Tax Remedies Cases

G.R. No.
L-41919-24 May 30, 1980

QUIRICO P. UNGAB, petitioner,
vs.
HON. VICENTE N. CUSI, JR., in his capacity as Judge of the Court of First Instance, Branch 1, 16TH Judicial District, Davao City, THE
COMMISSIONER OF INTERNAL REVENUE, and JESUS N. ACEBES, in his capacity as State Prosecutor, respondents.
CONCEPCION JR., J:
Petition for certiorari and prohibition with preliminary injunction and restraining order to annul and set aside the informations filed in Criminal Case
Nos. 1960, 1961, 1962, 1963, 1964, and 1965 of the Court of First Instance of Davao, all entitled: "People of the Philippines, plaintiff, versus
Quirico Ungab, accused;" and to restrain the respondent Judge from further proceeding with the hearing and trial of the said cases.
It is not disputed that sometime in July, 1974, BIR Examiner Ben Garcia examined the income tax returns filed by the herein petitioner, Quirico P.
Ungab, for the calendar year ending December 31, 1973. In the course of his examination, he discovered that the petitioner failed to report his
income derived from sales of banana saplings. As a result, the BIR District Revenue Officer at Davao City sent a "Notice of Taxpayer" to the
petitioner informing him that there is due from him (petitioner) the amount of P104,980.81, representing income, business tax and forest charges for
the year 1973 and inviting petitioner to an informal conference where the petitioner, duly assisted by counsel, may present his objections to the
findings of the BIR Examiner. 1 Upon receipt of the notice, the petitioner wrote the BIR District Revenue Officer protesting the assessment, claiming
that he was only a dealer or agent on commission basis in the banana sapling business and that his income, as reported in his income tax returns
for the said year, was accurately stated. BIR Examiner Ben Garcia, however, was fully convinced that the petitioner had filed a fraudulent income
tax return so that he submitted a "Fraud Referral Report," to the Tax Fraud Unit of the Bureau of Internal Revenue. After examining the records of
the case, the Special Investigation Division of the Bureau of Internal Revenue found sufficient proof that the herein petitioner is guilty of tax evasion
for the taxable year 1973 and recommended his prosecution: t.hqw
(1) For having filed a false or fraudulent income tax return for 1973 with intent to evade his just taxes due the government
under Section 45 in relation to Section 72 of the National Internal Revenue Code;
(2) For failure to pay a fixed annual tax of P50.00 a year in 1973 and 1974, or a total of unpaid fixed taxes of P100.00 plus
penalties of 175.00 or a total of P175.00, in accordance with Section 183 of the National Internal Revenue Code;
(3) For failure to pay the 7% percentage tax, as a producer of banana poles or saplings, on the total sales of P129,580.35 to
the Davao Fruit Corporation, depriving thereby the government of its due revenue in the amount of P15,872.59, inclusive of
surcharge. 2
In a second indorsement to the Chief of the Prosecution Division, dated December 12, 1974, the Commissioner of Internal Revenue approved the
prosecution of the petitioner. 3
Thereafter, State Prosecutor Jesus Acebes who had been designated to assist all Provincial and City Fiscals throughout the Philippines in the
investigation and prosecution, if the evidence warrants, of all violations of the National Internal Revenue Code, as amended, and other related
laws, in Administrative Order No. 116 dated December 5, 1974, and to whom the case was assigned, conducted a preliminary investigation of the
case, and finding probable cause, filed six (6) informations against the petitioner with the Court of First Instance of Davao City, to wit: t.hqw
(1) Criminal Case No. 1960 Violation of Sec. 45, in relation to Sec. 72 of the National Internal-Revenue Code, for filing a
fraudulent income tax return for the calendar year ending December 31, 1973; 4
(2) Criminal Case No. 1961 Violation of Sec. 182 (a), in relation to Secs. 178, 186, and 208 of the National Internal Revenue
Code, for engaging in business as producer of saplings, from January, 1973 to December, 1973, without first paying the annual
fixed or privilege tax thereof; 5
(3) Criminal Case No. 1962 Violation of Sec. 183 (a), in relation to Secs. 186 and 209 of the National Internal Revenue
Code, for failure to render a true and complete return on the gross quarterly sales, receipts and earnings in his business as
producer of banana saplings and to pay the percentage tax due thereon, for the quarter ending December 31, 1973; 6
Code, for failure to render a true and complete return on the gross quarterly sales receipts and earnings in his business as
producer of saplings, and to pay the percentage tax due thereon, for the quarter ending on March 31, 1973; 7
Code, for failure to render a true and complete return on the gross quarterly sales, receipts and earnings in his business as
producer of banana saplings for the quarter ending on June 30, 1973, and to pay the percentage tax due thereon; 8
Code, for failure to render a true and complete return on the gross quarterly sales, receipts and earnings as producer of
banana saplings, for the quarter ending on September 30, 1973, and to pay the percentage tax due thereon. 9
On September 16, 1975, the petitioner filed a motion to quash the informations upon the grounds that: (1) the informations are null and void for
want of authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2) the trial court has no jurisdiction to take
cognizance of the above-entitled cases in view of his pending protest against the assessment made by the BIR Examiner. 10 However, the trial court
denied the motion on October 22, 1975. 11 Whereupon, the petitioner filed the instant recourse. As prayed for, a temporary restraining order was
issued by the Court, ordering the respondent Judge from further proceeding with the trial and hearing of Criminal Case Nos. 1960, 1961, 1962,
1963, 1964, and 1965 of the Court of First Instance of Davao, all entitled: "People of the Philippines, plaintiff, versus Quirico Ungab, accused."
The petitioner seeks the annulment of the informations filed against him on the ground that the respondent State Prosecutor is allegedly without
authority to do so. The petitioner argues that while the respondent State Prosecutor may initiate the investigation of and prosecute crimes and
violations of penal laws when duly authorized, certain requisites, enumerated by this Court in its decision in the case of Estrella vs.
Orendain, 12should be observed before such authority may be exercised; otherwise, the provisions of the Charter of Davao City on the functions
and powers of the City Fiscal will be meaningless because according to said charter he has charge of the prosecution of all crimes committed
within his jurisdiction; and since "appropriate circumstances are not extant to warrant the intervention of the State Prosecution to initiate the
investigation, sign the informations and prosecute these cases, said informations are null and void." The ruling adverted to by the petitioner reads,
as follows: t.hqw
In view of all the foregoing considerations, it is the ruling of this Court that under Sections 1679 and 1686 of the Revised
Administrative Code, in any instance where a provincial or city fiscal fails, refuses or is unable, for any reason, to investigate or
prosecute a case and, in the opinion of the Secretary of Justice it is advisable in the public interest to take a different course of
action, the Secretary of Justice may either appoint as acting provincial or city fiscal to handle the investigation or prosecution
exclusively and only of such case, any practicing attorney or some competent officer of the Department of Justice or office of
any city or provincial fiscal, with complete authority to act therein in all respects as if he were the provincial or city fiscal
himself, or appoint any lawyer in the government service, temporarily to assist such city of provincial fiscal in the discharge of
his duties, with the same complete authority to act independently of and for such city or provincial fiscal provided that no such
appointment may be made without first hearing the fiscal concerned and never after the corresponding information has already
been filed with the court by the corresponding city or provincial fiscal without the conformity of the latter, except when it can be
patently shown to the court having cognizance of the case that said fiscal is intent on prejudicing the interests of justice. The
same sphere of authority is true with the prosecutor directed and authorized under Section 3 of Republic Act 3783, as
amended and/or inserted by Republic Act 5184. The observation in Salcedo vs. Liwag, supra, regarding the nature of the
power of the Secretary of Justice over fiscals as being purely over administrative matters only was not really necessary, as
indicated in the above relation of the facts and discussion of the legal issues of said case, for the resolution thereof. In any
event, to any extent that the opinion therein may be inconsistent herewith the same is hereby modified.
The contention is without merit. Contrary to the petitioner's claim, the rule therein established had not been violated. The respondent State
Prosecutor, although believing that he can proceed independently of the City Fiscal in the investigation and prosecution of these cases, first sought
permission from the City Fiscal of Davao City before he started the preliminary investigation of these cases, and the City Fiscal, after being shown
Administrative Order No. 116, dated December 5, 1974, designating the said State Prosecutor to assist all Provincial and City fiscals throughout the
Philippines in the investigation and prosecution of all violations of the National Internal Revenue Code, as amended, and other related laws,
graciously allowed the respondent State Prosecutor to conduct the investigation of said cases, and in fact, said investigation was conducted in the
office of the City Fiscal. 13
The petitioner also claims that the filing of the informations was precipitate and premature since the Commissioner of Internal Revenue has not yet
resolved his protests against the assessment of the Revenue District Officer; and that he was denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue
may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the
cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the
Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal
prosecution under the Code. t.hqw
The contention is made, and is here rejected, that an assessment of the deficiency tax due is necessary before the taxpayer
can be prosecuted criminally for the charges preferred. The crime is complete when the violator has, as in this case, knowingly
and willfully filed fraudulent returns with intent to evade and defeat a part or all of the tax. 14
An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax.
A crime is complete when the violator has knowingly and willfuly filed a fraudulent return with intent to evade and defeat the
tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate
return, and the government's failure to discover the error and promptly to assess has no connections with the commission of
the crime. 15
Besides, it has been ruled that a petition for reconsideration of an assessment may affect the suspension of the prescriptive period for the collection
