Tax CASE 2

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G.R. No. 177982 October 17, 2008

FITNESS BY DESIGN, INC.,petitioner,

vs.

COMMISSIONER ON INTERNAL REEN!E,respondent.

D E C I S I O N

CAR"IO MORALES, J.#

On March 17, 2004, the Commissioner on Internal even!e "respondent# assessed $itness %&

Desi'n, Inc. "petitioner# (or de(icienc& income ta)es (or the ta) &ear 1**+ in the total amo!nt o(10,-47,+2*.-*.1etitioner protested the assessment on the 'ro!nd that it as iss!ed %e&ond the

three/&ear prescriptive period !nder Section 20 o( the a) Code.2dditionall&, petitioner

claimed that since it as incorporated onl& on Ma& 0, 1**+, there as no %asis to ass!me that it

had alread& earned income (or the ta) &ear 1**+.

On $e%r!ar& 1, 200+, respondent iss!ed a arrant o( distraint and3or lev& a'ainst petitioner,4

drain' petitioner to (ile on March 1, 200+ a etition (or evie "ith Motion to S!spend

Collection o( Income a), al!e dded a), Doc!mentar& Stamp a) and S!rchar'es andInterests s!%5ect o( this etition#+%e(ore the Co!rt o( a) ppeals "C# %e(ore hich it

reiterated its de(ense o( prescription. he petition as doc6eted as C Case No. 71-0.

In his nser,-respondent alle'ed

he ri'ht o( the respondent to assess petitioner (or de(icienc& income ta), and Doc!mentar&

Stamp a) (or the &ear 1**+ has not prescri%ed p!rs!ant to Section 222"a# o( the 1**7 a) Code.

etitioner8s 1**+ Income a) et!rn "I# (iled on pril 11, 1**- as (alse and (ra!d!lent (orits deli%erate (ail!re to declare its tr!e sales. etitioner declared in its 1**+ Income a) et!rn

that it as on its pre/operation sta'e and has not declared its income. Investi'ation %& thereven!e o((icers o( the respondent, hoever, disclosed that it has %een operatin'3doin' %!siness

and had sales operations (or the &ear 1**+ in the total amo!nt o( 7,1+-,-.09 hich it (ailed to

report in its 1**+ I. h!s, (or the &ear 1**+, petitioner (iled a (ra!d!lent ann!al income ret!rnith intent to evade ta). :i6eise, petitioner (ailed to (ile al!e/dded a) "# et!rn and

reported the amo!nt o( 7,1+-,-.09 as its 'ross sales (or the &ear 1**+. ;ence, $or $%&'(re to$&'e % AT ret(r) %)* $or $&'&)+ % $r%(*('e)t &)coe t%- ret(r) $or te /e%r 199, te

correo)*&)+ t%-e %/ be %ee* %t %)/ t&e 3&t&) te) 4105 /e%r %$ter te *&co6er/ o$

(c o&&o) or $r%(*p!rs!ant to Section 222"a# o( the 1**7 a) Code.

he s!%5ect de(icienc& ta) assessments have alread& %ecome (inal, e)ec!tor& and demanda%le

(or (ail!re o( the petitioner to (ile a protest ithin the re'lementar& period provided (or %& la.

he I ecords nor re(lected in the ecord >oo6

o( the :e'al Division as normall& done %& o!r receivin' cler6 hen she receive?s@ an&

doc!ment. he respondent, there(ore, has le'al %asis to collect the ta) lia%ilit& either %& distraintand lev& or civil action.7"Emphasis and !nderscorin' s!pplied#

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he a(orecited Section 222"a#9o( the 1**7 a) Code provides

In the case o( a (alse or (ra!d!lent ret!rn ith intent to evade ta) or o( (ail!re to (ile a ret!rn, the

ta) ma& %e assessed, or a proceedin' in co!rt (or the collection o( s!ch ta) ma& %e (iled itho!tassessment, at an& time ithin ten "10# &ears a(ter the discover& o( the (alsit&, (ra!d, or omission

rovided, hat in a (ra!d assessment hich has %ecome (inal and e)ec!tor&, the (act o( (ra!dshall %e 5!diciall& ta6en co'niAance o( in the civil or criminal action (or the collection thereo(.

"Bnderscorin' s!pplied#

he >!rea! o( Internal even!e ">I# in (act (iled on March 10, 200+ a criminal complaint

%e(ore the Department o( =!stice a'ainst the o((icers and acco!ntant o( petitioner (or violation o(

the provisions o(

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In an& event, the C held that there as no need to iss!e a s!%poena duces tecumto o%tain the

((idavit o( the In(ormer as the same (ormed part o( the >I records o( the case, the prod!ction

o( hich had %een ordered %& it.2

etitioner8s Motion (or econsideration24o( the C esol!tion o( =an!ar& 1+, 2007 as

denied,2+

hence, the present etition (or Certiorari2-

hich imp!tes 'rave a%!se o( discretion tothe C

I.

) ) ) in holdin' that the le'alit& o( the mode o( ac!irin' the doc!ments hich are the %ases o(the a%ove disc!ssed de(icienc& ta) assessments, the s!%5ect matter o( the etition (or evie

no pendin' in the ;onora%le Second Division, is not material and relevant to the iss!e o(

prescription.

II.

) ) ) in holdin' that Mr. :eonardo Sa%lan8s testimon&, i( alloed, o!ld violate 29 hich

prohi%its the >I to reveal the identit& o( the in(ormer since 1# the p!rpose o( the s!%poena is to

elicit (rom him the herea%o!ts o( the ori'inal acco!ntin' records, doc!ments and receiptsoned %& the etitioner and not to discover i( he is the in(ormer since the identit& o( the in(ormer

is not relevant to the iss!es raisedF 2# 29 cannot le'all& 5!sti(& violation o( the etitioner8s

propert& ri'hts %& a person, hether he is an in(ormer or not, since s!ch cannot allo s!ch

invasion o( propert& ri'hts otherise 29 o!ld r!n co!nter to the constit!tional mandatethat

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I.

) ) ) hen the ;onora%le Co!rt o( a) ppeals r!led that the p!rpose o( the etitioner in

re!estin' (or ritten interro'atories is to anno&, em%arrass, or oppress the itness %eca!se s!chr!lin' has no (act!al %asis since espondent never alle'ed nor proved that the itnesses to

hom the interro'atories are addressed ill %e anno&ed, em%arrassed or oppressedF %esides theonl& o%vio!s p!rpose o( the etitioner is to 6no the herea%o!ts o( acco!ntin' records and

doc!ments hich are in the possession o( the itnesses to hom the interro'atories are directedand to !ltimatel& 'et possession thereo(. rantin' itho!t admittin' that there is anno&ance,

em%arrassment or oppressionF the same is not !nreasona%le.

II.

) ) ) hen it (ailed to r!le that the >I o((icers and emplo&ees are not covered %& theprohi%ition !nder 29 and do not have the a!thorit& to ithhold (rom the ta)pa&er

doc!ments oned %& s!ch ta)pa&er.

III.

) ) ) hen it re!ired the

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>esides, as the C held, the s!%poenas and ansers to the ritten interro'atories o!ld violate

Section 2 o( ep!%lic ct No. 29 as implemented %& Section 12 o( $inance Department Order

No. 4-/--.

etitioner claims, hoever, that it onl& intended to elicit in(ormation on the herea%o!ts o( the

doc!ments it needs in order to re(!te the assessment, and not to disclose the identit& o( thein(ormer.2*etitioner8s position does not pers!ade. he interro'atories addressed to Sa%lan and

the reven!e o((icers sho that the& ere intended to con(irm petitioner8s %elie( that Sa%lan asthe in(ormer. h!s the !estions (or Sa%lan read

1. Bnder hat circ!mstances do &o! 6no petitioner corporationH lease state in hat capacit&,

the date or period &o! o%tained said 6noled'e.

2. Do &o! 6no a Ms. Elnora Carpio, ho (rom 1**+ to the earl& part o( 1**- as the %oo66eeper o( petitionerH lease state ho &o! came to 6no o( Ms. Carpio.

. t the time that Ms. Carpio as %oo6 6eeper o( petitioner did she cons!lt &o! or sho an&acco!ntin' doc!ments and records o( petitionerH

4. hat doc!ments, i( an&, did &o! o%tain (rom petitionerH

+. ere these doc!ments that &o! o%tained (rom petitioner s!%mitted to the >!rea! o( Internaleven!e ">I#H lease descri%e said doc!ments and !nder hat circ!mstances the same ere

s!%mitted.

-. as the consent o( the petitioner, its o((icers or emplo&ees o%tained hen the doc!ments that

&o! o%tained ere s!%mitted to the >IH lease state hen and (rom hom the consent as

o%tained.

