Peti « vs. « Celehe CASE NO, et al.

DECISION

Petitioner has appealed from the finel decision ef the Commissioner of Internal Revere dated October 12, 1970, asseesing against and demonding from petitioner pay- nent of P683,191.06, computed as followss

EL 1061265

“2. “enagetent, Toe (not necessary) = = rat bok be adds 1/2% er ipo from 10-16-65 to total pe mens due and collectible novees ees .

SEss=secareetses

EL 1904-1965

: Spree: stent surplus « = « Le tat ines 10-16-65 ° Total amount due and collectibles..ess ace ba SaS2sSsstSsrccre Petitioner is e domestic corporation located at 97 Industrial Aveme, Northern Hills, Malabon, Rizal, It is engaged in the mamifacture and sale of electrical appliances » 98

DECISION «

CTA CADE NO, 2500 and plumbing supplies.

On Oetober 14, 1965, petitioner filed its income tax return for the fiseal year ended June 30, 1965. On Oetoder 20, 1965, Revenme Examiner Plaridel Paounsyen was authoriged to investigate the books of account and other accounting records of petitioner for tax purposes, On June 29, 1966, said examiner recommended to the Regional Director, qezon City, that a letter of demand be sent to petitioner for the collection of P0Y5,396.78 as deficiency income tax, exclusive of interest.

On June 13, 1965, the said Regional Directer, fol- lowing the standard operating procedure in the reveane office, invited petitioner for a conference, On Jamiary 27, 1969, Mr, Roberto ?, Clemente, Chief, Income Tax Divi- sion, invited petitioner for snother informal conferance to give petitioner the opportunity to present its side of the cas@, On April 7, 1969, Mr. Juan Corona, then Chief ef the Income Tax Division, advised petitioner in writing to make a protest on the proposed assessment, On April 4, 1969, petitioner*s counsel protested the proposed assess- sent and requested for the caneeliation thereof, On July 9, 1969, Regional Director Jose &, Consunj4 referred the pending income tax ease of petitioner to the Revenue District Officer, Melaben, Rizal, for further investigation, On November 25, 1969, the said official returned the case to the Re,ional Director and recommended, among Others, that the proposed assesanent involving he 79

DECISION

CTA CASE NO, 2500 3 substantial amount and a controversial legal question be referred to the National Offiee for final action, Gn December 5, 1969, the said Hegional Directer re- turned the entire docket of the said case of petitioner to the Assistant Revemme Operations Head (Assesament) can- formably with the recommendation contained in the memerandum of the Reverme District Officer of Malabon, Risal, On June 9, *970, the Assistant Reveme Operations Heed (Assessment) referred the said case to the Chief, judit Division, for immediate setion because Senior Reve- mae Examiner Plaridel Pacunayen was assigned thereat. On Getober 9, 1970, said examiner subsitted a memorandum to the Assistant Reveme Operations Head (Assessment), ex pisining the reason and justification for the proposed assessment, On Getober 12, 1970, the Commissioner of Internal Bevemie propared the disputed assessment in qestion, It was mailed in the Post Office on November 4, 1970 and re- ceived by petitioner on Hovenber 12, 1970.

On December 11, 1970, petitioner protested the said assesswent. On Jamary 15, 1973, respondent denied the seid protest but the denial was allegedly received by petitioner on February 19, 1973. Om March 15, 1973, peti- tioner filed with this Court ite petition for review, On August 22, 1973, petitioner filed a "Motion for Summary Judgment" praying that respondent's disputed assessment be declared mull and void and of no legal force . BO

DECISION «

CTa CASE NG, 2500 b end effect because it was made beyond the S-year period prescribed by Section 331 of the National Internal Reve- me Code, On December 7, 197}, respondent countered by filing his opposition thereto with a motion to dismiss petitioner's appeal.

The mein issue submitted to this Court for reseintion is whether or not the deficiency income tax assessnent / issued by respondent against petitioner has preseribed.

