TAXATION II Whether or not respondent court acted with grave abuse oF
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Based on Atty. Dante Maranan’s Syllabus
Jose Maria College – College of Law
TAX REMEDIES
COMMISSIONER OF CUSTOMS vs. HON.FEDERICO ALIKPALA
G.R. No. L-32542 NOVEMBER 26, 1970
FACTS:
The Collector of Customs of the port of Manila issued several
warrants of seizure and detention against the cargo of the
petitioners consisting of apples, lemons, oranges and grapes,
on the ground that they were imported in violation of Central
Bank circulars in relation to Section 2530-F (which declares
that articles of prohibited importation are subject to
forfeiture) of the Tariff and Customs Code.
In due time, the petitioners were notified of the seizure, but
before they could be heard, respondent Collector of Customs
issued a notice of sale of the imported fruits which was
scheduled for sale on August 10, 1970.
On August 11, 1970, the petitioners filed an action wherein it
was prayed that the Commissioner of Customs and the
Collector of Customs be restrained from carrying out the
seizure and scheduled auction sale of the fruits they imported
from abroad and that the said cargo be released to them under
the surety bonds which they have already submitted to
respondent Collector of Customs. The Court issued an order
setting the hearing of the petition for the issuance of a writ of
preliminary injunction on August 19, 1970, and restraining the
respondents, their agents, representatives and attorneys in
the meantime from carrying out the scheduled auction sale of
the fruits imported by the petitioners, until further orders from
the Court.
The petitioners filed with the Court of Tax Appeals a petition
seeking a review of the action taken by the Collector of
Customs of Manila who ordered the seizure of the imported
fresh fruits, with a prayer that pending final determination of
the case, a writ of preliminary injunction be issued restraining
the Commissioner of Customs and Collector of Customs from
carrying out the seizure. On August 12, 1970, said Court,
however, denied the petition on the ground that it had no
jurisdiction over the subject matter thereof and to grant the
writ of preliminary injunction.
ISSUE:
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
discretion when it granted the writ of preliminary injuncton.
RULING:
YES. Nowhere does the law expressly vest in the Court of Tax
Appeals original jurisdiction to issue writs of prohibition or
injunction independently of, and apart from, an appealed case.
The writ of prohibition or injunction that it may issue under the
provisions of section 11, Republic Act No. 1125, to suspend the
collection of taxes, is merely ancillary to and in furtherance of
its appellate jurisdiction in the cases mentioned in section 7 of
the Act. The power to issue the writ exists only in cases
appealed to it. This is reflected in the explanatory note of the
bill (House No. 175), creating the Court of Tax Appeal.
Respondent Court of First Instance assumed jurisdiction over
the petition before it on the ground that "the question
presented for resolution (was) whether there was absence of
due process," citing our decision in Nadeco vs. Collector of
Customs, G.R. No. L-19180, Oct. 31, 1969. The said Court
found: "Counsel for the respondents admitted that the
petitioners have not been heard on the seizure proceedings
and the imported cargo have already been advertised for sale
and some would have been sold had not this Court issued a
restraining order." Due notice and hearing, besides being an
inherent element of due process, is provided for in Section
2303 of the Tariff and Customs Code, which requires the
Collector to give the owner or importer of the property written
notice of the seizure and an opportunity to be heard in relation
to the delinquency which was the occasion for such seizure, as
well as in Section 2601, which directs that seized property,
other than contraband, shall be subject to sale after liability to
sale shall have been established by proper administrative or
judicial proceedings in conformity with the provisions of said
Code.
In view of the foregoing, we hold that respondent Court of First
Instance had jurisdiction to take cognizance of the petition for
injunction before it. The remedy prayed for was one in equity,
which the petitioner below tried to seek in the Court of Tax
Appeals, but was denied on the ground that no appealable
decision had yet been rendered by the Collector and the
Commissioner of Customs.
The jurisdiction of respondent Court was not invoked to
determine the validity of the seizure proceedings, which are
pending before the Collector of Customs and regarding which
an appeal could be eventually taken only to the Tax Court, but
rather to stop the projected auction sale of the goods in
question and secure the release thereof under surety bond,
without prejudice to the main issue concerning the validity of
the seizure. Such relief is interlocutory in nature, and is
sanctioned by Section 2301 of the Tariff and Customs Code,
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which provides that "upon making any seizure the Collector
shall issue a warrant for the detention of the property; but if
the owner or importer desires to secure the release of the
property for legitimate use, the Collector may surrender it
upon the filing of a sufficient bond, in an amount to be fixed
by him, conditioned for payment of the appraised value of the
article and/or any fine, expenses and costs which may be
adjudged in the case."
COMMISSIONER OF INTERNAL REVENUE (CIR) vs. ISABELA
CULTURAL CORPORATION (ICC)
G.R. No. 135210 July 11, 2001
FACTS
On February 23, 1990, ICC received from CIR 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.
In a letter, dated March 22, 1990, filed with the CIR’S office on
March 23, 1990, ICC requested a reconsideration of the subject
assessment. Supplemental to its protest was a letter, dated
April 2, 1990, to which 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
CIR would only have until April 5, 1991 within which to asses
and collect the taxes that may be found due from ICC after the
re-investigation.
On February 9, 1995, ICC received from CIR a Final Notice
Before Seizure, dated December 22, 1994. In said letter, CIR
demanded payment of the subject assessment within ten (10)
days from receipt thereof. Otherwise, failure on its part would
constrain CIR to collect the subject assessment through
summary remedies.
ICC considered said final notice of seizure as CIR’S final
decision. Hence, the instant petition for review filed with this
Court on March 9, 1995.
The CTA having rendered judgment dismissing the petition, ICC
filed the instant petition anchored on the argument that CIR’S
issuance of the Final Notice Before Seizure constitutes its
decision on ICC’S request for reinvestigation, which the ICC
may appeal to the CTA.
ISSUE
Whether the Final Notice Before Seizure dated February 9,
1995 signed by Acting Chief Revenue Collection Officer
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
Milagros Acevedo against ICC constitutes the final decision of
the CIR appealable to the CTA.
RULING
YES. 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 taxpayer's request for reconsideration. Such
letter amounts to a final decision on a disputed assessment
and is thus appealable to the Court of Tax Appeals
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
taxpayer's 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 CIR's 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.
ICC 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 commissioner's 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 CIR's final act
regarding the request for reconsideration.
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:
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"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."
In this case, the said period of 180 days had already lapsed
when ICC filed its request for reconsideration on March 23,
1990, without any action on the part of the CIR.
PETRONILA C. TUPAZ v. HONORABLE BENEDICTO B. ULEP.
G.R. No. 127777. October 1, 1999
FACTS:
Petronila Tupaz and her late husband, Jose Tupaz, Jr., as
corporate officers of El Oro Engravers Corp., were charged of
nonpayment of deficiency corporate income tax for the year
1979, in violation of Sec. 51(b) in relation to Sec. 73 of the 1977
Tax Code, which tax return was filed in April 1980. On July 16,
1984, the BIR issued a notice of assessment. Tupaz contends
that the July 16, 1984 assessment was made out of time.
Tupaz avers that while Sec. 318 and 319 of the 1977 NIRC
provide a 5-year period of limitation for the assessment and
collection of internal revenue taxes, BP700, enacted on
February 22, 1984, amended the two sections and reduced the
period to three (3) years to assess the tax liability, counted
from the last day of filing the return or from the date the return
is filed, whichever comes later. Since the tax return was filed
in April 1980, the assessment made on July 16, 1984 was
beyond the 3-year prescriptive period.
ISSUE:
Was the government’s right to assess already prescribed?
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
HELD:
NO. The shortened period of 3 years prescribed under BP700
is not applicable to Tupaz.
BP700, effective April 5, 1984, specifically states that the
shortened period of 3 years shall apply to assessments and
collections of internal revenue taxes beginning taxable year
1984. Assessments made on or after April 5, 1984 are
governed by the 5-year period if the taxes assessed cover
taxable years prior to January 1, 1984. The deficiency income
tax under consideration is for taxable year 1979. Thus, the
period of assessment is still 5 years, under the old law. The
income tax return was filed in April 1980. Hence, the July 16,
1984 tax assessment was issued within the prescribed period
of 5 years, from the last day of filing the return, or from the
date the return is filed, whichever comes later.
At the outset, it must be stressed that “internal revenue taxes
are self-assessing and no further assessment by the
government is required to create the tax liability. An
assessment, however, is not altogether inconsequential; it is
relevant in the proper pursuit of judicial and extrajudicial
remedies to enforce taxpayer liabilities and certain matters
that relate to it, such as the imposition of surcharges and
interest, and in the application of statute of limitations and in
the establishment with tax liens.”
COMMISSIONER OF INTERNAL REVENUE vs. METRO STAR
SUPERAMA, INC.
G.R. No. 185371, December 8, 2010
FACTS:
Petitioner is a domestic corporation duly organized and
existing by virtue of the laws of the Republic of the Philippines.
On January 26, 2001, the Regional Director of Revenue Region
No. 10, Legazpi City, issued Letter of Authority to examine
petitioner’s books of accounts and other accounting records
for income tax and other internal revenue taxes for the taxable
year 1999. For petitioner’s failure to comply with several
requests for the presentation of records and Subpoena Duces
Tecum, the investigation proceeded based on the best
evidence obtainable preparatory to the issuance of
assessment notice. On November 8, 2001, Revenue District
Officer issued a Preliminary 15-day Letter, which petitioner
received on November 9, 2001. On April 11, 2002, petitioner
received a Formal Letter of Demand dated April 3, 2002.
However, it denied that it received a Preliminary Assessment
Notice (PAN) and claiming that it was not accorded due
process, as provided under the National Internal Revenue
Code and Revenue Regulations No. 12-99 with regard to the
issuance of a deficiency tax assessment.
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ISSUE:
Whether CIR complied with the due process requirement
under the NIRC
RULING:
The sending of a PAN to taxpayer to inform him of the
assessment made is but part of the "due process requirement
in the issuance of a deficiency tax assessment," the absence of
which renders nugatory any assessment made by the tax
authorities. The use of the word "shall" in subsection 3.1.2
describes the mandatory nature of the service of a PAN. The
persuasiveness of the right to due process reaches both
substantial and procedural rights and the failure of the CIR to
strictly comply with the requirements laid down by law and its
own rules is a denial of Metro Star’s right to due process. Thus,
for its failure to send the PAN stating the facts and the law on
which the assessment was made as required by Section 228 of
R.A. No. 8424, the assessment made by the CIR is void. The
Court likewise added that the issuance of a Pre-Assessment
Notice is a mandatory requirement save only on specified
instances. The old rule laid down in CIR vs. Menguito that only
the FAN is mandatory no longer applies since the same was
ruled upon based on the old provision.
