Tuesday, February 21, 2012

Republic vs. Gancayco (1964)

Facts: Appellee Santiago Gancayco was assessed by the Collector of Internal Revenue for P11,203.19, for various taxes corresponding to the first quarter of the year 1946. Despite demand for payment of such amount, appellee failed to pay. Hence, the Collector issued a warrant of Distraint and Levy to enforce the same. 

In a letter (first letter) to the CIR, appellee asked for a reinvestigation as to the amount due from him alleging that his records show that his obligation is not as high as P11, 203.19. The letter was answered by the CIR more than a year later, stating that after a reinvestigation of the case, two items would have to be revised. From P11, 203.19, the assessment was reduced to P10, 982.30, plus P100 as compromise penalty. 

Appellee sent another letter (second letter) to the Collector, claiming that he found additional evidence supporting his objection and asking for some time to prepare and submit such evidence. One day before the deadline, appellee wrote the Collector (third letter), asking for another thorough reinvestigation of his case, on the ground that he has in his possession books and documents that will support his objection to the taxes assessed against him. 

No reinvestigation was conducted by the Collector or any of his agents or representatives. However, more than ten years after the third letter of appellee, the Collector wrote him, saying that his repeated request for the cancellation of said assessments on the ground of prescription is untenable because the statute of limitations is suspended upon the request of the taxpayer for reinvestigation or reconsideration of its tax liability. Appellee was requested that the amounts of P10,370.19 and P612.11 be paid to the City Treasurer of Manila, otherwise, judicial action will be instituted against him. 

Appellee failed to pay the amount in question, thus a case was filed against him. He moved to dismiss the complaint on the ground of prescription, invoking Sec. 332 of the Revenue Code. The CFI granted the motion to dismiss. 

(1) Whether or not the right of the State to collect the taxes due from appellee has prescribed 

(2) Whether or not an extra-judicial demand suspends the period of prescription 

(1) YES. Sec. 332 of the Revenue Code, among others, provides: 

(c) Where the assessment of any internal revenue tax has been made within the period of limitation above prescribed such tax may be collected by distraint or levy or by a proceeding in court, but only if begun (1) within five years after the assessment of the tax, ... 

Under the circumstances, it is evident that the right of the State to collect the taxes due from appellee has prescribed. 

Whether the computation of time starts from June 13, 1946 (1st assessment) or March 3, 1949 (revised assessment), the filing of the tax collection case on July 19, 1960, is far beyond the period (more than 5 years). 

The act of requesting a reinvestigation alone does not suspend the period. The request should first be granted in order to effect suspension. 

While it is true that on March 31, 1949, appellee requested a thorough reinvestigation of his case, he, at the same time, placed at the disposal of the Collector all the evidence he had for such purpose. Apparently, the Collector ignored the request, for the records and documents were not at all examined. 

(2)  NO.  The only agreement that can suspend the running of the prescriptive period for the collection of taxes by court action is a written agreement between the taxpayer and the CIR, entered into before the expiration of the five-year prescriptive period of limitation prescribed by law. 

Manifestly, therefore, the extra-judicial demands made, if any, did not serve to suspend or toll the period of prescription, the provisions of the Civil Code notwithstanding. It should be noted, in this connection, that the Internal Revenue Code being a special law, prevails over a general law. 

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1 comments: on "Republic vs. Gancayco (1964)"

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