San Beda College Mendiola, Manila

College of Arts and Sciences

Department of Accountancy

As partial fulfillment of the

Transfer, Business and Other Taxes
This Special Project
Bouncing Checks Law (B.P. Blg. 22) and Tax Remedies
Is presented to the faculty of San Beda College
And submitted to

Atty. Dante O. Dela Cruz, CPA

Faculty-in-charge

By
Rem Edcel E. Pasalo
IRRB, SY 2015-2016
Table of Contents

Table of Contents ...2

Bouncing Checks Law ...3
Describe checks without insufficient funds ...4
Identify the Evidence of knowledge of insufficient funds .....8
Explain credit construed ...10
Sources ..11
Tax Remedies 12
Evaluate the remedies of the government .13
Apply the remedies of the taxpayer...22
Explain the expanded jurisdiction of the Court of Tax Appeals ...28
Sources ..31

Bouncing Checks Law

(B.P. Blg. 22)

A. Describe checks without insufficient funds

A common predicament faced by businessmen is violating the Batas Pambansa Blg.22 or

also known as the Bouncing Checks Law. It is an act penalizing the making or drawing and
issuance of a check without sufficient funds and for other purposes.
According to Section 1 of BP Blg. 22, there would be insufficiency of funds when as
follows:
any person who makes or draws and issues any check to apply on account or for value,
knowing at the time of issue that he does not have sufficient funds in or credit with the
drawee bank for the payment of such check in full upon its presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit or would
have been dishonored for the same reason had not the drawer, without any valid reason,
ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty
days but not more than one (1) year or by a fine of not less than but not more than double the
amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or
both such fine and imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person who, having sufficient funds in or
credit with the drawee bank when he makes or draws and issues a check, shall fail to keep
sufficient funds or to maintain a credit to cover the full amount of the check if presented
within a period of ninety (90) days from the date appearing thereon, for which reason it is
dishonored by the drawee bank.
Where the check is drawn by a corporation, company or entity, the person or persons who
actually signed the check in behalf of such drawer shall be liable under this Act.
There are two possible ways before the Bouncing Checks Law shall apply:
1. Making or drawing and issuing any check to apply on account or for value, knowing
at the time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of such check in full upon its presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit or
would have been dishonored for the same reason had not the drawer, without any
valid reason, ordered the bank to stop payment.
For instance, John Doe went to a mall and buys a furniture worth Php1,000.00 by issuing
a check to the furniture retailer writing the same amount. However, John only has
Php900.00 in his bank account. Therefore, when the retailer present the check for
payment of the furniture, the check will bounce and return it to the bank of the retailer.
Another case is that when the issuer of check orders to stop the payment with no valid
reason/cause to do so and the dishonored check for insufficiency of funds would not have
happened had not the issuer ordered the bank to stop the payment.
2. Having sufficient funds in or credit with the drawee bank when he makes or draws
and issues a check, shall fail to keep sufficient funds or to maintain a credit to cover
the full amount of the check if presented within a period of ninety (90) days from the
date appearing thereon, for which reason it is dishonored by the drawee bank.

If at the time of issuing/writing the check, the issuer has sufficient funds on his
bank account but when presented for payment thereafter, the funds needed are
insufficient to cover the full amount issued within the period of 90 days from the date
appearing on the check and the occurrence of which would be the reason of dishonoring
of the check for insufficiency of funds.
The check involved in the first offense is worthless at the time of issuance since
the drawer had neither sufficient funds in nor credit with the drawee bank at the time,
while that involved in the second offense is good when issued as drawer had sufficient
funds in or credit with the drawee bank when issued. Under the first offense, the 90-day
presentment period is not expressly provided, while such period is an express element of
the second offense.
In any of these cases, the issuer of the check commits a violation of BP 22, and
may be held liable for imprisonment of thirty days to one year or a fine a double the value
of the check or both at the discretion of the court. Moreover, the issuer of the check may
also be liable for imprisonment, even if only a fine is imposed by the court, if the issuer
has no sufficient property to pay the fine imposed, in which case he or she shall be liable
to serve a prison term at the rate of one day for each eight pesos of the unpaid fine.
Elements of the offense under Section 1 of B.P. Blg.22 are:
(1) Drawing and issuance of any check to apply on account or for value;
(2) knowledge by the maker, drawer, or issuer that at the time of issue he did not have
sufficient funds in or credit with the drawee bank for the payment of such check in full
upon presentment; and
(3) Said check is subsequently dishonored by the drawee bank for insufficiency of funds or
credit, or would have been dishonored for the same reason had not the drawer, without any
valid reason, ordered the bank to stop payment.
Non-imprisonment for debt
It had been argued that BP 22 runs counter to the inhibition in the Bill of Rights which
states, "No person shall be imprisoned for debt or non-payment of a poll tax." Since the
offense under BP 22 is consummated only upon the dishonor or non-payment of the check
when it is presented to the drawee bank, the statute is really a "bad debt law" rather than a
"bad check law." What it punishes is the non-payment of the check, not the act of issuing it.
The statute, it is claimed, is nothing more than a veiled device to coerce payment of a debt
under the threat of penal sanction.
The gravamen of the offense punished by BP 22 is the act of making and issuing a
worthless check or a check that is dishonored upon its presentation for payment. It is not the
non-payment of an obligation which the law punishes. The law is not intended or designed to
coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting them in circulation. Because of its
5

deleterious effects on the public interest, the practice is proscribed by the law. The law
punishes the act not as an offense against property, but an offense against public order.

