Date: 19980227
Docket: T-2570-96
BETWEEN:
JAVED AHMAD
NAHEED SURRYA AHMAD
TAHIRA PARVEEN CHAUDHRY
KHUSH B.R. CHAUDHRY
Applicants
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
RICHARD J.:
NATURE OF THE PROCEEDING
[1] This proceeding raises the issue of compliance with subsection 231.2(1) of the Income Tax Act.
[2] On November 22, 1996, the applicants commenced an application for judicial review under section 18.1 of the Federal Court Act for the purpose of obtaining:
| (a) a declaration that the issuance of the demand for information addressed to Sydney Feldhammer in respect of the Applicants by the Respondent, the Minister of National Revenue, dated October 25, 1996, constitutes an unreasonable infringement of the Applicants' constitutional rights, as provided by sections 7, 8, 11(c), 11(d) and 13 of the Constitution Act, 1982 (Canadian Charter of Rights and Freedoms) and deprives them of their right to silence; |
|
| (b) a declaration that the said demand for information is not for any purpose related to the administration or enforcement of the Income Tax Act (Canada) and constitutes an abuse of process and is irregular, illegal and void; |
|
| (c) a Writ of Certiorari, or relief in the nature of Certiorari, directed against the Minister of National Revenue, to immediately return any and all documents, objects or information already obtained under subsection 231.2(1)(a) or (b) of the Income Tax Act (Canada), concerning the Applicants and prohibiting the Minister from communicating any knowledge to any other person; |
|
| (d) a Writ of Prohibition, or relief in the nature of Prohibition, directed against the Minister of National Revenue, to prohibit the Minister from demanding or receiving information from or concerning the Applicants under paragraph 231.2(1)(a) or (b) of the Income Tax Act (Canada). |
|
[3] The application is based on the following grounds:
| (a) the issuance of and compliance with the said demand constitutes an unreasonable infringement of the Applicants' constitutional rights, as provided by sections 7, 8, 11(c), 11(d) and 13 of the Constitutional Act, 1982 (Canadian Charter of Rights and Freedoms); |
|
| (b) the issuance of and compliance with the said demand deprives the Applicants of their right to silence; and |
|
| (c) the said demand is not for any purpose related to the administration or enforcement of the Income Tax Act (Canada), as required by subsection 231.2(1) of the Income Tax Act (Canada), and constitutes an abuse of process and is irregular, illegal, nul and void. |
|
[4] The decision which is challenged is a requirement to provide documents made pursuant to paragraph 231.2(1)(b) of the Income Tax Act. It is addressed to the applicants' accountant, Mr. Sydney Feldhammer, and reads as follows:
| REQUIREMENT FOR PRODUCTION OF DOCUMENTS |
|
Subject: Javed and Neheed Surrya AHMAD
108, Northview
Montréal (Québec)
H4A 2X4
Tahira Parveen and Khush B.R. CHAUDHRY
162, Montevista
Dollard-des-Ormeaux (Québec)
H9B 3A3
Dear Sir,
| For purposes related to the administration or enforcement of the Income Tax Act, pursuant to the provisions of paragraph 231.2(1)(b) of the said Act, I hereby require from you within thirty (30) days from the date of delivery or this requirement, production of documents regarding the above-mentioned names such as: |
|
| 1. all the supporting documents relative to the preparation of the statements of net worth; |
|
| 2. all the working papers relative to the preparation of the statements of net worth; |
|
| 3. A photocopy of any other documents in your possession, which may be relevant for Income Tax purposes. |
|
| To comply with this requirement, you should provide the documents hereby required to an officer of this Department who will attend at your office. |
|
| Alternatively, compliance with this requirement may be effected by mailing the documents hereby required, by registered mail, to the attention of the person mentioned on the preceeding [sic ] page within the time specified in the first paragraph of this requirement. |
|
| Your attention is directed to section 238 of the Income Tax Act for default in complying with this requirement. |
|
BACKGROUND
[5] Revenue Canada received from the Royal Canadian Mounted Police (the RCMP) information to the effect that Javed Ahmad and Naheed Surrya Ahmad were arrested on charges of possession of 10 kilograms of heroin and that they were suspected to live of the avails of proceeds of crime.
[6] The information received from the RCMP concerning the arrest of two of the applicants, Javed Ahmad and Naheed Surrya Ahmad, led to the review of the tax position of each one of the four applicants.
[7] In February 1995, the Special Investigations Division of Revenue Canada decided to review the tax liabilities of Javed Ahmad, Tahira Parveen Chaudhry, and Khush B.R. Chaudhry for the taxation years of 1989, 1990, 1991 and 1992 and of Naheed Surrya Ahmad for the taxation years of 1990, 1991 and 1992.
