GR L 8685; (January, 1957) (Digest)
G.R. No. L-8685; January 31, 1957
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. AURELIO P. REYES and COURT OF TAX APPEALS, respondents.
FACTS
The Collector of Internal Revenue demanded payment from Dr. Aurelio P. Reyes for alleged deficiency income taxes, surcharges, interests, and penalties for the tax years 1946 to 1950, amounting to P641,470.04 as of October 31, 1954. A warrant of distraint and levy was issued on October 13, 1954, to be executed if payment was not made. Reyes filed his income tax returns for 1946 to 1950, with the last return filed on April 27, 1951. On November 15, 1954, Reyes filed a petition for review with the Court of Tax Appeals, followed by an urgent petition to restrain the Collector from executing the warrant. He argued that the right to collect by summary proceedings had prescribed under Section 51(d) of the National Internal Revenue Code, as more than three years had elapsed since his returns were filed. The Collector opposed, arguing the Court of Tax Appeals had no authority to restrain the collection and that Reyes had an adequate remedy by paying first and then seeking recovery. The Court of Tax Appeals, by resolution on January 8, 1955, ordered the Collector to desist from collecting by administrative methods pending the appeal. The Collector filed a notice of appeal and instituted this certiorari proceeding.
ISSUE
1. Whether the Court of Tax Appeals could restrain the Collector of Internal Revenue from enforcing collection of income tax deficiency by summary proceedings after the expiration of the three-year period provided in Section 51(d) of the National Internal Revenue Code.
2. Granting such restraint is possible, whether the Court of Tax Appeals had the power to grant an injunction without requiring the filing of a bond or deposit as prescribed by Section 11 of Republic Act No. 1125 .
RULING
1. Yes. The Court affirmed that under Section 51(d) of the National Internal Revenue Code, the government’s right to enforce collection of income taxes by summary proceedings of distraint and levy is limited to a period of three years from the date the return is filed. Since the warrant of distraint and levy was issued on October 13, 1954, which was 3 years, 5 months, and 16 days after Reyes filed his last return on April 27, 1951, the Collector’s right to collect by summary methods had prescribed. The Collector could only proceed by judicial action.
2. Yes. The Court held that the requirement under Section 11 of Republic Act No. 1125 for a taxpayer to deposit the amount claimed or file a surety bond as a condition for suspending collection applies only when the collection processes are in accordance with law. In this case, the summary collection method was illegal due to the lapse of the three-year prescriptive period. Therefore, the Court of Tax Appeals acted correctly in issuing the injunction without requiring a bond. Furthermore, the Court noted that the petitioner’s failure to file a motion for reconsideration in the court below before seeking certiorari was a fatal procedural defect. The petition for certiorari was denied, and the resolution of the Court of Tax Appeals was affirmed.