On June 13, 1924, the Commissioner caused to be made and entered upon an assessment list a deficiency assessment against this taxpayer in the amount of $35,213.85. Thereupon the taxpayer filed with the Commissioner a protest against said additional assessment and a claim in abatement of all of such assessment, which claim in abatement the Commissioner received, considered, and reviewed, and finally rejected, and he forwarded to the taxpayer a notice of such rejection dated February 6, 1925, in words and figures as follows:

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, February 6, 1925.

IT: E: SM

CDL-A-2351

The DALLAS BRASS AND COPPER COMPANY,

223-231 North Jefferson Street,

Chicago, Illinois.

SIRS Reference is made to your income and profits tax return for the calendar year 1918 and to your protest dated July 19, 1924, and additional information subsequently submitted.

You are advised that after a thorough review of your case, the Bureau holds that the Commissioner of Internal Revenue may assess any tax found to be due even though such tax may have been previously erroneously abated or refunded, provided that such assessment is made within the time prescribed by statute; that the additional assessment of $35,213.85 against your corporation for the taxable year 1918 was made within the time prescribed by statute; and that the comparatives used in the final determination are, in the aggregate, fairly representative in all the material particulars specified in the act. The conclusions set forth in Bureau letter dated June 12, 1924 are, therefore, sustained.

In accordance with the above conclusions, your claims for the abatement of $35,213.85 and refund of $153,468.05, aggregating $188,681.90, will be rejected.

The Collector of Internal Revenue for your district will notify you as to the time and manner of making payment.

Upon receipt of notice and demand from that official, payment should be made to his office, in accordance with the conditions of his notice.

Your case is, therefore, deemed closed by the Bureau.

Respectfully,

(Signed)

J. G. BRIGHT, Deputy Commissioner.

From above notice of rejection of claim the taxpayer filed this appeal on March 18, 1925.

The granting of extensions of time within which taxpayers must file the returns required by law, and which are to be the basis for the computation and assessment of internal-revenue taxes, was provided for by statute many years prior to the levying of taxes upon incomes under the Sixteenth Amendment to the Constitution. Section 3176 of the Revised Statutes has for many years contained a provision for the granting of extensions of time within which to file returns on account of the absence or illness of taxpayers.

With the advent of income tax legislation, it was recognized that there are sometimes reasons, other than absence and illness, which require extensions of time within which to file returns. This was first recognized in the Revenue Act of 1916, section 8, which made provision for persons residing or traveling abroad, and later, in the Revenue Act of 1918, section 227(a), which contains the following language:

The Commissioner may grant a reasonable extension of time for filing returns whenever in his judgment good cause exists

This Act was approved on February 24, 1919, but was specifically made effective as of January 1, 1918. The returns for the year 1918 were required to be made and filed with the proper collector of internal revenue on or before March 15, 1919, which was only 19 days after the approval of the Act.

Some time prior to March 12, 1919, the Commissioner caused notice to be given "through the public press and otherwise that tentative returns (Forms 1031-T and 1040-T), accompanied by a first installment of one-fourth of the estimated tax due, would be accepted on that date [March 15, 1919] and that in such cases forty-five days would be given in which to file complete returns," and at the same. time the Commissioner issued and caused to be distributed in such a manner as to be available for the use of taxpayers the said so-called tentative return forms. Form 1031-T is in the nature of a communication addressed by the taxpayer to the collector and contains the following language:

The amount stated below is remitted herewith in payment of not less than one-fourth of the estimated amount of the income, war-profits, and excessprofits taxes for the year ended of the corporation whose name and

address appear at the head of this form.

An extension of

is requested.

days in the time allowed for filing a completed return

It is not possible to file a completed return on or before March 15, 1919, for the following reasons:

On or about March 12, 1919, the taxpayer made use of one of these forms, in the proper blank spaces of which it filled in the taxpayer's

name and address; showed that the form was used in connection with the year ended December 31, 1918; and, in the space for entering the estimated one-fourth of the amount of tax due, entered the figures $32,619.99, and filed this form, signed and sworn to, with the collector of internal revenue at Chicago, accompanied by a remittance for the amount stated in the form. Later, on June 13, 1919, the taxpayer filed a complete return with the collector at Chicago.

The taxpayer now argues that the Revenue Act of 1918 required it to file with the collector one return; that the Act itself contains no provision or mention of any tentative return or complete return, and that, therefore, when the taxpayer filed the above-mentioned tentative return, it had complied with the provisions of the statute requiring it to file a return and that the statute of limitations contained in the Revenue Act of 1924, section 277(a) (2), providing that taxes under various prior revenue laws "shall be assessed within five years after the return was filed," began to run on the day following the filing of the so-called tentative return.

The Revenue Act of 1918, section 239, contains this provision:

That every corporation subject to taxation under this title and every personal service corporation shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title. The return shall be sworn to by the president, vice president, or other principal officer and by the treasurer or assistant treasurer.

