Petition — Dema v. United States

Supreme Court, U. S,

@G=755 ' FILED

NFr 9 1976

MICHAEL RODAK, JR cure |

a ---- = - ans a J

Iu the

Supreme Court of the United States

Octobner Term—1976

J. RICHARD DEMA,

Petitioner,

vs.

UNITED STATES OF AMERICA and DAVID J. FEDDOR,

Revenue Agent, Internal Revenue Service,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

SHELDON R. WAXMAN

30 West Washington Street

Suite 915

Chicago, Illinois 60602

Telephone: (312) 782-1360

Counsel for Petitioner

Of Counsel:

HARVEY M. SILETS

7 South Dearborn Street

Chicago, Illinois 60603

——_—$<$

UNITED STATES LAW PRINTING CO., CHICAGO, ILLINOIS 60618 (312) 525-6581

INDEX

PAGE

EEL AAA DIT SE 1

S| a EE LR DE LAS eR Be oe Z

OUTS HT anna neces cnscscerenenseniescctemnnmncntnns 2

Constitutional provision and statutes involved _.......... 2

PEO suicix:scncesticsssntlabbianssdeaticmadapssehbineaeanbinedlssdiemaniiliadaciidbinie 3

Reasons for Granting the Writ .........................c.ccececeeeee 8

I,

The decision of the Court below creates an unprece-

dented rule which makes a District Court powerless to

implement the prohibitions of 26 USC 7605 (b) and

such curtailment of judicial authority should not be

permitted without expression from this Court. ............ 8

6 eT eer E Pee Me ae ae oreo as MEky 13

Appendix A—

Opinion of the United States Court of Appeals

ae IE GD cccesentctnsennccrciinniiiibsniinniia App. 1

Appendix B— -

Order denying Petition for Rehearing En Bane App. 21

CITATIONS

Cases

Alexander v. ‘‘Americans United,’’ Ine., 416 U.S. 752

CRE ccecccetcsstensenseisaitiniieciiniiciesantciciesiianiantiannsgitianiataliaeas 10

Clark v. Campbell, 501 F.2d 108 (5th Cir. 1974) .......... 10

il

PAGE

Commissioner of Internal Revenue v. Shapiro, ——

U.S. —, 44 US.L.W. 4313 (3-8-76) 2000... 10

De Masters v. Arend, 313 F.2d 79, 85, n.8 (9th Cir. 1963),

cert. dismissed pursuant to stipulation, 375 U.S. 936 - 9

Enochs v. Williams Packing Company, 3870 U.S. 1

SUTTUEIEY: * snipssevinsicceasibetdlecbinpsin iabigeondiesscbpheAdpeeenibidacnianiesapsiseiala 2+ 10, 11

Laing v. U. 8., 423 U.S. 161 (1976) ......0000 ww... 10

Pizzarello v. U. 8., 408 F.2d 579 (2d Cir. 1969) 00000.

Rambo v. U. 8., 492 F.2d 1060, 1064 (6th Cir. 1974)... 10

U.S. v. Friedman, 532 F.2d 928, 937 (8rd Cir., 1969) ... 10

U.S. v. Hall, 423 U.S. 161 (1976) _............ MOT aaa 10

Miscellaneous

98 U.S.C. 1254(1), 62 Stat. 928 se oad )

eS Ter: ae Sal ee Re 7

Tat RD is OE 5

26 U.S.C. 7605(b) coccccccccceen-. Coe hes es

Aa NR 2, 3,9

fF Se Ot eee lane ae

Jim Davidson, ‘* Tired of Being Pushed Around Every

April 15?’’, Vol. 23 ‘* Playboy Magazine’’ No. 4, April

SE ING TUIIED | ssebintsiclsbesdatssiceninpeebesiscbnebistakeiciadaaheisaabaaioseaabndibe 11

Constitution

Fifth Amendment to the Constitution of the United

I ih ae PRD: Be a OF ER ER: 2,11

Iu the

Supreme Court of the United States

Octoner TeRmM—1976

No.

J. RICHARD DEMA,

Petitioner,

vs. -

UNITED STATES OF AMERICA and DAVID J. FEDDOR,

. Revenue Agent, Internal Revenue Service,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

Petitioner prays that a writ of certiorari be issued to

review the judgment of the United States Court of Ap-

peals for the Seventh Circuit entered in this cause on

October 7, 1976.

OPINION BELOW

The opinion of the United States Court of Appeals for

the Seventh Circuit and the denial of the Petition for Re-

hearing En Banc are not yet reported and are printed in

full as an Appendix hereto.

2

JURISDICTION

The judgment of the Court of Appeals was entered on

October 7, 1976. A timely Petition for Rehearing En Banc

was filed by Petitioner on October 21, 1976 and was denied

by the Court of Appeals on November 1, 1976. On No-

vember 5, 1976, the Court of Appeals stayed its Mandate

until December 6, 1976, pending application for certiorari

to this Court. The jurisdiction of this Court is invoked

under Title 28 U.S.C. Section 1254(1); 62 Stat. 928. °

QUESTIONS PRESENTED

1. When the Government institutes proceedings to ob-

tain a taxpayer’s records, is the District Court barred

by the Anti-Injunction Act (26 USC 7421(a)) from enjoin-

ing further examinations when the Court finds the IRS

violated 26 USC 7605(b), prohibiting multiple-and un-

necessary examinations of a taxpayer’s records?

2. If the Anti-Injunction Act (26 USC 7421(a)) applies

to proceedings brought by the Government against a tax-

payer for enforcement of an IRS summons, does due

process require affording the taxpayer an opportunity to

make the showing necessary to invoke the exceptions to the

Act pursuant to Enochs v. Williams Packing Company, 370

U.S. 1?

CONSTITUTIONAL PROVISIONS AND STATUTES

INVOLVED

FIFTH AMENDMENT TO THE CONSTITUTION:

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in eases arising

in the land or naval forces, or in the Militia, when

in actual service in time of War or public danger; nor

shall any person be subject for the same offence to be

3

twice put in jeopardy of life or limb; nor shall be

compelled in any criminal case to be witness against

himself, nor be deprived of life, liberty, or property,

without due process of law; nor shall private property

be taken for public use, without just compensation.

(Italics supplied).

TITLE 26 UNITED STATES CODE:

SECTION 7421. Prohibition of suits to restrain

assessment or collection

(a) Tax. — Exeept as provided in sections 6212(a)

and (¢c), 6213(a), and 7426(a) and (b) (1), no suit for

the purpose of restraining the assessment or collection

of any tax shall be maintained in any court by any

person, whether or not such person is the person

against whom such tax was assessed.

