Yey’ Mepublic of Fit Philippines Court Gl Tan Appeals Man Lla Lazarus Joseph vs. Salverlo Blaquema, et al.

DECISION

The above~entitled cases were heard jointly be- fore this Court. The facts and circumstances, as well as the issue involved therein, being similar and in- terrelated with each other, we shall determine the same jointly.

1690 /9f Or re se a rt wt St a A ine, ae ey ee ge or > 1 - c. r.

267, 31-4.

- 2- These are petttlon• for the review of the d•· c1s1 ns of re pon •nt Co11 ctor of lntel"nal evenue •sseaslng against and de and1n fr eac of the above petitioners, yeua net 1n the nts 1nd1cated h reundar' LaJar\ls Joseph .Lazarus Jo epb Al ert Joseph orge J'oseph

John Joseph

1~5 19<46 1946 1946 19 6 A 0\lOt 12 , 067. ~ 87,521.63 32,814. 32 26,896.6 31, 932.32 Petitioner Lazarus Jo .. ph filed his 1nco • tax returns f r the y ars 1945 an 1946 on f bruary lB, 1 46 Apr il l , 1947. respectively. P t1t1oners 1 art Joseph and John Joaepb f~led th ir l nc t ax returns for the ye r 1946 on April 1, 1947.

Pet1-

1oner orge l osep who waa then n th Un ted tatea, did not file his co x ~•turn s f tl y r 1946, which should b&ve been. filed on or efore arch 1, 1 47.

nee, an examiner of t • eau of ntern 1 evenut prepared an fUed for hilll an .1ne t x r - turn for t sal year. Aft er an 1n at! atton of the respect1v 1neo e and ded ctions of each of th petition r herein, and th 1r corros on 1ng •nco t x liabi l 1tiea ccordingly dete~ ined, respondent, on August 19, 1947, assessed against and cl ded fro th th pa ant of th a inco • tax deficiencies. Ho ever, on epte r 10, 1947, pet1- 161 lfo .........

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• 267. 314, 315 316 - 3 - t1 nera ested f r a e1nveat1ga 1 n of the •• e ts que tio • lc re eats •~• r nt d y respon nt.

too 6 nd I, 19~1, r espondent a a1 ach of t1t1on r• f ~ t e a nt of tru. nc nt1 r v o • y 1asued against the plus terest p to tober 1~ .

tan oualy, respo ent ala iatu d 1.

r nts 1- traint and 1 vy a; 1n t propert1 s of p lt onus.

ver, by letters all dated to r 16, 1 ~~. etl- tionert LaJarua Joseph, Al rt Josep and John Joseph, re ested for t suspe s1on of th su collec- ion o the e tax assessed a1nst t e , llegln that t etr cas 1 are at111 • ding reinvestigation. Later, y etters all ated to r 17, 1951, tl- t~o ers 1nfo ed respondent of thelr wner t toe p shar ey cia re uf lc ent t a.rante of t 1r spute co • tax 11 11 tie • f c r - ic t info ation furn1 d by t1- tionera t eir letter• of to 17, 1951, respon- ent on the a ent to Joseph day, address d waxrant o oa., • • arn1sh1n h in ald corporation r•g1stered 1n th n s - f stoc n of ch of t • it oners.

owever, on • ruary 6, 195 , petl• of garnla ent, an requested furt er fo sti• gat1 n of the entire atter.

g ln, reapon nt or r 1 6 2 ae NOS, 267, 314, 315 & 316 -~ 4 = the reinvestigation of the income tax liabilities of the petitioness. — Although, the warrants of garnishment on peti- tioners’ shares of stock in the Joseph bros., Inc., were served on October 18, 1951, no further action was taken thereon until August 22, 1955, when respondent asked for the transfer of the garnished certificates of stock to the name of the Yureau of Internal Revenue.

