*4258 1. An unlimited waiver executed January 22, 1923, with regard to taxes for 1917, held to expire April 1, 1924.
2. Notice of acceptance of unlimited waiver by the Commissioner not necessary to constitute valid consent if waiver is actually signed on behalf of the Commissioner.
3. The fact that an unlimited waiver covers years 1917-1920 does not operate to invalidate the waiver as to the years 1918-1920 simply because waiver for 1917 has expired.
4. Held that assessment and collection on December 18, 1925, of taxes for 1918 and 1919 were not barred by the statute of limitations; where an unlimited waiver was executed on February 6, 1923, since the Commissioner and the taxpayer during the intervening time were in controversy over the taxes in question, and no notice was given by the taxpayer as to the termination of consent.
5. Held that Board has jurisdiction under section 284(e) of Revenue Act of 1926 to determine whether a collection on October 5, 1925, of taxes for 1917 and 1919, was barred by the statute of limitations.
6. Collection on October 5, 1925, of taxes for 1917 barred by statute of limitations, an unlimited waiver having expired April 1, 1924.
*4259 7. Collection on October 5, 1925, of taxes for fiscal year ended June 30, 1919, held not barred by statute of limitations where an unlimited waiver was executed on February 6, 1923, and had not expired.
*1282 The taxes in controversy are income and excess-profits taxes for the calendar year 1917Period January 1, 1918, to June 30, 1918, and fiscal year ended June 30, 1919, and the deficiency is in the total sum of $111,287.91, as follows:
| Calendar year 1917 | $42,476.36 |
| Period January 1 to June 30, 1918 | 14,568.67 |
| Fiscal year ended June 30, 1919 | 54,242.88 |
The total amount alleged to have been overpaid is $47,090.60, with interest from October 5, 1925. The total principal amount of taxes in controversy is $158,378.51.
A motion to sever the issues and try the issue of statute of limitations was granted.
FINDINGS OF FACT.
The petitioner is a corporation organized and existing under and by virtue of the laws of the Commonwealth of Massachusetts, with principal office at North Adams.
The*4260 notice of deficiency was mailed to the petitioner on December 18, 1925.
The petitioner filed its return for the calendar year 1917 on April 5, 1918; its return for the period ended June 30, 1918, on June 15, 1919, and its return for the fiscal year ended June 30, 1919, on September 19, 1919.
On October 5, 1925, the collector of internal revenue at Boston, Mass., collected from the petitioner the sum of $18,791.62, being taxes asserted by the respondent to be due for the calendar year 1917 in addition to those shown on the return in the sum of $13,027.12, and interest thereon in the sum of $5,764.50. This tax was assessed on Ganuary 3, 1920.
On October 5, 1925, the collector also collected from the petitioner the sum of $28,298.98, being the balance of the tax shown to be due on its return for the fiscal year ended June 30, 1919, in the sum of $21,994.02, together with interest thereon in the sum of $6,304.96.
The Revenue Act of 1924 was enacted on June 2, 1924.
On or about January 12, 1923, the petitioner received Treasury Department letter dated January 11, 1923, which is the ordinary 30-day letter, covering an additional tax liability for the years 1917, 1918, and*4261 1919 in the amount of $158,426.26.
On or about January 20, 1923, the petitioner received Treasury Department letter dated January 19, 1923, in which it is requested that petitioner execute a waiver form for the year 1917.
On or about January 23, 1923, the petitioner filed with the respondent its appeal from the Treasury Department letter dated January 11, 1923, a hearing being requested. On or about January 23, 1923, *1283 the petitioner filed with the respondent an instrument in writing designated "Income and Profits Tax Waiver," covering the year 1917. This instrument is as follows:
January 22-1923 (Date)
INCOME AND PROFITS TAX WAIVER
In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Greylock Mills of No Adams Mass., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said corporation for the years 1917 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under prior income, excess-profits, or war-profits tax Acts, *4262 or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of theUnited States, and for other purposes", approved August 5, 1909, irrespective of any period of limitations.
