CIR V. WESTERN PACIFIC CORP, G.R.

NO 18804 (1965)
FACTS: On March 2, 1959, respondent Western Pacific Corp was
assessed deficiency income tax for the year 1953. The assessment
was brought about by the disallowance listed in respondents
return as bad debts
1. The assessment was received by respondent on the same
date (March 2, 1959).
2. On March 5, 1959, CIR wrote a demand letter with the
final breakdown of the assessment.
3. However, on June 29, 1959, Western Pacific Corp
requested for non-assessment, claiming that the claim had
prescribed and that said items should be considered as
allowable deductions
4. On July 30, 1959, CIR denied the request and demanded
payment of the same within 30 days from receipt of
demand
5. Respondent corporation, on September 19, 1959,
requested that it be allowed until September 25 to submit
its formal objections to the assessment. The formal
objections submitted by Western Pacific were identical to
its former objections and as such, CIR denied the request.
6. The CIR, then, sent on October 28, 1959 a letter
demanding payment within 10 days
7. On appeal, CA absolved the respondent from the
assessment however it ruled out that the assessment
letter dated March 2, 1959 was within 5-year prescriptive
period
ISSUE: WON the assessment had prescribed
HELD: No. February 28, 1959 fell on a Saturday. Pursuant to
Republic Act No. 1880, as, implemented by Executive Order No.
25, effective July 1, 1959, all bureaus and offices of the
government, except schools, court, hospitals and health clinics,
hold office only five days a week or from Monday to Friday.
Saturday and Sunday, are constituted public holidays or days of
exemption from labor or work as far as government offices,
including that of respondent Commissioner, are concerned. The
offices and bureaus concerned are officially closed on those days.
So that on February 28, 1959 and March 1, 1959, which
were Saturday and Sunday, respectively, the office of
respondent was officially closed. And where the last day for

doing an act required by law falls on a holiday, the act may

be done on the next succeeding business day. (Section 31,
Revised Administrative Code.) Similarly, in computing any period
of time prescribed by statute, the day of the act after which the
designated period of time begins to run is not included. But the
last day of the period so computed is to be included, unless it is a
Sunday or a legal holiday, in which event the time shall run until
the end of the next day which is neither a Sunday or a holiday
(Section 1, Rule 28, Rules of Court). Consequently, since
February 28, 1959 was a Saturday and the next day, March
1, 1959, a Sunday, respondent had until the next
succeeding business day, March 2, 1959, Monday, within
which to issue the deficiency assessment. The assessment in
question having been issued on March 2, 1959, it was, therefore,
seasonably made.
However, contrary to the ruling of the CTA, the assessment made
by the Commissioner should be maintained, for the simple reason
that when the petition for review was brought to the CTA by
the respondent corporation, the said Court no longer had
jurisdiction to entertain the same. The assessment had long
become final. A petition for review should be presented,
within the reglementary period, as provided for in Section
11, Republic Act No. 1125, which is "thirty (30) days from
receipt of the assessment." The thirty (30) day period is
jurisdictional.
CAB: The assessment was received by the respondent corporation
on March 2, 1959. It was only on June 29, 1959, when said
corporation formally assailed the assessment, on the grounds of
prescription in making the assessment and the impropriety of the
disallowance of the listed deductions. From March 3 to June 29,
1959, manifestly more than thirty (30) days had lapsed and the
assessment became final, executory and demandable.

CIR V. PHOENIX ASSURANCE CO, G.R. NO L-19127 (1965)

FACTS: Phoenix Assurance is a foreign insurance company
organized under the laws of Great Britain, is licensed to do
business in the Philippines.
1. Through its head office, it entered in London into
worldwide reinsurance treaties with various foreign
insurance companies.
2. It agree to cede a portion of premiums received on original
insurances underwritten by its head office, subsidiaries,
and branch offices throughout the world, in consideration
for assumption by the foreign insurance companies of an
equivalent portion of the liability from such original
insurances.
3. Pursuant to such reinsurance treaties, Phoenix Assurance
Co., Ltd., ceded portions of the premiums it earned from
its underwriting business in the Philippines on the years
1952 to 1954.
4. Upon which the Commissioner of Internal Revenue, by
letter of May 6, 1958, assessed the withholding tax for
each year from 1952-1954.
5. On April 1, 1951, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1950, claiming therein,
among others, a deduction of P37,147.04 as net addition
to marine insurance reserve equivalent to 40% of the
gross marine insurance premiums received during the
year.
a. The Commissioner of Internal Revenue disallowed
P11,772.57 of such claim for deduction and
subsequently assessed against Phoenix Assurance
Co., Ltd. the sum of P1,884.00 as deficiency
income tax.
b. The Commissioner assumed that "ninety and
third, days are approximately the length of time
required before shipments reach their destination
or before claims are received by the insurance
companies."
6. On April 1, 1953, Phoenix Assurance Co., Ltd. filed
its Philippine income tax return for 1952, declaring
therein a deduction from gross income of P35,912.25 as
part of the head office expenses incurred for its Philippine
business, computed at 5% on its gross Philippine income.

7. On August 30, 1955 it amended its income tax return

for 1952 by excluding from its gross income the amount
of P316,526.75 representing reinsurance premiums ceded
to foreign reinsurers and further eliminating deductions
corresponding to the coded premiums.
8. The Commissioner of Internal Revenue disallowed
P15,826.35 of the claimed deduction for head office
expenses and assessed a deficiency tax of P5,667.00 on
July 24, 1958.
9. On April 30, 1954, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1953..
10. On August 30, 1955 it amended its 1953 income tax
return.
11. To avoid the prescriptive period provided for in Section 306
of the Tax Code, it filed a petition for review on April 11,
1956 in the Court of Tax Appeals praying for such refund.
After verification of the amended income tax return the
Commissioner of Internal Revenue disallowed P12,304.10
of the deduction representing head office expenses
allocable to Philippine business thereby reducing the
refundable amount to P20,180.00.
12. On April 29, 1955, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1954.
13. On August 1, 1958 the Bureau of Internal Revenue
released the for deficiency income tax for the years
1952 and 1954 against Phoenix Assurance Co., Ltd.
a. The above assessment resulted from the
disallowance of a portion of the deduction claimed
by Phoenix Assurance Co., Ltd. as head office
expenses allocable to its business in the Philippines
fixed by the Commissioner at 5% of the net
Philippine income instead of 5% of the gross
Philippine income as claimed in the returns.
b. Phoenix Assurance Co., Ltd. protested against the
aforesaid assessments for withholding tax and
deficiency income tax. However, the Commissioner
of Internal Revenue denied such protest.
14. Subsequently, Phoenix Assurance Co., Ltd. appealed to the
Court of Tax Appeals.
15. In a decision dated February 14, 1962, the Court of Tax
Appeals allowed in full the decision claimed by Phoenix
Assurance Co., Ltd. for 1950 as net addition to marine

insurance reserve; determined the allowable head office

expenses allocable to Philippine business to be 5% of the
net income in the Philippines; declared the right of the
Commissioner of Internal Revenue to assess
deficiency income tax for 1952 to have prescribed;
absolved Phoenix Assurance Co., Ltd. from payment of the
statutory penalties for non-filing of withholding tax return.
ISSUE: WON the right of CIR to assess the deficiency income tax
for 1952 has already prescribed
HELD: NO.
Phoenix Assurance Co., Ltd. filed its income tax return for
1952 on April 1, 1953 showing a loss of P199,583.93. It
amended said return on August 30, 1955 reporting a tax
liability of P2,502.00. On July 24, 1958, after examination of
the amended return, the Commissioner of Internal Revenue
assessed deficiency income tax in the sum of P5,667.00.
The Court of Tax Appeals found the right of the
Commissioner of Internal Revenue barred by prescription,
the same having been exercised more than five years from
the date the original return was filed.
On the other hand, the Commissioner of Internal Revenue insists
that his right to issue the assessment has not prescribed inasmuch
as the same was availed of before the 5-year period provided for
in Section 331 of the Tax Code expired, counting the running of
the period from August 30, 1955, the date when the
amended return was filed.
Should the running of the prescriptive period commence
from the filing of the original or amended return?
Prescriptive period shall commence from the filing of the
AMENDED RETURN.
The Court of Tax Appeals that the original return was a complete
return containing "information on various items of income and
deduction from which respondent may intelligently compute and
determine the tax liability of petitioner, hence, the prescriptive
period should be counted from the filing of said original return.

THE SC RULED IN FAVOR OF THE CIR: The changes and

alterations embodied in the amended income tax return
substantially MODIFIED the original return.
Considering that the deficiency assessment was based on
the amended return which, as aforestated, is substantially
different from the original return, the period of limitation of
the right to issue the same should be counted from the
filing of the amended income tax return. From August 30,
1955, when the amended return was filed, to July 24, 1958, when
the deficiency assessment was issued, less than five years
elapsed. The right of the Commissioner to assess the deficiency
tax on such amended return has not prescribed.
To strengthen our opinion, we believe that to hold otherwise, we
would be paving the way for taxpayers to evade the payment of
taxes by simply reporting in their original return heavy losses and
amending the same more than five years later when the
Commissioner of Internal Revenue has lost his authority to assess
the proper tax thereunder. The object of the Tax Code is to
impose taxes for the needs of the Government, not to
enhance tax avoidance to its prejudice.

BUTUAN SAWMILL INC V. CTA, G.R. NO L-20601 (1966)

FACTS: Butuan Sawmill, Inc. (BSI) sold logs to Japanese firms at
prices FOB Agusan. The FOB feature of the sales indicated that
the parties intended the title to pass to the buyer upon delivery of
the logs in Agusan on board the vessels that took the goods to
Japan. The sales, being domestic or local, are subject to sales tax
under Sec. 186 of the Tax Code as amended.
1. 2. Upon investigation by the BIR, it was ascertained that
no sales tax return was filed and neither did BSI pay the
corresponding sales tax. For the period Jan. 31, 1951 to
June 8, 1953, the CIR assessed initially assessed BSI the
amount of P40,004.01 but as a result of reinvestigation,
the amount was reduced to P38,917.74, as deficiency sales
tax and surcharge due on its sales of logs to the Japanese
buyers.
2. The lower court held that the amended assessment of the
sales tax and surcharge were domestic or local sales and
therefore subject to sales tax and that the assessment
thereof was made well within the ten year period
prescribed by Sec. 332(a) of the same Code since
petitioners herein omitted to file its sales tax returns for
the years 1951-53, and this omission was discovered only
on Sept. 17.1957.
3. It is clear that the said export sales had been
consummated in the Philippines and hence, subject to
sales tax. Petitioner allege that the filing of its income tax
return, wherein the proceeds of the disputed sales were
declared, is substantial compliance with the requirements
of filing a sales tax return, and if there should be deemed
a return filed, Sec. 331 and not Sec. 332(a) of the Tax
Code providing for a five year prescriptive period within
which to make an assessment and collection of the tax in
question from the time the return was deemed filed,
should be applied to the case at bar.
4. Since petitioner filed its income tax returns for the years
1951, 1952 and 1953, and the assessment was made in
1957 only it further contends that the assessment of the
sales tax corresponding to the years 1951 and 1952 had
already prescribed for having been made outside the five
year period prescribed in Sec. 331 of the Tax Code and
should, therefore, be deducted from the assessment of the
deficiency sales tax made by the BIR.

ISSUE: WON the assessment was made within the prescriptive

period provided by the law.
HELD: Yes.
1. An income tax return cannot be considered as a
return for compensating tax for purposes of
computing the period of prescription under Sec. 331
of the Tax Code and that the taxpayer must file a
return for the particular tax required by law in order
to avail himself of the benefits of Sec. 331 of the Tax
Code; otherwise, if he does not file a return, an
assessment may be made within the time stated in
Sec. 332(a) of the same Code.
2. It is undisputed that petitioner failed to file a return for the
disputed sales corresponding to the years 1951, 1952 and
1953, and this omission was discovered only on September
17, 1957, and that under Section 332(a) of the Tax Code
assessment thereof may be made within ten (10)
years from and after the discovery of the omission to
file the return, it is evident that the lower court
correctly held that the assessment and collection of
the sales tax in question has not yet prescribed.

BISAYA LAND TRANSPORATION CO INC V. CIR, 105 PHIL

1338 (1960)
DOCTRINE: In order that the filing of a return may serve as the
starting point of the period for the making of an assessment, the
return must be as substantive complete as to include the needed
details on which the full assessment may be made, and appellants
have not shown that such was the nature of the return they would
infer had been filed by the corporation.
When there is no provision in the law requiring the filing of return
but the tax is such that its amount cannot be ascertained without
the date that is pertinent thereto, the Commissioner may, by
appropriate regulations, require the filing of the necessary returns.
In any event, with or without such regulations, it is to the interest
of the taxpayer to file said return if he wishes to avail himself of
the benefits of the three-year prescriptive period. If this
notwithstanding, he does not file return at all, then an assessment
may be made at anytime within the ten-year prescriptive period.
FACTS: BLTC acquired equipment from US Commercial Co. which
it used in the operation of its buses without paying the
corresponding taxes.
1. The revenue agents who investigated its books discovered
that its gross receipts of the transportation business from
1946-1951 were not declared for taxation. And from 19451952, petitioner issued freight receipts but the
corresponding documentary stamps were not affixed;
deficiency additional tax was also determined.
2. CIR assessed and demanded P4,949.91consisting of 1)
compensating tax, 2) common carriers percentage tax, 3)
documentary stamp tax, and 4) additional residence tax.
3. January 11, 1955, BLTC filed a petition for review with the
CTA which upheld the assessment. But ruled that the
deficiency common carriers percentage tax for 1946, the
1st quarter of 1947, and the additional residence tax of
1947 were barred by the statute of limitations. Both
parties appealed.
4. Petitioner alleged that CTA erred in not holding that the
compensating and residence tax have also prescribed
because the period of prescription should be computed
from the filing of its income tax returns. And that the

compensating, documentary stamp, and common carrier

percentage tax were not chargeable.
ISSUE: Has the assessment made by the CIR been barred by
Statute of Limitations?
HELD: No.
The income tax returns were not introduced in evidence, therefore,
there was no means to determine what data were included to
apprise the BIR that the company should pay the compensating
tax.
When there is no provision in the law requiring the filing of
return but the tax is such that its amount cannot be
ascertained without the date that is pertinent thereto, the
Commissioner may, by appropriate regulations, require the
filing of the necessary returns. In any event, with or without
such regulations, it is to the interest of the taxpayer to file said
return if he wishes to avail himself of the benefits of the three-year
prescriptive period. If this notwithstanding, he does not file
return at all, then an assessment may be made at anytime
within the ten-year prescriptive period.

