1. When a taxpayer, in filing a claim for overpayment of income
taxes for several years, asks that the amount overpaid be credited
against an unpaid tax, the collection of which has not yet been
barred by time, he, in effect, requests the taxing authorities to
postpone the collection of that tax until the claim has been acted
on, during (at least) the statutory period for assessment of the
latest tax involved
Page 291 U. S. 55
in the claim, and where, within that period, the Commissioner
has found an overpayment and has applied it to the unpaid tax as
requested, the taxpayer is estopped from claiming the amount as
still due him upon the ground that collection of the unpaid tax had
in the meantime been barred by limitation. P.
291 U. S.
59.
So
held where the practice of the collector's office
was to treat such a claim as a stay of collection of unpaid taxes
against which credit was asked, until the Commissioner had adjudged
the claim, and where the taxpayer had at first accepted without
protest the application of the credit and paid the resulting
balance.
2. The provision of the Revenue Act of 1928 (§ 609) declaring
that a credit against any liability for any taxable year shall be
void if made against a liability barred by limitation, applies
where the credit is made by the Commissioner
in invitum,
not where it is done, as in this case, at the taxpayer's request.
P.
291 U. S.
60.
3. Under the provision of the Revenue Act of 1921, § 250(d),
that no suit shall be begun after the expiration of five years
succeeding the filing of the return "unless both the Commissioner
and the taxpayer consent in writing to a later determination,
assessment and collection," any writing, formal or informal, is
sufficient to show the Commissioner's consent if his approval may
be gathered from it as a reasonable inference. P.
291 U. S.
62.
4. A taxpayer suing for a refund upon the ground that the
crediting of the amount against an earlier tax took place after the
collection of that tax had become barred by limitation, has the
burden of producing evidence to show that a consent to extension of
the collection period, filed by him, was not assented to in writing
by the Commissioner. P.
291 U. S.
62.
5. The word "waiver" written on an assessment list attached to a
certificate of assessment signed by the Commissioner, together with
a date indicative of the tax referred to,
held evidence in
this case of the Commissioner's consent to a waiver filed by the
taxpayer. P.
291 U. S.
63.
6. Choice between two doubts as to which of two waivers was
intended by such entries should be so made as to favor the
presumption of official regularity. P.
291 U. S.
64.
7. Action to recover an overpayment of taxes, on the ground of
illegal assessment or collection, is barred by R.S., § 3226; 26
U.S.C. § 156, on the expiration of five years from the time of
payment. P.
291 U. S.
64.
8. To constitute an account stated, a balance must have been
struck in such circumstances as to import a promise of payment, on
the one side, and acceptance, on the other. P.
291 U. S.
65.
Page 291 U. S. 56
9. Mere rendition to the taxpayer of a certificate of
overassessment did not evince a promise to refund when, by his
request, the overpayment was to be applied against another tax, and
this was subsequently and in due course accomplished, and the
results accepted by him.
Bonwit Teller & Co. v. United
States, 283 U. S. 258,
distinguished. P.
291 U. S.
66.
77 Ct.Cls. 264, 2 F. Supp. 773, affirmed.
Certiorari, 290 U.S. 611, to review a judgment rejecting a claim
for an overpayment of income and profits taxes.
MR. JUSTICE CARDOZO delivered the opinion of the Court.
Upon the footing of an account stated, the petitioner sues the
Government for taxes overpaid.
Income and profits tax returns for the fiscal year ending July
31, 1917, were filed by the taxpayer in September, 1917. The tax
shown by these returns, as well as by amended returns for the same
year, was paid in full.
Income and profits tax returns for the fiscal year ending July
31, 1918, were filed in October, 1918, and again the tax was
promptly paid.
Following the practice of the Bureau, the Commissioner proceeded
to audit the returns to the end that the assessments might be
increased or reduced according to the facts.
In February, 1921, the taxpayer signed and filed a waiver of any
statutory period of limitation as to the assessment and collection
of the tax for the calendar year
Page 291 U. S. 57
1917. It did this in order to be assured that the audit by the
Commissioner would be deliberate and thorough. In the absence of
such a consent, the period of limitation would have expired in
April, 1923. The extension was approved in writing by the
Commissioner in February, 1923. The waiver, on its face, had no
limit in respect of time, but, under a regulation adopted in April,
1923, it spent its force on April 1, 1924, unless continued or
renewed.
