G.R. No. 175097 February 5, 2010 ALLIED BANKING CORPORATION, Pe ! !o"er, # $er%u% # CO&&I''IONER OF INTERNAL RE(EN)E, Re%*o"+e" .

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DECI'ION
The key to effective communication is clarity. The Commissioner of Internal Revenue (CIR) as well as his duly authorized representative must indicate clearly and unequivocally to the taxpayer whether an action constitutes a final determination on a disputed assessment. !" #ords must $e carefully chosen in order to avoid any confusion that could adversely affect the ri%hts and interest of the taxpayer. &ssailed in this 'etition for Review on Certiorari (" under )ection !( of Repu$lic &ct (R&) *o. +(,(- ." in relation to Rule /0 of the Rules of Court- are the &u%ust (.(112 3ecision /" of the Court of Tax &ppeals (CT&) and its 4cto$er !5- (112 Resolution 0" denyin% petitioner6s 7otion for Reconsideration. Factual Antecedents 4n &pril .1- (11/- the 8ureau of Internal Revenue (8IR) issued a 'reliminary &ssessment *otice ('&*) to petitioner &llied 8an9in% Corporation for deficiency 3ocumentary )tamp Tax (3)T) in the amount of '!(-101-0+0.21 and :ross Receipts Tax (:RT) in the amount of '.,-++0-(+2.52 on industry issue for the taxa$le year (11!. 2" 'etitioner received the '&* on 7ay !,- (11/ and filed a protest a%ainst it on 7ay (5- (11/. 5" 4n ;uly !2- (11/- the 8IR wrote a <ormal =etter of 3emand with &ssessment *otices to petitioner- which partly reads as follows> ,"
It is requested that the a$ove deficiency tax $e paid immediately upon receipt hereofinclusive of penalties incident to delinquency. This is our final decision $ased on investi%ation. If you disa%ree- you may appeal the final decision within thirty (.1) days from receipt hereof- otherwise said deficiency tax assessment shall $ecome finalexecutory and demanda$le.

'etitioner received the <ormal =etter of 3emand with &ssessment *otices on &u%ust .1- (11/. +"

Proceedings before the CTA First Division 4n )eptem$er (+- (11/- petitioner filed a 'etition for Review !1" with the CT& which was raffled to its <irst 3ivision and doc9eted as CT& Case *o. 512(. !!" 4n 3ecem$er 5- (11/- respondent CIR filed his &nswer. !(" 4n ;uly (,- (110- he filed a 7otion to 3ismiss !." on the %round that petitioner failed to file an administrative protest on the <ormal =etter of 3emand with &ssessment *otices. 'etitioner opposed the 7otion to 3ismiss on &u%ust !,- (110. !/" 4n 4cto$er !(- (110- the <irst 3ivision of the CT& rendered a Resolution !0" %rantin% respondent6s 7otion to 3ismiss. It ruled>
Clearly- it is neither the assessment nor the formal demand letter itself that is appeala$le to this Court. It is the decision of the Commissioner of Internal Revenue on the disputed assessment that can $e appealed to this Court (Commissioner of Internal Revenue vs. Villa, (( )CR& .). &s correctly pointed out $y respondent- a disputed assessment is one wherein the taxpayer or his duly authorized representative filed an administrative protest a%ainst the formal letter of demand and assessment notice within thirty (.1) days from date of" receipt thereof. In this case- petitioner failed to file an administrative protest on the formal letter of demand with the correspondin% assessment notices. ?ence- the assessments did not $ecome disputed assessments as su$@ect to the Court6s review under Repu$lic &ct *o. +(,(. ()ee also Republic v. Liam Tian Teng Sons & Co., Inc., !2 )CR& 0,/.) ,-EREFORE, the 7otion to 3ismiss is GRANTED. The 'etition for Review is here$y DI'&I''ED for lac9 of @urisdiction. 'O ORDERED. !2"

&%%rieved- petitioner moved for reconsideration $ut the motion was denied $y the <irst 3ivision in its Resolution dated <e$ruary !- (112. !5" Proceedings before the CTA En Banc
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4n <e$ruary ((- (112- petitioner appealed the dismissal to the CT& n !anc. The case was doc9eted as CT& A8 *o. !25.

