These cases are before us on petitioners' motion for a protective order under Rule 103(a)(10), Tax Court Rules of Practice and Procedure. We deny the motion for the reasons stated below and append some additional comments which we hope will facilitate the further proceedings in these cases.
The substantive gravamen of petitioners' complaint is that the deficiency notices involved herein stem from second examinations of the books and records of the corporate petitioners under section 7605;
On the basis of the foregoing, petitioners seek an order directing respondent to produce and deliver into the custody of the Court, and thereby make available for inspection by the petitioners prior to trial, all documents (whether in the custody of the Commissioner of Internal Revenue, the Secretary of the Treasury, the Attorney General of the United States, or any of their agents or designees) relating to the audit of petitioners' Federal income tax returns for 1966 through 1968 and any investigation of petitioners Thomas
Petitioners also ask us, in the event that their allegations are established, to declare respondent's determinations null and void and therefore decide that there is no deficiency due from any of them for 1968; alternatively, petitioners ask that we shift to respondent the burden of proof or the burden of going forward with the evidence.
In terms of petitioners' primary request herein — to wit, an impounding order under Rule 103(a)(10) — we are satisfied that they are not entitled to such relief. Initially, we note that Rule 103(a) contains the following prefatory language to the specification of the types of protective orders which the Court will consider issuing: "for good cause shown, the Court may make any order which justice requires to protect a party or other person from annoyance, embarrassment, oppression, or undue burden or expense."
Moreover, we note that impoundment is not customarily used to compel the production of documents before a court. Rather, it provides a means for retaining such documents in the court's custody after they have been properly produced by other means, such as pretrial discovery,
We come now to what we consider the crux of the matter before us: if petitioners were able to establish their allegations of discrimination in their selection as objects of an otherwise legitimate tax audit, would they be entitled to the benefit of any of the requested forms of relief? If not, such allegations would be immaterial to the resolution of the instant cases and petitioners would, therefore, not be warranted in their attempts to compel the production of any documents sought to establish those allegations. Cf. William O'Dwyer, 28 T.C. 698, 702-704 (1957), affd. 266 F.2d 575, 581 (C.A. 4, 1959).
As a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent's motives or of the administrative policy or procedure involved in making his determinations. Human Engineering Institute, 61 T.C. 61, 66 (1973), on appeal (C.A. 6, Jan. 2, 1974); Efrain T. Suarez, 58 T.C. 792, 813 (1972). Thus, we will not look into respondent's alleged failure to issue a 30-day letter to the petitioners or to afford them a conference
This Court has on occasion recognized an exception to the rule of not looking behind the deficiency notice when there is substantial evidence of unconstitutional conduct on respondent's part and the integrity of our judicial process would be impugned if we were to let respondent benefit from such conduct. Efrain T. Suarez, supra. But even in such limited situations, we have refused to declare the deficiency notice null and void, as petitioners would have us do. See Efrain T. Suarez, 58 T.C. at 814. See also Marx v. Commissioner, 179 F.2d 938, 942 (C.A. 1, 1950), affirming a Memorandum Opinion of this Court dated Jan. 24, 1949.
In the area of the criminal law, "mere selectivity in prosecution creates no constitutional problem." See United States v. Steele, 461 F.2d 1148, 1151 (C.A. 9, 1972). On the other hand, "While the Fifth Amendment contains no equal protection clause, it does forbid discrimination that is `so unjustifiable as to be violative of due process.'" (Citations omitted.) See Shapiro v. Thompson, 394 U.S. 618, 642 (1969). Even the conscious exercise of some selectivity is not in and of itself a Federal constitutional violation. See Oyler v. Boles, 368 U.S. 448, 456 (1962). Within these boundaries, the Federal courts have developed the test that before the complainant is entitled to relief, it must appear that the law has been "applied and administered by public authority with an evil eye and an unequal hand" (see Yick Wo v. Hopkins, 118 U.S. 356, 373-374 (1886)), or with "questionable emphasis" (see United States v. Steele, 461 F. 2d at 1152), through the use of an unjustifiable criterion such as race, religion, or expression of unpopular views. See also Two Guys v. McGinley, 366 U.S. 582, 588 (1961); United States v. Falk, 479 F.2d 616 (C.A. 7, 1973).
