1. CIR V PASCOR REALTY & DEVT CORP et. al.

GR No. 128315, June 29, 1999

Facts: The CIR authorized certain BIR officers to examine the books of accounts and
otheraccounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and
1988. The examination resulted in recommendation for the issuance of an assessment of
P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively. The Commissioner filed
acriminal complaint for tax evasion against PRDC, its president and treasurer before the DOJ.
Private

respondents

filed

immediately

an

urgent

request

for

reconsideration

on

reinvestigation disputing the tax assessment and tax liability. The Commissioner denied
private respondents request for reconsideration/reinvestigation on the ground that no
formal assessment has been issued which the latter elevated to the CTA on a petition for
review. The Commissionersmotion to dismiss on the ground of the CTAs lack of jurisdiction
denied by CTA and ordered the Commissioner to file an answer. Instead of complying with
the order of CTA, Commissioner filed a petition with the CA alleging grave abuse of
discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the
revenue officers and the endorsement of said report as assessment which may be appealed
to the CTA. The CA sustained the CTA decision and dismissed the petition.

Issues: (1) Whether or not the criminal complaint for tax evasion can be construed as an
assessment. (2) Whether or not an assessment is necessary before criminal charges for tax
evasion may be instituted.

Held: The filing of the criminal complaint with the DOJ cannot be construed as a formal
assessment. Neither the Tax Code nor the revenue regulations governing the protest
assessments provide a specific definition or form of an assessment.

An assessment must be sent to and received by the taxpayer, and must demand payment of
the taxes described therein within a specific period. The revenue officers affidavit merely
contained a computation of respondents tax liability. It did not state a demand or period for

payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit
was meant to support the criminal complaint for tax evasion; it was not meant to be a notice
of tax due and a demand to private respondents for the payment thereof. The fact that the
complaint was sent to the DOJ, and not to private respondent, shows that commissioner
intended to file a criminal complaint for tax evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be filed. A criminal charge need
not only be supported by a prima facie showing of failure to file a required return. The CIR
had, in such tax evasion cases, discretion on whether to issue an assessment, or to file
a criminal caseagainst the taxpayer, or to do both.

2. Marcos II vs. CA
273 SCRA 47 1997

Facts: Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the
deficiency income tax assessments and estate tax assessments upon the estate and
properties of his late father despite the pendency of the probate proceedings of the will of
the late President. On the other hand, the BIR argued that the States authority to collect
internal revenue taxes is paramount.

Petitioner further argues that "the numerous pending court cases questioning the late
president's ownership or interests in several properties (both real and personal) make the
total value of his estate, and the consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the estate tax and their
issuance of the Notices of Levy and sale are premature and oppressive." He points out the
pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by the
government to question the ownership and interests of the late President in real and
personal properties located within and outside the Philippines. Petitioner, however, omits to
allege whether the properties levied upon by the BIR in the collection of estate taxes upon
the decedent's estate were among those involved in the said cases pending in the

Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant to the
matter at issue. The mere fact that the decedent has pending cases involving ill-gotten
wealth does not affect the enforcement of tax assessments over the properties indubitably
included in his estate.

Issue: Is the contention of Marcos correct?

Held: No. The approval of the court, sitting in probate or as a settlement tribunal over the
deceaseds estate, is not a mandatory requirement in the collection of estate taxes.

There is nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's claim for estate
taxes,

before

the

same

can

be

enforced

and

collected.

The enforcement of tax laws and the collection of taxes are of paramount importance for the
sustenance of government. Taxes are the lifeblood of government and should be collected
without unnecessary hindrance. However, such collection should be made in accordance
with law as any arbitrariness will negate the existence of government itself.

It is not the Department of Justice which is the government agency tasked to determine the
amount of taxes due upon the subject estate, but the Bureau of Internal Revenue whose
determinations and assessments are presumed correct and made in good faith. The
taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in
the performance of official duties, an assessment will not be disturbed. Even an assessment
based on estimates is prima facie valid and lawful where it does not appear to have been
arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to
show clearly that the assessment is erroneous. Failure to present proof of error in the
assessment will justify the judicial affirmance of said assessment. In this instance, petitioner
has not pointed out one single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace of falsity. Indeed, the

petitioner's attack on the assessment bears mainly on the alleged improbable and
unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for
the charge of impropriety of the assessments made.
3. Meralco Securities Corporation vs. Savellano
GR No. L-36181

October 23, 1982

Facts: On May 22, 1967, the late Juan G. Maniago (substituted in these proceedings by his
wife and children) submitted to petitioner Commissioner of Internal Revenue confidential
denunciation against the Meralco Securities Corporation for tax evasion for having paid
income tax only on 25 % of the dividends it received from the Manila Electric Co. for the
years 1962-1966, thereby allegedly shortchanging the government of income tax due from
75% of the said dividends.

Petitioner Commissioner of Internal Revenue caused the investigation of the denunciation

after which he found and held that no deficiency corporate income tax was due from the
Meralco Securities Corporation on the dividends it received from the Manila Electric Co. and
accordingly denied Maniago's claim for informer's reward on a non-existent deficiency.
On August 28, 1970, Maniago filed a petition for mandamus, and subsequently an amended
petition for mandamus, in the Court of First Instance of Manila, docketed therein as Civil
Case No. 80830, against the Commissioner of Internal Revenue and the Meralco Securities
Corporation to compel the Commissioner to impose the alleged deficiency tax assessment
on the Meralco Securities Corporation and to award to him the corresponding informer's
reward under the provisions of R.A. 2338. Respondent judge granted the said petition and
thereafter, denied the motions for reconsideration filed by all the parties.

Issues: (1) Whether or not respondent judge has jurisdiction over the subject matter of the
case; (2) Whether or not respondent heirs of Maniago are entitled to informers reward.

