CIR v Lilia Yusay Gonzales, CTA  Jose failed to pay taxes on time, he later moved for extension
and filed a bond to guarantee such payment. Such request
GR L-19495 Nov. 24, 1966, J. Bengzon, J.P.
Assessment of Taxes; Prescription
Summary: After death of Matias Yusay his properties were inherited
by Jose (legitimate child) and Lilia (acknowledged natural child). Jose
filed a return on the properties which were assessed. Later on CIR
found out that the return was fraudulent, underreporting 90 parcels
of land and re-assessed such property. Jose continued to fail to pay
the taxes, upon his death, his widow Florencia was named
administrator of his portion. Lilia came to court challenging that such
assessment had already prescribed having been done 8 years after
the file of the return. SC ruled that a return must be substantially
complete in order to begin the tolling of the prescription period.
Considering that such return was incomplete in that it underdeclared
90 parcels of land and did not contain the presence of heirs, such was
fraudulent and entitled the CIR to 10 years to file an assessment from
the discovery of such fraudulent return.
FACTS :
 Matias Yusay died intestate leaving Jose and Lilia as heirs.
Legitimate child and acknowledged natural child for
respectively.
 Jose filed with the BIR declaring total gross estate of 187K.
however the BIR investigation revealed that it was actually
219K. fair market value was arrived at by increasing the
prices by 40%.
 The BIR assessed 7k estate and 17k inheritance tax at first. It
reassessed this later to 8k and 22k.
was denied.
 The Probate court ordered a warrant of distraint and levy in
order to pay said taxes however they could not be done
because Jose’s properties were in Iloilo City while the
warrant was to the Mun. Treas. Of Pototan.
 Upon investigation initiated by the probate court, it was
found out that the actually properties amounted to 356K. as
90 parcels of land were not reported in the initial return. The
BIR reinvestigated and assessed 28K estate tax and 38k
inheritance tax.
 Jose died and was succeeded by Florencia, his widow.
 Lilia came to the CTA disputing the legality of the assessment
since 5 years has elapsed from the initial return, thus the
same had prescribed.
 BIR counters that the return being fraudulent could not toll
the prescription period.
 CTA approved the request of Lilia, BIR elevates the same to
the SC.
ISSUE and RULING:
WoN Assessment had prescribed? NO
 Sec 331 limits the right to assess tax within 5 years of the
filing of the return
 Fraud being a question of fact, and the same not having been
alleged and established by BIR, does not deserve considering.
 However the CTA conclusion that he defective return may
start to toll the prescriptive period has no basis in the law.
 93(a) lists the requirement of a valid return:
 o (1) the value of the gross estate of the decedent at bound to do anything more than to wait for the
the time of his death, or, in case of a nonresident not Commissioner to assess the tax. However he need not wait
a citizen of the Philippines forever, which is the import of Sec 331.
o (2) the deductions allowed from gross estate in  Except, of course, if the taxpayer failed to observe the law, in
determining net estate as defined in section eighty- which case Section 332 of the same Code grants the
nine; Commissioner a longer period. Non-observance consists in
o (3) such part of such information as may at the time filing a false or fraudulent return with intent to evade the tax
be ascertainable and such supplemental data as may or in filing no return at all.
be necessary to establish the correct taxes.  332(a) provides 10 years upon the discovery of the falsity,
 A return need not be complete in all particulars. It is sufficient fraud or omission n the return.
if it complies substantially with the law. There is substantial
Whether Lilia should be liable only for the 1/3 which she administers?
compliance when:
NO
o forth (1) the value of the gross estate of the decedent
at the time of his death, or, in case of a nonresident  In coming to seek the illegality of the assessment, Lilia
not a citizen of the Philippines represented the entire of the estate. She cannot now claim
o (2) the deductions allowed from gross estate in to be only liable only for the 1/3rd she is administering to.
determining net estate as defined in section eighty-  Where there are two or more executors, all of them are
nine; severally liable for the payment of the estate tax.
o (3) such part of such information as may at the time
be ascertainable and such supplemental data as may
be necessary to establish the correct taxes.
 The Tax Return filed by Jose was subtstantially DEFECTIVE
o It was incomplete failing to state 92 parcels of land. Dispositive:
Such oversight could not have been a mistake.
CTA decision Set aside, Pet ordered to pay.
o The return did not mention a heir.
o When there is no heir - the return showed none -
o the intestate estate is escheated to the State.The
State taxes not itself.
 It was though no return was made.
 The law imposes upon the taxpayer the burden of supplying
by the return the information upon which an assessment
would be based. His duty complied with, the taxpayer is not