http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/66724/index.do 
9100-8649 Québec Inc. v. Canada (January 28, 2014 – 2014 FCA 20, Pelletier, Trudel (Author), Mainville JJA).
Précis: The appellant operated two restaurants. During the course of an audit the auditor noticed discrepancies between the alcohol purchases and the reported sales of alcohol. The auditor applied an alternative method to reconstruct the appellant’s income and found a discrepancy of roughly $3.2 million. The Federal Court of Appeal rejected the appellant’s argument that employees were consuming, among other things, 60% to 85% of the beer purchased by the company for both restaurants.
Decision: This is an English translation that was released on January 26, 2015 of a decision of the Federal Court of Appeal that was issued from the bench in French on January 28, 2014.
The appellant operated two restaurants. During the course of an audit the auditor noticed discrepancies between the alcohol purchases and the reported sales of alcohol. The auditor applied an alternative method to reconstruct the appellant’s income:
[3] During an audit undertaken by Revenu Québec, certain discrepancies emerged, including discrepancies between amounts relating to the purchase of beer, wine and sake and the reported sales of these products. Hence, an auditor from Revenu Québec decided to apply an alternative audit method in order to determine the company’s actual financial situation. The alternative method selected consisted of [translation] “reconstructing the appellant’s sales from its purchases by the application of a fixed ratio to certain items calculated on the basis of a sampling of invoices” (Appeal Book, Auditor’s Report, page 70).
[4] The auditor thus found a discrepancy of $3,167,703.82 in income for the three audit years. This is the amount on which the assessment, interest and penalty were based, and the assessment was upheld by the judge.
The Court of Appeal gave little credence to the argument that most of the missing alcohol had been consumed by the restaurant staff:
[6] We are all of the view that this appeal cannot succeed. We are no more convinced than the judge by the appellant’s argument that the application of the alternative audit method was inappropriate given the appellant’s explanation that the lack of profit on the alcoholic beverages was attributable to the employees’ consumption of alcohol during and after working hours; this explanation implies that the employees were consuming, among other things, 60% to 85% of the beer purchased by the company for both restaurants.