*197 Decision will be entered under Rule 50.
Petitioner filed timely claims for relief for the fiscal years 1942 to 1946, inclusive, under section 722, referring specifically therein to subsections (b) (2), (b) (3) (A), and (b) (5). After the time for filing any wholly new claims for the fiscal years 1942 and 1943 had expired under section 322, petitioner also claimed relief for all years under section 722 (b) (4). Respondent treated the 722 (b) (4) claim as an amendment of the original claims, and after various examinations and conferences denied relief under 722. At the hearing, respondent stipulated that petitioner was entitled to 722 (b) (4) relief, but denied any relief for 1942 and 1943 because the 722 (b) (4) claim was a wholly new claim, the filing of which was barred by section 322. Held, since respondent considered such claim on its merits he waived noncompliance with his regulations and cannot now deny relief to petitioner.
*221 Petitioner challenges respondent's disallowance of relief under section 722 of the Internal Revenue Code of 19391 for the fiscal years 1942 to 1946, inclusive, and respondent's determination of deficiencies in excess profits tax of $ 13,830.51 and $ 8,667.60 for the fiscal years ended February 29, 1944, and February 28, 1945, respectively. The deficiencies resulted from the disallowance of the deferment of excess profits tax under section 710 (a) (5) of the Code.
*199 In its petition petitioner claimed that it was entitled to relief under all subsections of section 722 (b), except (b) (1), and claimed the right to carry forward and carry back all unused excess profits tax credits which would result from an allowance of relief under section 722.
All issues were disposed of by stipulations of the parties except those which arise from the following circumstances: Petitioner filed timely applications "for relief under section 722 of the Internal Revenue Code with respect to its excess profits tax taxable [years]" 1942 and 1943 (Form 991), and, after the filing of new claims for refund for those years was barred by the statute of limitations, amended these claims by alleging the right to relief under a subsection (722 (b) (4)) of section 722 which had not been specified in the original applications for relief. The issues thus presented are whether the amended claims which violate respondent's regulatory requirements may be considered by him and, if so, whether he has given the claims thus amended such consideration as to constitute a waiver of those requirements.
*222 FINDINGS OF FACT.
Petitioner's business was started in St. Louis, Missouri, *200 during the year 1853 under the name of Eisenstadt Jewelry Company, and has been in continuous operation since that time. The present petitioner was incorporated in 1883 under the laws of the State of Missouri, taking over the business previously conducted by the original founders.
Prior to the depression of 1929-1934, petitioner's business consisted of the manufacture of fine quality jewelry and the selling at wholesale of fine jewelry, diamonds, and watches. During and immediately prior to the base period, petitioner changed the character of its business by engaging in the manufacture of popular type and costume jewelry but also continued the manufacture and sale of fine jewelry, diamonds, and watches. It also went through a reorganization and change of management during the base period.
Petitioner filed its returns on an accrual basis and for a fiscal period ending on February 28 or 29. Petitioner timely filed its Federal income and excess profits tax returns for the fiscal years ended February 28, 1942 and 1943, February 29, 1944, February 28, 1945 and 1946, with the collector of internal revenue for the first district of Missouri.
Petitioner filed consents, Form 872, fixing*201 period of limitation upon assessment of income and profits tax, extending the statute of limitations as follows:
| Fiscal year ended | Statute extended to |
| February 28 or 29 | June 30 |
| 1942 | 1947 |
| 1943 | 1947 |
| 1944 | 1949 |
| 1945 | 1949 |
| 1946 | None filed |
On August 28, 1943, petitioner filed with the Commissioner of Internal Revenue applications for relief under section 722, 1939 Code, on Form 991 for the taxable years ended February 28, 1942, and February 28, 1943. In such applications, petitioner claimed relief under sections 722 (b) (2), 722 (b) (3) (A), and 722 (b) (5). On May 12, 1944, petitioner filed a protective claim for refund on Form 843 for the taxable year ended February 28, 1943. The form covered installment payments of excess profits tax which were made on or before May 15, 1943, August 15, 1943, November 15, 1943, and February 15, 1944. In the explanatory statement attached to the protective claim for refund filed on May 12, 1944, the taxpayer made reference to application for relief filed on Form 991, and stated that "such application for relief is incorporated herein and made a part of this claim."