Held: (1) Respondent judge has no jurisdiction to take cognizance of the case because the
subject matter thereof clearly falls within the scope of cases now exclusively within the
jurisdiction of the Court of Tax Appeals. Section 7 of Republic Act No. 1125, enacted June 16,
1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by
appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the National Internal Revenue
Code or other law or part of law administered by the Bureau of Internal Revenue. The law
transferred to the Court of Tax Appeals jurisdiction over all cases involving said assessments
previously cognizable by courts of first instance, and even those already pending in said
courts. The question of whether or not to impose a deficiency tax assessment on Meralco
Securities Corporation undoubtedly comes within the purview of the words "disputed
assessments" or of "other matters arising under the National Internal Revenue Code . . . .In
the case of Blaquera vs. Rodriguez, et al, this Court ruled that "the determination of the
correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable,
falls within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance,
for under the provisions of Section 7 of Republic Act No. 1125, the Court of Tax Appeals has
exclusive appellate jurisdiction to review, on appeal, any decision of the Collector of Internal
Revenue in cases involving disputed assessments and other matters arising under the
National Internal Revenue Code or other law or part of law administered by the Bureau of
Internal Revenue."

(2) Considering then that respondent judge may not order by mandamus the Commissioner
to issue the assessment against Meralco Securities Corporation when no such assessment
has been found to be due, no deficiency taxes may therefore be assessed and collected
against the said corporation. Since no taxes are to be collected, no informer's reward is due
to private respondents as the informer's heirs. Informer's reward is contingent upon the
payment and collection of unpaid or deficiency taxes. An informer is entitled by way of
reward only to a percentage of the taxes actually assessed and collected. Since no
assessment, much less any collection, has been made in the instant case, respondent

judge's writ for the Commissioner to pay respondents 25% informer's reward is gross error
and without factual nor legal basis.

Petitions granted and the questioned decision of respondent judge and order reversed and
set aside.

4. SY PO vs. CTA
G.R. No. 81446; August 18, 1988

Facts: Po Bien Sing, the sole proprietor of Silver Cup Wine Factory (SCWF), engaged in the business of
manufacture and sale of compounded liquors. On the basis of a denunciation against SCWF allegedly "for
tax evasion amounting to millions of pesos, Secretary of Finance directed the Finance-BIR--NBI team to
investigate.

On the basis of the team's report of investigation, the respondent Commissioner of Internal Revenue
assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 in the amount of P7,154,685.16 and for
deficiency specific tax for January 2,1964 to January 19, 1972 in the amount of P5,595,003.68

Petitioner protested the deficiency assessments. The BIR recommended the reiteration of the assessments
in view of the taxpayer's persistent failure to present the books of accounts for examination.

Issue: WON the assessments have valid and legal basis.

Held: The law is specific and clear. The rule on The Best Evidence Obtainable applies when a tax report
required by law for the purpose of assessment is not available or when tax report is incomplete or
fraudulent.

The tax assessment by tax examiners are presumed correct and made in good faith. The taxpayer has the
duty to prove otherwise. In the absence of proof of irregularities in the performance of duties, an

assessment duly made by the BIR examiner and approved by his superior officers will not be disturbed.
All presumptions are in favour of the correctness of tax assessments.

5. CIR vs. CA, CTA and FORTUNE TOBACCO CORP.

G.R. No. 119761; August 29, 1996

Facts: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the manufacture of

different brands of cigarettes, registered "Champion," "Hope," and "More" cigarettes. BIR
classified them as foreign brands since they were listed in the World Tobacco Directory as
belonging to foreign companies. However, Fortun changed the names of 'Hope' to
'HopeLuxury' and 'More' to 'Premium More,' thereby removing the said brands from the
foreign brand category.

A 45% Ad Valorem taxes were imposed on these brands. Then Republic Act ("RA") No. 7654
was enacted 55% for locally manufactured foreign brand while 45% for locally
manufactured brands. 2 days before the effectivity of RA 7654, Revenue Memorandum
Circular No. 37-93 ("RMC 37-93"), was issued by the BIR saying since there is no showing
who the real owner/s are of Champion, Hope and More, it follows that the same shall be
considered locally manufactured foreign brand for purposes of determining the ad
valorem tax - 55%. BIR sent via telefax a copy of RMC 37-93 to Fortune Tobacco addressed
to no one in particular. Then Fortune Tobacco received, by ordinary mail, a certified xerox
copy of RMC 37-93. CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting
to P9,598,334.00.

Fortune Tobacco filed a petition for review with the CTA.

CTA upheld the position of Fortune.

CA affirmed.

Issue: WON it was necessary for BIR to follow the legal requirements when it issued its RMC

Held. YES. CIR may not disregard legal requirements in the exercise of its quasi-legislative
powers which publication, filing, and prior hearing.
When an administrative rule is merely interpretative in nature, its applicability needs nothing
further than its bare issuance for it gives no real consequence more than what the law itself
has already prescribed. BUT when, upon the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least cumbersome the
implementation of the law but substantially increases the burden of those governed, the
agency must accord, at least to those directly affected, a chance to be heard, before that
new issuance is given the force and effect of law.
RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as
amended, but has, in fact and most importantly, been made in order to place "Hope Luxury,"
"Premium More" and "Champion" within the classification of locally manufactured cigarettes
bearing foreign brands and to thereby have them covered by RA 7654 which subjects
mentioned brands to 55% the BIR not simply interpreted the law; verily, it legislated under
its quasi-legislativeauthority. The due observance of the requirements of notice, of hearing,
and of publication should not have been then ignored.

6. CIR v. Benguet Corp

G.R. Nos. 134587 and 134588; January 8, 2005

Facts: Benguet Corporation is a domestic corporation engaged in the exploration,

development and operation of mineral resources, and the sale or marketing thereof to
various entities. It is a VAT registered enterprise.

The transactions in question occurred during the period between 1988 and 1991. Under Sec.
99 of NIRC as amended by E.O. 273 s. 1987 then in effect, any person who, in the course of
trade or business, sells, barters or exchanges goods, renders services, or engages in similar
transactions and any person who imports goods is liable for output VAT at rates of either
10% or 0% (zero-rated) depending on the classification of the transaction under Sec. 100 of
the NIRC.

In January of 1988, Benguet applied for and was granted by the BIR zero-rated status on its
sale of gold to Central Bank. On 28 August 1988 VAT Ruling No. 3788-88 was issued which
declared that the sale of gold to Central Bank is considered as export sale subject to zerorate pursuant to
Section 100 of the Tax Code, as amended by EO 273.

