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Title: CIR vs. Hon.

Secretary Gonzales, GR 177279, October 2010 Issue: Whether the obtained information from third parties despite the
Topic: Organization and Function of BIR lack of consent of the taxpayer under investigation is illegal or
malicious?
Ruling: No.
Doctrine: Tax assessments by tax examiners are presumed correct and
As the revenue officers were not given the opportunity to examine the
made in good faith, and all presumptions are in favor of the correctness
taxpayers documents, they are authorized under Section 5 of the
of a tax assessment unless proven otherwise.
NIRC to gather information from third parties.
Facts: Pursuant to Letter of Authority issued. BIR conducted a fraud
In the absence of accounting records and other documents necessary
investigation for all internal revenue taxes to ascertain/determine the
for the proper determination of tax liabilities, the revenue officers
tax liabilities of respondent L. M. Camus Engineering Corporation
resorted to the Best Evidence Obtainable [Section 6(B) of the NIRC;
(LMCEC).
RMC No. 23-2000 (November 27, 2000)]. The lack of consent of the
taxpayer under investigation does not imply that the BIR obtained the
The audit and investigation against LMCEC was precipitated by the information from third parties illegally or that the information received is
information provided by an "informer" that LMCEC had substantial false or malicious. Nor does the lack of consent preclude the BIR from
underdeclared income for the said period. For failure to comply with the assessing deficiency taxes on the taxpayer based on the documents.
subpoena duces tecum issued in connection with the tax fraud In addition, respondents cannot be allowed to escape criminal
investigation, a criminal complaint was instituted by BIR against prosecution under Sections 254 and 255 of the NIRC by mere
LMCEC for violation of Section 266 of the NIRC. imputation of a fictitious or disqualified informant under Section 282
simply because other than disclosure of the official registry number of
Based on data obtained from an "informer" and various clients of the third party informer, the Bureau insisted on maintaining the
LMCEC, it was discovered that LMCEC filed fraudulent tax returns with confidentiality of the identity and personal circumstances of said
substantial underdeclarations of taxable income for the 3 years. informer.
Petitioner thus assessed the company of total deficiency taxes and Petition Granted.
PAN was received by LMCEC. But the company refused to pay and
they contend that the assessment were invalid since the serial
numbers were not consistent. The company also attacks the identity of
Fitness by Design vs. CIR, October 17, 2008
the informer for being fictitious and alleges that the criminal case
should not be filed, because it was only made to harass the company.
Topic: Organization and Function of the Bureau of Internal Revenue
Law: Section 5 of Tax Code - for failure to file a VAT return and for filing a fraudulent income tax
return for 1995, the corresponding taxes may be assessed at any time
Doctrine: The law thus allows the BIR access to all relevant or within 10 years after the discovery of such omission or fraud
material records and data in the person of the taxpayer, and the BIR
can accept documents which cannot be admitted in a judicial BIR filed a criminal complaint before DOJ against officers and
proceeding where the Rules of Court are strictly observed. To require accountant of petitioner for violation of provisions of NIRC covering
the consent of the taxpayer would defeat the intent of the law to help taxable year 1995
the BIR assess and collect the correct amount of taxes. CTA denied petitioners Motion for Issuance of Subpoenas and
disallowed the submission by petitioner of written interrogatories to
Facts: Sablan and revenue officers by resolution; to require Sablan to testify
would violate Sec. 2 RA 2338 proscribing revelation of identities of
Mar. 17, 2004: Respondent CIR assessed Petitioner Fitness by Design informers of violations of internal revenue laws, except when the
for deficiency income taxes for tax year 1995 information is proven to be malicious/false; There was no need to issue
Petitioner protested: subpoena duces tecum to obtain the Affidavit of the Informer as the
- the assessment on the ground that it was issued beyond the 3-year same formed part of the BIR records of the case, the production of
prescriptive period under Sec. 203 of Tax Code which had been ordered by it
- since it was incorporated only on May 30, 1995, there was no basis to
assume it had already earned income for the tax year 1995 Petitioners MR denied
2005: respondent issued a warrant of distraint and/or levy against Hence, this present petition.
petitioner
Petitioner filed a Petition for Review (with Motion to Suspend Collection Issue: WON the acquisition of documents by BIR without petitioners
of Income Tax, VAT, DST and Surcharges and Interests) before CTA; consent is considered as illegally obtained
defense was prescription
Respondent: Ratio:
- petitioners 1995 filed on Apr. 11, 1996 ITR was false and fraudulent
for its deliberate failure to declare its true sales Petitioners lack of consent does not, however, imply that the BIR
- did not disclose that it has been operating/doing business and had obtained them illegally or that the information received is false or
sales ops for 1995 which it failed to report in its 1995 ITR malicious. Nor does the lack of consent preclude the BIR from
assessing deficiency taxes on petitioner based on the documents.Thus
Section 5 of the Tax Code provides:
(E) To cause revenue officers and employees to make a canvass from
In ascertaining the correctness of any return, or in making a return time to time of any revenue district or region and inquire after and
when none has been made, or in determining the liability of any person concerning all persons therein who may be liable to pay any internal
for any internal revenue tax, or in collecting any such liability, or in revenue tax, and all persons owning or having the care, management
evaluating tax compliance, the Commissioner is authorized: or possession of any object with respect to which a tax is imposed.
(A) To examine any book, paper, record or other data which may be
relevant or material to such query; The law thus allows the BIR access to all relevant or material records
(B) To obtain on a regular basis from any person other than the and data in the person of the taxpayer, and the BIR can accept
person whose internal revenue tax liability is subject to audit or documents which cannot be admitted in a judicial proceeding where
investigation, or from any office or officer of the national and local the Rules of Court are strictly observed. To require the consent of the
governments, government agencies and instrumentalities, including taxpayer would defeat the intent of the law to help the BIR assess and
the Bangko Sentral ng Pilipinas and government-owned and controlled collect the correct amount of taxes.
corporations, any information such as, but not limited to, costs and
volume of production, receipts or sales and gross incomes of Petitioners invocation of the rights of an accused in a criminal
taxpayers, and the names, addresses, and financial statements of prosecution to cross examine the witness against him and to have
corporations, mutual fund companies, insurance companies, regional compulsory process issued to secure the attendance of witnesses and
operating headquarters of multinational companies, joint accounts, the production of other evidence in his behalf does not lie.CTA Case
associations, joint ventures or consortia and registered partnerships No. 7160 is not a criminal prosecution, and even granting that it is
and their members; related to I.S. No. 2005-203, the respondents in the latter proceeding
(C) To summon the person liable for tax or required to file a return, or are the officers and accountant of petitioner-corporation, not
any officer or employee of such person, or any person having petitioner. From the complaint and supporting affidavits in I.S. No.
possession, custody, or care of the books of accounts and other 2005-203, Sablan does not even appear to be a witness against the
accounting records containing entries relating to the business of respondents therein
the person liable for tax, or any other person, to appear before the
Commissioner or his duly authorized representatives at a time and Dispositive: WHEREFORE, in light of the foregoing disquisition, the
place specified in the summons and to produce such books, papers, petition is DISMISSED. Costs against petitioner
records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as
may be relevant or material to such inquiry; and
CIR vs. Hantex Trading Co., March 21, 2005
Topic: Organization and Function of the Bureau of Internal Revenue A Mission Order was issued for the audit and investigation of
importations of Hantex for 1987. IIPO issued subpoena duces tecum
Law: and ad testificandum for president and general manager of respondent
to appear in a hearing and bring the required documents. However,
Doctrine: The prima facie correctness of a tax assessment does not respondent refused to comply: books of accounts and records of
apply upon proof that an assessment is utterly without foundation, importation had been investigated repeatedly by BIR on prior
meaning it is arbitrary and capricious. The petitioner, in making a occasions. IIPO explained that they were still authorized to do so under
preliminary and final tax deficiency assessment against a taxpayer, EO 127 (Section 26-A). still, respondent refused to comply with the
cannot anchor the said assessment on mere machine copies of subpoena. IIPO secured certified copies of the Profit and Loss
records/documents. Mere photocopies of the Consumption Entries Statements for 1987 filed by respondent with SEC. however, they failed
have no probative weight if offered as proof of the contents thereof. to secure copies of respondents 1987 consumption entries from BOC
The reason for this is that such copies are mere scraps of paper and (Original copies were eaten by termites, accdg to custodian)
are of no probative value as basis for any deficiency income or Acting Chief of Collection Division of BOC Danganan issued a
business taxes against a taxpayer. certification instead that enumerated entries were filed by respondent
Facts: processed and released after payment of duties and taxes; includes
machine copies of the Consumption Entries for 1987
Respondent is engaged in sale of plastic products, imports synthetic
resin and other chemicals for the manufacture of its products. It is Based on those, EIIB found that respondent had unreported sales
required to file an Import Entry and Internal Revenue Declaration (P63M+) and income tax liability of P41M+ + penalty charge and
(Consumption Entry) with Bureau of Customs (Sec. 1301, Tariff and interests
Customs Code) EIIB Comm recommended BIR to collect the total tax assessment
Revenue Enforcement Officers conducted an investigation to ascertain
Sometime in 1989, Acting Chief Amoto of Counter-Intelligence Division the respondents liability for deficiency sales and income taxes, if any;
of Econ Intelligence and Investigation Bureau (EIIB) received a there was prima facie case of fraud (based on report of EIIB and
confidential information that respondent had imported synthetic resin documents/records)
amting to P115M+ but only declared P45M+. the 1987 importations Invitation to conference was reiterated in a letter. However, president
were understated in its accounting records. Amoto submitted a report and general manager of respondent requested that the report of
to EIIB Commissioner recommending that an inventory audit be officers be set aside saying that of all the prior investigations
conducted conducted, they already proved the contrary to the allegation.
Petitioner: sent a letter demanding payment of deficiency income tax
and deficiency sales tax In case a person fails to file a required return or other document at the
Warrant of Distraint and/or Levy was actually served. Respondent time prescribed by law, or willfully or otherwise files a false or
wrote the CIR protesting the assessment fraudulent return or other document, the Commissioner shall make or
BIR denied the letter-request for dismissal of assessments; she was amend the return from his own knowledge and from such information
not proscribed from relying on other admissible evidence on the as he can obtain through testimony or otherwise, which shall be prima
respondents tax liability facie correct and sufficient for all legal purposes. This provision applies
Respondent filed a petition for review with CTA when the Commissioner of Internal Revenue undertakes to perform her
CTA: denied petition; respondent failed to prove the correct amount of administrative duty of assessing the proper tax against a taxpayer, to
taxes due to BIR make a return in case of a taxpayers failure to file one, or to amend a
CA granted petition and reversed CTA decision return already filed in the BIR.
Hence, this petition. The petitioner may avail herself of the best evidence or other
information or testimony by exercising her power or authority under
Issue: WON the final assessment of petitioner against respondent for paragraphs (1) to (4) of Section 7 of the NIRC
deficiency income tax and sales tax for 1987 is based on competent The best evidence envisaged in Section 16 of the 1977 NIRC, as
evidence and the law amended, includes the corporate and accounting records of the
taxpayer who is the subject of the assessment process, the accounting
Ratio: NO records of other taxpayers engaged in the same line of business,
Central to the second issue is Section 16 of the NIRC of 1977, as including their gross profit and net profit sales. Such evidence also
amended, which provides that the Commissioner of Internal Revenue includes data, record, paper, document or any evidence gathered by
has the power to make assessments and prescribe additional internal revenue officers from other taxpayers who had personal
requirements for tax administration and enforcement. Among such transactions or from whom the subject taxpayer received any income;
powers are those provided in paragraph (b) thereof, which we quote: and record, data, document and information secured from government
(b) Failure to submit required returns, statements, reports and other offices or agencies, such as the SEC, the Central Bank of the
documents. When a report required by law as a basis for the Philippines, the Bureau of Customs, and the Tariff and Customs
assessment of any national internal revenue tax shall not be Commission. The law allows the BIR access to all relevant or material
forthcoming within the time fixed by law or regulation or when there is records and data in the person of the taxpayer. It places no limit or
reason to believe that any such report is false, incomplete or condition on the type or form of the medium by which the record
erroneous, the Commissioner shall assess the proper tax on the best subject to the order of the BIR is kept. The purpose of the law is to
evidence obtainable. enable the BIR to get at the taxpayers records in whatever form they
may be kept. Such records include computer tapes of the said records or perjury. Admissions in the said entries of the importers documents
prepared by the taxpayer in the course of business. In this era of are admissions against interest and presumptively correct.
developing information-storage technology, there is no valid reason to
immunize companies with computer-based, record-keeping capabilities In fine, then, the petitioner acted arbitrarily and capriciously in relying
from BIR scrutiny. The standard is not the form of the record but where on and giving weight to the machine copies of the Consumption Entries
it might shed light on the accuracy of the taxpayers return. in fixing the tax deficiency assessments against the respondent.

