Abad v.

CTA

Facts: Armando L. Abad is engaged in business as a distiller and operates two (2)
alcohol distilleries, a bonded warehouse and bonded denaturing warehouse. the
Commissioner of Internal Revenue wrote a letter to Abad, assessing and demanding
sales tax and surcharge on the gross selling price of completely denatured alcohol
appellant Abad claims exemption from specific tax on the theory that the
mixing of denatured alcohol with other materials, resulting into rubbing
alcohol, varnish, bayrum, lacquer, etc., constitutes use in the arts or
industries, that is, frees the alcohol from tax under Section 128 of the Tax
Code

Issue: W/N liable to pay tax

Ruling: Yes B: The rule has to be so because a deficiency tax indicates non-
payment of the correct tax, and such deficiency exists not only from the
assessment thereof to pay the correct amount of tax when it should have been
paid; and the imposition thereof is mandatory even in the absence of fraud or
willful failure to pay the tax in full

We agree with the Tax Court that this claim of appellant is untenable. Under
the facts, as stipulated, what is used or is marketed for use in arts and
industries is not the denatured alcohol (as required by Section 128). Since it
loses its identity upon mixture or combination with other materials; what
comes into use is the resultant product, which is different from the
denatured alcohol itself.
CIR v. Reyes
Facts: In 1997, The Regional District Office of South Makati conducted an investigation
on the estate left by Maria C. Tancinco who died in 1993. Based on the old Tax Code, a
Letter of Authority was issued to Reyes, a heir, without the submission of preliminary
findings. In 1998, the CIR issued a Final Assessment Notice (FAN) demanding a
payment of 14.9M of taxes including surcharge and interest. The new Tax Reform Act
was also made effective in 1998. Reyes applied for compromise and paid 1M on Jan 29
2001.

In 2001, Reyes filed a motion that the assessment is settled through a perfected
compromise. CTA favored the CIR declaring that without the approval of NEB, the
compromise cannot be perfected. Therefore, CTA denied the petition and ordered
Reyes to pay the deficiency estate tax of 19.5M plus delinquency interest.

ISSUE: Whether or not the assessment against the estate is valid and whether the
compromise entered into is valid.

HELD: No. It is made clear and mandatory under Section 228 of the new Tax Code that
taxpayers shall be informed in writing of the law and the facts on which the assessment
is made, otherwise, the assessment is void. And a void assessment cannot be a basis
for a valid compromise.

B:The general rule is that statutes apply prospectively, However, statutes that are
remedial, or that do not create new or take away vested rights, do not fall under the
general rule. Clearly, Section 228 of the Tax Code provides for the procedure in case an
assessment is protested and does not create new or take away vested rights. In both
instances, it can surely be applied retroactively. Moreover, R.A. 8424 does not state that
pending actions are excepted from the operation of Section 228, or that applying it to
pending proceedings would impair vested right
Collector v. Bohol Land Transportation Co
Facts:The Bohol Land Transportation Co. was issued deficiency assessments
the company filed in the Court of Tax Appeals an appeal
contesting the validity of the deficiency assessments made by the
Collector as well as of the warrant of distraint and levy issued by
him. The company argues that its failure to substantiate its
defense insofar as the years 1945 to 1950 are concerned should
not be held against it for there is no validity to the prima facie
correctness of the Collector’s findings since the assessments are
signed not by the Collector, nor by the chief of income tax
division, but by one Casto Ayeras, who did not even reveal his
position, nor state if he had any authority to sign for his chief.

Issue: W/N assessment valid

Ruling: Yes. B:An assessment signed by the Chief of the Income Tax Division or
by a Provincial Revenue Officer with delegated powers is a valid assessment

an examination of the assessment notices will show that they were duly signed
by Ayeras in behalf of his chief, the Collector. Under the set-up of the Bureau of
Internal Revenue, the chief of the income tax division as regards tax
assessments is possessed of delegated powers to issue assessment notices in
behalf of the Collector of Internal Revenue.
Yabes v. Flojo
Facts: Doroteo Yabes for sometime an exclusive dealer of products of the
International Harvester Macleod, Inc. She received a letter from the
Commissioner of Internal Revenue demanding payment as commercial
broker’s fixed and percentage taxes plus surcharges and the sum of P2,530 as
compromise penalty. Yabes, protested the assessment on the ground that his
agreements with the International HarvesterMacleod, Inc. were of purchase
and sale, and not of agency. The Commissioner filed a claim with RTC
ofCagayan and likewise filed a motion to dismiss dated March 24, 1971, with
theCourt of Tax Appeals in CTA Case No. 2216, and subsequently filed a
memorandum in support of said motion to dismiss,on the ground that the
assessment against Doroteo Yabes had already become final, executory and
incontestable, and theCourt of Tax Appeals had no jurisdiction over the case
Issue:Whether or not CTA has jurisdiction over the case and not the CFI
of Cagayan
Ruling: Yes. B:Once the appeal to the CTA is filed on time the CTA has
exclusive jurisdiction over the case. Hence, the collection case in the RTC
should be dismissed.
Petitioners received the summons in Civil Case No. II-7 ofthe respondent
Court of First Instance of Cagayan on January 20, 1971, and petitioners filed
their appeal with the Courtof Tax Appeals in CTA Case No. 2216, on
February 12, 1971, well within the thirty-dayprescriptive period under
Section11 of Republic Act No. 1125. The Court of Tax Appeals has
exclusive appellate jurisdiction to review on appeal any decisionof the
Collector of Internal Revenue in cases involving disputed assessments and
other matters arising under the NationalInternal Revenue Code

CIR v. Ayala Securities Co

Facts: Ayala Securities Corp. (Ayala) failed to file returns of their accumulated
surplus so Ayala was charged with 25% surtax by the Commissioner of
internal Revenue. The CTA (Court of Tax Appeals) reversed the
Commissioner’s decision and held that the assessment made against Ayala
was beyond the 5-yr prescriptive period as provided in section 331 of the
National Internal Revenue Code. Commissioner now files a motion for
reconsideration of this decision. Ayala invokes the defense of prescription
against the right of the Commissioner to assess the surtax.

Issue:
Whether or not the applicable provision of law to this case is Section 331 of
the National Internal Revenue Code, which provides for a five-year period of
prescription of assessment from the filing of the return, or Section 332(a) of
the same Code which provides for a ten-year period of limitation for the same
purpose;

Ruling: Yes 331 applies. Collected within 5 years.

there is no iota of evidence presented by the petitioner as to any fraud or
falsity on the return with intent to evade payment of tax, not even in the
income tax assessment (Exh. 5) nor in the letter-decision of February 18,
1963 (Exh. G), nor in his answer to the petition for review. Petitioner merely
relies on the provisions of Sec 25 of the National Internal Revenue Code,
violation of which, according to Petitioner, presupposes the existence of fraud.
But this is begging the question and We do not subscribe to the view of the
petitioner.

B:Fraud is a question of fact and the circumstances constituting fraud must be

alleged and proved in the trial court.- The finding of the trial court as to its non-
existence is final and cannot. be reviewed, unless clearly shown to be erroneous.
Fraud is never lightly to be presumed because it is a serious charge

Republic v. Xavier Gun Trading Co

Facts: The Bureau of Internal Revenue discovered that the "Xavier Gun Trading"
, failed to declare certain amounts representing sales for 1948. Mrs. Estrella F.
Javier, branch manager, acknowledged the violation and promised to pay. Xavier
Gun Trading, as principal and the Luzon Surety Co. Inc., as surety, executed an
ordinary bond for payment of taxes,an action was instituted in the CFI of Manila
by the plaintiff Republic against the defendants Xavier Gun Trading and Luzon
Surety Co. Inc. they raise the defense that plaintiff's cause of action, if any, is
barred by the statute of limitations and that the Court of First Instance has no
jurisdiction over the subject matter of the action.

Issue: W/N the right to collect has prescribed

Ruling: No. B: The filing of the bond has been held to be tantamount to a written
waiver which interrupts the period of limitation