Collector of Internal Revenue v. Angeles
REITERATIONFacts
The Antecedents: Marta Dizon died in 1928, leaving real and personal properties to four heirs, including respondent Servando de los Angeles. In March 1935, the administrator filed a return indicating an inheritance tax liability of P185.94 for each heir. The Collector of Internal Revenue issued assessment notices in August 1935, demanding payment by August 25, 1935. All heirs paid except Servando de los Angeles, who refused on the grounds that he had not yet received his share and that court proceedings regarding estate distribution were pending. Procedural History: Despite subsequent demands and instructions for distraint and levy, the tax remained uncollected from Servando de los Angeles. On January 28, 1955, approximately 20 years after the assessment, a warrant of distraint and levy was issued. Servando de los Angeles protested the warrant, not disputing the assessment's legality, but arguing that the collection had prescribed. He petitioned the Court of Tax Appeals (CTA) to declare the warrant illegal and enjoin its enforcement. The Appeal: The Court of Tax Appeals upheld the taxpayer's contention that the collection had prescribed. The Collector of Internal Revenue, the Provincial Treasurer of Rizal, and the Municipal Treasurer of Marikina, Rizal, appealed the CTA's decision to the Supreme Court, seeking to review the legality of collecting an assessed tax after a lapse of approximately 20 years.
Issue(s)
Whether an internal revenue tax assessed in 1935 could still be collected by distraint and levy approximately 20 years thereafter. Whether the proviso in Section 331 of the National Internal Revenue Code, stating that the limitation shall not apply to cases already investigated prior to the approval of the Code, affects the collection period prescribed in Section 332(c).
Ruling
The Supreme Court affirmed the decision of the Court of Tax Appeals. The Court ruled that the collection of the assessed tax by distraint and levy was barred by prescription, as it was initiated more than five years after the assessment.
Ratio Decidendi
On Issue 1: The Supreme Court held that the collection of the assessed internal revenue tax was barred by prescription. Section 332(c) of the National Internal Revenue Code explicitly states that an assessed tax may be collected by distraint or levy, but only if the proceeding is begun within five years after the assessment of the tax. In this case, the assessment was made in 1935, and the warrant of distraint and levy was issued in 1955, approximately 20 years later. This clearly exceeded the five-year period allowed for collection after assessment, rendering the collection attempt illegal. On Issue 2: The Supreme Court rejected the petitioners' contention that the proviso in Section 331 of the National Internal Revenue Code, which exempts cases investigated prior to the Code's approval from its limitation period, also exempts them from the collection period in Section 332(c). The Court explained that a proviso typically restricts or qualifies only the provision immediately preceding it. Therefore, the limitation mentioned in the proviso of Section 331 refers only to the assessment and collection periods established within Section 331 itself, and not to the distinct collection period provided in Section 332(c). The Court emphasized that taxing acts, including limitations on assessment and collection, should be construed liberally in favor of the taxpayer.
Main Doctrine
The Supreme Court held that the five-year period for collection by distraint or levy, as stipulated in Section 332(c) of the National Internal Revenue Code, is a strict limitation on the power of the Collector of Internal Revenue. This period commences from the date of assessment. The Court clarified that the proviso in Section 331, which exempts cases investigated prior to the Code's approval from its limitation period, does not extend to the collection period prescribed in Section 332(c). Therefore, an assessment made within the statutory period for assessment does not grant an indefinite period for collection; collection must still be initiated within five years from the assessment date.