PERIOD TO ASSESS AND COLLECT TAX DEFICIENCY

ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. COMMISSIONER OF INTERNAL
REVENUE
GR. No. 155541. January 27, 2004
Facts:
During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed
by the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days
after her death, PhilTrust filed her income tax return for 1978 not indicating that the
decedent had died. The BIR conducted an administrative investigation of the decedents tax
liability and found a deficiency income tax for the year 1997 in the amount of P318,233.93.
Thus, in November 18, 1982, the BIR sent by registered mail a demand letter and assessment
notice addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was the address
stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner of Internal
Revenue issued warrants of distraint and levy to enforce the collection of decedents deficiency
income tax liability and serve the same upon her heir, Francisco Gabriel. On November 22,
1984, Commissioner filed a motion to allow his claim with probate court for the deficiency tax.
The Court denied BIRs claim against the estate on the ground that no proper notice of the tax
assessment was made on the proper party. On appeal, the CA held that BIRs service on
PhilTrust of the notice of assessment was binding on the estate as PhilTrust failed in its legal
duty to inform the respondent of antecedents death. Consequently, as the estate failed to
question the assessment within the statutory period of thirty days, the assessment became
final, executory, and incontestable.
Issue:
(1) Whether or not the CA erred in holding that the service of deficiency tax assessment on
Juliana through PhilTrust was a valid service as to bind the estate.
(2) Whether or not the CA erred in holding that the tax assessment had become final,
executory, and incontestable.
Held:
(1) Since the relationship between PhilTrust and the decedent was automatically severed the
moment of the taxpayers death, none of the PhilTrusts acts or omissions could bind the estate
of the taxpayer. Although the administrator of the estate may have been remiss in his legal

obligation to inform respondent of the decedents death, the consequence thereof merely refer
to the imposition of certain penal sanction on the administrator. These do not include the
indefinite tolling of the prescriptive period for making deficiency tax assessment or waiver of
the notice requirement for such assessment.
(2) The assessment was served not even on an heir or the estate but on a completely
disinterested party. This improper service was clearly not binding on the petitioner. The most
crucial point to be remembered is that PhilTust had absolutely no legal relationship with the
deceased or to her Estate. There was therefore no assessment served on the estate as to the
alleged underpayment of tax. Absent this assessment, no proceeding could be initiated in court
for collection of said tax; therefore, it could not have become final, executory and
incontestable. Respondents claim for collection filed with the court only on November 22,
1984 was barred for having been made beyond the five-year prescriptive period set by law.
EVIDENCE IN TAX ASSESSMENTS; MACHINE COPIES OF RECORDS/ DOCUMENTS HAVE NO
PROBATIVE VALUE
COMMISSION OF INTERNAL REVENUE vs. HANTEX TRADING CO., INC
G.R. No. 136975. March 31, 2005
Facts:
Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of
plastic products, it imports synthetic resin and other chemicals for the manufacture of its
products. For this purpose, it is required to file an Import Entry and Internal Revenue
Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff
and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of CounterIntelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received
confidential information that the respondent had imported synthetic resin amounting to
P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to
present its books of account which it failed to do. The bureau cannot find any original copies of
the products Hentex imported since the originals were eaten by termites. Thus, the Bureau
relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988
on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted
by the informer, as well as excerpts from the entries certified by Tomas and Danganan. The
case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to
pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency

assessments issued by the petitioner were unlawful and baseless since the copies of the import
entries relied upon in computing the deficiency tax of the respondent were not duly
authenticated by the public officer charged with their custody, nor verified under oath by the
EIIB and the BIR investigators.
Issue:
Whether or not the final assessment of the petitioner against the respondent for deficiency
income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is
based on competent evidence and the law.
Held:
Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that
the Commissioner of Internal Revenue has the power to make assessments and prescribe
additional requirements for tax administration and enforcement. Among such powers are
those provided in paragraph (b), which provides that Failure to submit required returns,
statements, reports and other documents. When a report required by law as a basis for the
assessment of any national internal revenue tax shall not be forthcoming within the time fixed
by law or regulation or when there is reason to believe that any such report is false, incomplete
or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable.
This provision applies when the Commissioner of Internal Revenue undertakes to perform her
administrative duty of assessing the proper tax against a taxpayer, to make a return in case of
a taxpayers failure to file one, or to amend a return already filed in the BIR. The best
evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and
accounting records of the taxpayer who is the subject of the assessment process, the
accounting records of other taxpayers engaged in the same line of business, including their
gross profit and net profit sales. Such evidence also includes data, record, paper, document or
any evidence gathered by internal revenue officers from other taxpayers who had personal
transactions or from whom the subject taxpayer received any income; and record, data,
document and information secured from government offices or agencies, such as the SEC, the
Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs
Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as
amended, does not include mere photocopies of records/documents. The petitioner, in making
a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said
assessment on mere machine copies of records/documents. Mere photocopies of the
Consumption Entries have no probative weight if offered as proof of the contents thereof. The

reason for this is that such copies are mere scraps of paper and are of no probative value as
basis for any deficiency income or business taxes against a taxpayer.