G.R. No.

L-23534

May 16, 1967

JOSE A. ARCHES, petitioner-appellant,

vs.
ANACLETO I. BELLOSILLO and JAIME ARANETA, respondents-appellees.
Jose A. Arches for petitioner-appellant.
Office of the Solicitor General Arturo A. Alafriz, Solicitor A.B. Afurong and Atty.
S.S. Soriano for respondents-appellees.
BENGZON, J.P., J.:
Petitioner-appellant Jose Arches filed on February 27, 1954 his income tax return
for 1953. Within five years thereafter, or on February 26, 1959, deficiency income
tax and residence tax assessments were issued against him.
Said assessments not having been disputed, the Republic represented by the
Bureau of Internal Revenue Regional, Director, filed suit on December 29, 1960,
in the municipal court of Roxas City, to recover from petitioner-appellant the sum
of P4,441.25 as deficiency income tax and additional residence tax for 1953.
Arches then moved to dismiss the complaint on the ground that it did not
expressly show the approval of the Revenue Commissioner, as required by
Section 308 of the Tax Code, and on the further ground of prescription of the
action.
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The municipal court denied the motion. Petitioner-appellant, his motion to

reconsider having been denied also, resorted to the Court of First Instance of
Capiz on a petition for certiorari and prohibition assailing the order denying his
motion to dismiss. The trial court dismissed the petition. Hence, this appeal.
The only question here is the correctness of dismissal of the petition by the Court
of First Instance. The order was predicated upon the impropriety of the writ. We
find no error committed by said court.
The municipal court had jurisdiction over the parties and over the subject matter,
the amount demanded being less than P5,000.00.1 The suit below instituted by
the Republic, based on an uncontested assessment, was one merely for the
recovery of a sum of money where the amount demanded constitutes the
jurisdictional test.2
Petitioner-appellant would make much of the lack of approval of the Revenue
Commissioner. First of all, in this case, such requisite is not jurisdictional, but one
relating to capacity to sue or affecting the cause of action only.3So, in ruling on

said question, whatever error if any the municipal court committed, was
merely an error of judgment, not correctible by certiorari.4
Neither was there grave abuse of the discretion on the part of the municipal court
in ruling that the express approval of the Revenue Commissioner himself was not
necessary. The court relied upon Memorandum Order No. V-634 of the Revenue
Commissioner, approved by the Finance Secretary of July 1, 1956, wherein the
former's functions regarding the administration and enforcement of revenue laws
and regulations powers broad enough to cover the approval of court actions
as required in Section 308 of the Tax Code were expressly delegated to the
Regional Directors. This regulation, the issuance of which was authorized by
statute, has the force and effect of law.5 To rely upon it, hence, would not be
tantamount to whimsical, capricious and arbitrary exercise of judgment.
The verification by the Regional Director of the complaint constitutes sufficient
approval thereof already. It states,inter alia, that said Director has caused the
preparation of the complaint and that he has read the allegations thereof and
they are true and correct to the best of his knowledge and belief. Pleadings are to
be liberally construed.6
Assuming, therefore, in gratia argumenti, that the suit is being erroneously but
not invalidly entertained, for lack of express approval of the Commissioner or
the Regional Director, certiorari would still not lie. An order denying a motion to
dismiss is interlocutory and the remedy of the unsuccessful movant is to await
the judgment on the merits and then appeal therefrom.7 And, as the Court of First
Instance rightly observed, there was no showing of a special reason or urgent
need to stop the proceedings at such early stage in the municipal court.
Petitioner-appellant would also raise the question of prescription. Again, this is
not jurisdictional. And, We have already ruled8 that the proper prescriptive period
for bringing civil actions is five years from the date of the assessment, under
Section 332 of the Tax Code. The three-year period urged by petitioner-appellant
under Section 51 (d) refers only to the summary remedies of distraint and levy.
Here, the action was commenced one year, ten months and three days after the
assessments were made; hence, well within the period.
Wherefore, the dismissal of appellant's petition for certiorari by the Court of First
Instance is hereby affirmed. Costs against petitioner-appellant. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez
and Castro, JJ., concur

