VOL.108,JULY26,1960 Republic of the Phils. vs. Ablaza [No.L14519.

July26,1960]

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REPUBLIC OF THE PHILIPPINES, plaintiff and appellant,vs.LUISG.ABLAZA,defendantandappellee

1. INCOME TAX, COLLECTION, LIMITATION OF ACTIONS, PURPOSE; BENEFICIAL BOTH TO GOVERNMENT AND CITIZENS.The law prescribing a limitation of actions for the collection of the income tax is beneficialbothtotheGovernmentandtoitscitizens,tothe government because tax officers would be obliged to act properly in the making' of assessments and to citizens becauseafterthelapseoftheperiodofprescriptioncitizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books oftaxpayers,nottodeterminethelatter'srealliabilitybutto takeadvantageofeveryopportunitytomolestpeacefullaw abiding citizens. Without such a legal defense taxpayers wouldfurthermorebeunderobligationtoalwayskeeptheir books and keep them open for inspection subject to harrassmentbyunscrupuloustaxagents. 2. ID.; ID.; ID.; REMEDIAL MEASURE; INTERPRETATION.The law of prescription being a remedialmeasureshouldbeinterpretedinawayconducive to bringing about the beneficient purpose of affording protection to the taxpayer within the contemplation of the Commissionwhichrecommendtheapprovalofthelaw.

APPEALfromajudgmentoftheCourtofFirstInstanceof Manila.Alvendia,J. ThefactsarestatedintheopinionoftheCourt.

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PHILIPPINEREPORTSANNOTATED Republic of the Phils. vs. Ablaza

Assistant Solicitor General Jose P. Alejandro and Special Attorneys Cirilio R. FranciscoandSantiago M. Kapunanfor appellant. Martin B. Istaroforappellee. LABRADOR,J.: AppealfromajudgmentoftheCourtofFirstInstanceof Manila,Hon.CarmelinoG.Alvendia,presiding,dismissing an action instituted by the Government to recover income taxes from the defendantappellee corresponding to the years1945,1946,1947and1948. The record discloses that on October 3, 1951, the CollectorofInternalRevenueassessedincometaxesforthe years1945,1946,1947and1948ontheincometaxreturns ofdefendantappelleeLuisG.Ablaza.Theassessmentstotal P5,254.70 (Exhibit "I"). On October 16, 1951, the accountants for Ablaza requested a reinvestigation of Ablaza'staxliability,onthegroundthat(1)theassessment iserroneousandincomplete;(2)theassessmentisbasedon thirdpartyinformationand(3)neitherthetaxpayernorhis accountantswerepermittedtoappearinperson(Exh."J"). The petition for reinvestigation was granted in a letter of theCollectorofInternalRevenue,datedOctober17,1951. OnOctober30,1951,theaccountantsforAblazaagainsent another letter to the Collector of Internal Revenue submittingacopyoftheirowncomputation(Exh."L").On October 23, 1952, said accountants again submitted a supplementalmemorandum(Exh."M").OnMarch10,1954, theaccountantsforAblazasentalettertotheexaminerof accountsandcollectionsoftheBureauofInternalRevenue, stating:
"In this connection, we wish to state that this case is presently under reinvestigation as per our request dated October 16, 1951, and your letter to us dated October 17, 1951, and that said tax liabilitybeingonlyatentativeassessment,wearenotasyetadvised oftheresultsoftherequestedreinvestigation. "Inviewthereof,wewishtorequest,infairnesstothetaxpayer concerned,thatwebefurnishedacopyofthedetailedcomputation
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Republic of the Phils. vs. Ablaza of the alleged tax liability as soon as the reinvestigation is terminatedtoenableustoprovetheveracityofthetaxpayer'sside ofthecase,andifitisfoundoutthatsaidassessmentisproperand inorder,weassureyouofourassistanceinthespeedydispositionof thiscase."(Exh."P")