Relying on its zero-rated status and the above issuances, Benguet sold gold to the Central
Bank during the period of 1 August 1989 to 31 July 1991 and entered into transactions that
resulted in input VAT incurred in relation to the subject sales of gold. It then filed applications
for tax refunds/credits
corresponding to input VAT.

However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23 January
1992 that was issued subsequent to the consummation of the subject sales of gold to the
Central Ban`k which provides that sales of gold to the Central Bank shall not be considered
as export sales and thus, shall be subject to 10% VAT. BIR VAT Ruling No. 008-92 withdrew,
modified, and superseded all inconsistent BIR issuances.
Both petitioner and Benguet agree that the retroactive application of VAT Ruling No. 008-92
is valid only if such application would not be prejudicial to the Benguet pursuant Sec. 246 of
the NIRC.

Issues: (1) WON Benguets sale of gold to the Central Bank during the
period when such was classified by BIR issuances as zerorated could be taxed validly at a
10% rate after the consummation of the transactions involved; (2) WON there was prejudice
to Benguet Corp due to the new BIR VAT Ruling.

Held: (1) NO. At the time when the subject transactions were consummated, the prevailing
BIR regulations relied upon by Benguet ordained that gold sales to the Central Bank were

zero-rated. Benguet should not be faulted for relying on the BIRs interpretation of the said
laws and regulations.

While it is true, as CIR alleges, that government is not estopped from collecting taxes which
remain unpaid on account of the errors or mistakes of its agents and/or officials and there
could be no vested right arising from an erroneous interpretation of law, these principles
must give way to
exceptions based on and in keeping with the interest of justice and fair play. (then the Court
cited the ABS-CBN case).

(2) YES. The adverse effect is that Benguet Corp became the unexpected and unwilling
debtor to the BIR of the amount equivalent to the total VAT cost of its product, a liability it
previously could have recovered from the BIR in a zero-rated scenario or at least passed on
to the Central Bank had it known it would have been taxed at a 10% rate. Thus, it is clear
that Benguet suffered economic prejudice when it consummated sales of gold to the Central
Bank were taken out of the zero-rated category. The change in the VAT rating of Benguets
transactions with the Central Bank resulted in the twin loss of its exemption from payment of
output VAT and its opportunity to recover input VAT, and at the same time subjected it to the
10% VATsans the option to pass on this cost to the Central Bank, with the total prejudice in
money terms being equivalent to the 10% VAT levied on its sales of gold to the Central Bank.

Even assuming that the right to recover Benguets excess payment of income tax has not yet
prescribed, this relief would only address Benguets overpayment of income tax but not the
other burdens discussed above. Verily, this remedy is not a feasible option for Benguet
because the very reason why it was issued a deficiency tax assessment is that its input VAT
was not enough to offset its retroactive output VAT. Indeed, the burden of having to go
through an unnecessary and cumbersome refund process is prejudice enough.

7. CIR v Bursmeiters & Wain Scandinavian

GR 153205; January 22, 2007

Facts: A foreign consortium, parent company of Burmeister, entered into an O&M contract
with NPC. The foreign entity then subcontracted the actual O&M to Burmeister. NPC paid the
foreign consortium a mixture of currencies while the consortium, in turn, paid Burmeister
foreign currency inwardly remitted into the Philippines. BIR did not want to grant refund
since the services are not destined for consumption abroad (or the destination principle).

Issue: Are the receipts of Burmeister entitled to VAT zero-rated status?

Held: PARTIALLY. Respondent is entitled to the refund prayed for BUT ONLY for the period
covered prior to the filing of CIRs Answer in the CTA.

The claim has no merit since the consortium, which was the recipient of services rendered
by Burmeister, was deemed doing business within the Philippines since its 15-year O&M with
NPC can not be interpreted as an isolated transaction.

In addition, the services referring to processing, manufacturing, repacking and services

other than those in (1) of Sec. 102 both require (i) payment in foreign currency; (ii) inward
remittance; (iii) accounted for by the BSP; AND (iv) that the service recipient is doing
business outside the Philippines. The Court ruled that if this is not the case, taxpayers can
circumvent just by stipulating payment in foreign currency.

The refund was partially allowed since Burmeister secured a ruling from the BIR allowing
zero-rating of its sales to foreign consortium. However, the ruling is only valid until the time
that CIR filed its Answer in the CTA which is deemed revocation of the previously-issued
ruling. The Court said the revocation can not retroact since none of the instances in Section
246 (bad faith, omission of facts, etc.) are present.

8. CIR vs. HANTEX TRADING CO., INC.

G.R. No. 136975; March 31, 2005

Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic
products, it imports synthetic resin and other chemicals for the manufacture of its products. For this
purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry)
with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October
1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and
Investigation Bureau (EIIB), received confidential information that the respondent had imported
synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a
subpoena to present its books of account which it failed to do. The bureau cannot find any original copies
of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on the
certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the
machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts
from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that
Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the
income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the
copies of the import entries relied upon in computing the deficiency tax of the respondent were not duly
authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the
BIR investigators.

Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income
tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent
evidence and the law.

Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the
Commissioner of Internal Revenue has the power to make assessments and prescribe additional
requirements for tax administration and enforcement. Among such powers are those provided in
paragraph (b), which provides that Failure to submit required returns, statements, reports and other
documents. When a report required by law as a basis for the assessment of any national internal
revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to

believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper
tax on the best evidence obtainable. This provision applies when the Commissioner of Internal Revenue
undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a
return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR. The best
evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting
records of the taxpayer who is the subject of the assessment process, the accounting records of other
taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such
evidence also includes data, record, paper, document or any evidence gathered by internal revenue
officers from other taxpayers who had personal transactions or from whom the subject taxpayer received
any income; and record, data, document and information secured from government offices or agencies,
such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs
Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does
not include mere photocopies of records/documents. The petitioner, in making a preliminary and final tax
deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of
records/documents. Mere photocopies of the Consumption Entries have no probative weight if offered as
proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no
probative value as basis for any deficiency income or business taxes against a taxpayer.

