G.R. No. L-17008; October 31, 1962
ALLISON J. GIBBS and ESTHER K. GIBBS, petitioners, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

FACTS

Petitioners Allison J. and Esther K. Gibbs were assessed a deficiency income tax of P12,284.00 for 1950 after the Bureau of Internal Revenue disallowed their claimed deductible loss of P23,563.78 on certain Japanese-sequestered mortgages. They paid this amount under protest on October 3, 1956, and requested a refund. The Commissioner denied their request on October 26, 1956. On September 17, 1957, they filed a Petition for Review (C.T.A. Case No. 418) seeking a refund. The Court of Tax Appeals dismissed this petition for being filed beyond the 10-day statutory period, a dismissal affirmed by the Supreme Court on February 29, 1960.
While that first appeal was pending, the BIR examined the Gibbs’ subsequent tax returns (1952-1956) and issued new deficiency assessments on June 3, 1958. On September 16, 1958, the Gibbs wrote to the Commissioner, arguing that his later actions—recognizing a similar 1951 loss deduction and exempting a 1956 war damage payment—were inconsistent with the 1950 disallowance. They requested reconsideration of the P12,284.00 refund denial. Receiving no reply, they filed a second Petition for Review (C.T.A. Case No. 585) on October 2, 1958, this time seeking a credit of the same P12,284.00 against the newly assessed deficiencies.

ISSUE

Whether the second petition (C.T.A. Case No. 585) constitutes a different cause of action from the first (C.T.A. Case No. 418), thereby allowing its litigation despite a final judgment in the first case.

RULING

No. The Supreme Court affirmed the Tax Court’s dismissal, holding that the second case was barred by the doctrine of res judicata. The Court rejected the petitioners’ attempt to distinguish the two cases. The argument that the first case sought a “refund” while the second sought a “credit” was deemed a mere formal distinction without substantive difference; the ultimate objective and consequence—the recovery or effective return of the P12,284.00 to the petitioners—were identical. The Court also found unpersuasive the claim that the second case was based on new facts (the 1951 deduction allowance and 1956 exemption). These subsequent events were merely additional grounds supporting the same core contention: that the 1950 loss was deductible. The fundamental cause of action in both petitions remained the same: the challenge to the legality of the 1950 deficiency assessment based on the disallowance of the claimed loss. Since this issue had been directly and finally adjudicated in the first case, it could not be relitigated under a different form or theory. The Court emphasized the settled policy against re-litigating a matter once adjudicated between the same parties.