Republic v. Dela Rama (Actual versus Constructive Receipt) P: Zaldivar, J. Ordinary appeal.

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. LEONOR DE LA RAMA, ET AL., respondents-appellees.

FACTS: The estate of the late Esteban de la Rama was the subject of Special Proceedings No. 401 of the Court of First Instance of Iloilo. The executor-administrator, Eliseo Hervas, filed income tax returns of the estate corresponding to the taxable year 1950. The Bureau of Internal Revenue later claimed that it had found out that there had been received by the estate in 1950 from the De la Rama Steamship Company, Inc. cash dividends amounting to P86,800.00, which amount was not declared in the income tax return of the estate for the year 1950. The Bureau of Internal Revenue then made an assessment as deficiency income tax against the estate. The Collector of Internal Revenue wrote a letter to Mrs. Lourdes de la Rama-Osmea informing her of the deficiency income tax and asking for payment. Counsel for Lourdes wrote to the Collector acknowledging receipt of the assessment but contended that Lourdes had no authority to represent the estate, and that the assessment should be sent to Leonor de la Rama who was pointed to by said counsel as the administratrix. The Deputy Collector of Internal Revenue then sent a letter to Leonor de la Rama as administratrix of the estate, asking payment. The tax, as assessed, not having been paid, the Deputy Commissioner of Internal Revenue, on September 7, 1959, wrote another letter to Lourdes demanding the payment of the deficiency income tax within the period of thirty days from receipt thereof. The counsel of Lourdes insisted that the letter should be sent to Leonor de la Rama. The Deputy Commissioner of Internal Revenue wrote to Leonor de la Rama another letter, demanding the payment within thirty days from receipt thereof. The deficiency income tax not having been paid, the Republic of the Philippines filed a complaint against the heirs of Esteban de la Rama. The Trial court, however, dismissed the complaint on the ground that [relevant to the subject heading]it was Eliseo Hervas, and neither Leonor nor Lourdes, who was the proper administrator at the time, and to whom the assessment should have been sent. The appellant contended that the assessment had become final, because the decision of the Collector of Internal Revenue was sent in a letter dated February 11, 1960 and addressed to the heirs of the late Esteban de la Rama, through Leonor de la Rama as administratrix of the estate, and was not

disputed or contested by way of appeal within thirty days from receipt thereof to the Court of Tax Appeals. ISSUE: WON there was proper notice of the tax assessment RATIO: If the notice was not sent to the taxpayer for the purpose of giving effect to the assessment, said notice cannot produce any effect. HELD: The SC sustained the finding of the lower court that neither Leonor nor Lourdes was the administratrix of the estate of Esteban de la Rama. The Court noted that at the time the tax assessment was sent, Special Proceedings No. 401 were still open with respect to the controverted matter regarding the cash dividends upon which the deficiency assessment was levied. It is clear that at the time these special proceedings were taking place, Eliseo Hervas was the duly appointed administrator of the estate. Plaintiff-appellant also contends that the lower court could not take cognizance of the defense that the assessment was erroneous, this being a matter that is within the exclusive jurisdiction of the Court of Tax Appeals. This contention has no merit. According to Republic Act 1125, the Court of Tax Appeals has exclusive jurisdiction to review by appeal decisions of the Collector of Internal Revenue in cases involving disputed assessments, and the disputed assessment must be appealed by the person adversely affected by the decision within thirty days after the receipt of the decision. In the instant case, the person adversely affected should have been the administrator of the estate, and the notice of the assessment should have been sent to him. The administrator had not received the notice of assessment, and he could not appeal the assessment to the Court of Tax Appeals within 30 days from notice. Hence the assessment did not fall within the exclusive jurisdiction of the Court of Tax Appeals. DISPOSITION: Petition is DISMISSED, decision appealed from is AFFIRMED