The opinion
Disney, /., dissenting: I must dissent to the holding of the majority that the petitioner was not subject to penalty for failure to file personal holding company returns. The reasons given by the opinion are, in effect, that as to each year, except 1934, the petitioner’s income tax returns reported a net loss, and that an internal revenue agent examined petitioner’s income tax return for 1934 and found a net income of $927.79 and a deficiency of $121.17, due to disallowance of excessive depreciation, the agent stating in the report that the petitioner’s only income was the royalties from Smith’s individual plant locations. To hold that this constitutes reasonable cause in failing to file the return, in my view, is altogether inconsistent with the previous cases on the subject. Mere belief that a corporation is not subject to the tax is not reasonable cause for failure to file. P. Dougherty Co., 5 T. C. 791 (800), and cases cited. Moreover, in Searles Real Estate Trust, 25 B. T. A. 1115 (not a personal holding company case),.the excuse proffered for failure to file return was that an offer was made to file a belated return, but a revenue agent had told those in charge of petitioner’s affairs that it need not file; yet, we held that such facts did not suffice to excuse failure to file a return. It is true that that case arose under section 1311 of the Revenue Act of 1921 (in this respect the same as section 291 of the Revenue Act of 1934) under which a return, though belated, must be filed, whereas since the Act of 1936 the statutes have provided for showing of reasonable cause as excuse for not filing. Nevertheless, it seems to me that the case is recognition of the fact that conduct of a subordinate departmental officer may not be relied on as reasonable cause. Though the statute here involved did not, like the former one, absolutely require a belated filing, yet it did make a requirement — a showing of reasonable cause, and the language of the Searles case is still applicable: “We find no provision in the law which would permit the Commissioner to waive this requirement of the statute by the conduct of his subordinate employees * * I think that reasonable cause may not be predicated in the attitude of a revenue agent, at least not where, as here, he merely failed to do anything or say anything as to the personal holding company situation. Even if positive statements by an agent could constitute reasonable cause, surely silence does not. In general, silence may estop only where t here is a positive duty to speak. The excuse here offered amounts to a contention that a revenue agent has a duty of informing the taxpayer of all of his rights and duties — a view I consider neither sound, logical, nor administratively feasible. In line with the conclusion in the Searles case, and citing it, is our statement in Blum Folding Paper Box Co., 4 T. C. 795 (799), that, “The Government can not be estopped by statements of its agents which are beyond the scope of their authority.” Moreover, the majority opinion holds that for 1934, as to which the revenue agent made the examination, there was, due to a deficit and distribution of preferential dividends to Smith, no undistributed personal holding company net income subject to surtax, and therefore no penalty for failure to file return. Such situation may have been the reason that the revenue agent made no suggestion that the petitioner was liable as a personal holding company for 1934. In my opinion, at least in the absence of explanation in this regard, the agent’s silence as to personal holding company status offers no reasonable cause for failure to file; and the situation as to whether there was personal holding company income might change from year to year, so that even if the agent had made a positive statement in that regard for 1934, it would be no reasonable excuse in later years. I therefore respectfully dissent to the conclusion on the penalty issue.