Westland Theatres, Inc. v. Commissioner

*82 The Commissioner determined deficiencies of $2,109.28 and $2,041.99 in petitioner's excess profits tax for 1936 and 1937, respectively. Petitioner complains that in the computation of the tax the Commissioner erroneously used the declared value of its stock appearing on a capital stock tax return prepared and filed by persons allegedly unauthorized, and refused to accept a return proffered by its officers after expiration of the statutory filing period.

FINDINGS OF FACT.

Petitioner, a Colorado corporation with principal office at Colorado Springs, Colorado, is engaged in the*910 operation of motion picture theaters. In 1936 Louis A. Dent, a resident of Dallas, Texas, owned or controlled a majority of its shares, and T. B. Noble, Jr., its vice president and secretary-treasurer, conducted its business as general manager, with the assistance of A. J. Smullin, bookkeeper, and a stenographer. During July 1936 Dent and Noble went to New York to rent pictures for the ensuing year and H. C. Federer, manager of petitioner's theater at Pueblo, was left with Smullin to operate the Denver office. He had general authority to book pictures and sign checks and "things of that kind." No instructions relating to the filing of tax returns were given to either, and no arrangement was made for the filing of petitioner's capital stock tax return. Smullin prepared petitioner's earlier income and capital stock tax returns, signing them as chief accounting officer, under Dent's signature *83 as president or Noble's as secretary-treasurer. Smullin prepared petitioner's capital stock tax return; Federer signed it as assistant secretary, at his request; Smullin signed it as assistant treasurer, and filed it on July 31, 1936. On this return the declared value of petitioner's*911 capital stock was $144,063.27, that amount being the total of petitioner's capital, paid-in surplus, and accumulated earnings. Petitioner's bylaws did not provide for an assistant treasurer, but in January 1934 a corporate resolution was passed, authorizing "the President and Treasurer, or Assistant Treasurer as the President may direct in writing * * * to transfer, deposit, and withdraw the funds of this company in any bank." Smullin was designated assistant treasurer for these purposes, and as such he signed petitioner's 1937 tax return under Dent's signature as president.

Dent returned from New York to Dallas early in August 1936, and upon learning that the capital stock tax return had been filed, he instructed Noble to have another prepared. Noble directed Smullin to ask the Denver collector for an extension of time to file a correct return. Smullin wrote the collector, and the collector, by letter dated August 20, 1936, addressed to petitioner, replied:

* * * You state that it is now your wish to amend your return, and you request an extension of time of sixty days.

You are advised that no extension of time is necessary in making an amended return.

* * *

You are*912 advised that capital stock tax return for the period ending June 30, 1936, cannot be amended or the declared value changed in any way whatsoever. If you desire to file an amended return it will be submitted to the Commissioner of Internal Revenue, Washington, D.C., for decision.

Smullin prepared another return on which the declared value of the capital stock was put at $320,000, and a tax of $320, a delinquency penalty of $16 and interest of $1.60 were indicated. This form was signed and sworn to by Noble as treasurer and Smullin as auditor, on August 31, 1936, and lodged with the collector on the same date. The collector rejected the return. On its face is written, "Amended return not acceptable under the statute. Dec 12 1936."

In its income and excess profits tax returns for 1936 and 1937, petitioner computed net income subject to excess profits tax, using $320,000 as the basic declared value of its capital stock. The Commissioner recomputed the tax for each year, using $144,063.27 as the basic declared value on the ground that the capital stock tax return filed July 31, 1936, "was your first return for the capital stock tax year ended June 30, 1936."

OPINION.

STERNHAGEN: *913 For the petitioner's excess profits tax of 1936 and 1937 the Commissioner has used the capital stock valuation of $144,063.27 *84 which appeared on the return filed July 31, 1936. Petitioner demands the use of the valuation of $320,000 which appears on the return dated August 31, 1936, which it tendered for filing and which the collector did not accept.

In , and , it was held that the capital stock value shown on the first return, even though it be the result of a clerical or other mistake, may not be changed by an amended return, irrespective of whether the amended return is tendered within or after the extension period. These decisions compel the approval of the Commissioner's determination in this proceeding.

The taxpayer contends that the return filed July 31, 1936, must be disregarded because it was unauthorized. The circumstances of the filing are shown in the findings. The petitioner repudiates the first return as an officiously executed document signed by two persons who were not officers of the corporation and were not specially*914 authorized to represent it as officers, and filed by the auditor without authority. The evidence shows that neither of the two was a general officer of the corporation. But they had ample authority to prepare and file the return. The return was required by law to be filed within thirty days after the close of the fiscal year, and this the corporation and its officers are deemed to have known. It can not be supposed that the two persons who were placed completely in charge of the corporation's affairs were directed, actually or tacitly, to omit to file the return when due. Smullin, the auditor, had signed the previous returns as the chief accounting officer, together with a general officer, presumably with express authority, and he would naturally be expected to look after the proper filing. Federer was called from Pueblo to take charge of the operation of the business during the absence of the general officers. He was a temporary general agent, and his undertakings within the general or apparent scope of his authority may not be repudiated by the corporation. It would be intolerable under such circumstances to permit the corporation, after voluntarily placing itself in such*915 a position, tendering a return ostensibly executed by authorized persons, to renege by saying that the return was not authorized and therefore not binding upon it. The collector was unaware of any lurking question as to authority and had no reason to doubt the efficacy of the filing. The taxpayer may not now profit from a technical defect of its own making.

The evidence shows no repudiation of the filed return until this petition was filed. Before August 11, 1936, the corporation requested the collector to accept an amended return showing the higher valuation, and made no suggestion of invalidity of the first return. If *85 the first return was then thought to be unauthorized and not merely an erroneous declaration of value, it would have been necessary to request, not permission to file an amended return, but permission to file a return after the statutory time had expired. Such permission, however, would not have been granted upon application made after the prescribed filing date,

The decisions in *916 , and , do not aid the petitioner. In both those cases the taxpayer was an organization the character of which as a statutory corporation was in doubt and the duty of which to file a capital stock tax return therefore not clear. As to such a taxpayer, it was held that delinquency in filing was not fatal, but involved only the delinquency penalty. The Scaife case, however, intimates no such mitigation in respect of a corporation which simply fails to file its capital stock tax return within the statutory thirty days or within such time fails to get an extension from the Commissioner. It can not be that a corporation which files a first return and fails to get permission to file an amended return, is to be put in a worse position than one which omits entirely to file a timely return. Cf. .

Whether the July return be regarded as authorized or unauthorized, the result is the same - that there is no foundation for using the valuation of $320,000 declared on the August return.

Decision will be entered*917 for the respondent.