<indin% no reversi$le error in the Resolutions dated 4cto$er !((110 and <e$ruary !- (112 of the CT& <irst 3ivision- the CT& n !anc denied the 'etition for Review !+"as well as petitioner6s 7otion for Reconsideration. (1" The CT& n !anc declared that it is a$solutely necessary for the taxpayer to file an administrative protest in order for the CT& to acquire @urisdiction. It emphasized that an administrative protest is an inte%ral part of the remedies %iven to a taxpayer in

challen%in% the le%ality or validity of an assessment. &ccordin% to the CT& n !anc, althou%h there are exceptions to the doctrine of exhaustion of administrative remedies- the instant case does not fall in any of the exceptions. I%%ue ?ence- the present recourse- where petitioner raises the lone issue of whether the <ormal =etter of 3emand dated ;uly !2- (11/ can $e construed as a final decision of the CIR appeala$le to the CT& under R& +(,(. Our Ru.!"/ The petition is meritorious. Section " of R# $%&% e'pressly provi(es that the CT# e'ercises e'clusive appellate )uris(iction to revie* by appeal (ecisions of the CIR in cases involving (ispute( assessments The CT&- $ein% a court of special @urisdiction- can ta9e co%nizance only of matters that are clearly within its @urisdiction. (!" )ection 5 of R& +(,( provides>
)ec. 5. ;urisdiction. B The CT& shall exercise> (a) Axclusive appellate @urisdiction to review $y appeal- as herein provided> (!) De0!%!o"% o1 2e Co33!%%!o"er o1 I" er"a. Re$e"ue !" 0a%e% !"$o.$!"/ +!%*u e+ a%%e%%3e" %refunds of internal revenue taxes- fees or other char%espenalties in relation thereto- or other matters arisin% under the *ational Internal Revenue Code or other laws administered $y the 8ureau of Internal RevenueC Inaction $y the Commissioner of Internal Revenue in cases involvin% disputed assessments- refunds of internal revenue taxes- fees or other char%es- penalties in relation thereto- or other matters arisin% under the *ational Internal Revenue Code or other laws administered $y the 8ureau of Internal Revenue- where the *ational Internal Revenue Code provides a specific period of action- in which case the inaction shall $e deemed a denialC (Amphasis supplied)

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The word DdecisionsE in the a$ove quoted provision of R& +(,( has $een interpreted to mean the decisions of the CIR on the protest of the taxpayer a%ainst the assessments. ((" Corollary thereto- )ection ((, of the *ational Internal Revenue Code (*IRC) provides for the procedure for protestin% an assessment. It states>
)ACTI4* ((,. +rotesting of #ssessment. F #hen the Commissioner or his duly authorized representative finds that proper taxes should $e assessed- he shall first notify the taxpayer of his findin%s> 'rovided- however- That a preassessment notice shall not $e required in the followin% cases> (a) #hen the findin% for any deficiency tax is the result of mathematical error in the computation of the tax as appearin% on the face of the returnC or ($) #hen a discrepancy has $een determined $etween the tax withheld and the amount actually remitted $y the withholdin% a%entC or (c) #hen a taxpayer who opted to claim a refund or tax credit of excess credita$le withholdin% tax for a taxa$le period was determined to have carried over and automatically applied the same amount claimed a%ainst the estimated tax lia$ilities for the taxa$le quarter or quarters of the succeedin% taxa$le yearC or (d) #hen the excise tax due on excisa$le articles has not $een paidC or (e) #hen an article locally purchased or imported $y an exempt person- such as- $ut not limited to- vehicles- capital equipment- machineries and spare parts- has $een sold- traded or transferred to non-exempt persons. The taxpayers shall $e informed in writin% of the law and the facts on which the assessment is madeC otherwise- the assessment shall $e void. #ithin a period to $e prescri$ed $y implementin% rules and re%ulations- the taxpayer shall $e required to respond to said notice. If the taxpayer fails to respond- the Commissioner or his duly authorized representative shall issue an assessment $ased on his findin%s. )uch assessment may $e protested administratively $y filin% a request for reconsideration or reinvesti%ation within thirty (.1) days from receipt of the assessment in such form and manner as may $e prescri$ed $y implementin% rules and re%ulations. #ithin sixty (21) days from filin% of the protest- all relevant supportin% documents shall have $een su$mittedC otherwise- the assessment shall $ecome final. If the protest is denied in whole or in part- or is not acted upon within one hundred ei%hty (!,1) days from su$mission of documents- the taxpayer adversely affected $y the decision or inaction may appeal to the Court of Tax &ppeals within thirty (.1) days from receipt of the said decision- or from the lapse of the one hundred ei%hty (!,1)-day periodC otherwise- the decision shall $ecome final- executory and demanda$le.