It may be constitutionally impermissible for the legislature to penalize a person for nonpayment of a debt ex contractu But certainly it is within the prerogative of the lawmaking
body to proscribe certain acts deemed pernicious and inimical to public welfare. Acts mala in
se are not the only acts which the law can punish. An act may not be considered by society as
inherently wrong, hence, not malum in se but because of the harm that it inflicts on the
community, it can be outlawed and criminally punished as malum prohibitum. The state can
do this in the exercise of its police power.
The enactment of BP 22 is a declaration by the legislature that, as a matter of public
policy, the making and issuance of a worthless check is deemed public nuisance to be abated
by the imposition of penal sanctions. It had been reported that the approximate value of
bouncing checks per day was close to 200 million pesos.
It is not for the court to question the wisdom or policy of the statute. It is sufficient that a
reasonable nexus exists between means and end. Considering the factual and legal
antecedents that led to the adoption of the statute, it is not difficult to understand the public
concern which prompted its enactment.
Impairment of freedom of contract
Article III, Section 10 of the Constitution provides that: "No law impairing the obligation
of contracts shall be passed." However, the freedom of contract which is constitutionally
protected is freedom to enter into "lawful" contracts. Contracts which contravene public
policy are not lawful. Checks can not be categorized as mere contracts. It is a commercial
instrument which, in this modem day and age, has become a convenient substitute for
money; it forms part of the banking system and therefore not entirely free from the
regulatory power of the state.
Equal protection of the laws
The challenge is to the effect that BP 22 is discriminatory or is violative of the equal
protection of the laws since it penalizes the drawer of the check, but not the payee. It had
been argued that the payee is just as responsible for the crime as the drawer of the check,
since without the indispensable participation of the payee by his acceptance of the check
there would be no crime. It is settled, however, that the clause "equal protection of the laws"
does not preclude classification of individuals, who may be accorded different treatment
under the law as long as the classification is no unreasonable or arbitrary. The argument
premised on the equal protection of the law is tantamount to saying that, to give equal
protection, the law should punish both the swindler and the swindled.
Improper delegation of legislative powers
6

It had been argued that the law violates the Constitutional prohibition against the
delegation of legislative power, on the theory that the offense is not completed by the sole act
of the maker or drawer but is made to depend on the will of the payee -- if the payee does not
present the check to the bank for payment but instead keeps it, there would be no crime. This
argument, however, stretches to absurdity the meaning of "delegation of legislative power."
What cannot be delegated is the power to legislate, or the power to make laws. which means,
as applied to the present case, the power to define the offense sought to be punished and to
prescribe the penalty. By no stretch of logic or imagination can it be said that the power to
define the crime and prescribe the penalty therefor has been in any manner delegated to the
payee. Neither is there any provision in the statute that can be construed, no matter how
remotely, as undue delegation of executive power.
Defect in the enactment of BP 22
It is argued that Section 9 (2) of Article VII of the 1973 Constitution was violated by the
legislative body when it enacted BP 22 into law. This constitutional provision prohibits the
introduction of amendments to a bill during the Third Reading. It is claimed that during its
Third Reading, the bill which eventually became BP 22 was amended in that the text of the
second paragraph of Section 1 of the bill as adopted on Second Reading was altered or
changed in the printed text of the bill submitted for approval on Third Reading. However, it
is clear from the records that the text of the second paragraph of Section 1 of BP 22 is the
text which was actually approved by the body on Second Reading.

B. Identify the Evidence of knowledge of insufficient funds

The issuer of the check is not left with remedies. The Supreme Court has sanctioned
several defenses which have acquitted individuals charged with a violation of BP 22. Proving
the knowledge of the issuer of having insufficient funds has been ordered by the law as what
it states in Section 2 of Bouncing Checks Law as follows:
The making, drawing and issuance of a check payment of which is refused by the
drawee because of insufficient funds in or credit with such bank, when presented within
ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of
such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the
amount due thereon, or makes arrangements for payment in full by the drawee of such check
within (5) banking days after receiving notice that such check has not been paid by the
drawee.
There would be a prima facie presumption that the maker, drawer, or issuer had
knowledge of the insufficiency of funds only when it is proved that the issuer after receipt of
the notice of dishonor because of insufficiency of funds has failed to pay the amount of the
check or make arrangement for its payment within 5 banking days. Therefore, there would be
remedies and possible defenses for the issuer as to not violate the BP 22 including payment
of check within 5 banking days from the receipt of the notice. The notice of dishonor must be
in writing so as to bind the contract between the seller and the issuer; and so as to determine
when that 5-day period prescribed in section 2 would start and end.
For instance, John Doe has Php950.00 in his bank account today while he purchased an
equipment worth Php1,000.00 later that day issuing the latter amount on his check. When the
seller of the equipment went to bank for encashment within 90 days from date of issuance,
that check bounced for insufficiency of funds. The issuer of the check has to pay the holder
of the check or make an arrangement with the bank to pay the insufficient amount which is
Php50.00 either cases should be done within 5 banking days from receipt of notice that the
check has not been paid.
The foregoing discussion abundantly shows that the notice must be in writing. A verbal
and indirect notice, however, was found to be sufficient in the case of Yulo vs. People. Yulo
vs. People, G.R. No. 142762, 4 March 2005. The pertinent finding of fact in this case is as
follows:
As Myrna [the complainant] did not know petitioners [the accused] address, she
immediately informed Josefina [the "best friend of the accused] about the dishonored checks.
The latter told Myrna not to worry and repeated her assurance that petitioner is her best
friend and a good payer. Myrna tried to get petitioners address from Josefina, but the latter
refused and instead made the assurance that she will inform petitioner that the checks were
dishonored.
It is clear from these findings that there was no written notice given to the accused. It is
also clear that no notice, even a verbal notice, was given directly to the accused. Still, the
Supreme Court concluded that:

We likewise find no reason to sustain petitioners contention that she was not given any
notice of dishonor. Myrna had no reason to be suspicious of petitioner. It will be recalled that
Josefina Dimalanta assured Myrna that petitioner is her "best friend" and "a good payer."
Consequently, when the checks bounced, Myrna would naturally turn to Josefina for help. We
note that Josefina refused to give Myrna petitioners address but promised to inform
petitioner about the dishonored checks.
This ruling would appear to be inconsistent with the required burden of proof and the rule
of interpretation of penal laws, succinctly noted in King vs. People, thus:
We must stress that BP 22, like all penal statutes, is construed strictly against the State
and liberally in favor of the accused. Likewise, the prosecution has the burden to prove
beyond reasonable doubt each element of the crime. Hence, the prosecutions case must rise
or fall on the strength of its own evidence, never on the weakness or even absence of that of
the defense.

C. Explain credit construed

Credit may be comprehend as the amount owed to the bank when theres loan proceeds
received by the borrower or the figure or money received by the debtor to which he owes to
the creditor, in either cases, to be paid in future through lump sum or installment with or
without any interest or additional payments to be made which the two parties may agree. But
as to Bouncing Checks law, the word credit may be a different one from laymans term. As
what Section 3 of Bouncing Checks Law states is that the term credit is as follows:
The word "credit" as used herein shall be construed to mean an arrangement or
understanding with the bank for the payment of such check.
The rule of law states that there must be an agreement on how the issuer of check will
pay the bank in case of insufficiency of funds. It is in accordance to the banks rules and
regulations what provision will the issuer will follow because the bank maintains the account
of the issuing person. There is a dual relationship between a bank and its customer and the
latter should comply with the rules stated with the said bank like in payment of check.
D. Estafa vs. B.P. Blg. 22
It is often that the rule on bouncing checks may be altered with the rule on estafa since
both were dealing with insufficiency of funds through issuance of checks. For those with no
educational background regarding the said two term, it may create confusion because of its
highly technical terminologies.
Estafa is commited by means of any of the following false pretenses or fraudulent acts
executed prior to or simultaneously with the commission of the fraud:
By postdating a check, or issuing a check in payment of an obligation when the offender
had no funds in the bank, or his funds deposited therein were not sufficient to cover the
amount of the check.
The form of estafa has the following elements:
a. Postdating or issuance of a check in payment of an obligation contracted at the time
the check was issued
b. Insufficiency of funds to cover the check, and
c. Damage to the payee thereof
The difference lies between B.P. 22 and Estafa, lies on the time of issuance of check by
the issuer. It is said to be a violation of B.P. 22 when a check was issued in payment of a
pre-existing debt while Estafa shall push through when the check was issued at the time
the obligation was contracted.

10

Sources:
Soriano, Fidelito M. Negotiable Instrument(Law and Application)for business
students.2011.pp.269-277.
Bouncing Check & BP 22. http://www.philippinecriminallawyer.com/?q=bouncingcheck.
Robles, Chan. Batas Pambansa Bilang 22 Chan Robles Virtual Law Library.
http://www.chanrobles.com/bataspambansabilang22.htm#.VvX9mPl97IU. 2010.
Atty.Biron, James. Estafa and Bouncing Checks Law (B.P.22).
http://www.jamesbiron.com/2010/10/estafa-and-bouncing-checks-law-b-p-22/. October
16, 2010.
Bouncing Checks Law. http://wiki.lawcenter.ph/index.php?
title=Bouncing_Checks_Law#Element_2:_Knowledge_of_insufficiency_of_funds.

11

Tax Remedies

12

A. Evaluate the remedies of the government

Remedies for collection of delinquent taxes were provided by the National Internal
Revenue Code. These civil remedies for collection for internal revenue taxes, fees, or
charges, and any increment thereto resulting from delinquency shall be by:
I.
Administrative or Extrajudicial Procedings*
1) Distraint of personal property
2) Levy upon real property and interest in or rights to real property
*The remedies under extrajudicial proceedings shall not be availed of where the amount
of tax involved is not more than Php100.00.
II.
Judicial Proceedings*
1) Civil action or;
2) Criminal action
*The judgment in the criminal case shall not only impose the penalty but shall also
order payment of the taxes subject of the criminal cases as finally decided by the
Commissioner.
Either of the administrative or judicial or both simultaneously may be pursued in the
discretion of the authorities charged with the collection of such taxes.
Administrative or Extrajudicial Proceedings
I.1) Distraint of Personal Property
By distraint, it is the seizure by the government of the goods, chattels, or effects
or personal property of whatever character, including stocks and other securities, debts,
credits, bank accounts, and interests in and rights to personal property of the taxpayer.
Distinction between Actual and Constructive Distraint
Actual Distraint

Constructive Distraint*

Personal Property is physically taken

Personal property is not physically taken

The taxpayer is already delinquent in

payment of hi taxes.

