delivered the opinion of the Court.
The controversy to be determined presents another phase of a problem which has been much considered by the court in opinions recently announced.
United States
v.
Memphis Cotton Oil Co.,
The petitioner, Bemis Bro. Bag Company, having made payment of excess profits taxes for 1918 and 1919, filed its claims for refund with the Commissioner of Internal Revenue. The claims contained a request for a special assessment under §§ 327 and 328 of the Revenue Act of 1918, and in support of the request annexed a statement under oath which had been filed with a like claim as to the taxes of another year.
By the statement thus annexed, the right to the relief demanded is placed upon three grounds which are not to be confused.
The first is that the case is one “ where the Commissioner is unable to determine the invested capital ” in the ordinary way. This is the ground covered by § 327 (a) of the applicable statute.
The second is that the case is one “ where a mixed aggregate of tangible and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective
The third is that the case is one where “ the tax, if determined without the benefit of this section [327] would, owing to abnormal conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without the benefit of this section and the tax computed by reference to"the-representative corporations specified in section 328.” This is the ground covered by § 327 (d).
The taxpayer in presenting its claims t6 the Commissioner submitted facts and arguments in support of each of the three grounds.
To show that the invested capital had been inaccurately determined, and could hot be accurately determined by resort to the usual methods, the taxpayer stated inter alia that the value of printing plates and patterns had been erroneously omitted, and that owing to the loss of vouchers and the changes wrought by the lapse of time, the value of these- items could riot be measured with complete ¡precision, though it was susceptible even then of being fixed approximately. An estimate of the value was included in the claims..
To show that the case was one of a mixed aggregate of' tangibles and intangibles paid for in stock; with the value of the several elements not subject to accurate division, the taxpayer made a statement of the corporate history and structure.
To show that there were abnormal conditions that would bring about injustice if the computation of the tax were to be made according to the! usual method, and this though the invested capital were to be accurately determined, the taxpayer made a statement of the inequalities
Grounds numbers one and two gave notice to the Commissioner that the taxpayer’s invested capital had been erroneously assessed and charged him with a duty to inquire into the error and to give appropriate relief. United States v. Factors & Finance Co., supra. If he found that items had been omitted, but that he was unable to ascertain their value with reasonable accuracy, he might resort to § 328, and order the tax to be assessed in accordance with a special method. If he found that there had been omissions, but that he was able to his own satisfaction to identify and appraise them, he would learn in the process that there had been an undervaluation of invested capital, and that the assessment of the tax was correspondingly erroneous!
Ground number three is independent of the others, and has a different origin and meaning. “A demand for a special assessment in accordance with § 327 (d) of the statute of 1918 is not a challenge to any act of the Commissioner in the valuation of invested capital. On the contrary, the valuation of invested capital is irrelevant if the special method is accepted. The very basis of the application for the use of such a method is the presence of abnormal conditions whereby an unfair and disproportionate burden will be laid upon the taxpayer if invested capital is to be reckoned according to the statutory.definition (§§ 325, 326), and the profits of the taxpayer subjected to a tax accordingly. Let the new method be adopted and the value of the invested capital ceases to be a factor in the process.” United States v. Prentiss & Co., supra.
The Commissioner notified the taxpayer in October and November, 1926, that there was no evidence before him sufficient to justify relief under § 327 (d) on the ground of abnormal conditions in the business of the
We held in
United States
v.
Prentiss & Co., supra,
that after the period of limitation a claim for a special assessment under § 327 (d) may not he turned by amendment into one for the reaudit of invested capital and for the reassessment of the tax accordingly. The two proceedings, it was pointed out, are essentially diverse. The one is non-justiciable, invoking, as it does, an administrative and discretionary jurisdiction,. The other is akin to a
We think procedural analogies and administrative practice sustain the contention of the petitioner that the claim as amended does not differ in matter of substance from the claim as first presented.
1. If we look to the analogy of pleadings in a lawsuit, the conclusion is not doubtful. The claim as first presented gives notice .to the Commissioner that assets of great value have been omitted from invested capital. It tells him what those assets are, and even estimates their value, though imperfectly and roughly. There is no failure to make disclosures of the substance of the grievance, no dearth of information as to the facts that should be the prelude to inquiry. What is subject to criticism 'is this and nothing more, that the claim is niggardly, and hence
2. In this case administrative practice reinforces the suggestions of procedural analogies, and bids us follow where they point.
When a claim such as the one in controversy is submitted to a Commissioner, there is only one way in which it is possible for him to deal with it. He must look into the omitted items, and determine their effect upon the assessment he has made. If he finds that items have been omitted, and that by reason of their nature they make it impossible for him to determine the value of the capital, he will order a special assessment, for there will be nothing else to do. If he finds that they have been omitted, but
The brief for the Government describes the division of functions between one section and another of the Bureau of Internal Revenue. A claim which appears on its face to be one for a special assessment is sent to the Special Assessment section. A claim for the'revaluation of invested capital is sent to a section of the Field Audit Review Division. From this it ensues, we are told, that claims may be handled by different persons, and to some extent in different ways, áccording to the end in view.’ More than that must be shown to make out the contention that the substantial identity of the claim will be changed by this amendment. Whatever the distribution of labor may be between one division and another, it is impossible for any of them to pass upon a claim under § 327 (a) without also passing upon the question whether the valuation of the invested capital is wrong, and, , if so, whether in a determinable or an indeterminable amount. Once let it be ascertained that the amount is determinable, and all that follows is an -incident. At that point discovery has gone on to such a stage -that the Commissioner may not rid himself of the duty of pressing forward to the end. He cannot in good conscience be. satisfied with less. There may be need to take the case out
The judgment is Reversed.
Notes
For a summary of the decisions see Clark on Code Pleading, p. 184.