GR L 11151; (July, 1960) (Digest)
G.R. No. L-11151; July 30, 1960
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, et al., respondents.
FACTS
The respondent, Compañia General de Tabacos de Filipinas, filed its income tax returns for the calendar years 1939 and 1940 on April 22, 1940, and April 19, 1941, respectively. On March 14, 1946, the petitioner, the Collector of Internal Revenue, assessed deficiency income taxes against the respondent for those years. Between April 2, 1946, and October 29, 1948, several letters were exchanged between the parties, resulting in revised assessments. On October 31, 1955, the petitioner affirmed the 1939 assessment and reduced the 1940 assessment. On January 26, 1956, the petitioner issued a warrant of distraint and levy against the respondent’s properties, followed by a notice of seizure and sale on May 19, 1956. The respondent refused to accept the warrant and moved for a preliminary injunction in the Court of Tax Appeals, which was granted, restraining the petitioner from proceeding with the seizure and sale.
ISSUE
Whether the Collector of Internal Revenue’s attempt to collect the deficiency income taxes for 1939 and 1940 through summary proceedings (distraint and levy) in 1956 was barred by prescription under Section 51(d) of the National Internal Revenue Code.
RULING
Yes, the collection by summary proceeding was barred by prescription. Under Section 51(d) of the National Internal Revenue Code, the Collector had three years from the date the income tax returns were due or filed to determine deficiencies and enforce their collection by summary remedies. The respondent filed its returns in 1940 and 1941. The three-year period for summary collection had therefore expired long before the petitioner’s actions in 1956. The petitioner’s determination of deficiencies on March 14, 1946, and the subsequent communications between the parties occurred after this statutory period had lapsed and could not constitute a waiver of the defense of prescription. The Court of Tax Appeals correctly issued the injunction. Furthermore, the Supreme Court affirmed that requiring an injunction bond under Republic Act No. 1125 was illogical and improper since the Collector’s action was contrary to law. The resolution of the Court of Tax Appeals was affirmed.