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ASSIGNMENTS IN REMEDIES
A. Sections 2, 4, 5 and 6 of the NIRC [Powers of the CIR]; Sec 7; Sections 202 to 231 of the NIRC [Remedies of government and taxpayers]
C. Books of De Leon and Vitug and Acosta on Remedies
D. Cases:
1. CIR v. Pascor Realty & Dev Corp, 309 SCRA 402 (1999), Meaning of Assessment; is assessment prejudicial to filing a tax evasion
case? [1] 2. Marcos II v. CA, 270 SCRA 47(1997) Burden of Proof on taxpayer to prove erroneous assessment; inapplicability of the statute of non-
claims under the Rules of Court to taxes [2]
3. Meralco Securities Corp v Savellano, 117 SCRA 804 (BIR cannot be compelled by Mandamus to issue assessment) [2] 4. Sy Po v CTA, GR No. 81446, 18 Aug 1988 (best evidence to support assessment)[4]; Aurelio P. Reyes v Col of Internal Revenue,
CTA No. 42, Jul 26, 1956 and William Li Yao v Col CTA No. 30, Jul 30, 1956 [Use of net worth method] 5. Bache & Co. v. Ruiz, 37 SCRA 823 (requirement for a search warrant)[5] 6. CIR v CA, ROH Auto Products Phil, Inc. and CTA, GR No. 108358, 20 Jan 1995, 240 SCRA 368. (Nature of administrative rules &
regulations)[6] x 7. CIR v CA, CTA and Fortune Tobacco Corp, GR No. 119761, 29 Aug 1996, 261 SCRA 236 (Extent of BIR interpretative rule)[7] 8. CIR v Burroughs, Ltd., GR No. 66653, 19 Jun 1986, 142 SCRA 324 (Effect of revocation of ruling)[8] 9. PBC v CIR, GR No. 112024, 29 Jan 1999 (wrong interpretation will not prejudice the government)[9] 10. ABS-CBN v CTA & CIR GR52306 Oct 12, 1981 [Circulars or rulings prospective] 11. CIR v Benguet Corporation, 463 SCRA 28 (2005) – Non-retroactivity of ruling; while government is not bound by the error of its agents
issuing ruling, in the interest of justice and fair play, it may not be given retro effect. [same holding in Sy Po v CTA, GR No. 81446, 18 Aug 1988:
12. CIR v Bursmeiters & Wain Scandinavian, GR 153205, Jan 2007) – Non retroactivity of BIR ruling; 0% VAT on export of services. 13. CIR v. Hantex Trading Corp., 454 SCRA (GR136975 Mar 31 2005) – Best evidence to establish tax liability.\ 14. PNOC v. CA, 457 SCRA (GR112800 Apr 26 2005EB) - Validity and effect of compromise; jurisdiction of CTA v DOJ, entitlement of
informer to rewards, prescription to collect. [reversed DBP v. CA case] 15. Calamba Steel v. CIR, 457 SCRA (GR151857 Apr 28 2005) – Excess quarterly tax can be claimed for refund the following year. 16. BPI v CIR GR 137736, Oct 17, 2005 – Whether collection is barred by prescription? What are the statutory and doctrinal exceptions to
statute of limitations? When does a request for reinvestigation suspends the running of the period? Read also the Wyett Suaco and
Suyoc cases cited therein. 17. [BPI v CIR GR 174942, Mar 7, 2008]- In order to suspend the running of the prescriptive periods for assessment and collection, the
request for reinvestigation must be granted by the CIR. 18. Atlas Mining Consolidated v CIR, GR 14104 & 148763, Jun 8, 2007 – Key issues: (1) prescription of the claims of petitioner
corporation for input VAT refund/credit; (2) validity and applicability of Revenue Regulations No. 2-88 imposing upon petitioner corporation, as a requirement for the VAT zero-rating of its sales, the burden of proving that the buyer companies were not just BOI-registered but also exporting 70% of their total annual production; (3) sufficiency of evidence presented by petitioner corporation to establish that it is indeed entitled to input VAT refund/credit; and (4) legal ground for granting the motion of petitioner corporation for
re-opening of its cases or holding of new trial before the CTA so it could be given the opportunity to present the required evidence. 19. Estate of the Late Juliana Diez Vda de Gabriel v Cir, 421 SCRA 266 (2004) - The death of a taxpayer automatically severed the legal
relationship between her and her agent, and such could not be revived by the mere fact that the agent continued to act as such when two days after the principal’s death, the agent filed the principal’s income tax return. Sec 104 of the NIRC of 1977 requiring notice of death of taxpayer to be filed, falls in Title IIII, Chapter I and pertains to “all cases of transfers subject to tax” or where the “gross value of the estate exceeds three hundred pesos” and has absolutely no applicability to a case for deficiency income tax. Although the administrator of the estate may have been remissed in his legal obligation to inform respondent of the decedent’s death, the consequence thereof, as provided in Sec 119 of the NIRC x x x sanctions on the administrator. Where there was never any valid notice of an assessment, it could not have become final, executory and uncontestable, and for failure to make the assessment within the five year period provided in Sec 318 of the NIRC of 1977, the CIR’s claims against the taxpayer is barred. The rule that an assessment is deemed made for the purpose of giving effect to such assessment when the notice is released, mailed or sent to the taxpayer and not merely to a disinterested party. When the estate is under administration, notice must be sent to the administrator of the estate.
20. Apex Mining Corp v CIR & CTA GR122472 Oct 20, 2005. A judicious perusal of the records reveals that the assailed decision of the appellate court had become final and executory due to petitioner's failure to file a timely motion for reconsideration thereof. Thus the CA’s decision upholding the CIR’s assessment of Ad Valorem Tax on Apex purchases of mineral products from small-scale miners
stands. 21. Sps Tan v Bantegui GR554027 Oct 24, 2005 - The auction sale of real property for the collection of delinquent taxes is in personam,
not in rem.
22. CIR v Tulio GR139858 Oct 25, 2005. This involves the collection of percentage taxes for 1986 and 1987. 1989. Tulio did not file tax returns. BIR discovered on Sep 14, RTC dismissed BIR collection case on the ground of prescription. It counted 3 years from the
return filed by BIR instead of 10 yrs from discovery of omission to file return 23. CIR v PNB GR161997, Oct 25, 2005 - 25. How was Sec 230 on two-year prescriptive period construed? A case involving claim for
TCC of advance income tax payment. 24. Oceanic Wireless v CIR, CTA, CA, 148380 Dec 9, 2005 [Validity of Demand Letter of subordinate of CIR] - – Thus, the main issue is
whether or not a demand letter for tax deficiency assessments issued and signed by a subordinate officer who was acting in behalf of
the Commissioner of Internal Revenue, is deemed final and executory and subject to an appeal to the Court of Tax Appeals. 25. PHILAM ASSET MANAGEMENT, INC., petitioner, vs. CIR, respondent. [G.R. Nos. 156637/162004. Dec 14, 2005.] Under Sec 76 of
the NIRC, a taxable corporation with excess quarerly income tax payments may apply for eiher a tax refund or a tax credit, but not both. The choice of one precludes the other. Failure to indicate a choice, however, will not bar a valid request for a refund, should this option be chosen later on. [1997 and 1998 ITR (RA 8424 took effect on Jan 2008]. Issues are “Whether or not the failure of the [p]etitioner to indicate in its [a]nnual [i]ncome [t]ax [r]eturn the option to refund its creditable withholding tax is fatal to its claim for refund and “Whether or not the presentation in evidence of the [p]etitioner’s [a]nnual [i]ncome [t]ax [r]eturn for the succeeding calendar
year is a legal requisite in a claim for refund of unapplied creditable withholding tax.”[10] [Narrated history of recent NIRC amendments] 26. Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004, 447 SCRA 214] – When does
a request for reinvestigation suspend the running of the prescriptive period? 27. CIR v Benigno Toda, Jr. 438 SCRA 290 (Sept 14, 2004) – A tax planning exercise involving sale of real property by a corporation to
an individual who on the same day sold it to another corporation to save on 36% corporate income tax. Tax Evasion v. Tax Avoidance
explained. 28. Aznar v CIR L-20569, Aug 23, 1974, 58 SCRA 519 – Fraud issue. 29. CIR v Meralco, GR 121666 Oct 10, 2007 – Filing of ITR with excess payment applied for credit and refund. Evidence needed to prove
claims. Note the amendment to the law applied in this case under 1986 NIRC v 1997 NIRC provisions. 30. CIR V. ROSEMARIE ACOSTA AUG 2007 SC CASE – Requirement to file claim for refund with BIR before going to CTA under old
and new NIRC. 31. PLDT v CIR GR 157264 Jan 31, 2008 – Separation pay due to redundancy. Proof of receipt by employees of the pay and the
remittance of the withholding tax to the BIR are material to the claim for refund of erroneously paid withholding tax on separation pay. Also, it must be shown that employees declared the income and the tax paid to the BIR through withholding. “Section 10. Claims for tax credit or refund. – Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is established by a copy of the statement duly issued by the payer to the payee (BIR Form No. 1743.1) showing the
amount paid and the amount of tax withheld therefrom.” 32. Fitness by Design v CIR GR 177982 Oct 2008 – Filing of Fraudulent Return. 33. Rafael Dizon v CTA & CIR GR 140944 Apr 30, 2008 – Failure of the BIR to offer evidence during the CTA trial proved fatal to its case.
The exception to this rule is strictly construed.
CTA Circular 1-95 states in part:
1. The party who desires to introduce as evidence such voluminous documents must, after motion and approval by the Court, present: (a) a Summary containing, among others, a chronological listing of the numbers, dates and amounts covered by the invoices or receipts and the amount/s of tax paid; and (b) a Certification of an independent Certified Public Accountant attesting to the correctness of the contents of the summary after making an examination, evaluation and audit of the voluminous receipts and invoices
x x x
2. The method of individual presentation of each and every receipt, invoice or account for marking, identification and comparison with the originals thereof need not be done before the Court or Clerk of Court anymore after the introduction of the summary and CPA certification. It is enough that the receipts, invoices, vouchers or other documents covering the said accounts or payment to be introduced in evidence must be pre-marked by the party concerned and submitted to the Court in order to be made accessible to the adverse party who desires to check and verify the correctness of the summary and CPA certification. Likewise the originals of the voluminous receipts, invoices and accounts must be ready for verification and comparison in case of doubt on the authenticity thereof
is raised during the hearing or resolution of the formal offer of evidence. (Emphasis and underscoring supplied)
Motion for New Trial & Liberal application of the CTA rules of court discussed. Petition denied.
34. State Land Investment Corp v CIR 171956 Jan 18, 2008 – Excess creditable tax may be refunded or credited at the option of the taxpayer under former Sec 69, now Sec 76. Under then Sec 69 excess taxes may be credited vs the following year only, after than need to be claimed for refund within two years from payment which SIC did. MR filed with CTA included 1999 & 2000 ITRs showing losses, thus 1997 excess tax credit could have not been applied in 1999. Doctrines: SC is not trier of facts but if lower court mis-appreciated facts or failed to notice facts that could change conclusion then it can review facts. Solutio indebiti applied vs government.
Refund granted. Note: counting of 2 years starts from filing of final return. 35. Pilipinas Shell Petroleum Corp v CIR GR 172598 Dec 21, 2007 – Assessment of deficiency excise tax after validly issued TCCs were
subsequently cancelled for having been issued fraudulently. Prescription based on fraud or omission in filing excise tax return construed. Nature of TCCs and publication of MOA and other issuances requirement discussed. Petition granted and assessment
cancelled. 36. CIR v Primetown Realty, GR 161155 Aug 28, 2007 – Counting of 2-year period for filing claim for refund is no longer in accordance
with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987. In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1st month - Apr 15, 1998 to May 14, 1998 …. 24th month - Mar 15, 2000 to Apr 14, 2000. National Marketing
v. Tecson, 139 Phil 584 (1969) is no longer controlling. The 2-year period should start to run from filing of the final adjusted return. 37. CIR v Mirant Pagbilao Corp GR172129 Sep 12, 2008 Sale of power by Mirant to NPC is subject to zero rate VAT because NPC is
exempt both to direct and indirect tax. Excess input tax of Mirant can be claimed for refund or credit with 2 years from close of the taxable quarter when the sale was made under Sec 112(A) of the NIRC and not from date of payment under Sec 204 and 229 of the NIRC. Since the input tax from Mitsuibishi was belatedly paid beyond the two year period, the claim for refund was denied on the
ground of prescription. 38. CIR v Dominador Menguito GR 167560 Sep 17, 2008 – Corporation and Single Proprietorship bearing similar names and owned by
spouses considered as one the same taxpayer based on overwhelming evidence that taxpayer treated and admitted them as one; post-reporting and pre-assessment notice while required before a formal assessment is issued, the absence of the former is not grave
error as to deprive due process. 39. Fitness by Design v CIR GR 177982 Oct 17, 2008 – Petitioner was assessed for deficiency Inc Tax, VAT & DST for the year 1995 in
2004. It protested on the ground that it was barred by the 3-year prescription under Sec 205. However the BIR invoked Sec 222(a) alleging that the return filed was fraudulent thus an exception to the 3-year period. Thereafter, the CIR issued a warrant of Distraint and Levy. Thus, Petitioner went to the CTA on the issues of prescription and fraud and, where it moved for issuance of Subpeona Testeficandum and interrogatories addressed to revenue officers and the informer who allegedly obtained records from the Petitioner and submitted to BIR, but the CTA denied on the ground that it is irrelevant to the issue and that it would violate RA 2338 (secrecy of informant). A criminal case was also filed against the officers and accountant of Petitioner. Issue: 1. Whether CTA abused its discretion in denying petitioner’s motion. – No, said the SC. There was no grave abuse of discretion since the matters sought were not relevant and some of them ware available in the records. The purpose of petitioner was to establish that informer illegally obtained documents. 2. Whether documents illegally obtained from petitioner can be used as evidence against it – Yes, Petitioner’s lack of consent does not, however, imply that the BIR obtained them illegally or that the information received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on petitioner based on the documents pursuant to Sec 5 of the NIRC granting CIR to obtain information, documents, etc. The law thus allows the BIR access to all relevant or material records and data in the person of the taxpayer, and the BIR can accept documents, which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. (See Hantex Case) To require the consent of the taxpayer would defeat the intent of the law to help the BIR assess and collect the correct amount of taxes. 3. Whether petitioner can invoke its right to cross examine witnesses against it – No. Petitioner’s invocation of the rights of an accused in a criminal prosecution to cross examine the witness against him and to have compulsory process issued to secure the attendance of witnesses and the production of other evidence in his behalf does not lie. CTA Case No. 7160 is not a criminal prosecution, and even granting that it is related to I.S. No. 2005-203, the respondents in the latter proceeding are the officers and accountant of petitioner-corporation, not petitioner. From the complaint and supporting
affidavits in I.S. No. 2005-203, informer does not even appear to be a witness against the respondents therein.
GUIDE QUESTIONS
1. What are the powers of the CIR? 2. What is the nature of the regulations issued by the CIR? 3. What is the nature of the rulings issued by the CIR? 4. How are rulings made effective? 5. What are the exceptions to rule that revocation of ruling shall be given prospective effect? 6. How do you reconcile this with the rule that the government is not bound by the error of its agents? 7. What is an assessment? 8. What is the presumption on the assessment? 9. What powers of the CIR may not be delegated? Sec 7. 10. What are remedies of the BIR under the NIRC? 11. Explain the CIR power to Compromise, Abate or Cancel assessment, refund. 12. Explain the judicial and extra judicial remedies o the CIR. 13. What are remedies of the taxpayer under the NIRC? 14. When may the BIR assess a national internal revenue tax, or begin a court proceeding to collect the tax without assessment?
15. After the BIR has validly issued an assessment, within what period may it initiate the collection of the tax?
16. When is the tax assessment deemed made so that the 3-year [now 5) prescriptive period to collect the tax will begin to run? 17. Within what period may the collection of tax be made,
a. In case there is no assessment?
b. In case, there is assessment? c. In the absence of fraud, falsity or omission?
d. In case of fraud, falsity or omission? 18. In the absence of showing when the assessment was released, mailed or sent by the BIR, what is the presumption of its release,
mailing and sending? 19. How do we count the number of days to determine the last day to collect the tax? 20. When are distraint and levy proceedings considered validly begun or commenced? 21. In whose favor shall the statute of limitations be construed? 22. What is a Waiver of the Statute of Limitations? 23. Is the execution of a Waiver of the Statute of Limitations equivalent to the waiver of the right to invoke the defense of prescription?
[Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004, 447 SCRA 214] 24. What are the requisites for the execution of a valid Waiver of the Statute of Limitations?
25. Does a request for reconsideration or reinvestigation by the taxpayer without a valid waiver of the prescriptive periods for the assessment and collection of tax suspend the running of the said periods? Generally no, [Philippine Journalists, Inc. v. Commissioner
of Internal Revenue, G.R. No. 162852, 16 December 2004, 447 SCRA 214]. 26. Are there exceptions to the general rule that despite the absence of the Waiver, a request for reinvestigation may suspend the running
of the periods? 27. When may a request for reinvestigation, which is granted by the CIR, suspend the running of the prescriptive period despite the
absence of a Waiver? 28. What is the difference between a request for reconsideration and a request for reinvestigation? 29. What facts do we look into to determine whether it’s a reconsideration or a reinvestigation? The BPI case gives an example. 30. Assuming that the request is a request for reinvestigation, does it ipso facto suspend the running of the period?
31. Who has the burden of proof that the request for reinvestigation has actually been granted? 32. Give examples of instances that requests for reinvestigation had been granted? 33. How do we reconcile the CIR v Wyett Suaco Laboratories, Inc., 202 SCRA 125, Sept 30, 1991 and Suyoc case where it was held in
Wyett Suaco that the prescriptive period provided by law to make a collection is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment? 34. Aside from the exceptions to the statute of limitations as provided in the Tax Code, is or are there other exceptions? Collector of
Internal Revenue v. Suyoc Consolidated Mining Co., 104 Phil 819 (1958). [The repeated requests for reconsiderations and
conferences resulted to reduction assessment in this case.] 35. How do we reconcile BPI with Wyett Suaco? 36. What is the ruling of the court in the BPI case? 37. Does the right of the government to assess and collect taxes prescribe? CIR v Ayala Securities Corp L29485, Nov 21, 1980]
38. When does the 3-year prescriptive period for assessment begin to run? 39. What is the effect of an amendment of the tax return? 40. When does the 5-year prescriptive period for collection begin to run? 41. When does special law or part thereof administered by the BIR prescribe? 5 years per Sec 1 of Act No. 3585 which amended Act No.
3326. [People v Ching Lak (Unrep.), 103 Phil. 1149) 42. What is the prescriptive period for enforcing a tax compromise? 10 yrs Art 1144, Civil Code, compromise being a contract. (Art 2080,
CC). 43. How do we count the 3-year period to determine the last day to issue the assessment? Same as in determining the last for tax
collection, i.e., 1,095 days regardless of leap year. [National Marketing Corp v. Tecson, 29 SCRA 70, Aug 27, 1969; Primetown case,
a 2008 case]. 44. May a criminal case be filed against a taxpayer for violation of the NIRC although a protest against assessment has been filed by the
said taxpayer with the CIR? (see Ungab v Cusi, 97 SCRA 877 sustained in CIR v. Pascor, 309 SCRA 402) 45. State the procedure for protesting assessments and give example. 46. Is the 2-year prescriptive period within which to file the claim for refund of internal revenue tax jurisdictional such that failure to file the
same within the said period bars an action to file a claim for refund or tax credit? No. Commissioner vs. Phil-am Life [244 SCRA 446
[1995] 47. Are excess corporate quarterly taxes and creditable withholding taxes required to be withheld from the income payments covered by
the 2-year prescriptive period? Yes. Code as held in Citibank, N.A. vs. Court of Appeals. [280 SCRA 459 (1997)].
48. Does the issuance of a warrant of distraint and levy a proof of the finality of the assessment and render hopeless a request for reconsideration, being tantamount to an outright denial thereof and makes the said request deemed rejected? [[G.R. No. L-28896.
February 17, 1988. Commissioner of Internal Revenue, petitioner, vs. Algue, inc., and the CTA, respondents.]
Q & A BASED ON BPI CASE (GR139736 OCT 17, 2005)
1. When may the BIR assess a national internal revenue tax, or begin a court proceeding to collect the tax without assessment? [Another way of asking this question is “What is the statute of limitation provided in Section[s] 203 and 222 on the making of assessment and
the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency?”]
The BIR has three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. [BPI v
CIR GR 137736, Oct 17, 2005; See Sections 203 and 222(a) of the Tax Code].
"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 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 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 prescribed by law for the filing thereof shall be considered as filed
on such last day.” [This is the new provision under the Tax Code of 1997]
"SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. —
"(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a 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 falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.
"(b) If before the expiration of the time prescribed in Section 203 for the assessment of the 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. The period so agreed upon may 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 distraint or levy or by a proceeding in court within five (5) years following the assessment of the tax.
"(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (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.
"(e) Provided, however, That nothing in the immediately preceding Section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax return filed in accordance with the provisions of any tax amnesty
law or decree.” [This has been renumbered from Sec 203 to 222 under the Tax Code of
1997]
2. After the BIR has validly issued an assessment, within what period may it initiate the collection of the tax?
When the BIR has validly issued an assessment, either within the three-year or ten-year period, whichever is appropriate, then the BIR has another three years [now 5 years under the Tax Code of 1997] after the assessment within which to collect the national internal revenue tax
due thereon by distraint, levy, and/or court proceeding. [BPI v CIR GR 137736, Oct 17, 2005; See Section 222(c) and (d), ibid.].
3. When is the tax assessment deemed made so that the 3-year [now 5) prescriptive period to collect the tax will begin to run?
The assessment of the tax is deemed made and the three-year period [now 5 years under 1997 NIRC] for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer. [BPI v CIR GR 137736, Oct
17, 2005, citing Basilan Estates, Inc. v. CIR, 128 Phil. 19 (1967)].
4. In the absence of showing when the assessment was released, mailed or sent by the BIR, what is the presumption of its release,
mailing and sending?
In the present Petition, there is no controversy on the timeliness of the issuance of the Assessment, only on the prescription of the period to collect the deficiency DST following its Assessment. While Assessment No. FAS-5-85-89-002054 and its corresponding Assessment Notice were both dated 10 October 1989 and were received by petitioner BPI on 20 October 1989, there was no showing as to when the said Assessment and Assessment Notice were released, mailed or sent by the BIR. Still, it can be granted that the latest date the BIR could have released, mailed or sent the Assessment and Assessment Notice to petitioner BPI was on the same date they were received by the latter, on 20 October 1989.
5. How do we count the number of days to determine the last day to collect the tax?
Counting the three-year prescriptive period, for a total of 1,095 days[1], from 20 October 1989, then the BIR only had until 19 October
1992 within which to collect the assessed deficiency DST.
6. When are distraint and levy proceedings considered validly begun or commenced? What is the effect of serving said warrant upon the
taxpayer?
Existing jurisprudence establishes that distraint and levy proceedings are validly begun or commenced by the issuance of the Warrant and service thereof on the taxpayer. It is only logical to require that the Warrant of Distraint and/or Levy be, at the very least, served upon the taxpayer in order to suspend the running of the prescriptive period for collection of an assessed tax, because it may only be upon the service of the Warrant that the taxpayer is informed of the denial by the BIR of any pending protest of the said taxpayer, and the resolute
intention of the BIR to collect the tax assessed.
7. In whose favor shall the statute of limitations be construed?
Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against unreasonable investigation. The indefinite extension of the period for assessment is unreasonable because it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. In order to provide even better protection to the taxpayer against unreasonable investigation, the Tax Code of 1977, as amended, identifies specifically in Sections 223 and 224 thereof [now Sections 222 and 223] the circumstances when the prescriptive periods for assessing and collecting taxes could be suspended or interrupted. To give effect to the legislative intent, these provisions on the statute of limitations on assessment and collection of taxes shall be construed and
applied liberally in favor of the taxpayer and strictly against the Government.
8. What is a Waiver of the Statute of Limitations?
The agreements so described in Section 222 (b) and (d) are often referred to as waivers of the statute of limitations.
9. Is the execution of a Waiver of the Statute of Limitations equivalent to the waiver of the right to invoke the defense of prescription?
The agreements so described in Section 222 (b) and (d) are often referred to as waivers of the statute of limitations. The waiver of the statute of limitations, whether on assessment or collection, should not be construed as a waiver of the right to invoke the defense of prescription but, rather, an agreement between the taxpayer and the BIR to extend the period to a date certain, within which the latter could still assess or collect taxes due. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally.
[Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004, 447 SCRA 214]
10. What are the requisites for the execution of a valid Waiver of the Statute of Limitations?
A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended [now Sec 222(b) and (d) of 1997 NIRC], must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer; (3) before the expiration of the ordinary prescriptive periods for assessment and collection; and (4) for a definite period beyond the ordinary prescriptive periods for assessment and collection. The period agreed upon can still be extended by subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon. The BIR had issued Revenue Memorandum Order (RMO) No. 20-90 on 04 April 1990 to lay down an even more detailed procedure for the proper execution of such a waiver. RMO No. 20-90 mandates that the procedure for execution of the waiver shall be strictly followed, and any revenue official who fails to comply therewith resulting in the prescription of the right to assess and collect shall be administratively dealt with.
11. Does a request for reconsideration or reinvestigation by the taxpayer without a valid waiver of the prescriptive periods for the
assessment and collection of tax suspend the running of the said periods?
Generally no, as the SC had consistently ruled in a number of cases that a request for reconsideration or reinvestigation by the taxpayer, without a valid waiver of the prescriptive periods for the assessment and collection of tax, as required by the Tax Code and implementing rules, will not suspend the running thereof. [Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004, 447
SCRA 214].
12. Are there exceptions to the above general rule so that despite the absence of the Waiver, a request for reinvestigation may suspend
the running of the periods?
Yes. Sec. 224 of the Tax Code of 1977 [now Sec. 223 of 1997 NIRC], as amended, also recognizes instances when the running of the statute of limitations on the assessment and collection of national internal revenue taxes could be suspended, even in the absence of a
waiver, under Section 224 thereof, which reads —
SEC. 224. Suspension of running of statute. — The running of the statute of limitation provided in Section[s] 203 and 223 [now Sec 222 under 1997 NIRC] on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty 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 the return filed upon which a tax is being assessed or collected: Provided, That, if the 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 and 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 Philippines. [emphasis is DAM’s]
13. Why does a request for reinvestigation, which is granted by the CIR, suspend the running of the prescriptive period despite the
absence of a Waiver?
It bears to emphasize that under Section 224 of the Tax Code of 1977 [Now Sec 223 of 1997 NIRC], as amended, the running of the prescriptive period for collection of taxes can only be suspended by a request for reinvestigation, not a request for reconsideration. Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend
the running of the statute of limitations on collection of the assessed tax, while the latter can not.
14. What is the difference between a request for reconsideration and a request for reinvestigation?
(a) Request for reconsideration. — refers to a plea for a re-evaluation of an 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. This request does not suspend the running of the prescriptive period. (b) Request for reinvestigation. — refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or law or both. It
suspends the period if had been granted by the CIR.
15. What facts do we look into to determine whether it’s a reconsideration or a reinvestigation?
The BPI case gives an example. The protest letter of petitioner BPI, dated 16 November 1989 and filed with the BIR the next day, on 17 November 1989, did not specifically request for either a reconsideration or reinvestigation. A close review of the contents thereof would reveal, however, that it protested Assessment No. FAS-5-85-89-002054 based on a question of law, in particular, whether or not petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in taxable year 1985. The same protest letter did not raise any question of fact; neither did it offer to present any new evidence. In its own letter to petitioner BPI, dated 10 September 1992, the BIR itself referred to the protest of petitioner BPI as a request for reconsideration. 32 These considerations would lead this Court to deduce that the protest letter of petitioner BPI was in the nature of a request for reconsideration, rather than a request for reinvestigation and, consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension of the running of the statute of limitations should not apply.
16. Assuming that the request in the BPI case is a request for reinvestigation, does it ipso facto suspend the running of the period?
No. Even if, for the sake of argument, this Court glosses over the distinction between a request for reconsideration and a request for reinvestigation, and considers the protest of petitioner BPI as a request for reinvestigation, the filing thereof could not have suspended at once the running of the statute of limitations. Article 224 of the Tax Code of 1977, as amended, very plainly requires that the request for reinvestigation had been granted by the BIR Commissioner to suspend the running of the prescriptive periods for assessment and collection. In Republic of the Philippines v. Acebedo, 131 Phil. 169, 472 (1968), this Court similarly found that — “. [T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a reinvestigation thereof on October 11, 1949 (Exh. A). There is no
evidence that this request was considered or acted upon. In fact, on October 23, 1950 the then Collector of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment (Exh. D), but there was no follow-up of this warrant.” Consequently, the request for reinvestigation did not suspend the running of the period for filing an action for collection. [emphasis is DAM’s] [Need to read RP
v. Acebedo case]
17. Who has the burden of proof that the request for reinvestigation has actually been granted?
The burden of proof that the taxpayer's request for reinvestigation had been actually granted shall be on respondent BIR Commissioner. The grant may be expressed in communications with the taxpayer or implied from the actions of the respondent BIR Commissioner or his
authorized BIR representatives in response to the request for reinvestigation.
18. Give examples of instances that requests for reinvestigation had been granted?
In Querol v. Collector of Internal Revenue, 36 the BIR, after receiving the protest letters of taxpayer Querol, sent a tax examiner to San Fernando, Pampanga, to conduct the reinvestigation; as a result of which, the original assessment against taxpayer Querol was revised by permitting him to deduct reasonable depreciation. In another case, Republic of the Philippines v. Lopez, 37 taxpayer Lopez filed a total of four petitions for reconsideration and reinvestigation. The first petition was denied by the BIR. The second and third petitions were granted by the BIR and after each reinvestigation, the assessed amount was reduced. The fourth petition was again denied and, thereafter, the BIR filed a collection suit against taxpayer Lopez. When the taxpayers spouses Sison, in Commissioner of Internal Revenue v. Sison, 38 contested the assessment against them and asked for a reinvestigation, the BIR ordered the reinvestigation resulting in the issuance of an amended assessment. Lastly, in Republic of the Philippines v. Oquias, 39 the BIR granted taxpayer Oquias's request for reinvestigation and duly notified him of the date when such reinvestigation would be held; only, neither taxpayer Oquias nor his counsel appeared on the given date. In all these cases, the request for reinvestigation of the assessment filed by the taxpayer was evidently granted and actual reinvestigation was conducted by the BIR, which eventually resulted in the issuance of an amended assessment. On the basis of these facts, this Court ruled in the same cases that the period between the request for reinvestigation and the revised assessment should be subtracted from the total prescriptive period for the assessment of the tax; and, once the assessment had been reconsidered at the
taxpayer's instance, the period for collection should begin to run from the date of the reconsidered or modified assessment. 40
19. How do we reconcile the CIR v Wyett Suaco Laboratories, Inc., 202 SCRA 125, Sept 30, 1991 and Suyoc case where it was held in Wyett Suaco that the prescriptive period provided by law to make a collection is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment?
The foremost criticism of petitioner BPI of the Wyeth Suaco decision is directed at the statement made therein that, "settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment." 48 It would seem that both petitioner BPI and respondent BIR Commissioner, as well as, the CTA and Court of Appeals, take the statement to mean that the filing alone of the request for reconsideration or reinvestigation can already interrupt or suspend the running of the prescriptive period on collection. This Court therefore takes this opportunity to clarify and qualify this statement made in the Wyeth Suaco case. While it is true that, by itself, such statement would appear to be a generalization of the exceptions to the statute of limitations on collection, it is best interpreted in consideration of the particular facts
of the Wyeth Suaco case and previous jurisprudence.
The Wyeth Suaco case cannot be in conflict with the Suyoc case because there are substantial differences in the factual backgrounds of the two cases. The Suyoc case refers to a situation where there were repeated requests or positive acts performed by the taxpayer that convinced the BIR to delay collection of the assessed tax. This Court pronounced therein that the repeated requests or positive acts of the taxpayer prevented or estopped it from setting up the defense of prescription against the Government when the latter attempted to collect the assessed tax. In the Wyeth Suaco case, taxpayer Wyeth Suaco filed a request for reinvestigation, which was apparently granted by the BIR and, consequently, the prescriptive period was indeed suspended as provided under Section 224 of the Tax Code of 1977, as
amended. [In this case, the assessment was reduced by the CIR an indication that the request was granted].
20. What are the other exceptions to the statute of limitations that would suspend its running?
As had been previously discussed herein, the statute of limitations on assessment and collection of national internal revenue taxes may be affected if the taxpayer executes a valid waiver thereof, as provided in paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended; and in specific instances enumerated in Section 224 of the same Code, which include a request for reinvestigation granted by the BIR Commissioner. [DAM – other grounds are: taxpayer cannot be located; warrant of distraint and levy issued but no property was found; and
taxpayer is outside of the Philippines]
Outside of these statutory provisions, however, this Court also recognized one other exception to the statute of limitations on collection of
taxes in the case of Collector of Internal Revenue v. Suyoc Consolidated Mining Co., 104 Phil 819 (1958).[2] [The repeated requests for
reconsiderations and conferences resulted to reduction assessment in this case.]
21. Did the SC in BPI case abandon its ruling in Wyett Suaco?
Thus, this Court finds no compelling reason to abandon its decision in the Wyeth Suaco case. It also now rules that the said case is not applicable to the Petition at bar because of the distinct facts involved herein. As already heretofore determined by this Court, the protest filed by petitioner BPI was a request for reconsideration, which merely required a review of existing evidence and the legal basis for the assessment. Respondent BIR Commissioner did not require, neither did petitioner BPI offer, additional evidence on the matter. After petitioner BPI filed its request for reconsideration, there was no other communication between it and respondent BIR Commissioner or any of the authorized representatives of the latter. There was no showing that petitioner BPI was informed or aware that its request for reconsideration was granted or acted upon by the BIR..
22. What is the ruling of the court in the BPI case?
In the present Petition, there is no controversy on the timeliness of the issuance of the Assessment, only on the prescription of the period to collect the deficiency DST following its Assessment. While Assessment No. FAS-5-85-89-002054 and its corresponding Assessment Notice were both dated 10 October 1989 and were received by petitioner BPI on 20 October 1989, there was no showing as to when the said Assessment and Assessment Notice were released, mailed or sent by the BIR. Still, it can be granted that the latest date the BIR could have released, mailed or sent the Assessment and Assessment Notice to petitioner BPI was on the same date they were received by the latter, on 20 October 1989. Counting the three-year prescriptive period, for a total of 1,095 days, 21 from 20 October 1989, then the BIR
only had until 19 October 1992 within which to collect the assessed deficiency DST.
The earliest attempt of the BIR to collect on Assessment No. FAS-5-85-89-002054 was its issuance and service of a Warrant of Distraint and/or Levy on petitioner BPI. Although the Warrant was issued on 15 October 1992, previous to the expiration of the period for collection
on 19 October 1992, the same was served on petitioner BPI only on 23 October 1992.
To summarize all the foregoing discussion, this Court lays down the following rules on the exceptions to the statute of limitations on
collection.
The statute of limitations on collection may only be interrupted or suspended by a valid waiver executed in accordance with paragraph (d) of Section 223 of the Tax Code of 1977, as amended, and the existence of the circumstances enumerated in Section 224 of the same Code,
which include a request for reinvestigation granted by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or there is no request for reinvestigation that had been granted by the BIR Commissioner, the taxpayer may still be held in estoppel and be prevented from setting up the defense of prescription of the statute of limitations on collection when, by his own repeated requests or positive acts, the Government had been, for good reasons, persuaded to postpone collection to make the taxpayer feel that the demand is not unreasonable or that no harassment or
injustice is meant by the Government, as laid down by this Court in the Suyoc case.
Applying the given rules to the present Petition, this Court finds that —
(a) The statute of limitations for collection of the deficiency DST in Assessment No. FAS-5-85-89-002054, issued against petitioner
BPI, had already expired; and
(b) None of the conditions and requirements for exception from the statute of limitations on collection exists herein: Petitioner BPI did not execute any waiver of the prescriptive period on collection as mandated by paragraph (d) of Section 223 of the Tax Code of 1977, as amended; the protest filed by petitioner BPI was a request for reconsideration, not a request for reinvestigation that was granted by respondent BIR Commissioner which could have suspended the prescriptive period for collection under Section 224 of the Tax Code of 1977, as amended; and, petitioner BPI, other than filing a request for reconsideration of Assessment No. FAS-5-85-89-002054, did not make repeated requests or performed positive acts that could have persuaded the respondent BIR Commissioner to delay collection, and that would have prevented or estopped petitioner BPI from setting up the defense of prescription against collection of the tax assessed, as required in the Suyoc case.
22.a. Within what period from issuance of assessment should the CIR collect the tax? Was the prescriptive period tolled by the filing of
protest?
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.[3][10] Thus, the CIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment.
When it validly issues an assessment within the three (3)-year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed
tax begins to run on the date the assessment notice had been released, mailed or sent to the taxpayer.[4][11]
As applied to the present case, the CIR had three (3) years from the time he issued assessment notices to BPI on 7 April 1989 or until 6 April 1992 within which to collect the deficiency DST. However, it was only on 9 August 2002 that the CIR ordered BPI to pay the deficiency.
In order to determine whether the prescriptive period for collecting the tax deficiency was effectively tolled by BPI’s filing of the protest
letters dated 20 April and 8 May 1989 as claimed by the CIR, we need to examine Section 320[5][12] of the Tax Code of 1977, which
states:
Sec. 320. Suspension of running of statute.—The running of the statute of limitations provided in Sections 318 or 319 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a re-investigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, That if the 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 and 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 Philippines. (Emphasis supplied)
The above section is plainly worded. In order to suspend the running of the prescriptive periods for assessment and collection, the request
for reinvestigation must be granted by the CIR. [BPI v CIR GR 174942, Mar 7, 2008]
23. State the procedure for protesting assessments and give example.
SEC. 228. Protesting of Assessment.- x x x.
x x x x
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment
based on his findings.
Such 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 sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable. (Emphasis
supplied)
The CTA Second Division held in RCBC v. CIR, GR 168498, Jun 16, 2006::
Following the periods provided for in the aforementioned laws, from July 20, 2001, that is, the date of petitioner’s filing of protest, it had until September 18, 2001 to submit relevant documents and from September 18, 2001, the Commissioner had until March 17, 2002 to issue his decision. As admitted by petitioner, the protest remained unacted by the Commissioner of Internal Revenue. Therefore, it had until April 16, 2002 within which to elevate the case to this court. Thus, when petitioner filed its Petition for Review on April 30, 2002, the same is outside the thirty (30) period.[27]
Date RCBC received CIR demand letter Jul 5, 2001
Last day to file protest with CIR Aug 4, 2001
Jul 26 days
Aug 4
----------
30 days from receipt of demand
Date RCBC filed its protest Jul 20, 2001 within
Last day to submit relevant documents to CIR Sep 18, 2001
Jul 11 days
Aug 31
Sep 18
----------
60 days from filing of the protest
Last day for the CIR to act on the protest: Mar 17, 2002
Sep 12 days Dec 31
Oct 31 ` Jan 31
Nov 30 Feb 28
Mar 17
--------- ---------
73 days 107 = 180 days from Sep 18, 2001
Last day for RCBC to file Petition for review with CTA Apr 16, 2002
Mar 14 days
Apr 16
---------
30 days from end of 180th day
Actual date RCBC filed the petition with CTA Apr 30, 2002 Late
Timelines:
Rcvd Assmt File protest Submit docs CIR to act Appeal to CTA
0------------------0------------------------0------------------------------0------------------0
30 days from 60 days from 180 days from 30 days from
receipt of Assmt filing of protest submission of receipt of decision,
docs or end of 180 days
23(a). How do we now count the 2-year prescriptive period?
CIR v Primetown Realty, GR 161155 Aug 28, 2007 – Counting of 2-year period for filing claim for refund is no longer in accordance with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987. In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1st month - Apr 15, 1998 to May 14, 1998 …. 24th month - Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer
controlling. The 2-year period should start to run from filing of the final adjusted return.
24. Is the 2 year prescriptive period within which to file claim for refund of internal revenue tax jurisdictional such that failure to file the claim within
the period bars action to claim refund or tax credit?
In Commissioner vs. Phil-am Life [244 SCRA 446 [1995], the Court ruled that an availment of a tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period. Absent any specific provision in the Tax Code or special laws, that period would be ten (10) years under Article 1144 of the Civil Code. Significantly, Commissioner vs. Phil-Am is partly a reiteration of a previous holding that even if the two (2)-year prescriptive period, if applicable, had already lapsed, the same is not jurisdictional [Oral & Dental College vs. CA, 102 Phil. 912 [1958] and may be suspended for reasons of equity and other special circumstances.(Panay Electric Co. vs.
Collector, 103 Phil. 819 [1958])
25. How was Sec 230 on two-year prescriptive period construed in CIR v PNB [G.R. No. 161997, October 25, 2005]?
Section 230 of the Tax Code, as couched, particularly its statute of limitations component, is, in context, intended to apply to suits for the recovery of internal revenue taxes or sums erroneously, excessively, illegally or wrongfully collected. Black defines the term erroneous or illegal tax as one levied without statutory authority. 29 In the strict legal viewpoint, therefore, PNB's claim for tax credit did not proceed from, or is a consequence of overpayment of tax erroneously or illegally collected. It is beyond cavil that respondent PNB issued to the BIR the check for P180 Million in the concept of tax payment in advance, thus eschewing the notion that there was error or illegality in the payment. What in effect transpired when PNB wrote its July 28, 1997 letter 30 was that respondent sought the application of amounts advanced to the BIR to future annual income tax liabilities, in view of its inability to carry-over the remaining amount of such advance payment to the four (4) succeeding taxable years, not having incurred income tax liability during that period.
The instant case ought to be distinguished from a situation where, owing to net losses suffered during a taxable year, a corporation was also unable to apply to its income tax liability taxes which the law requires to be withheld and remitted. In the latter instance, such creditable withholding taxes, albeit also legally collected, are in the nature of "erroneously collected taxes" which entitled the corporate taxpayer to a refund
under Section 230 of the Tax Code. So it is that in Citibank, N.A. vs. Court of Appeals 31, we held:
The taxes thus withheld and remitted are provisional in nature. We repeat: five percent of the rental income withheld and remitted to the BIR pursuant to Rev. Reg. No. 13-78 is, unlike the withholding of final taxes on passive incomes, a creditable withholding tax; that is, creditable
against income tax liability if any, for that taxable year.
In Commissioner of Internal Revenue vs. TMX Sales, Inc., this Court ruled that the payments of quarterly income taxes (per Section 68, NIRC) should be considered mere installments on the annual tax due. These quarterly tax payments . . . should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. The same holds true in the case of the withholding of creditable tax at source. Withholding taxes are "deposits" which are subject to adjustments at the proper time when the complete tax liability is
determined.
In this case, the payments of the withholding taxes for 1979 and 1980 were creditable to the income tax liability, if any, of petitioner-bank, determined after the filing of the corporate income tax returns on April 15, 1980 and April 15, 1981. As petitioner posted net losses in its 1979 and 1980 returns, it was not liable for any income taxes. Consequently and clearly, the taxes withheld during the course of the taxable year, while collected legally under the aforecited revenue regulation, became untenable and took on the nature of erroneously collected taxes at the end of the taxable year. (Underscoring added)
26. Are excess corporate quarterly taxes and creditable withholding taxes required to be withheld from the income payments covered by the 2-year prescriptive period?
Yes. The instant case ought to be distinguished from a situation where, owing to net losses suffered during a taxable year, a corporation was also unable to apply to its income tax liability taxes which the law requires to be withheld and remitted. In the latter instance, such creditable withholding taxes, albeit also legally collected, are in the nature of "erroneously collected taxes" which entitled the corporate taxpayer to a refund
under Section 230 [now Sec. 229] of the Tax Code as held in Citibank, N.A. vs. Court of Appeals. [280 SCRA 459 (1997)].
27. In a claim for refund of excess quarterly income tax payments, is it necessary to prove every detailed items in the ITR in order to successfully
obtain the credit or refund? In other words, what evidence must be presented before the CTA to prove the claim?
No. Valid returns, proof of payment of taxes, evidence showing excess payments, testimony of the taxpayers accountants and offer of evidence
are needed to prove the claim. [CIR v Meralco, GR 121666 Oct 10, 2007]
28. Is the filing of a motion for extension of time to file a motion for reconsideration allowed in the Court of Appeals?
In [G.R. No. 122472. October 20, 2005.] APEX MINING CO., INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents, it was held that: A judicious perusal of the records reveals that the assailed decision of the appellate court had become
final and executory due to petitioner's failure to file a timely motion for reconsideration thereof.
It is a matter of record that petitioner received a copy of the CA decision on September 11, 1995. Going by the Rules, petitioner had only fifteen (15) days therefrom or until September 26, 1995, within which to move for a reconsideration. However, instead of a motion for reconsideration, what petitioner filed on September 22, 1995 was a motion for extension of time. The very motion for reconsideration itself was in fact filed only on
October 11, 1995, or 30 days later from petitioner's receipt of the copy of the appellate court's decision, a fatal procedural lapse.
The rule is and has been that the period for filing a motion for reconsideration is non-extendible. 9 The Court has made this clear as early as
1986 in Habaluyas Enterprises, vs. Japzon.
29. May a criminal case be filed against a taxpayer for violation of the NIRC even without an assessment being issued by the CIR? Stated
otherwise, should a tax assessment precede a criminal indictment?
Private respondents maintain that the filing of a criminal complaint must be preceded by an assessment. This is incorrect, because Section 222 of the NIRC specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return such as this case, proceedings in court may be commenced without an assessment. Furthermore, Section 205 of the same Code clearly mandates that the civil and criminal aspects of the case may be pursued simultaneously. In Ungab v. Cusi, 97 SCRA 877, petitioner therein sought the dismissal of the criminal Complaints for being premature, since his protest to the CTA had not yet been resolved. The Court held that such protests could not stop or suspend the criminal action, which was independent of the resolution of the protest in the CTA. This was because the commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an assessment or to file a criminal case against the taxpayer or to do both. Further, in Ungab v. Cusi it was held that while there can be no civil action to enforce collection before the assessment procedures are followed, there is no requirement for a precise computation and assessment of the tax due before a criminal case can be filed. [CIR v Pascor,
309 SCRA 402, sustaining Ungab.]
Note: In between these two cases CIR v CA 257 SCRA 200 ruled that before a criminal case be filed the fact that a tax is due must first proved.
30. May a taxpayer against whom a criminal complaint is filed in court successfully seek the dismissal of the said complaint on the ground that
it’s premature because his protest against an assessment issued by the CIR is still pending resolution with the CTA?
No. In Ungab v. Cusi, 97 SCRA 877, the Supreme Court held that such protest could not stop or suspend the criminal action which was independent of the resolution of the protest in the CTA. This was because the commissioner of internal revenue had, in such tax evasion cases,
discretion on whether to issue an assessment or to file a criminal case against the taxpayer or to do both.
31. What is the difference between a criminal complaint for tax evasion and an assessment?
The issuance of an assessment must be distinguished from the filing of a complaint. Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is then given a chance to submit position papers and documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not to demand payment, but to
penalize the taxpayer for violation of the Tax Code. [CIR v Pascor, 309 SCRA 402.]
32. What is the purpose of issuing an assessment?
The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the period within which to protest it. Section 203 13 of the NIRC provides that internal revenue taxes must be assessed within three years from the last day within which to file the return. Section 222, 14 on the other hand, specifies a period of ten years in case a fraudulent return with intent to evade was submitted or in case of failure to file a return. Also, Section 228 15 of the same law states that said assessment may be protested only within thirty days from receipt thereof. Necessarily, the taxpayer must be certain that a specific document constitutes an assessment. Otherwise, confusion would arise regarding the period within which to make an assessment or to protest the same, or whether interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an assessment is deemed made only when the
collector of internal revenue releases, mails or sends such notice to the taxpayer. 16
33. TAXATION; NATIONAL INTERNAL REVENUE CODE; DEFICIENCY INCOME TAXES; PERIOD TO APPEAL ASSESSMENT, SUSPENDED BY FILING OF PROTEST. — According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" and "renders hopeless a request for reconsideration," being "tantamount to an outright denial thereof and makes the said request deemed rejected." But there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest court not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served. As the Court of Tax Appeals correctly noted, the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed. [[G.R. No. L-28896. February 17, 1988.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.]
34. How may a claimant of tax refund of excess tax credit prove that indeed it is entitled to refund because it incurred losses in the year the tax credit would have been applied? [G.r. No. 122480. April 12, 2000.] Bpi-family savings bank, inc., petitioner, vs. Court of appeals, court of tax
appeals and the commissioner of internal revenue, respondents.]
35. Does the right of the government to assess and collect taxes prescribe?
Limitations on the government right to assess and collect taxes cannot be presumed in the absence of legislation to the contrary, and where the government has not by law limited its right to assess unpaid taxes, such right is imprescriptible. [CIR v Ayala Securities Corp L29485, Nov 21, 1980]
36. When does the 3-year prescriptive period for assessment begin to run?
The general rule is when the return is due or when it is filed whichever is later. Thus if the ITR due on April 15, 2003 was filed on April 20, 2003,
the 3-year period is counted from April 15. If filed on April 20, it is counted from April 20.
37. What is the effect of an amendment of the tax return?
If the amendment is substantial, then the period should run from the date the amended return is filed.
38. When does the 5-year prescriptive period for collection begin to run?
If there is an assessment, within 5 years from date of assessment; if no assessment was made and a return is filed and the return is not false or fraudulent, the period for collection is the same as period for assessment, that is, within 3 years after the return was due or filed, whichever is
later.
39. When does special law or part thereof administered by the BIR prescribe?
5 years per Sec 1 of Act No. 3585 which amended Act No. 3326. [People v Ching Lak (Unrep.), 103 Phil. 1149)
40. What is the prescriptive period for enforcing a tax compromise?
Ten years from the time the right of action accrues per Art 1144, Civil Code, compromise being a contract. (Art 2080, CC).
41. How do we count the 3-year period to determine the last day to issue the assessment?
Same as in determining the last for tax collection, i.e., 1,095 days regardless of leap year. [National Marketing Corp v. Tecson, 29 SCRA 70, Aug
27, 1969]. Note: This is now superseded by the Primetown Realty case.
42. PNOC v. CA, 457 SCRA (GR112800 Apr 26 2005EB) Topics involved: Withholding tax on interest earnings not withheld and remitted about P300M reported by informer but compromised by CIR; EO 44 on compromise construed and applied; validity and effect of compromise;
jurisdiction of CTA v DOJ, entitlement of informer to rewards, prescription to collect. [reversed DBP v. CA case]
S informed the BIR that PNB did not withhold 15% tax on interest earned by PNOC from PNB in 1984 and 1985 in the amount of around P300 M despite its non-tax exempt status since 1984. The BIR demanded payment from PNOC and PNB. PNOC offered to compromise under EO 44 by offsetting the pending NAPOCOR’s claims for refund/credit with BIR arising from excise tax on its purchase of oil. PNOC said that it had receivables from NAPOCOR. This was denied by Com Tan. Afterwards, another offer of 30% of basic tax was made accepted and collected. Thereupon, 15% reward fee based on actual collection was given to S. Thereafter, S filed with BIR a request for additional fee based on the original amount of P300 M. This was denied and therefore he went to the CTA assailing the validity of the compromise and urging the collection of the tax balance. This was opposed by PNOC and PNB stating the finality of the compromise. PNB alleged CTA had no jurisdiction under PD 242. [Now incorporated in the Revised Admin Code], Meantime BIR Com Tan was replaced by Com Ong, who agreed with S and initiated the collection of the balance. In fact, DOJ took over the case. Account of PNB with CB was garnished and transferred to Treasurer of the Phil, who
credited the account of BIR.
43. Was the compromise valid? No. It did not comply with requirements of EO 44 that only disputed or delinquent accounts as of Dec 31, 1985 could be compromised. Since the tax assessed was neither, thus it did not qualify to compromise. Even if it qualified, still since the offer was made beyond the period set by EO 44, the same was not allowed. May the CTA review, revoke the
44. What facts supported the conclusion that the compromise agreement did not comply with the requirement of EO 44 and therefore was not
validly executed.
45. Did the CTA have jurisdiction over the case in light of PD 242? Yes, RA 1125 is a special law while EO 44 was a general law, thus the former prevails over the latter despite its earlier issuance. Assuming PD 242 is applicable still CTA has jurisdiction because said PD speaks of a
situation where the parties are solely government entities, etc. Since is a party, this case falls under the exception.
46. Assuming it had jurisdiction, could CTA annul a compromise? A general rule, a compromise agreement constitutes re judicata between the
parties, but in this case, the agreement lacked legal basis, thus this rule will not apply.
47. Was the right of the BIR to collect barred by prescription? This cannot be raised for the first time in SC, thus deemed waived. Assuming could be invoked, the BIR was not barred by the 3 year prescriptive period to collect from date of assessment because the filling of the collection case by S in the CTA was initiated within 3 years. Assuming that S was not qualified to collect given that at the time BIR, PNOC and PNB were on the same side, still the prescriptive period was tolled because BIR was prohibited from filing collection case due to pendency of the case with
CTA, CA and SC. If it did it would violate the judicial policy on multiplicity of suits, as any collection case would have involved the same parties.
48. Was S entitled to the 15% reward money? Yes. The argument of PNB & PNOC that collection of taxes was not voluntary was not supported
by any law. The NIRC provision on reward does not distinguish, neither should we distinguish.
49. Ocanic Wireless v CIR CTA, CA, GR 148380, Dec 9, 2005.
49.1 When may a demand letter be considered as a decision on the a disputed or protested assessment?
A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment when the CIR inidicates 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 No. 1125, as amended. On the basis of his 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.
The 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.[10]
In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner’s 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.” [11] In addition, the letter
contained a notation indicating that petitioner’s request for reconsideration had been denied for lack of supporting documents.
49.2 May the final demand letter be issued and signed by the Chief of AR & Billing Division instead of the CIR?
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 non-delegable.
50. CIR V. ROSEMARIE ACOSTA AUG 2007 SC CASE
a. On March 21, 1997, the taxpayer, non-resident Filipino and her husband filed with the BIR their Joint Individual Income Tax Return for the year 1996. Later, on June 17, 1997, she, through her representative, filed an amended return and a Non-Resident Citizen Income Tax Return, and paid the BIR P17,693.37 plus interests in the amount of P14,455.76. On October 8, 1997, she filed another amended return indicating an overpayment of P358,274.63. Claiming that the income taxes paid
by the taxpayer resulted in an overpayment of P340,918.92,[6][4] she filed on April 15, 1999 a petition for review docketed as C.T.A. Case No. 5828 with the Court of Tax Appeals (CTA).
Under the Sec 230 of the 1993 NIRC, the filing of claim of refund within two years with the CIR was a requirement before one could file a Petition for Review with the CTA, while under the Sec 204 (c) of the 1997 NIRC (took effect on Jan 1, 19980), a showing in the ITR of an overpayment is sufficient claim for refund with the CIR.
a. Is the filing of the claim for refund with the CIR a condition precedent to the filing of the Petition for Review with the CTA?
Yes. Both under 1993 and 1997 NIRC. [See Secs 230 and 204 (c) of the 1993 and 1997 NIRC, respectively.]
a. Does the filing of the amended return indicating an overpayment constitute the written claim for refund required by law, thereby vesting the CTA with jurisdiction over this case?
Prior to the effectivity of the 1997 NIRC, a claimant must first file a written claim for refund, categorically demanding recovery of overpaid taxes with the CIR, before resorting to an action in court. This obviously is intended, first, to afford the CIR an opportunity to correct the action of subordinate officers; and second, to notify the government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure. Thus, on the first issue, we rule against taxpayer’s contention. Entrenched in our jurisprudence is the principle that tax refunds are in the nature of tax exemptions which are construed strictissimi juris against the taxpayer and liberally in favor of the government. As tax refunds involve a return of revenue from the government, the claimant must show indubitably the specific provision of law from which her right arises; it cannot be allowed to exist
upon a mere vague implication or inference[7][17] nor can it be extended beyond the ordinary and reasonable intendment of the
language actually used by the legislature in granting the refund.[8][18] To repeat, strict compliance with the conditions imposed for
the return of revenue collected is a doctrine consistently applied in this jurisdiction.[9][19] [CIR v. Rosemarie Acosta, GR 154068, Aug 3, 2007] (Note: The law applicable here was the 1993 NIRC; under 1997 NIRC, the ITR showing overpayment of income tax is
considered a written claim for credit or refund.)
a. Can the 1997 NIRC be given retroactive effect to a claim for refund filed in 1997 pertaining to overpaid income tax and
penalties for the taxable year 2006?
After a thorough consideration of this matter, we find that we cannot give retroactive application to Section 204(c) abovecited. We
have to stress that tax laws are prospective in operation, unless the language of the statute clearly provides otherwise.[10][20] [CIR v. Rosemarie Acosta, GR 154068, Aug 3, 2007] [Note: Taxpayer also contended that the Petition for Review was filed in 1999 when the 1997 NIRC was already in effect, to which the SC said that at the time of filing the amended return in 1997, the 1997 NIRC was not yet
in effect, thus taxpayer had no reason to think that the filing of the amended return constituted filing of claim for refund.]
a. May the taxpayer invoke the liberal application of technicalities in tax refund cases, conformably with our ruling in BPI-
Family Savings Bank, Inc. v. Court of Appeals, GR 122480, Apr 12, 2000, 330 SCRA 507] [?[11]
No, in BPI-Family case, the taxpayer filed a claim for refund and presented evidence to support its claim, thus it does not apply in the
instant case. [CIR v. Rosemarie Acosta, GR 154068, Aug 3, 2007]
a. Under the same facts as in par. 1 above, supposing the taxpayer failed to allege in her Petition for Review the date of filing
of her Final Adjustment Return, is it fatal as to divest the CTA of the jurisdiction over her Petition?
Furthermore, as the CTA stressed, even the date of filing of the Final Adjustment Return was omitted, inadvertently or otherwise, by taxpayer in her petition for review. This omission was fatal to taxpayer’s’s claim, for it deprived the CTA of its jurisdiction over the
subject matter of the case. [CIR v. Rosemarie Acosta, GR 154068, Aug 3, 2007]
a. Does the nature of this case call for the application of remedial laws as held by the CA?
Finally, we cannot agree with the Court of Appeals’ finding that the nature of the instant case calls for the application of remedial laws. Revenue statutes are substantive laws and in no sense must their application be equated with that of remedial laws. As well said in a
prior case, revenue laws are not intended to be liberally construed.[12][22] Considering that taxes are the lifeblood of the government and in Holmes’s memorable metaphor, the price we pay for civilization, tax laws must be faithfully and strictly implemented. [CIR v.
Rosemarie Acosta, GR 154068, Aug 3, 2007]
CTA
51. What cases fall under the original and exclusive jurisdiction of the CTA? 52. What cases fall under the appellate jurisdiction of the CTA? 53. What cases fall under the appellate jurisdiction of the CTA En Banc? 54. May the collection of taxes be enjoined pending appeal to the CTA? 55. What is the procedure for a appealing from the decision of a CTA to CTA En Banc?
File a Petition for Review under Sec 11 of RA 9282 in relation to Rule 43 of the 1997 Rules of Civil Procedures.
2
THIS IS THE PRODUCT OF ATTY. DAN A. MACATANGAY
[1] According to Article 13 of the Civil Code of the Philippines, “when the law speaks of years, months, days, or nights, it shall be understood that the years are of 365 days each; months, of thirty days; days, of twenty-four hours; and nights, from sunset to sunrise. If months are designated by their names, they shall be computed by the number of days which they respectively have in computing the period, the first day shall be excluded, and the last day included.” [Note Feb 1992 had 29 days being a leap year. Assessment was dated Oct 10, 1989 and no showing when actually mailed or sent thus receipt on Oct 20, 1989 was
considered as starting point.]
[2] By the principle of estoppel, taxpayer Suyoc was not allowed to raise the defense of prescription against the efforts of the Government to collect the tax assessed against it. This Court adopted the following principle from American jurisprudence: "He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned, for the law says to him in effect 'this is your own act, and therefore you are not damnified.'" 46
In the Suyoc case, this Court expressly conceded that a mere request for reconsideration or reinvestigation of an assessment may not suspend the running of the statute of limitations. It affirmed the need for a waiver of the prescriptive period in order to effect suspension thereof. However, even without such waiver, the taxpayer may be estopped from raising the defense of prescription because by his repeated requests or positive acts, he had induced Government authorities to delay collection of the assessed tax. In Cordero v Gonda, 18 SCRA 331, Oct 15, 1966, the SC said that the statutory period of collection is interrupted if by the taxpayers repeated requests or positive acts, the govt for good reasons, persuaded to postpone collection to make him feel that the demand was not unreasonable
or that no harassment or injustice is meant by the govt.
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
