The opinion
L. HAND, Circuit Judge
(dissenting in part).
I agree with my brothers as to all but the penalty; and as to that I also agree not to follow the reasoning in Noteman v. Welch, 1 Cir., 108 F.2d 206 , because a return is still a return, however misleading it may be. In the absence of fraud no penalty is imposed upon an innocent taxpayer, however he may throw the Commissioner off the track; it falls only upon those who by failing to make any return at all have given him no lead which he can follow up. Given a lead and good faith, it rests upon him to check the return.
For this reason it seems to me that our decision is a triumph of letter over substance. It is true that the “undistributed adjusted net income” defined by § 351(b) (2) and (3) is not the “net income” used for the base of the normal tax; but it is computed from that income, and the tax is an income tax, and indeed even a “surtax,” eo nomine. I can see no reason in substance to distinguish an innocent mistake as to it and an individual’s mistake as to his surtax, except that an individual puts both in one return.
The justification for this is that § 351 (c) makes applicable to this surtax all the administrative provisions of Title I; and since that title requires a return, so must Title IA. Therefore there must be two returns, as the Commissioner has ruled. I raise no question as to the propriety of his ruling; but the statute did not compel it. If he had merely added to the return required by Title I the questions necessary for Title IA, it would clearly have been a compliance with § 351(c); and certainly no penalty could have been then imposed. We are imposing one only because he has found it administratively convenient to make two bites to this particular cherry. The penalty was not meant for that; it was imposed to punish delinquents; those who either deliberately, or from indifference, made no effort at all to. pay their taxes, not those who merely misunderstood duties which they tried to discharge. By recourse to what even grammatically is a bit of by no means an inexorable verbal reasoning we are perverting it from that purpose.