Warner Sugar Refining Co. v. Commissioner

*9OPINION.

Littleton:

This appeal does not contest the correctness of the net taxable income, nor does it allege that the Commissioner committed an error in his determination of the deficiency for the year 1917, but alleges that the Commissioner was without legal authority in March, 1924, to assess or collect the deficiency of $110,583.55. The Commissioner moves to dismiss the appeal upon th*e ground that the Board is without jurisdiction to determine the issue raised.

The Board has jurisdiction to decide the question of whether the assessment was barred by the statute of limitations. Appeal of the National Refining Co. of Ohio, 1 B. T. A. 236. See sections 283 (f) and 906 (e) of the Revenue Act of 1926.

It is the contention of the taxpayer that the Commissioner was without legal authority to assess the deficiency of $110,583.55 in March, 1924, by reason of the fact that the three-year period of limitation within which he was authorized by the statute (Revenue Act of 1917) to make assessments against it of additional tax for the calendar year 1917 had expired and that his authority to determine and assess the amount of $110,583.55 had expired under the waiver executed by it on February 18, 1921. In other words, it is the position of the taxpayer that the waiver of the statute of limitations had expired when the Commissioner made the assessment of $108,414.74 in March, 1924.

The time within which the Commissioner was authorized to assess the tax here in question was governed by section 14 (a) of the Revenue Act of 1916. That Act contained no express provision that the time within which the Commissioner could assess the tax might be extended or waived by the taxpayer. However, the taxpayer, in consideration of the assurance given it by the Commissioner that any tax which might be due for the calendar year would be assessed only after deliberate and careful consideration, expressly waived its right to insist upon any assessments in respect of its 1917 'tax being made within the period prescribed by the statute. The taxpayer could effectively waive verbally or in writing its right to insist upon assessments being made within the statutory period of limitation. Randon v. Toby, 11 How. 493; State Loan & Trust Co. v. Cochran, 130 Cal. 245; 62 Pac. 466; Wells, Fargo & Co. v. Enright, 127 Cal. 669; 60 Pac. 439; Bridges v. Stephens, 132 Mo. 524; 34 S. W. 555; State Trust Co. v. Sheldon, 68 Vt. 259; 35 Atl. 177; Ennis v. Pullman Palace-Car Co., 165 Ill. 161; 46 N. E. 439; Holman v. Omaha & C. B. Ry. & Bridge Co., 117 Iowa, 268; 90 N. W. 833; Shutte v. Thompson. 15 Wall. 151.

*10There is no provision in the various Revenue Acts which provides that the Commissioner may not make more than one assessment in respect of the tax for any year, and we find no reason for holding in this appeal that, when the Commissioner' assessed the amount of $108,414.74 as an additional tax for 1917, after a hearing granted to the taxpayer pursuant to the provision of section, 250 (d) of the Revenue Act of 1918, he was thereafter prohibited from making a further determination and assessment of an additional amount under the law within the time prescribed by the statute, or if that limitation is waived, under the terms of such waiver. In the Appeal of Dallas Brass & Copper Co., 3 B. T. A. 856, the Board said:

It- lias long been recognized, both by tbe Commissioner and all of his predecessors, as well as taxpayers generally, that reconsiderations of liability to internal-revenue taxes were both proper and lawful. * * *. The principle or rule of law to the effect that reconsiderations and adjustments of tax liability can be properly made seems to have been recognized by Congress. [Citing sections 1309 and 1312, Revenue Act of 1921.]

In considering the matter of the determination of overassessments, credits, refunds, and interest, the court, in the case of Girard Trust Co. v. United States, 270 U. S. 163, decided March 1, 1926, said:

To have made the interest calculable to the date of actual payment would have led to uncertainty and confusion, as the Comptroller General indicates, and it was doubtless for that reason that Congress qualified its desire to pay interest for the exact time during which the money was detained to a date which was practical from an administrative standpoint. Nor does the fact that pending the carrying out of the direction of the Commissioner of Internal Revenue to make the refund, he might reverse himself, change the finality of his decision allowing the refund. If he does so, the date fixed as the date of the allowance under the section is changed of course, but the mere fact that he can reverse a final allowance does not prevent its being a final allowance, any more than when a court renders a judgment, its ability within the term to set it aside or change it affects its finality, if it is not changed. We think, therefore, that the words “ to the date of such allowance ” do not carry interest to be paid on refunds down to the time of payment.

