Case information

Taxation — Income tax — Assessment — Absence of accounting documentation making audit possible — Assessments for corporate tax and source deductions made by Agence du revenu du Québec using alternate methods — Whether Quebec Court of Appeal could validate indirect method of reconstitution of income that it deemed reasonable without regard to reliability of its results — In absence of legislation, whether Quebec Court of Appeal could create and apply presumption that sole shareholder or director who has complete control of business appropriated unreported profits of business, unless its profits appeared in accounting documentation or reasonable explanation was provided to explain what happened to those funds, and exempting Agence du revenu du Québec from auditing personal affairs of shareholder to demonstrate that their net worth or lifestyle exceeded reported income — Whether Quebec Court of Appeal could refuse to rule on question of pure law raised for first time on appeal in absence of procedural prejudice, when its review was necessary for uniformity of law and prevention of injustice — Alternatively, whether assessments for source deductions not connected to identified employees were lawful.

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.

The Agence du revenu du Québec (“Revenu Québec”) assessed Maison Sami T.A. Fruits inc. (“Sami Fruits”) for the 2007 to 2012 taxation years on the basis of taxable income and source deductions determined by alternate methods. It also taxed Sami Al Asmar personally, as sole shareholder of Sami Fruits, on unreported profits that he allegedly appropriated. Sami Fruits and Mr. Al Asmar appealed all of these assessments, which totalled, including interest and penalties, more than 30 million dollars. The Court of Québec dismissed the applications to appeal the tax assessments and found, in particular, that the alternate method used for the corporate tax assessments was reasonable, that Sami Fruits did not adduce prima facie evidence demonstrating the inaccurateness of the assessments relating to the source deductions, and that all of the evidence gave rise to a presumption of fact that made it possible to attribute Sami Fruits’ unreported income to its sole shareholder, Mr. Al Asmar. The Quebec Court of Appeal dismissed the appeal. It also refused to consider, in the absence of exceptional circumstances, a new argument according to which the absence of a connection between the assessments and specific employees rendered the assessments in this regard unfounded.