People Ex Rel. International Salt Co. v. Graves

*152 Crouch, J. From 1917 to 1928, inclusive, the relator, a domestic corporation, filed its annual franchise tax report under article 9-A of the Tax Law (Cons. Laws, ch. 60). Upon the data so supplied, assessments were made and the taxes paid. During all of those years section 218 of the Tax Law gave the relator an adequate remedy as against taxes unlawfully demanded, or payments illegally made or exacted, by providing for a revision proceeding within one year from the time of auditing and stating an account. No application for the revision of any of those assessments was ever made under that section. On August 12, 1932, the relator filed with the State Tax Commission a sworn return showing corrections made by the United States Commissioner of Internal Revenue in the reported net income for each of the business years *153 upon, which franchise tax assessments had been made for the tax years from November 1, 1917, to November 1, 1928, inclusive. The net corrections for all of the years was a substantial increase. That return was made pursuant to section 219-d of the Tax Law, which provided, in substance, that upon its filing, the Tax Commission should ascertain relator’s net income for each of the fiscal or calendar years for which a correction had been made; and should thereupon “ reaudit and restate the account of such corporation for taxes based upon the entire net income as changed or corrected for such fiscal or calendar year but without change of the segregation of assets upon which the original assessment was based, such reaudit to be according to the entire net income so ascertained by the tax commission.” In its return, however, the relator did not confine itself to the item of corrections in the reported net income, but in addition requested that the segregation of assets for the tax years beginning November 1, 1918, and November 1, 1919, be opened for the purpose of removing the limitation held unconstitutional in People ex rel. Alpha Portland Cement Co. v. Knapp (230 N. Y. 48); and further requested that the segregation for all the years be opened for the purpose of changing the valuation of the stocks of other corporations which had been reported at cost rather than at actual value. Upon that return the Tax Commission made the corrected and added assessments required by the correction in net income made by the Federal government. It declined, in accordance with the command of the statute, to make any change in the segregation of assets. The result of the changes in net income was net additional taxes of $11,305.29. Thereupon the relator applied for revision of said corrected and added assessments. A hearing was had and the final determination affirmed the corrected and added assessments without change. Upon certiorari to review the final determination, the Appel *154 late Division held as to all the years except 1918 and 1919 that the failure of relator to seek revision of the segregation within the time limited by section 218, was a bar to the revision now demanded. As to the years 1918 and 1919, however, it held that the relator’s failure to seek revision within the statutory period did not constitute a bar because the original segregation in each of those years, made in accordance with an unconstitutional statute, was no segregation, and so left open the entire matter of assessment to be gone into de nova in this proceeding arising out of the corrections of net income under section 219-d. As to the years other than 1918 and 1919, we all agree that the determination below was right. It is true that the express prohibition in section 219-d against change of the segregation of assets did not come into the statute until 1922 (Laws of 1922, ch. 507). But the matter is one of procedure and administration. Therefore, whatever may be drawn from other general language in the statutes, or from expressions with respect thereto in the Alpha Portland Cement case, the amendment of 1922, in force at the time the determination herein was made, is controlling. An adequate remedy always existed. The ruling as to the years 1918 and 1919 is more doubtful. No controlling authority has come to our attention. But for the provision of section 219-d, an assessment once made would have had complete finality, subject only to the right of revision granted by section 218. With the expiration of the time limited by that section for beginning the revision proceeding, no defect either of law or fact could have afforded ground for attack. The determination by the Commission of the several factors entering into the statutory formula would have been final. Neither error nor invalidity, whether constitutional or otherwise, entering into such determination would have changed the rule of finality. (Matter of Hoople, 179 N. Y. 308; Second Nat. Bank v. City of New *155 York, 213 N. Y. 457; Liberty Bank v. City of Buffalo, 241 App. Div. 323; affd., 265 N. Y. 543; Gorham Mfg. Co. v. State Tax Comm., 266 U. S. 265; Fourth Atlantic Nat. Bank v. City of Boston, 300 Fed. Rep. 29; Wheatland v. City of Boston, 202 Mass. 258.) But section 219-d, at least to the extent and for the purpose therein expressly stated, did modify the rule of finality. We think it modified it no further. The argument to the contrary rests and can only rest upon the direction to “ reaudit and restate the account,” after having ascertained “ from such return and any other information in the possession of the commission, the entire net income of such corporation for the fiscal or calendar year for which such change or correction has been made by such commissioner of internal revenue.” The argument, briefly, is that such reaudit and restatement necessarily involves a new segregation of assets since that which was originally made was wholly void because of the constitutional defect; and that being so, the Commission is bound to segregate in accordance with amended section 214 upon the basis of new data furnished by the relator. That argument gives a meaning to the words “ reaudit and restate ” in section 219-d which certainly they have not had since the amendment of 1922, and which it is reasonably clear they were not intended to have before that amendment. For practical reasons the annual net income of any corporation as reported to the United States Treasury Department was under the statute to be accepted as presumptively correct. The essential purpose of section 219-d was to carry into the State’s computation any change or correction made by the Federal authorities in that item. When the section directed the Tax Commission, after making such change or correction, to reaudit and restate the account, the obvious meaning was to correct the assessment on the basis of a change in the only factor up for consideration. The amendment of 1922 *156 served only to make explicit what was reasonably clear before. Since the time for making corrections of net income depends wholly upon the time when the Commissioner of Internal Revenue may act, it is obvious that the limitation of time for revision as to all other factors would be of little avail, if those factors could under any circumstances be opened up for revision in connection with the reaudit under section 219-d. In view of the great public importance to the State of finality in the determination of revenue matters, we can see no substantial reason for differentiating between the finality of determinations involving error of fact and those involving error of law. When, with the expiration of the time limitation, the opportunity for revision is past and gone except for the purpose expressly covered by section 219-d, gone also for all practical purposes is the legal distinction between an erroneous determination and an invalid or void determination. The order of the Appellate Division should be affirmed in so far as it confirmed the final determination of the State Tax Commission; and reversed in so far as it annulled said determination, and the determination of the Tax Commission should be confirmed. The order of the Appellate Division should be modified in accordance with this opinion and as so modified affirmed, with costs.