EN BANC

[G.R. No. L-19495. November 24, 1966.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. LILIA

YUSAY GONZALES and THE COURT OF TAX APPEALS ,
respondents.

Solicitor General for the petitioner.

Ramon A. Gonzalez for respondent Lilia Yusay Gonzales.

SYLLABUS

1. TAXATION; DISPUTED ASSESSMENTS; APPEAL FROM A DECISION

THEREON TO BE BROUGHT TO THE COURT OF TAX APPEALS. — An action
involving a disputed assessment for internal revenue taxes falls within the
exclusive appellate jurisdiction of the Court of Tax Appeals (Sec. 7[1], Rep.
Act 1125; Blaquera vs. Rodriguez, L-11295, March 29, 1958). It is in that
forum to the exclusion of the Court of First Instance where the taxpayer can
ventilate his or her defense against the assessment.
2. ID.; ID.; ID.; 30-DAY PERIOD TO COMMENCE FROM DATE OF
RECEIPT OF COMMISSIONER OF INTERNAL REVENUE'S DECISION. — On
November 17, 1959 Lilia Yusay disputed the legality of the assessment of
February 13, 1958. On March 14, 1960, Lilia Yusay received the decision of
the Commissioner of Internal Revenue on a disputed assessment. On April
13, 1960 she filed her petition for review in the Court of Tax Appeals. HELD:
The appeal was seasonably interposed pursuant to Section 11 of Republic
Act 1125. We already ruled in St. Stephen's Association vs. Collector of
Internal Revenue (L-11238, August 21, 1958), that the counting of the thirty
days within which to institute an appeal in the Court of Tax Appeals should
commence from the date of receipt of the decision of the Commissioner on
the disputed assessment, not from the date the assessment was issued.
Accordingly, the thirty-day period should begin running from March 14,
1960, the date Lilia Yusay received the appealable decision. From said date
to April 13, 1960, when she filed her appeal in the Court of Tax Appeals, is
exactly thirty days. Hence, the appeal was timely.
3. ID.; ID.; PROBATE COURT WITHOUT JURISDICTION TO
ADJUDICATE THE SAME. — The settlement court is of limited jurisdiction. And
under the Rules (Rules 74-92, now Rules 73-91, Rules of Court), its authority
relates only to matters of estates and probate of wills of deceased persons.
Said Court has no jurisdiction to adjudicate on questions of disputed tax
assessments.
4. ID.; TAX RETURNS; FRAUD IN THE MAKING THEREOF MUST BE
PROVED. — Fraud is a question of fact. The circumstances constituting it
must be alleged and proved in the court below. And the finding of said court
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 as to its existence and non-existence is final unless clearly shown to be
erroneous. (Perez vs. Court of Tax Appeals, L-9738, May 31, 1957). As the
court a quo found that no fraud was alleged and proved therein, we see no
reason to entertain the Commissioner's assertion that the return was
fraudulent.
5. ID.; ID.; REQUIREMENTS OF SUBSTANTIAL COMPLIANCE WITH
THE LAW. — A return need not be complete in all particulars. It is sufficient if
it complies substantially with the law. There is substantial compliance (1)
when the return is made in good faith and is not false or fraudulent; (2) when
it covers the entire period involved; and (3) when it contains information as
