Pennsylvania-Dixie Cement Corp. v. United States, (1936)

Full title: PENNSYLVANIA-DIXIE CEMENT CORPORATION v. UNITED STATES

Court: United States Court of Federal Claims

Date published: Dec 7, 1936

17 F. Supp. 196 (Fed. Cl. 1936)

Opinion

No. M-77.

December 7, 1936.

Fred A. Woodis, of Washington, D.C. (Francis R. Lash, of Washington, D.C., of counsel), for plaintiff.

George H. Foster, of Washington, D.C., and Robert H. Jackson, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

Suit by the Pennsylvania-Dixie Cement Corporation against the United States.

Petition dismissed.

The court, upon the report of a commissioner and the evidence, makes the following special findings of fact:

1. The plaintiff is a Delaware corporation with its principal office and place of business at Nazareth, Pa. It is the successor of the Clinchfield Portland Cement Corporation, a Virginia corporation, which was merged with the plaintiff September 23, 1926. Upon merger of the two corporations plaintiff took over all the assets and assumed all the liabilities of the Virginia corporation, and at that time the Virginia corporation surrendered its corporate charter and ceased to exist as a corporation. For convenience the name "plaintiff" will be used indiscriminately as applying to both corporations.

2. Income and/or profits tax returns were filed and the tax shown due thereon was paid as follows:

-------------------------------------------------------------- Year | Date return | Tax shown | Date of | was filed | due | payment -------------------|---------------|-----------|-------------- 1914 ............. | Feb. 26, 1915 | $1,489.78 | June 28, 1915 1915 ............. | Mar. 29, 1916 | 1,813.54 | June 29, 1916 1916 ............. | Mar. 26, 1917 | 2,701.78 | June 8, 1917 1917 ............. | Mar. 29, 1918 | 28,835.49 | June 15, 1918 --------------------------------------------------------------

3. After an audit of plaintiff's returns for 1913, 1914, 1915, 1916, and 1917, the Commissioner of Internal Revenue advised plaintiff January 29, 1923, as to the results of such audit as follows:

--------------------------------------------------- Year | Overassessment | Deficiency -------------------|----------------|-------------- 1913 ............. | $212.22 | ............. 1914 ............. | 235.97 | ............. 1915 ............. | 370.34 | ............. 1916 ............. | 482.93 | ............. 1917 ............. | .............. | $108,177.50 ---------------------------------------------------

The foregoing letter advised plaintiff of its right to protest such determination within thirty days, and also that, in the event it desired to protest, a waiver of the statute of limitations should be filed. February 23, 1923, plaintiff filed an unlimited waiver with the Commissioner for 1917. The name "D.H. Blair, Commissioner," with the initials "AHF" thereunder, was not placed thereon by the said D.H. Blair, but it was placed thereon after its receipt in the Bureau of Internal Revenue from plaintiff. After protest by plaintiff on or about June 28, 1923, the deficiency of $108,177.50 for 1917 was assessed July 6, 1923.

4. At a conference July 18, 1923, between representatives of plaintiff and the Commissioner, certain adjustments were tentatively agreed to which would result in a reduction of the deficiency for 1917 from $108,177.50 to approximately $28,000, and July 27, 1923, plaintiff advised the Commissioner as follows:

"With respect to the conference with the Bureau of Internal Revenue held on July 18th, 1923, in connection with our appeal from the findings for 1917 and prior years set forth in your registered letter dated January 30th, 1923, we accept the manner of disposition of the items as tentatively agreed in said conference, of which a memorandum is attached hereto.

"No mention, however, is made in the memorandum regarding the treatment of the earned surplus of Kingsport Power Corporation. This item is referred to on page 12 in your letter mentioned above, but at the conference we were advised it would be handled as a liquidating dividend instead of added to the amount credited on account of the sale of the power plant.

"We also enclose a statement by years of additions to the cement plant made by our company, for convenience in the recomputation of the income and excess profits taxes for the year 1917.

"Yesterday we were greatly surprised to receive from the collector at Nashville the notice and demand for payment before August 5th, 1923, of the additional income and excess-profits taxes for the year 1917, without any consideration given to our appeal, which undoubtedly is due to a mistake somewhere, and it is respectfully requested that the demand for payment of this additional tax be held up until a final recomputation is made in accordance with the data submitted herewith."

July 30, 1923, the Commissioner instructed the collector to withhold demand for the payment of the additional assessment for 1917 which had been made as shown in finding 3.

5. July 26, 1923, plaintiff received from the collector certificates of overassessment for 1913, 1914, 1915, and 1916 which showed overassessments for those years in the respective sums of $178.51, $235.97, $370.34, and $482.93. The foregoing overassessments were found to be overpayments, and the total amount, $1,267.75, was credited August 14, 1923, to the outstanding and unpaid additional tax for 1917, thus reducing such additional tax from $108,177.50 to $106,909.75.

