G.R. NO. 139858 - COMMISSIONER OF INTERNAL REVENUE, VS. ARTURO TULIO.D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE, in the light of the foregoing premises, the motion to dismiss is hereby GRANTED. Let this case be as it is hereby DISMISSED with prejudice." Petitioner filed a motion for reconsideration but was denied on August 25, 1999. Hence, this petition for review on certiorari . As mentioned earlier, the main issue for our resolution is whether petitioner's cause of action for the collection of deficiency percentage taxes against respondent has prescribed. The lower court erroneously applied Section 203 of the same Code providing for the three-year prescriptive period from the filing of the tax return within which internal revenue taxes shall be assessed. It held that such period should be counted from the day the return was filed, or from August 15, 1990 up to August 15, 1993. However, as shown by the records, respondent failed to file a tax return , forcing petitioner to invoke the powers of his office in tax administration and enforcement. Respondent's failure to file his tax returns is thus covered by Section 223 providing for a ten-year prescriptive period within which a proceeding in court may be filed. Section 223 (now Section 222) of the National Internal Revenue Code provides: "Section 223. Exceptions as to Period of Limitation of Assessment and Collection of Taxes . " (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission : Provided , That in a fraud assessment which had become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. x x x (c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within three (3) years following the assessment of the tax ." Section 223 specifies three (3) instances when the running of the three-year prescriptive period does not apply. These are: (1) filing a false return, (2) filing a fraudulent return with intent to evade tax or (3) failure to file a return. The period within which to assess tax is ten years from discovery of the fraud, falsification or omission. Here, respondent failed to file his tax returns for 1986 and 1987. On September 14, 1989, petitioner found respondent's omission. Hence, the running of the ten-year prescriptive period within which to assess and collect the taxes due from respondent commenced on that date until September 14, 1999. The two final assessment notices were issued on February 28, 1991, well within the prescriptive period of three (3) years. When respondent failed to question or protest the deficiency assessments thirty (30) days therefrom, or until March 30, 1991, the same became final and executory. As we he