Greenberg's Express, Inc. v. Comm'r of Internal Revenue
| Citation | 62 T.C. 324 |
| Decision Date | 18 June 1974 |
| Docket Number | 4036-72,4055-72,4245-72,Docket Nos. 4006-72,4220-72,5538-72.,4038-72,4269-72,4286-72 |
| Parties | GREENBERG'S EXPRESS, INC., ET AL.,1 PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Morton A. Smith and Samuel J. Friedman, for the petitioners.
Steedly Young, for the respondent.
1. Petitioners allege that respondent discriminatorily selected their income tax returns for a second examination because of their supposed family or business connections with persons purportedly involved in organized crime. Petitioners move under Rule 103(a)(10), Tax Court Rules of Practice and Procedure, for an order impounding various categories of documents in the custody, possession, or control of respondent and other Government agencies in order to enable them to obtain evidence to prove their allegations as to discriminatory section. Held, an impounding order under Rule 103(a)(10) may not be used to obtain access to documents which might be obtained by other available procedures.
2. In the event their allegations are proved, petitioners also move for an order declaring the deficiency notices null and void or, alternatively, shifting to respondent the burden of proof or the burden of going forward with the evidence. In this connection, they further allege that respondent's determinations were arbitrary and unreasonable because of his failure to follow established audit procedures and his blanket disallowance of claimed deductions and/or round dollar amount increases in income. Held, even if petitioners were able to establish their allegations, they would not be entitled to such relief.
These cases are before us on petitioners' motion for a protective order under Rule 103(a)(10), Tax Court Rules of Practice and Procedure. We deny the motion for the reasons stated below and append some additional comments which we hope will facilitate the further proceedings in these cases.
The substantive gravamen of petitioners' complaint is that the deficiency notices involved herein stem from second examinations of the books and records of the corporate petitioners under section 7605;2 that such second examinations, although ultimately made in compliance with the formal requirements of section 7605(b), were not instituted or conducted in good faith and for a legitimate purpose; and that such second examinations and the deficiency notices which issued as a result thereof were based upon discriminatory selection of petitioners because two of their number are the sons of one Carlo Gambino, a purported target of a governmental investigation into organized crime. In support of this claim, petitioners allege that the revenue agent in charge of the second examinations, and a member of the Strike Force, stated, ‘Your trouble is that ‘The Godfather’ got so much publicity, everybody was breathing down everybody's neck and we were told that we had to do something to take the heat off, so we went out to get a Gambino.' Petitioners further allege that the deficiency determinations in themselves were arbitrary, unreasonable, and capricious because of respondent's failure to follow his established audit procedures and, in the case of certain of the corporate petitioners, his blanket disallowance of claimed business expense deductions and/or increases of round dollar amounts of taxable income.
On the basis of the foregoing, petitioners seek an order directing respondent to produce and deliver into the custody of the Court, and thereby make available for inspection by the petitioners prior to trial, all documents (whether in the custody of the Commissioner of Internal Revenue, the Secretary of the Treasury, the Attorney General of the United States, or any of their agents or designees) relating to the audit of petitioners' Federal income tax returns for 1966 through 1968 and any investigation of petitioners Thomas Gambino and Joseph Gambino by the Department of Justice, the Internal Revenue Service, or the Federal Strike Force Against Organized Crime operating in New York City. Petitioners assert that such an order is necessary to prevent the possible destruction or concealment of the documents involved and to enable the petitioners to prove, by such documents, the allegations of their amended petitions that respondent's determination of deficiencies in each of their Federal income tax liabilities for 1968 arose from official actions violating their constitutional rights.
Petitioners also ask us, in the event that their allegations are established, to declare respondent's determinations null and void and therefore decide that there is no deficiency due from any of them for 1968; alternatively, petitioners ask that we shift to respondent the burden of proof or the burden of going forward with the evidence.
