                                                                               Digitally signed by
                                                                               Reporter of
                                                                               Decisions
                                                                               Reason: I attest to
                            Illinois Official Reports                          the accuracy and
                                                                               integrity of this
                                                                               document
                                    Appellate Court                            Date: 2019.07.16
                                                                               08:58:05 -05'00'




           Chak Fai Hau v. Department of Revenue, 2019 IL App (1st) 172588



Appellate Court        CHAK FAI HAU, d/b/a Joye Chop Suey, Plaintiff-Appellant, v. THE
Caption                DEPARTMENT OF REVENUE and CONSTANCE BEARD, in Her
                       Official Capacity as Director of Revenue, Defendants-Appellees.



District & No.         First District, Third Division
                       Docket No. 1-17-2588



Filed                  February 27, 2019



Decision Under         Appeal from the Circuit Court of Cook County, No. 15-CH-10662; the
Review                 Hon. Daniel J. Kubasiak, Judge, presiding.



Judgment               Affirmed.


Counsel on             William P. Drew III, of Chicago, for appellant.
Appeal
                       Lisa Madigan, Attorney General, of Chicago (David L. Franklin,
                       Solicitor General, and Laura Wunder, Assistant Attorney General, of
                       counsel), for appellees.



Panel                  JUSTICE COBBS delivered the judgment of the court, with opinion.
                       Presiding Justice Fitzgerald Smith and Justice Ellis concurred in the
                       judgment and opinion.
                                                 OPINION

¶1       Plaintiff-taxpayer, Chak Fai Hau, doing business as Joye Chop Suey, appeals from the
     circuit court’s judgment affirming in part the Department of Revenue’s (Department) tax
     assessment for the period from January 1, 2008, through December 31, 2010. For the reasons
     that follow, we affirm.

¶2                                       I. BACKGROUND
¶3       Hau is the sole proprietor of Joye Chop Suey, a carryout-only Chinese restaurant located
     at 4829 West Chicago Avenue in Chicago, Illinois. The Department assigned Denise Berry to
     audit Hau’s business taxes for the period from January 1, 2008, through December 31, 2010.
     The Department found that Hau fraudulently underreported his total sales during this period
     and issued corrected tax returns requesting Hau pay $206,455 to cover tax deficiencies under
     the Retailers’ Occupation Tax Act (Act) (35 ILCS 120/1 et seq. (West 2014)), penalties for
     fraud and late payment, and accumulated interest. On June 13, 2012, the Department issued
     two Notices of Tax Liability (NTLs) to Hau, covering the tax periods from January 1, 2008,
     through June 30, 2009, and from July 1, 2009, through December 31, 2010, detailing the
     breakdown of the corrected tax assessment.1 Per the instructions on the NTLs, Hau filed a
     protest on July 16, 2012, and requested an administrative hearing. The evidentiary hearing
     before an administrative law judge (ALJ) took place on December 11, 2013.

¶4                                   A. The Evidentiary Hearing
¶5       The Department limited its case-in-chief to submitting records, certified by the
     Department’s director, into evidence. These records consisted of a completed form titled
     “Audit Correction and/or Determination of Tax Due” and copies of the NTLs issued to Hau.
     The ALJ found that such certified documents were prima facie correct and overruled Hau’s
     counsel’s hearsay objections. The ALJ also asked counsel if he understood that the admitted
     documents established the Department’s prima facie case. Counsel responded that he
     understood but nevertheless argued that a prima facie case was not made because the exhibits
     failed to establish whether the Department employed minimum standards of reasonableness
     to determine Hau’s tax liability. Counsel further complained that the auditor was not present
     to testify. The Department responded once again that the law supported finding the proffered
     exhibits as prima facie correct irrespective of anything else. The ALJ agreed and counsel
     commented, “We’ll see, yeah. I’m—Sure.”
¶6       Hau testified, with the help of a Chinese interpreter, that he was 73 years old at the time
     of the hearing. He opened the restaurant in 2001 and operated it with the help of his wife.
     From the restaurant’s opening through early 2012, Hau retained Maria Tai, an accountant
     from First Quality Financial Group, to file his taxes. During the audit period, Hau had two
     part-time employees who assisted with food preparation and other small tasks. His wife

         1
           For January 1, 2008, through June 30, 2009, Hau was assessed $51,995 due in tax; $20,798 for a
     late payment penalty; $51,995 for a fraud penalty; and $11,650.06 due in interest, for a total assessment
     of $136,438.06. From July 1, 2009, through December 31, 2010, Hau was assessed $48,007 due in tax,
     $9658 for a late payment penalty, $24,003 for a fraud penalty, and $2194.15 due in interest, for a total
     assessment of $83,862.15.