of taxes, but not the prescriptive period of a criminal action for violation of law. 16 Obviously, the protest of the petitioner against the assessment of
the District Revenue Officer cannot stop his prosecution for violation of the National Internal Revenue Code. Accordingly, the respondent Judge did
not abuse his discretion in denying the motion to quash filed by the petitioner.
WHEREFORE, the petition should be, as it is hereby dismissed. The temporary restraining order heretofore issued is hereby set aside. With costs
against the petitioner.
SO ORDERED.
Barredo (Chairman), Aquino, Abad Santos and De Castro, JJ., concur.1wph
[G.R. No. 128315. June 29, 1999]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. PASCOR REALTY AND DEVELOPMENT CORPORATION, ROGELIO A. DIO and
VIRGINIA S. DIO, respondents.
DECISION
PANGANIBAN, J.:
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.
Statement of the Case
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court praying for the nullification of the October 30, 1996
Decision[1] of the Court of Appeals[2] in CA-GR SP No. 40853, which effectively affirmed the January 25, 1996 Resolution [3] of the Court of Tax Appeals[4] in CTA
Case No. 5271. The CTA disposed as follows:
WHEREFORE,finding[thehereinpetitioners]MotiontoDismissasUNMERITORIOUS,thesameisherebyDENIED.[TheCIR]isherebygivenaperiodof
thirty(30)daysfromreceipthereoftofileheranswer.
Petitioner also seeks to nullify the February 13, 1997 Resolution[5] of the Court of Appeals denying reconsideration.
The Facts
As found by the Court of Appeals, the undisputed facts of the case are as follows:
ItappearsthatbyvirtueofLetterofAuthorityNo.001198,thenBIRCommissionerJoseU.OngauthorizedRevenueOfficersThomasT.Que,SoniaT.Estorco
andEmmanuelM.SavellanotoexaminethebooksofaccountsandotheraccountingrecordsofPascorRealtyandDevelopmentCorporation.(PRDC)forthe
yearsending1986,1987and1988.ThesaidexaminationresultedinarecommendationfortheissuanceofanassessmentintheamountsofP7,498,434.65and
P3,015,236.35fortheyears1986and1987,respectively.
OnMarch1,1995,theCommissionerofInternalRevenuefiledacriminalcomplaintbeforetheDepartmentofJusticeagainstthePRDC,itsPresidentRogelioA.
Dio,anditsTreasurerVirginiaS.Dio,allegingevasionoftaxesinthetotalamountofP10,513,671.00.PrivaterespondentsPRDC,et.al.filedanUrgentRequest
forReconsideration/Reinvestigationdisputingthetaxassessmentandtaxliability.
OnMarch23,1995,privaterespondentsreceivedasubpoenafromtheDOJinconnectionwiththecriminalcomplaintfiledbytheCommissionerofInternal
Revenue(BIR)againstthem.
InaletterdatedMay17,1995,theCIRdeniedtheurgentrequestforreconsideration/reinvestigationoftheprivaterespondentsonthegroundthatnoformal
assessmenthasasyetbeenissuedbytheCommissioner.
PrivaterespondentsthenelevatedtheDecisionoftheCIRdatedMay17,1995totheCourtofTaxAppealsonapetitionforreviewdocketedasCTACaseNo.
5271onJuly21,1995.OnSeptember6,1995,theCIRfiledaMotiontoDismissthepetitiononthegroundthattheCTAhasnojurisdictionoverthesubject
matterofthepetition,astherewasnoformalassessmentissuedagainstthepetitioners.TheCTAdeniedthesaidmotiontodismissinaResolutiondatedJanuary
25,1996andorderedtheCIRtofileananswerwithinthirty(30)daysfromreceiptofsaidresolution.TheCIRreceivedtheresolutiononJanuary31,1996but
didnotfileananswernordidshemovetoreconsidertheresolution.
Instead,theCIRfiledthispetitiononJune7,1996,allegingasgroundsthat:
RespondentCourtofTaxAppealsactedwithgraveabuseofdiscretionandwithoutjurisdictioninconsideringtheaffidavit/reportoftherevenueofficerandthe
indorsementofsaidreporttothesecretaryofjusticeasassessmentwhichmaybeappealedtotheCourtofTaxAppeals;
RespondentCourtofTaxAppealsactedwithgraveabuseofdiscretioninconsideringthedenialbypetitionerofprivaterespondentsMotionforReconsideration
as[a]finaldecisionwhichmaybeappealedtotheCourtofTaxAppeals.
IndenyingthemotiontodismissfiledbytheCIR,theCourtofTaxAppealsstated:
Weagreewithpetitionerscontentions,thatthecriminalcomplaintfortaxevasionistheassessmentissued,andthattheletterdenialofMay17,1995isthe
decisionproperlyappealableto[u]s.Respondentsgroundofdenial,therefore,thattherewasnoformalassessmentissued,isuntenable.
ItistheCourtshonestbelief,thatthecriminalcasefortaxevasionisalreadyanassessment.Thecomplaint,moreparticularly,theJointAffidavitofRevenue
ExaminersLagmayandSavellanoattachedthereto,containsthedetailsoftheassessmentlikethekindandamountoftaxdue,andtheperiodcovered.
Petitionersareright,inclaimingthattheprovisionsofRepublicActNo.1125,relatingtoexclusiveappellatejurisdictionofthisCourt,donot,makeanymention
offormalassessment.Thelawmerelystates,thatthisCourthasexclusiveappellatejurisdictionoverdecisionsoftheCommissionerofInternalRevenue
ondisputedassessments,andothermattersarisingundertheNationalInternalRevenueCode,otherlaworpartadministeredbytheBureauofInternalRevenue
Code.
AsfarasthisCourtisconcerned,theamountandkindoftaxdue,andtheperiodcovered,aresufficientdetailsneededforanassessment.Thesedetailsaremore
thancomplete,comparedtothefollowingdefinitionsofthetermasquotedhereunder.Thus:
Assessmentislayingatax.JohnsonCityv.ClinchfieldR.Co.,43S.W.(2d)386,387,163Tenn.332.(WordsandPhrases,PermanentEdition,Vol.4,p.446)
Thewordassessmentwhenusedinconnectionwithtaxation,mayhavemorethanonemeaning.Theultimatepurposeofanassessmenttosuchaconnectionisto
ascertaintheamountthateachtaxpayeristopay.Morecommonly,thewordassessmentmeanstheofficialvaluationofataxpayerspropertyforpurposeof
taxation.Statev.NewYork,N.H.andH.R.Co.22A.765,768,60Conn.326,325.(Ibid.p.445)
Fromtheabove,itcanbegleanedthatanassessmentsimplystateshowmuchtaxisduefromataxpayer.Thus,basedonthesedefinitions,thedetailsofthetax
asgivenintheJointAffidavitofrespondentsexaminers,whichwasattachedtothetaxevasioncomplaint,morethansufficetoqualifyasan
assessment.Therefore,thisassessmenthavingbeendisputedbypetitioners,andtherebeingadenialoftheirletterdisputingsuchassessment,thisCourt
unquestionablyacquiredjurisdictionovertheinstantpetitionforreview.[6]
As earlier observed, the Court of Appeals sustained the CTA and dismissed the petition.
Hence, this recourse to this Court.[7]
Ruling of the Court of Appeals
The Court of Appeals held that the tax court committed no grave abuse of discretion in ruling that the Criminal Complaint for tax evasion filed by the
Commissioner of Internal Revenue with the Department of Justice 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, [8]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.
Issues
Petitioners submit for the consideration of this Court the following issues:
(1)Whetherornotthecriminalcomplaintfortaxevasioncanbeconstruedasanassessment.
(2)Whetherornotanassessmentisnecessarybeforecriminalchargesfortaxevasionmaybeinstituted.
(3)WhetherornottheCTAcantakecognizanceofthecaseintheabsenceofanassessment. [9]
In the main, the Court will resolve whether the revenue officers Affidavit-Report, which was attached to the criminal Complaint filed with the Department
of Justice, constituted an assessment that could be questioned before the Court of Tax Appeals.
The Courts Ruling
The petition is meritorious.
Main Issue: Assessment
Petitioner argues that the filing of the criminal complaint with the Department of Justice cannot in any way be construed as a formal assessment of private
respondents tax liabilities. This position is based on Section 205 of the National Internal Revenue Code [10] (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.
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.
We agree with petitioner. Neither the NIRC nor the revenue regulations governing the protest of assessments [11] 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.
True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has tax liabilities. But not all documents coming from
the BIR containing a computation of the tax liability can be deemed assessments.
To start with, 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 percent 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 percent 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.[12]
The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the period within which to protest
it. Section 203[13]of the NIRC provides that internal revenue taxes must be assessed within three years from the last day within which to file the return . Section
222,[14] on the other hand, specifies a period of ten years in case a fraudulent return with intent to evade was submitted or in case of failure to file a return. Also,
Section 228[15] of the same law states that said assessment may be protested only within thirty days from receipt thereof. Necessarily, the taxpayer must be certain
that a specific document constitutes an assessment. Otherwise, confusion would arise regarding the period within which to make an assessment or to protest the
same, or whether interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an assessment is deemed made only when the collector of
internal revenue releases, mails or sends such notice to the taxpayer.[16]
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.
Respondents maintain that an assessment, in relation to taxation, is simply understood to mean:
Anoticetotheeffectthattheamountthereinstatedisdueastaxandademandforpaymentthereof. [17]
Fixestheliabilityofthetaxpayerandascertainsthefactsandfurnishesthedatafortheproperpresentationoftaxrolls. [18]
Even these definitions fail to advance private respondents case. 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.
The fact that the Complaint itself was specifically directed and sent to the Department of Justice and not to private respondents shows that the intent of the
commissioner was to file a criminal complaint for tax evasion, not to issue an assessment. Although the revenue officers recommended the issuance of an
assessment, the commissioner opted instead to file a criminal case for tax evasion. What private respondents received was a notice from the DOJ that a criminal
case for tax evasion had been filed against them, not a notice that the Bureau of Internal Revenue had made an assessment.
In addition, what private respondents sent to the commissioner was a motion for a reconsideration of the tax evasion charges filed, not of an assessment, as
shown thus:
Thisistorequestforreconsiderationofthetaxevasionchargesagainstmyclient,PASCORRealtyandDevelopmentCorporationandforthesametobereferred
totheAppellateDivisioninordertogivemyclienttheopportunityofafairandobjectivehearing [19]
Additional Issues: 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 of the same Code clearly mandates that the civil and criminal aspects of the case may be pursued
simultaneously. In Ungab v. Cusi,[20] petitioner therein sought the dismissal of the criminal Complaints for being premature, since his protest to the CTA had not
yet been resolved. The Court held that such protests could not stop or suspend the criminal action which was independent of the resolution of the protest in the
CTA. This was because the commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an assessment or to file a criminal
case against the taxpayer or to do both.
Private respondents insist that Section 222 should be read in relation to Section 255 of the NIRC, [21] which penalizes failure to file a return. They add that a
tax assessment should precede a criminal indictment. We disagree. 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.
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.
WHEREFORE, the petition is hereby GRANTED.

