G.R. No. L-18307 June 30, 1964
Republic of the Philippines, plaintiff-appellant, vs. Santiago Gancayco, defendant-appellee.

FACTS

On June 13, 1946, the Collector of Internal Revenue assessed Santiago Gancayco for various taxes totaling P11,203.19 for the first quarter of 1946. A warrant of distraint and levy was issued on September 6, 1946, but could not be served as Gancayco’s whereabouts were unknown. On October 13, 1947, Gancayco resurfaced via a letter requesting a reinvestigation, asserting the assessment was excessive and offering to pay any legally determined amount. The Collector replied over a year later on March 3, 1949, revising the assessment to P10,982.30 after a reinvestigation. Gancayco then sent further letters on March 14 and March 31, 1949, explicitly requesting another thorough reinvestigation and presenting new evidence, including books and documents, to support his claim that he acted as an agent and did not earn the alleged profits. He placed all evidence at the Collector’s disposal.
The Collector took no apparent action on this specific request for reinvestigation of the new evidence. Over a decade later, on May 17, 1960, the Collector finally responded, rejecting Gancayco’s plea for cancellation based on prescription and demanding payment. Upon Gancayco’s failure to pay, the Republic filed a collection suit with the Court of First Instance of Manila on July 19, 1960. Gancayco moved to dismiss on the ground of prescription.

ISSUE

Whether the action for collection of internal revenue taxes had prescribed.

RULING

Yes, the action had prescribed. The prescriptive period for filing a judicial action for tax collection is five years from the date of assessment, as mandated by Section 332(c) of the National Internal Revenue Code. The original assessment was made on June 13, 1946, and a revised assessment was issued on March 3, 1949. The complaint was filed on July 19, 1960, which is beyond five years from either date.
The Supreme Court rejected the government’s argument that Gancayco’s request for reinvestigation suspended the prescriptive period. Following established precedent in Collector of Internal Revenue v. Suyoc Consolidated Mining Co., a mere request for reinvestigation does not suspend the period; the request must be granted by the Collector to effect suspension. Here, while Gancayco explicitly requested a reinvestigation and offered his evidence on March 31, 1949, the Collector ignored this request and took no action to conduct the reinvestigation or examine the proffered documents. The Collector’s inaction meant the request was not granted, and thus the statutory period continued to run unabated from the last assessment.
The Court also dismissed the Solicitor General’s alternative argument that extra-judicial demands tolled the period. Under the Revenue Code, the prescriptive period can only be suspended by a written agreement between the taxpayer and the Collector made before the expiration of the five-year period. No such agreement existed. As a special law, the Internal Revenue Code’s specific provisions on prescription prevail over the general tolling rules of the Civil Code. Consequently, the right to collect via judicial action had clearly prescribed. The dismissal of the complaint was affirmed.