(dissenting).
The petitioner, the taxpayer, in March, 1926, filed a Federal income tax return for himself and his wife for the calendar year 1925. Upon this return he reported a total income of $27,865.61 and net income of $19,198.33 which he stated had been received by him from real estate operations, dividends, interest and “election bets”. Upon this return he reported a tax due to the United States in the sum of $194.56. This sum was paid by him. It should be pointed out that upon the return referred to the petitioner did not state the nature of his business, the line of the return upon which this information was to be written being left blank by him. Thereafter an investigation was made by the Bureau of Internal Revenue and the Commissioner upon October 20, 1927, sent to the petitioner a deficiency notice showing a deficiency in tax for the calendar year 1925 in the amount of $9,563.86. This deficiency was duly assessed and was paid by the petitioner upon November 15, 1927. A closing agreement was then entered into between the Commissioner and the petitioner and by this agreement the total liability of the petitioner for tax and interest for the year 1925 was fixed and determined. The agreement so made between the Commissioner and the petitioner was approved by the Acting Secretary of the Treasury on January 27, 1928.
Thereafter, early in June, 1929, one Patrick F. McGowan informed the Bureau of Internal Revenue in respect to the operations of a brewery known as McGowan’s Brewery, at Edwardsville, Pennsylvania. It appears clearly from the record before us that the taxpayer was in fact the real owner and operator of the brewery which, ostensibly manufacturing near beer, was in fact brewing and selling real beer throughout the whole of the year 1925. McGowan was the figure-head of the brewery and acted as a cover for the petitioner. The record shows instances where the petitioner, afraid that his relationship to the brewery would be discovered through his connection with McGowan, sent the latter out of town and rewarded him for silence.
McGowan and the petitioner later fell out because of the following circumstances. McGowan was indicted by the Federal grand jury in the Middle District of Pennsylvania for alleged violations of the National Prohibition Act. The petitioner, concerned lest his own status be disclosed because of the pressure of the indictment upon McGowan, promised to reward McGowan with a substantial compensation if he would go through the trial of the- criminal proceedings without disclosing his relation to the petitioner as the latter’s agent. McGowan did not have to stand trial. See United States ex rel. McGowan v. Glass, 3 Cir., 25 F.2d 941, overruling United States v. Mayer, D.C., 22 F.2d 827. The petitioner thereupon reached the conclusion that McGowan had rendered no service to him of value and re*557fused to give McGowan the promised compensation. McGowan became angry with the petitioner and proceeded to inform the Bureau of Internal Revenue in detail concerning the operation of the brewery and the petitioner’s connection with it.
It appears that the brewery kept two sets of books. One showed its transactions in respect to near beer and the other set showed its dealings in real beer. McGowan admitted that he had defrauded and deceived the Government and had himself violated the prohibition laws. He made plain, however, that he did so upon the instructions of the petitioner. It also appears that approximately 885 carloads of real beer were shipped from the brewery over the rails of the Delaware and Lackawanna Railroad Company in the year 1925, and that the freight on these shipments amounted to over $98,000. From the record, it appears that each carload of beer contained approximately 100 barrels of beer and that these barrels were sold generally at a price not less than $12 a barrel. These shipments represented sales in excess of $1,000,000.
Other witnesses corroborated the testimony of McGowan and gave pertinent evidence upon the issues presented. There remains no doubt that the petitioner was engaged in the manufacture and sale of beer upon a very large scale within the taxable period designated by the United States.
The Board of Tax Appeals in its opinion states as follows: “We have found that the petitioner, with intent to evade tax, failed to report in his return income received from the operation of the brewery .and on the record it is apparent that he made no disclosure of such income at the time of executing the closing agreement, nor at any other time. While the filing of a return and the signing of a closing agreement are separate and distinct and fraud in one does not necessarily indicate fraud in the other, the same or a continuing act, that of wilfully concealing income, may be, and on the facts in this case, is a sufficient basis for finding that the return was fraudulent with intent to evade tax and further that there was a misrepresentation of a material fact in the execution of the closing agreement.”
The Board in its opinion also stated, “He (the petitioner) not only failed to disclose and report in his return the income from the operation of the brewery, but has at all times denied and still denies any connection whatever with its operation.”
If these findings are supported by substantial evidence and are neither capricious nor arbitrary, the decision of the Board should be affirmed by this court. In my opinion the findings of the Board are supported fully by the record and it is apparent that the petitioner fraudulently failed in the first instance to return his true income upon the return filed in 1926 for the calendar year 1925, that this fraud continued throughout the time of the 1927 assessment and the execution of the closing agreement, and as a matter of fact lasted throughout the hearings before the Board of Tax Appeals where the petitioner still took the position that he was not' the owner and operator and the true party in interest in the brewery.
The Revenue Act of 1926, c. 27, 44 Stat. 9, 113, provides:
“Sec. 1106.
“(b) If after a determination and assessment in any case the taxpayer has paid in whole any tax or penalty, or accepted any abatement, credit, or refund based on such determination and assessment, and an agreement is made in writing between the taxpayer and the Commissioner, with the approval of the Secretary, that such determination and assessment shall be final and conclusive, then (except upon a showing of fraud or malfeasance or misrepresentation of fact materially affecting the determination or assessment thus made) (1) the case shall not be reopened or the determination and assessment modified by any officer, employee, or agent of the United States, and (2) no suit, action, or proceeding to annul, modify, or set .aside such determination or assessment shall be entertained by any court of the United States.”