GREYLOCK MILLS,
Taxpayer,
By C. T. PLUNKETT.
D. H. BLAIR.Commissioner. A.
[SEAL.]
In addition to said instrument the petitioner filed with the respondent on February 6, 1923, another instrument in writing designated "Income and Profits Tax Waiver," covering the years 1917-1920, which is as follows:
(Date)
INCOME AND PROFITS TAX WAIVER
In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Greylock Mills, of No. Adams, Mass., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits or war-profits taxes due under any return made by or on behalf of the said corporation for the years 1917-1920 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of the*4263 United States, and for other purposes," approved August 5, 1909, irrespective of any period of limitations.
GREYLOCK MILLS,
Taxpayer,
By C. T. PLUNKETT,
D. H. BLAIR,Commissioner. A.
The waiver covering the years 1917-1920 bears notation in red pencil on the upper left-hand corner thereof as follows: "JNR 3/16/23"; and such notation was not on the waiver when it was filed by the petitioner.
*1284 The petitioner has not filed any other "Income and Profits Tax Waivers" or consents of any nature to a later determination, assessment or collection of any of the taxes in controversy.
On January 30, 1923, by letter mailed that day, a hearing was granted by the respondent to the petitioner covering the years 1917 to 1920, in accordance with the petitioner's request, this hearing being set for February 6, 1923.
On February 6, 1923, a hearing was held in the Income Tax Unit, petitioner being represented by counsel.
On April 11, 1923, the respondent issued an official ruling known as "Mim. 3085," and officially published same in Internal Revenue Bulletin, vol. II, No. 4, p. 29, dated April, 1923, and thereafter officially published same in Internal Revenue*4264 Bulletin, Cumulative Bulletin II-1, January-June, 1923, p. 174, in the following words:
Article 1012: Assessment of tax.
II-4-822
Mim. 3085
TREASURY DEPARTMENT,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D. C., April 11, 1923.
Unlimited waivers for 1917 income taxes held to expire April 1, 1924.
To Collectors of Internal Revenue, Internal Revenue Agents in Charge, and Others Concerned:
The form of waiver now in use extends the time in which assessments of 1917 income and excess profits taxes may be made to one year from the date of signing by the taxpayer. Inasmuch as there are many waivers on file signed by taxpayers containing no limitation as to the time in which assessments for 1917 may be made, all such unlimited waivers will be held to expire April 1, 1924.
D. H. BLAIR, Commissioner.
On August 27, 1925, a 30-day letter was mailed to the petitioner by the respondent, asserting a deficiency in tax amounting to $111,287.91 for the years 1917, 1918, and 1919.
On or about September 21, 1925, a protest was filed by the petitioner with the respondent to such notice.
On October 9, 1925, a letter was mailed to the petitioner by*4265 respondent granting a conference for October 19, 1925, in accordance with petitioner's request of September 21, 1925. On October 19, 1925, a conference was held at which the petitioner was represented by counsel.
On or about November 24, 1925, there was mailed to the petitioner by the respondent a letter in which it was stated that action would be withheld for a period of ten days in order for petitioner to advise whether it acquiesced in adjustments set forth in letter dated August 27, 1925.
*1285 On or about December 1, 1925, in answer to the letter of November 24, 1925, the petitioner's then counsel mailed to respondent a letter in which it was protested that the revision of an inventory led to an erroneous statement of taxable income.
On March 16, 1926, the petitioner filed with the collector of internal revenue at Boston, Mass., a claim for refund of taxes paid for the year 1917, of the rejection of which the petitioner was notified on or about September 30, 1926.
On or about September 17, 1919, the petitioner filed with the collector of internal revenue at Boston, a claim for credit of taxes paid for 1918, of the rejection of which petitioner was notified*4266 on or about August 31, 1926.
The petitioner never received notice from the respondent that the waivers had been accepted. The first time the petitioner knew that the respondent's name appeared on the waivers was on October 19, 1925, when the waivers were seen at a conference at the Income Tax Unit.
