GR L 17438; (April, 1964) (Digest)
G.R. No. L-17438. April 30, 1964. REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. RITA LIM DE YU, defendant-appellee.
FACTS
Rita Lim de Yu filed and paid her income tax returns for 1948 to 1953. On July 17, 1956, the Bureau of Internal Revenue (BIR) issued deficiency assessments for 1945-1953. She protested and requested a reinvestigation, signing a waiver of the statute of limitations on August 30, 1956. Subsequently, on July 18, 1958, the BIR issued new assessment notices for 1948-1953. Upon her failure to pay, the Republic filed a collection suit on May 11, 1959. The trial court dismissed the case, ruling the right to collect had prescribed. The government appealed, raising purely legal issues.
ISSUE
The primary issues were: (1) whether the deficiency assessments for 1948-1950 were timely; (2) the effect of the waiver on the assessment and collection periods; and (3) whether fraud extended the prescriptive period.
RULING
The Supreme Court modified the decision. Fraud was alleged but not proven. The BIR’s own inconsistent computations—accepting her returns, then assessing P22,450.50 in 1956, and later P35,379.63 in 1958—negated a finding of deliberate falsity. Absent fraud, the standard five-year prescriptive period for assessment under Section 331 of the Tax Code applied.
For the years 1948-1950, the five-year period from the filing dates had already expired when the BIR issued its first deficiency assessment on July 17, 1956. The waiver executed on August 30, 1956, could not revive these prescribed assessments. Under Section 332(b), a waiver extending the assessment period must be executed before the original five-year period lapses. Thus, the waiver was only valid for 1951 and 1952, whose assessment periods were still running. For 1953, the July 18, 1958 assessment was timely as it fell within the original five-year period from the March 1954 return filing.
Regarding collection, the Court clarified the distinction between assessment and collection periods. The waiver’s expiry date of December 31, 1958, pertained only to the extended period for making the assessment. For collection, Section 332(c) provides a separate five-year period from the date of assessment. Therefore, the government’s judicial action filed in 1959 was well within the five-year collection period from the 1958 assessment. The appealed decision was modified, ordering appellee to pay deficiency taxes for 1951, 1952, and 1953, plus surcharge and interest.