7. Did &o! e)ec!te an a((idavit as an in(ormer in the assessment hich as iss!ed %& the >I

a'ainst petitioner (or the ta) &ear 1**+ and other &earsH 0"Bnderscorin' s!pplied#

hile the !estions (or the reven!e o((icers read

1. here did &o! o%tain the doc!ments, partic!larl& the invoices and o((icial receipts, hich?ere@ !sed %& &o!r o((ice as evidence and as %asis o( the assessment (or de(icienc& income ta)

and val!e added ta) (or the ta) &ear 1**+ iss!ed a'ainst petitionerH

2. Do &o! 6no Mr. :eonardo Sa%lanH lease state !nder hat circ!mstance &o! came to 6noMr. Sa%lanH1"Bnderscorin' s!pplied#

etitioner imp!'ns the manner in hich the doc!ments in !estion reached the >I, Sa%lan

havin' alle'edl& s!%mitted them to the >I itho!t its "petitioner8s# consent. etitioner8s lac6 o(

consent does not, hoever, impl& that the >I o%tained them ille'all& or that the in(ormationreceived is (alse or malicio!s. Nor does the lac6 o( consent precl!de the >I (rom assessin'

de(icienc& ta)es on petitioner %ased on the doc!ments. h!s Section + o( the a) Code provides

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In ascertainin' the correctness o( an& ret!rn, or in ma6in' a ret!rn hen none has %een made, or

in determinin' the lia%ilit& o( an& person (or an& internal reven!e ta), or in collectin' an& s!ch

lia%ilit&, or in eval!atin' ta) compliance, the Commissioner is a!thoriAed

"# o e)amine an& %oo6, paper, record or other data hich ma& %e relevant or material to s!ch

!er&F

"># o o%tain on a re'!lar %asis $ro %)/ ero) oter t%) te ero) 3oe &)ter)%'re6e)(e t%- '&%b&'&t/ & (bect to %(*&t or &)6et&+%t&o),or (rom an& o((ice or o((icer o( thenational and local 'overnments, 'overnment a'encies and instr!mentalities, incl!din' the

Bangko Sentral ng Pilipinasand 'overnment/oned and controlled corporations, an&

in(ormation s!ch as, %!t not limited to, costs and vol!me o( prod!ction, receipts or sales and'ross incomes o( ta)pa&ers, and the names, addresses, and (inancial statements o( corporations,

m!t!al (!nd companies, ins!rance companies, re'ional operatin' head!arters o( m!ltinational

companies, 5oint acco!nts, associations, 5oint vent!res or consortia and re'istered partnerships

and their mem%ersF

"C# o s!mmon the person lia%le (or ta) or re!ired to (ile a ret!rn, or an& o((icer or emplo&ee o(

s!ch person, or %)/ ero) %6&)+ oe&o), c(to*/, or c%re o$ te boo o$ %cco()t %)*oter %cco()t&)+ recor* co)t%&)&)+ e)tr&e re'%t&)+ to te b(&)e o$ te ero) '&%b'e $or

t%-, or %)/ oter ero), to appear %e(ore the Commissioner or his d!l& a!thoriAedrepresentatives at a time and place speci(ied in the s!mmons and to prod!ce s!ch %oo6s, papers,

records, or other data, and to 'ive testimon&F

"D# o ta6e s!ch testimon& o( the person concerned, !nder oath, as ma& %e relevant or materialto s!ch in!ir&F and

"E# o ca!se reven!e o((icers and emplo&ees to ma6e a canvass (rom time to time o( an& reven!edistrict or re'ion and in!ire a(ter and concernin' all persons therein ho ma& %e lia%le to pa&

an& internal reven!e ta), and all persons onin' or havin' the care, mana'ement or possessiono( an& o%5ect ith respect to hich a ta) is imposed.

) ) ) ) "Emphasis and !nderscorin' s!pplied#

he la th!s allos the >I access to all relevant or material records and data in the person o(

the ta)pa&er,2and the >I can accept doc!ments hich cannot %e admitted in a 5!dicial

proceedin' here the !les o( Co!rt are strictl& o%served.o re!ire the consent o( theta)pa&er o!ld de(eat the intent o( the la to help the >I assess and collect the correct amo!nt

o( ta)es.

etitioner8s invocation o( the ri'hts o( an acc!sed in a criminal prosec!tion to cross e)amine the

itness a'ainst him and to have comp!lsor& process iss!ed to sec!re the attendance o( itnessesand the prod!ction o( other evidence in his %ehal( does not lie. C Case No. 71-0 is not a

criminal prosec!tion, and even 'rantin' that it is related to I.S. No. 200+/20, the respondents in

the latter proceedin' are the o((icers and acco!ntant o( petitioner/corporation, not petitioner.

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$rom the complaint and s!pportin' a((idavits in I.S. No. 200+/20, Sa%lan does not even appear

to %e a itness a'ainst the respondents therein.4

:: EENS, iss!ance o( s!%poena duces tecum(or the prod!ction o( the doc!mentsre!ested %& the petitioner hich doc!ments petitioner claims to %e cr!cial to its de(ense+ is

!nnecessar& in vie o( the C order (or respondent to certi(& and (orard to it all the recordso( the case.-I( the order has not %een complied ith, the C can en(orce it %& citin'

respondent (or indirect contempt.7

:;EREFORE, in li'ht o( the (ore'oin' dis!isition, the petition is DISMISSED.

Costs a'ainst petitioner.

SO ODEED.

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G.R. No. L

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even!e, dated Ma& 9, 1*+7, protestin' the assessments, on the 'ro!nd that the income ta)es are

no lon'er collecti%le (or the reason that the& have alread& prescri%ed. s the Collector did not

a'ree to the alle'ed claim o( prescription, action as instit!ted %& him in the Co!rt o( $irstInstance to recover the amo!nt assessed. he Co!rt o( $irst Instance !pheld the contention o(

%laAa that the action to collect the said income ta)es had prescri%ed. 'ainst this decision the

case as %ro!'ht here on appeal, here it is claimed %& the overnment that the prescriptiveperiod has not (!ll& r!n at the time o( the assessment, in vie especiall& o( the letter o( the

acco!ntants o( %laAa, dated March 10, 1*+4, pertinent provisions o( hich are !oted a%ove.

It is o( co!rse tr!e on Octo%er 14, 1*+1, %laAaJs acco!ntants re!ested a reinvesti'ation o( the

assessment o( the income ta)es a'ainst him, the period o( prescription o( action to collect theta)es as s!spended. "Sec. , C. . No. 4--.# he provision o( la on prescription as

adopted in o!r stat!te %oo6s !pon recommendation o( the ta) commissioner o( the hilippines

hich declares

Bnder the (ormer la, the ri'ht o( the overnment to collect the ta) does not prescri%e.

;oever, in (airness to the ta)pa&er, the overnment sho!ld %e estopped (rom collectin'the ta) here it (ailed to ma6e the necessar& investi'ation and assessment ithin + &ears

a(ter the (ilin' o( the ret!rn and here it (ailed to collect the ta) ithin + &ears (rom thedate o( assessment thereo(. 5!st as the 'overnment is interested in the sta%ilit& o( its

collection, so also are the ta)pa&ers entitled to an ass!rance that the& ill not %e

s!%5ected to (!rther investi'ation (or ta) p!rposes a(ter the e)piration o( a reasona%leperiod o( time. "ol. II, eport o( the a) Commission o( the hilippines, pp. 21/22#

he la prescri%in' a limitation o( actions (or the collection o( the income ta) is %ene(icial %oth

to the overnment and to its citiAensF to the overnment %eca!se ta) o((icers o!ld %e o%li'ed

to act promptl& in the ma6in' o( assessment, and to citiAens %eca!se a(ter the lapse o( the period

o( prescription citiAens o!ld have a (eelin' o( sec!rit& a'ainst !nscr!p!lo!s ta) a'ents ho illala&s (ind an e)c!se to inspect the %oo6s o( ta)pa&ers, not to determine the latterJs real lia%ilit&,

%!t to ta6e advanta'e o( ever& opport!nit& to molest peace(!l, la/a%idin' citiAens. itho!t s!chle'al de(ense ta)pa&ers o!ld (!rthermore %e !nder o%li'ation to ala&s 6eep their %oo6s and

6eep them open (or inspection s!%5ect to harassment %& !nscr!p!lo!s ta) a'ents. he la on

prescription %ein' a remedial meas!re sho!ld %e interpreted in a a& cond!cive to %rin'in'

a%o!t the %ene(icient p!rpose o( a((ordin' protection to the ta)pa&er ithin the contemplation o(the Commission hich recommend the approval o( the la.

he !estion in the case at %ar %oils don to the interpretation o( E)hi%it

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that at the time, March, 1*+4 the reinvesti'ation as a%o!t to %e (inished and he anted a cop&

o( the re/assessment in order to %e prepared to admit or contest it. Nohere does the letter impl&

a demand or re!est (or a read& re!ested and, there(ore, the said letter ma& not %e interpreted toa!thoriAe or 5!sti(& the contin!ance o( the s!spension o( the period o( limitations.

e (ind the appeal itho!t merit and e here%& a((irm the 5!d'ment o( the loer co!rtdismissin' the action. itho!t costs.

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G.R. No. 1>21 A(+(t 28, 2007

COMMISSIONER OF INTERNAL REEN!E %)* ART!RO . "ARCERO &) & o$$&c&%'

c%%c&t/ % Re6e)(e D&tr&ct O$$&cer o$ Re6e)(e D&tr&ct No. 0=9 4M%%t&5, etitioners,vs.

"RIMETO:N "RO"ERTY GRO!", INC.,espondent.

D E C I S I O N

CORONA, J.:

his petition (or revie on certiorari1see6s to set aside the !'!st 1, 200 decision2o( the Co!rt

o( ppeals "C# in C/.. S No. -4792 and its $e%r!ar& *, 2004 resol!tion den&in'

reconsideration.

On March 11, 1***, il%ert Lap, vice chair o( respondent rimeton ropert& ro!p, Inc.,

applied (or the re(!nd or credit o( income ta) respondent paid in 1**7. In LapJs letter to

petitioner reven!e district o((icer rt!ro . arcero o( even!e District No. 04* "Ma6ati# o( the

>!rea! o( Internal even!e ">I#,4he e)plained that the increase in the cost o( la%or andmaterials and di((ic!lt& in o%tainin' (inancin' (or pro5ects and collectin' receiva%les ca!sed the

real estate ind!str& to slodon.+s a conse!ence, hile %!siness as 'ood d!rin' the (irst

!arter o( 1**7, respondent s!((ered losses amo!ntin' to 71,97*,229 that &ear.-

ccordin' to Lap, %eca!se respondent s!((ered losses, it as not lia%le (or income ta)es.7Nevertheless, respondent paid its !arterl& corporate income ta) and remitted credita%le

ithholdin' ta) (rom real estate sales to the >I in the total amo!nt o( 2-,19,*9.2.9

here(ore, respondent as entitled to ta) re(!nd or ta) credit.*

On Ma& 1, 1***, reven!e o((icer EliAa%eth L. Santos re!ired respondent to s!%mit additional

doc!ments to s!pport its claim.10espondent complied %!t its claim as not acted !pon. h!s,

on pril 14, 2000, it (iled a petition (or revie11in the Co!rt o( a) ppeals "C#.

