
    GENERAL OUTDOOR ADVERTISING CO., INC. v. THE UNITED STATES
    [No. 270-52.
    Decided February 11, 1959.
    Plaintiff’s motion for reconsideration overruled April 8,1959] 
    
    
      
      Mr. Spaulding Glass for plaintiff.
    
      Mr. H. S. Fessenden, with whom was Mr. Assistant Attorney General Charles K. Rice, for defendant. Mr. James P. Garlarid was on the brief.
    
      
       ‘Plaintiff’s petition for writ of certiorari denies, by the Supreme Court March 28, 1960, 362 U.S. 927.
    
   Whitaker, Judge,

delivered the opinion of the court:

This controversy arose under this court’s Rule 38(c), concerning the amount of tax which plaintiff is entitled to recover under our previous decision in this case, reported in 137 C. Cls. 607. In that opinion we held that the Commissioner of Internal Revenue had erroneously reduced the value of plaintiff’s land and buildings. However, we also held that the claim for refund based upon this erroneous valuation was not an amendment of the original claim, but rather an independent claim, from which it follows that plaintiff can only recover the payments of tax made within two years prior to the date it was filed, which was April 3, 1950. Section 322 (b) of the Internal Revenue Code of 1939 permits recovery if “the tax was paid” within two years of the filing of the claim for refund.

The question presented is the date a remittance of $225,000 and interest by the taxpayer in August 1947 shall be credited as a tax payment on account of the taxpayer’s liability for additional taxes for 1944. This remittance was made prior to any assessment or a notice of a deficiency from the Commissioner on account of such liability, but after receipt of the revenue agent’s report recommending the assessment of a larger deficiency.

The Government says this was a voluntary payment by the taxpayer of an amount of additional tax which is admitted it owed for that year, and must be considered as the payment, in August 1947, of taxes due for 1944, although no assessment of additional taxes had been made at that time.

The plaintiff, on the other hand, says that the remittance in 1947 was merely “on account”, or a deposit, in anticipation of an assessment, to take care of one when made, and that the subsequent assessment in October 1947 was of no effect, because: (1) the plaintiff was not given a deficiency notice ninety days before the assessment, as provided by section 272 (a) (1) of the Internal Revenue Code of 1939; and (2) 'because the assessment list was not signed by the Commissioner personally, but by an agent, who, under authority from the Commissioner, had signed the Commissioner’s name thereto. Hence, it says the assessment was void, from which it follows there was no assessment to which the remittance of $225,000 could be applied, and that it could not lawfully be applied in part settlement of plaintiff’s tax liability for 1944 until the amount of that liability had been determined. That determination was in 1948, within two years of the filing of the claim for refund.

In May 1947 an internal revenue agent examined plaintiff’s tax returns for the years 1941,1942,1943, and 1944. For the year 1944, the only year involved here, the agent’s report showed a net deficiency in excess profit tax of $316,377.04. A copy of this report was furnished plaintiff with a letter dated July 23, 1947, which enclosed a form for “waiver and acceptance” and one for acknowledgement of receipt of the report with an expression of the taxpayer’s position with respect to it, but the letter stated that this was “not a final notice of deficiency.”

Plaintiff did not execute the form for waiver and acceptance, but it did execute the form headed “receipt oe revenue agent’s report.” This form first acknowledged receipt of the report, and then read:

The position of the undersigned with respect to the disposition of the findings disclosed by the report is indicated by a check mark:
1. Revenue Agent’s findings are agreed to-□
(a) Signed Agreement Form 874 is enclosed herewith_□
(b) Signed Agreement Form 874 has already been forwarded to your office-□
(c) Payment of any deficiency in tax indicated above has already been made to Collector of Internal Revenue (in part — not protested)- |x]
(d) Payment of any deficiency in tax indicated above will be made to the Collector of Internal Revenue upon receipt of notice and demand? and no objection will be made to the immediate assessment of the tax_□
2. Revenue Agent’s findings are not agreed to— |x]
3. Protest will be filed within the allotted time, [x]
4. I do not intend to protest these findings-□

By this the taxpayer said it did not agree with the agent’s report in full, and that it meant to file a protest, but not to the report in its entirety, but only in part, and that it was enclosing check in part payment.

