CTA Case No. 713 (Decision)

~EPUBLI'C OJ' THE PHILlPJtiNEI COURT OF TAX APPEAI.Jt QUEZON CITY ENGINEERING EQUIPMENT AND SUPPLY CO., Petitioner, versus CTA CASE NO. 713 � THE Cffi~ITSSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - X DE C I S I 0 N Petitioner sought the refund of �13 ,532.00 alleged to have been erroneusly assessed and col- lected by respondent as 1954 deficiency income tax based on the disallowan~e of bad debts claimed by petitioner in its income tax return for the said year. Petitioner is a duly organized domestic cor- poration with principal office and place of busi- ness at Manila . (Par. 1, Partial Stipulation of Facts, hereinafter referred to as ''STIFACTS 11 for brevity, PP� 20-21, CTA rec.) On February 19, 1955, petitioner filed its corporate income tax return for 1954 declaring therein a net income of �125 ,237o52 and a tax liability of �27 , 066 . 00 (Exh. L, PP � 1-10, BIR rec.) which has already been paid. (Par. 3, STIFACTS, ibid.)

DECISION - CTA CASE NO. 713 2 In the said income tax return for 1954, petitioner deducted from its gross income the total sum of ~,5'27.95' representing 11 1941 Ac- counts Receivable" written off (Exh. L, P� 1, BIR rec.; see also Exhibit E, Journal Voucher No . 2-12,~) as bad debts but which was disallowed by respondent. On account of the disallowed deduc- tion a deficiency income tax assessment of ~13,- 532.00 (No. 90-5'C-326-5'4) was issued against peti- tioner, computed as follows: Net Income as per return �� ~125',237.5'2 Add: Accounts receiv- ~J7438 :5726~ 2~ :4? able written off �� �� Net income per return Income tax due thereon �� ~0,5'9 .00 Less: Amount already assessed and paid.. 2i2i:0s6~2:o0o0 Deficiency income tax �� ~ (Par. 4, STIFACTS, ibid.) On October 31, 195'7, respondent notified peti- tioner that he had applied the refundable amount of �1,362.96 as sales tax erroneously collected to the payment of the deficiency income tax lia- bility of �13 ,5'32.00, thereby leaving a balance of ~12 ,169.04 (par. 5', STIFACTS, 1�1g.) On November 13, 195'7, a warrant of distraint and levy was issued by respondent to enforce the collection of petitioner's income tax liability of ~ 12,169.04 (p. 67, BIR rec.). On November 27, 1957, petitioner paid the said deficiency income tax of ~12 ,169.04 under protest (par. 6, STIFACTS,

DECISION - CTA CASE NO . 713 3 ibid.). On November 18, 1959, before the lapse of two years from the date of payment, petitioner filed with respondent a claim for the refund of ~13,532.00 on the ground that the said amount was ..illegally, erroneously and excessively assessed and collected (pars. 7 & 8, STIFACTS, !Qig.) . No final action having been taken by respondent on petitioner's claim for refund, it filed against the Commissioner of Internal Revenue the present p~:t;;;t~ion for review . The issues raised in this appeal are as follows: (1) Whether or not petitioner could still, after having paid the deficiency income tax of ~13 , 532 . 00, legally claim the refund thereof; and (2) Whether or not the disallowance by re- spondent of ~48,527 . 95 as pre-war bad debts deducted by petitioner in its 1954 gross income is legal and justified. First Issue - Respondent contends that the petitioner, after payin~the deficiency income tax assessment which has become final and executory for failure to contest the same , is estopped from claiming the

DECISION - CTA CASE NO . 713 .. 4 refund thereof, citing as authority the case of .Commissioner of Internal Revenue v . Jose Concepcion, �et al . , G.R . No . L-23912, promulgated March 15, 1968. The contention of respondent that petitioner is estopped from claiming the refund of the alleged overpaid income tax by judicial action is in order. In the case of Jose Concepcion, sypra, our Supreme Court held: For subsequently, in Republic v . Lim Tian Teng Sons & Co . , fnc . , the above doctrine was reaffirmed categorically in this language: "Taxpayer's failure to appeal to the Court of Tax Appeals in due time made the assessment in question final , executory and demandable . And when the action was instituted on Septem- ber 2, 1958 to enforce the deficien- cy assessment in question , it was already barred from disputing the correctness of the assessment or in- voking any defense that would re- open the question of his tax lia- bility on the merits . Otherwise , the period of thirty days for ap- peal to the Court of Tax Appeals would make little sense . " Once the matter has reached the stage of finality in view of the failure to appeal, it logically follows in the appropriate language of Justice Makalintal, in Morales v . Collector 9f Internal Revenue , that it "could no longer be reopened through the expedient of an appeal from the denial of petitioner ' s request for cancellation of the warrant of dis- traint and levy. " In the same way then that the expedient of an appeal from a denial of a tax request for cancellation of warrant of distraint and levy cannot be utilized for the purpose of test-

DECISION - CTA CASE NO. 713 5 ing the legality of an assessment, which had become conclusive and binding on the taxpayer, there being no catpi opne a3lU1 6 t hoef procedure set forth in Se the National Internal Revenue Code is not available to re- vive the right to contest the validity of an assessment once the same had been irretrievably lost not only by the failure to appeal but likewise by the lapse of the reglementary period within which to appeal could have been taken. Clearly then, the lia- bility of respondent Concepcion as an ancillary administrator of the es- tate of the deceased wife and of re- spondent Mitchell-Roberts as the hus- band for the amount of f- 1, 181.33 as estate tax and ~2 ,616.10 as inheri- tance tax was beyond question. Having paid the same, respondents are clear- ly devoid of any legal right to sue for recovery. The decision of the Court of Tax Appeals ordering peti- tioner Commissioner of Internal Rev- enue to refund the above total sum of f-3 ,797.~3 cannot stand � . In the case at bar, petitione~ did not dis- pute the 1954 deficiency income tax assessment of respondent for an unreasonable length of time un- til a warrant of distraint and levy was issued by SC:!id respondent on November 13, 1957 to enforce the collection of petitioner's income tax lia- bility. The action, therefore, filed by peti- tioner against respondent on November 18 , 19(59 seeking the recovery of the income tax paid does not constitute an appeal within the 30-day period prescDdbed by Section 11 of Republic Act No. 1125o Accordingly, we hold that petitioner's action has prescribed because it was filed in court beyond

DECISION CT CASE NO . 713 6 the period required by law. Having arrived at the conclusion that the taxpayer's failure to appeal to this Court in due time made respondent's assessment final , executory and demandable , and that the said taxpayer is no"YT estopped from claiming the refund by judicial action of the deficiency income tax paid , it is idle and pur- poseless for the Court to go into the merits of the case. h::r:ER.EFORE , petitioner's action for t he re- covery of ~ 13,532.00 re presenting the deficiency income tax paid on account of the disallowed bad debts in 1954 , should be , as it is hereby dismissed, with costs against petitioner. SO ORDERED. uezon City, ugust 30, 1969. ~ tT-i~lifs4u-,otfti~fA;L~V,AR,Eu ssociate Judge ~�JE C O ~\ICUR : ~~ Rm N H . U t LI "l Presiding Judge ~~~� R 10N L . V NCEf"'A Associate Judge