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Cases Nos.

59-67 AND 87 CIR v GONZALES Facts: Records bear out that the assessment notice and Formal Letter of Demand dated August 7, 2002 were duly served on L !"! on #ctober $, 2002% &rivate res'ondents did not file a motion for reconsideration of the said assessment notice and formal demand( neither did they a''eal to the !ourt of )a* A''eals within the reglementary 'eriod which renders it final, e*ecutory and una''ealable% )he matter was brought to the the De'artment of +ustice% )he ,ecretary of +ustice found that 'etitioner-s claim that there is yet no finality as to L !"!-s 'ayment of its $..7 ta*es since the audit re'ort was still 'ending review by higher authorities, is unsubstantiated and mis'laced% )he !A sustained the findings of the ,ecretary of +ustice% /,,0": $% 1#2 the ta*'ayer may still assail the validity of the assessment which has already become final, e*ecutory and una''ealable 2% )he 3onorable !ourt of A''eals erroneously sustained the findings of the ,ecretary of +ustice who gravely abused his discretion by in4uiring into the validity of a Final Assessment 2otice which has become final, e*ecutory and demandable 'ursuant to ,ection 225 of the )a* !ode of $..7 for failure of 'rivate res'ondent to file a 'rotest against the same R0L/26: $% 2o% ,ection 225 of the 2/R!78$9 'rovides the remedy to dis'ute a ta* assessment within a certain 'eriod of time% /t states that an assessment may be 'rotested by filing a re4uest for reconsideration or reinvestigation within :0 days from recei't of the assessment by the ta*'ayer% 2o such administrative 'rotest was filed by 'rivate

res'ondents see;ing reconsideration of the August 7, 2002 assessment notice and formal letter of demand% &rivate res'ondents cannot belatedly assail the said assessment, which they allowed to la'se into finality, by raising issues as to its validity and correctness during the 'reliminary investigation after the </R has referred the matter for 'rosecution under ,ections 2=> and 2== of the 2/R!%

2% )he ,!, citing the case of

arcos // v !A, ruled the !A was incorrect%

/t is not the De'artment of +ustice which is the government agency tas;ed to determine the amount of ta*es due ****, but the <ureau of /nternal Revenue, whose determinations and assessments are 'resumed correct and made in good faith% )he ta*'ayer has the duty of 'roving otherwise% /n the absence of 'roof of any irregularities in the 'erformance of official duties, an assessment will not be disturbed% "ven an assessment based on estimates is prima facie valid and lawful where it does not a''ear to have been arrived at arbitrarily or ca'riciously% )he burden of 'roof is u'on the com'laining 'arty to show clearly that the assessment is erroneous% Failure to 'resent 'roof of error in the assessment will ?ustify the ?udicial affirmance of said assessment% * * *% oreover, these ob?ections to the assessments should have been raised, considering the am'le remedies afforded the ta*'ayer by the )a* !ode, with the <ureau of /nternal Revenue and the !ourt of )a* A''eals, as described earlier, and cannot be raised now via &etition for !ertiorari, under the 'rete*t of grave abuse of discretion% )he course of action ta;en by the 'etitioner reflects his disregard or even re'ugnance of the established institutions for governance in the scheme of a well@ ordered society% )he sub?ect ta* assessments having become final, e*ecutory and enforceable, the same can no longer be contested by

means of a disguised 'rotest% /n the main, !ertiorari may not be used as a substitute for a lost a''eal or remedy% )his ?udicial 'olicy becomes more 'ronounced in view of the absence of sufficient attac; against the actuations of government% ,ection 225 of the 2/R!78$9 'rovides the remedy to dis'ute a ta* assessment within a certain 'eriod of time% /t states that an assessment may be 'rotested by filing a re4uest for reconsideration or reinvestigation within :0 days from recei't of the assessment by the ta*'ayer% 2o such administrative 'rotest was filed by 'rivate res'ondents see;ing reconsideration of the August 7, 2002 assessment notice and formal letter of demand% &rivate res'ondents cannot belatedly assail the said assessment, which they allowed to la'se into finality, by raising issues as to its validity and correctness during the 'reliminary investigation after the </R has referred the matter for 'rosecution under ,ections 2=> and 2== of the 2/R!%