BPI vs. CIR
G.R. No. 174942; March 7, 2008
DOCTRINE:
A request for reinvestigation, unacted upon by the BIR, does
not suspend the running of the period for filing an action for
collection. It must be shown that the request was granted or
denied for the suspension of the action to kick in.
FACTS:
BPI is the surviving bank after its merger with Far East Bank.
CIR issued a pre assessment notice (PAN) on November 26,
1986. BPI requested for the details of the amounts alleged in
the 1986 deficiency taxes mentioned in the PAN.
CIR issued an assessment/ demand notices for deficiency
withholding tax at source and DST involving the amounts of
P190,752,860.82 and P24,587,174.63 for the years 1982 to
1986.
On April 20, 1989, BPI filed a protest on the
demand/assessment notices. BPI requested for an opportunity
to present or submit additional documentation on the swap
transactions in connection with the reinvestigation of the
assessment. BPI executed several Waivers of Statutes of
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
Limitations, the last of which was effective until December 31,
1994.
On Aug. 9, 2002, CIR issued a final decision and ordered the
cancellation of the deficiency withholding tax but the DST
deficiency tax was retained.
BPI received the notice of the decision on January 15, 2003.
Thereafter, BPI filed a Petition for Review before the CTA. CTA
denied the petition. Hence, BPI’s recourse to the SC.
BPI Contentions:
The right of the government to collect the DST had already
prescribed because the CIR failed to issue any reply granting
BPI’s request for reinvestigation, warranting the conclusion
that prescription had already set in.
CIR was not precluded from collecting the deficiency within 3
years from the time the notice of assessment was issued or
even until the expiration of the last waiver of the statute of
limitations signed by BPI.
CIR Contentions:
CIR (thru OSG), claims that the prescriptive period was tolled
by the protest letters filed by BPI which were granted and
acted upon by the CIR. Thus, it was only upon BPI’s receipt of
the Aug 2002 decision that the period to collect commenced
to run again.
Citing CIR vs. Suyoc, BPI is already estopped from raising the
defense of prescription in view of its repeated requests for
reinvestigation which allegedly included the CIR to delay the
collection of the assessed tax.
BPI argues against the application of the Suyoc case on two
points: first, it never induced the CIR to postpone tax
collection; second, its request for reinvestigation was not
categorically acted upon by the CIR within the 3-year collection
period after assessment. BPI maintains that it did not receive
any communication from the CIR in reply to its protest letters.
ISSUE(S):
1. WON the collection of the deficiency DST is barred by
prescription (YES)
2. WON BPI is liable for DST on its SWAP loan transactions (NO,
since the action prescribed)
HELD:
1. Yes. The collection of the deficiency DST is barred by
prescription.
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The CIR has three years from the date of the actual filing of the
tax return to assess a national internal revenue tax or to
commence court proceedings for the collection thereof
without an assessment. When it validly issues an assessment
within the three-year period, it has another three years within
which to collect the tax due by distraint, levy, or court
proceeding. The assessment of the tax is deemed made and
the 3 year period for collection of the assessed tax begins to
run on the date the assessment notice had been released,
mailed, or sent to the taxpayer.
As applied to the present case, the CIR had three (3) years from
the time he issued assessment notices to BPI on 7 April 1989
or until 6 April 1992 within which to collect the deficiency DST.
However, it was only on 9 August 2002 that the CIR ordered
BPI to pay the deficiency.
In order to determine whether the prescriptive period for
collecting the tax deficiency was effectively tolled by BPI’s
filing of the protest letters dated 20 April and 8 May 1989 as
claimed by the CIR, we need to examine Section 320 of the Tax
Code of 1977. In order to suspend the running of the
prescriptive periods for assessment and collection, the request
for reinvestigation must be granted by the CIR.
In BPI v. Commissioner of Internal Revenue, the Court
emphasized the rule that the CIR must first grant the request
for reinvestigation as a requirement for the suspension of the
statute of limitations. The Court said:
In the case of Republic of the Philippines v. Gancayco, taxpayer
Gancayco requested for a thorough reinvestigation of the
assessment against him and placed at the disposal of the
Collector of Internal Revenue all the evidences he had for such
purpose; yet, the Collector ignored the request, and the
records and documents were not at all examined. Considering
the given facts, this Court pronounced that—
x x x The act of requesting a reinvestigation alone does not
suspend the period. The request should first be granted, in
order to effect suspension. (Collector v. Suyoc Consolidated,
supra; also Republic v. Ablaza, supra). Moreover, the Collector
gave appellee until April 1, 1949, within which to submit his
evidence, which the latter did one day before. There were no
impediments on the part of the Collector to file the collection
case from April 1, 1949…
The Court went on to declare that the burden of proof that the
request for reinvestigation had been actually granted shall be
on the CIR. Such grant may be expressed in its communications
with the taxpayer or implied from the action of the CIR or his
authorized representative in response to the request for
reinvestigation.
There is nothing in the records of this case which indicates,
expressly or impliedly, that the CIR had granted the request for
reinvestigation filed by BPI. What is reflected in the records is
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
the piercing silence and inaction of the CIR on the request for
reinvestigation, as he considered BPI’s letters of protest to be.
In this case, BPI’s letters of protest and submission of
additional documents pertaining to its SWAP transactions,
which were never even acted upon, much less granted, cannot
be said to have persuaded the CIR to postpone the collection
of the deficiency DST.
The inordinate delay of the CIR in acting upon and resolving
the request for reinvestigation filed by BPI and in collecting the
DST allegedly due from the latter had resulted in the
prescription of the government’s right to collect the
deficiency.
2. No, BPI is not liable because the action already prescribed.
Given the prescription of the government’s claim, we no
longer deem it necessary to pass upon the validity of the
assessment.
COMMISSIONER OF INTERNAL REVENUE V. ENRON SUBIC
POWERCORPORATION
G.R. NO. 166387 JANUARY 19, 2009
FACTS:
Enron, a domestic corporation registered with the Subic Bay
Metropolitan Authority as a freeport enterprise, filed its
annual income tax return for the year 1996 on April 12, 1997.
It indicated a net loss of P7,684,948. Enron received from the
CIR a formal assessment notice requiring it to pay the alleged
deficiency income tax of P2,880,817.25 for the taxable year
1996. Enron protested this deficiency tax assessment.
Due to the non-resolution of its protest within the 180-day
period, Enron filed a petition for review in the Court of Tax
Appeals (CTA). It argued that the deficiency tax assessment
disregarded the provisions of Section 228 of the National
Internal Revenue Code (NIRC), as amended, and Section 3.1.4
of Revenue Regulations (RR) No. 12-99 by not providing the
legal and factual bases of the assessment. Enron likewise
questioned the substantive validity of the assessment.
The CTA granted Enron’s petition and ordered the cancellation
of its deficiency tax assessment for the year 1996. The CTA
reasoned that the assessment notice sent to Enron failed to
comply with the requirements of a valid written notice under
Section 228 of the NIRC and RR No. 12-99. The CIR appealed
the CTA decision to the CA but the CA affirmed it.
ISSUE:
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Whether or not the notice of assessment complied with the
requirements of the NIRC and RR No. 12-99.
RULING:
No. A notice of assessment is:
[A] declaration of deficiency taxes issued to a [t]axpayer who
fails to respond to a Pre-Assessment Notice (PAN) within the
prescribed period of time, or whose reply to the PAN was
found to be without merit. The Notice of Assessment shall
inform the [t]axpayer of this fact, and that the report of
investigation submitted by the Revenue Officer conducting the
audit shall be given due course.
The formal letter of demand calling for payment of the
taxpayer’s deficiency tax or taxes shall state the fact, the law,
rules and regulations or jurisprudence on which the
assessment is based, otherwise the formal letter of demand
and the notice of assessment shall be void.
Section 228 of the NIRC provides that the taxpayer shall be
informed in writing of the law and the facts on which the
assessment is made. Otherwise, the assessment is void. To
implement the provisions of Section 228 of the NIRC, RR No.
12-99 was enacted. Section 3.1.4 of the revenue regulation
reads:
3.1.4. Formal Letter of Demand and Assessment Notice. – The
formal letter of demand and assessment notice shall be issued
by the Commissioner or his duly authorized
representative. The letter of demand calling for payment of
the taxpayer’s deficiency tax or taxes shall state the facts, the
law, rules and regulations, or jurisprudence on which the
assessment is based, otherwise, the formal letter of demand
and assessment notice shall be void. The same shall be sent
to the taxpayer only by registered mail or by personal delivery.
xxx (emphasis supplied)
The advice of tax deficiency, given by the CIR to an employee
of Enron, as well as the preliminary five-day letter, were not
valid substitutes for the mandatory notice in writing of the
legal and factual bases of the assessment. These steps were
mere perfunctory discharges of the CIR’s duties in correctly
assessing a taxpayer. The requirement for issuing a preliminary
or final notice, as the case may be, informing a taxpayer of the
existence of a deficiency tax assessment is markedly different
from the requirement of what such notice must contain. Just
because the CIR issued an advice, a preliminary letter during
the pre-assessment stage and a final notice, in the order
required by law, does not necessarily mean that Enron was
informed of the law and facts on which the deficiency tax
assessment was made.
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
The law requires that the legal and factual bases of the
assessment be stated in the formal letter of demand and
assessment notice. Thus, such cannot be presumed.
Otherwise, the express provisions of Article 228 of the NIRC
and RR No. 12-99 would be rendered nugatory. The alleged
“factual bases” in the advice, preliminary letter and “audit
working papers” did not suffice. There was no going around
the mandate of the law that the legal and factual bases of the
assessment be stated in writing in the formal letter of demand
accompanying the assessment notice.
CIR VS. PRIMETOWN PROPERTY GROUP, INC
G.R. NO. 162155, AUGUST 28, 2007
FACTS:
Gilbert Yap, vice chair of respondent Primetown Property
Group, Inc., applied for the refund or credit of income tax
respondent paid in 1997.He claimed that because explained
because respondent suffered losses, it was not liable for
income taxes. Nevertheless, respondent paid its quarterly
corporate income tax and remitted creditable withholding tax
from real estate sales to the BIR in the total amount of
P26,318,398.32. Therefore, respondent was entitled to tax
refund or tax credit.
Revenue officer required respondent to submit additional
documents to support its claim. Respondent complied but its
claim was not acted upon. It filed a petition for review in the
CTA.
