RH Stearns Co. v. United States

• Decision Date: 13 March 1933
• Docket Number: No. L-187.,L-187.
• Citation: 77 Ct. Cl. 264,2 F. Supp. 773
• Parties: R. H. STEARNS CO. v. UNITED STATES.
• Court: U.S. Claims Court

2 F. Supp. 773

77 Ct. Cl. 264

R. H. STEARNS CO. v. UNITED STATES.

No. L-187.

Court of Claims.

March 13, 1933.

COPYRIGHT MATERIAL OMITTED

Howe P. Cochran, of Washington, D. C. (William N. Wood and Frederick S. Winston, both of Washington, D. C., on the brief), for plaintiff.

Charles B. Rugg, Asst. Atty. Gen. (Charles R. Pollard and Joseph H. Sheppard, both of Washington, D. C., on the brief), for the United States.

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

WHALEY, Judge.

The plaintiff brings this suit to recover an overpayment of $14,928.07 found by the Commissioner due the plaintiff for the taxable year 1918 and applied to a deficiency for the year 1917. At the time of the application the plaintiff had filed a waiver signed by it, but the signature of the Commissioner was not placed thereon until several years after the tax liability for the years in question had been finally adjusted.

For the fiscal years 1917 and 1918 plaintiff filed its income and income and profits tax returns, and paid the taxes therein disclosed. The five-year period provided for in section 250 (d) of the Revenue Act of 1921 (42 Stat. 264), in which collection could be made for any additional assessment on the 1917 return, expired April 10, 1923, "unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax."

In February, 1921, the plaintiff executed an unlimited waiver, and the Commissioner signed this waiver on February 6, 1923. This waiver expired on April 1, 1924, under the provisions of the Commissioner's mimeograph letter 3085 (Cumulative Bulletin II-1, p. 174).

The five-year limit on the 1918 return for additional assessment expired June 19, 1924. The plaintiff therefore, on February 19, 1923, executed another waiver covering both the year 1917 and the year 1918, and, instead of being unlimited in time, expired by its terms on March 1, 1925. On June 26, 1923, the Commissioner of Internal Revenue made an additional assessment against the plaintiff for the fiscal year ended July 31, 1917, in the sum of $22,189.10. Following this assessment, the plaintiff filed on August 9, 1923, a claim for refund and credit for the four fiscal years, commencing August 1, 1917, and ending July 31, 1921.

After an audit of the various years covered by the claim for refund and credit, the Commissioner on March 1, 1924, one month before the first waiver had expired, and within the period of the second waiver, approved a schedule of overassessments, including an overassessment in favor of plaintiff for $14,928.07, and transmitted it to the appropriate collector for action in accordance with the directions appearing thereon. On June 12, 1924, the collector returned the said schedule with his certification of the application of the credit in accordance with instructions and also forwarded to the Commissioner at the same time a schedule of refunds and credits on which the said overpayment in favor of plaintiff was shown as having been credited. The Commissioner signed the schedule of refunds and credits June 28, 1924, and transmitted a certificate of overassessment to plaintiff. The said overpayment was thus applied as a credit against the remaining unpaid tax liability for the fiscal year ending July 31, 1917, reducing the outstanding liability for that year to $5,829.07 which was paid September 15, 1924, after a second notice and demand on September 1, 1924. The Commissioner's signature was not placed on the waiver of February 19, 1923, until April 7, 1930.

On May 16, 1930, the plaintiff filed two claims for refund, each in the amount of $14,928.07 for the fiscal years ended July 31, 1917, and July 31, 1918, respectively.

The sole contention of the plaintiff is that the signature of the Commissioner, having been placed on the waiver many years after the period for assessment and collection, was ineffective for the validation of such collection. The purpose of a waiver is to extend the time fixed by statute in which an assessment and collection could be made by the Commissioner, and the desire of the taxpayer in executing it is to have his returns carefully and deliberately examined and audited for the years in question so he can receive the benefit of any errors, overassessments, and corrections of alleged underpayment. The statute does not require or demand that the actual waiver executed by plaintiff be signed by the Commissioner. It only provides both Commissioner and taxpayer consent in writing to a later determination, assessment, and collection.

When the additional assessment was made June 26, 1923, the statute had not run even under the first waiver, which did not expire until April 1, 1924, and collection could, and undoubtedly would, have been then made had it not been for the action of plaintiff in filing a claim for refund and credit in August, 1923, at or about the time demand was being made for the payment of the tax. As a result of the filing of the claim, a consideration of which necessitated an examination of plaintiff's returns for four years beginning in 1917 and ending in 1921, and thus might well have required, and did require, more time than remained until the first waiver expired, it is certainly reasonable to say that in such consideration the commissioner relied upon the second waiver which was then on file.

It is thus evident that plaintiff benefited, at its own request, by the actions of the commissioner under the second waiver. Collection of $20,757.14 was withheld from August, 1923, until September, 1924, when, as a result of the application of the credit, plaintiff had to pay only $5,829.07. The first waiver included only the year 1917 and the second waiver included both 1917 and 1918; clearly the Commissioner acted under the greater, which included the lesser in the number of taxable years and in time extension. The plaintiff derived an advantage by the execution of the waiver. In the case of Liberty Baking Company v. Heiner (C. C. A.) 37 F.(2d) 703, 704, the court said: "* * * It would be unconscionable to allow the taxpayer to afterwards repudiate a consent upon which the Commissioner has acted and relied. It appears that, in the circumstances, the execution of the waivers, was a necessary incident to the securing of further consideration of the plaintiff's tax liability."

The plaintiff in this case...