The applications for relief, Form 991, filed by petitioner for*202 the *223 fiscal years ended February 28, 1942 and 1943, contained the following supporting schedules and statements:
(a) Schedule Showing Sales and Taxable Net Income for the Twenty Years Ending February 28, 1929.
(b) Schedule of History and Description of Character of Business as follows:
The business of the Eisenstadt Manufacturing Company was incorporated in 1883 as the M. Eisenstadt Jewelry Company. The name was changed to the present title in 1895, and the present certificate of incorporation was issued May 14, 1903. The company does a wholesale business in a general line of fine jewelry, diamonds, watches, and clocks. While the principal part of the company's business comes from the territory tributary to St. Louis, it sells over the entire country with the exception of the northeast section. A part of its sales consists of merchandise manufactured in its own factory, including fine jewelry, fraternal and class emblems, pins and rings. Its advertised brand of Priscilla Wedding Rings is nationally known.
(c) Statement of assertions and facts in support of grounds for relief as follows:
The excess profits tax, computed without the benefit of the relief provisions of *203 Section 722 of the Internal Revenue Code as amended by the Revenue Act of 1942, is excessive and discriminatory in the case of this taxpayer because the average base period net income credit does not provide a proper or adequate standard of the taxpayer's normal earnings, for the following reasons:
(a) The business of the industry of which the taxpayer is a member was depressed during the base period because of temporary and unusual economic events.
(b) The business of the taxpayer was depressed during the base period to an extent greater than the industry of which the taxpayer is a member because of temporary and unusual economic events.
(c) The taxpayer is a member of an industry, the profits cycle of which differs materially from the general business cycle.
(d) During the years 1930-1936, both inclusive, the taxpayer's working capital was severely depleted by losses aggregating approximately $ 850,000. These severe losses resulted in lowering the taxpayer's financial credit standing to such an extent that the taxpayer's volume of business was required to be curtailed and thus prevented the realization of normal earnings during the base period years.
In support of the foregoing*204 assertions, but without prejudice to the right of the taxpayer to submit from time to time or at any time additional explanations, factual data, or arguments in further support of the taxpayer's grounds for relief under the provisions of Section 722 of the Internal Revenue Code, the following is submitted:
DEPRESSION IN THE INDUSTRY OF WHICH TAXPAYER IS A MEMBER:
The jewelry industry, being in the luxury class, fluctuates widely according to the ability of the buying public to purchase luxury goods. Following the 1929 stock market collapse, the demand for luxury items receded rapidly and did not recover as soon as other industries.
A comparison of retail jewelry sales with total national income and index of industrial production is given on Table 1. This tabulation shows that national income during the years 1936-1939 was comparable with the years 1923-1926, whereas, retail jewelry sales during 1936-1939 were only equivalent to about 50 *224 per cent of the pre-depression period. The tabulation also shows that industrial production in the years 1936-1939 was at a higher level than in the six years prior to 1929.
DEPRESSION OF THE TAXPAYER'S BUSINESS AS COMPARED WITH THE INDUSTRY*205 OF WHICH THE TAXPAYER IS A MEMBER:
The business and profits of the taxpayer receded with the business and profits of the industry following the stock market crisis of 1929. However, the working capital of the taxpayer was so reduced by a series of seven consecutive loss years that it was unable to keep pace with the industry in the recent recovery years. Several members of the taxpayer's industry improved their financial position by compromising their debts during the depression years, whereas the taxpayer elected to sacrifice working capital to meet all of its obligations. As previously stated, this sacrifice of working capital retarded the recovery of the taxpayer. A comparison of sales by the taxpayer with retail jewelry sales showing the ratios of such sales to the year 1926 is given on Table 2.
DEPLETED WORKING CAPITAL:
Reference is made to Table 3 which reflects a comparative summary of net working capital by years. This summary shows that the taxpayer had net working capital of $ 939,392 as of February 28, 1912 and for the following seventeen years had an average net working capital of more than $ 1,000,000. Following the stock market collapse in 1929, the taxpayer entered*206 into a period of seven successive loss years which caused a substantial reduction in net working capital, the balance at February 28, 1936 being $ 248,750. The following four years (base period years) were relatively small profit years, and although no dividends were paid only $ 113,094 was added to working capital. The profits and losses of this taxpayer apply almost entirely to working capital since there are only minor amounts charged against income for items such as provision for depreciation. Unless relief is granted under Section 722, it will be impossible to rebuild working capital to an amount which will enable this taxpayer to survive a period of loss years should such re-occur.
