James v. United States

• Decision Date: 17 February 1930
• Docket Number: No. J-260.,J-260.
• Citation: 38 F.2d 140
• Parties: JAMES v. UNITED STATES.
• Court: U.S. Claims Court

38 F.2d 140 (1930)

JAMES v. UNITED STATES.

No. J-260.

Court of Claims.

February 17, 1930.

Robert E. Coulson, of New York City (Oscar W. Underwood, Jr., and H. C. Kilpatrick, both of Washington, D. C., on the brief), for plaintiff.

McClure Kelley, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and LITTLETON, WILLIAMS, GREEN, and GRAHAM, Judges.

LITTLETON, Judge.

Defendant has demurred to the petition in this case on the ground that under section 284 (d) of the Revenue Act of 1926 (26 USCA § 1065 (d), this court is without jurisdiction to entertain this suit because, prior to the institution thereof, the Commissioner of Internal Revenue mailed to the plaintiff a notice of a deficiency in respect of the tax for 1919, and the plaintiff instituted a proceeding before the United States Board of Tax Appeals.

From the record it appears that for the calendar year 1919 plaintiff paid a tax of $2,031,853.73, and subsequently, on March 6, 1926, duly filed a claim for refund for $389,627.78, or such greater amount as might be legally refundable. On May 13, 1926, the Commissioner of Internal Revenue rendered a decision on the claim for refund and rejected the claim in full upon the ground that plaintiff's correct tax liability for 1919 was in excess of the amount which he had paid. On the same day, namely, May 13, 1926, the Commissioner notified the plaintiff by registered mail of his determination of a deficiency in respect of the tax of the plaintiff for the calendar year 1919 of $178,202.17.

July 10, 1926, plaintiff instituted a proceeding before the United States Board of Tax Appeals by the filing of a petition therein in which he claimed that he owed no deficiency whatever but, on the contrary, was entitled to a refund, and prayed the Board to find that he had made an overpayment of $389,627.78, or such greater amount as might be legally refundable, as the said Board was authorized to do under section 284 (e) of the Revenue Act of 1926, 44 Stat. 9, c. 27 (26 USCA § 1065 (e). This proceeding was docketed by the Board of Tax Appeals under docket No. 18395, and up to the date of the submission of this case upon the demurrer the proceeding had not been heard or decided by the Board.

May 7, 1928, within two years after the rejection by the Commissioner of plaintiff's claim for refund, he instituted suit in this court asking judgment for $1,118,299.58, income tax alleged to have been erroneously and illegally assessed and collected, together with interest at 6 per cent from the dates of payment thereof. Defendant demurred to the petition upon the ground that the court is without jurisdiction to entertain plaintiff's suit.

In support of the plea to the jurisdiction, the defendant contends that (1) this court has no jurisdiction until the plaintiff has paid all the tax claimed by the Commissioner, has filed a claim for refund thereof, and brings suit upon said claim; (2) the plaintiff elected to institute a proceeding before the Board of Tax Appeals upon the Commissioner's deficiency notice, and he has made claim in that proceeding and still has opportunity to make further claim before the Board for any overpayment that he may have made; (3) two forums were available to the plaintiff, and he elected to go into the Board of Tax Appeals, therefore he is committed to his election, and cannot proceed in this court. Until the Board of Tax Appeals renders a decision in the proceeding there pending, it is impossible to determine whether any overpayment has in fact been made, and suit is therefore premature.

The plaintiff, on the other hand, contending that the defendant's plea to the jurisdiction should be overruled, asserts that he has a clear right in this court; that the Board of Tax Appeals under section 284 (e) of the Revenue Act of 1926, now section 507 of the Revenue Act of 1928 (26 USCA § 1065 (e), has no power to award a judgment in favor of any taxpayer against the Commissioner of Internal Revenue or against the United States or any agency thereof, but is solely vested with the power to determine the amount of overpayment made by the taxpayer, if any; that a taxpayer must necessarily proceed, either in this court, or in a District Court of the United States, against a collector, to protect his right to the refund and to secure a judgment in his favor for the amount thereof; that the rights of the taxpayer are in nowise changed from those which existed prior to the enactment of the Revenue Act of 1926, except that the Board of Tax Appeals is given the power by that act to determine the amount of an overpayment, without being given any power whatever to award the taxpayer an enforceable judgment; and that the Board of Tax Appeals is in no sense an equivalent and alternative forum to this court.

There is no inconsistency between section 3226 of the Revised Statutes, as re-enacted by section 1113 (a) of the Revenue Act of 1926 (26 USCA § 156) and the other provisions of the act, especially section 284, relating to proceedings before the Board of Tax Appeals and to the institution of suits. In all cases decided by the Board under the 1924 act, the taxpayer may pursue the remedy provided by section 3226 (26 USCA § 156); in cases instituted under the 1924 act, and heard and decided by the Board after the passage of the 1926 act, the taxpayer may pursue the remedy provided by section 3226 or petition for review of the decision of the Board. Old Colony Trust Co. et al. v. Commissioner of Internal Revenue, 279 U. S. 716, 49 S. Ct. 499, 73 L. Ed. 918. In cases where the taxpayer has filed claim for refund, he may institute suit in court as provided in section 3226 of the Revised Statutes, provided he does so before the Commissioner determines and notifies him of a deficiency under section 274(a), 26 USCA § 1048, of the Revenue Act of 1926, Ohio Steel Foundry Co. v. United States (Ct. Cl.) 38 F.(2d) 144, decided this date; and, if...