TUPAZ V. HON ULEP, G.R. NO 12777 (1999)

DOCTRINE: By its nature, the tax violation can only be committed
after service of notice and demand for payment of the deficiency
taxes upon the tax payer. Hence, it cannot be said that the
offense been committed as early as 1980 upon filing of the income
tax return.
FACTS: State Prosecutor filed with the Metropolitan Trial Court
(MeTC), Quezon City an information against herein petitioner
Petronila C. Tupaz and her late husband, Jose J. Tupaz, Jr., as
corporate officers of El Oro Engravers Corporation for nonpayment
of deficiency in corporate income tax for the year 1979 but was
later dismissed and denied upon reconsideration. Subsequently,
the same prosecutor filed two (2) informations before Regional
Trial Court (RTC), for the same alleged non-payment of deficiency
of corporate income tax for the year 1979, one was raffled to
Branch 105 while the other to Branch 86. Respondent Judge Ulep
issued an order directing the prosecution to withdraw the
information in Branch 86 after discovering that said information
was identical to that filed with Branch 105. The prosecutor
withdrew the information but later on filed a motion to reinstate
the same, stating that the motion to withdraw information was
made through palpable mistake, and the result of excusable
neglectto which the respondent Judge granted the motion over
the objections of the petitioner. Petitioner files this petition
assailing that respondent Judge committed a grave abuse of
discretion in reinstating the information because the offense has
prescribed and exposed her to double jeopardy. Petitioner argues
that while Section 318 and 319 of the National Internal Revenue
Code (NIRC) of 1997 provide a five (5) year period of limitation for
the assessment and collection of internal revenue taxes, Batas
Pambansa Blg. 700 (enacted on February 22, 1984), amended the
two (2) sections and reduced the period to three (3) years. As
provided under B.P. Blg. 700, the Bureau of Internal Revenue
(BIR) has three (3) years to assess the tax liability, counted from
the last day of filing the return or from the date the return is filed,
whichever comes later. Since the tax return was filed in April
1980, the assessment made on July 1984 was beyond the three
(3) year prescriptive period.
ISSUES:
1. Whether or not the offense has prescribed

2. Whether or not the reinstatement of the criminal

information has exposed petitioner to double jeopardy
HELD: As to the first issue, the Supreme Court ruled in the
negative. The shortened period of three (3) years prescribed
under B.P. Blg. 700 is not applicable to petitioner. B.P. Blg. 700
specifically states that the shortened period of three years shall
apply to assessments and collections of internal revenue beginning
taxable year 1984. The deficiency income tax under consideration
is for taxable year 1979. Thus, the period of assessment is still
five (5) years, under the old law. The income tax return was filed
in April 1980. Hence, the July 16, 1984 tax assessment was
issued within the prescribed period of five (5) years, from the last
day of filing the return, or from the date the returns is filed,
whichever comes later.
Neither is there prescription for the prescription of criminal action
by the BIR on June 8, 1989. Petitioner was charged with failure to
pay deficiency income tax after repeated demands by the taxing
authority. In Lim, Sr. v. Court of Appeals, we stated that by its
nature the violation could only be committed after service of notice
and demand for payment of the deficiency taxes upon the
taxpayer. Hence, it cannot be said that the offense has been
committed as early as 1980, upon filing of the income tax return.
This is so because prior to the finality of the assessment, the
taxpayer has not committed any violation for nonpayment of the
tax. The offense was committed only after the finality of the
assessment coupled with taxpayer's willful refusal to pay the taxes
within the allotted period. In this case, when the notice of
assessment was issued on July 16, 1984, the taxpayer still had
thirty (30) days from receipt thereof to protest or question the
assessment. Otherwise, the assessment would become final and
unappealable. As he did not protest, the assessment became final
and unappealable on August 16, 1984. Consequently, when the
complaint for preliminary investigation was filed with the
Department of Justice on June 8, 1989, the criminal action was
instituted within the five (5) year prescriptive period.
On the second issue, the Supreme Court ruled on the
affirmative. The reinstatement of the information would expose her
to double jeopardy. An accused is placed in double jeopardy if he
is again tried for an offense for which he has been convicted,

acquitted or in another manner in which the indictment against

him was dismissed without his consent. In the instant case, there
was a valid complaint filed against petitioner to which she pleaded
not guilty. The court dismissed the case at the instance of the
prosecution, without asking for accused-petitioner's consent. This
consent cannot be implied or presumed. Such consent must be
expressed as to have no doubt as to the accused's conformity. As
petitioner's consent was not expressly given, the dismissal of the
case must be regarded as final and with prejudice to the re-filing
of the case. Consequently, the trial court committed grave abuse
of discretion in reinstating the information against petitioner in
violation of her constitutionally protected right against double
jeopardy.

AZNAR V. CIR. 58 SCRA 519

Matias H. Aznar who died on May 18, 1958, predecessor in interest
of herein petitioner, during his lifetime as a resident of Cebu City,
filed his income tax returns on the cash and disbursement basis.
B.I.R. Examiner Honorio Guerrero ascertain the taxpayer's true
income and discovered that from 1946 to 1951, his net worth had
increased every year, which increases in net worth was very much
more than the income reported during 1946-1951
Based on the above findings of Examiner Guerrero, respondent
Commissioner, in his letter dated November 28, 1952,
notified the taxpayer (Matias H. Aznar) of the assessed tax
delinquency.
CIR, thru the City Treasurer of Cebu, placed the properties
of Matias H. Aznar under distraint and levy to secure
payment of the deficiency income tax in question. Aznar
filed his petition for review of the case with the Court of Tax
Appeals..
Court of Tax Appeals - the lower court concluded that the tax
liability of the late Matias H. Aznar for the year 1946 to 1951,
inclusive should be P227,788.64 minus P96.87 representing the
tax credit for 1945, or P227,691.77
ISSUE/HELD: Petitioner's contention is that the provision of
law applicable to this case is the period of five years
limitation upon assessment and collection from the filing of
the returns provided for in See. 331 of the National Internal
Revenue Code. He argues that since the 1946 income tax
return could be presumed filed before March 1, 1947 and
the notice of final and last assessment was received by the
taxpayer on March 2, 1955, a period of about 8 years had
elapsed and the five year period provided by law (Sec. 331
of the National Internal Revenue Code) had already
expired. The same argument is advanced on the taxpayer's return
for 1947, which was filed on March 1, 1948, and the return for
1948, which was filed on February 28, 1949.
Respondents, on the other hand, are of the firm belief that
regarding the prescriptive period for assessment of tax returns,

Section 332 of the National Internal Revenue Code should apply

because, as in this case, "(a) In the case of a false or fraudulent
return with intent to evade tax or of a failure to file a return, the
tax may be assessed, or a proceeding in court for the collection of
such tax may be begun without assessment, at any time within ten
years after the discovery of the falsity, fraud or omission" (Sec.
332 (a) of the NIRC).
We believe that the proper and reasonable interpretation of said
provision should be that in the three different cases of (1) false
return, (2) fraudulent return with intent to evade tax, (3) failure to
file a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment, at
any time within ten years after the discovery of the (1) falsity, (2)
fraud, (3) omission.
Our stand that the law should be interpreted to mean a
separation of the three different situations of false return,
fraudulent return with intent to evade tax, and failure to file
a return is strengthened immeasurably by the last portion
of the provision which segregates the situations into three
different classes, namely "falsity", "fraud" and "omission".
That there is a difference between "false return" and
"fraudulent return" cannot be denied. While the first merely
implies deviation from the truth, whether intentional or not, the
second implies intentional or deceitful entry with intent to evade
the taxes due.
The ordinary period of prescription of 5 years within which
to assess tax liabilities under Sec. 331 of the NIRC should
be applicable to normal circumstances, but whenever the
government is placed at a disadvantage so as to prevent its
lawful agents from proper assessment of tax liabilities due
to false returns, fraudulent return intended to evade
payment of tax or failure to file returns, the period of ten
years provided for in Sec. 332 (a) NIRC, from the time of
the discovery of the falsity, fraud or omission even seems to
be inadequate and should be the one enforced. There being
undoubtedly false tax returns in this case, We affirm the
conclusion of the respondent Court of Tax Appeals that Sec. 332
(a) of the NIRC should apply and that the period of ten years

within which to assess petitioner's tax liability had not expired at

the time said assessment was made.
The lower court's conclusion regarding the existence of fraudulent
intent to evade payment of taxes was based merely on a
presumption and not on evidence establishing a willful filing of
false and fraudulent returns so as to warrant the imposition of the
fraud penalty. The fraud contemplated by law is actual and not
constructive. It must be intentional fraud, consisting of deception
willfully and deliberately done or resorted to in order to induce
another to give up some legal right. Negligence, whether slight or
gross, is not equivalent to the fraud with intent to evade the tax
contemplated by the law. It must amount to intentional wrongdoing with the sole object of avoiding the tax. It necessarily
follows that a mere mistake cannot be considered as fraudulent
intent, and if both petitioner and respondent Commissioner of
Internal Revenue committed mistakes in making entries in the
returns and in the assessment, respectively, under the inventory
method of determining tax liability, it would be unfair to treat the
mistakes of the petitioner as tainted with fraud and those of the
respondent as made in good faith.
We conclude that the 50% surcharge as fraud penalty authorized
under Section 72 of the Tax Code should not be imposed, but
eliminated from the income tax deficiency for each year from 1946
to 1951, inclusive.
WHEREFORE, the decision of the Court of Tax Appeals is modified
in so far as the imposition of the 50% fraud penalty is concerned,
and affirmed in all other respects. The petitioner is ordered to pay
to the Commissioner of Internal Revenue, or his duly authorized
representative, the sum of P151,762.23, representing deficiency
income taxes for the years 1946 to 1951, inclusive, within 30 days
from the date this decision becomes final. If the said amount is not
paid within said period, there shall be added to the unpaid amount
the surcharge of 5%, plus interest at the rate of 12% per annum
from the date of delinquency to the date of payment, in
accordance with Section 51 of the National Internal Revenue Code.

REPUBLIC V. LIM DE YU, 10 SCRA 738 (1964)

FACTS: Respondent Lim de Yu filed her yearly income tax returns
from 1948 through 1953. BIR assed the taxes due thereon and
respondent paid them accordingly
1. On July 17, 1956, BIR assessed respondent deficiency
income tax for the years 1945 to 1953.
2. Lim de Yu protested the assessment and requested a
reinvestigation.
3. On August 30, 1956, respondent signed a waiver of the
statute of limitations under NIRC as a condition to the
reinvestigation requested.
4. Thereafter, on July 18, 1958, BIR issued respondent
income tax notices for the year 1948 to 1953 amounting to
P35,379.63. The last assessment included the basic
deficiency income tax and 50% surcharge
5. Petitioner claims that the lower court erred in ruling that
(1) the deficiency income taxes due from Lim for the years
1049, 1949 and 1956 were not assessed on tine; and (2)
in dismissing the case, CIRs right to collect had already
prescribed. Petitioner maintains that since the respondent
filed false or fraudulent returns (the annual net income
reported in the returns were much less than what was
computed by BIR), under Sec 332(a) NIRC, BIR had 10
years from the date of the discovery of the fraud or falsity,
i.e. May 25, 1955, to assess the taxes or file a collection
suit.
ISSUE: WON CIRs right to collect based on the assessment had
already prescribed
HELD: As to the years 1948 to 1950, it had already prescribed.
Fraud must not only be alleged in the complaint, it should also be
established. It appears that BIR was not sure as to the
amounts of respondents net income since it arrived at
different computations on 3 different occasions. Fraud not
having been proven, the period of limitation for assessment
was five years from the filing of the return (Sec 331). The
right to assess or collected for the years 1948 to 1950 had
already prescribed when BIR issued the deficiency tax
assessment on July 17, 1956.

The tax years 1948 to 1950 cannot be deemed included in the

waiver of the statute of limitations under the NIRC executed by
the respondent on August 30, 1956. The 5-year period
assessment, counted from the date the return is filed, may be
extended upon the agreement of the CIR and the taxpayer, but
such agreement must be made before the expiration of the original
period.
However, the waiver validly covers the tax years 1951 and
1952, since the 5-year period had not yet elapsed when the
said waiver was executed. With respect to the tax year
1953, the waiver was not necessary because the
assessment was within the original 5-year period provided
by law (July 18, 1958).
Respondents theory that collection could be made only up to the
end of the period of extension stated in the waiver (December 31,
1958) is without merit. Assessment and collection are different.
Thus, although under the waiver Lim consented to the
assessment and collection if not made later than
December 31, 1958, such expiration must be deemed to
refer only to the extension of the assessment period.
Insofar as collection is concerned, the period does not apply
because otherwise the effect of the waiver would be to
shorten the legal period for that purpose. As such, BIR had
within 5 years from 1958 within which to file his action,
which was actually filed in 1959.
Hence, respondent is liable to pay the deficiency income taxes due
for the years 1951, 1952 and 1953 plus 5% surcharge and 1%
monthly interest until full satisfaction.

BASILAN ESTATES INC V. CIR, G.R. NO L-22492 (1967)

FACTS: A Philippine corporation engaged in the coconut industry,
Basilan Estates, Inc., with principal offices in Basilan City, filed on
March 24, 1954 its income tax returns for 1953 and paid an
income tax of P8,028.
1. On February 26, 1959, the Commissioner of Internal
Revenue, per examiners' report of February 19, 1959,
assessed Basilan Estates, Inc., a deficiency income tax.
2. On non-payment of the assessed amount, a warrant of
distraint and levy was issued but the same was not
executed because Basilan Estates, Inc. succeeded in
getting the Deputy Commissioner of Internal Revenue to
order the Director of the district in Zamboanga City to hold
execution and maintain constructive embargo instead.
3. Because of its refusal to waive the period of prescription,
the corporation's request for reinvestigation was not given
due course, and on December 2, 1960, notice was served
the corporation that the warrant of distraint and levy
would be executed.
4. On December 20, 1960, Basilan Estates, Inc. filed before
the Court of Tax Appeals a petition for review of the
Commissioner's assessment, alleging AMONG OTHERS
prescription of the period for assessment and collection.
5. On October 31, 1963, the Court of Tax Appeals found that
there was no prescription and affirmed the deficiency
assessment in toto.
ISSUE: WON the period for assessment and collection has
prescribed
HELD: No.
There is no dispute that the assessment of the deficiency tax was
made on February 26, 1959; but the petitioner claims that it never
received notice of such assessment or if it did, it received the
notice beyond the five-year prescriptive period.
To show prescription, the annotation on the notice "No
accompanying letter 11/25/" is advanced as indicative of the fact
that receipt of the notice was after March 24, 1959, the last date
of the five-year period within which to assess deficiency tax, since
the original returns were filed on March 24, 1954.

Although the evidence is not clear on this point, We cannot accept

this interpretation of the petitioner, considering the presence of
circumstances that lead Us to presume regularity in the
performance of official functions.
The notice of assessment shows the assessment to have been
made on February 26, 1959, well within the five-year period. On
the right side of the notice is also stamped "Feb. 26, 1959"
denoting the date of release, according to Bureau of Internal
Revenue practice.
The Commissioner himself in his letter (Exh. H, p. 84 of BIR
records) answering petitioner's request to lift, the warrant of
distraint and levy, asserts that notice had been sent to petitioner. I
In the letter of the Regional Director forwarding the case to the
Chief of the Investigation Division which the latter received on
March 10, 1959 (p. 71 of the BIR records), notice of assessment
was said to have been sent to petitioner. Subsequently, the Chief
of the Investigation Division indorsed on March 18, 1959 (p. 24 of
the BIR records) the case to the Chief of the Law Division. There it
was alleged that notice was already sent to petitioner on February
26, 1959. These circumstances pointing to official performance of
duty must necessarily prevail over petitioner's contrary
interpretation.
Besides, even granting that notice had been received by the
petitioner late, as alleged, under Section 331 of the Tax Code
requiring five years within which to assess deficiency taxes, the
assessment is deemed made when notice to this effect is
released, mailed or sent by the Collector to the taxpayer
and it is not required that the notice be received by the
taxpayer within the aforementioned five-year period.

ARCHES V. BELLOSILLO, 20 SCRA 32

FACTS: Jose Arches filed on Feb. 27, 1954, his income tax return
for 1953. Within 5 years, or on February 26, 1959, deficiency
income tax and residence tax assessments were issued against
him.
Said assessments not having been disputed, the Republic
represented by the BIR Regional Director, filed suit on December
29, 1960, in the municipal court, to recover the sum of P4,441.25
as deficiency income tax and additional residence tax for 1953.
Arches then moved to dismiss the complaint on the ground that it
did not expressly show the approval of the Revenue Commissioner,
as required by the Tax Code, and on the ground of prescription.
The municipal court denied the motion. Archess motion to
reconsider was also denied, he resorted to the CFI on a petition
for certiorari and prohibition assailing the order denying his motion
to dismiss. The trial court dismissed the petition.
ISSUE: WON the approval of the CIR is needed before instituting a
case.
HELD: Petitioner would make much of the lack of approval of the
Revenue Commissioner. In this case, such requisite is not
jurisdictional, but one relating to capacity to sue or affecting the
cause of action only.So, in ruling on said question, whatever error
if any the municipal court committed, was merely an error of
judgment, not correctible by certiorari.
Neither was there grave abuse on the part of the municipal court
in ruling that the express approval of the Revenue Commissioner
himself was not necessary. The court relied upon
Memorandum
Order
No.
V-634
of
the
Revenue
Commissioner, approved by the Finance Secretary, wherein
the former's functions regarding the administration and
enforcement of revenue laws and regulations powers
broad enough to cover the approval of court actions as
required in the Tax Code were expressly delegated to the
Regional Directors. This regulation, the issuance of which
was authorized by statute, has the force and effect of
law. To rely upon it, hence, would not be tantamount to
whimsical and arbitrary exercise of judgment.

