The opinion of the court was delivered by: BRODERICK
This is a proceeding instituted by a complaint filed by the Internal Revenue Service (IRS) to enforce a summons served on the defendant, First Pennsylvania Bank (Bank),
calling for the production of specified books and records concerning the tax liability of Daniel J. Callahan (Mr. Callahan) for the years 1973 and 1974.
A show cause hearing was held on July 28, 1977, at which time Mr. Callahan filed a pro se motion to intervene. This Court granted the taxpayer's motion to intervene for the purpose of affording him an opportunity to set forth his reasons for claiming that his constitutional rights would be violated if the summons was enforced. After receiving briefs and affidavits from Mr. Callahan and the IRS, the Court determined that an additional hearing should be held so that Mr. Callahan could present evidence supporting his allegations. This hearing was held on January 25, 1978. The bank advised the Court that it had no objection to the summons. The Court has reviewed the briefs filed by Mr. Callahan and the IRS and the evidence presented, and, for the reasons hereinafter set forth, has concluded that enforcement of the summons will be ordered.
The IRS contends that it has met its burden of showing that its investigation of Mr. Callahan has been conducted for a legitimate purpose, that the material requested in the summons is relevant to this purpose, that the information sought is not already within the possession of the IRS, and that the administrative steps required by the Code have been followed.
At the show cause hearing on July 28, 1977, the IRS presented the testimony of IRS Special Agent Boyle in order to establish its claim that the summons issued by the IRS should be judicially enforced. Agent Boyle testified that prior to the time the subpoena was issued, he had been conducting a routine investigation of the federal tax liabilities of Mr. Callahan for the years 1973 and 1974 to determine if there had been violations of the Internal Revenue Code. In connection with this investigation, Agent Boyle served a summons on the Bank, which requested certain of the Bank's financial records relating to Mr. and Mrs. Callahan. The agent testified that these documents were to be used to determine if there was tax liability in Mr. Callahan's case. The witness stated that the IRS had requested certain tax information from Mr. Callahan, and that Mr. Callahan refused to cooperate. Mr. Callahan initiated a trespass action in the state court against the IRS agents who came to his house because they had not telephoned him before coming, and had ignored the "no trespass" signs posted at his home. It was further testified that Mr. Callahan declined to provide Agent Boyle with his financial records, which had been requested in writing. Agent Boyle also testified that at the time the subpoena was issued, he had not formed an intention to recommend a criminal prosecution of Mr. Callahan. Mr. Callahan then cross-examined Agent Boyle.
At the hearing on January 25, 1978, Mr. Callahan stated that he had no evidence to support his contention that the IRS's purpose was improper. He said that he might be able to find such evidence in the IRS's files. He testified that on August 24, 1976, IRS Agents Gudknecht and Boyle came to his house, and he told them that he would not talk to them unless they first made an appointment to see him. He explained that he was concerned because the agents had disregarded the "no trespass" signs which he had posted on his property. He said that one week later Mr. Boyle returned to his house without first telephoning, and that he was not at home. He testified that because the IRS agents did not obey his posted "no trespass" warnings and his verbal notices to refrain from coming to his door without an appointment, he filed a trespass action against them in the state court.
Mr. Callahan also stated that when he had an interview in Norristown with another IRS agent in connection with a payroll tax matter, Agent Boyle came into the room. Mr. Callahan explained that he thought this was done to surprise him, and that after Agent Boyle's appearance, the other agent's attitude toward him changed and he began to ask "demeaning questions". At that meeting, Mr. Callahan again told Agent Boyle that he would be glad to speak with him if he telephoned for an appointment.
Title 26 U.S.C. § 7602 authorizes the IRS to issue summonses "for the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability . . . ."
As pointed out by Chief Judge Seitz in United States v. McCarthy, 514 F.2d 368, 372 (3d Cir. 1975):
Under Powell, however, the abuse of process issue is only reached after the government has made a preliminary showing in support of the summons. In Powell, the Supreme Court held that the government must show: (1) that the investigation has a legitimate purpose and that the inquiry may be relevant to that purpose, (2) that the information sought is not already within the government's possession and (3) that the steps required by the Internal Revenue Code have been followed--"in particular that the 'Secretary or his delegate,' after investigation, has determined the further examination to be necessary and has notified the tax payer in writing to that effect." Powell, 379 U.S. at 58, 85 S. Ct. at 255.
On the basis of the evidence produced by the Government at the show cause hearing, we find that the IRS has established all the requisite elements enumerated in McCarthy.
Mr. Callahan, the intervenor, seeks to prevent enforcement of the IRS summons on the grounds that: (1) the IRS already possesses the material it seeks to obtain; (2) the IRS is using the Court's civil process to harass him; and (3) the summons was issued after criminal prosecution had already been recommended. Our Third Circuit in Gannet ...