The opinion
Sinmi, /., dissenting: I dissent from the conclusion of my brethren that the petitioner is liable to a 25 percent penalty for failure to file an excess profits tax return for its fiscal year ended September 30, 1940. Such penalty is imposed by section 291 of the Internal Revenue Code. It is imposed in case of a failure to make and file a return “unless it is shown that such failure is due to reasonable cause and not due to willful neglect.” The petitioner did not file an excess profits tax return because it “believed that its tax year began in 1939 and therefore no return was required.” The majority opinion states that “There is no evidence on this important question,” that is, as to the reason for not filing an excess profits tax return. It appears to me, however, that it is immaterial that the petitioner did not furnish evidence upon the question. Where the facts show that the petitioner had a reasonable cause for failure to file a return, no additional evidence is necessary.
It is also stated in the majority opinion: “The Commissioner’s assessment of the penalty for failure to file a return is not to be taken lightly.” I do not think that the respondent’s imposition of the penalty should carry any weight, with us. The Tax Court is not expected to rubber-stamp the Commissioner’s determinations. We are to pass upon issues presented for our determination upon the evidence and in accordance with the law and justice.
The penalty for delinquency is in truth and fact purely a penalty. The fact that it is to be collected as a part of the tax is of no significance so far as the jiresent issue is concerned. The imposition of the penalty is not a revenue measure. It is merely for the purpose of insuring collection of the tax imposed.
In Spies v. United States, 317 U. S. 492 , the taxpayer had not filed a required tax return. He had been convicted of attempting to defeat and evade income tax in violation of section 145 (b) of the Revenue Act of 1936. Passing upon the question as to whether he was correctly convicted, the Supreme Court covered the whole field of penalties imposed by the revenue acts, including the delinquency penalty. The Court stated:
Sanctions to insure payment of the tax are even more varied to meet the variety of causes of default. It is the right as well as the interest of the taxpayer to limit his admission of liability to the amount he actually owes. But the law is complicated, accounting treatment of various items raises problems of great complexity, and innocent errors are numerous, as appear from the number who make overpayments. It is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care. Such errors are corrected by the assessment of the deficiency of tax and its colleption with interest for the delay. * * * [Emphasis supplied.]
Just what constitutes a reasonable cause for failure to file a return, in the absence of willful neglect (there is no suggestion made that the petitioner willfully neglected to tile a return), is such a cause as appeals to a businessman, a man of the street, or a juror. It seems to me that the petitioner had a reasonable cause for failing to file an excess profits tax return for the taxable year. If the contention made by the petitioner in this case, which I believe was a reasonable contention, had been sustained, there would be no question of the 25 percent penalty in this case. It acted as a reasonable man would act. We, likewise, considering whether there was a reasonable, cause for failure to file a return, should act as a reasonable person would act and not mulct the petitioner to the extent of approximately $8,000 for making an innocent error.
Arundell and Mfxlott, JJ., agree with this dissent.