In the instant case- petitioner timely filed a protest after receivin% the '&*. In response thereto- the 8IR issued a <ormal =etter of 3emand with &ssessment

*otices. 'ursuant to )ection ((, of the *IRC- the proper recourse of petitioner was to dispute the assessments $y filin% an administrative protest within .1 days from receipt thereof. 'etitioner- however- did not protest the final assessment notices. Instead- it filed a 'etition for Review with the CT&. Thus- if we strictly apply the rules- the dismissal of the 'etition for Review $y the CT& was proper. The case is an e'ception to the rule on e'haustion of a(ministrative reme(ies ?owever- a careful readin% of the <ormal =etter of 3emand with &ssessment *otices leads us to a%ree with petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies- i.e.- estoppel on the part of the administrative a%ency concerned. In the case of V(a. ,e Tan v. Veterans !ackpay Commission- (." the respondent contended that $efore filin% a petition with the court- petitioner should have first exhausted all administrative remedies $y appealin% to the 4ffice of the 'resident. ?owever- we ruled that respondent was estopped from invo9in% the rule on exhaustion of administrative remedies considerin% that in its Resolution- it said- DThe opinions promul%ated $y the )ecretary of ;ustice are advisory in nature- which may either $e accepted or i%nored $y the office see9in% the opinion- and any a%%rieved party has the court for recourseE. The statement of the respondent in said case led the petitioner to conclude that only a final @udicial rulin% in her favor would $e accepted $y the Commission. )imilarly- in this case- we find the CIR estopped from claimin% that the filin% of the 'etition for Review was premature $ecause petitioner failed to exhaust all administrative remedies. The <ormal =etter of 3emand with &ssessment *otices reads>
8ased on your letter-protest dated 7ay (2- (11/- you alle%ed the followin%> !. (. That the said assessment has already prescri$ed in accordance with the provisions of )ection (1. of the Tax Code.

That since the exemption of <C3Gs from all taxes found in the 4ld Tax Code has $een deleted- the wordin% of )ection (,(&)(5)($) discloses that there are no other taxes imposa$le upon <C3Gs aside from the !1H <inal Income Tax. Contrary to your alle%ation- the assessments coverin% :RT and 3)T for taxa$le year (11! has not prescri$ed for sic" simply $ecause no returns were filed- thus- the three year prescriptive period has not lapsed.

#ith the implementation of the CTR'- the phrase Dexempt from all taxesE was deleted. 'lease refer to )ection (5(3)(.) and (,(&)(5) of the new Tax Code. &ccordin%ly- you were assessed for deficiency %ross receipts tax on onshore income from forei%n currency transactions in accordance with the rates provided under )ection !(! of the said Tax Code. =i9ewise- deficiency documentary stamp taxes was sic" also assessed on =oan &%reements- 8ills 'urchased- Certificate of 3eposits and related transactions pursuant to )ections !,1 and !,! of *IRC- as amended. The (0H surchar%e and (1H interest have $een imposed pursuant to the provision of )ection (/,(&) and (/+($)- respectively- of the *ational Internal Revenue Code- as amended. It is requested that the a$ove deficiency tax $e paid immediately upon receipt hereofinclusive of penalties incident to delinquency. T2!% !% our 1!"a. +e0!%!o" ba%e+ o" !"$e% !/a !o". I1 you +!%a/ree, you 3ay a**ea. 2!% 1!"a. +e0!%!o" 4! 2!" 2!r y 5607 +ay% 1ro3 re0e!* 2ereo1, o 2er4!%e %a!+ +e1!0!e"0y a8 a%%e%%3e" %2a.. be0o3e 1!"a., e8e0u ory a"+ +e3a"+ab.e. (/" (Amphasis supplied)

It appears from the fore%oin% demand letter that the CIR has already made a final decision on the matter and that the remedy of petitioner is to appeal the final decision within .1 days. In -ceanic .ireless /et*ork, Inc. v. Commissioner of Internal Revenue, (0" we considered the lan%ua%e used and the tenor of the letter sent to the taxpayer as the final decision of the CIR. In this case- records show that petitioner disputed the '&* $ut not the <ormal =etter of 3emand with &ssessment *otices. *evertheless- we cannot $lame petitioner for not filin% a protest a%ainst the <ormal =etter of 3emand with &ssessment *otices since the lan%ua%e used and the tenor of the demand letter indicate that it is the final decision of the respondent on the matter. #e have time and a%ain reminded the CIR to indicate- in a clear and unequivocal lan%ua%e- whether his action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine when his or her ri%ht to appeal to the tax court accrues. (2" Iiewed in the li%ht of the fore%oin%- respondent is now estopped from claimin% that he did not intend the <ormal =etter of 3emand with &ssessment *otices to $e a final decision. 7oreover- we cannot i%nore the fact that in the <ormal =etter of 3emand with &ssessment *otices- respondent used the word DappealE instead of DprotestEDreinvesti%ationE- or DreconsiderationE. &lthou%h there was no direct reference for petitioner to $rin% the matter directly to the CT&- it cannot $e denied that the word DappealE under prevailin% tax laws refers to the filin% of a 'etition for Review with the CT&. &s aptly pointed out $y petitioner- under )ection ((, of the *IRC- the terms DprotestE- Dreinvesti%ationE and DreconsiderationE refer to the administrative remedies a taxpayer may ta9e $efore the CIR- while the term DappealE refers to the remedy availa$le

