REASONS
FOR JUDGMENT
Hogan J.
I. Overview
[1]
The Appellant, Azim Bani, is appealing reassessments
and, as regards 2008, an assessment by which the Minister of National Revenue
(the “Minister”) disallowed claims for charitable donations as follows:
|
Taxation Year
|
Donations Claimed
|
Donations
Disallowed
|
|
2003
|
$4,650
|
$4,650
|
|
2004
|
$5,000
|
$5,000
|
|
2005
|
$3,715
|
$3,715
|
|
2006
|
$9,000
|
$9,000
|
|
2007
|
$9,090
|
$9,090
|
|
2008
|
$8,460
|
$8,460
|
|
2009
|
$9,200
|
$9,200
|
[2]
The Minister alleges that the Appellant
purchased false charitable donation receipts from his accountants, Fareed Raza
and Saheem Raza (the “Raza Brothers”). The Raza Brothers provided accounting
and tax services under the trade names Fareed Raza & Co. Inc. and F & A
Accounting Corporation (“FA”). The Raza Brothers were charged with fraud for
making false statements on income tax returns prepared by them for their
clients.
[3]
The onus of disproving the Minister’s assumptions
was on the Appellant, except in respect of the reassessments for the 2003 to
2007 taxation years, which were made after the normal reassessment
period referred to in subsection 152(4) of the Income Tax Act
(the “Act”). With respect to those taxation years, the Respondent has the burden
of establishing that the Appellant made a misrepresentation in
the circumstances set out in subparagraph 152(4)(a)(i) of the
Act.
II. Factual Background
[4]
The Appellant testified that he is a retired
power engineer. He immigrated to Canada in 1965.
[5]
Mr. Bani explained that he was late in filing
his return for the 2003 taxation year. His ex-wife referred him to Fareed Raza
(“Mr. Raza”). He met with Mr. Raza for the first time in 2004, a considerable
time after the filing due date for his 2003 tax return. Because his return
would be filed late and his taxes for his 2003 taxation year were not fully
paid, Mr. Bani realized that he would be charged a penalty. According to
Mr. Raza, the penalty could be avoided if the Appellant paid him $1,000 in
cash to be put towards a charity.
[6]
The Appellant admitted that he continued this
practice every year until 2010. He would give Mr. Raza $1,000 cash in a lump
sum amount when he went to see him to have his return for the prior year
prepared.
[7]
The Appellant claims he did not review any of
the tax returns prepared by Mr. Raza before he signed them.
[8]
Ms. Jane Yang, an investigator with the enforcement
division at the Vancouver Tax Services Office of the Canada Revenue Agency
(the “CRA”), testified on behalf of the Respondent. In October of 2008,
while attending an internal training session in Toronto, Ms. Yang learned that
one of her colleagues in Toronto was having success in uncovering schemes used
by tax preparers to sell forged charitable donation receipts to their clients.
[9]
On her return to Vancouver, Ms. Yang discovered
that a number of clients of FA appeared to have made large donations to the
Mehfuz Children Welfare Trust (the “Mehfuz Trust”). The donation pattern
appeared to be abnormal. The taxpayers were donating a significant portion of
their net income to the Mehfuz Trust.
[10]
A criminal investigation was launched and a
seizure was conducted at FA’s offices on July 14, 2010. The seized documents included receipts from the Mehfuz
Trust, which Ms. Yang believed were forged, and Mr. Raza’s desk calendar. The
calendar contained annotations that suggested that Mr. Raza was recording
amounts that he was receiving in return for caregiver and donation receipts.
Ms. Yang was able to establish that, in many cases, the amount indicated
on the calendar alongside a client’s name represented from 8% to 11% of the
amount claimed on the client’s return as a gift to the Mehfuz Trust.
Ms. Yang also observed that the receipts for the Mehfuz Trust seized at
the FA offices were different from the official receipts issued by the Mehfuz
Trust.
[11]
As a result of her investigation, Ms. Yang
concluded that the Raza Brothers had forged donation receipts totalling
approximately $12,000,000. Ms. Yang estimated that this scheme resulted in
a loss of tax revenue of approximately $4,700,000.
[12]
Mr. Mashud Miah, the chairman and founder of the
Mehfuz Trust, also testified on behalf of the Respondent. Mr. Miah was born in Bangladesh and immigrated to Canada in 1985. In addition to his duties at the Mehfuz Trust from 2001
to 2009, Mr. Miah worked as a cleaner.
