Republic

SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. L-31364 March 30, 1979
MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as
Regional Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental,
Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D.
TONGOY respondents.

DE CASTRO, J.:
Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special
Proceedings No. 7794, entitled: "Intestate Estate of Luis D. Tongoy," the first dated July 29,
1969 dismissing the Motion for Allowance of Claim and for an Order of Payment of Taxes by the
Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for
deficiency income taxes for the years 1963 and 1964 of the decedent in the total amount of
P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise penalties, and the
second, dated October 7, 1969, denying the Motion for reconsideration of the Order of
dismissal.
The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on
June 3, 1969 in the abovementioned special proceedings, (par. 3, Annex A, Petition, pp. 1920,
Rollo). The claim represents the indebtedness to the Government of the late Luis D. Tongoy for
deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment
Notices Nos. 11-50-29-1-11061-21-63 and 11-50-291-1 10875-64, to which motion was attached
Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator opposed the motion
solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court
(par. 4, Opposition to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition
well-founded, the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of
claim filed by herein petitioner, Regional Director of the Bureau of Internal Revenue, in an order
dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for
reconsideration was filed, of the order of July 29, 1969, but was denied in an Order dated
October 7, 1969.
Hence, this appeal on certiorari, petitioner assigning the following errors:

1. The lower court erred in holding that the claim for taxes by the government
against the estate of Luis D. Tongoy was filed beyond the period provided in
Section 2, Rule 86 of the Rules of Court.
2. The lower court erred in holding that the claim for taxes of the government was
already barred under Section 5, Rule 86 of the Rules of Court.
which raise the sole issue of whether or not the statute of non-claims Section 5, Rule 86 of the
New Rule of Court, bars claim of the government for unpaid taxes, still within the period of
limitation prescribed in Section 331 and 332 of the National Internal Revenue Code.
Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion
for Allowance of Claim, etc. of the petitioners reads as follows:
All claims for money against the decedent, arising from contracts, express or
implied, whether the same be due, not due, or contingent, all claims for funeral
expenses and expenses for the last sickness of the decedent, and judgment for
money against the decedent, must be filed within the time limited in they notice;
otherwise they are barred forever, except that they may be set forth as counter
claims in any action that the executor or administrator may bring against the
claimants. Where the executor or administrator commence an action, or
prosecutes an action already commenced by the deceased in his lifetime, the
debtor may set forth may answer the claims he has against the decedents,
instead of presenting them independently to the court has herein provided, and
mutual claims may be set off against each other in such action; and in final
judgment is rendered in favored of the decedent, the amount to determined shall
be considered the true balance against the estate, as though the claim has been
presented directly before the court in the administration proceedings. Claims not
yet due, or contingent may be approved at their present value.
A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary
obligation of the decedent created by law, such as taxes which is entirely of different character
from the claims expressly enumerated therein, such as: "all claims for money against the
decedent arising from contract, express or implied, whether the same be due, not due or
contingent, all claim for funeral expenses and expenses for the last sickness of the decedent
and judgment for money against the decedent." Under the familiar rule of statutory construction
of expressio unius est exclusio alterius, the mention of one thing implies the exclusion of
another thing not mentioned. Thus, if a statute enumerates the things upon which it is to
operate, everything else must necessarily, and by implication be excluded from its operation and
effect (Crawford, Statutory Construction, pp. 334-335).
In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No.
L-23081, December 30, 1969, it was held that the assessment, collection and recovery of taxes,
as well as the matter of prescription thereof are governed by the provisions of the National
Internal revenue Code, particularly Sections 331 and 332 thereof, and not by other provisions of