On Decem%er 1+, 2000, the C dismissed the petition as it as (iled %e&ond the to/&earprescriptive period (or (ilin' a 5!dicial claim (or ta) re(!nd or ta) credit.12It invo6ed Section 22*

o( the National Internal even!e Code "NIC#

Sec. 22*.Reco"ery of #a$es %rroneously or !llegally Collected. &&No s!it or proceedin' shall %emaintained in an& co!rt (or the recover& o( an& national internal reven!e ta) herea(ter alle'ed tohave %een erroneo!sl& or ille'all& assessed or collected, or o( an& penalt& claimed to have %een

collected itho!t a!thorit&, or o( an& s!m alle'ed to have %een e)cessivel& or in an& manner

ron'(!ll& collected, !ntil a claim (or re(!nd or credit has %een d!l& (iled ith theCommissionerF %!t s!ch s!it or proceedin' ma& %e maintained, hether or not s!ch ta), penalt&,

or s!m has %een paid !nder protest or d!ress.

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In an& case, )o (c (&t or rocee*&)+ %'' be $&'e* %$ter te e-&r%t&o) o$ t3o 425 /e%r$ro te *%te o$ %/e)t o$ te t%- or e)%'t/ re+%r*'e o$ %)/ (er6e)&)+ c%(e t%t

%/ %r&e %$ter %/e)tPro"ided' (o)e"er' hat the Commissioner ma&, even itho!t a claimthere(or, re(!nd or credit an& ta), here on the (ace o( the ret!rn !pon hich pa&ment as made,

s!ch pa&ment appears clearl& to have %een erroneo!sl& paid. "emphasis s!pplied#

he C (o!nd that respondent (iled its (inal ad5!sted ret!rn on pril 14, 1**9. h!s, its ri'ht to

claim a re(!nd or credit commenced on that date.1

he ta) co!rt applied rticle 1 o( the Civil Code hich states

rt. 1. hen the la spea6s o( &ears, months, da&s or ni'hts, it shall %e !nderstood that /e%r%re o$ tree ()*re* &-t/

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he concl!sion o( the C that respondent (iled its petition (or revie in the C ithin the to/

&ear prescriptive period provided in Section 22* o( the NIC is correct. Its %asis, hoever, is

not.

he r!le is that the to/&ear prescriptive period is rec6oned (rom the (ilin' o( the (inal ad5!sted

ret!rn.24

>!t ho sho!ld the to/&ear prescriptive period %e comp!tedH

s alread& !oted, rticle 1 o( the Civil Code provides that hen the la spea6s o( a &ear, it is

!nderstood to %e e!ivalent to -+ da&s. In*ational Marketing Corporation ". #ecson'2+er!led that a &ear is e!ivalent to -+ da&s re'ardless o( hether it is a re'!lar &ear or a leap

&ear.2-

;oever, in 1*97, EO272*2 or the dministrative Code o( 1*97 as enacted. Section 1,

Chapter III, >oo6 I thereo( provides

Sec. 1.+egal Periods. "Ye%r@ %'' be ()*ertoo* to be t3e'6e c%'e)*%r o)t

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>oth rticle 1 o( the Civil Code and Section 1, Chapter III, >oo6 I o( the dministrative

Code o( 1*97 deal ith the same s!%5ect matter the comp!tation o( le'al periods. Bnder the

Civil Code, a &ear is e!ivalentto -+ da&s hether it %e a re'!lar &ear or a leap &ear. Bnder thedministrative Code o( 1*97, hoever, a &ear is composed o( 12 calendar months. Needless to

state, !nder the dministrative Code o( 1*97, the n!m%er o( da&s is irrelevant.

here o%vio!sl& e)ists a mani(est incompati%ilit& in the manner o( comp!tin' le'al periods

!nder the Civil Code and the dministrative Code o( 1*97. $or this reason, e hold that Section1, Chapter III, >oo6 I o( the dministrative Code o( 1*97, %ein' the more recent la, 'overns

the comp!tation o( le'al periods.+e$ posteriori derogat priori.

ppl&in' Section 1, Chapter III, >oo6 I o( the dministrative Code o( 1*97 to this case, theto/&ear prescriptive period "rec6oned (rom the time respondent (iled its (inal ad5!sted ret!rn4

on pril 14, 1**9# consisted o( 24 calendar months, comp!ted as (ollos

Ye%r 1 1st calendar

month

pril 1+, 1**9 to Ma& 14, 1**9

2nd calendar month

Ma& 1+, 1**9 to =!ne 14, 1**9

rd calendar

month

=!ne 1+, 1**9 to =!l& 14, 1**9

4th calendar

month

=!l& 1+, 1**9 to !'!st 14, 1**9

+th calendar month

!'!st 1+, 1**9 to Septem%er 14,1**9

-th calendar

month

Septem%er 1+,

1**9

to Octo%er 14, 1**9

7th calendar

month

Octo%er 1+, 1**9 to Novem%er 14,

1**9

9th calendar month

Novem%er 1+,1**9

to Decem%er 14,1**9

*th calendar

month

Decem%er 1+,

1**9

to =an!ar& 14, 1***

10th calendar month =an!ar& 1+, 1*** to $e%r!ar& 14, 1***

11th calendar month

$e%r!ar& 1+, 1*** to March 14, 1***

12th calendar

month

March 1+, 1*** to pril 14, 1***

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Ye%r 2 1th calendar

month

pril 1+, 1*** to Ma& 14, 1***

14th calendar

month

Ma& 1+, 1*** to =!ne 14, 1***

1+th calendar month

=!ne 1+, 1*** to =!l& 14, 1***

1-th calendar

month

=!l& 1+, 1*** to !'!st 14, 1***

17th calendar

month

!'!st 1+, 1*** to Septem%er 14,

1***

19th calendar

month

Septem%er 1+,

1***

to Octo%er 14, 1***

1*th calendar

month

Octo%er 1+, 1*** to Novem%er 14,

1***

20th calendar

month

Novem%er 1+,

1***

to Decem%er 14,

1***

21st calendar

month

Decem%er 1+,

1***

to =an!ar& 14, 2000

22nd calendar

month

=an!ar& 1+, 2000 to $e%r!ar& 14, 2000

2rd calendar month

$e%r!ar& 1+, 2000 to March 14, 2000

24th calendar

month

March 1+, 2000 to pril 14, 2000

e there(ore hold that respondentJs petition "(iled on pril 14, 2000# as (iled on the last da& o(

the 24th calendar month (rom the da& respondent (iled its (inal ad5!sted ret!rn. ;ence, it as

(iled ithin the re'lementar& period.

ccordin'l&, the petition is here%& DENIED. he case is REMANDEDto the Co!rt o( a)ppeals hich is ordered to e)peditio!sl& proceed to hear C... Case No. -11 entitled

Primeto)n Property Group' !nc. ". Commissioner of !nternal Re"enue and Arturo -. Parcero.

No costs.

SO ODEED.

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G.R. No. L-29485 November 21, 1980

COMMISSIONER OF INTERNAL REVENE, petitioner,

vs.A!ALA SECRITIES COR"ORATION #$% T&E &ONORA'LE CORT OF TA(

A""EALS, respondents.

TEE&AN)EE, J.:

Before the Court is petitioner Commissioner of Internal Revenue's motion forreconsideration of the Court's decision of April 8, 1976 herein the Court affirmed in totothe appealed decision of respondent Court of !a" Appeals, the dispositive portion of

hich provides as follos#

$%&R&(R&, the decision of the respondent Commissioner of InternalRevenue assessin) petitioner the amount of *7+8,687.- as +/ surta"and interest is reversed. Accordin)l0, said assessment of respondent for19++ is here0 cancelled and declared of no force and effect, $ithoutpronouncement as to costs.

!his Court's decision under reconsideration held that the assessment made oneruar0 1, 1961 0 petitioner a)ainst respondent corporation 2and received 0 thelatter on 3arch , 19614 in the sum of *7+8,687.- on its surplus of *,7+8,--.57 for

its fiscal 0ear endin) eptemer 5, 19++ fell under the five0ear prescriptive periodprovided in section 551 of the ational Internal Revenue Code and that the assessmenthad, therefore, een made after the e"piration of the said five0ear prescriptive periodand as of no indin) force and effect .

*etitioner has ur)ed that

A perusal of ections 551 and 552a4 ill reveal that the0 refer to a ta",the asis of hich is reuired 0 la to e reported in a return such as fore"ample, income ta" or sales ta". %oever, the surta" imposed 0 ection+ of the !a" Code is not one such ta". Accumulated surplus are never

returned for ta" purposes, as there is no la reuirin) that such surplus ereported in a return for purposes of the +/ surta". In fact, ta"pa0ersresort to all means and devices to cover up the fact that the0 haveunreasonal0 accumulated surplus.

*etitioner, therefore, sumits that

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As there is no la reuirin) ta"pa0ers to file returns of their accumulatedsurplus, it is ovious that neither ection 55 nor ection 552a4 of the !a"Code applies in a case involvin) the +/ surta" imposed 0 ection + ofthe !a" Code. ...

*etitioner cites the Court of !a" Appeals' rulin) in the earlier case of United Equipment& Supply Company vs. Commissioner of Internal Revenue 2C!A Case o. 179+,(ctoer 5, 19714 hich as appealed 0 petitioner ta"pa0er to this Court in :. R. o.;5+6+5 earin) the same title, hich appeal as denied 0 this Court en anc for lac>

B!T!AN SA:MILL, INC.,petitioner,

vs.