SECTION 7605. Time and place of examination

(b) Resrricrions ON EXAMINATION OF TAXPAYER.—NO

taxpayer shall he subjected to unnecessary examina-

tion or investigations, and only one inspection of a

taxpayer’s books of account shall be made for each

taxable year unless the taxpayer requests otherwise

or unless the Secretary or his delegate, after investi-

gation, notifies the taxpayer in writing that an addi-

tional inspection is necessary.

STATEMENT P

On February 11, 1974, two IRS summonses were issued

by IRS Agent David J. Feddor and served by him on Peti-

tioner’s wife, Sally, at her home. One summons related

to Feddor’s audit of Tabcor, Inc., a subchapter S Cor-

poration of which Petitioner was the sole shareholder, for

the calendar years 1971, 1972 and 1973 and sought Tabcor’s

books and records.

The other summons was aimed at Petitioner, J. Richard

Dema, and his wife for the years 1971 and 1972. This

summons, however, sought the same books and records of

4

Tabcor for its fiseal years 1971 (1970 calendar year) and

1972 (1971 calendar year). No personal records were re-

quested.

Agent Feddor issued these summonses as part of his

audit and investigation of Tabcor’s treatment of payments

to certain of its independent contractors for withholding

tax and social security purposes (although he had told

Petitioner at one point that he was only investigating the

1971 1120S corporate return). Feddor subsequently con-

tended that some of those individuals should have been

considered as employees.’

Compliance with the summonses was refused because

there had been prior IRS inspections and audits of Tabcor’s

records relating to employment tax and independent con-

tractor issue investigations, which had led to the execution

of a consent to adjustments and payments of additional!

taxes for 1969, 1970 and 1971 by Tabecor and, also, because

a grossly excessive ‘‘quick’’ employment tax assessment

for the year 1970 had been issued by Agent Feddor against

Tabeor two months prior to the service of the summonses,

which assessment was 175% in excess of the gross volume

of Tabeor for that year and was, allegedly, based on Tab-

cor’s 1971 subchapter S corporate return, although the 1970

return was in the possession of the IRS.* Also, Agent

Feddor had himself been supplied with many of the records

1The IRS has never claimed that any fraud was involved, that

any monies were actually withheld and not paid over, nor that the

money paid to the individuals was not properly reported on either

Tabcor’s tax forms or on the forms provided by the IRS for the

reporting of such payments (1099's).

? The amount of the assessment, including penalties and interest,

totalled $142,921.62 as of December 12, 1973. Tabcor’s gross volume

for that year was $88,627.00.

5

prior to issuance of the summonses, his investigation hav-

ing commenced in February or March of 1973. Harass-

ment by Feddor and the IRS because of these acts and im-

proper purposes for the issuance of the summonses were

raised a; de ses to compliance.

On May 10, 1974, as a result of theerefusal to comply

with the summonses, Agent Feddor and the United States

instituted a summons enforcement proceeding against Tab-

cor and Petitioner in the United States District Court for

the Northern District of Illinois. During the course of

those proceedings, Agent Feddor, who had spent consid-

erable time working with Tabcor’s 1971 records, issued

another excessive ‘‘quick’’ assessment against Tabcor for

1971. Also, two months prior to institution of the sum-

mons enforcement proceeding, Agent Feddor issued a

proposed 100% penalty assessment against Petitioner

which was supposedly based on the grossly excessive 1970

assessment against T'abcor.*

After many hearings which resulted in an oral finding

by the trial court that multiple inspections had in fact oe-

curred with respect to calendar 1970 and 1971 records, the

trial court quashed the summons against the Petitioner and

his wife, and, thereby, refused to grant the IRS further

access to Tabcor’s 1970 and 1971 records. The court, how-

ever, did grant Agent Feddor an opportunity for a limited

supervised inspection of Tabeor’s 1972 and 1973 records

without objection by Tabeor. On April 8, 1975, after this

3 This assessment, including penalties and interest, totalled

$161,828.26 as of January 9, 1975 as against the total gross volume

of Tabcor for fiscal 1971 of $309,601.00.

*This proposed assessment totalled $89,600.00 as of May, 1974.

A responsible person who “wilfully” fails to pay over to the IRS

moneys withheld from employees is subject to a penalty equal to the

unremitted taxes. 26 USC 6672.

6

inspection had been completed by the IRS, the trial court

dismissed the enforcement proceeding ‘‘ without prejudice’”’.

On the same day of the dismissal of the enforcement

proceeding, Agent Feddor issued a notice of deficiency

against the Petitioner and his wife for their personal tax

liability for 1971. The alleged basis of this assessment

was that Petitioner did not have a sufficient tax base in

Tabeor to take the loss incurred by the corporation in

fiscal 1971 (calendar 1970). The total tax allegedly owed

because of this insufficient basis in the Subchapter S cor-

poration was $1,800.00.

Alleging that they could readily show that they had a

sufficient basis in Tabeor to take the loss because the 1971

1120S return of Tabecor clearly revealed loans from share-

holders far in excess of loss claims and producing records

evidencing this fact, Petitioner’s accountant and attorney

attended two conferences with Agent Feddor and requested

an abatement of the deficiency. They were told by Feddor

that they were required to produce all of the corporate

records of Tabeor for 1967 through 1970—records which

had been foreclosed to the IRS by the trial court in the

summons enforcement proceeding and which were for years

barred by the statute of limitations.°®

5 As stated by counsel for Tabcor:

“IT met with the supervisor of Mr. Feddor and Mr. Feddor,

and the accountant was there, too, and we said, ‘All right.’

‘I know we have got a problem here’. ‘You have thrown the

entire burden on us.’ “We have to produce all these books and

records.’ I said, ‘Is there any kind of limit?’ ‘How long is it

going to take?’ ‘What do you need? ‘I have a huge list.’

And I said, ‘How long is this going to take?” ‘I don’t know.’

‘Is there any limitation?’ ‘No, there isn’t.’ “Would you allow

this to be done in front of the judge?’ ‘No, we wouldn't.’ I

said, ‘Well, if we gave you these books and records, how do

we know you are going to be satisfied?’ ‘You don’t.’” (Tr.,

June 20 at p. 4).

7

Believing that the personal deficiency was a ruse by

Agent Feddor to avoid the trial court’s order barring re-

inspection of Tabcor’s 1970 and 1971 records, Petitioner

requested a contempt citation against the Agent from the

trial court. Instead of doing so, the trial court reopened

the case and entered a restraining order barring the IRS

from inspecting Petitioner’s and Tabecor’s records for the

years 1972 and years prior thereto.