[8] In order to conduct its audit on the tax liability of each of the applicants, the respondent requested the applicants to provide the following information:
Javed Ahmad and Naheed Surrya Ahmad
| A statement of their assets and liabilities as at each calendar year ending December 31st 1990 to December 31st 1993; |
|
| A reconciliation of capital with detailed costs of personal expenditures for each calendar year ending December 31st 1991 to December 31st 1993; |
|
Tahira Parveen Chaudhry and Khush B.R. Chaudhry
| A statement of their assets and liabilities as at each calendar year ending December 31st 1989 to December 31st 1993; |
|
| A reconciliation of capital with detailed costs of personal expenditures for each calendar year ending December 31st 1990 to December 31st 1993; |
|
[9] These requests were first made by letter from Lise Hennessey of Revenue Canada, on February 15, 1995, and subsequently by formal Requirement for Information under paragraph 231.2(1)a) of the Income Tax Act on May 5, 1995.
[10] In July 1995, the information requested by Lise Hennessey was forwarded to Revenue Canada by the applicants' accountant, Mr. Sydney Feldhammer.
[11] On October 25, 1996, the Minister of National Revenue followed up with a Requirement for Production of Documents pursuant to paragraph 231.2(1)b) of the Income Tax Act, requesting that each of the applicants provide:
| 1) all supporting documents relative to the preparation of the statements of net worth; |
| 2) all the working papers relative to the preparation of the statements of net worth; |
| 3) a photocopy of any other document in the possession of the applicants which may be relevant for income tax purposes. |
[12] None of the applicants complied with the Requirement for Production of Documents dated October 25, 1996.
AFFIDAVIT MATERIAL
[13] The applicants filed the affidavit of Mr. Sydney Feldhammer sworn November 22, 1996. In it he states in part:
| 1. I am an accountant and a partner in the firm of Feldhammer Fishman S.E.N.C., located at 5050 De Sorel, Suite 110, Montreal, Quebec and I have personal knowledge of the facts hereinafter stated. |
|
| 2. I am the accountant for the Applicants in the Originating Notice of Motion and for the company operated by Javed Ahmad and his brother, Khush B.R. Chaudhry, Koh-i-noor Textiles Inc., located at 9437 Côte de Liesse, Dorval, Quebec. |
|
| 3. In 1993, I learned that Javed Ahmad and his wife, Naheed Surrya Ahmad, were facing charges for breaching a provision of the Narcotic Control Act (Canada). |
|
| 4. In 1993, defence counsel, Edward L. Greenspan, Q.C. and assistant defence counsel, Todd White, requested me to prepare "net worth" statements for Javed Ahmad and his wife for the 1989, 1990, 1991, and 1992 calendar years to comply with the request by the Crown lawyer in the criminal case. I prepared and conveyed same to assistant defence counsel for presentation to the Crown lawyer. |
|
| 5. By letters addressed to Javed Ahmad, dated February 15, 1995, Lise Hennessey of the Special Investigations Department of the Montreal District Office of the Department of National Revenue, requested signed statements of his assets and liabilities as at December 31, 1990, 1991, 1992 and 1993, and a reconciliation of his capital and detailed cost of personal expenditures for the 1991, 1992, and 1993 calendar years. The same was requested from his wife, Naheed Surrya Ahmad, making a total of 14 demands. Javed Ahmad conveyed copies of these letters to me soon after receipt and instructed me to deal with the Department of National Revenue. Now shown to me and marked as Exhibit "A" to this my Affidavit is a true copy of the said series of 14 written demands. |
|
| 6. By letters addressed to Khush B.R. Chaudhry, dated February 15, 1995, Lise Hennessey of the Special Investigations Department of the Montreal District Office of the Department of National Revenue, requested signed statements of his assets and liabilities as at December 31, 1989, 1990, 1991, 1992 and 1993, and a reconciliation of his capital and detailed cost of personal expenditures for the 1990, 1991, 1992, and 1993 calendar years. The same was requested from his wife, Tahira Parveen Chaudhry, making a total of 18 letters. Khush B.R. Chaudhry conveyed these letters to me soon after receipt and instructed me to deal with the Department of National Revenue. Now shown to me and marked as Exhibit "B" to this my Affidavit is a true copy of the said series of 18 written demands. |
|
. . .
