Court Opinion

ID: 8889066
Source: CourtListenerOpinion
Date Created: 2022-11-26 22:44:12.95365+00
Date Added: 2024-06-11T17:07:05.713156
License: Public Domain

BELL, Circuit Judge
(dissenting):
The majority opinion proceeds upon an assumption that there are two possible interpretations of § 7605(b)1: one that would allow the Service to make the inspection it requests here, without giving notice; and one that would require the Service to invoke the notice procedure for every new day of inspection, or for every request for new books of account. Finding the latter interpretation unacceptable, since it would “frustrate the completion of investigation into even the simplest of corporate affairs,” the majority adopts the former, an interpretation which relieves the Service of the burden of giving notice with respect to any “second” inspection which is part of the same “investigation” as the first.
The majority opinion posits narrow alternatives. The logic and history of § 7605(b) do not compel a Hobson’s choice between a theory which would require notice to be given whenever a revenue agent sits down to look at books of account anew, and a theory which would never require notice to be given during the course of a “continuing investigation.” The first theory is not required by the statute; the second saps the statute of meaning. In my view, the proper course lies between the two.
The “notice” provision of § 7605(b) is not designed to warn taxpayers of impending inspections. In that sense it is not a “notice” provision at all. It is designed, rather, to cuijb an abuse of investigatory powers of lower-echelon revenue agents. The provision imposes this curb by reallocating decision-making power within the administrative system. Under this provision the revenue agent retains power to decide whether to conduct an initial inspection of books of account, but the “Secretary or his delegate, after investigation,” must approve all subsequent inspections and give no*986tice that they are “necessary.” For a discussion of the purpose of the notice provision, see United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112, 117 (1964).
The majority opinion reflects the tendency to expand the residual decision-making power of the revenue agent, either by expanding the definition of the “first” inspection, which he is entitled to make on his own, or by holding, as here, that the Secretary or his delegate need not approve additional inspections where they are part of the same “investigation” that produced the first. The tendency, as here, is to justify this conception of the agent’s residual power by asserting that in the course of a continuing investigation the agent may need to inspect a book again, after he has inspected it once, and that his power to do so on his own, without approval from his superiors, should be construed in light of that need. See e. g., United States v. Crespo, 281 F.Supp. 928 (D. Md.1968).
The difficulty with this approach does not lie in the factual assumption that during the course of a continuing investigation the agent may need to look at the books again. Indeed, it is obvious that he may need to do so. The difficulty lies, rather, in the conclusion that the probable necessity of multiple inspections during the course of continuing investigations makes it unnecessary for the agent, in any given case, to seek the approval of his superiors. The conclusion is impermissible precisely because it is the necessary second inspection which the statute requires the Secretary or his delegate to approve. The continuing investigation theory has the effect of substituting a rule authorizing multiple inspections during a continuing investigation for multiple judgments which, in the contemplation of Congress, are to be made by senior IRS officials in the context of particular cases.
In rejecting such a theory one is not compelled to embrace the view that the revenue agent, having put the book down, must consult his superiors before he may pick it up again. There is nothing in the history or the language of § 7605(b) that suggests that the “first” inspection must be completed in one sitting, or in one week or one month. At the same time, every consideration suggests that there is some point at which, for the purposes of the statute, an inspection of books of account, once begun, comes to an end. Otherwise, the distinction drawn by the statute between the initial inspection and subsequent ones would be meaningless, and the notice procedure would never come into play.
In the present case findings of fact by the district court, not found to be clearly erroneous by the majority, establish that the inspection of Carson’s books and records began in July, 1969, and continued, for a total of at least 60 working days, through “sometime in 1970”. During this period the daily proof journals were inspected at least once, though not, of course, for the purpose of securing the information the government now seeks. Did this inspection ever come to an end?
In light of the facts, the answer seems easy. It was not until March, 1971, months after the initial period of active inspection, that the government requested to inspect the proof journals again. Presumably, if Agent Goode had not uncovered the unexpected eccentricities of Carson’s bookkeeping practices, after his interview with Mrs. Long, the government would never have requested that it be allowed to do so. If this is not a request for a second inspection, it is rather difficult to imagine what is.
In light of the facts, it seems entirely proper that the Agent Goode should be allowed to consult the proof journals again. A second inspection seems necessary. But that determination, as the district court held, is one that the “Secretary or his delegate” must make. For this reason I must respectfully dissent.

. “Restrictions on examination of taxpayer.
“No taxpayer shall be subjected to unnecessary examination or investigations, and only one inspection of a taxpayer’s books of account shall be made for eaeh taxable year unless the taxpayer requests otherwise or unless the Secretary or his delegate, after investigation, notifies the taxpayer in writing that an additional inspection is necessary.”