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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Evidence: Bank Records and Net Worth Increases

Part 2

[73-1 USTC ¶9106] United States of America , Appellee v. Ed J. Hagen, Appellant.

(CA-10), U. S. Court of Appeals, 10th Circuit, No. 72-1303, 470 F2d 110, 12/5/72 , Aff'g unreported District Court decision

[Code Sec. 7201]

Crimes: Tax evasion: Evidence: Net worth: Specific items: Wilfullness.--The taxpayer's conviction on two counts of tax evasion was affirmed. It was not error to allow the government to introduce specific items of unreported income in addition to using the net worth method of reconstructing income. Moreover, there was sufficient testimony to show wilfullness, and the trial court's instructions adequately explained the net worth method to the jury.

John B. Owens, Jr., Scott P. Crampton, Assistant Attorney General, Meyer Rothwacks, John P. Burke, John R. Lusk, Department of Justice, Washington, D. C. 20530, William R. Burkett, United States Attorney, Oklahoma City, Okla., for appellee. Leslie H. Wald, Stanley L. Drexler, 1107 Tower Bldg., Denver U. S. Nat. Center, Denver, Colo., Rob ert W. Pittman, 27th Floor, City Nat. Bank Tower, Oklahoma City, Okla., for appellant.

Before JONES ^*, SETH and HOLLOWAY, Circuit Judges.

SETH, Circuit Judge:

Defendant Hagen was convicted on two counts of wilfully and knowingly attempting to evade income taxes by filing or causing to be filed with the District Director of Internal Revenue fraudulent tax returns on behalf of himself and his wife for the years 1964 and 1965. He has taken this appeal.

The defendant was in business as a broker-dealer of securities, and he also sold life insurance. The Government purportedly based its prosecution on the net worth plus nondeductible expenditures method of showing unreported income. The Government also introduced evidence of specific items of unreported income for the stated purpose of proving wilfulness. The specific items of unreported income aggregated more than was shown by the evidence relating to increased net worth.

At the conclusion of the Government's case, the defense declined to offer any evidence, and rested. The jury returned a verdict of guilty on both counts.

[Net Worth Method]

The defendant-appellant's principal point on appeal is not that the net worth method was used, but that the trial court should not have permitted the Government to also introduce evidence as to specific items of unreported income to an extent that such proof changed the theory of the case or in any event overshadowed the net worth proof. He also asserts that it was error because he was surprised by it; because the jury was confused by it; there was a variance created with the Bill of Particulars; and the instructions covered only the net worth aspects. The defendant also asserts that the trial court did not instruct on his theory of the case.

The record does not support the contention of defendant that specific item evidence came as a surprise, and thus he was not prepared to meet it. However, the extent of it may have been greater than anticipated. The record shows that copies of schedules of unreported income in the possession of the United States Attorney of defendant's attorney before trial. These of defendant's attorney before trial. These were, however, not extensive. Responding later to a motion for a Bill of Particulars, the Government refused to divulge other items of unreported income on the ground that these were evidentiary matters. In its opening statement the Government stated that it would prove wilfulness by showing defendant's failure to report specific items of income. Also the defendant in his opening statement stated that explanation would be made of certain asserted specific items. Reference was also made to specific items in the Government's long trial brief. Thus before the trial began the defendant was put on notice that the case would be one of net worth with specific items. During the course of the trial the specific item proof began to assume a larger part of the evidence and at the end it became difficult to say whether it still was a net worth case. This is the basis of the objection on appeal. According to the appellant's brief the biggest jolt came when the Government introduced a sixteen page summary of omitted specific items, the total of which exceeded in amount the net worth increases. This indeed made the case difficult to categorize, and the wilfulness purpose and "likely source" purpose of such evidence appears secondary. The nature and order of proof, and adherence to a stated theory are matters within the trial court's discretion. No objection was made by defendant during the Government's case to evidence of specific items, nor were requests for continuance made. Furthermore, no objection was made during the Government's case to the use of the net worth method. It is obvious from the record that defendant's attorney was familiar with the limitations placed on the net worth method. Thus as to the asserted surprise issue, we find no error, and in any event there has been no showing of plain error to warrant consideration of the issue of surprise on this appeal. See United States v. DeLuzio, 454 F. 2d 711 (10th Cir.), and United States v. Wheeler, 444 F. 2d 385 (10th Cir.).

