I have carefully re-examined this entire case, and I am thoroughly convinced that I was entirely wrong in my understanding of the intent and effect of the plaintiff's letter of September 13, 1921 and the letter of August 3, 1922, from the office of the Commissioner of Internal Revenue, signed by a deputy commissioner. The latter is certainly ambiguous and very misleading -- a really outstanding example of official obscurantism. The "statement" accompanying the letter does say quite plainly, "Your application for assessment * * * under the provisions of Section 328 * * * has been allowed ", and it refers to "the method by which your tax has been determined. " However, if this part of the statement be read in connection with the letter, in the light of what appears to be conceded to have been practice of the Department then in force, there seems to be no doubt that it simply does not mean what it says.
I am also satisfied that the taxpayer did not intend its letter of September 13, 1921 or of October 21, 1921 as applications for special assessment. They are general requests for relief and do not refer in any way to the special assessment sections of the Revenue Law. The reasons and brief submitted with them are exclusively directed to the valuation put upon the patent a matter totally immaterial and outside the procedure under the special assessment sections.
This leaves the taxpayer's letter of February 3, 1923 as the only thing in the case resembling an application by it for special assessment. I indicated in the original opinion what I thought about that. Apparently, it was written in compliance with two letters of the Commissioner which have been lost and are not in evidence but which seem almost certainly to have contained a suggestion of some kind that the taxpayer could or should make application for special assessment -- an indication, at least, that the Commissioner did not understand that such application had already been made.
The application embodied in the letter of February 3 was not an unqualified one. The situation was somewhat peculiar. The taxpayer had been assessed for an additional $13,277.84 under the statutory rates. He had also been told, that, under the special assessment sections, his tax would be $9,446. He had evidently been advised or believed that if he made application for special assessment, it might result in his losing all rights to contest his tax in the courts, and being limited to the review in the Department only.He plainly did not want to accept the comparatively small reduction which the special assessment would give him if so doing would cost him his right to contest the bulk of the tax.
What he said in effect was: "You have suggested that I apply for special assessment. You can treat this letter as such application, but not if, under the law, it will cost me my right to contest the tax. If that is the law, then disregard this altogether and send me my bill for the $13,227.84, so that I can contest it in the courts."
This is not quite the case of a taxpayer who desires to gamble with the special assessment provisions and preserve the right to resort to the courts at the same time. This taxpayer knew exactly how much relief he would get under the special assessment provisions, and he did not want it if it was going to interfere with his proceeding to obtain a larger measure of relief in the courts.
The defendant had cited Cleveland Automobile Co. v. U.S., 6 Cir., 70 F.2d 365, as authority for the rule that if the Commissioner accepts a conditional and qualified application, the taxpayer loses his rights at law. I do not think the case goes quite that far. In it, the Commissioner had assessed an income tax, and the taxpayer had made a claim for refund. Then the taxpayer made an unqualified application for special assessment. It is pretty clear from the statement of the case that, at that time, both parties must have been acting in the belief that the application for special assessment did not oust the jurisdiction of the courts. The Commissioner said in effect, "I will grant special assessment if you will agree that the statutory assessment is correct." The taxpayer refused to so agree and reserved the right to contest it if the special assessment was not satisfactory. The Commissioner then went ahead with the special assessment, and it was held that the court remedy was superseded. The point of difference was, in that case, the interchange apparently began with an unconditional request. The Commissioner attempted to impose a condition before he granted it. The taxpayer refused, and the Commissioner then took proceedings under Section 327 and 328, in accordance with the taxpayer's application.
For the reasons stated in this supplemental opinion, I vacate the additional finding of fact, and the rulings upon the requests made in my opinion. I make the following findings of fact:
The plaintiff did not intend its letters of September 13 and October 21 to be applications for special assessment under Section 327 and 328 of the Revenue Act of 1918.
I also hold as a matter of law that the letter of February 3, 1923 was not an "application by the corporation" within the meaning of Section 327(d) of the Revenue Act.
The special assessment, having been made by the Commissioner without application by the corporation, had no effect upon the rights of the ...