However, the CTA the petition as it was filed beyond the two-
year prescriptive period for filing a judicial claim for tax refund
or tax credit as provided in Sec. 229 of the NIRC. In addition,
the tax court applied Article 13 of the Civil Code which states:
Art. 13. When the law speaks of years, months, days or nights,
it shall be understood that years are of three hundred sixty-
five days each….
Thus, 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.
Respondent moved for reconsideration but it was denied.
Hence, it filed an appeal in the CA and the CA reversed the
decision of the CTA. Petitioners moved for reconsideration but
it was denied. Thus, this appeal.
ISSUE:
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 Whether or not Art. 13 of the Civil Code should be applicable
in computing the legal periods or Sec. 31 of the Administrative
Code of 1987
RULING:
E.O. 292 should be applied in computing the legal period being
the more recent law, governs the computation of legal periods.
Lex posteriori derogat priori.
Both Article 13 of the Civil Code and Section 31, Chapter VIII,
Book I of the Administrative Code of 1987 deal with the same
subject matter — the computation of legal periods. Under the
Civil Code, a year is equivalent to 365 days whether it be a
regular year or a leap year. Under the Administrative Code of
1987, however, a year is composed of 12 calendar months.
Needless to state, under the Administrative Code of 1987, the
number of days is irrelevant.
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.
NAMARCO vs MIGUEL TECSON
G.R. no L-20131 August 27 1969
FACTS:
December 21, 1965, National Marketing Corporation filed a
complaint, docketed as civil case no. 63701 on the same court,
as successor of the Price Stabilization Corporation, against the
same defendant from 10 years ago (December 21, 1955, Price
Stabilization Corporation vs. Tecson). Defendant Miguel
Tecson moved to dismiss the said complaint upon the ground
lack of jurisdiction over the subject matter of that and
prescription of action.
More than ten years have passed a year is a period of 365 days
(Art. 13, CCP). Plaintiff forgot that 1960 and 1964 were both
leap years so that when this present case was filed it was filed
two days too late.
The lower court, then, issued an order of dismissal with
regards the article 13 of the civil code. Pursuant to Art. 1144(3)
of our Civil Code, an action upon a judgment “must be brought
within ten years from the time the right of action accrues,” the
issue thus confined to the date on which ten years from
December 21, 1955 had expired.
However, National Marketing Corporation insists that the
same “is erroneous because a year means a calendar year.
There is no question that when it is not a leap year, December
21 to December 21 of the following year is one year. The case
reached its conclusion with the appellant’s theory that
contravenes the explicit provision of Article 13 of the civil code.
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
ISSUE:
W/N the present action is barred by the statute of limitations.
HELD:
YES. Pursuant to Art. 1144 (3), NCC, an action for judgement
must be brought w/in 10 yrs from the time the judgment
sought to be revived has become final. This in turn, took place
on 12/21/55 or 30 days from notice of the judgment-- w/c was
received by defendant. on 10/21/55-- no appeal having been
taken therefrom. The issue is thus confined to the date on w/c
the 10 yrs from 12/21/55 expired. Plaintiff alleges that it was
12/21/65, but appellee maintains otherwise, because. :when
the law speaks of years xxx it shall be understood that years
are of 365 days each"-- and, in 1960 and 1964 being leap years,
so that 10 yrs of 365 days each, or an aggregate of 365 days,
from 12/21/55, expired on 12/19/65.
Plaintiff.-appellant further insists that there is no question that
when it is not a leap year, 12/21 to 12/21 of the following year
is one year. If the extra day in a leap year is not a day of the
year, because. it is the 366th day, then to what year does it
belong? Certainly, it must belong to the year where it falls, and
therefore, that the 366 days constitute one yr.
The very conclusion thus reached by appellant shows that its
theory contravenes the explicit provision of Art. 13 limiting the
connotation of each "year"-- as the term is used in our laws--
to 365 days.
The action to enforce a judgment which became final on
December 21, 1955 prescribes in 10 years. Since the Civil Code
computes "years" in terms of 365 days each, the action has
prescribed on December 19, 1955, since the two intervening
leap years added two more days to the computation. It is not
the calendar year that is considered.
CIR vs. AZUCENA REYES
G.R. No. 159694 JANUARY 27, 2006
FACTS:
By virtue of a sworn affidavit for reward by one Abad, an
investigation was conducted by BIR on the estate of the
deceased Maria Tancinco who died in 1993 leaving a
residential lot and old house in Dasmarinas, Makati. Without
submitting a preliminary finding report, a Letter of Assesment
was issued and received by respondent Reyes, one of the heirs
on 14 March 1997.
Then on 12 Feb 1998, a PAN was issued against the estate, and
a FAN as well as demand letter was issued on 22 April 1998 for
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the assessment of P14.9M for estate tax of the estate of Maria
Tancinco. On March 11, 1999, the heirs proposed a
compromise settlement of P1,000,000.00.
During those dates, RA 8424 Tax Reform Act was already in
effect. RA 8424 stated that the taxpayer must be informed of
both the law and facts on which the assessment was based.
The notice required under the old law was no longer sufficient
under the new law. First, RA 8424 has already amended the
provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR’s
findings was changed in 1998 to 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.
Due to failure to pay tax on the deadline BIR notified on June
6, 2000 that the subject property would be sold at public
auction on August 8, 2000. Hence the petition for review filed
by Reyes in CTA and a TRO to desist and refrain from
proceeding with the auction sale of the subject property or
from issuing a warrant pending determination of the case
and/or unless a contrary order is issued.
The CIR filed a motion saying CTA has no jurisdiction since the
assessment against the estate is already final and executory;
and (ii) that the petition was filed out of time
The CTA Ruled in favour of CIR ordering Reyes to pay the estate
tax amounting to 19M. CTA ratiocinated that there can only be
a perfected and consummated compromise of the estate’s tax
liability, if the NEB has approved Reyes’ application for
compromise in accordance with RR No. 6-2000, as
implemented by RMO No. 42-2000.
ISSUE:
1.Whether or not the assessment against the estate is valid.
2.Whether the compromise entered into is valid.
RULING:
1. NO. Under the present provisions of the Tax Code and
pursuant to elementary due process, taxpayers must be
informed in writing of the law and the facts upon which a tax
assessment is based; otherwise, the assessment is void. Being
invalid, the assessment cannot in turn be used as a basis for
the perfection of a tax compromise. This was clear and
mandatory under Section 228.
Reyes was not informed in writing of the law and the facts on
which the assessment of estate taxes had been made. She was
merely notified of the findings by the CIR, who had simply
relied upon the provisions of former Section 22913 prior to its
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
amendment by Republic Act (RA) No. 8424, otherwise known
as the Tax Reform Act of 1997.
To be simply informed in writing of the investigation being
conducted and of the recommendation for the assessment of
the estate taxes due is nothing but a perfunctory discharge of
the tax function of correctly assessing a taxpayer. The act
cannot be taken to mean that Reyes already knew the law and
the facts on which the assessment was based. It does not at all
conform to the compulsory requirement under Section 228.
Moreover, the Letter of Authority received by respondent on
March 14, 1997 was for the sheer purpose of investigation and
was not even the requisite notice under the law.
2. It would be premature for this Court to declare that the
compromise on the estate tax liability has been perfected and
consummated, considering the earlier determination that the
assessment against the estate was void. Nothing has been
settled or finalized. Under Section 204(A) of the Tax Code,
where the basic tax involved exceeds one million pesos or the
settlement offered is less than the prescribed minimum rates,
the compromise shall be subject to the approval of the NEB
composed of the petitioner and four deputy commissioners.
Finally, as correctly held by the appellate court, this provision
applies to all compromises, whether government-initiated or
not. Ubi lex non distinguit, nec nos distinguere debemos.
Where the law does not distinguish, we should not distinguish.
LA FLOR DELA ISABELA, INC. V CIR
CTA EN BANC NO. 672, FEBRUARY 2, 2012
FACTS
La Flor is a domestic corporation. In 2000 the letter of
authority for assessment for taxable year 1999 was issued by
the BIR. From 2002 to 2005, La Flor executed five Waivers to
extend BIR’s period to assess the taxes. The Formal Letter of
Demand (FDL) for the tax deficiency was received by La Flor
before the expiration of the 5th waiver in 2005.
La Flor immediately filed a protest against the FDL. It also filed
a supplemental protest less than two weeks after. After 2
years, June 2007, La Flor received a Final Decision on Disputed
Assessments (FDDA) indicating its deficiency taxes in the total
amount of P10,460,217.23.
On October 2007, petitioner filed an application for tax
amnesty. Ten days later it also filed an application for
compromise agreement pursuant to Section 204 of the Tax
Code. La Flor received an undated Warrant of Distraint and/or
Levy (WDL) issued by BIR.
ISSUE
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Whether La Flor can still validly assail the assessment.
RULING
NO. If a protest is not acted upon by respondent within 180
days from submission of supporting documents, the taxpayer
adversely affected by such inaction may appeal to the CTA
within 30 days from the lapse of the 180-day period. La Flor
should have appealed to the CTA when it did not receive action
on its protest immediately.
To reiterate, the failure of a taxpayer to file a petition for
review with the Court of Tax Appeals within the statutory
period rendered the disputed assessment final, executory and
demandable, thereby precluding the said taxpayer from
interposing the defenses of legality or validity of the
assessment and prescription of the Government's right to
assess. Indeed, any objection against the assessment should
have been pursued following the avenue paved in Section 229
(now Section 228) of the NIRC on protests on assessments of
internal revenue taxes.
FERDINAND R. MARCOS II vs. COURT OF APPEALS, THE
COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE
and HERMINIA D. DE GUZMAN
GR No. 120880, June 5, 1997
FACTS:
Ferdinand “Bongbong” Marcos II sought for the reversal of the
ruling of the Court of Appeals granting CIR's petition to levy the
properties of the late Pres. Ferdinand Marcos to cover the
payment of his tax delinquencies during the period of his exile
in the US.
The Marcos family was assessed by the BIR after it failed to file
estate tax returns. However the assessment were not
protested administratively by the heirs of the late President,
hence it became final and executory after the period for filing
of appeal has elapsed.
Bongbong Marcos now contends that the properties could not
be levied to cover the tax dues because they are still pending
probate with the probate court, and settlement of tax
deficiencies could not be had, unless there is an order by the
probate court or until the probate proceedings are terminated.
He also pointed out that applying Memorandum Circular No.
38-68, the BIR's Notices of Levy on the Marcos’ properties
were issued beyond the allowed period, and are therefore null
and void.
ISSUE:
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
Were the contentions of Bongbong Marcos correct?
