CTA Case No. 4636 (Decision)

- ..... REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY DOLORES S. FAJARDO, P r~ t i t i o n e t~ , - versus C.T.A. CASE NO. 4636 I THE COMMISSIONER OF INTERNAL REVENUE, x - �- - � - r~e spondeTlt. - - - - --- x DEC 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 Inte rna 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 Di 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 ollec t the �alleged d e fi c ienc y capital gains ta>< has alt~eady r:wesct~ibed wwsua nt 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. 1 960 8'3 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

DECI SION - C.T.A. CASE NO. 4636 - 2- <I f\.1~0 , so 1 e, f o t�' a n consiclet~ ation of P611,E. ~3 0.00 <E >< h . " (.")") c::. On May 1 3 , l. 38 5 , petit i o n e t~ e nt e t~e d int o an agreement wi t h a certain Met icia P. J ingco whereby, for a consideration o f P 55 , 00 0.00, Met icia undet~ took "to pay and settle the CC'\ pital Ga ins Tax, transfet~ ta><es, fe e s, s tamp tax, and other incidental e><pense s II in conne c tion with the sale of the s ub j ect property to the INK <Exh. "B") .��.::.- . On Ma y 1.5, 19 B5 , p et i. t i on e t~ f i 1 e d w i t h the BIR her Individual Capital Gai n s Return on the sale of the subject ( p. 10- L::: , BIR In said t~ettwn, peti t ionet~ claimed as deduc tio n form the gross selling price the amounts of P5,E.40.00, P442,500.00 and P82 , 12 0.00, all e gedly repre se nting th e acquisition cost of the property, the value of the i m pt~ovem ent s s he thet~ eon, and the expenses of sale, rf?spect ively; Subsequently, the B I R' s As s essment Performance Control Division sent petit i onet~ an undated lettet~ <E><h. "C") t~equit~ing her to su bmit to said office the doc~mentary evidence in s upport of her c laimed deductions. This letter wa s s ent to petition et~ at h et~ add t~ess of t~ e c ot~d , i . e . , No. 13 .) Banlat Road, Tandang Quezon City. / /{

DECISION - C.T.A. CASE NO. 4636 - 3- Petitioner, failed t o c omply with the BIR's demand; On Septembet~ 30, 1 98 G, 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 sen t 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 v a lue of the impt~ ovements and the selling expE~nse s (ex ce 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 den ce. 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 ; 4 3u

DECISION - C.T.A. CASE NO. 4636 - 4- 8. Subsequently, the B I R s ent p e t i. t j o n e t~ t h t~ e e t t~ ace t~ 1 e t t e t~ s , r e s p e c t i v e l y d a t e d J u n e 1 , 1988, S ept em bet~ 7 , 1988 and August 7 , 1 '38 9 , a t het~ ad d t~ e s s o f t~ e c o n :l , but s t i l l , p e t i t i o n e t~ f a i 1. e d t o s e t t 1 e h e t~ u n p a i d a s s e s s men t ( s e e p p. 't 5- 't�7 , B I R Hecon:1. s; see also Exh. "F"); '3 . On Octobet~ 2 2 , 1990, th e BIR sent anothet~ letter to petitioner, giv i ng her a final ch a nce to settle h et~ unpaid asses s ment p 'J t~ s �J an t to the pt~ovi s ions of RMCl No. 29 - '30 (Exh. " F- 1"). This was followed by another letter of the s ame tenor, dated Fe bt~ u a ry 15, 1 '3'�:31. I n b o t h i n s t an c e s , pet i t i on e t~ did not make any response to the BIR; 10. On F e b t~ u. at~ y ;::~ 1, 1 gg 1 ' of D i s t t~ <:< i n t an tl I o t~ L e v y was s e t~ v e d on pet i t i o n e t~ at >. her addt~ ess of t~ecot~ d <Exh. " G" In addi t ion, a copy of said war rant was al s o ser v e d on p etitio ner at No. 85 P. Tuazon cot~. Pl a n as Si te II I , Quezon City Let ic i a S . ~~a s u n�J. t~ an , a 1 1 e g e rJ 1 y p e t i t i on e t�� ' s g t~ an d d a u g h t e t~ ( p � 5'~ , B I R HeconJ s) ; 11. On Febt~uat~y 27 , 19'31, pet it ionet~, thr o ugh het~ counsel, sent a letter to the re s pondent Commissionet~, t~equest ing that the of D i s tt~ a i n t and I o t~ Levy be 1 i f t e d on the g t~ o u n d that t~ espondent' s to issue the same had 43~

