
    LANCASTER COTTON MILLS v. THE UNITED STATES
    [No. J-596.
    Decided May 31, 1932]
    
      Mr. James Craig Peacooh for the plaintiff. Messrs. Otis Beall Kent and Arthur H. Deibert were on the briefs.
    
      Mr. Joseph H. Sheppard, with whom was Mr. Assistant Attorney General Charles B. Rugg, for. the defendant.
   Littleton, Judge,

delivered the opinion:

It is stipulated that if the plaintiff is entitled to recover on the claims presented judgment should be rendered in its favor for the principal amount of $104,349.36, with interest thereon, and for interest on the amounts of $2,854.01 and $9,360.07 credited and refunded. The defendant denies the right of plaintitff to recover on any of the claims made.

Upon the record in this case we are of opinion that the plaintiff is not entitled to recover with respect'to the first item of $104,349.36, being the alleged overpayment for the six months’ period in excess of that allowed by the commissioner. . Recovery of this amount is based upon the claim of plaintiff that the commissioner in his determination and allowance, as evidenced by the certificate of overassessment of August 22, 1923, should have used plaintiff’s full invested capital of $2,770,588,95 and the -full exemption of $3,000 instead of pro rating the invested capital and the exemption to the six months’period, as he-did.

The plaintiff states that “ This action is not for the overpayment of tax paid in 1918 and 1920, but is grounded upon the determination evidenced by the certificate issued by the commissioner August 22, 1923. Plaintiff, stands -squarely upon the ruling of the Supreme Court in. Bonwit Teller & Co. v. United States, supra:" and further, that “ the cases are distinguishable only in that the Government in the Bon-wit Teller ease had failed to pay an amount computed in the commissioner’s determination, while the gravamen of the instant case is that the commissioner failed to pay the amount which should ham teen computed therein.” In our opinion the decision in Bonwit Teller & Co. v. United States, supra, has no application here. There is a vital distinction between the failure of the commissioner to pay an amount of an overpayment determined and allowed by him and his failure to determine and compute the invested capital and the exemption in the manner now claimed by the plaintiff. The salient point in the Bormit Teller case was that the commissioner had determined, computed, and allowed an overpayment in a. stated amount, a portion of which he thereafter declined to pay. In the present case the overpayment determined, computed, and allowed by the commissioner was fully paid by credit or refund and the liability of the Government arising out of the commissioner’s action was fully satisfied and extinguished. In such a case no suit may be maintained to recover an alleged overpayment in excess of that allowed by the commissioner unless the matters forming the basis of suit for the claimed excess overpayment were brought to the commissioner’s attention by a timely claim for refund. This was not done and plaintiff makes no contention to that effect. The issuance of a certificate of overassessment by the commissioner showing the basis of his final determination and the manner in which the overassessment was arrived at does not give rise to ah account stated for an amount which would have been shown as an overassessment if the commissioner had determined and computed the net income, invested capital,, deductions, and exemptions in a manner and in amounts differently from what he did. To so hold would nullify the provisions of section 3226 of the Revised Statutes, as amended.

Pursuant to the permission granted by the commissioner to plaintiff to change its method of accounting from a calendar year to á fiscal year, the return for the fiscal taxable period January 1 to June 30, 1917, was due and was filed April 1, 1918. The tax of $151,537.75-shown to be due upon this return was paid June 7, 1918. The commissioner made an additional assessment of $177,791.86 for. this period, of which $99,803.04 was paid June 10, 1920.

