4/2/2017 G.R.No.

148380

TodayisSunday,April02,2017

CustomSearch

RepublicofthePhilippines
SUPREMECOURT

FIRSTDIVISION

G.R.No.148380December9,2005

OCEANICWIRELESSNETWORK,INC.,Petitioner,
vs.
COMMISSIONEROFINTERNALREVENUE,THECOURTOFTAXAPPEALS,andTHECOURTOFAPPEALS,
Respondents.

DECISION

AZCUNA,J.:

ThisisaPetitionforReviewonCertiorariseekingtoreverseandsetasidetheDecisionoftheCourtofAppeals
dated October 31, 2000, and its Resolution dated May 3, 2001, in "Oceanic Wireless Network, Inc. v.
CommissionerofInternalRevenue"docketedasCAG.R.SPNo.35581,upholdingtheDecisionoftheCourtof
TaxAppealsdismissingthePetitionforReviewinCTACaseNo.4668forlackofjurisdiction.

Petitioner Oceanic Wireless Network, Inc. challenges the authority of the Chief of the Accounts Receivable and
BillingDivisionoftheBureauofInternalRevenue(BIR)NationalOfficetodecideand/oractwithfinalityonbehalf
oftheCommissionerofInternalRevenue(CIR)onprotestsagainstdisputedtaxdeficiencyassessments.

Thefactsofthecaseareasfollows:

OnMarch17,1988,petitionerreceivedfromtheBureauofInternalRevenue(BIR)deficiencytaxassessmentsfor
thetaxableyear1984inthetotalamountofP8,644,998.71,brokendownasfollows:

KindofTaxAssessmentNo.Amount

DeficiencyIncomeTaxFAR4198488001130P8,381,354.00

PenaltiesforlatepaymentFAR41984880011313,000.00

ofincomeandfailureto

filequarterlyreturns

DeficiencyContractorsFAR419848800113229,849.06

Tax

DeficiencyFixedTaxFAR48800113312,083.65

DeficiencyFranchiseTaxFAR48488001134___227,712.00

TotalP8,644,998.71

Petitioner filed its protest against the tax assessments and requested a reconsideration or cancellation of the
sameinalettertotheBIRCommissionerdatedApril12,1988.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr.
SeverinoB.Buot,reiteratedthetaxassessmentswhiledenyingpetitionersrequestforreinvestigationinaletter1
datedJanuary24,1991,thus:

"Note:Yourrequestforreinvestigationhasbeendeniedforfailuretosubmitthenecessarysupportingpapersas
perendorsementletterfromtheofficeoftheSpecialOperationServicedated121290."

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 1/6
4/2/2017 G.R.No.148380

SaidletterlikewiserequestedpetitionertopaythetotalamountofP8,644,998.71withinten(10)daysfromreceipt
thereof,otherwisethecaseshallbereferredtotheCollectionEnforcementDivisionoftheBIRNationalOfficefor
theissuanceofawarrantofdistraintandlevywithoutfurthernotice.

Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant
CommissionerforCollection,actingfortheCommissionerofInternalRevenue,issuedthecorrespondingwarrants
ofdistraintand/orlevyandgarnishment.ThesewereservedonpetitioneronOctober10,1991andOctober17,
1991,respectively.2

On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the
issuanceofthewarrantstoenforcethecollectionofthetaxassessments.ThiswasdocketedasCTACaseNo.
4668.

TheCTAdismissedthepetitionforlackofjurisdictioninadecisiondatedSeptember16,1994,declaringthatsaid
petitionwasfiledbeyondthethirty(30)dayperiodreckonedfromthetimewhenthedemandletterofJanuary24,
1991bytheChiefoftheBIRAccountsReceivableandBillingDivisionwaspresumablyreceivedbypetitioner,i.e.,
"withinareasonabletimefromsaiddateintheregularcourseofmailpursuanttoSection2(v)ofRule131ofthe
RulesofCourt."3

The decision cited Surigao Electric Co., Inc. v. Court of Tax Appeals4 wherein this Court considered a mere
demand letter sent to the taxpayer after his protest of the assessment notice as the final decision of the
CommissionerofInternalRevenueontheprotest.Hence,thefilingofthepetitiononNovember8,1991washeld
clearlybeyondthereglementaryperiod.5

Thecourtaquolikewisestatedthatthefinalityofthedenialoftheprotestbypetitioneragainstthetaxdeficiency
assessmentswasbolsteredbythesubsequentissuanceofthewarrantsofdistraintand/orlevyandgarnishment
toenforcethecollectionofthedeficiencytaxes.Theissuancewasnotbarredbyprescriptionbecausethemere
filing of the letter of protest by petitioner which was given due course by the Bureau of Internal Revenue
suspended the running of the prescription period as expressly provided under the then Section 224 of the Tax
Code:

SEC.224.SuspensionofRunningoftheStatuteofLimitations.The running of the Statute of Limitations

provided in Section 203 and 223 on the making of assessment and the beginning of distraint or levy or a
proceedingincourtforcollection,inrespectofanydeficiency,shallbesuspendedfortheperiodduringwhichthe
Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court
and for sixty (60) days thereafter when the taxpayer requests for a reinvestigation which is granted by the
Commissionerwhenthetaxpayercannotbelocatedintheaddressgivenbyhiminthereturnfilesuponwhicha
tax is being assessed or collected: Provided, That if the taxpayer inform the Commissioner of any change of
address,therunningofthestatuteoflimitationswillnotbesuspendedwhenthewarrantofdistraintandlevyis
duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient
discretion, and no property could located and when the taxpayer is out of the Philippines. 6 (Underscoring
supplied.)

Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24, 1991 cannot be
consideredasthefinaldecisionoftheCommissionerofInternalRevenueonitsprotestbecausethesamewas
signedbyameresubordinateandnotbytheCommissionerhimself.7

Withthedenialofitsmotionforreconsideration,petitionerconsequentlyfiledaPetitionforReviewwiththeCourt
ofAppealscontendingthattherewasnofinaldecisiontospeakofbecausetheCommissionerhadyettomakea
personaldeterminationasregardsthemeritsofpetitionerscase.8

The Court of Appeals denied the petition in a decision dated October 31, 2000, the dispositive portion of which
reads:

"WHEREFORE,thepetitionisDISMISSEDforlackofmerit.

SOORDERED."

PetitionersMotionforReconsiderationwaslikewisedeniedinaresolutiondatedMay3,2001.

Hence,thispetitionwiththefollowingassignmentoferrors:9

THE HONORABLE RESPONDENT CA ERRED IN FINDING THAT THE DEMAND LETTER ISSUED BY THE
(THEN) ACCOUNTS RECEIVABLE/BILLING DIVISION OF THE BIR NATIONAL OFFICE WAS THE FINAL

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 2/6
4/2/2017 G.R.No.148380

DECISIONOFTHERESPONDENTCIRONTHEDISPUTEDASSESSMENTS,ANDHENCECONSTITUTEDTHE
DECISIONAPPEALABLETOTHEHONORABLERESPONDENTCTAAND,

II

THEHONORABLERESPONDENTCAERREDINDECLARINGTHATTHEDENIALOFTHEPROTESTOFTHE
SUBJECT ALLEGED DEFICIENCY TAX ASSESSMENTS HAD LONG BECOME FINAL AND EXECUTORY FOR
FAILUREOFTHEPETITIONERTOINSTITUTETHEAPPEALFROMTHEDEMANDLETTEROFTHECHIEFOF
THE ACCOUNTS RECEIVABLE/BILLING DIVISION, BIR NATIONAL OFFICE, TO THE HONORABLE
RESPONDENTCTA,WITHINTHIRTY(30)DAYSFROMRECEIPTTHEREOF.

Thus, the main issue is whether or not a demand letter for tax deficiency assessments issued and signed by a
subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed final and
executoryandsubjecttoanappealtotheCourtofTaxAppeals.

Weruleintheaffirmative.

A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested
assessment.Thedeterminationonwhetherornotademandletterisfinalisconditioneduponthelanguageused
orthetenoroftheletterbeingsenttothetaxpayer.

WelaiddowntherulethattheCommissionerofInternalRevenueshouldalwaysindicatetothetaxpayerinclear
andunequivocallanguagewhatconstituteshisfinaldeterminationofthedisputedassessment,thus:

. . . we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the
taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer
constituteshisfinaldeterminationonthedisputedassessment,ascontemplatedbySections7and11ofRepublic
Act No. 1125, as amended. On the basis of his statement indubitably showing that the Commissioners
communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be
able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be
abletodeterminewhenhisrighttoappealtothetaxcourtaccrues.

Theruleofconductwouldalsoobviatealldesireandopportunityonthepartofthetaxpayertocontinuallydelay
thefinalityoftheassessmentand,consequently,thecollectionoftheamountdemandedastaxesbyrepeated
requestsforrecomputationandreconsideration.OnthepartoftheCommissioner,thiswouldencouragehisoffice
to conduct a careful and thorough study of every questioned assessment and render a correct and definite
decisionthereoninthefirstinstance.ThiswouldalsodetertheCommissionerfromunfairlymakingthetaxpayer
gropeinthedarkandspeculateastowhichactionconstitutesthedecisionappealabletothetaxcourt.Ofgreater
import,thisruleofconductwouldmeetapressingneedforfairplay,regularity,andorderlinessinadministrative
action.10

Inthiscase,theletterofdemanddatedJanuary24,1991,unquestionablyconstitutesthefinalactiontakenbythe
Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency
assessmentsduefrompetitioner,andrequesteditspayment.Failuretodosowouldresultinthe"issuanceofa
warrant of distraint and levy to enforce its collection without further notice."11 In addition, the letter contained a
notationindicatingthatpetitionersrequestforreconsiderationhadbeendeniedforlackofsupportingdocuments.

