In Bauer, 2018 FCA 62, the CRA commenced an investigation into whether the taxpayer had evaded taxes. The CRA investigator issued requirements to several banks under section 231.2 to obtain information on the taxpayer. The CRA then used that information to prepare net worth assessments. The taxpayer’s notice of appeal from the assessments alleged that the information from the banks was inadmissible in the Tax Court proceedings because it had been obtained in a manner that violated his section 8 Charter rights. The Tax Court struck the allegation as having no reasonable prospect of success, even if true. The Federal Court upheld the Tax Court decision. Mr Justice Webb wrote the following for a unanimous court:
[13] In my view, even though an investigation had commenced that could lead to charges being laid under section 239 of the ITA, this does not preclude the CRA from using requirements to obtain information or documents that could be used only in relation to the reassessments. Both the reassessments and any charges under section 239 of the ITA ultimately relate to the underlying tax liability of the taxpayer. Therefore, there is a common element in both matters—the determination of the unreported income of the taxpayer for a particular year. Common facts will be needed for both the administrative reassessment and the penal charges under section 239 of the ITA.
[14] While using requirements under section 231.2 of the ITA to obtain information or documents after an investigation has commenced may result in that information or those documents not being admissible in a proceeding related to the prosecution of offences under section 239 of the ITA, it does not preclude that information or documents from being admissible in a Tax Court of Canada proceeding where the issue is the validity of an assessment issued under the ITA. It is the use of the information or documents that is relevant, not who at CRA issued the requirement for information or documents.
[15] In Piersanti the issue was the admissibility of certain documents in a hearing before the Tax Court of Canada in relation to Mr. Piersanti’s liability under the Excise Tax Act, R.S.C. 1985, c. E-15. The documents had been obtained as a result of requirements that had been issued under that Act while the CRA was investigating Mr. Piersanti to determine if criminal charges should be laid. In confirming the admissibility of such documents this Court noted, at paragraph 5, that ““[a] taxpayer’s Charter rights are engaged when an audit becomes a criminal investigation””. Since these Charter rights are engaged when this criminal investigation commences, these Charter rights, that could affect the admissibility of documents in court proceedings, must relate to proceedings arising from this criminal investigation and not to proceedings that do not relate to the commission of a criminal offence under the ITA or the Excise Tax Act.
[16] In relation to the appeal of his reassessment, Mr. Bauer is in the same position as any other taxpayer appealing a net worth assessment that is based on documents received following the issuance of a requirement under section 231.2 of the ITA. He should not be in a better position simply because he was also under investigation in relation to section 239 of the ITA.