(d) Schedule of Comparison of Retail Jewelry Sales with Total National Income and Index of Industrial Production.
(e) Comparison of Sales by the Taxpayer with Retail Jewelry Sales Showing the Ratios of Such Sales to the Year 1926.
(f) Summary of Net Working Capital by Years.
(g) Comparative Balance Sheets -- 1920-1939.
(h) Comparative Statements of Profit and Loss -- 1920-1939.
(i) Reconciliation of Taxable Income with Book Income and Analysis of Surplus -- 1920-1939.
The claim for refund on Form*207 843 filed by petitioner on May 12, 1944, for its fiscal year ended February 28, 1943, demanded the refund of excess profits tax in the amount of $ 22,981.92, that being the amount of excess profits tax paid by petitioner after it had filed its application for relief under section 722 on Form 991. The claim for refund contained inter alia the following statements:
It should not be construed that the amount of this claim for refund of $ 22,981.92, as shown above, is the entire amount of the refund claimed to be due to the taxpayer under the provisions of Section 722 of the Internal Revenue Code, and, in the event the above regulations are held to be invalid in respect of the *225 amount of the refund for which Treasury Department Form 991 is deemed to be a claim under the regulations, this claim should be construed to be a claim for refund for the entire amount of the excess profits tax which is refundable to the taxpayer under the provisions of Section 722 of the Internal Revenue Code, as amended by Section 222 of the Revenue Act of 1942 and as the said Section 722 may be further amended by subsequent acts of Congress.
In any event, this claim is intended to be and should*208 be construed to be a claim for the entire amount of refund to which the taxpayer is entitled, in excess of any refund payable to the taxpayer under any other claims filed by it under the provisions of Section 722 of the Internal Revenue Code, either under its present provisions or as the said section may be further amended by subsequent acts of Congress.
On May 12, 1944, petitioner filed with the Commissioner of Internal Revenue an application for relief under section 722 for the taxable year ended February 29, 1944, and on August 13, 1946, and May 7, 1948, it filed claims for refund on Form 843 for the taxable year ended February 29, 1944. The application for relief under section 722 on Form 991 called for the same relief and was based upon the same data as were the applications for relief under section 722 filed for the 2 preceding fiscal years. The claim for refund on Form 843 filed August 13, 1946, demanded the refund of $ 28,524.27, representing a portion of the petitioner's excess profits taxes for the fiscal year 1944, paid after the filing of the application for relief under section 722 on Form 991. That claim for refund contained substantially the same statement as did*209 the claim for refund on Form 843 filed for the fiscal year ended February 28, 1943. The claim for refund on Form 843 filed May 7, 1948, was captioned "Amended Claim" and demanded the refund of excess profits tax in the net amount of $ 21,622.16 after credit under sections 780 and 783 of the Internal Revenue Code of 1939.
Under date of December 18, 1944, petitioner was informed, by a so-called 30-day letter, that a revenue agent had examined its 1942 and 1943 tax returns and had considered petitioner's applications for relief under section 722 for such years. The revenue agent's report, dated October 16, 1944, recommended rejection of petitioner's applications for relief in the following language:
On the evidence submitted, taxpayer has not proved that it qualifies for relief under the provisions of section 722 (b), and that the claimed credit represents a fair and just amount representing normal earnings within the meaning of section 722 (a). Accordingly, it is recommended that the applications be rejected.
On May 9, 1945, petitioner filed with the Commissioner of Internal Revenue an application for relief on Form 991 for the fiscal year ended February 28, 1945, and on May 7, 1948, *210 it filed a claim for refund on Form 843 for the same fiscal year. The application for relief on Form 991 sought relief on the same grounds and on the basis of the same data as did the applications for relief for the fiscal years 1942 *226 and 1943. The claim for refund on Form 843 filed May 7, 1948, demanded refund of $ 17,282.28, representing a portion of the excess profits tax paid by petitioner after it had filed the application for relief on Form 991 for the fiscal year 1945.
