DOLORES S. FAJARDO, P r~ t i t i o n e t~ vs. I THE COMMISSIONER OF INTERNAL REVENUE, r~e spondeTlt. x-·--·- - - - - --- x D E C I s I 0 N Peti tion er comes to this Court with thP prayer that the fin al deci sion of the Co mmis s ioner of Interna l Rev en u e dated May 9, 1991 denying the can c e l l a t i on and n ul 1 i f i cat i. on o f t h e Wa t~ t~ ant o f D i s t t' a i n t and I o t~ L e v y a g a i n s t h e t~ be s e t as i d e on the ground that the right of th P Bureau of Interna l f~ev enue <BIR> to c ollect the ·alleged d e fi c ienc y capital gains ta>< has alt~eady r:wesct~ibed wwsuant to J.a\f-1. The facts as gathered from the record s of the case ar e as follow s: 1. Petitioner owned a parcel of land co vered by TCT No. 19608'3 of the Regi stt~ y of Deeds of ~uezon City, and located at No. 13 Banlat Road, Tand an g Sot~a, Quezon Ci ty. On May 8, 1 '385, she sold the subject property to the Iglesia Ni Krista

DECISION -

- 3 - Petitioner, failed t o c omply with the BIR's demand;

On Septembet~ 30, 1 98G, the BIR sent petitioner an othet~ lettet~ ( a g a in sent to h e t~ fat~ the s ubmi s sion of documen t r.:n~ y evidence to the deductions claimed in pet it ionet~' s capital gains ti:\X t~etm~n <Exh.

"D">.

The demand was again not complied with by petitioner; E,.

On July 2 7, 1987, the BIR sent peti tionet~ at addt~e s s of an assessment fat~ deficiency capital gains tax of P101., 839.00 exclu s ive of intet~est and s tw chat~ ge (p.

31 , BIR H ecot~ ds >.

The BIR explained that p e t i t i o n e t~ ' s claim fat~ deduction of the va lue of the impt~ ovements and the selling expE~nse s (exce pt fat~ documentat~y stamp taxes > had been disallo~tJed fat~ fai 1 twe by petitionet~ to pre s ent the t~ e q u i t~ e d docum entary ev i dence. Petitioner did not reply to this letter as well;

7.

On Novemb et~ 1987, the BIR ag;:d .n se nt petitioner at her address a s econd assessment for de ficiency capital gains tax in the total amount of P202,811.8G, in c lu s ive of intet~est and surc hat~ ge.

P e t i t i o n e t~ 1 i l< ew j s e fail e d to que stion this assessment ; 43u

8. Subsequently, the BIR sent petitioner three tracer letters, respectively dated June 1, 1988, September 7, 1988 and August 7, 1989, at her address of record, but still, petitioner failed to settle her unpaid assessment (see pp. 45-47, BIR Récdrdes see also Exh. "F") 35

9. On October 22, 1990, the BIR sent another letter to petitioner, giving her a final chance to settle her unpaid assessment pursuant to the provisions of RMO No. 29-90 (Exh. "F-i"). This was followed by another letter of the same tenor, dated February 15, 1991. In both instances, petitioner did not make any response to the BIR3 190. On February 1, 1991, a Warrant of Distraint and/or Levy was served an petitioner at her address of record (Exh. "G"). In addition, a copy of said warrant was also served on petitioner at No. 86 FL. Tuazon cor. Flanas Site ITI, auexer City through ai certain Leticia 5S. italia diaal allegedly petitioner’s granddaughter (p. S4, BIR Records) 3

11. On February 27, 1991, petitioner, through her counsel, sent a letter to the respondent Commissioner, requesting that the Warrant of Distraint and/or Levy be lifted on the ground that respondent’s authority to issue the same had- 43u

- 5 - allegedly alt~eady pt~e s et~ i bed, put·' s uan t to the ) provi s ions of Se c tions 203 and 223 (c ) of t h e NIRC ; lc~.