to the various items of income, deduction and credit with such definiteness
as to permit the computation and assessment of the tax. (Jacob Mertens, Jr.,
The Law of Federal Income Taxation, 1958 ed., Vol. 10, Section 57.13.)
6. ID.; ID.; ESTATE AND INHERITANCE TAX RETURN IN CASE AT BAR
INSUFFICIENT. — Tax return filed by Jose S. Yusay was substantially
defective. First, it was incomplete. It declared only ninety-three parcels of
land representing about 400 hectares and left out ninety- two parcels
covering 503 hectares. Said huge under declaration could not have been the
result of an oversight or mistake. Second, the return mentioned no heir.
Thus, no inheritance tax could be assessed. As a matter of law, on the basis
of the return, there would be no occasion for the imposition of estate and
inheritance taxes.
7. ID.; ID.; RETURNS MADE ON THE WRONG FORM; PRESCRIPTION
DOES NOT RUN. — Where the return was made on the wrong form, the
Supreme Court of the United States held that the filing thereof did not start
the running of the period of limitations. The return filed in this case was so
deficient, that it prevented the Commissioner from computing the taxes due
on the estate. It was as though no return was made. The Commissioner had
to determine and assess the taxes on data obtained, not from the return, but
from other sources. We therefore hold the view that the return in question
was no return at all as required in Section 93 of the Tax Code. If the taxpayer
failed to observe the law, Section 332 of the National Internal Revenue Code
which grants the Commissioner 10 years period within which to bring an
action for tax collection applies. As stated, the Commissioner came to know
of the identity of the heirs on September 24, 1953 and the huge under
declaration in the gross estate on July 12, 1957. From the latter date, Section
94 of the Tax Code obligated him to make a return or amend one already
filed based on his own knowledge and information obtained through
testimony or otherwise, and subsequently to assess thereon the taxes due.
The running of the period of limitations under Section 332(a) of the Tax Code
should therefore be reckoned from said date. From July 12, 1957 to February
13, 1958, the date of the assessment now in dispute, less than ten years
have elapsed. Hence, prescription did not abate the Commissioner's right to
issue said assessment.
8. ID.; ID.; TAXPAYER'S WILLINGNESS TO PAY NO BAR TO RAISE
DEFENSES AGAINST THE TAX LEGALITY. — Commissioner contends that Lilia
Yusay is estopped from raising the defense of prescription because she failed
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 to raise the same in her answer to the motion for allowance of claim and for
the payment of taxes filed in the settlement court. Held: The Court of First
Instance acting as a settlement court is not the proper tribunal to pass upon
such defense, therefore it would be futile to raise it therein. Moreover, the
Tax Code does not bar the right to contest the legality of the tax after a
taxpayer pays it. Under Section 306 thereof, he can pay the tax and claim a
refund therefor. A fortiori his willingness to pay the tax is no waiver to raise
defenses against the tax's legality.