| 11. On or about July 10, 1995, I provided to Lise Hennessey in respect of Javed Ahmad and Naheed Surrya Ahmad, their signed statement of assets and liabilities as at December 31, 1991, 1992 and 1993, and a reconciliation of their capital and detailed cost of personal expenditures for the 1991, 1992 and 1993 calendar years, on a combined marital basis. |
|
| 12. On or about July 10, 1995, I provided to Lise Hennessey in respect of Khush B.R. Chaudhry and Tahira Parveen Chaudhry, their signed statement of assets and liabilities as at December 31, 1991, 1992 and 1993, and a reconciliation of their capital and detailed cost of personal expenditures for the 1991, 1992 and 1993 calendar years, on a combined marital basis. |
|
| 13. I did not provide the "net worth" statements for 1989 and 1990 of any of the Applicants because I believed the Department of National Revenue was "statute-barred" or prohibited from requesting same. |
|
. . .
| 15. Upon consideration of legal advice, the Applicants have instructed me that they are unwilling to furnish any further financial information pursuant to the Income Tax Act (Canada) which may be used as evidence against Javed Ahmad and Naheed Surrya Ahmad in those criminal proceedings or against the Applicants in any criminal proceedings under the Income Tax Act (Canada). |
|
. . .
| 20. By letter addressed to me, dated October 25, 1996, Carole Gouin, Director of Tax Services Montreal, requested in respect of the Applicants all supporting documents and working papers relative to the preparation of "the statements of net worth", and a photocopy of any other documents in his possession, which may be relevant for Income Tax purposes. Now shown to me and marked as Exhibit "H" to this my Affidavit is a true copy of the said written demand. |
|
| 21. Assistant defence counsel has recently confirmed to me that the criminal case against Javed Ahmad and his wife is still pending, although there is an application by defence counsel for a stay of proceedings. |
|
[14] The respondent filed the affidavit of Catherine Pennors, sworn December 16, 1996. She confirmed that, in answer to a request by Revenue Canada, the accountant had furnished a net worth statement for each of the applicants and that the further demand for production of documents was for the purpose of completing the audit, and, if appropriate, of preparing tax assessments. Until such documents are produced, it is not possible to complete the audit in accordance with the Income Tax Act.
STATUTORY PROVISION
[15] SECTION 231.2: Requirement to provide
documents or information.
| (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice. |
|
| (a) any information or additional information, including a return of income or a supplementary return; or |
|
PURPOSE OF THE REQUEST
[16] The evidence reveals that the Minister is auditing each applicant on his/her tax liability.
[17] The tax system is a self-reporting and self-assessing one and the Minister of National Revenue has the task of administering and enforcing the Income Tax Act. To achieve this purpose, Parliament enacted several provisions, among which section 231.2 of the Income Tax Act, empowering the Minister to investigate and audit taxpayers.
[18] Pursuant to the demand made under paragraph 231.2(1)(a) of the Act, the applicants did provide signed statements of their net worth for the years 1991, 1992 and 1993. The respondent is not seeking, in these proceedings, to obtain information for 1989 and 1990.
[19] The respondent is seeking, under paragraph 231.2(1)(b) of the Act, the supporting documents and working papers relative to the preparation of the net worth statements which were signed and provided by the applicants through their accountant on July 10, 1995.
[20] To establish the tax position of each applicant, authorized officers of Revenue Canada are seeking to review the supporting documents and working papers relative to the preparation of the statements of net worth already provided to Revenue Canada in July 1995.
[21] The test to be applied in determining whether the Minister is acting for a purpose related to the administration and enforcement of the Income Tax Act was stated by the Supreme Court of Canada in [1962] S.C.R. 729">Canadian Bank of Commerce v. Attorney General of Canada, [1962] S.C.R. 729 and applied by that same Court in [1984] 1 S.C.R. 614">James Richardson & Sons, Ltd. v. M.N.R., [1984] 1 S.C.R. 614 at 623 as follows:
| The Canadian Bank of Commerce case, however, makes it clear that the subsection is not to be construed that broadly. It establishes through the majority judgment written by Mr. Justice Cartwright as: |
|
| (a) the test of whether the Minister is acting for a purpose specified in the Act is an objective one and has to be decided on the proper interpretation of the subsection and its application to the circumstances disclosed; |
|
| (b) the obtaining of information relevant to the tax liability of some specific person or persons whose liability to tax is under investigation is a purpose related to the administration or enforcement of the Act; |
|
| (c) it is not necessary that the person from whom the information is sought be one whose liability to tax is under investigation; |
|
| (d) the fact that the giving of the information may disclose private transactions involving persons who are not under investigation and may not be liable to tax does not invalidate the Requirement. |
|
[22] At this point, a tax audit is underway and the furnishing of the documents serves the purpose of continuing the audit of each of the applicants' taxable income for the years under review.