In February, 1923, the taxpayer signed a second waiver
applicable to the fiscal years 1917 and 1918 and extending the
period for collection until March 1, 1925. This waiver was not
signed by the Commissioner within the term of its duration, though
it was signed, years afterwards, on April 7, 1930. However, in
June, 1923, while both waivers were on file, the Commissioner made
an additional assessment for the fiscal year ending July 31, 1917,
and, on the attached assessment list, wrote the word "waiver"
opposite the item affecting the petitioner. The additional
assessment for 1917 was reduced by a credit of an overassessment
for 1916, and, when so reduced, amounted to $20,757.14. Payment of
this amount was demanded by the collector on August 3, 1923.
On August 9, 1923, the petitioner filed a claim for refund and
credit of income taxes alleged to have been overpaid for the fiscal
years 1918, 1919, 1920, and 1921, amounting in the aggregate to
$35,727.10, and asked that the unpaid balance for 1917 be set off
against the claim for overpayment, and that the remainder be
refunded. At that time, it was the practice of the collector's
office to treat such a claim as a stay of collection of unpaid
taxes against which the credit was asked, until the Commissioner
had considered and adjusted the claim.
On March 1, 1924, the Commissioner approved a schedule of
overassessments which included an overassessment in favor of the
petitioner for the fiscal year ending July
Page 291 U. S. 58
31, 1918, in the sum of $14,928.07, and sent this schedule to
the collector for action in accordance with the directions
appearing thereon. On June 12, 1924, the collector, following these
instructions, signed and returned the schedule to the Commissioner,
together with a schedule of refunds and credits, certifying the
application of $14,928.07 as a credit. On June 28, 1924, the
Commissioner signed the schedule of refunds and credits, by which
act for the first time he definitively announced his allowance of
the claim.
Girard Trust Co. v. United States, 270 U.
S. 163,
270 U. S. 170;
United States v. Swift & Co., 282 U.
S. 468,
282 U. S. 475.
Before doing this, and on or after March 1, 1924, he had
transmitted to the petitioner a certificate of overassessment for
the fiscal year ending July 31, 1918, in the sum of $14,928.07,
which sum was credited in June upon the taxes overdue. This
overassessment for 1918, applied as a credit upon the unpaid tax
for 1917 ($20,757.14), reduced the liability of the taxpayer to
$5,829.07. Demand for the payment of this balance with accrued
interest was made by the collector on September 1, 1924. Two weeks
later, the petitioner complied with the demand, accepting without
protest the application of the credit, and paying the resulting
balance.
For nearly six years, the transaction was allowed to stand
unopened and unchallenged. In April, 1930, the petitioner learned
through an attorney that the second waiver had not been signed by
the Commissioner until after it had expired. With this knowledge,
it filed with the Commissioner a claim for refund of the overpaid
tax for 1918 ($14,928.07) which had been collected through
application as a credit upon the tax for the year before. The basis
for the claim was this -- that, at the time of the credit, the
first waiver had expired, that the second waiver was ineffective
because not signed by the Commissioner, that collection by credit
after the term of limitation was as much prohibited as collection
at such a time by suit
Page 291 U. S. 59
or by distraint, and hence that the overpaid tax certified by
the Commissioner in the schedule of overassessment was an
undischarged indebtedness, still owing from the Government. Four
days later, this action was begun. T he Court of Claims gave
judgment in favor of the Government (2 F.Supp. 773), and a writ of
certiorari brings the case here.
1. Auditing the tax for 1918 and crediting the overassessment
for that year upon the tax for the year before, the Commissioner
acted at the request of the petitioner, which was valid till
revoked.
For the decision of this case, we do not need to rule whether a
"waiver" by a taxpayer consenting to the enlargement of the time
for assessment or collection is ineffective unless approved by the
Commissioner in writing.
* There was here
more than a waiver, an abandonment of a privilege to insist upon
the fulfillment of a condition (
Stange v. United States,
282 U. S. 270,
282 U. S.
275-276;
Florsheim Bros. Co. v. United States,
280 U. S. 453,
280 U. S.
466); there was a positive request which, till revoked
upon reasonable notice, had the effect of an estoppel.
