Case information

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Taxation – Income tax – Audits and investigations – Legislation – Interpretation – Does subsection 231.1 of the Act authorize the Minister to obtain a warrant to search a personal computer found in a dwelling house for audit and collection purposes – Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) (the “Act”).

The applicant contacted police to claim $40,000 that was found hidden in a condominium he had previously owned. When questioned about the money, he said that he had created websites that linked to online casinos and won 20-25% of the losses of those who played through the links, but that he did not declare the income since it was from gambling and not taxable. The police contacted a Canada Revenue Agency (“CRA”) investigator to flag the undeclared earnings. A CRA auditor conducted an audit, following which notices of reassessment of the applicant were filed claiming a total of $369,094.14 in income tax. Ex parte orders were obtained to seize the applicant’s bank accounts and to access the applicant’s condo and remove assets, including four computers, which were placed under judicial guardianship. The applicant filed a notice of opposition to the reassessments but did not seek a review of the Orders. The respondent successfully applied for an ex parte order and warrant pursuant to s. 231.1(3) of the Act to inspect the computers seized from the applicant’s premises for tax collection and audit purposes. The applicant brought motions to set aside the order and warrant and to have an affidavit and notes tendered as evidence by police, held inadmissible. The motions were dismissed by the Federal Court, and the Federal Court of Appeal dismissed the appeal.