On May 9, l 9':H, r~ e spo nden t C om m i s si on et~ sent petitioner, through her c o un se l, a lettet~ denying her request for the li f ting of the Wa rrant of Distt~ aint and/ot~ Levy ba s ed o n S ect io n 2 ;;:::4 of the Tax Code, as amended whi c h pt~ ov i des t hat the running of the statute of limitation pr ovi d ed in Section 203 and 2 c:3 on the be gi nni n g o f dis tt~a i nt o t~ 1 e v y o t~ a p t~ o c e e d i n g i n C o tn-t f o t~ c o 1 1 f~ c t i o n , i n t~espect of any deficiency, sh a ll be su s pend e d fot~ the pet~iod when, ,';\mong othet~s , t h e taxpay et~ c .:\nnot be located in the addt~ ess given by him in the return filed upon which a tax i s b ei ng as s es s e d o r coll ected.

The sole i s sue which thi s Co u r t is ca ll e d upon to r~ esolve ot~ not t h e W at~ r~ a n t of Di stt~aint and I ot' Levy 1-'Ja s i ss ued beyon d the reglementary prescriptive peri od under th e Nat ional Internal Revenue Code. It is well settled that limit a tions upon the right of the government to assess and colle c t taxes will not be pt'e sum ed in the absence of cleat' J.e~]islation to the contt~ at~y.

The e><i s tence of a time limit beyond which t he government may recover unpaid taxes is purely dependent upon some express statutory provision, (S1 Am. Jur. 8673 10 Mertens Law on Federal Income Taxation, par. S7.02). It follows that in the absence of express statutory provision, the right of the government to assess unpaid taxes is imprescriptible (Aranas, Updated National Internal Revenue Code [E7th ed., 1988], op. 881).

Quoted below are related provisions of the Tax Code bearing on the issne at bar which concern limitations on the government’ s right and exceptions thereto:

"Section 203. Feriod of limitation upon assessment and collection. - Except as pravided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in. court without assessment for the collection of such taxes shall be begun after the expiration of such: period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three-year period shall be counted from the day the return was filed. For the purposes of this section, a return is filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." (Underscoring supplied.)

"Section #223. Exceptions as to period of limitation of assessment and ~~ collection of taxes.

"KX xX xxx "Cce) An internal revenue tax which has been assessed within the rn atonsnyoooateoummtanie sees neastenrervtveryttaterepascsinn atnretty—iaente ester ns -eereesenthstsesrwatnstt eretuieenh grommenttneemntnetthnt tte may be collected by distrain or 430 at levy or by a proceeding in court assessment of the tax."

(Underscoring supplied) "Hx xx xxx Section 124. Suspension of running of statute. - The running of the statute of limitation provided in Section 203 and fe3 on the making of assessment and the beginning of distraint or levy or oa proceeding in court for collection, in respect of an deficiency, shall be suspended x x x when the taxpayer cannot be located in the address given by him in the return filed upon which ai tax is being assessed or collected; FProvided, That, if the taxpayer inform the Commissioner any change in address, the running of the statute of limitations will not be suspended; when the warrant of distraint and levy is duly served upan the taxpayer, his authorized representative, or aio.member af his household with sufficient discretion, and no property conld be located; «x x x." (Underscoring supplied.)

The BIR must make a tax assessment within three years after the correspondent return is filed but no action can be brought by it for the recovery of the tax after the lapse of that period in case no assessment has been made. Any tax assessed must in turn be collected by the remedies provided by law, i.e. distraint or levy, within three years following the assessment save in cases specified by law.

In the case at bar, it is ironic that while taxpayer AEkHEMLedged having received at her address of record all letters sent by the BIR,

435 J

- 8 - including the assess ment for deficie n cy capita l gain s tax <E><h.

