Source: https://supreme.justia.com/cases/federal/us/293/172/
Timestamp: 2019-04-21 04:18:15+00:00

Document:
assessment was limited by § 250(d) to four years from the filing of such return. P. 293 U. S. 176.
So held where the increase of tax liability under the 1921 Act was ascertainable by simple computation from returns already filed, and where the efficiency assessments, in large amounts, were based mainly on grounds unrelated to any changes in the law.
2. Under the Act of 1921, supra, a second return, reporting an additional tax for the period covered retroactively, would be an amendment or supplement of the return already on file, and being effective by relation, would not toll a limitation which had once begun to run. P. 293 U. S. 180.
3. Review by certiorari will not extend to a point not considered by the court below nor mentioned in the petition for certiorari and response thereto. P. 293 U. S. 182.
Certiorari, 292 U.S. 621, to review judgments of the court below affirming the Board of Tax Appeals, 26 B.T.A. 96, sustaining deficiency assessments of income and profits taxes.
The controversy in these cases hinges upon the date when the statute of limitations began to run against deficiency assessments by the Commissioner of Internal Revenue.
for the fiscal year beginning May 1, 1920, and ending April 30, 1921.
On March 15, 1921, it filed an income and profits tax return for the calendar year 1920 in behalf of A. S. Hopkins Company, a dissolved subsidiary, including in its own consolidated return the income of the A. S. Hopkins Company between January 1, 1921, and the date of dissolution.
At the filing of these returns the income and profits tax statute applicable to the taxpayers was the Revenue Act of 1918 (40 Stat. 1057). Later (on November 23, 1921) another tax statute, the Revenue Act of 1921 (42 Stat. 227), became a law, with a provision (§ 263) that it should take effect retroactively as of January 1, 1921.
By the Act of 1921 (§ 239a), every corporation subject to taxation thereunder was required to "make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title." Treasury Decisions issued by the Commissioner in March, 1922 (T.D. 3305, March 16, 1922, amended by T.D. 3310, March 28, 1922 [Footnote 1]), gave notice in substance that taxpayers who had filed returns under the Act of 1918 and who were subject to an additional tax for the same period under the Act of 1921, should file a new or supplemental return covering such additional tax. By implication this was a ruling that an additional return was not required of taxpayers whose taxes were not increased by the new law.
By implication, also, the new return was to be limited to a statement of the facts or figures necessary to exhibit the additions, without repetition of facts or figures that had been well returned already.
The Act of 1921, in its application to the petitioners, made one change and one only. If the net income of the taxpayer was more than $25,000, there was to be a denial of the credit or exemption of $2,000 otherwise allowable. Section 236b. The fiscal year of the petitioners ran, as we have seen, from May 1, 1920, to April 30, 1921, and, of this period, one-third was in the calendar year 1921. The net income being largely in excess of $25,000, the effect of the new law was to cut down the permissible credit by one-third of $2,000, thus increasing the tax by little more than a nominal amount. What that amount was could be ascertained by a simple computation, dependent upon data fully supplied by the return already filed, and calling only for the application of the statutory rule.
the return on file was a nullity, and hence that the statute of limitations had never been set running. 26 B.T.A. 96. The Court of Appeals for the Ninth Circuit affirmed. 69 F.2d 852. In so doing, it refused to follow decisions directly to the contrary by courts of coordinate jurisdiction. Myles Salt Co., Ltd. v. Commissioner, 49 F.2d 232; Isaac Goldmann Co. v. Commissioner, 60 App.D.C. 265, 51 F.2d 427; Valentine-Clark Co. v. Commissioner, 52 F.2d 346. Because of that conflict, writs of certiorari were granted by this Court. 292 U.S. 621.
limitation (§ 250d) is the return filed by the taxpayer at the close of the fiscal year, though supplementary information may modify or add to it. Cf. Florsheim Bros. Dry Goods Co., Ltd. v. United States, 280 U. S. 453, 280 U. S. 462.
A different conclusion would lead in practice to complications and injustice. Many taxpayers filing returns under the Act of 1918 were unaffected by the changes wrought by the Act of 1921. Their returns, if made over again, would have been an exact reproduction of those they had made already. A statute would have to be very plain to justify a holding in such circumstances that there was an obligation to report anew. Certainly the average man would be slow to suspect that he was subject to such a duty. If he looked into the Treasury Decisions, he would learn that the Commissioner agreed with him. In these. he was told by the plainest implication that, unless he had an additional tax to pay, his return would stand as filed, without supplement or correction. Now, the Commissioner of Internal Revenue is without dispensing power. If a return under the old act is not good under the new one, but, instead is an utter nullity, he may not relieve the taxpayer of making a return over again. To this the government assents, and on it builds the argument that the first returns are to be disregarded altogether, whether more is due or nothing. In that view, hundreds of taxpayers, perhaps thousands, though innocent of willful wrong, have been deprived of the protection of any rule of limitation, not to speak of other penalties unwittingly incurred. A statute of uncertain meaning will not readily be made an instrument for so much of hardship and confusion.
