Blair v. Oesterlein Mach Co
| Citation | 72 L.Ed. 249,48 S.Ct. 87,275 U.S. 220 |
| Decision Date | 10 October 1927 |
| Docket Number | No. 210,210 |
| Parties | BLAIR, Commissioner of Internal Revenue, v. OESTERLEIN MACH. CO. Agrued |
| Court | United States Supreme Court |
The Attorney General and Mr. W. J. Donovan, Asst. Atty. Gen., for petitioner.
Messrs. J. Robert Sherrod, John J. Hamilton, and Robert N. Miller, all of Washington, D. C., for respondent.
This is a proceeding brought in the Supreme Court of the District of Columbia under section 1025(a) of the Revenue Act of 1924 (chapter 234, 43 Stat. 253, 348; U. S. C. tit. 26, § 1258 (26 USCA § 1258; Comp. St. § 6371 5/6 r)) to compel the Commissioner of Internal Revenue to respond to a subpoena of the Board of Tax Appeals, issued under section 900(i) of the act (26 USCA § 1220 (Comp. St. § 6371 5/6 b)), requiring him to answer interroga- tories, and to furnish information contained in the tax returns of 12 corporations. The Commissioner denied the authority of the board to require a response to the subpoena. A decree upholding the jurisdiction of the board and ordering the Commissioner to obey was affirmed by the Court of Appeals of the District. 17 F.(2d) 663. The case is hrre on certiorari. 274 U. S. 730, 47 S. Ct. 591, 71 L. Ed. 1325.
Respondent corporation returned and paid excess profits taxes for the years 1918, 1919, and 1920. In the final determination of these taxes the Commissioner considered together the returns for all three years. He reduced the 1918 tax, increased the 1919 tax, and found the net balance as a deficiency. In fixing the amount of the tax for 1918, the Commissioner, as requested by the taxpayer in an amended return for that year, made a special assessment under sections 327 and 328 of the Revenue Act of 1918 (chapter 18, 40 Stat. 1057, 1093 (Comp. St. §§ 6336 7/16 j, 6336 7/16 k)), but decided that no grounds existed for a special assessment for the year 1919, and so determined the tax for that year, using the ordinary assessment method provided by sections 301, 311, and 312 of the act (Comp. St. §§ 6336 7/16 aa, 6336 7/16 e, 6336 7/16 f).
The invested capital of the corporation taxed is one of the necessary factors in the computation of the tax under those sections. In evident anticipation that in some cases the Commissioner might find it difficult or impossible to ascertain the invested capital, or that in the disturbed economic conditions left by the war the tax in some cases might be harsh in comparison with others, a special method of assessment for those cases (enumerated in section 327) was provided by section 328. These sections, printed in the margin,1 authorize the computation of the excess profits tax on the basis of a comparison with the data contained in the tax returns of other corporate taxpayers similarly situated.
Respondent, on appeal to the Board of Tex Appeals, assailed the determination of the Commissioner on the ground that, although the 1918 tax had been assessed under section 328, the standard of comparison applied was erroneous, and resulted in an excessive assessment, and on the ground that the tax for 1919 should have been assessed under section 328. As to the latter contention it set up that, as the Commissioner had been unable satisfactorily to determine respondent's invested capital for 1917 and 1918, he could not have done so for 1919, and that, since the net income for 1919 was abnormal, its profits tax, if asessed by the ordinary method, would be found excessive compared with the tax assessed on other representative corporations.
The subpoena called for information concededly relevant to these contentions, and was properly issued, if the Board of Tax Appeals had authority to make the inquiry. The Commissioner denies generally that any determinations made by him under sections 327 and 328 may be appealed, and in any case objects that the appeal as to the year 1918 was not properly taken.
The appeal was authorized, if at all, by section 900(e) of the Revenue Act of 1924 (chapter 234, 43 Stat. 253, 337; U. S. C. tit. 26, § 1216 (26 USCA § 1216; Comp. St. § 6371 5/6 b)), under section 274 of that Act (26 USCA §§ 1048-1054; Comp. St. § 6336 1/6 zz(1)). Section 274 permits an appeal by the taxpayer only if 'the Commissioner determines that there is a deficiency in respect of the tax' which has been returned. 'Deficiency' is defined by section 273, of the act (26 USCA § 1047 (Comp. St. § 6336 1/6 zz)) as:
* * *'
It is argued that, although there was a deficiency for 1918 and 1919, as considered together by the Commissioner, the years must be treated separately in determining whether a deficiency existed within the meaning of section 274, for purposes of appeal. So treated, there was no deficiency in the year 1918, since the Commissioner had reduced the amount of the tax returned and paid for that year. This argument was rejected in Appeal of E. J. Barry, 1 B. T. A. 156, and the Commissioner appears formally to have announced his acquiescence in its rejection. Int. Rev. Cum. Bull. IV-2-1.
We think the question suggested is not properly before us. It was not specifically raised on the record before the board, or either court below, and, so far as appears, was not considered by any of them. We were asked to grant certiorari only to pass upon the question whether the Commissioner's determinations under sections 327 and 328 may be appealed to the Board of Tax Appeals. This court sits as a court of review. It is only in exceptional cases, and then only in cases from the federal courts, that questions not pressed or passed upon below are considered here. Duignan v. United States, 274 U. S. 195, 47 S. Ct. 566, 71 L. Ed. 996. There are specially cogent reasons why this rule should be adhered to when the question involves a practice of one of the great departments of the government. Hence we do not pass upon this aspect of the case, with respect either to the return or the amended return for 1918, and our decision is without prejudice to the disposition of the question wherever appropriately presented.
The Commissioner's objection that as to both years the Board of Tax Appeals is without authority to review his action, is based, not on any limitations to be found in the sections of the act defining the jurisdiction of the board, but upon the peculiar provisions of sections 327 and 328 themselves. These, it is argued, vest in the Commissioner the exercise of a judgment and discretion in their nature not subject to appellate review. It is pointed out that by section 327 assessments in the manner provided in section 328 are premitted 'where the Commissioner is unable to determine' the invested capital of the taxpayer, or where 'the Commissioner is unable satisfactorily to determine' the value of a mixed aggregate of tangible and intangible property paid in as capital, or where the Commissioner 'finds and so declares of record that the tax, if determined without benefit of this section,' would, owing to abnormal conditions work a hardship on the taxpayer. And it is urged that this phraseology evidences an intention to make his decision final, The conclusion is said to be fortified by the confidential nature of the returns of taxpayers with which comparison must be made in order to make the assessment under section 328. Their privileged character is thought to preclude a construction of the appeal statute that would result in giving publicity to tax returns and confidential information so carefully guarded by other provisions of the Revenue Acts.
But there is no inherent impossibility, or, indeed, serious difficulty in reviewing judicially any determination authorized by sections 327 and 328. The determination is to be made upon prescribed and ascertainable data, and is to conform to standards set up by the statute, all defined with sufficient definiteness and clarity to be susceptible of judicial scrutiny. We cannot assume that it is to be either arbitrary or unrelated to the appropriate data in the Commissioner's office, or that he is more qualified to make it than the board established to review his deci- sions. An...
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