law. (See also Lim Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal
Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically mentioned, the
provisions of Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to have
been also in the mind of the Court as not affecting the aforecited Section of the National Internal
Revenue Code.
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that
"taxes assessed against the estate of a deceased person ... need not be submitted to the
committee on claims in the ordinary course of administration. In the exercise of its control over
the administrator, the court may direct the payment of such taxes upon motion showing that the
taxes have been assessed against the estate." The abolition of the Committee on Claims does
not alter the basic ruling laid down giving exception to the claim for taxes from being filed as the
other claims mentioned in the Rule should be filed before the Court. Claims for taxes may be
collected even after the distribution of the decedent's estate among his heirs who shall be liable
therefor in proportion of their share in the inheritance. (Government of the Philippines vs.
Pamintuan, 55 Phil. 13).
The reason for the more liberal treatment of claims for taxes against a decedent's estate in the
form of exception from the application of the statute of non-claims, is not hard to find. Taxes are
the lifeblood of the Government and their prompt and certain availability are imperious need.
(Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21
SCRA 105). Upon taxation depends the Government ability to serve the people for whose
benefit taxes are collected. To safeguard such interest, neglect or omission of government
officials entrusted with the collection of taxes should not be allowed to bring harm or detriment
to the people, in the same manner as private persons may be made to suffer individually on
account of his own negligence, the presumption being that they take good care of their personal
affairs. This should not hold true to government officials with respect to matters not of their own
personal concern. This is the philosophy behind the government's exception, as a general rule,
from the operation of the principle of estoppel. (Republic vs. Caballero, L-27437, September 30,
1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective Order of the Elks Inc.
vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the
Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66
SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit
Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November
26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L- 23041, July 31,
1969, 28 SCRA 119.) As already shown, taxes may be collected even after the distribution of the
estate of the decedent among his heirs (Government of the Philippines vs. Pamintuan, supra;
Pineda vs. CFI of Tayabas,supra Clara Diluangco Palanca vs. Commissioner of Internal
Revenue, G. R. No. L-16661, January 31, 1962).
Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last
paragraph of Section 315 of the Tax Code payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was made by the Commissioner of

Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held
that the property of the estate already in the hands of an heir or transferee may be subject to the
payment of the tax due the estate. A fortiori before the inheritance has passed to the heirs, the
unpaid taxes due the decedent may be collected, even without its having been presented under
Section 2 of Rule 86 of the Rules of Court. It may truly be said that until the property of the
estate of the decedent has vested in the heirs, the decedent, represented by his estate,
continues as if he were still alive, subject to the payment of such taxes as would be collectible
from the estate even after his death. Thus in the case above cited, the income taxes sought to
be collected were due from the estate, for the three years 1946, 1947 and 1948 following his
death in May, 1945.
Even assuming arguendo that claims for taxes have to be filed within the time prescribed in
Section 2, Rule 86 of the Rules of Court, the claim in question may be filed even after the
expiration of the time originally fixed therein, as may be gleaned from the italicized portion of the
Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the notice provided in the
preceding section, the court shall state the time for the filing of claims against the
estate, which shall not be more than twelve (12) nor less than six (6) months
after the date of the first publication of the notice. However, at any time before an
order of distribution is entered, on application of a creditor who has failed to file
his claim within the time previously limited the court may, for cause shown and
on such terms as are equitable, allow such claim to be flied within a time not
exceeding one (1) month. (Emphasis supplied)
In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an
Order of Payment of Taxes) which, though filed after the expiration of the time previously limited
but before an order of the distribution is entered, should have been granted by the respondent
court, in the absence of any valid ground, as none was shown, justifying denial of the motion,
specially considering that it was for allowance Of claim for taxes due from the estate, which in
effect represents a claim of the people at large, the only reason given for the denial that the
claim was filed out of the previously limited period, sustaining thereby private respondents'
contention, erroneously as has been demonstrated.
WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment
in the total amount of P3,254.80 with 5 % surcharge and 1 % monthly interest as provided in the
Tax Code is a final one and the respondent estate's sole defense of prescription has been
herein overruled, the Motion for Allowance of Claim is herein granted and respondent estate is
ordered to pay and discharge the same, subject only to the limitation of the interest collectible
thereon as provided by the Tax Code. No pronouncement as to costs.
SO ORDERED.

FIRST DIVISION
COMMISSIONER OF INTERNAL G.R. No. 134062
REVENUE,
Petitioner, Present:

SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and

PUNO, C.J., Chairperson,

GARCIA, JJ.