to the taxpayer $efore the CT&. )ection + of R& +(,(- amendin% )ection !! of R& !!(0- (5"li9ewise uses the term DappealE when referrin% to the action a taxpayer must ta9e when adversely affected $y a decision- rulin%- or inaction of the CIR. &s we see it thenpetitioner in appealin% the <ormal =etter of 3emand with &ssessment *otices to the CT& merely too9 the cue from respondent. 8esides- any dou$t in the interpretation or use of the word DappealE in the <ormal =etter of 3emand with &ssessment *otices should $e resolved in favor of petitioner- and not the respondent who caused the confusion. To $e clear- we are not disre%ardin% the rules of procedure under )ection ((, of the *IRC- as implemented $y )ection . of 8IR Revenue Re%ulations *o. !(-++. (," It is the <ormal =etter of 3emand and &ssessment *otice that must $e administratively protested or disputed within .1 days- and not the '&*. *either are we deviatin% from our pronouncement in St. Stephen0s Chinese 1irl0s School v. Collector of Internal Revenue- (+" that the countin% of the .1 days within which to institute an appeal in the CT& commences from the date of receipt of the decision of the CIR on the disputed assessment- not from the date the assessment was issued. #hat we are sayin% in this particular case is that- the <ormal =etter of 3emand with &ssessment *otices which was not administratively protested $y the petitioner can $e considered a final decision of the CIR appeala$le to the CT& $ecause the words usedspecifically the words Dfinal decisionE and DappealE- ta9en to%ether led petitioner to $elieve that the <ormal =etter of 3emand with &ssessment *otices was in fact the final decision of the CIR on the letter-protest it filed and that the availa$le remedy was to appeal the same to the CT&. #e note- however- that durin% the pendency of the instant case- petitioner availed of the provisions of Revenue Re%ulations *o. .1-(11( and its implementin% Revenue 7emorandum 4rder $y su$mittin% an offer of compromise for the settlement of the :RT- 3)T and I&T for the period !++,-(11.- as evidenced $y a Certificate of &vailment dated *ovem$er (!- (115. .1" &ccordin%ly- there is no reason to reinstate the 'etition for Review in CT& Case *o. 512(. ,-EREFORE- the petition is here$y GRANTED. The assailed &u%ust (.(112 3ecision and the 4cto$er !5- (112 Resolution of the Court of Tax &ppeals are RE(ER'ED and 'ET A'IDE. The 'etition for Review in CT& Case *o. 512( is here$y DI'&I''ED $ased solely on the 8ureau of Internal Revenue6s acceptance of petitioner6s offer of compromise for the settlement of the %ross receipts tax- documentary stamp tax and value added tax- for the years !++,-(11.. 'O ORDERED. &ARIANO C. DEL CA'TILLO #ssociate 2ustice

