[OFFICIAL ENGLISH TRANSLATION]
Date:
20021016
Docket:
2000-1501(IT)I
2000-1500(IT)I
BETWEEN:
HODA
MOURAD ATALLAH,
GABI
ATALLAH,
Appellants,
and
HER
MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
For
the Appellants: the Appellants themselves
Counsel
for the Respondent: Simon Crépin
Nathalie Lessard
____________________________________________________________________
REASONS FOR JUDGMENT
(reasons
read at the hearing of June 7, 2002,
in
Montréal, Quebec)
Chief Judge
Garon, T.C.C.
[1] The
two appellants appealed from the income tax assessments made with respect to
each of them by the Minister of National Revenue for the 1992 taxation year. In
each of those assessments, the Minister of National Revenue refused a tax
credit for a charitable gift in relation to an amount of $2,000 that each
appellant claims to have donated to l'Ordre Antonien libanais des maronites
during the 1992 taxation year.
[2] Both
appellants testified on their own behalf. The female appellant, Hoda Mourrad
Atallah, came to Canada with her parents and their other children in 1976. She
married the male appellant, Gabi Atallah, in Canada on August 7, 1982. The
appellants have two daughters.
[3] The
female appellant began by relating a tragedy that had taken place in her family
on May 23, 1992. Her brother Maurice Mourad died at the age of 23 in a fire in
the building in which he was living. A death certificate signed by the investigating
coroner on May 25, 1992, was filed in Court. The death occurred 12 days after
the appellant had given birth to her youngest daughter. Naturally, this death
had a profound impact on the young man’s parents and the other family members.
[4] The
female appellant explained that the brother in question held a $100,000 life
insurance policy. Her parents received this amount two or three months after
his death and gave the children $8,000 each from the proceeds. Their four
children thus received a total amount of $32,000.
[5] Despite
the appellants’ efforts in the weeks prior to the hearing of these appeals,
they were unable to obtain certain relevant bank statements and documentation
relating to the payment of the proceeds of the life insurance policy.
[6] After
indicating that her family had gone through an extremely difficult period in
the months following Maurice Mourad’s death, the appellant stated that she and
her husband, the appellant, had decided to pay l'Ordre Antonien libanais des
maronites $4,000 in November 1992 for masses to be held in
Maurice Mourad’s memory. This amount was divided equally between the two
appellants; according to the female appellant, each of them gave the
organization $2,000.
[7] The
female appellant had explained earlier that after her brother’s death, she and
her husband had started practicing their Catholic faith much more intensively
as a way of seeking comfort. She said that these donations totalling $4,000
were the only ones for which the appellants had claimed a tax credit during the
years prior to and after 1992. She nonetheless said that she and the male
appellant had donated $200 to $300 to l'Ordre Antonien libanais des maronites
each year but had not obtained any receipts or claimed a tax credit for those
donations.
[8] The
female appellant also testified that her parents had been informed immediately
of the appellants’ decision to give l’Ordre $4,000. She had not been present
when her husband had given the $4,000 to one of the organization’s priests in
November 1992.
[9] The
male appellant is a letter carrier and runs a small business as well. He stated
he was largely in agreement with the female appellant’s testimony. According to
his testimony, he came to Canada from Lebanon with his parents in 1976. The civil
war had broken out in that country in 1975.
[10] The male appellant stated that the $8,000 the female appellant had
received from her parents had been paid to the appellants by cheque and that
the $4,000 had been paid to l’Ordre in cash in $100 denominations. The money
had been put in an envelope. He could not remember which bank account the
$4,000 had come out of. At the time, he had a number of bank accounts,
including a joint account with his wife. The two receipts had not been made out
at the time the $4,000 had been paid to one of the organization’s priests but a
few months later.
[11] The female appellant’s father, Moussa Mourad, was called to testify at
the appellant’s proceedings. He confirmed that he and his wife had received
$100,000 as beneficiaries of a life insurance policy on Maurice Mourad and that
they had given $8,000 of that amount to each of their four children.
