EN BANC

[G.R. No. L-19495. November 24, 1966.]

COMMISSIONER OF INTERNAL REVENUE , petitioner, v s . LILIA YUSAY

GONZALES and THE COURT OF TAX APPEALS , respondents.

Solicitor General for the petitioner.

Ramon A. Gonzalez for respondent Lilia Yusay Gonzales.

SYLLABUS

1. TAXATION; DISPUTED ASSESSMENTS; APPEAL FROM A DECISION

THEREON TO BE BROUGHT TO THE COURT OF TAX APPEALS. — An action involving a
disputed assessment for internal revenue taxes falls within the exclusive appellate
jurisdiction of the Court of Tax Appeals (Sec. 7[1], Rep. Act 1125; Blaquera vs.
Rodriguez, L-11295, March 29, 1958). It is in that forum to the exclusion of the Court of
First Instance where the taxpayer can ventilate his or her defense against the
assessment.
2. ID.; ID.; ID.; 30-DAY PERIOD TO COMMENCE FROM DATE OF RECEIPT OF
COMMISSIONER OF INTERNAL REVENUE'S DECISION. — On November 17, 1959 Lilia
Yusay disputed the legality of the assessment of February 13, 1958. On March 14,
1960, Lilia Yusay received the decision of the Commissioner of Internal Revenue on a
disputed assessment. On April 13, 1960 she led her petition for review in the Court of
Tax Appeals. HELD: The appeal was seasonably interposed pursuant to Section 11 of
Republic Act 1125. We already ruled in St. Stephen's Association vs. Collector of
Internal Revenue (L-11238, August 21, 1958), that the counting of the thirty days within
which to institute an appeal in the Court of Tax Appeals should commence from the
date of receipt of the decision of the Commissioner on the disputed assessment, not
from the date the assessment was issued. Accordingly, the thirty-day period should
begin running from March 14, 1960, the date Lilia Yusay received the appealable
decision. From said date to April 13, 1960, when she led her appeal in the Court of Tax
Appeals, is exactly thirty days. Hence, the appeal was timely.
3. ID.; ID.; PROBATE COURT WITHOUT JURISDICTION TO ADJUDICATE THE
SAME. — The settlement court is of limited jurisdiction. And under the Rules (Rules 74-
92, now Rules 73-91, Rules of Court), its authority relates only to matters of estates and
probate of wills of deceased persons. Said Court has no jurisdiction to adjudicate on
questions of disputed tax assessments.
4. ID.; TAX RETURNS; FRAUD IN THE MAKING THEREOF MUST BE PROVED.
— Fraud is a question of fact. The circumstances constituting it must be alleged and
proved in the court below. And the nding of said court as to its existence and non-
existence is nal unless clearly shown to be erroneous. (Perez vs. Court of Tax Appeals,
L-9738, May 31, 1957). As the court a quo found that no fraud was alleged and proved
therein, we see no reason to entertain the Commissioner's assertion that the return was
fraudulent.
5. ID.; ID.; REQUIREMENTS OF SUBSTANTIAL COMPLIANCE WITH THE LAW.
— A return need not be complete in all particulars. It is su cient if it complies
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 substantially with the law. There is substantial compliance (1) when the return is made
in good faith and is not false or fraudulent; (2) when it covers the entire period involved;
and (3) when it contains information as to the various items of income, deduction and
credit with such de niteness as to permit the computation and assessment of the tax.
(Jacob Mertens, Jr., The Law of Federal Income Taxation, 1958 ed., Vol. 10, Section
57.13.)
6. ID.; ID.; ESTATE AND INHERITANCE TAX RETURN IN CASE AT BAR
INSUFFICIENT. — Tax return led by Jose S. Yusay was substantially defective. First, it
was incomplete. It declared only ninety-three parcels of land representing about 400
hectares and left out ninety- two parcels covering 503 hectares. Said huge under
declaration could not have been the result of an oversight or mistake. Second, the
return mentioned no heir. Thus, no inheritance tax could be assessed. As a matter of
law, on the basis of the return, there would be no occasion for the imposition of estate
and inheritance taxes.
7. ID.; ID.; RETURNS MADE ON THE WRONG FORM; PRESCRIPTION DOES
NOT RUN. — Where the return was made on the wrong form, the Supreme Court of the
United States held that the ling thereof did not start the running of the period of
limitations. The return led in this case was so de cient, that it prevented the
Commissioner from computing the taxes due on the estate. It was as though no return
was made. The Commissioner had to determine and assess the taxes on data obtained,
not from the return, but from other sources. We therefore hold the view that the return
in question was no return at all as required in Section 93 of the Tax Code. If the taxpayer
failed to observe the law, Section 332 of the National Internal Revenue Code which
grants the Commissioner 10 years period within which to bring an action for tax
collection applies. As stated, the Commissioner came to know of the identity of the
heirs on September 24, 1953 and the huge under declaration in the gross estate on July
12, 1957. From the latter date, Section 94 of the Tax Code obligated him to make a
return or amend one already led based on his own knowledge and information
obtained through testimony or otherwise, and subsequently to assess thereon the
taxes due. The running of the period of limitations under Section 332(a) of the Tax Code
should therefore be reckoned from said date. From July 12, 1957 to February 13, 1958,
the date of the assessment now in dispute, less than ten years have elapsed. Hence,
prescription did not abate the Commissioner's right to issue said assessment.
8. ID.; ID.; TAXPAYER'S WILLINGNESS TO PAY NO BAR TO RAISE DEFENSES
AGAINST THE TAX LEGALITY. — Commissioner contends that Lilia Yusay is estopped
from raising the defense of prescription because she failed to raise the same in her
answer to the motion for allowance of claim and for the payment of taxes led in the
settlement court. Held: The Court of First Instance acting as a settlement court is not
the proper tribunal to pass upon such defense, therefore it would be futile to raise it
therein. Moreover, the Tax Code does not bar the right to contest the legality of the tax
after a taxpayer pays it. Under Section 306 thereof, he can pay the tax and claim a
refund therefor. A fortiori his willingness to pay the tax is no waiver to raise defenses
against the tax's legality.