The document was enclosed in a letter of the same date, which read in part:

* * * Part of the net tax will be made the subject of a Protest to be filed with the agent in charge.
It is our purpose hereby to stop the further running of interest on the net tax deficiency for 1944 by making a payment on account of so many dollars in principal of tax and so many dollars of interest on such tax. Therefore, find enclosed herewith a check payable to your order in the sum of $225,000.00 to apply on the tax principal and another check payable to your order for $33,750.00 to apply on interest accrued on the tax deficiency for this year.

Enclosed also were two checks, one for $225,000 on account of the 1944 tax deficiency, and the other for $33,750 as accrued interest.

Upon receipt of these checks, the collector charged them to its 9-D unclassified collection account, since at that time there was no unpaid assessment for 1944 against plaintiff to which the payment could be credited. About two months later, on October 10,1947, without the plaintiff’s knowledge, an assessment for the year 1944 of $225,000 as excess profits tax and $32,625 as interest, computed to August 15, 1947, was duly certified under the signature of Commissioner .Schoeneman. The list was in fact signed by an employee in the office of the Commissioner, who had been previously authorized in writing by Mr. Schoeneman to sign Mr. Schoeneman’s name to such lists. About a month after the assessment, on November 14,1947, the sums were transferred by the collector from his 9-D account and credited against the assessment of October 10,1947. This was more than two years before the claim for refund was filed.

A refund of $1,125.00, as an overpayment of this assessment, was the first actual notice plaintiff had of this assessment. This was in April 1948.

Plaintiff first contends that the October 10 assessment was invalid, because notice of the proposed assessment was not given, as provided by section 272(a) (1), sufra. That section provides as follows:

Petition to the Tax Court of the United States. — If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this chapter, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within ninety days after such notice is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the ninetieth day) the taxpayer may file a petition with the Tax Court of the United States for a redetermination of the deficiency. No assessment of a deficiency in respect of the tax imposed by this chapter and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such ninety-day period, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 3653(a) the making of such assessment or the beginning of such a proceeding or distraint during the time such prohibition is in force may bo enjoined by a proceeding in the proper court. * * *

The purpose of this section is to allow a taxpayer to contest in the Tax Court a deficiency in tax which the Commissioner has found to be due, prior to payment. But, if the taxpayer states that he does not care to contest it, of course the notice need not be sent, since it is sent only to permit a contest in the Tax Court, and the assessment may be made forthwith. Here the taxpayer stated it meant to protest the action proposed by the revenue agent only in part, and sent its check for $225,000 in part payment of the asserted liability of $316,377.04. Five days later, it filed its protest against two alleged errors of the revenue agent. Thus, by its statement that it meant to protest the payment only in part, and by its payment of the amount of $225,000 on account of the proposed deficiency, the taxpayer admitted liability for $225,000 of the proposed deficiency.

In such circumstances the Commissioner of Internal Revenue was justified in making the assessment of the $225,000 and in satisfying it with plaintiff’s remittance of that amount. As to that amount plaintiff waived the notice required by Section 272(a)(1). Cf. Lehigh Portland Cement Co. v. United States, 90 C. Cls. 36.

The plaintiff’s second contention is that the assessment is void because the Commissioner did not sign it personally. There is no statutory requirement that he do so. Section 3901(a)(1) provides that the Commissioner of Internal Revenue shall have “general superintendence” of the assessment and collection of all taxes. 26 U.S.C. § 3901 (1952 ed.). Anyone at all acquainted with the magnitude of the task of making assessments of internal revenue taxes knows that Congress by the use of the words “general superintendence” did not intend the Commissioner to act personally on all collections and assessments. All assessments are made in his name, but he does not make them himself, but through subordinates. Nor need he himself sign the assessment lists, of which there are many, many thousands. As the trial commissioner points out in finding 4, if the Commissioner of Internal Revenue was required to sign such documents personally, he would have but little, if any, time for his other duties. Such signing may be done by the Commissioner personally, or his name may be subscribed by another under his direction. See Christopher v. Commissioner, 55 F. 2d 530.

It follows, therefore, that the October 10, 1947, assessment and the subsequent application thereto of the remittance of $225,000 were valid, and the April 3,1950, refund claim as to that amount is barred by the two-year statute of limitations.

However, the refund claim is valid as to the 1944 and 1945 taxes which were assessed and paid after April 3,1948. On this account plaintiff is entitled to recover a net overpayment for 1944 of $60,460.47; and a net overpayment for 1945 of $48,221.41. Judgment shall be entered for $108,681.88, with interest as provided by law.

It is so ordered.

Reed, Justice (Bet.), sitting by designation; Laramore, Judge, Madden, Judge, and Jones, OMef Judge, concur.

