GR L 46954; (July, 1982) (Digest)
G.R. No. L-46954 July 20, 1982
ELPIDIO YABES and SEVERINO YABES, petitioners, vs. THE HON. NAPOLEON FLOJO, in his capacity as Presiding Judge of Branch II, Court of First Instance of Cagayan and THE REPUBLIC OF THE PHILIPPINES, respondents.
FACTS
The Commissioner of Internal Revenue assessed the late Doroteo Yabes for deficiency commercial broker’s taxes. The taxpayer protested, and the Commissioner agreed to hold the resolution in abeyance pending the Supreme Court’s decision in a similar test case, Commissioner of Internal Revenue vs. Constantino. The prescriptive period was extended via waivers executed by the taxpayer and later by his heirs, the petitioners. Doroteo Yabes died, and no estate proceedings were instituted. After this Court decided the Constantino case in favor of the Commissioner, the Republic filed a collection suit (Civil Case No. II-7) in the Court of First Instance (CFI) of Cagayan against the Yabes heirs. The heirs, considering the filing of the suit as the Commissioner’s final decision on their protest, filed a petition for review contesting the assessment before the Court of Tax Appeals (CTA Case No. 2216). They then moved to dismiss the CFI case, arguing it lacked jurisdiction over a contested assessment. The CFI denied the motion and subsequent reconsiderations.
ISSUE
Whether the Court of First Instance lawfully acquired jurisdiction over the tax collection case despite the assessment being contested and pending before the Court of Tax Appeals.
RULING
No. The Supreme Court granted the petition, annulled the CFI orders, and directed the suspension of proceedings in Civil Case No. II-7 pending the CTA’s final decision. The legal logic is grounded on the doctrine of primary jurisdiction and the statutory jurisdiction of the CTA. Under Section 7 of Republic Act No. 1125 , the CTA has exclusive appellate jurisdiction to review decisions of the Commissioner of Internal Revenue on disputed assessments. A disputed assessment does not become final and executory while the protest is pending resolution. The filing of the collection suit in the CFI by the Republic was, under the circumstances, deemed the Commissioner’s final action on the protest, which the taxpayers seasonably appealed to the CTA. Consequently, the assessment remained contested. The CFI, therefore, could not validly take cognizance of the collection case, as jurisdiction over the subject matter—the validity of the contested tax assessment—was vested by law in the CTA. The proceedings in the CFI were premature until the CTA first resolves the protest on its merits. The Solicitor General correctly conceded this point and joined the petitioners in seeking the suspension of the CFI case.