CIR v.

Tulio

G.R. No. 139858 October 25, 2005

Facts: On February 28, 1991, Arturo Tulio, respondent taxpayer,

received from CIR a demand letter with two final assessment

notices requesting payment of his deficiency percentage taxes for

the taxable years 1986 and 1987; taxpayer failed to act on the

assessment notices. On October 15, 1991, to enforce the

collection of the taxes, CIR issued a warrant of distraint and/or

levy against Tulio. However, he has no properties which can be

placed under distraint and/or levy. On 3 different dates, CIR sent

letters to taxpayer giving him the last opportunity to settle his

deficiency tax liabilities; But the latter was obstinate. Thus, on

October 29, 1997, petitioner filed with the RTC of Baguio City a

civil action for the collection of the deficiency percentage

taxes. Taxpayer filed a motion to dismiss alleging that the

complaint was filed beyond the three-year prescriptive period

provided by Section 203 of the NIRC.

Issue: whether the complaint in the said civil case may be

dismissed on the ground of prescription.

Held: RTC erroneously applied Section 203 of the NIRC providing

for the three-year prescriptive period from the filing of the tax

return within which internal revenue taxes shall be assessed. As

shown by the records, respondent failed to file a tax return for

1986 and 1987. Such case is covered by Section 223 (now 222)

of the NIRC providing for a ten-year prescriptive period from the

discovery of the omission to file a tax return within which a

proceeding in court may be filed. On September 14, 1989,

petitioner found respondent’s omission to file a tax return.

Hence, the running of the ten-year prescriptive period within

which to assess and collect the taxes due from respondent

commenced on that date. The two final assessment notices were

issued on February 28, 1991, well within the prescriptive period of

three (3) years. When respondent failed to question or protest

the deficiency assessments thirty (30) days therefrom, or until

March 30, 1991, the same became final and executory. Thereby

the RTC had jurisdiction over this case, not the CTA for it is the

ordinary courts which can entertain BIR money claims based on

assessments that have become final and executory. Since the

estate tax assessment had become final and unappealable, there

is now no reason why petitioner should not enforce its authority to

collect respondent’s deficiency percentage taxes for 1986 and

1987.