CIR v. ESTATE OF TODA Facts: CIC authorized Benigno P. Toda, Jr., President andowner of 99.

991% of its issued and outstanding capital stock,to sell the Cibeles Building and the two parcels of land onwhich the building stands for an amount of not less than P90million.30 August 1989, Toda purportedly sold the property for P100million to Altonaga, who, in turn, sold the same property on thesame day to Royal Match Inc. (RMI) for P200 million. Thesetwo transactions were evidenced by Deeds of Absolute Salenotarized on the same day by the same notary public.For the sale of the property to RMI, Altonaga paid capital gainstax in the amount of P10 million.On 16 April 1990, CIC filed its corporate annual income taxreturn for the year 1989, declaring, among other things, its gainfrom the sale of real property in the amount of P75,728.021.After crediting withholding taxes of P254,497.00, it paidP26,341,207 for its net taxable income of P75,987,725.On 12 July 1990, Toda sold his entire shares of stocks in CICto Le Hun T. Choa for P12.5 million, as evidenced by a Deedof Sale of Shares of Stocks. Issue: WON this is a case of tax evasion or tax avoidance.Held/Ratio: Tax avoidance and tax evasion are the two mostcommon ways used by taxpayers in escaping from taxation. Tax avoidance is the tax saving device within the meanssanctioned by law. It should be used by the taxpayer in goodfaith and at arms length . Tax evasion is a scheme usedoutside of those lawful means and when availed of, it usuallysubjects the taxpayer to further or additional civil or criminalliabilities. Tax evasion connotes the integration of three factors

: (1) the end to be achieved, i.e., the payment of less than thatknown by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being"evil," in "bad faith," "willfull," or "deliberate and not accidental"; (3) a course of action or failure of action which is unlawful. All these factors the instant case. are present in

That Altonaga was a mere conduit finds support in theadmission of respondent .Estate that the sale to him was partof the tax planning scheme of CIC.The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, i.e., fromCIC to Altonaga, and then from Altonaga to RMI cannot beconsidered a legitimate tax planning. It is tainted with fraud.Here, it is obvious that the objective of the sale toAltonaga was to reduce the amount of tax to be paid. Thetransfer from him to RMI would result to 5% individual capitalgains tax, instead of 35% corporate income tax. Altonagassole purpose of acquiring and transferring title of the propertieson the same day was to create a tax shelter. Altonaga never controlled the property and did not enjoy the normal benefitsand burdens of ownership. The sale to him was merely a taxploy, a sham, and without business purpose and economicsubstance. Doubtless, the execution of the two sales wascalculated to mislead the BIR with the end in view of reducingthe consequent income tax liability.In a nutshell, the intermediary transaction, i.e., thesale of Altonaga, which was prompted more on the mitigationof tax liabilities than for legitimate business purposesconstitutes tax evasion.

REPUBLIC v LIM DE YU

BUTUAN SAWMILL INC. v. CTA SUMMARY Since no percentage tax return was actually filed by taxpayer to reflect the sales of its logs to Japan, the 10-year prescriptive period for cases where returns are not filed applies. Even if an ITR which happens to be the wrong return had been filed, and even considering that the income from said sales were all reflected therein, still, this would not take the place of the correct return which for purposes of tax in question should actually be the percentage tax return. The percentage tax on sale has now been replaced by the 10% VAT. WHEN THERE IS FRAUD Mere understatement of gross earnings not of itself proves fraud. The allegation of fraud with intention to evade the franchise tax has not been proved satisfactorily. The 1st quarter of 1960, the gross receipts of Butuan Sawmill as a franchise grantee amounted to P1, 369,383.10. Only P16, 799.56 represented the alleged unrecorded and under reported receipts of Butuan Sawmill. However, a big portion of the unrecorded receipts of P16, 799.56 was not reflected in the book of accounts of the taxpayer because it represented the cost of the electric current used free of charge by its officer and employees. It cannot be charged that Butuan Sawmill intended to defraud the government of the franchise tax. Fraud, being absent, the right of the government to assess the franchise tax had already prescribed.

