from the corporation, joint stock company or association, or in-, surance company making such return, such further information with reference to its capital, income, losses, and expenditures as he may deem expedient; and the Commissioner of Internal Revenue, for the purpose of ascertaining the correctness of such return or for the purpose of making a return where none has been made, is hereby authorized, by any regularly appointed revenue agent specially designated by him for that purpose, to examine any books and papers bearing upon the matters required to be included in the return of such corporation, joint stock company or association, or insurance company, and to require the attendance of any officer or employee of such corporation, joint stock company or association, or insurance company, and to take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons; and the Commissioner of Internal Revenue may also invoke the aid of any court of the United States having jurisdiction to require the attendance of such officers or employees and the production of such books and papers. Upon the information so acquired the Commissioner of Internal Revenue may amend any return or make a return where none has been made. All proceedings taken by the Commissioner of Internal Revenue under the provisions of this section shall be subject to the approval of the Secretary of the Treasury.

Commissioner of Internal Revenue, upon evidence produced before him, is authorized to make, or amend incorrect, return, as the case may be; he is also authorized to make additional assessments after taxes have been assessed and paid on original returns, even though errors in the original returns were made without any intention to deceive or mislead. (Eliot National Bank v. Gill, 218 Fed., 600; T. D. 2121.)

The Commissioner has power to make a new assessment within three years in case an incorrect return has been made; there is no necessity of construing the word "false," where it is used with reference to the time in which the Commissioner shall act, to mean fraudulently false. (National Bank of Commerce v. Allen, 223 Fed., 472; T. D. 2198.) Corporation which, as stockholder, receives dividends from another corporation, may not deduct taxes paid on its stock in its behalf by latter corporation, where it did not include amount of such taxes in return of gross income. (United States v. Aetna Life Ins. Co., 260 Fed., 333.)

Assessment of tax; additional tax; payment of tax; penalties; notice.

Fifth. All returns shall be retained by the Commissioner of Internal Revenue, who shall make assessments thereon; and in case of any return made with false or fraudulent intent, he shall add one hundred per centum of such tax, and in case of a refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty per centum of such tax. In case of neglect occasioned by the sickness or absence of an officer of such corporation, joint stock company or association, or insurance company, required to make said return, or for other sufficient reason, the collector may allow such further time for making and delivering such return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax originally assessed unless the refusal, neglect, or falsity is discovered after the date for payment of said taxes, in which case the amount so added shall be paid by the delinquent corporation, joint stock company or association, or insurance company, immediately upon notice given by the collector. All assessments shall be made

and the several corporations, joint stock companies or associations, or insurance companies, shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as above provided for, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint stock company or association, or insurance company immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of 1 per centum per month upon said tax from the time the same becomes due.

Notice of assessment may be sent by mail; notice sent in franked envelope bearing return card, and not returned, presumptively received. (United States v. General Inspection & Loading Co., 204 Fed., 657.)

The word "false," as used in the fifth subdivision of section 38, means "untrue" or "incorrect," and does not necessarily mean intentionally or fraudulently false. This act does not make the remedy by way of a reassessment by the Commissioner exclusive of all other remedies for collection of excise tax imposed on corporations, and suit may be brought under Revised Statutes, section 3213, without any such reassessment. (United States v. N. C. & St. L. Ry. Co., 249 Fed., 678; T. D. 2697.) Taxpayer having understated in its orignal return the amount for which it was subject to tax is not entitled to recover any part of a second assessment paid, although the original return was made in good faith and without any intention to escape lawful tax. (Camp Bird, Ltd., v. Howbert, 249 Fed., 27; T. D. 2661; reversed, 248 U. S., 590.) Regulations relating to the assessment and collection of the special excise tax imposed on corporations, joint-stock companies, associations, and insurance companies. (Regulations No. 31; T. D. 1571.)

