MONTERO // 3A TAX DIGESTS

AGATEP ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO
LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA

COMMISIONER OF INTERNAL REVENUE v. STANDARD

CHARTERED BANK (Agatep)
[GR. No. 192173; July 29, 2015]
Waiver invalid pag hindi nagcomply so form . . . so may prescription pa rin
Recit-Ready:
Facts: Standard Chartered Bank (Bank) received from the CIR a Formal
Letter of Demand dated June 24, 2004, for alleged deficiency income tax,
final income tax - FCDU, withholding tax on compensation, EWT, final
withholding tax and increments for taxable year 1998 in the aggregate
amount of P33,326,211.37.
The bank made a protest of the assessment and on the inaction of the
CIR, it filed a petition for review in the CTA. CTA Division granted

invalid because they did not conform with the formal requirements
prescribed by RMO No. 20-90 and RDAO No. 05-01. The provisions
explicitly show their mandatory nature requiring strict compliance.
Although respondent paid the deficiency WTC and FWT assessments,
there is no waiver of defense of prescription for the remaining tax
deficiencies, it being on record that the Bank continued to raise the issue
of prescription in its Pre-Trial Brief, Joint Stipulations of Facts and Issues,
direct testimonies of its witness, and Memorandum. More so, even CIR did
not consider such payment of respondent as a waiver of the defense of
prescription, but merely raised the issue of estoppel in her Motion for
Reconsideration.
Facts:

On July 14, 2004, Standard Chartered Bank (Bank) received from the
CIR a Formal Letter of Demand dated June 24, 2004, for alleged
deficiency income tax, final income tax - FCDU, withholding tax on
compensation, EWT, final withholding tax and increments for taxable year
1998 in the aggregate amount of P33,326,211.37.

In view of CIRs inaction on the Banks protest filed on August 12, 2004,
the Bank filed a Petition for Review on March 9, 2005.

The CTA in Division granted respondent's petition for the cancellation and
setting aside of the subject Formal Letter of Demand and Assessment
Notices on the ground that petitioner's right to assess respondent for the
deficiency covering taxable year 1998 was already barred by prescription.
Although petitioner offered in evidence copies of the Waivers of Statute of
Limitations executed by the parties, for the purpose of justifying the
extension of period to assess respondent, the subject waivers,
particularly the First and Second Waivers dated 20 July 2001 and 4 April
2002, respectively, failed to strictly comply and conform with the
provisions of Revenue Memorandum Order (RMO) No. 20-90, citing the
case of Philippine Journalists, Inc. v. CIR. It therefore concluded that

respondents petition on the ground that the CIRs right to assess has
already prescribed. The waivers of Statute of Limitations, executed by the
parties (CIR and Taxpayer), presented in evidence by the CIR was not
given credence because they were not in compliance with the form
prescribed by Revenue Memorandum Order.
Issue/s:
WON the CIRs right to assess deficiency taxes has prescribed?
YES
Held:
YES. CIR can no longer make an assessment for the taxable year 2008
because the assessment was issued beyond the three year prescriptive
period.
The waivers agreed in writing by the parties (CIR and Taxpayer) was

MONTERO // 3A TAX DIGESTS

AGATEP ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO
LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA
1. The waiver must be in the proper form prescribed by RMO 20-90. The
phrase "but not after __ 19 _", which indicates the expiry date of the
period agreed upon to assess/collect the tax after the regular three-year
period of prescription, should be filled up.

since the aforesaid waivers were invalid, it necessarily follows that the
subsequent waivers did not in any way cure these defects. Neither did it
extend the prescriptive period to assess. MR Denied. The CTA En Banc
affirmed in toto both the aforesaid Decision and Resolution.

2. The waiver must be signed by the taxpayer himself or his duly

authorized representative. In the case of a corporation, the waiver must
be signed by any of its responsible officials. In case the authority is
delegated by the taxpayer to a representative, such delegation should be
in writing and duly notarized.

Issue:
WON the CIRs right to assess deficiency taxes has prescribed?
YES

3. The waiver should be duly notarized.

Held/Ratio: Petition DENIED for lack of merit.

YES

At the outset, the period for petitioner to assess and collect an internal
revenue tax is limited only to three years by Section 203 of the NIRC of
1997.

As an exception, Section 222 of the NIRC allows the Commissioner and

the Taxpayer to agree in writing, before the expiration of the prescriptive
period, that assessment may be allowed even after the lapse of the three
year period.

In the case of Philippine Journalists, Inc. v. CIR a waiver is not

automatically a renunciation of the right to invoke the defense of
prescription. It is a bilateral agreement, thus necessitating the very
signatures of both the CIR and the taxpayer to give birth to a valid
agreement. Furthermore, indicating in the waiver the date of acceptance
by the BIR is necessary in order to determine whether the parties (the
taxpayer and the government) had entered into a waiver "before the
expiration of the time prescribed.

RMO No. 20-90 and RDAO No. 05-01 outline the procedure for the
proper execution of a waiver. The provisions explicitly show their
mandatory nature requiring strict compliance.

4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver. The date
of such acceptance by the BIR should be indicated. However, before
signing the waiver, the CIR. or the revenue official authorized by him must
make sure that the waiver is in the prescribed form, duly notarized, and
executed by the taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by
the Bureau should be before the expiration of the period of prescription or
before the lapse of the period agreed upon in case a subsequent
agreement is executed.
6. The waiver must be executed in three copies, the original copy to be
attached to the docket of the case, the second copy for the taxpayer and
the third copy for the Office accepting the waiver. The fact of receipt by the
taxpayer of his/her file copy must be indicated in the original copy to show
that the taxpayer was notified of the acceptance of the BIR and the
perfection of the agreement.

In this case, the Commissioner should have signed the waivers but only
Assistant Commissioners signed it. Date of Acceptance was not indicated
therein. The waivers did not specify the kind and amount of tax due.

Further, the tenor of the Waiver of the Statute of Limitations signed by

petitioner's authorized representative failed to comply with the prescribed
requirements of RMO No. 20-90. The subject waiver speaks of a request

MONTERO // 3A TAX DIGESTS

AGATEP ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO
LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA

for extension of time within which to present additional documents,

whereas the waiver provided under RMO No. 20-90 pertains to the
approval by the Commissioner of Internal Revenue of the taxpayer's
request for re-investigation and/or reconsideration of pending internal
revenue case.

Taking into consideration the foregoing defects in the First and Second
Waivers, the period to assess the tax liabilities was never extended.
Consequently, prescription has already set in.

Although respondent paid the deficiency WTC and FWT assessments,

there is no waiver of defense of prescription for the remaining tax
deficiencies, it being on record that the Bank continued to raise the issue
of prescription in its Pre-Trial Brief, Joint Stipulations of Facts and Issues,
direct testimonies of its witness, and Memorandum. More so, even CIR
did not consider such payment of respondent as a waiver of the defense
of prescription, but merely raised the issue of estoppel in her Motion for
Reconsideration.