DECISION

BENGZON, J.P., J .:

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 estate were 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 estate and inheritance tax return declaring therein the following
properties:
Personal properties:
Palay P6,444.00
Carabaos 1,000.00 P7,444.00
Real properties:
Capital, 74 )
parcels )
Conjugal 19 )
parcels )
assessed at P179,760.00
—————
Total gross estate P187,204.00
—————
The return mentioned no heir.
Upon investigation however the Bureau of Internal Revenue found the
following properties:
Personal properties:
Palay P6,444.00
Carabaos 1,500.00
Packard Automobile 2,000.00
2 Aparadors 500.00 P10,444.00
————
Real properties:
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 Capital, 25 parcels
assessed P 87,715.32
1/2 of Conjugal, 130
parcels assessed at P121,425.00 P209,140.32
————— —————
Total P219,584.32
—————
The fair market value of the real properties was computed by increasing the
assessed value by forty percent.
Based on the above 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 January 25, 1955 the Bureau of Internal Revenue increased the
assessment to P8,225.89 as estate tax and P22,117.10 as inheritance tax
plus delinquency interest and demanded payment thereof on or before
February 28, 1955. Meanwhile, on February 16, 1955, the Court of First
Instance of Iloilo required Jose S. Yusay to show proof of payment of said
estate and inheritance taxes.
On March 3, 1955 Jose S. Yusay requested an extension of time within
which to pay the tax. He posted a surety bond to guarantee payment of the
taxes in question within one year. The Commissioner of Internal Revenue
however denied the request. Then he issued a warrant of distraint and levy
which he transmitted to the Municipal Treasurer of Pototan for execution.
This warrant was not enforced because all the personal properties subject to
distraint were located in Iloilo City.
On May 20, 1955 the Provincial Treasurer of Iloilo requested the BIR
Provincial Revenue Officer to furnish him copies of the assessment notices to
support a motion for payment of taxes which the Provincial Fiscal would file
in Special Proceedings No. 459 before the Court of First Instance of Iloilo. The
papers requested were sent by the Commissioner of Internal Revenue to the
Provincial Revenue Officer of Iloilo to be transmitted to the Provincial
Treasurer. The records do not however show whether the Provincial Fiscal
filed a claim with the Court of First Instance for the taxes due.
On May 30, 1956 the commissioner appointed by the Court of First
Instance for the purpose, submitted a recommended project of partition
which listed the following properties:
Personal properties:
Buick Sedan P 8,100.00
Packard car 2,000.00
Aparadors 500.00
Cash in Bank (PNB) 8,858.46
Palay 6,444.00
Carabaos 1,500.00 P27,402.46
————
Real properties:
Land, 174 parcels
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 assessed at P324,797.21
Buildings 4,500.00 P329,297.21
———— ————
Total P356,699.67
More than a year later particularly on July 12, 1957, an agent of the
Bureau of Internal Revenue apprised the Commissioner of Internal Revenue
of the existence of said recommended project of partition. Whereupon, the
Internal Revenue Commissioner caused the estate of Matias Yusay to be
reinvestigated for estate and inheritance tax liability. Accordingly, on
February 13, 1958 he issued the following assessment:
Estate tax P16,246.04
5% surcharge 411.29
Delinquency interest 11,868.90
Compromise
No notice of death P15.00
Late payment 40.00 55.00
——— ————
Total P28,581.23
————
Inheritance Tax P38,178.12
5% surcharge 1,105.86
Delinquency interest 28,808.75
Compromise for late payment 50.00
————
Total P69,142.73
————
Total estate and inheritance
P97,723.96
taxes
————
Like in previous assessments, the fail market value of the real properties was
arrived at by adding 40% to the assessed value.
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 estate of 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 a motion for its allowance with the settlement
court invoking priority of lien pursuant to Section 315 of the Tax Code.
On June 1, 1959, Lilia Yusay, through her counsel, Ramon Gonzalez,
filed an answer to the proof of claim alleging non-receipt of the assessment
of February 13, 1958, the existence of two administrators, namely, Florencia
Piccio Vda. de Yusay who administered two-thirds of the estate, and Lilia
Yusay, who administered the remaining one-third, and her willingness to pay
the taxes corresponding to her share, and praying for deferment of the
resolution on the motion for the payment of taxes until after a new
assessment corresponding to her share was issued.
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 On November 17, 1959 Lilia Yusay disputed the legality of the
assessment dated February 13, 1958. She claimed that the right to make the
same had prescribed inasmuch as more than five years had elapsed since
the filing of the estate and inheritance tax return on May 11, 1949. She
therefore requested that the assessment be declared invalid and without
force and effect. This request was rejected by the Commissioner in his letter
dated January 20, 1960, received by Lilia Yusay on March 14, 1960, for the
reasons, namely, (1) that the right to assess the taxes in question has not
been lost by prescription since the return which did not name the heirs
cannot be considered a true and complete return sufficient to start the
running of the period of limitations of five years under Section 331 of the
Tax Code and pursuant to Section 332 of the same Code he has ten years
within which to make the assessment counted from the discovery on
September 24, 1953 of the identity of the heirs; and (2) that the estate's
administrator waived the defense of prescription when he filed a surety bond
on March 3, 1955 to guarantee payment of the taxes in question and when
he requested postponement of the payment of the taxes pending
determination of who the heirs are by the settlement court.
On April 13, 1960 Lilia Yusay filed a petition for review in the Court of
Tax Appeals assailing the legality of the assessment dated February 13,
1958. After hearing the parties, said court declared the right of the
Commissioner of Internal Revenue to assess the estate and inheritance taxes
in question to have prescribed and rendered the following judgment:
"WHEREFORE, the decision of respondent assessing against the
estate of the late Matias Yusay estate and inheritance taxes is hereby
reversed. No. costs."

