Republic v Ricarte

In 1961, BIR issued a notice to Ricarte demanding that he pay his tax deficiency for the year 1958. The
demand was unheeded so BIR filed a complaint with the lower courts who dismissed the complaint
saying that the action has already prescribed.
Issue: can BIR still collect? NO.
The 5 year prescription begins to run on the assessment of the taxes which is in 1959 and not the
reassessment in 1961.

Facts

1. On March 2, 1959, defendant Ricarte filed his income tax return for the year 1958. On April 6, 1959,
the CIR made the corresponding assessment and fixed at P222.00 the defendant's income tax liability
pursuant to the express provision of Section 51(a) of the National Internal Revenue Code
(Commonwealth Act No. 466), then in effect. Defendant paid his income tax in two equal installments of
P 111.00 each the first on May 15, 1959 and the second on August 17, 1959.

2. RA 2343 took effect in June 1959, where tax payer assesses himself, files his return and pays.

3. 1961- BIR discovered that Ricarte had a deficiency of 1,134. No payment was made despite demand
so a complaint was filed for collection in 1966.

4. City Court of Cebu dismissed the complaint on the ground of prescription- more than 5 years has
already elapsed.

5. CFI Cebu affirmed lower court’s decision.

ISSUE: Can BIR still collect deficiency thru judicial proceeding- NO. the action has prescribed.

The court compared the old and new laws.

Old law: It is the commissioner who assesses the income.
New law: taxpayer assesses himself – pay as you file system.

Appellee filed his income tax return for the year 1958 on March 2, 1959 and the same was assessed by the
Bureau of Internal Revenue on April 6, 1959. The tax was paid in two installments. The Bureau of Internal
Revenue reviewed the said return and found out a deficiency in the assessment it previously made and the
income tax paid by the appellee. A notice of assessment was sent to the appellee on January 19, 1961. Such
subsequent assessment undertaken by the BIR was based merely on the income tax return filed by the
appellee where no assessment has been made by him. As has been said, the amount of tax due was
previously computed by the BIR. Finding that it made an error, the Bureau reassessed the income tax return
of the appellee; but such reassessment was made pursuant to the old law and not under the amendatory act.

The SC agreed with the lower court that the present action was filed after the prescriptive period of five
(5) years provided for in Section 332(c) of the National Internal Revenue Code which reads:

(c) Where the assessment of any internal revenue tax has been made within the period of limitation
above described such tax may be collected by distraint or levy or by a proceeding in court, but only if
begun (1) within five years after the assessment of the tax,

BIR contends that the present action was filed within the five-year prescriptive period- that the
subsequent notice of assessment was made and appellee notified thereof on January 19, 1961; that
from January 19, 1961 up to the date this case was filed in court on January 14, 1966, only four years,
eleven months and twenty-five days had elapsed. But no evidence has been presented by the appellant
that the appellee actually received a copy of that assessment notice regarding the alleged deficiency tax.