The taxpayer had a marijuana-growing operation at her house. The Minister reassessed her for over $300,000 of income from the operation, and imposed s. 163(2) penalties for false statements on her returns. The taxpayer alleged that she had nothing to do with the growing operation, that the amounts added to her income represented loans from family and friends, and that the Minister's methods of assessing her personal expenses were flawed. Campbell J. dismissed the taxpayer's appeal in the main, citing a lack of credible evidence.
While considering Lacroix, Campell J. remarked that that decision appeared to conflate the tests in 152(4)(a)(i) and 163(2), which would eliminate the mens rea element of s. 163(2). He stated at paras. 44-45:
Where a taxpayer is accused of reckless and reprehensible conduct bordering on criminal behaviour for which he may be slammed with the punishment of gross negligence penalties, the Minister under subsection 163(2) has a duty to justify its decision which will not be satisfied merely, as Lacroix suggests, by showing that the taxpayer has unreported income but could not provide a credible explanation.
In the present appeals, the magnitude of the omissions in relation to the income declared is significant and occurred over a number of years.