G.R. No. L-18543 October 31, 1968
Republic of the Philippines, plaintiff-appellee, vs. General Sales Supply Co., Inc., Gerardo Samson and Restituto Samson, defendants-appellants.

FACTS

The General Sales Supply Co., Inc., with Gerardo Samson as President and Restituto Samson as General Manager, filed income tax returns for 1946 to 1949. Following a Senate Blue Ribbon Committee investigation revealing anomalous government sales, the Bureau of Internal Revenue (BIR) investigated the corporation. Examiner Valeriano Robles discovered the corporation’s books padded purchases, leading to a deficiency assessment. On February 28, 1951, the BIR Commissioner demanded payment, with formal notices issued on March 8, 1951. The corporation protested and requested reinvestigation, which was granted. Despite repeated extensions, the corporation failed to submit required vouchers and invoices, submitting only an unsubstantiated detailed statement on December 15, 1952. On February 12, 1954, the BIR reiterated the demand. After another reconsideration and reassessment, the BIR modified the total assessment to P79,379.69, with a notice served on March 12, 1955. The corporation protested again, raising the defense of prescription under Section 51(d) of the Tax Code. The BIR maintained that Section 332(a) applied. The Republic filed a collection suit on February 27, 1959. The corporation moved to dismiss based on prescription, which was denied. After trial where the defendants presented no evidence, the Court of First Instance of Manila rendered judgment for the plaintiff. The defendants appealed, arguing prescription and deprivation of their day in court.

ISSUE

1. Whether the action for collection of deficiency income taxes for 1946-1949 had prescribed.
2. Whether the defendants were deprived of their day in court.

RULING

1. No, the action had not prescribed. The applicable prescriptive period is ten years from the discovery of the fraud under Section 332(a) of the National Internal Revenue Code, not the three-year period under Section 51(d) for summary collection or the general five-year period under Section 331. The corporation filed false and fraudulent returns with intent to evade tax. The fraud was discovered on February 3, 1951, when examiner Robles filed his report. The judicial action for collection was commenced on February 27, 1959, which was within the ten-year period.
2. No, the defendants were not deprived of their day in court. Their counsel failed to appear at the scheduled hearings on February 2 and 20, 1961, despite a prior postponement. The trial court correctly proceeded to decide the case based on the plaintiff’s evidence. A party who fails to appear at trial due to his own fault cannot complain of deprivation of his day in court.
The Supreme Court affirmed the lower court’s judgment ordering the defendants to pay the deficiency taxes of P79,379.69 plus a 5% surcharge and 1% monthly interest from April 15, 1955. The assessment had become final for lack of appeal to the Court of Tax Appeals.