DECISION

BENGZON, J .P ., J .:
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13, 1948,
leaving two heirs, namely, Jose S. Yusay, a legitimate child, and Lilia Yusay Gonzales, an
acknowledged natural child. Intestate proceedings for the settlement of his estate
were instituted in the Court of First Instance of Iloilo (Special Proceedings No. 459).
Jose S. Yusay was therein appointed administrator.
On May 11, 1949 Jose S. Yusay led with the Bureau of Internal Revenue an
estate and inheritance tax return declaring therein the following properties:
Personal properties:
Palay P6,444.00
Carabaos 1,000.00 P7,444.00
Real properties:
Capital, 74 )
parcels )
Conjugal 19 )
parcels )
assessed at P179,760.00
—————
Total gross estate P187,204.00
—————
The return mentioned no heir.
Upon investigation however the Bureau of Internal Revenue found the following
properties:
Personal properties:
Palay P6,444.00
Carabaos 1,500.00
Packard Automobile 2,000.00
2 Aparadors 500.00 P10,444.00
————
Real properties:
Capital, 25 parcels
assessed P 87,715.32
1/2 of Conjugal, 130
parcels assessed at P121,425.00 P209,140.32
————— —————
Total P219,584.32
—————
The fair market value of the real properties was computed by increasing the assessed
value by forty percent.
Based on the above ndings, the Bureau of Internal Revenue assessed on
October 29, 1953 estate and inheritance taxes in the sums of P6,849.78 and
P16,970.63, respectively.
On January 25, 1955 the Bureau of Internal Revenue increased the assessment to
P8,225.89 as estate tax and P22,117.10 as inheritance tax plus delinquency interest
and demanded payment thereof on or before February 28, 1955. Meanwhile, on
February 16, 1955, the Court of First Instance of Iloilo required Jose S. Yusay to show
proof of payment of said estate and inheritance taxes.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 On March 3, 1955 Jose S. Yusay requested an extension of time within which to
pay the tax. He posted a surety bond to guarantee payment of the taxes in question
within one year. The Commissioner of Internal Revenue however denied the request.
Then he issued a warrant of distraint and levy which he transmitted to the Municipal
Treasurer of Pototan for execution. This warrant was not enforced because all the
personal properties subject to distraint were located in Iloilo City.
On May 20, 1955 the Provincial Treasurer of Iloilo requested the BIR Provincial
Revenue O cer to furnish him copies of the assessment notices to support a motion
for payment of taxes which the Provincial Fiscal would le in Special Proceedings No.
459 before the Court of First Instance of Iloilo. The papers requested were sent by the
Commissioner of Internal Revenue to the Provincial Revenue O cer of Iloilo to be
transmitted to the Provincial Treasurer. The records do not however show whether the
Provincial Fiscal filed a claim with the Court of First Instance for the taxes due.
On May 30, 1956 the commissioner appointed by the Court of First Instance for
the purpose, submitted a recommended project of partition which listed the following
properties:
Personal properties:
Buick Sedan P 8,100.00
Packard car 2,000.00
Aparadors 500.00
Cash in Bank (PNB) 8,858.46
Palay 6,444.00
Carabaos 1,500.00 P27,402.46
————
Real properties:
Land, 174 parcels
assessed at P324,797.21
Buildings 4,500.00 P329,297.21
———— ————
Total P356,699.67
More than a year later particularly on July 12, 1957, an agent of the Bureau of
Internal Revenue apprised the Commissioner of Internal Revenue of the existence of
