Petitions by the Standard Portland Cement Company, the Sunshine Soda Company, the Standard Silicate Company, and the Diamond Alkali Company to review an order of the Board of Tax Appeals redetermining deficiencies in the tax imposed by the Commissioner of Internal Revenue.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
This proceeding is a review of four orders of redetermination of the United States Board of Tax Appeals for a deficiency in the income tax return for 1926 of each of the four petitioning corporations. The aggregate deficiency ws $145,236.49 divided among the corporations as follows: Standard Portland Cement Company, a corporation of Ohio, $7,559.47; Sunshine Soda Company, a corporation of New York, $2,386.92; Standard Silicate Company, a corporation of Ohio, $2,658.48; and the Diamond Alkali Company, a corporation of West Virginia, $132,631.62.
These four appeals were consolidated and heard as one proceeding.
After a revenue agent had made the customary audit of the books, he requested the companies to waive the right ot appeal to the Board and to consent to the immediate assessment and collection of aggregate deficiencies for 1926 of $147,352.81. The Diamond Alkali Company, acting for itself and the other companies, on or about September 1, 1928, filed with the Commissioner of Internal Revenue the requested waivers and consents, which were never thereafter withdrawn and at the same time, in accordance with the provisions of section 142 (b) of the Act of 1928, 45 Stat. 832, and section 240 (b) of the Act of 1926, 44 Stat. 46, filed consent with the Commissioner that the entire deficiency of $147,352.81 be assessed against it rather than against it and the other three companies. Under the provisions of sections 272 (d) and 292 of the Act of 1928 (26 U.S.C.A. §§ 272, 292 and notes) and section 274 (d) and (i) of the Act of 1926 (26 U.S.C.A. § 272 note), the Commissioner could have assessed and collected the aggregate deficiency of $147,352.81 at any time after the waivers and consents were filed on September 1, 1928, and interest thereon would have run only "to the thirtieth day after the filing of such waiver[and consent] or to the date the deficiency is assessed whichever is the earlier," but he did not make the assessment or do anything toward collecting the tax until June 10, 1930, when he issued his deficiency letters which showed an aggregate deficiency of $145,236.49, which is $2,115.32 less than the Diamond Alkali Company consented that the Commissioner might assess and collect nearly two years before. The difference in the amounts resulted from the fact that the earlier computation was based upon a consolidated return for the companies and the amounts contained in the deficiency letters were based upon individual or separate returns. While computation on nonaffiliated returns decreased the tax liability of the companies here involved for the year 1926, it would have increased it for subsequent years. It was, therefore, important to determine whether or not the companies were entitled to file a consolidated return.
The letters of deficiency notified the companies that in accordance with section 274 (a) of the Act of 1926, 44 Stat. 55, they might within sixty days petition the Board of Tax Appeals for a redetermination of their tax liability. These letters also notified the companies that they might file waivers of their right to petition the Board and consent to immediate assessment and collection, but they declined, preferring to stand on those already filed. They petitioned the Board on August 8, 1930, to redetermine their tax liability on the ground that they were affiliated companies and entitled to file a consolidated return. The sole error alleged on the part of the Commissioner was that he had failed to determine the tax on the basis that the companies were entitled to file a consolidated return.
The next thing that took place was the entry of an order on October 2, 1931, consolidating the cases for hearing.
Nothing further was done by either party until August 13, 1933, when the petitioners paid the full amount of the deficiency of $145,236.49 asserted in the deficiency letters, together with $13,458.58, which was the interest thereon at the statutory rate from the date the tax was due, March 15, 1927, to October 1, 1928, thirty days after the filing of the consent to immediate assessment and collection of$147,352.81 and the collector duly acknowledged receipt of these payments.
The case came on for hearing on November 21, 1933, and at the hearing the petitioners offered in evidence the following documents:
"1. Form 870 as executed and filed, marked Exhibit 1.
"2. Said letter from Diamond Alkali Company to the Commissioner, marked Exhibit 2.
"3. The petitioners' tax return for 1926, marked Exhibit 3.
"4. Cancelled check covering said payment of $145,236.49 to said Collector, marked Exhibit 4.
"5. Cancelled check covering said further payment of $13,458.58 to said ...