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1 CIR vs. Gonzales

1 CIR vs. Gonzales

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Published by: Jan Michael Dela Cruz on Jun 22, 2012
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Commissioner of Internal Revenue vs. Gonzales and the CTAG.R. No. L-19495. November 24, 1966.
FACTS: Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13, 1948,leaving two heirs, namely, Jose S. Yusay, a legitimate child, and Lilia Yusay Gonzales,an acknowledged natural child. Intestate proceedings for the settlement of his estatewere instituted in the Court of First Instance of Iloilo (Special Proceedings No. 459).Jose S. Yusay was therein appointed administrator.On May 11, 1949 Jose S. Yusay filed with the Bureau of Internal Revenue an estateand inheritance tax return declaring that the gross estate of Matias Yusay wasP187,204.00. The return mentioned no heir. Upon investigation, however, the BIR foundthat several properties were not included in the return filed by Jose Yusay and that thetotal gross estate of the deceased should be P219,584.32.Based on the foregoing findings, the Bureau of Internal Revenue assessed on October 29, 1953 estate and inheritance taxes in the sums of P6,849.78 and P16,970.63,respectively.On July 12, 1957, an agent of the Bureau of Internal Revenue apprised theCommissioner of Internal Revenue of the existence of a reamended project of partition.Whereupon, the Internal Revenue Commissioner caused the estate of Matias Yusay tobe reinvestigated for estate and inheritance tax liability. The CIR found a hugeunderdeclaration of the gross estate of the deceased.In view of the demise of Jose S. Yusay, said assessment was sent to his widow, Mrs.Florencia Piccio Vda. de Yusay, who succeeded him in the administration of the estateof Matias Yusay.No payment having been made despite repeated demands, the Commissioner of Internal Revenue filed a proof of claim for the estate and inheritance taxes due and amotion for its allowance with the settlement court in voting priority of lien pursuant toSection 315 of the Tax Code.On April 13, 1960 Lilia Yusay filed a petition for review in the Court of Tax Appealsassailing the legality of the assessment dated February 13, 1958. After hearing theparties, said Court declared the right of the Commissioner of Internal Revenue toassess the estate and inheritance taxes in question to have prescribed.Hence, this petition.
ISSUE: Whether or not the right of the Commissioner of Internal Revenue to assess theestate and inheritance taxes in question has prescribed?DECISION: Lilia Yusay claims that since the latest assessment was issued only onFebruary 13, 1958 or eight years, nine months and two days from the filing of the estateand inheritance tax return, the Commissioner's right to make it has expired. She wouldrest her stand on Section 331 of the Tax Code which limits the right of theCommissioner to assess the tax within five years from the filing of the return.The conclusion, however, that the return filed by Jose S. Yusay was sufficient tocommence the running of the prescriptive period under Section 331 of the Tax Coderests on no solid ground. A return need not be complete in all particulars. It is sufficient if it complies substantiallywith the law. There is substantial compliance (1) when the return is made in good faithand is not false or fraudulent; (2) when it covers the entire period involved; and (3) whenit contains information as to the various items of income, deduction and credit with suchdefiniteness as to permit the computation and assessment of the tax.First, it was incomplete. It declared only ninety-three parcels of land representing about400 hectares and left out ninety-two parcels covering 503 hectares. Said huge under declaration could not have been the result of an over-sight or mistake. As found in L-11378,
note 7, Jose S. Yusay very well knew of the existence of the ommitedproperties. Perhaps his motive in under declaring the inventory of properties attached tothe return was to deprive Lilia Yusay from inheriting her legal share in the hereditaryestate, but certainly not because he honestly believed that they did not form part of thegross estate.Second, the return mentioned no heir. Thus, no inheritance tax could be assessed. As amatter of law, on the basis of the return, there would be no occasion for the impositionof estate and inheritance taxes. When there is no heir - the return showed none - theintestate estate is escheated to the State. The State taxes not itself.The return filed in this case was so deficient that it prevented the Commissioner fromcomputing the taxes due on the estate. It was as though no return was made. TheCommissioner had to determine and assess the taxes on data obtained, not from thereturn, but from other sources. We therefore hold the view that the return in questionwas no return at all as required in Section 93 of the Tax Code.The law imposes upon the taxpayer the burden of supplying by the return theinformation upon which an assessment would be based. His duty complied with, thetaxpayer is not bound to do anything more than to wait for the Commissioner to assessthe tax. However, he is not required to wait forever. Section 331 of the Tax Code givesthe Commissioner five years within which to make his assessment. Except, of course, if the taxpayer failed to observe the law, in which case Section 332 of the same Code

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