303 U.S. 391 (1938), 324, Helvering v. Mitchell

Docket Nº:No. 324
Citation:303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917
Party Name:Helvering v. Mitchell
Case Date:March 07, 1938
Court:United States Supreme Court
 
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Page 391

303 U.S. 391 (1938)

58 S.Ct. 630, 82 L.Ed. 917

Helvering

v.

Mitchell

No. 324

United States Supreme Court

March 7, 1938

Argued January 14, 1938

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Section 293(b) of the Revenue Act of 1928, Title I, provides that, if any part of a deficiency is due to fraud with intent to evade tax, 50% of the total amount of the deficiency (in addition to such deficiency) shall be assessed, collected and paid. Section 146(b) of the same Title declares that any person who willfully attempts in any manner to evade or defeat any tax imposed by the Title shall, in addition to other penalties provided by law, be guilty of a felony, and, upon conviction, be subject to fine and imprisonment.

Held: That an acquittal of a charge of willful attempt to evade, under § 146(b), does not bar assessment and collection of the 50% addition prescribed by § 293(b). P. 397 et seq.

The doctrine of res judicata is inapplicable because of the difference in quantum of proof in civil and criminal cases; the acquittal was merely an adjudication that the proof was not sufficient to overcome all reasonable doubt of guilt. P. 397.

The doctrine of double jeopardy is inapplicable because the 50% addition to tax provided by § 293(b) is not primarily punitive, but is a remedial sanction imposed as a safeguard for protection of the revenue and to reimburse the Government for expense and loss resulting from the taxpayer's fraud. As such, it may be enforced by a civil procedure to which the accepted rules and

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constitutional guaranties governing the trial of criminal prosecutions do not apply. P. 398.

Coffee v. United States, 116 U.S. 436, and United States v. La Franca, 282 U.S. 568, distinguished.

89 F.2d 873 reversed.

Certiorari, 302 U.S. 670, to review a judgment reversing in part a decision of the Board of Tax Appeals, 32 B.T.A. 1093, which sustained a deficiency income tax assessment, with a 50% addition for fraud.

Page 395

BRANDEIS, J., lead opinion

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

Revenue Act of 1928, c. 852, § 293, 45 Stat. 791, 858, provides, in dealing with assessment of deficiencies in income tax returns:

(b) Fraud. If any part of any deficiency is due to fraud with intent to evade tax, then 50 percentum of the total amount of the deficiency (in addition to such deficiency) shall be so assessed, collected, and paid.

The question for decision is whether assessment of the addition is barred by the acquittal of the defendant on an indictment under section 146(b) of the same act for a willful attempt to evade and defeat the tax.

The Commissioner of Internal Revenue found that Charles E. Mitchell of New York had, in his income tax return for the year 1929, fraudulently deducted from admitted gross income an alleged loss of $2,872,305.50 from a purported sale of 18,300 shares of National City Bank stock to his wife; that he had fraudulently failed to return the sum of $666,666.67 received by him as a distribution from the management fund of the National City Company, of which he was chairman, and that these fraudulent acts were done with intent to evade the tax. On December 8, 1933, the Commissioner notified Mitchell that there was a deficiency in his tax return of $728,709.84, and, on account of the fraud, a 50 percent addition thereto in the sum of $364,354.92.

Mitchell appealed to the Board of Tax Appeals, which sustained the Commissioner's determination. Mitchell v. Comm'r, 32 B.T.A. 1093. Upon a petition for review, the Circuit Court of Appeals concluded that there was ample evidence to support the Board's findings that Mitchell had fraudulently made deduction of the loss and that he had fraudulently failed to return the amount received from the management fund, and that, despite the facts hereafter stated,

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the Board was free to find the facts according to the evidence. It accordingly affirmed the assessment of the deficiency of $728,709.84; but it reversed the Board's approval of the additional assessment of $364,354.92 because of the following facts:

Before the deficiency assessment was made, Mitchell had been indicted in the federal court for Southern New York under § 146(b) of the Revenue Act of 1928, which provides:

Any person . . . who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000 or imprisoned for not more than five years, or both, together with the costs of prosecution.

The first count charged that Mitchell

unlawfully, willfully, knowingly, feloniously, and fraudulently did attempt to defeat and evade an income tax of, to-wit, $728,709.84, upon his net income for 1929.

He was tried on the indictment and acquitted on all the counts. The item of $728,709.84 set out in the first count is the same item as that involved in the deficiency assessed, and both arose from the same transactions of Mitchell. But the addition of $364,354.92 by reason of fraud was not [58 S.Ct. 632] involved in the indictment.

The Circuit Court of Appeals held that the prior judgment of acquittal was not a bar under the doctrine of res judicata, and hence it affirmed the assessment of the $728,709.84. But it held that our decisions in Coffey v. United States, 116 U.S. 436, and United States v. La Franca, 282 U.S. 568, required it "to treat the imposition of the penalty of 50 percent as barred by the prior acquittal of Mitchell in the criminal action." 89 F.2d 873, 878. Mitchell's petition for certiorari to review so much of the judgment as upheld the assessment of the deficiency

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of $728,709.84 was denied. 302 U.S. 723. The Commissioner's petition to review so much of the judgment as denied the 50 percentum in addition was granted because of the importance in the administration of the revenue laws of the questions presented and alleged conflict in decisions. 302 U.S. 670.

First. Mitchell contends that the claim for the 50 percent is barred by the doctrine of res judicata. He asserts that all the facts and intents requisite to the imposition of the 50 percentum addition to the deficiency were put in issue and determined against the Government in the criminal trial, and that, hence, under the doctrine of res judicata, the judgment of acquittal bars it from obtaining a second judgment based upon the same facts and intents. Since this proceeding to determine whether the amount claimed is payable as a tax is a proceeding different in its nature from the indictment for the crime of willfully attempting to evade the tax, the contention that the doctrine of estoppel by judgment applies rests wholly on the assertion that the issues here presented were litigated and determined in the criminal proceeding. Compare Tait v. Western Maryland Ry. Co., 289 U.S. 620, 623. But this is not true.

The difference in degree of the burden of proof in criminal and civil cases precludes application of the doctrine of res judicata. The acquittal was "merely . . . an adjudication that the proof was not sufficient to overcome all reasonable doubt of the guilt of the accused." Lewis v. Frick, 233 U.S. 291, 302. It did not determine that Mitchell had not willfully attempted to evade the tax. That acquittal on a criminal charge is not a bar to a civil action by the Government, remedial in its nature, arising out of the same facts on which the criminal proceeding was based has long been settled. Stone v. United States, 167 U.S. 178, 188; Murphy v. United States, 272 U.S. 630, 631-632. Compare Chantangco v. Abaroa, 218

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476, 481-482.1 Where the objective of the subsequent action likewise is punishment, the acquittal is a bar, because to entertain the second proceeding for punishment would subject the defendant to double jeopardy, and double jeopardy is precluded by the Fifth Amendment whether the verdict was an acquittal or a conviction. Murphy v. United States, 272 U.S. 630, 632.

The Government urges that application of the doctrine of res judicata is precluded also by the difference...

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