"#$%&''& #((& )* +,-.

&""&/
G.k. Nos. L-48134-37 Cctober 18, 1990

LIM v. CCUk1 CI ALALS

lalnLlffs: LMILIC L. LIM, Sk. and AN1CNIA SUN LIM

uefendanL: CCUk1 CI ALALS and LCLL CI 1nL nILIINLS

CASL: Spouses Lmlllo Llm and AnLonla Sun Llm were engaged ln Lhe
dealershlp of varlous household appllances. Cn CcLober 3, 1939, a rald
was conducLed by vlrLue of a search warranL ln Lhelr buslness address ln
Manlla and anoLher ln Lhelr address ln Cuezon ClLy. Selzed from Lhe Llm
couple were buslness and accounLlng records. 1he 8ureau of lnLernal
8evenue, Lhrough Lhe selzed records, found LhaL Lhe lncome Lax reLurns
flled by peLlLloners for Lhe years 1938 and 1939 were false or
fraudulenL. 1he spouses clalm LhaL Lhls flndlng was made on CcLober 13,
1964 (as declared by Lhe CourL of Appeals ln lLs declslon laLer on). Cn
Aprll 7, 1963, Lhe 8l8 lnformed Lhe peLlLloners whaL was due from Lhem
and requlred Lhem Lo pay. 1he Llms requesLed for a relnvesLlgaLlon
whlch Lhe 8l8 was wllllng Lo glve sub[ecL Lo cerLaln condlLlons. 1he Llm
refused Lo comply wlLh Lhe condlLlons and relLeraLed Lhelr requesL for
relnvesLlgaLlon. Cn CcLober 10, 1967, Lhe 8l8 rendered a flnal declslon
holdlng LhaL Lhere was no cause for reversal of Lhe flndlng of Lhe
assessmenL agalnsL peLlLloners, and on !uly 3, 1967, Lhe flnal noLlce and
demand for paymenL was served on peLlLloners Lhrough Lhelr daughLer-
ln-law. 8ecause Lhe Llms sLlll dldn'L pay, four (4) separaLe crlmlnal
lnformaLlons were flled agalnsL peLlLloners for vlolaLlon of SecLlons 43
and 31 ln relaLlon Lo SecLlon 73 of Lhe naLlonal lnLernal 8evenue Code.
1wo crlmlnal charges were flled agalnsL Lhem lnvolvlng Lhelr refusal Lo
pay Lhe deflclency lncome Laxes, and anoLher Lwo lnvolvlng Lhe flllng of
fraudulenL consolldaLed lncome Lax reLurns wlLh lnLenL Lo evade Lhe
assessmenL decreed by law. 1he Lrlal courL found Lhe Llm spouses gullLy
on all counLs and requlred Lhem Lo pay Lhe amounLs correspondlng Lo
Lhelr deflclency lncome Lax for Lhe years 1938 and 1939 pursuanL Lo
resldenLlal uecree no. 69.

1he Supreme CourL ruled LhaL Lhe flllng of charges was well wlLhln Lhe
flve-year prescrlpLlve perlod requlred under SecLlon 334 of Lhe naLlonal
lnLernal 8evenue Code. 1he CourL sLaLed LhaL prlor Lo Lhe recelpL of Lhe
leLLer-assessmenL by Lhe peLlLloners on !uly 3, 1968, no vlolaLlon has yeL
been commlLLed by Lhe Laxpayers. 1he offense was commlLLed only
afLer recelpL was coupled wlLh Lhe wllful refusal Lo pay Lhe Laxes due
wlLhln Lhe alloLed perlod. 1he Lwo crlmlnal lnformaLlons, havlng been
flled on !une 23, 1970, are well-wlLhln Lhe flve-year prescrlpLlve perlod
and are noL Llme- barred."