partnership. A general partnership is exempt from income tax although it is required to file an income tax return. Profits, whether distributed or not, are considered income of the partners. Acting upon a confidential report, however, that the company posted fictitious expesnes in its books to avoid taxes, the BIR investigated in 1954 the books of the partnership and discovered that the expenses were not covered by receipts, that the names of payees were erased, and that the payees did not report the sums in question in their income tax. The BIR disallowed expense deductions for the year 1948 amounting to P206,380 for being fictitious. Said sum was treated as income of the individual partners, and thus, the BIR assessed P50,956.57 as deficiency income tax against Tan Guan. Tan Guan appealed.

Issue: Whether the deduction claimed by the company as business income should be allowed, and thus absolve Tan Guan of the assessed tax liability.

Held: The Commissioners finding on the facts constituting fraud, proven, and found established by the Court of Tax Appeals, was not rebutted by the taxpayer. Tan Guan did not present any evidence to disprove the findings that the expenses are fictitious; considering that the investigation on Tan Guans liability was made prior to the expiration of the 5-year period to preserve and keep receipts as set fgorth in Section 337 of the Tax Code. As the determination of the Commissioner is presumed correct, it behooves the taxpayers to rebut such presumption. For failure to overcome the burden, Tan Guan or the company cannot claim the expenses as deduction from gross income.

TAN GUAN v CTA En Banc, Bengzon JP (J): 8 concur Facts: In 1947, Tan Guan and Sia Lin, Chinamen, organized and registered the Philippine Surplus Company, a general REPUBLIC v RAZON and JAI-ALAI CORP.

SY CHUICO v COLLECTOR

CIR v CA and CARNATION PHILS., INC.

Whether or not the right of the government to assess taxes has alreadyprescribed despite the waivers executed by the accountant of Kudos. HELD: Supreme Court affirmed the decision of the CTA en banc stating that Section 222of tax code provide that the period to assess and collect taxes may only be extendedupon written agreement between the CIR and the taxpayer following the procedures laiddown on RMO 20.90 and RDAO 05-01 such as: 1. Waiver must in official form and the expiration period must be stated. 2. Waiver must be notarized and must be signed by the duly authorizedrepresentative in case of representation. 3. The revenue officer must sign the waiver indicating that the BIR has acceptedand agreed to the waiver. 4. Both the date of execution by the taxpayer and the acceptance by therevenue officer should be before the expiration of the period agreed upon incase of subsequent waiver.

COMMISSIONER OF INTERNAL REVENUEvs. KUDOS METAL CORPORATION FACTS: Kudos Metal Corporation filed its Income Tax Return (ITR) on April 1999 fortaxable year 1998. However, pursuant to Letter of Authority, the BIR issued threenotices of Presentation of Records to Kudos but Kudos did not comply with the saidnotice. The BIR then issued subpoena duces tecum, thus the review and audit of therecord ensued.However, on December 2001, Pasco, the accountant of Kudos executed anaffidavit of Waiver of Prescription duly notarized and was received by BIR and acceptedthe same by Assistant Commissioner Salazar. Pasco executed second waiver onFebruary 2003 following the process undergone by the first waiver she executed.The BIR later issued a Preliminary Notice of Assessment followed by FormalDemand letter to Kudos asking them to settle their tax liabilities for the year 2008 covering the following: Income Tax 9,693,897.85 VAT 13,962,460.90 EWT 1,712,336.76 Withholding Compensation Tax 247,353.2 4 Penalties 8,000.00 TOTAL 25,624,048.76 On appeal, the Court of Tax Appeal en banc affirmed the decision of the CTA Second Division ruling that the governments right to assess taxes has alreadyprescribed. BIR appealed then appealed to the Supreme Court. ISSUE:

DIGEST 2

FACTS: CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the Statute of Limitations was executed on December 2001. The CTA issued a Resolution canceling the assessment notices issued against Petitioner for having been issued beyond the prescriptive period as the waiver purportedly failed to (a) have the valid officer execute the same (i.e., only the Assistant Commissioner signed it and not the CIR); (b) the date of acceptance was not indicated; (c) the fact of receipt by the taxpayer was not indicated in the original copy.

