G.R. No.
L-18384 September 20, 1965
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
HEIRS OF CESAR JALANDONI, ET AL., defendants-appellants.
ON TAX EVASION
FACTS:
Isabel Ledesma died intestate on June 23, 1948 leaving real properties situated in the
provinces of Negros Occidental and Rizal and in the cities of Manila and Baguio, and
personal properties consisting of shares of stock in various domestic corporations. She
left as heirs her husband Bernardino Jalandoni and three children, namely, Cesar,
Angeles and Delfin, all surnamed Jalandoni.
Cesar Jalandoni, one of the heirs, filed an estate and inheritance tax return reporting the
following: (1) that the real and personal properties owned by the deceased and her
surviving husband had a total market value of P1,324,555.80; (2) that after deducting
therefrom the conjugal share of her husband and some expenses the net estate subject
to estate tax was P28,148.04; and (3) that the amount subject to inheritance tax was
P542,225.83. This return also shows that no testamentary or intestate proceedings
were instituted. Bureau of Internal Revenue made an assessment on November 20,
1948 calling for the payment of the amounts of P31,435.95 and P58,863.52 as estate
and inheritance taxes, respectively, stating therein that the assessment was "to be
considered partial pending investigation of the return." These sums were paid by Cesar
Jalandoni.
After a preliminary investigation was made of the properties reported in the
abovementioned return, a second assessment was made on January 27, 1953 by the
Bureau of Internal Revenue showing that there was due from the estate the amounts of
P5,539.67 and P9,899.37 as deficiency estate and inheritance taxes, respectively, for
which reason a demand was made on Bernardino Jalandoni stating therein that the
same was still "to be considered partial pending further investigation of the return,"
which amounts were paid by Bernardino Jalandoni on February 28, 1953. Bureau of
Internal Revenue conducted another investigation and this time it found (1) that the
market value of the lands reported in the return filed by Cesar Jalandoni was
underdeclared. In answer to this third assessment after notice was served on the
administrator of the estate, Bernardino Jalandoni, Lorenzo J. Teves, in his capacity as
counsel of the heirs of the deceased, wrote a letter to the Collector of Internal Revenue
setting up the defense of prescription in the sense that the deficiency in the estate and
inheritance taxes payment of which was required therein can no longer be collected
since more than five years had already elapsed from the filing of the return invoking in
his favor Section 331 of the National Internal Revenue Code.
While this case was pending hearing on the merits, the lower court ordered the
Collector of Internal Revenue to verify the allegation that the seven lots in Negros
Occidental which were claimed not to have been included in the return filed by Cesar
Jalandoni were in fact included therein, and to this effect the Collector designated
Examiner Genaro Butas to conduct the examination. In his report Examiner Butas
stated that of the seven lots that were previously reported not included in the return, two
were actually declared therein, though he reaffirmed his previous finding as regards the
other five lots and the market value of the sugar lands and rice lands left by the
deceased and the value of the shares of stock owned by her in several domestic
corporations.
The trial court rendered its decision on February 16, 1960 ordering defendants, jointly
and severally, to pay plaintiff the sum of P79,837.35 as estate and inheritance taxes,
plus the interest that had accrued thereon as a result of their delinquency. Defendants
interposed the present appeal.
ISSUE:
Whether or not the lower court erred in finding that the return submitted by Cesar
Jalandoni is false and fraudulent and that the real asset of the estate has been
deliberately omitted from the return thereby evincing an intention to evade the payment
of the correct amount of tax due to the government.
HELD:
NO. The alleged undervaluation of certain sugar and rice lands reported by Cesar
Jalandoni which appellee fixes at P365,149.50, for the same can at most be considered
as the result of an honest difference of opinion and not necessarily an intention to
commit fraud. If there is any mistake in the valuation made by Jalandoni the same can
only be considered as honest mistake, or one based on excusable inadvertence, he
being not an expert in appraising real estate. The deficiency assessment, moreover,
was made by the Collector of Internal Revenue more than five years from the filing of
the return, and experience shows that such an intervening period is sufficiently long to,
warrant an increase in value of real estate which is precisely what was found by the
Collector of Internal Revenue with regard to the lands in question. It is certainly an error
to impute fraud based on an honest difference of opinion.