[Wilfulness]

Defendant argues next that there was no independent proof of wilfulness. He asserts that the Government merely had its witnesses testify twice to the same matters in an attempt to confuse and prejudice the jury into finding wilfulness. We cannot agree. The testimony relative to specific items of unreported income showed the defendant had from time to time deposited the proceeds from the sale of stock to his personal account, in some instances identifying the deposits in his check register as the repayment of loans that he had made. Other testimony relative to specific items of unreported income showed that defendant had failed to report accurately monies he had received as commissions for selling life insurance, or had understated them as to the amount. This is proper testimony to show wilfulness of the defendant, and we find no error in its admission into evidence.

[Instructions]

The defendant urges that the instructions were erroneous because he asserts they treated only the net worth method, and that in general terms. The defendant did not object to the instructions given on the ground here urged. He tendered some instructions but withdrew them. Thus the court had no requested instructions from defendant, and no objections directed to the issue here raised. The objections made by defendant to the instructions read in part:

"MR. PITTMAN: As indicated prior to the reading of the instructions, I would at this time, effective as of that time, like to withdraw my requested instructions that relate in any manner to the net worth, plus nondeductible expenses, method of proof, and object to all of the Court's instructions relating to this method of proof on the ground, and for the reason that the government's evidence in this case failed to meet the standard as to when this method may be used under the doctrine as laid down in the United States versus Holland case and the United States versus Spies case, and other well known cases in the net worth theory. The only other objection I have to--."

This was followed by discussions of instructions pertaining to reasonable doubt, and to evidence consistent with both guilt and innocence. The above quoted objection also pertains to the point above discussed relative to wilfulness.

Reading the instructions given as a whole, we find them to be sufficient. They properly covered the net worth case and were otherwise sufficiently specific to guide the jury as to the issues before it.

Considering further the above quoted objection as directed to the use of the net worth theory under Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121, it must be held to have come too late. It was directed to instructions relative to the method and came after the sides had rested and the case was about to be submitted to the jury. Again, the defendant at the outset was advised of the course of action the Government was going to follow and had adequate opportunity to raise the issue by motion or objections. In any event the Government followed and met the requirements of Holland v. United States . The evidence of specific items was proper as indicated to show wilfulness, but it was also proper to negate a likely source under Smith v. United States [54-2 USTC ¶9715], 348 U. S. 147, and United States v. Calderon [54-2 USTC ¶9712], 348 U. S. 160. We also find no variance of the proof with the Bill of Particulars.

As to defendant's contention that the trial court did not instruct the jury so as to allow it to consider the defendant's theory of the case, we also find no error. As stated above, the defendant requested no instructions on his theory of the case, and is therefore not entitled to consideration of the claimed error. See McMurray v. United States , 298 F. 2d 619 (10th Cir.). Furthermore, before an instruction may be given, it must have some foundation in the evidence, and we find no such foundation here.

AFFIRMED.

^* Of the Fifth Circuit, sitting by designation.

 

 

[72-1 USTC ¶9371]United States of America, Plaintiff-Appellee v. Lawrence Potts, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 71-1497, 459 F2d 412, 4/25/72 , Aff'g District Court, 71-1 USTC ¶9239, 321 F. Supp. 717

[Code Secs. 7201 and 7206(1)]

Crimes: Tax evasion: False return: Evidence: Net worth method: Willfulness.--The taxpayer's conviction for tax evasion and filing a false tax return was affirmed. The government proved his 1962 opening net worth with reasonable certainty and was not required to investigate leads furnished by his witnesses, whose evidence the trial court found unpersuasive. Willfulness was proved by the large discrepancies between his cancelled checks and his records, which had been altered to increase the amounts shown as paid for materials.

