Basilan Estates, Inc. filed on 24 March 1954 its income tax returns for 1953. On 26 February 1959, the BIR assessed it a deficiency income tax and 25% surtax on unreasonably accumulated profits for 1953. Upon non-payment of the assessed amount, a warrant of distraint and levy the execution of which was held and a constructive embargo was imposed instead. Its request for reinvestigation was not given course for failure to waive the period of prescription, and the company was served notice on 02 December 1960 that the warrant of distraint and levy would be executed.
The corporation filed before the Court of Tax Appeals a petition for review of the Commissioner’s assessment on the ground of prescription. The CTA found no prescription, affirming the deficiency assessment.
Basilan Estates appealed to the Supreme Court.
Whether or not the Commissioner’s right to collect deficiency income tax has prescribed.
NO. The notice of assessment shows the assessment to have been made on 26 February 1959, well within the five-year period. On the right side of the notice is also stamped Feb 26 1959 – denoting the date of release according to BIR practice. Even granting that the notice had been received by the petitioner late, under Section 331 of the Tax Code requiring five years within which to assess deficiency taxes, the assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to the
taxpayer and it is not required that the notice be received by the taxpayer within the aforementioned five-year period.