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PERIOD TO ACT UPON A PROTEST; DENIAL

ALLIED BANKING v. CIR; Feb. 5, 2010


DECISION

DEL CASTILLO, J.:


The key to effective communication is clarity.
The Commissioner of Internal Revenue (CIR) as well as his duly authorized representative
must indicate clearly and unequivocally to the taxpayer whether an action constitutes a final
determination on a disputed assessment.[1] Words must be carefully chosen in order to avoid any
confusion that could adversely affect the rights and interest of the taxpayer.
Assailed in this Petition for Review on Certiorari[2] under Section 12 of Republic Act (RA) No.
[3]
9282, in relation to Rule 45 of the Rules of Court, are the August 23, 2006 Decision [4] of the Court
of Tax Appeals (CTA) and its October 17, 2006 Resolution[5] denying petitioners Motion for
Reconsideration.
Factual Antecedents
On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment
Notice (PAN) to petitioner Allied Banking Corporation for deficiency Documentary Stamp Tax (DST) in
the amount of P12,050,595.60 and Gross Receipts Tax (GRT) in the amount of P38,995,296.76 on
industry issue for the taxable year 2001.[6]Petitioner received the PAN on May 18, 2004 and filed a
protest against it on May 27, 2004.[7]
On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to
petitioner, which partly reads as follows:[8]
It is requested that the above deficiency tax be paid immediately upon receipt
hereof, inclusive of penalties incident to delinquency. This is our final decision based
on investigation. If you disagree, you may appeal the final decision within thirty (30)
days from receipt hereof, otherwise said deficiency tax assessment shall become
final, executory and demandable.
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30, 2004.[9]
Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for Review [10] with the CTA which was
raffled to its First Division and docketed as CTA Case No. 7062.[11]
On December 7, 2004, respondent CIR filed his Answer. [12] On July 28, 2005, he filed a
Motion to Dismiss[13] on the ground that petitioner failed to file an administrative protest on the
Formal Letter of Demand with Assessment Notices. Petitioner opposed the Motion to Dismiss
on August 18, 2005.[14]
On October 12, 2005, the First Division of the CTA rendered a Resolution[15] granting
respondents Motion to Dismiss. It ruled:

Clearly, it is neither the assessment nor the formal demand letter itself that is
appealable to this Court. It is the decision of the Commissioner of Internal Revenue
on the disputed assessment that can be appealed to this Court (Commissioner of
Internal Revenue vs. Villa, 22 SCRA 3). As correctly pointed out by respondent, a
disputed assessment is one wherein the taxpayer or his duly authorized
representative filed an administrative protest against the formal letter of demand
and assessment notice within thirty (30) days from date [of] receipt thereof. In this
case, petitioner failed to file an administrative protest on the formal letter of demand
with the corresponding assessment notices. Hence, the assessments did not become
disputed assessments as subject to the Courts review under Republic Act No. 9282.
(See also Republic v. Liam Tian Teng Sons & Co., Inc., 16 SCRA 584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review
is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.[16]
Aggrieved, petitioner moved for reconsideration but the motion was denied by the First
Division in its Resolution dated February 1, 2006.[17]
Proceedings before the CTA En Banc
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.[18] The case
was docketed as CTA EB No. 167.
Finding no reversible error in the Resolutions dated October 12, 2005 and February 1,
2006 of the CTA First Division, the CTA En Banc denied the Petition for Review[19]as well as
petitioners Motion for Reconsideration.[20]
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an
administrative protest is an integral part of the remedies given to a taxpayer in challenging the
legality or validity of an assessment. According to the CTA En Banc, although there are exceptions
to the doctrine of exhaustion of administrative remedies, the instant case does not fall in any of the
exceptions.
Issue
Hence, the present recourse, where petitioner raises the lone issue of whether the Formal
Letter of Demand dated July 16, 2004 can be construed as a final decision of the CIR appealable to
the CTA under RA 9282.
Our Ruling
The petition is meritorious.
Section 7 of RA 9282 expressly provides that
the CTA exercises exclusive appellate
jurisdiction to review by appeal decisions of
the CIR in cases involving disputed
assessments
The CTA, being a court of special jurisdiction, can take cognizance only of
matters that are clearly within its jurisdiction.[21] Section 7 of RA 9282 provides:

Sec. 7. Jurisdiction. The CTA shall exercise:


(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue
in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal
Revenue;
(2) Inaction by the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising
under the National Internal Revenue Code or other
laws administered by the Bureau of Internal Revenue,
where the National Internal Revenue Code provides a
specific period of action, in which case the inaction
shall be deemed a denial; (Emphasis supplied)
xxxx
The word decisions in the above quoted provision of RA 9282 has been interpreted to mean
the decisions of the CIR on the protest of the taxpayer against the assessments. [22] Corollary thereto,
Section 228 of the National Internal Revenue Code (NIRC) provides for the procedure for protesting
an assessment. It states:
SECTION 228. Protesting of Assessment. When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he shall first
notify the taxpayer of his findings: Provided, however, That a preassessment notice
shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error
in the computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and
the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have carried over
and automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such
as, but not limited to, vehicles, capital equipment, machineries and spare parts, has
been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which
the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to respond,

the Commissioner or his duly authorized representative shall issue an assessment


based on his findings.
Such assessment may be protested administratively by filing a request for
reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing rules
and regulations. Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the assessment shall
become final.
If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision, or from the lapse of the one
hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response
thereto, the BIR issued a Formal Letter of Demand with Assessment Notices.Pursuant to Section 228
of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an
administrative protest within 30 days from receipt thereof.Petitioner, however, did not protest the
final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply
the rules, the dismissal of the Petition for Review by the CTA was proper.
The case is an exception to the
rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads
us to agree with petitioner that the instant case is an exception to the rule on exhaustion of
administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission,[23] the respondent contended
that before filing a petition with the court, petitioner should have first exhausted all administrative
remedies by appealing to the Office of the President. However, we ruled that respondent was
estopped from invoking the rule on exhaustion of administrative remedies considering that in its
Resolution, it said, The opinions promulgated by the Secretary of Justice are advisory in nature,
which may either be accepted or ignored by the office seeking the opinion, and any aggrieved party
has the court for recourse. The statement of the respondent in said case led the petitioner to
conclude that only a final judicial ruling in her favor would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition
for Review was premature because petitioner failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1.

That the said assessment has already prescribed in accordance


with the provisions of Section 203 of the Tax Code.

2.

That since the exemption of FCDUs from all taxes found in the
Old Tax Code has been deleted, the wording of Section 28(A)(7)(b)
discloses that there are no other taxes imposable upon FCDUs aside from
the 10% Final Income Tax.

Contrary to your allegation, the assessments covering GRT and DST for taxable year
2001 has not prescribed for [sic] simply because no returns were filed, thus, the
three year prescriptive period has not lapsed.
With the implementation of the CTRP, the phrase exempt from all taxes was
deleted. Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax
Code. Accordingly, you were assessed for deficiency gross receipts tax on onshore
income from foreign currency transactions in accordance with the rates provided
under Section 121 of the said Tax Code. Likewise, deficiency documentary stamp
taxes was [sic] also assessed on Loan Agreements, Bills Purchased, Certificate of
Deposits and related transactions pursuant to Sections 180 and 181 of NIRC, as
amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision
of Section 248(A) and 249(b), respectively, of the National Internal Revenue Code, as
amended.
It is requested that the above deficiency tax be paid immediately upon receipt
hereof, inclusive of penalties incident to delinquency. This is our final decision
based on investigation. If you disagree, you may appeal this final decision
within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable.[24](Emphasis
supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision
on the matter and that the remedy of petitioner is to appeal the final decision within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue,[25] we considered the
language used and the tenor of the letter sent to the taxpayer as the final decision of the CIR.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of
Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest
against the Formal Letter of Demand with Assessment Notices since the language used and the
tenor of the demand letter indicate that it is the final decision of the respondent on the matter. We
have time and again reminded the CIR to indicate, in a clear and unequivocal language, whether his
action on a disputed assessment constitutes his final determination thereon in order for the taxpayer
concerned to determine when his or her right to appeal to the tax court accrues. [26] Viewed in the
light of the foregoing, respondent is now estopped from claiming that he did not intend the Formal
Letter of Demand with Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment
Notices, respondent used the word appeal instead of protest, reinvestigation, or reconsideration.
Although there was no direct reference for petitioner to bring the matter directly to the CTA, it
cannot be denied that the word appeal under prevailing tax laws refers to the filing of a Petition for
Review with the CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms
protest, reinvestigation and reconsideration refer to the administrative remedies a taxpayer may
take before the CIR, while the term appeal refers to the remedy available to the taxpayer before the
CTA. Section 9 of RA 9282, amending Section 11 of RA 1125, [27] likewise uses the term appeal when
referring to the action a taxpayer must take when adversely affected by a decision, ruling, or
inaction of the CIR. As we see it then, petitioner in appealing the Formal Letter of Demand with
Assessment Notices to the CTA merely took the cue from respondent. Besides, any doubt in the
interpretation or use of the word appeal in the Formal Letter of Demand with Assessment Notices
should be resolved in favor of petitioner, and not the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as
implemented by Section 3 of BIR Revenue Regulations No. 12-99.[28] It is the Formal Letter of