;ON. CO!RT OF TA A""EALS, ET AL.,respondents.

a"id G. *itafan for t(e petitioner./ffice of t(e Solicitor General for t(e respondents.

REYES, .B.L., J.:

ppeal (rom a decision o( the Co!rt o( a) ppeals, in its C Case No. *-+, orderin' petitioner

herein, >!t!an Samill, Inc., to pa& respondent Commissioner o( Internal even!e the s!m o(-,107.74 as de(icienc& sales ta) and s!rchar'e d!e on its sales o( lo's to %!&ers in =apan (rom

=an!ar& 1, 1*+1 to =!ne 9, 1*+.

he (acts, as (o!nd and stated %& the loer co!rt in its decision, are in (!ll accord ith the

evidences presented thereinF hence, e !ote them here!nder

. . . that d!rin' the period (rom =an!ar& 1, 1*+1 to =!ne 9, 1*+, it sold lo's to =apanese

(irms at prices $O> essel Ma'allanes, '!san "in some cases $O> essel, Nasipit, also

in '!san#F that the $O> prices incl!ded costs o( loadin', har(a'e stevedorin' and

other costs in the hilippinesF that the !alit&, !antit& and meas!rement speci(ications o(the lo's ere certi(ied %& the >!rea! o( $orestr&F that the (rei'ht as paid %& the

=apanese %!&ersF and the pa&ments o( the lo's ere e((ected %& means o( irrevoca%le

letters o( credit in (avor o( petitioner and pa&a%le thro!'h the hilippine National >an6 or

an& other %an6 named %& it.

Bpon investi'ation %& the >!rea! o( Internal even!e, it as ascertained that no sales ta)

ret!rn as (iled %& the petitioner and neither did it pa& the correspondin' ta) on the sales.

On the %asis o( a'ent ntonio MoleJs report dated Septem%er 17, 1*+7, respondent, on!'!st 27, 1*+9, determined a'ainst petitioner the s!m o( 40,004.01 representin' sales

ta), s!rchar'e and compromise penalt& on its sales ?ta), s!rchar'e and compromise

penalt& on its sales@ o( lo's (rom =an!ar& 1*+1 to =!ne 1*+ p!rs!ant to Sections 19,19- and 20* o( the National Internal even!e Code "E)hi%it

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s!%5ect to sales ta) !nder the provision o( section 19- o( the a) Code, as amended %& ep!%lic

cts Nos. ++9 and +*4F and that the assessment thereo( as made ell ithin the ten/&ear period

prescri%ed %& Section 2"a# o( the same Code, since petitioner herein omitted to (ile its sales ta)ret!rns (or the &ears 1*+1, 1*+2 and 1*+, and this omission as discovered onl& on Septem%er

17, 1*+7. he imposition o( the compromise penalt& as, hoever, eliminated there(rom (or

ant o( a'reement %eteen the ta)pa&er and the Collector "no Commissioner# o( Internaleven!e. motion to reconsider said decision havin' %een denied, petitioner herein interposed

the present appeal %e(ore this Co!rt.

he iss!es presented in this appeal are hether or not petitioner herein is lia%le to pa& the +

sales ta) as then prescri%ed %& Section 19- o( the a) Code on its sales o( lo's to the =apanese%!&ersF and hether or not the assessment thereo( as made ithin the prescriptive period

provided %& la there(or.,0)p(1,.23t

On the (irst iss!e, petitioner herein insists that the circ!mstances en!merated in the a%ove

(indin', hich this Co!rt had, in previo!s decisions "Cf. (ootnote ?1@#, considered as

determinative o( the place o( trans(er o( onership o( the lo's sold, (or p!rposes o( ta)ation, arenot in themselves evidentiar& indications to sho that the parties intended the title o( the lo's to

pass to the =apanese %!&ers in =apan. h!s, it points o!t that the < (eat!re o( the salescontract as made onl& to (i) its price and not to (i) the place o( deliver&F that the re!irement

o( certi(ication o( !alit&, !antit&, and meas!rement speci(ications o( the lo's %& local

a!thorities as done to compl& ith local las, r!les, and re'!lations, and as not a part o( thesales arran'ementF that the pa&ment o( (rei'ht %& the =apanese %!&ers is not an !ncommon

(eat!re o( < shipmentsF and that the pa&ment o( prices %& means o( irrevoca%le letters o(

credit is %!t a common esta%lished %!siness practice to sec!re pa&ment o( the price to the seller.

It also insists that, even ass!min' that the < (eat!re o( the disp!ted sales determines thesitus o( trans(er o( onership, the same is merel& aprima faciepres!mption hich &ields to

contrar& proo( s!ch as that the lo's ere made delivera%le to the

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. he =apanese %!&ers chartered the ships that carried the lo's the& p!rchased (rom the

hilippines to =apan.

4. he =apanese %!&ers ins!red the shipment o( lo's and collected the ins!rance covera'ein case o( loss in transit.

+. he petitioner collected the p!rchase price o( ever& shipment o( lo's %& s!rrenderin'

the coverin' letter o( credit, %ill o( ladin', hich as indorsed in %lan6, tall& sheet,

invoice and e)port entr&, to the correspondin' %an6 in Manila o( the =apanese a'ent %an6ith hom the =apanese %!&ers opened letters o( credit.

-. In case o( nat!ral de(ects in lo's shipped to the %!&ers discovered in =apan, instead o(

ret!rnin' s!ch de(ective lo's, accepted them, %!t ere 'ranted a correspondin' credit

%ased on the contract price.

7. he lo's p!rchased %& the =apanese %!&ers ere meas!red %& a representative o( the

Director o( $orestr& and s!ch meas!rement as (inal, there%& ma6in' the overnment o(the hilippines a sort o( a'ent o( the =apanese %!&ers.

Bpon the (ore'oin' (acts and a!thorit& o(Bislig 4Bay5 +um6er Co.' !nc. "s. Collector of !nternal

Re"enue, .. No. :/119- "=an!ar& 29, 1*-1#,Misamis +um6er Co.' !nc. "s. Collector of!nternal Re"enue "+- O((. aA. +17# and7estern Mindanao +um6er e"elopment Co.' !nc. "s.

Court of #a$ Appeals' et al. ".. No. :/11710, =!ne 0, 1*+9#, it is clear that said e)port sales

had %een cons!mmated in the hilippines and ere, accordin'l&, s!%5ect to sales ta) therein.!t, i( e)cept (or the (orm o( the %ill o( ladin', the onershipo!ld have passed to the %!&er on shipment o( the 'oods, the sellersJs propert& in the

'oods shall %e deemed to %e onl& (or the p!rpose o( sec!rin' per(ormance %& the %!&er o(

his o%li'ations !nder the contract.

Moreover, it has %een

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*771, Ma& 21, 1*+7, cited in SancheA vs. Commissioner o( C!stoms, .. No. :/9++-,

Septem%er 0, 1*+7#F and it havin' %een (o!nd that there is no proo( to s!%stantiate the

(ore'oin' contention o( petitioner, the same sho!ld also %e r!led as devoid o( merit.

On the second iss!e, petitioner avers that the (ilin' o( its income ta) ret!rns, herein the

proceeds o( the disp!ted sales ere declared, is s!%stantial compliance ith the re!irement o((ilin' a sales ta) ret!rn, and, i( there sho!ld %e deemed a ret!rn (iled, Section 1, and not

Section 2"a#, o( the a) Code providin' (or a (ive/&ear prescriptive period ithin hich toma6e an assessment and collection o( the ta) in !estion (rom the time the ret!rn as deemed

(iled, sho!ld %e applied to the case at %ar. Since petitioner (iled its income ta) ret!rns (or the

&ears 1*+1, 1*+2 and 1*+, and the assessment as made in 1*+7 onl&, it (!rther contends thatthe assessment o( the sales ta) correspondin' to the &ears 1*+1 and 1*+2 has alread& prescri%ed

(or havin' %een made o!tside the (ive/&ear period prescri%ed in Section 1 o( the a) Code and

sho!ld, there(ore, %e ded!cted (rom the assessment o( the de(icienc& sales ta) made %&respondent.

he a%ove contention has alread& %een raised and re5ected as not meritorio!s in a previo!s casedecided %& this Co!rt. h!s, e held that an income ta) ret!rn cannot %e considered as a ret!rn

(or compensatin' ta) (or p!rposes o( comp!tin' the period o( prescription !nder Section 1 o(the a) Code, and that the ta)pa&er m!st (ile a ret!rn (or the partic!lar ta) re!ired %& la in

order to avail himsel( o( the %ene(its o( Section 1 o( the a) CodeF otherise, i( he does not

(ile a ret!rn, an assessment ma& %e made ithin the time stated in Section 2"a# o( the sameCode ">isa&a :and ransportation Co., Inc. vs. Collector o( Internal even!e Collector o(

Internal even!e vs. >isa&a :and ransportation Co., Inc., .. Nos. :/12100 :/11912, Ma&

2*, 1*+*#. he principle en!nciated in this last cited case is applica%le %& analo'& to the case at

%ar.

It %ein' !ndisp!ted that petitioner (ailed to (ile a ret!rn (or the disp!ted sales correspondin' tothe &ears 1*+1, 1*+2 and 1*+, and this omission as discovered onl& on Septem%er 17, 1*+7,

and that !nder Section 2"a# o( the a) Code assessment thereo( ma& %e made ithin ten "10#&ears (rom and a(ter the discover& o( the omission to (ile the ret!rn, it is evident that the loer

co!rt correctl& held that the assessment and collection o( the sales ta) in !estion has not &et

prescri%ed.

here(ore, the decision appealed (rom sho!ld %e, as it is here%& a((irmed, ith costs a'ainstpetitioner.

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G.R. No. L

T;E COMMISSIONER OF INTERNAL REEN!E,petitioner,

vs.

";OENI ASS!RANCE CO., LTD.,respondent.

/////////////////////////////

G.R. No. L

";OENI ASS!RANCE, CO., LTD.,petitioner,

vs.