FINDINGS OE FACT

The court, having considered the evidence, the report of Commissioner George H. Foster, and the briefs and argument of counsel, makes findings of fact as follows:

1. Under date of May 26, 1947, a revenue agent made an examination of plaintiff’s returns for the years 1941, 1942, 1943, and 1944. A copy of the report was furnished plaintiff by the agent with a letter dated July 23, 1947, which inclosed a form for “waiver and acceptance” and a form of “acknowledgement.” The report proposed adjustments for the years 1941, 1942, and 1943, as well as 1944. The years 1941, 1942, and 1943 are not herein involved. For the year 1944 there was a proposed deficiency of $419,193.64 in excess profits tax and an overpayment of income tax of $102,816.60. The net deficiency for 1944 was $316,377.04. The letter stated that it was “not a final notice of deficiency and this office will be pleased to answer any questions which may occur to you in your examination of the inclosed copy of the report.” The letter also stated that if plaintiff failed to file either a waiver and acceptance of the inclosed form or a written protest, within a thirty-day period, a final determination would be made and a notice of deficiency would be sent in accordance with the provisions of law applicable to the assessment and collection of deficiencies.

The report indicated that the principal cause of the change in the tax liabilities was adjustments of depreciation and excess profits credit which adjustments had been discussed with, plaintiff’s attorney wbo did not agree thereto. The basis of disagreement was stated in the report as follows:

The taxpayer has agreed to all adjustments made in this report with the exception of the amount determined to be the distributions in prior years out of accumulated earnings and profits.

2. Under date of August 14,1947, the plaintiff returned the acknowledgement form with a letter to the collector of internal revenue at Chicago with reference to the year 1944. The letter stated that “part of the net tax will be made subject of a Protest to be filed with the agent in charge.” The letter continued:

It is our purpose hereby to stop the further running of interest on the net tax deficiency for 1944 by making a payment on account of so many dollars in principal of tax and so many dollars of interest on such tax. Therefore, find enclosed herewith a check payable to your order in the sum of $225,000.00 to apply on the tax principal and another check payable to your order for $33,750.00 to apply on interest accrued on the tax deficiency for this year.
By reason of adjustments effective with the years 1942, -43, -44, a deficiency in tax will occur in 1945, and an amended return for 1945 is in the course of preparation and will be submitted to you at an early date. A tax deficiency for 1945 of approximately $150,000.00 at least is estimated. Accordingly, please find enclosed herewith another check in your favor to cover the expected tax deficiency for 1945 of $150,000.00 together with interest in the amount of $13,500.00 also covered by separate check payable to your order.

The acknowledgment form indicated that a part of the deficiency in tax determined by the revenue agent, which was not protested, had already been paid to the collector and a protest would be filed in the allotted time. Inclosed in the letter were the four checks for the amounts indicated. Plaintiff did not sign the form of waiver and acceptance.

3. Plaintiff filed a protest dated August 19, 1947, against the adjustments made in the revenue agent’s report as follows:

(1) The agent failed to allow as a deduction for each of the years 1942, 1943 and 1944, respectively, the sums of $3,448.05, $3,973.50 and $4,498.45, which are Pennsylvania State Franchise tax, deductible in the year of liability. The tax accrues for payment on March 15 of each year following year of liability. It is believed that the agent merely overlooked these items in the final windup of his report. The figures can be supported and correction should be made.
(2) In determining equity invested capital for excess profits tax purposes, the agent erred in computing the amount of distributions made prior to the current taxable year (in each instance) not out of accumulated earnings and profits. The agent refers to this issue on page 4 of his report and taxpayer’s position is outlined in letter dated May 21, 1947, prepared and submitted to you by its attorney, Mr. Glass. Such letter may be referred to by you as taxpayer’s brief in support of the protest of this item.
A hearing before the Conference Section of your office is hereby requested and you are asked to notify its attorney, Spaulding F. Glass, c/o Lord, Bissell & Kadyk, 135 South LaSalle Street, Chicago 3, Illinois-of the time for such hearing.

The questions raised in the protest of August 19, 1947,. were later referred to the Bureau of Internal Bevenue in Washington for a ruling.

4. Upon receipt of the checks, the collector credited his 9-D Unclassified Collection account on August 15, 1947, in the amount of the proceeds of the checks. At that time there, were no unpaid assessments for the years 1944 and 1945, against which to credit the payment.

