MARCOS II vs. Court of Appeals

 FERDINAND R. MARCOS II, petitioner, vs. COURT OFAPPEALS, THE COMMISSIONER OF THE BUREAU OFINTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents.

G.R. No. 120880. June 5, 1997. TORRES, JR., J.

Topic: Judicial Remedies in Detail (Section 220, NIRC) > Period within which the action may be filed > Where should these cases be filed.

Doctrine: 1) The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. 2) The deficiency tax assessment, if it has already become final, executory, and demandable, may be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC. 3) The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal, as under Section 223 of the NIRC, in case of failure to file a return,the tax may be assessed at any time within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the assessment of the tax.

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR after it failed to file estate tax returns.

The investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, - all in violation of the National Internal Revenue Code (NIRC).

BR issued deficiency tax assessment against the estate of the late president, deficiency tax assessment against the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the deficiency Income Tax assessment  of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to 1985.

However the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends that the properties could not be levied to cover the tax dues because they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless there is an order by the probate court or until the probate proceedings are terminated.  Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos properties were issued beyond the allowed period, and are therefore null and void.

On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes is paramount. Thus, the pendency of probate proceedings over the estate of the deceased does not preclude the assessment and collection, through summary remedies, of estate taxes over the same. According to the respondent, claims for payment of estate and income taxes due and assessed after the death of the decedent need not be presented in the form of a claim against the estate. These can and should be paid immediately. The probate court is not the government agency to decide whether an estate is liable for payment of estate of income taxes. Well-settled is the rule that the probate court is a court with special and limited jurisdiction.

ISSUE: Whether or not the proper avenues of assessment and collection of the said tax obligations were taken by the respondent Bureau.

HELD: Yes. Approval of the court,sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court’s sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court’s approval of the state’s claim for estate taxes, before the same can be enforced and collected.

The Notices of Levy upon real property were issued within the prescriptive period and in accordance with the provisions of the present Tax Code. The deficiency tax assessment, having already become final, executory, and demandable, the same can now be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.

The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal to the petitioner’s cause, as under the above-cited provision, in case of failure to file a return, the tax may be assessed at anytime within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner’s default as regards protesting the validity of the said assessment, there is now no reason why the BIR cannot continue with the collection of the said tax. Any objection against the assessment should have been pursued following the avenue paved in Section 229 of the NIRC on protests on assessments of internal revenue taxes.