[13]
Mr. Miah explained that the Mehfuz Trust was
named after his son, Mehfuz, who was born prematurely at a hospital in Vancouver. He believes that had his son been born prematurely in Bangladesh he likely would not have survived. In 1997, Mr. Miah was involved in two serious car
accidents, and the treatment he received while in hospital again made him recognizant
of the quality of health care services provided at Canadian hospitals. These
events inspired him to establish the Mehfuz Trust in 2000-2001, with the
assistance of Fareed Raza, as a vehicle to raise funds in Canada for the purpose of building and operating a medical clinic in Bangladesh. According to Mr.
Miah, the clinic was built, and it offered health care to poor and handicapped
children from 2003 to 2009. The clinic’s operations were abandoned in 2009
after the Mehfuz Trust became tainted by the controversy surrounding the
actions of the Raza Brothers.
[14]
Mr. Miah alleges that in 2008 he discovered
Saheem Raza forging charitable donation receipts of the Mehfuz Trust on
entering Saheem’s office, which he was to clean as part of his cleaning
services arrangement with FA. He testified that he saw Saheem signing his
(Mr. Miah’s) name to a receipt. He subsequently saw forged receipts lying
around the office. In the spring of 2008, after consulting with a lawyer, he
reported to the CRA that he suspected that the Raza Brothers were forging
charitable donation receipts in the name of the Mehfuz Trust. Mr. Miah
testified that he stopped using FA’s accounting services in 2007 as a result of
his suspicions regarding the Raza Brothers’ improprieties.
III. Analysis
[15]
The Respondent presented common evidence in these
appeals and the appeals of Jose Vekkal (2013-882(IT)I), Remmy Vekkal
(2013-883(IT)I), Martin Izkendar (2013-220(IT)I), Ruben
Nocon (2013-635(IT)I), Iraj Rasuli (2013-886(IT)I), Khorshid
Rasuli (2013-887(IT)I), Ladan Abootaleby-Pour (2013‑1779(IT)I) and Oleg
Komarynsky (2013-3354(IT)I).
[16]
At the conclusion of the hearing of these appeals,
an issue arose as to whether the evidence presented by the other eight appellants
or obtained by the Respondent through the cross-examination of those appellants
should form part of the Appellant’s record herein. I observe that the case
management judge did not deal with this procedural issue in setting down the
appeals for hearing. I also note that the Appellant was not served with the
pleadings in the other appeals and he did not partake in the examination or
cross-examination of the other appellants. Therefore, I will disregard the
evidence of the other appellants for the purpose of disposing of these appeals.
[17]
In any event, nothing material turns on this
matter as I did not find that evidence particularly relevant to the outcome of
these appeals.
[18]
The Appellant’s 2003 to 2007 taxation years were
reassessed beyond the normal reassessment period. Therefore, the Respondent
bears the onus of establishing that the Appellant made with respect to the
gifts that he claims he made a misrepresentation attributable to neglect, carelessness or wilful default. The Appellant argues that the
Respondent has failed to discharge her onus with respect to those taxation
years.
[19]
For the sake of brevity, I incorporate by
reference my credibility findings with respect to Ms. Yang’s and Mr. Miah’s
evidence as set out in paragraphs 24, 25, 26 and 27 of the reasons for judgment
in the appeals of Jose Vekkal (2013‑882(IT)I) and Remmy Vekkal
(2013-883(IT)I) released on the same date as these reasons for judgment.
[20]
The Appellant admitted that he made payments of
$1,000 only to Mr. Raza for each of the 2003 to 2009 taxation years. However,
he claimed donations far in excess of that amount. I do not believe that he did
not know that Mr. Raza was claiming tax credits for donations that he did not
make. He is a well‑educated person who admitted that he prepared his own tax
returns for the years prior to the 2003 taxation year.
[21]
I infer from all of the evidence that the
Appellant knowingly purchased false donation receipts. This practice began in
2004 when Mr. Raza presented the false donation receipt scheme as a way of
avoiding a late-filing penalty with respect to the 2003 taxation year. The
Appellant’s argument that he did not know what was going on because he simply
did not read the returns prepared by Mr. Raza is implausible. Under our
self-assessment system, taxpayers cannot be absolved of responsibilities for
misrepresentations made in their tax returns on the grounds that they failed to
read the returns before they signed and filed them. Such conduct is at the very
least akin to neglect and carelessness. Therefore, the Minister was entitled to
reassess the Appellant’s 2003 to 2007 taxation years beyond the normal
reassessment period.
[22]
With respect to the 2008 and 2009 taxation
years, the Appellant has failed to demonstrate that he made gifts to the Mehfuz
Trust in those years.
[23]
For all these reasons, the reassessments and
assessment are upheld and the appeal is dismissed.
Signed at Ottawa, Canada, this 18th day of November 2014.
“Robert J. Hogan”
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