Case Name: Louis Wald, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-10-25
Citations: 8 B.T.A. 1003
Docket Number: Docket No. 4629
Parties: Louis Wald, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Considered by Littleton, Love, and Tetjssell.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 8
Pages: 1003–1006

Head Matter:
Louis Wald, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 4629.
Promulgated October 25, 1927.
Benjamin H. Flesher, Esq., for the petitioner.
Joseph B. Harlacher, Esq., and J. Harry Byrne, Esq., for the respondent.

Opinion:
OPINION.
Smith :
The notice from which this appeal was taken is dated April 8,1925, and it states in paragraphs (1) and (2) that—
An examination of yonr income tax returns for the years 1918 to 1921, inclusive, has been made and the results thereof are outlined in the attached statement.
The right of appeal provided in the following paragraphs does not apply to the years 1918, 1920, and 1921, inasmuch as the overassessments for those years results from assessments made prior to June 2, 1924, the effective date of the Revenue Act of 1924.
The petition initiating this proceeding which was filed on June 8, 1925, refers to the deficiency letter and states the taxable year and amount of tax involved in paragraphs (2) and (3), respectively, as follows:
(2) The deficiency letter (a copy of which is attached) was mailed to the taxpayer on April 8, 1925 and states a deficiency for Louis Wald for the years 1919 of $223.37.
(3) The taxes in controversy are income taxes for the calendar year ended December 31, 1919 and is less than $10,000.00, to wit: — $223.37.
At the hearing, petitioner's counsel moved that the Board allow an oral amendment of the petition so as to include therein each of the years mentioned in the deficiency letter. In support of this motion he argued that the same questions were involved for each of those years; that none of the additional taxes assessed had been paid; and that the Board should take jurisdiction of the whole controversy between the petitioner and the respondent despite the statement of the latter that no right of appeal existed with respect to the years 1918, 1920, and 1921, which, he claimed, was relied on and which constituted the only reason why the petition filed June 3, 1925, did not specifically set out the taxes for 1918, 1920, and 1921 as being in controversy.
The statement which was attached to, and became part of, the deficiency letter of April 8, 1925, and which set out the tax computations for each of the years 1918 to 1921, inclusive, was not attached to and made a part of the petition. Counsel for respondent exhibited a copy of the statement at the hearing, but it was not offered in evidence nor was it offered for the purpose of amending the petition. No appeal with respect to the years 1918, 1920, and 1921 having been filed with the Board within the 60-day period required by the statute, we are without jurisdiction to consider an appeal covering those years.
The issues before us relating to the year 1919 are (1) whether the Commissioner correctly determined taxable net income, and (2) whether or not the petitioner filed a false and fraudulent return with intent to evade tax.
The evidence convinces us that, while the petitioner's return was incorrect, he was innocent of any fraud when he signed and verified it, and we are of the opinion that no fraud penalty can be assessed or collected from him. We are of the opinion, however, that the nondisclosure of tax liability on the original return for the year 1919 was due to negligence on the part of the petitioner, and the motion of counsel for respondent made at the hearing of this appeal that he be adjudged liable to the imposition of a penalty of 5 per cent under the provisions of section 250(b) of the Revenue Act of 1918, is granted. Appeal of American Packing Co., 3 B. T. A. 195. See also Appeal of Excelsior Motor Manufacturing & Supply Co., 5 B. T. A. 582.
The testimony adduced at the hearing shows conclusively that the books kept by the petitioner do not clearly reflect his income. They were discarded by both the revenue agent and the accountants employed by the petitioner as sources from which his income could be ascertained. It is significant that the revenue agent in his original, examination and the accountants employed by the petitioner used the same method and utilized the same sources of information in their independent computations of petitioner's net income. Although some differences existed in the intermediate figures obtained by them, there was only a negligible difference in the net result. This difference was not sufficiently large to convince us that the Commissioner erred in assessing a tax in the amount of $444.84 for the year 1919. We are not convinced, however, that the Commissioner was justified in proposing the assessment of an additional tax for that year, based on the arbitrary method employed by the revenue agent in his second computation of petitioner's net income.
In view of what has been said, we are of the opinion that the petitioner's income-tax liability for the year 1919 amounts to $444.84, plus the penalty for negligence provided for by section 250(b) of the Revenue Act of 1918.
Judgment will be entered on 20 days' notice, under Rule 50.
Considered by Littleton, Love, and Tetjssell.