Executive Summary: Key Legal and Evidentiary Issues

• Reassessments using the net worth method were issued against the appellant for the 2013, 2014, and 2015 taxation years for unreported income totaling $84,685.35, $163,717.03, and $49,542.14, respectively

• Admissibility and probative value of sworn statements from Morocco-based declarants were contested by the Crown but ultimately admitted under Quebec civil evidence rules

• The appellant claimed approximately $160,000 in non-taxable funds repatriated from Morocco through informal currency exchanges, but failed to provide documentary proof of dates, amounts, or use in Canada

• Unexplained withdrawals from MG Global's "advances" account ($20,400 in 2013 and $42,783.98 in 2015) were found by the Court to have been double-counted in the net worth calculation

• Penalties under subsection 163(2) of the Income Tax Act were upheld for 2013 and 2014 based on the appellant's gross negligence, but vacated for 2015

• The Minister's burden to reassess outside the normal reassessment period under subparagraph 152(4)(a)(i) was met for 2013 and 2014 but not for 2015

Background and the CRA audit

Bouchaib Gouriche, a Moroccan-born real estate broker residing in Brossard, Quebec, appealed reassessments issued by the Minister of National Revenue under the Income Tax Act for the 2013, 2014, and 2015 taxation years. The case was heard over four days in March 2026 before the Honourable Judge Dominique Lafleur at the Tax Court of Canada in Montreal. Mr. Gouriche represented himself, while the Crown was represented by counsel Christophe Tassé-Breault. The dispute arose after the Canada Revenue Agency audited 9263-2702 Québec inc., a construction and real estate company in which Mr. Gouriche was a shareholder and director, and subsequently extended its investigation to his personal affairs. Using the net worth method, the Minister determined that Mr. Gouriche had failed to report significant amounts of taxable income — $84,685.35 for 2013, $163,717.03 for 2014, and $49,542.14 for 2015 — and assessed penalties under subsection 163(2) of the Act for all three years. All reassessments were issued outside the normal reassessment period under subparagraph 152(4)(a)(i).

Mr. Gouriche's personal and business history

Mr. Gouriche left Morocco in 1997 to settle in the United States, where his son was born. Subsequently, in 2001, he immigrated to Quebec with his wife and two children. He studied for a master's degree in linguistics at UQAM while working part-time at the Port of Montreal and pursuing studies in real estate brokerage in the evenings. From 2004 onward, he worked as a mortgage and real estate broker and became involved in various business ventures — including a Subway restaurant franchise operated through MG Global Investments Inc., a taxi investment, a company called Automobile Plus, and a construction firm (9263) that built and sold apartments. He also invested $37,500 in the shares of 9285-9859 Québec inc. (also known as Technikad Analytique), a laboratory for the analysis of pharmaceutical and natural products. By the end of 2015, the activities of 9263 and MG Global had ceased, and Mr. Gouriche devoted himself entirely to real estate brokerage.

The net worth discrepancy and disputed elements

The CRA auditor, Mr. Nicolas Raymond, conducted a net worth analysis using 2012 as the reference year. He identified two primary sources of discrepancy: unexplained bank deposits (totaling $32,648 in 2013, $62,217 in 2014, and $21,971 in 2015) and unexplained advances made by Mr. Gouriche to companies 9263 and MG Global (totaling $52,037 in 2013, $101,500 in 2014, and $27,571 in 2015). The parties filed a Joint Statement of Facts (Partial) narrowing the issues in dispute to six specific elements: the inclusion of the Residence at 610 Verdure Street in the asset calculation; unrecorded shareholder advances to 9263; common shares of Technikad Analytique; the Laurentian Bank Distinction Line of Credit; unexplained withdrawals from MG Global; and sums originating from Morocco that the Minister refused to recognize as deductions.

Preliminary evidentiary question — Moroccan sworn statements

A significant preliminary issue involved the admissibility of six sworn statements from individuals residing in Morocco (Exhibits A-7 through A-12). The respondent objected to their filing, arguing that the reliability criteria under article 2870 of the Civil Code of Québec were not satisfied — particularly because the facts occurred more than ten years earlier, Mr. Gouriche had admitted to writing some of the statements himself, the respondent was unable to cross-examine the declarants, and the declarations were not necessary since Mr. Gouriche had personal knowledge of the facts. The Court dismissed the objection, finding that the necessity criterion was met because the declarants were all domiciled or resident in Morocco, the Court does not permit testimony by teleconference or other technological means from persons not physically in Canada, and it was unreasonable to require the declarants to appear in person given their remoteness and the high costs involved. The reliability criterion was also satisfied for the statements, as the facts recounted therein were largely corroborated by other evidence contained in the Joint Document Book and by Mr. Gouriche's testimony.

The Court's analysis of disputed net worth elements

On the Residence and the Laurentian Bank Line of Credit, Mr. Gouriche conceded these were no longer in dispute during the hearing, as the Residence's purchase cost of $228,000 was included consistently across all years (including the reference year) and thus did not increase the income calculated using the net worth method, and the line of credit balance of $216,908.55 as of December 31, 2014, was accurately recorded as a liability. Regarding the common shares of Technikad Analytique, Mr. Gouriche similarly withdrew his objection following the testimony of Mr. Hafid El Kadaoui and a $10,000 concession by the respondent for the 2015 taxation year. The unrecorded advances to 9263 ($7,000 in 2014 and $7,000 in 2015) were upheld by the Court, as Mr. Gouriche had not provided clear and detailed evidence justifying the source of those funds.