The above conclusion finds support in Commissioner of Internal Revenue v. Ayala Securities Corporation,12
whereweheld:

TheletterofFebruary18,1963(Exh.G),intheviewoftheCourt,istantamounttoadenialofthereconsideration
or[respondentcorporations]protesto[f]theassessmentmadebythepetitioner,consideringthatthesaidletter
[was]initselfareiterationofthedemandbytheBureauofInternalRevenueforthesettlementoftheassessment
alreadymade,andfortheimmediatepaymentofthesumofP758,687.04inspiteofthevehementprotestofthe
respondentcorporationonApril21,1961.Thiscertainlyisaclearindicationofthefirmstandofpetitioneragainst
the reconsideration of the disputed assessmentThis being so, the said letter amount[ed] to a decision on a
disputedorprotestedassessment,and,there,thecourtaquodidnoterrintakingcognizanceofthiscase.

Similarly,inSurigaoElectricCo.,Incv.CourtofTaxAppeals,13andinCIRv.UnionShippingCorporation,14we
held:

"...Inthisletter,thecommissionernotonlyineffectdemandedthatthepetitionerpaytheamountofP11,533.53
butalsogavewarningthatintheeventitfailedtopay,thesaidcommissionerwouldbeconstrainedtoenforcethe
collection thereof by means of the remedies provided by law. The tenor of the letter, specifically the statement
regardingtheresorttolegalremedies,unmistakablyindicate[d]thefinalnatureofthedeterminationmadebythe
commissionerofthepetitionersdeficiencyfranchisetaxliability."

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 3/6
4/2/2017 G.R.No.148380

Thedemandletterreceivedbypetitionerverilysignifiedacharacteroffinality.Therefore,itwastantamounttoa
rejectionoftherequestforreconsideration.AscorrectlyheldbytheCourtofTaxAppeals,"whilethedenialofthe
protestwasintheformofademandletter,thenotationinthesaidlettermakingreferencetotheprotestfiledby
petitionerclearlyshowstheintentionoftherespondenttomakeitas[his]finaldecision."15

Thisnowbringsustothecruxofthematterastowhethersaiddemandletterindeedattainedfinalitydespitethe
factthatitwasissuedandsignedbytheChiefoftheAccountsReceivableandBillingDivisioninsteadoftheBIR
Commissioner.

ThegeneralruleisthattheCommissionerofInternalRevenuemaydelegateanypowervesteduponhimbylaw
to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him
undertheNationalInternalRevenueCode(NIRC)enumeratedinSection7.

AsamendedbyRepublicActNo.8424,Section7oftheCodeauthorizestheBIRCommissionertodelegatethe
powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank
equivalenttoadivisionchieforhigher,exceptthefollowing:

(a)ThepowertorecommendthepromulgationofrulesandregulationsbytheSecretaryofFinance

(b)Thepowertoissuerulingsoffirstimpressionortoreverse,revokeormodifyanyexistingrulingoftheBureau

(c)ThepowertocompromiseorabateunderSection204(A)and(B)ofthisCode,anytaxdeficiency:Provided,
however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred
thousandpesos(P500,000)orless,andminorcriminalviolationsasmaybedeterminedbyrulesandregulations
tobepromulgatedbytheSecretaryofFinance,upontherecommendationoftheCommissioner,discoveredby
regionalanddistrictofficials,maybecompromisedbyaregionalevaluationboardwhichshallbecomposedofthe
RegionalDirectorasChairman,theAssistantRegionalDirector,headsoftheLegal,AssessmentandCollection
DivisionsandtheRevenueDistrictOfficerhavingjurisdictionoverthetaxpayer,asmembersand

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise
taxareproducedorkept.

It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts
Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non
delegable.

Section6oftheCodefurtherprovides:

"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax
AdministrationandEnforcement.

(A)ExaminationofReturnsandDeterminationofTaxDue.Afterareturnhasbeenfiledasrequiredunderthe
provisions of this Code, the Commissioner or his duly authorized representative may authorize the
examinationofanytaxpayerandtheassessmentofthecorrectamountoftaxProvided,however,Thatfailureto
fileareturnshallnotpreventtheCommissionerfromauthorizingtheexaminationofanytaxpayer.

