United Thacker Coal Co. v. Commissioner of Int. Rev.

• Decision Date: 02 January 1931
• Docket Number: No. 2436.,2436.
• Parties: UNITED THACKER COAL CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — First Circuit

46 F.2d 231 (1931)

UNITED THACKER COAL CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 2436.

Circuit Court of Appeals, First Circuit.

January 2, 1931.

Lyle T. Alverson, of New York City (Wayne Johnson, of New York City, and Buford Tynes, of Huntington, W. Va., on the brief), for petitioner for review.

P. S. Crewe, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., and J. Louis Monarch and Andrew D. Sharpe, Sp. Assts. to Atty. Gen., on the brief), for Commissioner of Internal Revenue.

Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.

BINGHAM, Circuit Judges.

This is the petition of the United Thacker Coal Company to review an assessment against it of a deficiency excess profits tax amounting to $30,095.44 for the period April 30, 1917, to December 20, 1917.

The petitioner's fiscal year began July 1, 1917, and ended June 30, 1918, and its return of taxes for this period, due not later than August 30, 1918, was filed July 18, 1918. Under section 14(a) of the Revenue Act of 1916 (39 Stat. 772), as amended by the Revenue Act of 1917 (40 Stat. 300), the Commissioner, upon discovery within three years after the petitioner's return was due that such return was incorrect, was authorized to make a corrected return and assess a deficiency tax. The Commissioner, however, failed to discover that the petitioner's return was incorrect until May 15, 1924.

The first question is whether on the facts of this case the authority of the Commissioner to assess a deficiency tax was barred by his failure to discover and notify the petitioner of an error in its return within three years of August 30, 1918. The contention of the petitioner is that after the expiration of three years, that is, after August 30, 1921, the Commissioner was without authority to assess a deficiency tax against it. This may be so as regards the power conferred upon him by section 14(a) of the Revenue Act of 1916, as amended by the Revenue Act of 1917. But in the act of 1921, approved November 23, 1921 (42 Stat. 227, 265), it was provided in section 250(d):

"The amount of income, excess-profits, or war-profits taxes due under any return made * * * under prior income, excess-profits, or war-profits tax Acts * * * shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax; and no suit or proceeding for the collection of any such taxes due under this Act or under prior income, excess-profits, or war-profits tax Acts * * * shall be begun, after the expiration of five years after the date when such return was filed. * * *"

By this act power was conferred upon the Commissioner to assess a deficiency excess profits tax within five years after the return was filed July 18, 1918, which means before July 18, 1923. Section 250(d), therefore, controls and fixes the period within which the Commissioner was authorized to assess and collect taxes levied under prior acts. This was the conclusion reached by the Court of Appeals of the Fourth Circuit in the companion case of Trustees for the Ohio & Big Sandy Coal Company v. Commissioner, 43 F.(2d) 782. See also W. P. Brown & Sons Lumber Co. v. Commissioner (6th Circuit) 38 F.(2d) 425; Aiken v. Commissioner (8th Circuit) 35 F.(2d) 620; Greylock Mills v. Commissioner (2d Circuit) 31 F. (2d) 655.

Section 250(d), though retroactive, is not unconstitutional, for the petitioner had no vested right not to have a deficiency assessed against it. Regla Coal Co. v. Bowers (D. C.) 37 F.(2d) 373; Eastman v. McCarten, 70 N. H. 23, 45 A. 1081, and cases there cited.

Section 1106(a) of the Revenue Act of 1926, approved February 26, 1926 (26 USCA § 1249 note), has no bearing upon the question here presented, for the tax in question was assessed September 25, 1925, five months before the provisions of section 1106 went into effect.

The deficiency tax in question was not assessed within the five-year period limited by section 250(d) of the act of 1921; but before the expiration of that period the taxpayer filed waivers or consents in writing with the Commissioner for a later determination, assessment and collection of the tax. If they were valid waivers under section 250 (d) then, inasmuch as the period was thereby extended beyond the time when the tax was assessed, the assessment was seasonably made.

The petitioner questions the validity of the waivers. It appears that on January 16, 1923, and before the expiration of the five-year period fixed by section 250(d), the petitioner executed and delivered to the Commissioner its written consent extending the time for the determination, assessment, and collection of the deficiency tax to April 1, 1924; that this written consent or waiver had written upon it, "Approved, D. H. Blair, A. H. F., Commissioner of Internal Revenue, date Jan. 19, 1923"; that January 8, 1924, and before the expiration of the time fixed by the waiver of January 16, 1923, the petitioner executed and delivered to the Commissioner another written consent or waiver, extending the time to March 15, 1925; that this waiver had upon it, "D. H. Blair, Commissioner, S. A., Jan. 10, 1924"; that November 24, 1924, and before the expiration of the time fixed by the prior waiver, the petitioner executed and delivered to the Commissioner another written consent or waiver extending the time for a further period of one year, or to March 15, 1926; that this waiver also had upon it, "D. H. Blair, Commissioner, L. T. L."; and that the signature "D. H. Blair" appearing on each of these waivers was "not the personal hand writing of D. H. Blair, Commissioner of Internal Revenue."

It further appears that each of these written consents or waivers, made in the manner above set forth, were acted upon by the Commissioner not only in allowing renewal waivers to be filed from time to time as above stated, but in letters and correspondence between the Commissioner and the petitioner leading up to the determination and assessment of the tax.

The petitioner contends that, under section 250(d), the Commissioner's consent in writing to each of the waivers was essential; and that his consent involved the exercise of discretion, which could not be delegated to a subordinate. If this be conceded, it does not follow that the mere manual act of placing the signature of the Commissioner upon a waiver must be done by him personally; and the fact that the signature is not in his handwriting does not show that he did not exercise the discretion involved in the approval of the waiver. If there had been direct evidence that the signature of the Commissioner on each waiver was written at his direction, there could be no question but that the signature was properly made and in the exercise of the Commissioner's discretion. The Commissioner is presumed to discharge his official duties in a proper and legal manner; and, in this case, if it was essential that the Commissioner...