G.R. No. L-13387 March 28, 1960

SY CHIUCO, Petitioner, vs. COLLECTOR OF INTERNAL
REVENUE, Respondent.
Amador E. Sagalongos for petitioner.
Office of the Solicitor General Edilberto Barot, Solicitor Felicisimo R.
Rosete and Special Attorneys Antonio H. Garces and Manuel F. del
Rosario for respondent.
BAUTISTA ANGELO, J.:

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Petitioner was the owner and operator of the La Loma Cabaret

located at La Loma, Quezon City from 1926 to January, 1956. The
customers who patronized the cabaret were charged P0.30 per
dance, P0.10 to be paid before entering the dance hall and the
remaining P0.20 to be paid to the "bailarinas" after the dance. The
customers were informed of the fees to be paid per dance by means
of posters found in conspicuous places of the cabaret stating:
Gate
Ladies

P0.10
20

A Dance Total P0.30

During the period from January, 1947 to August, 1950, petitioner

declared in his return only the following gross receipts: receipts
from gate admissions at P0.10 each, P59,160.40; receipts from
restaurant sales, P5,339.90; receipts from bar sales, P47,459.10,
and paid thereon a 10 per cent amusement tax in the amount of
P11,197.40. Having failed to declare for tax purposes the P0.20
dance fee payable to the "bailarinas" which petitioner collected as
part of his business, respondent assessed against him a deficiency
amusement tax, including 50 per cent surcharge, in the amount of
P17,616.05. Respondent also assessed against petitioner the further
sum of P300.00 as penalty in settlement of his violation of Section
260 of the Tax Code and the Bookkeeping Regulations.
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From the above assessment, petitioner took the case on appeal to

the Court of Tax Appeals where, after due hearing, said court
rendered decision affirming the contention of respondent insofar as

he holds petitioner liable to pay the sum of P17,616.05 as deficiency

amusement tax and surcharge for the period from January, 1947 to
August, 1950. However, the Court of Tax Appeals rejected the
imposition of the penalty in the sum of P300.00 alleging lack of
power or authority to order the payment of such penalty. In due
time, petitioner filed the present petition for review.
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The law under which the deficieny amusement tax was collected
from petitioner for his alleged gross receipts from January, 1947 to
August, 1950 is Section 260 of the Tax Code, the pertinent portion
of which reads:
In the case of cockpits, cabarets, and night clubs, there shall be
collected from the proprietors, lessees, or operators a tax equivalent
to ten per centum . . . of the gross receipts, irrespective of whether
or not any amount is charged or paid for admission. . . . For the
purpose of amusement tax, the term "gross receipts" embraces all
the receipts of the proprietor, lessee, or operator of the amusement
place.
It would appear that the owner or operator of a cabaret is required
to pay an amusement tax equivalent to 10 per cent of the gross
receipts of his business "irrespective of whether or not any amount
is charged or paid for admission. The law further adds that, for the
purposes of amusement tax, the term "gross receipts" embraces all
the receipts of the proprietor or operator of the business. The
question that now arises is: What should be considered as gross
receipts of the La Loma Cabaret operated by petitioner? Does this
term include only what it collects from its customers as admission
fee to the cabaret, or it should also include the dance fee that is
charged by the cabaret as compensation for its "bailarinas"?
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Petitioner contends that it should only include what he collects as

admission fee, and not those representing the dance fee because
they do not go to the operator, but to the "bailarinas". In other
words, petitioner contends that because those dance fees go to the
"bailarinas", they could not be considered as part of the gross
receipts of the cabaret.
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With this contention we disagree. A cabaret is a place of amusement