said recommended project of partition. Whereupon, the Internal Revenue
Commissioner caused the estate of Matias Yusay to be reinvestigated for estate and
inheritance tax liability. Accordingly, on February 13, 1958 he issued the following
assessment:
Estate tax P16,246.04
5% surcharge 411.29
Delinquency interest 11,868.90
Compromise
No notice of death P15.00
Late payment 40.00 55.00
——— ————
Total P28,581.23
————
Inheritance Tax P38,178.12
5% surcharge 1,105.86
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Delinquency interest 28,808.75
Compromise for late payment 50.00
————
Total P69,142.73
————
Total estate and inheritance taxes P97,723.96
————
Like in previous assessments, the fail market value of the real properties was arrived at
by adding 40% to the assessed value.
In view of the demise of Jose S. Yusay, said assessment was sent to his widow,
Mrs. Florencia Piccio Vda. de Yusay, who succeeded him in the administration of the
estate of Matias Yusay.
No payment having been made despite repeated demands, the Commissioner of
Internal Revenue led a proof of claim for the estate and inheritance taxes due and a
motion for its allowance with the settlement court invoking priority of lien pursuant to
Section 315 of the Tax Code.
On June 1, 1959, Lilia Yusay, through her counsel, Ramon Gonzalez, led an
answer to the proof of claim alleging non-receipt of the assessment of February 13,
1958, the existence of two administrators, namely, Florencia Piccio Vda. de Yusay who
administered two-thirds of the estate, and Lilia Yusay, who administered the remaining
one-third, and her willingness to pay the taxes corresponding to her share, and praying
for deferment of the resolution on the motion for the payment of taxes until after a new
assessment corresponding to her share was issued.
On November 17, 1959 Lilia Yusay disputed the legality of the assessment dated
February 13, 1958. She claimed that the right to make the same had prescribed
inasmuch as more than ve years had elapsed since the ling of the estate and
inheritance tax return on May 11, 1949. She therefore requested that the assessment
be declared invalid and without force and effect. This request was rejected by the
Commissioner in his letter dated January 20, 1960, received by Lilia Yusay on March 14,
1960, for the reasons, namely, (1) that the right to assess the taxes in question has not
been lost by prescription since the return which did not name the heirs cannot be
considered a true and complete return su cient to start the running of the period of
limitations of ve years under Section 331 of the Tax Code and pursuant to Section 332
of the same Code he has ten years within which to make the assessment counted from
the discovery on September 24, 1953 of the identity of the heirs; and (2) that the
estate's administrator waived the defense of prescription when he led a surety bond
on March 3, 1955 to guarantee payment of the taxes in question and when he
requested postponement of the payment of the taxes pending determination of who
the heirs are by the settlement court.
On April 13, 1960 Lilia Yusay led a petition for review in the Court of Tax
Appeals assailing the legality of the assessment dated February 13, 1958. After hearing
the parties, said court declared the right of the Commissioner of Internal Revenue to
assess the estate and inheritance taxes in question to have prescribed and rendered
the following judgment:
"WHEREFORE, the decision of respondent assessing against the estate of
the late Matias Yusay estate and inheritance taxes is hereby reversed. No. costs."