On February 11, 1957, after the reinvestigation, the Collector of Internal Revenue made a final assessment of theincometaxesofAblaza,fixingsaidincometaxesforthe yearsalreadymentionedatP2,066.56(Exh."Q").Noticeof thesaidassessmentwassent(Exhs."V","W"and"X")and uponreceiptthereoftheaccountantsofAblazasentaletter to the Collector of Internal Revenue, dated May 8, 1957, protestingtheassessments,onthegroundthattheincome taxesarenolongercollectibleforthereasonthattheyhave already prescribed. As the Collector did not agree to the allegedclaimofprescription,actionwasinstitutedbyhimin theCourtofFirstInstancetorecovertheamountassessed. TheCourtofFirstInstanceupheldthecontentionofAblaza that the action to collect the said income taxes had prescribed.Againstthisdecisionthecasewasbroughthere onappeal,whereitisclaimedbytheGovernmentthatthe prescriptive period has not f ully run at the time of the assessment, in view especially of the letter of the accountants of Ablaza, dated March 10, 1954, pertinent provisionsofwhicharequotedabove. It is of course true that when on October 14, 1951, Ablaza's accountants requested a reinvestigation of the assessment of the income taxes against him, the period of prescription of action to collect the taxes was suspended. (Sec. 333, C. A. No. 466.) The provision of law on prescription was adopted in our statute books upon recommendationofthetaxcommissionerofthePhilippines whichdeclares:
"Under the former law, the right of the Government to collect the tax does not prescribe. However, in fairness to the taxpayer, the Governmentshouldbeestoppedfromcollectingthetaxwhere
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PHILIPPINEREPORTSANNOTATED Republic of the Phils. vs. Ablaza

itfailedtomakethenecessaryinvestigationandassessmentwithin 5yearsafterthefilingofthereturnandwhereitfailedtocollectthe taxwithin5yearsfromthedateofassessmentthereof.Justasthe governmentisinterestedinthestabilityofitscollections,soalsoare the taxpayers entitled to an assurance that they will not be subjected to further investigation for tax purposes after the expirationofareasonableperiodoftime."(Vol.Il,ReportoftheTax CommissionofthePhilippines,pp.321322)

Thelawprescribingalimitationofactionsforthecollection oftheincometaxisbeneficialbothtotheGovernmentand toitscitizens;totheGovernmentbecausetaxofficerswould beobligedtoactpromptlyinthemakingofassessment,and to citizens because after the lapse of the period of prescriptioncitizenswouldhaveafeelingofsecurityagainst unscrupuloustaxagentswhowillalwaysfindanexcuseto inspectthebooksoftaxpayers,nottodeterminethelatter's realliability,buttotakeadvantageofeveryopportunityto molest peaceful, lawabiding citizens. Without such a legal defensetaxpayerswouldfurthermorebeunderobligationto alwayskeeptheirbooksandkeepthemopenforinspection subjecttoharassmentbyunscrupuloustaxagents.Thelaw on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommendtheapprovalofthelaw. The question in the case at bar boils down to the interpretationofExhibit"P",datedMarch10,1954,quoted above.Ifsaidletterbeinterpretedasarequestforfurther investigation or a new investigation, different and distinct fromtheinvestigationdemandedorprayedforinAblaza's firstletter,Exhibit"L",thentheperiodofprescriptionwould continue to be suspended thereby. But if the letter in question does not ask for another investigation, the result would be just the opposite. In our opinion the letter in question,Exhibit"P",doesnotask
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VOL.108,JULY26,1960 Ong Kue vs. Republic of the Phils.

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foranotherinvestigation.Itsfirstparagraphquotedabove showsthatthereinvestigationthenbeingconductedwasby

virtueofitsrequestofOctober16,1951.Allthattheletter asks is that the taxpayer be furnished a copy of the computation.Therequestmaybeexplainedinthismanner: AsthereinvestigationwasallowedonOctober1,1951and onOctober16,1951,thetaxpayersupposedorexpectedthat atthattime,March,1954thereinvestigationwasaboutto be finished and he wanted a copy of the reassessment in ordertobepreparedtoadmitorcontestit.Nowheredoesthe letterimplyademandorrequestforadifferentornewand distinct reinvestigation from that already requested and, therefore,thesaidlettermaynotbeinterpretedtoauthorize orjustifythecontinuanceofthesuspensionoftheperiodof limitations. Wefindtheappealwithoutmeritandweherebyaffirm the judgment of the lower court dismissing the action. Withoutcosts. Pars, C. J., Bengzon, Montemayor, Bautista Angelo, Concepcin, Reyes, J. B. L., Endencia, Barrera, and Gutirrez David, JJ.,concur. Judgment affirmed. ________________

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