where customers go because of their desire to dance and where the
"bailarinas" are the main attraction. Dancing is the main business
and customers patronize the place attracted by the "bailarinas". As
a matter of fact, "bailarinas" are the indispensable factor in the
operation of the business. Whatever is paid to them should,
therefore, be considered as paid on account of the business, and as
such it should be considered as part of petitioner's gross
receipts.
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That the foregoing is the correct interpretation of the term "gross

receipts" can be gleaned from the very terminology of the law
where in referring to the gross receipts the operation of the cabaret
may realize it includes mainly all receipts "irrespective of whether or
not any amount is charged or paid for admission." The law
undoubtedly mainly contemplates to include the fees that may be
paid by the customer for the privilege of dancing for it considers as
incidental what may be paid by the customer as admission fee. In
other words, the law in effect considers the amount charged against
the customers for dancing with the "bailarinas" as the main gross
receipts of the cabaret, the admission fee thereto being merely
incidental. In this respect, we are in full accord with the following
pronouncement of the Court of Tax Appeals:
We hold that when an operator, proprietor or lessee of a cabaret
takes it upon himself to set a fixed dance fee and thereby tends to
the collection of the same for the benefit of his "bailarinas" or
hostesses, the income derived therefrom forms part of his gross
receipts and therefore subject to amusement tax. By such
imposition, the operator becomes the principal party to the implied
contract of lease of services with his customers in place of the
"bailarinas" or hostesses under his employ and therefore subject to
the resulting liabilities as such contracting party.
Petitioner, however, contends that the Court of Tax Appeals erred in
charging against him the surcharge of 50 per cent on the amount he
allegedly under declared for the reason that there is no evidence on
record to show that he defrauded the Government. While there is no
direct evidence to show actual fraud on the part of petitioner,

however, the circumstances found by the Court of Tax Appeals

indicate that he has deliberately omitted in his book a sizeable
portion of his taxable income which in substance amounts to fraud.
In the circumstances, we are not prepared to disturb the finding of
the Court of Tax Appeals on this matter even if there is no direct
evidence that fraud was committed.
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As regards the contention that the collection of the tax in question

has already prescribed, it appears that this question was not raised
as an issue in the petition for review filed by petitioner in the Court
of Tax Appeals. It was not even touched by him in the memorandum
he submitted. There is, therefore, enough reason to believe that
petitioner has waived this defense and so it cannot now be
entertained. To hold otherwise would be to deprive respondent of
his right to show the contrary, this matter being evidentiary in
nature.
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Wherefore, the decision appealed from is affirmed, with costs

against petitioner.

G.R. No. L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME
ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal
Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros
Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the
Estate of the late LUIS D. TONGOY respondents.

DE CASTRO, J.:
Appeal from two orders of the Court of First Instance of Negros Occidental,
Branch V in Special Proceedings No. 7794, entitled: "Intestate Estate of Luis D.
Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of
Claim and for an Order of Payment of Taxes by the Government of the Republic

of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency
income taxes for the years 1963 and 1964 of the decedent in the total amount of
P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise
penalties, and the second, dated October 7, 1969, denying the Motion for
reconsideration of the Order of dismissal.
The Motion for allowance of claim and for payment of taxes dated May 28, 1969
was filed on June 3, 1969 in the abovementioned special proceedings, (par. 3,
Annex A, Petition, pp. 1920, Rollo). The claim represents the indebtedness to the
Government of the late Luis D. Tongoy for deficiency income taxes in the total
sum of P3,254.80 as above stated, covered by Assessment Notices Nos. 11-5029-1-11061-21-63 and 11-50-291-1 10875-64, to which motion was attached
Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator opposed
the motion solely on the ground that the claim was barred under Section 5, Rule
86 of the Rules of Court (par. 4, Opposition to Motion for Allowance of Claim, pp.
23-24, Rollo). Finding the opposition well-founded, the respondent Judge, Jose F.
Fernandez, dismissed the motion for allowance of claim filed by herein petitioner,
Regional Director of the Bureau of Internal Revenue, in an order dated July 29,
1969 (Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for
reconsideration was filed, of the order of July 29, 1969, but was denied in an
Order dated October 7, 1969.
Hence, this appeal on certiorari, petitioner assigning the following errors:
1. The lower court erred in holding that the claim for taxes by the
government against the estate of Luis D. Tongoy was filed beyond
the period provided in Section 2, Rule 86 of the Rules of Court.
2. The lower court erred in holding that the claim for taxes of the
government was already barred under Section 5, Rule 86 of the
Rules of Court.
which raise the sole issue of whether or not the statute of non-claims Section 5,
Rule 86 of the New Rule of Court, bars claim of the government for unpaid taxes,
still within the period of limitation prescribed in Section 331 and 332 of the
National Internal Revenue Code.
Section 5, Rule 86, as invoked by the respondent Administrator in hid
Oppositions to the Motion for Allowance of Claim, etc. of the petitioners reads as
follows:
All claims for money against the decedent, arising from contracts,
express or implied, whether the same be due, not due, or