The petitioner received no communications from the respondent in regard to the taxes for the years 1917, 1918, and 1919, between February 23, 1923, and August 27, 1925, nor did the petitioner communicate with the respondent in this regard during such period.
The petitioner did not serve notice that at any time in the future if the tax were not assessed by petitioner would consider the waivers invalid, but at the conference at the Income Tax Unit on October 19, 1925, the petitioner informed the conferee that in the opinion of the petitioner the waivers were already invalid.
The assessment list for the taxes for the fiscal year ended June 30, 1919, was signed in behalf of the respondent on November 26, 1919.
Sidney Alexander, while head of theSpecial Audit Division of the Bureau of Internal Revenue, signed the two waivers on behalf of the respondent, sometime between December, *4267 1919, and September, 1923, under specific authority of the respondent.
In the early part of of March, 1923, the petitioner brought mandamus proceedings to compel the respondent to accept calendar year returns, but the suit was resolved in favor of the respondent on March 3, 1925.
OPINION.
SIEFKIN: In this case the question is presented as to whether the statute of limitations has run against the proposed deficiencies for the year 1917, the six-month period ended June 30, 1918, and the fiscal year ended June 30, 1919, and had run against taxes which were collected on October 5, 1925, the same being an assessment made on January 3, 1920, of additional taxes asserted to be due on the *1286 return for the year 1917, and a portion of the taxes shown to be due by the taxpayer on the return for the fiscal year ended June 30, 1919, assessed November 26, 1919. The deficiency claimed is in the total sum of $111,287.91, as follows:
| Calendar year 1917 | $42,476.36 |
| Period January 1 to June 30, 1918 | 14,568.67 |
| Fiscal year ended June 30, 1919 | 54,242.88 |
The total amount alleged to have been overpaid is $47,090.60.
There is no doubt that the waiver for 1917 taxes, *4268 even if valid, expired on April 1, 1924, due to the announcement of the Commissioner to that effect; and the taxes assessed thereafter were barred by the statute of limitations.
In the case of , it was held that where the Commissioner gave notice that a consent in writing to the determination, assessment and collection after the time otherwise prescribed by law for such determination, assessment and collection, entered into by the Commissioner and the taxpayer, would expire at a certain time, in the absence of other factors, such as an estoppel against the taxpayer, the Commissioner may not determine, assess, or collect the tax after the date fixed by him for the termination of the consent.
In that case we stated:
Occasionally the courts have construed agreements containing such indefinite terms as terminable at the will of either party, but the more generally accepted construction is either (1) that the contract must be performed within a reasonable time, or (2) that it continues until terminated by either party upon reasonable notice. And where a reasonable time is allowed, the party who is first to perform the conditions of the*4269 contract may, by act, deed or otherwise, fix a limitation beyond which be may not extend the time for performance and upon which the other party to the contract may rely. (See Williston on Contracts, sec. 68, et seq., and cases cited.) We see no reason why the rules laid down by the courts for the purpose of determining the intent of the parties in such cases are not equally applicable to a "consent in writing" such as we have here.
In , it was also held that an outstanding waiver concerning the year 1917 expired April 1, 1924.
The instrument set forth in the findings of fact entitled "Income and Profits Tax Waiver" which covered the years 1917-1920 is undated but it is shown that it was filed with the respondent by the petitioner on February 6, 1923. However, the petitioner contends that since the Commissioner gave petitioner no notice of its acceptance, it is invalid and of no effect. Petitioner had no notice that the instrument was signed by respondent until October 19, 1925, at which time petitioner saw the instrument at a conference at the *1287 Income Tax Unit. At this time the petitioner gave notice that it did*4270 not consider the instrument valid.
However, the evidence discloses that Sidney Alexander, Head of the Special Audit Division of the Bureau of Internal Revenue, acting under specific authority of the respondent, signed the instruments in behalf of the respondent at some time prior to September, 1923. This instrument so executed, constituted written consent as provided by the statute, but that part of it referring to taxes for the year 1917 we must consider as having expired April 1, 1924.
In the cases of , and , it was held that it is not necessary for the Commissioner to sign personally waivers in order to have valid consent in writing.