On May 17, 1948, petitioner filed with the Commissioner of Internal Revenue an application for relief on Form 991 for the fiscal year ended February 28, 1946. That application claimed the same relief and was based upon the same data as were the applications filed for the fiscal years 1942 and 1943.
On May 4, 1949, petitioner filed with the office of the internal revenue agent in charge, St. Louis, Missouri, a document captioned "Brief," in which the petitioner set forth the facts showing that it had changed the character of its business during and immediately prior to the base period by adding a number of new products including popular priced jewelry and costume jewelry; that it had adopted a new *211 method of selling jewelry, including the use of a new type of box and the application of its trade-mark "Priscilla," which had theretofore been used only on its fine jewelry, to its popular priced lines; and that it had experienced a change of management and had gone through a reorganization during the base period.
Petitioner's applications for relief under section 722 were examined by an agent who set forth the result of examination and his conclusions in a report dated July 14, 1949, copy of which was furnished to the petitioner. The agent treated the "Brief" filed May 4, 1949, as an amendment of the applications for relief to include a claim for relief under section 722 (b) (4). The agent examined each of the changes set forth by petitioner in the brief and concluded that while the petitioner had demonstrated that it had made certain changes in its business and products, such changes were not sufficient to entitle petitioner to relief under section 722 (b) (4). The agent recommended that the applications for relief be rejected in the following language and for the reasons indicated:
Taxpayer has failed to establish that its actual base period net income is an inadequate standard*212 of normal earnings by reason of the existence of any factor enumerated under the provisions of Section 722. It is recommended, therefore, that the applications for relief be rejected.
Taxpayer filed original forms 991 and claimed relief under the provisions of Section 722 (b) (2), (b) (3) (A) and (b) (5). Supplement was filed on May 4, 1949, in which relief is also claimed under Section 722 (b) (4). Since the statute of limitations had run on the fiscal years ending 2/28/42 and 2/28/43 before the supplement was filed, it appears that no consideration may be given to those years under the provisions of Section 722 (b) (4).
On September 16, 1949, petitioner filed with the internal revenue agent in charge, St. Louis, Missouri, a document captioned "Protest," *227 bearing date of July 14, 1949, in which petitioner protested against the conclusions reached by the agent in his report of July 14, 1949, and submitted additional arguments and data in support of its applications for relief under section 722.
On November 22, 1949, petitioner filed with the internal revenue agent in charge, St. Louis, Missouri, a document captioned "Supplemental Data Relative to Applications for Relief*213 under Section 722 of the Internal Revenue Code," in which the petitioner again discussed in detail the change in character of its business during and immediately prior to the base period and submitted additional data in support of its application for relief under section 722 (b) (4).
Under date of December 28, 1949, the section 722 committee of the office of the internal revenue agent in charge at St. Louis, Missouri, submitted to the Commissioner of Internal Revenue, Washington, D. C., a field conference report covering petitioner's applications for relief under section 722 in which the issues were stated as follows:
1. Whether the taxpayer's business was depressed during the base period because of depleted working capital which was a temporary and unusual economic event and claims it qualifies for relief under either section 722 (b) (2) or (b) (5).
2. Whether the taxpayer's profits cycle differed materially from the general business cycle.
3. Whether the taxpayer had a change in management, change in products or change in the character of its business within the provisions of section 722 (b) (4).
After discussing the facts relied upon by the petitioner in support of each issue, *214 the section 722Field Committee reached the following conclusion:
After a thorough consideration of the record, it is concluded that the taxpayer has failed to establish that the tax as computed results in an excessive and discriminatory tax, and has failed to establish the existence of any qualifying factor prescribed by section 722 (b) (2), (b) (3) (A), (b) (4) and (b) ( 5) of the Internal Revenue Code.
The taxpayer's representatives do not agree to the findings, and it is recommended that the case be certified to the Excess Profits Tax Council for further consideration.