                                                     -2-
       worked the front of the store taking orders and “handl[ing] purchase transactions” while Hau
       managed everything else, including all the cooking.
¶7         Hau prepared his sales tax returns by calculating total daily sales and reporting those
       figures along with his expenses to Tai on a monthly basis. He did not provide Tai with any of
       the physical sales receipts. Hau also initially testified that he only accepted cash payments
       during the audit period because he did not have the machine to read credit cards, however he
       changed his statement and acknowledged that there were a small percentage of credit
       transactions during the audit period. He later testified that the register machine had been
       stolen at least twice, although he only reported the theft once, and it was unclear during
       which periods of time he did not have a register.
¶8         Hau submitted into evidence copies of his tax returns for 2008, 2009, and 2010. The
       copies were signed by a preparer from First Quality Financial Group but did not bear Hau’s
       signature. Hau commented, unprompted, that he did not understand the tax forms and just
       signed what his accountant had prepared. When asked specifically about the Schedule C
       figures, Hau responded, “To be honest, I never see this. I never see that because I have no
       knowledge how to calculate this number.” Hau further testified that although he reported the
       information to Tai, he had forgotten the amounts due to his old age. The Department objected
       to the admission of the tax returns because Hau could not authenticate the documents. The
       ALJ admitted the evidence over the Department’s objection.
¶9         Hau also submitted a copy of the restaurant’s menu representing the prices charged
       during the audit period. The most expensive item on the menu cost $16.45, the cheapest cost
       $0.60, and the majority of items cost $3 to $8. He testified that he used four sizes of
       containers, ranging from 8 to 38 ounces, to package food. The extra-large 38-ounce container
       was sparingly used for items like egg foo young. Rice would be packed for free, in a separate
       small or large container, with each purchase of a small or large entree. Some appetizers, such
       as egg rolls, were not packaged in a container at all and were placed in a small white bag
       instead. Hau also gave rough estimates about the percentage each type of item accounted for
       from his total sales, with fried rice at 50%, seafood entrees at 30%, and other meat entrees at
       20%. Hau estimated his average sales revenue to be $300 per day for Monday through
       Thursday, around $600 to $700 on Fridays and Saturdays, and that his profit margin for sales
       averaged 25%. The restaurant was closed on Sundays, holidays, and on slow nights when
       there was no business.
¶ 10       Hau testified about his expenses and stated that he would buy containers whenever they
       were on sale and place them into storage. He could not estimate how often he would deplete
       and restock the containers, which came in packs of 500. Hau also estimated that he would
       lose money on 10% of phone orders after the customers failed to pick up and pay for their
       food.
¶ 11       Hau was questioned about a previous hearing he had against the Department regarding a
       sales tax issue. It was elicited that in relation to an audit for the period of January 1, 2005,
       through December 31, 2007, Hau and the Department reached an agreement that he would
       reduce the percentage of markup on sales. Hau denied that he had received notice or was
       informed by his accountant about the need for cash register tapes after the first audit.
       However, he stated that, in the last six months, he had begun to maintain records in a new
       way. He then attempted to submit the physical sales receipts and a prepared statement
       recording the daily gross receipts for August 2013. Although Hau testified the figures were

