Revenue Act of 1928, c. 852, § 293, 45 Stat. 791, provides, in dealing with assessment of deficiencies in income tax returns:
"(b) Fraud. — If any part of any deficiency is due to fraud with intent to evade tax, then 50 per centum of the total amount of the deficiency (in addition to such deficiency) shall be so assessed, collected and paid. . . ."
The question for decision is whether assessment of the addition is barred by the acquittal of the defendant on an indictment under § 146 (b) of the same Act for a wilfull attempt to evade and defeat the tax.
The Commissioner of Internal Revenue found that Charles E. Mitchell of New York had, in his income tax return for the year 1929, fraudulently deducted from admitted gross income an alleged loss of $2,872,305.50 from a purported sale of 18,300 shares of National City Bank stock to his wife; that he had fraudulently failed to return the sum of $666,666.67 received by him as a distribution from the management fund of the National City Company, of which he was chairman; and that these fraudulent acts were done with intent to evade the tax. On December 8, 1933, the Commissioner notified Mitchell that there was a deficiency in his tax return of $728,709.84 and, on account of the fraud, a 50 per cent. addition thereto in the sum of $364,354.92.
Mitchell appealed to the Board of Tax Appeals, which sustained the Commissioner's determination. 32 B.T.A. 1093. Upon a petition for review, the Circuit Court of Appeals concluded that there was ample evidence to support the Board's findings that Mitchell had fraudulently made deduction of the loss and that he had fraudulently failed to return the amount received from the management fund; and that, despite the facts hereafter stated,
Before the deficiency assessment was made Mitchell had been indicted in the federal court for southern New York under § 146 (b) of the Revenue Act of 1928, which provides:
"Any person . . . who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than 5 years, or both, together with the costs of prosecution."
The first count charged that Mitchell "unlawfully, wilfully, knowingly, feloniously, and fraudulently did attempt to defeat and evade an income tax of, to wit, $728,709.84, upon his net income for 1929." He was tried on the indictment and acquitted on all the counts. The item of $728,709.84 set out in the first count is the same item as that involved in the deficiency assessed; and both arose from the same transactions of Mitchell. But the addition of $364,354.92 by reason of fraud was not involved in the indictment.
The Circuit Court of Appeals held that the prior judgment of acquittal was not a bar under the doctrine of res judicata; and hence it affirmed the assessment of the $728,709.84. But it held that our decisions in Coffey v. United States, 116 U.S. 436, and United States v. La Franca, 282 U.S. 568, required it "to treat the imposition of the penalty of 50 per cent. as barred by the prior acquittal of Mitchell in the criminal action." 89 F.2d 873. Mitchell's petition for certiorari to review so much of the judgment as upheld the assessment of the deficiency
First. Mitchell contends that the claim for the 50 per cent. is barred by the doctrine of res judicata. He asserts that all the facts and intents requisite to the imposition of the 50 per centum addition to the deficiency were put in issue and determined against the Government in the criminal trial, and that hence, under the doctrine of res judicata the judgment of acquittal bars it from obtaining a second judgment based upon the same facts and intents. Since this proceeding to determine whether the amount claimed is payable as a tax is a proceeding different in its nature from the indictment for the crime of wilfully attempting to evade the tax, the contention that the doctrine of estoppel by judgment applies rests wholly on the assertion that the issues here presented were litigated and determined in the criminal proceeding. Compare Tait v. Western Maryland Ry. Co., 289 U.S. 620, 623. But this is not true.
The difference in degree of the burden of proof in criminal and civil cases precludes application of the doctrine of res judicata. The acquittal was "merely . . . an adjudication that the proof was not sufficient to overcome all reasonable doubt of the guilt of the accused." Lewis v. Frick, 233 U.S. 291, 302. It did not determine that Mitchell had not wilfully attempted to evade the tax. That acquittal on a criminal charge is not a bar to a civil action by the Government, remedial in its nature, arising out of the same facts on which the criminal proceeding was based has long been settled. Stone v. United States, 167 U.S. 178, 188; Murphy v. United States, 272 U.S. 630, 631, 632. Compare Chantangco v. Abaroa, 218 U.S. 476,
The Government urges that application of the doctrine of res judicata is precluded also by the difference in the issues presented in the two cases; that although the indictment and this proceeding arise out of the same transactions and facts, the issues in them are not the same; that on the indictment the issue was whether Mitchell had "willfully" attempted to "evade or defeat" the tax; that whether he had done so "fraudulently" was not there an issue, United States v. Scharton, 285 U.S. 518; compare United States v. Murdock, 290 U.S. 389, 397; and that in this proceeding the issue is specifically whether the deficiency was "due to fraud." Compare Burton v. United States, 202 U.S. 344, 380. Since there was not even an adjudication that Mitchell did not wilfully attempt to evade or defeat the tax, it is not necessary to decide whether such an adjudication would be decisive also of this issue of fraud. Compare Hanby v. Commissioner, 67 F.2d 125, 129.