On April 15, 1950, petitioner filed with the Commissioner of Internal Revenue, Washington, D. C., a document captioned "Brief in Support of and Amendment to Applications for Relief under Section 722," bearing date of April 15, 1950, in which petitioner submitted additional arguments and data in support of its applications for relief under section 722 including section 722 (b) (4). In the same document which was verified before a notary public by petitioner's president, the petitioner again amended its pending applications for relief under section 722, as follows:
*228 Amendment of Applications and Claims *215 for Relief
Since the applications for relief on form 991 and the supplemental claims for refund on form 843 are still pending with [out] rejection, the taxpayer is entitled to amend them within the rule laid down by the United States Supreme Court in United States v. Memphis Cotton Oil Company, 288 U.S. 62 and United States v. Factors and Finance Company, 288 U.S. 89">288 U.S. 89.
* * * *
Under the above mentioned principle, the taxpayer hereby amends each and every one of its applications for relief and its supplemental claims for refund to claim relief alternatively under each subdivision of Section 722 (b) of the Internal Revenue Code, namely, 722 (b) (1), 722 (b) (2), 722 (b) (3), 722 (b) (4), and 722 (b) (5). It also claims the right to carry forward the unused excess profits credit for its fiscal year 1941, which will result from the allowance of relief under Section 722.
Conferences were held at Washington, D. C., between representatives of the Excess Profits Tax Council on February 16, 1950, and August 2, 1950. Subsequently, under date of June 12, 1953, the Commissioner of Internal Revenue issued to petitioner the*216 90-day statutory notice formally rejecting petitioner's application for relief under section 722 and related claims for refund on Form 843. The reason for the rejection of petitioner's applications for relief and related claims for refund were set forth in the statutory notice as follows:
After careful consideration of your applications for relief under section 722 of the Internal Revenue Code (Forms 991) filed August 28, 1943 for the taxable years ended February 28, 1942 and 1943, May 12, 1944 for the taxable year ended February 29, 1944, May 9, 1945 for the taxable year ended February 28, 1945 and May 17, 1948 for the taxable year ended February 28, 1946 and related claims on Forms 843 filed May 12, 1944 for the taxable year ended February 28, 1943, August 16, 1946 and May 7, 1948 for the taxable year ended February 29, 1944 and May 7, 1948 for the taxable year ended February 28, 1945, it has been determined that you have not established your right to the relief requested in your applications.
The documents considered by the Commissioner of Internal Revenue, in considering and in rejecting petitioner's applications for relief under section 722, were set forth in the statement attached*217 to the statutory notice as follows:
In making this determination of your excess profits tax liability, careful consideration has been given to your applications for relief under section 722 of the Internal Revenue Code filed August 28, 1943 for the years ended February 28, 1942 and 1943, May 12, 1944 for the taxable year ended February 29, 1944, May 9, 1945 for the taxable year ended February 28, 1945 and May 17, 1948 for the taxable year ended February 28, 1946, and related claims on Forms 843 filed May 12, 1944 for the taxable year ended February 28, 1943, August 16, 1946 and May 7, 1948 for the taxable year ended February 29, 1944 and May 7, 1948 for the taxable year ended February 28, 1945; to Brief dated April 7, 1949 and filed May 4, 1949 with the Internal Revenue Agent in Charge, St. Louis, Missouri; to report of examination of section 722 claims dated July 14, 1949; to your protest dated September 16, 1949; to statements made at conference held in St. Louis, *229 Missouri, on October 27, 1949 and to supplemental data submitted on November 23, 1949.
Consideration has also been given to statements made at conferences with representatives of the Excess Profits Tax Council*218 at Washington, D. C., on February 16, 1950 and August 2, 1950, and to the additional information submitted April 17, 1950.
The Excess Profits Tax Council has determined that you have not established your right to the relief requested in such applications.
The deficiencies result from the disallowance of the deferment of excess profits tax under section 710 (a) (5) claimed by you for the taxable years ended February 29, 1944 and February 28, 1945.
The parties have stipulated that the petitioner does not qualify for and is not entitled to relief under section 722 (b) (1), (b) (2), (b) (3) (A), (b) (3) (B), or (b) (5) of the 1939 Code for the fiscal years ended February 28, 1942 and 1943, February 29, 1944, February 28, 1945 and 1946.
