TAXATION

II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 4. NO ESTOPPEL AGAINST THE GOVERNMENT COMMISSIONER VS. ABAD PBCOM V. CIR EXCEPTION CIR V. CA (ALHAMBRA INDUSTRIES) CIR VS CENTRAL VEGETABLE 1 1 2 3 3 5

4. NO ESTOPPEL AGAINST THE GOVERNMENT

COMMISSIONER VS. ABAD Facts: Abad (Republic Alcohol Distillery) is a manufacturer and seller of denatured alcohol. Adenaturing committee from the BIR supervised the denaturation of the alcohol in Abads warehouse in Caloocan, Rizal .The alcohol was certified to be denatured by the Committee. Domestic alcohol, when denatured and used for industrial purposes, is exempt from payment of specific tax. In a surprise inspection, however, the BIR inspectors found that the alcohol has not been completely denatured and still may be used for compounding liquors. The team also discovered that only 10,480 gauge liters were left. Abad was made liable for specific tax. Issue: Whether the government is estopped by mistakes of its agents. Held: The BIR denaturing committee remissed in its performance of its duties as it certified the alcohol to be denatured, where it was found in a subsequent examination that it is not completely denatured. It is a settled rule in the performance of its governmental functions, the State cannot be estopped by the neglect or omission of its agents. For if otherwise held, it would be easy for manufacturers to evade liability on the pretext that some government official has certified to the quality of their products (and possibly the tax exemption resulting therefrom) and that they have every right to rely on this certificate. Abad

5. DISPUTABLE PRESUMPTION: DULY DIRECTED AND MAILED LETTER IS DEEMED RECEIVED 6 BASILAN V. COMMISSIONER 6 REPUBLIC OF THE PHILIPPINES V. THE COURT OF APPEALS, AND NIELSON & COMPANY, INC. 6 MARCOS V. CA 7 CIR V BAUTISTA 8 BASILAN ESTATES INC VS CIR 8 NAVA V CIR 9 CIR V PASCOR REALTY AND DEVELOPMENT CO 9 6. ASSESSMENT AND PAYMENT OF DEFICIENCY TAX 10

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 1

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 was ordered to payP19,402.20 as specific tax, with interest thereon from the date of last sale. Visayas Cebu Terminal vs. Commissioner Facts: Visayan CebuTerminal Co. was appointed the sole manager of the Arrastre Service at the Port of Cebu. In 1958, the BIR demanded the payment of percentage taxes and penalties due to the Government. Subsequently, however, BIR examiners stated that the company was not subjected of the 3% percentage tax, it has been paying 28% of the gross receipts to the Bureau of Customs. Issue: Whether Visayas Cebu Terminal Co. Inc. is exempted from the percentage tax. Held: The company is an arrastre contractor and is covered by Section 191 of the Tax Code. Section 191 of the Tax Code does not establish any distinction between an arrastre operator who handles only imported cargo in its arrastre operations , pursuant to RA 140, and those handling interisland cargo, so as to exempt the company from the percentage tax. It is a well settled rule that he who claim s exemption should prove by convincing proofs that he is exempted. The company failed to present such proofs. Further, the recommendation of the examiners are subject to the review of their superiors, who may countermand or affirm them. The government is never estopped to collect legitimate taxes because of the error committed by its agents. However, as the company pays 28% of the total monthly gross receipts derived from the arrastre service to the Bureau of Customs, to hold the company liable for the payment of percentage tax is unjust and not contemplated by Section 191 of the Tax Code. PBCOM V. CIR Facts: PBCom a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, subsequently, however, PBCom suffered net loss of thereby showing no income tax liability in its Annual Income Tax Returns for the succeeding two years, but during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes. Then, Petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the same was filed beyond the two-year reglementary period. A motion for Reconsideration was denied and the appeal to Court of Appeals was likewise denied. Thus, this appeal to Supreme Court. Issues: a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from two (2) years to ten (10) years is valid.

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 2

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 b) Whether or not the petition for tax refund had already prescribed. Ruling: RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive period is invalid. Administrative issuances are merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law prevails over them. Administrative agencies have no legislative power. When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress. It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement. Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute. By implication of the above, claim for refund had already prescribed. Since the petition had been filed beyond the prescriptive period, the same has already prescribed. The fact that the final adjusted return show an excess tax credit does not automatically entitle taxpayer claim for refund without any express intent. WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed from is AFFIRMED, with COSTS against the petitioner.