We agree with the contention of the petitioner that the best evidence The rule is that in the absence of the accounting records of a taxpayer,
obtainable may consist of hearsay evidence, such as the testimony of his tax liability may be determined by estimation. The petitioner is not
third parties or accounts or other records of other taxpayers similarly required to compute such tax liabilities with mathematical exactness.
circumstanced as the taxpayer subject of the investigation, hence, Approximation in the calculation of the taxes due is justified. To hold
inadmissible in a regular proceeding in the regular courts. Moreover, otherwise would be tantamount to holding that skillful concealment is
the general rule is that administrative agencies such as the BIR are not an invincible barrier to proof. However, the rule does not apply where
bound by the technical rules of evidence. It can accept documents the estimation is arrived at arbitrarily and capriciously.
which cannot be admitted in a judicial proceeding where the Rules of
Court are strictly observed. It can choose to give weight or disregard In fine, the petitioner based her finding that the 1987 importation of the
such evidence, depending on its trustworthiness. However, the best respondent was underdeclared in the amount of P105,761,527.00 on
evidence obtainable under Section 16 of the 1977 NIRC, as amended, the worthless machine copies of the Consumption Entries. Aside from
does not include mere photocopies of records/documents. The such copies, the petitioner has no other evidence to prove that the
petitioner, in making a preliminary and final tax deficiency assessment respondent imported goods costing P105,761,527.00. The petitioner
against a taxpayer, cannot anchor the said assessment on mere cannot find solace on the certifications of Tomas and Danganan
machine copies of records/documents. Mere photocopies of the because they did not authenticate the machine copies of the
Consumption Entries have no probative weight if offered as proof of the Consumption Entries, and merely indicated therein the entry numbers
contents thereof. The reason for this is that such copies are mere of Consumption Entries and the dates when the Bureau of Customs
scraps of paper and are of no probative value as basis for any released the same. The certifications of Tomas and Danganan do not
deficiency income or business taxes against a taxpayer. even contain the landed costs and the advance sales taxes paid by the
importer, if any. Comparing the certifications of Tomas and Danganan
The original copies of the Consumption Entries were of prime and the machine copies of the Consumption Entries, only 36 of the
importance to the BIR. This is so because such entries are under oath entry numbers of such copies are included in the said certifications; the
and are presumed to be true and correct under penalty of falsification
entry numbers of the rest of the machine copies of the Consumption Title: Commissioner of Internal Revenue v. Sony Philippines,
Entries are not found therein. [G.R. No. 178697. November 17, 2010.]
Topic: Organization and Function of the Bureau of Internal Revenue
Even if the Court would concede to the petitioners contention that the
certification of Tomas and Danganan authenticated the machine copies Law: Sec 6, Tax Code
of the Consumption Entries referred to in the certification, it appears Doctrine: There must be a grant of authority before any revenue officer
that the total cost of importations inclusive of advance sales tax is can conduct an examination or assessment. Equally important is that
only P64,324,953.00 far from the amount of P105,716,527.00 arrived the revenue officer so authorized must not go beyond the authority
at by the EIIB and the BIR, or even the amount of P110,079,491.61 given. In the absence of such an authority, the assessment or
arrived at by Deputy Commissioner Deoferio, Jr. As gleaned from the examination is a nullity.
certifications of Tomas and Danganan, the goods covered by the
Consumption Entries were released by the Bureau of Customs, from Facts: On November 24, 1998, the CIR issued Letter of Authority No.
which it can be presumed that the respondent must have paid the 000019734 (LOA 19734) authorizing certain revenue officers to
taxes due on the said importation. The petitioner did not adduce any examine Sony's books of accounts and other accounting records
documentary evidence to prove otherwise. regarding revenue taxes for "the period 1997 and unverified prior
years." A preliminary assessment for 1997 deficiency taxes and
Thus, the computations of the EIIB and the BIR on the quantity and penalties was issued by the CIR which Sony protested. Thereafter,
costs of the importations of the respondent in the amount acting on the protest, the CIR issued final assessment notices, the
of P105,761,527.00 for 1987 have no factual basis, hence, arbitrary formal letter of demand and the details of discrepancies.
and capricious. The petitioner cannot rely on the presumption that she
and the other employees of the BIR had regularly performed their Sony sought re-evaluation of the aforementioned assessment by filing
duties. a protest on February 2, 2000. Sony submitted relevant documents in
support of its protest on the 16th of that same month.
Dispositive: IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The Decision of the Court of Appeals is SET ASIDE. The On October 24, 2000, within 30 days after the lapse of 180 days from
records are REMANDED to the Court of Tax Appeals for further submission of the said supporting documents to the CIR, Sony filed a
proceedings, conformably with the decision of this Court. No costs. petition for review before the CTA.

- After trial, the CTA-First Division disallowed the deficiency VAT


assessment because the subsidized advertising expense paid by Sony
which was duly covered by a VAT invoice resulted in an input VAT SEC. 6. Power of the Commissioner to Make Assessments and
credit. As regards the EWT, the CTA-First Division maintained the Prescribe Additional Requirements for Tax Administration and
deficiency EWT assessment on Sony's motor vehicles and on Enforcement.
professional fees paid to general professional partnerships. It also
assessed the amounts paid to sales agents as commissions with five (A) Examination of Returns and Determination of tax Due. After a
percent (5%) EWT pursuant to Section 1 (g) of Revenue Regulations return has been filed as required under the provisions of this Code, the
No. 6-85. The CTA-First Division, however, disallowed the EWT Commissioner or his duly authorized representative may authorize the
assessment on rental expense since it found that the total rental examination of any taxpayer and the assessment of the correct amount
deposit of P10,523,821.99 was incurred from January to March 1998 of tax: Provided, however, That failure to file a return shall not prevent
which was again beyond the coverage of LOA 19734. Except for the the Commissioner from authorizing the examination of any
compromise penalties, the CTA-First Division also upheld the penalties taxpayer. . . . [
for the late payment of VAT on royalties, for late remittance of final
withholding tax on royalty as of December 1997 and for the late Clearly, there must be a grant of authority before any revenue officer
remittance of EWT by some of Sony's branches. In sum, the CTA-First can conduct an examination or assessment. Equally important is that
Division partly granted Sony's petition by cancelling the deficiency VAT the revenue officer so authorized must not go beyond the authority
assessment but upheld a modified deficiency EWT assessment as well given. In the absence of such an authority, the assessment or
as the penalties. examination is a nullity.

Issue: W/N the period 1997 and unverified prior years," should be As earlier stated, LOA 19734 covered "the period 1997 and unverified
understood to mean the fiscal year ending in March 31, 1998 prior years." For said reason, the CIR acting through its revenue
officers went beyond the scope of their authority because the
Ratio: NO. Based on Section 13 of the Tax Code, a Letter of Authority deficiency VAT assessment they arrived at was based on records from
or LOA is the authority given to the appropriate revenue officer January to March 1998 or using the fiscal year which ended in March
assigned to perform assessment functions. It empowers or enables 31, 1998. As pointed out by the CTA-First Division in its April 28, 2005
said revenue officer to examine the books of account and other Resolution, the CIR knew which period should be covered by the
accounting records of a taxpayer for the purpose of collecting the investigation. Thus, if CIR wanted or intended the investigation to
correct amount of tax. The very provision of the Tax Code that the CIR include the year 1998, it should have done so by including it in the LOA
relies on is unequivocal with regard to its power to grant authority to or issuing another LOA.
examine and assess a taxpayer.
Upon review, the CTA-EB even added that the coverage of LOA 19734, Topic: Organization and Function of the Bureau of Internal Revenue
particularly the phrase "and unverified prior years," violated Section C
of Revenue Memorandum Order No. 43-90 dated September 20, 1990, Law:
the pertinent portion of which reads: Doctrine: While the CIR has the authority to prescribe real property
values and divide the Philippines into zones, thelaw is clear that the
3. A Letter of Authority should cover a taxable period not exceeding same has to be done upon consultation with competent appraisers
one taxable year. The practice of issuing L/As covering audit of both from the public and private sectors.
"unverified prior years is hereby prohibited. If the audit of a taxpayer
shall include more than one taxable period, the other periods or years Facts: Respondent Aquafresh Seafoods Inc. sold to Philips Seafoods,
shall be specifically indicated in the L/A. Inc. two parcels of land, including improvements thereon, located at
Barrio Banica, Roxas City, for the consideration of Php3,100,000.00.
On this point alone, the deficiency VAT assessment should have been Respondent then filed a Capital Gains Tax Return/Application for
disallowed. Be that as it may, the CIR's argument, that Sony's Certification Authorizing Registration and paid the amount of
advertising expense could not be considered as an input VAT credit Php186,000.00, representing the Capital Gains Tax and the amount of
because the same was eventually reimbursed by Sony International Php46,500.00, representing the DST due from the said sale.
Singapore (SIS), is also erroneous. Thus, there must be a sale, barter Subsequently, Revenue District Officer Gil G. Tabanda issued
or exchange of goods or properties before any VAT may be levied. Certificate Authorizing Registration No. 1071477.
Certainly, there was no such sale, barter or exchange in the subsidy
given by SIS to Sony. It was but a dole out by SIS and not in payment The BIR, however, received a report that the lots sold were
for goods or properties sold, bartered or exchanged by Sony. undervalued for taxation purposes. This prompted the Special
Investigation Division (SID) of the BIR to conduct an ocular inspection
over the properties. After the investigation, the SID concluded that the
Dispositive: WHEREFORE, the petition is DENIED. SO ORDERED. subject properties were commercial with a zonal value of Php2,000.00
per square meter.

