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MONTERO // 3A TAX DIGESTS
AGATEP •ARCAINA • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • COLOQUIO • CUALOPING • DE LUIS • DIPLOMA • FAJARDO • GO
LIM, J. • LIM, Q. • LUNA • OCAMPO • ONG • PASCUAL • REYES • TRIAS • TUAZON • VANSLEMBROUCK • VILLARIN, L. • VILLARIN, P. • VILLARIVERA
(Continuation of Prescription of Government’s Right to Assess) there is no waiver of defense of prescription for the remaining tax
deficiencies, it being on record that the Bank continued to raise the issue
COMMISIONER OF INTERNAL REVENUE v. STANDARD of prescription in its Pre-Trial Brief, Joint Stipulations of Facts and Issues,
direct testimonies of its witness, and Memorandum. More so, even CIR did
CHARTERED BANK (Agatep)
not consider such payment of respondent as a waiver of the defense of
[GR. No. 192173; July 29, 2015] prescription, but merely raised the issue of estoppel in her Motion for
“Waiver invalid pag hindi nagcomply so form . . . so may prescription pa rin” Reconsideration.
Recit-Ready: Facts:
Facts: Standard Chartered Bank (Bank) received from the CIR a Formal • On July 14, 2004, Standard Chartered Bank (Bank) received from the CIR
Letter of Demand dated June 24, 2004, for alleged deficiency income tax, a Formal Letter of Demand dated June 24, 2004, for alleged deficiency
final income tax - FCDU, withholding tax on compensation, EWT, final income tax, final income tax - FCDU, withholding tax on compensation,
withholding tax and increments for taxable year 1998 in the aggregate EWT, final withholding tax and increments for taxable year 1998 in the
aggregate amount of P33,326,211.37.
amount of P33,326,211.37.
• In view of CIR’s inaction on the Bank’s protest filed on August 12, 2004,
The bank made a protest of the assessment and on the inaction of the the Bank filed a Petition for Review on March 9, 2005.
CIR, it filed a petition for review in the CTA. CTA Division granted
respondent’s petition on the ground that the CIR’s right to assess has • The CTA in Division granted respondent's petition for the cancellation and
already prescribed. The waivers of Statute of Limitations, executed by the setting aside of the subject Formal Letter of Demand and Assessment
parties (CIR and Taxpayer), presented in evidence by the CIR was not Notices on the ground that petitioner's right to assess respondent for the
deficiency covering taxable year 1998 was already barred by prescription.
given credence because they were not in compliance with the form
Although petitioner offered in evidence copies of the Waivers of Statute of
prescribed by Revenue Memorandum Order. Limitations executed by the parties, for the purpose of justifying the
extension of period to assess respondent, the subject waivers,
Issue/s: particularly the First and Second Waivers dated 20 July 2001 and 4 April
WON the CIR’s right to assess deficiency taxes has prescribed? 2002, respectively, failed to strictly comply and conform with the
—YES provisions of Revenue Memorandum Order (RMO) No. 20-90, citing the
case of Philippine Journalists, Inc. v. CIR. It therefore concluded that
since the aforesaid waivers were invalid, it necessarily follows that the
Held:
subsequent waivers did not in any way cure these defects. Neither did it
YES. CIR can no longer make an assessment for the taxable year 2008 extend the prescriptive period to assess. MR Denied. The CTA En Banc
because the assessment was issued beyond the three year prescriptive affirmed in toto both the aforesaid Decision and Resolution.
period.
Issue:
The waivers agreed in writing by the parties (CIR and Taxpayer) was
WON the CIR’s right to assess deficiency taxes has prescribed?
invalid because they did not conform with the formal requirements
prescribed by RMO No. 20-90 and RDAO No. 05-01. The provisions —YES
explicitly show their mandatory nature requiring strict compliance.
Held/Ratio: Petition DENIED for lack of merit.
Although respondent paid the deficiency WTC and FWT assessments, YES
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• At the outset, the period for petitioner to assess and collect an internal before the lapse of the period agreed upon in case a subsequent
revenue tax is limited only to three years by Section 203 of the NIRC of agreement is executed.
1997. 6. The waiver must be executed in three copies, the original copy to be
attached to the docket of the case, the second copy for the taxpayer and
• As an exception, Section 222 of the NIRC allows the Commissioner and the third copy for the Office accepting the waiver. The fact of receipt by
the Taxpayer to agree in writing, before the expiration of the prescriptive the taxpayer of his/her file copy must be indicated in the original copy to
period, that assessment may be allowed even after the lapse of the three show that the taxpayer was notified of the acceptance of the BIR and the
perfection of the agreement.
year period.
• In this case, the Commissioner should have signed the waivers but only
• In the case of Philippine Journalists, Inc. v. CIR a waiver is not
Assistant Commissioners signed it. Date of Acceptance was not indicated
automatically a renunciation of the right to invoke the defense of
therein. The waivers did not specify the kind and amount of tax due.
prescription. It is a bilateral agreement, thus necessitating the very
signatures of both the CIR and the taxpayer to give birth to a valid
• Further, the tenor of the Waiver of the Statute of Limitations signed by
agreement. Furthermore, indicating in the waiver the date of acceptance
petitioner's authorized representative failed to comply with the prescribed
by the BIR is necessary in order to determine whether the parties (the
requirements of RMO No. 20-90. The subject waiver speaks of a request
taxpayer and the government) had entered into a waiver "before the
for extension of time within which to present additional documents,
expiration of the time prescribed.
whereas the waiver provided under RMO No. 20-90 pertains to the
approval by the Commissioner of Internal Revenue of the taxpayer's
• RMO No. 20-90 and RDAO No. 05-01 outline the procedure for the proper
request for re-investigation and/or reconsideration of pending internal
execution of a waiver. The provisions explicitly show their mandatory
revenue case.
nature requiring strict compliance.
1. The waiver must be in the proper form prescribed by RMO 20-90. The • Taking into consideration the foregoing defects in the First and Second
phrase "but not after __ 19 _", which indicates the expiry date of the Waivers, the period to assess the tax liabilities was never extended.
period agreed upon to assess/collect the tax after the regular three-year Consequently, prescription has already set in.
period of prescription, should be filled up.
• Although respondent paid the deficiency WTC and FWT assessments,
2. The waiver must be signed by the taxpayer himself or his duly
authorized representative. In the case of a corporation, the waiver must there is no waiver of defense of prescription for the remaining tax
be signed by any of its responsible officials. In case the authority is deficiencies, it being on record that the Bank continued to raise the issue
delegated by the taxpayer to a representative, such delegation should be of prescription in its Pre-Trial Brief, Joint Stipulations of Facts and Issues,
in writing and duly notarized. direct testimonies of its witness, and Memorandum. More so, even CIR
did not consider such payment of respondent as a waiver of the defense
3. The waiver should be duly notarized.
of prescription, but merely raised the issue of estoppel in her Motion for
4. The CIR or the revenue official authorized by him must sign the waiver Reconsideration.
indicating that the BIR has accepted and agreed to the waiver. The date
of such acceptance by the BIR should be indicated. However, before
signing the waiver, the CIR. or the revenue official authorized by him must REPUBLIC v. LIM DE YU (Alarcon)
make sure that the waiver is in the prescribed form, duly notarized, and
executed by the taxpayer or his duly authorized representative.
[GR. No. L-17438; December 29, 1960]
“Dapat di pa prescribed bago ka mag waive”
5. Both the date of execution by the taxpayer and date of acceptance by
the Bureau should be before the expiration of the period of prescription or
Recit-Ready:
2
Facts: Lim de Yu filed her income tax returns for the years 1958 to of the statute on limitations under the Tax Code as a condition on the
1953. BIR assessed her taxes which she paid. BIR assessed her reinvestigation requested.
for income tax deficiency for the same period of 1948 to 1953 in • On July 18, 1958, the BIR issued to her tax assessment notices for the
the total of P22, 450.50. She protested and requested an years 1948 to 1953 totalling P35,379.63. This assessment, like the last
reinvestigation. She signed a “waiver on the statute of limitations one, covered not only the basic deficiency income taxes but also 50%
in the NIRC” on August 30, 1956. In July 18, 1958, BIR assessed thereof as surcharge.
her for the third time for tax deficiency of P35, 379.63 which • Upon respondent’s failure to pay, an action for collection was filed
included a 50% surcharge for the same tax periods. Upon her against her in Court of First Instance in Cotabato on May 11, 1959. After
failure to pay for the taxes due, BIR filed a collection case trial, the suit was dismissed. BIR appeled to the Supreme Court.
against her on May 11, 1958. Respondent alleges that BIR’s • BIR claims that the returns filed by Yu de Lim for 1948 to 1953 are
action to assess and collect has already prescribed as the 5 year fraudulent as they are much less than as computed by the BIR and
period has lapsed. BIR contends that it has 10 years from under par (a) Sec 332 of the Tax Code, it has 10 years from the date of
discovery of fraud to collect from Yu de Lim as her return were discovery of the fraud (May 25, 1955) within which to asses the tax or to
fraudulent, as there was a great disparity from BIR’s assessment file a suit for collection without assessment. They content Yu de Lim can
from the returns filed. no longer question the correctness of the assesments in view of her
failure to raise in the Court of Tax Appeals.
Issue/s:
1) WON the returns filed by respondent for the years 1948 to 1953 Issue/s:
are false and fraudulent—NO 1) WON the returns filed by respondent for the years 1948 to 1953
2) WON taxes due from 1948 to 1953 can still be collected are false and fraudulent—NO
—NO 2) WON taxes due from 1948 to 1953 can still be collected
—No,1948 to 1950; Yes- 1951 to 1953
Held:
1) Fraud was not established by BIR. The prescriptive period then is 5 Held/Ratio: decision of trial court is modified by ordering appellee to pay
years from the filing of the return. Prescriptive period for tax on years appellant the sum of P26,182.00 as deficiency income taxes for the years
1948 to 1950 has already prescribed when Yu de Lim executed a 1951, 1952 and 1953, plus 5% surcharge and 1% monthly interest thereon
“waiver” on August 30, 1956. What is only included in the “waiver” from July 31, 1958 until payment of the full obligation, with costs.
was 1951 and 1953 taxes. With respect to the tax year 1953, as to
which the return was filed by appellee on March 1, 1954, the waiver 1) No. While fraud is alleged, it has not been established by BIR.
was not necessary for the effectivity of the assessment made on July o It is one thing to say that the correctness of respondent’s assessment
18, 1958, since such assessment was well within the original five-year can no longer be challenged on the same technical grounds just
period provided by law. After the assessment on July 18, 1958, stated by BIR and another to say that respondent committed a
appellant had five years within which to file suit for collection pursuant deliberate fraud in her returns.
to Section 332 (c) of the tax code. o On three different occasions, BIR arrived in three highly different
computations.
Facts: ! First, it accepted Yu de Lim’s yearly statement of
• Rita Lim de Yu filed her yearly income tax returns from 1948 to 1953. BIR income from 1945 to 1953 and assessed her for
assessed her taxes due and she paid them accordingly. P2,732.37 which respondent paid.
• On July 17, 1955 BIR issued a deficiency tax assessment for the years ! In 1956, BIR came up with different figures for the
1945 to 1953 in the total amount of P22,450.50. She protested and same period. It assessed respondent with P22, 450.50
requested a reinvestigation. On August 30, 1956, she signed a “waiver” as deficiency tax.
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! In 1958, the Bureau assessed respondent P35, 379.63 action' as the phrase is used in section 316 of the
for years 1948 to 1953, inclusive of 50% surcharge Tax Code x x x" (Alhambra Cigar and Cigarette
notwithstanding the fact that respondent filed her Manufacturing Company v. The Collector of
return that year and paid for it. Internal Revenue, L-12026, May 29, 1959).
2) Fraud not having been proven, the period of limitation for REPUBLIC v HEIRS OF CESAR JALANDONI (Arcaina)
assessment or collection was five years from the filing of the [GR. No. L-13834; September 20, 1965]
return, according to Section 331 of the Tax Code. The right to
“Hindi lahat ng mistake, fraudulent.”
assess or collect taxes for 1948 to 1950 had already prescribed
when the BIR issued the deficiency tax assessment on July 17,
1956. Recit-Ready:
Facts: On Nov. 19, 1948, Cesar Jalandoni (one of the heirs) filed an
o Tax years 1948 to 1950 cannot be deemed included in the estate and inheritance tax return which the BIR considered as
“waiver of statute of limitations under the NIRC” executed by “partial pending investigation.” Deficiency estate and inheritance
respondent on August 30, 1956. The five year period for
taxes were discovered during the second assessment in January
assessment may be extended upon agreement between the
Commissioner and the taxpayer but such agreement must be 1953. Demands were made to the heirs and the BIR said that the
made before the expiration of the original period. same was still to be considered “partial pending further
investigation of the return (AGAIN!)”. During the third assessment
o With respect to the tax year 1953, as to which the return was (in May 9, 1956, note: 7 years and x months since first filing), it
filed by appellee on March 1, 1954, the waiver was not was found that:
necessary for the effectivity of the assessment made on July (1) The market value of the lands reported filed by Cesar Jalandoni
18, 1958, since such assessment was well within the original
was underdeclared in the amount of over P300k;
five-year period provided by law. After the assessment on July
18, 1958, appellant had five years within which to file suit for (2) 7 lots in Negros Occidental belonging to the deceased were
collection pursuant to Section 332 (c) of the tax code. omitted from the return (total market value of P100,200;
(3) Shares of stock owned by the deceased in Victoria’s Milling
o Appellee's theory that collection could be made only up to the Company etc, although included in the return, were again
end of the period of extension stated in the waiver, namely, underdeclared in the amount of P16,355.36.
December 31, 1958, is without merit. Assessment and
collection are two different processes. Collection may be
Issue/s:
effected within five years after assessment or within the period
for collection agreed upon in writing by the Commissioner of 1. WON the discovered “underdeclarations” were fraudulent – NO.
Internal Revenue and the taxpayer before the expiration of such 2. WON the BIR’s claim has prescribed – YES.
five-year period.
Held:
! "An assessment is not an action or proceeding for 1. NO. First, as regards the 7 lots deliberately omitted, it appears
the collection of taxes. It is merely a notice to the
that 3 of the 7 lots were actually included in the returns; that
effect that the amount therein stated is due as tax
and a demand for the payment thereof. It is a step 1 lot was not included because it belonged to one of the
preliminary, but essential to warrant distraint, if still heirs; and that the 3 remaining lots were already declared in
feasible, and, also, to establish a cause for 'judicial the return submitted by the husband of the heir as part of
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the conjugal property (for income tax purposes). Second, as o Nov. 20, 1948: FIRST ASSESSMENT, which demanded payments
regards the appraisal of the actual value of the properties, the of estate and inheritance taxes stating that the assessment was “to
Court ruled that any mistake in the valuation made by the be considered partial pending investigation of the return. The
representative, the same can only be considered as an amounts were paid.
honest mistake, he being NOT AN EXPERT in appraising real • SECOND RETURN
estate. Moreover, the deficiency assessment was made by the o Jan. 27, 1953: SECOND ASSESSMENT, which stated that there
Collector more than 5 years from the filing of the return, and were deficiency estate and inheritance taxes; demand was made
such an intervening period is SUFFICIENTLY LONG TO on the deceased’s hubby, Bernardino; again, this was “considered
WARRANT AN INCREASE IN VALUE OF REAL ESTATE. partial pending further investigation of the return”. The amounts
Third, as regards the value of the shares of stock that did not tally were paid.
with their book value – this is not indicative of fraud especially • THIRD ASSESSMENT: MAY 9, 1956
when said book value only became known several months o Market value of the lands reported filed by Cesar Jalandoni was
after the death of the deceased. Moreover, stock securities underdeclared in the amount of P365,149.50
frequently fluctuate in value and a mere difference of o 7 lots in Negros Occidental, as belonging to the deceased, including
opinion in relation thereto cannot serve as proper basis for their improvements, were omitted from the return the same having a
assessing an intention to defraud the government. market value of P100,200
2. YES. Since the filing was NOT based on fraud, as discussed o Shares of stock owned by the deceased in the Victoria’s Milling
above, the government’s right to assess has already prescribed Company etc, though included in the return, were undeclared in the
as provided for by Section 331 of the NIRC. The NIRC gives 5 amount of P16,355.36.
years to the government, from filing of the return. In this • As a response to the third assessment, Bernardino wrote a letter to the
case, the first return was filed in 1948, and the last assessment Collector of Internal revenue setting up the defense of prescription,
(basis for this case) was made in 1956. Almost 7-year since more than 5 years had already elapsed from the filing of the
difference. Sorry, CIR. return (Section 331, NIRC).
o Collector: alleged that the return filed by the administrator/heirs
Facts: contained omissions which amount to fraud indicative of an
• Isabel Ledesma died intestate on June 23, 1948 leaving real properties in intention to evade payment of the proper tax due the
Negros Occidental and Rizal, in Manila, Baguio, and personal properties government, the taxes then could still be demanded within 10
consisting of shares of stock in various corporations. years form discovery of falsity.
• Her heirs were her husband Bernardino Jalandoni, and three children • This case was tried on the merits and the Collector-designated Examiner
(Cesar, Angeles and Delfin) Genaro Butas stated that: of the 7 lots not included in the return, 2 were
• FIRST RETURN: Nov. 19, 1948 by Cesar actually declared. No other additional evidence was submitted. The court
o Real and personal properties owned by his deceased mom and held the heirs liable for deficiency taxes and found that the tax returns
surviving dad: total MV = P1,324,555.80 were false, that the substantial understatement of stocks and omission of
o After deducting conjugal share + some expenses = net taxable seven parcels of land evinced an intention to evade the payment of the
estate = P28,148.04 correct amount of tax.
o P542,225.98 = amount subject to inheritance tax Issue/s:
5
1.) WON the discovered “underdeclarations” were fraudulent – NO. by Section 331 of the NIRC. The NIRC gives 5 years to the
2.) WON the BIR’s claim has prescribed – YES government, from filing of the return. In this case, the first return was
filed in 1948, and the last assessment (basis for this case) was made
Held/Ratio: WHEREFORE, the decision appealed from is reversed in 1956. Almost 7-year difference. Sorry, CIR.
and the complaint of appellee is dismissed, No
pronouncement as to costs AZNAR v. COURT OF APPEALS (Austria)
[GR. No. l-20569; August 23, 1974]
1) NO. The underdeclarations were not fraudulent. “10 years prescription to assess your pagkakamali [false], panloloko
[fraudulent] and pag-iwan [failure to return], plus 50% surcharge for a
First, as regards the 7 lots deliberately omitted, it appears that 3 of the 7 fraudulent return”
lots were actually included in the returns; that 1 lot was not
included because it belonged to one of the heirs; and that the 3 Recit-Ready:
remaining lots were already declared in the return submitted by the Facts: The assets and liabilities of the taxpayer were ascertained and it
husband of the heir as part of the conjugal property (for income tax was discovered that from 1946 to 1951, his net worth had
purposes). increased every year, which increases in net worth was very
much more than the income reported during said years. The
Second, as regards the appraisal of the actual value of the properties, findings clearly indicated that the taxpayer did not declare
the Court ruled that any mistake in the valuation made by the correctly the income reported in his income tax returns for
representative, the same can only be considered as an honest the aforesaid years.
mistake, he being NOT AN EXPERT in appraising real estate.
Moreover, the deficiency assessment was made by the Collector more Petitioner, as administrator of the estate of the deceased, Matias
than 5 years from the filing of the return, and such an intervening H. Aznar, seeks a review and nullification of the decision of the
period is SUFFICIENTLY LONG TO WARRANT AN INCREASE IN Court of Tax Appeals ordering the petitioner to pay the
VALUE OF REAL ESTATE. government the sum of P227,691.77 representing deficiency
income taxes for the years 1946 to 1951, inclusive, with the
Third, as regards the value of the shares of stock that did not tally with condition that if the said amount is not paid within thirty days from
their book value – this is not indicative of fraud especially when said the date the decision becomes final, there shall be added to the
book value only became known several months after the death of unpaid amount the surcharge of 5%, plus interest at the rate of
the deceased. Moreover, stock securities frequently fluctuate in value 12% per annum from the date of delinquency to the date of
and a mere difference of opinion in relation thereto cannot serve as payment, in accordance with Section 51 of the National Internal
proper basis for assessing an intention to defraud the government. Revenue Code, plus costs against the petitioner. Moreover, the
lower court imposed the fraud penalty (surcharge of 50%
2) YES. The government’s right has prescribed. authorized in Section 72 of the Tax Code).
Since the filing was NOT based on fraud, as discussed above, the Petitioner insists that there might have been false returns by
government’s right to assess has already prescribed as provided for mistake filed by Mr. Matias H. Aznar as those prepared by his
6
accountant employees, but there were returns were no proven foregoing shows that it was not only Mr. Matias H. Aznar who
fraudulent returns with intent to evade taxes that would justify the committed mistakes in his report of his income but also the
imposition of the 50% surcharge authorized by law as fraud respondent Commissioner of Internal Revenue who committed
penalty. The petitioner argues that the period to assess has mistakes in his use of the inventory method to determine the
prescribed when the notice of final and last assessment was petitioner's tax liability.
received by the taxpayer on March 2, 1955, a period of about 8
years had elapsed.
Issue/s:
1) WON the period to assess has prescribed – NO Facts:
2) WON the imposition of the 50% surcharge is proper - NO • Late Matias H. Aznar who died on May 18, 1958, predecessor in interest
of herein petitioner, during his lifetime as a resident of Cebu City, filed
Held: his income tax returns on the cash and disbursement basis.
1) NO. 10 year prescriptive period applies. In the three different • The Commissioner of Internal Revenue having his doubts on the veracity
cases of (1) false return, (2) fraudulent return with intent to evade of the reported income of one obviously wealthy, pursuant to the
tax, (3) failure to file a return, the tax may be assessed, or a authority granted him by Section 38 of the National Internal Revenue
proceeding in court for the collection of such tax may be begun Code, caused B.I.R. Examiner Honorio Guerrero to ascertain the
without assessment, at any time within ten years after the taxpayer's true income for said years by using the net worth and
discovery of the (1) falsity, (2) fraud, (3) omission. The ordinary expenditures method of tax investigation.
period of prescription of 5 years within which to assess tax • The assets and liabilities of the taxpayer during the abovementioned
liabilities under Sec. 331 of the NIRC should be applicable to years were ascertained and it was discovered that from 1946 to 1951,
normal circumstances, but whenever the government is placed at his net worth had increased every year, which increases in net worth
a disadvantage so as to prevent its lawful agents from proper was very much more than the income reported during said years. The
assessment of tax liabilities due to false returns, fraudulent return findings clearly indicated that the taxpayer did not declare correctly the
intended to evade payment of tax or failure to file returns, the income reported in his income tax returns for the aforesaid years.
period of ten years provided for in Sec. 332 (a) NIRC, from the • Respondent Commissioner notified the taxpayer (Matias H. Aznar) of the
time of the discovery of the falsity, fraud or omission even seems assessed tax delinquency to the amount of P723,032.66, plus
to be inadequate and should be the one enforced. compromise penalty.
2) NO. There is no fraudulent return thus it shall not apply. No distinction • The taxpayer requested a reinvestigation which was granted for the
has been made between false returns (due to mistake, carelessness purpose of verifying the merits of the various objections of the taxpayer
or ignorance) and fraudulent returns (with intent to evade taxes). We to the deficiency income tax assessment of November 28, 1952.
can also state that fraudulent intent could not be deduced from • After the reinvestigation, another deficiency assessment to the reduced
mistakes however frequent they may be, especially if such mistakes amount of P381,096.07 dated February 16, 1955, superseded the
emanate from erroneous entries or erroneous classification of items in previous assessment and notice thereof was received by Matias H.
accounting methods utilized for determination of tax liabilities. The Aznar on March 2, 1955.
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• In determining the unreported income, the respondent Commissioner of March 2, 1955, a period of about 8 years had elapsed and
Internal Revenue resorted to the net-worth method. the five year period provided by law (Sec. 331 of the
• On February 20, 1953, respondent Commissioner of Internal Revenue, National Internal Revenue Code) had already expired.
thru the City Treasurer of Cebu, placed the properties of Matias H. Aznar o The same argument is advanced on the taxpayer's return
under distraint and levy to secure payment of the deficiency income tax for 1947, which was filed on March 1, 1948, and the return
in question. for 1948, which was filed on February 28, 1949.
• Matias H. Aznar filed his petition for review of the case with the Court of • Respondents, on the other hand, are of the firm belief that regarding the
Tax Appeals on April 1, 1955, with a subsequent petition immediately prescriptive period for assessment of tax returns, Section 332 of the
thereafter to restrain respondent from collecting the deficiency tax by National Internal Revenue Code should apply because, as in this case,
summary method, the latter petition being granted. (a,) In the case of a false or fraudulent return with intent to evade tax or
• Upon review, this Court set aside the C.T.A. resolution and required the of a failure to file a return, the tax may be assessed, or a proceeding in
petitioner to deposit with the Court of Tax Appeals the amount court for the collection of such tax may be begun without assessment, at
demanded by the Commissioner of Internal Revenue for the years 1949 any time within ten years after the discovery of the falsity, fraud or
to 1951 or furnish a surety bond for not more than double the amount. omission" (Sec. 332 (a) of the NIRC).
• On March 5, 1962, in a decision signed by the presiding judge and the • Petitioner argues that Sec. 332 of the NIRC does not apply because the
two associate judges of the Court of Tax Appeals, the lower court taxpayer did not file false and fraudulent returns with intent to evade tax,
concluded that the tax liability of the late Matias H. Aznar for the year while respondent Commissioner of Internal Revenue insists contrariwise
1946 to 1951, inclusive should be P227,788.64 minus P96.87 concluding that the very "substantial under-declarations of income for six
representing the tax credit for 1945, or P227,691.77. consecutive years eloquently demonstrate the falsity or fraudulence of
• Petitioner, as administrator of the estate of the deceased, Matias H. the income tax returns with an intent to evade the payment of tax.
Aznar, seeks a review and nullification of the decision of the Court of Tax • The petitioner contested some of the assessment on Aznar’s property,
Appeals ordering the petitioner to pay the government the sum of alleging errors committed by the Court of Tax Appeals:
P227,691.77 representing deficiency income taxes for the years 1946 o in not deducting from the alleged undeclared income of the
to 1951, inclusive, with the condition that if the said amount is not taxpayer for 1946 the proceeds from the sale of jewelries
paid within thirty days from the date the decision becomes final, valued at P30,000;
there shall be added to the unpaid amount the surcharge of 5%, o in not excluding from other schedules of assets of the
plus interest at the rate of 12% per annum from the date of taxpayer
delinquency to the date of payment, in accordance with Section 51 of ! (a) accounts receivable from customers in the
the National Internal Revenue Code, plus costs against the petitioner. amount of P38,000 for 1948, P126,816.50 for
• Petitioner's contention is that the provision of law applicable to this 1950, and provisions for doubtful accounts in the
case is the period of five years limitation upon assessment and amount of P41,810.56 for 1950;
collection from the filing of the returns provided for in Sec. 331 of ! (b) over valuation of hospital and dental buildings
the National Internal Revenue Code". for 1949 in the amount of P32,000 and P6,191.32
o He argues that since the 1946 income tax return could be respectively;
presumed filed before March 1, 1947 and the notice of final ! (c) investment in hollow block business in the
and last assessment was received by the taxpayer on amount of P8,603.22 for 1949;
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! (d) over valuation of surplus goods in the amount of o As to the accounts receivable from the United States
P23,000 for the year 1949; government for the amount of P38,254.90, representing a
! (e) various lands and buildings included in the claim for goods commandered by the U.S. Army during
schedule of assets for the years 1950 and 1951 in World War II, and which amount petitioner claimed should
the total amount of P243,717.42 for 1950 and be included in his net worth as of January 1, 1946,
P62,564.00 for 1951, ! the Court of Tax Appeals correctly concluded that
• [this part made the case long] These issues would depend for their the uncontradicted evidence showed that "the
resolution on determination of questions of facts based on an evaluation collectible accounts of Mr. Aznar from the U.S.
of evidence, and the general rule is that the findings of fact of the Court Government in the sum of P38,254.90 should be
of Tax Appeals supported by substantial evidence should not be added to his assets (under accounts receivable) as
disturbed upon review of its decision (Section 2, Rule 44, Rules of of January 1, 1946. As of December 31, 1947, and
Court). December 31, 1948, the years within which the
o On the question of the alleged sale of P30,000 worth of accounts were paid to him, the 'accounts
jewelries in 1946, which amount petitioner contends should receivable' shall decrease by P31,362.37 and
be deducted from the taxpayer's net worth as of December P6,892.53, respectively.
31, 1946: o Regarding a house in Talisay Cebu, (covered by Tax
! petitioner's accountant testified that on January 1, Declaration No. 8165) which was listed as an asset during
1945, Matias H. Aznar had jewelries worth P60,000 the years 1945 and 1947 to 1951, but which was not listed
which were acquired by purchase during the as an asset in 1946 because of a notation in the tax
Japanese occupation (World War II) and sold on declaration that it was reconstructed in 1947,
various occasions, as follows: 1945, P5,000 and ! the lower court correctly concluded that the
1946, P30,000. reconstruction of the property did not render it
! Mr. Aznar stated to the B.I.R. examiner that valueless during the time it was being
jewelries worth P10,000 were sold in 1945, while reconstructed and consequently it should be listed
his own accountant testified that the same jewelries as an asset as of January 1, 1946, with the same
were sold for only P5,000. Mr. Aznar also testified valuation as in 1945, that is P1,500.
that Mrs. Agustines purchased from his wife o On the question of accounts receivable from customers in
jewelries for P35,000, and yet Mrs. Agustines the amount of P38,000 for 1948, and P123,816.58 for the
herself testified that she bought jewelries for years 1950 and 1951, which were included in the assets of
P30,000 and P15,000 on two occasions, or a total Mr. Aznar for those years by the respondent Commissioner
of P45,000. of Internal Revenue
! petitioner's allegation that jewelries form part of his ! figures were taken from the statements (Exhs. 31
inventory of assets for the purpose of establishing and 32) filed by Mr. Matias H. Aznar with the
his net worth at the beginning of 1946 must be Philippine National Bank when he was intending to
dismissed as without factual basis obtain a loan.
9
! To believe the petitioner's argument that the late respondent Commissioner of Internal Revenue's
Mr. Aznar included those figures in his sworn valuation of both properties.
statement only for the purpose of obtaining a ! The reduced valuation for the latter years are due
bigger credit from the bank is to cast suspicion on to allowance for partial loss resulting from the 1949
the character of a man who can no longer defend typhoon. Petitioner did not question the inclusion of
himself. It would be as if pointing the finger of these buildings in the inventory for the years prior
accusation on the late Mr. Aznar that he to 1950, but objected to their inclusion as assets as
intentionally falsified his sworn statements (Exhs. of January 1, 1950, because both buildings were
31 and 32) to make it appear that there were non- destroyed by a typhoon in November of 1949.
existent accounts receivable just to increase his ! therefore, should be eliminated from the petitioner's
assets by fictitious entries so that his credit with the inventory of assets beginning December 31, 1949
Philippine National Bank could be enhanced. o On the issue of investment in the hollow blocks business,
! There is no merit to petitioners argument that those ! We see no compelling reason to alter the lower
statements were only for the purpose of obtaining a court's conclusion that "whatever was spent in the
bigger credit from the bank (impliedly stating that hollow blocks business is an investment, and being
those statements were false) and those accounts an investment, the same should be treated as an
were allegedly back accounts of students of the asset
Southwestern Colleges and were worthless, and if o With respect to the amount representing the value of the
collected, would go to the funds of the school. building,
o As to the questions of doubtful accounts (bad debts), for the ! there is no duplication in the listing as the inventory
amount of P41,810.56 of real property does not include the building in
! it is clear that said amount is taken from Exhibit 31, question.
the sworn statement of financial condition filed by o The inclusion of expenses (labor and raw materials) as part
Mr. Matias H. Aznar with the Philippine National of the hollow block business is sanctioned in the inventory
Bank. method of tax verification,
! it should be reverted to the accounts receivable ! It is a sound accounting practice to include raw
and, consequently, considered as an asset in 1950. materials that will be used for future manufacture.
o On the alleged over valuation of two buildings (hospital Inclusion of direct labor is also proper, as all these
building listed as an asset from 1949-1951 at the basic items are to be embodied in a summary of assets
valuation of P130,000, and which petitioner claims to be (investment by the taxpayer credited to his capital
over valued by P32,000; dentistry building valued by account as reflected in Exhibit 72A, which is a
respondent Commissioner of Internal Revenue at working sheet with entries taken from the journal of
P36,191.34, which petitioner claims to be over valued by the petitioner concerning his hollow blocks
P6,191.34), business.
! We find no sufficient reason to alter the conclusion o As to the question of the real value of the surplus goods
of respondent Court of Tax Appeals sustaining the purchased by Mr. Matias H. Aznar from the U.S. Army to
10
the effect "as part of my assets I have different (Exh. H), however, clearly shows that said
merchandise from Warehouse 35, Tacloban, Leyte at a total properties were formally conveyed to the
cost of P43,000.00 and valued at no less than P20,000 at Southwestern Colleges only on September 25,
present market value." 1952.
! Petitioner's claim that the goods should be valued ! Undoubtedly, petitioner was the owner of those
at only P20,000 in accordance with an alleged properties prior to September 25, 1952 and said
invoice is not supported by evidence since the properties should form part of his assets as of
invoice was not presented as exhibit. December 31, 1951.
! the statement of Mr. Aznar cannot be questioned in o The uncontested portions of the lower court's decision
the light of clear indications that it was never consisting of the following: must not be considered as an
controverted and it was given at a time long before asset of petitioner since to do so would result in a glaring
the tax controversy arose. duplication of items, are all affirmed:
o The last issue on propriety of inclusion in petitioner's assets ! its conclusions that library books valued at
as made by respondent Commissioner of Internal Revenue P7,041.03, appearing in a journal of the
concerns several buildings which were included in the list of Southwestern Colleges marked as ‘Exhibit 25A,
petitioner's assets as of December 31, 1950. being an investment, should be treated as an asset
! The lower court could not find any evidence of said beginning December 31, 1950;
alleged transfer of ownership from the taxpayer to ! that the expenses for construction to the amount of
the Southwestern Colleges as of December 15, P113,353.70, which were spent for the
1950, an allegation which if true could easily be improvement of the buildings appearing in Exhibit
proven. What is evident is that those buildings were 24 are deemed absorbed in the increased value of
used by the Southwestern Colleges. the buildings as appraised by respondent
! Mr. and Mrs. Matias H. Aznar offered those Commissioner of Internal Revenue at cost after
properties in exchange for shares of stocks of the improvements were made, and should be taken out
Southwestern Colleges, and Exhibit "G" which is as additional assets;
the minutes of the meeting of the Board of Trustees ! that the amount receivable of P5,776 from a certain
of the Southwestern Colleges held on August 6, Benito Chan should be treated as petitioner's asset
1951, shows that Mr. Aznar was amenable to the but the amount of P5,776 representing the value of
value fixed by the board of trustees and that he a house and lot given as collateral to secure said
requested to be paid in cash instead of shares of loan.
stock. But those are not sufficient evidence to • There seems to be no controversy as to the rest of the items listed in the
prove that transfer of ownership actually happened inventory of assets.
on December 15, 1950. • Petitioner also insists that there might have been false returns by
! Petitioner also contends that properties allegedly mistake filed by Mr. Matias H. Aznar as those returns were prepared by
ceded to the Southwestern Colleges in 1951 for his accountant employees, but there were no proven fraudulent returns
P150,000 worth of shares of stocks The evidence
11
with intent to evade taxes that would justify the imposition of the 50% o The ordinary period of prescription of 5 years within which to assess
surcharge authorized by law as fraud penalty. tax liabilities under Sec. 331 of the NIRC should be applicable to
normal circumstances, but whenever the government is placed at
Issue/s: a disadvantage so as to prevent its lawful agents from proper
1) WON the right of the Commissioner of Internal Revenue to assessment of tax liabilities due to false returns, fraudulent
assess deficiency income taxes of the late Matias H. Aznar for return intended to evade payment of tax or failure to file returns,
the years 1946, 1947, and 1948 had already prescribed at the the period of ten years provided for in Sec. 332 (a) NIRC, from the
time the assessment was made on November 28, 1952 – NO time of the discovery of the falsity, fraud or omission even seems to
2) WON the lower court properly imposed a surcharge of 50% (Sec.72) be inadequate and should be the one enforced.
– NO o There being undoubtedly false tax returns in this case, We affirm the
conclusion of the respondent Court of Tax Appeals that Sec. 332 (a)
Held/Ratio: WHEREFORE, the decision of the Court of Tax Appeals is of the NIRC should apply and that the period of ten years within
modified in so far as the imposition of the 50% fraud penalty is concerned, which to assess petitioner's tax liability had not expired at the time
and affirmed in all other respects. The petitioner is ordered to pay to the said assessment was made.
Commissioner of Internal Revenue, or his duly authorized representative, the
sum of P151,762.23, representing deficiency income taxes for the years
1946 to 1951, inclusive, within 30 days from the date this decision becomes 2) NO. Apparently, one cannot tax human beings, no matter how much
final. If the said amount is not paid within said period, there shall be added to they resemble characters from children’s television shows.
the unpaid amount the surcharge of 5%, plus interest at the rate of 12% per o The second issue which appears to be of vital importance in this case
annum from the date of delinquency to the date of payment, in accordance centers on the lower court's imposition of the fraud penalty (surcharge
with Section 51 of the National Internal Revenue Code. of 50% authorized in Section 72 of the Tax Code).
o No distinction has been made between false returns (due to mistake,
carelessness or ignorance) and fraudulent returns (with intent to
1) NO. The 10-year prescriptive period, not the ordinary 5 year evade taxes)
prescriptive period shall apply. o The lower court based its conclusion on the petitioner's alleged
o We believe that the proper and reasonable interpretation of said fraudulent intent to evade taxes on the substantial difference between
provision should be that in the three different cases of (1) false return, the amounts of net income on the face of the returns as filed by him in
(2) fraudulent return with intent to evade tax, (3) failure to file a return, the years 1946 to 1951 and the net income as determined by the
the tax may be assessed, or a proceeding in court for the collection of inventory method utilized by both respondents for the same years.
such tax may be begun without assessment, at any time within ten o The lower court based its conclusion on a presumption
years after the discovery of the (1) falsity, (2) fraud, (3) omission. that fraud can be deduced from the very substantial
o That there is a difference between "false return" and "fraudulent disparity of incomes as reported and determined by the
return" cannot be denied. inventory method and on the similarity of consecutive
! While the first merely implies deviation from the truth, disparities for six years.
whether intentional or not, the second implies intentional or
deceitful entry with intent to evade the taxes due.
12
o Such a basis for determining the existence of fraud o The mistakes committed by the Commissioner of Internal
(intent to evade payment of tax) suffers from an inherent Revenue which also involve very substantial amounts were
flaw when applied to this case. also repeated yearly, and yet we cannot presume therefrom
o It is very apparent here that the respondent the existence of any taint of official fraud.
Commissioner of Internal Revenue, when the inventory o From the above exposition of facts, we cannot but emphatically
method was resorted to in the first assessment, reiterate the well established doctrine that fraud cannot be
concluded that the correct tax liability of Mr. Aznar presumed but must be proven.
amounted to P723,032.66 (Exh. 1, B.I.R. rec. pp. 126- o As a corollary thereto, we can also state that fraudulent intent
129). could not be deduced from mistakes however frequent they may
o After a reinvestigation the same respondent, in another be, especially if such mistakes emanate from erroneous entries
assessment dated February 16, 1955, concluded that or erroneous classification of items in accounting methods
the tax liability should be reduced to P381,096.07. utilized for determination of tax liabilities.
o This is a crystal-clear, indication that even the respondent o We conclude that the 50% surcharge as fraud penalty authorized
Commissioner of Internal Revenue with the use of the inventory under Section 72 of the Tax Code should not be imposed, but
method can commit a glaring mistake in the assessment of eliminated from the income tax deficiency for each year from
petitioner's tax liability. 1946 to 1951, inclusive.
o When the respondent Court of Tax Appeals reviewed o The total sum of P151,859.10 should be decreased by P96.87
this case on appeal, it concluded that petitioner's tax representing the tax credit for 1945, thereby leaving a balance of
liability should be only P227,788.64. P151,762.23."
o The lower court in three instances (elimination of two
buildings in the list of petitioner's assets beginning COMMISSIONER OF INTERNAL REVENUE v. AYALA
December 31, 1949, because they were destroyed by SECURITIES CORPORATION, (BAÑADERA)
fire; elimination of expenses for construction in
[GR. No. L-29485; November 21, 1980]
petitioner's assets as duplication of increased value in
“If the law does not provide a period of prescription then it is imprescriptible
buildings, and elimination of value of house and lot in
so may FOREVER, pero sa tax lang hindi sa pag-ibig”
petitioner's assets because said property was only given
as collateral) supported petitioner's stand on the wrong
Recit-Ready:
inclusions in his lists of assets made by the respondent
Facts: Ayala Securities Corporation claims that the right of CIR to
Commissioner of Internal Revenue, resulting in the very
assess and collect the taxes due from its non-payment of
substantial reduction of petitioner's tax liability by the
improperly accumulated profits or surplus in 1955 has prescribed
lower court.
in accordance with the 5-year prescription period under Section
o The foregoing shows that it was not only Mr. Matias H.
331 of the NIRC since CIR only assessed them in 1961 (six
Aznar who committed mistakes in his report of his income
years). Petitioner claims that its right has not prescribed since
but also the respondent Commissioner of Internal Revenue
improperly accumulated profits are not normally included in a
who committed mistakes in his use of the inventory method
return and that prescription only applies if the law provides so.
to determine the petitioner's tax liability.
Given that the law does not provide a prescription period for such
13
taxes, then its right is imprescriptible. • Petitioner alternatively cites United Equipment & Supply Company vs.
Commissioner of Internal Revenue where the court held the following:
Issue: o A perusal of Sections 331 and 332(a)2 will reveal that they
WON CIR’s right to assess the unpaid taxes due to improperly refer to a tax required by law to be reported in a return.
accumulated profits or surplus has prescribed; However, accumulated surplus are never returned for tax
purposes as there is no law requiring that such surplus be
Held: NO. Limitations upon the right of the government to assess and reported in a return for purposes of the 25% surtax. In fact,
collect taxes will not be presumed in the absence of clear legislation to the taxpayers resort to all means and devices to cover up the
contrary and that where the government has not by express statutory fact that they have unreasonably accumulated surplus.
provision provided a limitation upon its right to assess unpaid taxes, such o Therefore, Section 331 limiting the right to assess internal
right is imprescriptible. Even assuming that there is a period of revenue taxes within five years from the date the return was
prescription for surplus tax, Section 332, not Section 331, shall be applied filed or was due does not apply.
since the non-inclusion of the surplus tax in the return is tantamount to an o Neither does Section 332(a) apply given that there can be
evasion of tax that necessarily partakes of a false and/or fraudulent return no failure or omission to file a return where no return is
making the 10 year prescription period of 332(a) of the Tax Code effective. required to be filed by law or by regulation. Therefore the
ten-year period for making an assessment under Section
Facts: 332 does not apply to internal revenue taxes which do not
• The issue concerns the February 21, 1961 assessment by CIR against require the filing of a return.
Respondent Ayala Securities Corporation. o It is well settled limitations upon the right of the government
• CIR assessed respondent for the sum of P758,687.04 on its surplus to assess and collect taxes will not be presumed in the
(improperly accumulated profits) of P2,758,442.37 for its fiscal year absence of clear legislation to the contrary.
ending September 30, 1955. o It follows that in the absence of express statutory provision,
• Respondent claims that the assessment fell under the five-year the right of the government to assess unpaid taxes is
prescriptive period provided in section 3311 of the Tax Code therefore, imprescriptible.
it was made after the expiration of the said five-year prescriptive period
and was of no binding force and effect. Issue: WON CIR’s right to assess the unpaid taxes due to improperly
accumulated profits or surplus has prescribed
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! —NO
1
! SEC.% 331.!Period! of! limitation! upon! assessment! and! collection.! —! Except! as!
provided! in! the! succeeding! section,! internal% revenue% taxes% shall% be% assessed%
within%five%years%after%the%return%was%filed,!and!no!proceeding!in!court!without! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2
assessment!for!the!collection!of!such!taxes!shall!be!begun!after!the!expiration! !SEC.%332%Exceptions!as!to!period!of!limitation!of!assessment!and!collection!of!
of!such!period.!For!the!purpose!of!this!section!a!return!filed!before!the!last!day! taxes.—!(a)!In!the!case!of!a!false%or%fraudulent%return%with%intent%to%evade%tax%
prescribed!by!law!for!the!filing!thereof!shall!be!considered!as!filed!on!such!last! or%of%failure%to%file%a%return,!the!tax!may!be!assessed,!or!a!proceeding!in!court!
day;!Provided,!That!this!limitation!shall!not!apply!to!cases!already!investigated! for! the! collection! of! such! tax! may! be! begun! without! assessment,! at! any! time!
prior!to!the!approval!of!this!Code.! within%ten%years%after%the%discovery%of%the%falsity,%fraud,%or%omission.!
! !
14
Held/Ratio: ACCORDINGLY, the Court's decision of April 8, 1976 is set • Even if the 25% surtax were to be deemed subject to prescription,
aside and in lieu thereof, judgment is hereby rendered ordering respondent computed from the filing of the income tax return in 1955, the intent to
corporation to pay the assessment in the sum of P758,687.04 as 25% surtax evade payment of the surtax is an inherent quality of the violation and the
on its unreasonably accumulated surplus, plus the 5% surcharge and 1% return filed must necessarily partake of a false and/or fraudulent character
monthly interest thereon, pursuant to section 51 (e) of the National Internal which would make applicable the 10-year prescriptive period provided in
Revenue Code, as amended by R. A. 2343. With Costs. section 332(a) of the Tax Code and since the assessment was made in
1961 (the sixth year), the assessment was clearly within the 10-year
NO. Limitations upon the right of the government to assess and collect prescriptive period.
taxes will not be presumed in the absence of clear legislation to the
contrary and that where the government has not by express statutory PRESCRIPTION OF GOVERNMENT RIGHT TO ASSESS
provision provided a limitation upon its right to assess unpaid taxes,
such right is imprescriptible. Even assuming that there is a period of CIR v. BASF Coating + INK Phils Inc. (Bello)
prescription for surplus tax, Section 332, not Section 331, shall be [GR. No. 198677; November 26, 2014]
applied since the non-inclusion of the surplus tax in the return is “The suspension of the three-year period to assess applies only if the BIR
tantamount to an evasion of tax that necessarily partakes of a false Commissioner is not aware of the whereabouts of the taxpayer.”
and/or fraudulent return making the 10 year prescription period of
332(a) of the Tax Code effective. Recit-Ready:
• The Court is persuaded by the fundamental principle invoked by petitioner Facts: BASF COATING + INKS PHILS., INC was a corporation which
that limitations upon the right of the government to assess and was duly organized under laws of the Philippines with a term of existence
collect taxes will not be presumed in the absence of clear of fifty (50) years. Its BIR-registered address was at 101 Marcos Alvarez
legislation to the contrary and that where the government has not Avenue, Barrio Talon, Las Piñas City. In a joint special meeting "
by express statutory provision provided a limitation upon its right to
Respondent BOD & Stockholders decided to dissolve the corporation by
assess unpaid taxes, such right is imprescriptible.
shortening its corporate term to March 31, 2001. Subsequently,
• Therefore there is no such time limit on the right of the Commissioner of respondent moved out of its address in Las Piñas City and
Internal Revenue to assess the 25% tax on unreasonably accumulated transferred to Calamba, Laguna.
surplus provided in section 25 of the Tax Code, since there is no express
statutory provision limiting such right or providing for its prescription. Respondent submitted two (2) letters to the Bureau of Internal Revenue
• The record amply shows that respondent corporation is a mere holding (BIR) Revenue District Officer of Revenue District Office (RDO) No. 53,
company of its shareholders through its mother company, a registered co- Region 8, in Alabang, Muntinlupa City. Thereafter, in a Formal
partnership then set up by the individual shareholders belonging to the Assessment Notice (FAN), CIR assessed BASF Coating + Inks Phil, tax
same family and that the prima facie evidence and presumption set up by Deficiencies. " The FAN was sent by registered mail on January 24,
the Tax Code3, therefore applied without having been adequately rebutted 2003 to respondent's former address in Las Piñas City.
by the respondent corporation.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3
! SEC.% 20.%Holding! and! Investment! Companies.! —! A! corporation! having! therefrom! or! investing! therein,! shall! be! considered! a! holding! company! within!
practically! no! activities! except! holding! property,! and! collecting! the! income! the!meaning!of!section!25.!
15
Chief of the Collection Section of BIR Revenue Region No. 7, RDO No. old address a Preliminary Assessment Notice but it was "returned to
39, South Quezon City, issued a First Notice Before Issuance of Warrant sender."
of Distraint and Levy, which was sent to the residence of one of
respondent's directors. " Hence, respondent filed a protest letter 2) NO. CTA is correct in holding that the FAN never attained finality
citing lack of due process and prescription as grounds. because respondent never received it, either actually or constructively
Trial on the merits ensued. " CTA ruled: petitioner was actually aware of Facts:
respondent's new address, the former's failure to send the Preliminary • BASF COATING + INKS PHILS., INC was a corporation which was duly
Assessment Notice and FAN to the said address should not be taken organized under laws of the Republic of the Philippines on August 1,
against the latter. Consequently, since there are no valid notices sent to 1990 with a term of existence of fifty (50) years. Its BIR-registered
respondent, the subsequent assessments against it are considered void. address was at 101 Marcos Alvarez Avenue, Barrio Talon, Las Piñas
City.
• In a joint special meeting held on March 19, 2001, majority of the
Issue/s: members of the Board of Directors and the stockholders representing
1) WON the Petitioner Right to Assess is already barred by Prescription? more than two-thirds (2/3) of the entire subscribed and outstanding capital
– YES stock of herein respondent corporation, resolved to dissolve the
2) WON the FAN for Respondent’s tax deficiencies for taxable year 1999 corporation by shortening its corporate term to March 31,
has not yet become final and executory? – No 2001. Subsequently, respondent moved out of its address in Las
Piñas City and transferred to Calamba, Laguna. (medyo important
Held: In ruling for Respondent, Petition DENIED. The Decision of the tong paglipat nila ng address dahil dito magiging base yung lack of due
Court of Tax Appeals En Banc, dated June 16, 2011, and its process)
Resolution dated September 16, 2011, in C.T.A. EB No. 664 • On June 26, 2001, respondent submitted two (2) letters to the Bureau of
(C.T.A. Case No. 7125), are AFFIRMED. Internal Revenue (BIR) Revenue District Officer of Revenue District Office
(RDO) No. 53, Region 8, in Alabang, Muntinlupa City.
1) YES. The provisions mentioned by the CIR on the suspension of the o The 1st Letter, dated April 26, 2001, was a notice of
three-year period to assess apply only if the BIR Commissioner is not respondent's dissolution, in compliance with the
aware of the whereabouts of the taxpayer. requirements of Section 52(c) of the National Internal
Revenue Code.
In the present case, CIR, by all indications, is well aware that o The 2nd Letter dated June 22, 2001, was a manifestation
respondent had moved to its new address in Calamba, Laguna, as indicating the submission of various documents
shown by the following documents which form part of respondent's supporting respondent's dissolution, among which was
records with the BIR. + The RDO sent respondent a letter dated April BIR Form No. 1905, which refers to an update of
24, 2002 informing the latter of the results of their investigation and information contained in its tax registration.
inviting it to an informal conference (two letters were sent to • Thereafter, in a Formal Assessment Notice (FAN) dated January 17,
respondent's new address in Laguna.) + CIR should have been alerted 2003, CIR assessed BASF Coating + Inks Phil the aggregate amount
by the fact that prior to mailing the FAN, petitioner sent to respondent's of P18,671,343.14 representing deficiencies in income tax, value added
16
tax, withholding tax on compensation, expanded withholding tax and

documentary stamp tax, including increments, for the taxable year 1999 Issue/s:
(in short, TAX Deficiencies). 1) WON the Petitioner Right to Assess is already barred by
o The FAN was sent by registered mail on January 24, Prescription?
2003 to respondent's former address in Las Piñas City. —YES
• On March 5, 2004, the Chief of the Collection Section of BIR Revenue 2) WON the FAN for Respondent’s tax deficiencies for taxable year
Region No. 7, RDO No. 39, South Quezon City, issued a First Notice 1999 has not yet become final and executory?
Before Issuance of Warrant of Distraint and Levy, which was sent to the —NO
residence of one of respondent's directors.
o On March 19, 2004, respondent filed a protest letter Held/Ratio: Petition DENIED. The Decision of the Court of Tax Appeals En
citing lack of due process and prescription as Banc, dated June 16, 2011, and its Resolution dated September 16, 2011, in
grounds. On April 16, 2004, respondent filed a C.T.A. EB No. 664 (C.T.A. Case No. 7125), are AFFIRMED.
supplemental letter of protest. Subsequently, on June 14,
2004, respondent submitted a letter wherein it attached " Petitioner’s Argument - insofar as respondent's alleged deficiency taxes
documents to prove the defenses raised in its protest for the taxable year1999 are concerned, the running of the three-year
letters. prescriptive period to assess, under Sections 2034 and 2225 of the
• On January 10, 2005, after 180 days had lapsed without action on the
part of petitioner on respondent's protest, the latter filed a Petition !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
for Review with the CTA. Trial on the merits ensued. 4
Sec. 203. Period of Limitation Upon Assessment and Collection.– Except as provided
• On February 17, 2010, the CTA Special First Division promulgated its in Section 222,internal revenue taxes shall be assessed within three (3) years after the last
day prescribed by law for the filing of the return, and no proceeding in court without
Decision, the dispositive portion of which reads, thus: assessment for the collection of such taxes shall be begun after the expiration of such
• WHEREFORE, the Petition for Review is hereby GRANTED. xxx (all the period: Provided, That in a case where a return is filed beyond the period prescribed by law,
tax deficiencies) xxx CANCELLED and SET ASIDE. SO ORDERED. the three (3)-year period shall be counted from the day the return was filed. For purposes of
this Section, a return filed before the last day prescribed by law for the filing thereof shall be
o The CTA Special First Division ruled that since petitioner considered as filed on such last day.
was actually aware of respondent's new address, the
5
Sec. 222. Exceptions as to Period of Limitation of Assessment and Collection of
former's failure to send the Preliminary Assessment
Taxes. -
Notice and FAN to the said address should not be (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
taken against the latter. Consequently, since there are no return, the tax may be assessed, or a proceeding in court for the collection of such tax may
be filed without assessment, at any time within ten (10) years after the discovery of the
valid notices sent to respondent, the subsequent falsity, fraud or omission: Provided, That in a fraud assessment which has become final and
assessments against it are considered void. " MR " executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal
action for the collection thereof.
denied " CTA EN Banc (b) If before the expiration of the time prescribed in Section 203 for the assessment of the
o The CTA En Banc held that petitioner's right to assess tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon.
respondent for deficiency taxes for the taxable year 1999
The period so agreed upon may be extended by subsequent written agreement made
has already prescribed and that the FAN issued to before the expiration of the period previously agreed upon.
respondent never attained finality because respondent did (c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding
not receive it. " MR " denied in court within five (5) years following the assessment of the tax.
17
National Internal Revenue Act of 1997 (Tax Reform Act of 1997) was shown by the following documents 8 which form part of respondent's
suspended when respondent failed to notify petitioner, in writing, of its records with the BIR.
change of address, pursuant to the provisions of Section 2236 of the same o The above documents, all of which were accomplished and signed
Act and Section 11 of BIR Revenue Regulation No. 12-857. by officers of the BIR, clearly show that respondent's address is
at Carmelray Industrial Park, Canlubang, Calamba, Laguna. The
1) YES! That the above-mentioned provisions on the suspension of CTA also found that BIR officers, at various times prior to the
the three-year period to assess apply only if the BIR issuance of the subject FAN, conducted examination and
Commissioner is not aware of the whereabouts of the taxpayer. investigation of respondent's tax liabilities for 1999 at the latter's
o In the present case, petitioner, by all indications, is well aware that new address in Laguna as evidenced by the following, in addition
respondent had moved to its new address in Calamba, Laguna, as to the above mentioned records:
! Letter, dated September 27, 2001, signed by Revenue Officer
I Eugene R. Garcia;
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
(d) Any internal revenue tax, which has been assessed within the period agreed upon as
! Final Request for Presentation of Records Before Subpoena
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a Duces Tecum, dated March 20, 2002, signed by Revenue
proceeding in court within the period agreed upon in writing before the expiration of the five Officer I Eugene R. Garcia.
(5) -year period. The period so agreed upon may be extended by subsequent written
agreements made before the expiration of the period previously agreed upon. o Moreover, the CTA found that, based on records, the RDO sent
(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof respondent a letter dated April 24, 2002 informing the latter of the
shall be construed to authorize the examination and investigation or inquiry into any tax results of their investigation and inviting it to an informal
return filed in accordance with the provisions of any tax amnesty law or decree.
conference. Subsequently, the RDO also sent respondent another
6
Sec. 223. Suspension of Running of Statute of Limitations. - The running of the letter dated May 30, 2002, acknowledging receipt of the latter's reply
Statute of Limitations provided in Sections 203 and 222 on the making of assessment and
to his April 24, 2002 letter.
the beginning of distraint or levy a proceeding in court for collection, in respect of any
deficiency, shall be suspended for the period during which the Commissioner is prohibited ! These two letters were sent to respondent's new address
from making the assessment or beginning distraint or levy or a proceeding in court and for in Laguna. Had the RDO not been informed or was not
sixty (60) days thereafter; when the taxpayer requests for a reinvestigation which is granted
by the Commissioner; when the taxpayer cannot be located in the address given by him in
aware of respondent's new address, he could not have
the return filed upon which a tax is being assessed or collected: Provided, that, if the sent the said letters to the said address.
taxpayer informs the Commissioner of any change in address, the running of the Statute of
Limitations will not be suspended; when the warrant of distraint or levy is duly served upon
the taxpayer, his authorized representative, or a member of his household with sufficient
discretion, and no property could be located; and when the taxpayer is out of the !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
8
Philippines. 1) Checklist on Income Tax/Withholding Tax/Documentary Stamp Tax/Value-Added Tax
and Other Percentage Taxes;
7
Sec. 11. Change of Address. – In case of change of address, the taxpayer must give a 2) General Information (BIR Form No. 23-02);
written notice thereof to the Revenue District Officer or the district having jurisdiction over 3) Report on Taxpayer's Delinquent Account, dated June 27, 2002;
his former legal residence and/or place of business, copy furnished the Revenue District 4) Activity Report, dated October 17, 2002;
Officer having jurisdiction over his new legal residence or place of business, the Revenue 5) Memorandum Report of Examiner, dated June 27, 2002;
Computer Center and the Receivable Accounts Division, BIR, National Office, Quezon City, 6) Revenue Officer's Audit Report on Income Tax;
and in case of failure to do so, any communication referred to in these regulations 7) Revenue Officer's Audit Report on Value-Added Tax;
previously sent to his former legal residence or business address as appear in is tax return 8) Revenue Officer's Audit Report on Compensation Withholding Taxes;
for the period involved shall be considered valid and binding for purposes of the period 9) Revenue Officer's Audit Report on Expanded Withholding Taxes;
within which to reply. 10) Revenue Officer's Audit Report on Documentary Stamp Taxes.
18
o Furthermore, petitioner should have been alerted by the fact that not tarry too long or indefinitely to the prejudice of the
prior to mailing the FAN, petitioner sent to respondent's old address interests of the Government, which needs taxes to run it;
a Preliminary Assessment Notice but it was "returned to sender." and for the taxpayer so that within a reasonable time after
This was testified to by petitioner's Revenue Officer II at its Revenue filing his return, he may know the amount of the
District Office 39 in Quezon City. Yet, despite this occurrence, assessment he is required to pay, whether or not such
petitioner still insisted in mailing the FAN to respondent's old assessment is well founded and reasonable so that he may
address. either pay the amount of the assessment or contest its
o In the instant case, respondent has not properly been informed validity in court x x x. It would surely be prejudicial to the
of the basis of its tax liabilities. Without complying with the interest of the taxpayer for the Government collecting
unequivocal mandate of first informing the taxpayer of the agency to unduly delay the assessment and the collection
government’s claim, there can be no deprivation of property, because by the time the collecting agency finally gets
because no effective protest can be made. It is true that taxes are around to making the assessment or making the collection,
the lifeblood of the government. However, in spite of all its plenitude, the taxpayer may then have lost his papers and books to
the power to tax has its limits. support his claim and contest that of the Government, and
o It bears stressing that, in a number of cases, this Court has what is more, the tax is in the meantime accumulating
explained that the statute of limitations on the collection of interest which the taxpayer eventually has to pay.
taxes primarily benefits the taxpayer. " The following are just
jurisprudence o Likewise, in Republic of the Philippines v. Ablaza, this Court
elucidated that the prescriptive period for the filing of actions for
" You may opt not to read this! collection of taxes is justified by the need to protect law-abiding
o In these cases, the Court exemplified the detrimental effects that the citizens from possible harassment.
delay in the assessment and collection of taxes inflicts upon the
taxpayers. o Also, in Bank of the Philippine Islands v. Commissioner of
Internal Revenue, it was held that the statute of limitations on the
o Thus, in Commissioner of Internal Revenue v. Philippine Global assessment and collection of taxes is principally intended to afford
Communication, Inc., this Court echoed Justice Montemayor's protection to the taxpayer against unreasonable investigations as
disquisition in his dissenting opinion in Collector of Internal Revenue the indefinite extension of the period for assessment deprives the
v. Suyoc Consolidated Mining Company, regarding the potential loss taxpayer of the assurance that he will no longer be subjected to
to the taxpayer if the assessment and collection of taxes are not further investigation for taxes after the expiration of a reasonable
promptly made, thus: period of time.
Prescription in the assessment and in the collection of taxes o Thus, in Commissioner of Internal Revenue v. B.F. Goodrich
is provided by the Legislature for the benefit of both the Phils., Inc., this Court ruled that the legal provisions on prescription
Government and the taxpayer; for the Government for the should be liberally construed to protect taxpayers and that, as a
purpose of expediting the collection of taxes, so that the corollary, the exceptions to the rule on prescription should be strictly
agency charged with the assessment and collection may construed. It might not also be amiss to point out that petitioner's
19
issuance of the First Notice Before Issuance of Warrant of Distraint the letter or notice must be properly addressed. It is not enough that
and Levy violated respondent's right to due process because no the notice is sent by registered mail as provided under the said
valid notice of assessment was sent to it. An invalid assessment Revenue Regulation.
bears no valid fruit. The law imposes a substantive, not merely a
formal, requirement. To proceed heedlessly with tax collection Revenue Memorandum Circular 29-2012 (Bello)
without first establishing a valid assessment is evidently violative of
the cardinal principle in administrative investigations: that !
taxpayers should be able to present their case and adduce Revenue Memorandum Order (RMO) No. 20-90 dated April 4, 1990 was
supporting evidence. issued to provide guidelines in the proper execution of the Waiver of the
Statute of Limitations under the National Internal Revenue Code
(hereinafter referred to as “Waiver”). RMO No. 20-90 prescribed the use of
o Thus, in Commissioner of Internal Revenue v. Algue, Inc.,41 this a particular waiver form and required that there should be no deviation
Court held: from such form.
Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance. On the other On August 2, 2001, Revenue Delegation Authority Order (RDAO) No. 05-
hand, such collection should be made in accordance with 01 was issued. Aside from authorizing subordinate officials to sign
Waivers, RDAO No. 05-01 introduced a new Waiver form.
law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the
Subsequently, Revenue Memorandum Circular (RMC) No. 06-05 dated
apparently conflicting interests of the authorities and the February 2, 2005 was issued to circularize the salient features of the
taxpayers so that the real purpose of taxation, which is the decision of the Supreme Court in the case of Philippine Journalists, Inc. v.
promotion of the common good, may be achieved. x x x x Commissioner of Internal Revenue, G.R. No. 162852, promulgated on
December 16, 2004, to wit:
o It is an elementary rule enshrined in the 1987 Constitution that no
person shall be deprived of property without due process of law. In “1. A waiver of the statute of limitations under the Tax Code must
balancing the scales between the power of the State to tax and its conform strictly with the provisions of Revenue Memorandum Order
inherent right to prosecute perceived transgressors of the law on No. 20-90 in order to be valid and binding.
one side, and the constitutional rights of a citizen to due process of
law and the equal protection of the laws on the other, the scales x x x” (emphasis supplied)
must tilt in favor of the individual, for a citizen’s right is amply
protected by the Bill of Rights under the Constitution. The statement in RMC No. 06-05 citing the Supreme Court decision that
“a waiver of the statute of limitations under the Tax Code must conform
strictly with the provisions of Revenue Memorandum Order No. 20-90” led
2) NO. CTA is correct in holding that the FAN never attained finality
some to believe that the Waiver form prescribed under RMO No. 20-90
because respondent never received it, either actually or should be used instead of the waiver form mandated under RDAO No. 05-
constructively. 01.
o CIR reliance on the provisions of Section 3.1.7 of BIR Revenue
Regulation No. 12-99 as well as on the case of Nava v. CLARIFICATION
Commissioner of Internal Revenue is misplaced, because in the
said case, one of the requirements of a valid assessment notice is that The aforecited Supreme Court decision pertains to a case involving a tax
assessment for the year 1994 and a waiver executed in 1997. Thus, in
20
resolving the case, the relevant BIR issuance is RMO No. 20-90 and not 2. The waiver shall be signed by the taxpayer himself or his duly
RDAO No. 05-01 which took effect only in 2001. authorized representative
3. Signature of the Proper Authority (for 1 million and above the
The provisions of RMO No. 20-90 should be strictly complied with in order CIR must sign)
for a Waiver to be valid. However, the Waiver form prescribed in RMO No. 4. The date of the acceptance by the BIR should be indicated.
20-90 should no longer be used as the same has been revised per RDAO
Both the date of execution by the taxpayer and the date of the
No. 05-01.
acceptance by the BIR should be before the expiration of the
A copy of the Waiver form prescribed under RDAO No. 05-01 is hereto period of prescription or before the lapse of the period agreed
attached as Annex “A” for reference. upon in case a subsequent agreement is executed. (date is
specified)
All concerned revenue officials and employees are hereby enjoined to give 5. The waiver must be executed in 3 copies,
this Circular as wide a publicity as possible. a. the original must be attached to the docket,
b. the second copy for the taxpayer
NOTES: c. the third copy for the office accepting the waiver.
• Note: The BIR has recently issued Revenue Memorandum Circular No. Taxpayer must be furnished a copy of the waiver in order to
29-2012 dated June 29, 2012 where it clarifies that the form to be perfect the agreement since the waiver is not a mere unilateral act.
used for a valid Waiver of the Defense of Prescription under the
Statute of Limitations as prescribed in Sections 203, 222 of the NIRC
of 1997, should be in accordance with the Waiver form prescribed in
RDAO No. 05-01.
• The provisions of RMO No. 20-90 should be strictly complied with in
order for a Waiver to be valid. However, the Waiver form prescribed
in RMO No. 20-90 should no longer be used as the same has been
revised per RDAO No. 05-01.
• The intent and purpose of this waiver is to afford the CIR ample time to
carefully consider the legal and/or factual questions involved in the
determination of the aforesaid tax liabilities.
• It is understood, however, that the undersigned taxpayer/taxpayer
represented, by the execution of the waiver, neither admits in advance
the correctness of the assessment/assessments which may be made for
the year above mentioned nor waives the right to use any legal
remedies accorded by law to secure a credit or refund of such tax that
may have been paid for the same year pursuant to the provisions of
Section 204 & 229 of the NIRC.
PM Reyes Notes:
• Requirements of a valid waiver of the Statute of Limitations
1. The waiver must be in the proper form.
21
prescribed; or
IMPOSITION OF PENALTIES
(2) Unless otherwise authorized by the Commissioner, filing a return with
an internal revenue officer other than those with whom the return is
TITLE X (BUGAY) required to be filed; or
STATUTORY OFFENSES AND PENALTIES (3) Failure to pay the deficiency tax within the time prescribed for its
(As amended by RA No. 10021) payment in the notice of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return
CHAPTER I required to be filed under the provisions of this Code or rules and
regulations, or the full amount of tax due for which no return is required to
ADDITIONS TO THE TAX be filed, on or before the date prescribed for its payment.
SEC. 247. General Provisions. - (B) In case of willful neglect to file the return within the period prescribed
by this Code or by rules and regulations, or in case a false or fraudulent
(a) The additions to the tax or deficiency tax prescribed in this Chapter return is willfully made, the penalty to be imposed shall be fifty percent
shall apply to all taxes, fees and charges imposed in this Code. The (50%) of the tax or of the deficiency tax, in case, any payment has been
Amount so added to the tax shall be collected at the same time, in the made on the basis of such return before the discovery of the falsity or
same manner and as part of the tax. fraud: Provided, That a substantial under-declaration of taxable sales,
receipts or income, or a substantial overstatement of deductions, as
(b) If the withholding agent is the Government or any of its agencies, determined by the Commissioner pursuant to the rules and regulations to
political subdivisions or instrumentalities, or a government-owned or be promulgated by the Secretary of Finance, shall constitute prima facie
controlled corporation, the employee thereof responsible for the evidence of a false or fraudulent return: Provided, further, That failure to
withholding and remittance of the tax shall be personally liable for the report sales, receipts or income in an amount exceeding thirty percent
additions to the tax prescribed herein. (30%) of that declared per return, and a claim of deductions in an amount
exceeding (30%) of actual deductions, shall render the taxpayer liable for
substantial under-declaration of sales, receipts or income or for
(c) The term 'person', as used in this Chapter, includes an officer or overstatement of deductions, as mentioned herein.
employee of a corporation who as such officer, employee or member is
under a duty to perform the act in respect of which the violation occurs.
SEC. 249. Interest. -
SEC. 248. Civil Penalties. -
(A) In General. - There shall be assessed and collected on any unpaid
amount of tax, interest at the rate of twenty percent (20%) per annum, or
(A) There shall be imposed, in addition to the tax required to be paid, a such higher rate as may be prescribed by rules and regulations, from the
penalty equivalent to twenty-five percent (25%) of the amount due, in the date prescribed for payment until the amount is fully paid.
following cases:
(B) Deficiency Interest. - Any deficiency in the tax due, as the term is
(1) Failure to file any return and pay the tax due thereon as required defined in this Code, shall be subject to the interest prescribed in
under the provisions of this Code or rules and regulations on the date Subsection (A) hereof, which interest shall be assessed and collected
22
from the date prescribed for its payment until the full payment thereof. this Chapter, be liable upon conviction to a penalty equal to the total
amount of the tax not withheld, or not accounted for and remitted.
(C) Delinquency Interest. - In case of failure to pay:
SEC. 252. Failure of a Withholding Agent to refund Excess
(1) The amount of the tax due on any return to be filed, or Withholding Tax. - Any employer/withholding agent who fails or refuses
to refund excess withholding tax shall, in addition to the penalties provided
in this Title, be liable to a penalty to the total amount of refunds which was
(2) The amount of the tax due for which no return is required, or
not refunded to the employee resulting from any excess of the amount
withheld over the tax actually due on their return.
(3) A deficiency tax, or any surcharge or interest thereon on the due date
appearing in the notice and demand of the Commissioner, there shall be
assessed and collected on the unpaid amount, interest at the rate
PHILIPPINE REFINING COMPANY (now known as
prescribed in Subsection (A) hereof until the amount is fully paid, which
interest shall form part of the tax.2 “UNILEVER”) v. COURT OF APPEALS (Caraan)
[GR. No. 118794; May 8, 1996]
(D) Interest on Extended Payment. - If any person required to pay the “Failure to pay within time prescribed = 25% surcharge + 20% interest, so
tax is qualified and elects to pay the tax on installment under the pay up and shut up ka nalang”
provisions of this Code, but fails to pay the tax or any installment hereof,
or any part of such amount or installment on or before the date prescribed
Recit-Ready:
for its payment, or where the Commissioner has authorized an extension
of time within which to pay a tax or a deficiency tax or any part thereof, Facts: Petitioner PRC was assessed to pay a deficiency tax and they
there shall be assessed and collected interest at the rate hereinabove protested because they claimed that CIR erroneously disallowed
prescribed on the tax or deficiency tax or any part thereof unpaid from the their “bad debts” and “interest expense” although both were
date of notice and demand until it is paid. allowable and legal deductions. The CIR ignored the protest and
issued a warrant of garnishment over PRC’s deposits at City
SEC. 250. Failure to File Certain Information Returns. - In the case of Trust Bank.
each failure to file an information return, statement or list, or keep any
record, or supply any information required by this Code or by the The CTA affirmed with modifications the CIR decision. The CA
Commissioner on the date prescribed therefor, unless it is shown that
affirmed such decision.
such failure is due to reasonable cause and not to willful neglect, there
shall, upon notice and demand by the Commissioner, be paid by the
person failing to file, keep or supply the same, One thousand pesos Issue/s:
(1,000) for each failure: Provided, however, That the aggregate amount to 3) WON all the bad debts claimed by petitioner are deductible
be imposed for all such failures during a calendar year shall not exceed 4) WON the CTA is correct in giving the petitioner 25% surcharge and
Twenty-five thousand pesos (P25,000). 20% interest as penalty
SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Held:
Any person required to withhold, account for, and remit any tax imposed
3) NO. To claim bad debts as a deduction, it must be supported by
by this Code or who willfully fails to withhold such tax, or account for and
remit such tax, or aids or abets in any manner to evade any such tax or evidence that the debt is indeed uncollectible. Mere testimony by
the payment thereof, shall, in addition to other penalties provided for under PRC’s accountant is not sufficient to claim the debts as “worthless”
23
and deductible. 1) NO. In order to be considered as “bad debts” and be allowed as

4) YES. The surcharge and the interest assessed to petitioner as penalty deduction, evidentiary support must be provided.
is correct as both find basis in the Tax Code, Sections 248 and 249. o The Court emphasized the requisites to be able to deduct bad debts:
(Read full ratio for the codal provisions) ! There is a valid and subsisting debt;
! The debt must be actually ascertained to be worthless and
Facts: uncollectible during the taxable year;
• Petitioner PRC was assessed by the CIR to pay a deficiency tax for the ! The debt must be charged off during the taxable year; and
year 1985 in the amount of P1,892,584.00. They timely protested such ! The debt must arise from the business or trade of the
assessment as they claimed that CIR erroneously disallowed their “bad taxpayer
debts” and “interest expense” although both were allowable and legal ! Additionally, before a debt can be considered worthless, the
deductions. taxpayer must also show that it is indeed uncollectible even in
• CIR, however, issued a warrant of garnishment over PRC’s deposits at the future
City Trust Bank. o In the case at hand, petitioner failed to comply with such
• Petitioner PRC then elevated the case to the CTA via a petition for review requirements.
on the same ground: the CIR erred in disallowing their claim of deduction o The only evidentiary support given by PRC for its aforesaid claimed
for “bad debts” and “interest expense” deductions was the explanation or justification posited by its financial
o The CTA affirmed the CIR decision with modifications, adviser or accountant, Guia D. Masagana, which the Court considered
reducing the deficiency income tax assessment to as insufficient as such justification was not supported by evidence.
P237,381.26, with surcharge and interest incident to
delinquency 2) YES. Both the 25% surcharge penalty and 20% delinquency interest
o In affirming the CIR’s decision, the CTA maintained the are correct.
disallowance of the supposed bad debts of thirteen (13) o Section 248 of the Tax Code: (25% surcharge)
debtors in the total sum of P395,324.27 ! “Civil Penalties - There shall be imposed, in addition to the
• The Court of Appeals affirmed the CTA’s decision. tax required to be paid, a penalty equivalent to twenty-five
percent (25%) of the amount due, in the following cases:
Issue/s: xxx
1) WON all the bad debts claimed by petitioner are deductible (3) Failure to pay the tax within the time prescribed for its
—NO payment.”
2) WON the CTA is correct in giving the petitioner 25% surcharge and o Section 249 of the Tax Code: (20% interest)
20% interest as penalty ! “Interest – (a) In General. - There shall be assessed and
—YES collected on any unpaid amount of tax, interest at the rate of
twenty percent (20%) per annum, or such higher rate as
Held/Ratio: ACCORDINGLY, the petition at bar is DENIED and the may be prescribed by regulations, from the date prescribed
judgment of respondent Court of Appeals is hereby AFFIRMED, with treble for payment until the amount is fully paid.
costs against petitioner. xxx
(c) Delinquency Interest. - In case of failure to pay:
24
(1) The amount of the tax due on any return required to

be filed, or Issue/s:
(2) The amount of the tax due for which no return is WON cement is a mineral product, the sale of which is exempt from sales
required, or tax. – NO.
(3) A deficiency tax, or any surcharge or interest
thereon, on the due date appearing in the notice and demand Held: In ruling for CIR, the Court ruled that cement is a manufactured
of the Commissioner, product, for although it is composed of at least 80% minerals
! there shall be assessed and collected, on the unpaid amount, quarried from mines, such minerals have already been subjected
interest at the rate prescribed in paragraph (a) hereof until the to different manufacturing processes resulting to a chemical
amount is fully paid, which interest shall form part of the tax.” change in their form or texture. Therefore, cement is subject to
o The deficiency tax was correctly assessed and thus should have sales tax and not under Sec. 246 which imposes ad valorem tax
been paid within 30 days from receipt of the demand letter sent on minerals or mineral products. Sec. 246 only contemplates the
by the CIR. act of actually severing the minerals from the mineral lands.
o By reason of petitioner’s default thereon, the delinquency penalties of Since cement is already a manufactured form of minerals, Sec.
25% surcharge and interest of 20% already accrued. 246 will not apply here.
o The fact that petitioner appealed the assessment to the CTA and However, the Court deleted the imposition of the surcharge for
that the same was modified does not relieve petitioner of the this case involves the interpretation of a difficult law, and
penalties incident to delinquency. everyone has been confused including the BIR, if cement is a
o (SC scolding petitioner) Tax laws imposing penalties for mineral or manufactured product.
delinquencies, so we have long held, are intended to hasten tax
payments by punishing evasions or neglect of duty in respect thereof. Facts:
If penalties could be condoned for flimsy reasons, the law imposing • The respondents are manufacturers of cement. CIR issued assessments
penalties for delinquencies would be rendered nugatory, and the against the respondents for deficiency sales tax and surcharge as
maintenance of the Government and its multifarious activities will be manufacturers of cement, totaling P38.5 million (for all the companies) for
adversely affected. the years 1963 to 1967.
CIR v. REPUBLIC CEMENT CORPORATION (Coloquio) o The CIR asserted that cement is a manufactured product
[GR. No. L-35668-72, L-35683; August 10, 1983] and therefore subject to sales tax.
“Yung cement, naprocess mo na so di na mineral yun.” o The respondents on the other hand assert that it is a
mineral product, therefore exempt from sales tax but the
Recit-Ready: CIR denied the protest of the respondents.
Facts: The respondents in this case are cement manufacturers • Upon appeal to the CTA, the CIR’s finding was reversed, the CTA
assessed by the CIR for deficiency sales tax and surcharge. The concluding that cement is a mineral product covered by Sec. 246 of the
respondents asserted that cement is a mineral product therefore Tax Code, and consequently exempt from sales tax.
exempt from sales tax, but the CIR asserted that cement is
actually a manufactured product. The CTA ruled that it is a Issue/s:
mineral product.
25
3) WON Cement is a mineral product, the sale of which is exempt from should be based on the selling price of cement which is its actual market
sales tax. value.
- NO • The Court found the argument of the respondents untenable, for the
question of whether cement is a mineral product under Sec. 246 has
Held/Ratio: Petition GRANTED. The decision of the CTA is set aside. already been answered in the negative in several decisions. It is rather a
manufactured product, but the quarried minerals used in its production
NO. Cement is a manufactured product, for the minerals have already are mineral products subject to ad valorem tax on the basis of the value
undergone different manufacturing processes which have changed the of the quarried minerals, and not on the selling price of the cement.
minerals from their original state. • The Court added that while cement is composed of 80% minerals, it is
• The Court found the necessity to recall the history of Sec. 246 of the Tax not merely a blending of raw materials (lime, silica, shale etc.) but a
Code which was amended by RA 1299, in relation to Sec. 188 of the result of a definite process – crushing, grinding, mixing, cooling adding
same code. retarder etc. In short, before it reaches its saleable state, the “mineral
o The original text of Sec. 246 provided that the term gross output products” in the cement have already undergone a chemical change
shall be interpreted as the actual market value of minerals or through the manufacturing process.
mineral products, or bullion from each mine or mineral lands • Therefore, it is not contemplated under Sec. 246 for the ad valorem tax
operated as a separate entity without any deduction from which the provision imposes is only for the act of extracting or severing
mining, milling, refining, transporting handling, marketing or any the minerals from the mines. The selling price of the cement cannot be
other expenses. If the minerals/ mineral products are sold or taken as the market value also of the minerals composing the cement,
consigned abroad by the lessee or owner of the mine under CIF for it was not the cement that was mined, but the minerals composing it.
terms, the actual cost of ocean freight and insurance shall be • As to the correct application of the tax, though the cement is subject to
deducted. The output of any group of contiguous mining claims sales tax, the minerals constituting it fall under Sec. 243, so subject to 1
shall not be subdivided. ½ ad valorem tax on the market value of the quarried raw materials.
o What is confusing here is that the term gross output is the only • Because of the confusion, the respondents, were asserting the
thing defined, but the words minerals and mineral products are application of the case of Cebu Portland Cement Co v. CIR which has
not, therefore taxpayers cannot properly determine how to fix kinda similar facts. The petitioner (APO Portland) in that case was also a
the proper ad valorem tax due from the miners/ owners of cement manufacturer, and claiming for refund of sales taxes:
mineral lands. o APO Portland had been paying sales tax at 7% of the gross
o Upon the release of RA 1299, the word minerals was defined as selling price of cement. But after Sec. 246 was amended by RA
all inorganic substances found in nature whether in solid, liquid 1299, it stopped paying sales tax, and instead paid the ad
or gaseous or any intermediate state. valorem tax on the selling price of the product. It was due to the
o The word mineral products on the other hand, shall mean things wrong interpretation of the law, taxpayers thinking that cement,
produced by the lessee/ concessionaire/ owner of mineral lands, originally categorized as a manufactured product, became
at least 80% of which things must be minerals extracted. categorized as a mineral product upon the release of RA 1299.
• Respondents assert that cement is a mineral product, for it consists of o What is erroneous in this decision is that the Court denied the
80% minerals quarried from its mines, so the imposable ad valorem tax refund not because of the interpretation that cement is already a
mineral product due to RA 1299, but because of the fact that RA
26
1299 should not be given retroactive application for such was WON Cagayan Electric is liable to pay the tax? YES
not provided in the law. But it ruled that yes, cement is newly
categorized as a mineral product, due to RA 1299. Held:
• The Court rejected the application of the case and actually overturned it The court noted that congress has the power to make laws regarding tax
here, since cement has always been a manufactured product. After RA exemption. The Constitution states that franchises are subject to
1299, it was not changed into the classification of a mineral product. amendment and repeal by congress. In this case the actual franchise
o This is supported by the discussions on the bill which became agreement also states this. Therefore, Cagayan Electric is liable for the
RA 1299 – the legislators stating that no tax change was period in between the time the tax exemption was removed to the time
envisioned, since cement remained as a manufactured product when it was reenacted.
therefore subject to sales tax. RA 1299 only added the definition
of the words minerals and mineral products. Facts:
• However, the Court ruled that the imposition of surcharge should be • Initial Tax Exemption: Cagayan Electric Power is the holder of a
deleted, for this case involved a controversy as to the proper application legislative franchise (RA 3247), under which its payment of 3% tax on its
of a difficult law. At the start, even BIR was confused if cement is really a gross earnings from the sale of electric current is "in lieu of all taxes and
mineral product or a manufactured product. assessments of whatever authority upon privileges, earnings, income,
• Also, the computation of the tax base for the imposition of the sales tax franchise, and poles, wires, transformers, and insulators of the grantee,
must be the selling price of the cement sold, minus the total cost of the from which taxes and assessments the grantee is hereby expressly
raw materials used in the manufacture of the cement. (I think ha kasi nga exempted" (Sec. 3).
diba the minerals composing it will still be subject to ad valorem tax on • Removal of Exemption: June 27, 1968, RA 5431 amended section 24 of
the basis of the value of the quarried minerals) the Tax Code by making liable for income tax all corporate taxpayers not
specifically exempt under paragraph (c) (1) of said section and section 27
CAGAYAN ELECTRIC V. CIR (Cualoping) of the Tax Code notwithstanding the "provisions of existing special or
[GR. No. 60126; September 25, 1985] general laws to the contrary". Thus, franchise companies were subjected
“Congress decides who gets exemptions and when they get them” to income tax in addition to franchise tax.
• Reenactment of taxexemption: August 4, 1969 franchise was amended
Recit-Ready: by RA 6020.
Facts: • The CIR in a demand letter dated February 15, 1973 required the
Cagayan Electric Power hold a legislative franchise, under which it was petitioner to pay deficiency income taxes for 1968-to 1971. The
subject to 3% tax in lieu of all other taxes. In 1968 RA 5431 Commissioner cancelled the assessments for 1970 and 1971 but insisted
ameneded the tax code and subjected franchise compaies to tax. on those for 1968 and 1969.
Then in 1969 Cagayan Electric’s franchise was specifically • The Tax Court, which on February 26, 1982 held the petitioner liable only
amended and effectively reenacted their previous tax exemption. for the income tax for the period from January 1 to August 3, 1969 or
The CIR assessed the company for tax deficiency and it is now before the passage of Republic Act No. 6020 which reiterated its tax
being contested. exemption.
Issue/s: Issue/s:
27
WON Cagayan Electric is liable to pay the tax? YES India airplanes outside the Philippines. On the basis of the said
transactions, the CIR held Air India liable for the payment of
Held/Ratio: P142,471.68 representing 2.5% income tax on its gross Philippine
o The Constitution provides that a franchise is subject to amendment, billings inclusive of the 50% surcharged for willful neglect to file a
alteration or repeal by the Congress when the public interest so requires return as provided in Section 72 of the NIRC.
o Section 1 of petitioner's franchise, RA 3247, provides that it is subject to
the provisions of the Constitution and to the terms and conditions Issue/s:
established in Act No. 3636 whose section 12 provides that the franchise 1) WON Air India is liable to pay the 50% surcharge imposed by
is subject to amendment, alteration or repeal by Congress. Section 72 of the NIRC –NO
o RA 5431, in amending section 24 of the Tax Code by subjecting to 2) WON Air India is liable to pay the income tax imposed upon it –
income tax all corporate taxpayers not expressly exempted therein and in YES
section 27 of the Code, had the effect of withdrawing petitioner's 3) WON Air India is liable to pay the other impositions imposed
exemption from income tax. upon it —YES
o The Tax Court acted correctly in holding that the exemption was restored
by the subsequent enactment on August 4, 1969 of Republic Act No. Held: Air India is ordered to pay the amount of P235,374.94 as
6020 which reenacted the said tax exemption. Hence, the petitioner is deficiency tax, inclusive of interest and surcharges.
liable only for the income tax for the period from January 1 to August 3, 1) NO. There is only a barren claim that the failure of Air India to file a
1969 when its tax exemption was modified by Republic Act No. 5431. return was fraudulent, without any evidence or justification for the
o However, it cannot be denied that the said 1969 assessment appears to same. The willful neglect to file the required tax return or the
be highly controversial. The Commissioner at the outset was not certain fraudulent intent to evade the payment of taxes, considering that
as to petitioner's income tax liability. It had reason not to pay income tax the same is accompanied by legal consequences, cannot be
because of the tax exemption in its franchise. For this reason, it should be presumed. Nonetheless, for failure to file a return, Air India is
liable only for tax proper and should not be held liable for the surcharge subjected to a 25% penalty pursuant to Section 729 of the Tax Code,
and interest. which amounts to P37, 101.95.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
CIR v. AIR INDIA and CTA (De Luis) 9
Sec. 72. Surcharges for failure to render returns and for rendering false and fraudulent
[G.R. No. 72443; January 29, 1988] returns.-In case of willful neglect to file the return or list required under this Title within the
time prescribed by law, or in case a false or fraudulent return or list is willfully made, the
“The willful neglect to file the required tax return or the fraudulent intent to
Commissioner of Internal Revenue shall add to the tax or to the deficiency tax, in case any
evade the payment of taxes, considering that the same is accompanied by payment has been made on the basis of such return before the discovery of the falsity or
legal consequences, cannot be presumed.” fraud, a surcharge of fifty per centum of the amount of such tax or deficiency tax. In case of
any failure to make and file a return or list within the time prescribed by law or by the
Commissioner or other internal revenue officer, not due to willful neglect, the Commissioner
Recit-Ready: of Internal Revenue shall add to the tax twenty-five per centum of its amount, except that,
Facts: Air India is an off-line international carrier organized under the when a return is voluntarily and without notice from the Commissioner or other officer filed
after such time, and it is shown that the failure to file it was due to a reasonable cause, no
laws of India. It is not engaged in air transportation in the such addition shall be made to the tax. The amount so added to any tax shall be collected
Philippines, however, PAL acts as its sales agent. Air India sells at the same time in the same manner and as part of the tax unless the tax has been paid
before the discovery of the neglect, falsity, or fraud, in which case the amount so added
airplane tickets through PAL and these tickets are serviced by Air
shall be collected in the same manner as the tax.
28
2) YES. On the basis of the doctrine pronounced in CIR v. British sources with the Philippines and in fact, the P2, 986, 156.00 was derived
Overseas Airways Corporation (BOAC), the revenue derived by Air exclusively from sources outside the Philippines.
India from the sales of airplane tickets through its agent PAL here in • (IMPOSITION OF PENALTIES RULING OF THE CTA) The CTA likewise
the Philippines, must be considered taxable income. Such income is held that the surcharge and interest imposed are improper because
subject to a 2.5% tax under the Tax Code. The total Philippine billings Section 72 of the Tax Code imposes the 50% surcharge in case of willful
of Air India amounts to P2,968,156.00 and 2.5% of this amounts to neglect to file a return or list required within the time prescribed by law, or
P74,203.90. in case of a willfully made false or fraudulent return. In Air India’s case, it
3) YES. Air India is liable to pay the following: (see held 3 for explanations cannot be charged with an intention to defraud the Government by
on each interest/surcharge imposed) willfully failing to file a return because it honestly and sincerely believed
a. 42% maximum interest on deficiency under Section 51 (d) that it is not liable for the tax sought to be imposed upon it. Citing Aznar
b. 60% maximum additional interest under Section 5 (e) (2) as v. Court of Tax Appeals, the CTA ruled that Willful failure to file an
amended by P.D. 1705 income tax return which justifies the imposition of the 50% surcharge, or
c. 10% additional surcharge on unpaid tax under Section 51 (e) what is commonly called the fraud penalty, requires that the failure to file
(2) as amended by P.D. 1705 a return was due to an intent to evade payment of tax legally due, in other
words an intention to defraud the Government of lawful revenue. Mere
Facts: failure to file a return is not in itself, standing alone, evidence of fraud.
• Air India is a foreign corporation organized under the laws of India. It is an • The CIR appealed to the Supreme Court.
off-line international carrier not engaged in the business of air
transportation in the Philippines. Air India is represented in the Philippines Issue/s:
by its general sales agent, Philippine Air Lines, Inc., (PAL) a corporate 1) WON Air India is liable to pay the 50% surcharge imposed by
entity duly organized under the laws of the Philippines. Air India sells Section 72 of the NIRC
airplane tickets in the Philippine through this agent. These tickets are —NO (Note: In the original case this issue was discussed next to the
serviced by Air India airplanes outside the Philippines. income tax issue)
• Air India’s total sales of airplane tickets transacted by PAL during the 2) WON Air India is liable to pay the income tax imposed upon it
fiscal year ending March 31, 1976 amounted to P2,968,156.00. On —YES (Note: First issue discussed by the Court, remember CIR v.
account of the same, the CIR held Air India liable for the payment of BOAC)
P142, 471.68 representing 2.5% income tax on its gross Philippine 3) WON Air India is liable to pay the other impositions imposed upon it
billings for the said fiscal year, inclusive of the 50% surcharge and —YES
interest for willful neglect to file a return as provided under Section 72 of
the NIRC. Held/Ratio: Air India is ordered to pay the amount of P235,374.94 as
• On, February 20, 1981, the Commissioner of Internal Revenue sought the deficiency tax, inclusive of interest and surcharges.
payment of the tax deficiency. (Fact mentioned at the end of the case.
Wow.) 1) NO. There is only a barren claim that the failure of Air India to file a
• (INCOME TAX RULING OF THE CTA) Air India appealed to the Court of return was fraudulent, without any evidence or justification for the
Tax Appeals, which ruled in favor of Air India. It held that Air India is not same. The willful neglect to file the required tax return or the
liable to pay the income tax because it did not derive any income from fraudulent intent to evade the payment of taxes, considering that
29
the same is accompanied by legal consequences, cannot be is subject to a 2.5% tax under the Tax Code. The total Philippine
presumed. Nonetheless, for failure to file a return, Air India is billings of Air India amounts to P2,968,156.00 and 2.5% of this
subjected to a 25% penalty pursuant to Section 7210 of the Tax amounts to P74,203.90.
Code, which amounts to P37, 101.95. o In CIR v. BOAC, the court ruled that the source of an income is the
o Going through the allegations of the CIR and the Memorandum property, activity or service that produced the income. It is sufficient
submitted by the Solicitor General (not quoted in the original case) on that the income is derived from activity within the Philippines. The sale
behalf of the CIR and on the basis of the same, the Court was not of tickets in the Philippines is the activity that produces the income.
convinced that Air India can be considered to have willfully neglected The situs of the source of income is the Philippines. The flow of wealth
to file the required tax return which warrants the imposition of the 50% proceeded from, and occurred within Philippine territory.
fraud penalty provided in Section 72. o The absence of flight operations to and from the Philippines is not
o In Aznar v. CTA it was held that, the fraud contemplated by law is determinative of the source of income or the situs of income taxation.
actual and not constructive. It must be intentional fraud, consisting of The test of taxability is the source and the source of income is that
deception willfully and deliberately done or resorted to in order to activity which produced the income.
induce another to give up some legal right. Negligence, whether slight 4) YES. Air India is liable to pay the following:
or gross, is not equivalent to the fraud with intent to give up some a. 42% maximum interest on deficiency under Section 51 (d)
legal right. Negligence, whether slight or gross, is not equivalent to the b. 60% maximum additional interest under Section 5 (e) (2) as
fraud with intent to evade the tax contemplated by the law. It must amended by P.D. 1705
amount to intentional wrongdoing with the sole object of avoiding the c. 10% additional surcharge on unpaid tax under Section 51
tax. (e) (2) as amended by P.D. 1705
o 42% maximum interest on deficiency under Section 51(d)
3) YES. On the basis of the doctrine pronounced in CIR v. British ! At the time the tax liability of the Air India accrued, Section
Overseas Airways Corporation (BOAC), the revenue derived by Air 51 (d) of the tax code, before it was amended by
India from the sales of airplane tickets through its agent PAL here in Presidential Decree No. 1705 12, prescribed an interest
the Philippines, must be considered taxable income. Such income rate of 14% per annum, provided that the maximum amount
that could be collected as interest on the tax deficiency will
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! not exceed the amount corresponding to a period of three
10
Sec. 72. Surcharges for failure to render returns and for rendering false and fraudulent
returns.-In case of willful neglect to file the return or list required under this Title within the years. Thus, the maximum interest rate then was 42% (14 x
time prescribed by law, or in case a false or fraudulent return or list is willfully made, the 3). This maximum interest rate is applicable to the Air India
Commissioner of Internal Revenue shall add to the tax or to the deficiency tax, in case any inasmuch as the period between March 31, 1976 (the end
payment has been made on the basis of such return before the discovery of the falsity or
fraud, a surcharge of fifty per centum of the amount of such tax or deficiency tax. In case of of the fiscal year in question) and February 20, 1981 (the
any failure to make and file a return or list within the time prescribed by law or by the time when the petitioner made the assessment in question)
Commissioner or other internal revenue officer, not due to willful neglect, the Commissioner
exceeds three years. P74,203.90 constitutes the tax
of Internal Revenue shall add to the tax twenty-five per centum of its amount, except that,
when a return is voluntarily and without notice from the Commissioner or other officer filed deficiency of the private respondent 42% of this amount is
after such time, and it is shown that the failure to file it was due to a reasonable cause, no P31,165.64.
such addition shall be made to the tax. The amount so added to any tax shall be collected
at the same time in the same manner and as part of the tax unless the tax has been paid
before the discovery of the neglect, falsity, or fraud, in which case the amount so added
shall be collected in the same manner as the tax.
30
o 60% maximum additional interest under Section 5 (e) (2) as o Under the aforementioned provisions of the tax code, the Air India
amended by P.D. 170511 became liable to pay the 60% additional interest provided in Section
o Section 51 (e) (2) imposes a 20% interest in addition to 51 (e) (2) and the 10% surcharge provided in Section 51 (e) (3) thirty
the interest provided in Section 51 (d). The additional days after February 20, 1981, the date when the Commissioner of
interest is to be computed upon the entire amount of the Internal Revenue sought the payment of the deficiency. More than
tax liability (previous interest included) which remains three years have passed since and yet the account remains unsettled.
unpaid. However, the same Section provides that the Thus, the additional interest and surcharge can be imposed on the
maximum amount that may be collected as interest private respondent as asserted by the petitioner.
cannot exceed the amount corresponding to a period of
three years. In this case, the maximum rate would be
60%. REVENUE REGULATIONS NO. 12-99 (Diploma)
o 10% additional surcharge on unpaid tax under Section 51 (e) (3)
as amended by P.D. 170512 RR 12-99 (From Go with slight changes in formatting)
o This 10% surcharge is imposed for the late payment of
the unpaid tax deficiency and/or unpaid interest SUBJECT: Implementing the Provisions of the National Internal Revenue
assessed in connection therewith, in addition to all other Code of 1997 Governing the Rules on Assessment of National Internal
charges. The additional surcharge is computed on the Revenue Taxes, Civil Penalties and Interest and the Extra-judicial Settlement
amount of tax unpaid, exclusive of all other impositions. of a Taxpayer's Criminal Violation of the Code Through Payment of a
The failure to pay the tax deficiency within the required Suggested Compromise Penalty
period of time upon demand is penalized by this
additional surcharge. Upon such failure to pay, the SECTION 1. Scope. Pursuant to the provisions of Section 244, in relation to
surcharge is automatically due; its imposition is Section 245 of the National Internal Revenue Code of 1997, these
mandatory. Regulations are hereby promulgated to implement the provisions of Sections
6, 7, 204, 228, 247, 248 and 249 on assessment of national internal
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! revenue taxes, fees and charges and to provide the rules governing the
11
(2) Deficiency.-Where a deficiency, or any interest assessed in connection therewith extra-judicial settlement of a taxpayer's criminal violation of the said
under paragraph (d) of this section, or any addition to the taxes provided for in Section
seventy-two of this Code is not paid in full within thirty days from the date of notice and
Code or any of its implementing Regulations through payment of a
demand from the Commissioner of Internal Revenue, there shall be collected upon the suggested compromise penalty.
unpaid amount as part of the tax, interest at the rate of twenty per centum per annum from
the date of such notice and demand until it is paid: Provided, That the maximum amount
that may be collected as interest on deficiency shall in no case exceed the amount SECTION 2. General Principles.
corresponding to a period of three years, the present provisions regarding prescription to 2.1 The surcharge and/or interest herein prescribed shall apply to all taxes,
the contrary notwithstanding. fees and charges imposed under the Code which shall be collected at the
12
(3) Surcharge.-If any amount of tax shown on the return is not paid in full on or
before the date prescribed for its payment under paragrah (a) of this Section, or any same time, in the same manner, and as part of the tax.
amount of deficiency, and any interest assessed in connection therewith, is not paid in full
within the period prescribed in the assessment notice and demand required under
2.2 In case the tax due from the taxpayer is paid on a partial or installment
paragraph (b) of this Section, there shall be collected in addition to the interest precribed
herein and in paragraph (d) above and as part of the tax a surcharge of ten per centum of basis, the interest on the deficiency tax or on the delinquency tax liability of
the amount of tax unpaid.
31
the taxpayer shall be imposed from due date of the tax until full payment least by registered mail, a Preliminary Assessment Notice (PAN)
thereof. The interest shall be computed based on the diminishing for the proposed assessment, showing in detail, the facts and the law,
balance of the tax, inclusive of interests. rules and regulations, or jurisprudence on which the proposed
assessment is based. If the taxpayer fails to respond within fifteen
SECTION 3. Due Process Requirement in the Issuance of a Deficiency (15) days from date of receipt of the PAN, he shall be considered in
Tax Assessment. default, in which case, a formal letter of demand and assessment
notice shall be caused to be issued by the said Office, calling for
3.1 Mode of procedures in the issuance of a deficiency tax payment of the taxpayer's deficiency tax liability, inclusive of the
assessment: applicable penalties.
3.1.1 Notice for informal conference. The Revenue Officer who
audited the taxpayer's records shall, among others, state in his report 3.1.3 Exceptions to Prior Notice of the Assessment. The notice
whether or not the taxpayer agrees with his findings that the taxpayer for informal conference and the preliminary assessment notice shall
is liable for deficiency tax or taxes. If the taxpayer is not amenable, not be required in any of the following cases, in which case, issuance
based on the said Officer's submitted report of investigation, the of the formal assessment notice for the payment of the taxpayer's
taxpayer shall be informed, in writing, by the Revenue District Office deficiency tax liability shall be sufficient:
or by the Special Investigation Division, as the case may be (in the (i) When the finding for any deficiency tax is the result of
case Revenue Regional Offices) or by the Chief of Division concerned mathematical error in the computation of the tax appearing on the
(in the case of the BIR National Office) of the discrepancy or face of the tax return filed by the taxpayer; or
discrepancies in the taxpayer's payment of his internal revenue taxes, (ii) When a discrepancy has been determined between the tax
for the purpose of "Informal Conference," in order to afford the withheld and the amount actually remitted by the withholding
taxpayer with an opportunity to present his side of the case. If the agent; or
taxpayer fails to respond within fifteen (15) days from date of receipt (iii) When a taxpayer who opted to claim a refund or tax credit of
of the notice for informal conference, he shall be considered in excess creditable withholding tax for a taxable period was determined
default, in which case, the Revenue District Officer or the Chief of the to have carried over and automatically applied the same amount
Special Investigation Division of the Revenue Regional Office, or the claimed against the estimated tax liabilities for the taxable quarter or
Chief of Division in the National Office, as the case may be, shall quarters of the succeeding taxable year; or
endorse the case with the least possible delay to the Assessment (iv) When the excise tax due on excisable articles has not
Division of the Revenue Regional Office or to the Commissioner or his been paid; or
duly authorized representative, as the case may be, for appropriate (v) When an article locally purchased or imported by an exempt
review and issuance of a deficiency tax assessment, if warranted. person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred to
3.1.2 Preliminary Assessment Notice (PAN). If after review and non-exempt persons.
evaluation by the Assessment Division or by the Commissioner or his
duly authorized representative, as the case may be, it is determined 3.1.4 Formal Letter of Demand and Assessment Notice. The
that there exists sufficient basis to assess the taxpayer for any formal letter of demand and assessment notice shall be issued by the
deficiency tax or taxes, the said Office shall issue to the taxpayer, at Commissioner or his duly authorized representative. The letter of
32
demand calling for payment of the taxpayer's deficiency tax or taxes shall be required to pay the corresponding deficiency tax or taxes
shall state the facts, the law, rules and regulations, or jurisprudence attributable thereto.
on which the assessment is based, otherwise, the formal letter of
demand and assessment notice shall be void. The same shall be The taxpayer shall submit the required documents in support of his
sent to the taxpayer only by registered mail or by personal delivery. If protest within sixty (60) days from date of filing of his letter of protest,
sent by personal delivery, the taxpayer or his duly authorized otherwise, the assessment shall become final, executory and
representative shall acknowledge receipt thereof in the duplicate copy demandable. The phrase "submit the required documents" includes
of the letter of demand, showing the following: (a) His name; (b) submission or presentation of the pertinent documents for scrutiny
signature; (c) designation and authority to act for and in behalf of the and evaluation by the Revenue Officer conducting the audit. The said
taxpayer, if acknowledged received by a person other than the Revenue Officer shall state this fact in his report of investigation.
taxpayer himself; and (d) date of receipt thereof.
If the taxpayer fails to file a valid protest against the formal letter of
3.1.5 Disputed Assessment. The taxpayer or his duly authorized demand and assessment notice within thirty (30) days from date of
representative may protest administratively against the aforesaid receipt thereof, the assessment shall become final, executory and
formal letter of demand and assessment notice within thirty (30) days demandable.
from date of receipt thereof. If there are several issues involved in the
formal letter of demand and assessment notice but the taxpayer only If the protest is denied, in whole or in part, by the Commissioner, the
disputes or protests against the validity of some of the issues raised, taxpayer may appeal to the Court of Tax Appeals within thirty (30)
the taxpayer shall be required to pay the deficiency tax or taxes days from date of receipt of the said decision, otherwise, the
attributable to the undisputed issues, in which case, a collection letter assessment shall become final, executory and demandable.
shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest. In general, if the protest is denied, in whole or in part, by the
No action shall be taken on the taxpayer's disputed issues until Commissioner or his duly authorized representative, the taxpayer may
the taxpayer has paid the deficiency tax or taxes attributable to appeal to the Court of Tax Appeals within thirty (30) days from date of
the said undisputed issues. The prescriptive period for assessment receipt of the said decision, otherwise, the assessment shall become
or collection of the tax or taxes attributable to the disputed issues final, executory and demandable: Provided, however, that if the
shall be suspended. taxpayer elevates his protest to the Commissioner within thirty (30)
days from date of receipt of the final decision of the Commissioner's
The taxpayer shall state the facts, the applicable law, rules and duly authorized representative, the latter's decision shall not be
regulations, or jurisprudence on which his protest is based, otherwise, considered final, executory and demandable, in which case, the
his protest shall be considered void and without force and effect. If protest shall be decided by the Commissioner.
there are several issues involved in the disputed assessment and the
taxpayer fails to state the facts, the applicable law, rules and If the Commissioner or his duly authorized representative fails to act
regulations, or jurisprudence in support of his protest against some of on the taxpayer's protest within one hundred eighty (180) days from
the several issues on which the assessment is based, the same shall date of submission, by the taxpayer, of the required documents in
be considered undisputed issue or issues, in which case, the taxpayer support of his protest, the taxpayer may appeal to the Court of Tax
33
Appeals within thirty (30) days from the lapse of the said 180-day return with an internal revenue officer other than those with whom the
period, otherwise, the assessment shall become final, executory and return is required to be filed; or
demandable. 4.1.3 Failure to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment; or
3.1.6 Administrative Decision on a Disputed Assessment. The 4.1.4 Failure to pay the full or part of the amount of tax shown on any
decision of the Commissioner or his duly authorized representative return required to be filed under the provisions of this Code or rules
shall (a) state the facts, the applicable law, rules and regulations, or and regulations, or the full amount of tax due for which no return is
jurisprudence on which such decision is based, otherwise, the required to be filed, on or before the date prescribed for its payment.
decision shall be void, in which case, the same shall not be
considered a decision on a disputed assessment; and (b) that the 4.2 Fifty Percent (50%) Surcharge:
same is his final decision. 4.2.1 In case of willful neglect to file the return within the period
prescribed by the Code, or in case a false or fraudulent return is
3.1.7 Constructive Service. If the notice to the taxpayer herein willfully made, the penalty to be imposed shall be fifty percent (50%)
required is served by registered mail, and no response is received of the tax or of the deficiency tax, in case any payment has been
from the taxpayer within the prescribed period from date of the made on the basis of such return before the discovery of the falsity or
posting thereof in the mail, the same shall be considered actually or fraud: Provided, That a substantial under declaration of taxable
constructively received by the taxpayer. If the same is personally sales, receipts or income, or a substantial overstatement of
served on the taxpayer or his duly authorized representative who, deductions, as determined by the Commissioner or his duly
however, refused to acknowledge receipt thereof, the same shall be authorized representative, shall constitute prima facie evidence of a
constructively served on the taxpayer. Constructive service thereof false or fraudulent return: Provided, further, That failure to report
shall be considered effected by leaving the same in the premises of sales, receipts or income in an amount exceeding thirty percent (30%)
the taxpayer and this fact of constructive service is attested to, of that declared per return, and a claim of deductions in an amount
witnessed and signed by at least two (2) revenue officers other than exceeding thirty percent (30%) of actual deductions, shall render the
the revenue officer who constructively served the same. The revenue taxpayer liable for substantial under declaration of sales, receipts or
officer who constructively served the same shall make a written report income or for overstatement of deductions, as mentioned herein:
of this matter which shall form part of the docket of this case. Provided, further, that the term "willful neglect to file the return within
the period prescribed by the Code" shall not apply in case the
SECTION 4. Civil Penalties. taxpayer, without notice from the Commissioner or his authorized
4.1 Twenty-Five Percent (25%) Surcharge. ` There shall be imposed, in representative, voluntarily files the said return, in which case, only
addition to the basic tax required to be paid, a penalty equivalent to twenty- 25% surcharge shall be imposed for late filing and late payment of the
five percent (25%) thereof, in any the following cases: tax in lieu of the above 50% surcharge. Conversely, the 50%
surcharge shall be imposed in case the taxpayer files the return only
4.1.1 Failure to file any return and pay the tax due thereon as after prior notice in writing from the Commissioner or his duly
required under the provisions of this Code or rules and regulations on authorized representative.
the date prescribed; or
4.1.2 Unless otherwise authorized by the Commissioner, filing a 4.2.2 Section 6 (A) of the Code provides that any tax return filed by a
34
taxpayer "may be modified, changed or amended" by the taxpayer

"within three (3) years from date of such filing" provided, however,
that "no notice for audit or investigation of such return, statement or
declaration has, in the meantime, been actually served upon the
taxpayer. "Thus, if upon investigation, it is determined that the
taxpayer's originally filed tax return is false or fraudulent, such
taxpayer shall remain liable to the 50% civil penalty regardless that
the taxpayer has filed his amended tax return, if the said amended tax
return, however, has been filed only after issuance of the Letter of
Authority for the investigation of the taxpayer's tax return or such
amendment has been made in the course of the said investigation.
SECTION 5. Mode of Procedures in Computing for the Tax and/or