EXCEPTION
CIR V. CA (ALHAMBRA INDUSTRIES) Facts: Private respondent Alhambra Industries, Inc., engaged in the manufacture and sale of cigar and cigarette products, received from Commissioner of Internal Revenue a letter stating that it has a deficiency Ad Valorem Tax of P488,396.62 on the removals of cigarette products from their place of production from November 2, 1990 to January 22, 1991. Alhambra filed a protest but the same was denied. CIR requested payment of the revised amount of P520,835.39. Without

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 3

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 waiting for CIRs reply to its reconsideration, Alhambra filed a petition for review with the Court of Tax Appeals. Meanwhile, CIR denied the request for reconsideration; Alhambra then paid the disputed ad valorem tax in the sum of P520,835.29 under protest. CTA, in its decision, ordered CIR to refund to Alhambra the amount erroneously paid, explaining that the subject deficiency excise tax assessment resulted from Alhambras use of the computation mandated by BIR Ruling473-88 dated October 4, 1988 as basis for computing the 15% ad valorem tax. BIR Ruling 017-91 revoked BIR Ruling 473-88 for being violative of Sec. 142 of the Tax Code; it included back the VAT to the gross selling price in determining the tax base for computing the ad valorem taxon cigarettes. Issue: Whether or not private respondent's reliance on a void BIR ruling conferred upon the latter avested right to apply the same in the computation of its ad valorem tax and claim for tax refund? Ruling: The present dispute arose from the discrepancy in the taxable base on which the excise tax is to apply on account of two incongruous BIR Rulings: (1) BIR Ruling 473-88 dated October 4, 1988 which excluded the VAT from the tax base in computing the 15% excise tax due; and, (2) BIR Ruling 017-91 dated February 11, 1991 which included back the VAT in computing the tax base for purposes of the 15% ad valorem tax. The question as to the correct computation of the excise tax on cigarettes in the case at bar has been sufficiently addressed by BIR Ruling 017-91 which revoked BIR Ruling 473-88.It is to be noted that Section 127 (b) of the Tax Code as amended applies in general to domestic products and excludes the value-added tax in the determination of the gross selling price, which is the tax base for purposes of the imposition of ad valorem tax. On the other hand, the last paragraph of Section 142 of the same Code which includes the value-added tax in the computation of the ad valorem tax refers specifically to cigar and cigarettes only. It does not include/apply to any other articles or goods subject to the ad valorem tax. Accordingly, Section142 must perforce prevail over Section 127 (b) which is a general provision of law insofar as the imposition of the ad valorem tax on cigar and cigarettes is concerned. Moreover, the phrase unless otherwise provided in Section 127 (b) purports of exceptions to the general rule contained therein, such as that of Section 142, last paragraph thereof which explicitly provides that in the case of cigarettes, the tax base for purposes of the ad valorem tax shall include, among others, the value-added tax. Private respondent did not question the correctness of the above BIR ruling. In fact, upon knowledge of the effectivity of BIR Ruling No. 017-91, private respondent immediately implemented the method of computation mandated therein by restoring the VAT in computing the tax base for purposes of the 15% ad valorem tax. Howe ver, well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to the taxpayers .The applicable law is Sec. 246 of the Tax Code which provides: Sec. 246. Non-retroactivity of rulings

