R. v. Ingram, 2016 NSPC 38

PROVINCIAL COURT OF NOVA SCOTIA Citation: R. v. Ingram , 2016 NSPC 38 Date: 2016-05-13 Docket: 2150501 - 2150549 Registry: Dartmouth Between: Her Majesty the Queen v. James (Jim) Barry Ingram Decision Revised Decision: Two of the actual dates heard were August 24 & 25, 2015. The original decision stated that it was August 24 & 25, 2016. This decision corrects the year and replaces the original decision. Judge: The Honourable Judge Theodore K.

Tax Heard: October 31, 2011, November 1, 2 & 3, 2011, November 7, 2011, December 20, 2011, February 3, 2012, October 30, 2012, November 19, 20, 21 & 22, 2012, April 10, 2013, October 1, 2 & 3, 2013, November 21, 2013, November 4, 2014, November 12, 2014, January 15, 2015, May 19, 2015, May 21, 2015, August 24 & 25, 2015, January 20, 2016 Decision: May 13, 2016 Charges: on or about the 27 th of August, 2003, did make or participate in, assent to or acquiesce in the making of false or deceptive statements in the TI Return of Income of James B.

Ingram (also known as Jim Ingram) filed for the 2002 taxation year by failing to declare net business income in the amount of $56,596.23, thereby committing an offence contrary to subparagraph 239(1) (

a) of the Income Tax Act R.S.C. 1985, c. 1(5th Supp .). on or about the 13 th of July, 2004, did make or participate in, assent to or acquiesce in the making of false or deceptive statements in the TI Return of Income of James B. Ingram (also known as Jim Ingram) filed for the 2003 taxation year by failing to declare net business income in the amount of $76,299.85, thereby committing an offence contrary to subparagraph 239(1) (

a) of the Income Tax Act R.S.C. 1985, c. 1(5th Supp .). between December 31, 2002 and July 14, 2004, did willfully evade the payment of taxes in the amount of $12,285.89 imposed by the Income Tax Act R.S.C. 1985 upon James B. Ingram (also known as Jim Ingram) for the 2003 taxation year, thereby committing an

offence contrary to subparagraph 239(1)(

d) of the said Act on or about the 16th of April, 2007, did make or participate in, assent to or acquiesce in the making of false or deceptive statements in the TI Return of Income of James B. Ingram (also known as Jim Ingram) filed for the 2004 taxation year by failing to declare net business income in the amount of $41,760.29, thereby committing an offence contrary to subparagraph 239(1) (

a) of the Income Tax Act R.S.C. 1985, c. 1(5th Supp .). between December 31, 2003 and April 17, 2007, did wilfully evade the payment of taxes in the amount of $2,859.01 imposed by the Income Tax Act R.S.C. 1985 upon James B. Ingram (also known as Jim Ingram) for the 2004 taxation year, thereby committing an offence contrary to subparagraph 239(1)(

d) of the said Act on or about the 13 th of April, 2007, did make or participate in, assent to or acquiesce in the making of false or deceptive statements in the TI Return of Income of James B. Ingram (also known as Jim Ingram) filed for the 2005 taxation year by failing to declare net business income in the amount of $44,690.27, thereby committing an offence contrary to subparagraph 239 (l)(

a) of the Income Tax Act R.S.C. 1985, c. 1(5th Supp .). between December 31, 2004 and April 14, 2007, did wilfully evade the payment of taxes in the amount of $6,124.12 imposed by the Income Tax Act R.S.C. 1985 upon James B. Ingram (also known as Jim Ingram) for the 2005 taxation year, thereby committing an offence contrary to subparagraph 239(1)(

d) of the said Act. on or about the 18 th of May, 2007, did make or participate in, assent to or acquiesce in the making of false or deceptive statements in the TI Return of Income of James B. Ingram (also known as Jim Ingram) filed for the 2006 taxation year by failing to declare net business income in the amount of $14,973.53, thereby committing an offence contrary to subparagraph 239(1) (

a) of the Income Tax Act R.S.C. 1985, c. 1(5th Supp .). between December 31, 2005 and June 16, 2007, did willfully evade the payment of taxes in the amount of $565.13 imposed by the Income Tax Act R.S.C. 1985 upon James B. Ingram (also known as Jim Ingram) for the 2006 taxation year, thereby committing an offence contrary to subparagraph 239(1)(

d) of the said Act. on or about the 24 th of April 2002, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending March 31, 2002 by understating taxable supplies in the amount of $1,845.59, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. on or about the 6 th of November 2002, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending June 30, 2002 by understating the Net Tax in the amount of $3,939.58, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of March, 2002 and the 7 th of November 2002, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,939.58 imposed by the Excise ‘Fax Act R.S.C. 1985 upon him for the quarterly filing period ending June 30, 2002, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 25 th of April 2003, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending December 31, 2002 by understating the Net Tax in the amount of $3,435.43, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of September, 2002 and the 26 th of April 2003, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,317.62 imposed by the Excise Tax Act

R.S.C. 1985 upon him for the quarterly filing period ending December 31, 2002, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. between the 30 th of September, 2002 and the 26 th of April 2003. willfully obtain a rebate or refund to which James B. Ingram is not entitled pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram for the quarterly filing period ending December 31, 2002 filed pursuant to the Excise Tax Act R.S.C. 1985, in the amount of $l17.8, and did thereby commit an offence contrary to subparagraph 327(1)(

d) of the said Act. on or about the 8 th of April 2003, make or participate in. assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending March 31, 2003 by understating the Net Tax in the amount of $3,148.07, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of December 2002 and the 9 th of April 2003, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,030.26 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending March 31, 2003, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. between the 31 st of December, 2002 and the 9 th of April 2003, willfully obtain a rebate or refund to which James B. Ingram is not entitled pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram for the quarterly filing period ending March 31, 2003 filed pursuant to the Excise Tax Act R.S.C. 1985, in the amount of $117.81, and did thereby commit an offence contrary to subparagraph 327(1)(

d) of the said Act. on or about the 15 th of September 2003, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending June 30, 2003 by understating the Net Tax in the amount of $1449.64, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of March 2003 and the 16 th of September 2003, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $2,449.64 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending June 30. 2003, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 26 th of January 2004, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending September 30, 2003 by understating the Net Tax in the amount of $3,319.86, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of June 2003 and the 27 th of January 2004, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,319.86 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending September 30, 2003, thereby committing an offence contrary to subparagraph 327(l)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 17 th of March 2004, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending December 31, 2003 by understating the Net Tax in the amount of $3,623.87, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of September 2003 and the 18 th of March 2004, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,823.87imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending December31, 2003, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985.

on or about the 9 th of July 2004, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending March 31, 2004 by understating the Net Tax in the amount of $2,600.72, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of December 2003 and the 10 th of July 2004, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $2,600.72 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending March 31, 2004, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 12 th of October 2004, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending June 30, 2004 by understating the Net Tax in the amount of $779.67, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of March, 2004 and the 13 th of October 2004, willfully obtain a rebate or refund to which James B. Ingram is not entitled pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram for the quarterly filing period ending June 30, 2004 filed pursuant to the Excise Tax Act R.S.C. 1985, in the amount of $779.67, and did thereby commit an offence contrary to subparagraph 327(1)(

d) of the said Act. on or about the 12 th of April 2005, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending September 30, 2004 by understating the Net Tax in the amount of $814.17, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of June 2004 and the 13” of April 2005. willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $1,814.174 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending September 30, 2004, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 20 th of May 2005, make or participate in. assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending December 31, 2004 by understating the Net Tax in the amount of $l,149.59, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of September 2004 and the 21 st of May 2005, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $1,149.59 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending December 31, 2004, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 30 th of June 2005, make or participate in. assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending March 31, 2005 by understating the Net Tax in the amount of $1,569.55, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of December 2004 and the 1 st of July 2005, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $1,569.55 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending March 31, 2005, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985.