6. August 23, 1923, plaintiff forwarded to the Commissioner additional information with respect to its tax liability for 1917, and on the basis of further requests from the Commissioner additional information was promptly furnished to the Commissioner with respect to 1917 on August 28, 1923, October 2, 1923, October 15, 1923, and November 7, 1923.

7. December 14, 1923, plaintiff filed an unlimited waiver of assessment and collection for 1917 and 1918. The foregoing waiver was not signed by the Commissioner, but his name was placed thereon by S. Alexander December 19, 1923, under a general authorization previously issued to him by the Commissioner.

8. After a further conference and after certain additional information had been furnished by plaintiff January 14, 1924, at the request of the Commissioner, plaintiff, on January 6, 1925, filed another waiver of the period within which assessment might be made for 1917, such waiver to remain in effect until December 31, 1925. The waiver was received in the office of one L.T. Lohman, who was then head of the division in which the return was being considered. Lohman at the time had a general authorization from the Commissioner to sign the Commissioner's name to waivers. At Lohman's direction the Commissioner's name was signed to this waiver by an employee in his office acting under him.

9. April 30, 1925, plaintiff called attention to the delay in the determination of its tax liability for 1917 and urged that the matter be expedited. July 24, 1925, the Commissioner advised plaintiff of a further tentative determination of its tax liability for the years 1913 to 1917, inclusive, and gave plaintiff thirty days within which to file a protest against that determination. Overassessments and deficiencies were shown in such determination as follows:

------------------------------------------------ Year | Overassessment | Deficiency -------------------|----------------|----------- 1913 ............. | $63.91 | .......... 1914 ............. | .............. | $7.22 1915 ............. | .............. | 82.98 1916 ............. | .............. | 381.92 1917 ............. | 78,788.55 | .......... ------------------------------------------------

Included in the letter of July 24, 1925, was the following statement: "In accordance with Article 841, Regulations 62, you are required to sign and return the inclosed waiver consenting to the assessment of additional taxes for the years 1914-1916, inc., as a prerequisite to the allowance of the additional income shown for those years in the computation of your invested capital for 1917 and subsequent years."

10. August 10, 1925, plaintiff executed and filed with the Commissioner a waiver of the period within which assessment might be made for 1914, 1915, and 1916, such waiver to remain in effect until December 31, 1925. This waiver was received in the office of a Mr. H.B. Robinson, head of the division in which the returns for the years 1914, 1915, and 1916, were being considered. Robinson at the time had a general authorization from the Commissioner to sign the Commissioner's name to waivers. At the direction of Robinson, the Commissioner's name was signed to this waiver by an employee of his office acting under him.

On the same day, namely, August 10, 1925, plaintiff filed an agreement waiving the right of appeal under section 274(a) of the Revenue Act of 1924 ( 43 Stat. 297) and consenting to immediate assessment of the deficiencies for 1914, 1915, and 1916 as shown in the Commissioner's letter of July 24, 1925. The foregoing deficiencies were assessed October 27, 1925.

11. November 9, 1925, plaintiff received certificates of overassessment for 1913 and 1917 showing overassessments for those years in the respective amounts of $63.91 and $78,788.55. The overassessment for 1913 was found to be an overpayment and was credited to the outstanding and unpaid additional tax for 1917. The overassessment for 1917 being an amount theretofore assessed and then outstanding and unpaid was abated, and that abatement, together with the credits theretofore made, reduced the unpaid additional assessment for 1917 to $28,057.29.

12. Accompanying the certificates of overassessment referred to in finding 11 were notices and demands for payment of the additional taxes for 1914, 1915, and 1916 referred to in finding 9, and an outstanding and unpaid balance of additional tax for 1917 of $28,057.29, together with interest thereon of $3,847.50. The notices required payment to be made within ten days under threat of the imposition of a penalty of 5 per cent. of such amounts and the further penalty of an increased rate of interest thereon for failure of prompt payment. Thereafter plaintiff, in order to avoid the consequences of the 5 per cent. penalty and increased rate of interest, paid the various amounts referred to above under protest November 16, 1925.

13. The Commissioner has not at any time mailed to plaintiff a notice, within the purview of section 274(a) and section 280 of the Revenue Act of 1924 ( 43 Stat. 297, 301), of his determination of a deficiency in tax for any one or more of the taxable years 1914, 1915, 1916, and 1917 from which plaintiff could have appealed to the United States Board of Tax Appeals for a determination of its tax liability for such year or years.

