Poznak v. Commissioner , 14 B.T.A. 727 ( 1928 )

ABIE POZNAK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Poznak v. Commissioner

Docket No. 19644.

United States Board of Tax Appeals

14 B.T.A. 727; 1928 BTA LEXIS 2925;

December 14, 1928, Promulgated

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">*2925 The determination of the Commissioner in respect of deficiencies in income tax for the years 1921, 1922, and 1923, and for the assessment and collection of fraud penalities for failure to include in income-tax returns filed for those years income from an illegal liquor business carried on during those years, sustained.

J. E. Marshall, Esq., and Maurice E. Parshall, Esq., for the respondent.

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SMITH

">*727 This is a proceeding for the redetermination of deficiencies in income and profits tax for the calendar years 1921, 1922, and 1923, and penalties for filing fraudulent returns for said years as follows:

	Tax	Penalty
1921	$2,897.64	$1,448,82
1922	37,315.41	18,657.71
1923	11,200.17	5,600.09
Totals	51,413.22	25,706.62

Subsequent to the filing of the petition, counsel for the petitioner conferred with the Commissioner and, as a result of such conference, the respondent redetermined that the deficiencies in tax and the fraud penalties incurred for the years 1921, 1922, and 1923 were as follows:

	Tax	Penalty
1921	$786.02	$393.01
1922	8,604.60	4,302.30
1923	2,191.59	1,095.80

The basis for">*2926 the determination of the deficiencies in income tax and for the penalties is that the petitioner failed to account in his income-tax returns for the years stated profits realized from an illegal liquor business. At the hearing before the Board there was no appearance for the petitioner.

FINDINGS OF FACT.

Petitioner is a resident of Newark, N. J. During the years 1921, 1922, and 1923, he was engaged in the trucking business and with one Joseph Krantz conducted an illegal liquor business, from which he derived a considerable income. Petitioner filed income-tax returns ">*728 for the years 1921, 1922, and 1923, showing no taxes due for 1921 and 1923, and taxes due in the amount of $21.21 for 1922. In his returns he failed to account for any profits from the illegal liquor business carried on with Joseph Krantz.

The petitioner kept no books of account. He had, however, an account with a bank in which he deposited money received from his trucking business and upon which he drew checks in payment of the expenses connected with that business. During the years 1921, 1922, and 1923, he received checks from Joseph Krantz made payable to him in the amount $903of for 1921, $6,884.54">*2927 for 1922, and $26,418.75 for 1923. All of these checks, totaling $34,206.25, were drawn on the American National Bank of Newark, N.J., and were cashed by the petitioner at the Ironbound Trust Co., Newark, N.J. These checks, all made payable to petitioner, were endorsed by the petitioner and deposited to his credit. His income-tax returns do not reflect the receipt of any part of the moneys thus deposited to his credit.

The respondent has amended the income-tax returns filed by the petitioner for the years 1921, 1922, and 1923, by adding to the amounts reported the amounts thus paid to him by Joseph Krantz, and has determined the deficiencies accordingly. He has also determined that the petitioner's income-tax returns for these years were false and fraudulent and has determined fraud penalties due upon the deficiencies in accordance with section 250(b) of the Revenue Act of 1921.

OPINION.

SMITH: That the petitioner is liable to income tax in respect of profits from the conduct of his illegal business is settled by the decision of the Supreme Court in ">*2928 .

In his income-tax returns for 1921, 1922, and 1923, the petitioner failed to account for any profits from his liquor business. At the hearing of this proceeding the petitioner did not appear in person or by counsel. He was apparently satisfied with the redetermination of the deficiencies in tax found by the Commissioner. Counsel for the Commissioner admitted at the hearing that a part of the deficiencies determined had been paid.

Section 907(a) of the Revenue Act of 1924, as amended by the Revenue Act of 1926, and as further amended by section 601 of the Revenue Act of 1928, provides in part:

* * * 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. * * *

To ">*729 bear such burden the Commissioner has offered affirmative proof before the Board of the fraudulent character of the returns filed by the respondent. From the evidence submitted the Board can not doubt that in his income-tax returns">*2929 for 1921, 1922, and 1923, the petitioner fraudulently refrained from reporting profits from an illegal liquor business derived in each of the taxable years. The returns filed were false and fraudulent and the 50 per cent penalty upon the deficiencies due for those years provided for by section 250(b) of the Revenue Act of 1921 is assessable and collectible.

The evidence indicates that a part of the deficiencies determined by the Commissioner have been paid by the petitioner. The Board can not at this time determine the exact amount of the deficiencies due.

Judgment will be entered under Rule 50.