Facts: Petitioner, as administrator of the estate of the deceased, Matias H.

Aznar,
seeks a review and nullification of the decision of the Court of Tax Appeals ordering
the petitioner to pay the government the sum of P227,691.77 representing
deficiency income taxes for the years 1946 to 1951. An investigation by the
Commissioner of Internal Revenue (CIR) ascertained the assets and liabilities of the
taxpayer and it was discovered that from 1946 to 1951, his net worth had
increased every year, which increases in net worth was very much more than the
income reported during said years. The findings clearly indicated that the taxpayer
did not declare correctly the income reported in his income tax returns for the
aforesaid years. Petitioner avers that according to the NIRC, the right of the CIR to
assess deficiency income taxes of the late Aznar for the years 1946, 1947, and
1948 had already prescribed at the time the assessment was made on November
28, 1952; there being a five year limitation upon assessment and collection from
the filing of the returns. Meanwhile, respondents believe that the prescription
period in the case at bar that is applicable is under Sec. 332 of the NIRC which
provides that: "(a) In the case of a false or fraudulent return with intent to evade
tax or of a failure to file a return, the tax may be assessed, or a proceeding in court
for the collection of such tax may be begun without assessment, at any time within
ten years after the discovery of the falsity, fraud or omission". Petitioner argues
said provision does not apply because the taxpayer did not file false and fraudulent
returns with intent to evade tax.

Issue: Whether or not the deceased Aznar filed false or fraudulent income tax
returns and subsequently, whether the action has not prescribed.

Held: The petition is without merit.

The respondent CTA concluded that the very "substantial under declarations of
income for six consecutive years eloquently demonstrate the falsity or fraudulence
of the income tax returns with an intent to evade the payment of tax." The ordinary
period of prescription of 5 years within which to assess tax liabilities under Sec. 331
of the NIRC should be applicable to normal circumstances, but whenever the
government is placed at a disadvantage so as to prevent its lawful agents from
proper assessment of tax liabilities due to false returns, fraudulent return intended
to evade payment of tax, or failure to file returns, the period of ten years from the
time of the discovery of the falsity, fraud or omission even seems to be inadequate.
There being undoubtedly false tax returns in this case, We affirm the conclusion of
the respondent Court of Tax Appeals that Sec. 332 (a) of the NIRC should apply
and that the period of ten years within which to assess petitioner's tax liability had
not expired at the time said assessment was made.