Action of debt may be brought against a corporation to recover back taxes. Suit is maintainable notwithstanding assessment can not be made; suit not barred by a three-year limitation in act of 1909. (United States v. Minneapolis Threshing Machine Co., 229 Fed., 1019; T. D. 2285.)

The three-year limitation is not a limitation upon the right of the Government to sue for unpaid taxes, but at most is a limitation upon the right of collecting officers to make assessment and to enforce payment by the summary statutory proceedings; suit for taxes will lie without assessment. (United States v. Grand Rapids & Indiana R. Co., 239 Fed., 153; T. D. 2166.)

In the provision of the act relative to assessments, the word "false" includes returns which are merely incorrect. In some instances the term "false" as used in the act means willfully and intentionally false. The statute does not require the additional assessment to be made within the three-year period. (Eliot National Bank v. Gill, 218 Fed., 600; T. D. 2121.)

Administrative officers unauthorized to relieve corporations from requirement that additional tax of 50 per cent shall be paid in case of failure to make return within prescribed time. (T. D. 1701.)

Assessed taxes held to be due and payable 10 days after actual mailing of notice and demand, Form 17. (T. D. 1659.)

Returns to be filed in office of Commissioner of Internal Revenue.

Sixth. When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the office of the

Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such.

Amended by the act of June 17, 1910, which provides that the returns shall be open to inspection only upon the order of the President, page 728. Publicity clause. (T. D. 1594. T. D. 1665.)

Government officer or employee divulging information; penalty.

Seventh. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States to divulge or make known in any manner whatever not provided by law to any person any information obtained by him in the discharge of his official duty, or to divulge or make known in any manner not provided by law any document received, evidence taken, or report made under this section except upon the special direction of the President; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding one thousand dollars, or by imprisonment not exceeding one year, or both, at the discretion of the court.

Failure to make true returns; false returns; applicability of general revenue laws; jurisdiction to compel testimony and production of books, etc.

Eighth. If any of the corporations, joint stock companies or associations, or insurances companies, aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint stock company or association, or insurance company, shall be liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dollars.

Any person authorized by law to make, render, sign, or verify any return who makes false or fraudulent return, or statement, with intent to defeat or evade the assessment required by this section to be made, shall be guilty of a misdemeanor, and shall be fined not exceeding one thousand dollars or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution.

All laws relating to the collection, remission, and refund of internal-revenue taxes, so far as applicable to and not inconsistent with the provisions of this section, are hereby extended and made applicable to the tax imposed by this section.

Jurisdiction is hereby conferred upon the circuit and district courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books, as aforesaid, shall reside, to compel such attendance, production of books, and testimony by appropriate process.

Synopsis of decisions relating to the tax. (T. D. 1606, 1675.) Suit to recover back taxes collected can not be maintained against the successor of collector to whom the taxes were paid, except in his individual capacity; remedy either lies in an action against the collector who actually received the taxes or in an action against the United States; act of February 8, 1899, was to enable proceedings pending against public officials in their official capacity to be continued when necessary to obtain settlement of questions involved. (Roberts v. Lowe, 236 Fed., 604; T. D. 2394.)

Remedy by suit against collector where taxes have been wrongfully collected is not made exclusive by provisions that all laws relating to collection, remission, and refund of taxes, so far as applicable, are ex

tended to the corporation excise tax. (United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28.)

Suit to recover taxes erroneously or illegally assessed can only be brought against collector who collected taxes, and not his successor. (Philadelphia, Harrisburg & Pittsburgh R. C. v. Lederer, 242 Fed., 492. T. D. 2507.)

Penalty for failure to make prescribed returns. (T. D. 1692.)

Penalty prescribed is constitutional; acceptance of return by Commissioner is not a waiver of the penalty. (T. D. 1864.)

Where corporations have gone out of business, leaving no assets, no proceedings to be instituted for penalty for failure to make return; assets distributed among stockholders available for collection of tax but not for penalty. (T. D. 1852.)

