G.R. No. L-16661; January 31, 1962
CLARA DILUANGCO PALANCA, ET AL., petitioners, vs. COMMISSIONER OF INTERNAL REVENUE, ET AL., respondents.

FACTS

Gliceria Diluangco died in 1947. The executor of her estate filed the required estate and inheritance tax return only in 1951, after being required by the Commissioner of Internal Revenue. The Commissioner issued a tentative assessment, including a 25% surcharge. Following a reinvestigation and a new appraisal of the estate’s properties, a deficiency tax assessment of P10,437.76 was made on July 26, 1952, payable by September 30, 1952. To enforce collection, the Commissioner issued a warrant of distraint and levy on June 23, 1955, which was served upon the estate’s counsel, Atty. Manuel V. San Jose.
Instead of paying, the heirs, through counsel, engaged in a series of requests for reinvestigation, revaluation, and a breakdown of individual tax liabilities. These requests were granted by the Commissioner, thereby delaying the actual execution of the warrant. Years later, before the Commissioner could act on a final request for revaluation, the heirs suddenly raised the defense of prescription. They argued that the government’s right to collect the tax by summary proceedings had prescribed, as more than five years had elapsed from the July 1952 assessment without the warrant being fully executed through seizure and sale.

ISSUE

Did the right of the government to collect the assessed estate and inheritance taxes by summary proceedings prescribe?

RULING

No, the right to collect did not prescribe. Under Section 332(c) of the National Internal Revenue Code, the five-year period to collect a tax by distraint and levy or court proceeding begins to run from the date of assessment. The law requires only that the summary proceeding be “begun” within that period. The Supreme Court, affirming the Court of Tax Appeals, held that a proceeding by distraint and levy is validly “begun” upon the issuance and service of the warrant of distraint and levy. It is not a requirement that the warrant be fully executed by the actual seizure and sale of property to toll the prescriptive period.
In this case, the warrant was issued and served on June 23, 1955, well within five years from the July 1952 assessment. The subsequent non-execution was not due to any voluntary desistance or inaction by the Commissioner. On the contrary, it was directly caused by the repeated requests and objections from the estate’s counsel for postponements, reinvestigations, and revaluations. The Court ruled that to hold that prescription runs during such delays, which are instigated by the taxpayer, would place tax collection at the mercy of the taxpayer and work an injustice against the government. Therefore, the prescriptive period was suspended from the issuance of the warrant until the filing of the petition for review, and the right to collect remained enforceable.