ISSUE: Has the CIRs right to assess prescribed?

(1)Has the action to protest the assessment judicially prescribed? (2) Whether a taxpayer, by paying the other tax assessments covered by a Waiver of the Statute of Limitations, is consider estopped from questioning the validity of the said waiver (on the basis that the CIR did not sign it) with respect to the other covered but unsettled assessments? HELD: (1) YES. The assessment has become final. The jurisdiction of the CTA has been expanded to include not only decision but also inactions and both are jurisdictional such that failure to observe either is fatal. However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the CTA within 30 days from the lapse of the 180-day period OR (2) await the final decision of the CIR and appeal such decision to the CTA within 30 days after receipt of the decision. These options are mutually exclusive and resort to one bars the application of the other. Thus, if petitioner belatedly filed an action based on inaction, it can not subsequently file another petition once the decision comes out.

HELD: YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-01 are mandatory to give effect to Section 222 of the Tax Code. Specifically, the flaws in the waiver executed by Kudos Metal were as follows: (a) there was no notarized written authority in favor of the signatory for the company; (b) there is no stated date of acceptance by the Commissioner or his representative; and (c) the fact of the receipt of the copy was not indicated in the original waivers. Neither can it be said that by merely executing the waiver the taxpayer is already estopped from disputing an action by the CIR beyond the statutory 3-year period since the exception under the Suyoc case (i.e., when the delays were due to taxpayers acts) does not apply. Note: Requisites of a valid waiver: (i) acceptance date; (ii) expiry date; (iii) signed by authorized officer of taxpayer and BIR; (iv) notarized; (v) fact of receipt must be indicated in the copies

RCBC vs CIR FACTS: RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001. As the protest was not acted upon, it filed a Petition for Review with the Court of Tax Appeals (CTA) on April 30, 2002, or more than 30 days after the lapse of the 180-day period reckoned from the submission of complete documents. The CTA dismissed the Petition for lack of jurisdiction since the appeal was filed out of time. ISSUE:

(2) YES. RCBC is considered estopped through its partial payment of the revised assessments within the extended period provided in the said waivers. Thus, it had impliedly admitted the validity of the said waivers. Had it believed that the waiver was invalid and that the period to assess had effectively prescribed, RCBC could have refused to make any payment based on any assessment against it.

SUMMARY As provided in Sec. 228, the failure of the taxpayer to appeal from an assessment on time rendered the assessment final, executory and demandable. RCBC is precluded from

disputing the correctness of the assessment. 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 statutory remedy 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 a MTD.

complaint prescribed? HELD: No. The action for collection is not barred by prescription. The basis of the complaint filed on August 1961 was the demand letter made by the CIR on August 29, 1958 and not the demand letter of the Bureau of Forestry on January 1949. So that the reckoning date of the 5-year period should be from the date of the BIR letter and not that of the Bureau of Forestry. This must be so because forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them. SUMMARY

MAMBULAO LUMBER COMPANY v. REPUBLIC OF THE PHILIPPINES "Forest charges are internal revenue taxes and the BIR has the sole power and duty to collect them. Thus, an assessment made by the Bureau of Forestry cannot be considered an assessment made by the BIR." FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to Mambulao Lumber Co. demanding for the payment of forest charges and surcharges. Mambulao protested the assessment. On August 29,1958, the BIR likewise wrote a letter to the company demanding payment, which subsequently requested reinvestigation. The BIR gave the company twenty (20) days from receipt within which to submit the results of its verification of payments. For failure to comply and failure to pay its tax liability despite demands, CIR filed a complaint for collection with CFI-Manila on August 25, 1961. The CFI-Manila and Court of Appeals decided against Mambulao ordering it to pay the tax liability. Petitioner argued that the collection is barred by the statute of limitations under Sections 332 of the NIRC. As stated, the collection should be made within the five (5) year period. From 1949 (date when the Bureau of Forestry assessed and demand payment as forestry charges and surcharges) up to 1961 (date of filing of complaint), it is already more than five years. ISSUE: Has the period of filing of collection

