[OFFICIAL ENGLISH TRANSLATION]
2000-894(IT)I
BETWEEN:
SIMON DAOU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals by Vincent Daou 2000-895(IT)I
on April 29, 2002 at Montreal, Quebec by
the Honourable Judge François Angers
Appearances
Counsel for the Appellant: Éric Potvin
Counsel for the Respondent: Simon-Nicolas Crépin
Nathalie Lessard
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years are dismissed.
Signed at Ottawa, Canada, this 13th day of January 2003.
|
"François Angers" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
2000-895(IT)I
BETWEEN:
VINCENT DAOU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals by Simon Daou 2000-894(IT)I
on April 29, 2002 at Montréal, Quebec by
the Honourable Judge François Angers
Appearances
Counsel for the Appellant: Éric Potvin
Counsel for the Respondent: Simon-Nicolas Crépin
Nathalie Lessard
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1989, 1990 and 1991 taxation years are dismissed.
Signed at Ottawa, Canada, this 13th day of January 2003.
|
"François Angers" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20030113
Docket: 2000-894(IT)I
2000-895(IT)I
BETWEEN:
SIMON DAOU,
VINCENT DAOU,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers, J.T.C.C.
[1] The Minister of National Revenue ("the Minister") disallowed charitable donation tax credits claimed by the appellants for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years in the case of Simon Daou and for the 1989, 1990 and 1991 taxation years in the case of Vincent Daou. The amounts of the disallowed charitable donation tax credits claimed by Simon Daou are $2,500, $4,000, $6,000, $8,500, $5,000, $6,000 and $3,500 for these taxation years respectively. All these donations were made to the Ordre Antonien Libanais des Maronites ("the Order"). As well, the Minister made this reassessment after the expiry of the normal time limit for reassessments, for each of the 1989, 1990, 1991, 1992 and 1993 taxation years in the case of Simon Daou and for each of the three taxation years at issue in the case of Vincent Daou; the Minister also assessed penalties for both appellants for each of the taxation years at issue. On November 22, 1999, the Minister confirmed the assessments for both appellants for each of the taxation years at issue.
[2] The appeals were heard on common evidence; the parties agreed that the hearing would be held in French and that the Reasons for Judgment could be rendered in French even though the arguments presented had been written in English.
[3] In making the reassessment in the case of Vincent Daou, the Minister relied on the following assumptions of fact, the truth of each of which this appellant admitted or denied:
DONATIONS
(a) in filing his Income Tax Return for the 1989 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $2,000 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1989 taxation year; (ADMITTED)
(b) the Appellant has not in any manner given donation for an amount of $2,000 to the "Ordre Antonien Libanais des Maronites", during 1989 taxation year; (DENIED)
(c) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $2,000 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(d) in filing his Income Tax Return for the 1990 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $2,500 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1990 taxation year; (ADMITTED)
(e) the Appellant has not in any manner given donation for an amount of $2,500 to the "Ordre Antonien Libanais des Maronites", during 1990 taxation year; (DENIED)
(f) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $2,500 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(g) in filing his Income Tax Return for the 1991 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $3,680 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1991 taxation year; (ADMITTED)
(h) the Appellant has not in any manner given donation for an amount of $3,680 to the "Ordre Antonien Libanais des Maronites", during 1991 taxation year; (DENIED)
(i) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $3,680 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(j) the Appellant has not given the donations for which he claims charitable donations tax credits in his income tax returns for the 1989, 1990 and 1991 taxation years, and has rather participated in the following scheme:
in certain cases, the "Ordre Antonien Libanais des Maronites" issued receipt to a taxpayer indicating a donation in money for an amount equal to the amount that the taxpayer had paid by cheque, giving back to the taxpayer a sum of money or an amount approximately equal to the sum;
in other cases, the "Ordre Antonien Libanais des Maronites" issued a receipt to a taxpayer indicating a donation in money for a certain amount, the taxpayer having given no donation or having paid by cheque a small amount as opposed to the amount indicated on the receipt; (DENIED)
(k) ( ... )
(l) in filing his income tax returns and in supplying any information under the Act for the 1989, 1990 and 1991 taxation years, relatively to non-refundable tax credits claimed by the Appellant as charitable donations, in relation with the amounts of $2,000, $2,500 and $3,680 respectively, the Appellant has made misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud; (DENIED)
PENALTIES
(m) the Appellant knowingly, or under circumstances amounting to gross negligence, made false statements or omission in claiming non-refundable tax credits as charitable donations, in relation to the amounts of $2,000, $2,500 and $3,680 respectively, for the 1989, 1990 and 1991 taxation years, as he had never given any donation; (DENIED)
(n) the Appellant knowingly, or under circumstances amounting to gross negligence in carrying out a duty or obligation imposed under the Act, made or participated in, assented to or acquiesced in the making of false statements or omission in the income tax returns filed for the 1989, 1990 and 1991 taxation years, as a result of which the tax that would have been assessed on the information provided in the Appellant's income tax returns filed for those years, was less than the tax in fact payable by the amounts of $481.22, $615.26 and $917.76 respectively, for the 1989, 1990 and 1991 taxation years. (DENIED)
[4] In making the reassessment in the case of Simon Daou, the Minister relied on the following assumptions of fact, the truth of each of which this appellant admitted or denied:
DONATIONS
(a) in filing his Income Tax Return for the 1989 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $2,500 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1989 taxation year; (ADMITTED)
(b) the Appellant has not in any manner given donation for an amount of $2,500 to the "Ordre Antonien Libanais des Maronites", during 1989 taxation year; (DENIED)
(c) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $2,500 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(d) in filing his Income Tax Return for the 1990 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $4,000 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1990 taxation year; (ADMITTED)
(e) the Appellant has not in any manner given donation for an amount of $4,000 to the "Ordre Antonien Libanais des Maronites", during 1990 taxation year; (DENIED)
(f) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $4,000 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(g) in filing his income tax return for the 1991 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $6,000 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1991 taxation year; (ADMITTED)
(h) the Appellant has not in any manner given donation for an amount of $6,000 to the "Ordre Antonien Libanais des Maronites", during the 1991 taxation year; (DENIED)
(i) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $6,000 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(j) in filing his Income Tax Return for the 1992 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $8,500 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1992 taxation year; (ADMITTED)
(k) the Appellant has not in any manner given donation for an amount of $8,500 to the "Ordre Antonien Libanais des Maronites", during 1992 taxation year; (DENIED)
(l) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $8,500 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(m) in filing his Income Tax Return for the 1993 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $5,000 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1993 taxation year; (ADMITTED)
(n) the Appellant has not in any manner given donation for an amount of $5,000 to the "Ordre Antonien Libanais des Maronites", during 1993 taxation year; (DENIED)
(o) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $5,000 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(p) in filing his Income Tax Return for the 1994 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $6,000 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1994 taxation year; (ADMITTED)
(q) the Appellant has not in any manner given donation for an amount of $6,000 to the "Ordre Antonien Libanais des Maronites", during the 1994 taxation year; (DENIED)
(r) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $6,000 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(s) in filing his Income Tax Return for the 1995 taxation year, the Appellant claimed a charitable donation tax credit in relation, among other things, to an amount of $3,500 for which he contended having been a charitable donation given to the "Ordre Antonien Libanais des Maronites", during 1995 taxation year; (ADMITTED)
(t) the Appellant has not in any manner given donation for an amount of $3,500 to the "Ordre Antonien Libanais des Maronites", during 1995 taxation year; (DENIED)
(u) the Appellant never provided the Minister with any valid receipt containing prescribed information in relation to the so-called donation in the amount of $3,500 that the Appellant contends to having been made to the "Ordre Antonien Libanais des Maronites", as the amount of the donation that appears on the said-receipt is false; (DENIED)
(v) the Appellant has not given the donations for which he claims charitable donations tax credits in his income tax returns for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years, and has rather participated in the following scheme:
in certain cases, the "Ordre Antonien Libanais des Maronites" issued receipt to a taxpayer indicating a donation in money for an amount equal to the amount that the taxpayer had paid by cheque, giving back to the taxpayer a sum of money or an amount approximately equal to the sum;
in other cases, the "Ordre Antonien Libanais des Maronites" issued a receipt to a taxpayer indicating a donation in money for a certain amount, the taxpayer having given no donation or having paid by cheque a small amount as opposed to the amount indicated on the receipt; (DENIED)
(w) ( ... )
(x) in filing his income tax returns and in supplying any information under the Act for the 1989, 1990, 1991, 1992 and 1993 taxation years, relatively to non-refundable tax credits claimed by the Appellant as charitable donations, in relation with the amounts of $2,500, $4,000, $6,000, $8,500 and $5,000 respectively, the Appellant has made misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud; (DENIED)
PENALTIES
(y) the Appellant knowingly, or under circumstances amounting to gross negligence, made false statements or omission in claiming non-refundable tax credits as charitable donations, in relation to the amounts of $2,500, $4,000, $6,000, $8,500, $5,000, $6,000 and $3,500 respectively, for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years, as he had never given any donation; (DENIED)
(z) the Appellant knowingly, or under circumstances amounting to gross negligence in carrying out a duty or obligation imposed under the Act, made or participated in, assented to or acquiesced in the making of false statements or omission in the income tax returns filed for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years, as a result of which the tax that would have been assessed on the information provided in the Appellant's income tax returns filed for those years, was less than the tax in fact payable by the amounts of $608.14, $1,026.24, $1,518.12, $2,149.71, $1,242.52, $1,493.69 and $857.33 respectively, for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years. (DENIED)
[5] The appellant Vincent Daou testified that he settled permanently in Canada in 1988. After leaving Lebanon in 1981, he studied in the United States until 1988. His other brothers arrived in Canada in 1989 and 1990. Initially this appellant lived alone in an apartment; later he lived for a number of years with his brothers, Georges and Simon. During the taxation years at issue, this appellant was single.