COMMISSIONER OF INTERNAL REEN!E,respondent.

/ffice of t(e Solicitor General for petitioner&respondent Commissioner of !nternal Re"enue.

Sycip' Sala8ar' +una 9 Associates and A. S. Mon8on' B. -. A6ela 9 J. M. Castillo forrespondent&petitioner P(oeni$ Assurance Co.' +td.

BENG?ON, ."., J.:

$rom a 5!d'ment o( the Co!rt o( a) ppeals in C... Cases Nos. 0+ and +4, consolidatedand 5ointl& heard therein, these to appeals ere ta6en. Since the& involve the same (acts and

interrelated iss!es, the appeals are herein decided to'ether.

hoeni) ss!rance Co., :td., a (orei'n ins!rance corporation or'aniAed !nder the las o( reat

>ritain, is licensed to do %!siness in the hilippines ith head o((ice in :ondon. hro!'h its

head o((ice, it entered in :ondon into orldide reins!rance treaties ith vario!s (orei'nins!rance companies. It a'ree to cede a portion o( premi!ms received on ori'inal ins!rances

!nderritten %& its head o((ice, s!%sidiaries, and %ranch o((ices thro!'ho!t the orld, inconsideration (or ass!mption %& the (orei'n ins!rance companies o( an e!ivalent portion o( the

lia%ilit& (rom s!ch ori'inal ins!rances.,0)p(1,.23t

!rs!ant to s!ch reins!rance treaties, hoeni) ss!rance Co., :td., ceded portions o( the

premi!ms it earned (rom its !nderritin' %!siness in the hilippines, as (ollos

Ye%r Ao()t Ce*e*

1*+2 1-,+2-.7+

1*+ 24-,092.04

1*+4 20,94.-*

!pon hich the Commissioner o( Internal even!e, %& letter o( Ma& -, 1*+9, assessed the

(olloin' ithholdin' ta)

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Ye%r :&to'*&)+ T%-

1*+2 7+,*--.42

1*+ +*,0+*.-9

1*+4 49,912.2

otal 19,99.42PPPPPPPPPPPPP

On pril 1, 1*+1, hoeni) ss!rance Co., :td. (iled its hilippine income ta) ret!rn (or 1*+0,claimin' therein, amon' others, a ded!ction o( 7,147.04 as net addition to marine ins!rance

reserve e!ivalent to 40 o( the 'ross marine ins!rance premi!ms received d!rin' the &ear. he

Commissioner o( Internal even!e disalloed 11,772.+7 o( s!ch claim (or ded!ction ands!%se!entl& assessed a'ainst hoeni) ss!rance Co., :td. the s!m o( 1,994.00 as de(icienc&

income ta). he disalloance res!lted (rom the (i)in' %& the Commissioner o( the net addition

to the marine ins!rance reserve at 100 o( the marine ins!rance premi!ms received d!rin' thelast three months o( the &ear. he Commissioner ass!med that

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e)penses alloca%le to its hilippine %!siness, comp!ted at + o( its 'ross hilippine income. It

also e)cl!ded (rom its 'ross income the amo!nt o( 20,94.-* representin' reins!rance

premi!ms ceded to (orei'n reins!rers not doin' %!siness in the hilippines.

On !'!st 1, 1*+9 the >!rea! o( Internal even!e released the (olloin' assessment (or

de(icienc& income ta) (or the &ears 1*+2 and 1*+4 a'ainst hoeni) ss!rance Co., :td.

1*+2

Net income per a!dited ret!rn 12,+11.-1

Bnalloa%le ded!ction additional income

Overclaimed ;ead O((ice e)penses

mo!nt claimed . . . . . . . . . .

. . +,*12.2+

mo!nt alloed . . . . . . . . . .. . 20,09+.*0 1+,92-.+

Net income per investi'ation 29,7.*-

a) d!e thereon +,--7.00PPPPPPPPPPP

1*+4

Net income per a!dited 1-0,20.21

Bnalloa%le ded!ction additional income

Overclaimed ;ead O((ice e)penses

mo!nt claimed . . . . . . . . . .

. .2*,-24.7

mo!nt alloed . . . . . . . . . .. .

1*,4++.+0 10,1-.2

Net income per investi'ation 170,49*.41

a) d!e thereon *,77.00

:ess amo!nt alread& assessed -,9*0.00

DE$ICIENCL G DBE 2,947.00

PPPPPPPPPPP

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he a%ove assessment res!lted (rom the disalloance o( a portion o( the ded!ction claimed %&

hoeni) ss!rance Co., :td. as head o((ice e)penses alloca%le to its %!siness in the hilippines

(i)ed %& the Commissioner at + o( the net hilippine income instead o( + o( the 'rosshilippine income as claimed in the ret!rns.

hoeni) ss!rance Co., :td. protested a'ainst the a(oresaid assessments (or ithholdin' ta) andde(icienc& income ta). ;oever, the Commissioner o( Internal even!e denied s!ch protest.

S!%se!entl&, hoeni) ss!rance Co., :td. appealed to the Co!rt o( a) ppeals. In a decisiondated $e%r!ar& 14, 1*-2, the Co!rt o( a) ppeals alloed in (!ll the decision claimed %&

hoeni) ss!rance Co., :td. (or 1*+0 as net addition to marine ins!rance reserveF determined the

alloa%le head o((ice e)penses alloca%le to hilippine %!siness to %e + o( the net income in thehilippinesF declared the ri'ht o( the Commissioner o( Internal even!e to assess de(icienc&

income ta) (or 1*+2 to have prescri%edF a%solved hoeni) ss!rance Co., :td. (rom pa&ment o(

the stat!tor& penalties (or non/(ilin' o( ithholdin' ta) ret!rnF and, rendered the (olloin'5!d'ment

;EE$OE, petitioner hoeni) ss!rance Compan&, :td. is here%& ordered to pa& theCommissioner o( Internal even!e the respective amo!nts o( 7+,*--.42, +*,0+*.-9

and 49,912.2, as ithholdin' ta) (or the &ears 1*+2, 1*+ and 1*+4, and 2,947.00 asincome ta) (or 1*+4, or the total s!m o( 19-,-9+.42 ithin thirt& "0# da&s (rom the

date this decision %ecomes (inal. Bpon the other hand, the respondent Commissioner is

ordered to re(!nd to petitioner the s!m o( 20,190.00 as overpaid income ta) (or 1*+,hich s!m is to %e ded!cted (rom the total s!m o( 19-,-9+.42 d!e as ta)es.

I( an& amo!nt o( the ta) is not paid ithin the time prescri%ed a%ove, there shall %e

collected a s!rchar'e o( + o( the ta) !npaid, pl!s interest at the rate o( 1 a month (rom

the date o( delin!enc& to the date o( pa&ment, provided that the ma)im!m amo!nt that

ma& %e collected as interest shall not e)ceed the amo!nt correspondin' to a period o(three "# &ears. itho!t prono!ncement as to costs.

hoeni) ss!rance Co., :td. and the Commissioner o( Internal even!e have appealed to this

Co!rt raisin' the (olloin' iss!es "1# hether or not reins!rance premi!ms ceded to (orei'nreins!rers not doin' %!siness in the hilippines p!rs!ant to reins!rance contracts e)ec!ted

a%road are s!%5ect to ithholdin' ta)F "2# hether or not the ri'ht o( the Commissioner o(

Internal even!e to assess de(icienc& income ta) (or the &ear 1*+2 a'ainst hoeni) ss!ranceCo., :td., has prescri%edF "# hether or not the ded!ction o( claimed %& the hoeni) ss!rance

Co., :td.as net addition to reserve (or the &ear 1*+0 is e)cessiveF "4# hether or not the

ded!ctions claimed %& hoeni) ss!rance Co., :td. (or head o((ice e)penses alloca%le to

hilippine %!siness (or the &ears 1*+2, 1*+ and 1*+4 are e)cessive.

he !estion o( hether or not reins!rance premi!ms ceded to (orei'n reins!rers not doin'

%!siness in the hilippines p!rs!ant to contracts e)ec!ted a%road are income (rom so!rces ithin

the hilippines s!%5ect to ithholdin' ta) !nder Sections + and +4 o( the a) Code has alread&%een resolved in the a((irmative inBritis( #raders: !nsurance Co.' +td.". Commisioner of!nternal Re"enue, :/20+01, pril 0, 1*-+.1

8/9/2019 Tax CASE 2

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e come to the iss!e o( prescription. hoeni) ss!rance Co., :td. (iled its income ta) ret!rn (or

1*+2 on pril 1, 1*+ shoin' a loss o( 1**,+9.*. It amended said ret!rn on !'!st 0, 1*++

reportin' a ta) lia%ilit& o( 2,+02.00. On =!l& 24, 1*+9, a(ter e)amination o( the amended ret!rn,the Commissioner o( Internal even!e assessed de(icienc& income ta) in the s!m o( +,--7.00.

he Co!rt o( a) ppeals (o!nd the ri'ht o( the Commissioner o( Internal even!e %arred %&

prescription, the same havin' %een e)ercised more than (ive &ears (rom the date the ori'inalret!rn as (iled. On the other hand, the Commissioner o( Internal even!e insists that his ri'ht

to iss!e the assessment has not prescri%ed inasm!ch as the same as availed o( %e(ore the +/&ear

period provided (or in Section 1 o( the a) Code e)pired, co!ntin' the r!nnin' o( the period(rom !'!st 0, 1*++, the date hen the amended ret!rn as (iled.