The Government appealed from this order, pursuant to

Title 28 United States Code, Section 1291, which resulted |

in a reversal of the trial court’s order by the Seventh Cir-

cuit in a divided opinion. (App. A).°

® Citation is to Petitione:’s Appendix herein.

REASONS FOR GRANTING THE WRIT

The issues raised by this case go to the fundamental

jurisdictional powers of Federal Courts. When these

powers are sought to be invoked by the United States to

enforce a summons issued by the Internal Revenue Service

can the IRS thereafter take shelter from the Court’s utiliza-

tion of its equitable powers against it by urging the pro-

tection of the Anti Injunction Act?

I.

THE DECISION OF THE COURT BELOW CREATES

AN UNPRECEDENTED RULE WHICH MAKES A DIS.

TRICT COURT POWERLESS TO IMPLEMENT THE

PROHIBITIONS OF 26 USC 7605 (b) AND SUCH CUR-

TAILMENT OF JUDICIAL AUTHORITY SHOULD NOT

BE PERMITTED WITHOUT EXPRESSION FROM THIS

COURT.

The decision of the Court below represents the first

known Appellate decision reviewing an order issued by a

trial court in a summons enforcement proceeding brought

by the Government restraining the IRS from further in-

spections of a taxpayer’s records. The order of the trial

court was issued pursuant to the inherent equitable au-

thority of the District Court to issue orders in aid of a

finding of multiple or unnecessary records inspections pur-

suant to Title 26 U.S.C. Section 7605(b), which had been

enacted in accordance with a legislative finding by Congress

that it was necessary to curb the investigative powers of

low-echelon revenue agents by entrusting ultimate au-

thority for the determination of abuse of power with the

judiciary. 61 Cong. Rec. 5855 (1921).

‘

The majority below has stated that the District Court

has no ancillary power to curb the continuation of this

abuse of power in a summons enforcement proceeding in-

stituted by the IRS because to do so would run afoul of

the Anti-Injunction Act. Title 26 U.S.C. 7421(a).

We submit that the majority decision has effectively re-

tracted the District Court’s authority to review revenue

agents’ summons issuing power and has made the District

Courts ‘‘rubber stamps”’’ for the IRS.

We, further, subimit that this decision is contrary to the

intent of Congress in enacting Section 7605(b) and is a

misapplication of the Anti-Injunction Act,’ which leaves

the taxpayer with no remedy, injunctive or otherwise,

against the abusive exercise of the record inspection power

of the IRS.

At the very time when this Court has provided an in-

dication that it will no longer allow the IRS to ride rough-

shod over the rights of taxpayers, the Court below has

removed one of the few congressionally enacted remedies

for curbing IRS abuses by bringing judicial relief issued

pursuant to Section 7605(b) of the Internal Revenue Code

within the shroud of the Anti-Injunction Act.

The judiciary has the power ‘‘to attach conditions to

the enforcement of an IRS summons [because of] the very

fact that the enforcement of such summons is entrusted to

7A case which research has revealed as approaching the sub-

ject matter of this Petition was only recently found, after the

cenial of the Petition for Rehearing En Banc, and, therefore, was

not argued to the Seventh Circuit. It is supportive of Petitioner’s

position with respect to the applicability of the Anti-Injunction Act,

although it involved a suit brought by the taxpayer. De Masters v.

Arend, 313 F.2d 79, 85, n. 8 (9th Cir. 1963), cert. dismissed pur-

suant to stipulation, 375 U.S. 936.

10

the judiciary.’’ U.S. v. Friedman, 532 F.2d 928, 937 (3rd

Cir., 1976). The remedy of damages or costs for multiple,

unnecessary examinations of a taxpayer’s records was not

even suggested by the majority as an alternative remedy

to the injunctive relief granted by the trial court.

In Laing v. U.S. and U.S. vy. Hall, 423 U.S. 161 (1976)

and Commissioner of Internal Revenue v. Shapiro, ....

) ae , 44 U.S.L.W. 4313 (3-8-76), this Court declared

that the Anti-Injunction Act was not inviolable.

As stated in Mr. Justice Blackmun’s dissent in Alcxander

v. ‘‘ Americans United’’ Inc., 416 U.S. 752, he is:

. disturbingly aware of the overwhelming power

of the Internal Revenue Service ... 1 write primarily,

therefore, to express what I feel is a needed word of

caution about government power where the means to

challenge that power are unfavorable and unsatis-

factory at best. Jd. at 763.

Justice Blackmun’s ‘‘word of caution’’ was adopted by

the majority in the Laing, Hall and Shapiro cases.’ As Mr.

Justice Brennan stated in his concurring opinion in Laing

& Hall:

But it cannot be gainsaid that the risk of erroneous

determinations by the Commissioner with the conse-

quent possibility of irreparable injury to a taxpayer

is very real. This suffices to bring due process re-

quirements into play. Jd. at 186.

Wholly apart from our contention that the Anti-Injune-

tion Act was inapplicable, the majority below initiated

application of the exceptions for overcoming the prohibi-

tion of the Anti-Injunction Act enunciated in Enochs v.

Williams Packing Co., 370 U.S. 1 (1952) and stated that

® See also, Rambo v. U.S., 492 F.2d 1060, 1064 (6th Cir., 1974)

and Clark v. Campbell, 501 F.2d 108 (5th Cir., 1974).

11

no proof was offered by Petitioner to substantiate applica-

tion of the exceptions. However, the majority refused to

remand to the trial court to provide Petitioner with an op-

portunity to make a showing as to the invocation of the

Enochs exceptions to application of the bar of the Anti-

Injunction Act, even after such relief was requested in

the Petition for Rehearing En Bane.

Petitioner had never attempted such a showing nor did

the trial court request that such a showing be made. This

failure to remand for further proceedings has denied Peti-

tioner his Due Process rights under the Fifth Amendment

to the United States Constitution. See Pizzarello v. U.S.,

408 F.2d 579 (2nd Cir., 1969).

This Court must recognize that there is a growing public

dissatisfaction over the entire substantive and procedural

apparatus of the Internal Revenue Service, the 1976 Tax

‘Reform’? Act notwithstanding. See, Jim Davidson,

‘*Tired of Being Pushed Around Every April 15?’’, Vol.

23 ‘‘Playboy Magazine’’ No, 4, April, 1976, at p. 82. For

the judiciary to countenance the abusive tactics of an IRS

Agent by applying the Anti-Injunction Act when it should

not be applied, could lead to an exigency where the citizenry

comes to recognize that extra-legal approaches are all that

remains as a vehicle for mediation of their difficulties.

As stated in the dissent by Chief Judge Howard T.