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Surigao lectric Co., Inc. v. Court of Ta' #ppeals, !02 'hil. 0!5- 0((-0(. (!+5/). Rollo, pp. 5-(!. &n &ct Axpandin% the ;urisdiction of the Court of Tax &ppeals (CT&)- Alevatin% its Ran9 to the =evel of a Colle%iate Court with )pecial ;urisdiction and Anlar%in% its 7em$ership- &mendin% for the 'urpose Certain )ections of Repu$lic &ct *o. !!(0- &s &mended- otherwise 9nown as the =aw Creatin% the Court of Tax &ppeals- and for 4ther 'urposes. Rollo- pp. (.-.1C penned $y &ssociate ;ustice Arlinda '. Gy and concurred in $y 'residin% ;ustice Arnesto 3. &costa- and &ssociate ;ustices ;uanito C. CastaJeda- ;r.- =ovell R. 8autista- and Caesar &. Casanova. &ssociate ;ustice 4l%a 'alanca-Anriquez inhi$ited herself and did not ta9e part. Id. at .(-./. Id. at 0.-0/. Id. at (/. Id. at .0-.2. Id. at (/. Id. at .5-2!. Id. at (/. Id. Id. at 2(-22. Id. at (0. Id. at 25-5(. Id. at 5!-5(. Id. at (0. Id. at (.. Id. at (+. Id. at ./. Ri3al Commercial !anking Corporation v. Commissioner of Internal Revenue- :.R. *o. !2,/+,- &pril (/- (115- 0(( )CR& !//- !01. Commissioner of Internal Revenue v. Villa, !.1 'hil. .- 2 (!+2,). !10 'hil. .55- .,. (!+0+). Rollo- p. .2. :.R. *o. !/,.,1- 3ecem$er +- (110- /55 )CR& (10- (!!. Surigao lectric Co., Inc. v. Court of Ta' #ppeals, supra note !. )ection !!. .ho may #ppeal4 5o(e of #ppeal4 ffect of #ppeal C F &ny party adversely affected $y a decision- rulin% or inaction of the Commissioner of Internal Revenue- the Commissioner of Customs- the )ecretary of <inance- the )ecretary of Trade and Industry or the )ecretary of &%riculture or the Central 8oard of &ssessment &ppeals or the Re%ional Trial Courts may file an appeal with the CT& within thirty (.1) days after the receipt of such decision or rulin% or after the expiration of the period fixed $y law for action as referred to in )ection 5(a) (() herein. xxxx )ection .. ,ue +rocess Re6uirement in the Issuance of a ,eficiency Ta' #ssessment. F xxxx ..!.( 'reliminary &ssessment *otice ('&*). F If after review and evaluation $y the &ssessment 3ivision or $y the Commissioner or his duly authorized representative- as the case may $e- it is determined that there exists sufficient $asis to assess the taxpayer for any deficiency tax or taxes- the said 4ffice shall issue to the taxpayer- at least $y re%istered mail- a 'reliminary &ssessment *otice ('&*) for the proposed assessment- showin% in detail- the facts and the lawrules and re%ulations- or @urisprudence on which the proposed assessment is $ased. If the taxpayer fails to respond within fifteen (!0) days from date of receipt of the '&*- he shall $e considered in default- in which case- a formal letter of demand and assessment notice shall $e caused to $e issued $y the said 4fficecallin% for payment of the taxpayerKs deficiency tax lia$ility- inclusive of the applica$le penalties. xxxx ..!./ <ormal =etter of 3emand and &ssessment *otice. F The formal letter of demand and assessment notice shall $e issued $y the Commissioner or his duly authorized representative. The letter of demand callin% for payment of the taxpayerKs deficiency tax or taxes shall state the facts- the law- rules and re%ulationsor @urisprudence on which the assessment is $ased- otherwise- the formal letter of demand and assessment notice shall $e void. The same shall $e sent to the taxpayer only $y re%istered mail or $y personal delivery. x x x ..!.0 3isputed &ssessment F The taxpayer or his duly authorized representative may protest administratively a%ainst the aforesaid formal letter of demand and assessment notice within thirty (.1) days from date of receipt thereof x x x. The taxpayer shall state the facts- the applica$le law- rules and re%ulations- or @urisprudence on which his protest is $ased- otherwise- his protest shall $e considered void and without force and effect x x x. The taxpayer shall su$mit the required documents in support of his protest within sixty (21) days from the date of filin% of his letter of protest- otherwise- the assessment shall $ecome final and executory and demanda$le x x x If the taxpayer fails to file a valid protest a%ainst the formal letter of demand and assessment notice within thirty (.1) days from date of receipt thereof- the assessment shall $ecome final- executory and demanda$le. If the protest is denied- in whole or in part- $y the Commissioner- the taxpayer may appeal to the Court of Tax &ppeals within thirty (.1) days from date of receipt of the said decision- otherwise- the assessment shall $ecome final- executory and demanda$le. In %eneral- if the protest is denied- in whole or in part- $y the Commissioner or his duly authorized representative- the taxpayer may appeal to the Court of Tax &ppeals- within thirty (.1) days from date of receipt of the said decision- otherwise- the assessment shall $ecome final- executory and demanda$le> 'rovidedhowever- that if the taxpayer elevates his protest to the Commissioner within thirty (.1) days from date of receipt of the final decision of the Commissioner6s duly authorized representative- the latter6s decision shall not $e considered final- executory and demanda$le- in which case- the protest shall $e decided $y the Commissioner. If the Commissioner or his duly authorized representative fails to act on the taxpayer6s protest within one hundred ei%hty (!,1) days from date of su$mission$y the taxpayer- of the required documents in support of his protest- the taxpayer may appeal to the Court of Tax &ppeals within thirty (.1) days from the lapse of said !,1-day period- otherwise- the assessment shall $ecome final- executory and demanda$le. xxxx !1/ 'hil. .!/- .!5 (!+0,). &nnex D&E of petitioner6s 7emorandum.