Court Opinion

ID: 9575222
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:12:29.195068+00
Date Added: 2024-06-11T12:45:04.366089
License: Public Domain

SUTIN, Judge (dissenting). I dissent. Introduction Section 72-13-39(D), N.M.S.A. 1953 (Repl.Vol. 10, pt. 2, 1973 Supp.) provides: Upon appeal, the cou^t shall set aside a decision and order of the commissioner only if found to he: (1) arbitrary, capricious or an abuse of discretion; (2) not supported by substantial evidence in the record; or (3) otherwise not in accordance with the law. [Emphasis added.] The majority opinion states: When the evidence is considered in the light most favorable to the Commissioner’s decision, there is substantial evidence that the taxpayers lacked reasonable cause in failing to pay the taxes when due. With this statement of the law, I disagree. From this statement we may assume that if the evidence is not considered in the light most favorable to the Commissioner, substantial evidence does not support the Commissioner’s decision. Section 72-13-38(G) provides: In hearings before the commissioner or his delegate, the Rules of Civil Procedure shall not apply, but the hearing shall be conducted so that both complaints and defenses are amply and fairly presented. To this end, the commissioner or his delegate shall hear arguments, entertain and dispose of motions, require written expositions of the case as the circumstances justify, and render a decision in accordance with the law and the evidence presented and admitted. [Emphasis added.] It is important to note that the decision is rendered on “the evidence presented and admitted.” This means all of the evidence admitted on behalf of the taxpayer and thd Commissioner. It is important to note that the Commissioner must “render a decision in accordance with the law”. It is not in accordance with the law if it is based upon an erroneous interpretation or misapplication of relevant statutory provisions. Louisville and Nashville Railroad Co. v. United States, 268 F.Supp. 71 (W.D.Ky.1967). The Commissioner must be qualified to interpret the Tax Administration Act and all legal authorities cited in order to arrive at a decision upon a rational basis. The Commissioner is not required to make findings of fact and conclusions of law. This Court cannot know upon what evidence the decision was made that the taxpayer was negligent. It could be made solely on his own evidence, or that evidence, isolated in pockets, which is viewed in a light most favorable to the Commissioner. This may not be substantial evidence based upon all of the testimony admitted at the hearing. Under the Tax Administration Act, the Commissioner of Revenue “is appointed by, and holds office at the pleasure of the governor.” Section 72-13-17. He needs no qualifications in law, taxation or Rules of Civil Procedure. The Commissioner sits as an ordinary citizen to act as judge and attorney, and in the instant case, he also acted as a witness and was also examined by his delegate. The hearing officer can be a delegate appointed by the Commissioner. His qualifications are not fixed by law. A delegate, the attorney for the Commissioner, heard the evidence in this case. The taxpayer requested that a hearing officer be designated from the staff of the Attorney General’s office, but this was denied. “The attorney general is the legal adviser to the commissioner but the commissioner may employ other counsel and, in so doing, shall consult the attorney general.” Section 72-13-21. The reasons for the taxpayer’s request are obvious. There is no adjudication of law or facts by experts or specialists in the field involved. Our duty is not to view the evidence in the light most favorable to the Commissioner’s decision. If otherwise, every decision of the Commissioner will be supported by substantial evidence. The Administrative Proceedings Act [§§ 4-32-1 to 4-32-25, N.M.S.A. 1953 (Repl. Vol. 2, pt. 1)] was adopted in 1969. All agencies in New Mexico have escaped from these modern and liberal rules of administrative procedure because the legislature made no agency subject to coverage. This Act reposes in peace and quiet. Nevertheless, we can adopt the language of § 4-32-22, (Scope of Review) to determine our method for arriving at a decision. Subsection A, after reciting the reasons for setting aside a decision, contains the following paragraph: The reviewing court shall make the foregoing determinations upon consideration of the entire record, or portions of the record cited by the parties. The court may give due weight to the experience, technical competence and specialised knowledge of the agency, as well as to the discretionary authority conferred upon it. [Emphasis added.] Under this provision, the “substantial evidence” test takes a turn away from the interpetation of that test expressed in the majority opinion. In Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456, 468 (1951), Justice Frankfurter traced the history of the “substantial evidence” test leading to the adoption of the Administrative Procedure Act. The Court held that “a reviewing court is not barred from setting aside a Board decision when it cannot conscientiously find that the evidence supporting that decision is substantial, when viewed in the light that the record in its entirety furnishes, including the body of evidence opposed to the Board’s view.” [Emphasis added.] Even though the Commissioner’s findings may be supported by substantial evidence, based on the definition in Universal Camera Corp., it may nonetheless reflect arbitrary and capricious action. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 95 S. Ct. 438, 42 L.Ed.2d 447 (1974). “Substantial evidence means such relevant evidence as a reasonable man might find adequate to support a conclusion.” In making this determination, we must review the record of the Commissioner’s action. Otero v. New Mexico State Police Board, 83 N.M. 594, 595, 495 P.2d 374, 375 (1972). The Commissioner decided and ordered that the taxpayers negligently failed to pay, when due, the amount of tax owed for the years 1968, 1969, and 1970; that the amounts of penalty due were properly assessed; and that the total balance remaining due in all the assessments is $5,945.86. “Any assessment of taxes made by the bureau is presumed to be correct.” Section 72-13-32(C). The taxpayer must overcome this presumption. But under the Tax Administration Act, no provision is made for burden of proof or findings of fact. We must simply view the entire record to determine whether the Commissioner’s order is supported by substantial evidence. Under the Federal Income Tax Penalty-Act, decisions are based upon decisions of the Tax Court or the United States District Court, where findings of fact and conclusions of law are made by qualified people. Procedures differ extensively with those present in the State Income Tax Act. Facts The evidence is undisputed that a certified public accountant prepared the federal and state income tax returns of the taxpayer, and checks in payment thereof, between 1966 and 1971. The taxpayer would sign the tax returns and checks and give them to the accountant. The taxpayer relied upon the accountant to mail the tax returns to the federal and state revenue departments. The taxpayer never mailed any of them. As far as the taxpayer knew, the accountant actually mailed the returns and checks to the revenue departments. The taxpayer would receive the copies. In the instant case, the accountant prepared the federal and state income tax returns for the years 1968, 1969, and 1970, together with separate checks for each tax return. The accountant mailed the federal income tax returns, but delivered the original state tax returns and signed checks to the taxpayer, each year, in manila envelopes. The taxpayer’s secretary put them in the taxpayer’s desk. In June, 1971, the taxpayer, while cleaning out his desk in the process of moving to a new office, discovered the manila envelopes and noticed that the originals and copies of the taxpayer’s state tax returns were in the envelopes. The taxpayer had nothing to do with the non-filing of the returns. He was shocked. If he had known about this, he would have mailed them. The taxpayer immediately sent a check for $22,869.00, payable to the Bureau of Revenue, to the attorney general at his request. The attorney general “delivered all of the material to the Bureau and had a conversation with the personnel and [he] was satisfied that everything would be all right and so advised Dr. Gathings.” On this appeal the evidence upon which the Commissioner relies appears to be a letter sent by the accountant to the Director of Income Tax Division on October 13, 1967, seven years before the hearing. This letter indicated that the taxpayer filed his state tax returns. The taxpayer never received a copy of the letter and did not remember the contents. On October 17, 1967, the Director answered the accountant that no tax return had been filed. On October 18, 1967, the accountant mailed the 1966 income tax return and the check in payment thereof to the Bureau. A. Taxpayers’ failure to file in time was not due to negligence. The Commissioner decided and ordered that the penalty was properly assessed due to negligence; and that the “taxpayers failed to exercise ordinary care under the circumstances to pay when due the amount of the tax required to be paid [when due] and which they knew was required to be paid when due.” We do not know upon what evidence the decision and order was made that the taxpayer was negligent. We must, therefore, determine from the entire record whether there is substantial evidence to support the decision and order. The sole issue is: Did the taxpayer fail to exercise ordinary care under the circumstances to pay when due the amount of tax required? The tax returns were prepared in time. The checks in payment were attached thereto. Was the taxpayer negligent in relying on his accountant to mail the state income tax returns ? The answer is “no”. “A failure to act, to be negligent, must be a failure to do an act which one is under a duty to do and which a reasonably prudent person in the exercise of ordinary care would do in order to prevent injury to himself or to another.” N.M.U.J.I. 12.1. “Ordinary care is that care which a reasonably prudent person exercises in the management of his own affairs. ‘Ordinary care’ is not an absolute term, but a relative one. In deciding whether ordinary care has been exercised, the conduct in question must be considered in the light of all the surrounding circumstances, as shown by the evidence.” [Emphasis added.] N.M. U.J.I. 12.2. The Tax Administration Act does not place the burden of proof on the taxpayer to free himself of the penalty. Section 72-13-82 (A) provides that the Commissioner has the power to assess a penalty if he decides that the failure to pay the tax was due to negligence. The only evidence on this matter was the testimony of the taxpayer. He testified about his conduct in the light of all the surrounding circumstances. The Commissioner presented no expert testimony that a reasonably prudent person would not rely on his accountant to mail the state income tax returns. No finding was made on this issue. The Commissioner or his delegate are not qualified to speculate upon this matter. It would be normal for the Bureau to decide and order in its own favor regardless of the testimony. When a taxpayer employs an accountant to handle all of his tax matters, it is reversible error to assess a penalty against the taxpayer for failure to file a tax return on time. McIntyre v. C. I. R., 272 F. 2d 188 (6th Cir. 1959). We are not concerned with those federal authorities which relate to advice given by an accountant or lawyer to the taxpayer. Neither are we concerned with the negligent failure of an accountant to prepare tax returns. Logan Lumber Co. v. Commissioner of Int. Revenue, 365 F.2d 846, 4 A.L.R. Fed. 521 (5th Cir. 1966); nor with the failure to file, decided as a question of fact by the tax court. Ferrando v. United States, 245 F.2d 582 (9th Cir. 1957); Pfeiffer v. United States, 315 F.Supp. 392 (E.D.Cal.1970). Bar L. Ranch, Inc. v. Phinney, 272 F.Supp. 249 (S.D.Tex.1967), aff’d, 400 F.2d 90 (5th Cir. 1968), relies on Logan. We are concerned only with that case in which the taxpayer over the years employs an accountant to handle all of his tax matters. Reviewing the entire record, there is no substantial evidence to support the Commissioner’s decision and order. It should be reversed.