likewise DISMISSED. No costs.
SO ORDERED.
Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
Romero (Chairman), J., abroad on official business.
LUCAS G. ADAMSON, THERESE

JUNE D. ADAMSON, and SARA
S. DE LOS REYES, in their capacities
as President, Treasurer and Secretary
of Adamson Management Corporation,
Petitioners,
The
assailed
Decision
is REVERSED and SET
ASIDE. CTA Case
No.
5271
is
G.R. No. 120935
- versus COURT OF APPEALS and

LIWAYWAY VINZONS-CHATO,
in her capacity as Commissioner
of the Bureau of Internal Revenue,
Respondents.
x-- - - - - - - - - - - - - - - - - - - - - - - - x
COMMISSIONER OF
G.R. No. 124557
INTERNAL REVENUE,
Petitioner,
Present:
-versus-
PUNO, C.J., Chairperson,

CARPIO,
CORONA,
COURT OF APPEALS, COURT

LEONARDO-DE CASTRO, and
OF TAX APPEALS, ADAMSON
BERSAMIN, JJ.
MANAGEMENT CORPORATION,
LUCAS G. ADAMSON, THERESE
JUNE D. ADAMSON, and SARA
Promulgated:
S. DE LOS REYES,
Respondents.
May 21, 2009
x--------------------------------------------------x
DECISION
PUNO, C.J.:
Before the Court are the consolidated cases of G.R. No. 120935 and G.R. No. 124557.
G.R. No. 120935 involves a petition for review on certiorari filed by petitioners LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON, and
SARA S. DE LOS REYES (private respondents), in their respective capacities as president, treasurer and secretary of Adamson Management Corporation (AMC)
against then Commissioner of Internal Revenue Liwayway Vinzons-Chato (COMMISSIONER), under Rule 45 of the Revised Rules of Court. They seek to
review and reverse the Decision promulgated on March 21, 1995 and Resolution issued on July 6, 1995 of the Court of Appeals in CA-G.R. SP No. 35488
(Liwayway Vinzons-Chato, et al. v. Hon. Judge Erna Falloran-Aliposa, et al.).
G.R. No. 124557 is a petition for review on certiorari filed by the Commissioner, assailing the Decision dated March 29, 1996 of the Court of Appeals
in CA-G.R. SP No. 35520, titled Commissioner of Internal Revenue v. Court of Tax Appeals, Adamson Management Corporation, Lucas G. Adamson, Therese
June D. Adamson and Sara S. de los Reyes. In the said Decision, the Court of Appeals upheld the Resolution promulgated on September 19, 1994 by the Court of
Tax Appeals (CTA) in C.T.A. Case No. 5075 (Adamson Management Corporation, Lucas G. Adamson, Therese Adamson and Sara de los Reyes v. Commissioner
of Internal Revenue).
The facts, as culled from the findings of the appellate court, follow:
On June 20, 1990, Lucas Adamson and AMC sold 131,897 common shares of stock in Adamson and Adamson, Inc. (AAI) to APACHolding Limited
(APAC). The shares were valued at P7,789,995.00.[1] On June 22, 1990, P159,363.21 was paid as capital gains tax for the transaction.
On October 12, 1990, AMC sold to APAC Philippines, Inc. another 229,870 common shares of stock in AAI for P17,718,360.00. AMC paid the
capital gains tax of P352,242.96.
On October 15, 1993, the Commissioner issued a Notice of Taxpayer to AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes, informing them of deficiencies on their payment of capital gains tax and Value Added Tax (VAT). The notice contained a schedule for preliminary
conference.
The events preceding G.R. No. 120935 are the following:
On October 22, 1993, the Commissioner filed with the Department of Justice (DOJ) her Affidavit of Complaint [2] against AMC, Lucas G. Adamson,
Therese June D. Adamson and Sara S. de los Reyes for violation of Sections 45 (a) and (d) [3], and 110[4], in relation to Section 100[5], as penalized under Section
255,[6] and for violation of Section 253[7], in relation to Section 252 (b) and (d) of the National Internal Revenue Code (NIRC).[8]
AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes filed with the DOJ a motion to suspend proceedings on the ground of
prejudicial question, pendency of a civil case with the Supreme Court, and pendency of their letter-request for re-investigation with the Commissioner. After the
preliminary investigation, State Prosecutor Alfredo P. Agcaoili found probable cause. The Motion for Reconsideration against the findings of probable cause was
denied by the prosecutor.
On April 29, 1994, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes were charged before the Regional Trial Court (RTC)
of Makati, Branch 150 in Criminal Case Nos. 94-1842 to 94-1846. They filed a Motion to Dismiss or Suspend the Proceedings. They invoked the grounds that
there was yet no final assessment of their tax liability, and there were still pending relevant Supreme Court and CTA cases. Initially, the trial court denied the
motion. A Motion for Reconsideration was however filed, this time assailing the trial courts lack of jurisdiction over the nature of the subject cases. On August
8, 1994, the trial court granted the Motion. It ruled that the complaints for tax evasion filed by the Commissioner should be regarded as a decision of the
Commissioner regarding the tax liabilities of Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes, and appealable to the CTA. It further held
that the said cases cannot proceed independently of the assessment case pending before the CTA, which has jurisdiction to determine the civil and criminal tax
liability of the respondents therein.
On October 10, 1994, the Commissioner filed a Petition for Review with the Court of Appeals assailing the trial courts dismissal of the criminal
cases. She averred that it was not a condition prerequisite that a formal assessment should first be given to the private respondents before she may file the
aforesaid criminal complaints against them. She argued that the criminal complaints for tax evasion may proceed independently from the assessment cases
pending before the CTA.
On March 21, 1995, the Court of Appeals reversed the trial courts decision and reinstated the criminal complaints. The appellate court held that, in a
criminal prosecution for tax evasion, assessment of tax deficiency is not required because the offense of tax evasion is complete or consummated when the
offender has knowingly and willfully filed a fraudulent return with intent to evade the tax. [9] It ruled that private respondents filed false and fraudulent
returns with intent to evade taxes, and acting thereupon, petitioner filed an Affidavit of Complaint with the Department of Justice, without an
accompanying assessment of the tax deficiency of private respondents, in order to commence criminal action against the latter for tax evasion. [10]
Private respondents filed a Motion for Reconsideration, but the trial court denied the motion on July 6, 1995. Thus, they filed the petition inG.R. No.
120935, raising the following issues:
1.
WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS ERRED IN APPLYING THE
DOCTRINE IN UNGAB V. CUSI (Nos. L-41919-24, May 30, 1980, 97 SCRA 877) TO THE CASE AT BAR.
2.
WHETHER OR NOT AN ASSESSMENT IS REQUIRED UNDER THE SECOND CATEGORY OF THE OFFENSE IN
SECTION 253 OF THE NIRC.
3.
WHETHER OR NOT THERE WAS A VALID ASSESSMENT MADE BY THE COMMISSIONER IN THE CASE AT BAR.
4.
WHETHER OR NOT THE FILING OF A CRIMINAL COMPLAINT SERVES AS AN IMPLIED ASSESSMENT ON THE
TAX LIABILITY OF THE TAXPAYER.
5.
WHETHER OR NOT THE FILING OF THE CRIMINAL INFORMATION FOR TAX EVASION IN THE TRIAL COURT IS
PREMATURE BECAUSE THERE IS YET NO BASIS FOR THE CRIMINAL CHARGE OF WILLFULL INTENT TO
EVADE THE PAYMENT OF A TAX.
6.
WHETHER OR NOT THE DOCTRINES LAID DOWN IN THE CASES OF YABES V. FLOJO (No. L-46954, July 20, 1982,
115 SCRA 286) ANDCIR V. UNION SHIPPING CORP. (G.R. No. 66160, May 21, 1990, 185 SCRA 547) ARE APPLICABLE
TO THE CASE AT BAR.
7.
WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION OVER THE DISPUTE ON WHAT
CONSTITUTES THE PROPER TAXES DUE FROM THE TAXPAYER.
In parallel circumstances, the following events preceded G.R. No. 124557:

On December 1, 1993, AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes filed a letter request for re-investigation with the
Commissioner of the Examiners Findings earlier issued by the Bureau of Internal Revenue (BIR), which pointed out the tax deficiencies.
On March 15, 1994 before the Commissioner could act on their letter-request, AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes filed a Petition for Review with the CTA. They assailed the Commissioners finding of tax evasion against them. The Commissioner moved to dismiss the
petition, on the ground that it was premature, as she had not yet issued a formal assessment of the tax liability of therein petitioners. On September 19, 1994,
the CTA denied the Motion to Dismiss. It considered the criminal complaint filed by the Commissioner with the DOJ as an implied formal assessment, and the
filing of the criminal informations with the RTC as a denial of petitioners protest regarding the tax deficiency.
The Commissioner repaired to the Court of Appeals on the ground that the CTA acted with grave abuse of discretion. She contended that, with regard
to the protest provided under Section 229 of the NIRC, there must first be a formal assessment issued by the Commissioner, and it must be in accord with Section
6 of Revenue Regulation No. 12-85. She maintained that she had not yet issued a formal assessment of tax liability, and the tax deficiency amounts mentioned in
her criminal complaint with the DOJ were given only to show the difference between the tax returns filed and the audit findings of the revenue examiner.
The Court of Appeals sustained the CTAs denial of the Commissioners Motion to Dismiss. Thus, the Commissioner filed the petition for review
under G.R. No. 124557, raising the following issues:
1.
WHETHER OR NOT THE INSTANT PETITION SHOULD BE DISMISSED FOR FAILURE TO COMPLY WITH THE
MANDATORY REQUIREMENT OF A CERTIFICATION UNDER OATH AGAINST FORUM SHOPPING;
2.
WHETHER OR NOT THE CRIMINAL CASE FOR TAX EVASION IN THE CASE AT BAR CAN PROCEED WITHOUT
AN ASSESSMENT;
3.
WHETHER OR NOT THE COMPLAINT FILED WITH THE DEPARTMENT OF JUSTICE CAN BE CONSTRUED AS AN
IMPLIED ASSESSMENT; and
4.
WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO ACT ON PRIVATE RESPONDENTS
PETITION FOR REVIEW FILED WITH THE SAID COURT.
The issues in G.R. No. 124557 and G.R. No. 120935 can be compressed into three:
1.
WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT (FORMAL OR

