Collector of Internal Revenue vs Suyoc Consolidated Mining Co.

G.R. No. L-11527 – 104 Phil. 819 – Taxation Law – NIRC Rules of Procedure – Estoppel – Waiver of the Statute of Limitations

Due to the chaos caused by World War II, Congress extended the filing of income tax returns for the year 1941. The extension was up to December 31, 1945. However, Suyoc Consolidated Mining Company (SCMC), due to lost records, requested the Commissioner of Internal Revenue (CIR) for further extension. The same was granted and SCMC was allowed to file its return until February 15, 1946. On February 12, 1946, SCMC filed a tentative income tax return. On November 28, 1946, SCMC filed a second final return. In February 1947, the CIR made an assessment notifying SCMC that it was liable for P33k in taxes. The CIR gave SCMC 3 months to pay but the latter failed to make payment.

What followed was a series of negotiations as SCMC repeatedly asked for reconsideration and reinvestigation. Due to SCMC’s requests, the CIR had to revise the assessment several times. Eventually in July 1955, the CIR made a final assessment notice (FAN) notifying SCMC that it is liable for P24k in taxes. This time, SCMC questioned the validity of the assessment as it now alleged that it was issued beyond the 5 year prescriptive period. (NOTE: Under the National Internal Revenue Code of 1997, prescriptive period for normal assessment is 3 years).

The issue reached the Court of Tax Appeals (CTA) which ruled that the assessment issued is void because in the first place, when SCMC requested for a  reinvestigation, there was no agreement as to the extension of the prescriptive period; that a mere request for reinvestigation does not automatically suspend the running of the prescriptive period. The CTA ruled that the FAN issued in 1955 was already way beyond the 5 year prescriptive period.

ISSUE: Whether or not the CTA is correct.

HELD: No. This is one case where a taxpayer is barred from setting up the defense of prescription even though there was not a written agreement. It is true that when a request for reinvestigation is made by the taxpayer, the same does not toll the running of the prescriptive period unless there is a written agreement between the CIR and the taxpayer. However, in this case, due to the repeated requests of SCMC which were acted upon by the government for good reasons the government was persuaded to delay the final assessment. The applicable principle is fundamental and unquestioned. “He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned, for the law says to him in effect this is your own act, and therefore you are not damnified.” The tax could have been collected, but the government withheld action at the specific request of SCMC. SCMC is now estopped and should not be permitted to raise the defense of the Statute of Limitations.

Read full text.