Powever, Lhe Supreme CourL sLaLed LhaL Lhe Lrlal courL had absoluLely
no [urlsdlcLlon ln senLenclng Lhe Llm couple Lo lndemnlfy Lhe
CovernmenL for Lhe Laxes unpald. 1he lower courL erred ln applylng
resldenLlal uecree no. 69, parLlcularly SecLlon 316 Lhereof, whlch
provldes LhaL "[udgmenL ln Lhe crlmlnal case shall noL only lmpose Lhe
penalLy buL shall order paymenL of Lhe Laxes sub[ecL of Lhe crlmlnal
case", because LhaL decree Look effecL only on !anuary 1, 1973 whereas
Lhe crlmlnal cases sub[ecL of Lhls appeal were lnsLlLuLed on !une 23,
1970. Save ln Lhe Lwo speclflc lnsLances, resldenLlal uecree no. 69 has
no reLroacLlve appllcaLlon." lL clLed Lhe cases of eople vs. 1lerra and
eople vs. ArnaulL whlch sLaLes LhaL whlle SecLlon 73 of Lhe naLlonal
lnLernal 8evenue Code provldes for Lhe lmposlLlon of Lhe penalLy for
refusal or neglecL Lo pay lncome Lax or Lo make a reLurn Lhereof, by
lmprlsonmenL or flne, or boLh, lL falls Lo provlde for Lhe collecLlon of
sald Lax ln crlmlnal proceedlngs.lL ls a commonly accepLed prlnclple of
law LhaL Lhe meLhod prescrlbed by sLaLuLe for Lhe collecLlon of Laxes ls
generally excluslve, and unless a conLrary lnLenL be gaLhered from Lhe
sLaLuLe, lL should be followed sLrlcLly." under Lhe clLed 1lerra and
ArnaulL cases, lL ls clear LhaL crlmlnal convlcLlon for a vlolaLlon of any
penal provlslon ln Lhe 1ax Code does noL amounL aL Lhe same Llme Lo a
declslon for Lhe paymenL of Lhe unpald Laxes lnasmuch as Lhere ls no
speclflc provlslon ln Lhe 1ax Code Lo LhaL effecL."

uCC18lnL: lL ls a commonly accepLed prlnclple of law LhaL Lhe meLhod
prescrlbed by sLaLuLe for Lhe collecLlon of Laxes ls generally excluslve,
and unless a conLrary lnLenL be gaLhered from Lhe sLaLuLe, lL should be


"#$%&''& #((& )* +,-.&""&/
followed sLrlcLly. (3 Cooley, Law on 1axaLlon, SecLlon 1326, pp. 621-
623).

8ACkGkCUND:
! eLlLloner spouses Lmlllo L. Llm, Sr. and AnLonla Sun Llm were
engaged ln Lhe dealershlp of varlous household appllances
o 1hey flled lncome Lax reLurns for years 1938 and 1939.
! CcLober 3, 1939 ! a rald was conducLed aL Lhelr buslness
address ln Manlla by Lhe naLlonal 8ureau of lnvesLlgaLlon by
vlrLue of a search warranL lssued by a [udge from Manlla.
o A slmllar rald was made on peLlLloners' premlses aL 111
12Lh SLreeL, Cuezon ClLy.
o Selzed from Lhe Llm couple were buslness and
accounLlng records.
! CcLober 14, 1960 ! Lhe Chlef of Lhe lnvesLlgaLlon ulvlslon of
Lhe 8ureau of lnLernal 8evenue lnformed Lhe Llms LhaL revenue
examlners had been auLhorlzed Lo examlne Lhe books of
accounL selzed from Lhem durlng Lhe ralds.
! SepLember 30, 1964 ! Senlor 8evenue Lxamlner 8aphael S.
uaeL submlLLed a memorandum wlLh Lhe flndlngs LhaL Lhe
lncome Lax reLurns flled by peLlLloners for Lhe years 1938 and
1939 were false or fraudulenL. uaeL recommended LhaL an
assessmenL of 833,127.00 be made agalnsL Lhe peLlLloners.
o Allegedly, lL was Cctober 1S, 1964 when Lhe fraudulenL
represenLaLlons of Lhe Llms regardlng Lhelr lncome was
unearLh by Lhe 8l8.
! Apr|| 7, 196S ! Lhen AcLlng Commlssloner of Lhe 8l8, 8en[amln
M. 1ablos lnformed peLlLloners whaL was due from Lhem as
deflclency lncome Lax and gave Lhem unLll May 7, 1963 Lo pay
Lhe amounL.
! Aprll 10, 1963 ! peLlLloner Lmlllo L. Llm, Sr., requesLed for a
relnvesLlgaLlon. 1he 8l8 expressed wllllngness Lo granL such
requesL buL on condlLlon LhaL wlLhln Len days from noLlce, Llm
would accompllsh a walver of defense of prescrlpLlon under Lhe
SLaLuLe of LlmlLaLlons and LhaL one half of Lhe deflclency lncome
Lax would be deposlLed wlLh Lhe 8l8 and Lhe oLher half secured
by a sureLy bond. lf wlLhln Lhe Len-day perlod Lhe 8l8 dld noL
hear from peLlLloners, Lhen lL would be presumed LhaL Lhe
requesL for relnvesLlgaLlon had been abandoned.
o Llm refused Lo comply wlLh Lhe sald condlLlons.
! !anuary 31, 1967 ! 8l8 lnformed Lhe Llms of Lhe deflclency due
from Lhem and LhaL Lhey had unLll March 7, 1967 Lo proLesL,
oLherwlse a demand would ensue.
! March 13, 1967 ! peLlLloners wroLe Lhe 8l8 Lo proLesL Lhe
laLesL assessmenL and repeaLed Lhelr requesL for a
relnvesLlgaLlon.
! Cctober 10, 1967 ! Lhe 8l8 rendered a flnal declslon holdlng
LhaL Lhere was no cause for reversal.
! Iu|y 3, 1968 ! 1he flnal noLlce and demand for paymenL was
served on peLlLloners Lhrough Lhelr daughLer-ln-law.
! !une 23, 1970 ! 8ecause Lhe Llms sLlll dldn'L pay, four (4)
separaLe crlmlnal lnformaLlons were flled agalnsL peLlLloners for
vlolaLlon of SecLlons 43 and 31 ln relaLlon Lo SecLlon 73 of Lhe
naLlonal lnLernal 8evenue Code.
1. Crlmlnal Cases nos. 1788 and 1789 whlch lnvolved
peLlLloners' refusal Lo pay Lhe deflclency lncome Laxes.
2. Crlmlnal Cases nos. 1790 and 1791 whlch dealL wlLh
peLlLloners' flllng of fraudulenL consolldaLed lncome Lax
reLurns wlLh lnLenL Lo evade Lhe assessmenL decreed by
law
! AugusL 19, 1973 ! Lhe Lrlal courL rendered Lwo (2) [olnL
declslons flndlng peLlLloners gullLy as charged and requlrlng
Lhem Lo pay Lhe governmenL pursuanL Lo resldenLlal no. 69 Lhe
amounLs of 380,388.73 and 636,601.80 as deflclency lncome
Laxes for Lhe years 1938 and 1939.
! eLlLloners aver LhaL Lhe flve-year prescrlpLlve perlod for Lhelr
vlolaLlon of Lhe nl8C (as sLaLed ln SecLlon 334) should be
counLed accordlngly:
o 8elaLlve Lo (1), Lhe flve-year perlod of llmlLaLlon under
SecLlon 334 should be reckoned from Aprll 7, 1963, Lhe
daLe of Lhe orlglnal assessmenL whlle Lhe CovernmenL
lnslsLs LhaL lL should be counLed from !uly 3, 1968 when


