Republic v. Lopez Topic: Prescription of Governments Right to Collect Relevant Provisions: Secs. 203, 222-223, NIRC G.R. No.

L-18007 March 30, 1963 Plaintiff-appellant: Republic of the Philippines Defendant-appellee: Benito H. Lopez Summary: Lopez filed his ITR and was assessed by the BIR demanding payment of P200k++. Lopez requested for reconsideration which resulted in a reduction of the assessment to P20k++. Without settling his liability, Lopez asked for another reinvestigation. BIR assessed an additional P6k++ deficiency income tax. Again, Lopez did not pay and ask for another reinvestigation. BIR acceded to his request provided he executed a waiver of statute of limitations. Lopez executed an unconditional waiver imposing a deadline (Dec 1957) within which the government should finish its reinvestigation. BIR ignored the deadline imposed and instead issued an assessment on March 1960. Due to nonpayment, BIR filed a collection suit before the CFI. Lopez filed a motion to dismiss on the ground of prescription. CFI granted the motion to dismiss. The issue is whether or not the deadline is binding and operative, and ultimately, whether or not the action to collect has already prescribed. SC held that the action has not yet prescribed since under the NIRC the government has 5-year prescriptive period within which it may sue to collect an assessed tax to be counted from the last revised assessment resulting from the reinvestigation AND the time employed in reinvestigation should be deducted from the total period of limitation. Regarding the December 1957 deadline, SC seriously doubts that the CIR could validly agree to reduce the prescriptive period to less than what was granted by law to the detriment of the State, since it diminishes the opportunities of collecting taxes due to the Republic. Facts:

Benito Lopez filed his 1950 ITR on December 6, 1950. Nov. 13, 1952: BIR issued an assessment on November 13, 1952, demanding payment of P245,100.29. Nov. 30, 1952: Lopez requested for reconsideration, which was denied by the BIR. st 1 reinvestigation: Lopez reiterated his petition for reconsideration, this time, it was given due course and resulted in a reduction of the assessment to P20,346.14 on May 29, 1954 (wow, anlaki ng nabawas) Satisfied, Lopez manifested in his letter that he will settle his obligation by the end of the month. 2 reinvestigation: However, without settling his liability, Lopez asked for another reinvestigation, which was (again) granted by the BIR. Result: BIR issued an assessment demanding payment of P6,019 as additional deficiency income tax. (so, total na P26,365.14) Again, Lopez did NOT pay despite repeated demands. rd January 16 and February 11, 1956 3 reinvestigation: For the third time, Lopez prayed for a reinvestigation. (Strangely) BIR acceded to Lopezs request, PROVIDED he waives the statute of limitations Instead of executing an unconditional waiver, Lopez imposed a deadline of December 31, 1957, within rd which the government should finish the 3 reinvestigation. Demanding!! March 23, 1960: BIR ignored the same and issued an assessment demanding P 26,365.14 August 13, 1960: Due to non-payment, BIR filed a collection suit before CFI Baguio Lopez filed a motion to dismiss on the ground that the action has already prescribed CFI granted the motion to dismiss
nd

Issue/Held: W/N the action has prescribed (related: w/n the December 31, 1957 limit contemplated in the Waiver of Statute of Limitations is binding and operative) NO!!! The ORDER OF DISMISSAL appealed from is REVOKED AND SET ASIDE, and the records are ordered REMANDED to the court of origin for further proceedings conformable to this opinion. Ratio: COMPUTATION: PRESCRIPTIVE PERIOD The 5-year prescriptive period within which the government may sue to collect an assessed tax is to be COUNTED FROM THE LAST REVISED ASSESSMENT RESULTING FROM A REINVESTIGATION asked for by the taxpayer AND that were a taxpayer demands a reinvestigation, the TIME EMPLOYED IN REINVESTIGATION SHOULD BE DEDUCTED from the total period of limitation

Applying these rules to the present case Prescriptive Period starts Filing should be made to run within 5 years May 29, 1954 August 13, 1960 First revised assessment Filing of Complaint TOTAL PERIOD from the revised assessment to filing MINUS

Running of PP Suspended during this period January 16, 1956 April 22, 1960*

6 years, 2 months and 15 days *weird, facts of the case stated March but in the ratio naging April

Time consumed in considering and deciding the taxpayers subsequent petition for reconsideration and reinvestigation 4 years, 3 months and 6 days

(in words) st The 1 reinvestigation was granted and a reduced assessment issued on May 29, 1954 from which date the government had 5 years for bringing an action to collect. nd The 2 reinvestigation was asked on January 16, 1956 and lasted until it was decided on April 22, 1960 st Deducting the above interval from the period intervening between the 1 revised (and executory) assessment to the filing of the complaint [from May 29,1954 to August 13, 1960] leaves ONLY 1 year, 3 months, and 6 days COUNTED AGAINST THE GOVERNMENT Conclusion: PRESCRIPTIVE PERIOD OF 5 YEARS HAD NOT ELAPSED FROM THE REVISED ASSESSMENT REGARDING THE DECEMBER 1957 LIMIT The fixing by the taxpayer of a prescriptive period "not beyond December 31, 1957" operates to reduce the time available to the government for the collection of the tax from 29 May 1954 to 31 December 1957 only, which is much less than the 5 years prescribed by law It is seriously to be doubted that the said official could validly agree to reduce the prescriptive period to less than that granted by law to the detriment of the state, since it diminishes the opportunities of collecting taxes due to the Republic. Even if because of the date fixed by the taxpayer, the second reinvestigation asked on 16 January 1956 should have been decided on 31 December 1957, and that the interruption due to the second reinvestigation was, therefore, only 1 year, 11 months, and 16 days, still it would appear that the government brought suit after only 4 years, 9 months, and 1 day, and, therefore, well within the prescriptive 5-year period. Other Matters: Wrong Remedy Another ground for reversing the dismissal of the complaint is that the proper remedy of the taxpayer against the assessment complained of was to appeal the ruling of the CIR to the CTA. The failure to appeal the CIRs ruling is a waiver of the defenses against it, and estops the taxpayer from subsequently raising those objections thereafter. Chismis time SC calls attention to the extraordinary reduction by the revenue authorities of the taxes due in this case from the original P245,100.29 to less than one tenth of it (P20,346.14) upon reinvestigation. Such a result is ample evidence that the first assessment was carelessly made, without regard to the true facts, and it strongly reflects upon the efficiency of the revenue examiner who made the grossly excessive assessment. Equally anomalous is the fact that after the taxpayer had promised to pay the computed tax, and after he had failed to keep his promise, the tax authorities still agreed to a further revision of the assessment Irregularities of this kind inevitably provoke suspicion over the competency and honesty of the tax collecting operations, and it is expected that the competent authorities will take immediate and drastic steps to stop such deplorable practices.