Appropriation for expenses of collecting tax; returns open to inspection by order of President. [Extract from the legislative, executive, and judicial appropriation act for the fiscal year ending June 30, 1911, approved June 17, 1910. (36 Stat., 494.)]

For expenses of collecting the corporation tax authorized by the Act approved August fifth, nineteen hundred and nine: "To provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," one hundred thousand dollars.

For classifying, indexing, exhibiting and properly caring for the returns of all corporations, required by section thirty-eight of an Act entitled "An Act to provide revenue, equalize duties, encourage the industries of the United States, and for other purposes," approved August fifth, nineteen hundred and nine, including the employment, in the District of Columbia, of such clerical and other personal services and for rent of such quarters as may be necessary, twenty-five thousand dollars: Provided, That any and all such returns shall be open to inspection only upon the order of the President under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President.

See also the legislative, executive, and judicial appropriation act approved March 4, 1911, which appropriated the same amount for the year ended June 30, 1912, repeating the proviso. (36 Stat., 1197.)

Deficiency appropriation act of March 4, 1911 (36 Stat., 1291), appropriated $5,000 for the purposes above specified, repeating the proviso.

Executive order and regulations governing the publicity of returns, November 25, 1910. (T. D. 1665.)

[Extract from the deficiency appropriation act for 1910 (act of June 25, 1910, 36 Stat., 780).]

The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is authorized out of the appropriation made for the purpose of carrying into effect section thirty-eight of the tariff Act of August fifth, nineteeen hundred and nine, for the fiscal year nineteen hundred and eleven, and out of the balance of the appropriation for that purpose for the fiscal year nineteen hundred and ten, which balance is hereby reappropriated and made available for the fiscal year nineteen hundred and eleven, to employ such additional force of internal-revenue agents, inspectors, deputy collectors, clerks, laborers, and other assistants as he may deem proper and necessary to the prompt operation and enforcement of said section thirty-eight.

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See also the deficiency appropriation act of March 4, 1911 (36 Stat., 1291), which reenacted authority to employ additional force.

Refund or abatement of penalty taxes.

An act to provide for refund or abatement under certain conditions of penalty taxes imposed by section 38 of the act of August 5, 1909, known as the special excise corporation-tax law, approved March 3, 1913 (37 Stat., 734).

Be it enacted, etc., That any corporation, joint-stock company, association, or any insurance company subject to the special excise tax provided by section thirty-eight of the act of August fifth, nineteen hundred and nine, known as the special excise corporation-tax law, which has been or may be compelled to pay or become liable for any additional tax within the provisions of subsection five of said section thirty-eight, which additional tax has been or may hereafter be imposed for a neglect to file a return as provided in said corporation-tax law on or before the first of March of any year, may, within one year after the passage of this act or within one year after the date of notice of assessment where such notice is given after the passage of this act, make application to the Commissioner of Internal Revenue for a refund of such additional tax. And the Commissioner of Internal Revenue, with the advice and consent of the Solicitor of Internal Revenue, is hereby directed to remit, abate, or pay back all such additional taxes in excess of $100 for any single year whenever in any case it appears to his satisfaction that the additional tax was assessed or imposed solely because of a neglect to make a return at the time or times specified in said act, and without any intention or design on the part of any officer of such corporation, joint-stock company, association, or insurance company to hinder or delay the United States in the collection of the tax originally assessed.

Claim for abatement or refund required to be made on Form 47 or 46, respectively; claims required to be accompanied by affidavit of corporation's president, vice president, or other principal officer, and its treasurer or assistant treasurer, stating that neglect to make return was without intent or design to hinder or delay the United States in collection of tax, etc. (T. D. 1838.)

CHAPTER 8.
INCOME TAX.

AN ACT To reduce tariff duties and to provide revenue for the Government, and for other purposes. Approved October 3, 1913 (38 Stat., 114, 166.)