The verification by the Regional Director of the complaint

constitutes sufficient approval thereof already. It states,
that said Director has caused the preparation of the
complaint and that he has read the allegations thereof and
they are true and correct to the best of his knowledge and
belief.
Petitioner-appellant would also raise the question of
prescription. Again, this is not jurisdictional. And, We have
already ruled that the proper prescriptive period for
bringing civil actions is five years from the date of the
assessment. The three-year period urged by petitioner
under Section 51 (d) refers only to the summary remedies
of distraint and levy. Here, the action was commenced one
year, ten months and three days after the assessments
were made; hence, well within the period.
Wherefore, the dismissal of appellant's petition for certiorari by the
Court of First Instance is hereby affirmed.

SY CHUICO V. COLLECTOR, 107 PHIL 428

DOCTRINE: For the purposes of amusement tax, the term
"GROSS RECEIPTS" embraces all the receipts of the proprietor or
operator of the business. Prescription is evidentiary in nature.
FACTS: Petitioner was the owner and operator of the La Loma
Cabaret in QC from 1926 to January 1956. It charged its
customers P0.30 per dance: P0.10 entrance fee and the remaining
P0.20 to be paid to the "bailarinas" after the dance. The
customers were informed of the fees by means of posters found in
conspicuous places of the cabaret stating:
1. From January 1947 - August 1950, petitioner declared
in his return only the following gross receipts:
o receipts from gate admissions at P0.10 each,
P59,160.40;
o receipts from restaurant sales, P5,339.90;
o receipts from bar sales, P47,459.10,
o --- and paid thereon a 10 % amusement tax of
P11,197.40.
2. Petitioner failed to declare for tax purposes the P0.20
dance fee. Thus, respondent assessed against him a
deficiency amusement tax, including50 % surcharge of
P17,616.05. As well as P300.00 penalty in settlement of
his violation of Section 260 of the Tax Code and the
Bookkeeping Regulations.
3. Petitioner appealed to the CTA which affirmed the
contention of respondent holding petitioner liable to pay
P17,616.05 as deficiency amusement tax and surcharge
for January 1947 - August, 1950; but, CTA rejected the
P300.00 penalty alleging lack of power or authority to
order the payment of such penalty. Hence, this petition.
4. Petitioner contends that because those dance fees go to
the "bailarinas", they could not be considered as part of
the gross receipts of the cabaret.
ISSUES:
1. Should the gross receipts include the dance fee charged by
the cabaret for its "bailarinas"? YES.

2. Has the collection of the tax in question already

prescribed? SC considered that petitioner waived this
defense.
HELD: Section 260 of the Tax Code applies. The owner or
operator of a cabaret is required to pay an amusement tax
equivalent to 10 % of the gross receipts of his business
irrespective of whether or not any amount is charged or paid for
admission. The law further adds that, for the purposes of
amusement tax, the term "GROSS RECEIPTS" embraces all the
receipts of the proprietor or operator of the business. A cabaret is
a place of amusement where customers go because of their desire
to dance and where the "bailarinas" are the main attraction.
Dancing is the main business and customers patronize the place
attracted by the "bailarinas". As a matter of fact, "bailarinas" are
the indispensable factor in the operation of the business. Whatever
is paid to them should, therefore, be considered as paid on
account of the business, and as such it should be considered as
part of petitioner's gross receipts.
RE SURCHARGE: While there is no direct evidence to show actual
fraud on the part of petitioner, the circumstances found by the CTA
indicate that he has deliberately omitted in his book a
sizeable portion of his taxable income which in substance
amounts to fraud.
RE PRESCRIPTION: This was not raised as an issue in the petition
for review filed in the CTA. It was not even touched by him in the
memorandum he submitted. There is, therefore, enough reason to
believethat petitioner has waived this defense and so it
cannot now be entertained. To hold otherwise would be to
deprive respondent of his right to show the contrary, this matter
being evidentiary in nature.

CIR V. ATLAS CONSOLIDATED MINING, G.R. NO 31230-32

(2000)

CIR V. CA & CARNATION PHILS INC, G.R. NO 115712 (2000)

FACTS: Carnation Phils. Inc. (Carnation), filed its
Corporation Annual Income Tax Return for taxable year
ending
September
30,
1981;
and
its
Manufacturers/Producers Percentage Tax Return for the
quarter ending September 30, 1981. 5
On October 13, 1986, March 16, 1987 and May 18, 1987,
Carnation, through its Senior Vice President Jaime O.
Lardizabal, signed three separate "waivers of the Statute of
Limitations Under the National Internal Revenue Code"
wherein it waives the running of the prescriptive period
provided for in sections 318 and 319 and other related
provisions of the National Internal Revenue Code and
consents to the assessment and collection of the taxes
which may be found due after reinvestigation and
reconsideration at anytime before or after the lapse of the
period of limitations fixed by said sections 318 and 319 and
other relevant provisions of the National Internal Revenue
Code, but not after (13 April 1987 for the earlier-executed waiver,
or June 14, 1987 for the later waiver, or July 30, 1987 for the
subsequent waiver, as the case may be). However, the taxpayer
(petitioner herein) does not waive any prescription already accrued
in its favor.
The waivers were not signed by the BIR Commissioner or any of
his agents.
On August 5, 1987, Carnation received BIR's letter of demand
dated July 29, 1987 asking the said corporation to pay deficiency
income tax.
In a basic protest dated August 17, 1987, Carnation disputed the
assessments and requested a reconsideration and reinvestigation
thereof.
These protests were denied by the BIR Commissioner in a letter
dated March 15, 1988.
Whereupon, Carnation appealed to the CTA. On January 26, 1993,
the CTA issued the questioned order nulling and voiding the

assessments for having been issued

prescriptive period provided by law.

beyond

the

five-year

defense of prescription and remains binding in accordance with the

terms and conditions set forth in the waiver.

ISSUE: WON the 3 waivers signed by private respondent are valid

and binding as to toll the prescriptive period for assessment

Petitioner's submission is inaccurate. The same tax code is clear on

the matter, to wit:
Sec. 319.Exceptions as to period of limitation of
assessment and collection of taxes.(a) . . .
(b) Where before the expiration of the time
prescribed in the preceding section for the
assessment of the tax, both the Commissioner of
Internal Revenue and the taxpayer have consented
in writing to its assessment after such time, the
tax may be assessed at anytime prior to the
expiration of the period agreed upon. The period
so agreed upon may be extended by subsequent
agreement in writing made before the expiration of
the period previously agreed upon.

HELD:
Sec. 318 (now Section 203) of the National Internal Revenue
Code, the law then applicable reads:
Sec 318.Period of Limitations 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. (emphasis ours)
Carnation filed its annual income tax and percentage tax
returns for the fiscal year ending September 30, 1981 on
January 15, 1982 and November 20, 1981, respectively. In
accordance with the above-quoted provision of law, private
respondent's 1981 income and sales taxes could have been
validly assessed only until January 14, 1987 and November
19, 1986, respectively. However, Carnation's income and
sales taxes were assessed only on July 29, 1987, beyond
the five-year prescriptive period.
Petitioner BIR Commissioner contends that the waivers signed by
Carnation were valid although not signed by the BIR Commissioner
because (a) when the BIR agents/examiners extended the period
to audit and investigate Carnation's tax returns, the BIR gave its
implied consent to such waivers; (b) the signature of the
Commissioner is a mere formality and the lack of it does not
vitiate binding effect of the waivers; and (c) that a waiver is not a
contract but a unilateral act of renouncing ones right to avail of the

Verily, we discern no basis for overruling the aforesaid conclusions

arrived at by the Court of Appeals. In fact, there is every reason to
leave undisturbed the said conclusions, having in mind the precept
that all doubts as to the correctness of such conclusions will be
resolved in favor of the Court of Appeals.
What is more, the waivers in question reveal that they are
in no wise unequivocal, and therefore necessitates for its
binding effect the concurrence of the Commissioner of
Internal Revenue. In fact, in his reply dated April 18, 1995,
the Solicitor General, representing the Commissioner of
Internal Revenue, admitted that subject waivers executed
by Carnation were "for end in consideration of the approval
by the Commissioner of Internal Revenue of its request for
reinvestigation and/or reconsideration of its internal
revenue case involving tax assessments for the fiscal year
ended September 30, 1981 which were all pending at the
time". On this basis neither implied consent can be
presumed nor can it be contended that the waiver required
under Sec. 319 of the Tax Code is one which is unilateral
nor can it be said that concurrence to such an agreements a
mere formality because it is the very signatures of both the
Commissioner of Internal Revenue and the taxpayer which
give birth to such a valid agreement.

CIR V. BF GOODRICH PHILS, G.R. NO 104171 (1999)

FACTS: BF Goodrich was an American-owned and controlled
corporation. As a condition for approving the manufacture of tires
and other rubber products, the Central Bank required that it
should develop a rubber plantation.
1. In compliance with this requirement, it purchased from the
Philippine government, certain parcels of land and there
developed a rubber plantation.
2. On August 2, 1973, the justice secretary rendered an
opinion stating that, upon the expiration of the Parity
Amendment, the ownership rights over public agricultural
lands, including the right to dispose or sell their real
estate, would be lost.
3. On the basis of this Opinion, private respondent sold to
Siltown Realty, its Basilan landholding for P500,000. In
accord with the terms of the sale, Siltown Realty, leased
the land to private respondent for a period of 25 years,
with an extension of another 25 years at the latter's
option.
4. The books and accounts of private respondent were
examined for the purpose of determining its tax liability for
taxable year 1974. The examination resulted in the April
23, 1975 assessment of for deficiency income tax, which it
duly paid.
5. Subsequently, the BIR also examined Siltown's business,
income and tax liabilities. The BIR issued against private
respondent on October 10, 1980, an assessment for
deficiency in donor's tax in relation to the sale of its
Basilan landholdings to Siltown. The BIR deemed the
consideration for the sale insufficient.
6. On November 24, 1980, private respondent contested this
assessment. On April 9, 1981, it received another
assessment dated March 16, 1981, which increased the
amount demanded for the alleged deficiency donor's tax,
surcharge, interest and compromise penalty.
7. Private respondent appealed the correctness and the
legality of these last two assessments.
ISSUE: WON petitioner's right to assess herein deficiency donor's
tax has indeed prescribed as ruled by public respondent Court of
Appeals.

HELD: The petition has no merit. Applying this provision of law to

the facts at hand, it is clear that the October 16, 1980 and the
March 1981 assessments were issued by the BIR beyond the fiveyear statute of limitations.
The
subsequent
assessment
made
by
the
respondent
Commissioner on October 40, 1980, modified by that of March 16,
1981, violates the law. Involved in this petition is the income of
the petitioner for the year 1974, the returns for which were
required to be filed on or before April 15 of the succeeding year.
The returns for the year 1974 were duly filed by the petitioner,
and assessment of taxes due for such year including that on the
transfer of properties on June 21, 1974 was made on April 13,
1975 and acknowledged by Letter of Confirmation terminating the
examination on this subject.
For the purpose of safeguarding taxpayers from any unreasonable
examination, investigation or assessment, our tax law provides
a statute of limitations in the collection of taxes. Thus, the
law on prescription, being a remedial measure, should be
liberally construed in order to afford such protection. As a
corollary, the exceptions to the law on prescription should
perforce be strictly construed.
Sec. 15 of the NIRC, on the other hand, provides that "[w]hen a
report required by law as a basis for the assessment of any
national internal revenue tax shall not be forthcoming within the
time fixed by law or regulation, or when there is reason to believe
that any such report is false, incomplete, or erroneous, the
Commissioner of Internal Revenue shall assess the proper tax on
the best evidence obtainable." Clearly, Section 15 does not provide
an exception to the statute of limitations on the issuance of an
assessment, by allowing the initial assessment to be made on the
basis of the best evidence available. Having made its initial
assessment in the manner prescribed, the commissioner could not
have been authorized to issue, beyond the five-year prescriptive
period, the second and the third assessments under consideration
before us.
Nor is petitioner's claim of falsity sufficient to take the questioned
assessments out of the ambit of the statute of limitations. It is
possible that real property may be sold for less than adequate

consideration for a bona fide business purpose; in such event, the

sale remains an "arm's length" transaction.
Since the BIR failed to demonstrate clearly that private
respondent had filed a fraudulent return with the intent to
evade tax, or that it had failed to file a return at all, the
period for assessments has obviously prescribed. Such
instances of negligence or oversight on the part of the BIR cannot
prejudice taxpayers, considering that the prescriptive period was
precisely intended to give them peace of mind.
Based on the foregoing, a discussion of the validity and legality of
the assailed assessments has become moot and unnecessary.

CIR V. PASCOR REALTY, G.R. NO 128315 (1999)

DOCTRINE: 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. Accordingly, an
affidavit, which was executed by revenue officers stating the tax
liabilities of a taxpayer and attached to a criminal complaint for tax
evasion, cannot be deemed an assessment that can be questioned
before the Court of Tax Appeals.
FACTS: By virtue of a Letter of Authority, BIR Commissioner Jose
U. Ong authorized 2 Revenue Officers to examine the books of
accounts and other accounting records of Pascor Realty (PRDC)
for the years 1986 - 1988. Examination resulted in a
recommendation for the issuance of an assessment in the
amounts of P7,498,434.65 and P3,015,236.35 for the years 1986
and 1987, respectively.
1. CIR then filed a criminal complaint before the DOJ against
the PRDC, its President Rogelio A. Dio, and its Treasurer
Virginia S. Dio, alleging evasion of taxes (P10,513,671).
Private respondents disputed the tax assessment and tax
liability. Private respondents received a subpoena from the
DOJ in connection with the criminal complaint filed by the
BIR against them.
2. May 17, 1995, CIR denied the urgent request for
reconsideration/reinvestigation on the ground that no
formal assessment has as yet been issued by the
Commissioner.
3. Private respondents elevated the case to the CTA on a
petition for review; CIR filed an MTD on the ground that
CTA has no jurisdiction over the subject matter, as there
was no formal assessment issued against the petitioners.
CTA denied the said MTD; CIR also did not file an answer
nor move to reconsider the resolution.
4. Instead, the CIR filed this petition with the CA alleging that
CTA acted with grave abuse of discretion and without
jurisdiction.
5. CA sustained the CTA and dismissed the petition. Hence,
this recourse to SC.