RULING:
No. The deficiency income tax assessments and estate tax
assessment are already final and unappealable -and-the
subsequent levy of real properties is a tax remedy resorted to
by the government, sanctioned by Section 213 and 218 of the
National Internal Revenue Code. This summary tax remedy is
distinct and separate from the other tax remedies (such as
Judicial Civil actions and Criminal actions), and is not affected
or precluded by the pendency of any other tax remedies
instituted by the government.
The approval of the court, sitting in probate, or as a settlement
tribunal over the deceased's estate is not a mandatory
requirement in the collection of estate taxes. It cannot
therefore be argued that the Tax Bureau erred in proceeding
with the levying and sale of the properties allegedly owned by
the late President, on the ground that it was required to seek
first the probate court's sanction. 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.
On the contrary, under Section 87 of the NIRC, it is the probate
or settlement court which is bidden not to authorize the
executor or judicial administrator of the decedent's estate to
deliver any distributive share to any party interested in the
estate, unless it is shown a Certification by the Commissioner
of Internal Revenue that the estate taxes have been paid. This
provision disproves Bongbong Marcos' contention that it is the
probate court which approves the assessment and collection
of the estate tax.
On the issue of prescription, the omission to file an estate tax
return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to Bongbong Marcos'
cause, as under Sec. 223 of the NIRC, in case of failure to file a
return, the tax may be assessed at anytime within 10 years
after the omission, and any tax so assessed may be collected
by levy upon real property within 3 years (now 5 years)
following the assessment of the tax. Since the estate tax
assessment had become final and unappealable by the
Bongbong Marcos's default as regards protesting the validity
of the said assessment, there is no reason why the BIR cannot
continue with the collection of the said tax.
COMMISSIONER OF INTERNAL REVENUE v. CENTRAL LUZON
DRUG CORPORATION
G.R. NO. 159647, April 15, 2005
FACTS:
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Respondents operated six drugstores under the business name
Mercury Drug. From January to December 1996 respondent
granted 20% sales discount to qualified senior citizens on their
purchases of medicines pursuant to RA 7432.
On April 15, 1997, respondent filed its annual Income Tax
Return for taxable year 1996 declaring therein net losses. On
Jan. 16, 1998 respondent filed with petitioner a claim for tax
refund/credit of ₱ 904,769.00 allegedly arising from the 20%
sales discount. Unable to obtain affirmative response from
petitioner, respondent elevated its claim to the Court of Tax
Appeals. The court dismissed the same but upon
reconsideration, the latter reversed its earlier ruling and
ordered petitioner to issue a Tax Credit Certificate in favor of
respondent citing that Sec. 229 of RA 7432 deals exclusively
with illegally collected or erroneously paid taxes but that there
are other situations which may warrant a tax credit/refund.
ISSUE:
Whether the respondent, despite incurring a net loss, may still
claim the 20% sales discount as a tax credit
RULING:
Yes. Sec. 4a of RA 7432 grants to senior citizens the privilege of
obtaining a 20% discount on their purchase of medicine from
any private establishment in the country. The latter may then
claim the cost of the discount as a tax credit. Such credit can
be claimed even if the establishment operates at a loss.
A tax credit generally refers to an amount that is “subtracted
directly from one’s total tax liability.” It is an “allowance
against the tax itself” or “a deduction from what is owed” by a
taxpayer to the government.
A tax credit should be understood in relation to other tax
concepts. One of these is tax deduction – which is subtraction
“from income for tax purposes,” or an amount that is “allowed
by law to reduce income prior to the application of the tax rate
to compute the amount of tax which is due.” In other words,
whereas a tax credit reduces the tax due, tax deduction
reduces the income subject to tax in order to arrive at the
taxable income.
A tax credit is used to reduce directly the tax that is due, there
ought to be a tax liability before the tax credit can be applied.
Without that liability, any tax credit application will be useless.
There will be no reason for deducting the latter when there is,
to begin with, no existing obligation to the government.
However, as will be presented shortly, the existence of a tax
credit or its grant by law is not the same as the availment or
use of such credit. While the grant is mandatory, the
availment or use is not. If a net loss is reported by, and no other
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
taxes are currently due from, a business establishment, there
will obviously be no tax liability against which any tax credit
can be applied. For the establishment to choose the
immediate availment of a tax credit will be premature and
impracticable.
COMMISSIONER OF INTERNAL REVENUE vs. BICOLANDIA
DRUG CORPORATION (formerly known as ELMAS DRUG CO.)
DOCTRINE:
In cases of conflict between the law and the rules and
regulations implementing the law, the law shall always prevail.
Should Revenue Regulations deviate from the law they seek to
implement, they will be struck down.
A tax credit reduces the taxpayer's liability, while a deduction
reduces taxable income upon which the tax liability is
calculated. A credit differs from deduction to the extent that
the former is subtracted from the tax while the latter is
subtracted from income before the tax is computed.
FACTS:
IRA 7432, otherwise known as "An Act to Maximize the
Contribution of Senior Citizens to Nation Building, Grant
Benefits and Special Privileges and For Other Purposes,"
granted senior citizens several privileges, one of which was
obtaining a 20% discount from all establishments relative to
the use of transportation services, hotels and similar lodging
establishments, restaurants and recreation centers and
purchase of medicines anywhere in the country.
The law also provided that the private establishments giving
the discount to senior citizens may claim the cost as tax credit.
In compliance with the law, the BIR issued RR 2-94, which
defined "tax credit" as “the amount representing the 20%
discount granted to a qualified senior citizen by all
establishments relative to their utilization of transportation
services, hotels and similar lodging establishments,
restaurants, halls, circuses, carnivals and other similar places
of culture, leisure and amusement, which discount shall be
deducted by the said establishments from their gross income
for income tax purposes and from their gross sale for value-
added tax or other percentage tax purposes”.
BICOLANDIA DRUG Corporation, a corporation engaged in the
business of retailing pharmaceutical products under the
business style of "Mercury Drug," granted the 20% sales
discount to qualified senior citizens purchasing their medicines
in compliance with RA 7432.
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On April 15, 1996, Bicolandia Drug filed its 1995 Corporate
Annual Income Tax Return declaring a net loss position with nil
income tax liability.
Subsequently, it filed a claim for tax refund or credit in the
amount of PhP 259,659.00 with the BIR Appellate Division
because its net losses for the year 1995 prevented it from
benefiting from the treatment of sales discounts as a
deduction from gross sales during the said taxable year.
It alleged that the CIR erred in treating the 20 percent sales
discount given to senior citizens as a deduction from its gross
income for income tax purposes or other percentage tax
purposes rather than as a tax credit.
ISSUE:
Is the 20 percent sales discount granted to qualified senior
citizens pursuant to RA 7432 claimable as a tax credit or as a
deduction from gross income or gross sales? (Tax credit)
RULING:
1) RR 2-94 INCORRECTLY REDFEINED "TAX CREDIT" AS "TAX
DEDUCTION"
RR 2-94 equated "tax credit" with "tax deduction. Under said
RR, the tax credit was defined as the discount itself.
This is contrary to the definition in Black's Law Dictionary,
which defined tax credit as: “An amount subtracted from an
individual's or entity's tax liability to arrive at the total tax
liability. A tax credit reduces the taxpayer's liability x x x,
compared to a deduction which reduces taxable income upon
which the tax liability is calculated. A credit differs from
deduction to the extent that the former is subtracted from the
tax while the latter is subtracted from income before the tax is
computed.”
Although the interpretation of an implementing administrative
agency is accorded great respect and ordinarily controls the
construction of the courts, the definition laid down in the
questioned RR can still be subjected to scrutiny. Courts will not
hesitate to set aside an executive interpretation when it is
clearly erroneous.
There is no need for interpretation when there is no ambiguity
in the rule, or when the language or words used are clear and
plain or readily understandable to an ordinary reader. The
definition of the term "tax credit” is plain and clear, and the
attempt of RR 2-94 to define it differently is the root of the
conflict.
The CIR contends that since RA 7432 used the word "may," the
availability of the tax credit to private establishments is only
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
permissive and not mandatory. Furthermore, the definition of
the term "tax credit" in RR 2-94 was validly issued under the
authority granted by the law to the Department of Finance to
formulate the needed guidelines. RR 2-94 can be harmonized
with RA 7432, if the definition in RR 2-94 is made to control. To
do otherwise would result in Section 4(a) of RA 7432 impliedly
repealing Section 204 (c) of the National Internal Revenue
Code.
SC: Untenable. RR 2-94 is still subordinate to RA 7432, and in
cases of conflict, the implementing rule will not prevail over
the law it seeks to implement. While seemingly conflicting laws
must be harmonized as far as practicable, in this particular
case, the conflict cannot be resolved in the CIR’s favor. There
is a great divide separating the idea of "tax credit” and "tax
deduction," as seen in the definition in Black's Law Dictionary.
The claimed absurdity of Section 4(a) of RA 7432 impliedly
repealing Section 204(c) of the National Internal Revenue Code
could only come about if it is accepted that a tax credit is akin
to a tax refund wherein payment of taxes must be made in
order for it to be claimed. But as shown in Section 112(a) of
the National Internal Revenue Code, it is not always necessary
for payment to be made for a tax credit to be available.
2) INTENTION OF RA 7432 WAS TO GIVE A TAX CREDIT
The CIR contends that should private establishments like
Bicolandia Drug be allowed to claim tax credits for discounts
given to senior citizens, they would be earning and not just be
reimbursed for the discounts given.
The Supreme Court ruled that the deliberations show that
Congress tried to balance the promotion of senior citizen
interests with the impact of the proposed discount on
retailers. Congress purposely chose tax credit as the form of
just compensation to the retailers, whose property has been
taken away by the State for public use, as seen from the
following excerpt quoted in CIR v. v. Central Luzon Drug.
If the private establishments appear to benefit more from the
tax credit than originally intended, it is not for the CIR to say
that they shouldn't. The tax credit may actually have provided
greater incentive for the private establishments to comply
with RA 7432, or quicker relief from the cut into profits of
these businesses.
3) RR 2-94 NULL AND VOID UNDER THE RA 7432
From the foregoing, it must be concluded that RR 2-¬94 is null
and void for failing to conform to the law it sought to
implement. In case of discrepancy between the basic law and
a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the
terms and provisions of the basic law.
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RR 2-94 being null and void, it must be ruled then that under A Preliminary Collection Letter was sent to pay the assessment
RA 7432, which was effective at the time, Bicolandia Drug is within 10 days from receipt of the letter. A Final Notice Before
entitled to its claim of a tax credit, and the ruling of the Court Seizure was issued giving the petitioner 10 days from receipt
of Appeals must be affirmed. to pay. Petitioner received a copy of the final notice. Petitioner
asked to be clarified how the tax liability of P111,291,214.46
PHILIPPINE JOURNALISTS, INC. V. COMMISSIONER OF was reached and requested an extension of 30 days from
INTERNAL REVENUE receipt of the clarification within which to reply. The BIR
G.R. NO. 162852 DECEMBER 16, 2004 received a follow-up letter from the petitioner asserting that
its records do not show receipt of Tax Assessment/Demand
No. 33-1-000757-94. It also contested that the assessment had
FACTS:
no factual and legal basis. A Warrant of Distraint and/or Levy
No. 33-06-046 was received by the petitioner.