[12] The appellant’s father also explained that a few weeks before the
first anniversary of the death of his son Maurice, he had asked the male
appellant to pay $700 on his behalf to have an anniversary mass celebrated in
his son’s memory because, as he put it, he did not know how to write a cheque
and did not have any money on him. A written declaration made by the appellant’s
father confirming the substance of his testimony was adduced.
[13] On the respondent’s behalf, the Court heard two employees of the
Canada Customs and Revenue Agency. One of them, Gaétan Ouellette, was an
investigator with the special investigations unit and the other, Colette
Langelier, was an officer with the tax avoidance division. According to their
testimony, the scheme had been set up by l’Ordre. It was the wife of one of the
organization’s directors, a female doctor, who had reported the scheme to
Revenue Canada in March 1994. She herself had participated in it for a number
of years.
[14] In some cases, l'Ordre would issue a taxpayer a receipt indicating a
financial donation equal to the amount the taxpayer had paid l'Ordre by cheque
and would return approximately 80% of the amount of the cheque to the taxpayer
in cash. In other cases, l'Ordre would issue a taxpayer a receipt indicating a
cash donation when the taxpayer had donated only a minimal amount compared with
the amount that appeared on the receipt. There were even cases in which
taxpayers obtained tax receipts without paying anything.
[15] After this scheme was reported, Ms. Langelier began auditing l’Ordre’s
accounting records and bank statements starting in late September 1994. Her work
was carried out during the fall of 1994. She concluded in particular that many
of the taxpayers who had participated in the scheme had essentially purchased
tax receipts from l’Ordre for an amount equivalent to 20% of the amount that
appeared on the receipt. The amounts paid to l’Ordre in cash were not recorded
in the organization’s bank accounts.
[16] As a result of the auditor’s report, the file was then assigned to the
special investigations unit and search warrants were executed at the premises
of l’Ordre and at its accountant’s office.
[17] It should be noted that the documents seized included a printout from
a computer owned by l'Ordre that provided information for 1993 using an
electronic spreadsheet program called Biblio-Reç. The document in question
indicated 356 cases involving 352 receipts and in each case the taxpayer’s name
is noted. The entries are numbered 1 to 356. The notation “cancelled” appears
for four entries. The entries indicate the donor’s name and telephone number,
the number of the receipt, the amount of the donation, the amount returned to
the donor, the amount paid, the balance payable, the net amount received by the
clerks of l’Ordre, where applicable, the name of the intermediary who had put
the taxpayer in contact with l’Ordre and the percentage of the actual donation
compared with the amount that appeared on the receipt.
[18] The worksheets that were seized (Exhibit I-12, tab 9, at page 39)
refer to a receipt bearing number 922 for a $2,000 donation and a $700 deposit.
The receipt is dated December 31, 1992, and was issued in the male appellant’s
name. The receipt in question was in a receipt book, a copy of which was
adduced in evidence.
[19] It is worth noting that 15 taxpayers were subject to criminal
proceedings in cases in which the receipts indicated amounts of over $100,000
during the period from 1989 to 1995. The proceedings were launched under
section 239 of the Income Tax Act.
[20] With the exception of four complaints that were abandoned, the other
taxpayers pleaded guilty. The priests of l’Ordre who had been involved in the
scheme having left Canada, no criminal action was brought against them.
[21] Close to 1,200 donors were assessed and the tax credits they had
claimed for a charitable gift were refused. Some 100 taxpayers filed appeals
with the Tax Court of Canada.
[22] The male appellant’s father and brother also obtained receipts for
charitable gifts and their receipts were numbered 919 and 920 respectively.
Their receipts were for amounts of $2,500 and $2,000 and were also dated
December 31, 1992.
[23] Two other taxpayers were called to testify at the respondent’s
proceedings. They both acknowledged they had obtained receipts from l’Ordre for
amounts that were substantially higher than those that had actually been paid
to it.
