The taxpayer had pleaded guilty to fraud in misappropriating funds from her former employer. She was sentenced to imprisonment of two years less a day to be served in the community, and to pay restitution of $40,000 to her employer. Paris J noted that, under s. 22.1 of the Ontario Evidence Act, a criminal conviction is prima facie proof of the underlying facts, although related jurisprudence states that the inference is even stronger where there was a full trial leading to a conviction (which was not the case here) (para. 14).
The taxpayer's conviction was therefore prima facie proof that she had misappropriated $40,000 (para. 37). Before upholding the penalty (based on underreported income of $37, 476 for the particular taxation year in question), Paris J stated (at para. 37):
I would adopt the position taken by Bowman C.J. in Biros v Canada, 2007 TCC 248, that where the respondent has proved that a taxpayer has received funds from a fraudulent scheme, the failure to report the income from the fraud is more likely part of the overall fraud than due to inadvertence by the taxpayer.