Director Sacamos of the Revenue Region Iloilo City sent two


Title: REPUBLIC OF THE PHILIPPINES, represented by the
Assessment Notices apprising respondent of CGT and DST defencies
Honorable COMMISSIONER OF INTERNAL REVENUE (CIR),
in the sum of Php1,372,171.46 and Php356,267.62, respectively.
petitioner, vs. AQUAFRESH SEAFOODS, INC., respondent.
Director Sacamos relied on the findings of the SID that the subject
G.R. No. 170389. October 20, 2010.]
properties were commercial with a zonal valuation of Php2,000.00 per
square meter. Respondent sent a letter protesting the assessments
made by Director Sacamos. Director Sacamos denied respondent's Petitioner failed to prove that it had complied with Revenue
protest for lack of legal basis. Memorandum No. 58-69 and that a revision of the 1995 Revised Zonal
Values of Real Properties was made prior to the sale of the subject
Respondent filed a petition for review before the CTA seeking the properties. Thus, notwithstanding petitioner's disagreement to the
reversal of the denial of its protest. The main thrust of respondent's classification of the subject properties, the same must be followed for
petition was that the subject properties were located in Barrio Banica, purposes of computing the CGT and DST. It bears stressing, and as
Roxas, where the pre-defined zonal value was Php650.00 per square observed by the CTA En Banc, that the 1995 Revised Zonal Values of
meter based on the "Revised Zonal Values of Real Properties in the Real Properties was drafted by petitioner, BIR personnel,
City of Roxas under Revenue District Office No. 72 Roxas City". representatives from the Department of Finance, National Tax
Respondent asserted that the subject properties were classified as Research Center, Institute of Philippine Real Estate Appraisers and
"RR" or residential and not commercial. Respondent argued that since Philippine Association of Realtors Board, which duly satisfied the
there was already a pre-defined zonal value for properties located in requirement of consultation with public and private appraisers.
Barrio Banica, the BIR officials had no business re-classifying the
subject properties to commercial. In BIR Ruling No. 041-2001, issued on September 18, 2001, the BIR
tackled the application of a provision which is identical to Section 2 (a)
Issue: W/N the CIR is correct in re-classifying the subject properties of the Zonal Valuation Guidelines. BIR Ruling No. 041-2001 involved a
from residential to commercial, consequentlyraising the zonal value request by the Iglesia ni Cristo that the re-computation of CGT and
of the properties. DST based on the predominant use of the real properties located at
Mindanao Avenue, Quezon City, be set aside. In said case, the Iglesia
Ratio: No. While the CIR has the authority to prescribe real property ni Cristo paid the CGT and DST based on the zonal value of residential
values and divide the Philippines into zones, the law is clear that the lots in Quezon City. The Revenue District Officer, however, ordered a
same has to be done upon consultation with competent appraisers re-computation of the CGT and DST based on the ground that the real
both from the public and private sectors. It is undisputed that at the property is located in a predominantly commercial area and must be
time of the sale of the subject properties found in Barrio Banica, Roxas classified as commercial for purposes of zonal valuation. The BIR ruled
City, the same were classified as "RR," or residential, based on the in favor of Iglesia ni Cristo stating that "Certain Guidelines in the
1995 Revised Zonal Value of Real Properties. Petitioner, thus, cannot Implementation of Zonal Valuation of Real Properties for RDO No. 38,
unilaterally change the zonal valuation of such properties to applying the predominant use of property as the basis for the
"commercial" without first conducting a re-evaluation of the zonal computation of the Capital Gains and Documentary Stamp Taxes, shall
values as mandated under Section 6 (E) of the NIRC. apply only when the real property is located in an area or zone where
the properties are not yet classified and their respective zonal valuation Dispositive: WHEREFORE, premises considered, the petition is
are not yet determined." denied. The November 9, 2005 Decision of the Court of Tax Appeals
En Banc, in CTA-E.B. No. 77, is hereby AFFIRMED.
this Court need not belabour on the applicability of Section 2 (a), as the SO ORDERED.
BIR itself has already ruled that the same shall apply only when the
real property is located in an area or zone where the properties are not
yet classified and their respective zonal valuation are not yet
determined. As mentioned earlier, the subject properties were already CIR vs. Sony Philippines, November 17, 2010
part of the 1995 Revised Zonal Value of Real Properties which
classified the same as residential with a zonal value of Php650.00 per Topic: Organization and Function of the Bureau of Internal Revenue
square meter; thus, Section 2 (a) clearly has no application.
Law: Section 13 of NIRC
This Court agrees with the observation of the CTA that "zonal valuation
was established with the objective of having an 'efficient tax Doctrine: There must be a grant of authority before any revenue
administration by minimizing the use of discretion in the determination officer can conduct an examination or assessment. Equally important
of the tax based on the part of the administrator on one hand and the is that the revenue officer so authorized must not go beyond the
taxpayer on the other hand.' Zonal value is determined for the purpose authority given. In the absence of such an authority, the assessment or
of establishing a more realistic basis for real property valuation. Since examination is a nullity.
internal revenue taxes, such as CGT and DST, are assessed on the
basis of valuation, the zonal valuation existing at the time of the sale Facts:
should be taken into account.
Nov. 24, 1998: CIR issued a Letter of Authority authorizing certain
this Court rules that even assuming arguendo that the subject revenue officers to examine Sonys books of accounts and other
properties were used for commercial purposes, the same remains to accounting records regarding revenue taxes for the period 1997 and
be residential for zonal value purposes. It appears that actual use is unverified prior years.
not considered for zonal valuation, but the predominant use of other 1999: a preliminary assessment for 1997 deficiency taxes and
classification of properties located in the zone. Again, it is undisputed penalties was issued by CIR; Sony protested
that the entire Barrio Banica has been classified as residential. Acting on the protest, CIR issued final assessment notices, formal
letter of demand and details of discrepancies
Sony sought re-evaluation of the assessment by filing a protest in
2000. Sony submitted relevant documents in support of its protest on Ratio: NO
the 16th of that same month.
Based on Section 13 of the Tax Code, a Letter of Authority or LOA is
Within 30 days after the lapse of 180 days from submission of said the authority given to the appropriate revenue officer assigned to
documents to CIR, Sony filed a petition for review before CTA. perform assessment functions. It empowers or enables said revenue
officer to examine the books of account and other accounting records
CTA 1st division: disallowed deficiency VAT assessment because the of a taxpayer for the purpose of collecting the correct amount of tax.
subsidized advertising expense paid by Sony which was duly covered The very provision of the Tax Code that the CIR relies on is
by a VAT invoice resulted in an input VAT credit; maintained the unequivocal with regard to its power to grant authority to examine and
deficiency Expanded Withholding Tax (EWT) on Sonys motor vehicles assess a taxpayer.
and on professional fees paid to general professional partnerships;
also assessed amounts paid to sales agents as commissions with 5% SEC. 6. Power of the Commissioner to Make Assessments
EWT; disallowed EWT assessment on rental expense since the total and Prescribe Additional Requirements for Tax Administration and
rental deposit incurred from Jan-Mar 1998 beyond the coverage of Enforcement.
LOA; Except for compromise penalties, it also upheld the penalties for (A)Examination of Returns and Determination of tax Due. After a return
the late payment of VAT on royalties, for late remittance of FWT on has been filed as required under the provisions of this Code, the
royalty and for late remittance of EWT by some of Sonys branches Commissioner or his duly authorized representative may authorize
(Partly granted Sonys petition by cancelling the deficiency VAT the examination of any taxpayer and the assessment of the
assessment but upheld a modified deficiency EWT assessment + correct amount of tax: Provided, however, That failure to file a return
penalties shall not prevent the Commissioner from authorizing the examination
of any taxpayer. x x x [Emphases supplied]
CIR sought reconsideration; CTA 1st Division denied
CIR filed a petition for review with CTA-EB Clearly, there must be a grant of authority before any revenue officer
CTA-EB dismissed; CIRs MR denied can conduct an examination or assessment. Equally important is that
Hence, this petition for review the revenue officer so authorized must not go beyond the authority
given. In the absence of such an authority, the assessment or
Issue: WON LOA 19734, though it states the period 1997 and examination is a nullity.
unverified prior years, should be understood to mean the fiscal year
ending in Mar. 31, 1998
As earlier stated, LOA 19734 covered the period 1997 and unverified Doctrine: While the CIR has the authority to prescribe real property
prior years. For said reason, the CIR acting through its revenue officers values and divide the Philippines into zones, the law is clear that the
went beyond the scope of their authority because the deficiency VAT same has to be done upon consultation with competent appraisers
assessment they arrived at was based on records from January to both from the public and private sectors.
March 1998 or using the fiscal year which ended in March 31, 1998. As
pointed out by the CTA-First Division in its April 28, 2005 Resolution, Facts:
the CIR knew which period should be covered by the investigation.
Thus, if CIR wanted or intended the investigation to include the year June 7, 1999: Respondent Aquafresh Seafoods, Inc sold to Philips
1998, it should have done so by including it in the LOA or issuing Seafoods, Inc. 2 parcels of land + improvements, located at Barrio
another LOA. Banica, Roxas City, for P3.1M; properties were covered under TCTs

Upon review, the CTA-EB even added that the coverage of LOA 19734, Respondent then filed a Capital Gains Tax Return/Application for
particularly the phrase and unverified prior years, violated Section C of Certification Authorizing Registration and paid P186K (CGT) and
Revenue Memorandum Order No. 43-90 dated September 20, 1990 P46,500 (DST) due from the said sale. Revenue District Officer
(LOA should cover a taxable period not exceeding one taxable year; Tabanda issued Certificate Authorizing Registration
covering unverified prior years is prohibited)
BIR received a report that the lots sold were undervalued for taxation
Dispositive: In view of the foregoing, the Court finds no reason to purposes. This prompted the Special Investigation Division (SID) of
disturb the findings of the CTA-EB. WHEREFORE, the petition is BIR to conduct an ocular inspection over the properties. After the
DENIED. investigation, SID concluded that the properties were commercial with
a zonal value of P2k per sq.m.
--- 2000: Regional Director Sacamos of Revenue Region Iloilo sent 2
Assessment Notices apprising respondent of CGT and DST
Republic of the Philippines vs. Aquafresh Seafoods, Oct. 20, 2010 deficiencies; he relied on findings of SID
Respondent sent a letter protesting the assessments made by
Topic: Organization and Function of the Bureau of Internal Revenue Sacamos; denied protest for lack of legal basis
Respondent appealed; denied
Law: Section 6(E) of the NIRC Respondent filed a petition for review before CTA seeking reversal of
denial of protest
- Subject properties were classified as residential and not commercial
- Since there was already a pre-defined zonal value for properties On the other hand, under Section 196 of the NIRC, DST is based on
located in Barrio Banica, the BIR officials had no business re- the consideration contracted to be paid or on its fair market value
classifying the subject properties to commercial determined in accordance with Section 6(E) of the NIRC, whichever is
higher.
CTA: for respondent (existing Revised Zonal Values in Roxas City
should prevail for purposes of determining respondents tax liablities) Thus, in determining the value of CGT and DST arising from the sale of
CIR filed MR; denied a property, the power of the CIR to assess is subject to Section 6(E) of
Petitioner appealed to CTA-EB; dismissed the NIRC, which provides:
Hence, this petition. Section 6. Power of the Commissioner to Make Assessments and
- The requirement of consultation with competent appraisers is Prescribe Additional Requirements for Tax Administration and
mandatory only when it is prescribing real property values that is when Enforcement.
formulation or change is made in the schedule of zonal values (E) Authority of the Commissioner to Prescribe Real Property Values
- What it did was not to prescribe zonal values, but merely classify the The Commissioner is hereby authorized to divide the Philippines into
same as commercial and apply the corresponding zonal value for such different zones or area and shall, upon consultation with competent
classification based on the existing schedule of zonal values in Roxas appraisers both from the private and public sectors, determine the
fair market value of real properties located in each zone or area. For
Issue: WON the requirement of consultation with competent appraisers purposes of computing internal revenue tax, the value of the property
both from private and public sectors in determining the FMV of subject shall be, whichever is higher of:
lots is applicable in the case at bar (1) the fair market value as determined by the Commissioner; or
(2) the fair market value as shown in the schedule of values of the
Ratio: YES Provincial and City Assessors.

