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United States v. Aggarwal

United States District Court, N.D. California, San Francisco Division

November 14, 2014

UNITED STATES OF AMERICA, Petitioner,
v.
ANCHI AGGARWAL, Respondent

United States of America, Plaintiff, Pro se, San Francisco, CA USA.

ORDER FOR REASSIGNMENT WITH REPORT AND RECOMMENDATION RE ENFORCEMENT OF INTERNAL REVENUE SERVICE SUMMONS

NATHANAEL M. COUSINS, United States Magistrate Judge.

Introduction

Petitioner, the United States of America, seeks enforcement of an Internal Revenue Service Summons against Respondent, Anchi Aggarwal. Revenue Officer Ava Pointer is attempting to conduct an investigation into the collection of Khana Peena Indian Cuisine's Form 941 tax liabilities for the quarterly periods ending September 30, 2012, September 30, 2013, and December 31, 2013, and Form 1065 partnership income for the calendar periods ending December 31, 2010, December 31, 2011, and December 31, 2012. Verified Petition, ¶ 3. On May 20, 2104, Revenue Office Pointer served a Summons upon Respondent by leaving an attested copy taped to the entrance door of the last and usual place of abode of Respondent. Id. at ¶ 6. The Summons required Respondent to appear before Revenue Officer Pointer on June 6, 2014, to give testimony and to bring for examination certain documents and records relating to Khana Peena Indian Cuisine. Id. at Exhibit A. Respondent did not appear on June 6, 2014 as required in the Summons. Id. at ¶ 8. By letter dated June 27, 2014, Respondent was provided a second opportunity to comply with the Summons and appear before Revenue Officer Pointer on July 25, 2014. Id. at ¶ 9 and Exhibit B. Respondent failed to appear on July 25, 2014 or otherwise comply. Id. at ¶ 10. Because the respondent has not consented to the jurisdiction of a magistrate judge, the Court refers this case for reassignment to a district court judge.

On September 4, 2014, Petitioner filed a Verified Petition to Enforce Internal Revenue Service Summons against Respondent, requesting that the Court order Respondent to appear before Revenue Officer Pointer to give testimony and produce items requested in the Summons, at a time and place directed by the Court. Id. at ¶ ¶ A-B. Petitioner also requested that the Court grant its costs in this proceeding, as well as any other relief that may be necessary and proper. Id. at ¶ C.

On September 15, 2014, this Court issued an Order to Show Cause (" OSC") why the Summons should not be enforced, and a hearing was set for November 12, 2014. See Order to Show Cause. On September 19, 2014, Revenue Officer Pointer served the OSC on Respondent's daughter-in-law, Neetu Aggarwal, at Respondent's last and usual place of abode. Declaration of Ava Pointer, ¶ 2. Following this service, also on September 19, 2014, Respondent called Revenue Officer Pointer and acknowledged receipt of the OSC. Id. at ¶ 3. During this call, Revenue Officer Pointer made an appointment with Respondent for her to provide the summonsed records on September 23, 2014. Id.

On September 23, 2014, Respondent and her son, Deepak Aggarwal, appeared before Revenue Officer Pointer. Id. at ¶ 4. Respondent and her son told Revenue Officer Pointer how many people they employed at their restaurant, Khana Peena Indian Cuisine, as well as the balance due for the restaurant's June 2014 Form 941 tax return. Id. Respondent and her son, however, did not provide any further information, documents, or records to comply with the summons. Id. At the end of this meeting, Revenue Officer Pointer requested that Respondent provide the summonsed records by October 17, 2014. Id.

On October 17, 2014, Respondent e-faxed documents to Revenue Officer Pointer, but the information was insufficient to satisfy the summons. Id. at ¶ 5. For example, Respondent provided Forms 433-A and 433-B for Khana Peena Indian Cuisine, but both forms were incomplete. Id. Respondent did not list any income or provide verification of business expenses, and thus was not in compliance with the summons. Id.

On October 21, 2014, Respondent's niece called Revenue Officer Pointer but no documents or records were submitted. Id. at ¶ 6. On October 28, 2014, Respondent, her niece, and her son, Deepak, called Revenue Officer Pointer. Id. at ¶ 7. During this call, Revenue Officer Pointer requested that Respondent provide the summonsed records by October 31, 2014. Id. Revenue Officer Pointer has not heard from Respondent since the October 28, 2014 phone call. Id. at ¶ 8. Currently, Respondent has not fully complied with the summons. Id. at ¶ 9.

At the hearing on November 12, 2014, Thomas Moore and Emily Rossi appeared for the United States. Respondent did not file any opposition, and did not appear in response to the OSC.

Respondent has not consented to the jurisdiction of a U.S. Magistrate judge, so under 28 U.S.C. § 636 and Local Civil Rule 72, this Order is in the form of a report and recommendation to the District Court. Any party must serve and file its objection to this Order within fourteen days of being served with a copy of this Order. For the reasons stated below, IT IS HEREBY RECOMMENDED that Petitioner's Summons be enforced.