On August 3, 1923, the collector made demand upon the petitioner
for the payment of $20,757.14, the tax balance then due for the
year 1917. There is no dispute that the demand was timely, and that
collection would have been enforced unless the taxpayer had done
something to postpone the hour of payment. Waivers were then on
file, one of them signed by the Commissioner, the other unsigned,
but the petitioner did not rest upon these, nor would these,
without more, have availed to avert the threatened levy. On August
9, 1923, the petitioner filed with the Commissioner a request to
withhold the
Page 291 U. S. 60
process of collection until credits were adjusted. In substance,
the request was this: please do not collect the tax for 1917 until
you have completed the audit for the years 1918 to 1921, inclusive,
and if there has been overassessment for those years, set it off as
a credit.
Now, the time for assessment and collection of the 1921 tax did
not expire till 1925, and this without the aid of any waiver or
extension. In such circumstances, request by the taxpayer that the
Commissioner withhold collection for 1917 until there had been an
audit of the tax for 1921 was at least equivalent to a request that
he delay until the assessment for 1921 was due under the statute.
But, before that time arrived --
i.e., before 1925 -- the
Commissioner had acted. On March 1, 1924, he had completed the
reaudit, and had discovered an overassessment for one of the years
covered by the petitioner's request. Within a reasonable time
thereafter (June 12, 1924), he had received from the collector a
report that $20,757.14 was still unpaid upon the tax for 1917.
Promptly thereafter (June 28, 1924), he had complied with the
petitioner's instructions by offsetting the overpayment for the one
year in reduction of the balance owing for the other. The whole
process had been completed within the time fixed by implication in
the petitioner's request, within the time when assessment was due
for the last of the group of years (1918 to 1921) to be covered by
the audit.
The petitioner makes the point that, by the Revenue Act of 1928
(c. 852, pp. 791, 875, § 609), a credit against a liability in
respect of any taxable year shall be "void" if it has been made
against a liability barred by limitation. The aim of that
provision, as we view it, was to invalidate such a credit if made
by the Commissioner of his own motion without the taxpayer's
approval or with approval falling short of inducement or request.
Cf. Stange v. United States, supra; Revenue Act of 1928, §
506(b), (c), 45 Stat. c. 852, pp. 791, 870, 871. If nothing
Page 291 U. S. 61
more than this appeared, there was to be no exercise
in
invitum of governmental power. But the aim of the statute
suggests a restraint upon its meaning. To know whether liability
has been barred by limitation, it will not do to refer to the
flight of time alone. The limitation may have been postponed by
force of a simple waiver, which must then be made in adherence to
the statutory forms, or so we now assume. It may have been
postponed by deliberate persuasion to withhold official action. We
think it an unreasonable construction that would view the
prohibition of the statute as overriding the doctrine of estoppel
(
Randon v.
Toby, 11 How. 493,
52 U. S. 519)
and invalidating a credit made at the taxpayer's request. Here, at
the time of the request, the liability was still alive, unaffected
as yet by any statutory bar. The request, in its fair meaning,
reached forward into the future and prayed for the postponement of
collection till the audits for later years had been completed in
the usual course. This having been done, the suspended collection
might be effected by credit or by distraint or by other methods
prescribed by law. Congress surely did not mean that a credit was
to be void if made by the Government in response to such a
prayer.
The applicable principle is fundamental and unquestioned.
"He who prevents a thing from being done may not avail himself
of the nonperformance which he has himself occasioned, for the law
says to him, in effect: 'This is your own act, and therefore you
are not damnified.'"
Dolan v. Rodgers, 149 N.Y. 489, 491, 44 N.E. 167, and
Imperator Realty Co. v. Tull, 228 N.Y. 447, 457, 127 N.E.
263; quoting
West v. Blakeway, 2 Man. & G. 729, 751.
Sometimes the resulting disability has been characterized as an
estoppel, sometimes as a waiver. The label counts for little.
Enough for present purposes that the disability has its roots in a
principle more nearly ultimate than either waiver or estoppel --
the principle that no one
Page 291 U. S. 62
shall be permitted to found any claim upon his own inequity or
take advantage of his own wrong.
Imperator Realty Co. v. Tull,
supra. A suit may not be built on an omission induced by him
who sues.
Swain v.
Seamens, 9 Wall. 254,
76 U. S. 274;
United States v. Peck, 102 U. S. 64;
Thomson v. Poor, 147 N.Y. 402, 42 N.E. 13;
New Zealand
Shipping Co. v. Societe des Ateliers, [1919] A.C. 1, 6;
Williston, Contracts, vol. 2, §§ 689, 692.