[6] The appellant Vincent Daou stated that he was a Christian and that he occasionally attended the religious services of the Order. He learned about the Order in Lebanon, since most Lebanese Christians were members of the Order. Because during the taxation years at issue war was raging in this appellant's country of origin, the officiating priest had asked for help in the form of donations to help families in Lebanon cope with the conflict at the time. This appellant was single at the time and considered himself lucky to be in his position. He therefore considered that making a donation was the least he could do. He stated that he consulted his accountant before making the donations. The accountant apparently told him that he could make donations since he had employment income, and that the donations were deductible from his taxable income but that there was an allowable maximum for charitable donations to be observed.
[7] The appellant Vincent Daou made a donation for each of the taxation years at issue. For the 1989 taxation year he made a donation in the amount of $2,000. This cheque, which was given to the Order, was adduced as Exhibit A-1. The cheque is dated December 28, 1989. The receipt from the Order, dated December 31, 1989, was adduced as Exhibit A-2 and meets the requirements set out in the Income Tax Act ("the Act"). However, the cheque was deposited to the account of the Order only on April 3, 1990. The appellant stated that he recalled having given the cheque after mass but that it was possible that he wrote the cheque before that time. He himself gave the cheque to Father Joseph Khamar, who apparently gave the receipt to him at the same time. Under cross-examination, this appellant stated that except for his brother he did not know any other persons who had made similar donations. He was unable to explain why the cheque was deposited only on April 3 of the year following the donation. He admitted that this fact did not trouble him at the time but added that the situation was different now. He acknowledged that the account on which the cheque was drawn was a joint account he had opened with his brothers, and that they used this account in their business. He admitted that he did not usually issue postdated cheques and that, when issuing a cheque, he usually dated it the same day.
[8] In 1989, the appellant Vincent Daou declared employment income in the amount of $24,230, as well as interest and investment income in the amount of $3,388 (Exhibit I-2). The only charitable donation was the one at issue; for that year, this appellant did not make a contribution to a Registered Retirement Savings Plan (RRSP) (Exhibit I-2).
[9] For the 1990 taxation year, the appellant Vincent Daou made a donation to the Order in the amount of $2,500. This cheque was not located, but a letter from the bank (Exhibit A-3) confirms that a joint cheque in the amount of $6,000 was issued to cover the donation by this appellant and his brother. As was the case for the previous taxation year, the cheque was drawn on a joint account that this appellant had opened with his brothers. This appellant was unable to explain why the cheque was issued jointly with his brother but stated that his brothers each knew how much money in the account belonged to them. This appellant did not recall how much money belonged to each brother at the time but stated that enough money belonged to him to cover his donation. On the day of the hearing, this appellant did not recall how much of the $13,856 balance in the joint account on February 22, 1991 belonged to him but stated that he knew that amount at the time. Nor did he recall how much of the $190,902 balance in the joint account on December 20, 1988 belonged to each of his brothers.
[10] The receipt issued for the donation for the 1990 taxation year is dated December 31, 1990 (Exhibit A-12). The bank withdrawal was made on February 22, 1991. The appellant Vincent Daou did not recall either the date he wrote on the cheque or the circumstances in which he gave the cheque to the Order but, as was the case for the 1989 taxation year, he stated that he was given the receipt when he made the donation and that the cheque should bear the same date as the receipt. This receipt meets the requirements set out in the Act.
[11] In 1990, the appellant Vincent Daou declared employment income in the amount of $31,915, as well as interest and investment income in the amount of $4,870. He made contribution in the amount of $5,000 to an RRSP, and made the donation at issue (Exhibit I-3).
[12] For the 1991 taxation year, the appellant Vincent Daou made a donation to the Order in the amount of $3,700. This donation was made in two parts. The first part, in the amount of $200, was paid on February 20, 1991; the second part, in the amount of $3,500, was made on December 5, 1991. The cheque for the second part was adduced in evidence (Exhibit A-5). The first part of this donation was apparently made in cash. This appellant adduced in evidence two receipts, one for the donation in the amount of $200 (Exhibit A-6), and another for the donation in the amount of $3,500 (Exhibit A-6); these receipts meet the requirements set out in the Act.
[13] In 1991, the appellant Vincent Daou received employment income in the amount of $20,293, unemployment insurance benefit income in the amount of $1,113 $, interest income in the amount of $1,700, and other income in the amount of $1,076. He made a contribution in the amount of $5,700 to an RRSP, and made a donation to the Order in the amount of $3,700 (Exhibit I-4).
[14] The evidence has established that, in 1992, the appellant Vincent Daou worked less and made no donations to the Order. His income was approximately $19,000, and he made a contribution in the amount of $3,500 to his RRSP (Exhibit I-5). Furthermore, this appellant made no further charitable donations after 1992. From 1995 to 2000, he spend nearly all his time in Lebanon looking after his parents. When questioned about the scandal involving the Order, he stated that he had learned about these events by reading the newspapers. He felt powerless in the face of these events, and was out of the country. According to this appellant, only his brothers knew that he had made donations to the Order.
[15] The appellant Simon Daou was born in Lebanon. He studied with the Marist Brothers in his country of origin. After the war broke out, his father sent him to the United States, where he studied mechanical engineering. He then worked for approximately six years in Saudi Arabia. His family immigrated to Canada; he arrived in Canada in December 1988 to joint his brothers Georges and Vincent. His brother Ghassan arrived later. From 1989 to 1995, this appellant worked for the Worthington company. He is married to Marie Malek; they have two children, aged six and three years.
