Greengard v. Commissioner

1927 BTA LEXIS 2823 | B.T.A. | 1927

Lead Opinion

OPINION.

MoRRis:

The correctness of the respondent’s determination as to the deficiencies and penalties for 1917 and 1918 and the deficiency for 1919 are not in dispute. The determination of the deficiency for 1920 is disputed, and this proceeding presents the question whether certain commissions paid in 1921 are deductible items for 1920. The petitioner alleges that being on the accrual basis he properly accrued the commissions and deducted the same as an expense in 1920. The respondent denies that petitioner is on the accrual basis and asserts that petitioner’s books of account do not clearly reflect income, and that section 212 (b) of the 1918 act provides that in such a case the computation is to be made in the manner which in the opinion of the Commissioner will clearly reflect income.

The only witness called by the petitioner was a public accountant through whom he attempted to introduce certain documentary evidence. The witness, however, had only recently been employed by the petitioner, had no personal knowledge of the book entries, nor did he know' that they were the petitioner’s books other than that they had been so represented to him. He was therefore incompetent to testify as to the documents or their contents and the same were excluded when offered in evidence. The records kept by the petitioner were incomplete and in several of the businesses in which he was interested, no books of account were kept.

It is true that the use of inventories may indicate that the return is filed on the accrual basis and that books of account are kept on the same basis. But such evidence is by no means conclusive. Here we have the testimony of an accountant who stated that certain records maintained by the petitioner would, in his opinion, have been sufficient to prepare therefrom and file a return on the accrual basis, but he did not state that the books were so kept. However, the books and records are not in evidence and we are unable to determine whether petitioner kept his accounts on the accrual or cash receipts and disbursements basis. We therefore approve the determination of the respondent.

Counsel for petitioner contended at some length on brief that the allegations of fact of the petition should be accepted as true since the respondent’s answer was not verified. In support of this contention counsel cited numerous Federal court cases and decisions of the District of Columbia courts, also the rules of practice of the Board, and the rules of the equity courts of the District of Columbia. The particular section of the law upon which counsel relies is section 907(a) of Title IX of the Revenue Act of 1924, as amended by section 1000 of Title X of the Revenue Act of 1926, which states, “ The proceedings of the Board and its divisions shall be conducted in accordance with such rules of practice and procedure (other than rules of evidence) as the Board may prescribe and in accordance with the rules of evidence applicable in courts of equity of the District of Columbia.”

Counsel then refers to Rule 39 of the rules of practice before the Board, which says: “Rule 39. — Evidence. The rules of evidence applicable in courts of equity of the District of Columbia shall govern the admission or exclusion of evidence before the Board or any of its Divisions.” Counsel also refers to Rule 8 of the equity rules of the District of Columbia Supreme Court: “ Every pleading must be subscribed by the party or his attorney, and every pleading of fact, except as otherwise provided, must be verified by the affidavit of the party, his agent or attorney; * * * and when the United States or any officer thereof in its behalf is a party, the verification may be made by any person acquainted with the facts, the Attorney-General or the attorney prosecuting or defending the action * *

We are unable to agree with the argument of counsel and we are of the opinion that the proposition advanced is not well founded in law. The statute expressly provides that the Board shall have the power to prescribe the rules of procedure and practice before it. Part of the provision contained in section 907 (a) supra, applies to evidence and its admission or rejection. Where questions of evidence are involved the Board is governed by the rules applicable in courts of equity of the District of Columbia, but where the question is one of procedure or practice, the rules applicable to the equity courts of the District of Columbia are inoperative. Having been vested by law with the authority to prescribe its own rules of procedure and practice the Board has promulgated the same. The Board has not promulgated a rule which requires that the answer shall be verified.

Judgment will be entered for the respondent.

Considered by Trammell and Littleton.