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 4

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 .- Any revocation, modification, or reversal of any rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner of Internal Revenue shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or c) where the taxpayer acted in bad faith. Without doubt, private respondent would be prejudiced by the retroactive application of the revocation as it would be assessed deficiency excise tax. The Court finds no convincing evidence on petitioners claim that private respondent falls under the third exception in Sec. 246,i.e., that the taxpayer has acted in bad faith. To the contrary, as a sign of good faith, private respondent immediately reverted to the computation mandated by BIR Ruling 017-91 upon knowledge of its issuance on 11 February 1991. CIR VS CENTRAL VEGETABLE Held: Tax burdens are not to be imposed or presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. CENVOCO is a manufacturer of edible and coconut/coprameal cake and such other coconut related oil subject to the miller's tax of 3%. Petitioner also manufactures lard, detergent and laundry soap subject to the sales tax of 10%. In1986, petitioner purchased a specified number of containers and packaging Yes, it can be credited against the deficiency millers tax due thereon. The law relied upon by the BIR Commissioner as the basis for not allowing Cenvoco's tax credit is just a proviso of Section 168 of the old Tax Code. The restriction in the said proviso, however, is limited only to sales, miller's or excise taxes paid "on raw materials used in the milling process". Under the rules of statutory construction, exceptions, as a general rule, should be strictly but reasonably construed. They extend only so far as their language fairly warrants, and all doubts should be materials for its edible oil from its suppliers and paid the sales tax due thereon. After an investigation conducted by respondent's Revenue Examiner, Assessment Notice No. FAS-B- 86-88-001661-001664 dated April 22, 1988was issued against petitioner for deficiency miller's tax in the total amount of P1,575,514.70. On June 29, 1988, CENVOCO filed with CIR a letter dated June 27, 1988 requesting for reconsideration of the above deficiency miller's tax assessments, contending that the final provision of Section168 of the Tax Code does not a apply to sales tax paid on containers and packaging materials, hence, the amount paid Therefore should have been credited against the miller's tax assessed against it. CIR contends that Sec. 188 of the Tax Code provides that sales, miller's or excise taxes paid on raw materials or supplies used in the milling process shall not be allowed against the miller's tax due. Issue: WoN the sales tax paid by CENVOCO when it purchased containers and packaging materials for its milled products can be credited against the deficiency millers tax due thereon

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 5

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 resolved in favor of the general provisions rather than the exception. Where a general rule is established by statute with exceptions, the court will not curtail the former nor add to the latter by implication. The exception provided for in Section 168 of the old Tax Code should thus be strictly construed. Conformably, the sales, miller's and excise taxes paid on all other materials (except on raw materials used in the milling process), such as the sales taxes paid on containers and packaging materials of the milled products under consideration, may be credited against the miller's tax due therefor. It is a basic rule of interpretation that words and phrases used in the statute, in the absence of a clear legislative intent to the contrary should be given their plain, ordinary and common usage or meaning. From the disquisition and rationalization aforequoted, containers and packaging materials are certainly not raw materials. Cans and tetrakpaks are not used in the manufacture of Cenvoco's finished products which are coconut, edible oil or coprameal cake. Such finished products are packed in cans and tetrapaks. It bears stressing that tax burdens are not to be imposed or presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. alleging prescription of the period of assessment and collection considering that the assessment was made on February 26, 1959. Basilan claims that it never received notice of such assessment or if it did, it received the notice beyond the five-year prescriptive period. To show prescription, the annotation on the notice "No accompanying letter 11/25/" is advanced as indicative of the fact that receipt of the notice was after March 24, 1959, the last date of the five-year period within which to assess deficiency tax. The Court said that notice of assessment shows the assessment has been made well within the 5-year period. On the right side is also stamped "Feb. 26, 1959" denoting the date of release. Circumstances pointing to official performance of duty must necessarily prevail over petitioner's contrary interpretation. Besides, even granting that notice had been received by the petitioner late, as alleged, under Section 331 of the Tax Code requiring five years within which to assess deficiency taxes, the assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to the taxpayer and it is not required that the notice be received by the taxpayer within the aforementioned five-year period. REPUBLIC OF THE PHILIPPINES V. THE COURT OF APPEALS, AND NIELSON & COMPANY, INC. The CIR assessed Nielson deficiency taxes for the years 1949 to 1952, totalling P14,449.00. It reiterated its demand for payment in other letters. Nielson did not contest the assessment in the CTA. On the theory that the assessment had become final and executory, Government filed a complaint for collection. Lower court rendered a decision against Nielson. CA reversed. BIR claims that the demand letter showed an imprint indicating that

5. DISPUTABLE PRESUMPTION: DULY LETTER IS DEEMED RECEIVED

BASILAN V. COMMISSIONER

DIRECTED AND MAILED

The Commissioner assessed Basilan it for deficiency estate tax. On non-payment, a warrant of distraint and levy was issued but not executed when the deputy ordered the District Director to hold execution and maintain construction embargo. Because of its refusal to execute waiver of prescription, Basilans request for reinvestigation was not given due course. Notice was served that the warrant would be executed. Basilan filed petition for review