Under Section 27(D)(5) of the NIRC of 1997, a CGT of six (6%) While the CIR has the authority to prescribe real property values and
percent is imposed on the gains presumed to have been realized in the divide the Philippines into zones, the law is clear that the same has to
sale, exchange or disposition of lands and/or buildings which are not be done upon consultation with competent appraisers both from the
actively used in the business of a corporation and which are treated as public and private sectors. It is undisputed that at the time of the sale of
capital assets based on the gross selling price or fair market value as the subject properties found in Barrio Banica, Roxas City, the same
determined in accordance with Section 6(E) of the NIRC, whichever is were classified as RR, or residential, based on the 1995 Revised Zonal
higher. Value of Real Properties. Petitioner, thus, cannot unilaterally change
the zonal valuation of such properties to commercial without first
conducting a re-evaluation of the zonal values as mandated under already subject to a zonal valuation, a fact which even petitioner
Section 6(E) of the NIRC. has admitted in its petition. A case involving Iglesia ni Cristo (which
guidelines [Section 29(a)] are relied upon by petitioner as well) stated
To this Court's mind, petitioner's act of re-classifying the subject Certain Guidelines in the Implementation of Zonal Valuation of Real
properties from residential to commercial cannot be done without first Properties for RDO No. 38, applying the predominant use of property
complying with the procedures prescribed by law. It bears to stress that as the basis for the computation of the Capital Gains and Documentary
ALL the properties in Barrio Banica were classified as residential, Stamp Taxes, shall apply only when the real property is located in an
under the 1995 Revised Zonal Values of Real Properties. Thus, area or zone where the properties are not yet classified and their
petitioner's act of classifying the subject properties involves a re- respective zonal valuation are not yet determined.
classification and revision of the prescribed zonal values. In addition,
Revenue Memorandum No. 58-69 provides for the procedures on the Zonal valuation was established with the objective of having an efficient
establishment of the zonal values of real properties. tax administration by minimizing the use of discretion in the
determination of the tax based on the part of the administrator on one
Petitioner failed to prove that it had complied with Revenue hand and the taxpayer on the other hand. Zonal value is determined for
Memorandum No. 58-69 and that a revision of the 1995 Revised Zonal the purpose of establishing a more realistic basis for real property
Values of Real Properties was made prior to the sale of the subject valuation. Since internal revenue taxes, such as CGT and DST, are
properties. Thus, notwithstanding petitioner's disagreement to the assessed on the basis of valuation, the zonal valuation existing at the
classification of the subject properties, the same must be followed for time of the sale should be taken into account.
purposes of computing the CGT and DST. It bears stressing, and as
observed by the CTA En Banc, that the 1995 Revised Zonal Values of If petitioner feels that the properties in Barrio Banica should also be
Real Properties was drafted by petitioner, BIR personnel, classified as commercial, then petitioner should work for its revision in
representatives from the Department of Finance, National Tax accordance with Revenue Memorandum Order No. 58-69. The burden
Research Center, Institute of Philippine Real Estate Appraisers and was on petitioner to prove that the classification and zonal valuation
Philippine Association of Realtors Board, which duly satisfied the in Barrio Banica have been revised in accordance with the prevailing
requirement of consultation with public and private appraisers. memorandum. In the absence of proof to the contrary, the 1995
Revised Zonal Values of Real Properties must be followed.
Section 1(b) of the Zonal Valuation Guidelines (relied upon by
petitioner) does not apply to the case at bar for the simple reason that Dispositive: WHEREFORE, premises considered, the petition is
said proviso operates only when no zonal valuation has been denied. The November 9, 2005 Decision of the Court of Tax
prescribed. The properties located in Barrio Banica, Roxas City were Appeals En Banc, in CTA-E.B. No. 77, is hereby AFFIRMED.
assessment but upheld a modified deficiency EWT assessment as well
as the penalties. This finding was later affirmed by the CTA-EB.
Unfazed, the CIR filed the instant petition for review.
A. CIR v SONY PHILIPPINES
G.R. No. 178697 / November 17, 2010 ISSUES:
1. WON the LOA, although it states the period 1997 and unverified
TOPIC: Remedies - Assesment prior years, should be understood to mean the fiscal year ending in
March 31, 1998.
DOCTRINE: 2. WON the advertising expense, which amount was reimbursed by
1. In the absence of authority through the Letter of Authority, the Sony-Singapore, is an income of Sony and thus, VAT-taxable
assessment or examination by BIR agents is a nullity. transaction under the NIRC?
2. There must be a sale, barter or exchange of goods or properties
before any VAT may be levied. HELD:
1. NO, the period 1997 and unverified prior years should not be
FACTS: The CIR issued Letter of Authority (LA) to examine Sonys understood to mean the fiscal year ending March 31, 1998. As earlier
books of accounts and other accounting records regarding revenue stated, the LOA covered the period 1997 and unverified prior years.
taxes for the period 1997 and unverified prior years. A preliminary For said reason, the CIR acting through its revenue officers went
assessment and demand letter for 1997 taxes, deficiencies and beyond the scope of their authority because the deficiency VAT
penalties was issued by the CIR. The VAT deficiency resulted from its assessment they arrived at was based on records from January to
disallowance of the input VAT tax credit from Sonys advertising March 1998 or using the fiscal year which ended in March 31, 1998. In
expense. Sony sought a re-evaluation of these tax deficiency the absence of such an authority, the assessment or examination is a
assessments by filing a protest. Acting on the protest, the CIR issued nullity. On this point alone, the deficiency VAT assessment should have
final assessment notices with formal letter of demand. Thereafter, Sony been disallowed.
filed a petition for review before the CTA Division. Before the CTA
Division, CIR argued that since Sonys advertising expense was 2: NO, the reimbursement for the advertising expense incurred by
reimbursed by Sony Singapore, the former never incurred any Sony Phils., by Sony Singapore was not an income and was not VAT
advertising expense. As a result, Sony is not entitled to a tax credit. At taxable. As aptly founded by the CTA-First Division and later affirmed
most, the CIR continues, the said advertising expense should be for by the CTA-EB, Sonys deficiency VAT assessment stemmed from the
the account of Sony Singapore, and not Sony Philippines. The CTA CIRs disallowance of the input VAT credits that should have been
Division partly granted Sonys petition by cancelling the deficiency VAT realized from the advertising expense of the latter. The Court does not
agree that the same subsidy should be subject to the 10% VAT. To DISPOSITIVE: WHEREFORE, the petition is DENIED.
begin with, the said subsidy termed by the CIR as reimbursement was
not even exclusively earmarked for Sonys advertising expense for it -
was but an assistance or aid in view of Sonys dire or adverse
economic conditions, and was only equivalent to Sonys advertising
expenses. CIR vs. Sony Philippines (GR 178697, November 17, 2010

Section 106 of the Tax Code explains when VAT may be imposed or NATURE OF THE CASE: Petition for review on certiorari seeks to set
exacted. Thus: aside the Decision and the Resolution of the Court of Tax Appeals En
SEC. 106. Value-added Tax on Sale of Goods or Properties. Banc, affirming the Decision of the CTA-First Division which partially
(A) Rate and Base of Tax. There shall be levied, assessed and granted the petition for review of respondent Sony Philippines, Inc.
collected on every sale, barter or exchange of goods or properties,
value-added tax equivalent to ten percent (10%) of the gross selling FACTS: Sony Philippines was ordered examined for the period 1997
price or gross value in money of the goods or properties sold, bartered and unverified prior years as indicated in the Letter of Authority. The
or exchanged, such tax to be paid by the seller or transferor. audit yielded assessments against Sony Philippines for deficiency VAT
and FWT, viz: (1) late remittance of Final Withholding Tax on royalties
Thus, there must be a sale, barter or exchange of goods or properties for the period January to March 1998 and (2) deficiency VAT on
before any VAT may be levied. Certainly, there was no such sale, reimbursable received by Sony Philippines from its offshore affiliate,
barter or exchange in the subsidy given by Sony Singapore to Sony. It Sony International Singapore (SIS).
was but a dole out by Sony Singapore and not in payment for goods or
properties sold, bartered or exchanged by Sony.
On November 24, 1998, the CIR issued Letter of Authority to examine
In the present case, the services rendered by the advertising Sonys books of accounts and other accounting records regarding
companies, paid for by Sony using Sony Singapore dole-out, were for revenue taxes for the period 1997 and unverified prior years.
Sony Phils. Sony Singapore just gave assistance to Sony Phils. in the On December 6, 1999, a preliminary assessment and demand letter
amount equivalent to the latters advertising expense but never for 1997 VAT, EWT, FWT deficiencies and penalties was issued by the
received any goods, properties or service in return. In view of the CIR. The VAT deficiency resulted from its disallowance of the input VAT
foregoing, the Court finds no reason to disturb the findings of the CTA- tax credit from Sonys advertising expense. Sony sought a re-
EB. evaluation of these tax deficiency assessments by filing a protest.
Acting on the protest, the CIR issued final assessment notices with
formal letter of demand. Thereafter, Sony filed a petition for review deficiency VAT assessment they arrived at was based on records from
before the Court of Tax Appeals First Division. January to March 1998 or using the fiscal year which ended in March
Before the CTA First Division, CIR argued that since Sonys advertising 31, 1998. In the absence of such an authority, the assessment or
expense was reimbursed by Sony Singapore, the former never incurred examination is a nullity.
any advertising expense. As a result, Sony is not entitled to a tax On this point alone, the deficiency VAT assessment should have been
credit. At most, the CIR continues, the said advertising expense should disallowed.
be for the account of Sony Singapore, and not Sony Philippines.
The CTA-First Division partly granted Sonys petition by cancelling the
deficiency VAT assessment but upheld a modified deficiency EWT 2: NO, the reimbursement for the advertising expense incurred by
assessment as well as the penalties. Sony Phils., by Sony Singapore was not an income and was not VAT
This finding was later affirmed by the CTA-EB. Unfazed, the CIR filed taxable.
the instant petition for review. As aptly founded by the CTA-First Division and later affirmed by the
CTA-EB, Sonys deficiency VAT assessment stemmed from the CIRs
ISSUES: 1.) Whether or not the LOA, although it states the period disallowance of the input VAT credits that should have been realized
1997 and unverified prior years, should be understood to mean the from the advertising expense of the latter.
fiscal year ending in March 31, 1998; and The Court does not agree that the same subsidy should be subject to
2.) Whether or not the advertising expense, which amount was the 10% VAT. To begin with, the said subsidy termed by the CIR as
reimbursed by Sony-Singapore, is an income of Sony and thus, VAT- reimbursement was not even exclusively earmarked for Sonys
taxable transaction under the NIRC? advertising expense for it was but an assistance or aid in view of
Sonys dire or adverse economic conditions, and was only equivalent
3.) Was the investigation of its 1998 Final Withholding Tax return to Sonys advertising expenses.
valid? Section 106 of the Tax Code explains when VAT may be imposed or
exacted. Thus:
SEC. 106. Value-added Tax on Sale of Goods or Properties.
HELD (A) Rate and Base of Tax. There shall be levied, assessed and
1: NO, the period 1997 and unverified prior years should not be collected on every sale, barter or exchange of goods or properties,
understood to mean the fiscal year ending March 31, 1998? value-added tax equivalent to ten percent (10%) of the gross selling
As earlier stated, the LOA covered the period 1997 and unverified price or gross value in money of the goods or properties sold, bartered
or exchanged, such tax to be paid by the seller or transferor.
prior years. For said reason, the CIR acting through its revenue
officers went beyond the scope of their authority because the
Thus, there must be a sale, barter or exchange of goods or properties Facts:
before any VAT may be levied. Certainly, there was no such sale, - Enron, A domestic corporation registered in subic bay, filed its annual
barter or exchange in the subsidy given by Sony Singapore to Sony. It income tax return for 1996 on Aril 12, 1997. It indicated a net loss pf
was but a dole out by Sony Singapore and not in payment for goods or Php 7,684,948.
properties sold, bartered or exchanged by Sony. - The BIR sent a preliminary five-day letter to inform Enron of a
In the present case, the services rendered by the advertising proposed assessment over an alleged Php 2,880,817.25 deficiency
companies, paid for by Sony using Sony Singapore dole-out, were for income tax.
Sony Phils. Sony Singapore just gave assistance to Sony Phils. in the - Eron disputed the deficiency assessment.
amount equivalent to the latters advertising expense but never - On may 26, 1999, Enron received a formal assessment notice
received any goods, properties or service in return. requiring it to pay the deficiency tax but Enron protested.
- Due to the non-resolution of the protest within the 180 day period, it
3: NO. A Letter of Authority should cover a taxable period not was brought to the CTA for review and argued that the assessment
exceeding one year and to indicate that it covers unverified prior years disregard Section 228 of the Tax Code by not providing the legal and
should be enough to invalidate it. In addition, even if the Final factual basis of the assessment.
Withholding Tax was covered by Sony Philippines fiscal year ending - CTA favored enron, CA affirmed
March 1998, the same fell outside of the period 1997 and was thus
not validly covered by the Letter of Authority. Issue: WON the CIR informed Enron of the factual and legal basis for
the deficiency assessment?