March 2, 1923, within five years after the return for the period in question was due, plaintiff filed a claim for refund. Lucker v. United States, 72 C. Cls. 606, 53 Fed. (2d) 418. This claim for refund was for one dollar, ór “ such greater amount as is legally refundable.” It stated no specific ground upon which a refund should be granted nor did it set forth any facts which would show that any overpayment had been made. The only statement contained therein was that “ This claim is filed to protect deponent’s interest against the expiration of the five-year limitation provided by section 252 of the revenue act of 1921.” It is definitely established that this claim was not amended prior to the final action by the commissioner and the issuance of a certificate of overassessment of August 22, 1923, so as to call to the commissioner’s attention or place in issue the matters which constitute the basis of this suit for the recovery of the alleged overpayment of $104,349.36. The claim as filed, however, gave the commissioner jurisdiction over the matter of the tax liability for the period involved beyond the period of five years after the return was due. Factors & Finance Co. v. United States, 73 C. Cls. 707; 56 Fed. (2d) 902. And he had jurisdiction and authority to determine, allow, and refund whatever overpayment he might find had been made, notwithstanding the defectiveness of the claim. Bonwit Teller c&. Go. v. United States, supra. Since the refund claim filed in this case specified no ground and stated no facts to show an overpayment, the plaintiff would have had no right to institute this suit to recover an overpayment on the ground specified in the petition or to recover any overpayment for the period involved if the commissioner had rejected the claim for refund of March 2, 1923. United States v. Felt & Tarrant Mfg. Co., 283 U. S. 269; Factors & Finance Co. v. United States, supra. It is obvious therefore that the commissioner’s allowance of an overassessment in a certain amount did not give the taxpayer a greater right to sue for a larger overpayment than it would have had if the commissioner had entirely rejected the claim. Plaintiff can not, therefore, maintain this suit for the alleged overpayment of $104,349.36.

On the question of interest on the overpayment of $12,214.08 allowed, the defendant contends that the action of the commissioner in allowing the refund and credit was not the result of the allowance of the claim for refund, but was “ the result of an office audit,” and pursuant to the authority conferred upon the commissioner by the statute to allow the overpayment and credit independently of the claim for refund. We can not agree with this contention of the defendant. The claim filed gave the commissioner jurisdiction and he so construed it. The term “ office audit ” has no significance in a case where the commissioner would have had no authority to allow an overpayment and make a refund but for the claim filed. The term “ office audit ” appears to be used in this case to convey the idea that the commissioner allowed the overpayment and made the refund and credit upon the basis of information and facts in his possession or obtained by him in connection with his consideration and action upon the claim, and that, therefore, the claim was invalid and of no effect. So far as concerns the jurisdiction and authority of the commissioner to act upon the claim filed by the plaintiff, the manner in which the facts were submitted to him, or brought to his attention, was unimportant. The only purpose of supplying facts is fully to inform the commissioner so that he may act intelligently. The time within which he could allow an overpayment and pay a refund without a claim had expired when he made his audit. The claim filed, although defective, gave him jurisdiction of the matter, and under it he had authority to proceed with the audit and to determine and allow the overpayment beyond the period within which he could have clone so without a claim. In such a case, however, no suit may be maintained to recover any overpayment in excess of that allowed by the commissioner unless the matters made .the basis of the suit were brought to the attention of the commissioner and. urged by the taxpayer.

In Art Metal Construction Co. v. United States, 41 Fed. (2d) 558, the,Circuit Court of. Appeals for. the Second.Circuit held that a refund claim timely .filed for a particular taxable year which does not specifically state the grounds upon which it is based and contains no statement of facts intended to be relied upon to show an overpayment is not a claim for refund but a mere caveat requiring no action by the commissioner and which he may completely ignore; and that such a claim may not be amended so as to state a ground and supply facts after the expiration of the date on which the taxpayer could file an original claim. We think this holding, as a general rule, is too limited as concerns the jurisdiction and authority of the commissioner to act in the premises after the expiration of the period within which he may act without a claim, and as concerns the right of amendment before action is taken by the commissioner. Factors & Finance co. v. United States, supra.