COMMISSIONER OF INTERNAL REVENUE VS. METRO STAR SUPERAMA INC FA!),: etro ,tar ,u'erama was audited for ta*able year $... and received a &reliminary $=@ day Letter on 2ovember $=, 200$% #n A'ril $$, 2002, it received a Formal Letter of Demand dated A'ril :, 2002% Denying that it received a &re@Assessment 2otice and thus not accorded due 'rocess, /,,0": 1as the &etitioner accorded the re4uired due 'rocessA 3"LD: 2#% ,ince the &etitioner denied recei't of the &re@Assessment 2otice, the burden of 'roving the same shifts to the </R% )o raise the 'resum'tion of recei't, it must be shown that BaC the letter was 'ro'erly addressed with 'ostage 're'aid and BbC that it etro ,tar ,u'erama filed a &etition with the !)A%

was mailed% /f recei't is denied, the </R must then show actual recei't through 'resentation of the registry recei't or, if the same cannot be located, at least a certification from the <ureau of &osts% )he !ourt li;ewise added that the issuance of a &re@Assessment 2otice is a mandatory re4uirement save only on s'ecified instances% )he old rule laid down in !/R vs% enguito that only the FA2 is mandatory no longer a''lies since the same was ruled u'on based on the old 'rovision%

CIR v. A!"#e$a Re%es /n $..:, aria )ancino died leaving behind an estate worth &:2 million% /n $..7, a ta* eanwhile, the 2ational /nternal Revenue !ode

audit was conducted on the estate%

B2/R!C of $..7 was 'assed% "ventually in $..5, the estate was issued a final assessment notice BFA2C demanding the estate to 'ay &$>%. million in ta*es inclusive of surcharge and interest( the estate-s liability was based on ,ection 22. of the 7old9 )a* !ode% ADucena Reyes, one of the heirs, 'rotested the FA2% )he !ommissioner of /nternal Revenue B!/RC nevertheless issued a warrant of distraint andEor levy% Reyes again 'rotested the warrant but in arch $..., she offered a com'romise and was willing to 'ay &$ million in ta*es% 3er offer was denied% ,he continued to wor; on another com'romise but was eventually denied% )he case reached the !ourt of )a* A''eals where Reyes was also denied% /n the !ourt of A''eals, Reyes received a favorable ?udgment% ISSUE& 1hether or not the formal assessment notice is valid% 'ELD& 2o% )he 2/R! of $..7 was already in effect when the FA2 was issued% 0nder ,ection 225 of the 2/R!, (a)*a%e+s s,a-- .e /$0o+1e2 /$ 3+/(/$4 o0 (,e -a3 a$2 (,e 0a#(s o$ 3,/#, (,e assess1e$( /s 1a2e : otherwise, the assessment shall be void% /n the case at bar, the FA2 merely stated the amount of liability to be shouldered by the estate and the law u'on which such liability is based% 3owever, the estate was not

informed in writing of the facts on which the assessment of estate ta*es had been made% )he estate was merely informed of the findings of the !/R% ,ection 225 of the 2/R! being remedial in nature can be a''lied retroactively even though the ta* investigation was conducted 'rior to the law-s 'assage% !onse4uently, the invalid FA2 cannot be a basis of a com'romise, any 'roceeding emanating from the invalid FA2 is void including the issuance of the warrant of distraint andEor levy%

