Republic v. Hizon
REITERATIONFacts
The Antecedents: On July 18, 1986, the Bureau of Internal Revenue (BIR) issued a deficiency income tax assessment to respondent Salud V. Hizon for P1,113,359.68 covering the fiscal year 1981-1982. Respondent did not contest the assessment. On January 12, 1989, the BIR served warrants of distraint and levy to collect the tax deficiency but did not proceed to dispose of the attached properties. On November 3, 1992, respondent requested a reconsideration of the assessment. The BIR denied this request on August 11, 1994. Procedural History: On January 1, 1997, the BIR filed a case with the Regional Trial Court (RTC) to collect the tax deficiency. The RTC dismissed the case upon respondent's motion, citing lack of authority from the BIR Commissioner to file the suit and prescription of the action. The Petition: The Republic of the Philippines, represented by the Commissioner of Internal Revenue, filed a petition for review, assailing the RTC's dismissal.
Issue(s)
Whether the civil case for collection of taxes was filed without the approval of the Commissioner in violation of Section 221 of the National Internal Revenue Code (NIRC). Whether the action for collection of taxes had already been barred by the statute of limitations.
Ruling
The petition is denied. The Regional Trial Court's dismissal of the BIR's complaint is affirmed.
Ratio Decidendi
On the issue of authority to file the case: The Court held that the RTC erred in dismissing the case for lack of authority. While Section 221 of the NIRC requires the Commissioner's approval for civil actions to recover taxes, Revenue Administrative Orders (RAOs) Nos. 5-83 and 10-95 authorize the Regional Director or Chief of the Legal Division to sign pleadings for tax collection cases. These RAOs are valid administrative issuances that carry the force of law as they implement Section 4(d) of the NIRC, which allows the BIR to specify conditions for instituting legal actions. Furthermore, amendments to the NIRC by R.A. No. 8424 explicitly allow the BIR Commissioner to delegate powers to subordinate officials, and the power to approve tax collection cases is not among the exceptions. Therefore, the complaint signed by the Chief of the Legal Division and verified by the Regional Director complied with the legal requirements. On the issue of prescription: The Court ruled that the action had prescribed. The assessment was issued on July 18, 1986. The respondent's request for reconsideration on November 3, 1992, was filed beyond the 30-day period mandated by Section 229 of the NIRC (now Section 228), making the assessment final and demandable. Consequently, this late request did not suspend the running of the prescriptive period for collection. The Court also clarified that the timely service of warrants of distraint and levy on January 12, 1989, suspends the prescriptive period for collection only when the BIR relies solely on the summary remedy of distraint and levy, as held in Advertising Associates Inc. v. Court of Appeals and Palanca v. Commissioner of Internal Revenue. In this case, the BIR also filed a judicial collection case, and the suspension due to distraint and levy does not extend indefinitely or indefinitely suspend the period for filing a court action without a clear basis. The BIR failed to establish when the prescriptive period would have commenced running again after the service of the warrants, rendering the subsequent filing of the collection case on January 1, 1997, beyond the three-year prescriptive period from the assessment.
Main Doctrine
A request for reconsideration of a tax deficiency assessment, filed beyond the 30-day period prescribed by law, does not suspend the running of the prescriptive period for collection. Furthermore, the timely service of warrants of distraint and levy suspends the prescriptive period for collection only in cases where the BIR relies solely on the summary remedy of distraint and levy, not when a judicial collection case is also filed.