OTHERWISE) OF THE TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND
SARA S. DE LOS REYES;
2.
WHETHER THERE IS BASIS FOR THE CRIMINAL CASES FOR TAX EVASION TO PROCEED AGAINST AMC,
LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES; and
3.
WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO TAKE COGNIZANCE OF BOTH THE
CIVIL AND THE CRIMINAL ASPECTS OF THE TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE
JUNE D. ADAMSON AND SARA S. DE LOS REYES.
The case of CIR v. Pascor Realty, et al.[11] is relevant. In this case, then BIR Commissioner Jose U. Ong authorized revenue officers to examine the
books of accounts and other accounting records of Pascor Realty and Development Corporation (PRDC) for 1986, 1987 and 1988. This 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.
On March 1, 1995, the Commissioner filed a criminal complaint before the DOJ against PRDC, its President Rogelio A. Dio, and its Treasurer Virginia
S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00. Private respondents filed an Urgent Request for Reconsideration/Reinvestigation
disputing the tax assessment and tax liability.
The Commissioner denied the urgent request for reconsideration/reinvestigation because she had not yet issued a formal assessment.
Private respondents then elevated the Decision of the Commissioner to the CTA on a petition for review. The Commissioner filed a Motion to Dismiss
the petition on the ground that the CTA has no jurisdiction over the subject matter of the petition, as there was yet no formal assessment issued against the
petitioners. The CTA denied the said motion to dismiss and ordered the Commissioner to file an answer within thirty (30) days. The Commissioner did not file an
answer nor did she move to reconsider the resolution. Instead, the Commissioner filed a petition for review of the CTA decision with the Court of Appeals. The
Court of Appeals upheld the CTA order. However, this Court reversed the Court of Appeals decision and the CTA order, and ordered the dismissal of the petition.
We held:
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.
Neither the NIRC nor the revenue regulations governing the protest of assessments [12] 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.
True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has tax liabilities. But not all
documents coming from the BIR containing a computation of the tax liability can be deemed assessments.
To start with, 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 percent 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 percent 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.
[13]
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[14] of the NIRC provides that internal revenue taxes must be assessed within three years from the last day
within which to file the return. Section 222,[15] on the other hand, specifies a period of ten years in case a fraudulent return with intent to
evade was submitted or in case of failure to file a return. Also, Section 228[16] of the same law states that said assessment may be protested
only within thirty days from receipt thereof. Necessarily, the taxpayer must be certain that a specific document constitutes an
assessment. Otherwise, confusion would arise regarding the period within which to make an assessment or to protest the same, or whether
interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an assessment is deemed made only
when the collector of internal revenue releases, mails or sends such notice to the taxpayer.[17]
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.
Respondents maintain that an assessment, in relation to taxation, is simply understood to mean:
A notice to the effect that the amount therein stated is due as tax and a demand for payment thereof. [18]
Fixes the liability of the taxpayer and ascertains the facts and furnishes the data for the proper
presentation of tax rolls.[19]
Even these definitions fail to advance private respondents case. 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.
The fact that the Complaint itself was specifically directed and sent to the Department of Justice and not to private respondents
shows that the intent of the commissioner was to file a criminal complaint for tax evasion, not to issue an assessment. Although the revenue
officers recommended the issuance of an assessment, the commissioner opted instead to file a criminal case for tax evasion. What private
respondents received was a notice from the DOJ that a criminal case for tax evasion had been filed against them, not a notice that the
Bureau of Internal Revenue had made an assessment.
Private respondents maintain that the filing of a criminal complaint must be preceded by an assessment. This is incorrect, because
Section 222 of the NIRC specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return
such as this case, proceedings in court may be commenced without an assessment. Furthermore, Section 205 of the same Code clearly
mandates that the civil and criminal aspects of the case may be pursued simultaneously. In Ungab v. Cusi,[20] petitioner therein sought the
dismissal of the criminal Complaints for being premature, since his protest to the CTA had not yet been resolved. The Court held that such
protests could not stop or suspend the criminal action which was independent of the resolution of the protest in the CTA. This was because
the commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an assessment or to file a criminal case
against the taxpayer or to do both.
Private respondents insist that Section 222 should be read in relation to Section 255 of the NIRC, [21] which penalizes failure to file a
return. They add that a tax assessment should precede a criminal indictment. We disagree. 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.
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.
In the cases at bar, the Commissioner denied that she issued a formal assessment of the tax liability of AMC, Lucas G. Adamson, Therese June D. Adamson
and Sara S. de los Reyes. She admits though that she wrote the recommendation letter[22] addressed to the Secretary of the DOJ recommending the filing of
criminal complaints against AMC and the aforecited persons for fraudulent returns and tax evasion.
The first issue is whether the Commissioners recommendation letter can be considered as a formal assessment of private respondents tax liability.
In the context in which it is used in the NIRC, an assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a
due tax liability that is there definitely set and fixed. A written communication containing a computation by a revenue officer of the tax liability of a taxpayer and
giving him an opportunity to contest or disprove the BIR examiners findings is not an assessment since it is yet indefinite. [23]
We rule that the recommendation letter of the Commissioner cannot be considered a formal assessment. Even a cursory perusal of the said letter would
reveal three key points:
1. It was not addressed to the taxpayers.
2. There was no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein.
3. The letter was never mailed or sent to the taxpayers by the Commissioner.
In fine, the said recommendation letter served merely as the prima facie basis for filing criminal informations that the taxpayers had violated Section
45 (a) and (d), and 110, in relation to Section 100, as penalized under Section 255, and for violation of Section 253, in relation to Section 252 9(b) and (d) of the
Tax Code.[24]
The next issue is whether the filing of the criminal complaints against the private respondents by the DOJ is premature for lack of a formal assessment.
Section 269 of the NIRC (now Section 222 of the Tax Reform Act of 1997) provides:
Sec. 269. Exceptions as to period of limitation of assessment and collection of taxes.-(a) In the case of a false or fraudulent return
with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court after 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: Provided, That in a fraud
assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for
collection thereof
The law is clear. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the collection of such tax may be begun
without assessment. Here, the private respondents had already filed the capital gains tax return and the VAT returns, and paid the taxes they have declared due
therefrom. Upon investigation of the examiners of the BIR, there was a preliminary finding of gross discrepancy in the computation of the capital gains taxes due
from the sale of two lots of AAI shares, first to APAC and then to APAC Philippines, Limited. The examiners also found that the VAT had not been paid for VATliable sale of services for the third and fourth quarters of 1990. Arguably, the gross disparity in the taxes due and the amounts actually declared by the private
respondents constitutes badges of fraud.
Thus, the applicability of Ungab v. Cusi[25] is evident to the cases at bar. In this seminal case, this Court ruled that there was no need for precise
computation and formal assessment in order for criminal complaints to be filed against him. It quoted Mertens Law of Federal Income Taxation, Vol. 10, Sec.
55A.05, p. 21, thus:
An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income
tax. A crime is complete when the violator has knowingly and willfully filed a fraudulent return, with intent to evade and defeat the
tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the
governments failure to discover the error and promptly to assess has no connections with the commission of the crime.
This hoary principle still underlies Section 269 and related provisions of the present Tax Code.
We now go to the issue of whether the CTA has no jurisdiction to take cognizance of both the criminal and civil cases here at bar.
Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals ) as amended, the rulings of the Commissioner are appealable to the CTA,
thus:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein
provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue;
Republic Act No. 8424, titled An Act Amending the National Internal Revenue Code, As Amended, And For Other Purposes, later expanded the
jurisdiction of the Commissioner and, correspondingly, that of the CTA, thus:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. The power to interpret the provisions of this
Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of
Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested
in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
The latest statute dealing with the jurisdiction of the CTA is Republic Act No. 9282.[26] It provides:
SEC. 7. Section 7 of the same Act is hereby amended to read as follows:
Sec. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial;
(3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by
them in the exercise of their original or appellate jurisdiction;
xxx
(b) Jurisdiction over cases involving criminal offenses as herein provided:
(1) Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal
Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau
of Customs: Provided, however, That offenses or felonies mentioned in this paragraph where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) or where there
is no specified amount claimed shall be tried by the regular courts and the jurisdiction of the CTA shall be appellate. Any
provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil
action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and
jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry
with it the filing of the civil action, and no right to reserve the filling of such civil action separately from the criminal
action will be recognized.
(2) Exclusive appellate jurisdiction in criminal offenses:
(a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in
the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
(c) Jurisdiction over tax collection cases as herein provided:
(1) Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the
principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million
pesos (P1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and
Regional Trial Court.
(2) Exclusive appellate jurisdiction in tax collection cases:
(a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in
tax collection cases originally decided by them, in their respective territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial
Courts in the exercise of their appellate jurisdiction over tax collection cases originally decided
by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in
their respective jurisdiction.
These laws have expanded the jurisdiction of the CTA. However, they did not change the jurisdiction of the CTA to entertain an appeal only from a final
decision or assessment of the Commissioner, or in cases where the Commissioner has not acted within the period prescribed by the NIRC. In the cases at bar, the
Commissioner has not issued an assessment of the tax liability of private respondents.
Finally, we hold that contrary to private respondents stance, the doctrines laid down in CIR v. Union Shipping Co. and Yabes v. Flojo are not
applicable to the cases at bar. In these earlier cases, the Commissioner already rendered an assessment of the tax liabilities of the delinquent taxpayers, for which
reason the Court ruled that the filing of the civil suit for collection of the taxes due was a final denial of the taxpayers request for reconsideration of the tax
assessment.
IN VIEW WHEREOF, premises considered, judgment is rendered:
1.
In G.R. No. 120935, AFFIRMING the CA decision dated March 21, 1995, which set aside the Regional Trial Courts Order
dated August 8, 1994, and REINSTATING Criminal Case Nos. 94-1842 to 94-1846 for further proceedings before the trial court;
and
2.
In G.R. No. 124557, REVERSING and SETTING ASIDE the Decision of the Court of Appeals dated March 29, 1996, and
ORDERING the dismissal of C.T.A. Case No. 5075.
No costs.
SO ORDERED.
COMMISSIONER OF INTERNAL
REVENUE and ARTURO V.
PARCERO in his official
capacity as Revenue District
Officer of Revenue District
No. 049 (Makati),
Petitioners,
G.R. No. 162155
Present:
-versus-
PRIMETOWN PROPERTY
GROUP, INC.,
Respondent.
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.
Promulgated:
August 28, 2007
x-----------------------------------------x
DECISION
CORONA, J.:
This petition for review on certiorari[1] seeks to set aside the August 1, 2003 decision [2] of the Court of Appeals (CA) in CA-G.R. SP No. 64782 and its
February 9, 2004 resolution denying reconsideration.[3]
On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax respondent paid in
1997. In Yap's letter to petitioner revenue district officer Arturo V. Parcero of Revenue District No. 049 (Makati) of the Bureau of Internal Revenue (BIR), [4] he
explained that the increase in the cost of labor and materials and difficulty in obtaining financing for projects and collecting receivables caused the real estate
industry to slowdown.[5] As a consequence, while business was good during the first quarter of 1997, respondent suffered losses amounting to P71,879,228 that
year.[6]
According to Yap, because respondent suffered losses, it was not liable for income taxes. [7] Nevertheless, respondent paid its quarterly corporate income tax
and remitted creditable withholding tax from real estate sales to the BIR in the total amount of P26,318,398.32.[8] Therefore, respondent was entitled to tax refund
or tax credit.[9]
On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional documents to support its claim. [10]Respondent complied but
its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for review[11] in the Court of Tax Appeals (CTA).
On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial claim for tax refund or
tax credit.[12] It invoked Section 229 of the National Internal Revenue Code (NIRC):
Sec. 229. Recovery of Taxes Erroneously or Illegally Collected. -- No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the
tax or penalty regardless of any supervening cause that may arise after payment : Provided, however, That the Commissioner may,
even without a claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid. (emphasis supplied)
The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. [13]
The tax court applied Article 13 of the Civil Code which states:
Art. 13. When the law speaks of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each;
months, of thirty days; days, of twenty-four hours, and nights from sunset to sunrise.
If the months are designated by their name, they shall be computed by the number of days which they respectively have.
In computing a period, the first day shall be excluded, and the last included. (emphasis supplied)
Thus, according to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because
the year 2000 was a leap year, respondent's petition, which was filed 731 days [14] after respondent filed its final adjusted return, was filed beyond the reglementary
period.[15]
Respondent moved for reconsideration but it was denied.[16] Hence, it filed an appeal in the CA.[17]
On August 1, 2003, the CA reversed and set aside the decision of the CTA. [18] It ruled that Article 13 of the Civil Code did not distinguish between a regular
year and a leap year. According to the CA:
The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap year.[19]
In other words, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still be
counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed. [20]
Petitioners moved for reconsideration but it was denied.[21] Thus, this appeal.
Petitioners contend that tax refunds, being in the nature of an exemption, should be strictly construed against claimants. [22] Section 229 of the NIRC should
be strictly applied against respondent inasmuch as it has been consistently held that the prescriptive period (for the filing of tax refunds and tax credits) begins to
run on the day claimants file their final adjusted returns. [23] Hence, the claim should have been filed on or before April 13, 2000 or within 730 days, reckoned from
the time respondent filed its final adjusted return.
The conclusion of the CA that respondent filed its petition for review in the CTA within the two-year prescriptive period provided in Section 229 of the
NIRC is correct. Its basis, however, is not.
The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return. [24] But how should the two-year prescriptive period
be computed?
As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to be equivalent to 365 days. InNational
Marketing Corporation v. Tecson,[25] we ruled that a year is equivalent to 365 days regardless of whether it is a regular year or a leap year.[26]
However, in 1987, EO[27] 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides:
Sec. 31. Legal Periods. Year shall be understood to be twelve calendar months; month of thirty days, unless it refers to a specific
calendar month in which case it shall be computed according to the number of days the specific month contains; day, to a day of twentyfour hours and; night from sunrise to sunset. (emphasis supplied)
A calendar month is a month designated in the calendar without regard to the number of days it may contain. [28] It is the period of time running from the
beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in
the next month, then up to and including the last day of that month. [29] To illustrate, one calendar month from December 31, 2007 will be from January 1, 2008 to
January 31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008 until February 29, 2008.[30]
A law may be repealed expressly (by a categorical declaration that the law is revoked and abrogated by another) or impliedly (when the provisions of a
more recent law cannot be reasonably reconciled with the previous one).[31] Section 27, Book VII (Final Provisions) of the Administrative Code of 1987 states:
Sec. 27. Repealing clause. All laws, decrees, orders, rules and regulation, or portions thereof, inconsistent with this Code are hereby
repealed or modified accordingly.
A repealing clause like Sec. 27 above is not an express repealing clause because it fails to identify or designate the laws to be abolished. [32] Thus, the provision
above only impliedly repealed all laws inconsistent with the Administrative Code of 1987.
Implied repeals, however, are not favored. An implied repeal must have been clearly and unmistakably intended by the legislature. The test is whether the
subsequent law encompasses entirely the subject matter of the former law and they cannot be logically or reasonably reconciled. [33]
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of
1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For
this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal
periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time
respondent filed its final adjusted return[34] on April 14, 1998) consisted of 24 calendar months, computed as follows:
Year 1
Year 2
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd
23rd
24th
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
April 15, 1998