contingent, all claims for funeral expenses and expenses for the last
sickness of the decedent, and judgment for money against the
decedent, must be filed within the time limited in they notice;
otherwise they are barred forever, except that they may be set forth
as counter claims in any action that the executor or administrator
may bring against the claimants. Where the executor or
administrator commence an action, or prosecutes an action already
commenced by the deceased in his lifetime, the debtor may set forth
may answer the claims he has against the decedents, instead of
presenting them independently to the court has herein provided, and
mutual claims may be set off against each other in such action; and
in final judgment is rendered in favored of the decedent, the amount
to determined shall be considered the true balance against the
estate, as though the claim has been presented directly before the
court in the administration proceedings. Claims not yet due, or
contingent may be approved at their present value.
A perusal of the aforequoted provisions shows that it makes no mention of claims
for monetary obligation of the decedent created by law, such as taxes which is
entirely of different character from the claims expressly enumerated therein, such
as: "all claims for money against the decedent arising from contract, express or
implied, whether the same be due, not due or contingent, all claim for funeral
expenses and expenses for the last sickness of the decedent and judgment for
money against the decedent." Under the familiar rule of statutory construction
of expressio unius est exclusio alterius, the mention of one thing implies the
exclusion of another thing not mentioned. Thus, if a statute enumerates the
things upon which it is to operate, everything else must necessarily, and by
implication be excluded from its operation and effect (Crawford, Statutory
Construction, pp. 334-335).
In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant,
et al., G.R. No. L-23081, December 30, 1969, it was held that the assessment,
collection and recovery of taxes, as well as the matter of prescription thereof are
governed by the provisions of the National Internal revenue Code, particularly
Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim
Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal
Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically
mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may
reasonably be presumed to have been also in the mind of the Court as not
affecting the aforecited Section of the National Internal Revenue Code.
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more
pointedly held that "taxes assessed against the estate of a deceased person ...

