GR 106588; (March, 1997) (Digest)
G.R. No. 106588 March 24, 1997
RAUL H. SESBREÑO, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS and THE CITY ASSESSOR OF CEBU CITY, respondents.
FACTS
Petitioner Raul H. Sesbreño purchased two lots with a building in 1980. He declared the improvement for tax purposes as a 60-square-meter residential house of strong materials, which was assessed accordingly. In 1989, the City Assessor of Cebu discovered through a tax-mapping operation that the property was actually a four-storey building with a roof deck, having a total floor area of 500.20 square meters. Consequently, the Assessor issued a new tax declaration canceling the old one and imposing a significantly higher assessed value, applying the 1981-1984 Schedule of Market Values retroactively to 1981.
Sesbreño protested the new assessment before the Local Board of Assessment Appeals (LBAA), arguing it was excessive. The LBAA dismissed his appeal. He then elevated the case to the Central Board of Assessment Appeals (CBAA). The CBAA, in its decision, directed the City Assessor to issue new tax declarations for back taxes, effectively retroacting the assessment to 1981. Sesbreño filed a motion for reconsideration.
ISSUE
The primary issue is whether the City Assessor could validly impose retroactive real estate tax assessments for previous years based on a discovery that the property had been underdeclared in size and specification.
RULING
The Supreme Court ruled in favor of the petitioner, annulling the CBAA’s resolution. The Court held that the retroactive assessment was invalid. The legal logic centers on the interpretation of Section 12 of Presidential Decree No. 464 (the Real Property Tax Code), which allows back taxes for properties “declared for the first time.” The Court clarified that this phrase refers to properties that have never been declared for taxation purposes at all, not to properties previously declared but later found to have been underdeclared or misdeclared.
Since Sesbreño’s property had been declared and assessed since 1980, it was not declared for the first time in 1989. The discovery of a greater floor area or a different building type constituted a correction of an existing assessment, not an initial declaration. The law does not authorize the retroactive collection of deficiency taxes based on such a correction. The City Assessor’s power is prospective; the new assessment could only take effect in the year it was made (1989) and subsequent years. Therefore, the CBAA erred in ordering the issuance of tax declarations with retroactive effect to 1981. The Court emphasized that tax laws are to be construed strictly against the government, and any ambiguity must be resolved in favor of the taxpayer.