                                                  -3-
       “probably the same” as a monthly statement for the audit period would be, the ALJ sustained
       the Department’s objection and excluded the evidence as irrelevant to the audit period. Hau
       was asked if he also maintained purchase records, to which he stated, “Now we have, yeah,”
       and he indicated that he would have produced them for the hearing if he had been asked.
       Lastly, Hau testified that during the audit he complied fully and turned over all the sales
       receipts and purchase records he had available. He also noted that there was a leak in his
       restaurant’s roof at one point in time and there was water damage to some records, which he
       threw away.
¶ 12        After the conclusion of Hau’s testimony, the Department offered into evidence an “Audit
       Narrative” prepared by Berry on April 30, 2012, and filed with the certificate of the
       Department’s director. Berry wrote that during the audit she examined invoices, some guest
       checks, Hau’s personal tax returns and the related Schedule Cs, the monthly sales tax returns,
       bank statements, EDA-20s, as well as numerous documents prepared by Hau in Chinese and
       transmitted to Tai. These self-prepared documents included monthly receipt summaries, cash
       payouts, and inventory purchases as well as yearly recaps of sales/receipts, expenses, and
       gross profit. Berry thus found that “[t]he owner is in control of all figures that go on the
       [monthly sales tax returns] and personal returns.”
¶ 13        Berry noted that Hau’s bank deposits and cash payout reports did not match up. She
       calculated that $135,642 of unreported receipts were missing from the bank deposits. Berry
       found that Hau paid for inventory with cash and other expenses and investments were paid
       by money orders. Berry further noted that Hau also retained Tai as a personal financial
       investor and was well diversified. Although Berry worked with Tai at the beginning of the
       audit, Tai expressed that she would stop representing Hau in 2012 citing her company’s
       inability to spare the time needed to continue compliance with the audit.
¶ 14        Berry described Hau’s restaurant and her personal experience ordering food for carryout.
       She related that when paying using her debit card, she was provided with a receipt, however,
       she did not receive one when paying with cash. Rather, she noted that customers were given
       their orders with the “guest check” stapled to the bag. These guest checks were written in
       Chinese and copies of the guest checks were turned over for the audit. Berry attempted to
       schedule the receipts based on the June 2010 guest checks despite the checks being out of
       numerical order and her belief that “[t]here’s no control whatsoever for guest checks.” Berry
       calculated receipts totalling $15,200.21 based on the June 2010 guest checks, which did not
       match Hau’s reported receipts of $9941.
¶ 15        Berry contacted the suppliers Hau relied on and requested they complete EDA-20s. Berry
       believed that purchase orders for meat and seafood were missing from the documents turned
       over for the current audit because in comparison to figures from Hau’s first audit, meat and
       seafood purchases had decreased around $23,000 annually whereas the amount of rice
       purchased remained the same. As she believed too many purchase orders were missing to
       utilize a markup method, she calculated the tax due by estimating sales receipts under “the
       container method.” She described her calculations as follows: Using 2010 as a test year,
       Berry reviewed invoices from June through August and “scheduled out all of the containers.”
       Berry then calculated the average selling price for the large and small rice orders and
       determined the average monthly receipts based on the number of containers used. From
       there, she multiplied by 12 to get the expected annual total sales receipts. She then calculated


                                                  -4-
       the tax deficiency by subtracting the reported taxable sales receipts from her calculated total
       and multiplying by the sales tax percentage.
¶ 16       Berry calculated the total tax due for the audit period as $100,002. She reported that she
       hand-delivered the audit results to Hau and informed him he had 30 days to review the audit
       and make his payment. At that point, Hau had not retained a new accountant and stated he
       would have his new accountant speak with Berry later. Berry’s narrative also referenced
       several documents in the “audit package,” however these documents were not introduced into
       evidence.

¶ 17                                 B. The ALJ’s Recommendation
¶ 18       The ALJ prepared a 12-page recommendation for disposition in which he found that the
       NTLs admitted into evidence established the Department’s prima facie case. Further, Hau did
       not have books and records available for audit as required by Illinois law. The ALJ
       concluded that, due to Hau’s failure to maintain records, the container method employed by
       the auditor to determine the unreported tax liability and related penalties was a “reasonable”
       method to estimate revenue and the related sales tax. Although Hau disputed the container
       method, Hau’s testimony about his use of the containers without documentary support was
       insufficient to disprove the reasonableness of the auditor’s calculations. The ALJ concluded
       that Hau’s submission of his tax forms was inadequate to establish that the figures listed were
       more accurate or more reasonable than the auditor’s calculations. The ALJ noted that Hau
       had not signed the tax forms and could not testify as to their accuracy. Furthermore, Hau
       testified that his accountant prepared the forms based on information that he calculated and
       submitted without the supporting physical receipts. The ALJ found that in line with case law,
       he could not find Hau’s summary calculations overcame the Department prima facie case.
¶ 19       The ALJ also found that the record failed to establish, by clear and convincing evidence,
       that Hau filed his returns with an intent to defraud. The Department had the burden to prove
       fraud, and the ALJ found that the sole support for a fraud penalty stemmed from the auditor’s
       calculation that the net tax reported percentage change was 555%. The auditor’s narrative
       directed the reader to other supporting documents which were not submitted into evidence at
       the hearing. The ALJ believed that a simple misunderstanding on Hau’s part due to the
       language barrier and his advanced age could just as likely explain his accounting errors as
       intent to defraud.
¶ 20       In addressing Hau’s remaining contentions, the ALJ found that the Department had not
       violated Hau’s due process rights in relation to waiving the statute of limitations. The ALJ
       noted that the forms indicated the waiver was marked for the benefit of the taxpayer rather
       than the Department, and the Department was not required by statute, regulation, obligation,
       or duty to present the waivers in Chinese or communicate with Hau in Chinese. The ALJ
       found that Hau had his own duty to ensure he understood the agreement before signing.
       Thus, Hau could not complain where he had the opportunity and means to seek assistance
       from counsel or his accountant prior to signing the waivers.
¶ 21       The ALJ recommended that the NTLs be revised to eliminate the fraud penalties but
       found that the alleged taxes owed and late penalties due should be finalized as assessed.




