Lafayette Worsted Co. v. Page

• Decision Date: 24 June 1925
• Docket Number: No. 215.,215.
• Citation: 6 F.2d 399
• Parties: LAFAYETTE WORSTED CO. v. PAGE, Collector of Internal Revenue.
• Court: U.S. District Court — District of Rhode Island

6 F.2d 399 (1925)

LAFAYETTE WORSTED CO. v. PAGE, Collector of Internal Revenue.

No. 215.

District Court, D. Rhode Island.

June 24, 1925.

Michael J. Lynch, of Providence, R. I., Harry S. Hall, of Washington, D. C., and Frederick G. Fischer, of New York City, for complainant.

Norman S. Case, U. S. Atty., and Harold A. Andrews, Asst. U. S. Atty., both of Providence, R. I., for defendant.

MORTON, District Judge.

The plaintiff was assessed and paid income taxes for the years 1918 and 1919. Thereafter applications for refunds were filed by it, on which about $167,000 was repaid. Later the Commissioner, having become convinced that the refund was erroneously allowed, made a "jeopardy" assessment, as it is called, of additional taxes upon the plaintiff for the same years and in the same amount as the refund. In so doing he relied upon the same figures and returns as those on which the original assessment was made; there was no claim of fraud, or that concealed income had been discovered. The Commissioner's notice of this reassessment was sent to the plaintiff under date of March 22, 1924. The plaintiff duly made application for abatement and took an appeal. This appeal was rejected by the Commissioner, and abatement was finally refused under date of November 25, 1924. In the meantime, on June 2, 1924, the Revenue Act of that year had been passed (43 Stat. 253), which established the Board of Tax Appeals. It allowed appeals to that board from the Commissioner's determination of deficiency taxes, and stayed collection of the tax pending the appeal.

As to the present tax, the Commissioner held that his determination with respect to it was the assessment made in March, 1924, before the enactment of the New Revenue Law. He therefore disregarded the plaintiff's appeal to the Board of Tax Appeals, and when the present bill was filed was threatening to enforce collection by immediate distraint with that appeal pending. The plaintiff contends that the assessment of March, 1924, was not a determination (within the act of 1924) by the Commissioner that the tax was due, because he entertained an appeal within his department, pending which the tax was held in abeyance, and that he did not finally decide (or "determine") that the tax was due until his final action thereon in November, 1924, after the passage of the new law. The plaintiff, therefore, urges that it had the right of appeal to the Board of Tax Appeals, and that there was no right to distrain for the tax pending that appeal.

The Board of Tax Appeals has decided that cases like this are within its jurisdiction. Appeal of Ormsby, McKnight, Mitchell, Dec. 11, 1924; Appeal of Boston Structural Steel Co., Feb. 17, 1925; Appeal of Joseph Garneau Co., Nov. 21, 1924. There is a conflict of opinion between it and the Commissioner.

Speaking generally, our law of taxation is based upon the principle that the entire power to assess and to collect taxes is committed to certain designated officers or boards. Within their field their action is not subject to be interfered with by the courts of law. No matter how erroneous or illegal their construction of the tax law or an assessment may be, the law courts are not to prevent the collection of the tax. The person assessed must pay it and bring his action in the courts to recover it back. It is only when the taxing authorities act beyond their jurisdiction or when their claim of legal authority is merely colorable, or when special and extraordinary circumstances of hardship are shown, that the law courts are free to disregard the provisions of Rev. St. § 3224 (Comp. St. § 5947), and prevent by injunction the collection of a tax. See Snyder v. Marks, 109 U. S. 189, 3 S. Ct. 157, 27 L. Ed. 901; Arkansas Building & Loan Ass'n v. Madden, 175 U. S. 269, 20 S. Ct. 119, 44 L. Ed. 159; Graham v. Dupont, 262 U. S. 234, 43 S. Ct. 567, 67 L. Ed. 965; Bailey v. George, 259 U. S. 16, 42 S. Ct. 419, 66 L. Ed. 816; Dodge v. Osborn, 240 U. S. 116, 36 S. Ct. 275; Hill v. Wallace, 259 U. S. 44, 42 S. Ct. 453, 66 L. Ed. 822; Lipke v. Lederer, 259 U. S. 557, 42 S. Ct. 549, 66 L. Ed....