There is no finding yet of a discrepancy, only

that the taxpayer is leaving the country or
disposing of his property in fraud of creditors
or is in the process of liquidation.
Personal property is merely held as security
to answer for any future tax delinquency.

Personal property taken is sold in order to

satisfy the tax delinquency.

*The constructive distraint of personal property shall be effected by requiring the

taxpayer or any person having possession or control of such property to sign a receipt covering
the property distrained and obligate himself to preserve the same intact and unaltered and not to
dispose of the same in any manner whatever, without the express authority of the Commissioner.
However, if the taxpayer refuses or fails to sign the receipt herein referred to, the Revenue
13

Officer effecting the constructive distraint shall proceed to prepare a list of such property, and in
presence of two (2) witnesses, leave a copy thereof in the premises where the property distrained
is located, after which the said property shall be deemed to have been placed under constructive
distraint.
Instances where the taxpayers personal property may be constructively distraint were as follows:
1.
2.
3.
4.

The delinquent taxpayer is retiring from any business subject to tax;

Intending to leave the Philippines;
Intending to remove his property in the Philippines or to hide or conceal his property; or
To perform any act tending to obstruct the proceedings for collecting the tax due or which
may be due from him.

Upon failure of the person owing any delinquent tax or delinquent revenue to pay the
same at the time required, the Commissioner or his authorized representative shall seize and
distraint personal property of such persons in sufficient quantity to satisfy the tax, or charges,
together with any increment thereto incident to delinquency, and the expenses of the distraint and
the cost of the subsequent sale.
The paragraph above shall be summarized as follows:
Amount involved (Delinquent Tax)
More than Php1,000,000.00
Php1,000,000.00 or less

Persons authorized to seize and distraint

Commissioner or his duly authorized
representative
Revenue District Officer (RDO)

I.2) Levy on Real Property

By levy of real property, it is a seizure by the government, aside from distraint,
obtaining money by legal process through sale of property; the raising of the money for
which an execution has been issued.
When to levy:
After the expiration of the time required to pay the delinquent tax or delinquent revenue,
real property may be levied upon before, simultaneously or after the distraint of personal
property belonging to the delinquent taxpayer.
Other cases when to levy:
(1) where warrant of levy on real property is not issued before or simultaneously with
warrant of distraint; and
(2) personal property of taxpayer is insufficienct to satisfy his tax delinquency.
*Executed by the Commissioner or hi duly authorized representative within 30 days after
execution of distraint.
How to effect:
14

Levy shall be effected by writing upon a duly authenticated certificate showing the name
of the taxpayer and the amount of the tax and penalty due from him a description of the
property upon which levy is made.
Written notice of the levy shall be mailed to or served upon the:
1) Register of Deeds of the province or city where the property is located
2) Delinquent taxpayer
3) If taxpayer is absent from Philippines, to his agent or manager of the business in
respect to which the liability arose.
4) If there is none, to the occupant of the property in question.
There are two (2) cases in which the taxpayer may redeem the property sold:
1. By paying within one year from date of sale:
a. Amount of public taxes
b. Penalties
c. Interest thereon (date of delinquency to date of sale)
d. 15% interest per annum of purchase price (date of purchase to date of
redemption)
2. The owner shall not be deprived of the possession of the property sold and shall
be entitled to the rents and other income thereof until the expiration of the time
allowed for redemption.

Distinction among Warrant of Distraint, Warrant of Levy, and Warrant of Garnishment

a)Subject Matter

b)Disposition for
want of bidders or
bids inadequate to
satisfy tax
defieciency
c)Advertisement for
sale

Distraint
Seizure of personal
property owned by
and in possession of
the taxpayer

Levy
Seizure of real
property owned by
and in possession of
the taxpayer

The government may

purchase the property
if no sufficient bid is
received to meet
deficiency
No advertisement is
required

Forfeited to the
government then sold
to meet the
deficiency

Garnishment*
Seizure of personal
property owned by
the taxpayer but in
the possession of a
third party (e.g. bank)
Purchased by
government then
resold to meet
deficiency

Advertised once a
week for three weeks

No advertisement is
required

*Garnishment of bank accounts shall be effected by serving a warrant of garnishment

upon the taxpayer and upon the president, manager, treasurer or other responsible officer
or the bank.

15

Judicial Proceedings
Civil and criminal actions and proceedings instituted in behalf of the Government under
the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be
brought in the name of the Government of the Philippines and shall be conducted by legal
officers of the Bureau of Internal Revenue. However, no civil or criminal action for recovery of
taxes or the enforcement of any fine, penalty, or forfeiture under this Code shall be filed in court
without the approval of the Commissioner.
a. Civil action it is a case filed before the regular courts requiring the taxpayer to pay
taxes.
b. Criminal action it is a case filed before the regular court requiring the taxpayer to pay
the taxes and enforcing penalty against him for violation of the tax code.
I.

