For the years 1934, 1935, and 1936 the taxpayer, a corpoation, filed complete income and excess-profits tax returns on Form 1120 of the Treasury Department. Each of these included a question whether the corporation was a personal holding company within the meaning of § 351 of the applicable revenue act, 26 U.S.C.A. Int.Rev.Acts, pages 757, 936, and stated that if it was, an additional return on Form 1120H was required. The taxpayer answered the question in the negative and did not in any year file personal holding company returns on Form 1120H.
The Commissioner imposed personal holding company surtaxes for each year and under the authority of § 406 of the Revenue Act of 1935, 26 U.S.C.A. Int.Rev.Acts, page 811, and § 291 of the Revenue Acts of 1934 and 1936, 26 U.S.C.A. Int.Rev.Code, § 291, imposed a 25 per cent penalty for failure to file the personal holding company return.
The president, who executed the income tax returns, did not file personal holding company returns because he thought the taxpayer was not a personal holding company within the meaning of the Act. It was actively engaged in the pawnshop business. However, more than 50 per cent of its capital stock was owned by less than five stockholders, and more than 80 per cent of its gross income was derived from interest. The taxpayer filed information returns showing dividends of over $300 paid to each stockholder during those years and its books and records made available to the Commissioner during audit disclosed the facts. No fraud or had faith is suggested.
The Board of Tax Appeals affirmed the penalties, and its decision was affirmed by the Circuit Court of Appeals. There appearing to be no conflict of decision between circuits, we on November 9, 1942 denied certiorari. The 25-day period allowed by our rule in which to file petition for rehearing expired. In February 1943 a conflict developed through decision of Lane-Wells Co. v. Commissioner by the Court of Appeals for the Ninth Circuit. Petitioner asked leave to file out of time a petition for rehearing and we consented. On June 7, 1943, we granted petition for rehearing, vacated the order denying certiorari, and granted certiorari limited to the penalty question. We asked counsel in view of § 1140 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 1140, and Helvering v. Northern Coal Co., 293 U.S. 191, 55 S.Ct. 3, 79 L.Ed. 281, to discuss our jurisdiction to grant a petition for rehearing in the case.
Section 1140 of the Internal Revenue Code, in relevant part, provides:
'The decision of the Tax Court shall become final-
'(b) Decision affirmed or petition for review dismissed
'(2) Petition for certiorari denied. Upon the denial of a petition for certiorari, if the decision of the Tax Court has been affirmed or the petition for review dismissed by the Circuit Court of Appeals; or
'(3) After mandate of (the) Supreme Court. Upon the expiration of 30 days from the date of issuance of the mandate of the Supreme Court, if such Court directs that the decision of the Board be affirmed or the petition for review dismissed.'
There are other provisions dealing with the situations where the Board's decision is modified or reversed by the Circuit Court of Appeals or by this Court, the purpose being to determine definitely the date on which the statute of limitations, suspended during appeal, begins to run again and assessment may be made by the Commissioner. The Revenue Act of 1926 had identical provisions. In reporting upon the provision in the Revenue Bill of 1926, the Senate committee said: 'Section 1005 prescribes the date on which a decision of the Board (whether or not review thereof is had) is to become final. Inasmuch as the statute of limitations upon assessments and suits for collection, both of which are suspended during review of the Commissioner's determination, commences to run upon the day upon which the Board's decision becomes final, it is of utmost importance that this time be specified as accurately as possible. In some instances in order to achieve this result the usual rules of law applicable in court procedure must be changed. For example, the power of the court of review to recall its mandate is made to expire 30 days from the date of issuance of the mandate.' Sen.Rep. No. 52, 69th Cong., 1st Sess., p. 37.