The parties have stipulated that the petitioner does qualify for relief under section 722 (b) (4) of the 1939 Code. Solely because of such qualification, the constructive average base period net income is to be $ 53,383 for each of the fiscal years involved, except for the fiscal year ended February 28, 1941. For that fiscal year the constructive average base period net income under the variable credit rule is $ 47,105.
The petitioner's excess profits*219 net income and excess profits credit, computed under the invested capital method, as finally determined by the Commissioner of Internal Revenue, for the fiscal years ended February 28, 1942, through February 28, 1946, are as follows:
| Excess | ||
| Fiscal year | Excess | profits credit |
| ended | profits | (invested |
| February 28 or 29 | net income | capital) |
| 1942 | $ 103,524.43 | $ 38,699.08 |
| 1943 | 76,971.44 | 40,060.60 |
| 1944 | 212,260.38 | 43,721.34 |
| 1945 | 271,464.38 | 42,197.88 |
| 1946 | 277,651.33 | 45,879.08 |
The stipulated facts are found as stipulated.
OPINION.
All issues with respect to the fiscal years 1944, 1945, and 1946 have been stipulated by the parties, and effect will be given thereto under Rule 50.
For the fiscal years 1942 and 1943 the qualification of petitioner for relief under section 722 (b) (4) and its constructive average base period net income have been stipulated, and the questions here before us for decision are whether petitioner's applications for relief under section 722 and claims for refund relating to those years, as amended to include specifically a reliance on subsection 722 (b) (4) by a document *230 filed after the time within which original claims for refund*220 could be filed for those years, were completely invalid in their amended form or could be considered by respondent upon waiver of their noncompliance with respondent's regulations; and, if they could be considered by respondent by such waiver, whether respondent gave to these claims as thus amended such consideration prior to final administrative action as to constitute a waiver of his regulatory requirements.
Petitioner contends that if filed timely applications for relief under section 722; that its applications were later expanded to include a ground (sec. 722 (b) (4)) not specifically claimed in its original applications; that respondent considered and rejected the expanded applications on their merits; and that such action by the respondent constitutes a waiver of the lack of specificity required in his regulations within the meaning of the rule announced by the Supreme Court in United States v. Memphis Cotton Oil Co., 288 U.S. 62">288 U.S. 62, and United States v. Factors & Finance Co., 288 U.S. 89">288 U.S. 89. See, also, Bemis Bros. Bag Co. v. United States, 289 U.S. 28">289 U.S. 28; United States v. Kales, 314 U.S. 186">314 U.S. 186;*221 Pink v. United States, 105 F. 2d 183 (C. A. 2, 1939); Addressograph-Multigraph Corporation v. United States, 112 Ct. Cl. 201">112 Ct. Cl. 201, 78 F. Supp. 111">78 F. Supp. 111 (1948); Industrial Yarn Corporation, 12 T. C. 589; and Martin Weiner Corp., 26 T.C. 128">26 T. C. 128. See, also, Wilmington Gasoline Corporation, 27 T.C. 500">27 T. C. 500.
Assuming, arguendo, that respondent had refused to waive the specificity requirements of his regulations, petitioner contends, nevertheless, that it was entitled to amend its applications for relief under section 722, after the statute of limitations had barred the filing of a new application but prior to the rejection of its pending applications, because all the facts necessary to consider such amendment would necessarily have been ascertained by respondent in his examination and consideration of petitioner's applications prior to the amendment. In other words, petitioner contends that the facts, ascertained by respondent in his investigation of the section 722 (b) (2), (b) (3) (A), and (b) (5) grounds for relief, were*222 sufficient to apprise him of the facts relating to the 722 (b) (4) ground for relief later added by amendment.
Respondent maintains that petitioner's amended claim for relief, filed May 4, 1949, claiming relief specifically under section 722 (b) (4), was a new ground for relief which was not timely filed for the fiscal years 1942 and 1943. Respondent maintains further that he did not waive compliance with his regulations regarding the form or substance of any of petitioner's claims for refund or relief. Respondent relies primarily upon United States v. Andrews, 302 U.S. 517">302 U.S. 517; United States v. Garbutt Oil Co., 302 U.S. 528">302 U.S. 528; Nemours Corporation v.*231 , 188 F. 2d 745 (C. A. 3, 1951); and H. Fendrich, Inc., 25 T.C. 262">25 T. C. 262, revd. 242 F. 2d 803 (C. A. 7, 1957).