                                                  -5-
¶ 22                                   C. The Director’s Decision
¶ 23       In 2015, Department Director Constance Beard (Director) entered her decision and
       ordered finalization of the NTLs issued to Hau as they were originally entered. Although she
       adopted the majority of the ALJ’s recommendations, the Director believed that the record
       supported a fraud penalty and entered additional findings of facts and conclusions of law in
       accordance with her opinion.
¶ 24       The Director gave special consideration to the differences between Hau’s first audit and
       the current audit. The Director found that Hau had been given actual written notice of the
       record-keeping requirements. She believed he realized that if such records were not provided
       the auditor would be forced to use the markup method and roughly estimate sales based on
       purchase records. Thus, she inferred that Hau had intentionally produced fewer purchase
       records in an attempt to reduce the estimated gross sales.
¶ 25       The Director further highlighted that Hau provided the auditor with a receipt for her
       purchase on a debit card but not for the cash purchase. She also determined that at the very
       least, Hau fraudulently reported his sales based on the guest checks he had provided to the
       auditor for June 2010, which were totaled to be 150% greater than the reported receipts.
       Lastly, the Director placed emphasis on the fact that the auditor determined that Hau used
       cash from his sales to purchase savings bonds and other personal investments in amounts that
       greatly exceeded the gross receipts reported on the tax returns.
¶ 26       Following the Director’s decision, two “Revised Final Assessments” were issued to Hau
       on June 5, 2015. For the tax period from January 1, 2008, through June 30, 2009, Hau was
       assessed as owing $143,117.26 and from July 1, 2009, through December 31, 2010,
       $88,250.28 for a total assessment of $231,367.54 2 due by July 5, 2015. Hau filed a
       complaint for administrative review on July 10, 2015.

¶ 27                                      D. Circuit Court Order
¶ 28       The circuit court held that the Act and case law established the Department’s prima facie
       case was proven by the certified exhibits. However, the court agreed with Hau that the
       auditor’s methods were “opaque at best” because she did not give a formal accounting or
       mention the exact prices used in her calculations. Given the “rather large estimate” her
       calculations netted, the court expected to see a more thorough work-up in the audit.
       Nevertheless, the court could not rule that the Department failed to meet a minimum standard
       of reasonableness. The court wrote that Hau’s challenge to the calculations lacked
       documentary evidence and could not prove that there was a better way to calculate the
       estimated sales receipts where no books and records existed. Even Hau’s testimony failed to
       mount a sufficient challenge to the auditor’s “container method,” where Hau could not
       describe the frequency of his purchases of containers, the rate at which he used them, or
       adequately describe which containers were used for which items he sold. Although the court
       was sympathetic to Hau, it did not find that the Department’s prima facie case had been
       overcome.
¶ 29       As to the fraud penalties, the court overruled the Director’s decision finding that there
       was no clear showing of the prerequisite intent to fraud. Although the Director drew
          2
            The revised final assessment included an additional $100 “Cost of Collection Fee” for each
       reporting period and levied additional interest charges computed through June 5, 2015.

                                                  -6-
       comparisons to another case, the court found that the Director had an aggressive reading of
       the evidence in the record and Hau’s case was distinguishable from case law in which the
       Department had submitted significantly more evidence and the taxpayer had a less believable
       defense. The court would not absolve Hau’s tax liability due to the language barrier and his
       old age but found that such circumstances called into question his intent to defraud the State.
       Thus, the court held that the Department had failed to prove fraud by clear and convincing
       evidence where fraud or general incompetence and ignorance were equally likely
       explanations for Hau’s tax deficiency.