On December 28, 1955, petitioners wrote respon- dent that his right to collect, @ither by distraint and levy or by judicial action, the income tax assessments in question has already prescribed, and requested that the said essessments be withdrawn. Un January 13, 1956, respondent denied the requests of petitioners and urge them to pay the tax assessed against each of them with the warning that if they fail te pay the said assess- ments, drastic action will oe taken against them with- out any further notice. in view of this, petitioners, on March 3, 1956, delivered to respondent the certifi- cates of stock under garnishment, which were endorsed in blank.

Upon receipt of the garnished certificates of stock of the Joseph Bros., Inc., respondent advertised the same for sale at public auction on May 7, 1956. However, for lack of bidders, the scheduled sale did not take place. Hence, respondent advertised again the same shares of stock for public auction sale on June 26, 1956. Again, no bidders appeared. And for the third time, respondent re~-advertised the sale at 163 DECISION «- C.T.A. CASES NOS, 267, 314, 315 & 316 » & = public auction of the same shares of stock to take place on August 30, 1956. Inasmuch 4s there was no bidder at this third scheduled sale, respondent pur- chased the shares of stock for the government for “whatever book value the shares of stock may have." | The only question in this case is whether or not the sale of petitioners’ shares of stock on August 30, 1956 is legal and valid?

We find thet in the instant case, all the income tax returns of petitioners which are under review were filed on or before April 1, 1947. The warrants g@rnishing petitioners’ shares of stock were served enly on October 18, 1951, or more than three years after the inc tax returns were filed or should have bean Aone now well settled that in view of the provisions of Section 51 (d) of the Tax Code, the Collector of Internal Revenue has no power to collect by administrative methods any deficiency income tax assessments beyond the three year period from the time the returns have been filed or should have been filed, | (Collector of Internal Revenue vs. Villegas, 56 Phil. 554; Collector of internal Revenue vs. Haygoed, 65 Phil. 520; Juan de la Vifta vs. El Gobierno de las Filipinas, 65 Phil. 262; Collector of Internal Revenue vs. Jose Collector of internal Hevenue vs. Aurelio P, Reyes et al., GR. No. L-8685, Jan. 31,1957; Collector of In- ternal Revenue vs. Jose C. Zulueta, 53 0.G,. 6532;

164 /g 2 WHOS, 267, 314, 315 & 316 ~ fe Adriano Chua Joy vs. Collector of Internal Revenue, GA. Now Le10961, Feb, 28, 1958.) | The acts of the revenue authorities in viola- tion of said section 51 (4d) would be illegal and, therefore, the warrant of garnishment involved herein as regard petitioners’ shares of stock having deen issued contrary to law, were without force and effect. it necesserily follows that respondent never legally acquired control over petitioners' shares of stock and the subsequent sele thereoi on August 31, 1956 in favor of the government is likewise null and void.

It may be asked, however, as to whether this case could be tréeted as @ judicial action to collect the tax and if so whether such judicial action has not yet era note that all these cases were brought to this Court by the petitioners for re- view on appeal on May 5, 1956, and respondent filed his answers to the petitions for review on March 13, 1957. it is ther@fore clear that et the time of the institution of this case more than five (5) years had lapsed from August 19, 1947, the date the assessusnis were made. After an @eseessment has been made, the collection thereof may be enforced by judicial action, However, under Section 352 of the Tax Vede, the judi- cial proceedings for the collection. of the tax can- not be made beyond five (5) years after the assess- ment thereof. Consequently, the collection of the deficiency income tax assessments from petitioners is already barred by the statute of limitations and

165 VT

ne ee rr ee eS DECISION -CT.A. CASES NOS. 267, 314, 315 & 316 a 7 « therefore pursuant to Section 14 of Republic Act No. 1125, there is no deficiency in respect to such tax.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision of respondent is hereby reversed, The sale of petitioners’ shares of stock in Joseph Bros., Inc. to the government on August 30, 1956, is hereby de- ¢lared null and void, and respondent is hereby ordered to return the said shares of stock to petitioners.

It 1s further declared that there is no defi- ¢lency Income tax due and payable by petitioner Lazarus Joseph for the years 1945 and 1946 and petitioners Albert Joseph, George Joseph and John Joseph for the year 1946,

— Presiding Judge

Associate Judge

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