The statutory law is found in sections 322 and 722 (d). Section 322 (b) (1) provides that unless a claim for credit or refund is filed by a taxpayer within 3 years from the time the return was filed or within 2 years from the time the tax was paid, no*223 credit or refund shall be allowed or made after the expiration of whichever of such periods expires the later. Section 722 (d) denies a taxpayer the benefits of section 722, unless within the period of time prescribed by section 322 it makes application for such benefits. The pertinent provisions of respondent's regulations, as amended, are set forth in the margin. 2
*224 Petitioner's original applications for relief and claims for refund covering the years in question were filed within the time required by statute. Petitioner's amendment of May 4, 1949, stating another ground for refund, i. e., section 722 (b) (4), was filed after the expiration of such time. The filing of such amendment was not contrary *232 to the statute, but was prohibited by respondent's regulation. The statute requires that the taxpayer file an application for relief under section 722 "within the period of time prescribed by section 322," but does not contain any requirements as to the statement therein of grounds relied upon. The respondent's regulations require the statement of grounds for relief and provide that "No new grounds presented by the taxpayer after the period of time for filing a claim for credit or refund prescribed by section 322, * * * will be considered in determining whether the taxpayer is entitled to relief * * *."
In considering a similar problem in the case of Martin Weiner Corp., supra, we said (p. 134): "[Although] a claim for refund may * * * be denied if it does not conform with the formal requirements contained*225 in respondent's regulations under section 322 (to the effect that such claims shall be made on certain forms and must state the grounds relied upon for refund), those regulatory requirements can be waived by respondent."
In the instant case, the requirements that specific grounds be set out in an application for general relief under section 722 and that no new ground can be presented by amendment of such application after the period prescribed by section 322 are requirements not made by the statute but by respondent's regulations. On the authority of Martin Weiner Corp., supra, and the cases therein cited, we hold that these regulatory requirements may be waived by respondent.
We turn now to the question of whether there was a waiver by respondent.
The original claims for 1942 and 1943 and petitioner's tax returns for such fiscal years were examined and considered by one of respondent's revenue agents. Petitioner was informed, by the 30-day letter dated December 18, 1944, that as a result of his investigation the revenue agent recommended rejection of the claims, but no statutory notice of disallowance was mailed to petitioner following such investigation*226 and consideration.
This record discloses no administrative action on any of petitioner's claims between December 18, 1944, and May 4, 1949, when petitioner filed the document entitled "Brief." Prior to and after December 18, 1944, petitioner filed additional applications for relief and additional claims for refund for the fiscal years 1944, 1945, and 1946, based upon the same grounds and date set forth in the applications and claims for fiscal years 1942 and 1943. It was only after the Brief of May 4, 1949, was filed presenting section 722 (b) (4) factors that further administrative action occurred. For clarity, we point out that at that time the applications and claims pending before the respondent related to the 5 fiscal years 1942 to 1946, inclusive.
It is a fact, so found, that the Brief filed on May 4, 1949, was treated *233 by respondent's agent as amending the applications for relief to include a claim under section 722 (b) (4). After his examination of petitioner's claims, as amended, the revenue agent recommended the rejection thereof on all grounds claimed, i. e., section 722 (b) (2), (b) (3) (A), (b) (4), and (b) (5). In his report, the revenue agent pointed out*227 that the statute of limitations had run on fiscal years 1942 and 1943 before the supplement (Brief) was filed and that "no consideration may be given to those years under the provisions of section 722 (b) (4)." This statement was apparently based on the agent's determination that the section 722 (b) (4) claim was a new ground which the regulations provided would not be considered in determining whether a taxpayer is entitled to relief, if presented after the time prescribed by section 322 for filing a claim. Sec. 35.722-5 (a), supra, footnote 2. Nevertheless, respondent did not choose to stand on this formal defect and no statutory notice of disallowance based thereon was mailed to petitioner.
