1. AZNAR v.

CTA

FACTS:

Aznar, as administrator of the estate of the deceased, Matias H. Aznar, seeks a review and
nullification of the decision of the Court of Tax Appeals ordering the petitioner to pay the
government the sum of P227,691.77 representing deficiency income taxes for the years 1946 to
1951. An investigation by the Commissioner of Internal Revenue (CIR) ascertained the assets and
liabilities of the taxpayer and it was discovered that from 1946 to 1951, his net worth had increased
every year, which increases in net worth was very much more than the income reported during said
years. The findings clearly indicated that the taxpayer did not declare correctly the income reported
in his income tax returns for the aforesaid years. Petitioner avers that according to the NIRC, the
right of the CIR to assess deficiency income taxes of the late Aznar for the years 1946, 1947, and
1948 had already prescribed at the time the assessment was made on November 28, 1952; there
being a five year limitation upon assessment and collection from the filing of the returns.
Meanwhile, respondents believe that the prescription period in the case at bar that is applicable is
under Sec. 332 of the NIRC which provides that: "(a) In the case of a false or fraudulent return with
intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court
for the collection of such tax may be begun without assessment, at any time within ten years after
the discovery of the falsity, fraud or omission". Petitioner argues said provision does not apply
because the taxpayer did not file false and fraudulent returns with intent to evade tax.

ISSUE:

Whether or not the deceased Aznar filed false or fraudulent income tax returns and subsequently,
whether the action has not prescribed.

RULING:

Yes, Aznar filed false or fraudulent income tax returns.

The respondent CTA concluded that the very "substantial under declarations of income for six
consecutive years eloquently demonstrate the falsity or fraudulence of the income tax returns with
an intent to evade the payment of tax." The ordinary period of prescription of 5 years within which
to assess tax liabilities under Sec. 331 of the NIRC should be applicable to normal circumstances,
but whenever the government is placed at a disadvantage so as to prevent its lawful agents from
proper assessment of tax liabilities due to false returns, fraudulent return intended to evade
payment of tax, or failure to file returns, the period of ten years from the time of the discovery of the
falsity, fraud or omission even seems to be inadequate. There being undoubtedly false tax returns
in this case, We affirm the conclusion of the respondent Court of Tax Appeals that Sec. 332 (a) of
the NIRC should apply and that the period of ten years within which to assess petitioner's tax
liability had not expired at the time said assessment was made.