The Commissioner of Internal Revenue appealed to this Court and raises the
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 following issues:
1. Was the petition for review led in the Court of Tax Appeals within the 30-
day period provided for in Section 11 of Republic Act 1125?
2. Could the Court of Tax Appeals take cognizance of Lilia Yusay's appeal
despite the pendency of the "Proof of Claim" and "Motion for Allowance of Claim and
for an Order of Payment of Taxes" led by the Commissioner of Internal Revenue in
Special Proceedings No. 459 before the Court of First Instance of Iloilo?
3. Has the right of the Commissioner of Internal Revenue to assess the
estate and inheritance taxes in question prescribed?
On November 17, 1959 Lilia Yusay disputed the legality of the assessment of
February 13, 1958. On March 14, 1960 she received the decision of the Commissioner
of Internal Revenue on the disputed assessment. On April 13, 1960 she filed her petition
for review in the Court of Tax Appeals. Said Court correctly held that the appeal was
seasonably interposed pursuant to Section 11 of Republic Act 1125. We already ruled
in St. Stephen's Association vs. Collector of Internal Revenue, 1 that the counting of the
thirty days within which to institute an appeal in the Court of Tax Appeals should
commence from the date of receipt of the decision of the Commissioner on the
disputed assessment, not from the date the assessment was issued.
Accordingly, the thirty-day period should begin running from March 14, 1960, the
date Lilia Yusay received the appealable decision. From said date to April 13, 1960,
when she led her appeal in the Court of Tax Appeals, is exactly thirty days. Hence, the
appeal was timely.
Next, the Commissioner attacks the jurisdiction of the Court of Tax Appeals to
take cognizance of Lilia Yusay's appeal on the ground of lis pendens. He maintains that
the pendency of his motion for allowance of claim and for order of payment of taxes in
the Court of First Instance of Iloilo would preclude the Court of Tax Appeals from
acquiring jurisdiction over Lilia Yusay's Appeal. This contention lacks merit.
Lilia Yusay's cause seeks to resist the legality of the assessment in question.
Should she maintain it in the settlement court or should she elevate her cause to the
Court of Tax Appeals ? We say, she acted correctly by appealing to the latter court. An
action involving a disputed assessment for internal revenue taxes falls within the
exclusive appellate jurisdiction of the Court of Tax Appeals. 2 It is in that forum, to the
exclusion of the Court of First Instance, 3 where she could ventilate her defenses
against the assessment.
Moreover, the settlement court, where the Commissioner would wish Lilia Yusay
to contest the assessment is of limited jurisdiction. And under the Rules, 4 its authority
relates only to matters having to do with the settlement of estates and probate of wills
of deceased persons. 5 Said court has no jurisdiction to adjudicate the contentions in
question, which — assuming they do not come exclusively under the Tax Court's
cognizance — must be submitted to the Court of First Instance in the exercise of its
general Jurisdiction. 6
We now come to the issue of prescription. Lilia Yusay claims that since the latest
assessment was issued only on February 13, 1958 or eight years, nine months and two
days from the ling of the estate and inheritance tax return, the Commissioner's right to
make it has expired. She would rest her stand on Section 331 of the Tax Code which
limits the right of the Commissioner to assess the tax within five years from the filing of
the return.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 The Commissioner claims that fraud attended the ling of the return; that this
being so, Section 332(a) of the Tax Code would apply. 7 It may be well to note that the
assessment letter itself (Exhibit 22) did not impute fraud in the return with intent to
evade payment of the tax. Precisely, no surcharge for fraud was imposed. In his answer
to the petition for review led by Lilia Yusay in the Court of Tax Appeals, the
Commissioner alleged no fraud. Instead, he broached the insu ciency of the return as
barring the commencement of the running of the statute of limitations. He raised the
point of fraud for the rst time in the proceedings, only in his memorandum led with
the Tax Court subsequent to resting his case. Said Court rejected the plea of fraud for
lack of allegation and proof, and ruled that the return, although not accurate, was
sufficient to start the period of prescription.
Fraud is a question of fact. 8 The circumstances constituting it must be alleged
and proved in the court below. 9 And the nding of said court as to its existence and
nonexistence is nal unless clearly shown to be erroneous. 1 0 As the court a quo found
that no fraud was alleged and proved therein, we see no reason to entertain the
Commissioner's assertion that the return was fraudulent.
The conclusion, however, that the return led by Jose S. Yusay was su cient to
commence the running of the prescriptive period, under Section 331 of the Tax Code
rests on no solid ground.
Paragraph (a) of Section 93 of the Tax Code lists the requirements of a valid
return. It states:
"(a) Requirements. — In all cases of inheritance or transfers subject to
either the estate tax or the inheritance tax, or both, or where, though exempt from
both taxes, the gross value of the estate exceeds three thousand pesos, the
executor, administrator, or anyone of the heirs, as the case may be, shall le a
return under oath in duplicate, setting forth (1) the value of the gross estate of the
decedent at the time of his death, or, in case of a nonresident not a citizen of the
Philippines, or that part of his gross estate situated in the Philippines; (2) the
deductions allowed from gross estate in determining net estate as de ned in
section eighty-nine; (3) such part of such information as may at the time be
ascertainable and such supplemental data as may be necessary to establish the
correct taxes."