[16] The appellant Simon Daou stated that, during the years he spent in Saudi Arabia, his income varied between US$35,000 and US$50,000. In that country, everything was provided and he did not pay income tax. Simon Daou stated that he was Catholic and therefore Christian, and Maronite by birth. In Montréal, the Order has a monastery, a church, and a bishop who leads the community. During the period at issue, the Order was administered by three teams of priests; this appellant recalled mainly Father Joseph Khamar. This appellant stated that he was a practising Christian and more Christian than the average person. He became a more practising Christian because, he said, in Lebanon there are Lebanese Muslims and Lebanese Christians, and the Lebanese Christians are the only Christians in the Middle East.
[17] When announcements were made in church, this appellant's conscience and his desire to help his people led him to make donations to the Order. According to this appellant, he made these donations in order to help the victims of the war in his country of origin. The church was asking for food, clothing and donations of money. In 1989, this appellant discussed this matter with his brothers and visited his accountant, one Mr. Bacopanos, in order to discuss with him terms and conditions such as the allowable maximum for charitable donations for income tax purposes and the tax benefits of charitable donations.
[18] As a result, for the 1989 taxation year, the appellant Simon Daou made a donation to the Order in the amount of $2,500. A cheque for this amount, dated December 28, 1989, was adduced as Exhibit A-10. A receipt dated December 31, 1989 (Exhibit A-11) was also adduced. This cheque was deposited into the Order's account on April 3, 1990. This appellant did not recall who gave him the receipt, but said he believed he gave the cheque to a priest, whose name he did not know. He also said he believed that he wrote the cheque on the date indicated on the cheque, that is, December 28, 1989, but that the receipt was given to him on the date indicated on the receipt, that is, December 31, 1989. He stated that he probably gave the cheque to the Order on December 31, 1989.
[19] Under cross-examination, the appellant Simon Daou testified that the fact that this cheque was deposited only on April 3 did not trouble him. He stated that at the time he was financially comfortable and did not ask himself any questions on this point. This receipt meets the requirements set out in the Act.
[20] This cheque (Exhibit A-10) was drawn on a joint account that the appellant Simon Daou held at the time with his brothers Georges, Vincent and Ghassan. Exhibit A-21 confirms this fact and the fact that the account was debited for the amount of $2,500 on April 3, 1990.
[21] For the 1990 taxation year, the appellant Simon Daou made a donation to the same donee in the amount of $4,000. Like his brother Vincent, he adduced a letter from the Royal Bank (Exhibit A-3) confirming that a cheque in the amount of $6,500 was drawn on their account but that the 1991 files were destroyed and that it was impossible to produce a copy of this cheque. The statements of account of this appellant and his brother were adduced as Exhibit A-9 and indicate that a cheque in the amount of $6,500 was debited from their account on February 22, 1991. On the statement of account, this appellant wrote the respective amounts of their donations, that is, $4,000 donated by himself and $2,500 donated by his brother Vincent. The Order gave this appellant a receipt in the amount of $4,000 dated December 31, 1990 (Exhibit A-12); this receipt meets the requirements set out in the Act. The cheque was drawn on an account that was different from the one used in 1989 but was opened in the names of this appellant and these same brothers.
[22] For the 1991 taxation year, the donation made was in the amount of $6,000. This cheque was drawn on the same bank account as the donation made for the 1990 taxation year and was issued to the same donee. The cheque, adduced as Exhibit A-13, is dated December 4, 1991 and was cashed on December 6, 1991. The receipt (Exhibit A-14) is dated December 5, 1991 and meets the requirements set out in the Act. The appellant Simon Daou stated that the amount of the donation made for that taxation year was based on his income and that he consulted his accountant before deciding on this amount. The donation was taken from an account this appellant held with his brothers; Exhibit A-22 confirms that this account was debited on December 6, 1991.
[23] In 1991, Simon Daou's income tax return (Exhibit I-9) shows employment income in the amount of $49,000 and interest and investment income in the amount of $3,400. He made a contribution in the amount of $5,420 to an RRSP, and made the donation at issue as well as another donation in the amount of $50 to the Centre des femmes de Montréal. He explained that he made this second donation at the time of a solicitation at his office. According to this appellant, the difference in the amounts of the two donations can be explained by the fact that Canada is a country that offers a great deal more than does Lebanon.
[24] For the 1992 taxation year, the donation made by the appellant Simon Daou to the Order was in the amount of $8,500 (Exhibit A-15). This cheque, dated December 30, 1992, was cashed on January 8, 1993 (Exhibit A-23). A copy of the receipt given to this appellant was adduced as Exhibit I-6, Tab 5; this receipt meets the requirements set out in the Act. The cheque was drawn on the same account from which the donation made for the 1989 taxation year was drawn, that is, a joint account that this appellant had opened with his brothers.
[25] Simon Daou's 1992 income tax return (Exhibit I-6, Tab 1) shows employment income in the amount of $51,663 and interest and investment income in the amount of $2,663. He made a contribution in the amount of $3,757 to his RRSP, and made minimal donations to other donees as well as the donation at issue.