That portion of Section 1106 quoted above and contained within the brackets constitutes matter added to the Revenue Laws by the enactment of Section 1312 of the Revenue Act of 1921. See 42 Stat. 313. The purpose of the addition within the brackets is too plain to require explanation. It is sufficient to state that these words were added in order that a, closing agreement might be set aside if fraud upon the part of the taxpayer existed at the time of the execution of the agreement.
In my opinion there is no doubt that the Commissioner has sustained the bur*558den placed upon him by the Act and has shown fraud and malfeasance upon the part of the petitioner in respect to a question of fact, “* * * materially affecting the determination of assessment * * * ” made against him.
It is fundamental that “* * * Fraud is always a question of fact to be determined by the court or jury upon a careful scrutiny of the evidence before it.” Smith v. Vodges, Assignee, 92 U.S. 183, 184, 23 L.Ed. 481. See also Warner v. Norton, 20 How. 448, 460, 15 L.Ed. 950; Helvering v. Nat. Grocery Co., 304 U.S. 282, 294, 58 S.Ct. 932, 82 L.Ed. 1346; and Ball v. Warrington, 3 Cir., 108 F. 472, 475. In the case last cited this court said, “* * * the general rule of law being that fraud is a question of fact, and when facts are disputed the jury shall decide.”
The closing agreement has not been introduced in evidence. It is simply referred to in paragraph (f) of the petition. Attached to the petition as Exhibit A is the assessment of deficiency against the petitioner and his wife under which the suit at bar is brought. In this appears an item, -designated (a), which reads as follows, “Other income not reported from the operation of the P. F. McGowan Brewery of Edwardsville, Pa. ($) 890,-000.” The deficiency assessment of $9,-758.42 (sic) made in 1927 also appears specifically. The appellant contends that because of the items quoted the burden of proof is upon the Commissioner to show that ■ the closing statement did not cover the income received by the petitioner from the illegal operation of the brewery upon Which the assessment is based and that if the- 1927 assessment did include and the closing agreement cover any of the petitioner’s income from the illegal operation of the brewery, the Commissioner has failed to sustain the burden of showing the fraud or misrepresentation by which the closing agreement may be set aside.
This position is untenable for two reasons. First, it does not appear from evidence of record in the case at bar that the tax deficiency assessed against the petitioner in November, 1927,- included any income from the illegal operation of the brewery. Second,- even if such assessment was shown to have included income acquired by the petitioner from the illegal operation of the brewery, there is no evidence showing that the whole or any substantial part, .of the. income of the petitioner from his illegal operations was included in the assessment or covered by the closing agreement. Seemingly the petitioner takes the position that if he disclosed any portion of his illegal income to the United States in 1927 or if he was assessed by the United States upon any portion of that illegal income in that year, he may claim the protection of the closing agreement. The success of such, a contention would place a great premium upon fraud. It became the petitioner’s duty to disclose his true income in 1926 when he. filed his 1925 return. The duty then placed upon him remained his thereafter and required 'him to disclose his true income when the assessment was made and the closing agreement executed. That he did make such a disclosure or that the United States had knowledge of his true income is clearly rebutted by the evidence, which shows that the petitioner at all times refused to acknowledge his part in the illegal operation of the brewery and that the United States received knowledge of the petitioner’s connection with the-brewery when McGowan turned informer. For these reasons, it is my. opinion that fraud and misrepresentation by the petitioner at the time of the execution of the-closing agreement in respect to his true-income are clearly shown.
Whatever may be my.views upon this, question or those of the majority of the-court, this question was for the determination of the Board, of Tax Appeals which upon ample and sufficient evidence has resolved it against the petitioner. The Circuit Courts of the United States have held; unanimously that when supported by substantial evidence, findings of the Board upon questions of fact are not reviewable. Mitchell v. Commissioner, 2 Cir., 89 F.2d 873, 874, 875, reversed on other grounds, 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917; Wickham v. Commissioner, 8 Cir., 65 F.2d 527, 529, 532; Commissioner v. Hales, 7 Cir., 76 F.2d 916.
As I read the majority opinion of the court it is admitted that the evidence in the case at bar permitted the drawing of an inference by the Board that knowledge of income taxable to the petitioner was. fraudulently withheld by him from the Government at the time of the execution-of the closing agreement. In this connection the majority opinion states, “The-very most that can be said for the testimony produced before the Board of Tax. *559Appeals is that it permits two inferences to be drawn; one, that income was fraudulently omitted from the deficiency assessment on which the closing agreement was based; secondly, that the income was considered at the time of the deficiency assessment and led to the figure of $53,990.-46, additional taxable income on which an additional tax of over $9,000 was paid and closing agreement signed, executed and approved by the Secretary of the Treasury.” At the very least, the foregoing is a statement by this court of a permissible inference to be drawn by the Board of Tax Appeals upon the evidence that the petitioner neglected fraudulently to disclose all his income when the closing agreement was executed. The Board found the fraud of the petitioner to be a fact.
Accordingly I am of the opinion that the decision of the Board of Tax Appeals should be affirmed and for this reason I must dissent from the majority opinion of this court.