*1000 1. Where petitioner failed to prove that he was entitled to any per diem allowance for expenses in addition to his regular salary and also failed to prove the amount of any of his expenses in case he had been so entitled, held, the respondent's determination of the deficiencies is approved for lack of evidence.
2. Where petitioner during the taxable years in question was a senior auditor in the War Department of the United States and received a net income from salaries considerably in excess of the personal exemption to which he was entitled for each of the years 1927 to 1931, inclusive, and failed to file any income tax returns for any of the years involved during this period, held, part of the deficiency for each year was "due to fraud with intent to evade tax" as the term is used in section 275(b) of the Revenue Act of 1926 and section 293(b) of the Revenue Act of 1928, and the addition by the Commissioner of fraud penalties is sustained.
*646 The respondent determined deficiencies in income tax, together with additions to the tax of*1001 50 percent for fraud and 25 percent for failure to file returns for the calendar years 1927 to 1931, inclusive, as follows:
| Year | Deficiency | 50 percent additional | 25 percent additional |
| 1927 | $102.63 | $51.32 | $25.66 |
| 1928 | 145.05 | 72.53 | 36.26 |
| 1929 | 77.30 | 38.65 | 19.33 |
| 1930 | 67.79 | 33.90 | 16.95 |
| 1931 | 37.32 | 18.66 | 9.33 |
*647 Petitioner alleges that the respondent's determination is based upon the following error:
Taking up as income monies received by the petitioner under authority of United States War Department, from the Mercur Corporation, operating Port Newark Army Base, N. J., which was used for expenses of travel and per diem on official government business under direction of the War Department.
The burden of proof, as will be shown in our opinion, is upon petitioner to prove the correctness of the above allegation of error, and upon the respondent to prove that at least a part of the deficiency for each year was due to fraud with intent to evade tax. Petitioner did not offer any evidence in proof of his allegation of error, but he relies upon certain portions of the evidence offered by the respondent which the respondent offered in proof*1002 of the correctness of his determination of fraud.
FINDINGS OF FACT.
Petitioner is an individual, residing in the State of Virginia. He did not file any Federal income tax returns for the years 1927 to 1931, inclusive. The respondent determined that petitioner had income and deductions for these years as follows:
| Income | |||||
| Item | 1927 | 1928 | 1929 | 1930 | 1931 |
| Salaries received | $5,480.91 | ||||
| Salary from War Department | $3,649.98 | $3,699.96 | $3,749.41 | $3,800.01 | |
| Income from Mercur Corporation | 3,284.46 | 6,783.36 | 3,281.59 | 1,759.58 | |
| Rents received | 75.92 | ||||
| Total income | 8,765.37 | 10,433.34 | 10,610.05 | 7,031.00 | 5,559.59 |
| Deductions | |||||
| Interest paid | $319.02 | $242.69 | |||
| Taxes paid | 66.65 | 134.30 | |||
| Loss from rental property | $96.56 | $198.42 | |||
| Total deductions | 385.67 | 96.56 | 198.42 | 376.99 | |
| Net income determined | 8,379.70 | 10,336.78 | 10,610.05 | 6,832.58 | 5,182.60 |
In a statement attached to the deficiency notice the respondent wrote petitioner in part as follows:
Your contention that the income of your wife should not be taxed to you has been conceded.
Your contention that the income received from Mercur Corporation is*1003 not taxable to you for the reason it was expended for Mercur Corporation, has not been conceded, for the reason the evidence submitted fails to substantiate the contention and since the amounts were received they are taxable in accordance with section 213 of the Revenue Act of 1926 and section 22 of the Revenue Act of 1928.
*648 The respondent further determined that the personal exemption provided for under section 216(c) of the Revenue Act of 1926 and section 25(c) of the Revenue Act of 1928 of $3,500, allowed a husband and wife living together, should be divided between petitioner and his wife, Eva Kessler, as follows:
| Year | Apportioned to petitioner | Apportioned to petitioner's wife |
| 1927 | $1,818.37 | $1,681.63 |
| 1928 | 2,129.88 | 1,370.12 |
| 1929 | 2,799.50 | 700.50 |
| 1930 | 1,819.58 | 1,680.42 |
| 1931 | 1,864.94 | 1,635.06 |
During the years 1927 to 1931, inclusive, petitioner was employed as a senior auditor in War Department of the United States and was paid a salary by the United States of $3,306.67 for 1927, $3,649.98 for 1928, $3,699.96 for 1929, $3,749.41 for 1930, and $3,800.01 for 1931. His salary on January 1, 1927, was at the rate of $3,000 per annum. *1004 On June 27, 1927, he was promoted to a salary of $3,600; on July 1, 1928, to $3,700; and on July 3, 1930, to $3,800. He was suspended from the service on February 9, 1932.