Analysis
[24] First, there was ample evidence that a scheme involving what was
referred to at the time as the selling of charitable receipts had been set up
by l'Ordre Antonien libanais des maronites. The scheme was in place from 1989
to 1995. Its existence was even acknowledged by one of the appellants. The
deception in issue here was described in great detail during depositions before
this Court by two Canada Customs and Revenue Agency employees.
[25] I must determine whether the appellants each donated $2,000 to l'Ordre
Antonien libanais des maronites during 1992.
[26] I refer first to the testimony of the female appellant’s father,
Moussa Mourad.
[27] Moussa Mourad stated that he had learned from one of the organization’s
priests that his daughter, the female appellant, and his son-in-law, the male
appellant, had made a total of $4,000 in donations shortly after the death of
his son Maurice. He did not know whether the $4,000 donation had been made
before or after he and his wife had received $100,000 in proceeds from a life
insurance policy in Maurice’s name. It is completely implausible that those
donations totalling $4,000 would have been made before the appellants
themselves had received $8,000 from the female appellant’s parents given the
male appellant’s testimony that, among other circumstances, the deceased’s
cousins were the ones who paid the expenses for Maurice Mourad’s funeral.
[28] Moreover, Moussa Mourad’s statement that he had been informed by one
of l’Ordre’s priests about the appellants’ $4,000 donation contradicts the
appellants’ testimony that they had informed the parents of the female
appellant of their decision when the donation was made in order to bring them
some comfort.
[29] Moussa Mourad also testified that he was the one who had asked the
appellant to pay l'Ordre $700 on his behalf in April 1993 on the first
anniversary of his son’s death. It seemed strange to me that he would remember
specifically this $700 donation nine years later when he was mistaken about the
date of his son’s death. He also remembered exactly how the $700 had been
divided, which he indicated as follows: $200 to each of the two priests and
$400 to the church. I do not attach any weight to the calculation error made by
this witness with respect to the breakdown of this $700 total.
[30] Nor do I believe the statement of the female appellant’s father that
he had not actually discussed with either or both of the appellants the
testimony he would be giving at the hearing of these appeals after he was
recently informed that he would be called to testify. He remembered too easily
some of the factual elements I have just noted.
[31] In short, I have some serious doubts about Moussa Mourad’s testimony.
[32] I now come to the appellants’ testimony in light of all of the
evidence, both oral and documentary. The documentary evidence is particularly
abundant. I will discuss only certain elements of the evidence that seem
relevant to me.
[33] The entire situation relating to the $2,000 donation that each of the
appellants allegedly made in November 1992 to have a mass held in
Maurice Moussad’s memory seems rather unlikely to me in light of the
following considerations:
1. First, it is surprising that the appellants would have paid the $4,000
in cash. The appellants had an interest in having documentary evidence in hand
and in paying the amount in question by cheque, the receipts for that amount
not being issued until a few months later. As well, we know it is unwise for
anyone to carry such a substantial amount on them.
2. According to the income statement of l'Ordre (Centre
communautaire St‑Antoine Le Grand) for the period ended
December 31, 1992, the total amount paid for masses in 1992 was only
$5,125. Based on the appellants’ statements, their contribution would thus
represent close to 80% of all contributions made to l'Ordre’s community centre.
3. Objectively, the $4,000 offering to have masses celebrated seems
very high, irrespective of the observations made earlier, and the total number
of masses was not specified.
4. L’Ordre did not record the amounts totalling $4,000 that appeared
on the receipts attributed to the appellants for masses. The income statements,
including the one for 1992 (Exhibit I‑19), indicated that l’Ordre had
separate items for donations and for masses.
5. The appellants’ habits with respect to charitable donations for
the years prior to the year in issue were the complete opposite of those for
1992. See in particular the male appellant’s tax returns for 1997, 1998, 1999
and 2000, in which the total amount of donations is less than $100 for each
year. In the female appellant’s case, no amount is claimed for donations in her
tax returns for those same years.