¶ 30                                           II. ANALYSIS
¶ 31                                       A. Standard of Review
¶ 32        When an appeal is taken to the appellate court following entry of judgment by the circuit
       court on administrative review, it is the decision of the administrative agency, not the
       judgment of the circuit court, which is under consideration. See Anderson v. Department of
       Professional Regulation, 348 Ill. App. 3d 554, 560 (2004). Our statutes mandate that “[t]he
       findings and conclusions of the administrative agency on questions of fact shall be held to be
       prima facie true and correct” and “[n]o new or additional evidence in support of or in
       opposition to any finding, order, determination or decision of the administrative agency shall
       be heard by the court.” 735 ILCS 5/3-110 (West 2014). Thus our courts have held that “it is
       not a court’s function on administrative review to reweigh evidence or to make an
       independent determination of the facts.” Kouzoukas v. Retirement Board of the Policemen’s
       Annuity & Benefit Fund, 234 Ill. 2d 446, 463 (2009). When an administrative agency’s
       factual findings are contested, the court will only ascertain whether such findings of fact are
       against the manifest weight of the evidence. Cook County Republican Party v. Illinois State
       Board of Elections, 232 Ill. 2d 231, 244 (2009).
¶ 33        Conversely, if the dispute is over an agency’s conclusion on a point of law, the decision
       of the agency is subject to de novo review by the courts. Cinkus v. Village of Stickney
       Municipal Officers Electoral Board, 228 Ill. 2d 200, 210-11 (2008). A third standard is
       applicable where the dispute concerns the legal effect of a given set of facts, i.e., where the
       historical facts are admitted or established, the rule of law is undisputed, and the issue is
       whether the facts satisfy the statutory standard. A mixed question of law and fact is reviewed
       for clear error. Exelon Corp. v. Department of Revenue, 234 Ill. 2d 266, 273 (2009). An
       administrative decision will be set aside as clearly erroneous only when the reviewing court
       is left with the definite and firm conviction that a mistake has been committed. Id.

¶ 34                                    B. The Auditor’s Narrative
¶ 35       As a preliminary matter we address Hau’s arguments regarding the admission of and use
       of the auditor’s narrative during these proceedings. Hau first challenges the admissibility of
       the narrative arguing that it did not constitute competent evidence because the auditor did not
       testify. Hau further contends it was unfair for the ALJ and Director to draw conclusions
       based on the narrative, which was not presented during the Department’s case-in-chief. Hau
       argues that the narrative was not a part of the Department’s prima facie case and therefore it
       was erroneous to cite the narrative in support of finding that Hau failed to rebut the
       Department’s prima facie case. Although Hau raised the issues as evidentiary objections, the
       Act has several applicable provisions which the Department cites in rebuttal to Hau’s

                                                  -7-
       objections. Thus, Hau’s arguments pose mixed questions of law and fact, which we review
       for clear error.
¶ 36       First, we find that the plain language of the Act clearly negates Hau’s challenge to the
       auditor’s narrative as competent evidence. Section 8 of the Act states,
                “[t]he books, papers, records and memoranda of the Department, or parts thereof,
                may be proved in any hearing, investigation, or legal proceeding by a reproduced
                copy thereof under the certificate of the Director of Revenue. Such reproduced copy
                shall, without further proof, be admitted into evidence before the Department or in
                any legal proceeding.” 35 ILCS 120/8 (West 2014).
       Hau makes no effort to explain why the auditor’s narrative does not fall under the “books,
       papers, records and memoranda of the Department.” Hau simply repeats the same hearsay
       argument made during the hearing. We find that the auditor’s narrative was prepared as a
       memorandum of the Department detailing the procedures of the audit, certified by the
       Department’s director, and properly admitted into evidence by the ALJ. Under section 8 of
       the Act, the auditor was not required to testify in order to admit the narrative into evidence.
¶ 37       Second, we disagree with Hau that the ALJ and Director incorrectly referred to and relied
       on the auditor’s narrative to draw conclusions about the case. We find that Hau’s argument
       amounts to a mere technicality about the presentation of evidence. The Act provides that the
       Department is not bound by the technical rules of evidence during the hearing. See 35 ILCS
       120/8 (West 2014). But see Novicki v. Department of Finance, 373 Ill. 342, 344 (1940) (this
       statutory provision does not abrogate the fundamental rules of evidence). The provision
       further provides that, “[i]n the conduct of any investigation or hearing, *** no informality in
       any proceeding, or in the manner of taking testimony, shall invalidate any order, decision,
       rule or regulation made or approved or confirmed by the Department.” 35 ILCS 120/8 (West
       2014). Thus, we find no justification for invalidating the administrative decision simply
       because the ALJ or Director relied on evidence introduced in rebuttal in discussing Hau’s
       failure to overcome the Department’s prima facie case.
¶ 38       We cannot find any error in the ALJ’s admission of the auditor’s narrative into evidence
       or the ALJ’s and Director’s reliance on the narrative in drawing their conclusions.
       Accordingly, there is no reason to set aside the administrative decision on these claims.