The commencement of the 5-year period should be counted from Aug. 29, 1958, the date of the letter of demand of the BIR Commissioner to Mambulao. It is this demand or assessment that is appealable to the CTA. The complaint for collection was filed in the CFI on Aug. 25, 1961, very much within the 5-year period prescribed by Sec. 332 (c) of the Tax Code. The right of the Commissioner to collect the forest charges and surcharges in the amount of P15, 443.55 has not prescribed. It is also not disputed the Mambulao requested for a reinvestigation of its tax liability. In reply, Republic gave Mambulao 20-days from receipt thereto to submit the results of its verification of payments and failure to comply would be an abandonment of the request for reinvestigation. Neither did it appeal to the CTA within 30-days from receipt of the letter, thus making the assessment final and executory.

COMMISSIONER OF INTERNAL REVENUE vs. HAMBRECHT & QUIST PHILIPPINES, INC. FACTS: The assessment against Hambrecht & Quist had become final and unappelable since there was a failure to protest the same within the 30-day period provided by

law. However, the CTA held that the BIR failed to collect within the prescribed time and thus ordered the cancellation of the assessment notice. The CIR disputed the jurisdiction of the CTA arguing that since the assessment had become final and unappealable, the taxpayer can no longer dispute the correctness of the assessment even before the CTA. ISSUE: Can the CTA still take cognizance of an assessment case which has become final and unappealable for failure of the taxpayer to protest within the 30-day protest period? HELD: YES. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or refunds. The CTA law clearly bestows jurisdiction to the CTA even on other matters arising under the National Internal Revenue Code. Thus, the issue of whether the right of the CIR to collect has prescribed, collection being one of the duties of the BIR, is considered covered by the term other matters. The fact that assessment has become final for failure to protest only means that the validity or correctness of the assessment may no longer be questioned on appeal. However, this issue is entirely distinct from the issue of whether the right to collect has in fact prescribed. The Court ruled that the right to collect has indeed prescribed since there was no proof that the request for reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect was never suspended.

extension was up to December 31, 1945. However, Suyoc Consolidated Mining Company (SCMC) due to lost records requested the Commissioner of Internal Revenue (CIR) for further extension. The same was granted and SCMC was allowed to file its returnuntil February 15, 1946. On February 12, 1946, SCMC filed a tentative income tax return. On November 28, 1946, SCMC filed asecond final return. In February 1947, the CIR made an assessment notifying SCMC that is liable for P33k in taxes. The CIR gave SCMC 3 months to pay but the latter failed to make payment. What followed was a series of negotiations as SCMC repeatedly asked for reconsideration and reinvestigation. Due to SCMCs requests, the CIR had to revise the assessment several times. Eventually in July 1955, the CIR made a final assessment notice (FAN) notifying SCMC that it is liable for P24k in taxes. This time, SCMC questioned the validity of the assessment as it now alleged that it was issued beyond the 5 year prescriptive period. (NOTE: Under the National Internal Revenue Code of 1997, prescriptive period for normal assessment is 3 years). The issue reached the Court of Tax Appeals (CTA) which ruled that the assessment issued is void because in the first place, when SCMC requested for a reinvestigation, there was no agreement as to the extension of the prescriptive period; that a mere request for reinvestigation does not automatically suspend the running of the prescriptive period. The CTA ruled that the FAN issued in 1955 was already way beyond the 5 year prescriptive period. ISSUE: Whether or not the CTA is correct. HELD: No. This is one case where a taxpayer is barred from setting up the defense of prescription even though there was not a written agreement. It is true that when a request for reinvestigation is made by the taxpayer, the same does not toll the running of the prescriptive period unless there is a written agreement between the CIR and the taxpayer.

CIR v SUYOC CONSOLDIATED MINING FACTS: Due to the chaos caused by World War II, Congress extended the filing of income tax returns for the year 1941. The

However, in this case, due to the repeated requests of SCMC which were acted upon by the government for good reasons the government was persuaded to delay the final assessment. The applicable principle is fundamental and unquestioned. 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. The tax could have been collected, but the government withheld action at the specific request of SCMC. SCMC is now estopped and should not be permitted to raise the defense of the Statute of Limitations.

