Republic of the Philippines v.

Lopez
No. L-18007
March 30, 1963

FACTS: Respondent Benito Lopez filed his income tax return for 1950 for which an
assessment was issued by the BIR on November 1952 demanding payment of
245,100.29 PHP as deficiency income tax. Lopez requested for a reconsideration. It
was given due course, and resulted in the reduction of the assessment to 20,346.14
PHP on May 1954. Apparently satisfied, respondent manifested in a letter that he will
settle the obligation by the end of the month. Without complying thereto, on July 9 1955,
Lopez pleaded for another reinvestigation which was granted by the BIR. As a result, an
assessment was issued demanding payment of 6,019 PHP as additional deficiency
income tax for 1950, the total of which he did not pay despite repeated demands.
Appellee prayed for a third investigation which was acceded to by the BIR in 1956
provided he waives the statue of limitations. Ironically instead of executing an
unconditional waiver, defendant imposed a deadline on December 1957 within which
the government should finish the third reinvestigation. The BIR ignored such an issued
an assessment demanding the same amount of 26,365.14 PHP as deficiency income
tax for 1950. On september 1960, defendant filed a motion to dismiss the complaint,
which, as has already been stated was sustained.
ISSUE:
(1) Whether or not the time limit of December 31, 1957 enjoined by appellee in the
contemplated Waiver of the Statute of Limitations, be binding and operativeNO

HELD:
(1) NO, it is not. It is well-settled in our jurisdiction that the 5-year prescriptive period
fixed by section 332 (c) of the Internal Revenue Code within which the government may
sue to collect an assessed tax is to be counted from the last revised assessment
resulting from a reinvestigation asked for by the taxpayer.
When a taxpayer demands a reinvestigation, the time employed in reinvestigation
should be deducted from the total period of limitation. BY applying these rules, the

prescriptive period of 5 years had not elapsed from the revision of 1954. If from the
period intervened between the first revised (1954) and the filing of the complaint (1960)
is deducted the time consumed in considering and deciding the taxpayers subsequent
petition for reconsideration and reinvestigation (Jan 1956 to April 1960) it will be seen
that less than 5 years can be counted against the Government.
1st reinvestigationMay 29, 1954 from which date the Government had 5 years for
bringing an action to collect
2nd reinvestigationJan 16, 1956 and lasted until it was decided on April 22, 1960 or a
period of 4 years, 3 months, and 6 days during which the limitation period was
interrupted.
Deducting this interval from the period intervening between the first revised and
executory assessment to the filing of the complaint (from May 1954 to August 1960,
which is a total of 6 years, 2 months, and 15 days) leaves only 1 year, 3 months, and 6
days counted against the government.
This court cannot accept the fact that a taxpayer fixed the prescriptive period not
beyond December 31, 1957 operates to reduce the time available to the government for
the collection of the tax from May 1954 to December 1957 which is less than 5 years
prescribed by law. Even if we consider the date fixed by the taxpayer, the government is
well within the prescriptive 5-year period.
Another ground for reversing the dismissal of the complaint is that the proper remedy of
the taxpayer against the assessment complained of was to appeal then ruling of the
Collector to the Court of Tax Appeal. Under Republic Act No. 1154, the jurisdiction of
the CTA shall include the decisions of the CIR in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
arising under the NIRC. The failure to appeal to the Collectors ruling is a waiver of the
defenses against it and estops the taxpayer from subsequently raising those objections.
Otherwise, the period of 30 days for appeal to the Tax Court would make little sense.
However it is to be noted how much an extraordinary reduction was made by the
revenue authorities of the taxes originally assessed from 245, 100.29 to less than one
tenth of it 20, 346.14 upon reinvestigation. Such result is evidence that the first
assessment was carelessly made without regard to the true facts and strongly reflects
the efficiency of the revenue examiner who made the grossly excessive assessment.
Equally anomalous is the fact that after the taxpayer had promised to pay the computed
tax, and after he had failed to keep his promise the tax authorities should still agree to a
further revision of the assessment. This is highly irregular and suspicious over the

competency and honesty of the tax collecting authorities.