on or about the 19 th of October 2005, make or participate in. assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending June 30, 2005 by understating the Net Tax in the amount of $1,580.04, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of March 2005 and the 20 th of October 2005, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $180.04 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending June 30, 2005, thereby committing an offence contrary to subparagraph 327(1)(

e) of the Excise Tax Act R.S.C. 1985. on or about the 20 th of January, 2006, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending September 30, 2005 by understating the Net Tax in the amount of $3,310.56, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of June 2005 and the 21 st of January 2006, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $3,310.56 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending September 30, 2005, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 27 th of April 2006, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending December 31, 2005 by understating the Net Tax in the amount of $243.39, thereby committing an offence contrary to subparagraph 327(l)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of September 2005 and the 28 th of April 2006, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $243.39 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending December 31, 2005, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 21 st of June 2006, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending March 31, 2006 by understating the Net Tax in the amount of $1,363.78, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 31 st of December 2005 and the 22 nd of June 2006, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $313.62 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending March 31, 2006, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. between the 31 st of December, 2005 and the 22 nd of June 2006, willfully obtain a rebate or refund to which James B. Ingram is not entitled pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram for the quarterly filing period ending March 31, 2006 filed pursuant to the Excise Tax Act R.S.C. 1985, in the amount of $1,049.96, and did thereby commit an offence contrary to subparagraph 327(1)(

d) of the said Act. on or about the 14 th of May 2007, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James H. Ingram filed for the quarterly filing period ending June 30, 2006 by understating the Net Tax in the amount of $272.47, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985.

between the 31 st of March 2006 and the 15 th of May 2007, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $272.47 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending June 30, 2006, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 14 th of May 2007, make or participate in, assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending September 30, 2006 by understating The Net Tax in the amount of $891.91, thereby committing an offence contrary to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of June 2006 and the 15 th of May 2007, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James 11 Ingram in the amount of $891.91 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending September 30, 2006, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. on or about the 14 th of May 2007, make or participate in. assent to or acquiesce in the making of false or deceptive statements in the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram filed for the quarterly filing period ending December 31, 2006 by understating the Net Tax in the amount of $297.56, thereby committing an offence contrary’ to subparagraph 327(1)(

a) of the Excise Tax Act R.S.C. 1985. between the 30 th of September 2006 and the 15 th of May 2007, willfully evade the payment or remittance of Net Tax pertaining to the Goods and Services Tax/Harmonized Sales Tax Return of James B. Ingram in the amount of $297.56 imposed by the Excise Tax Act R.S.C. 1985 upon him for the quarterly filing period ending December31, 2006, thereby committing an offence contrary to subparagraph 327(1)(

c) of the Excise Tax Act R.S.C. 1985. Counsel: Constantin Draghici-Vasilescu, for the Crown Gerard Tompkins, for the Defence By The Court (Orally) : [ 1 ] Mr. James (Jim) Barry Ingram, operating as a sole proprietor under the business name of J. Ingram Construction has been charged with a total of 49 offences under the Income Tax Act (“the ITA ”), RSC 1985, c.1 (5 th Supp) and the Excise Tax Act (“the ETA ”), RSC 1985 in relation to the 2002, 2003, 2004, 2005 and 2006 taxation years. [ 2 ] In particular, Mr. Ingram has been charged with a total of 9 offences under the ITA , which include 5 offences for the 2002, 2003, 2004, 2005 and 2006 taxation years contrary to subparagraph 239(1) (

a) of the ITA , for having made or participated in, assented to or acquiesced in the making of false or deceptive statements in the T-1 return of income of Mr. Ingram. Mr. Ingram has also been charged with 4 offences contrary to subparagraph 239(1)(

d) of the ITA , for willfully evading the payment of taxes in amounts specified in the information, which were amended during the trial, as imposed by the ITA on James B. Ingram for the 2003, 2004, 2005 and 2006 taxation years. [ 3 ] In addition to the charges under the ITA , Mr. Ingram has also been charged with a total of 40 offences under the ETA . In particular, there are 19 charges under the ETA for having made or participated in, assented to or acquiesced in the making of false or deceptive statements in the Goods and Services Tax (“GST”)/ Harmonized Sales Tax (“HST”) Return of James B.

Ingram for certain quarters of the 2002, 2003, 2004, 2005 and 2006 taxation years, contrary to subparagraph 327(1)(

a) of the ETA . In addition, there are also 17 charges against Mr. Ingram for having wilfully evaded the payment or remittance of Net Tax pertaining to the GST/HST Tax Return of James B. Ingram for certain quarters of the 2002, 2003, 2004, 2005 and 2006 taxation years, contrary to subparagraph 327(1) (

c) of the ETA . Finally, there are also 4 charges against Mr. Ingram for having wilfully obtained a rebate or refund to which James B. Ingram was not entitled pertaining to the GST/HST Tax Return of James B. Ingram for certain quarters of the 2002, 2003, 2004, 2005 and 2006 taxation years, contrary to subparagraph 327(1)(

d) of the ETA . [ 4 ] The Crown proceeded summarily on all of the charges before the Court. Trial evidence was heard over a total period of 24 days: October 31-November 3, 2011, November 7, 2011, December 20, 2011, February 13, 2012, October 30, 2012, November 19-22, 2012, April 10, 2013, October 1-3, 2013, November 21, 2013, November 4, 2014, November 12, 2014, January 12, 2015, May 19, 2015,

May 21, 2015 and finally, August 24-25, 2015. The Court requested that written submissions be filed by both counsel and the submissions of Defence Counsel were received on November 20, 2015. The submissions of the Crown Attorney were received on January 6, 2016 and oral submissions of counsel were made on January 20, 2016. The Court reserved its decision until today’s date. [ 5 ] Since both counsel have acknowledged that the charges before the Court have alleged that Mr.

Ingram committed true criminal offences, as opposed to an offence of strict liability, the issue to determine is whether the Crown has established, beyond a reasonable doubt, that Mr.

Ingram committed the prohibited acts (the actus reus ) of the offences alleged in the Information and if so, that, he had done so with a culpable state of mind (the mens rea ) for the purpose of evading the payment of tax. [ 6 ] While there are numerous factual issues to determine in terms of the allegations of tax evasion before the Court, both counsel have submitted that the real issue in this case is whether the Crown has proven, beyond a reasonable doubt, Mr. Ingram’s actions were done with the intent to “wilfully” evade the payment of income tax and the payment or remittance of HST/GST.

In so far as charges of “making, participating in or acquiescing in the making of a false or deceptive statement” are concerned under the ITA and ETA , it is the position of the Crown that the mens rea of those offences is established by proof, beyond a reasonable doubt that Mr. Ingram had knowledge of or was wilfully blind to the fact that the statements contained in his ITA and ETA tax returns were inaccurate or deceptive and that they were filed with intent that the information therein be acted upon by Canada Revenue Agency (hereafter “CRA”) officials as if that information was true and accurate.

Positions of the Parties [ 7 ] It is the position of the Crown that Mr. Ingram’s tax returns for the 2002, 2003, 2004, 2005 and 2006 taxation years were based upon numerous entries made by Mr. Ingram in his journal, which he understated his business income or overstated his business expenses and thereby reduced or eliminated the amount of federal or provincial income tax and GST/HST to be paid. The Crown Attorney submits that Mr.

Ingram’s entries of those amounts in his business Journal, which was exclusively controlled by him to record his income and expenses for the year, was then forwarded to his bookkeeper as the source document upon which his tax returns were prepared. The Crown Attorney therefore submits that they have established, beyond a reasonable doubt, the actus reus or in other words, the conduct or manner in which Mr.

