Paso Robles Mercantile Co. v. Commissioner of Internal Revenue

• Decision Date: 12 August 1929
• Docket Number: No. 5758.,5758.
• Citation: 33 F.2d 653
• Parties: PASO ROBLES MERCANTILE CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Ninth Circuit

33 F.2d 653 (1929)

PASO ROBLES MERCANTILE CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 5758.

Circuit Court of Appeals, Ninth Circuit.

July 1, 1929.

Rehearing Denied August 12, 1929.

Philip G. Sheehy, of San Jose, Cal., for petitioner.

Mabel Walker Willebrandt, Asst. U. S. Atty. Gen., Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, and Stanley Suydam, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.

Before RUDKIN, DIETRICH, and WILBUR, Circuit Judges.

DIETRICH, Circuit Judge.

This is a petition for the review of a decision by the Board of Tax Appeals rendered September 6, 1928. The only question submitted for consideration is: When did the statutory period of limitations for the assessment of petitioner's income taxes for the years 1918-19 commence to run? Section 200 et seq. of the Revenue Act of 1918 (40 Stat. 1057) provide that returns may be made upon the basis of the calendar year or of a "fiscal year," "fiscal year" being defined as a "period of twelve months ending on the last day of any month other than December" (40 Stat. 1058, § 200), and "the net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books" of the taxpayer (40 Stat. 1064, § 212). Section 250 of the act provides that: "Except in the case of false or fraudulent return with intent to evade the tax, the amount of tax due under any return shall be determined and assessed by the Commissioner within five years after the return was due or was made, and no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made." 40 Stat. 1083. The petitioner, a California corporation with its principal place of business at Paso Robles, kept its books on the basis of a fiscal year ending January 31st. Instead of adjusting its tax returns to such a year, it made them on the basis of the calendar year, and, accordingly, for the calendar year 1918 it filed a return on April 14, 1919, and for the calendar year 1919, on March 11, 1920, and similarly for the years 1920, 1921, and 1922, which latter years are not presently important. Declining to accept the calendar year as the return period, the Commissioner on March 10, 1925, made an assessment of an additional tax of $3,697.10 for the fiscal year ending January 31, 1919. He had no specific return for that period, and in determining the amount he computed the tax from the two pertinent calendar year returns. Finding to be due a total of $4,653.66, he credited thereon eleven-twelfths of the tax petitioner had paid on the basis of its return for the calendar year 1918 and one-twelfth of the amount paid on a like basis for 1919, and thus determined a net balance of $3,697.10. If the return made on April 14, 1919, for the 1918 calendar year, standing alone, be held effective as a return for that period, it would be necessary to decide that the assessment of March 10, 1925, in so far as it related to the 1918 calendar year, was void for want of authority; more than five years having elapsed subsequently to the return. If, upon the other hand, such return be deemed ineffective for any purpose until supplemented by the return for the following calendar year because it covered only eleven months of the taxpayer's fiscal year, then the assessment of March 10, 1925, would be within the five-year limitation period, for upon that theory there was no complete return for the...