Davis J. Cannon, United States Attorney, Joseph P. Stadtmueller, Steven C. Underwood, Assistant United States Attorneys, Milwaukee, Wis., for plaintiff-appellee. J. Rob ert Kaftan, 522 Doty St. , Green Bay , Wis. , for defendant-appellant.

Before DUFFY, Senior Circuit Judge; KNOCH, Senior Circuit Judge; and GRANT, ^* District Judge.

GRANT, District Judge:

Defendant was indicted and found guilty of underpayment of taxes in violation of 26 U. S. C. §§ 7201 and 7206(1) for the years 1962, 1963, and 1964, from which he appeals following a trial to the court. Defendant claims that the government's proof was insufficient to convict, and that the burden of proof was shifted to defendant. The errors assigned principally involve the prosecution's use of the net worth method of proof in establishing an opening net worth at the close of 1961, the defendant maintaining that his assets at the beginning of 1962 were greater than those established by the government's evidence.

[Net Worth]

During the years in question, defendant maintained a farm and a cheese manufacturing facility. The evidence showed a general depression in the cheese market at the close of 1961, that defendant withheld certain of his cheese products at public warehouses, and that the defendant's own property included storage areas sufficient in size to hold the alleged inventory which he urged would increase his opening net worth by an amount great enough to offset any tax liability for 1962.

The government's inventory calculations which formed the basis of establishing defendant's opening net worth, were substantiated by records introduced at trial. Defendant objects to the trial court's having accorded the government's evidence greater weight (which defendant does not challenge as inaccurate) to the exclusion of testimony adduced from the defendant's witnesses who claimed that defendant held additional cheese stores on his own premises some eight years prior to the trial. The district court found defendant's evidence "unpersuasive" in view of the long period of intervening time. Assessment of credibility is a matter committed to the discretion of the trier of fact. We find no error in the district court's determination, especially in view of the fact that defendant's claim was totally unsupported by any business records. Further, we do not believe that the government's failure to investigate leads furnished by these same witnesses of the defendant, whose credibility was so tenuous, requires reversal. Blackwell v. United States [57-1 USTC ¶9644], 244 F. 2d 423 (8th Cir. 1957) cert. den., 355 U. S. 838 (1957).

Bearing in mind the caution which must attend use of the net worth theory, the record reflects adequate proof from which the 1962 tax deficiency was established. "Reasonable certainty" is the standard by which the opening net worth must be measured, and the government's proof clearly met this test. Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1954). Contrary to defendant's assertion, such proof need not rebut all possible suggestions of non-taxable sources of an alleged higher net worth. Holland, supra, at p. 137. The opening net worth having been proven, a defendant remains quiet at his peril; this, however, does not create any presumption nor does it shift the burden of proof. Holland, supra, at p. 139; U. S. v. Mackey [65-1 USTC ¶9328], 345 F. 2d 499 (7th Cir. 1965).

[Willfulness]

Defendant further challenges the district court's finding of willfulness contending that the court failed to consider his lack of formal education and the fact that his wife had charge of the company's accounting. Wiseley v. Commissioner [50-1 USTC ¶9504], 185 F. 2d 263 (6th Cir. 1950). Realizing the realities of proving intent to evade taxes, the courts must often rely upon circumstantial proof as to intent. Spies v. U. S. [43-1 USTC ¶9243], 317 U. S. 492 (1942); Tinkoff v. U. S. [36-2 USTC ¶9487], 86 F. 2d 868 (7th Cir. 1937). It is sufficient to prove that a substantial amount of tax liability has been willfully averted or that there has been a pattern of under-reporting of income as revealed by the taxpayer's books and records. Spies, supra; U. S. v. Doyle [56-1 USTC ¶9553], 234 F. 2d 788 (7th Cir. 1956). The evidence herein revealed a number of substantial discrepancies between the defendant's cancelled checks for supplies and the records kept by this business--all of which represented an overstatement of expenditures for supplies in excess of $8,000.00. Additionally, these same records which defendant made available to government agents, revealed numerous changes, which had been made in defendant's checkbook entries, increasing the amounts paid for materials used in his business. This documentary evidence was supported by the testimony of many of the defendant's suppliers. The record also demonstrates that defendant was fully involved with his business and its financial development. The proof amply supports the trial court's finding with respect to intent.