Ingram avoided or attempted to avoid the payment of tax imposed by the ITA and the ETA . [ 8 ] As the Crown Attorney and Defence Counsel have noted, the key factual and legal issue in this case is whether the Crown has established that Mr.

Ingram, in making those entries in his Journal, had the required mens rea or specific intention to do so “wilfully” in that he knew or ought to have known that tax was imposed by the ITA and ETA and that he engaged in that conduct or manner of reporting for the purpose of avoiding or attempting to avoid the payment of taxes or did so knowing that avoiding the payment of tax imposed by those Acts was a virtually certain consequence of his actions. It is the position of the Crown that the number and manner in which entries made by Mr.

Ingram understated his income and overstated his expenses demonstrates a consistent pattern over an extended period of time which cannot be attributed to a series of honest “mistakes.” As a result, the Crown Attorney submits that they have established beyond a reasonable doubt that Mr. Ingram’s intentional actions amounted to a gross manipulation of taxation data during the taxation years in question for the purpose of evading taxes that he knew or ought to have known were owing. [ 9 ] While Mr.

Ingram did acknowledge, during his direct examination and on cross examination, after reviewing the trial evidence and forensic accounting done by the CRA investigator, Mr. Bruce McCabe, that numerous entries were the result of a “mistake” on his part, it is the position of the Crown that there is no reasonably conceivable way in which Mr. Ingram could have held an honest belief that he had reported his income properly. Therefore, the Crown Attorney submits that the only reasonable inference that can be drawn from Mr.

Ingram’s intentional manipulation of the amounts recorded in his business Journals, was for the purpose of underreporting his taxable income and collected HST and for exaggerating his expenses and income tax credits. It is the position of the Crown that they have established, beyond a reasonable doubt, all of the essential elements of the tax evasion charges that are before the Court and that conviction should be entered against Mr.

Ingram on all of those charges. [ 10 ] Furthermore, the Crown Attorney submits that, in the event that the Court was to conclude that there was reasonable doubt with respect to whether Mr. Ingram had the specific intent or mental element to “wilfully” evade the payment of taxes, then, he submits that the Crown has established, beyond a reasonable doubt, the alternative charges under section 239(1)(

a) of the ITA and 327(1)(

a) of the ETA of making or participating in the making a false or deceptive statement in his ITA and ETA returns. In this regard, it is the position of the Crown that these charges do not require the Crown to establish a specific intention of tax evasion, but rather, the mental element of those charges is established by the proof of Mr. Ingram’s intentional making of false or deceptive statements in his returns. The Crown Attorney submits that they have established all of the essential elements of these charges and the Court should reject Mr.

Ingram’s claim that the returns were honest “mistakes” resulting from his carelessness, inattention or perhaps even his negligence in his bookkeeping and reporting practices. [ 11 ] During his submissions, Defence Counsel acknowledged that Mr. Ingram, after reviewing the trial testimony and forensic accounting done by Mr. McCabe, now concedes that he made many “mistakes” in making entries in its business Journal of income and expenses, which were due to Mr. Ingram’s careless and inattentive record-keeping. However, it is the position of the Defence that the most that can be said by the Crown is that Mr.

Ingram’s record-keeping which resulted in “mistakes” was careless, inattentive and perhaps negligent, but the Crown has not established, beyond a reasonable doubt, that Mr. Ingram made those entries with the requisite mental element, that is, the specific intention to evade taxes. In further support for this submission, Defence Counsel points to the fact that Mr. Ingram also made “mistakes” in failing to keep track of some of his legitimate business expenses, which were ultimately discovered by Mr. McCabe during his forensic accounting of Mr. Ingram’s income and expenses during the taxation years in question.

As a result of this confirmation of additional expenses, Defence Counsel has noted that the specific dollar amounts alleged in several counts in the Information were adjusted in August, 2015. [ 12 ] Defence counsel submits that the Court should accept Mr. Ingram’s evidence that he did not know there were any possible problems with the information that he provided in his ITA and ETA returns and that he held an honest belief in their accuracy and completeness of those returns when they were forwarded to CRA to be acted upon. It is the position of the Defence that Mr.

Ingram’s honest belief with respect to the integrity of the stated income and expenses for the taxation years in question is supported by the fact that

he received very few cash payments from his client, he did not have any off-shore or hidden bank accounts, he made entries of most of the amounts received from his client in his business Journal, kept many duplicate copies of client invoices in his home office and perhaps most importantly, deposited all of his client’s cheques in his business bank accounts, which “left a trail of the money in the business bank accounts.” [ 13 ] Defence Counsel submits that all of those facts taken together, merely point to Mr.

Ingram’s inattention, carelessness or perhaps, his negligence in his bookkeeping procedures, but given the “trail” of ascertainable information, the Court ought to be left in reasonable doubt as to whether the Crown has established that his actions were intentionally done with the purpose or mental element of “wilfully” evading the payment of taxes that he knew or ought to of known were owing. The Legislation [ 14 ] The wording of the ITA offences alleged in this case are found in section 239(1) of the ITA which reads as follows: 239(1) Every person who has….. (

a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation, (

d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act…. (

e) is guilty of an offence and, in addition to any penalty otherwise provided, is liable on

summary conviction to (

f) a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, or (

g) both the fine described in paragraph 239(1) (

f) and imprisonment for a term not exceeding 2 years. [ 15 ] The wording of the ETA offences alleged in this case are found in section 327(1) of the ETA which reads as follows: 327(1) Every person who has…….. (

a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, application, certificate, statement, document or answer filed or made as required by or under this Part or the regulations made under this Part, (

c) wilfully, in any manner, evaded or attempted to evade compliance with this Part or payment or remittance of tax or net tax imposed under this Part, (

d) wilfully, in any manner, obtained or attempted to obtain a rebate or refund to which the person is not entitled under this Part. …. is guilty of an offence and, in addition to any penalty otherwise provided, is liable on

summary conviction to (

f) a fine of not less than 50%, and not more than 200%, of the amount of the tax or net tax that was sought to be evaded, or of the rebate or refund sought, or, where the amount that was sought to be evaded cannot be ascertained, a fine of not less than $1,000 and not more than $25,000, or (

g) both a fine referred to in paragraph (

f) and imprisonment for a term not exceeding two years. Overview of the Specific Charges [ 16 ] In an Information, sworn on February 24 th 2010, the informant, Bruce McCabe of CRA stated that he had reasonable and probable grounds to believe that Mr. James (Jim) Barry Ingram had committed 49 offences in the Halifax Regional Municipality, contrary to the provisions of the ITA and the ETA between March 31, 2002 and June 16, 2007, which were particularized in Appendix “A” to that Information.

In Appendix “A” of the Information, the informant particularized nature of the allegation by outlining a specific dollar amount involved each and every one of the 49 counts alleged in the Information. At the conclusion of the evidence, after having taken into account further information provided by Mr. Ingram during the trial in relation to additional expenses that had been primarily identified by virtue of Mr. McCabe’s original analysis together with further analyses by Mr. McCabe during the trial itself, additional amounts were credited to Mr. Ingram as expenditures which Mr.

