In this case Justice Valerie Miller said that CRA may use documents it gets in a criminal investigation to assess the taxpayer’s income tax obligation, even if the evidence couldn’t be used for criminal prosecution. In this view, she seems to disagree with Justice D’Arcy, who thought that such evidence might be inadmissible on a GST reassessment. See Cambridge Leasing v. The Queen.
Here’s what happened in Piersanti: CRA investigated Mrs. Piersanti for criminally hiding GST collected for shopping centre rent. CRA prosecuted her for tax evasion. She plead guilty. CRA also reassessed Mrs. Piersanti for unreported income tax, using the evidence it got in the GST criminal investigation. She said the Tax Court shouldn’t allow CRA to use that evidence because CRA couldn’t use it to prosecute her, because of the SCC decision in Jarvis. Justice Miller disagreed with Mrs. Piersanti and allowed the evidence. She said:
“[20] As of July 1999, the predominant purpose of [the CRA auditor’s] investigation was the determination of the Appellant’s penal liability under the ETA. The documents received as a result of the Requirements was in furtherance of that investigation. Such evidence may be excluded from the prosecution of an offence: R v Ling, [2002] SCC 74 at paragraph 5. However, the issue before this court is the determination of the Appellant’s income tax liability not her penal liability.
“[21] The CRA may conduct both an audit and an investigation concurrently. They are not mutually exclusive: Ling (supra) at paragraph 30. …
“[22] … although an audit and an investigation could be conducted concurrently, the results of the audit could not be used in furtherance of the prosecution. However, the results of the audit can be used in relation to an administrative matter, such as a reassessment: Romanuk v The Queen, 2013 FCA 133 at paragraph 7.
“[23] It is my view that the Appellant’s rights under section 7 and 8 of the Charter are not violated by using the information from the Requirements to raise the reassessments at issue. In fact, the use of Requirements is one of the tools the CRA has to further an audit. Her section 7 and 8 rights may have been violated by using the information from the Requirements to prosecute her under the ETA but that would have been a question for the Superior Court of Justice to decide at the Appellant’s trial for GST evasion: Romanuk at paragraph 8. The Appellant chose not to raise that defence at the proceedings before the Superior Court of Justice.”
So, relying on the FCA’s decision in Romanuk v. The Queen, Miller J. said CRA could use the evidence it got in its GST criminal investigation to reassess Mrs. Piersanti’s income tax. (Justice Miller was the TCC judge in Romanuk, whose decision the FCA upheld.)
In Romanuk, the FCA (Webb JA, who used to be a TCC judge) said:
“In paragraph 103 of Jarvis, the Supreme Court also confirmed that “…it is clear that, although an investigation has been commenced, the audit powers may continue to be used, though the results of the audit cannot be used in pursuance of the investigation or prosecution”. Since the audit powers may continue to be used, even though the results cannot be used in relation to an investigation or prosecution, the results can be used in relation to an administrative matter, such as a reassessment.
“The use of such information or documents in administering the [ITA] and reassessing the appellant does not violate her rights under either section 7 or 8 of the Charter because the CRA has the right to continue to use its audit powers provided that the information or documents are only used for the purposes of administering the [ITA].”
See Piersanti v. The Queen, 2013 TCC (Affirmed on appeal (28 Oct 2014) Piersanti v. Canada, 2014 FCA 243.)