Court Opinion

ID: 9640990
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:20:20.662053+00
Date Added: 2024-06-11T18:10:34.402564
License: Public Domain

MANTON, Circuit Judge
(concurring). I concur in the reversal of the judgment of conviction below for the several errors pointed out in the prevailing opinion. But I also think that the judgment should be reversed, with directions to dismiss the indictment, because no breach of the perjury statute is established. The income or gains as to which it is said the plaintiff in error failed to report, and therefore perjured himself, came from the sale of diverted whisky obtained by the Cardo Company, and sales of diverted alcohol obtained by the Reliance Company, and fees for bribing enforcement officials. If he had returns from any or all of these sources, was it gains, profit, or income within the taxing statute? Section 213 of the Revenue Act of 1921 (Comp. St. Ann. Supp. 1923, § 6336%ff) provides for taxing gains, profits, and income derived from any source received. Income, within the meaning of the aet, “includes gains, profits, and income derived from salaries, wages, or compensation for personal service' * * * of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, .rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever.” It means “the gain derived from capital, from labor, or from both combined.” Eisner v. Macomber, 40 S. Ct. 189, 252 U. S. 189, 64 L. Ed. 521, 9 A. L. R. 1570. Did Congress intend anything other than legitimate labor, as opposed to criminal effort in labor, in imposing a tax from which it was to secure revenue to pay the obligations of the government? No property right exists in whisky that might be termed capital. Title 2, § 25 (Comp. St. Ann. Supp. 1923, § 10138%m). Reasonable doubt as to what constitutes income must be resolved against the government. United States v. Merriam, 44 S. Ct. 69, 263 U. S. 179, 68 L. Ed. 240, 29 A. L. R. 1547.
The law requires a return under oath by the taxpayer. Section 223, 42 Stat. 250' (Comp. St. Ann. Supp. 1923, § 6336%kk). The taxpayer must keep a record, and render under oath his statement and return and comply with such regulations as the Commissioner, with the approval of the Secretary of the Treasury, may from time to time prescribe. Act 1921, § 1300,42 Stat. 308 (Comp. St. Ann.' Supp. 1923, § 6371%b). The Commissioner may examine under oath any person rendering a return. Aet 1918, § 1305, 40 Stat. 1142 (Comp. St. Ann. Supp. 1919, § 6371%e).' In the ease of criminal gains, a taxpayer may refuse to incriminate himself, ¿nd the government is powerless in securing the detailed information of his return; for the Fifth Amendment of the Constitution means' that a person shall not be compelled, when acting as a witness in any investigation, to give testimony that might tend to show ■-that he had committed a crime. Counselman v. Hitchcock, 12 S. Ct. 195, 142 U. S. 547, 39 L. Ed. 1110. The protection of the Fifth Amendment is not confined to criminal causes, but extends to any investigation by an administrative officer. Arndstein v. McCarthy, 41 S. Ct. 26, 254 U. S. 71, 65 L. Ed. 138; Interstate Commerce Commission v. Brim-son, 14 S. Ct. 1125, 154 U. S. 447, 38 L. Ed. 1047; Internal Revenue Agent v. Sullivan (D. C.) 287 F. 138. It is not possible that Congress intended to grant the right of examining the sources from which the income came, so as to make an investigation-regarding it — with knowledge that the taxpayer would be justified under the Fifth Amendment in refusing to give testimony at such investigation because what he might say would tend to incriminate him. Nor could Congress expect him to. keep a record, so that he might make returns, and which record might in time be used to incriminate him. Criminal practices should always be punished and immunity should not be granted to the criminal in return for the government obtaining a share of his profits in criminal operations through the medium of income tax payments. If the recipient of this kind of income is obliged to make known its amount and the source, when it is received in sufficient sums to be beyond the exempt minimum, he is compelled to state under oath information that he is not obliged to give, if *569he chooses to exercise his right of protection of the Fifth Amendment.
It is also interesting to note that any collector, deputy collector, or employee of the United States may not divulge or make known in any manner whatever the operation, the style of work, or the property of the manufacturer or producer visited by him in the discharge of his official duties, or the amount or sources of income, profits, losses, or expenditures of any kind set forth or discussed in the income return, and for thus offending the government employee is punished by a fine or imprisonment. Rev. Stat. § 3167; Revenue Act 1921, § 1311; 42 Stat. 311, 313 (Comp. St. Ann. Supp. 1923, § 5837). By this Congress intended to protect the taxpayer in his business, so that his secrets of business might not be divulged. But who would be served if this protection is accorded to the bootlegger or highwayman ?
Again, assuming that he was entitled to deduction for ordinary and necessary expenses as provided in section 214 of the Acs of 1921 (42 Stat, 239; Comp. St. Ann. Supp. 1923, § 6336%g), is it possible that the government is to make allowances for expenses and loss sustained in this illegitimate trade? Assuming that bribery was a means of carrying on tbe trade, is the government to make allowances for bribing its officials? And, if the business flourishes, is the government to share in his prosperity? It is hard to conceive of Congress ever having had in mind that the government be paid a part of the income, gains, or profits derived from successfully carrying on this crime, or entering into a combination with the person engaged in this unlawful business to ascertain how and to -what extent he shall be taxed. Tbe Criminal Code provides punishment for those who violate the Volstead Act and its various provisions, and, if severer punishment should be inflicted, it is a matter for Congress to legislate. It is incredible to believe that it was intended that a bootlegger be dignified as a taxpayer for his illegal profit, so that the government may accept his money for governmental purposes, as it accepts the money of the honest merchant taxpayer.
The courts of Canada have considered the question under its income tax law, and have held that its Parliament never intended to levy income tax on the proceeds of crime or gain, derived from the business whieh cannot be carried on without violating its criminal law. They have pointed out that such a business should be strictly suppressed, and that it would be strange,' indeed, if, under such a statute, the crown in right could levy a tax
upon the proceeds of a business which its provincial Legislature in the exercise of its constitutional powers has prohibited within the province. Smith v. Minister of Finance, [1925] 2 Dom. Law Rep. 1137. We have said that an embezzler’s moneys are not taxable under the Income Tax Act. Rau v. United States, 260 F. 136, 171 C. C. A. 167.
In Emmich v. United States (C. C. A.) 298 F. 5, an embezzler was convicted, and in Levin v. United States (C. C. A.) 5 F. (2d) 598, a bootlegger was convicted, of making false returns by evading the proper income tax upon their respective incomes. • In neither case does it appear that the question presented here was considered. Therefore I conclude that the reversal should also order the dismissal of the indictment.