Discussion

A. Validity of Summons

The IRS is authorized to make administrative " inquiries, determinations, and assessments" regarding all internal revenue taxes that are owed. 26 U.S.C. § 6201. In connection with such inquiries, the IRS has the authority to summon the person liable or the tax to appear " at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material." 26 U.S.C. § 7602(a)(2). Such summons may be issued for the purpose of " ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or 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." 26 U.S.C. § 7602(a). However, no summons may be issued or enforced " if a Justice Department referral is in effect with respect to such person." 26 U.S.C. § 7602(d)(1). Thus, a summons issued pursuant to 26 U.S.C. § 7602 is valid only if " issued for a proper purpose and prior to a recommendation for criminal prosecution." Donaldson v. U.S., 400 U.S. 517, 537, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971).

B. Standard for Enforcement of IRS Summons

The Supreme Court held in United States v. Powell that to obtain enforcement of a summons, the IRS must first establish its " good faith" by showing that the summons: (1) is issued for a legitimate purpose; (2) seeks information relevant to that purpose; (3) seeks information not already within the IRS' possession; and (4) satisfies all administrative steps required by the United States Code. Powell, 379 U.S. at 57-59 (1964). The government's burden is " a slight one" and typically is satisfied by the introduction of the sworn declaration of the IRS agent who issued the summons establishing that the Powell requirements have been met. United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993). Once a prima facie case is made, a " heavy" burden is placed on the taxpayer to show an abuse of process or lack of institutional good faith. Id.

First, to establish a legitimate purpose, the IRS must demonstrate that the summons is being issued for one of the purposes for which it has authority: " ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or 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." 26 U.S.C. § 7602(a).

Second, the standard for relevance is whether the information sought might shed light on the taxpayer's liability. United States v. Ryan, 455 F.2d 728, 733 (9th Cir. 1972). However, the Ninth Circuit has cautioned that " the government's burden, while not great, is also not non-existent" and it is not necessarily satisfied by an IRS agent's mere assertion of relevance. United States v. Goldman, 637 F.2d 664, 667 (9th Cir. 1980). Thus, the Court may scrutinize the summons to determine whether the IRS seeks information relevant to a legitimate purpose and may choose either to refuse enforcement or narrow the scope of the summons. Id. A summons should not be enforced if it is so overbroad that it constitutes a violation of the Fourth Amendment ban on unreasonable search and seizure. United States v. Malnik, 489 F.2d 682, 686 n.4 (5th Cir. 1974).

Third, a statement by the government that it does not possess the information sought by the summons is generally sufficient to shift the burden to the taxpayer to show actual possession in order to defeat the summons. United States v. Garrett, 571 F.2d 1323, 1328 (5th Cir. 1978).

Fourth, to comply with administrative requirements, the summons must be served either by delivery " in hand to the person to whom it is directed" or by leaving it at that person's " last and usual place of abode." 26 U.S.C. § 7603. Where the summons requires production of documents, " it shall be sufficient if such books, papers, records, or other data are described with reasonable certainty." Id. The time and place of the examination must be " reasonable under the circumstances" and must be at least 10 days from the date the summons is served. 26 U.S.C. § 7605(a).

C. Analysis of the Summons and Verified Petition

As an initial matter, the Summons issued by Petitioner is valid because it was issued for the proper purpose under 26 U.S.C. § 7602(a) of collecting unpaid tax liability.

The government has met its initial burden under Powell through its Verified Petition. First, the IRS issued the Summons to Respondent for the legitimate purpose of completing its inquiry into the collection of Khana Peena Indian Cuisine's Form 941 tax liabilities and Form 1065 partnership income. Verified Petition, at ¶ 3. The Summons only requested Respondent's testimony, documents, and records related to her restaurant, Khana Peena Indian Cuisine. Id. at Exhibit A; Declaration of Ava Pointer, ¶ 4. Second, the IRS states that the information it seeks is " relevant to and can reasonably be expected to assist in the ascertainment and/or collection of" Khana Peena Indian Cuisine's tax liabilities. Id. at ¶ 7. This court finds that the information sought by the IRS is both reasonable and relevant to the purpose of collecting Respondent's tax liability. Third, the IRS has met its burden of establishing its need for this information through its assertion that it does not otherwise have " access, possession, or control" of the information sought in the Summons. Id. at ¶ 5. Fourth, the IRS states that it has fulfilled all of the required administrative steps under the United States Code. Id. at ¶ 11. The IRS properly served the Summons upon Respondent by taping an attested copy to Respondent's last and usual place of abode, Id. at ¶ 6, which is an acceptable form of service. United States v. Gilleran, 992 F.2d 232, 233 (9th Cir. 1993). In addition, the Summons is sufficiently clear, and the date of the requested appearance was more than 10 days after the Summons was served.

Thus the IRS has met its burden by presenting evidence through its Verified Petition that the Summons was issued for a legitimate purpose, that the information sought may be relevant to that purpose; that the summoned information is not already in possession of the IRS; and that the proper administrative steps have been followed. Respondent has submitted no evidence to refute these facts.

Conclusion

IT IS HEREBY RECOMMENDED that the Summons be enforced and that Respondent be ordered to fully obey the subject summons and each requirement thereof, including providing the testimony, and producing the records called for by the terms of the summons, before Revenue Officer Pointer, or any other proper officer or employee of the IRS, at such time and place as may be set by the Revenue Officer or a designee. This case to be reassigned to a District Court Judge.


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