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Fitness by Design vs CIR

March 17, 2004: CIR assessed Fitness by Design Inc. for deficiency Income Taxes for the year of
1995 for P 10,647, 529.69
February 1, 2005: CIR issued a warrant of distraint and levy against petitioner which prompted
petitioner to file a Petition for Review before the CTA where he alleged his defense of
prescription based on Sec. 203 of the Tax Code.
CIR answer: Tax return was false and fraudulent for deliberately failing to declare its true sales
of P 7,156,336.08 and failure to file a VAT return for it. Since petitioner failed to file a protest,
it is subject to either distraint or levy. Moreover, it cited Sec. 222 (a) of 1997 Tax Code where
false and fraudulent return with intent to evade tax or failure to file a return prescribe 10 years
after the discovery of the falsity, fraud or omission.
March 10, 2005: BIR filed a criminal complaint before the DOJ against the officers and
accountant of petitioner for violation against the 1977 NIRC.
During the preliminary hearing on the issue of prescription, petitioner's former bookkeeper
attested that his former colleague, CPA Sablan, illegally took custody of accounting records and
turned them over to the BIR.
Petitioner then requested a subpoena ad testificandum for Sablan who failed to appear.
CTA: Denied the motion for issuance of subpoena and disallowed the submission of written
interrogatories to Sablan who is NOT a party to the case nor was his testimony relevant. It also
violates Section 2 of Republic Act No. 2338, as implemented by Section 12 of Finance
Department Order No. 46-66, proscribing the revelation of identities of informers of violations
of internal revenue laws, except when the information is proven to be malicious or
false. Moreover, the subpoena is NOT needed to obtain affidavit of the informer.

ISSUE: W/N BIR can use the information without petitioner's consent


Sec. 5 of the tax code provides that the BIR is authorized to obtain from any person other than
the person whose internal revenue tax liability is subject to audit or investigation and can even
summon any person having possession, custody or care of the books of accountants and other
accounting records containing entries relating to the business of the person liable for tax. This
includes even those which cannot be admitted in a judicial proceeding where the Rules of Court
are strictly observed. CTA case is not a criminal prosecution where he can cross examine the
witness against him. CTA can enforce its order by citing them for indirect contempt.
Republic vs Ablaza

The Collector of Internal Revenue assessed income taxes for the years 1945, 1946,1947 and
1948 on the income tax returns of defendant-appellee to a total P5,254.70.Respondent
requested a reinvestigation of tax liability which was granted by the Collector of Internal
Revenue. Final assessment was fixed at P2,066.56. Respondent protested the assessment
contending that the income taxes are no longer collectible for the reason that
they have already prescribed. As the Collector did not agree to the alleged claim of prescription,
action was instituted for the recovery of the amount assessed. The Court of First Instance
upheld the contention of Ablaza that the action to collect the said income taxes had prescribed.
Thus this appeal.
Issue : Whether or not the claim of prescription by the respondent is valid.
Held : Judgment of the lower court dismissing the action is affirmed.
The law prescribing a limitation of actions for the collection of the income tax is beneficial both
to the Government and to its citizens; to the Government because tax officers would be obliged
to act promptly in the making of assessment, and to citizens because after the lapse of the
period of prescription citizens would have a feeling of security against unscrupulous tax agents
who will always find an excuse to inspect the books
of taxpayers, not to determine the latter's real liability, but to take advantage of everyopportun
ity to molest peaceful, law-abiding citizens. Without such legal defense taxpayers would
furthermore be under obligation to always keep their books and keep them open for inspection
subject to harassment by unscrupulous tax agents. The law on prescription being a remedial
measure should be interpreted liberally in a way conducive to bringing about the beneficial
purpose of affording protection to the taxpayers
CIR vs Primetown property group


On March 11, 1999, Gilbert Yap, the Vice President of Primetown (respondent), applied for
refund of the income tax which they have paid on 1997. According to Yap, the company
accrued lossesamounting to P/ 71,879,228. These losses enabled them to be exempt from
paying income tax, which respondent paid diligently. Respondent was therefore claiming a
refund. Respondents submitted requirements but the petitioners ignored their claim. On April
14, 2000, respondents filed a review in the Court of Tax Appeals. The said Court, however, denied
the petition stating that the petition was filed beyond the 2-year prescriptive period for filing
judicial claim for tax refund.

According to Sec 229 of the National Internal Revenue Code, “no suit or proceedings shall be filed
after the expiration of 2-yearsfrom the date of the payment of the tax regardless of any
supervening cause that may arise after payment. Respondents paid the last income tax return on
April 14, 1998. Article 13 of the New Civil Code states that a year is considered 365 days; months
30 days; days 24-hours; and night from sunset to sunrise. Therefore, according to CTA, the date
of filing a petition fell on the 731st day, which is beyond the prescriptive period.


Whether the two-year/730-day prescriptive period ends on April 13, 2000 or April 14, 2000
considering that the last payment of tax was on April 14, 1998 and that year 2000 was a leap

Whether or not Article 13 of the New Civil Code be repealed by EO 292 Sec 31 Chap 8 Book 1 of
the Administrative Code of 1987.


The Court ruled that when a subsequent law impliedly repeals a prior law, the new law shall
apply. In the case at bar, Art 13 of the New Civil Code, which states that a year shall compose 365
days, shall be repealed by EO 292 Sec 31 of the Administrative Code of 1987, which states that a
year shall be composed of 12 months regardless of the number of days in a month. Therefore,
the two-year prescriptive period ends on April 14, 2000. Respondents filed petition on April 14,
2000 (which is the last day prescribed to file a petition
Butuan Sawmill vs CTA

The Petitioner was granted a legislative franchise under RA 399 for an electric light, heat, and power
system in Butuan and Cabadbaran, Agusan, together with the issuance of a certificate of public
convenience and necessity by the Public Service Commission. However, the City of Butuan issued
Ordinances numbered 11, 131 and 148 imposing a 2% tax on the gross sales or receipts of any business
operated in the city. Butuan Sawmill, Inc. questioned the validity of the taxing ordinance which is
deemed to have impaired the obligation of contract thereby depriving the Petitioner of property
without due process of law. On the other hand, Respondent maintained that it was vested with the
“power to provide for the levy and collection of taxes for general and special purposes” as stipulated in
its charter which was granted in 1950.


W/N the inclusion of the franchise business of Petitioners falls within the coverage of the taxing
ordinances pursuant to the city’s power of taxation.


No. the inclusion of the franchise business of the Butuan Sawmill, Inc. by the City of Butuan is beyond
the broad power of taxation of the city under its charter. Neither could the latter’s power therein
granted be taken as an authority delegated to the city to amend or alter the franchise, considering the
absence of an express or specific grant of power to do so. Where there are two statutes, the earlier
special and the latter general – and the terms of the general are broad enough to include the matter
provided for in the special – the fact that one is special and the other is general creates a presumption
that the special is to be considered as a remaining exception to the general as a general law of the land,
while the other as the law of a particular case.