McCabe was able to identify as a business transaction and then allocate the expenditure to the appropriate taxation year or quarter. As a result of that additional detailed analysis, the Crown amended the specific dollar amounts in many of the counts alleged in Appendix “A” of the Information, as of conclusion of the trial evidence, on August 25, 2015. [ 17 ] In the final analysis, without repeating the specific allegations contained in the Information as amended on Appendix “A” in August, 2015, in

summary form, the following represents the various dollar amounts in issue with respect to specific allegations contained in the Information: [ 18 ] Counts 1, 2, 4, 6, and 8 relate to charges contrary to subparagraph 239(1) (

a) of the ITA for having made, participated in or acquiesced in the making of a false or deceptive statement in Mr. Ingram’s T-1 return by failing to declare net business income in the following amounts: • for the 2002 taxation year – $56,596;

• for the 2003 taxation year – $76,299; • for the 2004 taxation year – $41,760; • for the 2005 taxation year – $44,690; and • for the 2006 taxation year – $14,973. [ 19 ] Counts 3 5, 7, and 9 relate to charges contrary to subparagraph 239(1) (

d) of the ITA for having wilfully evaded the payment of income taxes in the following amounts: • for the 2003 taxation year – $12,285; • for the 2004 taxation year – $2,859; • for the 2005 taxation year – $6,124; and • for the 2006 taxation year – $565. [ 20 ] Counts 10, 11, 13, 16, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41, 44, 46, and 48, all relate to having made, participated in or acquiesced in the making a false or deceptive statement in GST/HST returns of Mr. Ingram contrary to subparagraph 327(1)(

a) of the ETA for the quarterly periods by understating the net tax in the following amounts: • for the quarter ended March 31, 2002 – $1,845; • for the quarter ended June 30, 2002 – $3,939; • for the quarter ended December 31, 2002 – $3,435; • for the quarter ended March 31, 2003 – $3,148; • for the quarter ended June 30, 2003 – $2,449; • for the quarter ended September 30, 2003 – $3,319; • for the quarter ended December 31, 2003 – $3,823; • for the quarter ended March 31, 2004 – $2,600; • for the quarter ended June 30, 2004 – $779; • for the quarter ended September 30, 2004 – $1,814; • or the quarter ended December 31, 2004 – $1,149; • for the quarter ended March 31, 2005 – $1,569; • for the quarter ended June 30, 2005 – $1,580; • screen for the quarter ended September 30, 2005 – $3,310; • for the quarter ended December 31, 2005 – $243; • for the quarter ended March 31, 2006 – $1,363; • for the quarter ended June 30, 2006 – $272; • for the quarter ended September 30, 2006 – $891; and • for the quarter ended December 31, 2006 – $297. [ 21 ] Counts 12, 14, 17, 20, 24, 26, 30, 32, 34, 36, 38, 40, 42, 45, 47, and 49 relate to the wilful evasion of payments or remittance of Net Tax pertaining to the GST/HST returns of Mr.

Ingram contrary to subparagraph 327(1)(

c) of the ETA for the quarterly periods in the following amounts: • for the quarter ended June 30, 2002 – $3,939; • for the quarter ended December 31, 2002 – $3,317; • for the quarter ended March 31, 2003 – $3,030; • for the quarter ended June 30, 2003 – $2,449; • for the quarter ended September 30, 2003 – $3,319; • for the quarter ended December 31, 2003 – $3,823;

• for the quarter ended March 31, 2004 – $2,600; • for the quarter ended September 30, 2004 – $1,814; • for the quarter ended December 31, 2004 – $1,149; • for the quarter ended March 31, 2005 – $1,569; • for the quarter ended June 30, 2005 – $1,580; • for the quarter ended September 30, 2005 – $3,310; • for the quarter ended December 31, 2005 – $243; • for the quarter ended March 31, 2006 – $313; • for the quarter ended June 30, 2006 – $272; • for the quarter ended September 30, 2006 – $891; and • for the quarter ended December 31, 2006 – $297. [ 22 ] Finally, counts 15, 18, 28, and 43 relate to wilfully obtaining a rebate or refund to which Mr.

Ingram was not entitled to receive pertaining to the GST/HST returns of Mr. Ingram contrary to subparagraph 327(1)(

d) of the ETA for the quarterly periods in the following amounts: • for the quarter ended on December 31, 2002 – $117; • for the quarter ended on March 31, 2003 – $117; • for the quarter ended June 30, 2004 – $982; and • for the quarter ended March 31, 2006 – $1,049. [ 23 ] In the final analysis, based upon the allegations contained in the Information as amended in August, 2015, the Crown alleges that Mr. Ingram made false or deceptive statements and did not report income in the amount of $234,318 contrary to subparagraph 239(1) (

a) of the ITA for the 5 taxation years in question. As a result, the Crown alleges that Mr. Ingram wilfully evaded the payment of a grand total of $21,833 of income tax for the 2003-2006 taxation years, contrary to subparagraph 239(1)(

d) of the ITA . The Crown also alleges that Mr. Ingram evaded a further amount of $6,021 of Income tax as a result of making false or deceptive filings for 2002 Taxation Year, contrary to subparagraph 239(1)(

a) of the ITA. [ 24 ] As for the GST/HST returns, the Crown alleges that Mr. Ingram made false or deceptive statements during the quarterly periods outlined in the Information, contrary to subparagraph 327(1)(

a) of the ETA in the total amount of $37,825 and that he wilfully evaded the payment or remittance of Net Tax pertaining to the GST/HST returns, contrary to subparagraph 327(1)(

c) of the ETA in the total amount of $33,915. Finally, the Crown also alleges that Mr. Ingram wilfully obtained rebates on his GST/ HST returns for which he was not entitled to receive contrary to subparagraph 327(1)(

d) of ETA in the total amount of $2,265. [ 25 ] During his submissions, the Crown Attorney advised the Court that if the Court was to find Mr. Ingram guilty of tax evasion, then the false and deceptive filing charges would be subject to the R. v. Keinapple principle as the same acts are the basis for the charges under ITA and ETA . The same principle would apply if Mr. Ingram was to be found guilty of the false and deceptive filing charge in relation to the corresponding tax evasion charge. [ 26 ] As a result, the Crown alleges that, as a result of Mr.

Ingram’s wilful evasion of income tax and his wilful evasion of the payment or remittance of the net tax pertaining to his GST/HST returns, Mr. Ingram obtained a personal enrichment of $27,854 [by evading income tax] and $37,825 [by collecting GST/HST and evading the payment of that amount to CRA] for a grand total of, personal enrichment of $65,679. [ 27 ] Although detailed evidence was presented during the trial with respect to the exact amount of Mr.

Ingram’s income or expenses in both dollars and cents, it was agreed by all counsel, for simplification purposes, that those amounts should be rounded off and only indicated in dollars. Factual Background [ 28 ] At all material times to the charges before the Court, Mr. James (Jim) Barry Ingram, operated as a sole proprietor under the business name of J. Ingram Construction. Mr.

Ingram was, at all material times, and remains today, a self-employed contractor whose business income is primarily derived from the construction of houses, garages, decks, building and installation of cabinets, as well as from the repairs, renovations or additions to houses. However, Mr. Ingram also derives income from other services as he performs seasonal snow removal contracts on behalf of his clients. [ 29 ] Mr. Ingram’s 2002 tax return was prepared by Mr. Paul Hyland based upon the information provided to Mr. Hyland by Mr. Ingram in his synoptic Journal. Mr. Hyland calculated Mr.

Ingram’s income and expenses, gross revenue and net revenue based upon the information provided to him by Mr. Ingram. Mr. Hyland discussed the contents of the taxation return with Mr. Ingram, who then signed the return and forwarded it to the St. John’s Newfoundland Tax Center, where it was received on August 27, 2003. In that return, Mr.

Ingram stated that his self-employment business income [gross] was $106,620 total net income for the 2002 year with a loss of $8,800, he was not obliged to pay any federal or provincial income tax. [ 30 ] Mr. Ingram’s 2003 tax return was prepared by Mr. Paul Hyland based upon the information supplied by Mr. Ingram in his journal, was signed by Mr. Ingram and forwarded to CRA. Mr. Ingram’s return was received by the St. John’s Newfoundland Tax Center on July 13, 2004. In that return, Mr.

