Citation: 2011TCC555
Date: 20111208
Docket: 2008-3993(IT)I
BETWEEN:
DARSHANABEN PATEL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
The Appellant, Darshanaben Patel, is appealing the reassessment of the Minister of
National Revenue denying her claims for non-refundable tax credits for
charitable donations of $2,960, $7,560, $5,350 and $7,081 in 2003, 2004, 2005
and 2006, respectively. Although these amounts were initially accepted as filed
in each of the taxation years, they were subsequently disallowed following a
Canada Revenue Agency investigation of the Appellant’s tax preparer, one
Ambrose Danso-Dapaah operating under the name ADD Accounting.
As it turned out, Danso-Dapaah was ultimately convicted
of, among other things, having sold charitable donation receipts to his
clientele for 10% of the face value of the amount shown in the receipts.
[2]
The basis for the Minister’s
reassessments was that the Appellant had not made a “gift” to the charities
named in the receipts and did not have “official receipts” for the amounts
claimed in the prescribed form as required by the Income Tax Act and Income
Tax Regulations. The Minister assumed that rather than making a gift to the
charities, the Appellant had merely purchased charitable donation receipts for
10% of the value shown therein.
[3]
The Appellant had the onus of
proving wrong the Minister’s assumptions. In respect of the 2003 taxation year
which was reassessed after the normal reassessment period, it was for the
Minister to justify his reassessment under subsection 152(4) of the Act.
[4]
Called for the Minister was Barbara Lovie,
an Investigator with the Canada Revenue Agency. Ms. Lovie was involved in the
investigation of Danso-Dapaah and his related businesses. She presented her
evidence in a thorough and careful manner and I accept without hesitation her
analysis of the documents referred to during her testimony. Ms. Lovie explained
that during the course of the investigation of Danso-Dapaah, his computer and
paper records were seized including his clients’ income tax returns, “official”
charitable donation receipts and clients’ invoices showing the face value of
the donation receipts and the amount they had been billed for them. The
Appellant’s files were among those seized.
[5]
The Appellant represented herself
and was the only witness to testify on her behalf. She said she first met
Danso-Dapaah in 2002 and began using his services the following year. Under his
guidance, she made numerous cash payments to Danso-Dapaah throughout each taxation
year to donate to charities he suggested, the CanAfrica International
Foundation and/or the Harvest Family Church. While she had no receipts from Danso-Dapaah for
these amounts, the Appellant put in evidence bank statements
showing cash withdrawals in each taxation year. She also produced a hand-written
summary
(“Summary”) identifying which of these had been used for charitable donations.
[6]
Though initially the Appellant
claimed to have also made in-kind donations of toys and clothes, she later said
that at Danso-Dapaah’s suggestion, she had given him cash as he said he could
purchase these items more cheaply in Africa. She admitted she had no receipts
for these items. Given the inconsistency of the Appellant’s testimony, I find
it highly unlikely she made any in-kind donations.
[7]
On cross-examination, counsel for
the Respondent carefully reviewed with the Appellant the figures in the income
tax returns found among Danso-Dapaah’s records. The Appellant confirmed that
they accurately reflected the information she had provided to him; she noted, for
example, certain Employment Insurance and federal child benefit payments she
had received. She confirmed, as well, the accuracy of the information regarding
the charitable donation amounts claimed in 2003,
2004 and 2005.
[8]
When confronted with invoices
seized from Danso-Dapaah which purported to show that the Appellant had been
billed for an amount equal to 10% of the face value of the charitable donations
reported in 2004 and 2005, her only response was a flat denial that she had done
so. She declined to comment on the likelihood of all the information contained
in her records being accurate except for the invoices.
[9]
Counsel for the Respondent also
reviewed the income reported in the Appellant’s returns and asked her to
estimate her average annual household expenses. This the Appellant did with
efficiency and ease; in spite of having to work from memory, she had no
difficulty reciting the amounts she usually paid for mortgage, utilities and so
on. On the rare occasion when she had to refer to her bank statements, the
Appellant was quickly able to identify, for example, her monthly condo fees and
a $5,000 RRSP contribution made in 2003.
[10]
It was clear from her review of
her income and expenses that, in each of the taxation years, the Appellant would
have had little money left with which to make the sizeable donations claimed in
her returns. She countered, however, with the assertion that she had received
cash payments from her family and after 2005, her husband, to help out with her
expenses. She added that in 2004 she had also received cash from a “friend” in repayment
of a loan she had made at some unspecified earlier time. No witnesses were
called to substantiate these claims. In respect of the loan, the Appellant had
no documentary proof of either the loan or its repayment. Nor did she explain
how she would have had the funds available to make the loan in the first place
if, as she said, she was dependent on her family for financial assistance.
[11]
I regret to say that overall, I
did not find the Appellant to be a credible witness. Her review of the returns,
bank statements and records seized from Danso‑Dapaah showed her to have a
keen mind and clear understanding of her financial dealings. Yet, when it came
to explaining vital components of her donation history, she had nothing to say,
other than to remind the Court that there was nothing illegal in dealing in
cash. As for the charities involved, the Appellant made no pretence of having
any particular enthusiasm for either the CanAfrica International Foundation or
the Harvest Family Church yet insisted that, even in her limited circumstances,
she had made relatively large donations over a four-year period to them. Although
she had at least three bank accounts during the relevant period, rather than
simply writing cheques to the charities to ensure she had proof of her donations,
the Appellant claimed to have made unreceipted cash payments to Danso-Dapaah. The
Appellant did not strike me as either gullible or trusting enough to have behaved
so rashly. All in all, the Appellant failed to persuade me that she had made a
“gift” to any charities in the taxation years under appeal.