Section 1 o( the a) Code, hich limits the ri'ht o( the Commissioner o( Internal even!e to

assess income ta) ithin (ive &ears (rom the $ilipino o( the income ta) ret!rn, states

SEC. 1.Period of limitation upon assessment and collection. E)cept as provided in

the s!cceedin' section internal reven!e ta)es shall %e assessed ithin (ive &ears a(ter the

ret!rn as (iled, and no proceedin' in co!rt itho!t assessment (or the collection o( s!chta)es shall %e %e'!n a(ter the e)piration o( s!ch period. $or the p!rposes o( this section, a

ret!rn (iled %e(ore the last da& prescri%ed %& la (or the (ilin' thereo( shall %e consideredas (iled on s!ch last da&Pro"ided, hat this limitation shall not appl& to cases alread&

investi'ated prior to the approval o( this Code.

he !estion is Sho!ld the r!nnin' o( the prescriptive period commence (rom the (ilin' o( the

ori'inal or amended ret!rnH

he Co!rt o( a) ppears that the ori'inal ret!rn as a complete ret!rn containin'

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s!%stantiall& modi(&in' the ori'inal ret!rn. $!rthermore, altho!'h the ded!ction (or head o((ice

e)penses alloca%le to hilippine %!siness, hose disalloance 'ave rise to the de(icienc& ta),

as claimed also in the ori'inal ret!rn, the Commissioner co!ld not have possi%l& determined ade(icienc& ta) there!nder %eca!se hoeni) ss!rance Co., :td. declared a loss o( 1**,+9.*

therein hich o!ld have more than o((set s!ch disalloance o( 1+,92-.+. Considerin' that

the de(icienc& assessment as %ased on the amended ret!rn hich, as a(orestated, iss!%stantiall& di((erent (rom the ori'inal ret!rn, the period o( limitation o( the ri'ht to iss!e the

same sho!ld %e co!nted (rom the (ilin' o( the amended income ta) ret!rn. $rom !'!st 0,

1*++, hen the amended ret!rn as (iled, to =!l& 24, 1*+9, hen the de(icienc& assessment asiss!ed, less than (ive &ears elapsed. he ri'ht o( the Commissioner to assess the de(icienc& ta)

on s!ch amended ret!rn has not prescri%ed.

o stren'then o!r opinion, e %elieve that to hold otherise, e o!ld %e pavin' the a& (or

ta)pa&ers to evade the pa&ment o( ta)es %& simpl& reportin' in their ori'inal ret!rn heav& lossesand amendin' the same more than (ive &ears later hen the Commissioner o( Internal even!e

has lost his a!thorit& to assess the proper ta) there!nder. he o%5ect o( the a) Code is to impose

ta)es (or the needs o( the overnment, not to enhance ta) avoidance to its pre5!dice.

e ne)t consider hoeni) ss!rance Co., :td.Js claim (or ded!ction o( 7,147.04 (or 1*+0representin' net addition to reserve comp!ted at 40 o( the marine ins!rance premi!ms received

d!rin' the &ear. reatin' said said ded!ction to %e e)cessive, the Commissioner o( Internal

even!e red!ced the same to 2+,74.47 hich is e!ivalent to 100 o( all marine ins!rancepremi!ms received d!rin' the last months o( the &ear.

ara'raph "a# o( Section 2 o( the a) Code states

SEC. 2. Special pro"isions regarding income and deductions of insurance companies'

)(et(er domestic or foreign. 4a5 Special deductions allo)ed to insurance companies. In the case o( ins!rance companies, e)cept domestic li(e ins!rance companies and(orei'n li(e ins!rance companies doin' %!siness in the hilippines, the net additions, i(

an&, re!ired %& la to %e made ithin the &ear to reserve (!nds and the s!ms other than

dividends paid ithin the &ear on polic& and ann!it& contracts ma& %e ded!cted (romtheir 'ross income rovided, hoever, hat the released reserve %e treated as income (or

the &ear o( release.

Section 19- o( the Ins!rance :a re!ires the settin' !p o( reserves (or lia%ilit& on marine

ins!rance

SEC. 19-. ...Pro"ided, hat (or marine ris6s the ins!rin' compan& shall %e re!ired tochar'e as the lia%ilit& (or reins!rancefifty per centum of t(e premiums )ritten in t(e

policies upon yearly risks, and thefull premiumsritten in the policies upon all ot(er

marine risks not terminated"Emphasis s!pplied.#

he reserve re!ired (or marine ins!rance is determined on to %ases +0 o( premi!ms !nder

policies on &earl& ris6s and 100 o( premi!ms !nder policies o( marine ris6s not terminated

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d!rin' the &ear. Section 2 "a# o( the a) Code !oted a%ove allos the (!ll amo!nt o( s!ch

reserve to %e ded!cted (rom 'ross income.

It ma& %e noteorth& to o%serve that the (orm!las (or determinin' the marine reserve emplo&ed%& hoeni) ss!rance Co., :td. and the Commissioner o( Internal even!e 40 o( premi!ms

received d!rin' the &ear and 100 o( premi!ms received d!rin' the last three months o( the&ear, respectivel& do not compl& ith Section 19-. Said determination r!ns short o( the

re!irement. $or p!rposes o( the Ins!rance :a, this Co!rt there(ore cannot co!ntenance thesame. he reserve called (or in Section 19- is a sa(e'!ard to the 'eneral p!%lic and sho!ld %e

strictl& (olloed not onl& %eca!se it is an e)press provision %!t also as a matter o( p!%lic polic&.

;oever, (or income ta) p!rposes a ta)pa&er is (ree to ded!ct (rom its 'ross income a lesseramo!nt, or not to claim an& ded!ction at all. hat is prohi%ited %& the income ta) la is to claim

a ded!ction %e&ond the amo!nt a!thoriAed therein.

hoeni) ss!rance Co., :td.Js claim (or ded!ction o( 7,147.04 %ein' less than the amo!nt

re!ired in Section 19- o( the Ins!rance :a, the same cannot %e and is not e)cessive, and

sho!ld there(ore %e (!ll& alloed.

Q

e come no to the controvers& on the ta)pa&erJs claim (or ded!ction on head o((ice e)penses

inc!rred d!rin' 1*+2, 1*+, and 1*+4 alloca%le to its hilippine %!siness comp!ted at + o( its

gross incomein the hilippines he Commissioner o( Internal even!e redetermined s!chded!ction at + on hoeni) ss!rance Co., :tdJs net incomethere%& partiall& disalloin' the

latterJs claim. he parties are a'reed as to the percenta'e + %!t di((er as to the %asis o(

comp!tation. hoeni) ss!rance Co. :t. insists that the + head o((ice e)penses %e determined(rom thegross income, hile the Commissioner ants the comp!tation to %e made on the net

income. hat, there(ore, needs to %e resolved is Sho!ld the + %e comp!ted on the 'ross or net

incomeH

he record shos that the 'ross income o( hoeni) ss!rance Co., :td. consists o( income (romits hilippine %!siness as ell as reins!rance premi!ms received (or its head o((ice in :ondon

and reins!rance premi!ms ceded to (orei'n reins!rance. Since the items o( income not %elon'in'

to its hilippine %!siness are not ta)a%le to its hilippine %ranch, the& sho!ld %e e)cl!ded indeterminin' the head o((ice e)penses alloa%le to said hilippine %ranch. his concl!sion (inds

s!pport in para'raph 2, s!%section "a#, Section 0 o( the a) Code, !oted here!nder

"2#%$penses allo)a6le to non&resident alien indi"iduals and foreign corporations. In the

case o( a non/resident alien individ!al or a (orei'n corporation, the e)penses ded!cti%leare the, necessar& e)penses paid or inc!rred in carr&in' on an& %!siness or trade

cond!cted )it(in t(e P(ilippinese)cl!sivel&. "Emphasis s!pplied.#

Conse!entl&, the de(icienc& assessments (or 1*+2, 1*+ and 1*+4, res!ltin' (rom partial

disalloance o( ded!ction representin' head o((ice e)penses, are s!stained.

$inall&, the Commissioner o( Internal even!e assails the dispositive portion o( the a) Co!rtJs

decision limitin' the ma)im!m amo!nt o( interest collecti%le (or deli!enc& o( an amo!nt

correspondin' to a period o( three &ears. ;e contends that since s!ch limitation as incorporated

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into Section +1 o( the a) Code %& ep!%lic ct 24 hich too6 e((ect onl& on =!ne 20, 1*+*,

it m!st not %e applied retroactivel& on ithholdin' ta) (or the &ears 1*+2, 1*+ and 1*+4.

he imposition o( interest on !npaid ta)es is one o( the stat!tor& penalties (or ta) delin!enc&,(rom the pa&ments o( hich the Co!rt o( a) ppeals a%solved the hoeni) ss!rance Co., :td.

on the e!ita%le 'ro!nd that the latterJs (ail!re to pa& the ithholdin' ta) as d!e to theCommissionerJs opinion that no ithholdin' ta) as d!e. Conse!entl&, the ta)pa&er co!ld %e

held lia%le (or the pa&ment o( stat!tor& penalties onl& !pon its (ail!re to compl& ith the a)Co!rtJs 5!d'ment rendered on $e%r!ar& 14. 1*-2, a(ter ep!%lic ct 24 too6 e((ect. his part

o( the r!lin' o( the loer co!rt o!'ht not to %e dist!r%ed.

;EE$OE, the decision appealed (rom is modi(ied, hoeni) ss!rance Co., :td. is here%&ordered to pa& the Commissioner, o( Internal even!e the amo!nt o( 7+,*--.42, +*,0+*.-9

and 49,912.2 as ithholdin' ta) (or the &ears 1*+2, 1*+ and 1*+4, respectivel&, and the s!ms

o( +,--7.00 and 2,947.00 as income ta) (or 1*+2 and 1*+4 or a total o( 1*2,+2.42. he

Commissioner o( Internal even!e is ordered to re(!nd to hoeni) ss!rance Co., :td. the

amo!nt o( 20,190.00 as overpaid income ta) (or 1*+, hich sho!ld %e ded!cted (rom theamo!nt o( 1*2,+2.42.