Ingram stated that his self-employment business income [gross] was $195,044 but after expenses and other deductions, his total net income for the 2003 taxation year resulted in a loss of $4,034. As a result, he was not obliged to pay any federal or provincial income tax. [ 31 ] Mr. Ingram’s 2004 tax return was also prepared by Mr. Paul Hyland in the same manner as in previous years and Mr. Ingram signed that return on June 11, 2005. The return was received by CRA in St. John’s, Newfoundland, on April 16, 2007. In that return, Mr.

Ingram reported gross self-employment income from business in the amount of $126,705, but when expenses were taken into account he reported a loss of $13,420 in his 2004 taxation return. As a result, Mr. Ingram was not obliged to pay any federal or provincial income tax. [ 32 ] Mr. Ingram’s 2005 Tax return was also prepared by Mr. Hyland in the same manner as previous years, was signed by Mr. Ingram but not dated, however, the receipt stamp on them confirms that the St. John’s, Newfoundland office of CRA received it on May 14, 2007 [approximately 1 to 2 months before Mr. Ingram declared bankruptcy].

In that return, Mr. Ingram reported gross business income of $126,325 and from that amount, Mr. Ingram had $3,500 of net income on his 2005 tax return. [ 33 ] Mr. Ingram’s 2006 tax return was prepared by Mr. Ingram himself and in that return, he reported gross self-employment income from business as $109,241 with a net taxable total income of $1,434. The 2006 T-1 return was received in the St. John’s, Newfoundland tax center on May 16, 2007. [ 34 ] By virtue of an Agreed Statement of Fact [Exhibit 7], Mr.

Ingram admitted for the purpose of dispensing with the proof thereof, that he performed work for or provided services to the individuals or corporations listed in that Exhibit at certain dates and times, during the 2002-2006 taxation years, both inclusive. In addition, Mr. Ingram acknowledged that none of the people or companies who were listed in Exhibit 7 had paid any amounts to Mr. James B.

Ingram or J Ingram Construction that were not related to the business services provided by him to them as his clients, or as reimbursement of expenses that he had incurred on their behalf. [ 35 ] Exhibit 7 contains a detailed listing of each one of the 53 clients together with a general overview of the work performed by Mr. Ingram on their behalf. In addition, in Exhibit 7 for each client name, there are the dates, amounts and how Mr. Ingram was paid for the services that he provided to the particular client. For the most part Mr.

Ingram was paid by cheque and copies of cheques were obtained from the clients or from Mr. Ingram’s bank or in some cases from both sources by the CRA. Based upon the agreement of counsel, all of that banking information was filed as Exhibit 4 in these proceedings. Exhibit 4 contains over 190 “Envelopes” of information which have copies of the front and back of most, if not all of the client cheques and, in most cases, banking information endorsed on the back of those cheques. [ 36 ] Furthermore, Exhibit 4 also contains either the client’s copy of a numbered invoice provided by J.

Ingram Construction for the work done on their behalf and, in several cases, a copy of the relevant invoice for the client which was obtained by CRA during an audit of his activities or obtained pursuant to a search warrant which was executed at Mr. Ingram’s residence. [ 37 ] In some cases, the services provided or work done by Mr. Ingram for his client were itemized by Mr. Ingram on unnumbered invoices or quotes which he provided to the client, which CRA officials were able to obtain directly from Mr.

Ingram either voluntarily or during a subsequent search of his house which was also where he maintained his business accounts. However, once CRA officials were able to obtain copies of Mr. Ingram’s bank statements, and the cheques that he deposited from his client in those accounts, CRA officials were able to identify all of the clients for whom Mr. Ingram had performed work or services during the 2002-2006 taxation years. Thereafter, CRA officials met with Mr. Ingram’s clients and from those meetings, CRA obtained the client’s copies of the invoices or quotes which had been prepared by Mr.

Ingram in relation to the services provided or work that he had performed at their locations. [ 38 ] As I indicated earlier in this decision, the Court heard trial evidence over a total period of 24 days. Most of those trial hearing dates involved the detailed testimony of Mr. McCabe, the CRA investigator and Mr. Ingram. However, I do want to note, at this point, that the duration of this trial could have been significantly longer than what it actually took, had the counsel not concluded the Agreed Statement of Fact [Exhibit 7].

The first practical result of that Agreed Statement of Fact was that both Crown and Defence were able to focus on the real question in issue, that is, whether the Crown has established the requisite mens rea for the various offences beyond a reasonable doubt or in the alternative, whether the Defence evidence of honest, but mistaken belief as to the true state of Mr. Ingram’s business affairs raised a reasonable doubt.

The second very practical result of the Agreed Statement of Fact is that it dispensed with the necessity of the Crown having to call up to 53 clients to provide their viva voce testimony with respect to all of the information contained in Exhibit 7, which would have made this trial significantly longer, had that agreement not been reached. [ 39 ] In addition, by virtue of the Agreed Statement of Fact, Mr. Ingram agreed that all of the amounts listed as having been paid by cash or by client’s cheques were deposited by Mr. Ingram in one of his bank accounts.

During the trial, the parties agreed to file Exhibit 3 which contains all of Mr. Ingram’s bank statements from the his business bank accounts, primarily at the Bank of Montréal located on Sackville Drive, in Lower Sackville, Nova Scotia, for the period ending January 31, 2002 up to and including the statements for the period ending December 31, 2006. [ 40 ] According to the banking information contained in Exhibit 3, Exhibit 7 and the testimony of Mr. McCabe and Mr. Ingram, all of the cheques provided to Mr.

Ingram by his clients in payment for the work that he had done and the materials which he had supplied to them, were deposited in one of Mr. Ingram’s bank accounts, primarily by way of ABM deposits at the Bank of Montréal. CRA’s Audit and Subsequent Investigation

[ 41 ] In March 2005, Ms. Karen Smits was a member of the CRA Verification and Enforcement Division and she was tasked with a random audit of Mr. Ingram’s 2002 and 2003 T1 Income Tax Returns. At that time, Ms. Smits was a generalist auditor, who had been working on other audits as a member of the “underground economy team.” She was asked to conduct a “quick review” of Mr. Ingram’s tax returns for those years. During a telephone conversation with Mr. Ingram on March 7, 2005 and in a letter on the same date, Ms. Smits confirmed that she would be meeting with Mr.

Ingram at his house located in Windsor Junction, Nova Scotia and she asked him to have a list of books and records available for her to review. [ 42 ] Ms. Smits testified that during her telephone conversation with Mr. Ingram, he confirmed that his primary source of income was doing construction and residential framing and that his secondary source of income was from snow plowing. Ms. Smits asked Mr.

Ingram about the manner in which he kept his business records and she testified that he told her that he wrote quotes for each job, he personally maintained a ledger book to record his revenue and expenses, that he kept a folder for each of his expenses and then forwarded that material to Mr. Paul Hyland to complete his tax returns. When Ms. Smits met with Mr. Ingram, he, once again, confirmed that he did all bookkeeping functions himself, and that he forwarded that information to Mr. Hyland to complete his tax returns. [ 43 ] Ms. Smits said that Mr.

Ingram advised her that he recorded his revenue on a “cash” basis, that is, he recorded the revenue when he received payments from a client, mainly by cheque and then he deposited the cheque in his bank account by using an instant teller or ABM. Mr. Ingram also advised Ms. Smits that he did not reconcile the deposits to revenue on either a monthly or annual basis and added that he did not keep copies of the ABM deposits. Mr. Ingram told Ms. Smits that he also recorded his expenses when they were paid. Mr. Ingram also advised Ms.