The Commissioner of Internal Revenue appealed to this Court and

raises the following issues:
1. Was the petition for review filed in the Court of Tax Appeals
within the 30-day period provided for in Section 11 of Republic Act 1125?
2. Could the Court of Tax Appeals take cognizance of Lilia Yusay's
appeal despite the pendency of the "Proof of Claim" and "Motion for
Allowance of Claim and for an Order of Payment of Taxes" filed by the
Commissioner of Internal Revenue in Special Proceedings No. 459 before the
Court of First Instance of Iloilo?
3. Has the right of the Commissioner of Internal Revenue to assess
the estate and inheritance taxes in question prescribed?
On November 17, 1959 Lilia Yusay disputed the legality of the
assessment of February 13, 1958. On March 14, 1960 she received the
decision of the Commissioner of Internal Revenue on the disputed
assessment. On April 13, 1960 she filed her petition for review in the Court
of Tax Appeals. Said Court correctly held that the appeal was seasonably
interposed pursuant to Section 11 of Republic Act 1125. We already ruled in
St. Stephen's Association vs. Collector of Internal Revenue, 1 that the
counting of the thirty days within which to institute an appeal in the Court of
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 Tax Appeals should commence from the date of receipt of the decision of the
Commissioner on the disputed assessment, not from the date the
assessment was issued.
Accordingly, the thirty-day period should begin running from March 14,
1960, the date Lilia Yusay received the appealable decision. From said date
to April 13, 1960, when she filed her appeal in the Court of Tax Appeals, is
exactly thirty days. Hence, the appeal was timely.
Next, the Commissioner attacks the jurisdiction of the Court of Tax
Appeals to take cognizance of Lilia Yusay's appeal on the ground of lis
pendens. He maintains that the pendency of his motion for allowance of
claim and for order of payment of taxes in the Court of First Instance of Iloilo
would preclude the Court of Tax Appeals from acquiring jurisdiction over Lilia
Yusay's Appeal. This contention lacks merit.
Lilia Yusay's cause seeks to resist the legality of the assessment in
question. Should she maintain it in the settlement court or should she
elevate her cause to the Court of Tax Appeals ? We say, she acted correctly
by appealing to the latter court. An action involving a disputed assessment
for internal revenue taxes falls within the exclusive appellate jurisdiction of
the Court of Tax Appeals. 2 It is in that forum, to the exclusion of the Court of
First Instance, 3 where she could ventilate her defenses against the
assessment.
Moreover, the settlement court, where the Commissioner would wish
Lilia Yusay to contest the assessment is of limited jurisdiction. And under the
Rules, 4 its authority relates only to matters having to do with the settlement
of estates and probate of wills of deceased persons. 5 Said court has no
jurisdiction to adjudicate the contentions in question, which — assuming they
do not come exclusively under the Tax Court's cognizance — must be
submitted to the Court of First Instance in the exercise of its general
Jurisdiction. 6
We now come to the issue of prescription. Lilia Yusay claims that since
the latest assessment was issued only on February 13, 1958 or eight years,
nine months and two days from the filing of the estate and inheritance tax
return, the Commissioner's right to make it has expired. She would rest her
stand on Section 331 of the Tax Code which limits the right of the
Commissioner to assess the tax within five years from the filing of the return.
The Commissioner claims that fraud attended the filing of the return;
that this being so, Section 332(a) of the Tax Code would apply. 7 It may be
well to note that the assessment letter itself (Exhibit 22) did not impute
fraud in the return with intent to evade payment of the tax. Precisely, no
surcharge for fraud was imposed. In his answer to the petition for review
filed by Lilia Yusay in the Court of Tax Appeals, the Commissioner alleged no
fraud. Instead, he broached the insufficiency of the return as barring the
commencement of the running of the statute of limitations. He raised the
point of fraud for the first time in the proceedings, only in his memorandum
filed with the Tax Court subsequent to resting his case. Said Court rejected
the plea of fraud for lack of allegation and proof, and ruled that the return,
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 although not accurate, was sufficient to start the period of prescription.
Fraud is a question of fact. 8 The circumstances constituting it must be
alleged and proved in the court below. 9 And the finding of said court as to
its existence and nonexistence is final unless clearly shown to be erroneous.
10 As the court a quo found that no fraud was alleged and proved therein, we
see no reason to entertain the Commissioner's assertion that the return was
fraudulent.
The conclusion, however, that the return filed by Jose S. Yusay was
sufficient to commence the running of the prescriptive period, under Section
331 of the Tax Code rests on no solid ground.
Paragraph (a) of Section 93 of the Tax Code lists the requirements of a
valid return. It states:
"(a) Requirements. — In all cases of inheritance or transfers
subject to either the estate tax or the inheritance tax, or both, or
where, though exempt from both taxes, the gross value of the estate
exceeds three thousand pesos, the executor, administrator, or anyone
of the heirs, as the case may be, shall file a return under oath in
duplicate, setting forth (1) the value of the gross estate of the decedent
at the time of his death, or, in case of a nonresident not a citizen of the
Philippines, or that part of his gross estate situated in the Philippines;
(2) the deductions allowed from gross estate in determining net estate
as defined in section eighty-nine; (3) such part of such information as
may at the time be ascertainable and such supplemental data as may
be necessary to establish the correct taxes."

