M. Snower & Co. v. United States

• Decision Date: 12 April 1943
• Docket Number: No. 1710.,1710.
• Citation: 50 F. Supp. 197
• Parties: M. SNOWER & CO. v. UNITED STATES.
• Court: U.S. District Court — Northern District of Illinois

50 F. Supp. 197

M. SNOWER & CO. v. UNITED STATES.

No. 1710.

District Court, N. D. Illinois, E. D.

April 12, 1943.

W. R. Brown and W. Robert Brown, both of Chicago, Ill., for plaintiff.

J. Albert Woll, U. S. Dist. Atty., of Chicago, Ill., for defendant.

SULLIVAN, District Judge.

This is a suit to recover $45,827.41, which plaintiff claims to have heretofore paid under the provisions of the Agricultural Adjustment Act, 7 U.S.C.A. § 601 et seq. The complaint alleges that in 1933 plaintiff paid to the Collector of Internal Revenue the sum of $29,477.80 as floor stocks taxes under the provisions of the Agricultural Adjustment Act, and from August 1, 1933, to March 2, 1934, it paid through its vendors an additional $17,430.05 as processing taxes under the provisions of the same Act. That on June 28, 1937, plaintiff filed a claim for refund, which was rejected on May 27, 1938; that on December 27, 1939, plaintiff filed an amended claim for refund which was rejected on May 10, 1940. That plaintiff bore the burden of the tax which it seeks to recover.

Defendant filed its answer admitting that the taxes here involved were paid by the plaintiff and that plaintiff bore the burden of them, and setting up as a complete defense that on March 14, 1938, the Commissioner of Internal Revenue notified this plaintiff of a deficiency of $6,301.27 in its income taxes for 1934, and of a deficiency of $1,608.91 in its excess profits tax for the same year. That the deficiency in taxes for 1934 resulted from the addition of the sum of $45,827.41 to plaintiff's income for that year, which sum represented the taxes paid by it under the Agricultural Adjustment Act, and are the same taxes for the recovery of which this suit is brought. That prior to March 14, 1938, plaintiff had filed its claim for refund of these taxes and on March 23, 1938, it was mutually agreed between the plaintiff and the Commissioner of Internal Revenue that in consideration of the withdrawal by the plaintiff of its claim for refund of taxes paid by it under the Agricultural Adjustment Act the deficiency in income and excess profits taxes asserted by the Commissioner would be withdrawn. That pursuant to such agreement plaintiff withdrew its claim for refund, and the Commissioner withdrew the asserted deficiencies, and that by reason of this compromise plaintiff is now estopped to maintain its action.

Subsequently the defendant filed its motion for summary judgment dismissing the complaint for insufficiency and lack of jurisdiction on the ground that neither of the claims for refund complied with the requirements of Section 903 of the Revenue Act of 1936, 7 U.S.C.A. § 645, requiring that claims for refund shall be supported by evidence that plaintiff has not shifted the burden of the tax.

Plaintiff also filed a motion for a summary judgment setting up as ground therefor that to the extent that the agreement in question purported to satisfy plaintiff's claim for refund of $45,827.41 in return for the withdrawal by the Commissioner of the asserted deficiency in the sum of $7,910.18, consideration existed only to the extent of $7,910.18.

The Government urges that the "executed compromise" is a complete defense to this action. Plaintiff, on the other hand, contends that the informal agreement or compromise is invalid, first, because of failure to comply with the statutory requirements providing (a) that it be made with the approval of the Secretary or the Under Secretary of the Treasury, or of an Assistant Secretary of the Treasury, or (b) that there should be "placed on file in the office of the Commissioner" the opinion of the General Counsel of the Department of the Treasury setting out his reasons therefor; and second, because the agreement establishes consideration only to the extent of $7,910.18, the admitted income tax liability.

It is admitted by both sides that the asserted tax deficiency resulted solely from the Commissioner's finding that the entire amount of $45,827.41 claimed as a refund should be added to plaintiff's net income for the year 1934, on the theory that taxes erroneously paid are gross income for the year in which the claim is allowed or refunded.

It is also admitted that no refund was made, so the court logically assumes that the Commissioner first allowed the refund, as the statute requires, and then assessed the deficiency tax, and so notified the plaintiff. The answer admits that this was done "pursuant to statute."

In its motion for summary judgment defendant for the first time attacks the sufficiency of the claim for refund on the ground that it does not comply with Section 903 of the Revenue Act of 1936, and in its brief the Government also urges non-compliance with Section 902 of the Act.

Section 903, Title 7 U.S.C.A. § 645, provides for the form in which claims for refund shall be presented, while Section 902, Title 7 U.S.C.A. § 644, provides that no such claims shall be made or allowed for any amount paid as taxes under Title VII unless the claimant establishes to the satisfaction of the Commissioner, or the trial court, that he bore the burden of such amount, and has not been relieved thereof nor reimbursed therefor, nor shifted such burden directly or indirectly.

The claim here involved was filed on form 76, the form prescribed by the Commissioner, and under oath plaintiff there sets out that it had borne the burden of the tax, had not been relieved thereof, nor reimbursed therefor. It is not shown that the Commissioner ever requested any other or further evidence in support of the claim, or that he at any time ever objected to the sufficiency of the evidence presented. Inasmuch as the claim was not rejected because of insufficiency of evidence, or because of any irregularity in form, but rather on the ground of the executed compromise agreement, I am of the opinion that the Commissioner thereby waived any such defects in plaintiff's claim as to form or sufficiency of evidence, which it now urges for the first time. In Samara v. United States, 129 F.2d 594, 596, the Circuit Court of Appeals for the Second Circuit in passing on this same question, said:

"The trial court's opinion reasons that section 903 requires the claimant to set forth under oath the evidence relied upon in support of his claim, and since the present claim did not meet this requirement `the Commissioner was without jurisdiction to consider the claim on the merits.' With this view we are unable to agree. The defect in form resulting merely from failure to comply with paragraphs 6 and 7 of the instructions, compliance with which was made compulsory by Article 201 of the Regulation, was not jurisdictional and could be waived by the Commissioner. See Tucker v. Alexander, 275 U.S. 228, 231, 48 S.Ct. 45, 72 L.Ed. 253; Bonwit Teller & Co. v. United States, 283 U.S. 258, 264, 51 S.Ct. 395, 75 L.Ed. 1018; United States v. Memphis Cotton Co., 288 U.S. 62, 71, 53 S.Ct. 278, 77 L.Ed. 619. The statutory provision in section 903 respecting setting forth "all evidence relied upon" in support of the claim means, in our opinion, all evidence upon which the claimant relies rather than all available evidence. If the latter were the meaning it would follow that the Commissioner could reject a claim, even though satisfied on the evidence submitted that the tax burden had not been shifted, because additional corroboratory evidence available to the claimant had not been set forth in the claim — a most unreasonable construction. Several district courts have held that the complaint need not allege...