classify the disbursement by referring to the cash books, purchase invoices, and canceled checks. And in connection with the liabilities, he was able to examine the outstanding accounts payable by looking at the unpaid invoices in the files and comparing this list with the claims filed with the receiver.
It is to be observed that according to Webster, 'a ledger is the final book of record in business transactions,' in which all debits and credits from the journal and other records, are placed under appropriate heads. Generally speaking, in bookkeeping the journal is the daybook. But the source material for the ledger is the detailed records of purchases, sales, deposits, payments, and other records of the daily transactions. These detailed records came into the hands of the state court receiver and afterwards the Trustee in Bankruptcy. In a corporation such at the bankrupt no doubt a ledger should have been made available, and the failure of the corporation to produce such a record in the first instance would permit such an assessment made by the Government. On the other hand, the Referee in his report has carefully reviewed the evidence before him and concluded the presumption as to the correctness as to the income tax assessments has been overcome by the Trustee's evidence. Counsel for the Government have cited many decisions. This Court agrees with counsel that those decisions are authoritative on the facts shown in the individual cases. This is a civil action as were the determinations of the Commissioner in Shahadi v. C.I.R., 3 Cir., 266 F.2d 495, where the Court on page 500, said the determinations of the Commissioner have prima facie validity. The Court of Appeals, however, has indicated in In re Monongahela Rye Liquors, 3 Cir., 141 F.2d 864, that the Bankruptcy Court has the power to redetermine tax claims. Also the Court of Appeals of the Sixth Circuit has said in In re Gustav Schaefer Co., 103 F.2d 237, that the Bankruptcy Court is not irrevocably bound by an irrebuttable presumption of validity and correctness of the assessment made by taxing authorities.
The question before this Court is whether it should reweigh the evidence which the Referee heard and come to a different conclusion. The Referee heard and saw both the witnesses, that is, the Internal Revenue Agent and the Certified Public Accountant. I concluded from an examination of his memorandum that the Referee decided that Mr. Anderson made a more thorough and competent examination of the daily records which were available. In this connection it should be pointed out that the Receiver and Trustee had great quantities of records of the corporation which were examined by Mr. Anderson. The agent on the other hand paid little attention to the detailed records, but was looking for a ledger showing a summary of the business which would ordinarily be shown on the ledger, and not finding it available to him, made his assessment. Under these circumstances I think the Court is bound to accept the findings of the Referee. In the Gustav Schaefer case, 103 F.2d 237, 242, the Court said:
'No fixed rule can be laid down for determining the weight to be given a finding of fact by a bankruptcy referee, but depends on its character. If it be a deduction from established facts as is in the case here, it is entitled to but little weight as the judge, with the same facts, may as well draw inferences or deductions as the referee but where the referee's finding is based upon conflicting evidence involving questions of credibility and he has heard the witnesses, much greater weight attaches to his conclusions and in the latter case, his findings will not be disturbed unless there is cogent evidence of a mistake and miscarriage of justice. Ohio Valley Bank Co. v. Mack, 6 Cir., 163 F. 155, 24 L.R.A.,N.S., 184; In re Lang Body Company, supra (6 Cir., 92 F.2d 338). The weight to be given opinion evidence of valuations depends upon its origin and the thoroughness with which it is supported by experience and facts.'
Finally, this Court is bound by the clearly erroneous rule. See General Order 47. The issue presented here is one of fact finding, that is, as to whether the corporation had a taxable income during the years 1958 and 1959. Under the rule, I am required to accept the Referee's Findings of Fact unless clearly erroneous, but under the record presented it is clear that the Referee's Findings are based upon conflicting evidence involving questions of credibility, and he having heard the witnesses, his findings and conclusions are entitled to considerable weight. Under the evidence presented to him as shown in this record, I believe his decision is correct.
ORDER OF COURT
And now, May 25, 1964, upon due consideration and for the reasons indicated in the foregoing opinion, this Court accepts the findings and conclusions of Referee Laffey in all respects, and his report is adopted and his decision affirmed.
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