decided: December 22, 1959.
STRAWBERRY HILL PRESS, INC., APPELLEE,
THOMAS E. SCANLON, DISTRICT DIRECTOR OF INTERNAL REVENUE FOR THE DISTRICT OF BROOKLYN, APPELLANT.
Before LUMBARD, Chief Judge, and SWAN and FRIENDLY, Circuit Judges.
Thomas E. Scanlon, District Director of Internal Revenue for the District of Brooklyn, appeals from an order granting summary judgment to Strawberry Hill Press, plaintiff in an action to enjoin collection, prior to the issuance of a ninety day letter, of a delinquency penalty assessed under Sec. 6651 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 6651, and to vacate certain federal tax liens on plaintiff's property. We affirm the judgment.
Plaintiff's tax return for its 1957 fiscal year, due on July 15, 1958, was filed in the defendant's office about July 25, 1958. Shortly thereafter, the defendant sent a form letter to plaintiff, stating that unless reasonable cause were shown for the delay in filing, a penalty would be asserted. Upon plaintiff's failure to respond a penalty of 5% per month of the tax due was assessed under Sec. 6651(a) of the Internal Revenue Code of 1954*fn1 and a demand for payment for that penalty in the amount of $3,003.79 plus interest was made. On November 19, 1958 the defendant filed a notice of lien with the Registers of New York and Kings County in favor of the United States upon the plaintiff's property. At no time was plaintiff sent the deficiency notice provided in Sec. 6212(a) of the 1954 Code.*fn2 On December 5, 1958 plaintiff brought this action to enjoin collection of the penalty and to obtain cancellation of the liens, alleging that under Sec. 6659 of the 1954 Code*fn3 the defendant was obliged to send it a notice of deficiency and grant it an opportunity to appeal to the Tax Court prior to collection of the penalty. Defendant disputed this interpretation of Sec. 6659, emphasizing primarily the practice under prior tax statutes*fn4 and the inconvenience of administration which would be caused where a deficiency notice for the penalty for late filing required. On cross motions for summary judgment, the trial court granted the relief sought by plaintiff.*fn5
In Granquist v. Hackleman, 9 Cir. 1959, 264 F.2d 9, the Ninth Circuit was faced with a case virtually identical to this. We agree with so much of that opinion as holds that a penalty for late filing of a return is to be treated as a deficiency with respect to the requirement that a ninety day letter be sent the taxpayer and the reasons given for that conclusion.