Bonwit Teller Co v. United States

• Decision Date: 13 April 1931
• Docket Number: No. 282,282
• Citation: 283 U.S. 258,51 S.Ct. 395,75 L.Ed. 1018
• Parties: BONWIT TELLER & CO. v. UNITED STATES
• Court: U.S. Supreme Court

283 U.S. 258

51 S.Ct. 395

75 L.Ed. 1018

BONWIT TELLER & CO.

v UNITED STATES.

No. 282.

Argued March 16, 1931.

Decided April 13, 1931.

Mr. Arthur B. Hyman, of New York City, for petitioner.

Mr. Charles B. Rugg, Asst. Atty. Gen., for the United States.

Mr. Justice BUTLER delivered the opinion of the Court.

This action was brought to recover the amount of an overpayment of income tax for the year ended January 31, 1919, as determined by the Commissioner of Internal Revenue and shown in his certificate, No. 990,988, issued to plaintiff May 12, 1927. The government first filed a general traverse. But later, asserting lack of authority on the part of the Commissioner to make the determination and refund, it filed a counterclaim for the amount of a check sent plaintiff to pay the balance of the refund remaining after deducting a part to pay an additional tax assessed against it for the year ended January 31, 1917. That tax was then, as it is now conceded, barred by a statute of limitation. Bowers v. N. Y. & Albany Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676. On special findings the court entered judgment dismissing plaintiff's complaint and the government's counterclaim, but gave the latter judgment for the cost of printing the record. 69 Ct. Cl. 638; (Ct. Cl.) 39 F. (2d) 730. On plaintiff's petition we granted a writ of certiorari. 282 U. S. 823, 51 S. Ct. 34, 75 L. Ed. —.

The court found:

Plaintiff is a corporation engaged in the business of selling merchandise at retail. Its fiscal year begins February 1. July 14, 1919, it filed its return for the year ended January 31, 1919, reporting an income tax of $57,871.16 which was paid, one-half July 14 and the balance December 13 following. Pending audit of the return, the Commissioner fixed plaintiff's total tax liability for that year at $225,165.75 and in April, 1924, made a jeopardy assessment for $167,294.59, the excess over the amount returned and paid. The plaintiff promptly filed a claim for abatement of the full amount of the additional assessment.

November 19, 1924, the Bureau sent plaintiff a letter containing a schedule disclosing the computation of its tax for the year ended January 31, 1919, and showing a total overassessment of $178,161.02. From this amount there was deducted $10,866.43 found by the Commissioner to have been erroneously included in plaintiff's return and paid. The letter stated: 'Inasmuch as the provisions of section 281 of the Revenue Act of 1924¹ have not been complied with (in) regard to the full amount of the above overassessment, a portion in the amount of $10,866.43 cannot be allowed.' In accordance with that letter, the Commissioner allowed plaintiff's claim for abatement.

May 16, 1925, the Bureau wrote plaintiff that an examination of its income tax return for the year ended January 31, 1919, disclosed an apparent overassessment, and that it could not then be allowed 'unless an income and profits tax waiver is filed on or before June 15, 1925, as provided by an Act of Congress dated March 3, 1925, amending section 281(e) of the Revenue Act of 1924.² Two waiver forms are therefore enclosed in order that you may, if you desire, execute and forward one of the formsto t his office.' Plaintiff executed the waiver and May 22, 1925, returned it with a letter stating: 'In accordance with your request, we enclose you herewith waiver.' On the following day the waiver was received and accepted in writing by the Commissioner.

December 11, 1926, counsel for plaintiff sent the Bureau a letter which quoted the substance, as above given, of the letters of November 19, 1924, and May 16, 1925, and, in reference to the letter of May 22, 1925, said: 'Since that time we have heard nothing further from you and there has been no refund made to the taxpayer.' February 5, 1927, the head of the audit division approved and recommended for allowance the certificate of overassessment No. 990,988. The record of the case was checked to determine whether the plaintiff had filed a claim for refund prior to the expiration of the applicable period of limitation. And it was determined that the documents filed which included the audit letter of November 19, 1924, showing how the amount of the overpayment was ascertained, the letter of May 16, 1925, furnishing form of waiver, and the plaintiff's answer of May 22 following, inclosing the executed waiver, would be treated by the Bureau as an informal claim for refund filed May 23, 1925.

Plaintiff's letter of May 22, 1925, bears an undated indorsement: 'Inferential demand for the refund upon basis of the schedule sent taxpayer under date of November 19, 1924 * * * Rules and Regulations. Mulligan,' and another dated April 4, 1927: 'Approved by Mr. Mulligan and Mr. Sherwood for scheduling as is. O. Allen.'

February 9, 1927, the Bureau wrote plaintiff's counsel: '* * * In order that the allowance of the overassessment may be made, you are requested to file with this office a claim on the enclosed Form 843 setting forth the basis of the adjustment. * * *' Accordingly plaintiff executed the form and thereon stated that the application should be allowed for the reasons shown in the audit letter of November 19, 1924, a copy of which was attached. And February 17, 1927, plaintiff returned the form with a letter saying: '* * * We enclose herewith for filing, claim for refund in the sum of $10,866.43 * * * on Form 843.' The Claim was received and filed in the Bureau February 19; the Commissioner allowed the claim and on March 8 approved and scheduled to the collector the certificate of overassessment.

On the margin of the Bureau's record copy appear the following certifications: 'Waiver filed May 23, 1925. Informal claim for refund filed May 23, 1925, with waiver perfected by claim Form 843. (Signed) O. Allen, 3/4/27.' 'Claim for refund filed May 23, 1925, waiver filed May 23, 1925.' 'This C. of O. (certificate of overassessment) approved for scheduling as is by W. T. S. (Signed) O. Allen, 4/4/27.'

The collector credited $9,846.06 against the additional tax assessed for the year ending January 31, 1917. May 12, 1927, the Commissioner caused the certificate, show- ing the deduction made by the collector, to be delivered to plaintiff with a check for the balance of the overassessment and interest, $1,462.99. Plaintiff objected to the application of any part of the refund against such additional assessment on the ground that the 1917 tax was barred and declined to accept the check in full settlement, but offered to apply it in partial payment of the claim.

The government, in support of the judgment below, insists that no claim for refund was filed by plaintiff prior to April 1, 1926, the time permitted by the Act of March 3, 1925, 43 Stat. 1115, and that therefore the Commissioner was without authority o al low the claim.

The provision involved amends section 281(e) of the Revenue Act of 1924, 43 Stat. 302. It provides that, if the taxpayer has on or before June 15, 1925, filed a waiver of his right to have the tax due for the taxable year 1919 determined and assessed within five years after the return was filed, then refund relating to such tax shall be made if claim therefor is filed on or before April 1, 1926. The section is a part of a tax law giving to taxpayers opportunity to secure refund of overpayments that had become barred. Manifestly it is to be construed liberally in favor of the taxpayers to give the relief it was intended to provide. United States v. Merriam, 263 U. S. 179, 187, 44 S. Ct. 69, 68 L. Ed. 240, 29 A. L. R. 1547; Bowers v. N. Y. & Albany Co., supra, 273 U. S. 350, 47 S. Ct. 389, 71 L. Ed. 676; United States v. Updike, 281 U. S. 489, 496, 50 S....