Companies exempt from zero-rate tax

9. BPI v CIR
G.R No. 139786O; ctober 17, 2005

Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The
petitioner filed a protest letter, requesting for reconsideration with BIR however the latter
did not reply. Instead, BIR issued a warrant for distraint/levy against petitioner BPI. The
petitioner did not hear from BIR until September 11, 1997 when then Commissioner
Liwayway Vinzons-Chado, denied its request for reconsideration. Subsequently, the
petitioner filed a petition for review with the CTA, raising the defense of prescription. The
CTA denied the petition and held that the period of prescription had not yet prescribed

nonetheless, it held that the petitioner was not liable for the deficiency of DST. On appeal,
the CA reversed the ruling of CTA on the issue of DST tax and held that the petitioner was
indeed liable for DST.

Issue: Whether or not the right of the respondent to collect from petitioner BPIis barred by
prescription?

Held : Yes, the Court ruled that the period to collect has already prescribed. The BIR has
three years, counted from the date of actual filing of the return or from the last date
prescribed by law for the filing of such return, whichever comes later, to assess a national
internal revenue tax or to begin a court proceeding or the collection thereof without an
assessment. In case of a false or fraudulent return with intent to evade tax or the failure to
file any return at all, the prescriptive period for assessment of the tax due shall be 10 years
from discovery by the BIR of the falsity, fraud, or omission. When the BIR validly issues an
assessment, within either the three-year or ten-year period, whichever is appropriate, then
the BIR has another three years after the assessment within which to collect the national
internal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment
of the tax is deemed made and the three-year period for collection of the assessed tax
begins to run on the date the assessment notice had been released, mailed or sent by the
BIR to the taxpayer.

In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner
BPI of a protest letter suspended the running of the prescriptive period for collecting the
assessed DST. This Court, however, takes the opposing view, and, based on the succeeding
discussion, concludes that there is no valid ground for suspending the running of the
prescriptive period for collection of the deficiency DST assessed against petitioner BPI.

The statute of limitations on assessment and collection of taxes is for the protection of the
taxpayer and, thus, shall be construed liberally in his favor

10. ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. CIR
GR. No. 155541; January 27, 2004

Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were
managed by the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but
two days after her death, PhilTrust filed her income tax return for 1978 not indicating that
the decedent had died. The BIR conducted an administrative investigation of the decedents
tax liability and found a deficiency income tax for the year 1997 in the amount of
P318,233.93. Thus, in November 18, 1982, the BIR sent by registered mail a demand letter
and assessment notice addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which
was the address stated in her 1978 income tax return. On June 18, 1984, respondent
Commissioner of Internal Revenue issued warrants of distraint and levy to enforce the
collection of decedents deficiency income tax liability and serve the same upon her heir,
Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim
with probate court for the deficiency tax. The Court denied BIRs claim against the estate on
the ground that no proper notice of the tax assessment was made on the proper party. On
appeal, the CA held that BIRs service on PhilTrust of the notice of assessment was binding
on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedents
death. Consequently, as the estate failed to question the assessment within the statutory
period of thirty days, the assessment became final, executory, and incontestable.

Issue: (1) Whether or not the CA erred in holding that the service of deficiency tax
assessment on Juliana through PhilTrust was a valid service as to bind the estate; (2)
Whether or not the CA erred in holding that the tax assessment had become final,
executory, and incontestable.

Held: (1) Since the relationship between PhilTrust and the decedent was automatically
severed the moment of the taxpayers death, none of the PhilTrusts acts or omissions could
bind the estate of the taxpayer. Although the administrator of the estate may have been
remiss in his legal obligation to inform respondent of the decedents death, the consequence

thereof merely refer to the imposition of certain penal sanction on the administrator. These
do not include the indefinite tolling of the prescriptive period for making deficiency tax
assessment or waiver of the notice requirement for such assessment.

(2) The assessment was served not even on an heir or the estate but on a completely
disinterested party. This improper service was clearly not binding on the petitioner. The most
crucial point to be remembered is that PhilTust had absolutely no legal relationship with the
deceased or to her Estate. There was therefore no assessment served on the estate as to
the alleged underpayment of tax. Absent this assessment, no proceeding could be initiated
in court for collection of said tax; therefore, it could not have become final, executory and
incontestable. Respondents claim for collection filed with the court only on November 22,
1984 was barred for having been made beyond the five-year prescriptive period set by law.

11. CIR v. Tulio

GR139858; October 25, 2005.

Facts: This involves the collection of percentage taxes for 1986 and 1987. Tulio did not file
tax returns. BIR discovered on September 14 1989. RTC dismissed BIR collection case on the
ground of prescription. It counted 3 years from the return was supposed to be filed with
the BIR instead of 10 yrs from discovery of omission to file return by the respondent.

Issue: Whether petitioners cause of action for the collection of deficiency percentage taxes
against respondent has prescribed.
The lower court erroneously applied Section 203 of the same Code providing for the threeyear prescriptive period from the filing of the tax return within which internal revenue taxes
shall be assessed. It held that such period should be counted from the day the return was
filed, or from August 15, 1990 up to August 15, 1993. However, as shown by the records,
respondent failed to file a tax return, forcing petitioner to invoke the powers of his office in
tax administration and enforcement. Respondents failure to file his tax returns is thus

covered by Section 223 providing for a ten-year prescriptive period within which a
proceeding in court may be filed.
Here, respondent failed to file his tax returns for 1986 and 1987. On September 14, 1989,
petitioner found respondents omission. Hence, the running of the ten-year prescriptive
period within which to assess and collect the taxes due from respondent commenced on that
date until September 14, 1999. The two final assessment notices were issued on February
28, 1991, well within the prescriptive period of three (3) years. When respondent failed to
question or protest the deficiency assessments thirty (30) days therefrom, or until March 30,
1991, the same became final and executory.

12. Oceanic Wireless v. CIR

GR NO. 148380, December 9, 2005

Facts: 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. Petitioner filed its protest
against the tax assessments and requested a reconsideration or cancellation of the same in a letter to the
BIR Commissioner.

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. Said letter likewise requested petitioner to pay within 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.

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. The CTA dismissed the petition for lack of
jurisdiction.
Petitioner filed a Motion for Reconsideration arguing that the demand letter 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.

