Concept of Assessment

Requisites for a valid assessment

1. Issued by the BIR

2. Based on findings of fact and/or law; actual facts
3. Factual and/or legal bases of the assessment must be stated; otherwise, the assessment is null
and void
4. Contain a computation of tax liabilities
5. Contain a demand for payment within the prescribed period (CIR v PASCOR)
6. It must be sent to the taxpayer

The presumption of correctness cannot be based on another presumption. (CIR v. Island

Garments, 153 SCRA 665)

An assessment is deemed made when the notice to that effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to the assessment. (Republic v. Dela Rama)

Tax delinquency and tax deficiency

1. Deficiency - amount still due and collectible from a taxpayer upon audit or investigation.

2. Delinquency - failure of the taxpayer to pay the tax due on the date fixed by law or indicated in
the assessment notice or letter of demand.

Jeopardy Assessment
A tax assessment made by an authorized Revenue Officer without the benefit of complete or
partial audit, in light of the RO‘s belief that the assessment and collection of the deficiency tax will
be jeopardized by delay caused by the taxpayer‘s failure to:

i. Comply with audit and investigation requirements to present his books of accounts and/or
pertinent records

ii. Substantiate all or any of the deductions, exemptions or credits claimed in his return.

It is usually issued when statutory prescriptive periods for the assessment or collection of taxes
are about to lapse due principally to the taxpayer‘s fault.

Prescriptive Period for assessment

a. General Rule
- 3 years counted from the period fixed by law for the filing of tax return or the actual date of
filing, which ever is later.
b. False or fraudulent returns non-filing of returns
- 10 years after discovery
c. Suspension of the running of statute of limitations

2. Civil penalties, additions to the tax

a. Delinquency interest
 b. surcharge
c. compromise penalty
3. Assessment process and reglementary period
a. letter of authority and tax audit
b. notice of informal conference
c. issuance of preliminary assessment notice; GR and EXc
General Rule:
- PAN must first be issued by the BIR before issuing a Fan and Letter of Demand.
Exceptions:
- Mathematical error appears on the face of the return;
- Discrepancy between tax withheld and tax remitted exists;
- Double availment of Tax Credit/Refund and Carry-Over;
- Excise Tax on excisable goods has not been paid;
- Article purchased by exempt person is transferred to non-exempt person
d. issuance of formal letter of demand and FAN
e. disputed assessment
4. Collection
a. requisites
b. prescriptive periods; suspension of running of statute of limitations
- once a FAN is issued, the five-year period to collect starts to run. The mere filing of a case in court
does not prohibit the tax authorities from enforcing collection because no court can enjoin the
collection of tax. There must be a suspension order and it must come from the CTA.

I. Taxpayer’s Remedies
1. Protesting an assessment
a. Protested assessment
b. Period to file protest
- Within 30 days from receipt of the assessment, within 60 days from filing the protest, all
relevant supporting docs must be submitted
c. Form, content, and validity of protest
d. Submission of supporting documents
e. Effect of failure to file protest
- The Commissioner shall issue an assessment based on his findings
f. Decision of the commissioner on the protest filed.
1.) Period to act upon or decide on protest filed
- 180 days upon submission of documents
2.) Remedies of the taxpayer in case the commissioner denies the protest or fails
to act on the protest
- The taxpayer may appeal to the CTA within 30 days from receipt of the decision
3.) Effect of failure to appeal
2. Compromise and abatement of taxes
- the decision becomes final, executory and demandable
Compromise
- allowed when:

1. a reasonable doubt as to validity of the claim against the taxpayer exists

2. financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
(minimum compromise rate equivalent to 10% of the basic assessed tax and the
 taxpayer must waive in writing his privilege under the Banking Secrecy Law, such
waiver constituting authority of the CIR to inquire into his bank deposits)

Compromise v. ABATEMENT:

As Effect
Compromise: reduce tax liability;
Abatement: cancel the entire tax liability
As to when proper
Compromise: when there is reasonable doubt as to validity of tax assessment or the
taxpayer is financially incapacitated to pay;
Abatement: when there is unjust assessment (excessive) or when administration and
collection cost do not justify the amount of tax due

GR: compromise of criminal violations is allowed, EXCEPT:

1. those already filed in court

2. those involving fraud

GR: power to compromise is a non-delegable power of CIR, EXCEPT that regional

evaluation board may compromise:

1. basic taxes less than P500,000

2. minor criminal violations

3. Recovery of tax erroneously or illegally collected

a. Tax refund as distinguished from tax credit
- That a return filed showing an overpayment shall be considered as a written claim for
credit or refund.

b. Grounds, requisites and period for filing a claim for refund or issuance of a tax
credit certificate

- Credit or refund taxes erroneously or illegally received or penalties imposed without

authority
- No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after the
payment of the tax or penalty

c. Statutory basis and proof of claim for refund or tax credit

d. Proper party to file claim for refund or tax credit

- Appropriate revenue officer for verification and cancellation

II. Government Remedies

1. Administrative Remedies
 a. Tax lien
- from the moment the tax is due, not from the service of the warrant of
distraint
- not valid against a mortgage purchaser or judgment creditor until NOTICE has
been filed by CIR with the RD of the province or city where property is located
(the tax lien shall be annotated on the title)
b. Distraint and levy
- summary, extra-judicial or administrative enforcement remedies
DISTRAINT v. LEVY: distraint is to personal property while levy is to real property
c. Forfeiture of real property
- divesture of property without compensation, in consequence of a default or
offense.
Resorted to when: there is no bidder or the amount of the bid is not sufficient to
cover the tax liabilities
d. Suspension of business operation
- Understatement of taxable sale or receipt by 30% or more based on sales
(Ground)
- Duration: not less than 5 days
(The temporary closure of the establishment shall be for duration of not less than 5 days
and shall be lifted only upon compliance with whatever requirements prescribed by the
CIR in the closure order)
e. Non-availability of injunction to restrain collection of tax
2. Judicial Remedies – civil or criminal action
Civil Action
WHEN:

- when a tax is assessed and the assessment becomes final and unappealable (because TP
failed to file administrative protest with BIR within 30d from receipt of assessment)
- when an administrative protest is denied or is not acted upon within 180d from
submission of documents and TP fails to appeal to the CTA

WHERE:
- regular courts, with approval of CIR except if express delegation to Regional Director;
motion to dismiss the complaint should also be filed in the regular courts

HOW:
- the complaint must be brought in the name of the Government and conducted by a
legal officer of the BIR

Criminal Action
WHEN:
- before lapse of 5 years (prescription period)

WHERE:
- DOJ

HOW:
- complaint approved by CIR brought in the name of the Government and conducted by a
legal officer of the BIR

GROUND:
- prima facie showing of failure to file a required tax return or a willful attempt to evade
taxes; no need for assessment