Applicable Surcharge. Shown hereunder are illustrative cases for the
computation and assessment of the tax, inclusive of surcharge (if applicable)
Only one 25% surcharge shall be imposed for late filing of the return and late
and interest:
payment of the tax.
5.1 Late filing and late payment of the tax. ` Illustration: Income tax return
5.2 The tax return is filed on time but filed through an internal revenue
for the calendar year 1998 was due for filing on April 15, 1999 but the
officer other than with whom the return is required to be filed.
taxpayer voluntarily filed his tax return, without notice from the BIR, only on
Illustration: The taxpayer's 1998 income tax return is required to be filed
June 30, 1999. The tax due per return amounts to P100,000. In this case, the
through the authorized agent bank under the jurisdiction of RDO East Makati.
taxpayer shall be liable for delinquency penalties consisting of 25%
But, without prior authorization from the BIR, the taxpayer filed his tax return
surcharge, plus 20% interest per annum, computed from due date of the tax
and paid the tax through the authorized agent bank under the jurisdiction of
until date of payment, computed as follows:
RDO Davao City. Tax due and paid per return is P100,000.00.
35
5.3 Late filing and late payment due to taxpayer's willful neglect.
`Illustration: The taxpayer did not file his income tax return for the calendar
year 1997 which was due for filing on April 15, 1998. He was notified by the
BIR of his failure to file the tax return, for which reason, he filed his tax return
and paid the tax, only after the said notice, on June 30, 1999. The tax due
per return is P100,000.00.
Illustration No. 2: ABC CORPORATION filed its income tax return for
calendar year 1997 and paid on time its income tax shown thereunder,
amounting to P100,000. Said taxpayer was investigated. Upon verification of
its accounting records, it was disclosed that its deduction, from gross
income, of representation expenses in the amount of P200,000.00 did not
meet all the statutory requisites for deductibility. The corporation was duly
notified of the said discrepancy through a Preliminary Assessment Notice.
Based on the 35% income tax rate on corporations applicable in the year
1997, the income tax due after investigation amounts to P170,000.00. After
deduction of income tax paid per return filed, the basic deficiency income tax
amounts to P70,000, excluding penalties. Failing to protest on time against
5.4 Penalty or penalties for deficiency tax. ` As a rule, no surcharge is the preliminary assessment notice, a formal letter of demand and
imposed on deficiency tax and on the basic tax. However, if the amount due assessment notice was issued on May 31, 1999, requiring payment of the
inclusive of penalties is not paid on or before the due date stated on the assessment not later than June 30, 1999.
demand letter, the corresponding surcharge shall be imposed.
Illustration No. 1: Taxpayer filed on time his income tax return for calendar
year 1997 and paid P100,000.00 on April 15, 1998. Upon pre-audit of his
return, it was disclosed that he erroneously computed the tax due. The
correct amount of tax due is P120,000.00. The taxpayer is assessed for
deficiency income tax in a letter of demand and assessment notice issued on
June 30, 1999.
36
Illustration No. 3: XYZ CORPORATION filed its income tax return for penalties incident to late payment.
calendar year 1997 with a net taxable income of P500,000.00. At the
applicable income tax rate of 35%for the year 1997, its income tax amounted Illustration: Based on the above Illustration No. 3, Scenario 4, assuming that
to P175,000.00. However, upon investigation, it was disclosed that its the calendar year 1997 deficiency income tax assessment against XYZ
income tax return was false or fraudulent because it did not report a taxable CORPORATION, in the amount of P304,771.67, is not paid by June 30,
income amounting to another P500,000.00. On its net income of 1999, the deadline for payment of the assessment, and assuming further that
P1,000,000.00, per investigation, the income tax due is P350,000.00. this assessment has already become final and collectible. In this case, such
Deducting its payment per return filed, the deficiency, excluding penalties, corporation shall be considered late in payment of the said assessment.
amounted to P175,000.00. It was duly informed of this finding through a Assuming, further, that the corporation pays its tax assessment only by July
Preliminary Assessment Notice. Failing to protest on time against the 31, 1999, the civil penalties for late payment shall be computed as follows:
preliminary assessment notice, a formal letter of demand and assessment
notice was issued on May 31, 1999 calling for payment of the deficiency
income tax on or before June 30, 1999.
In this case, said corporation is liable for the civil penalties of 50% surcharge
for having filed a false or fraudulent return, plus 20% interest per annum on
the deficiency, computed as follows:
5.6 Computation of 20% interest per annum in case of partial or

installment payment of a tax liability.
Illustration No. 1: In case extended payment of the tax is duly authorized.
DEF CORPORATION, due to financial incapacity, requested that it be
allowed to pay its income tax liability per return for calendar year 1998, in the
amount of P1,000,000.00, in four (4) monthly installments, starting April 15,
5.5 Late payment of a deficiency tax assessed. In general, the deficiency 1999. Its request has been duly approved pursuant to Sec. 53 of the Tax
tax assessed shall be paid by the taxpayer within the time prescribed in the Code.
notice and demand, otherwise, such taxpayer shall be liable for the civil
37
In this case, no 25% surcharge shall be imposed for late payment of the tax
since its deadline for payment has been duly extended. However, 20%
interest per annum for the extended payment shall be imposed, computed
based on the diminishing balance of the "unpaid amount", pursuant to the
provisions of Section 249 (D) of the Code.
No 25% surcharge on extended payment shall be imposed provided,

however, that the taxpayer's request for extension of the period within which
to pay is made on or before the deadline prescribed for payment of the tax
due. Conversely, if such request is made after the deadline prescribed for
payment, the taxpayer shall already be treated late in payment, in which
case, the 25% surcharge shall be imposed, even if payment of the
delinquency be allowed in partial amortization.
Example:
Illustration No. 2: Computation of tax delinquency in case of partial payment

of the tax due without prior BIR authorization for extended payment.
Example: GHI CORPORATION did not file its final adjustment income tax
return for the calendar year 1998 which was due on April 15, 1999. The BIR
informed the corporation of its failure to file its said tax return and required
that it file the same, inclusive of the 25% surcharge and 20% interest per
38
annum penalties incident to the said omission. On May 15, 1999 it advised Section 6.6 hereof.
that its income tax due for the said year amounts to P1,000,000.00 but,
however, due to its adverse financial condition at the moment, it will be SECTION 6. Suggested Compromise Penalty in Extra-judicial
unable to pay the entire amount, inclusive of the delinquency penalties. Settlement of a Taxpayer's Criminal Violation. Section 204 of the Tax
Hence, on May 15, 1999, it made a partial payment of P400,000.00. Code of 1997 provides that "All criminal violations may be compromised
Assuming that the BIR demanded payment of the unpaid balance of its tax except: (a) those already filed in court, or (b) those involving fraud."
obligation payable by June 15, 1999, the unpaid balance of the corporation's This means that, in general, the taxpayer's criminal liability arising from his
delinquent income tax shall be computed as follows: violation of the pertinent provision of the Code may be settled extra-judicially
instead of the BIR instituting against the taxpayer a criminal action in Court.
A compromise in extra-judicial settlement of the taxpayer's criminal liability
for his violation is consensual in character, hence, may not be imposed on
the taxpayer without his consent. Hence, the BIR may only suggest
settlement of the taxpayer's liability through a compromise.
The extra-judicial settlement of the taxpayer's criminal liability and the

amount of the suggested compromise penalty shall conform with the
schedule of compromise penalties provided under Revenue Memorandum
Order No. 1-90 or as hereafter revised.
SECTION 7. Repealing Clause. Any revenue issuance which is

inconsistent herewith shall be considered repealed, amended, or modified
accordingly.
SECTION 8. Effectivity.
8.1 General Rule. In general, the provisions of these Regulations shall be

effective beginning January 1, 1998 pursuant to the provisions of Section 8
of R.A. No. 8424, otherwise known as the National Internal Revenue Code of
1997.
If the said taxpayer fails to pay the amount of P811,111.17 by June 15, 1999,
no further 25% surcharge for late payment of the tax shall be imposed. 8.2 Computation of Surcharge and Interest on Deficiency Tax Assessment.
Instead, only the 20% interest per annum shall be imposed against the Any deficiency tax assessment issued beginning January 1, 1998 shall be
taxpayer against the taxpayer, computed from due date thereof (i.e., June governed by the rules prescribed in these Regulations.
15, 1999) until paid. If said taxpayer pays the same on partial payment basis,
the 20% interest per annum shall be computed on the diminishing balance 8.3 Other Provisions. Any provision of these Regulations not otherwise
thereof, pursuant to the procedures in the preceding Illustration No. 1, specifically provided in the National Internal Revenue Code of 1997 shall
39
take effect fifteen (15) days after publication in any newspaper of general "Willful neglect to file the return within the
•
circulation. period prescribed by the Code" shall not
apply in case the taxpayer, without notice from
SUMMARY OF RR 12 – 99 PERTINENT TO OUR TOPIC OF IMPOSITION the Commissioner or his authorized
OF PENALTIES (Diploma) representative, voluntarily files the said
return, in which case, only 25% surcharge
The RR covers the assessment of national internal revenue taxes, fees and shall be imposed for late filing and late
charges and to provide the rules governing the extra-judicial settlement of payment of the tax in lieu of the above 50%
a taxpayer's criminal violation of the said Code or any of its implementing surcharge.
Regulations through payment of a suggested compromise penalty. ! False of fraudulent return willfully made
o PROVIDED
A. Applicability: ! A substantial under declaration of taxable sales,
• The surcharge and/or interest applies to all taxes, fees and charges receipts or income, or a substantial overstatement of
imposed under the Code which shall be collected at the same time, in deductions, as determined by the Commissioner or
the same manner, and as part of the tax. his duly authorized representative, shall constitute
• If such is paid on a partial or installment basis, the interest on the prima facie evidence of a false or fraudulent return
deficiency tax or on the delinquency tax liability of the taxpayer shall be • Failure to report sales, receipts or income in
imposed from due date of the tax until full payment thereof. an amount exceeding thirty percent (30%)
o The interest shall be computed based on the diminishing of that declared per return, and a claim of
balance of the tax, inclusive of interests. deductions in an amount exceeding thirty
percent (30%) of actual deductions, shall
B. Grounds for Civil Penalties: render the taxpayer liable for substantial under
• 25% Surcharge declaration.
o Failure to file any return and pay the tax due thereon on the
date prescribed by the rules and regulations • Amendments, Modification and Changes
o Filing a return with an internal revenue officer OTHER than o Must be made within 3 years from date of such filing
those with whom return is required to be filed o REQUISITE: No notice for audit or investigation of such return,
! Unless otherwise authorized by the Commissioner statement or declaration has, in the meantime, been actually
o Failure to pay the full or part of the amount of tax shown on served upon the taxpayer
any return required to be filed, or the full amount of tax due ! If it is determined AFTER investigation, that the
for which no return is required to be filed, on the date originally filed tax return is false or fraudulent, such
prescribed for its payment taxpayer shall remain liable to the 50% civil penalty.
• 50% Surcharge • Regardless that the taxpayer has filed his
o In case any payment has been made on the basis of such return amended tax return, if the said amended tax
before the discovery of the falsity or fraud due to: return, however, has been filed only after
! Willful neglect to file return within the period prescribed issuance of the Letter of Authority for the
40
investigation of the taxpayer's tax return or o (a) those already filed in court, or
such amendment has been made in the course o (b) those involving fraud.
of the said investigation. • In general, the taxpayer's criminal liability arising from his violation of the
C. Modes of Procedures in Computing for the Tax/Applicable Surcharge pertinent provision of the Code may be settled extra-judicially instead of
*Check RR for illustrations the BIR instituting against the taxpayer a criminal action in Court.
! Late filing and late payment of the tax but taxpayer voluntarily filed • A compromise in extra-judicial settlement of the taxpayer's criminal
return WITHOUT notice from BIR liability for his violation is consensual in character, hence, may not be
o Tax due + 25% surcharge on tax due + interest imposed on the taxpayer without his consent.
! Filed on time but filed through an internal revenue officer other than • Hence, the BIR may only suggest settlement of the taxpayer's liability
with whom the return is required to be filed through a compromise.
o Tax due + 25% surcharge on tax due LESS amount paid • The extra-judicial settlement of the taxpayer's criminal liability and the
! Late filing and late payment due to taxpayer's willful neglect amount of the suggested compromise penalty shall conform with the
o Tax due + 50% surcharge + interest schedule of compromise penalties provided under Revenue
! Penalties for deficiency tax Memorandum Order No. 1-90 or as hereafter revised.
o Tax due as of pre-aduit – amount paid + interest on
deficiency REVENUE REGULATION 18-2013 (Fajardo, K)
! Late payment of a deficiency tax assessed
o Total deficiency tax assessed + 25% surcharge + interest AMENDING CERTAIN SECTIONS OF REVENUE REGULATIONS NO. 12-
! 20% interest per annum in case of partial or installment payment of 99 RELATIVE TO THE DUE PROCESS REQUIREMENT IN THE
a tax liability ISSUANCE OF A DEFICIENCY TAX ASSESSMENT
o check illustration
o No 25% surcharge shall be imposed for late payment of the SECTION 1. Scope. — Pursuant to the provisions of Section 244, in relation
tax if its deadline for payment has been duly extended to Section 245 of the National Internal Revenue Code of 1997 (Tax Code), as
! BUT if such request for extension is made after the amended, these Regulations are hereby promulgated to amend provisions of
deadline prescribed for payment, the taxpayer shall Revenue Regulations (RR) No. 12-99.
already be treated late in payment, in which case,
the 25% surcharge shall be imposed SECTION 2. Amendment. — Section 3 of RR 12-99 is hereby amended by
o 20% interest per annum for the extended payment shall be deleting Section 3.1.1 thereof which provides for the preparation of a Notice
imposed, computed based on the diminishing balance of of Informal Conference, thereby renumbering other provisions thereof, and
the "unpaid amount", pursuant to the provisions of Section prescribing other provisions for the assessment of tax liabilities. Section 3 of
249 (D) of the Code. RR 12-99 shall now read as follows:
D. Compromise Penalty in Extra-Juidicla Settlement of Taxpayer’s Criminal “SECTION 3. Due Process Requirement in the Issuance of a Deficiency
Violation Tax Assessment. —
• Section 204 of the Tax Code of 1997 provides that: All criminal violations 3.1 Mode of procedure in the issuance of a deficiency tax
may be compromised except: assessment:
41
3.1.1 Preliminary Assessment Notice (PAN). — If after review and above-cited cases, a FLD/FAN shall be issued outright.
evaluation by the Commissioner or his duly authorized representative, as
the case may be, it is determined that there exists sufficient basis to 3.1.3 Formal Letter of Demand and Final Assessment Notice
assess the taxpayer for any deficiency tax or taxes, the said Office shall (FLD/FAN). — The Formal Letter of Demand and Final Assessment
issue to the taxpayer a Preliminary Assessment Notice (PAN) for the Notice (FLD/FAN) shall be issued by the Commissioner or his duly
proposed assessment. It shall show in detail the facts and the law, rules authorized representative. The FLD/FAN calling for payment of the
and regulations, or jurisprudence on which the proposed assessment is taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
based (see illustration in ANNEX “A” hereof). If the taxpayer fails to regulations, or jurisprudence on which the assessment is based;
respond within fifteen (15) days from date of receipt of the PAN, he shall otherwise, the assessment shall be void (see illustration in ANNEX “B”
be considered in default, in which case, a Formal Letter of Demand and hereof).
Final Assessment Notice (FLD/FAN) shall be issued calling for payment of
the taxpayer's deficiency tax liability, inclusive of the applicable penalties. 3.1.4 Disputed Assessment. — The taxpayer or its authorized
representative or tax agent may protest administratively against the
If the taxpayer, within fifteen (15) days from date of receipt of the PAN, aforesaid FLD/FAN within thirty (30) days from date of receipt thereof.
responds that he/it disagrees with the findings of deficiency tax or taxes, The taxpayer protesting an assessment may file a written request for
an FLD/FAN shall be issued within fifteen (15) days from filing/submission reconsideration or reinvestigation defined as follows:
of the taxpayer’s response, calling for payment of the taxpayer's (ii) Request for reconsideration — refers to a plea of re-evaluation of an
deficiency tax liability, inclusive of the applicable penalties. assessment on the basis of existing records without need of additional
evidence. It may involve both a question of fact or of law or both. (ii)
3.1.2 Exceptions to Prior Notice of the Assessment. — Pursuant to Request for reinvestigation — refers to a plea of re-evaluation of an
Section 228 of the Tax Code, as amended, a PAN shall not be required in assessment on the basis of newly discovered or additional evidence that
any of the following cases: a taxpayer intends to present in the reinvestigation. It may also involve a
(i) When the finding for any deficiency tax is the result of mathematical question of fact or of law or both.
error in the computation of the tax appearing on the face of the tax return
filed by the taxpayer; or The taxpayer shall state in his protest
(ii) When a discrepancy has been determined between the tax withheld (i) the nature of protest whether reconsideration or reinvestigation,
and the amount actually remitted by the withholding agent; or specifying newly discovered or additional evidence he intends to
(iii) When a taxpayer who opted to claim a refund or tax credit of excess present if it is a request for reinvestigation,
creditable withholding tax for a taxable period was determined to have (ii) date of the assessment notice, and
carried over and automatically applied the same amount claimed against (iii) the applicable law, rules and regulations, or jurisprudence on which
the estimated tax liabilities for the taxable quarter or quarters of the his protest is based, otherwise, his protest shall be considered
succeeding taxable year; or void and without force and effect.
(iv)When the excise tax due on excisable articles has not been paid; or (v)
When an article locally purchased or imported by an exempt person, such If there are several issues involved in the FLD/FAN but the taxpayer only
as, but not limited to, vehicles, capital equipment, machineries and spare disputes or protests against the validity of some of the issues raised, the
parts, has been sold, traded or transferred to non-exempt persons. In the assessment attributable to the undisputed issue or issues shall become
42
final, executory and demandable; and the taxpayer shall be required to If the protest is denied, in whole or in part, by the Commissioner’s duly
pay the deficiency tax or taxes attributable thereto, in which case, a authorized representative, the taxpayer may either: (i) appeal to the Court
collection letter shall be issued to the taxpayer calling for payment of the of Tax Appeals (CTA) within thirty (30) days from date of receipt of the
said deficiency tax or taxes, inclusive of the applicable surcharge and/or said decision; or (ii) elevate his protest through request for
interest. reconsideration to the Commissioner within thirty (30) days from date of
receipt of the said decision. No request for reinvestigation shall be
If there are several issues involved in the disputed assessment and the allowed in administrative appeal and only issues raised in the decision of
taxpayer fails to state the facts, the applicable law, rules and regulations, the Commissioner’s duly authorized representative shall be entertained
or jurisprudence in support of his protest against some of the several by the Commissioner.
issues on which the assessment is based, the same shall be considered
undisputed issue or issues, in which case, the assessment attributable If the protest is not acted upon by the Commissioner’s duly authorized
thereto shall become final, executory and demandable; and the taxpayer representative within one hundred eighty (180) days counted from the
shall be required to pay the deficiency tax or taxes attributable thereto date of filing of the protest in case of a request reconsideration; or from
and a collection letter shall be issued to the taxpayer calling for payment date of submission by the taxpayer of the required documents within sixty
of the said deficiency tax, inclusive of the applicable surcharge and/or (60) days from the date of filing of the protest in case of a request for
interest. reinvestigation, the taxpayer may either:
(i) appeal to the CTA within thirty (30) days after the expiration of the
For requests for reinvestigation, the taxpayer shall submit all relevant one hundred eighty (180)-day period; or
supporting documents in support of his protest within sixty (60) days from (ii) await the final decision of the Commissioner’s duly authorized
date of filing of his letter of protest, otherwise, the assessment shall representative on the disputed assessment.
become final. The term “relevant supporting documents” refer to those
documents necessary to support the legal and factual bases in disputing If the protest or administrative appeal, as the case may be, is denied, in
a tax assessment as determined by the taxpayer. The sixty (60)-day whole or in part, by the Commissioner, the taxpayer may appeal to the
period for the submission of all relevant supporting documents shall not CTA within thirty (30) days from date of receipt of the said decision.
apply to requests for reconsideration. Furthermore, the term “the Otherwise, the assessment shall become final, executory and
assessment shall become final” shall mean the taxpayer is barred from demandable. A motion for reconsideration of the Commissioner’s denial
disputing the correctness of the issued assessment by introduction of of the protest or administrative appeal, as the case may be, shall not toll
newly discovered or additional evidence, and the FDDA shall the thirty (30)-day period to appeal to the CTA.
consequently be denied.
If the protest or administrative appeal is not acted upon by the
If the taxpayer fails to file a valid protest against the FLD/FAN within thirty Commissioner within one hundred eighty (180) days counted from the
(30) days from date of receipt thereof, the assessment shall become final, date of filing of the protest, the taxpayer may either: (i) appeal to the CTA
executory and demandable. No request for reconsideration or within thirty (30) days from after the expiration of the one hundred eighty
reinvestigation shall be granted on tax assessments that have already (180)-day period; or (ii) await the final decision of the Commissioner on
become final, executory and demandable. the disputed assessment and appeal such final decision to the CTA within
thirty (30) days after the receipt of a copy of such decision.
43
his clerk or with a person having charge thereof. If the known address is
It must be emphasized, however, that in case of inaction on protested the place of residence, substituted service can be made by leaving the
assessment within the 180-day period, the option of the taxpayer to copy with a person of legal age residing therein. If no person is found in
either: the party’s registered or known address, the revenue officers concerned
(1) file a petition for review with the CTA within 30 days after the shall bring a barangay official and two (2) disinterested witnesses to the
expiration of the 180-day period; or address so that they may personally observe and attest to such absence.
(2) await the final decision of the Commissioner or his duly authorized The notice shall then be given to said barangay official. Such facts shall
representative on the disputed assessment and appeal such final be contained in the bottom portion of the notice, as well as the names,
decision to the CTA within 30 days after the receipt of a copy of such official position and signatures of the witnesses.
decision, are mutually exclusive and the resort to one bars the application
of the other. Should the party be found at his registered or known address or any other
place but refuse to receive the notice, the revenue officers concerned
3.1.5 Final Decision on a Disputed Assessment (FDDA). — The shall bring a barangay official and two (2) disinterested witnesses in the
decision of the Commissioner or his duly authorized representative shall presence of the party so that they may personally observe and attest to
state the such act of refusal. The notice shall then be given to said barangay
(i) facts, the applicable law, rules and regulations, or jurisprudence on official. Such facts shall be contained in the bottom portion of the notice,
which such decision is based, otherwise, the decision shall be void (see as well as the names, official position and signatures of the witnesses.
illustration in ANNEX “C” hereof), and “Disinterested witnesses” refers to persons of legal age other than
(ii) that the same is his final decision. employees of the Bureau of Internal Revenue.
3.1.6 Modes of Service. — The notice (PAN/FLD/FAN/FDDA) to the (iii) Service by mail is done by sending a copy of the notice by registered
taxpayer herein required may be served by the Commissioner or his duly mail to the registered or known address of the party with instruction to the
authorized representative through the following modes: Postmaster to return the mail to the sender after ten (10) days, if
undelivered. A copy of the notice may also be sent through reputable
(i) The notice shall be served through personal service by delivering professional courier service. If no registry or reputable professional
personally a copy thereof to the party at his registered or known address courier service is available in the locality of the addressee, service may
or wherever he may be found. A known address shall mean a place other be done by ordinary mail. The server shall accomplish the bottom portion
than the registered address where business activities of the party are of the notice. He shall also make a written report under oath before a
conducted or his place of residence. In case personal service is not Notary Public or any person authorized to administer oath under Section
practicable, the notice shall be served by substituted service or by mail. 14 of the NIRC, as amended, setting forth the manner, place and date of
service, the name of the person/barangay official/professional courier
(ii) Substituted service can be resorted to when the party is not present at service company who received the same and such other relevant
the registered or known address under the following circumstances: The information. The registry receipt issued by the post office or the official
notice may be left at the party’s registered address, with his clerk or with a receipt issued by the professional courier company containing sufficiently
person having charge thereof. If the known address is a place where identifiable details of the transaction shall constitute sufficient proof of
business activities of the party are conducted, the notice may be left with mailing and shall be attached to the case docket.
44
Service to the tax agent/practitioner, who is appointed by the taxpayer

under circumstances prescribed in the pertinent regulations on
accreditation of tax agents, shall be deemed service to the taxpayer.”
SECTION 3. Amendment. — Section 5 of RR 12-99 is hereby amended by

modifying Section 5.5 thereof which provides for modes of procedures in
computing for the tax and/or applicable surcharge. In cases of late payment
of a deficiency tax assessed, the taxpayer shall be liable for the delinquency
interest provided under Section 249 (C)(3) of the 1997 National Internal
Revenue Code, as amended. Section 5.5 of RR 12-99 shall now read as
follows:
“5.5 Late payment of a deficiency tax assessed. – In general, the

deficiency tax assessed shall be paid by the taxpayer within the time
prescribed in the notice and demand, otherwise, such taxpayer shall be liable
for the delinquency interest incident to late payment.
Illustration 1: Based on the above Illustration No. 3, Scenario 4, assuming

that the calendar year 1997 deficiency income tax assessment against XYZ
CORPORATION, in the amount of P304,771.67, is not paid by June 30,
1999, the deadline for payment of the assessment, and assuming further that
this assessment has already become final and collectible. In this case, such
corporation shall be considered late in payment of the said assessment.
Assuming, further, that the corporation pays its tax assessment only by July
31, 1999, the delinquency interest for late payment shall be computed as
follows: Illustration 2: Based on the immediately preceding Illustration, assuming that
the calendar year 1997 deficiency income tax assessment against XYZ
CORPORATION, in the amount of P304,771.67, is not paid by June 30,
1999, the deadline for payment of the assessment but is instead timely
protested. Assuming further that after exhaustion of all administrative
remedies, the assessment was upheld and became final, executory and
demandable on July 1, 2000. However, payment was made by the taxpayer
only on June 30, 2002. In this case, such corporation shall be considered
late in payment of the said assessment. The civil penalties for late payment
shall be computed as follows:
45
SECTION 4. Repealing Clause. — Any rules and regulations or parts thereof

inconsistent with the provisions of these Regulations are hereby repealed,
amended, or modified accordingly.
SECTION 5. Effectivity. —The provisions of these Regulations shall take
effect after fifteen (15) days following publication in any newspaper of
general circulation.
Illustration 3: Assuming that in calendar year 1997, XYZ CORPORATION
filed a false or fraudulent return and was assessed of deficiency basic
income tax amounting to Php100,000. Assuming further that XYZ
REVENUE REGULATION 19 – 2007 (GO)
CORPORATION timely protested the said assessment. After exhaustion of
Aug. 10, 2007
all administrative remedies, the assessment was upheld and became final,
executory and demandable on April 15, 2001. However, payment was made
SUBJECT: The Consolidated Revised Schedule of Compromise Penalties
by the taxpayer only on April 15, 2003. In this case, such corporation shall be
for Violations of the National Internal Revenue Code
considered late in payment of the said assessment. The civil penalties for
late payment shall be computed as follows:
TO: All Internal Revenue Officers and Others Concerned.
46
I. OBJECTIVES: 2. Cases involving fraud shall be referred to the concerned Division having
This Order is issued: jurisdiction over the case, for the institution of the corresponding
criminal action.
A. To update and align the Schedule of Compromise Penalties with that of
the penalties provided for in the National Internal Revenue Code of 1997 3. In no case shall the compromise penalty differ in amount from those
(NIRC) and to delete from the coverage thereof certain acts commonly specified in the aforementioned Schedule, except when duly approved
resorted to by taxpayers as means of tax evasion; by the Commissioner or concerned Deputy Commissioner, or in
proper cases, by the Regional Directors.
B. To reflect the changes in the Schedule which include the Code Section,
Nature of Violation, Criminal Penalty Imposed under the NIRC and 4. Although all amounts of compromise penalties incident to violations shall
Amount of Compromise Penalty; be itemized in the assessment notice and/or demand letter, the same
should not form part of assessment notice that reflects deficiency basic
C. To adopt and implement a uniform application of the various compromise tax, surcharge and interest but should appear in a separate
penalties for criminal violations of the NIRC; and assessment notice/demand letter as the amount suggested to the
taxpayer to pay in lieu of criminal prosecution. If paid, the
D. To provide supplemental guidelines on compromise penalties for resident compromise penalties shall be collected and accounted for under the
taxpayers and non-residents as well. usual procedures, as internal revenue collection.
II. POLICIES: 5. Since compromise penalties are only amounts suggested in settlement
In order to attain these objectives, the following are hereby prescribed for the of criminal liability, and may not therefore be imposed or exacted on the
information and strict compliance by all concerned: taxpayer, the violation shall be referred to the appropriate office for
criminal action in the event that a taxpayer refuses to pay the suggested
1. In all cases of criminal violations of the NIRC, not involving the compromise penalty
commission of fraudulent act, it is directed that henceforth, compromise
penalties to be imposed shall follow strictly the amounts in the attached 6. The schedule of compromise penalties herein prescribed shall not
"Revised Schedule of Compromise Penalties", marked as Annex "A" and prevent the Commissioner or his duly authorized representative from
made an integral part hereof. accepting a compromise amount higher than what is provided hereof. A
2. Certain acts/violations which are commonly resorted to by taxpayers as compromise offer lower than the prescribed amount may be accepted
means of tax evasion are deleted from the coverage thereof for having met after approval by the Commissioner of Internal Revenue or the
the requirements of the definition of fraudulent acts. concerned Deputy Commissioner/ Assistant Commissioner/ Regional
Director.
III. GUIDELINES AND INSTRUCTIONS:
1. The internal revenue officers concerned shall apply the Revised 7. In cases were Apprehension Slips were issued, all offers of
Schedule of Compromise Penalties embodied in Annex "A" to ensure compromise shall be made by accomplishing the form as shown in
uniformity of action. Annex "B".
47
IV. REPEALING CLAUSE: ANNEX A

All other orders which are inconsistent herewith are hereby repealed or
revoked accordingly.
V. EFFECTIVITY:
This Order shall take effect immediately.
48
49
50
51
52
ANNEX B
53
CRIMINAL ACTION AND OTHER PENALTIES thousand (P30,000) but not more than One hundred thousand pesos
(P100,000) and suffer imprisonment of not less than two (2) years but not
SEC. 253. General Provisions. – more than four (4) years: Provided, That the conviction or acquittal
(a) Any person convicted of a crime penalized by this Code shall, in obtained under this Section shall not be a bar to the filing of a civil suit for
addition to being liable for the payment of the tax, be subject to the the collection of taxes.
penalties imposed herein: Provided, That payment of the tax due after
apprehension shall not constitute a valid defense in any prosecution for SEC. 255. Failure to File Return, Supply Correct and Accurate
violation of any provision of this Code or in any action for the forfeiture of Information, Pay Tax Withhold and Remit Tax and Refund Excess
untaxed articles. Taxes Withheld on Compensation. - Any person required under this
(b) Any person who willfully aids or abets in the commission of a crime Code or by rules and regulations promulgated thereunder to pay any tax
penalized herein or who causes the commission of any such offense by make a return, keep any record, or supply correct the accurate
another shall be liable in the same manner as the principal. information, who willfully fails to pay such tax, make such return, keep
(c) If the offender is not a citizen of the Philippines, he shall be deported such record, or supply correct and accurate information, or withhold or
immediately after serving the sentence without further proceedings for remit taxes withheld, or refund excess taxes withheld on compensation, at
deportation. If he is a public officer or employee, the maximum penalty the time or times required by law or rules and regulations shall, in addition
prescribed for the offense shall be imposed and, in addition, he shall be to other penalties provided by law, upon conviction thereof, be punished
dismissed from the public service and perpetually disqualified from holding by a fine of not less than Ten thousand pesos (P10,000) and suffer
any public office, to vote and to participate in any election. If the offender imprisonment of not less than one (1) year but not more than ten (10)
is a Certified Public Accountant, his certificate as a Certified Public years.
Accountant shall, upon conviction, be automatically revoked or cancelled. Any person who attempts to make it appear for any reason that he or
(d) In the case of associations, partnerships or corporations, the penalty another has in fact filed a return or statement, or actually files a return or
shall be imposed on the partner, president, general manager, branch statement and subsequently withdraws the same return or statement after
manager, treasurer, officer-in-charge, and the employees responsible for securing the official receiving seal or stamp of receipt of internal revenue
the violation. office wherein the same was actually filed shall, upon conviction therefore,
(e) The fines to be imposed for any violation of the provisions of this Code be punished by a fine of not less than Ten thousand pesos (P10,000) but
shall not be lower than the fines imposed herein or twice the amount of not more than Twenty thousand pesos (P20,000) and suffer imprisonment
taxes, interest and surcharges due from the taxpayer, whichever is higher. of not less than one (1) year but not more than three (3) years.
SEC. 254. Attempt to Evade or Defeat Tax. - Any person who willfully SEC. 256. Penal Liability of Corporations. - Any corporation,
attempts in any manner to evade or defeat any tax imposed under this association or general co-partnership liable for any of the acts or
Code or the payment thereof shall, in addition to other penalties provided omissions penalized under this Code, in addition to the penalties imposed
by law, upon conviction thereof, be punished by a fine not less than Thirty
54
herein upon the responsible corporate officers, partners, or employees or rules and regulations promulgated thereunder; or
shall, upon conviction for each act or omission, be punished by a fine of (4) Knowingly makes any false entry or enters any false
not less than Fifty thousand pesos (P50,000) but not more than One or fictitious name in the books of accounts or record
hundred thousand pesos (P100,000). mentioned in the preceding paragraphs; or
(5) Keeps two (2) or more sets of such records or books
SEC. 257. Penal Liability for Making False Entries, Records or of accounts; or
Reports, or Using Falsified or Fake Accountable Forms. -  (6) In any way commits an act or omission, in violation of
(A) Any financial officer or independent Certified Public the provisions of this Section; or
Accountant engaged to examine and audit books of accounts of (7) Fails to keep the books of accounts or records
taxpayers under Section 232 (A) and any person under his mentioned in Section 232 in a native language, English
direction who: or Spanish, or to make a true and complete translation as
(1) Willfully falsifies any report or statement bearing on required in Section 234 of this Code, or whose books of
any examination or audit, or renders a report, including accounts or records kept in a native language, English or
exhibits, statements, schedules or other forms of Spanish, and found to be at material variance with books
accountancy work which has not been verified by him or records kept by him in another language; or
personally or under his supervision or by a member of (8) Willfully attempts in any manner to evade or defeat
his firm or by a member of his staff in accordance with any tax imposed under this Code, or knowingly uses fake
sound auditing practices; or or falsified revenue official receipts, Letters of Authority,
(2) Certifies financial statements of a business enterprise certificates authorizing registration, Tax Credit
containing an essential misstatement of facts or omission Certificates, Tax Debit Memoranda and other
in respect of the transactions, taxable income, deduction accountable forms shall, upon conviction for each act or
and exemption of his client; or omission, be punished by a fine not less than Fifty
(B) Any person who: thousand pesos (P50,000) but not more than One
(1) Not being an independent Certified Public Accountant hundred pesos (P100,000) and suffer imprisonment of
according to Section 232(B) or a financial officer, not less than two (2) years but not more than six (6)
examines and audits books of accounts of taxpayers; or years.
(2) Offers to sign and certify financial statements without
audit; or If the offender is a Certified Public Accountant, his certificate as a Certified
(3) Offers any taxpayer the use of accounting Public Accountant shall be automatically revoked or cancelled upon
bookkeeping records for internal revenue purposes not in conviction.
conformity with the requirements prescribed in this Code In the case of foreigners, conviction under this Code shall result in his
55
immediate deportation after serving sentence, without further proceedings cigarettes, who has been found guilty under this Section, shall, upon
for deportation. conviction for each act or omission, be punished by a fine of not less than
Twenty thousand pesos (P20,000) but not more than One hundred
SEC. 258. Unlawful Pursuit of Business. - Any person who carries on thousand pesos (P100,000) and suffer imprisonment for a term of not less
any business for which an annual registration fee is imposed without than six (6) years and one (1) day but not more than twelve (12) years.
paying the tax as required by law shall, upon conviction for each act or
omission, be punished by a fine of not less than Five thousand pesos SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who for
(P5,000) but not more than Twenty thousand pesos (P20,000) and suffer the purpose of manufacturing any beverage, uses denatured alcohol or
imprisonment of not less than six (6) months but not more than two (2) alcohol specially denatured to be used for motive power or withdrawn
years: Provided, That in the case of a person engaged in the business of under bond for industrial uses or alcohol knowingly misrepresented to be
distilling, rectifying, repacking, compounding or manufacturing any article denatured to be
subject to excise tax, he shall, upon conviction for each act or omission, unfit for oral intake or who knowingly sells or offers for sale any beverage
be punished by a fine of not less than Thirty thousand pesos (P30,000) made in whole or in part from such alcohol or who uses such alcohol for
but not more than Fifty thousand pesos (P50,000) and suffer the manufacture of liquid medicinal preparations taken internally, or
imprisonment of not less than two (2) years but not more than four (4) knowingly sells or offers for sale such preparations containing as an
years. ingredient such alcohol, shall upon conviction for each act or omission be
punished by a fine of not less than Twenty thousand pesos (P20,000) but
SEC. 259. Illegal Collection of Foreign Payments. - Any person who not more than One hundred thousand pesos (P100,000) and suffer
knowingly undertakes the collection of foreign payments as provided imprisonment for a term of not less than six (6) years and one (1) day but
under Section 67 of this Code without having obtained a license therefor, not more than twelve (12) years.
or without complying with its implementing rules and regulations, shall,
upon conviction for each act or omission, be punished by a fine of not less Any person who shall unlawfully recover or attempt to recover by
than Twenty thousand pesos (P20, 000) but not more than Fifty thousand distillation or other process any denatured alcohol or who knowingly sells
pesos (P50, 000) and suffer imprisonment of not less than one (1) year or offers for sale, conceals or otherwise disposes of alcohol so recovered
but not more than two (2) years. or redistilled shall be subject to the same penalties imposed under this
Section.
SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or
Rolls, Etc. - It shall be unlawful for any person to have in his possession SEC. 262. Shipment or Removal of Liquor or Tobacco Products
cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter under False Name or Brand or as an Imitation of any Existing or
tips, without the corresponding authority therefor issued by the Otherwise Known Product Name or Brand. - Any person who ships,
Commissioner. Any person, importer, manufacturer of cigar and transports or removes spirituous, compounded or fermented liquors, wines
56
or any manufactured products of tobacco under any(sic) other than the more than Sixty thousand pesos (P60,000) and suffer
proper name or brand known to the trade as designating the kind and imprisonment of not less than four (4) years but not more than six
quality of the contents of the cask, bottle or package containing the same (6) years, if the appraised value, to be determined in the manner
or as an imitation of any existing or otherwise known product name or prescribed in the Tariff and Customs Code, including duties and
brand or causes such act to be done, shall, upon conviction for each act or taxes of the articles is more than Fifty thousand pesos (P50,000)
omission, be punished by a fine of not less than Twenty thousand pesos but does not exceed One hundred fifty thousand pesos
(P20,000) but not more than One hundred thousand pesos (P100,000) (P150,000); or
and suffer imprisonment of not less than six (6) years and one (1) day but (d) A fine of not less than Fifty thousand pesos (P50,000) but not
not more than twelve (12) years. more than One hundred thousand pesos (P100, 000) and suffer
imprisonment of not less than ten (10) years but not more than
SEC. 263. Unlawful Possession or Removal of Articles Subject to twelve (12) years, if the appraised value, to be determined in the
Excise Tax without Payment of the Tax. - Any person who owns and/or manner prescribed in the Tariff and Customs Code, including
is found in possession of imported articles subject to excise tax, the tax on duties and taxes, of the articles exceeds One hundred fifty
which has not been paid in accordance with law, or any person who owns thousand pesos (P150,000).
and/or is found in possession of imported tax-exempt articles other than
those to whom they are legally issued shall be punished by: Any person who is found in possession of locally manufactured
(a) A fine of not less than One thousand pesos (P1,000) nor more articles subject to excise tax, the tax on which has not been paid
than Two thousand pesos (P2,000) and suffer imprisonment of in accordance with law, or any person who is found in possession
not less than sixty (60) days but not more than one hundred (100) of such articles which are exempt from excise tax other than
days, if the appraised value, to be determined in the manner those to whom the same is lawfully issued shall be punished with
prescribed in the Tariff and Customs Code, including duties and a fine of not less than (10) times the amount of excise tax due on
taxes, of the articles does not exceed One thousand pesos the articles found but not less than Five hundred pesos (P500)
(P1,000). and suffer imprisonment of not less than two (2) years but not
(b) A fine of not less than Ten thousand pesos (P10,000) but not more than four (4) years.
more than Twenty thousand pesos (P20,000) and suffer
imprisonment of not less than two (2) years but not more than Any manufacturer, owner or person in charge of any article
four (4) years, if the appraised value, to be determined in the subject to excise tax who removes or allows or causes the
manner prescribed in the Tariff and Customs Code, including unlawful removal of any such articles from the place of production
duties and taxes, of the articles exceeds One thousand pesos or bonded warehouse, upon which the excise tax has not been
(P1,000) but does not exceed Fifty thousand pesos (P50,000); paid at the time and in the manner required, and any person who
(c) A fine of not less than Thirty thousand pesos (P30,000) but not knowingly aids or abets in the removal of such articles as
57
aforesaid, or conceals the same after illegal removal shall, for the style, Taxpayer Identification Number, and business
first offense, be punished with a fine of not less than ten (10) address of the person or entity.
times the amount of excise tax due on the articles but not less
than One thousand pesos (P1,000) and suffer imprisonment of SEC. 265. Offenses Relating to Stamps. - Any person who commits any
not less than one (1) year but not more than two (2) years. of the acts enumerated hereunder shall, upon conviction thereof, be
punished by a fine of not less than Twenty thousand pesos (P20,000) but
The mere unexplained possession of articles subject to excise tax, the tax not more than Fifty thousand pesos (P50,000) and suffer imprisonment of
on which has not been paid in accordance with law, shall be punishable not less than four (4) years but not more than eight (8) years:
under this Section. (a) Making, importing, selling, using or possessing without
express authority from the Commissioner, any die for printing or
Sec. 264. Failure or refusal to Issue Receipts or Sales or Commercial making stamps, labels, tags or playing cards;
Invoices, Violations related to the Printing of such Receipts or (b) Erasing the cancellation marks of any stamp previously used,
Invoices and Other Violations. - or altering the written figures or letters or cancellation marks on
(a) Any person who, being required under Section 237 to issue internal revenue stamps;
receipts or sales or commercial invoices, fails or refuses to issue (c) Possessing false, counterfeit, restored or altered stamps,
such receipts of invoices, issues receipts or invoices that do not labels or tags or causing the commission of any such offense by
truly reflect and/or contain all the information required to be another;
shown therein, or uses multiple or double receipts or invoices, (d) Selling or offering for sale any box or package containing
shall, upon conviction for each act or omission, be punished by a articles subject to excise tax with false, spurious or counterfeit
fine of not less than One thousand pesos (P1,000) but not more stamps or labels or selling from any such fraudulent box, package
than Fifty thousand pesos (P50,000) and suffer imprisonment of or container as aforementioned; or
not less than two (2) years but not more than four (4) years. (e) Giving away or accepting from another, or selling, buying or
(b) Any person who commits any of the acts enumerated using containers on which the stamps are not completely
hereunder shall be penalized in the same manner and to the destroyed.
same extent as provided for in this Section:
(1) Printing of receipts or sales or commercial invoices Sec. 266. Failure to Obey Summons. - Any person who, being duly
without authority from the Bureau of Internal Revenue; or summoned to appear to testify, or to appear and produce books of
(2) Printing of double or multiple sets of invoices or accounts, records, memoranda or other papers, or to furnish information
receipts; or as required under the pertinent provisions of this Code, neglects to appear
(3) Printing of unnumbered receipts or sales or or to produce such books of accounts, records, memoranda or other
commercial invoices, not bearing the name, business papers, or to furnish such information, shall, upon conviction, be punished
58
by a fine of not less than Five thousand pesos (P5,000) but not more than distillery warehouse, bonded warehouse or other place where made, after
ten thousand pesos (P10,000) and suffer imprisonment of not less than the tax thereon has been paid;
one (1) year but not more than two (2) years. otherwise, all such articles shall be forfeited. Articles withdrawn from any
such place or from customs custody or imported into the country without
SEC. 267. Declaration under Penalties of Perjury. - Any declaration, the payment of the required tax shall likewise be forfeited.
return and other statement required under this Code, shall, in lieu of an
oath, contain a written statement that they are made under the penalties of CHAPTER III
perjury. Any person who willfully files a declaration, return or statement PENALTIES IMPOSED ON PUBLIC OFFICERS
containing information which is not true and correct as to every material
matter shall, upon conviction, be subject to the penalties prescribed for SEC. 269. Violations Committed by Government Enforcement
perjury under the Revised Penal Code. Officers. - Every official, agent, or employee of the Bureau of Internal
Revenue or any other agency of the Government charged with the
SEC. 268. Other Crimes and Offenses. - enforcement of the provisions of this Code, who is guilty of any of the
(A) Misdeclaration or Misrepresentation of Manufacturers Subject to offenses herein below specified shall, upon conviction for each act or
Excise Tax. - Any manufacturer who, in violation of the provisions of Title omission, be punished by a fine of not less than Fifty thousand pesos
VI of this Code, misdeclares in the sworn statement required therein or in (P50,000) but not more than One hundred thousand pesos (P100,000)
the sales invoice, any pertinent data or information shall be punished by a and suffer imprisonment of not less than ten (10) years but not more than
summary cancellation or withdrawal of the permit to engage in business fifteen (15) years and shall likewise suffer an additional penalty of
as a manufacturer of articles subject to excise tax. perpetual disqualification to hold public office, to vote, and to participate in
any public election:
(B) Forfeiture of Property Used in Unlicensed Business or Dies Used (a) Extortion or willful oppression through the use of his office or
for Printing False Stamps, Etc. - All chattels, machinery, and removable willful oppression and harassment of a taxpayer who refused,
fixtures of any sort used in the unlicensed production of articles subject to declined, turned down or rejected any of his offers specified in
excise tax shall be forfeited. Dies and other equipment used for the paragraph (d) hereof;
printing or making of any internal revenue stamp, label or tag which is in (b) Knowingly demanding or receiving any fee, other or greater
imitation of or purports to be a lawful stamp, label or tag shall also be sums that are authorized by law or receiving any fee,
forfeited. compensation or reward, except as by law prescribed, for the
performance of any duty;
(C) Forfeiture of Goods Illegally Stored or Removed. - Unless (c) Willfully neglecting to give receipts, as by law required, for any
otherwise specifically authorized by the Commissioner, all articles subject sum collected in the performance of duty or willfully neglecting to
to excise tax should not be stored or allowed to remain in a distillery, perform any other duties enjoined by law;
59
(d) Offering or undertaking to accomplish, file or submit a report Provided, further, That the term 'grave misconduct', as defined
or assessment on a taxpayer without the appropriate examination in Civil Service Law, shall include the issuance of fake letters of
of the books of accounts or tax liability, or offering or undertaking authority and receipts, forgery of signature, usurpation of authority
to submit a report or assessment less than the amount due the and habitual issuance of unreasonable assessments.
Government for any consideration or compensation, or conspiring SEC. 270. Unlawful Divulgence of Trade Secrets. - Except as provided
or colluding with another or others to defraud the revenues or in Section 6(F) and 71 of this Code and Section 26 of Republic Act No.
otherwise violate the provisions of this Code; 6388, any officer or employee of the Bureau of Internal Revenue who
(e) Neglecting or by design permitting the violation of the law by divulges to any person or makes known in any other manner than may be
any other person; provided by law information regarding the business, income or estate of
(f) Making or signing any false entry or entries in any book, or any taxpayer, the secrets, operation, style or work, or apparatus of any
making or signing any false certificate or return; manufacturer or producer, or confidential information regarding the
(g) Allowing or conspiring or colluding with another to allow the business of any taxpayer, knowledge of which was acquired by him in the
unauthorized retrieval, withdrawal or recall of any return, discharge of his official duties, shall upon conviction for each act or
statement or declaration after the same has been officially omission, be punished by a fine of not less than Fifty thousand pesos
received by the Bureau of Internal Revenue; (P50,000) but not more than One hundred thousand pesos (P100,000), or
(h) Having knowledge or information of any violation of this Code suffer imprisonment of not less than two (2) years but not more than five
or of any fraud committed on the revenues collectible by the (5) years, or both.
Bureau of Internal Revenue, failure to report such knowledge or
information to their superior officer, or failure to report as Any officer or employee of the Bureau of Internal Revenue who divulges or
otherwise required by law; and makes known in any other manner to any person other than the
(i) Without the authority of law, demanding or accepting or requesting foreign tax authority information obtained from banks and
attempting to collect, directly or indirectly, as payment or financial institutions pursuant to Section 6(F), knowledge or information
otherwise any sum of money or other thing of value for the acquired by him in the discharge of his official duties, shall upon
compromise, adjustment or settlement of any charge or complaint conviction, be punished by a fine of not less than Fifty thousand pesos
for any violation or alleged violation of this Code. (P50,000) but not more than One hundred thousand pesos (P100,000), or
suffer imprisonment of not less than two (2) years but not more than five
Provided, That the provisions of the foregoing paragraph (5) years, or both.
notwithstanding, any internal revenue officer for which a prima
facie case of grave misconduct has been established shall, after SEC. 271. Unlawful Interest of Revenue Law Enforcers in Business. -
due notice and hearing of the administrative case and subject to Any internal revenue officer who is or shall become interested, directly or
Civil Service Laws, be dismissed from the revenue service: indirectly, in the manufacture, sale or importation of any article subject to
60
excise tax under Title VI of this Code or in the manufacture or repair or SEC. 273. Penalty for Failure to Issue and Execute Warrant. - Any
sale, of any die for printing, or making of stamps, or labels shall upon official who fails to issue or execute the warrant of distraint or levy within
conviction for each act or omission, be punished by a fine of not less than thirty (30) days after the expiration of the time prescribed in Section 207 or
Five thousand pesos (P5,000) but not more than Ten thousand pesos who is found guilty of abusing the exercise thereof by competent authority
(P10,000), or suffer imprisonment of not less than two (2) years and one shall be automatically dismissed from the service after due notice and
(1) day but not more than four (4) years, or both. hearing.
SEC. 272. Violation of Withholding Tax Provision. - Every officer or CHAPTER IV

employee of the Government of the Republic of the Philippines or any of OTHER PENAL PROVISIONS 
its agencies and instrumentalities, its political subdivisions, as well as SEC. 274. Penalty for Second and Subsequent Offenses. - In the case
government-owned or controlled corporations, including the Bangko of reincidence, the maximum of the penalty prescribed for the offense
Sentral ng Pilipinas (BSP), who, under the provisions of this Code or rules shall be imposed.
and regulations promulgated thereunder, is charged with the duty to
deduct and withhold any internal revenue tax and to remit the same in SEC. 275. Violation of Other Provisions of this Code or Rules and
accordance with the provisions of this Code and other laws is guilty of any Regulations in General. - Any person who violates any provision of this
offense herein below specified shall, upon conviction for each act or Code or any rule or regulation promulgated by the Department of Finance,
omission be punished by a fine of not less than Five thousand pesos for which no specific penalty is provided by law, shall, upon conviction for
(P5,000) but not more than Fifty thousand pesos (P50,000) or suffer each act or omission, be punished by a fine of not more than One
imprisonment of not less than six (6) months and one (1) day but not more thousand pesos (P1,000) or suffer imprisonment of not more than six (6)
than two (2) years, or both: months, or both.
(a) Failing or causing the failure to deduct and withhold any
internal revenue tax under any of the withholding tax laws and SEC. 276. Penalty for Selling, Transferring, Encumbering or in any
implementing rules and regulations; way Disposing of Property Placed under Constructive Distraint. - Any
(b) Failing or causing the failure to remit taxes deducted and taxpayer, whose property has been placed under constructive distraint,
withheld within the time prescribed by law, and implementing who sells, transfers, encumbers or in any way disposes of said property,
rules and regulations; and or any part thereof, without the knowledge and consent of the
(c) Failing or causing the failure to file return or statement within Commissioner, shall, upon conviction for each act or omission, be
the time prescribed, or rendering or furnishing a false or punished by a fine of not less than twice the value of the property so sold,
fraudulent return or statement required under the withholding tax encumbered or disposed of but not less than Five Thousand pesos
laws and rules and regulations. (P5,000), or suffer imprisonment of not less than two (2) years and one (1)
day but not more than four (4) years, of both.
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SEC. 277. Failure to Surrender Property Placed under Distraint and Instruments of Crime. - In addition to the penalty Imposed for the
Levy. - Any person having in his possession or under his control any violation of the provisions of Title X of this Code, the same shall carry with
property or rights to property, upon which a warrant of constructive it the confiscation and forfeiture in favor of the government of the proceeds
distraint, or actual distraint and levy has been issued shall, upon demand of the crime or value of the goods, and the instruments or tools with which
by the Commissioner or any of his deputies executing such warrant, the crime was committed: Provided, however, That if in the course of the
surrender such property or right to property to the Commissioner or any of proceedings, it is established that the instruments or tools used in the illicit
his deputies, unless such property or right is, at the time of such demand, act belong to a third person, the same shall be confiscated and forfeited
subject to an attachment or execution under any judicial process. Any after due notice and hearing in a separate proceeding in favor of the
person who fails or refuses to surrender any of such property or right shall Government if such third person leased, let, chartered or otherwise
be liable in his own person and estate to the Government in a sum equal entrusted the same to the offender: Provided, further, That in case the
to the value of the property or rights not so surrendered but not exceeding lessee subleased, or the borrower, charterer, or trustee allowed the use of
the amount of the taxes (including penalties and interest) for the collection the instruments or tools to the offender, such instruments or tools shall,
of which such warrant had been issued, together with cost and interest if likewise, be confiscated and forfeited: Provided, finally, That property of
any, from the date of such warrant. In addition, such person shall, upon common carriers shall not be subject to forfeiture when used in the
conviction for each act or omission, be punished by a fine of not less than transaction of their business as such common carrier, unless the owner or
Five thousand pesos (P5,000), or suffer imprisonment of not less than six operator of said common carrier was, at the time of the illegal act, a
(6) months and one (1) day but not more than two (2) years, or both. consenting party or privy thereto, without prejudice to the owner's right of
recovery against the offender in a civil or criminal action. Articles which
SEC. 278. Procuring Unlawful Divulgence of Trade Secrets. - Any are not subject of lawful commerce shall be destroyed.
person who causes or procures an officer or employee of the Bureau of
Internal Revenue to divulge any confidential information regarding the SEC. 280. Subsidiary Penalty. - If the person convicted for violation of
business, income or inheritance of any taxpayer, knowledge of which was any of the provisions of this Code has no property with which to meet the
acquired by him in the discharge of his official duties, and which it is fine imposed upon him by the court, or is unable to pay such fine, he shall
unlawful for him to reveal, and any person who publishes or prints in any be subject to a subsidiary personal liability at the rate of one (1) day for
manner whatever, not provided by law, any income, profit, loss or each Eight pesos and fifty centavos (P8.50) subject to the rules
expenditure appearing in any income tax return, shall be punished by a established in Article 39 of the Revised Penal Code.
fine of not more than Two thousand pesos (P2,000), or suffer
Crimes and Other Offenses:
imprisonment of not less than six (6) months nor more than five (5) years,
1. Attempt to evade and defeat tax (Sec. 254)
or both.
2. Failure to file return. Supply correct and accurate information, pay
tax, withhold and remit tax, and refund excess taxes withheld on
SEC. 279. Confiscation and Forfeiture of the Proceeds or compensation (Sec. 255)
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3. Penal liability of corporations (Sec. 256) OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX
4. Penal liability for making false entries, records or reports, or using APPEALS, AND FOR OTHER PURPOSES
falsified or fake accountable forms (Sec. 257)
5. Unlawful pursuit of business (Sec. 258) Sec. 7 b. Jurisdiction over cases involving criminal offenses as herein
6. Illegal collection of foreign payments (Sec. 259) provided:
7. Unlawful possession of cigarette paper in bobbins or rolls, etc. (Sec.
260) 1. Exclusive original jurisdiction over all criminal offenses arising from
8. Unlawful use of denatured alcohol (Sec. 261) violations of the National Internal Revenue Code or Tariff and Customs
9. Shipment or removal of liquor or tobacco products under false name Code and other laws administered by the Bureau of Internal Revenue or
or brand or as an imitation of any existing or otherwise known the Bureau of Customs: Provided, however, That offenses or felonies
product name or brand (Sec. 262) mentioned in this paragraph where the principal amount o taxes and fees,
10. Unlawful possession or removal of articles subject to excise tax exclusive of charges and penalties, claimed is less than One million pesos
(P1,000,000.00) or where there is no specified amount claimed shall be
without payment of the tax (Sec. 263)
tried by the regular Courts and the jurisdiction of the CTA shall be
11. Failure or refusal to issue receipts or sales or commercial invoices,
appellate. Any provision of law or the Rules of Court to the contrary
violations related to the orienting of such receipts or invoices and
notwithstanding, the criminal action and the corresponding civil action for
other violations (Sec. 264)
the recovery of civil liability for taxes and penalties shall at all times be
12. Offenses relating to stamps (Sec. 265)
simultaneously instituted with, and jointly determined in the same
13. Failure to obey summons (Sec. 266) proceeding by the CTA, the filing of the criminal action being deemed to
14. Declarations under penalties of perjury (Sec. 267) necessarily carry with it the filing of the civil action, and no right to reserve
15. Other crimes and offenses (Sec. 268) the filling of such civil action separately from the criminal action will be
recognized
Penalties Imposed on Public Officers CRIMINAL ACTION and OTHER PENALTIES
1. Violations committed by Government Enforcement Officers (Sec.
269) UNGAB v. CUSI (Layno)
2. Unlawful divulgence of trade secrets (Sec. 270)
[GR. No. L-41919-24; May 30, 1980]
3. Unlawful interest of revenue law enforcers in business (Sec. 271)
“State Prosecutor has authority. No excuse, criminal prosecution can take
4. Violation of withholding tax provision (Sec. 272)
place.”
5. Penalty for failure to issue and execute warrant (Sec. 273)
Recit-Ready:
Republic Act No. 9282
Facts: Petitioner Ungab is imputing grave abuse of discretion against
respondent judge for dismissing his MTQ. Petitioner’s MTQ is
AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX
grounded on his contention that the State Prosecutor cannot
APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A
prosecute/conduct a preliminary investigation for alleged violation
COLLEGIATE COURT WITH SPECIAL JURISDICTION AND
of the NIRC and its related laws since that is the job of
ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE
city/provincial fiscals. Also, he said that no prosecution can take
CERTAIN SECTIONS OR REPUBLIC ACT NO. 1125, AS AMENDED,
place since CIR has not yet ruled on his assessment protest.
63
examination, he discovered that the petitioner failed to report his income

Issue/s: derived from sales of banana saplings.
1) WON State Prosecutor has the authority to conduct the
• BIR District Revenue Officer at Davao City sent a "Notice of Taxpayer"
preliminary investigation and file an information regarding the
to the petitioner informing him that there is due from him (petitioner) the
fraudulent return? amount of P104,980.81, representing income, business tax and forest
2) WON the case must not go on because RTC has not yet acquired charges for the year 1973 and inviting petitioner to an informal
jurisdiction over it given that there’s a pending assessment conference where the petitioner, duly assisted by counsel, may present
protest? his objections to the findings of the BIR Examiner
• Upon receipt of the notice, the petitioner wrote the BIR District Revenue
Held: 1) Yes. The respondent State Prosecutor, although believing that
Officer protesting the assessment, claiming that he was only a dealer or
he can proceed independently of the City Fiscal in the agent on commission basis in the banana sapling business and that his
investigation and prosecution of these cases, first sought income, as reported in his income tax returns for the said year, was
permission from the City Fiscal of Davao City before he started accurately stated.
the preliminary investigation of these cases, and the City Fiscal,
after being shown Administrative Order No. 116, dated December o BIR Examiner Ben Garcia, however, was fully convinced
5, 1974, designating the said State Prosecutor to assist all that the petitioner had filed a fraudulent income tax return
so that he submitted a "Fraud Referral Report," to the Tax
Provincial and City fiscals throughout the Philippines in the
Fraud Unit of the Bureau of Internal Revenue. After
investigation and prosecution of all violations of the National examining the records of the case, the Special Investigation
Internal Revenue Code, as amended, and other related laws, Division of the Bureau of Internal Revenue found sufficient
graciously allowed the respondent State Prosecutor to conduct proof that the herein petitioner is guilty of tax evasion for the
the investigation of said cases, and in fact, said investigation was taxable year 1973 and recommended his prosecution
conducted in the office of the City Fiscal
• Chief of Prosecution Division and CIR approved the prosecution.
State Prosecutor Jesus Acebes who, via Admin. Order No. 116, had
2) What is involved here is not the collection of taxes where the
been designated to assist all Provincial and City Fiscals throughout
assessment of the Commissioner of Internal Revenue may be the Philippines in the investigation and prosecution, if the evidence
reviewed by the Court of Tax Appeals, but a criminal prosecution warrants, of all violations of the NIRC and related laws and to whom
for violations of the National Internal Revenue Code which is the case was assigned, conducted a preliminary investigation of the
within the cognizance of courts of first instance. The crime case, and finding probable cause, filed six information against the
(fraudulent filing of return) is complete when the violator has, as petitioner with the CFI Davao.
in this case, knowingly and willfully filed fraudulent returns with
intent to evade and defeat a part or all of the tax • petitioner filed an MTQ the informations upon the grounds that: (1)
the informations are null and void for want of authority on the part of
the State Prosecutor to initiate and prosecute the said cases; and
(2) the trial court has no jurisdiction to take cognizance of the above-
Facts: entitled cases in view of his pending protest against the assessment
• Sometime in July, 1974, BIR Examiner Ben Garcia examined the made by the BIR Examiner " RTC denied the motion hence
income tax returns filed by the herein petitioner, Quirico P. Ungab, for Petitioner went to SC and asked for a TRO which the Court granted
the calendar year ending December 31, 1973. In the course of his
Issue/s:
64
1) WON the State Prosecutor, has has the authority to prosecute the • Besides, it has been ruled that a petition for reconsideration of an
case under the NIRC? assessment may affect the suspension of the prescriptive period for
—YES the collection of taxes, but not the prescriptive period of a criminal
2) WON the filing of the information(s) were premature since CIR has action for violation of law. Obviously, the protest of the petitioner
not resolved his protest regarding the assessments of the RDO? against the assessment of the District Revenue Officer cannot stop
—NO his prosecution for violation of the National Internal Revenue Code.
Accordingly, the respondent Judge did not abuse his discretion in
Held/Ratio: Petition is DISMISSED. The TRO heretofore issued is set aside. denying the motion to quash filed by the petitioner.
1) YES. The respondent State Prosecutor, although believing that he can

proceed independently of the City Fiscal in the investigation and COMMISSIONER OF INTERNAL REVENUE v. COURT OF
prosecution of these cases, first sought permission from the City APPEALS (Lim, J.)
Fiscal of Davao City before he started the preliminary investigation of
[GR. No. 119322; June 4, 1996]
these cases, and the City Fiscal, after being shown Administrative
Order No. 116, dated December 5, 1974, designating the said State “Before one is prosecuted for willful attempt to evade or defeat any tax, the
Prosecutor to assist all Provincial and City fiscals throughout the fact that a tax is due must first be proved.”
Philippines in the investigation and prosecution of all violations of the
National Internal Revenue Code, as amended, and other related laws, Recit-Ready:
graciously allowed the respondent State Prosecutor to conduct the
Facts: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing
investigation of said cases, and in fact, said investigation was
conducted in the office of the City Fiscal. deficiency income, ad valorem and value-added taxes for the year 1992 to
which Fortune moved for reconsideration of the assessments. Later, the
2) What is involved here is not the collection of taxes where the CIR filed a complaint with the DOJ against the Fortune, its corporate
assessment of the Commissioner of Internal Revenue may be officers, nine (9) other corporations and their respective corporate officers
reviewed by the Court of Tax Appeals, but a criminal prosecution for for alleged fraudulent tax evasion for supposed non-payment by Fortune
violations of the National Internal Revenue Code which is within the
cognizance of courts of first instance. While there can be no civil of the correct amount of taxes, alleging among others the fraudulent
action to enforce collection before the assessment procedures scheme of making simulated sales to fictitious buyers declaring lower
provided in the Code have been followed, there is no requirement for wholesale prices, as allegedly shown by the great disparity on the
the precise computation and assessment of the tax before there can declared wholesale prices registered in the "Daily Manufacturer's Sworn
be a criminal prosecution under the Code. Statements" submitted by the respondents to the BIR. Such documents
when requested by the court were not however presented by the BIR,
o The crime is complete when the violator has, as in this
case, knowingly and willfully filed fraudulent returns with prompting RTC to grant the prayer for preliminary injunction sought by the
intent to evade and defeat a part or all of the tax. respondent upon the reason that tax liability must be duly proven before
any criminal prosecution be had. CIR relying on the Ungab Doctrine
o The perpetration of the crime is grounded upon knowledge sought the lifting of the writ of preliminary mandatory injuction issued by
on the part of the taxpayer that he has made an inaccurate RTC.
return, and the government's failure to discover the error
and promptly to assess has no connections with the
commission of the crime. Issue/s:
WON a criminal case of tax evasion may be filed before the
65
determination of tax due in the assessment? • On July 1993, the CIR issued a RMC No. 37-93 reclassifying best selling
cigarettes bearing the brands Hope, More, and Champion as cigarettes of
Held: NO. CIR misplaced the ruling in Ungab v. Cusi, that the lack of a foreign brands subject to a higher rate of tax.
final determination of Fortune's exact or correct tax liability is not • On August 1993, Fortune Tobacco Corporation (Fortune) questioned the
a bar to criminal prosecution, and that while a precise validity of the reclassification of said brands of cigarettes as violative of its
computation and assessment is required for a civil action to right to due process and equal protection of law.
collect tax deficiencies, the Tax Code does not require such o The CTA ruled that the reclassification made by CIR is of doubtful
computation and assessment prior to criminal prosecution. legality and enjoined its enforcement on September 8, 1993.
Reading Ungab carefully, the pronouncement therein that • In a letter of August 13, 1993, the CIR assessed against Fortune P7.6
deficiency assessment is not necessary prior to prosecution is Billion representing deficiency income, ad valorem and value-added tax
pointedly and deliberately qualified by the Court with following for 1992 with the request that the said amount be paid within thirty (30)
statement quoted from Guzik v. U.S.: "The crime is complete days upon receipt thereof.
when the violator has knowingly and willfully filed a o On September 17, 1993, Fortune moved for reconsideration of the
fraudulent return with intent to evade and defeat a part or all assessments.
of the tax." In plain words, for criminal prosecution to proceed • On September 7, 1993, the CIR filed a complaint with the DOJ against
before assessment, there must be a prima facie showing of Fortune, its corporate officers, nine (9) other corporations and their
a willful attempt to evade taxes. There was a willful attempt to respective corporate officers for alleged fraudulent tax evasion for
evade tax in Ungab because of the taxpayer's failure to declare in supposed non-payment by Fortune of the correct amount of income tax,
his income tax return "his income derived from banana saplings." ad valorem tax and value-added tax for the year 1992.
In the mind of RTC and CA, Fortune's situation is quite apart o The complaint was referred to the DOJ Task Force on revenue
factually since the registered wholesale price of the goods, cases which found sufficient basis to further investigate the
approved by the BIR, is presumed to be the actual wholesale allegations that Fortune, through fraudulent means, evaded payment
price, therefore, not fraudulent and unless and until the BIR of income tax, ad valorem tax, and value-added tax for the year
has made a final determination of what is supposed to be 1992 thus, depriving the government of revenues of P7.5B.
the correct taxes, the taxpayer should not be placed in the o The fraudulent scheme allegedly adopted by Fortune consisted of
crucible of criminal prosecution. Herein lies a whale of making fictitious and simulated sales of Fortunes cigarette products
difference between Ungab and the case at bar. to non-existing individuals and to fictitious entities by declaring
registered wholesale prices with the BIR lower than the actual
Facts: wholesale prices which are required for determination of Fortune’s
• On June 1993, the President created a Task Force to investigate the tax correct tax liabilities.
liabilities of manufacturers engaged in tax evasion scheme to collect from o The ghosts-wholesale buyers then ostensibly sold the products to
them any tax liabilities discovered from such investigation, and to file the customers and other wholesalers/retailers at higher wholesale prices
necessary criminal actions against those who may have violated the tax determined by Fortune.
code. o The tax returns and manufacturer’s sworn statements filed by
Fortune would then declare the fictitious sales it made to the
fictitious buyers as its gross sales.
66
• On September 8, 1993, the DOJ Task Force issued a subpoena directing o that the subpoena violates private respondents constitutional right to
Fortune to submit their counter-affidavits. due process, equal protection and presumption of innocence;
o Instead of filing their counter-affidavits, Fortune filed a Verified o that no tax assessment has been issued by the Commission of
Motion to Dismiss and Motion to Suspend, which were denied and Internal Revenue and considering that taxes paid have not been
treated as their counter-affidavit. challenged, no tax liability exists; and
• Fortune filed a MR for the motion to dismiss, a motion to require the o that since Assistant City Prosecutor Baraquia was a former
submission by the BIR of certain documents in further support of their classmate of Presidential Legal Counsel Antonio T. Carpio, the
Verified Motion to Dismiss, and a motion to inhibit the prosecutor. Among former cannot conduct the preliminary investigation in an impartial
the documents sought to be produced are the Daily Manufacturer’s Sworn manner.
Statements which according to CIR were false and fraudulent. • On January 28, 1994, Fortune filed a second supplemental petition, also
o Fortune claimed that without it, there is no evidence to support the seeking to stay the preliminary investigation on the third complaint filed
complaint, hence, warranting its outright dismissal. with the DOJ for alleged fraudulent tax evasion for 1991.
o The panel of prosecutors issued an Omnibus Order denying all of • On January 31, 1994, the lower court admitted the two (2) supplemental
Fortune’s motions. petitions and issued a TRO in both preliminary investigations.
• Fortune filed a petition for certiorari and prohibition with prayer for • On February 7, 1994, RTC issued an order denying CIR’s motion to
preliminary injunction with the RTC, praying that the complaint of the CIR dismiss Fortune’s petition seeking to stay preliminary investigation, ruling
and the orders of the prosecutors be dismissed or set aside, or the that the issue of whether Sec. 127(b) of the National Tax Revenue
preliminary investigation to be suspended pending final determination by Code should be the basis of Fortune’s tax liability, or whether it is
CIR of Fortunes MR of the assessment of the taxes due. Sec. 142(c) of the same Code that applies, as argued by herein
• CIR filed a motion to dismiss the petition on the grounds that Fortune, should first be settled before any complaint for fraudulent
o (a) the trial court is bereft of jurisdiction to enjoin a criminal tax evasion can be initiated.
prosecution under preliminary investigation; • On February 14, 1994, RTC issued an order granting Fortune’s petition
o (b) a criminal prosecution for tax fraud can proceed for a supplemental writ of preliminary injunction, likewise enjoining the
independently of criminal or administrative action; preliminary investigation of the 2 other complaints filed for fraudulent tax
o (c) there is no prejudicial question to justify suspension of the evasion for the taxable years 1990 and 1991.
preliminary investigation; o In granting the supplemental writ, RTC stated that the two other
o (d) private respondents rights to due process was not violated; and complaints are the same as in 1992 complaint, except that the
o (e) selective prosecution is not a valid defense in this jurisdiction. former refer to the taxable years 1990 and 1991.
• RTC issued an order granting the prayer for the issuance of a preliminary • CIR filed a petition for certiorari and prohibition with prayer for preliminary
injunction. injunction before SC.
o Fortune filed with RTC a Motion to Admit Supplemental Petition and o However, the petition was referred to the CA for disposition by virtue
sought the issuance of a writ of preliminary injunction to enjoin the of its original concurrent jurisdiction over the petition.
State Prosecutors from continuing with the preliminary investigation • CA rendered a decision denying the petition.
for alleged fraudulent tax evasion for 1990. o In making such conclusion CA must have understood from CIR’s
o Fortune averred in their motion that no supporting documents or letter-complaint of 14 pages and the joint affidavit of eight revenue
copies of the complaint were attached to the subpoena; officers of 17 pages attached thereto and its annexes, that the
67
charge against Fortune is for tax evasion for non-payment of the ! if the MR is denied, it may appeal to the CA within thirty (30)
correct amounts of income tax, ad valorem tax and value added tax, days from receipt of the decision.
NOT necessarily fraudulent tax evasion. ! Here, Fortune received the assessment notice dated August 13,
o Hence, the need for previous assessment of the correct amount 1993 and asking for the payment of the deficiency taxes on
by CIR before Fortune may be charged criminally. August 24, 1993.
Issue/s: ! Within thirty (30) days from receipt thereof, Fortune moved for
3) WON a criminal case of tax evasion may be filed before the reconsideration.
determination of tax due in the assessment? —NO ! The Commissioner has not resolved the request for
reconsideration up to the present.
Held/Ratio: Petition GRANTED. In applying the doctrine of animation, Court o The Court shares with the view of both RTC and CA that before the
rules for the Applicant. tax liabilities of Fortune are first finally determined, it cannot be
correctly asserted that Fortune has willfully attempted to evade or
3) NO. The Court emphasized the doctrine of… defeat the taxes sought to be collected. In plain words, before one is
o Fraud cannot be presumed. prosecuted for willful attempt to evade or defeat any tax under
! If there was fraud or willful attempt to evade payment of ad Sections 253 and 255 of the Tax Code, the fact that a tax is due
valorem taxes by private respondents through the manipulation must first be proved.
of the registered wholesale price of the cigarettes, it must have o Suppose the CIR eventually resolves Fortune’s MR of the
been with the connivance or cooperation of certain BIR officials assessments by pronouncing that the taxpayer is not liable for any
and employees who supervised and monitored Fortunes deficiency assessment, then, the criminal complaints filed against
production activities to see to it that the correct taxes were paid. private respondents will have no leg to stand on.
! But there is no allegation, much less evidence, of BIR o In view of the foregoing reasons, the Court cannot subscribe to CIR’s
personnel’s malfeasance. thesis citing, Ungad v. Cusi, that the lack of a final determination of
! In the very least, there is the presumption that the BIR Fortunes exact or correct tax liability is not a bar to criminal
personnel performed their duties in the regular course in prosecution, and that while a precise computation and assessment is
ensuring that the correct taxes were paid by Fortune. required for a civil action to collect tax deficiencies, the Tax Code
o It is the opinion of both RTC and CA that before Fortune could be does not require such computation and assessment prior to criminal
prosecuted for tax evasion under Sections 253 and 255 of the Tax prosecution.
Code, the fact that the deficiency income, ad valorem and value- o Reading Ungad carefully, the pronouncement that deficiency
added taxes were due from Fortune for the year 1992 should first assessment is not necessary prior to prosecution is pointedly
be established. and deliberately qualified by the Court.
! Fortune received from the CIR the deficiency assessment notices ! The crime is complete when the violator has knowingly and
in the total amount of P7.6B on August 24, 1993. willfully filed a fraudulent return with intent to evade and defeat a
! However, under Section 229 of the Tax Code, the taxpayer has part or all of the tax.
the right to move for reconsideration of the assessment issued ! In plain words, for criminal prosecution to proceed before
by the CIR within 30 days from receipt of the assessment; and assessment, there must be a prima facie showing of a
willful attempt to evade taxes.
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! There was a willful attempt to evade tax in Ungad because of

the taxpayer’s failure to declare in his income tax return his Held:
income derived from banana saplings. 2) NO. Neither the NIRC nor the Revenue Regulations governing the
! In the mind of RTC and CA, Fortune’s situation is quite apart protest of assessments provide a specific definition or form of an
factually since the registered wholesale price of the goods, assessment. However, the NIRC defines the specific functions and
approved by the BIR, is presumed to be the actual effects of an assessment. To consider the affidavit attached to the
wholesale price, therefore, not fraudulent and unless and Complaint as a proper assessment is to subvert the nature of an
until the BIR has made a final determination of what is assessment and to set a bad precedent that will prejudice innocent
supposed to be the correct taxes, the taxpayer should not taxpayers. The Revenue Officers’ Affidavit merely contained a
be placed in the crucible of criminal prosecution. computation of respondents’ tax liability. It did not state a
! Herein lies a whale of difference between Ungad and the case demand or a period for payment.
at bar.
3) NO. Section 222 of the NIRC specifically states that in cases where a
CIR v. PASCOR REALTY AND DEVELOPMENT false or fraudulent return is submitted or in cases of failure to file
CORPORATION (Lim, Q.) a return, such as this case, proceedings in court may be
[GR. No. 128315; June 29, 1999] commenced without an assessment. Furthermore, Section 205 of
“An assessment is not necessary before a criminal charge can be filed” the same Code clearly mandates that the civil and criminal aspects
of the case may be pursued simultaneously.
Recit-Ready:
Facts: BIR Commissioner Jose U. Ong authorized Revenue Officers to Facts:
examine the books of accounts and other accounting records of • By virtue of Letter of Authority No. 001198, then BIR Commissioner Jose
Pascor Realty and Development Corporation (“PRDC”). The U. Ong authorized Revenue Officers to examine the books of accounts
examination resulted in a recommendation for the issuance of an and other accounting records of Pascor Realty and Development
assessment for the years 1986 and 1987. CIR filed a criminal Corporation (“PRDC”) for the years ending 1986, 1987 and 1988.
complaint before the Department of Justice against the • The said examination resulted in a recommendation for the issuance of
PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. an assessment for the years 1986 and 1987.
Dio, alleging evasion of taxes. • Commissioner of Internal Revenue filed a criminal complaint before
the Department of Justice against the PRDC, its President Rogelio A.
Issue/s: Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the
1) WON the Revenue Officers’ AffidavitReport, which was attached to total amount of P10,513,671.00.
the criminal complaint filed with the Department of Justice, constituted • PRDC, et al. filed an Urgent Request for Reconsideration/ Reinvestigation
an assessment that could be questioned before the Court of Tax disputing the tax assessment and tax liability.
Appeals. –NO • Private respondents received a subpoena from the DOJ in connection
with the criminal complaint filed by the Commissioner of Internal Revenue
2) WON an assessment is necessary before the filing of a criminal (BIR) against them.
complaint. –NO
69
• CIR denied the Urgent Request for Reconsideration/ Reinvestigation of constituted an assessment that could be questioned before the
the private respondents on the ground that no formal assessment has yet Court of Tax Appeals.
been issued by the Commissioner. —NO
• PRDC then elevated the Decision of the CIR to the Court of Tax Appeals
• CIR alleges that the Court of Tax Appeals acted with grave abuse of 2) WON an assessment is necessary before the filing of a criminal
discretion and without jurisdiction in considering the affidavit/report of the complaint.
Revenue Officer and the indorsement of said report to the Secretary of —NO
Justice as assessment which may be appealed to the Court of Tax
Appeals. Held/Ratio: The petition is hereby GRANTED. The assailed Decision is
• CIR argues that the filing of the criminal complaint with the Department of REVERSED and SET ASIDE. CTA Case No. 5271 is likewise DISMISSED.
Justice cannot in any way be construed as a formal assessment of
PRDC’s tax liabilities.
o This position is based on Section 205 of the National Internal 1) NO. Neither the NIRC nor the Revenue Regulations governing the
Revenue Code, which provides that remedies for the protest of assessments provide a specific definition or form of an
collection of deficient taxes may be by either civil or criminal assessment. However, the NIRC defines the specific functions and
action. effects of an assessment. To consider the affidavit attached to the
o Likewise, it cites Section 223(a) of the same Code, which Complaint as a proper assessment is to subvert the nature of an
states that in case of failure to file a return, the tax may be assessment and to set a bad precedent that will prejudice innocent
assessed or a proceeding in court may be begun without taxpayers.
assessment. o As pointed out by PRDC, an assessment informs the taxpayer that he
• PRDC, on the other hand, maintain that an assessment is not an action or or she has tax liabilities. But not all documents coming from the
proceeding for the collection of taxes, but merely a notice that the amount BIR containing a computation of the tax liability can be deemed
stated therein is due as tax and that the taxpayer is required to pay the assessments.
same. o An assessment must be sent to and received by a taxpayer, and
o Thus, qualifying as an assessment was the BIR examiners’ must demand payment of the taxes described therein within a
Joint Affidavit, which contained the details of the supposed specific period.
taxes due from respondent for taxable years ending 1987 and ! Thus, the NIRC imposes a 25% penalty, in addition to the tax
1988, and which was attached to the tax evasion complaint due, in case the taxpayer fails to pay the deficiency tax within
filed with the DOJ. Consequently, the denial by the BIR of the time prescribed for its payment in the notice of
private respondents’ request for reinvestigation of the assessment.
disputed assessment is properly appealable to the CTA. ! Likewise, an interest of 20% per annum, or such higher rate
as may be prescribed by rules and regulations, is to be
Issue/s: collected from the date prescribed for its payment until the full
1) WON the Revenue Officers’ AffidavitReport, which was attached to payment.
the criminal complaint filed with the Department of Justice, o The issuance of an assessment is vital in determining the period of
limitation regarding its proper issuance and the period within which to
70
protest it. Thus, a taxpayer must be certain that a specific o Section 222, the general rule, states that an assessment is not
document constitutes an assessment. Otherwise, confusion would necessary before a criminal charge can be filed. Private
arise regarding the period within which to make an assessment or to respondents failed to show that they are entitled to an exception.
protest the same, or whether interest and penalty may accrue thereon. o Moreover, the criminal charge need only be supported by a prima
o It should also be stressed that the said document is a notice duly sent facie showing of failure to file a required return. This fact need not be
to the taxpayer. Indeed, an assessment is deemed made only proven by an assessment.
when the collector of internal revenue releases, mails or sends o The issuance of an assessment must be distinguished from the filing
such notice to the taxpayer. of a complaint. Before an assessment is issued, there is, by practice,
o In the present case, the Revenue Officers’ Affidavit merely a preassessment notice sent to the taxpayer. The taxpayer is then
contained a computation of respondents’ tax liability. It did not given a chance to submit position papers and documents to prove that
state a demand or a period for payment. Worse, it was addressed the assessment is unwarranted. If the Commissioner is unsatisfied, an
to the Justice Secretary, not to the taxpayers. assessment signed by him or her is then sent to the taxpayer
o That the BIR examiners’ Joint Affidavit attached to the Criminal informing the latter specifically and clearly that an assessment has
Complaint contained some details of the tax liabilities of PRDC does been made against him or her.
not ipso facto make it an assessment. ! In contrast, the criminal charge need not go through all these.
! The purpose of the Joint Affidavit was merely to support and The criminal charge is filed directly with the DOJ. Thereafter,
substantiate the Criminal Complaint for tax evasion. Clearly, it the taxpayer is notified that a criminal case had been
was not meant to be a notice of the tax due and a filed against him, not that the Commissioner has issued
demand to the PRDC for payment thereof. an assessment. It must be stressed that a criminal
o The fact that the Complaint itself was specifically directed and sent to complaint is instituted not to demand payment, but to
the Department of Justice and not to private respondents shows that penalize the taxpayer for violation of the Tax Code.
the intent of the Commissioner was to file a criminal complaint
for tax evasion, not to issue an assessment.
o What private respondents received was a notice from the DOJ that a Adamson vs. Court of Appeals (Luna)
criminal case for tax evasion had been filed against them, not a notice [GR. No. 120935/!124557; May 21, 2009]
that the Bureau of Internal Revenue had made an assessment. “No need for an assessment before a criminal case of Tax Evasion may be
o In addition, what PRDC sent to the commissioner was a Motion for a filed; CTA has no jurisdiction on the criminal case of Tax Evasion until CIR
Reconsideration of the tax evasion charges filed, not an assessment. issues an assessment or his inaction.”
2) NO. Section 222 of the NIRC specifically states that in cases where Recit-Ready:
a false or fraudulent return is submitted or in cases of failure to file Facts: A deficiency tax assessment was issued against Petitioners
a return, such as this case, proceedings in court may be relating to their payment of capital gains tax and VAT on their sale
commenced without an assessment. Furthermore, Section 205 of of shares of stock and parcels of land. Subsequent to the
the same Code clearly mandates that the civil and criminal aspects preliminary conference, the CIR filed with the Department of
of the case may be pursued simultaneously. Justice her Affidavit of Complaint against Petitioners. The Court of
Appeals ultimately ruled that, in a criminal prosecution for tax
71
evasion, assessment of tax deficiency is not required because the • Lucas Adamson as President of Adamson Management Corporation
offense of tax evasion is complete or consummated when the (AMC) sold common shares of stock to APAC Holding Limited (APAC)
offender has knowingly and willfully filed a fraudulent return with and paid the capital gains tax for the transaction.
intent to evade the tax. • Subsequently, AMC sold to APAC Philippines, Inc. common shares of
stock and paid the capital gains tax therefor.
Issue/s: • CIR Vinzons-Chato issued a “Notice of Taxpayer” to AMC, Adamson,
1) WON the CIR has issued an assessment Therese Adamson (AMC treasurer), and Sara de Los Reyes (AMC
2) WON a criminal prosecution for tax evasion must be preceded by a secretary), informing them of deficiencies on their payment of capital
deficiency tax assessment gains tax and VAT.
3) WON the CTA has jurisdiction on the case • CIR filed w/ the DOJ an Affidavit of Complaint against AMC and Adamson
et al. for violation of the NIRC.
Held: • After preliminary investigation, the state prosecutor found probable cause.
1) NO. The recommendation letter of the Commissioner cannot be • AMC and Adamson et al. then filed a letter request for re-investigation
considered a formal assessment as (a) it was not addressed to the with the Commissioner.
taxpayers; (b) there was no demand made on the taxpayers to pay • Before the CIR could act on their letter-request, AMC, and Adamson et al.
the tax liability, nor a period for payment set therein; (c) the letter was filed a petition for review with the CTA, assailing the CIR’s finding of tax
never mailed or sent to the taxpayers by the Commissioner. It was evasion against them.
only an affidavit of the computation of the alleged liabilities and thus • CIR moved to dismiss the petition, on the ground that it was premature,
merely served as prima facie basis for filing a criminal information. as she had not yet issued a formal assessment of the tax liability of
2) NO. When fraudulent tax returns are involved as in the cases at bar, a Adamson et al.
proceeding in court after the collection of such tax may be begun • In 1994, Adamson, et al. were charged in a criminal case before the RTC
without assessment considering that upon investigation of the Makati. TC ruled that it did NOT have jurisdiction over the criminal case
examiners of the BIR, there was a preliminary finding of gross because the complaints for tax evasion filed by the Commissioner should
discrepancy in the computation of the capital gains taxes due from the be regarded as a decision of the Commissioner regarding the tax
transactions. The Tax Code is clear that the remedies may proceed liabilities of Adamson et al. thus appealable to the CTA. It further held that
simultaneously. the said cases cannot proceed independently of the assessment case
3) NO. While the laws governing the CTA have expanded the jurisdiction pending before the CTA, which has jurisdiction to determine the civil and
of the Court, they did not change the jurisdiction of the CTA to criminal tax liability of Adamson et al.
entertain an appeal only from a final decision of the Commissioner, or • CTA denied the motion to dismiss filed by the Commissioner and
in cases of inaction within the prescribed period. Since in the cases at considered the criminal complaint filed by the Commissioner with the DOJ
bar, the Commissioner has not issued an assessment of the tax as an implied formal assessment, and the filing of the criminal
liability of the Petitioners, the CTA has no jurisdiction. informations with the RTC as a denial of Adamson et al.’s protest
regarding the tax deficiency.
Facts: • CIR filed a petition for review with the CA assailing the trial court’s
dismissal of the criminal cases. The CA reversed the trial court’s decision
and reinstated the criminal complaints. The CA ruled that in a criminal
72
prosecution for tax evasion, assessment of tax deficiency is not required o The gross disparity in the taxes due and the amounts actually
because the offense of tax evasion is complete or consummated when declared by Adamson, AMC, etc. constitutes badges of fraud.
the offender has knowingly and willfully filed a fraudulent return with intent
to evade the tax. 3) NO.
o CTA can only entertain an appeal from a final decision or
Issue/s: assessment of the Commissioner, or in cases where the
1) WON CIR’s recommendation letter to DOJ can be considered as a Commissioner has not acted within the period prescribed by the
formal assessment of Adamson et al.’s tax liability NIRC.
—NO o In the cases at bar, the Commissioner has not issued an assessment
2) WON the criminal complaints against Adamson et al. by the DOJ are of the tax liability of private respondents.
premature for lack of a formal assessment
—NO People vs. Kintanar (Pascual)
3) WON the CTA has jurisdiction to take cognizance of both the civil [ December 3, 2010 by the Court of Tax Appeals and affirmed in a Minute
and criminal aspects of the tax liability of Adamson et al. Resolution by the Supreme Court in 20120]
—NO Note: The discussion on this case was mainly based on the decision
promulgated by the CTA as the Supreme Court merely affirmed the decision
Held/Ratio: Petition DENIED. The Court rules for the Court of Appeals. in a Minute Resolution.
“Neglect or omission in filing the ITRs when done with Willful Blindness
1) NO, the letter is NOT an assessment. constitutes a violation of Sec. 255 of the NIRC.
o An assessment is a written notice and demand made by the BIR on
the taxpayer for the settlement of a due tax liability that is definitely set Recit-Ready:
and fixed. It is a written communication containing a computation by a Facts: Spouses Kintanar were independent distributors of products of
revenue officer of the tax liability of a taxpayer and giving him an Forever Living Products, Phil. Inc., who had failed to file their
opportunity to contest or disprove the BIR examiner’s findings is not income tax returns for the years 1999 to 2001. Upon confidential
an assessment since it is yet indefinite. information received by the BIR on the alleged tax evasion
o In this case, the recommendation letter is NOT an assessment. It scheme of the spouses, an investigation was conducted and it
served merely as the prima facie basis for filing criminal informations was found that there was no record of ITRs filed by the spouses
that the taxpayers had violated the Tax Code. during those years. Before the court, the spouses argued, mainly,
that their failure to file their Income Tax Returns was not willfully
2) NO. When fraudulent tax returns are involved, a proceeding in court done as Gloria Kintanar had relied on her husband to file her ITRs
after the collection of such tax may be begun without assessment. for her and that her husband had, in turn, hired and relied upon
o Here, Adamson et al. had already filed the capital gains tax return and an accountant to file their returns. They argued then that they had
the VAT returns, and paid the taxes they have declared due no knowledge of the amounts stated in the ITRs prepared by their
therefrom. Upon investigation of the examiners of the BIR, there was a account or when such were filed.
preliminary finding of gross discrepancy in the computation of the
capital gains taxes, and that VAT had not been paid. Issue/s:
73
WON Kintanar had willfully failed to file her ITRs and was thus guilty of o The spouses then filed a petition for review, alleging that
violating Sec. 255 of the NIRC?—YES the Court of Tax Appeals had erred in finding that the
spouses’ failure to file their ITR was willfully done.
Held: ! Gloria Kintanar claims that she had no knowledge
YES. Kintanar should have known what her tax obligations were under the of the contents and filing of her ITR as she had
law and her neglect and omission to comply with such was tantamount to entrusted the same to her husband.
“deliberate ignorance” or “conscious avoidance,” such that she had ! The husband, in turn, claims that he had entrusted
willfully failed to file her ITRs. the filing of the returns to his accountant and so the
latter’s failure to do so could not make him or his
Facts: wife liable.
• Gloria Kintanar and her husband were independent distributors of Issue/s:
products of Forever Living Products, Philippines Inc. WON Kintanar’s failure to file her income tax return was willful?—YES
• Based on a confidential information received by the National Investigation
Division of the BIR on an alleged tax evasion scheme by the spouses, an Held/Ratio:
investigation was conducted to determine the spouses’ tax liabilities.
o A certification issued by the Revenue District Officer stated YES. The natural presumption is that petitioner knows what her tax
that the spouses had no record or file for the years 1999 to obligations are under the law and, as a businesswoman, should have
2001. taken ordinary care of her tax duties and obligations in making sure
• The spouses were then required to submit a list of documents to the that her ITRs were filed.
BIR but the spouses failed to submit. • The elements of Violation of Section 255 for failure to make or file a
o The spouses failed to respond to any of the notices of the return are as follows:
investigation being conducted against them as well as the • The accused is a person required to make or file a return;
orders to submit books of account and other information. • The accused failed to make or file the return at the time
o They also failed to comply with the preliminary assessment required by law; and
notice and it was only when a Formal Letter of Demand was • That failure to make or file the return was willful.
made against them that they responded. • Petitioner cannot argue that she had merely relied on her husband
! They submitted photocopies of their alleged to file her ITR was a valid reason to justify her non-filing, considering
income tax returns and requested for a period of 60 that she should have known from the start that she and her husband
days to submit additional documents. were mandated by law to file separate income tax returns as
! After the lapse of the period, they again failed to independent distributors of FLPPI.
submit. • Neither can petitioner rely on the argument that her
• The spouses were thus charged with violation of Sec. 255 of the husband had hired an account to file their returns for them.
NIRC, and were found guilty by the court based on the evidence • Petitioner should know how much are her tax dues, the details
presented. stated on the ITR, where the same was filed, and other important
facts related to the filing if her ITR.
74
• In this case, petitioner testified that she did not even know
how much her tax obligations were and that she did not Facts:
bother to inquire or determine the facts surrounding the • On November 3, 2005, the prosecution filed an information before the
filing of her ITR. CTA against the accused Judy Anne Santos for violation of Section 255
• Such neglect or omission was tantamount to “deliberate of the NIRC, as amended, specifically, for her failure to supply correct and
ignorance” or “conscious avoidance.” (Willful Blindness accurate information when she filed her 2002 annual income tax return.
Doctrine) Said information alleged that the accused under-declared her gross
• Thus, all the elements of the violation were present as it was income when she indicated therein a gross income of P8,033,332.70.
sufficiently proven by the prosecution that petitioner and her • The prosecution presented pieces of evidence based on various
husband were persons required to file or make a return, that they Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307)
had failed to do so, and that such failure to make or file the return issued by various entities (i.e., ABS-CBN, Viva Productions, Star Cinema
was willful. Productions, Regal Entertainment, etc.) with whom the accused
contracted with during the taxable year 2002 along with the related
PEOPLE OF THE PHILIPPINES v. SANTOS (Ocampo) contracts, and alleged that her true total gross income for 2002 amounted
[CTA CRIM. CASE No. O-012; January 16, 2013] to P16,396,234.70.
“CTA: Hindi tax evader si Juday kasi walang willful intent!” • In her defense, the accused alleged that she entrusted all her
transactions (e.g., contract negotiations, contract signing, handling fees)
to her manager, Alfonso Lorenzo. With such set-up, she claimed that she
Recit-Ready:
Facts: Judy Anne Santos was charged with tax evasion for her alleged had no knowledge of how much she was earning per project. She denied
that she willfully filed a false and fraudulent ITR and stated that it was her
failure to supply a correct and accurate information when she filed
her ITR for the taxable year 2002. The prosecution alleged that manager who was in charge of filing the tax returns and the payments
she under-declared her income by P8,362,902. However, she thereof. She also stated she really intended to settle the case were it not
for the opposition by her manager and then counsel.
denied the allegation of willful or fraudulent on her part and stated
she entrusted all her transactions to her manager including the
filing of tax returns and the corresponding tax payments. Issue:
WON the accused may be held liable for violation of Section 255 of the
Issue: WON the accused may be held liable for violation of Section 255 of NIRC, as amended —NO
the NIRC, as amended
Held/Ratio: Wherefore, on the ground of reasonable doubt, accused Judy
Held: NO. The CTA held that the prosecution failed to prove the element Anne Santos y Lumagui is hereby acquitted of the crime charged.
of willfulness on the part of the accused to supply the correct and
No. The CTA found that the records were bereft of any evidence to
accurate information on her subject return. The CTA further held
that willful failure cannot be presumed from mere inadvertent or establish the key element of willfulness on the part of the accused to
negligent acts. However, the CTA held that the accused is still supply the correct and accurate information on her subject return.
o The CTA provided that the elements of willful failure to supply correct
civilly liable for the deficiency income tax corresponding to her
undeclared income receipts. and accurate information are as follows:
75
1. That a person is required to supply correct and accurate o However, the CTA held that the accused was still civilly liable for the
information; deficiency income taxes for the taxable year 2002 in the total amount
2. That there is failure to supply correct and accurate information at of P3,418,034.78, including penalties and interests, corresponding to
the time or times required by law or rules and regulations; and the undeclared income receipts by the accused.
3. That such failure to supply correct and accurate information is
done willfully.
o The CTA cited various pronouncements of the Supreme Court on tax
evasion, as follows:
o CIR v. Estate of Toda, Jr: Tax evasion connotes the integration of
three factors: (1) the end to be achieved, i.e., the payment of less
than that known by the taxpayer to be legally due, or the non-
payment of tax when it is shown that a tax is due; (2) an
accompanying state of mind which is described as being evil, in
bad faith, willful or deliberate and not accidental; and (3) a course
of action or failure of action which is unlawful.
o CIR v. Japan Air Lines: The willful neglect to file the required tax
return or the fraudulent intent to evade the payment of taxes,
considering the same is accompanied by legal consequences,
cannot be presumed. The fraud contemplated by law is actual
and constructive. It must be intentional fraud, consisting of
deception willfully and deliberately done or resorted to in order to
induce another to give up some legal right.
o The CTA, thus, held that the element of willful failure to supply correct
and accurate information must be fully established as a positive act or
state of mind. It cannot be presumed nor attributed to mere
inadvertent or negligent acts.
o The CTA held that the prosecution was able to prove that the accused
failed to supply the correct and accurate information in her 2002 ITR
for her failure to declare her other income payments received from
other sources. However, the CTA also held that it is well settled that
mere understatement of a tax is not itself proof of fraud for the
purpose of tax evasion.
o The CTA found that the accused was only negligent and such is not
enough to convict her. Negligence, whether slight or gross, is not
equivalent to evade the tax contemplated by law. Fraud must amount
to intentional wrongdoing with the sole subject of avoiding the tax.
76
PRESCRIPTION OF CRIMINAL ACTION Issue/s:

WON the action has prescribed.
SEC. 281. Prescription for Violations of any Provision of this Code. - Held: No. In addition to the fact of discovery, there must be a judicial
All violations of any provision of this Code shall prescribe after Five (5) proceeding for the investigation and punishment of the tax
years. offense before the fiveyear limiting period begins to run. (See
Prescription shall begin to run from the day of the commission of the below for complete law applicable)
violation of the law, and if the same be not known at the time, from the
discovery thereof and the institution of judicial proceedings for its Section 51(b) of the Tax Code provides that the tax or deficiency so
investigation and punishment. discovered shall be paid upon notice and demand from the CIR.
The prescription shall be interrupted when proceedings are instituted Inasmuch as the final notice and demand for payment of the
against the guilty persons and shall begin to run again if the proceedings deficiency taxes was served on petitioners on July 3, 1968, it was
are dismissed for reasons not constituting jeopardy. only then that the cause of action on the part of the BIR accrued.
The term of prescription shall not run when the offender is absent from the This is so because prior to the receipt of the letter assessment, no
Philippines. violation has yet been committed by the taxpayers.
LIM, SR. v. COURT OF APPEALS (Ong) The offense was committed only after receipt was coupled with the
[GR. No. 48134-37; October 18, 1990] willful refusal to pay the taxes due. The two criminal informations,
“Prescription of criminal action shall begin to run from the discovery AND having been filed on June 23, 1970, are well within the fiveyear
institution of judicial proceedings.” prescriptive period and are not timebarred.
Recit-Ready: Section 354 speaks not only of discovery of the fraud but also
Facts: Spouses Lim filed fraudulent returns for the years 1958 and 1959. institution of judicial proceedings because of the conjunctive
The BIR informed petitioners that they should pay the deficiency “and.”
but they refused despite repeated demands. On July 3, 1968, the In addition to the fact of discovery, there must be a judicial
BIR served their final assessment but they still did not pay. Thus proceeding for the investigation and punishment of the tax
on September 1, 1969, the matter was referred to the Fiscal’s offense before the fiveyear limiting period begins to run.
Office for investigation and prosecution. They were found guilty Thus it only started when the case was indorsed to the
by the trial court and the CA. In this appeal, petitioners claim that Fiscal’s office on September 1, 1969.
the action has prescribed because the offenses charged
prescribed in 5 years and not 10 years and that the prescriptive Tax cases, such as the present ones, are practically
period commenced to run from April 7, 1965, the date of the imprescriptible for as long as the period from the discovery
original assessment. The respondent claims that the prescriptive and institution of judicial proceedings for its investigation and
period should be counted from July 3, 1968 when the final notice punishment, up to the filing of the information in court does
and demand was served. not exceed five (5) years.
77
penalty. This was served on petitioners their final assessment through

their daughter in law on July 3, 1968. They still did not pay.
Facts: • On September 1, 1969, the matter was referred by the BIR to the Manila
• Petitioner spouses Lim were engaged in the dealership of various Fiscal’s Office for investigation and prosecution.
household appliances. They filed income tax returns for the years 1958 • On June 23, 1970, 4 separate criminal informations were filed against
and 1959. petitioners in the Court of First Instance of Manila for violations of Section
• A raid was conducted at their business address and at their premises by 45 and 51, in relation to Section 73 of the NIRC. The trial court found
the NBI. Accounting records which served as bases for an investigation petitioner guilty and were ordered to pay the deficiency (580,588.75 +
undertaken by the BIR. 656,601.80) and a fine of 6000.
• On October 14, 1960, the BIR informed petitioners that revenue • The CA affirmed in toto the decisions of the lower court. 23 days later,
examiners had been authorized to examine their books of account. Emilio Lim died.
• On September 30, 1964, Senior Revenue Examiner Daet found that the • Petitioners:
income tax returns filed by petitioners for the years 1958 and 1959 were o The offenses charged prescribed in 5 years and not 10
false or fraudulent. He recommended an assessment of P835,127 be years and that the prescriptive period commenced to run
made. from April 7, 1965, the date of the original assessment.
• On April 7, 1965, the BIR informed petitioners that there was due from • Respondent:
them the amount of P922,913.04 as deficiency income taxes giving them o Prescriptive period should be counted from July 3, 1968
until May 7, 1965 to pay the amount. when the final notice and demand was served.
• On April 10, 1965, petitioners requested for a reinvestigation. The BIR
expressed willingness to grant such request but on condition that within Issue/s:
10 days from notice, Lim would accomplish a waiver of defense of WON the action has prescribed.
prescription under the Statute of Limitations and that one half of the —NO
deficiency income tax would be deposited with the BIR and the other half
secured by a surety bond. If within the tenday period the BIR did not hear Held/Ratio: In addition to the fact of discovery, there must be a judicial
from petitioners, then it would be presumed that the request for proceeding for the investigation and punishment of the tax offense
reinvestigation had been abandoned before the fiveyear limiting period begins to run.
• Petitioner Emilio Lim refused to comply with the above conditions and
reiterated his request for another investigation. NO.
• On January 31, 1967, the BIR informed the petitioners that their o What we are dealing with here are criminal prosecutions for fling
deficiency income tax liabilities had been assessed at P934,000.54 fraudulent income tax returns and for refusing to pay deficiency taxes.
including interest and compromise penalty for late payment. o The governing penal provision is Section 73 in conjunction with
• On March 15, 1967, petitioners wrote the BIR to protest the latest Section 354.
assessment and repeated their request for reinvestigation. o On the 5 year prescriptive period, both parties are in agreement. They
• On October 10, 1967, the BIR decided that there was no cause for differ however in the manner of computation, specifically as to when
reversal of the assessment and they were required to pay deficiency the period should commence.
income taxes amounting to P1,237,190.55 inclusive of interest and
78
"Section 73. Penalty for failure to file return or to pay tax.— Anyone o Section 51(b) of the Tax Code provides that the tax or deficiency so
liable to pay the tax, to make a return or to supply information discovered shall be paid upon notice and demand from the CIR.
required under this Code, who refuses or neglects to pay such tax, o Inasmuch as the final notice and demand for payment of the
to make such return or to supply such information at the time or deficiency taxes was served on petitioners on July 3, 1968, it was only
times herein specified in each year, shall be punished by a fine of then that the cause of action on the part of the BIR accrued. This is so
not more than two thousand pesos or by imprisonment for not more because prior to the receipt of the letter assessment, no violation has
than six months, or both. yet been committed by the taxpayers.
"Any individual or any officer of any corporation, or general o The offense was committed only after receipt was coupled with the
copartnership x x x, required by law to make, render, sign or verify willful refusal to pay the taxes due.
any return or to supply any information, who makes any false or o The two criminal informations, having been filed on June 23, 1970,
fraudulent return or statement with intent to defeat or evade the are well within the fiveyear prescriptive period and are not
assessment required by this Code to be made, shall be punished by timebarred.
a fine of not exceeding four thousand pesos or by imprisonment for o With regard to Criminal Cases Nos. 1790 and 1791 which dealt with
not exceeding one year, or both." petitioners' filing of fraudulent consolidated income tax returns with
intent to evade the assessment decreed by law, petitioners contend
"Section 354. Prescription for violations of any provisions of this that the said crimes have likewise prescribed. They advance the view
Code.—All violations of any provision of this Code shall prescribe that the fiveyear period should be counted from the date of discovery
after five years. of the alleged fraud which, at the latest, should have been October
"Prescription shall begin to run from the day of the commission 15, 1964, the date stated by the Appellate Court in its resolution of
of the violation of the law, and if the same be not known at the April 4, 1978 as the date the fraudulent nature of the returns was
time, from the discovery thereof and the institution of judicial unearthed.
proceedings for its investigation and punishment. o The Court adopts the view of the Solicitor General:
'The prescription shall be interrupted when proceedings are o The crime of filing false returns can be “discovered” only
instituted against the guilty persons and shall begin to run again if after the manner of commission and nature and extent
the proceedings are dismissed for reasons not constituting jeopardy. of fraud have been ascertained. It was only on October
"The term of prescription shall not run when the offender is absent 10, 1967 when the BIR rendered its final decision
from the Philippines.” holding that there was no ground for the reversal of the
assessment
o Petitioners had filed false and fraudulent income tax returns by o Section 354 speaks not only of discovery of the
nondisclosure of the aggregate amount of P2,197,742.92, thereby fraud but also institution of judicial proceedings
depriving the Government in the amount of P1,237,190.55, because of the conjunctive “and.”
representing deficiency income taxes inclusive of interest, surcharges o In addition to the fact of discovery, there must be a
and compromise penalty for late payment. judicial proceeding for the investigation and
o Both agree that the violations could only be committed after service of punishment of the tax offense before the fiveyear
notice and demand for payment. limiting period begins to run. Thus it only started
79
when the case was indorsed to the Fiscal’s office on

September 1, 1969.
o As Section 354 stands in the statute book (and to this day it has
remained unchanged) it would indeed seem that tax cases, such as
the present ones, are practically imprescriptible for as long as
the period from the discovery and institution of judicial
proceedings for its investigation and punishment, up to the filing
of the information in court does not exceed five (5) years.
o The petition, however, is impressed with merit insofar as it assails the
inclusion in the judgment of the payment of deficiency taxes in
Criminal Cases Nos. 17881789. The trial court had absolutely no
jurisdiction in sentencing the Lim couple to indemnify the Government
for the taxes unpaid. The lower court erred in applying Presidential
Decree No. 69, particularly Section 316 thereof, which provides that
"judgment in the criminal case shall not only impose the penalty but
shall order payment of the taxes subject of the criminal case",
because that decree took effect only on January 1, 1973 whereas the
criminal cases subject of this appeal were instituted on June 23, 1970.
Presidential Decree No. 69 has no retroactive application. There is no
legal sanction for the imposition of payment of the civil indemnity to
the government in a criminal proceeding for violation of income tax
laws.
o Considering that under Section 316 of the Tax Code prior to its
amendment the trial could not order the payment of the unpaid taxes
as part of the sentence, the question of whether or not the
supervening death of petitioner Emilio E. Lim, Sr. has extinguished his
tax liability need not concern us. However, with regard to the
pecuniary penalty of fine imposed on the deceased Lim, this is
necessarily extinguished by his death in accordance with Section 89
of the Revised Penal Code.
80
smuggled and confiscated goods or One Million Pesos (P1,000,000)

INFORMER’S REWARD per case, whichever is lower, shall be given to persons instrumental in
the discovery and seizure of such smuggled goods.
The cash rewards of informers shall be subject to income tax,
SECTION 282. Informer's Reward to Persons Instrumental in the collected as a final withholding tax, at a rate of ten percent (10%).
Discovery of Violations of the National Internal Revenue Code and in The Provisions of the foregoing Subsections notwithstanding, all
the Discovery and Seizure of Smuggled Goods. - public officials, whether incumbent or retired, who acquired the information
(A) For Violations of the National Internal Revenue Code.- Any in the course of the performance of their duties during their incumbency,
person, except an internal revenue official or employee, or other are prohibited from claiming informer's reward.
public official or employee, or his relative within the sixth degree of
consanguinity, who voluntarily gives definite and sworn information,
not yet in the possession of the Bureau of Internal Revenue, leading
to the discovery of frauds upon the internal revenue laws or violations REVENUE REGULATIONS 16-2010 (NOVEMBER 25, 2010)
of any of the provisions thereof, thereby resulting in the recovery of
SUMMARY RR 16-2010
revenues, surcharges and fees and/or the conviction of the guilty
Prescribes the guidelines, rules and procedures in the filing of
party and/or the imposition of any of the fine or penalty, shall be
confidential information and the investigation of cases arising therefrom.
rewarded in a sum equivalent to ten percent (10%) of the revenues,
surcharges or fees recovered and/or fine or penalty imposed and
A qualified informer shall be rewarded in a sum equivalent to 10%
collected or One Million Pesos (P1,000,000) per case, whichever is
of the revenues, surcharges or fees recovered and/or fine or penalty
lower. The same amount of reward shall also be given to an informer
imposed and collected or P 1,000,000 per case, whichever is lower. The
where the offender has offered to compromise the violation of law
following are disqualified to avail of the informer's reward:
committed by him and his offer has been accepted by the
a. A BIR official or employee or any other incumbent public
Commissioner and collected from the offender: Provided, That should official or employee;
no revenue, surcharges or fees be actually recovered or collected, th
b. Relative within the 6 civil degree of consanguinity of a
such person shall not be entitled to a reward: Provided, further, That
BIR official or employee, or other public official or
the information mentioned herein shall not refer to a case already employee; and
pending or previously investigated or examined by the Commissioner c. Though already retired or otherwise separated from service,
or any of his deputies, agents or examiners, or the Secretary of BIR officials or employees or other public officials who
Finance or any of his deputies or agents: Provided, finally, That the acquired the information in the course of the performance
reward provided herein shall be paid under rules and regulations of their duties during their incumbency.
issued by the Secretary of Finance, upon recommendation of the
Confidential Information against the denounced taxpayer shall be
Commissioner.
under oath and shall be personally executed and filed by the Informer
before the Chief, Prosecution Division, BIR National Office on the following
(B) For Discovery and Seizure of Smuggled Goods.To encourage violations:
the public to extend full cooperation in eradicating smuggling, a cash a. Attempt to evade or defeat tax;
reward equivalent to ten percent (10%) of the fair market value of the b. Failure to file return, supply correct and accurate
information, pay tax, withhold and remit tax and refund
81
excess taxes withheld on compensation; case may be, should be given access to the identity or contact details of
c. Failure or refusal to issue receipts or sales or commercial the Informer.
invoices, violations related to the printing of such receipts or
invoices or other violations; Upon the commencement of the investigation process, the
d. Unlawful pursuit of business; assigned investigators shall not divulge to third parties, including the
e. Use of multiple Tax Identification Number/s (TINs); Informer, any information, data or documents gathered during the
f. Making false entries, records or reports or using falsified investigation process. The investigators may only provide the Informer with
or false accountable forms; and updates on the status of the investigation.
g. Other violations of the National Internal Revenue Code In order for an Informer to be entitled to a reward, the Confidential
(NIRC) of 1997. Information given must lead to or be instrumental in the discovery of the
fraud or violation of the provisions of the NIRC of 1997, as amended, or
However, if the estimated basic tax liability arising from the special laws being administered by the BIR, and the same must result in
alleged violation is less than P 1,000,000.00, the confidential information the actual recovery or collection of revenues, surcharges and fees, and/or
should be filed before the Chief, Legal Division of the Revenue Region the conviction of the guilty party or parties, and/or the imposition of any
having jurisdiction over the taxpayer being denounced. A Confidential fine or penalty or the actual collection of a compromise amount, in case of
Information shall be treated as valid only if it meets ALL the following amicable settlement.
requisites: Where there are two (2) or more Informers in the same case, the
a. The Informer is not disqualified. one who gave the information in full satisfaction of the conditions herein
b. The Informer voluntarily provides sworn information on the outlined shall be entitled to the reward. In the event that each Informer
tax fraud or violation of the NIRC of 1997, as amended, meets all conditions fully, the Informer who first furnished the information
allegedly committed by the denounced taxpayer. shall be entitled to the reward. In case two (2) or more persons jointly filed
c. The said information is not yet in the possession of the BIR. the confidential information who are qualified for the reward, they shall
d. The said information does not refer to a case already divide the reward equally among themselves.
pending or previously investigated or examined by the Taxes assessed as a result of a valid Confidential Information, if
Commissioner of Internal Revenue or any of his deputies, involving a commission of criminal fraud established beyond reasonable
agents or examiners, or by the Secretary of Finance or any doubt, shall not be compromised. Unless otherwise provided by relevant
of his deputies or agents. revenue issuances, taxpayer subject of a valid Confidential Information
e. The said information does not refer to or is not exactly shall be excluded from the coverage of any administrative program of the
similar to a previous information filed by another informer Bureau promulgated to facilitate and enhance revenue collection (i.e. VAP,
covering the same taxpayer describing the same scheme VAAP, CTRP, etc.). Consequently, taxpayers who availed of such
or information covering the same taxable year or period. programs are not entitled to the privilege of “last priority in audit or
investigation” or any other benefit to be accorded therein.
In order to protect the identity of the Informer and safeguard the The informer’s claim for reward shall be filed with the Prosecution
strict confidentiality of his information, the name of the Informer or any Division at the BIR National Office or with the Legal Division, Revenue
information appearing in the second copy of the Confidential Information Regional Office, as the case may be. Claims for rewards shall be filed
that may possibly lead to the identity of the said Informer shall be deleted within three (3) years from the date of actual payment, recovery or
by the Records Management Division. From start until completion of the collection of revenues, surcharges and fees, and/or the imposition of any
investigation, the docket of the case shall bear no information on the fine or penalty or the actual collection of a compromise amount, in case of
identity of the Informer. However, in extremely meritorious cases, wherein amicable settlement.
there is a need to communicate with the Informer, the Chief, National The Informer's Reward shall be subject to Income Tax, collected
Investigation Division (NID) or Special Investigation Division (SID), as the as a Final Withholding Tax, at the rate of 10%. The tax shall be withheld
by the Accounting Division and shall be remitted to the BIR in the manner
82
provided by law. internal revenue laws or violations of any provision of the NIRC of 1997,
The procedures in the processing of Confidential Information and as amended, resulting in the recovery of revenues, surcharges and
documents and conduct of preliminary investigation at the National Office fees and/or the conviction of the guilty party and/or the imposition of any
and Regional Office are specified in the Regulations. fine or penalty.
2.2 Confidential Information- refers to the sworn written
statement given voluntarily by an Informer. Such statement must
definitely state the facts or acts constituting fraud committed by a person
REVENUE REGULATIONS NO. 16-2010 or entity denounced to have violated or in violation of the NIRC of 1997,
as amended.
SUBJECT: Guidelines, Rules & Procedures in the Filing of th
2.3 Relatives within the Sixth (6 ) Civil Degree of
Confidential Information & Investigation of Cases Consanguinity-this means the father, mother, children,
Arising Therefrom grandchildren, grandfather, grandmother, brothers, sisters, uncles,
aunts, nephews, nieces, first cousins and second cousins of BIR officials
With the advent of the Run After Tax Evaders (RATE) Program in and employees or other public officials or employees.
2005, the Bureau of Internal Revenue (BIR) has received an increased
number of information from concerned citizens against taxpayers, SECTION 3. Disqualifications of Informers for Reward. The following
individual or corporate, who allegedly violated the pertinent provisions of are disqualified to avail of the Informer's Reward:
the National Internal Revenue Code (NIRC) of 1997, as amended. (a) A BIR official or employee or any other incumbent public official or
employee;
Pursuant to Department of Finance (DOF) Regulations No. 1, in th
(b) Relative within the sixth (6 ) civil degree of consanguinity of a BIR
relation to Section 282 of the NIRC of 1997, as amended, a qualified
official or employee, or other public official or employee; and
Informer shall be rewarded in a sum equivalent to ten percent (10%) of the
(c) Though already retired or otherwise separated from service, BIR
revenues, surcharges or fees recovered and/or fine or penalty imposed
officials or employees or other public officials who acquired the
and collected or One Million Pesos (P1,000,000) per case, whichever is
information in the course of the performance of their duties during
lower.
their incumbency.
SECTION 1. Objectives.
SECTION 4. Filing of the Informer’s Confidential Information.
Confidential Information against the denounced taxpayer
(a) To provide guidelines, rules and procedure in the
shall be under oath and shall be personally executed and filed by the
filing of Confidential Information for violations of the NIRC of 1997, as
Informer before the Chief, Prosecution Division, BIR National
amended;
Office on the following violations:
(b) To facilitate the investigation of persons covered
(a) Attempt to Evade or Defeat Tax (Section 254 of the NIRC of
by such Confidential Information; and
1997, as amended);
(c) To delineate the responsibilities of the different BIR offices and
(b) Failure to File Return, Supply Correct and Accurate
units involved in the filing, investigation, disposition of such
Information, Pay Tax, Withhold and Remit Tax and Refund
Confidential Information, and the grant and payment of reward.
Excess Taxes Withheld on Compensation (Section 255
of the NIRC, as amended);
SECTION 2. Definition of Terms.
(c) Failure or Refusal to Issue Receipts or Sales or
2.1 Informer- any qualified person who voluntarily provides
Commercial Invoices, Violations Related to the Printing of
definite and sworn information not yet in the possession of the BIR
such Receipts or Invoices or Other Violations (Section 264 of
nor of public knowledge, leading to the discovery of frauds upon the
the NIRC of 1997, as amended);
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(d) Unlawful Pursuit of Business (Section 258 of the NIRC of 1997, statement. It must specify: 1) the name & address of the taxpayer
as amended); committing the violation; 2) taxable period when the fraud or violation
(e) Use of multiple Tax Identification Number/s (TINs); was committed; 3) the internal revenue law allegedly violated; 4) the
(f) Making False Entries , Records or Reports or Using Falsified address of witnesses, if any; and 5) other facts pertinent to the
or False Accountable Forms (Section 257 of the NIRC, as violation.
amended); and Also, it must be supported by “substantial evidence” or that
(g) Other violations of the NIRC of 1997. amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion, such as the following documents:
However, if the estimated liability arising from the alleged 1. BIR’s Certificate of
violation is less than One Million Pesos (P1,000,000.00), the Registration; 2. Income
Confidential Information should be filed before the Chief, Legal Division of Tax Returns;
the Revenue Region having jurisdiction over the taxpayer being 3. Deed of Absolute Sale;
denounced. 4. License to Operate Business in the Philippines, as issued
The format of the duly sworn Confidential Information shall by the Securities and Exchange Commission (SEC);
be in accordance with the sample attached hereto as Annex “A”. 5. General Information Sheet (GIS) obtained from the
SEC; 6. Audited Financial Statements; and
SECTION 5. Requisites of a Valid Confidential Information. 7. Other relevant documents
Pursuant to Section 282 of the NIRC of 1997, as amended, a
Confidential Information shall be treated as valid only if it meets ALL the The foregoing documents and other “substantial evidence”
following requisites: to be submitted by the Informer must consist of certified true
copies. For this purpose, a certified true copy is a copy which is
(a) The Informer is not disqualified as provided under Section 3 authenticated and signed by the authorized officer of the agency
of this Order. having custody of the original thereof. However, for purposes of
Aside from stating his name and address, the Informer’s duly evaluation, mere photocopies of documents which are within the
sworn Confidential Information shall definitely state that he is not related custody of the denounced taxpayer (i.e. private records) may be
th accepted.
within the sixth (6 ) civil degree of consanguinity to any official or
If the Informer does not have possession or control of such
employee of the BIR, or any other public official or employee.
Otherwise, his Confidential Information shall be treated as invalid. documents, records, or books but he has knowledge of the person who
If the Informer withheld such information in his Confidential has the custody, possession or control thereof, or the place where they
Information and as a result of which he was paid the Informer’s are kept, he shall state in his sworn information the person who has the
reward, he shall, upon discovery of such fact, be liable to the penalty of possession thereof and/or the location where such documents, records
perjury and, in addition, he shall also be required to restitute to the BIR and books are kept.
the amount of reward wrongfully obtained, inclusive of the legal
interest thereon. (c) The said information is not yet in the possession of the BIR.
In the course of the evaluation of the Informer’s
Confidential Information, the Chief, Prosecution Division or the Chief,
(b) The Informer voluntarily provides sworn information on the tax
Legal Division, as the case may be, shall determine from the records
fraud or violation of the NIRC of 1997, as amended, allegedly
of the BIR whether the information being submitted is already
committed by the denounced taxpayer.
reasonably in the possession of the BIR [e.g. the information offered by
The facts mentioned in the information constituting the
the Informer is already available from the BIR’s Third Party
alleged tax evasion or violation of the NIRC of 1997, as amended,
Information (TPI) System or the same is of public knowledge as
must be definite, concise and credible, and not merely a general
when it is already the subject of a newspaper publication or report,
84
television or radio broadcast, etc.], or will reasonably come into the shall indicate the date and time the information was received; its Book
possession of the BIR in the course of its operations. Entry Number; the name and address of the Informer; name and
Unless it is established that the information offered by the address of the person denounced; names and addresses of the
Informer is not available from the records of the BIR, the information witnesses, if any; the subject matter of the information; and the list of
shall not be treated as valid. records, documents and books submitted, if any. All the
supporting documents submitted shall be duly identified, marked and
(d) The said information does not refer to a case already sequentially numbered.
pending or previously investigated or examined by the
Commissioner of Internal Revenue or any of his deputies, agents or The First copy of the numbered Confidential Information
examiners, or by the Secretary of Finance or any of his deputies or and its supporting documents shall be retained by the Records
agents. Management Division for filing and reference.
Any information provided in the said Confidential Information,
which had already been filed with the Department of Finance and any of The Second Copy of the numbered Confidential Information
its attached agencies, including the BIR, shall not be treated as a and the attached supporting documents shall be forwarded to the
valid Confidential Information. Enforcement Service for indorsement to the National Investigation
Division (NID) for preliminary investigation and/or audit of the
(e) The said information does not refer to or is not exactly denounced taxpayer.
similar to a previous information filed by another informer covering the
same taxpayer describing the same scheme or information covering the The Third Copy of the numbered Confidential Information
same taxable year or period. and the attached supporting documents shall be forwarded to the Chief,
Prosecution Division, for file and future reference (i.e. for processing of
SECTION 6. Processing of the Confidential Information and claim for reward).
Documents.
The Fourth Copy of the numbered Confidential
(a) At the National Office. Information duly stamped received by the Records Management Division
shall be furnished to the Informer, which shall serve as his identification
Upon receipt of the information together with the or evidence that he is the true informer.
supporting documents, the Chief, Prosecution Division, shall evaluate the
same and shall determine whether it qualifies as a valid Confidential (b) At the Revenue Regional Office.
Information pursuant to Section 5 of this Order.
Upon receipt of the information together with the
If the information is found to be invalid and insufficient, the supporting documents, the Chief, Legal Division, shall evaluate the
Informer, within three (3) days from the receipt of the information, shall same and shall determine whether it qualifies as a valid Confidential
be notified of such findings and the information with the supporting Information pursuant to Section 5 of this Order.
documents should be returned to him. If the information is found to be invalid and insufficient, the
Informer, within three (3) days from the receipt of the information, shall
All four (4) copies of the Confidential Information with its be notified of such findings and the information with the supporting
supporting documents shall be forwarded to the Records documents should be returned to him.
Management Division, BIR National Office, for numbering and
recording in the Confidential Entry Book provided for the purpose. If the information is found to be a valid Confidential
The individual entries to be made in the Confidential Entry Book Information, the Informer shall execute under oath four (4)
copies of his Confidential Information before the Chief, Legal Division,
85
and he shall attach one (1) copy of the supporting documents to each
copy of the Confidential Information. In order to protect the identity of the Informer and
accordingly safeguard the strict confidentiality of his information, the name
All four (4) copies of the Confidential Information with its of the Informer or any information appearing in the Second Copy
supporting documents shall be forwarded to the Records (intended for NID/SID) of the Confidential Information that may possibly
Management Division, BIR National Office, for numbering and lead to the identity of the said Informer, shall be deleted by the Records
recording in the Confidential Entry Book provided for the purpose. Management Division. From start until completion of the investigation,
The individual entries to be made in the Confidential Entry Book the docket of the case shall bear no information on the identity of the
shall indicate the date and time the information was received; its Book Informer.
Entry Number; the name and address of the Informer; name and
address of the person denounced; names and addresses of the However, in extremely meritorious cases, wherein there is a
witnesses, if any; the subject matter of the information; and the list of need to communicate with the Informer, the Chief, NID or SID, as the
records, documents and books submitted, if any. All the case may be, should be given access to the identity or contact details of
supporting documents submitted shall be duly identified, marked and the Informer.
sequentially numbered.
SECTION 8. Preliminary Investigation.
The First copy of the numbered Confidential Information (a) At the National Office.
and its supporting documents shall be retained by the Records
Management Division for filing and reference. For cases covered by a sworn Confidential Information –
Upon receipt of the second copy of the Confidential
The Second Copy of the numbered Confidential Information Information and other documents or evidence duly processed by the
and the attached supporting documents shall be forwarded to the Records Management Division, the Chief, NID shall forthwith
Regional Director of the Revenue Region concerned for transmittal to assign the case to any of his investigators for the conduct of a
its Special Investigation Division (SID) for preliminary investigation preliminary investigation to determine whether there exists probable
and/or audit of the denounced taxpayer. cause that tax fraud or a violation of any provision of the NIRC of
1997, as amended, was committed. The assigned investigator has
The Third Copy of the numbered Confidential Information sixty (60) working days from assignment of the Confidential Information
and the attached supporting documents shall be forwarded to the to conduct a preliminary investigation thereon.
Regional Director of the Revenue Region concerned for transmittal to its
Legal Division, for filing and reference (i.e. processing of claim for If there exists probable cause that tax fraud or a violation
reward). of any provision of the NIRC of 1997, as amended, was
committed, a report requesting for the issuance of Electronic Letter
The Fourth Copy of the numbered Confidential of Authority (eLA) shall be prepared. The Chief, NID shall submit the
Information duly stamped received by the Records Management Division report and recommendation on the case to the Assistant Commissioner,
shall be furnished to the Informer, which shall serve as his identification or Enforcement Service, for review of the Deputy Commissioner, Legal &
evidence that he is the true informer. Inspection Group and for approval by the Commissioner who shall
issue the eLA.
The Records Management Division is responsible in observing
strict confidentiality of the contents of the Confidential Information, In cases where the information is deemed insufficient to
except as provided in this Order. establish probable cause that tax fraud or a violation of any provision
of the NIRC of 1997, as amended, was committed, the Informer
SECTION 7. Non-disclosure of the Identity of the Informer shall immediately be notified, within ten (10) working days from
86
the time the findings was established, that his denunciation shall be (b) At the Regional Office.
referred, for purposes of regular audit, to the appropriate Revenue For those cases which are either directly filed with the Revenue
Region/District Office which has jurisdiction over the taxpayer concerned. Region/District Office or whose investigation had been referred
Whenever the Informer fails to substantiate the allegations in his by the Assistant Commissioner, Enforcement Service, the
Confidential Information or fails to provide addresses, information shall be assigned by the Chief, SID, to any of his
telephone/cellular numbers, and other means by which he investigators for the conduct of a preliminary investigation and
could be contacted, or cannot be reached thereat despite diligent determine the existence of probable cause that tax fraud or a violation of
efforts by the NID, the Confidential Information shall be archived. any provision of the NIRC of 1997, as amended, was committed. The
investigator to whom the information was assigned has sixty (60)
For cases covered by Denunciation Letters or unsworn complaints – working days from receipt thereof to complete the preliminary
In cases where the denunciation is sent through electronic or investigation.
ordinary mail, the Chief, NID, shall assign the same to any of his In cases where the information is deemed insufficient to
investigators. The assigned investigator shall have thirty (30) days establish probable cause that tax fraud or a violation of any provision
therefrom to evaluate the same. of the NIRC of 1997, as amended, was committed, the Informer shall
Within ten (10) working days from receipt of the corresponding be notified within ten (10) working days from the time the that findings
Memo-Assignment from the Chief, NID, the investigator shall send a was established, that his information shall be archived.
letter to the Informer acknowledging receipt of the information and If there exists probable cause that tax fraud or a violation
advising him to submit additional information or other supporting of any provision of the NIRC of 1997, as amended, was committed, a
documents, if necessary. report shall be submitted by the Chief, SID for the approval by the
In cases where the information is deemed insufficient to Regional Director. The report shall be referred by the Regional
establish probable cause that tax fraud or a violation of any provision Director to concerned Revenue District Officer (RDO). The Regional
of the NIRC of 1997, as amended, was committed, the Informer shall Director shall issue the eLA upon request of the said RDO.
be notified within ten (10) working days from the time the findings
was established, that his information shall be forwarded, for SECTION 9. Confidentiality of Investigation.
purposes of regular audit, to the appropriate Revenue Pursuant to Section 270 of the NIRC of 1997, as amended,
Region/District Office which has jurisdiction over the taxpayer upon the commencement of the investigation process, the assigned
concerned. Whenever the Informer fails to investigators shall not divulge to third parties, including the Informer,
substantiate the allegations in his denunciation letter or provide any information, data or documents gathered during the investigation
addresses, telephone/cellular numbers, and other means by which they process. The investigators may only provide the Informer with update on
could be contacted, or cannot be reached thereat despite diligent the status of the investigation.
efforts by the NID, the information shall be archived.
Should the information and evidence provided be deemed SECTION 10. Reporting of Dockets/Cases covered by
sufficient by the investigator, the Informer shall be invited to appear Confidential Information.
and execute under oath a sworn Affidavit of Confidential The NID or SID, as the case may be, shall prepare a report
Information before the Chief, Prosecution Division, as required under which contains the legal and factual basis for the entitlement of
this Order. The informer shall also be made aware that the duly the Informer's Reward. Such report, together with the docket of
executed affidavit of Confidential Information is a prerequisite for the case, shall be forwarded to the Prosecution Division of the
entitlement to the Informer’s Reward. In case the Informer, despite National Office or Legal Division of the Revenue Region, as the case
having been so invited, fails to appear and execute the affidavit of may be, for evaluation. The NID or SID may render a partial report for
information under oath, the NID shall nonetheless pursue the payment of Informer's Reward on undisputed issues of the case which
preliminary investigation. clearly refers to the information contained in the Confidential
Information. The NID or SID shall attach a certification from the
87
Revenue Accounting Division confirming that payment has already Bureau promulgated to facilitate and enhance revenue collection
been made by the denounced taxpayer. (i.e. VAP, VAAP, CTRP, etc.). Consequently, taxpayers who availed of
such programs are not entitled to the privilege of “last priority in audit or
SECTION 11. Entitlement of an Informer to a Reward. investigation” or any other benefit to be accorded therein.
In order for an Informer to be entitled to a reward, the Confidential
Information given must lead to or be instrumental in the discovery of the
fraud or violation of the provisions of the NIRC of 1997, as amended, SECTION 15. Procedure for Follow-ups by Informers.
or special laws being administered by the BIR, and the same must th
On or before the tenth (10 ) day of each month following receipt by the
result in the actual recovery or collection of revenues, surcharges and
NID/SID of the denunciation or information, a letter advising the
fees, and/or the conviction of the guilty party or parties, and/or the
Informer about the status of his Confidential Information shall be sent by
imposition of any fine or penalty or the actual collection of a compromise
the concerned office. Pursuant to Section 270 of the NIRC of 1997, as
amount, in case of amicable settlement.
amended, informers may only be told about the current status of their
Where there are two (2) or more Informers in the same case,
denunciation or information, but not the specific actions taken or to be
the one who gave the information in full satisfaction of the conditions
taken thereon, any information, data or documents gathered against the
herein outlined shall be entitled to the reward.
subject taxpayer.
In the event that each Informer meets all conditions fully, the
To ensure confidentiality, any follow-up or request for update of
Informer who first furnished the information shall be entitled to the reward.
status by Informers shall be made in writing by indicating the Informer’s
In case two (2) or more persons jointly filed the
Name and C.I. No. that appear in the confidential information or
Confidential Information who are qualified for the reward, they shall
Memo Assignment Order No. (for unsworn confidential information).
divide the reward equally among themselves.
Follow-ups or requests for status updates which do not indicate the
foregoing information or those made through telephone or those made
personally or those made beyond three (3) years from the filing date
SECTION 12. Amount of Reward to the Informer.
of the Confidential Information shall not be entertained.
The Informer’s reward shall be equivalent to ten percent (10%)
All valid written follow-ups or requests of Informers shall be acted
of the taxes and penalties (or compromise amount, in case of
upon by the assigned investigator within ten (10) working days from
compromise settlement) actually collected as a result of the
the date of receipt. For this purpose, the assigned investigator
Confidential Information, or One Million Pesos (P1,000,000.00) per case,
shall submit a Memorandum Report and a draft letter to the
whichever is lower, pursuant to Section 282 of the NIRC of 1997, as
Informer addressing the concerns and issues being raised by
amended.
the latter. The signatory for Memorandum Report shall be the
Supervisor of the concerned NID/SID group. If the NID/ SID Chief
SECTION 13. Assessment involving a criminal fraud shall
finds the Memorandum Report in order, he shall sign the draft letter
not be compromised.
addressed to the Informer.
Taxes assessed as a result of a valid Confidential
Information, if involving a commission of criminal fraud established
SECTION 16. Claims for Informer’s Reward.
beyond reasonable doubt, shall not be compromised pursuant to the
The Informer’s Claim for Reward shall be filed with the
provisions of Section 204 of the NIRC of 1997, as amended.
Prosecution Division at the BIR National Office or with the Legal
Division, Revenue Regional Office, as the case may be.
SECTION 14. Exclusion from administrative programs that gives
Claims for rewards shall be filed within three (3) years from the
“last priority in audit or investigation” and other benefits.
date of actual payment, recovery or collection of revenues,
Unless otherwise provided by relevant revenue issuances,
surcharges and fees, and/or the imposition of any fine or penalty or
taxpayers subject of a valid Confidential Information shall be
the actual collection of a compromise amount, in case of amicable
excluded from the coverage of any administrative program of the
88
settlement. Upon receipt of the approval from the Secretary of Finance

Claims for Reward on cases investigated at the NID for the payment of the claim for Informer's Reward, a Disbursement
1. The Informer/Claimant shall file his claim for reward at the Voucher (DV) together with the supporting documents shall be prepared
Prosecution Division, National Office. by the Enforcement Service and shall be forwarded to the Accounting
2. The Chief, Prosecution Division, shall evaluate the claim and Division for processing of the Claim, subject to budgeting, accounting,
determine whether the Informer is entitled to a reward as detailed in auditing and other pertinent rules and regulations.
this Order. After processing the DV and its supporting documents, the
3. After evaluation, the Chief, Prosecution Division, Accounting Division shall forward the same to the Financial Services
recommendation of approval/denial of the claim, for approval of payment.
Commissioner, Enforcement Service. After approval of Payment, the Financial Services shall
4. After the review by the Assistant Commissioner, Enforcement Service, forward the documents to the General Services Division for the
the recommendation of approval/denial shall be forwarded to preparation of the check, subject to existing Revenue Delegation
the Deputy Commissioner, Legal and Inspection Group. Authority Order and other pertinent rules and regulations.
5. After the review by the Deputy Commissioner, Legal and
Inspection Group, the recommendation of approval/denial shall be SECTION 18. Final withholding tax on Informer’s Reward.
forwarded to the Commissioner of Internal Revenue. The Informer's Reward herein provided shall be subject to
6. Should the Commissioner of Internal Revenue find the claim income tax, collected as a final withholding tax, at the rate of ten percent
meritorious, the same shall be forwarded to the Secretary of Finance (10%), pursuant to Section 282 of the NIRC of 1997, as amended. The
for final approval. Otherwise, the Commissioner of Internal tax shall be withheld by the Accounting Division and shall be remitted
Revenue shall notify the Claimant/Informer of the denial of the to the BIR in the manner provided by law.
claim.
SECTION 19. Repealing Clause.
Claims for Reward on cases investigated at the SID, Revenue Region All existing issuance or portions thereof which are
1. The Informer/Claimant shall file his claim for reward at the Legal inconsistent herewith are hereby repealed.
Division of the concerned Revenue Regional Office.
2. The Chief, Legal Division, shall evaluate the claim and determine SECTION 20. Effectivity.
whether the Informer is entitled to a reward as detailed in this Order. This Revenue Regulations shall take effect immediately.
3. After evaluation, the Chief, Legal Division,
shall forward his recommendation of
approval/denial, to the Regional Director.
4. After the review by the Regional Director, the
recommendation of approval/denial shall be forwarded to the
Deputy Commissioner, Legal and Inspection Group.
5. After the review by the Deputy Commissioner, Legal and ANNEX A
Inspection Group, the recommendation of approval/denial shall be
forwarded to the Commissioner of Internal Revenue. BUREAU OF INTERNAL RENENUE
6. Should the Commissioner of Internal Revenue find merit on the claim, QUEZON CITY
the same shall be forwarded to the Secretary of Finance for final
approval. Otherwise, the Commissioner of Internal Revenue
shall notify the Claimant/Informer of the denial of the claim. Entry No.___________________
__________________
SECTION 17. Payment of Informer's reward. REPUBLIC OF THE PHILIPPINES
89
BUREAU OF INTERNAL REVENUE