On August 10, 1995, Revenue District Office No. 33 of BIR
issued Letter of Authority No. 87120 to examine petitioner’s
Petitioner filed a Petition for Review with the CTA. Petitioner
books of account and other accounting records for internal
complains: (a) that no assessment or demand was received
revenue taxes for the period January 1, 1994 to December 31,
from the BIR; (b) that the warrant of distraint and/or levy was
1994.
without factual and legal bases as its issuance was premature;
(c) that the assessment, having been made beyond the 3-year
From the examination, the petitioner was told that there were
prescriptive period, is null and void; (d) that the issuance of the
deficiency taxes, inclusive of surcharges, interest and
warrant without being given the opportunity to dispute the
compromise penalty in the following amounts:
same violates its right to due process; and (e) that the grave
prejudice that will be sustained if the warrant is enforced is
Value Added Tax - P 229,527.90
enough basis for the issuance of the writ of preliminary
Income Tax - 125,002,892.95
injunction.
Withholding Tax - 2,748,012.35
Total - P 127,980,433.20
CTA: The waiver executed by Petitioner was suffering from
legal infirmities, rendering the same invalid and ineffective,
Petitioner was invited to send a representative to an informal
CTA finds Assessment/Demand No. 33-1-000757-94 to be
conference for an opportunity to object and present
time-barred. Consequently, the Warrant of Distraint and/or
documentary evidence relative to the proposed assessment.
Levy issued pursuant thereto is considered null and void.
Petitioner’s Comptroller, Lorenza Tolentino, executed a
"Waiver of the Statute of Limitation Under the NIRC. The
ISSUE:
document "waive[d] the running of the prescriptive period
provided by Sections 223 and 224 and other relevant
Whether or not the waiver was valid.
provisions of the NIRC and consent[ed] to the assessment and
collection of taxes which may be found due after the
RULING:
examination at any time after the lapse of the period of
limitations fixed by said Sections 223 and 224 and other
No. The NIRC, under Sections 203 and 222, provides for a
relevant provisions of the NIRC, until the completion of the
statute of limitations on the assessment and collection of
investigation".
internal revenue taxes in order to safeguard the interest of the
taxpayer against unreasonable investigation. Unreasonable
Petitioner had deficiency taxes in the total amount of
investigation contemplates cases where the period for
P136,952,408.97. The Assessment Division of the BIR issued
assessment extends indefinitely because this deprives the
Pre-Assessment Notices which informed petitioner of the
taxpayer of the assurance that it will no longer be subjected to
results of the investigation. BIR Revenue Region No. 6,
further investigation for taxes after the expiration of a
Assessment Division/Billing Section, issued
reasonable period of time.
Assessment/Demand No. 33-1-000757-94 stating the
following deficiency taxes, inclusive of interest and
RMO No. 20-90 implements these provisions of the NIRC
compromise penalty:
relating to the period of prescription for the assessment and
collection of taxes.
Income Tax - P108,743,694.88
Value Added Tax - 184,299.20
A waiver of the statute of limitations under the NIRC, to a
Expanded Withholding Tax - 2,363,220.38
certain extent, is a derogation of the taxpayers’ right to
Total - P111,291,214.46
security against prolonged and unscrupulous investigations

DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN 12
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and must therefore be carefully and strictly construed. The
waiver of the statute of limitations is not a waiver of the right
to invoke the defense of prescription as erroneously held by
the Court of Appeals. It is an agreement between the taxpayer
and the BIR that the period to issue an assessment and collect
the taxes due is extended to a date certain. The waiver does
not mean that the taxpayer relinquishes the right to invoke
prescription unequivocally particularly where the language of
the document is equivocal. For the purpose of safeguarding
taxpayers from any unreasonable examination, investigation
or assessment, our tax law provides a statute of limitations in
the collection of taxes. Thus, the law on prescription, being a
remedial measure, should be liberally construed in order to
afford such protection. As a corollary, the exceptions to the
law on prescription should perforce be strictly construed.
As found by the CTA, the Waiver of Statute of Limitations,
signed by petitioner’s 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,
petitioner’s waiver became unlimited in time, violating Section
222(b) of the NIRC.
The waiver is also defective from the government side because
it was signed only by a revenue district officer, not the
Commissioner, as mandated by the NIRC and RMO No. 20-90.
The waiver is not a unilateral act by the taxpayer or the BIR,
but is a bilateral agreement between two parties to extend the
period to a date certain. The conformity of the BIR must be
made by either the Commissioner or the Revenue District
Officer. This case involves taxes amounting to more than One
Million Pesos (P1,000,000.00) and executed almost seven
months before the expiration of the three-year prescription
period. For this, RMO No. 20-90 requires the Commissioner of
Internal Revenue to sign for the BIR.
The other defect noted in this case is the date of acceptance
which makes it difficult to fix with certainty if the waiver was
actually agreed before the expiration of the three-year
prescriptive period. Finally, the records show that petitioner
was not furnished a copy of the waiver. Under RMO No. 20-90,
the waiver must be executed in three copies with the second
copy for the taxpayer. The Court of Appeals did not think this
was important because the petitioner need not have a copy of
the document it knowingly executed. It stated that the reason
copies are furnished is for a party to be notified of the
existence of a document, event or proceeding.
BANK OF THE PHILIPPINE ISLANDS VS. COMMISSIONER OF
INTERNAL REVENUE
G.R. No. 139736 October 17, 2005
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
FACTS:
On October 20, 1989, the Bureau of Internal Revenue (BIR)
issued a formal assessment notice (FAN) against the Bank of
the Philippine Islands (BPI). The FAN demanded BPI to pay
P28k in taxes. In November 1989, BPI filed a protest however
the protest did not specify if it was a request for
reconsideration or a reinvestigation. The BIR did not reply on
the protest but on October 15, 1992 (four days before the
expiration of the period to collect – or 1095 days [3 years] after
issuance of FAN on 10/20/1989), the Commissioner of Internal
Revenue (CIR) issued a warrant of distraint/levy against BPI for
the satisfaction of the assessed tax. The warrant was served to
BPI on October 23, 1992 (four days after period has
prescribed). In September 1997, the CIR finally sent a letter to
BPI advising the latter that its protest is denied.
ISSUES:
1. Whether or not the filing of the protest by BPI suspended
the running of the prescriptive period.
2. Whether or not the government’s right to collect the
assessed tax has prescribed.
HELD:
1.)No. The protest did not indicate whether BPI was asking for
a reconsideration or a reinvestigation but since BPI did not
adduce additional evidence, it should be treated as a request
for reconsideration. Under the tax code, a request for
reconsideration does not suspend the running of the
prescriptive period. Even assuming that the protest is a
request for reinvestigation, the same did not toll the running
of the prescriptive period because the CIR failed to show proof
that the request has been granted and that a reinvestigation
has been actually conducted. In fact, BPI never heard from the
BIR not until the CIR decided the protest in September 1997 –
5 years after the protest has been filed.
2.)Yes. When it comes to collection, even though the warrant
for distraint/levy was issued within the prescriptive period, it
is required that the same should be served upon the taxpayer
within the prescriptive period. This is because it is upon the
service of the Warrant that the taxpayer is informed of the
denial by the BIR of any pending protest of the said taxpayer,
and the resolute intention of the BIR to collect the tax
assessed. In the case at bar, BPI received the warrant 4 days
after the expiration of the prescriptive period hence, the right
to collect has already prescribed.
CIR VS PHOENIX INSURANCE
G.R. no. L-19727 May 20, 1965
FACTS:
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Phoenix Assurance Co., Ltd., a foreign insurance corporation
organized under the laws of Great Britain, is licensed to do
business in the Philippines with head office in London. On April
1, 1953, Phoenix Assurance Co., Ltd. filed its Philippine income
tax return for 1952, declaring therein a deduction from gross
income as part of the head office expenses incurred for its
Philippine business.
On August 30, 1955 it amended its income tax return for 1952
by excluding from its gross income the amount representing
reinsurance premiums ceded to foreign reinsurers and further
eliminating deductions corresponding to the ceded premiums.
The Commissioner of Internal Revenue disallowed a portion of
the claimed deduction for head office expenses and assessed
a deficiency tax on July 24, 1958.
On August 1, 1958 the Bureau of Internal Revenue released the
assessment for deficiency income tax for the years 1952 and
1954 against Phoenix Assurance Co, Ltd. which the latter
protested. However, the Commissioner of Internal Revenue
denied such protest. Subsequently, Phoenix Assurance Co.,
Ltd. appealed to the Court of Tax Appeals. The Court of Tax
Appeals declared the right of the Commissioner of Internal
Revenue to assess deficiency income tax for 1952 to have
prescribed.
ISSUE:
W/N the right of the Commissioner of Internal Revenue to
assess deficiency income tax has prescribed
HELD:
YES. The Court of Tax Appeals found the right of the
Commissioner of Internal Revenue barred by prescription, the
same having been exercised more than five years from the
date the original return was filed. On the other hand, the
Commissioner of Internal Revenue insists that his right to issue
the assessment has not prescribed inasmuch as the same was
availed of before the 5-year period provided for in Section 331
of the Tax Code expired, counting the running of the period
from August 30, 1955, the date when the amended return was
filed.
The Court of Tax Appeals ruled that the original return was a
complete return containing “information on various items of
income and deduction from which respondent may
intelligently compute and determine the tax liability of
petitioner,” hence, the prescriptive period should be counted
from the filing of said original return. On the other hand, the
Commissioner of Internal Revenue maintains that:
‘xxx the deficiency income tax in question could not possibly
be determined, or assessed, on the basis of the original return
filed n April 1, 1953, for considering that the declared loss
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
amounted to P199,583.93, the mere disallowance of part of
the head office expenses could not possibly result in said loss
being completely wiped out and Phoenix being liable to
deficiency tax. Not until the amended return was filed on
August 30, 1955 could the Commissioner assess the deficiency
income tax in question.”
Accordingly, he would wish to press for the counting of the
prescriptive period from the filing of the amended return.
To our mind, the Commissioner’s view should be sustained.