BANK OF THE PHILIPPINE

ISLANDS,
Respondent. Promulgated:
April 17, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION
CORONA, J.:

This is a petition for review on certiorari [1] of a decision[2] of the Court of Appeals (CA)
dated May 29, 1998 in CA-G.R. SP No. 41025 which reversed and set aside the
decision[3] and resolution[4] of the Court of Tax Appeals (CTA) dated November 16,
1995 and May 27, 1996, respectively, in CTA Case No. 4715.
In two notices dated October 28, 1988, petitioner Commissioner of Internal
Revenue (CIR) assessed respondent Bank of the Philippine Islands (BPIs) deficiency
percentage and documentary stamp taxes for the year 1986 in the total amount
of P129,488,656.63:

1986 Deficiency Percentage Tax

Deficiency percentage tax P 7, 270,892.88
Add: 25% surcharge 1,817,723.22
20% interest from 1-21-87 to
10-28-88 3,215,825.03
Compromise penalty 15,000.00
TOTAL AMOUNT DUE AND COLLECTIBLE P12,319,441.13
1986 Deficiency Documentary Stamp Tax
Deficiency percentage tax P93,723,372.40
Add: 25% surcharge 23,430,843.10
Compromise penalty 15,000.00
TOTAL AMOUNT DUE AND COLLECTIBLE P117,169,215.50.[5]

Both notices of assessment contained the following note:

Please be informed that your [percentage and documentary stamp taxes have]
been assessed as shown above. Said assessment has been based on return
(filed by you) (as verified) (made by this Office) (pending investigation) (after
investigation). You are requested to pay the above amount to this Office or to our
Collection Agent in the Office of the City or Deputy Provincial Treasurer of xxx[6]
In a letter dated December 10, 1988, BPI, through counsel, replied as follows:
1. Your deficiency assessments are no assessments at all. The taxpayer
is not informed, even in the vaguest terms, why it is being assessed a
deficiency. The very purpose of a deficiency assessment is to inform taxpayer
why he has incurred a deficiency so that he can make an intelligent decision on
whether to pay or to protest the assessment. This is all the more so when the
assessment involves astronomical amounts, as in this case.
We therefore request that the examiner concerned be required to state, even in
the briefest form, why he believes the taxpayer has a deficiency documentary
and percentage taxes, and as to the percentage tax, it is important that the
taxpayer be informed also as to what particular percentage tax the assessment
refers to.
2. As to the alleged deficiency documentary stamp tax, you are aware of the
compromise forged between your office and the Bankers Association of
the Philippines [BAP] on this issue and of BPIs submission of its computations
under this compromise. There is therefore no basis whatsoever for this
assessment, assuming it is on the subject of the BAP compromise. On the other
hand, if it relates to documentary stamp tax on some other issue, we should like
to be informed about what those issues are.

3. As to the alleged deficiency percentage tax, we are completely at a loss on

how such assessment may be protested since your letter does not even tell the
taxpayer what particular percentage tax is involved and how your examiner
arrived at the deficiency. As soon as this is explained and clarified in a proper
letter of assessment, we shall inform you of the taxpayers decision on whether to
pay or protest the assessment.[7]

On June 27, 1991, BPI received a letter from CIR dated May 8, 1991 stating
that:
although in all respects, your letter failed to qualify as a protest under Revenue
Regulations No. 12-85 and therefore not deserving of any rejoinder by this office
as no valid issue was raised against the validity of our assessment still we
obliged to explain the basis of the assessments.
xxx xxx xxx
this constitutes the final decision of this office on the matter.[8]
On July 6, 1991, BPI requested a reconsideration of the assessments stated in
the CIRs May 8, 1991 letter.[9] This was denied in a letter dated December 12, 1991,
received by BPI on January 21, 1992.[10]
On February 18, 1992, BPI filed a petition for review in the CTA. [11] In a decision
dated November 16, 1995, the CTA dismissed the case for lack of jurisdiction since the
subject assessments had become final and unappealable. The CTA ruled that BPI
failed to protest on time under Section 270 of the National Internal Revenue Code
(NIRC) of 1986 and Section 7 in relation to Section 11 of RA 1125. [12] It denied
reconsideration in a resolution dated May 27, 1996.[13]

On appeal, the CA reversed the tax courts decision and resolution and
remanded the case to the CTA [14] for a decision on the merits. [15] It ruled that
the October 28, 1988 notices were not valid assessments because they did not inform
the taxpayer of the legal and factual basestherefor. It declared that the proper

assessments were those contained in the May 8, 1991 letter which provided the
reasons for the claimed deficiencies.[16] Thus, it held that BPI filed the petition for
review in the CTA on time.[17] The CIR elevated the case to this Court.

