G.R. No. L-14522; May 31, 1961
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. MANUEL B. PINEDA as one of the heirs of the deceased ATANASIO PINEDA, respondent.

FACTS

Atanasio Pineda died on May 23, 1945. Proceedings for the settlement of his estate were commenced, with his widow, Felicisima Bagtas, appointed as administratrix until the estate was closed on June 8, 1948. Years later, an internal revenue examiner discovered that no income tax returns had been filed for the estate for the years 1945 to 1948. Based on gathered data, the examiner filed returns and issued assessment notices. Respondent Manuel B. Pineda, an heir, contested these assessments, arguing the estate’s income had been included in the widow’s personal returns. After reinvestigation, the Bureau of Internal Revenue (BIR) issued revised deficiency assessments for income taxes (1945-1947), residence tax for 1945, and real estate dealer’s fixed tax. Pineda appealed to the Court of Tax Appeals (CTA).
The CTA reversed the Collector’s decision, holding the right to collect the taxes was barred by prescription. The Collector petitioned for review, arguing the prescriptive periods had not lapsed. The core dispute centered on the applicable statutes of limitation for the assessment and collection of the various taxes given the procedural history and the nature of the filings.

ISSUE

Whether the government’s right to collect the assessed deficiency income taxes, residence tax, and real estate dealer’s fixed tax from the estate of Atanasio Pineda had prescribed.

RULING

The Supreme Court partially granted the petition. The prescriptive periods vary by tax type and circumstance. For the 1947 income tax, the right to collect prescribed. The assessment was made on October 20, 1952. Under the Tax Code, an action to collect an assessed income tax must be filed within five years from the assessment date. The Collector’s court action was initiated on March 15, 1957, which was beyond the five-year period. Thus, collection for 1947 was barred.
However, for the 1945 and 1946 income taxes, the right to collect had not prescribed. The original assessments for these years were issued on August 1, 1951. The Collector’s court action was commenced within five years from this date. The subsequent cancellation and issuance of revised assessments in 1953 did not reset the prescriptive period; the controlling date for the statute of limitations remained the date of the original, valid assessment.
For the real estate dealer’s fixed tax and the residence tax, the ten-year prescriptive period under Section 332(a) of the Tax Code applied because no returns were filed for these taxes. This period runs from the discovery of the omission to file. The government’s action was well within ten years from such discovery. Therefore, the plea of prescription for these taxes was erroneously sustained by the CTA. The case was remanded to the CTA for further proceedings on unresolved factual issues material to determining the taxpayer’s liability.