Berlin v. Commissioner of Internal Revenue, 339.

• Decision Date: 20 June 1932
• Docket Number: No. 339.,339.
• Citation: 59 F.2d 996
• Parties: BERLIN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Second Circuit

59 F.2d 996 (1932)

BERLIN v. COMMISSIONER OF INTERNAL REVENUE.

No. 339.

Circuit Court of Appeals, Second Circuit.

June 20, 1932.

Gilbert & Gilbert, of New York City (A. S. Gilbert and Jerome E. Malino, both of New York City, of counsel), for petitioner.

G. A. Youngquist, Asst. Atty. Gen. (Sewall Key, and John H. McEvers, Sp. Assts. to Atty. Gen., E. C. Crouter and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, both of Washington, D. C., and Maxwell M. Mahany, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., of counsel), for respondent.

Before MANTON, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

The deficiency assessment involved in this appeal represents a 25 per cent. penalty, amounting to $3,354.64, which the Commissioner assessed against the taxpayer for the tardy filing of his income tax return for the year 1924. The penalty is claimed by virtue of section 1003 of the Revenue Act of 1924 (43 Stat. 339, 26 USCA § 98). This reads in part as follows:

"In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Commissioner of Internal Revenue or the collector in pursuance of law, the Commissioner shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. * * *"

Confessedly the return, filed on May 15, 1925, was late, but the taxpayer contends that under the circumstances hereafter to be related his failure to file it within the time prescribed by the Commissioner, "was due to a reasonable cause and not to willful neglect." If so, it was within the exception, and no penalty was incurred. The Board held the contrary, one member dissenting. The correctness of this ruling is the question presented.

Mr. Berlin, the taxpayer, is a musical composer, author, and publisher. His residence and place of business were in New York City. In the latter part of December, 1924, he went to Florida and shortly after his arrival contracted a cold which developed into a "bronchial condition" that caused his return to New York to be delayed until the end of April, 1925. For several years prior to 1924 the preparation and filing of income tax returns had been handled for Mr. Berlin by a firm of tax accountants; and prior to March 15, 1925, Mr. Leopold of this firm applied to the Commissioner for an extension of time to file the 1924 return on the ground that Mr. Berlin was out of the city and in ill health. Pursuant to section 227(a) of the Revenue Act of 1924 (43 Stat. 281 26 USCA § 967 and note) the Commissioner first granted an unconditional extension to April 15th, and subsequently, by letter dated April 14th, which referred to a request by Mr. Leopold for a further extension, extended the time to May 15th on condition that a tentative return be filed on April 15th and payment made of one-fourth of the estimated tax shown thereon to be due. Mr. Leopold testified that this letter from the Commissioner was received by him in New York on the evening of April 14th, and that he forthwith prepared and mailed to the collector at New York a tentative return showing no tax to be due. The records of the collector, however, do not show the receipt of any tentative return. The Board did not find as a fact that none was mailed, but ruled that mailing did not comply with the condition that the tentative return be "filed." This ruling the taxpayer does not question. See United States v. Lombardo, 241 U. S. 73, 76, 36 S. Ct. 508, 60 L. Ed. 897. Assuming that he had complied with the conditions of the extension, Mr. Leopold prepared a complete return after Mr. Berlin's return from Florida and filed it, within the time prescribed, as he supposed, on May 15th. Although Mr. Leopold could have obtained much of the information necessary for a complete return from the taxpayer's New York office, information regarding certain deductions could be obtained only from Mr. Berlin himself.

It is urged by the petitioner that the "willful neglect" which justifies the imposition of a penalty must be that of the taxpayer personally, not that of his agent. However that may be when the taxpayer relies upon an agent whom he has supplied with all necessary information for the preparation of his return, in the case at bar the petitioner can relieve himself of a charge of having personally neglected the filing of his tax return only by claiming the benefit of his agent's efforts to procure an extension of time. Under such circumstances, we think he takes the benefit cum onere, and is chargeable with any "willful neglect" ascribable to his agent. See Eagle Piece Dye Works v. Commissioner, 10 B. T. A....