In course of audit, Canada Revenue Agency requested draft due diligence report prepared by accounting firm in connection with transaction involving taxpayer. Taxpayer refused to provide report on grounds of irrelevance, solicitor-client privilege, and principle that taxpayer was not required to self-audit. Minister of National Revenue brought application pursuant to s. 231.7 of Income Tax Act for order requiring taxpayer to provide report. Application granted. Taxpayer was required to provide report. Judge did not need to review report to fairly decide issues and it remained sealed in court file. Minister met low threshold that report may be relevant to amount payable by taxpayer under Act. Report was prepared for purpose of transaction that was being audited. Minister did not need to demonstrate that report was relevant to specific issue under audit. Report was not protected by solicitor-client privilege. Jurisprudence precluding imposition on taxpayers of obligation to self-audit did not apply to these circumstances. At least some information in report could be characterized as tax accrual working papers but Minister’s request for report was made in context of active audit. Compelling taxpayer to provide report would not offend principle that taxpayer was not required to self-audit. There was no reason to exercise discretion to decline to compel production of report.
Canada (National Revenue) v. Atlas Tube Canada ULC (2018), 2018 CarswellNat 6229, 2018 FC 1086, Richard F. Southcott J. (F.C.).