A return need not be complete in all particulars. It is su cient if it complies

substantially with the law. There is substantial compliance (1) when the return is made
in good faith and is not false or fraudulent; (2) when it covers the entire period involved;
and (3) when it contains information as to the various items of income, deduction and
credit with such de niteness as to permit the computation and assessment of the tax.
11

There is no question that the estate and inheritance tax return led by Jose S.
Yusay was substantially defective.
First, it was incomplete. It declared only ninety-three parcels of land representing
about 400 hectares and left out ninety-two parcels covering 503 hectares. Said huge
under declaration could not have been the result of an oversight or mistake. As found in
L-11378, supra note 7, Jose S. Yusay very well knew of the existence of the omitted
properties. Perhaps his motive in under declaring the inventory of properties attached
to the return was to deprive Lilia Yusay from inheriting her legal share in the hereditary
estate, but certainly not because he honestly believed that they did not form part of the
gross estate.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Second, the return mentioned no heir. Thus, no inheritance tax could be assessed.
As a matter of law, on the basis of the return, there would be no occasion for the
imposition of estate and inheritance taxes. When there is no heir — the return showed
none — the intestate estate is escheated to the State. 1 2 The State taxes not itself.
In a case where the return was made on the wrong form, the Supreme Court of
the United States held that the ling thereof did not start the running of the period of
limitations. 1 3 The reason is that the return submitted did not contain the necessary
information required in the correct form. In this jurisdiction, however, the Supreme
Court refrained from applying the said ruling of the United States Supreme Court in
Collector of Internal Revenue vs. Central Azucarera de Tarlac, L-11760-61, July 31,
1958, on the ground that the return was complete in itself although inaccurate. To our
mind, it would not make much difference where a return is made on the correct form
prescribed by the Bureau of Internal Revenue if the data therein required are not
supplied by the taxpayer. Just the same, the necessary information for the assessment
of the tax would be missing.
The return led in this case was so de cient that it prevented the Commissioner
from computing the taxes due on the estate. It was as though no return was made. The
Commissioner had to determine and assess the taxes on data obtained, not from the
return, but from other sources. We therefore hold the view that the return in question
was no return at all as required in Section 93 of the Tax Code.
The law imposes upon the taxpayer the burden of supplying by the return the
information upon which an assessment would be based. 14 His duty complied with, the
taxpayer is not bound to do anything more than to wait for the Commissioner to assess
the tax. However, he is not required to wait forever. Section 331 of the Tax Code gives
the Commissioner ve years within which to make his assessment. 1 5 Except, of
course, if the taxpayer failed to observe the law, in which case Section 332 of the same
Code grants the Commissioner a longer period. Non-observance consists in ling a
false or fraudulent return with intent to evade the tax or in filing no return at all.
Accordingly, for purposes of determining whether or not the Commissioner's
assessment of February 13, 1958 is barred by prescription, Section 332 (a) which is an
exception to Section 331 of the Tax Code nds application. 16 We quote Section
332(a):
"SEC. 332. Exception as to period of limitations of assessment and
collection of taxes. — (a) In the case of a false or fraudulent return with intent to
evade tax or of a failure to le 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."