need not be submitted to the committee on claims in the ordinary course of

administration. In the exercise of its control over the administrator, the court may
direct the payment of such taxes upon motion showing that the taxes have been
assessed against the estate." The abolition of the Committee on Claims does not
alter the basic ruling laid down giving exception to the claim for taxes from being
filed as the other claims mentioned in the Rule should be filed before the Court.
Claims for taxes may be collected even after the distribution of the decedent's
estate among his heirs who shall be liable therefor in proportion of their share in
the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13).
The reason for the more liberal treatment of claims for taxes against a decedent's
estate in the form of exception from the application of the statute of non-claims, is
not hard to find. Taxes are the lifeblood of the Government and their prompt and
certain availability are imperious need. (Commissioner of Internal Revenue vs.
Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation
depends the Government ability to serve the people for whose benefit taxes are
collected. To safeguard such interest, neglect or omission of government officials
entrusted with the collection of taxes should not be allowed to bring harm or
detriment to the people, in the same manner as private persons may be made to
suffer individually on account of his own negligence, the presumption being that
they take good care of their personal affairs. This should not hold true to
government officials with respect to matters not of their own personal concern.
This is the philosophy behind the government's exception, as a general rule, from
the operation of the principle of estoppel. (Republic vs. Caballero, L-27437,
September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and
Protective Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30,
1976, 73 SCRA 162; Sy vs. Central Bank of the Philippines, L-41480, April
30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553;
Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine
Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance
Telephone Company, L-18841, January 27, 1969, 26 SCRA 620; Zamora vs.
Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez,
Inc. vs. Collector of Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As
already shown, taxes may be collected even after the distribution of the estate of
the decedent among his heirs (Government of the Philippines vs.
Pamintuan, supra; Pineda vs. CFI of Tayabas,supra Clara Diluangco Palanca vs.
Commissioner of Internal Revenue, G. R. No. L-16661, January 31, 1962).
Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra,
citing the last paragraph of Section 315 of the Tax Code payment of income tax
shall be a lien in favor of the Government of the Philippines from the time the
assessment was made by the Commissioner of Internal Revenue until paid with
interests, penalties, etc. By virtue of such lien, this court held that the property of

the estate already in the hands of an heir or transferee may be subject to the
payment of the tax due the estate. A fortiori before the inheritance has passed to
the heirs, the unpaid taxes due the decedent may be collected, even without its
having been presented under Section 2 of Rule 86 of the Rules of Court. It may
truly be said that until the property of the estate of the decedent has vested in the
heirs, the decedent, represented by his estate, continues as if he were still alive,
subject to the payment of such taxes as would be collectible from the estate even
after his death. Thus in the case above cited, the income taxes sought to be
collected were due from the estate, for the three years 1946, 1947 and 1948
following his death in May, 1945.
Even assuming arguendo that claims for taxes have to be filed within the time
prescribed in Section 2, Rule 86 of the Rules of Court, the claim in question may
be filed even after the expiration of the time originally fixed therein, as may be
gleaned from the italicized portion of the Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the notice
provided in the preceding section, the court shall state the time for
the filing of claims against the estate, which shall not be more than
twelve (12) nor less than six (6) months after the date of the first
publication of the notice. However, at any time before an order of
distribution is entered, on application of a creditor who has failed to
file his claim within the time previously limited the court may, for
cause shown and on such terms as are equitable, allow such claim
to be flied within a time not exceeding one (1) month. (Emphasis
supplied)
In the instant case, petitioners filed an application (Motion for Allowance of Claim
and for an Order of Payment of Taxes) which, though filed after the expiration of
the time previously limited but before an order of the distribution is entered,
should have been granted by the respondent court, in the absence of any valid
ground, as none was shown, justifying denial of the motion, specially considering
that it was for allowance Of claim for taxes due from the estate, which in effect
represents a claim of the people at large, the only reason given for the denial that
the claim was filed out of the previously limited period, sustaining thereby private
respondents' contention, erroneously as has been demonstrated.
WHEREFORE, the order appealed from is reverse. Since the Tax
Commissioner's assessment in the total amount of P3,254.80 with 5 % surcharge
and 1 % monthly interest as provided in the Tax Code is a final one and the
respondent estate's sole defense of prescription has been herein overruled, the
Motion for Allowance of Claim is herein granted and respondent estate is ordered

to pay and discharge the same, subject only to the limitation of the interest
collectible thereon as provided by the Tax Code. No pronouncement as to costs.
SO ORDERED

