Court Opinion

ID: 6751674
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:20:43.599599+00
Date Added: 2024-06-11T16:02:17.492639
License: Public Domain

Zellab,
dissenting. The audit by the Tax Commissioner completed for the second quarter of 1960 disclosed that appellants’ records were incorrectly maintained and it would logically follow that the reports submitted from such records were also obviously incorrect. Appellants admitted the correctness of the Tax Commissioner’s audit for this period and admits the same system of reporting was used throughout all quarters involved. The incorrect records maintained by appellants resulted from a substantial un-derreporting of mileage during the taxable quarters in question. These facts have been stipulated by the appellant.
The question to be determined is: May the Tax Commissioner apply and project the same percentage of error elicited in the audit for the second quarter of 1960 to the other quarters erroneously reported?
*124Section 5728.10, Revised Code, provides, among other things, that “In the event any person required to file a highway use tax return * * * files an incorrect return * * * for the period covered by the return, the tax commissioner may make an assessment against such person based upon omy information in his possession for the period for which such tax was due.” (Emphasis supplied by B. T. A.)
The information the Tax Commissioner has in his possession obtained after 2605 man hours of examination and auditing is:
1. Appellants’ records were incorrect and manifested a consistent degree of error during the second quarter of 19600 which was the period audited.
2. He had the information reported by appellants in their returns which he knew were incorrect because of the improper system of reporting.
3. He knew the same practice of an underreporting of mileage was followed in the preparation of all returns included in the assessment at issue.
4. He had an admission from appellants that his audit for the second quarter of 1960 was correct, from which he logically concluded was representative of the degree of error applied and assigned to the other quarters in issue.
5. He knew the appellants used the same system of reporting during the subsequent quarters which are at issue.
All of this information was in the Tax Commissioner’s possession and formed the basis for his assessment. From that information he determined that the appellants’ erroneous practices, which were consistently followed in the preparation of all returns for the periods in issue, all of which returns the appellants acknowledged to be incorrect.
The Tax Commissioner, therefore, upon this information and upon this basis, applied and projected the same degree of error disclosed and revealed by the audit for the second quarter of 1960, to the returns of the subsequent quarters erroneously reported by the appellants.
It is the opinion of this member that this is a proper exercise of the statutory authority conferred upon him, as *125expressly delegated by statute or necessarily implied from those powers so delegated. To find otherwise would he virtually telling the Tax Commissioner that he must make a complete audit of the records of appellants for each quarter and the langue of the Legislature, i. e., “may make an assessment * * * based upon any information in his possession,” is synonomous to the word “audit.” I cannot concur in such an interpretation of this language. If a taxpayer fails to keep correct records, certainly some formula must be devised by, or be available to, the Tax Commissioner for him to determine the tax liability as established by the legislative authority if the Tax Commissioner is compelled to conduct a complete audit of each quarter to as-, certain the incorrectness of a taxpayer’s records. The maintaing of incorrect records by a taxpayer could inure to his own benefit because of the economic infeasibility and inordinate cost of such an audit. I think that such a requirement would be contrary to the legislative intent scribed in Section 5728.10, Revised Code, and is not in accord with the case of Brockway v. Donahue, B. T. A. case No. 59267, in which this board said:
“The appellant clams that an assessment ‘based on any information in the Tax Commissioner’s possession’ can be made only if the appellant failed to have accurate records and only if the Tax Commissioner first determined that such failure had occurred.
“However, the existence or nonexistence of records, either accurate or inaccurate, is immaterial insofar as the authority of the Tax Commissioner to issue an assessment under the provisions of Revised Code Section 5728.10 is concerned. The Tax Commissioner’s power and authority to act under this section has nothing to do with the existence or nonexistence of records. The Tax Commissioner’s authority is derived solely from the fact that appellant filed inaccurate and incomplete returns. It is clear, from the statutory language, that any person liable for the payment of highway use tax who files an incomplete and incorrect return renders himself liable to an assessment based *126upon any information in tlie Tax Commissioner’s possession * *
The board also said that the taxpayer’s failure to comply with the law had a twofold result:
“* * * Because of said failures (1) the Tax Commissioner was authorized to assess appellant based upon any information in his possession, and (2) the burden of proof was placed upon the appellant to show that his equipment did not travel the miles found by the Tax Commissioner. ’ ’
In the instant case the appellants have acknowledged the incorrectness of the returns which they filed. Because of the incorrectness of those returns, it is the opinion of this member that the twofold result noted in the Brockway case is applicable.