G.R. No.

140944 April 30, 2008

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the
deceased JOSE P. FERNANDEZ, petitioner,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

Facts:

 The case involves the nullification of the Bureau of Internal Revenue's deficiency estate
tax assessment against the Estate of Jose P. Fernandez.
 The petitioner, Rafael Arsenio S. Dizon, is the Judicial Administrator of the Estate of Jose
P. Fernandez.
 The respondents are the Court of Tax Appeals and the Commissioner of Internal
Revenue.
 Jose P. Fernandez died on November 7, 1987, and a petition for the probate of his will
was filed with the Regional Trial Court (RTC) of Manila.
 Retired Supreme Court Justice Arsenio P. Dizon and petitioner Rafael Arsenio P. Dizon
were appointed as Special and Assistant Special Administrators, respectively, of the
Estate.
 Justice Dizon informed the Bureau of Internal Revenue (BIR) of the special proceedings
for the Estate.
 The petitioner alleged that several requests for extension of the period to file the required
estate tax return were granted by the BIR.
 The estate tax return was eventually filed, showing a NIL estate tax liability.
 The BIR issued certifications stating that the taxes due on the transfer of properties had
been fully paid.
 However, the BIR later issued a deficiency estate tax assessment against the Estate,
demanding payment of a significant amount.
 The petitioner filed a motion for reconsideration, but it was denied.
 The Court of Tax Appeals (CTA) upheld the BIR's assessment but made its own
computation of the deficiency estate tax.
 The petitioner appealed to the Court of Appeals (CA), arguing that the BIR's evidence
was inadmissible since it was not formally offered.
 The CA affirmed the CTA's ruling, stating that the filing of the estate tax return and the
issuance of BIR certifications did not deprive the BIR of its authority to re-examine the
return and assess the estate tax.
Issue:
  Whether or not the estate tax return filed by the Estate and the BIR certifications should
be considered in determining the deficiency estate tax.
 Whether or not the valid claims of creditors against the Estate should be allowed as
deductions.
Ruling:
The Court ruled in favor of the petitioner, nullifying the BIR's deficiency estate tax assessment
against the Estate.
Ratio:
The Court held that the admission of evidence that was not formally offered by the BIR is
contrary to the Rules of Court and previous rulings. The Court emphasized the importance of
formal offer of evidence and the need for strict compliance with the rules. Since the BIR's
evidence was not formally offered, it should not have been admitted by the CTA and CA.
The Court disagreed with the CTA and CA's determination of the deficiency estate tax. The
Court stated that the estate tax return filed by the Estate and the BIR certifications should be
considered in determining the deficiency estate tax. The filing of the estate tax return and the
issuance of BIR certifications indicate that the taxes due on the transfer of properties had been
fully paid. Therefore, the deficiency estate tax assessment by the BIR is not valid.
The Court ruled that the valid claims of creditors against the Estate should be allowed as
deductions. The claims of the Estate's creditors had been condoned, and therefore, should be
considered as valid deductions in determining the deficiency estate tax.
The Court did not provide a ruling on the validity of the double imputation of values in the estate
tax return, as it was not one of the main issues raised in the case.