G.R. No. L-18866; September 28, 1964
Republic of the Philippines, plaintiff-appellant, vs. Juan S. Alano, defendant-appellee.

FACTS

The Republic of the Philippines filed a complaint on December 9, 1960, to recover deficiency income taxes from Juan S. Alano for the years 1947 to 1951. The Bureau of Internal Revenue (BIR) conducted an investigation and issued an initial assessment on January 13, 1956, amounting to P111,234.53 plus interest and a 50% surcharge. Alano protested this assessment and requested reconsideration. Subsequently, on November 11, 1957, the BIR issued a revised assessment, significantly reducing the amount to P15,863.18 plus a lowered 5% surcharge and interest. Alano failed to pay the reduced amount, prompting the government to initiate the collection suit.
Alano moved to dismiss the complaint, arguing that the assessment was barred by the statute of limitations under Section 331 of the National Internal Revenue Code. The Court of First Instance of Rizal granted the motion and dismissed the case, holding that the action stated no cause of action as it was filed beyond the prescriptive period. The Republic appealed, contending that the court erred in declaring the action barred.

ISSUE

Whether the action for collection of deficiency income taxes is barred by the five-year prescriptive period for assessment under Section 331 of the National Internal Revenue Code.

RULING

Yes, the action is barred. Section 331 of the National Internal Revenue Code mandates that internal revenue taxes must be assessed within five years after the return is filed. For income tax returns, the law presumes filing by the last day prescribed, which is March 31 of each year. Consequently, for the 1951 return, the five-year period commenced on March 31, 1951, and expired on March 31, 1956. The final and operative assessment in this case was the revised one issued on November 11, 1957, which clearly fell outside the statutory period.
The Republic’s argument that the revised assessment should relate back to the date of the original assessment (January 13, 1956) due to Alano’s petition for reconsideration is without merit. Jurisprudence establishes that a mere protest or request for reconsideration, which does not involve a reinvestigation or the submission of new evidence by the taxpayer, does not interrupt or suspend the running of the prescriptive period. The Court distinguished this case from instances where a taxpayer’s positive acts cause delay. Here, Alano merely sought a reexamination based on the same records already in the BIR’s possession. The Court found the drastic reduction from the original assessment—from over P111,000 to about P15,000 on the same facts—indicative of a recklessly made initial assessment intended to harass the taxpayer. The prescriptive rule is designed to protect taxpayers from such oppressive governmental action. Therefore, the order of dismissal was affirmed.