A return need not be complete in all particulars. It is sufficient if it

complies substantially with the law. There is substantial compliance (1) when
the return is made in good faith and is not false or fraudulent; (2) when it
covers the entire period involved; and (3) when it contains information as to
the various items of income, deduction and credit with such definiteness as
to permit the computation and assessment of the tax. 11
There is no question that the estate and inheritance tax return filed by
Jose S. Yusay was substantially defective.
First, it was incomplete. It declared only ninety-three parcels of land
representing about 400 hectares and left out ninety-two parcels covering
503 hectares. Said huge under declaration could not have been the result of
an oversight or mistake. As found in L-11378, supra note 7, Jose S. Yusay
very well knew of the existence of the omitted properties. Perhaps his
motive in under declaring the inventory of properties attached to the return
was to deprive Lilia Yusay from inheriting her legal share in the hereditary
estate, but certainly not because he honestly believed that they did not form
part of the gross estate.
Second, the return mentioned no heir. Thus, no inheritance tax could
be assessed. As a matter of law, on the basis of the return, there would be
no occasion for the imposition of estate and inheritance taxes. When there is
no heir — the return showed none — the intestate estate is escheated to the
State. 12 The State taxes not itself.
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 In a case where the return was made on the wrong form, the Supreme
Court of the United States held that the filing thereof did not start the
running of the period of limitations. 13 The reason is that the return
submitted did not contain the necessary information required in the correct
form. In this jurisdiction, however, the Supreme Court refrained from
applying the said ruling of the United States Supreme Court in Collector of
Internal Revenue vs. Central Azucarera de Tarlac, L-11760-61, July 31, 1958,
on the ground that the return was complete in itself although inaccurate. To
our mind, it would not make much difference where a return is made on the
correct form prescribed by the Bureau of Internal Revenue if the data therein
required are not supplied by the taxpayer. Just the same, the necessary
information for the assessment of the tax would be missing.
The return filed in this case was so deficient that it prevented the
Commissioner from computing the taxes due on the estate. It was as though
no return was made. The Commissioner had to determine and assess the
taxes on data obtained, not from the return, but from other sources. We
therefore hold the view that the return in question was 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 the information upon which an assessment would be based. 14 His
duty complied with, the taxpayer is not bound to do anything more than to
wait for the Commissioner to assess the tax. However, he is not required to
wait forever. Section 331 of the Tax Code gives the Commissioner five years
within which to make his assessment. 15 Except, of course, if the taxpayer
failed to observe the law, in which case Section 332 of the same Code grants
the Commissioner a longer period. Non-observance consists in filing a false
or fraudulent return with intent to evade the tax or in filing no return at all.
Accordingly, for purposes of determining whether or not the
Commissioner's assessment of February 13, 1958 is barred by prescription,
Section 332 (a) which is an exception to Section 331 of the Tax Code finds
application. 16 We quote Section 332(a):
"SEC. 332. Exception as to period of limitations of assessment
and collection of taxes. — (a) In the case of a false or fraudulent return
with intent to evade tax or of a failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be
begun without assessment, at any time within ten years after the
discovery of the falsity, fraud or omission."

