Bishoff v. Commissioner , 6 B.T.A. 570 ( 1927 )

OPINION.

MuRdook:

This petitioner either failed to keep records which clearly reflect the income from his business, or else he failed to so place those records before us that from them we can compute that income. We do not know all of his credit items, nor do we know all of his debit items, and therefore we can not determine whether he had a gain or a loss, nor the amount of whichever he had. Certain links in the chain to measure his income are missing. They were capable of proof and having failed to prove them the petitioner can expect no relief from the deficiency as determined by the Commissioner.

We are asked to compute the expenditures made by this petitioner in his business during the taxable years by an examination of his checks and by an analysis of the testimony in regard to certain payments which he made in cash. From the testimony we are not satisfied of the amounts paid in cash for either year. Bills, invoices and receipts for 1918 are missing. The petitioner kept no accurate record of the amount he paid out in salaries. He contends that he paid wages to extra help and never deducted the amount in his income-tax return. He estimated the amount involved in this discrepancy.

All of his checks were put in evidence, but they were not self-explanatory even when read with the stubs. To remedy this the petitioner’s bookkeeper, in 1925, made pencil notations on the stubs, as set out in the findings of fact. The stubs for part of 1918 are missing.

In placing the pencil notations on the stubs the bookkeeper relied upon her memory. She was not examined as to any of the checks, stubs, or items, but merely said in a general way that her notations were correct. This applies to both years. From evidence such as this we are unable to properly allocate and separate the different expenditures, some of which are deductible, some of which are not, some of which apparent^ belong to one year, some to another. An accountant’s compilation from this same source is of no assistance to us.

Taking into consideration all of the evidence we are unable to say whether the petitioner made a profit or suffered a loss in either year. Nor can we say that the income from his business was not as great as that attributed to this source by the Commissioner. Counsel for the petitioner admitted that we can not now accurately compute and determine what was the correct income. Here the evidence proves nothing from which we would be j ustified in taking any other figure to represent the true deficiency than that determined by the Commissioner.

We are not convinced that the petitioner was guilty of either fraud or negligence in filing his income-tax returns for the two years here in question, as those terms are used in the Revenue Act.

The deficiencies are: For 1918, $%fi91{..33; for 1919, $%,0Glt£J±. Order will be entered accordingly.