Court Opinion

ID: 4493246
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:03:51.118379+00
Date Added: 2024-06-11T15:03:59.789912
License: Public Domain

McMahon,
concurring: The provision of section 907 (a), Revenue Act of 1924, as amended by section 601, Revenue Act of 1928, is as follows:
* * * In any proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax, where no hearing has been held before the enactment of the Revenue Act of 1928, the burden of proof in respect of such issue shall be upon the Commissioner. * * * [Emphasis ours.]
The word “ involving ” as used here has a broad meaning. It has a broader meaning than the word “ pleaded.” The word “ issue ’! as used here is not qualified by the word “ pleaded ” or by the words “ raised by the pleadings ” or by the words “ pleaded under the rules *1018of the Board.” There is no justification for reading such qualifications or similar qualifications, into this statute. While the Board has authority to make rules governing its procedure, and has made them, it has no authority to make rules which conflict with the statute. The statute is paramount; and the Board’s rules, in any event, must he construed to harmonize with the statute. “ The issue whether the petitioner has been guilty of fraud with intent to evade tax ” became involved within the meaning of section 907 (a) when respondent determined a deficiency and a penalty, based on fraud and computed on the deficiency of which he gave the petitioner notice. The penalty cannot stand without a basis of fraud to sustain it, in addition to a deficiency as a basis of computation. The burden of proving this fraud, under section 907 (a), is put upon the respondent, who relies upon it. The petitioner is not required to disprove fraud before the Board until he is confronted, at a hearing, with proof of fraud. In other words, he is not required to meet this serious issue until he is properly confronted with it; and the Board cannot approve the fraud penalty as determined by respondent and computed on the deficiency until respondent has discharged his burden of affirmatively proving the fraud upon which the penalty, as computed on the deficiency, is based. See Miller-Pocahontas Coal Co., 21 B.T.A. 1360, Carlton Building Co., 29 B.T.A. 599; and Joseph Buchhalter, 29 B.T.A. 600. Furthermore, such proof is not admissible here in the absence of respondent’s allegation of fraud raising “ the issue ”, as required by Rule 14.