COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. BOHOL LAND TRANSPORTATION CO., RESPONDENT. BOHOL LAND TRANSPORTATION CO., PETITIONER, VS. COLLECTOR OF INTERNAL REVENUE, RESPONDENT.

This in an appeal from a decision of the Court of Tax Appeals dated
September 25, 1957 ordering the Bohol Land Transportation Co.,
hereinafter referred to as company, to pay the amounts of P20,711.99,
P18,728.21 and P30,155.09 as deficiency income taxes for the years
1948, 1949 and 1950.

The Bohol Land Transportation Co. is a domestic corporation engaged
in the land transportation business with main office at Tagbilaran,
Bohol. From 1945 to 1951 it had consistently filed its income tax
returns and paid the corresponding income taxes due thereon as per said
returns. Subsequently, a verification of its income tax returns was
conducted by an examiner of the Bureau of Internal Revenue and as a
result the following deficiency assessments were issued against it oil
August 4 and 5, 1953: for 1945 the deficiency income tax assessed is
P15,275.31; for 1946, P15,768.20; for 1947, P11,732.90; for 1948,
P20,711.99; for 1949, 18,728.21; for 1950, P30,155.09, and for 1051,
P30,189.00.

Due to the company’s failure to settle said deficiency income taxes,
the Collector of Internal Revenue issued a warrant of distraint and
levy on the property of the company on December 23, 1954. On March 8,
1956, the Collector garnished the sum of P53,910.13 deposited by the
company with the Philippine National Bank, Manila Branch, and the
current accounts and bank deposits it had with the Chartered Bank of
India, Australia, and China, Cebu City, in the amount of P200,000.00.

On April 7, 1956, the company filed in the Court of Tax Appeals an
appeal contesting the validity of the deficiency assessments made by
the Collector as well as of the warrant of distraint and levy issued by
him. On May 7, 1956, the Collector filed his answer praying that the
company be ordered to pay the deficiency income taxes for the years
1945 to 1951, plus the delinquent penalties that have accrued thereon,
in accordance with the assessments made by him.

On January 10, 1957, the company filed with the Court of Tax Appeals
an urgent motion for mandatory injunction praying that the Collector be
required (1) to revoke the warrant of distraint and levy and/or
garnishment issued against its properties consisting of 79 motor buses,
lands, buildings and office and shop equipment, and against its
deposits in the Philippine National Bank, Manila, and the Chartered
Bank of India, Australia, and China, Cebu City; and (2) to enjoin him
from collecting by summary methods the aforesaid deficiency income
taxes for the years 1945 to 1951, inclusive.

At the hearing on the injunction, the Collector admitted that
pursuant to several decisions of the Supreme Court he has no authority
to collect by summary methods the income taxes assessed against the
company for the years 1945 to 1950, inclusive, it appearing that the
warrant of distraint and levy and the warrant of garnishment were
issued beyond the period of three years from the time the income tax
returns were filed. Consequently the parties entered into an agreement
dated February 23, 1957 whereby the Collector agreed to withdraw the
warrant of distraint and levy against the properties of the company as
well as the warrant of garnishment issued against its deposit with the
Chartered Bank of India, Austria, and China, Cebu City in the amount of
P200,000.00, but “leaving the cash deposit with the Philippine National
Bank in Manila, in the amount of P53,910.13, subject to said
garnishment to guarantee the interest of the Government with respect to
the collection of the tax assessment for the year 1951.”

At the hearing of the case on the merits, the company in spite of
the suggestion of the court did not present any evidence to show the
incorrectness of the deficiency income tax assessments with respect to
the years 1945 to 1950, inclusive, and so the court considered such
failure fatal in view of the theory that the assessment made by the
Collector is presumed to be prima facie correct unless
controverted. Hence, the Court of Tax Appeals held the petitioner
liable for deficiency income taxes for the years 1948, 1949 and 1950.
However, the court found and held that the collection of deficiency
taxes from 1945 to 1947 has already prescribed for the reason that the
assessments corresponding to said years had been made beyond the 5-year
period, counted from the time the returns for said years were filed.
From this decision, both parties have appealed.