Viewing the evidence on appeal in the light most favorable to the government as we must, the district court's judgment is AFFIRMED.

^* Chief District Judge Rob ert A. Grant of the Northern District of Indiana is sitting by designation.

 

 

[72-2 USTC ¶9478]United States of America Vernon M. Mathews, Appellant

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 72-1085, 463 F2d 182, 6/6/72

[Code Sec. 7201]

Tax evasion conviction: Timeliness of appeal: Appeal from order.--The Court determined that it had no jurisdiction over an appeal from a tax evasion conviction where the first notice of appeal was filed prematurely (before sentence) and the second notice was filed late. The premature appeal could not be a source of jurisdiction as an appeal from a District Court order, where the order was not a final, appealable one.

Thomas A. Daley, Assistant United States Attorney, Pittsburgh , Pa. , for appellee. Joseph W. Conway, Balzarini, Walsh, Conway & Maurizi, 3113 Grant Bldg., Pittsburgh , Pa. , for appellant.

Before STALEY, ALDISERT and HUNTER, Circuit Judges.

Opinion of the Court

PER CURIAM:

Appellant seeks review of his conviction under 28 U. S. C. §7201, for income tax evasion for the years 1964, 1965, 1966 and 1967. He contends that: (1) he should have been apprised of his Miranda rights during the investigation of his activities by Internal Revenue Service Special Agents; (2) the government failed to prove appellant's opening net worth during the years in question; (3) after the jury commenced deliberations, it was given prejudicial exhibits which created an inference that appellant was engaged in criminal tax evasion in years prior to those involved in the indictments; and (4) appellant's expert witness should have been permitted to testify concerning the weaknesses of the net worth method of tax analysis.

[Timeliness of Appeal]

We address ourselves initially, however, to the timeliness of this appeal. Appellant was found guilty by a jury on June 10, 1971 . The district court [72-1 USTC ¶9352] denied appellant's motions for a new trial and judgment of acquittal on December 13, 1971 . Notice of appeal from this order was filed on December 22, 1971 . The court imposed sentence on December 27, 1971 . Appellant's counsel recognized the prematurity of his December 22 notice of appeal, and, on January 7, 1972 , filed a notice of appeal "from the judgment and order . . . dated December 27, 1971 ."

Rule 4(b), F. R. A. P., provides: "in a criminal case the notice of appeal by a defendant shall be filed in the district court within 10 days after the entry of judgment or order appealed from. . . ." Here, the second notice of appeal was filed 11 days after the date of sentence. Appellant, therefore, does not, and could not, attempt to justify the jurisdiction of this court on the basis of the January 7 notice. The 10-day limitation of the period in which a notice of appeal may be filed, absent a finding of excusable neglect by the trial court, is mandatory and jurisdictional. United States v. Rob inson, 361 U. S. 220, 224 (1960); United States v. Deans, 436 F. 2d 596, 599 (3d Cir. 1971).

Therefore, the jurisdiction vel non of this court must result from the notice of appeal filed on December 22, 1971 . Clearly, as appellant's counsel himself recognized, this notice was premature because "[a]n appeal may not be taken until after the pronouncement of sentence, and must be taken promptly after sentence is imposed." Corey v. United States 375 U. S. 169, 172 (1963); Parr v. United States , 351 U. S. 513, 518 (1956).