2. If we assume in favor of the petitioner that the credit is a
nullity in the absence of a written waiver, approved by the
Commissioner, the record supports the inference that, at the time
of the setoff, such approval had been given.
The statute provides that no suit or proceeding shall be begun
for the collection of the tax after the expiration of five years
succeeding the filing of the return "unless both the Commissioner
and the taxpayer consent in writing to a later determination,
assessment, and collection." Revenue Act of 1921, § 250(d), 42
Stat. c. 136, pp. 227, 264, 265. In this case, consent by the
taxpayer in due form is found, and indeed conceded. The only
question is whether there was consent by the Commissioner. But the
statute does not say that the evidence of consent shall be embodied
in a single paper.
Cf. Eclipse Lawn Mower Co. v. United
States, 1 F. Supp. 768. Its one requirement in respect of form
is that the consent shall be in writing.
Sabin v. United
States, 70 Ct.Cls. 574. There is left a wide range of
administrative discretion. Any writing, formal or informal, is
sufficient if made for the purpose of recording the Commissioner's
approval, and, if approval, may be gathered therefrom as a
reasonable inference.
The burden was on the petitioner, seeking a refund of its tax,
to prove its allegation that the overassessment for 1918 had been
illegally credited upon the tax for 1917.
Page 291 U. S. 63
At the outset, it might have stood upon the fact that the credit
had been made after the normal term of limitation, casting the
burden on the Government of going forward with evidence in proof of
an extension. When its own waiver had been proved, however, the
case took on another aspect. At that stage, the presumption of
official regularity was sufficient to sustain the inference that
the Commissioner, on his side, had done whatever was appropriate to
give support to his own act, and thus validate the credit. Acts
done by a public officer "which presuppose the existence of other
acts to make them legally operative, are presumptive proofs of the
latter."
Bank of the United States v.
Dandridge, 12 Wheat. 64,
25 U. S. 70;
United States v. Royer, 268 U. S. 394,
268 U. S. 398;
Knox County v. Ninth National Bank, 147 U. S.
91,
147 U. S. 97;
Mandeville v. Reynolds, 68 N.Y. 528, 534;
Demings v.
Supreme Lodge Knights of Pythias, 131 N.Y. 522, 527, 30 N.E.
572; Wigmore, Evidence, vol. 5, § 2524. No doubt the presumption of
regularity is subject to be rebutted. It stands until
dislodged.
Now the petitioner has failed to show that the Commissioner did
not approve in writing. On the contrary, the evidence is persuasive
that he did. A certificate of an additional assessment for the
fiscal year ending July 31, 1917, was signed, as we have seen, on
June 26, 1923, and on the assessment list attached thereto,
opposite the entry of the assessment against the petitioner, the
following appears: "7/31/17 Fisc. 1753361. O.L. 4/17/23; waiver."
The Commissioner did not sign his name below the memorandum, but
the memorandum was attached to a certificate which the Commissioner
did sign, and his name subscribed to the certificate authenticates
also the documents attached to it, if we assume in favor of the
petitioner that signing is essential. The Court of Claims was of
the opinion that the word "waiver" on this list had relation to
Page 291 U. S. 64
the second of the two consents on file with the Commissioner.
The context and the circumstances lend support to that conclusion.
The fiscal year for the petitioner ended July 31. Probably through
inadvertence, the first waiver refers to a tax for the calendar
year ending December 31. This might have seemed to exclude the
first six months of the year ending July 31, 1917 --
i.e.,
the period from July 31, 1916 to January 1 following. We do not say
that the courts would uphold so literal a construction. Almost
certainly, the objection, if made, would be put aside as
hypercritical.
See 39 Stat. c. 463, p. 770, § 13. Even so,
the memorandum may well be allocated to the waiver that fits it
precisely in preference to the one that fits it imperfectly. We
turn, then, to the documents in order to relate them to one
another. If we look only to its letter, the memorandum does not
refer to a waiver for the calendar year ending December 31, 1917.
It refers, on the contrary, to a waiver for the fiscal year ending
July 31, 1917 (7/31/17). The only waiver corresponding to this
description in form as well as in substance is the one filed with
the Commissioner February 19, 1923, which covers the year ending
July 31, 1917, as well as the year after.
The inference, therefore, is legitimate that the second of the
two waivers is the one that the Commissioner had in view when he
wrote this memorandum indicative of assent. At the very least, the
effect of the entry is to leave the purpose of the writer doubtful.