I( the amo!nt o( 1*2,+2.42 or a portion thereo( is not paid ithin thirt& "0# da&s (rom the date

this 5!d'ment %ecomes (inal, there sho!ld %e collected a s!rchar'e and interest as provided (or inSection +1"c# "2# o( the a) Code. No costs. It is so ordered.

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G.R. No. L>

COMMISSIONER OF INTERNAL REEN!E,petitioner,

vs.

LILIA Y!SAY GON?ALES %)* T;E CO!RT OF TA A""EALS,respondents.

/ffice of t(e Solicitor General for t(e petitioner.Ramon A. Gon8ales for respondent +ilia ;usay Gon8ales.

BENG?ON, ."., J.:

Matias L!sa&, a resident o( ototan, Iloilo, died intestate on Ma& 1, 1*49, leavin' to heirs,

namel&, =ose S. L!sa&, a le'itimate child, and :ilia L!sa& onAales, an ac6noled'ed nat!ralchild. Intestate proceedin's (or the settlement o( his estate ere instit!ted in the Co!rt o( $irst

Instance o( Iloilo "Special roceedin's No. 4+*#. =ose S. L!sa& as therein appointed

administrator.

On Ma& 11, 1*4* =ose S. L!sa& (iled ith the >!rea! o( Internal even!e an estate andinheritance ta) ret!rn declarin' therein the (olloin' properties

*ersonal properties

*ala0Caraaos

*6,---.1,. *7,---.

Real properties#

Capital, 7- parcels 4

ConDu)al 19 parcels4assessedat *179,76.

!otal )ross estate *187,-.

he ret!rn mentioned no heir.

Bpon investi'ation hoever the >!rea! o( Internal even!e (o!nd the (olloin' properties

*ersonal properties#

*ala0Caraaos*ac

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Capital, + parcelsassessed at

1H of ConDu)al, 15parcels assessed at *11,-+. *9,1-.5

!otal *19,+8-.5

he (air mar6et val!e o( the real properties as comp!ted %& increasin' the assessed val!e %&

(ort& percent.

>ased on the a%ove (indin's, the >!rea! o( Internal even!e assessed on Octo%er 2*, 1*+estate and inheritance ta)es in the s!ms o( -,94*.79 and 1-,*70.-, respectivel&.

On =an!ar& 2+, 1*++ the >!rea! o( Internal even!e increased the assessment to 9,22+.9* as

estate ta) and 22,117.10 as inheritance ta) pl!s delin!enc& interest and demanded pa&ment

thereo( on or %e(ore $e%r!ar& 29, 1*++. Meanhile, on $e%r!ar& 1-, 1*++, the Co!rt o( $irstInstance o( Iloilo re!ired =ose S. L!sa& to sho proo( o( pa&ment o( said estate and inheritance

ta)es.

On March , 1*++ =ose S. L!sa& re!ested an e)tension o( time ithin hich to pa& the ta). ;eposted a s!ret& %ond to '!arantee pa&ment o( the ta)es in !estion ithin one &ear. he

Commissioner o( Internal even!e hoever denied the re!est. hen he iss!ed a arrant o(

distraint and lev& hich he transmitted to the M!nicipal reas!rer o( ototan (or e)ec!tion. his

arrant as not en(orced %eca!se all the personal properties s!%5ect to distraint ere located inIloilo Cit&.

On Ma& 20, 1*++ the rovincial reas!rer o( Iloilo re!ested the >I rovincial even!eO((icer to (!rnish him copies o( the assessment notices to s!pport a motion (or pa&ment o( ta)eshich the rovincial $iscal o!ld (ile in Special roceedin's No. 4+* %e(ore the Co!rt o( $irst

Instance o( Iloilo. he papers re!ested ere sent %& the Commissioner o( Internal even!e to

the rovincial even!e O((icer o( Iloilo to %e transmitted to the rovincial reas!rer. he records

do not hoever sho hether the rovincial $iscal (iled a claim ith the Co!rt o( $irst Instance(or the ta)es d!e.

On Ma& 0, 1*+- the commissioner appointed %& the Co!rt o( $irst Instance (or the p!rpose,

s!%mitted a reamended pro5ect o( partition hich listed the (olloin' properties

*ersonalproperties#

Buic< edan*ac

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*ala0Caraaos 1,+.

Real properties#

;and, 17- parcelsassessed atBuildin)s

*5-,797.1 -,+. *59,97.1

!otal *5+6,699.67

More than a &ear later, partic!larl& on =!l& 12, 1*+7, an a'ent o( the >!rea! o( Internal even!eapprised the Commissioner o( Internal even!e o( the e)istence o( said reamended pro5ect o(

partition. here!pon, the Internal even!e Commissioner ca!sed the estate o( Matias L!sa& to

%e reinvesti'ated (or estate and inheritance ta) lia%ilit&. ccordin'l&, on $e%r!ar& 1, 1*+9 he

iss!ed the (olloin' assessment

&state ta" *16,-6.-

+/ surchar)e -11.9

Gelinuenc0interest 11,868.9

Compromiseo notice of death;ate pa0ment

*1+.-. ++.

!otal *8,+81.5

Inheritance !a" *58,178.1

+/ surchar)e 1,1+.86

Gelinuenc0interest 8,88.7+

Compromise for late pa0ment +.

!otal *69,1-.75

!otal estate and inheritanceta"es *97,75.96

:i6e in previo!s assessments, the (air mar6et val!e o( the real properties as arrived at %&

addin' 40 to the assessed val!e.

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In vie o( the demise o( =ose S. L!sa&, said assessment as sent to his ido, Mrs. $lorencia

iccio da. de L!sa&, ho s!cceeded him in the administration o( the estate o( Matias L!sa&.

No pa&ment havin' %een made despite repeated demands, the Commissioner o( Internal even!e(iled a proo( o( claim (or the estate and inheritance ta)es d!e and a motion (or its alloance ith

the settlement co!rt in votin' priorit& o( lien p!rs!ant to Section 1+ o( the a) Code.

On =!ne 1, 1*+*, :ilia L!sa&, thro!'h her co!nsel, amon onAales, (iled an anser to the proo(

o( claim alle'in' non/receipt o( the assessment o( $e%r!ar& 1, 1*+9, the e)istence o( toadministrators, namel& $lorencia iccio da. de L!sa& ho administered to/thirds o( the

estate, and :ilia L!sa&, ho administered the remainin' one/third, and her illin'ness to pa& the

ta)es correspondin' to her share, and pra&in' (or de(erment o( the resol!tion on the motion (orthe pa&ment o( ta)es !ntil a(ter a ne assessment correspondin' to her share as iss!ed.

On Novem%er 17, 1*+* :ilia L!sa& disp!ted the le'alit& o( the assessment dated $e%r!ar& 1,

1*+9. She claimed that the ri'ht to ma6e the same had prescri%ed inasm!ch as more than (ive

&ears had elapsed since the (ilin' o( the estate and inheritance ta) ret!rn on Ma& 11, 1*4*. Shethere(ore re!ested that the assessment %e declared invalid and itho!t (orce and e((ect. his

re!est as re5ected %& the Commissioner in his letter dates =an!ar& 20, 1*-0, received %& :ilia

L!sa& on March 14, 1*-0, (or the reasons, namel&, "1# that the ri'ht to assess the ta)es in

!estion has not %een lost %& prescription since the ret!rn hich did not name the heirs cannot %econsidered a tr!e and complete ret!rn s!((icient to start the r!nnin' o( the period o( limitations o(

(ive &ears !nder Section 1 o( the a) Code and p!rs!ant to Section 2 o( the same Code he

has ten &ears ithin hich to ma6e the assessment co!nted (rom the discover& on Septem%er 24,1*+ o( the identit& o( the heirsF and "2# that the estateJs administrator aived the de(ense o(

prescription hen he (iled a s!ret& %ond on March , 1*++ to '!arantee pa&ment o( the ta)es in

!estion and hen he re!ested postponement o( the pa&ment o( the ta)es pendin'

determination o( ho the heirs are %& the settlement co!rt.

On pril 1, 1*-0 :ilia L!sa& (iled a petition (or revie in the Co!rt o( a) ppeals assailin'

the le'alit& o( the assessment dated $e%r!ar& 1, 1*+9. (ter hearin' the parties, said Co!rt

declared the ri'ht o( the Commissioner o( Internal even!e to assess the estate and inheritanceta)es in !estion to have prescri%ed and rendered the (olloin' 5!d'ment

;EE$OE, the decision o( respondent assessin' a'ainst the estate o( the late Matias

L!sa& estate and inheritance ta)es is here%& reversed. No costs.

he Commissioner o( Internal even!e appealed to this Co!rt and raises the (olloin' iss!es

1. as the petition (or revie in the Co!rt o( a) ppeals ithin the 0/da& period provided (orin Section 11 o( ep!%lic ct 112+H

2. Co!ld the Co!rt o( a) ppeals ta6e co'niAance o( :ilia L!sa&Js appeal despite the pendenc&

o( the

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. ;as the ri'ht o( the Commissioner o( Internal even!e to assess the estate and inheritance

ta)es in !estion prescri%edH

On Novem%er 17, 1*+* :ilia L!sa& disp!ted the le'alit& o( the assessment o( $e%r!ar& 1, 1*+9.On March 14, 1*-0 she received the decision o( the Commissioner o( Internal even!e on the

disp!ted assessment. On pril 1, 1*-0 she (iled her petition (or revie in the Co!rt o( a)ppeals. Said Co!rt correctl& held that the appeal as seasona%l& interposed p!rs!ant to Section

11 o( ep!%lic ct 112+. e alread& r!led in St. Step(en:s Association ". Collector of !nternalRe"enue,1that the co!ntin' o( the thirt& da&s ithin hich to instit!te an appeal in the Co!rt o(

a) ppeals sho!ld commence (rom the date o( receipt o( the decision o( the Commissioner on

the disp!ted assessment, not (rom the date the assessment as iss!ed.

ccordin'l&, the thirt&/da& period sho!ld %e'in r!nnin' (rom March 14, 1*-0, the date :ilia

L!sa& received the appeala%le decision. $rom said date to pril 1, 1*-0, hen she (iled her

appeal in the Co!rt o( a) ppeals, is e)actl& thirt& da&s. ;ence, the appeal as timel&.