QUEZON CITY ________________________
AFFIDAVIT Affiant
I, ________________________________________, ______ years

of age, married/single, and a resident of SUBSCRIBED AND SWORN to before me this_____ day of
_______________________________________________, after having ______________, 2010, affiant having exhibited to me his
been duly sworn in accordance with the law, depose and say: ______________________ issued at _______________ on
_________________
1. That I am not a Bureau of Internal Revenue (BIR) official or
employee, or other public official;
2. That I am not related within the sixth civil degree of consanguinity to
NOTARY PUBLIC
any BIR official or employee, or other public official;
3. That I hereby furnish the information that
!
__________________________________
______________________________________________________
______________________________________________________
____________________________ (State definitely and specifically
the facts constituting as grounds for the information and frauds
upon or violations of the internal revenue laws, either contemplated
or already effected.)
4. That to the best of my knowledge and belief, this information is not
yet in the possession of the Bureau of Internal Revenue; nor does
this refer to any case of fraud or violation already pending or
previously investigated or examined by any official or employee of
the BIR or the Department of Finance;
5. That this information is given voluntarily and not for the purpose of
harassing, molesting or in any way prejudicing any person
whatsoever;
6. That I request that this information be held strictly confidential; and
7. That I hereby reserve my right to claim for reward under Section 282
of the National Internal Revenue Code, as amendment.
Done this ___th day of ___________, 20___
90
91
AGATEP •ARCAINA • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • COLOQUIO • CUALOPING • DE LUIS • DIPLOMA • FAJARDO • GO • GUZMAN
LAYNO • LIM, J. • LIM, Q. • LUNA • OCAMPO • ONG • PASCUAL • REYES • ROCILLO • TRIAS • TUAZON • VANSLEMBROUCK • VILLARIN, L. • VILLARIN, P. • VILLARIVERA
POWER/REMEDY OF COLLECTION Republic Act No. 9282 (March 30 2004)
AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX

COLLECTION IN CASES WHERE ASSESSMENT HAS BECOME FINAL APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A
AND UNAPPEALABLE
COLLEGIATE COURT WITH SPECIAL JURISDICTION AND
ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE
CERTAIN SECTIONS OR REPUBLIC ACT NO. 1125, AS AMENDED,
SECTION 205. Remedies for the Collection of Delinquent Taxes. – OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX
The civil remedies for the collection of internal revenue taxes, fees or APPEALS, AND FOR OTHER PURPOSES
charges, and any increment thereto resulting from delinquency shall be:
(*Emphasis are made through the underlined and italicized words, no
(a) By distraint of goods, chattels, or effects, and other personal summaries are made so as to ensure no important detail/s is/are omitted
property of whatever character, including stocks and other securities, and so that you can always refer to the original law)
debts, credits, bank accounts and interest in and rights to personal
property, and by levy upon real property and interest in rights to real Section 1. Section 1 of Republic Act No. 1125, as amended is hereby
property; and further amended to read as follows:
(b) By civil or criminal action. "SECTION 1. Court; Justices; Qualifications; Salary; Tenure. -
There is hereby created a Court of Tax Appeals (CTA) which shall
Either of these remedies or both simultaneously may be pursued in be of the same level as the Court of Appeals, possessing all the
the discretion of the authorities charged with the collection of such taxes: inherent powers of a Court of Justice, and shall consist of a
Provided, however, That the remedies of distraint and levy shall not be Presiding Justice and five (5) Associate Justices. The incumbent
availed of where the amount of tax involve is not more than One hundred Presiding Judge and Associate Judges shall continue in office and
pesos (P100). bear the new titles of Presiding Justice and Associate Justices.
The Presiding Justice and the most Senior Associate Justice shall
The judgment in the criminal case shall not only impose the penalty serve as chairmen of the two (2) Divisions. The additional three
but shall also order payment of the taxes subject of the criminal case as (3) Justices and succeeding members of the Court shall be
finally decided by the Commissioner. appointed by the President upon nomination by the Judicial and
Bar Council. The Presiding Justice shall be so designated in his
The Bureau of Internal Revenue shall advance the amounts needed to appointment, and the Associate Justices shall have precedence
defray costs of collection by means of civil or criminal action, including the according to the date of their respective appointments, or when
preservation or transportation of personal property distrained and the the appointments of two (2) or more of them shall bear the same
advertisement and sale thereof, as well as of real property and date, according to the order in which their appointments were
improvements thereon. issued by the President. They shall have the same qualifications,
rank, category, salary, emoluments and other privileges, be
subject to the same inhibitions and disqualifications, and enjoy the
same retirements and other benefits as those provided for under follows:
existing laws for the Presiding Justice and Associate Justices of
the Court of Appeals. "SEC. 3. Clerk of Court; Division Clerks of Court;
Appointment; Qualification; Compensation. - The CTA shall
"Whenever the salaries of the Presiding Justice and the Associate have a Clerk of Court and three (3) Division Clerks of Court who
Justices of the Court of Appeals are increased, such increases in shall be appointed by the Supreme Court. No person shall be
salaries shall be deemed correspondingly extended to and appointed Clerk of Court or Division Clerk of Court unless he is
enjoyed by the Presiding Justice and Associate Justices of the duly authorized to practice law in the Philippines. The Clerk of
CTA. Court and Division Clerks of Court shall exercise the same powers
and perform the same duties in regard to all matters within the
"The Presiding Justice and Associate Justices shall hold office Court's jurisdiction, as are exercised and performed by the Clerk
during good behavior, until they reach the age of seventy (70), or of Court and Division Clerks of Court of the Court of Appeals, in
become incapacitated to discharge the duties of their office, so far as the same may be applicable or analogous; and in the
unless sooner removed for the same causes and in the same exercise of those powers and the performance of those duties
manner provided by law for members of the judiciary of equivalent they shall be under the direction of the Court. The Clerk of Court
rank." and the Division Clerks of Court shall have the same rank,
privileges, salary, emoluments, retirement and other benefits as
Section 2. Section 2 of the same Act is hereby amended to read as those provided for the Clerk of Court and Division Clerks of Court
follows: of the Court of Appeals, respectively.'
"SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - Section 4. Section 4 of the same Act is hereby amended to read as
The CTA may sit en banc or in two (2) Divisions, each Division follows:
consisting of three (3) Justices.
"SEC. 4. Other Subordinate Employees. - The Supreme Court
"Four (4) Justices shall constitute a quorum for sessions en banc shall appoint all officials and employees of the CTA, in
and two (2) Justices for sessions of a Division: Provided, That accordance with the Civil Service Law. The Supreme Court shall
when the required quorum cannot be constituted due to any fix their salaries and prescribe their duties."
vacancy, disqualification, inhibition, disability, or any other lawful
cause, the Presiding Justice shall designate any Justice of other Section 5. Section 5 of the same Act is hereby amended to read as
Divisions of the Court to sit temporarily therein. follows:
"The affirmative votes of four (4) members of the Court en banc or "SEC. 5. Disqualifications. - No Justice or other officer or
two (2) members of a Division, as the case may be, shall be employee of the CTA shall intervene, directly or indirectly, in the
necessary for the rendition of a decision or resolution." management or control of any private enterprise which in any way
may be affected by the functions of the Court. Justices of the
Section 3. Section 3 of the same Act is hereby amended to read as Court shall be disqualified from sitting in any case on the same
grounds provided under Rule one hundred thirty-seven of the inaction shall be deemed a denial;
Rules of Court for the disqualification of judicial officers. No
person who has once served in the Court in a permanent "3. Decisions, orders or resolutions of the Regional Trial
capacity, either as Presiding Justice or as Associate Justice Courts in local tax cases originally decided or resolved by
thereof, shall be qualified to practice as counsel before the Court them in the exercise of their original or appellate
for a period of one (1) year from his retirement or resignation." jurisdiction;
Section 6. Section 6 of the same Act is hereby amended to read as "4. Decisions of the Commissioner of Customs in cases
follows: involving liability for customs duties, fees or other money
charges, seizure, detention or release of property affected,
"SEC. 6. Place of Office. - The CTA shall have its principal office fines, forfeitures or other penalties in relation thereto, or
in Metro Manila and shall hold hearings at such time and place as other matters arising under the Customs Law or other laws
it may, by order in writing, designate." administered by the Bureau of Customs;
Section 7. Section 7 of the same Act is hereby amended to read as "5. Decisions of the Central Board of Assessment Appeals
follows: in the exercise of its appellate jurisdiction over cases
involving the assessment and taxation of real property
"Sec. 7. Jurisdiction. - The CTA shall exercise: originally decided by the provincial or city board of
assessment appeals;
"a. Exclusive appellate jurisdiction to review by appeal, as herein
provided: "6. Decisions of the Secretary of Finance on customs cases
elevated to him automatically for review from decisions of
"1. Decisions of the Commissioner of Internal Revenue in the Commissioner of Customs which are adverse to the
cases involving disputed assessments, refunds of internal Government under Section 2315 of the Tariff and Customs
revenue taxes, fees or other charges, penalties in relation Code;
thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of "7. Decisions of the Secretary of Trade and Industry, in the
Internal Revenue; case of nonagricultural product, commodity or article, and
the Secretary of Agriculture in the case of agricultural
"2. Inaction by the Commissioner of Internal Revenue in product, commodity or article, involving dumping and
cases involving disputed assessments, refunds of internal countervailing duties under Section 301 and 302,
revenue taxes, fees or other charges, penalties in relations respectively, of the Tariff and Customs Code, and
thereto, or other matters arising under the National Internal safeguard measures under Republic Act No. 8800, where
Revenue Code or other laws administered by the Bureau of either party may appeal the decision to impose or not to
Internal Revenue, where the National Internal Revenue impose said duties.
Code provides a specific period of action, in which case the
"b. Jurisdiction over cases involving criminal offenses as herein

provided: "c. Jurisdiction over tax collection cases as herein
provided:
"1. Exclusive original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue "1. Exclusive original jurisdiction in tax collection
Code or Tariff and Customs Code and other laws cases involving final and executory assessments for
administered by the Bureau of Internal Revenue or the taxes, fees, charges and penalties: Provided,
Bureau of Customs: Provided, however, That offenses or however, That collection cases where the principal
felonies mentioned in this paragraph where the principal amount of taxes and fees, exclusive of charges and
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos
penalties, claimed is less than One million pesos (P1,000,000.00) shall be tried by the proper Municipal
(P1,000,000.00) or where there is no specified amount Trial Court, Metropolitan Trial Court and Regional Trial
claimed shall be tried by the regular Courts and the Court.
jurisdiction of the CTA shall be appellate. Any provision of
law or the Rules of Court to the contrary notwithstanding, "2. Exclusive appellate jurisdiction in tax collection
the criminal action and the corresponding civil action for the cases:
recovery of civil liability for taxes and penalties shall at all
times be simultaneously instituted with, and jointly "a. Over appeals from the judgments, resolutions
determined in the same proceeding by the CTA, the filing of or orders of the Regional Trial Courts in tax
the criminal action being deemed to necessarily carry with it collection cases originally decided by them, in
the filing of the civil action, and no right to reserve the filling their respective territorial jurisdiction.
of such civil action separately from the criminal action will
be recognized. "b. Over petitions for review of the judgments,
resolutions or orders of the Regional Trial Courts
"2. Exclusive appellate jurisdiction in criminal offenses: in the Exercise of their appellate jurisdiction over
tax collection cases originally decided by the
"a. Over appeals from the judgments, resolutions or Metropolitan Trial Courts, Municipal Trial Courts
orders of the Regional Trial Courts in tax cases originally and Municipal Circuit Trial Courts, in their
decided by them, in their respected territorial jurisdiction. respective jurisdiction."
"b. Over petitions for review of the judgments, Section 8. Section 10 of the same Act is hereby amended to read as
resolutions or orders of the Regional Trial Courts in the follows:
exercise of their appellate jurisdiction over tax cases
originally decided by the Metropolitan Trial Courts, "SEC. 10. Power to Administer Oaths; Issue Subpoena;
Municipal Trial Courts and Municipal Circuit Trial Courts Punish for Contempt. - The Court shall have the power to
in their respective jurisdiction. administer oaths, receive evidence, summon witnesses by
subpoena duces tecum, subject in all respects to the same party adversely affected by a ruling, order or decision of a Division
restrictions and qualifications as applied in judicial proceedings of of the CTA may file a motion for reconsideration of new trial
a similar nature. The Court shall, in accordance with Rule seventy- before the same Division of the CTA within fifteens (15) days from
one of the Rules of Court, have the power to punish for contempt notice thereof: Provided, however, That in criminal cases, the
for the same causes, under the same procedure and with the general rule applicable in regular Courts on matters of prosecution
same penalties provided therein." and appeal shall likewise apply.
Section 9. Section 11 of the same Act is hereby amended to read as "No appeal taken to the CTA from the decision of the
follows: Commissioner of Internal Revenue or the Commissioner of
Customs or the Regional Trial Court, provincial, city or municipal
"SEC. 11. Who May Appeal; Mode of Appeal; Effect of treasurer or the Secretary of Finance, the Secretary of Trade and
Appeal. - Any party adversely affected by a decision, ruling or Industry and Secretary of Agriculture, as the case may be shall
inaction of the Commissioner of Internal Revenue, the suspend the payment, levy, distraint, and/or sale of any property
Commissioner of Customs, the Secretary of Finance, the of the taxpayer for the satisfaction of his tax liability as provided by
Secretary of Trade and Industry or the Secretary of Agriculture or existing law: Provided, however, That when in the opinion of the
the Central Board of Assessment Appeals or the Regional Trial Court the collection by the aforementioned government agencies
Courts may file an appeal with the CTA within thirty (30) days after may jeopardize the interest of the Government and/or the
the receipt of such decision or ruling or after the expiration of the taxpayer the Court any stage of the proceeding may suspend the
period fixed by law for action as referred to in Section 7(a)(2) said collection and require the taxpayer either to deposit the
herein. amount claimed or to file a surety bond for not more than double
the amount with the Court.
"Appeal shall be made by filing a petition for review under a
procedure analogous to that provided for under Rule 42 of the "In criminal and collection cases covered respectively by Section
1997 Rules of Civil Procedure with the CTA within thirty (30) days 7(b) and (c) of this Act, the Government may directly file the said
from the receipt of the decision or ruling or in the case of inaction cases with the CTA covering amounts within its exclusive and
as herein provided, from the expiration of the period fixed by law original jurisdiction."
to act thereon. A Division of the CTA shall hear the appeal:
Provided, however, That with respect to decisions or rulings of the Section 10. Section 13 of the same Act is hereby amended to read as
Central Board of Assessment Appeals and the Regional Trial follows:
Court in the exercise of its appellate jurisdiction appeal shall be
made by filing a petition for review under a procedure analogous "SEC. 13. Decision, Maximum Period for Termination of
to that provided for under rule 43 of the 1997 Rules of Civil Cases. - Cases brought before the Court shall be decided in
Procedure with the CTA, which shall hear the case en banc. accordance with Section 15, paragraph (1), Article VIII (Judicial
Department) of the 1987 Constitution. Decisions of the Court shall
"All other cases involving rulings, orders or decisions filed with the be in writing, stating clearly and distinctly the facts and the law on
CTA as provided for in Section 7 shall be raffled to its Divisions. A which they are based, and signed by the Justices concurring
therein. The Court shall provide for the publication of its decision favorable to the national government, the CTA shall issue an order
in the Official Gazette in such form and manner as may best be authorizing the Bureau of Internal Revenue, through the Commissioner to
adopted for public information and use. seize and distraint any goods, chattels, or effects, and the personal
property, including stocks and other securities, debts, credits, bank
"The Justices of the Court shall each certify on their applications accounts, and interests in and rights to personal property and/or levy the
for leave, and upon salary vouchers presented by them for real property of such persons in sufficient quantity to satisfy the tax or
payment, or upon the payrolls under which their salaries are paid, charge together with any increment thereto incident to delinquency. This
that all proceedings, petitions and motions which have been remedy shall not be exclusive and shall not preclude the Court from
submitted to the Court for determination or decision for a period availing of other means under the Rules of Court.
required by the law or the Constitution, as the case may be, have
been determined or decided by the Court on or before the date of Section 14. Retention of Personnel; Security of Tenure; Upgrading of
making the certificate, and no leave shall be granted and no Positions and Salaries. - All existing permanent personnel of the CTA
salary shall be paid without such certificate." shall not be adversely affected by this Act. They shall continue in office
and shall not be removed or separated from the service except for cause
Section 11. Section 18 of the same Act is hereby amended as follows: as provided for by existing laws. Further, the present positions and
salaries of personnel shall be upgraded to the level of their counterparts in
"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No the Court of Appeals.
civil proceeding involving matter arising under the National
Internal Revenue Code, the Tariff and Customs Code or the Local Section 15. Transitory Provisions. - In consonance with the above
Government Code shall be maintained, except as herein provided, provision, the incumbent Presiding Judge and Associate Judges shall
until and unless an appeal has been previously filed with the CTA comprise a Division pending the constitution of the entire Court.
and disposed of in accordance with the provisions of this Act.
Section 16. Appropriations. - The amount necessary to carry out the
"A party adversely affected by a resolution of a Division of the provisions of this Act shall be included in the General Appropriations Act
CTA on a motion for reconsideration or new trial, may file a of the year following its enactment into law and thereafter.
petition for review with the CTA en banc."
Section 17. Repealing Clause. - All laws, executive orders, executive
Section 12. Section 19 of the same Act is hereby amended as follows: issuances or letter of instructions, or any part thereof, inconsistent with or
contrary to the provisions of this Act are hereby deemed repealed,
"SEC. 19. Review by Certiorari. - A party adversely affected by a amended or modified accordingly.
decision or ruling of the CTA en banc may file with the Supreme
Court a verified petition for review on certiorari pursuant to Rule Section 18. Separability Clause. - If for any reason, any section or
45 of the 1997 Rules of Civil Procedure." provision of this Act shall be declared unconstitutional or invalid, the other
parts thereof not affected thereby shall remain valid.
Section 13. Distraint of Personal Property and/or Levy on Real
Property. - Upon the issuance of any ruling, order or decision by the CTA Section 19. Effectivity Clause - This Act shall take effect after fifteen
(15) days following its publication in at least (2) newspapers of general reinvestigation, and (b) that petitioner grants such request. The right to
circulation. collect has indeed prescribed since there was no proof that the
request for reinvestigation was in fact granted/acted upon by the
CIR v. HAMBRECHT AND QUIST PHILIPPINES INC. (Lim, Q.) CIR. Thus, the period to collect was never suspended.
[GR. No. 169225; November 17, 2010.]
“CTA has jurisdiction over ‘Other Matters’” Facts:
• Respondent, Hambrecht and Quist Philippines Inc. (“HQPI”), informed the
Recit-Ready: Bureau of Internal Revenue (BIR), through its WestMakati District Office
Facts: The assessment against Hambrecht & Quist had become final of its change of business address.
and unappelable since there was a failure to protest the same o Said letter was duly received by the BIR West Makati on
within the 30-day period provided by law. However, the CTA held February 18, 1993.
that the BIR failed to collect within the prescribed time and thus • On November 4, 1993, HQPI received a tracer letter or followup letter
ordered the cancellation of the assessment notice. The CIR dated October 11, 1993 issued by the Accounts Receivable/Billing
disputed the jurisdiction of the CTA arguing that since the Division of the BIR’s National Office and signed by then Assistant Chief
assessment had become final and unappealable, the taxpayer Mr. Manuel B. Mina, demanding for payment of alleged deficiency income
can no longer dispute the correctness of the assessment even and expanded withholding taxes for the taxable year 1989 amounting to
before the CTA. P2,936,560.87.
o On December 3, 1993, HQPI, through its external auditors,
Issue/s: filed its protest letter against the alleged deficiency tax
1) WON the CTA has jurisdiction to rule that the government’s right assessments for 1989.
to collect the tax has prescribed. • The alleged deficiency income tax assessment apparently resulted from
—YES an adjustment made to respondent’s taxable income for the year 1989, on
2) WON the period to collect the assessment has prescribed. account of the disallowance of certain items of expense, namely,
—YES professional fees paid, donations, repairs and maintenance, salaries and
wages, and management fees.
Held: o The latter item of expense, the management fees, made up
1) YES. The appellate jurisdiction of the CTA is not limited to cases which the bulk of the disallowance, the examiner alleging, among
involve decisions of the CIR on matters relating to assessments or others, that petitioner failed to withhold the appropriate tax.
refunds. The CTA Law clearly bestows jurisdiction to the CTA o This is also the same basis for the imposition of the
even on “other matters arising under the National Internal deficiency withholding tax assessment on the management
Revenue Code”. Thus, the issue of whether the right of the CIR to fees. Revenue Regulations No. 685 (EWT Regulations)
collect has prescribed, collection being one of the duties of the BIR, is does not impose or prescribe EWT on management fees
considered covered by the term “other matters.” paid to a nonresident.
• On November 7, 2001, nearly eight (8) years later, HQPI’s external
2) YES. Two requisites must concur before the period to enforce auditors received a letter from the CIR, dated October 27, 2001.
collection may be suspended: (a) that the taxpayer requests for
o The letter advised the HQPI that CIR had rendered a final 1) YES. The jurisdiction of the CTA is governed by Section 7 of
decision denying its protest on the ground that the protest Republic Act No. 1125, as amended, and the term “other matters”
against the disputed tax assessment was allegedly referred to by the CIR in its argument can be found in number (1) of
filed beyond the 30day reglementary period the aforementioned provision.1
prescribed in then Section 229 of the National Internal o The appellate jurisdiction of the CTA is not limited to cases which
Revenue Code. involve decisions of the CIR on matters relating to assessments or
• HQPI filed a Petition for Review before the Court of Tax Appeals, to refunds. The second part of the provision covers other cases that
appeal the final decision of the CIR denying its protest against the arise out of the National Internal Revenue Code (NIRC) or related
deficiency income and withholding tax assessments issued for taxable laws administered by the Bureau of Internal Revenue (BIR).
year 1989. o The fact that an assessment has become final for failure of the
• CTA Original Division held that the subject assessment notice sent by taxpayer to file a protest within the time allowed only means that the
registered mail on January 8, 1993 to HQPI former place of business validity or correctness of the assessment may no longer be
was valid and binding since respondent only gave formal notice of its questioned on appeal.
change of address on February 18, 1993. Thus, the assessment had o However, the validity of the assessment itself is a separate and
become final and unappealable for failure of respondent to file a distinct issue from the issue of whether the right of the CIR to collect
protest within the 30day period provided by law. the validly assessed tax has prescribed. This issue of prescription,
• However, the CTA held that: being a matter provided for by the NIRC, is well within the
o (a) the CIR failed to collect the assessed taxes within the jurisdiction of the CTA to decide.
prescriptive period; and
o (b) directed the cancellation and withdrawal of Assessment 2) YES. Two requisites must concur before the period to enforce
Notice No. 001543895668. collection may be suspended: (a) that the taxpayer requests for
• Petitioner’s Motion for Reconsideration and Supplemental Motion for reinvestigation, and (b) that petitioner grants such request. In this
Reconsideration of said Decision filed on October 14, 2004 and case, the request for reinvestigation was not granted.
November 22, 2004, respectively, were denied for lack of merit. o In order to suspend the running of the prescriptive periods for
assessment and collection, the request for reinvestigation must be
Issue/s: granted by the CIR.
1) WON the CTA has jurisdiction to rule that the government’s right to o The mere filing of a protest letter which is not granted does not
collect the tax has prescribed. operate to suspend the running of the period to collect taxes.
—YES
2) WON the period to collect the assessment has prescribed.
1
—YES “Section 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate
jurisdiction to review by appeal, as herein provided—
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
Held/Ratio: WHEREFORE, the petition is DENIED. The assailed Decision of assessments,
1. Decisions ofrefunds
the Commissioner
of internal revenue
of Internal
taxes,
Revenue
fees orinother
casescharges,
involvingpenalties
disputedimposed
the Court of Tax Appeals (CTA) En Banc dated August 12, 2005 is assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under the National Internal Revenue Code
AFFIRMED. or other law as part of law administered by the Bureau of Internal Revenue.”
(Emphasis supplied.)
o In the case at bar, the records show that HQPI filed a request for the disputed assessments was a bar against collection of taxes.
reinvestigation on December 3, 1993, however, there is no indication
that the CIR acted upon respondent’s protest. The request for Issue/s: WON the assessment is final, executory, and demandable
reinvestigation was not granted. Thus, the period to collect was
never suspended. Held: YES. The act of the Commissioner, in filing an action for
allowance of the claim for estate and inheritance taxes, may be
DAYRIT v CRUZ (Tuazon) construed as a denial of the taxpayers’ request for
[GR. No. L-39910; Sept. 26, 1988.] reconsideration. From the date of receipt of the copy of the
“Failed to appeal denial; final and executory; decision on a request for Commissioner’s letter for collection of taxes, the taxpayers must
reinvestigation NOT condition precedent to filing action for collection” contest and dispute the same, and upon denial thereof, they have
a period of 30 days to appeal the case to the Court of Tax
Recit-Ready: Appeals. Failure of the taxpayers to appeal to the Court of Tax
Facts: Petitioners are the children of the deceased Spouses Teodoro. Appeals in due time made the assessments final, executory and
They filed separate estate and inheritance tax returns for the demandable. Also, a decision on a request for reinvestigation is
estates of the late spouses with the BIR. In 1972, the CIR issued not a condition precedent to the filing of an action for collection of
the deficiency estate and inheritance tax assessments. The notice taxes already assessed.
of deficiency assessments was received by Dayrit (one of the
children) and she thereafter asked for a reconsideration of the Facts:
said assessments alleging that the same are contrary to law and • Petitioners are the children of the deceased Spouses Teodoro.
not supported by sufficient evidence. CIR filed a motion for Thereafter, the heirs filed separate estate and inheritance tax returns for
Allowance of Claim against the estates of spouses Teodoro and the estates of the late spouses with the BIR. In 1972, the CIR issued the
for an order of payment of taxes with the CFI praying that deficiency estate and inheritance tax assessments. The notice of
petitioner Dayrit be ordered to pay the BIR the sum of 6M. deficiency assessments were received by Dayrit and she thereafter asked
Petitioners filed 2 separate oppositions alleging that the for a reconsideration of the said assessments alleging that the same are
assessments have not become final and executory. Respondent contrary to law and not supported by sufficient evidence.
Judge issued an order approving the claim of respondent • CIR filed a motion for Allowance of Claim against the estates of spouses
Commissioner and directing the payment of the estate and Teodoro and for an order of payment of taxes with the CFI praying that
inheritance taxes. Dissatisfied, petitioners filed an MR, denied. petitioner Dayrit be ordered to pay the BIR the sum of 6M. Petitioners
Hence this petition. filed 2 separate oppositions alleging that the assessments have not
become final and executory.
Petitioners contend that CFI Judge acted with GADALEJ in granting the • Respondent Judge issued an order approving the claim of respondent
Commissioner's claim for estate and inheritance taxes against the Commissioner and directing the payment of the estate and inheritance
estates of the Teodoro spouses on the ground that due to the taxes. Dissatisfied, petitioners filed an MR, denied. Hence this petition.
pendency of their motion for reconsideration of the deficiency • Petitioners contend that CFI Judge acted with GADLEJ in granting the
assessments, said tax assessments are not yet final and Commissioner's claim for estate and inheritance taxes against the estates
executory. Petitioners stressed that the absence of a decision on of the Teodoro spouses on the ground that due to the pendency of their
motion for reconsideration of the deficiency assessments, said tax failure to file a position paper may be construed as abandonment of
assessments are not yet final and executory. Petitioners stressed that the the petitioners' request for reconsideration.
absence of a decision on the disputed assessments was a bar against o Petitioners' contention that the absence of a decision on their
collection of taxes. request for reconsideration of the assessments is a bar to
• Respondent Commissioner contends that petitioners cannot avail of the granting the claim for collection is likewise without merit.
tax amnesty in view of the prior existing assessments issued against the § This Court had occasion to rule that a decision on a
estates of the deceased spouses before the promulgation of P.D. No. 23. request for reinvestigation is not a condition precedent
In support thereof, respondent cited Section 4 of Revenue Regulation No. to the filing of an action for collection of taxes already
15-72, amending Section 4 of Regulation No. 8-12. Respondent assessed.
Commissioner contends further that neither may petitioners' act of filing a § This Court ruled that "nowhere in the Tax Code is
return of a previously untaxed income or wealth in the amount of the Collector of Internal Revenue required to rule first on a
P3,655,595.98 entitled the estates to tax amnesty where petitioners failed taxpayer's request for reconsideration before he can go to
to pay the 10% tax in full within the time frame required under P.D. No. court for the purpose of collecting the tax assessed.
23, and that to allow petitioners to avail of the tax amnesty will render o From the date of receipt of the copy of the Commissioner's letter for
nugatory the provisions of P.D. No. 68. Moreover, said respondent argues collection, petitioners must contest or dispute the same and, upon a
that certiorari is not the proper remedy in that respondent Judge denial thereof, the petitioners have a period of thirty (30) days within
committed no grave abuse of discretion in allowing the claim for collection which to appeal the case to the Court of Tax Appeals. This they failed
of taxes and that if at all, it was merely an error of judgment which can be to avail of.
corrected only on appeal, and in which case the reglementary period for
the same has already prescribed. 2) YES. The petitioners' allegation that the CFI lacks jurisdiction over the
subject of the case is likewise untenable. The assessments having
Issue/s: become final and executory, the CFI properly acquired jurisdiction.
1) WON the BIR can claim the deficiency taxes despite pendency of Neither is there merit in petitioners' claim that the exclusive jurisdiction of
MR. (IMPT) —YES the CTA applies in the case. The aforesaid exclusive jurisdiction of the
2) WON the CFI has jurisdiction to grant the claim for estate and CTA arises only in cases of disputed tax assessments. As noted earlier,
inheritance taxes. petitioners' letter asking for reconsideration of the questioned
—YES assessments cannot be considered as one disputing the assessments
because petitioners failed to substantiate their claim that the deficiency
Held/Ratio: assessments are contrary to law. Petitioners asked for a period of thirty
(30) days within which to submit their position paper but they failed to
1) YES. submit the same nonetheless. Hence, petitioners' letter for a
o Anent petitioners' claim that the tax assessments against the estates reconsideration of the assessments is nothing but a mere scrap of paper.
are not yet final, the court finds the claim untenable. In petitioners' MR,
they requested the Commissioner for thirty (30) days within which to MARCOS v. COURT OF APPEALS (Vanslembrouck)
submit a position paper that would embody their grounds for [GR. No. 120880; June 5,1997]
reconsideration. However, no position paper was ever filed. Such
“No approval of probate court needed for collection of estate tax deficiency
by levy and sale of real properties” Facts:
• On September 29, 1989, former President Ferdinand Marcos died in
Recit-Ready: Honolulu, Hawaii, USA.
Facts: Upon the death of former President Marcos, the Marcoses were • A Special Tax Audit Team was created to conduct investigations and
assessed deficiency income tax assessments and estate taxes. examinations of the tax liabilities and obligations of the late president, as
They were sent several notices of assessment. However, they well as that of his family, associates and "cronies".
continuously ignored said Notices despite several opportunities o Said audit team concluded its investigation with a Memorandum dated
given to them to file a protest and thereafter appeal to the CTA. July 26, 1991.
Thus the deficiency tax assessment became final and o The investigation disclosed that the Marcoses failed to file a written
unappealable after the period for filing of opposition had notice of the death of the decedent, an estate tax return, as well as
prescribed. Several pieces of real property were subsequently several income tax returns covering the years 1982 to 1986, -all in
levied on and sold at public auction. Bongbong Marcos sought for violation of the National Internal Revenue Code (NIRC).
the reversal of the ruling of the Court of Appeals to grant CIR's • The Commissioner of Internal Revenue thereby caused:
petition to levy the properties of the late Pres. Marcos to cover the o the preparation and filing of the Estate Tax Return for the estate of the
payment of his tax delinquencies during the period of his exile in late president,
the US. Marcos contends that the properties could not be levied o the Income Tax Returns of the Spouses Marcos for the years 1985 to
to cover the tax dues because they are still pending probate with 1986, and
the court, and settlement of tax deficiencies could not be had, o the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos II
unless there is an order by the probate court or until the probate for the years 1982 to 1985.
proceedings are terminated. • On July 26, 1991, the BIR issued the following:
o (1) Deficiency estate tax assessment against the estate of the late
Issue/s: WON the claims for payment of estate and income taxes due and president Ferdinand Marcos in the amount of P23,293,607,638.00
assessed after the death of the decedent need to be presented in the form Pesos;
of a claim against the estate in the probate court? o (2) Deficiency income tax assessment against the Spouses
Ferdinand and Imelda Marcos in the amounts of P149,551.70 and
Held: In ruling for the BIR, the Court held that it was unnecessary to first P184,009,737.40 representing deficiency income tax for the years
secure the consent of the probate court. The BIR is authorized to collect 1985 and 1986;
estate tax deficiency through the summary remedy of levying upon and o (3) Deficiency income tax against petitioner Ferdinand 'Bongbong'
sale of real properties of the decedent without first securing the authority Marcos II in the amounts of P258.70 pesos; P9,386.40 Pesos;
of the court sitting in probate over the supposed will of the decedent P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency
because the collection of estate tax is executive in character. income taxes for the years 1982 to 1985.
• The Commissioner of Internal Revenue avers that copies of the
As such, the estate tax is exempted from the statute of non-claims, and deficiency estate and income tax assessments were all personally and
this is justified by the necessity of government funding, immortalized in the constructively served on August 26, 1991 and September 12, 1991 upon
maxim that taxes are the lifeblood of the government.
Mrs. Imelda Marcos (through her caretaker Mr. Martinez) at her last summary tax remedy is distinct and separate from the other tax remedies
known address at No. 204 Ortega St., San Juan, M.M. (such as Judicial Civil actions and Criminal actions), and is not affected or
• Likewise, copies of the deficiency tax assessments issued against precluded by the pendency of any other tax remedies instituted by the
petitioner Ferdinand 'Bongbong' Marcos II were also personally and government.
constructively served upon him (through his caretaker) on September 12, o In the Philippine experience, the enforcement and collection of estate tax,
1991, at his last known address at Don Mariano Marcos St. corner P. is executive in character (not judicial), as the legislature has seen it fit to
Guevarra St., San Juan, M.M. ascribe this task to the Bureau of Internal Revenue.
• Thereafter, Formal Assessment notices were served on October 20, o Thus, it was in Vera vs. Fernandez, that the court recognized the liberal
1992, upon Mrs. Marcos c/o petitioner, at his office, House of treatment of claims for taxes charged against the estate of the decedent.
Representatives, Batasan Pambansa, Quezon City. Moreover, a notice to Such taxes, we said, were exempted from the application of the statute of
Taxpayer inviting Mrs. Marcos (or her duly authorized representative or non-claims, and this is justified by the necessity of government funding,
counsel), to a conference, was furnished the counsel of Mrs. Marcos, immortalized in the maxim that taxes are the lifeblood of the government.
Dean Antonio Coronel - but to no avail. o Taxes assessed against the estate of a deceased person, after
• The deficiency tax assessments were not protested administratively, by administration is opened, need not be submitted to the committee on
Mrs. Marcos and the other heirs of the late president, within 30 days from claims in the ordinary course of administration.
service of said assessments. o In the exercise of its control over the administrator, the court may direct
• Thus, the BIR Commissioner notices of levy on real property against the payment of such taxes upon motion showing that the taxes have been
certain parcels of land owned by the Marcoses - to satisfy the alleged assessed against the estate.
estate tax and deficiency income taxes of Spouses Marcos. o Such liberal treatment of internal revenue taxes in the probate
• Notices of sale at public auction were posted and a public auction for the proceedings extends so far, even to allowing the enforcement of tax
sale of some of the parcels of land took place. There being no bidder, the obligations against the heirs of the decedent, even after distribution of the
lots were declared forfeited in favor of the government. estate's properties.
o Claims for taxes, whether assessed before or after the death of the
Issue: WON the Bureau of Internal Revenue can collect by the deceased, can be collected from the heirs even after the distribution of
summary remedy of levying upon, and sale of real properties of the the properties of the decedent.
decedent, estate tax deficiencies, without the cognition and authority § They are exempted from the application of the statute of non-claims.
of the court sitting in probate over the supposed will of the deceased? § The heirs shall be liable therefor, in proportion to their share in the
—YES
inheritance.
o Thus, the Government has two ways of collecting the taxes in question.
Held/Ratio:
§ One, by going after all the heirs and collecting from each one of them
the amount of the tax proportionate to the inheritance received.
YES. There is no need for the BIR to seek the approval of the probate
§ Another remedy, pursuant to the lien created by Section 315 of the
court to allow the collection and assessment of the deficiency taxes.
Tax Code upon all property and rights to property belong to the
o The deficiency income tax assessments and estate tax assessment are
taxpayer for unpaid income tax, is by subjecting said property of the
already final and unappealable -and-the subsequent levy of real
estate which is in the hands of an heir or transferee to the payment of
properties is a tax remedy resorted to by the government, sanctioned by
the tax due the estate.
Section 213 and 218 of the National Internal Revenue Code. This
o From the foregoing, it is discernible that the approval of the court, sitting without further notice. In a letter dated October 5, 1957, received
in probate, or as a settlement tribunal over the deceased is not a by the Collector of Internal Revenue on October 7, 1957, Lim Tian
mandatory requirement in the collection of estate taxes. Teng Sons & Co., Inc. reiterated its request for reinvestigation. It
o It cannot therefore be argued that the Tax Bureau erred in proceeding also wrote the Solicitor General on October 8, 1957 requesting
with the levying and sale of the properties allegedly owned by the late that it be allowed to present its explanation together with
President, on the ground that it was required to seek first the probate supporting papers relative to its income tax liability. The Solicitor
court's sanction. General transmitted the letter to the Collection of Internal
o There is nothing in the Tax Code, and in the pertinent remedial laws that Revenue. Thereupon, the Deputy Collector of Internal Revenue
implies the necessity of the probate or estate settlement court's approval informed the taxpayer that its request for reinvestigation would be
of the state's claim for estate taxes, before the same can be enforced and granted provided it executed within ten days a waiver of the
collected. statute of limitations as required in General Circular V-258 dated
o On the contrary, under Section 87 of the NIRC, it is the probate or August 20, 1957.
settlement court which is bidden not to authorize the executor or judicial
administrator of the decedent's estate to deliver any distributive share to In his letter dated December 10, 1957, the Deputy Collector of
any party interested in the estate, unless it is shown a Certification by Internal Revenue extended the period within which to execute and
the Commissioner of Internal Revenue that the estate taxes have file with him the waiver of the statute of limitations to December
been paid. This provision disproves the petitioner's contention that it is 31, 1957, but advised that if no waiver is forthcoming on or before
the probate court which approves the assessment and collection of the said date, judicial action for collection would be instituted without
estate tax. further notice. Receipt of this letter is denied by appellant
o If there is any issue as to the validity of the BIR's decision to assess the company.
estate taxes, this should have been pursued through the proper
administrative and judicial avenues provided for by law. As Lim Tian Teng Sons & Co., Inc. failed to file a waiver of the
statute of limitations, the Collector of Internal Revenue instituted
REPUBLIC v. LIM TIAN TENG SONS and CO., INC. (Villarin, L.) eight months after, specifically on September 2, 1958, an action
[GR. No. L-21731; March 31, 1966] in the Court of First Instance of Cebu for the collection of
“Kapag walang sinabing bawal, ibig sabihin puwede.” deficiency income tax.
Recit-Ready: Issue:
Facts: On January 31, 1957 Lim Tian Teng Sons & Co., Inc. requested WON the lower court has jurisdiction to entertain this case on the ground
reinvestigation of its 1952 income tax liability. The Collector of that the Collector of Internal Revenue has not yet issued his final decision
Internal Revenue did not reply; instead, he referred the case to on its requests for reinvestigation. —YES
the Solicitor General for collection by judicial action.
Held: The Collector of Internal Revenue is authorized to collect
On September 20, 1957 the Solicitor General demanded from Lim delinquent internal revenue taxes either by distraint and levy or by
Tian Teng Sons & Co., Inc. the payment of P15,111.50 within five judicial action or both simultaneously. The only requisite before
days, stating that otherwise judicial action would be instituted he can collect the tax is that he must first assess the same within
the time fixed by law. And in the case of a false or fraudulent that otherwise judicial action would be instituted without further notice. In
return with intent to evade the tax or of a failure to file a return, a a letter dated October 5, 1957, received by the Collector of Internal
proceeding in court for the collection of such tax may be begun Revenue on October 7, 1957, Lim Tian Teng Sons & Co., Inc. reiterated
without assessment. its request for reinvestigation. It also wrote the Solicitor General on
October 8, 1957 requesting that it be allowed to present its explanation
Facts: together with supporting papers relative to its income tax liability. The
• Lim Tian Teng Sons & Co., Inc., a domestic corporation with principal Solicitor General transmitted the letter to the Collection of Internal
office in Cebu City, engaged in 1951 and 1952, among others, in the Revenue. Thereupon, the Deputy Collector of Internal Revenue informed
exportation of copra. The copra was weighed before shipment in the port the taxpayer that its request for reinvestigation would be granted provided
of departure and upon arrival in the port of destination. The weight before it executed within ten days a waiver of the statute of limitations as
shipment was called copra outturn. To allow for lose in weight due to required in General Circular V-258 dated August 20, 1957.
shrinkage, said exporter collected only 95% of the amount appearing in • In his letter dated December 10, 1957, the Deputy Collector of Internal
the letter of credit covering every copra outturn. The 5% balance Revenue extended the period within which to execute and file with him
remained outstanding until final liquidation and adjustment. the waiver of the statute of limitations to December 31, 1957, but advised
• On March 30, 1953 Lim Tian Teng Sons & Co., Inc. filed its income tax that if no waiver is forthcoming on or before said date, judicial action for
return for 1952 based on accrued income and expenses. Its return collection would be instituted without further notice. Receipt of this letter is
showed a loss of P56,109.98. It took up as part of the beginning inventory denied by appellant company.
for 1952 the copra outturn shipped in 1951 in the sum of P95,500.00 • As Lim Tian Teng Sons & Co., Inc. failed to file a waiver of the statute of
already partially collected, as part of its outstanding stock as of December limitations, the Collector of Internal Revenue instituted eight months after,
31, 1951. specifically on September 2, 1958, an action in the Court of First Instance
• In the audit and examination of taxpayer's 1952 income tax return, the of Cebu for the collection of deficiency income tax.
Collector of Internal Revenue eliminated the P95,500.00 outturn from the • The court rendered judgment declaring the assessment of income tax in
beginning inventory for 1952 and considered it as accrued income for the sum of P15,111.00 due from the defendant to the plaintiff for the year
1951. This increased taxpayer's 1952 net income by P95,500.00 which, 1952 valid, final and executory; condemning the defendant to pay the
considering disallowances in the sum of P9,980.85, raised the taxpayer's same to the plaintiff with interest at one (1) per centum monthly from
net taxable income for 1952 to P50,370.87. Accordingly, in a letter October 28, 1957 until fully paid.
received by Lim Tian Teng Sons & Co., Inc. on January 30, 1957, the • Not satisfied with the decision, the Collector of Internal Revenue moved
Collector of Internal Revenue assessed a deficiency income tax of for its reconsideration on the ground that it did not include the 5%
P10,074.00 and 50% surcharge thereon amounting to P5,037.00 and surcharge for late payment of tax. The motion was denied for the reason
demanded payment thereof not later than February 15, 1957. that the taxpayer has already been ordered to pay a surcharge of 50%.
• On January 31, 1957 Lim Tian Teng Sons & Co., Inc. requested • Both parties appealed, raising only questions of law.
reinvestigation of its 1952 income tax liability. The Collector of Internal
Revenue did not reply; instead, he referred the case to the Solicitor Issue/s:
General for collection by judicial action. 1) WON the lower court has jurisdiction to entertain this case on the
• On September 20, 1957 the Solicitor General demanded from Lim Tian ground that the Collector of Internal Revenue has not yet issued his
Teng Sons & Co., Inc. the payment of P15,111.50 within five days, stating final decision on its requests for reinvestigation.
—YES the ordinary courts for its recovery pursuant to Section 306 of the
2) WON the court a quo erred in considering as final and executory the Code. Collection or payment of the tax was not made, to, wait until
assessment contained in the letter of the Collector of Internal after the Collector of Internal Revenue has resolved all issues raised
Revenue dated January 16, 1957. by the taxpayer against an assessment. Republic Act 1125 creating
—NO the Court of Appeals allows the taxpayer to dispute the correctness
3) WON the lower court erred in not imposing on defendant's tax legality of an assessment both in the purely administrative level and in
liability a surcharge of 5% for late payment. said court, but it does not stop the Collector of Internal Revenue from
—YES collecting the tax through any of the means provided for in Section
316 of the Tax Code, except when enjoined by said Court of Tax
Held/Ratio: Decision appealed from is modified. Lim Tian Teng Sons & Co., Appeals.
Inc. is hereby ordered to pay the sum of P10,074.00 as deficiency income
tax for 1952 plus 50% and 5% surcharges thereon for fraud and late 2) NO. Collector's insistence to collect the tax is indicative of the his
payment, respectively, and 1% monthly interest upon said tax of P10,074.00, decision against reinvestigation.
computed from February 16, 1957 until the tax is fully paid. o Taxpayer questions the legality of requiring waiver of the statute of
limitations before the grant of reinvestigation as provided for in
1) YES. The Collector of Internal Revenue is authorized to collect General Circular No.
delinquent internal revenue taxes either by distraint and levy or by o V-258. This question was not raised in the BIR. Suffice it to say in this
judicial action or both simultaneously. connection that General Circular No. V-258 was promulgated pursuant
o The only requisite before he can collect the tax is that he must first to Section 338 of the Tax Code. The authority thereunder of the
assess the same within the time fixed by law. And in the case of a Secretary of Finance to issue rules and regulations for the effective
false or fraudulent return with intent to evade the tax or of a failure to enforcement of the provisions of the Tax Code has been sustained by
file a return, a proceeding in court for the collection of such tax may be this Court in previous cases.
begun without assessment. o Even if we do not count the period from October 8, 1957 (the date
o Section 305 of the same Code withholds from all courts, except the when taxpayer received notice of the denial of its request for
Court of Tax Appeals under Section 11 of Republic Act 1125, the reinvestigation) to December 31, 1957 (the deadline for the
authority to restrain the collection of any national internal-revenue tax, submission of the written waiver of the statute of limitations) in
fee or charge, thereby indicating the legislative policy to allow the reckoning the 30-day period within which the taxpayer may appeal to
Collector of Internal Revenue much latitude in the speedy and prompt the Court of Tax Appeals, said period had long lapsed when the
collection of taxes. The reason is that it is upon taxation that the Collector of Internal Revenue filed the complaint in this case on
government chiefly relies to obtain the means the carry on its September 2, 1958.
operations, and it is of the utmost importance that the modes adopted o Taxpayer failure to appeal to the Court of Tax Appeals in due time
to enforce collection of taxes levied should be summary and interfered made the assessment in question final, executory and demandable.
with as little as possible. And when the action was instituted on September 2, 1958 to enforce
o Moreover, before the creation of the Court of Tax Appeals the remedy the deficiency assessment in question, it was already barred from
of a taxpayer who desired to contest an assessment issued, by the disputing the correctness of the assessment or invoking any defense
Collector of Internal Revenue was to pay the tax and bring an action in that would reopen the question of his tax liability on merits. Otherwise,
the period of thirty days for appeal to the Court of Tax Appeals would was made. Hence, pursuant to Section 51 (e), quoted earlier, interest
make little sense. on the unpaid tax fell due starting February 16, 1957 and continues to
3) YES. accrue until full payment of the tax.
o Subsection (c), Section 51 of the Tax Code states:
SEC. 51. Assessment and payment of income tax. — YABES v. FLOJO (VILLARIN P)
xxx xxx xxx [GR. No. L-46954, July 20, 1982]
(c) Surcharge and interest in case of delinquency. - To any “type buzzwords here for easy-recall of the case, e.g. Chinese Golden Cat”
sum or sums due and unpaid after the dates prescribed in
subsections (b), (c) and (d) for the payment of the same, Recit-Ready:
there shall be added the sum of five per centum on the Facts: Doroteo Yabes of Calamaniugan Cagayan, who was for
amount of tax unpaid and interest at the rate of one per sometime an exclusive dealer of products of the International
centum a month upon said tax from the time the same Harvester Macleod, Inc., received on or about May 1, 1962, a
became due . . . . (Emphasis supplied) letter from the Commissioner of Internal Revenue dated March
o As may be gleaned from the above-quoted provision, the 5% 27, 1962, demanding payment of the amount of P15,976.81, as
surcharge is mandatory and automatically due, once the tax is not commercial broker’s fixed and percentage taxes plus surcharges
paid on time. "Shall" is the word that law uses a word normally to which Yabes protested on the ground that his agreements with
imperative and a "language of demand". 13 Applicable herein is what the International Harvester Macleod, Inc. were of purchase and
has been said of a similar provision — the present Section 183 of the sale, and not of agency, hence not liable for such kind of taxes.
Tax Code — stating that: To give time for the Commissioner to study the case and several
If the percentage tax on any business is not paid within the other cases similar thereto, Yabes filed, a tax waiver on October
time prescribed above the amount of the tax shall be 20, 1962, extending the period of prescription to December 31,
increased by twenty-five per centum, the increment to be 1967; Doroteo Yabes died on March 13, 1963 and no estate
part of the tax. proceedings were instituted for the settlement of his estate. On
o Said this Court in Lim Co Chui vs. Posadas 14: March 14, 1966, the CTA decided the Constantino “test” case.
This provision is mandatory. It provides a plan which works The CTA ruled that agreements entered into by Constantino with
out automatically. It confers no discretion on the Collector of the International Harvester Macleod, Inc. were of purchase and
Internal Revenue. That, official may not disregard the law sale, and not of agency, hence no commercial broker’s fixed and
and substitute therefor his own personal judgment. percentage fees could be collected, however this Court reversed
o Finally, the Government questions the computation of the delinquency the CTA and ruled in favor of the Commissioner of Internal
interest, due on the deficiency tax, from October 8, 1957. It insists that Revenue. The heirs of Doroteo Yabes filed a revised waiver
payment of such interest should commence from February 15, 1957. further extending the period of prescription to December 31,
Such contention is well-founded. Pursuant to Section 51(d), "the 1970 as requested by the Commissioner. Thereafter, no word
assessment made by the Collector of Internal Revenue shall be paid was received by the petitioners or their lawyers during the interim
... immediately upon notification of the amount of such assessment." of more than three (3) years, but on January 20, 1971, petitioners
Now, the income tax assessment notice gave defendant up to as heirs of the deceased Doroteo Yabes received the summons
February 15, 1957 to pay the deficiency tax in question. No payment and a copy of the complaint filed by the Commissioner on
December 4, 1970 with the CFI of Cagayan which seeks to collect demanding payment of the amount of P15,976.81, as commercial
from the petitioners the sum of P 15,976.82, as deficiency broker's fixed and percentage taxes plus surcharges and the sum of
commercial broker’s fixed and percentage taxes, including P2,530 as compromise penalty allegedly due from Yabes for the
surcharges and interest thereon, due from Yabes by reason of the years1956-1960.
latter’s income derived from transactions as dealer of the • On May 11, 1962, Doroteo Yabes, through his counsel, filed with the
products of the International Harvester Macleod, Inc.; Taking the Commissioner's Office his letter protesting the assessment of commercial
complaint as the final decision of the Commissioner on the broker's fixed and percentage taxes plus penalties against him on the
disputed assessment against the deceased taxpayer Doroteo ground that his agreements with the International Harvester Macleod, Inc.
Yabes, petitioners filed on February 12, 1971, a petition for review were of purchase and sale, and not of agency, hence he claimed he was
of said disputed assessment with the CTA. Petitioners filed on the not able to pay such kind of taxes
same day their answer to the complaint before the CFI of • Thereafter, there ensued an exchange of correspondence between the
Cagayan and alleged, by way of special defense, that the CTA lawyers of Doroteo Yabes and the Commissioner.
has exclusive jurisdiction of the action and that there is another • The Commissioner in a letter dated August 3, 1962, informed Doroteo
action of the same nature between the parties relating to the Yabes that he acted as a commercial broker "in accordance with the
same assessment pending before the CTA ruling of this Office in the case of Cirilo D.Constantino" in turn, Doroteo
Yabes, in a letter dated August 22, 1962, requested for an investigation or
Issue: review of the case by the appellate division of the BIR in accordance with
Whether or not the assessment made by the CIR against the deceased standing rules, regulations or practice on the matter.
taxpayer Doroteo Yabes, as contained in the letter dated March 27, 1962, • Yabes also wrote the Commissioner on August 24, 1962, requesting that
has become final, executory and incontestable, after Doroteo Yabes had the appeal be held in abeyance pending final decision of the Case of
received the Commissioner's letter denying the latter's protest against the Cirilo D. Constantino. In reply, the Commissioner informed Doroteo
said assessment on September 18, 1962 and his failure to appeal Yabes in a letter dated September 18, 1962, that the latter's request for
therefrom within the 30-day period contemplated under Section 11, of reinvestigation was denied on the ground that he has not submitted any
Republic Act 1125 —NO evidence to offset the findings of this Office as to warrant a
reinvestigation.
Held: Under the circumstances of this case, what may be considered as • Eight days later or on September 26, 1962, the Commissioner wrote a
final decision or assessment of the Commissioner is the filing of the letter advising Doroteo Yabes that "the administrative appeal ... will be
complaint for collection in the respondent CFI, the summons of held in abeyance pending the resolution of the issues in a similar case
which was served on petitioners on January 20, 1971, and that (referring to the aforesaid Constantino case)”
therefore the appeal with the CTA was filed on time. • To give time for the Commissioner to study the case and several other
cases similar thereto, the lawyers of Doroteo Yabes agreed to file, and
Doroteo Yabes did file a tax waiver on October 20, 1962, extending the
Facts: period of prescription to December 31, 1967.
• Doroteo Yabes of Calamaniugan Cagayan was an exclusive dealer of • Then Doroteo Yabes died and no estate proceedings were instituted for
products of the International Harvester Macleod, Inc. It received on or the settlement of his estate. His widow also died during the pendency of
about May 1, 1962, a letter from the CIR dated March 27, 1962,
the case. The petitioners are the children of the deceased taxpayer. On 1962, has become final, executory and incontestable, after Doroteo
March 14, 1966, the CTA decided the Constantino "test" case. Yabes had received the Commissioner's letter denying the latter's
• CTA ruled that agreements entered into by Constantino with the protest against the said assessment on September 18, 1962 and his
International Harvester Macleod, Inc. were of purchase and sale, and not failure to appeal therefrom within the 30-day period contemplated
of agency, hence no commercial broker's fixed and percentage fees could under Section 11, of Republic Act 1125
be collected from the said taxpayer. However this Court on February 27, —NO
1970, in G.R. No. L-25926 reversed the CTA’s decision and ruled in favor
of the CIR. Held/Ratio: WHEREFORE, the petition is granted and the writs prayed for
• After a lapse of about five years, the heirs of the deceased Doroteo are hereby issued. The questioned orders dated June 22, 1971, June 7,
Yabes, through their lawyers, received a letter from the Commissioner 1977 and July 21, 1977 are hereby annulled and set aside and the complaint
dated July 27, 1967, requesting that they "waive anew the Statute of filed in Civil Case No. II-7 of the CFI of Cagayan, entitled: "Republic of the
Limitations" and further confirming the previous understanding that the Philippines, plaintiff, versus Nicolasa Jurado Yabes, et al., defendants,"
final resolution of the protest of the deceased Doroteo Yabes was "being should be, as it is hereby, dismissed, the same to be transferred to the CTA
held in abeyance until the Supreme Court renders its decision on a similar to be considered therein as a counterclaim in CTA Case No. 2216. The
case involving the same factual and legal issues brought to it on appeal" temporary restraining order heretofore issued is hereby made permanent.
(referring to the Constantino "test" case). Without costs.
• Cconformably with the request of the Commissioner, the heirs of Doroteo
Yabes filed a revised waiver further extending the period of prescription to NO.
December 31, 1970. o Under the circumstances of this case, what may be considered as final
• Thereafter, no word was received by the petitioners or their lawyers decision or assessment of the Commissioner is the filing of the complaint
during the interim of more than three (3) years, but on January 20, 1971, for collection in the respondent CFI, the summons of which was served
petitioners as heirs of the deceased Doroteo Yabes received the on petitioners on January 20, 1971, and that therefore the appeal with the
summons and a copy of the complaint filed by the Commissioner. Taking CTA was filed on time.
the complaint as the final decision of the Commissioner on the disputed o The respondent CFI can only acquire jurisdiction over this case filed
assessment against the deceased taxpayer Doroteo Yabes, petitioners against the heirs of the taxpayer if the assessment made by the CIR had
filed on February 12, 1971, a petition for review of said disputed become final and incontestable.
assessment with the CTA. o If the contrary is established, as the Court held it to be, considering the
• Later on the same day, February 12, 1971, petitioners filed their answer aforementioned conclusion of the CTA on the finality and incontestability
to the complaint of the Commissioner before the CFI and alleged therein, of the assessment made by the Commissioner is correct, then the CTA
by way of special defense, that the CTA has exclusive jurisdiction of the has exclusive jurisdiction over this case.
action and that there is another action of the same nature between the o Petitioners received the summons in Civil Case No.II-7 of the respondent
parties relating to the same assessment pending before the CTA. CFI on January 20, 1971, and petitioners filed their appeal with the CTA,
on February 12, 1971, well within the thirty-day prescriptive period under
Issue/s: Section 11 of RA No. 1125.
Whether or not the assessment made by the CIR against the deceased o The CTA has exclusive appellate jurisdiction to review on appeal any
taxpayer Doroteo Yabes, as contained in the letter dated March 27, decision of the Collector of Internal Revenue in cases involving disputed
assessments and other matters arising under the NIRC. Besides, the judgement creditor
defendant should have been more sensitive and observant. until notice of such lien shall be filed by the CIR in the office of the
Register of Deeds (RoD) of the province or city where the property is
TAX LIEN located.
When Tax lien in favor of the Government may arise:

SECTION 219. Nature and Extent of Tax Lien. – If any person, Personal property – from the time the tax became due and payable.
corporation, partnership, joint-account (cuentas en participacion), Real property – from the time of registration with the RoD.
association or insurance company liable to pay an internal revenue tax,
neglects or refuses to pay the same after demand, the amount shall be a CIR v. NLRC, DEPUTY CITY SHERIFF CARMELO V. CACHERO,
lien in favor of the Government of the Philippines from the time when the MARITIME COMPANY OF THE PHILIPPINES, DOMINGO C. NIANGAR,
assessment was made by the Commissioner until paid, with interest, DANIEL C. SABINO, FERNANDO S. TULIAO and TULMAR TRADING
penalties, and costs that may accrue in addition thereto upon all property CORPORATION, (Villarivera)
and rights to property belonging to the taxpayer; Provided, That this lien [GR. No.74965; November 9, 1994]
shall not be valid against any mortgagee, purchaser or judgement creditor “Gusto ng CIR to annul the sheriff’s sale of 4 barges ni Maritime OR bigay sa
until notice of such lien shall be filed by the Commissioner in the office of kanila (BIR) ang proceeds pambayad sa tax due ni Maritime Co.”
the Register of Deeds of the province or city where the property of the
taxpayer is situated or located. Recit-Ready:
Facts: The P17.28M deficiency tax assessment of the BIR to Maritime
Co. became final and executory as Maritime did not contest it.
Despite not contesting, Maritime did not pay its tax liability.
Notes: Therefore, the CIR issued its “Receipt for Goods, Articles, and
A “tax lien” denotes a legal claim or charge on property, whether real or Things Seized under Authority of the NIRC”2 on 6 barges, among
personal, as security for the payment of some debt or obligation. others. Subsequently however, as a result of losing a labor case,
4 of the 6 barges were levied upon execution by respondent
When a taxpayer deputy sheriff to satisfy the judgment for unpaid wages and other
liable to pay an internal revenue tax benefits of employees of Maritime.
neglects or refuses to pay his tax liability after demand,
the amount so demanded shall be a lien in favor of the government The respondents said that the distraint was not valid because the
from the time the assessment was made by the CIR Receipt for Goods, Articles, and Things Seized” was not signed;
until paid, with interest, penalties and costs that may accrue thereto and so the 4 barges were sold at a public auction.
upon all property and rights to property belonging to the taxpayer.
Tax lien not valid against any

mortgagee, 2
This receipt is required by Sec.206 of the NIRC as proof of the constructive distraint of
purchaser, or property. It is an undertaking by the taxpayer or person in possession of the property
covered that he will preserve the property and deliver it upon order of the court or the CIR.
Hence, this petition to annul the public auction sale; or deliver the tax, documentary stamp tax, income tax and withholding taxes in the total
proceeds to the BIR. amount of P17,284,882.45.
• The assessment became final and executory because it was not
Issue/s: contested; and despite of not contesting, Maritime did not pay the tax
1) WON the constructive distraint on the barges is valid despite not being liability. The Commissioner of Internal Revenue issued warrants of
signed; and despite a writ of execution subsequently levied upon the distraint of personal property and levy of real property of private
same property by the deputy sheriff of Manila to satisfy the claims of respondent.
employees in an NLRC Case. – YES. Distraint was valid because there • On April 16, 1985 a "Receipt for Goods, Articles, and Things
was a previously signed Receipt. Seized under Authority of the National Internal Revenue Code" was
2) WON payment on a judgment for salaries and wages are preferred executed, covering, among other things, six barges identified as MCP-
over taxes. NO. This only applies to bankruptcy and judicial liquidation 1,2,3,4,5 and 6. This receipt is required § 206 of the NIRC as proof of the
cases. constructive distraint of property. It is an undertaking by the taxpayer or
person in possession of the property covered that he will preserve the
Held: property and deliver it upon order of the court or the Internal Revenue
1) In ruling for the CIR, the SC held that there was a previous Receipt Commissioner.
signed and valid involving the same 4 barges in a previous case • The receipt was not actually signed. This circumstance has given rise to
involving Maritime Co. Consequently therefore, the subject barges the question in this case as it appears that four of the barges placed
were no longer unquestionably the property of Maritime Co. And under constructive distraint were levied upon execution by respondent
considering that the levy pertaining to the labor case came later, the deputy sheriff of Manila on July 20, 1985 to satisfy a judgment for unpaid
same is invalid. wages and other benefits of employees of respondent Maritime Company
of the Philippines.
The SC is also quick to add that: “It is settled that the claim of the • The four barges were sold by respondent deputy sheriff at a public
government predicated on a tax lien is superior to the claim of a private auction on August 12, 1985.
litigant predicated on a judgment.” • LA- Denied the petition to annul the sale or deliver the proceeds of the
same
2) Labor Code. Art. 110. — In the event of bankruptcy or liquidation of an • Hence, this petition by the CIR to annul the public auction sale OR deliver
employer's business, his workers shall enjoy first preference as the proceeds from the sale to the BIR.
regards wages due them for services rendered during the period prior
to the bankruptcy or liquidation xxx. Issue/s:
1) WON the constructive distraint on the barges is valid despite not
being signed; and despite a writ of execution subsequently levied
Facts: upon the same property by the deputy sheriff of Manila to satisfy
• On January 12, 1984, the Commissioner of the Internal Revenue sent two the claims of employees in an NLRC Case.
– YES. Distraint was valid because there was a previously signed
letters of demand to the respondent Maritime Company of the Philippines
Receipt.
for deficiency common carrier's tax, fixed tax, 6% Commercial Broker's 2) WON payment on a judgment for salaries and wages are preferred
over taxes.
– NO. This only applies to bankruptcy and judicial liquidation cases. COMPROMISE & ABATEMENT
Held/Ratio: Petition GRANTED.

SECTION 204. Authority of the Commissioner to Compromise, Abate
1) YES. The distraint is valid. and Refund or Credit Taxes. - The Commissioner may -
o Yes for the 2 barges (MCP Nos. 1 and 4), it is settled that the claim of
(A) Compromise the payment of any internal revenue tax, when:
the government predicated on a tax lien is superior to the claim of a
private litigant predicated on a judgment.
(1) A reasonable doubt as to the validity of the claim against the
o The tax lien attaches not only from the service of the warrant of taxpayer exists; or
distraint of personal property but from the time the tax became due
and payable. (2) The financial position of the taxpayer demonstrates a clear
o Besides, the distraint on the subject properties of the Maritime inability to pay the assessed tax.
Company of the Philippines as well as the notice of their seizure were
The compromise settlement of any tax liability shall be subject to
made by petitioner, through the Commissioner of the Internal
the following minimum amounts:
Revenue, long before the writ of the execution was issued by the
Regional Trial Court of Manila, Branch 31. For cases of financial incapacity, a minimum compromise rate
o There is no question then that at the time the writ of execution was equivalent to ten percent (10%) of the basic assessed tax; and
issued, the two (2) barges, MPC-1 and MCP-4, were no longer
properties of the Maritime Company of the Philippines. The power of For other cases, a minimum compromise rate equivalent to forty
the court in execution of judgments extends only to properties percent (40%) of the basic assessed tax.
unquestionably belonging to the judgment debtor. Execution sales
Where the basic tax involved exceeds One million pesos (P1,000.000) or
affect the rights of the judgment debtor only, and the purchaser in an where the settlement offered is less than the prescribed minimum rates,
auction sale acquires only such right as the judgment debtor had at the compromise shall be subject to the approval of the Evaluation Board
the time of sale. It is also well-settled that the sheriff is not authorized which shall be composed of the Commissioner and the four (4) Deputy
to attach or levy on property not belonging to the judgment debtor. Commissioners.
2) NO. Salaries and wages are only preferred in bankruptcy and
judicial liquidation cases. (B) Abate or cancel a tax liability, when:
o Art. 110. Worker preference in case of bankruptcy. — In the event of
(1) The tax or any portion thereof appears to be unjustly or
bankruptcy or liquidation of an employer's business, his workers shall excessively assessed; or
enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any (2) The administration and collection costs involved do not justify
provision of law to the contrary notwithstanding. Unpaid wages shall the collection of the amount due.
be paid in full before other creditors may establish any claims to a
All criminal violations may be compromised except: (a) those
share in the assets of the employer.
already filed in court, or (b) those involving fraud.
o This case does not involve the liquidation of employer’s
business. (C) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps Facts:
when they are returned in good condition by the purchaser, and, in his Petitioner Rovero arrived at Makati Airport from Bangkok. It was
discretion, redeem or change unused stamps that have been rendered discovered that he brought along with him undeclared 259 pieces of
unfit for use and refund their value upon proof of destruction. No credit or
jewelry appraised at P23,736. The jewelry was, therefore, seized as
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) property subject to forfeiture.
years after the payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered as a written Rovero was found guilty of the charge. The forfeiture was waived and in
claim for credit or refund. lieu thereof a fine in an amount equal to three times the appraised value of
the jewelry was imposed. He appealed the Decision to the CFI of Manila
A Tax Credit Certificate validly issued under the provisions of this Code and subsequently to the Supreme Court but it was denied.
may be applied against any internal revenue tax, excluding withholding
taxes, for which the taxpayer is directly liable. Any request for conversion
into refund of unutilized tax credits may be allowed, subject to the After the decision has become final, Petitioner and Bureau of Customs
provisions of Section 230 of this Code: Provided, That the original copy of entered into a compromise agreement and they decided to reappraise the
the Tax Credit Certificate showing a creditable balance is surrendered to value of the jewelries from P23,736 to P9,880.
the appropriate revenue officer for verification and cancellation: Provided,
further, That in no case shall a tax refund be given resulting from During the proceedings for execution, the petitioner that he has paid all his
availment of incentives granted pursuant to special laws for which no obligations arising from the case based on the reappraised value of
actual payment was made.
P9,880 which the execution court disagrees with.
The Commissioner shall submit to the Chairmen of the Committee on
Ways and Means of both the Senate and House of Representatives, every Issue:
six (6) months, a report on the exercise of his powers under this Section, WON there was a proper compromise agreement?
stating therein the following facts and information, among others: names —NO
and addresses of taxpayers whose cases have been the subject of
abatement or compromise; amount involved; amount compromised or Held:
abated; and reasons for the exercise of power: Provided, That the said The right of compromise claimed is not applicable at this stage of the
report shall be presented to the Oversight Committee in Congress that judicial proceedings. For the Government, the time for compromise is
shall be constituted to determine that said powers are reasonably over. There no longer is any necessity or reason for its exercise.
exercised and that the government is not unduly deprived of revenues. COMPROMISE is defined as a contract whereby the parties in interest by
giving, promising or retaining something or otherwise making reciprocal
concessions, avoid litigation or terminate one already commenced.
ROVERO v. AMPARO (Agatep)
[G.R. No. L-5482; May 5, 1952]
Here, as far as the Republic is concerned, the period for compromise had
“The purpose of a compromise is to avoid litigation or when it is already
definitely ended. The original controversy about the legality of the seizure
existing, to end one. So if there is already a final judgment, there is no more
of the jewelry, the imposition of the fine treble the appraised value of
need for a compromise”
P23,736 has not only been taken to court, but it has been finally decided
by the highest Tribunal. There is no longer any uncertainty as to the result
Recit-Ready:
of the litigation because the Government has definitely and finally won it. • After promulgation of the decision of the Supreme Court, Rovero wrote to
In other words, there is nothing more to compromise. By the attempted so- the Commissioner of Customs a letter stating that the pieces of jewelry
called compromise in the form of reappraisal, the Government had nothing was still pending in this Tribunal, and petitioning for a reappraisal of said
to gain but much to lose in the form of several thousand pesos. jewelry. The jewelry were reappraised at P9,880. The Commissioner of
Customs forwarded the reappraisal to the Secretary of Finance
requesting for the setting aside of the original appraisal which the
Facts: Secretary granted and the P9,880 appraisal was approved. A
• Petitioner Rovero arrived at Makati Airport from Bangkok. He brought with compromise agreement was then made lowering the value of the
him several pieces of baggage, among which was a Chinese vase which appraisal. Note that this happened after the promulgation of the decision
he declared and valued at P15. In the course of the examination of said of the Supreme Court.
Chinese vase, it was found to contain a tin can containing undeclared 259 • The Solicitor-General moved for execution of the decision of the CFI,
pieces of jewelry appraised at P23,736. The jewelry was, therefore, which have been affirmed by this Tribunal. Petitioner asked for the denial
seized as property subject to forfeiture. Rovero admitted that the of the motion on the ground that the judgment had already been satisfied,
belonged to him, he having bought them in Bangkok for $4,353 and that claiming that under Official Receipt No. B-2361606, the fine in lieu for
he purposely concealed them because he was afraid that he might be forfeiture plus surcharge and other legal charges had already been paid,
robbed and that he did not then have enough cash with which to pay the including sales tax. Incidentally, it should be here stated that according to
duties and taxes which he figured to amount to about P6,000. Evidently, Exhibit M entitled RECEIPT, dated August 23, 1951, Rovero received
the Customs officials were not impressed by his explanation. from the Collector of Customs the 259 pieces of jewelry after he had paid
• Rovero was found guilty for Violation of the Administrative Code and the corresponding duty and all charges and the fine based on the
sentenced to pay a fine of P2,500, with subsidiary imprisonment in case reappraised value, based on the compromise agrrement, of P9,880 (not
of insolvency, plus costs. In the decision, it was found that Rovero had the original appraisal of P23,736).
attempted to import the jewelry by fraudulent entry; that it was not the first
time that Rovero was guilty of fraudulent entry against the Government. Issue:
For this reason the Commissioner of Customs declared that the seizure of WON there was a proper compromise agreement?
said 259 pieces of jewelry was proper. —NO
• The forfeiture was waived and in lieu thereof a fine in an amount equal to
three times the appraised value of the jewelry was imposed, it being Held/Ratio: Motion is DENIED.
understood that the jewelry may be delivered to Rovero upon payment of
the legal duties, compensating tax and other charges due thereon, plus o It is argued that the parties to a case may enter into a compromise about
the fine, and that upon his failure to take delivery of the articles, and after even a final judgment and it is contended by petitioner that the
the decision has become final the jewelry will be sold at public auction for reappraisal was proper.
the satisfaction of the Government's claim. § The contention may be correct as regards private parties and who are
• Rovero appealed the case to the CFI of Manila and later on appealed to therefore free to do with what they own or what is awarded to them, as
the SC. The decision appealed from was affirmed, with costs. they please. Not so, however in the present case. Here, the
Commissioner of Customs is not a private party and is not the owner
of the money involved in the fine based on the original appraisal. He is
a mere agent of the Government and acts as a trustee of the money decided by the court, and because Rovero considered it immaterial, never
or property in his hands or coming thereto by virtue of a favorable questioned the amount of said appraisal.
judgment. Unless expressly authorized by his principal or by law, he is § That contention cannot be accepted. That the amount of the appraisal
not authorized to accept anything different from or anything less than was material from the beginning, is to us obvious. The imposed on
what is adjudicated in favor of the Government. Rovero for the fraudulent importation of jewelry was based on this
o The right of compromise claimed is not applicable at this stage of the same appraisal. Naturally, if he lost the case as he did, the fine based
judicial proceedings. For the Government, the time for compromise is on said appraisal will have to be paid by him. But even if he won the
over. There no longer is any necessity or reason for its exercise. case, said original appraisal was still material because he would have
COMPROMISE is defined as a contract whereby the parties in interest by to pay the ordinary customs duties on said jewelry just the same
giving, promising or retaining something or otherwise making reciprocal based on the original appraisement.
concessions, avoid litigation or terminate one already commenced. o Furthermore, regardless of the final decision of the court, which as
o Here, as far as the Republic is concerned, the period for compromise had already stated, definitely decided the validity of the original appraisal, it
definitely ended. The original controversy about the legality of the seizure would seem that the original appraisal had become final. Rovero never
of the jewelry, the imposition of the fine treble the appraised value of filed a protest questioning the propriety and correctness of the amount
P23,736 has not only been taken to court, but it has been finally decided thereof.
by the highest Tribunal. There is no longer any uncertainty as to the result o In the course of the court's deliberations over this case, the possibility of
of the litigation because the Government has definitely and finally won it. fraud, even connivance on the part of the Customs officials, was
In other words, there is nothing more to compromise. By the attempted mentioned. To some members the proceedings leading to the reappraisal
so-called compromise in the form of reappraisal, the Government had were not free from suspicion, what with the seeming haste with which the
nothing to gain but much to lose in the form of several thousand pesos. reappraisal requested by Rovero was considered, recommended and
o Petitioner argues that if the Commissioner of Customs may refund money then as it were rushed to the Department of Finance for approval; the
erroneously or illegally received, or fines imposed without authority, that it readiness, and conformity of said officials to compromise a final judgment
to say, money already in the Treasury of the Philippines, with more by the highest Court of the land in favor of the Government, when by such
reason may he compromise a judgment not yet executed. compromise the Government had nothing to gain but much to lose, and
§ The argument is not flawless. It refers to money erroneously or the approval by said officials of the relatively small amount of the
illegally received, or fines imposed without authority. In the present reappraisal which is less than one-half of the original appraisal, which as
case, there is no money erroneously or illegally received. A fine was already stated, Rovero himself never questioned or protested for about
imposed, yes, but it was pursuant to law and presumably with four years. But, that is neither here nor there; that question is not involved
authority. That very question of the authority of the Commissioner to in the present case and we shall assume that everything as far as the
seize the jewelry and impose the fine in lieu of forfeiture was taken on Customs officials are concerned, is above board, only that they
appeal to the Courts, which finally decided that the fine was legal and misinterpreted the law and overestimated their authority.
authorized.
o Petitioner argues that if the Commissioner of Customs may refund money REVENUE REGULATION NO. 30-2002
erroneously or illegally received, or fines imposed without authority, that it
o Petitioner insinuated that the original appraisement of the jewelry in (December 16, 2002) (Alarcon)
the amount of P23,736 is not final because it was not in issue in the case
o On the other hand, other protested cases shall be handled by the

SEC. 1. SCOPE AND OBJECTIVES. Regional Evaluation Board (REB) or the National Evaluation Board
Pursuant to Sec 244 of NIRC, these Regulations are hereby promulgated (NEB) on a case to case basis;  
for the purpose of: 6. Cases which become final and executory after final judgment of a
• implementing Sections 7(c), 204(A) and 290 of the same Code, court, where compromise is requested on the ground of doubtful
• superseding Revenue Regulations (RR) Nos. 6-2000 and 7-2001 validity of the assessment; and  
7. Estate tax cases where compromise is requested on the ground of
SEC. 2. CASES WHICH MAY BE COMPROMISED. financial incapacity of the taxpayer.  
Upon compliance by the applicant-taxpayer of Section 3 of these
Regulations, the following may be the subject matter of COMPROMISE SEC. 3. BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT
SETTLEMENT: 1. Doubtful Validity of Assesment - Offer to compromise a delinquent
1. Delinquent accounts;   account or disputed assessment on the ground of reasonable doubt as
2. Cases under administrative protest to the validity of the assessment when it is shown that:
o after issuance of the Final  Assessment Notice to the taxpayer a) one resulting from a jeopardy assessment
which are still pending in the Regional Offices, Revenue District § jeopardy assessment- tax assessment which was assessed
Offices, Legal Service, Large Taxpayer Service (LTS), Collection without the benefit of complete or partial audit by an authorized
Service, Enforcement Service and other offices in the National revenue officer, who has reason to believe that the assessment
Office;   and collection of a deficiency tax will be jeopardized by delay
3. Civil tax cases being disputed before the courts;   because of the taxpayer’s failure to comply with the audit and
4. Collection cases filed in courts;   investigation requirements to present his books of accounts
5. Criminal violations, other than those already filed in court or those and/or pertinent records, or to substantiate all or any of the
 involving criminal tax fraud.   deductions, exemptions, or credits claimed in his return);  
b) The assessment seems to be arbitrary in nature,
EXCEPTIONS: o appearing to be based on presumptions and
1. Withholding tax cases, o there is reason to believe that it is lacking in legal and/or factual
o unless the applicant-taxpayer invokes provisions of law that cast basis; or  
doubt on the taxpayer’s obligation to withhold; c) The taxpayer failed to file an administrative protest on account
2. Criminal tax fraud cases confirmed as such by the Commissioner of of the alleged failure to receive notice of assessment and there
Internal Revenue or his duly authorized representative;    is reason to believe that the assessment is lacking in legal and/or
3. Criminal violations already filed in court;   factual basis; or
4. Delinquent accounts with duly approved schedule of installment d) The taxpayer failed to file a request for reinvestigation/
 payments;    reconsideration within 30 days from receipt of final
5. Cases where final reports of reinvestigation or reconsideration have assessment notice and there is reason to believe that the
 been issued resulting to reduction in the original assessment and the assessment is lacking in legal and/or factual basis; or  
taxpayer is agreeable to such decision by signing the required e) The taxpayer failed to elevate to the Court of Tax Appeals
agreement form for the purpose. (CTA) an adverse decision of the Commissioner, or his
authorized representative, in some cases, within 30 days from o provided further that the taxpayer has no sufficient liquid asset
receipt thereof and there is reason to believe that the assessment to satisfy the tax liability; or  
is lacking in legal and/or factual basis; or   o The taxpayer is suffering from a networth deficit (total
f) The assessments were issued on or after January 1, 1998, liabilities exceed total assets)
where the demand notice allegedly failed to comply with the o computed by deducting total liabilities from total assets
formalities prescribed under Sec. 228 of the National Internal o Total liabilities: (net of deferred credits and amounts
Revenue Code of 1997; or   payable to stockholders/owners reflected as liabilities,
g) Assessments made based on the “Best Evidence Obtainable except business- related transactions)
Rule” and there is reason to believe that the same can be disputed o Total Assets: (net of prepaid expenses, deferred charges,
by sufficient and competent evidence; or   pre-operating expenses, as well as appraisal increases in
h) The assessment was issued within the prescriptive period for fixed assets)
assessment as extended by the taxpayer’s execution of Waiver o taken from the latest audited financial statements, provided
of the Statute of Limitations the validity or authenticity of which is that in the case of an individual taxpayer, he has no other
being questioned or at issue and there is strong reason to believe leviable properties under the law other than his family home;
and evidence to prove that it is not authentic.   or
o The taxpayer is a compensation income earner with
2. Financial incapacity. - The offer to compromise based on financial no other source of income and
incapacity may be accepted upon showing that: o the family’s gross monthly compensation income does not
o The corporation ceased operation or is already exceed the levels of compensation income provided for under
dissolved.-Provided, that Sec. 4.1.1 of these Regulations,
1. tax liabilities corresponding to the Subscription Receivable or o and it appears that the taxpayer possesses no other leviable
2. Assets distributed/distributable to the stockholders or distrainable assets, other than his family home; or  
representing return of capital o The taxpayer has been declared by any competent
at the time of cessation of operation or dissolution of business tribunal/authority/body/government agency as
shall NOT be considered for compromise; or   bankrupt or insolvent.  
o The taxpayer, as reflected in its latest Balance Sheet
supposed to be filed with the Bureau of Internal The Commissioner shall NOT consider any offer for compromise
Revenue, is suffering from surplus or earnings deficit settlement on the ground of
resulting to impairment in the original capital by at o financial incapacity of a taxpayer with Tax Credit Certificate(TCC),
least 50%, issued under:
o provided that 1. National Internal Revenue Code of 1997 or
§ amounts payable or due to stockholders other than 2. Executive Order No. 226, on hand or in transit, or
business-related transactions which are properly includible o with pending claim for tax refund or tax credit with the
in the regular “accounts payable” o Bureau of Internal Revenue,
are by fiction of law considered as part of capital and NOT o Department of Finance One-Stop-Shop Tax Credit and Duty
liability, and Drawback Center (Tax Revenue Group or Investment Incentive
Group) than his family home

o and/or the courts, or 1.2 Individual, without any source 10%
o with existing finalized agreement or prospect of future agreement with of income
any party that resulted or could result to an increase in the equity of the 1.3 Under any of the following 10%
taxpayer at the time of the offer for compromise or at a definite future conditions:
time. 1.3.1 Zero net worth computed
in accordance with Sec. 3.2 (c)
Moreover, NO offer of compromise shall be entertained unless and until hereof
the taxpayer waives in writing his privilege of the secrecy of bank 1.3.2 Negative net worth 10%
deposits under Republic Act No. 1405 or under other general or special computed in accordance with Sec.
laws, and such waiver shall constitute as the authority of the 3.2 (c) hereof
Commissioner to inquire into the bank deposits of the taxpayer. 1.3.3. Dissolved Corporations 20%
1.3.4 Already non-operating
Presence of circumstances that would place the taxpayer- companies for a period of:
applicant’s inability to pay in serious doubt can be a ground to deny a) three (3) years or more as 10%
the application for compromise based on financial incapacity of the of date of application for
taxpayer to pay the tax. compromise settlement
b) Less than 3 years 20%
SEC. 4. PRESCRIBED MINIMUM PERCENTAGES OF COMPROMISE 1.3.5 Surplus or earnings deficit 40%
SETTLEMENT. – The compromise settlement of the internal revenue tax resulting to impairment in the
liabilities of taxpayers, reckoned on a per tax type assessment basis, shall original capital by at least 50%
be subject to the following minimum rates based on the basic assessed 1.3.6 Declared insolvent or 20%
tax: bankrupt,
o Unless, taxpayer falls
§ For Cases of Financial Incapacity squarely under any
1.1 Individual 10% situation as discussed
o only source of income is above, thus resulting to
employment whose monthly the application of the
salary is: appropriate rate
if single, P10,500 or less
if married, salary with § For cases of “doubtful validity” – A minimum compromise rate
spouse is P21,000 per equivalent to forty percent (40%) of the basic assessed tax. The
month taxpayer may, nevertheless, request for a compromise rate lower
o appears that taxpayer has than forty percent (40%): Provided, however, that he shall be
no other leviable / required to
distrainable assets, other (1) submit his request in writing
(1) stating therein the reasons, legal and/or factual, why he should Moreover, additional requirements prescribed under the existing
be entitled to such lower rate: Revenue Memorandum Order (RMO) shall still be complied with
(2) Provided, further, that for applications of compromise settlement unless amended and/or expanded by an amendatory RMO.
based on doubtful validity of the assessment involving an offer
lower than the minimum forty percent (40%) compromise rate, the SEC. 6. APPROVAL OF OFFER OF COMPROMISE. - Except for offers
same shall be subject to the prior approval by the NEB. of compromise where the approval is delegated to the REB pursuant to
The herein prescribed minimum percentages shall likewise apply in the succeeding paragraph, all compromise settlements within the
compromise settlement of assessments consisting solely of jurisdiction of the National Office (NO) shall be
increments, i.e., surcharge, interest, etc., based on the total amount • approved by a majority of all the members of the NEB
assessed. • composed of the Commissioner and the four (4) Deputy
Commissioners.
SEC. 5. DOCUMENTARY REQUIREMENTS. –
1. If the application for compromise is premised under Sec. 4.1.1 hereof, All decisions of the NEB, granting the request of the taxpayer or
the taxpayer-applicant shall submit with his application favorable to the taxpayer, shall have the concurrence of the
(a) a certification from his employer on his prevailing monthly Commissioner.
salary, including allowances; and
(b) a sworn statement that he has no other source of income other Offers of compromise of assessments issued by the Regional Offices
than from employment. involving basic deficiency taxes of Five Hundred Thousand Pesos
2. If the application is premised under Sec. 4.1.2 hereof, the taxpayer- (P500,000) or less and for minor criminal violations discovered by the
applicant shall submit with his application a sworn statement that he Regional and District Offices, shall be subject to the approval by the
derives no income from any source whatever. Regional Evaluation Board (REB), comprised of the following Officers of
3. If the application is premised under Sec. 4.1.3 hereof, a copy of the the Region:
applicant's latest audited financial statements or audited Account
Information Form filed with the BIR shall be submitted with the Regional Director – Chairman Members:
application. Nonetheless, for situation under Sec. 4.1.3.3 hereof, the i. Assistant Regional Director  
“Notice of Dissolution” submitted to SEC or other similar or equivalent ii. Chief, Legal Division  
document should likewise be submitted. For situation under Sec. 4.1.3.6, iii. Chief, Assessment Division  
a copy of the order declaring bankruptcy or insolvency shall be iv. Chief, Collection Division  
submitted. v. Revenue District Officer having jurisdiction over the  taxpayer-
applicant  Provided, however, that if the offer of compromise is less
In all cases of offer based on financial incapacity, Waiver of the Secrecy than the prescribed rates set forth in Sec. 4 hereof, the same shall
of Bank Deposit under R.A. 1405 and Sworn Statement saying that he always be subject to the approval of the NEB.  The compromise
has no Tax Credit Certificate(TCC) on hand or in transit or claim for tax offer may be paid before or after the approval of the offer of
refund or TCC under the National Internal Revenue Code of 1997 and compromise by the Board (NEB or REB), at the option of the
Executive Order No. 226 pending in any office shall be submitted. taxpayer. In case of disapproval of compromise offer previously
paid, the same shall be dealt with in accordance with the prevailing
procedures embodied in the Revenue Memorandum Order issued

for this purpose, including amendments thereto.   SECTION 1. SCOPE – Pursuant to Section 244 of the NIRC (Code), these
Regulations are hereby promulgated for the purpose of implementing
SEC. 7. REPORT OF THE COMMISSIONER ON THE EXERCISE OF Section 204(B), in relation to Sections 7(c) and 290 of the same Code,
HIS AUTHORITY TO COMPROMISE TO THE CONGRESSIONAL regarding the authority of the Commissioner of Internal Revenue
OVERSIGHT COMMITTEE. – The Commissioner shall submit to the (Commissioner) to abate or cancel internal revenue tax liabilities of
Congressional Oversight Committee through the Chairmen of the certain taxpayers based on any of the following grounds, viz:
Committee on Ways and Means of both the Senate and House of
Representatives, every six (6) months of each calendar year, a report on (1) The tax/or any portion thereof appears to be unjustly or
the exercise of his powers to compromise the tax liabilities of excessively assessed; or
taxpayers. In this regard, the REB should submit to the Commissioner all (2) The administration and collection costs involved do not justify
the necessary reports and data in due time for the latter to be able to the collection of the amount due.
submit the required reports to the Congressional Oversight Committee.  
SECTION 2. INSTANCES WHEN THE PENALTIES AND/OR INTEREST
SEC. 8. REPEALING CLAUSE. – These Regulations supersede Revenue IMPOSED ON THE TAXPAYER MAY BE ABATED/CANCELLED ON
Regulations No. 6-2000, and Revenue Regulations No. 7-2001. All other THE GROUNDT THAT THE IMPOSITION THEREOF IS UNJUST OR
issuances inconsistent with the provisions of these Regulations are hereby EXCESSIVE –
amended, modified or repealed accordingly.  
2.1. When the filing of the return/payment of the tax is made at the wrong
SEC. 9. EFFECTIVITY. – The provisions of these Regulations shall take venue;
effect after fifteen (15) days following publication in any newspaper of
general circulation except for cases the compromise of which have been 2.2. When taxpayer’s mistake in payment of his tax is due to erroneous
confirmed by the Secretary of Finance in which case these Regulations written official advice of a revenue officer;
shall take effect immediately upon publication.
2.3. When taxpayer fails to file the return and pay the tax on time due to
substantial losses from prolonged labor dispute, force majeure,
legitimate business reverses such as in the following instances,
REVENUE REGULATION NO. 13-2001 (Sept. 27, 2001)
provided, however, that the abatement shall only cover the surcharge
and the compromise penalty and not the interest imposed under
Section 249 of the Code:
SUBJECT: Implementing Section 204(B), in Relation to Section 290 of the 2.3.1 Labor strike for more than 6 months which has caused the
Tax Code of 1997, Regarding Abatement or Cancellation of the Internal temporary shutdown of business;
Revenue Tax Abilities 2.3.2. Public turmoil;
2.3.3 Natural calamity such as lightning, earthquake, storm, flood
TO: All Internal Revenue Officers and Others Concerned and the like;
2.3.4 Armed conflicts such as war or insurgency;
2.3.5 Substantial losses sustained due to fire, robbery, theft, the license to the Philippine branch office/subsidiary,
embezzlement; provided, however, that the abatement shall only cover the
2.3.6 Continuous heavy losses incurred by the taxpayer for the surcharge and the compromise penalty and not the interest;
last 2 years; 2.6.9 Wrong use of Tax Credit Certificate (TCC) where Tax Debit
2.3.7 Liquidity problem of the taxpayer for the last 3 years; or Memo (TDM) was not properly applied for; and
2.3.8 Such other instances which the Commissioner may deem 2.6.10 Such other instances which the Commissioner may deem
analogous to the enumeration above analogous to the enumeration above.
2.4 When the assessment is brought about or the result of taxpayer’s non- 2.7 Other cases similar/synonymous thereto.
compliance with the law due to a difficult interpretation of said law;
SECTION 3. INSTANCES WHEN THE TAX LIABILITIES, PENALTIES
2.5 When the taxpayer fails to file the return and pay the correct tax on AND/OR INTEREST IMPOSED ON TAXPAYER MAY BE
time due to circumstances beyond his control, provided, however, that ABATED/CANCELLED ON THE GROUND THAT THE
abatement shall cover only the surcharge and the compromise ADMIINSTRATION AND COLLECTION COSTS ARE MORE THAN THE
penalty and not the interest; AMOUNT SOUGHT TO BE COLLECTED – when the administration and
collection costs, including cost of litigation, are much more than the
2.6 Late payment of the tax under meritorious circumstances such as: amount that may be collected from the taxpayer, the assessment may be
reduced through abatement, or entirely cancelled pursuant to Section
2.6.1 One day late filing and remittance due to failure to beat 204(B) of the code. The instances that may fall under this category are the
bank cut-off time; following:
2.6.2 Use of wrong tax form but correct amount of tax was
remitted; 3.1 Abatement of penalties on assessment confirmed by lower court but
2.6.3 Filing an amended return under meritorious circumstances, appealed by the taxpayer to a higher court;
provided, however, that abatement shall cover only the 3.2 Abatement of penalties on withholding tax assessment under
penalties and not the interest; meritorious circumstances;
2.6.4 Surcharge erroneously imposed; 3.3 Abatement of penalties on delayed installment payment under
2.6.5 Late filing of return due to unresolved issue on meritorious circumstances;
classification/valuation of real property (for CGT cases, etc.); 3.4 Abatement of penalties on assessment reduced after reinvestigation
2.6.6 Offsetting of taxes of the same kind, i.e., overpayment in but taxpayer is still contesting reduced assessment; and
one quarter/month is offset against underpayment in another 3.5 Such other instances which the Commissioner may deem analogous
quarter/month; to the enumeration above
2.6.7 Automatic offsetting of overpayment of one kind of
withholding tax against the underpayment of another kind; For items 3.1 to 3.4 above, the abatement of the surcharge and
2.6.8 Late remittance of withholding tax on compensation of compromise penalty shall be allowed only upon written application by the
expatriates for services rendered in the Philippines pending taxpayer signifying his willingness to pay the basic tax and interest or
the issuance of the Securities and Exchange Commission of basic tax only, whichever is applicable under the prevailing circumstance.
said office. The BIR National Office has 30 days within which to act on
SECTION 4. THE COMMISSIONER HAS THE SOLE AUTHORITY TO the case.
ABATE OR CANCEL TAX, PENALTIES AND/OR INTEREST – The
Commissioner has the sole authority to abate or cancel internal revenue SECTION 6. REPORT OF THE COMMISISONER TO THE
taxes, penalties and/or interest pursuant to Section 204(B), in relation to CONGRESSIONAL OVERSIGHT COMMITTEE (COC). – The
Section 7(c), both of the Code. This authority is generally applicable to Commissioner shall submit to the Congressional Oversight Committee
surcharge and compromise penalties only, however, in meritorious (COC), through the Chairmen of the Committee on Ways and Means of
instances, the Commissioner may likewise abate the interest as well as both the Senate and the House of Representatives, every 6 months of
basic tax assessed, provided, however, that cases for abatement or each calendar year, a report on the exercise of his power to abate or
collection of tax, penalties and/or interest by the Commissioner shall be cancel tax liabilities, penalties and/or interest imposed on taxpayers. In
coursed through the following officials: this regard, all the originating offices which processed the application for
abatement or cancellation of tax, penalties and/or interest shall likewise
4.1 The Deputy Commissioner (Operations Group), who shall constitute a prepare for this activity/process (abatement) all the reports being prepared
Technical Working Committee (TWC) for the evaluation and review of any in the collection of taxes under the compromise power of the
application for abatement or cancellation of tax, penalties and/or interest Commissioner, unless the Commissioner provides otherwise.
processed by the Revenue District Office (RDO) as reviewed by the
Regional Office (RO), or by the Large Taxpayers’ Service’s Collection or SECTION 7. TRANSITORY PROVISIONS. – Dockets that are already in
Audit Division and Large Taxpayers District Office (LTDO) as reviewed by the National Office as of the effectivity of these Regulations shall no longer
the Large Taxpayers Service (LTS), or by Collection Enforcement be returned to the Region but shall be processed taking into consideration
Division/Withholding Agent and Monitoring Division as reviewed by the the recommendation of the originating office, although subject to review
Collection Service, or by the Legal Service, or any other office that has and modification by the National Office.
jurisdiction over the case; and
4.2 The Deputy Commissioner (Legal and Inspection Group), who shall SECTION 8. REPEALING CLAUSE. – All existing rules and regulations or
evaluate the legal issue involved in the case. rulings or parts thereof, which are contrary to or inconsistent with the
provisions of these Regulations are hereby amended, or repealed
The application for abatement or cancellation of tax, penalties and/or accordingly.
interest should state the reasons and causes for such request.
Documentary proofs for the underlying reasons and causes aforestated SECTION 9. EFFECTIVITY. – The provisions of these Regulations shall
should be appended to the “Application for the Abatement or Cancellation take effect fifteen (15) days after publication in any newspaper of general
of Tax, Penalties and/or Interest (Annex “A”). On the other hand, denial of circulation.
the application for abatement or cancellation of tax, penalties and/or
interest should state the reasons therefor.
REVENUE REGULATION No. 4-2012 (March 28, 2012)
SECTION 5. PROCESSING TIME – The application for abatement or Amending RR No 13-2001

cancellation of tax, penalties and/or interest should be acted upon by the
processing office and reviewing office within 5 days from receipt by
SECTION 1. SCOPE – Pursuant to the provisions of Section 244 of the deem analogous to the enumeration above.
NIRC of 1997, as amended, these Regulations are hereby promulgated to
amend RR No. 13-2001. SECTION 3. REPEALING CLAUSE – All rules and regulations or parts
thereof inconsistent with the provisions of these Regulations are hereby
SECTION 2. AMENDMENT – Section 2.6 of RR No, 13-2001 is hereby repealed accordingly.
amended by deleting Section 2.6.1 thereof which provides that penalties
and/or interest imposed on the taxpayer may be abated or cancelled on SECTION 4. EFFECTIVITY – The provisions of these Regulations shall
the ground of one day late filing and remittance due to failure to beat the take effect fifteen days following publications in any newspaper of general
bank cut-off time. Accordingly, Section 2.6 of RR No. 13-2001 shall now circulation.
read
2.6 Late payment of the tax under meritorious
circumstances such as: SUMMARY OF RR NO 13-2001, AS AMENDED BY RR NO 4-2012:
2.6.1 Use of wrong tax form but correct amount of tax was RR No. 13-2001 talks about the authority of the Commissioner of Internal
remitted; Revenue (Commissioner) to abate or cancel internal revenue tax
2.6.2 Filing an amended return under meritorious liabilities of certain taxpayers based on any of the following grounds,
circumstances, provided, however, that abatement shall viz:
cover only the penalties and not the interest;
2.6.3 Surcharge erroneously imposed; (1) The tax/or any portion thereof appears to be unjustly or
2.6.4 Late filing of return due to unresolved issue on excessively assessed. What are the instances when the CIR can
classification/valuation of real property (for CGT cases, do this?
etc.); • When the filing of the return/payment of the tax is made at the
2.6.5 Offsetting of taxes of the same kind, i.e., overpayment wrong venue;
in one quarter/month is offset against underpayment in • When taxpayer’s mistake in payment of his tax is due to erroneous
another quarter/month; written official advice of a revenue officer;
2.6.6 Automatic offsetting of overpayment of one kind of • When taxpayer fails to file the return and pay the tax on time
withholding tax against the underpayment of another kind; due to substantial losses from prolonged labor dispute, force
2.6.7 Late remittance of withholding tax on compensation of majeure, legitimate business reverses such as in the following
expatriates for services rendered in the Philippines pending instances, provided, however, that the abatement shall only cover
the issuance of the Securities and Exchange Commission the surcharge and the compromise penalty and not the interest
of the license to the Philippine branch office/subsidiary, imposed under Section 249 of the Code:
provided, however, that the abatement shall only cover the o Labor strike for more than 6 months which has caused the
surcharge and the compromise penalty and not the interest; temporary shutdown of business;
2.6.8 Wrong use of Tax Credit Certificate (TCC) where Tax o Public turmoil;
Debit Memo (TDM) was not properly applied for; and o Natural calamity such as lightning, earthquake, storm, flood
2.6.19 Such other instances which the Commissioner may and the like;
o Armed conflicts such as war or insurgency; o Late remittance of withholding tax on compensation of
o Substantial losses sustained due to fire, robbery, theft, expatriates for services rendered in the Philippines pending
embezzlement; the issuance of the Securities and Exchange Commission
o Continuous heavy losses incurred by the taxpayer for the of the license to the Philippine branch office/subsidiary,
last 2 years; provided, however, that the abatement shall only cover the
o Liquidity problem of the taxpayer for the last 3 years; or surcharge and the compromise penalty and not the interest;
o Such other instances which the Commissioner may deem o Wrong use of Tax Credit Certificate (TCC) where Tax Debit
analogous to the enumeration above Memo (TDM) was not properly applied for; and
o Such other instances which the Commissioner may deem
• When the assessment is brought about or the result of taxpayer’s analogous to the enumeration above.
non-compliance with the law due to a difficult interpretation of • Other cases similar/synonymous thereto.
said law;
• When the taxpayer fails to file the return and pay the correct tax (2) The administration and collection costs involved do not justify the
on time due to circumstances beyond his control, provided, collection of the amount due. When can the CIR do this?
however, that abatement shall cover only the surcharge and the
compromise penalty and not the interest; The administration and collection costs, including cost of litigation, are
• Late payment of the tax under meritorious circumstances such much more than the amount that may be collected from the taxpayer, the
as: assessment may be reduced through abatement, or entirely cancelled
o One day late filing and remittance due to failure to beat pursuant to Section 204(B) of the code. The instances that may fall under
bank cut-off time; (THIS WAS DELETED through RR 4- this category are the following:
2012. This is the amended provision)s • Abatement of penalties on assessment confirmed by lower court but
o Use of wrong tax form but correct amount of tax was appealed by the taxpayer to a higher court;
remitted; • Abatement of penalties on withholding tax assessment under
o Filing an amended return under meritorious circumstances, meritorious circumstances;
provided, however, that abatement shall cover only the • Abatement of penalties on delayed installment payment under
penalties and not the interest; meritorious circumstances;
o Surcharge erroneously imposed; • Abatement of penalties on assessment reduced after reinvestigation
o Late filing of return due to unresolved issue on but taxpayer is still contesting reduced assessment; and
classification/valuation of real property (for CGT cases, • Such other instances which the Commissioner may deem analogous
etc.); to the enumeration above
o Offsetting of taxes of the same kind, i.e., overpayment in
one quarter/month is offset against underpayment in For the [first 4 items], the abatement of the surcharge and compromise
another quarter/month; penalty shall be allowed only upon written application by the taxpayer
o Automatic offsetting of overpayment of one kind of signifying his willingness to pay the basic tax and interest or basic tax
withholding tax against the underpayment of another kind; only, whichever is applicable under the prevailing circumstance.
NOTE: This power of the CIR is generally applicable to surcharge and been processed, analyzed and recommended for approval/disapproval.
compromise penalties only, however, in meritorious instances, the However, it has come to the attention of the National Office that
Commissioner may likewise abate the interest as well as basic tax applications for abatement and/or compromise settlement have been
assessed, provided, however, that cases for abatement or collection of tax, forwarded by the investigating offices to the TWGs without any evaluation
and recommendation as to whether the application can be approved or not
penalties and/or interest by the Commissioner shall be coursed through the
and leave the initial analysis of the case to the latter which is supposed to
other BIR officials (check main RR). be the reviewing office.
Revenue Memorandum Order 20-2007 (RMO 20-2007) Inasmuch as the responsibilities/functions of the concerned offices were
already spelled-out in the existing issuances, this Order is thus issued to
(Austria)
mandate the concerned offices to be mindful of their responsibilities with
regards to the processing of application for compromise settlement and
abatement cases for a simplified processing of application for availing
SUBJECT: Simplified Processing of Application to Avail Taxpayer’s taxpayer's remedies.
Remedies Under Section 204(A), Compromise Settlement, and Section
204(B), Abatement, Both of the National Internal Revenue Code of 1997 II. Policies
TO: All IR Offices, Employees and Others Concerned (a) Abatement

Under existing rules, the BIR processes applications for the abatement of
only the surcharges, interests and compromise penalties. Any application
I. Background for the abatement of the basic tax assessed or any portion thereof, if any,
The National Internal Revenue Code of 1997 (Code) particularly, Sections are not covered by any existing regulations and therefore shall not be
204(A) and (B), in relation to Section 7, empowers the Commissioner of processed.
Internal Revenue (CIR) to compromise or abate internal revenue tax
liabilities as a sort of taxpayer's remedy. These provisions have been The RDO/investigating offices of the LTS having jurisdiction over the
implemented by several Revenue Regulations (RR), particularly RR Nos. taxpayer-applicant shall, upon receipt of the application for abatement
6-2000, 7-2001 and 30-2002, for compromise settlement, and RR No. 13- together with the required supporting documents, process the application,
2001, for abatement. These RRs provided for the guidelines and make the necessary evaluation and prepare a report containing its
procedures in the processing of the application for compromise settlement recommendation to the duly constituted Technical Working Committee
and abatement, including the offices which are tasked to process and (TWC). The report shall likewise state the basis of the recommendation as
approve the applications. provided under Section 204(B) of the Code and RR No. 13-2001
Based on the aforesaid RRs, receiving, processing and evaluation of the The TWC shall review the report and recommendation of the investigating
application, including the initial recommendation for the offices and thereafter prepare the final recommendation for the approval of
approval/disapproval thereof, were lodged in the Revenue Regional the Commissioner.
Offices thru the Revenue District Offices, for regional office cases and to
the ACIR/HREA of the Large Taxpayers Service thru its investigating In all instances, no application for abatement shall be initially
Offices being the offices which have jurisdiction over the taxpayers. processed/evaluated by the investigating office without the payment of
Technical Working Groups (TWG) were created, both in the National 100% of the basic tax.
Office and the Regional Offices, to review applications and make the final
recommendation to the approving authority, after the said application has (b) Compromise Settlement
Pursuant to Section 204(A), in relation to Section 7, of the Code, as
implemented by RR Nos. 6-2000, 7-2001 and 30-2002, payments already made pursuant to these applications shall be
recommendation/final report on the application for compromise shall be treated as partial or installment payments of the assessments.
signed/approved as herein stated:
III. Effectivity
1) Concerned Regional Evaluation Board (REB) This Order takes effect immediately.
o Regional office cases involving basic tax assessment
amounting to Five hundred thousand pesos (P500,0000) or LILIAN B. HEFTI
less, and minor criminal violations discovered by regional and OIC-Commissioner of Internal Revenue
district officials which were already delegated to the REB.
2) CIR DIGEST of RMO 20-2007

o Other cases which were not delegated
o Cases which, by law, have been entrusted to the CIR Prescribes the policies for simplified processing of application to avail
taxpayer’s remedies, compromise settlement and abatement provided under
3) National Evaluation Board (NEB) Sections 204(A) and 204 (B), NIRC
o Cases where the basic tax exceeds One million pesos Under existing rules, the BIR processes applications for the abatement of
(P1,000,000) or where the settlement offered is less than the only the surcharges, interests and compromise penalties. Any application for
prescribed minimum amount (10% for cases of financial the abatement of the basic tax assessed or any portion thereof, if any, are
incapacity; 40% for cases of doubtful validity of the not covered by any existing regulations and therefore shall not be processed.
assessment) which, by law, have been entrusted to the NEB
The Revenue District Office (RDO)/investigating offices of the Large
Prior to its approval/disapproval, application for compromise Taxpayers Service (LTS) having jurisdiction over the taxpayer-applicant
settlement shall likewise be processed, evaluated and recommended shall, upon receipt of the application for abatement together with the required
by the investigating offices having jurisdiction over the taxpayer- supporting documents, process the application, make the necessary
applicant. Processing and evaluation of regional office cases shall be evaluation and prepare a report containing its recommendation (with the
undertaken by the respective district offices while LTS cases shall be basis stated) to the duly constituted Technical Working Committee (TWC).
processed and evaluated by the LTS investigating offices before The TWC shall review the report and recommendation of the investigating
submitting the recommendation thereon to the respective TWGs. The offices and thereafter prepare the final recommendation for approval of the
concerned TWG shall review the submitted report and Commissioner.
recommendation and prepare its final recommendation for the
approval of the CIR/REB/NEB. In all instances, no application for abatement shall be initially
processed/evaluated by the investigating office without the payment of 100%
In all instances, application for compromise settlement shall not be of the basic tax.
forwarded to the TWGs without being processed, evaluated and
provided with recommendation by the originating office. The recommendation/final report on the application for compromise
settlement shall be signed/approved by the following:
The concerned RDO/head of the LTS investigating office is hereby a) Concerned Regional Evaluation Board (REB)
directed to require all applicants to pay the basic tax assessed, for o Regional office cases involving basic tax assessment amounting to P
abatement cases, and the offers of compromise, for compromise 500,000 or less, and minor criminal violations discovered by regional
settlement, upon filing of the application for abatement/compromise and district officials which were already delegated to the REB.
settlement before the application can be initially processed. In case of b) Commissioner of Internal Revenue (CIR)
ultimate disapproval of the application by the approving authority,
o Other cases which were not delegated any increment thereto resulting from delinquency shall be:
o Cases which, by law, have been entrusted to the CIR
c) National Evaluation Board (NEB) (a) By distraint of goods, chattels, or effects, and other personal
o Cases where the basic tax exceeds P 1,000,000 or where the property of whatever character, including stocks and other
settlement offered is less than the prescribed minimum amount (10% securities, debts, credits, bank accounts and interest in and rights
for cases of financial incapacity; 40% for cases of doubtful validity of to personal property, and by levy upon real property and interest
the assessment) which, by law, have been entrusted to the NEB in rights to real property; and
Prior to its approval/disapproval, application for compromise settlement shall

(b) By civil or criminal action.
likewise be processed, evaluated and recommended by the investigating
offices having jurisdiction over the taxpayer-applicant. Processing and
evaluation of regional office cases shall be undertaken by the respective Either of these remedies or both simultaneously may be pursued in the
district offices while LTS cases shall be processed and evaluated by the LTS discretion of the authorities charged with the collection of such taxes:
investigating offices before submitting the recommendation thereon to the Provided, however, That the remedies of distraint and levy shall not be
respective Technical Working Groups (TWGs). The concerned TWG shall availed of where the amount of tax involve is not more than One hundred
review the submitted report and recommendation and prepare its final pesos (P100).
recommendation for approval of the CIR/REB/NEB.
The judgment in the criminal case shall not only impose the penalty but
In all instances, application for compromise settlement shall not be forwarded shall also order payment of the taxes subject of the criminal case as finally
to the TWGs without being processed, evaluated and provided with decided by the Commissioner.
recommendation by the originating office.
The Bureau of Internal Revenue shall advance the amounts needed to
The concerned RDO/head of the LTS investigating office is directed to defray costs of collection by means of civil or criminal action, including the
require all applicants to pay the basic tax assessed, for abatement cases, preservation or transportation of personal property distrained and the
and the offers of compromise, for compromise settlement, upon filing of the advertisement and sale thereof, as well as of real property and
application for abatement/compromise settlement before the same can be improvements thereon.
initially processed. In case of ultimate disapproval of the application by the
approving authority, payments already made pursuant to these applications
SEC. 206. Constructive Distraint of the Property of A Taxpayer. - To
shall be treated as partial or installment payments of the assessments. safeguard the interest of the Government, the Commissioner may place
under constructive distraint the property of a delinquent taxpayer or any
CIVIL REMEDIES FOR COLLECTION (DISTRAINT & LEVY) taxpayer who, in his opinion, is retiring from any business subject to tax, or
is intending to leave the Philippines or to remove his property therefrom or
TAX CODE to hide or conceal his property or to perform any act tending to obstruct
CHAPTER II the proceedings for collecting the tax due or which may be due from him.
CIVIL REMEDIES FOR COLLECTION OF TAXES The constructive distraint of personal property shall be affected by
requiring the taxpayer or any person having possession or control of such
property to sign a receipt covering the property distrained and obligate
SEC. 205. Remedies for the Collection of Delinquent Taxes. - The civil himself to preserve the same intact and unaltered and not to dispose of
remedies for the collection of internal revenue taxes, fees or charges, and the same ;in any manner whatever, without the express authority of the
Commissioner. showing the name of the taxpayer and the amounts of the tax and penalty
due from him. Said certificate shall operate with the force of a legal
In case the taxpayer or the person having the possession and control of execution throughout the Philippines.
the property sought to be placed under constructive distraint refuses or
fails to sign the receipt herein referred to, the revenue officer effecting the Levy shall be affected by writing upon said certificate a description of the
constructive distraint shall proceed to prepare a list of such property and, property upon which levy is made. At the same time, written notice of the
in the presence of two (2) witnesses, leave a copy thereof in the premises levy shall be mailed to or served upon the Register of Deeds for the
where the property distrained is located, after which the said property shall province or city where the property is located and upon the delinquent
be deemed to have been placed under constructive distraint. taxpayer, or if he be absent from the Philippines, to his agent or the
manager of the business in respect to which the liability arose, or if there
SEC. 207. Summary Remedies. - be none, to the occupant of the property in question.
(A) Distraint of Personal Property. - Upon the failure of the person In case the warrant of levy on real property is not issued before or
owing any delinquent tax or delinquent revenue to pay the same at the simultaneously with the warrant of distraint on personal property, and the
time required, the Commissioner or his duly authorized representative, if personal property of the taxpayer is not sufficient to satisfy his tax
the amount involved is in excess of One million pesos (P1,000,000), or the delinquency, the Commissioner or his duly authorized representative shall,
Revenue District Officer, if the amount involved is One million pesos within thirty (30) days after execution of the distraint, proceed with the levy
(P1,000,000) or less, shall seize and distraint any goods, chattels or on the taxpayer's real property.
effects, and the personal property, including stocks and other securities,
debts, credits, bank accounts, and interests in and rights to personal Within ten (10) days after receipt of the warrant, a report on any levy shall
property of such persons in sufficient quantity to satisfy the tax, or charge, be submitted by the levying officer to the Commissioner or his duly
together with any increment thereto incident to delinquency, and the authorized representative: Provided, however, That a consolidated report
expenses of the distraint and the cost of the subsequent sale. by the Revenue Regional Director may be required by the Commissioner
as often as necessary: Provided, further, That the Commissioner or his
A report on the distraint shall, within ten (10) days from receipt of the duly authorized representative, subject to rules and regulations
warrant, be submitted by the distraining officer to the Revenue District promulgated by the Secretary of Finance, upon recommendation of the
Officer, and to the Revenue Regional Director: Provided, That the Commissioner, shall have the authority to lift warrants of levy issued in
Commissioner or his duly authorized representative shall, subject to rules accordance with the provisions hereof.
and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, have the power to lift such order of SEC. 208. Procedure for Distraint and Garnishment. - The officer
distraint: Provided, further, That a consolidated report by the Revenue serving the warrant of distraint shall make or cause to be made an
Regional Director may be required by the Commissioner as often as account of the goods, chattels, effects or other personal property
necessary. distrained, a copy of which, signed by himself, shall be left either with the
owner or person from whose possession such goods, chattels, or effects
(B) Levy on Real Property. - After the expiration of the time required to or other personal property were taken, or at the dwelling or place of
pay the delinquent tax or delinquent revenue as prescribed in this Section, business of such person and with someone of suitable age and discretion,
real property may be levied upon, before simultaneously or after the to which list shall be added a statement of the sum demanded and note of
distraint of personal property belonging to the delinquent. To this end, any the time and place of sale.
internal revenue officer designated by the Commissioner or his duly
authorized representative shall prepare a duly authenticated certificate Stocks and other securities shall be distrained by serving a copy of the
warrant of distraint upon the taxpayer and upon the president, manager, the corporation, company or association shall make the corresponding
treasurer or other responsible officer of the corporation, company or entry in its books, transfer the stocks or other securities sold in the name
association, which issued the said stocks or securities. of the buyer, and issue, if required to do so, the corresponding certificates
of stock or other securities.
Debts and credits shall be distrained by leaving with the person owing the
debts or having in his possession or under his control such credits, or with Any residue over and above what is required to pay the entire claim,
his agent, a copy of the warrant of distraint. The warrant of distraint shall including expenses, shall be returned to the owner of the property sold.
be sufficient authority to the person owning the debts or having in his The expenses chargeable upon each seizure and sale shall embrace only
possession or under his control any credits belonging to the taxpayer to the actual expenses of seizure and preservation of the property pending
pay to the Commissioner the amount of such debts or credits. the sale, and no charge shall be imposed for the services of the local
internal revenue officer or his deputy.
Bank accounts shall be garnished by serving a warrant of garnishment
upon the taxpayer and upon the president, manager, treasurer or other SEC. 210. Release of Distrained Property Upon Payment Prior to
responsible officer of the bank. Upon receipt of the warrant of Sale. - If at any time prior to the consummation of the sale all proper
garnishment, the bank shall turn over to the Commissioner so much of the charges are paid to the officer conducting the sale, the goods or effects
bank accounts as may be sufficient to satisfy the claim of the Government. distrained shall be restored to the owner.
SEC. 209. Sale of Property Distrained and Disposition of Proceeds. - SEC. 211. Report of Sale to Bureau of Internal Revenue. - Within two
The Revenue District Officer or his duly authorized representative, other (2) days after the sale, the officer making the same shall make a report of
than the officer referred to in Section 208 of this Code shall, according to his proceedings in writing to the Commissioner and shall himself preserve
rules and regulations prescribed by the Secretary of Finance, upon a copy of such report as an official record.
recommendation of the Commissioner, forthwith cause a notification to be
exhibited in not less than two (2) public places in the municipality or city SEC. 212. Purchase by Government at Sale Upon Distraint. - When
where the distraint is made, specifying; the time and place of sale and the the amount bid for the property under distraint is not equal to the amount
articles distrained. The time of sale shall not be less than twenty (20) days of the tax or is very much less than the actual market value of the articles
after notice to the owner or possessor of the property as above specified offered for sale, the Commissioner or his deputy may purchase the same
and the publication or posting of such notice. One place for the posting of in behalf of the national Government for the amount of taxes, penalties
such notice shall be at the Office of the Mayor of the city or municipality in and costs due thereon.
which the property is distrained.
Property so purchased may be resold by the Commissioner or his deputy,
At the time and place fixed in such notice, the said revenue officer shall subject to the rules and regulations prescribed by the Secretary of
sell the goods, chattels, or effects, or other personal property, including Finance, the net proceeds therefrom shall be remitted to the National
stocks and other securities so distrained, at public auction, to the highest Treasury and accounted for as internal revenue.
bidder for cash, or with the approval of the Commissioner, through duly
licensed commodity or stock exchanges.
SEC. 213. Advertisement and Sale. - Within twenty (20) days after levy,
the officer conducting the proceedings shall proceed to advertise the
In the case of Stocks and other securities, the officer making the sale shall property or a usable portion thereof as may be necessary to satisfy the
execute a bill of sale which he shall deliver to the buyer, and a copy claim and cost of sale; and such advertisement shall cover a period of a
thereof furnished the corporation, company or association which issued least thirty (30) days. It shall be effectuated by posting a notice at the main
the stocks or other securities. Upon receipt of the copy of the bill of sale, entrance of the municipal building or city hall and in public and
conspicuous place in the barrio or district in which the real estate lies and said Revenue District Officer that he has thus redeemed the property, and
by publication once a week for three (3) weeks in a newspaper of general the Revenue District Officer shall forthwith pay over to the purchaser the
circulation in the municipality or city where the property is located. The amount by which such property has thus been redeemed, and said
advertisement shall contain a statement of the amount of taxes and property thereafter shall be free from the lien of such taxes and penalties.
penalties so due and the time and place of sale, the name of the taxpayer
against whom taxes are levied, and a short description of the property to The owner shall not, however, be deprived of the possession of the said
be sold. At any time before the day fixed for the sale, the taxpayer may property and shall be entitled to the rents and other income thereof until
discontinue all proceedings by paying the taxes, penalties and interest. If the expiration of the time allowed for its redemption.
he does not do so, the sale shall proceed and shall be held either at the
main entrance of the municipal building or city hall, or on the premises to
SEC. 215. Forfeiture to Government for Want of Bidder. - In case there
be sold, as the officer conducting the proceedings shall determine and as
is no bidder for real property exposed for sale as herein above provided or
the notice of sale shall specify.
if the highest bid is for an amount insufficient to pay the taxes, penalties
and costs, the Internal Revenue Officer conducting the sale shall declare
Within five (5) days after the sale, a return by the distraining or levying the property forfeited to the Government in satisfaction of the claim in
officer of the proceedings shall be entered upon the records of the question and within two (2) days thereafter, shall make a return of his
Revenue Collection Officer, the Revenue District officer and the Revenue proceedings and the forfeiture which shall be spread upon the records of
Regional Director. The Revenue Collection Officer, in consultation with the his office. It shall be the duty of the Register of Deeds concerned, upon
Revenue district Officer, shall then make out and deliver to the purchaser registration with his office of any such declaration of forfeiture, to transfer
a certificate from his records, showing the proceedings of the sale, the title of the property forfeited to the Government without the necessity
describing the property sold stating the name of the purchaser and setting of an order from a competent court.
out the exact amount of all taxes, penalties and interest: Provided,
however, That in case the proceeds of the sale exceeds the claim and
Within one (1) year from the date of such forfeiture, the taxpayer, or any
cost of sale, the excess shall be turned over to the owner of the property.
one for him, may redeem said property by paying to the Commissioner or
the latter's Revenue Collection Officer the full amount of the taxes and
The Revenue Collection Officer, upon approval by the Revenue District penalties, together with interest thereon and the costs of sale, but if the
Officer may, out of his collection, advance an amount sufficient to defray property be not thus redeemed, the forfeiture shall become absolute.
the costs of collection by means of the summary remedies provided for in
this Code, including the preservation or transportation in case of personal
SEC. 216. Resale of Real Estate Taken for Taxes. - The Commissioner
property, and the advertisement and subsequent sale, both in cases of
shall have charge of any real estate obtained by the Government of the
personal and real property including improvements found on the latter. In
Philippines in payment or satisfaction of taxes, penalties or costs arising
his monthly collection reports, such advances shall be reflected and
under this Code or in compromise or adjustment of any claim therefore;
supported by receipts.
and said Commissioner may, upon the giving of not less than twenty (20)
days notice, sell and dispose of the same of public auction or with prior
SEC. 214. Redemption of Property Sold. - Within one (1) year from the approval of the Secretary of Finance, dispose of the same at private sale.
date of sale, the delinquent taxpayer, or any one for him, shall have the In either case, the proceeds of the sale shall be deposited with the
right of paying to the Revenue District Officer the amount of the public National Treasury, and an accounting of the same shall rendered to the
taxes, penalties, and interest thereon from the date of delinquency to the Chairman of the Commission on Audit.
date of sale, together with interest on said purchase price at the rate of
fifteen percent (15%) per annum from the date of purchase to the date of
SEC. 217. Further Distraint or Levy. - The remedy by distraint of
redemption, and such payment shall entitle the person paying to the
personal property and levy on realty may be repeated if necessary until
delivery of the certificate issued to the purchaser and a certificate from the
the full amount due, including all expenses, is collected. on Assessments Upheld by the Court of Tax Appeals.
INJUNCTION I. LEGAL PROVISIONS
Under Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, no

SECTION 218. Injunction not Available to Restrain Collection of Tax. appeal taken to the Court of Tax Appeals (CTA) from the decision of the
– No court shall have the authority to grant an injunction to restrain the Commissioner of Internal Revenue on a disputed assessment shall
collection of any national internal revenue tax, fee or charge imposed by suspend the payment, levy, distraint, and/or sale of any property of
this Code. the taxpayer for the satisfaction of his tax liability, unless the CTA
suspends the collection under certain conditions.
REPUBLIC ACT NO. 9282 Also, under Section 13 of said law, upon the issuance of any ruling, order
or decision of the CTA favorable to the national government, the CTA shall
SECTION 11. Section 18 of the same Act is hereby amended as follows: issue an order authorizing the Bureau of Internal Revenue to seize and
distraint any goods, chattels, or effects, and the personal property,
"SEC. 18. Appeal to the Court of Tax Appeals En including stocks and other securities, debts, credits, bank accounts, and
Banc. – No civil proceeding involving matter arising interests in and rights to personal property and/or levy the real property of
under the National Internal Revenue Code, the Tariff and the taxpayer in sufficient quantity to satisfy the tax together with any
Customs Code or the Local Government Code shall be increment thereto incident to delinquency.
maintained, except as herein provided, until and unless
an appeal has been previously filed with the CTA and Moreover, under Section 218 of the Tax Code, no court (except the CTA)
disposed of in accordance with the provisions of this Act. shall have the authority to grant an injunction to restrain the collection of
any national internal revenue tax, fee or charge imposed by said Code.
"A party adversely affected by a resolution of a Division
of the CTA on a motion for reconsideration or new trial, II. SCOPE
may file a petition for review with the CTA en banc."
This Memorandum Order covers the following:
"SEC. 19. Review by Certiorari. – A party adversely affected by a
decision or ruling of the CTA en banc may file with the Supreme Court a 1. Disputed assessments finally decided by the Commissioner or
verified petition for review on certiorari pursuant to Rule 45 of the 1997 Regional Director, as the case may be, against the taxpayer.
Rules of Civil Procedure."
2. Assessments upheld by the CTA in Division whether or not
appealed to the CTA En Banc, or upheld by the CTA En Banc
Revenue Memorandum Order 39-2007 whether or not appealed to the Supreme Court.
Issuance of Warrants of Distraint and Garnishment, and/or Levy on
Disputed Assessments Finally Decided by the Bureau Against Taxpayer III. ISSUANCE AND SERVICE OF WARRANTS OF DISTRAINT
AND GARNISHMENT, AND/OR LEVY suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability
Upon issuance by the Commissioner or Regional Director of the final E: When the CTA suspends the collection under certain conditions.
decision on the disputed assessment against the taxpayer or upon
issuance by the CTA in Division or En Banc of its decision upholding the Section 13:
assessment, Warrants of Distraint and Garnishment, and/or Levy When CTA issued any ruling, order or decision favorable to the national
shall forthwith be immediately issued and served. government. à CTA shall order BIR to seize and distraint any property of
the taxpayer to satisfy the tax and any increment thereto incident to
IV. EFFECTIVITY delinquency
This Order takes effect immediately. Section 218:

Only the CTA à authority to grant injunction to restrain the collection of any
Summary: national internal revenue taxes and such.
Revenue Memorandum Order No. 39-2007 issued on December 13, 2007

prescribes the issuance of Warrants of Distraint and Garnishment, and/or REVENUE MEMORANDUM ORDER NO. 042-10 (May 4, 2010)
Levy on disputed assessments finally decided by the BIR against the (Bugay)
taxpayer on assessments upheld by the Court of Tax Appeals (CTA).
SUBJECT : Prohibition on the Issuance of Temporary Restraining
Orders on the Collection of Taxes Against the Bureau of
This covers disputed assessments finally decided by the Commissioner of Internal Revenue By Courts Other than the Court of Tax Appeals, the
Internal Revenue (CIR) or Regional Director, as the case may be, against Issuance of Warrants of Distraint and Garnishment, and/or Levy on
the taxpayer and assessments upheld by the CTA in Division whether or Final Decisions of the Bureau of Internal Revenue on Disputed
not appealed to the CTA En Banc, or upheld by the CTA En Banc whether Assessments, Cases Filed Before the Court of Tax Appeals, and the
Sale of Property Distrained and Garnished
or not appealed to the Supreme Court
TO : All Internal Revenue Officers and Others Concerned
Upon Issuance by the CIR or Regional Director of the final decision on the
disputed upholding the assessment, Warrants of Distraint and I. Legal Provisions
Garnishment, and/or Levy shall forthwith be immediately issued and
served. Under Section 218 of the National Internal Revenue Code as amended,
(herein referred to as the Tax Code) NO COURT (except the CTA) shall
have the authority to grant an injunction to restrain the collection of any
NOTES:
national internal revenue tax, fee or charge imposed by the said Tax
I. LEGAL PROVISION Code. This prohibition shall apply to all collection activities, including
imposition and collection of taxes prescribed in tax laws; issuance of
Section 11: warrants of distraint and garnishment, and/or levy on final decisions of the
GR: No appeal taken to the Court of Tax Appeals (CTA) from the decision of Bureau of Internal Revenue on disputed assessments, cases filed before
the Commissioner of Internal Revenue on a disputed assessment shall the Court of Tax Appeals, and the sale of property distrained and
garnished. Please refer to the following cases for reference, Zuño vs. Judge Arnulfo
G. Cabredo, A.M. No. RTJ-03-1779, April 30, 2003; Republic of the
Moreover, pursuant to Section 11 of Republic Act No. 1125 — An Act Philippines vs. Judge Ramon S. Caguioa, A.M. No. RTJ-07-2063 June 26,
Creating the Court of Tax Appeals, as amended by Republic Act No. 9282, 2009; Commissioner of Customs vs. Judge Ramon S. Caguioa, A.M. No.
no appeal taken to the Court of Tax Appeals from the decision of the RTJ-07-2064 June 26, 2009; Charles T. Burns, Jr. vs. Judge Ramon S.
Bureau of Internal Revenue on a disputed assessment shall suspend the Caguioa, A.M. No. RTJ-07-2006 June 26, 2009.
payment, levy, distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability, unless the Court of Tax Appeals suspends III. Issuance and Service of Warrants of Distraint and Garnishment,
the collection under certain conditions. and/or Levy and/or Notice of Tax Liens
Furthermore, when deemed proper, the Bureau of Internal Revenue or its Upon issuance by the Commissioner or its authorized representatives of
duly authorized agent, may cause the issuance of a Notice of Tax Lien to the final decision on the disputed assessment against the taxpayer or
safeguard the interest of the national government pursuant to Section 219 upon filing of a Petitioner for Review before the Court of Tax Appeals in
of the 1997 Tax Code as well as other issuances by the Bureau of Division or En Banc of its decision upholding the assessment, Warrants of
Internal Revenue. Distraint and Garnishment, and/or Levy shall forthwith be immediately
issued and served pursuant to the provisions
II. Issuance of Injunction or Temporary Restraining Orders (TRO) By of Revenue Memorandum Order No. 39-2007 and other rules, regulations,
Courts and issuances of the Bureau of Internal Revenue when applicable.
In Section 218 of the 1997 Tax Code, it is very clear and explicit that Moreover, in order to safeguard the interest of the Government, the Tax
injunctions are not available to restrain collection of taxes. No court shall Code under Section 206 authorizes the Bureau of Internal Revenue to
have the authority to grant an injunction to restrain the collection of any place under constructive distraint the property of a delinquent taxpayer or
national internal revenue tax, fee or charge imposed by said Code. any taxpayer who, in his opinion:
1. is retiring from any business subject to tax, or
By way of exception pursuant to Section 11 of Republic Act No. 1125 as 2. is intending to leave the Philippines or
amended, it is only the Court of Tax Appeals that has judicial jurisdiction to 3. is intending to remove his property therefrom or
suspend the collection of taxes but only under certain conditions that is 4. is intending to hide or conceal his property or
when in its opinion the collection by the Bureau of Internal Revenue may 5. is intending to perform any act tending to obstruct the proceedings
jeopardize the interest of the government and/or the taxpayer and which for collecting the tax due or which may be due from him.
case the Court of Tax Appeals may suspend the collection of taxes and
require the taxpayer either to deposit the amount claimed or to file a surety IV. Effectivity
bond for not more than double the amount being assessed.
This Order takes effect immediately.
Thus, temporary restraining orders or injunctions issued by courts other
than the Court of Tax Appeals against the Bureau of
Internal Revenue contrary to the foregoing provision should be annulled
and cancelled for lack of jurisdiction. The concerned legal officers of the
Bureau of Internal Revenue are instructed to immediately take the
necessary legal remedy to annul and cancel the temporary
restraining order or injunction together with an appropriate administrative
case against the erring judge whenever the circumstances so warrant.
AGATEP • ALARCON • ARCAINA • AUSTRIA • BAÑADERA • BANTA • BELLO • BUGAY • CARAAN • COLOQUIO • CUALOPING • DE LUIS • DIPLOMA • FAJARDO • GO • GUZMAN
PRESCRIPTION OF THE GOVERNMENT’S RIGHT TO COLLECT distraint or levy or by a proceeding in court within five (5) years following
the assessment of the tax.
REMEDIES IN GENERAL (d) Any internal revenue tax, which has been assessed within the period
SEC. 203. Period of Limitation Upon Assessment and Collection. – agreed upon as provided in paragraph (b) hereinabove, may be collected
Except as provided in Section 222, internal revenue taxes shall be by distraint or levy or by a proceeding in court within the period agreed
assessed within three (3) years after the last day prescribed by law for upon in writing before the expiration of the five (5) -year period. The period
the filing of the return, and no proceeding in court without assessment for so agreed upon may be extended by subsequent written agreements
the collection of such taxes shall be begun after the expiration of such made before the expiration of the period previously agreed upon.
period: Provided, That in a case where a return is filed beyond the period
prescribed by law, the three (3)-year period shall be counted from the day (e) Provided, however, That nothing in the immediately preceding and
the return was filed. For purposes of this Section, a return filed before the paragraph (a) hereof shall be construed to authorize the examination and
last day prescribed by law for the filing thereof shall be considered as filed investigation or inquiry into any tax return filed in accordance with the
on such last day. provisions of any tax amnesty law or decree.
CIVIL REMEDIES FOR COLLECTION OF TAXES SEC. 223. Suspension of Running of Statute of Limitations. – The
SEC. 222. Exceptions as to Period of Limitation of Assessment and running of the Statute of Limitations provided in Sections 203 and 222 on
Collection of Taxes. – the making of assessment and the beginning of distraint or levy a
proceeding in court for collection, in respect of any deficiency, shall be
(a) In the case of a false or fraudulent return with intent to evade tax suspended for the period during which the Commissioner is prohibited
or of failure to file a return, the tax may be assessed, or a proceeding in from making the assessment or beginning distraint or levy or a proceeding
court for the collection of such tax may be filed without assessment, at any in court and for sixty (60) days thereafter; when the taxpayer requests for
time within ten (10) years after the discovery of the falsity, fraud or a reinvestigation which is granted by the Commissioner; when the
omission: Provided, That in a fraud assessment which has become final taxpayer cannot be located in the address given by him in the return filed
and executory, the fact of fraud shall be judicially taken cognizance of in upon which a tax is being assessed or collected: Provided, that, if the
the civil or criminal action for the collection thereof. taxpayer informs the Commissioner of any change in address, the running
of the Statute of Limitations will not be suspended; when the warrant of
(b) If before the expiration of the time prescribed in Section 203 for the distraint or levy is duly served upon the taxpayer, his authorized
assessment of the tax, both the Commissioner and the taxpayer have representative, or a member of his household with sufficient discretion,
agreed in writing to its assessment after such time, the tax may be and no property could be located; and when the taxpayer is out of the
assessed within the period agreed upon. The period so agreed upon may Philippines.
be extended by subsequent written agreement made before the expiration
of the period previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of
limitation as prescribed in paragraph (a) hereof may be collected by
1
THE GUAGUA ELECTRIC LIGHT PLANT COMPANY, INC. v.

