G.R. No. L-13099 and L-13462; April 29, 1960
COLLECTOR OF INTERNAL REVENUE, petitioner, vs. BOHOL LAND TRANSPORTATION CO., respondent.

BOHOL LAND TRANSPORTATION CO., petitioner, vs. COLLECTOR OF INTERNAL REVENUE, respondent.

FACTS

The Bohol Land Transportation Co. (the company), a domestic corporation, filed its income tax returns and paid corresponding taxes from 1945 to 1951. After a verification, the Collector of Internal Revenue issued deficiency income tax assessments against the company on August 4 and 5, 1953, covering the years 1945 to 1951. Due to the company’s failure to pay, the Collector issued a warrant of distraint and levy on December 23, 1954, and garnished bank deposits on March 8, 1956. The company appealed to the Court of Tax Appeals, contesting the assessments and the warrant. The Collector admitted that, pursuant to Supreme Court rulings, he had no authority to collect by summary methods (distraint, levy, garnishment) the taxes for 1945 to 1950, as the warrant was issued beyond the three-year period from the filing of the returns. The parties entered an agreement whereby the Collector withdrew the warrant and garnishment, except for a cash deposit to guarantee the assessment for 1951. At the hearing on the merits, the company presented no evidence to controvert the deficiency assessments for 1945 to 1950. The Court of Tax Appeals held the company liable for deficiency taxes for 1948, 1949, and 1950 but ruled that the right to collect taxes for 1945 to 1947 had prescribed, as the assessments were made beyond the five-year period from the filing of the returns. Both parties appealed.

ISSUE

1. Whether the right of the Government to assess and collect by judicial action the deficiency income taxes for the years 1945 to 1947 has prescribed.
2. Whether the company is liable for the deficiency income tax assessments for 1948, 1949, and 1950.

RULING

1. On the prescription of the right to collect for 1945-1947: The Supreme Court affirmed the Court of Tax Appeals, holding that the Government’s right to collect the deficiency income taxes for 1945, 1946, and 1947 by judicial action had prescribed. The Court clarified that its prior ruling in Collector of Internal Revenue vs. Jose Avelino did not mean the right to collect income taxes by judicial action is imprescriptible. It distinguished between the prescriptive periods for collection by summary methods (3 years under Section 51(d) of the National Internal Revenue Code) and by judicial action (5 years under Section 332 of the same Code). Since the assessments for 1945-1947 were made on August 4 and 5, 1953, which was beyond five years from the dates the returns for those years were filed (presumably in 1946, 1947, and 1948, respectively), the right to collect by judicial action had lapsed.
2. On the liability for deficiency taxes for 1948-1950: The Supreme Court affirmed the company’s liability for the deficiency income taxes for 1948, 1949, and 1950. The Court upheld the presumption of correctness of the Collector’s assessments. Since the company failed to present any evidence at the hearing to show the assessments were incorrect, it did not overcome this presumption. The burden of proof was on the taxpayer to prove the assessments erroneous, which the company failed to do.