May 15, 1998
June 15, 1998
July 15, 1998
August 15, 1998
September 15, 1998
October 15, 1998
November 15, 1998
December 15, 1998
January 15, 1999
February 15, 1999
March 15, 1999
April 15, 1999
May 15, 1999
June 15, 1999
July 15, 1999
August 15, 1999
September 15, 1999
October 15, 1999
November 15, 1999
December 15, 1999
January 15, 2000
February 15, 2000
March 15, 2000
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
May 14, 1998

June 14, 1998
July 14, 1998
August 14, 1998
September 14, 1998
October 14, 1998
November 14, 1998
December 14, 1998
January 14, 1999
February 14, 1999
March 14, 1999
April 14, 1999
May 14, 1999
June 14, 1999
July 14, 1999
August 14, 1999
September 14, 1999
October 14, 1999
November 14, 1999
December 14, 1999
January 14, 2000
February 14, 2000
March 14, 2000
April 14, 2000
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24 th calendar month from the day respondent filed its
final adjusted return. Hence, it was filed within the reglementary period.
Accordingly, the petition is hereby DENIED. The case is REMANDED to the Court of Tax Appeals which is ordered to expeditiously proceed to hear
C.T.A. Case No. 6113 entitled Primetown Property Group, Inc. v. Commissioner of Internal Revenue and Arturo V. Parcero.
No costs.
SO ORDERED.
BANK OF THE PHILIPPINE