[26] The donation made for the 1993 taxation year was in the amount of $5,000. A photocopy of this cheque was adduced (Exhibit A-16). The cheque appears to be dated December 11, 1993. According to an inscription on the back of the cheque and according to this appellant's statement of account (Exhibit A-24), the cheque was apparently cashed on December 16, 1993. It was drawn on a joint account that this appellant had opened with his brother Georges. For this donation, the Order gave this appellant a receipt dated November 22, 1993 (Exhibit I-6, Tab 5) that meets the requirements set out in the Act.
[27] Simon Daou's 1993 income tax return (Exhibit I-6, Tab 2) shows employment income in the amount of $53,567 and income from other sources in the amount of $2,577. He made a contribution in the amount of $3,400 to an RRSP, and made donations by means of payroll deductions to the United Way and the Red Cross, as well as the donation at issue.
[28] On May 22, 1994, the appellant Simon Daou married. For the 1994 taxation year, he made a donation to the same donee in the amount of $6,000. This cheque (Exhibit A-17) is dated December 27, 1994 and is drawn on a joint account that this appellant opened with his spouse. The cheque was cashed on January 31, 1995 (Exhibit A-25). On that date the donee gave this appellant a receipt; this receipt meets the requirements set out in the Act (Exhibit A-18 and Exhibit I-6, Tab 5).
[29] The appellant Simon Daou acknowledged that his 1994 income was made up of employment income in the amount of $57,000 and interest and investment income and income from other sources in the amount of $1,069. He made a contribution in the amount of $3,674 to his RRSP, and made other donations totalling $93.
[30] The last donation was the one made for the 1995 taxation year. This donation was in the amount of $3,500 and was made by cheque on December 22, 1995 (Exhibit A-19). This cheque was cashed on January 9, 1996 (Exhibits A-19 and A-26). A receipt for this amount was issued on December 25, 1995 (Exhibit A-20); this receipt meets the requirements set out in the Act. The cheque was drawn on a joint account of the appellant Simon Daou and his spouse that was debited on January 9, 1996 (Exhibit A-26).
[31] In 1995, the appellant Simon Daou declared income in the amount of $63,000. He made a contribution in the amount of $4,787 to his RRSP, and made only one donation, the donation at issue.
[32] The appellant Simon Daou acknowledged that after 1995 he made no further donations to the Order. He explained that after 1995 he was made aware of a scandal in the print media and on the radio. He recalled that things had happened that he described as "not right". He continued to attend services at Oratoire St-Joseph and to make donations in small amounts in order not to abandon them. He also stated that he no longer sent money to Lebanon by other means because in 1996 the situation in Lebanon improved greatly. Under cross-examination, he confirmed that his salary was $66,000 in 1996, was $68,000 in 1997, was similar to the two previous years in 1998, doubled in 1999, and was nil in 2000.
[33] The appellant Simon Daou specified that, after the scandal broke, he tried unsuccessfully to contact one of the priests. He also admitted that he did not ask his family in Lebanon to inquire into these events.
[34] The evidence adduced by the respondent was voluminous, and necessarily so in order to establish the various stratagems devised by the Order in order to reward some of its donors and provide them with receipts for income tax purposes. In 1990, the Order was audited by Revenue Canada and received instructions following that audit. The eventual investigation and final audit have indicated that the Order did not follow the instructions it received in 1990.
[35] Revenue Canada initiated the main investigation after receiving information about various stratagems employed by the Order to receive donations and reward its donors. While I shall not go into all the details of that investigation, the evidence adduced has made it clear that the investigation resulted in convictions of tax evasion for a number of persons, and in reassessments for the participants in the stratagem, nearly 1,200 persons. Most of those taxpayers did not contest the reassessments; some appealed.
[36] Investigator Gaétan Ouellette testified about his role in the review of the Order's files. On November 8, 1995, armed with a warrant, the investigators seized all of the Order's files for review: bank records, deposit slips, cheques issued by the Order, books of receipts for donations, and diskettes containing accounting records. They also met with the Order's accountants.
[37] As well, nearly 100 persons informed the investigators of the existence of a stratagem by means of which the donors of substantial donations would each be given receipts and the Order would subsequently return to the donors, in cash, 80 percent of the donations made. By means of another other stratagem employed, donors would make cash donations, in return for which they would each be given receipts for amounts four or five times as high as the amounts of the donations.
[38] Most of the donations were solicited by persons who, in turn, kept 5 per cent of the donations as a commission. Some accountants suggested this stratagem to their clients so that the clients could obtain a tax benefit from it. A number of admissions were adduced in evidence, and confirm the existence of the stratagems employed (Exhibit I-12, Tabs 10 and 11). The witness Mr. Ouellette reproduced (Exhibit I-12, Tab 3) the information taken from a diskette referred to as "bibliorec" at the time of the search; in a numeric sequence of receipts issued, this diskette explains the reception and distribution of the donations and identifies the donors, the amounts of the donations, the amounts paid back to the donors, the amounts kept by the Order and, lastly, the amounts remitted by the persons soliciting. No more need be said on this point, except that the information taken from this diskette and reproduced corresponds to information taken from other files seized, such as the cheques and deposit slips, and in fact confirms the stratagem by means of which the Order kept only 20 per cent of the donations, issued receipts for the full amounts, and paid back the differences to the donors in cash.