Civil Penalties
The additions to the tax or deficiency tax shall apply to all taxes, fees and charges
imposed under the Code. The amount so added to the tax shall be collected at the same time,
in the same manner and as part of the subject tax.
There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to
25% of the amount due in the following cases:
(1) Failure to file any return and pay the tax due thereon as required under the provisions
of this Code or rules and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal
revenue officer other than those with whom the return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the
notice of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required to be
filed under the provisions of this Code or rules and regulations, or the full amount of tax due
for which no return is required to be filed, on or before the date prescribed for its payment.
A penalty of 50% of the tax or of the deficiency tax is imposed under the following cases:
(1) Willful neglect to file the return on the date prescribed.
- Taxpayer is presumed to unable to file his return after a considerable length of
time. (Unable to pay the amount tax due after receiving notice from the
Commissioner)
(2) Willful filing of a false or fraudulent return.
- Substantial under-declaration of sales, receipts, or income; and
- Substantial overstatement of deductions of deductions constitute prima facie
evidence of a false or fraudulent return
- Failure to report sales, receipts, or income in an amount exceeding 30% of return
declared
16

II.

Claim of deductions in amount exceeding 30% of actual deductions

Criminal Penalties
The fines to be imposed for any violation of the Code shall be:
Not lower than Php30, 000.00 or twice the amount of TIS (taxes, interest, and surcharges)
due, whichever is higher.
Any person convicted of a crime penalized by the Code shall be liable not only for the
payment of the tax but for the penalties imposed as well. Any person who willfully aids or
abets in the commission of such crime or ho causes the commission of any offense by
another, shall be equally liable as the principal.
The table below shows what would be the criminal actions against different offenders:
Offender
Non-citizen of the Philippines

Public officer or Employee

CPA

Associations, Partnerships, or Corporations

Any person who willfully attempts to evade

tax

Criminal Penalty
Shall be deported immediately after serving
the sentence w/o further proceedings for
deportation.
Maximum penalty prescribed;
Dismissed from public service; and
Perpetually disqualified from holding
any public office
Disqualified to vote and participate in
any collection
CPA certificate shall be revoked or cancelled,
upon conviction
Penalty imposed on person/s responsible for
violation (partner, president, general manager,
branch manager, treasurer, etc.)
In addition to other penalties;
o Shall be fined:
Php30,000.00 to Php100,000.00
o Shall suffer imprisonment:
2 to 4 years

Injunction not Available to Restrain Collection of Tax

An injunction is an equitable remedy in the form of a court order that compels a party to
do or refrain from specific acts. A party that fails to comply with an injunction faces criminal or
civil penalties, including possible monetary sanctions and even imprisonment. They can also be
charged with contempt of court.
17

No court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by Tax Code.
However, the Court of Tax Appeals (CTA) can issue injunctions while in the exercise of
its appellate jurisdiction in cases pending before it. This is an exception to no injunction rule.
The CTA may enjoin collection of taxes if in its opinion the same may jeopardize the
interest of the government and/or the taxpayer.
Tax lien and Remedy for Enforcement of Statutory Penal Revision
Tax lien: A legal claim or charge on property, either real or personal, as security from the
payment of a tax obligation.
Remedy: The remedy for enforcement of statutory penalties of all sort shall be by criminal or
civil action, as particular situation may require, subject to the approval of the Commissioner.
Period for Assessment and Collection
Assessment is the written notice and demand by the BIR on the taxpayer for the
settlement of a due tax liability that is there definitely set and fixed.
The steps for issuance of an assessment notice shall be:
1. Examination/audit of the books of accounts of the taxpayer by a revenue officer who
is armed with a Letter of Authority.
2. Issuance of a Preliminary Assessment Notice (PAN)
3. Issuance of a Final Assessment Notice (FAN) / Formal Letter of Demand (FLD)
Internal revenue taxes shall be assessed within 3 years. Commencement of such period starts:
(1) From the day after the due date, if the return is filed on or before the due date; or
(2) From the day the return was filed, if the return is filed beyond the due date
*No proceeding in court without assessment for the collection of such taxes shall be begun
after expiration of such period.
o Return filed was not false or fraudulent
(a) Collection with prior assessment
Assessment: within 3 years from date of file or from last day of filing
Collection: within 5 years from date of assessment, either by:
i.
ii.

Summary proceedings, or
Judicial proceedings

18

(b) Collection without prior assessment

Collection: No proceeding in court w/o assessment shall be begun after the expiration
of the 3 year-period from date of file or from last day of filing

o Return filed was false or fraudulent (with intent to evade tax or no return was filed after
notice)
(a) Collection with prior assessment
Assessment: any time within 10 years after date of discovery of the falsity, fraud, or
omission;
Collection: within 5 years from date of assessment, either by:

19

i.
ii.

Summary proceedings, or
Judicial proceedings

(b) Collection without prior assessment

Collection: A proceeding in court for collection (w/o assessment) at any time within
10 years after date of discovery of the falsity, fraud, or omission.