Treasury and with the interpretation of its own meaning implicit in them. National Lead Co. v. United States, 252 U. S. 140, 252 U. S. 146; McCaughn v. Hershey Chocolate Co., 283 U. S. 488, 283 U. S. 492-493; Costanzo v. Tillinghast, 287 U. S. 341, 287 U. S. 345; Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294, 288 U. S. 315.
amendment or a supplement. So this Court construes them now.
In the argument for the government, much is made of the point that, in giving effect for any purpose to the original return, we cut down the period available to the bureau for audit and assessment. The reduction, however, is not serious. In the first place, it applies only to that part of the taxable year as to which the two statutes overlap. In the second place, the return in its first form was subject to immediate audit in respect of everything embraced within it. Indeed at that time, the examiners could not know whether a new statute would be passed before the end of the calendar year, or whether the changes would be great or small. Whatever shortening of time there has been is limited to those matters as to which the statutes differ from each other. Even for that purpose, however, the time available was ample. Almost three years and eight months were left for carrying the audit to completion. The curtailment is too slight, the inconvenience too nearly negligible, to affect the process of construction.
the limitation shall run from the original return when there is nothing on the face of that return to indicate that the liability reported is less than is owing. [Footnote 5] The statute supplies no basis for such a principle of division. An examiner needs more time for an audit when errors are latent, to be discovered only by digging into books and vouchers, than when errors are apparent upon a bare inspection of the record. It would be a strange rule of limitation that would vary his opportunity inversely to his needs.
One other contention of the government is stated merely to exclude it from the scope of our decision. The government makes the point that the petitioners' return, even if filed at the proper time, must be held to be a nullity for the reason that it commingles the income of the affiliated companies, parent and subsidiary, with that of another company, the A. S. Hopkins Company, previously dissolved. No such point was considered by the court below, nor was it suggested either in the petition for certiorari or in any response thereto. Review by this Court will be limited accordingly. Johnson v. Manhattan Ry. Co., 289 U. S. 479, 289 U. S. 494; Charles Warner Co. v. Independent Pier Co., 278 U. S. 85, 278 U. S. 91.
The decree should be reversed, and the cause remanded for further proceedings in accordance with this opinion.
* Together with No. 39, National Paper Products Co. v. Helvering, Commissioner of Internal Revenue, certiorari to the Circuit Court of Appeals for the Ninth Circuit.
"If any taxpayer has, before November 23, 1921, filed a return for a fiscal year ending in 1921, and paid or become liable for a tax computed under the Revenue Act of 1918, and is subject to additional tax for the same period under the Revenue Act of 1921, a return covering such additional tax shall be filed at the same time as the returns of persons making returns for the fiscal year ending February 28, 1922, are due under the laws and regulations, and payment of such additional tax will be due in the same installments and at the same times as in the case of payments based on returns for the fiscal year ending February 28, 1922. . . ."
"§ 205a. That if a taxpayer makes return for a fiscal year beginning in 1920 and ending in 1921, his tax under this title for the taxable year 1921 shall be the sum of: (1) the same proportion of a tax for the entire period computed under Title II of the Revenue Act of 1918 at the rates for the calendar year 1920 which the portion of such period falling within the calendar year 1920 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title at the rates for the calendar year 1921, which the portion of such period falling within the calendar year 1921 is of the entire period."
"§ 239a. That every corporation subject to taxation under this title and every personal service corporation shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title."
"§ 250d. The amount of income, excess profits, or war profits taxes due under any return made under this Act for the taxable year 1921 or succeeding taxable years shall be determined and assessed by the Commissioner within four years after the return was filed. . . ."
"If a corporation has, before February 25, 1919, filed a return for a fiscal year ending in 1918 and paid or become liable for a tax computed under the revenue act of 1917, and is subject to additional tax for the same period under the revenue act of 1918, the return covering such additional tax shall be filed at the same time as returns of persons making returns for the calendar year 1918 are due under existing rulings, and payment of such additional tax is due in the same installments and at the same times as in the case of payments based on returns for the calendar year 1918. If no part of the tax for such fiscal year was due until after February 24, 1919, the whole amount of tax due, including tax due under the original return and additional tax due under the amended return, will be payable in the same installments and at the same times as in the case of payments based on returns for the calendar year 1918."
See, e.g., Isaac Goldmann Co. v. Burnet, Commissioner, 17 B.T.A. 1103, rev'd, 60 App.D.C. 265, 51 F.2d 427; Myles Salt Co., Ltd. v. Commissioner, 18 B.T.A. 742, 744, rev'd, 49 F.2d 232; G. Corrado Coal & Coke Interests, Inc. v. Commissioner, 19 B.T.A. 691; E. J. Lorie v. Commissioner, 21 B.T.A. 612.
See, e.g., Fred T. Ley & Co. v. Commissioner, 9 B.T.A. 749, 751; Palmetto Coal Co. v. Commissioner, 11 B.T.A. 154; Denholm & McKay Co. v. Commissioner, 15 B.T.A. 225.

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