[39] In order to pay the 80 per cent back to the donors, the Order issued cheques drawn on its account and payable to cash. This procedure implemented out immediately after the donations were deposited or within the next few days. Exhibit I-12, Tab 7 contains a number of examples of this procedure; some of these withdrawals identify the donors to whom the money was to be paid back.
[40] The facts have shown that, even after the searches, the Order continued to issue receipts and to offer receipts to certain persons.
[41] The respondent also called as a witness Colette Langelier, who actively participated in this investigation. She began to participate in the investigation after the informations were received from the spouse of one participant in this stratagem. She prepared the correspondence and the instructions sent to the Order in order to ensure that the Order complied with Revenue Canada's requirements. She also reviewed all the Order's income tax returns (Exhibit I-15, Tab 1), which contained the donor lists. She then met with the priests in order to review the accounting records, and realized that the Order had no such records. She reviewed certain expenditure vouchers, the bank account statements and the deposit slips in order to carry out a bank reconciliation (Exhibit I-16), which she adduced. She noted all the details from 1989 to 1993. Her purpose was to identify the amounts of the deposits made in comparison with the total of the receipts issued.
[42] The results of this exercise allowed Ms Langelier to conclude that three different stratagems were employed:
(1) professionals, mostly physicians of Lebanese origin, and/or their spouses, as well as business persons, whose "amounts donated" accounted for approximately 80 per cent of the total of the receipts issued. In other words, these persons issued cheques equivalent to 100 per cent of the amounts of the official receipts issued by the Order, and the Order subsequently paid back to them 80 per cent of the donations in cash;
(2) partial donations: as part of this stratagem were found cheques from donors for between 10 per cent and 20 per cent of the amounts of the official receipts. The persons participating in this stratagem were employees or retired persons; usually the cheques were deposited from January to May of the year following the year indicated on the receipts, which therefore were backdated;
(3) donations that could not be traced, or for which no material evidence except the official receipts was found. These donations were made by the donors in cash. It can be seen from the numbers on the receipts that a number of these donations were made during the following year. A simple comparison of the donations made by cheque, the dates they were deposited, and the numbers of the corresponding receipts points to this conclusion.
[43] Ms Langelier adduced two charts (Exhibits I-19 and I-20) showing the tax benefits the appellants obtained after making donations to the Order for the taxation years at issue, and two additional charts (Exhibits I-22 and I-23) showing amounts from the appellants' income tax returns, the percentages of their donations to the Order in comparison with their costs of living, and the percentages of the receipts in comparison with the allowable maximum for charitable donations. In the first case, the donations varied between 11 per cent and 20 per cent; in the second case, they varied between 29 per cent and 85 per cent.
[44] A further chart (Exhibit I-24) shows the relationship between the dates of the receipts issued to the appellants and the dates the cheques obtained as donations were deposited. The Order's deposit books each contained either 25 or 10 receipts, all numbered. By means of a comparison of the dates of the deposits, the dates of the receipts, and the numbers of the receipts, the chart shows that the receipts issued by the Order for the 1989 and 1990 taxation years had to be backdated. As well, according to the order of the numbers of the receipts, the deposit of a cheque in the amount of $6,500 issued by the two appellants should have appeared in 1990. According to Ms Langelier, the reconciliation does not show any deposit in this amount, which leads her to conclude that the donation would have been made in cash and that the receipt was backdated.
[45] Ms Langelier noted that, according to Exhibit I-16, page 23, the cheques for the two donations made by the appellants for the 1991 taxation year, that is, in the amounts of $3,500 and $6,000, were deposited on December 6, 1991. The deposit made that day and the deposit made on December 10, 1991 totalled $69,000. The same chart shows withdrawals made by the Order on December 10 and 11 by means of cheques payable to cash for approximately 80 per cent of the total of these two deposits; Ms Langelier therefore concluded that this occurrence was a hybrid case corresponding to the first stratagem.
[46] Exhibit I-16, page 35, describes the same occurrence concerning the donation made by the appellant Simon Daou for the 1992 taxation year, in the amount of $8,500. Along with other cheques, his cheque in the amount of $8,500 was deposited on January 8, 1993. The total amount of the deposit was $26,000. On January 15, 1993, the Order made a withdrawal payable to cash in the amount of $20,000, approximately 80 per cent of the amount of the deposit. This occurrence also corresponds to the first stratagem.
[47] According to Exhibit I-16, page 40, a deposit for the 1993 taxation year in the amount of $24,600 was made to the Order's account on December 16, 1993. According to the receipt issued to the appellant Simon Daou, this amount included the donation in the amount of $5,000 made by him. The deposit was made one month after the date the receipt was issued. On December 20, 1993, the Order made a withdrawal in the amount of $4,000 from another bank than the bank at which the deposit was made. The amount of this withdrawal is approximately 80 per cent of the amount of the donation for which the receipt was issued.