[Appeal from Order]

In an effort to circumvent this language, both in brief and at oral argument, appellant's counsel argued that the instant appeal is from the district court's order denying appellant's motions for judgment of acquittal and a new trial. But in United States v. Rizzo, 439 F. 2d 694 (3d Cir. 1971), we held that an order denying a motion for judgment of acquittal was not a final appealable order. Moreover, this court has clearly held that "[n]either the order finding the accused guilty nor the order denying a new trial is an appealable final order absent any imposition of sentence." United States v. Jarrett, 439 F. 2d 1135 (3d Cir. 1971). ¹

Although we find that because this appeal was not timely filed we are without jurisdiction, ² we have examined all of appellant's contentions advanced in brief and oral argument, and we find them to be without merit.

The appeal will be dismissed for want of jurisdiction.

¹ The wellspring of authority for this well-established proposition is Berman v. United States, 302 U. S. 211, 212-213 (1937), in which Chief Justice Hughes said: "Final judgment in a criminal case means sentence. The sentence is the judgment. * * * In criminal cases, as well as civil, the judgment is final for the purposes of appeal 'when it terminates the litigation . . . on the merits,' and 'leaves nothing to be done but to enforce by execution what has been determined.'" See also, United States v. Bendicks, 439 F. 2d 1120, 1121 (5th Cir. 1971); United States v. Garber, 413 F. 2d 284, 285 (2d Cir. 1969); United States v. Henson, 358 F. 2d 721 (4th Cir. 1966); Northern v. United States [62-1 USTC ¶9331], 300 F. 2d 131, 132 (6th Cir. 1962).

The Berman rule has been scrupulously followed in this circuit, see, e.g., United States v. Swidler [53-2 USTC ¶9588], 207 F. 2d 47 (3d Cir. 1953); United States v. Knight, 162 F. 2d 809 (3d Cir. 1947). In United States v. Kokin [66-2 USTC ¶15,705], 365 F. 2d 595 (3d Cir. 1966), however, this court did elect to proceed to the merits, despite a premature notice of appeal. But in United States v. Battista, 397 F.2d 286 (3d Cir. 1968), when we inadvertently proceeded to the merits in an appeal from the denial of a motion for a new trial, the Supreme Court denied certiorari, sub nom. Laris v. United States, 393 U. S. 936 (1968). "[I]t appearing that the order of the court below was not a final appealable order, no judgment of conviction, sentence and commitment having been entered. . . . [o] ur former judgment therefore was void for we were without jurisdiction to adjudicate the appeal." United States v. Battista, 418 F. 2d 572, 573 (3d Cir. 1969). (Emphasis supplied.)

² Nor can our jurisdiction rest under the ambit of the second sentence of Rule 4(b): "A notice of appeal filed after the announcement of a decision, sentence or order but before entry of the judgment or order shall be treated as filed after such entry and on the day thereof." The situation contemplated by the second sentence of Rule 4(b) occurred in Lemke v. United States, 346 U. S. 325 (1953). There, the Court found acceptable the filing of a notice of appeal one day after the sentence was in fact imposed, but three days before the judgment was formally entered. This is most unlike the instant case where the notice of appeal was filed before the fact of sentencing. Indeed, here the sentencing judge informed appellant's counsel that an appeal could not be taken before sentencing, and appellant's counsel agreed:

The Court: So, I trust you will advise me about whether an appeal is pending.

Counsel: I will your Honor.

The Court: As soon as possible. I know there has been one already, which I think is premature. I think the final order is the sentence here.

Counsel: I know. I went back and read the rules.