Smits that he did his quarterly HST remittances based upon his ledger or Journal entries. With respect to the HST remittances, Ms. Smits stated that Mr. Ingram told her, once again, during the meeting, that he does all of the bookkeeping functions, but Mr. Hyland prepares his T-1 returns. [ 44 ] During her “review” of Mr. Ingram’s 2002 and 2003 tax returns, Ms. Smits also contacted Mr. Paul Hyland. Mr. Hyland confirmed that he had prepared Mr. Ingram’s T-1 returns for the 2002 and 2003 taxation years. Mr. Hyland confirmed to Ms. Smits that he prepared Mr.

Ingram’s Statement of Business Activities and he inputted the numbers in the appropriate lines of the tax returns, based upon the information that Mr. Ingram had supplied to him, which Mr. Ingram had documented in his ledger or Journal for the years in question. Ms. Smits stated that Mr. Hyland confirmed the information that she had received from Mr. Ingram, that is, Mr. Hyland relied upon the entries made by Mr. Ingram, in the Journal or ledger to prepare Mr. Ingram’s Statement of Business Activities and his taxation returns. Mr. Hyland also confirmed for Ms.

Smits that, in preparing the Statement of Business Activities, he relied upon Mr. Ingram’s ledger or Journal of income and expenses as his “source document.” [ 45 ] At the request of Ms. Smits, Mr. Ingram signed an authorization for the Bank of Montréal to provide her with bank statements and canceled cheques for the period January 1, 2002 to December 31, 2003. After Ms. Smits received all of the bank information with respect to canceled cheques and deposits made by Mr.

Ingram into his business bank account at the Bank of Montréal, she noticed that several deposits of cheques from 3 rd parties were not recorded in his ledger. In addition, Ms. Smits also noted that there were invoices in a folder at Mr. Ingram’s house which were not recorded in his ledger. Once she received the canceled cheques from the Bank of Montréal, she verified with 3 rd parties that they had paid Mr. Ingram by cheque for work done. After that, Ms. Smits confirmed that several of those cheques were not recorded and reported as revenue in Mr. Ingram’s Journal of income and expenses. [ 46 ] Ms.

Smits prepared a document in which she recorded the 2002 revenue reconciliation against the bank deposits, [Exhibit 1 - Tab 16]. In that document, Ms. Smits identified amounts which she believed were not included or reported as revenue of almost $91,000, although $109,058 was reported as revenue in Mr. Ingram’s Journal or ledger. She indicated that there was approximately $34,000 of “unidentified” deposits for the 2002 taxation year. [ 47 ] At the same time, Ms. Smits prepared a similar reconciliation of revenue to the bank deposits for the 2003 taxation year.

In that reconciliation which was also confirmed with some 3 rd parties who were clients of Mr. Ingram, Ms. Smits noted that Mr. Ingram reported revenue of $204,470 in his Journal or ledger. However, based upon her reconciliation, she believed that there was a total of $116,915 of unreported income and that there was also an amount of approximately $15,595 of “unidentified” deposits. As further information came in and was analyzed by Ms. Smits, some minor adjustments were made to the amounts for the 2 taxation years [see Tab18 of Exhibit 1]. [ 48 ] On June 22, 2005, Ms.

Smits signed a Special Investigation Referral Report after completing the audit steps and the

summary of adjustments. Given the fact that she believed there were “large amounts of unreported revenue” from self-employment activities and that there were “significant differences” between the total deposits in the business bank account at the Bank of Montréal and the revenue reported, Mr. Ingram’s file for the 2002 and 2003 taxation years was forwarded to the enforcement

section of the CRA. [ 49 ] In the Special Investigations Referral Report, Ms. Smits noted what she had stated during her testimony, that Mr. Ingram is the only participant involved in the “revenue recognition cycle” that is, he is the contact with the potential customer, preparing quotes, completing the construction/snow plowing activities, preparing and delivering the sales invoices, accepting payments, depositing the payments, and performing all bookkeeping functions. She also noted that Mr.

Ingram has been in the business of residential construction and snow plowing, in the Halifax Regional Municipality for the past 20 years as a sole proprietor. [ 50 ] On cross examination, Ms. Smits confirmed that she had been with CRA for about 9 ½ years and had an undergrad degree from Mount St. Vincent University with a major in accounting. She confirmed that Exhibit 1-Tab 4 was her handwritten notes of the initial interview with Mr. Ingram conducted on March 22, 2005 at his house. Ms. Smits confirmed that the initial CRA contact with Mr.

Ingram had occurred by way of a letter dated March 7, 2005 [Exhibit 1- Tab 1]. Ms. Smits confirmed that her detailed memo to file outlining the matters discussed with Mr. Ingram on March 22, 2005 [Exhibit 1-Tab 4] was based on her notes of the questionnaire [Exhibit 1- Tab 5] that she utilized as a template for her discussions with Mr. Ingram. [ 51 ] When questioned about her referral to the Special Investigations Unit, Ms. Smits noted that Mr.

Ingram had reported a net business losses of $8,800 for 2002 and $4,034 for 2003 and that based upon a “rough” Source and Application of Funds, she was of the view that there were insufficient funds available for personal expenses for a family of five. However, she did agree with Defence Counsel that if CRA was to do a net worth assessment of Mr. Ingram, they would need additional personal information.

[ 52 ] Ms. Smits confirmed that she was aware of the role played by Mr. Hyland in the preparation of Mr. Ingram’s T-1 returns based upon the taxation returns themselves and the fact that Mr. Ingram had confirmed Mr. Hyland’s role in the preparation of those returns. She also confirmed that on April 13, 2005, Mr. Ingram had called her [as she noted in Tab 3 of Exhibit 1] to say that not all expenses had been claimed. Ms. Smits confirmed that if Mr. Ingram could detail those expenses, forward the supporting documents and the amounts were reasonable, she would review her audit results.

She confirmed that her key task in doing this audit was to obtain information relating to Mr. Ingram’s income and expenses, so that she could determine the accuracy of the amounts listed in Mr. Ingram’s T-1 returns for 2002 and 2003. Based upon her review, Ms. Smits concluded that Mr. Ingram’s profit was higher than he had reported for the 2002 and 2003 taxation years. [ 53 ] During her interview with Mr. Ingram, Ms. Smits confirmed that Mr. Ingram was using a “cash” basis for his accounting and that he had no real knowledge of an “accrual” basis for accounting at that time.

Moreover, she was not able to find Accounts Receivable in his records, that is, for work done in December or earlier and paid in January or after. She also confirmed, on cross examination, that she did not issue any reassessments for those taxation years as there was not enough information in Mr. Ingram’s records to do so. [ 54 ] Ms. Smits confirmed that her final meeting with Mr. Ingram was on April 12, 2005 at the taxpayer’s residence in Windsor Junction. Her notes of that meeting [see Tab 6 of Exhibit 1] indicate that she showed Mr.

Ingram a list of “unidentified” deposits through her bank reconciliation for 2002 and 2003 at the Bank of Montréal. Ms. Smits noted that Mr. Ingram reviewed the list but could not identify any of the deposits as revenue, so she concluded that Mr. Ingram had underreported his income. While she stated that Mr. Ingram was cooperative and had signed the bank Authorizations that she had requested, she also added that he was not forthcoming with the unreported income that was confirmed by bank deposits. She added that Mr.

Ingram had asked about what impact the information that she was providing back to other officials at CRA would have on his bank account and if he would be subjected to seizures or collection activities. [ 55 ] Since she had not completed the final audit and, in fact, Ms. Smits was still “fact-finding,” she did not issue any reassessments to Mr. Ingram. However, Ms. Smits added that Mr. Ingram could not identify the sources of the income that she had identified through the bank deposits, so she had to go to the Bank of Montréal for confirmation. On cross examination, she advised Defence Counsel that if Mr.