¶ 39                                   C. The Prima Facie Case
¶ 40       Hau contends that the Department failed to present a prima facie case where the corrected
       tax return and NTLs allegedly proving the prima facie case were based on inadmissible
       hearsay. Hau further challenges the Department’s method of assessment, arguing that it failed
       to meet a minimum standard of reasonableness. In the alternative, Hau argues that he
       factually rebutted the Department’s prima facie case through his credible testimony and the
       submission of his federal income tax returns for the audit period.

¶ 41                               1. Corrected Tax Return and NTLs
¶ 42       Like his challenge to the auditor’s narrative, Hau’s contention that the exhibits offered in
       the Department’s case-in-chief are inadmissible is negated by the Act. Section 4 of the Act
       expressly provides that:



                                                  -8-
               “In the event that the return is corrected for any reason other than a mathematical
               error, any return so corrected by the Department shall be prima facie correct and shall
               be prima facie evidence of the correctness of the amount of tax due, as shown therein.
               ***
                   ***
                   Proof of such correction by the Department may be made at any hearing before
               the Department or the Illinois Independent Tax Tribunal or in any legal proceeding by
               a reproduced copy or computer print-out of the Department’s record relating thereto
               in the name of the Department under the certificate of the Director of Revenue. ***
               Such certified reproduced copy or certified computer print-out shall without further
               proof, be admitted into evidence before the Department or in any legal proceeding
               and shall be prima facie proof of the correctness of the amount of tax due, as shown
               therein.” (Emphasis added.) 35 ILCS 120/4 (West 2014).
       Here, the documents submitted were provided along with the certification of the
       Department’s director. The Act is clear that corrected tax returns are admissible and that no
       further proof is necessary. We further find that copies of the NTLs issued and submitted into
       evidence were also admissible under section 8 of the Act as “books, papers, records and
       memoranda of the Department.” See 35 ILCS 120/8 (West 2014). Thus, we find that the ALJ
       properly admitted these documents into evidence under the Act and Hau’s argument for
       setting aside the decision on this claim has no merit.
¶ 43       Furthermore, we have strictly construed the statute insofar as establishing a prima facie
       case is concerned. Masini v. Department of Revenue, 60 Ill. App. 3d 11, 14 (1978). “Illinois
       courts have uniformly sustained a prima facie case based on corrected tax returns.” Mel-Park
       Drugs, Inc. v. Department of Revenue, 218 Ill. App. 3d 203, 207 (1991); see also Central
       Furniture Mart, Inc. v. Johnson, 157 Ill. App. 3d 907, 910 (1987). Thus, the ALJ and Director
       correctly interpreted the Act and found that the Department’s submission of corrected returns
       and the NTLs established its prima facie case.

¶ 44                            2. Minimum Standard of Reasonableness
¶ 45       Hau further challenges the Department’s prima facie case by arguing that the audit
       procedures were arbitrary and capricious resulting in an unreliable assessment. Hau contends
       that the Department’s prima facie case was not substantiated with “sufficient and probative
       documentary proofs” and, therefore, the auditor should have testified to explain and justify
       the amounts Hau was alleged to owe in tax. Hau cites Grand Liquor Co. v Department of
       Revenue, 67 Ill. 2d 195, 201-02 (1977), in support of finding that the auditor needs to testify.
       He also points to the circuit court’s finding that the auditor’s narrative was “opaque” in
       describing the methods employed to determine tax liability. Thus, Hau argues that the
       narrative was meaningless in establishing whether the Department’s methods of assessment
       met a minimum standard of reasonableness and the prima facie case must fail.
¶ 46       If the taxpayer calls into question the method employed by the Department to calculate
       the amount of tax due, then the record must show that the techniques and assumptions that
       the Department used met some minimum standard of reasonableness. Mansini, 60 Ill. App.
       3d at 14. This requirement is tied to section 4 of the Act, which states that, “the Department
       shall examine such return and shall, if necessary, correct such return according to its best
       judgment and information.” 35 ILCS 120/4 (West 2014). However, “[t]he statute does not