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.

The Court of Appeals denied the petition.

Issue: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was
acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA.

Held: YES. 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. In this case, the letter of
demand, 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. In addition, the letter contained a
notation indicating that petitioners request for reconsideration had been denied for lack of supporting
documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it
was tantamount to a rejection of the request for reconsideration.

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 .

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.

Thus, the authority to make tax assessments may be delegated to subordinate officers. Said
assessment has the same force and effect.

13. Philam Asset Management, Inc. vs CTA

G.R.156637 and 162004; December 14, 2005

Facts: Petitioner acts as investment manager of PFI &PBFI. It provides management

&technical services and thus respectively paid for its services. PFI & PBFI withhold the
amount of equivalent to 5% creditable tax regulation. On April 3, 1998, filed ITR with a net
loss thus incurred withholding tax. Petitioner filed for refund from BIR but was unanswered .
CTA denied the petition for review. CA held that to request for either a refund or credit of
income tax paid, a corporation must signify its intention by marking the corresponding box
on

its

annual

corporate

adjustment

return.

Issue: Whether or not petitioner is entitled to a refund of its creditible taxes.

Ruling: Any tax income that is paid in excess of its amount due to the government may be
refunded, provided that a taxpayer properly applies for the refund. One can not get a tax
refund and a tax credit at the same time for the same excess to income taxes paid. Failure
to signify ones intention in Final Assessment Return (FAR) does not mean outright barring of
a valid request for a refund

Requiring that the ITR on the FAR of the succeeding year be presented to the BIR in
requesting a tax refund has no basis in law and jurisprudence. The Tax Code likewise allows
the refund of taxes to taxpayer that claims it in writing within 2 years after payment of the
taxes. Technicalities and legalism should not be misused by the government to keep money
not belonging to it, and thereby enriched itself at the expense of its law-abiding citizens.

14. Philippine Journalist, Inc. v. CIR

G.R. No. 162852; December 16, 2004

Facts: In 1995, the Bureau of Internal Revenue (BIR) issued Letter of Authority for two
Revenue Officers to examine petitioners books of account and other accounting records for
internal revenue taxes for the period January 1, 1994 to December 31, 1994.
In 1997, petitioners Comptroller, executed a "Waiver of the Statute of Limitation Under the
National Internal Revenue Code (NIRC)". The document "waive[d] the running of the
prescriptive period provided by Sections 223 and 224 and other relevant provisions of the
NIRC and consent[ed] to the assessment and collection of taxes which may be found due
after the examination at any time after the lapse of the period of limitations fixed by said
Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of the
investigation.
In 1998, Revenue Officer submitted his audit report recommending the issuance of an
assessment and finding that petitioner had deficiency taxes. Subsequently, the Assessment
Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of
the investigation. Thus, BIR issued Assessment/Demand stating the deficiency taxes,
inclusive of interest and compromise penalty
On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo
S. Panganiban to the petitioner to pay the assessment within ten (10) days from receipt of
the letter. On November 10, 1999, a Final Notice Before Seizure was issued by the same
deputy commissioner giving the petitioner ten (10) days from receipt to pay. Petitioner
received a copy of the final notice on November 24, 1999. By letters dated November 26,
1999, petitioner asked to be clarified how the tax liability of P111,291,214.46 was reached
and requested an extension of thirty (30) days from receipt of the clarification within which
to reply.
The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not
show receipt of Tax Assessment/Demand. Petitioner also contested that the assessment had
no factual and legal basis. On March 28, 2000, a Warrant of Distraint and/or Levy was
received by the petitioner.
Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) which was amended
on May 12, 2000. Petitioner complains: (a) that no assessment or demand was received from
the BIR; (b) that the warrant of distraint and/or levy was without factual and legal bases as

its issuance was premature; (c) that the assessment, having been made beyond the 3-year
prescriptive period, is null and void; (d) that the issuance of the warrant without being given
the opportunity to dispute the same violates its right to due process; and (e) that the grave
prejudice that will be sustained if the warrant is enforced is enough basis for the issuance of
the writ of preliminary injunction.
CTA ruled in favor of PJI. It declared that the deficiency income, value-added and expanded
withholding tax assessments issued by the respondent against the petitioner on December
9,

1998,

in

the

total

amount

of

P111,291,214.46

for

the

year 1994 ANCELLED,

WITHDRAWN andWITH NO FORCE AND EFFECT. Likewise, it declared that the Warrant of
Distraint and/or Levy No. 33-06-046 NULL and VOID.
On appeal CA ruled that Mere assessment notices which have become final after the lapse of
the thirty (30)-day reglementary period are not appealable. Thus, the CTA should not have
entertained the petition at all. Also, it ruled that there is a valid waiver thus the running of
the prescriptive period is tolled.
Issues: (1) whether or not CTA has jurisdiction over the issues in this case. (2) Whether or
not the Waiver of the Statute of Limitations is valid and binding on the petitioner
Held: (1) No. The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the Commissioner of Internal Revenue on matters relating to assessments or
refunds. The second part of the provision covers other cases that arise out of the NIRC or
related laws administered by the Bureau of Internal Revenue. The wording of the provision is
clear and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and
levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly
effected.
(2) No. As found by the CTA, the Waiver of Statute of Limitations, signed by petitioners
comptroller on September 22, 1997 is not valid and binding because it does not conform
with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the
BIR and petitioner, within which the former may assess and collect revenue taxes. Thus,
petitioners waiver became unlimited in time, violating Section 222(b) of the NIRC.
The waiver document is being incomplete and defective, the three-year prescriptive period
was not tolled or extended and continued to run until April 17, 1998. Consequently, the

Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because

it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint
and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void
for having been issued pursuant to an invalid assessment.

15. Rafael Arsenio S. Dizon, v. CTA and CIR

G.R. No. 140944; April 30, 2008

Facts: Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of
his will was filed. The probate court appointed Atty. Rafael Arsenio P. Dizon as administrator
of the Estate of Jose Fernandez.