As stated, the Commissioner came to know of the identity of the heirs on

September 24, 1953 and the huge under declaration in the gross estates on July 12,
1957. From the latter date, Section 94 of the Tax Code obligated him to make a return
or amend one already led based on his own knowledge and information obtained
through testimony or otherwise, and subsequently to assess thereon the taxes due. The
running of the period of limitations under Section 332(a) of the Tax Code should
therefore be reckoned from said date for, as aforesaid, it is from that time that the
Commissioner was expected by law to make his return and assess the tax due thereon.
From July 12, 1957 to February 13, 1958, the date of the assessment now in dispute,
less than ten years have elapsed. Hence, prescription did not abate the Commissioner's
right to issue said assessment.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Anent the Commissioner's contention that Lilia Yusay is estopped from raising
the defense of prescription because she failed to raise the same in her answer to the
motion for allowance of claim and the payment of taxes led in the settlement court
(Court of First Instance of Iloilo), su ce it to state that it would be unjust to the
taxpayer if We were to sustain such a view. The Court of First Instance acting as a
settlement court is not the proper tribunal to pass upon such defense, therefore it
would be but futile to raise it therein. Moreover, the Tax Code does not bar the right to
contest the legality of the tax after a taxpayer pays it. Under Section 306 thereof, he can
pay the tax and claim a refund therefore. A fortiori his willingness to pay the tax is no
waiver to raise defenses against the tax's legality.
WHEREFORE, the judgment appealed from is set aside and another entered
a rming the assessment of the Commissioner of Internal Revenue dated February 13,
1958. Lilia Yusay Gonzales, as administratrix of the intestate estate of Matias Yusay, is
hereby ordered to pay the sums of P16,246.04 and P39,178.12 as estate and
inheritance taxes, respectively, plus interest and surcharge for delinquency in
accordance with Section 101 of the National Internal Revenue Code, without prejudice
to reimbursement from her co-administratrix, Florencia Piccio Vda. de Yusay for the
latter's corresponding tax liability. No costs. So ordered.
Concepcion, C. J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Sanchez and
Castro, JJ., concur.
Zaldivar, J., took no part.

RESOLUTION
ON MOTION FOR RECONSIDERATION
April 24, 1967
BENGZON, J.P., J.:

Respondent Lilia Yusay Gonzales seeks reconsideration of our decision holding

her liable for the payment of P97,723.96 as estate and inheritance taxes plus
delinquency penalties as administratrix of the intestate estate of Matias Yusay. The
grounds raised by her deserve this extended resolution.
Firstly, movant maintains that the issue of whether or not the estate and
inheritance tax return led by Jose Yusay on May 13, 1949 was su cient to start the
running of the statute of limitations on assessment, was neither raised in the Court of
Tax Appeals nor assigned as error before this Court. The records in the Court of Tax
Appeals however show the contrary. Paragraph 2 of the answer led by the
Commission of Internal Revenue states:
"2. That he likewise admits, as alleged in paragraph 1 thereof having
received the letter of the petitioner dated November 27, 1959 (Annex "A" of the
Petition for Review), contesting the assessment of estate and inheritance taxes
levied against the Intestate Estate of the late Matias Yusay, Special Proceedings
No. 459, Court of First Instance of Iloilo, on the ground that the said assessment
has already prescribed, but speci cally denies the allegations that the
assessments have already prescribed, the truth of the matter being that the
returns led on May 11, 1949 cannot be considered as a true, and complete return
su cient to start the running of the period of ve (5) years prescribed in Sec. 331
of the Tax Code;"
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 This point was discussed in the memorandum of the Commissioner of Internal
Revenue, thus:
"In the estate and inheritance tax return filed by Jose S. Yusay (Exhibits B &
1, pp. 14-20, B.I.R. records) the net value of the estate of the deceased was
claimed to be P203,354.00 and no inheritance tax was shown as the heirs were
not indicated. In the nal computation of the estate by an examiner of the
respondent, the net estate was found to be worth P410,518.38 (p. 105, B.I.R.
records) or about more than twice the original amount declared in the return. In
the subsequent investigation of this case, it was also determined that the heirs of
the deceased were Jose S. Yusay, a legitimate son, and Lilia Yusay, an
acknowledged natural child, (petitioner herein).
"Under the circumstances, we believe the return led on May 11, 1949 was
false or fraudulent in the sense that the value of the properties were under
declared and that the said return was also incomplete as the heirs to the estate
were not speci ed. Inasmuch as the respondent was not furnished adequate data
upon which to base an assessment, the said return cannot be considered a true
and complete return su cient to start the running of the period of limitations of
five (5) years prescribed in Section 331 of the Tax Code."

