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OTTAWA — A Muslim charity is asking a court to freeze a federal suspension, which prohibits it from issuing tax receipts, while a challenge of the penalty plays out. 

Ottawa-based Human Concern International says the one-year suspension levied last month will cause "irreparable harm" to the organization and thousands of beneficiaries. 

The Canada Revenue Agency penalized HCI following an audit by the agency's charities directorate that flagged concerns about six initiatives.

The agency accused the charity of improperly issuing donation receipts totalling more than US$307,000 on behalf of organizations administering the six projects — a practice known as third-party receipting. 

The initiatives included three education and health projects in India, education and skills development of orphans in Bangladesh, orphan support in Somalia and an education project in Kenya. 

HCI says Canadian charities often work with individuals and groups connected to the communities where the projects are taking place.

The charity insists it has always been committed to maintaining direction and control of its overseas projects and to ensuring that all such projects conducted through third-party intermediaries constitute HCI's own charitable activities. 

In a July 7 letter to HCI, the revenue agency disagreed with the charity's interpretation, saying it was unable to accept the assertion that the six unregistered organizations were third-party fundraisers acting on behalf of, and for the benefit of, HCI.

The resulting one-year suspension is in effect until July 13, 2022.

HCI has objected to the penalty through the revenue agency's internal administrative appeal process. 

At the same time, it applied to the federal Tax Court to delay the application of the suspension until the objection was dealt with.

Early this month a federal Tax Court judge ruled against providing a stay of the suspension.

HCI is now challenging the refusal in the Federal Court of Appeal, arguing in a submission this week the judge failed to observe a principle of natural justice and procedural fairness in not giving HCI the right to a trial before punishment.

HCI, which is responding to the recent earthquake in Haiti, wants to ensure donors' charitable dollars will continue to help, said Mahmuda Khan, the charity's executive director.

"Whether it is a bakery in Yemen that serves vulnerable families in a war zone, supporting orphans or offering education to young girls, the suspension significantly risks this important work."

HCI's charitable work continues, notwithstanding the court's decision, but the reality is the charity "will have to scale back some of its programs," Khan added.

Almost 100 Muslim organizations and civil society groups sent a letter last month to Justin Trudeau calling on him to reform the revenue agency's auditing practices, alleging they unfairly target Muslim charities. 

The groups also asked the Liberal government, which has since triggered an election campaign, to overturn the agency's decision to suspend HCI.

Revenue Minister Diane Lebouthillier agreed during a national summit on Islamophobia last month to ask the taxpayers' ombudsperson, François Boileau, for a systemic review of the concerns.

Boileau said he is committed to examining the issues and will provide the government with an update on his investigation by Jan. 1.

This report by The Canadian Press was first published Aug. 20, 2021.

Jim Bronskill, The Canadian Press