ELEGARDO v. CTA

G.R. No. L-68385, May 12, 1989

FACTS: Warren Taylor Graham, an American national formerly resident in the Philippines, died in Oregon, U.S.A. As he left certain shares of stock in the Philippines, his son, Ward Graham, filed an estate tax return with the Philippine Revenue Representative in San Francisco, U.S.A.

The respondent CIR assessed the decedent's estate an estate tax in the amount of P96,509.35. This assessment was protested by the law firm of Bump, Young and Walker on behalf of the estate. The protest was denied by the Commissioner. No further action was taken by the estate in pursuit of that protest.

The decedent's will had been admitted to probate in the Circuit Court of Oregon. Ward Graham, the designated executor, then appointed Ildefonso Elegado, the herein petitioner, as his attorney-in-fact for the allowance of the will in the Philippines.

Petitioner commenced probate proceedings and the will was allowed, with the petitioner as ancillary administrator. As such, he filed a second estate tax return with the BIR.

On the basis of this second return, the Commissioner imposed an assessment on the estate in the amount of P72,948.87 which was protested on behalf of the estate by the Agrava, Lucero and Gineta Law Office.

While this protest was pending, the Commissioner filed in the probate proceedings a motion for the allowance of the basic estate tax of P96,509.35 as previously assessed. He said that this liability had not yet been paid although the assessment had long become final and executory.

The petitioner regarded this motion as an implied denial of the protest against the second assessment of P72,948.87. On this understanding, he filed a petition for review with the Court of Tax Appeals challenging the said assessment.

The Commissioner did not immediately answer (in fact, as the petitioner stressed, no answer was filed during a delay of 195 days) and in the end instead canceled the protested assessment. This cancellation was notified to the Court of Tax Appeals in a motion to dismiss on the ground that the protest had become moot and academic.

The motion was granted and the petition dismissed. The petitioner then came to this Court on certiorari under Rule 45 of the Rules of Court.

ISSUES/RULING:

1) Whether or not the respondent Court of Tax Appeals erred in dismissing the petitioner's appeal on grounds of jurisdiction and lack of a cause of action?

NO. It is obvious from the express cancellation of the second assessment for P72,948.87 that the petitioner had been deprived of a cause of action as it was precisely from this assessment that he was appealing. The petitioner argues that the issuance of the second assessment had the effect of cancelling the first assessment and that the subsequent cancellation of the second assessment did not have the effect of automatically reviving the first. It is noted that in the letter imposing the second assessment of P72,948.87, the Commissioner made it clear that the  amount is considered provisional only. It is illogical to suggest that a provisional assessment can supersede an earlier assessment which had clearly become final and executory.

2) Whether the appeal filed with the respondent court should be considered moot and academic?

YES. The respondent court was on surer ground, however, when it followed with the finding that the said cancellation had rendered the petition moot and academic. There was really no more assessment to review.

If indeed the Commissioner of Internal Revenue committed an error in the computation of the estate tax, as the petitioner insists, that error can no longer be rectified because the original assessment has long become final and executory. If that assessment was not challenged on time and in accordance with the prescribed procedure, that error - for error it was - was committed not by the respondents but by the decedent's estate itself which the petitioner represents.