[23] The evidence clearly indicates that the Requirement for Production of Documents was issued for a purpose related to the administration and enforcement of the Income Tax Act. The documents requested are necessary to follow-up on the information already provided in July 1995 by the applicants to the Minister with respect to their tax liability.1
CHARTER ISSUES
Notice
[24] The applicants did not provide notice of a constitutional question under section 57 of the Federal Court Act. The respondent raised this in its memorandum and in oral argument but did make written and oral representations dealing with the applicants' claims of infringement of their Charter Rights. I have concluded that the applicants' rights under the Charter have not been infringed.
Section 7 and Right to Silence
[25] In the tax audit per se there is no suspect and no accused. The procedure is entirely administrative in nature.
[26] Even assuming that the liberty and security of the person is engaged under section 7 of the Charter, in the context of a tax audit, the deprivation of the applicants' liberty and security of the person does not amount to a breach of the principles of fundamental justice.
[27] In the present case, an administrative process is involved and the requirement for documents is in compliance with the principles of fundamental justice as it is sufficiently clear to inform the applicants of precisely what documents are being demanded and for what purpose, and it is not abusive or made in bad faith.
[28] In the Tyler case2, the Court prohibited the respondent Minister from communicating the signed statements obtained under paragraph 231.2(1)(a) to the RCMP. Here, the applicants have already provided those statements to the Minister. What they are objecting to is the production of supporting documents under paragraph 231.2(1)(b).
Section 8
[29] In the McKinlay case at page 649, the Supreme Court of Canada reviewed the constitutionality of subsection 231(3) of the Income Tax Act (now subsection 231.2(1) of the Income Tax Act) and concluded that even if a Requirement for Production of Documents is a "seizure" within the meaning of section 8 of the Charter, such "seizure" is reasonable and, hence, is not a violation of section 8;
| In my opinion, s. 231(3) provides the least intrusive means by which effective monitoring of compliance with the Income Tax Act can be effected. It involves no invasion of a taxpayer's home or business premises. It simply calls for the production of records which may be relevant to the filing of an income tax return. A taxpayer's privacy interest with regard to these documents vis-à-vis the Minister is relatively low. The Minister has no way of knowing whether certain records are relevant until he has had an opportunity to examine them. At the same time, the taxpayer's privacy interest is protected as much as possible since s. 241 of the Act protects the taxpayer from disclosure of his records or the information contained therein to other persons or agencies. |
|
Subsections 11(c) and (d), Section 13 and Right to Silence
[30] The tax audit conducted by Revenue Canada is not an investigation in a criminal process; it is purely administrative in a civil context.
[31] The protection afforded by subsections 11(c) and (d) is a protection against testimonial compulsion of an accused and a protection against self-incrimination.
[32] Revenue Canada has collected little information at this point in its audit on the applicants' tax position and there is no evidence in the record that information was conveyed from Revenue Canada to the RCMP or any other person in relation to Javed Ahmad's and Naheed Surrya Ahmad's criminal proceedings.
[33] Even though Javed Ahmad and Naheed Surrya Ahmad are facing criminal charges under the Narcotic Control Act, the production of the requested documents, pursuant to the Income Tax Act, does not deprive them of their constitutional rights under the Canadian Charter of Rights and Freedoms.
[34] With respect to Tahira Parveen Chaudhry and Khush B.R. Chaudhry, they have not been charged with any criminal offences and, therefore, the protection afforded by the Charter under subsections 11(c) and (d) does not apply to them in the course of a tax audit, which is purely administrative.
[35] Neither of the four applicants are required to testify in any proceedings, they are merely required to produce the documents in support of the information already provided to the Minister in the course of the tax audit. Further, the demand is addressed to their accountant.
CONCLUSION
[36] I find that the request for production under paragraph 231.2(1)(b) of the Income Tax Act is for a valid purpose and does not constitute an abuse of process.
[37] I also find that the request does not infringe the applicants' rights under sections 7, 8, 11(c), 11(d) and section 13 of the Charter or their right to silence.
[38] I further find that the applicants are not entitled to an order in the nature of mandamus compelling the Minister to immediately return all information and documents provided to date under paragraph 231.2(1)(a) of the Income Tax Act.
[39] Finally, I order that the documentary material at pages 86 to 157 of the applicants' application record be struck out as failing to comply with Rules 1603 and 1606.
__________________________
Judge
Ottawa, Ontario
February 27, 1998
__________________
1 Djokich v. A.G. Canada, 96 D.T.C. 6214 (F.C.T.D.).
2 Tyler v. [1984] 1 S.C.R. 614">M.N.R., 91 D.T.C. 5022 at 5027 (F.C.A.).
Email this Content