6. CA held that the tax court committed no grave abuse of

discretion in ruling that the Criminal Complaint for tax
evasion filed by the CIR with the DOJ constituted an
assessment of the tax due, and that the said
assessment could be the subject of a protest. By definition,
an assessment is simply the statement of the details and
the amount of tax due from a taxpayer. Based on this
definition, the details of the tax contained in the BIR
examiners Joint Affidavit, which was attached to the
criminal Complaint, constituted an assessment. Since the
assailed Order of the CTA was merely interlocutory and
devoid of grave abuse of discretion, a petition for certiorari
did not lie.
7. Petitioner argues that the filing of the criminal complaint
with the DOJ cannot be construed as a formal assessment
of private respondents tax liabilities. This position is based
on Section 205 of the NIRC which provides that remedies
for the collection of deficient taxes may be by either civil or
criminal action. Likewise, petitioner cites Section 223(a)
of the same Code, which states that in case of failure to
file a return, the tax may be assessed or a proceeding in
court may be begun without assessment.
8. Respondents, on the other hand, maintain that an
assessment is not an action or proceeding for the collection
of taxes, but merely a notice that the amount stated
therein is due as tax and that the taxpayer is required to
pay the same. Thus, qualifying as an assessment was the
BIR examiners Joint Affidavit, which contained the details
of the supposed taxes due from respondent for taxable
years ending 1987 and 1988, and which was attached to
the tax evasion Complaint filed with the DOJ.
Consequently, the denial by the BIR of private
respondents request for reinvestigation of the disputed
assessment is properly appealable to the CTA.
ISSUE: Could the Affidavit-Report attached to the criminal
Complaint filed with the DOJ constituted an assessment that could
be questioned before the Court of Tax Appeals? NO.
HELD: Neither the NIRC nor the revenue regulations governing the
protest of assessments provide a specific definition or form of an
assessment. However, the NIRC defines the specific functions and

effects of an assessment. To consider the affidavit attached to the

Complaint as a proper assessment is to subvert the nature of an
assessment and to set a bad precedent that will prejudice innocent
taxpayers.
Not all documents coming from the BIR containing a computation
of the tax liability can be deemed assessments. An assessment
must be sent to and received by a taxpayer, and must demand
payment of the taxes described therein within a specific period.
Thus, the NIRC imposes a 25% penalty, in addition to the tax due,
in case the taxpayer fails to pay the deficiency tax within the time
prescribed for its payment in the notice of assessment. Likewise,
an interest of 20% per annum, or such higher rate as may be
prescribed by rules and regulations, is to be collected from the
date prescribed for its payment until the full payment.
The issuance of an assessment is vital in determining the period of
limitation regarding its proper issuance and the period within
which to protest it.

Section 203: provides that internal revenue taxes must be

assessed within 3 years from the last day within which to
file the return.
Section 222: specifies a period of 10 years in case a
fraudulent return with intent to evade was submitted or in
case of failure to file a return.
Section 228: states that said assessment may be protested
only within 30 days from receipt thereof.

Necessarily, the taxpayer must be certain that a specific document

constitutes an assessment. Otherwise, confusion would arise
regarding the period within which to make an assessment or to
protest the same, or whether interest and penalty may accrue
thereon. That the said document is a notice duly sent to the
taxpayer. Indeed, an assessment is deemed made only when
the collector of internal revenue releases, mails or sends
such notice to the taxpayer.
In the present case, the revenue officers Affidavit merely
contained a computation of respondents tax liability. It did not
state a demand or a period for payment. Worse, it was addressed
to the justice secretary, not to the taxpayers.

That the BIR examiners Joint Affidavit attached to the Criminal

Complaint contained some details of the tax liabilities of private
respondents does not ipso facto make it an assessment. The
purpose of the Joint Affidavit was merely to support and
substantiate the Criminal Complaint for tax evasion. Clearly, it was
not meant to be a notice of the tax due and a demand to the
private respondents for payment thereof.
In addition, what private respondents sent to the commissioner
was an MR of the tax evasion charges filed, not of an assessment.
This is to request for reconsideration of the tax evasion charges
against my client, PASCOR Realty
ADDITIONAL ISSUE: Assessment Not Necessary Before Filing of
Criminal Complaint
Private respondents maintain that the filing of a criminal complaint
must be preceded by an assessment. This is incorrect, because
Section 222 of the NIRC specifically states that in cases where a
false or fraudulent return is submitted or in cases of failure to file a
return such as this case, proceedings in court may be commenced
without an assessment.
Furthermore, Section 205 mandates that the civil and criminal
aspects of the case may be pursued simultaneously.
To reiterate, said Section 222 states that an assessment is not
necessary before a criminal charge can be filed. This is the general
rule. Private respondents failed to show that they are entitled to an
exception. Moreover, the criminal charge need only be supported
by a prima facie showing of failure to file a required return. This
fact need not be proven by an assessment.
PROCEDURE: The issuance of an assessment must be
distinguished from the filing of a complaint. Before an assessment
is issued, there is, by practice, a pre-assessment notice sent to the
taxpayer. The taxpayer is then given a chance to submit position
papers and documents to prove that the assessment is
unwarranted. If the commissioner is unsatisfied, an assessment
signed by him or her is then sent to the taxpayer informing the
latter specifically and clearly that an assessment has been made

against him or her. In contrast, the criminal charge need not go

through all these. The criminal charge is filed directly with the
DOJ. Thereafter, the taxpayer is notified that a criminal case had
been filed against him, not that the commissioner has issued an
assessment. It must be stressed that a criminal complaint is
instituted not to demand payment, but to penalize the taxpayer for
violation of the Tax Code.

MARCOS II V. CA,CIR & DE GUZMAN, 273 SCRA 46

CIR V. SUYOC CONSOLIDATED MINING, 104 PHIL 819

FACTS: Due to the chaos caused by World War II, Congress
extended the filing of income tax returns for the year 1941. The
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 return until February 15, 1946. On February 12,
1946, SCMC filed a tentative income tax return. On November 28,
1946, SCMC filed a second 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
prescriptive period for normal assessment is 3 years).

of

1997,

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: WON 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. 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.

PHILIPPINE JOURNALISTS INC V. CIR, G.R. NO 162582

(2004)
DOCTRINE: The law prescribing a limitation of actions for the
collection of the income tax is beneficial both to the Government
and to its citizens; to the Government because tax officers would
be obliged to act promptly in the making of assessment, and to
citizens because after the lapse of the period of prescription
citizens would have a feeling of security against unscrupulous tax
agents who will always find an excuse to inspect the books of
taxpayers, not to determine the latters real liability, but to take
advantage of every opportunity to molest peaceful, law-abiding
citizens. Without such a legal defense taxpayers would furthermore
be under obligation to always keep their books and keep them
open for inspection subject to harassment by unscrupulous tax
agents. The law on prescription being a remedial measure should
be interpreted in a way conducive to bringing about the beneficent
purpose of affording protection to the taxpayer within the
contemplation of the Commission which recommend the approval
of the law. (Republic of the Phils. v. Ablaza)
A waiver of the statute of limitations under the NIRC, to a
certain extent, is a derogation of the taxpayers right to security
against prolonged and unscrupulous investigations and must
therefore be carefully and strictly construed.
It is an agreement between the taxpayer and the BIR that the
period to issue an assessment and collect the taxes due is
extended to a date certain. The waiver does not mean that the
taxpayer relinquishes the right to invoke prescription unequivocally
particularly where the language of the document is equivocal. For
the purpose of safeguarding taxpayers from any unreasonable
examination, investigation or assessment, our tax law provides a
statute of limitations in the collection of taxes. Thus, the law on
prescription, being a remedial measure, should be liberally
construed in order to afford such protection. As a corollary, the
exceptions to the law on prescription should perforce be strictly
construed.
The waiver is not a unilateral act by the taxpayer or the BIR, but is
a bilateral agreement between two parties to extend the period to
a date certain. The conformity of the BIR must be made by either
the Commissioner or the Revenue District Officer.

FACTS: The case arose from the Annual Income Tax Return filed
by petitioner for the calendar year ended December 31, 1994
which presented a net income of P30,877,387.00 and the tax
due of P10,807,086.00. After deducting tax credits for the year,
petitioner paid the amount of P10,247,384.00.
1. August 10, 1995, Revenue District Office issued Letter of
Authority (LOA) to examine petitioners books of account
and other accounting records for internal revenue taxes for
January 1 - December 31, 1994.
2. Petitioner was told that there were deficiency taxes,
inclusive of surcharges, interest and compromise penalty
3. August 29, 1997, the Revenue District Officer invited
petitioner to send a representative to an informal
conference on September 15, 1997.
o SEPTEMBER 22, 1997, petitioners Comptroller,
Lorenza Tolentino, executed a "Waiver of the Statute
of Limitation Under the National Internal
Revenue Code (NIRC)" which waived the running of
the prescriptive period provided by Sections 223 and
224 of the NIRC and consented to the assessment and
collection of taxes which may be found due after the
examinationat any time after the lapse of the period of
limitations fixed until the completion of the
investigation.
4. July 2, 1998, Revenue Officer submitted his audit report
recommending the issuance of an assessment and
deficiency taxes of P136,952,408.97.
5. October 5, 1998, BIR issued Pre-Assessment Notices
informing petitioner of the results of the investigation.
6. December 9, 1998, BIR issued Assessment/Demand
stating the following deficiency taxes, inclusive of interest
and compromise penalty for a Total of P111,291,214.46
7. March 16, 1999, a Preliminary Collection Letter was
sent to the petitioner to pay the assessment within (10)
days from receipt of the letter.
8. November 10, 1999, a Final Notice for Seizure was
issued giving the petitioner (10) days from receipt to pay.
o November 24, 1999, Petitioner received a copy of the
final notice
o November 26, 1999, petitioner asked to be clarified
how the tax liability of P111M was reached and

9.
10.
11.

12.

requested an extension of (30) days from receipt of

the clarification within which to reply.
Petitioner asserted that its records do not show receipt of
Tax Assessment/Demand. Petitioner also contested that
the assessment had no factual and legal basis.
March 28, 2000, a Warrant of Distraint and/or Levy was
received by the petitioner.
Petitioner filed a Petition for Review with the CTA
complaining among others that the assessment, having
been made beyond the 3-year prescriptive period, is null
and void.
May 14, 2002, CTA granted the petition. It ruled that
since the subject assessments were issued beyond the
three-year prescriptive period, it becomes imperative to
rule on the validity of the waiverallegedly executedon
September 22, 1997, for if this court finds the same to be
ineffective, then the assessments must necessarily fail.
CTA considered the waiver to be without any binding
effect because it was an unlimited waiver. CTA found
the waiver executed by Phil. Journalists to be invalid for
the following reasons: (1) it does not indicate a definite
expiration date; (2) it does not state the date of
acceptance by the BIR; and (3) Phil. Journalist, the
taxpayer, was not furnished a copy of the waiver.
o

under RMO No. 20-90, the waiver must be executed in

three (3) copies, the second copy of which is for the
taxpayer. It is likewise required that the fact of receipt
by the taxpayer of his/her file copy be indicated in the
original copy. Again, respondent failed to comply.

13. August 12, 2002, an appeal was filed with the CA which
disagreed with the CTA saying that the remedy was not
proper. Only decisions of the BIR, denying the request for
reconsideration or reinvestigation may be appealed to the
CTA. Mere assessment notices which have become final
after the lapse of (30)-day reglementary period are not
appealable. Thus, CTA should not have entertained the
petition at all. The grounds relied upon by the CTA are
merely formal in nature.

The biggest flaw of the decision was the

pronouncement on the need for a definite expiration
date. The period of prescription for the assessment of
taxes may be extended provided that the extension be
made in writing and that it be made prior to the
expiration of the period of prescription.

ISSUE: Was the waiver of the statute of limitation valid? NO.

HELD:
RE JURISDICTION OF THE CTA. The petitioner argues that the case
was brought to the CTA because the warrant of distraint or levy
was illegally issued and that no assessment was issued because it
was based on an invalid waiver of the statutes of limitations.
SC agrees with petitioner. Section 7 of RA No. 1125 (the Act
Creating the CTA) provides for the jurisdiction. 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 second part of the provision covers other cases that
arise out of the NIRC or related laws administered by the
BIR. It gives the CTA the jurisdiction to determine if the warrant
of distraint and levy issued by the BIR is valid and to rule if the
Waiver of Statute of Limitations was validly effected.
RE RMO NO.20-90 (RMO No. 20-90) VALID WAIVER OF THE
STATUTE OF LIMITATIONS. CA held that the requirements and
procedures laid down in the RMO are only formal in nature and did
not invalidate the waiver that was signed even if the requirements
were not strictly observed.
Sections 203 and 222 of NIRC provides for a statute of limitations
on the assessment and collection of internal revenue taxes in order
to safeguard the interest of the taxpayer against unreasonable
investigation. Unreasonable investigation contemplates cases
where the period for assessment extends indefinitely because this
deprives the taxpayer of the assurance that it will no longer be
subjected to further investigation for taxes after the expiration of a
reasonable period of time.

RMO No. 20-90 implements these provisions of the NIRC relating

to the period of prescription for the assessment and collection of
taxes. The Order supports petitioners argument that the RMO
must be strictly followed. Any revenue official found not to have
complied shall be administratively dealt with.
The waiver of the statute of limitations is not a waiver of
the right to invoke the defense of prescription as
erroneously held by the Court of Appeals. RMO No. 20-90
explains the rationale of a waiver:
The phrase "but not after _________ 19___" should be filled up.
This indicates the expiry date of the period agreed upon to
assess/collect the tax after the regular 3-year period of
prescription. The period agreed upon shall constitute the time
within which to effect the assessment/collection of the tax in
addition to the ordinary prescriptive period.
As found by the CTA, the Waiver of Statute of Limitations, signed
by petitioners comptroller (September 22, 1997) is not valid and
binding because it does not conform with the provisions of
the RMO. It did not specify a definite agreed date between the
BIR and petitioner, within which the former may assess and collect
revenue taxes. Thus, petitioners waiver became unlimited in
time, violating Section 222(b) of the NIRC.
The waiver is also defective from the government side because
it was signed only by a revenue district officer, NOT the
Commissioner, as mandated by the NIRC and RMO No. 20-90.
The waiver is not a unilateral act by the taxpayer or the BIR, but is
a bilateral agreement between two parties to extend the period to
a date certain. The conformity of the BIR must be made by either
the Commissioner or the Revenue District Officer.
This case involves taxes amounting to more than P1M and
executed almost seven months before the expiration of the threeyear prescription period. For this, the RMO requires the
Commissioner of Internal Revenue to sign for the BIR.
Section 319 of NIRC is clear and explicit that the waiver of the
5-year prescriptive period must be in writing and signed by both
the BIR Commissioner and the taxpayer.

RE DEFECT IN THE DATE OF ACCEPTANCE. CA held that the date

of the execution of the waiver on September 22, 1997 could
reasonably be understood as the same date of acceptance by the
BIR. Petitioner points out however that Revenue District Officer
(Ms.Sarmiento) could not have accepted the waiver yet because
she was not the Revenue District Officer on such date. Sarmientos
transfer and assignment to RDO was only signed by the BIR
Commissioner on January 16, 1998. CTA noted that it is
unlikely as well that Ms. Sarmiento made the acceptance on
January 16, 1998 because "Revenue Officials normally have to
conduct first an inventory of their pending papers and property
responsibilities."
RE PETITIONER WAS NOT FURNISHED A COPY OF THE WAIVER.
Under RMO No. 20-90, the waiver must be executed in 3 copies
with the 2nd copy for the taxpayer. CA did not think this was
important because the petitioner need not have a copy of the
document it knowingly executed. It stated that the reason copies
are furnished is for a party to be notified of the existence of a
document, event or proceeding. CA assumes that the waiver is a
unilateral act of the taxpayer when it is in fact and in law an
agreement between the taxpayer and the BIR. When the
petitioners comptroller signed the waiver on September 22,
1997, it was not yet complete and final because the BIR had
not assented. There is compliance with the provision only
after the taxpayer received a copy of the waiver accepted
by the BIR. The requirement to furnish the taxpayer with a copy
of the waiver is not only to give notice of the existence of the
document but of the acceptance by the BIR and the perfection of
the agreement.
The waiver document is incomplete and defective and thus the 3year rescriptive period was not tolled or extended and continued to
run until April 17, 1998. Consequently, the Assessment issued on
December 9, 1998 was invalid because it was issued beyond the
(3) year period. Similarly, the Warrant of Distraint and/or Levy is
also null and void for having been issued pursuant to an invalid
assessment. WHEREFORE, the instant petition for review is
GRANTED.
TAXATION : Three-year period within which to assess Internal
Revenue Taxes, Waiver and Extension, Requisites for Validity.