CIR and CA (Caraan) Facts:
[GR. No. L-23611; April 24, 1967] • Guagua Electric Light Plant Co. (“Guagua”) was a grantee of municipal
“Right to collect TAX prescribes in three (3) years, as governed by the TAX franchises by virtue of Act 667 in Pampanga. It reported a gross income
CODE; not 6 years as provided by the Civil Code” of P1,133,003.44 during the period of January 1, 1947 to November 1956
and paid thereon a franchise tax at 5%.
Recit-Ready: • (March 25, 1957) However, it believed that it should pay franchise tax at
Facts: Guagua was a grantee of municipal franchises. It reported a the lower rates provided for in its franchises instead of the 5% rate. It filed
gross income of P1,133,003.44 and paid 5% franchise tax. It a claim for refund for allegedly overpaid franchise tax amounting to
believed that it should have paid lower taxes (1% or 2% based on P35,593.98 on its gross receipts realized from January 1, 1947 to
Act 667) so it filed for refund. November 1956.
• The CIR denied refund of franchise tax corresponding to the period prior
The SC released a decision saying that that electric franchise to the fourth quarter of 1951 on the ground that the right to its refund had
holders under Act 667 are liable at the 5% franchise tax. Cir then prescribed. He, however, granted refund on the rest totaling to
assessed Guagua for deficiency franchise tax. Thereafter, P16,593.87.
Guagua was given a revised assessment on the ground that the • Guagua appealed to the CTA.
right to assess and collect the tax corresponding to the period • Pending the appeal to the CTA, the Supreme Court ruled in Hoa Hin Co.,
prior to January 1, 1956 has prescribed. It received P16,593.87 Inc. v. David that electric franchise holders under Act 667 are liable at the
as refund. 5% franchise tax provided for in the NIRC.
o (March 2, 1961) CIR then assessed Guagua for deficiency franchise
Issue/s: tax from 1951 to 1960 in the total amount of P42,879.42.
1) WON the rate of 5% in the NIRC (instead of the 1% or 2% for o Guagua contested the deficiency assessment and contended that the
franchises) impairs the obligation of contract and is therefore same is violative of its franchises; that the computation of the gross
unconstitutional receipts is contrary to rules; and that the right to assess and/or collect
2) WON the government is precluded from recovering the P16,593.87 the tax has prescribed.
representing the amount refunded on the grounds of prescription • (August 21, 1961) The appellate division of the BIR recommended that
the right to assess and collect the tax corresponding to the period prior to
Held: January 1, 1956 has prescribed and issued the revised assessment with
1) NO. Guagua, whose franchises were similarly granted under Act 667, P16,593.87 given as refund to Guagua.
being similarly situated as the taxpayers-franchise holders in previous • Guagua was still not satisfied.
cases already decided by the Court, shall likewise be subject to the
5% rate. Issue/s:
2) YES. CIR claims that prescription of its right to collect is six (6) years, 1) WON the rate of 5% in the NIRC (instead of the 1% or 2% for
based on the Civil Code. The Court said that that was wrong seeing as franchises) impairs the obligation of contract and is therefore
what is involved is deficiency franchise tax; thus, the Tax Code must unconstitutional
be followed. —NO
2
2) WON the government is precluded from recovering the P16,593.87 o Our above conclusion absolving Guagua Electric from the payment of
representing the amount refunded on the grounds of prescription the sum of P16,593.87 has removed the necessity of discussing
—YES Guagua Electric's assertion that the Government is precluded from
recovering the said sum because it failed to set it up as a counterclaim
Held/Ratio: Wherefore, the judgment appealed from is affirmed. in C.T.A. Case No. 508.
1) NO. The constitutionality of collecting franchise tax at the rate of 5%

of the gross receipts based on the NIRC, instead of Act 667, has VERA v. FERNANDEZ (Coloquio)
already been settled by the Court in several cases. [GR. No. L-31364; March 30, 1979]
o Guagua Electric, whose franchises were similarly granted under Act “Bat mo pinipilit na Rules of Court magapply diba nga taxes issue dito dapat
667, being similarly situated as the taxpayers-franchise holders in NIRC aralin mo bro.”
those cases already decided by the Court, shall likewise be subject to
the 5% rate. Recit-Ready:
Facts: Deficiency income taxes for the years 1963 and 1964 incurred by
2) YES. The Tax Code governs prescription of the right to collect deceased Luis D. Tongoy, were claimed against his estate. The
taxes, not the Civil Code. Administrator of his estate opposed such claims, stating that they
o The CIR seeks the recovery of the amount of P16,593.87 allegedly have already been barred by prescription under Rule 86 of the
erroneously refunded to Guagua. Said amount represents the Rules of Court. The CFI denied the claim for taxes, thus this
difference between the tax computed at 5% pursuant to the Tax Code petition.
and the tax at 1% or 2% under its franchises.
! This, in effect, is an assessment for deficiency franchise tax. Issue/s:
o CIR further maintains that the prescription of the right to recover the WON the government’s claim for taxes has already been barred by
amount of P16,593.87 is governed by Article 1145(2) in relation to prescription under Rule 86 of the Rules of Court. – NO
Articles 1154 and 1155 of the Civil Code.
! Hence, prescription will set in only after the expiration of six Held: NO. Rule 86 does not contemplate the claim for taxes, for it only
(6) years mentions claims for money against the decedent arising from
! CIR concludes by saying that such 6 years has not yet contracts, funeral expenses, money judgments against the
expired decedent, and expenses for his last sickness. What should be
o As stated above, the demand on the taxpayer by the CIR to pay the applied in this case is the NIRC, which states that claims for
sum of P16,593.87 is in effect an assessment for deficiency franchise taxes need not even be field during the ordinary course of the
tax. administration. In fact, even after the distribution of the estate,
! Being a deficiency franchise tax, the right to assess or collect such may still be collected from the heirs who shall be liable in
the same is governed by Section 331 [203 of the current] of proportion to their shares in the inheritance. Taxes are the
the Tax Code rather than by Article 1145 of the Civil Code. lifeblood of the government and ultimately for the benefit of the
! A special law (Tax Code) shall prevail over a general law people, therefore the latter cannot be prejudiced by the negligent
(Civil Code). omission of government officials to collect taxes.
3
Facts: o The provision enumerates all different claims which may be

• Deficiency income taxes for the years 1963 and 1964 were claimed made (from contracts, funeral expenses etc.). Applying an
against the Estate of the late Luis D. Tongoy, incurred by the deceased old rule of statutory construction, if a statute enumerates the
during his lifetime. things upon which it is to operate, everything else must
o Total amount: P3,254.80 with 5% surcharge, 1% monthly necessarily by excluded by implication.
interest and comrpromise penalties. • Assessment, collection and recovery of taxes as well as the matter
• The Administrator of the Estate opposed such claims, stating that it is of prescription thereof are governed by the NIRC, and not by other
already barred under Rule 86 of the Rules of Court, for it was filed laws.
beyond the period prescribed under the aforesaid provision. • Taxes assessed against the estate of a deceased person, need not
• The CFI denied the claim, and the subsequent motion for be submitted during the ordinary course of administration, for the
reconsideration filed was likewise denied, thus this petition. court may direct payment of such taxes upon showing that these
have already been assessed.
Issue/s: o Taxes may even be claimed after the distribution of the
WON the claims for deficiency income taxes have already been barred estate among the heirs, who shall be liable thereof in
for being filed beyond the period provided under Rule 86 of the Rules proportion to their share in the inheritance.
of Court. • The basic reason for this is that, taxes are the lifeblood of the
— NO government, and their prompt and certain availability are imperious
need.
Held/Ratio: Petition GRANTED. The order appealed from is reversed. o The general rule is that the government is excepted from
the operation of the principle of estoppel. The neglect or
NO. The Court emphasized that a claim for taxes is governed by the omission of government officials to collect taxes should not
NIRC, and may be collected even after the distribution of the estate. be allowed to bring detriment to the people.
• Rule 86 of the Rules of Court invoked by the Administrator of the • Furthermore, the NIRC states that payment of income tax shall be a
Estate states that: “All claims for money against the decedent, lien in favor of the Government from the time the assessment was
arising from contracts, express or implied, whether the same be due, made by the CIR until it is paid.
not due or contingent, all claims for funeral expenses and expenses • Assuming arguendo that the claim for taxes has to be filed within the
for the last sickness of the decedent and judgment for money time prescribed under Rule 86, the latter states that the claim may
against the decedent, must be filed within the time limited in the still be filed even after the period prescribed in the notice, if filed
notice, otherwise they are barred forever..” before an order of distribution is entered. This is allowed on
• The same rule also adds that: “in the notice provided, the court shall equitable considerations, for a period not exceeding 1 month.
state the time for the filing of the claims against the estate, which o In this case, the petitioners filed a claim for the payment of
shall not be more than 12 nor less than 6 months after the date of the taxes, after the period prescribed in the notice but
the first publication of the notice” before the order of distribution was entered. In the absence
o The Court pronounced that a perusal of such provision of any valid ground justifying the denial of the claim, it
shows that it makes no mention of claims for monetary should have been granted by the CFI considering that it is a
obligations of the decedent created by law, such as taxes. claim for taxes – for the benefit of the people at large.
4
Republic of the Philippines v. Limcaco (Cualoping) board the "SS Steel Ranger". The specific tax due thereon amounted to
[GR. No. L-13081; August 31, 1962] P6,000.00, at the rate of P3.00/ thousand.
“Period runs from assessment (when there is a demand)” • On July 15, 1946, LDGC, paid to the Bureau of Customs, the sum of
P1,000.00 in cash and P5,000.00 in PNB Check. The cigarettes were
Recit-Ready: released to LDGC. The said check, however, was subsequently
Facts: LDGC is the business of importing cigarettes. It executed two dishonored by the bank, for lack of funds.
bonds with VSIC to guarantee the payment of associated taxes. • On June 17, 1948, the CIR, demanded from LDGC, the payment of the
LDGC filed with customs papers covering their shipment of 2 aforesaid sum of P5,000.00 as deficiency specific tax, due on the
million cigarettes, which had a tax due of 6000. In 1946 LDGC imported cigarette. The said amount remained unpaid, notwithstanding
then paid the tax 1000 in case and 5000 by a PNB check so that repeated demands upon the LDGC and VSIC. LDGC and VSIC both sent
their shipment could be released. However the check bounced, letters to the Solgen to request the case to be deferred since they were
so the CIR demanded the deficiency due (in 1948). Following "willing to make representations with the CIR with a view to settling the
nonpayment after repeated demands, a case was filed in 1953 (7 matter amicably".
years after 1st payment, 5 years after demand). • On February 18, 1953, plaintiff filed a complaint with the CFI of Manila,
praying for the forfeiture of the bonds and payment of the sum of P5,000,
Issue/s: plus interest.
WON action has been barred by the statute of limitations? NO • After due hearing, the Tax Court held that the action had prescribed.
Held: The lower court wrongly held that the 5 year prescription period Issue/s:
started to run at the time the first payment was made. The SC WON action has been barred by the statute of limitations? NO
held that the period should actually start to run from the time of
assessment, which was when the letter of demand was issued. Held/Ratio:
The letter fixed a tax to be payable and a demandable settlement.
The first payment was simply the date of tender of payment, not NO. Plaintiff-appellant's action has not prescribed.
of assessment. Even assuming that the earlier date is the date of o Under Sec. 332 (c) of the Tax Code, the collection of the tax summary
assessment, it was suspended when LGDC wrote two letter to methods or by judicial action shall be effected within five (5) years after
the assessment of the tax.
the solgen to request for deferment of judicial action to be taken.
o Here, Tax Court observed that "the taxes in question must have been
assessed at the earliest on June 27, 1946, when a return (importer's
Facts: declaration) was filed or at the latest on July 15, 1946, when payment
• In 1946, "Limaco & De Guzman Commercial Co., Inc." (LDGC) was was made…” and concluded that the action had prescribed since it was
engaged in the importation of cigarettes. To guarantee payment of the instituted 7 years later on February 8, 1953.
revenue taxes due to the government plaintiff, LDGC and the Visayan o The assessment in question was not issued on July 14, 1946, but on
Surety & Insurance Corporation (VSIC), executed two importers Bonds, June 17, 1948. When the CIR received information from the Bureau of
Customs that the said sum of P5,000.00 was not paid (for lack of funds),
holding themselves jointly and severally liable to pay. On June 27, 1946,
he immediately issued a letter dated June 17, 1948, addressed to the
LDGC filed with the Bureau of Customs, entry papers covering shipment LDGC assessing and demanding from the latter the payment of the said
of 2 million "Spud" cigarettes it had imported from New York, U.S., on P5,000.00.
5
o July 15, 1946 was simply the date of tender of payment. The right to taxes. On Jan. 20, 1951, the CIR issued income tax assessment
collect the amount of P5,000.00 began only after the P5,000.00 — notices to Ret. Criminal actions were filed against Ret for
rubber check was dishonored. When the tax was paid in cash and in violations of Sections 45, 51, and 72 of the old Tax Code. On
check on July 15, 1946, the plaintiff-appellant had a right to rely that said
Sept. 21, 1957, the Republic filed a case for collection of Ret’s
payment fully settled the specific taxes due on the imported cigarettes.
The cigarettes would not have been released, had plaintiff-appellant deficiency taxes totaling P103,245.73 plus 5% surcharge and 1%
been aware that the payment did not fully settle the said specific taxes. monthly interest. Ret filed a motion to dismiss, claiming that the
o The action to assess and collect the unpaid tax commenced anew on cause of action had already prescribed.
June 14, 1948, when a letter of demand for the amount of said rubber-
check had been sent to LDGC. This letter should be deemed to be an Issue/s:
assessment because it declared and fixed a tax to be payable against WON the action to collect Ret’s deficiency taxes has prescribed
the party liable thereto, and demanded the settlement thereof. Judicial
—YES
action having been instituted on February 18, 1953, the five-year period
for collection had not then elapsed.
Held: The action to collect Ret’s deficiency taxes has prescribed
o Even assuming that July 15, 1946 is the date of assessment, still the because the court action filed on Sept. 21, 1957 is beyond the 5-
action to collect is not barred by the statute of limitations, because the year prescriptive period counted from the assessment made by
statute was suspended. When the rubber-check was dishonored and the BIR on Jan. 20, 1951. Despite the statutory 10-year
demand letters were sent by the plaintiff-appellant and the Solicitor
prescriptive period for fraudulent returns, once an assessment
General to LDGC, LDGC wrote two letters to the Solgen requesting for
the deferment of the judicial action to be taken by the latter towards the against the taxpayer is made, the government cannot avail of the
collection of the obligation. This being the case, the prescriptive period to 10-year prescriptive period in Section 332a (now Section 222a).
effect the collection of the tax which allegedly commenced on July 15, The assessment takes the case out of the said provision and
1946, was interrupted. "The prescription of actions is interrupted when places it under Section 332a (now Section 222c), which gives the
they are filed before the court, when there is any written extrajudicial government a period of only 5 years from the date of the
demand by the creditors and when there is any written acknowledgment assessment to collect any tax due.
of the debt by the debtor."
Facts:
• On February 23, 1949, Damian Ret filed with the BIR his Income Tax
REPUBLIC v. RET (De Luis) Return for the year 1948, where he made it appear that his net income
[GR. No. L-13754; March 31, 1962] was only P2,252.53 with no income tax liability.
“In cases where there was an omission, falsity, or fraud on the part of the tax • The BIR found out later that the return was fraudulent since Ret's
payer, an assessment takes out the case from the 10-year prescriptive income, derived from his sales of office supplies to different provincial
period and the period to collect is 5 years from the assessment.” government offices, totaled P94,198.76. The BIR assessed him
P34,907.33, as deficiency income tax for 1948, inclusive of the 50%
surcharge for rendering a false and/or fraudulent return.
Recit-Ready: • Ret failed to file his Income Tax return for 1949, notwithstanding the fact
Facts: Damian Ret filed his ITR with the BIR and the latter discovered that he earned a net income of P150,447.32, also from sale of office
that it was fraudulent. On Jan. 13, 1951, the CIR made an supplies. His income, as assessed for tax purposes, showed a
extrajudicial demand from Ret for the payment of the deficiency deficiency tax of P68,338.40 for 1949, inclusive of the 50% surcharge.
6
• On January 13, 1951, the CIR demanded from Ret the payment of the of the filing of the two criminal cases, the nature of which
above sums, but he failed and refused to pay the said amounts. covered the subject-matter of the civil complaint; and there was
• On January 20, 1951, the CIR issued income tax assessment notices need for the criminal charges to be determined first by the lower
to Ret, urging him to pay the sums mentioned, but with the same result. court, before a civil action for the collection of the tax could be
• Upon recommendation of the CIR, Ret was criminally prosecuted for a resorted to. In other words, the criminal action constituted a
violation of Sections 45[a], 51[d] and 72, of the N.I.R.C. penalized under prejudicial question, which should be resolved before the Civil
Sec. 73. He pleaded guilty to the two cases and was sentenced to pay a Action for collection, could be filed.
fine of P300.00 in each. o The extrajudicial demand written by the CIR on January 13,
• On September 21, 1957, the Republic filed the a case for collection of 1951 suspended the period of prescription.
Ret's deficiency taxes in the total sum of P103,245.73, plus 5% o The collection income tax through judicial action is
surcharge and 1% monthly interest. imprescriptible by virtue of certain rules of statutory construction
• Ret filed Motion to Dismiss, claiming that the "cause of action had and the case of Estate of De la Viña v. Government of the
already prescribed.” Philippine Islands, holding that "the statutes of limitations do not
• The Republic argued that the collection case has not yet prescribed run against the State; and this principle is applicable to action
because: brought for the collection of taxes.”
o The provisions of section 332(c)1 of the N.I.R.C. do not apply to o Assuming arguendo that the action is prescriptible, then the
income taxes pursuat to the case Collector vs. Avelino and provisions of Art. 1144 of the New Civil Code on prescription of
CTA, wherein it was held that section 331 and 332 of the Tax actions, which provides for a ten-year period, is applicable,
Code "merely apply to internal revenue taxes in general and not inasmuch as aside from sections 331, 332 and 51 (d), there is
to income taxes, the collection of which is specifically provided no provision in the Revenue Code, which deals on the limitation
in section 51 (d), which refers only to the collection of income of action for the collection of income tax thru judicial action.
tax through the summary remedies of distraint and levy within
three years after the return was filed or should have been filed. Issue/s:
After the lapse of the three year period, collection of income WON the action to collect Ret’s deficiency taxes has prescribed
taxes must be had through judicial action. However, the period —YES
of limitation for the collection of income taxes through judicial
action is nowhere to be found in law or jurisprudence.
Held/Ratio: Petition DENIED. The Republic’s cause of action has already
o Granting the applicability of Section 332, the government has 10
years to collect the deficiency taxes computed from the prescribed.
discovery of falsity, fraud, or omission, pursuant to subsection
(a) of the same provision. YES. The action to collect Ret’s deficiency taxes has prescribed.
o The government was prohibited from going to court for the o The prescriptive period of 5 years in Section 332 applies to collection
collection of the taxes due from the defendant-appellee, in view of taxes through judicial action.
! In Collector vs. Avelino and CTA the court was referring to
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
Where the assessment of any internal revenue tax has been made within the period of
collection of taxes through summary proceeding and not by
limitation above prescribed such tax may be collected by distraint or levy or by a proceeding court action.
in court, but only if begun (1) within five years after the assessment of the tax, or (2) period o Under Section 332(a), the government has two alternatives: (1) to
to the expiration of any period for collection agreed upon in writing by the Collector of
Internal Revenue and the taxpayer before the expiration of such five-year period. The assess the tax within 10 years from the discovery of the falsity, fraud
period so agreed upon may be extended by subsequent agreements in writing made before or omission, or (2) to file an action in court for the collection of
the expiration of the period previously agreed upon.
7
such tax without assessment also within 10 years from the REPUBLIC OF THE PHILIPPINES VS. ACEBEDO (Diploma)
discovery of the falsity, fraud, or omission. [G.R. No. L-20477; March 29, 1968]
! In the case at bar, an assessment had been made and this “12 years = It’s just a little too late, a little too wrong and I can’t wait - Jojo”
fact has taken out the case from the realms of the
provisions of section 332(a) and placed it under the
Recit-Ready:
mandates of section 332(c), under which the 5-year
prescriptive period should be applied. Facts: A notice of assessment was issued to Acebedo in 1949 for
! The CIR made the assessment on January 20, 1951 and deficiency income tax in 1948. The government filed the suit for
had up to January 20, 1956 to file the necessary action. It collection only in Dec. 27, 1961, over 12 years since the notice of
was only on September 5, 1957, that an action was filed in assessment. Acebedo moved to dismiss the case on the ground
Court for the collection of alleged deficiency income tax - far of prescription, which the lower court accepted. The present case
beyond the 5-year period.
is the appeal of the Government appealed.
o The principle of prejudicial question does not apply in the case at bar.
The present complaint against Ret is not for the recovery of civil
liability arising from the offense of falsification; it is for the collection of
Issue/s: WON the government’s right to collect has prescribed
deficiency income tax.
o The said criminal cases would not effect, one way or
Held: Yes. Sec. 332(c) of the NIRC provides that collection is valid and
another, the running of the prescriptive period for the
commencement of the civil suit. The criminal actions are exempted as to period of limitation and assessment and collection
entirely separate and distinct from the present civil suit. of taxes only if begun (1) within five years after the assessment
There is nothing in the law, which would have stopped the of the tax, or (2) prior to the expiration of any period for
plaintiff-appellant from filing this civil suit simultaneously collection agreed upon in writing by the Collector of Internal
with or during the pendency of the criminal cases. Revenue and the taxpayer before the expiration of such five-year
o The extrajudicial demand written by the CIR on January 13, 1951
period. The collection was not filed within the 5-year period from
could not have suspended the running of the statute of limitations.
1949. Neither did it begin prior to the expiration of any period for
o The only agreement that could have suspended the running
collection agreed upon in writing by the Commissioner and
of the prescriptive period was a written agreement
between the taxpayer and the Collector, which should have defendant before the expiration of such five-year period. The only
been entered before the expiration of the five (5) year evidence of such written agreement, in the form of a Waiver of the
prescriptive period. Statute of Limitations signed by the defendant, is dated
o In the instant case, there is no such written agreement, and December 17, 1959. But this waiver was ineffective because it
there was nothing to agree about. The letter of demand by was executed beyond the original five-year limitation.
the Collector on January 13, 1951, was made prior to the
issuance of the assessment notice to the defendant-
appellee, made on January 20, 1951, from which date, the
5-year period was to be counted. The letter of demand
could not suspend something that started to run only on Facts:
January 20, 1951. • This is a suit for collection of deficiency tax for the year 1948 in the
! amount of P5,9962.83
• In 1949, a notice of assessment was issued to Acebedo
8
• A suit for collection was filed however only in 1961 (12 years after the ! But this waiver was ineffective because it was
notice of assessment) executed beyond the original five-year limitation.
• Acebedo moved to dismiss on the ground of prescription which the court o The Govt. contends that the period of prescription was suspended
granted by the Acebedo’s various requests for reinvestigation or
• Hence, this appeal by the government reconsideration of the tax assessment.
o The trial court rejected this contention, saying that a mere
Issue/s: WON the government’s right to collect has prescribed request for reinvestigation or reconsideration of an
assessment does not have the effect of such
Held/Ratio: The order appealed from is affirmed, without pronouncement as suspension
to costs. o This legal provision, according to some decisions of this Court, does
not rule out a situation where the taxpayer may be in estoppel to
o The statute of limitations which governs this case is Section 332(c) of the claim prescription.
National Internal Revenue Code o CIR v. Consolidated Mining: There are cases however
o SEC. 332. Exemptions as to period of limitation of where a taxpayer may be prevented from setting up the
assessment and collection of taxes. — defense of prescription even if he has not previously waived
! (c) Where the assessment of any internal-revenue it in writing as when by his repeated requests or positive
tax has been made with the period of limitation acts the Government has been, for good reasons,
above prescribed such tax may be collected by persuaded to postpone collection to make him feel that the
distraint or levy or by a proceeding in court, but demand was not unreasonable or that no harassment or
only if begun (1) within five years after the injustice is meant by the Government.
assessment of the tax, or (2) prior to the expiration ! Based on this case, estoppel is an exception to
of any period for collection agreed upon in writing prescription.
by the Collector of Internal Revenue and the o When a taxpayer asks for a reinvestigation of the tax assessment
taxpayer before the expiration of such five-year issued to him and such reinvestigation is made, on the basis of
period. The period so agreed upon may be which the Government makes another assessment, the five-year
extended by subsequent agreements in writing period with which an action for collection may be commenced
made before the expiration of the period previously should be counted from this last assessment.
agreed upon. o In this case, Acebedo, after receiving the assessment
o The present suit was not begun within five years after the notice of September 24, 1949, asked for a reinvestigation
assessment of the tax, which was in 1949. thereof on October 11, 1949.
o Neither did it begin prior to the expiration of any period for o There is no evidence that this request was considered
collection agreed upon in writing by the Commissioner and or acted upon.
defendant before the expiration of such five-year period. o In fact, on October 23, 1950 the then Collector of Internal
o The only evidence of such written agreement, in the form of Revenue issued a warrant of distraint and levy for the full
a Waiver Of The Statute Of Limitations signed by the amount of the assessment, but there was no follow up of
defendant was dated December 17, 1959. this warrant.
9
o Therefore, the request for reinvestigation did not Recit-Ready:

suspend the running of the period for filing an action Facts: Respondent Benito Lopez filed income tax return for 1950 for
for collection. which the BIR issued an assessment demanding 245,100.29 PHP
o The next communication of record is a letter signed for Acebedo by as deficiency income tax. He requested for a reconsideration
one Troadio Concha and dated October 6, 1951, again requesting a which resulted in a reduction of 20,346.14 PHP. He promised to
reinvestigation of his tax liability settled the obligation through a letter but he pleaded for another
o Nothing came of this request either. reinvestigation to be made by the BIR. As a result of those
o Then on February 9, 1954, Acebedo’s lawyers wrote the CIR reinvestigation, another assessment was made demanding
informing him that the books of their client were ready at their office payment of 6,019 PHP as additional deficiency tax. Lopez prayed
for examination. for another 3rd reinvestigation which the BIR acceded provided he
o The reply was dated more than a year later and CIR waives the statute of limitations. Instead of executing an
required that the defendants specify his objections to the unconditional waiver, defendant imposed a deadline on Dec 1957
assessment and execute the enclosed forms for waiver, of within which the government should finish the 3rd reinvestigation.
the statute of limitations. BIR ignored such and demanded payment for deficiency income
o The last part of the letter was a warning that unless the tax.
waiver "was accomplished and submitted within 10 days the
collection of the deficiency taxes would be enforced by Issue/s: Whether or not the time limit of December 31, 1957 enjoined by
means of the remedies provided for by law." appellee in the contemplated “Waiver of the Statute of Limitations” be
o It will be noted that up to October 4, 1955 the delay in collection binding and operative.—NO
could not be attributed to Acebedo at all.
o By October 4, 1955, more than five years had elapsed since Held:
assessment in question was made, and hence prescription had NO, it is not. It is well-settled in our jurisdiction that the 5-year
already set in, making subsequent events in connection with the prescriptive period fixed by section 332 (c) of the Internal Revenue
said assessment entirely immaterial. Code within which the government may sue to collect an assessed
o Even the written waiver of the statute signed by the tax is to be counted from the last revised assessment resulting from
defendant on December 17, 1959 could no longer revive the a reinvestigation asked for by the taxpayer.
right of action, for under the law such waiver must be o When a taxpayer demands a reinvestigation, the time employed in
executed within the original five-year period within which reinvestigation should be deducted from the total period of
suit could be commenced. limitation.
o If from the period intervened between the first revised (1954) and
the filing of the complaint (1960) is deducted the time consumed in
REPUBLIC V. LOPEZ (FajardoRK) considering and deciding the taxpayer’s subsequent petition for
[No. L-18007; March 30, 1963] reconsideration and reinvestigation (Jan 1956 to April 1960) it will
“The 5-year prescriptive period which the government may sue to collect an be seen that less than 5 years can be counted against the
assessed tax is counted from the last revised assessment resulting from a Government.
reinvestigation asked for by the taxpayer.” a. 1st reinvestigation—May 29, 1954 from which date the
10
Government had 5 years for bringing an action to collect ISSUE:

b. 2nd reinvestigation—Jan 16, 1956 and lasted until it was Whether or not the time limit of December 31, 1957 enjoined by
decided on April 22, 1960 or a period of 4 years, 3 appellee in the contemplated “Waiver of the Statute of Limitations”, be
months, and 6 days during which the limitation period binding and operative
was interrupted. —NO
o Deducting this interval from the period intervening between the
first revised and executory assessment to the filing of the HELD:
complaint (from May 1954 to August 1960, which is a total of 6 NO, it is not. It is well-settled in our jurisdiction that the 5-year
years, 2 months, and 15 days) leaves only 1 year, 3 months, and prescriptive period fixed by section 332 (c) of the Internal Revenue
6 days counted against the government. Code within which the government may sue to collect an assessed tax
is to be counted from the last revised assessment resulting from a
reinvestigation asked for by the taxpayer.
FACTS: • When a taxpayer demands a reinvestigation, the time employed in
• Respondent Benito Lopez filed his income tax return for 1950 for which reinvestigation should be deducted from the total period of limitation. By
an assessment was issued by the BIR on November 1952 demanding applying these rules, the prescriptive period of 5 years had not elapsed
payment of 245,100.29 PHP as deficiency income tax. from the revision of 1954.
• Lopez requested for a reconsideration. It was given due course, and • If from the period intervened between the first revised (1954) and the
resulted in the reduction of the assessment to 20,346.14 PHP on May filing of the complaint (1960) is deducted the time consumed in
1954. considering and deciding the taxpayer’s subsequent petition for
o Apparently satisfied, respondent manifested in a letter that he reconsideration and reinvestigation (Jan 1956 to April 1960) it will be
will settle the obligation by the end of the month. seen that less than 5 years can be counted against the Government.
• Without complying thereto, on July 9 1955, Lopez pleaded for another o 1st reinvestigation—May 29, 1954 from which date the
reinvestigation which was granted by the BIR. As a result, an Government had 5 years for bringing an action to collect
assessment was issued demanding payment of 6,019 PHP as additional o 2nd reinvestigation—Jan 16, 1956 and lasted until it was
deficiency income tax for 1950, the total of which he did not pay despite decided on April 22, 1960 or a period of 4 years, 3 months, and
repeated demands. 6 days during which the limitation period was interrupted.
• Appellee prayed for a third investigation which was acceded to by the • Deducting this interval from the period intervening between the first
BIR in 1956 provided he waives the statute of limitations. revised and executory assessment to the filing of the complaint (from
• Ironically instead of executing an unconditional waiver, defendant May 1954 to August 1960, which is a total of 6 years, 2 months, and 15
imposed a deadline on December 1957 within which the government days) leaves only 1 year, 3 months, and 6 days counted against the
should finish the third reinvestigation. government.
• The BIR ignored such an issued an assessment demanding the same • This court cannot accept the fact that a taxpayer fixed the prescriptive
amount of 26,365.14 PHP as deficiency income tax for 1950. period “not beyond December 31, 1957” operates to reduce the time
• On September 1960, defendant filed a motion to dismiss the complaint, available to the government for the collection of the tax from May 1954 to
which, as has already been stated was sustained. December 1957 which is less than 5 years prescribed by law. Even if we
11
consider the date fixed by the taxpayer, the government is well within the for review with the CTA. Such petition was dismissed by the CTA
prescriptive 5-year period. and the SC. The CIR demanded for payment of the deficiency
taxes but Ker refused, contending that the government’s right to
Another ground for reversing the dismissal of the complaint is that the collect the taxes has already prescribed.
proper remedy of the taxpayer against the assessment complained of
was to appeal then ruling of the Collector to the Court of Tax Appeal. Issue:
• Under Republic Act No. 1154, the jurisdiction of the CTA shall include WON the right of the government to collect the taxes has already
the decisions of the CIR in cases involving disputed assessments, prescribed (NO)
refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation arising under the NIRC. Held: In ruling for the government, the Court noted that Ker’s filing of a
• The failure to appeal to the Collector’s ruling is a waiver of the defenses petition for review in the CTA suspended the running of the
against it and estops the taxpayer from subsequently raising those prescriptive period for the government to collect, since such
objections. Otherwise, the period of 30 days for appeal to the Tax Court filing had the effect of legally preventing the CIR from
would make little sense. instituting an action in the CFI for the collection of tax. This
• However, it is to be noted how much an extraordinary reduction was is pursuant to Sec. 333 of the Tax Code.
made by the revenue authorities of the taxes originally assessed from
245, 100.29 to less than one tenth of it 20, 346.14 upon reinvestigation. Facts:
• Such result is evidence that the first assessment was carelessly made • Ker & Co., Ltd., a domestic corporation, filed its income tax returns for the
without regard to the true facts and strongly reflects the efficiency of the years 1947, 1948, 1949, and 1950 on the following dates:
revenue examiner who made the grossly excessive assessment. Year Date Filed
• Equally anomalous is the fact that after the taxpayer had promised to 1947 April 12, 1948
pay the computed tax, and after he had failed to keep his promise the tax 1948 April 30, 1949
authorities should still agree to a further revision of the assessment. 1949 May 15, 1950
1950 May 9, 1951
• This is highly irregular and suspicious over the competency and honesty
of the tax collecting authorities.
• In 1953, the BIR issued the following assessments for deficiency income
tax:
Year Amount Date Assessed
REPUBLIC OF THE PHILIPPINES v. KER & COMPANY, LTD. 1947 P42,342.30 July 25, 1953
(GO) 1948 18,651.87 (carried the Feb. 16, 1953
[GR. No. L-21609; September 29, 1966] surcharge of 50%)
“Kapag nagfile ka sa CTA ng case, ma-sususpend yung prescriptive period 1949 139.67 Feb. 16, 1953
1950 12,813 (carried the Feb. 16, 1953
ng government to collect taxes”
surcharge of 50%)
Recit-Ready:
• These amounts were later reduced by the BIR:
Facts: Ker was assessed for deficiency income tax. Ker filed a petition
Year Amount From To
12
1947 P42,342.30 27,026.28 prohibited from making the assessment or beginning the distraint or
1950 12,813 8,542.00 levy or a proceeding in court, and for 60 days thereafter.
o According to the SC, the pendency of Ker’s appeal in the CTA and the
• On March 1, 1956, Ker filed a petition for review in the CTA. The CTA SC have the effect of legally preventing the CIR from instituting an
dismissed the case for being filed beyond the 30-day period provided for action in the CFI for the collection of tax.
in R.A. 1125. The SC affirmed the dismissal. ! From March 1, 1956 when Ker filed a petition for review in the
• On March 15, 1962, the BIR demanded payment but Ker refused to pay, CTA contesting the legality of the assessments in question,
and instead, set up the defense of prescription of the Commissioner’s until the termination of its appeal in the SC, the CIR was
right to collect the taxes. prevented from filing an ordinary action in the CFI to collect
• On March 27, 1962, the RP filed a complaint with CFI Manila, seeking the tax. Besides, to do so would be to violate the judicial
collection of the deficiency income tax. In the complaint, the RP did not policy of avoiding multiplicity of suits and the rule on lis
allege fraud nor did it pray for the payment of surcharge. pendens.
• The CFI dismissed the case; the RP filed a motion for reconsideration. o It would be interesting to note that when the Commissioner of Internal
o The RP contends that the right to collect taxes has not yet Revenue issued the final deficiency assessments on Jan. 5, 1954, he
prescribed since the ITR of Kerr was fraudulent. Thus, the had already lost, by prescription, the right to collect the tax (except
prescriptive period for such is 10 years from the discovery that for 1950) by the summary method of warrant of distraint and levy.
of fraud. o Ker immediately requested suspension of the collection of the tax
• Ker filed a motion for reconsideration reiterating that CFI did not acquire without penalty incident to late payment pending the filing of a
jurisdiction over its person and maintaining that the complaint was filed 9 memorandum in support of its views. As requested, no tax was
years, 1 month, and 11 days after the deficiency assessments for 1948, collected. On May 22, 1954 the projected memorandum was filed, but
1949, and 1950 were made and since the filing of its petition for review in as of that date the Commissioner's right to collect by warrant of
the CTA did not stop the running of the period of limitations. distraint and levy the deficiency tax for 1950 had already prescribed.
So much so, that on Mar. 1, 1956 when Ker filed a petition for review
Issue: in the CTA, the Commissioner of Internal Revenue had but one
WON the filing of a petition for review by the taxpayer in the CTA remedy left to collect the tax, that is, by judicial action.
suspend the running of the statute of limitations to collect the ! However, as stated, an independent ordinary action in the
deficiency income for the years 1948, 1949, and 1950 CFI was not available to the CIR in view of the pendency of
—YES Ker’s petition for review in the CTA.
! Thus, did the taxpayer produce the effect of temporarily
Held/Ratio: staying the hands of the Commissioner of Internal Revenue
YES. Under Sec. 333 of the Tax Code 2 the running of the statute of simply through a choice of remedy. And, if We were to sustain
limitations shall be suspended for the period during which the CIR is the taxpayer's stand, We would be encouraging taxpayers to
delay the payment of taxes in the hope of ultimately avoiding
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2
SEC. 333. Suspension of running of statute.—The running of the statute of limitations !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
provided in Section 331 or three hundred thirty-two on the making of assessments and the is prohibited from making the assessment or beginning distraint or levy or a proceeding in
beginning, of distraint or levy or a proceeding in court for collection, in respect of any court, and for sixty days thereafter.
deficiency, shall be suspended for the period during which the Collector of Internal Revenue
13
the same. (---This part I copied from the case itself, but I Yes. BIR issued the assessment for deficiency DST on 19 April 1989,
kinda don’t get the wording) when the applicable rule was Section 319(c) of the National Internal
o Under the circumstances, the CIR was in effect prohibited from Revenue Code of 1977. In that provision, the time limit for the government
collecting the tax in question. This being so, the provisions of to collect the assessed tax is set at three years, to be reckoned from the
Section 333 of the Tax Code will apply. date when the BIR mails/releases/sends the assessment notice to the
taxpayer. The provision also states that the assessed tax must be
collected by distraint or levy and/or court proceeding within the three-year
CHINA BANKING CORPORATION V COMMISSIONER OF period. The records of this case show that there was neither a warrant of
distraint or levy served on CBC's properties nor a collection case filed in
INTERNAL REVENUE (Guzman)
court by the BIR within the three-year period. Consequently, the claim of
[GR. No. 172509; February 4, 2015]
the CIR for deficiency DST from petitioner is forever lost, as it is now
“If no warrant of distraint or levy was issued, or a collection case was not
barred by time.
filed in court within the timeframe prescribed by law for collection, the BIR is
barred from collecting tax deficiency”
Facts:
Recit-Ready:
• Petitioner CBC is a universal bank duly organized and existing under
Facts:
the laws of the Philippines. For the taxable years 1982 to 1986, CBC
For the taxable years 1982-1986, China Banking Corporation or CBC was was engaged in transactions involving sales of foreign exchange to
engaged in transactions involving sales of foreign exchange to the Central the Central Bank of the Philippines commonly known as SWAP
Bank of the Philippines commonly known as SWAP transactions. transactions.
Petitioner did not file tax returns or pay tax on the SWAP transactions for • Petitioner did not file tax returns or pay tax on the SWAP
those taxable years. On 19 April 1989, petitioner CBC received an transactions for those taxable years.
assessment from the BIR finding CBC liable for deficiency DST for a total • On 19 April 1989, BIR assessed CBC for deficiency tax for a total of
P11, 383,165.50.
of P11,383,165.50. On 8 May 1989, CBC, sent a letter of protest to the
• On 8 May 1989, petitioner CBC, through its vice-president, sent a
BIR. On 6 December 2001, more than 12 years after the filing of the
letter of protest to the BIR requesting for reinvestigation.
protest, the CIR rendered a decision reiterating the deficiency DST
• On 6 December 2001, more than 12 years after the filing of the
assessment and ordered the payment thereof. CBC contends that the
protest, the Commissioner of Internal Revenue (CIR) rendered a
government has three years from 19 April 1989, the date the former
decision reiterating the deficiency DST assessment and ordered the
received the assessment of the CIR, to collect the tax. Within that time
payment thereof plus increments within 30 days from receipt of the
frame, however, neither a warrant of distraint or levy was issued, nor a
Decision
collection case filed in court. Hence, the BIR is barred by prescription.
• On 18 January 2002, CBC filed a Petition for Review with the
CTA. On 11 March 2002, the CIR filed an Answer with a demand
Issue/s:
for CBC to pay the assessed DST. On 23 February 2005, and after
Whether the right of the BIR to collect the assessed DST from CBC is
trial on the merits, the CTA denied the Petition of CBC. The CTA
barred by prescription.
ruled that a SWAP arrangement should be treated as a telegraphic
transfer subject to documentary stamp tax.
Held:
14
• The taxpayer now comes to this Court with a Rule 45 Petition, • The fact that the taxpayer in this case may have requested a
reiterating the arguments it raised at the CTA level and invoking for reinvestigation did not toll the running of the three-year prescriptive
the first time the argument of prescription. Petitioner CBC states that period. A request for reinvestigation alone will not suspend the
the government has three years from 19 April 1989, the date the statute of limitations. Two things must concur: there must be a
former received the assessment of the CIR, to collect the tax. Within request for reinvestigation and the CIR must have granted. In the
that time frame, however, neither a warrant of distraint or levy was case at bar, the CIR made no action with respect to the
issued, nor a collection case filed in court. reinvestigation request of CBC.
• On 17 October 2006, respondent CIR submitted its Comment in • In the case of Republic of the Philippines v. Gancayco, taxpayer
compliance with the Court’s Resolution dated 26 June 2006.12 The Gancayco requested for a thorough reinvestigation of the
Comment did not have any discussion on the question of assessment against him and placed at the disposal of the Collector
of Internal Revenue all the [evidence] he had for such purpose; yet,
prescription.
the Collector ignored the request, and the records and documents
were not at all examined. Considering the given facts, this Court
Issue/s: pronounced that—
Whether the right of the BIR to collect the assessed DST from CBC is barred x x x. The act of requesting a reinvestigation alone does not
by prescription -Yes suspend the period. The request should first be granted, in
order to effect suspension.
Held/Ratio:
YES. Failure to raise prescription at the
Prescription Has Set In administrative level/lower court as a
• BIR issued the assessment for deficiency DST on 19 April 1989, defense is of no moment.
when the applicable rule was Section 319(c) of the National Internal • The Court noted that petitioner has raised the issue of prescription
Revenue Code of 1977. In that provision, the time limit for the for the first time only before the Supreme Court. Such instance shall
not be a ground to dismiss the petition. The Court held that Section
government to collect the assessed tax is set at three years, to be
1, Rule 9 of the Rules of Court expressly provides
reckoned from the date when the BIR mails/releases/sends the that:ChanRoblesVirtualawlibrary
assessment notice to the taxpayer. The provision also states that Section 1. Defenses and objections not pleaded. - Defenses and
the assessed tax must be collected by distraint or levy and/or court objections not pleaded either in a motion to dismiss or in the
proceeding within the three-year period. The records of this case answer are deemed waived. However, when it appears from
show that there was neither a warrant of distraint or levy served on the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action
CBC's properties nor a collection case filed in court by the BIR within
pending between the same parties for the same cause, or by
the three-year period. Consequently, the claim of the CIR for the statute of limitations, the court shall dismiss the claim.
deficiency DST from petitioner is forever lost, as it is now barred by • If the pleadings or the evidence on record show that the claim is
time. barred by prescription, the court is mandated to dismiss the claim
The running of the statute of even if prescription is not raised as a defense.
limitations was not suspended
by the request for reinvestigation. WHEREFORE, the Petition is GRANTED. A new ruling is entered DENYING
CIR’s claim for deficiency DST in the amount of P11,383,165.50.
15
REPUBLIC v. ARCACHE (Layno) Globe Assurance Company, Inc. for the forfeiture of the surety bond
[GR. No. L-15547; eb. 29, 1964] executed by them (Arcache, as principal, and the Globe insurance
Company, Inc., as surety) to secure payment of P22,524.41 representing
“Hindi pa nag-prescribe kasi kasalanan mo.” Arcache's income tax for year 1946 and surcharge, plus 1% monthly
interest on the income tax proper amounting to P18,289.71, from June
Recit-Ready: 21, 1954 to August 31, 1956.
Facts: Arcache asked for several reinvestigations, re-examinations, and
extension of time to pay. With Globe Assurance Company, he • Arcache, after admitting some of the averments made in the complaint
and denying others, interposed the defense of prescription, and alleged
executed a bond to ensure his payment of his tax liabilities. He
further that he was "compelled against his will" to execute the surety bond
was not able to pay, still, despite several extensions hence CIR sought to be forfeited, because the Bureau Internal Revenue refused to
finally filed a collection suit against him. Lower court granted the issue him a tax clearance — which he needed to make a business trip
collection. Now, Arcache’s saying that collection cannot be made abroad-unless he executed said bond to secure the payment of his
because the right to collect has already prescribed. alleged tax obligation
• The separate answer filed by the Globe Assurance Company, Inc.

Issue/s:
adopted the defense of fact and law raised by its co-defendant and also
1) WON the CIR’s right to collect has already been barred by said that the surety bond sought to be forfeited became null and void as
prescription? against it after the lapse of one year from the date of its execution, for
lack of consideration, Arcache not having paid the required premium
Held: 1) No. In the first place, it appears obvious that the delay in the thereon for the second year.
collection of his 1946 tax liability was due to his own repeated
• The lower court rendered its decision holding defendants jointly and
requests for reinvestigation and similarly repeated requests for
severally liable to pay plaintiff through the CIR on the income tax proper
extension of time to pay. There are cases however where a of P18,289.81 at the rate of 12% per annum from September 1, 1956 until
taxpayer may be prevented from setting up the defense of the same is fully paid, and to pay the costs.
prescription even if he has not previously waived it in writing as
when by his repeated requests or positive acts the Government • Arcache appealed claiming that (a) the lower court erred in not sustaining
has been, for good reasons, persuaded to postpone collection to his defense of prescription and (b) in holding that, by executing the surety
make him feel that the demand was not unreasonable or that no bond to secure the payment of the income tax allegedly due from him, he
harassment or injustice is meant by the Government. He who thereby acknowledged his tax liability.
prevents a thing from being done may not avail himself of
• The whole time before it got to the lower court ordering Arcache and
the non-performance which he has himself occasioned, for
Globe to pay, what happened was the following:
the law says to him in effect "this is your own act, and
therefore you are damnified. The fact that he also executed a o evidence discloses that on March 1, 1947, appellant filed his income
bond to ensure payment of his tax liabilities in effect constitutes a tax return for the year 1946, which showed a loss in the amount of
waiver of the benefit granted by law. P2,272.23 however, subsequent investigations revealed that in 1946
he had an unexplained increase in net worth
o BIR issued another assessment against him because of the increase,

Facts: to which he asked for several reinvestigations which were all granted
• Republic of the Philippines filed action against Joseph Arcache and the
16
o So pursuant to this, BIR again released another assessment. Arcache request for re-examination or reinvestigation may not have the
was still not satisfied so he asked for re-examination which was effect of suspending the running of the period of limitation for in
granted again. When the assessment was released, Arcache said that such a case there is need of a written agreement to extend the
he will pay but the because he paid PhP2, 000 before, this should be period between the Collector and the taxpayer there are cases
deducted from his total liability of PhP19, 000. He also said that the however where a taxpayer may be prevented from setting up the
50% surcharge that was imposed upon him should be removed defense of prescription even if he has not previously waived it in
because there was no intent to defraud on his part given that he writing as when by his repeated requests or positive acts the
actually made a downpayment of PhP2000 before as partial payment Government has been, for good reasons, persuaded to postpone
for his liability. collection to make him feel that the demand was not unreasonable
or that no harassment or injustice is meant by the Government.
o This was again granted, but he failed to pay still. He asked for a 120- And when such situation comes to pass there are authorities that
day extension which was granted. hold, based on weighty reasons, that such an attitude or behavior
should not be countenanced if only to protect the interest of the
o On August 23, 1955, appellant, as principal, and the Globe Assurance Government.
Company, Inc., as surety, executed the surety bond Exhibit A to
secure payment of the former's tax liability then amounting to o Citing an American jurisprudence: He who prevents a thing from
P22,524.41. They bound themselves, jointly and severally, to pay the being done may not avail himself of the non-performance
aforesaid amount and "to cover full payment of the obligation of which he has himself occasioned, for the law says to him in
Joseph Arcache to the Bureau of Internal Revenue for income tax, effect "this is your own act, and therefore you are damnified.”
surcharge and interest" still failed to pay.
• In the second place, appellant admitted in writing his tax obligation and
o Bottomline: Sobrang bait ni BIR sa kanya sa kasong ‘to, basically puro promised to pay the same, not once but several times even after the date
extension to pay hinihingi ni Arcache, lahat granted basta lang daw when — according to him — the government's right to collect had already
magbayad siya. However, when Arcache was still not able to pay, CIR prescribed In fact, he not only made such repeated promise to settle his
already filed in court for the payment (hindi na kaya ni CIR). account but he actually made two partial payments, the first of P2,000
and the last P1,000
• Now, Arcache is saying that the right to collect has already prescribed.
• In the third place, it is to be noted that the present action was filed for the
Issue/s: forfeiture of the bond in satisfaction of the tax obligation of appellant.
WON CIR is barred from collecting? Thus, the action is for the enforcement of a written contractual obligation,
—NO for which the prescriptive period is ten years.
Held/Ratio: WHEREFORE, finding no error in the decision appealed from, • The fact that he also executed a bond to ensure payment of his tax
the same is hereby affirmed, with costs. liabilities in effect constitutes a waiver of the benefit granted by law to the
petitioner who is estopped from raising the question of prescription after
• No. In the first place, it appears obvious that the delay in the collection having waived such defense by the execution of the bond.
of his 1946 tax liability was due to his own repeated requests for
reinvestigation and similarly repeated requests for extension of time to
pay. This case, therefore, falls within the purview of our ruling in CIR v.
Suyoc:
o While we may argue with the Court of Tax Appeals that a mere
17
PHILIPPINE NATIONAL OIL COMPANY vs CA (Lim, J.)

[G.R. No. 109976; April 26, 2005]
“Mukha akong pera, kaya isusumbong kita” Facts:
• Tirso Savellano informed the BIR that PNB had failed to withhold the 15%
Recit-Ready: final tax on interest earnings and yields from the money placements of
Facts: Savellano informed the BIR that PNB had failed to withhold the PNOC, which was violative of P.D. 1931 (which withdrew all tax
15% final tax on interest earnings and yields from the money exemptions of GOCCs).
placements of PNOC. BIR requested PNOC to settle its tax • Acting on such information, the BIR requested PNOC to settle its tax
liability. PNOC offered to compromise by proposing that it be set- liability.
off against a claim for tax refund/credit. The proposal was • PNOC offered to compromise the same by proposing that it be set-off
premature as the claim was still pending. PNOC amended its against a claim by NAPOCOR for tax refund/credit (the amount of the tax
offer and offered to pay an amount representing 30% of the basic refund was supposedly a receivable account of PNOC from NAPOCOR).
tax. Meanwhile, Savellano was paid the informer’s reward from • The proposal was found premature by the BIR as NAPOCOR’s claim was
the compromise collected. Savellano wrote the BIR to demand still under process, so PNOC amended its offer and offered to pay an
payment of the balance of his reward. Savellano questioned the amount representing 30% of the basic tax in accordance with E.O. 44.
legality of the compromise agreement. Eventually, new BIR • The same was accepted by BIR Commissioner Tan.
Commissioner found his claim meritorious and ordered the PNB • Meanwhile, Savellano was paid the informer’s reward (15% of the tax
to pay the deficiency withholding tax. The CTA likewise found the collected from compromise).
compromise agreement as without any force and effect. Upon • A month after receiving his last installment for the reward, Savellano
payment by PNOC, Savellano was entitled to the balance of his wrote the BIR to demand payment of the balance of his reward, to which
informer’s reward. The CA concurred with the CTA decision and the BIR replied that Savellano was no longer owed by them as he had
affirmed the same, hence the case at bar already received an amount equal to 15% of the compromise agreement
proposed by PNOC.
Issue/s: • Savellano questioned the legality of the compromise agreement between
WON prescription applies? NO. the BIR and PNOC.
• While his Motion for Reconsideration was yet pending with the BIR,
Held: In ruling for Savellano, the court held that prescription would not Savellano filed a Petition for Review with the CTA claiming acted with
apply since it was never pleaded as a defense. Even assuming grave abuse of discretion in entering into a compromise agreement with
that it was used as a defense, prescription has not yet set in. PNOC which immensely lessened his informer’s reward.
Period to assess and period to collect are different and separate o On July 1988, he amended his petition to implead PNOC and PNB.
things. Also, the filing of the amended petition which impleaded • Ultimately, new BIR Commissioner Jose Ong, found meritorious
PNOC and PNB is in the nature of a collection case. Thus it Savellano’s MR and ordered the PNB to pay the deficiency withholding
suspends the prescription period to collect. Even assuming that it tax on the interest earnings from PNOC’s money placements.
was not in the nature of a collection case, it was still suspended • The CTA later on likewise found the compromise agreement entered into
due to lis pedens since there was already a pending MR in BIR at between the BIR and PNOC as without any force and effect.
the time the petition for review was filed in CTA.
18
• They likewise ordered that upon payment by PNOC, Savellano was 3) NO. The defense of prescription was never raised by petitioners
entitled to the balance of his informer’s reward. PNOC and PNB, and should be considered waived.
• The CA concurred with the CTA decision and affirmed the same, hence o The issue of prescription was brought up only in the dissenting
the case at bar. opinion and was never raised by PNOC and PNB in the proceedings
before the BIR, CTA and the CA.
Issue/s: o It has been consistently held in earlier tax cases that the defense of
1) WON the CTA declaration finding the compromise agreement prescription shall be deemed waived when such defense was not
between the BIR and PNOC valid?-- NO. properly pleaded and the facts alleged and evidences submitted by
2) WON the CTA finding that the deficiency withholding tax the parties were not sufficient to support a finding by this Court on the
assessment against PNB was already final and unappealable and matter.
unenforceable valid? --YES. o This Court could not make a proper ruling on the matter of
3) Whether the prescription applies? --NO. prescription on the mere basis of assumptions; such an issue should
4) Whether the CTA order directing payment of additional informer’s have been properly raised, argued, and supported by evidences
reward for Savellano valid? --YES. submitted by the parties themselves before the BIR and the courts
below.
Held/Ratio:
1) NO. The compromise agreement between PNOC and BIR is void for DISSENTING OPINION on Prescription:
being contrary to law and public policy PNOC could not apply for a o The dissenting opinion points out that more than four years have
compromise under E.O. 44 because its tax liability was not a elapsed from 25 January 1986 (the last day prescribed by law for
delinquent account or a disputed assessment. PNB to file its withholding tax return for the fourth quarter of 1985) to
o Besides, the defendant should have been more sensitive and 16 January 1991 (the date when the alleged final assessment of
PNOC’s tax liability could not be considered a delinquent account PNBs tax liability was issued).
because it was not self-assessed as the BIR conducted an o In making its conclusion that the assessment and collection in this
investigation after receiving information from Savellano. case had prescribed, the dissenting opinion took liberties to assume
o There was no deficiency assessment present. the following facts even in the absence of allegations and evidences
o Neither PNOC nor PNB conducted self-assessment, and neither was to the effect that:
there any tax assessment issued by the BIR against them.
o PNOC and PNB were both silent about their tax liabilities until they (1) PNB filed returns for its withholding tax obligations for taxable
were assessed thereon. year 1985;
(2) PNB reported in the said returns the interest earnings of PNOCs
2) NO. The withholding tax assessment vs. PNB had become final and money placements with the bank; and
unappealable. The CTA and the CA declared as final and unappealable (3) that the returns were filed on or before the prescribed date, which
the assessment vs PNB since PNB failed to protest it within the 30-day was 25 January 1986.
prescribed period. ! It is not safe to adopt the first and second assumptions
considering that Section 269 of NIRC provides for a different
period of limitation for assessment and collection of taxes in
19
case of false or fraudulent return or for failure to file a return. In o Savellano, in his Amended Petition for Review, prayed for (1) the
such cases, the BIR is given 10 years after discovery of the CTA to direct the BIR Commissioner to enforce and collect the tax,
falsity, fraud, or omission within which to make an assessment. and (2) PNB and/or PNOC to pay the tax making CTA case a
! It is also not safe to accept the third assumption since there can collection case. Consequently, upon the filing of the amended
be a possibility that PNB filed the withholding tax return later petition, judicial action for collection of the tax had been initiated and
than the prescribed date, in which case, following the dictates of the running of the prescriptive period for collection of the said tax was
Section 268 of the NIRC of 1977, as amended, the three-year terminated.
prescriptive period shall be counted from the date the return
was actually filed. SUPPOSING THAT IT WAS NOT A COLLECTION CASE WHICH STOPS
o PNBs withholding tax returns for taxable year 1985 would have been THE RUNNING OF THE PRESCRIPTIVE PERIOD FOR THE
the best evidence to prove actual filing, the date of filing and the COLLECTION, it still suspends the prescriptive period.
contents thereof. Yet, the pleadings did not refer to any return, and no o Under Section 271, the running of the prescriptive period to collect
return was made part of the records of the present case. deficiency taxes shall be suspended for the period during which the
BIR Commissioner is prohibited from beginning a distraint or levy or
GRANTING THAT DEFENSE OF PRESCRIPTION WAS USED, this Court instituting a proceeding in court, and for 60 days thereafter.
finds that the assessment and collection of the tax were done within the o Just as in the cases of Republic v. Ker & Co., Ltd. and Protectors
prescriptive period. Services, Inc. v. CA, this Court declares that the pendency of the
o If this Court adopts the assumption made by the dissenting opinion present case before the CTA, the CA and this Court, legally prevents
that PNB filed its withholding tax return for the last quarter of 1985 on the BIR Commissioner from instituting an action for collection of the
25 January 1986, then the BIR had until 24 January 1989 to assess same tax liabilities assessed against PNOC and PNB in the CTA or
PNB. the regular trial courts.
o The original assessment against PNB was issued as early as 08 ! To rule otherwise would be to violate the judicial policy of
October 1986, well-within the 3-yr period for making the assessment. avoiding multiplicity of suits and the rule on lis pendens.
o Sections 268 and 269(c) of the NIRC of 1977 should be read in o The fact that the BIR Commissioner cannot file a judicial action in any
conjunction with one another. other court for the collection of the tax because on the rule of lis
! When an assessment is timely issued in accordance with pendens is controlling.
Section 268, the BIR is given another three-year period, under o The 3-yr prescriptive period for collection of the tax shall commence
Section 269(c), within which to collect the tax assessed, to run only after the promulgation of the decision of this Court in
reckoned from the date of the assessment. which the issues of the present case are resolved with finality.
o In the case of PNB, an assessment was issued on 08 October 1986, o Whether the filing of the amended petition by Savellano entirely stops
so that the BIR had until 07 October 1989 to enforce it and to collect or merely suspends the running of the prescriptive period for
the tax assessed. collection of the tax, it had been premature for the BIR Commissioner
o The filing by Savellano of his Amended Petition for Review on July to issue a writ of garnishment against PNB and for the Central Bank
1988 already constituted a judicial action for collection which stops of the Philippines to debit the account of PNB, because the case was
the running of the 3-yr prescriptive period for collection. pending review by the CA.
20
! However, since this Court ruled that the compromise agreement Issue/s:
is without force and effect, the issue has become moot and WON the right of respondent BIR Commissioner to collect from
academic. petitioner BPI the alleged deficiency DST for taxable year 1985 had
prescribed
4) YES. Savellano is entitled to be paid the remainder of his informer’s —YES
reward. Savellano is entitled to additional informer’s award since the BIR
had already collected the full amount of the tax assessment against PNB. Held: YES. The efforts of respondent Commissioner to collect on
Assessment No. FAS58589002054 were already barred by
prescription. The BIR has three years, counted from the date of
BANK OF THE PHILIPPINE ISLANDS v. CIR (Lim, Q.) actual filing of the return or from the last date prescribed by law for
[GR. No. 139736 ; October 17, 2005 ] the filing of such return, whichever comes later, to assess a
(*This is a really long case, but it’s easy to read. Filtered out as much as I national internal revenue tax or to begin a court proceeding
can) for the collection thereof without an assessment. While
“Warrant of Distraint and/or Levy served beyond the prescriptive period. Assessment No. FAS585 89002054 and its corresponding
None of the exceptions to suspend the prescriptive period were present.” Assessment Notice were both dated 10 October 1989 and were
received by petitioner BPI on 20 October 1989, there was no
Recit-Ready: showing as to when the said Assessment and Assessment
Facts: BIP sold United States (US) $500,000.00 to the Central Bank of Notice were released, mailed or sent by the BIR. Still, it can be
the Philippines (Central Bank), for the total sales amount of granted that the latest date the BIR could have released, mailed or
US$1,000,000.00. BIR held BPI for liable for deficiency DST. sent the Assessment and Assessment Notice to petitioner BPI was
BPI received the Assessment, together with the attached on the same date they were received by the latter, on 20 October
Assessment on 20 October 1989. BPI protested the Assessment. 1989. Counting the threeyear prescriptive period, for a total of
BPI did not receive any immediate reply to its protest letter. 1,095 days from 20 October 1989, then the BIR only had until 19
However, on 15 October 1992, the BIR issued a Warrant of October 1992 within which to collect the assessed deficiency
Distraint and/or Levy against BPI for the assessed deficiency DST. The earliest attempt of the BIR to collect on Assessment
DST for taxable year 1985. It served the Warrant on petitioner No. FAS58589002054 was its issuance and service of a
BPI only on 23 October 1992. Then again, petitioner BPI did not Warrant of Distraint and/or Levy on petitioner BPI. Although the
hear from the BIR until 11 September 1997, when its counsel Warrant was issued on 15 October 1992, previous to the expiration
received a letter, dated 13 August 1997, signed by then BIR of the period for collection on 19 October 1992, the same was
Commissioner, denying its “request for reconsideration.” In this served on petitioner BPI only on 23 October 1992. Distraint and
petition, BPI alleges that respondent BIR Commissioner only had levy proceedings are validly begun or commenced by the issuance
three years to collect on Assessment No. FAS58589002054, of the Warrant and service on the taxpayer. Thus, it was served
but she waited for seven years and nine months to deny the beyond the three year prescriptive period.
protest; thus, it is already barred by prescription. Aside from this, none of the conditions and requirements for
exception from the statute of limitations on collection exists—
there was no waiver nor was there any ground to say that BPI was
21
estopped from setting up the defense of prescription. against BPI for the assessed deficiency DST for taxable year 1985, in
This is a simple case wherein the BIR Commissioner and other BIR the amount of P27,720.00 (excluding the compromise penalty of
officials failed to act promptly in resolving and denying the request P300.00).
for reconsideration filed by BPI and in enforcing collection on the • It served the Warrant on petitioner BPI only on 23 October 1992.
assessment. They presented no reason or explanation as to why it • Then again, petitioner BPI did not hear from the BIR until 11 September
took them almost eight years to address the protest of petitioner 1997, when its counsel received a letter, dated 13 August 1997, signed
BPI. The statute on limitations imposed by the Tax Code precisely by then BIR Commissioner Liwayway VinzonsChato, denying its “request
intends to protect the taxpayer from such prolonged and for reconsideration, stating among others that:
unreasonable assessment and investigation by the BIR. o Even before the amendment of Sec. 222 (now Sec. 173) of
the Tax Code, as amended, the same was already
Facts: interpreted to hold that the other party who is not exempt
• Petitioner, BPI, is a commercial banking corporation organized and from the payment of documentary stamp tax liable from the
existing under the laws of the Philippines. tax.
• On two separate occasions, particularly on 06 June 1985 and 14 June • Upon receipt of the letter from the BIR, BPI proceeded to file a Petition for
1985, it sold United States (US) $500,000.00 to the Central Bank of the Review with the CTA on 10 October 1997; to which respondent BIR
Philippines (Central Bank), for the total sales amount of Commissioner, represented by the Office of the Solicitor General, filed an
US$1,000,000.00. Answer on 08 December 1997.
• On 10 October 1989, the Bureau of Internal Revenue (BIR) issued • BPI raised in its Petition for Review before the CTA, in addition to the
Assessment No. FAS58589002054, finding BPI liable for deficiency arguments presented in its protest letter, dated 16 November 1989, the
DST on its aforementioned sales of foreign bills of exchange to the defense of prescription of the right of respondent BIR Commissioner to
Central Bank. enforce collection of the assessed amount.
• BPI received the Assessment, together with the attached Assessment o It alleged that respondent BIR Commissioner only had three
Notice, on 20 October 1989. years to collect on Assessment No. FAS58589002054,
• BPI, through its counsel, protested the Assessment in a letter dated 16 but she waited for seven years and nine months to deny the
November 1989, and filed with the BIR on 17 November 1989. Stating protest. In her Answer and subsequent Memorandum,
that: respondent BIR Commissioner merely reiterated her
o Under established market practice, the documentary stamp position, as stated in her letter to petitioner BPI, dated 13
tax on telegraphic transfers or sales of foreign exchange is August 1997, which denied the latter’s protest; and
paid by the buyer. remained silent as to the expiration of the prescriptive
o In the two transactions subject of your assessment, no period for collection of the assessed deficiency DST.
documentary stamps were affixed because the buyer,
Central Bank of the Philippines, was exempt from such tax. Issue/s:
Hence, the liability for the documentary stamp tax could not WON the right of respondent BIR Commissioner to collect from
be shifted to the seller. petitioner BPI the alleged deficiency DST for taxable year 1985 had
• BPI did not receive any immediate reply to its protest letter. However, on prescribed
15 October 1992, the BIR issued a Warrant of Distraint and/or Levy —YES
22
has another three years after the assessment within which to

Held/Ratio: Petition GRANTED. The Decision of the Court of Appeals in collect the national internal revenue tax due thereon by distraint,
CAG.R. SP No. 51271, dated 11 August 1999, which reinstated Assessment levy, and/or court proceeding.
No. FAS58589002054 requiring petitioner BPI to pay the amount of o The assessment of the tax is deemed made and the threeyear period
P28,020.00 as deficiency documentary stamp tax for the taxable year 1985, for collection of the assessed tax begins to run on the date the
inclusive of the compromise penalty, is REVERSED and SET ASIDE. assessment notice had been released, mailed or sent by the BIR to
Assessment No. FAS58589002054 is hereby ordered CANCELED. the taxpayer
o There is no controversy on the timeliness of the issuance of the
YES. The period of the BIR to assess and collect the tax already Assessment, only on the prescription of the period to collect the
prescribed. deficiency DST following its Assessment.
o While Assessment No. FAS585 89002054 and its corresponding
I. The efforts of respondent Commissioner to collect on Assessment Notice were both dated 10 October 1989 and were
Assessment No. FAS58589002054 were already barred by received by petitioner BPI on 20 October 1989, there was no
prescription. showing as to when the said Assessment and Assessment
o This Court disagrees in the Decisions of the CTA and the Court of Notice were released, mailed or sent by the BIR.
Appeals, and herein determines the statute of limitations on collection o Still, it can be granted that the latest date the BIR could have
of the deficiency DST in Assessment No. FAS58589002054 had released, mailed or sent the Assessment and Assessment Notice to
already prescribed. petitioner BPI was on the same date they were received by the latter,
o The period for the BIR to assess and collect an internal revenue tax is on 20 October 1989.
limited to three years by Section 203 of the Tax Code of 1977, as o Counting the threeyear prescriptive period, for a total of 1,095
amended. Which can be affected, adjusted, or suspended, in days from 20 October 1989, then the BIR only had until 19 October
accordance with Section 223 of the Code. (*Exceptions are currently 1992 within which to collect the assessed deficiency DST.
in Section 222 of the present Code. This case just used the old Code o The earliest attempt of the BIR to collect on Assessment No.
kaya Section 223 siya.) FAS58589002054 was its issuance and service of a Warrant of
o As enunciated in these statutory provisions, the BIR has three years, Distraint and/or Levy on petitioner BPI. Although the Warrant was
counted from the date of actual filing of the return or from the issued on 15 October 1992, previous to the expiration of the period for
last date prescribed by law for the filing of such return, whichever collection on 19 October 1992, the same was served on petitioner
comes later, to assess a national internal revenue tax or to begin BPI only on 23 October 1992.
a court proceeding for the collection thereof without an o Under Section 223(c) of the Tax Code of 1977, as amended, it is not
assessment. essential that the Warrant of Distraint and/or Levy be fully executed so
o In case of a false or fraudulent return with intent to evade tax or the that it can suspend the running of the statute of limitations on the
failure to file any return at all, the prescriptive period for assessment of collection of the tax. It is enough that the proceedings have validly
the tax due shall be 10 years from discovery by the BIR of the falsity, began or commenced and that their execution has not been
fraud, or omission. suspended by reason of the voluntary desistance of the respondent
o When the BIR validly issues an assessment, within either the BIR Commissioner.
threeyear or tenyear period, whichever is appropriate, then the BIR
23
o Existing jurisprudence establishes that distraint and levy o The statute of limitations on assessment and collection of
proceedings are validly begun or commenced by the issuance of national internal revenue taxes may be waived, subject to certain
the Warrant and service thereof on the taxpayer. conditions, under paragraphs (b) and (d) of Section 223 of the Tax
o It is only logical to require that the Warrant of Distraint and/or Levy be, Code of 1977, as amended, respectively. Petitioner BPI, however,
at the very least, served upon the taxpayer in order to suspend did not execute any such waiver in the case at bar.
the running of the prescriptive period for collection of an o The protest filed by petitioner BPI did not constitute a request for
assessed tax, because it may only be upon the service of the reinvestigation, granted by the respondent BIR Commissioner, which
Warrant that the taxpayer is informed of the denial by the BIR of could have suspended the running of the statute of limitations on
any pending protest of the said taxpayer, and the resolute collection of the assessed deficiency DST under Section 224 of the
intention of the BIR to collect the tax assessed. Tax Code of 1977, as amended.
o If the service of the Warrant of Distraint and/or Levy on petitioner BPI o The protest filed by petitioner BPI was a request for reconsideration,
on 23 October 1992 was already beyond the prescriptive period for not a reinvestigation, of the assessment against it; and even granting
collection of the deficiency DST, which had expired on 19 October that the protest of petitioner BPI was a request for reinvestigation,
1992, then what more the letter of respondent BIR Commissioner, there was no showing that it was granted by respondent BIR
dated 13 August 1997 and received by the counsel of the petitioner Commissioner and that actual reinvestigation had been conducted.
BPI only on 11 September 1997, denying the protest of petitioner BPI
and requesting payment of the deficiency DST? Even later and more SUMMARY BY THE COURT:
unequivocally barred by prescription on collection was the demand o To summarize all the foregoing discussion, this Court lays down the
made by respondent BIR Commissioner for payment of the deficiency following rules on the exceptions to the statute of limitations on
DST in her Answer to the Petition for Review of petitioner BPI before collection.
the CTA, filed on 08 December 1997. o The statute of limitations on collection may only be interrupted or
suspended by a valid waiver executed in accordance with paragraph
II. There is no valid ground for the suspension of the running of the (d) of Section 223 of the Tax Code of 1977, as amended, and the
prescriptive period for collection of the assessed DST under the existence of the circumstances enumerated in Section 224 of the
Tax Code of 1977, as amended. same Code, which include a request for reinvestigation granted by
o In their Decisions, both the CTA and the Court of Appeals found that the BIR Commissioner.
the filing by petitioner BPI of a protest letter suspended the running of o Even when the request for reconsideration or reinvestigation is not
the prescriptive period for collecting the assessed DST. accompanied by a valid waiver or there is no request for
o This Court, however, takes the opposing view, and, based on the reinvestigation that had been granted by the BIR Commissioner, the
succeeding discussion, concludes that there is no valid ground for taxpayer may still be held in estoppel and be prevented from setting
suspending the running of the prescriptive period for collection up the defense of prescription of the statute of limitations on
of the deficiency DST assessed against petitioner BPI. collection when, by his own repeated requests or positive acts, the
o The statute of limitations on assessment and collection of taxes Government had been, for good reasons, persuaded to postpone
is for the protection of the taxpayer and, thus, shall be construed collection to make the taxpayer feel that the demand is not
liberally in his favor. unreasonable or that no harassment or injustice is meant by the
Government, as laid down by this Court in the Suyoc case.
24
o Applying the given rules to the present Petition, this Court finds o Considering that the right of the respondent BIR Commissioner to
that— collect from petitioner BPI the deficiency DST in Assessment No.
(a) The statute of limitations for collection of the deficiency FAS58589002054 had already prescribed, then, there is no more
DST in Assessment No. FAS58589 002054, issued need for this Court to make a determination on the validity and
against petitioner BPI, had already expired; and   correctness of the said Assessment for the latter would only be
unenforceable.
(b) None of the conditions and requirements for
exception from the statute of limitations on collection
exists herein: China Banking Corporation vs. CIR (LUNA)
! BPI did not execute any waiver of the prescriptive [GR. No. 172509; February 4, 2015]
period on collection as mandated by paragraph (d) “For the filing of an Answer by the CIR to constitute the “collection”
of Section 223 of the Tax Code of 1977, as contemplated by law required to be done within the prescribed period, the
amended; the protest filed by petitioner BPI was a same must have been done properly to be effective.”
request for reconsideration, not a request for
reinvestigation that was granted by respondent BIR Recit-Ready:
Commissioner which could have suspended the Facts: Petitioner did not file tax returns or pay tax on its SWAP
prescriptive period for collection under Section 224 transactions from 1982-1986. CBC received an assessment
of the Tax Code of 1977, as amended; and, finding CBC liable for deficiency Documentary Stamp Tax (DST)
! BPI, other than filing a request for reconsideration on the sales of foreign bills of exchange to the Central Bank. CBC
of Assessment No. FAS58589002054, did not sent a letter of protest and request for reinvestigation to the BIR.
make repeated requests or performed positive acts More than 12 years after the filing of the protest, the CIR rendered
that could have persuaded the respondent BIR a decision reiterating the deficiency DST assessment and ordered
Commissioner to delay collection, and that would the payment thereof plus increments within 30 days from receipt
have prevented or estopped petitioner BPI from of the Decision. CBC filed a Petition for Review with the CTA,
setting up the defense   of prescription against which was later denied after trial on the merits. The taxpayer now
collection of the tax assessed, as required in the comes to the Court reiterating the arguments it raised at the CTA
Suyoc case. level and invoking for the first time the argument of prescription.
o This is a simple case wherein the BIR Commissioner and other
BIR officials failed to act promptly in resolving and denying the
Issue/s:
request for reconsideration filed by BPI and in enforcing
Whether the right of the BIR to collect the assessed DST from CBC is
collection on the assessment. barred by prescription. —YES
o They presented no reason or explanation as to why it took
them almost eight years to address the protest of petitioner
Held: Right to collect has prescribed. The assessment of the tax is
BPI. The statute on limitations imposed by the Tax Code precisely
deemed made and the three-year period for collection of the
intends to protect the taxpayer from such prolonged and
assessed tax begins to run on the date the assessment notice
unreasonable assessment and investigation by the BIR.
had been released, mailed or sent by the BIR to the taxpayer.
25
Thus, failure of the BIR to file a warrant of distraint or serve a levy Held/Ratio: Petition granted, judgment and resolution reversed and set
on taxpayer's properties nor file collection case within the three- aside.
year period is fatal. Also, the attempt of the BIR to collect the tax
through its Answer with a demand for the taxpayer to pay the Yes, the right of the BIR to collect the assessed DST is barred by the
assessed DST in the CTA is not deemed compliance with the Tax statute of limitations.
Code.
• The BIR issued the assessment for deficiency DST on 19 April 1989,
Facts: when the applicable rule was Section 319(c) of the National Internal
• CBC is a universal bank duly organized and existing under the laws of the Revenue Code of 1977, as amended. In that provision, the time limit for
the government to collect the assessed tax is set at three years, to be
Philippines. For the taxable years 1982 to 1986, CBC was engaged in
reckoned from the date when the BIR mails/releases/sends the
transactions involving sales of foreign exchange to the Central Bank of assessment notice to the taxpayer.
the Philippines, commonly known as SWAP transactions. Petitioner did o Further, Section 319(c) states that the assessed tax must
not file tax returns or pay tax on the SWAP transactions for those taxable be collected by distraint or levy and/or court proceeding
years. within the three-year period.
• CBC received an assessment from the Bureau of Internal Revenue (BIR)
• In this case, the records do not show when the assessment notice was
finding CBC liable for deficiency Documentary Stamp Tax (DST) on the
mailed, released or sent to CBC. Nevertheless, the latest possible date
sales of foreign bills of exchange to the Central Bank.
that the BIR could have released, mailed or sent the assessment notice
• CBC, through its vice-president, sent a letter of protest and request for was on the same date that CBC received it, 19 April 1989. Assuming
reinvestigation to the BIR raising the defenses of double taxation, therefore that 19 April 1989 is the reckoning date, the BIR had three
absence of liability, violation of the due process, and the validity of the years to collect the assessed DST. However, the records of this case
assessment. show that there was neither a warrant of distraint or levy served on
• More than 12 years after the filing of the protest, the Commissioner of CBC's properties nor a collection case filed in court by the BIR within the
three-year period.
Internal Revenue (CIR) rendered a decision reiterating the deficiency DST
assessment and ordered the payment thereof plus increments within 30 • The attempt of the BIR to collect the tax through its Answer with a
days from receipt of the Decision. CBC filed a Petition for Review with demand for CBC to pay the assessed DST in the CTA on 11 March
the CTA, which was later denied after trial on the merits. The CTA ruled 2002 did not comply with Section 319(c) of the 1977 Tax Code, as
that a SWAP arrangement should be treated as a telegraphic transfer amended. The demand was made almost thirteen years from the
subject to documentary stamp tax. date from which the prescriptive period is to be reckoned. Thus,
the attempt to collect the tax was made way beyond the three-year
• The taxpayer now comes to the Court reiterating the arguments it raised
prescriptive period.
at the CTA level and invoking for the first time the argument of
o The BIR’s Answer in the case filed before the CTA could
prescription. not, by any means, have qualified as a collection case as
required by law. Under the rule prevailing at the time the
Issue/s: BIR filed its Answer, the regular courts, and not the CTA,
Whether the right of the BIR to collect the assessed DST from CBC is had jurisdiction over judicial actions for collection of internal
barred by prescription. —YES revenue taxes. It was only on 23 April 2004, when Republic
Act Number 9282 took effect, that the jurisdiction of the CTA
was expanded to include, among others, original jurisdiction
26
over collection cases in which the principal amount involved government’s claim for deficiency DST is barred by prescription, it is no
is one million pesos or more. longer necessary to dwell on the validity of the assessment.
o Consequently, the claim of the CIR for deficiency DST from
petitioner is forever lost, as it is now barred by time CIR v. Philippine Global Communication, Inc. (Pascual)
[GR. No. 167146; October 31, 2006]
• The fact that the taxpayer in this case may have requested a
reinvestigation did not toll the running of the three-year prescriptive “A request for reconsideration, unlike a request for reinvestigation, cannot
period. Section 320 of the 1977 Tax Code states: suspend the statute of limitations on the collection of an assessed tax.”
o Sec. 320. Suspension of running of statute.—The running of
the statute of limitations provided in Sections 318 or 319 on Recit-Ready:
the making of assessment and the beginning of distraint or Facts: the CIR issued an Assessment notice against Philippine Global
levy or a proceeding in court for collection, in respect of any on April 14, 1994, for alleged tax deficiencies in the latter’s ITR
deficiency, shall be suspended for the period during which
that was filed on April 15, 1990. Philippine Global protested the
the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding in assessment on the ground of lack of factual and legal basis. No
court and for sixty days thereafter; when the taxpayer new evidence was presented to or received by the BIR. The CIR,
requests for a re-investigation which is granted by the however, decided on the protest only on 16 October 2002, more
Commissioner; when the taxpayer cannot be located in the than 8 years after the assessment was issued. Philippine Global
address given by him in the return filed upon which a tax is filed a Petition for Review with the CTA and the latter ruled in
being assessed or collected: Provided, That if the taxpayer
favor of Philippine Global, deciding that the CIR’s right to collect
informs the Commissioner of any change in address, the
running of the statute of limitations will not be suspended; had prescribed. The CIR now argues before the SC that
when the warrant of distraint and levy is duly served upon Philippine Global’s letters of protest should be considered as
the taxpayer, his authorized representative, or a member of requests for reinvestigation, such that the prescriptive period
his household with sufficient discretion, and no property should have been tolled.
could be located; and when the taxpayer is out of the
Philippines. Issue/s:
WON the CIR’s right to collect respondent’s alleged deficiency income tax
• The provision is clear. A request for reinvestigation alone will not
is barred by prescription?
suspend the statute of limitations. Two things must concur: there must
be a request for reinvestigation and the CIR must have granted it.
o In the present case, there is no showing from the records Held: YES. The letter of protest was a request for reconsideration
that the CIR ever granted the request for reinvestigation and not for reinvestigation. A request for reconsideration,
filed by CBC. That being the case, it cannot be said that the unlike a request for reinvestigation, cannot suspend the
running of the three-year prescriptive period was effectively statute of limitations on the collection of an assessed tax. In
suspended
this case, as the earliest attempt of the BIR to collect the tax
• The earliest attempt of the BIR to collect the tax was when it filed its due was on 9 January 2003—well beyond the 3-year
answer in the CTA on 23 February 1999, which was several years prescriptive period that began on 14 April 1994—the CIR is
beyond the three-year prescriptive period. In as much as the prescribed from collecting the assessed tax.
27
Facts: Issue/s:
• Philippine Global Communications, a corporation engaged in WON the CIR’s right to collect respondent’s alleged deficiency income
telecommunications, filed its annual ITR for taxable year 1990 on 15 April tax is barred by prescription?
1992. — YES
• On 13 April 1992, the CIR issued a Letter of Authority, authorizing the BIR
to examine the books of account and other accounting records of Held/Ratio: Petition denied, assailed en banc decision affirmed.
respondent, in connection with the investigation of respondent’s 1990
income tax liability. YES. The letter of protest was a request for reconsideration and not for
• On 22 April 1992, the BIR sent a letter to respondent requesting the latter reinvestigation A request for reconsideration, unlike a request for
to present for examination certain records and documents, but reinvestigation, cannot suspend the statute of limitations on the
respondent failed to present any. collection of an assessed tax. In this case, as the earliest attempt of
• On April 21 and 22, 1994, Philippine Global received, respectively, a the BIR to collect the tax due was on 9 January 2003—well beyond the
Preliminary Assessment Notice and a Formal Assessment Notice for 3-year prescriptive period that began on 14 April 1994—the CIR is
deficiency income tax in the total amount of P118, 271, 672.00. prescribed from collecting the assessed tax.
• Philippine Global, through its counsels—Ponce Enrile Cayetano Reyes • For assessment, the law prescribes a period of:
and Manalastas and Siguion Reyna Montecillo & Ongsiako Law Offics— o 3 years from the date the return was actually filed or from
filed formal protest letters against the assessment, requesting for the the last date prescribed by the law for the filing of such
cancellation of the tax assessment, which they alleged was invalid for return, whichever, came later; or
lack of factual and legal basis. o 10 years when a false or fraudulent return was filed with the
• However, it was only on 16 October 2002, more than 8 years after the intent of evading the tax or when no return was filed at all.
assessment was presumably issued, that the CIR issued a Final Decision • If the BIR issues an assessment within the 3-year or 10-year period,
denying Philippine Global’s protest. whichever is applicable, another 3 years after the assessment for
• Respondent filed a Petition for Review with the CTA and the CTA the collection of the tax due thereon through the administrative
rendered a decision in favor of Philippine Global. process of distraint, and/or levy, or through judicial proceedings.
o The CTA ruled on the primary issue of prescription and o The 3-year period for collection of the assessed tax begins
found it unnecessary to decide the issues on the validity to run on the date the assessment notice is released,
and propriety of the assessment. mailed, or sent by the BIR.
o It decided that the protest letters filed by the respondent did • In this case:
not constitute requests for reinvestigation and, thus, could o The assessment was issued on 14 April 1994.
not toll the running of the prescriptive period to collect the o Thus, the BIR had until 13 April 1997 to collect.
assessed deficiency income tax. o However, the earliest attempt of the BIR to collect the tax
o Thus, the 3-year prescriptive period had lapsed. due was when it filed its Answer in the CTA Case on 9
• The CIR’s motion for reconsideration and Petitioner for Review were January, 2003, which was several years beyond the 3-year
both denied. prescriptive period.
o Thus, the CIR was prescribed from collecting the assessed
tax.
28
• The CIR’s argument that the prescriptive period had been tolled by o Rationale: If both types of protest can effectively interrupt
the Philippine Global Communication’s alleged request for a the running of the statute of limitations, an erroneous
reinvestigation, which was allegedly, granted by the CIR, cannot assessment may never prescribe as, (hypothetically):
stand. ! If the taxpayer fails to file a protest, then the
o A distinction must be made between the two types of erroneous assessment would become final and
protests: [1] the request for reconsideration; and [2] the unappealable.
request for reinvestigation. ! If the taxpayer does file the protest on a patently
! A request for reconsideration involves a re- erroneous assessment, the statute of limitations
evaluation of existing records.—It does NOT toll would automatically be suspended and the tax
the running of the prescriptive period for the thereon may be collected long after it was
collection of an assessed tax. assessed.
! A request for reinvestigation, when requested by a ! Meanwhile, the interest on the deficiencies and the
taxpayer and is granted by the CIR, involves the surcharges would continue to accumulate and, for
reception and evaluation of additional evidence. an unrestricted number of years, the taxpayer
o In this case, the separate letters of protest are requests for would remain uncertain and be burdened with the
reconsideration and not for reinvestigation. cost of preserving their books and records.
! The CIR’s allegation that there was a request for !
reinvestigation is inconceivable since Philippine
Global consistently and categorically refused to CIR v. UNITED SALVAGE & TOWAGE (PHILS.), INC. (Ocampo)
submit new evidence and cooperate in any [G.R. No. 197515; July 2, 2014]
reinvestigation proceedings. “3 years to assess…another 3 years to collect”
! The BIR itself admitted that there was no new or
additional evidence presented and so there was no Recit-Ready:
reason to suspend the running of the statute of Facts: The BIR assessed respondent for deficiency EWT for taxable
limitations. years 1992, 1994 and 1998. The CTA declared the FANs for
• Note: Where a taxpayer, demands a 1994 and 1998 void because these failed to state the law and the
reinvestigation, the time employed in facts on which the assessments were based. On the other hand,
reinvestigating should be deducted from the CTA declared that the right to collect of the petitioner has
the total period of limitation. (CIR v. Sison, already lapsed with respect to the deficiency EWT for the taxable
Republic v. Lopez) year 1992 pursuant to Section 203 of the Tax Code.
• The SC, repeated itself over and over and over again in saying that,
o A request for reconsideration, unlike a request for Issue: WON the petitioner’s right to collect the creditable withholding tax
reinvestigation, cannot suspend the statute of limitations on and expanded withholding tax for taxable year 1992 has already
the collection of an assessed tax. prescribed
Held: YES. The Preliminary Collection Letter for deficiency taxes for
29
taxable year 1992 was only issued on February 21, 2002 despite WON the petitioner’s right to collect the creditable withholding tax and
the fact that the related FAN was issued as early as January 9, expanded withholding tax for taxable year 1992 has already prescribed
1996. Clearly, five years had already lapsed, beyond the three- —YES
year prescriptive period, before petitioner pursued collection.
Held/Ratio: WHEREFORE, the petition is DENIED. The June 27, 2011
Facts: Decision of the Court of Tax Appeals En Banc in C.T.A. EB No. 662 is
• Respondent is engaged in the business of sub-contracting work for hereby AFFIRMED.
service contractors engaged in petroleum operations in the Philippines.
• Petitioner, through BIR officials, issued demand letters with attached Yes. The Preliminary Collection Letter for deficiency taxes for taxable
assessment notices for withholding tax on compensation and expanded year 1992 was only issued on February 21, 2002 despite the fact that
withholding tax for taxable years 1992, 1994 and 1998. On January 29, the related FAN was issued as early as January 9, 1996. Clearly, five
1998 and October 24, 2001, respondent filed administrative protests years had already lapsed, beyond the three-year prescriptive period,
against the 1994 and 1998 EWT assessments, respectively. On February before petitioner pursued collection.
21, 2003, respondent appealed by way of Petition for Review before the o The statute of limitations on assessment and collection of national
court. internal revenue taxes was shortened from five (5) years to three (3)
• CTA Special First Division held that the PANs for deficiency EWT for years by virtue of Batas Pambansa Blg. 700. Thus, petitioner has
taxable years 1994 and 1998 were not formally offered. Hence, it shall three (3) years from the date of actual filing of the tax return to assess
neither consider the same as evidence nor rule on their validity in a national internal revenue tax or to commence court proceedings for
accordance with the Revised Rules of Court. Said court also declared the the collection thereof without an assessment. However, when it validly
FANs for deficiency EWT for taxable years 1994 and 1998 void as these issues an assessment within the three-year period, it has another
do not show the law and the facts on which the assessments were based. three years within which to collect the tax due by distraint, levy, or
It also declared that the right of the petitioner to collect the deficiency court proceeding. The assessment of the tax is deemed made and the
EWT for taxable year 1992 had already lapsed pursuant to Section 203 of three-year period for collection of the assessed tax begins to run on
the Tax Code. the date the assessment notice had been released, mailed or sent to
• Petitioner avers that its right to collect the EWT for taxable year 1992 has the taxpayer.
not yet prescribed. It argues that while the FAN and demand letter on o The Court held that while the request for reinvestigation was made on
EWT for taxable year 1992 were all issued on January 9, 1996, the five March 14, 1997, the same was only acted upon by petitioner on
(5)-year prescriptive period to collect was interrupted when respondent January 22, 2001, also beyond the three year statute of limitations
filed its request for reinvestigation on March 14, 1997 which was granted reckoned from January 9, 1996, notwithstanding the lack of
by petitioner on January 22, 2001 through the issuance of Tax Verification impediment to rule upon such issue. The Court held that it cannot
Notice No. 00165498 on even date. Thus, the period for tax collection countenance such inaction by petitioner to the prejudice of
should have begun to run from the date of the reconsidered or modified respondent. The petitioner had ample time to make a factually and
assessment. legally well-founded assessment and implement collection pursuant
thereto. Whatever examination that petitioner may have conducted
Issue: cannot possibly outlast the entire three-year prescriptive period
30
provided by law to collect the assessed tax. Thus, there is no reason

to suspend the running of the statute of limitations in this case. Held: YES. The act of requesting a reinvestigation alone does not
o The Court also stated that a request for reinvestigation should be suspend the period. The request should first be granted in
granted or at least acted upon in due course before the suspension of order to effect suspension.
the statute of limitations may set in.
The statute of limitations on assessment and collection of national
internal revenue taxes was shortened from five (5) years to three
(3) years by Batas Pambansa Blg. 700. Thus, the CIR has three (3)
BPI v. Commissioner of Internal Revenue (Ong)
years from the date of actual filing of the tax return to assess or to
[GR. No. 174942; March 7, 2008]
commence court proceedings for the collection. It had 3 years from
“The act of requesting a reinvestigation alone does not suspend the period.
the time he issued assessment notices to BPI on April 7, 1989 or
The request should first be granted in order to effect suspension.”
until April 6, 1992 within which to collect the deficiency DST.
Recit-Ready:
Section 320 of the Tax Code of 1977 states that the running of the
Facts: BPI was assessed by the CIR for deficiency DST (24M) for the
statute of limitations shall be suspended when the taxpayer
years 1982-1986.
requests for a re-investigation which is granted by the
Commissioner, among others. The CIR must first grant the request
April 7, 1989 – CIR issued assessment notices
for reinvestigation as a requirement for the suspension of the
April 20, 1989 – Petitioner filed a protest.
statute of limitations. In BPI vs CIR, the court ruled that the act of
May 8, 1989 – Supplemental protest.
requesting a reinvestigation alone does not suspend the
period. The request should first be granted in order to effect
Petitioner also executed several waivers of the statutes of
suspension.
limitation. Respondent issued a final decision ordering petitioner
to pay within 30 days. Petitioner filed a petition for review before
There is nothing in the records of this case which indicates,
the CTA. The CTA ruled that BPI’s protest should be considered
expressly or impliedly, that the CIR had granted the request for
requests for reinvestigation which tolled the prescriptive period
reinvestigation filed by BPI. What is reflected in the records is the
provided by law to collect a tax deficiency.
piercing silence and inaction of the CIR on the request for
reinvestigation, as he considered BPI’s letters of protest to be.
BPI argued that the government’s right to collect the DST had
already prescribed because CIR failed to issue any reply granting
BPI’s request for reinvestigation. The CIR/SolGen argued that the
Facts:
prescriptive period was tolled by the protest letters filed by BPI
• CIR issued a pre-assessment notice (PAN) to BPI on November 26,
which were granted and acted upon by the CIR.
1986.
• BPI requested for the details of the amounts alleged as 1982-1986
Issue/s:
deficiency taxes mentioned in the PAN.
WON the collection of the deficiency DST is barred by prescription.
31
• On April 7, 1989, respondent issued assessment/demand notices for o The prescriptive period was tolled by the protest letters filed
deficiency withholding tax (190M) and DST (24M) for the years 1982- by BPI which were granted and acted upon by the CIR. In
1986. fact, BPI submitted additional documents pertaining to its
• On April 20, 1989, Petitioner filed a protest on the assessments SWAP transactions in support of its request for
(reinvestigation) and executed several waivers of the statutes of reinvestigation.
limitation. On May 8, 1989, it also filed a supplemental protest. o It was only upon BPI’s receipt on January 13, 2003 of the
• Respondent issued a final decision ordering the withdrawal and August 9, 2002 decision that the period to collect
cancellation of the deficiency withholding tax assessment but reiterated commenced to run again.
the DST assessment and ordered petitioner to pay within 30 days. o BPI is estopped from raising the defense of prescription in
o Petitioner received this on January 15, 2003. view of its repeated requests for reinvestigation which
• On January 24, 2003, petitioner filed a petition for review before the CTA. induced the CIR to delay the collection (CIR v. Suyoc).
This was denied. The MR was also denied.
• The CTA ruled that BPI’s protest and supplemental protest should be Issue/s:
considered requests for reinvestigation which tolled the prescriptive WON the collection of the deficiency DST is barred by prescription.
period provided by law to collect a tax deficiency by distraint, levy, or —YES
court proceeding.
• BPI Held/Ratio: The act of requesting a reinvestigation alone does not
o The government’s right to collect the DST had already suspend the period. The request should first be granted in order to
prescribed because the CIR failed to issue any reply effect suspension.
granting BPI’s request for reinvestigation dated April 20
and May 8, 1989. YES.
o It was only through the August 9, 2002 decision ordering o We grant the petition.
BPI to pay deficiency DST or after the lapse of more than
13 years that the CIR acted on the request for “Sec. 318. Period of limitation upon assessment and collection.—
reinvestigation, warranting the conclusion that prescription Except as provided in the succeeding section, internal revenue taxes
had already set it. shall be assessed within five years after the return was filed, and no
o It further claims that the CIR was not precluded from proceeding in court without assessment for the collection of such
collecting the deficiency within three (3) years from the time taxes shall be begun after the expiration of such period. For the
the notice of assessment was issued on 7 April 1989, or purposes of this section, a return filed before the last day prescribed
even until the expiration on 31 December 1994 of the last by law for the filing thereof shall be considered as filed on such last
waiver of the statute of limitations signed by BPI. day: Provided, That this limitation shall not apply to cases already
o It also argues that the cabled instructions to its investigated prior to the approval of this Code.”
correspondent bank are not subject to DST as the NIRC of
1977 does not contain a specific provision that cabled o The statute of limitations on assessment and collection of national
instructions on SWAP transactions are subject to DST. internal revenue taxes was shortened from five (5) years to three (3)
• CIR/SOLGEN years by Batas Pambansa Blg. 700. Thus, the CIR has three (3) years
32
from the date of actual filing of the tax return to assess or to upon, much less granted, cannot be said to have persuaded the CIR
commence court proceedings for the collection. to postpone the collection of the deficiency DST.
o When it validly issues an assessment within the three (3)year period, o The inordinate delay of the CIR in acting upon and resolving the
it has another three (3) years within which to collect the tax due by request for reinvestigation filed by the BPI and in collecting the
distraint, levy, or court proceeding. The assessment of the tax is DST resulted in the prescription of the government’s right to
deemed made and the three (3)year period for collection of the collect the deficiency.
assessed tax begins to run on the date the assessment notice had
been released, mailed or sent to the taxpayer.
o CIR had 3 years from the time he issued assessment notices to BPI CIR v. CAPITOL SUBDIVISION INC. (Reyes)
on April 7, 1989 or until April 6, 1992 within which to collect the [GR. No. L-18993; April 30, 1964]
deficiency DST. “A letter for clarification or breakdown of amounts of the assessment is
o Section 320 of the Tax Code of 1977 states that the running of the tantamount to a review or reconsideration which effectively interrupts the 5-
statute of limitations shall be suspended when the taxpayer requests year prescriptive period to collect.”
for a re-investigation which is granted by the Commissioner, among
others. Recit-Ready:
o The CIR must first grant the request for reinvestigation as a Facts: The CIR assessed Capitol Subdivision for deficiency taxes for
requirement for the suspension of the statute of limitations. In BPI vs several taxable years. On May 30, 1953 Capitol Subdivision sent
CIR, the court ruled that the act of requesting a reinvestigation a letter to the CIR requesting for the breakdown of the amounts
alone does not suspend the period. The request should first be reflected under the heading General Expenses in the
granted in order to effect suspension. assessments. The CIR denied this request on June 21, 1955.
o The burden of proof that the request for reinvestigation had been Capitol reiterated its request which was likewise denied by the
actually granted shall be on the CIR. Such grant may be expressed or CIR. This trend went on for sometime until December 1959 when
implied. the CIR filed an answer to Capitol’s petition in the CTA.
o There is nothing in the records of this case which indicates,
expressly or impliedly, that the CIR had granted the request for Issue/s:
reinvestigation filed by BPI. What is reflected in the records is WON the CIR’s action already prescribed
the piercing silence and inaction of the CIR on the request for —NO
reinvestigation, as he considered BPI’s letters of protest to be.
o It was only in his comment through the OSG that the CIR argued for Held: The SC held that the prescription period was interrupted when
the first time that he had granted the request for reinvestigation. Capitol Subdivision made a letter requesting for the breakdown of
o Neither did the waiver of the statute of limitations signed by BPI the amounts in the assessment notice.! While it is true that the
supposedly effective until 31 December 1994 suspend the prescriptive said letter did not specifically use the words “review” or
period. The CIR himself contends that the waiver is void as it shows “reconsideration,” the request itself for an explanation of the
no date of acceptance. disallowances in the assessment in effect was an exception to
o BPI’s letters of protest and submission of additional documents the correctness thereof. The period of interruption from May 30,
pertaining to its SWAP transactions, which were never even acted 1953 (when Capitol filed its first request for clarification which
33
amounted to a reconsideration of the assessment) to June 21, • Instead of giving the breakdown, on June 21, 1955, the CIR sent circular
1955 (when the CIR denied the petition by reiterating its demand letters making inquiry as to whether payment was already made on the
for payment), or a period of 2 years and 21 days, must be assessments.
subtracted from the period of 6 years, 8 months and 21 days. As • So Capitol just reiterated its previous request to see the breakdown.
a result, there is left a period of 4 years and 8 months. Since the • CIR replied and at the same time reiterated his demand for payment. The
law allows 5 years for collection, the CIR’s action has not yet CIR also added a surcharge of 5%, 1% monthly interest, and compromise
prescribed. fees of Php20 for the years 1948 to 1950, and Php40 for 1951.
• Capitol then requested for a reinvestigation. CIR once again made a
Please take note that in this case, the SC only considered the first demand.
request and first denial in the interruption of the prescriptive • In 1959, Capitol invoked the defense of prescription, and on that ground,
period. It did not rule that the second and third requests and denied liability for deficiency income taxes for the aforesaid years.
denials also interrupted the prescriptive period. Nevertheless, • CIR denied the request for cancellation, alleging that the 5-year period
WON the SC considers it, pasok parin naman sa 5 years yung was suspended by various requests for reinvestigation filed with his office
action for collection. It’s just confusing that the SC only and demanded the payment of the deficiency income tax assessments
considered the first one. Probably good to ask Sir about this. from 1948 to 1951.
• The CTA ruled that the CIR’s action already prescribed. The assessments
Facts: in question were made in 1953 and the CIR’s answer to the petition for
• Capitol Subdivision Inc. is a corporation engaged in the real estate review, which is tantamount to a judicial action for collection, was filed in
business. 1959, or 6 years, 8 months and 21 days thereafter.
• It filed its income tax returns for the years 1948, 1949, 1950, and 1951,
on February 28, 1949, March 31, 1950, March 31, 1951, and March 1, Issue/s:
1952, respectively, and the amounts assessed thereon as per return, WON the CIR’s action has already prescribed
were promptly paid. —NO
• That in an investigation conducted by an examiner of the respondent, it
was recommended in the memorandum report dated June 30, 1952 of the Held/Ratio: Petition GRANTED. The decision of the CTA is set aside.
examiner, that petitioner should pay a total of Php27,212 as deficiency
income tax for the aforesaid years. NO. The prescription period was interrupted when Capitol Subdivision
• CIR sent income tax assessment notices dated April 8, 1953, requesting made requests for a breakdown of the amounts in the assessment, and
payment of the aforesaid amounts due and collectible, the said taxes for reinvestigation.
being based on disallowed deductions, and over-claimed depreciations, • The first interruption was made in May 30, 1953, when Capitol requested
as shown on pages 12, 19, 39, and 45, BIR records. for itemized information on the disallowed items.
• Capital Subdivision, on May 30, 1953, upon receipt of the said o While it is true that the said letter did not specifically use the
Assessment Notices, requested for the breakdown of the amounts words “review” or “reconsideration,” the request itself for an
reflected under the heading General Expenses in the said notices. explanation of the disallowances in the assessment in effect was
an exception to the correctness thereof.
34
• Thereafter, several incidents of “tolling-the-prescriptive-period-rerunning- • Protector's Services, Inc. (PSI) is a contractor engaged in recruiting
of-prescriptive-period” happened security guards for clients. PSI was assessed for deficiency percentage
o This request for reconsideration or review of the taxes including surcharges, penalties and interests.
assessment was denied when petitioner demanded for • On December 7, 1987, BIR sent demand letters by registered mail.
payment of the alleged deficiency tax on June 21, 1955. However, PSI alleged that on December 10, 1987, it only received
The period for collection then started to run again, but it was demand letters for the years 1983 and 1984, and denied receiving any
tolled when the taxpayer reiterated its request for notice for the year 1985.
explanation of the disallowances on July 1, 1955 or after 10 • PSI sent a protest letter dated January 02, 1988 regarding the 1983
days. This request was denied on September 20, 1955, and and 1984 assessments and claimed that its gross receipts subject to
a span of 25 days elapsed until October 15, 1955 when the percentage taxes should exclude the salaries of the security and the
taxpayer explained the disallowed items and requested for employer's share of SSS, State Insurance Fund (SIP) and Medicare
a reinvestigation of the same. On September 2, 1959, contributions.
petitioner denied the request for reinvestigation when it • Without acting on the PSI's protest, the BIR sent a follow-up letter
reiterated its demand for collection of the alleged deficiency dated July 12, 1988, ordering the settlement of taxes
tax. From this date until December 28, 1959, when the • On July 22, 1988, PSI filed its second protest on the 1983 and 1984
answer to the taxpayer's petition wish filed in the Court of percentage taxes, and included, for the first time, its protest against the
Tax Appeals, only 3 months and 26 days had passed. 1985 assessment.
• The period of interruption from May 30, 1953 (when Capitol filed its • On November 9, 1990, BIR Deputy Commissioner Santos sent a letter
first request for clarification which amounted to a reconsideration of to the PSI which denied with finality the protests against the
the assessment) to June 21, 1955 (when the CIR denied the petition assessment.
by reiterating its demand for payment), or a period of 2 years and 21 • On December 5, 1990, petitioner filed a petition for review before the
days, must be subtracted from the period of 6 years, 8 months and CTA but the CTA dismissed the petition
21 days. As a result, there is left a period of 4 years and 8 months. • PSI appealed to the Court of Appeals, which affirmed the decision of
Since the law allows 5 years for collection, the CIR’s action has not the CTA.
yet prescribed.
Issue/s:
o WON the CTA has the jurisdiction to act on the petition for
PROTECTOR’S SERVICES INC v. COURT OF APPEALS review filed before it? – No. CTA correctly dismissed the appeal for
(Rocillo) lack of jurisdiction.
[GR. No. 187176; April 12, 2000] o WON the assessments against PSI for deficiency taxes for 1983
“Government’s right to collect not yet prescribed; assessment presumed duly and 1984 were made after the lapse of the prescriptive period. –
received” No. The assessments were made before the lapse of the prescriptive
period.
Recit-Ready: o WON the period to collect for 1983, 1984 and 1985 has already
prescribed. – No, it has not yet prescribed and the government may
Facts: still collect from PSI
35
o WON the assessments were correct. – Yes, the assessment by the prime or principal contractor as the total price,
correctly covered all gross receipts. undiminished by the amount paid to the subcontractor under a
subcontract arrangement. Hence, gross receipts could not be
Held: diminished by employer's SSS, SIF and Medicare contributions.
o YES. The 1977 NIRC provides that the protests to assessments
and appeals to denial of protests must be made within 30 days Facts:
otherwise, the assessment becomes final and unappealable. From • Protector's Services, Inc. (PSI) is a contractor engaged in recruiting
the receipt of the assessment on December 10, 1987 to January security guards for clients. PSI was assessed for deficiency percentage
12, 1988 when it filed its protest and requested for a taxes including surcharges, penalties and interests, as follows:
reinvestigation, 33 days had lapsed. Thereafter PSI may no longer
dispute the correctness of the assessments. Hence, the CTA YEAR..........AMOUNT..........DEMAND LETTER NO.
correctly dismissed the appeal for lack of jurisdiction. 1983..........P503,564.59..........18-452-83B-87-B2
o NO. B.P. 700, which revised the prescriptive period from 5 to 3 1984........... 831,464.30..........18-451-84B-87-B2
years was approved on April 5, 1984. The three-year prescriptive 1985..........P1,514,047.86.......18-450-85B-87-B2
period for assessment and collection of revenue taxes applied to
taxes paid beginning 1984. Clearly, the tax assessment made on • On December 7, 1987, BIR sent demand letters by registered mail.
December 10, 1987, for the year 1983 was still covered by the However, PSI alleged that on December 10, 1987, it only received
five-year statutory prescriptive period. demand letters for the years 1983 and 1984, and denied receiving any
o NO. Under the 1986 tax code, the running of the prescriptive notice for the year 1985.
period is suspended by the following: • PSI sent a protest letter dated January 02, 1988 regarding the 1983 and
- for the period during which the Commissioner is prohibited 1984 assessments and claimed that its gross receipts subject to
from making the assessment or beginning distraint or levy or percentage taxes should exclude the salaries of the security and the
a proceeding in court and for sixty days thereafter employer's share of SSS, State Insurance Fund (SIP) and Medicare
- when the taxpayer request for a reinvestigation which is contributions.
granted by the Commissioner • Without acting on the PSI's protest, the BIR sent a follow-up letter dated
- when the taxpayer cannot be located in the address given by July 12, 1988, ordering the settlement of taxes. DST of P2,025.00 for
him in the return filed upon which a tax is being assessed or 1983 and 1984, and P703.41 as deficiency EWTs were included in the
collected demand.
PSI filed a petition before the CTA to prevent the collection of the • On July 21, 1988, PSI paid the deficiency DST and EWT. On July 22,
assessed deficiency tax. When the CTA dismissed the case, 1988, PSI filed its second protest on the 1983 and 1984 percentage
petitioner elevated the case before SC. The actions taken by the taxes, and included, for the first time, its protest against the 1985
PSI suspended the running of the statute of limitation. assessment.
o YES. Contractors’ tax on gross receipts imposed on business • On November 9, 1990, BIR Deputy Commissioner Santos sent a letter to
agents including private detective watchman agencies, was a tax the PSI which denied with finality the protests against the assessment.
on the sale of services or labor, imposed on the exercise of a • On December 5, 1990, petitioner filed a petition for review before the CTA
privilege. The term "gross receipts" means all amounts received but the CTA dismissed the petition on the following grounds:
36
(1) The 3-year period of limitation for assessment in 1984 The pertinent provision of the 1977 NIRC reads:
commenced from the date of filing the final return on January 20,
1985, hence assessment made on December 10, 1987, was within "Section 270. Protesting of assessment. --When the Commissioner
said period. of Internal Revenue or his duly authorized representative finds that
(2) PSI could not deny receipt of the 1985 assessment on the same proper taxes should be assessed, he shall first notify the taxpayer of
date, December 10, 1987, for as supported by testimony of the BIR his findings. Within a period to be prescribed by implementing
personnel, all the assessment letters for the years 1983, 1984, and regulations, the taxpayer shall be required to respond to said notice.
1985 were included in one envelope and mailed together. If the taxpayer fails to respond, the Commissioner shall issue an
(3) PSI's protest letter dated January 2, 1988, was filed on January assessment based on his findings.
12, 1988, or 33 days from December 10, 1987, hence, the request
for reinvestigation was filed out of time. Such assessment may be protested administratively by filing a
• PSI appealed to the Court of Appeals, which affirmed the decision of request for reconsideration or reinvestigation in such form and
the CTA. manner as may be prescribed by the implementing regulations
within thirty (30) days from receipt of the assessment; otherwise, the
Issues: assessment shall become final, and unappealable.
1) WON the CTA has the jurisdiction to act on the petition for
review filed before it? – No. CTA correctly dismissed the appeal for If the protest is denied in whole or in part, the individual, association
lack of jurisdiction. or corporation adversely affected by the decision on the protest may
2) WON the assessments against PSI for deficiency taxes for 1983 appeal to the Court of Tax Appeals within thirty (30) days from
and 1984 were made after the lapse of the prescriptive period. – receipt of the said decision; otherwise, the decision shall become
No. The assessments were made before the lapse of the prescriptive final, executory and demandable."
period.
3) WON the period to collect for 1983, 1984 and 1985 has already From the receipt of the assessment on December 10, 1987 to January
prescribed. – No, it has not yet prescribed and the government may 12, 1988 when it filed its protest and requested for a reinvestigation, 33
still collect from PSI days had lapsed. Thereafter PSI may no longer dispute the correctness
4) WON the assessments were correct. – Yes, the assessment of the assessments. Hence, the CTA correctly dismissed the appeal for
correctly covered all gross receipts. lack of jurisdiction.
Held/Ratio: 2) Relying on BP Blg. 700, which reduced the period of limitation for
1) PSI maintains that the assessments only became final on November 9, assessment and collection of internal revenue taxes from 5 to 3 years,
1990, when the CIR denied the request for reconsideration. CTA had PSI asserts that the government was barred from reviewing the 1983 tax
jurisdiction over the appeal filed by the petitioner on December 5, 1990. starting December 10, 1987, the expiry date of the 3-year limit. It insists
CTA resolved that the assessments became final after 30 days from that the reckoning period of prescription should start from the date when
receipt of demand letters by PSI, without the latter interposing a the quarterly percentage taxes were paid and not when the Final Annual
reconsideration. Percentage Tax Return for the year was filed. Moreover, he denies
having received the 1985 tax assessment.
37
five-year period if the taxes assessed thereby cover taxable

