Date: 20010319
Docket: 2000-1230-IT-I,
2000-1231-IT-I
BETWEEN:
MARIE-HÉLÈNE ABBOUD,
FAYEZ ABBOUD,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Tardif, J.T.C.C.
[1] The parties agreed to proceed on common evidence.
[2] The appeals relate to the 1989 and 1990 taxation years for the appellant Fayez Abboud and to the 1991 taxation year for the appellant Marie-Hélène Abboud.
[3] The issue in both cases is whether the appellants are entitled to the credits they have claimed for charitable donations. The donations in question were $12,000 in 1989 and 1990 for Fayez Abboud and $3,000 in 1991 for Marie-Hélène Abboud.
[4] To justify the assessments and penalties, the respondent alleged the following in the Reply to the Notice of Appeal ("the Reply") in Fayez Abboud's appeal (2000-1231(IT)I):
[TRANSLATION]
(a) when he filed his tax returns for the 1989 and 1990 taxation years, the appellant claimed in each case a charitable donations credit in respect of $12,000 that he says he donated to the Ordre Antonien libanais des Maronites during each of those taxation years;
(b) the appellant did not in any way whatsoever donate an amount of $12,000 to the Ordre Antonien libanais des Maronites in either the 1989 or the 1990 taxation years;
(c) the appellant did not submit to the Minister valid receipts containing the prescribed information for the alleged $12,000 donations he claims to have made to the Ordre Antonien libanais des Maronites, since the donation amounts shown on the receipts are false;
(d) the appellant did not make the donations for which he is claiming credits in his tax returns; rather, he was involved in the following scheme:
(i) in some cases, the Ordre Antonien libanais des Maronites issued a receipt to a taxpayer showing a donation of money equal to the amount that the taxpayer paid it by cheque and then returned to the same taxpayer the same or nearly the same amount of money in cash;
(ii) in other cases, the Ordre Antonien libanais des Maronites issued a receipt to a taxpayer showing a donation of a certain amount of money when the taxpayer had not paid anything at all or had paid in cash a minimal amount in comparison with the amount indicated on the receipt;
(e) in filing his tax returns and in supplying information under the Act for the 1989 and 1990 taxation years, the appellant made a misrepresentation attributable to wilful default concerning credits claimed by him in respect of charitable donations of $12,000 for each of those years;
(f) the appellant knowingly, or at least under circumstances amounting to gross negligence, made a false statement or omission by claiming credits for charitable donations of $12,000 for each of the 1989 and 1990 taxation years when he had not made any donation at all;
(g) since the appellant knowingly, or under circumstances amounting to gross negligence, made or participated in, assented to or acquiesced in the making of, a false statement or omission in the tax returns filed for the taxation years at issue, the tax that the appellant would have been required to pay on the basis of the information provided in the tax returns filed for those years was lower than the amount of tax actually payable by $3,019 for 1989 and $3,157 for 1990.
And in Marie-Hélène Abboud's appeal (2000-1230(IT)I) the allegations were as follows:
[TRANSLATION]
(a) when she filed her tax returns for the 1991 taxation year, the appellant claimed a charitable donations credit in respect of $3,000 that she says she donated to the Ordre Antonien libanais des Maronites during that taxation year;
(b) the appellant did not in any way whatsoever donate an amount of $3,000 to the Ordre Antonien libanais des Maronites during the 1991 taxation year;
(c) the appellant did not submit to the Minister a valid receipt containing the prescribed information for the alleged $3,000 donation she claims to have made to the Ordre Antonien libanais des Maronites, since the donation amount shown on the receipt is false;
(d) the appellant did not make the donation for which she is claiming a credit in her tax return; rather, she was involved in the following scheme:
(i) in some cases, the Ordre Antonien libanais des Maronites issued a receipt to a taxpayer showing a donation of money equal to the amount that the taxpayer paid it by cheque and then returned to the same taxpayer the same or nearly the same amount of money in cash;
(ii) in other cases, the Ordre Antonien libanais des Maronites issued a receipt to a taxpayer showing a donation of a certain amount of money when the taxpayer had not paid anything at all or had paid in cash a minimal amount in comparison with the amount indicated on the receipt;
(e) in filing her tax returns and in supplying information under the Act for the 1991 taxation year, the appellantmade a misrepresentation attributable to wilful default concerning the credit claimed by her in respect of a charitable donation of $3,000;
(f) the appellant knowingly, or at least under circumstances amounting to gross negligence, made a false statement or omission by claiming a credit for a charitable donation of $3,000 for the 1991 taxation year when she had not made any donation at all;
(g) since the appellant knowingly, or under circumstances amounting to gross negligence, made or participated in, assented to or acquiesced in the making of, a false statement or omission in the tax return filed for the taxation year at issue, the tax that the appellant would have been required to pay on the basis of the information provided in the tax return filed for that year was lower than the amount of tax actually payable for that year by $3,000.
[5] The appellants testified and explained the circumstances in which and the reasons why they made charitable donations to the Ordre Antonien libanais des Maronites. The appellant Fayez Abboud explained the development of his career and described the circumstances which brought about his coming to Canada. His spouse, who is of French origin, did the same.
[6] Both doctors, they practised at hospital centres in the Outaouais area, earning incomes much higher than those of average Canadians. The appellant Fayez Abboud was born in Lebanon, a country that has been severely affected and terrorized by war. War has orphaned countless children and injured thousands of people there and resulted in the displacement of thousands of Lebanese. He explained that he felt called upon to act at the time the war was at its deadliest.
[7] He explained that he was solicited over the telephone by a representative of the Ordre Antonien libanais des Maronites, with whom he talked three or four times in 1989 and 1990, the representative always being the one who initiated the conversations.