CIR V. FMF DEVELOPMENT CORP, G.R. NO 167765 (2008)

FACTS: On April 15, 1996 respondent FMF Corporation filed its
corporate income tax return for taxable year 1995 and declared a
loss of Php 3,348,932. On May 8, 1996, it filed an amended return
and declared a loss of Php 2,826,541.00. Then the Bureau of
Internal Revenue sent FMF pre assessment notices all dated
October 6, 1998 informing it of its alleged tax liabilities. FMF filed a
protest against the notices with the BIR and requested
reconsideration/reinvestigation.
1. On January 22, 1999, Revenue District Officer Rogelio
Zambarrano informed FMF that the reinvestigation had
been referred to Revenue Officer Alberto Fortaleza. He also
advised FMF of the informal conference set on February 2,
1999 to allow it to present evidence to dispute the
assessments.
2. On February 9, 1999, FMF President Enrique Fernandez
executed a waiver of the three-year prescriptive period for
the BIR to assess taxes, thus extending the assessment
period until October 31, 1999. The waiver was accepted
and signed by RDO Zambarrano.
3. On October 18, 1999, FMF received from BIR amended
pre-assignment notices dated October 6, 1999. FMF
immediately filed a protest on November 3, 1999 but on
that same date it received BIRs demand letter and
assessment notice dated October 25, 1999 stating FMFs
alleged deficiency taxes in the sum of Php 1,608,015.50
plus penalties and accrued interests all in the total of Php
2,053,698.25.
4. FMF filed a letter of protest with BIR, invoking the defense
of prescription by reason of the invalidity of the waiver.
BIR, however, insisted on the validity of the waiver and
advised FMF to immediately settle its tax liabilities or be
faced with judicial action.
5. FMF filed a petition for review with the Court of Tax
Appeals challenging the validity of the assessment. The
CTA granted the petition and cancelled the assessment,
ruling that FMFs waiver did not extend the three-year
prescriptive period within which BIR could make the
assessment. CTA
did not give validity to the waiver
because first, it did not state the dates of its execution and
acceptance; second, FMF was not furnished a copy of the
waiver signed by Zambarrano; and third, the amount of

tax involved was more than Php1 million, and the period to
assess was yet about to prescribe, hence it should have
been accepted and signed by the Commissioner of Internal
Revenue, not a mere RDO. BIR moved for reconsideration
of the CTA decision but its motion was denied. It then
sought recourse with the Court of Appeals but said court
denied its petition and affirmed the CTA decision.
ISSUE:
Petitioner Commissioner of Internal Revenue
presents these basic questions for resolution: (1) Is the waiver
valid? And (2) Did the three-year period to assess internal revenue
taxes prescribe?
HELD:
(1) Three-year period within which to asses internal
revenue taxes; Extension by means of waiver; Requisites.Petitioner contends that the waiver was validly executed mainly
because it complied with Section 222(b) of the National Internal
Revenue Code (NIRC). Petitioner points out that the waiver was in
writing, signed by the taxpayer and the Commissioner, and
executed within the three-year prescriptive period. Petitioner also
argues that the requirements in RMO No. 20-90 are merely
directory; thus, the indication of the dates of execution and
acceptance of the waiver, by the taxpayer and the BIR,
respectively, are not required by law. Petitioner adds that there is
no provision in RMO No. 20-90 stating that a waiver may be
invalidated upon failure of the BIR to furnish the taxpayer a copy
of the waiver. Further, it contends that respondents execution of
the waiver was a renunciation of its right to invoke prescription.
Petitioner also argues that the government cannot be estopped by
the mistakes committed by its revenue officer in the enforcement
of RMO No. 20-90.
On the other hand, respondent counters that the waiver is void
because it did not comply with RMO No. 20-90. Respondent assails
the waiver because (1) it was not signed by the Commissioner
despite the fact that the assessment involves an amount of more
than Php 1 Million; (2) there is no stated date of acceptance by the
Commissioner or his duly authorized representative; and (3) it
was not furnished a copy of the BIR-accepted waiver. Respondent
also cites Philippine Journalists, Inc. vs Commissioner of Internal
Revenue (447 SCRA 214 (2004)) and contends that the

procedures in RMO No. 20-90 are mandatory in character,

precisely to give full effect to Section 222 (b) of the NIRC.
Moreover, a waiver of the statute of limitations is not a waiver of
the right to invoke the defense of prescription.
After considering the issues and the submissions of the parties in
the light of the facts of this case, we are in agreement that the
petition lacks merit.
Under Section 203 of the NIRC, internal revenue taxes must be
assessed within years of counted from the period fixed by law for
the filing of the tax return or the actual date of filing, whichever is
later. This mandate governs the question of prescription of the
governments right to assess internal revenue taxes primarily to
safeguard the interests of taxpayers from unreasonable
investigation. Accordingly, the government must assess internal
revenue taxes on time so as not to extend indefinitely the period
of assessment and deprive the taxpayer of the assurance that it
will no longer be subjected to further investigation for taxes after
the expiration of reasonable period of time.
An exception to the three-year prescriptive period on the
assessment of taxes is Section 222 (b) of the NIRC, which
provides:
(b) if before the expiration of the time prescribed in
Section 203 for the assessment of the tax, both the Commissioner
and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon.
The period so agreed upon may be extended by subsequent
written agreement made before the expiration of the period
previously agreed upon.
The above provision authorizes the extension of the original threeyear period by the execution of a valid waiver, where the taxpayer
and the BIR agreed in writing that the period to issue an
assessment and collect the taxes due is extended to an agreed
date. Under RMO No. 20-90, which implements Section 203 and
222 (b), the following procedures should be followed:
1. The waiver must be in the form identified as Annex A
hereof

2. The waiver shall be signed by the taxpayer himself or

his duly authorized representative. In the case of a corporation,
the waiver must be signed by any of its responsible officials.
Soon after the waiver is signed by the taxpayer, the Commissioner
of Internal Revenue or the revenue official authorized by him, as
hereinafter provided, shall sign the waiver indicating that the
Bureau has accepted and agreed to the waiver. The date of such
acceptance by the Bureau should be indicated. Both the date of
execution by the taxpayer and date of acceptance by the bureau
should be before the expiration of the period of prescription or
before the lapse of the period agreed upon in case a subsequent
agreement is executed.
3. The following revenue officials are authorized to sign the waiver.
A. In the National Office
3. Commissioner
For tax cases involving
more than Php1M
B. In the Regional Offices
1. The Revenue District Officer with respect to tax
cases still pending investigation and the period to assess is about
to prescribe regardless amount.
4. The waiver must be executed in three (3) copies, the
original copy to be attached to the docket of the case, the second
copy for the taxpayer and the third copy for the Office accepting
the waiver. The fact of receipt by the taxpayer of his/her file copy
shall be indicated in the original copy.
5. The foregoing procedures shall be strictly followed. Any
revenue official found not to have complied with this Order
resulting in prescription of the right to assess/collect shall be
administratively dealt with.
(2) Waiver and extension of three-year prescriptive period;
The waiver in this case is defective and invalid, hence the tax
assessment is time-barred.- Applying RMO No. 20-90, the waiver
in question here was defective and did not validly extend the
original three-year prescriptive period. Firstly, it was not proven
that respondent was furnished a copy of the BIR-accepted waiver.
Secondly, the waiver was signed only by a revenue district officer,
when it should have been signed by the Commissioner as
mandated by the NIRC and RMO no. 20-90, considering that the
case involves an amount of more than Php 1 Million, and the
period to assess is not yet about to prescribe. Lastly, it did not

contain the date of acceptance by the Commissioner of Internal

Revenue, a requisite necessary to determine whether the waiver
was validly accepted before the expiration of the original threeyear period. Bear in mind that the waiver in question is a bilateral
agreement, thus necessitating the very signatures of both the
Commissioner and taxpayer to give birth to a valid agreement.
Petitioner contends that the procedures in RMO No. 20-90 are
merely directory and that the execution of a waiver was a
renunciation of respondents right to invoke prescription. We do
not agree. RMO No. 20-90 must be strictly followed. In Philippine
Journalists, Inc. vs. Commissioner of Internal Revenue, we ruled
that a waiver of the statute of limitations under the NIRC, to a
certain extent being a derogation of the taxpayers right to
security against prolonged and unscrupulous investigations, must
be carefully and strictly construed. The waiver of the statute of
limitations does not mean that the taxpayer relinquishes the right
to invoke prescription unequivocally, particularly where the
language of the document is equivocal. Notably, in this case, the
waiver became unlimited in time because it did not specify a
definite date, agreed upon between the BIR and respondent,
within which the former may assess and collect taxes. It also had
no binding effect on respondent because there was no consent by
the Commissioner. On this basis, no implied consent can be
presumed, nor can it be contented that the concurrence to such
waiver is a mere formality.
Consequently, petitioner cannot rely on its invocation of the rule
that the government cannot be estopped by the mistakes of its
revenue officers in the enforcement of RMO No. 20-90 because the
law on prescriptions should be interpreted in a way conducive to
bringing about the beneficent purpose of affording protection to
the taxpayer within the contemplation of the Commissioner which
recommended the approval of the law. To the Government, its tax
officers are obliged to act promptly in the making of assessment so
that taxpayers, after the lapse of the period of prescription, would
have a feeling of security against unscrupulous tax agents who will
always try to find an excuse to inspect the books of taxpayers, not
to determine the latters real liability but to take advantage of a
possible opportunity to harass even law-abiding businessmen.
Without such legal defense, taxpayers would be open season to
harassment by unscrupulous tax agents.

In fine, Assessment Notice No. 33-1-00487-95 dated

October 25, 1999, was issued beyond the three-year prescriptive
period. The waiver was incomplete and defective and thus, the
three-year prescriptive period was not tolled nor extended and
continued to run until April 15, 1999. Even if the three-year period
be counted from May 8, 1996, the date of filing of the amended
return, assuming the amended return was substantially different
from the original return, a case which affects the reckoning point
of the prescriptive period, still the subject assessment is definitely
considered time-barred.

BPI V. CIR, G.R. NO 139736 (2005)

FACTS: On two separate occasions, particularly on 06 June 1985
and 14 June 1985, BPI sold United States (US) $500,000.00 to the
Central Bank of the Philippines (Central Bank), for the total sales
amount of US$1,000,000.00. On 10 October 1989, the Bureau of
Internal Revenue (BIR) issued Assessment No. FAS-5-85-89002054,[3] finding petitioner BPI liable for deficiency DST on its
afore-mentioned sales of foreign bills of exchange to the Central
Bank,
Petitioner BPI received the Assessment, together with the attached
Assessment Notice,[4] on 20 October 1989. Petitioner BPI, through
its counsel, protested the Assessment in a letter dated 16
November 1989, and filed with the BIR on 17 November 1989.
Petitioner BPI did not receive any immediate reply to its protest
letter. However, on 15 October 1992, the BIR issued a Warrant of
Distraint and/or Levy[6] against petitioner BPI for the assessed
deficiency DST for taxable year 1985, in the amount of P27,720.00
(excluding the compromise penalty of P300.00). It served the
Warrant on petitioner BPI only on 23 October 1992.[7]
Then again, petitioner BPI did not hear from the BIR until 11
September 1997, when its counsel received a letter, dated 13
August 1997, signed by then BIR Commissioner LiwaywayVinzonsChato, denying its request for reconsideration
Upon receipt of the above-cited letter from the BIR,
petitioner BPI proceeded to file a Petition for Review with
the CTA on 10 October 1997;[9]
After due trial, the CTA rendered a Decision on 02 February 1999,
Section 320 (now 223) of the Tax Code, clearly states that a
request for reinvestigation which is granted by the Commissioner,
shall suspend the prescriptive period to collect. The underscored
portion above does not mean that the Commissioner will cancel
the subject assessment but should be construed as when the same
was entertained by the Commissioner by not issuing any warrant
of distraint or levy on the properties of the taxpayer or any action

prejudicial to the latter unless and until the request for

reinvestigation is finally given due course.
Taking into
consideration this provision of law and the aforementioned ruling
of the Supreme Court in Wyeth Suaco which specifically and
categorically states that a protest could be considered as a request
for reinvestigation, We rule that prescription has not set in against
the government.[11]
In sum, the CTA decided that the statute of limitations for
respondent BIR Commissioner to collect on Assessment No. FAS-585-89-002054 had not yet prescribed; nonetheless, it still ordered
the cancellation of the said Assessment because the sales of
foreign currency by petitioner BPI to the Central Bank in taxable
year 1985 were tax-exempt.
Herein respondent BIR Commissioner appealed the Decision of the
CTA to the Court of Appeals. In its Decision dated 11 August
1999,[14] the Court of Appeals sustained the finding of the CTA on
the first issue, that the running of the prescriptive period for
collection on Assessment No. FAS-5-85-89-002054 was suspended
when herein petitioner BPI filed a protest on 17 November 1989
and, therefore, the prescriptive period for collection on the
Assessment had not yet lapsed. In the same Decision, however,
the Court of Appeals reversed the CTA on the second issue and
basically adopted the position of the respondent BIR Commissioner
that the sales of foreign currency by petitioner BPI to the Central
Bank in taxable year 1985 were subject to DST. The Court of
Appeals, thus, ordered the reinstatement of Assessment No. FAS5-85-89-002054 which required petitioner BPI to pay the amount
of P28,020.00 as deficiency DST for taxable year 1985, inclusive of
the compromise penalty.
HELD: Anent the question of prescription, this Court disagrees in
the Decisions of the CTA and the Court of Appeals, and herein
determines the statute of limitations on collection of the deficiency
DST in Assessment No. FAS-5-85-89-002054 had already
prescribed.
The period for the BIR to assess and collect an internal revenue
tax is limited to three years by Section 203 of the Tax Code of
1977

The three-year period of limitations on the assessment and

collection of national internal revenue taxes set by Section 203 of
the Tax Code of 1977, as amended, can be affected, adjusted, or
suspended, in accordance with the following provisions of SEC.
223. Exceptions as to period of limitation of assessment and
collection of taxes.
The BIR has three years, counted from the date of actual filing of
the return or from the last date prescribed by law for the filing of
such return, whichever comes later, to assess a national internal
revenue tax or to begin a court proceeding for the collection
thereof without an assessment. In case of a false or fraudulent
return with intent to evade tax or the failure to file any return at
all, the prescriptive period for assessment of the tax due shall be
10 years from discovery by the BIR of the falsity, fraud, or
omission. When the BIR validly issues an assessment, within
either the three-year or ten-year period, whichever is appropriate,
then the BIR has another three years[19] after the assessment
within which to collect the national internal revenue tax due
thereon by distraint, levy, and/or court proceeding.
The
assessment of the tax is deemed made and the three-year period
for collection of the assessed tax begins to run on the date the
assessment notice had been released, mailed or sent by the BIR to
the taxpayer.[20]
In the present Petition, there is no controversy on the timeliness of
the issuance of the Assessment, only on the prescription of the
period to collect the deficiency DST following its Assessment.
While Assessment No. FAS-5-85-89-002054 and its corresponding
Assessment Notice were both dated 10 October 1989 and were
received by petitioner BPI on 20 October 1989, there was no
showing as to when the said Assessment and Assessment Notice
were released, mailed or sent by the BIR. Still, it can be granted
that the latest date the BIR could have released, mailed or sent
the Assessment and Assessment Notice to petitioner BPI was on
the same date they were received by the latter, on 20 October
1989. Counting the three-year prescriptive period, for a total of
1,095 days,[21] from 20 October 1989, then the BIR only had until
19 October 1992 within which to collect the assessed deficiency
DST.