Markey:

The irreparable injury done the taxpayer when

harassed by his government is but a part of the injury

done a society attempting to live free. Arbitrary, ar-

rogant and capricious action by a government agent,

engaged in a vendetta and unfettered by law, does in-

justiee to us all, ineluding especially the government

itself. Such action cries out for the healing power

of judicial intervention. Appendix at p. 20.

12

Clearly, here, the trial court was of the opinion that the

bounds of propriety had been exceeded. The following are

excerpts from the hearing on the date the trial court issued

the restraining order (June 20, 1975) and are contained

in the Record on Appeal filed in the Seventh Cireuit Court

of Appeals at R. 43.

So that there is no misunderstanding about the

Court’s attitude in this case, I think the government is

entitled to pursue all the remedies they have against

taxpayers. But I have had this witness (Feddor) on

the stand. I have had this case up at least ten times.

The records have been made available to not only Mr.

Feddor but his associates. They had ample time to go

back to 1970 records long before now. Tr. at 3.

* o *

Well, they may be investigating my income tax as a

result of it. Maybe they have vendettas. From the

top of the pole to the bottom of the totem pole, who-

ever is in charge of doing that, if they persist in what

they are doing, I know what I would do. All of us

have our self respect. You as a lawyer, if your boss

wants you to do something that you know shouldn’t

be done, stand up and say it shouldn’t be done. Your

self respect is important. Some matters are matters

of principle. There are men in the higher echelon that

do not care what they order someone to do; they don’t

have the guts to do it themselves. Some men send

someone else in for cannon fodder. (Italics supplied).

Tr. at 8.

It is a sad commentary on our times that a United States

District Court Judge must feel the fear of a personal IRS

tax investigation because he has come to the aid of a tax-

payer being harassed by the IRS. Is IRS ‘‘efficiency’’ al-

ways to be favored over taxpayer’s rights?

13

CONCLUSION

For the foregoing reasons, this Petition for Certiorari

should be granted.

Respectfully submitted,

SHeLpon R. WaxMan

30 West Washington Street

Chicago, Illinois 60602

Counsel for Petitioner

Of Counsel:

Harvey M. Sitets

7 South Dearborn Street

Chicago, Illinois 60603

APPENDIX

APPENDIX A

United States Court of Appeals

For the Seventh Cireuit

No. 75-1894

UNITED STATES and DAVID J. FEDDOR, Revenue

Agent, Internal Revenue Service,

Petitioner-A ppellant,

v.

J. RICHARD DEMA,

Respondent-A ppellee.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 74 C 1283—Abraham L. Marovitz, Judge.

Argued April 21, 1976—Decided October 7, 1976*

Before Farrcuiip, Chief Judge, Markey, Judge,** and

Grant, Senior District Judge.***

* This appeal was originally decided by unreported order on Octo-

ber 7, 1976. See Circuit Rule 35. The panel has subsequently

decided to issue the decision as an opinion.

** Chief Judge Howard T. Markey of the United States Court

of Customs and Patent Appeals is sitting by designation.

*** Senior District Judge Robert A. Grant of the United States

District Court for the Northern District of Indiana is sitting by des-

ignation.

App. 2

Grant, Senior District Judge. This is an appeal from

an order of the district court permanently restraining

the Internal Revenue Service from issuing any subpoenas

or requesting any books or records of J. Richard Dema

(the appellee herein), Sally A. Dema, his wife, or Tabcor,

Inc., a subchapter S corporation of which appellee was

president, for the years 1972 and prior thereto. The

relevant facts of the case are as follows: The govern-

ment filed a petition pursuant to §§ 7402(b) and 7604(a)

of the Internal Revenue Code of 1954, seeking to enforce

IRS summonses. The summonses, issued by Revenue

Agent David J. Feddor, sought information for the purpose

of ascertaining the correct tax liability of appellee and his

wife for the years 1971 and 1972 and of Tabcor, Inc., for

the years 1971, 1972, and 1973. Appellee refused to comply

with the summonses and asked that they be quashed. After

several hearings, the district court ordered appellee to

produce certain corporate records, but quashed the sum-

mons for his personal records upon being advised by the

government that such information was not required. The

district court, on being advised that the corporate records

had been produced as ordered, dismissed the action with-

out prejudice. On the same day that the action was dis-

missed, however, a notice of deficiency with respect to

appellee’s 1971 income tax liability was mailed. Appellee

thereupon filed a motion for an order from the court re-

quiring Agent Feddor to show cause why he should not be

held in contempt of court for violating the court’s previous

order quashing thes summons on personal records, and

for an order directing withdrawal of the netice of deficien-

cy. The government responded, alleging that appellee

was seeking injunctive relief which was proscribed by the

provisions of the Internal Revenue Code. A hearing on

the matter was held on 20 June 1975. After stating that

the Service’s action ‘‘borders on harassment,’’ the district

App. 3

court entered an order permanently restraining the IRS

from issuing any subpoenas or requesting any books or

records of appellee, his wife, and Tabcor for the years 1972

and prior thereto. ‘The court also suppressed any exist-

ing subpoenas or requests for those years. Thereupon, the

action was dismnissed with prejudice. This appeal followed.

Appellant’s primary contention in this appeal is that

§ 7421(a) of the Internal Revenue Code of 1954 prohibits

all suits seeking to restrain the assessment or collection

of any tax. This prohibition, it is argued, reaches not

only those actions which seek to restrain the assessment

or collection acts themselves, but extends as well to all

suits which seek to restrain any and all acts necessary or

incident to the assessment or collection of taxes. There-

fore, appellant maintains that the order of the district

court, which precludes the IRS from carrying out investi-

gations leading to the assessment and collection of taxes,

contravenes the clear mandate of § 7421(a). In this re-

gard, appellant claims that appellee presented no evidence,

and thus did not establish the two conditions—(1) that

there are no circumstances under which the government

could ultimately prevail, and (2) that equity jurisdiction

exists—which must be shown if the bar of § 7421(a) is to

be avoided. Enochs vy. Williams Packing Co., 370 US.

1 (1962). For these reasons, appellant urges this Court

to remand this case to the district court with directions

to dissolve the restraining order and dismiss the action.

