Amarjit S Grewal, Mohinder Singh Grewal, Rajinder Grewal v. Minister of National Revenue, [1979] CTC 3102, 79 DTC 896

John B Goetz:—By consent of the appellants and of counsel for the respondent, the appeals of Amarjit S Grewal, Mohinder Singh Grewal and Rajinder Grewal were heard on common evidence at Sudbury, Ontario, on June 11,1979. It was agreed at the outset of the hearing that the sole issue to be determined was whether the non-resident dependants declared in the respective income tax returns in actual fact received funds as claimed by the appellants. The respondent conceded that if, in fact, the Board found that the monies as claimed by the appellants had been paid, the nonresident dependants would qualify as dependants under the Income Tax Act, SC 1970-71-72, c 63, as amended. It was also agreed by all parties that the evidence of the respondent would apply to all appeals.

The appeal of Amarjit S Grewal is from a reassessment dated March 28, 1978, in respect of the 1975 taxation year.

The appeal of Mohinder Singh Grewal is from reassessments dated March 21, 1978, in respect of the 1973, 1974, 1975 and 1976 taxation years.

The appeal of Rajinder Grewal is from reassessments dated March 30, 1978, in respect of the 1974, 1975 and 1976 taxation years of this appellant.

Amarjit S Grewal was a design engineer, working out of Sudbury, Ontario. He came to Canada in 1968 having spent some time in Denmark, Germany, India and Southern California. He obviously had an excellent education, having studied in India and in Southern California. He produced a receipt from Punjab Express Foreign Exchange Services (hereinafter referred to as “Punjab”) dated July 25, 1975, for the sum of $600 for the purpose of sending same to Bhan Singh Grewal in India. He testified that this was a cash receipt. Punjab Express Foreign Exchange Services was located on Bloor Street in the City of Toronto, Ontario, and the appellant stated that he would travel by car from Sudbury and deposit cash with Punjab. He stated that he had started saving cash over a period of months and placed same in a box and took a special trip to Toronto by car which cost him $20. His reason for doing this was that he would get a better exchange rate from Punjab and that Punjab wanted funds in cash. In this appeal there is no evidence of the money having been received by any dependant.

During cross-examination, counsel for the Minister produced five bank statements of Mr Amarjit Grewal, from the Canadian Bank of Commerce, said statements covering the period June 1975 to December 1975. The appellant could not produce any cancelled cheques. This was a personal chequing account which would seem to be available to the appellant in paying for funds to be sent to India by Punjab.

The appeal of Rajinder Grewal was presented by her husband, Mohinder Singh Grewal, on the basis of a consent of Rajinder Grewal which was filed at the hearing. Counsel for the respondent, at the outset, agreed that the assessment for the 1974 taxation year against Rajinder Grewal should be rescinded and the appeal with respect thereto should be allowed. The

Board acceded to this request, leaving the validity of the tax assessments for the years 1975 and 1976 to be determined by this Board.

Mohinder Singh Grewal appealed against reassessments for the taxation years 1973,1974,1975 and 1976. At the outset of the hearing counsel for the Minister consented to his appeal for the years 1973 and 1974, leaving to be determined the question of the validity of the assessments for the taxation years 1975 and 1976.

Mr John Abois, a chartered accountant, asked that he be permitted to sit with Mohinder Singh Grewal in the conduct of his appeal. This request was granted.

Mohinder Singh Grewal filed seven receipts that he says he obtained from Punjab. These receipts bear the following dates and are in the following amounts: July 25, 1975—$640; October 1, 1975—$515; October 1, 1975— $484; October 14, 1976—$400; October 14, 1976—$400; December 6, 1976— $350; and December 6, 1976—$350. He also filed receipts issued to Rajinder Grewal by Punjab, bearing the following dates and amounts: May 21, 1975—$640; June 28, 1975—$650; March 17, 1976—$200; March 17, 1976—$200; July 7, 1976—$125; July 7, 1976—$150.

Mohinder Singh Grewal also filed two letters on the letterhead of Cook and Abois. These letters were both dated June 27, 1978, one relating to Mohinder Singh Grewal and the other one relating to Rajinder Grewal and were in the following forms:

Exhibit A-4

June 27, 1978

Revenue Canada Taxation

Federal Building

19 Lisgar Street, South,

SUDBURY, Ontario

Dear Sirs:

RE: Support payments received from my daughter and granddaughter,

Rajinder Grewal

This is to certify that we have received the following support payments:

1974	$1,185	(Can)
1975	1,290
1976	675
		Signed:	(Signature)
			Karnail Singh Pancych
Stamp	ATTESTED
			Gurbax Kaur
(Signature)			(Signature)
Notary Public for States of			Sher Singh
Pb & UP 26/7/78
			(Signature)
			Notary
(Notary Public)
Jullundur, (India)

Exhibit A-5

June 27, 1978

Revenue Canada Taxation

Federal Building

19 Lisgar Street South

SUDBURY, Ontario

Dear Sirs:

RE: Support payments received from my son

Mohinder Singh Grewal

This is to certify that we have received the following support payments:

1973	$1,100	(Can)
1974	1,160
1975	1,640
1976	1,500
		Signed:	(Signature)
		R S Grewal
			(Signature)
Stamp		Mohinder Kaur Grewal
			(Signature)
		Notary

Mohinder Grewal in cross-examination said that Punjab preferred cash and that he had difficulty in cashing Canadian money orders in India, although he was shown, by counsel for the respondent, three money orders from the Royal Bank, dated September 22, 1976, September 22, 197 and November 24, 197 , purchased by Rajinder Grewal and payable to presumed dependants in India, namely, her father and her mother. He had no explanation for this.