REPUBLIC v KER & CO Facts: Petitioner filed before the Regional Trial Court of Davao City apetition for expropriation of portions of two parcels of land owned by respondent. Petitioner needed the parcels of land for the widening of the road component of J.P. Laurel-Buhangin Interchange in Davao City. The Regionaltrial court rendered decision of a fair just compensation for defendant Ker Corporation. However, it was challenged by Petitioner Republic of the Philippines, represented by the Department of Public Works and Highways alleging that just compensation for site must be reduced. Petitioner alleged that when the petition forexpropriation was filed, the tax declaration of the property indicated its assessed value at a lower price. Issue: Whether or not respondent Ker Company was given a decision for fair just compensation. Held: The Supreme Court held that the valuation for the lot Sites are excessive and unreasonable. Just compensation cannot be measured by the assessed value of the property as stated in the tax declaration andschedule of market values. For the purpose of appraisal, the fair market value of the property is taken into account and such value refers to the highest price in terms of money which a property will bring if exposed for sale in the public market. In computing just compensation forexpropriation proceedings, it is the value of the land at the time of the taking or at the time of the filing of the complaint not at the time of the rendition of judgment which should be taken into consideration. 4 Section 4, Rule 67 of the 1997 Rules of Civil Procedure provides that just compensation is to be determined as of the date of the taking or the filing of the complaint whichever came first. On this matter, the appellate court is correct in disregarding petitioner's claim.

SUMMARY A mere request for re-examination or reinvestigation of assessment may not suspend the running of the period of limitation for in such a case there is a need of a written agreement to extend the period between the collector and the taxpayer. There are cases, however, where a taxpayer may be prevented from setting-up the defense of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts, the government has been for good reasons persuaded to postponed collection to make himself feel that the demand was not unreasonable or that no harassment or injustice is meant by the government, and when such situation comes to pass there are authorities that hold, based on weighty reason, that such an attitude or behaviour should not be countenanced if only to protect the interest of the government. 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 damnified. The tax could have been collected, but the government withheld action at the specific request of plaintiff. The plaintiff is now stopped and should not be permitted to raise the defense of statute of limitations.

DIGEST 2 Facts: Petitioner filed before the Regional Trial Court of Davao City a petition for expropriation of portions of two parcels of land owned by respondent. Petitioner needed the parcels of land for the widening of the road component of J.P. Laurel-Buhangin Interchange in Davao City. The Regional trial court rendered decision of a fair just compensation for defendant Ker Corporation. However, it was challenged by Petitioner Republic of the Philippines, represented by the Department of Public Works and Highways alleging that just compensation for site must be reduced. Petitioner alleged that when the petition for expropriation was filed, the tax declaration of the property indicated its assessed value at a lower price.

the date of the taking or the filing of the complaint whichever came first. On this matter, the appellate court is correct in disregarding petitioner's claim. SUMMARY Under Sec. 333 of the Tax Code, the running of the prescriptive period to collect deficiency taxes shall be suspended for the period during which the BIR Commissioner is prohibited from beginning a distraint and levy or instituting a proceeding in court, and for 60 days thereafter. In the case at bar, the pendency of the taxpayers appeal in CTA and in SC had the effect of temporarily staying the hands of the Commissioner. If the taxpayers stand that the pendency of the appeal did not stop the running of the period because the CTA did not have jurisdiction over the case is upheld, taxpayers would be encouraged to delay the payment of taxes in the hope of ultimately avoiding the same. Under the circumstances, the running of the prescriptive period was suspended. REPUBLIC v ACEBEDO

Issue: Whether or not respondent Ker Company was given a decision for fair just compensation.

Held: The Supreme Court held that the valuation for the lot Sites are excessive and unreasonable. Just compensation cannot be measured by the assessed value of the property as stated in the tax declaration and schedule of market values. For the purpose of appraisal, the fair market value of the property is taken into account and such value refers to the highest price in terms of money which a property will bring if exposed for sale in the public market.

