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FEDERAL INCOME TAX - Administration and enforcement - Investigations

Wednesday, June 17, 2020 @ 6:21 AM  

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Appeal by Roofmart Ontario Inc. from a Federal Court order for production pursuant to s. 231.2(3) of the Income Tax Act. The appellant was a largescale supplier of roofing and building materials in the Ontario construction industry. The Canada Revenue Agency (CRA) believed that tax compliance was a significant issue in the residential construction sector. Consequently, the CRA applied for an order requiring the appellant to disclose personal, business and financial information regarding customers who had purchased $10,000 or more of supplies in 2018, or $20,000 or more of supplies between 2015 and 2017. The Federal Court found that the targeted persons were ascertainable based on the total annual purchase requirement, and that the information was sought to verify unnamed persons’ compliance with the Income Tax Act. The judge rejected the appellant’s contention that an active audit was required to obtain the order. The judge concluded that the statutory preconditions for the relief sought were met. Roofmart appealed.

HELD: Appeal dismissed. The fact that a CRA official swore the underlying affidavit did not render the application ultra vires, as the notice of application was brought by the Minister of National Revenue. No proof of instructions from the Minister to counsel was required to show that the application was properly instituted. The judge did not err in finding the criteria for the order were met. The statutory criteria were not altered by the size of the request. There was ample evidence justifying the conclusion that the targeted group was ascertainable. Additionally, the jurisprudence established that a pending or existing tax audit was not a precondition to a s. 231.2(3) order. The evidence sufficiently established that the information sought would assist in determining whether the unnamed persons targeted had complied with their taxation requirements. The appellant’s arguments sought to reinsert criteria into the legal test that were no longer part of the legislation. No error of discretion or error in the application of the standard of proof was established.

Canada (Minister of National Revenue - M.N.R.) v. Roofmart Ontario Inc., [2020] F.C.J. No. 593, Federal Court of Appeal, W.W. Webb, D.J. Rennie and A.L. Mactavish JJ.A., May 11, 2020. Digest No. TLD-June152020006