Ingram had kept a well-documented bank deposit book with all deposits as well as the names of clients and corresponding invoices, there would have been no need for her to go to the bank to verify sources of income. [ 56 ] On further cross examination, Ms. Smits repeated that the reason why she had to go to the bank to determine Mr. Ingram’s revenue, was because the taxpayer’s records “were incomplete and inaccurate”, since Mr. Ingram had said that all money was deposited into the Bank of Montréal.

However, she noted that there were “gaps” between what was reported as income in the synoptic Journal or ledger and what was deposited in the Bank of Montréal. Moreover, she indicated that Mr. Ingram had very few invoices in the file folders which he had given to her for review. Preparation of Mr. Ingram’s Income Tax Returns for the 2002- 2005 Years [ 57 ] Mr. Paul Hyland testified that he prepared the documents which were compiled in Exhibit 2, Envelopes 1-18. Mr.

Hyland confirmed that his business, Hyland’s Financial Records Service is a sole proprietorship which he has run since 1974 to assist his clients in the preparation and presentation of their tax returns. He also does accounting, general ledger work or financial statements for small businesses, depending on the nature of his retainer with the client. [ 58 ] Mr. Hyland confirmed that he has done work for Mr. Ingram for many years. He worked with Mr. Ingram from the early 1990’s until 2005, but not since. Mr. Hyland’s role was to prepare Mr. Ingram’s tax returns based upon the income and expenses that Mr.

Ingram entered in his Journal. Mr. Hyland stated that he used the Journal or ledger presented to him by Mr. Ingram, to prepare Mr. Ingram’s T-1 tax returns, Statement of Business Activities and his HST reports. Mr. Hyland made it clear that he relied on the Journal that Mr. Ingram presented to him as he was not given any source documents by his client. [ 59 ] On some occasions, Mr. Hyland added that Mr. Ingram gave him additional information to complete the tax returns, which may not have been recorded by Mr. Ingram in his Journal.

For example, he said that Tab 2 of Exhibit 2 was an example for the 2002 taxation year where Mr. Hyland received a J Ingram Construction invoice to document additional expenses for truck insurance, oil and lights for the house and house insurance as expenses for the year. Mr. Hyland pointed out that Mr. Ingram was a sole proprietorship and could deduct some home expenses, because Mr. Ingram operated his business out of the house, however, they were not usually in the ledger or Journal.

A similar invoice document from J Ingram Construction was received for the 2003 taxation year dated, March 9, 2007 [see Exhibit 2 at Tab 18] which was for household and other expenses for the 2004 and 2005 taxation returns, which information was not contained in Mr. Ingram’s ledger. Mr. Hyland confirmed that the phone number on that invoice was his fax number. [ 60 ] In terms of Mr. Ingram’s HST returns, based upon the information provided by Mr. Ingram, Mr. Hyland prepared the

summary chart to be included in the tax return. Mr. Hyland confirmed that he prepared the

summary of sales and HST collected for 2002 [Exhibit 2 at Tab 4]. Mr. Hyland also confirmed that he prepared the 2002 Comparative Tax

Summary for Mr. Ingram which showed the total income and tax payable for that taxation year and the previous four years. Mr. Hyland confirmed that in 2002, Mr. Ingram reported a total income loss of $8,800, and he has also had a loss of about $3,100 in 1998, while in 1999-2001, Mr. Ingram reported total income of about $6,300 to $6,500. [ 61 ] Mr. Hyland confirmed that he prepared all the material for Mr. Ingram’s 2002 and 2003 T-1 taxation returns [2002 return located at Tab 74 of Exhibit 1 and the 2003 return located at Tab 75 of Exhibit 1] based upon the information supplied to him by his client. Mr.

Hyland’s practice is to review the file with the client, the client verifies the information in the return and the client signs the return before it is put in the mail. Mr. Hyland provides his client with a copy of the return for the client’s records. [ 62 ] Mr. Hyland made it clear that the client is responsible for the numbers inserted in the tax returns, because he uses the client’s

Journal or ledger to input the numbers in the appropriate spaces or lines. He added that his firm did not do any bank reconciliations for Mr. Ingram nor did they do any reconciliations of what was reported against the invoices issued by Mr. Ingram. The only source documents that were utilized prepare the T-1 and HST returns, was the Journal or ledger information which Mr. Hyland got from Mr. Ingram. Mr. Hyland confirmed that this is the manner in which he prepared Mr. Ingram’s returns for the taxation years 2002-2005. Mr.

Hyland added that he did not prepare any of the quarterly HST returns, as they were prepared by Mr. Ingram himself. However, the summaries which were included in the Mr. Ingram’s T-1 returns reflected the entries that Mr. Ingram had placed in his Journal which had been forwarded to him to prepare the tax returns. [ 63 ] In terms of the documents found in Exhibit 5 at Tab 1, which contained the synoptic Journals or ledgers, Mr. Hyland made it very clear that they were also prepared by Mr. Ingram and then forwarded to him and that he did use them to prepare Mr. Ingram’s 2004 and 2005 tax returns.

In Exhibit 5 at Tab 2, there is a copy of the synoptic Journal or ledger for the 2006 tax year, but Mr. Hyland confirmed that he did not do the work to prepare Mr. Ingram’s returns for that taxation year. Mr. Hyland also confirmed that in Exhibit 1 at Tab 14 and 15, there were copies of the Journal or ledger that he would have used to prepare the 2002 and 2003 tax returns. [ 64 ] As Mr. Hyland had repeated on many occasions, in reviewing these documents, he relied on Mr. Ingram to prepare the Journals and he relied on the numbers in the Journals.

He did not double check or correct the addition of the amounts entered by Mr. Ingram in the Journal. [ 65 ] Mr. Hyland confirmed that when he utilized the numbers provided by Mr. Ingram, there were net losses of about $8,900 in 2002, $4,035 in 2003 and $13,420 in 2004. Mr. Hyland stated that he has known Mr. Ingram for several years, his business is construction and that Mr. Ingram is a hard worker who he believed had made “a serious attempt to keep records”. For those reasons, he had no reason to question the entries in the Journal.

He added that the construction industry is very volatile and that the sales can go up or down, and that he did not have any involvement in Mr. Ingram’s day-to-day activities or know any of his clients. [ 66 ] With respect to any of Mr. Ingram’s payroll records, Mr. Hyland stated that he never saw any of them, as he relied entirely upon the entries made by Mr. Ingram in the Journal, He did not recall whether Mr. Ingram told him that he had subcontractors involved or employees to perform the work. However, in looking at the returns filed by him, Mr.

Hyland noticed that there was a line item for direct wages, so that indicated to him that Mr. Ingram probably had some employees. Furthermore, Mr. Hyland added that he did not know anything about Mr. Ingram’s Accounts Receivable, and he repeated that he only knew what he had been provided by Mr. Ingram. [ 67 ] On cross examination, Mr. Hyland confirmed that the document from J. Ingram Construction at Exhibit 2 at Tab 2 was utilized to add additional expenses for the house and he confirmed that the document was written by Mr. Ingram and was not included in the Journal. When he received the document, Mr.

Hyland include, the additional amounts for mortgage interest and property taxes. In terms of whether Mr. Ingram reported on the cash or accrual basis, Mr. Hyland recalled discussing that with his client, but not at length, and he was confident that Mr. Ingram gave him his income and expenses. [ 68 ] Mr. Hyland stated that he had the short telephone conversation with Ms. Karen Smits, the CRA auditor and that he confirmed that she had added input credits to get to “gross income” and deducted expenses for HST when applicable. He did not recall other areas of which Ms. Smits had a concern. He did not talk to Mr.