Thereafter, in due course of time, an assessment list was-prepared upon which an assessment against the plaintiff in the amount of $225,000 of excess profits tax, together with interest of $32,625 computed to August 15, 1947, for the year 1944 was listed. This assessment list was certified on October 10, 1947, as having been determined to be due-from plaintiff over the name of George J. Schoeneman,. the then Commissioner of Internal Bevenue. The name-George J. Schoeneman was not placed thereon by Mr. Schoeneman. It was signed by an employee in the office of the Commissioner who had been previously authorized, in writing, by Mr. Schoeneman to sign Mr. Schoeneman’s name to such lists. The practice of the signing by authorized persons had existed for many years prior to the time that Mr. Schoeneman was appointed commissioner and continued throughout his holding of that position. This practice grew out of the volume of documents requiring the signature of the commissioner, which was so great that had the commissioner personally signed, he would have had little or no time for anything else.

5. On November 14,1947, the sums of $225,000 and $32,625 were transferred by the collector from the 9-D account and credited against the assessments of October 10, 1947. Subsequently an amount equal to the difference between the $33,750 sent in by plaintiff, as interest, and the sum of $32,625, assessed as interest, was considered as an overpayment. A refund of $1,125 was made to plaintiff in April 1948, with interest thereon for seven months and five days, amounting to $40.30.

6. The questions raised in the protest were not settled until sometime in April 1948. However, on December 5, 1947, plaintiff executed a consent agreement, extending the time for assessment for the year 1944 to December 31,1948. The agreement was signed on behalf of the Commissioner on December 16,1947, in the same manner as described in finding 4. The final determination for the year 1944 was made in April 1948. On April 22,1948, plaintiff executed a waiver of the restrictions on assessment and collection for the year 1944 with respect to an excess profits tax deficiency of $308,699.83. This waiver was received by the revenue agent on April 27, 1948. This amount was later reduced to $308,-493.20. Inasmuch as $225,000 with interest of $32,625 has been placed on the October 10, 1947 assessment list, the difference between $308,493.20 and $225,000, namely $83,493.20, was thereupon placed on an assessment list, together with $16,028.41 as interest thereon. This assessment list was certified on behalf of the Commissioner of Internal Revenue in a same maimer as described in finding 4.

7. The payment of the assessment of $83,493.20 and the interest was accomplished by credits of $22,116.42 and $62,-786.59 on August 24, 1948, and the payment on September 2,1948, of $14,618.60.

8. On an assessment list certified on December 10, 1948, in the same manner, described in finding 4, there was assessed against plaintiff for the year 1945 a deficiency of excess profits tax of $341,767.06, together with interest to September 12, 1948, in the amount of $40,323.40. There was a valid waiver of time applicable to this assessment. This excess profits tax deficiency with the interest thereon was paid as follows:

$ 13,500.00: Transferred January 17, 1949, from 9-D account.
$150,000.00: Transferred January 17, 1949, from 9-D account.
$21,345.20: Transferred February 16, 1949, from 9-D account.
$150,000.00: Transferred February 16, 1949, from 9-D account.
$33,239.09: Paid December 31, 1948.
$13,798.04: Credit January 5,1949.
$208.13: Abated July 1,1949.

The amount of $13,500 transmitted as a payment against estimated interest on the estimated tax deficiency for 1945, was, when transferred from the 9-D account, used to pay in part the deficiency and interest on the December 10,1948 assessment.

9. A recomputation of the tax liability for the year 1944, based on the decision of March 6, 1957, shows an overpayment of excess profits tax of $254,901.53 with interest thereon of $40,882.62, and a deficiency in income tax of $119,252.17.

The amounts paid by the plaintiff within two years prior to the filing of the claim for refund on April 3,1950, of the excess profits tax are $83,493.20 together with the interest thereon of $16,028.41. The amount of $83,493>.20 of the excess profits tax is 32.75508 percent of the total overpayment. A similar percentage of the deficiency of income tax is $39,061.14. The net overpayment for 1944 amounts to $60,460.47.

10. A recomputation of the tax liability for the year 1945, based on the decision of March 6, 1957, shows an overpayment of excess profits tax of $74,239.34 with interest thereon of $8,713.92, and a deficiency in income tax of $34,731.85, leaving a net overpayment for 1945 of $48,221.41.

conclusion op law

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover. It is, therefore, adjudged and ordered that plaintiff recover of and from the United States the amount of one hundred eight thousand six hundred eighty-one dollars and eighty-eight cents ($108,-681.88), with interest as provided by law.  