The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or
fromhisdulyauthorizedrepresentative...."(Emphasissupplied)

Thus,theauthoritytomaketaxassessmentsmaybedelegatedtosubordinateofficers.Saidassessmenthasthe
sameforceandeffectasthatissuedbytheCommissionerhimself,ifnotreviewedorrevisedbythelattersuchas
inthiscase.16

A request for reconsideration must be made within thirty (30) days from the taxpayers receipt of the tax
deficiency assessment, otherwise, the decision becomes final, unappealable and therefore, demandable. A tax
assessment that has become final, executory and enforceable for failure of the taxpayer to assail the same as
providedinSection228cannolongerbecontested,thus:

"SEC. 228. Protesting of Assessment. When the Commissioner or his duly authorized representative finds
thatpropertaxesshouldbeassessed,heshallfirstnotifythetaxpayerofhisfindingsSuchassessmentmaybe
protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from
receiptoftheassessmentinsuchformandmannerasmaybeprescribedbyimplementingrulesandregulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted
otherwise,theassessmentshallbecomefinal.

Iftheprotestisdeniedinwholeorinpart,orisnotacteduponwithinonehundred(180)daysfromsubmissionof
documents,thetaxpayeradverselyaffectedbythedecisionorinactionmayappealtotheCourtofTaxAppeals

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 4/6
4/2/2017 G.R.No.148380

withinthirty(30)daysfromreceiptofthesaiddecision,orfromthelapseoftheonehundredeighty(180)day
periodotherwise,thedecisionshallbecomefinal,executoryanddemandable."

Here, petitioner failed to avail of its right to bring the matter before the Court of Tax Appeals within the
reglementaryperioduponthereceiptofthedemandletterreiteratingtheassesseddelinquenttaxesanddenying
its request for reconsideration which constituted the final determination by the Bureau of Internal Revenue on
petitioners protest. Being a final disposition by said agency, the same would have been a proper subject for
appealtotheCourtofTaxAppeals.

TheruleisthatfortheCourtofTaxAppealstoacquirejurisdiction,anassessmentmustfirstbedisputedbythe
taxpayerandruleduponbytheCommissionerofInternalRevenuetowarrantadecisionfromwhichapetitionfor
review may be taken to the Court of Tax Appeals. Where an adverse ruling has been rendered by the
Commissioner of Internal Revenue with reference to a disputed assessment or a claim for refund or credit, the
taxpayermayappealthesamewithinthirty(30)daysafterreceiptthereof.17

WeagreewiththefactualfindingsoftheCourtofTaxAppealsthatthedemandlettermaybepresumedtohave
been duly directed, mailed and was received by petitioner in the regular course of the mail in the absence of
evidencetothecontrary.ThisisinaccordancewithSection2(v),Rule131oftheRulesofCourt,andinthiscase,
sincetheperiodtoappealhascommencedtorunfromthetimetheletterofdemandwaspresumablyreceivedby
petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse
decisionontherequestforreconsiderationhadalreadylapsedwhenthepetitionwasfiledwiththeCourtofTax
AppealsonlyonNovember8,1991.Hence,theCourtofTaxAppealsproperlydismissedthepetitionasthetax
delinquencyassessmenthadlongbecomefinalandexecutory.

WHEREFORE,premisesconsidered,theDecisionoftheCourtofAppealsdatedOctober31,2000andits
ResolutiondatedMay3,2001inCAG.R.SPNo.35581areherebyAFFIRMED.Thepetitionisaccordingly
DENIEDforlackofmerit.

SOORDERED.

ADOLFOS.AZCUNA

AssociateJustice

WECONCUR:

HILARIOG.DAVIDE,JR.

ChiefJustice

Chairman

LEONARDOA.QUISUMBING,CONSUELOYNARESSANTIAGO
AssociateJusticeAssociateJustice

ANTONIOT.CARPIO

AssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.

HILARIOG.DAVIDE,JR.

ChiefJustice

Footnotes
1Annex"CofPetition,Rollo,p.48.

2Rollo,p.7.

3CARollo,pp.3839.

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 5/6
4/2/2017 G.R.No.148380
4L25289,June28,1974,57SCRA524.

5CARollo,pp.4041.

6IdNote:Section224isnowSection223.

7Rollo,p.9.

8Id.at10.

9Id.at22.

10SurigaoElectricCo.,Inc.v.CourtofTaxAppeals,L25289,June28,1974,57SCRA523.

11Annex"C"ofPetition,Rollo,p.48.

12No.L24985,March31,1976,70SCRA204,209.

13L25289,June28,1974,57SCRA523,526.

14G.R.No.66160,May21,1990,188SCRA547.

15CARollo,p.40.

16Archesv.Bellosillo,126Phil.426(1967).

17Section11,RepublicActNo.1125.

TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri2005/dec2005/gr_148380_2005.html 6/6