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 6

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 the original thereof was released and mailed by the Records Section of the BIR, and that the original letter was not returned to said Bureau; thus, said demand letter must be considered to have been. If service is made by ordinary mail, unless the actual date of receipt is shown, service is deemed complete and effective upon the expiration of five (5) days after mailing. There arises the presumption that the letter was received in the absence of evidence to the contrary.. The Supreme Court said that the contention that a mailed letter is deemed received by the addressee in the ordinary course of mail, is merely a disputable presumption, subject to controversion. A direct denial of the receipt shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee. Since the BIR has not adduced proof that Nielson had in fact received the demand letter, it cannot be assumed that private respondent received said letter. However, the BIR wrote a follow-up letter, which is a notice of assessment in itself which was duly received per Nielsons own admission. The assessment is appealable to the CTA. Failure to appeal within the period makes it final, executory and demandable. Nielson is barred from disputing its correctness. The action to collect is akin to an action to enforce a judgment. No inquiry can be made therein as to the merits of the original case or the justness of the judgment relied upon. MARCOS V. CA GR No. 120880 June 5 1997 Marcos questions the assessment of the CIR and collecting through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and properties of his father, despite the pendency of the proceedings on probate of the will. CA ruled the deficiency assessments for estate and income tax of the late President already become final and unappealable, and may thus be enforced by the summary remedy of levying upon the properties, hence this petition. The CIR avers that copies of the deficiency estate and income tax assessments were all personally and constructively served on August 26, 1991 upon Mrs. Marcos (through her caretaker Mr. Martinez) and copies of the deficiency tax assessments issued against Bongbong Marcos II were also personally and constructively served upon him (through his caretaker). Formal Assessment notices were served on October 20, 1992, upon Mrs. Marcos c/o petitioner, at his office. Moreover, a notice to Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel - but to no avail. WON there was lack of notice? There was sufficient, constructive and/or actual notice of assessments, levy and sale, sent to herein petitioner "Bongbong" Marcos as well as to his mother Mrs. Imelda Marcos. In the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the petitioner as heir of the deceased. In the same vein, in the matter of income tax delinquency of the late president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices of levy in satisfaction of these tax delinquencies upon the petitioner is not required by law, as under Section 213 of the NIRC, which pertinently states: ...Levy shall be effected by writing upon said certificate a description of the property upon which levy is made. At the same time, written notice of the levy shall be mailed to or

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 7

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 served upon the Register of Deeds of the province or city where the property is located and upon the delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose, or if there be none, to the occupant of the property in question. The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of sale were furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and the petitioner himself on April 12, 1993 at his office at the Batasang Pambansa. Where there was an opportunity to raise objections to government action, and such opportunity was disregarded, for no justifiable reason, the party claiming oppression then becomes the oppressor of the orderly functions of government. CIR V BAUTISTA GR No. L12250 May 17, 1959 Spouses Bautista each filed a separate income tax return for 1947. CIR consolidated returns and assessed against them deficiency tax from alleged under-declaration of proceeds of sale. Spouses claimed that the right to assess had already prescribed. Whether the right to collect had already prescribed? No. Income tax returns for 1947 are deemed filed as of March 1, 1948. Section 331 of Tax Code provides that the deficiency assessment must be made within five years after the return was filed and the assessment is deemed made when the notice to this effect is released, mailed or sent by the Collector to the taxpayer for the purpose of giving effect to said assessment. It does not require that the notice be received by the taxpayer within the said period of five years. In this case, the Collector assessed the deficiency tax on January 21, 1953 and notice to this effect was sent or given due course prior to March 1, 1953, and hence before the expiration of the said period. BASILAN ESTATES INC VS CIR GR L 22492 September 5 1967 Basilan Estates, Inc. filed on March 24, 1954 its ITR for 1953 and paid an income tax of P8,028. On February 26, 1959, the CIR, assessed Basilan Estates, Inc., a deficiency income tax. On non- payment of the assessed amount, a warrant of distraint and levy was issued. Because of its refusal to waive the period of prescription, the corporation's request for reinvestigation was not given due course, and on December 2, 1960, notice was served the corporation that the warrant of distraint and levy would be executed. On December 20, 1960, Basilan Estates, Inc. filed before the Court of Tax Appeals a petition for review of the Commissioner's assessment, alleging prescription of the period for assessment and collection WON Commissioner's right to collect deficiency income tax prescribed? No. The notice of assessment shows the assessment to have been made on February 26, 1959, well within the five- year period. The assessment of the deficiency tax was made on February 26, 1959; but the petitioner claims that it never received notice of such assessment or if it did, it received the notice beyond the five-year prescriptive period. The Court cannot accept this interpretation of the petitioner, considering the presence of circumstances that lead us to presume regularity in the performance of official functions. The Commissioner himself in