In response, appellee argues that in an IRS enforcement

proceeding where the trial court has determined that there

has been harassment, § 7421(a) is not applicable to the

entry of an order prohibiting the IRS from requesting

records that it has already, in fact, seen. In this respect,

appellee says that the court below acted well within its

inherent equity powers in issuing the relief granted. Even

App. 4

if this Court should determine that § 7421(a) is found to

be applicable to the case at bar, however, appellee asserts

that he has met the requirements for injunctive relief by

proving to the trial court’s satisfaction that the governmen:

could not ultimately prevail and additionally that he wouid

suffer irreparable harm unless he received equitable relief

Finally, appellee contends that the restraining order en

tered by the district court is specific in its terms, is fuils

supported by the evidence; and, therefore, the govern-

ment’s suggestion that the court’s order of 20 June 1975

is invalid for lack of findings therein is without merit. In

support of this contention, appellee submits that, because

of the trial judge’s extensive remarks which outlined his

reasons for issuing the restraining order, there is no need

for this Court to conjecture as to what were the reasons

for the entry of the order. For the foregoing reasons,

appellee requests that the lower court’s order of 20 June

1975 be affirmed.

The sole issue presented in this appeal is whether the

district court lacked the authority to render injunctive

relief to appellee in view of the prohibition contained in

§ 7421(a) of the Internal Revenue Code of 1954. For the

reasons which follow, we find that the district court was

precluded from issuing the restraining order herein by

§ 7421. Accordingly, the order of the district court is

reversed, and the cause is remanded with directions to

dissolve the restraining order and dismiss the action.

Section 7421(a) of the Internal Revenue Code of 1954

states in clear and precise language that ‘*. .. [N]Jo suit

for the purpose of restraining the assessment or collection

of any tax shall be maintained in any court by any per-

son....’’ The policy or purpose behind this provision,

of course, is ‘‘to [protect] the government’s need to assess

and collect taxes as expeditiously as possible with a

+ omnes wae

App. 5

minimum of pre-enforcement judicial interference. .. .’’

Bob Jones University v. Simon, 416 U.S. 725, 736 (1974).

It is also clear that this ban against judicial interference

is applicable not only to the assessment or collection itself,

but is equally applicable to activities which are intended

to or may culminate in the assessment or collection of

taxes. Koin v. Coyle, 402 F.2d 468 (7th Cir. 1968). The

restraint placed on the courts in this regard, however, is

not absolute. John M. Hirst & Co. v. Gentsch, 133 F.2d 247,

248 (6th Cir. 1943). Extraordinary or exceptional circum-

stances may exist, for example, which are of sufficient im-

portance to warrant court interference. Singleton v.

Mathis, 284 F.2d 616, 618 (8th Cir. 1960). Therefore, under

certain circumstances, a taxpayer may maintain a suit to

enjoin the collection of federa! taaes. Martin v. Andrews,

238 F.2d 552, 554 (9th Cir. 1956). In order that such a

suit may be maintained, though, the taxpayer has the

burden of proving: (1) that the government could not

ultimately prevail under any circumstances; and (2) that

equity jurisdiction otherwise exists. Enochs, supra, 370

U.S. at 7; Pizzarello v. United States, 408 F.2d 579, 582

(2d Cir. 1969).

In the instant case, we are not convinced, based on a

careful review of the record before us, that appellee sus-

tained his burden of proving the exceptional circumstances

necessary to justify the trial court’s intervention into the

assessment and collection process. First of all, the record

is barren of any evidence which would support the con-

clusion that the government could not ultimately prevail

in the assessment or collection of a deficiency in taxes

for the years of 1972 and prior thereto. The fact of the

matter is that appellant sought to inspect books and rec-

ords for the sole purpose of ascertaining the correct tax

liability for the years in question. The tax deficiency had

App. 6

already been determined; and this Court is of the opinion

that it was improper for the court below to thwart the

Service’s attempt to obtain material pertinent to the as-

sessment. We conclude, therefore, that the first require-

ment of Enochs, supra, has not been satisfied.

In this regard, the Court has noted with interest ap-

pellee’s argument that there is a significant distinguish-

ing feature between the instant case and those cited by

appellant—that feature being the fact that the order ap-

pealed from herein resulted from the actions of the IRS

itself and not from any suit brought by appellee to enjoin

those actions. We fully appreciate appellee’s contention

in this respect. Nevertheless, under the circumstances of

the present case, we decline to be persuaded thereby. Al-

though we concede, as we must, that appellee did not ini-

tiate proceedings against appellant in an attempt to en-

join the assessment or collection of taxes, it must be ad-

mitted that for all practical purposes appellee sought the

identical result when he filed his motion for an order di-

recting withdrawal of the notice of deficiency. The net

result of appellee’s motion, and the obvious intent thereof,

was to restrain the IRS from pursuing any activities re-

lating to the assessment and collection of taxes. Accord.

ingly, it could reasonably be argued that appellee herein

instituted his own sub-action against appellant for injune-

tive relief, the potential result of which was in contraven-

tion of the spirit and purpose of § 7421(a). In such cir-

cumstances, as we have stated above, we hold that it was

improper for the district court to intervene and restrain

appellant from pursuing its assessment procedures.

Second, this Court is not impressed with appellee's

argument that he would suffer irreparable harm if equi-

table relief were not granted. It is clear in this case, as

App. 7

it is in all cases where the IRS asserts a tax claim, that

appellee was not without an adequate remedy at law. His

remedies were three-fold. First, he could have paid the

tax and then proceeded with a suit for refund. Enochs,

supra, 370 U.S. at 7. Second, he could have elected to seek

redetermination by the Tax Court. Bob Jones, supra, 416

U.S. at 746. Additionally, appellee could have chosen to

refuse to comply with the request for inspection, which

would have forced the IRS to seek a judicial determina-

tion in an enforcement proceeding. Dickerson v. Conrad,

274 F.Supp. 881 (D. Alaska 1967). We conclude, there-

fore, that the court below lacked the necessary equity

jurisdiction to issue injunctive relief to appellee.

Finally, the Court feels constrained to address itself to

the lower court’s statement concerning its belief that the

investigation of appellee ‘‘borders on harassment.’’ We

are aware of, and subscribe to, the proposition that the

IRS should not be allowed to abuse its position of power

to harass a taxpayer by means of repeated demands for

inspection. The court below was convinced that this oc-

curred in the present case, and we support the trial

judge’s desire to protect the appellee from such an abuse.

However, we cannot conclude from the record that a con-

scious program of harassment was aimed at appellee. In

any event, our review of the record on this subject does

not allow us to conclude that any harassment of appellee

—if, in fact, there was harassment—amounted to an ex-

ceptional or extraordinary circumstance sufficient to avoid

the strictures of § 7421(a).

For the foregoing reasons, therefore, the 20 June 1975

order of the district court is Reversep, and the cause is

Remanvep with directions to dissolve the restraining

order and dismiss the action.

App. 8

Markey, Chief Judge, United States Court Of Customs

And Patent Appeals, dissenting.

