ANTONIO E. QUEROL, PETITIONER, VS. COLLECTOR OF INTERNAL REVENUE, RESPONDENT.

Review of a decision of the Court of Tax Appeals sentencing
petitioner to pay a deficiency income tax of P753.51 for the year 1947,
plus 5% surcharge for late payment and interest at the rate of 1% per
month from March 16, 1955.

On February 28, 1948, petitioner filed his income tax return for the
year 1947. Subsequently, he also filed income tax returns for the years
1948 to 1950. Sometime in 1951, respondent Collector issued an income
tax assessment notice charging petitioner an income tax on the amount
of P9,004.22, representing expenses incurred by petitioner for the
repair of his house, and which petitioner claimed as deductible expense
in his 1947 returns. On December 14, 1951, in a letter addressed to
respondent Collector, petitioner requested reconsideration of this
opinion of the Collector on the ground that there was nothing added to
the house to increase its original value, and, therefore, said amount
cannot be made part of the asset. On May 25, 1953, without having
received a reply to his first request, petitioner reiterated his
request for exemption from the income tax mentioned in respondent’s
assessment notice in another letter addressed to the Municipal
Treasurer of San Fernando, La Union. On July 10, 1954, the Examiner
assigned to investigate the case submitted his report recommending
denial of petitioner’s request, and charging as disallowances the costs
of repairs, but recommending instead that said repairs be capitalized
and depreciated yearly. On February 9, 1955, respondent Collector
issued a tax assessment notice of P753.51 for 1947. He also issued
assessment tax notices for the years 1948 to 1950. On February 19,
1955, petitioner returned assessment notices from 1947 to 1950, with a
request for information how the computation of his tax liability had
been arrived at.

On September 14, 1956, respondent Collector issued a warrant of
distraint and levy against petitioner’s properties to satisfy the
amount of P1,808.10, petitioner’s total income tax liability for the
years 1947 to 1950, plus its legal increments. On September 19, 1956,
the municipal treasurer distrained and levied on petitioner’s
residential house. On September 22, 1956, petitioner filed a petition
for review, seeking to declare the warrant of distraint and levy null
and void, and to enjoin respondent from executing the warrant. On
appeal to the Tax Court, that Court held that the right to collect
summarily had already prescribed, and declared the warrant null and
void. Appeal by the respondent Collector to this Court was later
dismissed.

On March 18, 1959, petitioner filed an amended petition for review
to the end that the real matter in dispute may be completely determined
in a single proceeding; and on October 7, 1959, the Tax Court rendered
the decision, modifying respondent Collector’s decision in the sense
stated above, and from which petitioner is now appealing.

Petitioner argues that the Tax Court erred in holding that an
initial assessment notice for the year 1947 was sent to petitioner
sometime in 1951 and in finding that his requests for reconsideration
suspended the running of the prescriptive period, thus upholding the
non-prescriptibility of the right of the Collector to collect from
petitioner a deficiency income tax for 1947; the respondent claims, in
turn, that the evidence on record regarding the initial assessment is
clear, as admitted in petitioner’s requests for reconsideration
(letters of December 14, 1951 and May 25, 1953), which evidence the Tax
Court can take cognizance of since evidence not formally offered may be
taken into account in deciding a case; that since the period from the
first request for consideration to the date of the respondent’s receipt
of the result of the investigation suspended the running of the period
for the running of prescription,the tax assessment notices issued on
February 9, 1955 were on time, and so was the judicial action for
collection, which was considered filed when respondent Collector filed
his answer to the amended petition for review on April 8, 1959.

The issue is here concentrated by the appellant taxpayer on his
defense of prescription of the action to collect the tax due on his
income during 1947.

Starting from the ruling of the Tax Court that the irregularities in
his return do not make it false or fraudulent, the appellant first
contends that the Collector’s 1955 revised assessment is void, because
it was not made within the five years prescribed by section 331 of the
Internal Revenue Code, from and after the filing of his income tax
return (Exhibit A) on February 28, 1948. We agree with the court below
that this contention is not tenable, because there had been a preceding
assessment in 1951. In his own letter of December 14, 1951 (Exhibit O
or 11- A), Querol stated:

“With reference to the income tax assessment notice
No. 24-A-36-51/47, I have the honor to request reconsideration of your
opinion charging me an income tax for the amount of expenses I incurred
for the repair of my house.”

These words necessarily import that the taxpayer had received a tax assessment notice before
the date of the letter. That such assessment referred to his 1947
income tax return is shown by his reference to the value of the repairs
made to his house, that he had claimed as deduction in his 1947 return
(Exhibit A). No similar claim appear? in any other tax return made by
him. Now, from February, 1948 (when the return was filed) to December,
1951 is less than four years; hence, the first assessment was made on
time.

It is true that the Collector revised the original assessment on
February 9, 1955; and appellant avers that this revision was invalid in
that it was not made within the five-year prescriptive period fixed by
law (Collector vs. Pineda, 112 Phil., 321). But the fact is
that the revised assessment was merely a result of petitioner Querol’s
requests for reconsideration of the original assessment, contained in
his letters of December 14, 1951 and May 25, 1953. The records of the
Bureau of Internal Revenue show that after receiving the letters, the
Bureau conducted a reinvestigation of petitioner’s tax liabilities,
and, in fact, sent a tax examiner to San Fernando, La Union, for that
purpose; that because of the examiner’s report, the Bureau revised the
original assessment, and that while it still refused to allow full
deduction of the repairs to the taxpayer’s residence as a business
expense, it allowed him to capitalize the amount, and permitted him to
deduct a reasonable depreciation for 1947. In other words, the
reconsideration was granted in part, and the original assessment was
altered. Consequently, the period between the petition for
reconsideration and the revised assessment should be subtracted from
the total prescriptive period (Republic vs. Ablaza, 108 Phil., 1105).

We have also ruled that once the assessment has been reconsidered at
the taxpayer’s instance, the five-year period for filing of the court
action for collection should begin to run from the date of the
reconsidered or modified assessment (Collector vs. Pineda, supra).
The judicial action to recover the taxes in the present case was made
when the Collector, countering the taxpayer’s suit in the Court of Tax
Appeals, asked the Court, in April of 1959, to order payment thereof,
less than 5 years after the revised assessment was made.

Much is made by appellant of the fact that no clear evidence exists
on the date when the original tax assessment was issued by the
Collector or when it was received by the taxpayer. But it must be
remembered that prescription is a matter of defense; hence, the
burden is on the taxpayer to prove that the full period of limitation
has expired, and this requires him to positively establish the date
when the period started running, and when the same was fully
accomplished.

Finding no cogent reason to vary the ruling of the Tax Court, its decision is hereby affirmed, with costs against appellant.

Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.