Case information

None.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Taxation - Procedure - Requirement that taxpayer produce certain tax returns and related information - Requirement based on third party disclosure - Canada Revenue Agency was aware that taxpayer had been accused of criminal activity in California - Whether predominant purpose of Requirement was to determine taxpayer’s penal liability - Whether Federal Court of Appeal failed to make a full and proper inquiry into the nature and objectives of all the state institutions that may become possessed of the information demanded - Whether the Federal Court of Appeal failed to apply Jarvis v. The Queen, [2002] 3 S.C.R. 757, 2002 SCC 73 - Whether the Federal Court of Appeal’s approach conflicts with existing jurisprudence as to Requirements issued under s. 231.2 of the Income Tax Act.

In January 2004, Mr. Ellingson was charged in California with various offences involving an illicit drug importation and distribution operation and the laundering of the proceeds between June 2000 and March 2004. A grand jury indictment was unsealed on April 1, 2004, and a news release naming Mr. Ellingson was issued by the United States Attorney the next day. On April 16, 2004, the Special Enforcement Program (“SEP”), a unit within the Investigations Division of the Canada Revenue Agency (“CRA”), received a copy of a suspicious transaction report from a bank via the RCMP. The SEP deals with audits of taxpayers where there is an indication that they may have earned income from illegal activities. If an auditor determines that a criminal offence may have been committed, the file is referred to the Investigations Division, but the auditor must first gather information to see if an audit is warranted. The report was first directed to an investigator in the Investigations Division of the CRA. Having found that Mr. Ellingson had not filed a tax return for the years 1997 through 2003, the investigator referred the report, a newspaper article reporting the American indictment, and the database search to an auditor/inspector in the SEP. The auditor, who had sole conduct of the file, was not provided with the indictment or the news release. Acting on an honest belief that the Requirement was for tax liability purposes only, and intending only that it be used for those purposes, the auditor issued a Requirement that Mr. Ellingson produce signed income tax returns for 1999-2003 and signed statements of his assets, liabilities and personal expenses for those years on July 20, 2004, under s. 231.1(1) of the Income Tax Act. There was no evidence of a criminal investigation by the Investigations Division and Mr. Ellingson was not interviewed by the CRA. The auditor took no other actions. Mr. Ellingson applied for judicial review of the auditor’s decision.

The applications judge granted judicial review and quashed the Requirement. The Federal Court of Appeal allowed the Minister’s appeal and restored the Requirement.