The Mercur Corporation was the lessee of certain United States Government property in the State of New Jersey, known as the Port Newark Army Supply Base, which property was under the jurisdiction of the War Department. Under the lease the United States was to receive about 90 percent of the gross revenue from the property after certain allowable expenditures were deducted. Petitioner was employed by the War Department to audit the accounts of the lessee.
During the period from May 1927 to July 1931, inclusive, the Mercur Corporation paid to petitioner, among other amounts, an amount of $12,210. Of this amount $1,500 was recorded on its books as a salary paid to petitioner at the rate of $300 per month from May to September 1927, and $10,710 as a per diem allowance paid to petitioner at the rate of $210 per month from May 1927 to July 1931, inclusive.
Prior to the commissioner's determination of the deficiencies and penalties involved in this proceeding and the mailing of the deficiency notice, the petitioner*1005 filed with the Commissioner an affidavit giving his explanation of why he did not file income tax returns for any of the taxable years in question. The language in the body of this affidavit is as follows:
1. Ollie V. Kessler, after being duly sworn, according to law, depose and say, that I am a Citizen of the United States, a Resident of the District of Columbia, during the time questioned in the seemingly arbitrary assessments against me by the Internal Revenue Department (Income Tax Bureau thereof) of the United States; that during the period I am, seemingly, held, but arbitrarily, *649 that is, from 1927 to 1932, both inclusive, I did not make a total income that required me, by law, to file any income tax report; I being a married man, whose chargeable and deductible expenses before any tax report is even due, was not charged by law to nor did I file reports during said periods for said reasons; that while it is true that my wife worked portions of said period, it is the recollection of affiant that even if same were chargeable to him, which he claims was not the fact, same would have made slight difference as far as his taxability is concerned; that for purposes of*1006 explanation, only, I file herewith, as Exhibit "A", copy of Letter dated August 23, 1932 addressed to The Secretary of War, Washington, D.C. and bearing purported signature of Mercur Corporation by C. B. Sellars, Treasurer and an Addenda thereto "Done at Washington, D.C. this 31st day of October 1932, F. H. PAYNE, Acting Secretary of War"; that I verily believe that I was not under legal responsibility to file an income tax report for said period and that I am in no sense chargeable, legally, with any delinquency in the premises, all of which your affiant is ready to verify, at a hearing on this matter.
Affiant holds himself ever ready to furnish constituted authorities with full details of every source of his income during said periods or any other periods.
A part of the deficiency determined by the respondent for each of the years 1927 to 1931, inclusive, was due to fraud with intent to evade tax.
OPINION.
BLACK: This proceeding presents two issues: (1) Whether the respondent erred in determining that petitioner received certain income come from the Mercur Corporation for each of the years 1927 to 1931, inclusive, and (2) whether the respondent erred in determining that*1007 at least some if not all of the deficiency for each of the years 1927 to 1931, inclusive, was due to fraud with intent to evade tax. The burden of proof as to the first issue is upon petitioner. . The burden of proof as to the second issue is upon the respondent. Sec. 601, Revenue Act of 1928.
At the hearing before the Board petitioner was represented by counsel, but petitioner himself did not appear. Petitioner's counsel offered no evidence. In his brief in support of his contention that petitioner received no income from the Mercur Corporation, he relies upon certain portions of Exhibit E introduced in evidence by the respondent, and the pleadings in a suit at law No. 82875 filed by the United States against petitioner in the Supreme Court of the District of Columbia to recover $1,913.18 as salary paid to petitioner under an alleged mistake of fact from February 21 to September 30, 1927, which suit was later discontinued upon motion of the Government. The pleadings in that suit were attached to petitioner's brief as Exhibit A but were not introduced in evidence and must, therefore, be disregarded. *1008 .