The return required by the statute is a document prepared in such a manner as to set forth the information called for in the above quotation from section 239 of the Revenue Act of 1918. The form filed by the taxpayer on March 12, 1919, contained none of the information required by section 239, above quoted. We must, therefore, treat this tentative return only as a request for an extension of time within which to file the return, accompanied by a statement that the taxpayer complied with the Commissioner's requirement of making a payment of one-fourth of the amount of tax estimated to be due, and that this taxpayer, having availed itself of the extension offered by the Commissioner to it and all other taxpayers in similar circumstances, can not now, with any degree of propriety, claim that the simple form used by it, containing none of the information required by the statute, was a return which could start the running of the statute of limitations.

We are, therefore, of the opinion that the form of tentative return used by this taxpayer and filed with the collector on March 12, 1919, was not a return required by the statute; that the return prepared and filed with the collector on June 13, 1919, was the return required by statute; and that the five-year period of limitation within which assessment might be made began to run on the day following June 13, 1919.

The taxpayer further argues that in the event the Board shall find that the assessment of June 13, 1924, was not barred by the statute of limitations, the Commissioner is nevertheless without authority to make an assessment or assert a deficiency as of that date, for the reason that he had, prior to that time, fully considered and acted upon all the facts pertinent to the subject of the taxpayer's liability to income and profits taxes for the year 1918 and had made a final adjustment of such liability, and that the case was closed and could not be reopened. The record of this appeal shows that the return filed by the taxpayer on June 13, 1919, disclosed the tax liability of $181,297.03; that an application for relief under sections 327 and 328 was made and was considered by the Commissioner; and that on February 10, 1921, an abatement of the amount assessed upon the return was made in the sum of $27,828.98, reducing the tax liability to $153,468.05. This last amount apparently was fully paid by the taxpayer, but thereafter the taxpayer made application for still further relief under section 328 of the Revenue Act of 1918. This second relief application was considered by the Commissioner and on or about September 14, 1922, the Commissioner granted to the taxpayer a further reduction of tax liability and advised the taxpayer of his action in a communication included in the above findings of fact.

This adjustment of tax liability appears to have been followed by a refund and payment to the taxpayer of an amount equal to the overassessment last above shown, and there the matter rested until on or about June 12, 1924, when the Commissioner caused to be forwarded to the taxpayer a communication, in words and figures as set forth in the findings of fact, in which the Commissioner asserted a deficiency in tax for the year 1918 in the amount of $35,213.85, and on the following day, June 13, 1924, the Commissioner caused to be entered on the appropriate list an assessment against the taxpayer in the amount last above stated.

The taxpayer now contends that the Commissioner's actions on June 12 and 13, 1924, in reopening and reconsidering the taxpayer's liability to income and profits taxes for the year 1918, were unauthorized, and that the Commissioner had no power at that time either to assert or assess an alleged deficiency in tax; that, by virtue of having on or about September 14, 1922, arrived at a determination of tax liability and adjustment of the same satisfactorily to the taxpayer, the Commissioner had divested himself of power to take any further action in the matter.

In support of this contention the taxpayer cites, as an authority for our consideration, the case of Penrose v. Skinner, 278 Fed. 284, where the court, among other things, said:

No authority has been vested in a Commissioner to overrule and reverse the action of his predecessor in office. Commissioner Osborn, acting under his authority, heard and determined a question of fact necessary to enable him to act intelligently in ascertaining and determining the amount of plaintiff's net income on which he would be required to make the levy and assessment, and his finding on that issue not having been impeached by the answer should, under every principle and rule of law, be regarded here as final.

In support of this view, numerous decisions of both the Supreme Court and other Federal courts were cited in that opinion. These precedents are urged as establishing the principle that the acts of one Commissioner, acting with full knowledge of all the facts, may not be reversed by his successor. A wholly different situation, however, exists in the matter of the instant appeal. David H. Blair was the Commissioner when all the acts and proceedings here in question were done, and we are of the opinion that Commissioner Blair at all times possessed full authority to review his own official

acts.

It has long been recognized, both by the Commissioner and all of his predecessors, as well as taxpayers generally, that reconsiderations of liability to internal-revenue taxes were both proper and lawful. This taxpayer itself recognized this principle when, after having received an abatement of $27,828.98 of its originally computed tax liability, it again applied to the same Commissioner for a further reduction of such tax liability. The principle or rule of law to the effect that reconsiderations and adjustments of tax liability can be properly made seems to have been recognized by Congress when, in the Revenue Act of 1921, it enacted:

That no taxpayer shall be subjected to unnecessary examinations or investigations, and only one inspection of a taxpayer's books of account shall be made for each taxable year unless the taxpayer requests otherwise or unless the Commissioner, after investigation, notifies the taxpayer in writing that an additional inspection is necessary. (Revenue Act of 1921, section 1309.)

Such recognition on the part of Congress is still further evidenced by this enactment:

That if after a determination and assessment in any case the taxpayer has without protest paid in whole any tax or penalty, or accepted any abatement, credit, or refund based on such determination and assessment, and an agreement is made in writing between the taxpayer and the Commissioner, with the approval of the Secretary, that such determination and assessment shall be final and conclusive, then (except upon a showing of fraud or malfeasance or misrepresentation of fact materially affecting the determination or assessment thus made) (1) the case shall not be reopened or the determination and assessment modified by any officer, employee, or agent of the United States, and (2) no suit, action, or proceeding to annul, modify, or set aside such determination or assessment shall be entertained by any court of the United States. (Revenue Act of 1921, section 1312.)