G.R. No. L-8685

January 31, 1957

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
AURELIO P. REYES and COURT OF TAX APPEALS, respondents.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Ramon L. Avancea,
Solicitor Jose P. Alejandro, Melquiades Gutierrez and Librada del Rosario-Natividad for petitioner.
Meer, Meer and Meer for respondents.
FELIX, J.:
This is a petition for certiorari filed by the Collector if the Internal Revenue wherein he seeks to nullify
the resolution of the Court of Tax Appeals restraining him from collecting, through summary
administrative methods, taxes allegedly due from Dr. Aurelio P. Reyes. The facts of the case may be
summarized as follows:
In a letter dated October 13, 1954, petitioner, the Collector of Internal Revenue demanded from
Aurelio P. Reyes payment of his alleged deficiency income taxes, surcharges, interests and
penalties for the tax years 1946 to 1950 amounting to P641,470.04 as of October 31, 1954, with the
suggestion that the aforesaid tax liabilities be paid either to the Bureau of Internal Revenue or the
City Treasurer of Manila. Together with said letter of assessment, respondent Aurelio P. Reyes
received a warrant of distraint and levy on his properties in the event that he should fail to pay the
alleged deficiency income taxes on or before October 31, 1954, Being informed by the City
Treasurer of Manila by a letter dated November 4, 1954, that said Treasurer was instructed by
petitioner to execute the warrant of distraint and levy on the amount demanded is not settled on or
before November 10, 1954, Aurelio P. Reyes filed with the Court of Tax Appeals on November 15,
1954, a petition for review of the Collector's assessment of his alleged deficiency income tax
liabilities. This was followed by an urgent petition, filed on November 16, 1954, to restrain the
Collector of Internal Revenue from executing the warrant of distraint and levy on his properties,
alleging among others, that the right of respondent to collect by summary proceedings the tax
demanded had already prescribed in accordance with section 51 (d) of the National Internal
Revenue Code, as his income tax returns for the tax years 1946 to 1950 had been filed more than
three years ago, the last one being on April 27, 1951; that a distraint and levy on his properties
would work injustice or irreparable injury to him and would tend to render any judgment of the Court
in the main case meaningless and ineffectual; that the requisite if Section 11 of Republic Act No.
1125 for the filing of a bond or deposit before a writ of distraint and levy may be suspended is not
applicable in this case; and that a greater portion of his assets consists of real properties located in
Manila and shares a stock in the Philippine Racing Club which are all encumbered in various

financial institutions and therefore there is no possibility that he would abscond with his property or
remove or conceal the same.
The Collector of Internal Revenue opposed said petition in November 19, 1954, on the ground that
Court of Tax Appeals has no authority to restrain him from executing the warrant of distraint and levy
on his properties of Aurelio P. Reyes in connection with the collection of the latter's deficiency
income taxes; that said taxpayer has an adequate remedy in law by paying first and then seek for
the recovery thereof; and that section 51 (d) does not preclude distraint and levy. By resolution of
January 8, 1955, the Court of Tax Appeals upheld the stand of Aurelio P. Reyes and ordered the
Collector of Internal Revenue to desist from collecting by administrative method the taxes allegedly
due from Reyes pending the outcome of his appeal, without prejudice to other judicial remedy or
remedies which the Collector may desire to pursue for the protection of the interest of the
Government, pending the final decision of the case on the merits. On January 21, 1955, the Solicitor
General filed a notice of appeal from said resolution and instituted in this Court the instant certiorari
case on January 22, 1955.
It is not disputed that respondent Reyes filed his income tax returns for the years 1946 to 1950, and
that the warrant of distraint and levy against the properties of said respondent was issued only on
October 13, 1954, or 3 years, 5 months and 16 days after the respondent taxpayer has filed his
returns for the tax year 1950, which he made on April 27, 1951. Therefore, the issues in this
instances are: (1) whether the Court of Tax Appeals could restrain the Collector of Internal Revenue
from enforcing collection of income tax deficiency by summary proceedings after the expiration of
the three-year period provided for in section 51 (d) of the National Internal Revenue Code; and (2)
granting that the Collector could be restrained, whether the Court of Tax Appeals had any power to
grant an injunction without requiring the filing of a bond or making a deposit as prescribed by section
11 of Republic Act No. 1125.
Section 51 (d) of the National Internal Revenue Code reads as follows:
SEC. 51. Assessment and Payment of income Tax.
xxx