After additional data and argument in support of its claims were submitted by petitioner in September and November 1949, the section 722 committee of the office of the internal revenue agent in charge at St. Louis considered the claims and submitted a field conference report to respondent. This report shows that one of the grounds for relief considered was the change in management, change in products, or change in character of business under section 722 (b) (4). The field committee*228 concluded that petitioner had failed to establish the existence of any qualifying factor prescribed by section 722 (b) (2), (b) (3) (A), (b) (4), and (b) (5).
Following additional conferences, the filing of further data, the amending of the pending applications and related claims to include section 722 (b) (1), and further administrative review and consideration by the Excess Profits Tax Council, respondent issued his statutory notice of disallowance. This was the first time final action was taken by respondent with respect to any of the section 722 claims filed by petitioner for the taxable years. The notice of disallowance and the statement attached thereto dealt with applications for relief and related claims under section 722 generally. No mention was made to specific subsections of section 722. No reference was made to section 322 as barring the claims for fiscal years 1942 and 1943. No indication was given that respondent did not fully and completely understand the grounds upon which petitioner's claims were based. On the contrary, the statutory notice indicated that respondent fully understood the grounds and dealt with them on the basis of such understanding. Keneipp v. United States, 184 F.2d 263">184 F. 2d 263, 267*229 (C. A., D. C., 1950). The notice of disallowance, in our opinion, was a flat denial of relief on the merits with no mention whatsoever of untimely filing, informality, or *234 inadequacy of information as to the claims for 1942 and 1943. United States v. Kales, supra.
With this history of respondent's various administrative reviews of petitioner's claims before us, we are convinced that there was a waiver by respondent of his regulatory requirements with regard to petitioner's claims and applications covering the 2 years here in question, and we so hold.
Reviewed by the Special Division.
Decision will be entered under Rule 50.
Footnotes
1. Sectional references and the word "Code," as used herein, refer to the Internal Revenue Code of 1939.↩
2. Regulations 112.
Sec. 35.722-5. Application for Relief Under Section 722. -- (a) Requirements for filing. --
* * * *
Except as otherwise provided in this section, the application on Form 991 (revised January, 1943) must set forth in detail and under oath each ground under section 722 upon which the claim for relief is based, and facts sufficient to apprise the Commissioner of the exact basis thereof. It is incumbent upon the taxpayer to prepare a true and complete claim and to substantiate it by clear and convincing evidence of all the facts necessary to establish the claim for relief; failure to do so will result in the disallowance of the claim. If a claim for relief is based upon section 722 (b) (5) and section 35.722-3 (e) (relating to factors other than those expressly provided by section 722 (b) (1), (2), (3), and (4) and section 35.722-3 (a), (b), (c), and (d)), the application must state the factors which affect the business of the taxpayer, which may reasonably be considered as resulting in an inadequate standard of normal earnings during the base period, and the reasons why the extension of relief under section 722 to the taxpayer would not be inconsistent with the principles underlying the provisions of section 722 (b) (1), (2), (3), and (4) and section 35.722-3 (a), (b), (c), and (d), and with the conditions and limitations enumerated therein. Only one application for relief under section 722 shall be filed for an excess profits tax taxable year. New grounds or additional facts not contained in the original application shall be presented as an amendment to the original application for the taxable year. Any supplemental or additional applications filed after the filing of the original application shall be considered amendments to the original application previously filed. No new grounds presented by the taxpayer after the period of time for filing a claim for credit or refund prescribed by section 322, and no new grounds or additional facts presented after the disallowance, in whole or in part, of the application for relief and the claim for refund based thereon, will be considered in determining whether the taxpayer is entitled to relief or the amount of the constructive average base period net income to be used in computing such relief for the taxable year.
* * * *
(c) Claim for refund. -- The application on Form 991 or Form 991 (revised January, 1943) shall be considered a claim for refund or credit with respect to the excess profits tax for the taxable year for which the application is filed which has been paid at or prior to the time such application is filed. The amount of credit or refund claimed shall be the excess of the amount of excess profits tax for the taxable year paid over the amount of excess profits tax claimed to be payable computed pursuant to the provisions of section 722↩. In case the taxpayer elects to pay in installments the tax shown upon its return and at the time the application is filed such tax has not been paid in full, the taxpayer should file a claim for refund on Form 843 as promptly as possible after such tax has been paid in full. The information already submitted in the application need not again be submitted on Form 843 if reference is made therein to such application. * * *