The earliest attempt of the BIR to collect on Assessment No. FAS5-85-89-002054 was its issuance and service of a Warrant of
Distraint and/or Levy on petitioner BPI. Although the Warrant was
issued on 15 October 1992, previous to the expiration of the
period for collection on 19 October 1992, the same was served on
petitioner BPI only on 23 October 1992.
It is not essential that the Warrant of Distraint and/or Levy be fully
executed so that it can suspend the running of the statute of
limitations on the collection of the tax. It is enough that the
proceedings have validly began or commenced and that their
execution has not been suspended by reason of the voluntary
desistance of the respondent BIR Commissioner. It is only logical
to require that the Warrant of Distraint and/or Levy be, at the very
least, served upon the taxpayer in order to suspend the running of
the prescriptive period for collection of an assessed tax, because it
may only be upon the service of the Warrant that the taxpayer is
informed of the denial by the BIR of any pending protest of the
said taxpayer, and the resolute intention of the BIR to collect the
tax assessed.
If the service of the Warrant of Distraint and/or Levy on petitioner
BPI on 23 October 1992 was already beyond the prescriptive
period for collection of the deficiency DST, which had expired on
19 October 1992, then what more the letter of respondent BIR
Commissioner, dated 13 August 1997 and received by the counsel
of the petitioner BPI only on 11 September 1997, denying the
protest of petitioner BPI and requesting payment of the deficiency
DST? Even later and more unequivocally barred by prescription on
collection was the demand made by respondent BIR Commissioner
for payment of the deficiency DST in her Answer to the Petition for
Review of petitioner BPI before the CTA, filed on 08 December
1997.[23]
Though the statute of limitations on assessment and collection of
national internal revenue taxes benefits both the Government and
the taxpayer, it principally intends to afford protection to the
taxpayer against unreasonable investigation. The indefinite
extension of the period for assessment is unreasonable because it
deprives the said taxpayer of the assurance that he will no longer
be subjected to further investigation for taxes after the expiration
of a reasonable period of time.[24] As aptly explained in Republic
of the Philippines v. Ablaza[25]

The law prescribing a limitation of actions for the collection of the

income tax is beneficial both to the Government and to its citizens;
to the Government because tax officers would be obliged to act
promptly in the making of assessment, and to citizens because
after the lapse of the period of prescription citizens would have a
feeling of security against unscrupulous tax agents who will always
find an excuse to inspect the books of taxpayers, not to determine
the latters real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens. Without such
a legal defense taxpayers would furthermore be under obligation
to always keep their books and keep them open for inspection
subject to harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be interpreted in a
way conducive to bringing about the beneficent purpose of
affording protection to the taxpayer within the contemplation of
the Commission which recommend the approval of the law.
A valid waiver of the statute of limitations under paragraphs (b)
and (d) of Section 223 of the Tax Code of 1977, as amended, must
be: (1) in writing; (2) agreed to by both the Commissioner and the
taxpayer; (3) before the expiration of the ordinary prescriptive
periods for assessment and collection; and (4) for a definite period
beyond the ordinary prescriptive periods for assessment and
collection. The period agreed upon can still be extended by
subsequent written agreement, provided that it is executed prior
to the expiration of the first period agreed upon. The BIR had
issued Revenue Memorandum Order (RMO) No. 20-90 on 04 April
1990 to lay down an even more detailed procedure for the proper
execution of such a waiver. RMO No. 20-90 mandates that the
procedure for execution of the waiver shall be strictly followed, and
any revenue official who fails to comply therewith resulting in the
prescription of the right to assess and collect shall be
administratively dealt with.
This Court had consistently ruled in a number of cases that a
request for reconsideration or reinvestigation by the taxpayer,
without a valid waiver of the prescriptive periods for the
assessment and collection of tax, as required by the Tax Code and
implementing rules, will not suspend the running thereof.[29]

In the Petition at bar, petitioner BPI executed no such waiver of

the statute of limitations on the collection of the deficiency DST
per Assessment No. FAS-5-85-89-002054. In fact, an internal
memorandum of the Chief of the Legislative, Ruling & Research
Division of the BIR to her counterpart in the Collection
Enforcement Division, dated 15 October 1992, expressly noted
that, The taxpayer fails to execute a Waiver of the Statute of
Limitations extending the period of collection of the said tax up to
December 31, 1993 pending reconsideration of its protest. . . [30]
Without a valid waiver, the statute of limitations on collection by
the BIR of the deficiency DST could not have been suspended
under paragraph (d) of Section 223 of the Tax Code of 1977, as
amended.
To summarize all the foregoing discussion, this Court lays down
the following rules on the exceptions to the statute of limitations
on collection.
The statute of limitations on collection may only be interrupted or
suspended by a valid waiver executed in accordance with
paragraph (d) of Section 223 of the Tax Code of 1977, as
amended, and the existence of the circumstances enumerated in
Section 224 of the same Code, which include a request for
reinvestigation granted by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is not
accompanied by a valid waiver or there is no request for
reinvestigation that had been granted by the BIR Commissioner,
the taxpayer may still be held in estoppel and be prevented from
setting up the defense of prescription of the statute of limitations
on collection when, by his own repeated requests or positive acts,
the Government had been, for good reasons, persuaded to
postpone collection to make the taxpayer feel that the demand is
not unreasonable or that no harassment or injustice is meant by
the Government, as laid down by this Court in the Suyoc case.
Applying the given rules to the present Petition, this Court finds
that
(a) The statute of limitations for collection of the deficiency
DST in Assessment No. FAS-5-85-89-002054, issued
against petitioner BPI, had already expired; and

(b) None of the conditions and requirements for exception

from the statute of limitations on collection exists herein:
Petitioner BPI did not execute any waiver of the
prescriptive period on collection as mandated by paragraph
(d) of Section 223 of the Tax Code of 1977, as amended;
the protest filed by petitioner BPI was a request for
reconsideration, not a request for reinvestigation that was
granted by respondent BIR Commissioner which could
have suspended the prescriptive period for collection under
Section 224 of the Tax Code of 1977, as amended; and,
petitioner BPI, other than filing a request for
reconsideration of Assessment No. FAS-5-85-89-002054,
did not make repeated requests or performed positive acts
that could have persuaded the respondent BIR
Commissioner to delay collection, and that would have
prevented or estopped petitioner BPI from setting up the
defense of prescription against collection of the tax
assessed, as required in the Suyoc case.
WHEREFORE, based on the foregoing, the instant Petition is
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
51271, dated 11 August 1999, which reinstated Assessment No.
FAS-5-85-89-002054 requiring petitioner BPI to pay the amount
of P28,020.00 as deficiency documentary stamp tax for the taxable
year 1985, inclusive of the compromise penalty, is REVERSED and
SET ASIDE. Assessment No. FAS-5-85-89-002054 is hereby
ordered CANCELED.

REPUBLIC V. KER & CO, G.R. NO L-21609 (1966)

FACTS: Ker & Co., Ltd., filed its income tax returns for the years
1947, 1948, 1949 and 1950. It amended its income tax returns for
1948 and 1949 on May 11, 1949 and June 30, 1950, respectively.
1. In 1953 the BIR examined and audited Ker & Co., Ltd.'s
returns and books of accounts and subsequently issued
assessments for deficiency income tax. Due and payable
on dates indicated in the notices of assessment. The
assessments for 1948 and 1950 carried the surcharge of
50% for the filing of fraudulent returns.
2. Upon request of Ker & Co., Ltd., through its counsel, the
BIR reduced the assessments for the year 1947 and for the
year 1950, imposed the 50% surcharge for the year 1947
and eliminated the surcharge for the year 1950. The
assessments for years 1948 and 1949 remained the same.
3. On March 1, 1956 Ker & Co. filed with the CTA a petition
for review with preliminary injunction. The court dismissed
the appeal for having been instituted beyond the 30-day
period.
4. On March 15, 1962, the BIR demanded payment of the
assessments together with a surcharge of 5% for late
payment and interest at the rate of 1% monthly.
5. Ker & Co., Ltd. refused to pay, instead it set up the
defense of prescription. Subsequently, the Republic of the
Philippines filed on March 27, 1962 a complaint with the
CFI seeking collection of the deficiency income tax for the
years 1947, 1948, 1949 and 1950.
6. The complaint did not allege fraud in the filing of any of
the income tax returns for the years involved, nor did it
pray for the payment of the corresponding 50% surcharge,
but it prayed for the payment of 5% surcharge for late
payment and interest of 1% per month without however
specifying from what date interest started to accrue.
7. Summons was served not on the defendant taxpayer but
upon its counsel in the proceedings before the BIR and the
CTA.

8. On April 14, 1962 Ker & Co., Ltd. through its counsel
moved for the dismissal of the complaint on the ground
that the court did not acquire jurisdiction over the person
of the defendant and that plaintiff's cause of action has
prescribed.
The issues in this case are:
1. Did the Court of First Instance acquire jurisdiction over the
person of defendant Ker & Co., Ltd.?
2. Did the right of the Commissioner of Internal Revenue to
assess deficiency income tax for the year 1947 prescribe?
3. Did the filing of a petition for review by the taxpayer in the
Court of Tax Appeals suspend the running of the statute of
limitations to collect the deficiency income for the years
1948, 1949 and 1950?
4. When did the delinquency interest on the deficiency
income tax for the years 1948, 1949 and 1950 accrue?
First Issue - Messrs. Leido and Associates acted as counsel for Ker
Co., Ltd. when this tax case was in its administrative stage and
when it appealed the case to the CTA and later to this Court.
Perforce, they were the taxpayer's agent when summons was
served.
Second Issue - The stand of the Republic of the Philippines hinges
on whether or not the income tax return for 1947 was fraudulent.
Said court resolved the issue without touching upon fraudulence of
the return. The reason is that the complaint alleged no fraud, nor
did the plaintiff present evidence to prove fraud. Fraud is a serious
charge and, to be sustained, it must be supported by clear and
convincing proof. Accordingly, fraud should have been alleged and
proved in the lower court. On these premises we therefore sustain
the ruling of the lower court upon the point of prescription.
It would be worth mentioning that since the assessment for
deficiency income tax for 1947 has become final and executory,
Ker & Co., Ltd. may not anymore raise defenses which go into the
merits of the assessment, i.e., prescription of the Commissioner's
right to assess the tax. Such was our ruling in previous cases. In
this case however, Ker & Co., Ltd. raised the defense of
prescription in the proceedings below and the Republic of the
Philippines, instead of questioning the right of the defendant to
raise such defense, litigated on it and submitted the issue for

resolution of the court. By its actuation, the Republic of the

Philippines should be considered to have waived its right to object
to the setting up of such defense.
Third Issue - Did the pendency of the taxpayer's appeal in the
Court of Tax Appeals and in the Supreme Court have the effect of
legally preventing the Commissioner of Internal Revenue from
instituting an action in the Court of First Instance for the collection
of the tax? Our view is that it did.
From March 1, 1956 when Ker & Co., Ltd. filed a petition for
review in the CTA contesting the legality of the assessments in
question, until the termination of its appeal in the Supreme Court,
the CIR was prevented, from filing an ordinary action in the CFI to
collect the tax. Besides, to do so would be to violate the judicial
policy of avoiding multiplicity of suits and the rule on lispendens.
It would be interesting to note that when the CIR issued the final
deficiency assessments on January 5, 1954, he had already lost,
by prescription, the right to collect the tax (except that for 1950)
by the summary method of warrant of distraint and levy. Ker &
Co., Ltd. immediately thereafter requested suspension of the
collection of the tax without penalty incident to late payment
pending the filing of a memorandum in support of its views. As
requested, no tax was collected. On May 22, 1954 the projected
memorandum was filed, but as of that date the Commissioner's
right to collect by warrant of distraint and levy the deficiency tax
for 1950 had already prescribed. So much so, that on March 1,
1956 when Ker & Co., Ltd. filed a petition for review in the CTA,
the CIR had but one remedy left to collect the tax, that is, by
judicial action. However, as stated, an independent ordinary action
in the CFI was not available to the Commissioner in view of the
pendency of the taxpayer's petition for review in the CTA.
Precisely he urgently filed a motion to dismiss the taxpayer's
petition for review with a view to terminating therein the
proceedings in the shortest possible time in order that he could file
a collection case in the CFI before his right to do so is cut off by
the passage of time. As moved, the Tax Court dismissed the case
and Ker & Co., Ltd. appealed to the Supreme Court. By the time
the Supreme Court affirmed the order of dismissal of the CTA in L12396 on January 31, 1962 more than five years had elapsed

since the final assessments were made on January 5, 1954.

Thereafter, the CIR demanded extra-judicially the payment of the
deficiency tax in question and in reply the taxpayer, by its letter
dated March 28, 1962, advised the CIR that the right to collect the
tax has prescribed pursuant to Section 332 (c) of the Tax Code.
Thus, did the taxpayer produce the effect of temporarily staying
the hands of the Commissioner of Internal Revenue simply through
a choice of remedy? And, if We were to sustain the taxpayer's
stand, We would be encouraging taxpayers to delay the payment
of taxes in the hope of ultimately avoiding the same.
Under the circumstances, the Commissioner of Internal Revenue
was in effect prohibited from collecting the tax in question. This
being so, the provisions of Section 333 of the Tax Code will apply.
Fourth Issue. Exhibit "F" the letter of assessment shows that
the deficiency income tax for 1948 and 1949 became due on
March 15, 1953 and that for 1950 accrued on February 15, 1954.
Since the tax in question remained unpaid, delinquency interest
accrued and became due starting from said due dates. The
decision appealed from should therefore be modified accordingly
WHEREFORE, the decision appealed from is affirmed with the
modification that the delinquency interest at the rate of 1% per
month shall be computed from March 15, 1953 for the deficiency
income tax for 1948 and 1949 and from February 15, 1954 for the
deficiency income tax for 1950. With costs against Ker & Co.,
Ltd.So ordered.

REPUBLIC V. ACEBEDO, G.R. NO L-20477 (1968)

FACTS: This is a suit for collection of deficiency income tax for the
year 1948 in the amount of P5,962.83.
1. The corresponding notice of assessment was issued on
September 24, 1949.
2. The complaint was filed on December 27, 1961.
3. After the defendant filed his answer but before trial started
he moved to dismiss on the ground of prescription.
4. The court received evidence on the motion, and on
September 1, 1962 issued an order finding the same
meritorious and hence dismissing the complaint.
5. Plaintiff appealed from the order of dismissal.
ISSUE: WON the right to collect has already prescribed.
HELD: YES
The statute of limitations which governs this case is Section 332,
subsection (c), of the National Internal Revenue Code, which
provides for an exemption as to the period of limitation
thattax 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, or (2) prior to the
expiration of any period for collection agreed upon in
writing by the Collector of Internal Revenue and the
taxpayer before the expiration of such five-year period. The
period so agreed upon may be extended by subsequent
agreements in writing made before the expiration of the
period previously agreed upon.
The present suit was not begun within five years after the
assessment of the tax, which was in 1949.
Was it, however, begun prior to the expiration of any period
for collection agreed upon in writing by the Commissioner
of Internal Revenue and the defendant before the
expiration of such five-year period? NO.
The only evidence of such written agreement, in the form of
a "waiver of the statute of limitations" signed by the
defendant, dated December 17, 1959. But this waiver was
ineffective because it was executed beyond the original
five-year limitation.
The plaintiff contends that the period of prescription was
suspended by the defendant's various requests for reinvestigation
or reconsideration of the tax assessment. The trial court
rejected this contention, saying that a mere request for

reinvestigation or reconsideration of an assessment does

not have the effect of such suspension. The ruling is logical,
otherwise there would be no point to the legal requirement
that the extension of the original period be agreed upon in
writing.
There are certain decisions where the taxpayer may be in
estoppel to claim prescription as a defense even if he has
not previously waived it in writing:
IN the case of CIR vs Consolidated Mining the SC ruled that when
by his repeated requests or positive acts, the government
has been for good reasons, persuaded to postpone
collection.
Likewise, when a taxpayer asks for a reinvestigation of the
tax assessment issued to him and such reinvestigation is made,
on the basis of which the Government makes another assessment,
the five-year period with which an action for collection may be
commenced should be counted from this last assessment.
In the case at bar, the defendant, after receiving the assessment
notice of September 24, 1949, asked for a reinvestigation thereof
on October 11, 1949. There is no evidence that this request
was considered or acted upon. In fact, on October 23, 1950 the
then Collector of Internal Revenue issued a warrant of distraint
and levy for the full amount of the assessment at (Exh. D), but
there was no follow up of this warrant. Consequently, the
request for reinvestigation did not suspend the running of
the period for filing an action for collection.
The next communication of record is a letter signed for the
defendant by one Troadio Concha and dated October 6, 1951,
again requesting a reinvestigation of his tax liability (Exh. B).
Nothing came of this request either.
Then on February 9, 1954, the defendant's lawyers wrote the
Collector of Internal Revenue informing him that the books of their
client were ready at their office for examination (Exh. C). The
reply was dated more than a year later, or on October 4,
1955, when the Collector bestirred himself for the first time in
connection with the reinvestigation sought, and required that the
defendants specify his objections to the assessment and execute
"the enclosed forms for waiver, of the statute of limitations." The
last part of the letter was a warning that unless the waiver "was
accomplished and submitted within 10 days the collection of the
deficiency taxes would be enforced by means of the remedies
provided for by law."

