Beck Engraving Co. v. Commissioner

OPINION.

Moesis :

With respect to the fiscal year ended April 30, 1919, and the deficiency determined for the same, the petitioner asserts that the statute of limitations constitutes a bar to the assessment or collection of the tax for any period ending prior to January 1, 1919, and therefore $45,222.22 of the deficiency asserted can not be assessed or collected. ' Petitioner admits the correctness of the remainder of the deficiency and does not contest the respondent’s determination as to the calendar year 1920.

The proceeding raises a question of law, the determination of which necessarily involves a consideration of the various returns filed by the petitioner, the time of filing of said returns, and the application of the statute of limitations to the return which is held to be the one required by law. The petitioner filed three returns covering a part or all of the period here involved, only one of which can be the statutory return. The tentative return which was filed on or about March 12, 1919, for the calendar year 1918 can be eliminated from consideration in view of our decision in the Appeal of Dallas Brass & Copper Co., 3 B. T. A. 856, wherein we held that such a return was not the return required by law.

As to the remaining two returns, we are of the opinion that the return filed on or about October 26, 1920, for the fiscal year ended April 30,1919, is the statutory return and that the statute of limitations begins to run from that date. This is true because the statute provides by section 212 (b) of the Revenue Act of 1918 that “the net income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer * * Petitioner therefore had no authority and was in error when it filed returns on a calendar year basis while keeping its books on a fiscal year basis.

The period of limitation upon assessments under the provisions of the Revenue Act of 1918 is contained in section 277 (a) (2) of the Revenue Act of 1924, as follows:

(2) The amount of income, excess-profits, and war-profits taxes imposed by * * *, tbe Revenue Act of 1918, * * * shall be assessed within five years after the return was filed, and no proceeding in court for the collection of such taxes shall be begun after the expiration of such period.

Section 277 (a) (8) of the 1926 Act is to the same effect, and it follows accordingly that the bar to the assessment would operate after October 26, 1925.

It is provided, however, by the revenue laws, beginning with section 250 (d) of the Revenue Act of 1921, that the period within which taxes may be assessed can be extended by an agreement between the taxpayer and the Commissioner evidenced by a writing. In pursuance of this authority the Commissioner submitted a consent form to the petitioner which was executed by the latter on February 20, 1925, whereby the time for making an assessment was extended until December 31,1925. Subsequently the parties executed a second consent on December 10, 1925, which extended the time for making an assessment to December 31, 1926. Petitioner accompanied the form executed February 20, 1925, with a letter of transmittal wherein in a broad and general statement it attempted to reserve all rights which it might have had at the time of signing the consent. The second consent carries on its face a similar reservation which states “ taxpayer reserves all rights in existence at date hereof.”

Having decided that the statute of limitations- on the entire fiscal year ended April 30, 1919, began to run on or about October 26, 1920, it is unnecessary to consider the second issue presented, whether, if the assessment of additional tax for the portion of the fiscal year 1919, falling in the year 1919 was barred on January 8, 1925, the filing of the consents set out in the findings of fact, tended to reopen and extend such period.

It follows, therefore, that on February 2,1926, the statutory period within which taxes may be assessed against the petitioner for the fiscal year ended April 30,1919, as extended by the consents, had not expired. Cf. Appeal of Davis Feed Co., 2 B. T. A. 616.

Reviewed by the Board.

Judgment will be entered for the respondent.