Neither “inspect” nor “examine” suggested power to compel person to answer questions and oral examination was not ordinary meaning of word “audit”

Federal appeal | Tax | Income tax | Administration and enforcement

Taxpayer C Corp. refused demand by Minister of National Revenue for in-person interviews with taxpayer's employees pursuant to s. 231.1(1)(a) of Income Tax Act as part of audit as to whether taxpayer complied with transfer pricing rules. Federal Court judge dismissed Minister’s summary application for compliance order directing taxpayer to produce employees for interviews. Minister appealed. Appeal dismissed. Section 231.1(1)(a) of Act cannot be interpreted so as to permit Minister to compel oral interviews of taxpayer or its employees concerning its tax liability. Focus of powers to “inspect, audit or examine” in s. 231.1(1)(a) of Act was on Minister’s ability to access information in taxpayer’s books and records. Neither “inspect” nor “examine” suggested power to compel person to answer questions and oral examination was not ordinary meaning of word “audit”. Context of provision showed that s. 231.1 of Act was intended to allow Minister to independently verify through audit, which was different than compelling answers to questions. Purpose of s. 231.1 of Act was to facilitate Minister’s access to all books, records and information of taxpayer. Concept of “clean hands” had no role in determining whether compliance order should issue. Issue of admissibility of evidence and prejudice arising from answers given during audit was to be dealt with by Tax Court, not at audit stage. Principle of proportionality and vagueness were not relevant considerations in request for compliance order under s. 231.7 of Act.

Canada (National Revenue) v. Cameco Corporation (2019), 2019 CarswellNat 957, 2019 FCA 67, Donald J. Rennie J.A., Judith Woods J.A., and J.B. Laskin J.A. (F.C.A.); affirmed (2017), 2017 CarswellNat 3791, 2017 CarswellNat 6716, 2017 FC 763, 2017 CF 763, Glennys L. McVeigh J. (F.C.).


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