G.R. Nos. L-48134-37 October 18, 1990
Emilio E. Lim, Sr. and Antonia Sun Lim, petitioners, vs. Court of Appeals and People of the Philippines, respondents.

FACTS

Petitioners Emilio E. Lim, Sr. and Antonia Sun Lim were engaged in a household appliance dealership. Following a raid on their business premises in 1959, seized records led the Bureau of Internal Revenue (BIR) to investigate their income tax returns for 1958 and 1959. The BIR found the returns fraudulent and issued a deficiency tax assessment on April 7, 1965. The petitioners requested a reinvestigation but refused to comply with the BIR’s conditions, including executing a waiver of the statute of limitations. After a final BIR decision in 1967 and a final demand for payment in 1968, the petitioners still did not pay. Consequently, four criminal informations for tax code violations were filed against them on June 23, 1970.
The trial court convicted the petitioners in 1975, imposing fines and ordering payment of the deficiency taxes. The Court of Appeals affirmed the decision on September 1, 1977. Petitioner Emilio E. Lim, Sr. died on September 24, 1977. The appellate court subsequently ruled that his criminal liability was extinguished by his death but required substitution for the civil aspect.

ISSUE

The primary issues were: (1) whether the offenses had prescribed; (2) when the prescriptive period commenced; and (3) whether the civil liability of the deceased petitioner was extinguished by his death.

RULING

The Supreme Court modified the decision. On prescription, the Court ruled that for violations of Section 45 (failure to file a return) under the 1939 Tax Code, the prescriptive period was five years from the date of the commission of the violation, not ten. Since the informations for the 1958 and 1959 violations were filed only in 1970, these offenses (Criminal Cases Nos. 1790 and 1791) had already prescribed. The Court rejected the argument that prescription began only from the BIR’s final assessment, as the violation of Section 45 was complete upon the failure to file the return by the statutory deadline.
For violations of Section 51 (filing a false or fraudulent return), the prescriptive period was ten years from the discovery of the falsity. The Court held that discovery occurred not later than October 14, 1960, when the BIR informed the petitioners of the examination. Applying Section 332 of the Tax Code, the ten-year period to institute judicial proceedings commenced from that date of discovery. The judicial proceedings (the filing of the informations on June 23, 1970) were instituted within ten years from 1960; therefore, the offenses in Criminal Cases Nos. 1788 and 1789 had not prescribed.
Regarding civil liability, the Court affirmed that the death of accused Emilio E. Lim, Sr. extinguished his criminal liability, including the fine. However, his civil liability arising from the offense, which is the payment of the deficiency taxes, survived and could be pursued against his estate. The civil liability of petitioner Antonia Sun Lim remained. The fines imposed on her were affirmed.