                                                  -9-
       spell out any precise method of producing the corrected return.” Puleo v. Department of
       Revenue, 117 Ill. App. 3d 260, 266 (1983). Hau raises a mixed question of law and fact as to
       whether the Department proved it complied with the statutory requirement of correcting
       Hau’s return using “best judgment and information,” which we review for clear error.
¶ 47       At the hearing, the Department did not offer live testimony from the auditor who
       reviewed Hau’s records and calculated his additional tax liability. In lieu of her testimony,
       the Department submitted the narrative she had typed up and submitted regarding her
       procedures and findings. The narrative supported the Department’s argument that the audit
       was performed under a minimum standard of reasonableness. The auditor’s method of
       calculation included scheduling the containers purchased by Hau, calculating the average
       menu prices for items, and estimating gross sales revenue based on the number of containers
       used multiplied by the average sales price for that size container. This method was selected
       because the auditor believed that a significant number of purchase orders for higher priced
       items were missing. The auditor did not believe that the records did not exist or that Hau had
       simply purchased less meat and seafood because other purchases had remained consistent
       between the first time Hau was audited and this current audit. Thus, a decline in production
       and sales could not account for the disparity in the meat and seafood purchases over the
       years. Using this container method, the auditor estimated monthly sales receipts to be
       $34,600. We note that the narrative also discusses a second method of calculation in which
       the auditor reviewed the guest checks provided for June 2010 and found the receipts totalled
       $15,200.21. However, the auditor found that these guest checks were unreliable because
       there was no control for the guest checks, they were not in numerical order, and guest checks
       would be stapled to carryout bags and given to customers. From the estimated monthly sales
       receipts, the auditor was able to compare the reported figures on Hau’s returns and determine
       the amount of underreported sales receipts and tax deficiencies due.
¶ 48       After reviewing the record, we find that the Department did not employ arbitrary or
       unreasonable methods to calculate the sales tax owed. The auditor attempted several methods
       of calculations but found that both the markup method and scheduling the guest checks were
       unreliable due to Hau’s poor record keeping. Thus, the Department resorted to the container
       method.
¶ 49       In Vitale v. Illinois Department of Revenue, 118 Ill. App. 3d 210, 212-13 (1983), the court
       recognized that auditor’s calculation method was driven by the taxpayer’s failure to maintain
       adequate records. The court further determined that the method and techniques employed met
       the requirements of the law where they were not “designed by whim or caprice, but rather
       represented a studied effort to reconstruct with limited information, and much hard work, the
       taxpayer’s business records.” Id. Similarly here, we find that the auditor was working with
       limited information, which was due to the actions or inactions of the taxpayer himself, and
       engaged in a calculated effort to obtain the best reconstruction possible. Therefore, we find
       that the Director did not commit clear error in accepting the auditor’s container method.
¶ 50       Hau’s complaint that the auditor’s testimony was necessary is undercut by previous cases
       that recognized the Department is not required to produce the auditor to prove up the
       Department’s prima facie case. See American Welding Supply Co. v. Department of Revenue,
       106 Ill. App. 3d 93, 99 (1982) (recognizing that statute does not require the Department to
       produce auditor for testimony); see also A.R. Barnes & Co. v. Department of Revenue, 173 Ill.
       App. 3d 826, 832 (1988) (noting that the auditor or someone personally familiar with the

                                                 - 10 -
       case may testify). Although it may be convenient to have a fuller explanation of the
       procedures employed by the auditor, we find that the narrative submitted outlined her method
       of calculation to a sufficient degree that the Director could determine whether the method
       employed met a minimum standard of reasonableness.
¶ 51       Further, we reject Hau’s reliance on Grand Liquor, which, as the court discussed in
       Puleo, 117 Ill. App. 3d at 266-67, was limited to a set of circumstances in which “the
       corrected return was based upon data generated by a computer.” Grand Liquor is further
       distinguishable because it concerned whether hearsay evidence could be used to shore up the
       Department’s case where the taxpayer’s books and records were available. Unlike Grand
       Liquor, Hau failed to maintain adequate books and records for the audit.