Mohinder Grewal has been in Canada since 1955 and employed by the Canadian National Railways for 14 years as a draftsman, having obtained his Grade XII education in Canada. He stated the purpose in using Punjab as an intermediary was that Punjab could get him a better exchange rate, therefore more rupees on the purchase by Mohinder. This is what he attributes partly for the purpose of his paying Punjab in cash. It should be pointed out that certain Punjab receipts indicate payment either by way of cash, cheque, money order, postdated cheques or by way of promissory notes or credit card.

Mohinder Grewal stated that he would take time off from work without pay if he went to Toronto on week-days for the purpose of dealing with Punjab. He would receive no pay for the period from which he would be absent from work and his reason for this expense in dealing with Punjab was that he could do shopping in Toronto and see movies not available in Sudbury. Punjab eventually went bankrupt and Johal (the operator) was prosecuted on 24 counts of issuing false receipts and was convicted and fined. There was apparently clear evidence available to the respondent to lay countless other charges but there were no charges laid.

The respondent called Noele Blair who is a special investigator with the Department of National Revenue, Toronto Taxation Office. She produced records of Punjab for the years 1975-1976 and 1976-1977. These were in fact so-called ledgers of Punjab. These records would indicate the name of the remitter, the amount of Canadian funds, the name of the recipient and the address of the recipient. Punjab’s records show that in 1975 it received $318,000 (Canadian) which it converted into rupees for forwarding to India. Sixty per cent of this amount was received by way of cheques from the remitters. In 1976 Punjab received $130,000 which would be converted into rupees for forwarding to India. Payment of these funds was supported by cheques from the remitters. It was clearly indicated by this witness that none of the appellants were listed in any of the records of Punjab and further that none of the dependants of the appellants were referred to in the business records of Punjab. Many receipts issued by Punjab were not issued at face value and the investigation indicated that during the year 1975 the Tax Department learned that Punjab had issued receipts in the amount of $1,971,000 and had only received in cash or by way of cheques $318,000 for transfer overseas.

A Mr Johal who was the operator of Punjab stated to the income tax investigator that:

He stated that he issued receipts for 3% of the face value. Anywhere between 0% and 3% of the face value. And these receipts were given for tax purposes so that the person could claim a non-resident dependent. (Evidence of Noele Blair.)

In other words, Punjab would issue receipts for 3% of the face value and sometimes receipts were issued without it having received any funds whatsoever.

Punjab used an involved black market system whereby funds were transferrd to the agents in London and the whole operation was a very complicated operation whereby they could also get funds out of India to these agents illegally. Quoting further from the evidence of Miss Noele Blair:

The profits realized by the participants in this scheme and the benefit accrued to Johal’s customers are of course financed by the Indian immigrant who pays a high premium to avoid the currency restrictions which would otherwise prevent him from removing his life savings from India on leaving the country.

This witness further stated that any person dealing with Punjab in cash had their dealings recorded in the records of Punjab.

Findings

The appellants are entitled to claim as deductions from their income, payments legitimately made to dependants outside of Canada, pursuant to the provisions of paragraph 100(1 )(f) of the Income Tax Act. This being an exemption, the decision in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182, holds that the statute must be strictly construed and the burden of proof of payment to the non-resident dependants rests squarely on the shoulders of the appellants.

The sole issue to be determined here is whether I am satisfied that the dependants did in fact receive funds from the appellants as declared in their income tax returns. Having regard to the level of education of Amarjit Grewal and Mohinder Grewal, I find it extremely hard to give credence to their evidence that they would take time off from work in Sudbury, travel by car to Toronto and deliver the “saved up’’ cash to Punjab Express for the purpose of remitting such funds to their dependants. The record shows that Rajinder Grewall purchased Royal Bank of Canada money orders for the purpose of remitting funds to dependants in India. Clearly, Mohinder Grewal could have remitted funds to Punjab by way of cheque, money order or otherwise than in cash. He was dealing with Punjab Express which he obviously knew was dealing with his funds, converting same into rupees in a rather strange and undoubtedly nefarious way, whereby rupees would be hand delivered to the actual door of the non-resident dependants.

I am satisfied from the evidence above that the dependants did not receive funds as declared by the various appellants (other than those remitted by Rajinder Grewal by way of money-orders purchased from the Royal Bank of Canada). The appellants’ names and those of their nonresident dependants were not even listed in the records of Punjab. I can give no weight to the two letters drawn by Cook & Abois purportedly being shown before a notary, without any attestation clause.

For the reasons given above, the appeals are disposed as follows:

The appeal of Amarjit Grewal in respect of the 1975 taxation year is dismissed.

The appeal of Mohinder Singh Grewal is allowed and the matter referred back to the respondent for reconsideration and reassessment in respect of the 1973 and 1974 taxation years, as consented to by counsel for the respondent at the hearing. The appeal in respect of the 1973 and 1976 taxation years is dismissed.

The appeal of Rajinder Grewal is allowed and the matter referred back to the respondent for reconsideration and reassessment in respect of the 1974 taxation year, as consented to by counsel for the respondent at the hearing. The appeal in respect of the 1975 and 1976 taxation years is allowed and the matter referred back to the respondent for reconsideration and reassessment to the extent of the sums of the money orders purchased from the Royal Bank of Canada in Sudbury, and filed as Exhibit R-1.

Appeal allowed in part.