It will be noted that up to October 4, 1955 the delay in

collection could not be attributed to the defendant at all. His
requests in fact had been unheeded until then, and there
was nothing to impede enforcement of the tax liability by
any of the means provided by law.
By October 4, 1955, more than five years had elapsed since
assessment in question was made, and hence prescription
had already set in, making subsequent events in connection
with the said assessment entirely immaterial. Even the
written waiver of the statute signed by the defendant on December
17, 1959 could no longer revive the right of action, for under the
law such waiver must be executed within the original five-year
period within which suit could be commenced.

GUAGUA ELECTRIC V. COLLECTOR, 19 SCRA 790

FACTS: Guagua Electric Light Plant Co. ( Guagua Electric), is a
grantee of municipal franchise by the municipal council of Guagua,
Pampanga and by the municipal council of Sexmoan, Pampanga .
It reported a gross income in the sum of P1,133,003.44 during
the period from January 1, 1947 to November 1956 and paid
thereon a franchise tax of P56,664.97 computed at 5% thereof in
accordance with Section 259 of the National Internal Revenue
Code.
1. Believing that it should pay a lower franchise fee (1-2%) as
provided for in its franchise, it claimed for the refund of
allegedly overpaid franchise tax amounting to P35,593.98. The
CIR denied the refund corresponding to the period before the
4th quarter of 1951 on the ground that the right to its refund
had already prescribed. The CIR granted, however, a
refund of P16,593.87 starting for the period of 4th
quarter of 1951 and thereafter.
2. Subsequently, based on the ruling in HoaHin Co., Inc. vs,
David, the franchise tax was set at 5% of gross receipts.

Thus, Guagua Electric was assessed a deficiency franchise tax

amounting to P41,516.62 for gross receipts from Oct. 1,
1952 to June 30, 1960 plus surcharge.
3. Guagua Electric alleged that the government is precluded from
recovering the sum of P16,593.87 representing the amount
refunded by the BIR on grounds of prescription and failure to
set up as counterclaim.
4. The CIR claimed that prescription will set in only after the
expiration of six years from 1957 and 1959, the dates refunds
were granted.
Since the petition for review and answer
thereto were filed in the CTA on Feb 14 and May 4, 1962, the
CIR concludes that the prescriptive period of six years has not
expired.
ISSUE:
WON Guagua Electric should refund the amount of
P16.593.87
HELD: NO.
1. Where the CIR seeks to recover from the taxpayer an
amount which was erroneously refunded to the latter as
excess franchise tax, said amount is in effect an
assessment for deficiency franchise tax. And being so, the
right to assess or collect it, is governed by Sec. 331 of the
Tax Code rather than by Art. 1145 of the New Civil Code.
A special law (Tax Code) prevails over a general law (New
Civil Code0.
2. Deficiency franchise taxes for the period prior to January
1, 1956 cannot be assessed and collected in March 1961
inasmuch as the five year prescriptive period for assessing
and collecting the same had already expired.
3. Where the taxpayer acted in good faith in paying the
franchise tax, it is patently unfair on the part of the
Government to require him to pay 25% surcharge on the
amount correctly due.
Wherefore, the judgment appealed from is affirmed with the
modification that the amount of P16,593.87 representing franchise
tax allegedly refunded erroneously and the 25% surcharge
imposed on petitioner should be, and are eliminated, thereby
reducing the tax from a total of P41,516.52 to P19,938.12. No
costs. So ordered.

2. October 15, 1974, the report disclosed that Wyeth Suaco

was paying royalties to its foreign licensors as well as
remuneration for technical services to Wyeth International
London. Wyeth Suaco was also found to have declared
cash dividends (September 27, 1973) and these were paid
on October 31, 1973. However, it failed to remit
withholding tax at source for the 4th quarter of 1973 on
accrued royalties, remuneration for technical services and
cash dividends, resulting in a deficiency withholding
tax
at
source
in
the
aggregate
amount
of
P3,178,994.15.
a.
CIR V. WYETH SUACO LABORATORIES & CTA, G.R. 202 SCRA
125 (1991)
DOCTRINE: Settled is the rule that the prescriptive period
provided by law to make a collection by distraint or levy or by a
proceeding in court is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment, and starts to
run again when said request is denied (CIR vs. Capitol Subdivision,
Inc).
Partial payment would not prevent the government from suing the
taxpayer. Because, by such act of payment, the government is not
thereby "persuaded to postpone collection to make him feel that
the demand was not unreasonable or that no harassment or
injustice is meant." This is the underlying reason behind the rule
that the prescriptive period is arrested by the taxpayer's request
for re-examination or reinvestigation - even if he "has not
previously waived it (prescription in writing)".

that from November 1, 1972 - December 31, 1972

and January 1, 1973 - October 31, 1973, Wyeth
Suaco deducted the cost of non-deductible raw
materials, resulting in its alleged failure to pay the
correct amount of advance sales tax.

3. Thus, BIR assessed Wyeth Suaco on the aforesaid tax

liabilities in (2) notices dated December 16, 1974 and
DECEMBER 17, 1974. These assessment notices were
both received by Wyeth Suaco on December 19, 1974.
4. Wyeth Suaco through its tax consultant SGV &Co., sent
the BIR (2) letters dated January 17, 1975 and
February 8, 1975, protesting the assessments and
requesting their cancellation or withdrawal on the
ground that said assessments lacked factual or legal
basis.

FACTS: Wyeth Suaco Laboratories, Inc. is engaged in the

manufacture and sale of assorted pharmaceutical and nutritional
products. Its accounting period is on a fiscal year basis ending
October 31 of every year.

5. Wyeth Suaco argued that it was not liable to pay

withholding tax at source on the accrued royalties and
dividends because they have yet to be remitted or paid
abroad. It claimed that it was not able to remit the balance
of (50%) of the accrued royalties to its foreign licensors
because of CB Circular No. 289 allowing remittance of
royalties up to fifty (50%) only.

1. By virtue of Letter of Authority (June 17, 1974) the

Revenue Examiner (Kabigting) conducted an investigation
and examination of the books of accounts of Wyeth Suaco.

6. September 12, 1975, CIR asked Wyeth Suaco to avail itself

of the compromise settlement. Wyeth manifested its
conformity to a 10% compromiseprovided it be applied

only to the basic sales tax, excluding surcharge and

interest. Wyeth also took exception as to the deficiency
withholding tax at source, on the ground that it involves
purely a legal question and some of the amounts included
in the assessment have already been paid.
7. December 10, 1979, CIR through acting Commissioner
Ancheta, reduced the assessment of the withholding tax at
source for 1973 to P1,973,112.86. The deficiency sales
tax remained the same.
8. January 18, 1980, Wyeth Suaco filed a petition for review
in CTA, praying that petitioner be enjoined from enforcing
the assessments by reason of prescription and that the
assessments be declared null and void for lack of legal and
factual basis.
9. February 7, 1980, petitioner issued a warrant of distraint
of personal property and warrant of levy of real property
again private respondent to enforce collection of the
deficiency taxes. These were SERVED on private
respondent on MARCH 12, 1980.
a.

May 22, 1980, collection of the deficiency

taxes by virtue of warrants of distraint and levy
was enjoined.

10. August 29, 1986, CTA enjoined the CIR from collecting the
deficiency taxes. It found that while the assessments for
the deficiency taxes were made within the 5-year period of
limitation, the right of petitioner to collect the same
has already prescribed in accordance with Section 319
(c) of the Tax Code of 1977: that an assessment of any
internal revenue tax within the five-year period of
limitation may be collected by distraint or levy or by a
proceeding in court, BUT ONLY IF begun within five (5)
years after the assessment of the tax. Hence, this petition.
11. Petitioner contends that the 5-year prescriptive period
provided by law to make a collection by distraint or
levy or by a proceeding in court has not yet
prescribed. Although he admits that more than (5) years

have already lapsed from the time the assessment notices

were received by private respondent on DECEMBER 19,
1974 up to the time the warrants of distraint and levy
were served on MARCH 12, 1980, he avers that the
running of the prescriptive period was stayed or
interrupted when Wyeth Suaco protested the assessments.
That the protest letters sent by SGV & Co. in behalf of
Wyeth Suaco requesting for withdrawal and cancellation
of the assessments were actually requests for
reinvestigation or reconsideration, which could
interrupt the running of the five-year prescriptive period.
12. Wyeth Suaco maintains the position that it never asked
for a reinvestigation nor reconsideration of the
assessments. What it requested was the cancellation
and withdrawal of the assessments for lack of legal
and factual basis. Thus, its protest letters did not
suspend or interrupt the running of the 5-year prescriptive
period.
ISSUE: Did Wyeth Suaco sought reinvestigation or reconsideration
of the deficiency tax assessments interrupting the prescriptive
period? YES.
HELD: The applicable laws in the instant case are Sections 318
and 319 (c) of the NIRC of 1977 (now Sections 203 and 224 of the
NIRC of 1986).
Wyeth Suaco admitted that it was seeking reconsideration of the
tax assessments as shown in a letter of James A. Gump, its
President and General Manager (April 28, 1975): the relevant
portion of which is quoted hereunder:
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.
Although the protest letters prepared by SGV & Co. in behalf of
private respondent did not categorically state or use the words

"reinvestigation" and "reconsideration," the same are to be

treated as letters of reinvestigation and reconsideration. By
virtue of these letters, BIR ordered its Manufacturing Audit Division
to review the assessment made. Furthermore, private
respondent's claim that it did not seek reinvestigation or
reconsideration of the assessments is belied by the subsequent
correspondence or letters written by its officers.
These letters of Wyeth Suaco interrupted the running of the
five-year prescriptive period to collect the deficiency taxes.
The final assessment issued (December 10, 1979) and received by
private respondent (January 2, 1980), fixed its tax liability at
P1,973,112.86 as deficiency withholding tax at source and
P61,155.21 as deficiency sales tax. It was only upon receipt by
Wyeth Suaco of this final assessment that the five-year
prescriptive period started to run again.
Verily, the original assessments (December 16 and 17, 1974)
received by Wyeth Suaco on December 19, 1974. However, when
Wyeth Suaco protested the assessments and sought its
reconsideration the prescriptive period was interrupted. This
period started to run again when the BIR served the final
assessment to Wyeth Suaco on January 2, 1980. Since the
warrants of distraint and levy were served on Wyeth Suaco on
March 12, 1980, then, only about four (4) months of the fiveyear prescriptive period was used.
RE MERITS OF THE CASE:
Wyeth Suaco maintains the stand that withholding tax at source
should only be remitted to the BIR once the incomes subject to
withholding tax at source have actually been paid. Thus, private
respondent avers that it was not liable to remit the taxes withheld
at source on royalties and dividends unless these incomes have
been actually paid to its foreign licensors and stockholders.
The Tax Code, particularly Section 54 (a) [now Section 51 (a)]
provides that "the Commissioner of Internal Revenue may, with
the approval of the Secretary of Finance, require the withholding
agents to pay or deposit the taxes deducted and withheld at more
frequent intervals when necessary to protect the interest of the
government. The return shall be filed and the payment made

within 25 days from the close of each calendar quarter". Revenue

Regulation No. 6-85 (July 1, 1985), requires the filing of
monthly return and payment of taxes withheld at source within
(10) days after the end of each month.
Wyeth Suaco adopted the accrual method of accounting
wherein the effect of transactions and other events on assets and
liabilities are recognized and reported in the time periods to which
they relate rather than only when cash is received or paid. The
"Report of Investigation" submitted by the tax examiner indicated
that accrual was the basis of the taxpayer's return. Thus,
private respondent recorded accrued royalties and dividends
payable as well as the withholding tax at source payable on these
incomes. Having deducted and withheld the tax at source and
having recorded the withholding tax at source payable in its books
of accounts, private respondent was obligated to remit the
same to the BIR.
RE ACCURACY OF THE ASSESSMENT ON DEFICIENCY SALES TAX.
The examiner's assessment should be given full weight and credit,
in the absence of proof submitted by Wyeth Suaco to the contrary.
Tax assessments by tax examiners are presumed correct
and made in good faith. The taxpayer has the duty to prove
otherwise.
WHEREFORE, the petition is GRANTED. Wyeth Suaco Laboratories,
Inc, is ordered to pay the BIR the amount of P1,973,112.86 as
deficiency withholding tax at source, with interest and surcharge in
accordance with law, without prejudice to any reduction brought
about by payments or remittance made.

foreign shipowner Yee Fong Hong, Ltd.; to which petitioner

filed his answer on March 29, 1979.
5. Respondent Tax Court, in a decision dated December 9,
1983, ruled in favor of private respondent Wherefore,
the decision of the Commissioner of Internal Revenue
appealed from, assessing against and demanding from
petitioner the payment of deficiency income tax, inclusive
of 50% surcharge, interest and compromise penalties, in
the amounts of P73,958.76 and P583,155.22 for the years
1971 and 1972, respectively, is reversed.

CIR V. UNION SHIPPING CORP, 185 SCRA 547

FACTS: In a letter dated December 27, 1974, herein petitioner
Commissioner of Internal Revenue assessed against Yee Fong
Hong, Ltd and/or herein private respondent Union Shipping
Corporation, the total sum of P583,155.22 as deficiency income
taxes due for the years 1971 and 1972. On January 13, 1975,
private respondent protested the assessment.
1. Petitioner, without ruling on the protest, issued a Warrant
of Distraint and Levy, which was served on private
respondents counsel, Clemente Celso, on November 25,
1976.
2. In a letter dated November 27, 1976, received by
petitioner on November 29, 1976, private respondent
reiterated its request for reinvestigation of the assessment
and for the reconsideration of the summary collection thru
the Warrant of Distraint and Levy.
3. Petitioner, again, without acting on the request for
reinvestigation and reconsideration of the Warrant of
Distraint and Levy, filed a collection suit against private
respondent. Summons in the said collection case was
issued to private respondent on December 28, 1978.
4. On January 10, 1979, private respondent filed with
respondent court its Petition for Review of the petitioners
assessment of its deficiency income taxes in a letter dated
December 27, 1974, docketed therein as CTA Case No.
2989wherein it prays that it is not liable for the payment of
the income tax herein involved, or which may be due from

ISSUE: WON a) the Court of Tax Appeals has jurisdiction over

this case, and b) Union Shipping Corporation acting as a mere
husbanding agent of Yee Fong Hong Ltd., is liable for payment of
taxes on the gross receipts or earnings of the latter.
RULINGS:
1. The main thrust of this petition is that the issuance of a
warrant of distraint and levy is proof of the finality of an
assessment because it is the most drastic action of all
media of enforcing the collection of tax, and is tantamount
to an outright denial of a motion for reconsideration of an
assessment. Among others, petitioner contends that the
warrant of distraint and levy was issued after respondent
corporation filed a request for reconsideration of subject
assessment, thus constituting petitioners final decision in
the disputed assessment.
2. Petitioner argues therefore that the period to appeal to the
Court of Tax Appeals commenced to run from receipt of
said warrant on November 25, 1976, so that on January
10, 1979 when respondent corporation sought redress
from the Court, petitioners decision has long become final
and executory.
3. On this issue, the Court had already laid down the dictum
that the Commissioner should always indicate to the
taxpayer in clear and unequivocal language what
constitutes his final determination of the disputed
assessment.
4. There appears to be no dispute that petitioner did not rule
on private respondents motion for reconsideration but
contrary to the above ruling of this Court, left private

respondent in the dark as to which action of the

Commissioner is the decision appealable to the Court of
Tax Appeals. Had he categorically stated that that he
denies private respondents motion for reconsideration and
that his action constitutes his final determination on the
disputed assessment, private respondent without needless
difficulty would have been able to determine when his right
to appeal accrues and the resulting confusion would have
been avoided.
5. Much later, this Court reiterated the above-mentioned
dictum in a ruling applicable on all fours to the issue in the
case at bar, that the reviewable decision of the Bureau of
Internal Revenue is that contained in the letter of its
Commissioner, that such constitutes the final decision on
the matter which may be appealed to the Court of Tax
Appeals and not the warrants of distraint. It was likewise
stressed that the procedure enunciated is demanded by
the pressing need for fair play, regularity and orderliness
in administrative action.
6. Under the circumstances, the Commissioner of Internal
Revenue, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when the private
respondent received the summons on the civil suit for
collection of deficiency income on December 28, 1978 that
the period to appeal commenced to run.
7. The request for reinvestigation and reconsideration was in
effect considered denied by petitioner when the latter filed
a civil suit for collection of deficiency income. So, that on
January 10, 1979 when private respondent filed the appeal
with the Court of Tax Appeals, it consumed a total of only
thirteen (13) days well within the thirty day period to
appeal pursuant to Section 11 of R.A. 1125.

