The opinion of the court was delivered by: HERLANDS
Plaintiff-taxpayer commenced this action
on March 21, 1955 to enjoin defendant-District Director of Internal Revenue from collecting or attempting to collect from plaintiff any part of two certain assessments of interest on deficiencies in plaintiff's consolidated excess profits tax returns for the calendar years 1943 and 1944.
The decisive question in this case is raised by defendant's motion to dismiss the complaint on the ground that there is 'lack of jurisdiction over the subject matter'. Rule 12(b)(1) F.R.C.P., 28 U.S.C.A. The answer to that question involves the interpretation and application of section 272(a)(1) of the Internal Revenue Code of 1939, 26 U.S.C.A. 272(a)(1); now, with changes, Internal Revenue Code of 1954, §§ 6212(a) and 6213(a).
Section 272(a)(1) is an express exception
to the general provision that 'no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.' Section 3653(a) of the Internal Revenue Code of 1939, 26 U.S.C.A. 3653(a), now Internal Revenue Code of 1954, § 7421(a).
In the exceptional case provided for by section 272(a)(1), the taxpayer may maintain an injunction suit to restrain the collection of an assessment where the assessment is for a tax deficiency and the tax authorities have not complied with the procedure and timetable prescribed by section 272(a)(1).
Section 272(a)(1), so far as relevant, provides:
'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 * * * 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 proceeding or distraint during the time such prohibition is in force may be enjoined by a proceeding in the proper court. * * *'
The core of this controversy can be excised from its factual and legal complexities by stating defendant's position syllogistically:
1. The procedure and timetable prescribed by section 272(a)(1) apply only to an assessment of a tax deficiency and not to an assessment of interest on a deficiency.
2. This case involves an assessment of interest on a deficiency as distinguished from an assessment of a deficiency.
3. Therefore, since section 272(a)(1) does not apply to this case, plaintiff's action for an injunction -- which is mistakenly based on that section -- must be dismissed for jurisdictional insufficiency.
Whether the above premises are valid must be determined in the light of the allegations contained in the complaint and as amplified by a 'Stipulation of Facts.'
On June 29, 1954, defendant mailed to plaintiff a notice that there had been assessed against plaintiff the sum of $ 6,334,565.70 (subsequently corrected and reduced to $ 1,682,410.45) representing interest on a deficiency in plaintiff's excess ...