The Collector of Internal Revenue is appealing from that portion of
the decision which holds that the right of the Government to assess and
collect by judicial action the income taxes for the years 1945 to 1947,
inclusive, has already prescribed, invoking our ruling in the case of
Collector of Internal Revenue vs. Jose Avelino, et al., 100 Phil., 327; 54 Off. Gaz. [3] 645, November 10, 1956, the pertinent portion of which reads:

“It is true that under section 331 and 332 of the
National Internal Revenue Code the Collector of Internal Revenue may
assess an internal revenue tax within five years after the return was
filed, and in case of a false or fraudulent return he may also assess
such tax as may be found to be due at any time within ten years after
the discovery of the falsity, fraud or omission, and their collection
may be enforced either by distraint or levy or by a proceeding in
court; but said sections merely apply to internal revenue taxes in
general and not to income taxes the collection of which is specifically
provided for under a different title of the same law. Thus, when the
National Internal Revenue Code was codified and enacted in 1939, the
whole Act No. 2833, commonly known as the Income Tax Law, was
incorporated therein and became Title II thereof, which is exclusively
devoted to income tax, section 51 (d) of said Code, which refers to the
assessment and payment of income tax, being merely a reproduction of
section 9(a) of the former Income Tax Law, but there is nothing
provided in the new Code from which it may be inferred that the
provisions of said section 51 (d) were deemed repealed or modified by
the provisions of sections 331 and 332 thereof. Since repeals by
implication are not favored, unless the contrary clearly appears, and
it is a well known rule that conflicting provisions should be
harmonized and reconciled so that both may be given force and validity,
it is our duty to harmonize and reconcile them if only to give effect
to the clear intent of our legislative body. A cursory reading of the
provisions of our National Internal Revenue Code regarding the
collection of income tax as distinguished from internal revenue taxes
in general clearly reveals the intention of our legislative body to
preserve in toto the procedure and method of collection
originally adopted with regard to the former considering its nature and
peculiarities in spite of the adoption of a similar method of
collection with some variation with regard to the latter. And because
of this manifest intent of Congress, we have no other course of action
than to bold that the two provisions are valid and binding, one being
special, particularly applicable to income tax, and the other general,
applicable to other kinds of internal revenue taxes. To hold otherwise
would be to render, nugatory and meaningless section 51 (d) of our
National Internal Revenue Code, a conclusion not warranted by the
circumstances, since it cannot be presumed that Congress has adopted it
merely through an oversight. We find no sufficient justification for
such conclusion.”

In other words, because in the aforesaid case we said that Sections
331 and 332 of the National Internal Revenue Code apply to internal
revenue taxes in general and not to income taxes the collection of
which is specifically provided for under a different title of the same
Code, particularly Title II which refers exclusively to income tax, the
Collector concludes that the right of the Government to assess and
collect income taxes by judicial action has no definite period of
limitation and so the deficiency income taxes for 1945, 1946 and 1947
which the Government is seeking to collect has not as yet prescribed.

But it should be noted that in expressing the opinion that the right
to collect by summary methods can only be exercised within the period
of three years from the time the return is filed, otherwise the right
can only be enforced by judicial action, this Court did not say that
the right to collect by judicial action is unlimited or
inprescriptible. The only question on which we have been called upon to
determine is whether Section 51 (d) of the National Internal Revenue
Code, which refers to the collection of income taxes, shall be deemed
to have been repealed by implication by Sections 331 and 332 of the
same Code, which refers to internal revenue taxes in general, in view
of their apparent conflicting provisions. We held then that said
Section 61 cannot be deemed to have been repealed because it refers
exclusively to income tax which is covered by a separate title of the
Code and which Congress has intended to preserve in toto by incorporating it therein. This view is reflected in the following portion of our decision:

“* * * A cursory reading of the precisions of our
National Internal Revenue Code regarding the collection of income tax
as distinguished from internal revenue taxes in general clearly reveals
the intention of our legislative body to preserve in toto the
procedure and method of collection originally adopted with regard to
the former considering its nature and peculiarities in spite of the
adoption of a similar method of collection with some variation with
regard to the latter. And because of this manifest intent of Congress,
we have no other course of action than to hold that the two provisions
are valid and binding, one being special, particularly applicable to
income tax, and the other general, applicable to other kinds of
internal revenue taxes. To hold otherwise would be to render nugatory
and meaningless section 51 (d) of our National Internal
Revenue Code, a conclusion not warranted by the circumstances, since it
cannot be presumed that Congress; has adopted it merely through an
oversight. We find no sufficient justification for such conclusion.”
(The Collector of Internal Revenue V. Avelino, supra)

We notice, however, that Section 51 (d) of the
National Internal Revenue Code, which refers to the collection of
income tax, does not provide for any prescriptive period insofar as the
collection of income tax by judicial action is concerned, the
prescriptive period therein mentioned being merely applicable to
collection by summary methods, as interpreted by this Court.
Considering this void in the law applicable to income tax, and bearing
in mind that Section 331 of the Code which provides for the limitation
upon assessment and collection by judicial action comes under Title IX,
Chapter II, which refers to “CIVIL REMEDIES FOR COLLECTION OF TAXES”,
we may conclude that the provisions of said Section 331 are general in character which may be considered suppletory
with regard to matters not covered by the title covering income tax. In
other words, Title II of the Code is a special provision which governs
exclusively all matters pertaining to income tax, whereas Title IX,
Chapter II, is a general provision which governs all internal revenue
taxes in general, which cannot apply insofar as it may conflict with
the provisions of Title II as to which the latter shall prevail, but
that in the absence of any provision in said Title II relative to the
period and method of collection of the tax, the provisions of Title IX,
Chapter II, may be deemed to be suppletory in character. Hence, in our
opinion, the Court of Tax Appeals did not err in holding that the right
of the Government to collect the deficiency income taxes for the years,
1945, 1946 and 1947 has already prescribed under Section 381 of the
National Internal Revenue Code.

Coming now to the appeal of
the company, the following are the errors ascribed to the trial court:
(1) in holding that the proceeding for review instituted by the company
is equivalent to a judicial action within the purview of Section 332 (c)
of the Tax Code; (2) in holding that under the facts and circumstances
of this case, the tax assessments for the years 1948, 1949 and 1950 are
presumptively correct; (3) in holding the company liable for
the payment of the 1948, 1949 and 1950 tax assessments; and (4) in
denying its motion for reconsideration and reopening to enable it, in
the interest of justice, to introduce further evidence to prove the
errors committed in the assessments for 1948, 1949 and 1950.

In holding that the appeal interposed by the company with the Court
of Tax Appeals is equivalent to a judicial action within the purview of
Section 332 (c) of the Tax Code, the Court of Tax Appeals made the
following comment :

“We find his theory not well taken. The judicial
action contemplated may refer not only to the civil case instituted by
the government to collect the tax but also to a case where the taxpayer
takes the initiative to contest the validity of the assessment or
collection of taxes by the Collector of Internal Revenue. The objective
in both cases is the same—the validity and correctness of the
determination and collection of the tax. Thus, a single claim filed by
the Collector of Internal Revenue against the estate of a deceased in a
probate case has been recognized as tantamount to the judicial
collection of taxes. (Collector vs. Annie Laurie Haygood, 65
Phil., 520). On the other hand, in a claim for refund instituted
against the Collector of Internal Revenue, the Supreme Court considered
the taxpayer’s suit for refund as sufficient judicial action for the
collection of taxes on the part of the former (see Phil. Sugar Estate
Development Co., Inc. vs. Posadas, 65 Phil., 216).”

We agree with the foregoing view. Indeed, had the company not taken
the matter to the Court of Tax Appeals, the Collector would have
reasonably taken a similar action for, as it should be noted, he has
already taken the preliminary step, which is the collection by
distraint and levy, to insure the effective collection of the tax
assessed against the company. And when the company appealed the
Collector’s decision, the Collector was placed in the alternative of
sustaining his decision, which is tantamount to a judicial action. As
the Court of Tax Appeals well observed, “The objective in both cases is
the same—the validity and correctness of the determination and
collection of the tax.” Indeed, the action of the Collector cannot be
taken in any other light. It is a judicial action pure and simple.

