United States v. United Distillers Products Corp., 287

• Decision Date: 15 July 1946
• Docket Number: Docket 20187.,No. 287,287
• Citation: 156 F.2d 872
• Parties: UNITED STATES v. UNITED DISTILLERS PRODUCTS CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

156 F.2d 872 (1946)

UNITED STATES v. UNITED DISTILLERS PRODUCTS CORPORATION.

No. 287, Docket 20187.

Circuit Court of Appeals, Second Circuit.

July 15, 1946.

Samuel Rosenthal, of Hartford, Conn., for appellant.

Arthur L. Jacobs, Sp. Asst. to the Atty. Gen. (Sewall Key, Acting Asst. Atty. Gen., A. F. Prescott, Sp. Asst. to the Atty. Gen., Adrian W. Maher, U. S. Atty., of Bridgeport, Conn., and Edward J. Lonergan, Asst. U. S. Atty., of Hartford, Conn., on the brief), for appellee.

Before SWAN, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

Defendant, a New Jersey corporation having its principal place of business in Amston, Connecticut, appeals from an order denying its motion to vacate a summons, which required it to produce certain corporate books and records for the years 1940 through 1944 at the office of the Bureau of Internal Revenue in Hartford, Connecticut.¹ Defendant does not question the Bureau's general right to inspect its records while investigating possible tax deficiencies. It contends, however, that the summons was unreasonable in its demands, improper because of a prior examination of the books, and barred, as to the years 1940 and 1941, by the three-year Statute of Limitations in § 275(a) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 275 (a).

Defendant's arguments as to prior examination and the Statute of Limitations are without merit. Section 3614 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev. Code, § 3614, does provide that there shall be no unnecessary examinations of a taxpayer's books and that only one inspection may be had for each taxable year unless the Commissioner, after investigation, gives written notice that additional inspection is required. But defendant's claim of prior examination is made for the first time on this appeal and is not supported by the evidence below. The sole shred of testimony relied on consists of two vague statements by the corporation's president, both of which show his uncertainty as to the year in which the alleged examination took place and neither of which gives any indication as to the taxable years concerned.

Section 275(a), barring the collection of taxes after three years in the absence of prior assessment, does not preclude examination of the corporate records for 1940 and 1941. For this general three-year limitation is modified by § 275(c),² which authorizes collection at any time within five years in a case where the taxpayer has omitted from gross income a sum exceeding 25 per cent of the amount reported. Ketcham v. C. I. R., 2 Cir., 142 F. 2d 996; Ewald v. C. I. R., 6 Cir., 141 F.2d 750; Corrigan v. C. I. R., 6 Cir., 155 F.2d 164. Obviously, this provision would be of no practical effect if the Bureau were barred from making the investigation necessary to ascertain such a misstatement. Nor should it be required to prove the grounds of its belief prior to examination of the only records which provide the ultimate proof. Cf. Perkins v. Endicott Johnson Corp., 2 Cir., 128 F.2d 208, 225, affirmed Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424.

The summons was not so sweeping in its scope as to constitute an unreasonable search and seizure within the meaning of the Fourth Amendment to the Constitution of the United States. Defendant objects to its requirement of all sales invoices, all vouchers supporting the accounts payable ledger and capital and revenue expenditures, and all retained copies of tax returns. But these records are clearly essential to any thorough tax investigation; and the examiner must have them simultaneously in his possession in order to check in its entirety any single transaction.

The only real question is as to the reasonableness of the requirement that defendant leave at the tax office in Hartford, twenty-five miles away, its books containing its current as well as past accounts for an investigation of possibly four months' duration. But...