Docket: 2013-3201(IT)I
BETWEEN:
RAVINDERJIT DHILLON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with the
appeal of
Jaswinder Dhillon 2013-2826(IT)I
on January 15, 2014, at Toronto, Ontario
Before: The Honourable Justice Valerie
Miller
Appearances:
|
Agent for the
Appellant:
|
Jaswinder Dhillon
|
|
Counsel for the
Respondent:
|
Alexandra Humphrey
Tony Cheung
|
JUDGMENT
The appeal from the reassessment made under the Income
Tax Act for the Appellant’s 2003, 2004, 2005 and 2006 taxation years is allowed,
without costs, and the matter is referred back to the Minister of National
Revenue for reconsideration and reassessment on the basis that:
(a)
she is entitled to
deduct child care expenses of $4,000 in 2003, 2004 and 2005; and
(b) the gross negligence penalties imposed in
2003, 2004, 2005 and 2006 are to be deleted.
In all other respects, the Appellant’s
appeal is dismissed.
Signed at
Ottawa, Canada, this 23rd day of January 2014.
“V.A. Miller”
Citation : 2014TCC25
Date: 20140123
Docket: 2013-2826(IT)I
BETWEEN:
JASWINDER DHILLON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2013-3201(IT)I
AND
BETWEEN:
RAVINDERJIT DHILLON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The appeals of
Jaswinder Dhillon and Ravinderjit Dhillon were with respect to the reassessment
of their 2004 to 2006 taxation years in which the Minister of National Revenue
(the “Minister”) disallowed their claim for non-refundable tax credits in
respect of alleged charitable donations.
[2]
The appeal of
Ravinderjit Dhillon also involved the disallowance of child care expenses in
her 2003 to 2006 taxation year. However, at the beginning of the hearing, the
Respondent conceded the child care expenses for the 2003 to 2005 taxation years
and the gross negligence penalties which had been imposed in the 2003 to 2006
taxation years in respect of the child care expenses.
[3]
The issues at the
hearing of these appeals were:
(a)
Whether the Appellants
made charitable donations in the following amounts to the following charities:
|
|
Jaswinder Dhillon
|
Ravinderjit Dhillon
|
Charity
|
|
2004
|
$9,500
|
$5,004
|
Whit-Tee Youth
Shelter Inc.
|
|
2005
|
14,500
|
3,500
|
Whit-Tee Youth
Shelter Inc.
|
|
2006
|
5,100
|
|
Whit-Tee Youth
Shelter Inc.
|
|
2006
|
5,005
|
1,855
|
New Hope for Africa
|
(b)
In the alternative,
whether the receipts for the alleged charitable donations satisfied the
requirements of section 118.1 of the Income Tax Act (“Act”) and
sections 3500 and 3501 of the Income Tax Regulations (“Regulations”);
and
(c)
Whether Ravinderjit
Dhillon paid child care expenses of $4,000 in 2006.
[4]
The appeals were heard
on common evidence and both Appellants gave evidence. The Respondent called
four witnesses – Staff Sergeant Roy Steinebach, RCMP; Rita Hirchliffe, Appeals
Officer with the Canada Revenue Agency (“CRA”); Neal Swietlinski, investigator
and auditor with the CRA; and, Tracey Cooper, Litigation Officer with the CRA.
Charitable Donations
Facts
[5]
The Appellants are
spouses of one another. It was Ravinderjit Dhillon’s evidence that her spouse
handled the preparation of their tax returns for each of the years under
appeal. Jaswinder Dhillon stated that their 2004 tax returns were prepared by
someone named Steve who was in the same building as Orbit Financial Services (“Orbit”)
but Steve was not employed by Orbit. In 2005 and 2006, their tax returns were
prepared by someone whose name he couldn’t remember. This person was located in
the same building as the Tax Help Centre but was not employed by it.
[6]
The evidence disclosed
that the Appellants’ 2004 income tax returns were e-filed using the e-file
agent number D6302 which was registered to E.S. Services/Evelyn Serwaah. The
evidence established that Isaac Amoako (“Amoako”) and Orbit filed some of its
clients’ income tax returns by using the e-file agent number for E.S. Services
(see exhibit R-32). Amoako was a director and officer of Orbit.
[7]
Amoako and Orbit were
convicted of preparing and filing false income tax returns in which they
claimed fraudulent charitable tax donations on behalf of their clients in the
2004 to 2006 taxation years.