xxx

xxx

(d) Refusal or neglect to make return; fraudulent returns, etc. In cases of refusal or
neglect to make return or in cases of erroneous, false or fraudulent returns, the Collector of
Internal Revenue shall, upon discovery thereof, at any time within three years after said
return is due, or has been made, make a return upon information obtained as provided for in
this Code or by existing law, or require the necessary corrections to be made, and the
assessment made by the Collector on Internal Revenue thereon shall be paid by such
person or corporation immediately upon notification of the amount of said assessment.
and in a long line of cases this Court has already construed this just quoted provision to mean that
the three year prescriptive period provided therein constituted a limitation to the right of the
Government to enforce the collection of income taxes by the summary proceedings of distraint and
levy though it could proceed to recover the taxes due by the institution of the corresponding civil
action (Collector of Internal Revenue vs. Villegas, 56 Phil., 554, citing Holmes, Federal Income Tax,
2d., p. 581; Collector of Internal Revenue vs. Haygood, 65 Phil., 520; and Juan de la Via vs. El
Gobierno de las Filipinas, G.R. No. 42669, January 29, 1938). This doctrine was reiterated in the
case of Philippine Sugar Estate Development Co., Inc., vs. Juan Posadas, 68 Phil., 216, wherein it
was held that:

. . . after the three years have elapsed from the date to which income tax returns which have
been found to be false, fraudulent or erroneous, may have been made, the Collector of
Internal Revenue cannot make any summary collection through administrative methods, but
must do so through judicial proceedings.
In the recent case of the Collector of Internal Revenue vs. Jose Avelino et al., supra, p. 327,
promulgated November 19, 1956, this Court held:
It therefore appears that when it refers to the Collection of income tax it is mandatory that the
right of the Collector of Internal Revenue to collect it by the summary methods of distraint
and levy be exercised within the period of three years from the time the income tax return is
filed, otherwise the right can only be enforced by judicial action. Since, admittedly, the
deficiency taxes in question were assessed and the warrants for their collection by distraint
and levy were issued after the period of three years from the filing of the returns, it is evident
that said warrants, as well as the steps taken in connection with the sale of the properties of
the taxpayer, were issued without authority of the law and, hence, the Court of Tax Appeals
acted properly in enjoining their enforcement as prayed for by petitioner.
It is, however, contended by petitioner that the respondent Court of Tax Appeals acted in complete
disregard of the prohibition of said section 305 of the National Internal Revenue Code when it
restrained the former from executing the warrant of distraint and levy against the properties of
respondent Aurelio P. Reyes. Said provision reads as follows:
SEC. 305. INJUNCTION NOT AVAILABLE TO RESTRAIN THE COLLECTION OF TAX.
No court shall have authority to grant an injunction to restrain the collection of any internal
revenue tax, fee, or charge imposed by this Code (National Internal Revenue Code).
However, Section 11 of Republic Act No. 1125 prescribes the following:
SEC. 11. Who may appeal; effect of appeal. Any person, association or corporation
adversely affected by a decision or ruling of the Collector of internal Revenue,. may file an
appeal in the Court of Tax Appeals within thirty days after receipt of such decision or ruling.
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal
Revenue . . . shall suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however,
That when in the opinion of the Court the collection by the Bureau of Internal
Revenue . . . may jeopardize the interest of the Government and/or the taxpayer the Court at
any stage of the proceeding may suspend said collection and require the taxpayer either to
deposit the amount claimed or to file a surety bond for not more than double the amount with
the Court.
It can be inferred from the aforequoted provision that there may be instances like the one at bar,
when the Collector of Internal Revenue could be restrained from proceeding with the collection, levy,
distraint and/or sale of any property of the taxpayer. In this respect, this Court said in the case
of Collector of Internal Revenue vs. Avelino et al., supra:
This section (Sec. 11 of Rep. Act No. 1125) must be deemed to have modified section 305 of
the National Internal Revenue Code in view of the repeating clause contained in said Act to
the effect that "any law or part of law, or any executive order, rule or regulation or part
thereof, inconsistent with the provisions of this Act is hereby repealed" (Section 21).