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 8

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 his letter answering petitioner's request to lift, the warrant of distraint and levy, asserts that notice had been sent to petitioner. In the letter of the Regional Director notice of assessment was said to have been sent to petitioner. These circumstances pointing to official performance of duty must necessarily prevail over petitioner's contrary interpretation. Besides, even granting that notice had been received by the petitioner late, as alleged, under Section 331 of the Tax Code requiring five years within which to assess deficiency taxes, the assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to the taxpayer and it is not required that the notice be received by the taxpayer within the aforementioned five-year period. NAVA V CIR GR L-19470 January 30 1965 On May 15, 1951, Nava filed his ITR for 1950, and, on the same date, he was assessed by CIR P4,952.00. On March 30, 1955, after investigation of petitioner's 1950 income tax return, respondent Collector issued a deficiency income tax assessment notice (Exhibit "4") requiring petitioner to pay not later than April 30, 1955. Several notices of this revised assessment are alleged to have been issued to the taxpayer, but Nava claims to have learned of it for the first time on December 19, 1956, more than five years since the original tax return was filed, and testified to that effect in the court below. Whether the enforcement of the tax assessment has prescribed? YES, the action to collect said deficiency income tax has already prescribed. Contrary to the finding of the CTA, respondent failed to prove by substantial evidence that the assessment notice dated March 30, 1955 and the other written demand letters or notices subsequent thereto were in fact issued or sent to taxpayer Nava. The presumption that a letter duly directed and mailed was received in the regular course of mail (Sec. 5 [v], Rule 131, revised Rules of Court) cannot be applied to the case at bar. The facts to be proved to raise this presumption are (a) that the letter was properly addressed with postage prepaid, and (b) that it was mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mail. But if one of the said facts fails to appear, the presumption does not lie." Since none of these requirements have been shown, there has been no valid and effective issuance or release of said deficiency income tax assessment notice dated March 30, 1955 and of the other demand letters or notices subsequent thereto, the latest of which was purportedly sent on August 25, 1956, and these dates cannot be reckoned with in computing the period of prescription within which a court action to collect the same may be brought. Mere notations made without the taxpayer's intervention, notice, or control, without adequate supporting evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection or defense. CIR V PASCOR REALTY AND DEVELOPMENT CO GR 128315 June 1999 The Commissioner filed a criminal complaint for tax evasion against PRDC, its president and treasurer before the DOJ. Private respondents filed immediately an urgent request for

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 9

TAXATION II CASE DIGESTS | DEFICIENCY TAX ASSESSMENT 4 & 5 reconsideration on reinvestigation disputing the tax assessment and tax liability. The Commissioner denied private respondents request for reconsideration/reinvestigation on the ground that no formal assessment has been issued which the latter elevated to the CTA on a petition for review. (1) Whether or not the criminal complaint for tax evasion can be construed as an assessment (2) Whether or not an assessment is necessary before criminal charges for tax evasion may be instituted The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither the Tax Code nor the revenue regulations governing the protest assessments provide a specific definition or form of an assessment. An assessment is not necessary before criminal charges can be filed. A criminal charge need not only be supported by a prima facie showing of failure to file a required return. The CIR had, in such tax evasion cases, discretion on whether to issue an assessment, or to file a criminal case against the taxpayer, or to do both. An assessment must be sent to and received by the taxpayer, and must demand payment of the taxes described therein within a specific period. The revenue officers affidavit merely contained a computation of respondents tax liability. It did not state a demand or period for payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint for tax evasion; it was not meant to be a notice of tax due and a demand to private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows that commissioner intended to file a criminal complaint for tax evasion, not to issue an assessment. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer. Accordingly, an affidavit, which was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment that can be questioned before the Court of Tax Appeals.

6. ASSESSMENT AND PAYMENT OF DEFICIENCY TAX

BY: BRIONES CHUA CONTRERAS CRUZ DUMA ESPINOSA GONZAGA HUI LAZARO LIM LORENZO SYSON TENGCO TONGSON TRONQUED TUMARU | 3D 2015 | 10