This brings us to the question of whether the waiver filed by the taxpayer on February 18, 1921, expired prior to the assessment of $110,583.55.

This question must be determined from the language of the waiver executed by the taxpayer and the evidence concerning the same. The original waiver signed by the taxpayer, by its vice president, and bearing the corporate seal, provides that—

in consideration of the assurance given it by the officials of * * * the Bureau of Internal Revenue that its liability for all Federal taxes * * * fon the year ended December 31, 1917, on its net income received from all sources in said year, shall not be determined except after deliberate, intensive and thorough consideration, hereby waives any and all statutory limitations as to the time within which assessments based upon such liability may be entered. It is understood, however, that the above corporation does not, by *11tile execution of this waiver, admit in advance the correctness of any assessment which may be made against it for said year * * *.

It will be noted from the above that this taxpayer waived any and all statutory limitations as to the time within which assessments might be made of all Federal taxes for which it was liable upon its net income received from all sources during the calendar year 1917. It had a right to decline to execute this waiver and to insist upon assessments in respect of any tax for that year being made within the statutory period, and in executing the same it had a right to include therein any condition it thought proper and, if accepted by the Commissioner, he would have been bound by its provisions. This waiver was executed after conferences between the officers of the company and its counsel, and the only condition contained in the waiver is that the officers of the Bureau of Internal Revenue should not determine the corporation’s liability for tax except after deliberate, intensive, and thorough consideration, and that it did not' admit in advance the correctness of any assessment which might be made against it for the year 1917. No limitation was specified in the waiver as to the time beyond the statutory period within which the Commissioner might make assessments based upon the net income of the corporation for the year 1917. The language “within which assessments * * * may be entered ” is subject only to the interpretation that more than one assessment was contemplated. No notice was ever served upon the Commissioner by the taxpayer prior to the assessment of the amount here in controversy as to when it would regard the provisions of the waiver as having been fully complied with by both parties and become inoperative.

On November 11, 1922, and January 6, 1923, before the audit had been completed and before any assessment in respect of the additional tax for 1917 had been made, and while the Commissioner and the taxpayer were engaged in conferences in respect of its tax liability for that year, the Commissioner submitted to the taxpayer a form of written waiver of limitations provided in section 250 (d) of the Revenue Act of 1921. Upon the receipt of this blank the taxpayer’s counsel handed it to the representative personally engaged in conferences with the Commissioner respecting the tax and advised that the outstanding waiver was sufficient authority for the Commissioner to proceed. Conferences were thereafter had upon the taxpayer’s contention between the Commissioner and its representatives and on April 23, 1923, the Commissioner, proceeding under the Authority of the original waiver and the provisions of the Revenue Act of 1921, mailed the taxpayer a letter setting forth that, as a result of conferences with the Income Tax Unit, an additional tax of $108,414.74 was disclosed, and advised it that, under the provisions *12of the Revenue Act of 1921, 30 days would be granted for the filing of an appeal to be heard by the agency designated by him for that purpose. Such an appeal was filed by the taxpayer and conferences were thereafter held thereon and the amount of $108,414.74 was subsequently assessed. Upon reconsideration of his action the Commissioner decided that he had made a mistake in the assessment of $108,414.74 in respect' of the amount of the profits tax computed under the provisions of section 210 of the Revenue Act of 1917, and on March 31, 1924, he made a further assessment of $110,583.55 and advised the taxpayer on the same date that a claim for abatement of all, or a portion thereof, would be entertained, and that an opportunity would be afforded to contest the correctness of the amount assessed. The taxpayer availed itself of this privilege, filed a claim for the abatement of the amounts so assessed, and had various conferences with the Commissioner concerning the same between that time and December 26, .1924, when the Commissioner rendered his decision that the claim should be denied. From this decision the taxpayer appeals.

Under the language of the waiver and all of the evidence in the appeal, the Board is of the opinion that the Commissioner had authority to make the assessment of $110,583.55 and that his assessment thereof was in all respects legal.

The deficiency is $110,583.55. Order will T>e entered accordingly.

James concurs in the result only.

On reference to the Board, SteeNhageN concurs in the result only. Phillips dissents.