DECISION - C.T.A. CASE NO. 4636 - 5- allegedly alt~eady pt~e s et~ i be d, 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 or coll ected. The sole i s sue which thi s Co u r t is ca ll e d upon t o r~ esolve ot~ not t h e Wat~ 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 u nder th e Nat ional Internal Revenue Code. It is well settled that limit a tions upon the right of the government to assess and collec t taxes will not be pt'e sum ed in the absence of cleat' J.e~]islation t o t h e 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

DECISION - C.T.A. CASE NO. 4636 - 6- statutory provision. (51 Am. Jm~. 857; 10 Met~tens Law on Fedet~aJ. Income Taxation, p;::~t~. 57. 02). It f o 1 1 o v.J s t hat i n t h e a b s en c e o f e x p t~ e s s s t at u t or~ y provision, the r~ight of the gover~nment to assess .J unpaid taxes is i~prescriptible <Aranas, Updated National Intet~nal Revenue Code [7th ed., 1988], p. 881). Quoted below are related provisions of the Tax Code beat~ in g on the issue at bar~ which concet~n limitations on the gover~nment ' s and exceptions thereto: "Section 203. Pet~iod of limitation upon assessment and collection. - Except as pt~ovided in the succe e ding section, internal r~evenue ta_x es shall be asses.~~Q. within t hr~ ef?_~eat~s aft et~ tb e 1 ast d<lY. Q.t~esct~ibed by law for~ the fi.l.j_!)JL_Qf___~jl~ r~et ur~n, and no proceec!iJ.lg_ _i n com~ t ~jthout <E\_?Se_2.sm~pt for the CQ_.llection of ?..!::.~ch tax~..2...___? hi:_\_ll be b~~~j:;~_th~ expit~ation of such� pet~iod: Pt~ovided, That in a c a se wher~ e a t�e tut' n is fil e d beyond th e pet' i od pt~e sct~i bed by 1 aw, the t h r~ e e- y e .:n~ p e t~ i ad s h a 1 1 be co u n t e d ft� o m the day the r~ ettwn li'J as filed. Fot' the pur~poses of this section, a t� ettwn is fil~?d befot'e the last d a y pt'esct'ibed by law for the filing there of sh~ll be considet'ed as filed on such last day." (Underscoring supplied.) "Section 223. Exceptions as to pet~iod of limitation of assessment and ~. collection of taxes. "xxx XXX XXX "(c) ~')ny intet~nal revenue t~~ which has been assess!?d within the per i !?..S:.j__Q_.f_Li!!!.t.t a t_j_Q_!l.___.�_g_q_~..g - g_g_?.�X~i...Q.gQ. _Qy__ !!@Y__b e._._._g_q_l_.!,~<;] _e d __ -~Ji_..?_!.t' ~.in_L_o t~

-' DECISION - C.T.A. CASE NO. 4636 - 7- 1 e v__y__()J":.___g_y____~___.P!2.9 c~~_f!j_f.1..9...___Lf.l__c Q~~~..!~.t w i t _h i __ n______i.b..!'.:~_e. _y_~-~t:.?_ _f_.Q 1-_}_q_w. :i,_n_g___..!_h e ~s s e S._S._!"_e..n..t ....._ ....___q_f_ ____t .U_E.!.________t_.9..~. o I I <Under sco ring supplied ) "x xx XXX XXX S ection 2 12 4 . S u s pen sio n of runn ing o f s tatute. - �-r h e r� unniT.l.fl_fl_f.__j ; he s tat_!:_tj;_~ o f _limitation pr� ovided in Sect ion 2 0 3 a n d 2,::: ::; on the .!!laking of asses s m _e..nj;~nd_!;_h~ b ~.!l.i!lll i n g o f d j _s tt� a i 11 t or� 1 ~ o r� a Q..!~ Oceeding in t;Ot!t't for� C _9j,__!_g_r-: t_ion, in r� ~ect of a!l.Y.__ de_f.ici en~- ' shall b e .?Jl?..Q end e d x x x wh e..D..__:th.~__!!_�_~.Q.~'i..E.!.l'.' c a 11 n o t QJL..Lo cat e d_i_!LJ.b~.-~ci!=l r� e s s g i v ~.!Lt.?..Y h i m i n th_i:'_ _r�et ur�n ___f.U_g~QO_~h_i_c t}.. a tax is be_:!:_n~ss ~s sed _Q!_ __.�Q_L~cted; P 1� ovided, Th at , if t he tax p a yer� i nf or� m the C o mmi s.s i o 11 e t' a n y c h a n g e i n a c1 d r� e s s , t h e running of the s t a tute of limi t a t ion s I.'Ji 1 1 not b e s u sp end e d ; I.'Jh e n t h e wa t�t� a n t o f di s tra i nt a nd levy is duly s er ve d u po n th e t a ><payet�, his a u t h ot� i z e d t�e pr�esentati v e, or� a . memb e r� of hi s h o us eho 1 d with s �J f f ic i ent d i sc r� e t i on, .:m d no pr� opet�ty cou l d be locat r.!d ; x x x . " <Un derscoring s upplied.> The BIR mu s t ma ke a ta x a ss ess ment wi thin three ye ars aft er the c orrespond e nt re turn i s filed but no a c tion can b e brought by i t for the r ecover y of the t a x after� the lapse of th at per� iod in c a s e no a s s ess ment has been made. Any t a x asses~ed must in tm� n be collected by the t� em e dies pt� ovided by law, i.e. distt� aint ot' levy, within tt�wee yeat�s following the assessment save in c a s es specified by law. In t he case at bat�, it i s it� onic that while taxpay e t� admowledged having at her� .I a ci d t ' e s s o f t' e c o t ' d a l 1 1 e t t e r� s s en t b y t h e B I R,