[8] After assessing his ability to pay and considering a number of factors, the main one being providing assistance to those who had been orphaned, injured or displaced by the war, and after consulting his accountant, he concluded that he had to do something and that he could donate $12,000 for 1989. He therefore wrote, for that year, a postdated cheque for $12,000, which he sent to the Ordre Antonien libanais des Maronites in Montreal.
[9] In 1990, the same thing occurred: after being solicited again, he decided to make another donation in the same amount and he followed the same procedure, that is, he prepared a postdated cheque cashable at the end of the year.
[10] The cheques were cashed in March in one case and April in the other. Also, in both cases the cheques were drawn on the appellant Fayez Abboud's line of credit, on which there was a very high interest rate.
[11] The appellant Marie-Hélène Abboud was not solicited directly by the Ordre Antonien libanais des Maronites. She explained that she made the donation to show solidarity in a cause that meant a great deal to her spouse, especially since he had suggested and recommended that she make the donation, which she spontaneously agreed to do.
[12] Given her income, it was a relatively modest effort. A cheque was written, and the donation was sent by mail. The cheque was cashed in the days that followed, the funds being taken out of the appellant Marie-Hélène Abboud's account.
[13] In Marie-Hélène Abboud's case, the process was regular, standard and ordinary. The donation was made through a cheque that was cashed in the days that followed and debited to an account with a positive balance. A receipt was then issued corresponding to the amount of the cheque.
[14] There is nothing that can justify rejecting either appellant's testimony. They could afford to make the donations. The cause underlying the donations was noble, rational and real. If it had been a scheme to evade taxes or reduce their tax burden, I think that the amounts of the donations would have been higher than those at issue here and that the appellants would no doubt have arranged to have everything spread out over more than three years; moreover, both of them might have profited more significantly from the scheme.
[15] The respondent adduced very substantial, well-documented evidence showing unequivocally that the Ordre Antonien libanais des Maronites was at the centre of a veritable network that perpetrated several hundred frauds. It was a structured, efficient, large-scale organization. A very large number of taxpayers were knowingly involved in it, and the operation was very profitable for both the donors and the recipient, which issued fraudulent receipts. The investigators and auditors did very good work. The investigation was thorough and very serious and led to a finding that the vast majority of the subscribers were indeed parties to the fraud. Is such circumstantial evidence a sufficient basis for concluding that all the donors were involved in the fraud even where there are no facts or information linking them to it directly?
[16] Does such evidence, the presentation of which was certainly very convincing as regards the scheme's existence, necessarily entail the conclusion that the appellants were also involved in and parties to the system set up by the Ordre Antonien libanais des Maronites just because they made three donations? I do not think so.
[17] The abundant evidence adduced by the respondent had the effect of creating a strong presumption that the appellants too were involved in the scheme behind the frauds.
[18] Such a presumption, founded essentially on circumstantial evidence, was certainly not a sufficient, adequate or satisfactory basis for concluding that the appellants were knowingly involved in and actually profited from the scheme.
[19] The evidence presented by the respondent showed that the vast majority of those who were given receipts were parties to or involved in the scheme. Gaëtan Ouellete, a Revenue Canada investigator, even said that he believed that all those who were given receipts, without exception, were involved in and parties to the system. In his opinion, there were no exceptions.
[20] That is a conclusion that is more intuitive than based on reality, since in answer to the very specific question [TRANSLATION] "Did you find any facts or indications whatsoever that could link the appellants directly to the system?", he said no. However, he immediately added that everything suggested that the answer should be yes.
[21] Questioning the appellants' tax files for the years at issue was warranted because of the quality of the circumstantial evidence. However, that evidence alone is not sufficient for a finding that the assessments are valid, let alone for upholding the penalties, especially since the burden of proof was on the respondent.
[22] The appellants testified credibly, plausibly and reasonably. Admittedly, I noted and pointed out during the hearing that there were some factors that could raise doubts and give cause for some suspicion; I am referring, inter alia, to the dates on which the appellant Fayez Abboud's cheques were cashed and the fact that the donations were made using his line of credit, on which there was a very high interest rate and which also had a negative balance at the time the cheques were cashed.
[23] On the other hand, the appellants could afford to make such donations. They said clearly and unequivocally that they had no connection with the people at the centre of the scheme. They provided plausible, reasonable and credible motives and justifications. The Court must decide on the balance of evidence, which does not mean that some doubt cannot exist.
[24] In the circumstances, it is my view that the balance of the evidence is in the appellants' favour.
[25] For these reasons, the appeals are allowed, without costs.
Signed at Ottawa, Canada, this 19th day of March 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true on this 30th day of August 2002.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-1230(IT)I
BETWEEN:
MARIE-HÉLÈNE ABBOUD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeals of Fayez Abboud (2000-1231(IT)I)
on January 24, 2001, at Ottawa, Canada, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the Appellant: Darquise Jolicoeur
Counsel for the Respondent: Nathalie Lessard and Simon Crépin
Judgment
The appeal from the assessment made under the Income Tax Act for the 1991 taxation year is allowed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 19th day of March 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true on this 30th day of August 2002.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-1231(IT)I
BETWEEN:
FAYEZ ABBOUD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeal of Marie-Hélène Abboud (2000-1230(IT)I)
on January 24, 2001, at Ottawa, Canada, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the Appellant: Darquise Jolicoeur
Counsel for the Respondent: Nathalie Lessard and Simon Crépin
Judgment
The appeals from the assessments made under the Income Tax Act for the 1989 and 1990 taxation years are allowed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 19th day of March 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true on this 30th day of August 2002.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]