This petition raises the following issues:

1)

whether or not the assessments issued to BPI for deficiency

percentage and documentary stamp taxes for 1986 had already become
final and unappealable and

2)

whether or not BPI was liable for the said taxes.

The former Section 270[18] (now renumbered as Section 228) of the NIRC stated:
Sec. 270. Protesting of assessment. When the [CIR] or his duly
authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings. Within a period to be prescribed
by implementing regulations, the taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the [CIR] shall issue an assessment
based on his findings.
xxx xxx xxx (emphasis supplied)

WERE THE OCTOBER 28, 1988

NOTICES VALID ASSESSMENTS?

The first issue for our resolution is whether or not the October 28,
1988 notices[19] were valid assessments. If they were not, as held by the CA, then the
correct assessments were in the May 8, 1991 letter, received by BPI on June 27, 1991.
BPI, in its July 6, 1991 letter, seasonably asked for a reconsideration of the findings
which the CIR denied in his December 12, 1991 letter, received by BPI on January 21,

1992. Consequently, the petition for review filed by BPI in the CTA on February 18,
1992 would be well within the 30-day period provided by law.[20]

The CIR argues that the CA erred in holding that the October 28, 1988 notices
were invalid assessments. He asserts that he used BIR Form No. 17.08 (as revised in
November 1964) which was designed for the precise purpose of notifying taxpayers of
the assessed amounts due and demanding payment thereof. [21] He contends that there
was no law or jurisprudence then that required notices to state the reasons for
assessing deficiency tax liabilities.[22]

BPI counters that due process demanded that the facts, data and law upon
which the assessments were based be provided to the taxpayer. It insists that the
NIRC, as worded now (referring to Section 228), specifically provides that:
[t]he taxpayer shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.

According to BPI, this is declaratory of what sound tax procedure is and a

confirmation of what due process requires even under the former Section 270.
BPIs contention has no merit. The present Section 228 of the NIRC provides:
Sec. 228. Protesting of Assessment. When the [CIR] or his duly
authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings: Provided, however, That
a preassessment notice shall not be required in the following cases:
xxx xxx xxx
The taxpayer shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be void.
xxx xxx xxx (emphasis supplied)

Admittedly, the CIR did not inform BPI in writing of the law and facts on which the
assessments of the deficiency taxes were made. He merely notified BPI of his findings,
consisting only of the computation of the tax liabilities and a demand for payment
thereof within 30 days after receipt.
In merely notifying BPI of his findings, the CIR relied on the provisions of the former
Section 270 prior to its amendment by RA 8424 (also known as the Tax Reform Act of
1997).[23] In CIR v. Reyes,[24] we held that:
In the present case, Reyes was not informed in writing of the law and the
facts on which the assessment of estate taxes had been made. She was merely
notified of the findings by the CIR, who had simply relied upon the provisions of
former Section 229 prior to its amendment by [RA] 8424, otherwise known as the
Tax Reform Act of 1997.
First, RA 8424 has already amended the provision of Section 229 on
protesting an assessment. The old requirement of merely notifying the
taxpayer of the CIR'sfindings was changed in 1998 to informing the taxpayer
of not only the law, but also of the facts on which an assessment would be made;
otherwise, the assessment itself would be invalid.
It was on February 12, 1998, that a preliminary assessment notice was
issued against the estate. On April 22, 1998, the final estate tax assessment
notice, as well as demand letter, was also issued. During those dates, RA 8424
was already in effect. The notice required under the old law was no longer
sufficient under the new law.[25] (emphasis supplied; italics in the original)