Ne)t, the Commissioner attac6s the 5!risdiction o( the Co!rt o( a) ppeals to ta6e co'niAanceo( :ilia L!sa&Js appeal on the 'ro!nd o( lis pendens. ;e maintains that the pendenc& o( his

motion (or alloance o( claim and (or order o( pa&ment o( ta)es in the Co!rt o( $irst Instance o(

Iloilo o!ld precl!de the Co!rt o( a) ppeals (rom ac!irin' 5!risdiction over :ilia L!sa&Js

appeal. his contention lac6s merit.

:ilia L!sa&Js ca!se see6s to resist the le'alit& o( the assessment in !estion. Sho!ld she maintain

it in the settlement co!rt or sho!ld she elevate her ca!se to the Co!rt o( a) ppealsH e sa&,

she acted correctl& %& appealin' to the latter co!rt. n action involvin' a disp!ted assessment (orinternal reven!e ta)es (alls ithin the e)cl!sive 5!risdiction o( the Co!rt o( a) ppeals.2It is in

that (or!m, to the e)cl!sion o( the Co!rt o( $irst Instance,here she co!ld ventilate her

de(enses a'ainst the assessment.

Moreover, the settlement co!rt, here the Commissioner o!ld ish :ilia L!sa& to contest theassessment, is o( limited 5!risdiction. nd !nder the !les,4its a!thorit& relates onl& to matters

havin' to do ith the settlement o( estates and pro%ate o( ills o( deceased persons.+Said co!rt

has no 5!risdiction to ad5!dicate the contentions in !estion, hich ass!min' the& do not

come e)cl!sivel& !nder the a) Co!rtJs co'niAance m!st %e s!%mitted to the Co!rt o( $irstInstance in the e)ercise o( its 'eneral 5!risdiction.-

e no come to the iss!e o( prescription. :ilia L!sa& claims that since the latest assessment as

iss!ed onl& on $e%r!ar& 1, 1*+9 or ei'ht &ears, nine months and to da&s (rom the (ilin' o( the

estate and inheritance ta) ret!rn, the CommissionerJs ri'ht to ma6e it has e)pired. She o!ld resther stand on Section 1 o( the a) Code hich limits the ri'ht o( the Commissioner to assess

the ta) ithin (ive &ears (rom the (ilin' o( the ret!rn.

he Commissioner claims that (ra!d attended the (ilin' o( the ret!rnF that this %ein' so, Section2"a# o( the a) Code o!ld appl&.7It ma& %e ell to note that the assessment letter itsel(

"E)hi%it 22# did not imp!te (ra!d in the ret!rn ith intent to evade pa&ment o( ta). recisel&, no

s!rchar'e (or (ra!d as imposed. In his anser to the petition (or revie (iled %& :ilia L!sa& in

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the Co!rt o( a) ppeals, the Commissioner alle'ed no (ra!d. Instead, he %roached the

ins!((icienc& o( the ret!rn as %arrin' the commencement o( the r!nnin' o( the stat!te o(

limitations. ;e raised the point o( (ra!d (or the (irst time in the proceedin's, onl& in hismemorand!m (iled ith the a) Co!rt s!%se!ent to restin' his case. Said Co!rt re5ected the

plea o( (ra!d (or lac6 o( alle'ation and proo(, and r!led that the ret!rn, altho!'h not acc!rate,

as s!((icient to start the period o( prescription.

$ra!d is a !estion o( (act.9he circ!mstances constit!tin' it m!st %e alle'ed and proved in theco!rt %elo.*nd the (indin' o( said co!rt as to its e)istence and non/e)istence is (inal !nless

clearl& shon to %e erroneo!s.10s the co!rt a

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Second, the ret!rn mentioned no heir. h!s, no inheritance ta) co!ld %e assessed. s a matter o(

la, on the %asis o( the ret!rn, there o!ld %e no occasion (or the imposition o( estate and

inheritance ta)es. hen there is no heir / the ret!rn shoed none / the intestate estate isescheated to the State.12he State ta)es not itsel(.

In a case here the ret!rn as made on the ron' (orm, the S!preme Co!rt o( the Bnited Statesheld that the (ilin' thereo( did not start the r!nnin' o( the period o( limitations.1he reason is

that the ret!rn s!%mitted did not contain the necessar& in(ormation re!ired in the correct (orm.In this 5!risdiction, hoever, the S!preme Co!rt re(rained (rom appl&in' the said r!lin' o( the

Bnited States S!preme Co!rt in Collector of !nternal Re"enue ". Central A8ucarera de #arlac, :/

117-0/-1, =!l& 1, 1*+9, on the 'ro!nd that the ret!rn as complete in itsel( altho!'h inacc!rate.o o!r mind, it o!ld not ma6e m!ch di((erence here a ret!rn is made on the correct (orm

prescri%ed %& the >!rea! o( Internal even!e i( the data therein re!ired are not s!pplied %& the

ta)pa&er. =!st the same, the necessar& in(ormation (or the assessment o( the ta) o!ld %emissin'.

he ret!rn (iled in this case as so de(icient that it prevented the Commissioner (rom comp!tin'the ta)es d!e on the estate. It as as tho!'h no ret!rn as made. he Commissioner had to

determine and assess the ta)es on data o%tained, not (rom the ret!rn, %!t (rom other so!rces. ethere(ore hold the vie that the ret!rn in !estion as no ret!rn at all as re!ired in Section *

o( the a) Code.

he la imposes !pon the ta)pa&er the %!rden o( s!ppl&in' %& the ret!rn the in(ormation !pon

hich an assessment o!ld %e %ased.14;is d!t& complied ith, the ta)pa&er is not %o!nd to doan&thin' more than to ait (or the Commissioner to assess the ta). ;oever, he is not re!ired

to ait (orever. Section 1 o( the a) Code 'ives the Commissioner (ive &ears ithin hich to

ma6e his assessment.1+E)cept, o( co!rse, i( the ta)pa&er (ailed to o%serve the la, in hich case

Section 2 o( the same Code 'rants the Commissioner a lon'er period. Non/o%servance consistsin (ilin' a (alse or (ra!d!lent ret!rn ith intent to evade the ta) or in (ilin' no ret!rn at all.

ccordin'l&, (or p!rposes o( determinin' hether or not the CommissionerJs assessment o(

$e%r!ar& 1, 1*+9 is %arred %& prescription, Section 2"a# hich is an e)ception to Section 1o( the a) Code (inds application.1-e !ote Section 2"a#

SEC. 2.%$ceptions as to period of limitation of assessment and collection of ta$es.

"a# In the case o( a (alse or (ra!d!lent ret!rn ith intent to evade ta) or o( a (ail!re to (ile

a ret!rn, the ta) ma& %e assessed, or a proceedin' in co!rt (or the collection o( s!ch ta)ma& %e %e'!n itho!t assessment, at an& time ithin ten &ears a(ter the discover& o( the

(alsit&, (ra!d or omission.

s stated, the Commissioner came to 6no o( the identit& o( the heirs on Septem%er 24, 1*+

and the h!'e !nderdeclaration in the 'ross estate on =!l& 12, 1*+7. $rom the latter date, Section*4 o( the a) Code o%li'ated him to ma6e a ret!rn or amend one alread& (iled %ased on his on

6noled'e and in(ormation o%tained thro!'h testimon& or otherise, and s!%se!entl& to assess

thereon the ta)es d!e. he r!nnin' o( the period o( limitations !nder Section 2"a# o( the a)Code sho!ld there(ore %e rec6oned (rom said date (or, as a(oresaid, it is (rom that time that the

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Commissioner as e)pected %& la to ma6e his ret!rn and assess the ta) d!e thereon. $rom =!l&

12, 1*+7 to $e%r!ar& 1, 1*+9, the date o( the assessment no in disp!te, less than ten &ears

have elapsed. ;ence, prescription did not a%ate the CommissionerJs ri'ht to iss!e saidassessment.

nent the CommissionerJs contention that :ilia L!sa& is estopped (rom raisin' the de(ense o(prescription %eca!se she (ailed to raise the same in her anser to the motion (or alloance o(

claim and (or the pa&ment o( ta)es (iled in the settlement co!rt "Co!rt o( $irst Instance o( Iloilo#,s!((ice it to state that it o!ld %e !n5!st to the ta)pa&er i( e ere to s!stain s!ch a vie. he

Co!rt o( $irst Instance actin' as a settlement co!rt is not the proper tri%!nal to pass !pon s!ch

de(ense, there(ore it o!ld %e %!t (!tile to raise it therein. Moreover, the a) Code does not %arthe ri'ht to contest the le'alit& o( the ta) a(ter a ta)pa&er pa&s it. Bnder Section 0- thereo(, he

can pa& the ta) and claim a re(!nd there(or. fortiori his illin'ness to pa& the ta) is no aiver

to raise de(enses a'ainst the ta)Js le'alit&.

;EE$OE, the 5!d'ment appealed (rom is set aside and another entered a((irmin' the

assessment o( the Commissioner o( Internal even!e dated $e%r!ar& 1, 1*+9. :ilia L!sa&onAales, as administratri) o( the intestate estate o( Matias L!sa&, is here%& ordered to pa& the

s!ms o( 1-,24-.04 and *,179.12 as estate and inheritance ta)es, respectivel&, pl!s interestand s!rchar'e (or delin!enc& in accordance ith Section 101 o( the National Internal even!e

Code, itho!t pre5!dice to reim%!rsement (rom her co/administratri), $lorencia iccio da. de

L!sa& (or the latterJs correspondin' ta) lia%ilit&. No costs. So ordered.