DECISION - C.T.A. CASE NO. 4636 - 8- including the assess ment for deficie n cy capita l gain s tax <E><h. II C" ' "D"' " E " and F II 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 becau se 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 b el ie f th a t representation s were made by Me ticia 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 i t s . 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

DECISION - C.T.A. CASE NO. 4636 - 9- F t "' Oin the da te of thE? C:l.s ,, essment (1st assessment dat ed Jul y 2 7 , 1987 ; 2nd as s essment dated Nove mbet' 23 , :1. '387 ) to the date the Wat"t"a nt of Distt�'e:d.nt and/ o t" Le vy was set�v ed on Febt' IJ <'H' Y 21, 1 '3 '3 l. , a p e t' i o d o f mo t" e t h an t h t ' e e <3 ) y e at" s h a s This was beyond the period of limitation p t"ovided by Section ;:::;:=: J ( c ) of the Tax Code as amende d whereby a tax which as been as s e s s e d may be co l l e c t e d by d i s t t" '"' i n t o t" l e v y o t' by a proceeding in court <Section 2 23<c >, NIRC). T hus , it was held that wh et' e the assessment of an y i n t e t' n a l t�' e v e n u e t ax has be en 111 io:\ d e w i t h j n t h e tim e allowed by lai-J, the tax must be collected withi n three ( 3) ye ars after the ~s s essment of the tax. <C oll ~ctor v . Cleme nt , L - :1. 21.0 1, Januat' Y 24 , 1'35'3. ) The three-year pr escriptive period is meant to set' Ve as a limit a tion on th e t'ight of the Go v e t' n men t t o co 1 J. e c t t ax e s by t h e s u mma t' y me t h o d of d ist t' aint a nd levy . <Collector of I nternal Rev enue v. Zuluet a and Court of Tax Appeals, 100 Phi J.. 872) The right of the Collector o f Internal Revenue to collect t ax by the su mmat"Y methods of distt'ai n t an d levy must be exet'ci sed within the p eriod of t hree years . <Collec tor of I n ternal Reven u e v. Ave 1 i no and Co u r t of Ta>c Appe a l s, 100 Phi 1. 327 > I t i s man d at o t' y i; hat the t'ight of the ~/0 ..1 44 ~ I

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 elled and annulled fot~ being is s ued beyond the Re s ponde nt Commissioner of Internal Revenue is hereby ord ered since it has already prescribed. I t i s j u s t 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 1ant 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. SO ORDERED . /' Quezon City, Metro Manila, May 12, 19'33. / .) LAli- ~~ci~ I EL<K. GRUBA Judge

DECI SION - C.T.A. CASE NO. 4636 - 11 - WE CONCUR: TO D. ACOSTA ~ RAMON - - ;D J. E/__~I - 0. Associate Judge CE RT I F I CAT 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 Cons titution . ~\Q,~ ERNESTO D. ACOSTA Pt�esi ding Judge Court of Tax Appeals 44v