"#$%&''& #((& )* +,-.&""&/
Lhe flnal noLlce and demand was served on peLlLloners'
daughLer-ln-law.
o 8elaLlve Lo (2), Lhe flve-year perlod should be counLed
from Lhe daLe of dlscovery of Lhe alleged fraud whlch, aL
Lhe laLesL, should have been CcLober 13, 1964, Lhe daLe
sLaLed by Lhe AppellaLe CourL ln lLs resoluLlon of Aprll 4,
1978 as Lhe daLe Lhe fraudulenL naLure of Lhe reLurns
was unearLhed. Cn behalf of Lhe CovernmenL, Lhe
SollclLor Ceneral counLers LhaL Lhe crlme of flllng false
reLurns can be consldered "dlscovered" only afLer Lhe
manner of commlsslon, and Lhe naLure and exLenL of
Lhe fraud have been deflnlLely ascerLalned. lL was only
on CcLober 10, 1967 when Lhe 8l8 rendered lLs flnal
declslon holdlng LhaL Lhere was no ground for Lhe
reversal of Lhe assessmenL.

ISSULS 1C 8L kLSCLVLD:
1. 8elaLlve Lo (1), wheLher or noL Lhe flve-year perlod should be
counLed from !uly 3, 1968.
2. 8elaLlve Lo (2), wheLher or noL Lhe flve-year perlod should be
counLed from CcLober 10, 1967.
3. WheLher or noL lL was proper for Lhe 1rlal CourL Lo order
peLlLloners, ln lLs declslon, Lo pay Lhe amounL of deflclency
lncome Lax pursuanL Lo .u. no. 69.

kLSCLU1ICNS AND AkGUMLN1S
ISSUL 1 ! 8elaLlve Lo (1), wheLher or noL Lhe flve-year perlod should be
counLed from !uly 3, 1968. ! ?LS. lnasmuch as Lhe flnal noLlce and
demand for paymenL of Lhe deflclency Laxes was served on peLlLloners
on !uly 3, 1968, lL was only Lhen LhaL Lhe cause of acLlon on Lhe parL of
Lhe 8l8 accrued.

MAICk CIN1 1: 1hls ls so because prlor Lo Lhe recelpL of Lhe leLLer-
assessmenL, no vlolaLlon has yeL been commlLLed by Lhe Laxpayers.
1he offense was commlLLed only afLer recelpL was coupled wlLh
Lhe wllful refusal Lo pay Lhe Laxes due wlLhln Lhe alloLed perlod.
1he Lwo crlmlnal lnformaLlons, havlng been flled on !une 23,
1970, are well-wlLhln Lhe flve-year prescrlpLlve perlod and are
noL Llme- barred.

