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PENNSYLVANIA TRANSFER CO. OF PHILADELPHIA v. WHINS
January 11, 1972
PENNSYLVANIA TRANSFER COMPANY OF PHILADELPHIA, INC.
Alfred L. WHINSTON, District Director of Internal Revenue
Hannum, District Judge.
The opinion of the court was delivered by: HANNUM
1. That it is not chargeable with any illegal conduct committed by its president.
2. That its waiver of the statute of limitations included in Form 656 -- Offers-in-Compromise -- is invalid.
The defendant has moved to dismiss the action because:
1. The Court does not have jurisdiction over the United States, the real defendant in this action.
2. Equitable jurisdiction of the Court does not obtain.
3. Title 26 United States Code, § 7421, and Title 28 United States Code, § 2201, act as a complete bar to the granting of the relief requested by plaintiff.
Title 26 United States Code, § 7421 (a) prohibits, with certain exceptions not here relevant, actions seeking to restrain the assessment or collection of any tax. In Enochs v. Williams Packing & Navigation Co.,
the Supreme Court held that a taxpayer might escape the prohibition of § 7421 (a) where "it is clear that under no circumstances could the Government ultimately prevail" and "equity jurisdiction otherwise exists." We feel that the plaintiff corporation has not met the first requirement.
The plaintiff, in support of its first argument, relies upon Asphalt Industries, Inc. v. C. I. R., 384 F.2d 229 (3rd Cir. 1967). Under the facts in this case it was held that the conduct of the president of Asphalt, who had embezzled corporate income, could not be attributed to the corporation. The case did not involve consideration of 26 U.S.C. § 7421 (a). However, it is clear that whether or not the fraud of a corporate officer to evade payment of taxes can be attributed to the corporate taxpayer raises questions of law and fact. In Enochs, Mr. Chief Justice Warren stated:
"The manifest purpose of § 7421 (a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund. In this manner the United States is assured of prompt collection of its lawful revenue. Nevertheless, if it is clear that under no circumstances could the Government ultimately prevail, the central purpose of the Act is inapplicable and, under the Nut Margarine case, the attempted collection may be enjoined if equity jurisdiction otherwise exists. In such a situation the exaction is merely in 'the guise of a tax.' Id., [Miller v. Standard Nut Margarine Co.] 284 U.S.  at 509, 52 S. Ct. 260 at 263. [ 76 L. Ed. 422].
"We believe that the question of whether the Government has a chance of ultimately prevailing is to be determined on the basis of the information available to it at the time of suit. Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the District Court is without jurisdiction, and the complaint must be dismissed. To require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act -- protection of the collector from litigation pending a suit for refund. And to permit even the maintenance of a suit in which an injunction could issue only after the taxpayer's nonliability had been conclusively established might 'in every practical sense operate to suspend collection of the . . . taxes until the litigation is ended.' Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 299, 63 S. Ct. 1070, 1073, 87 L. Ed. 1407. Thus, in general, the Act prohibits suits for injunctions barring the collection of federal taxes when the collecting officers have made the assessment and claim that it is valid. Snyder v. Marks, 109 U.S. 189, 194, 3 S. Ct. 157, 160, 27 L. Ed. 901."
Upon the present state of the record
it is not apparent that, under the most liberal view of the law and the facts, ...
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