14. October 24, 1929, plaintiff filed the following letter with the Commissioner:

"Reference is made to certificate of overassessment No. 862381 which was issued to the above-named corporation on or about November 6, 1925. The certificate referred to indicated an overassessment of income taxes for the year 1913, in the amount of $63.91. It appears from such certificate that this overassessment was allowed by the Commissioner on schedule No. 17228.

"The total amount of this overassessment, $63.91, was credited to additional taxes alleged to be due for the year 1917. Since the collection of the additional tax for 1917 was barred, by the applicable statute of limitations, at the time the credit was made, such credit was erroneous. Therefore, request is hereby made that the sum of such overpayment, $63.91, together with interest thereon be now refunded.

"If, for any reason, it is contemplated to disallow the claim herein made, it is respectfully requested that a conference be arranged with the office handling the matter and notice of such conference be sent to the undersigned."

No reply thereto was made by the Commissioner.

15. November 5, 1929, plaintiff filed claims for refund of the additional tax and interest thereon paid for 1914, 1915, 1916, and 1917, as set out in finding 12, and assigned the following basis therefor: "The above tax was assessed and/or collected when the Commissioner, and/or the collector, was without a legal right so to do. Such tax was assessed and/or collected after the expiration of the statutory period properly applicable thereto, at a time when such assessment and/or collection were barred by the applicable statute of limitations. Such assessment and/or collection were erroneous and illegal."

The foregoing claims were rejected by the Commissioner April 25, 1930, and such amounts have not been paid to the plaintiff.

WILLIAMS, Judge.

The plaintiff, the Pennsylvania-Dixie Cement Corporation, successor of the Clinchfield Portland Cement Corporation of Virginia, with which it was merged on September, 23, 1926, brings suit to recover additional income taxes assessed against and paid by its predecessor for the years 1914 to 1917, inclusive, amounting to $32,376.91. For convenience the name "plaintiff" is used in the findings as applying to both corporations and will be so used in the opinion.

The plaintiff duly filed its tax returns for the years involved and paid the taxes shown to be due thereon. After various transactions set forth in detail in the findings, not necessary to repeat here, the Commissioner of Internal Revenue, on July 24, 1925, advised plaintiff of a recomputation of its taxes for the years involved. This recomputation showed an overassessment of $63.91 for 1913, an overassessment of $78,788.55 for the year 1917, and small deficiencies for the years 1914 to 1916, inclusive. The Commissioner requested plaintiff to file waivers for the years 1914 to 1916, as a prerequisite to the allowance of additional invested capital for 1917 and subsequent years.

On August 10, 1925, plaintiff executed and filed the waivers requested for the years 1914, 1915, and 1916, effective to December 31, 1925, and on the same date filed an agreement waiving the right to appeal to the Board of Tax Appeals and consenting to the immediate assessment of the deficiencies for those years. The deficiencies were assessed by the Commissioner on October 27, 1925.

The Commissioner had previously, on June 28, 1923, made an additional assessment for the year 1917 of $108,177.50, which amount had not been paid.

On November 9, 1925, the plaintiff received certificates of overassessments for the years 1913 and 1917 in the amounts of $63.91 and $78,788.55, respectively. The overassessment for 1913 which was found to be an overpayment was credited against the taxes due for 1917, and since the balance of the unpaid assessment for 1917 exceeded the overpayment for that year, such balance was abated, reducing the unpaid taxes for the year $28,057.29. Accompanying the certificates of overassessment were notices and demands for the payment of the additional assessment for 1914 to 1916, inclusive, and the unpaid taxes due for 1917 with interest. These amounts, aggregating $32,376.91, were paid by the plaintiff, under protest, on November 16, 1925.

The plaintiff contends that the additional taxes for the years 1914, 1915, 1916, and 1917 were assessed and collected after the expiration of the applicable statutory period of limitation.

The plaintiff's returns for the years 1914, 1915, 1916, and 1917 were filed on February 26, 1915, March 29, 1916, March 26, 1917, and March 29, 1918, respectively. The applicable statutory period of five years within which assessments and collections could be made expired on February 26, 1920, March 29, 1921, March 26, 1922, and March 29, 1923, respectively. The additional taxes for each of the years involved were assessed and collected subsequent to the running of the applicable statutory period of limitation and were therefore erroneously and illegally assessed and collected unless valid waivers were on file extending such statutory period.

At the request of the Commissioner, the plaintiff, on August 10, 1925, as we have seen, executed and filed with the Commissioner a waiver of the period within which assessment might be made for the years 1914, 1915, and 1916 to December 31, 1925. This waiver, duly signed by the plaintiff, was received in the Bureau of Internal Revenue. Mr. H.B. Robinson, the head of the division in which plaintiff's returns were being considered, had a general authorization from the Commissioner to sign the Commissioner's name to waivers. At the direction of Mr. Robinson, an employee working under him signed the Commissioner's name to the waiver, appending Mr. Robinson's initials thereto.

