http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/120550/index.do
Boroumand v. The Queen (September 15, 2015 – 2015 TCC 239, Lamarre ACJ).
Précis: This is a classic net worth case where Mr. Boroumand reported aggregate income of roughly $40,000 in the years 2003 to 2007 and was reassessed for additional amounts totalling roughly $3.7 million for the same taxation years.
Apart from some minor concessions made by the Crown the appeals were dismissed with costs.
Decision: This case is a classic example of net worth assessments where the taxpayer claimed that the disputed funds all came from non-taxable sources either from inside or outside of Canada. The Associate Chief Justice reviewed the taxpayer’s arguments meticulously but in the end simply did not accept any of his explanations:
[67] As explained above in my reasons, I am satisfied that the appellant earned unreported income and did not provide a credible and plausible explanation for the discrepancy between his reported income and his net worth.
[68] Counsel for the appellant argued that more is required in order to reassess after three years. He suggested that there must be some deficiency on the face of a return in order for an audit to be commenced outside the statutory period; otherwise no one would be able to invoke the protection of the limitation period. He argued that, although the Minister is not required to prove the precise source of income, she must nevertheless be able to show that there was a taxable source of income.
[69] With respect, I think the law is quite clear: the Minister is not obligated to identify a source of income underlying a net worth assessment. Our system of taxation is a self‑assessing one. The taxpayer is in the best position to know the sources of his income; if that income is non‑taxable, he is in the best position to establish that fact by showing where the income came from through credible and plausible evidence provided in accordance with the rules of law.
[70] Here, the magnitude of the omissions in relation to the income declared is significant and occurred over a number of years. In the appellant's testimony, more than half of the amount assessed as unreported income was not addressed. There were serious inconsistencies in his evidence and his version of events was in conflict with documents prepared by his own accountants and with some of his previous statements. I am satisfied that the respondent has met her burden of proof of both showing that the appellant made a misrepresentation of his income in a way that is attributable to carelessness, neglect or wilful default, but also in a way that involved a high degree of negligence tantamount to intentional acting, or indifference as to whether the law is complied with or not.
Apart from some minor concessions made by the Crown the appeals were dismissed with costs.