With unmitigated deference, I am unable to agree that

the District Court lacked jurisdiction to issue this re-

straining order, and I am convineed that the record amply

supports a finding of taxpayer harassment in this case.

I also feel that the case presents novel legal issues on the

interaction of See. 7421(a) and See. 7605(b) of the Inter-

nal Revenue Code which have not been directly addressed

by any federal appellate court. The effect of court-ap-

proved taxpayer harassment upon our ‘‘voluntary’’ tax

system further impels these few remarks.

Background

Some knowledge of the background of the case is neces-

sary to fully appreciate the District Court’s action.

Tabeor, Ine. is a corporation which coordinates ticket

marketing, sales, and distribution for children’s shows

produced by a companion corporation. The shows are

sponsored by various charitable organizations or schools

in the Chicago area such as the Knights of Columbus,

Elks, Amvets, B’nai B’rith, ete. A sponsoring organiza-

tion may hire Tabcor as middleman to coordinate sale of

tickets to a particular show, or it may handle the details

itself. In either case ticket brokers, delivery men and

other personnel are used for actual sales of the tickets

with Tabecor acting as a clearing house for those shows

in which it is involved.

The tax dispute which led to the issuance of the sum-

monses in this case centers around the employment status,

for withholding purposes, of brokers and delivery men.

Tabeor had been the subject of an earlier Internal Reve-

nue Service (IRS) investigation for certain quarters of

App. 9

the years 1970 and 1971 which resulted in adjustments of

$4,843.27 being paid. After those payments the investi-

gation was closed for the quarters in question, while two

other quarters were referred by the revenue officer to the

audit division.

An apparently unrelated examination was initiated in

March, 1973, to investigate the employment status of cer-

tain persons paid by Tabcor in 1971 and in January, 1972.

Agent I‘eddor examined the books and records of Tabcor

on at least two occasions and, according to his own work

records, spent 93 hours on the case. In October, 1973, the

agent asked appellee Dema, president of Tabcor, to voiun-

tarily extend the statute of limitations for the year 1970

which would otherwise run out on April 15, 1974. Dema

objected to the extension and to a subsequent notice of

reexamination received for three quarters of 1970 and two

quarters of 1971, because he had already paid adjustments

for three of those five quarters and the earlier investiga-

tion had been closed for those periods. In December, 1973,

Dema received Statements of Tax Due for all four quar-

ters of 1970 aggregating over $140,000. Tabcor’s gross

receipts for 1970 were less than $100,000. Agent Feddor

admitted to the District Court at a hearing that he had

precipitated these disproportionate assessments because

the limitation period was running out for 1970 and that

he could not get copies of Tabcor’s 1970 return from the

IRS regional headquarters in time to make a proper de-

termination because of the slowness of the response of

that IRS office. He therefore used the Tabcor 1971 return

as a basis for predicting the 1970 tax and told Dema’s

attorney he would adjust the figures if IRS could see the

Tabeor books and records for 1970 again. Agent Feddor

also stated to the court that he knew this procedure was

unethical but that he felt he had no alternative.

App. 10

In February, 1974, the two summonses at issue were

served, calling for production of various books and ree-

ords of Tabcor for 1971, 1972 and 1973. Dema again ob-

jected, this time raising the provisions of Section 7605(b)

as a defense to multiple inspections, because the notice

of reexamination from the District Director had specified

only two quarters of 1971 and none of 1972 or 1973. Also,

the overall action of IRS was attacked as an arbitrary and

capricious attempt to make Tabcor carry the burden of

paying income taxes which IRS should collect from the

individuals involved, whom Tabcor considered to be inde-

pendent contractors. By May, 1974 Tabcor received two

proposed assessments of 100% penalty for the four quar-

ters of 1970 totalling $89,600. (This followed from its

failure to pay the $140,000, previously assessed.) On May

10, 1974, the present action was filed by the government

asking the court to enforce the two summonses calling for

production of the Tabcor records for 1971-73.

Dissenting Opinion

I.

This proceeding was instituted under the provisions of

26 USC 7402(a) and 7604(a), which give jurisdiction to

the District Courts ‘‘to render such judgments and de-

crees as may be necessary or appropriate for the enforce-

ment of the internal revenue laws’’ at the ‘‘instance of

the United States.’’ Section 7604(a) specifically provides

for the use of court process to ‘‘compel * * * production

of books, papers, records, or other data.’’ A proceeding

to enforce a summons is an adversary proceeding at which

the taxpayer ‘‘may challenge the summons on any appro-

priate ground.’’ Reisman v. Caplin, 375 U.S. 440, 449

(1964). The primary challenge raised by appellee in this

case is based on 26 USC 7605(b):

App. 11

Restrictions on examination of taxpayer—No tax-

payer shall be subjected to unnecessary examination

or investigations, and only one inspection of a tax-

payer’s books of account shall be made for each tax-

able year unless the taxpayer requests otherwise or

unless the Secretary or his delegate, after investiga-

tion, notifies the taxpayer in writing that an addi-

tional inspection is necessary. (Emphasis supplied.)

The legislative history of this section which was first

enacted as Sec. 1309 of the 1921 Revenue Act clearly

shows that its purpose was to curb the investigative

powers of low-echelon revenue agents from making un-

necessary inspections after a thorough examination was

supposed to have been completed. 61 Cong. Ree. 5855

(1921). The enforcement of See. 7605(b), like the other

sections of the revenue statutes, is left to the judiciary

under See. 7402(a). Cf. United States v. Church of Scien-

tology of California, 520 F.2d 818 (CA 9, 1975). There-

fore, the decision as to what constitutes an ‘‘unnecessary”’

inspection under the statute is one to be made by the Dis-

trict Court.

The extensive record in this case was developed in more

than a year of judicial proceedings which saw the attor-

neys for the parties before a judge fifteen times. Six of

these hearings are transcribed fully in the record. The

District Court showed concern throughout the action with

doing justice to all parties and as a result allowed Dema

to conduct limited discovery of IRS documents and per-

sonnel in the development of evidence of harassment and

lack of necessity for further inspections."

1 Such discovery in the context of IRS summons enforcement pro-

ceedings has only recently been allowed. Sce e.g. United States v.

Church of Scientology of California, supra.

App. 12

The Supreme Court has set forth standards which the

Commissione: must mect to obtain enforcement of his

summons:

He must show that the investigation will be conducted

pursuant to a legitimate purpose, that the inquiry

may be relevant to the purpose, that the information

sought is not already within the Commissioner's pos-

session, and that the administrative steps required

by the Code have been followed—in particular, that

the ‘‘Secretary or his delegate,’’ after investigation,

has determined the further examination to be neces-

sary and has notifiedthe taxpayer in writing to that

effect. This does not make meaningless the adversary

hearing to which the taxpayer is entitled before en-

forcement is ordered. United States v. Powell, 379

U.S. 48, 57-58 (1964). (Emphasis supplied and foot-

note omitted.)