 

 

[72-1 USTC ¶9352]United States of America v. Vernon W. Mathews

U. S. District Court, West. Dist. Pa., No. 70-291 Criminal, 335 FSupp 157, 12/13/71

[Code Secs. 446 and 7201]

Crimes: Tax evasion: Reconstruction of income: Net worth method: Wilfulness: Miscellaneous assignments of error: Jury trial.--The jury was rightfully justified in determining that the taxpayer had wilfully attempted to evade or defeat his income taxes. He was thus properly convicted on all four counts of the indictment. The evidence to establish his guilt by use of the net worth method, which was corroborated by a bank deposits analysis, justified conviction. Numerous trial errors claimed, pertaining to admission of evidence and instructions to the jury, were without merit.

Richard L. Thornburgh, United States Attorney, Pittsburgh, Pa., for U. S. Joseph W. Conway, Balzarini, Walsh, Conway & Maurizi, 3113 Grant Bldg., Pittsburgh, Pa., Samuel Y. Stroh, Law & Fin. Bldg., Pittsburgh, Pa., Andrew J. Conner, 1111 Baldwin Bldg., Erie, Pa., Ritchie T. Marsh, 806 Baldwin Bldg., Erie, Pa., for defendant.

Opinion and Order Denying Motion for New Trial or Judgment of Acquittal

KNOX, District Judge:

Defendant was found guilty by verdict of a jury of the crime of wilfully attempting to evade or defeat income taxes imposed upon his personal income for the years 1964, 1965, 1966 and 1967 under the provisions of 26 U. S. C. 7201. ¹ He has filed Motions for a New Trial or Judgment of Acquittal claiming that the evidence was insufficient to convict him or was not sufficient to establish his guilt beyond a reasonable doubt and, in any event, he should be entitled to a new trial. Numerous trial errors are also claimed in the Motion for New Trial.

The evidence showed that defendant for some period of years had operated in [an] IGA (Independent Grocers Association) supermarket in Edinboro, Erie County, Pennsylvania , which the evidence indicated became quite profitable. His income tax returns as filed for the years in question showed tax liability as follows:

                          Gross                Net            Income

                     Receipts             Income               Tax

1964 ....       $634.323.56           $ 2,549.18            $ 0.00

1965 ....       $662.140.61           $ 4,077.33           $ 61.07

1966 ....       $717.758.90           $ 4,502.77          $ 482.64

1967 ....       $810,007.30           $24,382.41         $5,762.04

[Net Worth Method]

The government's evidence to establish defendant's guilt used the net worth method and was corroborated by a bank deposits analysis. The evidence by the net worth method indicated that as of December 31, 19 63, an examination of defendant's assets showed he had a net worth of $217,447.72 and as of December 31, 19 67, he had a net worth of $382,258.92. Obviously, the net income as reported by the defendant on his returns did not account for this. Such a great increase in wealth in such a short period of time obviously could only be attributed to a large amount of income or gifts or inheritances. He further admitted to the agents that the only property he had ever inherited consisted of a few shares of stock in the First National Bank of Edinboro. Defendant took the stand himself and did not attempt to explain the tremendous increase in net worth by inheritance or by gifts. Due allowance was made by the government for increases in market values of securities during the years in question and this also failed to explain the reason for the increase.

Defendant's explanation was that some time in the year 1965 or 1966, he became aware of the fact that there was a great amount of unaccounted for cash and of a great increase in his assets nd finally came to the conclusion that the cash registers in his store were only picking up a total of certain types of transactions and not giving a daily grand total of all the sales in the store. These sales, as required by Pennsylvania Sales Tax Regulations, were broken down into taxable items and nontaxable items such as food. Notwithstanding this, the defendant made no complaint to the cash register distributor who sold him the machines that he was not getting the daily grand total of all transactions. The dealer who sold him the cash register testified in behalf of the defendant but did not claim that there was any mistake in the totals provided by the machines and gave no evidence as to complaints having been made or requests to rectify the situation.

