BIR Must Strictly Follow the Procedures in Executing a

Waiver for Extending the Period of Assessment

Commissioner vs Kudos Metal Corporation

GR 178087, May 5, 2010

Facts:

The BIR reviewed and audited Kudos Metals records after the
latter filed its income tax return. Meanwhile, Pasco, the
corporations accountant, executed two waivers of raising the
defense of prescription so that the BIR may complete its
investigation even after the 3-year period of assessment
expires. The waivers, however, were executed with the
following defects: first, Pasco was not duly authorized to sign
the waiver in behalf of Kudos; second, the date of acceptance
by the Commissioner were not indicated in the first waiver; and
lastly, the fact of receipt by Kudos Metal of its file copy was not
indicated in the original copies of the waivers.
When BIR issued a PAN for the taxable year 1998, followed by
FAN, which was dated September 3, 2003 and received by
Kudos Metal on November 3, 2003, the latter protested the
assessments. The BIR insisted on collecting the tax so Kudos
Metal brought the issue before the CTA, claiming that the
governments right to assess taxes had prescribed.
Issue 1: W/N the notices of assessment were issued by BIR
beyond the 3-year prescriptive period
Yes. The period for assessment prescribed already because
the waivers allowing the extension of the period were void.
Section 222 of the NIRC and RMO-20-90, which lays down the
procedure for the proper execution of waivers, were not
complied with. Most importantly, the date of acceptance by
the BIR was not indicated so there is no way to determine if the
suspension was made within the prescriptive period. The BIR
as a result is now barred from collecting the unpaid taxes from
Kudos Metal.
Issue 2: W/N Kudos Metal is estopped from claiming
prescription by executing the waivers
No. The doctrine of estoppel, which is predicated on equity, is
not applicable here because there is a detailed procedure for
the proper execution of a waiver. The BIR failed to comply with

the requirements of such law, plain and simple. It cannot now

use estoppel to make up for its failure most especially because
a waiver of the statute of limitations, which derogates a
taxpayers right to security against prolonged and
unscrupulous investigations, must be carefully and strictly
construed. ##