Demand and Assessment Notice that must be administratively protested or disputed within 30 days,
and not the PAN. Neither are we deviating from our pronouncement in St. Stephens Chinese Girls
School v. Collector of Internal Revenue,[29] that the counting of the 30 days within which to institute
an appeal in the CTA commences from the date of receipt of the decision of the CIR on the disputed
assessment, not from the date the assessment was issued.
What we are saying in this particular case is that, the Formal Letter of Demand with
Assessment Notices which was not administratively protested by the petitioner can be considered a
final decision of the CIR appealable to the CTA because the words used, specifically the words final
decision and appeal, taken together led petitioner to believe that the Formal Letter of Demand with
Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the
available remedy was to appeal the same to the CTA.
We note, however, that during the pendency of the instant case, petitioner availed of the
provisions of Revenue Regulations No. 30-2002 and its implementing Revenue Memorandum Order
by submitting an offer of compromise for the settlement of the GRT, DST and VAT for the period
1998-2003, as evidenced by a Certificate of Availment dated November 21, 2007.[30] Accordingly,
there is no reason to reinstate the Petition for Review in CTA Case No. 7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision
and the October 17, 2006 Resolution of the Court of Tax Appeals areREVERSED and SET
ASIDE. The Petition for Review in CTA Case No. 7062 is hereby DISMISSED based solely on the
Bureau of Internal Revenues acceptance of petitioners offer of compromise for the settlement of the
gross receipts tax, documentary stamp tax and value added tax, for the years 1998-2003.
Oceanic Wireless v. CIR; December 9, 2005
DECISION
AZCUNA, J.:
This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision of the
Court of Appeals dated October 31, 2000, and its Resolution dated May 3, 2001, in Oceanic
Wireless Network, Inc. v. Commissioner of Internal Revenue docketed as CA-G.R. SP No.
35581, upholding the Decision of the Court of Tax Appeals dismissing the Petition for Review
in CTA Case No. 4668 for lack of jurisdiction.
Petitioner Oceanic Wireless Network, Inc. challenges the authority of the Chief of the
Accounts Receivable and Billing Division of the Bureau of Internal Revenue (BIR) National
Office to decide and/or act with finality on behalf of the Commissioner of Internal Revenue
(CIR) on protests against disputed tax deficiency assessments.
The facts of the case are as follows:
On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency
tax assessments for the taxable year 1984 in the total amount of P8,644,998.71, broken
down as follows:
Kind of Tax Assessment No. Amount
Deficiency Income Tax FAR-4-1984-88-001130 P8,381,354.00
Penalties for late payment FAR-4-1984-88-001131 3,000.00

of income and failure to


file quarterly returns
Deficiency Contractors FAR-4-1984-88-001132 29,849.06
Tax
Deficiency Fixed Tax FAR-4--88-001133 12,083.65
Deficiency Franchise Tax FAR-484-88-001134 ___227,712.00
T o t a l -------- P8,644,998.71
Petitioner filed its protest against the tax assessments and requested a reconsideration or
cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988.
Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and
Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying
petitioners request for reinvestigation in a letter [1] dated January 24, 1991, thus:
Note: Your request for re-investigation has been denied for failure to submit
the necessary supporting papers as per endorsement letter from the office of
the Special Operation Service dated 12-12-90.
Said letter likewise requested petitioner to pay the total amount of P8,644,998.71 within ten
(10) days from receipt thereof, otherwise the case shall be referred to the Collection
Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and
levy without further notice.
Upon petitioners failure to pay the subject tax assessments within the prescribed period, the
Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue,
issued the corresponding warrants of distraint and/or levy and garnishment. These were
served on petitioner on October 10, 1991 and October 17, 1991, respectively. [2]
On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax Appeals
(CTA) to contest the issuance of the warrants to enforce the collection of the tax
assessments. This was docketed as CTA Case No. 4668.
The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16,
1994, declaring that said petition was filed beyond the thirty (30)-day period reckoned from
the time when the demand letter of January 24, 1991 by the Chief of the BIR Accounts
Receivable and Billing Division was presumably received by petitioner, i.e., within a
reasonable time from said date in the regular course of mail pursuant to Section 2(v) of Rule
131 of the Rules of Court.[3]
The decision cited Surigao Electric Co., Inc. v. Court of Tax Appeals [4] wherein
Court considered a mere demand letter sent to the taxpayer after his protest of
assessment notice as the final decision of the Commissioner of Internal Revenue on
protest. Hence, the filing of the petition on November 8, 1991 was held clearly beyond
reglementary period.[5]

this
the
the
the

The court a quo likewise stated that the finality of the denial of the protest by
petitioner against the tax deficiency assessments was bolstered by the subsequent issuance
of the warrants of distraint and/or levy and garnishment to enforce the collection of the
deficiency taxes. The issuance was not barred by prescription because the mere filing of the
letter of protest by petitioner which was given due course by the Bureau of Internal Revenue
suspended the running of the prescription period as expressly provided under the then
Section 224 of the Tax Code:

SEC. 224. Suspension


of
Running
of
the
Statute
of
Limitations. The running of the Statute of Limitations provided in Section 203
and 223 on the making of assessment and the beginning of distraint or levy or
a proceeding in court for collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner is prohibited from
making the assessment or beginning distraint or levy or a proceeding in court
and for sixty (60) days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return files upon which a
tax is being assessed or collected: Provided, That if the taxpayer inform the
Commissioner of any change of address, the running of the statute of
limitations will not be suspended; when the warrant of distraint and levy is
duly served upon the taxpayer, his authorized representative, or a member of
his household with sufficient discretion, and no property could located; and
when the taxpayer is out of the Philippines. [6] (Underscoring supplied.)
Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24,
1991 cannot be considered as the final decision of the Commissioner of Internal Revenue on
its protest because the same was signed by a mere subordinate and not by the
Commissioner himself.[7]
With the denial of its motion for reconsideration, petitioner consequently filed a Petition for
Review with the Court of Appeals contending that there was no final decision to speak of
because the Commissioner had yet to make a personal determination as regards the merits
of petitioners case.[8]
The Court of Appeals denied the petition in a decision dated October 31, 2000, the
dispositive portion of which reads:
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Petitioners Motion for Reconsideration was likewise denied in a resolution dated May 3,
2001.
Hence, this petition with the following assignment of errors: [9]
I
THE HONORABLE RESPONDENT CA ERRED IN FINDING THAT THE
DEMAND LETTER ISSUED BY THE (THEN) ACCOUNTS RECEIVABLE/BILLING
DIVISION OF THE BIR NATIONAL OFFICE WAS THE FINAL DECISION OF THE
RESPONDENT CIR ON THE DISPUTED ASSESSMENTS, AND HENCE
CONSTITUTED THE DECISION APPEALABLE TO THE HONORABLE RESPONDENT
CTA; AND,
II
THE HONORABLE RESPONDENT CA ERRED IN DECLARING THAT THE
DENIAL OF THE PROTEST OF THE SUBJECT ALLEGED DEFICIENCY TAX
ASSESSMENTS HAD LONG BECOME FINAL AND EXECUTORY FOR FAILURE OF
THE PETITIONER TO INSTITUTE THE APPEAL FROM THE DEMAND LETTER OF
THE CHIEF OF THE ACCOUNTS RECEIVABLE/BILLING DIVISION, BIR NATIONAL

OFFICE, TO THE HONORABLE RESPONDENT CTA, WITHIN THIRTY (30) DAYS


FROM RECEIPT THEREOF.
Thus, the main issue is whether or not a demand letter for tax deficiency assessments
issued and signed by a subordinate officer who was acting in behalf of the Commissioner of
Internal Revenue, is deemed final and executory and subject to an appeal to the Court of Tax
Appeals.
We rule in the affirmative.
A demand letter for payment of delinquent taxes may be considered a decision on a
disputed or protested assessment. The determination on whether or not a demand letter is
final is conditioned upon the language used or the tenor of the letter being sent to the
taxpayer.
We laid down the rule that the Commissioner of Internal Revenue should always
indicate to the taxpayer in clear and unequivocal language what constitutes his final
determination of the disputed assessment, thus:
. . . we deem it appropriate to state that the Commissioner of Internal
Revenue should always indicate to the taxpayer in clear and unequivocal
language whenever his action on an assessment questioned by a taxpayer
constitutes his final determination on the disputed assessment, as
contemplated by Sections 7 and 11 of Republic Act No. 1125, as amended. On
the basis of his statement indubitably showing that the Commissioners
communicated action is his final decision on the contested assessment, the
aggrieved taxpayer would then be able to take recourse to the tax court at the
opportune time. Without needless difficulty, the taxpayer would be able to
determine when his right to appeal to the tax court accrues.
The rule of conduct would also obviate all desire and opportunity on the part
of the taxpayer to continually delay the finality of the assessment and,
consequently, the collection of the amount demanded as taxes by repeated
requests for recomputation and reconsideration. On the part of the
Commissioner, this would encourage his office to conduct a careful and
thorough study of every questioned assessment and render a correct and
definite decision thereon in the first instance. This would also deter the
Commissioner from unfairly making the taxpayer grope in the dark and
speculate as to which action constitutes the decision appealable to the tax
court. Of greater import, this rule of conduct would meet a pressing need for
fair play, regularity, and orderliness in administrative action.[10]
In this case, the letter of demand dated January 24, 1991, unquestionably constitutes
the final action taken by the Bureau of Internal Revenue on petitioners request for
reconsideration when it reiterated the tax deficiency assessments due from petitioner, and
requested its payment. Failure to do so would result in the issuance of a warrant of distraint
and levy to enforce its collection without further notice. [11] In addition, the letter contained a
notation indicating that petitioners request for reconsideration had been denied for lack of
supporting documents.
The above conclusion finds support in Commissioner of Internal Revenue v. Ayala
Securities Corporation,[12] where we held:
The letter of February 18, 1963 (Exh. G), in the view of the Court, is
tantamount
to
a
denial
of
the
reconsideration
or [respondent

