Court Opinion

ID: 6886125
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:28:45.089+00
Date Added: 2024-06-11T16:05:43.120836
License: Public Domain

WOODROUGH, Circuit Judge
(dissenting).
It appears in this case that the taxpayer received net income of $93,828.83 for the fiscal year 1936 and that the tax liability to which it became subject under the applicable revenue act was $14,951.83. The return which it made for the year was untrue and the Commissioner was required to and did determine deficiency which properly adjusted the tax to the true income. But the taxpayer appealed from the deficiency determination to the Board of Tax Appeals. It was there established that the income determined by the Commissioner was the true income for 1936 and that the tax was rightly computed, but the taxpayer alleged that it had been overassessed and had overpaid its taxes in former years and it called upon the Board to determine such overpayments and to allow a credit for the amount thereof on the tax for 1936.
The Board is given broad powers to consider such facts with relation to the taxes for other taxable years as may be necessary to correctly determine the amount of a deficiency brought before it for review, but by the statute which created the Board in 1924 and has governed it ever since the Board is expressly prohibited from determining whether or not a tax for any other tax year has been overpaid or underpaid. The statute says that the Board “in so doing [i. e., in considering facts related to the taxes for other taxable years] shall have no jurisdiction to determine whether or not the tax for any other taxable year has been overpaid or underpaid.” 26 U.S.C.A.Int.Rev.Code, § 272 (g). Complying with that statute, the Board refused to consider the taxpayer’s claim for credit for overpayment in prior years, as it has consistently done in like cases since its creation, on the ground that it had no jurisdiction.
The words of the statute forbidding the Board “to determine whether or not the tax for any other taxable year has been overpaid or underpaid” are so plain and unambiguous that no court has been called upon to construe or discuss them. The Seventh Circuit in stating the limitation upon the Board’s powers stated it simply in the above quoted words of the statute (Commissioner v. Forest Glen Creamery Co., 7 Cir., 98 F.2d 968), and the Supreme Court, with the same provision in mind, merely observed that the Board’s jurisdiction is “limited to the determination of the amount of deficiency” and that the Board “is without authority to order * * * a credit.” United States ex rel. Girard Trust Co. v. Helvering, 301 U.S. 540, loc.cit. 542, 57 S.Ct. 855, loc.cit 856, 81 L.Ed. 1272.
The statute, the Board’s consistent obedience to it for nearly twenty years, the courts’ recognition of it and the acquiescence of the profession have established an administrative system where the taxpayer may appeal to the Board from a deficiency found in any year with assurance that the Board cannot use a former year’s underpayment to defeat him and where both the taxpayer and the government know that the tax for the year of the deficiency is the only tax the Board can adjudicate. The system is complete, there being other equally certain means, administrative and judicial, to correct over and under assessments or payments in other years.
But of course all the Revenue Acts include limitation of action provisions'.
On the review in this court the taxpayer renews its claim of right to have the Board determine the amounts alleged to have been overpaid in former years and credit them on the 1936 deficiency. The arguments in support seem to me to propose a new system for the Board, but on careful consideration of all that has been said neither the new system nor the arguments have appealed to me. Though it is not so stated by it, the petitioner’s claim of injustice is really an attack upon the statute of limitations. The taxpayer’s untrue returns in *139prior years, accepted by the tax collector, caused it to be overtaxed in those years. It had all the time given it by law to obtain correction. But it took no steps within the time allowed. The same limitation applies to all taxpayers alike. It is a lawful limitation, and if unjust to this or any other taxpayer may be changed by Congress but not by the Board or by this court on review of the Board.
The incorrect items of its returns which caused this taxpayer to be overtaxed in years prior to 1936 were the amounts ascribed to inventory, an element in the returns of thousands of taxpayers which is especially subject to erroneous statement. But where overpayment results from the taxpayer’s untrue statement the Board cannot say that the government receives the excess upon any continuing trust to offset or credit it on a lawful tax in some later year. On the contrary, it must leave the overpayment to be recovered from the government under the procedure provided by law and not otherwise. It cannot discriminate.
As I see it, the Commissioner having taken the true inventory figure and having rightly computed the taxpayer’s true income and lawful tax in the 1936 deficiency, the Board of Tax Appeals was prohibited from finding an overpayment in former years or giving any credit on that account against the deficiency. I would affirm the Board’s denial of jurisdiction.