An estate tax return was filed later on which showed ZERO estate tax liability. BIR thereafter
issued a deficiency estate tax assessment, demanding payment of Php 66.97 million as
deficiency estate tax. This was subsequently reduced by CTA to Php 37.42 million. The CA
affirmed the CTAs ruling, hence, the instant petition.

The petitioner claims that in as much as the valid claims of creditors against the Estate are
in excess of the gross estate, no estate tax was due. On the other hand, respondents argue
that since the claims of the Estates creditors have been condoned, such claims may no
longer be deducted from the gross estate of the decedent.

Issue: Whether the actual claims of creditors may be fully allowed as deductions from the
gross estate of Jose despite the fact that the said claims were reduced or condoned through
compromise agreements entered into by the Estate with its creditors

Held: YES. Following the US Supreme Courts ruling in Ithaca Trust Co. v. United States, the
Court held that post-death developments are not material in determining the amount of
deduction. This is because estate tax is a tax imposed on the act of transferring property by
will or intestacy and, because the act on which the tax is levied occurs at a discrete time,

i.e., the instance of death, the net value of the property transferred should be ascertained,
as nearly as possible, as of the that time. This is the date-of-death valuation rule.

The Court, in adopting the date-of-death valuation principle, explained that: First. There is
no law, nor do we discern any legislative intent in our tax laws, which disregards the date-ofdeath valuation principle and particularly provides that post-death developments must be
considered in determining the net value of the estate. It bears emphasis that tax burdens
are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and
clearly

imports,

tax

statutes

being

construed strictissimi

juris against

the

government. Second. Such construction finds relevance and consistency in our Rules on
Special Proceedings wherein the term "claims" required to be presented against a
decedent's estate is generally construed to mean debts or demands of a pecuniary nature
which could have been enforced against the deceased in his lifetime, or liability contracted
by the deceased before his death. Therefore, the claims existing at the time of death are
significant to, and should be made the basis of, the determination of allowable deductions.

16. Pilipinas Shell Petrolium Corp v. CIR

G.R. No. 172598; December 21, 2007

Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum Corporation
(PSPC) for alleged deficiency excise tax liabilities of PhP 1,705,028,008.06 for the taxable
years 1992 and 1994 to 1997, inclusive of delinquency surcharges and interest. As basis for
the collection letter, the BIR alleged that PSPC is not a qualified transferee of the TCCs it
acquired from other BOI-registered companies.

These alleged excise tax deficiencies

covered by the collection letter were already paid by PSPC with TCCs acquired through, and
issued and duly authorized by the Center, and duly covered by Tax Debit Memoranda (TDM)
of both the Center and BIR, with the latter also issuing the corresponding Accept Payment
for Excise Taxes (APETs).

PSPC protested the collection letter, but it was denied. Because of respondent inaction on a
motion for reconsideration PSPC filed a petition for review before the CTA.

In 1999, the CTA ruled that the use by PSPC of the TCCs was legal and valid, and that
respondents attempt to collect alleged delinquent taxes and penalties from PSPC without an
assessment constitutes denial of due process. Respondent elevated CTA Decision to the
Court of Appeals (CA) through a petition for review.

Despite the pendency of this case, PSPC received assessment letter from respondent for
excise tax deficiencies, surcharges, and interest based on the first batch of cancelled TCCs
and TDM covering PSPCs use of the TCCs. All these cancelled TDM and TCCs were also part
of the subject matter of the now pending before the CA.

PSPC protested the assessment letter, but the protest was denied by the BIR, constraining it
to file another case before the CTA. Subsequently, CTA ruled in favor of PSPC and
accordingly cancelled and set aside the assessment issued by the respondent. Respondent
motion for reconsideration of the above decision which was rejected thus respondent
appealed the above decision before the CTA En Banc.

The CTA En Banc ruled in favor of respondent and ordered PSPC to pay the amount of
P570,577,401.61 as deficiency excise tax for the taxable years 1992 and 1994 to 1997,
inclusive of 25% surcharge and 20% interest.
Issue: Whether or not petitioner is liable for the assessment of deficiency excise tax after the
validly issued TCCs were subsequently cancelled for having been issued fraudulently

Held: No. Petitioner is not liable for the assessment of deficiency excise tax.

In the instant case, with due application, approval, and acceptance of the payment by PSPC
of the subject TCCs for its then outstanding excise tax liabilities in 1992 and 1994 to 1997,
the subject TCCs have been canceled as the money value of the tax credits these

represented have been used up. Therefore, the DOF through the Center may not now cancel
the subject TCCs as these have already been canceled and used up after their acceptance as
payment for PSPCs excise tax liabilities. What has been used up, debited, and canceled
cannot anymore be declared to be void, ineffective, and canceled anew.

Besides, it is indubitable that with the issuance of the corresponding TDM, not only is the
TCC canceled when fully utilized, but the payment is also final subject only to a post-audit on
computational errors.

Under RR 5-2000, a TDM is a certification, duly issued by the

Commissioner or his duly authorized representative, reduced in a BIR Accountable Form in

accordance with the prescribed formalities, acknowledging that the taxpayer named therein
has duly paid his internal revenue tax liability in the form of and through the use of a Tax
Credit Certificate, duly issued and existing in accordance with the provisions of these
Regulations. TheTax Debit Memo shall serve as the official receipt from the BIR evidencing a
taxpayers payment or satisfaction of his tax obligation. The amount shown therein shall be
charged against and deducted from the credit balance of the aforesaid Tax Credit Certificate.

Thus, with the due issuance of TDM by the Center and TDM by the BIR, the payments made
by PSPC with the use of the subject TCCs have been effected and consummated as the TDMs
serve as the official receipts evidencing PSPCs payment or satisfaction of its tax obligation.
Moreover, the BIR not only issued the corresponding TDM, but it also issued ATAPETs which
doubly show the payment of the subject excise taxes of PSPC.

Based on the above discussion, we hold that respondent erroneously and without factual
and legal basis levied the assessment. Consequently, the CTA En Banc erred in sustaining
respondents assessment.

17. CIR v. Primetown Property Group

GR 161155; August 28, 2007

Facts: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the
refund or credit of income tax respondents paid in 1997.