corporations]protest o[f] the assessment made by the petitioner, considering


that the said letter [was] in itself a reiteration of the demand by the Bureau of
Internal Revenue for the settlement of the assessment already made, and for
the immediate payment of the sum of P758,687.04 in spite of the vehement
protest of the respondent corporation on April 21, 1961. This certainly is a
clear indication of the firm stand of petitioner against the reconsideration of
the disputed assessmentThis being so, the said letter amount[ed] to a
decision on a disputed or protested assessment, and, there, the court a quo
did not err in taking cognizance of this case.
Similarly, in Surigao Electric Co., Inc v. Court of Tax Appeals, [13] and in CIR v. Union Shipping
Corporation,[14] we held:
. . . In this letter, the commissioner not only in effect demanded that
the petitioner pay the amount of P11,533.53 but also gave warning that in the
event it failed to pay, the said commissioner would be constrained to enforce
the collection thereof by means of the remedies provided by law. The tenor of
the letter, specifically the statement regarding the resort to legal remedies,
unmistakably indicate[d] the final nature of the determination made by the
commissioner of the petitioners deficiency franchise tax liability.
The demand letter received by petitioner verily signified a character of finality. Therefore, it
was tantamount to a rejection of the request for reconsideration. As correctly held by the
Court of Tax Appeals, while the denial of the protest was in the form of a demand letter, the
notation in the said letter making reference to the protest filed by petitioner clearly shows
the intention of the respondent to make it as [his] final decision. [15]
This now brings us to the crux of the matter as to whether said demand letter indeed
attained finality despite the fact that it was issued and signed by the Chief of the Accounts
Receivable and Billing Division instead of the BIR Commissioner.
The general rule is that the Commissioner of Internal Revenue may delegate any
power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot,
however, delegate the four powers granted to him under the National Internal Revenue Code
(NIRC) enumerated in Section 7.
As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR
Commissioner to delegate the powers vested in him under the pertinent provisions of the
Code to any subordinate official with the rank equivalent to a division chief or higher, except
the following:
(a)

The power to recommend the promulgation of rules and


regulations by the Secretary of Finance;

(b)

The power to issue rulings of first impression or to reverse, revoke


or modify any existing ruling of the Bureau;

(c) The power to compromise or abate under Section 204(A) and (B) of this
Code, any tax deficiency: Provided, however, that assessments issued
by the Regional Offices involving basic deficiency taxes of five hundred
thousand pesos (P500,000) or less, and minor criminal violations as
may be determined by rules and regulations to be promulgated by the
Secretary of Finance, upon the recommendation of the Commissioner,
discovered by regional and district officials, may be compromised by a
regional evaluation board which shall be composed of the Regional

Director as Chairman, the Assistant Regional Director, heads of the


Legal, Assessment and Collection Divisions and the Revenue District
Officer having jurisdiction over the taxpayer, as members; and
(d)

The power to assign or reassign internal revenue officers to


establishments where articles subject to excise tax are produced or
kept.

It is clear from the above provision that the act of issuance of the demand letter by
the Chief of the Accounts Receivable and Billing Division does not fall under any of the
exceptions that have been mentioned as non-delegable.
Section 6 of the Code further provides:
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe
Additional Requirements for Tax Administration and Enforcement.
(A)
Examination of Returns and Determination of Tax
Due. - After a return has been filed as required under the provisions of this
Code, theCommissioner or his duly authorized representative may
authorize the examination of any taxpayer and the assessment of the correct
amount of tax; Provided, however, That failure to file a return shall not prevent
the Commissioner from authorizing the examination of any taxpayer.
The tax or any deficiency tax so assessed shall be paid upon notice
and demand from the Commissioner or from his duly authorized
representative. . . .(Emphasis supplied)
Thus, the authority to make tax assessments may be delegated to subordinate officers. Said
assessment has the same force and effect as that issued by the Commissioner himself, if not
reviewed or revised by the latter such as in this case.[16]
A request for reconsideration must be made within thirty (30) days from the
taxpayers receipt of the tax deficiency assessment, otherwise, the decision becomes final,
unappealable and therefore, demandable. A tax assessment that has become final,
executory and enforceable for failure of the taxpayer to assail the same as provided in
Section 228 can no longer be contested, thus:
SEC. 228. Protesting of Assessment. When the Commissioner or his
duly authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findingsSuch assessment may be
protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such
form and manner as may be prescribed by implementing rules and
regulations. Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is not acted upon within one
hundred (180) days from submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the Court of Tax Appeals
within thirty (30) days from receipt of the said decision, or from the lapse of
the one hundred eighty (180) - day period; otherwise, the decision shall
become final, executory and demandable.