In respect to the year 1917, the Commissioner of Internal Revenue, in his letter notifying plaintiff of the proposed deficiency for that year, advised that a waiver of the statute of limitations would be necessary in case protest was made by plaintiff against the proposed assessment. On February 23, 1923, plaintiff executed and filed in the Bureau of Internal Revenue a waiver for 1917 which by its terms expired on February 23, 1924. The name "D.H. Blair, Commissioner," with the initials "A.H.F." thereunder, appears on the waiver. The additional taxes involved for the year 1917 were assessed on July 6, 1923, well within the life time of the waiver.

Subsequently, on January 6, 1925, plaintiff, at the request of the Commissioner, filed another waiver for the period in which assessment might be made for 1917 to December 31, 1925. The head of the division in the bureau in which plaintiff's 1917 return was being considered was a Mr. L.T. Lohman, who had a general authorization from the Commissioner to sign his name to income tax waivers. At Mr. Lohman's direction the Commissioner's name was signed to this waiver by a clerk in his office who appended Mr. Lohman's initials thereto.

If the foregoing waivers were valid, all the taxes involved were timely assessed. But the plaintiff says they were not valid for the reason that they were not signed by the Commissioner himself or by some one duly authorized to act for him in that respect. It is contended that the waivers did not meet the statutory requirement of a consent in writing by "both the Commissioner and the taxpayer," but were consents of the taxpayer only; the Commissioner not having indicated his consent to them in the manner required.

We think the plaintiff's contentions are entirely without merit. The head of the division in the Bureau which considered the returns for 1914 to 1916, inclusive, had a general authorization to sign the Commissioner's name to waivers. We think it immaterial whether this official personally placed the Commissioner's name on the waivers for those years or had it placed thereon by one of the clerks of his office working under his directions. It could make no earthly difference to the plaintiff or to any one else whether this official personally signed the Commissioner's name to the waiver or whether that act was performed at his direction by a clerk in his office. In substance the act of the clerk was the act of the official himself. The waiver for the years 1914 to 1916 was therefore valid. The same is true as to the waivers for the year 1917 signed on behalf of the Commissioner under the same circumstances.

Furthermore, and entirely aside from the fact that the Commissioner's name was authoritatively placed on the waivers in the manner stated, we think under the facts disclosed that both the Commissioner and the taxpayer in this case consented in writing to a later determination, assessment, and collection of all the taxes involved. The Commissioner of Internal Revenue on reaching a determination of the deficiencies in question notified the plaintiff of that fact in writing, and also requested plaintiff to execute and return proper waivers which were enclosed. Both the plaintiff and the Commissioner knew that, if postponement of the additional assessments was made, the statute of limitations would run and the taxes could not legally be assessed and collected in the absence of waivers. Knowing this, the plaintiff promptly executed the waivers and returned them to the Commissioner as requested. With such waivers duly signed by the plaintiff on file, the Commissioner, within the time as extended, proceeded to make the assessments and thereafter made timely collection of the taxes. The action of the Commissioner in requesting the waivers in writing, the execution of the waivers by plaintiff and the filing of them with the Commissioner in response to the request, and the subsequent assessment of the taxes by the Commissioner after his authority to do so had expired but for the waivers, clearly meet the requirements of the statute (Revenue Act 1924, § 278(c), 43 Stat. 300) that "both the Commissioner and the taxpayer" have "consented in writing" to the assessment of the taxes after the limitation prescribed in the statutes. In these circumstances it was entirely immaterial whether the Commissioner's name was ever attached to the waivers either by himself or by some one authorized to act for him in that regard.

Plaintiff makes the further contention that the assessment and collection for the years 1916 and 1917 were erroneous and illegal because the Commissioner did not send the taxpayer the deficiency notice required in sections 274(a) and 280 of the Revenue Act of 1924 ( 43 Stat. 297, 301). In respect to this contention it is sufficient to point out that for the year 1916 the Commissioner advised plaintiff of the proposed deficiency on July 24, 1925, and that on August 10, 1925, the plaintiff waived the right of appeal to the Board of Tax Appeals and consented to the immediate assessment of the deficiencies, and that the assessment for 1917 was made prior to the passage of the 1924 Revenue Act, and that the adjustment and reduction of the assessment involved for that year was based on an agreement of the parties entered into at the request of plaintiff. In these circumstances the failure of the Commissioner to send a 60-day letter was at most an irregularity which did not invalidate the assessment or the collection of the tax for either year.

The plaintiff is not entitled to recover, and it is ordered that the petition be dismissed.