*Exception to 3 year period assessment*

20

1) If before the expiration of 3 year period, both the Commissioner and the
taxpayer have agreed in writing to it assessment after such time, assessment may be made
within the period agreed.
2) The period so agreed upon may be extended by the subsequent written
agreement before the expiration of the 5 year period following the assessment by:
i) Summary proceedings, or
ii) Judicial proceedings.
Illustration:
The income tax return of Jean for taxable year 2015 was filed on March 10, 2016.
The tax per return is Php 10,000.00. However, upon audit by the BIR, it was discovered
that the correct amount of tax payable by Jean is Php 18,000.00. An assessment for
deficiency tax was made on April 5, 2019.
In the case above, the assessment was made on time. The assessment for tax
deficiency is valid until April 15, 2019 or 3 years from the date following the deadline for
filling the return. Considering that the assessment was made on April 5, 2019, the
assessment is valid.
Suppose the assessment is made on April 20, 2019, there is no valid assessment
since it was made after the last day for making an assessment. The taxpayer can question
the legality of the assessment on the ground of prescription of assessment.
Suppose the taxpayer filed a fraudulent return and this is discovered by the BIR
on April 20, 2018. If the assessment is made on May 15, 2021, it is valid because it is
issued within 10 years after the discovery of filling a fraudulent return. Since the
fraudulent return is discovered April 20, 2019, the Commissioner has until April 20, 2029
to make a valid assessment.
Instances where the Running of Statute of Limitation shall be suspended
1) When the taxpayer requests for a reinvestigation, which is granted by the Commissioner;
2) When the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected (except if the taxpayer informs the
Commissioner of any change in address);
3) When the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property
could be located;
4) When the taxpayer is out of the Philippines

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B. Apply the remedies of the taxpayer

Assessment of the BIR of the taxpayers financial stability and performance through auditing
of records may be thoroughly and deemed accurate. Although it may possibly contain an
erroneous or mistaken process during audit due to numerous transactions and records filed by the
tax payer which in turn having an anomaly or discrepancy in the amount tax due.
Assessment is defined as the official action of an officer authorized by law in ascertaining the
amount of tax due under the law from a taxpayer. It is delivered to the taxpayer through an
Assessment Notice which is a formal demand sent to the taxpayer requiring payment within a
specified time of the tax due from him including interest and civil penalties. While an assessment
is an inherent power of the BIR to check whether the return filed has been filed correctly, there
are remedies given to the taxpayer which he may apply regarding the assessment process and the
tax paid.
Taxpayers who can avail of the tax remedies:
a. Any person adversely affected by the action taken by the Commissioner
b. The officers and directors of a defunct corporation in an assessment made against the
corporation which, if upheld, would render them personally liable as successors in
interest in the corporate property
c. In indirect taxes, the person on whom the tax is imposed and who paid it is the proper
party, even if he shifted the burden to another.
Under the National Internal Revenue Code (NIRC), remedies of the taxpayer is supplied as
follows:

Before payment of tax

1. Administrative Protest
2. Request for Reconsideration
3. Request of Reinvestigation
4. Judicial Protest (Appeal to Court of Tax Appeals)
5. Appeal to Supreme Court
After payment of tax
6. Claim for tax refund/credit

1. Administrative Protest
When: Within 30 days from date of receipt of FLD/FAN
How:
(a) Written protest; stating facts, applicable law, rules, and regulations or jurisprudence
of which his protest is based; date of the assessment notice.
(b) If only portions of FAN are disputed, must pay the deficiency tax on undisputed
portion
(c) By filing Request for Reconsideration or Request for Reinvestigation
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Procedure:
(1) Protest against pre-assessment notice (PAN) within 15 days from receipt
(2) Protest against final assessment notice (FAN) and formal letter of demand (FAN)
Pre-assessment notice shall be issued to taxpayer after the review of the Commissioner or
his duly authorized representative in determination that there exists sufficient basis to
assess the taxpayer.
A pre-assessment notice shall not be required in the following cases:
A. finding for any deficiency tax is the result of mathematical error in
computation of tax as appearing on face of return
B. a discrepancy has been determined between the tax withheld and the amount
actually remitted
C. taxpayer who opted to claim a refund or credit of excess creditable
withholding tax for at taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter/s for the succeeding taxable year/s
D. excise tax due on excisable articles have not been paid
E. article locally purchased or imported by an exempt person
FLD/FAN shall be issued calling for the payment of the taxpayers deficiency tax liability
in the either of following cases:
A. Failure to respond within 15 days from date of receipt of PAN. (default)
B. Taxpayer responds within 15-day period but disagrees with the findings of
deficiency taxes.
*both PAN and FAN are to be issued by the Commissioner or his duly authorized
representative.
*Failure to file a valid protest will render the assessment become final, executory and
demandable.
2. Request for Reconsideration
- refers to a plea for re-evaluation of an assessment on the basis of existing records
without need of additional evidence. (question of law or fact or both)
When: During filing of protest
Decision: The CIR or his duly authorized representative must act within 180 days from
filing of request of reconsideration for decision.
3. Request for Reinvestigation
- refers to a plea for reinvestigation of an assessment on the basis of newly-discovered
evidence that a taxpayer intends to present in the reinvestigation. (question of law or fact
or both)
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When: Within 60 days from date of filing of protest