[48] Still according to Exhibit I-16, page 48, the Order made a deposit in the amount of $11,000 on January 31, 1995; this amount included the cheque from the appellant Simon Daou in the amount of $6,000, for which he had been given a receipt dated December 27, 1994, that is, one month earlier. This receipt, numbered 860, is from a book of 10 receipts. All the other receipts from the same book were issued at the beginning of the month. Ms Langelier wondered about this discrepancy, and also noted a large withdrawal made by the Order a few days later.
[49] The respondent called as a witness Michel Yazbeck, a dentist. Mr. Yazbeck was has lived in Canada since 1979 and is familiar with the Order. He stated that in 1990, 1991 and 1992 he made donations to the Order. He would go to the church in order to donate a cheque, and would return there approximately one week later in order to obtain a receipt and a cash kickback. Although the donation for the 1990 taxation year in the amount of $10,000 was actually a donation in the amount of only $2,000, he obtained a receipt in the amount of $10,000. He also stated that the donation for the 1990 taxation year was made in March 1991 and that the receipt was backdated to December 31, 1990. After being contacted by Revenue Canada in 1997, he sent Revenue Canada a letter confirming that the Order had paid back as much as 80 per cent of the donations he made during the three years he participated in the stratagem.
[50] In making his arguments, counsel for the respondent adduced before the Court a collection of case law setting out the legal principles concerning the burden of proof and the rules concerning the assignment of probative value to circumstantial evidence. On this latter point, in La preuve civile (2e édition), Éditions Yvon Blais, author Jean-Claude Royer writes as follows at page 100, paragraph 175:
175 - Direct evidence is preferable to indirect evidence - Direct evidence is evidence that has a direct bearing on the fact at issue. Indirect evidence, circumstantial evidence, or evidence made by presumption has to do with relevant facts that make it possible to infer the existence of the fact at issue. [. . .]
Direct testimonial evidence is superior to evidence made by presumption. However, this rule is not absolute. In certain circumstances, the court may prefer circumstantial evidence to direct evidence.
[51] It must also be borne in mind that the courts are not obliged to believe witnesses, even if they are not contradicted by other witnesses, if their versions of the facts appear implausible according to the circumstances established by the evidence or according to plain common sense (see Legaré v. The Shawinigan Water and Power Co. Ltd.).
[52] In this case, the evidence adduced by the respondent leaves no doubt about the existence of a well-structured stratagem set up by the Order. By employing this stratagem, the Order could collect considerable amounts of money and, at the same time, reward donors by means of receipts issued for amounts higher than the actual amounts of the donations. As has been explained above, there were three possible ways of obtaining false receipts. At issue in this case is whether the appellants participated in this stratagem in order to obtain a tax benefit from it.
[53] Counsel for the appellants stated that there was no direct evidence establishing that his clients participated in the Order's stratagem. In making his arguments, he adduced the donation cheques for all the taxation years at issue except the 1990 taxation year. He stated that the receipts adduced were acceptable as evidence, that his clients could afford to make the donations at issue, and that they stated that they made these donations. No admission taken by the investigators pointed to the appellants. According to Exhibits I-22 and I-23, the appellants' contributions were well below the allowable maximum for charitable donations, and their incomes allowed them to be generous. According to counsel for the appellants, the evidence of the existence of the stratagem was not sufficient to allow the respondent to discharge the onus of establishing that the appellants participated in the stratagem. Quoting author Jean-Claude Royer, counsel for the appellants argued that it is left to the Court to assign probative value to assumptions of fact not established by law, and that the Court must take into consideration only those assumptions of fact that are serious, precise and in agreement. In this case, counsel for the appellants argued, there is no agreement between the donations made by the appellants and the allowable maximum for charitable donations of 20 per cent of net income shown in Exhibits I-22 and I-23.
[54] Counsel for the respondent, on the other hand, argued that she had established the existence of a stratagem and that her evidence pointing to the appellants, although circumstantial, was sufficient to allow her to discharge the burden of proof on her. The details of the Order's transactions as part of the stratagem show how the Order respected its financial obligations, but the receipts issued to the taxpayers, including the receipts adduced by the appellants, were illegal and false and had no probative value.
[55] Counsel for the respondent argued that, for the 1990 taxation year, neither Mr. Ouellette nor Ms Langelier was able to confirm the existence of the deposit in the amount of $6,500 that the Order should have made after receiving the donation from the appellants. She argued that this was the only cheque the appellants did not locate or adduce in evidence, and the only donation they made together. She also wondered where the priest who signed the receipt (Exhibit A-2) obtained the telephone number of the appellant Vincent Daou, since this information does not appear on this donation cheque. The same question arises for the 1994 and 1995 taxation years: where could the priest have obtained this information? Counsel for the respondent argued that the appellants and the priest must have spoken to each other more often than the appellants suggested, since the address and telephone number of the appellant Simon Daou do not appear on the cheque for the donation for the 1991 taxation year (Exhibit A-13) but do appear on the receipt (Exhibit A-14).