The facts and circumstances in this case and those in Memphis Cotton Oil Co. v. United States, No. L-173, decided this date [post, p. 195], and Factors & Finance Co. v. United States, supra, illustrate the application of the rule which we think is authorized by the Statute. Compare also McKesson & Robbins v. United States, 38 Fed. (2d) 887; Prentiss & Co. v. United States, 46 Fed. (2d) 159. It is the regular practice of the commissioner’s office upon the receipt of refund claims to make a record thereof in the claims control section and to route such claims to the proper division of his office for consideration and action, and thereafter to record the action taken thereon. Williams & Co. v. United States, 71 C. Cls. 1; 48 Fed. (2d) 672. In point of fact, therefore, it has long been the practice of the commissioner to consider the cases to which such claims relate and to take some action on the claims. In some cases he allows an overpayment to the extent that it is justified by the record before him, as in this case. In other- cases he calls the attention of the taxpayer to the insufficiency of the claim. In other cases he rejects the claims. This practice of the commissioner is authorized by the statutes. We think the practice followed by the bureau should be given weight in determining whether a claim that is defective gives the. commissioner jurisdiction beyond the limitation period of five years, and we think such a defective claim may be amended and perfected before it has been acted upon by the commissioner.

The five-year-period of limitation within which the commissioner could allow a refund or credit, or pay a refund under section 252 of the revenue act of -1921, without the-filing of “ a claim for refund ” expired in this case April 1, 1923. The first action of the commissioner setting forth the results of his audit with reference to the tax liability of the plaintiff for the taxable period in question was on April 13, 1923, as disclosed by his letter of that date to the-plaintiff to which was attached various statements and schedules showing the detail? of his computation, which computation was- afterwards embodied as a part of the certificate of overassessment. Thereafter, and beyond the five-year period- provided in the statute, the commissioner on July 20, 1923, signed a schedule of overassessments which was transmitted to the collector and was checked against his records and the account of the taxpayer upon its books after-which he prepared a schedule of refunds and credits which he executed and transmitted to the commissioner. Thereafter, on October 23, 1923, the commissioner signed and approved this schedule of refunds and credits which action, constituted the allowance by the commissioner of a credit of a portion of the overpayment for the period in question and the refund of the balance. Boston Buick Co. v. United States, 282 U. S. 476; Pottstown Iron Co. v. United States, 282 U. S. 479.

■ In addition the commissioner specifically stated in the-certificate of overassessment that he had given careful consideration to the claim for refund of March 2, 1923, and the determination made. We hold, therefore, that the commissioner, in allowing the refund and credit involved herein, allowed the claim for refund, McKenny et al. v. United States, 49 Fed. (2d) 667, and that the plaintiff is therefore-entitled, under section 1324(a) of the revenue act of 1921,. to interest upon the credit of $2,854.01 and the refund of' $9,360.07 paid pursuant to an additional assessment from-, the date of payment on June 10, 1920, to the date of allowance, August 6, 1923. This section provides “ that upon the allowance of a claim for the refund of or credit * * interest shall be allowed and paid ” from the date of the payment, in the case of an additional assessment, to the date of the allowance.

We need not consider or discuss the claim for refund filed July 2, 1925, which was rejected by the commissioner September 2, 1926, for that claims which was filed after the commissioner’s final action, could not' and was not intended to be an amendment of the claim of March 2, 1923. It did not mention the questions which form the basis of this suit, and it was also filed after the expiration of the statute of limitation within which a claim could be filed. Nor need we discuss in detail the letters written to the commissioner on February 13 and February 21, 1928. These letters gave the plaintiff no greater right to bring suit than it had to maintain suit upon the original action of the commissioner.

Plaintiff is entitled to recover $2,312.53, being interest allowed by section 1324(a) of the revenue act of 1921 at six per cent per annum on $2,854.01 and $9,360.07, totaling $12,214.08, from June 10, 1920, to August 6, 1923. Judgment will be entered accordingly. It is so ordered.

Whalet, Judge; Williams, Judge; Gkeen, Judge; and Booth, Chief Justice, concur.  