The changes and alterations embodied in the amended income
tax return consisted of the exclusion of reinsurance premiums
received from domestic insurance companies by Phoenix
Assurance Co., Ltd.’s London head office, reinsurance
premiums ceded to foreign reinsurers not doing business in
the Philippines and various items of deduction attributable to
such excluded reinsurance premiums thereby substantially
modifying the original return. Furthermore, although the
deduction for head office expenses allocable to Philippine
business, whose disallowance gave rise to the deficiency tax,
was claimed also in the original return, the Commissioner
could not have possibly determined a deficiency tax
thereunder because Phoenix Assurance Co., Ltd. declared a
loss of P199,583.93 therein which would have more than
offset such disallowance of P15,826.35.
Considering that the deficiency assessment was based on the
amended return which, as aforestated, is substantially
different from the original return, the period of limitation of
the right to issue the same should be counted from the filing
of the amended income tax return. From August 30, 1955,
when the amended return was filed, to July 24, 1958, when the
deficiency assessment was issued, less than five years elapsed.
The right of the Commissioner to assess the deficiency tax on
such amended return has not prescribed.
CIR vs. WYETH SUACO LABORATORIES
G.R. No. 76281 September 30, 1991
FACTS:
On December 19, 1974, Wyeth Suaco received notice of
assessment from the BIR for its failure to remit withholding tax
at source for the 4th quarter of 1973. The same was based on
accrued royalties, remuneration for technical services paid
abroad and cash dividends, including the deduction of non-
deductible raw materials from its reports.
The company, thru its tax consultant, SVG & co., sent BIR two
letters dated January 17, 1975 and February 8, 1975 protesting
the assessment and requesting their cancellation or
withdrawal on the ground that said assessments lacked factual
or legal basis. Wyeth Suaco argued that it was not liable to pay
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withholding tax at source on the accrued royalties and
dividends because they have yet to be remitted or paid
abroad. It claimed that it was not able to remit the balance of
fifty percent (50%) of the accrued royalties to its foreign
licensors because of Central Bank Circular No. 289 allowing
remittance of royalties up to fifty percent (50%) only. With
regard to what the Bureau of Internal Revenue claimed as the
amount of P2,952,391.00 forming part of the cash dividends
declared in 1973, Wyeth Suaco alleged that the same was due
its foreign stockholders.
On September 12, 1975, the CIR offered to compromise, but
only resulted to a slight reduction of the tax as per the acting
Commissioner’s decision on December 10,1979. Subsequently,
on January 18, 1980, Wyeth Suaco filed petition for review
with the CTA, praying that CIR been joined from enforcing the
assessments by reason of prescription and that assessments
be declared null and void for lack of legal and factual basis.
The CTA decided against the CIR holding that while the
assessments for the deficiency taxes were made within the
five-year period of limitation, the right of CIR to collect the
same has already prescribed, in accordance with Sec. 319(c) of
the NIRC.
ISSUE:
Whether or not the right of CIR to collect has already
prescribed.
RULING:
NO. Although the protest letters prepared by SGV & Co. in
behalf of private respondent did not categorically state or use
th words "reinvestigation" and "reconsideration," the same
are to be treated as letters of reinvestigation and
reconsideration. By virtue of these letters, the Bureau of
Internal Revenue ordered its Manufacturing Audit Division to
review the assessment made. Furthermore, private
respondent's claim that it did not seek reinvestigation or
reconsideration of the assessments is belied by the
subsequent correspondence or letters written by its officers,
as shown above.
These letters of Wyeth Suaco interrupted the running of the
five-year prescriptive period to collect the deficiency taxes.
The Bureau of Internal Revenue, after having reviewed the
record of Wyeth Suaco, in accordance with its request for
reinvestigation, rendered a final assessment. This final
assessment issue by then Acting Commissioner Ruben B.
Ancheta was date December 10, 1979 and received by private
respondent on January 2, 1980, fixed its tax liability at
P1,973,112.86 as deficiency withholding tax at source and
P61,155.21 as deficiency sales tax. It was only upon receipt by
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
Wyeth Suaco of this final assessment that the five-year
prescriptive period started to run again.
Verily, the original assessments dated December 16 and 17,
1974 were both received by Wyeth Suaco on December 19,
1974. However, when Wyeth Suaco protested the assessments
and sought its reconsideration in two (2) letters received by
the Bureau of Internal Revenue on January 20 and February 10,
1975, the prescriptive period was interrupted. This period
started to run again when the Bureau of Internal Revenue
served the final assessment to Wyeth Suaco on January 2,
1980. Since the warrants of distraint and levy were served on
Wyeth Suaco on March 12, 1980, then, only about four (4)
months of the five-year prescriptive period was used.
COMMISSIONER OF INTERNAL REVENUE vs. MANUEL B.
PINEDA, as one of the heirs of deceased ATANASIO PINEDA
G.R. No. L-22734 September 15, 1967
FACTS
Estate proceedings were had to settle the estate of Atanasio
Pineda. After the estate proceedings were closed, the BIR
found out that the income tax liability of the estate during the
pendency of the estate proceedings were not paid.
The Court of Tax Appeals rendered judgment holding Manuel
B. Pineda, the eldest son of the deceased, liable for the
payment corresponding to his share of the estate.
The Commissioner of Internal Revenue has appealed to SC and
has proposed to hold Manuel B. Pineda liable for the payment
of all the taxes found by the Tax Court to be due from the
estate instead of only for the amount of taxes corresponding
to his share in the estate.
ISSUE
Can the Government require Pineda to pay the full amount of
the taxes assessed?
RULING:
Yes. Pineda is liable for the assessment as an heir and as a
holder-transferee of property belonging to the
estate/taxpayer.
As a holder of property belonging to the estate, Pineda is liable
for the tax up to the amount of the property in his possession.
The reason is that the Government has a lien on what he
received from the estate as his share in the inheritance for
unpaid income taxes for which said estate is liable.
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By virtue of such lien, the Government has the right to subject
the property in Pineda's possession, i.e., the P2,500.00, to
satisfy the income tax assessment in the sum of P760.28. After
such payment, Pineda will have a right of contribution from his
co-heirs, to achieve an adjustment of the proper share of each
heir in the distributable estate.
The Government has two ways of collecting the tax in
question. One, by going after all the heirs and collecting from
each one of them the amount of the tax proportionate to the
inheritance received. The reason why a case suit is filed against
all the heirs for the tax due from the estate is to achieve
thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate
as lessened by the tax.
Another remedy is by subjecting said property of the estate
which is in the hands of an heir or transferee to the payment
of the tax due. This second remedy is the very avenue the
Government took in this case to collect the tax. The BIR should
be given the necessary discretion to avail itself of the most
expeditious way to collect the tax because taxes are the
lifeblood of government and their prompt and certain
availability is an imperious need. The adjustment of the
respective shares due to the heirs from the inheritance, as
lessened by the tax, is left to await the suit for contribution by
the heir from whom the Government recovered said tax.
COMMISSIONER OF INTERNAL REVENUE vs. UNION
SHIPPING CORPORATION and THE COURT OF TAX APPEALS
G.R. No. L-66160 May 21, 1990
FACTS:
In a letter dated December 27, 1974 CIR assessed against Yee
Fong Hong, Ltd. and/or Union Shipping Corporation for
deficiency income taxes due for the years 1971 and 1972.
Union Shipping protested the assessment.
CIR, without ruling on the protest, issued a Warrant of Distraint
and Levy. In a letter, Union Shipping reiterated its request for
reinvestigation. CIR, again, without acting on the request for
reinvestigation and reconsideration of the Warrant of Distraint
and Levy, filed a collection suit against Union Shipping. The
said collection case was issued to Union Shipping on December
28, 1978.
On January 10, 1979, Union Shipping filed with the Court of Tax
Appeals a petition for Review. The CTA ruled in favor of Union
Shipping. Hence, this petition for review on certiorari.
CIR argues that the period to appeal to the Court of Tax
Appeals commenced to run from receipt of said warrant on
November 25, 1976, hence, on January 10, 1979 when Union
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
Shipping sought redress from the Tax Court, CIR's decision has
long become final and executory.
ISSUE:
Was CIR’s decision became final and executory for failure of
Union Shipping to timely appeal?
HELD:
NO. The Court had already laid down the dictum that the
Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
determination of the disputed assessment.
There appears to be no dispute that CIR did not rule on Union
Shipping’s motion for reconsideration but left the latter in the
dark as to which action of the Commissioner is the decision
appealable to the Court of Tax Appeals. Had he categorically
stated that he denies Union Shipping’s motion for
reconsideration and that his action constitutes his final
determination on the disputed assessment, Union Shipping
without needless difficulty would have been able to determine
when his right to appeal accrues and the resulting confusion
would have been avoided.
The reviewable decision of the Bureau of Internal Revenue is
that contained in the letter of its Commissioner that such
constitutes the final decision on the matter which may be
appealed to the Court of Tax Appeals and not the warrants of
distraint. It was likewise stressed that the procedure
enunciated is demanded by the pressing need for fair play,
regularity and orderliness in administrative action.
Under the circumstances, the Commissioner of Internal
Revenue, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when Union Shipping
received the summons on the civil suit for collection of
deficiency income on December 28, 1978 that the period to
appeal commenced to run.
The request for reinvestigation and reconsideration was in
effect considered denied by CIR when the latter filed a civil suit
for collection of deficiency income. Hence, on January 10, 1979
when Union Shipping filed the appeal with the Court of Tax
Appeals, it consumed a total of only thirteen (13) days well
within the thirty day period to appeal pursuant to Section 11
of R.A. 1125.
ELPIDIO YABES and SEVERINO YABES vs. THE HON.
NAPOLEON FLOJO
G.R. No. L-46954, July 20, 1982
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FACTS:
Doroteo Yabes was for sometime an exclusive dealer of
products of the International Harvester Macleod, Inc., received
on or about May 1, 1962, a letter from the Commissioner of
Internal Revenue demanding payment for commercial broker's
fixed and percentage taxes plus surcharges and compromise
penalty. Through his counsel, he protested the on the ground
that his agreements with the International Harvester Macleod,
Inc. were of purchase and sale, and not of agency, hence he
claimed he was not able to pay such kind of taxes.
Thereafter, there ensued an exchange of correspondence
between the lawyers of Doroteo Yabes and the Commissioner;
the Commissioner informed Doroteo Yabes that he acted as a
commercial broker "in accordance with the ruling of this Office
in the case of Cirilo D. Constantino;" in turn, Doroteo Yabes
requested for the reinvestigation, or review of the case.
Doroteo Yabes had received the Commissioner's letter dated
August 3, 1962, denying the latter's protest against the said
assessment on September 18, 1962 and failed to appeal
therefrom within the 30-day period contemplated under
Section 11, of Republic Act 1125.
