Bioff v. Commissioner

OPINION.

Mukdcck :

The Commissioner sent the petitioner a notice of deficiency advising of the determination of a deficiency in income tax of $9,200.56 and an addition to the tax of $4,600.28 for the calendar year 1988. The addition to the tax was the 50 percent for fraud provided in section 293 (b) of the Revenue Act of 1938. The petitioner transmitted to the Board a petition designed to contest the correctness of the Commissioner’s determination both as to the deficiency and as to the addition. He did not pay the fee of $10 required for filing the petition. The Board issued an order on the petitioner to show cause why the proceeding should not be dismissed for failure to pay the fee of $10 as authorized by section 904 of the Revenue Act of 1926 and as required by Rule 8 of the Board’s Rules of Practice. The hearing on this order was continued from time to time, but at no time did the petitioner appear or have anyone appear for him. The petitioner states in his petition that he is confined in a Federal penitentiary. Counsel for the respondent has moved that the Board, in dismissing this proceeding, enter an order that there is a deficiency and a 50 percent addition in ■the amounts determined by the Commissioner.

Section 1117 (d) of the Internal Revenue Code provides:

(d) Effect of Decision Dismissing Petition. — If a petition for a redeter-mination of a deficiency has been filed by the taxpayer, a decision of the Board •dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Commissioner. An order specifying such amount shall be entered in the records of the Board unless the Board can not determine such amount from the record in the proceeding, or unless the dismissal is for lack of jurisdiction.

Section 293 of the code provides:

(a) Negt-Igence. — If any part of any deficiency is due to negligences or intentional disregard of rules and regulations but without intent to defraud, 5 per centum of the total amount of the deficiency (in addition to such deficiency) shall be assessed, collected, and paid in the same manner as if it were a deficiency, except that the provisions of section 272 (i), relating to the prorating of a deficiency, and of section 292, relating to interest on deficiencies, shall not be applicable.
(b) Fraud. — If any part of any deficiency is due to fraud with intent to evade tax, then 50 per centum of the total amount of the deficiency (in addition to such deficiency) shall be so assessed, collected, and paid, in lieu of the 50 per centum addition to the tax provided in section 3612 (d) (2).

Section 1112 of the Internal Revenue Code provides in regard to procedure before the Board:

In any proceeding involving the issue whether the petitioner has been guilty of fraud with interest to evade tax, the burden of proof in respect of such issue •shall be upon the Commissioner.

*944Two questions naturally arise. The first is whether this is a proceeding in which the burden of proof as to fraud has been cast upon the Commissioner by statute, and the second is whether, in any event, the Board has authority under the statute to specify in its order of dismissal that there is not only a deficiency but also an additional 50 percent as determined by the Commissioner. Congress, in using the phrase “proceeding involving the issue whether the petitioner has been guilty of fraud”, must have meant an issue raised by a pleading properly filed under the rules which it authorized the Board to promulgate. While the petition has been given a docket number and stamped “Filed”, that action of the Board was taken in accordance with a long established lenient practice for the purpose of receiving the petition within the statutory period. It was tentative in character and continued so as long as the petitioner failed to comply with the requirement of the statute and the Board’s rules in regard to the payment of a filing fee. The petitioner has not taken the necessary steps to institute a proper proceeding raising any issue, since he has not paid the fee. The established practice of the Board, under such circumstances, is not to serve a copy of the petition upon the respondent. It insists that the filing fee be paid before any further action is taken. That is the only available way of enforcing its rule. Thus, the failure of the petitioner is entirely responsible for the fact that no issues have been raised and that the Commissioner has not been able to join issue with the petitioner as to fraud. Since there is no “proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax,” section 1112 does not cast any burden of proof upon the Commissioner.

The Commissioner does not want to have this proceeding dismissed unless the Board will specify in its order that there is not only a deficiency, but also an additional amount due under section 293 (b) as determined by the Commissioner. Section 1117 (d), authorizing the Board to enter an order in the case of a dismissal, does not mention the additional 50 percent. The question is whether or not the Board can, in a proper case of dismissal, enter an order specifying not only the amount of the deficiency, but also the additional amount determined by the Commissioner. The Board has already held that this can not be done where a proceeding is at issue after the filing of proper pleadings and the petitioner fails to appear on the day set for trial. Miller-Pocahontas Coal Co., 21 B. T. A. 1360. The Board said that “the revenue acts contain clear recognition of a distinction between a deficiency in tax and a penalty” when it comes to dismissal for failure properly to prosecute. There, it was clear that the statute imposed upon the Commissioner the burden of proof in the fraud issue. But that .case is not authority here, where the facts are different. Not only does the statute fail to impose any burden upon the Commissioner in cases where the *945petitioner has not taken the necessary steps to raise an issue of fraud, but there would seem to be no reason for a contrary intent upon the part of Congress. It has merely said to taxpayers — if you express your desire to go before the Board by filing a proper petition with it, in accordance with its rules, you can thereby impose upon the Commissioner the burden of proof in the fraud issue, but not otherwise.

The question remains whether there is statutory authority under which the Board can enter an order dismissing this case, and, at the same time, specifying that not only the deficiency, but also the addition to the tax determined by the Commissioner, are in the amounts shown in the notice of deficiency. Section 293 (b) provides that the additional amount “shall be so assessed, collected, and paid.” For the meaning of the word “so” we must go back to paragraph (a) which just precedes (b) in section 293. Paragraph (a) provides that the addition for negligence shall be assessed, collected and paid “in the same manner as if it were a deficiency.” These words mean that there is no difference between such an amount and the deficiency for these purposes. They give the Board authority to specify the amount of the addition for negligence if it dismisses a proceeding because the filing fee had not been paid. No suggestion has ever been made that the Board could not enter an order including that amount in case of dismissal for failure of the petitioner properly to prosecute. Since the same language covers the addition for fraud, the authority is the same there. The fact that the Commissioner has the burden of proof in regard to fraud, if the fraud issue is ever properly raised, is no reason for distinguishing between the addition for fraud and that for negligence where, as here, the petitioner has not complied with the Board’s rules covering the filing of a petition.

Reviewed by the Board.

Judgment will be entered that the proceed- ,. mg will be dismissed because of the 'petitioner’s failure to pay the fling fee, and an order will be entered that there is a defeiency in income tax of $9$00.50 and an addition for fraud of $ff)0038 for the calendar year 19-38.