The opinion
AitoNdell, /., dissenting: The first question presented by this proceeding is whether it is within our jurisdiction so that we may hear and decide it on its merits. If it is, there is a further question as to the amount of the deficiency.
I accept the conclusion of tbe majority on the jurisdictional question. The respondent has determined that there is a deficiency in the petitioner’s income tax for the year 1945, has sent a notice of such deficiency to the petitioner, and the petitioner has filed with this Court a timely petition for a redetermination. There has thus been compliance with the basic jurisdictional factors prescribed by Code section 272 (a). While it may be that upon consideration of the merits of a case, we may decide that there is no deficiency, we must take the amount that has been determined by the respondent to be a deficiency as the starting point in deciding whether a proceeding is within our jurisdiction. The fact that the respondent later concedes error as to some or all of the amount determined by him does not oust us of jurisdiction of a proceeding obtained by compliance with the provisions of section 272 (a).
The majority concludes that there is a deficiency in tax in the amount of $5,007.60. This amount so redetermined is the amount by which the petitioner’s tax for 1945 has been reduced by renegotiation proceedings, and which was credited to his renegotiation liability after all of his 1945 income tax had been refunded. It is one of the two sums set forth in the respondent’s notice as making up the deficiency. On this point I disagree with the majority, as I think that there is no deficiency.
Although for jurisdictional purposes we accept an amount which has been determined by the respondent to be a deficiency as such, from that point on our function is to “redeterminé the correct amount of the deficiency.” Code section 272 (e). Our redetermination may be that the deficiency determined by the respondent is correct, or that the correct amount is greater or less than that determined by him. If our redetermination differs from the respondent’s determination, there are statutory procedures by which the result of our decision may be made effective.
A deficiency has its source in the tax imposed by law. Section 271 of the Code starts out with the statement that “ ‘deficiency’ means the amount by which the tax imposed by this chapter exceeds the excess of” the sum of the amount returned by the taxpayer plus amounts previously assessed as a deficiency over the amount of rebates. It follows that in no case can the deficiency be greater than the tax imposed by law. In this case, the petitioner reported and paid an amount equal to the tax imposed by law based on the then existing facts. When, by reason of a subsequent net operating loss, the petitioner’s taxable income was eliminated, there was no tax imposed by law on him for the year 1945. Consequently, there was no deficiency. The fact that liability to make a renegotiation refund has been abated does not increase the amount of the tax imposed by law and, therefore, it does not create a deficiency.
I recognize that by the credit of $5,007.60 against the petitioner’s renegotiation liability he has in effect received funds from the Treasury to which he was not entitled. No doubt there is a procedure, including a proper form, by which the excess payment can be recovered. I think that a deficiency proceeding is not the proper one when in fact and in law there is no deficiency in tax.
I would enter a decision that there is no deficiency.