Choice between two doubts should be made in such a way as to favor
the presumption of official regularity.
3. The petitioner has failed to make out the existence of an
account stated for its benefit, and its claim, even if otherwise
valid, is barred by limitation.
Payment of the tax for the fiscal year ending July 31, 1918, was
made by the petitioner, partly in 1918 and
Page 291 U. S. 65
partly in 1919. Five years from the date of payment, a statute
of limitations set up a bar to a suit for the recovery of the tax
on the ground of illegal assessment or collection. R.S. § 3226; 26
U.S.C. § 156;
Bonwit Teller & Co. v. United States,
283 U. S. 258,
283 U. S. 265.
The petitioner, conceding this, maintains that in June, 1924, there
was a statement of an account, giving rise to a new cause of action
with a new term of limitation.
Daube v. United States,
289 U. S. 367,
289 U. S. 370;
Bonwit Teller & Co. v. United States, supra. This suit
was not brought till May, 1930. In the absence of an account stated
in its favor, the petitioner must fail.
A recent judgment of this Court recalls the essentials of an
account stated as they were long ago defined.
Daube v. United
States, supra. A balance must have been struck in such
circumstances as to import a promise of payment, on the one side,
and acceptance, on the other. But plainly no such promise is a just
or reasonable inference from the certificate of overassessment
delivered to this taxpayer if the certificate is interpreted in the
setting of the occasion. The taxpayer knew that the Commissioner
had been requested, after determining the overassessment, to set it
off against the tax for an earlier year. The taxpayer knew also
that the set-off or credit would not appear on the face of the
certificate of overassessment, knew also that it had signed a
formal and later document, the schedule of refunds and credits. The
diverse functions of these documents were pointed out by this Court
in
United States v. Swift & Co., 282 U.
S. 468,
282 U. S. 475,
and
Girard Trust Co. v. United States, 270 U.
S. 163,
270 U. S. 170.
The taxpayer payer knew also that it had signed a formal waiver
extending the term of collection until March, 1925, and it had no
reason to believe that this waiver had not been signed by the
Commissioner, if it be assumed, for present purposes, that such a
signature was necessary.
Page 291 U. S. 66
Plainly, in such circumstances, the certificate of
overassessment, without more, does not import a promise by the
Commissioner to refund the amount there certified instead of
applying it as a credit upon the tax of an earlier year. At most,
the promise to be implied is one to refund the excess after there
has been a computation of the taxes unpaid for other years and an
ascertainment of the balance. The statement of the account is not
unconditional and definitive. It is provisional and tentative.
Finality was lacking until there was an agreement as to credits.
Newburger-Morris Co. v. Talcott, 219 N.Y. 505, 512, 114
N.E. 846.
The events that followed confirm this interpretation of the
effect of the transaction. Upon a computation of the credits, the
final balance was ascertained to be in favor of the Government. The
balance thereby fixed was reported to the taxpayer. After the
schedule of refunds and credits had been signed by the
Commissioner, the collector transmitted to the taxpayer a new
statement of account by which it was clearly made to appear that
the overassessment had been credited upon the tax for 1917, and
that, after such credit, there was still owing from the taxpayer a
balance of $5,829.07, which, together with the accrued interest,
was thereupon collected. Then, for the first time, was there a
final ascertainment of the balance upon consideration of both sides
of the account, the debits and the credits. The taxpayer did not
object to the account as submitted in its final form. Far from
objecting, it paid the resulting balance, and, by this act as well
as by silence, conceded the indebtedness. Indeed, there was more
than an account stated -- by force of voluntary payment. there was
also an account settled.
Lockwood v. Thorne, 18 N.Y. 285,
292. The statute of limitations is a bar to the recovery by the
petitioner of the balance paid to the Government upon the demand of
the collector.
Page 291 U. S. 67
This is not disputed. It is equally a bar to the recovery of any
item that entered into the account and determined the balance as
thus definitively adjusted.
The judgment is
Affirmed.
MR. JUSTICE STONE took no part in the consideration or decision
of this case.
*
See Commissioner v. U.S. Refractories Corp., 64 F.2d
69,
affirmed by an equally divided court, 290 U.S. 591;
Atlantic Mills v. United States, 3 F. Supp. 699.
Contra: Commissioner v. Hind, 52 F.2d 1075;
John M.
Parker Co. v. Commissioner, 49 F.2d 254.