But petitioner asserts that even assuming that under Section 11 of Republic Act No. 1125 respondent
court is empowered to order him to desist from the collection of said taxes by extra-judicial methods,
yet the Court erred in issuing the injunction without requiring the taxpayer either to deposit the
amount claimed or file a surety bond for an amount not more than double the tax sought to be
collected. We disagree with this contention. At first blush it might be as contended by the Solicitor
General, but a careful analysis of the second paragraph of said Section 11 will lead us to the
conclusion that the requirement of the bond as a condition precedent to the issuance of the writ of
injunction applies only in cases where the processes by which the collection sought to be made by
means thereof are carried out in consonance with the law for such cases provided and not when
said processes are obviously in violation of the law to the extreme that they have to be
SUSPENDED for jeopardizing the interests of the taxpayer.
Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the collection
by summary proceedings is by itself in accordance with existing law; and then what is suspended is
the act of collecting, whereas, in the case at bar what the respondent Court suspended was the use
of the method employed to verify the collection which was evidently illegal after the lapse of the
three-year limitation period. The respondent Court issued the injunction in question on the basis of
its finding that the means intended to be used by petitioner in the collection of the alleged deficiency
taxes were in violation of law. It certainly would be an absurdity on the part of the Court of Tax
Appeals to declare that the collection by the summary methods of distraint and levy was violative of
law, and then, on the same breath require the petitioner to deposit or file a bond as a prerequisite for
the issuance of a writ of injunction. Let us suppose, for the sake of argument, that the Court a
quo would have required the petitioner to post the bond in question and that the taxpayer would
refuse or fail to furnish said bond, would the Court a quo be obliged to authorize or allow the
Collector of Internal Revenue to proceed with the collection from the petitioner of the taxes due by a
means it previously declared to be contrary to law?
The pronouncement made by the respondent Court, after due hearing, to the effect that summary
methods of collection by distraint and levy would be improper in the instant case, was done in the
exercise of its power to pass judgment on all matters brought before it. It was a lawful exercise of the
jurisdiction vested in said Court which is well--provided for in section 7 of Republic Act No. 1125:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate
jurisdiction to review by appeal, as herein provided
(1) Decisions of the Collector of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal
Revenue.
There is another issue raised by respondent Aurelio P. Reyes that merits consideration. It does not
appear from the records that a motion for reconsideration was ever filed by counsel for petitioner,
although a notice of appeal, dated January 21, 1955, was filed in the court below. It is an established
doctrine in this jurisdiction that the attention of the Court should first be called to its supposed error,
and its correction asked for on a motion for reconsideration (Herrera vs. Barretto, 25 Phil., 245; Uy
Chua vs. Imperial, 44 Phil., 27; Manila Post Publishing Co.vs. Sanchez, 81 Phil., 614 46 Off., Suppl.
(1) 412; Alvarez vs. Ibaez, 83 Phil., 104, 46 Off. Gaz., 4233).
That failure of the petitioner to file with the court below a motion for reconsideration of the order
subject of the certiorari proceedings is a fatal and insurmountable barrier, is further stressed in the

case of Valeriano Nicolas et al. vs. The Hon. Modesto Castillo et al., (97 Phil., 336) wherein this
Court held:
No motion for reconsideration was ever filed by petitioners in the court below, calling its
attention to the alleged errors and irregularities now raised in this petition, to give it an
opportunity to correct such errors and irregularities, if indeed any were committed. For his
reason alone if not for any other, the writ was applied for should be denied.
Wherefore, the petition for certiorari is denied and the resolution of the respondent Court of Tax
Appeals is hereby affirmed, without pronouncement as to costs. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador and Endencia,
JJ., concu