Held: no
In view of the foregoing, the Court finds no reason to disturb the
findings of the CTA-EB. Ruling: WHEREFORE, the petition is hereby DENIED. The November
24, 2004 decision of the Court of Appeals is AFFIRMED.
RULING: WHEREFORE, the petition is DENIED.
SO ORDERED.
Ratio:
- The advice of tax deficiency, given by the CIR to an employee of
CIR vs. Enron Subic Power Corporation
Enron, as well as the preliminary five-day letter, were not valid
GR 166387, January 19, 2009
substitutes for the mandatory notice in writing of the legal and factual
Topic: Remedies
bases of the assessment. These steps were mere perfunctory
discharges of the CIRs duties in correctly assessing a taxpayer.
- The requirement for issuing a preliminary or final notice, as the case and Adamson, Inc. (AAI) to APAC Holding Limited (APAC). A
may be, informing a taxpayer of the existence of a deficiency tax deficiency tax assessment was issued against Petitioners relating to
assessment is markedly different from the requirement of what such their payment of capital gains tax and VAT on their sale of shares of
notice must contain. Just because the CIR issued an advice, a stock and parcels of land. Subsequent to the preliminary conference,
preliminary letter during the pre-assessment stage and a final notice, in despite the revenue officers RECOMMENDATION to issue
the order required by law, does not necessarily mean that Enron was assessment, the CIR filed with the Department of Justice her Affidavit
informed of the law and facts on which the deficiency tax assessment of Complaint against Petitioners. Lucas Adamson et al invoked the
was made. grounds that there was yet no final assessment of their tax liability, and
- The law requires that the legal and factual bases of the assessment there were still pending relevant Supreme Court and CTA cases. The
be stated in the formal letter of demand and assessment notice. Thus, Court of Appeals ultimately ruled that, in a criminal prosecution for tax
such cannot be presumed. Otherwise, the express provisions of Article evasion, assessment of tax deficiency is not required because the
228 of the NIRC and RR No. 12-99 would be rendered nugatory. The offense of tax evasion is complete or consummated when the offender
alleged factual bases in the advice, preliminary letter and audit working has knowingly and willfully filed a fraudulent return with intent to evade
papers did not suffice. There was no going around the mandate of the the tax.
law that the legal and factual bases of the assessment be stated in
writing in the formal letter of demand accompanying the assessment ISSUES:
notice. (1) Did the CIR issue an assessment?
In view of the absence of a fair opportunity for Enron to be informed of (2) Must a criminal prosecution for tax evasion be preceded by a
the legal and factual bases of the assessment against it, the deficiency tax assessment?
assessment in question was void (3) Does the CTA have jurisdiction on the case?

D. LUCAS ADAMSON vs. COURT OF APPEALS HELD:


G.R. No. 120935 / May 21, 2009 (1) NO. The recommendation letter of the Commissioner cannot be
considered a formal assessment as (a) it was not addressed to the
TOPIC: Remedies - Assessment taxpayers; (b) there was no demand made on the taxpayers to pay the
tax liability, nor a period for payment set therein; (c) the letter was
DOCTRINE: See rulings never mailed or sent to the taxpayers by the Commissioner. It was only
an affidavit of the computation of the alleged liabilities and thus merely
FACTS: Lucas Adamson, President of Adamson Management Corp served as prima facie basis for filing criminal informations.
(AMC), and other officers, sold common shares of stock in Adamson
(2) NO. The law is clear. When fraudulent tax returns are involved as in 3.1.4. Formal Letter of Demand and Assessment Notice. The formal
the cases at bar, a proceeding in court after the collection of such letter of demand and assessment notice shall be issued by the
tax may be begun without assessment. When fraudulent tax returns Commissioner or his duly authorized representative. The letter of
are involved as in the cases at bar, a proceeding in court after the demand calling for payment of the taxpayers deficiency tax or taxes
collection of such tax may be begun without assessment considering shall state the facts, the law, rules and regulations, or jurisprudence on
that upon investigation of the examiners of the BIR, there was a which the assessment is based, otherwise, the formal letter of demand
preliminary finding of gross discrepancy in the computation of the and assessment notice shall be void. The same shall be sent to the
capital gains taxes due from the transactions. The Tax Code is clear taxpayer only by registered mail or by personal delivery. x x x44
that the remedies may proceed simultaneously.
It is clear from the foregoing that a taxpayer must be informed in writing
(3) NO. While the laws governing the CTA have expanded the of the legal and factual bases of the tax assessment made against him.
jurisdiction of the Court, they did not change the jurisdiction of the CTA The use of the word "shall" in these legal provisions indicates the
to entertain an appeal only from a final decision of the Commissioner, mandatory nature of the requirements laid down therein.
or in cases of inaction within the prescribed period. Since in the cases
at bar, the Commissioner has not issued an assessment of the tax
liability of the Petitioners, the CTA has no jurisdiction. FACTS:

E. CASE TITLE: CIR v. UNITED SALVAGE and TOWAGE (PHILS.) 1. This is a petition for review on certiorari under Rule 45 of the
INC., G.R. No. 197515, July 2, 2014 Revised Rules of Court.
TOPIC: Contains factual and legal basis of the deficiency tax
assessment
2. United Salvage and Towage (Phils.), Inc., Respondent, is engaged
in the business of sub-contracting work for service contractors
PONENTE: Peralta, J.
engaged in petroleum operations in the Philippines.

DOCTRINE: Section 228 of the Tax Code provides that the taxpayer 3. During the taxable years in question, it had entered into various
shall be informed in writing of the law and the facts on which the contracts and/or sub-contracts with several petroleum service
assessment is made. Otherwise, the assessment is void. To implement contractors, such as Shell Philippines Exploration, B.V. and Alorn
the aforesaid provision, Revenue Regulation No. 12-99was enacted by Production Philippines for the supply of service vessels.
the BIR, of which 4. In the course of respondents operations, petitioner CIR found
Section 3.1.4 thereof reads: respondent USTP liable for deficiency income tax, withholding tax,
value-added tax (VAT) and documentary stamp tax (DST) for taxable were not formally offered; hence, pursuant to Section 34, Rule 132 of
years 1992,1994, 1997 and 1998. the Revised Rules of Court, the Court shall neither consider the same
5. Particularly, petitioner CIR, through BIR officials, issued demand as evidence nor rule on their validity. As regards the Final Assessment
letters with attached assessment notices for withholding tax on Notices (FANs) for deficiency EWT for taxable years 1994 and 1998,
compensation (WTC) and expanded withholding tax (EWT) for taxable the CTA-Special First Division held that the same do not show the law
years 1992, 1994 and 1998. and the facts on which the assessments were based. Said
assessments were, therefore, declared void for failure to comply with
6. USTP filed administrative protests against the 1994 and 1998 EWT Section 228 of the 1997 National Internal Revenue Code (Tax Code).
assessments, respectively.
From the foregoing, the only remaining valid assessment is for taxable
7. USTP appealed by way of Petition for Review before the Court in year 1992.
action (which was thereafter raffled to the CTA-Special First Division) 12. Hence, petitioner filed a Petition for Review with the CTA En Banc
alleging, among others, that the Notices of Assessment are bereft of
praying that the Decision of the CTA-Special First Division, dated
any facts, law, rules and regulations or jurisprudence; thus, the
March 12, 2010,be set aside.
assessments are void and the right of the government to assess and
collect deficiency taxes from it has prescribed on account of the failure
ISSUES:
to issue a valid notice of assessment within the applicable period.
8. During the pendency of the proceedings, USTP moved to withdraw 1. Whether or not the Court of Tax Appeals is governed strictly by the
the aforesaid Petition because it availed of the benefits of the Tax technical rules of evidence;
Amnesty Program under Republic Act (R.A.) No. 9480. 2. Whether or not the Expanded Withholding Tax Assessments issued
9. Having complied with all the requirements therefor, the CTA-Special by petitioner against the respondent for taxable year 1994 was without
First Division partially granted the Motion to Withdraw and declared the any factual and legal basis; and
issues on income tax, VAT and DST deficiencies closed and terminated 3. Whether or not petitioners right to collect the creditable withholding
in accordance with our pronouncement in Philippine Banking tax and expanded withholding tax for taxable year 1992 has already
Corporation v. Commissioner of Internal Revenue. prescribed.

10. Consequently, the case was submitted for decision covering the
remaining issue on deficiency EWT and WTC, respectively, for taxable
HELD:
years 1992, 1994 and 1998.
11. CTA-Special First Division: held that the Preliminary Assessment 1. No. The Court of Tax Appeals is not governed strictly by the
Notices (PANs) for deficiency EWT for taxable years 1994 and 1998 technical rules of evidence. Under Section 8 of Republic Act (R.A.) No.
1125, the CTA is categorically described as a court of record. As such, witnesses was presented. Hence, we agree with the CTA En Bancs
it shall have the power to promulgate rules and regulations for the observation that the 1994 and 1998 PANs for EWT deficiencies were
conduct of its business, and as may be needed, for the uniformity of not duly identified by testimony and were not incorporated in the
decisions within its jurisdiction. Moreover, as cases filed before it are records of the case, as required by jurisprudence.
litigated de novo, party-litigants shall prove every minute aspect of their
cases. Thus, no evidentiary value can be given the pieces of evidence While we concur with petitioner that the CTA is not governed strictly by
submitted by the BIR, as the rules on documentary evidence require technical rules of evidence, as rules of procedure are not ends in
that these documents must be formally offered before the CTA. themselves but are primarily intended as tools in the administration of
Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence justice, the presentation of PANs as evidence of the taxpayers liability
which reads: is not mere procedural technicality. It is a means by which a taxpayer is
informed of his liability for deficiency taxes. It serves as basis for the
SEC. 34. Offer of evidence. The court shall consider no evidence taxpayer to answer the notices, present his case and adduce
which has not been formally offered. The purpose for which the supporting evidence. More so, the same is the only means by which
evidence is offered must be specified. the CTA may ascertain and verify the truth of respondent's claims.