ISSUE:
Whether the assessment made by the Commissioner Yabes
has become final, executory and incontestable
RULING:
No. Under the circumstances of this case, what may be
considered as final decision or assessment of the
Commissioner is the filing of the complaint for collection in the
respondent Court of First Instance of Cagayan, the summons
of which was served on petitioners on January 20, 1971, and
that therefore the appeal with the Court of Tax Appeals was
filed on time. The respondent Court of First Instance of
Cagayan can only acquire jurisdiction over this case filed
against the heirs of the taxpayer if the assessment made by the
Commissioner of Internal Revenue had become final and
incontestable. If the contrary is established, as this Court holds
it to be, considering the aforementioned conclusion of the
Court of Tax Appeals on the finality and incontestability of the
assessment made by the Commissioner is correct, then the
Court of Tax Appeals has exclusive jurisdiction over this case.
Petitioners received the summons in Civil Case No. II-7 of the
respondent Court of First Instance of Cagayan on January 20,
1971, and petitioners filed their appeal with the Court of Tax
Appeals in CTA Case No. 2216, on February 12, 1971, well
within the thirty-day prescriptive period under Section 11 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
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
assessments and other matters arising under the National
Internal Revenue Code.
PASUDECO VS COURT OF INDUSTRIAL RELATIONS
GR No. L-39387, June 29, 1982
FACTS:
Petitioner Pampanga Sugar Development Company Inc. seeks
the reversal of the decision of the respondent CIR awarding
respondent Sugar Workers Association's counsel attorney's
fees equivalent to 20% in the judgment and ordering the lower
court's Examining Division to compute the wage and fringe
benefits differentials due the 28 individual workers who did
not execute quitclaims as well as attorney's fees corresponding
to 20% of the benefits due to 53 workers who entered into
agreements waiving their rights and benefits under the
decision.
Sometime in February, 1956, the workers' affiliates of
respondent Union staged a strike against petitioner company.
This labor dispute was certified by the President to the Court
of Industrial Relations. After six years, the said Court issued an
order directing petitioner company to reinstate the members
of respondent union. On March 12, 1963 some 88 union
members were thus reinstated by petitioner. However,
petitioner discriminated against the reemployed workers with
respect to wage rates, off-season pay, cost of living allowance,
milling bonus and Christmas bonus by depriving them of
aforesaid benefits or by granting to some members benefits
lesser than those given to members of the Pasudeco Workers
Union, another labor group in the service of petitioner.
On December 4, 1972, the CIR handed down a decision
adjudging herein petitioner guilty of unfair labor practice acts
and directing petitioner to pay wage differentials to certain
workers and fringe benefits as would be found due and
payable to them and to readmitted seasonal and casual
members of respondent union totalling 88 with the exception
of 7 workers.
ISSUE:
Whether or not the quitclaims are valid (NO)
HELD:
No. The court held that such quitclaims are not valid because
of these reasons:
Firstly, the quitclaims are secured after the petitioner lost its
case on the lower court. It's obvious that petitioner wants to
frustrate the decision of the lower court not to grant benefits
to the workers.
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Secondly, while rights may be waived they must not be
contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right recognized
by law. The quitclaims are not valid because they are contrary
to law. It is provided in the quitclaims that the workers will
forego their benefits and the petitioner company is exempt
from legal liability.
Third, the quitclaims are contrary to public policy. Once a civil
action is filed in court, the cause of action may not be the
subject of compromise unless the same is by leave of the court
concerned. Otherwise, this will render the entire judicial
system irrelevant to the prejudice of the national interest.
Parties to litigations cannot be allowed to trifle with the
judicial system by coming to court and later on agreeing to a
compromise without the knowledge and approval of the court.
This converts the judiciary into a mere tool of party-litigants
who act according to their whims and caprices. This is more so
when the court has already rendered its decision on the issues
submitted.
In the case at bar, the lower court has already rendered a
decision on the issues presented before the alleged quitclaims
agreements were made. It shows the evident bad faith of the
petitioner to comply with its legal obligation. This Court
likewise rejects petitioner's allegation that the 53 quitclaim
agreements were in the nature of a compromise citing the case
of Republic vs. Estenzo, et al., (L-24656, September 25, 1968,
25 SCRA 122) and Articles 2028 and 2040 of the New Civil Code.
Petitioner's allegations and citations apply only to
compromises between the party-litigants done in good faith.
In the case at bar, there was no compromise between the
petitioner and the respondent Sugar Workers Association. In
respect of the 53 quitclaims, these are not compromise
agreements between the petitioner and respondent union.
They are separate documents of renunciation of individual
rights. Compromise involves the mutual renunciation of rights
by both parties on a parity basis. The quitclaims, however, bind
the workers to renounce their rights while the petitioner not
only does not renounce anything but also acquires exemption
from any legal liability in connection therewith.
Note: *pag search nako sa google kay nigawas ni part sa tax
reviewer. But if isearch ang case, lahi ang issue and walay tax
related facts*
May the tax liability of a taxpayer be compromised during the
pendency of an appeal? Explain.
ANSWER:
Yes. During the pendency of the appeal, the taxpayer may still
enter into a compromise settlement of his tax liability for as
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
long as any of the grounds for a compromise, ie. doubtful
validity of assessment and financial incapacity of taxpayer, is
present. A compromise of a tax liability is possible at any stage
of litigation, even during appeal, although legal propriety
demands that prior leave of court should be obtained
(Pasudeco vs. CIR. L-39387. June 29. 1982). (BAR 1996)
QUIRICO P. UNGAB V. HON. VICENTE N. CUSI, JR.
G.R. NO. L-41919-24 MAY 30, 1980
FACTS:
The BIR Examiner Ben Garcia examined the income tax returns
filed by the herein petitioner, Quirico P. Ungab, for the
calendar year ending December 31, 1973. He discovered that
the petitioner failed to report his income derived from sales of
banana saplings. As a result, the BIR District Revenue Officer at
Davao City sent a "Notice of Taxpayer" to the petitioner
informing him that there is due from him (petitioner) the
amount of P104,980.81, representing income, business tax
and forest charges for the year 1973.
Upon receipt of the notice, the petitioner wrote the BIR District
Revenue Officer protesting the assessment, claiming that he
was only a dealer or agent on commission basis in the banana
sapling business and that his income, as reported in his income
tax returns for the said year, was accurately stated.
BIR Examiner Ben Garcia, however, was fully convinced that
the petitioner had filed a fraudulent income tax return so that
he submitted a "Fraud Referral Report," to the Tax Fraud Unit
of the Bureau of Internal Revenue. The Special Investigation
Division of the BIR found sufficient proof that the herein
petitioner is guilty of tax evasion for the taxable year 1973 and
recommended his prosecution.
The petitioner filed a motion to quash the informations upon
the grounds that: (1) the informations are null and void for
want of authority on the part of the State Prosecutor to initiate
and prosecute the said cases; and (2) the trial court has no
jurisdiction to take cognizance of the above-entitled cases in
view of his pending protest against the assessment made by
the BIR Examiner.
ISSUE:
Whether or not the contention that the criminal prosecution is
premature since the CIR has not yet resolved the protest
against the tax assessment tenable.
RULING:
No. What is involved here is not the collection of taxes where
the assessment of the Commissioner of Internal Revenue may
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be reviewed by the Court of Tax Appeals, but a criminal
prosecution for violations of the National Internal Revenue
Code which is within the cognizance of courts of first instance.
While there can be no civil action to enforce collection before
the assessment procedures provided in the Code have been
followed, there is no requirement for the precise computation
and assessment of the tax before there can be a criminal
prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal
prosecution for wilful attempt to defeat and evade the income
tax. A crime is complete when the violator has knowingly and
wilfully filed a fraudulent return with intent to evade and
defeat the tax. The perpetration of the crime is grounded upon
knowledge on the part of the taxpayer that he has made an
inaccurate return, and the government's failure to discover the
error and promptly to assess has no connections with the
commission of the crime.
PEOPLE VS. ILDEFONSO TIERRA
G.R. NO. L-17177-80 December 28, 1964
FACTS:
It was established that appellant was, during the years 1946 up
to 1949, engaged in the general merchandise business,
including the buying and selling of school and office supplies.
For the years 1946, 1947 and 1949, he filed his income tax
returns, declaring in full all his gross sales, and paid income
taxes due thereon in the respective sums of P2,557.54,
P13,097.63 and P2,980.00.
Said returns were later verified by Valerians Robles, an income
tax examiner of the Bureau of Internal Revenue. And on
December 16, 1950, examiner Robles reported his finding, that
appellant had filed false and fraudulent returns for said by
overstating his purchases for 1946, 1947 and 1949, and over
declaring his expenses, for 1947, thereby reducing the, net
income subject to tax.
During the investigation, the appellant could not produce to
examiner Robles, all the pertinent vouchers, sales invoices and
other accounting records for the Purpose) of verifying the
correctness of the returns. In view of the inability of the
appellant to produce said books and records, examiner Robles
resorted to the so-called "percentage basis" of computing net
income. Under this method, net income was computed by the
use of an average percentage method based on the returns of
taxpayers engaged in the same line of business.
On the basis of the reports of examiner Robles, the Collector
of Internal Revenue made a formal demand dated December
23, 1950, on the accused for the payment of his deficiency
income taxes for 1946, 1947 and 1949, including surcharges
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
thereon, in the respective sums of P30,632.51 P376,303.16,
and P60,205.80, and asked him to show cause why he should
not be prosecuted for his failure to preserve his books of
accounts, vouchers and invoices, for a period of five years from
the date of the last entry therein. The Collector found that the
income tax returns should have stated that his income was
P93,886.55, P621,072.80 and P359,310.18 for the years 1946,
1947 and 1949.
On December 29, 1950, Income Tax Assessment Notices were
sent to the appellant, giving him up to January 29, 1951 to pay
the aforementioned deficiency income taxes plus surcharges.
Appellant protested against the assessments. On February 26,
1951, the Collector of Internal Revenue reiterated the demand
for payment by the appellant. Up to now, nothing was paid by,
the appellant on account of the above claims of the
government.
ISSUE:
W/N the actions against appellant has already prescribed
HELD:
NO. Section 354 of the National Internal Revenue Code
provides:
All violations of any provision of this Code shall prescribe after
five years.
Prescription shall begin to run from the day of the commission
of the violation of the law and if the same be not known at the
time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment. ...
Evidence was adduced to show' and the trial court so found,
that the falsity of the returns filed by the appellant and his
failure to preserve his books of accounts for at least five years
from the date of the last entry in each book were all discovered
only on December 16, 1950. Since the informations were filed
on December 12, 1955, the trial court correctly ruled that the
actions were all within the five-year period of limitation.
