Before KALODNER, STALEY and HASTIE, Circuit Judges.
This is an appeal from a conviction for income tax evasion under Section 145(b) of the Internal Revenue Code, 26 U.S.C. § 145(b).*fn1
Before discussing the errors complained of a brief statement of the factual background is in order.
The defendant, William B. Stayback, was indicted on a two-count indictment charging him with filing false and fraudulent income and victory tax returns for 1943 (Count I) and 1944 (Count II). He was found guilty on both counts and sentenced to imprisonment for 18 months and fined $3,000 and costs.*fn2
The evidence adduced at the trial established that the defendant during the years covered by the indictment was engaged in the manufacture and sale of metal novelties and souvenirs.
Defendant in his 1943 and 1944 returns listed no other income except that received in the conduct of his business.
In his 1943 return defendant listed his "Total receipts" at $15,000.00. Against this sum he charged, under "Cost of Goods Sold", $3,585.00 for "Material and supplies" and $2,000.00 for reduction in inventory, making "net cost of goods sold", $5,585.00. Under "Other Business Deductions" he claimed a credit of $1,300.00 for "Rent, repairs and other expenses". After applying the $6,885.00 credits claimed against his stated receipts of $15,000.00, the defendant fixed his "Net profit" for 1943 at $8,115.00.
In his 1944 return defendant listed his "Total receipts" at $4,000.00. Against this sum he charged, under "Cost of Goods Sold", $185.61 for "Material and supplies" and $2,000.00 for reduction in inventory, making "Net cost of goods sold", $2,185.61.Under "Other Business Deductions" he claimed a credit of $261.00 for "Rent, repairs and other expenses". After applying the $2,446.61 credits claimed against his stated receipts of $4,000.00, the defendant fixed his "Net profits" for 1944 at $1,553.39.
In both his 1943 and 1944 returns the defendant also took credit for contributions, interest and taxes paid. These deductions, $980.00 for 1943, and $975.00 for 1944, played no part in the determination of the tax evasion issue. They served to reduce his stated "Net income" for 1943 to $7,135.00, and for 1944 to $578.39.
The defendant's tax returns for 1943 and 1944 were prepared by an accountant, John F. Primoshic, at his request.*fn3 Primoshic testified that before he prepared the returns he asked defendant for his books and records and was told that he had none; that defendant advised him he was only able to give him an estimate of $15,000.00 "Total receipts" for 1943 and $4,000.00 for 1944.The calculations stated in the returns as to "Net cost of goods sold" and "Other Business Deductions" (except rent) were computed by Primoshic on a percentage basis based on his familiarity with the defendant's particular type of business and his general accounting experience. Primoshic further testified that at the time the tax returns were prepared the defendant expressed agreement with his calculations and accepted and adopted them as his own.*fn3
Various government witnesses testified that during 1943 and 1944 defendant had operated his business not only as the W. S. Novelty Co. but also as Clifford Allen, S. Pannone, George Wilson Specialty Co., Harlem Chromium Plating Co. and Universal Alarm Corp.*fn4
Testimony relating to the defendant's operations was given by his employees and those of various concerns to whom he made sales during 1943 and 1944, and by John George Cassidy, Internal Revenue Agent and certified public accountant. Cassidy had made an exhaustive examination of the books and records of concerns to whom the defendant had made sales.
As to 1943: Cassidy testified that his investigation had disclosed that the defendant that year had made sales of $104,667.38 in his operations under the following guises; as W. S. Novelty Co., $4,627.95; as Clifford Allen, $24,549.85; as S. Pannone, $25,321.85; as George Wilson Specialty Co., $46,310.06; as Harlem Chromium Plating Co., $1,656.20 and as Universal Alarm Corp., $2,201.47.*fn5 The $104,667.38 sales enumerated exceeded by $89,667.38 the $15,000 "Total receipts" listed by the defendant in his 1943 tax return.
As to 1944: Cassidy testified that his investigation had disclosed that the defendant that year had made sales of $59,373.40 in his various trading identities; as W. S. Novelty Company, $35,807.11; as Clifford Allen, $18,143.53; as Harlem Chromium Plating Company, $5,422.16.*fn6 The $59,373.40 sales enumerated exceeded by $55,373.40 the $4,000.00 "Total receipts" listed by the defendant in his 1944 tax return.
Defendant does not dispute the accuracy of the government's testimony that he understated his gross income by $89,667.39 ...