In the lower court the defense of the Commissioner of Internal Revenue against
Lilia Yusay Gonzales' plea of prescription, centered on the insu ciency and fraudulence
or falsity of the return led by Jose Yusay. The Court of Tax Appeals overruled the
Commissioner of Internal Revenue. Said of Tax Code:
"The provision of Section 332 (a) of the Tax Code cannot be invoked in this
case as it was neither alleged in respondent's answer, nor proved during the
hearing that the return was false or fraudulent with intent to evade the payment of
tax. Moreover, the failure of respondent to charge fraud and impose the penalty
thereof in the assessments made in 1953, 1955 and 1956 is an eloquent
demonstration that the ling of petitioner's transfer tax return was not attended
by falsity or fraud with intent to evade tax.
xxx xxx xxx

"But respondent urges upon us that the ling of the return did not start the
running of the ve (5) year period for the reason that the return did not disclose
the heirs of the deceased Matias, Yusay, and contained inadequate data
regarding the value of the estate. We believe that these mere omissions do not
require additional returns for the same. Altho incomplete for being de cient on
these matters, the return cannot be regard as a case of failure to le a return
where want of good faith and intent to evade the tax on the part of petitioner are
not charged. It served as a su cient notice of the Commissioner of Internal
Revenue to make his assessment and start the running of the period of limitation.
In this connection, it must be borne in mind that the Commissioner is not confined
to the taxpayer's return in making assessment of the tax, and for his purpose he
may secure additional information from other sources. As was done in the case at
bar, he sends investigators to examine the taxpayer's records and other pertinent
data. His assessment is based upon the facts uncovered by the investigation
(Collector vs. Central Azucarera de Tarlac, G.R. Nos. L-11760 and L-11761, July
31, 1958).

"Furthermore, the failure to state the heirs in the return can be attributed to
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 the then unsettled con ict raging before the probate court as to who are the heirs
of the estate. Such failure could not have been a deliberate attempt to mislead the
government in the assessment of the correct taxes."

In his appeal, the Commissioner of Internal Revenue assigned as third error of the
Court of Tax Appeals the nding that the assessment in question was "made beyond
the ve-year statutory period provided in Section 332(a) of the Tax Code," and that the
right of the Commissioner of Internal Revenue to assess the estate and inheritance
taxes has already prescribed. To sustain his side, the Commissioner ventilated in his
brief, fraud in the ling of the return, absence of certain data from the return which
prevented him from assessing thereon the tax due and the pendency in this Court of L-
11374 entitled "Intestate Estate of the late Yusay Gonzales" which allegedly had the
effect of suspending the running of the period of limitations on assessment.
Clearly, therefore, it would be incorrect to say that the question of whether or not
the return led by Jose Yusay was su cient to start the running of the statute of
limitations to assess the corresponding tax, was not raised by the Commissioner in the
Court of Tax Appeals and in this Court.
Second. Movant contends that contrary to Our ruling, the return led by Jose
Yusay was su cient to start the statute of limitations on assessment. Inasmuch as
this question was amply discussed in Our decision sought to be reconsidered, and no
new argument was advanced, We deem it unnecessary to pass upon the same. There is
no reason for any change on Our stand on this point.
Third. Movant insists that since she administers only one-third of the estate of
Matias Yusay, she should not be liable for the whole tax. And she suggests that We hold
the intestate estate of Matias Yusay liable for said taxes, one-third to be paid by Lilia
Yusay Gonzales and two-thirds to be paid by Florencia P. Vda. de Yusay.
The foregoing suggestion to require payment of two-thirds of the totals taxes by
Florencia P. Vda. de Yusay is not acceptable, for she (Florencia P. Vda. de Yusay) is not
a party in this case.
It should be pointed out that Lilia Yusay Gonzales appealed the whole
assessment to the Court of Tax Appeals. Thereupon, the Commissioner of Internal
Revenue questioned her legal capacity to institute the appeal on the ground that she
administered only one- third of the estate of Matias Yusay. In opposition, she espoused
the view, which was sustained by the Tax Court, that in co-administration, the
administratrices are regarded as one person and the acts of one of them in relation to
the regular administration of the estate are deemed to be the acts of all; hence, each
administratrix can represent the whole estate. In advancing such proposition, Lilia
Yusay Gonzales represented the whole estate and hoped to bene t from the favorable
outcome of the case. For the same reason that she represented her co- administratrix
and the whole estate of Matias Yusay, she risked being ordered to pay the whole
assessment, should the assessment be sustained.
Her change of stand adopted in the motion for reconsideration to the effect that
she should be made liable for only one-third of the total tax, would negate her aforesaid
proposition before the Court of Tax Appeals. She is now estopped from denying liability
for the whole tax.
At any rate, estate and inheritance taxes are satis ed from the estate and are to
be paid by the executor or administrator. 1 Where there are two or more executors, all
of them are severally liable for the payment of the estate tax. 2 The inheritance tax,
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 although charged against the account of each bene ciary, should be paid by the
executor or administrator. 3 Failure to pay the estate and inheritance taxes before
distribution of the estate would subject the executor or administrator to criminal
liability under Section 107(c) of the Tax Code.
It is immaterial therefore that Lilia Yusay Gonzales administers only one-third of
the estate and will receive as her share only said portion, for her right to the estate
comes after taxes. 4 As an administratrix, she is liable for the entire estate tax. As an
heir, she is liable for the entire inheritance tax although her liability would not exceed the
amount of her share in the estate. 5 The entire inheritance tax which amounts to
P39,178.12 excluding penalties is obviously much less than her distributive share.
Motion for reconsideration denied.
Concepcion, C. J., Reyes, J.B.L., Dizon, Regala, Makalintal, Sanchez and Castro, JJ.,
concur.
Zaldivar, J., did not take part.

