Republic v. Gancayco
REITERATIONFacts
The Antecedents: On June 13, 1946, appellee Santiago Gancayco was assessed P11,203.19 for various taxes for the first quarter of 1946. Demand for payment was made, and upon failure to pay, a warrant of distraint and levy was issued on September 6, 1946, but could not be served as Gancayco's whereabouts were unknown. Procedural History: Gancayco contacted the Collector on October 13, 1947, requesting a reinvestigation. After a reinvestigation, the assessment was revised to P10,982.30 plus P100.00 compromise penalty on March 3, 1949. Gancayco requested more time to submit evidence, which was granted until April 1, 1949. On March 31, 1949, Gancayco submitted a letter detailing his objections and evidence, requesting a thorough reinvestigation. No action was taken on this request until May 17, 1960, when the Collector informed Gancayco that his request for cancellation due to prescription was denied, citing the ruling in Collector of Internal Revenue vs. Suyoc Consolidated Mining Co., Inc., and demanded payment. The Republic filed a collection case on July 19, 1960. Gancayco moved to dismiss based on prescription, invoking Section 332 of the Revenue Code. The lower court denied the motion. In its Answer, Gancayco reiterated the defense of prescription. The lower court sustained the defense of prescription and dismissed the case, finding that the filing of the action on July 19, 1960, was too late, being based on the final assessment dated May 17, 1960, after the action had long prescribed. The Republic appealed. The Petition: The Republic of the Philippines appealed the decision of the lower court which dismissed the collection case on the ground of prescription.
Issue(s)
Whether the right of the State to collect taxes from the appellee has prescribed. Whether the extra-judicial demands made upon the appellee tolled the prescriptive period.
Ruling
The Supreme Court affirmed the decision of the lower court, holding that the right of the State to collect the taxes due from the appellee had prescribed.
Ratio Decidendi
On the issue of prescription: The Court held that the right of the State to collect taxes had prescribed. The original assessment was made on June 13, 1946, and the revised assessment on March 3, 1949. Section 332 of the Revenue Code provides that court proceedings for the collection of taxes must be instituted within five (5) years after the assessment was made. The collection case was filed on July 19, 1960, which is more than ten (10) years after the revised assessment and more than five (5) years after the original assessment. The Court clarified that while the taxpayer requested a reinvestigation on March 31, 1949, and placed evidence at the Collector's disposal, the Collector ignored the request, and no action was taken until May 17, 1960. The act of requesting a reinvestigation alone does not suspend the period; the request must be granted to effect suspension. The Collector gave the appellee until April 1, 1949, to submit evidence, and there were no impediments to filing the collection case from April 1, 1949, onwards. The Court noted that the Collector's own letter on May 17, 1960, indicated that the appellee had been asking for cancellation due to prescription, implying no action had been taken on the request for re-examination of documents. Therefore, the five-year period had long lapsed when the case was instituted. On the issue of tolling by extra-judicial demands: The Court found the argument that extra-judicial demands tolled the prescriptive period to be untenable. Citing Collector of Internal Revenue v. Solano, the Court stated that the only agreement that can suspend the running of the prescriptive period for tax collection by court action is a written agreement between the taxpayer and the Collector of Internal Revenue, entered into before the expiration of the five-year prescriptive period. The Internal Revenue Code, being a special law, prevails over general provisions of the Civil Code regarding prescription. Therefore, extra-judicial demands, if any, did not serve to suspend or toll the period of prescription.
Main Doctrine
The mere request for a reinvestigation by a taxpayer does not automatically suspend the running of the prescriptive period for the collection of taxes. The request must be granted and acted upon by the Collector of Internal Revenue to effect suspension. Furthermore, extra-judicial demands do not toll the prescriptive period for tax collection, as the Internal Revenue Code, a special law, prevails over general provisions of the Civil Code.