The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right
to claim a refund or credit commenced on that date. According to the CTA, the two-year
prescriptive period under Section 229 of the NIRC for the filing of judicial claims was
equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which
was filed 731 days after respondent filed its final adjusted return, was filed beyond the
reglementary period.

On appeal, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of
the Civil Code did not distinguish between a regular year and a leap year. According to the
CA, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14,
1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total
of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed.

Issue:

Whether or not the counting of the 2-year prescriptive period for filing claim of

refund is governed by the Civil Code.

Held: Counting of 2-year period for filing claim for refund is no longer in accordance with Art
13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987.

As between the Civil Code, which provides that a year is equivalent to 365 days, and the
Administrative Code of 1987, which states that a year is composed of 12 calendar months, it
is the latter that must prevail being the more recent law, following the legal maxim, Lex
posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on
Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The
procedure is 1st month -Apr 15, 1998 to May 14, 1998 . 24th month - Mar 15, 2000 to Apr

14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer controlling. The 2year period should start to run from filing of the final adjusted return.
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last
day of the 24th calendar month from the day respondent filed its final adjusted return.
Hence, it was filed within the reglementary period

18. CIR vs. Reyes and Reyes vs. CIR

GR Nos. 159694 & 163581

Facts: Decedent Tancinco left a 1,292 square-meter residential lot and an old house thereon.
The heirs of the decedent received a final estate tax assessment notice and a demand
letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge
and interest. The CIR issued a preliminary collection letter to Reyes, followed by a Final
Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was served upon the
estate. Reyes initially protested the notice of levy but then the heirs proposed a compromise
settlement of P1,000,000.00. The CIR rejected Reyess offer, pointing out that since the
estate tax is a charge on the estate and not on the heirs, the latters financial incapacity is
immaterial as, in fact, the gross value of the estate amounting to P32,420,360.00 is more
than sufficient to settle the tax liability. As the estate failed to pay its tax liability within the
deadline, BIR notified Reyes that the subject property would be sold at public auction on
August 8, 2000. Reyes filed a protest with the BIR Appellate Division. Assailing the scheduled
auction sale, she asserted that the assessment, letter of demand, and the whole tax
proceedings against the estate are void ab initio. She offered to file the corresponding estate
tax return and pay the correct amount of tax without surcharge or interest.

Issue: WON the assessment in this case can be used as a basis for the perfection of a tax
compromise.

Held: NO. The 2nd paragraph of Sec. 228 of NIRC is clear and mandatory insofar as taxpayers
shall be informed in writing of the law and the facts on which the assessment is made,

otherwise the assessment shall be void. RA 8424 has already amended the provisions of
Sec. 229 of NIRC on protesting an assessment. The old requirement of merely notifying the
taxpayer of the CIRs findings was changed in 1998 of informing the taxpayer of not only the
law, but also of the facts on which an assessment would be made, otherwise, the
assessment itself would be invalid. Being invalid, the assessment canot be in turn be used
as a basis for the perfection of a tax compromise.

Hence, it is premature to declare the compromise on the tax liability of the estate perfected
and consummated considering that the tax assessment is void. While administrative
agencies, like the BIR, were not bound by procedural requirements, they were still required
by law and equity to observe substantive due process. The reason behind this requirement,
said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively
protest -- the basis of tax assessments against them.7 Since the assessment and the
demand were void, the proceedings emanating from them were likewise void, and any order
emanating from them could never attain finality.
20. CIR vs. First Express Pawnshop Company, Inc.
G.R. Nos. 172045-46; June 16 2009
Facts: CIR issued assessment notices against Respondent for deficiency income tax, VAT and
documentary stamp tax on deposit on subscription and on pawn tickets. Respondent filed its
written protest on the assessments. When CIR did not act on the protest during the 180-day
period, respondent filed a petition before the CTA.
Issue: Has Respondents right to dispute the assessment in the CTA prescribed?
Held: NO. The assessment against Respondent has not become final and unappealable. It
cannot be said that respondent failed to submit relevant supporting documents that would
render the assessment final because when respondent submitted its protest, respondent
attached all the documents it felt were necessary to support its claim. Further, CIR cannot
insist on the submission of proof of DST payment because such document does not exist as
respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on
subscription.
The term "relevant supporting documents" are those documents necessary to support the
legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only

inform the taxpayer to submit additional documents and cannot demand what type of
supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of
the BIR, which may require the production of documents that a taxpayer cannot submit.
Since the taxpayer is deemed to have submitted all supporting documents at the time of
filing of its protest, the 180-day period likewise started to run on that same date.

21. CIR vs. Enron Subic Power Corp

GR No. 166387; January 19, 2009
Facts: The BIR assessed Enron which countered by filing a Petition for Review with the CTA
stating that the assessment disregarded the provisions of the Tax Code and of RR No. 12-99,
when the assessment failed to provide the legal and factual bases of the assessment. The
CTA and CA ruled that the assessment notice must not only refer to the supporting revenue
laws or regulations for the assessment but must also justify their applicability to the factual
milieu of the assessment.
Issue: Is the disputed assessment valid?
Held: NO. The assessment is not valid. Although the revenue examiners discussed their
findings with Respondents representative during the pre-assessment stage, the same,
together with the Preliminary Five-Day Letter and Petitioners Annex G, were not sufficient to
comply with the procedural requirement of due process. The Tax Code provides that a
taxpayer shall be informed (and not merely notified as was the requirement before) in
writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void. The use of the word shall indicates the mandatory nature of the
requirement.

22. TFS Inc. v. CIR

G.R. No. 166829; April 19, 2010

Facts: The CTA rendered a Decision upholding the assessment issued against petitioner in
the amount of P11,905,696.32, representing deficiency VAT for the year 1998, inclusive of
25% surcharge and 20% deficiency interest, plus 20% delinquency interest from February
25, 2002 until full payment, pursuant to Sections 248 and 249(B) of the National Internal
Revenue Code of 1997 (NIRC). The CTA ruled that pawnshops are subject to VAT under
Section 108(A) of the NIRC as they are engaged in the sale of services for a fee,
remuneration or consideration.

Petitioner filed before the Court of Appeals a Petition for Review but it was dismissed by the
CA for lack of jurisdiction in view of the enactment of Republic Act No. 9282 (RA 9282).

Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The petition,
however, was dismissed for having been filed out of time. Petitioner filed a Motion for
Reconsideration but it was denied.
Issues: (1) Whether the Honorable court of Tax Appeal en banc should have given due
course to the petition for review and not strictly applied the technical rules of procedure to
the detriment of justice; (2) Whether or not petitioner is subject to the 10% VAT.

Held: (1) The petition is meritorious. Jurisdiction to review decisions or resolutions issued by
the Divisions of the CTA is no longer with the CA but with the CTA En Banc. This rule is
embodied in Section 11 of RA 9282.
In the instant case, we are constrained to disregard procedural rules because we cannot in
conscience allow the government to collect deficiency VAT from petitioner considering that
the government has no right at all to collect or to receive the same. Besides, dismissing this
case on a mere technicality would lead to the unjust enrichment of the government at the
expense of petitioner, which we cannot permit. Technicalities should never be used as a
shield to perpetrate or commit an injustice.

(2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the amount
ofP11,905,696.32 for taxable year 1998 on the ground that pawnshops are not included in
the coverage of VAT.

We agree. x x x Since petitioner is a non-bank financial intermediary, it is subject to 10%

VAT for the tax years 1996 to 2002; however, with the levy, assessment and collection of
VAT from non-bank financial intermediaries being specifically deferred by law, then
petitioner is not liable for VAT during these tax years. But with the full implementation of the
VAT system on non-bank financial intermediaries starting January 1, 2003, petitioner is liable

for 10% VAT for said tax year. And beginning 2004 up to the present, by virtue of R.A. No.
9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross
receipts from 0% to 5%, as the case may be.

Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the
VAT deficiency assessment issued by the BIR against petitioner has no legal basis and must
therefore be cancelled. In the same vein, the imposition of surcharge and interest must be
deleted.

FORT BONIFACIO
DEVELOPMENT
CORPORATION vs.
COMMISSIONER OF INTERNAL
REVENUE- Transitional Input
Value Added Tax
FACTS:
Petitioner was a real estate developer that bought from the national government a parcel of land that
used to be the Fort Bonifacio military reservation. At the time of the said sale there was as yet no

VAT imposed so Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two
parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes (because the VAT
had already been imposed in the interim), Petitioner claimed transitional input VAT corresponding to
its inventory of land. The BIR disallowed the claim of presumptive input VAT and thereby assessed
Petitioner for deficiency VAT.

ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature
as a real estate dealer and if so (i) is the transitional input VAT applied only to the improvements on
the real property or is it applied on the value of the entire real property and (ii) should there have
been a previous tax payment for the transitional input VAT to be creditable?

HELD:
YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the
improvements but on the value of the entire real property and regardless of whether there was in fact
actual payment on the purchase of the real property or not.

The amendments to the VAT law do not show any intention to make those in the real estate business
subject to a different treatment from those engaged in the sale of other goods or properties or in any
other commercial trade or business. On the scope of the basis for determining the available
transitional input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in
Section 105 of the Tax Code without statutory authority or basis. The transitional input tax credit
operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods, materials and supplies.

[G.R. No. 181371, March 02 : 2011]

CENTRAL LUZON DRUG CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.
DEL CASTILLO, J.:
Factual Antecedents
Petitioner is a duly registered corporation engaged in the retail of medicines and other pharmaceutical
products.[2] It operates 22 drugstores located in Central Luzon under the business name and style of
"Mercury Drug."[3]
On April 13, 2005, petitioner filed with respondent Commissioner of Internal Revenue (CIR) a request for the
issuance of a tax credit certificate in the amount of P32,170,409, representing the 20% sales discounts
allegedly granted to senior citizens for the year 2002.[4]

Under petitioner's Annual ITR and audited financial statements, it had gross sales amounting to
P674,877,125.00. However, the Court cannot ascertain from the documents submitted by petitioner such
as Schedule of Sales (net), Schedule of Prepaid Tax-OSCA, and Special Record Books for the year 2002,
whether its gross sales of P674,877,125.00 included its gross sales to senior citizens of P26,681,354.59.
The Schedule of Prepaid Tax-OSCA, taken from the Special Record Books, showed its daily sales to qualified
senior citizens and the corresponding twenty percent (20%) discount granted by each of the twenty-two
branches of petitioner. Meanwhile, theSchedule of Sales showed only its total monthly sales without
indicating which portion therein were sales to senior citizens. Petitioner should have presented its daily net
sales as reflected in the general ledger, cash receipt books, sales book or any other document whereby the
Court can trace or verify that petitioner's gross sales of P674,877,125.00 for the year 2002 included its
gross sales to senior citizens for the same year.
In sum, though the twenty percent (20%) sales discounts granted to senior citizens on their purchase of
medicines should be treated as a tax credit and petitioner was able to substantiate the same, the instant
petition will not prosper for petitioner's failure to show that its gross sales to senior citizens were declared as
part of its taxable income.
Our Ruling
We grant the Motion to Withdraw.
Section 1, Rule 13 of the Internal Rules of the Supreme Court [24] provides that "[a] case shall be deemed
submitted for decision or resolution upon the filing of the last pleading, brief, or memorandum that the Court
or its Rules require." In the instant case, records show that on August 19, 2009, [25] we resolved to require
petitioner to file a reply. Instead of complying, petitioner opted to file a motion to withdraw. Clearly, by
requiring petitioner to file its Reply, the Court has not yet deemed the case submitted for decision or
resolution. Thus, we resolve to grant petitioner's Motion to Withdraw.
However, we agree with the OSG that the dismissal of the instant case should be with prejudice. By
withdrawing the appeal, petitioner is deemed to have accepted the decision of the CTA. And since the CTA
had already denied petitioner's request for the issuance of a tax credit certificate in the amount of
P32,170,409 for insufficiency of evidence, it may no longer be included in petitioner's future claims.
Petitioner cannot be allowed to circumvent the denial of its request for a tax credit by abandoning its appeal
and filing a new claim. To reiterate, "an appellant who withdraws his appeal x x x must face the consequence

of his withdrawal, such as the decision of the court a quo becoming final and executory."[26]