ISLANDS (Formerly: Far East
Bank and Trust Company),
Petitioner,
G.R. No. 174942

Present:
CARPIO, J.,
Acting Chairperson,
- versus -
CARPIO MORALES,
AZCUNA,*
TINGA, and
VELASCO, JR., JJ.
REVENUE,
Respondent.
Promulgated:
March 7, 2008
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
The Bank of the Philippine Islands (BPI) seeks a review of the Decision[1] dated 15 August 2006 and the Resolution[2] dated 5 October 2006, both of the
Court of Tax Appeals (CTA or tax court), which ruled that BPI is liable for the deficiency documentary stamp tax (DST) on its cabled instructions to its foreign
correspondent bank and that prescription had not yet set in against the government.
The following undisputed facts are culled from the CTA decision:
Petitioner, the surviving bank after its merger with Far East Bank and Trust Company, is a corporation duly created and existing
under the laws of the Republic of the Philippines with principal office at Ayala Avenue corner Paseo de Roxas Ave., Makati City.
Respondent thru then Revenue Service Chief Cesar M. Valdez, issued to the petitioner a pre-assessment notice (PAN)
dated November 26, 1986.
Petitioner, in a letter dated November 29, 1986, requested for the details of the amounts alleged as 1982-1986 deficiency taxes
mentioned in the November 26, 1986 PAN.
On April 7, 1989, respondent issued to the petitioner, assessment/demand notices FAS-1-82 to 86/89-000 and FAS 5-82 to 86/89-000
for deficiency withholding tax at source (Swap Transactions) and DST involving the amounts of P190,752,860.82 and P24,587,174.63,
respectively, for the years 1982 to 1986.
On April 20, 1989, petitioner filed a protest on the demand/assessment notices. On May 8, 1989, petitioner filed a supplemental
protest.
On March 12, 1993, petitioner requested for an opportunity to present or submit additional documentation on the Swap Transactions
with the then Central Bank (page 240, BIR Records). Attached to the letter dated June 17, 1994, in connection with the reinvestigation of
the abovementioned assessment, petitioner submitted to the BIR, Swap Contracts with the Central Bank.
Petitioner executed several Waivers of the Statutes of Limitations, the last of which was effective until December 31, 1994.
On August 9, 2002, respondent issued a final decision on petitioners protest ordering the withdrawal and cancellation of the
deficiency withholding tax assessment in the amount of P190,752,860.82 and considered the same as closed and terminated. On the other
hand, the deficiency DST assessment in the amount of P24,587,174.63 was reiterated and the petitioner was ordered to pay the said amount
within thirty (30) days from receipt of such order. Petitioner received a copy of the said decision on January 15, 2003. Thereafter,
on January 24, 2003, petitioner filed a Petition for Review before the Court.
On August 31, 2004, the Court rendered a Decision denying the petitioners Petition for Review, the dispositive portion of which is
quoted hereunder:
IN VIEW OF ALL THE FOREGOING, the petition is hereby DENIED for lack of merit. Accordingly, petitioner
is ORDERED to PAY the respondent the amount of P24,587,174.63 representing deficiency documentary stamp tax for the
period 1982-1986, plus 20% interest starting February 14, 2003 until the amount is fully paid pursuant to Section 249 of the Tax
Code.
SO ORDERED.
On September 21, 2004, petitioner filed a Motion for Reconsideration of the abovementioned Decision which was denied for lack of
merit in a Resolution dated February 14, 2005.
On March 9, 2005, petitioner filed with the Court En Banc a Motion for Extension of Time to File Petition for Review praying for
an extension of fifteen (15) days from March 10, 2005 or until March 25, 2005. Petitioners motion was granted in a Resolution
dated March 16, 2005.
On March 28, 2005, (March 25 was Good Friday), petitioner filed the instant Petition for Review, advancing the following
assignment of errors.
I. THIS HONORABLE COURT OVERLOOKED THE SIGNIFICANCE OF THE WAIVER DULY AND
VALIDLY AGREED UPON BY THE PARTIES AND EFFECTIVE UNTIL DECEMBER 31, 1994;
II. THIS TAX COURT ERRED IN HOLDING THAT THE COLLECTION OF ALLEGED DEFICIENCY
TAX HAS NOT PRESCRIBED.
III.
THIS HONORABLE COURT ERRED IN HOLDING THAT RESPONDENT DID NOT VIOLATE
PROCEDURAL DUE PROCESS IN THE ISSUANCE OF ASSESSMENT NOTICE RELATIVE TO DOCUMENTARY
STAMP DEFICIENCY.
IV.
THIS HONORABLE COURT ERRED IN HOLDING THAT THE 4 MARCH 1987 MEMORANDUM
OF THE LEGAL SERVICE CHIEF DULY APPROVED BY THE BIR COMMISISONER VESTS NO RIGHTS TO
PETITIONER.
V. THIS HONORABLE COURT ERRED IN HOLDING THAT PETITIONER
DOCUMENTARY STAMP TAX ON SWAP LOANS TRANSACTIONS FROM 1982 TO 1986.[3]
IS
LIABLE
FOR
The CTA synthesized the foregoing issues into whether the collection of the deficiency DST is barred by prescription and whether BPI is liable for
DST on its SWAP loan transactions.
On the first issue, the tax court, applying the case of Commissioner of Internal Revenue v. Wyeth Suaco Laboratories, Inc., [4] (Wyeth Suacocase), ruled
that BPIs protest and supplemental protest should be considered requests for reinvestigation which tolled the prescriptive period provided by law to collect a tax
deficiency by distraint, levy, or court proceeding. It further held, as regards the second issue, that BPIs cabled instructions to its foreign correspondent bank to
remit a specific sum in dollars to the Federal Reserve Bank, the same to be credited to the account of the Central Bank, are in the nature of a telegraphic transfer
subject to DST under Section 195 of the Tax Code.
In its Petition for Review[5] dated 24 November 2006, BPI argues that the governments right to collect the DST had already prescribed because the
Commissioner of Internal Revenue (CIR) failed to issue any reply granting BPIs request for reinvestigation manifested in the protest letters dated 20 April and 8
May 1989. It was only through the 9 August 2002 Decision ordering BPI to pay deficiency DST, or after the lapse of more than thirteen (13) years, that the CIR
acted on the request for reinvestigation, warranting the conclusion that prescription had already set in. It further claims that the CIR was not precluded from
collecting the deficiency within three (3) years from the time the notice of assessment was issued on 7 April 1989, or even until the expiration on 31 December
1994 of the last waiver of the statute of limitations signed by BPI.
Moreover, BPI avers that the cabled instructions to its correspondent bank are not subject to DST because the National Internal Revenue Code of 1977
(Tax Code of 1977) does not contain a specific provision that cabled instructions on SWAP transactions are subject to DST.
The Office of the Solicitor General (OSG) filed a Comment[6] dated 1 June 2007, on 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. 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.
The OSG cites the case of Collector of Internal Revenue v. Suyoc Consolidated Mining Company, et al. [7] (Suyoc case) in support of its argument that
BPI is already estopped from raising the defense of prescription in view of its repeated requests for reinvestigation which allegedly induced the CIR to delay the
collection of the assessed tax.
In its Reply[8] dated 30 August 2007, BPI argues against the application of the Suyoc case on two points: first, it never induced the CIR to postpone tax
collection; second, its request for reinvestigation was not categorically acted upon by the CIR within the three-year collection period after assessment. BPI
maintains that it did not receive any communication from the CIR in reply to its protest letters.
We grant the petition.
Section 318[9] of the Tax Code of 1977 provides:
Sec. 318. Period of limitation upon assessment and collection.Except as provided in the succeeding section, internal revenue
taxes shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period. For the purposes of this section, a return filed before the last day prescribed by law
for the filing thereof shall be considered as filed on such last day: Provided, That this limitation shall not apply to cases already investigated
prior to the approval of this Code.
The statute of limitations on assessment and collection of national internal revenue taxes was shortened from five (5) years to three (3) years by Batas
Pambansa Blg. 700.[10] Thus, the CIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence
court proceedings for the collection thereof without an assessment.
When it validly issues an assessment within the three (3)-year period, it has another three (3) years within which to collect the tax due by distraint,
levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the
assessment notice had been released, mailed or sent to the taxpayer.[11]
As applied to the present case, the CIR had three (3) years from the time he issued assessment notices to BPI on 7 April 1989 or until 6 April
1992 within which to collect the deficiency DST. However, it was only on 9 August 2002 that the CIR ordered BPI to pay the deficiency.
In order to determine whether the prescriptive period for collecting the tax deficiency was effectively tolled by BPIs filing of the protest letters dated
20 April and 8 May 1989 as claimed by the CIR, we need to examine Section 320[12] of the Tax Code of 1977, which states:
Sec. 320. Suspension of running of statute.The running of the statute of limitations provided in Sections 318 or 319 on the
making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer requests for a re-investigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or
collected: Provided, That if the taxpayer informs the Commissioner of any change in address, the running of the statute of limitations will
not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of his
household with sufficient discretion, and no property could be located; and when the taxpayer is out of the Philippines. (Emphasis supplied)
The above section is plainly worded. In order to suspend the running of the prescriptive periods for assessment and collection, the request for
reinvestigation must be granted by the CIR.
In BPI v. Commissioner of Internal Revenue,[13] the Court emphasized the rule that the CIR must first grant the request for reinvestigation as a
requirement for the suspension of the statute of limitations. The Court said:
In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested for a thorough reinvestigation of the
assessment against him and placed at the disposal of the Collector of Internal Revenue all the evidences he had for such purpose; yet, the
Collector ignored the request, and the records and documents were not at all examined. Considering the given facts, this Court pronounced
that
x x x The act of requesting a reinvestigation alone does not suspend the period. The request should first be granted, in order
to effect suspension.(Collector v. Suyoc Consolidated, supra; also Republic v. Ablaza, supra). Moreover, the Collector gave appellee
until April 1, 1949, within which to submit his evidence, which the latter did one day before. There were no impediments on the part of the
Collector to file the collection case from April 1, 1949
In Republic of the Philippines v. Acebedo, this Court similarly found that
x x x T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a reinvestigation thereof on
October 11, 1949 (Exh. A). There is no evidence that this request was considered or acted upon. In fact, on October 23, 1950 the then
Collector of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment (Exh. D), but there was followup of this warrant. Consequently, the request for reinvestigation did not suspend the running of the period for filing an action for
collection. [Emphasis in the original][14]
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.
In fact, it was only in his comment to the present petition that the CIR, through the OSG, argued for the first time that he had granted the request for
reinvestigation. His consistent stance invoking the Wyeth Suaco case, as reflected in the records, is that the prescriptive period was tolled by BPIs request for
reinvestigation, without any assertion that the same had been granted or at least acted upon. [15]
In the Wyeth Suaco case, private respondent Wyeth Suaco Laboratories, Inc. sent letters seeking the reinvestigation or reconsideration of the deficiency
tax assessments issued by the BIR. The records of the case showed that as a result of these protest letters, the BIR Manufacturing Audit Division conducted a
review and reinvestigation of the assessments. The records further showed that the company, thru its finance manager, communicated its inability to settle the tax
deficiency assessment and admitted that it knew of the ongoing review and consideration of its protest.
As differentiated from the Wyeth Suaco case, however, there is no evidence in this case that the CIR actually conducted a reinvestigation upon the
request of BPI or that the latter was made aware of the action taken on its request. Hence, there is no basis for the tax courts ruling that the filing of the request
for reinvestigation tolled the running of the prescriptive period for collecting the tax deficiency.
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. 20-90. [16] At any rate, the records of this case do not
disclose any effort on the part of the Bureau of Internal Revenue to collect the deficiency tax after the expiration of the waiver until eight (8) years thereafter when
it finally issued a decision on the protest.
We also find the Suyoc case inapplicable. In that case, several requests for reinvestigation and reconsideration were filed by Suyoc Consolidated
Mining Company purporting to question the correctness of tax assessments against it. As a result, the Collector of Internal Revenue refrained from collecting the
tax by distraint, levy or court proceeding in order to give the company every opportunity to prove its claim. The Collector also conducted several reinvestigations
which eventually led to a reduced assessment. The company, however, filed a petition with the CTA claiming that the right of the government to collect the tax
had already prescribed.
When the case reached this Court, we ruled that Suyoc could not set up the defense of prescription since, by its own action, the government was
induced to delay the collection of taxes to make the company feel that the demand was not unreasonable or that no harassment or injustice was meant by the
government.
In this case, BPIs letters of protest and submission of additional documents pertaining to its SWAP transactions, which were never even acted upon,
much less granted, cannot be said to have persuaded the CIR to postpone the collection of the deficiency DST.
The inordinate delay of the CIR in acting upon and resolving the request for reinvestigation filed by BPI and in collecting the DST allegedly due from
the latter had resulted in the prescription of the governments right to collect the deficiency. As this Court declared in Republic of thePhilippines v. Ablaza:[17]
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.[18]
Given the prescription of the governments claim, we no longer deem it necessary to pass upon the validity of the assessment.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Tax Appeals dated 15 August 2006 and its Resolution dated 5 October 2006,
are hereby REVERSED and SET ASIDE. No pronouncement as to costs. SO ORDERED.
COMMISSIONER OF INTERNAL G.R. No. 134062
REVENUE,
Petitioner,
Present:
-versus-
BANK OF THE PHILIPPINE