[8]
The Appellants’ 2005
income tax returns were e-filed using the number E7117. That number was registered
to SuSu Financials at 222-350 Rutherford Rd. South in Brampton and its contact
person was Frank Osei. Mr. Osei was an associate of William Ankomah (“Ankomah”)
who was with the Tax Help Centre. The address for the Tax Help Centre was the
same as that of SuSu Financials.
[9]
Sergeant Roy Steinebach
testified that a search warrant was executed by the RCMP and CRA against the
Tax Help Centre and Ankomah on May 31, 2007. They seized documents, electronic
data and computers from Ankomah. The documents included blank receipt books and
letterhead for Whit-Tee Youth Shelter Inc. (“Whit-Tee”), New Hope for Africa (“New Hope”) and other charities. They found books which showed that Ankomah charged his
clients 10% of the amount on the charitable donation receipt for the
preparation and filing of their tax returns. The electronic data contained
approximately 6000 tax records which the CRA later used for reassessment
purposes.
[10]
After the search, the
RCMP interviewed 23 clients of Ankomah. These clients stated that Ankomah offered
to file their returns claiming false charitable tax donations; they did not
receive the charitable donation receipts when their tax returns were prepared;
they were not told the name of the charity which was used; and, they did not
make the charitable donations claimed in their tax returns. They paid Ankomah
10% of the amount of the alleged charitable donation. I note that the
Appellants were not interviewed by the RCMP.
[11]
Ankomah was convicted
of fraud in respect of preparing and filing false income tax returns in which
he claimed fraudulent charitable tax donations on behalf of his clients.
[12]
Rita Hirchliffe stated
that she received a disc which had been seized from Ankomah. It contained all
of the Appellants’ tax information for the 2005 and 2006 taxation years.
[13]
The Appellants’ 2006
tax returns were paper filed with the Minister.
[14]
The Appellants claimed
that they made the charitable donations listed in paragraph 3(a) above in cash.
It was Mr. Dhillon’s evidence that he went to Whit-Tee five or six times a year
to personally deliver the cash. In 2004, he gave the money to a man called
Dave; in 2005 he gave the cash to Dave or Oscar; in 2006 he dealt with Oscar.
He stated that he didn’t receive a receipt for the money at the time he gave
it; but, he personally kept track of his donations in a book he kept at his
home. Mr. Dhillon also stated that he received the 2004 receipts in early 2005
and the 2005 receipts in early 2006. In 2004 and 2005, he delivered the cash to
Whit-Tee’s office at 2095 Weston Road and in 2006 he delivered the cash to the
office Whit-Tee had in a warehouse on Millcreek Road in Mississauga. New Hope and Whit-Tee were located in the same warehouse. At New Hope, he gave his money to
Steve.
[15]
In support of his
evidence, Mr. Dhillon submitted bank records which showed that he had made
various cash withdrawals from his bank account.
Analysis
[16]
It is my view that the
Appellants have not given any credible evidence to demonstrate that they made
charitable donations to Whit-Tee or New Hope. The bank records (exhibits A-1,
A-2, and A-3) showed that the Appellants withdrew cash from their joint bank
account or their parents’ bank account. There was no documentary evidence to
connect the withdrawal of the cash with the alleged charitable donations. Although
Mr. Dhillon stated that he kept personal records of his cash donations in a
book, he did not bring that book to court with him. In addition, I find it
difficult to believe that the Appellants would give $44,464 in cash over a
three year period to people whose names they did not know and not receive a
receipt for the cash at the time it was given.
[17]
I find that Mr. Dhillon
was not credible. It was his evidence that he learned about Whit-Tee from a
salesman at a Mercedes Benz dealership. He didn’t know the salesman’s name. He
allegedly attended at Whit-Tee’s office on Weston Road in 2004 and 2005; but,
records showed that Whit-Tee did not have an office on Weston Road until August
11, 2005. He allegedly went to Whit-Tee’s office on Millcreek Road in 2006. Records
showed that Whit-Tee never had an office on Millcreek Road (see exhibit R-27).
He said that prior to making his donations, he looked into Whit-Tee and New Hope to ascertain the programs they carried on to achieve their charitable purposes.
His description of the programs carried on by Whit-Tee and New Hope was vague
but the testimony of Neal Swietlinski and documents tendered by the Respondent
proved that even these vague descriptions were incorrect.
[18]
Mr. Dhillon’s evidence
with respect to when he received the charitable donation receipts for Whit-Tee
was discredited by the evidence given by Neal Swietlinski who audited Whit-Tee.
