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Commissioner of Internal Revenue v. Estate.

March 25, 1940

COMMISSIONER OF INTERNAL REVENUE
v.
DALLAS' ESTATE.



Petition to Review a Decision of Board of Tax Appeals.

Author: Patterson

Before SWAN, AUGUSTUS N. HAND, and PATTERSON, Circuit Judges.

PATTERSON, Circuit Judge.

The question is whether refund for overpayment of income tax was barred by limitation. Dallas, the taxpayer, filed income tax return for the year 1933, showing net income of $17,339 and tax of $1,120.20. By error he included in gross income an item of $19,566 received from a firm of which he had formerly been a member; of the amount received only $4,186.20 in fact represented income. He paid the tax in installments, $283.04 on May 18, 1934, $560.10 on June 15, 1934 and $280.01 on December 15, 1934.

The Commissioner on August 15, 1936 sent Dallas a notice of deficiency, stating that income from a trust in the amount of $2,062.69 should have been included in the return and that there was a tax deficiency of $244.97. Dallas filed petition with the Board of Tax Appeals on September 30, 1936. The petition merely set forth facts in contravention of the Commissioner's determination that the trust income should be taxed as income of Dallas. Dallas died later. His administrator discovered the error that had been made in reporting $19,566 as income, and on November 7, 1938 filed an amended petition with the Board, setting forth the facts concerning that amount and asking that the Board determine that the taxpayer had made an overpayment for 1933 in the full amount of the tax paid. The Commissioner's answer conceded the overpayment, but claimed that refund was barred by limitation. The Board held that there had been overpayment of $1,120.20, which was obviously right. But it also held that the amended petition related back to the filing of the original petition, and that consequently the last installment of tax, $280.01, had been paid within two years "before the filing of * * * the petition", within the meaning of section 322(d) of the Revenue Act of 1932.

Section 322 of the Revenue Act of 1932, as amended by section 809(c) of the Revenue Act of 1938, 26 U.S.C.A. Int. Rev. Acts, deals with refunds and credits. The paragraph of section 322 governing a case like the present one reads:

"(d) Overpayment Found by Board. If the Board finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax in respect of the taxable year in respect of which the Commissioner determined the deficiency, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the taxpayer. No such credit or refund shall be made of any portion of the tax unless the Board determines as part of its decision that such portion was paid within two years before the filing of the claim or the filing of the petition, whichever is earlier * * * ."

The taxpayer's original petition to the Board was filed within two years from the payment of the last installment of tax, $280.01. The original petition, however, merely raised the issue whether the trust income was taxable to the taxpayer; it showed no ground of overpayment. The amended petition, in which it was for the first time claimed that the amount reported as income from the partnership did not constitute income and that an overpayment had been made, was filed more than two years after the last payment of tax. We are of opinion that the amended petition did not relate back to the date of filing the original petition, and that no portion of the tax was paid within two years before "the filing of the petition", as those words are used in section 322(d).

A timely claim of refund asking repayment of tax on a specific ground may not be amended, after expiration of the time for filing claim, so as to set forth a new and unrelated ground of refund. United States v. Andrews, 302 U.S. 517, 58 S. Ct. 315, 82 L. Ed. 398; United States v. Garbutt Oil Co., 302 U.S. 528, 58 S. Ct. 320, 82 L. Ed. 405. The same principle must apply, we think, to petitions to the Board, so far as the right to recover an overpayment is concerned. A taxpayer may obtain refund for overpayment either through filing claim for refund with the Commissioner or through filing petition for redetermination of deficiency with the Board. Section 322(d) imposes a time limit of two years after payment both for filing of claim and for filing of petition. It would be incongruous to hold that while a claim could not be amended to set up different grounds for refund after expiration of the time limit, an amendment to a petition setting up different grounds for refund was effective though filed after expiration of the time limit. "The necessities and realities of administrative procedure", referred to in the Andrews case, supra [302 U.S. 517, 58 S. Ct. 319, 82 L. Ed. 398], are as potent against the relation back of an amended petition as of an amended claim.

It is quite true that as to deficiencies the Board may redetermine a deficiency greater than that asserted by the Commissioner in the notice of deficiency, and may redertermine a deficiency on different grounds, even after expiration of the period. Davison v. Commissioner, 2 Cir., 60 F.2d 50. But that is because the statute, in section 272(e), 26 U.S.C.A. Int. Rev. Acts, makes what amounts to express provision to that effect as to deficiencies. As to overpayments the statutory provision, section 322(d), is not so broad.

Our conclusion is in accord with Commissioner v. Rieck, 3 Cir., 104 F.2d 294, where the facts were the same as in the present case. Refund of the overpayment was barred by the lapse of more than two years before the filing of the amended petition which first set up the grounds of overpayment.

Reversed.

SWAN, Circuit Judge (dissenting).

The present case involves only a small amount of money; the taxpayer has not even thought it worth while to enter an appearance in this court. But the construction placed upon the statute by the majority opinion, if followed, will control many important cases. Hence an expression of my ...


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