Section 288

Subsection 288(1) - Inspections


R v Young,, 2021 NSSC 361

evidence gathered by an auditor regarding unsubstantiated ITC claims had an audit focus, and could be used in a criminal prosecution

The four co-accused and their ten related companies, who had been charged with offences relating to large allegedly false input tax credit claims made over a period of over four years, alleged breaches of their ss. 7 and 8 Charter rights as a result of the intended use of the information gathered in the context of a civil audit, contrary to the Jarvis principle. The audit had commenced with a review of one registrant, whose history included disallowed ITCs, notations suggesting poor manual record keeping, and failure to provide requested records. The auditor (Ms. Power) extended the audit to related companies using the same bookkeeper, who told Ms. Power there were no electronic records, no corporate bank accounts and therefore no bank records to produce, there were no employees, and no customs documentation to support claims. By September of 2015, Ms. Power had eight related companies before her for various review periods. Ms. Power conducted site views of the business premises and interviews with the registrants on October 6 and 7, 2015. On November 10, in the process of concluding her audit work and passing the file to another auditor as she was going on leave, Ms. Powers for the first time suggested that the matter should be referred to the Criminal Investigation Division (“CID”). The referral was made, but the criminal investigation did not begin until June of 2016.

In dismissing the application (so that the evidence collected by Ms. Power was admissible), Gogan J stated (at paras. 83, 84, 87, 93):

… None of Power’s work can be characterized as de facto investigation. It was related to her work to try and verify the information in the credit returns.

In the end, she was unable to verify much and her audit opinion to disallow ITCs and adjust the returns accordingly rested mainly on the lack of supporting information. There is no question that the conduct of the registrants, their inability to provide support for the claims made in credit returns and the constantly evolving presentation of the various company operations triggered suspicion by the time interviews concluded. However, no further information was collected after that point in the audits.

...I also observe that it is a nuanced distinction to assess relevance as between a registrant being unable to support claims made (the audit conclusion and one potentially explained by poor record keeping) and a registrant making false or fraudulent statements to CRA (a criminal conclusion potentially explained by having no legitimate records). In this case, I am satisfied that any evidence obtained came as a result of Power’s audit inquiries. ...

… I find that the predominant purpose of the investigation did not turn to criminal or penal liability until after the completion of Power’s interviews with each of the accused. …

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 8 Jarvis principle did not exclude evidence gathered before referral to criminal investigation 197

Tellza Inc. v. Canada (National Revenue), 2021 FC 853

it was not unreasonable for CRA to exercise its audit power by requesting a copy of all electronic records for a 20-month period

CRA issued a letter to the applicant (“Tellza”) on October 4, 2019 under s. 288(1) of the ETA to obtain all of Tellza’s electronic accounting data for the period November 1, 2016 to January 31, 2018. Fuhrer J stated (at para. 11):

Contrary to Tellza’s position that the October 4, 2019 letter was a "requirement" and not a "request" and hence, should have issued under the ETA s 289(1), instead of the ETA s 288(1), I am not persuaded that it was unreasonable for the CRA to issue the letter under the latter provision instead.

In this regard she noted (at para. 15) that she “[did] not disagree with the general proposition about the more limited scope of subsection 288(1)” as compared to s. 289(1), but indicated (at para. 18) that s. 288(1) nonetheless “grants an authorized person the power to request or require a taxpayer to provide information in any form” and further stated that “the authorized person is not limited, in a modern, electronic era, to an inspection, audit or examination of the taxpayer’s documents and records at their premises.”

After having noted that the word “document” (used in s. 288(1)) was defined in s. 123(1) to include “a record” which, in turn, was defined to include “any other thing containing information, whether in writing or in any other form” (her emphasis), she also rejected (at para. 22) the contention of Tellza that “the request for records in an electronically readable format, along with the system administrator’s user ID and password, where applicable, falls outside the scope of the inspection power in the ETA s 288(1).”

Tellza’s request for judicial review was dismissed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 231.1 - Subsection 231.1(1) CRA could request records in electronic form and did not need to utilize the requirement provision 239

R v. He, 2012 DTC 5129 [at 7234], 2012 BCCA 318

The Court affirmed the trial judge's decision to exclude evidence obtained by CRA in the course of a pilot project to evaluate the adequacy and reliability of the point-of-sale systems of various business including that of the accused, including the warrantless seizure of accounting diskettes. The project was a randomly sampled study intended for policy research, and was not meant to investigate tax liabilities. CRA officials misrepresented their authority under the project in order to seize the diskettes. The Court found that this amounted to a warrantless seizure in violation of the taxpayer's Charter rights.

Hinkson J.A. also remarked (at para. 54) that the Supreme Court of Canada's requirement in Richardson, that the Minister exercise power under s. 231.2 of the Income Tax Act only if the taxpayer's liability is a "subject of genuine and serious inquiry," also applies to s. 231.1. As Hinkson J.A. also stated (at paras. 20 and 22) that ss. 288 and 289 Excise Tax Act were parallel provisions to 231.1 and 231.2 respectively, a similar conclusion probably applies to those sections.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 231.1 - Subsection 231.1(1) 147