According to Mr. Swietlinski, Whit-Tee kept no accounting records, and no books
and records of periodic donations made by persons. Whit-Tee could not have
produced a receipt at the end of the year for the total donations.
[19]
The notices of
objection filed by the Appellants do not support Mr. Dhillion’s evidence that
their 2005 and 2006 returns were not prepared by Tax Help. Attached to each
objection form is a letter from the Tax Help Centre which stated that their
clients could not submit the documents for the charitable donations they had
claimed in their returns because that information was now in the possession of
the CRA as part of an ongoing investigation.
[20]
I also find that
Ravenderjit Dhillon was not credible. At the hearing she claimed to have
donated $5,004 to Whit-Tee in 2004. However, the Respondent presented documents
which showed that on April 6, 2005, the CRA requested the official receipt for
the charitable donation claimed by Ravinderjit Dhillon in her 2004 income tax
return. This request was made prior to assessment and was sent to Evelyn
Serwaah because her e-file agent number had been used to file the return. In
response, a receipt was sent to the CRA which showed the charity to be
Panafrican Canadian Multicultural Centre (“Panafrican”) and the amount of the
donation was $5,004. Neither Appellant knew about the enquiry made by the CRA
or about the receipt for Panafrican.
[21]
I have concluded from
the evidence that the Appellants had their 2004 tax returns completed by Amoako
and Orbit and their 2005 and 2006 returns prepared by Ankomah and his
associates at Tax Help. I have also concluded that the Appellants did not make the
charitable donations claimed in their income tax returns in 2004, 2005 and
2006. This conclusion is sufficient to dismiss the appeals with respect to the
issue concerning the charitable donations and I do not have to address the
Respondent’s alternative argument.
Child Care
[22]
Mrs. Dhillon stated
that she paid Sandy Duncan Williams $4,000 in cash in 2006 to baby-sit her son.
She stated that she left the home at 6:30am to go to work and Ms. Duncan
Williams babysat her son from 6:15am until 8:00am when he left for school. Mrs.
Dhillon’s son was 15 years old at the time.
[23]
Mrs. Dhillon submitted
a letter dated December 30, 2006 and addressed “To Whom It May Concern” from
S.D.W. – Home Child Care Centre (“SDW”). The letter read that Ms. Sandy Duncan
babysat “Mr. Ravinder Jit Dhillon’s” son for 32 weeks during the period January
2006 to December 2006 for a total cost of $4,000.
[24]
It was Mrs. Dhillon’s
evidence that the cost for the babysitting was $120 per week. However, she did
not pay any amount until December 2006. She could not specify the exact 32
weeks that Ms. Duncan Williams babysat.
[25]
The Respondent
presented evidence that Ms. Duncan Williams reported T4 income in 2006 but not
any child care income. She claimed child care expenses in 2006. In 2007, Ms.
Duncan Williams reported child care income.
[26]
The Appellants stated
that Ms. Duncan Williams was out of town and could not attend the hearing.
[27]
I find it implausible
that Mrs. Dhillon hired a baby sitter to be with her son for one hour and
forty-five minutes each school day. When asked why her son required a baby
sitter in the mornings, Mrs. Dhillon’s response was that he was not 16. I also
do not believe that Ms. Duncan Williams or any baby sitter would work for 32
weeks in a year and not receive any pay until December 30th of the
year.
[28]
The letter from SDW
could have been typed at any date. There was no opportunity to hear from Ms.
Duncan Williams and test any of the statements she made in the letter. I have
given no weight to the letter.
[29]
I find that Ravinderjit
Dhillon has not shown that she incurred child care expenses in 2006. For this
reason, Ravinderjit Dhillon’s claim for child care expenses of $4,000 in her
2006 taxation year is dismissed.
[30]
In conclusion,
Jaswinder Dhillon’s appeal for his 2004, 2005 and 2006 taxation years is
dismissed.
[31]
Ravinderjit Dhillon’s
appeal is allowed as follows:
(b)
she is entitled to
deduct child care expenses of $4,000 in 2003, 2004 and 2005; and
(c)
the gross negligence
penalties imposed in 2003, 2004, 2005 and 2006 are to be deleted.
[32]
In all other respects,
the appeal for Ravinderjit Dhillon is dismissed.
Signed at Ottawa, Canada, this 23rd
day of January 2014.
“V.A. Miller”
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