The evidence may, therefore, be admitted provided the following 2. Yes. The Expanded Withholding Tax Assessments issued by
requirements are present: (1) the same must have been duly identified petitioner against the respondent for taxable year 1994 was without
by testimony duly recorded; and (2) the same must have been any factual and legal basis.
incorporated in the records of the case. Being an exception, the same
may only be applied when there is strict compliance with the requisites In order to determine whether the requirement for a valid assessment
mentioned above; otherwise, the general rule in Section 34 of Rule 132 is duly complied with, it is important to ascertain the governing law,
of the Rules of Court should prevail. rules and regulations and jurisprudence at the time the assessment
was issued.
In the case at bar, petitioner categorically admitted that it failed to
formally offer the PANs as evidence. Worse, it advanced no justifiable In the instant case, the PANs and FANs pertaining to the deficiency
reason for such fatal omission. Instead, it merely alleged that the EWT for taxable years 1994 and 1998, respectively, were issued on
existence and due execution of the PANs were duly tackled by January 19, 1998, when the Tax Code was already in effect.
petitioners witnesses. We hold that such is not sufficient to seek
exception from the general rule requiring a formal offer of evidence, In the present case, a mere perusal of the FAN for the deficiency EWT
since no evidence of positive identification of such PANs by petitioners for taxable year 1994 will show that other than a tabulation of the
alleged deficiency taxes due, no further detail regarding the national internal revenue tax or to commence court proceedings for the
assessment was provided by petitioner. Only the resulting interest, collection thereof without an assessment. However, when it validly
surcharge and penalty were anchored with legal basis. 45 Petitioner issues an assessment within the three (3)-year period, it has another
should have at least attached a detailed notice of discrepancy or stated three (3) years within which to collect the tax due by distraint, levy, or
an explanation why the amount of P48,461.76 is collectible against court proceeding. The assessment of the tax is deemed made and the
respondent and how the same was arrived at. Any short-cuts to the three (3)-year period for collection of the assessed tax begins to run on
prescribed content of the assessment or the process thereof should not the date the assessment notice had been released, mailed or sent to
be countenanced, in consonance with the ruling in Commissioner of the taxpayer.
Internal Revenue v. Enron Subic Power Corporation.
On this matter, we note the findings of the CTA-Special First Division
It is clear that the assailed deficiency tax assessment for the EWT in that no evidence was formally offered to prove when respondent filed
1994 disregarded the provisions of Section 228 of the Tax Code, as its returns and paid the corresponding EWT and WTC for taxable year
amended, as well as Section 3.1.4 of Revenue Regulations No. 12-99 1992.
by not providing the legal and factual bases of the assessment. Hence,
the formal letter of demand and the notice of assessment issued Nevertheless, as correctly held by the CTA En Banc, the Preliminary
relative thereto are void. Collection Letter for deficiency taxes for taxable year 1992 was only
issued on February 21, 2002, despite the fact that the FANs for the
In any case, we find no basis in petitioners claim that Revenue deficiency EWT and WTC for taxable year 1992 was issued as early as
Regulation No. 12-99 is not applicable at the time the PAN and FAN for January 9, 1996. Clearly, five (5) long years had already lapsed,
the deficiency EWT for taxable year 1994 were issued. Considering beyond the three (3)-year prescriptive period, before collection was
that such regulation merely implements the law, and does not create or pursued by petitioner.
take away vested rights, the same may be applied retroactively.
Further, while the request for reinvestigation was made on March 14,
3. Yes. Petitioners right to collect the EWT for taxable year 1992 has 1997, the same was only acted upon by petitioner on January22, 2001,
prescribed. also beyond the three (3) year statute of limitations reckoned from
January 9, 1996, notwithstanding the lack of impediment to rule upon
The statute of limitations on assessment and collection of national such issue.
internal revenue taxes was shortened from five (5) years to three (3)
years by virtue of Batas Pambansa Blg. 700. Thus, petitioner has three F. CIR vs. Metro Star Superama
(3) years from the date of actual filing of the tax return to assess a GR 185371, December 08, 2010
Denying that it received a Preliminary Assessment Notice (PAN) and
Topic: Assessment; Due Process claiming that it was not accorded due process, Metro Star filed a
petition for review with the CTA.
Doctrine

While taxes are the lifeblood of the government, the power to tax has Issues
its limits in spite of all its plenitude. In balancing the scales between the
power of the State to tax and its inherent right to prosecute perceived 1. Whether or not the assessment is based on the best evidence
transgressors of the law on one side, and the constitutional rights of a obtainable pursuant to Section 6(b) of the National Internal Revenue
citizen to due process of law and the equal protection of the laws on Code;
the other, the scales must tilt in favor of the individual, for a citizens
right is amply protected by the Bill of Rights under the Constitution. 1. Whether the deficiency assessments issued by the respondent are
void for failure to state the law and/or facts upon which they are based;
The sending of a Preliminary Assessment Notice (PAN) to taxpayer to and
inform him of the assessment made is but part of the due process
requirement in the issuance of a deficiency tax assessment, the 1. Whether the respondent complied with the due process requirement
absence of which senders nugatory any assessment made by the tax as provided under the National Internal Revenue Code and Revenue
authorities Regulations No. 12-99 with regard to the issuance of a deficiency tax
assessment.
Facts
Ruling
Metro Star is a domestic corporation that owns and operates a
movie/cinema house. After conducting a post audit review on Metro 1. Yes. Jurisprudence is replete with cases holding that if the taxpayer
Star, a Revenue District Officer issued a Preliminary 15-day Letter denies ever having received an assessment from the BIR, it is
which states that there was deficiency value-added and withholding
incumbent upon the latter to prove by competent evidence that such
taxes due from it. A year later, Metro Star received a Formal Letter of notice was indeed received by the addressee. The onus probandi was
Demand on the same. This was followed by a Final Notice of Seizure
shifted to CIR to prove by contrary evidence that Metro Star received
and a Warrant of Distraint and/or Levy. the assessment in the due course of mail.
The Supreme Court has consistently held that while a mailed letter is G. COMMISSIONER OF INTERNAL REVENUE vs. FMF
deemed received by the addressee in the course of mail, this is merely DEVELOPMENT CORP.
a disputable presumption subject to controversion and a direct denial GR No. 167765 | June 30, 2008 | Quisumbing, J.
thereof shifts the burden to the party favored by the presumption to
prove that the mailed letter was indeed received by the addressee Facts:
(Republic vs. Court of Appeals, 149 SCRA 351).
On April 15, 1996, FMF filed its Corporate Annual Income Tax Return
1. Yes. Section 228 of the Tax Code clearly requires that the taxpayer for taxable year 1995 and declared P3.348Mn loss. FMF filed an
must first be informed that he is liable for deficiency taxes through the amended return on May 8. 1996 and declared P2.826Mn loss. As a
sending of a PAN. He must be informed of the facts and the law upon result, the BIR sent pre-assessment notices dated Oct. 6, 1998 to FMF,
which the assessment is made. The law imposes a substantive, not informing them about their alleged tax liabilities. A protest was filed by
merely a formal, requirement. To proceed heedlessly with tax collection FMF and requested for reinvestigation.
without first establishing a valid assessment is evidently violative of the
cardinal principle in administrative investigations that taxpayers On Jan. 22, 1999 Revenue District Officer (RDO) Zambarranoinformed
should be able to present their case and adduce supporting evidence. FMF that the reinvestigation was already referred to the Revenue
Officer and advised them about the informal conference on Feb. 2,
1. No. It is clear that the sending of a PAN to taxpayer to inform him of 1999 to allow them to present evidence that will dispute the BIR
the assessment made is but part of the due process requirement in the assessment.
issuance of a deficiency tax assessment. The absence of which
renders nugatory any assessment made by the tax authorities. On Feb. 9, 1999, FMF President signed a waiver of the 3-year
prescriptive period for assessment and extending until Oct. 31, 1999.
The use of the word shall in subsection 3.1.2 describes the This was accepted by RDO Zambarrano.
mandatory nature of the service of a PAN. The persuasiveness of the
right to due process reaches both substantial and procedural rights and FMF received amended pre-assessment notices dated Oct. 6, 1999 on
the failure of the CIR to strictly comply with the requirements laid down Oct. 18, 1999. FMF filed a protest on Nov. 3, 1999 wherein they also
by law and its own rules is a denial of Metro Stars right to due process. received a Demand Letter and Assessment Notice dated Oct. 25, 1999
Thus, for its failure to send the PAN stating the facts and the law on on the same day of filing. Said letter bore FMFs alleged deficiency
which the assessment was made as required by Section 228 of R.A. taxes and accrued interests totaling P2.053Mn.
No. 8424, the assessment made by the CIR is void.
A Letter of Protest on the assessment was filed by FMF on the ground longer be subjected to further investigation for taxes after the expiration
of prescription by reason of the invalidity of waiver. Since the BIR of reasonable period of time
insisted that the waiver is valid, it ordered FMF to settle tax liabilities. Exception to the three-year prescriptive period is the execution of a
FMF filed a petition for review before the CTA, challenging the validity
valid waiver (Sec. 222 (b) of the NIRC) where the taxpayer and the BIR
of the assessment.
agreed in writing that the period to issue an assessment and collect the
taxes due is extended to an agreed upon date
CTA Ruling
The waiver did not extend the 3-year prescriptive period where BIR Characteristics of a valid waiverpursuant to RMO No. 20-90:
must make a valid assessment. BIR did not comply with Revenue a. Must be in the form identified as Annex A
Memorandum Order No. 20-90 since the waiver did not state the dates
of execution and acceptance; hence it is hard to determine with
b. Shall be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed
certainty whether the waiver was executed and accepted within the
by any of its responsible officials.
time period. Also, FMF was not given a copy of the signed waiver.

Soon after the waiver is signed by the taxpayer, the Commissioner of


CA Ruling
Internal Revenue or the revenue official authorized by him, as
Appealed the decision of CTA.
hereinafter provided, shall sign the waiver indicating that the Bureau
has accepted and agreed to the waiver. The date of such acceptance
Issue:WON the three-year prescriptive period wherein the BIR must
by the Bureau should be indicated. Both the date of execution by the
able to make an assessment has already prescribed
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
Ruling: YES
agreed upon in case a subsequent agreement is executed