It further appeared that defendant would take his cash register tapes home at the end of each day and enter the totals on a large sheet which was used at the end of the year to provide item I "gross receipts" on Schedule C (business income) attached to his income tax return. These sheets at the end of the year were turned over to his accountant. The latter testified that from these sheets he prepared the income tax returns in question. Immediately upon transcribing the totals from each days sales onto the larger sheets, defendant admitted he destroyed the tapes so that there was no tangible evidence to support the daily totals entered upon the larger sheets. The evidence also showed that the total gross receipts as entered on the federal income tax returns did not correspond with the gross receipts as shown upon the reports required for Pennsylvania Sales Tax purposes. It also appeared that defendant paid out large amounts of cash for the purchases of securities, for the purchase of life insurance and other assets during the years in question. The jury was, therefore, entitled to infer that defendant had destroyed his cash register tapes so that no evidence existed to support the figures shown on the larger sheets which were used for preparing the income tax returns, and that defendant did this deliberately as a part of his scheme to evade taxes. Support for the necessary finding of a wilful attempt to evade taxes was to be found in the following ample evidence.

1. His business background and training at Edinboro State College and Erie Commercial College .

2. His never having bothered to reconcile cash in the register with the tape totals, although he knew how, and his continued daily destruction of the tapes even after "sensing something wrong". The routine audit in 1961 mentioned by taxpayer furnished no justification for this and certainly no estoppel would run against the government on this, particularly in the absence of complete knowledge of the facts.

3. His never having contacted the seller of the cash registers, the National Cash Register Company, regarding "the sales he felt he was missing."

4. The financial statements he presented his bank which disclosed his awareness of yearly increases in his net worth far exceeding the taxable income reported on his returns.

5. His extensive use of cash, although possessing both business and personal checking accounts, to make considerable expenditures; cash payments by him for just one insurance premium, that to the Luthern Brotherhood, substantially exceeded the taxable income he reported in 1964, 1965, and 1966 (Government Exhibit 70).

6. The false Pennsylvania Sales Tax Returns he filed from September 1965 through July of 1967 and again in December of 1967.

Defendant testified that he was too busy to reconcile cash. Reconciliation of cash with sales as shown on the cash registers would certainly be a normal method for any prudent business man to follow to determine if mistakes were being made by employees or if there was dishonesty or whether the machines themselves were accurate.

He did not attempt to file amended returns or report this matter to the internal revenue agents who later began to question him about his returns.

From this brief recital of the evidence, it is the opinion of the court that the jury was rightly justified in determining that defendant had wilfully attempted to evade or defeat his income taxes. He was thus properly convicted on all four counts of the indictment. As the net worth method does have possible objections, it should be used with great caution. See Smith v. U. S. [54-2 USTC ¶9715], 348 U. S. 147; U. S. v. Calderon [54-2 USTC ¶9712], 348 U. S. 160. The jury was so instructed. ² Nevertheless, the evidence in the instant case was so overwhelming, it is difficult to see how the jury could come to any other conclusion.

Use by the agents of the so-called bank deposit and expenses method also pointed inevitably to the same conclusion with only a small difference in unreported income for each year. Even if the net worth method was not substantiated, the other method likewise justified conviction.

For these reasons, the Motion for Judgment of Acquittal will be denied.

We will now turn to the specific grounds urged for grant of new trial.

Ground 1. Lack of Proof of Wilfulness.

The defendant asserts that the government failed to establish a Section 7201 violation for each indictment year as its proof did not show that the defendant wilfully and with specific intent, attempted to evade the taxable income due and owing the government in each of the years in question. The defendant further asserts that the government failed to offer corroborative evidence as to the defendant's opening cash as of December 31, 19 63, knowing that defendant in the conduct of his business required and held substantial amounts of cash.

In examining the evidence together with all inference reasonably and logically deducible therefrom, it must be viewed in the light most favorable to the government since the jury returned a verdict of guilty as to all four counts. United States v. Minker [63-1 USTC ¶15,458], 312 F. 2d 632 (3d cir. 1962), cert. denied, 372 U. S. 953.

What we have previously said in denying the Motion for Judgment of Acquittal applies equally to this ground for new trial. Further, taxpayer's understatement to the Pe