Credibility & Reliability Redux

In this recent TCC case the appellant had their 2006 tax return reopened despite it being outside the statute barred period and was reassessed for charitable donations that the CRA believed that he did not make but claimed regardless. As a reminder, the CRA’s assessment of tax owing is deemed to be correct unless vacated or reassessed upon objection or appeal. However, in the case where the assessment is made outside the normal assessment period as allowed by statute, the burden of proof is on the CRA to prove that there was a misrepresentation on the return that was attributable to neglect, carelessness or wilful default that allows them to reopen the return after the otherwise statute barred period. The judge proceeded to analyze the CRA’s representations as to how a misrepresentation had been made and that it was attributable to neglect, carelessness or wilful default. For the most part the judge did not accept the CRA’s adverse inferences made to prove that they were allowed by statute to reopen the period, but in his testimony under examinations, the appellant was found to be neither credible or reliable in his testimony and this was ultimately his downfall:

“The Respondent initially asked the Appellant on the witness stand whether he attended Mega Church weekly and, in response, the Appellant said that the visits were not weekly but probably twice a month. This corresponds to approximately 24 Mega Church visits in 2006. Later, he testified that he attended the Mega Church location three times in 2006 and, on each occasion, he gave Mega Church a donation of $2,000 by way of bank draft. This was his version of events through most of his testimony. However, when the Respondent returned to the topic of Mega Church later in questioning, the Appellant testified that he attended Mega Church with his brother every Sunday; this would correspond to 52 visits in 2006.”

The judge later says:

“However, even though I do not agree with the Respondent’s submissions on the significance of this other evidence, I find myself resolving the question at hand by returning to inconsistency in the Appellant’s testimony on his pattern of visits to Mega Church in 2006. Earlier, I said that the Appellant’s failure to provide a consistent account of his 2006 Mega Church transaction pattern led me to reject his testimony as proof of the frequency of his 2006 Mega Church payments and the amount each time. But, the impact of the inconsistency in his testimony on this point goes further. Six thousand dollars is a significant amount of money for any individual and it is inconceivable that a person could purport to be transacting with Mega Church and his bank in aggregate amounts of this magnitude and not clearly recall whether it was 3, 24 or 52 visits or that the face amounts of the bank drafts were $2,000, $250 or $115. While I was prepared to accept some imprecision or small inconsistencies in the Appellant’s recollection of visits to Mega Church in 2006 and delivery of bank drafts on each visit, I find the fact that the Appellant gave starkly inconsistent accounts of his 2006 visits to Mega Church and, by implication, his visits to his bank to purchase bank drafts for delivery to Mega Church supports the conclusion that the aggregate amount of bank drafts that he gave Mega Church could not have been $6,000. It is on this basis I conclude that, on a balance of probabilities, the Appellant did not purchase and deliver bank drafts payable to Mega Church in 2006 with face amounts of $6,000 in aggregate.”

The upshot of all this is that the appellant by being neither credible nor reliable, persuaded the judge (despite none of the evidence proffered by the CRA/DoJ being accepted) that on the balance of probabilities, a misrepresentation was made and that it was attributable to neglect, carelessness or wilful neglect. This enabled the CRA to reopen the prior tax year and reassess the appellant for the amount and all penalties and interest going back to 2006 (18 years), which will likely be a very large tax bill.