Assuming without deciding that a similar standard should be applied to civil tax litigation (cf. Hugo Romanelli, 54 T.C. 1448 (1970), reversed in part 466 F.2d 872 (C.A. 7, 1972), and John Harper, 54 T.C. 1121 (1970)), it is conceivable that there may be situations where a taxpayer should be accorded some relief, if he were able to prove that he was selected for audit on a clearly unjustifiable criterion. But we think that such situations will be extremely rare and we are satisfied that petitioners' allegations, even if true, would not be sufficient. Petitioners
What is more, petitioners are not faced with prejudicial action by a Government agency which will, absent protective intervention by this Court, result in a final determination of petitioners' tax liabilities or in the establishment of facts which will be deemed undisputed and inexorably lead to the imposition of such liabilities. Cf. Shapiro v. Thompson, supra; United States v. Falk, supra; United States v. Steele, supra. Indeed, their right to a trial de novo in this Court is the critical factor which distinguishes practically all of the cases relied upon by petitioners. Compare Bob Jones University v. Simon, supra; Robida v. Commissioner, 371 F.2d 518 (C.A. 9, 1967); Boyd v. United States, 345 F.Supp. 790 (E.D.N.Y. 1972). In this connection, we note that petitioners make no claim that they are presently or may be subjected to criminal prosecution as a consequence of respondent's actions. Compare Hinchcliff v. Clarke, 371 F.2d 697 (C.A. 6, 1967); see also Donaldson v. United States, 400 U.S. 517, 532-533 (1971).
The broad sweep of the power to enforce revenue laws has repeatedly been recognized. E.g., Donaldson v. United States, 400 U.S. at 534-536; United States v. Roundtree, 420 F. 2d at 850-851; Human Engineering Institute, supra. When this power is evaluated against the commonly recognized pervasive influence of organized crime in this country, we cannot say that petitioners' allegations create an unjustifiable criterion. See S. Rept. No. 1097, 90th Cong., 2d Sess. (1968), 2 U.S. Cong. & Adm. News 2112, 2119-2120. Nor do we believe that the fact that petitioners' connection with the "organized crime" frame of reference may turn out to be only because of a family or business relationship is sufficient to justify a contrary conclusion. Cf. United States v. Kahn, 415 U.S. 143 (1974). Clearly, the circumstances herein cannot be equated with the horrendous attempt to infer guilt by association in violation of a taxpayer's first amendment right of free speech which existed in Lenske v. United States, 383 F.2d 20 (C.A. 9, 1967), heavily relied upon by petitioners. Likewise, we do not believe that the selective process which may have been utilized herein meets the standard of "harassment" or "pressure" suggested, without any delineation, in United States v. Powell, 379 U.S. 48, 59 (1964). In short, we do not believe that petitioners' allegations, even if true, would be violative of the applicable requirements of due process. See
The foregoing reasoning also disposes of petitioners' attempt to attack the validity of the second examinations under section 7605(b). In a prior proceeding, petitioners unsuccessfully attacked the summons issued in connection with such examinations. See United States v. Gambino, an unreported case (S.D. N.Y. 1971, 29 A.F.T.R. 2d 72-1010, 72-1 U.S.T.C. par. 9439). Most, if not all, of the arguments made herein were considered and rejected by Judge Ryan in that proceeding. Assuming without deciding that the prior proceeding does not justify the application of collateral estoppel, we nevertheless reach the same conclusion independently. Cf. United States v. DeLuca, an unreported case (E.D.N.Y. 1972, 30 A.F.T.R. 2d 72-5771, 72-2 U.S.T.C. par. 9738), affd. 474 F.2d 1336 (C.A. 2, 1973). Compare Arthur Meister, 60 T.C. 286, 294 (1973), on appeal (C.A. 3, Aug. 21, 1973). In so doing, we note that the procedural requirements of section 7605(b) and therefore the underlying purpose of the section were satisfied. See United States v. Powell, 379 U.S. at 54-56. We are also satisfied that the circumstances alleged herein do not constitute unconstitutional action on the part of the respondent which would justify, at least at this stage of the proceeding, shifting to respondent the burden of proof or of going forward with the evidence as we did in Efrain T. Suarez, supra. Nor do the allegations of blanket disallowances of deductions and/or increases of round dollar amounts of taxable income, in the case of the corporate petitioners, dictate any such action. To be sure, the evidence presented at the trial may be such that the Court will be required to determine the extent of petitioners' tax liabilities, if any, on the basis of the record before it and not merely on the basis that petitioners have failed to sustain their burden of proof. Helvering v. Taylor, 293 U.S. 507 (1935); Marx v. Commissioner, supra; Durkee v. Commissioner, 162 F.2d 184, 187 (C.A. 6, 1947), remanding 6 T.C. 773 (1946). Compare Human Engineering Institute, 61 T.C. at 66. But whether this situation will obtain will have to abide the event.
We conclude that petitioners' motion should be denied and that these cases should proceed to trial in due course.
An appropriate order will be entered.