G.R. No. 36906 ; November 21, 1933
IN THE MATTER OF THE ESTATE OF FRANK H. GOULETTE, deceased. GOVERNMENT OF THE PHILIPPINE ISLANDS, claimant.

FACTS

In the probate proceedings for the estate of Frank H. Goulette, the Collector of Internal Revenue filed a claim for deficiency income tax for 1925, alleging omissions in Goulette’s personal income tax return. The Bureau of Internal Revenue discovered discrepancies by comparing Goulette’s return with the corporate return of France and Goulette, Inc. The Government’s case relied heavily on unsworn oral statements made years later by the corporation’s auditor, E. A. Gebert, to a revenue agent, claiming these statements were admissible evidence against the estate. The trial court held the Government entitled to recover P12,751.03. Both parties appealed.

ISSUE

Whether the Government’s evidence, primarily consisting of unsworn hearsay statements from the corporation’s auditor, is admissible and sufficient to establish the alleged omissions in Goulette’s 1925 income tax return.

RULING

No. The Supreme Court rejected the Government’s novel contention that pure hearsay was admissible, noting the context of the cited authority (Wigmore on Evidence) was inapplicable. Most of the Government’s testimony was inadmissible hearsay with no evidential value. However, based on competent evidence, the Court found that Goulette failed to report: (1) the profit from the sale of 1,150 shares of France and Goulette, Inc. stock (acquired at incorporation) in 1925, calculated at P61,520; (2) interest of P5,775 received on the deferred payments for that sale; and (3) personal benefits in drugs valued at P1,678.06 taken from the corporation. The Government failed to prove its claims regarding additional shares and other items. The trial court’s decision was modified, reducing the deficiency tax to P6,809.91, and affirmed as modified.

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