The Minister assumed that $7,559,684 of an amount claimed by the taxpayer as a bad debt dedution in respect of a loan held by it comprised interest of $183,336 of interest and principal as to the balance. The taxpayer's witness testified that the taxpayer had included $263,000 of interest in its retained earnings. The Court was satisfied that the witness's testimony, which the trial judge had stated was credible, was enough to demolish the Minister's assumptions regarding accumulated interest. The burden then fell the Minister to prove the assumptions, which was not done. Dawson JA stated:
In tax cases, the taxpayer has an initial onus to demolish the Minister's assumptions. This onus is met if the taxpayer establishes a prima facie case that the Minister's assumptions are wrong. Once the taxpayer establishes a prima facie case, then the burden shifts to the Minister to prove its assumptions on a balance of probabilities.