Procedure: The taxpayer shall submit all relevant supportive documents in support of hi
protest within 60 days from date of filing of his letter of protest.
Decision: The CIR or his duly authorized representative must act within 180 days from
filing of request of reconsideration for decision.
Relevant supporting documents are documents necessary to support the legal and
factual bases in disputing a tax assessment as determined by the taxpayer.
*Failure to do so, assessment shall become final and BIR shall issue a Final Decision on
Disputed Assessment (FDDA).
4. Judicial Protest
- The protest or administrative appeal, as the case may be, is denied, in whole or
part, by the Commissioner
When: Within 30 days from date of receipt of denial of protest (whole or part)
How: Appeal to CTA within the 30 day period
Procedure:

If protest is denied (in whole or part) by Commissioners duly authorized

representative:
a) Appeal to the CTA within 30 days from date of receipt of the said decision
b) Elevate protest through request for reconsideration to the Commissioner
within 30 days from date of receipt of the said decision
If protest is denied (in whole or part) by the Commissioner:
a) Appeal to the CTA within 30 days from date of receipt of such decision
*A motion for reconsideration of the Commissioners denial of the protest or
administrative appeal, as the case may be, shall not toll the 30 day period to the
CTA.
If the protest is not acted upon by the Commissioners duly authorized
representative within 180 days from date of filing of protest or date of submission
of required documents:
a) Appeal to the CTA within 30 days after the expiration of the 180-day period;
or
b) Await the final decision of the Commissioners duly authorized representative
on the disputed assessment
If the protest or administrative appeal is not acted upon by the Commissioner
within 180 days from date of filing of protest:
a) Appeal to the CTA within 30 days after the expiration of the 180-day period;
or
b) Await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within 30 days after the receipt of such
decision.
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If denied by a CTA Division, appeal to CTA en banc within 15 days from date of
decision.
5. Appeal to the Supreme Court

When: Within 15 days from the receipt of decision of CTA

Any decision made by the SC shall become final, executory and demandable.
Illustration/Application:
Rujean received an assessment on October 6, 2015. She filed a request for reinvestigation
with the BIR on November 5, 2015. The request was denied and Rujean received the decision on
May 5, 2016.
Held:
Rujean received the assessment on October 6, 2015. The taxpayer is given 30 days from
receipt to protest the assessment. Therefore, the last day for filing the protest is November 5,
2015. The request for reinvestigation was, therefore, filed on time.
Rujean filed a protest on November 5, 2015. Therefore, the last day to submit supporting
documents is on January 4, 2016 or 60 days from the filing of the request.
Supposed the protest is denied and the denial was received on May 5, 2016, when is the
last day to file an appeal with the CTA? The denial of the request for reinvestigation was
received on May 5, 2016. Considering that the taxpayer is given 30 days from receipt of the
denial, the last day to file an appeal is on June 4, 2016.
Supposed Rujean submitted the supporting documents on December 1, 2015 and the BIR
failed to act on the protest until the lapse of the 180-day period. When in the last day for Rujean
to appeal to the CTA the inaction of the Commissioner?
The documents were submitted on December 1, 2015. The 180-day period will lapse on
May 30, 2016. From this date, she has 30 days to appeal the inaction of the Commissioner.
Therefore, the last day to appeal to the CTA is on June 29, 2016.

6. Claim for tax refund/credit

Where tax has been paid by the taxpayer, the remedy available to him is to refund if the
tax was (1) erroneously collected, or (2) illegally collected.
Tax refund vs Tax Credit
The former takes place when there is actually a reimbursement of the tax; while in the
latter, the Government issues a tax certificate or tax credit memo covering the amount
determined to be reimbursable, which can be applied proper verification against any sum that
may be due and collectible from the taxpayer.

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The following are procedures in the recovery taxes or penalties which have been
erroneously or illegally collected from the taxpayer:

File a written claim for refund with the CIR within 2 years after final payment of the
tax or penalty;
*submit the relevant documents within 60 days from filing of claim for refund.
File an appeal with CTA within 30 days but within the 2-year period filing from:
a) Receipt of final unfavorable decision on the claim for refund
b) Lapse of 180 days
*filing of claim of refund and appeal with CTA can be done simultaneously or one
after the other (protection of taxpayers interest)

File a petition for review with the CTA within the said 2-year period when the 2-year
period is about to prescribe and the claim for refund with the CIR has not been acted
upon.

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If the decision of the Commissioner was made after the 2-year period, he can no
longer appeal the same to the CTA.

When can there be refund or credit without written claim?

-

Where the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid.

When there will be a forfeiture?

-

Tax refund: a refund check or warrant which shall remain unclaimed or uncashed
within 5 years from the date the said warrant or check was mailed or delivered.
Tax credit: tax credit certificate issued which shall remain unutilized after 5 years
from the date of issue, shall be invalid and shall not be allowed as payment for
any internal revenue tax liabilities.