II C" '

"D"'

" E "

and

II F II) '

Commissionet~ of Intet~nal Revenue wo uld claim, on the other hand, that the taxpayer canno t be l ocated in th e addt~ess given by het~ in the Individual Capital Gains Tax Return filed, there b eing no response to its letters. It was on this premi se of respondent that p eti tionet~ ' s plea f ot~ the can c e 1 l at i on and n •J l l i f i cat i on o f t h e War~ r~ a nt o f and I or~ Levy ag<:\inst h et~ was denied because the t~unning of the statiJte of lim itation allegedly suspended dut~ i ng the respondent was trying to locat e petit ioner. As b or~ ne out by the t~ ecot~d s of t he case , the 1 e t t e t~ s o f t h e B I R were t~ e c e i v e d at p e t i t i on e t~' s addY'ess of recot~ d a nd mad e knovm to het~ , alb£~ it no respon se was made on the honest bel ie f th a t representation s were made by Meticia P . Jingco with the BlR.

In fact, re s pond e nt a dmitted in it ~ "A n s w er~ " (p.

3'3- 4 3 , C.T.A.

~ecot~ds ) the matet~ial alleg a tions in the petition which claims to h a ve received all commiJnications from the BIR.

No comments likewise made by respondent on evidence offet~ed by petitioner~ in s uppot~ t of its .

contention of r e ce ipt of notices evincing l a ck of obje c tion thereto <"Re solution", P· 6'3 , C. T. A.

4<i u / j

From the date of the assessment (ist assessment dated July #7, 15987; end assessment dated November 23, 1987) to the date the Warrant of Distraint and/or Levy was served on February 21, 1991, a period of more than three (3) years has already lapsed. This was beyond the period of limitation provided by Section 223(c) of the Tax Code as amended whereby a tax which as been assessed may be collected by distraint or levy or by a proceeding in court (Section 223(c), NIRC).

Thus, it was held that where the assessment of any internal revenue tax has been made within the time allowed by law, — tax must be collected within three (3) years after the assessment of the tax. (Collector v. Clement, L-1e1i01, Jandery 24, 1959.) The three-year prescriptive period is meant to serve as a limitation on the right of the Government to collect taxes by the summary method of distraint and levy. (Callector of Internal Revenue v. Zulueta and Court of Tax Appeals, 100 Fhril. 872) The right of the Collector of Internal Revenue to collect tax by the summary methods of distraint and levy must be exercised within the period of three years. {Collector of Internal Revenue v. Aveline and Court of Tax Appeals, 100 Fhil. 327) It is mandatory that the right of the 44a FA (a

DECISION -

C.T.A.

CASE NO. 4636 - 10 - Collector of Internal Revenue to collect tax by the su mmary methods of di stra int and levy be exercised w i t h i n t h e p e t~ i o d o f t tn~ e e y e cn~ s .

<Collector of Inter nal Revenue v . Reyes and Court of Tax Appe als, 100 Phil. 822. >

WHEREFORE, the Warrant of Distraint and/or Levy is s ued against petitioner i s hereby c a n c elle d and annulled fot~ being is s ued beyond the Re s pondent Commissioner of Internal Revenue is hereby ord ered since it has already prescribed. It is just unfot~tunate th i::\t t~ espondent aftet~ hav ing exerted effort, time and resources to assess the deficiency capital gains tax, will now find its t~ i g h t t o co 1 1 e c t t h e s am e has a lt~ e ad y p t~ e s c t~ i bed • Attention of re spo ndent is called to v i g i 1 ant i n t h e e x e t~ c i s e o f i t s t~ i g h t s s i n c e t h e life of the n ations depend s heavily on its abilit y to raise revenues for our financ ially-s trapped govet~n ment.

DECI SION -

- 11 -

WE CONCUR:

TO D. ACOSTA ~ --; J.

/__ I-

RAMON 0. DE~ Associate Judge C E R T I F I C A T I 0 N I het·eby this decision was reached after due consultation among the member of the Court o f Tax Appeals in accordance with Section 13, Ar ticle VIII of the Constitution . 44v ~\Q,~ ERNESTO D. ACOSTA Pt·esi ding Judge Court of Tax Appeals