Here, petitioner failed to avail of its right to bring the matter before the Court of Tax
Appeals within the reglementary period upon the receipt of the demand letter reiterating the
assessed delinquent taxes and denying its request for reconsideration which constituted the
final determination by the Bureau of Internal Revenue on petitioners protest. Being a final
disposition by said agency, the same would have been a proper subject for appeal to the
Court of Tax Appeals.
The rule is that for the Court of Tax Appeals to acquire jurisdiction, an assessment
must first be disputed by the taxpayer and ruled upon by the Commissioner of Internal
Revenue to warrant a decision from which a petition for review may be taken to the Court of
Tax Appeals. Where an adverse ruling has been rendered by the Commissioner of Internal
Revenue with reference to a disputed assessment or a claim for refund or credit, the
taxpayer may appeal the same within thirty (30) days after receipt thereof. [17]
We agree with the factual findings of the Court of Tax Appeals that the demand letter
may be presumed to have been duly directed, mailed and was received by petitioner in the
regular course of the mail in the absence of evidence to the contrary. This is in accordance
with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the period to appeal
has commenced to run from the time the letter of demand was presumably received by
petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to
appeal the adverse decision on the request for reconsideration had already lapsed when the
petition was filed with the Court of Tax Appeals only on November 8, 1991. Hence, the Court
of Tax Appeals properly dismissed the petition as the tax delinquency assessment had long
become final and executory.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated October 31,
2000 and its Resolution dated May 3, 2001 in CA-G.R. SP No. 35581 are hereby AFFIRMED.
The petition is accordingly DENIED for lack of merit.

CIR v. Isabela Cultural Corporation; July 11, 2001

DECISION
PANGANIBAN, J.:
A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer
the immediate payment of a tax deficiency assessment previously made, is tantamount to a
denial of the taxpayers request for reconsideration. Such letter amounts to a final decision
on a disputed assessment and is thus appealable to the Court of Tax Appeals (CTA).
The Case
Before this Court is a Petition for Review on Certiorari[1] pursuant to Rule 45 of the Rules
of Court, seeking to set aside the August 19, 1998 Decision [2] of the Court of Appeals[3] (CA)
in CA-GR SP No. 46383 and ultimately to affirm the dismissal of CTA Case No. 5211. The
dispositive portion of the assailed Decision reads as follows:
WHEREFORE, the assailed decision is REVERSED and SET ASIDE. Accordingly, judgment is
hereby rendered REMANDING the case to the CTA for proper disposition. [4]
The Facts
The facts are undisputed. The Court of Appeals quoted the summary of the CTA as
follows:
As succinctly summarized by the Court of Tax appeals (CTA for brevity), the antecedent facts
are as follows:
In an investigation conducted on the 1986 books of account of [respondent, petitioner] had
the preliminary [finding] that [respondent] incurred a total income tax deficiency
of P9,985,392.15, inclusive of increments. Upon protest by [respondents] counsel, the said
preliminary assessment was reduced to the amount of P325,869.44, a breakdown of which
follows:
Deficiency Income Tax P321,022.68
Deficiency Expanded
Withholding Tax 4,846.76
___________

