Conrad Hardware Co. v. Commissioner

1927 BTA LEXIS 2873 | B.T.A. | 1927

Lead Opinion

OPINION.

Littleton :

The Board is of the opinion from the evidence of this proceeding that the assessment and collection of the deficiency of $1,317.46 claimed by the Commissioner for the fiscal year ending August 31, 1920, is barred by the statute of limitation of five years. Section 250, Revenue Act of 1918. Petitioner, on October 26, 1920, prepared an income and profits-tax return, showing specifically the items of its gross income, deductions, net income and invested capital, and this return was duly signed and sworn to by the proper officers of the petitioner and was transmitted to the collector of internal revenue at Raleigh, N. C., for filing, together with petitioner’s check for $150, more than one-fourth of the tax due upon the net income of of $6,072.66, shown. This return, together with proper schedules, was received by the collector October 27, 1920. The Commissioner insists that because the return executed October 26, 1920, and transmitted to the collector for filing and received and stamped by the collector, was not retained by him, it was not “ filed ” and did not operate to start the running of the statute of limitation within which assessment and collection of any tax for the fiscal year ending August 31, 1920, might be made. He says that this return was not received by him and that he can not be charged with knowledge that it was received by the collector; that he could not examine the return as required by section 250 of the Revenue Act of 1918 because it was never in his custody. The statute, section 239 of the Revenue Act of 1918, provides “ that every corporation subject to taxation under this title and every personal service corporation shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title * * This the petitioner did when it transmitted to the collector the income and profits-tax return executed October 26, 1920, which return was received by the collector on October 27, 1920. Subsections (a) and (b) of section 227 of the Revenue Act of 1918 provide “ that returns shall be made on or before the fifteenth day of the third month following the close of the fiscal year * * *. Returns shall be made to the collector for the district in which is located the legal residence or principal place of business of the person making the return, or, if he has no legal residence or principal place of business in the United States, then to the collector at Baltimore, Maryland.” The petitioner complied with this section.. It made a return to the collector of internal revenue for the Fourth District of North Carolina. Section 250(b) of the Revenue Act of 1918 provides that “as soon as practicable after the return is filed, the Commissioner shall examine it.” It was not this petitioner’s fault that the Commissioner did not have an opportunity to examine the return first filed. The petitioner had made a return to the collector and if the collector failed to transmit said return to the Commissioner, that was no fault of the petitioner. The fact that the collector did not retain the return in his files after it had been mailed to and received by him, but instead returned it to the petitioner, can not defeat the rights of the petitioner under the statutes. The petitioner certainly could not be held liable to a penalty for failure to make a return under the statute and if the return which was signed and sworn on October 26, 1920, and transmitted to the collector for filing and received by him in due course had been willfully false and fraudulent with intent to evade the tax and that fact were proved, the petitioner would be liable for the penalty provided in the statute. The petitioner was under no obligation to undertake to induce the collector to retain in his files the return which it had made to him. The collector should not have sent the return back to the petitioner. All that remained to be done upon the return which the petitioner filed was to compute the tax at the rates provided by the Revenue Act of 1918, upon the net income shown in the return. While there is no direct evidence on this point, it would appear probable that the reason the collector sent the first return back to the petitioner was because it had been made on a form which contained in “ Schedule Y — Computation of taxes ” rates to be used in determining the amount of tax for a fiscal year beginning in 1918 and ending in 1919, and that evidently accounts for the fact that petitioner did not make a computation of the tax upon this return. The running of the statute of limitation, however, does not depend upon whether the taxpayer computed the tax upon the income shown on the return made to the collector. The fact that the return is inaccurate or that it is filed on a calendar year instead of a fiscal year basis does not postpone the date on which the statute of limitation begins to run. See Afpeal of Mabel Elevator Co., 2 B. T. A. 517; United States v. Mabel Elevator Co., 17 Fed. (2d) 109. Presumably the collector when he returned the income and profits-tax return to the petitioner, sent it a return, Form 1120, which he desired the petitioner to execute. Just why the first return was sent back by the collector and what occurred in respect of the making of the new return is not disclosed by the evidence, since D. H. Conrad who handled this matter for the petitioner is now deceased. At any rate, the petitioner executed another income and profits-tax return, Form 1120, showing the same gross income, deductions and credits, net income and invested capital as had been shown in the first return made to the collector and attached to this return the same schedules and balance sheets which had been attached to the first return. Petitioner also computed the tax upon this net income in this return and transmitted to the collector $257.27, the balance of its tax for the taxable year. In the opinion of the Board, the first return executed on October 26, 1920, and transmitted to and received by the collector of internal revenue at Raleigh, N. C., on October 27, 1920, was a return under the statute and operated to start the running of the statute of limitation for five years. Since the date on which the Commissioner mailed the petitioner the notice of his determination was more than five years after the filing of this return, the assessment and collection of any additional tax for the fiscal year ending August 31, 1920, is barred.

Reviewed by the Board.

Judgment of no deficiency will be entered accordingly.