Appellant argues, however, that since the informations make
no allegation that the offenses were not known at the time of
the commission as to bring them within the exception to the
statute of limitations, then the informations were necessarily
defective for that reason, and this fatal defect cannot be cured
by the introduction of evidence. Prescription is a matter of
defense and the information does not need to anticipate arid
meet it. The defendant could, at most, object to the
introduction of evidence to defeat his claim of prescription;
but he did not. Anyway, the law says that prescription begins
to run from ... "the institution of judicial proceedings, for its ...
punishment"
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ALLIED BANK VS CIR
G.R. 175097 February 5, 2010
FACTS:
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. Petitioner received the PAN on May 18,
2004 and filed a protest against it on May 27, 2004.
On July 16, 2004, the BIR wrote a Formal Letter of Demand
with Assessment Notices to petitioner. Petitioner received the
Formal Letter of Demand with Assessment Notices on August
30, 2004.
On September 29, 2004, petitioner filed a Petition for Review
with the CTA which was raffled to its First Division and
docketed as CTA Case No. 7062.
On December 7, 2004, respondent CIR filed his Answer. On
July 28, 2005, he filed a Motion to Dismiss 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.
On October 12, 2005, the First Division of the CTA rendered a
Resolution granting respondent’s Motion to Dismiss. On
February 22, 2006, petitioner appealed the dismissal to the
CTA En Banc. 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 ]as well as
petitioner’s Motion for Reconsideration.
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.
ISSUE:
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.
HELD:
Section 7 of RA 9282 expressly provides that the CTA exercises
exclusive appellate jurisdiction to review by appeal decisions
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
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.
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. Corollary
thereto, Section 228 of the National Internal Revenue Code
(NIRC) provides for the procedure for protesting an
assessment.
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.
However, 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. 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.
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.
JOSE AZNAR VS. COURT OF TAX APPEALS
GR NO. 20569, 23 AUGUST 1974
FACTS:
Petitioner, as administrator of the estate of the deceased,
Matias H. Aznar, seeks a review and nullification of the
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decision of the Court of Tax Appeals ordering the petitioner to
pay the government the sum of P227,691.77 representing
deficiency income taxes for the years 1946 to 1951. An
investigation by the Commissioner of Internal Revenue (CIR)
ascertained the assets and liabilities of the taxpayer and it was
discovered that from 1946 to 1951, his net worth had
increased every year, which increases in net worth was very
much more than the income reported during said years. The
findings clearly indicated that the taxpayer did not declare
correctly the income reported in his income tax returns for the
aforesaid years.
Petitioner avers that according to the NIRC, the right of the CIR
to assess deficiency income taxes of the late Aznar for the
years 1946, 1947, and 1948 had already prescribed at the time
the assessment was made on November 28, 1952; there being
a five year limitation upon assessment and collection from the
filing of the returns.
Meanwhile, respondents believe that the prescription period
in the case at bar that is applicable is under Sec. 332 of the
NIRC which provides that: "(a) In the case of a false or
fraudulent return with intent to evade tax or of a failure to file
a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment,
at any time within ten years after the discovery of the falsity,
fraud or omission". Petitioner argues said provision does not
apply because the taxpayer did not file false and fraudulent
returns with intent to evade tax.
ISSUE:
1.Whether or not the deceased Aznar filed false or fraudulent
income tax returns.
2.Whether or not the action has prescribed.
RULING:
1. YES. Petitioner argues that Sec. 332 of the NIRC does not
apply because the taxpayer did not file false and fraudulent
returns with intent to evade tax, while respondent
Commissioner of Internal Revenue insists contrariwise, with
respondent Court of Tax Appeals concluding that the very
"substantial under declarations of income for six consecutive
years eloquently demonstrate the falsity or fraudulence of the
income tax returns with an intent to evade the payment of
tax."
To our minds we can dispense with these controversial
arguments on facts, although we do not deny that the findings
of facts by the Court of Tax Appeals, supported as they are by
very substantial evidence, carry great weight, by resorting to a
proper interpretation of Section 332 of the NIRC. We believe
that the proper and reasonable interpretation of said provision
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
should be that in the three different cases of (1) false return,
(2) fraudulent return with intent to evade tax, (3) failure to file
a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment,
at any time within ten years after the discovery of the (1)
falsity, (2) fraud, (3) omission. Our stand that the law should
be interpreted to mean a separation of the three different
situations of false return, fraudulent return with intent to
evade tax, and failure to file a return is strengthened
immeasurably by the last portion of the provision which
segregates the situations into three different classes, namely
"falsity", "fraud" and "omission". That there is a difference
between "false return" and "fraudulent return" cannot be
denied. While the first merely implies deviation from the truth,
whether intentional or not, the second implies intentional or
deceitful entry with intent to evade the taxes due.
2. NO. The ordinary period of prescription of 5 years within
which to assess tax liabilities under Sec. 331 of the NIRC should
be applicable to normal circumstances, but whenever the
government is placed at a disadvantage so as to prevent its
lawful agents from proper assessment of tax liabilities due to
false returns, fraudulent return intended to evade payment of
tax or failure to file returns, the period of ten years provided
for in Sec. 332 (a) NIRC, from the time of the discovery of the
falsity, fraud or omission even seems to be inadequate and
should be the one enforced.
There being undoubtedly false tax returns in this case, We
affirm the conclusion of the respondent Court of Tax Appeals
that Sec. 332 (a) of the NIRC should apply and that the period
of ten years within which to assess petitioner's tax liability had
not expired at the time said assessment was made.
MARIA CARLA PIROVANO vs. THE COMMISSIONER OF
INTERNAL REVENUE
G.R. No. L-19865 July 31, 1965
FACTS
Enrico Pirovano as General Manager and President of De la
Rama Steamship Co. was given a life insurance by the latter.
The initial beneficiary of the insurance was the company.
During the Japanese occupation Enrico Pirovano died.
After the liberation of the Philippines from the Japanese
forces, the Board of Directors of De la Rama Steamship Co.
adopted a resolution ceding its rights of the insurance in favor
of Pirovano’s heirs, (4) minor children. Thereafter, CIR
classified such transaction as a donation and subjected it
Donor’s Tax.
The heir’s of Pirovano contended that the grant does not come
within the purview of Donor’s tax because such was a
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remuneratory donation given in consideration of Pirovano’s
past services as General Manager and President of De la Rama
Steamship Co.
ISSUE
Whether the donation was a simple donation or a
remuneratory? And as such is it subject to Donor’s Tax?
RULING
SIMPLE DONATION. “There is nothing on record to show that
when the late Enrico Pirovano rendered services as President
and General Manager of the De la Rama Steamship Co. he was
not fully compensated for such services, or that, because they
were "largely responsible for the rapid and very successful
development of the activities of the company." Pirovano
expected or was promised further compensation over and in
addition to his regular emoluments as President and General
Manager.
The fact that his services contributed in a large measure to the
success of the company did not give rise to a recoverable debt,
and the conveyances made by the company to his heirs remain
a gift or donation. This is emphasized by the directors'
Resolution of January 6, 1947, that "out of gratitude" the
company decided to renounce in favor of Pirovano's heirs the
proceeds of the life insurance policies in question. The true
consideration for the donation was, therefore, the company's
gratitude for his services, and not the services themselves.”
Therefore, the donation is a simple one and must be subjected
to Donor’s tax
On the issue: that the assessment and demand for donees' gift
taxes was prematurely made and of no legal effect; hence,
they should not be held liable for such surcharge and interest.
Petitioner-donees have failed to file any gift tax return and that
they also failed to pay the amount of the assessment made
against them by respondent in 1955. This situation is covered
by Section 119(b) (1) and (c) and Section 120 of the Tax Code:
(b) Deficiency.
(1) Payment not extended. — Where a deficiency, or any
interest assessed in connection therewith, or any addition to
the taxes provided for in section one hundred twenty is not
paid in full within thirty days from the date of the notice and
demand from the Commissioner, there shall be collected as a
part of the taxes, interest upon the unpaid amount at the rate
of one per centum a month from the date of such notice and
demand until it is paid. (section 119)
(c) Surcharge. — If any amount of the taxes included in the
notice and demand from the Commissioner of Internal
Revenue is not paid in full within thirty days after such notice
DIGESTED BY: ERUM, OLACO, PANIZA, RIVERA, TAN, UNAS, VILLAHERMOSA & VILLARIN
and demand, there shall be collected in addition to the interest
prescribed above as a part of the taxes a surcharge of five per
centum of the unpaid amount. (sec. 119)
The failure to file a return was found by the lower court to be
due to reasonable cause and not to willful neglect. On this
score, the elimination by the lower court of the 25% surcharge
is ad valorem penalty which respondent Commissioner had
imposed pursuant to Section 120 of the Tax Code was proper,
since said Section 120 vests in the Commissioner of Internal
Revenue or in the tax court power and authority to impose or
not to impose such penalty depending upon whether or not
reasonable cause has been shown in the non-filing of such
return.
On the other hand, unlike said Section 120, Section 119,
paragraphs (b) (1) and (c) of the Tax Code, does not confer on
the Commissioner of Internal Revenue or on the courts any
power and discretion not to impose such interest and
surcharge. It is likewise provided for by law that an appeal to
the Court of Tax Appeals from a decision of the Commissioner
of Internal Revenue shall not suspend the payment or
collection of the tax liability of the taxpayer unless a motion to
that effect shall have been presented to the court and granted
by it on the ground that such collection will jeopardize the
interest of the taxpayer (Sec. 11, Republic Act No. 1125; Rule
12, Rules of the Court of Tax Appeals).
It has been the uniform holding of this Court that no suit for
enjoining the collection of a tax, disputed or undisputed, can
be brought, the remedy being to pay the tax first, formerly
under protest and now without need of protect, file the claim
with the Collector, and if he denies it, bring an action for
recovery against him. (David v. Ramos, et al., 90 Phil. 351)
Section 306 of the National Internal Revenue Code ... lays
down the procedure to be followed in those cases wherein a
taxpayer entertains some doubt about the correctness of a tax
sought to be collected. Said section provides that the tax,
should first be paid and the taxpayer should sue for its
recovery afterwards. The purpose of the law obviously is to
prevent delay in the collection of taxes, upon which the
Government depends for its existence. To allow a taxpayer to
first secure a ruling as regards the validity of the tax before
paying it would be to defeat this purpose. (National Dental
Supply Co. vs. Meer, 90 Phil. 265)
Petitioners did not file in the lower court any motion for the
suspension of payment or collection of the amount of
assessment made against them.
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