Ingram about the CRA’s authority to seize documents, but he did advise Mr. Ingram to see if he could get the “field audit” done at his house in order to keep control of his documents. Mr. Hyland also indicated that when CRA becomes involved with an audit of a client, his advice to the client is to be sure they know where all their records are located. Finally, he did not recall any discussions with Mr. Ingram about CRA’s ability to obtain bank statements, as he never saw any bank statements from Mr. Ingram. [ 69 ] On further cross examination, Mr.

Hyland confirmed that his son had helped him prepare some of the documents for the 2004 and 2005 returns. He had discussed vehicle expenses with Mr. Ingram and the fact that he could write off some of his business expenses for a vehicle, but he had to adjust the amount for personal use and they talked about how much would be reasonable. [ 70 ] With respect to his “engagement” with Mr. Ingram for the taxation years 2002 to 2005, Mr. Hyland did not review that “engagement” as he only sat down to review the terms of the “engagement” with a new client. Mr.

Hyland also confirmed that he does not have the professional designation of a CGA, CA or a CMA, but added that he has taken accounting courses. Mr. Hyland only does the work that the client wants him to do and repeated that it is the client’s responsibility to provide him with their records. In this case, he had the “feeling” that Mr. Ingram had provided all of the necessary information to him so he could do is work. Mr. Hyland added that he only saw Mr. Ingram once a year. [ 71 ] When he prepares a return, Mr.

Hyland points out to the client that there is a “Notice to Reader” and he puts this “disclaimer” on his returns, which is on the last page of the tax return just above the client signature certifying that the information given in the return and any documents attached are “correct, complete and fully disclose all my income”. The “disclaimer” of the 2003 tax return, for example, [Tab 75 of Exhibit 1] reads as follows: “This 2003 Tax Return has been prepared using information provided by the taxpayer. No review or verification of this information has been completed by the preparer.

Compliance with the Income Tax Act concerning disclosure of accurate and complete information remains with the taxpayer.” Forensic Reconciliation and Accounting of Mr. Ingram’s Unreported Revenue by Mr. Bruce McCabe of Canada Revenue Agency

[ 72 ] On day 4 of the trial which was on November 3, 2011, Mr. Bruce McCabe of the Special Investigations Unit took the witness stand to outline the investigative work he had done after the file was referred to him in January 2006. He conducted a preliminary review and then prepared a more detailed report regarding his investigation. He reviewed the audit report of Ms. Smits, confirmed her findings and then reviewed additional information that he had obtained. Based upon that information, Mr. McCabe prepared an Information to Obtain a Search Warrant which was approved and the Search Warrant was executed at Mr.

Ingram’s house in Windsor Junction, on September 11, 2007. [ 73 ] Pursuant to the authority of the Search Warrant, CRA investigators entered Mr. Ingram’s house to locate and seize the business records of Mr. Ingram, Journal books, receipts for expenses, invoices for sales and all bank records for J. Ingram Construction. Documents were seized from Mr. Ingram’s house and placed in a bond room where only the investigators would have access to review those documents. Those documents were one of the main sources to determine the accuracy of the income reported and the expenses claimed. With that information, Mr.

McCabe did an audit of the 2004, 2005 and 2006 taxation years and he confirmed the preliminary audit done by Ms. Smits for the 2002 and 2003 taxation years. [ 74 ] When Mr. McCabe noticed that many of the records were incomplete, he prepared and obtained a Production Order which was delivered to the Bank of Montréal [Mr. Ingram’s business bank], the Heritage Credit Union [Mr. Ingram’s personal banking institution] and the Royal Bank of Canada in Lower Sackville. Mr. McCabe’s investigation reviewed the documents obtained from the Search Warrant at Mr.

Ingram’s house and financial information received pursuant to the Production Orders to follow-up on the audit of the 2002 and 2003 taxation years. Since he had also reviewed the returns for 2004-2006 taxation years, and they all had low income or net losses, he added those years, because they were all filed at the same time in the spring of 2007. [ 75 ] Mr. McCabe confirmed that the Production Orders were executed in October, 2008 at the three financial institutions, which he had previously mentioned. Pursuant to those Production Orders, Mr.

McCabe received the bank’s copies of all information relating to cheques which had gone into Mr. Ingram’s account for the taxation years 2002-2006, he received copies of deposit slips and copies of cheques written by Mr. Ingram to pay expenses. Once Mr. McCabe received all of that information, he was then in a position to review the complete set of the Bank of Montréal’s monthly “Business Banking statements” for the 2002-2006 taxation years [which are in Exhibit 3]. [ 76 ] In addition to the large majority of financial information received from the Bank of Montréal with respect to deposits made by Mr.

Ingram and cheques written on that account by him, Mr. Ingram also had an account at the Heritage Credit Union and Mr. McCabe received an annual statement from their database which listed all deposits and withdrawals on Mr. Ingram’s account. The Production Order materials received from the Heritage Credit Union, Sackville Branch, for the calendar year 2002, 2003, 2004, 2005 and 2006 are found in Exhibit 3, Tabs 60-64. Finally, Mr. McCabe also issued a Production Order to the Royal Bank of Canada, Lower Sackville Branch to produce the financial records of J.

Ingram Construction and as a result of that Order, the Royal Bank of Canada produced records for the months of November and December, 2006. During the 2002-2006 taxation years, most of Mr. Ingram’s banking records were located at the Bank of Montréal, the Heritage Credit Union account was utilized throughout that period as well, but the Royal Bank of Canada account was opened in November, 2006. [ 77 ] Once all of the banking information had been received by Mr. McCabe, he started to analyze the information that he had received and divided the amounts into 4 categories for the purposes of his investigation:

a) Identified amounts that were reported in Mr. Ingram’s Journal and therefore included in his tax returns;

b) Identified amounts that were not taxable;

c) Identified amounts that were not reported in Mr. Ingram’s Journal and not reported in his tax returns for the years in question; and

d) Any amounts of money that could not be identified as to its source or how much was paid, for example, where a customer paid Mr. Ingram in cash or work was done on a “barter” basis where services that could have been exchanged for work done where CRA was not able to locate any cheque or record of payments. [ 78 ] Mr. McCabe explained that the methodology of his detailed analysis and reconciliation of Mr. Ingram’s accounts was focused primarily on the third category referred to above that is, “Identified” or “Deposited” amounts that he was able to verify as having gone into one of Mr.

Ingram’s bank accounts, but the amount was not recorded in Mr. Ingram’s business Journal. Since, Mr. Ingram’s business Journal was the source document utilized by Mr. Hyland for the preparation of Mr. Ingram’s T-1 tax returns for the years in question and amounts had not been reported to CRA to determine Mr. Ingram’s taxable income, Mr. McCabe also identified the amounts of tax that Mr. Ingram would have been required to pay for the taxation years in question. In conducting this deposit analysis, Mr. McCabe was required to look at Mr.

Ingram’s Journal to see if the amount was reported there, and if so, then he would go on to look for any unreported amounts, bearing in mind that some of them might not be taxable and that for others, he might never be able to identify them. [ 79 ] Mr. McCabe’s first task was to identify all amounts in the business Journal and reconcile those Journal amounts with the tax returns prepared by Mr. Hyland. Next, some amounts written in the Journal did not indicate who had paid Mr. Ingram, so Mr.

McCabe was required to utilize the information obtained through the Production Orders and photocopies of cheques on deposit at the various financial institutions to determine who Mr. Ingram had worked for and had paid him by cheque. Once the copy of the client’s cheques were obtained, then Mr. McCabe and five other investigators from CRA conducted interviews with most of Mr. Ingram’s clients with a view to finding out exactly what was done for them, the method by which they had paid Mr. Ingram and whether or not they had any copies of canceled cheques or invoices signed by Mr.

Ingram to confirm the work done, as well as, the payments made by the client. Mr. McCabe stated that these third party interviews were his main sou

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