Unexplained MG Global withdrawals — double-counting found

A critical finding concerned the unexplained withdrawals from MG Global's "advances" account totaling $20,400 in 2013 and $42,783.98 in 2015. The auditor had made positive adjustments for these amounts in the net worth calculation because he could not trace corresponding deposits in Mr. Gouriche's bank accounts. However, the Court found that this treatment distorted Mr. Gouriche's financial picture because the withdrawals were already recorded in MG Global's "advances" account and had the effect of increasing the amount owed by Mr. Gouriche to the company. By making a positive adjustment, the debt owed by Mr. Gouriche to MG Global was reduced accordingly, producing a distorted picture of his assets. The auditor himself indicated that these amounts may have been taken into account twice. The Court concluded, on the balance of probabilities, that these amounts had been double-counted and ordered their removal from the net worth calculation.

Adjustments for community reimbursements

The Court accepted credible testimony and documentary evidence establishing that Mr. Gouriche regularly paid expenses on behalf of members of the Moroccan community in Quebec and was reimbursed. Specifically, the Court ordered deductions for reimbursements from the Fadhil family ($900 in 2013 and $4,400 in 2014 in cash deposits, plus university payments of $1,573.36 in 2013 and $617.31 in 2014), Mr. Aboufirassi ($2,000 loan repaid in 2013), Mr. Brouk ($5,020 in 2013, $2,100 in 2014, and $216.95 in 2015), Mr. Abderrazeq Eddahir ($1,640 in 2013, $556.18 in 2014, and $2,751.96 in 2015), and Mr. Taya ($800 in 2015). The adjustments for the 9263 "advances" account discrepancies ($10,414 in 2013 and $29,656 in 2014) were also reversed in Mr. Gouriche's favour, as the Court was not convinced that the discrepancies between the information provided by Mr. Gouriche and the information in the financial statements should be attributed to Mr. Gouriche, given that 9263 had four shareholders.

Funds from Morocco — claims rejected

Despite finding Mr. Gouriche's overall testimony credible and accepting that he did receive funds from Morocco during the years 2012 to 2015 from three sources — a 500,000 DH inheritance from the estate of one of his brothers, 300,000 DH in advances from his sister for the purchase of an apartment, and the repayment of a 280,000 DH debt by his brother-in-law (Mr. Barrad) — the Court declined to make any adjustments to the net worth calculation for these amounts. The Court reasoned that Mr. Gouriche had failed to demonstrate, on the balance of probabilities, that he actually repatriated the funds to Canada and that he used the funds to support his cost of living and to inject capital into the companies. Key evidentiary gaps included the absence of records showing dates and amounts of payments, no documentary evidence of the informal currency exchanges in Moroccan bazaars, inconsistencies between dates in the donation contract (dated February 23, 2012) and the sworn affidavit (indicating the donation was made between 2012 and 2013), the Court's finding that it was highly unlikely that the deceased brother Hassan's funds were distributed before his death on September 29, 2013, the continued existence of a precautionary attachment on Mr. Barrad's property as of June 2021 casting doubt on whether the 280,000 DH debt had actually been repaid, and the implausibility of repatriating approximately $160,000 in cash at $5,000 to $6,000 per trip when Mr. Gouriche's passport indicated he made only approximately one or two trips per year to Morocco during the period.

Reassessment outside the normal period and penalties

The Court upheld the Minister's right to reassess outside the normal reassessment period for 2013 and 2014, finding that Mr. Gouriche misrepresented the facts through negligence — a lack of due diligence — when filing his income tax returns for those years. The remaining discrepancy between reported and calculated income, combined with the evidence that Mr. Gouriche was a sophisticated individual given his past professional experience, that he had control of the various bank accounts including those of the companies, and that he failed to keep records for the repatriation of funds from abroad, established the requisite negligence. Penalties under subsection 163(2) were likewise maintained for 2013 and 2014, as the Court found that Mr. Gouriche's conduct deviated markedly and substantially from the standard of conduct expected of a reasonable businessman in the same circumstances, amounting to gross negligence. However, for the 2015 taxation year, the Court found that the adjustments it ordered reduced the difference between the income reported by Mr. Gouriche and the difference calculated using the net worth method to zero. Therefore, Mr. Gouriche's negligence had not been proven on a balance of probabilities for 2015, and the Minister had not discharged his burden to justify either the reassessment outside the normal period or the penalties for that year. The 2015 reassessment was cancelled.

The ruling and outcome

The appeals for 2013 and 2014 were allowed in part, with the reassessments referred to the Minister for further review and reassessment. The unreported taxable income was reduced from $84,685.35 to $42,737.99 for 2013 (a reduction of $41,947.36) and from $163,717.03 to $124,387.54 for 2014 (a reduction of $39,329.49). The penalties under subsection 163(2) were maintained for 2013 and 2014 but must be reduced to take account of the adjustments made by the Court to the unreported taxable income. The appeal for 2015 was allowed and the reassessment was cancelled since the Minister had not discharged his burden of reassessing outside the normal reassessment period. No costs were awarded. The judgment was signed by Judge Dominique Lafleur on April 28, 2026. The exact amount of penalties owing for 2013 and 2014 cannot be determined from the decision alone, as they depend on the recalculated tax amounts for each year.