ISLANDS,
Respondent.

SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.
Promulgated:
April 17, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CORONA, J.:
This is a petition for review on certiorari [1] of a decision[2] of the Court of Appeals (CA) dated May 29, 1998 in CA-G.R. SP No.
41025 which reversed and set aside the decision[3] and resolution[4] of the Court of Tax Appeals (CTA) dated November 16,
1995 and May 27, 1996, respectively, in CTA Case No. 4715.
In two notices dated October 28, 1988, petitioner Commissioner of Internal Revenue (CIR) assessed respondent Bank of the
Philippine Islands (BPIs) deficiency percentage and documentary stamp taxes for the year 1986 in the total amount
of P129,488,656.63:
1986 Deficiency Percentage Tax
Deficiency percentage tax
Add: 25% surcharge
20% interest from 1-21-87 to
10-28-88
Compromise penalty
TOTAL AMOUNT DUE AND COLLECTIBLE
P 7, 270,892.88
1,817,723.22
3,215,825.03
15,000.00
P12,319,441.13
1986 Deficiency Documentary Stamp Tax

Deficiency percentage tax
P93,723,372.40
Add: 25% surcharge

23,430,843.10
Compromise penalty
15,000.00
TOTAL AMOUNT DUE AND COLLECTIBLE P117,169,215.50.[5]
Both notices of assessment contained the following note:
Please be informed that your [percentage and documentary stamp taxes have] been assessed as shown above. Said
assessment has been based on return (filed by you) (as verified) (made by this Office) (pending investigation) (after
investigation). You are requested to pay the above amount to this Office or to our Collection Agent in the Office of the City or
Deputy Provincial Treasurer of xxx[6]
In a letter dated December 10, 1988, BPI, through counsel, replied as follows:
1. Your deficiency assessments are no assessments at all. The taxpayer is not informed, even in the vaguest
terms, why it is being assessed a deficiency. The very purpose of a deficiency assessment is to inform taxpayer why he has
incurred a deficiency so that he can make an intelligent decision on whether to pay or to protest the assessment. This is all the
more so when the assessment involves astronomical amounts, as in this case.
We therefore request that the examiner concerned be required to state, even in the briefest form, why he believes the
taxpayer has a deficiency documentary and percentage taxes, and as to the percentage tax, it is important that the taxpayer be
informed also as to what particular percentage tax the assessment refers to.
2. As to the alleged deficiency documentary stamp tax, you are aware of the compromise forged between your office
and the Bankers Association of the Philippines [BAP] on this issue and of BPIs submission of its computations under this
compromise. There is therefore no basis whatsoever for this assessment, assuming it is on the subject of the BAP
compromise. On the other hand, if it relates to documentary stamp tax on some other issue, we should like to be informed
about what those issues are.
3. As to the alleged deficiency percentage tax, we are completely at a loss on how such assessment may be protested
since your letter does not even tell the taxpayer what particular percentage tax is involved and how your examiner arrived at
the deficiency. As soon as this is explained and clarified in a proper letter of assessment, we shall inform you of the taxpayers
decision on whether to pay or protest the assessment.[7]
On June 27, 1991, BPI received a letter from CIR dated May 8, 1991 stating that:
although in all respects, your letter failed to qualify as a protest under Revenue Regulations No. 12-85 and therefore not
deserving of any rejoinder by this office as no valid issue was raised against the validity of our assessment still we obliged to
explain the basis of the assessments.
xxx
xxx
xxx
this constitutes the final decision of this office on the matter.[8]

On July 6, 1991, BPI requested a reconsideration of the assessments stated in the CIRs May 8, 1991 letter.[9] This was
denied in a letter dated December 12, 1991, received by BPI on January 21, 1992.[10]
On February 18, 1992, BPI filed a petition for review in the CTA. [11] In a decision dated November 16, 1995, the CTA
dismissed the case for lack of jurisdiction since the subject assessments had become final and unappealable. The CTA ruled that
BPI failed to protest on time under Section 270 of the National Internal Revenue Code (NIRC) of 1986 and Section 7 in relation to
Section 11 of RA 1125.[12] It denied reconsideration in a resolution dated May 27, 1996.[13]
On appeal, the CA reversed the tax courts decision and resolution and remanded the case to the CTA [14] for a decision on
the merits.[15] It ruled that the October 28, 1988 notices were not valid assessments because they did not inform the taxpayer of the
legal and factual bases therefor. It declared that the proper assessments were those contained in the May 8, 1991 letter which
provided the reasons for the claimed deficiencies. [16] Thus, it held that BPI filed the petition for review in the CTA on time. [17] The CIR
elevated the case to this Court.
This petition raises the following issues:

1)
whether or not the assessments issued to BPI for deficiency percentage and documentary stamp taxes for 1986
had already become final and unappealable and
2)
whether or not BPI was liable for the said taxes.
The former Section 270[18] (now renumbered as Section 228) of the NIRC stated:
Sec. 270. Protesting of assessment. When the [CIR] or his duly authorized representative finds that proper
taxes should be assessed, he shall first notify the taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the
[CIR] shall issue an assessment based on his findings.
xxx
xxx
xxx
(emphasis supplied)
WERE THE OCTOBER 28, 1988