Exhibit E introduced in evidence by the respondent is an affidavit made by petitioner as affiant which he filed with the respondent *650 while petitioner's tax liabilities for the years 1927 to 1931, inclusive, were being considered in the respondent's office prior to the respondent's final determination of the deficiencies and the additions to the tax here in question. This affidavit has been included in our findings of fact. Attached to this affidavit is a letter written by the Mercur Corporation to the Secretary of War under date of August 23, 1932. That part of the letter specifically relied upon by petitioner as proof that he received no income from the Mercur Corporation is as follows:
At first Mercur Corporation was given to understand that this monthly charge represented the salary of the senior Government auditor. However, in September 1927 Mercur Corporation was notified by the senior Government auditor that in the future the proportion ( $300) representing his salary would be transferred back to the Washington payroll and so thereafter discontinued in the Mercur Corporation accounts, but that his per diem allowance*1009 of $210 per month, being the stated regular allowance made to him on duty away from his home station at Washington, would continue to be paid through the Mercur Corporation accounts. The salary payments of $300 per month were thereupon immediately discontinued.
After the supervision of the operations was transferred from the quartermaster supply officer, Army base, to the corps area quartermaster, Governors Island, the question seems to have first arisen in the Department as to the status of the senior Government auditor as to whether or not he could any longer be considered as being away from his home station and so entitled to the per diem allowance. Under the date of March 3, 1931, Mercur Corporation was notified by the corps area quartermaster that thereafter no payments should be made on accounts pertaining to the Government auditor and his office, except for salaries, rental, of the office, telephone or water, without the prior approval of the office of the corps area quartermaster. After further consideration, this order was modified by the corps area quartermaster on April 3, 1931, so as specifically to authorize the continued payment of the per diem allowance of $210*1010 per month. On June 23, 1931, this order was further modified so as to eliminate for the future the per diem allowance, but on July 2, 1931, the corps area quartermaster reinstated the per diem allowance for the month of July 1931. These payments were discontinued entirely after July 1931. The payments covering the salary and per diem allowance paid to the senior Government auditor were included in the monthly reports submitted by Mercur Corporation regularly to the War Department. Such accounts were audited by the designated officials of the Department and Mercur Corporation was advised from time to time of the approval of the accounts and audits by the office of the Quartermaster General and the Secretary of War. We contend that the payments questioned were made under the instructions of the duly authorized representatives of the War Department, audited and approved by the War Department, were properly made by Mercur Corporation, and are properly chargeable in the operating expenses under the lease, and cannot properly be charged back to Mercur Corporation.
It is our opinion that the above excerpt from the letter dated August 23, 1932, is of no particular help to petitioner*1011 on the question of the correctness of respondent's determination of the deficiencies *651 in question. This letter shows clearly that petitioner did receive from Mercur Corporation for a considerable period, $210 per month as per diem allowance, also salary of $300 per month for several months in 1927. The applicable regulations under the Revenue Acts of 1926 and 1928 are article 102 of Regulations 69 and article 122 of Regulations 74, respectively. The material part of these articles is identical and is as follows:
(b) If an individual receives a salary and is also repaid his actual traveling expenses, he shall include in gross income the amount so repaid and may deduct such expenses.
(c) If an individual receives a salary and also an allowance for meals and lodging, as, for example, a per diem allowance in lieu of subsistence, the amount of the allowance should be included in gross income and the cost of such meals and lodging may be deducted therefrom.
Petitioner has not shown that he was entitled to any per diem allowance in lieu of subsistence, and, even if he had proved himself to be so entitled, any amount so received would first have to be included in gross*1012 income and only the actual cost to petitioner of the expenses intended to be provided for in the per diem allowance, concerning which petitioner has offered no evidence, could be deducted therefrom.
Petitioner admits that during the taxable years in question he received a per diem allowance of $210 per month from the Mercur Corporation for a period of 51 months, but he contends that none of these payments were includable in his gross income. In support of this proposition he cites , affirming . We have examined that case and find that it has nothing whatever to do with taxation. It is not in point. Under sections 213 of the Revenue Act of 1926 and section 22 of the Revenue Act of 1928, and the applicable regulations which we have already quoted, petitioner would have to include in his gross income for the appropriate taxable years the 51 monthly payments of $210 per month which he received from the Mercur Corporation. Then, if petitioner had certain expenses such as meals, lodging, etc., which were incurred while away from home in the pursuit of his trade or business, these would be decudtible*1013 upon a proper showing made. See section 23 of the Revenue Act of 1928 and the corresponding section in the 1926 Act.
Of course petitioner's failure to testify in his own case does not relieve respondent from carrying his full burden of proof on the issue of fraud, but it does prevent us from giving petitioner any deductions except those which have been allowed by the Commissioner in the deficiency notice. If there are any other deductions to which petitioner is entitled, it was his burden to appear at the hearing and *652 prove them. This he failed to do. We affirm the Commissioner's determination of the deficiencies for lack of evidence to overcome the presumption of their correctness.
