GR L 18007; (March, 1963) (Digest)
G.R. No. L-18007. March 30, 1963. REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. BENITO H. LOPEZ, defendant-appellee.
FACTS:
The Republic filed a collection suit on August 13, 1960, to recover a deficiency income tax from Benito H. Lopez for the year 1950. The Bureau of Internal Revenue (BIR) had issued an initial assessment on November 13, 1952. Following a reinvestigation requested by Lopez, the BIR reduced the assessment on May 29, 1954. Lopez promised to pay but did not. He later requested another reinvestigation, which the BIR granted on the condition he execute a waiver of the statute of limitations. Lopez signed a waiver on February 29, 1956, but stipulated that the government must complete its reinvestigation by December 31, 1957. The BIR subsequently issued a final assessment on March 23, 1960.
Lopez moved to dismiss the complaint, arguing the action had prescribed. The trial court dismissed the case, ruling that the government was bound by the waiver’s December 31, 1957 deadline and that the March 1960 assessment was issued too late. The government appealed, contending the waiver was invalid and that the prescriptive period had not lapsed.
ISSUE
Whether the government’s right to collect the assessed tax had prescribed.
RULING
No, the action had not prescribed. The Supreme Court reversed the dismissal. The legal logic rests on established rules governing the prescriptive period for tax collection under Section 332(c) of the National Internal Revenue Code. First, the five-year prescriptive period is counted from the last revised assessment resulting from a reinvestigation requested by the taxpayer. Here, the revised assessment of May 29, 1954, started the five-year period. Second, the period during which a taxpayer’s request for reinvestigation is pending is deducted from the total prescriptive period, as it constitutes an interruption.
Applying these rules, the period from the May 29, 1954 assessment to the filing of the suit on August 13, 1960, was six years, two months, and fifteen days. However, Lopez’s second reinvestigation request, pending from January 16, 1956, to April 22, 1960, interrupted the prescriptive period for four years, three months, and six days. Deducting this interruption leaves only one year, three months, and six days counted against the government, well within the five-year limit. The Court further held that the taxpayer’s attempt to impose a December 31, 1957, deadline in his waiver was ineffective, as it sought to shorten the prescriptive period granted by law to the detriment of the state, and such a reduction could not be validly agreed upon. The case was remanded for further proceedings.