6. Receipt number 922 (Exhibit I‑23) referring to a $2,000
donation, allegedly made by the male appellant, is in the same receipt book as
that of his father (receipt No. 919), his brother (receipt No. 920) and the
female appellant (receipt No. 921). It can be seen that the numbers are
consecutive. However, the male appellant testified that he did not know whether
his father and his brother had participated in the scheme or whether they had
donated $2,500 and $2,000 during that same year. The same receipt book contains
a number of other false receipts, including those pertaining to donations made
by Garbin Yessayan during 1991, 1992, 1993 and 1994. Mr. Yessayan confirmed
during the hearing of these appeals that the amounts on the four receipts
adduced during his testimony were inaccurate.
[34] With respect to the $700 payment the male appellant allegedly made to
l’Ordre in April 1993 to have an anniversary mass celebrated on behalf of
Moussa Mourad, the female appellant’s father, that claim also appears unlikely
in more than one respect:
1. The appellants separated in April 1993. It seems implausible to
me that Moussa Mourad would have asked the appellant, his daughter’s
former husband, to render that type of service for him even though the female
appellant was then living with an aunt and uncle who were members of the male
appellant’s family.
2. The $700 amount seems very high for an anniversary mass. This is
surely an uncommon situation.
3. According to the income statement of l'Ordre (Centre
communautaire St‑Antoine Le Grand) for 1993, the total amount paid for
masses was only $2,617 (Exhibit I-19, tab 5). In other words, the $700
amount apparently represents more than one quarter of the total amount paid for
masses by everyone¾parishioners and
non-parishioners¾who dealt with the
community centre during 1993. This $700 donation thus seems very high in light
of the total offerings made for masses at this particular church.
With respect to the financial statements, the appellant was surprised that
a certain amount of credibility was given to l'Ordre’s financial statements. On
this issue, it must be recalled that the evidence showed that the
irregularities detected in l’Ordre’s financial statements dealt particularly
with the receipts.
4. L'Ordre’s accountant associated the $700 amount with the receipt
given to the male appellant and showing an amount of $2,000, as indicated on
l’Ordre’s worksheets, which were seized by the Minister of National Revenue:
see Exhibit I-12, tab 9, at page 39. The same connection was made by
Ms. Langelier, a Canada Customs and Revenue Agency employee, in her
testimony before this Court.
5. The receipt relating to the $700 donation should have been made
not in the male appellant’s name but in his father-in-law’s name, since the
male appellant stated that it was at his father-in-law’s request that he had
paid l’Ordre the $700.
[35] From the whole of the evidence, I am satisfied that, unlike what they
maintained, the appellants did not make a total of $4,000 in donations in 1992.
However, it does not seem unlikely to me that the appellants would instead have
made a $700 donation in April 1993 and obtained two receipts for a total of
$4,000. In any event, I do not need to determine whether the appellants made
this $700 donation to l’Ordre in 1993 since this appeal pertains only to 1992.
[36] Having regard to all the circumstances described above and their
cumulative effect, the appellants’ testimony does not seem credible to me,
particularly on the issue of the $2,000 donation each of them is alleged to
have made in November 1992.
[37] I have come to the conclusion that neither appellant donated $2,000 to
l'Ordre Antonien libanais des maronites during the 1992 taxation year. The
appellants therefore made a misrepresentation to the Minister of National
Revenue in filing their tax returns and in stating that they had made such
donations. As a result, in the circumstances, the Minister of National Revenue
had the right to issue reassessments after the normal assessment period
provided for by subsection 152(4) of the Income Tax Act.
[38] The evidence also allows me to conclude that the respondent
established the reprehensible nature of the appellants’ conduct. They knowingly
made false statements in reporting to the Minister of National Revenue that
they had made a total of $4,000 in donations to l’Ordre during 1992 when no
such donations had been made. The Minister of National Revenue accordingly
discharged the burden that was on him with respect to the assessment of
penalties under subsection 163(2) of the Income Tax Act.
[39] For these reasons, the appeals are dismissed.
Signed at Ottawa, Canada, this 16th
day of October 2002.
C.J.T.C.C.
Translation certified true
on this 28th day of January
2004.
Sophie Debbané,
Revisor
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