Sec. 203 of the NIRC states that nternal revenue taxes must be
assessed within three years counted from the period fixed by law for
c. Authorized revenue officials to sign the waiver:
the filing of the tax return or the actual date of filing, whichever is later.
This is to safeguard the interests of taxpayers from unreasonable
o Commissioner for taxes involving more than P1Mn if in the

investigation. Accordingly, the government must assess internal National Office


revenue taxes on time so as not to extend indefinitely the period of o Revenue District Officer with respect to tax cases still pending
assessment and deprive the taxpayer of the assurance that it will no investigation and the period to assess is about to prescribe regardless
of amount if in the Regional Office
until April 15, 1999. Even if the three-year period be counted from May
d. The waiver must be executed in three (3) copies, the original copy 8, 1996, the date of filing of the amended return, assuming the
to be attached to the docket of the case, the second copy for the amended return was substantially different from the original return, a
taxpayer and the third copy for the Office accepting the waiver. The fact case which affects the reckoning point of the prescriptive period, 22 still,
of receipt by the taxpayer of his/her file copy shall be indicated in the the subject assessment is definitely considered time-barred.
original copy.
e. The foregoing procedures shall be strictly followed. Any
Dispositive Portion:
revenue official found not to have complied with this Order resulting in
WHEREFORE, the petition is DENIED for lack of merit. The assailed
prescription of the right to assess/collect shall be administratively dealt
Decision and Resolution dated January 31, 2005 and April 14, 2005,
with.
respectively, of the Court of Appeals in CA-G.R. SP No. 79675 are
hereby AFFIRMED. No pronouncement as to costs.
The waiver is NOT valid and did not validly extend the three-year
prescriptive period
o It was not proven that respondent was furnished a copy of the BIR- H. Title: CIR vs. Stanley Works Sales (GR 1187589, December 3,
2014)
accepted waiver
o The waiver was signed only by a revenue district officer, when it
Facts: On January 1, 1979, respondent and Stanley Works Agencies
should have been signed by the Commissioner as mandated by the
(Pte.) Limited, Singapore (Stanley-Singapore) entered into a
NIRC and RMO No. 20-90, considering that the case involves an
Representation Agreement. Under such agreement, Stanley-Singapore
amount of more than P1 million, and the period to assess is not yet
appointed respondent as its sole agent for the selling of its products
about to prescribe
within the Philippines on an indent basis.
o Does not contain the date of acceptance by the Commissioner of
Internal Revenue, a requisite necessary to determine whether the On April 16, 1990, respondent filed with the BIR its Annual Income Tax
waiver was validly accepted before the expiration of the original three- Return for taxable year 1989.
year period
In fine, Assessment Notice No. 33-1-00487-95 dated October 25, On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992,
the BIR issued against respondent a Pre-Assessment Notice (PAN)
1999, was issued beyond the three-year prescriptive period. The
No. 002523 for 1989 deficiency income tax.
waiver was incomplete and defective and thus, the three-year
prescriptive period was not tolled nor extended and continued to run
On March 29, 1993, respondent received its copy of the PAN. letter to the Revenue District Officer (RDO) of BIR Revenue Region No.
4B-2 and asked for the transmittal of the entire docket of the subject
On April 12, 1993, petitioner, through OTC Domingo C. Paz of tax assessment to the BIR Appellate Division.
Revenue Region No. 4B-2 of Makati, issued to respondent
Assessment Notice No. 002523-89-6014 for deficiency income tax for On September 30, 1994, respondent, through its external auditors
taxable year 1989. The Notice was sent on April 15, 1993 and Punongbayan & Araullo, submitted a Supplemental Memorandum on
respondent received it on April 21, 1993. its protest to the BIR Revenue Region No. 4B-2.

On May 19, 1993, respondent, through its external auditors On September 20, 1995, respondent, through its external auditors
Punongbayan & Araullo, filed a protest letter and requested Punongbayan & Araullo, filed a Supplemental Memorandum with the
reconsideration and cancellation of the assessment. BIR Appellate Division.

On November 16, 1993, a certain Mr. John Ang, on behalf of On November 29, 2001, the Chief of the BIR Appellate Division sent a
respondent, executed a Waiver of the Defense of Prescription Under letter to respondent requiring it to submit duly authenticated financial
the Statute of Limitations of the National Internal Revenue Code statements for the worldwide operations of Stanley Works and a sworn
(Waiver). Under the terms of the Waiver, respondent waived its right to declaration from the home office on the allocated share of respondent
raise the defense of prescription under Section 223 of the NIRC of as a branch office.
1977 insofar as the assessment and collection of any deficiency taxes
for the year ended December 31, 1989, but not after June 30, 1994. On December 11, 2001, respondent, through its counsel, the
The Waiver was not signed by petitioner or any of his authorized Quisumbing Torres Law Offices, wrote the BIR Appellate Division and
representatives and did not state the date of acceptance as prescribed asked for an extension of period within which to comply with the
under Revenue Memorandum Order No. 20-90. Respondent did not request for submission of documents. On January 15, 2002,
execute any other Waiver or similar document before or after the respondent sent a request for an extension of period to submit a
expiration of the November 16, 1993 Waiver on June 30, 1994. Supplemental Memorandum.

On January 6, 1994, respondent, through its external auditors On March 4, 2002, respondent, through its counsel, the Quisumbing
Punongbayan & Araullo, wrote a letter to the Chief of the BIR Appellate Torres Law Offices, submitted a Supplemental Memorandum alleging,
Division and requested the latter to take cognizance of respondent's inter alia, that petitioner's right to collect the alleged deficiency income
protest/request for reconsideration, asserting that the dispute involved tax has prescribed.
pure questions of law. On February 22, 1994, respondent sent a similar
On March 22, 2004, petitioner rendered a Decision denying Protest of the taxpayer. The statute of limitations imposed by the Tax
respondents request for reconsideration and ordering respondent to Code precisely intends to protect the taxpayer from prolonged and
pay the deficiency income tax plus interest that may have accrued. unreasonable assessment and investigation by the BIR. Even
assuming arguendo that the Waiver executed by respondent on 16
Issue/s: WON respondents repeated requests and positive acts November 1993 is valid, the right of petitioner to collect the deficiency
constitute estoppel from setting up the defense of prescription under income tax for the year 1989 would have already prescribed by 2001
the NIRC. when the latter first acted upon the protest, more so in 2004 when it
finally denied the reconsideration. Records show that the Waiver
Ruling: NO. extends only for the period ending 30 June 1994, and that there were
True, respondent filed a Protest and asked for a reconsideration and no further extensions or waivers executed by respondent. Again, a
cancellation of the assessment on 19 May 1993; however, it is waiver is not a unilateral act of the taxpayer or the BIR, but is a bilateral
uncontested that petitioner failed to act on that Protest until 29 agreement between two parties to extend the period to a date certain.
November 2001, when the latter required the submission of other Since the Waiver in this case is defective and therefore invalid, it
supporting documents. In fact, the Protest was denied only on 22 produces no effect; thus, the prescriptive period for collecting
March 2004. Petitioners reliance on CIR v. Suyoc (Suyoc) is likewise deficiency income tax for taxable year 1989 was never suspended or
misplaced. In Suyoc, the BIR was induced to extend the collection of tolled. Consequently, the right to enforce collection based on
tax through repeated requests for extension to pay and for Assessment Notice No. 002523-89-6014 has already prescribed.
reinvestigation, which were all denied by the Collector. Contrarily,
herein respondent filed only one Protest over the assessment, and Dispositive: Petition DENIED.
petitioner denied it 10 years after. The subsequent letters of
respondent cannot be construed as inducements to extend the period I. CIR vs Next Mobile
of limitation, since the letters were intended to urge petitioner to act on
the Protest, and not to persuade the latter to delay the actual collection. Topic: Remedies; Assessment
Petitioner cannot take refuge in BPI vs CIR either, considering that Doctrine: - Section 203 of the 1997 NIRC mandates the BIR to assess
respondent and BPI are similarly situated. Similar to BPI, this is a internal revenue taxes within three years from the last day prescribed
simple case in which the BIR Commissioner and other BIR officials by law for the filing of the tax return or the actual date of filing of such
failed to act promptly in resolving and denying the request for return, whichever comes later. Hence, an assessment notice issued
reconsideration filed by the taxpayer and in enforcing the collection on after the three-year prescriptive period is not valid and effective.
the assessment. Both in BPI and in this case, the BIR presented no - Exceptions to this rule are provided under Section 222 of the NIRC.
reason or explanation as to why it took many years to address the Section 222(b) of the NIRC provides that the period to assess and
collect taxes may only be extended upon a written agreement between
the CIR and the taxpayer executed before the expiration of the three- - Section 203 of the 1997 NIRC mandates the BIR to assess internal
year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 5 revenue taxes within three years from the last day prescribed by law for
issued on August 2, 2001 provided or the proper execution of waiver the filing of the tax return or the actual date of filing of such return,
whichever comes later. Hence, an assessment notice issued after the
Facts: three-year prescriptive period is not valid and effective.
- On April 15, 2002, Respondent Filed its income tax return for 2001. - Exceptions to this rule are provided under Section 222 of the NIRC.
Respondent also filed its Monthly Remittance Returs of Final income Section 222(b) of the NIRC provides that the period to assess and
taxes withheld, its monthly Remittance returns of expanded Witholding collect taxes may only be extended upon a written agreement between
tax, and on compensation for 2001 the CIR and the taxpayer executed before the expiration of the three-
- September 23, 2003, respondent received a letter signed by the year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 5
Regional Director VAleroso authorizing Revenue Officer Crespo to issued on August 2, 2001 provided or the proper execution of waiver
examine respondents books of accounts. - In the instant case, the CT A found the Waivers because of the
- Sarmiento, Respondents Director of Finance, executed several following flaws: (1) they were executed without a notarized board
waivers to the statute of limitations extending the prescriptive period of authority; (2) the dates of acceptance by the BIR were not indicated
the assessment (5 waivers from August 30, 2004 to May 3, 2005) therein; and (3) the fact of receipt by respondent of its copy of the
- On October 25, 2005, respondent received a formal letter of demand Second Waiver was not indicated on the face of the original Second
dated October 17, 2005, demanding payment of the deficiency taxes Waiver.
amounting to P313,339,610.42 for 2001 - respondent, through Sarmiento, executed.five Waivers in favor of
- Respondent filed its protest and requested for reinvestigation of its petitioner. However, her authority to sign these Waivers was not
assessment. BIR denied the protest presented upon their submission to the BIR. In fact, later on, her
- CTA ruled in favor of the respondent saying that the demand is authority to sign was questioned by respondent itself, the very same
already beyond the 3 year prescriptive period entity that caused her to sign such in the first place. Thus, it is clear
that respondent violated RMO No. 20-90 which states that in case of a
Issue: Whether the CIRs right to assess deficiency taxes had already corporate taxpayer, the waiver must be signed by its responsible
prescribed? officials and RDAO 01-05 which requires the presentation of a written
and notarized authority to the BIR.
Held: Yes Similarly, the BIR violated its own rules and was careless in performing
its functions with respect to these Waivers. It is very clear that under
Ratio: RDAO 05-01 it is the duty of the authorized revenue official to ensure
that the waiver is duly accomplished and signed by the taxpayer or his Doctrine: The prescriptive period on when to assess taxes benefits both the
authorized representative before affixing his signature to signify government and the taxpayer. Exceptions extending the period to assess
acceptance of the same. It also instructs that in case the authority is must, therefore, be strictly construed.
delegated by the taxpayer to a representative, the concerned revenue
official shall see to it that such delegation is in writing and duly Facts: April 15, 1999: Respondent filed its Annual Income Tax Return
notarized. Furthermore, it mandates that the waiver should not be for the taxable year 1998.
accepted by the concerned BIR office and official unless duly notarized Pursuant to a Letter of Authority (Sept. 7, 1999), BIR served upon
. Vis-a-vis the five Waivers it received from respondent, the BIR has respondent 3 Notices of Presentation of Records. Respondent failed to
failed, for five times, to perform its duties in relation thereto: to verify comply with these notices, hence, BIR issued a Subpoena Duces
Ms. Sarmiento's authority to execute them, demand the presentation of Tecum (Sept. 21, 2006), receipt of which was acknowledged by
a notarized document evidencing the same, refuse acceptance of the respondents presentation, Mr. Chan Ching Bio, in a letter.
Waivers when no such document was presented, affix the dates of its
acceptance on each waiver, and indicate on the Second Waiver the A review and audit of respondents records then ensued.
date of respondent's receipt thereof. Both parties knew the infirmities of
the Waivers yet they continued dealing with each other on the strength Pasco, respondents accountant, executed a Waiver of the Defense of
of these documents without bothering to rectify these infirmities. In fact, Prescription, received by the BIR Enforcement Service and by the BIR
in its Letter Protest to the BIR, respondent did not even question the Tax Fraud Division, and accepted by the Assistant Commissioner
validity of the Waivers or call attention to their alleged defects. Enforcement Service; this was followed by a 2nd waiver of defense of
prescription executed by Pasco received by the BIR Tax Fraud Division,
and accepted by Asst Commissioner.