EMILIO S. LIM V. CA, 190 SCTA 616

BPI (FEBTC) V. CIR, G.R. NO 17492 (2008)

FACTS: The CIR thru the Revenue Service Chief issued to BPI a
pre-assessment notice dated November 26, 1986.
1. BPI requested for the details of the amounts alleged as
1982-1986 deficiency taxes mentioned in the November
26, 1986 PAN.
2. On April 7, 1989, respondent issued to the petitioner,
assessment/demand notices for deficiency withholding tax
at source (Swap Transactions) and DST for the years 1982
to 1986.
3. On April 20, 1989, petitioner filed a protest on the
demand/assessment notices. On May 8, 1989, petitioner
filed a supplemental protest.
4. On March 12, 1993, petitioner requested for an
opportunity to present or submit additional documentation
on the Swap Transactions with the Central Bank. Attached
to the letter dated June 17, 1994, in connection with the
reinvestigation of the assessment, petitioner submitted to
the BIR, Swap Contracts with the Central Bank.
5. Petitioner executed several Waivers of the Statutes of
Limitations, the last of which was effective until December
31, 1994.
6. On August 9, 2002, respondent issued a final decision on
petitioners
protest
ordering
the
withdrawal
and
cancellation of the deficiency withholding tax assessment
and considered the same as closed and terminated.
7. On the other hand, the deficiency DST assessment was
reiterated and the petitioner was ordered to pay the said
amount within 30 days from receipt of such order.
8. The tax court, ruled that BPIs protest and supplemental
protest should be considered requests for reinvestigation
which tolled the prescriptive period to collect a tax
deficiency by distraint, levy, or court proceeding.
9. In its Petition for Review dated 24 November 2006, BPI
argues that the governments right to collect the DST had

already prescribed because the CIR failed to issue any

reply granting BPIs request for reinvestigation manifested
in the protest letters dated 20 April and 8 May 1989.
10. It was only through the 9 August 2002 Decision ordering
BPI to pay deficiency DST, or after the lapse of more than
13 years that the CIR acted on the request for
reinvestigation, warranting the conclusion that prescription
had already set in.
11. The OSG filed a Commenton behalf of the CIR, asserting
that the prescriptive period was tolled by the protest
letters filed by BPI which were granted and acted upon by
the CIR. Such action was allegedly communicated to BPI
as, in fact, the latter submitted additional documents
pertaining to its SWAP transactions in support of its
request for reinvestigation.
12. Thus, it was only upon BPIs receipt on 13 January 2003 of
the 9 August 2002 Decision that the period to collect
commenced to run again.
ISSUE: WON the collection of the deficiency DST is barred by
prescription and whether BPI is liable for DST on its SWAP loan
transactions.
HELD: We grant the petition.
The statute of limitations on assessment and collection of national
internal revenue taxes was shortened from 5 years to 3 years by
Batas PambansaBlg. 700. Thus, the CIR has 3 years from the date
of actual filing of the tax return to assess a national internal
revenue tax or to commence court proceedings for the collection
thereof without an assessment.
When it validly issues an assessment within the 3-year period, it
has another 3 years within which to collect the tax due by
distraint, levy, or court proceeding. The assessment of the tax is
deemed made and the 3-year period for collection of the assessed
tax begins to run on the date the assessment notice had been
released, mailed or sent to the taxpayer.
As applied to the present case, the CIR had 3 years from the time
he issued assessment notices to BPI on 7 April 1989 or until 6 April
1992 within which to collect the deficiency DST. However, it was

only on 9 August 2002 that the CIR ordered BPI to pay the
deficiency.
In order to determine whether the prescriptive period for collecting
the tax deficiency was effectively tolled by BPIs filing of the
protest letters dated 20 April and 8 May 1989 as claimed by the
CIR, Section 320 is plainly worded. In order to suspend the
running of the prescriptive periods for assessment and collection,
the request for reinvestigation must be granted by the CIR. The
act of requesting a reinvestigation alone does not suspend
the period. The request should first be granted, in order to
effect suspension.
The Court went on to declare that the burden of proof that the
request for reinvestigation had been actually granted shall be on
the CIR. Such grant may be expressed in its communications with
the taxpayer or implied from the action of the CIR or his
authorized representative in response to the request for
reinvestigation.
There is nothing in the records of this case which indicates,
expressly or impliedly, that the CIR had granted the request for
reinvestigation filed by BPI. What is reflected in the records is the
piercing silence and inaction of the CIR on the request for
reinvestigation, as he considered BPIs letters of protest to be.
Neither did the waiver of the statute of limitations signed by BPI
supposedly effective until 31 December 1994 suspend the
prescriptive period. The CIR himself contends that the waiver is
void as it shows no date of acceptance in violation of RMO No. 2090. At any rate, the records of this case do not disclose any effort
on the part of the BIR to collect the deficiency tax after the
expiration of the waiver until 8 years thereafter when it finally
issued a decision on the protest.
The law prescribing a limitation of actions for the collection of the
income tax is beneficial both to the Government and to its citizens;
to the Government because tax officers would be obliged to act
promptly in the making of assessment, and to citizens because
after the lapse of the period of prescription citizens would have a
feeling of security against unscrupulous tax agents who will always
find an excuse to inspect the books of taxpayers, not to determine
the latters real liability, but to take advantage of every

opportunity to molest peaceful, law-abiding citizens. Without such

a legal defense taxpayers would furthermore be under obligation
to always keep their books and keep them open for inspection
subject to harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be interpreted in a
way conducive to bringing about the beneficent purpose of
affording protection to the taxpayer within the contemplation of
the Commission which recommend the approval of the law.
Given the prescription of the governments claim, we no longer
deem it necessary to pass upon the validity of the assessment.

CIR V. PHILIPPINE GLOBAL COMMUNICATION INC, G.R. NO

167146 (2006)
FACTS:
Respondent,
a
corporation
engaged
in
telecommunications, filed its Annual Income Tax Return for taxable
year 1990 on 15 April 1991.
1. On 13 April 1992, the Commissioner of Internal Revenue
(CIR) issued Letter of Authority No. 0002307, authorizing
the appropriate Bureau of Internal Revenue (BIR) officials
to examine the books of account and other accounting
records of respondent, in connection with the investigation
of respondents 1990 income tax liability.
2. On 22 April 1992, the BIR sent a letter to respondent
requesting the latter to present for examination certain
records and documents, but respondent failed to present
any document.
3. On 21 April 1994, respondent received a Preliminary
Assessment Notice dated 13 April 1994 for deficiency
income tax in the amount of P118,271,672.00.
4. On the following day, 22 April 1994, respondent received
a Formal Assessment Notice with Assessment Notice
No. 000688-80-7333, dated 14 April 1994, for deficiency
income tax in the total amount of P118,271,672.00.
5. On 6 May 1994, respondent, through its counsel filed a
formal protest letter against Assessment Notice No.
000688-80-7333. Respondent filed another protest letter
on 23 May 1994, through another counsel.
6. In both letters, respondent requested for the cancellation
of the tax assessment, which they alleged was invalid for
lack of factual and legal basis.
7. On 16 October 2002, more than eight years after the
assessment was presumably issued, the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices received from
the CIR a Final Decision dated 8 October 2002 denying the
respondents protest against Assessment Notice No.
000688-80-7333, and affirming the said assessment in
toto.
8. Respondents filed a petition for review with the CTA. CTA
ruled on the primary issue of prescription. It decided that
the protest letters filed by the respondent cannot
constitute a request for reinvestigation, hence, they
cannot toll the running of the prescriptive period to
collect the assessed deficiency income tax.7 Thus,

since more than three years had lapsed from the

time Assessment Notice No. 000688-80-7333 was
issued in 1994, the CIRs right to collect the same
has prescribed.
ISSUE: WON the CIRs right to collect the tax under said
Assessment notice has prescribed.
HELD: YES
Sec. 269 provides for the exceptions as to the period of limitation
where, Any internal revenue tax which has been assessed within
the period of limitation above-prescribed may be collected by
distraint or levy or by a proceeding in court within three years
following the assessment of the tax.
The law prescribed a period of three years from the date the
return was actually filed or from the last date prescribed by law for
the filing of such return, whichever came later, within which the
BIR may assess a national internal revenue tax.13 However, the
law increased the prescriptive period to assess or to begin a court
proceeding for the collection without an assessment to ten years
when a false or fraudulent return was filed with the intent of
evading the tax or when no return was filed at all.14 In such cases,
the ten-year period began to run only from the date of discovery
by the BIR of the falsity, fraud or omission.
If the BIR issued this assessment within the three-year period or
the ten-year period, whichever was applicable, the law provided
another three years after the assessment for the collection of the
tax due thereon through the administrative process of distraint
and/or levy or through judicial proceedings.15 The three-year
period for collection of the assessed tax began to run on the date
the assessment notice had been released, mailed or sent by the
BIR.
The assessment, in this case, was presumably issued on 14
April 1994 since the respondent did not dispute the CIRs
claim. Therefore, the BIR had until 13 April 1997. However,
as there was no Warrant of Distraint and/or Levy served on the
respondents nor any judicial proceedings initiated by the BIR, the
earliest attempt of the BIR to collect the tax due based on this
assessment was when it filed its Answer in CTA Case No. 6568 on
9 January 2003, which was several years beyond the threeyear prescriptive period. Thus, the CIR is now prescribed
from collecting the assessed tax.

In a number of cases, this Court has also clarified that the statute
of limitations on the collection of taxes should benefit both the
Government and the taxpayers.
Thus, in Commissioner of Internal Revenue v. B.F. Goodrich,21 this
Court affirmed that the law on prescription should be liberally
construed in order to protect taxpayers and that, as a corollary,
the exceptions to the law on prescription should be strictly
construed.
The Tax Code of 1977, as amended, provides instances when the
running of the statute of limitations on the assessment and
collection of national internal revenue taxes could be suspended,
even in the absence of a waiver, when the taxpayer requests
for a reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address given by him
in the return filed upon which a tax is being assessed or collected x
xx. (Emphasis supplied.)
Among the exceptions provided by the aforecited section, and
invoked by the CIR as a ground for this petition, is the instance
when the taxpayer requests for a reinvestigation which is granted
by the Commissioner. However, this exception does not apply
to this case since the respondent never requested for a
reinvestigation. More importantly, the CIR could not have
conducted a reinvestigation where, as admitted by the CIR
in its Petition, the respondent refused to submit any new
evidence.
Revenue Regulations No. 12-85, the Procedure Governing
Administrative Protests of Assessment of the Bureau of Internal
Revenue, issued on 27 November 1985, defines the two types
of protest, the request for reconsideration and the request
for reinvestigation, and distinguishes one from the other in
this manner:
Section 6.Protest. - The taxpayer may protest administratively an
assessment by filing a written request for reconsideration or
reinvestigation specifying the following particulars:xxx
For the purpose of protest herein
(a) Request for reconsideration-- refers to a plea for a reevaluation of an assessment on the basis of existing records

without need of additional evidence. It may involve both a

question of fact or of law or both.
(b) Request for reinvestigationrefers to a plea for re-evaluation
of an assessment on the basis of newly-discovered evidence or
additional evidence that a taxpayer intends to present in the
investigation. It may also involve a question of fact or law or both.
The main difference between these two types of protests lies in the
records or evidence to be examined by internal revenue officers,
whether these are existing records or newly discovered or
additional evidence. A re-evaluation of existing records which
results from a request for reconsideration does not toll the
running of the prescription period for the collection of an
assessed tax. Section 271 distinctly limits the suspension of
the running of the statute of limitations to instances when
reinvestigation is requested by a taxpayer and is granted by
the CIR.
The Court provided a clear-cut rationale in the case of Bank of the
Philippine Islands v. Commissioner of Internal Revenue explaining
why a request for reinvestigation, and not a request for
reconsideration, interrupts the running of the statute of limitations
on the collection of the assessed tax:
Undoubtedly, a reinvestigation, which entails the reception
and evaluation of additional evidence, will take more time
than a reconsideration of a tax assessment, which will be
limited to the evidence already at hand; this justifies why
the former can suspend the running of the statute of
limitations on collection of the assessed tax, while the
latter cannot.
In the present case, the separate letters of protest dated 6
May 1994
and 23
May 1994 are requests for
reconsideration. The CIRs allegation that there was a
request
for
reinvestigation
is
inconceivable
since
respondent consistently and categorically refused to submit
new evidence and cooperate in any reinvestigation
proceedings.
The distinction between a request for reconsideration and a
request for reinvestigation is significant. It bears repetition
that a request for reconsideration, unlike a request for
reinvestigation, cannot suspend the statute of limitations on the
collection of an assessed tax. If both types of protest can

effectively interrupt the running of the statute of limitations, an

erroneous assessment may never prescribe. If the taxpayer fails to
file a protest, then the erroneous assessment would become final
and unappealable. On the other hand, if the taxpayer does file the
protest on a patently erroneous assessment, the statute of
limitations would automatically be suspended and the tax thereon
may be collected long after it was assessed. Meanwhile the
interest on the deficiencies and the surcharges continue to
accumulate. And for an unrestricted number of years, the
taxpayers remain uncertain and are burdened with the costs of
preserving their books and records. This is the predicament that
the law on the statute of limitations seeks to prevent.
In the present case the respondent did nothing to prevent
the BIR from collecting the tax. It did not present to the BIR
any new evidence for its re-evaluation. At the earliest opportunity,
respondent insisted that the assessment was invalid and made
clear to the BIR its refusal to produce documents that the BIR
requested. On the other hand, the BIR also communicated to the
respondent its unwavering stance that its assessment is correct.
Given that both parties were at a deadlock, the next logical step
would have been for the BIR to issue a Decision denying the
respondents protest and to initiate proceedings for the collection
of the assessed tax and, thus, allow the respondent, should it so
choose, to contest the assessment before the CTA. Postponing the
collection for eight long years could not possibly make the
taxpayer feel that the demand was not unreasonable or that no
harassment or injustice is meant by the Government.
Thus, the three-year statute of limitations on the collection
of an assessed tax provided under Section 269(c) of the Tax
Code of 1977, a law enacted to protect the interests of the
taxpayer, must be given effect. In providing for exceptions
to such rule in Section 271, the law strictly limits the
suspension of the running of the prescription period to,
among other instances, protests wherein the taxpayer
requests for a reinvestigation. In this case, where the
taxpayer merely filed two protest letters requesting for a
reconsideration, and where the BIR could not have
conducted a reinvestigation because no new or additional
evidence was submitted, the running of statute of
limitations cannot be interrupted. The tax which is the

subject of the Decision issued by the CIR on 8 October 2002

affirming the Formal Assessment issued on 14 April 1994
can no longer be the subject of any proceeding for its
collection. Consequently, the right of the government to
collect the alleged deficiency tax is barred by prescription.