The company argues that its failure to substantiate it’s defense
insofar as the years 1945 to 1950 are concerned should not be held
against it for there is no validity to the prima facie
correctness of the Collector’s findings since the assessments are
signed not by the Collector, nor by the chief of income tax division,
but by one Casto Ayeras, who did hot even reveal his position, nor
state if he had any authority to sign for his chief. This contention is
untenable, for a cursory examination of the assessment notices will
show that they were duly signed by Ayeras in behalf of his chief, the
Collector. Under the set-up of the Bureau of Internal Revenue, the
chief of the income tax division as regards tax assessments is
possessed of. delegated powers to issue assessment notices in behalf of
the Collector of Internal Revenue. And in such a case, we may not infer
that the decision is not the decision of the Collector himself. Nor is
the fact that the tax assessments were not duly sworn to of any
consequence, because tax assessments are not required by law to be
under oath.

With regard to the second issue raised, what transpired during the
trial is as follows: When the turn of the company to present its
evidence with regard to the alleged errors committed in the assessment
of the deficiency income taxes for the years 1948, 1949 and 1950 came,
its counsel informed the court that he was abstaining from presenting
any evidence in view of the theory he entertained that the
interposition of the present appeal is not equivalent to a judicial
action within the purview of the law, and he adopted this attitude in
order that he may not be taken as having waived his right to press that
legal question.

But counsel for the company took the action we have related above in
spite of the suggestion of the court that he present his evidence
without prejudice to having that legal question determined when the
case is decided on the merits, but he remained adamant and desisted
from presenting his evidence. And when the decision came contrary to
his theory it was only then that he filed a motion for reopening in
order that he may be given his chance to present evidence invoking the
interest of justice. We agree with the Solicitor General that such
honest mistake on the part of counsel cannot be considered a ground for
reopening the case for he has taken such action at his own risk. This
is especially so when the court has already suggested that he present
his evidence without prejudice of pressing the issue later and he
disregarded the suggestion.

Since no evidence was presented to substantiate the errors that are
claimed to have been committed by the Collector in making the
assessments for the years 1948, 1949 and 1950, the trial court had no
other alternative than to resort to the legal truism that “all
presumptions are in favor of the correctness of tax assessments”. The
burden of proof is on the taxpayer to show the contrary. This the
company failed to do. This action finds support in the following
authorities:

“All presumptions are in favor of the correctness of
tax assessments. The good faith of tax assessors and the validity of
their actions are presumed. They will be presumed to have taken into
consideration all the facts to which their attention was called. No
presumption can be indulged that all of the public officials of the
state in the various counties who have to do with the assessment of
property for taxation will knowingly violate, the duties imposed upon
them by law.

“As a logical outgrowth of the presumption in
favor of the, validity of assessments, when such assessments are
assailed, the burden of proof is upon the complaining party. It is
incumbent upon the property owner clearly to show that the assessment
was erroneous, in order to relieve himself from it.’ (61 Am. Jur. pages
620-621).” (Interprovincial Autobus Co., Inc. vs. Collector of Internal Revenue, 98 Phil., 290; 52 Off. Gaz., [2] 791.)

“When
an importer challenges by legal steps the correctness of the assessment
of a duty by the Collector of Customs, the question to be decided is
not whether the Collector was wrong but whether the importer was right,
the burden being on the latter to establish the correctness of his own
contention.” (Behn, Meyer & Co. vs. Collector of Customs, 26 Phil., 647)

“That the determination of the tax deficiency by the Government has prima facie,
validity and the burden rests upon the taxpayer to overcome this
presumption and to show to the satisfaction of the Tax Court that the
determination was not correct.” (Perez vs. Court of Tax Appeals, et al., G. R. No. L-10607, May 30, 1958)

Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

Paras, C. J., Bengzon, Montemayor, Labrador, Concepcion, Endencia, Barrera, and Gutierrez David, JJ., concur.