CIR v ENRON S"./# Po3e+ Co+* FA!),: )he </R assessed "nron which countered by filing a &etition for Review with the !)A stating that the assessment disregarded the 'rovisions of the )a* !ode and of RR 2o% $2@.., when the assessment failed to 'rovide the legal and factual bases of the assessment% )he !)A and !A ruled that the assessment notice must not only refer to the su''orting revenue laws or regulations for the assessment but must also ?ustify their a''licability to the factual milieu of the assessment% /,,0": /s the dis'uted assessment validA 3"LD: 2#% )he assessment is not valid% Although the revenue e*aminers discussed their findings with Res'ondent-s re'resentative during the 're@assessment stage, the same, together with the &reliminary Five@Day Letter and &etitioner-s Anne* 6, were not sufficient to com'ly with the 'rocedural re4uirement of due 'rocess% )he )a* !ode 'rovides that a ta*'ayer shall be informed Band not merely FnotifiedG as was the re4uirement beforeC in writing of the law and the facts on which the assessment is made( otherwise, the assessment shall be void% )he use of the word FshallG indicates the mandatory nature of the re4uirement%

FLOUR DANIEL P'IL INC. v. CIR FA!),: /n res'onse to the 'rotest filed by Flour Daniel &hil, the !/R rendered a Final Decision on Dis'uted Assessment wherein res'ondent change it from "*'anded 1ithholding )a* B"1)C to a Final 1ithholding )a* BF1)C of :2H% )hus, the 'etitioner argues that the change in the classification of the assessed deficiency ta* shall be considered as new assessment and hence it is not 'ro'er for the </R to issue a FDDA because it would violate the 'etitioner-s right to due 'rocess and ma;ing a 'rotest for the new assessment% )he res'ondent argues however that no new assessment was made as it was merely an off@shoot of the original assessment% /,,0": 1#2 the change in the classification of the assessed ta* deficiency shall be considered a new assessment R0L/26: Ies% /n the FDDA issued by the </R, the !ommissioner changed the assessment from "1) to F1D% !onsidering that the FDDA constitutes final decision on the matter, 'etitioner was therefore, not given the chance to refute within the administrative level the findings of res'ondent, which is in clear violation of ,ection 225 of the $..7 2/R!, as amended% )he due 'rocess re4uirements have not been com'lied with% 3ence, the FDDA is invalid%

RIZAL C'INA 5AN6ING CORP. CIR #n +uly =, 200$, the !ommissioner of /nternal Revenue B!/RC issued a final assessment notice BFA2C to the RiDal !ommercial <an;ing !or'oration BR!<!C demanding a total ta* liability of about &$00 million% #n +uly 20, 200$ Bwithin the :0 day 'eriod from issuance of FA2 to file a 'rotestC, R!<! filed a 'rotest% )he !/R never

acted on the 'rotest% #n A'ril :0, 2002, R!<! filed an a''eal with the !ourt of )a* A''eals B!)AC% ISSUE& 1hether or not R!<! filed a timely a''eal% 'ELD & 2o% 0nder the law, after the la'se of $50 days within which the !/R is su''osed to rule on the 'rotest J yet the !/R did not, the ta*'ayer has :0 days from said la'se to file an a''eal with the !)A% /n the case at bar, the 'rotest was filed on +uly 20, 200$% From that date, R!<! had until ,e'tember $5, 200$ B80 daysC to submit su''orting documents% )here was no showing that R!<! submitted any such documents% <ut assuming it submitted said documents on ,e'tember $5, 200$, the $50 day 'eriod for the !/R to decide shall commence on that date hence the $50 day 'eriod has la'sed on arch $7, 2002% )hereafter, R!<! has :0 days to a''eal the inaction of the !/R B:0 days from the la'se of the $50 day 'eriodC or until A'ril $8, 2002% R!<! filed its a''eal on A'ril :0, 2002 which was already beyond the :0 day 'eriod% /n such case, the decision of the !/R indirectly denying the 'rotest by reason of inaction is already final and e*ecutory and is no longer a''ealable% COMMISSIONER OF INTERNAL REVENUE VS. FIRST E7PRESS PA8NS'OP COMPAN9 INC. FA!),: !/R issued assessment notices against Res'ondent for deficiency income ta*, KA) and documentary stam' ta* on de'osit on subscri'tion and on 'awn tic;ets% Res'ondent filed its written 'rotest on the assessments% 1hen !/R did not act on the 'rotest during the $50@day 'eriod, res'ondent filed a 'etition before the !)A% /,,0": 3as Res'ondent-s right to dis'ute the assessment in the !)A 'rescribedA 3"LD:

2#% )he assessment against Res'ondent has not become final and una''ealable% /t cannot be said that res'ondent failed to submit relevant su''orting documents that would render the assessment final because when res'ondent submitted its 'rotest, res'ondent attached all the documents it felt were necessary to su''ort its claim% Further, !/R cannot insist on the submission of 'roof of D,) 'ayment because such document does not e*ist as res'ondent claims that it is not liable to 'ay, and has not 'aid, the D,) on the de'osit on subscri'tion% )he term Lrelevant su''orting documentsL are those documents necessary to su''ort the legal basis in dis'uting a ta* assessment as determined by the ta*'ayer% )he </R can only inform the ta*'ayer to submit additional documents and cannot demand what ty'e of su''orting documents should be submitted% #therwise, a ta*'ayer will be at the mercy of the </R, which may re4uire the 'roduction of documents that a ta*'ayer cannot submit% ,ince the ta*'ayer is deemed to have submitted all su''orting documents at the time of filing of its 'rotest, the $50@day 'eriod li;ewise started to run on that same date% RIZAL COMMERCIAL 5AN6ING CORPORATION VS. COMMISSIONER OF

INTERNAL REVENUE FA!),: R!<! received the final assessment notice on +uly =, 200$% /t filed a 'rotest on +uly 20, 200$% As the 'rotest was not acted u'on, it filed a &etition for Review with the !ourt of )a* A''eals B!)AC on A'ril :0, 2002, or more than :0 days after the la'se of the $50@ day 'eriod rec;oned from the submission of com'lete documents% )he !)A dismissed the &etition for lac; of ?urisdiction since the a''eal was filed out of time% /,,0": 3as the action to 'rotest the assessment ?udicially 'rescribedA 3"LD:

I",% )he assessment has become final% )he ?urisdiction of the !)A has been e*'anded to include not only decision but also inactions and both are ?urisdictional such that failure to observe either is fatal% 3owever, if there has been inaction, the ta*'ayer can choose between B$C file a &etition with the !)A within :0 days from the la'se of the $50@day 'eriod #R B2C await the final decision of the !/R and a''eal such decision to the !)A within :0 days after recei't of the decision% )hese o'tions are mutually e*clusive and resort to one bars the a''lication of the other% )hus, if 'etitioner belatedly filed an action based on inaction, it can not subse4uently file another 'etition once the decision comes out% LASCONA LAND INC v. CIR /n arch $..5, the !ommissioner of /nternal Revenue B!/RC issued a formal

assessment notice BFA2C to Lascona Land !o%, /nc% BLL!/C demanding the latter to 'ay &7=:; in ta*es% LL!/ filed a timely 'rotest on A'ril 20, $..5% From said date Bsince no su''orting document was re4uired to be submittedC, the !/R has $50 days to decide on the 'rotest% 3owever, the !/R 'romulgated its decision on received a co'y of the decision on arch :, $...% LL!/ arch $2, $...% #n A'ril $2, $..., LL!/ a''ealed

the decision to the !ourt of )a* A''eals B!)AC% )he !/R moved for the dismissal of the a''eal on the ground that under a revenue regulation issued by the <ureau of /nternal Revenue BRR 2o% $2@..C, if the !/R or its re'resentative failed to act on a 'rotest within the $50@day 'eriod the ta*'ayer may a''eal within :0 days from the la'se of the $50@ day 'eriod to the !)A otherwise, the decision shall become final and e*ecutory( that LL!/ failed to a''eal within the said 'eriod hence the !)A has no ?urisdiction over the case a''ealed by LL!/% ISSUE& 1hether or not the !/R is correct% 'ELD& 2o% )he revenue regulation is invalid% 0nder the law B,ection 225 of the 2ational /nternal Revenue !odeC, a ta*'ayer has two remedies if the !/R failed to act on his 'rotest within the $50@day 'eriod, to wit(