*in both cases, the amount thereof shall revert to the general fund of the Government
Instances when the 2-year period shall suspend:
1) The Commissioner led to believe the taxpayer that he would be credited for
the payment.
2) There is an agreement between the taxpayer and agent of Commissioner to
abide by the decision of the Supreme Court.
Illustration/Application:
On April 5, 2015, Taroma paid his income taxes. After a year, he realized that he had
overpaid and so he immediately filed a claim for refund with the Commissioner of Internal
Revenue.
Issue:
On March 20, 2017, he received the decision of the Commissioner denying his claim for
refund. On April 19, 2017, Taroma filed an appeal with the CTA. Is the appeal filed on time?
Held:
No, his appeal was filed beyond the 2-year period. He should have filed his appeal within
30 days from receipt of the decision and within 2 years from the date of final payment. Hence,
the deadline for the filing of the appeal is on April 5, 2017.

C. Explain the expanded jurisdiction of the Court of Tax Appeals

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R.A. No. 9282

AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA),
ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL
JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE
CERTAIN SECTIONS OR REPUBLIC ACT NO. 1125, AS AMENDED, OTHERWISE
KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER
PURPOSES.
Creation of CTA
There is hereby created a Court of Tax Appeals (CTA) which shall be the same
level as the Court of Appeals possessing all the inherent powers of a Court of Justice.
(Sec.1, RA No. 1125, as amended by RA. No.9282)
Composition of CTA
The CTA shall consist of:
-

1 Presiding Judge
8 Associate Justices

(Sec.2, RA No.1125, as amended by RA No. 9503)

Sitting En Banc or Division
The CTA may sit en banc or in 3 Divisions, each Division consisting of 3 Justices.
Quorum
A quorum constitutes:
-

5 Justices for sessions en banc

2 Justices for session of a Division

Rendition of a Decision or a Resolution

The affirmative votes of 5 members of the Court en banc shall be necessary to
reverse a decision of a Division but a simple majority of the Justices present necessary to
promulgate a resolution or decision in all cases or 2 members of a Division shall be
necessary for the rendition of a decision or resolution in the Division Level.
Jurisdiction of the CTA (Sec.7, RA No. 1125, as amended)
The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal;
(b) Jurisdiction over cases involving criminal offenses;
(c) Jurisdiction over tax collection cases

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Exclusive appellate Jurisdiction

The CTA shall exercise exclusive appellate jurisdiction to review by appeal:
(1) Decision of the CIR in cases involving disputed assessments, refunds of internal
revenues, fees or other charges, penalties in relation thereto, or other matters arising
under NIRC or other laws administered by the BIR;
(2) Inaction by the CIR in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under NIRC or other laws administered by the BIR where the NIRC provides
a specific period for action, in which case the inaction shall be deemed a denial;
(3) Decisions, order, or resolutions of the Regional Trial Court in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;
(4) Decisions of the Commissioner of Customs in cases involving liability for custom
duties, fees, or orher money charges, seizure, detention or release of property
affected, fines, forfeitures or other penalties, in relation thereto, or other matter ariing
under the Customs;
(5) Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property
originally decided by the provincial or city board of assessment appeals;
(6) Decisions of the Secretary of Finance on customs cases elevated to him automatically
for review from decisions of the Commissioner of Customs which are adverse to the
Government under Sec.2315 of the Tariff and Customs Code;
(7) Decisions of the Secretary of Trade and Industry in the case of non-agricultural
product, commodity or article, and the Secretary of Agriculture in the case of
agriculture products, commodity or article, involving dumping and countervailing
duties under Sec. 301 and 301, respectively, of the Tariff and Customs Code, and
safeguard measures under RA No. 8800, where either party may appeal the decision
to impose or not to impose said duties.
Jurisdiction over cases involving criminal offenses
The CTA shall exercise jurisdiction over cases involving criminal offenses:
(1) Exclusive original jurisdiction over all criminal offenses arising from violations of the
NIRC or Tariff and Customs Code and other laws administered by the BIR or the
BoC: Provided, however, that offenses or felonies where the principal amount of
taxes and fees, exclusive of charges of charges and penalties, claimed is less than Php
1.000.000 or where there is no specified amount claimed shall be tried by the regular
court and the jurisdiction of the CTA shall be appellate.
(2) Exclusive appellate jurisdiction in criminal offenses:
(a) Over appeals from judgments, resolutions or orders of the Regional Trial Court in
tax cases originally decided by them, in their respective territorial jurisdictions;
(b) Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax case originally
decided by the Metropolitan Circuit Trial Courts in their respective jurisdictions.

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Jurisdiction over tax collection cases

The CTA shall exercise jurisdiction over tax collection cases:
(1) Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties; Provided, however, that collection
cases where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than Php 1,000,000 shall be tried by the proper Municipal
Court, Metropolitan trial Court and Regional Court.
(2) Exclusive appellate jurisdiction in tax collection cases:
(a) Over appeals from judgments, resolutions or orders of the Regional Trial Court in
tax collection cases originally decided by them, in their respective territorial
jurisdictions;
(b) Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax collection cases
decided by the Metropolitan Circuit Trial Courts in their respective jurisdictions.

Sources:

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Ballada, Susan, CPA. Domdane Publishers. Transfer and Business Taxation 2014 Issue 14th
Edition. 2014. Pp.343-352.
Reyes, Virgilio D. Philippine Business and Transfer Taxes. 2013. Plates 18-21.
Tamayo, Asser. Tax Remedies. ReSa Handouts. 2015.
Tax Remedies: Remedies of the Taxpayer. http://scire-licet.blogspot.com/2010/03/tax-remediesremedies-of-taxpayer.html. 2010.

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