Second. Mitchell contends that this proceeding is barred under the doctrine of double jeopardy because the 50 per centum addition of $364,354.92 is not a tax, but a criminal penalty intended as punishment for allegedly fraudulent acts. Unless this sanction was intended as punishment, so that the proceeding is essentially criminal,
1. In assessing income taxes the Government relies primarily upon the disclosure by the taxpayer of the relevant facts. This disclosure it requires him to make in his annual return. To ensure full and honest disclosure, to discourage fraudulent attempts to evade the tax, Congress imposes sanctions. Such sanctions may confessedly be either criminal or civil. As stated in Oceanic Steam Navigation Co. v. Stranahan, 214 U.S. 320, 339:
"In accord with this settled judicial construction, the legislation of Congress from the beginning, not only as to tariff but as to internal revenue, taxation and other subjects, has proceeded on the conception that it was within the competency of Congress, when legislating as to matters exclusively within its control, to impose appropriate obligations and sanction their enforcement by reasonable money penalties, giving to executive officers the power to enforce such penalties without the necessity of invoking the judicial power."
Congress may impose both a criminal and a civil sanction in respect to the same act or omission; for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense. The question for decision is thus whether § 293 (b) imposes a criminal sanction. That question is one of statutory construction. Compare Murphy v. United States, 272 U.S. 630, 632.
Remedial sanctions may be of varying types. One which is characteristically free of the punitive criminal element is revocation of a privilege voluntarily granted.
"It must therefore be considered as remedial, as providing indemnity for loss. And it is not the less so because the liability of the wrongdoer is measured by double the value of the goods received, concealed, or purchased, instead of their single value. The act of abstracting goods illegally imported, receiving, concealing or buying them, interposes difficulties in the way of a government seizure, and impairs, therefore, the value of the government right. It is, then, hardly accurate to say that the only loss the government can sustain from concealing the goods liable to seizure is their single value, or to assert that the liability imposed by the statute of double the value is arbitrary and without reference to indemnification. Double the value may not be more than complete indemnity. . . .
"The act of 1823 was, as we have seen, remedial in its nature. Its purpose was to secure full compensation for interference with the rights of the United States. . . ."
3. In §§ 276 and 293 it is provided that collection of the 50 per centum addition, like that of the primary tax itself,
4. The fact that the Revenue Act of 1928 contains two separate and distinct provisions imposing sanctions, and that these appear in different parts of the statute, helps to make clear the character of that here invoked.
Third. Mitchell insists that Coffey v. United States, 116 U.S. 436, requires affirmance of the judgment; the Government argues that this case is distinguishable, and, if not, that it should be disapproved. The Circuit Court of Appeals, citing Stone v. United States, 167 U.S. 178, 186-189, and later cases, recognized that the rule of the Coffey case "did not apply to a situation where there had been an acquittal on a criminal charge followed by a civil action requiring a different degree of proof"; but
MR. JUSTICE McREYNOLDS is of opinion that the judgment of the Circuit Court of Appeals should be affirmed.
MR. JUSTICE CARDOZO and MR. JUSTICE REED took no part in the consideration or decision of this case.
Administrative determination of sanctions imposed by the income tax laws has likewise been upheld. Berlin v. Commissioner, 59 F.2d 996, 997 (C.C.A. 2); McDowell v. Heiner, 9 F.2d 120 (W.D. Pa.), aff'd on opinion below, 15 F.2d 1015 (C.C.A. 3); Board v. Commissioner, 51 F.2d 73, 76 (C.C.A. 6); Wickham v. Commissioner, 65 F.2d 527, 531-32 (C.C.A. 8); Little v. Helvering, 75 F.2d 436, 439 (C.C.A. 8); Bothwell v. Commissioner, 77 F.2d 35, 38 (C.C.A. 10); Doll v. Evans, Fed. Cas. No. 3,969 (C.C.E.D. Pa.).
Similarly, if the Government is successful it may recover costs as in other civil suits. Grant Bros. Construction Co. v. United States, 232 U.S. 647, 665. See also United States v. Southern Pacific Co., 172 Fed. 909, 911 (C.C.D. Ore.); United States v. Minneapolis, St. P. & S.S.M. Ry. Co., 235 Fed. 951, 952-953 (D. Minn.).