Accordingly, when the assessments were made pursuant to the former Section 270,
the only requirement was for the CIR to notify or inform the taxpayer of his
findings. Nothing in the old law required a written statement to the taxpayer of the law
and facts on which the assessments were based. The Court cannot read into the law
what obviously was not intended by Congress. That would be judicial legislation,
nothing less.
Jurisprudence, on the other hand, simply required that the assessments
contain a computation of tax liabilities, the amount the taxpayer was to pay and a

demand for payment within a prescribed period. [26] Everything considered, there was
no doubt the October 28, 1988 notices sufficiently met the requirements of a valid
assessment under the old law and jurisprudence.
The sentence
[t]he taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void

was not in the old Section 270 but was only later on inserted in the renumbered
Section 228 in 1997. Evidently, the legislature saw the need to modify the former
Section 270 by inserting the aforequoted sentence.[27] The fact that the amendment
was necessary showed that, prior to the introduction of the amendment, the statute
had an entirely different meaning.[28]
Contrary to the submission of BPI, the inserted sentence in the renumbered
Section 228 was not an affirmation of what the law required under the former Section
270. The amendment introduced by RA 8424 was an innovation and could not be
reasonably inferred from the old law. [29] Clearly, the legislature intended to insert a new
provision regarding the form and substance of assessments issued by the CIR.[30]
In ruling that the October 28, 1988 notices were not valid assessments, the CA
explained:
xxx. Elementary concerns of due process of law should have prompted
the [CIR] to inform [BPI] of the legal and factual basis of the formers decision to
charge the latter for deficiency documentary stamp and gross receipts taxes.[31]

In other words, the CAs theory was that BPI was deprived of due process when
the CIR failed to inform it in writing of the factual and legal bases of the assessments
even if these were not called for under the old law.

We disagree.

Indeed, the underlying reason for the law was the basic constitutional
requirement that no person shall be deprived of his property without due process of
law.[32] We note, however, what the CTA had to say:
xxx xxx xxx
From the foregoing testimony, it can be safely adduced that not only was
[BPI] given the opportunity to discuss with the [CIR] when the latter issued the
former a Pre-Assessment Notice (which [BPI] ignored) but that the examiners
themselves went to [BPI] and "we talk to them and we try to [thresh] out the
issues, present evidences as to what they need." Now, how can [BPI] and/or its
counsel honestly tell this Court that they did not know anything about the
assessments?
Not only that. To further buttress the fact that [BPI] indeed knew
beforehand the assessments[,] contrary to the allegations of its counsel[,] was
the testimony of Mr. JerryLazaro, Assistant Manager of the Accounting
Department of [BPI]. He testified to the fact that he prepared worksheets which
contain his analysis regarding the findings of the [CIRs] examiner, Mr. San Pedro
and that the same worksheets were presented to Mr. Carlos Tan, Comptroller of
[BPI].
xxx xxx xxx
From all the foregoing discussions, We can now conclude that [BPI] was
indeed aware of the nature and basis of the assessments, and was given all the
opportunity to contest the same but ignored it despite the notice conspicuously
written on the assessments which states that "this ASSESSMENT becomes final
and unappealable if not protested within 30 days after receipt." Counsel resorted
to dilatory tactics and dangerously played with time. Unfortunately, such strategy
proved fatal to the cause of his client.[33]

The CA never disputed these findings of fact by the CTA:

[T]his Court recognizes that the [CTA], which by the very nature of its
function is dedicated exclusively to the consideration of tax problems, has
necessarily developed an expertise on the subject, and its conclusions will not be
overturned unless there has been an abuse or improvident exercise of authority.
Such findings can only be disturbed on appeal if they are not supported by
substantial evidence or there is a showing of gross error or abuse on the part of
the [CTA].[34]
Under the former Section 270, there were two instances when an assessment
became final and unappealable: (1) when it was not protested within 30 days from
receipt and (2) when the adverse decision on the protest was not appealed to the CTA
within 30 days from receipt of the final decision:[35]
Sec. 270. Protesting of assessment.
xxx xxx xxx
Such assessment may be protested administratively by filing a request for
reconsideration or reinvestigation in such form and manner as may be prescribed
by the implementing regulations within thirty (30) days from receipt of the
assessment; otherwise, the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or
corporation adversely affected by the decision on the protest may appeal to the
[CTA] within thirty (30) days from receipt of the said decision; otherwise, the
decision shall become final, executory and demandable.

IMPLICATIONS OF A
VALID ASSESSMENT

Considering that the October 28, 1988 notices were valid assessments, BPI
should have protested the same within 30 days from receipt thereof. The December 10,
1988 reply it sent to the CIR did not qualify as a protest since the letter itself stated
that [a]s soon as this is explained and clarified in a proper letter of assessment, we
shall inform you of the taxpayers decision on whether to pay or protest the

assessment.[36] Hence, by its own declaration, BPI did not regard this letter as a protest
against the assessments. As a matter of fact, BPI never deemed this a protest since it
did not even consider the October 28, 1988 notices as valid or proper assessments.

