" ... the [Tax Court] judge had already concluded that the respondent [the Crown] had shown that the workers used by Kosma-Kare could not have been the employees either of 9167 nor of 9199 [the supposed empolyment agencies whose invoices Kosma-Kare had sought to use to get input tax credits], nor of subcontractors with whom these agencies said they were doing business."
But the FCA did agree that Kosma-Kare wasn't liable for penalties:
" First, the respondent admitted that the Act does not deal with the obligation to pay employees a minimum wage nor that it demands obtaining a work permit. Consequently, ... the judge did not explain the link she established between the false statement or omission of Kosma-Kare (the only question discussed in the hearing before us was the name and registration number of the supplier or the intermediary that Kosma-Kare must declare for purposes of the Regulation [on ITCs]) and the non-respect of other laws that deal with work permits and minimum wage."
For similar reasons, the FCA also agreed that Kosma-Kare could not be reassessed for statute barred periods:
" In the same way, when she deals with the application of paragraph 298(4) of the Act [late reassessment], the judge does not specify the link she established between Kosma-Kare's wilful blindness to the illegality of the workers and the false statement it made. At no time, does the judge say on which basis Kosma-Kare knew or ought to have known but for its neglect, carelessness or wilful default that 9167 and 9199 were not the suppliers of the service and were not acting as intermediaries in the meaning of the Regulation." [My translations.]
See Kosma-Kare Canada inc. c. Canada, 2014 CAF (Gauthier) (upholding Kosma-Kare Canada Inc. c. La Reine, (2014 CCI Lamarre) on ITC disallowance but rejecting penalties and late reassessment.)