Respondent ellieges that his right to assess the @eficioncy income tax in question has not yet preseribed because petitioner's income tax return for the fiseal year ending June 30, 1965 was filed on October 1%, 1965. Con- sequently, respondent has five years from the last day for the filing of said return within which to assess petitioner under section 331 of the National Internal Reverme Code, Since the deficiency ineowe tax assessment issued against petitioner was dated Getober 12, 1970, respondent Com missioner of Internal Revere maintains that the disputed assessment was made within the five-year period, Petitioner, however, maintains the opposite view and alleges that respondent's right to assess has prescribed sinee the sSsessuent in question was not sent or received by petitioner on or before October 15, 1970. The disputed assesenent dated October 12, 1970 was actually mailed by respondent or his representative on November 4, 1970 as shown by the original envelope containing the assessuent. Petitioner, therefore, argues that respontent's assessment

DECISION «

CTA CASE 10. 2500 5 should have been served or mailed te petitioner within five years from October 15, 1965, the last day for the flliing of the return as required by fection 331 of the Tax Code, jafrma, As the disputed assessment was mailed in the Pest Office on November 4, 1970, as shown and evidenced by the imprint on respondent's envelope, it is clear that the assessment in question was made beyond the Se-year period preseribed by Seetion 331 of the National - Internal Keveme Code, We sustain the view of petitioner, Section 331 of the National Internal Reveme Code provides as follows:

tiled, and in court without assessment for the co ef such taxes shall be begun after the tion of such period, For the of this section a return filled before last by law for the filing thereof be considered as on such last day.

As petitioner filed its income tax return for the fiecal year ending June 30, 1965 on October 1%, 1965, the five-year poriod fixed by the Revenue Code started on Getober 15, 1965 and expired on October 15, 1970. Al- though the disputed assessment was dated October 12, 1970, whieh is made within the five-year period limit set by Section 331 of the Tax Code, gaya, said date should not be considered as the date when the assessment was made, The tax assessment of respondent, although dated October 12, 1970, Gid not step the running of the pres- a

DECISION «

CTA CASE HO, 2500 6 eriptive period of ascessent under Section 331 of the Tax Code, g@iuwa, except om tho date the assessment notice ia Thus, in the ease of Collecter of internal Keverme vs, Pedro RK. Bautista, et ale, G» Re No. [92250 and 12259, May 27, 1959, our Supreme Court helds hte Cree oe on an Coe aoe ar pe arse ark. ) years after the return & five yours, ZKXXKEZEXs It should be noted im this particular case thet the the Records Division of the Suresu of Internal Keveme as late as Getober 30, 1970, (pps G65 BIP ree.) and the zwelope bearing the letter-assessment was posted on Woveaber 4, 1970) which moans that it was only on this date that respondent's assessment was wailed, Therefore, from Cetober 15, 1965, the last day for the filing of the return to November +, 1970, the date when the assessment notice was mailed, more than five (5) years and twenty (20) days have elapsed, in brief, the year period of limita- tion set by Section 331 of the National Internal Reveme Code has tolled against the respondent, | In the following cases, to wits Collector of Internal » 88

DSCIZION «

CTA CASS WO, 2500 7 Reveme Woe be los Angeles, et al,, ©, Ky Lo989S, AUge 135 19573 Bepublic of the Philippines ve, Ablaza, Cele im14519, July 26, 1960; Ganeayeo vs, Collector of In- ternal Heveme, ©. %, 113325, April 20, 196%; Republic of the Philippines ys. Alamo, GO» hi, 115865, Sept, 28, 196% and Republic of the Philippines vs. Kite Lim Be Yu, Gs Ry L-i7e38, April 30, 1964, our Supreme Court has invariably hela that che essessment should be made within five pears efter the last day for the filing of the re- tarng otherwise, the government is estopped from collect- ing the tax.

The said ruking and eonelusion of the court is | amply justified by the purpose for whieh the statute of Aimitation was embodied in Sections 531 and 332 of our Hationai Internal tevemne Code, Thus, in the case of fiepublic of the Philippines vs, Ablaza, @igta, wr Supreme Gourt saids the law prescribing a limitation of actions for the estesemeant and calleetion of taxes is beneficial

DECISION «

CTa CaSB NO, 2500 IN VIEW OF TES PORSOOING, petitioner's Motion for Summary Judgment is granted and respondent's deficiency income tax cesessment ia hereby cancelled and declared of no foree and effect. However, Let this case be set for hearing on the marits with respeet to the penalty imposed by law on petitioner's alleged unreasonable accumilation of surplus, SO GRDBKED.

dwezon City, May 12, 1975+

Bassas

Associate Judge

w#8 COsCURs bf bm RAMON be AVANCRMA

Associate Judge