Total P325,869.44
==========
(pp. 187-189, BIR records)
On February 23, 1990, [respondent] received from [petitioner] an assessment letter, dated
February 9, 1990, demanding payment of the amounts of P333,196.86 and P4,897.79 as
deficiency income tax and expanded withholding tax inclusive of surcharge and interest,
respectively, for the taxable period from January 1, 1986 to December 31, 1986. (pp. 204
and 205, BIR rec.)
In a letter, dated March 22, 1990, filed with the [petitioners] office on March 23, 1990 (pp.
296-311, BIR rec.), [respondent] requested x x x a reconsideration of the subject
assessment.
Supplemental to its protest was a letter, dated April 2, 1990, filed with the [petitioners]
office on April 18, 1990 (pp. 224 & 225, BIR rec.), to which x x x were attached certain
documents supportive of its protest, as well as a Waiver of Statute of Limitation, dated April
17, 1990, where it was indicated that [petitioner] would only have until April 5, 1991 within
which to asses and collect the taxes that may be found due from [respondent] after the reinvestigation.
On February 9, 1995, [respondent] received from [petitioner] a Final Notice Before Seizure,
dated December 22, 1994 (p. 340, BIR rec.). In said letter, [petitioner] demanded payment
of the subject assessment within ten (10) days from receipt thereof. Otherwise, failure on its
part would constrain [petitioner] to collect the subject assessment through summary
remedies.
[Respondent] considered said final notice of seizure as [petitioners] final decision. Hence,
the instant petition for review filed with this Court on March 9, 1995.
The CTA having rendered judgment dismissing the petition, [respondent] filed the instant
petition anchored on the argument that [petitioners] issuance of the Final Notice Before
Seizure constitutes [its] decision on [respondents] request for reinvestigation, which the
[respondent] may appeal to the CTA.[5]
Ruling of the Court of Appeals
In its Decision, the Court of Appeals reversed the Court of Tax Appeals. The CA
considered the final notice sent by petitioner as the latters decision, which was appealable
to the CTA. The appellate court reasoned that the final Notice before seizure had effectively
denied petitioners request for a reconsideration of the commissioners assessment. The CA
relied on the long-settled tax jurisprudence that a demand letter reiterating payment of
delinquent taxes amounted to a decision on a disputed assessment.
Hence, this recourse.[6]

Issues
In his Memorandum,[7] petitioner presents for this Courts consideration a solitary issue:
Whether or not the Final Notice Before Seizure dated February 9, 1995 signed by Acting
Chief Revenue Collection Officer Milagros Acevedo against ICC constitutes the final decision
of the CIR appealable to the CTA.[8]
The Courts Ruling
The Petition is not meritorious.
Sole Issue: The Nature of the Final Notice Before Seizure
The Final Notice Before Seizure sent by the Bureau of Internal Revenue (BIR) to
respondent reads as follows:
On Feb.9, 1990, [this] Office sent you a letter requesting you to settle the above-captioned
assessment. To date, however, despite the lapse of a considerable length of time, we have
not been honored with a reply from you.
In this connection, we are giving you this LAST OPPORTUNITY to settle the adverted
assessment within ten (10) days after receipt hereof. Should you again fail, and refuse to
pay, this Office will be constrained to enforce its collection by summary remedies of Warrant
of Levy of Road Property, Distraint of Personal Property or Warrant of Garnishment, and/or
simultaneous court action.
Please give this matter your preferential attention.
Very truly yours,
ISIDRO B. TECSON, JR.
Revenue District Officer
By:
(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection Officer[9]
Petitioner maintains that this Final Notice was a mere reiteration of the delinquent
taxpayers obligation to pay the taxes due. It was supposedly a mere demand that should not
have been mistaken for a decision on a protested assessment. Such decision, the

commissioner contends, must unequivocably indicate that it is the resolution of the


taxpayers request for reconsideration and must likewise state the reason therefor.
Respondent, on the other hand, points out that the Final Notice Before Seizure should be
considered as a denial of its request for reconsideration of the disputed assessment. The
Notice should be deemed as petitioners last act, since failure to comply with it would lead to
the distraint and levy of respondents properties, as indicated therein.
We agree with respondent. In the normal course, the revenue district officer sends the
taxpayer a notice of delinquent taxes, indicating the period covered, the amount due
including interest, and the reason for the delinquency. If the taxpayer disagrees with or
wishes to protest the assessment, it sends a letter to the BIR indicating its protest, stating
the reasons therefor, and submitting such proof as may be necessary. That letter is
considered as the taxpayers request for reconsideration of the delinquent assessment. After
the request is filed and received by the BIR, the assessment becomes a disputed
assessment on which it must render a decision. That decision is appealable to the Court of
Tax Appeals for review.
Prior to the decision on a disputed assessment, there may still be exchanges between
the commissioner of internal revenue (CIR) and the taxpayer. The former may ask
clarificatory questions or require the latter to submit additional evidence. However, the CIRs
position regarding the disputed assessment must be indicated in the final decision. It is this
decision that is properly appealable to the CTA for review.
Indisputably, respondent received an assessment letter dated February 9, 1990, stating
that it had delinquent taxes due; and it subsequently filed its motion for reconsideration on
March 23, 1990. In support of its request for reconsideration, it sent to the CIR additional
documents on April 18, 1990. The next communication respondent received was already the
Final Notice Before Seizure dated November 10, 1994.
In the light of the above facts, the Final Notice Before Seizure cannot but be considered
as the commissioners decision disposing of the request for reconsideration filed by
respondent, who received no other response to its request. Not only was the Notice the only
response received; its content and tenor supported the theory that it was the CIRs final act
regarding the request for reconsideration. The very title expressly indicated that it was
a final notice prior to seizure of property. The letter itself clearly stated that respondent was
being given this LAST OPPORTUNITY to pay; otherwise, its properties would be subjected to
distraint and levy. How then could it have been made to believe that its request for
reconsideration was still pending determination, despite the actual threat of seizure of its
properties?
Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent
taxpayer may nevertheless directly appeal a disputed assessment, if its request for
reconsideration remains unacted upon 180 days after submission thereof. We quote:
Sec. 228. Protesting an Assessment. x x x