In addition, the same opinion discussed the cireum-

stances under which a court could inquire into the under-

lying reasons for the examination.

It is the court’s process which is invoked to enforce

the administrative summons and a court may not per-

mit its process to be abused. Such an abuse would

take place if the summons had been issued for an im-

proper purpose, such as to harass the taxpayer or to

put pressure on him to settle a collateral dispute, or

for any other purpose reflecting on the good faith of

the particular investigation. The burden of showing

an abuse of the court’s process is on the taxpayer,

and it is not met by a mere showing, as was made in

this case, that the statute of limitations for ordinary

deficiencies has run or that the records in question

have already been once examined. 379 U.S. at 58. (Em-

phasis supplied.)

App. 13

Under these guidelines, a District Court could deny en-

forcement of a summons if: (1) the commissioner failed

to establish one of the necessary elements above, or (2)

if the court determined that enforcement would otherwise

be an abuse of its process.

Based on the documents produced by IRS, the deposi-

tion of Revenue Officer Dillon, and the testimony in court

of Dema and Revenue Agent Feddor, the court concluded

that additional inspections of Tabecor, Inc.’s records for

1971, as sought in the IRS summonses, were unnecessary.

That ceneclusion is supported by the evidence.

The court ordered Dema to produce records for 1972

and 1973, presumably because the evidence was insufficient

to show previous inspections for those years. The court

also attempted to keep further IRS intrusions to a mini-

mum by obtaining an estimate from Agent Feddor of how

long he needed access to the records to complete work on

the case. Agent Feddor was allowed ten days by the court

(twice Feddor’s estimate) to inspect the records and re-

turn them to Dema. Representations of counsel for the

government show acquiescence in the limitations. After

the records had been produced and inspected in accor-

dance with the court’s terms, the action was dismissed

without prejudice.

However, the IRS apparently was not satisfied with

its examinations and, according to Dema, asked to inspect

the Tabeor books further, and also to examine the per-

sonal records of Mr. and Mrs. Dema.? Dema was also

2Although there is some confusion among the parties and the

court as to whether any personal records had been previously sum-

moned, it is clear from the text of the summonses at issue that they

were directed only to the production of Tabcor, Inc. records.

App. 14

notified of a deficiency in his personal income tax for

the year 1970 on the same day the enforcement proceed-

ing was dismissed.* Dema considered these actions to be

inconsistent with the court’s earlier ‘‘order’’ and subse-

quently moved for an order to show cause and for a con-

tempt judgment against the several IRS employees in-

volved. The government filed a motion to strike raising

procedural grounds, and Section 7421 of the LR.C. (26

USC 7421) (‘‘th> Anti-injunction Act’’) as defenses.

Dema’s allegations in his motion, regarding IRS’ re-

peated requests for more inspections of his records, were

neither admitted nor denied by thé government. The gov-

ernment simply argued that production of his records

was not the only remedy available to Dema in seeking to

have the deficiency notice removed.

At the hearing on the motion,‘ when the government

again argued that Sec. 7421 precludes any injunction

against the revenue-collecting apparatus of the govern-

ment, the court stated that it would not issue an injune-

tion order, but ‘‘a restraining order preventing the gov-

ernment from seeking any additional books in this case.’’

Later in the hearing, counsel for the government request-

ed clarification of the order and its possible effect on the

collection machinery for this and other deficiencies of

Tabcor. The court stated ‘‘[I] am saying * * * they can

3 The statute of limitations for 1970 would have run out seven

days later.

* The court apparently treated Dema’s motion as one under Fed.

R. Civ. P. 6O(b), which it could properly do under 60(b)(3) or

60(b) (6).

ee eee

App. 15

do whatever they want to do * * *. All I am saying is they

are not going to get any more books from these people.”’

It is clear that the court was in no way attempting to en-

join the collection process. It was simply preventing the

further book-inspecting harassment of this taxpayer.®

Counsel for Dema pointed out that certain books and ree-

ords would be produced voluntarily by Dema in subse-

quent administrative proceedings concerning the allegedly

outstanding deficiencies. In its ‘‘motion to strike,’’ the

government had admitted that Dema may contest the defi-

ciency assessments without producing his records, and

that production is no guarantee of the assessment being

altered. Nevertheless, the government argued that an in-

junction would violate Section 7421(a) by somehow re-

straining the assessment or collection of Dema’s taxes

and has relied on that argument before us.

II.

Section 7421(a) of the Internal Revenue Code, the so-

called ‘‘anti-injunetion’’ act, prohibits a court from enter-

taining any suit for the purpose of restraining the assess-

ment or collection of any tax. The government contends

that this proscription also extends to suits which seek to

*At the hearing on Dema’s final motion the District Court stated

unequivocally :

I don’t know anything about this man [Agent Feddor] but

I have heard him testify and I have watched what the opera-

tion is. I think it has become a personal vendetta for anybody

to make the kind of evaluation that he did out of the clear

blue sky and put the burden on the taxpayer to come in and

try to offset it; in my judgment it is harassment. (Bracketed

matter and emphasis supplied. )

App. 16

restrain any and all acts necessary or incident to assess-

ment or collection, i.e., the production of financial records.*

Recent decisions of this and other courts have broadly

interpreted Sec. 7421(a) to remove jurisdiction in such

collateral areas as suits to prevent revocation of tax-

exempt status, Bob Jones University v. Simon, 416 U.S.

725 (1974); Commissioner v. Americans United, Inc., 416

U.S. 752 (1974); suits to prevent the Director of Internal

Revenue from using illegally seized evidence to compute

tax assessments, Koin v. Coyle, 402 F.2d 468 (CA 7 1968);

Zamaroni Vv. Philpott, 346 F.2d 365 (CA 7) cert. denied

382 U.S. 903 (1965) and suits to prevent local police from

supplying information to IRS on narcotics peddlers, Lewis

v. Sandler, 498 F.2d 395 (CA 4 1974). None of these cases,

however, has faced the question of the interaction between

Sec. 7421(a) and Sec. 7605(b) in a situation where evi-

dence of IRS harassment is presented by the taxpayer.

Neither was that precise issue addressed in Enochs v.