As stated, the Commissioner came to know of the identity of the heirs

on September 24, 1953 and the huge under declaration in the gross estates
on July 12, 1957. From the latter date, Section 94 of the Tax Code obligated
him to make a return or amend one already filed based on his own
knowledge and information obtained through testimony or otherwise, and
subsequently to assess thereon the taxes due. The running of the period of
limitations under Section 332(a) of the Tax Code should therefore be
reckoned from said date for, as aforesaid, it is from that time that the
Commissioner was expected by law to make his return and assess the tax
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 due thereon. From July 12, 1957 to February 13, 1958, the date of the
assessment now in dispute, less than ten years have elapsed. Hence,
prescription did not abate the Commissioner's right to issue said assessment.
Anent the Commissioner's contention that Lilia Yusay is estopped from
raising the defense of prescription because she failed to raise the same in
her answer to the motion for allowance of claim and the payment of taxes
filed in the settlement court (Court of First Instance of Iloilo), suffice it to
state that it would be unjust to the taxpayer if We were to sustain such a
view. The Court of First Instance acting as a settlement court is not the
proper tribunal to pass upon such defense, therefore it would be but futile to
raise it therein. Moreover, the Tax Code does not bar the right to contest the
legality of the tax after a taxpayer pays it. Under Section 306 thereof, he can
pay the tax and claim a refund therefore. A fortiori his willingness to pay the
tax is no waiver to raise defenses against the tax's legality.
WHEREFORE, the judgment appealed from is set aside and another
entered affirming the assessment of the Commissioner of Internal Revenue
dated February 13, 1958. Lilia Yusay Gonzales, as administratrix of the
intestate estate of Matias Yusay, is hereby ordered to pay the sums of
P16,246.04 and P39,178.12 as estate and inheritance taxes, respectively,
plus interest and surcharge for delinquency in accordance with Section 101
of the National Internal Revenue Code, without prejudice to reimbursement
from her co-administratrix, Florencia Piccio Vda. de Yusay for the latter's
corresponding tax liability. No costs. So ordered.
Concepcion, C. J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal,
Sanchez and Castro, JJ., concur.
Zaldivar, J., took no part.

RESOLUTION
ON MOTION FOR RECONSIDERATION
April 24, 1967
BENGZON, J.P., J.:

Respondent Lilia Yusay Gonzales seeks reconsideration of our decision

holding her liable for the payment of P97,723.96 as estate and inheritance
taxes plus delinquency penalties as administratrix of the intestate estate of
Matias Yusay. The grounds raised by her deserve this extended resolution.
Firstly, movant maintains that the issue of whether or not the estate
and inheritance tax return filed by Jose Yusay on May 13, 1949 was sufficient
to start the running of the statute of limitations on assessment, was neither
raised in the Court of Tax Appeals nor assigned as error before this Court.
The records in the Court of Tax Appeals however show the contrary.
Paragraph 2 of the answer filed by the Commission of Internal Revenue
states:
"2. That he likewise admits, as alleged in paragraph 1 thereof
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 having received the letter of the petitioner dated November 27, 1959
(Annex "A" of the Petition for Review), contesting the assessment of
estate and inheritance taxes levied against the Intestate Estate of the
late Matias Yusay, Special Proceedings No. 459, Court of First Instance
of Iloilo, on the ground that the said assessment has already
prescribed, but specifically denies the allegations that the assessments
have already prescribed, the truth of the matter being that the returns
filed on May 11, 1949 cannot be considered as a true, and complete
return sufficient to start the running of the period of five (5) years
prescribed in Sec. 331 of the Tax Code;"

This point was discussed in the memorandum of the Commissioner of

Internal Revenue, thus:
"In the estate and inheritance tax return filed by Jose S. Yusay
(Exhibits B & 1, pp. 14-20, B.I.R. records) the net value of the estate of
the deceased was claimed to be P203,354.00 and no inheritance tax
was shown as the heirs were not indicated. In the final computation of
the estate by an examiner of the respondent, the net estate was found
to be worth P410,518.38 (p. 105, B.I.R. records) or about more than
twice the original amount declared in the return. In the subsequent
investigation of this case, it was also determined that the heirs of the
deceased were Jose S. Yusay, a legitimate son, and Lilia Yusay, an
acknowledged natural child, (petitioner herein).
"Under the circumstances, we believe the return filed on May 11,
1949 was false or fraudulent in the sense that the value of the
properties were under declared and that the said return was also
incomplete as the heirs to the estate were not specified. Inasmuch as
the respondent was not furnished adequate data upon which to base
an assessment, the said return cannot be considered a true and
complete return sufficient to start the running of the period of
limitations of five (5) years prescribed in Section 331 of the Tax Code."