Sections 1 and 3 of BP 700 provides: years prior to January 1, 1984. (emphasis supplied) Scmis
"Sec. 1, Section 318 of the National Internal Revenue Code, as Corollarily, assessments made before April 5, 1984
amended, is hereby amended to read as follows: shall still be governed by the original five-year period.
Sec. 318. Period of limitation upon assessment and collection. -- However, assessments made on or April 5, 1984
Except as provided in the succeeding sections, internal revenue covering taxable years beginning January 1, 1984 shall be
taxes shall be assessed within three years after the last day under the new three-year period."
prescribed by law for the filing of the return, and no proceeding in
court without assessment for the collection of such taxes shall be Should the three-year limitation be reckoned at the time of the quarterly
begun after the expiration of such period: Provided, That in a case payment of contractor's tax or at the due date of the final annual tax?
where a return is filed beyond the period prescribed by law, the
three-year period shall be counted from the day the return was filed. Section 2 of Revenue Regulation No.6-81, states:
For the purposes of this section, a return filed before the last day "Sec. 2. Percentage tax. --In general, unless otherwise
prescribed by law for the filing thereof shall be considered as filed on specifically provided in the Tax Code, every person conducting
such last day. business on which a percentage tax is imposed under Chapter II
xxx Title V of the Tax Code must render quarterly declaration on
cumulative basis of the amount of his sales, receipts or earnings or
"Sec. 3. The period of limitation herein prescribed shall apply to gross value of output actually removed from the factory or near
assessments of internal revenue taxes beginning taxable year warehouse, compute and pay the tax due thereon.
1984." (a) Quarterly Percentage Return.--
For each of the first three quarters of the taxable year, the
B.P. 700 was approved on April 5, 1984. The three-year prescriptive period tax so computed shall be decreased by the amount of tax
for assessment and collection of revenue taxes applied to taxes paid previously paid and by the sum of the tax credits allowed
beginning 1984. Clearly, the tax assessment made on December 10, 1987, under this Title for the preceding current quarters. The tax
for the year 1983 was still covered by the five-year statutory prescriptive due shall be paid not later than twenty (20) days following
period. the close of each of the first three quarters of the taxable
year.
This rule was emphasized in Revenue Memorandum Circular (RMC) (b) Final Annual Percentage Tax Return --
No. 33-84: On or before the twentieth day of the second month
"B. Effectivity of Prescriptive Periods of Assessment and following the close of the taxable year, a final percentage
Collection tax return shall be filed under BIR Form No. __ covering the
entire taxable year. If the sum of the total quarterly
Assessment made on or after April 5, 1984 (date, percentage tax payments made for the first three quarters
of approval of BP 700) will still be governed by the original and total tax credit allowable for the taxable year are not
38
equal to the total tax due on the entire gross sales, receipts proceeding in court for collection, in respect of any deficiency, shall
or earnings or gross value of the output for that taxable be suspended for the period during which the Commissioner is
year, the taxpayer shall either: prohibited from making the assessment or beginning distraint or levy
(1) Pay the tax still due; or Mis sc or a proceeding in court and for sixty days thereafter; when the
(2) Credit to the extent allowable under this Title, taxpayer request for a reinvestigation which is granted by the
the amount of excess tax credits shown in the final Commissioner; when the taxpayer cannot be located in the address
adjustment return against the quarterly percentage tax given by him in the return filed upon which a tax is being assessed
liabilities for the succeeding taxable quarters." or collected: Provided, That, if the taxpayer informs the
Commissioner of any change in address, the running of the statute
In CIR vs. Court of Appeals, February 25, 1999, it was held that the 3-year of limitation will not be suspended; when the warrant of distraint and
prescriptive period of tax assessment of contractors tax should be computed levy is duly served upon the taxpayer, his authorized representative,
at the time of the filing of the "final annual percentage tax return,"[5] when it or a member of his household with sufficient discretion, and no
can be finally ascertained if the taxpayer still has an unpaid tax, and not from property could be located; and when the taxpayer is out of the
the tentative quarterly payments. Philippines."
On PSI’s denial of the receipt of assessment, there is factual findings of the PSI filed a petition before the CTA to prevent the collection of the assessed
CTA that the assessment letter may be presumed to have been received by deficiency tax. When the CTA dismissed the case, petitioner elevated the
petitioner. The CTA found that the 1985 assessment was shown to be sent case before SC. The actions taken by the PSI suspended the running of the
through registered mail as stated by Mr. Larroza, Chief Administrative statute of limitation. In the old case of Republic of the Philippines vs. Ker and
Branch Mailing Section, Rev. Region No. 4B-1, Quezon City. He said that the Company, Ltd.:
1983, 1984 and 1985 assessments were placed in one envelope when it was
mailed by registered mail. Presumably, it was received in the regular course "Under Section 333 (renumbered to 271 during the instant case)
of the mail. The facts to be proved to raise this presumption are (a) that the of the Tax Code the running of the prescriptive period to collect
letter was properly addressed with postage prepaid; and (b) that it was deficiency taxes shall be suspended for the period during which the
mailed. Hence, the same assessment is also considered final and Commissioner of Internal Revenue is prohibited from beginning a
unappealable for failure of the petitioner to protest the same within the distraint and levy or instituting a proceeding in court, and for sixty days
reglementary period provided by law." thereafter. In the case at bar, the pendency of the taxpayer's appeal in
the Court of Tax Appeals and in the Supreme Court had the effect of
3) PSI claims that since the CIR failed to commence the collection of the temporarily staying the hands of the said Commissioner. If the taxpayer's
1983, 1984, and 1985 deficiency tax, the right to collect had prescribed. stand that the pendency of the appeal did not stop the running of the
Note that Section 271 of the 1986 Tax Code provides for the suspension period because the Court of Tax Appeals did not have jurisdiction over
of running of the statute of limitation of tax collection, as follows: the case of taxes is upheld, taxpayers would be encouraged to delay the
payment of taxes in the hope of ultimately avoiding the same. Under the
"Sec. 271. Suspension of running of statute. -- The running of the circumstances, the running of the prescriptive period was suspended."
statute of limitations provided in Sections 268 and 269 on the
making of assessment and the beginning of distraint or levy or a
39
4) PSI contends that the assessments made by the respondent CIR were
erroneous because they included in the gross receipts subject to the
contractor's tax the salaries of the security guards and the employer's
share in the SSS, SIF and Medicare. PSI claims that it did not benefit
from those amounts earmarked for other persons or institutions, hence,
they must not be taxable.
Contractors’ tax on gross receipts imposed on business agents

including private detective watchman agencies, was a tax on the sale of
services or labor, imposed on the exercise of a privilege. The term
"gross receipts" means all amounts received by the prime or principal
contractor as the total price, undiminished by the amount paid to the
subcontractor under a subcontract arrangement. Hence, gross receipts
could not be diminished by employer's SSS, SIF and Medicare
contributions. Furthermore, it has been consistently ruled by the BIR that
the salaries paid to security guards should form part of the gross receipts
subject to tax.
40
TAXPAYER’S REMEDIES: PROTEST Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment shall
SECTION 228. Protesting of Assessment. - When the Commissioner or become final.
his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided, If the protest is denied in whole or in part, or is not acted upon within one
however, That a preassessment notice shall not be required in the hundred eighty (180) days from submission of documents, the taxpayer
following cases: adversely affected by the decision or inaction may appeal to the Court of
(a) When the finding for any deficiency tax is the Tax Appeals within thirty (30) days from receipt of the said decision, or
result of mathematical error in the computation of the tax as from the lapse of one hundred eighty (180)-day period; otherwise, the
appearing on the face of the return; or decision shall become final, executory and demandable.
(b) When a discrepancy has been determined
between the tax withheld and the amount actually remitted by the _____________________________________________________________
withholding agent; or
(c) When a taxpayer who opted to claim a refund CIR v. GONZALES (Trias)
or tax credit of excess creditable withholding tax for a taxable [G.R. No. 177279; October 13, 2010]
period was determined to have carried over and automatically ―Assessment must state the fact, laws, regulations or jurisprudence on which
applied the same amount claimed against the estimated tax the assessment was based.‖ and ―Certiorari may not be used as a substitute
liabilities for the taxable quarter or quarters of the succeeding for a lost appeal or remedy.‖
taxable year; or
(d) When the excise tax due on exciseable Recit-Ready:
articles has not been paid; or Facts: Pursuant to Letter of Authority issued by the CIR to Revenue
(e) When the article locally purchased or Officers, the latter conducted a fraud investigation for all internal
imported by an exempt person, such as, but not limited to, revenue taxes to ascertain the tax liabilities of respondent L. M.
vehicles, capital equipment, machineries and spare parts, has Camus Engineering Corporation (LMCEC) for the taxable years
been sold, traded or transferred to non-exempt persons. 1997, 1998 and 1999. The audit and investigation against
LMCEC was precipitated by the information provided by an
The taxpayers shall be informed in writing of the law and the facts on informer that LMCEC had substantial underdeclared income for
which the assessment is made; otherwise, the assessment shall be void. the said period. For failure to comply with the subpoena duces
Within a period to be prescribed by implementing rules and regulations, tecum issued in connection with the tax fraud investigation, a
the taxpayer shall be required to respond to said notice. If the taxpayer criminal complaint (Case 1) was instituted by the BIR against
fails to respond, the Commissioner or his duly authorized representative LMCEC in 2001 for violation of Section 266 of the NIRC.
shall issue an assessment based on his findings.
Petitioner thus assessed the company of total deficiency taxes amounting
Such assessment may be protested administratively by filing a request for to P430,958,005.90. A PAN was received by the company in
reconsideration or reinvestigation within thirty (30) days from receipt of the February 2002. Assessment notices together with a formal letter
assessment in such form and manner as may be prescribed by of demand dated August 7, 2002 were sent to LMCEC through
implementing rules and regulations. personal service on October 1, 2002. Since the company and its
representatives refused to receive the said notices and demand
letter, the revenue officers resorted to constructive service. BIR The Court additionally cited the case of Marcos II v. Court of Appeals:
filed a criminal complaint (Case 2) for Attempt to Evade or Defeat ―In the absence of proof of any irregularities in the
Tax and Willful Failure to Supply Correct and Accurate performance of official duties, an assessment will not be
Information and Pay Tax. Respondents argued on many grounds disturbed. Even an assessment based on estimates is prima
(check comprehensive digest) the most relevant among which is facie valid and lawful where it does not appear to have been
that the assessment notices are invalid because it bears no serial arrived at arbitrarily or capriciously. The burden of proof is
numbers and should be shown to have been validly served by an upon the complaining party to show clearly that the assessment is
Affidavit of Constructive Service executed and sworn to by the erroneous. Failure to present proof of error in the assessment will
revenue officers who served the same. justify the judicial affirmance of said assessment. Moreover,
these objections to the assessments should have been
Issue/s: raised, considering the ample remedies afforded the
WON LMCEC and its corporate officers may be prosecuted for taxpayer by the Tax Code, with the Bureau of Internal
violation of Sections 254 (Attempt to Evade or Defeat Tax) and 255 Revenue and the Court of Tax Appeals, as described earlier,
(Willful Failure to Supply Correct and Accurate Information and Pay and cannot be raised now via Petition for Certiorari, under the
Tax) —YES pretext of grave abuse of discretion. The course of action taken
by the petitioner reflects his disregard or even repugnance of the
established institutions for governance in the scheme of a well-
Held: In ruling for the CIR, the Court noted that a ―notice of ordered society. The subject tax assessments having become
assessment‖ is a declaration of deficiency taxes issued to a final, executory and enforceable, the same can no longer be
taxpayer who fails to respond to a Pre-Assessment Notice (PAN) contested by means of a disguised protest. In the main,
within the prescribed period of time, or whose reply to the PAN Certiorari may not be used as a substitute for a lost appeal or
was found to be without merit. The Notice of Assessment shall remedy. This judicial policy becomes more pronounced in view of
inform the taxpayer of this fact, and that the report of investigation the absence of sufficient attack against the actuations of
submitted by the Revenue Officer conducting the audit shall be government.‖
given due course. The formal letter of demand calling for
payment of the taxpayers deficiency tax or taxes shall state the Facts:
fact, the law, rules and regulations or jurisprudence on Pursuant to Letter of Authority issued by the CIR to Revenue Officers, the
which the assessment is based, otherwise the formal letter latter conducted a fraud investigation for all internal revenue taxes to
of demand and the notice of assessment shall be void. As it ascertain the tax liabilities of respondent L. M. Camus Engineering
is, the formality of a control number in the assessment notice is Corporation (LMCEC) for the taxable years 1997, 1998 and 1999.
not a requirement for its validity but rather the contents thereof The audit and investigation against LMCEC was precipitated by the
which should inform the taxpayer of the declaration of deficiency information provided by an informer that LMCEC had substantial
tax against said taxpayer. Both the formal letter of demand and underdeclared income for the said period.
the notice of assessment shall be void if the former failed to state For failure to comply with the subpoena duces tecum issued in
the fact, the law, rules and regulations or jurisprudence on which connection with the tax fraud investigation, a criminal complaint (Case 1)
the assessment is based, which is a mandatory requirement was instituted by the BIR against LMCEC in 2001 for violation of Section
under Section 228 of the NIRC. 266 of the NIRC.
Petitioner assessed the company of total deficiency taxes amounting to is fictitious and his true identity and personality could not be
P430,958,005.90. produced
A PAN was received by the company in February 2002. o there was no prior determination of the existence of fraud
Assessment notices together with a formal letter of demand dated August o petitioner committed forum shopping when it filed the
2002 were sent to LMCEC through personal service on October 2002. instant case even as the earlier criminal complaint (Case 1)
Since the company and its representatives refused to receive the said dismissed was still pending appeal
notices and demand letter, the revenue officers resorted to constructive The BIR officials countered by arguing the following:
service in accordance with Section 3, RR No. 12-99. o It is not a mere civil case for claim. It was a criminal case
In May 2003, the preliminary investigation (Case 2) against Camus and which finds support in Section 205 of the NIRC which
Mendoza, as officials of LMCEC, was referred to the DOJ Secretary. provides for administrative (distraint, levy, fine, forfeiture,
BIR officials alleged that despite the receipt of the final assessment notice lien, etc.) and judicial (criminal or civil action) remedies in
and formal demand letter, LMCEC failed and refused to pay the order to enforce collection of taxes. Both remedies may be
deficiency tax assessment in the total amount of P630,164,631.61, which pursued either independently or simultaneously. In this
had become final and executory as a result of the said taxpayers failure case, the BIR decided to simultaneously pursue both
to file a protest thereon within the thirty (30)-day reglementary period. remedies.
Camus and Mendoza argued that LMCEC cannot be held liable o On the lack of control number in the assessment notice,
whatsoever for the alleged tax deficiency which had become due and petitioner explained that such is a mere office requirement
demandable on the following grounds: in the Assessment Service for the purpose of internal
o the complaint and its annexes all showed that the suit is a control and monitoring; hence, the unnumbered
simple civil action for collection and not a tax evasion case assessment notices should not be interpreted as irregular or
o assessment notices are invalid because it bears no serial anomalous.
numbers and should be shown to have been validly served o Petitioner stressed that LMCEC already lost its right to file a
by an Affidavit of Constructive Service executed and sworn protest letter after the lapse of the thirty (30)-day
to by the revenue officers who served the same reglementary period.
o the company had already undergone a series of routine o Even assuming for the sake of argument that the
examinations for the years 1997, 1998 and 1999; under the assessment notices were invalid, petitioner contended that
NIRC, only one examination of the books of accounts is such could not affect the present criminal action, citing the
allowed per taxable year ruling in the landmark case of Ungab v. Cusi, Jr.
o it had availed of the Bureaus Tax Amnesty Programs o LMCEC is not actually entitled to the benefits of VAP under
(Economic Recovery Assistance Payment [ERAP] Program Section 1 (1.1 and 1.2) of RR No. 10-2001. In fact, it is
and the Voluntary Assessment Program [VAP]) for 1998 disqualified.
and 1999; for 1997, its tax liability was terminated and o As to the principle of estoppel invoked by LMCEC, estoppel
closed under Letter of Termination clearly does not lie against the BIR as this involved the
o it filed on April 20, 2001 a protest on the PAN issued by exercise of an inherent power by the government to collect
petitioner for having no basis in fact and law but, until now taxes
the said protest remains unresolved o As to the allegedly unresolved protest filed on April 20,
o as to the alleged informant who purportedly supplied the 2001 by LMCEC over the PAN, this has been disregarded
confidential information, LMCEC believes that such person by the Bureau for being pro forma and having been filed
beyond the 15-day reglementary period. Even assuming respondents with the crimes of attempt to evade or defeat tax
said protest letter was validly filed on behalf of the and willful failure to supply correct and accurate information
company, the issuance of a Formal Demand Letter and and pay tax defined and penalized under Sections 254 and
Assessment Notice through constructive service on October 255, respectively.
1, 2002 is deemed an implied denial of the said protest. o As to the allegation that the informer is a fictitious person, the Court
o Lastly, the details regarding the informer being confidential, ruled that:
such information is entitled to some degree of protection, Private respondents were already notified that inasmuch as
including the identity of the informant against LMCEC. the revenue officers were not given the opportunity to
Decision of Chief State Prosecutor: no finding of probable cause examine LMCECs books of accounts, accounting records and
Decision of Secretary of Justice: denied BIR‘s motion other documents, said revenue officers gathered information
Decision of the CA: denied BIR‘s petition and affirmed the findings of from third parties. Such procedure is authorized under
the Secretary Section 5 of the NIRC.
Private respondents assertions regarding the qualifications of
Issue/s: the informer of the Bureau deserve scant consideration. We
WON LMCEC and its corporate officers may be prosecuted for violation have held that the lack of consent of the taxpayer under
of Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful investigation does not imply that the BIR obtained the
Failure to Supply Correct and Accurate Information and Pay Tax). information from third parties illegally or that the information
—YES received is false or malicious. Nor does the lack of consent
preclude the BIR from assessing deficiency taxes on the
Held/Ratio: Petition GRANTED. taxpayer based on the documents.
o As to the argument that the notice of assessment is invalid for being
YES. The Court emphasized the doctrine of presumption of regularity of unnumbered, the Court ruled that:
assessments. A ―notice of assessment‖ is a declaration of deficiency taxes
o As to the DOJ Secretary‘s claim of litis pendentia in the case at bar, issued to a taxpayer who fails to respond to a Pre-
the same cannot stand for the following reasons: Assessment Notice (PAN) within the prescribed period of
Pursuant to RR No. 12-99 a PAN was sent to and received by time, or whose reply to the PAN was found to be without
LMCEC on February 22, 2001 wherein it was notified of the merit. The Notice of Assessment shall inform the taxpayer of
proposed assessment of deficiency taxes amounting to this fact, and that the report of investigation submitted by the
P430,958,005.90 covering taxable years 1997, 1998 and Revenue Officer conducting the audit shall be given due
1999. course.
In response to said PAN, LMCEC sent a letter-protest to the The formal letter of demand calling for payment of the
TFD, which denied the same on April 12, 2001 for lack of taxpayers deficiency tax or taxes shall state the fact, the
legal and factual basis and also for having been filed beyond law, rules and regulations or jurisprudence on which the
the 15-day reglementary period. assessment is based, otherwise the formal letter of
It is clear that I.S. No. 00-956 involves a separate offense and demand and the notice of assessment shall be void.
hence litis pendentia is not present considering that the As it is, the formality of a control number in the assessment
outcome of I.S. No. 00-956 is not determinative of the issue notice is not a requirement for its validity but rather the
as to whether probable cause exists to charge the private contents thereof which should inform the taxpayer of the
declaration of deficiency tax against said taxpayer. Both the prima facie evidence of false or fraudulent return under
formal letter of demand and the notice of assessment shall be Section 248(B) of the NIRC, as amended.
void if the former failed to state the fact, the law, rules and The computation in the final assessment notice showed
regulations or jurisprudence on which the assessment is underdeclarations of almost 200%.
based, which is a mandatory requirement under Section 228 o As to the argument they are covered by the tax amnesty
of the NIRC. Section 1 of RR No. 8-2001 provides:
To implement the provisions of Section 228 of the NIRC, RR
No. 12-99 was enacted. Section 3.1.4 of the revenue SECTION 1. COVERAGE. x x x
regulation reads: Any person, natural or juridical, including estates and trusts, liable to pay any
3.1.4. Formal Letter of Demand and Assessment Notice. The formal letter of of the above-cited internal revenue taxes for the above specified period/s
demand and assessment notice shall be issued by the Commissioner or his who, due to inadvertence or otherwise, erroneously paid his internal revenue
duly authorized representative. The letter of demand calling for payment tax liabilities or failed to file tax return/pay taxes may avail of the Voluntary
of the taxpayers deficiency tax or taxes shall state the facts, the law, Assessment Program (VAP), except those falling under any of the
rules and regulations, or jurisprudence on which the assessment is following instances:
based, otherwise, the formal letter of demand and assessment notice 1.1 Those covered by a Preliminary Assessment Notice (PAN), Final
shall be void. The same shall be sent to the taxpayer only by registered mail Assessment Notice (FAN), or Collection Letter issued on or before July 31,
or by personal delivery. x x x. (Emphasis supplied.) 2001; or
The Formal Letter of Demand dated August 7, 2002 contains 1.2 Persons under investigation as a result of verified information filed
not only a detailed computation of LMCECs tax deficiencies by a Tax Informer under Section 282 of the Tax Code of 1997, duly
but also details of the specified discrepancies, explaining the processed and recorded in the BIR Official Registry Book on or before
legal and factual bases of the assessment. It also reiterated July 31, 2001;
that in the absence of accounting records and other 1.3 Tax fraud cases already filed and pending in courts for adjudication; and
documents necessary for the proper determination of the x x x x (Emphasis supplied.)
companys internal revenue tax liabilities, the investigating o The Court reiterated important doctrines on tax assessments
revenue officers resorted to the Best Evidence Obtainable as Tax assessments by tax examiners are presumed correct and
provided in Section 6(B) of the NIRC (third party information) made in good faith, and all presumptions are in favor of the
and in accordance with the procedure laid down in RMC No. correctness of a tax assessment unless proven otherwise.
23-2000 dated November 27, 2000. We have held that a taxpayers failure to file a petition for
o As to the argument that there was failure to prove fraud: review with the Court of Tax Appeals within the statutory
In the same letter, private respondents were informed that the period rendered the disputed assessment final, executory and
estimated tax liabilities arising from LMCECs demandable, thereby precluding it from interposing the
underdeclaration amounted to P186,773,600.84 in 1997, defenses of legality or validity of the assessment and
P150,069,323.81 in 1998 and P163,220,111.13 in 1999. prescription of the Governments right to assess.
These figures confirmed that the non-declaration by LMCEC Indeed, any objection against the assessment should have
for the taxable years 1997, 1998 and 1999 of an amount been pursued following the avenue paved in Section 229
exceeding 30% income declared in its return is considered a (now Section 228) of the NIRC on protests on assessments
substantial underdeclaration of income, which constituted of internal revenue taxes.
Records bear out that the assessment notice and Formal means of a disguised protest. In the main, Certiorari may not be
Letter of Demand dated August 7, 2002 were duly served on used as a substitute for a lost appeal or remedy. This judicial policy
LMCEC on October 1, 2002. Private respondents did not file becomes more pronounced in view of the absence of sufficient
a motion for reconsideration of the said assessment notice attack against the actuations of government.‖
and formal demand; neither did they appeal to the Court of
Tax Appeals. Section 228 of the NIRC provides the remedy to _____________________________________________________________
dispute a tax assessment within a certain period of time. It
states that an assessment may be protested by filing a CIR vs. METRO STAR SUPERAMA INC (Tuazon)
request for reconsideration or reinvestigation within 30 days [GR. No. 185371; December 8, 2010]
from receipt of the assessment by the taxpayer. No such ―Assessment must state fact and law on which it is based—otherwise, void;
administrative protest was filed by private respondents PAN must be issued before FAN and letter of demand—otherwise, no due
seeking reconsideration of the August 7, 2002 assessment process‖
notice and formal letter of demand.
Private respondents cannot belatedly assail the said Recit-Ready:
assessment, which they allowed to lapse into finality, by Facts: In January 2001, a revenue officer was authorized to examine the
raising issues as to its validity and correctness during the books of accounts of Metro Star Superama, Inc. In April 2002,
preliminary investigation after the BIR has referred the matter after the audit review, the revenue district officer issued a formal
for prosecution under Sections 254 and 255 of the NIRC. assessment notice (FAN) against Metro Star advising the latter
As we held in Marcos II v. Court of Appeals: that it is liable to pay deficiency taxes. Metro Star assailed the
―xxx In the absence of proof of any irregularities in the issuance of the FAN as it averred that due process was not
performance of official duties, an assessment will not be observed when it was not issued a pre-assessment notice (PAN).
disturbed. Even an assessment based on estimates is prima Nevertheless, the BIR Commish authorized the issuance of a
facie valid and lawful where it does not appear to have been Warrant of Distraint and/or Levy against the properties of Metro
arrived at arbitrarily or capriciously. The burden of proof is upon Star. Metro Star then appealed to the CTA, which ruled in favor of
the complaining party to show clearly that the assessment is Metro Star.
erroneous. Failure to present proof of error in the assessment will
justify the judicial affirmance of said assessment. Issue/s: WON due process was observed in the issuance of the FAN
x x x. —NO
Moreover, these objections to the assessments should have
been raised, considering the ample remedies afforded the
taxpayer by the Tax Code, with the Bureau of Internal Revenue Held: NO. The presumption that the tax assessment was duly issued is
and the Court of Tax Appeals, as described earlier, and cannot be disregarded if the taxpayer denies ever having received a tax
raised now via Petition for Certiorari, under the pretext of grave assessment from the BIR. In such cases, it is incumbent upon the
abuse of discretion. The course of action taken by the petitioner BIR to prove by competent evidence that such notice was indeed
reflects his disregard or even repugnance of the established received by the addressee-taxpayer. The onus probandi was
institutions for governance in the scheme of a well-ordered society. shifted to the BIR to prove by contrary evidence that the Metro
The subject tax assessments having become final, executory Star received the assessment in the due course of mail. In the
and enforceable, the same can no longer be contested by case at bar, the CIR merely alleged that Metro Star received the
pre-assessment notice in January 2002. The CIR could have its deficiency tax liabilities within ten (10) [days] from receipt thereof,
simply presented the registry receipt /certification from the otherwise respondent BIR shall be constrained to serve and execute
postmaster that it mailed the pre-assessment notice, but failed. the Warrants of Distraint and/or Levy and Garnishment to enforce
Neither did it offer any explanation on why it failed to comply with collection.
the requirement of service of the PAN. The SC emphasized that On February 6, 2004, petitioner received from Revenue District
the sending of a PAN is part of the due process requirement in Office No. 67 a Warrant of Distraint and/or Levy No. 67-0029-23
the issuance of a deficiency tax assessment, the absence of dated May 12, 2003 demanding payment of deficiency value-added
which renders nugatory any assessment made by the tax tax and withholding tax payment in the amount of P292,874.16.
authorities. On July 30, 2004, petitioner filed with the Office of respondent
Commissioner a Motion for Reconsideration pursuant to Section
Section 228 of the Tax Code clearly requires that the taxpayer must first 3.1.5 of Revenue Regulations No. 12-99.On February 8, 2005,
be informed that he is liable for deficiency taxes through the respondent Commissioner, through its authorized representative,
sending of a PAN (subject only of course to the 5 exceptions Revenue Regional Director of Revenue Region 10, Legaspi City,
under the same section). He must be informed of the facts and issued a Decision denying petitioner‗s Motion for Reconsideration.
the law upon which the assessment is made. The law imposes a Petitioner, through counsel received said Decision on February 18,
substantive, not merely a formal, requirement. To proceed 2005. Denying that it received a Preliminary Assessment Notice
heedlessly with tax collection without first establishing a valid (PAN) and claiming that it was not accorded due process, Metro
assessment is evidently violative of the cardinal principle in Star filed a petition for review with the CTA.
administrative investigations - that taxpayers should be able to The CTA-Second Division found merit in the petition of Metro Star
present their case and adduce supporting evidence and, on March 21, 2007, rendered a decision, granting the petition
and ordering CIR from collecting the subject taxes. It opined that
Facts: while there is a disputable presumption that a mailed letter is
On January 26, 2001, the Regional Director of Revenue of Legazpi deemed received by the addressee in the ordinary course of mail, a
City, issued Letter of Authority to examine Metro Stars books of direct denial of the receipt of mail shifts the burden upon the party
accounts and other accounting records for income tax and other favored by the presumption to prove that the mailed letter was
internal revenue taxes for the taxable year 1999. indeed received by the addressee.
For Metro Stars failure to comply with several requests for the o It also found that there was no clear showing that Metro
presentation of records and Subpoena Duces Tecum, BIR of Star actually received the alleged PAN, dated January
Legazpi City proceeded with the investigation based on the best 16,2002. It, accordingly, ruled that the Formal Letter of
evidence obtainable preparatory to the issuance of assessment Demand dated April 3, 2002, as well as the Warrantof
notice. Distraint and/or Levy dated May 12, 2003 were void, as
On April 11, 2002, Metro Star received a Formal Letter of Demand Metro Star was denied due process.
dated April 3, 2002 from Revenue District No. 67, Legazpi City,
assessing petitioner the amount of P292,874.16. for deficiency Issue/s: WON due process was observed?
value-added and withholding taxes for the taxable year 1999. —NO
Subsequently, Revenue District Office No. 67 sent a copy of the
Final Notice of Seizure dated May 12,2003, which petitioner Held/Ratio:
received on May 15, 2003, giving the latter last opportunity to settle
The Court agrees with the CTA that the CIR failed to discharge its requirement of merely notifying the taxpayer of the CIR‗s findings
duty and present any evidence to show that Metro Star indeed was changed in 1998 to informing the taxpayer of not only the law,
received the PAN dated January 16, 2002. It could have simply but also of the facts on which an assessment would be made.
presented the registry receipt or the certification from the postmaster Otherwise, the assessment itself would be invalid.
that it mailed the PAN, but failed. Neither did it offer any explanation
on why it failed to comply with the requirement of service of the _____________________________________________________
PAN.
It merely accepted the letter of Metro Star‗s chairman dated April 29, CIR vs. AZUCENA REYES (Vanslembrouck)
2002, that stated that he had received the FAN dated April 3, 2002, [GR. No. 159694; January 27,2006]
but not the PAN; that he was willing to pay the tax as computed by ―Failure to be informed of law and facts on which it is based = void
the CIR; and that he just wanted to clarify some matters with the assessment‖
hope of lessening its tax liability.
AS TO COMPLIANCE WITH NOTICE REQUIREMENT: Section 228 Recit-Ready:
of the Tax Code clearly requires that the taxpayer must first be Facts: Tancinco died. Her estate was assessed for the estate tax due it.
informed that he is liable for deficiency taxes through the sending of However, the notice failed to contain the facts and laws on which
a PAN. He must be informed of the facts and the law upon which the the assessment was based. Subsequently, Reyes, one of the
assessment is made. The law imposes a substantive, not merely a decedent‘s heirs entered into a compromise agreement with the
formal, requirement. To proceed heedlessly with tax collection BIR after the latter offered an opportunity to compromise
without first establishing a valid assessment is evidently violative of delinquent tax liability.
the cardinal principle in administrative investigations - that taxpayers
should be able to present their case and adduce supporting Issue/s:
evidence. 1) WON the assessment against the estate is valid?
o Sending of a PAN to taxpayer to inform him of the 2) WON the compromise entered into is also valid?
assessment made is but part of the due process
requirement in the issuance of a deficiency tax assessment, Held:
the absence of which renders nugatory any assessment 1) NO. It failed to contain the facts and the law on which it was based.
made by the tax authorities. Aa cursory review of the preliminary assessment notice, as well as the
o The use of the word shall in subsection 3.1.2 (of RR 12-99) demand letter sent, reveals the lack of basis for -- not to mention the
describes the mandatory nature of the service of a PAN. insufficiency of -- the gross figures and details of the itemized
Thus, for its failure to send the PAN stating the facts and the law on deductions indicated in the notice and the letter. This Court cannot
which the assessment was made as required by Section 228, the countenance an assessment based on estimates that appear to have
assessment made by the CIR is void. The case of CIR v. Menguito been arbitrarily or capriciously arrived at.
cited by the CIR in support of its argument that only the non-service 2) NO. The assessment being invalid, it cannot be in turn used as a basis
of the FAN is fatal to the validity of an assessment, cannot apply to for the perfection of a tax compromise.
this case because the issue therein was the non-compliance with
the provisions of R. R. No. 12-85 which sought to interpret Section
229 of the old tax law. RA No. 8424 has already amended the
provision of Section 229 on protesting an assessment. The old
Facts: Commenting on the motion, the CIR] countered that, without the
Maria C. Tancinco (or ‗decedent‘) died, leaving a residential lot and approval of the NEB, Reyes‘s application for compromise with the
an house in Dasmariñas Village, Makati City. BIR cannot be considered a perfected or consummated
On March 1997, a Letter of Authority for the regular investigation of compromise.
the estate tax case was received by Azucena T. Reyes, one of the
decedent‘s heirs. Issue/s:
On February 1998, a preliminary assessment notice was issued 1) WON the assessment against the estate is valid?
against the estate. —NO
On April 1998, the final estate tax assessment notice, as well as 2) WON the compromise entered into is also valid?
demand letter, was also issued. —NO
During both these dates in 1998, RA 8424 (which amended Sec.
229 on protesting an assessment) was already in force. Held/Ratio:
o The old requirement of merely notifying the taxpayer of the
CIR‘s findings was changed in 1998 to informing the 1) NO, the assessment was invalid. She was not informed in writing of
taxpayer of not only the law, but also of the facts on which the law and the facts on which the assessment of estate taxes had
an assessment would be made; otherwise, the assessment been made. She was merely notified of the findings by the CIR.
itself would be invalid.
Subsequently, the BIR issued RR No. 6-2000 and RMO No. 42- First, RA 8424 has already amended the provision of Section 229
2000 offering certain taxpayers with delinquent accounts and on protesting an assessment. The old requirement of merely
disputed assessments an opportunity to compromise their tax notifying the taxpayer of the CIR‘s findings was changed in 1998 to
liability. informing the taxpayer of not only the law, but also of the facts on
o Thus, Reyes filed an application with the BIR for the which an assessment would be made; otherwise, the
compromise settlement of the assessment against the assessment itself would be invalid.
estate pursuant to Sec. 204(A) of the Tax Code, as o During the dates that the PAN and the FAN were issued,
implemented by RR No. 6-2000 and RMO No. 42-2000. RA 8424 was already in effect. The notice required under
o Reyes paid the compromise amount of P1,062,778.20 but the old law was no longer sufficient under the new law.
was still awaiting approval of the National Evaluation Board To be simply informed in writing of the investigation being conducted
(or ‗NEB‘). and of the recommendation for the assessment of the estate taxes
On February 2001, Reyes filed a Motion to Declare Application for due is nothing but a perfunctory discharge of the tax function of
the Settlement of Disputed Assessment as a Perfected correctly assessing a taxpayer.
Compromise. o The act cannot be taken to mean that Reyes already knew
o In said motion, she alleged that the CIR had not yet signed the law and the facts on which the assessment was based.
the compromise, because of procedural red tape requiring o It does not at all conform to the compulsory requirement
the initials of four Deputy Commissioners on relevant under Section 228.
documents before the compromise is signed by the CIR. o Moreover, the Letter of Authority received by respondent on
o Reyes posited that the absence of the requisite initials and March 1997 was for the sheer purpose of investigation and
signatures on said documents does not vitiate the perfected was not even the requisite notice under the law.
compromise.
The general rule is that statutes are prospective. However, statutes issuance of the preliminary assessment notice and demand
that are remedial, or that do not create new or take away vested letter.
rights, do not fall under the general rule against the retroactive Third, neither Section 229 nor RR 12-85 can prevail over Section
operation of statutes. 228 of the Tax Code.
o Clearly, Section 228 provides for the procedure in case an o No doubt, Section 228 has replaced Section 229. The
assessment is protested. The provision does not create provision on protesting an assessment has been amended.
new or take away vested rights. In both instances, it can o Furthermore, in case of discrepancy between the law as
surely be applied retroactively. amended and its implementing but old regulation, the
o Moreover, RA 8424 does not state, either expressly or by former necessarily prevails.
necessary implication, that pending actions are excepted o Thus, between Section 228 of the Tax Code and the
from the operation of Section 228, or that applying it to pertinent provisions of RR 12-85, the latter cannot stand
pending proceedings would impair vested rights. because it cannot go beyond the provision of the law. The
Second, the non-retroactive application of Revenue Regulation law must still be followed, even though the existing tax
(RR) No. 12-99 is of no moment, considering that it merely regulation at that time provided for a different procedure.
implements the law. The regulation then simply provided that notice be sent to the
o At the time the pre-assessment notice was issued to Reyes, respondent in the form prescribed, and that no consequence would
RA 8424 already stated that the taxpayer must be informed ensue for failure to comply with that form.
of both the law and facts on which the assessment was Fourth, petitioner violated the cardinal rule in administrative law that
based. the taxpayer be accorded due process.
o Thus, the CIR should have required the assessment officers o Not only was the law here disregarded, but no valid notice
of the Bureau of Internal Revenue (BIR) to follow the clear was sent, either. A void assessment bears no valid fruit.
mandate of the new law. o The law imposes a substantive, not merely a formal,
o It may be argued that the Tax Code provisions are not self- requirement.
executory. To proceed heedlessly with tax collection without
It would be too wide a stretch of the imagination, first establishing a valid assessment is evidently
though, to still issue a regulation that would simply violative of the cardinal principle in administrative
require tax officials to inform the taxpayer, in any investigations: that taxpayers should be able to
manner, of the law and the facts on which an present their case and adduce supporting
assessment was based. evidence.
That requirement is neither difficult to make nor its o In the instant case, respondent has not been informed of
desired results hard to achieve. the basis of the estate tax liability.
Moreover, an administrative rule interpretive of a statute, and not o Without complying with the unequivocal mandate of first
declarative of certain rights and corresponding obligations, is given informing the taxpayer of the government‘s claim, there can
retroactive effect as of the date of the effectivity of the statute. be no deprivation of property, because no effective protest
o RR 12-99 is one such rule. can be made.
o Being interpretive of the provisions of the Tax Code, even if o The haphazard shot at slapping an assessment,
it was issued only on September 6, 1999, this regulation supposedly based on estate taxation‘s general provisions
was to retroact to January 1, 1998 -- a date prior to the
that are expected to be known by the taxpayer, is utter lex non distinguit, nec nos distinguere debemos. Where the law
chicanery. does not distinguish, we should not distinguish.
Even a cursory review of the preliminary assessment notice, as well
as the demand letter sent, reveals the lack of basis for -- not to _____________________________________________________
mention the insufficiency of -- the gross figures and details of the
itemized deductions indicated in the notice and the letter. CIR v. ENRON SUBIC POWER CORP. (Villarin, L.)
This Court cannot countenance an assessment based on estimates [GR. No. 166387; January 19, 2009]
that appear to have been arbitrarily or capriciously arrived at. ―No legal basis, no legal value (void)‖
Although taxes are the lifeblood of the government, their
assessment and collection "should be made in accordance with law
Recit-Ready:
as any arbitrariness will negate the very reason for government
Facts: On May 26, 1999, Enron received from the CIR a Final
itself."
Assessment Notice (FAN) requiring it to pay the alleged
Fifth, the rule against estoppel does not apply. Although the deficiency income tax of P2,880,817.25 for the taxable year 1996.
government cannot be estopped by the negligence or omission of its Enron protested this deficiency tax assessment.
agents, the obligatory provision on protesting a tax assessment
cannot be rendered nugatory by a mere act of the CIR . Due to the non-resolution of its protest within the 180-day period,
Tax laws are civil in nature. Under our Civil Code, acts executed Enron filed a petition for review in the CTA. It argued that the
against the mandatory provisions of law are void, except when the deficiency tax assessment disregarded the provisions of Section
law itself authorizes the validity of those acts. 228 of the NIRC, as amended, and Section 3.1.4 of Revenue
o Failure to comply with Section 228 does not only render the Regulations (RR) No. 12-99 by not providing the legal and factual
assessment void, but also finds no validation in any bases of the assessment. Enron likewise questioned the
provision in the Tax Code. substantive validity of the assessment.
o We cannot condone errant or enterprising tax officials, as
they are expected to be vigilant and law-abiding. Issue/s:
WON the deficiency tax assessment was valid.
2) NO. The assessment being invalid, it cannot be in turn used as a —NO
basis for the perfection of a tax compromise.
It would be premature for this Court to declare that the compromise Held: The law requires that the legal and factual bases of the
on the estate tax liability has been perfected and consummated, assessment be stated in the formal letter of demand and
considering the earlier determination that the assessment against assessment notice. Thus, such cannot be presumed. Otherwise,
the estate was void. Nothing has been settled or finalized. the express provisions of Article 228 of the NIRC and RR No. 12-
Under Section 204(A) of the Tax Code, where the basic tax involved 99 would be rendered nugatory. The alleged factual bases in the
exceeds one million pesos or the settlement offered is less than the advice, preliminary letter and audit working papers did not suffice.
prescribed minimum rates, the compromise shall be subject to the There was no going around the mandate of the law that the
approval of the NEB composed of the petitioner and four deputy legal and factual bases of the assessment be stated in
commissioners. writing in the formal letter of demand accompanying the
Finally, as correctly held by the appellate court, this provision assessment notice.
applies to all compromises, whether government-initiated or not. Ubi
o We affirm the CA‘s decision. A notice of assessment is:

Facts: A declaration of deficiency taxes issued to a taxpayer who
Enron, a domestic corporation registered with the Subic Bay Metropolitan fails to respond to a Pre-Assessment Notice (PAN) within the
Authority as a freeport enterprise, filed its annual income tax return for the prescribed period of time, or whose reply to the PAN was
year 1996 on April 12, 1997. It indicated a net loss of P7,684,948. found to be without merit. The Notice of Assessment shall
Subsequently, the BIR, through a preliminary five-day letter, informed it of inform the taxpayer of this fact, and that the report of
a proposed assessment of an alleged P2,880,817.25 deficiency income investigation submitted by the Revenue Officer conducting
tax. Enron disputed the proposed deficiency assessment in its first protest the audit shall be given due course.
letter. The formal letter of demand calling for payment of the
On May 26, 1999, Enron received from the CIR a Final Assessment taxpayers deficiency tax or taxes shall state the fact, the law,
Notice (FAN) requiring it to pay the alleged deficiency income tax of rules and regulations or jurisprudence on which the
P2,880,817.25 for the taxable year 1996. Enron protested this deficiency assessment is based, otherwise the formal letter of demand
tax assessment. and the notice of assessment shall be void. (emphasis
Due to the non-resolution of its protest within the 180-day period, Enron supplied)
filed a petition for review in the CTA. It argued that the deficiency tax o Section 228 of the NIRC provides that the taxpayer shall be informed
assessment disregarded the provisions of Section 228 of the NIRC, as in writing of the law and the facts on which the assessment is made.
amended, and Section 3.1.4 of Revenue Regulations (RR) No. 12-99 by Otherwise, the assessment is void. To implement the provisions of
not providing the legal and factual bases of the assessment. Enron Section 228 of the NIRC, RR No. 12-99 was enacted. Section 3.1.4 of
likewise questioned the substantive validity of the assessment. the revenue regulation reads:
Based on the grounds argued by Enron, the CTA granted its petition and 3.1.4. Formal Letter of Demand and Assessment Notice. The
ordered the cancellation of its deficiency tax assessment for the year formal letter of demand and assessment notice shall be
1996. issued by the Commissioner or his duly authorized
The CIR appealed the CTA decision to the CA but the CA affirmed it. The representative. The letter of demand calling for payment
CA held that the audit working papers did not substantially comply with of the taxpayers deficiency tax or taxes shall state the
Section 228 of the NIRC and RR No. 12-99 because they failed to show facts, the law, rules and regulations, or jurisprudence on
the applicability of the cited law to the facts of the assessment. The CIR which the assessment is based, otherwise, the formal
filed a motion for reconsideration but this was deemed abandoned when letter of demand and assessment notice shall be void.
he filed a motion for extension to file a petition for review in this Court. The same shall be sent to the taxpayer only by registered
mail or by personal delivery. xxx (emphasis supplied)
Issue/s: o It is clear from the foregoing that a taxpayer must be informed in
WON the deficiency tax assessment was valid. writing of the legal and factual bases of the tax assessment made
—NO against him. The use of the word ―shall‖ in these legal provisions
indicates the mandatory nature of the requirements laid down therein.
Held/Ratio: Petition DENIED. o Both the CTA and the CA concluded that the deficiency tax
assessment merely itemized the deductions disallowed and included
NO. The Court emphasized the the law requires that the legal and these in the gross income. It also imposed the preferential rate of 5%
factual bases of the assessment be stated in the formal letter of on some items categorized by Enron as costs. The legal and factual
demand and assessment notice. bases were, however, not indicated.
o The CIR insists that an examination of the facts shows that Enron was of the assessment against it, the assessment in question was void.
properly apprised of its tax deficiency. During the pre-assessment We reiterate our ruling in Reyes v. Almanzor, et al.:
stage, the CIR advised Enron‘s representative of the tax deficiency, Verily, taxes are the lifeblood of the Government and so
informed it of the proposed tax deficiency assessment through a should be collected without unnecessary hindrance.
preliminary five-day letter and furnished Enron a copy of the audit However, such collection should be made in accordance with
working paper allegedly showing in detail the legal and factual bases law as any arbitrariness will negate the very reason for the
of the assessment. The CIR argues that these steps sufficed to inform Government itself.
Enron of the laws and facts on which the deficiency tax assessment
was based. _____________________________________________________
o We disagree. The advice of tax deficiency as well as the preliminary
five-day letter were not valid substitutes for the mandatory notice in
SAMAR-I ELECTRIC COOPERATIVE v. CIR (VILLARIN, P.)
writing of the legal and factual bases of the assessment. These steps
[GR. No.193100; December 10, 2014]
were mere perfunctory discharges of the CIRs duties in correctly
“If you were able to protest, you were given due process‖
assessing a taxpayer. The requirement for issuing a preliminary or
final notice, as the case may be, informing a taxpayer of the existence
Recit-Ready:
of a deficiency tax assessment is markedly different from the
Facts: Petitioner filed its 1998 and 1999 income tax returns in July of
requirement of what such notice must contain. Just because the CIR
1999 and April of 2000 as well as his 1997, 1998 and 1999
issued an advice, a preliminary letter during the pre-assessment stage
withholding taxes on February 17, 1998, February 1, 1999, and
and a final notice, in the order required by law, does not necessarily
February 4, 2000. In November 2000, it received a LOA. The CIR
mean that Enron was informed of the law and facts on which the
issued a Notice for Informal Conference which indicated the
deficiency tax assessment was made.
allegedly income and withholding tax liabilities of petitioner.
o The law requires that the legal and factual bases of the assessment
Petitioners then asked for a detailed computation of the alleged
be stated in the formal letter of demand and assessment notice. Thus,
deficiency. Then, on February 28, 2002, the CIR issued a PAN to
such cannot be presumed. Otherwise, the express provisions of
petitioner, which they protested. However, CIR dismissed the
Article 228 of the NIRC and RR No. 12-99 would be rendered
protest and consequently issued demand letters and FANs for
nugatory. The alleged factual bases in the advice, preliminary letter
alleged deficiency in its income and withholding taxes. Petitioner
and audit working papers did not suffice. There was no going around
filed its protest and Supplemental Protest to the FANs. But on the
the mandate of the law that the legal and factual bases of the
Final Decision on Disputed Assessment issued on April 10, 2003,
assessment be stated in writing in the formal letter of demand
petitioner was still held liable for the alleged tax liabilities. CTA
accompanying the assessment notice.
EB, affirming the decision of the CTA in division, CTA EB. It ruled
o We note that the old law merely required that the taxpayer be notified
that SAMELCO-I is exempted in the payment of the Minimum
of the assessment made by the CIR. This was changed in 1998 and
Corporate Income Tax (MCIT); that due process was observed in
the taxpayer must now be informed not only of the law but also of the
the issuance of the assessments in accordance with Section 228
facts on which the assessment is made. Such amendment is in
of the Tax Code; and that the 1997 and 1998 assessments on
keeping with the constitutional principle that no person shall be
deficiency withholding tax on compensation have not prescribed.
deprived of property without due process. In view of the absence of a
Petitioner contends that the subject 1997 and 1998 withholding
fair opportunity for Enron to be informed of the legal and factual bases
tax assessments on compensation were issued beyond the
prescriptive period of three years under Section 203 and that that Special Investigation Division of the BIR by submitting the required
as the Final Demand Letter and FAN were silent as to the nature documents on December 5, 2000.
and basis of the assessments, it was denied due process, and On October 19, 2001, CIR sent a Notice for Informal Conference which
the assessments must be declared void. It likewise invokes RR indicated the allegedly income and withholding tax liabilities of petitioner
No. 12-99. for 1997 to 1999. Attached to the letter is a summary of the report, with
an explanation of the findings of the investigators.
Issue/s: In response, petitioner sent a letter to respondent maintaining its
1) Whether the 1997 and 1998 assessments on withholding tax on indifference to the latter‘s findings and requesting details of the
compensation were issued within the prescriptive period provided by assessment. On December 13, 2001, petitioner executed a Waiver of the
law; and Defense of Prescription under the Statute of Limitations, good until March
—YES 29, 2002. On February 27, 2002, a letter was sent by petitioner to CIR
2) Whether the assessments were issued in accordance with Section 228 requesting a detailed computation of the alleged deficiency withholding
of the NIRC of 1997 tax on compensation.
—YES On February 28, 2002, CIR issued a PAN which petitioner protested on
Held: April 18, 2002. However, CIR dismissed petitioner‘s protest and
recommended the issuance of a FAN.
1) YES. Petitioner‘s substantial under declaration of withholding taxes in Consequently, petitioner received a demand letter and assessments
the amount of P2,690,850.91 which constituted the "falsity" in the notices (FANs) for the alleged 1997, 1998, and 1999 deficiency
subject returns – gave CIR the benefit of the period under Section 222 withholding tax in the amount of P3,760,225.69, as well as deficiency
to assess the correct amount of tax "at any time within ten (10) years income tax covering the years 1998 to 1999 in the amount of
after the discovery of the falsity, fraud or omission.‖ P440,545.71, or in the aggregate amount of P4,200,771.40.
2) YES. The requirement of Section 228 was substantially complied with. Petitioner filed its protest and Supplemental Protest to the FANs on
CIR had fully informed petitioner in writing of the factual and legal October 14, 2002 and November 4, 2002, respectively. But on the Final
bases of the deficiency taxes assessment, which enabled the latter to Decision on Disputed Assessment issued on April 10, 2003, petitioner
file an "effective" protest. was still held liable for the alleged tax liabilities.
Petitioner filed Petition for Review the Court in division. On May 27, 2008,
Facts: the assailed Decision partially granting SAMELCO-I‘s petition was
On July 13, 1999 and April 17, 2000, Samar-I Electric Cooperative, Inc. promulgated.
(Petitioner) filed its 1998 and 1999 income tax returns, respectively. Dissatisfied, both parties sought reconsideration of the said decision. On
Petitioner filed its 1997, 1998, and 1999 Annual Information Return of January 19, 2009, the Court in division promulgated its Amended
Income Tax Withheld on Compensation, Expanded and Final Withholding Decision which denied CIR‘s motion and partially granted SAMELCO-I‘s
Taxes on February 17, 1998, February 1, 1999, and February 4, 2000, in motion.
that order. Both parties filed petitions for review before the CTA EB. It ruled that
On November 13, 2000, CIR issued a duly signed a LOA, covering the SAMELCO-I is exempted in the payment of the Minimum Corporate
examination of petitioner‘s books of account and other accounting Income Tax (MCIT); that due process was observed in the issuance of
records for income and withholding taxes for the period 1997 to 1999. the assessments in accordance with Section 228 of the Tax Code; and
Petitioner cooperated in the audit and investigation conducted by the that the 1997 and 1998 assessments on deficiency withholding tax on
compensation have not prescribed. Finding no reversible error in the o However, while petitioner is correct that Section 203 sets the three-
Decision and the Amended Decision year prescriptive period to assess, the following exceptions are
Petitioner moved for reconsideration, but, the CTA EB denied the motion. provided under Section 222 of the NIRC of 1997, viz.:
SEC. 222. Exceptions as to Period of Limitation of
Issue/s: Assessment and Collection of Taxes. –
1) Whether the 1997 and 1998 assessments on withholding tax on
compensation were issued within the prescriptive period provided (a) In the case of a false or fraudulent return with intent to
by law; and evade tax or of failure to file a return, the tax may be
—YES assessed, or a proceeding in court for the collection of such
2) Whether the assessments were issued in accordance with Section tax may be filed without assessment, at any time within ten
228 of the NIRC of 1997 (10) years after the discovery of the falsity, fraud or omission:
—YES Provided, That in a fraud assessment which has become final
and executory, the factof fraud shall be judicially taken
Held/Ratio: WHEREFORE, the petition is DENIED. The assailed Decision cognizance of in the civil or criminal action for the collection
and Resolution of the Court of Tax Appeals En Banc dated March 11, 2010 thereof.
and July 28, 2010, respectively, in C.T.A. EB Nos. 460 and 462 (C.T.A. Case
No. 6697), are hereby AFFIRMED and UPHELD. (b) If before the expiration of the time prescribed in Section
203 for the assessment of the tax, both the Commissioner
1) YES. The assessments were issued were issued within the and the taxpayer have agreed in writing to its assessment
prescriptive period provided by law (10years) after such time, the tax may be assessed within the period
o Petitioner contends that the subject 1997 and 1998 withholding tax agreed upon. The period so agreed upon may be extended
assessments on compensation were issued beyond the prescriptive by subsequent written agreement made before the expiration
period of three years under Section 2031 of the NIRC of 1997. Under of the period previously agreed upon.
this section, the government is allowed a period of only three years to
assess the correct tax liability of a taxpayer. (c) Any internal revenue tax which has been assessed within
the period of limitation as prescribed in paragraph (a) hereof
1 may be collected by distraint or levy or by a proceeding in
SEC. 203. Period of Limitation Upon Assessment and Collection. – Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by court within five (5) years following the assessment of the tax.
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a (d) Any internal revenue tax, which has been assessed within
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed. For purposes of this Section, a return filed before the last day the period agreed upon as provided in paragraph (b) herein
prescribed by law for the filing thereof shall be considered as filed on such last day. Relying on above, may be collected by distraint orlevy or by a
Section 203, petitioner argues that the subject deficiency tax assessments issued by respondent on proceeding incourt within the period agreed upon in writing
September 15, 2002 was issued beyond the three-year prescriptive period. Petitioner filed its
before the expiration of the five (5)-year period. The period so
Annual Information Return of Income Tax Withheld on Compensation, Expanded and Final
Withholding Taxeson the following dates: on February 17, 1998 for the taxable year 1997; and on agreed upon may be extended by subsequent written
February 1, 1999 for the year taxable 1998. Thus, if the period prescribed under Section 203 of the agreements made before the expiration of the period
NIRC of 1997 is to be followed, the three-year prescriptive period to assess for the taxable years previously agreed upon.
1997 and 1998 should have ended on February 16,2001 and January 31, 2002, respectively.
(e) Provided, however, That nothing in the immediately legal bases of the deficiency taxes assessment, which enabled the
preceding Section and paragraph (a) hereof shall be latter to file an "effective" protest.
construed to authorize the examination and investigation or o Section 228 requires that taxpayers should be informed in writing of
inquiry into any tax return filed in accordance with the the law and the facts on which the assessment is made; otherwise,
provisions of any tax amnesty law or decree. (Emphasis the assessment shall be void.
supplied.) o Petitioner contends that as the Final Demand Letter and FAN were
o In the case at bar, it was petitioner‘s substantial under declaration of silent as to the nature and basis of the assessments, it was denied
withholding taxes in the amount of P2,690,850.91 which constituted due process, and the assessments must be declared void. It likewise
the "falsity" in the subject returns – giving CIR the benefit of the period invokes RR No. 12-992
under Section 222 to assess the correct amount of tax "at any time o Both Section 228 of the NIRC of 1997 and Section 3.1.4 of RR No.
within ten (10) years after the discovery of the falsity, fraud or 12-99 require the written details on the nature, factual and legal bases
omission." of the subject deficiency tax assessments. The reason for the
o The Court believes that the proper and reasonable interpretation of mandatory nature of this requirement is due process.
said provision should be that in the three different cases of (1) false o In this case, petitioner was sufficiently apprised of the nature, factual
return, (2) fraudulent return with intent to evade tax, (3) failure to file a and legal bases, as well as how the deficiency taxes being assessed
return, the tax may be assessed, or a proceeding in court for the against it were computed. Records reveal that prior to the conduct of
collection of such tax may be begun without assessment, at any time an informal conference, petitioner was already informed of the results
within ten years after the discovery of the (1) falsity, (2) fraud,(3) and findings of the investigations made by the respondent, and was
omission. duly furnished with a copy of the summary of the report submitted by a
o The ordinary period of prescription of 5 years within which to assess Revenue Officer of the Special Investigation Division. Said summary
tax liabilities under Sec. 331 of the NIRC should be applicable to report contained an explanation of Findings of Investigation stating the
normal circumstances, but whenever the government is placed at a legal and factual bases for the deficiency assessment.
disadvantage so as to prevent its lawful agents from proper o On April 9, 2002, petitioner received the PAN dated February 28,
assessment of tax liabilities due to false returns, fraudulent return 2002 which contained the computations of its deficiency income and
intended to evade payment of tax or failure to file returns, the period of withholding taxes. Attached to the PAN was the detailed explanation
ten years provided for in Sec. 332 (a) NIRC, from the time of the of the particular provision of law and revenue regulation violated. The
discovery of the falsity, fraud or omission even seems to be petitioner was enabled to protest the PAN. In its letter-reply, CIR
inadequate and should be the one enforced. answered the arguments raised by petitioner in its protest, and
o There being undoubtedly false tax returns in this case, CTA was requested it to pay the assessed deficiency on the date of payment
correct that Sec. 332 (a) of the NIRC should apply and that the period stated in the PAN. A second protest letter was sent by petitioner, to
of ten years within which to assess petitioner‘s tax liability had not which CIR replied answering each of the two issues reiterated by
expired at the time said assessment was made. petitioner. The FAN was finally received by petitioner on September
o Noteworthy to mention that during the trial, the witness for the CIR
testified that SAMELCO-I did not file an accurate return. 2
3.1.4 Formal Letter of Demand and Assessment Notice.– The formal letter of demand and
assessment notice shall be issued by the Commissioner or his duly authorized representative. The
2) YES. The requirement of Section 228 was substantially complied letter of demand calling for payment of the taxpayer’s deficiency tax or taxes shall state the facts,
with. CIR had fully informed petitioner in writing of the factual and the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void. The same shall be sent to the
taxpayer only by registered mail or by personal delivery. x x x
24, 2002, and protested by it in a letter which reiterated in lengthy Held:

arguments its earlier interpretation of the laws and regulations upon CTA held that the reclassification of an assessment from
which the assessments were based. deficiency EWT in the Formal Letter of Demand to deficiency
o Although the FAN and demand letter issued to petitioner were not FWT in the Final Decision on Disputed Assessment constitutes a
accompanied by a written explanation of the legal and factual bases of new assessment, which results in a denial on the part of the
the deficiency taxes assessed against the petitioner, the records taxpayer to administratively protest said new assessment, and
showed that CIR in its letter responded to petitioner's letter-protest, which is in violation of Sec. 228 of the Tax Code.
explaining at length the factual and legal bases of the deficiency tax
assessments and denying the protest.
o Petitioner's right to due process was thus not violated. Facts:
Petitioner Fluor Daniel Philippines, Inc.(FDPI) is a domestic corporation
_____________________________________________________ duly organized and existing under and by virtue of the laws of the
republic of the Philippines.
FLUOR DANIEL PHILIPPINES, INC. v. CIR (Villarivera) A Formal Letter of Demand (FLD) dated April 16, 2007 from Respondent
[CTA. No. 7793; April 17, 2012] CIR assessing, among others, deficiency expanded withholding tax
“CIR cannot change a tax assessment in the Final Decision on Disputed (EWT) for taxable year 2004.
Assessment; since that would deprive the taxpayer to avail of an The CIR alleged that FDPI‘s payments to Fluor International, Inc.(FII), a
administrative remedy on the new assessment.‖ non-resident foreign corporation, for software maintenance service fees
is considered as ―after-sales service‖ subject to 32% EWT pursuant to
Recit-Ready: RMC No. 77-03.
Facts: Fluor Daniel Phils was being assessed for deficiency income tax, FDPI protested the EWT assessment and argued that under Article 8(1)
VAT, and EWT. Fluor Daniel protested, claiming that it was not of the RP-US Tax Treaty, its payments to FII are not subject to EWT as
liable for EWT because such were made to a foreign corporation the latter is a US corporation not engaged in trade or business, and is
not engaged in trade or business in the Phils. CIR replied by without a permanent establishment in the Philippines. In its Final
subjecting Fluor Daniel to FWT instead. Fluor Daniel then filed a Decision on Disputed Assessment (FDDA), the CIR changed the EWT
petition for review with the CTA arguing that FWT should be assessment in the FLD to 15% FWT, applying Article 13 of the RP-US
treated as a new assessment. The CIR, in making it an issue in Tax Treaty and Section 5 of RMC No. 44-05, which treats software
the assessment on income, VAT, and EWT deficiency, effectively maintenance service fee as ―license generating royalty income.‖
deprives Fluor the opportunity to be heard and to submit evidence FDPI filed a Petition for Review with the CTA and argued that the
in support of its defense for the FWT assessment. change from deficiency EWT in the FLD to deficiency FWT in the FDDA
should be treated as a new assessment, which effectively deprives FDPI
Issue/s: of the opportunity to be heard and to submit evidence in support of its
WON the CIR’s reclassification of the assessment from EWT defense, in violation of the due process requirements of Section 228 of
in the formal letter of demand to FWT in the Final Decision the Tax Code.
on Disputed Assessment constitute a new assessment.
--YES SEC. 228. Protesting of Assessment. -
XXX XXX XXX
If the protest is denied in whole or in part, or is not acted against the assessment, which is a clear violation of the due process
upon within one hundred eighty (180) days from requirements prescribed by Section 228 of the Tax Code. Considering
submission of documents, the taxpayer adversely that the FDDA constitutes the CIR‘s final decision on the assessment,
affected by the decision or inaction may appeal to the FDPI was not given the chance to refute, within the administrative level,
Court of Tax Appeals within thirty (30) days from receipt the findings of the CIR as to the applicability of RMC 44-05.
of the said decision, or from the lapse of one hundred
eighty (180)-day period; otherwise, the decision shall SEC. 228. Protesting of Assessment. - When
become final, executory and demandable." the Commissioner or his duly authorized
representative finds that proper taxes should be
Issue/s: assessed, he shall first notify the taxpayer of his
Whether or not the CIR’s reclassification of the assessment from EWT findings: Provided, however, That a preassessment
in the FLD to FWT in the FDDA constitute a new assessment? notice shall not be required in the following cases:
--YES
XXX XXX XXX
Held/Ratio: Petition GRANTED. The taxpayers shall be informed in writing of the

law and the facts on which the assessment is
Yes. The change from deficiency EWT in the FLD to deficiency FWT in made; otherwise, the assessment shall be void.
the FDDA constitutes a new assessment, which denied FDPI the
opportunity to administratively protest the new assessment, which is in Within a period to be prescribed by implementing
violation of Section 228 of the Tax Code. rules and regulations, the taxpayer shall be
The reclassification of an assessment from deficiency EWT in the required to respond to said notice. If the taxpayer
Formal Letter of Demand to deficiency FWT in the Final Decision on fails to respond, the Commissioner or his duly
Disputed Assessment constitutes a new assessment, which results in a authorized representative shall issue an
denial on the part of the taxpayer to administratively protest said new assessment based on his findings.
assessment, and which is in violation of Section 228 of the Tax Code.
The FDDA shows that the reclassification of FDPI‘s deficiency taxes Such assessment may be protested
from EWT to FWT was primarily based on Section 5 of RMC No. 44-05, administratively by filing a request for
which provides that software service maintenance fees are considered reconsideration or reinvestigation within thirty (30)
as ―license generating royalty income.‖ However, RMC No. 44-05 does days from receipt of the assessment in such form
not apply in this case in view of the rule of non-retroactivity of rulings and and manner as may be prescribed by implementing
circulars. The subject of the assessment covers taxable year 2004 so rules and regulations."
the CIR cannot use RMC 44-05, which became effective on September In the FDDA issued by respondent, she changed the assessment from
1, 2005, as basis for the change of the original assessment. Moreover, EWT to FWT applying this time, the provisions of RMC No. 44-05.
the concept of ―license generating royalty income‖ in RMC No. 44-05 is Considering that the FDDA constitutes respondent's final decision on the
not provided in RMC No. 77-03. matter, petitioner was therefore, not given the chance to refute within the
Changing the assessment from EWT to FWT only in the FDDA deprived administrative level the findings of respondent as to the applicability of
FDPI of a reasonable opportunity to be heard and to submit evidence
RMC No. 44-05 to its case, which is a clear violation of Section 228 of present during the course of the hearing not only on the trial but
the 1997 NIRC, as amended. also on the motion for reconsideration.
_____________________________________________________________ 2. Following the periods, from July 20, 2001, that is, the date of
petitioner‘s filing of protest, it had until September 18, 2001 to
RIZAL COMMERCIAL BANKING CORPORATION (RCBC) v. submit relevant documents and from September 18, 2001, the
COMMISSIONER OF INTERNAL REVENUE(Agatep) Commissioner had until March 17, 2002 to issue his decision. As
[G.R. No. 168498; June 16, 2006] admitted by petitioner, the protest remained unacted by the
―Opportunity to participate in hearing, due process na. Action filed after Commissioner of Internal Revenue. Therefore, it had until April
prescriptive period, aw aw aw!‖ 16, 2002 within which to elevate the case to this court. Thus,
when petitioner filed its Petition for Review on April 30, 2002, the
Recit-Ready: same is outside the thirty (30) period.
Facts:
RCBC received a Formal Letter of Demand CIR for its tax liabilities Facts:
amounting to P53,998,428.29 and P46,717,952.76, respectively, for the On July 5, 2001, petitioner Rizal Commercial Banking Corporation
taxable year 1997. Petitioner filed a protest letter/request for received a Formal Letter of Demand dated May 25, 2001 from the
reconsideration/reinvestigation. As the respondent did not act upon the respondent Commissioner of Internal Revenue for its tax liabilities
protest, petitioner filed a petition for review with the CTA for the particularly for Gross Onshore Tax in the amount of P53,998,428.29 and
cancellation of the assessments. Documentary Stamp Tax for its Special Savings Placements in the
amount of P46,717,952.76, for the taxable year 1997. Petitioner filed a
The petition for review was dismissed because it was filed beyond the 30- protest letter/request for reconsideration/reinvestigation.
day period following the lapse of 180 days from petitioner‘s submission of
documents in support of its protest. NO MR on Appeal made. As the protest was not acted upon by the respondent, petitioner filed a
petition for review with the CTA for the cancellation of the assessments.
Petitioner filed a Petition for Relief from Judgment, which was denied.
The petition for review was dismissed because it was filed beyond the 30-
Issue/s: day period following the lapse of 180 days from petitioner‘s submission of
WON there was a proper compromise agreement? documents in support of its protest, as provided under Section 228 of the
—NO NIRC and Section 11 of R.A. No. 1125, otherwise known as the Law
WON the Petitioner’s action was barred by Prescription? Creating the Court of Tax Appeals. Petitioner did not file a motion for
—YES reconsideration or an appeal/ Consequently, the September 10, 2003
Resolution became final and executor. Thereafter, respondent sent a
Held: Demand Letter to petitioner for the payment of the deficiency tax
1. It is basic that as long as a party is given the opportunity to assessments.
defend his interests in due course, he would have no reason to
complain, for it is this opportunity to be heard that makes up the Petitioner filed a Petition for Relief from Judgment. The CTA Second
essence of due process. The counsel of the petitioner was Division rendered a Resolution denying petitioner‘s Petition for Relief from
Judgment. Motion for reconsideration was denied hence it filed a petition Within a period to be prescribed by implementing rules and
for review with the CTA En Banc which affirmed the assailed Resolutions. regulations, the taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the Commissioner or his
Issue/s: duly authorized representative shall issue an assessment based
1) WON the Petitioner was denied due process when the CTA denied on his findings.
the Petition for relief? Such assessment may be protested administratively by filing a
—NO request for reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form and manner as
2) WON the Petitioner’s action was barred by prescription? may be prescribed by implementing rules and regulations. Within
—YES sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the
Held/Ratio: Petition is DENIED. assessment shall become final.
It is basic that as long as a party is given the opportunity to defend his
interests in due course, he would have no reason to complain, for it is this If the protest is denied in whole or in part, or is not acted
opportunity to be heard that makes up the essence of due process. The upon within one hundred eighty (180) days from submission
counsel of the petitioner was present during the course of the hearing not of documents, the taxpayer adversely affected by the
only on the trial but also on the motion for reconsideration. decision or inaction may appeal to the Court of Tax Appeals
"To be heard" does not only mean verbal arguments in court; one within (30) days from receipt of the said decision, or from the
may be heard also through pleadings. Where opportunity to be lapse of the one hundred eighty (180)-day period; otherwise
heard, either through oral arguments or pleadings, is accorded, the decision shall become final, executory and demandable.
there is no denial of procedural due process.
Relief cannot be granted on the flimsy excuse that the failure to appeal Following the periods, from July 20, 2001, that is, the date of petitioner‘s
was due to the neglect of petitioner‘s counsel. Otherwise, all that a losing filing of protest, it had until September 18, 2001 to submit relevant
party would do to salvage his case would be to invoke neglect or mistake documents and from September 18, 2001, the Commissioner had until
of his counsel. The fact that counsel allegedly had not renewed the March 17, 2002 to issue his decision. As admitted by petitioner, the
employment of his secretary, thereby making the latter no longer attentive protest remained unacted by the Commissioner of Internal Revenue.
or focused on her work, did not relieve him of his responsibilities to his Therefore, it had until April 16, 2002 within which to elevate the case to
client. this court. Thus, when petitioner filed its Petition for Review on April 30,
Assuming that the negligence of petitioner‘s counsel is excusable, still the 2002, the same is outside the thirty (30) period.
petition must fail since its action for the cancellation of its assessments As provided in Section 228, the failure of a taxpayer to appeal from an
had already prescribed. assessment on time rendered the assessment final, executory and
Petitioner protested the assessments pursuant to Section 228 of the demandable. Consequently, petitioner is precluded from disputing the
NIRC, which provides: correctness of the assessment.
The requirement that it must be brought within 30 days is jurisdictional. If
SEC. 228. Protesting of Assessment.- x x x. a statutory remedy provides as a condition precedent that the action to
xxxx enforce it must be commenced within a prescribed time, such
requirement is jurisdictional and failure to comply therewith may be raised
in a motion to dismiss.
_____________________________________________________ require proof of payment of DST when respondent is claiming it is not

subject to DST and did not pay such.
CIR v. FIRST EXPRESS PAWNSHOP (Alarcon)
2) No. The P800,000 entry on the deposit on security is not subject
[GR. No. 172045-46; June 16, 2009]
to DST because as of 1998, there was no agreement to subscribe
“BIR, humingi ka na nga ng hindi niya kaya ibigay, ginawa mo pang final and
to the unissued shares. The deposit on stock subscription refers to
unappealable‖
an amount of money received by the corporation as a deposit with the
possibility of applying the same as payment for the future issuance of
Recit-Ready:
capital stock, an event which may or may not happen. Person making
Facts: Respondent received assessment notices from BIR subjecting
a deposit on subscription does not have a standing of a shareholder.
them to deficiency taxes on VAT, DST and compromise penalty.
There is yet not subscription that creates rights and obligations for
Respondent protested the assessment pursuant to Section 228 of
dividends, voting rights, and other prerogatives and attributes of a
the NIRC. They allege that as a pawnshop, they are not lending
shareholder.
investors subject to VAT and Sec 180 does not apply to any of
their activities that will make them liable for DST. BIR, despited
Facts:
their protest, held that their assessment was final and
On December 28, 2001, CIR through Acting Regional Director Ruperto
unappealable due to respondent‘s failure to submit supporting
P. Somera of Revenue Region 6 Manila, issued the following
documents within 60 days from the filing of protest. CTA upheld
assessment notices against First Express Pawnshop Company, Inc.
the validity of the assessment notices on VAT, DST but excepted
(respondent):
the compromise penalty in the absence of consent to pay such.
a. Assessment No. 31-1-98 for deficiency income tax of P20,712.58
with compromise penalty of P3,000;
Issue/s:
b. Assessment No. 31-14-000053-98 for deficiency value-added
1) WON CTA erred on a question of law in disregarding the rule on
tax (VAT) of P601,220.18 with compromise penalty of P16,000;
finality of assessments prescribed under Section 228 of the Tax
c. Assessment No. 31-14-000053-98 for deficiency documentary
Code
stamp tax (DST) of P12,328.45 on deposit on subscription with
—YES
compromise penalty of P2,000; and
2) WON respondent is liable to pay P12,328.45 as DST on deposit on
d. Assessment No. 31-1-000053-98 for deficiency DST of
subscription of capital stock
P62,128.87 on pawn tickets with compromise penalty of P8,500.
—NO
Respondent received the assessment notices on 3 January 2002. On 1
February 2002, respondent filed its written protest on the above
Held:
assessments.
1) Yes, respondent fully complied with requisites in Section 228 to
protest an assessment. It did not need to present supporting Since petitioner did not act on the protest during the 180-day period,
documents within 60 days after filing protest as they submitted the respondent filed a petition before the CTA on 28 August 2002. 
GIS and Balance Sheet when they filled the protest. The term o Respondent contended that petitioner did not consider the
―relevant documents‖ means such documents necessary to support supporting documents on the interest expenses and donations
the legal basis in disputing the assessment. BIR cannot require what which resulted in the deficiency income tax.
documents to submit which the taxpayer cannot submit. BIR may not o Respondent maintained that pawnshops are not lending
investors whose services are subject to VAT, hence it was not
liable for deficiency VAT. (1) there is no agreement to subscribe;

o Respondents also allege that no deficiency DST was due (2) there are no shares issued or any additional
because Section 180 of the NIRC does not cover any document subscription in the restructuring plan; and
or transaction which relate to respondent. (3) there is no proof that the issued shares can be
They argued that issuance of a pawn ticket did not considered as issued certificates of stock
constitute a pledge under Sec 195 of the Tax Code. CTA explained that there can be subscription only with reference
Petitioner alleged that the assessment was valid and correct and the to shares of stock which have been unissued, in the following
taxpayer had the burden of proof to impugn its validity or correctness. cases:
o Petitioner maintained that respondent is subject to 10% VAT (a) the original issuance from authorized capital stock at the
based on its gross receipts pursuant to Republic Act No. 7716, time of incorporation;
or the Expanded Value-Added Tax Law (EVAT). Petitioner also (b) the opening, during the life of the corporation, of the
cited BIR Ruling No. 221-91 which provides that pawnshop portion of the original authorized capital stock previously
tickets are subject to DST. unissued; or
CTA First Division Ruling (c) the increase of authorized capital stock achieved
Only Assessment No. 31-14-000053-98 was upheld (VAT, DST, through a formal amendment of the articles of incorporation
Compromise Penalty) except for the imposition of compromise penalty in the and registration of the articles of incorporation with the
absence of showing that petitioner consented thereto. Securities and Exchange Commission.
o petitioner is ORDERED to PAY the deficiency value added CTA held that in this case, there was no subscription or any contract
tax in the amount of Six Hundred One Thousand Two for the acquisition of unissued stock for P800,000 in the taxable year
Hundred Twenty Pesos and 18/100 (P601,220.18) inclusive assessed.
of deficiency interest for the year 1998. In addition, o The General Information Sheet (GIS) of respondent showed
petitioner is ORDERED to PAY 25% surcharge and 20% only a capital structure of P500,000 as Subscribed Capital
delinquency interest per annum from February 12, 2002 Stock and P250,000 as Paid-up Capital Stock and did not
until fully paid pursuant to Sections 248 and 249 of the include the assessed amount.
1997 Tax Code. o Mere reliance on the presumption that the assessment was
correct and done in good faith was unavailing vis-à-vis the
CTA En Banc evidence presented by respondent. Thus, the CTA ruled
On 24 March 2006, the CTA En Banc promulgated a Decision affirming that the assessment for deficiency DST on deposit on
respondent‘s liability to pay the VAT and ordering it to pay DST on its subscription has not become final.
pawnshop tickets. However, the CTA En Banc found that respondent‘s
deposit on subscription was not subject to DST.
On the taxability of deposit on subscription, the CTA, citing First Issue/s:
Southern Philippines Enterprises, Inc. v. Commissioner of 1) WON CTA erred on a question of law in disregarding the rule on
Internal Revenue, pointed out that deposit on subscription is not finality of assessments prescribed under Section 228 of the Tax
subject to DST in the absence of proof that an equivalent amount of Code—YES
shares was subscribed or issued in consideration for the deposit. 2) WON respondent is liable to pay P12,328.45 as DST on deposit on
Expressed otherwise, deposit on stock subscription is not subject to subscription of capital stock—NO
DST if:
assessment based on his findings.

Held/Ratio: WHEREFORE, we DENY the petition. We AFFIRM the Court of Such assessment may be protested administratively by
Tax Appeals‘ Decision dated 24 March 2006 in the consolidated cases of filing a request for reconsideration or reinvestigation
C.T.A. EB Nos. 60 and 62. within thirty (30) days from receipt of the assessment in
such form and manner as may be prescribed by
1) YES. Respondent has complied with the requisites in disputing an implementing rules and regulations. Within sixty (60) days
assessment pursuant to Section 228 of the Tax Code. Hence, the from filing of the protest, all relevant supporting
assessment cannot be said to be final, executory and demandable. documents shall have been submitted; otherwise, the
Section 228 of the Tax Code provides: assessment shall become final.
―SEC. 228. Protesting of Assessment.—When the If the protest is denied in whole or in part, or is not acted
Commissioner or his duly authorized representative finds upon within one hundred eighty (180) days from submission
that proper taxes should be assessed, he shall first notify the of documents, the taxpayer adversely affected by the
taxpayer of his findings: Provided, however, That a decision or inaction may appeal to the Court of Tax
preassessment notice shall not be required in the Appeals within thirty (30) days from receipt of the said
following cases:…xxx 3 decision, or from the lapse of the one hundred eighty
xxxxThe taxpayer shall be informed in writing of the law (180)-day period; otherwise, the decision shall become final,
and the facts on which the assessment is made; otherwise, executory and demandable.‖
the assessment shall be void. Sec 228 provides the remedy to dispute a tax assessment within a
Within a period to be prescribed by implementing rules and certain period of time. It says an assessment may be protested by
regulations, the taxpayer shall be required to respond to said filing a request for reconsideration or reinvestigation within 30
notice. If the taxpayer fails to respond, the Commissioner days from receipt of assessment by the taxpayer. Within 60 days
or his duly authorized representative shall issue an from filing of the protest, all relevant supporting documents shall be
submitted otherwise the assessment shall become final.
3
(a) When the finding for any deficiency tax is the result of mathematical error in the o Respondent received assessment on January 3, 2002 (had
computation of the tax as appearing on the face of the return; or until Feb 2, 2002 to protest)
o Respondent filled protest and attached GIS and Balance
(b) When a discrepancy has been determined between the tax withheld and the amount
Sheetas of December 31, 1998 on February 1, 2002,
actually remitted by the withholding agent; or
explained the P800,000 deposit on security with the
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable possibility of applying the same on future issuance of stock.
withholding tax for a taxable period was determined to have carried over and Respondent did not need to submit supporting
automatically applied the same amount claimed against the estimated tax liabilities for documents within 60 days from filling of protest
the taxable quarter or quarters of the succeeding taxable year; or
as they submitted such with the protest. (GIS and
(d) When the excise tax due on excisable articles has not been paid; or Balance Sheet)
Petitioner cannot require respondent to submit proof of payment of
(e) When an article locally purchased or imported by an exempt person, such as, but not DST as respondent claims it is not liable to pay DST and has not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, paid such. The term ―relevant supporting documents‖ should be
traded or transferred to non-exempt persons.
understood as those documents necessary to support the legal
basis in disputing a tax assessment as determined by the taxpayer.
The BIR can only inform the taxpayer to submit additional documentary stamp tax.
documents. The BIR cannot state what documents to submit o RMO 08-98, reiterating Revenue Memorandum Circular No. 47-
otherwise, a taxpayer will be at the mercy of the BIR, which may 97 (RMC 47-97), also states that what is being taxed is the
require the production of documents that a taxpayer cannot submit. privilege of issuing shares of stock, and, therefore, the taxes
On 28 August 2002 or within 30 days after the lapse of the 180-day accrue at the time the shares are issued. RMC 47-97 also
period counted from the filing of the protest as the supporting defines issuance as the point in which the stockholder acquires
documents were simultaneously filed, respondent filed a petition and may exercise attributes of ownership over the stocks.
before the CTA. Respondent has complied with the requisites in _____________________________________________________
disputing an assessment pursuant to Section 228 of the Tax Code.
Hence, the tax assessment cannot be considered as final, executory RIZAL COMMERCIAL BANKING v. CIR (Arcaina)
and demandable. Further, respondent‘s deposit on subscription is
[GR. No. 168498; April 24, 2007]
not subject to the payment of DST. Consequently, respondent is not
“Wag mo na ipilit yung issues mo.‖
liable to pay the deficiency DST of P12,328.45.
Recit-Ready:
2) NO. The GIS submitted to SEC showed that the subscribed capital
Facts: This case is the Resolution of the Court as regards Rizal‘s
stock was worth P500,000 and a P800,000 entry on the deposit on
Commercial Banking Corporation (RCBC)‘s MR on a case
security is not subject to DST because as of 1998, there was no
already decided on June 16, 2006 (another assigned case).
agreement to subscribe to the unissued shares. The deposit on stock
RCBC raised the following issues in the MR: (1) The denial of its
subscription refers to an amount of money received by the corporation as a
Petition for Relief from Judgment will result in the denial of
deposit with the possibility of applying the same as payment for the future
substantive justice, because the assessment sought to be
issuance of capital stock, an event which may or may not happen. Person
cancelled has already prescribed, a fact not denied by the CIR
making a deposit on subscription does not have a standing of a shareholder.
in its answer. (raised for the first time ever); (2) RCBC filed its
There is yet not subscription that creates rights and obligations for dividends,
Petition for Review before the CTA on time so CTA has
voting rights, and other prerogatives and attributes of a shareholder.
jurisdiction over the case; and (3) RCBC should be allowed to
o In Commissioner of Internal Revenue v. Construction Resources
fully litigate the issue before the CTA (since the subject
of Asia, Inc., this Court explained that the DST attaches upon
assessment involves an industry issue – deficiency assessment
acceptance of the stockholder‘s subscription in the corporation‘s
for DST on special savings accounts and gross onshore tax)
capital stock regardless of actual or constructive delivery of the
certificates of stock.
RCBC likewise maintains that its counsel‘s neglect in not filing the
o ―As regards those certificates of stocks temporarily
petition for review within the reglementary period was excusable,
subject to suspensive conditions they shall be liable
since the counsel‘s secretary misplaced the Resolution. K.
for said tax only when released from said
Hence, the counsel was not aware of the issuance and that it had
conditions, for then and only then shall they truly
become final and executory.
acquire any practical value for their owners. ―
o In Compagnie Financiere Sucres et Denrees v. Commissioner of
Issue/s:
Internal Revenue, this Court held that under Section 176 of the
1) WON denial of Petition will result in the denial of substantive justice,
Tax Code, sales to secure the future transfer of due-bills,
on basis of prescription and excusable neglect of counsel – NO
certificates of obligation or certificates of stock are subject to
2) WON the CTA should have taken jurisdiction of RCBC‘s case - NO second option (await the decision of the CIR + appeal to
CTA). Isa lang dapat.
Held: Note: all issues brought by RCBC in this MR are rehashed issues
brought up in its Petition, except prescription (which was raised Facts:
for the first time in the MR). The MR is denied for lack of merit This is an MR of the SC‘s June 16, 2006 decision affirming the CTA
Decision En Banc, which affirmed the CTA Resolutions of the CTA
1) NO. Just no. Division, denying RCBC’s Petition for Relief from Judgment and MR.
RCBC claims that its former counsel‘s failure the petition for review with
Although the issue of prescription was raised in the petition for the CTA on time was excusable (since the counsel‘s secretary misplaced
review, the CTA dismissed the same for late filing. No MR was the Resolution so counsel was not aware of its issuance and that it had
filed so the assessment attained finality. Subsequently, RCBC become final and executory) and raised the following issues in this MR:
failed to raise this issue in its Petition for Relief from Judgment o The denial of petitioner‘s petition for relief from judgment will
and Petition for Review with the SC. The rule is well-settled that result in the denial of substantive justice to petitioner,
points of law, theories, issues and arguments not adequately contrary to established decisions of this Honorable Court
brought to the attention of the lower court need not be considered because the assessment sought to be cancelled HAS
by the reviewing court as they cannot be raised for the first time ALREADY PRESCRIBED – a fact not denied by the respondent
on appeal, much more in a motion for reconsideration as in this in its answer
case, because this would be offensive to the basic rules of fair o Contrary to this Honorable Court‘s decision and following the
play, justice and due process. As regards the neglect of the Lascona decision, as well as the 2005 Revised Rules of the
counsel – RCBC could only fault its counsel, really. The counsel CTA, petitioner timely filed its petition for review before the CTA;
failed to check the status of the pending case periodically and thus, the CTA had jurisdiction over the case
could not put the blame his secretary for this neglect. o Considering that the subject assessment involves an industry
issue that is, a deficiency assessment for documentary stamp tax
2) NO. The 30-day period within which to file an appeal is on special savings accounts and gross onshore tax, petitioner in
jurisdictional and failure to comply therewith would bar the appeal and the interest of substantive justice and uniformity of taxation,
deprive the CTA of its jurisdiction. should be allowed to fully litigate the issue before the CTA.
In this case, the CIR failed to act on the disputed assessment Issue/s:
within 180 days from date of submission of documents. Thus, 1) WON denial of Petition will result in the denial of substantive justice, on
petitioner opted to file a petition for review before the CTA, which basis of prescription and excusable neglect of counsel – NO
was filed out of time (more than 30 days after the lapse of the 2) WON the CTA should have taken jurisdiction of RCBC‘s case - NO
180-day period). So the CTA dismissed it for late filing. Hence,
the disputed assessment became final, demandable and Held/Ratio: WHEREFORE, in view of the foregoing, petitioner’s
executory. RCBC cannot now claim then that the disputed motion for reconsideration is DENIED.
assessment is not yet final as it remained unacted by the CIR,
that it can still await the final decision of the CIR and thereafter 1) NO. Just no.
appeal the same. After availing of the first option (ie filing a As regards prescription: that petitioner is raising the issue of
Petition for Review), RCBC cannot successfully resort to the prescription for the first time in the instant motion for
reconsideration. Although the same was raised in the petition for petition for review with the CTA within 30 days after the
review, it was dismissed for late filing. No motion for reconsideration expiration of the 180-day period or 2) await the final
was filed hence the disputed assessment became final, demandable decision of the Commissioner on the disputed assessments
and executory. Thereafter, petitioner filed with the Court of Tax and appeal such final decision to the CTA.
Appeals a petition for relief from judgment. However, it failed to raise o THESE OPTIONS ARE MUTUALLY EXCLUSIVE. Resort to
the issue of prescription therein. After it petition for relief from one bars the application of the other.
judgment was denied by the Court of Tax Appeals for lack of merit, In the instant case, the Commissioner failed to act on the disputed
petitioner filed a petition for review before this Court without raising assessment within 180 days from date of submission of documents.
the issue of prescription. It is only in the instant motion for Thus, petitioner opted to file a petition for review before the CTA.
reconsideration that petitioner raised the issue of prescription which Unfortunately, the petition was filed out of time, i.e. more than 30
is not allowed. The rule is well-settled that points of law, theories, days after lapse of the 180-day period. So it was dismissed for
issues and arguments not adequately brought to the attention of the late filing. Petitioner did not file an MR/appeal, hence the disputed
lower court need not be considered by the reviewing court as they assessment became final, demandable and executory. Petitioner
cannot be raised for the first time on appeal, much more in a motion can not now claim that the assessment is not yet final as it remained
for reconsideration as in this case, because this would be offensive unacted upon by the Commissioner, that it can still await the final
to the basic rules of fair play, justice and due process. decision of the Commissioner and thereafter appeal the same. After
As regards excusable neglect of counsel: Relief cannot be availing the first option (Petition for Review), it cannot successfully
granted on the flimsy excuse that the failure to appeal was due to resort to the second option (await final decision of the Commissioner
the neglect of petitioner‘s counsel. Negligence to be ―excusable‖ and appeal the same)
must be one which ordinary diligence and prudence could not have _____________________________________________________________
guarded against and by reason of which the rights of an aggrieved
party have probably been impaired. RCBC‘s counsel was remiss, as LASCONA v. CIR (Austria)
an act of prudence and diligence, in his duty of checking periodically [GR. No. 171251; March 5, 2012]
the status of the pending case before the CTA. “Last mo na[mang] decision after more than 180 days, so LAS[t] CO
NA[mang] chance to appeal within 30 days after receipt of your decision on
my protest‖
2) NO. The 30-day period within which to file an appeal is jurisdictional
and failure to comply therewith would bar the appeal and deprive the Recit-Ready:
CTA of its jurisdiction. Facts: On March 12, 1999, Petitioner Lascona Land Co. Inc. (Lascona)
Under law, the decisions, rulings or inaction of the Commissioner received an Assessment Notice for a deficiency income tax of
are necessary in order to vest the CTA with jurisdiction to entertain P753,266.56 in 1993 to Petitioner Lascona Land Co. Inc.
the appeal, provided it is filed within 30 days after the receipt of such (Lascona). The latter filed a protest but was denied by the OIC
decision or ruling, OR within 30 days after the expiration of the 180- Reg. Dir Odulio on the ground that the case was not elevated to
day period fixed by law for the Commissioner to act on the disputed the Court of Tax Appeals as mandated by the provisions of
assessments. the last paragraph of Section 228 of the Tax Code. By virtue
o In case the Commissioner failed to act on the disputed thereof, the said assessment notice has become final,
assessment within the 180-day period form date of executory and demandable. On April 12, 1999, Lascona appeal
submission of documents, a taxpayer can either 1) file a
to the CTA. Co., Inc. (Lascona) informing the latter of its alleged deficiency income
tax for the year 1993 in the amount of P753,266.56
Issue/s: Consequently, on April 20, 1998, Lascona filed a letter protest, but
Whether the subject assessment has become final, executory and was denied in a letter dates March 3, 1999 by Norberto R. Odulio,
demandable due to the failure of petitioner to file an appeal before Officer-in- Charge (OIC), Regional Director, Bureau of Internal Revenue,
the CTA within thirty (30) days from the lapse of the One Hundred Revenue Region No. 8, Makati City
Eighty (180) day period pursuant to Section 228 of the NIRC o ―xxx We cannot give due course to your request to cancel or set
– NO aside the assessment notice issued to your client for the reason that
the case was not elevated to the Court of Tax Appeals as
mandated by the provisions of the last paragraph of Section
Held: NO. Petitioner Lascona has the option to await the final 228 of the Tax Code. By virtue thereof, the said assessment
decisions and appeal such final decisions to the CTA within notice has become final, executory and demandable.
30 day after the receipt of a copy of such decision, even after On April 12, 1999, Lascona appealed the decision before the CTA
the expiration of the 180-day period fixed by law for the COR o Lascona alleged that the Regional Director erred in ruling that the
to act on the disputed assessment. failure to appeal to the CTA within thirty (30) days from the lapse of
the 180-day period rendered the assessment final and executory.
In case of the inaction of the CIR on the protested o The CIR, however, maintained that Lascona's failure to timely file an
assessment, while we reiterate—the taxpayer has two appeal with the CTA after the lapse of the 180-day reglementary
options, either: period provided under Section 228 of the National Internal Revenue
(1) file a petition for review with the CTA within 30 days after the Code (NIRC) resulted to the finality of the assessment.
expiration of the 180-day period; or The CTA, in its Decision, nullified the subject assessment
(2) await the final decision of the Commissioner on the disputed o It held that in cases of inaction by the CIR on the protested
assessment and appeal such final decision to the CTA within assessment, Section 228 of the NIRC provided two options for the
30 days after the receipt of a copy of such decision taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse
of the one hundred eighty (180) day period, or (2) wait until the
These options are mutually exclusive and resort to one bars the Commissioner decides on his protest before he elevates the case.
application of the other. CIR moved for reconsideration.
o It argued that in declaring the subject assessment as final, executory
Therefore, Lascona, when it filed an appeal on April 12, 1999 before and demandable, it did so pursuant to Section 3 (3.1.5) of Revenue
the CTA, after its receipt of the Letter dated March 3, 1999 on Regulations No. 1299 dated September 6, 1999:
March 12, 1999, the appeal was timely made as it was filed within If the Commissioner or his duly authorized
30 days after receipt of the copy of the decision representative fails to act on the taxpayer's protest
within one hundred eighty (180) days from date of
submission, by the taxpayer, of the required
Facts: documents in support of his protest, the taxpayer
On March 27, 1998, the Commissioner of Internal Revenue (CIR) may appeal to the Court of Tax Appeals within
issued Assessment Notice No. 000004793 4075 against Lascona Land thirty (30) days from the lapse of the said 180-day
period; otherwise, the assessment shall become CTA within thirty (30) days from the lapse of the One Hundred Eighty
final, executory and demandable. (180)day period pursuant to Section 228 of the NIRC
the CTA denied the CIR's motion for reconsideration for lack of merit. – NO
o The CTA held that Revenue Regulations No. 12-99 must conform to
Section 228 of the NIRC Held/Ratio: The petition is MERITORIOUS. Section 228 of the NIRC is
o It pointed out that the former [RR 12-99] spoke of an assessment instructional as to the remedies of a taxpayer in case of the inaction of the
becoming final, executory and demandable by reason of the inaction Commissioner on the protested assessment.
by the Commissioner, while the latter[Sec.228] referred to decisions
becoming final, executory and demandable should the taxpayer NO. Petitioner Lascona has the option to await the final decisions and
adversely affected by the decision fail to appeal before the CTA appeal such final decisions to the CTA within 30 day after the receipt of
within the prescribed period. a copy of such decision, even after the expiration of the 180-day period
o Finally, it emphasized that in cases of discrepancy, Section 228 of fixed by law for the COR to act on the disputed assessment.
the NIRC must prevail over the revenue regulations.
CIR filed an appeal before the CA. As in Section 228, when the law provided for the remedy to appeal the
Court of Appeals granted the CIR's petition and further declared that the inaction of the CIR, it did not intend to limit it to a single remedy of
subject Assessment Notice No. 000004793407 dated March 27, 1998 as filing of an appeal after the lapse of the 180-day prescribed period.
final, executory and demandable. o Precisely, when a taxpayer protested an assessment, he
Petitioner Lascona, invoking Section 3, Rule 4 of the Revised Rules of the naturally expects the CIR to decide either positively or
Court of Tax Appeals, maintains that in case of inaction by the CIR on the negatively.
protested assessment, it has the option to either: o A taxpayer cannot be prejudiced if he chooses to wait for
1) appeal to the CTA within 30 days from the lapse of the 180-day the final decision of the CIR on the protested assessment.
period; or o More so, because the law and jurisprudence have always
2)await the final decision of the Commissioner on the disputed contemplated a scenario where the CIR will decide on the
assessment even beyond the 180-day period—in which case, the protested assessment.
taxpayer may appeal such final decision within 30 days from the receipt of It must be emphasized, however, that in case of the inaction of the
the said decision. CIR on the protested assessment, while we reiterate—the taxpayer
Corollarily, petitioner posits that when the Commissioner failed to act on has two options, either:
its protest within the 180-day period, it had the option to await for the final (1) file a petition for review with the CTA within 30 days after the
decision of the Commissioner on the protest, which it did expiration of the 180-day period; or
Respondent, however, insists that in case of the inaction by the (2) await the final decision of the Commissioner on the disputed
Commissioner on the protested assessment within the 180day assessment and appeal such final decision to the CTA within
reglementary period, petitioner should have appealed the inaction to the 30 days after the receipt of a copy of such decision
CTA these options are mutually exclusive and resort to one bars the
application of the other.
Issue/s: Accordingly, considering that Lascona opted to await the final decision
Whether the subject assessment has become final, executory and of the Commissioner on the protested assessment, it then has the right
demandable due to the failure of petitioner to file an appeal before the to appeal such final decision to the Court by filing a petition for
review within thirty days after receipt of a copy of such decision or

ruling, even after the expiration of the 180-day period fixed by law TO: All Internal Revenue Officers and Others Concerned
for the Commissioner of Internal made Revenue to act on the
disputed assessments. SECTION 1. Scope. — Pursuant to the provisions of Section 244 , in
relation to Section 245 of the National Internal Revenue Code of 1997,
Thus, Lascona, when it filed an appeal on April 12, 1999 before the these Regulations are hereby promulgated to implement the provisions of
CTA, after its receipt of the Letter dated March 3, 1999 on March 12, Sections 6 , 7 , 204 , 228 , 247 , 248 and 249 on assessment of national
1999, the appeal was timely as it was filed within 30 days after internal revenue taxes, fees and charges and to provide the rules
receipt of the copy of the decision governing the extra-judicial settlement of a taxpayer's criminal violation of
As early as the case of CIR v. Villa, it was already established that the the said Code or any of its implementing Regulations through payment of
word "decisions" in paragraph 1, Section 7 of Republic Act No. 1125, a suggested compromise penalty.
quoted above, has been interpreted to mean the decisions of the SECTION 2. General Principles. —
Commissioner of Internal Revenue on the protest of the taxpayer 2.1. The surcharge and/or interest herein prescribed shall apply to all
against the assessments. Definitely, said word does not signify the taxes, fees and charges imposed under the Code which shall be collected
assessment itself. at the same time, in the same manner, and as part of the tax.
2.2. In case the tax due from the taxpayer is paid on a partial or
installment basis, the interest on the deficiency tax or on the delinquency
tax liability of the taxpayer shall be imposed from due date of the tax until
From BIR Website Digest: full payment thereof. The interest shall be computed based on the
REVENUE REGULATIONS NO. 12-99 issued September 14, 1999 diminishing balance of the tax, inclusive of interests.
implements the provisions of the Tax Code of 1997 relative to the rules on
SECTION 3. Due Process Requirement in the Issuance of a
assessment of national internal revenue taxes, fees and charges, as well as
Deficiency Tax Assessment. —
provides the rules for the extra-judicial settlement of a taxpayer's criminal
violation of the said Code or any of its implementing Regulations through 3.1. Mode of procedures in the issuance of a deficiency tax assessment:
payment of a suggested compromise penalty. As a general principle, in case
the tax due from the taxpayer is paid on a partial or installment basis, the 3.1.1. Notice for informal conference. — The Revenue Officer who audited
interest on the deficiency tax or on the delinquency tax liability of the the taxpayer's records shall, among others, state in his report whether or
taxpayer will be imposed from due date of the tax until full payment thereof. not the taxpayer agrees with his findings that the taxpayer is liable for
deficiency tax or taxes. If the taxpayer is not amenable, based on the said
The interest will be computed based on the diminishing balance of the tax,
Officer's submitted report of investigation, the taxpayer shall be informed,
inclusive of interests. in writing, by the Revenue District Office or by the Special Investigation
_____________________________________________________________ Division, as the case may be (in the case Revenue Regional Offices) or by
the Chief of Division concerned (in the case of the BIR National Office) of
REVENUE REGULATION NO. 12-99 (Bañadera) the discrepancy or discrepancies in the taxpayer's payment of his internal
revenue taxes, for the purpose of "Informal Conference," in order to afford
the taxpayer with an opportunity to present his side of the case. If the
SUBJECT: Implementing the Provisions of the National Internal Revenue taxpayer fails to respond within fifteen (15) days from date of receipt of the
Code of 1997 Governing the Rules on Assessment of National Internal notice for informal conference, he shall be considered in default, in which
Revenue Taxes, Civil Penalties and Interest and the Extra-judicial case, the Revenue District Officer or the Chief of the Special Investigation
Settlement of a Taxpayer's Criminal Violation of the Code Through Division of the Revenue Regional Office, or the Chief of Division in the
Payment of a Suggested Compromise Penalty National Office, as the case may be, shall endorse the case with the least
possible delay to the Assessment Division of the Revenue Regional Office machineries and spare parts, has been sold, traded or transferred
or to the Commissioner or his duly authorized representative, as the case to non-exempt persons.
may be, for appropriate review and issuance of a deficiency tax
assessment, if warranted. 3.1.4 Formal Letter of Demand and Assessment Notice. — The formal
letter of demand and assessment notice shall be issued by the
3.1.2 Preliminary Assessment Notice (PAN). — If after review and Commissioner or his duly authorized representative. The letter of demand
evaluation by the Assessment Division or by the Commissioner or his duly calling for payment of the taxpayer's deficiency tax or taxes shall state the
authorized representative, as the case may be, it is determined that there facts, the law, rules and regulations, or jurisprudence on which the
exists sufficient basis to assess the taxpayer for any deficiency tax or assessment is based, otherwise, the formal letter of demand and
taxes, the said Office shall issue to the taxpayer, at least by registered assessment notice shall be void (see illustration in ANNEX B hereof). The
mail, a Preliminary Assessment Notice (PAN) for the proposed same shall be sent to the taxpayer only by registered mail or by personal
assessment, showing in detail, the facts and the law, rules and delivery. If sent by personal delivery, the taxpayer or his duly authorized
regulations, or jurisprudence on which the proposed assessment is based representative shall acknowledge receipt thereof in the duplicate copy of
(see illustration in ANNEX A hereof). If the taxpayer fails to respond within the letter of demand, showing the following: (a) His name; (b) signature;
fifteen (15) days from date of receipt of the PAN, he shall be considered in (c) designation and authority to act for and in behalf of the taxpayer, if
default, in which case, a formal letter of demand and assessment notice acknowledged received by a person other than the taxpayer himself; and
shall be caused to be issued by the said Office, calling for payment of the (d) date of receipt thereof.
taxpayer's deficiency tax liability, inclusive of the applicable penalties.
3.1.5 Disputed Assessment. — The taxpayer or his duly authorized
3.1.3 Exceptions to Prior Notice of the Assessment. — The notice for representative may protest administratively against the aforesaid formal
informal conference and the preliminary assessment notice shall not be letter of demand and assessment notice within thirty (30) days from date
required in any of the following cases, in which case, issuance of the of receipt thereof. If there are several issues involved in the formal letter of
formal assessment notice for the payment of the taxpayer's deficiency tax demand and assessment notice but the taxpayer only disputes or protests
liability shall be sufficient: against the validity of some of the issues raised, the taxpayer shall be
required to pay the deficiency tax or taxes attributable to the undisputed
(i) When the finding for any deficiency tax is the result of issues, in which case, a collection letter shall be issued to the taxpayer
mathematical error in the computation of the tax appearing on the calling for payment of the said deficiency tax, inclusive of the applicable
face of the tax return filed by the taxpayer; or surcharge and/or interest. No action shall be taken on the taxpayer's
disputed issues until the taxpayer has paid the deficiency tax or taxes
(ii) When a discrepancy has been determined between the tax attributable to the said undisputed issues. The prescriptive period for
withheld and the amount actually remitted by the withholding assessment or collection of the tax or taxes attributable to the disputed
agent; or issues shall be suspended.
(iii) When a taxpayer who opted to claim a refund or tax credit of The taxpayer shall state the facts, the applicable law, rules and
excess creditable withholding tax for a taxable period was regulations, or jurisprudence on which his protest is based, otherwise, his
determined to have carried over and automatically applied the protest shall be considered void and without force and effect. If there are
same amount claimed against the estimated tax liabilities for the several issues involved in the disputed assessment and the taxpayer fails
taxable quarter or quarters of the succeeding taxable year; or to state the facts, the applicable law, rules and regulations, or
jurisprudence in support of his protest against some of the several issues
(iv) When the excise tax due on excisable articles has not been on which the assessment is based, the same shall be considered
paid; or undisputed issue or issues, in which case, the taxpayer shall be required
to pay the corresponding deficiency tax or taxes attributable thereto.
(v) When an article locally purchased or imported by an exempt
person, such as, but not limited to, vehicles, capital equipment, The taxpayer shall submit the required documents in support of his protest
within sixty (60) days from date of filing of his letter of protest, otherwise, 3.1.7 Constructive Service. — If the notice to the taxpayer herein
the assessment shall become final, executory and demandable. The required is served by registered mail, and no response is received from
phrase "submit the required documents" includes submission or the taxpayer within the prescribed period from date of the posting thereof
presentation of the pertinent documents for scrutiny and evaluation by the in the mail, the same shall be considered actually or constructively
Revenue Officer conducting the audit. The said Revenue Officer shall received by the taxpayer. If the same is personally served on the taxpayer
state this fact in his report of investigation. or his duly authorized representative who, however, refused to
acknowledge receipt thereof, the same shall be constructively served on
If the taxpayer fails to file a valid protest against the formal letter of the taxpayer. Constructive service thereof shall be considered effected by
demand and assessment notice within thirty (30) days from date of receipt leaving the same in the premises of the taxpayer and this fact of
thereof, the assessment shall become final, executory and demandable. constructive service is attested to, witnessed and signed by at least two
If the protest is denied, in whole or in part, by the Commissioner, the (2) revenue officers other than the revenue officer who constructively
taxpayer may appeal to the Court of Tax Appeals within thirty (30) days served the same. The revenue officer who constructively served the same
from date of receipt of the said decision, otherwise, the assessment shall shall make a written report of this matter which shall form part of the
become final, executory and demandable. docket of this case (see illustration in ANNEX D hereof).
In general, if the protest is denied, in whole or in part, by the SECTION 4. Civil Penalties. —
Commissioner or his duly authorized representative, the taxpayer may 4.1 Twenty-Five Percent (25%) Surcharge. — There shall be imposed,
appeal to the Court of Tax Appeals within thirty (30) days from date of in addition to the basic tax required to be paid, a penalty equivalent to
receipt of the said decision, otherwise, the assessment shall become final, twenty-five percent (25%) thereof, in any the following cases:
executory and demandable: Provided, however, that if the taxpayer 4.1.1 Failure to file any return and pay the tax due thereon as
elevates his protest to the Commissioner within thirty (30) days from date required under the provisions of this Code or rules and
of receipt of the final decision of the Commissioner's duly authorized regulations on the date prescribed; or
representative, the latter's decision shall not be considered final, 4.1.2 Unless otherwise authorized by the Commissioner, filing a
executory and demandable, in which case, the protest shall be decided by return with an internal revenue officer other than those with whom
the Commissioner. the return is required to be filed; or
4.1.3 Failure to pay the deficiency tax within the time prescribed
If the Commissioner or his duly authorized representative fails to act on for its payment in the notice of assessment; or
the taxpayer's protest within one hundred eighty (180) days from date of 4.1.4 Failure to pay the full or part of the amount of tax shown on
submission, by the taxpayer, of the required documents in support of his any return required to be filed under the provisions of this Code or
protest, the taxpayer may appeal to the Court of Tax Appeals within thirty rules and regulations, or the full amount of tax due for which no
(30) days from the lapse of the said 180-day period, otherwise, the return is required to be filed, on or before the date prescribed for
assessment shall become final, executory and demandable. its payment.
3.1.6 Administrative Decision on a Disputed Assessment. — The 4.2 Fifty Percent (50%) Surcharge:
decision of the Commissioner or his duly authorized representative shall 4.2.1 In case of willful neglect to file the return within the period
prescribed by the Code, or in case a false or fraudulent return is
(a) state the facts, the applicable law, rules and regulations, or willfully made, the penalty to be imposed shall be fifty percent
jurisprudence on which such decision is based, otherwise, the (50%) of the tax or of the deficiency tax, in case any payment has
decision shall be void (see illustration in ANNEX C hereof), in been made on the basis of such return before the discovery of the
which case, the same shall not be considered a decision on a falsity or fraud: Provided, That a substantial underdeclaration of
disputed assessment; and taxable sales, receipts or income, or a substantial overstatement
(b) that the same is his final decision. of deductions, as determined by the Commissioner or his duly
authorized representative, shall constitute prima facie evidence of
a false or fraudulent return: Provided, further, That failure to Income tax due per return P100,000.00
report sales, receipts or income in an amount exceeding thirty Add: 25% surcharge for late filing and late
percent (30%) of that declared per return, and a claim of payment (P100,000.00 times 25%) P25,000.00
deductions in an amount exceeding thirty percent (30%) of actual 20% int. p.a. from 4-15-99 to 6-30-99
deductions, shall render the taxpayer liable for substantial (P100,000.00 times .0415524) P4,155.24 P29,155.24
underdeclaration of sales, receipts or income or for overstatement ———— —————
of deductions, as mentioned herein: Provided, further, that the Total amount due (excluding suggested compromise for
term "willful neglect to file the return within the period prescribed late filing and late payment of the tax) P129,155.24
by the Code" shall not apply in case the taxpayer, without notice =========
from the Commissioner or his authorized representative, Only one 25% surcharge shall be imposed for late filing of the return and
voluntarily files the said return, in which case, only 25% late payment of the tax.
surcharge shall be imposed for late filing and late payment of the
tax in lieu of the above 50% surcharge. Conversely, the 50% 5.2 The tax return is filed on time but filed through an internal
surcharge shall be imposed in case the taxpayer files the return revenue officer other than with whom the return is required to be
only after prior notice in writing from the Commissioner or his duly filed. — Illustration: The taxpayer's 1998 income tax return is required to
authorized representative. be filed through the authorized agent bank under the jurisdiction of RDO
4.2.2 Section 6 (A) of the Code provides that any tax return filed East Makati. But, without prior authorization from the BIR, the taxpayer
by a taxpayer "may be modified, changed or amended" by the filed his tax return and paid the tax through the authorized agent bank
taxpayer "within three (3) years from date of such filing" provided, under the jurisdiction of RDO Davao City. Tax due and paid per return is
however, that "no notice for audit or investigation of such return, P100,000.00.
statement or declaration has, in the meantime, been actually
served upon the taxpayer." Thus, if upon investigation, it is Calendar Year 1998
determined that the taxpayer's originally filed tax return is false or Income tax due per return P100,000.00
fraudulent, such taxpayer shall remain liable to the 50% civil Add: 25% surcharge P25,000.00
penalty regardless that the taxpayer has filed his amended tax —————
return, if the said amended tax return, however, has been filed Total amount due P125,000.00
only after issuance of the Letter of Authority for the investigation Less: Amount paid P100,000.00
of the taxpayer's tax return or such amendment has been made in —————
the course of the said investigation. Amount still due P25,000.00
=========
SECTION 5. Mode of Procedures in Computing for the Tax and/or
Applicable Surcharge. — Shown hereunder are illustrative cases for the 5.3 Late filing and late payment due to taxpayer's willful neglect. —
computation and assessment of the tax, inclusive of surcharge (if
applicable) and interest: Illustration: The taxpayer did not file his income tax return for the calendar
year 1997 which was due for filing on April 15, 1998. He was notified by
5.1 Late filing and late payment of the tax. — Illustration: Income tax the BIR of his failure to file the tax return, for which reason, he filed his tax
return for the calendar year 1998 was due for filing on April 15, 1999 but return and paid the tax, only after the said notice, on June 30, 1999. The
the taxpayer voluntarily filed his tax return, without notice from the BIR, tax due per return is P100,000.00.
only on June 30, 1999. The tax due per return amounts to P100,000. In Calendar Year 1997
this case, the taxpayer shall be liable for delinquency penalties consisting Income tax due per return P100,000.00
of 25% surcharge, plus 20% interest per annum, computed from due date Add: 50% surcharge for willful neglect to
of the tax until date of payment, computed as follows: file the return and late payment of the tax
(P100,000 times 50%) P50,000.00
Calendar Year 1998 20% int. p.a. fr. 4-15-98 to 6-30-99
(P100,000.00 times .2415524) P24,155.24 P74,155.24 Deficiency income tax P70,000.00

————— ————— Add: 20% int. p.a. fr. 4-15-98 to 6-30-99 (P70,000 times .2415524)
Total amount due (excluding suggested compromise P16,908.67
for late filing and late payment of the tax) P174,155.24 —————
========= Total amount still due P86,908.67
5.4 Penalty or penalties for deficiency tax. — As a rule, no surcharge is =========
imposed on deficiency tax and on the basic tax. However, if the amount
due inclusive of penalties is not paid on or before the due date stated on Illustration No. 3: XYZ CORPORATION filed its income tax return for
the demand letter, the corresponding surcharge shall be imposed. calendar year 1997 with a net taxable income of P500,000.00. At the
Illustration No. 1: Taxpayer filed on time his income tax return for calendar applicable income tax rate of 35% for the year 1997, its income tax
year 1997 and paid P100,000.00 on April 15, 1998. Upon pre-audit of his amounted to P175,000.00. However, upon investigation, it was disclosed
return, it was disclosed that he erroneously computed the tax due. The that its income tax return was false or fraudulent because it did not report
correct amount of tax due is P120,000.00. The taxpayer is assessed for a taxable income amounting to another P500,000.00. On its net income of
deficiency income tax in a letter of demand and assessment notice issued P1,000,000.00, per investigation, the income tax due is P350,000.00.
on June 30, 1999. Deducting its payment per return filed, the deficiency, excluding penalties,
Calendar Year 1997 amounted to P175,000.00. It was duly informed of this finding through a
Tax due per pre-audit P120,000.00 Preliminary Assessment Notice. Failing to protest on time against the
Less: Amount assessed and paid per tax return filed P100,000.00 preliminary assessment notice, a formal letter of demand and assessment
————— notice was issued on May 31, 1999 calling for payment of the deficiency
Deficiency income tax P20,000.00 income tax on or before June 30, 1999. llcd
Add: 20% int. p.a. from 4-15-98 to 6-30-99 In this case, said corporation is liable for the civil penalties of 50%
(P20,000.00 times .2415524) P4,831.05 surcharge for having filed a false or fraudulent return, plus 20% interest
————— per annum on the deficiency, computed as follows:
Amount still due P24,831.05 Calendar Year 1997
========= Income tax due per investigation P350,000.00
Less: Income tax paid per return P175,000.00
Illustration No. 2: ABC CORPORATION filed its income tax return for —————
calendar year 1997 and paid on time its income tax shown thereunder, Deficiency income tax P175,000.00
amounting to P100,000. Said taxpayer was investigated. Upon verification Add: 50% surcharge for filing a fraudulent or false
of its accounting records, it was disclosed that its deduction, from gross return (P175,000.00 times 50%) P87,500.00
income, of representation expenses in the amount of P200,000.00 did not 20% int. p.a. fr. 4-15-98 to 6-30-99
meet all the statutory requisites for deductibility. The corporation was duly (P175,000.00 times .2415524) P42,271.67 P129,771.67
notified of the said discrepancy through a Preliminary Assessment Notice. ————— —————
Based on the 35% income tax rate on corporations applicable in the year Total amount due P304,771.67
1997, the income tax due after investigation amounts to P170,000.00. =========
After deduction of income tax paid per return filed, the basic deficiency 5.5 Late payment of a deficiency tax assessed. — In general, the
income tax amounts to P70,000, excluding penalties. Failing to protest on deficiency tax assessed shall be paid by the taxpayer within the time
time against the preliminary assessment notice, a formal letter of demand prescribed in the notice and demand, otherwise, such taxpayer shall be
and assessment notice was issued on May 31, 1999, requiring payment of liable for the civil penalties incident to late payment.
the assessment not later than June 30, 1999. Illustration: Based on the above Illustration No. 3, Scenario 4, assuming
Calendar Year 1997 that the calendar year 1997 deficiency income tax assessment against
Income tax due per investigation P170,000.00 XYZ CORPORATION, in the amount of P304,771.67, is not paid by June
Less: Income tax paid per return P100,000.00 30, 1999, the deadline for payment of the assessment, and assuming
————— further that this assessment has already become final and collectible. In
this case, such corporation shall be considered late in payment of the said ——————
assessment. Assuming, further, that the corporation pays its tax Amount due on 5-15-99 P762,500.03
assessment only by July 31, 1999, the civil penalties for late payment shall Less: 2nd installment on 5-15-99 (P250,000.00 plus
be computed as follows: P12,500.03 interest) P262,500.03
Calendar Year 1997 ——————
Total deficiency income tax assessed on May 31, 1999 P304,771.67 Balance as of 5-15-99 P500,000.00
Add: 25% surcharge for late payment Add: 20% int. p.a. from 5-15-99 to 6-15-99
(P304,771.67 times 25%) P76,192.92 (P500,000.00 times .0166667) P8,333.35
20% interest p.a. from 7-1-99 to ——————
7-31-99 (P304,771.67 Amount due on 6-15-99 P508,333.35
times .0166667) P5,079.54 P81,272.46 Less: 3rd installment on 6-15-99 (P250,000.00 plus
————— ————— P8,333.35 interest) P258,333.35
Total amount due (excluding suggested compromise ——————
penalty for late payment) P386,044.13 Balance as of 6-15-99 P250,000.00
========= Add: 20% int. p.a. from 6-15-99 to 7-15-99
5.6 Computation of 20% interest per annum in case of partial or (P250,000.00 times .0166667) P4,166.68
installment payment of a tax liability. — ——————
4th and final installment on 7-15-99 P254,166.68
Illustration No. 1: In case extended payment of the tax is duly authorized. ===========
— DEF CORPORATION, due to financial incapacity, requested that it be
allowed to pay its income tax liability per return for calendar year 1998, in Illustration No. 2: Computation of tax delinquency in case of partial
the amount of P1,000,000.00, in four (4) monthly installments, starting payment of the tax due without prior BIR authorization for extended
April 15, 1999. Its request has been duly approved pursuant to Sec. 53 of payment. —
the Tax Code. Example: GHI CORPORATION did not file its final adjustment income tax
In this case, no 25% surcharge shall be imposed for late payment of the return for the calendar year 1998 which was due on April 15, 1999. The
tax since its deadline for payment has been duly extended. However, 20% BIR informed the corporation of its failure to file its said tax return and
interest per annum for the extended payment shall be imposed, computed required that it file the same, inclusive of the 25% surcharge and 20%
based on the diminishing balance of the "unpaid amount", pursuant to the interest per annum penalties incident to the said omission. On May 15,
provisions of Section 249 (D) of the Code. 1999 it advised that its income tax due for the said year amounts to
No 25% surcharge on extended payment shall be imposed provided, P1,000,000.00 but, however, due to its adverse financial condition at the
however, that the taxpayer's request for extension of the period within moment, it will be unable to pay the entire amount, inclusive of the
which to pay is made on or before the deadline prescribed for payment of delinquency penalties. Hence, on May 15, 1999, it made a partial payment
the tax due. Conversely, if such request is made after the deadline of P400,000.00. Assuming that the BIR demanded payment of the unpaid
prescribed for payment, the taxpayer shall already be treated late in balance of its tax obligation payable by June 15, 1999, the unpaid balance
payment, in which case, the 25% surcharge shall be imposed, even if of the corporation's delinquent income tax shall be computed as follows:
payment of the delinquency be allowed in partial amortization. cdasia Calendar Year 1998
Example: Income tax due per return P1,000,000.00
Calendar Year 1998 Add: 25% surcharge for late filing and
Income tax due per return P1,000,000.00 late payment P250,000.00
Less: 1st installment of the tax on or before 4-15-99 P250,000.00 20% interest per annum from 4-15-99
—————— to 5-15-99 (P1,000,000.00
Balance as of 4-15-99 P750,000.00 times .0166667) P16,666.70 P266,666.70
Add: 20% int. p.a. from 4-15-99 to 5-15-99 ————— —————
(P750,000.00 times .0166667) P12,500.03 Amount due as of 5-15-99 P1,266,666.70
Less: Partial payment on 5-15-99 P400,000.00 Assessment. — Any deficiency tax assessment issued beginning
————— January 1, 1998 shall be governed by the rules prescribed in these
Balance as of 5-15-99 P866,666.70 Regulations.
Add: 20% interest per annum from 5-15-99 8.3 Other Provisions. — Any provision of these Regulations not
to 6-15-99 (P866,666.70 times .0166667) P14,444.47 otherwise specifically provided in the National Internal Revenue Code of
————— 1997 shall take effect fifteen (15) days after publication in any newspaper
Amount still due (exclusive of the suggested compromise of general circulation
penalty for late filing and late payment P811,111.17
========= _____________________________________________________________
If the said taxpayer fails to pay the amount of P811,111.17 by June 15,
1999, no further 25% surcharge for late payment of the tax shall be
imposed. Instead, only the 20% interest per annum shall be imposed REVENUE REGULATIONS NO. 18-2013
against the taxpayer against the taxpayer, computed from due date
(November 28, 2013)
thereof (i.e., June 15, 1999) until paid. If said taxpayer pays the same on
partial payment basis, the 20% interest per annum shall be computed on
the diminishing balance thereof, pursuant to the procedures in the SUBJECT: Amending Certain Sections of Revenue Regulations No. 12-
preceding Illustration No. 1, Section 6.6 hereof. 99 Relative to the Due Process Requirement in the Issuance of a
SECTION 6. Suggested Compromise Penalty in Extra-judicial Deficiency Tax Assessment
Settlement of a Taxpayer's Criminal Violation. — Section 204 of the Tax
Code of 1997 provides that "All criminal violations may be compromised TO: All Internal Revenue Officers and Others Concerned
except: (a) those already filed in court, or (b) those involving fraud." This
means that, in general, the taxpayer's criminal liability arising from his
violation of the pertinent provision of the Code may be settled extra-
judicially instead of the BIR instituting against the taxpayer a criminal SECTION 1. Scope. – Pursuant to the provisions of Section 244, in relation
action in Court. A compromise in extra-judicial settlement of the taxpayer's to Section 245 of the National Internal Revenue Code of 1997 (Tax Code),
criminal liability for his violation is consensual in character, hence, may not as amended, these Regulations are hereby promulgated to amend
be imposed on the taxpayer without his consent. Hence, the BIR may only
provisions of Revenue Regulations (RR) No. 12-99.
suggest settlement of the taxpayer's liability through a compromise. prLL
The extra-judicial settlement of the taxpayer's criminal liability and the
amount of the suggested compromise penalty shall conform with the SECTION 2. Amendment. – Section 3 of RR 12-99 is hereby amended by
schedule of compromise penalties provided under Revenue Memorandum deleting Section 3.1.1 thereof which provides for the preparation of a Notice
Order No. 1-90 or as hereafter revised. of Informal Conference, thereby renumbering other provisions thereof, and
prescribing other provisions for the assessment of tax liabilities. Section 3 of
RR 12-99 shall now read as follows:
SECTION 7. Repealing Clause. — Any revenue issuance which is
inconsistent herewith shall be considered repealed, amended, or modified ―SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax
accordingly. Assessment. –
SECTION 8. Effectivity. — 3.1 Mode of procedure in the issuance of a deficiency tax

8.1 General Rule. — In general, the provisions of these Regulations shall assessment:
be effective beginning January 1, 1998 pursuant to the provisions of
Section 8 of R.A. No. 8424, otherwise known as the National Internal 3.1.1. Preliminary Assessment Notice (PAN). – If after review and
Revenue Code of 1997. evaluation by the Commissioner or his duly authorized
8.2 Computation of Surcharge and Interest on Deficiency Tax representative, as the case may be, it is determined that there exists
sufficient basis to assess the taxpayer for any deficiency tax or 3.1.3. Formal Letter of Demand and Final Assessment Notice
taxes, the said Office shall issue to the taxpayer a Preliminary (FLD/FAN). – The Formal Letter Letter of Demand and Final
Assessment Notice (PAN) for the proposed assessment. It shall Assessment Notice (FLD/FAN) shall be issued by the Commissioner
show in detail the facts and the law, rules and regulations, or or his duly authorized representative. The FLD/FAN calling for
jurisprudence on which the proposed assessment is based. payment of the taxpayer's deficiency tax or taxes shall state the
facts, the law, rules and regulations, or jurisprudence on which the
If the taxpayer fails to respond within fifteen (15) days from date of assessment is based; otherwise, the assessment shall be void.
receipt of the PAN, he shall be considered in default, in which case,
a Formal Letter of Demand and Final Assessment Notice (FLD/FAN) 3.1.4 Disputed Assessement. – The taxpayer or its authorized
shall be issued calling for payment of the taxpayer's deficiency tax representative or tax agent may protest administratively against the
liability, inclusive of the applicable penalties. aforesaid FLD/FAN within thirty (30) days from date of receipt
thereof. The taxpayer protesting an assessment may file a written
If the taxpayer, within fifteen (15) days from date of receipt of the request for reconsideration or reinvestigation defined as follows:
PAN, responds that he/it disagrees with the findings of deficiency
tax or taxes, an FLD/FAN shall be issued within fifteen (15) days (i) Requests for reconsideration – refers to a plea of re-
from filing/submission of the taxpayer‘s response, calling for evaluation of an assessment on the basis of existing
payment of the taxpayer's deficiency tax liability, inclusive of the records without need of additional evidence. It may involve
applicable penalties both a question of fact or of law or both.
3.1.2 Exceptions to Prior Notice of the Assessment. – Pursuant (ii) Request for reinvestigation – refers to a plea of re-
to Section 228 of the Tax Code, as amended, a PAN shall not be evaluation of an assessment on the basis of newly
required in any of the following cases: discovered or additional evidence that a taxpayer intends to
present in the reinvestigation. It may also involve a question
(i) When the finding for any deficiency tax is the result of of fact or of law or both.
mathematical error in the computation of the tax appearing
on the face of the tax return filed by the taxpayer; or The taxpayer shall state in his protest (i) the nature of protest
(ii) When a discrepancy has been determined between the tax whether reconsideration or reinvestigation, specifying newly
withheld and the amount actually remitted by the discovered or additional evidence he intends to present if it is a
withholding agent; or request for reinvestigation, (ii) date of the assessment notice, and
(iii) When a taxpayer who opted to claim a refund or tax credit (iii) the applicable law, rules and regulations, or jurisprudence on
of excess creditable withholding tax for a taxable period which his protest is based, otherwise, his protest shall be
was determined to have carried over and automatically considered void and without force and effect.
applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the If there are several issues involved in the FLD/FAN but the taxpayer
succeeding taxable year; or only disputes or protests against the validity of some of the issues
(iv) When the excise tax due on excisable articles has not been raised, the assessment attributable to the undisputed issue or
paid; or issues shall become final, executory and demandable; and the
(v) When an article locally purchased or imported by an taxpayer shall be required to pay the deficiency tax or taxes
exempt person, such as, but not limited to, vehicles, capital attributable thereto, in which case, a collection letter shall be issued
equipment, machineries and spare parts, has been sold, to the taxpayer calling for payment of the said deficiency tax or
traded or transferred to non-exempt persons. taxes, inclusive of the applicable surcharge and/or interest.
In the above-cited cases, a FLD/FAN shall be issued outright. If there are several issues involved in the disputed assessment and
the taxpayer fails to state the facts, the applicable law, rules and
regulations, or jurisprudence in support of his protest against some required documents within sixty (60) days from the date of filing of
of the several issues on which the assessment is based, the same the protest in case of a request for reinvestigation, the taxpayer may
shall be considered undisputed issue or issues, in which case, the either: (i) appeal to the CTA within thirty (30) days after the
assessment attributable thereto shall become final, executory and expiration of the one hundred eighty (180)-day period; or (ii) await
demandable; and the taxpayer shall be required to pay the the final decision of the Commissioner‘s duly authorized
deficiency tax or taxes attributable thereto and a collection letter representative on the disputed assessment.
shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest. If the protest or administrative appeal, as the case may be, is
denied, in whole or in part, by the Commissioner, the taxpayer may
For requests for reinvestigation, the taxpayer shall submit all appeal to the CTA within thirty (30) days from date of receipt of the
relevant supporting documents in support of his protest within sixty said decision. Otherwise, the assessment shall become final,
(60) days from date of filing of his letter of protest, otherwise, the executory and demandable. A motion for reconsideration of the
assessment shall become final. The term ―relevant supporting Commissioner‘s denial of the protest or administrative appeal, as
documents‖ refer to those documents necessary to support the the case may be, shall not toll the thirty (30)-day period to appeal to
legal and factual bases in disputing a tax assessment as determined the CTA.
by the taxpayer. The sixty-day (60-day) period for the submission of
all relevant supporting documents shall not apply to requests for If the protest or administrative appeal is not acted upon by the
reconsideration. Furthermore, the term ―the assessment shall Commissioner within one hundred eighty (180) days counted from
become final‖ shall mean the taxpayer is barred from disputing the the date of filing of the protest, the taxpayer may either: (i) appeal to
correctness of the issued assessment by introduction of newly the CTA within thirty (30) days from after the expiration of the one
discovered or additional evidence, and the FDDA shall consequently hundred eighty (180)-day period; or (ii) await the final decision of the
be denied. Commissioner on the disputed assessment and appeal such final
decision to the CTA within thirty (30) days after the receipt of a copy
If the taxpayer fails to file a valid protest against the FLD/FAN within of such decision.
thirty (30) days from date of receipt thereof, the assessment shall
become final, executory and demandable. No request for It must be emphasized, however, that in case of inaction on
reconsideration or reinvestigation shall be granted on tax protested assessment within the 180-day period, the option of the
assessments that have already become final, executory and taxpayer to either: (1) file a petition for review with the CTA within 30
demandable. days after the expiration of the 180-day period; or (2) await the final
decision of the Commissioner or his duly authorized representative
If the protest is denied, in whole or in part, by the Commissioner‘s on the disputed assessment and appeal such final decision to the
duly authorized representative, the taxpayer may either: (i) appeal to CTA within 30 days after the receipts of a copy of such decision, are
the Court of Tax Appeals (CTA) within thirty (30) days from date of mutually exclusive and the resort to one bars the application of the
receipt of the said decision; or (ii) elevate his protest through other.
request for reconsideration to the Commissioner within thirty (30)
days from date of receipt of the said decision. No request for 3.1.5 Final Decision on a Disputed Assessment (FDDA). – The
reinvestigation shall be allowed in administrative appeal and only decision of the Commissioner or his duly authorized representative
issues raised in the decision of the Commissioner‘s duly authorized shall state the (i) facts, the applicable law, rules and regulations, or
representative shall be entertained by the Commissioner. jurisprudence on which such decision is based, otherwise, the
decision shall be void; and (ii) that the same is his final decision.
If the protest is not acted upon by the Commissioner‘s duly
authorized representative within one hundred eighty (180) days 3.1.6 Modes of Service. – The notice (PAN/FLD/FAN/FDDA) to the
counted from the date of filing of the protest in case of a request taxpayer herein required may be served by the Commissioner or his
reconsideration; or from date of submission by the taxpayer of the duly authorized representative through the following modes:
of the witnesses.
(i) The notice shall be served through personal service by o ―Disinerested witnesses‖ refers to persons of legal
delivering personally a copy thereof to the party at his age other than employees of the Bureau of Internal
registered or known address or wherever he may be found. Revenue.
A known address shall mean a place other than the
registered address where business activities of the party (iii) Service by mail is done by sending a copy of the notice by
are conducted or his place of residence. registered mail to the registered or known address of the
party with instruction to the Postmaster to return the mail to
In case personal service is not practicable, the notice shall the sender after ten (10) days, if undelivered. A copy of the
be served by substituted service or by mail. notice may also be sent through reputable professional
courier service. If no registry or reputable professional
(ii) Substituted service can be resorted to when the party is not courier service is available in the locality of the addressee,
present at the registered or known address under the service may be done by ordinary mail.
following circumstances:
o The notice may be left at the party‘s registered The server shall accomplish the bottom portion of the
address, with his clerk or with a person having notice. He shall also make a written report under oath
charge thereof. before a Notary Public or any person authorized to
o If the known address is a place where business administer oath under Section 14 of the NIRC, as amended,
activities of the party are conducted, the notice setting forth the manner, place and date of service, the
may be left with his clerk or with a person having name of the person/barangay official/professional courier
charge thereof. service company who received the same and such other
o If the known address is the place of residence, relevant information. The registry receipt issued by the post
substituted service can be made by leaving the office or the official receipt issued by the professional
copy with a person of legal age residing therein. courier company containing sufficiently identifiable details of
o If no person is found in the party‘s registered or the transaction shall constitute sufficient proof of mailing
known address, the revenue officers concerned and shall be attached to the case docket.
shall bring a barangay official and two (2)
disinterested witnesses to the address so that they Service to the tax agent/practitioner, who is appointed by the
may personally observe and attest to such taxpayer under circumstances prescribed in the pertinent
absence. The notice shall then be given to said regulations on accreditation of tax agents, shall be deemed service
barangay official. Such facts shall be contained in to the taxpayer.‖
the bottom portion of the notice, as well as the
names, official position and signatures of the SECTION 3. Amendment. – Section 5 of RR 12-99 is hereby amended by
witnesses. modifying Section 5.5 thereof which provides for modes of procedures in
o Should the party be found at his registered or computing for the tax and/or applicable surcharge. In cases of late payment
known address or any other place but refuse to of a deficiency tax assessed, the taxpayer shall be liable for the delinquency
receive the notice, the revenue officers concerned interest provided under Section 249 (C)(3) of the 1997 National Internal
shall bring a barangay official and two (2) Revenue Code, as amended. Section 5.5 of RR 12-99 shall now read as
disinterested witnesses in the presence of the party follows:
so that they may personally observe and attest to
such act of refusal. The notice shall then be given ―5.5 Late payment of a deficiency tax assessed. – In general, the
to said barangay official. Such facts shall be deficiency tax assessed shall be paid by the taxpayer within the time
contained in the bottom portion of the notice, as prescribed in the notice and demand, otherwise, such taxpayer shall
well as the names, official position and signatures be liable for the delinquency interest incident to late payment.
Illustration 1: Based on the above Illustration No. 3, Scenario 4,

assuming that the calendar year 1997 deficiency income tax
assessment against XYZ CORPORATION, in the amount of
P304,771.67, is not paid by June 30, 1999, the deadline for payment
of the assessment, and assuming further that this assessment has
already become final and collectible. In this case, such corporation
shall be considered late in payment of the said assessment.
Assuming, further, that the corporation pays its tax assessment only
by July 31, 1999, the delinquency interest for late payment shall be
computed as follows: (see Illustration below)
Illustration 2: Based on the immediately preceding Illustration, assuming

that the calendar year 1997 deficiency income tax assessment against
XYZ CORPORATION, in the amount of P304,771.67, is not paid by
June 30, 1999, the deadline for payment of the assessment but is
instead timely protested. Assuming further that after exhaustion of all
administrative remedies, the assessment was upheld and became final,
executory and demandable on July 1, 2000. However, payment was
made by the taxpayer only on June 30, 2002.
In this case, such corporation shall be considered late in payment of the

said assessment. The civil penalties for late payment shall be computed
as follows: In this case, such corporation shall be considered late in payment of

the said assessment. The civil penalties for late payment shall be
computed as follows:
SECTION 4. Repealing Clause. – Any rules and regulations or parts thereof

inconsistent with the provisions of these Regulations are hereby repealed,
amended, or modified accordingly.
Illustration 3: Assuming that in calendar year 1997, XYZ SECTION 5. Effectivity. – The provisions of these Regulations shall take
CORPORATION filed a false or fraudulent return and was assessed effect after fifteen (15) days following publication in any newspaper of
of deficiency basic income tax amounting to Php 100,000. Assuming general circulation.
further that XYZ CORPORATION timely protested the said
assessment. After exhaustion of all administrative remedies, the
assessment was upheld and became final, executory and
demandable on April 15, 2001. However, payment was made by the
SUMMARY: RR 18-2013 (Banta)
taxpayer only on April 15, 2003. [November 28, 2013]
“Amending Certain Sections of Revenue Regulations No. 12-99 Relative to 2. When a discrepancy has been determined between the tax withheld
the Due Process Requirement in the Issuance of a Deficiency Tax and the amount actually remitted by the withholding agent; or
Assessment‖ 3. When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to
These regulations effectively amend the provisions of Revenue Regulations have carried over and automatically applied the same amount
(RR) No. 12-99. claimed against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
AMENDMENT OF SECTION 3.1.1 AND RENUMBERINGS OF RR 12-99 4. When the excise tax due on excisable articles has not been paid; or
5. When an article locally purchased or imported by an exempt person,
Section 2 of these Regulations amend Section 3.1.1 of RR No. 12-99, such as, but not limited to, vehicles, capital equipment, machineries
thereby renumbering other provisions thereof, and prescribing other and spare parts, has been sold, traded or transferred to non-exempt
provisions for the assessment of tax liabilities. persons.
3.1.1 PRELIMINARY ASSESSMENT NOTICE (PAN) 3.1.3 FORMAL LETTER OF DEMAND AND FINAL ASSESSMENT
A Preliminary Assessment Notice (PAN) shall be issued after NOTICE (FLD/FAN)
review and evaluation by the Commissioner or his duly authorized Shall be issued by the Commissioner or his duly authorized
representative and it is determined that there exists sufficient basis representative
to assess the taxpayer for any deficiency tax or taxes. Shall state the facts, the law, rules and regulations, or jurisprudence
on which the assessment is based
Scenario 1 — TAXPAYER FAILS TO RESPOND WITHIN 15 DAYS FROM o Otherwise, the assessement shall be void
RECEIPT OF PAN:
Taxpayer considered in default; and 3.1.4 DISPUTED ASSESSMENT
Formal Letter of Demand and Final Assessment Notice (FLD/FAN)
shall be issued, calling for payment of the taxpayer's deficiency tax Who can dispute the assessment?
liability, inclusive of the applicable penalties The following may protest administratively against the FAN/FLD WITHIN 30
DAYS from the date of receipt thereof:
Scenario 2 — TAXPAYER RESPONDS WITHIN 15 DAYS FROM RECEIPT a. Taxpayer;
OF PAN AND HE/IT DISAGREES WITH THE FINDINGS OF DEFICIENCY b. His/its authorized representative; or
A Formal Letter of Demand (FLD) and Final Assessment Notice c. Tax agent
(FAN) shall be issued within 15 days from filing/submission of
taxpayer‘s response, calling for payment of taxpayer‘s deficiency tax What written requests can the protesting taxpayer file?
liability, inclusive of the applicable penalties The taxpayer may file either:
a. Request for reconsideration – refers a plea of re-evaluation of an
3.1.2 EXCEPTIONS TO PRIOR NOTICE OF THE ASSESSMENT assessment on the basis of existing records without need of
In the following cases, a FLD/FAN shall be issued OUTRIGHT: additional evidence. It may involve both a question of fact or of law
1. When the finding for any deficiency tax is the result of mathematical or both.
error in the computation of the tax appearing on the face of the tax b. Request for reinvestigation – refers to a plea of re-evaluation of
return filed by the taxpayer; or an assessment on the basis of newly discovered or additional
evidence that a taxpayer intends to present in the reinvestigation. It surcharge and/or interest
may also involve a question of fact or of law or both Shall be considered undisputed
issue or issues, in which case,
Taxpayer shall submit all relevant supporting documents in support of his the assessment attributable
There are several issues involved in
thereto shall become final,
protest within sixty (60) days from date of filing of his letter of protest. the disputed assessment and the
executory and demandable;
Relevant supporting documents – refer to those documents taxpayer fails to state the facts,
The taxpayer shall be required to
necessary to support the legal and factual bases in disputing a tax the applicable law, rules and
pay the deficiency tax or taxes
regulations, or jurisprudence in
assessment as determined by the taxpayer. attributable thereto; and
support of his protest against
EXCEPTION: The sixty-day (60-day) period for the submission of all some of the several issues on A collection letter shall be issued
relevant supporting documents shall not apply to requests for which the assessment is based to the taxpayer calling for
reconsideration. payment of the said deficiency
tax, inclusive of the applicable
Furthermore, the term ―the assessment shall become final‖ shall surcharge and/or interest.
mean the taxpayer is barred from disputing the correctness of the The assessment shall become
issued assessment by introduction of newly discovered or additional final
evidence, and the FDDA shall consequently be denied. o Meaning, the taxpayer is
barred from disputing the
Taxpayer fails to submit all
Contents of the protest correctness of the issued
relevant documents in support of
1. Nature of protest whether reconsideration or reinvestigation, assessment by
his protest within 60 days from the
specifying newly discovered or additional evidence he intends to introduction of newly
date of filing of his protest
present if it is a request for reinvestigation, discovered or additional
2. Date of the assessment notice, and evidence, and the FDDA
3. The applicable law, rules and regulations, or jurisprudence on which shall consequently be
his protest is based, otherwise, his protest shall be considered void denied.
and without force and effect. The assessment shall become
final, executory and demandable.
Summary of scenarios of protest, denial, and inaction of CIR No request for reconsideration or
reinvestigation shall be granted
SCENARIO RESULT / RECOURSE on tax assessments that have
The assessment attributable to already become final, executory
the undisputed issue or issues and demandable.
shall become final, executory Taxpayer fails to file a valid protest
and demandable; and against the FLD/FAN within thirty Recourse of the taxpayer if the
There are several issues involved in (30) days from date of receipt protest is denied, in whole or in
The taxpayer shall be required to
the FLD/FAN but the taxpayer only thereof part, by the CIR:
pay the deficiency tax or taxes
disputes or protests against the attributable thereto;
validity of some of the issues o In which case, a collection 1. Appeal to the Court of Tax
raised letter shall be issued to Appeals (CTA) within thirty (30)
the taxpayer calling for days from date of receipt of the
payment of the said said decision; or
deficiency tax or taxes, 2. Elevate his protest through
inclusive of the applicable request for reconsideration to the
Commissioner within thirty (30) 2. Await the final decision of the

days from date of receipt of the Commissioner on the disputed
said decision assessment and appeal such
final decision to the CTA within
No request for reinvestigation thirty (30) days after the receipt
shall be allowed in administrative of a copy of such decision.
appeal and only issues raised in
the decision of the It must be emphasized, however, that
Commissioner‘s duly authorized the above-mentioned recoursed are
representative shall be MUTUALLY EXCLUSIVE and the
entertained by the resort to one bars the application
Commissioner. of the other.
Protest is not acted upon by the
Commissioner‘s duly authorized Taxpayer may either: 3.1.5 FINAL DECISION ON A DISPUTED ASSESSMENT (FDDA)
representative within one hundred 1. Appeal to the CTA within thirty CIR or his duly authorized representative shall state:
eighty (180) days counted from the (30) days after the expiration of a. The facts, the applicable law, rules and regulations, or
date of filing of the protest in case of the one hundred eighty (180)- jurisprudence on which such decision is based, otherwise,
a request reconsideration; or from day period; or the decision shall be void; and
date of submission by the taxpayer 2. Await the final decision of the b. That the same is his final decision.
of the required documents within Commissioner‘s duly authorized
sixty (60) days from the date of representative on the disputed 3.1.6 MODES OF SERVICE
filing of the protest in case of a assessment. 1. Through personal service:
request for reinvestigation o Delivering personally a copy thereof to the party at his
Taxpayer may appeal to the CTA registered or known address or wherever he may be found.
within thirty (30) days from date o A known address shall mean a place other than the
of receipt of the said decision. registered address where business activities of the party
o Otherwise, the assessment are conducted or his place of residence.
shall become final,
executory and In case personal service is not practicable, the notice shall be served by
The protest or administrative substituted service or by mail.
demandable.
appeal, as the case may be, is
o A motion for reconsideration
denied, in whole or in part, by the
of the Commissioner‘s 2. Through substituted service:
Commissioner o Substituted service can be resorted to when the party is not
denial of the protest or
administrative appeal, as present at the registered or known address under the
the case may be, shall not following circumstances:
toll the thirty (30)-day The notice may be left at the party‘s registered
period to appeal to the address, with his clerk or with a person having
CTA. charge thereof.
Protest or administrative appeal is Taxpayer may either: If the known address is a place where business
not acted upon by the 1. Appeal to the CTA within thirty activities of the party are conducted, the notice
Commissioner within one hundred (30) days from after the may be left with his clerk or with a person having
eighty (180) days counted from expiration of the one hundred charge thereof.
the date of filing of the protest eighty (180)-day period; or
If the known address is the place of residence, of service, the name of the person/barangay
substituted service can be made by leaving the official/professional courier service company who
copy with a person of legal age residing therein. received the same and such other relevant
If no person is found in the party‘s registered or information.
known address, the revenue officers concerned o The registry receipt issued by the post office or the official
shall bring a barangay official and two (2) receipt issued by the professional courier company
disinterested witnesses to the address so that they containing sufficiently identifiable details of the transaction
may personally observe and attest to such shall constitute sufficient proof of mailing and shall be
absence. The notice shall then be given to said attached to the case docket.
barangay official. Such facts shall be contained in
the bottom portion of the notice, as well as the REMEMBER: service to the tax agent/practitioner, who is appointed by the
names, official position and signatures of the taxpayer under circumstances prescribed in the pertinent regulations on
witnesses. accreditation of tax agents, shall be deemed service to the taxpayer.
Should the party be found at his registered or
known address or any other place but refuse to AMENDMENT OF SECTION 5 OF RR 12-99
receive the notice, the revenue officers concerned Section 3 of these regulations hereby Section 5 of RR 12-99 by modifying
shall bring a barangay official and two (2) Section 5.5. thereof which provides for the modes of procedures in
disinterested witnesses in the presence of the party computing for the tax and/or applicable surcharge.
so that they may personally observe and attest to In cases of late payment of a deficiency tax assessed, the taxpayer
such act of refusal. The notice shall then be given shall be liable for the delinquency interest provided under Section
to said barangay official. Such facts shall be 249 (C)(3) of the 1997 National Internal Revenue Code, as
contained in the bottom portion of the notice, as amended.
well as the names, official position and signatures
of the witnesses. Section 5.5 of RR 12-99 shall now read as follows:
―Disinerested witnesses‖ refers to persons of
legal age other than employees of the Bureau of
Internal Revenue. 5.5 Late payment of a deficiency tax assessed. – In general, the
deficiency tax assessed shall be paid by the taxpayer within the time
3. Through service by mail: prescribed in the notice and demand, otherwise, such taxpayer shall be liable
o Done by sending a copy of the notice by registered mail to for the DELINQUENCY INTEREST incident to late payment.
the registered or known address of the party with instruction
to the Postmaster to return the mail to the sender after ten
(10) days, if undelivered. *For the ILLUSTRATIONS of the application of this amendment, please see
o A copy of the notice may also be sent through reputable the illustrations described in the lifted copy of RR18-2013 preceding this
professional courier service. summary.
o If no registry or reputable professional courier service is
available in the locality of the addressee, service may be _____________________________________________________________
done by ordinary mail.
o The server shall accomplish the bottom portion of the
notice. REVENUE MEMORANDUM CIRCULAR NO. 39-2013 (Bello)
He shall also make a written report under oath
before a Notary Public or any person authorized to I. BACKGROUND
administer oath under Section 14 of the NIRC, as
amended, setting forth the manner, place and date
It has been observed that substantial number of tax cases covered by letters of protest, requests for reinvestigation/reconsideration and
Final Assessment Notices (FANS) and Formal Letters of Demand which similar correspondences shall be considered void and without
had been reported by the Regional Assessment Divisions under the force and effect.
prescribed Monthly Summary of Taxes Assessed-Unprotested (BIR
Form 40.00) were still allowed to be referred to the concerned The abovementioned revenue officials shall be primarily
investigating office for reinvestigation, notwithstanding that the responsible in ensuring the preparation of a complete/accurate
assessments were already final and executory. report on all protests that were filed in their respective offices and
the prompt submittal thereof to the Commissioner of Internal
Further, since they have become delinquent accounts, they are already Revenue (CIR) every Monday of each week in hard and soft
subject to enforcement collection through summary remedies under copies. The soft copy of the report shall be emailed to kim.jacinto-
Sections 205, 206 and 207 of the National Internal Revenue Code (NIRC) henares@bir.gov.ph and flor.mercado@bir.gov.ph. The format of
of 1997, as amended. However, taxpayers alleged that their protest letters the Report on Protest Letters Received Covering Final
had been filed with other offices of the Bureau before the prescribed Assessment Notices and Final Decisions on Disputed
deadline under existing regulations and that the same failed to reach the Assessments is hereto attached as Annex ―A‖.
concerned Regional Assessment Divisions before the submission of the
BIR Form 40.00 report to other concerned offices. 2. Based on this weekly report, the Office of the CIR shall create a
database of all letters of protest, requests for
II. CLARIFICATION reinvestigation/reconsideration and similar correspondences
received by the different offices of the Bureau.
In order to avoid the conduct of unwarranted reinvestigation cases, to
prevent the undue accumulation of delinquent accounts, and to obviate The information contained therein can be provided to the other
the pre-mature enforcement of summary remedies against the concerned concerned offices, subject to the CIR‘s approval of the release of
taxpayers, the guidelines for receipt of protest letters and other similar such information and upon written request of the concerned
correspondences are clarified as follows: revenue official. The said database shall be regularly updated
for purposes of providing accurate information on the matter to all
1. All letters of protest, requests for reinvestigation/reconsideration concerned officials and employees.
and similar correspondences shall only be filed by the
taxpayers or their duly authorized representatives, in person or 3. In the event that no letter of protest, request for
through registered mail with return card, with the Office of the reinvestigation/reconsideration and similar communication has
concerned Regional Director (RD), Assistant Commissioner- been received during any given week, the herein prescribed
Large Taxpayers Service (ACIR-LTS) and Assistant report shall nevertheless be accomplished and submitted within
Commissioner-Enforcement Service (ACIR-ES), who signed the the same period with the notation ―No Letter of Protest or
Preliminary Assessment Notices (PANs), Request for Reinvestigation/Reconsideration Received‖.
FANs and Formal Letters of Demand, for proper recording of the 4. Any letter of protest, request for reinvestigation/reconsideration,
protests, and evaluation if the same is in accordance with Section or other similar communication allegedly filed by any taxpayer but
228 of the NIRC, as implemented by Revenue Regulations No. are not included in the aforementioned database shall be
12-99. If the aforesaid procedures are not followed, then the deemed as not officially filed with the Bureau and shall not
be used as basis for the grant of any request for kim.jacinto-henares@bir.gov.ph and flor.mercado@bir.gov.ph. The format
reinvestigation/reconsideration of any FAN or Final Decision on of the Report on Protest Letters
Disputed Assessment (FDDA) issued against the taxpayer.
Received Covering Final Assessment Notices and FDDAs is shown in
Annex ―A‖ of this
5. These guidelines and policies shall be strictly observed until Circular.
such time that a more sophisticated and information technology-
driven document receipting and tracking system has been put in The Office of the CIR shall create a database of all letters of protest,
place. requests for reinvestigation/reconsideration and similar correspondences
received by the different offices of the BIR. The information contained
6. All letters of protest, requests for reinvestigation/reconsideration therein can be provided to the other concerned offices, subject to the
CIR‘s approval of the release of such information and upon written request
or similar correspondences that will be accepted from taxpayers
of the concerned revenue official. The said database shall be regularly
beginning April 29, 2013 shall be guided by this Circular. updated for purposes of providing accurate information on the matter to all
concerned officials and employees.
All internal revenue officials and employees are enjoined to provide this
Circular as wide a publicity possible. In the event that no letter of protest, request for
reinvestigation/reconsideration and similar communication has been
received during any given week, the prescribed report shall nevertheless
Summary:
be accomplished and submitted within the same period with the notation
REVENUE MEMORANDUM CIRCULAR NO. 39-2013 issued on May 7, ―No Letter of Protest or Request for Reinvestigation/Reconsideration
2013 clarifies the guidelines on the receipt of protest letter on Final Received‖.
Assessment Notices (FANs) and Final Decision on Disputed Assessments
(FDDAs). Any letter of protest, request for reinvestigation/reconsideration or other
similar communication allegedly filed by any taxpayer but are not included
All letters of protest, requests for reinvestigation/reconsideration and in the said database shall be deemed as not officially filed with the BIR
similar correspondences shall only be filed by the taxpayers or their duly and shall not be used as basis for the grant of any request for
authorized representatives, in person or through registered mail with reinvestigation/reconsideration of any FAN or FDDA issued against the
return card, with the office of the concerned Regional Director, Assistant taxpayer.
Commissioner-Large Taxpayers Service and Assistant Commissioner-
Enforcement Service, who signed the Preliminary Assessment Notices, All letters of protest, requests for reinvestigation/reconsideration or similar
FANs and Formal Letters of Demand, for proper recording of the protests correspondences that will be accepted from taxpayers beginning April 29,
and evaluation if the same is in accordance with Section 228 of the 2013 shall be guided by this Circular.
National Internal Revenue Code, as implemented by Revenue
Regulations No. 12-99. If the aforesaid procedures are not followed, then
the letters of protest, requests for reinvestigation/reconsideration and _____________________________________________________
similar correspondences shall be considered void and without force and
effect. REVENUE MEMORANDUM CIRCULAR NO. 011-14 (Bugay)
February 18, 2014
The said revenue officials shall be primarily responsible in ensuring the REVENUE MEMORANDUM CIRCULAR NO. 011-14
preparation of a complete/accurate report on all protests that were filed in SUBJECT : Clarifying Certain Issues Relative to Due Process
their respective offices and the prompt submittal thereof to the Requirement in the Issuance of a Deficiency Tax
Commissioner of Internal Revenue (CIR) every Monday of each week in Assessment Pursuant to Revenue Regulations (RR)
hard and soft copies. The soft copy of the report shall be emailed to 12-99, as Amended by RR 18-2013
filing/submission of the taxpayer's response to the PAN

TO : All Internal Revenue Officers and Others Concerned shall be valid, provided that, it is issued within the period
of limitation to assess internal revenue taxes. The non-
This Circular is issued to clarify certain issues relative to the amendments observance of the fifteen (15)-day period, however, shall
introduced to Revenue Regulations (RR) 12-99 by RR 18-2013. constitute an administrative infraction and
(1) RR 12-99, as amended by RR 18-2013, provides that the the revenue officers who caused the delay shall be
Commissioner or his duly authorized representative shall subject to administrative sanctions as provided for by law
issue the Preliminary Assessment Notice (PAN), Formal and pertinent revenue issuances.
Letter of Demand/Final Assessment Notice (FLD/FAN)
and Final Decision on Disputed Assessment (FDDA). The (5) RR 12-99, as amended by RR 18-2013, provides
term "duly authorized representative" therein refers that "[f]or requests for reinvestigation, the taxpayer shall
to Revenue Regional Directors, Assistant Commissioner- submit all relevant supporting documents in support of his
Large Taxpayers Service, and Assistant Commissioner- protest within sixty (60) days from date of filing of his letter
Enforcement and Advocacy Service. of protest, otherwise, the assessment shall become
Accordingly, pursuant final." The term "the assessment shall become
to Revenue Memorandum Circular No. 39-2013, final" means that the failure of the taxpayer who
taxpayers shall submit/file their responses to the PAN and requested for a reinvestigation to submit all relevant
protests (requests for reconsideration/reinvestigation) to supporting documents within the sixty (60)-day period
the FLD/FAN with the duly authorized representative of shall render the FLD/FAN "final" by operation of law. He/it
the Commissioner who signed the PAN and FLD/FAN. shall be barred from disputing the correctness of the
Protests in the nature of requests for reconsideration of FLD/FAN by the introduction of newly discovered or
taxpayers elevated to the Commissioner arising from additional evidence because he/it is deemed to have lost
inactions or adverse decisions of the "duly authorized his/its chance to present these evidence. The BIR shall
representatives" shall be filed with the Office of the then deny the request for reinvestigation through the
Commissioner. issuance of an FDDA. SEAHID
(2) Prior to the issuance of the PAN, the taxpayer may be (6) The notice (PAN/FLD/FAN/FDDA) shall first be served to
allowed to make voluntary payments of probable the taxpayer's registered address before the same may
deficiency taxes and penalties. be served to the taxpayer's known address, or in the
alternative, may be served to the taxpayer's registered
(3) An FLD/FAN issued reiterating the immediate payment of address and known address simultaneously.
deficiency taxes and penalties previously made in the
PAN is a denial of the response to the PAN. A final
demand letter for payment of delinquent taxes may be All other issuances inconsistent herewith are hereby repealed or modified
considered a decision on a disputed assessment accordingly.
(Commissioner of Internal Revenue vs. Isabela Cultural All concerned are hereby enjoined to be guided accordingly and give
Corporation; G.R. No. 135210; July 11, 2001). This this Circular as wide a publicity as possible.
includes a disputed PAN. So long as the parties are given
the opportunity to explain their side, the requirements of This Circular shall take effect immediately.
due process are satisfactorily complied with (Calma vs.
Court of Appeals; G.R. No. 122787; February 9, 1999).
(4) An FDL/FAN issued beyond fifteen (15) days from

REFUNDS collection of the amount due.
All criminal violations may be compromised except: (a) those already

SEC. 72. Suit to Recover Tax Based on False or Fraudulent Returns. filed in court, or (b) those involving fraud.
– When an assessment is made in case of any list, statement or return,
which in the opinion of the Commissioner was false or fraudulent or (C) Credit or refund taxes erroneously or illegally received or penalties
contained any understatement or undervaluation, no tax collected under imposed without authority, refund the value of internal revenue stamps
such assessment shall be recovered by any suit, unless it is proved that when they are returned in good condition by the purchaser, and, in his
the said list, statement or return was not false nor fraudulent and did not discretion, redeem or change unused stamps that have been rendered
contain any understatement or undervaluation; but this provision shall not unfit for use and refund their value upon proof of destruction. No credit or
apply to statements or returns made or to be made in good faith regarding refund of taxes or penalties shall be allowed unless the taxpayer files in
annual depreciation of oil or gas wells and mines. writing with the Commissioner a claim for credit or refund within two (2)
years after the payment of the tax or penalty: Provided, however, That a
REMEDIES IN GENERAL return filed showing an overpayment shall be considered as a written
SEC. 204. Authority of the Commissioner to Compromise, Abate and claim for credit or refund.
Refund or Credit Taxes. – The Commissioner may –
A Tax Credit Certificate validly issued under the provisions of this
(A) Compromise the payment of any internal revenue tax, when: Code may be applied against any internal revenue tax, excluding
(1) A reasonable doubt as to the validity of the claim against the withholding taxes, for which the taxpayer is directly liable. Any request for
taxpayer exists; or conversion into refund of unutilized tax credits may be allowed, subject to
(2) The financial position of the taxpayer demonstrates a clear inability the provisions of Section 230 of this Code: Provided, That the original
to pay the assessed tax. copy of the Tax Credit Certificate showing a creditable balance is
The compromise settlement of any tax liability shall be subject to the surrendered to the appropriate revenue officer for verification and
following minimum amounts: cancellation: Provided, further, That in no case shall a tax refund be given
For cases of financial incapacity, a minimum compromise rate resulting from availment of incentives granted pursuant to special laws for
equivalent to ten percent (10%) of the basic assessed tax; and which no actual payment was made.
For other cases, a minimum compromise rate equivalent to forty
percent (40%) of the basic assessed tax. The Commissioner shall submit to the Chairmen of the Committee on
Where the basic tax involved exceeds One million pesos (P1,000.000) Ways and Means of both the Senate and House of Representatives, every
or where the settlement offered is less than the prescribed minimum rates, six (6) months, a report on the exercise of his powers under this Section,
the compromise shall be subject to the approval of the Evaluation Board stating therein the following facts and information, among others: names
which shall be composed of the Commissioner and the four (4) Deputy and addresses of taxpayers whose cases have been the subject of
Commissioners. abatement or compromise; amount involved; amount compromised or
abated; and reasons for the exercise of power: Provided, That the said
(B) Abate or cancel a tax liability, when: report shall be presented to the Oversight Committee in Congress that
(1) The tax or any portion thereof appears to be unjustly or excessively shall be constituted to determine that said powers are reasonably
assessed; or exercised and that the Government is not unduly deprived of revenues.
(2) The administration and collection costs involved do not justify the
PROTESTING AN ASSESSMENT, REFUND, ETC. creditable balance as of said date, shall be presented for revalidation with
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. – No the Commissioner or his duly authorized representative or on before June
suit or proceeding shall be maintained in any court for the recovery of any 30, 1998.
national internal revenue tax hereafter alleged to have been erroneously
or illegally assessed or collected, or of any penalty claimed to have been CIR v. MERALCO (Coloquio)
collected without authority, of any sum alleged to have been excessively [GR. No. 181459; June 9, 2014]
or in any manner wrongfully collected without authority, or of any sum “Sayang MERALCO, late mo nalaman exempt pala si NORD/LB, nung huli
alleged to have been excessively or in any manner wrongfully collected, na ang lahat”
until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or Recit-Ready:
not such tax, penalty, or sum has been paid under protest or duress. Facts: MERALCO obtained 2 loans from NORD/LB, aggregating to
$220,000,000. The arrangement was that MERALCO shall remit
In any case, no such suit or proceeding shall be filed after the to the BIR, the 10% final withholding tax on the interest payments
expiration of two (2) years from the date of payment of the tax or made to NORD/LB. So from 1999-2003, MERALCO remitted a
penalty regardless of any supervening cause that may arise after total of P264,120,181.44 as FWT to the BIR. Subsequently, it
payment: Provided, however, That the Commissioner may, even without a discovered that NORD/LB is owned and controlled by the
written claim therefor, refund or credit any tax, where on the face of the Government of Germany, thus it should be exempt from FWT.
return upon which payment was made, such payment appears clearly to The BIR confirmed this through a ruling issued.
have been erroneously paid.
MERALCO then filed for a refund/credit of the erroneously paid
SEC. 230. Forfeiture of Cash Refund and of Tax Credit. – FWT, from 1999-2003. The CIR denied the refund, but upon
appeal, the CTA modified the decision. The CTA denied the claim
(A) Forfeiture of Refund. – A refund check or warrant issued in for 1999-2002 on the ground of prescription, but it allowed the
accordance with the pertinent provisions of this Code, which shall remain claim for 2002-2003.
unclaimed or uncashed within five (5) years from the date the said warrant
or check was mailed or delivered, shall be forfeited in favor of the Issue/s:
Government and the amount thereof shall revert to the general fund. WON the CTA erred in allowing the refund only for the years 2002-
2003. - NO
(B) Forfeiture of Tax Credit. – A tax credit certificate issued in accordance
with the pertinent provisions of this Code, which shall remain unutilized Held: The Court cited Sec. 229 of the NIRC, which states that a
after five (5) years from the date of issue, shall, unless revalidated, be taxpayer only has 2 years within which to file for a refund/ credit,
considered invalid, and shall not be allowed as payment for internal running from the date of the payment of the tax regardless of any
revenue tax liabilities of the taxpayer, and the amount covered by the supervening cause. The CTA therefore, was correct in denying
certificate shall revert to the general fund. the claim for 1999-2002, on the ground of prescription.
(C) Transitory Provision. – For purposes of the preceding Subsection, a MERALCO cannot invoke the BIR ruling as confirming its right to
tax credit certificate issued by the Commissioner or his duly authorized a refund, for such only answers the questions of whether
representative prior to January 1, 1998, which remains unutilized or has a NORD/LB is tax-exempt, and the period within which to file for a
refund/ credit. It is not the operative act determinative of whether Held/Ratio: Petition DENIED. The resolution of the CTA is affirmed.
one is entitled to a refund/ credit or not.
1. YES. The Court ruled that MERALCO sufficiently established the
Facts: tax-exempt status of NORD/lB through a certification from the
MERALCO obtained a loan from Norddeutsche Landesbank Girozentrale Embassy of Germany.
(NORLD/LB) Singapore Branch, for $120,000,000. Subsequently, they The CIR argues that MERALCO is not entitled to a refund/credit, for it
executed another loan agreement for $100,000,000. failed to establish that NORD/LB is owned and controlled by the Federal
In the arrangement, the income received by NORD/LB by way of Republic of Germany.
MERALCO’s interest payments shall be paid in full, for MERALCO shall The Court however found that MERALCO sufficiently established that
bear the obligation of remitting the 10% final withholding tax to the BIR. NORD/LB is controlled and owned by the government of Germany, for it
o MERALCO in turn remitted the FWT on the interest presented a certification of the Embassy of Germany. Such proves that
payments, aggregating to P264,120,181.44, for the years NORD/LB is a regional bank in Germany, offering support in the public
1999-2003. sector financing.
In 2001, MERALCO discovered that NORD/LB is a foreign government- The Embassy of Germany is in the best position to confirm such
owned financing institution of Germany. Thus, it requested for a BIR information, for it is the representative of Germany here in the
Ruling with regard to the tax exempt status of NORD/LB. Philippines.
o The BIR responded, saying that interest payments made to The BIR also decided that NORD/LB is tax-exempt, through a ruling
NORD/LB are exempt from FWT, since it is owned and issued.
controlled by the government of Germany.
Pursuant to the ruling, MERALCO filed for a tax refund/ credit, for the 2. NO. The NIRC provides only 2 years within which to file a refund,
erroneously paid or overpaid FWT. which runs from the date of the payment of the taxes.
o CIR denied the refund, on the basis that it had already The Court agreed with the CTA, that the claim pertaining to the years
prescribed under Sec. 204 of the NIRC, giving a taxpayer 2 1999-2002 has already prescribed.
years from the date of payment of tax to file for a refund. o Sec. 229 of the NIRC states that a claim for a refund/credit may
An appeal was brought to the CTA, which ruled that the claim from 1999- only be filed within 2 years from the date of the payment of the
2002 (P224,760,926.65) has already been barred by prescription, but tax, regardless of any supervening cause that may arise after
that for 2002-2003 (P39,359,254.79) may still be claimed. payment.
o The motion for reconsideration was denied, thus this petition. o Such period does not run from the discovery by the taxpayer of
the erroneous or excessive payment of taxes.
Issue/s: MERALCO argued that the BIR Ruling already established its right to a
1. WON the interest payments to NORD/LB is exempt from FWT. refund.
- YES o But the Court stated that the BIR Ruling declaring the tax-
2. WON the CTA erred in allowing the refund only for the years exempt status of NORD/LB, is merely confirmatory in nature.
2002-2003, denying that for 1999-2002 on the ground of o The ruling is not the operative act from which an entitlement of
prescription. refund is determined.
- NO o The BIR is tasked only to confirm what is provided under the
NIRC, on the matter of tax exemptions, and the period within
which to file a claim.
MERALCO is also misguided when it relied upon the 6-year prescriptive Leopoldo R. Aguinaldo and his wife received in 1952 cash dividends in
period for initiating an action on the ground of a quasi-contract/ solution the sum of P10,000.00 from Aguinaldo Brothers, Inc. They did not declare
indebiti under Art. 1145 of the Civil Code. Such applies when: said dividends in their joint income tax return for 1952, but declared
1. There is no binding relation between the payor, who has no duty to P5,000.00 thereof in their income tax return for 1953. On August 14,
pay and the person who received the payment. 1954, they paid the tax due on their declared income for 1953.
2. The payment is made through mistake and not through liberality or In 1955, the BIR re-examined the 1952 and 1953 joint income tax returns
some other cause. and readjusted the returns, increasing the declared income for 1952 by
o Here, there is a binding relation between CIR as the taxing P10,000.00 and eliminating from the 1953 income tax return the reported
authority, and MERALCO, which is bound by law to act as a dividends of P5,000.00. The result was a deficiency of P3,840.00 for
withholding agent for the FWT. 1952 and an overpayment of P1,600.00 for 1953.
o Also, such provision shall not apply for the NIRC already The CIR, by his letter dated October 28, 1957, assessed against
provides for the period to claim for a refund. Leopoldo R. Aguinaldo the amount of P3,840.00 as deficiency income tax
for 1952, without crediting in his favor the overpayment in 1953.
VDA DE AGUINALDO v. CIR (Cualoping) Aguinaldo's counsel, in a letter dated January 10, 1958, protested against
[GR. No. L-19927; February 26, 1965] the assessment, and requested that the overpayment for 1953 be
“2 year requirement mandatory” credited in favor of the taxpayer.
The request was denied. The CIR informed him that the amount of
Recit-Ready: P1,600.00 cannot be credited against the tax for 1952 inasmuch as the
Facts: Aguinaldo and his wife received 10000 in cash dividends in 1952. claim for tax credit was filed beyond the two-year period provided for in
However they did not declare anything for 1952 and declared Section 309 of the National Internal Revenue Code.
5000 for 1953. Upon examination the BIR found that there was a
deficiency of 3840 for 1952 and an overpayment of 1953. The Issue/s:
CIR made a demand for the deficiency but did not credit the WON petitioner is entitled to tax credit for the year 1953? NO.
overpayment. Aguinaldo through his lawyer protested this and
requests that the overpayment be applied. Held/Ratio:
Issue/s: NO. Not entitled to tax credit.

WON petitioner is entitled to tax credit for the year 1953? NO. SEC. 309. Authority of Collector to make compromises and refund
taxes.—The Collector of Internal Revenue may compromise any
Held: Sec 309 clearly requires the filing by the taxpayer of a written civil or other cases arising under this Code…
claim for credit or refund within two years after payment of the xxx
tax, before the CIR can exercise his authority to grant the credit The authority of the Collector of Internal Revenue to credit or refund
or refund. The adjustment took place in 1955 but the claim for tax taxes or penalties under this section can only be exercised if the claim
credit was only made in 1958, therefore the 2 year period to claim for credit or refund is made in writing and filed with him within two years
the credit had lapsed. after the payment of the tax or penalty.
The third paragraph of Section 309 clearly requires the filing by the
taxpayer of a written claim for credit or refund within two years after
Facts: payment of the tax, before the CIR can exercise his authority to grant the
credit or refund. Such requirement is therefore a condition precedent and interests, surcharge and compromise penalty. The executor paid
non-compliance therewith precludes the CIR from exercising the the basic deficiency tax and paid under protest the surcharge,
authority thereunder given. interest, and other penalties. The executor filed a petition for
As noted, the Aguinaldo’s paid the income tax for 1953 on August 14, review with the CTA with the prayer that the CIR’s decision be
1954 although the adjustment took place on August 29, 1955. From both reversed and that a refund of the amount of P438,040.38 be
dates to January 13, 1958, when the claim for tax credit was filed, more ordered. The Commissioner opposed the said petition,
than two years have elapsed. alleging that the CTA’s jurisdiction was not properly invoked
inasmuch as no written claim for a tax refund of the deficiency tax
FELISA VDA. DE SAN AGUSTIN v. CIR (De Luis) collected was filed with the Bureau of Internal Revenue before the
[GR. No. 138485; September 10, 2001] petition was filed, in violation of Sections 204 and 230 of the
“Written claim for refund to the BIR, is not required when the taxpayer National Internal Revenue Code.
appeals the disputed assessment of the BIR to the CTA and the claim for
refund is only incidental to questioning the correctness of the assessment” Issue/s:
1) WON a written claim for tax refund of the deficiency tax should be
Recit-Ready: filed with the BIR before filling a petition for review with the CTA
Facts: Atty. San Agustin died and left a holographic will, instituting his —NO
wife as sole heir and naming retired Justice Jose Feria as 2) WON the imposition of surcharge, interest and penalties on the
executor. The probate proceedings were instituted and the deficiency estate tax is in accord with the law
required notice of death and an estate tax return was sent to the —YES, surcharge
BIR. The executor also requested for extension for the payment —NO, compromise penalty
of the tax since the widow Felisa San Agustin did not personally
have sufficient funds, and that the payment would have to come Held:
from the estate. The BIR only granted an extension of 6 months. 1) NO. As held in Roman Catholic Archbishop of Cebu v. CIR, to require
the taxpayer to file a written claim for refund to the BIR as a condition
The executor submitted to the probate court a motion for authority
precedent to his right to appeal the assessment, would in effect
to withdraw funds for the payment of the estate tax. require of him to go through a useless and needless ceremony that
Consequently, the estate tax was paid within the 6-month would only delay the disposition of the case, for the CIR would
extension period. On Sept. 23, 1991, Felisa San Agustin received certainly disallow the claim for refund in the same way as he
a pre-assessment notice indicating a deficiency tax of P538, disallowed the protest against the assessment. The assessment in
509.50 including surcharge, interest and penalties. The executor this case as well as in the Archbishop of Cebu v. CIR case is
wrote a letter to the CIR expressing his readiness to pay the basic disputed. Hence, the CTA has jurisdiction over the matter pursuant to
R.A. 1125 creating the CTA, which provides that the said court has
deficiency tax as soon as the RTC approves its withdrawal from
jurisdiction over appeals from a decision of the CIR in cases involving
the estate, in the same letter the executor questioned the disputed assessments as distinguished from cases involving refunds
surcharge, interest, and other penalties and requested the same of taxes, fees, or other charges. The claim for refund is only incidental
to be waived. On Oct. 4, 1991, the CIR issued an assessment to questioning the correctness of the assessment.
notice reiterating the demand in the pre-assessment notice and 2) (Not relevant to Refunds, see held 2 below)
requesting payment on or before 30 days upon receipt. The CIR
also stated that there is no legal justification for the waiver of the Facts:
Atty. Jose San Agustin died on June 27, 1990 leaving his wife Dra. In a letter, dated October 31, 1991, the executor requested the
Felisa L. San Agustin as sole heir. He left a holographic will executed on Commissioner a reconsideration of the assessment of P976,549.00 and
April 21, 1980 giving all his estate to his widow, and naming retired waiver of the surcharge, interest, etc.
Justice Jose Y. Feria as Executor. On December 18, 1991, the CIR accepted payment of the basic
Probate proceedings were instituted on August 22, 1990, in the RTC of deficiency tax in the amount of P538,509.50. However, the request for
Makati. The required notice of decedents death was sent to the CIR on reconsideration was not acted upon until January 21, 1993, when the
August 30, 1990. executor received a letter signed by the Commissioner, stating that there
On September 3, 1990, an estate tax return reporting an estate tax due is no legal justification for the waiver of the interests, surcharge and
of P1,676,432.00 was filed on behalf of the estate, with a request for an compromise penalty in this case, and requiring full payment of
extension of two years for the payment of the tax, inasmuch as the P438,040.38 representing such charges within ten (10) days from receipt
decedents widow did not personally have sufficient funds, and that the thereof.
payment would have to come from the estate. In view of the said letter, the estate paid the amount of P438,040.38
In his letter/answer, BIR Deputy Commissioner Victor A. Deoferio, Jr., under protest on January 25, 1993. And on February 18, 1993, the
granted the heirs an extension of only six (6) months, subject to the executor filed a Petition for Review with the CTA with the prayer that
imposition of penalties and interests under Sections 248 and 249 of the the CIR’s letter/decision be reversed and that a refund of the
National Internal Revenue Code, as amended. amount of P438,040.38 be ordered.
The RTC allowed probate of the will and appointed Jose Feria as The Commissioner opposed the said petition, alleging that the
Executor of the estate. On December 5, 1990, the executor submitted to CTA’s jurisdiction was not properly invoked inasmuch as no
the probate court an inventory of the estate with a motion for authority to written claim for a tax refund of the deficiency tax collected was
withdraw funds for the payment of the estate tax. Such authority was filed with the Bureau of Internal Revenue before the petition was
granted by the probate court on March 5, 1991. Within the 6 months filed, in violation of Sections 204 and 230 of the National Internal
extension period granted by the BIR, the executor paid the estate tax in Revenue Code. Moreover, there is no statutory basis for the refund of
the amount of P1,676,432. the deficiency surcharges, interests and penalties charged by the
On September 23, 1991, the widow of the deceased, Felisa L. San Commissioner upon the estate of the decedent.
Agustin, received a Pre-Assessment Notice from the BIR, dated August The CTA upheld its jurisdiction over the dispute, and it modified the
29, 1991, showing a deficiency estate tax of P538,509.50, which, CIR’s assessment for surcharge, interests, and other penalties. It also
including surcharge, interest and penalties, amounted to P976,540.00. ordered the reimbursement to the estate of the balance of P423.577.64.
On October 1, 1991, the executor filed a letter with the CIR expressing
readiness to pay the basic deficiency estate tax of P538,509.50 as soon Issue/s:
as the RTC approves its withdrawal from the estate, but, requesting that 1) WON a written claim for tax refund of the deficiency tax should be
the surcharge, interest, and other penalties, amounting to P438,040.38 filed with the BIR before filling a petition for review with the CTA
be waived, considering that the assessed deficiency arose only on —NO
account of the difference in zonal valuation used by the Estate and the 2) WON the imposition of surcharge, interest and penalties on the
BIR, and that the estate tax due per return of P1,676,432.00 was already deficiency estate tax is in accord with the law
paid in due time within the extension period. —YES, surcharge
On October 4, 1991, the CIR issued an Assessment Notice reiterating —NO, compromise penalty
the demand in the pre-assessment notice and requesting payment on or
before thirty (30) days upon receipt thereof.
Held/Ratio: Petition GRANTED. The estate is ordered to pay deficiency annum, which interest shall be assessed and collected from the
taxes and the Commissioner is ordered to refund to the estate the overpaid date prescribed for its payment until full payment is made.
amount of P289, 950.38. o The CTA correctly held that the compromise penalty of
P20,000.00 could not be imposed on petitioner, a compromise
1) NO. As held in Roman Catholic Archbishop of Cebu v. CIR, to hold being, by its nature, mutual in essence. The payment made
that the taxpayer has now lost the right to appeal from the ruling on under protest by petitioner could only signify that there was no
the disputed assessment but must prosecute his appeal under agreement that had effectively been reached between the
Section 306 of the Tax Code, which requires a taxpayer to file a parties.
claim for refund of the taxes paid as a condition precedent to his
right to appeal, would in effect require of him to go through a
useless and needless ceremony that would only delay the CIR VS. AICHI FORGING COMPANY OF ASIA (Diploma)
disposition of the case, for the CIR would certainly disallow the [G.R. No. 184823; October 6, 2010]
claim for refund in the same way as he disallowed the protest “Stop being (pre)mature.”
against the assessment.
o The assessment in this case as well as in the Archbishop of Cebu v. Recit-Ready:
CIR case is disputed. Hence, the CTA has jurisdiction over the Facts: Aichi Forging Company is engaged in the manufacturing,
matter pursuant to R.A. 1125 creating the CTA, which provides that producing and processing of steel and its by-products. Aichi filed
the said court has jurisdiction over appeals from a decision of the for a judicial and an administrative claim for refund/credit of
CIR in cases involving disputed assessments as distinguished from input VAT on Sept. 30, 2004. CIR filed its Answer contended that
cases involving refunds of taxes, fees, or other charges. The claim the claim for refund is subject to administrative investigation by
for refund is only incidental to questioning the correctness of the the BIR; and Aichi must prove that the claim was filed within 2
assessment. year period prescribed in Section 229. Also, since the year
o The Court sees no cogent reason to require a useless formality that 2004 was a leap year, the filing of the claim for tax refund/credit
can serve the interest of neither the government nor the taxpayer. on September 30, 2004 was beyond the 2-year period, which
expired on September 29, 2004.
2) YES for the surcharge. NO for the compromise penalty. The delay in
the payment of the deficiency tax within the time prescribed for its Issue/s: WON Aichi’s judicial and administrative claims were filed
payment in the notice of assessment justifies the imposition of the within the 2-year prescriptive period provided in Sections
25% surcharge. In this case, the estate received a pre-assessment 112(A) and 229 of the NIRC – YES. But the judicial claim is
notice indicating a deficiency tax as early as Sept. 23, 1991. A notice prematurely filed.
of assessment was sent to the estate on Oct. 4, 1991, reiterating the
deficiency and demanding for its payment before the lapse of 30 Held: Yes. Sec. 112 will apply which states that unutilized input VAT
days. Nonetheless, the deficiency estate tax was only paid on Dec. must be claimed w/n 2 yrs after the close of the taxable quarter
19, 1991. when the sales were made. Sec. 204(c) and Sec. 229 set a 2-
o The basic deficiency tax in this case being P538,509.50, the year prescriptive period, reckoned from date of payment of the
25% percent thereof amounts to P134,627.37. Section 249 of tax or penalty, for the filing of a claim of refund/credit. However,
the Tax Code states that any deficiency in the tax due would be both provisions apply ONLY to instances of erroneous
subject to interest at the rate of twenty percent (20%) per payment or illegal collection of internal revenue taxes. The
administrative claim was timely filed since the Admin Code o Claim must be filed within 2 years after the close of the taxable
prevails which states that one year is equivalent to 12 months, quarter when such sales were made
hence, the deadline is Sept. 30 NOT Sept. 29. However, the o Creditable input tax due or paid must be attributable to such sales,
judicial claim was prematurely filed in violation of Sec 112(D), except the transitional input tax, to the extent that such input tax has
w/c states that CIR has, 120 days, within which to grant or deny not been applied against the output tax
the claim. In case of full or partial denial by the CIR, the CTA found that Aichi complied with the first 3 requisites but as to the 4th
taxpayer’s recourse is to file an appeal before the CTA within 30 requisite, CTA found that there are some documents and claims of Aichi
days from receipt of the decision of the CIR. If after the 120-day that are baseless and have not been satisfactorily substantiated.
period the CIR fails to act on the application for tax refund/credit, CTA Decision: Petition for Review partially granted, CIR is ordered to
the remedy of the taxpayer is to appeal the inaction of the CIR to refund or issue a tax credit certificate in favor of Aichi in the
CTA within 30 days. Aichi did NOT wait for the decision of the amount of P3,239,119.25
CIR or the lapse of the 20-day period. CIR filed a Motion for Partial Reconsideration arguing that it was filed
beyond the 2-year period
o Since the year 2004 was a leap year, the filing of the claim for tax
Facts: refund/credit on September 30, 2004 was beyond the 2-year period,
On September 30, 2004, Aichi filed a claim for refund/credit of input which expired on September 29, 2004.
VAT for the period July 1, 2002 to September 30, 2002 with CIR, through Article 13 of NCC states that when the law speaks
Dept. of Finance One-Stop Shop Inter-Agency Tax Credit and Duty of a year, it is equivalent to 365 days
Drawback Center. It also argued that the simultaneous filing of administrative and
On the same date, Aichi filed a Petition for Review with CTA for the judicial claim contravenes Sections 112 and 229
refund/credit of the same input VAT. o Prior filing of an administrative claim is a “condition
Aichi alleged that for the period July - September 2002, it generated and precedent” before a judicial claim can be filed
recorded zero-rated sales in the amount of about P131M, and it incurred o This is due to the doctrine of exhaustion of admin remedies
and paid input VAT amounting to about P3.9M from purchases and and also on the fact that the CTA is an appellate body
importation attributable to its zero-rated sales. which exercises the power of judicial review over admin
Aichi said that in its application for refund/credit with the CIR, it only actions of the BIR
claimed the amount of about P3.8M CTA En Banc: Affirmed the 2nd Division’s decision allowing the
CIR filed its Answer contended that the claim for refund is subject to partial tax refund
administrative investigation by the BIR; and Aichi must prove that the CTA EB held that the reckoning point for counting the 2-year period
claim was filed within 2 year period prescribed in Section 229 should start from the payment of tax subject claim for refund,
CTA 2nd Division rendered a decision partially granting Aichi’s citing Section 229, NIRC.
claim for refund/credit. o In this case, Aichi filed its VAT Return for the taxable 3 rd
CTA Pursuant to Section 112 of the NIRC, the following are the quarter of 2002 on October 20, 2002 – hence,
requisites to be entitled to input VAT refund/credit administrative and judicial claims for refund filed on
o Taxpayer is engaged in sales which are zero-rated or effectively September 30, 2004 were filed on time because Aichi has
zero-rated until October 20, 2004 within which to file its claim for
o Taxpayer is VAT-registered refund.
CTA EB also did NOT agree with CIR’s contention that NIRC As held in the case of Mirant:
requires the previous filing of an administrative claim for refund prior o To be sure, MPC cannot avail itself of the provisions of either
to judicial claim. Sec. 204(C)2 or 2293 of the NIRC which, for the purpose of
CTA EB further said that such should not be the case as the law refund, prescribes a different starting point for the two-year
does NOT prohibit the simultaneous filing of the administrative prescriptive limit for the filing of a claim therefore.
and judicial claims for refund. What is controlling is that both The 2 provisions also set a 2-year prescriptive period, reckoned from
claims for refund must be filed within the 2-year prescriptive period. date of payment of the tax or penalty, for the filing of a claim of
CIR filed MR, CTA EB denied. CIR appealed to the SC. refund/credit.
However, both provisions apply ONLY to instances of erroneous
Issue/s: Whether Aichi Forging’s judicial and administrative claims payment or illegal collection of internal revenue taxes.
were filed within the 2-year prescriptive period provided in Sections Aichi’s claim for refund/credit was filed in violation of Sec. 112(D) w/c
112(A) and 229 of the NIRC – YES. But the judicial claim is prematurely provides that the CIR has 120 days, from the date of the submission of
filed. the complete documents in support of the application [for tax
refund/credit], within which to grant or deny the claim. In case of full or
Held/Ratio: WHEREFORE, the Petition is hereby GRANTED. The assailed partial denial by the CIR, the taxpayer’s recourse is to file an appeal
July 30, 2008 Decision and the October 6, 2008 Resolution of the Court of before the CTA within 30 days from receipt of the decision of the CIR.
Tax Appeals are hereby REVERSED and SET ASIDE. The Court of Tax However, if after the 120-day period the CIR fails to act on the
Appeals Second Division is DIRECTED to dismiss CTA Case No. 7065 for application for tax refund/credit, the remedy of the taxpayer is to appeal
having been prematurely filed. the inaction of the CIR to CTA within 30 days.
The second paragraph of Section 112(D) of the NIRC envisions two
The pivotal question of when to reckon the running of 2-year scenarios: (1) when a decision is issued by the CIR before the lapse of
prescriptive period has already been resolved in CIR vs. Mirant the 120-day period; and (2) when no decision is made after the 120-day
Pagbilao Corp. period. In both instances, the taxpayer has 30 days within which to file
o In that case, SC ruled that Section 112(A)1 of the NIRC is the an appeal with the CTA.
applicable provision in determining the start of the 2-year period
for claiming a refund/credit and NOT Sections 204(C) and 229
o The above provision clearly provides that unutilized input VAT 2
Credit or refund taxes erroneously or illegally received or penalties imposed without
payments not otherwise used for any internal revenue tax due authority, refund the value of internal revenue stamps when they are returned in good
the taxpayer must be claimed within 2 years reckoned from condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No
the close of the taxable quarter when the relevant sales
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
were made pertaining to the input VAT regardless of whether writing with the Commissioner a claim for credit or refund within two (2) years after
said tax was paid or not. the payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund.
3
In any case, no such suit or proceeding shall be filed after the expiration of two (2)
years from the date of payment of the tax or penalty regardless of any supervening
1 Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, cause that may arise after payment: Provided, however, That the Commissioner may,
within two (2) years after the close of the taxable quarter when the sales were made, even without written claim therefor, refund or credit any tax, where on the face of the return
apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid upon which payment was made, such payment appears clearly to have been erroneously
attributable to such sales, except transitional input tax, to the extent that such input tax has paid.
not been applied against output ta
IN THIS CASE, the admin and the judicial claims were whether before, during, or after the effectivity of the Atlas
simultaneously filed on Sept. 30, 2004. Aichi did NOT wait for the doctrine.”
decision of the CIR or the lapse of the 20-day period. Applying this doctrine only the TCC applied for during 2004 may
be taken to effect and not the 2003
MIRAMAR FISH COMPANY v. CIR (FajardoRK) (2) No, it did not comply with the requirements set under the law.
[G.R. No. 185432; June 4, 2014] Well-settled is the rule that absence or non-printing of the word
“120+30 day rule is mandatory for the filing of refund or tax credit claims” “zero-rated” in petitioner’s invoices is fatal to its claim for the
refund and/or tax credit representing its unutilized input VAT
Recit-Ready: attributable to its zero-rated sales.
Facts: Petitioner Miramar is a corporation with a place of business in
Zamboanga. It is registered with the CIR as a VAT taxpayerin FACTS:
accordance with the NIRC. It filed for refund in the form of Tax Petitioner Miramar is a corporation organized under the law of the
Credit Claim for alleged unutilized input VAT with a total amount Philippines with their principal office at Zambaonga City. It is
of 12,741,136.81 PHP during 2003 and 2004. The CTA division registered with the CIR as a VAT taxpayer in accordance with the
denied due course to their claim stating that the sales invoices NIRC.
presented did not comply with the invoicing requirements under Petitioner was registered with the Board of Investment (BOI) as a
the NIRC and RR. The CTA en banc affirmed in toto the decision new export producer of canned tuna and canned pet food with non-
of the divison. pioneer status, having been issued BOI Cert. of Registration.
Petitioner filed its quarterly VAT returns for taxable year 2002 with
Issue/s: the BIR for 2002-2003.
(1) Whether or not the CTA properly acquired jurisdiction over The administrative claim for refund in the form of a TCC (Tax Credit
petitioner’s claim for taxable years 2002 and 2003. —Only on the filing Claim) of petitioner’s alleged unutilized input VAT in the amount of
of claim during 2003 NOT 2002 6,751,751.65 for taxable year 2002 was filed on Feb 2003.
(2) Whether or not petitioner is entitled to a TCC in the amount of Petitioner also filed quarterly VAT returns for 2003. An
12,741,136.81 representing excess and unutilized input VAT for the administrative claim for refund in the form of a TCC of unutilized
year 2002 and 2003. —NO, it is not input VAT in the amount of 5,895,912.38 PHP for taxable year 2003
was filed on 2004.
Held: Another admin claim for refund or issuance of a TCC in the amount
(1) No it did not pursuant to Section 112 of the NIRC, Refunds or Tax of 12,741,136.81 PHP was filed on 2004.
Credits must be made within 120 days from the date of Consequently, no action has been taken by respondent on
submission of complete documents in support of the application petitioner’s various administrative claims, latter filed a review before
filed in accordance with the rules (see ruling below- the CTA on March 2004.
comprehensive). In the case of San Roque the court ruled that: The CTA division on October 22 2007 denied due course to their
“One of the conditions for a judicial claim of refund or credit under claims one the ground that the sales invoices presented did not
the VAT System is compliance with the 120+30-day mandatory comply with the invoicing requirements under Section 113 of the
and jurisdictional periods. Thus, strict compliance with the NIRC and Section 4.108-1 of RR No. 7-95—by not imprinting the
120+30 day periods is necessary for such a claim to prosper, word “zero-rated” on the subject invoices or receipts were fatal to its
claim. years after the close of the taxable quarter when the sales were
On Feb 19, 2008 the CTA division denied petitioner’s MR. made, apply for the issuance of a tax credit certificate or refund of
Aggrieved, the appealed to the CTA en banc under Sec. 18 R.A. creditable input tax due or paid attributable to such sales, except
1125, amended by R.A. 9282, on April 2008. transitional input tax, to the extent that such input tax has not been
The CTA on November 18, 2008 dismissed their appeal since they applied against output tax:
are just mere reiteration of its arguments contained in the MR and
affirmed the decision of the division. xxx
Hence, petitioner filed this petition for review seeking the reversal of
the decision and constituting a departure from the accepted and (D)Period within which Refund or Tax Credit of Input Taxes shall be
usual course of judicial proceedings as to call for an exercise of the Made.—In proper cases, the Com-missioner shall grant a refund or
power of supervision. issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of
ISSUE: complete documents in support of the application filed in
(1) Whether or not the CTA properly acquired jurisdiction over accordance with Subsections (A) hereof.
petitioner’s claim for taxable years 2002 and 2003. —Only on the filing of
claim during 2003 NOT 2002 In case of full or partial denial of the claim for tax refund or tax credit, or
(2) Whether or not petitioner is entitled to a TCC in the amount of the failure on the part of the Commissioner to act on the application
12,741,136.81 representing excess and unutilized input VAT for the year within the period prescribed above, the taxpayer affected may, within
2002 and 2003. —NO, it is not thirty (30) days from the receipt of the decision denying the claim or
after the expiration of the one hundred twenty-day period, appeal the
HELD: decision or the unacted claim with the Court of Tax Appeals.
Section 7 of RA No. 1125 amended by R.A. 9282 clearly defined
the appellate jurisdiction of the CTA. Section 7 defines the jurisdiction The proper interpretation of the provision was settled in the San Roque
of the CTA that provides: (1) Decisions of the Collector of Internal case:
Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees, or other charger, penalties imposed in relation “To repeat, a claim for tax refund or credit, like a claim for tax refund
thereto, or other matter arising under the NIRC or other law or part of exemption, is construed strictly against the taxpayer. One of the conditions
law administered by the BIR. for a judicial claim of refund or credit under the VAT System is compliance
with the 120+30-day mandatory and jurisdictional periods. Thus, strict
Relative thereto, is Section 11 which states those who may compliance with the 120+30 day periods is necessary for such a claim
appeal—Any person, association or corporation…may file an appeal in to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No.
the CTA within 30 days after the receipt of such decision or ruling.
DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi
The timeliness in the administrative and judicial claims can be doctrine was adopted, which again reinstated the 120+30 day periods
as mandatory and jurisdictional.”
found in Section 112 of the NIRC of 1997:
SEC. 112. Refunds or Tax Credits of Input Tax.— (A) Zero-rated or
The said doctrine was reiterated in the case of Mindanao II
Effectively Zero-rated Sales.—Any VAT-registered person, whose
Geothermal Partnership v. CIR, We summarize the rules on the
sales are zero-rated or effectively zero- rated may, within two (2)
determination of the prescriptive period for filing a tax refund or credit of taxable year 2002 was filed beyond the 30-day period.
unutilized input VAT as provided in Section 112 of the 1997 Tax Code, Section 112(D) states that in case of failure on the part of
as follows: respondent to act on the application within the 120-day
period prescribed by law, petitioner only has 30 days after
(1) An administrative claim must be filed with the CIR within two the expiration of the 120-day period to appeal the uncaught
years after the close of the taxable quarter when the zero-rated or claim with the CTA.
effectively zero-rated sales were made. Since petitioner’s claim for 2002 was filed before the CTA only on March
30, 2004, which was beyond the mandatory 120+30 days to seek judicial
(2) The CIR has 120 days from the date of submission of complete recourse, such noncompliance is fatal to its refund claim on the ground
documents in support of the administrative claim within which to prescription.
decide whether to grant a refund or issue a tax credit certificate. The Petitioner tried to justify the timeliness of its claim for taxable year 2002,
120-day period may extend beyond the two-year period from the petitioner made it appear in its letter dated March 2004 that there has been
filing of the administrative claim if the claim is filed in the later part of an amendment on its administrative claim covering year 2002.
the two-year period. If the 120-day period expires without any However, we are not persuaded by such allegation considering that
decision from the CIR, then the administrative claim may be there was supposed difference in the amounts being claimed for refund in
considered to be denied by inaction. the Letter of Request for VAT claim dated Feb 24, 2003 and letter dated
March 2004, a scrutiny of the subject letter reveals that both rely on the
(3) A judicial claim must be filed with the CTA within 30 days figures reflected in the VAT returns filed for 2002.
from the receipt of the CIR’s decision denying the The transmittal receipts attached to the letter visibly shows that it has
administrative claim or from the expiration of the 120-day submitted various documents in support of its 2002 claim including a copy of
period without any action from the CIR. the VAT return for 2002.
The court cannot consider the subsequent letter on March 2004 to have
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489- amended the previous one covering its refund claim for taxable year 2002.
03 from the time of its issuance on 10 December 2003 up to its Thus, petitioner failed to observe the 30-day period under Section 112 of
reversal by this Court in Aichi on 6 October 2010, as an the NIRC of 1997 through its belated filing of the petitioner for review before
exception to the mandatory and jurisdictional 120+30 day the CTA and warrants a dismissal with prejudice for lack of jurisdiction.
periods. However, this court allowed the amendment of petitioner’s refund claim
covering taxable year 2003 contained in the March 25, 2004 letter since
A taxpayer-claimant only had a limited period of 30 days from the there was a statement that there were amended quarterly VAT returns filed
expiration of the 120-day period of inaction of the CIR to file its judicial claim on March 12, 2004.
with the CTA, with the exception of claims made during the effectivity of the Even if it is shown that petitioner did not strictly comply with the
BIR Ruling No. DA-489-03. mandatory 12-+30 day prescriptive periods under Section 112 of the NIRC,
Failure to do so, the judicial claim shall prescribe or be considered as its administrative claim covering taxable year 2003 falls within the effectivity
filed out of time. of BIR Ruling No. DA-489-03, being an exception. Hence, there is no more
Applying the doctrine, petitioner complied with the required two-year need for petitioner to wait for the 120-day period to expire before it can file its
period within which to file a refund/tax credit claim with the BIR by filing on appropriate judicial claim before the CTA. Accordingly, the CTA indeed
Feb 24, 2003 and March 25, 2004. acquired jurisdiction over petitioner’s refund claim for taxable year 2003.
However, their judicial claim insofar as to the 4 quarters of
(2) Section 4.108-1 of RR No. 7-95 states that: counter the motion to dismiss, arguing that according to Sec. 306
of the NIRC, they have two years to file the appeal.
Invoicing Requirements.—All VAT--registered persons shall, for
every sale or lease of goods or properties or services, issue duly Issue:
registered receipts or sales or commercial invoices which must show: WON the petition for review was filed out of time (YES)
(1) The name, TIN and address of seller
(2) Date of Transaction Held: In ruling for the CIR, the Court noted that both laws must be
(3) Quantity, unit cost and description of merchandise or nature of construed together. A taxpayer who has paid the tax and who is
service; claiming a refund must file a claim for refund with the CIR within 2
(4) The name, TIN, business style, if any, and address of the VAT- years from the date of his payment of the tax, and appeal to the
registered purchaser, customer or client; CTA within 30 days from receipt of the CIR's decision. If,
(5) The word “zero-rate” imprinted on the invoice covering zero-rated however, the CIR takes time in deciding the claim, and the period
sales; of two years is about to end, the suit or proceeding must be
(6) The invoice value or consideration started in the CTA before the end of the two-year period without
awaiting the decision of the Collector.
Well-settled is the rule that absence or non-printing of the word “zero-
rated” in petitioner’s invoices is fatal to its claim for the refund and/or tax Basically, a taxpayer has 2 years to file the administrative
credit representing its unutilized input VAT attributable to its zero-rated sales claim with the CIR. If the CIR decides, then he has 30 days to
(Panasonic Communications Imaging Corporation v. CIR). appeal from that decision or inaction with the CTA. In this
case, since the CIR already denied the request, then the
Equally essential, Section 113 of the NIRC that categorically provides that petitioners only had 30 days to appeal that decision.
a VAT_registered entity, like petitioner, shall issue a duly registered VAT
invoice or official receipt, which must contain “a statement that the seller is a Facts:
VAT-registered person.” Therefore, invoking requirement is mandatory which On March 14, 1956, petitioners protested the deficiency income tax
petitioner failed to do. Absence, compliance the unavoidable result is assessment in the amount of P12,284, exclusive of surcharge and
immediate denial of the claim. interest, for the year 1950, issued against them by the CIR, on the ground
that said deficiency assessment was based on a disallowance of bad
GIBBS v. CIR (GO) debts and losses claimed in their income tax return for 1950.
[GR. No. L-13453; February 29, 1960] On Aug. 28, 1956, the CIR rejected the protest and reiterated his
“30 days lang binigay sayo, gusto mo 10 months, pwede pa rin???” demand.
On Oct. 3, 1956, petitioners sent a check in the amount of P12,284 as
Recit-Ready: payment of the deficiency tax, at the same time demanding the
Facts: Petitioners paid an assessment under protest and filed a claim for immediate refund of the amount paid.
refund with the CIR, which was later denied. Ten months after On Oct. 26, 1956, the CIR denied the request for refund. The petitioners
the denial, they filed a petition for review with the CTA. The CIR received the notice of denial on Nov. 14, 1956.
filed a motion to dismiss, stating that it was filed beyond the 30- Petitioners then filed with the CTA a petition for review and refund on
day period provided for in Sec. 11 of R.A. 1125. The petitioners Sept. 27, 1957 (10 months after receiving the notice of denial of refund).
The CIR filed a motion to dismiss on the ground of filing out of time – It has been held in Johnston Lumber Co. vs. CTA that Sec. 11
beyond the 30-day period provided in R.A. 1125. of R.A. 1125 was intended to cope with a situation where the
The petitioners contend that according the Sec. 306 of the NIRC, judicial taxpayer, elects to appeal to the CTA instead of paying the tax.
proceedings may be instituted for recovery of taxes paid, within two years For this reason, Sec. 11, provides that no such appeal would
from payment. suspend the payment of the tax demanded by the Government,
unless for special reasons, the CTA would deem it fit to restrain
Issue: said collection. On the other hand, Sec. 306 of the NIRC
WON the petition for review was filed out of time contemplates of a case wherein the taxpayer paid the tax,
—YES whether under protest or not, and later on decides to go to court
for its recovery. Where payment has already been made and
Held/Ratio: the taxpayer is merely asking for its refund, he must first
YES. According to Sec. 11 of R.A. 1125 4, appeals may be filed with the file with the Collector a claim for refund before taking the
CTA within 30 days after the receipt of the decision or ruling being matter to the Court, and that appeals from decisions or
questioned. rulings of the Collector of Internal Revenue to the Court of
It is not disputed that petitioners received on Nov. 14, 1956, the Tax Appeals must always be perfected within 30 days from
notice of the CIR’s decision denying their request for a refund of receipt.
the deficiency assessment paid by them. The SC has held that these two laws must be construed
Pursuant to Sec. 11, they had 30 days from said date within together. A taxpayer who has paid the tax, whether under
which to file their appeal. However, they filed said appeal only protest or not, and who is claiming a refund, must comply with
on Sept. 27, 1957, or more than 10 months thereafter, much the requirements of both sections, that is, he must file a
beyond the 30-day period within which to file the same. claim for refund with the CIR within 2 years from the date of
Petitioners’ reliance on Sec. 306 of the NIRC 5 is misplaced. his payment of the tax, as required by Sec. 306 of the NIRC,
and appeal to the CTA within 30 days from receipt of the
4
CIR's decision.
Section 11. Who may appeal; effect of appeal. - Any person association or corporation
adversely affected by a decision or ruling of the Collector of Internal Revenue, the Collector If, however, the CIR takes time in deciding the claim, and the
of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the period of two years is about to end, the suit or proceeding
Court of Tax Appeals within thirty days after the receipt of such decision or ruling.
must be started in the CTA before the end of the two-year
No appeal taken by the Court of Appeals from the decision of the Collector of Internal period without awaiting the decision of the CIR. This is so
Revenue or the Collector of Customs shall suspend the payment, levy, distraint, and or sale because of the positive requirement of Sec. 306 and the
of any property of the taxpayer for the satisfaction of his tax liability as provided by existing
law; Provided, however, That when in the opinion of the Court the collection by the Bureau doctrine that delay of the Collector in rendering decisions does
of Internal Revenue or the Commissioner of Customs may jeopardize the interest of the not extend the peremptory period fixed by the statute.
Government and/or the taxpayer the Court at any stage of the proceeding may suspend the In the case of a taxpayer who has not yet paid the tax and who
said collection and require the taxpayer either to deposit the amount claimed or to file a
surety bond for not more than double the amount with the Court is protesting the assessment made by the CIR, he must file his
appeal with the CTA within 30 days from his receipt of the
5
SEC. 306. Recovery of tax erroneously or illegally collected.- No suit or proceeding
shall be maintained in any court for the recovery of any national internal-revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum alleged to have maintained, whether or not such tax penalty, or sum has been paid under protest or duress.
been excessive or in any manner wrongfully collected, until a claim for refund or credit has It any case, no such suit or proceeding shall be begun after the expiration of two years from
been duly filed with the Collector of Internal Revenue; but such suit or proceeding may be the date of payment of the tax or penalty.
CIR's assessment, as required by Sec. 11 of R.A. 1125. already prescribed.

Otherwise, his failure to comply with said statutory requirement
would bar his appeal and deprive the CTA of its jurisdiction to Issue/s:
entertain or determine the same. 1) WON the taxes paid are considered as indebtedness - YES
2) WON Palanca’s claim is barred by prescription - NO
CIR v PALANCA (Guzman)
[GR. No. L-16626; October 29, 1966] Held:
“computation of the two-year prescriptive period for a claim for refund should 1) Yes. While "taxes" and "debts" are distinguishable legal concepts, in
be from the date of the last installment” certain cases as in the suit at bar, on account of their nature, the
distinction becomes inconsequential. The term "debt" is properly used
Recit-Ready: in a comprehensive sense as embracing not merely money due by
contract, but whatever one is bound to render to another, either for
contract or the requirements of the law. Where statutes impose a
Facts: Palanca received through a donation from his father, Palanca,
Sr., shares of stock in La Tondeña, Inc. amounting to 12,500 personal liability for a tax, the tax becomes at least in a broad sense,
shares. For failure to file a return on the donation within the a debt. Although taxes already due have not, strictly speaking, the
statutory period, Palanca was assessed the sums of same concept as debts, they are, however obligations that may be
P97,691.23, P24,442.81 and P47,868.70 as gift tax, 25% considered as such.
surcharge and interest, respectively, which were duly paid. 2) Palanca paid the last installment on his 1955 income tax account on
March 1, 1956, Palanca filed with the BIR his income tax return August 14, 1956. His claim for refund of the alleged overpayment on it
for the calendar year 1955. Subsequently, on November 10,
1956, he filed an amended return claiming a deduction in the was filed with the court on August 13, 1958. It was, therefore, still
amount of P47,868.70 representing interest paid on the donee's timely instituted as the law provides a 2-year prescriptive period after
gift tax. The claim for deduction was based on the provisions of the date of last installment.
Section 30(b) (1) of the Tax Code, which authorizes the
deduction from gross income of interest paid within the taxable Facts:
year on indebtedness. Under his claim for deduction, he alleges
Palanca received through a donation from his father, Palanca, Sr., shares
that he had incurred overpayment of taxes; therefore, he is
entitled to a refund. BIR denied his claim for refund and of stock in La Tondeña, Inc. amounting to 12,500 shares. For failure to
subsequently considered the transfer of 12,500 shares of stock file a return on the donation within the statutory period, Palanca was
of La Tondeña Inc. to be a transfer in contemplation of death assessed the sums of P97,691.23, P24,442.81 and P47,868.70 as gift
and assessed against him the sum of P191,591.62 as estate tax, 25% surcharge and interest, respectively, which were duly paid.
and inheritance taxes on the transfer of said 12,500 shares of Subsequently, on November 10, 1956, the petitioner filed an amended
stock. Palanca paid the amount of P60,581.80 as interest. He return for the calendar year 1955, claiming therein an additional
once more filed an amended income tax return claiming, in
deduction in the amount of P47,868.70 representing interest paid on the
addition to the interest deduction of P9,076.45 appearing in his
original return, a deduction in the amount of P60,581.80, donee's gift tax, thereby reporting a taxable net income of P18,113.42
representing interest on the estate and inheritance taxes on the and a tax due thereon in the sum of P3,167.00.
12,500 shares of stock. He requested the refund of P20,624.01. A claim for the refund of alleged overpaid income taxes for the year 1955
The CIR claims that a tax is not an indebtedness and therefore it amounting to P17,885.01, which is the difference between the amount of
cannot be deducted. It further alleged that Palanca’s claim has P21,052.01 he paid as income taxes under his original return and of
P3,167.00, was filed together with this amended return. In a
communication dated June 20, 1957, the respondent (BIR) denied the comprehensive sense as embracing not merely money due by contract,
claim for refund. but whatever one is bound to render to another, either for contract or the
BIR denied his claim for refund and subsequently considered the transfer requirements of the law. Where statutes impose a personal liability for a
of 12,500 shares of stock of La Tondeña Inc. to be a transfer in tax, the tax becomes at least in a broad sense, a debt. Although taxes
contemplation of death and assessed against him the sum of already due have not, strictly speaking, the same concept as debts, they
P191,591.62 as estate and inheritance taxes on the transfer of said are, however obligations that may be considered as such. The interests
12,500 shares of stock on taxes should be considered as interests on indebtedness within the
The amount of P17,002.74 paid on June 22, 1955 by the petitioner as gift meaning of Section 30(b) (1) of the Tax Code. The interpretation we
tax, including interest and surcharge was applied to his estate and have placed upon the said section was predicated on the congressional
inheritance tax liability. On the tax liability of P191,591.62, the petitioner intent, not on the nature of the tax for which the interest was paid.
paid the amount of P60,581.80 as interest for delinquency.
On August 12, 1958, the petitioner once more filed an amended income 2) The claim at bar refers to the alleged overpayment by respondent
tax return for the calendar year 1955, claiming, in addition to the interest Palanca of his 1955 income tax. Inasmuch as the said account was paid
deduction of P9,076.45 appearing in his original return, a deduction in the by him by installment, then the computation of the two-year prescriptive
amount of P60,581.80, representing interest on the estate and period, under Section 306 of the National Internal Revenue Code, should
inheritance taxes on the 12,500 shares of stock, thereby reporting a net be from the date of the last installment. Palanca paid the last installment
taxable income for 1955 in the amount of P5,400.32 and an income tax on his 1955 income tax account on August 14, 1956. His claim for refund
due thereon in the sum of P428.00. Attached to this amended return was of the alleged overpayment on it was filed with the court on August 13,
a letter of the petitioner, dated August 11, 1958, wherein he requested 1958. It was, therefore, still timely instituted.
the refund of P20,624.01 which is the difference between the amounts of
P21,052.01 he paid as income tax under his original return and of GIBBS v. CIR (Layno)
P428.00. [GR. No. L-17406; Nov. 29, 1965]
The CIR claims that a tax is not an indebtedness and therefore it cannot “The period to claim for refund has expired. You should’ve filed a claim for
be deducted. It also invokes prescription, at least with respect to the sum refund within two years from payment of tax AND appealed to the CTA
of P17,112.21, paid by Palanca under his withheld tax and under Receipt 30days from receipt of ruling denying your claim.”
No. 677395 dated May 11, 1956 may no longer be refunded since the
claim therefor was filed in court only on August 13, 1958, or beyond two Recit-Ready:
years of their payment Facts: Herein petitioners contest the denial of the claim for refund of the
CIR regarding their deficiency income tax. CIR first sent a letter to
Issue/s: Allison Gibbs telling her to pay the deficiency income tax of her
1) WON the taxes paid are considered as indebtedness - YES and that of his brother’s in the States. To this she sent a response
2) WON Palanca’s claim is barred by prescription - NO saying she will and that she attached a check with it to answer
the payment. However, also in that same letter she said that she
is demanding a refund “for reasons heretofore given to you”. She
Held/Ratio: sent this letter on the thinking that the letter sent by CIR was
1) While "taxes" and "debts" are distinguishable legal concepts in certain already a final demand. However, eventually she denied receiving
cases as in the suit at bar, on account of their nature, the distinction this. The claim for refund was denied by CIR saying that there
becomes inconsequential. The term "debt" is properly used in a was no justifiable basis for it. She filed a petition for review in the
CTA which ruled in favor of CIR. that the latter was notified by him of the said deficiency assessment. In
the same letter, Allison J. Gibbs questioned the disallowance of the items
Issue/s: which gave rise to the deficiency assessment and requested for a
1) WON respondent court erred in saying that Gibbs can no longer correction of it. On August 26, 1956, however, the respondent
claim for refund? Commissioner denied the request.
A letter was sent to Gibbs which states in part, “In view of the foregoing,
Held: 1) No it did not. Gibbs was not able to file the claim on time. As you are hereby requested for the last time to pay the said amount of
held by the Court in a previous case, Section 306 of the National P12,284.00 exclusive of surcharge and interest, to the City Treasurer,
Internal Revenue Code should be construed together with Manila, within ten (10) days from your receipt hereof in order that this
Section 11 of Republic Act No. 1125. In fine, a taxpayer who has case may be closed (this one is for Allison’s own income tax). You are
paid the tax, whether under protest or not, and who is claiming a further requested to urge your brother to pay the abovementioned amount
refund of the same, must comply with the requirement of both immediately upon your receipt hereof in order that his case may also be
sections, that is, he must file a claim for refund with the Collector closed.”
of Internal Revenue within 2 years from the date of his payment Allison deemed the reply of CIR as a final decision, hence she wrote back
of the tax, as required by Sec. 306 of the NIRC, AND appeal to saying that it was contrary to law and that just so she can show good faith
the Court of Tax Appeals within 30 days from receipt of the on her part, she attached a check drawn on the Chartered Bank of India,
Collector's decision or ruling denying his claim for refund, as Australia & China as full payment for the deficiency assessment.
required by Section 11 of Republic Act No. 1125. If, however, However (I dunno how) at the same time, she demanded refund of the
the Collector takes time in deciding the claim, and the period same payment “for reasons heretofore given to you”. She also demanded
of two years is about to end, the suit or proceeding must be that she should receive it on or before the fourth of October otherwise she
started in the Court of Tax Appeals before the end of the will file a Petition for Review with the CTA and charge CIR with damages.
two-year period without awaiting the decision of the Commissioner denied the refund for both tax liabilities (Allisons’s and
Collector. This is so because of the positive requirement of her brother’s) because there’s no justifiable basis for it.
Section 306 and the doctrine that delay of the Collector in On September 29, 1958, Allison J. Gibbs, signing as counsel for Finley J.
rendering decision does not extend the peremptory period Gibbs, wrote another letter addressed to the respondent Commissioner to
fixed by the statute "reiterate our client's demand for refund of the P16,873.00 he paid on
October 3, 1956 and for certain tax credits.
Petitioners filed with the respondent court a "Petition for Review and
Facts: Refund of Income Tax with Motion for Suspension of Collection of
On February 6, 1965, the respondent CIR issued against the petitioners, Additional Taxes," alleging, in the main, its claims for refund and tax
"Finley J. Gibbs and Diane P. Gibbs, c/o Francisco Collantes, Rm. 301, credit discussed above. To this petition, the respondent Commissioner
Cepoc Bldg., Dasmariñas, Manila" a deficiency Income Tax Assessment filed an Answer saying that 1) CTA had no jurisdiction to take judicial
for P16,873.00 for the tax year 1950 with the demand that the said cognizance of the petition for review on the ground that it was filed
amount should be paid on or before March 15, 1956. On March 14, 1956, beyond thirty days from the date of receipt of respondent's decision
Allison J. Gibbs, signing as attorney-in-fact for Finley J. Gibbs, his denying the claim for refund; and 2) no jurisdiction over the cause of
brother, acknowledged receipt of the above assessment notice and action with respect to the credit of the amounts stated in the petition for
notified the respondent Commissioner that Finley J. Gibbs was then living review for the reason that the request for credit and the petition for review
in Atherton, California, with office at 200 Bush Street, San Francisco and praying for the credit of said amounts have been filed beyond two (2)
years from the dates of payment of the amounts sought to be credited in that even Allison J. Gibbs deemed the August 28, 1956 correspondence as
the petition for review. the Commissioner's "final decision" on the controversy, it is difficult to see
The respondent court, after due hearing and reception of evidence, how the petitioners can now argue that the said letter of October 26, 1956,
sustained the above objection to its jurisdiction and upheld the was not a denial of their claim for refund. Parenthetically, it may be observed
respondent Commissioner's claim that the two causes of action asserted that respondent court had no jurisdiction over the petition for review because
by the petitioner were barred by prescription. it was filed beyond the 30-day period.
The petitioners contend that the respondent court erred in ruling that their 3) The petitioners' thesis is to the effect that income tax assessments against
petition for review was filed outside the 30-day period prescribed by which claims for refund have been lodged and which are covered by taxes
Section 8 of Republic Act No. 1125 because (a) there is neither evidence withheld at the source shall be considered paid, not at the time such tax
nor record that the petitioners received a copy of the letter of October 26, obligations fall due, but, only when the claims for refund against the
1956 denying their claim for refund, and (b) the aforesaid letter of October assessments are finally resolved by the authorities.
26, 1956 is not a denial of their claim for refund. Payment is a mode of extinguishing obligations (Art. 1231, Civil Code)
Issue/s: and it means not only the delivery of money but also the performance,
3) WON Petitioner Finley Gibbs (the brother) was not able to receive a in any other manner, of an obligation (id., Art. 1231). A taxpayer,
copy of the denial of refund? resident or non-resident, who contributes to the withholding tax system,
—NO does so not really to deposit an amount to the Commissioner of Internal
2) WON petitioners knew that the letter that was received is a denial of Revenue, but, in truth, to perform and extinguish his tax obligation for
their claim? the year concerned. In other words, he is paying his tax liabilities for
-YES that year. Consequently, a taxpayer whose income is withheld at the
3) WON CTA erred in ruling that the period to claim for refund has source will be deemed to have paid his tax liability when the same falls
already prescribed? due at the end of the tax year. It is from this latter date then, or when
-NO the tax liability falls due, that the two-year prescriptive period under
Section 306 of the Revenue Code starts to run with respect to payments
Held/Ratio: WHEREFORE, the instant petition for review is hereby effected through the withholding tax system. It is of no consequence
dismissed, with costs against the petitioners. whatever that a claim for refund or credit against the amount
withheld at the source may have been presented and may have
1) No. Anent the insistence of the petitioners that they never received a copy
remained unresolved since, as this Court has previously explained
of the letter of October 26, 1956 denying their claim for refund, suffice it to
in the case of Gibbs vs. Collector of Internal Revenue:
say that while they themselves personally might not have received a copy of
it, Allison J. Gibbs, as their attorney-in-fact and actually as their counsel, Section 306 of the National Internal Revenue Code should be
received a copy of the same. That Allison J. Gibbs was not merely the agent construed together with Section 11 of Republic Act No. 1125. In fine,
of the petitioners in the matter under litigation is proved by her a taxpayer who has paid the tax, whether under protest or not, and
acknowledging of the petitioners receipt of the deficiency income tax who is claiming a refund of the same, must comply with the
assessment, formally protested the same in writing, paid the assessment and requirement of both sections, that is, he must file a claim for refund
likewise formally demanded in writing its refund. with the Collector of Internal Revenue within 2 years from the date of
2) Yes. Petitioners' claim that the letter of October 26, 1956 was not a denial his payment of the tax, as required by Sec. 306 of the NIRC, AND
of their claim for refund is patently unmeritorious. The letter in question appeal to the Court of Tax Appeals within 30 days from receipt of
clearly stated that "for reasons stated in our letter dated August 28, 1956, the Collector's decision or ruling denying his claim for refund, as
this Office finds no justifiable basis to grant your said request." Considering required by Section 11 of Republic Act No. 1125. If, however, the
Collector takes time in deciding the claim, and the period of two filing of the Supplemental Petition? --NO.
years is about to end, the suit or proceeding must be started in 2) Assuming it was tolled, WON the refund would prosper? --NO.
the Court of Tax Appeals before the end of the two-year period
without awaiting the decision of the Collector. This is so Held:
because of the positive requirement of Section 306 and the 1) NO. The filing of a Supplemental petition does not toll the prescriptive
doctrine that delay of the Collector in rendering decision does period for refund. The admission of such petition is discretionary for
not extend the peremptory period fixed by the statute. the courts. If denied, it is deemed not filed and cannot toll the
prescriptive period.
FAR EAST BANK AND TRUST COMPANY vs 2) NO. Even if it did toll the prescriptive period, it would still not be
subject for refund. The CTA evinced palpable discomfort over the
COMMISSIONER OF INTERNAL REVENUE (Lim, J.)
sufficiency of the evidence presented by petitioner to establish its
[G.R. No. 138919; May 2, 2006]
claim for refund. Tax refunds partake the nature of tax exemptions
“Refund. Refund. Refund. LOL .”
and are construed strictly against the one claiming it. The burden in
proving the claim for refund necessarily falls on the taxpayer, and
Recit-Ready:
petitioner in this case failed to discharge the necessary burden of
proof.
Facts: FEBTC is the trustee of various retirement plans established by
several companies for its employees. As the trustee, FEBTC
Facts:
utilized these retirement funds in various instruments and
Petitioner is the trustee of various retirement plans established by several
necessarily earned interest income. FEBTC's claim for refund
companies for its employees.
centers on the tax withheld and paid to the CIR for 1993. By this
o As the trustee, petitioner was authorized to hold, manage, invest
time, there was a pending petition in CTA, involving the same
and reinvest the assets of these plans.
legal issue but a previous taxable period. FEBTC filed a Motion to
o Petitioner utilized such authority to invest these retirement funds in
Admit Supplemental Petition seeking to include in that case the
various instruments and necessarily earned interest income.
tax refund claimed for 1993, which was denied. CTA advised that
o Petitioner's claim for refund centers on the tax withheld by the
petitioner could file a separate petition for review, to which it
various withholding agents, and paid to the CIR for the 4 quarters of
followed and filed on October 9, 1995. While the CTA noted that
1993, on the aforementioned interest income. It is alleged that the
the income from employees’ trust funds were exempt from
total final withholding tax on interest income paid for that year
income taxes, the claims for refund which covered the 1st-3rd
amounted to P6M.
quarters of 1993 and October 1-8, 1993 had already prescribed.
On four dates, 12 May 1993, 16 August 1993, 31 January 1994, and 29
As to the claim for refund covering the period 9 October 1993 up
April 1994, petitioner filed its written claim for refund with the BIR for all
to 31 December 1993, the CTA ruled that the evidence being
quarters of 1993, respectively.
insufficient to establish the fact that the money or assets of the
o Petitioner cited CIR v. CA, holding that employees’ trusts are
funds were indeed used and invested. The CTA and CA denied
exempted by specific mandate of law from income taxation.
all subsequent MRs and petition for review. Hence this case.
o Nonetheless, the claims for refund were denied.
Issue/s: By this time, petitioner already had a pending petition before the CTA and
1) WON the 2-year prescriptive period for refund is tolled by the apparently involving the same legal issue but a previous taxable period.
Hoping to comply with the 2-year period for refund, petitioner filed a 4) WON it was dismissed due to a mere technicality? -NO.
Motion to Admit Supplemental Petition on 28 April 1995, seeking to 5) WON the 2-year prescriptive period for refund is tolled by the filing
include in that case the tax refund claimed for the year 1993. of the Supplemental Petition? --NO.
o However, the CTA denied the admission of the Supplemental 6) Assuming it was tolled, WON the refund would prosper? NO.
Petition.
o The CTA reasoned then that CTA case had already been pending Held/Ratio:
for more than 2.5 years, and the admission of the supplemental 3) NO. It is only after a prima facie finding that the CTA had committed
petition, with a substantial enlargement of petitioners original claim errors of fact or law that would warrant reversal, that the case record
for refund, would further delay the proceedings, causing as it would, would be transmitted from the court of origin to the CA.
an effective change in the cause of action. Clearly, upon the filing of the petition, the appellate court would have
o Nonetheless, the CTA advised that petitioner could instead file a no documentary basis to discern whether the required prima facie
separate petition for review. standard has been met except the petition itself and the documents
Petitioner decided to follow the CTA's advice. that accompany it.
o On 9 October 1995, it filed another petition for review with the CTA, While the submissions in the petition may refer to other documents
concerning its claim for refund for the year 1993. in the record, or may even quote at length from those documents,
o On 1998, CTA denied the claim for refund for the year 1993. the CA would have no way to ascertain the veracity of the
o The claims for refund had already prescribed insofar as they submissions unless the certified true copies of these documents are
covered the first, second and third quarters of 1993, as well as attached to the petition itself.
from the period of 1 October to 8 October 1993. Thus, the requirement that certified true copies of documents be
o The CTA ruled considering that the petition before it was filed only attached is not a mere technicality that can be overlooked with ease,
on 9 October 1995, and thus, only those claims that arose after but an essential requisite for the determination of prima facie basis
9 October 1993 could be considered in light of 2-year for giving due course to the petition.
prescriptive period from the date of payment of the tax.
o As to the claim for refund covering the period 9 October 1993 up to 4) NO. In this case, the claim for refund for the taxes paid in 1993 was
31 December 1993, the CTA ruled that the evidence being through a supplemental petition and not through an original action.
insufficient to establish the fact that the money or assets of the funds The admission of supplemental pleadings and complaints is in the
were indeed used and invested. sound discretion of the court.
o The CTA noted that petitioner merely submitted as its evidence It is only upon the admission by the court of the supplemental
copies of documents. complaint that it may be deem to augment the original complaint.
The CTA faulted petitioner for failing to submit such necessary Until such time, the court acquires no jurisdiction over such new
documentary proof of transactions, such as confirmation receipts and claims as may be raised in the supplemental complaint.
purchase orders that would ordinarily show the fact of purchase of Assuming that the CTA erred in refusing to admit the Supplemental
treasury bills or money market placements by the various funds, together Petition, such action is now beyond the review of this Court, the
with their individual bank account numbers. order denying the same having long lapsed into finality, and it
The CTA and CA denied all subsequent MRs and petition for review. appearing that petitioner did not attempt to elevate such denial
Hence this case. for judicial review with the proper appellate court.
Thus, the Court cannot treat the Supplemental Petition as having
Issue/s: any judicial effect.
It cannot even be deemed as having been filed, the CTA refusing to o Yet it cannot be escaped that the taxpayer needs to
admit the same. establish not only that the refund is justified under the law,
but also the correct amount that should be refunded.
5) NO. Assuming that the filing of the Supplemental Petition could have o If the latter requisite cannot be ascertained with
tolled the two (2)-year prescriptive period insofar as the 1993 taxes particularity, there is cause to deny the refund, or allow it
paid after 28 April 1993 were concerned, the Court would still not only to the extent of the sum that is actually proven as due.
grant refund sought for. o Tax refunds partake the nature of tax exemptions and are
The CTA evinced palpable discomfort over the sufficiency of the thus construed strictly against the one claiming it.
evidence presented by petitioner to establish its claim for refund. o The burden in proving the claim for refund necessarily falls
The tax exemption enjoyed by employees trusts was absolute, on the taxpayer, and petitioner in this case failed to
irrespective of the nature of the tax. discharge the necessary burden of proof.
What has to be established though, as a matter of evidence, is that
the amount sought to be refunded to petitioner actually corresponds CIR v. SWEENEY (Lim, Q.)
to the tax withheld on the interest income earned from the exempt [No. L-12178; August 21, 1959]
employees’ trusts. “Taxpayers need not wait for the action of the CIR on the request for refund
It clearly bothered the CTA that the submitted certifications from before taking the matter to Court.”
Citibank, the BSP, and attest only to the total amount of final
withholding taxes remitted to the BIR. Recit-Ready:
o Evidently, the sum includes not only such taxes withheld Facts: International Club of Iloilo, Inc., is a non-profit, nonstock
from the interest income of the exempt employees trusts, corporation that aims to promote athletic and social relations
but also from other transactions between petitioner and among its members, and to that end, to establish and maintain
the BSP or Citibank which are not similarly exempt one or more clubhouses. It maintained and operated a clubhouse
from taxation. with a bar, wherein liquor and light refreshments were sold
o There is particular need for them to segregate such taxes exclusively to its members and their guests with a slight overprice
withheld from the interest income of employees’ trusts, and to cover operational expenses. The Club was operated with funds
those withheld from other sources for them to hold value. derived from membership fees, monthly dues and the income of
The Court agrees with the CIR that petitioner should have instead its bar. Collector of Internal Revenue addressed and demanded
submitted documentary proof of transactions, such as confirmation from the Club payment of the sum of P1,987.01 as fixed and
receipts and purchase orders, as the best evidence on the percentage tax and surcharge as operator of the bar. It protested
participation of the funds from these employees’ trusts. these amounts and ask that these be withdrawn. CIR urged the
o These documents are vital to establish the extent of the City Fiscal of Iloilo to prosecute criminally the past presidents of
investments made by petitioner from the employees’ trusts, the Club. Sweeney requested for the reconsideration of their
as distinguished from those made from other account cases. In view of the instructions of respondent, the City Fiscal
sources, and correspondingly, the amount of taxes withheld conducted a preliminary investigation of the case. However the
from the interest income derived from these employees’ projected information against Sweeney were withdrawn on
trusts alone. August 3, 1955 as they paid under protest to the City Treasurer of
The Court has no desire to impose unnecessarily pernickety Iloilo their alleged tax liabilities. Sweeney thru counsel filed their
documentary requirements in obtaining a valid tax refund. written claim for refund with the CIR of the aforesaid amounts
paid by them under protest. Not having received any reply from members and their guests with a slight overprice to cover operational
the CIR regarding said claim for refund, Sweeney thru counsel expenses. The Club was operated with funds derived from membership
sent their petition for review. Sweeney then contends that the fees, monthly dues and the income of its bar.
Court of Tax Appeals has no jurisdiction to order the refund of the During its brief existence, the Club had four (4) presidents. Respondents,
taxes involved because the CIR has not yet ruled upon their Sweeney and Burgas, were among these four.
request for refund. It is admitted that the Club never paid fixed or percentage taxes as
operator of a bar during its brief lifespan.
Issue/s: On November 11, 1950, Collector of Internal Revenue addressed and
1) WON the CTA has jurisdiction to order the refund of the amounts demanded from the Club payment of the sum of P1,987.01 as fixed and
paid.--YES percentage tax and surcharge as operator of the bar for the period
2) WON the government is required to pay interest for the amount covering August 1949 to September 1950, plus P50.00 as penalty in
refunded.--NO extrajudicial settlement of violations of sections 182, 183 and 191 of the
Tax Code.
Held: Although CIR threatened to enforce summary collection of the alleged tax
1) NO. Taxpayers need not wait for the action of the CIR on the deficiency, no positive step was taken to effect the same.
request for refund before taking the matter to Court. It cited two On March 12, 1951, J. N. Sweeney, then president of the Club, wrote the
cases previously decided on by the court to support its claim. (See City Treasurer of Iloilo protesting the aforementioned assessment against
Ratio) the Club and asking that it be withdrawn for the reason that the Club was
a private one, not organized for profit, which like the Manila Polo Club
2) NO. In the absence of a statutory provision clearly or expressly should not be held liable for the taxes sought to be collected.
directing or authorizing such payment, and none has been cited by This protest remained unanswered for about ten months..
respondent, the National Government cannot be required to pay On January 15, 1952 Collector denied Sweeney's request for withdrawal
interest. Even if the Court held that club is not required to pay for of the assessment against the Club and this time demanded from the
percentage tax, this does not entitle Sweeney to obtain interest from the latter payment of the sum of P3,526.55, representing fixed and
award given because there is no statutory provision stating that the percentage taxes and surcharge, as operator of a bar for the period
Government is required to pay interest. covering August 1949 to August 1951.
Although no payment was made, CIR did not take positive steps to
enforce collection of the alleged tax deficiency.
Facts:
However, on August 15, 1953 and October 15, 1953, CIR urged the City
The International Club of Iloilo, Inc., is a non-profit, nonstock corporation Fiscal of Iloilo to prosecute criminally the past presidents of the Club for
organized under Philippine laws sometime in January 1949, in order to violation of Sections 182, 183 and 191 of the Tax Code.
promote athletic and social relations among its members, and to that end,
Meanwhile, Sweeney requested for the reconsideration of their cases. In
to establish and maintain one or more club houses having a library,
view of the instructions of respondent, the City Fiscal conducted a
reading room and such other athletic and social appurtenances and preliminary investigation of the case.
belongings as are usual in social clubs and clubhouses.
However, the projected information against Sweeney were withdrawn on
In consonance with this avowed purpose, the club from its incorporation August 3, 1955 as they paid under protest to the City Treasurer of Iloilo
in 1949 to its dissolution, maintained and operated a clubhouse with a
their alleged tax liabilities.
bar, wherein liquor and light refreshments were sold exclusively to its
On the same date, August 3, 1955, Sweeney thru counsel filed their statutory period of two years proceed with his suit without
written claim for refund with the CIR of the aforesaid amounts paid by waiting for the Collector's decision.
them under protest. And in the case of College of Oral & Dental Surgery vs. Court of Tax
Not having received any reply from the CIR regarding said claim for Appeals and Collector of Internal Revenue, we ruled:
refund, Sweeney thru counsel sent their petition for review. o "This Court, construing the aforequoted provisions of law
Sweeney contends that the Court of Tax Appeals has no jurisdiction to (referring to Section 306 of the National Internal Revenue
order the refund of the taxes involved: Code) in an identical case, made the pronouncement that
o First, because said amounts had been paid in extrajudicial although the filing of the claim with the Collector of Internal
settlement of the case against them, and Revenue is intended as a notice to said official that unless
o Second, because the CIR has not yet ruled upon their the tax or penalty alleged to have been erroneously or
request for refund. illegally collected is refunded court action will follow, this
does not imply that the taxpayer must wait for the
Issue/s: action of the Collector before bringing the matter to
1) WON the CTA has jurisdiction to order the refund of the amounts court. Indeed, it must be observed that under said
paid.--YES provisions, the taxpayer's failure to comply with the
2) WON the government is required to pay interest for the amount requirement regarding the institution of the action or
refunded.--NO proceeding in court within 2 years after the payment of the
taxes bars him from the recovery of the same, irrespective
Held/Ratio: In view of the foregoing and with the modification already stated of whether a claim for the refund of such taxes filed
as to the non-payment of interest, the appealed decision is hereby affirmed. with the Collector of Internal Revenue is still pending
No costs. action of the latter."
1) YES. Taxpayers need not wait for the action of the CIR on the 2) NO. In the absence of a statutory provision clearly or expressly
request for refund before taking the matter to Court. directing or authorizing such payment, and none has been cited by
As to the propriety of taking the case to the Court of Tax Appeals respondent, the National Government cannot be required to pay
before Sweeney received any advice as to the action taken, if any, interest.
on their petition for refund, this question has already been previously Even if the Court held that club is not required to pay for percentage
ruled upon by the Court. tax, this does not entitle Sweeney to obtain interest from the award
Taxpayers need not wait for the action of the Collector of given because there is no statutory provision stating that the
Internal Revenue on the request for refund before taking the Government is required to pay interest.
matter to court. The court held in Collector of Internal Revenue vs. St. Paul's
In the case of P. J. Kiener Co. vs. David, 92 Phil., 945, we said: Hospital of Iloilo that:
o Nowhere and in no wise does the law imply that the “We agree, however, with the Solicitor General that the Court of Tax
Collector of Internal Revenue must act upon the claim Appeals erred in ordering the payment of interest on the amount to
or that the taxpayer shall not go to court before he is be refunded to respondent herein. In the absence of a statutory
notified of the Collector's action. Having filed his claim provision clearly or expressly directing or authorizing such payment,
and the Collector of Internal Revenue having had ample and none has been cited by respondent, the National Government
time to study it, the claimant may, indeed should, within the cannot be required to pay interest.”
increased rates, the latter law did not specifically provide for a refund
Philex Mining Corporation vs. CIR (LUNA) based on the increased rates. Since the grant of refund privileges must be
[GR. No. 120324; April 21, 1999] strictly construed against the taxpayer, the basis for the refund remains to
“The base of the tax refund shall be based on the law that provided for be the amounts deemed paid under Sections 1 and 2 of R.A. 1435.
refunds on the specific taxes. The tax refund cannot be based on the Furthermore, the claims for refund which were not filed with the CIR and
subsequent amendments of the rates not providing for a same refund.” those that prescribed must be deemed excluded, for being outside the
ambit of the legislative enactment.
Recit-Ready:
Facts: From July 1, 1980 to December 31, 1981, Philex Mining Corp. Facts:
purchased from several oil companies, refined and manufactured Philam entered into a Mining License Agreement w/ Ministry of Nat
minerals, motor fuels, and diesel fuel oils. Specific taxes were Resources (now DENR).
paid. On October 22, 1982, the company availed of the provisions From the period July 1, 1980 to December 31, 1981, Philam purchased
of RA 1435 granting refund of 25% of the specific tax paid. from several oil companies, refined and manufactured mineral oils, motor
Pending such claim for refund (P623,169.30 representing the fuels, and diesel fuel oils.
25% of actual specific taxes paid) with the CIR, the company filed The specific taxes passed on to the petitioner amounted to
another claim for refund with the same amount plus 20% interest P2,492,677.22.
thereon with the CTA on November 16, 1982. The CTA granted On October 1982, pursuant to R.A. 1435, petitioner filed a claim for
the refund but only P16,747.36 which was based on the amount refund with the CIR for P623,169.30, representing the 25% of the specific
deemed paid under Sections 1 & 2 of RA 1435. Philex contends taxes paid on their use of refined and manufactured mineral oils, motor
the refund should be based on the actual specific taxes paid as fuels and diesel fuel oils.
per the increased rates provided in Sections 142 and 145 (which Pending CIR action, on November 1982, the petitioner filed a case for tax
became Sections 153 and 156) of the NIRC. refund with the CTA.
The petitioner sought judgment ordering the CIR to pay as refund the
Issue/s: amount of P623,169.30, with 20% interest per annum, plus the costs of
Whether CA erred in basing the tax refund on the 20% specific taxes suit.
deemed paid under RA 1435 (taxes deemed paid) instead of the On August 4, 1994, the CTA rendered its decision, granting the tax
increased rates imposed by Sec 142 and 145 (taxes actually paid). – NO refund, but only to the extent of P16,747.36 (based on the specific taxes
deemed paid under R.A. 1435).
Held: Petitioner seeks a higher tax base (specific taxes actually paid) for the
This Court, in a string of decisions, repeatedly held that the tax refund refund it seeks.
under R.A. 1435 is computed on the basis of the specific tax deemed paid
under Sections 1 and 2, and not on the increased rates actually paid Issue/s:
under the 1977 NIRC. Whether respondent court erred in basing the tax refund under
Sections 1 and 2 of R.A. 1435, instead of the increased rates imposed
The subsequent codification of tax laws under the 1977 NIRC, Sections by Sections 142 and 145 (which became Sections 153 and 156) of the
153 and 156, mandated the increased rates of specific taxes levied on National Internal Revenue Code, as amended.  —NO
manufactured oils, other fuels and diesel fuel oils. Although Philex Mining
Corporation paid the taxes on their oil and fuel purchases based on the
Held/Ratio: Petition DENIED, and the assailed decision of the Court of As to the 20% interest per annum prayed for by the petitioner,
Appeals is hereby AFFIRMED. o The rule is that no interest on refund of tax can be awarded
unless authorized by law or the collection of the tax was
NO, court's decision was proper. attended by arbitrariness. An action is not arbitrary when
exercised honestly and upon due consideration where there is
Right to refund under R.A. 1435 room for two opinions, however much it may be believed that an
o In 1977, PD 1158 codified all existing internal revenue laws. erroneous conclusion was reached. Arbitrariness presupposes
Sections 142 and 145 of the Tax Code, as amended by inexcusable or obstinate disregard of legal provisions. None of
Sections 1 and 2 of RA 1435 (An Act to Provide Means for the exceptions are present in the case at bar. Respondent’s
Increasing the Highway Special Fund) were re-numbered to decision denying petitioner’s claim for refund was based on an
Sections 153 and 156. honest interpretation of law.
o RA 1435 explained that mining and lumber companies seldom
use national highways. Since the gasoline and fuel purchased
by mining and lumber companies are used within their own CIR v. Tokyo Shipping Co., Ltd. (Pascual)
compounds and roads, and they do not benefit directly from the [GR. No. 68252; May 26, 1995]
Fund, the government granted to these companies a 25% “Su-gaaaaar! Re-ceeeeeipts! Would you refund the tax paid erroneously?”
partial refund of specific taxes paid on purchases of
manufactured diesel and fuel oils. Recit-Ready:
o The SC, in a string of decisions repeatedly held that tax refund Facts: Tokyo Shipping, a resident foreign international carrier, had one
under R.A. 1435 is computed on the basis of the specific tax of its vessels chartered by NASUTRA to load 16,500 metric tons
deemed paid under Sections 1 and 2, and NOT on the of raw sugar in the Philippines to be shipping to Japan. Pursuant
increased rates actually paid under 1977 NIRC. to the charter agreement, Tokyo Shipping paid in advance the
o Later, PD 1672 amended sec. 153 and 156 and, subsequently, appropriate income and common carrier’s taxes based on its
by EO 672, increasing the tax rates for certain oil and fuel expected gross receipts. Upon arrival at the port, the vessel found
products. When the highway special fund was abolished in no sugar for loading and so it was forced to sail to Japan without
1985, the reason for the refund ceased to exist. realizing any receipts. Thus, Tokyo Shipping filed a claim for tax
Since the partial refund authorized under Section 5, R.A. 1435, is in the refund but the CIR. The CIR failed to act promptly and so Tokyo
nature of a tax exemption, it must be construed strictissimi juris against Shipping filed a Petition for Review with the CTA. The CIR
the grantee. opposed the petition, arguing that Tokyo Shipping had the burden
The subsequent codification of tax laws under the NIRC Sec 153 and of proof to support its claim for tax refund. The CTA ruled in favor
156 mandated increase rates of specific taxes on oils, fuels, etc. of Tokyo Shipping
Although PHILEX paid the taxes on their oil and fuel based on the
increased rates, the latter law did NOT specifically provide for a refund Issue/s:
based on the increased rates. WON Tokyo Shipping is entitled to a refund or tax credit for amounts
o Since the grant of refund privileges must be strictly construed representing pre-payment of income and common carrier’s taxes
against the taxpayer, the basis for the refund remains to be the under the NIRC as amended?
amounts deemed paid under Sections 1 and 2 of R.A. 1435. — YES
Held: YES. Although the CIR is correct in arguing that a claim for o That Tokyo Shipping had suppressed evidence when it did
refund is in the nature of a claim for exemption and should be not present its charter agreement.
construed strictissimi juris against the taxpayer and that the burden Issue/s:
of proof to establish the factual basis of the claim is on the taxpayer, WON Tokyo Shipping is entitled to a refund or tax credit for amounts
such burden had been satisfied in this case. representing pre-payment of income and common carrier’s taxes under
the NIRC as amended?
— YES
Facts:
Respondent is a foreign corporation represented in the Philippines by Held/Ratio:
Soriamont Steamship Agencies.
In December of 1980, one of its vessels was chartered by NASUTRA to YES. Although the CIR is correct in arguing that a claim for refund is in
load 16,500 metric tons of raw sugar in the Philippines. the nature of a claim for exemption and should be construed
o Pursuant to such, the required income and common strictissimi juris against the taxpayer and that the burden of proof to
carrier’s taxes, amounting to P107, 142.75 were paid, establish the factual basis of the claim is on the taxpayer, such burden
based on the expected gross receipts of the vessel. had been satisfied in this case.
o Upon arriving at the port, however, the vessel found no In this case, the CTA held that Tokyo Shipping had adduced
sugar for loading and so NASUTRA and private sufficient evidence in proving that it had derived no receipt from its
respondent’s agent mutually agreed to have the vessel sail charter agreement with NASUTRA.
for Japan without any cargo. o Documents issued by officials of the Bureau of Customs
No cargo meant that no receipts were realized. attested to the fact of there being no sugar shipments and
Claiming the pre-payment of income and common carrier’s taxes as the CIR did not contest these documents.
erroneous since no receipt was realized from the charter agreement, Also, in the course of proceedings before the CTA, the CIR was
private respondent instituted a claim for tax credit or refund but the CIR inconsistent in its stance.
failed to act promptly on the claim. o At certain points, the CIR had manifested that the BIR
o Note: Under the NIRC, a resident foreign corporation examiner had actually recommended the claim for refund
engaged in the transport of cargo is liable for taxes and that the government would withdraw the opposition to
depending on the amount of income it derives from sources the petition for tax refund after final approval.
within the Philippines. o That being said, they never did and so the case dragged
o International cariers pay a tax of 2.5% on their Gross on.
Philippine Billings. The SC also held that the CIR’s argument that Tokyo Shipping had
Tokyo Shipping then filed a Petition for Review before the Court of Tax been suppressing evidence by not presenting its charter agreement
Appeals and the latter ruled in their favor. with NASUTRA could not stand because it presupposed without any
Thus, the case before the SC where the CIR argue that: basis that the charter agreement was prejudicial evidence against
o Tokyo Shipping has the burden of proof to support its claim Tokyo Shipping.
of refund; o Besides, the CIR itself could have presented the charter
o That it had failed to prove that it did not realize any receipts agreement through the proper use of a subpoena duces
from its charter agreement; tecum but it never did.
Fair deal is expected by the taxpayers from the BIR and duty period provided, should be computed from the time of filing the
demands that BIR should refund without any unreasonable delay Adjustment Return and final payment of the tax for the year.
what it has erroneously collected.
o In this case, the tax was paid way back in 1980 and despite
the clear showing that it was erroneously paid, the Facts:
government succeeded in delaying its refund for 15 years. Petitioner, a commercial banking corporation, filed its quarterly income
Thus, the decision of the CTA was affirmed. tax returns for the first and second quarters of 1985, reported profits and
paid the total income tax of P5,016,954.00 for the said quarters.
PHILIPPINE BANK OF COMMUNICATIONS v. CIR However, when it filed its annual income tax return for the same year, it
declared a net loss of P25,317,288.00, thereby showing no income tax
(Ocampo)
liability. It also incurred loss of P14,129,602.00 for the succeeding taxable
[G.R. No. 112024; January 28, 1999]
year 1986.
“The prescriptive period is 2 years (not 10 years) from the time of filing the
On August 7, 1987, petitioner requested the CIR for a tax credit of
final adjusted return and final payment of the tax for the year.”
P5,016,954.00 representing overpayment for the first two quarters of
1985. Petitioner also filed on July 25, 1988 a claim for refund of creditable
Recit-Ready:
taxes of P282,795.50 for 1985 and P234,077.69 for 1986 arising from its
Facts: The petitioner filed a claim for tax credit or refund before the CIR
rental income.
on its overpaid income tax for taxable years 1985 and 1986 on
Pending investigation of the CIR, petitioner instituted a Petition for
August 7, 1987. Pending its investigation, the petitioner filed a
Review before the CTA on November 18, 1988. The latter denied the
petition for review before the CTA on November 18, 1988. The
request for a tax refund or credit on the ground that it was filed beyond
latter denied said claim on the basis that the petitioner failed to
the two-year reglementary period provided for by law. Such ruling was
file such claim within the reglementary period (i.e., 2 years)
affirmed by the Court of Appeals.
provided by law. The petitioner argued that it relied on RMC No.
7-85 which provides allows claims to be made within 10 years Petitioner argues that its claim for refund and tax credits are not yet
barred by prescription relying on RMC No. 7-85 which states that
based on the Civil Code.
overpaid income taxes are not covered by the two-year prescriptive
period under the Tax Code. Instead, it is covered by Article 1144 of the
Issue: WON the dismissal by the CA erred in denying the plea for tax
Civil Code providing 10 years.
refund or tax credits on the ground of prescription, despite petitioner’s
reliance on RMC No. 7-85
Issue:
WON the dismissal by the CA erred in denying the plea for tax refund or
Held: NO. The Court held that the relaxation of revenue regulations by
tax credits on the ground of prescription, despite petitioner’s reliance
RMC No. 7-85 is not warranted as it disregards the two-year
on RMC No. 7-85 —NO
prescriptive period set by law. The Court held that the Acting
Commissioner legislated guidelines contrary to the statute passed
Held/Ratio: Wherefore, the petition is DENIED.
by the Congress. Section 230 of 1977 NIRC states that the
taxpayer may file a claim for refund or credit with the Commissioner
No. The Court held that the relaxation of revenue regulations by RMC
of Internal Revenue, within two (2) years after payment of tax,
No. 7-85 is not warranted as it disregards the two-year prescriptive
before any suit in CTA is commenced. The two-year prescriptive
period set by law.
The Court held that it is of utmost importance that the modes adopted April 14, 1988 and the next day, it filed a petition with the CTA to
to enforce the collection of taxes levied should be summary and toll the running of the prescriptive period. The CTA granted the
interfered with as little as possible. From the same perspective, claims refund and opined that the prescriptive period commenced on
for refund or tax credit should be exercised within the time fixed by law April 15, 1986, the last day of the filing of the corporate income
because the BIR being an administrative body enforced to collect tax return. Petitioner argued that it should be computed from
taxes, its functions should not be unduly delayed or hampered by April 2, 1984, when the final adjustment return was actually filed.
incidental matters.
Section 230 of 1977 NIRC states that the taxpayer may file a claim for Issue/s:
refund or credit with the Commissioner of Internal Revenue, within two WON the 2-year prescriptive period should be computed from the
(2) years after payment of tax, before any suit in CTA is commenced. time the final adjustment return was actually filed. —YES
The two-year prescriptive period provided, should be computed from
the time of filing the Adjustment Return and final payment of the tax for
the year. Held: YES. The period of prescription should be counted from the
The Court held that when the Acting Commissioner of Internal date of payment of the time of filing the Adjustment Return or
Revenue issued RMC No. 7-85, changing the prescriptive period of Annual Income Tax Return and final payment of income tax.
two years to ten years on claims of excess quarterly income tax
payments, such circular created a clear inconsistency with the Section 230 of the NIRC, provides for a two-year period of
provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not prescription counted “from the date of payment of the tax” for
simply interpret the law but it legislated guidelines contrary to the actions for refund of corporate income tax, the two-year period
statute passed by Congress. should be computed from the time of actual filing of the
Moreover, the non-retroactivity of rulings by the CIR is not applicable Adjustment Return or Annual Income Tax Return. This is so
in this case because the nullity of RMC No. 7-85 was declared by because at that point, it can already be determined whether there
respondent courts and not by the CIR. has been an overpayment by the taxpayer. Moreover, under §49(a)
of the NIRC, payment is made at the time the return is filed.
CIR v. CA and BPI (Ong) In this case, Paramount filed its corporate annual income tax return
on April 2, 1986. However, private respondent BPI, as liquidator of
[GR. No. 117254; January 21, 1999]
Paramount, filed a written claim for refund only on April 14, 1988
“The period of prescription to claim a refund should be counted from the date
and a petition for refund only on April 15, 1988. Both claim and
of the ACTUAL FILING of the Annual Income Tax Return.”
action for refund were thus barred by prescription.
Recit-Ready:
Facts: BPI acted as the liquidator of Paramount Acceptance Corporation
Facts:
after its dissolution. On April 2, 1986, Paramount filed its
Corporate Annual Income Tax return for the year 1985. The tax BPI acted as the liquidator of Paramount Acceptance Corporation after its
payable (P1.15M) is less than the total amount of quarterly dissolution.
income tax already paid by paramount (P1.2M). The difference is On April 2, 1986, Paramount filed its Corporate Annual Income Tax
P65k. Thus, Paramount marked the “to be refunded” option in the return for calendar year ending December 31, 1985, declaring a net
ITR amounting to P65k. BPI reiterated the claim for refund on income of P3.3M where the income tax due is P1.15M. However,
Paramount already paid its quarterly income tax amounting to P1.2M.
o After deducting this, the return showed a refundable amount

of P65k. On the other hand, §70(b) of the same Code provides that—
o The appropriate box in the return was marked with a cross §70 (b) Time of filing the income return—The corporate quarterly
indicating “to be refunded” the amount of P65k. declaration shall be filed within sixty (60) days following the close of
BPI as liquidator, reiterated the claim for refund on April 14, 1988. The each of the first three quarters of the taxable year. The final
next day, BPI filed a petition with the CTA to toll the running of the adjustment return shall be filed on or before the 15th day of the 4th
prescriptive period for filing a claim for refund. month following the close of the fiscal year, as the case may be.
The CTA considered the 2-year period to have commenced to run from
April 15, 1986, the last day of the filing of the corporate income tax return, It can be deduced from the foregoing that, in the context of §230,
and since the claim for refund was filed on April 14, 1988, the action which provides for a two-year period of prescription counted “from the
brought on April 15, 1988 has not prescribed. Thus, it granted the refund. date of payment of the tax” for actions for refund of corporate
Petitioner: income tax, the two-year period should be computed from the time of
o The 2-year prescriptive period should be computed from actual filing of the Adjustment Return or Annual Income Tax
April 2, 1984 when the final adjustment return was actually Return. This is so because at that point, it can already be determined
filed, because that is the time of payment of the tax. whether there has been an overpayment by the taxpayer. Moreover,
under §49(a) of the NIRC, payment is made at the time the return is
Issue/s: filed.
WON the 2-year prescriptive period should be computed from the time In this case, Paramount filed its corporate annual income tax return on
the final adjustment return was ACTUALLY filed. April 2, 1986. However, private respondent BPI, as liquidator of
—YES Paramount, filed a written claim for refund only on April 14, 1988 and
a petition for refund only on April 15, 1988. Both claim and action
Held/Ratio: The period of prescription should be counted from the date for refund were thus barred by prescription.
of payment of the time of filing the Adjustment Return or Annual
Income Tax Return and final payment of income tax. CIR v. PHILIPPINE AMERICAN INSURANCE CO. (Reyes)
[GR. No. 105208; May 29, 1995]
YES. “The 2 year prescriptive period begins to run from the filing of the Final
Clearly, there is the need to file a return first before a claim for refund Adjustment Return, NOT from the payment/remittance for any taxable
can prosper inasmuch as the respondent Commissioner by his own quarter in a given year”
rules and regulations mandates that the corporate taxpayer opting to
ask for a refund must show in its final adjustment return the income it (Sorry the digest is a little long. I had to copy-paste the relevant laws. That
received from all sources. said, please read the long digest to make sense of the recit-ready)
Recit-Ready:
Sec. 49(a) of the NIRC provides that— Facts: Phil. American Insurance was claiming for a refund from the CIR
§49. Payment and assessment of income tax for individuals and but the latter denied such claim on the ground that it was already
corporations. made beyond the two-year prescriptive period. The CIR poses
(a) Payment of tax—(1) In general.—The total amount of tax imposed that when a taxpayer pays/remits taxes wittheld for the first
by this Title shall be paid by the person subject thereto at the taxable quarter in a given year but whose business operations
time the return is filed. . . .
actually resulted in a loss for that, as reflected in the Corporate For the Third Quarter of 1983, private respondent declared a net taxable
Final Adjustment Return subsequently filed with the BIR, the income of P2.5M and a tax due of P708K. After crediting the amount of
running of the prescriptive period should commence from the P3.8M, it declared a refundable amount of P3.1M.
remittance/payment at the end of the first quarter instead of from For its Fourth and final quarter ending December 31, private respondent
the filing of the Final Adjustment Return. suffered a loss and thereby had no income tax liability. In the return for
that quarter, it declared a refund of P3.9M representing the first and
Issue/s: second quarterly payments: P215,742.00 as withholding taxes on rental
WON the claim for refund has already prescribed income for 1983 and P133,084.00 representing 1982 income tax refund
—NO applied as 1983 tax credit.
In 1984, private respondent again suffered a loss and declared no income
Held: In ruling for Phil. American Insurance, the Court noted that tax liability. However, it applied as tax credit for 1984, the amount of
Section 292 should be read with other particular provisions of the P3.9M representing its 1982 and 1983 overpaid income taxes and the
Tax Code. From these other provisions, it may be observed that amount of P250,867.00 as withholding tax on rental income for 1984.
although quarterly taxes due are required to be paid within sixty On September 26, 1984, private respondent filed a claim for its 1982
days from the close of each quarter, the fact that the amount shall income tax refund of P133,084.00. On November 22, 1984, it filed a
be deducted from the tax due for the succeeding quarter shows petition for review with the Court of Tax Appeals with respect to its 1982
that until a final adjustment return shall have been filed, the taxes claim for refund of P133,084.00.
paid in the preceding quarters are merely partial taxes due from a On December 16, 1985, it filed another claim for refund with petitioners
corporation. Neither amount can serve as the final figure to appellate division in the aggregate amount of P4.1M.
quantify what is due the government nor what should be refunded On January 2, 1986, private respondent filed a petition for review with the
to the corporation. This interpretation may be gleaned from the CTA regarding its 1983 and 1984 claims for refund in the above-stated
last paragraph of Section 69 of the Tax Code which provides that amount.
the refundable amount, in case a refund is due a corporation, is Later, it amended its petition by limiting its claim for refund to only P3.8M.
that amount which is shown on its final adjustment return and not
The issues in this case is the reckoning date of the two-year prescriptive
on its quarterly returns. Clearly, the prescriptive period of two period provided in Section 230 of the NIRC:
years should commence to run only from the time that the refund “XXX
is ascertained, which can only be determined after a final In any case, no such suit or proceeding shall be begun after the expiration of
adjustment return is accomplished. In this case, both the claim for two years from the date of payment of the tax or penalty regardless of any
refund and the petition for review are within the two-year supervening cause that may arise after payment:Provided, however, That the
reglementary period. Commissioner may, even without a written claim therefor, refund or credit
any tax, where on the face of the return upon which payment was made,
such payment appears clearly to have been erroneously paid.”
Facts:
The CIR poses the following question: In a case such as this, where a
On May 30, 1983, Philamlife paid to the Bureau of Internal Revenue (BIR) corporate taxpayer remits/pays to the BIR tax withheld on income for the
its first quarterly corporate income tax for the year 1983 amounting to first quarter but whose business operations actually resulted in a loss for
P3,246,141.00. that year, as reflected in the Corporate Final Adjustment Return
On August 29, 1983, it paid P396,874.00 for the Second Quarter of 1983. subsequently filed with the BIR, should not the running of the prescriptive
period commence from the remittance/payment at the end of the first
quarter of the tax withheldinstead of from the filing of the Final Adjustment preceding quarter or quarters upon which the income tax, as
Return? provided in Title II of this Code shall be levied, collected and
o The CIR states that the phrase "regardless of supervening paid. The Tax so computed shall be decreased by the amount of
cause that may arise after payment" is an amendatory tax previously paid or assessed during the preceding quarters
phrase under the said Section 292 which did not appear in and shall be paid not later than sixty (60) days from the close of
Section 306 of the old Tax Code before it was amended by each of the first three (3) quarters of the taxable year.
Presidential Decree No. 69, which became effective
January 1, 1973. Sec. 69. Final Adjustment Return. — Every corporation
o The CIR also argues that the incorporation of the said liable to tax under Section 24 shall file a final adjustment return
phrase did away with any other interpretation and, covering the total net income for the preceding calendar or fiscal
therefore, the reckoning period of prescription under year. If the sum of the quarterly tax payments made during the
Section 292 (now section 230) is from the date of payment said taxable year is not equal to the total tax due on the entire
of tax regardless of financial loss (the "supervening cause"). taxable net income of that year the corporation shall either:
Thus, the claim for refund of the amounts of P3,246,141.00 (a) Pay the excess still due; or
and P396,874.00 paid on May 30, 1983 and August 29, (b) Be refunded the excess amount paid, as the case may be.
1983, respectively, has prescribed. In case the corporation is entitled to a refund of the excess
estimated quarterly income taxes paid, the refundable amount
Issue/s: shown on its final adjustment return may be credited against the
WON the claim for refund has already prescribed. estimated quarterly income tax liabilities for the taxable quarters
—NO of the succeeding taxable year.
It may be observed that although quarterly taxes due are required to
Held/Ratio: Petition DISMISSED. be paid within sixty days from the close of each quarter, the fact that the
amount shall be deducted from the tax due for the succeeding quarter
NO. The claim for refund and the petition for review by Phil. American shows that until a final adjustment return shall have been filed, the taxes
were both filed within the two-year prescriptive period. paid in the preceding quarters are merely partial taxes due from a
The CIR used Pacific Procon Ltd. v. CTA to support his argument that corporation. Neither amount can serve as the final figure to quantify what
Section 230 of the NIRC is mandatory and “not subject to any is due the government nor what should be refunded to the corporation.
qualification”, hence the prescriptive period applies regardless of the This interpretation may be gleaned from the last paragraph of Section 69
conditions under which payment may have been made. of the Tax Code which provides that the refundable amount, in case a
The SC ruled that the Procon case was already overturned in the case of refund is due a corporation, is that amount which is shown on its final
CIR v. TMX Sales Incorporated and the CTA: adjustment return and not on its quarterly returns.
o The SC, in that case, ruled that in reading Section 230, the other Therefore, when private respondent paid P3,246,141.00 on May 30,
provisions of the Tax Code should also be considered, 1983, it would not have been able to ascertain on that date, that the said
particularly Sections 68, 69, 70, and 232. All these provisions amount was refundable. The same applies with cogency to the payment
should be harmonized with each other. of P396,874.00 on August 29, 1983.
Sec. 68 Declaration of Quarterly Income Tax. — Every Clearly, the prescriptive period of two years should commence to run only
corporation shall file in duplicate a quarterly summary declaration from the time that the refund is ascertained, which can only be
of its gross income and deductions on a cumulative basis for the determined after a final adjustment return is accomplished. In the present
case, this date is April 16, 1984, and two years from this date would be illegal or wrongful collection of tax. It stressed that its P180 Million
April 16, 1986. The record shows that the claim for refund was filed on advance income tax payment for 1991 partakes of the nature of a
December 10, 1985 and the petition for review was brought before the deposit made in anticipation of taxes not yet due or levied.
CTA on January 2, 1986. Both dates are within the two-year reglementary PNB remitted the P180 Million in question as a measure of
period. goodwill and patriotism, a gesture noblesse oblige, to help the
cash-strapped national government. Hence, there is a presence
CIR v. PHILIPPINE NATIONAL BANK (Rocillo) of a special circumstance which would warrant a suspension for
[GR. No. 161997; October 25,2005] the running of the 2 year prescriptive period. Principle of equity
“The 2 year prescriptive period may be suspended for reasons of equity and will also set in since it would be unfair to leave PNB to suffer
special circumstances” losing millions of pesos advanced by it for future tax liabilities.
2) YES. The BIR’s very own conduct led PNB to believe all along
Recit-Ready: that its original intention to apply the advance payment to its
Facts: In April 1991, PNB issued to the BIR Cashier’s Check No. 109435 future income tax obligations will be respected by the BIR. Thus,
for P180,000,000.00 which represented PNBs advance income upon posting a net income in 1997 and regaining a profitable
tax payment for its 1991 operations and was remitted in response business operation, respondent bank promptly sought the
to then President Corazon C. Aquino’s call to generate more issuance of a TCC for the reason that its credit balance of P73,
revenues for national development. PNB incurred losses for four 298,892.60 remained unutilized. Hence, BIR can be considered
years (from 1992 to 1996), hence it cannot apply as a tax credit as estopped from collecting the taxes due.
its unutilized creditable taxes which involves an amount of
overpayment covered by the P180 million advance payment it Facts:
made. PNB then applied for a claim for TCC in order to be able to In April 1991, PNB issued to the BIR Cashier’s Check No. 109435
refund the said unutilized credits. BIR denied its claim primarily for P180,000,000.00 which represented PNBs advance income tax
due to it being allegedly filed beyond the 2 year prescriptive payment for its 1991 operations and was remitted in response to
period. PNB contends that the rule admits of certain exception then President Corazon C. Aquino’s call to generate more revenues
such as the special circumstance present in the case at bar. for national development.
BIR acknowledged receipt of the amount by issuing Payment Order
Issue/s: No. C-10151465 and BIR Confirmation Receipt No. 22063553, both
1) WON PNB’s claim for tax credit is barred by prescription? dated April 15, 1991.
No. The 2 year prescriptive period may be suspended by reason Through letters sent to CIR Ong April 19 and 29, 1991 and May 14,
of equity and special circumstances. 1991, PNB requested the issuance of a tax credit certificate (TCC)
2) WON the equitable principle of estoppel bar the BIR to be utilized against future tax obligations of the bank.
petitioner from collecting taxes due? Yes. BIR is estopped For the Q1 and Q2 of 1991, PNB also paid additional taxes
from denying the claim for refund and collecting the tax due.
amounting to P6,096,150.00 and P26,854,505.80, as shown in its
Held: quarterly ITR filed on May 30, 1991. Inclusive of the P180 Million
aforementioned, PNB paid and BIR received in 1991 the amount of
1) NO. The Court agreed with PNB’s contention that its claim for tax P212, 950,656.79. This final figure, if tacked to PNBs prior years
credit did not arise from overpayment resulting from erroneous, excess tax credit (P1,385,198.30) and the creditable tax withheld for
1991 (P3,216,267.29), adds up to P217,552,122.38.
By the end of 1991, PNBs annual income tax liability, per its 1992 In time, PNB filed a petition for review with the CA arguing that the
annual income tax return, amounted to P144,253,229.78, which, applicability of the two (2)-year prescriptive period is not
when compared to its claimed total credits and tax payments of jurisdictional and that said rule admits of certain exceptions.
P217,552,122.38, resulted to a credit balance in its favor in the - The CA granted the petition on the main premise that there is
amount of P73,298,892.60. This credit balance was carried-over to a presence of a special circumstance since the tax credit that
cover tax liability for the years 1992 to 1996, but, as PNB alleged, PNB has been seeking is to be sourced not from any tax
was never applied since the bank incurred losses during the 4-year erroneously or illegally collected but from advance income tax
period. payment voluntarily made in response to then President
On July 28, 1997, PNB wrote CIR Liwayway Vinzons-Chato, to Aquino’s call to generate more revenues for the government, in
inform her about the aforementioned and to reiterate its request for no way can the amount
the issuance of a TCC, this time for the unutilized balance of its - The BIR is deemed to have waived the two (2)-year
advance payment made in 1991 amounting to P73,298,892.60. prescriptive period when its officials led the PNB to believe that
In a letter dated July 26, 2000, PNB sought reconsideration of the its request for tax credit had not yet prescribed since the matter
decision of Deputy Commissioner Hefti not to take cognizance of the was not being treated as an ordinary claim for tax refund/credit
banks claim for tax credit certificate on the ground that the or a simple case of excess payment.
jurisdiction of the Appellate Division is limited to claims for tax refund - Commissioner of Internal Revenue vs. Philippine American
and credit involving erroneous or illegal collection of taxes whenever Life Insurance Co. instructs that even if the two (2)-year
there are questions of law and/or facts and does not include claims prescriptive period under the Tax Code had already lapsed, the
for refund of advance payment, pursuant to Revenue Administrative same is not jurisdictional, and may be suspended for reasons of
Order [RAO] No. 7-95 dated October 10, 1995. equity and other special circumstances.
On August 14, 2001, PNB again wrote the BIR requesting that it be
allowed to apply its unutilized advance tax payment Issues:
of P73,298,892.60 to the banks future gross receipts tax liability. 1) WON PNB’s claim for tax credit is barred by prescription? No.
The BIR Commissioner denied PNBs claim for tax credit for the The 2 year prescriptive period may be suspended by reason of
several reasons, relevant of which is based on a finding that PNB’s equity and special circumstances.
claim has already prescribed on the ground that it was filed beyond 2) WON the equitable principle of estoppel bar the BIR petitioner
the two (2) year prescriptive period as provided for under Section from collecting taxes due? Yes. BIR is estopped from denying the
204 of NIRC. claim for refund and collecting the tax due.
On June 20, 2002, PNB appealed the denial action of the BIR to the
CTA. CIR filed a motion to dismiss on the ground of prescription to Held/Ratio:
which PNB filed an opposition. 1) The core issue in this case pivots on the applicability hereto of the two
In its Resolution of October 10, 2002, the CTA granted the (2)-year prescriptive period under in Section 230 (now Sec. 229) of the
Commissioners motion to dismiss and, accordingly, denied PNBs NIRC, reading:
petition for review, reiterating the claim for refund should be filed
within the 2 year prescriptive period and such rule admits of no SEC. 230. Recovery of tax erroneously or illegally collected.
exception. No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected , . . , or of
any sum, alleged to have been excessive or in any manner suspension of the statutory limitation in this case, PNB adds, is justified
wrongfully collected, until a claim for refund or credit has been duly under exceptional circumstance, as what is present in the case at bar.
filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid It bears stressing that PNB remitted the P180 Million in question as a
under protest or duress. measure of goodwill and patriotism, a gesture noblesse oblige, to help
the cash-strapped national government. It would, be unfair to leave PNB
In any case, no such suit or proceeding shall be begun after to suffer losing millions of pesos advanced by it for future tax liabilities.
the expiration of two [(2)] years from the date of payment of the tax
or penalty regardless of any supervening cause that may arise after 2) The suspension of the two (2)-year prescriptive period is warranted not
payment: Provided, however, That the Commissioner may, even solely by the objective or purpose pursuant to which respondent PNB
without a written claim therefor, refund or credit any tax, where on made the advance income tax payment in 1991. Records show that the
the face of the return upon which payment was made, such payment BIR’s very own conduct led PNB to believe all along that its original
appears clearly to have been erroneously paid. (Underscoring intention to apply the advance payment to its future income tax
added.) obligations will be respected by the BIR. Thus, upon posting a net
income in 1997 and regaining a profitable business operation,
Section 230 of the Tax Code, particularly its statute of limitations respondent bank promptly sought the issuance of a TCC for the reason
component, is intended to apply to suits for the recovery of internal that its credit balance of P73, 298,892.60 remained unutilized. Hence,
revenue taxes or sums erroneously, excessively, illegally or wrongfully BIR can be considered as estopped from collecting the taxes due.
collected.
PHILAM ASSET MANAGEMENT INC. v. CIR (Trias)
Black defines the term erroneous or illegal tax as one levied without [G.R. Nos. 156637/162004; December 14, 2005]
statutory authority. In the strict legal viewpoint, PNB’s claim for tax credit “If you choose to carry-over (even if you did not explicitly choose but your
did not proceed from, or is a consequence of overpayment of tax actions indicate such choice), that option is irrevocable for the taxable
erroneously or illegally collected. period.”
The Court agreed with PNB’s contention that its claim for tax credit did Recit-Ready:
not arise from overpayment resulting from erroneous, illegal or wrongful Facts: Petitioner is a domestic corporation duly organized and existing
collection of tax. It stressed that its P180 Million advance income tax under the laws of the Republic of the Philippines. It acts as the
payment for 1991 partakes of the nature of a deposit made in investment manager of both Philippine Fund, Inc. (PFI) and
anticipation of taxes not yet due or levied. Accordingly, the P180 Million Philam Bond Fund, Inc. (PBFI), which are open-end investment
was strictly not a payment of a valid and existing tax liability, let alone an companies in the sale of their shares of stocks and in the
erroneous payment, the refund of which is governed by Section 230 of investment of the proceeds of these sales into a diversified
the NIRC. portfolio of debt and equity securities. On April 3, 1998, petitioner
filed its annual corporate income tax return for the taxable year
PNB also states that, even assuming, in gratia argumenti that the two 1997 representing a net loss of P2,689,242.00. Consequently, it
(2)-year limitation in Section 230 of the NIRC is of governing application, failed to utilize the creditable tax withheld in the amount of
still the prescriptive period set forth therein is not jurisdictional. The P522,092.00 representing tax withheld by petitioners withholding
agents, PFI and PBFI, on professional fees. On April 13, 1999,
petitioner filed its Annual Income Tax Return with the BIR for the failure of petitioner  to make the appropriate marking in the BIR
taxable year 1998 declaring a net loss of P1,504,951.00. Thus, form, the filing of its written claim effectively serves as an
there was no tax due against petitioner for the taxable year 1998. expression of its choice to request a tax refund, instead of a tax
Likewise, petitioner had an unapplied creditable withholding tax in credit. To assert that any future claim for a tax refund will be
the amount of P459,756.07. In both years (1997 and 1998), instantly hindered by a failure to signify ones intention in the FAR
petitioner filed a claim for refund for unutilized excess tax credits is to render nugatory the clear provision that allows for a two-year
for those years but both were denied. prescriptive period. In the present case, although petitioner did
not mark the refund box in its 1997 FAR, neither did it perform
The CA ruled that The appellate court pointed out that, in the any act indicating that it chose a tax credit. On the contrary, it
respective ITRs for both years, petitioner did not indicate its filed on September 11, 1998, an administrative claim for the
option to have the amounts either refunded or carried over and refund of its excess taxes withheld in 1997. In none of its
applied to the succeeding year. It was held that to request for quarterly returns for 1998 did it apply the excess creditable taxes.
either a refund or a credit of income tax paid, a corporation must Under these circumstances, petitioner is entitled to a tax refund of
signify its intention by marking the corresponding option box on its 1997 excess tax credits in the amount of P522,092
its annual corporate adjustment return. The CA further held in the
1997 claim, the failure to present the 1998 ITR was fatal to the For 1998 (2nd case), according to petitioner, it neither chose nor
claim for a refund, because there was no way to verify if the tax marked the carry-over option box in its 1998 FAR. As this option
credit for 1997 could not have been applied against the 1998 tax was not chosen, it seems that there is nothing that can be
liabilities of petitioner. considered irrevocable. In other words, petitioner argues that it is
still entitled to a refund of its 1998 excess income tax payments.
Issue: WON petitioner is entitled to tax refund for 1997 and 1998 for This argument does not hold water. The subsequent acts of
its creditable taxes withheld? –YES to 1997 claims, NO to petitioner reveal that it has effectively chosen the carry-over
1998 claims option. The fact that it filled out the portion Prior Years Excess
Credits in its 1999 FAR means that it categorically availed itself of
Held: For 1997 (1st case), the CA erred in requiring petitioners to the carry-over option. In fact, the line that precedes that phrase in
present its 1998 ITR as no law requires such. The established the BIR form clearly states Less: Tax Credits/Payments. The
procedure is that a taxpayer that wants a cash refund shall make contention that it merely filled out that portion because it was a
a written request for it, and the ITR showing the excess expanded requirement -- and that to have done otherwise would have been
withholding tax credits shall then be examined by the BIR. For the tantamount to falsifying the FAR -- is a long shot. If an application
grant of refund, RRs 12-94 and 6-85 state that all  pertinent for a tax refund has been -- or will be -- filed, then that portion of
accounting records should be submitted by the taxpayer. These the BIR form should necessarily be blank, even if the FAR of the
records, however, actually refer only to (1) the withholding tax previous taxable year already shows an overpayment in taxes.
statements; (2) the ITR of the present quarter to which the excess Tax refunds are construed strictly against the taxpayer. Once the
withholding tax credits are being applied; and (3) the ITR of the carry-over option is taken, actually or constructively, it becomes
quarter for the previous taxable year in which the excess credits irrevocable. Petitioner has chosen that option for its 1998
arose. To stress, these regulations implementing the law do not creditable withholding taxes. Thus, it is no longer entitled to a tax
require the proffer of the FAR for the taxable year following the refund of P459,756.07, which corresponds to its 1998 excess tax
period to which the tax credits are being applied. Despite the credit.
On April 13, 1999, petitioner filed its Annual Income Tax Return with the
Facts: BIR for the taxable year 1998 declaring a net loss of P1,504,951.00.
This is a consolidation of 2 petitions. Thus, there was no tax due against petitioner for the taxable year 1998.
Petitioner is a domestic corporation duly organized and existing under the Likewise, petitioner had an unapplied creditable withholding tax in the
laws of the Republic of the Philippines. It acts as the investment manager amount of P459,756.07.
of both Philippine Fund, Inc. (PFI) and Philam Bond Fund, Inc. (PBFI), In the 1999, petitioner had a tax due in the amount of P80,042.00, and a
which are open-end investment companies in the sale of their shares of creditable withholding tax in the amount of P915,995.00. Petitioner
stocks and in the investment of the proceeds of these sales into a likewise declared in its 1999 tax return the amount of P459,756.07, which
diversified portfolio of debt and equity securities. represents its prior excess credit for taxable year 1998.
Being an investment manager, petitioner provides management and In 2000, petitioner filed with the RDO a written administrative claim for
technical services to PFI and PBFI. refund with respect to the unapplied creditable withholding tax of
Petitioner is, likewise, PFIs and PBFIs principal distributor which takes P459,756.07. According to petitioner, the amount of P80,042.00,
charge of the sales of said companies shares to prospective investors. representing the tax due for the taxable year 1999 has been credited from
Pursuant to the separate management and distribution agreements its P915,995.00 creditable withholding tax for taxable year 1999, thus
between the petitioner and PFI and PBFI, both PFI and PBFI agree to leaving its 1998 creditable withholding tax in the amount of P459,756.07
pay the petitioner, by way of compensation for the latters services and still unapplied.
facilities, a monthly management fee from which PFI and PBFI withhold The claim for refund yielded no action on the part of the BIR.
the amount equivalent to five percent (5%) creditable tax pursuant to the Petitioner asserting that it is entitled to the refund of P459,756.07 since
Expanded Withholding Tax Regulations. said amount has not been applied against its tax liabilities in the taxable
year 1998.
For the first case: GR 156637 On May 2, 2002, the CTA rendered [a] x x x decision denying [petitioners]
On April 3, 1998, petitioner filed its annual corporate income tax return for Petition for Review
the taxable year 1997 representing a net loss of P2,689,242.00. Both cases by petitioner for a claim for refund (1997 and 1998) were
Consequently, it failed to utilize the creditable tax withheld in the amount denied by CTA so the CA decided the case together.
of P522,092.00 representing tax withheld by petitioners withholding The CA denied the claim of petitioner for a refund of the latters excess
agents, PFI and PBFI,on professional fees. creditable taxes withheld for the years 1997 and 1998, despite
Petitioner filed an administrative claim for refund with the BIR in the compliance with the basic requirements of Revenue Regulations (RR)
amount of P522,092.00 representing unutilized excess tax credits for No. 12-94.
calendar year 1997. The appellate court pointed out that, in the respective Income Tax
Respondent did not act on petitioners claim for refund; hence, a Petition Returns (ITRs) for both years, petitioner did not indicate its option to have
for Review was filed with this Court to toll the running of the two-year the amounts either refunded or carried over and applied to the
prescriptive period succeeding year.
On October 9, 2001, the CTA rendered a Decision denying petitioners It was held that to request for either a refund or a credit of income tax
Petition for Review. paid, a corporation must signify its intention by marking the corresponding
option box on its annual corporate adjustment return.
For the second case: GR No. 162004 The CA further held in GR No. 156637 that the failure to present the 1998
ITR was fatal to the claim for a refund, because there was no way to
verify if the tax credit for 1997 could not have been applied against the The first option is relatively simple. Any tax on income that is
1998 tax liabilities of petitioner. paid in excess of the amount due the government may be
In GR No. 162004, however, the subsequent acts of petitioner refunded, provided that a taxpayer properly applies for the
demonstrated its option to carry over its tax credit for 1998, even if it refund.
again failed to tick the appropriate box for that option in its 1998 ITR. The second option works by applying the refundable amount,
Under RR 12-94, its failure to indicate that option resulted in the as shown on the FAR of a given taxable year, against the
automatic carry-over of any excess tax credit for the prior year. The estimated quarterly income tax liabilities of the succeeding
appellate court said that the government would not be unjustly enriched taxable year.
by denying a refund, because there would be no forfeiture of the amount These two options under Section 76 are alternative in nature.
in its favor. The amount claimed as a refund would remain in the account The choice of one precludes the other.
of the taxpayer until utilized in succeeding taxable years. Indeed, in Philippine Bank of Communications v. Commissioner of
Internal Revenue, the Court ruled that a corporation must signify its
Issue/s: intention -- whether to request a tax refund or claim a tax credit -- by
WON petitioner is entitled to a refund of its creditable taxes withheld for marking the corresponding option box provided in the FAR. While a
taxable years 1997 and 1998. - The Petition in GR No. 156637 is taxpayer is required to mark its choice in the form provided by the
meritorious, but that in GR No. 162004 is not. BIR, this requirement is only for the purpose of facilitating tax
collection.
Held/Ratio: Petition PARTIALLY GRANTED. One cannot get a tax refund and a tax credit at the same time for the
same excess income taxes paid. Failure to signify ones intention in
Section 76. Final Adjustment Return. -- Every corporation liable to tax the FAR does not mean outright barring of a valid request for a
under Section 24 shall file a final adjustment return covering the total net refund, should one still choose this option later on. A tax credit
income for the preceding calendar or fiscal year. If the sum of the quarterly should be construed merely as an alternative remedy to a tax refund
tax payments made during the said taxable year is not equal to the total tax under Section 76, subject to prior verification and approval by
due on the entire taxable net income of that year the corporation shall either: respondent.
The reason for requiring that a choice be made in the FAR upon its
(a) Pay the excess tax still due; or filing is to ease tax administration particularly the self-assessment
(b) Be refunded the excess amount paid, as the case may be. and collection aspects. A taxpayer that makes a choice expresses
certainty or preference and thus demonstrates clear diligence.
In case the corporation is entitled to a refund of the excess estimated Conversely, a taxpayer that makes no choice expresses uncertainty
quarterly income taxes paid, the refundable amount shown on its final or lack of preference and hence shows simple negligence or plain
adjustment return may be credited against the estimated quarterly income oversight.
tax liabilities for the taxable quarters of the succeeding taxable year.
For the first case: GR 156637
Section 76 offers two options to a taxable corporation whose total Respondent denied the claim of petitioner for a refund of excess
quarterly income tax payments in a given taxable year exceeds its taxes withheld in 1997, because the latter  (1) had not indicated in
 total income tax due. These options are (1) filing for a tax refund or its ITR for that year whether it was opting for a credit or a refund;
(2) availing of a tax credit. and (2) had not submitted as evidence its 1998 ITR, which could
have been the basis for determining whether its claimed 1997 tax decisive to and will easily resolve the material issue in this case. If
credit had not been applied against its 1998 tax liabilities. only judicial notice were taken earlier, the fact that there was no
Requiring that the ITR or the FAR of the succeeding year be carry-over of the excess creditable taxes withheld for 1997 would
presented to the BIR in requesting a tax refund has no basis in law have already been crystal clear.
and jurisprudence. Despite the failure of petitioner  to make the appropriate marking in
Section 76 of the Tax Code does not mandate it. The law merely the BIR form, the filing of its written claim effectively serves as an
requires the filing of the FAR for the preceding -- not the succeeding expression of its choice to request a tax refund, instead of a tax
-- taxable year. credit. To assert that any future claim for a tax refund will be
Section 5 of RR 12-94 merely provides that claims for the refund of instantly hindered by a failure to signify ones intention in the FAR is
income taxes deducted and withheld from income payments shall be to render nugatory the clear provision that allows for a two-year
given due course only (1) when it is shown on the ITR that the prescriptive period.
income payment received is being declared part of the taxpayers In the present case, although petitioner did not mark the refund box
gross income; and (2) when the fact of withholding is established by in its 1997 FAR, neither did it perform any act indicating that it chose
a copy of the withholding tax statement, duly issued by the payor to a tax credit. On the contrary, it filed on September 11, 1998, an
the payee, showing the amount paid and the income tax withheld administrative claim for the refund of its excess taxes withheld in
from that amount. 1997. In none of its quarterly returns for 1998 did it apply the excess
The established procedure is that a taxpayer that wants a cash creditable taxes. Under these circumstances, petitioner is entitled to
refund shall make a written request for it, and the ITR showing the a tax refund of its 1997 excess tax credits in the amount of
excess expanded withholding tax credits shall then be examined by P522,092.
the BIR. For the grant of refund, RRs 12-94 and 6-85 state that all
 pertinent accounting records should be submitted by the taxpayer. For the second case: GR No. 162004
These records, however, actually refer only to (1) the withholding tax The carry-over option under Section 76 is permissive. A corporation
statements; (2) the ITR of the present quarter to which the excess that is entitled to a tax refund or a tax credit for excess payment of
withholding tax credits are being applied; and (3) the ITR of the quarterly income taxes may carry over and credit the excess income
quarter for the previous taxable year in which the excess credits taxes paid in a given taxable year against the estimated income tax
arose. To stress, these regulations implementing the law do not liabilities of the succeeding quarters. Once chosen, the carry-over
require the proffer of the FAR for the taxable year following the option shall be considered irrevocable for that taxable period, and no
period to which the tax credits are being applied. application for a tax refund or issuance of a tax credit certificate shall
The BIR ought to have on file its own copies of petitioners FAR for then be allowed.
the succeeding year, on the basis of which it could rebut the According to petitioner, it neither chose nor marked the carry-over
assertion that there was a subsequent credit of the excess income option box in its 1998 FAR. As this option was not chosen, it seems
tax payments for the previous year. Its failure to present this vital that there is nothing that can be considered irrevocable. In other
document to support its contention against the grant of a tax refund words, petitioner argues that it is still entitled to a refund of its 1998
to petitioner is certainly fatal. excess income tax payments. This argument does not hold water.
The TA should have taken judicial notice of the fact of filing and the The subsequent acts of petitioner reveal that it has effectively
pendency of petitioners subsequent claim for a refund of excess chosen the carry-over option.
creditable taxes withheld for 1998. The existence of the claim ought The fact that it filled out the portion Prior Years Excess Credits in its
to be known by reason of its judicial functions. Furthermore, it is 1999 FAR means that it categorically availed itself of the carry-over
option. In fact, the line that precedes that phrase in the BIR form
clearly states Less: Tax Credits/Payments. The contention that it ASIAWORLD PROPERTIES vs. CIR (Tuazon)
merely filled out that portion because it was a requirement -- and [GR. No. 171766; July 29, 2010]
that to have done otherwise would have been tantamount to “Irrevocability; Exercise of the option to carry-over the excess income tax
falsifying the FAR -- is a long shot. credit prohibits a claim for refund in the subsequent taxable years for the
If an application for a tax refund has been -- or will be -- filed, then unused portion of the excess tax credits carried over”
that portion of the BIR form should necessarily be blank, even if the
FAR of the previous taxable year already shows an overpayment in Recit-Ready:
taxes. Facts: Basically, Petitioner is arguing that: the option to carry-over and
The resulting redundancy in the claim of petitioner for a refund of its apply the excess quarterly income tax against the income tax due
1998 excess tax credits on November 14, 2000 cannot be in the succeeding taxable years is irrevocable only for the next
countenanced. It cannot be allowed to avail itself of a tax refund and taxable period when the excess payment was carried over. Thus,
a tax credit at the same time for the same excess income taxes petitioner posits that the option to carry-over its 1999 excess
paid. Besides, disallowing it from getting a tax refund of those income tax payment is irrevocable only for the succeeding
excess tax credits will not enervate the two-year prescriptive period taxable year 2000 and that for the taxable year 2001, petitioner is
under the Tax Code. That period will apply if the carry-over option not barred from seeking a refund of the unused tax credits carried
has not been chosen. over from year 1999.
Tax refunds are construed strictly against the taxpayer. Petitioner
has failed to meet the burden of proof required in order to establish Issue: WON the exercise of the option to carry-over the excess income
the factual basis of its claim for a tax refund. tax credit, which shall be applied against the tax due in the succeeding
The first-in first-out (FIFO) principle enunciated by the CTA does not taxable years, prohibits a claim for refund in the subsequent taxable
apply. Money is fungible property. The amount to be applied against years for the unused portion of the excess tax credits carried over.
the P80,042 income tax due in the 1998 FAR of petitioner may be
taken from its excess credits in 1997 or from those withheld in 1998 Held: In the old Code provision, the option to carry-over the excess or
or from both. Whichever of these the amount will be taken from will overpaid income tax for a given taxable year is limited to the
not make a difference. In fact, the FAR is cumulative in nature. immediately succeeding taxable year only. Under the current
Following a natural sequence, the prior years excess tax credits will provision (SEC 76), the application of the option to carry-over the
have to be reduced first to answer for any current tax liabilities excess creditable tax is not limited only to the immediately
before the current years withheld amounts can be applied. following tax year but extends to the next succeeding taxable
Otherwise, there will be no sense in requiring a taxpayer to fill out years. Thus, once the taxpayer opts to carry-over the excess
the line items in the FAR to segregate its sources of tax credits. income tax against the taxes due for the succeeding taxable
Once the carry-over option is taken, actually or constructively, it years, such option is irrevocable for the whole amount of the
becomes irrevocable. Petitioner has chosen that option for its 1998 excess income tax, thus, prohibiting the taxpayer from applying
creditable withholding taxes. Thus, it is no longer entitled to a tax for a refund for that same excess income tax in the next
refund of P459,756.07, which corresponds to its 1998 excess tax succeeding taxable years. The unutilized excess tax credits will
credit. Nonetheless, the amount will not be forfeited in the remain in the taxpayer’s account and will be carried over and
governments favor, because it may be claimed by petitioner as tax applied against the taxpayer’s income tax liabilities until fully
credits in the succeeding taxable years. utilized.
application for cash refund or issuance of a tax credit certificate shall

Facts: be allowed therefore referring to that taxable period comprising the
Petitioner Asiaworld filed its annual ITR for 2001. Petitioner declared succeeding taxable years.
a minimum corporate income tax (MCIT) due in the amount In the old Code provision, the option to carry-over the excess or
of P1,222,066.00, but with a refundable income tax payment. In its overpaid income tax for a given taxable year is limited to the
2001 ITR, petitioner stated an amount representing Prior Years immediately succeeding taxable year only. Under the current
Excess Credits was net of year 1999 excess creditable withholding provision (SEC 76), the application of the option to carry-over the
tax to be refunded in the amount of P18,477,144.00. Petitioner also excess creditable tax is not limited only to the immediately following
indicated in its 2001 ITR its option to carry-over as tax credit next tax year but extends to the next succeeding taxable years. Thus,
year/quarter the overpayment. Petitioner filed with the RDO a once the taxpayer opts to carry-over the excess income tax against
request for refund allegedly representing partial excess creditable the taxes due for the succeeding taxable years, such option is
tax withheld. Petitioner claimed that it is entitled to the refund of its irrevocable for the whole amount of the excess income tax, thus,
unapplied creditable withholding taxes. CTA denied the petition. CA prohibiting the taxpayer from applying for a refund for that same
affirmed. excess income tax in the next succeeding taxable years. The
unutilized excess tax credits will remain in the taxpayer’s account
Basically, Petitioner is arguing that: the option to carry-over and and will be carried over and applied against the taxpayer’s income
apply the excess quarterly income tax against the income tax due in tax liabilities until fully utilized.
the succeeding taxable years is irrevocable only for the next taxable
period when the excess payment was carried over. Thus, petitioner
CIR vs. FEBTC (Vanslembrouck)
posits that the option to carry-over its 1999 excess income tax
[GR. No. 173854; March 15, 2010]
payment is irrevocable only for the succeeding taxable year 2000
“Failure to show that income included in gross income = refund denied”
and that for the taxable year 2001, petitioner is not barred from
seeking a refund of the unused tax credits carried over from year
Recit-Ready:
1999.
Facts: Far East Bank & Trust Company (FEBTC) filed a claim for a tax
refund (for refundable income tax). Due to the failure of the BIR to
Issue/s: WON petitioner is prohibited from claiming refund?—YES
act on the claim for refund, FEBTC brought it to the CTA. The
CTA denied the claim on the ground that FEBTC failed to show
Held/Ratio:
that the income derived from rentals and sale of real property
from which the taxes were withheld were reflected in its Income
Section 76 of the NIRC of 1997 clearly states: Once the option to
Tax Return. FEBTC appealed to the CA which reversed the CTA.
carry-over and apply the excess quarterly income tax against
The CA gave credence to FEBTC’s contention that its income
income tax due for the taxable quarters of the succeeding taxable
derived from rentals and sales of real properties were included in
years has been made, such option shall be considered irrevocable
the gross income but were classified as “Other Earnings” in its
for that taxable period and no application for cash refund or
Schedule of Income attached to the return.
issuance of a tax credit certificate shall be allowed therefore. Section
76 expressly states that the option shall be considered irrevocable
Issue/s: WON FEBTC is entitled to a refund?
for that taxable period referring to the period comprising
the succeeding taxable years. Section 76 further states that no
Held: NO. To claim a refund one has to (1) File the claim within 2 years To prove its entitlement to a refund, FEBTC presented the following
from paying the tax, (2) the income received was declared as part of the documents:
gross income, (3) The fact of withholding must be established by a copy of o Corporate Annual Income Tax Return for the year 1994
a statement showing the amount paid and the amount of tax withheld. and 1995
Although FEBTC was able to comply with the first, it failed to comply with o Certificates of Creditable Withholding Tax and Monthly
the second and the third. Remittance Returns of Income Taxes Withheld issued by
various withholding agents for the year ended December
FEBTC failed to show that the income derived from rentals and sales of 31, 1994
real property were included in FEBTC’s gross income. The phrase “Not o Letter claim for refund
Applicable” was printed on the space provided for rent, sale of real BIR did not present any evidence.
property and trust income. FEBTC’s explanation that its income derived
from rentals and sales of real properties were included in the gross Issue/s: WON FEBTC is entitled to a refund? —NO
income as “Other Earnings” attached to the return is not supported by the
evidence. FEBTC failed to produce documentary or testimonial evidence Held/Ratio:
to prove this. Finally, FEBTC failed to present ALL the Certificates of
Creditable Tax Withheld at Source. The burden is on the taxpayer to prove NO, FEBTC is not entitled to a refund for (1) failure to declare the
its entitlement to refund. income received as part of the gross income and (2) failure to present
ALL the Certificates of Creditable Tax Withheld at Source.
Facts:
FEBTC filed with the BIR a Tax Return on April 1995. A taxpayer claiming for a tax credit or refund of creditable
o The return reflected a refundable income tax of withholding tax must comply with the following requisites:
P12,682,864.00. 1) The claim must be filed with the CIR within the two-year
o The amount of P12,682,864.00 was carried over and period from the date of payment of the tax;
applied against FEBTC income tax liability for the taxable 2) It must be shown on the return that the income received
year ending December 1995. was declared as part of the gross income; and
On April 1996, FEBTC filed its 1995 Annual Income Tax Return, 3) The fact of withholding must be established by a copy of a
which showed a total overpaid income tax in the amount of statement duly issued by the payor to the payee showing
P17,443,133.00. the amount paid and the amount of the tax withheld.
o Out of the P17,433,133.00 refundable income tax, only First Requisite: FEBTC timely filed its claim for refund.
P13,645,109.00 was sought to be refunded by FEBTC. o There is no dispute that FEBTC complied with the first
o As to the remaining P3,798,024.00, FEBTC opted to carry it requirement.
over to the next taxable year. o The filing of FEBTC administrative claim for refund on May
On May 1996, FEBTC filed a claim for refund of the amount of 17, 1996 and judicial claim for refund on April 8, 1997 were
P13,645,109.00 with the BIR. well within the two-year period from the date of the filing of
Due to the failure of petitioner Commissioner of Internal Revenue the return on April 10, 1995.
(CIR) to act on the claim for refund, FEBTC was compelled to bring Second Requisite: Respondent failed to prove that the income
the matter to the CTA on April 1997. derived from rentals and sale of real property were included in the
gross income as reflected in its return.
o The income derived from rentals and sales of real property o Thus, based on the entries in the return, the income derived
were not included in respondents gross income. from rentals and sales of real property upon which the
o In respondents 1994 Annual Income Tax Return, the phrase creditable taxes were withheld were not included in
NOT APPLICABLE was printed on the space provided for respondents gross income as reflected in its return.
rent, sale of real property and trust income. o Since no income was reported, it follows that no tax was
o Respondents explanation that its income derived from withheld.
rentals and sales of real properties were included in the o As to the certifications issued by FEBTC the same cannot
gross income but were classified as Other Earnings in its be considered in the absence of SEVERAL requisite
Schedule of Income attached to the return is not supported Certificates of Creditable Tax Withheld at Source.
by the evidence. o To reiterate, it is incumbent upon the taxpayer to reflect in
o There is nothing in the Schedule of Income to show that the his return the income upon which any creditable tax is
income under the heading Other Earnings includes income required to be withheld at the source.
from rentals and sales of real property. Based on the foregoing, FEBTC has failed to comply with two
o No documentary or testimonial evidence was presented by essential requirements for a valid claim for refund.
respondent to prove this. Consequently, the same cannot be given due course.
o In fact, respondent, upon realizing its omission, filed a The burden is on the taxpayer to prove its entitlement to the refund.
motion for new trial on the ground of excusable negligence o Moreover, the fact that the petitioner failed to present any
with the CTA. evidence or to refute the evidence presented by respondent
o Respondent knew that it had to present additional evidence does not ipso facto entitle the respondent to a tax refund. It
showing the breakdown of the Other Earnings reported in is not the duty of the government to disprove a taxpayers
its Schedule of Income attached to the return to prove that claim for refund. Rather, the burden of establishing the
the income from rentals and sales of real property were factual basis of a claim for a refund rests on the taxpayer.
actually included under the heading Other Earnings. o And while the petitioner has the power to make an
Third Requisite: To establish the fact of withholding, respondent examination of the returns and to assess the correct
submitted Certificates of Creditable Tax Withheld at Source and amount of tax, his failure to exercise such powers does not
Monthly Remittance Returns of Income Taxes Withheld, which create a presumption in favor of the correctness of the
pertain to rentals and sales of real property, respectively. returns.
o The Certificates of Creditable Tax Withheld at Source o The taxpayer must still present substantial evidence to
submitted by FEBTC pertain to rentals of real property while prove his claim for refund. As we have said, there is no
the Monthly Remittance Returns of Income Taxes Withheld automatic grant of a tax refund.
refer to sales of real property. Hence, for failing to prove its entitlement to a tax refund,
o However, a perusal of respondents 1994 Annual Income respondents claim must be denied. Since tax refunds partake of the
Tax Return shows that the gross income was derived nature of tax exemptions, which are construed strictissimi juris
solely from sales of services. against the taxpayer, evidence in support of a claim must likewise
o In fact, the phrase NOT APPLICABLE was printed on the be strictissimi scrutinized and duly proven.
schedules pertaining to rent, sale of real property, and trust
income. CIR v. SMART COMMUNICATION, INC. (Villarin, L.)
[GR. No. 179045-46; August 25, 2010]
“The right of a withholding agent to claim a refund of erroneously or illegally property right over the SDM program, but not over the CM and SIM
withheld taxes comes with the responsibility to return the same to the Application programs as the proprietary rights of these programs
principal taxpayer.” belong to respondent.
Recit-Ready: Facts:
Facts: SMART entered into three Agreements for Programming and On May 25, 2001, SMART entered into three Agreements for
Consultancy Services with Prism, a non-resident corporation duly Programming and Consultancy Services with Prism Transactive (M) Sdn.
organized and existing under the laws of Malaysia. Under the Bhd. (Prism), a non-resident corporation duly organized and existing
agreements, Prism was to provide programming and consultancy under the laws of Malaysia. Under the agreements, Prism was to provide
services for the installation of the Service Download Manager programming and consultancy services for the installation of the Service
(SDM) and the Channel Manager (CM), and for the installation Download Manager (SDM) and the Channel Manager (CM), and for the
and implementation of Smart Money and Mobile Banking Service installation and implementation of Smart Money and Mobile Banking
SIM Applications (SIM Applications) and Private Text Platform Service SIM Applications (SIM Applications) and Private Text Platform
(SIM Application). (SIM Application).
On June 25, 2001, Prism billed respondent in the amount of
Prism billed respondent in the amount of US$547,822.45. US$547,822.45, broken down as follows:
Thinking that these payments constitute royalties, respondent SDM Agreement US$236,000.00
withheld the amount of US$136,955.61 or P7,008,840.43, CM Agreement 296,000.00
representing the 25% royalty tax under the RP-Malaysia Tax SIM Application Agreement 15,822.45
Treaty. Total US$547,822.45
Thinking that these payments constitute royalties, respondent withheld
Within the two-year period to claim a refund, respondent filed with the amount of US$136,955.61 or P7,008,840.43, representing the 25%
the BIR, through the International Tax Affairs Division (ITAD), an royalty tax under the RP-Malaysia Tax Treaty.
administrative claim for refund of the amount of P7,008,840.43 On September 25, 2001, respondent filed its Monthly Remittance Return
of Final Income Taxes Withheld for the month of August 2001.
Issue/s: Within the two-year period to claim a refund, respondent filed with the
3) WON respondent has the right to file the claim for refund BIR, through the International Tax Affairs Division (ITAD), an
4) WON payments made to Prism constitute business profits or royalties administrative claim for refund of the amount of P7,008,840.43.
Due to the failure of the petitioner CI to act on the claim for refund,
Held: respondent filed a Petition for Review with the CTA which was raffled to
3) YES. Although being related parties is a factor that increases the its Second Division.
latter’s legal interest to file a claim for refund, there is nothing in In its Petition for Review, respondent claimed that it is entitled to a refund
Philippine Guaranty to suggest that such relationship is required or because the payments made to Prism are not royalties but business
that the lack of such relation deprives the withholding agent of the right profits, pursuant to the definition of royalties under the RP-Malaysia Tax
to file a claim for refund. Rather, what is clear in the decision is that a Treaty, and in view of the pertinent Commentaries of the Organization for
withholding agent has a legal right to file a claim for refund for two Economic Cooperation and Development (OECD) Committee on Fiscal
reasons. Affairs through the Technical Advisory Group on Treaty Characterization
4) NO. The provisions in the agreements are clear. Prism has intellectual of Electronic Commerce Payments. Respondent further averred that
since under Article 7 of the RP-Malaysia Tax Treaty, business profits are liability under the withholding tax system. The CTA En Banc also
taxable in the Philippines only if attributable to a permanent establishment concurred with the Second Divisions characterization of the payments
in the Philippines, the payments made to Prism, a Malaysian company made to Prism, specifically that the payments for the CM and SIM
with no permanent establishment in the Philippines, should not be taxed. Application Agreements constitute business profits, while the payment for
On December 1, 2003, petitioner filed his Answer arguing that the SDM Agreement is a royalty.
respondent, as withholding agent, is not a party-in-interest to file the claim Only petitioner sought reconsideration of the Decision but it was denied.
for refund, and that assuming for the sake of argument that it is the
proper party, there is no showing that the payments made to Prism Issue/s:
constitute business profits. 1) WON respondent has the right to file the claim for refund —YES
The Second Division of the CTA upheld respondent’s right, as a 2) WON payments made to Prism constitute business profits or
withholding agent, to file the claim for refund citing several cases. royalties
However, as to the claim for refund, it found respondent entitled only to a —SDM program, ROYALTY subject to 25% tax
partial refund. Although it agreed with respondent that the payments for —CM & SIM Applications, BUSINESS PROFITS not subject to tax
the CM and SIM Application Agreements are business profits, and
therefore, not subject to tax under the RP-Malaysia Tax Treaty, the Held/Ratio: Petition is bereft of merit.
payment for the SDM Agreement a royalty subject to withholding tax.
Accordingly, respondent was granted refund in the amount of 1) YES. Although being related parties is a factor that increases the
P3,989,456.43, computed as follows: latter’s legal interest to file a claim for refund, there is nothing in
Philippine Guaranty to suggest that such relationship is required
Particulars Amount (in US$) or that the lack of such relation deprives the withholding agent of
1. CM 296,000.00 the right to file a claim for refund. Rather, what is clear in the
2. SIM Application 15,822.45
decision is that a withholding agent has a legal right to file a claim
Total US$311,822.45
for refund for two reasons.
Particulars Amount Sections 204(c) and 229 of the National Internal Revenue Code
Tax Base US$311,822.45
(NIRC) provide:
Multiply by: Withholding Tax Rate 25%
Final Withholding Tax US$ 77,955.61
Multiply by: Prevailing Exchange Sec. 204. Authority of the Commissioner to Compromise, Abate, and
Rate 51.176 Refund or Credit Taxes. The Commissioner may
Tax Refund Due P3,989,456.43
xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties
Both parties moved for partial reconsideration but the CTA Second
imposed without authority, refund the value of internal revenue stamps
Division denied the motions. Both parties appealed to the CTA En Banc
when they are returned in good condition by the purchaser, and, in his
by filing their respective Petitions for Review, which were consolidated.
discretion, redeem or change unused stamps that have been rendered
On June 28, 2007, the CTA En Banc affirmed the partial refund granted
unfit for use and refund their value upon proof of destruction. No credit
to respondent. In sustaining respondents right to file the claim for refund,
or refund of taxes or penalties shall be allowed unless the taxpayer
the CTA En Banc said that although respondent and Prism are unrelated
files in writing with the Commissioner a claim for credit or refund
entities, such circumstance does not affect the status of respondent as a
within two (2) years after the payment of the tax or penalty:
party-in-interest as its legal interest is based on its direct and independent
Provided, however, That a return filed showing an overpayment shall In Philippine Guaranty Company, Inc. v. CIR, this Court
be considered as a written claim for credit or refund. x x x x pointed out that a withholding agent is in fact the agent both
of the government and of the taxpayer, and that the
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit withholding agent is not an ordinary government agent:
or proceeding shall be maintained in any court for the recovery of any o The law sets no condition for the personal liability of
national internal revenue tax hereafter alleged to have been the withholding agent to attach. The reason is to
erroneously or illegally assessed or collected, or of any penalty compel the withholding agent to withhold the tax
claimed to have been collected without authority, or of any sum under all circumstances. In effect, the responsibility
alleged to have been excessively or in any manner wrongfully for the collection of the tax as well as the payment
collected, until a claim for refund or credit has been duly filed with thereof is concentrated upon the person over whom
the Commissioner; but such suit or proceeding may be maintained, the Government has jurisdiction. Thus, the
whether or not such tax, penalty, or sum has been paid under protest withholding agent is constituted the agent of both the
or duress. Government and the taxpayer. With respect to the
In any case, no such suit or proceeding shall be filed after the collection and/or withholding of the tax, he is the
expiration of two (2) years from the date of payment of the tax or Governments agent. In regard to the filing of the
penalty regardless of any supervening cause that may arise after necessary income tax return and the payment of the
payment: Provided, however, That the Commissioner may, even tax to the Government, he is the agent of the
without a written claim therefor, refund or credit any tax, where on the taxpayer. The withholding agent, therefore, is no
face of the return upon which payment was made, such payment ordinary government agent especially because under
appears clearly to have been erroneously paid. (Emphasis supplied) Section 53 (c) he is held personally liable for the tax
Pursuant to the foregoing, the person entitled to claim a tax refund is he is duty bound to withhold; whereas the
the taxpayer. However, in case the taxpayer does not file a claim for Commissioner and his deputies are not made liable
refund, the withholding agent may file the claim. by law.
In Commissioner of Internal Revenue v. Procter & Gamble If, as pointed out in Philippine Guaranty, the withholding
Philippine Manufacturing Corporation, a withholding agent was agent is also an agent of the beneficial owner of the
considered a proper party to file a claim for refund of the withheld dividends with respect to the filing of the necessary
taxes of its foreign parent company. Pertinent portions of the income tax return and with respect to actual payment of
Decision read: the tax to the government, such authority may
A person liable for tax has been held to be a person subject reasonably be held to include the authority to file a claim
to tax and properly considered a taxpayer. The terms liable for refund and to bring an action for recovery of such
for tax and subject to tax both connote legal obligation or duty claim. This implied authority is especially warranted where,
to pay a tax. It is very difficult, indeed conceptually as in the instant case, the withholding agent is the wholly
impossible, to consider a person who is statutorily made owned subsidiary of the parent-stockholder and therefore, at
liable for tax as not subject to tax. By any reasonable all times, under the effective control of such parent-
standard, such a person should be regarded as a party in stockholder. In the circumstances of this case, it seems
interest, or as a person having sufficient legal interest, to particularly unreal to deny the implied authority of P&G-Phil.
bring a suit for refund of taxes he believes were illegally to claim a refund and to commence an action for such refund.
collected from him. x x x x (Emphasis supplied.)
Petitioner, however, submits that this ruling applies only when the equipment, or for information concerning industrial, commercial or
withholding agent and the taxpayer are related parties, i.e., where the scientific experience; (ii) the use of, or the right to use, cinematograph
withholding agent is a wholly owned subsidiary of the taxpayer. films, or tapes for radio or television broadcasting. These are taxed at
We do not agree. Although such relation between the taxpayer and the the rate of 25% of the gross amount.
withholding agent is a factor that increases the latter’s legal interest to Under the same Treaty, the business profits of an enterprise of a
file a claim for refund, there is nothing in the decision to suggest that Contracting State is taxable only in that State, unless the enterprise
such relationship is required or that the lack of such relation deprives carries on business in the other Contracting State through a
the withholding agent of the right to file a claim for refund. Rather, permanent establishment. The term permanent establishment is
what is clear in the decision is that a withholding agent has a legal defined as a fixed place of business where the enterprise is wholly or
right to file a claim for refund for two reasons. First, he is considered a partly carried on. However, even if there is no fixed place of business,
taxpayer under the NIRC as he is personally liable for the withholding an enterprise of a Contracting State is deemed to have a permanent
tax as well as for deficiency assessments, surcharges, and penalties, establishment in the other Contracting State if it carries on supervisory
should the amount of the tax withheld be finally found to be less than activities in that other State for more than six months in connection
the amount that should have been withheld under law. Second, as an with a construction, installation or assembly project which is being
agent of the taxpayer, his authority to file the necessary income tax undertaken in that other State.
return and to remit the tax withheld to the government impliedly In the instant case, it was established during the trial that Prism does
includes the authority to file a claim for refund and to bring an action not have a permanent establishment in the Philippines. Hence,
for recovery of such claim. business profits derived from Prisms dealings with respondent are not
In this connection, it is however significant to add that while the taxable. The question is whether the payments made to Prism under
withholding agent has the right to recover the taxes erroneously or the SDM, CM, and SIM Application agreements are business profits
illegally collected, he nevertheless has the obligation to remit the same and not royalties.
to the principal taxpayer. The provisions in the agreements are clear. Prism has intellectual
As to Silkair (Singapore) Pte, Ltd. v. CIR cited by the petitioner, we property right over the SDM program, but not over the CM and SIM
find the same inapplicable as it involves excise taxes, not withholding Application programs as the proprietary rights of these programs
taxes. In that case, it was ruled that the proper party to question, or belong to respondent. In other words, out of the payments made to
seek a refund of, an indirect tax is the statutory taxpayer, the person Prism, only the payment for the SDM program is a royalty subject to a
on whom the tax is imposed by law and who paid the same even if he 25% withholding tax. A refund of the erroneously withheld royalty
shifts the burden thereof to another. taxes for the payments pertaining to the CM and SIM Application
Agreements is therefore in order.
2) NO. The provisions in the agreements are clear. Prism has Indeed, the government has no right to retain what does not belong to
intellectual property right over the SDM program, but not over the it. No one, not even the State, should enrich oneself at the expense of
CM and SIM Application programs as the proprietary rights of these another.
programs belong to respondent.
Under the RP-Malaysia Tax Treaty, the term royalties is defined as CIR v PETRON CORP. (VILLARIN P)
payments of any kind received as consideration for: (i) the use of, or [GR. No. 185568; March 21, 2012]
the right to use, any patent, trade mark, design or model, plan, secret
formula or process, any copyright of literary, artistic or scientific work, Recit-Ready:
or for the use of, or the right to use, industrial, commercial, or scientific
Facts: For the taxable years of 1995-1998, Petron Corp paid its tax alleged fraudulent acts involved in the transfer and utilization of the
liabilities with the Tax Credit Certificates (TCC) it received from subject TCCs.
different BOI-registered companies as consideration for the Petron had the right to rely on the joint stipulation that absolved it from
delivery of petroleum products to these companies. Petron’s any participation in the alleged fraud pertaining to the issuance and
acceptance and use of the TCCs has been continuously procurement of the subject TCCs.
approved by the Department of Finance as well as the BIR The joint stipulation made by the parties consequently obviated the
Collection Program Division through its surrender and opportunity of the CIR to present evidence on this matter, as no proof
subsequent issuance of Tax Debit Memos (TDMs). In a post-audit is required for an admission made by a party in the course of the
conducted by the DOF, it was found out that the TCCs issued to proceedings. Thus, the CIR cannot now be allowed to change its
the TCC transferors were fraudulently obtained and fraudulently stand and renege on that admission.
transferred to Petron. Thus, the TCCs and TDMs issued to Petron 2) YES.
were cancelled by the DOF. It is a well-settled rule in jurisprudence that TCCs are valid and
Now, the CIR issued an assessment against Petron for deficiency effective from their issuance and are not subject to a post-audit as a
excise taxes for the taxable years 1995-1998, inclusive of suspensive condition for their validity. Thus, Petron has the right to
surcharges and interests, on the ground that the TCCs which rely on the validity and effectivity of the TCCs that were assigned to it.
Petron used to pay its taxes were cancelled and therefore has the In finally determining their effectivity in the settlement of Petron’s
effect of nonpayment of taxes. The CIR also alleged that Petron excise tax liabilities, the validity of those TCCs should not depend on
has the intent to evade its taxes, thus making the returns it filed the results of the DOFs post-audit findings.
fraudulent. As an exception, the transferee/assignee may be held liable if proven
In the stipulation of facts between the parties, one of the judicial to have been a party to the fraud or to have had knowledge of the
admissions was that Petron never participated in the procurement fraudulent issuance of the subject TCCs. But here, the parties entered
and issuance of the TCCs to its transferors. Also, before the CTA into a joint stipulation of facts stating that Petron did not participate in
En Banc, it was held that Petron was an innocent purchaser in the procurement or issuance of those TCCs. Thus, the exception to
good faith and for value. the rule is not applicable as Petron was an innocent transferee for
value of the TCCs.
Issue/s: 3) YES The Court recognizes that estoppel does not apply to the
1) Whether Petron was involved in the perpetration of fraud in the government, especially on matters of taxation. Taxes are the nations
transfer and use of the TCCs. lifeblood through which government agencies continue to operate and
2) Whether Petron can validly claim the right of innocent transferee with which the State discharges its functions for the welfare of its
for value. constituents. As an exception, however, this general rule cannot be
3) Whether government is stopped from connecting taxes due. applied if it would work injustice against an innocent party.
4) Whether respondent is liable for 25% surcharge and 20% interest Petron, in this case, was not proven to have had any participation in or
per annum pursuant to 248 and 249 of NIRC.WON Queeny Lim knowledge of the CIRs allegation of the fraudulent transfer and
acts like a cartoon character. utilization of the subject TCCs. Respondents status as a transferee in
good faith and for value of these TCCs has been established and even
Held: stipulated upon by petitioner.
4) NO. Petron is an innocent transferee for value of the subject TCCs.
1) NO. Petron has not been shown or proven to have participated in the Consequently, the Tax Returns it filed for the years 1995 to 1998 are
not considered fraudulent. Hence, the CIR had no legal basis to assess It further ruled that Petron’s acceptance of the TCCs was considered a
the excise taxes or any penalty surcharge or interest thereon, as contract entered into by respondent with the CIR and subject to post-
respondent had already paid the appropriate excise taxes using the audit, which was considered a suspensive condition.
subject TCCs. Moreover, the CTA, finding that the circumstances pertaining to the
issuance of the subject TCCs and their transfer to Petron brim with fraud.
Facts: Hence, the said court concluded that since the TCCs used by Petron
For the taxable years of 1995-1998, Petron Corp paid its tax liabilities were found to be spurious, respondent was deemed to have not paid its
with the Tax Credit Certificates (TCC) it received from different BOI- excise taxes and ought to be liable to the CIR.
registered companies as consideration for the delivery of petroleum Aggrieved, Petron appealed the Decision to the CTA EB.
products to these companies. Petron’s acceptance and use of the TCCs CTA EB absolved Petron from any deficiency excise tax liability for
has been continuously approved by the Department of Finance as well as taxable years 1995 to 1998. Its ruling in favor of Petron was anchored on
the BIR Collection Program Division through its surrender and this Court’s pronouncements in Pilipinas Shell Petroleum Corp. v.
subsequent issuance of Tax Debit Memos (TDMs). In a post-audit Commissioner of Internal Revenue, which found that the factual
conducted by the DOF, it was found out that the TCCs issued to the TCC background and legal issues therein were similar to those in the present
transferors were fraudulently obtained and fraudulently transferred to case.
Petron. Thus, the TCCs and TDMs issued to Petron were cancelled by In resolving the issues, the CTA EB adopted the main points in Shell,
the DOF. which it quoted at length as basis for deciding the appeal in favor of
Now, the CIR issued an assessment against Petron for deficiency excise Petron. The gist of the main points of Shell cited by the said court is as
taxes for the taxable years 1995-1998 in the amount of ₱739,003,036.32, follows:
inclusive of surcharges and interests, on the ground that the TCCs which o The issued TCCs are immediately valid and effective and are not
Petron used to pay its taxes were cancelled by the DOF for having been subject to a post-audit as a suspensive condition
fraudulently issued and transferred and therefore has the effect of o A TCC is subject only to the following conditions:
nonpayment of taxes. The CIR also alleged that Petron has the intent to Post-audit in the event of a computational discrepancy
evade its taxes, thus making the returns it filed fraudulent. A reduction for any outstanding account with the BIR and/or
Instead of submitting the documents required by the respondent BOC
petitioner filed its protest letter to the Assessment. A revalidation of the TCC if not utilized within one year from
Thereafter, CIR served a Warrant of Distraint and/or Levy on petitioner to issuance or date of utilization
enforce payment of the ₱739,003,036.32 tax deficiencies. CIR allegedly o A transferee of a TCC should only be a BOI-registered firm under
served the Warrant of Distraint and/or Levy against petitioner without first the IRR of EO No. 226.
acting on its letter-protest. Thus, construing the Warrant of Distraint o The liability clause in the TCCs provides only for the solidary liability
and/or Levy as the final adverse decision of the BIR on its protest of the of the transferee relative to its transfer in the event it is a party to the
assessment, Petron filed the instant petition before the CTA in Division. fraud.
Denying the petition, the CTA held Petron liable for deficiency excise o A transferee can rely on the Centers approval of the TCCs transfer
taxes on the ground that the cancellation by the DOF of the TCCs and subsequent acceptance as payment of the transferees excise
previously issued to and utilized by respondent to settle its tax liabilities tax liability.
had the effect of nonpayment of the latter’s excise taxes. These taxes o A TCC cannot be cancelled by the Center, as it was already
corresponded to the value of the TCCs Petron used for payment. cancelled after the transferee had applied it as payment for the
latters excise tax liabilities.
The CTA EB also found that Petron had no participation in or knowledge

of the fraudulent issuance and transfer of the subject TCCs. Issue/s:
Finally, the CTA EB ruled that Petron was considered an innocent 1) Whether Petron was involved in the perpetration of fraud in the
transferee of the subject TCCs and may not be prejudiced by a re- transfer and use of the TCCs. —NO
assessment of excise tax liabilities that respondent has already settled, 2) Whether Petron can validly claim the right of innocent transferee for
when due, with the use of the TCCs. Petron is thus considered to have value.—YES
not fraudulently filed its excise tax returns. Consequently, the assessment 3) Whether government is estopped from collecting taxes due.—YES
issued by the CIR against it had no legal basis. 4) Whether respondent is liable for 25% surcharge and 20% interest per
Issue: W/N the post-audit report has the effect of a suspensive condition annum pursuant to 248 and 249 of NIRC.—NO
that would determine the validity of the TCCs
No. It is a well-settled rule in jurisprudence that TCCs are valid and Held/Ratio: WHEREFORE, the CIRs Petition is DENIED for lack of merit.
effective from their issuance and are not subject to a post-audit as a The CTA En Banc Decision dated 03 December 2008 in CTA EB No. 311 is
suspensive condition for their validity. Thus, Petron has the right to rely hereby AFFIRMED in toto. No pronouncement as to costs.
on the validity and effectivity of the TCCs that were assigned to it. In
finally determining their effectivity in the settlement of Petron’s excise tax 1) NO.
liabilities, the validity of those TCCs should not depend on the results of Under RR 5-2000, a TCC may be used by the grantee or its
the DOFs post-audit findings. assignee in the payment of its direct internal revenue tax liability. It
As an exception, the transferee/assignee may be held liable if proven to may be transferred in favor of an assignee subject to the following
have been a party to the fraud or to have had knowledge of the fraudulent conditions: 1) the TCC transfer must be with prior approval of the
issuance of the subject TCCs. But here, the parties entered into a joint Commissioner or the duly authorized representative; 2) the transfer
stipulation of facts stating that Petron did not participate in the of a TCC should be limited to one transfer only; and 3) the
procurement or issuance of those TCCs. Thus, the exception to the rule transferee shall strictly use the TCC for the payment of the
is not applicable as Petron was an innocent transferee for value of the assignees direct internal revenue tax liability and shall not be
TCCs. convertible to cash.
Issue 2: W/N the doctrine of “non-applicability of estoppel to the A TCC is valid only for 10 years subject to the following rules: (1) it
government” apply in this case must be utilized within five (5) years from the date of issue; and (2) it
No. As a general rule, the principle of estoppel does not apply to the must be revalidated thereafter or be otherwise considered invalid
government, especially on matters of taxation. Taxes are the nation’s A TCC undergoes a stringent process of verification by various
lifeblood through which government agencies continue to operate and specialized government agencies before it is accepted as payment
with which the State discharges its functions for the welfare of its of an assignees tax liability.
constituents. The exception however is that this rule cannot be applied it In the case at bar, CIR believes that there was substantial evidence
if it would work injustice against an innocent party. to support its allegation of a fraudulent transfer of the TCCs to
Petron has not been proven to have had any participation in or Petron. It further contends that respondent was not a qualified
knowledge of the CIR’s allegation of fraudulent transfer and utilization of transferee of the TCCs, because the latter did not supply petroleum
the TCCs. Petron’s status as an innocent purchaser for value has been products to the companies that were the assignors of the subject
established and even stipulated upon by the CIR. Petron was thereby TCCs.
amply protected from the adverse findings subsequently made by the The CIR bases its contentions on the DOFs post-audit findings
DOF agency stating that, for the periods covering 1995 to 1998, Petron did not
deliver fuel and other petroleum products to the companies (the devoid of support or are glaringly erroneous as to constitute
transferor companies) that had assigned the subject TCCs to palpable error or grave abuse of discretion. Such an exception does
respondent. Petitioner further alleges that the findings indicate that not obtain in the circumstances of this case.
the transferor companies could not have had such a high volume of
export sales declared to the Center and made the basis for the 2) YES.
issuance of the TCCs assigned to Petron. It is a well-settled rule in jurisprudence that TCCs are valid and
Thus, the CIR believes respondent was a transferee in good faith effective from their issuance and are not subject to a post-audit as a
and for value of the subject TCCs. Not finding merit in the CIRs suspensive condition for their validity. Thus, Petron has the right to
contention, we affirm the ruling of the CTA En Banc finding that rely on the validity and effectivity of the TCCs that were assigned to
Petron is a transferee in good faith and for value of the subject it. In finally determining their effectivity in the settlement of Petron’s
TCCs. From the records, we observe that the CIR had no allegation excise tax liabilities, the validity of those TCCs should not depend on
that there was a deviation from the process for the approval of the the results of the DOFs post-audit findings.
TCCs, which Petron used as payment to settle its excise tax As an exception, the transferee/assignee may be held liable if
liabilities for the years 1995 to 1998. proven to have been a party to the fraud or to have had knowledge
However, any merit in the position of petitioner on this issue is of the fraudulent issuance of the subject TCCs. But here, the parties
negated by the Joint Stipulation it entered into with Petron in the entered into a joint stipulation of facts stating that Petron did not
proceedings before the said Division. This stipulation of fact by the participate in the procurement or issuance of those TCCs. Thus, the
CIR amounts to an admission and, having been made by the parties exception to the rule is not applicable as Petron was an innocent
in a stipulation of facts at pretrial, is treated as a judicial admission. transferee for value of the TCCs.
Petron has not been shown or proven to have participated in the 3) YES
alleged fraudulent acts involved in the transfer and utilization of the The Court recognizes that estoppel does not apply to the
subject TCCs. government, especially on matters of taxation. Taxes are the nations
Petron had the right to rely on the joint stipulation that absolved it lifeblood through which government agencies continue to operate
from any participation in the alleged fraud pertaining to the issuance and with which the State discharges its functions for the welfare of
and procurement of the subject TCCs. its constituents. As an exception, however, this general rule cannot
The joint stipulation made by the parties consequently obviated the be applied if it would work injustice against an innocent party.
opportunity of the CIR to present evidence on this matter, as no Petron, in this case, was not proven to have had any participation in
proof is required for an admission made by a party in the course of or knowledge of the CIRs allegation of the fraudulent transfer and
the proceedings. Thus, the CIR cannot now be allowed to change its utilization of the subject TCCs. Respondents status as a transferee
stand and renege on that admission. in good faith and for value of these TCCs has been established and
Moreover, a close examination of the arguments proffered by the even stipulated upon by petitioner. Given the circumstances, the
CIR in their Petition calls for a reevaluation of the sufficiency of CIRs invocation of the non-applicability of estoppel in this case is
evidence in the case. A recalibration of the sufficiency of evidence misplaced.
presented by the CIR is needed for a different conclusion to be
reached. It is basic that where it is the sufficiency of evidence that is 4) NO
being questioned, there is a question of fact. It is not the function of CIR contends that a 25% surcharge and a 20% interest per annum
this Court to analyze or weigh the evidence all over again, unless must be imposed upon Petron for respondents excise tax liabilities
there is a showing that the findings of the lower court are totally as mandated under Sections 248 and 249 of the National Internal
Revenue Code (NIRC). Petitioner considers the tax returns filed by

respondent for the years 1995 to 1998 as fraudulent on the basis of The SC held that:
the post-audit finding that the TCCs were void. It argues that the (1) Subject of claim for tax refund is the tax paid on passenger
prescriptive period within which to lawfully assess Petron for its tax revenue for taxable year 1999 at the time when petitioner was still
liabilities has not prescribed under Section 222 (a) of the Tax Code. operating cargo flights originating from the Philippines. The CTA
The CIR explains that respondents assessment on 30 January 2002 found that petitioner had underpaid its GPB tax for 1999 because
of respondents deficiency excise tax for the years 1995 to 1998 was petitioner had made deductions from its gross cargo revenues in
well within the ten-year prescription period. the income tax return it filed for the taxable year 1999, the
As explained in the main ruling (issue #1), Petron is an innocent amount of underpayment even greater than the refund sought for
transferee for value of the subject TCCs. Consequently, the Tax erroneously paid GPB tax on passenger revenues for the same
Returns it filed for the years 1995 to 1998 are not considered taxable period. Hence, the CTA ruled petitioner is not entitled to a
fraudulent. Hence, the CIR had no legal basis to assess the excise tax refund. Petitioner’s arguments regarding the propriety of such
taxes or any penalty surcharge or interest thereon, as respondent determination by the CTA are misplaced. Under Section 72 of the
had already paid the appropriate excise taxes using the subject NIRC, the CTA can make a valid finding that petitioner made
TCCs. erroneous deductions on its gross cargo revenue; that because of
the erroneous deductions, petitioner reported a lower cargo
UNITED AIRLINES, INC. v. CIR (Villarivera) revenue and paid a lower income tax thereon; and that
[GR. No. 178788; September 29, 2010] petitioner’s underpayment of the income tax on cargo revenue is
“Gusto ng CIR to annul the sheriff’s sale of 4 barges ni Maritime OR bigay sa even higher than the income tax it paid on passenger revenue
kanila (BIR) ang proceeds pambayad sa tax due ni Maritime Co.” subject of the claim for refund, such that the refund cannot be
granted.
Recit-Ready:
United was a foreign corporation, engaged in international airline (2) Also, while as a general rule, taxes cannot be offset, there are
business. It ceased operating passenger flights from the exceptions. Citing the case of Citytrust (CIR v. CTA), the SC held
Philippines beginning 1998. It erroneously paid passenger Gross that in order to avoid multiplicity of suits and pursuant to the then
Philippine Billings (“GPB”) in 1999 so it sought a refund. The CTA Sec. 82 of the NIRC, refund may be denied when the return’s
found that United erroneously deducted items from its cargo GPB accuracy is challenged and the deficiency assessment is made in
so United underpaid its cargo revenue taxes by P31.43 million, the same case. Here, the return filed by United for 1999 (its basis
which amount was way higher than the P5.03 million in of the claim for refund) is challenged when it was ruled that the
Passenger GPBs tax it asked to be refunded. passenger sales should be subject to the Sec. 28(A)(1) instead of
Sec. 28(A)(3)(a) and the CTA made the proper assessment of the
CTA denied refund and the MR. This was affirmed by CTA EB. deficiency when the case was elevated to them from the CIR.
Hence present petition. Lastly, tax refunds are construed against the taxpayer.
United argues that to deny refund on the basis of its larger cargo Facts:
liability amounts to setting off which is contrary to the well- United Airlines, Inc. (“United”) operated passenger and cargo flights
entrenched rule that taxes cannot be off set. in and out of the Philippines.
o In February 21, 1998, it ceased operating passenger flights o United asserts that under the new definition of Gross
and appointed Aerotel Ltd. Corp.—an independent general Philippine Billings, the Philippines has jurisdiction to tax only
sales agent—as its sales agent. the gross revenue derived by US air and shipping carriers
o United continued operating cargo flights until January 31, from outgoing traffic in the Philippines.
2001. o Hence BIR erroneously imposed and collected income tax
United filed with the CIR on April 12, 2002 a claim for income tax in 1999 (P5,028,813.23) based on United’s gross
refund pursuant to Section 28(A)(3)(a)6 of the NIRC in relation to passenger revenue as United no longer flew passenger
Article 4(7)7 of the RP-US Tax Treaty flights in 1998.
o It sought to refund a total amount of P15,916,680.69 CTA ruled that no excess or erroneously paid tax may be
pertaining to gross passenger and cargo revenues for years refunded to United because the income tax on Gross Philippine
1999 to 2001 Billings applies as well to gross revenue from carriage of
o P5,028,813.23 (the relevant amount in this case) pertained cargoes from the Philippines.
allegedly to income taxes paid in 1999 on passenger o CTA agreed that United cannot be taxed for its 1999
revenue tickets sold in the Philippines the uplifts of which passenger revenue.
did not originate in the Philippines o However, upon investigation, CTA found that United
Since it no longer operated passenger flights, erroneously deducted two items (commission and other
United argued that its passenger income from 1999 incentives) from its cargo gross revenue before applying the
to 2001 is not income from sources within the tax rate.
Philippines CTA notes that this was wrong. GROSS nga eh.
As such, it should be subject to Article 98 of the Thus, United’s Gross Philippine Billings tax on
RP-US Treaty. Cargo in 1999 was P42.54 million but it only paid
United filed with the CTA a petition for review on April 15, 2002 there P11.1 million.
being no resolution on its claim and in view of the 2 year prescriptive So, United underpaid its cargo revenue taxes by
period (from the time of filing of Final Adjustment Return for taxable P31.43 million, which amount was much much
year 1999). much higher than the P5.03 million in Passenger
Gross Philippine Billings tax it asked to be
6
refunded; the amount of underpayment is higher
SEC. 28. Rates of Income Tax on Foreign Corporations. -
(a) International Air Carrier - "Gross Philippine Billings" refers to the amount of gross that amount of refund.
revenue derived from carriage of persons, excess baggage, cargo and mail originating from o The MR was denied.
the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or
issue and the place of payment of the ticket or passage document: xxx.
CTA EB affirmed in toto.
7
Source of Income
(7) Gross revenues from the operation of ships in international traffic shall be treated as Issues:
from sources within a Contracting State to the extent they are derived from international
traffic originating in that State. Whether United is entitled to refund of P5,028,813.23 it paid as
8
Article 9 income tax on passenger revenues in 1999. - NO
Shipping and Air Transport
2) Nothing in the Convention shall affect the right of a Contracting State to tax, in
accordance with its domestic laws, profits derived by a resident of the other Contracting Held: WHEREFORE, we DENY the petition for lack of merit
State from sources within the first-mentioned Contracting State from the operation of and AFFIRM the Decision dated July 5, 2007 of the Court of Tax Appeals En
aircraft in international traffic.
Banc in C.T.A. EB No. 227.
b. EXCEPTION:
Ratio: i. In CIR v. CTA—to award tax refund despite
deficiency tax assessment is an absurdity.
1. Basically, United argues that the claim for cannot be denied on the 1. SC granted offsetting of tax refund with tax
basis of its underpaid taxes is higher than the amount claimed for deficiency on the basis of Section 82
refund. This, United claims, amounts to an offsetting of taxes which (NOW Section 72) of the Code.
contravenes the well-entrenched rule that taxes cannot be the a. Section 83 (Now 72) provides that
subject of set-off or compensation. “(w)hen an assessment is made
in case of any list, statement, or
2. Preliminarily, United is not subject to the Gross Philippine Billings return, which in the opinion of the
pertaining to passengers Commissioner of Internal
a. South African Airways v. CIR - if an international air carrier Revenue was false or fraudulent
maintains flights to and from the Philippines, it shall be or contained any understatement
taxed at the rate of 2½% (Sec. 28(A)(3)(a)) of its GPB, or undervaluation, no tax
while international air carriers that do not have flights to and collected under such assessment
from the Philippines but nonetheless earn income from shall be recovered by any suits
other activities in the country will be taxed at the rate of unless it is proved that the said
32% (Sec. 28(A)(1)) of such income. list, statement, or return was not
b. Even if it is not subject to this, it was still subject to Cargo false nor fraudulent and did not
Gross Philippine Billings. contain any understatement or
undervaluation; but this provision
3. Under Section 72 of NIRC, CTA may make a valid finding that shall not apply to statements or
United made erroneous deductions on its gross cargo revenue; that returns made or to be made in
because of the erroneous deductions, petitioner reported a lower good faith regarding annual
cargo revenue and paid a lower income tax thereon; and that depreciation of oil or gas wells
petitioner's underpayment of the income tax on cargo revenue is and mines."
even higher than the income tax it paid on passenger revenue i. The grant of refund is
subject of the claim for refund, such that the refund cannot be found on the assumption
granted. that the tax return is
valid, the facts stated
4. Petitioner is also correct that under civil code, there can be no off- therein are true and
set; however, there is an exception correct.
a. GR (NO SET-OFF): taxes cannot be subject to ii. However, a deficiency
compensation for the simple reason that the government assessment, although not
and the taxpayer are not creditors and debtors of each yet final, creates a doubt
other. Debts are due to the Government in its corporate as to and constitutes a
capacity, while taxes are due to the Government in its challenge against the
sovereign capacity
truth and accuracy of the correctness of the return filed by petitioner

facts stated in the return. is now put in doubt. As such, we cannot
1. Thus, a return grant the prayer for a refund
whose accuracy a. On the assumption that petitioner
is challenged filed a correct return, it had the
cannot be the right to file a claim for refund of
basis of the GPB tax on passenger revenues
grant of refund it paid in 1999
b. Moreover, to grant the refund b. However, upon examination by
without determination of the the CTA, petitioner’s return was
proper assessment and the tax found erroneous as it understated
due would inevitably result in its gross cargo revenue for the
multiplicity of proceedings or same taxable year due to
suits. deductions of two (2) items
i. If later on the deficiency c. Having underpaid the GPB tax
assessment is upheld, due on its cargo revenues for
the government would 1999, petitioner is not entitled to a
have to collect the taxes refund of its GPB tax on its
it refunded. passenger revenue, the amount
c. Thus, to avoid multiplicity of suits of the former being even much
and unnecessary difficulties or higher (P31.43 million) than the
expenses, it is both logically tax refund sought (P5.2 million)
necessary and legally appropriate d. The CTA therefore correctly
that the issue of the deficiency tax denied the claim for tax refund
assessment against Citytrust after determining the proper
(petitioner in case cited) be assessment and the tax due
resolved jointly with its claim for 5. We must emphasize that tax refunds, like tax exemptions, are
tax refund, to determine once and construed strictly against the taxpayer and liberally in favor of the
for all in a single proceeding the taxing authority. In any event, petitioner has not discharged its
true and correct amount of tax burden of proof in establishing the factual basis for its claim for a
due or refundable. refund and we find no reason to disturb the ruling of the CTA. It has
been a long-standing policy and practice of the Court to respect the
2. HERE, petitioner’s similar tax refund claim conclusions of quasi-judicial agencies such as the CTA, a highly
assumes that the tax return that it filed specialized body specifically created for the purpose of reviewing tax
was correct. Given, however, the finding of cases.
the CTA that petitioner, although not liable
under Sec. 28(A)(3)(a) of the 1997 NIRC,
is liable under Sec. 28(A)(1), the
REVENUE REGULATION 14-2011
REVENUE REGULATION 14-2011
SUBJECT: Amending Certain Provision of Revenue Regulation No.

5-2000 as amended, Prescribing the Regulations Governing the
Manner of the Issuance of Tax Credit Certificates, and the Conditions
for their Use, Revalidation and Transfer.
TO: All Revenue Officials, Employees and Others Concerned
SECTION 1. SCOPE – Pursuant to provision of Sec 244 and 245 of the

National Internal Revenue Code of 1997 (Tax Code), as amended, in
relation to Sections 76, 112, 130, 135, 204 and 230 all of the same Tax
Code, these Regulations are hereby promulgated to amend certain
provision of Revenue Regulations (RR) No. 5-2000, as amended.
SECTION 2. ASSIGNMENT OR TRANSFERS – Section 4 of RR No. 5-

2000, as amended is hereby modified to read as follows:
“SEC. 4 ASSIGNMENT OR TRANSFER –
All Tax Credit Certificates (TCCs) issued by the BIR shall

not be allowed to be transferred or assigned to any person.”
SECTION 3. REPEALING CLAUSE – The provisions of RR 5-2000 and

all other issuances or portions thereof which are inconsistent with the
provisions of these regulations are hereby repealed, amended or modified
accordingly.
SECTION 4. EFFECTIVITY – This regulations shall take effect after fifteen

(15) days following its publication in any newspaper of general circulations
or in the Official Gazette.
COURT OF TAX APPEALS salaries shall be deemed correspondingly extended to and enjoyed by the
Presiding Justice and Associate Justices of the CTA.
Republic Act No. 9282 as amended by Republic Act No. 9504

"The Presiding Justice and Associate Justices shall hold office during good
behavior, until they reach the age of seventy (70), or become incapacitated
AN ACT ENLARGING THE ORGANIZATIONAL STRUCTURE OF to discharge the duties of their office, unless sooner removed for the same
THE COURT OF TAX APPEALS, AMENDING FOR THE causes and in the same manner provided by law for members of the
PURPOSE CERTAIN SECTIONS OF THE LAW CREATING THE judiciary of equivalent rank."
COURT OF TAX APPEALS, AND FOR OTHER PURPOSES
Section 2. Section 2 of the same Act is hereby amended to read as follows:
"SECTION 1. Court; Justices, Qualifications; Salary; Tenure. - There is
hereby created a Court of Tax Appeals (CTA) which shall be of the same "SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - The
level as the Court of Appeals, possessing all the inherent powers of a CTA may sit en banc or in three (3) Divisions, each Division
Court of Justice, and shall consist of a Presiding Justice and eight (8) consisting of three (3) Justices.
Associate Justices. The incumbent Presiding Judge and Associate Judges
shall continue in office and bear the new titles of Presiding Justice and "Five (5) Justices shall constitute a quorum for sessions en
Associate Justices. The Presiding Justices and the two (2) most Senior banc and two (2) Justices for sessions of a Division. Provided,
Associate Justices, all of whom are incumbent, shall serve as chairmen of That when the required quorum cannot be constituted due to any
the three (3) Divisions. The other three (3) incumbent Associate Justices vacancy, disqualification, inhibition, disability, or any other lawful
and the three (3) additional Associate Justices shall serve as members of cause, the Presiding Justice shall designate any Justice of other
the Divisions. The additional three (3) Justices as provided herein and the Divisions of the Court to sit temporarily therein.
succeeding members of the Court shall be appointed by the President
upon nomination by the Judicial and Bar Council. The Presiding Justice "The affirmative votes of five (5) members of the Court en banc
shall be so designated in his appointment, and the Associate Justices shall shall be necessary to reverse a decision of a Division but a
have precedence according to the date of their respective appointment or simple majority of the Justices present necessary to promulgate a
when the appointments of two (2) or more of them shall bear the same date, resolution or decision in all other cases or two (2) members of a
according to the order in which their appointments were issued by the Division, as the case may be, shall be necessary for the rendition
President. They shall have the same qualifications, rank, category, of a decision or resolution in the Division Level."
salary, emoluments and other privileges, be subject to the same
inhibitions and disqualifications, and enjoy the same retirement and
other benefits as those provided for under existing laws for the
Presiding Justice and Associate Justices of the Court of Appeals. Section 3. Section 3 of the same Act is hereby amended to read as follows:
"Whenever the salaries of the Presiding Justice and the Associate "SEC. 3. Clerk of Court; Division Clerks of Court; Appointment;
Justices of the Court of Appeals are increased, such increases in Qualification; Compensation. - The CTA shall have a Clerk of
Court and three (3) Division Clerks of Court who shall be qualified to practice as counsel before the Court for a period
appointed by the Supreme Court. No person shall be appointed of one (1) year from his retirement or resignation."
Clerk of Court or Division Clerk of Court unless he is duly
authorized to practice law in the Philippines. The Clerk of Court Section 6. Section 6 of the same Act is hereby amended to read as follows:
and Division Clerks of Court shall exercise the same powers
and perform the same duties in regard to all matters within the "SEC. 6. Place of Office. - The CTA shall have its principal office in
Court's jurisdiction, as are exercised and performed by the Metro Manila and shall hold hearings at such time and place as it
Clerk of Court and Division Clerks of Court of the Court of may, by order in writing, designate."
Appeals, in so far as the same may be applicable or analogous;
and in the exercise of those powers and the performance of those Section 7. Section 7 of the same Act is hereby amended to read as follows:
duties they shall be under the direction of the Court. The Clerk of
Court and the Division Clerks of Court shall have the same rank, "Sec. 7. Jurisdiction. - The CTA shall exercise:
privileges, salary, emoluments, retirement and other benefits as
those provided for the Clerk of Court and Division Clerks of Court "a. Exclusive appellate jurisdiction to review by appeal, as
of the Court of Appeals, respectively.' herein provided:
Section 4. Section 4 of the same Act is hereby amended to read as follows: "1. Decisions of the Commissioner of Internal
Revenue in cases involving disputed
"SEC. 4. Other Subordinate Employees. - The Supreme Court shall assessments, refunds of internal revenue taxes,
appoint all officials and employees of the CTA, in accordance with fees or other charges, penalties in relation
the Civil Service Law. The Supreme Court shall fix their salaries thereto, or other matters arising under the
and prescribe their duties." National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
Section 5. Section 5 of the same Act is hereby amended to read as follows:
"2. Inaction by the Commissioner of Internal
"SEC. 5. Disqualifications. - No Justice or other officer or employee Revenue in cases involving disputed
of the CTA shall intervene, directly or indirectly, in the management assessments, refunds of internal revenue taxes,
or control of any private enterprise which in any way may be fees or other charges, penalties in relations
affected by the functions of the Court. Justices of the Court shall thereto, or other matters arising under the
be disqualified from sitting in any case on the same grounds National Internal Revenue Code or other laws
provided under Rule one hundred thirty-seven of the Rules of Court administered by the Bureau of Internal Revenue,
for the disqualification of judicial officers. No person who has where the National Internal Revenue Code
once served in the Court in a permanent capacity, either as provides a specific period of action, in which case
Presiding Justice or as Associate Justice thereof, shall be the inaction shall be deemed a denial;
"3. Decisions, orders or resolutions of the 8800, where either party may appeal the decision
Regional Trial Courts in local tax cases to impose or not to impose said duties.
originally decided or resolved by them in the
exercise of their original or appellate jurisdiction; "b. Jurisdiction over cases involving criminal offenses as
herein provided:
"4. Decisions of the Commissioner of
Customs in cases involving liability for customs "1. Exclusive original jurisdiction over all criminal offenses arising
duties, fees or other money charges, seizure, from violations of the National Internal Revenue Code or Tariff and
detention or release of property affected, fines, Customs Code and other laws administered by the Bureau of Internal
forfeitures or other penalties in relation thereto, or Revenue or the Bureau of Customs: Provided, however, That offenses or
other matters arising under the Customs Law or felonies mentioned in this paragraph where the principal amount o taxes
other laws administered by the Bureau of and fees, exclusive of charges and penalties, claimed is less than One
Customs; million pesos (P1,000,000.00) or where there is no specified amount
claimed shall be tried by the regular Courts and the jurisdiction of the CTA
"5. Decisions of the Central Board of shall be appellate. Any provision of law or the Rules of Court to the contrary
Assessment Appeals in the exercise of its notwithstanding, the criminal action and the corresponding civil action for
appellate jurisdiction over cases involving the the recovery of civil liability for taxes and penalties shall at all times be
assessment and taxation of real property simultaneously instituted with, and jointly determined in the same
originally decided by the provincial or city board proceeding by the CTA, the filing of the criminal action being deemed to
of assessment appeals; necessarily carry with it the filing of the civil action, and no right to reserve
the filling of such civil action separately from the criminal action will be
"6. Decisions of the Secretary of Finance on recognized.
customs cases elevated to him automatically for
review from decisions of the Commissioner of "2. Exclusive appellate jurisdiction in criminal offenses:
Customs which are adverse to the Government
under Section 2315 of the Tariff and Customs "a. Over appeals from the judgments, resolutions or orders of the
Code; Regional Trial Courts in tax cases originally decided by them, in their
respected territorial jurisdiction.
"7. Decisions of the Secretary of Trade and
Industry, in the case of nonagricultural product, "b. Over petitions for review of the judgments, resolutions or orders of
commodity or article, and the Secretary of the Regional Trial Courts in the exercise of their appellate jurisdiction over
Agriculture in the case of agricultural product, tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial
commodity or article, involving dumping and Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and "c. Jurisdiction over tax collection cases as herein provided:
safeguard measures under Republic Act No.
"1. Exclusive original jurisdiction in tax collection cases involving final "SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. -
and executory assessments for taxes, fees, charges and penalties: Any party adversely affected by a decision, ruling or inaction of
Provided, however, That collection cases where the principal amount of the Commissioner of Internal Revenue, the Commissioner of
taxes and fees, exclusive of charges and penalties, claimed is less than Customs, the Secretary of Finance, the Secretary of Trade and
One million pesos (P1,000,000.00) shall be tried by the proper Municipal Industry or the Secretary of Agriculture or the Central Board of
Trial Court, Metropolitan Trial Court and Regional Trial Court. Assessment Appeals or the Regional Trial Courts may file an
appeal with the CTA within thirty (30) days after the receipt of such
"2. Exclusive appellate jurisdiction in tax collection cases: decision or ruling or after the expiration of the period fixed by law
for action as referred to in Section 7(a)(2) herein.
"a. Over appeals from the judgments, resolutions or orders of the
Regional Trial Courts in tax collection cases originally decided by "Appeal shall be made by filing a petition for review under a
them, in their respective territorial jurisdiction. procedure analogous to that provided for under Rule 42 of the 1997
Rules of Civil Procedure with the CTA within thirty (30) days from
"b. Over petitions for review of the judgments, resolutions or orders of the receipt of the decision or ruling or in the case of inaction as
the Regional Trial Courts in the Exercise of their appellate jurisdiction herein provided, from the expiration of the period fixed by law to
over tax collection cases originally decided by the Metropolitan Trial Courts, act thereon. A Division of the CTA shall hear the appeal: Provided,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective however, That with respect to decisions or rulings of the Central
jurisdiction." Board of Assessment Appeals and the Regional Trial Court in the
exercise of its appellate jurisdiction appeal shall be made by filing
Section 8. Section 10 of the same Act is hereby amended to read as a petition for review under a procedure analogous to that provided
follows: for under rule 43 of the 1997 Rules of Civil Procedure with the CTA,
which shall hear the case en banc.
"SEC. 10. Power to Administer Oaths; Issue Subpoena; Punish for
Contempt. - The Court shall have the power to administer "All other cases involving rulings, orders or decisions filed with the
oaths, receive evidence, summon witnesses by subpoena CTA as provided for in Section 7 shall be raffled to its Divisions. A
duces tecum, subject in all respects to the same restrictions and party adversely affected by a ruling, order or decision of a Division
qualifications as applied in judicial proceedings of a similar nature. of the CTA may file a motion for reconsideration of new trial before
The Court shall, in accordance with Rule seventy-one of the Rules the same Division of the CTA within fifteens (15) days from notice
of Court, have the power to punish for contempt for the same thereof: Provide, however, That in criminal cases, the general rule
causes, under the same procedure and with the same penalties applicable in regular Courts on matters of prosecution and appeal
provided therein." shall likewise apply.
Section 9. Section 11 of the same Act is hereby amended to read as "No appeal taken to the CTA from the decision of the
follows: Commissioner of Internal Revenue or the Commissioner of
Customs or the Regional Trial Court, provincial, city or municipal
treasurer or the Secretary of Finance, the Secretary of Trade and
Industry and Secretary of Agriculture, as the case may be shall making the certificate, and no leave shall be granted and no salary
suspend the payment, levy, distraint, and/or sale of any property of shall be paid without such certificate."
the taxpayer for the satisfaction of his tax liability as provided by
existing law: Provided, however, That when in the opinion of the Section 11. Section 18 of the same Act is hereby amended as follows:
Court the collection by the aforementioned government agencies
may jeopardize the interest of the Government and/or the taxpayer "SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil
the Court any stage of the proceeding may suspend the said proceeding involving matter arising under the National Internal
collection and require the taxpayer either to deposit the amount Revenue Code, the Tariff and Customs Code or the Local
claimed or to file a surety bond for not more than double the amount Government Code shall be maintained, except as herein provided,
with the Court. until and unless an appeal has been previously filed with the CTA
and disposed of in accordance with the provisions of this Act.
"In criminal and collection cases covered respectively by Section
7(b) and (c) of this Act, the Government may directly file the said "A party adversely affected by a resolution of a Division of the CTA
cases with the CTA covering amounts within its exclusive and on a motion for reconsideration or new trial, may file a petition for
original jurisdiction." review with the CTA en banc."
Section 10. Section 13 of the same Act is hereby amended to read as "SEC. 19. Review by Certiorari. - A party adversely affected by a
follows: decision or ruling of the CTA en banc may file with the Supreme
Court a verified petition for review on certiorari pursuant to Rule 45
"SEC. 13. Decision, Maximum Period for Termination of Cases. - of the 1997 Rules of Civil Procedure."
Cases brought before the Court shall be decided in accordance
with Section 15, paragraph (1), Article VIII (Judicial Department) of Section 13. Distraint of Personal Property and/or Levy on Real Property. -
the 1987 Constitution. Decisions of the Court shall be in writing, Upon the issuance of any ruling, order or decision by the CTA favorable to
stating clearly and distinctly the facts and the law on which they are the national government, the CTA shall issue an order authorizing the
based, and signed by the Justices concurring therein. The Court Bureau of Internal Revenue, through the Commissioner to seize and
shall provide for the publication of its decision in the Official distraint any goods, chattels, or effects, and the personal property,
Gazette in such form and manner as may best be adopted for including stocks and other securities, debts, credits, bank accounts,
public information and use. and interests in and rights to personal property and/or levy the real
property of such persons in sufficient quantity to satisfy the tax or
"The Justices of the Court shall each certify on their applications charge together with any increment thereto incident to delinquency.
for leave, and upon salary vouchers presented by them for This remedy shall not be exclusive and shall not preclude the Court from
payment, or upon the payrolls under which their salaries are paid, availing of other means under the Rules of Court.
that all proceedings, petitions and motions which have been
submitted to the Court for determination or decision for a period Section 14. Retention of Personnel; Security of Tenure; Upgrading of
required by the law or the Constitution, as the case may be, have Positions and Salaries. - All existing permanent personnel of the CTA shall
been determined or decided by the Court on or before the date of not be adversely affected by this Act. They shall continue in office and shall
not be removed or separated from the service except for cause as provided Facts: Isabela Cultural Corp was initially assessed of a total tax deficiency
for by existing laws. Further, the present positions and salaries of personnel of about P9.9M, later on reduced to around P325K after protest.
shall be upgraded to the level of their counterparts in the Court of Appeals. CIR subsequently demanded an amount more than this assessed
value (around P338K) so Isabela filed for a reconsideration of
Section 15. Transitory Provisions. - In consonance with the above such assessment. The CIR did not really respond to this. Instead,
provision, the incumbent Presiding Judge and Associate Judges shall it filed a FINAL NOTICE BEFORE SEIZURE which demanded
comprise a Division pending the constitution of the entire Court. payment of the assessment AND a statement that failure to do
such would constrain the CIR to collect the subject
Section 16. Appropriations. - The amount of Twenty million pesos assessment through summary remedies. Isabela then filed a
(20,000,000.00) necessary to carry out the provisions of this Act shall be Petition for Review with the CTA, claiming that the Final Notice was
appropriated immediately to be generated from whatever source that are a final decision of the CIR appealable to the CTA. The CIR
available in the National Treasury, based on a special supplemental budget maintained that the Final Notice was a mere demand, not to be
to be submitted to the Department of Budget and Management (DBM) mistaken as a final decision appealable to the CTA.
which shall not exceed the herein appropriation.
Issue/s: WON the FINAL NOTICE BEFORE SEIZURE constitutes the
Section 17. Repealing Clause. - All laws, executive orders, executive final decision of the CIR appealable to the CTA – YES.
issuances or letter of instructions, or any part thereof, inconsistent with or
contrary to the provisions of this Act are hereby deemed repealed, amended Held: In ruling for Isabela Cultural Corp, the Court held that such final
or modified accordingly. notice constituted the final decision of the CIR appealable to the
CTA. The FINAL NOTICE’s content and tenor supported the
Section 18. Separability Clause. - If for any reason, any section or provision theory that it was the CIR’s final act regarding the request for
of this Act shall be declared unconstitutional or invalid, the other parts reconsideration. The very title expressly indicated that it was a
thereof not affected thereby shall remain valid. FINAL NOTICE prior to seizure of property; stating that Isabela
was being given ‘this LAST OPPORTUNITY” to pay.
Section 19. Effectivity Clause - This Act shall take effect after fifteen (15)
days following its publication in at least (2) newspapers of general Likewise, jurisprudence dictates that a final demand letter for
circulation. payment of delinquent taxes may be considered as a decision
on a disputed/protested assessment, similar to this case,
where a final letter of demand was made indicating the demand
CIR v. ISABELA CULTURAL CORP (Arcaina)
to pay + statement that failure to pay would constrain the CIR
[GR. No. 135210; July 11, 2001]
to enforce collection through summary remedies.
“FINAL NOTICE BEFORE SEIZURE = demand to pay + statement of failure
to do so would constrain CIR to enforce collection through summary remedies
Facts:
= FINAL DECISION OF CIR which is APPEALABLE TO CTA”
• In an investigation conducted on the 1986 books of account of Isabela
Cultural Corporation, it was preliminary found by the CIR that Isabela had
Recit-Ready:
incurred a total income tax deficiency of P9,985,391.15.
• Upon protest by Isabela’s counsel, the said preliminary assessment was YES. The Final Notice Before constitutes the final decision of the CIR
reduced to just around P325,869.44. appealable to the CTA.
o Later on, CIR sent an assessment letter demanding P333,196.86 and • The Final Notice cannot BUT be considered as the commissioner’s
P4897.79 as deficiency income tax and EWHT inclusive of surcharge. decision disposing of the request for reconsideration filed by [Isabela],
o So, Isabela filed a reconsideration of this assessment. It also who received no other response to its request.
attached certain documents supportive of its protest, as well as a • Not only was the Notice the only response received, its content and
Waiver of Statute of Limitation. tenor supported the theory that it was the CIR’s final act
• In Feb 9, 1995, Isabela received from CIR a FINAL NOTICE BEFORE regarding the request for reconsideration. The very title expressly
SEIZURE. It demanded payment of the subject assessment within 10 indicated that it was a FINAL NOTICE prior to seizure of property;
days from receipt thereof. Otherwise, failure on its part would constrain stating that Isabela was being given ‘this LAST OPPORTUNITY” to
CIR to collect the subject assessment through summary remedies. pay. How then could it have been made to believe that its request for
The FINAL NOTICE BEFORE SEIZURE read: reconsideration was still pending determination, despite the actual
o “On Feb. 9, 1990, [this] Office sent you a letter requesting you to settle threat of seizure of its properties?
the abovecaptioned assessment. To date, however, despite the lapse • Section 228 of the NIRC states that a delinquent taxpayer may
of a considerable length of time, we have not been honored with a nevertheless directly appeal a disputed assessment, if its
reply from you. In this connection, we are giving you this LAST request for reconsideration remains unacted upon 180 days after
OPPORTUNITY to settle the adverted assessment within ten (10) submission.
days after receipt hereof. Should you again fail, and refuse to pay, o In this case, the said period of 180 days had already lapsed when
this Office will be constrained to enforce its collection by summary Isabela filed its reconsideration, without any action on the part of
remedies of Warrant of Levy of Road Property, Distraint of Personal the CIR.
Property or Warrant of Garnishment, and/or simultaneous court • Jurisprudence dictates that a final demand letter for payment of
action. Please give this matter your preferential attention.” delinquent taxes may be considered as a decision on a
• Isabela considered this Notice as CIR’s final decision so it filed a Petition disputed/protested assessment.
for Review with the CTA. o CIR v Ayala Securities: The Court considered a letter which
o CIR maintains that the Final Notice was a mere reiteration of the reiterated the demand of the BIR for the settlement of the
delinquent taxpayer’s obligation to pay the taxes due. It was assessment + immediate payment of such, a denial of the
supposedly a mere demand that should not have been mistaken for reconsideration made by Ayala. Such was considered as a
a decision on a protested assessment. clear indication of the BIR’s stand against the reconsideration of
the disputed assessment. This amounted to a decision on a
Issue/s: WON the Final Notice Before Seizure constitutes the final disputed/protested assessment. So the CTA did not err in taking
decision of the CIR appealable to the CTA cognizance of the case.
o Surigao Electric v CTA and CIR v Union Shipping: the letter
Held/Ratio: WHEREFORE, the Petition is hereby DENIED and the of demand by the CIR unquestionably constituted the final action
assailed Decision AFFIRMED. by the CIR on the corporations’ several requests for
reconsideration and recomputation. The CIR in his letter, did not
only demand the taxpayers to pay the tax due, but said that the
CIR would be constrained to enforce the collection by means Petitioner appealed to the Court of Tax Appeals. The tax court
of remedies provided by law. The tenor of the letter, dismissed the appeal on October 1, 1965 on the ground that
specifically that regarding the resort to legal remedies, the appeal was filed beyond the thirty-day period of appeal
unmistakably indicated the final nature of the determination provided by section 11 of Republic Act 1125
made by the CIR.
o IN THIS CASE: CIR failed to rule on the MR filed by Isabela and Issue/s:
simply continued to demand payment of the delinquency. Thus, Whether or not the petitioner's appeal to the Court of Tax Appeals
the Court reiterated the dictum that the BIR should always was time-barred – YES
indicate in clear and unequivocal language what constitutes final
action on a disputed assessment. Further, the second notice Held: YES. Petitioner is already barred by prescription to appeal
received by Isabela verily indicated its nature – that it was (prescription: May 8 -June 7, 1963)
final. Hence, it was tantamount to a rejection of the request
for reconsideration. Further, CIR does not deny receipt of The revised assessment embodied in the Commissioner's
Isabela’s protest letter. Having admitted this fact, CIR could have letter dated April 29, 1963 being, in legal contemplation, the
passed upon it prior to the issuance of the Final Notice Before final ruling reviewable by the tax court, the thirty-day appeal
Seizure period should be counted from May 8, 1963 (the day the
petitioner received a copy of the said letter).
SURIGAO ELECTRIC CO., INC. v. CTA and CIR (Austria)
[GR. No. L-25289; June 28, 1974] The June 6, 1963 request for further recomputation,
“sure na ikaw sa liability ni Surigao? from receipt of final determination mo partaking of a motion for reconsideration, tolled the running
lang tatakbo ang 30-day period to appeal, mga tol[l]!” of the thirty day period from June 7, 1963 (the day the
petitioner sent its letter by registered mail) to July 16, 1963
Recit-Ready: (the day the petitioner received the letter of the
Facts: Petitioner Surigao Electric Co., Inc., grantee of a legislative Commissioner dated June 28, 1963 turning down its
electric franchise, received a warrant of distraint and levy to request). The prescriptive period commenced to run again on
enforce the collection from "Mainit Electric" of a deficiency July 16, 1963 [NOTE: prescription started May 8 then tolled from
franchise tax plus surcharge in the total amount of P718.59. June 7 to July 16] The petitioner filed its petition for review with
The petitioner contested this warrant, stating that it did not the tax court on August 1, 1963—after the lapse of an
have a franchise in Mainit, Surigao. A revised assessment was additional sixteen days. The petition for review having been
received by the petitioner on May 8, 1963 in the amount of P1 filed beyond the thirty-day period, we rule that the Court of
1,533.53,. The petitioner then requested a recomputation on Tax Appeals correctly dismissed the same.
June 6, 1963. The Commissioner, however, in a letter dated
June 28, 1963 (received by the petitioner on July 16, 1963), Facts:
denied the request for recomputation. • On November 1961 the petitioner Surigao Electric Co., Inc., grantee of a
legislative electric franchise, received a warrant of distraint and levy to
enforce the collection from "Mainit Electric" of a deficiency franchise o The June 6, 1963 request for further recomputation, partaking of a
tax plus surcharge in the total amount of P718.59 motion for reconsideration, tolled the running of the thirty day
• In a letter to the Commissioner of Internal Revenue, the petitioner period from June 7, 1963 (the day the petitioner sent its letter by
contested this warrant, stating that it did not have a franchise in registered mail) to July 16, 1963 (the day the petitioner received
Mainit, Surigao. the letter of the Commissioner dated June 28, 1963 turning down
o petitioner asked for reconsideration of the assessment, its request). [i..e 1 days left] The prescriptive period commenced to run
admitting liability only for the 2% franchise tax in accordance again on July 16, 1963. The petitioner filed its petition for review with
with its legislative franchise and not at the higher rate of 5% the tax court on August 1, 1963—after the lapse of an additional
imposed by section 259 of the National Internal Revenue sixteen days. The petition for review having been filed beyond the
Code, as amended, which latter rate the Auditor General thirty-day period, we rule that the Court of Tax Appeals correctly
used as basis in computing the petitioner's deficiency dismissed the same.
franchise tax. o the letter of demand issued by the Commissioner on April 29, 1963 and
• a revised assessment dated April 29, 1963 was received by the received by the petitioner on May 8, 1963 constitutes the definite
petitioner on May 8, 1963 in the amount of P1 1,533.53, representing the determination of the petitioner's deficiency franchise tax liability or the
petitioner's deficiency franchise tax and surcharges thereon for the period decision on the disputed assessment and, therefore, the decision
from April 1, 1956 to June 30, 1959. appealable to the tax court
• The petitioner then requested a recomputation. o in response to the communications of the petitioner, particularly the
• The Commissioner, however, in a letter dated June 28, 1963 (received by letter of August 2, 1962 wherein it assailed the 4th Indorsement's data
the petitioner on July 16, 1963), denied the request for recomputation. and findings on its deficiency franchise tax liability computed
• On August 1, 1963 the petitioner appealed to the Court of Tax Appeals. o Moreover, the letter of demand dated April 29, 1963 unquestionably
o The tax court dismissed the appeal on October 1, 1965 constitutes the final action taken by the Commissioner on the
on the ground that the appeal was filed beyond the petitioner's several requests for reconsideration and
thirty-day period of appeal provided by section 11 of recomputation
Republic Act 1125. § Commissioner not only in effect demanded that the
• The parties disagree on which letter of the Commissioner embodies the petitioner pay the amount of P11,533.53 but also gave
decision or ruling appealable to the tax court. warning that in the event it failed to pay, the said
Commissioner would be constrained to enforce the
Issue/s: collection thereof by means of the remedies provided by
Whether or not the petitioner's appeal to the Court of Tax Appeals was law.
time-barred – YES § The tenor of the letter, specifically the statement"
regarding the resort to legal remedies, unmistakably
Held/Ratio: ACCORDINGLY, the decision of the Court of Tax Appeals dated indicates the final nature of the determination made by
October 1, 1965 is affirmed, at petitioner's cost the Commissioner of the petitioner's deficiency franchise
tax liability.
YES. Petitioner is already barred by prescription to appeal.
o this Court has considered the following communications sent by the taxpayer to lodge his appeal within the prescribed period bars his
Commissioner to taxpayers as embodying rulings appealable to the appeal and renders the questioned decision final and executory
tax court: o Prescinding from all the foregoing, we deem it appropriate to state that
(a) a letter which stated the result of the reinvestigation requested by the Commissioner of Internal Revenue should always indicate to
the taxpayer and the consequent modification of the assessment; the taxpayer in clear and unequivocal language whenever his
(b) a letter which denied the request of the taxpayer for the action on an assessment questioned by a taxpayer constitutes
reconsideration, cancellation, or withdrawal of the original his final determination on the disputed assessment, as
assessment; contemplated by sections 7 and 11 of Republic Act 1125, as
(c) a letter which contained a demand on the taxpayer for the payment amended.
of the revised or reduced assessment; and
(d) a letter which notified the taxpayer of a revision of previous ADVERTISING ASSOCIATES, INC v. COURT OF APPEALS and
assessments. COMMISSIONER OF INTERNAL REVENUE (BAÑADERA)
o the petitioner's contention is that the Commissioner's letter of June 28, [GR. No. L-59758; December 26, 1984]
1963 denying its request for further amendment of the revised “Commissioner should always indicate to the taxpayer in clear and
assessment constitutes the ruling appealable to the tax court unequivocal language what constitutes his final determination of the disputed
§ thus the thirty-day period should, therefore, be counted from assessment”
July 16, 1963, the day it received the June 28, 1963 letter,
§ this would, in effect, leave solely to the petitioner's will the Recit-Ready:
determination of the commencement of the statutory thirty- Facts: After unsuccessfully contesting its assessments, Advertising
day period, and place the petitioner—and for that matter, any
Associates Inc. was issued two warrants of distraints for its non-
taxpayer—in a position to delay at will and on convenience payment of its 1967-1971 and 1972 contractor’s tax. After a year
the finality of a tax assessment from such warrants being issued or on May 23, 1979, another letter
§ Interpretation espoused by the petitioner would result in
was sent to petitioner requesting it to pay its liabilities and advising
grave detriment to the interests of the Government, that it may file an appeal to the Court of Tax Appeals 30 days from
considering that taxes constitute its lifeblood and their prompt receipt of the said letter. Nineteen days after, petitioner filed and
and certain availability is an imperative need.
had the warrants of distraint enjoined. However, the court did not
o The revised assessment embodied in the Commissioner's letter rule on the merits given that the petition for review was filed out of
dated April 29, 1963 being, in legal contemplation, the final ruling time.
reviewable by the tax court, the thirty-day appeal period should
be counted from May 8, 1963 (the day the petitioner received a Issue:
copy of the said letter). WON the petition for review was filed out of time?
o The thirty-day period prescribed by section 11 of Republic Act 1125,
as amended, within which a taxpayer adversely affected by a decision Held: NO. The reviewable decision is that contained in Commissioner
of the Commissioner of Internal Revenue should file his appeal with Plana's letter of May 23, 1979 and not the warrants of distraint earlier
the tax court, is a jurisdictional requirement, and the failure of a
issued. Therefore May 23, 1979 is the period that should be considered for
the petition for review.
decisions. Since Advertising Associates appealed from the decision of May

Facts: 23, 1979, the petition for review was filed out of time. It was dismissed. The
• Advertising Associates, lnc. is engaged in the business of leasing neon taxpayer appealed to this Court.
signs and billboards. Advertising Associates alleged that it sold in 1949 its
advertising agency business to Philippine Advertising Counsellors, that its Issue:
business is limited to the making, construction and installation of billboards WON the petition for review was filed out of time?
and electric signs and making and printing of posters, signs, handbills, etc. —NO
It contends that it is a media company, not an advertising company
therefore it is not liable to pay contractor’s tax. Held/Ratio: WHEREFORE, the judgment of the Tax Court is reversed and set
• The Commissioner required Advertising Associates to pay contractor's tax aside. The Commissioner's deficiency assessments are modified by requiring
for 1967-1971 and 1972, including 25% surcharge on its income from the petitioner to pay the tax proper and eliminating the 25% surcharge, interest
billboards and neon signs. and penalty. In case of non-payment, the warrants of distrant should be
• Despite Advertising Associates contesting the assessments, the implemented. The preliminary injunction issued by the Tax Court on August
Commissioner still reiterated the assessments in his letters. 28, 1979 restraining the enforcement of said warrants is lifted. No costs.
• The taxpayer then requested the cancellation of the assessments in its
letters of September 13 and November 21, 1974. Inexplicably, for about NO. The reviewable decision is that contained in Commissioner Plana's
four years there was no movement in the case. letter of May 23, 1979 and not the warrants of distraint. Therefore May 23,
• Then, on March 31, 1978, the Commissioner resorted to the summary 1979 is the period that should be considered for the petition for review.
remedy of issuing two warrants of distraint, directing the collection • We hold that the petition for review was filed on time. The reviewable
enforcement division to levy on the taxpayer's personal properties as would decision is that contained in Commissioner Plana's letter of May 23, 1979
be sufficient to satisfy the deficiency taxes and not the warrants of distraint.
• More than a year later, Acting Commissioner Efren I. Plana wrote a letter • No amount of quibbling or sophistry can blink the fact that said letter,
dated May 23, 1979 in answer to the requests of the taxpayer for the as its tenor shows, embodies the Commissioner's final decision
cancellation of the assessments and the withdrawal of the warrants of within the meaning of section 7 of Republic Act No. 1125. The
distraint. He requested the taxpayer to pay the deficiency taxes within Commissioner said so. He even directed the taxpayer to appeal it to
ten days from receipt of the demand; otherwise, the Bureau would the Tax Court. The directive is in consonance with this Court's dictum
enforce the warrants of distraint. He closed his demand letter with this that the Commissioner should always indicate to the taxpayer in clear
paragraph: and unequivocal language what constitutes his final determination of
o This constitutes our final decision on the matter. If you the disputed assessment. That procedure is demanded by the
are not agreeable, you may appeal to the Court of Tax pressing need for fair play, regularity and orderliness in
Appeals within 30 days from receipt of this letter. administrative action.
• Nineteen days later or on July 7, Advertising Associates filed its petition for
review. CIR v. UNION SHIPPING CORPORATION and the COURT OF
• In its resolution, the Tax Court enjoined the enforcement of the warrants of TAX APPEALS (Banta)
distraint. The Tax Court however did not resolve the case on the merits. It [GR. No. L-66160; May 21, 1990]
ruled that the warrants of distraint were the Commissioner's appealable
“CIR’s filling of collection case is deemed a denial of Union Shipping’s request Issue/s:
for reinvestigation therefore, it was only upon the company’s receipt of the 1) WON the CTA has jurisdiction over this case
summons did the appeal period commence to run.” —YES
2) WON Union Shipping Corporation, acting as a mere “husbanding
Recit-Ready: agent” of Yee Fong Hong, Ltd. is liable for payment of taxes on the
Facts: On December 27, 1974, petitioner Commission on Internal gross receipts of earnings of Yee Fong Hong
Revenue (CIR) assessed against Yee Fong Hong, Ltd. and/or —YES
private respondent Union Shipping Corporation, the total sum
of P583,155.22 as deficiency income taxes for the years 1971- Held:
1972. 1) YES. The CIR, not having clearly signified his final action on the disputed
assessment, legally the period to appeal has not commenced to run. It
The following exchanges then occurred: was only when private respondent received the summons on the
• Letter dated January 10, 1975: Union Shipping protested civil suit for collection of deficiency income on DECEMBER 28,
the assessment (received by CIR on January 13, 1975) 1978 that the period to appeal commenced to run. The request for
• Without ruling on the protest, CIR issued a Warrant of reinvestigation and reconsideration was in effect considered denied by
Distraint and Levy, which was served on Union petitioner when the latter filed a civil suit for collection of deficiency
Shipping’s counsel, Clemente Celso, on NOVEMBER 25, income. Hence, on January 10, 1979, when private respondent filed the
1976. appeal with the Court of Tax Appeals, it consumed a total of only
• Letter dated November 27, 1976: Union Shipping thirteen (13) days well within the thirty-day period to appeal
reiterated its request for reinvestigation of the assessment pursuant to Section 11 of R.A. 1125.
and for the reconsideration of the summary collection thru
the Warrant of Distraint and Levy (received by CIR on 2) NO. It was fully substantiated by the CTA that respondent Union
December 29, 1976) Shipping was the husbanding agent of Yee Fong Hong. Even CIR Vera,
• Again, without acting on the request for reinvestigation on a query of respondent’s counsel, opined that respondent corporation
and reconsideration of the Warrant, CIR filled a collection being merely a husbanding agent is not liable for the payment of the
suit before Branch 21 of the then CFI of Manila (docketed income taxes due from the foreign ship owners loading cargoes in the
as Civil Case No. 120459) against Union Shipping. Philippines. Neither can private respondent be liable for withholding tax
• SUMMONS in the collection case was issued to Union under Section 53 of the Internal Revenue Code since it is not in
Shipping on DECEMBER 28, 1978. possession, custody or control of the funds received by and remitted to
• January 10, 1979: respondent Union Shipping filed with Yee Fong Hong, Ltd., a non-resident taxpayer.
the Court of Tax Appeals its Petition for Review of the
petitioner’s assessment of its deficiency income taxes
(docketed as CTA Case No. 2989).
Facts:
Respondent CTA ruled in favor of respondent Union Shipping. • Letter dated December 27, 1974: Petitioner Commission on Internal
Revenue (CIR) assessed against Yee Fong Hong, Ltd. and/or private
respondent Union Shipping Corporation, the total sum of P583,155.22 4) WON Union Shipping Corporation, acting as a mere “husbanding
as deficiency income taxes for the years 1971-1972. agent” of Yee Fong Hong, Ltd. is liable for payment of taxes on the
o Letter was received on January 4, 1975 gross receipts of earnings of Yee Fong Hong
• Letter dated January 10, 1975: Union Shipping protested the assessment —YES
o Letter was received by CIR on January 13, 1975
• Without ruling on the protest, CIR issued a Warrant of Distraint and Levy, Held/Ratio: The instant petition is hereby DISMISSED and the decision of the
which was served on Union Shipping’s counsel, Clemente Celso, on CTA is AFFIRMED.
November 25, 1976.
• Letter dated November 27, 1976: Union Shipping reiterated its request for 1) YES. The CIR, not having clearly signified his final action on the disputed
reinvestigation of the assessment and for the reconsideration of the assessment, legally the period to appeal has not commenced to run. It was
summary collection thru the Warrant of Distraint and Levy only when private respondent received the summons on the civil suit
o Letter was received by CIR on November 29, 1976 for collection of deficiency income on DECEMBER 28, 1978 that the
• Again, without acting on the request for reinvestigation and reconsideration period to appeal commenced to run. The request for reinvestigation and
of the Warrant, CIR filled a collection suit before Branch 21 of the then CFI reconsideration was in effect considered denied by petitioner when the
of Manila (docketed as Civil Case No. 120459) against Union Shipping. latter filed a civil suit for collection of deficiency income. Hence, on January
o Summons in the collection case was issued to Union Shipping on 10, 1979, when private respondent filed the appeal with the Court of Tax
December 28, 1978. Appeals, it consumed a total of only thirteen (13) days well within the
• January 10, 1979: respondent Union Shipping filed with the Court of Tax thirty-day period to appeal pursuant to Section 11 of R.A. 1125.
Appeals its Petition for Review of the petitioner’s assessment of its o Petitioner contends that:
deficiency income taxes (docketed as CTA Case No. 2989) § The warrant of distraint and levy was issued after respondent
o Union Shipping prays that judgment be rendered holding that it is corporation filed a request for reconsideration of subject
not liable for the payment of the income tax herein involved, or assessment, thus constituting petitioner CIR’s final decision in
which may be due from foreign shipowner Yee Fong Hong. the disputed assessments;
• Respondent CTA ruled in favor of respondent Union Shipping: § The period to appeal to the CTA commenced to run from
o “WHEREFORE, the decision of the Commissioner of Internal receipt of said warrant on November 25, 1976, so that on
Revenue appealed from, assessing against and demanding from January 10, 1979 when respondent corporation sought redress
petitioner the payment of deficiency income tax, inclusive of 50% from the Tax Court, petitioner's decision has long become final
surcharge, interest and compromise penalties, in the amounts of and executory.
P73,958.76 and P583,155.22 for the years 1971 and 1972, o The Court has long settled that the Commissioner should always
respectively, is reversed.” indicate to the taxpayer in clear and unequivocal language what
• Hence, the instant petition. constitutes his final determination of the disputed assessment.
o In this case, petitioner CIR did not rule on private respondent's motion
Issue/s: for reconsideration but contrary to the above ruling of this Court, left
3) WON the CTA has jurisdiction over this case private respondent in the dark as to which action of the Commissioner
—YES is the decision appealable to the Court of Tax Appeals.
§ Had he categorically stated that he denies private respondent's possession, custody or control of the funds received by and
motion for reconsideration and that his action constitutes his remitted to Yee Fong Hong, Ltd., a non-resident taxpayer.
final determination on the disputed assessment, private § As correctly ruled by the Court of Tax Appeals, “if an
respondent without needless difficulty would have been able to individual or corporation like the petitioner in this case, is
determine when his right to appeal accrues and the resulting not in the actual possession, custody, or control of the
confusion would have been avoided. funds, it can neither be physically nor legally liable or
obligated to pay the so-called withholding tax on income
2) NO. claimed by Yee Fong Hong, Ltd.”.
o It was fully substantiated by the CTA that respondent Union o Finally, it must be stated that factual findings of the Court of Tax
Shipping was the husbanding agent of Yee Fong Hong because: Appeals are binding on this Court.
a. It neither performed nor transacted any shipping § It is well-settled that in passing upon petitions for review
business, for and in representation, of Yee Fong Hong, of the decisions of the Court of Tax Appeals, this Court is
Ltd. or its vessels or otherwise negotiated or procured generally confined to questions of law.
cargo to be loaded in the vessels of Yee Fong Hong, Ltd.; § The findings of fact of said Court are not to be disturbed
b. It never solicited or procured cargo or freight in the unless clearly shown to be unsupported by substantial
Philippines or elsewhere for loading in said vessels of evidence.
Yee Fong Hong, Ltd.;
c. It had not collected any freight income or receipts for the
said Yee Fong Hong, Ltd.; OCEANIC WIRELESS NETOWORK v. CIR (Bello)
d. It never had possession or control, actual or constructive, [GR. No. 148380; December 9, 2005]
over the funds representing payment by Philippine “A demand letter for payment of delinquent taxes may be considered a
shippers for cargo loaded on said vessels; decision on a disputed or protested assessment. The determination on
e. Petitioner never remitted to Yee Fong Hong, Ltd. any sum whether or not a demand letter is final is conditioned upon the language used
of money representing freight incomes of Yee Fong or the tenor of the letter being sent to the taxpayer. ”
Hong, Ltd.; and
f. The freight payments made for cargo loaded in the Recit-Ready:
Philippines for foreign destination were actually paid Facts: OWN received from the (BIR) deficiency tax assessments.
directly by the shippers to the said Yee Fong Hong, Ltd. Petitioner filed its protest against the tax assessments and requested a
upon arrival of the goods in the foreign ports reconsideration or cancellation of the same in a letter to the BIR
o CIR Vera, on a query of respondent’s counsel, opined that Commissioner.
respondent corporation being merely a husbanding agent is not
liable for the payment of the income taxes due from the foreign Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts
ship owners loading cargoes in the Philippines. Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax
o Neither can private respondent be liable for withholding tax under assessments while denying petitioner’s request for reinvestigation. +
Section 53 of the Internal Revenue Code since it is not in requested OWN to pay within 10 days from receipt thereof, otherwise there
will an issuance of a warrant of distraint and levy without further notice.
determination on whether or not a demand letter is final is conditioned

OWN failed to pay the tax assessments with the prescribed period, the upon the language used or the tenor of the letter being sent to the
Assistant Commissioner for Collection, acting for the Commissioner of taxpayer.
Internal Revenue, issued the corresponding warrants of distraint and/or levy
and garnishment. In this case, the letter of demand, unquestionably constitutes the final action
taken by the Bureau of Internal Revenue on petitioner’s request for
OWN filed a Petition for Review with the Court of Tax Appeals (CTA) to reconsideration when it reiterated the tax deficiency assessments due from
contest the issuance of the warrants to enforce the collection of the tax petitioner, and requested its payment. Failure to do so would result in the
assessments. The CTA dismissed the petition for lack of jurisdiction. “issuance of a warrant of distraint and levy to enforce its collection without
further notice.”
OWN filed a Motion for Reconsideration arguing that the demand letter
cannot be considered as the final decision of the Commissioner of In addition, the letter contained a notation indicating that petitioner’s request
Internal Revenue on its protest because the same was signed by a for reconsideration had been denied for lack of supporting documents. The
mere subordinate and not by the Commissioner himself. demand letter received by petitioner verily signified a character of finality.
Therefore, it was tantamount to a rejection of the request for
With the denial of its motion for reconsideration, petitioner consequently reconsideration.
filed a Petition for Review with the Court of Appeals contending that there
was no final decision to speak of because the Commissioner had yet to 2) YES! The general rule is that the Commissioner of Internal
make a personal determination as regards the merits of petitioner’s case. Revenue may delegate any power vested upon him by law to
Division Chiefs or to officials of higher rank, except the following
The Court of Appeals denied the petition. 4 instances
Issue/s: It is clear from the above provision that the act of issuance of the demand
1) WON the final demand letter issued by the BIR reiterating the letter by the Chief of the Accounts Receivable and Billing Division does not
demand for immediate payment considered a final decision fall under any of the exceptions that have been mentioned as non-
appealable to the CTA? – YES! delegable.
2) WON said demand letter indeed attained finality despite the fact
that it was issued and signed by the Chief of the Accounts Thus, the authority to make tax assessments may be delegated to
Receivable and Billing Division instead of the BIR Commissioner. - subordinate officers. Said assessment has the same force and effect.
Yes
Facts:
Held: In ruling for CIR. The Petition is accordingly denied for Lack of • Oceanic Wireless Network (OWN/Petitioner) received from the Bureau of
Merit. Internal Revenue (BIR) deficiency tax assessments for the taxable year
1984 in the total amount of P8,644,998.7.
1) YES. A demand letter for payment of delinquent taxes may be
considered a decision on a disputed or protested assessment. The
• OWN filed its protest against the tax assessments and requested a • The CTA dismissed the petition for lack of jurisdiction in a decision
reconsideration or cancellation of the same in a letter to the BIR dated September 16, 1994, declaring that said petition was filed beyond
Commissioner dated April 12, 1988. the thirty (30)-day period reckoned from the time when the demand
letter of January 24, 1991 by the Chief of the BIR Accounts Receivable
BIR: and Billing Division was presumably received by petitioner, i.e., within
• Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts a reasonable time from said date in the regular course of mail pursuant to
Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax Section 2(v) of Rule 131 of the Rules of Court.
assessments while denying petitioners request for reinvestigation in a • The court a quo likewise stated that the finality of the denial of the protest
letter dated January 24, 1991, thus: by petitioner against the tax deficiency assessments was bolstered by the
o “Note: Your request for re-investigation has been denied for subsequent issuance of the warrants of distraint and/or levy and
failure to submit the necessary supporting papers as per garnishment to enforce the collection of the deficiency taxes.
endorsement letter from the office of the Special Operation • The issuance was not barred by prescription because the mere filing of the
Service dated 12-12-90.” letter of protest by petitioner which was given due course by the Bureau of
• Said letter likewise requested petitioner to pay the total amount Internal Revenue suspended the running of the prescription period as
of P8,644,998.71 within ten (10) days from receipt thereof, otherwise the expressly provided under the then Section 2241 of the Tax Code.
case shall be referred to the Collection Enforcement Division of the BIR • OWN filed a Motion for Reconsideration arguing that the demand letter of
National Office for the issuance of a warrant of distraint and levy without January 24, 1991 cannot be considered as the final decision of the
further notice. Commissioner of Internal Revenue on its protest because the same
• Upon OWN failure to pay the subject tax assessments within the prescribed was signed by a mere subordinate and not by the Commissioner
period, the Assistant Commissioner for Collection, acting for the himself. à Denied
Commissioner of Internal Revenue, issued the corresponding warrants of C.A:
distraint and/or levy and garnishment. These were served on petitioner on • With the denial of its motion for reconsideration, petitioner consequently
October 10, 1991 and October 17, 1991, respectively filed a Petition for Review with the Court of Appeals contending that there
was no final decision to speak of because the Commissioner had yet to
CTA: make a personal determination as regards the merits of petitioners case.
• On November 8, 1991, OWN filed a Petition for Review with the Court of à Denied
Tax Appeals (CTA) to contest the issuance of the warrants to enforce
the collection of the tax assessments. This was docketed as CTA Case No. Issue/s:
4668.