Williams Packing Co., 370 U.S. 1 (1962), where the Su-

preme Court fashioned the narrow judicial exception to

Sec. 7421(a) relied on by the majority. Mr. Justice Black-

® While the proposition may be plausible when the records are

needed to make an assessment or colJection, restraining production

would seem to have no effect when assessments have already been

made based on previous inspections, or other methods of prediction,

or when all records in the period covered by the injunction have

already been inspected. In this case IRS had already inspected

Tabcor records for the years 1970-73 at least once. The only rec-

ords covered by the order which may not have been inspected were

the Demas’ personal records. A notice of deficiency against the

Demas personally for the year 1970 had already been issued. So at

most, the order might be construed to affect assessment or collection

of the Demas’ personal tax for 1971 and 1972. Years prior to 1970

were outside the statute of limitations, absent fraud or other special

circumstances.

App. 17

mun’s dissent in Commissioner v. Americans United,

supra, sets forth the most logical procedure for analysis

of this novel question:

In considering § 7421(a), a two-step analysis is

necessary: (1) When does the statute apply? (2)

When it is applicable, under what circumstances is

an exception permitted? ...

The threshold question, obviously, is whether the

present litigation is a ‘‘suit for the purpose of re-

straining’’ any tax.

416 U.S. at 767.

Contrary to the government’s contention and the ma-

jority’s opinion, this is not ‘‘a suit for the purpose of

restraining’’ collection of any tax. A summons enforce-

ment proceeding is the proper forum for a taxpayer who

believes himself to be the subject of ‘‘unnecessary inspec-

tions’? to invoke the protections of Section 7605(b).

Donaldson v. U.S., 400 U.S. 517 (1971); In re Peter, 322

F. Supp. 270 (E.D. Ky. 1970); Dickerson v. Conrad, 274

IF’. Supp. 881 (D. Alaska 1967). A finding by the court of

lack of necessity for inspections of records under Sce.

7605(b) should carry with it the conclusion that such in-

spections were not ‘‘necessary or incident to assessment

or collection’’ for purposes of Section 7421(a). This is

true whether the basis for the finding is harassment, im-

proper purpose or any of the other grounds enumerated

above. An injunction which issues against IRS as a re-

sult of a finding that further inspections are ‘‘unneces-

sary’? may or may not restrain the collection process (see

footnote 5, supra). But the purpose of Sec. 7605(b)—to

limit unessential IRS inspections—would be meaningless

if truly ‘‘unnecessary’’ inspections could never be re-

strained. Therefore, the possibility of an ancillary re-

App. 18

straint on the collection process, while an important con-

sideration in the court’s fashioning of an appropriate

remedy, should not automatically foreclose the use of in-

junctive relief in an appropriate case. Since, in my view,

the anti-injunction statute is inapplicable to summons en-

forcement proceedings, the exception requirements of

Enochs v. Williams Packing Co., supra, do not come into

play.

The government’s concern as to the possible effect of

the injunction on discovery in subsequent litigation over

the liabilities for years up to and including 1972 is un.

founded. Any lawful discovery in a judicial proceeding

would be under authority of a court, and would not vio-

late a properly fashioned injunction.

III.

A judicial finding of IRS harassment should preclude

further conduct of any kind, including service of a new

summons, which would place unnecessary burdens on the

taxpayer. In the situation present in this case, a restrain-

ing order against IRS would seem wholly appropriate,

even if res judicata would bar a subsequent IRS action

on the same operative facts. The taxpayer, having once

provec his case, should not be subjected to the further

harassment of having to defend the same issues again.

I fully recognize that the Commissioner’s burden to

obtain enforcement of a summons is very slight and the

taxpayer’s burden in obtaining a denial of enforcement

or injunctive relief is extremely heavy. Nevertheless, I

believe judicial intervention is proper, nay compelled, when

a taxpayer does meet that heavy burden. There would be

no need for Sec. 7605(b)—and no need for the power of

the District Court—if such were not the case.

App. 19

Leaving a taxpayer to his remedies in the Tax Court

or Court of Claims on a possibly unrelated tax dispute

would offer little or no relief from proven IRS harass-

ment or improper IRS purpose related to inspections of

his records. Likewise, seeking a judicial determination

in a new enforcement proceeding would be an inadequate

remedy for harassment when ‘‘unnecessary’’ multiple in-

spections of records are the very basis of that harass-

ment.’ Even if the taxpayer should prevail in a collateral

tax claim, he could not be compensated for the intrusions

resulting from ‘‘unnecessary’’ IRS inspections.

The irreparable injury done the taxpayer when harassed

by his government is but a part of the injury done a so-

ciety attempting to live free. Arbitrary, arrogant and

capricious action by a government agent, engaged in a

vendetta and unfettered by law, does injustice to us all,

including especially the government itself. Such action

cries out for the healing power of judicial intervention.

I conclude that equitable relief in the form of an in-

junction was fully appropriate in this case.

IV.

The record contains adequate evidence upon which the

court below found harassment on the part of IRS. Agent

Feddor’s unethical action in precipitating tax assessments

for 1970 as well as the IRS’ apparent disregard of the

court’s clear instructions to limit the further unnecessary

intrusion on Dema’s business, would appear sufficient of

themselves. The court may have logically questioned the

7 Such a proceeding would offer a truly hollow remedy if the

court were precluded from enjoining the harassment by Sec. 7421

(a), as the majority suggests.

App. 20

propriety of the personal deficiency notice served the very

day on which it first dismissed the action, in view of the

earlier, admittedly unethical practices used by Agent

Feddor to avoid the statute of limitations. Absent a clear

delineation of the error requiring reversal in the ma-

jority opinion, and I find none, I cannot join my colleagues.

Being convineed that no such error is shown by the record,

I would affirm the order of the District Court in all

respects.

A true Copy:

Teste:

SEE EERE EERE EERE EEE EEE EEE REE EEE EEE

Clerk of the United States Court of

Appeals for the Seventh Circuit

.

i ee ee

App. 21

APPENDIX B

In the

Gnited States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

November 1, 1976.

Before

Hon. Thomas E. Fairchild, Chief Judge

Hon. Howard T. Markey, Chief Judge*

Hon. Robert A. Grant, Sr., District Judge

UNITED STATES OF AMERICA,

Petitioner-Appellant,

No. 75-1894 vs.

J. RICHARD DEMA,

Respondent-Appellee.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 74-C-1283

On consideration of the petition for rehearing and sug-

gestion that it be reheard en banc filed in the above-en-

titled cause, no judge in active service having requested

a vote thereon, nor any judge having voted to grant the

suggestion, and all of the members of the panel having

voted to deny a rehearing,

It Is Ordered that the petition for a rehearing in the

above-entitled cause be, and the same is hereby, Denied.

* The Honorable Howard T. Markey, Chief Judge, United States

Court of Customs and Patent Appeals is sitting by design »tion.