Regarding the second issue, relating to fraud, the respondent has affirmatively proved that petitioner received a net income for each of the years in question, exclusive of the so-called per diem payments reveived from the Mercur Corporation, which was considerably in excess of his personal exemption.
Petitioner, in his reply to respondent's affirmative allegations of fraud, admits that during the taxable years he was employed as an auditor in the War Department of the United States*1014 Government, from which he received a salary, and admits that he received large amounts for per diem expenses, but alleges that the moneys received as per diem were paid on account of expenses in connection with official Government business; and denies that he received large amounts of income from the Mercur Corporation under the guise of per diem expenses which required the filing of Federal income tax returns, and denies that with intent to evade tax he willfully failed to file income tax returns for the taxable years 1927 to 1931, inclusive.
Section 223 of the Revenue Act of 1926 reads in part as follows:
SEC. 223. (a) The following individuals shall each make under oath a return stating specifically the items of his gross income and the deductions and credits allowed under this title -
* * *
(2) Every individual having a net income for the taxable year of $3,500 or over, if married and living with husband or wife: and
(3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income.
Section 51 of the Revenue Act of 1928 reads the same.
Srticle 301(b) of Regulations 69, applicable to the Revenue Act of*1015 1926, reads as follows:
(b) Under the Revenue Act of 1926 a single person is entitled to a personal exemption of $1,500 and the head of a family or a married person living with husband or wife to $3,500, regardless of the amount of the net income. A husband and wife living together have but one personal exemption, which is $3,500. If they make separate returns, such exemption may be taken by either or divided between them.
Article 291(b) of Regulations 74, applicable to the Revenue Act of 1928, reads the same as the above.
Section 275(b) of the Revenue Act of 1926 and section 293(b) of the Revenue Act of 1928 are, for all material purposes, identical and provide as follows:
(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 3176 of the Revised Statutes, as amended.
*653 In *1016 , we said:
A failure to report for taxation income unquestionably received, such action being predicated on a patently lame and untenable excuse, would seem to permit of no difference of opinion. It evidences a fraudulent purpose.
In the instant proceeding petitioner did not appear at the hearing before the Board and offered no excuse whatever for his failure to report for taxation the income affirmatively proved by the respondent as having been received by petitioner. In , the petitioner there failed and neglected to file any income tax return for the year 1925, although he had a net income in excess of his personal exemption for that year. In that case we found that the deficiency was due to fraud with intent to evade tax. In the instant proceeding we have found as a fact that a part of the deficiency for each of the years 1927 to 1931, inclusive, was due to fraud with intent to evade tax. We think the evidence supports that finding. Cf. *1017 ; ; .
In arriving at the conclusion, here reached, we have assumed, as petitioner's counsel argues in his brief, that petitioner's failure to report as taxable income the $210 per diem allowance monthly payment which he received from the Mercur Corporation was due to petitioner's belief that these sums were not taxable income in view of the fact that they were paid him for subsistence. It may well be that petitioner believed in good faith that he did not have to report these amounts for taxation. That seems to be the purport of his affidavit which was filed with the Commissioner and is in evidence. But certainly petitioner must have known that the salary which he received from the United States Government for his services as senior auditor in the War Department was taxable.
Petitioner admits that he received from the United States Government a salary of $3,306.87 in 1927 and also the proof shows that he received $1,500 in salary in that year from the Mercur Corporation. Notwithstanding he received these two amounts as salary which aggregated*1018 $4,806.87 and was entitled to only $1,818.37 personal exemption, the part of the $3,500 personal exemption granted to married persons which the Commissioner has apportioned to petitioner in 1927, the correctness of which apportionment petitioner has not attacked, petitioner filed no income tax return for 1927. A similar situation, as will be seen from an examination of our findings of fact, prevailed to a more or less degree for each of the other taxable years.
Therefore, we must hold, under the authorities above cited, that at least a part of the deficiency in each year is due to fraud with intent to evade the tax. And, whenever the Commissioner has proved that a part of the deficiency is due to fraud with intent to evade the tax, then the 50 percent fraud penalty attaches to the entire deficiency, even *654 though some of it is based upon income the failure to report which was not due to fraud with intent to evade the tax. .
The additions to the tax of 25 percent for failure to file returns is not contested.
Decision will be entered for the respondent.