In terms of petitioners' primary request herein—to wit, an impounding order under Rule 103(a)(10)—we are satisfied that they are not entitled to such relief. Initially, we note that Rule 103(a) contains the following prefatory language to the specification of the types of protective orders which the Court will consider issuing: ‘for good cause shown, the Court may make any order which justice requires to protect a party or other person from annoyance, embarrassment, oppression, or undue burden or expense.'3 We are unable to find that petitioners have made the necessary showing to justify the issuance of the requested order. Petitioners make the bare allegation that the Government officials who possess the documents they seek may be tempted to destroy or conceal them in order to cover up the alleged scheme of harassment directed against them. Petitioners, however, do nothing more than suggest the possibility of destruction or concealment of potential evidence. We are not prepared as a court to presume, on the strength of such mere speculation, that Government officials will in fact destroy or conceal potential evidence in pending litigation. The custodians of the documents which petitioners seek are already, by virtue of their offices, obligated to preserve any evidence which they know may be relevant to these cases and we, therefore, consider it unnecessary, at least at this point, to use our procedures in an attempt to assure compliance with their obligations. Cf. Harris v. Sunset Oil Co., 2 F.R.D. 93 (W.D. Wash. 1941).
Moreover, we note that impoundment is not customarily used to compel the production of documents before a court. Rather, it provides a means for retaining such documents in the court's custody after they have been properly produced by other means, such as pretrial discovery, subpoenas duces tecum, or voluntarily by a party or witness to the litigation. United States v. Birrell, 242 F.Supp. 191, 202-203 (S.D.N.Y. 1965). We will not exercise our power to impoundment as a means of providing petitioners with a device for obtaining access to documents which they might be able to obtain by some other available procedures for the production of documents. Cf. Rules 72 (production of documents) and 147 (subpoena duces tecum), Tax Court Rules of Practice and Procedure. Such procedures are to be ‘preferred to a reflexive motion for a protective order.’ See John W. Pearsall, 62 T.C. 94 (1974). Of course, these procedures are subject to the usual limitations on the scope of discovery, including resolution of the question (which we do not now decide) as to whether, under Rule 72, a notice to produce served upon respondent should be limited to documents or things directly ‘in the possession, custody or control’ of the Commissioner of Internal Revenue or may properly be extended so as to require respondent to produce documents or things ‘in the possession, custody or control’ of other departments and agencies of the United States Government. Cf. Kazuko S. Marsh, 62 T.C. 256 (1974). Finally, to the extent that such procedures may properly be utilized, they demand that petitioners give careful attention to developing a more precise description of the materials which they may seek; the blanket coverage of the motion herein is clearly beyond any reasonable bounds.4 Cf. United States v. Roundtree, 420 F.2d 845, 851-852 (C.A. 5, 1969); United States v. National Steel Corporation, 26 F.R.D. 607 (S.D. Tex. 1960).
We come now to what we consider the crux of the matter before us: if petitioners were able to establish their allegations of discrimination in their selection as objects of an otherwise legitimate tax audit, would they be entitled to the benefit of any of the requested forms of relief? If not, such allegations would be immaterial to the resolution of the instant cases and petitioners would, therefore, not be warranted in their attempts to compel the production of any documents sought to establish those allegations. Cf. William O'Dwyer, 28 T.C. 698, 702-704 (1957), affd. 266 F.2d 575, 581 (C.A. 4, 1959).
As a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent's motives or of the administrative policy or procedure involved in making his determinations. Human Engineering Institute, 61 T.C. 61, 66 (1973), on appeal (C.A. 6, Jan. 2, 1974); Efrain T. Suarez, 58 T.C. 792, 813 (1972). Thus, we will not look into respondent's alleged failure to issue a 30-day letter to the petitioners or to afford them a conference before the Appellate Division. Cleveland Trust Co. v. United States, 421 F.2d 475, 480-482 (C.A. 6, 1970); Luhring v. Glotzbach, 304 F.2d 560 (C.A. 4, 1962); Crowther v. Commissioner, 269 F.2d 292, 293 (C.A. 9, 1959), affirming 28 T.C. 1293 (1957). The underlying rationale for the foregoing is the fact that a trial before the Tax Court is a proceeding de novo; our determination as to a petitioner's tax liability must be based on the merits of the case and not any previous record developed at the administrative level. William O'Dwyer, supra.
This Court has on occasion recognized an...
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