ISSUL 2 ! 8elaLlve Lo (2), wheLher or noL Lhe flve-year perlod should be
counLed from CcLober 10, 1967. ! ?LS.

MAICk CIN1 1: As SecLlon 334 sLands ln Lhe sLaLuLe book (and Lo Lhls
day lL has remalned unchanged) lL would lndeed seem LhaL Lax cases,
such as Lhe presenL ones, are pracLlcally lmprescrlpLlble for as long as
Lhe perlod from Lhe dlscovery and lnsLlLuLlon of [udlclal proceedlngs for
lLs lnvesLlgaLlon and punlshmenL, up Lo Lhe flllng of Lhe lnformaLlon ln
courL does noL exceed flve (3) years.

ISSUL 3 ! WheLher or noL lL was proper for Lhe 1rlal CourL Lo order
peLlLloners, ln lLs declslon, Lo pay Lhe amounL of deflclency lncome Lax
pursuanL Lo .u. no. 69. ! nC. 1he Lrlal courL had absoluLely no
[urlsdlcLlon ln senLenclng Lhe Llm couple Lo lndemnlfy Lhe CovernmenL
for Lhe Laxes unpald. .u. no. 69 Look effecL afLer Lhese cases had
already been lnsLlLuLed. 1he law has no reLroacLlve appllcaLlon.

MAICk CIN1 1: 1he lower courL erred ln applylng resldenLlal uecree
no. 69, parLlcularly SecLlon 316 Lhereof, whlch provldes LhaL "[udgmenL
ln Lhe crlmlnal case shall noL only lmpose Lhe penalLy buL shall order
paymenL of Lhe Laxes sub[ecL of Lhe crlmlnal case", because LhaL decree
Look effecL only on !anuary 1, 1973 whereas Lhe crlmlnal cases sub[ecL
of Lhls appeal were lnsLlLuLed on !une 23, 1970.

MAICk CIN1 2: Crlmlnal convlcLlon for a vlolaLlon of any penal
provlslon ln Lhe 1ax Code does noL amounL aL Lhe same Llme Lo a
declslon for Lhe paymenL of Lhe unpald Laxes lnasmuch as Lhere ls no
speclflc provlslon ln Lhe 1ax Code Lo LhaL effecL.
ln Lhe case of eople vs. 1lerra, we relLeraLed Lhe rullng ln
eople vs. ArnaulL, LhaL Lhere ls no legal sancLlon for Lhe
lmposlLlon of paymenL of Lhe clvll lndemnlLy Lo Lhe CovernmenL
ln a crlmlnal proceedlng for vlolaLlon of lncome Lax laws. 1hus:


"#$%&''& #((& )* +,-.&""&/

...Whlle SecLlon 73 of Lhe naLlonal lnLernal 8evenue Code
provldes for Lhe lmposlLlon of Lhe penalLy for refusal or neglecL
Lo pay lncome Lax or Lo make a reLurn Lhereof, by lmprlsonmenL
or flne, or boLh, lL falls Lo provlde for Lhe collecLlon of sald Lax ln
crlmlnal proceedlngs.ChapLers l and ll of 1lLle lx of Lhe naLlonal
lnLernal 8evenue Code provldes only for clvll remedles for Lhe
collecLlon of Lhe lncome Lax, and under SecLlon 316, Lhe clvll
remedy ls elLher by dlsLralnL of goods, chaLLels, eLc., or by
[udlclal acLlon.

lL ls a commonly accepLed prlnclple of law LhaL Lhe meLhod
prescrlbed by sLaLuLe for Lhe collecLlon of Laxes ls generally
excluslve, and unless a conLrary lnLenL be gaLhered from Lhe
sLaLuLe, lL should be followed sLrlcLly. (3 Cooley, Law on
1axaLlon, SecLlon 1326, pp. 621-623).


SLAkA1L CINICNS
GU1ILkkL2 Ir. !"# $%&$'(()&*
! 1o say LhaL no vlolaLlon of Lhe lncome 1ax Law has been
commlLLed unLll afLer recelpL of Lhe leLLer assessmenL overlooks
Lhe facL LhaL Lhe assessmenL ls only evldence of a prlor
vlolaLlon. lL ls noL Lhe refusal Lo comply wlLh Lhe laLLer LhaL
creaLes Lhe vlolaLlon. lL ls Lhe fallure Lo pay Laxes ln Lhe years
LhaL Lhey were due. Agaln, Lo make dlscovery of Lhe fraud and
lnsLlLuLlon of [udlclal proceedlngs con[uncLlve seems Lo me
llloglcal because Lhe [udlclal proceedlngs always come afLer
dlscovery.