August 25, 2003: BIR issued a Preliminary Assessment Notice for the
J. CIR vs. Kudos Metal Corporation taxable year 1998 against respondent; followed by a Formal Letter of
Demand with Assessment Notices for taxable year 1998 (Sept. 26,
Topic: Prescriptive Period 2003), which was received by respondent on Nov. 12, 2003.

Law: Sections 203 and 222, NIRC Respondent challenged the assessments by filing its Protest on
Various Tax Assessments and its Documents in support of protests
against various assessments.
June 22, 2004 BIR: requested immediate payment of tax liabilities Ratio:
Believing that the governments right to assess taxes had prescribed, Section 203 of the National Internal Revenue Code of 1 997 (NIRC)
respondent filed a petition for review with CTA; Respondent filed an mandates the government to assess internal revenue taxes within three
Urgent Motion for Preferential Resolution of the Issue on Prescription years from the last day prescribed by law for the filing of the tax return
or the actual date of filing of such return, whichever comes
CTA: resolution cancelling the assessment notices issued against later. Hence, an assessment notice issued after the three-year
respondent for having been issued beyond the prescriptive period; prescriptive period is no longer valid and effective. Exceptions however
found first waiver of statute of limitations incomplete a defective for are provided under Section 222 of the NIRC.
failure to comply with RMO 20-90
- Asst commissioner is not the revenue official authorized to sign The waivers executed by respondents accountant did not extend the
the waiver, as the tax case involves more than 1M; only period within which the assessment can be made
commissioner is authorized
- The waiver failed to indicate the date of acceptance Section 222 (b) of the NIRC provides that the period to assess and collect
- Fact of receipt by the TP of his file copy was not indicated in the taxes may only be extended upon a written agreement between the CIR and
original copy (this is to give notice of acceptance by BIR and the taxpayer executed before the expiration of the three-year period. RMO
perfection of agreement) 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2,
Subject waiver is therefore incomplete and defective; as 2001 lay down the procedure for the proper execution of the waiver
such, the 3-year prescriptive period was not tolled or A perusal of the waivers executed by respondents accountant reveals the
extended and continued to run following infirmities:

Petitioner moved for reconsideration; denied 1. The waivers were executed without the notarized
CTA En Banc: affirmed cancellation of assessment notices written authority of Pasco to sign the waiver in behalf of
Reconsideration denied respondent.
Hence, this petition.
2. The waivers failed to indicate the date of
Issue: WON the governments right to assess unpaid taxes of acceptance.
respondent prescribed
3. The fact of receipt by the respondent of its file copy
Held: YES was not indicated in the original copies of the waivers.
Due to the defects in the waivers, the period to assess or collect As to the alleged delay of the respondent to furnish the BIR of the
taxes was not extended. Consequently, the assessments were issued by the required documents, this cannot be taken against respondent. Neither can
BIR beyond the three-year period and are void. the BIR use this as an excuse for issuing the assessments beyond the three-
year period because with or without the required documents, the CIR has the
Estoppel does not apply in this case power to make assessments based on the best evidence obtainable.

The doctrine of estoppel cannot be applied in this case as an


exception to the statute of limitations on the assessment of taxes considering
that there is a detailed procedure for the proper execution of the waiver, which
the BIR must strictly follow. As we have often said, the doctrine of estoppel is K. Bank of the Philippine Islands vs. CIR
predicated on, and has its origin in, equity which, broadly defined, is justice
according to natural law and right. As such, the doctrine of estoppel cannot G.R. No. 181836 July 9, 2014
give validity to an act that is prohibited by law or one that is against public BANK OF THE PHILIPPINE ISLANDS, Petitioner, vs. COMMISSIONER OF
policy. It should be resorted to solely as a means of preventing injustice and INTERNAL REVENUE, Respondent.
should not be permitted to defeat the administration of the law, or to CARPIO, J.:
Facts: BPI, successor-in-interest of Citytrust Banking Corporation, is a
accomplish a wrong or secure an undue advantage, or to extend beyond
commercial banking corporation organized and existing under the laws of the
them requirements of the transactions in which they originate. Simply put, the
Philippines. On 19 May 1989, BIR issued Assessment No. FAS-5-85-89-
doctrine of estoppel must be sparingly applied.
0009885 finding BPI liable for deficiency DST on its sales of foreign bills of
exchange to the Central Bank. On 16 June 1989, BPI received the
Moreover, the BIR cannot hide behind the doctrine of estoppel to assessment notice and demand letter from the BIR.
cover its failure to comply with RMO 20-90 and RDAO 05-01, which the BIR BPI, through itscounsel, filed a protest letter requesting for the reinvestigation
itself issued. As stated earlier, the BIR failed to verify whether a notarized and/or reconsideration of the assessment for lack of legal and factual bases.
written authority was given by the respondent to its accountant, and to The BPI alleged that it should not be liable for the assessed DST because: (1)
indicate the date of acceptance and the receipt by the respondent of the based on recognized business practice incorporated in the Bankers
waivers. Having caused the defects in the waivers, the BIR must bear the Association of the Philippines (BAP) Foreign Exchange Trading Center Rule
consequence. It cannot shift the blame to the taxpayer. To stress, a waiver of 2(e), DST was for the account of the buyer; (2) BIR Ruling No. 135-87stated
that neither the tax-exempt entity nor the other party shall be liable for the
the statute of limitations, being a derogation of the taxpayers right to security
payment of DST before the effectivity of Presidential Decree No. (PD) 1994 on
against prolonged and unscrupulous investigations, must be carefully and
1 January 1986; (3) since the then law left the tax to be paid indifferently by
strictly construed. either party and the party liable was exempt, the document was exempt from
DST; and (4) the assessed DST was the same assessment made by the BIR for reconsideration, which did not suspend the running of the prescriptive
for DST swap transaction covering taxable years 1982-1986. period to collect.
The CIR held that BPIs arguments were legally untenable. The CIR cited BIR
Unnumbered Ruling dated 30 May 1977 and BIR Ruling No. 144-84 dated 3 Even considering that BPIs protest was a request for reinvestigation, there
September 1984, where the liability to pay DST was shifted to the other party, was nothing in the records which showed that the BIR granted such request.
who was notexempt from the tax. As for being taxed twice, the CIR found that On the other hand, the BIR only responded to BPI on 4 August 1998 or after
such allegation was unsubstantiated by BPI. the CTA ordered the cancellation nine years from the protest letter of BPI. In the Bank of the Philippine Islands
of the assessed DST on BPI. The CTA ruled that neither BPI nor Central case,26 we clarified and qualified our ruling in Commissioner of Internal
Bank, which was tax-exempt, could be liable for the payment of the assessed Revenue v. Wyeth Suaco Laboratories, Inc.,27 such that the request for
DST. The CTA reasoned out that before PD 1994 took effect in 1986, there reinvestigation in that case was granted by the BIR. Thus, unlike in the
was no law that shifted the liability to the other party, in case the party liable to present case, there was a proper ground for suspension of the prescriptive
pay the DST was tax exempt. period in Wyeth Suaco.
Issue: whether or not BIR has a right to collect the assessed DST from BPI. Considering that the dismissal of the present case due to prescription is
Held: We deny the right of the BIR tocollect the assessed DST on the ground imperative, there is no more need to determine the validity of the assessment.
of prescription.
The earliest attempt of the BIR to collect the tax was when it filed its answer in
the CTA on 23 February 1999, which was several years beyond the three-year
L. Lascona vs CIR
prescriptive period. However, the BIRs answer in the CTA was not the
GR 171251 March 5 2012
collection casecontemplated by the law. Before 2004 or the year Republic Act
No. 9282 took effect, the judicial action to collect internal revenue taxes fell
under the jurisdiction of the regular trial courts, and not the CTA. Evidently, Facts:
prescription has set in to bar the collection of the assessed DST. On March 27 1998, the CIR issued an assessment notice against
The BIR nevertheless insists thatthe running of the prescriptive period to Lascona Land Co., Inc informing the latter of its deficiency income tax
collect the tax was suspended by BPIs filing of a request for the for the year 1993. On March 27 1998, Lascona filed a letter protest. In
reinvestigation and/or reconsideration on 23 June 1989. its letter dated March 3, 1999, which was received by Lascona on
In the present case, the protest letter of BPI essentially raises the same March 12, 1999, the Commissioner denied the protest on the ground
question of law, that is whether BPI was liable for DST on its sales of foreign that the assessment has become final and executory when Lascona
bills of exchange to the Central Bank in the taxable year 1985. Although it did not appeal before the CTA within 30 days after the lapse of 180-day
raised the issue of being taxed twice, the BIR admitted that BPI did not
period as mandated by Sec 228 of the NIRC.
present any new or additional evidence to substantiate its allegations.24 In its
On April 12 1999, Lascona appealed the Commissioners decision
letter dated 4 August 1998,25 the BIR itself referred to the protest of BPI as a
request for reconsideration, found the arguments in it legally untenable, and
before the CTA. Lascona averred that the Commissioner erred in ruling
denied the request. Hence, we find that the protest letter of BPI was a request
that failure to file a timely appeal before the CTA resulted to the finality on April 12 1999 before the CTA, after its receipt of the Letter dated
of the assessment. March 3 1999 on March 12 1999, the appeal was timely made as it
Issue: W/N the taxpayers failure to appeal before the CTA within 30 was filed within 30 days after receipt of copy of the decision. #
days after the lapse of the 180-day reglementary period pursuant to Note ***RMC 54-2014
Sec 228 resulted to the finality of the assessment In the filing of administrative claims for refund or tax credit of input
No. First, it must be clarified that the word decision does not signify taxes, the option for the taxpayer to wait for the Commissioners
the assessmentitself. It is well-established in jurisprudence that the decision on its claim before filing an appeal may not be available.
word decision in the CTA Charter has been interpreted to mean the Under the new rule promulgated by the BIR in 2014, if the claim for
decisions of the Commissioner on the protest of the taxpayer against VAT refund or credit is not acted upon by the Commissioner within the
the assessments. 120-day period as required by law, such inaction shall be deemed a
Second, the filing of an appeal within 30 days after the lapse of 180- denial of the application for tax refund or credit. Further, the new
day period is not the only remedy available in case of inaction by the regulation provides that the taxpayer can appeal in one of the two
CIR on the protested assessment. It is a well-settled rule in ways: (1) File the judicial claim within 30 days after the Commissioner
jurisprudence, which is consistent with the Revised Rules of the CTA, denies the claim within the 120-day period, or (2) File the judicial claim
that the taxpayer may also opt to await the final decision of the within 30 days after the expiration of the 120-day period if the
Commissioner on the disputed assessment and appeal such decision Commissioner did not act on the claim.
to the CTA within 30 days after the receipt of a copy of such decision. This will have to mean that, unlike in the case of appealing before the
These options are mutually exclusive and resort to one bars the CTA for disputed assessments, the remedy of the taxpayer to wait for
application of the other. the Commissioners decision even after the 120-day period is not
Here, considering that Lascona opted to await the final decision of the available when it comes to claiming refund or tax credit of VAT input
Commissioner on the protested assessment, it then has the right to taxes.Thus, if the taxpayer failed to file an appeal or judicial claim
appeal such final decision to the CTA by filing a petition for review within 30 days after the lapse of the 120-day period of the
within 30 days after receipt of copy of such decision or ruling, even Commissioners inaction, the taxpayer loses its right to appeal to the
after the expiration of the 180-day period fixed by law for the CIR to act CTA.
on the disputed assessments. Thus, Lascona, when it filed an appeal