The opinion of the court was delivered by: MARSH
George Cindrich, Jr., defendant, was indicted on three counts under Section 145(b) of the Internal Revenue Code of 1939, 26 U.S.C. § 145(b), for 'willfully' and 'knowingly' 'attempting to evade and defeat a large part of the income tax' which he and his wife owed for the years 1948, 1949 and 1951, and accomplishing this 'by filing and causing to be filed * * * false and fraudulent * * * return(s). * * *'
The jury found the defendant guilty of the third count for the year 1951 and acquitted him on the first and second counts for the years 1948 and 1949. The defendant did not offer any evidence. He moves for judgment of acquittal, and, in the alternative, for a new trial.
Motion for Judgment of Acquittal.
The grounds alleged in support of this motion are that the evidence was insufficient (1) to establish willfulness with intent to evade the payment of income tax for the year 1951, and (2) to establish a substantial deficiency in net income reported for 1951.
In regard to the first ground, we think there was ample evidence to support a finding of willful attempt to evade the tax and from which the jury could have inferred the requisite intent.
As to the second, in our opinion, when the attempt to evade is proved by the specific item method, the prosecution is not required to establish a substantial deficiency in net income.
Examining the evidence favorably to the prosecution, the following facts and inferences could have been found:
The total business receipts reported by defendant for the year 1951 were $ 133,111.77. His return for that year was false to the extent of $ 4,680.60, which was 3.39% of his true gross receipts. This deficiency in income was accounted for by 10 checks,
most of which were cashed at the bank. None of these items were entered as income in defendant's books; none were deposited in his bank account.
He paid $ 7,182.78 income tax for that year but should have paid $ 9,124.78. The underpayment of $ 1,942 is 21.28% of the true income tax due for that year.
About the middle of 1949, a certified public accountant, Mr. Canson, was engaged to organize the bookkeeping methods of the defendant. In doing so, he made the defendant aware of the necessity that the books reflect every detail of the activities of his business. Canson prepared the returns for 1949, 1950 and 1951 from these books.
One of the 10 checks was for $ 3,500. This check was received by defendant in February, 1951, in the mail at the Post Office, where he endorsed and handed it to a creditor, knowing full well that this check was taxable income, and that it should have been entered as income in his books. It never was. It could have been found that defendant never told his then bookkeeper to enter the $ 3,500 check in his books.
It was shown that the defendant's income was also understated in his returns for the years 1947 and 1950. In 1947 five checks and in 1950 twenty checks were not entered in his books. The evidence of prior offenses was admissible to prove fraudulent intent. Hoyer v. United States, 8 Cir., 1955, 223 F.2d 134; Emmich v. United States, 6 Cir., 1924, 298 F. 5.
The defendant had been a successful contractor since 1947. Dorothy S. Redella, his bookkeeper during that year and part of the next, testified that he supervised and corrected her work on the books. Notwithstanding, defendant constantly asserted in his statement to the revenue agents, which was admitted in evidence, that he was not familiar with bookkeeping methods, that he could not understand accounts, that he never really knew how much income his businesses produced, that he relied on his bookkeeper to do the right thing, that he thought everything was in order, and that he never inquired about the accuracy of the books or the correctness of the returns. Defendant contends that the prosecution is bound by this exculpatory matter in the statement which also contained admissions, but we do not agree. See 7 Wigmore, Evidence § 2100 (3d ed. 1940). On the contrary, and especially in view of defendant's 'habit' of not entering items of income in his books, it was within the province of the jury to reject defendant's protestations of ignorance and inadvertent neglect.
The defendant urges that the facts show no more than a mere understatement of taxable income, citing Holland v. United States, 1954, 348 U.S. 121, 139, 75 S. Ct. 127, 99 L. Ed. 150; United States v. Lindstrom, 3 Cir., 1955, 222 F.2d 761, 763. But we believe that the jury was warranted in concluding that defendant handled the ten items of income in a manner calculated to avoid making the usual records of receiving income from his business, and that this was affirmative conduct 'the likely effect of which would be to mislead or to conceal.' Spies v. United States, 1943, 317 U.S. 492, 499, 63 S. Ct. 364, 368, 87 L. Ed. 418. The jury could have found that defendant knew his return for 1951 was false to the extent that $ ...