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MONTERO // 3A TAX DIGESTS

AGATEP • ALARCON • ARCAINA • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • COLOQUIO • CUALOPING • DE LUIS • DIPLOMA • FAJARDO • GO • GUZMAN
LAYNO • LIM, J. • LIM, Q. • LUNA • OCAMPO • ONG • PASCUAL • REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK • VILLARIN, L. • VILLARIN, P. • VILLARIVERA

REPUBLIC v. LIM DE YU (Alarcon)
[GR. No. L-17438; December 29, 1960]
“Dapat di pa prescribed bago ka mag waive”
Recit-Ready:
Facts: Lim de Yu filed her income tax returns for the years 1958
to 1953. BIR assessed her taxes which she paid. BIR
assessed her for income tax deficiency for the same
period of 1948 to 1953 in the total of P22, 450.50. She
protested and requested an reinvestigation. She signed a
“waiver on the statute of limitations in the NIRC” on
August 30, 1956. In July 18, 1958, BIR assessed her for
the third time for tax deficiency of P35, 379.63 which
included a 50% surcharge for the same tax periods. Upon
her failure to pay for the taxes due, BIR filed a collection
case against her on May 11, 1958. Respondent alleges
that BIR’s action to assess and collect has already
prescribed as the 5 year period has lapsed. BIR contends
that it has 10 years from discovery of fraud to collect
from Yu de Lim as her return were fraudulent, as there
was a great disparity from BIR’s assessment from the
returns filed.
Issue/s:
1) WON the returns filed by respondent for the years
1948 to 1953 are false and fraudulent—NO
2) WON taxes due from 1948 to 1953 can still be collected
—NO
Held:
1) Fraud was not established by BIR. The prescriptive period
then is 5 years from the filing of the return. Prescriptive
period for tax on years 1948 to 1950 has already prescribed
when Yu de Lim executed a “waiver” on August 30, 1956.
What is only included in the “waiver” was 1951 and 1953
taxes. With respect to the tax year 1953, as to which the
return was filed by appellee on March 1, 1954, the waiver was
not necessary for the effectivity of the assessment made on
July 18, 1958, since such assessment was well within the
original five-year period provided by law. After the

assessment on July 18, 1958, appellant had five years within
which to file suit for collection pursuant to Section 332 (c) of
the tax code.
Facts:
 Rita Lim de Yu filed her yearly income tax returns from 1948 to
1953. BIR assessed her taxes due and she paid them
accordingly.
 On July 17, 1955 BIR issued a deficiency tax assessment for the
years 1945 to 1953 in the total amount of P22,450.50. She
protested and requested a reinvestigation. On August 30,
1956, she signed a “waiver” of the statute on limitations under
the Tax Code as a condition on the reinvestigation requested.
 On July 18, 1958, the BIR issued to her tax assessment notices
for the years 1948 to 1953 totalling P35,379.63. This
assessment, like the last one, covered not only the basic
deficiency income taxes but also 50% thereof as surcharge.
 Upon respondent’s failure to pay, an action for collection was
filed against her in Court of First Instance in Cotabato on May
11, 1959. After trial, the suit was dismissed. BIR appeled to the
Supreme Court.
 BIR claims that the returns filed by Yu de Lim for 1948 to 1953
are fraudulent as they are much less than as computed by the
BIR and under par (a) Sec 332 of the Tax Code, it has 10 years
from the date of discovery of the fraud (May 25, 1955) within
which to asses the tax or to file a suit for collection without
assessment. They content Yu de Lim can no longer question the
correctness of the assesments in view of her failure to raise in
the Court of Tax Appeals.
Issue/s:
1) WON the returns filed by respondent for the years
1948 to 1953 are false and fraudulent—NO
2) WON taxes due from 1948 to 1953 can still be
collected
—No,1948 to 1950; Yes- 1951 to 1953
Held/Ratio: decision of trial court is modified by ordering appellee
to pay appellant the sum of P26,182.00 as deficiency income taxes
for the years 1951, 1952 and 1953, plus 5% surcharge and 1%
monthly interest thereon from July 31, 1958 until payment of the

MONTERO // 3A TAX DIGESTS AGATEP • ALARCON • ARCAINA • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • COLOQUIO • CUALOPING • DE LUIS • DIPLOMA • FAJARDO • GO • GUZMAN LAYNO • LIM. to establish a cause for 'judicial action' as the phrase is used in section 316 of the Tax Code x x x" (Alhambra Cigar and Cigarette Manufacturing Company v. the Bureau assessed respondent P35. J. 1) No. December 31. L. • VILLARIVERA full obligation. the period of limitation for assessment or collection was five years from the filing of the return. and. namely.63 for years 1948 to 1953. o On three different occasions. according to Section 331 of the Tax Code. Assessment and collection are two different processes. 1958. • LIM. o Tax years 1948 to 1950 cannot be deemed included in the “waiver of statute of limitations under the NIRC” executed by respondent on August 30. 2) Fraud not having been proven. since such assessment was well within the original five-year period provided by law. as to which the return was filed by appellee on March 1. • VILLARIN. 379. o Appellee's theory that collection could be made only up to the end of the period of extension stated in the waiver. May 29.37 which respondent paid. also. is without merit.50 as deficiency tax. Q. it has not been established by BIR.732. While fraud is alleged. 1954. with costs. 450. the waiver was not necessary for the effectivity of the assessment made on July 18. .  "An assessment is not an action or proceeding for the collection of taxes. appellant had five years within which to file suit for collection pursuant to Section 332 (c) of the tax code.  In 1958. The right to assess or collect taxes for 1948 to 1950 had already prescribed when the BIR issued the deficiency tax assessment on July 17. • LUNA • OCAMPO • ONG • PASCUAL • REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK • VILLARIN. 1956.  First. Collection may be effected within five years after assessment or within the period for collection agreed upon in writing by the Commissioner of Internal Revenue and the taxpayer before the expiration of such five-year period. it accepted Yu de Lim’s yearly statement of income from 1945 to 1953 and assessed her for P2. It is merely a notice to the effect that the amount therein stated is due as tax and a demand for the payment thereof. 1959). The Collector of Internal Revenue. 1958. o With respect to the tax year 1953. It is a step preliminary. After the assessment on July 18. BIR came up with different figures for the same period. 1956. The five year period for assessment may be extended upon agreement between the Commissioner and the taxpayer but such agreement must be made before the expiration of the original period. L-12026. P. but essential to warrant distraint.  In 1956. inclusive of 50% surcharge notwithstanding the fact that respondent filed her return that year and paid for it. 1958. BIR arrived in three highly different computations. if still feasible. o It is one thing to say that the correctness of respondent’s assessment can no longer be challenged on the same technical grounds just stated by BIR and another to say that respondent committed a deliberate fraud in her returns. It assessed respondent with P22.