ALLIED BANKING CORP. V. COMMISSIONER OF INTERNAL REVENUE Date: Aug.

8, 2005 (First Division) Facts: On February 5, 2004, petitioner received the PAN dated January 14, 2004 issued by respondent notifying the petitioner that after an investigation was conducted by their office, from the latter is found liable to pay P11,225,010.05, inclusive of interests (from January 11, 2002 to February 26, 2004) and compromise penalty (representing deficiency DST on its Special Savings Account Deposits) for the taxable year 2001. On February 18, 2004, petitioner filed its protest to the preliminary assessment arguing that its Special Savings Account Deposits were not subject to DST. Petitioner received the Formal Letter of Demand dated March 10, 2004 together with a copy of Assessment Notice No. DST-2-01-000045 assessing petitioner P11,452,940.41, plus interest and compromise penalty. On the belief that the Fomal Letter of Demand constituted the final decision on the matter of the assessment, petitioner filed its appeal to the CTA on May 5, 2004. CIR alleged that the CTA has no jurisdiction over the case as the petition was filed 6 days after the expiration of the reglementary period provided under Section 228. CIR filed his MTD. He argued that the Formal Letter of Demand dated March 10, 2004, which was received by petitioner's Tax and Collection Department H.O. on March 30, 2004, as evidenced by the stamp of receipt on respondent's original duplicate copy of the demand letter, had become final and executory for failure of petitioner to seasonably file its protest against said demand letter within 30 days from its receipt. The Petition for Review was filed on May 5, 2004. Issue: W/N CTA had jurisdiction Held: NO. Ratio: Section 228 of the 1997 NIRC provides that a taxpayer shall first be informed of its tax liabilities through the issuance of a preliminary assessment notice, although not in all cases of tax delinquencies or deficiencies, is the issuance of a preliminary assessment notice required. It specifically provides for the instances where a PAN is no longer required. A PAN is issued to inform the taxpayer that proper taxes should be assessed against it. Under RR 12-85, the taxpayer is given a period of 15 days from receipt of PAN within which to file its reply and explain why no assessment notice should be issued against it. If the taxpayer fails to respond ot that its explanation is not acceptable to the CIR, a formal assessment notice shall then be issued to the taxpayer. It is this FAN, which is issued after the PAN, that the protest is required. The period of 30 days within which to dispute or protest refers to the notice of formal assessment and not the PAN. The Formal Demand Letter received by the petitioner did not ripen into a disputed assessment for its failure to seasonably file its protest. When petitioner received said demand letter, what it did was to actually file the appeal with the CTA instead of exhausting the administrative remedies allowed by law. The Formal Demand Letter dated March 10, 2004 cannot be considered as the final decision appealable to the CTA. The final decision subject of appeal clearly concerns disputed assessments. An assessment not properly disputed can never be the subject of an appeal to the CTA. It may be true that based on the letter of the demand letter, it was written that the same shall be considered as the final decision of the respondent, however, to have a closer look on the exact words of the letter shows that it was a "final decision based on the investigation. If you disagree, you may appeal the decision within 30 days from receipt thereof." Assuming that the formal letter of demand was final decision subject of review, the petition was still filed out of time as the petitioner had until April 29, 2004, or 30 days after March 30. Date: Jan. 2, 2007 (En Banc) (From Punongbayan&Araullos tax newsletter) Undisputed protest is not appealable The appellate jurisdiction of the Court can be invoked only if there is a disputed assessment. A final assessment may be protested administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment. The protest should state the facts and law upon which it is based. Otherwise, the issues not properly protested shall be considered undisputed issues and the assessment shall become final, executory and demandable.

COMMISSIONER OF INTERNAL REVENUE V. AYALA SECURITIES CORP. Date: March 31, 1976 Ponente: Esguerra, J. Facts: In a letter dated February 21, 1961, petitioner advised the respondent corporation of the assessment of P758.687.04 on its accumulated surplus reflected on its income tax return for the fiscal year which ended September 30, 1955. The respondent corporation, on the other hand, in a letter dated April 19, 1961, protested against the assessment on its retained and accumulated surplus pertaining to the taxable year 1955 and sought reconsideration thereof for the reasons (1) that the accumulation of the surplus was for a bona fide business purpose and not to avoid the imposition of income tax on the individual shareholders, and (2) that the said assessment was issued beyond the five-year prescriptive period On May 30, 1961, petitioner wrote respondent corporation's auditing and accounting firm with the "advise that your request for reconsideration will be the subject matter of further reinvestigation and a thorough analysis of the issues involved conditioned, however, upon the execution of your client of the enclosed form for waiver of the defense of prescription". However, respondent corporation did not execute the requested waiver of the statute of limitations, considering its claim that the assessment in question had already prescribed. On February 21, 1963, respondent corporation received a letter dated February 18, 1963, from the Chief, Manila Examiners, of the Office of the herein petitioner, calling the attention of the respondent corporation to its outstanding and unpaid tax in the amount of P708,687.04 and thereby requesting for the payment of the said amount within five (5) days from receipt of the said letter. Believing the aforesaid letter to be a denial of its protest, respondent corporation filed with the CTA a Petition for Review of the assessment. CTA Petitioner maintains that respondent CTA erred in holding that the letter dated February 18, 1963, is a denial of the private respondent corporation's protest against the assessment, and as such, is a decision contemplated under the provisions of Sections 7 and 11 of Republic Act No. 1125. Petitioner contends that the letter dated February 18, 1963, is merely an ordinary office letter designed to remind delinquent taxpayers of their obligations to pay their taxes to the Government and, certainly, not a decision on a disputed or protested assessment contemplated under Section 7(1) of R.A. 1125. Issue: W/N the case falls within the jurisdiction of the CTA Held: YES. Ratio:

The CTA is a court of special appellate jurisdiction created under R. A. No. 1125. Thus under Section 7 (1), R. A. 1125, the CTA exercises exclusive appellate jurisdiction to review by appeal "decisions of the Collector of Internal Revenue in cases involving disputed 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 or other law or part of law administered by the Bureau of Internal Revenue". The letter of February 18, 1963 is tantamount to a denial of the reconsideration or protest of the respondent corporation on the assessment made by the petitioner, considering that the said letter is in itself a reiteration of the demand by the Bureau of Internal Revenue for the settlement of the assessment already made, and for the immediate payment of the sum of P758, 687.04 in spite of the vehement protest of the respondent corporation on April 21, 1961. This certainly is a clear indication of the firm stand of petitioner against the reconsideration of the disputed assessment in view of the continued refusal of the respondent corporation to execute the waiver of the period of limitation upon the assessment in question. This being so, the said letter amounts to a decision on a disputed or protested assessment and, therefore, the court a quo did not err in taking cognizance of this case. CIR V. UNION SHIPPING Date: May 21, 1990 Ponente: Paras, J. Facts:

In a letter dated December 27, 1974 CIR assessed against Yee Fong Hong, Ltd. and/or Union Shipping Corporation, the total sum of P583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received on January 4, 1975, and in a letter dated January 10, 1975, received by petitioner on January 13, 1975, private respondent protested the assessment.

 Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy, which was served on private respondent's counsel, Clemente Celso, on November 25, 1976. In a letter dated November 27, 1976, received by petitioner on November 29, 1976 private respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru the Warrant of Distraint and Levy. Petitioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit before Branch XXI of the then Court of First Instance of Manila and docketed as Civil Case No. 120459 against private respondent. Summons in the said collection case was issued to private respondent on December 28, 1978. On January 10, 1979, private respondent filed with respondent court its Petition for Review of the petitioner's assessment of its deficiency income taxes in a letter dated December 27, 1974. CTA reversed CIR. Issue: W/N the CTA has jurisdiction over the case Held: YES. Ratio:

The main thrust of this petition is that the issuance of a warrant of distraint and levy is proof of the finality of an assessment because it is the most drastic action of all media of enforcing the collection of tax, and is tantamount to an outright denial of a motion for reconsideration of an assessment. Among others, petitioner contends that the warrant of distraint and levy was issued after respondent corporation filed a request for reconsideration of subject assessment, thus constituting petitioner's final decision in the disputed assessments. Petitioner argues therefore that the period to appeal to the CTA commenced to run from receipt of said warrant on November 25, 1976, so that on January 10, 1979 when respondent corporation sought redress from the Tax Court, petitioner's decision has long become final and executory. However, the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. The CIR should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7 and 11 of Republic Act 1125, as amended. On the basis of this statement indubitably showing that the Commissioner's communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment and, consequently, the collection of the amount demanded as taxes by repeated requests for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the first instance. This would also deter the Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative action. (Surigao Electric Co., Inc. v. C.T.A.). There appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration but contrary to the above ruling of this Court, left private respondent in the dark as to which action of the Commissioner is the decision appealable to the CTA. Had he categorically stated that he denies private respondent's motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided. The reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner, that such constitutes the final decision on the matter which may be appealed to the CTA and not the warrants of distraint Under the circumstances, the CIR, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the period to appeal commenced to run. The request for reinvestigation and reconsideration was in effect considered denied by petitioner when the latter filed a civil suit for collection of deficiency income. So. that on January 10, 1979 when private respondent filed the appeal with the CTA, it consumed a total of only thirteen (13) days well within the thirty day period to appeal pursuant to Section 11 of R.A. 1125. OCEANIC WIRELESS NETWORK V. CIR

Date: Dec. 9, 2005 Ponente: Azcuna, J. Facts:

On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest against the tax assessments and requested a reconsideration or cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988. Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation in a letter dated January 24, 1991. Said letter likewise requested petitioner to pay the total amount of P8,644,998.71 within ten (10) days from receipt thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and levy without further notice. Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding warrants of distraint and/or levy and garnishment. These were served on petitioner on October 10, 1991 and October 17, 1991, respectively. On November 8, 1991, petitioner filed a Petition for Review with the CTA to contest the issuance of the warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16, 1994, declaring that said petition was filed beyond 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 and Billing Division was presumably received by petitioner, i.e., within a reasonable time from said date in the regular course of mail pursuant to Section 2(v) of Rule 131 of the Rules of Court. The decision cited Surigao Electric Co., Inc. v. CTA[4] wherein this Court considered a mere demand letter sent to the taxpayer after his protest of the assessment notice as the final decision of the Commissioner of Internal Revenue on the protest. Hence, the filing of the petition on November 8, 1991 was held clearly beyond the reglementary period. The CTA likewise stated that the finality of the denial of the protest by petitioner against the tax deficiency assessments was bolstered by the subsequent issuance of the warrants of distraint and/or levy and garnishment to enforce the collection of the deficiency taxes. The issuance was not barred by prescription because the mere filing of the letter of protest by petitioner which was given due course by the Bureau of Internal Revenue suspended the running of the prescription period as expressly provided under the then Section 224 of the Tax Code: Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24, 1991 cannot be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. Issue: W/N a demand letter for tax deficiency assessments issued and signed by a subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed final and executory and subject to an appeal to the CTA. Held: YES. Ratio: A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. The Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its collection without further notice. In addition, the letter contained a notation indicating that petitioners request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration. As correctly held by the CTA, while the denial of the protest was

in the form of a demand letter, the notation in the said letter making reference to the protest filed by petitioner clearly shows the intention of the respondent to make it as [his] final decision. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in Section 7. As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher, except the following: a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency: Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500,000) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as nondelegable. Section 6 of the Code further provides: SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement. (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 authorized representative may authorize the examination of any taxpayer and the 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. The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his duly authorized representative. . . . Thus, the authority to make tax assessments may be delegated to 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. A request for reconsideration must be made within thirty (30) days from the taxpayers receipt of the tax deficiency assessment, otherwise, the decision becomes final, unappealable and therefore, demandable. A tax assessment that has become final, executory and enforceable for failure of the taxpayer to assail the same as provided in Section 228 can no longer be contested. Here, petitioner failed to avail of its right to bring the matter before the CTA within the reglementary period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its request for reconsideration which constituted the final determination by the Bureau of Internal Revenue on petitioners protest. Being a final disposition by said agency, the same would have been a proper subject for appeal to the CTA.

The rule is that for the CTA to acquire jurisdiction, an assessment must first be disputed by the taxpayer and ruled upon by the Commissioner of Internal Revenue to warrant a decision from which a petition for review may be taken to the CTA. Where an adverse ruling has been rendered by the Commissioner of Internal Revenue with reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the same within thirty (30) days after receipt thereof. The demand letter may be presumed to have been duly directed, mailed and was received by petitioner in the regular course of the mail in the absence of evidence to the contrary. This is in accordance with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the period to appeal has commenced to run from the time the letter of demand was presumably received by petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse decision on the request for reconsideration had already lapsed when the petition was filed with the CTA only on November 8, 1991. Hence, the CTA properly dismissed the petition as the tax delinquency assessment had long become final and executory.