[56] The receipt in the amount of $5,000 issued to the appellant Simon Daou (Exhibit I-6, Tab 5) is dated November 22, 1993; the cheque for this donation (Exhibit A-16) is dated December 11, 1993. However, this appellant testified that he was given the receipts on the same day. For the 1995 taxation year, counsel for the respondent wondered why the Order would have issued a receipt (Exhibit A-20) in the name of the appellant Simon Daou alone when the donation was taken from the joint account of this appellant and his spouse. For the 1994 taxation year, the receipt (Exhibit A-18) for the donation taken from the same account was issued in the name of this appellant and his spouse. According to counsel for the respondent, contrary to the allegations made by Simon Daou, there must have been conversations between him and the representatives of the Order.
[57] Another yet unanswered question, according to counsel for the respondent, was why the Order waited so long to deposit the donations when, according to Exhibit I-16, it made deposits every day. On the cheque dated December 30, 1992 (Exhibit A-15), it can be seen that a change was made to the three letters indicating the month, so that one might conclude that the writer had initially written a "J", for January; counsel for the respondent wondered about this fact as well. According to Ms Langelier, if a deposit is made after the date of a receipt, it must be concluded that the receipt is backdated. All these arguments contradict the appellants' version of the facts, that is, that they were given their receipts on the dates they donated their cheques. Counsel for the respondent added that Exhibit I-15, Tab 3 contains 13 pages of receipts, all dated December 31, 1991, which supported the hypothesis that the Order did not date the receipts accurately.
[58] Counsel for the respondent continued, stating that the priests found to have participated in the false receipts stratagem were the same persons who signed the receipts issued to the appellants. The investigation showed that the taxpayers who made donations to the Order were very generous and did not make donations to other organizations. The evidence also established that the appellants made donations only in the taxation years during which the stratagem was operative. She therefore cast doubt on the appellants' version of the facts, that is, that they consulted their accountant in order to ascertain how much money they were allowed to donate. That consultation was held before the end of the year, and it must have been difficult for the accountant to respond before having available all the information about the appellants' income. Counsel for the respondent concluded that it was more than likely that the appellants participated in the stratagem, even if their names do not appear in the diskette referred to as "bibliorec".
[59] As has been noted in paragraph 42 of these Reasons, the evidence adduced by the respondent exposes a stratagem well established by the Order. Did the appellants participate in this stratagem? Although all the receipts meet the requirements set out in the Act, it is also true that the donations must be legitimately made, that is, there must be a remittance of the money constituting the irrevocable donation. In this case, the balance of evidence adduced favours the respondent and makes it possible to find that the appellants did indeed participate in the stratagem set up by the Order during all the taxation years at issue.
[60] The testimony by the appellants, the percentages of their donations in comparison with their incomes and the percentages of their donations in comparison with the allowable maximum for charitable donations, the dates of the deposits in comparison with the dates of the receipts, the withdrawals made almost immediately after the deposits and in amounts of approximately the percentage of the kickbacks made by means of the stratagem, and the backdated receipts, to name only these factors, allow me to find that the appellants did participate in the stratagem.
[61] I find it odd that, except for one donation in the amount of $50 made by Simon Daou for the 1991 taxation year, all the other donations made during the taxation years at issue, amounting to $43,680, were made to the Order.
[62] The information gathered by Ms Langelier and adduced in evidence in chart form, particularly Exhibits I-16, I-22, I-23 and I-24, is quite revealing of the circumstances that should not occur in the normal course of a donor's making a donation and obtaining a receipt and the donee's depositing the donation within a few days. In this case, one must wonder why, as part of the first stratagem, the receipts were backdated, the donations were deposited on later dates, and the Order made withdrawals shortly thereafter in amounts of approximately a percentage of the donations.
[63] It is true that the appellants made donations that were within the allowable maximum for charitable donations and that their incomes allowed them to be generous. On the other hand, one cannot ignore all the circumstances in which the donations were made, such as the fact that no evidence was found of the donation in the amount of $6,500 made by the appellants and the fact that this cheque was the only one the appellants were unable to locate. What about the fact that one receipt is dated November 22, 1993 while the cheque for which this receipt was issued is dated December 11, 1993, when this appellant claims that he was given the receipts on the same days he made the donations? One may doubt the credibility of the evidence regarding these donations: in fact, they were not donations, but a semblance that allowed the appellants to obtain a tax benefit.
[64] If it is found that the appellants did not make genuine donations, is subsection 163(2) of the Act applicable in this case? Did the appellants, knowingly or under circumstances amounting to gross negligence, make a false statement or an omission in filing their income tax returns for the taxation years at issue? Having found that the appellants participated in the stratagem and were aware of the contents of their income tax returns and of the income tax credits based on the false receipts they obtained, I consider that I am justified in finding that on a balance of probabilities they made false statements on their income tax returns and that the penalties are justified.
[65] For the same reasons, I am also justified in finding that on a balance of probabilities the respondent has established that through neglect, carelessness or wilful default the appellants made a misrepresentation of the facts, and in finding that the respondent may make reassessments after the expiry of the normal time limit for reassessments, for the 1989 through 1993 taxation years in the case of Simon Daou and for the 1989, 1990 and 1991 taxation years in the case of Vincent Daou.
[66] For these reasons, the appeals are dismissed.
Signed at Ottawa, Canada, this 13th day of January 2003.
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"François Angers" |
J.T.C.C.