Republic vs. Heirs of Cesar Jalandoni, GR No.

18384, 15 SCRA 51, September

20, 1965

FACTS:Isabel Ledesma died intestate leaving real properties and personal

properties consisting of shares of stock invarious domestic corporations. She left
as heirs her husband Bernardino Jalandoni and three children, namely,
Cesar,Angeles and Delfin. Cesar Jalandoni, one of the heirs, filed an estate and
inheritance tax return. On the basis of thisreturn, the BIR made two separate
partial assessments calling for the payment deficiency estate and inheritance
taxes.The BIR then demanded payment from the heirs while stating that the
same was still "to be considered partial pendinginvestigation of the return."

These stated sums were unquestionably paid by the heirsWhen the BIR
conducted another investigation, it found:

(1) that themarket value of the lands

reported in the returnfiled by Cesar Jalandoni were UNDERDECLARED
(2) thatseven lotsin the Talisay-Silay, Negros Occidental were OMITTED from the
return; and
(3) theshares of stock owned by the deceased in the Victorias Milling Company,
Hawaiian-Philippine Company and Central Azucarera de la Carlota were also
UNDERDECLARED

As such, the BIR required the heirs to pay the amounts of P 29,995.30 and P
49,842.05 as deficiency estate and inheritance taxes. Defendant Bernardino
Jalandoni wrote a letter to the Collector of Internal Revenue setting up the
defense of PRESCRIPTION
.He argued that the required deficiency in the estate and inheritance taxes
payment can no longer be collected since MORE THAN FIVE YEARS had already elapsed
from the filing of the return pursuant to Section 331 ofthe NIRC. As a rejoinder, the
Collector retorted claiming that such defense is not valid since the estate and
inheritance tax return filed by them contained OMISSIONS which amount to FRAUD
INDICATIVE OF AN INTENTION TO EVADEPAYMENT of the proper tax due the
government. Hence, the Collector concluded that
THE TAXES COULD STILL BEDEMANDED
within ten years from the discovery of the falsity or omission pursuant to Section
332(a) of said Code.When the lower court ordered the Collector to verify the
allegation that the seven lots in Negros Occidental were in factincluded therein,
the Collector designated Examiner Genaro Butas to conduct the examination. In
his report, ExaminerButas stated that
of the seven lots that were previously reported not included in the return
,
TWO WERE ACTUALLYDECLARED THEREIN
, though he reaffirmed his previous finding as regards the other five lots and the
market value of thesugar lands and rice lands and the value of the shares of
stock in several domestic corporations.Nevertheless, the lower court found that
that the return submitted by Cesar Jalandoni is
FALSE AND FRAUDULENT
onthe ground that the
DIFFERENCES
between the amounts appearing in the returns filed and the undeclared
properties ofthe estate of the deceased is a
SUBSTANTIAL UNDERSTATEMENT OF THE TRUE VALUE OF THE ESTATE
. The lower courtwas not inclined to believe that the omission or understatements
were due to mere inadvertence, negligence, or honeststatement of error, in fact,
it believed that such circumstances are indicative of a willful intent to defraud.
Hence, itordered the heirs to pay the Collector the sum of P 79,837.35 as estate
and inheritance taxes. The heirs appealed thecase arguing that
FRAUD CANNOT BE IMPUTED AGAINST THEM
since there was
NO EVIDENCE ON RECORD SHOWINGTHAT SAID RETURN WAS FILED IN BAD
FAITH.

ISSUE:
Was there an intention on the part of the heirs to evade payment of the proper
tax?
DECISION: NO.
The omission and under declaration of the properties was
NOT DELIBERATE
and
DID NOT AMOUNT TOFRAUD
indicative of an intention to evade payment of the proper tax due the government.
As regards to the

claim of theGovernment that the

SEVEN LOTS
were deliberately omitted from the tax returns filed by the representative of
theheirs: It appears, however, that
three of the seven lots alleged to have been excluded were actually INCLUDED
in thereturns
; that
one lot was not included because it BELONGED to one of the heirs
; and that the
three remaining lotswere ALREADY DECLARED in the return submitted by
Bernardino Jalandoni as part of the conjugal property forpurposes of income tax
.

As regards to the claim of the Government that the

MARKET VALUE OF THE SUGAR LANDS
were under declared by therepresentative of the heirs, as it did not tally with the
valuation made by the Collector: Any mistake made in thevaluation made by the
representative can only be considered as
HONEST MISTAKE
or one based on an
EXCUSABLEINADVERTENCE
, since
HE NOT AN EXPERT IN APPRAISING REAL ESTATE.
It is certainly an
ERROR TO IMPUTE FRAUDBASED ON AN HONEST DIFFERENCE OF OPINION.
As regards to the claim of the Government that the
VALUE OF THE SHARES OF STOCK
did not tally with their book value:The fact that the value of the shares of stock
given in the returns did not tally with their book value appearing in thecorporate
books is
NOT IN ITSELF INDICATIVE OF FRAUD
especially when said
BOOK VALUE ONLY BECAME KNOWNSEVERAL MONTHS AFTER THE DEATH OF
THE DECEASED
. Moreover, stock securities frequently fluctuate in value and a
MERE DIFFERENCE OF OPINION
in relation thereto
CANNOT SERVE AS PROPER BASIS
for assessing
AN INTENTION TODEFRAUD
the government