In the lower court the defense of the Commissioner of Internal Revenue

against Lilia Yusay Gonzales' plea of prescription, centered on the
insufficiency and fraudulence or falsity of the return filed by Jose Yusay. The
Court of Tax Appeals overruled the Commissioner of Internal Revenue. Said
of Tax Code:
"The provision of Section 332 (a) of the Tax Code cannot be
invoked in this case as it was neither alleged in respondent's answer,
nor proved during the hearing that the return was false or fraudulent
with intent to evade the payment of tax. Moreover, the failure of
respondent to charge fraud and impose the penalty thereof in the
assessments made in 1953, 1955 and 1956 is an eloquent
demonstration that the filing of petitioner's transfer tax return was not
attended by falsity or fraud with intent to evade tax.

xxx xxx xxx

"But respondent urges upon us that the filing of the return did
not start the running of the five (5) year period for the reason that the
return did not disclose the heirs of the deceased Matias, Yusay, and
contained inadequate data regarding the value of the estate. We
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 believe that these mere omissions do not require additional returns for
the same. Altho incomplete for being deficient on these matters, the
return cannot be regard as a case of failure to file a return where want
of good faith and intent to evade the tax on the part of petitioner are
not charged. It served as a sufficient notice of the Commissioner of
Internal Revenue to make his assessment and start the running of the
period of limitation. In this connection, it must be borne in mind that
the Commissioner is not confined to the taxpayer's return in making
assessment of the tax, and for his purpose he may secure additional
information from other sources. As was done in the case at bar, he
sends investigators to examine the taxpayer's records and other
pertinent data. His assessment is based upon the facts uncovered by
the investigation (Collector vs. Central Azucarera de Tarlac, G.R. Nos.
L-11760 and L-11761, July 31, 1958).

"Furthermore, the failure to state the heirs in the return can be

attributed to the then unsettled conflict raging before the probate court
as to who are the heirs of the estate. Such failure could not have been
a deliberate attempt to mislead the government in the assessment of
the correct taxes."

In his appeal, the Commissioner of Internal Revenue assigned as third

error of the Court of Tax Appeals the finding that the assessment in question
was "made beyond the five-year statutory period provided in Section 332(a)
of the Tax Code," and that the right of the Commissioner of Internal Revenue
to assess the estate and inheritance taxes has already prescribed. To sustain
his side, the Commissioner ventilated in his brief, fraud in the filing of the
return, absence of certain data from the return which prevented him from
assessing thereon the tax due and the pendency in this Court of L-11374
entitled "Intestate Estate of the late Yusay Gonzales" which allegedly had the
effect of suspending the running of the period of limitations on assessment.
Clearly, therefore, it would be incorrect to say that the question of
whether or not the return filed by Jose Yusay was sufficient to start the
running of the statute of limitations to assess the corresponding tax, was not
raised by the Commissioner in the Court of Tax Appeals and in this Court.
Second. Movant contends that contrary to Our ruling, the return filed
by Jose Yusay was sufficient to start the statute of limitations on
assessment. Inasmuch as this question was amply discussed in Our decision
sought to be reconsidered, and no new argument was advanced, We deem it
unnecessary to pass upon the same. There is no reason for any change on
Our stand on this point.
Third. Movant insists that since she administers only one-third of the
estate of Matias Yusay, she should not be liable for the whole tax. And she
suggests that We hold the intestate estate of Matias Yusay liable for said
taxes, one-third to be paid by Lilia Yusay Gonzales and two-thirds to be paid
by Florencia P. Vda. de Yusay.
The foregoing suggestion to require payment of two-thirds of the totals
taxes by Florencia P. Vda. de Yusay is not acceptable, for she (Florencia P.
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 Vda. de Yusay) is not a party in this case.
It should be pointed out that Lilia Yusay Gonzales appealed the whole
assessment to the Court of Tax Appeals. Thereupon, the Commissioner of
Internal Revenue questioned her legal capacity to institute the appeal on the
ground that she administered only one- third of the estate of Matias Yusay.
In opposition, she espoused the view, which was sustained by the Tax Court,
that in co-administration, the administratrices are regarded as one person
and the acts of one of them in relation to the regular administration of the
estate are deemed to be the acts of all; hence, each administratrix can
represent the whole estate. In advancing such proposition, Lilia Yusay
Gonzales represented the whole estate and hoped to benefit from the
favorable outcome of the case. For the same reason that she represented
her co- administratrix and the whole estate of Matias Yusay, she risked being
ordered to pay the whole assessment, should the assessment be sustained.
Her change of stand adopted in the motion for reconsideration to the
effect that she should be made liable for only one-third of the total tax,
would negate her aforesaid proposition before the Court of Tax Appeals. She
is now estopped from denying liability for the whole tax.
At any rate, estate and inheritance taxes are satisfied from the estate
and are to be paid by the executor or administrator. 1 Where there are two
or more executors, all of them are severally liable for the payment of the
estate tax. 2 The inheritance tax, although charged against the account of
each beneficiary, should be paid by the executor or administrator. 3 Failure
to pay the estate and inheritance taxes before distribution of the estate
would subject the executor or administrator to criminal liability under
Section 107(c) of the Tax Code.
It is immaterial therefore that Lilia Yusay Gonzales administers only
one-third of the estate and will receive as her share only said portion, for her
right to the estate comes after taxes. 4 As an administratrix, she is liable for
the entire estate tax. As an heir, she is liable for the entire inheritance tax
although her liability would not exceed the amount of her share in the
estate. 5 The entire inheritance tax which amounts to P39,178.12 excluding
penalties is obviously much less than her distributive share.
Motion for reconsideration denied.
Concepcion, C. J., Reyes, J.B.L., Dizon, Regala, Makalintal, Sanchez and
Castro, JJ., concur.
Zaldivar, J., did not take part.

Footnotes

1 . L-11238, August 21, 1958. See also Baguio Country Club Corporation vs.
Collector of Internal Revenue, et al., L-11419, April 22, 1959.

2. Sec. 7(1), Rep. Act 1125; Blaquera vs. Rodriguez, L-11295, March 29, 1958.
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 3. Castro vs. Blaquera, L-8429, February 28, 1957, 53 Off. Gaz. 2135; Ledesma vs.
Court of Tax Appeals, L-11343, January 29, 1958, 55 Off. Gaz. 2883.
4. Rules 74-92, Now Rules 73-91, Rules of Court.

5. Adapon vs. Naralit, 69 Phil. 383, 387.

6. Guzman vs. Anog and Anog, 37 Phil. 62.

7. Brief for Petitioner, p. 26.

8. Collector of Internal Revenue vs. Bautista, L-12250 & L-12259, May 27, 1959.
9. Gutierrez vs. Court of Tax Appeals, L-9738 & L-9771, May 31, 1957.

10. Perez vs. Court of Tax Appeals, L-9738, May 31, 1957.

11. Jacob Mertens, Jr., The Law of Federal Income Taxation, 1958 ed., Vol. 10,
Section 57.13.
12. Articles 1011-1014, Civil Code; Rules 91, Rules of Court.

13. Florsheim Brothers Dry-Goods Company, Ltd. vs. United States, 280 US 453, 74
L. ed. 542. See also Commissioner vs. Lana-Wells Co., 321 US 219, 88 L. ed.
684; Rockland &: Rockport Lime Corporation vs. Ham, 38 F. 2d. 239 (D.C.S.D.
Main, 1930); Dubuque Packing Co. vs. US, 126 F. Supp. 796 (D.C.N.D. Iowa,
1954).

14. FIorsheim Brothers Dry-Goods Company, Ltd. vs. United States, 280 U.S. 453,
74 L. ed. 542, 547.
15. Republic of the Philippines vs. Lim De Yu, L-17438, April 30, 1964.

16. Taligaman Lumber Co. vs. Collector of Internal Revenue, L- 15717, March 31,
1962: Tan Tiong Bio, et al., vs. Commissioner of Internal Revenue, L-15778,
April 23, 1962.

BENGZON, J.:

1. Section 95 (a) (1), Tax Code.

2. Baldwin v. Commissioner of Internal Revenue, 94 F. 2d 355, 20 AFTER 940.

3 . Jose Arañas, Annotation and Jurisprudence on the National Internal Revenue

Code, As Amended, Second Edition, 1963, Vol. I, p. 630.
4. Section 105, Tax Code.

5. Section 95(c), Tax Code.

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