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MONTERO // 3A TAX DIGESTS

AGATEP ALARCON ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO GUZMAN
LAYNO LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES ROCILLO TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA

REPUBLIC v. LIM DE YU (Alarcon)


[GR. No. L-17438; December 29, 1960]
Dapat di pa prescribed bago ka mag waive
Recit-Ready:
Facts: Lim de Yu filed her income tax returns for the years 1958
to 1953. BIR assessed her taxes which she paid. BIR
assessed her for income tax deficiency for the same
period of 1948 to 1953 in the total of P22, 450.50. She
protested and requested an reinvestigation. She signed a
waiver on the statute of limitations in the NIRC on
August 30, 1956. In July 18, 1958, BIR assessed her for
the third time for tax deficiency of P35, 379.63 which
included a 50% surcharge for the same tax periods. Upon
her failure to pay for the taxes due, BIR filed a collection
case against her on May 11, 1958. Respondent alleges
that BIRs action to assess and collect has already
prescribed as the 5 year period has lapsed. BIR contends
that it has 10 years from discovery of fraud to collect
from Yu de Lim as her return were fraudulent, as there
was a great disparity from BIRs assessment from the
returns filed.
Issue/s:
1) WON the returns filed by respondent for the years
1948 to 1953 are false and fraudulentNO
2) WON taxes due from 1948 to 1953 can still be collected
NO
Held:
1) Fraud was not established by BIR. The prescriptive period
then is 5 years from the filing of the return. Prescriptive
period for tax on years 1948 to 1950 has already prescribed
when Yu de Lim executed a waiver on August 30, 1956.
What is only included in the waiver was 1951 and 1953
taxes. With respect to the tax year 1953, as to which the
return was filed by appellee on March 1, 1954, the waiver was
not necessary for the effectivity of the assessment made on
July 18, 1958, since such assessment was well within the
original five-year period provided by law. After the

assessment on July 18, 1958, appellant had five years within


which to file suit for collection pursuant to Section 332 (c) of
the tax code.
Facts:
Rita Lim de Yu filed her yearly income tax returns from 1948 to
1953. BIR assessed her taxes due and she paid them
accordingly.
On July 17, 1955 BIR issued a deficiency tax assessment for the
years 1945 to 1953 in the total amount of P22,450.50. She
protested and requested a reinvestigation. On August 30,
1956, she signed a waiver of the statute on limitations under
the Tax Code as a condition on the reinvestigation requested.
On July 18, 1958, the BIR issued to her tax assessment notices
for the years 1948 to 1953 totalling P35,379.63. This
assessment, like the last one, covered not only the basic
deficiency income taxes but also 50% thereof as surcharge.
Upon respondents failure to pay, an action for collection was
filed against her in Court of First Instance in Cotabato on May
11, 1959. After trial, the suit was dismissed. BIR appeled to the
Supreme Court.
BIR claims that the returns filed by Yu de Lim for 1948 to 1953
are fraudulent as they are much less than as computed by the
BIR and under par (a) Sec 332 of the Tax Code, it has 10 years
from the date of discovery of the fraud (May 25, 1955) within
which to asses the tax or to file a suit for collection without
assessment. They content Yu de Lim can no longer question the
correctness of the assesments in view of her failure to raise in
the Court of Tax Appeals.
Issue/s:
1) WON the returns filed by respondent for the years
1948 to 1953 are false and fraudulentNO
2) WON taxes due from 1948 to 1953 can still be
collected
No,1948 to 1950; Yes- 1951 to 1953
Held/Ratio: decision of trial court is modified by ordering appellee
to pay appellant the sum of P26,182.00 as deficiency income taxes
for the years 1951, 1952 and 1953, plus 5% surcharge and 1%
monthly interest thereon from July 31, 1958 until payment of the

MONTERO // 3A TAX DIGESTS


AGATEP ALARCON ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO GUZMAN
LAYNO LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES ROCILLO TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA

full obligation, with costs.


1) No. While fraud is alleged, it has not been established by
BIR.
o It is one thing to say that the correctness of respondents
assessment can no longer be challenged on the same
technical grounds just stated by BIR and another to say that
respondent committed a deliberate fraud in her returns.
o On three different occasions, BIR arrived in three highly
different computations.
First, it accepted Yu de Lims yearly statement of
income from 1945 to 1953 and assessed her for
P2,732.37 which respondent paid.
In 1956, BIR came up with different figures for
the same period. It assessed respondent with
P22, 450.50 as deficiency tax.
In 1958, the Bureau assessed respondent P35,
379.63 for years 1948 to 1953, inclusive of 50%
surcharge
notwithstanding
the
fact
that
respondent filed her return that year and paid
for it.
2) Fraud not having been proven, the period of
limitation for assessment or collection was five years
from the filing of the return, according to Section
331 of the Tax Code. The right to assess or collect taxes
for 1948 to 1950 had already prescribed when the BIR
issued the deficiency tax assessment on July 17, 1956.
o

Tax years 1948 to 1950 cannot be deemed included in


the waiver of statute of limitations under the NIRC
executed by respondent on August 30, 1956. The five
year period for assessment may be extended upon
agreement between the Commissioner and the
taxpayer but such agreement must be made before
the expiration of the original period.

With respect to the tax year 1953, as to which the


return was filed by appellee on March 1, 1954, the
waiver was not necessary for the effectivity of the
assessment made on July 18, 1958, since such
assessment was well within the original five-year period

provided by law. After the assessment on July 18, 1958,


appellant had five years within which to file suit for
collection pursuant to Section 332 (c) of the tax code.
o

Appellee's theory that collection could be made only up


to the end of the period of extension stated in the
waiver, namely, December 31, 1958, is without merit.
Assessment and collection are two different processes.
Collection may be effected within five years after
assessment or within the period for collection agreed
upon in writing by the Commissioner of Internal
Revenue and the taxpayer before the expiration of such
five-year period.

"An assessment is not an action or


proceeding for the collection of taxes. It is
merely a notice to the effect that the amount
therein stated is due as tax and a demand
for the payment thereof. It is a step
preliminary, but essential to warrant
distraint, if still feasible, and, also, to
establish a cause for 'judicial action' as the
phrase is used in section 316 of the Tax Code
x x x" (Alhambra Cigar and Cigarette
Manufacturing Company v. The Collector of
Internal Revenue, L-12026, May 29, 1959).

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