The inevitable conclusion is that BPIs failure to protest the assessments within
the 30-day period provided in the former Section 270 meant that they became final
and unappealable. Thus,

the

CTA

correctly

dismissed BPIs appeal

for

lack

of

jurisdiction. BPI was, from then on, barred from disputing the correctness of the
assessments or invoking any defense that would reopen the question of its liability on
the merits.[37] Not only that. There arose a presumption of correctness when BPI failed
to protest the assessments:
Tax assessments by tax examiners are presumed correct and made in
good faith. The taxpayer has the duty to prove otherwise. In the absence of proof
of any irregularities in the performance of duties, an assessment duly made by a
Bureau of Internal Revenue examiner and approved by his superior officers will
not be disturbed. All presumptions are in favor of the correctness of tax
assessments.[38]

Even if we considered the December 10, 1988 letter as a protest, BPI must
nevertheless be deemed to have failed to appeal the CIRs final decision regarding the
disputed assessments within the 30-day period provided by law. The CIR, in his May 8,
1991 response, stated that it was his final decision on the matter. BPI therefore had
30 days from the time it received the decision on June 27, 1991 to appeal but it did
not. Instead it filed a request for reconsideration and lodged its appeal in the CTA only
on February 18, 1992, way beyond the reglementary period.BPI must now suffer the
repercussions of its omission. We have already declared that:

the [CIR] should always indicate to the taxpayer in clear and unequivocal
language whenever his action on an assessment questioned by a taxpayer
constitutes his final determination on the disputed assessment, as contemplated
by Sections 7 and 11 of [RA 1125], as amended. On the basis of his statement
indubitably showing that the Commissioner's communicated action is his
final decision on the contested assessment, the aggrieved taxpayer would
then be able to take recourse to the tax court at the opportune time.
Without needless difficulty, the taxpayer would be able to determine when
his right to appeal to the tax court accrues.
The rule of conduct would also obviate all desire and opportunity on
the part of the taxpayer to continually delay the finality of the assessment
and, consequently, the collection of the amount demanded as taxes by
repeated requests for recomputation and reconsideration. On the part of the
[CIR], this would encourage his office to conduct a careful and thorough study of
every questioned assessment and render a correct and definite decision thereon
in the first instance. This would also deter the [CIR] from unfairly making the
taxpayer grope in the dark and speculate as to which action constitutes the
decision appealable to the tax court. Of greater import, this rule of conduct would
meet a pressing need for fair play, regularity, and orderliness in administrative
action.[39] (emphasis supplied)

Either way (whether or not a protest was made), we cannot absolve BPI of its
liability under the subject tax assessments.

We realize that these assessments (which have been pending for almost 20
years) involve a considerable amount of money. Be that as it may, we cannot legally
presume the existence of something which was never there. The state will be deprived
of the taxes validly due it and the public will suffer if taxpayers will not be held liable
for the proper taxes assessed against them:
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of sovereignty, the
exercise of taxing power derives its source from the very existence of the state
whose social contract with its citizens obliges it to promote public interest and
common good. The theory behind the exercise of the power to tax emanates
from necessity; without taxes, government cannot fulfill its mandate of promoting
the general welfare and well-being of the people.[40]

WHEREFORE, the petition is hereby GRANTED. The May 29, 1998 decision of
the Court of Appeals in CA-G.R. SP No. 41025 is REVERSEDand SET ASIDE.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22734

September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.

BENGZON, J.P., J.:

On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the
eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First
Instance of Manila (Case No. 71129) wherein the surviving widow was appointed administratrix. The
estate was divided among and awarded to the heirs and the proceedings terminated on June 8,
1948. Manuel B. Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income
tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding
income tax returns were not filed. Thereupon, the representative of the Collector of Internal Revenue
filed said returns for the estate on the basis of information and data obtained from the aforesaid
estate proceedings and issued an assessment for the following:
1. Deficiency income tax

1945
P135.83
1946
436.95
1947
1,206.91
Add: 5% surcharge
1% monthly interest
from November 30,
1953 to April 15, 1957
Compromise for late
filing
Compromise for late
payment
Total amount due

P1,779.69
88.98
720.77
80.00
40.00
P2,707.44
===========
P14.50
===========

Additional residence tax for

1945
3. Real Estate dealer's tax for
the fourth quarter of 1946 and
P207.50
the whole year of 1947
===========
2.

Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed
to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion
pertaining to him as one of the heirs."
After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the
Commissioner on the ground that his right to assess and collect the tax has prescribed. The
Commissioner appealed and this Court affirmed the findings of the Tax Court in respect to the
assessment for income tax for the year 1947 but held that the right to assess and collect the taxes
for 1945 and 1946 has not prescribed. For 1945 and 1946 the returns were filed on August 24, 1953;
assessments for both taxable years were made within five years therefrom or on October 19, 1953;
and the action to collect the tax was filed within five years from the latter date, on August 7, 1957.
For taxable year 1947, however, the return was filed on March 1, 1948; the assessment was made
on October 19, 1953, more than five years from the date the return was filed; hence, the right to
assess income tax for 1947 had prescribed. Accordingly, We remanded the case to the Tax Court for
further appropriate proceedings.1
In the Tax Court, the parties submitted the case for decision without additional evidence.
On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable
for the payment corresponding to his share of the following taxes:
Deficiency income tax
1945
1946
Real estate dealer's
fixed tax 4th quarter
of 1946 and whole
year of 1947

P135.83
436.95

P187.50

The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B.
Pineda liable for the payment of all the taxes found by the Tax Court to be due from the estate in the
total amount of P760.28 instead of only for the amount of taxes corresponding to his share in the
estate.
1awphl.nt

Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid
income tax due the estate only up to the extent of and in proportion to any share he received. He
relies on Government of the Philippine Islands v. Pamintuan2 where We held that "after the partition
of an estate, heirs and distributees are liable individually for the payment of all lawful outstanding
claims against the estate in proportion to the amount or value of the property they have respectively
received from the estate."
We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes
assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to
the estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to
the share he received from the inheritance.3 His liability, however, cannot exceed the amount of his
share.4
As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the
property in his possession. The reason is that the Government has a lien on the P2,500.00 received
by him from the estate as his share in the inheritance, for unpaid income taxes 4a for which said
estate is liable, pursuant to the last paragraph of Section 315 of the Tax Code, which we quote
hereunder:
If any person, corporation, partnership, joint-account (cuenta en participacion), association,
or insurance company liable to pay the income tax, neglects or refuses to pay the same after
demand, the amount shall be a lien in favor of the Government of the Philippines from the
time when the assessment was made by the Commissioner of Internal Revenue until paid
with interest, penalties, and costs that may accrue in addition thereto upon all property and
rights to property belonging to the taxpayer: . . .
By virtue of such lien, the Government has the right to subject the property in Pineda's possession,
i.e., the P2,500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment,
Pineda will have a right of contribution from his co-heirs,5 to achieve an adjustment of the proper
share of each heir in the distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all the
heirs and collecting from each one of them the amount of the tax proportionate to the inheritance
received. This remedy was adopted in Government of the Philippine Islands v. Pamintuan, supra. In
said case, the Government filed an action against all the heirs for the collection of the tax. This
action rests on the concept that hereditary property consists only of that part which remains after the
settlement of all lawful claims against the estate, for the settlement of which the entire estate is first
liable.6 The reason why in case suit is filed against all the heirs the tax due from the estate is levied
proportionately against them is to achieve thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate as lessened by the tax.
Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and
rights to property belonging to the taxpayer for unpaid income tax, is by subjecting said property of
the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate.
This second remedy is the very avenue the Government took in this case to collect the tax. The

Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary
discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the
particular provision of the Tax Code above quoted, because taxes are the lifeblood of government
and their prompt and certain availability is an imperious need.7 And as afore-stated in this case the
suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for
contribution by the heir from whom the Government recovered said tax.
WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay
to the Commissioner of Internal Revenue the sum of P760.28 as deficiency income tax for 1945 and
1946, and real estate dealer's fixed tax for the fourth quarter of 1946 and for the whole year 1947,
without prejudice to his right of contribution for his co-heirs. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur.