CIR v.

Julieta Ariete
Apr 16, 1999: Respondent offered compromise, but it was denied by BIR. Respondent filed petition for review with CTA. Jan 15, 2002: CTA rendered decision cancelling deficiency assessments. MR filed by CIR but denied by CTA. Petitioner appealed to CA. June 14, 2004: CA affirmed CTAs decision. Petitioner filed appeal to SC. ISSUE: Is the recording in the Official Registry Book of the BIR of the information filed by informer a mandatory requirement before taxpayer may be excluded from coverage of VAP? SC DECISION: Yes. Where the language of the law is clear and unequivocal, it must be given its literal application and applied without interpretation. CIR v. Julieta Ariete RMO 59-97, 60-97, and 63-97 consistently provided that persons under investigation as a result of verified information filed by an informer under Sec 281 of the NIRC, and duly recorded in the Official Registry Book of the Bureau before the date of availment under VAP are excluded from the coverage of the VAP. This denotes that in addition to the filing of verified information, the same should also be duly recorded in the ORB of BIR. The conjunctive word and is not without legal significance. It means in addition to. The word and, whether it is used to connect words, phrases or full sentences, must be accepted as binding together and as relating to one another. It implies conjunction or union. This interpretation is bolstered by the fact that BIR issued RR 18-2005 and reiterated the same provision in the implementation of the Enhanced VAP. When a tax provision speaks unequivocably, it is not the province of a Court to scan its wisdom or its policy. The more correct course of dealing with a question of construction is to take the words exactly what they say. Findings of facts of the CTA are final and binding upon the SC, specially if these are similar findings of the CA, which is the final arbiter of questions of fact.FINAL ASSESSMENT NOTICE ESSENTIAL REQUIREMENTS There is an assessment. FAN (BIR FORM 17.08) contains name, address, and TIN; kind of tax; period covered; basic tax and penalties; date tax must be paid, while demand letter explains basis of assessment. Must state facts, law, or jurisprudence; otherwise, assessment is void A. Pre-Subic Enron Power Corp (up to 2008) Taxpayer was fairly informed since it was able to categorically explain how assessment came about (Toledo Power Co. vs. CIR) PAN has audit sheet but did not explain how assessment was arrived. Demand letter did not contain the information on law and facts (HPCO Agridev Corp vs. CIR) B. Subic Enron Power Corp v. CIR (Jan, 2009): Basis is stated in the FAN. Signed by the Commissioner or his authorized representative Issued within the prescriptive period under the law or the extended period agreed upon between the parties Served by personal delivery or by registered mail to the proper person FAN is covered by a validly issued letter of authority

CIR vs PRIMETOWN PROPERTY GROUP,INC., CORONA, J.: This petition for review on certiorari[1] seeks to set aside the August 1, 2003 decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 64782 and its February 9, 2004 resolution denying reconsideration.[3] On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax rsespondent paid in 1997. In Yap's letter to petitioner revenue district officer Arturo V. Parcero of Revenue District No. 049 (Makati) of the Bureau of Internal Revenue (BIR),[4] he explained that the increase in the cost of labor and materials and difficulty in obtaining financing for projects and collecting receivables caused the real estate industry to slowdown.[5] As a consequence, while business was good during the first quarter of 1997, respondent suffered losses amounting to P71,879,228 that year.[6] According to Yap, because respondent suffered losses, it was not liable for income taxes.[7] Nevertheless, respondent paid its quarterly corporate income tax and remitted creditable withholding tax from real estate sales to the BIR in the total amount of P26,318,398.32.[8] Therefore, respondent was entitled to tax refund or tax credit.[9] On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional documents to support its claim.[10] Respondent complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for review[11] in the Court of Tax Appeals (CTA). On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax credit.[12] It invoked Section 229 of the National Internal Revenue Code (NIRC): Sec. 229. Recovery of Taxes Erroneously or Illegally Collected. -- No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (emphasis supplied) The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date.[13] The tax court applied Article 13 of the Civil Code which states: Art. 13. When the law speaks of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours, and nights from sunset to sunrise. If the months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last included. (emphasis supplied) Thus, according to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was filed 731 days[14] after respondent filed its final adjusted return, was filed beyond the reglementary period.[15] Respondent moved for reconsideration but it was denied.[16] Hence, it filed an appeal in the CA.[17] On August 1, 2003, the CA reversed and set aside the decision of the CTA.[18] It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. According to the CA: The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap [19] year. In other words, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed.[20] Petitioners moved for reconsideration but it was denied.[21] Thus, this appeal.

Petitioners contend that tax refunds, being in the nature of an exemption, should be strictly construed against claimants.[22] Section 229 of the NIRC should be strictly applied against respondent inasmuch as it has been consistently held that the prescriptive period (for the filing of tax refunds and tax credits) begins to run on the day claimants file their final adjusted returns.[23] Hence, the claim should have been filed on or before April 13, 2000 or within 730 days, reckoned from the time respondent filed its final adjusted return. The conclusion of the CA that respondent filed its petition for review in the CTA within the twoyear prescriptive period provided in Section 229 of the NIRC is correct. Its basis, however, is not. The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return.[24] But how should the two-year prescriptive period be computed? As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to be equivalent to 365 days. In National Marketing Corporation v. Tecson,[25] we ruled that a year is equivalent to 365 days regardless of whether it is a regular year or a leap year.[26] However, in 1987, EO[27] 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides: Sec. 31. Legal Periods. Year shall be understood to be twelve calendar months; month of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; day, to a day of twenty-four hours and; night from sunrise to sunset. (emphasis supplied) A calendar month is a month designated in the calendar without regard to the number of days it may contain.[28] It is the period of time running from the beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month, then up to and including the last day of that month.[29] To illustrate, one calendar month from December 31, 2007 will be from January 1, 2008 to January 31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008 until February 29, 2008.[30] A law may be repealed expressly (by a categorical declaration that the law is revoked and abrogated by another) or impliedly (when the provisions of a more recent law cannot be reasonably reconciled with the previous one).[31] Section 27, Book VII (Final Provisions) of the Administrative Code of 1987 states: Sec. 27. Repealing clause. All laws, decrees, orders, rules and regulation, or portions thereof, inconsistent with this Code are hereby repealed or modified accordingly. A repealing clause like Sec. 27 above is not an express repealing clause because it fails to identify or designate the laws to be abolished.[32] Thus, the provision above onlyimpliedly repealed all laws inconsistent with the Administrative Code of 1987. Implied repeals, however, are not favored. An implied repeal must have been clearly and unmistakably intended by the legislature. The test is whether the subsequent law encompasses entirely the subject matter of the former law and they cannot be logically or reasonably reconciled.[33] Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori. Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the twoyear prescriptive period (reckoned from the time respondent filed its final adjusted return[34] on April 14, 1998) consisted of 24 calendar months, computed as follows:

Year 1

1 2 3 4 5 6 7 8 9

st

nd

rd

th

th

th

th

th

th

10 11 12 Year 2 13 14 15 16 17 18 19 20 21 22 23 24

th

th

th

th

th

th

th

th

th

th

th

st

nd

rd

th

calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month calendar month

April 15, 1998 May 15, 1998 June 15, 1998 July 15, 1998 August 15, 1998 September 15, 1998 October 15, 1998 November 15, 1998 December 15, 1998 January 15, 1999 February 15, 1999 March 15, 1999 April 15, 1999 May 15, 1999 June 15, 1999 July 15, 1999 August 15, 1999 September 15, 1999 October 15, 1999 November 15, 1999 December 15, 1999 January 15, 2000 February 15, 2000 March 15, 2000

to to to to to to to to to to to to to to to to to to to to to to to to

May 14, 1998 June 14, 1998 July 14, 1998 August 14, 1998 September 14, 1998 October 14, 1998 November 14, 1998 December 14, 1998 January 14, 1999 February 14, 1999 March 14, 1999 April 14, 1999 May 14, 1999 June 14, 1999 July 14, 1999 August 14, 1999 September 14, 1999 October 14, 1999 November 14, 1999 December 14, 1999 January 14, 2000 February 14, 2000 March 14, 2000 April 14, 2000

We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period. Accordingly, the petition is hereby DENIED. The case is REMANDED to the Court of Tax Appeals which is ordered to expeditiously proceed to hear C.T.A. Case No. 6113 entitled Primetown Property Group, Inc. v. Commissioner of Internal Revenue and Arturo V. Parcero. No costs.

ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent. DECISION YNARES-SANTIAGO, J.: This petition for review on certiorari assails the decision of the Court of Appeals in CA-G.R. CV No. 09107, dated September 30, 2002,1 which reversed the November 19, 1995 Order of Regional Trial Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994, entitled Testate Estate of Juliana Diez Vda. De Gabriel. The petition was filed by the Estate of the Late Juliana Diez Vda. De Gabriel, represented by Prudential Bank as its duly appointed and qualified Administrator. As correctly summarized by the Court of Appeals, the relevant facts are as follows: During the lifetime of the decedent, Juliana Vda. De Gabriel, her business affairs were managed by the Philippine Trust Company (Philtrust). The decedent died on April 3, 1979. Two days after her death, Philtrust, through its Trust Officer, Atty. Antonio M. Nuyles, filed her Income Tax Return for 1978. The return did not indicate that the decedent had died. On May 22, 1979, Philtrust also filed a verified petition for appointment as Special Administrator with the Regional Trial Court of Manila, Branch XXXVIII, docketed as Sp. Proc. No. R-82-6994. The court a quo appointed one of the heirs as Special Administrator. Philtrusts motion for reconsideration was denied by the probate court. On January 26, 1981, the court a quo issued an Order relieving Mr. Diez of his appointment, and appointed Antonio Lantin to take over as Special Administrator. Subsequently, on July 30, 1981, Mr. Lantin was also relieved of his appointment, and Atty. Vicente Onosa was appointed in his stead. In the meantime, the Bureau of Internal Revenue conducted an administrative investigation on the decedents tax liability and found a deficiency income tax for the year 1977 in the amount of P318,233.93. Thus, on November 18, 1982, the BIR sent by registered mail a demand letter and Assessment Notice No. NARD-78-82-00501 addressed to the decedent c/o Philippine Trust Company, Sta. Cruz, Manila which was the address stated in her 1978 Income Tax Return. No response was made by Philtrust. The BIR was not informed that the decedent had actually passed away. In an Order dated September 5, 1983, the court a quo appointed Antonio Ambrosio as the Commissioner and Auditor Tax Consultant of the Estate of the decedent. On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce collection of the decedents deficiency income tax liability, which were served upon her heir, Francisco Gabriel. On November 22, 1984, respondent filed a Motion for Allowance of Claim and for an Order of Payment of Taxes with the court a quo. On January 7, 1985, Mr. Ambrosio filed a letter of protest with the Litigation Division of the BIR, which was not acted upon because the assessment notice had allegedly become final, executory and incontestable. On May 16, 1985, petitioner, the Estate of the decedent, through Mr. Ambrosio, filed a formal opposition to the BIRs Motion for Allowance of Claim based on the ground that there was no proper service of the assessment and that the filing of the aforesaid claim had already prescribed. The BIR filed its Reply, contending that service to Philippine Trust Company was sufficient service, and that the filing of the claim against the Estate on November 22, 1984 was within the five-year prescriptive period for assessment and collection of taxes under Section 318 of the 1977 National Internal Revenue Code (NIRC). On November 19, 1985, the court a quo issued an Order denying respondents claim against the Estate,2 after finding that there was no notice of its tax assessment on the proper party.3 On July 2, 1986, respondent filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 09107,4 assailing the Order of the probate court dated November 19, 1985. It was claimed that Philtrust, in filing the decedents 1978 income tax return on April 5, 1979, two days after the taxpayers death, had constituted itself as the administrator of the estate of the deceased at least insofar as said return is concerned.5 Citing Basilan Estate Inc. v. Commissioner of Internal Revenue,6 respondent argued that the legal requirement of notice with respect to tax assessments7 requires merely that the Commissioner of Internal Revenue release, mail and send the notice of the assessment to the taxpayer at the address stated in the return filed, but not that the taxpayer actually receive said assessment within the five-year prescriptive period.8 Claiming that Philtrust had been remiss in not notifying respondent of the decedents death, respondent therefore argued that the deficiency tax assessment had already become final, executory and incontestable, and that petitioner Estate was liable therefor.

On September 30, 2002, the Court of Appeals rendered a decision in favor of the respondent. Although acknowledging that the bond of agency between Philtrust and the decedent was severed upon the latters death, it was ruled that the administrator of the Estate had failed in its legal duty to inform respondent of the decedents death, pursuant to Section 104 of the National Internal Revenue Code of 1977. Consequently, the BIRs service to Philtrust of the demand letter and Notice of Assessment was binding upon the Estate, and, upon the lapse of the statutory thirty-day period to question this claim, the assessment became final, executory and incontestable. The dispositive portion of said decision reads: WHEREFORE, finding merit in the appeal, the appealed decision is REVERSED AND SET ASIDE. Another one is entered ordering the Administrator of the Estate to pay the Commissioner of Internal Revenue the following: a. The amount of P318,223.93, representing the deficiency income tax liability for the year 1978, plus 20% interest per annum from November 2, 1982 up to November 2, 1985 and in addition thereto 10% surcharge on the basic tax of P169,155.34 pursuant to Section 51(e)(2) and (3) of the Tax Code as amended by PD 69 and 1705; and b. The costs of the suit. SO ORDERED.9 Hence, the instant petition, raising the following issues: 1. Whether or not the Court of Appeals erred in holding that the service of deficiency tax assessment against Juliana Diez Vda. de Gabriel through the Philippine Trust Company was a valid service in order to bind the Estate; 2. Whether or not the Court of Appeals erred in holding that the deficiency tax assessment and final demand was already final, executory and incontestable. Petitioner Estate denies that Philtrust had any legal personality to represent the decedent after her death. As such, petitioner argues that there was no proper notice of the assessment which, therefore, never became final, executory and incontestable.10 Petitioner further contends that respondents failure to file its claim against the Estate within the proper period prescribed by the Rules of Court is a fatal error, which forever bars its claim against the Estate.11 Respondent, on the other hand, claims that because Philtrust filed the decedents income tax return subsequent to her death, Philtrust was the de facto administrator of her Estate.12 Consequently, when the Assessment Notice and demand letter dated November 18, 1982 were sent to Philtrust, there was proper service on the Estate.13 Respondent further asserts that Philtrust had the legal obligation to inform petitioner of the decedents death, which requirement is found in Section 104 of the NIRC of 1977.14 Since Philtrust did not, respondent contends that petitioner Estate should not be allowed to profit from this omission.15 Respondent further argues that Philtrusts failure to protest the aforementioned assessment within the 30-day period provided in Section 319-A of the NIRC of 1977 meant that the assessment had already become final, executory and incontestable.16 The resolution of this case hinges on the legal relationship between Philtrust and the decedent, and, by extension, between Philtrust and petitioner Estate. Subsumed under this primary issue is the sub-issue of whether or not service on Philtrust of the demand letter and Assessment Notice No. NARD-78-8200501 was valid service on petitioner, and the issue of whether Philtrusts inaction thereon could bind petitioner. If both sub-issues are answered in the affirmative, respondents contention as to the finality of Assessment Notice No. NARD-78-82-00501 must be answered in the affirmative. This is because Section 319-A of the NIRC of 1977 provides a clear 30-day period within which to protest an assessment. Failure to file such a protest within said period means that the assessment ipso jure becomes final and unappealable, as a consequence of which legal proceedings may then be initiated for collection thereof. We find in favor of the petitioner. The first point to be considered is that the relationship between the decedent and Philtrust was one of agency, which is a personal relationship between agent and principal. Under Article 1919 (3) of the Civil Code, death of the agent or principal automatically terminates the agency. In this instance, the death of the decedent on April 3, 1979 automatically severed the legal relationship between her and Philtrust, and such could not be revived by the mere fact that Philtrust continued to act as her agent when, on April 5, 1979, it filed her Income Tax Return for the year 1978. Since the relationship between Philtrust and the decedent was automatically severed at the moment of the Taxpayers death, none of Philtrusts acts or omissions could bind the estate of the Taxpayer. Service on Philtrust of the demand letter and Assessment Notice No. NARD-78-82-00501 was improperly done. It must be noted that Philtrust was never appointed as the administrator of the Estate of the decedent, and, indeed, that the court a quo twice rejected Philtrusts motion to be thus appointed. As of

November 18, 1982, the date of the demand letter and Assessment Notice, the legal relationship between the decedent and Philtrust had already been non-existent for three years. Respondent claims that Section 104 of the National Internal Revenue Code of 1977 imposed the legal obligation on Philtrust to inform respondent of the decedents death. The said Section reads: SEC. 104. Notice of death to be filed. In all cases of transfers subject to tax or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or any of the legal heirs, as the case may be, within two months after the decedents death, or within a like period after qualifying as such executor or administrator, shall give written notice thereof to the Commissioner of Internal Revenue. The foregoing provision falls in Title III, Chapter I of the National Internal Revenue Code of 1977, or the chapter on Estate Tax, and pertains to all cases of transfers subject to tax or where the gross value of the estate exceeds three thousand pesos. It has absolutely no applicability to a case for deficiency income tax, such as the case at bar. It further lacks applicability since Philtrust was never the executor, administrator of the decedents estate, and, as such, never had the legal obligation, based on the above provision, to inform respondent of her death. Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedents death, the consequences thereof, as provided in Section 119 of the National Internal Revenue Code of 1977, merely refer to the imposition of certain penal sanctions on the administrator. These do not include the indefinite tolling of the prescriptive period for making deficiency tax assessments, or the waiver of the notice requirement for such assessments. Thus, as of November 18, 1982, the date of the demand letter and Assessment Notice No. NARD-78-8200501, there was absolutely no legal obligation on the part of Philtrust to either (1) respond to the demand letter and assessment notice, (2) inform respondent of the decedents death, or (3) inform petitioner that it had received said demand letter and assessment notice. This lack of legal obligation was implicitly recognized by the Court of Appeals, which, in fact, rendered its assailed decision on grounds of equity.17 Since there was never any valid notice of this assessment, it could not have become final, executory and incontestable, and, for failure to make the assessment within the five-year period provided in Section 318 of the National Internal Revenue Code of 1977, respondents claim against the petitioner Estate is barred. Said Section 18 reads: SEC. 318. Period of limitation upon assessment and collection. Except as provided in the succeeding section, internal revenue taxes shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. For the purpose 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: Provided, That this limitation shall not apply to cases already investigated prior to the approval of this Code. Respondent argues 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 to effectuate the assessment, and there is no legal requirement that the taxpayer actually receive said notice within the five-year period.18 It must be noted, however, that the foregoing rule requires that the notice be sent to the taxpayer, and not merely to a disinterested party. Although there is no specific requirement that the taxpayer should receive the notice within the said period, due process requires at the very least that such notice actually be received. In Commissioner of Internal Revenue v. Pascor Realty and Development Corporation,19 we had occasion to say: An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer. In Republic v. De le Rama,20 we clarified that, when an estate is under administration, notice must be sent to the administrator of the estate, since it is the said administrator, as representative of the estate, who has the legal obligation to pay and discharge all debts of the estate and to perform all orders of the court. In that case, legal notice of the assessment was sent to two heirs, neither one of whom had any authority to represent the estate. We said: The notice was not sent to the taxpayer for the purpose of giving effect to the assessment, and said notice could not produce any effect. In the case of Bautista and Corrales Tan v. Collector of Internal Revenue this Court had occasion to state that the assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment. It appearing that the person liable for the payment of the tax did not receive the

assessment, the assessment could not become final and executory. (Citations omitted, emphasis supplied.) In this case, the assessment was served not even on an heir of the Estate, but on a completely disinterested third party. This improper service was clearly not binding on the petitioner. By arguing that (1) the demand letter and assessment notice were served on Philtrust, (2) Philtrust was remiss in its obligation to respond to the demand letter and assessment notice, (3) Philtrust was remiss in its obligation to inform respondent of the decedents death, and (4) the assessment notice is therefore binding on the Estate, respondent is arguing in circles. The most crucial point to be remembered is that Philtrust had absolutely no legal relationship to the deceased, or to her Estate. There was therefore no assessment served on the Estate as to the alleged underpayment of tax. Absent this assessment, no proceedings could be initiated in court for the collection of said tax, 21 and respondents claim for collection, filed with the probate court only on November 22, 1984, was barred for having been made beyond the five-year prescriptive period set by law. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 09107, dated September 30, 2002, is REVERSED and SET ASIDE. The Order of the Regional Trial Court of Manila, Branch XXXVIII, in Sp. Proc. No. R-82-6994, dated November 19, 1985, which denied the claim of the Bureau of Internal Revenue against the Estate of Juliana Diez Vda. De Gabriel for the deficiency income tax of the decedent for the year 1977 in the amount of P318,223.93, is AFFIRMED. No pronouncement as to costs.

G.R. No. 166387 January 19, 2009 COMMISSIONER OF INTERNAL REVENUE, Petitioners, vs. ENRON SUBIC POWERCORPORATION, Respondents. RESOLUTION CORONA, J.: In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Commissioner of Internal Revenue (CIR) assails the November 24, 2004 decision1 of the Court of Appeals (CA) annulling the formal assessment notice issued by the CIR against respondent Enron Subic Power Corporation (Enron) for failure to state the legal and factual bases for such assessment. Enron, a domestic corporation registered with the Subic Bay Metropolitan Authority as a freeport enterprise,2 filed its annual income tax return for the year 1996 on April 12, 1997. It indicated a net loss of P7,684,948. Subsequently, the Bureau of Internal Revenue, through a preliminary five-day letter,3 informed it of a proposed assessment of an alleged P2,880,817.25 deficiency income tax.4 Enron disputed the proposed deficiency assessment in its first protest letter.5 On May 26, 1999, Enron received from the CIR a formal assessment notice 6 requiring it to pay the alleged deficiency income tax of P2,880,817.25 for the taxable year 1996. Enron protested this deficiency tax assessment.7 Due to the non-resolution of its protest within the 180-day period, Enron filed a petition for review in the Court of Tax Appeals (CTA). It argued that the deficiency tax assessment disregarded the provisions of Section 228 of the National Internal Revenue Code (NIRC), as amended,8and Section 3.1.4 of Revenue Regulations (RR) No. 12-999by not providing the legal and factual bases of the assessment. Enron likewise questioned the substantive validity of the assessment.10 In a decision dated September 12, 2001, the CTA granted Enrons petition and ordered the cancellation of its deficiency tax assessment for the year 1996. The CTA reasoned that the assessment notice sent to Enron failed to comply with the requirements of a valid written notice under Section 228 of the NIRC and RR No. 12-99. The CIRs motion for reconsideration of the CTA decision was denied in a resolution dated November 12, 2001. The CIR appealed the CTA decision to the CA but the CA affirmed it. The CA held that the audit working papers did not substantially comply with Section 228 of the NIRC and RR No. 12-99 because they failed to show the applicability of the cited law to the facts of the assessment. The CIR filed a motion for reconsideration but this was deemed abandoned when he filed a motion for extension to file a petition for review in this Court. The CIR now argues that respondent was informed of the legal and factual bases of the deficiency assessment against it. We adopt in toto the findings of fact of the CTA, as affirmed by the CA. In Compagnie Financiere Sucres et Denrees v. CIR,11 we held: We reiterate the well-established doctrine that as a matter of practice and principle, [we] will not set aside the conclusion reached by an agency, like the CTA, especially if affirmed by the [CA]. By the very nature of its function, it has dedicated itself to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority on its part, which is not present here. The CIR errs in insisting that the notice of assessment in question complied with the requirements of the NIRC and RR No. 12-99. A notice of assessment is: [A] declaration of deficiency taxes issued to a [t]axpayer who fails to respond to a PreAssessment Notice (PAN) within the prescribed period of time, or whose reply to the PAN was found to be without merit. The Notice of Assessment shall inform the [t]axpayer of this fact, and that the report of investigation submitted by the Revenue Officer conducting the audit shall be given due course. The formal letter of demand calling for payment of the taxpayers deficiency tax or taxes shall state the fact, the law, rules and regulations or jurisprudence on which the assessment is based, otherwise the formal letter of demand and the notice of assessment shall be void.(emphasis supplied)12 Section 228 of the NIRC provides that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made. Otherwise, the assessment is void. To implement the provisions of Section 228 of the NIRC, RR No. 12-99 was enacted. Section 3.1.4 of the revenue regulation reads: 3.1.4. Formal Letter of Demand and Assessment Notice. The formal letter of demand and assessment notice shall be issued by the Commissioner or his duly authorized representative. The letter

of demand calling for payment of the taxpayers deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and assessment notice shall be void. The same shall be sent to the taxpayer only by registered mail or by personal delivery. xxx (emphasis supplied) It is clear from the foregoing that a taxpayer must be informed in writing of the legal and factual bases of the tax assessment made against him. The use of the word shall in these legal provisions indicates the mandatory nature of the requirements laid down therein. We note the CTAs findings: In [this] case, [the CIR] merely issued a formal assessment and indicated therein the supposed tax, surcharge, interest and compromise penalty due thereon. The Revenue Officers of the [the CIR] in the issuance of the Final Assessment Notice did not provide Enron with the written bases of the law and facts on which the subject assessment is based. [The CIR] did not bother to explain how it arrived at such an assessment. Moreso, he failed to mention the specific provision of the Tax Code or rules and regulations which were not complied with by Enron.13 Both the CTA and the CA concluded that the deficiency tax assessment merely itemized the deductions disallowed and included these in the gross income. It also imposed the preferential rate of 5% on some items categorized by Enron as costs. The legal and factual bases were, however, not indicated. The CIR insists that an examination of the facts shows that Enron was properly apprised of its tax deficiency. During the pre-assessment stage, the CIR advised Enrons representative of the tax deficiency, informed it of the proposed tax deficiency assessment through a preliminary five-day letter and furnished Enron a copy of the audit working paper14 allegedly showing in detail the legal and factual bases of the assessment. The CIR argues that these steps sufficed to inform Enron of the laws and facts on which the deficiency tax assessment was based. We disagree. The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the preliminary five-day letter, were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the assessment. These steps were mere perfunctory discharges of the CIRs duties in correctly assessing a taxpayer.15 The requirement for issuing a preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the requirement of what such notice must contain. Just because the CIR issued an advice, a preliminary letter during the pre-assessment stage and a final notice, in the order required by law, does not necessarily mean that Enron was informed of the law and facts on which the deficiency tax assessment was made. The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged factual bases in the advice, preliminary letter and audit working papers did not suffice. There was no going around the mandate of the law that the legal and factual bases of the assessment be stated in writing in the formal letter of demand accompanying the assessment notice. We note that the old law merely required that the taxpayer be notified of the assessment made by the CIR. This was changed in 1998 and the taxpayer must now be informed not only of the law but also of the facts on which the assessment is made.16 Such amendment is in keeping with the constitutional principle that no person shall be deprived of property without due process.17 In view of the absence of a fair opportunity for Enron to be informed of the legal and factual bases of the assessment against it, the assessment in question was void. We reiterate our ruling in Reyes v. Almanzor, et al.:18 Verily, taxes are the lifeblood of the Government and so should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for the Government itself. WHEREFORE, the petition is hereby DENIED. The November 24, 2004 decision of the Court of Appeals isAFFIRMED. No costs.

ALLIED BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE- Formal Letter of Demand on Tax Assessment FACTS: Allied Banking Corporation received a PAN from the BIR which it timely disputed. In response, the BIR issued a Formal Letter of Demand with Assessment Notices. Instead of protesting the FAN, the petitioner filed a Petition for Review with the CTA. The CTA dismissed the Petition stating that it is neither the assessment nor the formal demand letter itself that is appealable before it but instead it should be the decision of the CIR on the disputed assessment ISSUES: Can the Formal Letter of Demand be construed as the final decision of the CIR appealable to the CTA under Republic Act 9282? HELD: YES. This is considered an exception to the general rule on exhaustion of administrative remedies since the CIR is considered estopped from claiming the same principle applies in its case. The tenor of the demand letter is clear that the CIR had already made a final decision and that the remedy of the Petitioner was to appeal the same within 30 days of receipt. This can be gleaned from the use of the terms final decision and appeal which were deemed unequivocal language pointing to the finality of the decision. While the Court cited the rules relative to (a) protesting the FAN and not the PAN and (b) counting the 30 day period to appeal to the CTA from receipt of the decision of the CIR and not issuance of the assessment, this particular case was deemed a clear exception in view of the CIRs own actions.

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. SANTIAGO GANCAYCO, PAREDES, J.: On June 13, 1946, appellee Santiago Gancayco was assessed by the Collector of Internal Revenue for P11,203.19, for various taxes corresponding to the first quarter of the year 1946, and demand for the payment of the same amount within five (5) days from receipt thereof was made. The assessment and demand were made after Gancayco allegedly refused to produce his books of accounts and other records. For failure to make payment, the Collector issued on September 6, 1946, a warrant of Distraint and Levy, to enforce the same. The warrant was not served on Gancayco because his whereabouts could not then be ascertained. The whereabouts of Gancayco remained unknown until October 13, 1947, when he wrote the Collector a letter (Exh. "2" or "H") which contained, among others, the following: ... . It was only recently that I was reminded of my obligation to our Government and I found out after consulting my records and other papers that it is not as high as P11,203.19. xxx xxx xxx I am ready and willing to pay the taxes due the Government but at the same time I hope you will not collect what is not. Based on the foregoing facts and circumstances, I am requesting your consideration to order another investigation and whatever is found to be legally due from me, I will not hesitate paying it. ... . In conclusion, permit me to reiterate my request for reinvestigation and I assure you that I will abide by your decision on the matter and pay the taxes legally due from me. The above letter was answered by the Collector of Internal Revenue on March 3, 1949, more than a year later, wherein he stated that after a reinvestigation of the case, it was found out that the allegations in the letter of October 13, 1947, were not supported by the evidence, with the exception of two items, resulting in the revision of the assessment from P11,203.19 to P10,982.30, plus P100.00 as compromise penalty. Under date of March 14, 1949, Gancayco sent another letter to the Collector, claiming that all his documents and records were being sorted out, in the course of which, he found additional evidence relating to the taxes being collected and asking for some time to prepare and submit such evidence. In response to this letter, the Deputy Collector advised appellee on March 17, that he was given until April 1, 1949. One day before the dateline, or on March 31, 1949, Gancayco wrote the Collector, stating: I am happy to inform you that I have now in my possession the books and documents that will support my objections to the taxes assessed against me. These evidences will prove the following: 1. That I purchased these surplus goods not in my own behalf but in the capacity of an agent or co-buyer of third persons. In this connection, I have copies of the legal papers which show the names of those persons numbering more than seventy in all and the particular items acquired by them. After my purchase, all these equipments passed directly to the hands of third persons and were registered in their names. As an intermediary therefore, it would not be fair to levy the taxes assessed on such equipments against me. The ones who should be liable for such obligations are these third persons who acquired the true ownership of those equipments from the Foreign Liquidation Office through my intercession. 2. I did not actually gain such estimated twenty (20%) percent profit as assessed. My books and documents will bear me out that while it is true that I gained in some of my transactions, my profits did not exceed 20%. In the majority of cases, my deals were on even terms if not on a losing basis. The books and papers that I am ready to present are quite voluminous. I believe it would be for the convenience of all parties concerned if your office should order a reinvestigation of my case. All these evidences are now ready for the inspection of the investigator that you may send. I have also the names and addresses of all the third persons who are the true owners of those equipments. 1wph1.t I therefore request that a thorough reinvestigation of my case be ordered and I am willing to abide by whatever the outcome of the same maybe after a careful study of all the evidences. Nothing in the record would show that action was taken in connection with the above letter. Manifestly, no reinvestigation was conducted or a review of the evidence offered by appellee was made by the Collector or any of his agents or representatives. On May 17, 1960, however, more than ten (10) years after the above letter of Gancayco, the Collector wrote appellee, saying: Your repeated request for the cancellation of said assessments on the ground that the right of this Office to collect the tax has already prescribed is not sustained by law nor judicial precedents.

Recently, the Supreme Court held in the case, entitled "Collector of Internal Revenue vs. Suyoc Consolidated Mining Co., Inc.", G.R. No. L-11527, that the statute of limitations is suspended upon the request of the taxpayer for reinvestigation or reconsideration of its tax liability. xxx xxx xxx Your contention that you purchased the surplus goods from the Foreign Liquidation Office as an agent or co-buyer of third persons and not in your own behalf, is not borne out by the findings of the reinvestigation. In view thereof, it is requested that the amounts of P10,370.19 and P612.11 be paid to the City Treasurer of Manila, within ten (10) days from receipt hereof; otherwise, judicial action will be instituted against you without further notice. Appellee Gancayco must have failed to pay the amount in question, because, on July 19, 1960, the case at bar was presented with the CFI of Manila. On August 3, 1960, Gancayco moved to dismiss the complaint on the ground of prescription, invoking Sec. 332 of the Revenue Code, which provides that court proceedings for the collection of taxes must be instituted within five (5) years after the assessment was made. Here, the original assessment was made on June 13, 1946 and the revised assessment on March 3, 1949. An opposition to the motion to dismiss was supposedly made (we do not find it in the record) and the lower court, on September 30, 1960, denied the motion in an order of the following tenor: Acting on Defendant's motion for dismissal, considering the reasons adduced in support thereof and the opposition thereto, the Court denies the motion for lack of merit, on the authority of Collector of Internal Revenue v. Suyoc Consolidated Mining Co. Inc., G.R. L-11527 promulgated November 25, 1958; Republic of the Philippines v. Luis G. Abraza, G.R. L-14519, promulgated July 26, 1960. A motion to reconsider the above order was denied for lack of merit, on September 3, 1960. In Answer to the complaint, after the customary admissions and denials, Gancayco interposed the following special and affirmative defenses, to wit: 8. That over five years from the date of the assessment had elapsed before the complaint was filed, and hence, the plaintiff is barred by the statute of limitations from enforcing collection thru judicial action; 9. That the alleged assessment against the defendant is erroneous and illegal as the same was arrived at without referring to the books and records and inspite of the fact that the same were at the disposal of the Collector. In sustaining the defense of prescription, the lower court stated: Under the evidence, it appears that the final assessment made by Commissioner of Internal Revenue covering the sales tax due from the defendant for the first quarter of 1946 was made on May 17, 1960, more than five years from the date of the original assessment made on June 13, 1946, or from March 3, 1949 when the Collector of Internal Revenue made his revised assessment (Exh. 3 or 1). It is true that defendant requested for a reinvestigation and reconsideration based on additional records and evidence by letters dated March 14 and 31, 1949 (Exhs. 5 and 6) ; however, the collector gave defendant until April 1, 1949only within which to submit the aforementioned evidence, upon the expiration of which without ouch evidence being presented, it became the duty of the Collector to reiterate its revised assessment, Exhibit 3, and prosecute court action within five years thereafter. This is an imperative duty imposed upon the Collector, which he failed to discharge. Indeed, no action was taken in the tax case until May 17, 1960, or after the lapse of more than 11 years from the request for reinvestigation. However broad and wide the powers and discretion of the Collector (now Commissioner), to allow him to delay action without justifiable reason beyond the five-year period would run counter to the letter, spirit and purpose of the statute of limitations regarding taxes. ... . xxx xxx xxx It results that the f filing of the action on July 19, 1960 comes too late it being based on the final assessment dated May 17, 1960 after the action has long prescribed. The case of Collector vs. Suyoc Consolidated Mining Co., G.R. L-11527 promulgated November 25, 1952 does not improve plaintiff's position due to factual differences between that case and the present case. There in there were several requests for reconsideration and reinvestigation conducted by the taxpayer including an appeal to the conference in the Bureau of Internal Revenue. While the assessment of March 3, 1949 has become anal for lack of appeal to the Court of Tax Appeals, the defense of prescription is not barred in a court proceeding for collection, as here. The observations land conclusions of the lower court are well taken. Under the circumstances stated and found in the decision, it is evident that the right of the State to collect the taxes due from appellee has prescribed. Whether the computation of time starts from June 13, 1946 or March 3, 1949, the filing of the tax collection case on July 19, 1960, is far beyond the period. While it is true that or, March 31,

1949, appellee Gancayco requested a thorough reinvestigation of this case, he, at the same time, placed at the disposal of the Collector all the evidence he had for such purpose. Apparently, the Collector ignored the request, for the records and documents were not at all examined. The act of requesting a reinvestigation alone does not suspend the period. The request should first be granted in order to effect suspension (Collector vs. Suyoc Consolidated, supra; also Republic vs. Ablaza, supra). Moreover, the Collector gave appellee until April 1, 1949, within which to submit his evidence, which the latter did one day before. There were no impediments on the Part of the Collector to file the collection from April 1, 1949. The very letter of the Collector to appellee on May 17, 1960, indicated that the latter had been asking for the cancellation of the assessments in question due to prescription, which only goes to show that in the interim, no action had been taken by the Collector on the request for re-examination of the documents appellee had placed under the Collector's disposal. Sec. 332 of the Revenue Code, among others, provides: (c) Where the assessment of any internal revenue tax has been made within the period of limitation above prescribed such tax may be collected by distraint or levy or by a proceeding in court, but only if begun (1)within five years after the assessment of the tax, ... . (Emphasis supplied). Obviously, the five-year period had long lapsed when the case at bar was instituted. The Solicitor General further argues that even if the five-year period had lapsed, still the case at bar was properly instituted, because the extra-judicial demands upon the appellee tolled the prescriptive period, citing in support thereof provisions of the Civil Code and cases. The argument is untenable. This court said: The only agreement that can suspend the running of the prescriptive period for the collection of taxes by court action is a written agreement between the taxpayer and the Collector of Internal Revenue, entered into before the expiration of the five-year prescriptive period of limitation prescribed by law. (Coll. of Int. Rev. v. Solano, G.R. No. L-11475, July 31, 1958). (See also par. [b] Sec. 332, Revenue Code.) Manifestly, therefore, the extra-judicial demands made, if any, did not serve to suspend or toll the period of prescription, the provisions of the Civil Code notwithstanding. It should be noted, in this connection, that the Internal Revenue Code being a special law, prevails over a general law. WHEREFORE, the decision appealed from is hereby affirmed, without pronouncement as to costs.

Philippine Journalists Inc. v CIRG.R No. 162852December 15, 2004 Facts: The Revenue District Office of the BIR issued a letter of a u t h o r i t y f o r the examination of petitioner Philippine Journalists books of accounts. From theexamination, the petitioner was told that there were deficiency taxes, inclusiveof surcharges, interest and compromise penalty. Then, petitioner, through itsC o m p t r o l l e r , L o r e n z a T o l e n t i n o , e x e c u t e d a w a i v e r o f s t a t u t e o f l i m i t a t ionsp u r s u a n t t o S e c . 2 2 3 a n d S e c . 2 2 4 a n d c o n s e n t e d t o t h e a s s e s s m e n t a n d collection of taxes which may be found due after the examination at any timeafter the lapse of the period of limitations fixed by said Sections 223 and 224a n d o t h e r r e l e v a n t p r o v i s i o n s o f t h e N I R C , u n t i l t h e c o m p l e t i o n o f t h e investigation.Petitioner had a deficiency of P136,952,408 .97. On October 5, 1998, theAssessment Division of the BIR issued Pre-Assessment Notices which informedpetitioner of the results of the investigation. A Final Notice Before Seizure wass e n t t o t h e p e t i t i o n e r b u t t h e l a t t e r m e r e l y q u e s t i o n e d t h e a m o u n t o f t h e deficiency and how the same was arrived.A Warrant of Distraint/Levy was received by petitioner for the deficiency.P e t i t i o n e r f i l e d a P e t i t i o n f o r R e v i e w w i t h t h e C T A , c o n t e n d i n g t h a t n o assessment was received by him; that the warrant of distraint/levy was issuedp r e m a t u r e l y ; a n d t h a t t h e a s s e s s m e n t w a s m a d e b e y o n d t h e 3 - y e a r p e r i o d . Regarding the assessment, the CTA ruled that the assessment was sufficientlyproven by the receipts of the Post Master. As to the premature distraint/levy andthe assessment made beyond the 3-year period, the CTA ruled in favor of thep e t i t i o n e r . T h e w a i v e r o f s t a t u t e o f l i m i t a t i o n s b y t h e p e t i t i o n e r w a s i n v a l i d which resulted in the lapse of the 3 year period for assessment. Consequently,the petition was granted, declaring the order for payment of deficiency tax nulland void. T h e C I R f i l e d a m o t i o n f o r r e c o n s i d e r a t i o n b u t t h e s a m e w a s d e n i e d . Undaunted, the CIR filed an appeal with the CA. The CA reversed the ruling of the CTA, stating that the waiver of limitations was valid and that the assessmentnotices was final and executory. Hence, this appeal. Issue: Whether or not the waiver of limitations was invalid, makin g t h e assessment beyond the 3 year period? Held: Yes, the court ruled that the waiver of limitation was invalid, makingthe assessment beyond the allowable period of 3 years. The waiver of thes t a t u t e o f l i m i t a t i o n s i s n o t a w a i v e r o f t h e r i g h t t o i n v o k e t h e d e f e n s e o f prescription as erroneously held by the Court of Appeals. It is an agreementbetween the taxpayer and the BI R that the period to issue an assessment andcollect the taxes due is extended to a date certain. The waiver does not meanthat the taxpayer relinquishes the right to invoke prescription unequivocallyparticularly where the language of the document is equivocal. For the purposeof safeguarding taxpayers from any unreasonable examination, investigation orassessment, our tax law provides a statute of limitations in the collection of t a x e s . T h u s , t h e l a w o n p r e s c r i p t i o n , b e i n g a r e m e d i a l m e a s u r e , s h o u l d bel i b e r a l l y c o n s t r u e d i n o r d e r t o a f f o r d s u c h p r o t e c t i o n . A s a c o r o l l a r y , t h e exceptions to the law on prescription should perforce be strictly construed.

RCBC vs CIR 522 SCRA 144 Facts: RCBC received a Formal Letter of Demand dated May 25, 2001 from the respondent CIR for its taxliabilities particularly for Gross Onshore Tax in the amount of P53,998,428.29 and Documentary StampT a x f o r i t s S p e c i a l S a v i n g s P l a c e m e n t s i n t h e a m o u n t o f P 4 6 , 7 1 7 , 9 5 2 . 7 6 , f o r t h e t a x a b l e y e a r 1997.Petitioner filed a protest letter/request for reconsideration/reinvestigation pursuant to Section 228 of the NIRC. As the protest was not acted upon by the respondent, petitioner filed a petition for review withthe CTA for the cancellation of the assessments. Respondent filed a motion to resolve first the issue of CTAs jurisdiction, which was granted by the CTA in a Resolution dated September 10, 2003.8 The petition for review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from petitioners submission of documents in support of its protest, as provided under Section228 of the NIRC and Section 11 of R.A. No. 1125, otherwise known as the Law Creating the Court of Tax Appeals. Petitioner did not file a motion for reconsideration or an appeal to the CTA En Banc fromthe dismissal of its petition for review. Consequently, the September 10, 2003 Resolution became finaland executory on October 1, 2003 and Entry of Judgment was made on December 1, 2003.9 Thereafter, respondent sent a Demand Letter to petitioner for the p a y m e n t o f t h e d e f i c i e n c y t a x assessments. On February 20, 2004, petitioner filed a Petition for Relief from Judgment on the ground of excusable negligence of its counsels secretary who allegedly misfiled and lost the September 10, 2003R e s o l u t i o n . T h e C T A Second Division set the case for hearing on April 2, 200411 d u r i n g w h i c h petitioners counsel was present.12 Respondent filed an Opposition13 while petitioner submitted itsManifestation and Counter-Motion. On May 3, 2004, the CTA Second Division rendered a Resolution15denying petitioners Petition for Relief from Judgment. Petitioners motion for reconsideration wasdenied in a Resolution dated November 5, 2004,16 hence it filed a petition for review with the CTA EnBanc, docketed as C.T.A. EB No. 50, which affirmed the assailed Resolutions of the CTA Second Division in a Decision dated June 7, 2005. Ruling: As provided in Sec. 228, the failure of the taxpayer to appeal from an assessment on time rendered theassessment final, executory and demandable. RCBC is precluded from disputing the correctness of theassessment. While the right to appeal a decision of the Commissioner of CTA is merely a statutory remedy, nevertheless the requirement that it must be brought within 30 days is jurisdictional. If a statutoryremedy provides as a condition precedent that the action to enforce it must be commenced within a prescribed time, such requirement is jurisdictional and failure to comply therewith may be raised in aMTD.

LASCONA LAND CO., INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISION PERALTA, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1 dated October 25, 2005 and Resolution2 dated January 20, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 58061 which set aside the Decision3 dated January 4, 2000 and Resolution4 dated March 3, 2000 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 5777 and declared Assessment Notice No. 0000047-93-407 dated March 27, 1998 to be final, executory and demandable. The facts, as culled from the records, are as follows: On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice No. 000004793-4075 against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City, in his Letter6 dated March 3, 1999, which reads, thus: xxxx Subject: LASCONA LAND CO., INC. 1993 Deficiency Income Tax Madam, Anent the 1993 tax case of subject taxpayer, please be informed that while we agree with the arguments advanced in your letter protest, we regret, however, that we cannot give due course to your request to cancel or set aside the assessment notice issued to your client for the reason that the case was not elevated to the Court of Tax Appeals as mandated by the provisions of the last paragraph of Section 228 of the Tax Code. By virtue thereof, the said assessment notice has become final, executory and demandable. In view of the foregoing, please advise your client to pay its 1993 deficiency income tax liability in the amount of P753,266.56. x x x x (Emphasis ours) On April 12, 1999, Lascona appealed the decision before the CTA and was docketed as C.T.A. Case No. 5777. Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and executory. The CIR, however, maintained that Lasconas failure to timely file an appeal with the CTA after the lapse of the 180-day reglementary period provided under Section 228 of the National Internal Revenue Code (NIRC) resulted to the finality of the assessment. On January 4, 2000, the CTA, in its Decision,7 nullified the subject assessment. It held that in cases of inaction by the CIR on the protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse of the one hundred eighty (180)day period, or (2) wait until the Commissioner decides on his protest before he elevates the case. The CIR moved for reconsideration. It argued that in declaring the subject assessment as final, executory and demandable, it did so pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated September 6, 1999 which reads, thus: If the Commissioner or his duly authorized representative fails to act on the taxpayers protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period; otherwise, the assessment shall become final, executory and demandable. On March 3, 2000, the CTA denied the CIRs motion for reconsideration for lack of merit.8 The CTA held that Revenue Regulations No. 12-99 must conform to Section 228 of the NIRC. It pointed out that the former spoke of an assessment becoming final, executory and demandable by reason of the inaction by the Commissioner, while the latter referred to decisions becoming final, executory and demandable should the taxpayer adversely affected by the decision fail to appeal before the CTA within the prescribed period. Finally, it emphasized that in cases of discrepancy, Section 228 of the NIRC must prevail over the revenue regulations.

Dissatisfied, the CIR filed an appeal before the CA.9 In the disputed Decision dated October 25, 2005, the Court of Appeals granted the CIRs petition and set aside the Decision dated January 4, 2000 of the CTA and its Resolution dated March 3, 2000. It further declared that the subject Assessment Notice No. 0000047-93-407 dated March 27, 1998 as final, executory and demandable. Lascona moved for reconsideration, but was denied for lack of merit. Thus, the instant petition, raising the following issues: I THE HONORABLE COURT HAS, IN THE REVISED RULES OF COURT OF TAX APPEALS WHICH IT RECENTLY PROMULGATED, RULED THAT AN APPEAL FROM THE INACTION OF RESPONDENT COMMISSIONER IS NOT MANDATORY. II THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE ASSESSMENT HAS BECOME FINAL AND DEMANDABLE BECAUSE, ALLEGEDLY, THE WORD DECISION IN THE LAST PARAGRAPH OF SECTION 228 CANNOT BE STRICTLY CONSTRUED AS REFERRING ONLY TO THE DECISION PER SEOF THE COMMISSIONER, BUT SHOULD ALSO BE CONSIDERED SYNONYMOUS WITH AN ASSESSMENT WHICH HAS BEEN PROTESTED, BUT THE PROTEST ON WHICH HAS NOT BEEN ACTED UPON BY THE COMMISSIONER.10 In a nutshell, the core issue to be resolved is: Whether the subject assessment has become final, executory and demandable due to the failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC. Petitioner Lascona, invoking Section 3,11 Rule 4 of the Revised Rules of the Court of Tax Appeals, maintains that in case of inaction by the CIR on the protested assessment, it has the option to either: (1) appeal to the CTA within 30 days from the lapse of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment even beyond the 180-day period in which case, the taxpayer may appeal such final decision within 30 days from the receipt of the said decision. Corollarily, petitioner posits that when the Commissioner failed to act on its protest within the 180-day period, it had the option to await for the final decision of the Commissioner on the protest, which it did. The petition is meritorious. Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the Commissioner on the protested assessment, to wit: SEC. 228. Protesting of Assessment. x x x xxxx 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). Respondent, however, insists that in case of the inaction by the Commissioner on the protested assessment within the 180-day reglementary period, petitioner should have appealed the inaction to the CTA. Respondent maintains that due to Lasconas failure to file an appeal with the CTA after the lapse of the 180-day period, the assessment became final and executory. We do not agree. In RCBC v. CIR,12 the Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision.13 This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax Appeals,14 to wit: SEC. 3. Cases within the jurisdiction of the Court in Divisions. The Court in Divisions shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty dayperiod abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code; (Emphasis ours) In arguing that the assessment became final and executory by the sole reason that petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period, respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just one, that is to appeal the inaction of the Commissioner on its protested assessment after the lapse of the 180-day period. This is incorrect. As early as the case of CIR v. Villa,15 it was already established that the word decisions in paragraph 1, Section 7 of Republic Act No. 1125, quoted above, has been interpreted to mean the decisions of the Commissioner of Internal Revenue on the protest of the taxpayer against the assessments. Definitely, said word does not signify the assessment itself. We quote what this Court said aptly in a previous case: In the first place, we believe the respondent court erred in holding that the assessment in question is the respondent Collectors decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11 of Republic Act No. 1125 within which petitioner should have appealed to the respondent court must be counted from its receipt of said assessment. Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a disputed assessment that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the disputed assessment, . . . 16 Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment. It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while we reiterate the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other. Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments.17 Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the Letter18 dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt of the copy of the decision. Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its inaction on the protested assessment. It is imperative that the taxpayers are informed of its action in order that the

taxpayer should then at least be able to take recourse to the tax court at the opportune time. As correctly pointed out by the tax court: x x x to adopt the interpretation of the respondent will not only sanction inefficiency, but will likewise condone the Bureaus inaction. This is especially true in the instant case when despite the fact that respondent found petitioners arguments to be in order, the assessment will become final, executory and demandable for petitioners failure to appeal before us within the thirty (30) day period.19 Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.20 Thus, even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.21 WHEREFORE, the petition is GRANTED. The Decision dated October 25, 2005 and the Resolution dated January 20, 2006 of the Court of Appeals in CA-G.R. SP No. 58061 are REVERSED and SET ASIDE. Accordingly, the Decision dated January 4, 2000 of the Court of Tax Appeals in C.T.A. Case No. 5777 and its Resolution dated March 3, 2000 are REINSTATED.

FISHWEALTH CANNING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE- Court of Tax Appeals FACTS: Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax Appeals issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with the CIR instead of appealing the same to the Court of Tax Appeals within 30 days. The CIR then issued a Preliminary Collection Letter which prompted the Petitioner to file its Petition with the Court of Tax Appeals. CIR argued that the Petition with the Court of Tax Appeals was filed out of time. ISSUE: Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax Appeals? HELD: NO. A Motion for Reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the Court of Tax Appeals.