1
SEC. 224. Suspension of Running of the Statute of Limitations. The running of the by him in the return files upon which a tax is being assessed or collected: Provided, That if
Statute of Limitations provided in Section 203 and 223 on the making of assessment and the the taxpayer inform the Commissioner of any change of address, the running of the statute
beginning of distraint or levy or a proceeding in court for collection, in respect of any of limitations will not be suspended; when the warrant of distraint and levy is duly served
deficiency, shall be suspended for the period during which the Commissioner is prohibited upon the taxpayer, his authorized representative, or a member of his household with
from making the assessment or beginning distraint or levy or a proceeding in court and for sufficient discretion, and no property could located; and when the taxpayer is out of the
sixty (60) days thereafter; when the taxpayer requests for a reinvestigation which is Philippines.
granted by the Commissioner; when the taxpayer cannot be located in the address given
1) WON the final demand letter issued by the BIR reiterating the by Sections 7 and 11 of Republic Act No. 1125, as amended.
demand for immediate payment considered a final decision On the basis of his statement indubitably showing that the
appealable to the CTA? – YES! Commissioners communicated action is his final decision on
2) WON said demand letter indeed attained finality despite the fact that the contested assessment, the aggrieved taxpayer would then
it was issued and signed by the Chief of the Accounts Receivable be able to take recourse to the tax court at the opportune time.
and Billing Division instead of the BIR Commissioner. - Yes Without needless difficulty, the taxpayer would be able to
determine when his right to appeal to the tax court accrues.
xxx
Held/Ratio: Petition DENIED. In applying the doctrine of animation, Court o In this case, the letter of demand dated January 24, 1991,
rules for the Respondent. unquestionably constitutes the final action taken by the Bureau of
Internal Revenue on petitioners request for reconsideration when
3) YES J A demand letter for payment of delinquent taxes may be it reiterated the tax deficiency assessments due from petitioner,
considered a decision on a disputed or protested assessment. The and requested its payment.
determination on whether or not a demand letter is final is § Failure to do so would result in the issuance of a warrant of
conditioned upon the language used or the tenor of the letter being distraint and levy to enforce its collection without further notice.
sent to the taxpayer. In addition, the letter contained a notation indicating that
o In this case, the letter of demand dated January 24, 1991, petitioners request for reconsideration had been denied for
unquestionably constitutes the final action taken by the Bureau of lack of supporting documents.
Internal Revenue on petitioners request for reconsideration when
it reiterated the tax deficiency assessments due from petitioner, SUPPORTING JURISPRUDENCE
and requested its payment. o Commissioner of Internal Revenue v. Ayala Securities Corporation,
§ Failure to do so would result in the issuance of a warrant of where we held:
distraint and levy to enforce its collection without further notice. § The letter of February 18, 1963 (Exh. G), in the view of the
In addition, the letter contained a notation indicating that Court, is tantamount to a denial of the reconsideration
petitioners request for reconsideration had been denied for or [respondent corporations]protest o[f] the assessment made
lack of supporting documents. by the petitioner, considering that the said letter [was] in itself
o We laid down the rule that the Commissioner of Internal Revenue a reiteration of the demand by the Bureau of Internal Revenue
should always indicate to the taxpayer in clear and unequivocal for the settlement of the assessment already made, and for the
language what constitutes his final determination of the disputed immediate payment of the sum of P758,687.04 in spite of the
assessment. vehement protest of the respondent corporation on April 21,
1961. This certainly is a clear indication of the firm stand of
§ xxx we deem it appropriate to state that the Commissioner of petitioner against the reconsideration of the disputed
Internal Revenue should always indicate to the taxpayer in assessment. This being so, the said letter amounted to a
clear and unequivocal language whenever his action on an decision on a disputed or protested assessment, and, there,
assessment questioned by a taxpayer constitutes his final the court a quo did not err in taking cognizance of this case.
determination on the disputed assessment, as contemplated
o Surigao Electric Co., Inc v. Court of Tax Appeals and in CIR v. Union a. The power to recommend the promulgation of rules and
Shipping Corporation we held: regulations by the Secretary of Finance;
§ In this letter, the commissioner not only in effect demanded that b. The power to issue rulings of first impression or to reverse,
the petitioner pay the amount of P11,533.53 but also gave revoke or modify any existing ruling of the Bureau;
warning that in the event it failed to pay, the said commissioner c. The power to compromise or abate under Section 204(A) and
would be constrained to enforce the collection thereof by (B) of this Code, any tax deficiency: Provided, however, that
means of the remedies provided by law. The tenor of the letter, assessments issued by the Regional Offices involving basic
specifically the statement regarding the resort to legal deficiency taxes of five hundred thousand pesos (P500,000)
remedies, unmistakably indicate[d] the final nature of the or less, and minor criminal violations as may be determined
determination made by the commissioner of the petitioners by rules and regulations to be promulgated by the Secretary
deficiency franchise tax liability. of Finance, upon the recommendation of the Commissioner,
o The demand letter received by petitioner verily signified a discovered by regional and district officials, may be
character of finality. Therefore, it was tantamount to a rejection of compromised by a regional evaluation board which shall be
the request for reconsideration. As correctly held by the Court of Tax composed of the Regional Director as Chairman, the
Appeals, while the denial of the protest was in the form of a demand Assistant Regional Director, heads of the Legal, Assessment
letter, the notation in the said letter making reference to the protest and Collection Divisions and the Revenue District Officer
filed by petitioner clearly shows the intention of the respondent to having jurisdiction over the taxpayer, as members; and
make it as his final decision. d. The power to assign or reassign internal revenue officers to
establishments where articles subject to excise tax are
produced or kept.
4) YES J general rule is that the Commissioner of Internal Revenue o It is clear from the above provision that the act of issuance of the
may delegate any power vested upon him by law to Division demand letter by the Chief of the Accounts Receivable and Billing
Chiefs or to officials of higher rank. Division does not fall under any of the exceptions that have been
mentioned as non-delegable. Section 62 of the tax code.
o As amended by Republic Act No. 8424, Section 7 of the Code § The tax or any deficiency tax so assessed shall be paid
authorizes the BIR Commissioner to delegate the powers vested in him upon notice and demand from the Commissioner or
under the pertinent provisions of the Code to any subordinate official from his duly authorized representative. . . .
with the rank equivalent to a division chief or higher, except the o Thus, the authority to make tax assessments may be delegated to
following: subordinate officers. Said assessment has the same force and effect
as that issued by the Commissioner himself, if not reviewed or revised
by the latter such as in this case.

2
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional authorized representative may authorize the examination of any taxpayer and the
Requirements for Tax Administration and Enforcement. assessment of the correct amount of tax; Provided, however, That failure to file a return shall
not prevent the Commissioner from authorizing the examination of any taxpayer.
(A) Examination of Returns and Determination of Tax Due. - After a return
has been filed as required under the provisions of this Code, the Commissioner or his duly
§
A request for reconsideration must be made within thirty mailed and was received by petitioner in the regular course of the
(30) days from the taxpayers receipt of the tax deficiency mail in the absence of evidence to the contrary.
assessment, otherwise, the decision becomes final, § This is in accordance with Section 2(v), Rule 131 of the
unappealable and therefore, demandable. A tax Rules of Court, and in this case, since the period to
assessment that has become final, executory and appeal has commenced to run from the time the letter of
enforceable for failure of the taxpayer to assail the same demand was presumably received by petitioner within a
as provided in Section 2283 can no longer be contested. reasonable time after January 24, 1991, the period of
o If the protest is denied in whole or in part, or is not acted upon thirty (30) days to appeal the adverse decision on the
within one hundred (180) days from submission of documents, the request for reconsideration had already lapsed when the
taxpayer adversely affected by the decision or inaction may appeal to petition was filed with the Court of Tax Appeals only on
the Court of Tax Appeals within thirty (30) days from receipt of the said November 8, 1991. Hence, the Court of Tax Appeals
decision, or from the lapse of the one hundred eighty (180) - day period; properly dismissed the petition as the tax delinquency
otherwise, the decision shall become final, executory and demandable. assessment had long become final and executory.
o Here, petitioner failed to avail of its right to bring the matter before
the Court of Tax Appeals within the reglementary period upon the CITY OF MAKATI vs. CIR (Bugay)
receipt of the demand letter reiterating the assessed delinquent taxes [C.T.A. EB Case No. 641; September 16, 2011]
and denying its request for reconsideration which constituted the final “A reopening/reinvestigation after a final decision on disputed assessment
determination by the Bureau of Internal Revenue on petitioners protest. (“FDDA”) has been issued must be initiated by the commissioner”
Being a final disposition by said agency, the same would have been a
proper subject for appeal to the Court of Tax Appeals. Recit-Ready:
o The rule is that for the Court of Tax Appeals to acquire jurisdiction, an • Facts: The City of Makati received assessment notices imposing
assessment must first be disputed by the taxpayer and ruled upon by deficiency taxes. Makati protested and requested for several
the Commissioner of Internal Revenue to warrant a decision from which extensions. The BIR later stated that the assessments were
a petition for review may be taken to the Court of Tax Appeals. already final and executory. Nonetheless, Makati requested for
§ Where an adverse ruling has been rendered by the another reinvestigation. Makati offered to pay P100 million as
Commissioner of Internal Revenue with reference to a compromise, which the Revenue officer and deputy Commissioner
disputed assessment or a claim for refund or credit, the granted. However, the new Regional Director informed Makati that
taxpayer may appeal the same within thirty (30) days after such compromise is denied, and therefore demanded that the
receipt thereof. balance of the assessed deficiency taxes for 1999-2001 in the
o We agree with the factual findings of the Court of Tax Appeals that the amount of P581,468,164.58 and the proposed assessment of
demand letter may be presumed to have been duly directed, P322,952,109.25 for 2002-2004 be paid.

3
SEC. 228. Protesting of Assessment. When the Commissioner or his duly authorized sixty (60) days from filing of the protest, all relevant supporting documents shall have been
representative finds that proper taxes should be assessed, he shall first notify the taxpayer submitted; otherwise, the assessment shall become final.
of his findingsSuch assessment may be protested administratively by filing a request for
reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in
such form and manner as may be prescribed by implementing rules and regulations. Within
• On January 29, 2003, Makati filed its protest dared 26 December

2002, citing discrepancies in the assessment for deficiency VAT,
Issue: Whether or not the reinvestigation of the case reversed the finality expanded withholding tax and withholding tax on compensation.
of the assessments. o Regional Director (RD) Anselmo Adriano denied Makati’s
protest and stated that the amount still due is
P1,316,424,402.15 on April 30, 2003.
Held: No. Only the Commissioner of Internal Revenue has the power to • On June 30, 2003, Makati filed a letter reiterating its protest against
reverse, revoke or modify any existing ruling of the Bureau of Internal the subject assessments. On September 3, 2003, it requested an
Revenue (“BIR”), which power cannot be delegated. In assessment cases, extension of sixty (60) days within which to submit the documents
a reopening/reinvestigation after a final decision on disputed assessment supporting its protest letter.
(“FDDA”) has been issued must be initiated by the commissioner. • On October 16, 2003, RD Adriano issued Amended Assessment
Otherwise, the reopening / reinvestigation is without authority and failure to Notices to Makati in the amount of P1,146,883,843.08 for the taxable
appeal the FDDA to CTA would render the assessment final and executory. years 1999-2001.
Here, the reinvestigation was merely granted by a revenue officer and a • On October 24, 2003, Makati, through the City Treasurer, requested
deputy commissioner. a recomputation of the deficiency tax assessments and submitted
documents to support its claim that the computation made was
excessive. Makati then requested an additional extension of thirty (30)
days to submit additional supporting documents.
Facts: • In a letter dated August 18, 2004, RD Adriano informed Makati that
• City of Makati is a local government unit existing under its Charter by virtue the assessment against it were already final and executory.
of RA 7854. • On August 27, 2004, Makati, through its Vice Mayor, advised RD
• On September 20, 2002, Regional Director Antonio Ortega of Revenue Adriano of its position that the subject assessments had not become
Region No. 8, Makati City issued a Preliminary Assessment Notice (PAN) final and executory as these were baseless and arbitrary. Hence void
to petitioner in the amount of P1,320,980, 395.63. and of no effect.
o City of Makati (Makati) filed a letter dated 4 October 2022 • Makati, in a letter dated 11 March 2005, requested for the reopening
discussing the inaccuracies of the findings of the RDO on its and reinvestigation of the case, citing an agreement on the re-
deficiency income tax, VAT and withholding tax on examination of Makati’s financial records allegedly reached between
compensation for taxable year 1999-2002. petitioner and Revenue Officer Martinez.
• On October 15, 2002, Makati received assessment notices imposing o RD Adriano in 29 April 2005 informed Makati that its request
deficiency taxes in the amount of P1,331,615,125,30 for taxable year for re-opening of investigation for its tax deficiency
1999.2002. assessments was approved by then Commissioner
o Makati, through its Vice Mayor, requested for a Guillermo Parayno, with then Deputy Commissioner Jose
reinvestigation of the said assessments, stating that it Mario Buñag signing on his behalf.
needed time to reconcile its records with the BIR. • On August 4, 2005, RD Adriano sent a letter to Makati informing it of
the newly revised assessment for the taxable years 1999-2001 in the
amount of P520,829,896.92 and demanded payment on or before Issues:

August 31, 2005. (1) Whether or not the 2nd Division of the CTA erred when it ruled that
• On September 1, 2005, a meeting was held at the Office of the Mayor there was a valid assessment made by the BIR, particularly the
of Makati to reconcile the records and positions of Makati and the BIR. assessment letter date 16 October 2003 for taxable year 1999-2001
o Pursuant to the directive of Finance Secretary Teves to settle and for taxable years 2002-2004.
the case fairly and reasonably, Makati offered to pay P100 (2) Whether or not the 2nd Division of the CTA erred when it held that the
million in full settlement of the tax deficiency and tendered assessment dated 16 October 2003 was the final assessment
P20 million as initial payment. contemplated under the law, which could be the subject of a petition
o Payment was officially accepted by RD Adriano for review with the CTA given the subsequent actions of the BIR and
• On October 21, 2005, Makati made another offer to compromise in the Secretary of Finance.
the amount of P100 million this time to settle its assessed deficiency Held/Ratio:
taxes for taxable years 2002-2004. (1) No. The Final Decision on Disputed Assessment dated 16
o This offer was made pursuant to the directive of Secretary October 2003 issued against Makati has factual and legal bases
Teves upon the parties to conclude the reconciliation of their and is therefore valid.
records. a. A careful study of the FDDA, together with the Amended
o On the same date, RD Adriano accepted Makati’s offer on Assessment Notice, both dated 16 October 2003, reveal that
the condition that 30% of the proposed amount be paid on or both complied with the requirements set forth in Section 228
before October 31, 2005. of the 1997 NIRC and its implementing rules, particularly
§ Makati paid on October 28, 2005. Section 3.1.6 of the Revenue Regulations 12-99. The subject
• On February 22, 2006, Makati made two payments: assessment contains the facts and the applicable law, rules
o P80 million representing the balance of the compromise for and regulations on which the tax deficiency imposed upon
the taxable years 1999-2001; and the petitioner were based.
o P70 million representing the balance of the compromise for b. The FDDA and the Amended Assessment Notice both
the taxable years 2002-2004. likewise show that the subject assessment is the result of the
o As of this date, Makati had already paid P200 million pesos reinvestigation of the Formal Assessment Notice issued on
to the BIR, in full settlement of the compromise amount for October 14, 2002, taking into account the explanation and
the said taxable years. the documents in support thereof submitted by Makati as well
• However, the new RD Aspe informed Makati that the offer of as the evidence on record. The considerable changes
compromise settlement was not accepted and demanded that the resulting from the reinvestigation proves that the subject
balance of the assessed deficiency taxes for 1999-2001 in the amount assessment has factual and legal bases, and therefore
of P581,468,164.58 and the proposed assessment of complied with the mandatory requirements under the law.
P322,952,109.25 for 2002-2004 be paid. c. As regards the assessment for tax deficiencies for the
• On May 2, 2007, a Warrant of Garnishment was issued by Roberto A. taxable years 2002-2004, we reiterate the ruling in the
Baquiran based on a letter of demand and formal assessment notices Assailed Decision and Assailed Resolution that the said
dated April 17, 2007 issued by RD Aspe. assessment is likewise valid for having factual and legal
bases.
(2) NO. The FDDA dated 16 October 2003 is the Decision that is delegated authority to do so. As such, they said that there was yet
Appealable to the CTA. no final decision or inaction of the CIR from which to appeal.
a. The subsequent reopening/reinvestigation of petitioner’s
assessment did not in any way reverse the finality of Issue/s:
respondent’s decision dated 16 October 2003. As correctly WON the letter by the revenue officer was a final decision from which Festo
pointed out in the Assailed Decision and Resolution of the can appeal from
Former Second Division, it is the Commissioner of the BIR
who has the power to reverse, revoke or modify any Held: NO. The taxpayer must wait for the final decision or inaction of the
existing ruling of the Bureau, and such power cannot be CIR before filing a petition for review with the CTA. Granted that
delegated. the letter was issued by a revenue officer; still, it must be
b. In the case at bench, the reopening/reinvestigation was ascertained whether such officer was CIR’s duly authorized
initiated by a mere Revenue Officer and approved by a mere representative.
Deputy Commissioner. As the aforementioned actions were
clearly done without the necessary authority, respondent Absent any proof that the CIR authorized the revenue officer to act
cannot be bound by the same. It is a settled rule that the in his / her behalf, such acts from the revenue officer cannot be
government cannot be estopped from collecting taxes by considered as final decision. Granted that such are not considered
mistake, negligence or omission of its agents. as a final decision, such are not appealable to the CTA.
c. It is therefore undeniable that the FDDA dated 16 October
2003 has become final and executory, hence the decision is Facts:
appealable to the CTA. • Festo Holdings filed a petition for review of a disputed assessment with the
CTA.
FESTO HOLDINGS, INC. v. CIR (Caraan) • Respondent CIR filed a Motion to Dismiss on the ground that said judicial
[CTA Case No. 8226; September 2, 2011] appeal was premature.
“Letters issued by a revenue officer who is unauthorized cannot be considered o (Sections 7 and 11, RA 1125; Rule 8 of the Revised Rules of
as a final decision = not appealable to the CTA” CTA) An aggrieved taxpayer must file a petition for review
with the CTA within 30 days from the receipt of the adverse
Recit-Ready: decision of the CIR
Facts: Festo Holdings, Inc. filed a petition for review of a disputed o There must be a decision, ruling or inaction on the part of the
assessment with the CTA. CIR filed motion to dismiss on the CIR within the allotted period before a taxpayer can seek
ground that the letter (assessment) from which Festo bases its court intervention.
petition cannot be considered the final decision of the CIR; thus, • CIR further contends that the authority to make a tax assessment may be
the petition was premature. delegated by the CIR to his / her subordinate officers and the said
assessment has the same force and effect as that issued by him / her, if
CIR said that the officer who issued it (RDO Wilfredo Narnola) not reviewed or revised by him / her.
cannot be deemed the alter ego of the CIR and did not have o CIR said that Revenue District Officer Wilfredo Z. Narnola,
who signed the letter dated December 17, 2010 and which
became the basis of the instant petition by Festo, cannot be [GR. No. 175097; February 5, 2010]
deemed an alter ego of the CIR for purposes of issuing a final “CIR, klaruhin mo gusto mo sabihin. Para di tayo nacoconfuse.”
decision on petitioner's protest under a delegated authority.
o As such, the subject letter dated December 17, 2010 is not Recit-Ready:
the CIR's final decision on petitioner's protest; thus, the 30- Facts: The BIR issued a PAN to petitioner ABC, for deficiency DST and
day period to file an appeal was yet to commence, rendering GRT for the taxable year 2001. ABC timely filed a protest against
the instant petition premature. the PAN, but the BIR disregarded the protest and sent a FAN to
the former. Instead of filing an administrative protest on the FAN,
Issue/s: which is the procedure stated in the NIRC, ABC directly filed a
WON the letter by the revenue officer was a final decision from which petition for review with the CTA. The CTA dismissed the petition
Festo can appeal from stating that ABC should have exhausted the administrative
—NO remedies first. It further ruled that it has no jurisdiction on the
assessment since it was not disputed since again, ABC failed to
Held/Ratio: WHEREFORE, premises considered, respondent's Motion to file an administrative protest.
Dismiss is hereby GRANTED. Accordingly, the instant Petition for Review [by
Festo] is hereby DISMISSED for lack of jurisdiction. Issue/s:
WON the FAN can be construed as a final decision of the CIR,
NO. The taxpayer must wait for the final decision or inaction of the CIR appealable to the CTA under RA 9282. - YES
before filing a petition for review with the CTA. (Sec. 7 and 11, RA 1125;
Sec. 3(a) Rule 8, Revised Rules of the CTA; Sec. 228 NIRC and RR 12-99) Held: The Court explained that the proper procedure would be to file an
o It must also be ascertained if the Revenue District Officer who issued administrative protest on a FAN, and if it is denied, only then may
the Final Decision on Disputed Assessment dated December 17, 2010 the taxpayer bring it to the CTA through a petition for review.
is the CIR's duly authorized representative. However, this case is an exception to the exhaustion of
o The NIRC allows the CIR to delegate her vested powers, subject to administrative remedies. The Court considered the language used
exceptions, to any subordinate official, with the rank equivalent to a in the FAN which stated that “this is our final decision. If you
division chief or higher. disagree, you may appeal this within 30 days from the receipt
§ Be that as it may, the decision of the Revenue District Officer thereof..” The use of the word final has led ABC to believe that
cannot be considered as the CIR's decision appealable to this filing an administrative protest would be futile, since it is already
Court, in the absence of any proof that the former was the final decision of the CIR. The use of the word appeal also
authorized to decide and act in behalf of the latter on the added to the confusion, since such word pertains to the filing with
protest of a taxpayer. a court. The CIR should have instead used the words: protest,
§ Nowhere is it provided for in Sec. 11 and 13 of the NIRC that reinvestigation or reconsideration.
a Revenue District Officer can issue decisions that are In this case then estoppel operates on the part of the CIR for
appealable to this Court. causing confusion due to the choice of words stated in the FAN.
ALLIED BANKING CORP v. CIR (Coloquio) Facts:

• In April 30, 2004, the BIR issued a PAN to petitioner Allied Banking
Corporation (ABC), for deficiency DST (P12,050,595.60) and Gross YES. The Court stated that the language used in the FAN led ABC to
Receipts Tax (P38,995,296.76), for the taxable year 2001. believe that an administrative protest would be futile since the
o Timeline: assessment is already FINAL.
May 18, 2004 – ABC received the PAN. • The Court stated that the CTA, being a court of special jurisdiction, can
May 27, 2004 – ABC filed a protest against it. take cognizance only of matters that are clearly within its jurisdiction. As
July 16, 2004 – BIR wrote a Formal Letter of Demand with stated in RA 9282, the CTA exercises exclusive appellate jurisdiction to
Assessment Notices (FAN) to ABC. review by appeal, decisions of the CIR in cases involving disputed
August 30, 2004 – ABC received the FAN. assessments.
• The FAN sent by the BIR stated that “This is our FINAL decision based on o The word “decisions” has been interpreted to mean the decisions
the investigation. If you disagree, you may appeal within 30 days from on the protest.
receipt thereof, otherwise the assessment shall become final and o The proper procedure, based on Sec. 228 of the NIRC is:
executory, and demandable.” (take note of the words used: “this is our FINAL 1. CIR sends a PAN.
decision…. you may appeal” kasi dun nagpakatanga si BIR.) 2. The taxpayer may file a protest on the PAN, within the period
• On September 24, 2004, ABC filed a petition for review with the CTA. The prescribed by the IRR.
CIR filed a motion to dismiss, stating that ABC filed to file an administrative 3. The CIR then sends a FAN.
protest on the FAN first, before resorting to filing with the CTA. 4. Then the taxpayer may file an administrative protest, by filing
o The CTA granted the motion to dismiss. It explained that it is a request for reconsideration or reinvestigation within 30
neither the assessment nor the FAN itself which is appealable to days from receipt of the FAN. He may submit all supporting
the CTA. It is the decision of the CIR on the disputed assessment documents within 60 days from the filing of the protest.
which can be appealed to it. 5. If the protest is denied in whole or in part, or is not acted upon
o It was added, that a disputed assessment is one wherein the within 180 days from the submission of the documents, only
taxpayer filed an administrative protest against the FAN within 30 then may the taxpayer appeal to the CTA within 30 days from
days from the receipt thereof. Here, ABC failed to file an the receipt of the decision or from the lapse of the 180-day
administrative protest, hence the assessments did not become period. If this is not done, the decision of the CIR shall
disputed subject to CTA’s review. become final and executory.
• ABC’s motion for reconsideration and petition for review with the CTA En • In this case, ABC filed a timely protest after receiving the PAN. In
Banc were also denied, thus this petition. response thereto, the BIR issued the FAN. However, instead of filing an
administrative protest within 30 days, it directly filed a petition for review
Issue/s: with the CTA.
WON the FAN can be construed as a final decision of the CIR, appealable o If the rules are strictly applied, the CTA’s dismissal of the petition
to the CTA under RA 9282. was proper.
—YES • However, the Court stated that this case is an exception to the rule on
exhaustion of administrative remedies.
o Going back to the FAN, it stated that “this is our FINAL decision
Held/Ratio: Petition GRANTED. based on our investigation. If you disagree, you may appeal this
FINAL decision within 30 days from receipt thereof.” Such

statement has led ABC to conclude that only a final judicial ruling Issue/s:
from the CTA would be accepted by the CIR. Meaning, an WON the petition before the court of tax appeals was filed out of time?
administrative protest would be futile (kasi nakalagay na final na nga).
In this case, estoppel operates against the CIR. Held: YES
o Therefore, we cannot blame ABC for not filing a protest, since the Section 228 of the tax code explicitly states that that if a protest is denied,
language used and the tenor of the demand letter indicated that there is a 30 day period to appeal it with the CTA. A motion for
the FAN is already the final decision of the CIR. reconsideration of the denial of the administrative protest does not toll the
• The Court also reminded the CIR, to indicate in a clear and unequivocal 30-day period to appeal to the CTA. In this case, FCC should have filed
language whether his action on a disputed assessment constitutes his their petition in the CTA before September 3, 2005 (30 days after denial of
final determination thereof, to prevent confusion on the part of the their letter of protest).
taxpayer.
• Also, the FAN stated the word appeal instead of protest/ reinvestigation/
reconsideration. Since the word appeal pertains to the filing of a petition Facts:
for review with the CTA, that added more to the confusion. • CIR ordered the examination of the internal revenue taxes for the taxable
• Any doubt in the interpretation of the FAN must be resolved in favor of the year 1999 of Fishwealth Canning Corp. (FCC). The investigation disclosed
taxpayer, and not the CIR who cause the confusion. that FCC was liable in the amount of P2,395,826.88, and these were
• The Court made it clear that this decision is not a departure from the strict eventually settled on August 30, 2000.
rules of procedure (30 days to file an administrative protest and if denied, • On August 25, 2000, CIR reinvestigated FCC’s books of accounts covering
only then may you file with the CTA). This case is just an exception the same period for the purpose of which it issued a subpoena duces
considering the confusion brought about by the language used in the FAN. tecum.
• CIR sent, on August 6, 2003, a Final Assessment Notice of income
FISHWEALTH CANNING CORP. v. CIR (Cualoping) tax and VAT deficiencies totaling P67,597,336.75 for the taxable year
[GR. No. 179343; January 21, 2010] 1999, which was contested by FCC.
“MR does not toll the 30 day period to appeal denial of protest of FAN” • CIR thereafter issued a Final Decision on Disputed Assessment dated
August 2, 2005, which FCC received on August 4, 2005, denying its letter
Recit-Ready: of protest, apprising it of its income tax and VAT liabilities in the amounts
Facts: of "P15,396,905.24 and P63,688,434.40 [sic], respectively, for the taxable
CIR examined the books of FCC and found them to have tax deficiencies, year 1999," and requesting the immediate payment thereof, "inclusive of
and these were eventually settled. Later the CIR conducted a penalties incident to delinquency."
reinvestigation over the same period and demanded payment for more o CIR added that if FCC disagreed, it may appeal to the Court
deficiencies. CIR issued a Final Assessment Notice and also denied FCC’s of Tax Appeals (CTA) "within thirty (30) days from date of
letter of protest on August 4, 2000. Instead of appealing to the CTA, FCC receipt hereof, otherwise our said deficiency income and
filed a letter of reconsideration. The CIR eventually sent a collection letter value-added taxes assessments shall become final,
to demand payment, and on October 20, 2005 FCC filed a petition in the executory, and demandable."
CTA as a response.
• Instead of appealing to the CTA, FCC filed, on September 1, 2005, a CTA Division. It filed one, however, on October 20, 2005, hence, it was
Letter of Reconsideration dated August 31, 2005. filed out of time.
• CIR eventually sent a collection letter to demand payment, and FCC o A motion for reconsideration of the denial of the administrative
responded by filing on October 20, 2005 a Petition for Review before protest does not toll the 30-day period to appeal to the CTA.
the CTA.
JUDY ANNE SANTOS v. PEOPLE OF THE PHILIPPINES and
Issue/s:
BIR (De Luis)
WON the petition before the court of tax appeals was filed out of time?
[GR. No. 173176; August 26, 2008]
“The denial of a motion to quash is an interlocutory order and, thus,
Held/Ratio: YES.
unappealable.”
o Section 228 of the 1997 Tax Code provides that an assessment:
x x x may be protested administratively by filing a request for
Recit-Ready:
reconsideration or reinvestigation within thirty (30) days from
Facts: BIR Commissioner Parayno wrote to DOJ Secretary Raul
receipt of the assessment in such form and manner as may be Gonzales regarding the possible filing of criminal charges against Judy
prescribed by implementing rules and regulations. Within sixty Anne Santos for tax evasion. The BIR Commissioner summarized Santos’s
(60) days from filing of the protest, all relevant supporting ITR and concluded that she substantially underdeclared her income in
documents shall have been submitted; otherwise, the assessment different taxable years, this constituted a prima facie evidence of false or
shall become final. fraudulent return under the NIRC. Accordingly, Prosecutor Torrevillas
issued a Resolution finding probable cause and recommending the filing of
criminal information against Santos. Pursuant to this, an Information for
If the protest is denied in whole or in part, or is not acted upon
violation of Section 255 in relation to Sections 254 and 248(b) of the NIRC
within one hundred eighty (180) days from submission of was filed with the CTA First Division on Nov. 3, 2005. Petitioner filed a
documents, the taxpayer adversely affected by the decision or motion to quash the information, which was denied by the CTA First
inaction may appeal to the Court of Tax Appeals within thirty (30) Division. Consequently, petitioner filed a motion with the CTA en banc a
days from receipt of the said decision, or from the lapse of the one Motion for Extension of Time to File Petition for Review. She filed her
hundred eighty (180)-day period; otherwise, the decision shall Petition for Review with the CTA en banc on June 16, 2006. However, the
CTA en banc denied petitioner’s Motion for Extension of Time to File
become final, executory and demandable. (underscoring
Petition for Review because a ruling denying a motion to quash is only an
supplied)1avvphi1 interlocutory order, as such, it cannot be made the subject of an appeal.
Juday appealed to the Supreme Court alleging that the resolution of the
o FCC’s administrative protest was denied by Final Decision on Disputed CTA Divison denying a motion to quash is a proper subject of an appeal to
Assessment dated August 2, 2005 issued by respondent and the CTA en banc under Section 18 of R.A. 1125, because the law does not
which petitioner received on August 4, 2005. Under the above-quoted say that only a resolution that constitutes a final disposition of a case may
Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal be appealed to the CTA en banc.
respondent’s denial of its protest to the CTA.
o Since FCC received the denial of its administrative protest on August 4, Issue/s:
2005, it had until September 3, 2005 to file a petition for review before the
WON a resolution of the CTA Division denying a motion to quash is a in 2002 income in the amount of at least P14,796,234.70, not only from
proper subject of an appeal to the CTA en banc under Section 11 of ABS-CBN, but also from other sources, such as movies and product
R.A. 9282 (CTA Law) endorsements; the estimated tax liability arising from
—NO petitioner’s underdeclaration amounted to P1,718,925.52, including
incremental penalties; the non-declaration by petitioner of an amount
equivalent to at least 84.18% of the income declared in her return was
considered a substantial underdeclaration of income, which
Held: constituted prima facie evidence of false or fraudulent return under Section
Petitioner cannot file a Petition for Review with the CTA en banc to appeal 248(B) of the NIRC, as amended; and petitioners failure to account as part
the Resolution of the CTA First Division denying her Motion to Quash. The of her income the professional fees she received from sources other than
Resolution is interlocutory and, thus, unappealable. The petition for review ABS-CBN and her underdeclaration of the income she received from ABS-
under Section 18 of Republic Act No. 1125, as amended, may be new to CBN amounted to manifest violations of Sections 254 and 255, as well as
the CTA, but it is actually a mode of appeal long available in courts of
Section 248(B) of the NIRC, as amended.
general jurisdiction. The CTA merely adopts the procedure for petitions for
review and appeals long established and practiced in other Philippine • Prosecution Attorney Olivia Laroza-Torrevillas issued a Resolution dated
courts. Accordingly, doctrines, principles, rules, and precedents laid down Oct. 21, 2005, finding probable cause and recommending the filing of
in jurisprudence by this Court as regards petitions for review and appeals criminal information against Santos. Chief State Prosecutor Jovencito R.
in courts of general jurisdiction should likewise bind the CTA, and it cannot Puno approved the Resolution. Pursuant to this, an information for violation
depart therefrom. It is a general rule in the rules of procedure that the denial of Section 255 in relation to Sections 254 and 248(b) of the NIRC was filed
of motion to quash is an interlocutory order, which is not the proper subject
with the CTA on Nov. 3, 2005.
of an appeal or a petition for certiorari.
• The CTA First Division then issued a warrant for the arrest of petitioner.
Even if her Petition for Review is to be treated as a petition for certiorari, it The tax court lifted and recalled the warrant of arrest on 21 December 2005
is dismissible for lack of merit, because the Prosecuting Attorney Torrevillas after petitioner voluntarily appeared and submitted herself to its jurisdiction
(Prosecutor appointed by the DOJ) has the authority to file the information and filed the required bail bond in the amount ofP20,000.00.
by virtue of the approval of the BIR Commissioner through his letter to the • On Jan. 10, 2006, petitioner filed with the CTA First Division a Motion to
DOJ Secretary. Also, the filing of the said information was not in violation of Quash the information on the following grounds: 1) the facts alleged do not
petitioner’s constitutional rights to due process and equal protection of laws. constitute an offense; 2) the officer who filed the information had no
authority to do so; 3) the Honorable CTA has no jurisdiction over the
Facts: subject matter of the case; and 4) the information is void ab initio, for being
• On May 19, 2005, BIR Commissioner Guillermo Parayno wrote to the DOJ violative of due process, and the equal protection of laws.
• The CTA First Division denied the petitioner’s Motion to Quash and
Secretay Raul Gonzales regarding the possible filing of criminal charges
accordingly scheduled her arraignment on March 2, 1006. Petitioner filed
against Judy Anne Santos.
a Motion for Reconsideration and/or Reinvestigation, which was again
• In said letter, BIR Commissioner Parayno summarized the findings of the denied by the CTA First Division
investigating BIR officers that petitioner, in her Annual Income Tax Return • On June 1, 2006, petitioner filed with the CTA en banc a Motion for
for taxable year 2002 filed with the BIR, declared an income Extension of Time to File Petition for Review. She filed her Petition for
of P8,033,332.70 derived from her talent fees solely from ABS-CBN; initial Review with the CTA en banc on June 16, 2006. However, the CTA en
documents gathered from the BIR offices and those given by petitioners banc denied petitioner’s Motion for Extension of Time to File Petition for
accountant and third parties, however, confirmed that petitioner received
Review because a ruling denying a motion to quash is only an interlocutory therein when declared by the Rules to be appealable. Said
order, as such, it cannot be made the subject of an appeal. provision, thus, explicitly states that no appeal may be taken from
• Juday appealed to the Supreme Court alleging that the resolution of the an interlocutory order.
CTA Divison denying a motion to quash is a proper subject of an appeal to § After a final order or judgment, the court should have nothing
the CTA en banc under Section 18 of R.A. 1125, because the law does not more to do in respect of the relative rights of the parties to the
say that only a resolution that constitutes a final disposition of a case may case. Conversely, "an order that does not finally dispose of the
be appealed to the CTA en banc. case and does not end the Court's task of adjudicating the parties'
contentions in determining their rights and liabilities as regards
Issue/s: each other, but obviously indicates that other things remain to be
WON a resolution of the CTA Division denying a motion to quash is a done by the Court, is interlocutory.
proper subject of an appeal to the CTA en banc under Section 11 of R.A. § Another recognized reason of the law in permitting appeal only
from a final order or judgment, and not from an interlocutory or
9282 (CTA Law)
incidental one, is to avoid multiplicity of appeals in a single action,
—NO which must necessarily suspend the hearing and decision on the
merits of the case during the pendency of the appeal.
Held/Ratio: Petition DENIED. The CTA en banc did not err in denying o The remedy of an accused from the denial of his or her motion to quash
petitioner’s Motion for Extension of Time to File Petition for Review. is an appeal from the judgment after trial on the merits. The accused,
after the denial of his motion to quash, should have proceeded with the
NO. Petitioner cannot file a Petition for Review with the CTA en banc to trial of the case in the court below, and if final judgment is rendered against
appeal the Resolution of the CTA First Division denying her Motion to him, he could then appeal, and, upon such appeal, present the questions
Quash. The Resolution is interlocutory and, thus, unappealable. Even if which he sought to be decided by the appellate court in a petition
her Petition for Review is to be treated as a petition for certiorari, it is for certiorari.
dismissible for lack of merit. o While the general rule proscribes the appeal of an interlocutory order,
there are also recognized exceptions to the same. Where special
§ The petition for review under Section 18 of Republic Act No. 1125, as circumstances clearly demonstrate the inadequacy of an appeal, then the
amended, may be new to the CTA, but it is actually a mode of appeal long special civil action of certiorari or prohibition (Rule 65) may
available in courts of general jurisdiction. Hence, the Revised CTA Rules exceptionally be allowed.
no longer elaborated on it but merely referred to existing rules of § This Court recognizes that under certain situations, recourse to
procedure on petitions for review and appeals. The CTA merely adopts extraordinary legal remedies, such as a petition for certiorari, is
the procedure for petitions for review and appeals long established and considered proper to question the denial of a motion to quash (or
practiced in other Philippine courts. Accordingly, doctrines, principles, any other interlocutory order) in the interest of a "more
rules, and precedents laid down in jurisprudence by this Court as regards enlightened and substantial justice” or to promote public welfare
petitions for review and appeals in courts of general jurisdiction should and public policy; or when the cases "have attracted nationwide
likewise bind the CTA, and it cannot depart therefrom. attention, making it essential to proceed with dispatch in the
§ It is a general rule in the rules of procedure that the denial of motion to consideration thereof"; or when the order was rendered with
grave abuse of discretion.
quash is an interlocutory order which is not the proper subject of an appeal
§ Certiorari is an appropriate remedy to assail an interlocutory
or a petition for certiorari. order (1) when the tribunal issued such order without or in excess
§ According to Section 1, Rule 41 of the Revised Rules of Court, of jurisdiction or with grave abuse of discretion; and (2) when the
governing appeals from the Regional Trial Courts (RTCs) to the assailed interlocutory order is patently erroneous, and the
Court of Appeals, an appeal may be taken only from a judgment remedy of appeal would not afford adequate and expeditious
or final order that completely disposes of the case or of a matter relief.
o As to whether the CTA en banc, under its expanded jurisdiction in (Velasquez) were dismissed by the DOJ the reason that
Republic Act No. 9282, has been granted jurisdiction over special civil Velasquez’s tax liability was not yet fully determined when the
actions for certiorari is not raised as an issue in the Petition at bar, thus, charges were filed.
precluding the Court from making a definitive pronouncement thereon. § This contention lacks merit. First, a motion to quash
However, even if such an issue is answered in the negative, it would not should be based on a defect in the information, which is
substantially affect the ruling of this Court herein, for a party whose motion evident on its face. The Information against petitioner
to quash had been denied may still seek recourse, under exceptional and appears valid on its face; and that it was filed in violation
meritorious circumstances, via a special civil action for certiorari with this of her constitutional rights to due process and equal
Court, refuting petitioner’s assertion of a procedural void. protection of the laws is not evident on the face thereof.
As pointed out by the CTA First Division, the more
o Assuming that the CTA en banc, as an exception to the general rule, appropriate recourse petitioner should have taken, given
allowed and treated petitioner’s Petition for Review in C.T.A. EB. the dismissal of similar charges against Velasquez, was
CRIM. No. 001 as a special civil action for certiorari, it would still be to appeal with the DOJ Secretary the Resolution of the
dismissible for lack of merit. Office of the State Prosecutor recommending the filing
§ Petitioner argues that the information was filed without the of an information against her.
approval of the BIR Commissioner in violation of Section 220 of § Second, petitioner cannot claim denial of due process
the NIRC. This argument must fail in light of BIR Commissioner when she was given the opportunity to file her affidavits
Parayno’s letter dated 19 May 2005 to DOJ Secretary Gonzales and other pleadings and submit evidence before the
referring "for preliminary investigation and filing of an DOJ during the preliminary investigation of her case and
information in court if evidence so warrants," the findings of the before the Information was filed against her.
BIR officers recommending the criminal prosecution of petitioner. § Third, petitioner was not able to duly establish to the
In said letter, BIR Commissioner Parayno already gave his prior satisfaction of this Court that she and Velasquez were
approval to the filing of an information in court should the DOJ, indeed similarly situated, i.e., that they committed
based on the evidence submitted, find probable cause against identical acts for which they were charged with the
petitioner during the preliminary investigation. Section 220 of the violation of the same provisions of the NIRC; and that
NIRC, as amended, simply requires that the BIR Commissioner they presented similar arguments and evidence in their
approve the institution of civil or criminal action against a tax law defense - yet, they were treated differently. In the case
violator, but it does not describe in what form such approval must at bar, no evidence of a clear and intentional
be given. discrimination against petitioner was shown, whether by
§ Petitioner asserts that it is the City Prosecutor under the Quezon Prosecution Attorney Torrevillas in recommending the
City Charter, who has the authority to investigate and prosecute filing of Information against petitioner or by the CTA First
offenses allegedly committed within the jurisdiction of Quezon Division in denying petitioner’s Motion to Quash. The
City. This argument is untenable because the charge against only basis for petitioner’s claim of denial of equal
petitioner is already within the exclusive original jurisdiction of the protection of the laws was the dismissal of the charges
CTA. The City Prosecutor does not have the authority to appear against Velasquez while those against her were not.
before the CTA, which is now the same rank as the Court of
Appeals. The proper prosecutor in this case is the Chief State PHILIPPINE JOURNALISTS v. CIR (Diploma)
Prosecutor, who exercises control and supervision over City
[GR 162582; Dec. 16, 2004]
Prosecutors.
§ Petitioner alleges that she has been denied due process and “The limit (of CTA jurisdiction in decisions of the CIR on matters only relating
equal protection of the laws when similar charges for violation of to assessments or refunds) does not exist – Cady, Mean Girls”
the NIRC, against Regina Encarnacion A. Velasquez
Recit-Ready: running of the prescriptive period of the government’s right to make an

• Facts: PJI was assessed deficiency tax. In 1995. A assessment.
reinvestigation took place which yielded the same result rendering o Said right was set to expire on April 17, 1998 but due to the
PJI liable for tax deficiencies. In 1998, PJI was thereafter issued a additional evidence that PJI sought to present, the
warrant for distraint/levy, yielding the same result. The Court of government needed more time.
Appeals ruled that only decisions of the BIR denying a request for • A reinvestigation took place which yielded the same result rendering PJI
reconsideration or reinvestigation may be appealed to the CTA. liable for tax deficiencies.
Since PJI did not file a request for reinvestigation or • In December 1998, a formal assessment notice (FAN) was sent via
reconsideration within thirty (30) days, the assessment registered mail to PJI. Subsequently, a warrant for distraint/levy was
notices became final and unappealable. CIR argues that the issued against the assets of PJI.
case was brought to the CTA because the warrant of distraint or o PJI filed a protest which eventually reached the Court of Tax
levy was illegally issued and that no assessment was issued Appeals. PJI averred that the waiver executed by Tolentino
because it was based on an invalid waiver of the statutes of was incomplete;
limitations. o that no acceptance date was indicated to show that the
waiver was accepted by BIR;
Issue: WON CTA has jurisdiction —YES o that no copy was furnished PJI; that the waiver was an
unlimited waiver because it did not indicate as to how long
Held: SC held that the CTA had jurisdiction over the case, as the law the extension of the prescriptive period should last.
gave the CTA the jurisdiction to determine if the warrant of o As such, there was no valid waiver of the statute of limitations
distraint/levy issued by the BIR is valid and to rule if the Waiver of which in turn make the FAN issued in December 1998 void.
Statute of Limitations was validly effected. Based on Section 7 of • CIR argued that the placing of the acceptance date is merely a formal
the Act Creating the CTA, the appellate jurisdiction of the CTA requirement and not vital to the validity of the waiver.
is not limited to cases which involve decisions of the CIR on • It also contended that there is no need to furnish PJI a copy of the waiver
matters relating to assessments or refunds. because in the first place, it was PJI, through its representative, who was
making the waiver so it should know about it
• Further, there is no need to place a specific date as to how long the
Facts: prescriptive period should be extended because PJI was waiving the
• In April 1995, the Philippine Journalists, Inc. (PJI) filed its ITR for the year prescriptive period and was not asking to extend it.
1994. • The Court of Appeals ruled that only decisions of the BIR denying a
• In 1995, a tax audit was conducted by the BIR, where it was found that request for reconsideration or reinvestigation may be appealed to the
PJI was liable for a tax deficiency. CTA.
• In September 1997, PJI asked that it be allowed to present its evidence to o Since PJI did not file a request for reinvestigation or
dispute the finding. reconsideration within thirty (30) days, the assessment notices
• In the same month, the Comptroller of PJI (Lorenza Tolentino) executed became final and unappealable.
a waiver of the statute of limitations, whereby PJI agreed to waive the § CIR argues that the case was brought to the CTA because
the warrant of distraint or levy was illegally issued and that
no assessment was issued because it was based on an taxpayer as null and void, thus invalidating the assessments issued
invalid waiver of the statutes of limitations. by the BIR, was upheld by this Court.
Issue: WON CTA has jurisdiction —YES

CIR v. LEAL (FajardoRK)
Held/Ratio: WHEREFORE, premises considered, the instant petition for [GR. No. 113459; November 18, 2002]
review is GRANTED. The Decision of the Court of Appeals dated August 5,
2003 and its Resolution dated March 31, 2004 are REVERSED and SET Recit-Ready:
ASIDE. The Decision of the Court of Tax Appeals in CTA Case No. 6108 dated Facts: The CIR issued an RMO No. 15-91 which imposes 5% lending
May 14, 2002, declaring Warrant of Distraint and/or Levy No. 33-06-046 null investor’s tax on pawnshops based on their gross income and
and void, is REINSTATED. requiring all investigating units of the Bureau to investigate and
assess the lending investor’s tax. This was an offshoot of
• Section 7 of the RA 1125 [An Act Creating the CTA] provides: petitioner’s evaluation that the nature of pawnshop business is
o SEC. 7. Jurisdiction. – The Court of Tax Appeals shall similar to that of lending investors. CIR then issued RMO
exercise exclusive appellate jurisdiction to review by appeal: subjecting the pawn ticket to the DST under the tax code.
Decisions of the Commissioner of Internal Revenue in cases Respondent were adversely affected by the revenue orders and
involving disputed assessments, refunds of internal revenue asked for reconsideration of both RMO No. 15-91 and RMC No.
taxes, fees or other charges, penalties imposed in relation 43-91 filed with the RTC a petition for prohibition to implement such
thereto, or other matters arising under the National revenue orders.
Internal Revenue Code or other laws or part of law
administered by the Bureau of Internal Revenue. Issue/s:
• Thus, the appellate jurisdiction of the CTA is not limited to cases (1) Whether or not the CTA has jurisdiction to review the ruling of the
which involve decisions of the CIR on matters relating to CIR—Yes the CTA has JD
assessments or refunds. Held: The jurisdiction to review rulings of the Commissioner pertains to
• The second part of the provision covers other cases that arise out of the the CTA and NOT the RTC.
NIRC or related laws administered by the Bureau of Internal Revenue. • The questioned RMO and RMC are actually rulings or opinions of
• The law gave the CTA the jurisdiction to determine if the warrant of the Commissioner implementing the Tax Code on the taxability of
distraint/levy issued by the BIR is valid and to rule if the Waiver of Pawnshops. Under RA 1125, Section 7 (The JD of the CTA)—it
Statute of Limitations was validly effected. shall exercise exclusive appellate jurisdiction to review by appeal,
• This is not the first case where the CTA validly ruled on issues that did not the decisions of the CIR in cases involving disputed assessments,
relate directly to a disputed assessment or a claim for refund. refunds, fees, or other charges, penalties imposed in relation
o In Pantoja v. David, we upheld the jurisdiction of the CTA to act on a thereto or other matters arising under the NIRC or other laws or
petition to invalidate and annul the distraint orders of the part of law administered by the BIR. Clearly then, she should have
Commissioner of Internal Revenue. filed her petition with the CTA, not the RTC. Indeed, the CA erred
o In Commissioner of Internal Revenue v. Court of Appeals, the in holding that the RTC order should have been challenged before
decision of the CTA declaring several waivers executed by the SC.
Pawnshops. This is clear from petitioner’s RMO No. 15-91 which

reads:
“A restudy of P.D. 114 (the Pawnshop Regulation Act) shows that the
principal activity of pawnshops is lending money at interest and
Facts: incidentally accepting a ‘pawn’ of personal property delivered by the
pawner to the pawnee as security for the loan (Sec. 3, ibid.). Clearly,
• Pursuant to Sec. 116 of the Tax Code which imposes percentage tax on
this makes pawnshop business akin to lending investor’s business
dealers in securities and lending investors, the CIR issued Memorandum
activity which is broad enough to encompass the business of lending
Order (RMO) No. 15-91 money at interest by any person whether natural or juridical. Such being
o It imposes 5% lending investor’s tax on pawnshops based on the case, pawnshops shall be subject to the 5% lending investor’s tax
their gross income and requiring all investigating units of the based on their gross income pursuant to Section 116 of the Tax Code,
Bureau to investigate and assess the lending investor’s tax as amended.”
due from them.
• The issuance of RMO No. 15-91 was an offshoot of petitioner’s evaluation • Such revenue orders were issued pursuant to petitioner’s powers
that the nature of pawnshop business is similar to that of lending investors. under Section 245 of the Tax Code regarding the authority of the
• Subsequently, petitioner issued RMO Circular No. 43-91, subjecting the Secretary of Finance to determine articles similar or analogous to
pawn ticket to the DST under the tax code. those subject to a rate of sales tax under certain category enumerated
• The respondent was adversely affected by the revenue orders and asked in Sections 163 and 165 of this Code shall be without prejudice to the
for reconsideration of both RMO No. 15-91 and RMC No. 43-91 filed with power of the Commissioner of Internal Revenue to make rulings or
the RTC a petition for prohibition to implement such revenue orders. opinions in connection with the implementation ruling on the
• The CIR, through the OSG, filed a motion to dismiss on the ground that the classification of articles of sales and similar purpose.
RTC has no jurisdiction to review the questioned revenue orders. • Under RA 1125 (An Act Creating the CTA), Sec 7. Jurisdiction—The
• Their MTD was denied holding that the revenue orders are not Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
assessments to implement a Tax Code provision, but are in effect new review by appeal, the decisions of the CIR in cases involving disputed
taxes which are not provided under the Code. assessments, refunds, fees or other charges, penalties imposed in
• The CA affirmed the order issued by the RTC relation thereto or other matters arising under the NIRC or other laws
or part of law administered by the BIR.
Issue/s:
“SEC. 11. Who may appeal; effect of appeal.—Any person, association or
Whether or not the Court of Tax Appeals has jurisdiction to review ruling
corporation adversely affected by a decision or ruling of the Commissioner of
of the CIR—Yes, the CTA has JD
Internal Revenue, or the Commissioner of Customs or any provincial or city
Board of Assessment Appeals may file an appeal in the Court of Tax Appeals
Held/Ratio: within thirty days after the receipt of such decision or ruling.
Yes the CTA has jurisdiction. The jurisdiction to review rulings of the x x x x x x x x.” (emphasis added)
Commissioner pertains to the CTA and NOT the RTC. “SEC. 18. x x x.—No judicial proceedings against the Government involving
• The questioned RMO and RMC are actually rulings or opinions of the matters arising under the National Internal Revenue Code, the Customs Law
Commissioner implementing the Tax Code on the taxability of or the Assessment Law shall be maintained, except as herein provided, until
and unless an appeal has been previously filed with the Court of Tax Appeals
and disposed of in accordance with the provisions of this Act. imposed in relation thereto, or other matters arising under the
x x x x x x x x x.” (emphasis added) NIRC or other laws or part of law administered by the BIR. An
RMC is considered as an administrative ruling, which is issued
• Respondent Josefina Leal, being a pawnshop owner is assailing the from time to time by the CIR.
revenue orders imposing 5% lending investor’s tax on pawnshops
issued by petitioner. In the case at bar, the assailed RMC is a ruling of the CIR on the
• Clearly then, she should have filed her petition with the CTA, not the tax treatment of motor vehicles sold at public auction within the
RTC. Indeed, the CA erred in holding that the RTC order should have SSEZ pursuant to R.A. 7227. This RMC was issued in
been challenged before SC. accordance with the power of the CIR to interpret tax laws.
Thus, the petitioners should have filed their case with the CTA and
ASIA INTERNATIONAL AUCTIONEERS, INC. v. PARAYNO, JR. not the RTC.
(Go)
[GR. No. 163445; December 18, 2007] Facts:
“An RMC is a ruling or opinion of the CIR, thus the CTA will have jurisdiction • Congress enacted R.A. 7227 creating the Subic Special Economic Zone
in cases which question RMCs” (SSEZ), which extended a number of economic or tax incentives therein.
• On June 3, 2003, CIR Parayno issued RMC 31-2003 setting the “Uniform
Recit-Ready: Guidelines on the Taxation of Imported Motor Vehicles through the Subic
Facts: The CIR issued RMC 31-2003 which sets the guidelines for the Free Port Zone and Other Freeport Zones that are Sold at Public Auction.”
taxation of imported motor vehicles in the Subic Free Port Zone • The petitioner, Asia International Auctioneers, is a corporation organized
and other free port zones that are sold at public auction. Asia under Philippine laws with principal place of business within the SSEZ. It
International Auctioneers is engaged in the importation of second is engaged in the importation of mainly secondhand or used motor vehicles
hand cars which they sell to the public through public auction. and heavy transportation or construction equipment which it sells to the
public through auction.
The petitioners filed before the RTC a complaint stating that the • The petitioner filed a case with the RTC of Olongapo, praying for the
RMC is unconstitutional and is an ultra vires act. The CIR filed a nullification of RMC 31-2003 stating that it is unconstitutional and is an ultra
motion to dismiss stating that the RTC has no jurisdiction over the vires act.
case. In the meantime, the BIR District Officer sent a PAN to the • The CIR filed a motion to dismiss alleging: (1) the RTC has no jurisdiction
petitioner for unpaid VAT on auction sales. over the case; and (2) non-exhaustion of administrative remedies.
o In the meantime, BIR Revenue District Officer Tambis sent a
Issue: 10-day Preliminary Notice (PAN) to the president of Asia
WON the RTC has jurisdiction over the case. (NO) International for unpaid VAT on auction sales conducted on
June 6-8, 2003.
Held: In ruling for the CIR, the SC noted that Sec. 7 of R.A. 1125 vests • Petitioner’s arguments against the Motion to Dismiss:
with the CTA the exclusive appellate jurisdiction to review o The jurisdiction over the case properly pertains to the regular
decisions of the CIR in cases involving disputed assessments, courts since it is an action to declare as unconstitutional, void
refunds of internal revenue taxes, fees, or other charges, penalties
and against the provisions of RA 7227” the RMC issued by interpret the provisions of this Code and other tax
the CIR. laws shall be under the exclusive and original
o It does not challenge the rate, structure or figures of imposed jurisdiction of the Commissioner, subject to review
taxes, rather, it challenges the authority of the CIR to impose by the Secretary of Finance.
and collect said taxes.
o The challenge on the authority of the CIR to issue the RMC The power to decide disputed assessments, refunds of
does not fall within the jurisdiction of the CTA. internal revenue taxes, fees or other charges, penalties
Issue: imposed in relation thereto, or other matters arising
WON the RTC has jurisdiction over the case under this Code or other laws or portions thereof
—NO administered by the Bureau of Internal Revenue is
vested in the Commissioner, subject to the exclusive
Held/Ratio: Petition DENIED. appellate jurisdiction of the Court of Tax Appeals.
o With the foregoing, it is the CTA which has jurisdiction over the case at
NO. The case at bar properly falls within the jurisdiction of the CTA. bar, and not the RTC.
o Sec. 7 of R.A. 1125 states that the Court of Tax Appeals shall exercise
exclusive appellate jurisdiction to review by appeal: PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE
o Decisions of the Commissioner of Internal Revenue COMPANY v SECRETARY OF FINANCE (Guzman)
in cases involving disputed assessments, refunds of [GR. No. 210987; November 24, 2014]
internal revenue taxes, fees or other charges, penalties “Decisions of the Secretary of Finance are appealable to the CTA”
imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other Recit-Ready:
laws or part of law administered by the Bureau of
Internal Revenue.
Facts: Philamlife owned 498,590 Class A shares in PhilamCare,
o The SC has held that RMCs are considered administrative rulings,
representing 49.89% of the latter's outstanding capital stock. In 2009,
which are issued from time to time by the CIR.
Philamlife, offered to sell its shareholdings in PhilamCare through
o In the case at bar, the assailed RMC is a ruling or opinion of the CIR on
competitive bidding. On September 24, 2009, Philamlife's shares were
the tax treatment of motor vehicles sold at public auction within the
sold for PhP 104,259,330 based on the prevailing exchange rate at the
SSEZ to implement R.A. 7227 which provides that the exportation or
time of the sale, to STI Investments, Inc., who emerged as the highest
removal of goods from the territory of the SSEZ to the other parts of the
bidder. Thereafter, petitioner was informed that it needed to secure a BIR
Philippine territory shall be subject to customs duties and taxes under
ruling in connection with its application due to potential donor’s tax liability.
the Customs and Tariff Code and other relevant tax laws of the
In compliance, petitioner, on January 4, 2012, requested a ruling to
Philippines.
confirm that the sale was not subject to donor’s tax. CIR denied
o RMC 31-2003 was issued pursuant to the power of the CIR under Sec.
Philamlife’s request. It determined that the selling price of the shares was
4 of the NIRC.
lower than their book value. As such, donor’s tax became imposable on
o Section 4. Power of the Commissioner to Interpret Tax
the price difference pursuant to Sec. 100 of the National Internal Revenue
Laws and to Decide Tax Cases. -- The power to
Code (NIRC). Petitioner requested Secretary of Finance to review BIR
Ruling but to no avail. Thereafter, Petitioner elevated the case via Petition imposable on the price difference pursuant to Sec. 100 of the National
for Review under Rule 43. with the Court or Appeals. The CA denied the Internal Revenue Code (NIRC).
case for lack of jurisdiction. • Petitioner requested Secretary of Finance to review BIR Ruling but to
no avail. Thereafter, Petitioner elevated the case via Petition for
Issue/s: Review under Rule 43. with the Court or Appeals. The CA denied the
WON the CA has jurisdiction over the case – NO case for lack of jurisdiction.
• Petitioner postulates that there is a need to differentiate the rulings
Held: promulgated by the respondent Commissioner relating to those
No. Reviews by the Secretary of Finance pursuant its powers to interpret rendered under the first paragraph of Sec. 4 of the NIRC, which are
laws and decide tax cases are appealable to the CTA. The CTA is the appealable to the Secretary of Finance, from those rendered under
proper forum with which to institute the appeal. As the specialized quasi- the second paragraph of Sec. 4 of the NIRC, which are subject to
judicial agency mandated to adjudicate tax, customs, and assessment review on appeal with the CTA to wit:
cases, there can be no other court of appellate jurisdiction that can decide
the issues raised, which involves the tax treatment of the shares of stocks “SECTION 4. Power of the Commissioner to Interpret
sold. Tax Laws and to Decide Tax Cases. – The power to interpret the
provisions of this Code and other tax laws shall be under the
Facts: exclusive and original jurisdiction of the Commissioner, subject to
• Philamlife owned 498,590 Class A shares in PhilamCare, review by the Secretary of Finance.
representing 49.89% of the latter's outstanding capital stock. In 2009,
Philamlife, offered to sell its shareholdings in PhilamCare through The power to decide disputed assessments, refunds of internal
competitive bidding. revenue taxes, fees or other charges, penalties imposed in relation
• On September 24, 2009, Philamlife's shares were sold for PhP thereto, or other matters arising under this Code or other laws or
104,259,330 based on the prevailing exchange rate at the time of the portions thereof administered by the Bureau of Internal Revenue is
sale, to STI Investments, Inc. vested in the Commissioner, subject to the exclusive appellate
• After the sale was completed and the necessary documentary stamp jurisdiction of the Court of Tax Appeals.”
and capital gains taxes were paid, Philamlife filed an application for a
certificate authorizing registration/tax clearance with the BIR Large • Petitioner asserts that appeals questioning the decisions of the Secretary
Taxpayers Service Division to facilitate the transfer of the shares. of Finance in the exercise of its power of review under Sec. 4 of the NIRC
Months later, petitioner was informed that it needed to secure a BIR are not within the CTA’s limited special jurisdiction and, according to
ruling in connection with its application due to potential donor’s tax petitioner, are appealable to the CA via a Rule 43 petition for review.
liability
• In compliance, petitioner, on January 4, 2012, requested a ruling to Issue/s:
confirm that the sale was not subject to donor’s tax. CIR denied WON the CA has jurisdiction over the case – NO
Philamlife’s request. It determined that the selling price of the shares
was lower than their book value. As such, donor’s tax became Held/Ratio:
Admittedly, there is no provision in law that expressly provides where exactly abuse of discretion amounting to lack or excess of jurisdiction on the part of
the ruling of the Secretary of Finance under the adverted NIRC provision is the RTC in issuing an interlocutory order in cases falling within the exclusive
appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as amended, appellate jurisdiction of the tax court. It, thus, follows that the CTA, by
addresses the seeming gap in the law as it vests the CTA, albeit impliedly, constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
with jurisdiction over the CA petition as "other matters" arising under the NIRC these cases. Indeed, in order for any appellate court to effectively exercise its
or other laws administered by the BIR. As stated: appellate jurisdiction, it must have the authority to issue, among others, a writ
of certiorari
Sec. 7. Jurisdiction.- The CTA shall exercise:
On the issue of donor’s tax liability: The absence of donative intent does
a. Exclusive appellate jurisdiction to review by appeal, as herein provided: not exempt the sales of stock transaction from donor's tax since Sec. 100 of
the NIRC categorically states that the amount by which the fair market value
1. Decisions of the Commissioner of Internal Revenue in cases involving of the property exceeded the value of the consideration shall be deemed a gift.
disputed assessments, refunds of internal revenue taxes, fees or other Thus, even if there is no actual donation, the difference in price is considered
charges, penalties in relation thereto, or other matters arising under the a donation by fiction of law. Philamlife is liable for donor’s tax.
National Internal Revenue or other laws administered by the Bureau of Internal
Revenue. (emphasis supplied) CITY OF MANILA v. GRECIA-CUERDO (Layno)
[GR. No. 175723; FEB. 4, 2014]
Even though the provision suggests that it only covers rulings of the “If appellate jurisdiction if vested with CTA, it follows that a petition for certiorari
Commissioner, We hold that it is, nonetheless, sufficient enough to include seeking nullification of an interlocutory order issued in the same case should
appeals from the Secretary’s review under Sec. 4 of the NIRC. As the likewise be filed in the said Court (even if the RA’s creating CTA did not
specialized quasi-judicial agency mandated to adjudicate tax, customs, and explicitly say so.)”
assessment cases, there can be no other court of appellate jurisdiction that
can decide the issues raised, which involves the tax treatment of the shares Recit-Ready:
of stocks sold. Facts: Petitioner City of Manila assessed taxes against stores owned by
SM like Ace Hardware, Watsons, and Surplus, etc. SM was
NOTE (in case sir asks): The Court also ruled that the CTA may issue writs of constrained to pay P19M for the assessment under protest. They
certiorari notwithstanding the fact that there is no express grant of such power, thereafter filed with RTC Pasay a complaint for the recovery of
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that what they paid. RTC granted their Writ of Preliminary Injunction to
judicial power shall be vested in one Supreme Court and in such lower courts which the City of Manila assailed by filing a Rule 65 to the CA. CA
as may be established by law and that judicial power includes the duty of the dismissed their petition for not having jurisdiction over it.
courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been Issue/s:
a grave abuse of discretion amounting to lack or excess of jurisdiction on the 1) WON CA erred in dismissing petitioner’s case for lack of
part of any branch or instrumentality of the Government. On the strength of jurisdiction?
the above constitutional provisions, it can be fairly interpreted that the power
of the CTA includes that of determining whether or not there has been grave
Held: 1) No it did not. The jurisdiction for such a scenario is lodged with • CA dismissed petitioners' petition for certiorari holding that it has no
the CTA because as the law expressly confers on the CTA, the jurisdiction over the said petition. The CA ruled that since appellate
tribunal with the specialized competence over tax and tariff jurisdiction over private respondents' complaint for tax refund, which was
matters, the role of judicial review over local tax cases without filed with the RTC, is vested in the Court of Tax Appeals. It follows that a
mention of any other court that may exercise such power. Thus, petition for certiorari seeking nullification of an interlocutory order issued
the Court agrees with the ruling of the CA that since appellate in the said case should, likewise, be filed with the CTA.
jurisdiction over private respondents' complaint for tax refund is
vested in the CTA, it follows that a petition for certiorari seeking Issue/s:
nullification of an interlocutory order issued in the said case should, WON CA erred in dismissing the case for lack of jurisdiction?
likewise, be filed with the same court. To rule otherwise would lead -NO
to an absurd situation where one court decides an appeal in the
main case while another court rules on an incident in the very same Held/Ratio: WHEREFORE, the petition is DENIED.
case.
Without first resolving the above issues, this Court finds that the instant petition
should be denied for being moot and academic. Upon perusal of the original
Facts: records of the instant case, this Court discovered that a Decision in the main
• The record shows that petitioner City of Manila, through its treasurer, case had already been rendered by the RTC granting the tax refunds and that
petitioner Liberty Toledo, assessed taxes for the taxable period from the public respondents were enjoined from collecting taxes pursuant to Sec.
January to December 2002 against private respondents SM Mart, Inc., 21 of their Revenue Code of Manila.
SM Prime Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace
Hardware Philippines, Inc., Watsons Personal Care Stores Phils., Inc., • The basic question posed before this Court is whether or not the CTA has
Jollimart Philippines Corp., Surplus Marketing Corp. and Signature Lines. jurisdiction over a special civil action for certiorari assailing an
In addition to the taxes purportedly due from private respondents interlocutory order issued by the RTC in a local tax case to which the
pursuant to the Revised Revenue Code of Manila, said assessment Court rules in the affirmative. As culled from RA 1125, the law that
covered the local business taxes petitioners were authorized to collect. created the CTA, and RA 9282 expanding the jurisdiction of the CTA,
Because payment of the taxes assessed was a precondition for the while it is clearly stated that the it has exclusive appellate jurisdiction over
issuance of their business permits, private respondents were constrained decisions, orders or resolutions of the RTCs in local tax cases originally
to pay the P19,316,458.77 assessment under protest. decided or resolved by them in the exercise of their original or appellate
jurisdiction, there is no categorical statement under RA 1125 as well as
• Private respondents then filed in the RTC of Pasay the complaint the amendatory RA 9282, which provides that the CTA has jurisdiction
denominated as one for "Refund or Recovery of Illegally and/or over petitions for certiorari assailing interlocutory orders issued by the
Erroneously-Collected Local Business Tax, Prohibition with Prayer to RTC in local tax cases filed before it.
Issue TRO and Writ of Preliminary Injunction" before the public
respondent’s sala. The RTC granted the writ of preliminary injunction. To • Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that
this granting of injunction (Injunction Order) petitioners filed an MR which judicial power shall be vested in one Supreme Court and in such lower
was denied hence they filed a Rule 65 to CA. courts as may be established by law and that judicial power includes the
duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether against interlocutory orders of the RTC but giving to the CTA the
or not there has been a grave abuse of discretion amounting to lack or jurisdiction over the appeal from the decision of the trial court in the same
excess of jurisdiction on the part of any branch or instrumentality of the case. It is more in consonance with logic and legal soundness to conclude
Government. that the grant of appellate jurisdiction to the CTA over tax cases filed in
and decided by the RTC carries with it the power to issue a writ of
• On the strength of the above constitutional provision, it can be fairly certiorari when necessary in aid of such appellate jurisdiction. The
interpreted that the power of the CTA includes that of determining supervisory power or jurisdiction of the CTA to issue a writ of certiorari in
whether or not there has been grave abuse of discretion amounting to aid of its appellate jurisdiction should co-exist with, and be a complement
lack or excess of jurisdiction on the part of the RTC in issuing an to, its appellate jurisdiction to review, by appeal, the final orders and
interlocutory order in cases falling within the exclusive appellate decisions of the RTC, in order to have complete supervision over the acts
jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional of the latter.
mandate, is vested with jurisdiction to issue writs of certiorari in these
cases. CLARK INVESTORS AND LOCATORS ASSOCIATION vs
SECRETARY OF FINANCE (Lim, J.)
• Now, if the SC were to sustain petitioners' contention that jurisdiction over [G.R. No. 200670; July 6, 2006]
their certiorari petition lies with the CA, this Court would be confirming the “Magreklamo ka sa taong may paki.”
exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter – precisely the split-jurisdiction
Recit-Ready:
situation which is anathema to the orderly administration of justice.
Facts: Congress enacted RA No. 7227 which provides for the creation of the Subic
Special Economic Zone and was given an in-lieu of all taxes provision.
• The Court cannot accept that such was the legislative motive, especially
Congress also enacted RA No. 9400 which extended the benefits under RA
considering that the law expressly confers on the CTA, the tribunal with
No. 7227 to the Clark Freeport Zone. On February 17, 2012, the DOFissued
the specialized competence over tax and tariff matters, the role of judicial
RR 2-2012 which imposed VAT and excise tax on the importation of
review over local tax cases without mention of any other court that may
petroleum and petroleum products from abroad and into the Freeport or
exercise such power. Thus, the Court agrees with the ruling of the CA
Economic Zones. Petitioner, which represents the businesses and
that since appellate jurisdiction over private respondents' complaint for
enterprises within the Clark Freeport Zone, filed a petition for certiorari
tax refund is vested in the CTA, it follows that a petition for certiorari
alleging that respondents acted with grave abuse of discretion in issuing
seeking nullification of an interlocutory order issued in the said case
RR 2-2012. It argues that by imposing the VAT and excise tax on the
should, likewise, be filed with the same court. To rule otherwise would
importation of petroleum and petroleum products from abroad and into the
lead to an absurd situation where one court decides an appeal in the main
Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax
case while another court rules on an incident in the very same case.
exemption granted by RA No. 7227 and RA No. 9400 to the businesses and
enterprises operating within the Subic Special Economic Zone and Clark
• Stated differently, it would be somewhat incongruent with the pronounced
Freeport Zone.
judicial abhorrence to split jurisdiction to conclude that the intention of the
law is to divide the authority over a local tax case filed with the RTC by
Issue/s:
giving to the CA or this Court jurisdiction to issue a writ of certiorari
WON SC has jurisdiction over the petition filed? NO.
• On March 2012, petitioner, which represents the businesses and

Held: In ruling for respondents, the court held it was an improper remedy. enterprises within the CFZ, filed the instant petition alleging that
First, the BIR did not act in any judicial or quasi-judicial capacity. respondents acted with grave abuse of discretion in issuing RR 2-2012.
RR2-2012 was issued based on its rule-making powers. Second, o It argues that by imposing the VAT and excise tax on the importation
though it was a petition for certiorari, it was actually a petition for of petroleum and petroleum products from abroad and into the
declaratory relief which is the exclusive jurisdiction of RTC. Lastly, Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax
though the SC, CA and RTC has concurrent jurisdiction to issue exemption granted by RA No. 7227 and RA No. 9400 to the
writs of certiorari, prohibition, mandamus, quo warranto, habeas businesses and enterprises operating within the SSEZ and CFZ.
corpus and injunction, such concurrence does not give the • Respondents, through the OSG, contend that the petition must be denied
petitioner unrestricted freedom of choice of court forum. § The outright because the petition for certiorari cannot be used to assail RR 2-
Court shall not entertain a direct resort to this Court unless the 2012 which was issued by the respondents in the exercise of their quasi-
remedy cannot be obtained in the appropriate courts, and legislative or rule-making powers.
exceptional and compelling circumstances justify the availment of o The OSG invokes the doctrine of hierarchy of courts.
the extraordinary remedy of writ of certiorari. o Finally, the OSG points out that RR2-2012 allows the businesses and
enterprises operating within the SSEZ and CFZ to claim for a tax
refund upon submission of competent proof that they used the
Facts: imported fuel exclusively within the SSEZ and CFZ.
• On March 1992, Congress enacted RA No. 7227 which mandated the o Thus, the OSG claimed that RR 2-2012 is consistent with RA No.
accelerated conversion of the Clark and Subic military reservations into 7227 and RA No. 9400.
special economic zones. Issue/s:
• Section 12 thereof provides for the creation of the Subic Special Economic WON the SC has jurisdiction over the petition filed? -- NO.
Zone (SSEZ).
• Based on Section 12 (c), in lieu of national and local taxes, all businesses Held/Ratio:
and enterprises operating within the SSEZ shall pay a preferential gross NO. The Court denies the petition for being an improper remedy.
income tax rate of five percent (5%). o For a special civil action for certiorari to prosper, the following
• Meanwhile, Congress enacted RA No. 9400 which extended the requisites must concur:
aforementioned tax and fiscal incentives under RA No. 7227 to the Clark (1) it must be directed against a tribunal, board, or officer
Freeport Zone (CFZ). exercising judicial or quasi-judicial functions;
• Thus, the businesses and enterprises within the CFZ are similarly exempt (2) the tribunal, board, or officer must have acted without or in
from the payment of all taxes and duties on the importation of raw materials, excess of jurisdiction or with grave abuse of discretion amounting
capital and equipment. to lack or excess of jurisdiction; and
• On February 2012, the DOF, upon recommendation of the BIR, issued RR (3) there is no appeal or any plain, speedy, and adequate remedy
2-2012 which imposed VAT and excise tax on the importation of petroleum in the ordinary course of law.
and petroleum products from abroad and into the Freeport or Economic
Zones.- o Firstly, BIR did not act in any judicial or quasi-judicial capacity.
§ BIR issued RR 2-2012 in the exercise of their quasi-legislative or had to be remanded or referred to the lower court as the proper
rule-making powers, and not judicial or quasi-judicial functions. forum under the rules of procedure, or as better equipped to
§ Respondents did not adjudicate or determine the rights of the resolve the issues because this Court is not a trier of facts.
parties. § The Court shall not entertain a direct resort to this Court
§ To determine whether a Revenue Regulation is quasi-legislative unless the remedy cannot be obtained in the appropriate
in nature, we must examine the legal basis of the Secretary of courts, and exceptional and compelling circumstances justify
Finance in the issuance thereof. the availment of the extraordinary remedy of writ of certiorari.
§ In BPI Leasing Corporation v. CA, the Court ruled that RR 19-86 § In Chamber of Real Estate and Builders Association, Inc.
was quasi-legislative in nature because it was issued by the (CREBA) v. Secretary of Agrarian Reform, the Court provided
Secretary of Finance in the exercise of his rule-making powers examples of such exceptional and compelling circumstances:
under Section 244 of the NIRC (a) Chavez v. Romulo, on citizens' right to bear anus;
§ In the same way, RR 2-2012 is based on Section 244, and is (b) Government of [the] United States of America v. Hon.
therefore quasi-legislative in nature which is outside the scope of Purganan, on bail in extradition proceedings;
a petition for certiorari. (c) Commission on Elections v. Judge Quijano-Padilla, on
government contract involving modernization and
o Secondly, though it is a petition for certiorari, it actually seeks the computerization of voters' registration list;
declaration of the unconstitutionality and illegality of the questioned (d) Buklod ng Kawaning EIIB v. Hon. Sec. Zamora, on status
rule. and existence of a public office; and
§ In reality, it is of one for declaratory relief over which this Court has (e) Hon. Fortich v. Hon. Corona, on the so-called "Win-Win
only appellate, not original, jurisdiction. Resolution" of the Office of the President which modified the
§ This Court does not have original jurisdiction over a petition for approval of the conversion to agro-industrial area.
declaratory relief even if only questions of law are involved. § In the case at bar, petitioner failed to allege such exceptional and
§ The special civil action of declaratory relief falls under the compelling circumstances which justify a direct resort to this
exclusive jurisdiction of the RTC. Court.
§ The Rules of Court is explicit that such action shall be brought § In view of the serious procedural and technical defects of the
before the appropriate Regional Trial Court. petition, there is no need for this Court to resolve the other issues
raised by the petitioner.
o Lastly, although this Court, the CA and the RTC have concurrent
jurisdiction to issue writs of certiorari, prohibition, mandamus, quo CIR v. CBK POWER COMPANY LIMITED (Lim, Q.)
warranto, habeas corpus and injunction, such concurrence does not [GR. No. 20305455 ; July 29, 2015]
give the petitioner unrestricted freedom of choice of court forum. “CTA En Banc has jurisdiction over final order or judgment but not over
§ The rationale for this rule is two-fold: interlocutory orders issued by the CTA in division.”
(1) it would be an imposition upon the precious time of this Court;
and Recit-Ready:
(2) it would cause an inevitable and resultant delay, intended or Facts: Private respondent, CBK Power Company Limited (“CBK”), is a
otherwise, in the adjudication of cases, which in some instances special purpose entity. Petitioner is the duly appointed
Commissioner of Internal Revenue. CBK filed with the CTA a in division. As no appeal can be taken from the questioned order
judicial claim for the issuance of a tax credit certificate. After to declare in default, Petitioner’s filing of the instant petition for
various procedural aspects, the CTA issued the first assailed certiorari with the Supreme Court is in conformity with the rules.
Resolution, allowing the petitioner to present its evidence ex (*As a general rule, decisions of the CTA in division are still only
parte. Respondent was ordered to file its comment on the motion appealable to the CTA en banc and not to the Supreme Court.)
to lift order of default but failed to do so. Petitioner filed a motion
for reconsideration on April 27, 2012. The CTA directed private Facts:
respondent to file its Comment thereto but failed to do so. CTA • Private respondent, CBK Power Company Limited (“CBK”), is a special
issued the second assailed Resolution denying the motion to lift purpose entity engaged in all aspects of
order of default stating Section 5 of Rule 18 of the Revised Rules (1) design, financing, construction, testing, commissioning, operation,
of Court. Petitioner filed a motion for reconsideration, which the maintenance, management, and ownership of Kalayaan II pumped
respondent denied. CBK claims that petitioner chose an storage hydroelectric power plant, the new Caliraya Spillway in
erroneous remedy when it filed a petition for certiorari with the Laguna; and
Supreme Court since the proper remedy on any adverse (2) the rehabilitation, expansion, commissioning, operation,
resolution of any division of the CTA is an appeal by way of a maintenance and management of the Caliraya, Botocan, and
petition for review with the CTA En Banc. Kalayaan I hydroelectric power plants and their related facilities in
Laguna.
Issue/s: • Petitioner is the duly appointed Commissioner of Internal Revenue vested
with authority to act as such, inter alia, the power to decide, approve and
WON an interlocutory order (Order of Default) issued by a division grant refunds or tax credit of erroneously or illegally collected internal
of the CTA be brought directly on certiorari to the Supreme Court revenue taxes as provided by law.
even without appealing the same to the CTA en banc? • On March 30, 2011, CBK filed with the CTA a judicial claim for the
—YES issuance of a tax credit certificate in the amount of P17,784,968.91,
representing unutilized input taxes on its local purchases and importations
Held: YES. It is clear that the CTA En Banc has jurisdiction over final of goods other than capital goods, local purchases of services, payment of
order or judgment but not over interlocutory orders issued by services rendered by nonresidents, including unutilized amortized input
the CTA in division. Given the differences between a final taxes on capital goods exceeding one million for the period of January 1,
judgment and an interlocutory order, there is no doubt that the CTA 2009 to March 31, 2009, all attributable to zerorated sales for the same
Order dated December 23, 2011 granting private respondent’s period.
motion to declare petitioner as in default and allowing respondent o The case was docketed as CTA Case No. 8246.
to present its evidence ex parte, is an interlocutory order as it did • On May 30, 2011, petitioner received summons requiring it to answer.
not finally dispose of the case on the merits but will proceed Petitioner complied and filed the Answer.
for the reception of the former’s evidence to determine its • Petitioner then received a notice of pretrial conference set on July 21, 2011.
entitlement to its judicial claim for tax credit certificates. Petitioner filed its pretrial brief.
The CTA en banc has clear jurisdiction over final orders or • Earlier, CBK filed another judicial claim for the issuance of a tax credit
judgments but not over interlocutory orders issued by the CTA certificate in the amount of P31,680,290.87.
o The case was docketed as CTA Case No. 8302. • Petitioner filed a motion for reconsideration on April 27, 2012. The CTA
• Subsequently, CBK filed a motion for consolidation and postponement directed private respondent to file its Comment thereto but failed to do so.
of the pretrial conference scheduled for CTA Case No. 8246. • In a Resolution dated June 13, 2012, the CTA denied the motion for
• On July 19, 2011 petitioner received summons requiring it to answer the reconsideration.
petition for review. Petitioner’s lawyer, filed his Answer. • CBK claims that petitioner chose an erroneous remedy when it filed
• The pretrial conference for CTA Case No. 8302 was set on September 29, a petition for certiorari with the Supreme Court since the proper
2011. Thus, private respondent filed a motion for consolidation and remedy on any adverse resolution of any division of the CTA is an
postponement of the pretrial conference for CTA Case No. 8302.   appeal by way of a petition for review with the CTA En Banc.
• In a Resolution dated October 14, 2011, the CTA granted the motion for • It claims that it is what is provided under Section 2(a)(1) of Rule 4 of the
consolidation and set the pretrial conference on November 3, 2011. Revised Rules of the Court of Tax Appeals (RRCTA) that the Court En
• Atty. Mauricio failed to appear at the scheduled pretrial conference as he Banc shall exercise exclusive appellate jurisdiction to review by appeal the
was on leave for health reasons from October to December 2011. decision or resolutions on motions for reconsideration or new trial of the
• The pretrial was reset to December 1, 2011. Petitioner’s counsel, Atty. Court in division in the exercise of its exclusive appellate jurisdiction over
Sandico, who was then assigned to handle the consolidated cases, filed cases arising from administrative agencies such as the Bureau of Internal
his consolidated pretrial brief on November 15, 2011. However, on the Revenue.
December 1, 2011 pretrial conference, Atty. Sandico failed to appear, thus
private respondent moved that petitioner be declared in default. Issue/s:
• On December 23, 2011, the CTA issued the first assailed Resolution, WON an interlocutory order (Order of Default) issued by a division of the
allowing the petitioner to present its evidence ex parte. CTA be brought directly on certiorari to the Supreme Court even without
• On January 6, 2012, petitioner filed a Motion to Lift Order of Default alleging appealing the same to the CTA en banc?
that the failure to attend the pretrial conference on November 3, 2011 was —YES
due to confusion in office procedure in relation to the consolidation of CTA
Case No. 8246 with CTA Case No. 8302 since the latter was being handled Held/Ratio: WHEREFORE, the petition for certiorari is GRANTED.
by a different lawyer; that when the pretrial conference was reset to
December 1, 2011, petitioner’s counsel, Atty. Sandico, had to attend the YES. It is clear that the CTA En Banc has jurisdiction over final order or
hearing of another case in the CTA’s First Division also at 9:00 a.m., hence, judgment but not over interlocutory orders issued by the CTA in division.
he unintentionally missed the pretrial conference of the consolidated o Although the filing of a petition for review with the CTA En Banc from a
cases. decision, resolution, or order of the CTA Division, was newly made
• Respondent was ordered to file its comment on the motion to lift available to the CTA, such mode of appeal has long been available in
order of default but failed to do so. Philippine courts of general jurisdiction. Hence, the Revised CTA Rules
• On April 19, 2012, the CTA issued the second assailed Resolution no longer elaborated on it but merely referred to existing rules of
denying the motion to lift order of default stating Section 5 of Rule 18 procedure on petitions for review and appeals
of the Revised Rules of Court.4

4
Sec. 5. Effect of failure to appear.—The failure of the plaintiff to appear when so required the part of the defendant shall be cause to allow the plaintiff to present his evidence ex
pursuant to the next preceding section shall be cause for dismissal of the action. The parte and the court to render judgment on the basis thereof.
dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on
o According to the Rules of Court,5 the petition for review to be filed with
the CTA En Banc as the mode for appealing a decision, resolution, or SMART COMMUNICATIONS, INC. VS. MUNICIPALITY OF
order of the CTA Division, under Section 18 of Republic Act No. 1125, MALVAR (LUNA)
as amended, is not a totally new remedy. [GR. No. 204429; February 18, 2014]
o To the contrary, the CTA merely adopts the procedure for petitions for “CTA has no jurisdiction over a decision of the RTC involving regulatory fees.”
review and appeals long established and practiced in other Philippine
courts. Accordingly, doctrines, principles, rules, and precedents laid Recit-Ready:
down in jurisprudence by this Court as regards petitions for review and
Facts: Petitioner received a closure order from the Respondent for the
appeals in courts of general jurisdiction should likewise bind the CTA, non-payment of dues arising out of an ordinance regulating the
and it cannot depart therefrom. establishment of special projects, which included Petitioner’s
o Given the differences between a final judgment and an interlocutory
telecommunications tower. Petitioner protested and upon denial of
order, there is no doubt that the CTA Order dated December 23, 2011 the protest appealed the same to the Regional Trial Court of
granting private respondent’s motion to declare petitioner as in default Tanauan questioning as well the validity of the ordinance.
and allowing respondent to present its evidence ex parte, is an
Thereafter, Petitioner appealed the RTC’s decision to the CTA
interlocutory order as it did not finally dispose of the case on the which dismissed the same for lack of jurisdiction claiming that it
merits but will proceed for the reception of the former’s evidence cannot resolve cases where the constitutionality of a law or rule is
to determine its entitlement to its judicial claim for tax credit
challenged.
certificates.
o Even the CTA’s subsequent orders denying petitioner’s motion to lift Issue/s:
order of default and denying reconsideration thereof are all interlocutory
Does the CTA have jurisdiction over a decision of the RTC on a purported
orders since they pertain to the order of default. tax case?
o Since the CTA Orders are merely interlocutory, no appeal can be
taken therefrom. Hence, petitioner’s filing of the instant petition
Held:
for certiorari assailing the interlocutory orders issued by the CTA NO. The primary reason for the CTA’s lack of jurisdiction is that what was
is in conformity with the above quoted provision. imposed under the questioned ordinance are not taxes but are instead

5
RULE 7  PROCEDURE IN THE COURT OF TAX APPEALS RULE 9 PROCEDURE IN CRIMINAL CASES
SEC. 1. Applicability of the Rules of the Court of Appeals.— The procedure in the Court En SEC. 1. Review of cases in the Court.—The review of criminal cases in the Court En Banc
Banc or in Divisions in original and in appealed cases shall be the same as those in or in Division shall be governed by the applicable provisions of Rule 124 of the Rules of
petitions for review and appeals before the Court of Appeals pursuant to the applicable Court.
provisions of Rules 42, 43, 44 and 46 of the Rules of Court, except as otherwise provided
for in these Rules. SEC. 9. Appeal; period to appeal.—
(b) An appeal to the Court En Banc in criminal cases decided by the Court in Division shall
RULE 8 PROCEDURE IN CIVIL CASES be taken by filing a petition for review as provided in Rule 43 of the Rules of Court within
SEC. 4. Where to appeal; mode of appeal.— fifteen days from receipt of a copy of the decision or resolution appealed from. The Court
(b) An appeal from a decision or resolution of the Court in Division on a motion for may, for good cause, extend the time for filing of the petition for review for an additional
reconsideration or new trial shall be taken to the Court by petition for review as provided in period not exceeding fifteen days.
Rule 43 of the Rules of Court. The Court En Banc shall act on the appeal.
regulatory fees, specifically to address the environmental depredation of the Republic Act No. 7925 which provides that the NTC, in the exercise
said special projects. As such, the case that originated from the RTC is not of its regulatory powers, shall impose such fees and charges as may
considered a local tax case over which the CTA has jurisdiction. be necessary to cover reasonable costs and expenses for the
regulation and supervision of the operations of telecommunications
Facts: entities. Thus, Smart alleges that the regulation of
• Smart constructed a telecommunications tower within the territorial telecommunications entities and all aspects of its operations is
jurisdiction of the Municipality. The construction of the tower was for the specifically lodged by law on the NTC.
purpose of receiving and transmitting cellular communications within the • Malvar’s arguments:
covered area. o Said Ordinance is not a tax ordinance but a regulatory fee imposed to
• On 30 July 2003, the Municipality passed Ordinance No. 18, series of 2003, regulate the “placing, stringing, attaching, installing, repair and
entitled "An Ordinance Regulating the Establishment of Special Projects." construction of all gas mains, electric, telegraph and telephone wires,
• On 24 August 2004, Smart received from the Permit and Licensing Division conduits, meters and other apparatus, and provide for the correction,
of the Office of the Mayor of the Municipality an assessment letter with a condemnation or removal of the same when found to be dangerous,
schedule of payment for the total amount of P389,950.00 for Smart’s defective or otherwise hazardous to the welfare of the inhabitant.
telecommunications tower. Due to the alleged arrears in the payment of o It was also envisioned to address the foreseen "environmental
the assessment, the Municipality also caused the posting of a closure depredation" to be brought about by these "special projects" to the
notice on the telecommunications tower. Municipality. Pursuant to these objectives, the Municipality imposed
• On 9 September 2004, Smart filed a protest, claiming lack of due process fees on various structures, which included telecommunications
in the issuance of the assessment and closure notice. In the same protest, towers.
Smart challenged the validity of Ordinance No. 18 on which the o The fees are not imposed to regulate the administrative, technical,
assessment was based. financial, or marketing operations of telecommunications entities,
• In a letter dated 28 September 2004, the Municipality denied Smart’s such as Smart’s; rather, to regulate the installation and maintenance
protest. of physical structures – Smart’s cell sites or telecommunications
• RTC partially granted Smart’s petition, but did not rule on the legality of tower.
Ordinance No. 18. It declared that Smart is only liable for fees starting
October 1, 2003, and null and void insofar as the assessment made from Issue/s:
2001 to 2003. MR denied. CTA denied. CTA MR also denied. CTA en banc 5) WON the fees are taxes
denied. CTA en banc likewise denied. —NO
• SMART’s arguments: 6) WON CTA should have take cognizance of the case.
o CTA erred in refusing to take cognizance of the case and for -- NO
dismissing the case for lack of jurisdiction considering the “unique” 7) WON the fees are unjust and unreasonable.
factual circumstances involved. —NO
o The fees imposed in Ordinance No. 18 are actually taxes since they
are not regulatory but rather, revenue-raising. Held/Ratio: Petition DENIED.
o Municipality is encroaching on the regulatory powers of the National
Telecommunications Commission (NTC). Smart cites Section 5(g) of 1) NO. The fees are NOT taxes.
o Since the main purpose of Ordinance No. 18 is to regulate certain i) Barangay Council Resolution endorsing the special projects.
construction activities of the identified special projects, which included • SECTION 6. Requirement for Final Development Permit – Upon
"cell sites" or telecommunications towers, the fees imposed in the expiration of 180 days and the proponents of special projects
Ordinance No. 18 are primarily regulatory in nature, and not primarily shall apply for final [development permit] and they are require[d]
revenue-raising. While the fees may contribute to the revenues of the to submit the following:
Municipality, this effect is merely incidental. Thus, the fees imposed in a) evaluation from the committee where the Vice Mayor refers the
Ordinance No. 18 are not taxes. special project
o Progressive Development Corporation v. Quezon City: if the generating b) Certification that all local fees have been paid.
of revenue is the primary purpose and regulation is merely incidental,
the imposition is a tax; but if regulation is the primary purpose, the fact o Even if the fees do not appear in Section 143 or any other provision in
that incidentally revenue is also obtained does not make the imposition the LGC, the Municipality is empowered to impose taxes, fees and
a tax. charges, not specifically enumerated in the LGC or taxed under the Tax
o Victorias Milling Co., Inc. v. Municipality of Victorias: the purpose and Code or other applicable law according to Section 186 of the LGC. Thus
effect of the imposition determine whether it is a tax or a fee, and that they don’t encroach on NTC’s powers.
the lack of any standards for such imposition gives the presumption that
the same is a tax.
o Ordinance No. 18 expressly provides for the standards which Smart 2) NO. CTA correctly refused to take cognizance of the case.
must satisfy prior to the issuance of the specified permits, clearly o Considering that the fees in Ordinance No. 18 are not in the nature of
indicating that the fees are regulatory in nature. These requirements local taxes, and Smart is questioning the constitutionality of the
are as follows: ordinance, the CTA correctly dismissed the petition for lack of
• SECTION 5. Requirements and Procedures in Securing jurisdiction. Likewise, Section 187 of the LGC, which outlines the
Preliminary Development Permit. procedure for questioning the constitutionality of a tax ordinance, is
The following documents shall be submitted to the SB Secretary inapplicable, rendering unnecessary the resolution of the issue on non-
in triplicate: exhaustion of administrative remedies.
a) zoning clearance
b) Vicinity Map 3) NO.
c) Site Plan o An ordinance carries with it the presumption of validity. The question
d) Evidence of ownership of reasonableness though is open to judicial inquiry. Much should be
e) Certificate true copy of NTC Provisional Authority in case of left thus to the discretion of municipal authorities. Courts will go slow
Cellsites, telephone or telegraph line, ERB in case of gasoline in writing off an ordinance as unreasonable unless the amount is so
station, power plant, and other concerned national agencies excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
f) Conversion order from DAR is located within agricultural zone. confiscatory. A rule which has gained acceptance is that factors
g) Radiation Protection Evaluation. relevant to such an inquiry are the municipal conditions as a whole and
h) Written consent from subdivision association or the residence the nature of the business made subject to imposition.
of the area concerned if the special projects is located within the o To justify the nullification of the law or its implementation, there must
residential zone. be a clear and unequivocal, not a doubtful, breach of the Constitution.
In case of doubt in the sufficiency of proof establishing 3. WON petitioner can still assess taxes under the tax ordinances?-
unconstitutionality, the Court must sustain legislation because "to -NO
invalidate [a law] based on xx x baseless supposition is an affront to 4. WON the enforcement of the tax ordinance amounted to double
the wisdom not only of the legislature that passed it but also of the taxation?--YES
executive which approved it." This presumption of constitutionality can
be overcome only by the clearest showing that there was indeed an Held:
infraction of the Constitution, and only when such a conclusion is 1. YES. When the petitioners filed their Petition for Review on 30
reached by the required majority may the Court pronounce, in the May 2007, it was still within the reglementary period as it was
discharge of the duty it cannot escape, that the challenged act must within the 15-days extendable period from the original 30-day
be struck down. period within which such a Petition could be filed.
2. YES. The Coca-Cola case is applicable to the instant case.
CITY OF MANILA V. COCA-COLA BOTTLERS PHILIPPINES, 3. NO. The tax ordinances were declared null and void and cannot
INC. (Pascual) have any legal effect. The amendments to the tax ordinances,
[GR. No. 181845; August 4, 2009] likewise, could not be said to have cured the defects as there was
“To appeal an adverse decision or ruling of the RTC to the CTA, the taxpayer legally nothing to cure.
must file a Petition for Review with the CTA within 30 days of said adverse 4. YES. The enforcement would have amounted to double taxation.
decision, extendable by another 15 days as suppletorily provided by the Rules
of Court” Facts:
• Prior to 25 February 2000, Coca-cole had been paying the City of Manila
Recit-Ready: local business taxes only under Sec 14 of Tax Ordinance 7794 as it was
Facts: The City of Manila assessed Coca-Cola deficiency taxes on the expressly exempted from the business tax.
basis of local tax ordinances. However, in a separate case, these • On 25 February 2000, however, the City of Manila approved Tax Ordinance
ordinances were declared null and void by the Supreme Court. 7988—later amended by Tax Ordinance 8011—which amended certain
Coca-Cola filed an action with the RTC of Manila, seeking the sections of Tax Ordinance 7794, particularly by deleting the proviso found
cancellation of the assessment and an adverse decision was therein, which stated that “all registred businesses in the City of Manila that
rendered against the City of Manila. The City of Manila attempted are already paying the aforementioned (business) tax shall be exempted
to file a Pettion for Review with the CTA, but the same was from payment thereof.”
dismissed for allegedly being filed beyond the reglementary period. o The ordinances, however, were later declated null and void
by the Supreme Court in another case. (Coca-cola v. City of
Issue/s: Manila)
1. WON petitioners substantially complied with the reglementary o There, it was found that Tax Ordinance 7988 was enacted in
period to timely appeal the case for review before the CTA? (Main contravention of the provisions of the Local Government
Issue)—YES for the period but they still messed up procedurally by Code and [2] Tax Ordinance 8011 could not cure the defects
not submitting all the required attachments. of 7988, which was null and void.
2. WON the ruling of the SC in the earlier Coca-Cola Case is • Before the Court rendered the abovementioned decision, though,
doctrinal and controlling in the instant case?--YES petitioner assessed respondent on the basis of the ordinances for
deficiency local business taxes, penalties, and interest, in the total 15-days extendable period from the original 30-day period within
amount of P18, 583, 932.04. which such a Petition could be filed.
o Respondent filed a protest on the ground that the • Under RA 9282, to appeal an adverse decision or ruling of the RTC
assessment amounted to double taxation. to the CTA, the taxpayer must file a Petition for Review with the CTA
• When petitioner did not respond to the protest, they filed an action with within 30 days of said adverse decision or ruling.
the RTC of Manila an action for the cancellation of the assessment. o Though the same provision is silent as to whether such 30-
o Initially, the RTC dismissed the case, finding that there was day period can be extended or not, the law does provide that
no double taxation, but later granted the motion for the Petition for Review shall be filed with the CTA following
reconsideration. the procedure analogous to Rule 42 of the Revised Rules of
o The latter ruling of the RTC was in conformity with the ruling Civil Procedure.
of the SC in the other Coca-Cola case. § This rule provides that the Petition for Review must
• Take Note of these dates: be filed with the Court of Appeals within:
o 20 April 2007—petitioners received a copy of the adverse • The original 15-dau period from receipt of
order of the RTC the judgment or final order to be appealed;
o 4 May 2007—petitioners filed a Motion for Extension, • An extended period of 15 days from the
grounded on the belief that the reglementary period for filing lapse of the original period; and
their Petition was to expire on 5 May 2007 • Only for the most compelling reasons,
o 18 May 2007—petitioners filed a Motion for Extention of time, another extended period not to exceed 15
prior to the lapse of the 30-day period days from the lapse of the first extended
• The CTA, dismissed the Petition for Review on procedural grounds, period.
deciding that the same was filed beyond the reglementary period. • Following the abovementioned rules, the 30-day original period for
Issue/s: filing a petition for review with the CTA may be extended for a period
1. WON petitioners substantially complied with the reglementary of 15 days and no further extension shall be allowed thereafter,
period to timely appeal the case for review before the CTA? (Main except only for the most compelling reasons, in which case the
Issue)—YES for the period but they still messed up procedurally by not extended period shall not exceed 15 days.
submitting all the required attachments. • In this case, then, the CTA did err in finding that petitioners failed
2. WON the ruling of the SC in the earlier Coca-Cola Case is doctrinal to file their Petition for Review within the reglementary period.
and controlling in the instant case? o Quick Recap of the Timeline of Events:
3. WON petitioner can still assess taxes under the tax ordinances? § 20 April 2007—petitioners received a copy of the
4. WON the enforcement of the tax ordinance amounted to double adverse order of the RTC; thus petitioners had 30
taxation? days (until 20 May 2007) within which to file their
Petition for Review.
Held/Ratio: Petition for Review is hereby DENIED. § 4 May 2007—petitioners filed a Motion for
Extension, grounded on the belief that the
1. YES. When the petitioners filed their Petition for Review on 30 May reglementary period for filing their Petition was to
2007, it was still within the reglementary period as it was within the expire on 5 May 2007 (15 days after receipt of the
adverse decision)—This motion was superfluous o In this case, the Petition for Review consisted only of 1 copy
and unnecessary as it was still within the and all the attachments thereto were merely machine copies.
original 30 day period. § Thus the SC sustained the CTA’s dismissal in this
§ 18 May 2007—petitioners filed a Motion for regard.
Extention of time, prior to the lapse of the 30-day 2. YES. The Coca-Cola case is applicable to the instant case. (Putting
period—Should have been granted by the CTA the discussions for 2-4 under here because the SC only discussed
as, in reality, this was only their first Motion for these issues briefly after getting through the procedural matters.)
Extension of Time. • Petitioner’s argument that the other Coca-Cola case cannot apply to
o Thus, when the petitioners filed their Petition for Review the instant case simply cannot stand as the pivotal issue in that case
with the CTA on 30 May 2007, they were able to comply was whether the Tax Ordinances were null and void, which the Court
with the reglementary period for filing such a petition. resolved that they were.
§ Original 30-day period: Ends on May 20, 2007. o Thus, said Tax Ordinances could not have any legal effect.
§ Motion for Extension of Time was filed on May 18, o The City of Manila never appealed from that decision and so
2007. (Still within the 30-day period and SHOULD the same attained finality after the lapse of the period for
have been granted by the CTA) appeal of the same.
§ Date when Petition for Review was filed: 30 May o Tax Ordinance 8011, which amended Tax Ordinance 7988,
2007. (30-Day Period + 10-Day Extension = Pasok did not cure the effects of the latter as, since it was null and
sa reglementary period yay) void, there was legally nothing to cure—it did not exist.
• However, there were other procedural reasons for which the CTA o As such, respondent cannot be taxed under any of these
dismissed the Petition for Review. ordinances.
o The Revised Rules of the CTA requires that: • Petitioners tried to make an argument that they could still tax the
§ The parties shall file 11 signed copies of every paper respondents under the original tax ordinance but under the original
for cases before the Court en banc and 6 signed ordinance, the respondents were expressly exempted from the
copies for cases before a Division of the Court in payment of the local business taxes imposed by the ordinance.
addition to the signed original copy; • Furthermore, if they were to be taxed under the original tax ordinance,
§ A clearly legible duplicate original or certified true as it was worded before all the amendments, such would indeed
copy of the decision appealed from shall be amount to double taxation.
attached to the petition. o Recall: For double taxation to be present, the two taxes must
o The Revised Rules of the CTA do not provide for the be imposed on the same subject matter,f or the same
consequences of non-compliance but the Rules of Court, purpose, by the same taxing authority, within the same
again, apply suppletorily. jurisdiction, during the same taxing period, and the taxes
§ Effect of Failure to comply with requirements—the must be of the same kind or character.
failure of the petitioner to comply with any of the o In this case and under the abovementioned test, the taxes
foregoing requirements…shall be sufficient ground that were sought to be imposed would have constituted
for the dismissal thereof. double taxation.
COMMISSIONER OF CUSTOMS v. MARINA SALES, INC. • The Valuation and Classification Review Committee (VCRC) reclassified
(Ocampo) the subject importations of respondent at 7% import duty rate. Respondent
[G.R. No. 183868; November 22, 2010] interposed a petition for review before the CTA. CTA Second Division ruled
“CTA En Banc: MagMR ka muna sa Division bago ka pumunta sakin.” in favor of respondent holding that its classification with 1% import duty rate
was the most appropriate and descriptive of the disputed importations.
Recit-Ready: • Petitioner disagreed with said decision and elevated the case to the CTA
Facts: The BOC examiners recommended to the VCRC the En Banc via a petition for review. However, the latter dismissed the petition
reclassification of the importations of respondent Marina from for failure to file the required Motion for Reconsideration before the CTA
being subject to 1% import duty rate to 7%. VCRC adopted such Second Division prior to elevating the case to CTA En Banc in accordance
recommendation. Respondent filed a petition for review before the with Section 1, Rule 8 of the Revised Rules of the Court of Tax Appeals.
CTA. Its Second Division ruled in favor of respondent. The
petitioner appealed the same to the CTA En Banc without filing a Issue:
prior MR before said Division. Thus, it dismissed the petition on WON the dismissal by the CTA En Banc on mere technicality will result
such ground in accordance with the Revised Rules of CTA. in injustice and unfairness to the petitioner —NO
Issue: WON the dismissal by the CTA En Banc on mere technicality will Held/Ratio: Wherefore, the petition is DENIED.
result in injustice and unfairness to the petitioner
No. Before the CTA En Banc could take cognizance of the petition for
Held: NO. Before the CTA En Banc could take cognizance of the petition review concerning a case falling under its exclusive appellate
for review concerning a case falling under its exclusive appellate jurisdiction, the litigant must sufficiently show that it sought prior
jurisdiction, the litigant must sufficiently show that it sought prior reconsideration or moved for a new trial with the concerned CTA
reconsideration or moved for a new trial with the concerned CTA division.
division. o The Court agreed with the CTA En Banc that the Commissioner failed
to comply with the mandatory provisions of Rule 8, Section 1 of the
Facts: Revised Rules of the Court of Tax Appeals requiring that the petition for
review of a decision or resolution of the Court in Division must be
• Respondent Marina Sales, Inc. is engaged in the manufacture of Sunquick
preceded by the filing of a timely motion for reconsideration or new trial
juice concentrates and usually imports raw materials into the country. In
with the Division. The word "must" clearly indicates the mandatory, not
the past the Bureau of Customs (BOC) assessed said type of importations
merely directory, nature of a requirement.
under Tariff Heading H.S. 2106.90 10 with a 1% import duty rate.
o The Court also held that procedural rules are not to be trifled with or be
• However, on March 6, 2003, the BOC examiners contested the tariff
excused simply because their non-compliance may have resulted in
classification made by the respondent and recommended to the Collector
prejudicing a party’s substantive rights. Rules are meant to be followed.
of Customs to reclassify respondent’s importation with a corresponding 7%
They may be relaxed only for very exigent and persuasive reasons to
import duty rate.
relieve a litigant of an injustice not commensurate to his careless non-
• Respondent executed an undertaking that it will pay when the
observance of the prescribed rules.
reclassification (i.e., from 1% to 7% import duty rate) is finally determined
as correct in order to prevent the withholding of its importations.
PHILIPPINE BRITISH ASSURANCE COMPANY INC. v. The BOC did not consider the case as one for tax collection. It
REPUBLIC OF THE PHILIPPINES (Ong) instituted a complaint for collection of money and not a tax collection
[GR. No. 185588; February 2, 2010] case. It also did not follow the proper prosecution of a tax collection
“It is the CA which has appellate jurisdiction over an action to collect on a bond case. The instant case is not a tax collection case, hence, the CA
used to secure the payment of taxes as is not a tax collection case but rather, has jurisdiction over the case.
a simple case for enforcement of a contractual liability.”
Facts:
Recit-Ready: • Philippine British Assurance Company Inc. is an insurance company
Facts: Philippine British Assurance Company is an insurance company existing under and by virtue of the laws of the Philippines.
that issues customs bonds to its clients in favor of the BOC. These • Petitioner issues customs bonds to its clients in favor of the BOC. These
bonds secure the release of imported goods in order that the goods bonds secure the release of imported goods in order that the goods may
may be released without prior payment of the customs duties and be released from the BOC without prior payment of the customs duties and
taxes. Under these bonds, petitioner and its clients jointly and taxes.
severally bind themselves to pay the BOC the face value of the o Under these bonds, petitioner and its clients jointly and
bonds in the event that they expire without either the imported severally bind themselves to pay the BOC the face value of
goods being re-exported or the proper duties and taxes being paid. the bonds, in the event that the bonds expire without either
The BOC filed a complaint against petitioner for collection of money the imported goods being re-exported or the proper duties
with damages before the RTC for outstanding unliquidated and taxes being paid.
customs bonds with the BOC. The RTC ruled in its favor. Petitioner • On Dec. 9, 2003, the Republic, represented by the BOC, filed a complaint
appealed to the CA which dismissed the case for lack of against petitioner for collection of money with damages before the RTC for
jurisdiction. According to the CA, it should have been filed with the outstanding unliquidated customs bonds with the BOC.
CTA since it is a tax collection case. • The RTC ruled in favor of the BOC. MR was denied.
• Petitioner appealed to the CA.
Issue/s: o The CA dismissed the case for lack of jurisdiction. It ruled
WON the CTA has jurisdiction over the case. that the instant case is a tax collection case and should be
filed with the CTA.
Held: No. An action to collect on a bond used to secure the payment • Petitioner:
of taxes is not a tax collection case but rather, a simple case for o In as much as Respondents right was initially based on its
enforcement of a contractual liability. right to collect duties and taxes, the same was converted to
a right arising out of a contract, the bond being a contract
The original complaint filed with the RTC was in the nature of a between Respondent and Petitioner.
collection case, purportedly to collect on the obligation of petitioner
by virtue of the bonds executed by it in favor of respondent, Issue/s:
essentially a contractual obligation. WON the CTA has jurisdiction over the case.
—NO
Held/Ratio: An action to collect a bond used to secure the payment of

taxes is not a tax collection case but rather, a simple case for
enforcement of a contractual liability.
NO.
o The original complaint filed with the RTC was in the nature of a
collection case, purportedly to collect on the obligation of petitioner by
virtue of the bonds executed by it in favor of respondent, essentially a
contractual obligation.
o In the Mambulao Lumber Company case, the court ruled that the
NIRC’s provisions on prescription are inapplicable to the case since the
action is based upon a surety bond and it cannot be considered a tax
collection case, rather, it is an action based on a contract.
o The instant case is not a tax collection case, hence, the CA has
jurisdiction over the case.
o The BOC did not consider the case as one for tax collection. It instituted
a complaint for collection of money and not a tax collection case. It also
did not follow the proper prosecution of a tax collection case.
o Certainly, the administrative agencies tasked with the prosecution of
cases within their specific area of concern should know the nature of
the action to be filed and the proper procedure by which they can collect
on liabilities to it. Here, the BOCs actions reveal its position that indeed
the case was not a tax collection case but an action for the enforcement
of a contractual obligation. Hence, appellate jurisdiction over the
petition properly lies with the CA and not the Court of Tax Appeals.

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MONTERO // 3A TAX DIGESTS

tax, withholding tax on compensation, expanded withholding tax and

and deductible. 1) NO. In order to be considered as “bad debts” and be allowed as

(1) The amount of the tax due on any return required to

taxpayer "may be modified, changed or amended" by the taxpayer

SECTION 5. Mode of Procedures in Computing for the Tax and/or

5.6 Computation of 20% interest per annum in case of partial or

No 25% surcharge on extended payment shall be imposed provided,

Illustration No. 2: Computation of tax delinquency in case of partial payment

The extra-judicial settlement of the taxpayer's criminal liability and the

SECTION 7. Repealing Clause. Any revenue issuance which is

8.1 General Rule. In general, the provisions of these Regulations shall be

Service to the tax agent/practitioner, who is appointed by the taxpayer

SECTION 3. Amendment. — Section 5 of RR 12-99 is hereby amended by

“5.5 Late payment of a deficiency tax assessed. – In general, the

Illustration 1: Based on the above Illustration No. 3, Scenario 4, assuming

SECTION 4. Repealing Clause. — Any rules and regulations or parts thereof

IV. REPEALING CLAUSE: ANNEX A

SEC. 272. Violation of Withholding Tax Provision. - Every officer or CHAPTER IV

examination, he discovered that the petitioner failed to report his income

1) YES. The respondent State Prosecutor, although believing that he can

! There was a willful attempt to evade tax in Ungad because of

PRESCRIPTION OF CRIMINAL ACTION Issue/s:

penalty. This was served on petitioners their final assessment through

when the case was indorsed to the Fiscal’s office on

smuggled and confiscated goods or One Million Pesos (P1,000,000)

settlement. Upon receipt of the approval from the Secretary of Finance

BUREAU OF INTERNAL REVENUE

I, ________________________________________, ______ years

Done this ___th day of ___________, 20___

POWER/REMEDY OF COLLECTION Republic Act No. 9282 (March 30 2004)

AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX

"b. Jurisdiction over cases involving criminal offenses as herein

When Tax lien in favor of the Government may arise:

Tax lien not valid against any

Held/Ratio: Petition GRANTED.

o On the other hand, other protested cases shall be handled by the

Group) than his family home

procedures embodied in the Revenue Memorandum Order issued

SECTION 5. PROCESSING TIME – The application for abatement or Amending RR No 13-2001

TO: All IR Offices, Employees and Others Concerned (a) Abatement

2) CIR DIGEST of RMO 20-2007

Prior to its approval/disapproval, application for compromise settlement shall

INJUNCTION I. LEGAL PROVISIONS

Under Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, no

This Order takes effect immediately. Section 218:

Revenue Memorandum Order No. 39-2007 issued on December 13, 2007

THE GUAGUA ELECTRIC LIGHT PLANT COMPANY, INC. v.

1) NO. The constitutionality of collecting franchise tax at the rate of 5%

Facts: o The provision enumerates all different claims which may be

o Therefore, the request for reinvestigation did not Recit-Ready:

Government had 5 years for bringing an action to collect ISSUE:

• The separate answer filed by the Globe Assurance Company, Inc.

o BIR issued another assessment against him because of the increase,

PHILIPPINE NATIONAL OIL COMPANY vs CA (Lim, J.)

has another three years after the assessment within which to

provided by law to collect the assessed tax. Thus, there is no reason

five-year period if the taxes assessed thereby cover taxable

Contractors’ tax on gross receipts imposed on business agents

o We affirm the CA‘s decision. A notice of assessment is:

24, 2002, and protested by it in a letter which reiterated in lengthy Held:

Held/Ratio: Petition GRANTED. The taxpayers shall be informed in writing of the

_____________________________________________________ require proof of payment of DST when respondent is claiming it is not

I, __________________________________, years

Done this _th day of _______, 20_