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall
be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or
his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and
manner as may be prescribed by implementing rules and regulations. Within sixty (60) days
from filing of the protest, all relevant supporting documents shall have become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision
or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said
decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the
decision shall become final, executory and demandable.[10]
In this case, the said period of 180 days had already lapsed when respondent filed its
request for reconsideration on March 23, 1990, without any action on the part of the CIR.
Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes
may be considered a decision on a disputed or protested assessment. In Commissioner of
Internal Revenue v. Ayala Securities Corporation, this Court held:
The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a denial
of the reconsideration or [respondent corporations] x x x protest o[f] the assessment made
by the petitioner, considering that the said letter [was] in itself a reiteration of the demand
by the Bureau of Internal Revenue for the settlement of the assessment already made, and
for the immediate payment of the sum of P758,687.04 in spite of the vehement protest of
the respondent corporation on April 21, 1961. This certainly is a clear indication of the firm
stand of petitioner against the reconsideration of the disputed assessment, in view of the
continued refusal of the respondent corporation to execute the waiver of the period of
limitation upon the assessment in question.
This being so, the said letter amount[ed] to a decision on a disputed or protested
assessment and, there, the court a quo did not err in taking cognizance of this case.[11]
Similarly, in Surigao Electric Co., Inc. v. Court of Tax Appeals [12] and again in CIR v. Union
Shipping Corp.,[13] we ruled:
x x x. The letter of demand dated April 29, 1963 unquestionably constitutes the final action
taken by the commissioner on the petitioners several requests for reconsideration and
recomputation. In this letter the commissioner not only in effect demanded that the
petitioner pay the amount of P11,533.53 but also gave warning that in the event it failed to
pay, the said commissioner would be constrained to enforce the collection thereof by means
of the remedies provided by law. The tenor of the letter, specifically the statement regarding
the resort to legal remedies, unmistakably indicate[d] the final nature of the determination
made by the commissioner of the petitioners deficiency franchise tax liability.

As in CIR v. Union Shipping,[14] petitioner failed to rule on the Motion for Reconsideration
filed by private respondent, but simply continued to demand payment of the latters alleged
tax delinquency. Thus, the Court reiterated the dictum that the BIR should always indicate to
the taxpayer in clear and unequivocal language what constitutes final action on a disputed
assessment.The object of this policy is to avoid repeated requests for reconsideration by the
taxpayer, thereby delaying the finality of the assessment and, consequently, the collection
of the taxes due.Furthermore, the taxpayer would not be groping in the dark, speculating as
to which communication or action of the BIR may be the decision appealable to the tax
court.[15]
In the instant case, the second notice received by private respondent verily indicated its
nature that it was final. Unequivocably, therefore, it was tantamount to a rejection of the
request for reconsideration.
Commissioner v. Algue[16] is not in point here. In that case, the Warrant of Distraint and
Levy, issued to the taxpayer without any categorical ruling on its request for
reconsideration, was not deemed equivalent to a denial of the request. Because such
request could not in fact be found in its records, the BIR cannot be presumed to have taken
it into consideration. The request was considered only when the taxpayer gave a copy of it,
duly stamp-received by the BIR. Hence, the Warrant was deemed premature.
In the present case, petitioner does not deny receipt of private respondents protest
letter. As a matter of fact, it categorically relates the following in its Statement of Relevant
Facts:[17]
3. On March 23, 1990, respondent ICC wrote the CIR requesting for a reconsideration of the
assessment on the ground that there was an error committed in the computation of interest
and that there were expenses which were disallowed (Ibid., pp. 296-311).
4. On April 2, 1990, respondent ICC sent the CIR additional documents in support of its
protest/reconsideration. The letter was received by the BIR on April 18, 1990. Respondent
ICC further executed a Waiver of Statute of Limitation (dated April 17, 1990) whereby it
consented to the BIR to assess and collect any taxes that may be discovered in the process
of reinvestigation, until April 3, 1991 (Ibid., pp. 296-311). A copy of the waiver is hereto
attached as Annex C.
Having admitted as a fact private respondents request for reconsideration, petitioner
must have passed upon it prior to the issuance of the Final Notice Before Seizure.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.