$C the ta*'ayer adversely affected by the decision may a''eal to the !)A within :0 days from recei't of the decision, or 2C may a''eal to the !)A within :0 days from the la'se of the one hundred eighty B$50C@day 'eriod% /nter'reting the above 'rovision, the ta*'ayer has two o'tions in case of inaction by the !/R% First is to a''eal to the !)A within :0 days from the la'se of the $50 day 'eriod( or second, wait for the !/R to issue the decision and then a''eal, if adverse, to the !)A within :0 days from the recei't of the decision by the ta*'ayer Bbecause even if the !/R failed to decide on the case within the $50 day 'eriod, it can still decide on it and may even issue a favorable ?udgment to the ta*'ayer, hence it may be logical to wait and only a''eal if the adverse decision is actually receivedC% /n the case at bar, LL!/ chose to wait for the !/R to decide on the case and it did not a''eal within :0 days from the la'se of the $50@day 'eriod% LL!/ received the adverse decision of the !/R on arch $2, $...% /t a''ealed on A'ril $2, $... which is still within the :0@day 'eriod to a''eal to the !)A% )he revenue regulation in 4uestion is invalid because in effect, it limited the remedy 'rovided for by the law% ,ection 225 of the 2/R! 'revails over the said revenue regulation% )he said revenue regulation cannot validly ta;e away the o'tion of the ta*'ayer to continue waiting, even after the la'se of the $50 day 'eriod, for the !/R to decide on the case and ?ust a''eal, within :0 days from recei't, if the !/R-s ruling is adverse% /t must however be noted that these two remedies are mutually e*clusive%

87.U$/(e2 A/+-/$es vs. Co11/ss/o$e+ o0 I$(e+$a- Reve$"e

Facts: /nternational airline, 'etitioner 0nited Airlines, filed a claim for income ta* refund% &etitioner sought to be refunded the erroneously collected income ta* from in the amount of P5 :;8 8<=.;= on 'assenger revenue from tic;ets sold in the &hili''ines, the

u'lifts of which did not originate in the &hili''ines% )he airlines ceased o'eration originating form the &hili''ines since February 2$, $..5% !ourt of tA* a''eals ruled the 'etitioner is not entitled to a refund because under the 2/R!, income ta* on 6&< also includes gross revenue from carriage of cargoes from the &hili''ines% And u'on assessment by the !)A, it was found out that 'etitioner deducted items from its cargo revenues which should have entitled the government to an amount of P :$%>: million, which is obviously higher than the amount the 'etitioner 'rayed to be refunded% &etitioner argued that the 'etitioner-s su''osed under'ayment cannot offset his claim to a refund as established by well@settled ?uris'rudence% /ssue: 1hether or not 'etitioner is entitled to a refundA 3"Ld: &etitioner was correct in averring that his claim to a refund cannot be sub?ect to offsetting or, as it claimed the offsetting to be, a legal com'ensation under Se#. ;8>A?>=?>a? @Pe(/(/o$e+As >s/1/-a+? (a) +e0"$2 #-a/1 ass"1es (,a( (,e (a) +e("+$ (,a( /( 0/-e2 3as #o++e#(. G/ve$ ,o3eve+ (,e 0/$2/$4 o0 (,e CTA (,a( *e(/(/o$e+ a-(,o"4, $o( -/a.-e "$2e+ Se#. ;8>A?>=?>a? o0 (,e <997 NIRC /s -/a.-e "$2e+ Se#. ;8>A?><? (,e #o++e#($ess o0 (,e +e("+$ 0/-e2 .% *e(/(/o$e+ /s $o3 *"( /$ 2o".(. As s"#, 3e>(,e #o"+(? #a$$o( 4+a$( (,e *+a%e+ 0o+ a +e0"$2.B )he court held that the 'etitioner is not entitled to a refund, 3aving under'aid the 6&< ta* due on its cargo revenues for $..., the amount of the former being even much higher B&:$%>: millionC than the ta* refund sought B&=%2 millionC%