[12]
The word “gift” is not defined in
the legislation. The leading case on the meaning of “gift” is The Queen v.
Friedberg, 92 DTC 6031, where Linden J.A., at page 6032, defined
“gift” as:
… [A] gift is
a voluntary transfer of property owned by a donor to a donee, in return for
which no benefit or consideration flows to the donor …
[13]
In Coombs et al v. The Queen,
2008 DTC 4004, Woods J. listed the requisite elements of this definition as
follows:
[15] … First,
it is necessary that the gifted property be owned by the donor, second that the
transfer to the charity be voluntary, third that no consideration flow to the
donor in return for the gift, and fourth that the subject of the gift be
property, which distinguishes it from providing services to the charity. These
elements reflect the general notion that a taxpayer must have a donative
intent in regards to the transfer of property to the charity. [Emphasis
added.]
[14]
In Webb v. The Queen, 2004
TCC 619, [2004] T.C.J. No. 453 at paragraph 16, Bowie J. enlarged on the
notion of “donative intent”:
[16] Much has been written on the subject of
charitable donations over the years. The law, however, is in my view quite
clear. I am bound by the decision of the Federal Court of Appeal in The
Queen v. Friedberg, among others. These cases make it clear that in order
for an amount to be a gift to charity, the amount must be paid without benefit
or consideration flowing back to the donor, either directly or indirectly, or
anticipation of that. The intent of the donor must, in other words, be entirely
donative.
[15]
Given her general lack of
credibility, the Appellant’s bald assertion that she donated the amounts listed
in the Summary is not sufficient to rebut the Minister’s assumption to the
contrary. The Summary is nothing more than a list of some of the numerous cash
withdrawals in the Appellant’s bank statements. A review of the bank statements
reveals there is nothing to link the Summary withdrawals with the amounts she
claimed to have donated through Danso-Dapaah’s office or indeed, to distinguish
them from the other cash amounts withdrawn. For example, in the Summary, the Appellant
lists a cash withdrawal for charitable donation purposes of $2,000 on March 10,
2004. However, in that same month, she made other cash withdrawals of $200
(March 2), $1,100 (March 3) and $40 (March 12). Similarly, the Summary shows a
charitable donation withdrawal of $400 on April 29, 2005; other large
withdrawals were made on April 18 ($300) and April 28 ($500). This pattern
is repeated throughout the Summary and the bank statements. The Appellant
offered no explanation as to how, without receipts or other records, she could
identify from among the many cash withdrawals made those that were allegedly
dedicated to charitable donations.
[16]
The Appellant pointed out to me that
there was nothing illegal about making a donation in cash. This is quite true:
paragraph 3501(1)(e) of the Regulations specifically
contemplates that possibility. However, when a taxpayer chooses to deal only in
cash, whether for charitable donations or any other matters likely to come
under the scrutiny of the Minister of National Revenue, she imposes on herself the
burden of having some means of verifying the otherwise untraceable
transactions. The present case provides a perfect illustration of why the Act
strictly regulates the conditions of eligibility for charitable donation deductions.
As Tardif J. explained in
Plante v. The Queen, [1999] T.C.J. No. 51:
[46] The
requirements in question are not frivolous or unimportant; on the contrary, the
information required is fundamental, and absolutely necessary for checking both
that the indicated value is accurate and that the gift was actually made.
[47] The
purpose of such requirements is to prevent abuses of any kind. They are the
minimum requirements for defining the kind of gift that can qualify the
taxpayer making it for a tax deduction.
[17]
In my view, the Appellant did not
make any donations to the charities named in the receipts. She claimed to have
made them in cash to justify her lack of any verifiable records. Knowing that
she had done nothing more than to pay Danso‑Dapaah 10% of the face value
of the false charitable donation receipts she had purchased from him and
without any documents to substantiate her claims, she decided to bluff her way
through the objection and judicial stage of her appeals on the off-chance
someone might buy her story. While it is never good for a taxpayer to cheat on
her taxes, it strikes me as even more reprehensible when she does so under the
guise of being a charitable giver. Even worse, at the same time the Appellant
was reaping the benefits of her false charitable donation claims, she was also happily
pocketing Employment Insurance and other federal benefits financed by honest taxpayers.
The Appellant not having rebutted the assumption that formed the basis of the
Minister’s reassessment, there is no justification for interfering with it.
[18]
This leaves, then, only the question
of whether the Minister was justified in reassessing the 2003 taxation year
after the normal reassessment period. Subparagraph 152(4)(a)(i) of the Act
requires that the Minister establish that a misrepresentation occurred in each year
that was attributable to the taxpayer’s neglect, carelessness, wilful default
or fraud. In view of the above findings and the Appellant’s admission that her returns
were prepared by Danso-Dapaah in accordance with the information she provided
to him, it is clear the Appellant knew that her 2003 return falsely reported a
charitable donation amount. Accordingly, the Minister was justified in
reassessing after the normal reassessment period.
[19]
The appeals of the 2003, 2004,
2005 and 2006 taxation years are dismissed.
Signed at Ottawa, Canada, this 8th day of December 2011.
“G. A. Sheridan”
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