http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/214007/index.do
Boroumand v. Canada (December 15, 2016) – 2016 FCA 313, Nadon, Near (author), Rennie JJ. A.).
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. The Tax Court decision dismissing his appeal was blogged earlier on this site. In the Federal Court of Appeal Mr. Boroumand was unsuccessful in arguing that the Tax Court Judge should have admitted hearsay evidence of money transfers, holding that the evidence was too inherently unreliable to meet the business records exception to the hearsay rule. The Tax Court Judge made no reversible error in permitting the opening of statute-barred years or sustaining the imposition of gross negligence penalties. The appeal was dismissed with costs.
Decision: The Court of Appeal rejected Mr. Boroumand’s argument that the Tax Court Judge should have admitted hearsay evidence of money transfers:
[2] The Judge found that the appellant had unreported income of $3,669,458 and that he had not demonstrated that the source of the unreported funds was not taxable. The Judge also found that the Minister of National Revenue (the Minister) was justified in reassessing the taxation years outside the statutory period and in imposing gross negligence penalties. In coming to her decision, the Judge refused to admit documents from money exchange enterprises purporting to show that the appellant received nearly two million dollars from Iran. The appellant’s main ground of appeal is that the Judge erred in refusing to admit the documents under an exception to the rule excluding hearsay evidence.
[3] The Supreme Court of Canada has found that “the trial judge is well placed to determine the extent to which the hearsay dangers of a particular case are of concern and whether they can be sufficiently alleviated.” Further, a trial judge’s ruling on admissibility is entitled to deference so long as it is informed by correct principles of law (R v. Blackman, 2008 SCC 37 at para 36, [2008] 2 S.C.R. 298). In my view, there is no reason to interfere with the Judge’s ruling on the admissibility of the money exchange documents.
[4] It was not disputed that the relevant documents were hearsay and, therefore, presumptively inadmissible.
[5] Section 30 of the Canada Evidence Act, R.S.C., 1985, c. C-5 (CEA) provides a statutory hearsay exception for records made in the usual and ordinary course of business (i.e. business records).
[6] To determine whether the evidence meets the statutory exception, the court may, pursuant to subsection 30(6) of the CEA, examine the documents and hear evidence as to the circumstances of the creation of the documents and draw any reasonable inference. Despite assertions by the appellant that the money exchange documents were created in the usual and ordinary course of business of the money exchange enterprise, these assertions were unsupported by evidence. There was no affidavit evidence and the appellant did not call any witnesses from the money exchange enterprises. The Judge found that “the appellant offered no explanation as to the circumstances in which the records were made” (reasons at para. 49). As such, there is no basis on which to interfere with the Judge’s finding.
The Court of Appeal also rejected Mr. Boroumand’s arguments that the Tax Court Judge erred in permitting the opening of statute-barred years and in sustaining gross negligence penalties:
[12] The appellant also alleges that the Judge made a palpable and overriding error in upholding the Minister’s reassessment outside the statutory period and imposition of gross negligence penalties under subparagraph 152(4)(a)(i) and subsection 163(2) of the Income Tax Act. No error is alleged in the Judge’s articulation of what is required to apply those provisions. The Judge found that the appellant had unreported income and did not provide a plausible explanation for the discrepancy between his reported income and net worth (reasons at para. 67). The Judge also found that the appellant made serious and lengthy omissions in income declared and provided inconsistent and incomplete evidence (reasons at para. 70). There is no basis on which to interfere with the Judge’s determination that the Minister met her burden and was entitled to impose gross negligence penalties and reassess outside the statutory period.
As a result the appeal was dismissed with costs.