GR L 13754; (March, 1962) (Digest)
G.R. No. L-13754; March 31, 1962
Republic of the Philippines, plaintiff-appellant, vs. Damian P. Ret, defendant-appellee.
FACTS
Damian Ret filed a fraudulent income tax return for 1948, understating his income, and failed to file any return for 1949 despite substantial earnings from sales to government offices. The Bureau of Internal Revenue assessed deficiency taxes, including surcharges, totaling P103,245.73. Ret pleaded guilty to related criminal charges and was fined. Subsequently, the Republic filed a civil suit for collection of the taxes on September 21, 1957. The tax assessments had been issued on January 20, 1951.
Ret moved to dismiss the complaint, arguing prescription. The Court of First Instance granted the motion, ruling that under Section 332(c) of the National Internal Revenue Code (NIRC), a judicial action for collection must be commenced within five years from the date of assessment. Since the suit was filed more than five years after the January 20, 1951 assessment, it was time-barred. The Republic appealed, contending the action was not prescribed.
ISSUE
Whether the Republic’s right to collect the deficiency income taxes from Ret through judicial action has prescribed.
RULING
Yes, the action has prescribed. The Supreme Court affirmed the dismissal. The Court rejected the government’s argument that Section 332(c) on prescriptive periods did not apply to income taxes. It held that Sections 331 and 332 of the NIRC apply to all internal revenue taxes, including income tax, and provide the governing limitations. For a tax assessed within the statutory period, as here, Section 332(c) mandates that collection by judicial action must be begun within five years after the assessment.
The assessment was made on January 20, 1951, but the complaint was filed only on September 21, 1957, clearly beyond the five-year window. The Court also found no ground to apply the ten-year period for fraudulent returns under Section 332(a), as that provision pertains to the period for making an assessment, not for filing a collection suit after a valid assessment has already been issued. Furthermore, the Court held that the prior criminal prosecution against Ret did not suspend the running of the prescriptive period for the civil collection action. No written agreement extending the period existed. Therefore, the right to collect via the courts was extinguished by prescription.