There then arises the question as to whether that portion concerning the taxes for the years 1918 and 1919 had expired prior to December 18, 1925, the date on which the notice of deficiency was mailed to the petitioner. In view of the fact that the Commissioner's bulletin referred only to waivers concerning taxes for the year 1917, we can not hold that the waiver in question expired as to taxes for 1918 and*4271 1919, simply because it also refers to 1917.
As stated before, in the absence of waivers, the statute of limitations would run on the 1918 taxes on June 15, 1924, and on the 1919 taxes on September 19, 1924. The waiver was filed by petitioner on February 6, 1923, leaving a period of approximately three years between the time of filing the waiver and the time the notice of deficiency was sent to petitioner. However, during that time no notice was given by the petitioner as to a termination of the consent, but on the contrary, a suit was brought by petitioner to compel respondent to accept calendar year returns, which suit was resolved in favor of respondent on March 3, 1924, and as late as December 1, 1925, the petitioner and the respondent were corresponding regarding the taxes in controversy.
In the appeal of the , we said, in holding that a waiver had not expired prior to assessment:
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*4272 inoperative.
In , it was held that 20 months was a reasonable time after the filing of a waiver within which the Commissioner might assess taxes.
In the case at bar the petitioner gave notice at a conference on October 19, 1925, that it considered the waiver invalid, but upon the ground that the Commissioner gave no notice of acceptance. *1288 Petitioner did not at any time notify the respondent as to the time at which it would consider the waiver to have expired.
We find that the Commissioner acted within a reasonable time after the consent was filed, and must hold that the assessments for the years 1918 and 1919, were not barred by the statute of limitations.
Another question to be considered is whether the Board has jurisdiction to determine whether the statute of limitations had run against the collection on October 5, 1925, of the 1917 taxes.
Section 284(e) of the Revenue Act of 1926 provides as follows:
(e) If the Board finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax in respect of the taxable year in respect of which the Commissioner*4273 determined the deficiency, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the taxpayer as provided in subdivision (a). Such refund or credit shall be made either (1) if claim therefor was filed within the period of limitation provided for in subdivision (b) or (g), or (2) if the petition was filed with the Board within four years after the tax was paid, or in the case of a tax imposed by this Act, within three years after the tax was paid.
While the Board has no jurisdiction of appeals involving overpayments as an original issue, yet when jurisdiction has been assumed in a case involving an asserted deficiency, by section 284(e) of the Revenue Act of 1926 the Board may determine whether there has been an overpayment. The decision on this point turns upon the question whether the collection of a tax claimed as an overpayment was barred by the statute of limitations at the time of collection.
The collector of internal revenue, on October 5, 1925, collected from the petitioner the sum of $18,791.62, being taxes asserted by the respondent to be due*4274 for the calendar year 1917 in addition to those shown on the return. This tax was assessed January 3, 1920. The petitioner filed a claim for refund of this on March 16, 1926, but the claim was rejected on or about September 30, 1926. The return was filed on April 5, 1918, and the period within which this could be collected expired on April 5, 1923, and the waiver in the case expired April 1, 1924. Since collection was not made until October 5, 1925, we must hold that the collection was barred prior to that time by the statute of limitations.
The collector also, on October 5, 1925, collected from the petitioner the sum of $28,298.98, being the balance shown to be due on its return for the fiscal year ended June 30, 1919, in the sum of $21,994.02, together with interest thereon in the sum of $6,304.96.
In the absence of a waiver the period within which this could be collected would have expired on September 19, 1924, since the return was filed on September 19, 1919, but a waiver was executed which *1289 extended the time, and we must hold that this collection was not barred by the statute of limitations.
Reviewed by the Board.
Judgment will be entered that there*4275 is no deficiency for the calendar year 1917 and that there has been an overpayment of taxes for the calendar year 1917 in the amount of $28,298.98. The proceedings, so far as they relate to the period January 1 to June 30, 1918, and the fiscal year ended June 30, 1919, are restored to the general calendar for assignment for hearing upon the merits in due course.