CIR vs. WYETH SUACO LAB Facts: An investigation and examination of the books of accounts of Wyeth disclosed that Wyeth was paying royalties to Wyeth International and have also declared cash dividends on September 27, 1973 and these were paid on October 3, 1973. It allegedly failed to remit withholding tax at source and accrued royalties resulting to tax deficiency. Assessment notice were received on December1974 whereas letters/reply were sent on Feb 1975 protesting assessment and requesting their cancellation or withdrawal. On December 10, 1979 petitioner rendered a decision reducing the assessment of withholding tax at source. There after, petitioner issued a warrant of distrait of personal; property and warrant of levy real property. CTA decided in favor of

In computing just compensation for expropriation proceedings, it is the value of the land at the time of the taking or at the time of the filing of the complaint not at the time of the rendition of judgment which should be taken into consideration. 4 Section 4, Rule 67 of the 1997 Rules of Civil Procedure provides that just compensation is to be determined as of

respondent ratiocinating that an assessment of any internal revenue tax within the 5 years period of limitation may be collected by distrait of personal property and warrant of levy of real property. CTA decided in favor of respondent ratiocinating that an assessment of any internal revenue tax within the 5 years period of limitation may be collected by distained or levy by a proceeding in count but only if begun within 5 years after the assessment of the tax. Issue: Whether or not the right to collect deficiency tax at source and sales tax liabilities from private respondent is barred by prescription. Ruling: Settled is a rule that the prescription period provided by law to make collection by distrait or levy by proceeding in court is interrupted once a tax payers requests of reinvestigation or reconsideration of assessment when Wyeth, through SGV and Co protests the assessment and sought its reconsideration on Feb 1975, the prescription period was interrupted. This period started to run again when the BIR served the final assessment of Wyeth on Jan 2, 1980. Since the warrant of distrait and levy were served on Wyeth on March 12, 1980 then only about for months of the five year prescriptive period was used.

Appeals(CTA) asking the said court to enjoin the CIR from enforcing the assessment on the ground that the governments right to collect the assessed taxes has already prescribed; that the CIR has 5 years from December 1974 (issuance of assessment) to collect but it never did and the right has already prescribed in December 1975. The CIR then issued a warrant of distraint/levy in February 1980. Meanwhile, the CIR filed its answer with the CTA. It averred that the running of the prescriptive period was suspended whenWyeth filed its protest; that such protest was a request for reinvestigation and reconsideration, hence, the suspension of the period of prescription. Wyeth however averred that it never requested for a reconsideration or a reinvestigation but rather its protest was a request for cancellation and withdrawal of the assessment, hence, the prescriptive period was never tolled. ISSUE: Whether or not the prescriptive period was suspended. HELD: Yes. What Wyeth asked was a request for a reconsideration and reinvestigation based on the letters it sent to the CIR, to wit: xxx We submit this letter as a follow-up to our protest filed with your office, through our tax advisers, Sycip, Gorres, Velayo & Co., on January 20 and February 10, 1975 regarding alleged deficiency on withholding tax at source of P3,178,994.15 and on percentage tax of P60,855.21, including interest and surcharges, on which we are seeking reconsideration. (emphasis supplied) xxx Further, the assessments issued in 1974 are not yet final. These assessments only became final in December 1979 when the CIR finally denied the protest filed by Wyeth. Hence, the warrant of distraint/levy issued by the CIR in February 1980 was issued well within the prescriptive period for the government to collect the assessed taxes.

DIGEST 2

FACTS: On December 16 and 17, 1974, the Commissioner of Internal Revenue (CIR) issued two assessment notices to Wyeth Suaco Laboratories, Inc. (Wyeth) asking the latter to pay about P2 million in taxes. On January 17, 1975, Wyeth filed its protest. In December 1979, Wyeths protest was denied. On January 18, 1980, Wyeth filed a petition for review with the Court of Tax

QUEROL v COLLECTOR