ELEGADO
v. CA
Doctrine:
Facts:
Warren Taylor Graham, an American national formerly
resident in the Philippines, died in Oregon, U.S.A.
As he left certain shares of stock in the
Philippines, his son, Ward Graham, filed an estate tax return with the
Philippine Revenue Representative in San Francisco, U.S.A.
The respondent CIR assessed the decedent's estate
an estate tax in the amount of P96,509.35. This assessment was protested by the
law firm of Bump, Young and Walker on behalf of the estate.
The protest was denied by the Commissioner. No
further action was taken by the estate in pursuit of that protest.
The decedent's will had been admitted to probate in
the Circuit Court of Oregon. Ward Graham, the designated executor, then
appointed Ildefonso Elegado, the herein petitioner, as his attorney-in-fact for
the allowance of the will in the Philippines.
Petitioner commenced probate proceedings and the
will was allowed, with the petitioner as ancillary administrator. As such, he
filed a second estate tax return with the BIR.
On the basis of this second return, the
Commissioner imposed an assessment on the estate in the amount of P72,948.87
which was protested on behalf of the estate by the Agrava, Lucero and Gineta Law
Office.
While this protest was pending, the Commissioner
filed in the probate proceedings a motion for the allowance of the basic estate
tax of P96,509.35 as previously assessed. He said that this liability had not
yet been paid although the assessment had long become final and executory.
The petitioner regarded this motion as an implied
denial of the protest against the second assessment of P72,948.87. On this
understanding, he filed a petition for review with the Court of Tax Appeals
challenging the said assessment.
The Commissioner did not immediately answer (in
fact, as the petitioner stressed, no answer was filed during a delay of 195
days) and in the end instead canceled the protested assessment. This
cancellation was notified to the Court of Tax Appeals in a motion to dismiss on
the ground that the protest had become moot and academic.
The motion was granted and the petition dismissed.
The petitioner then came to this Court on certiorari under Rule 45 of the Rules
of Court.
Issue:
whether or not the respondent Court of Tax Appeals
erred in dismissing the petitioner's appeal on grounds of jurisdiction and lack
of a cause of action.- NO
-whether the appeal filed
with the respondent court should be considered moot and academic. YES
Ruling:
In the letter to the decedent's estate, the
Commissioner of Internal Revenue requested for the settlement of the assessment
for P96,509.35 within fifteen (15) days upon receipt and also expressly cancelled the assessment
for P72,949.57.
It is obvious from the express cancellation of the
second assessment for P72,948.87 that the petitioner had been deprived of a
cause of action as it was precisely from this assessment that he was appealing.
The petitioner argues that the issuance of the
second assessment had the effect of canceling the first assessment and that the
subsequent cancellation of the second assessment did not have the effect of
automatically reviving the first. Moreover, the first assessment is not binding
on him because it was based on a return filed by foreign lawyers who had no
knowledge of our tax laws or access to the Court of Tax Appeals.
It is noted that in the letter imposing the second
assessment of P72,948.87, the Commissioner made it clear that "the
aforesaid amount is considered provisional only based on the estate tax return
filed subject to investigation by this Office for final determination of the
correct estate tax due from the estate. Any amount that may be found due after
said investigation will be assessed and collected later." It is illogical
to suggest that a provisional assessment can supersede an earlier assessment
which had clearly become final and executory.
The most compelling consideration in this case is
the fact that the first assessment is already final and executory and can no
longer be questioned at this late hour. The assessment was made on February 9,
1978. It was protested on March 7, 1978. The protest was denied on July 7,
1978. As no further action was taken thereon by the decedent's estate, there is
no question that the assessment has become final and executory.
In fact, the law firm that had lodged the protest
appears to have accepted its denial. In his motion with the probate court, the
respondent Commissioner stressed that "in a letter dated January 29, 1980,
the Estate of Warren Taylor Graham thru the aforesaid foreign law firm informed
claimant that they have paid said tax liability thru the Agrava, Velarde,
Lucero and Puno, Philippine law firm that initiated the instant ancillary
proceedings" although he added that such payment had not yet been
received. This letter was an acknowledgment by the estate of the validity and
finality of the first assessment. Significantly, it has not been denied by the
petitioner.
In view of the finality of the first assessment,
the petitioner cannot now raise the question of its validity before this Court
any more than he could have done so before the Court of Tax Appeals. What the
estate of the decedent should have done earlier, following the denial of its
protest on July 7, 1978, was to appeal to the Court of Tax Appeals within the
reglementary period of 30 days after it received notice of said denial. It was
in such appeal that the petitioner could then have raised the first two issues
he now raises without basis in the present petition.
If indeed the Commissioner of Internal Revenue
committed an error in the computation of the estate tax, as the petitioner
insists, that error can no longer be rectified because the original assessment
has long become final and executory. If that assessment was not challenged on
time and in accordance with the prescribed procedure, that error - for error it
was - was committed not by the respondents but by the decedent's estate itself
which the petitioner represents.
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