Opinion
Thaddeus G. Benton, of Washington, D. C., for plaintiff.
John A. Rees, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen. (Elizabeth B. Davis, of Washington, D. C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
The plaintiff instituted this suit to recover $7,184.04 and $6,828.33 with interest, income and profits taxes paid for 1919 and 1920, respectively, on the grounds: First, that it was affiliated with five other corporations within the meaning of section 240 of the Revenue Act of 1918 (40 Stat. 1081); and, second, that the amount of $5,239.70 with interest is recoverable for 1920 upon a cause of action in the nature of an account stated. The second ground upon which recovery for 1920 is sought is based upon the claim that the Commissioner of Internal Revenue allowed affiliation for that year as a result of which he computed an overassessment of $5,239.70, which he refused to allow as an overpayment and to refund on the erroneous ground that it was barred by the statute of limitation, and that such decision, that affiliation existed, cannot now be questioned in this court.
Special Findings of Fact.
1. Plaintiff, a Nebraska corporation, duly filed separate tax returns for 1919 and 1920 and paid the tax of $17,703.87 and $12,703.98, respectively, shown thereon to be due. The defendant subsequently determined the tax for these years to be $17,297.97 and $12,891.11, respectively, crediting the overpayment of $405.90 for 1919 against taxes due for a prior year and assessing the deficiency of $187.13 for 1920. The last-mentioned amount was paid.
2. The Sioux City Iron Company, Bennett Company, the Baum Iron Company, New Paddock Hawley Company, and the Curtice-Baum Company were all Nebraska corporations, except the Bennett Company, which was organized under the laws of Delaware. All of the corporations filed separate tax returns for 1919 and 1920.
3. None of the corporations above mentioned owned directly or legally controlled through closely affiliated interests, or by a nominee or nominees, substantially all of the stock of any of the other corporations actively engaged in business, nor was substantially all of the stock of any two or more of the corporations owned or legally controlled by the same interests.
4. Plaintiff filed timely and sufficient claims for refund for 1919 and 1920, stating, as one of the grounds thereof, that it was affiliated with the other corporations mentioned within the meaning of section 240 of the Revenue Act of 1918.
5. November 24, 1928, the Commissioner of Internal Revenue decided under the rulings then in force that plaintiff and the other corporations mentioned were affiliated for the year 1920 and, upon that basis, computed an overassessment in respect of the tax paid by plaintiff for that year of $5,426.83, advising the plaintiff of the details thereof in a letter of that date. The Commissioner held, however, that the claim for refund filed did not comply with the statute and the regulations and that only $187.13 of the indicated overassessment, paid within four years, was allowable. Accordingly, the Commissioner scheduled an overassessment of $187.13 and later refunded it with interest of $34.93. No allowance was ever made of the computed overassessment of $5,239.70. Upon the allowance of an overassessment of $187.13, the refund claim for 1920 was otherwise disallowed and rejected. The Commissioner did not determine or decide that plaintiff and any of the other corporations mentioned were affiliated for 1919 and did not compute the tax liability for that year on an affiliated basis, but rejected the refund claim for 1919 in full. This suit was instituted within two years after such rejection.
6. If plaintiff and the five other corporations hereinbefore mentioned were affiliated within the meaning of section 240 for 1919 and 1920, plaintiff's tax liability was $7,184.04 and $6,828.33, respectively, less than the tax paid for those years.
LITTLETON, Judge.
The facts of record are insufficient to warrant the conclusion that plaintiff was affiliated with all or any of the five corporations under the rule announced in Handys&sHarman v. Burnet, 284 U.S. 136, 52 S.Ct. 51, 76 L.Ed. 207, and Pokorny Estate v. United States, 59 F. (2d) 236, 75 Ct. Cl. 459. An examination of the stockholdings, which we have deemed unnecessary to set forth in detail in the findings but which fully appear in the record, shows that the same interests did not hold substantially all the stock of each of the corporations claimed to have been affiliated with the plaintiff and that the holdings were not the same in the several corporations as required by the law and Treasury Regulations, art. 643, Regs. 45. See, also, Peytona Lumber Co. v. Commissioner (C. C. A.) 55 F. (2d) 27, 85 A. L. R. 148; Wadhamss&sCo. v. United States, 67 Ct. Cl. 235; Madera Yosemite Big Tree Auto Co.s&sYosemite Stages&sTurnpike Co. v. United States, 49 F. (2d) 672, 72 Ct. Cl. 171, and United States v. Cleveland, P.s&sE. R. Co., Inc. (C. C. A.) 42 F. (2d) 413.
Plaintiff further contends that the determination of the Commissioner for 1920, in which he first reached the conclusion that it and the other corporations were affiliated, was final and conclusive and not subject to review by the court, and that inasmuch as that determination showed an overassessment of $5,239.70 for 1920 which the Commissioner refused to refund on a different ground the court should render judgment in favor of plaintiff for that amount. With this we cannot agree. It is the duty of the Commissioner of Internal Revenue correctly to determine the tax liability of each taxpayer whose case is before him for consideration, and he has authority under the statute to make more than one determination so long as he acts within the limitation period provided in the statute. He may therefore reconsider a case and change his determination or reassess and collect a tax erroneously refunded or institute suit for that purpose. Talcott v. United States (C. C. A.) 23 F. (2d) 897; McIlhenny et al. v. Commissioner (C. C. A.) 39 F. (2d) 356; Radiant Glass Co. v. Burnet, 60 App. D. C. 351, 54 F. (2d) 718; Appeal of Covert Gear Co., Inc., 4 B. T. A. 1025; Couzens v. Commissioner, 11 B. T. A. 1040; Oak Worsted Mills v. United States, 36 F. (2d) 529, 68 Ct. Cl. 539; Western Shade Cloth Co. v. United States, 58 F. (2d) 863, 75 Ct. Cl. 165; and Burnet v. Porter et al., 283 U.S. 230, 51 S.Ct. 416, 75 L.Ed. 996. In a suit or counterclaim to recover an alleged erroneous refund the government would have the burden of proof, but as a general rule we know of no legal principle that would preclude recovery upon proper proof.
With respect to 1919, in which plaintiff seeks to recover $7,184.04 on the ground of affiliation, it appears that the Commissioner did not determine or compute the net income, invested capital, or the tax of the plaintiff or any of the other alleged affiliated corporations upon a consolidated or affiliated basis. In view of our conclusion that the corporations were not affiliated either for 1919 or 1920, no recovery can be had of the amount claimed for 1919.
Plaintiff finally contends that there was an account stated for $5,239.70, overassessment for 1920, shown in the certificate of overassessment delivered to it. This contention may be answered by pointing out that the Commissioner never allowed the overassessment indicated in his letter of November 24, 1928, and set forth in the certificate of overassessment, which certificate showed an allowance of only $187.13. On the contrary, both his letter and the certificate of overassessment showed the amount of $5,239.70 as not being allowable. There was therefore no agreement that this amount was due, and in the circumstances of this case there was no promise, expressed or implied, to pay.
The petition must be dismissed, and it is so ordered.