Footnotes

1. L-11238, August 21, 1958. See also Baguio Country Club Corporation vs. Collector of Internal
Revenue, et al., L-11419, April 22, 1959.

2. Sec. 7(1), Rep. Act 1125; Blaquera vs. Rodriguez, L-11295, March 29, 1958.
3. Castro vs. Blaquera, L-8429, February 28, 1957, 53 Off. Gaz. 2135; Ledesma vs. Court of Tax
Appeals, L-11343, January 29, 1958, 55 Off. Gaz. 2883.

4. Rules 74-92, Now Rules 73-91, Rules of Court.

5. Adapon vs. Naralit, 69 Phil. 383, 387.

6. Guzman vs. Anog and Anog, 37 Phil. 62.

7. Brief for Petitioner, p. 26.

8. Collector of Internal Revenue vs. Bautista, L-12250 & L-12259, May 27, 1959.

9. Gutierrez vs. Court of Tax Appeals, L-9738 & L-9771, May 31, 1957.

10. Perez vs. Court of Tax Appeals, L-9738, May 31, 1957.
11. Jacob Mertens, Jr., The Law of Federal Income Taxation, 1958 ed., Vol. 10, Section 57.13.

12. Articles 1011-1014, Civil Code; Rules 91, Rules of Court.

13. Florsheim Brothers Dry-Goods Company, Ltd. vs. United States, 280 US 453, 74 L. ed. 542.
See also Commissioner vs. Lana-Wells Co., 321 US 219, 88 L. ed. 684; Rockland &:
Rockport Lime Corporation vs. Ham, 38 F. 2d. 239 (D.C.S.D. Main, 1930); Dubuque
Packing Co. vs. US, 126 F. Supp. 796 (D.C.N.D. Iowa, 1954).

14. FIorsheim Brothers Dry-Goods Company, Ltd. vs. United States, 280 U.S. 453, 74 L. ed. 542,
547.

15. Republic of the Philippines vs. Lim De Yu, L-17438, April 30, 1964.

16. Taligaman Lumber Co. vs. Collector of Internal Revenue, L- 15717, March 31, 1962: Tan
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Tiong Bio, et al., vs. Commissioner of Internal Revenue, L-15778, April 23, 1962.

BENGZON, J.:

1. Section 95 (a) (1), Tax Code.

2. Baldwin v. Commissioner of Internal Revenue, 94 F. 2d 355, 20 AFTER 940.

3 . Jose Arañas, Annotation and Jurisprudence on the National Internal Revenue Code, As
Amended, Second Edition, 1963, Vol. I, p. 630.
4. Section 105, Tax Code.
5. Section 95(c), Tax Code.

CD Technologies Asia, Inc. 2018 cdasiaonline.com