Langer v. Gray
| Decision Date | 27 November 1946 |
| Docket Number | 7027. |
| Citation | 25 N.W.2d 89,75 N.D. 1 |
| Parties | LANGER v. GRAY. |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1 Ch. 284, Sess. Laws N.D.1931, authorizes the Tax Commissioner to assess additional income tax against the taxpayer if any is found due upon audit of the taxpayer's return and prescribes the procedure to be followed by the Tax Commissioner in making such additional assessment.
2. The provision of Ch. 284, Sess. Laws N.D.1931, requiring the Tax Commissioner to audit the reports of taxpayers and not later than three years after the due date of the return assess any additional tax found due is a limitation upon the right to make such additional assessment rather than upon the remedy and no explanation as to why proceedings were not taken within the time prescribed will toll the statute or prevent the bar.
3. Fraud or concealment does not toll or extend a statute prescribing a time limit that affects the right rather than the remedy.
Cox Cox & Pearce and J. K. Murray, all of Bismarck, and Francis Murphy, of Fargo, for plaintiff and respondent.
Nels Johnson, Atty. Gen., C. E. Brace, Asst. Atty. Gen., and Charles Simon, Sp. Asst. Atty. Gen., for defendant and appellant.
This is an appeal from a judgment of the district court determining that an additional assessment of income tax made by the State Tax Commissioner on November 5, 1942, wherein the Commissioner assessed $1574.72 additional tax upon the 1937 income of William Langer, was void because it was made more than three years after the due date of the return. The trial court decided that the additional assessment was violative of Ch. 284, Sess.Laws N.D.1931, which in part provides:
It appears the State Tax Commissioner learned that in 1937 the taxpayer had engaged in a transaction whereby he purported to sell 500 shares of stock in the Land Finance Company, a South Dakota Corporation, to one Thomas V. Sullivan for $25000 of which $11000 was paid in 1937 and $14000 in 1938 and had also sold a number of tracts of land in North Dakota to the Realty Holding Company of Des Moines, Iowa. Neither transaction was disclosed in any income tax return. Upon acquiring this information the Commissioner audited the taxpayer's returns for 1937 and 1938 and made an additional assessment of his income tax for 1937 of $3704.57. Notice of the additional assessment was served on the taxpayer on April 22, 1942. The taxpayer requested a hearing which was granted. At the hearing, held on April 28, 1942, the taxpayer appeared and testified under oath regarding both his 1937 and 1938 income. As a result of this hearing the amount of the additional assessment was reduced to $1574.72. The Tax Commissioner's final computation with respect thereto is as follows:
Add: Profit on sale of farm lands as follows: 38300.00
Cost computed under the sworn avowal that
mortgage liabilities would be paid by Wm.
Langer. Amount of gross income from sale 1937
Sec. 29"32"30, 960 acres (P.P.) 15200.00
SW 19"134"80, (P.P.) 3040.00
NW 1/4"20"124"80 Est. 3000.00
32500.00 32500.00
(Improvements and depreciation not figured.) 20455.87
Total taxable income
Personal exemption 2300.00
18155.87
Tax 1588.53
Tax Paid 13.81
Additional tax due 1574.72'
The taxpayer appealed from the foregoing determination to the district court pursuant to the Administrative Agencies Practice Act, Ch. 28-32, R.C.N.D.1943. The Tax Commissioner in turn appealed to this Court from the judgment of the district court holding the additional assessment void because not made within three years after the due date of the return.
The Commissioner contends that the limitation applies only to matters disclosed on the face of the return and that the audit mentioned in the statute means an audit of the figures presented by the taxpayer in his return and does not apply to taxable income resulting from transactions which the return does not disclose. He further contends that the failure of the taxpayer to disclose the transactions resulting in the additional assessment amounts to fraud, renders the return fraudulent and that such fraud either tolls the statute or renders it wholly inapplicable to the transactions involved.
The taxpayer contends that the audit which the statute requires to be made within three years after the due date of the return covers the taxpayer's entire tax liability whether disclosed by the return or not and that no additional assessment can be made after that time regardless of disclosure in the return or the fraud of the taxpayer.
The limitation contained in Ch. 284, Sess.Laws N.D.1931, had its origin in Ch. 240, Sess.Laws N.D.1929, and was enacted by the legislature with the evident intent of prescribing the time within which the Tax Commissioner might assess additional income taxes. It places a time limit upon the power of the Commissioner to make such assessment, without exception and regardless of the reason for which the additional assessment is made.
It is apparent from this record that the Tax Commissioner proceeded under Ch. 284, Sess.Laws N.D.1931. On April 22, 1942, he served a notice on the taxpayer of an additional assessment for 1937 of $3704.57 which he later reduced to $1574.72 and thus initiated the proceedings which culminated in this appeal. On the same day the taxpayer, in a conversation with the Commissioner over the telephone, protested the assessment and asked for a hearing and was advised that a hearing could be held at the taxpayer's convenience. Later such a hearing was arranged for on April 28th, at which time the taxpayer appeared before the Commissioner and testified regarding his income for 1937 and 1938. The stenographic record of the hearing shows that at the beginning thereof the Commissioner said:
The notice of additional assessment which was the basis for this proceeding was dated April 16, 1942, and contained the following:
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