¶ 52                                          3. Hau’s Rebuttal
¶ 53       Having found that the Department properly established its prima facie case and
       demonstrated its assessment methods complied with minimum standards of reasonableness,
       we turn to Hau’s contention that he factually rebutted the Department’s corrected assessment.
       Defendant argues that the submitted income tax returns and his credible testimony were
       sufficient to overcome the Department’s prima facie case.
¶ 54       The burden was on Hau to present competent evidence to show that the Department’s
       assessment of additional tax liability was incorrect. “ ‘[A taxpayer] may not prevail by
       merely saying [his] own return was correct, ***. Simply questioning the Department of
       Revenue’s return does not shift the burden to the Department of Revenue.’ ” Masini, 60 Ill.
       App. 3d at 15 (quoting Quincy Trading Post, Inc. v. Department of Revenue, 12 Ill. App. 3d
       725, 730-31 (1973)). “[The taxpayer] must produce competent evidence, identified with [his]
       books and records and showing that the Department’s returns are incorrect.” Id. at 15 (citing
       multiple cases). “The law is well-settled that a taxpayer cannot overcome the Department’s
       prima facie case merely by denying the accuracy of the Department’s assessments or by
       suggesting hypothetical weaknesses.” Smith v. Department of Revenue, 143 Ill. App. 3d 607,
       613 (1986).
¶ 55       Hau argued that the container method used by the auditor was flawed and denied the
       estimated sales revenue as astronomically large. However, his challenge to the Department’s
       assessment consists simply of offering copies of his tax returns and his own testimony. These
       returns have little probative value as he could not testify that they were correct and he related
       that the returns were prepared by his accountant based on monthly summaries that he
       generated himself. His testimony further revealed that his accountant did not have access to
       the source material (i.e., the sales receipts) on which the summaries were based. A taxpayer’s
       failure to produce their records permits a negative inference that if the records had been
       produced, they would have reflected unfavorably on the taxpayer. Id.
¶ 56       We find that Hau’s testimony and offered evidence amount to no more than a bare
       assertion that the Department’s corrected returns were incorrect. Hau offered no evidence to
       prove the hypothetical weaknesses in the Department’s methods. Although Hau estimated his
       daily sales revenue and testified to the impoverished nature of the neighborhood, he failed to
       provide any documentary support for his claim that he could not possibly meet the estimated
       sale revenue the auditor calculated. We have consistently found that a taxpayer’s oral
       testimony without sufficient corroborative evidence will not rebut a prima facie case.
       Mel-Park Drugs, Inc., 218 Ill. App. 3d at 217; A.R. Barnes & Co., 173 Ill. App. 3d at 835;

                                                  - 11 -
       Smith, 143 Ill. App. 3d at 613. Accordingly, we find that Hau did not factually rebut the
       Department’s prima facie case and the Director did not err in her conclusions to the contrary.

¶ 57                              D. Due Process and the Fraud Penalties
¶ 58       We briefly note that neither party raised concerns, in the circuit court or in this appeal,
       about the Director’s finding, adopted from the ALJ’s recommendation, that Hau’s due
       process rights were not violated. Thus, we do not address this issue and affirm the Director’s
       finding as written.
¶ 59       Similarly, neither party briefed the issue of whether the fraud penalties were properly
       imposed. However, the Director’s decision and the circuit court’s judgment diverge on this
       issue placing this court in a unique position. Under administrative review, we consider only
       the administrative agency’s decision rather than the judgment of the circuit court. See
       Anderson, 348 Ill. App. 3d at 560. The question remains whether we affirm the Director’s
       imposition of the fraud penalties or, conversely, the circuit court’s finding that fraud was not
       proven by clear and convincing evidence.
¶ 60       “[U]nder our supreme court rules, both appellees and appellants forfeit any points not
       argued in their initial briefs.” Amalgamated Transit Union v. Illinois Labor Relations Board,
       Local Panel, 2017 IL App (1st) 160999, ¶ 59 (citing Ill. S. Ct. R. 341(h)(7), (i) (eff. Feb. 6,
       2013)). We have long recognized that an appellate court will not consider a point that has not
       been argued, unless justice calls for it, and this rule of practice is also applicable to appeals
       under the Administrative Review Law (735 ILCS 5/3-101 et seq. (West 2014)). See Village
       of Maywood v. Health, Inc., 104 Ill. App. 3d 948, 952 (1982). Historically, the effect of the
       dismissal of an appeal for failure of the appellant to file its brief “is an affirmance of the
       judgment of the trial court rendered following a judicial proceeding in which a judge has
       concluded that based upon the law and the facts such a judgment should be entered.” First
       Capitol Mortgage Corp. v. Talandis Construction Corp., 63 Ill. 2d 128, 131 (1976). Although
       we are instructed under Administrative Review Law to consider only the agency’s decision,
       neither party has taken issue with the fact that the Director’s decision on the imposition of the
       fraud penalty was overturned. Thus, we find that, in this instance, it is appropriate to affirm
       the circuit court’s judgment in its entirety, and we also reverse the fraud penalties.

¶ 61                                      III. CONCLUSION
¶ 62      For the reasons stated, we affirm the circuit court’s judgment.

¶ 63      Affirmed.




                                                  - 12 -