NOTICES VALID ASSESSMENTS?
The first issue for our resolution is whether or not the October 28, 1988 notices[19] were valid assessments. If they were not,
as held by the CA, then the correct assessments were in the May 8, 1991 letter, received by BPI on June 27, 1991. BPI, in its July 6,
1991 letter, seasonably asked for a reconsideration of the findings which the CIR denied in hisDecember 12, 1991 letter, received by
BPI on January 21, 1992. Consequently, the petition for review filed by BPI in the CTA on February 18, 1992 would be well within
the 30-day period provided by law.[20]
The CIR argues that the CA erred in holding that the October 28, 1988 notices were invalid assessments. He asserts that
he used BIR Form No. 17.08 (as revised in November 1964) which was designed for the precise purpose of notifying taxpayers of the
assessed amounts due and demanding payment thereof. [21] He contends that there was no law or jurisprudence then that required
notices to state the reasons for assessing deficiency tax liabilities. [22]
BPI counters that due process demanded that the facts, data and law upon which the assessments were based be provided
to the taxpayer. It insists that the NIRC, as worded now (referring to Section 228), specifically provides that:
[t]he taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void.
According to BPI, this is declaratory of what sound tax procedure is and a confirmation of what due process requires even under the
former Section 270.
BPIs contention has no merit. The present Section 228 of the NIRC provides:
Sec. 228. Protesting of Assessment. When the [CIR] or his duly authorized representative finds that proper
taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That
a preassessment notice shall not be required in the following cases:
xxx
xxx
xxx
The taxpayer shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void.
xxxxxxxxx(emphasissupplied)
Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of the deficiency taxes were
made. He merely notified BPI of his findings, consisting only of the computation of the tax liabilities and a demand for payment
thereof within 30 days after receipt.
In merely notifying BPI of his findings, the CIR relied on the provisions of the former Section 270 prior to its amendment by RA
8424 (also known as the Tax Reform Act of 1997). [23] In CIR v. Reyes,[24] we held that:
In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate
taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former
Section 229 prior to its amendment by [RA] 8424, otherwise known as the Tax Reform Act of 1997.
First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR's findings was changed in 1998 to informing the taxpayer of not
only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid.
It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On April 22, 1998,
the final estate tax assessment notice, as well as demand letter, was also issued. During those dates, RA 8424 was already in
effect. The notice required under the old law was no longer sufficient under the new law. [25] (emphasis supplied; italics in
the original)
Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to
notify or inform the taxpayer of his findings. Nothing in the old law required a written statement to the taxpayer of the law and
facts on which the assessments were based. The Court cannot read into the law what obviously was not intended by Congress. That
would be judicial legislation, nothing less.
Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax liabilities, the
amount the taxpayer was to pay and a demand for payment within a prescribed period. [26] Everything considered, there was no
doubt the October 28, 1988 notices sufficiently met the requirements of a valid assessment under the old law and jurisprudence.
The sentence
[t]he taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void
was not in the old Section 270 but was only later on inserted in the renumbered Section 228 in 1997. Evidently, the legislature saw
the need to modify the former Section 270 by inserting the aforequoted sentence.[27] The fact that the amendment was necessary
showed that, prior to the introduction of the amendment, the statute had an entirely different meaning. [28]
Contrary to the submission of BPI, the inserted sentence in the renumbered Section 228 was not an affirmation of what the
law required under the former Section 270. The amendment introduced by RA 8424 was an innovation and could not be reasonably
inferred from the old law.[29] Clearly, the legislature intended to insert a new provision regarding the form and substance of
assessments issued by the CIR.[30]
In ruling that the October 28, 1988 notices were not valid assessments, the CA explained:
xxx. Elementary concerns of due process of law should have prompted the [CIR] to inform [BPI] of the legal and
factual basis of the formersdecision to charge the latter for deficiency documentary stamp and gross receipts taxes.[31]
In other words, the CAs theory was that BPI was deprived of due process when the CIR failed to inform it in writing of the
factual and legal bases of the assessments even if these were not called for under the old law.
We disagree.
Indeed, the underlying reason for the law was the basic constitutional requirement that no person shall be deprived of his
property without due process of law.[32] We note, however, what the CTA had to say:
xxx
xxx
xxx
From the foregoing testimony, it can be safely adduced that not only was [BPI] given the opportunity to discuss with
the [CIR] when the latter issued the former a Pre-Assessment Notice (which [BPI] ignored) but that the examiners themselves
went to [BPI] and "we talk to them and we try to [thresh] out the issues, present evidences as to what they need." Now, how
can [BPI] and/or its counsel honestly tell this Court that they did not know anything about the assessments?
Not only that. To further buttress the fact that [BPI] indeed knew beforehand the assessments[,] contrary to the
allegations of its counsel[,] was the testimony of Mr. Jerry Lazaro, Assistant Manager of the Accounting Department of [BPI].
He testified to the fact that he prepared worksheets which contain his analysis regarding the findings of the [CIRs] examiner,
Mr. San Pedro and that the same worksheets were presented to Mr. Carlos Tan, Comptroller of [BPI].
xxx
xxx
xxx
From all the foregoing discussions, We can now conclude that [BPI] was indeed aware of the nature and basis of the
assessments, and was given all the opportunity to contest the same but ignored it despite the notice conspicuously written on
the assessments which states that "this ASSESSMENT becomes final and unappealable if not protested within 30 days after
receipt." Counsel resorted to dilatory tactics and dangerously played with time. Unfortunately, such strategy proved fatal to the
cause of his client.[33]
The CA never disputed these findings of fact by the CTA:
[T]his Court recognizes that the [CTA], which by the very nature of its function is dedicated exclusively to the
consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be
overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be disturbed on appeal
if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the [CTA]. [34]
Under the former Section 270, there were two instances when an assessment became final and unappealable: (1) when it
was not protested within 30 days from receipt and (2) when the adverse decision on the protest was not appealed to the CTA within
30 days from receipt of the final decision:[35]
Sec. 270. Protesting of assessment.
xxx
xxx
xxx
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such
form and manner as may be prescribed by the implementing regulations within thirty (30) days from receipt of the assessment;
otherwise, the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the
decision on the protest may appeal to the [CTA] within thirty (30) days from receipt of the said decision; otherwise, the decision
shall become final, executory and demandable.
IMPLICATIONS OF A VALID ASSESSMENT
Considering that the October 28, 1988 notices were valid assessments, BPI should have protested the same within 30 days
from receipt thereof. The December 10, 1988 reply it sent to the CIR did not qualify as a protest since the letter itself stated that
[a]s soon as this is explained and clarified in a proper letter of assessment, we shall inform you of the taxpayers decision on
whether to pay or protest the assessment.[36] Hence, by its own declaration, BPI did not regard this letter as a protest against the
assessments. As a matter of fact, BPI never deemed this a protest since it did not even consider the October 28, 1988 notices as
valid or proper assessments.
The inevitable conclusion is that BPIs failure to protest the assessments within the 30-day period provided in the former
Section 270 meant that they became final and unappealable. Thus, the CTA correctly dismissed BPIs appeal for lack of jurisdiction.
BPI was, from then on, barred from disputing the correctness of the assessments or invoking any defense that would reopen the
question of its liability on the merits. [37] Not only that. There arose a presumption of correctness when BPI failed to protest the
assessments:
Tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to
prove otherwise. In the absence of proof of any irregularities in the performance of duties, an assessment duly made by a
Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed. All presumptions are in favor
of the correctness of tax assessments.[38]
Even if we considered the December 10, 1988 letter as a protest, BPI must nevertheless be deemed to have failed to appeal
the CIRs final decision regarding the disputed assessments within the 30-day period provided by law. The CIR, in his May 8,
1991 response, stated that it was his final decision on the matter. BPI therefore had 30 days from the time it received the
decision on June 27, 1991 to appeal but it did not. Instead it filed a request for reconsideration and lodged its appeal in the CTA only
on February 18, 1992, way beyond the reglementary period. BPI must now suffer the repercussions of its omission. We have
already declared that:
the [CIR] should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment
questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by Sections 7 and
11 of [RA 1125], as amended. On the basis of his statement indubitably showing that the Commissioner's
communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to
take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to
determine when his right to appeal to the tax court accrues.
The rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually
delay the finality of the assessment and, consequently, the collection of the amount demanded as taxes by
repeated requests for recomputation and reconsideration. On the part of the [CIR], this would encourage his office to
conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the
first instance. This would also deter the [CIR] from unfairly making the taxpayer grope in the dark and speculate as to which
action constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need
for fair play, regularity, and orderliness in administrative action.[39] (emphasis supplied)
Either way (whether or not a protest was made), we cannot absolve BPI of its liability under the subject tax assessments.
We realize that these assessments (which have been pending for almost 20 years) involve a considerable amount of
money. Be that as it may, we cannot legally presume the existence of something which was never there. The state will be deprived of
the taxes validly due it and the public will suffer if taxpayers will not be held liable for the proper taxes assessed against them:
Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal
attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social
contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to
tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and wellbeing of the people.[40]
WHEREFORE, the petition is hereby GRANTED. The May 29, 1998 decision of the Court of Appeals in CA-G.R. SP No.
41025 is REVERSED and SET ASIDE.
SO ORDERED.
PHILIPPINE JOURNALISTS, INC.,

G.R. No. 162852
Petitioner,
Present:
- versus -
REVENUE,
Respondent.
Davide, Jr., C.J. (Chairman),

Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
Promulgated:
December 16, 2004

x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review filed by Philippine Journalists, Incorporated (PJI) assailing the Decision [1] of the Court of Appeals dated August 5, 2003,
which ordered petitioner to pay the assessed tax liability of P111,291,214.46 and the Resolution [3] dated March 31, 2004 which denied the Motion for
Reconsideration.
[2]
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.
On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal Revenue (BIR) issued Letter of Authority No. 87120 [4] for Revenue Officer
Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioners books of account and other accounting records for internal revenue taxes for
the period January 1, 1994 to December 31, 1994.
From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty in the following
amounts:
Value Added Tax
Income Tax
Withholding Tax
Total
229,527.90
125,002,892.95
2,748,012.35
_______________
P 127,980,433.20
In a letter dated August 29, 1997, Revenue District Officer Jaime Concepcion invited petitioner to send a representative to an informal conference on
September 15, 1997 for an opportunity to object and present documentary evidence relative to the proposed assessment. On September 22, 1997, petitioners
Comptroller, Lorenza Tolentino, executed a Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC). [5] The document waive[d]
the running of the prescriptive period provided by Sections 223 and 224 and other relevant provisions of the NIRC and consent[ed] to the assessment and
collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and
other relevant provisions of the NIRC, until the completion of the investigation.[6]
On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending the issuance of an assessment and finding that petitioner had deficiency
taxes in the total amount of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner
of the results of the investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section, issued Assessment/Demand No. 33-1-000757-94 [7] on
December 9, 1998 stating the following deficiency taxes, inclusive of interest and compromise penalty:
Income Tax
Value Added Tax
Expanded Withholding Tax
Total
P108,743,694.88
184,299.20
2,363,220.38
______________
P111,291,214.46
On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. Panganiban to the petitioner to pay the assessment within
ten (10) days from receipt of the letter. On November 10, 1999, a Final Notice Before Seizure [8] was issued by the same deputy commissioner giving the
petitioner ten (10) days from receipt to pay. Petitioner received a copy of the final notice on November 24, 1999. By letters dated November 26, 1999, petitioner
asked to be clarified how the tax liability of P111,291,214.46 was reached and requested an extension of thirty (30) days from receipt of the clarification within
which to reply.[9]
The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt of Tax Assessment/Demand No. 33-1-000757-94.
Petitioner also contested that the assessment had no factual and legal basis. On March 28, 2000, a Warrant of Distraint and/or Levy No. 33-06-046 [11] signed
by Deputy Commissioner Romeo Panganiban for the BIR was received by the petitioner.
[10]
Petitioner filed a Petition for Review [12] with the Court of Tax Appeals (CTA) which was amended on May 12, 2000. Petitioner complains: (a) that no
assessment or demand was received from the BIR; (b) that the warrant of distraint and/or levy was without factual and legal bases as its issuance was premature;
(c) that the assessment, having been made beyond the 3-year prescriptive period, is null and void; (d) that the issuance of the warrant without being given the
opportunity to dispute the same violates its right to due process; and (e) that the grave prejudice that will be sustained if the warrant is enforced is enough basis for
the issuance of the writ of preliminary injunction.
On May 14, 2002, the CTA rendered its decision,[13] to wit:
As to whether or not the assessment notices were received by the petitioner, this Court rules in the affirmative.
To disprove petitioners allegation of non-receipt of the aforesaid assessment notices, respondent presented a certification issued
by the Post Master of the Central Post Office, Manila to the effect that Registered Letter No. 76134 sent by the BIR, Region No. 6, Manila
on December 15, 1998 addressed to Phil. Journalists, Inc. at Journal Bldg., Railroad St., Manila was duly delivered to and received by a
certain Alfonso Sanchez, Jr. (Authorized Representative) on January 8, 1999. Respondent also showed proof that in claiming Registered
Letter No. 76134, Mr. Sanchez presented three identification cards, one of which is his company ID with herein petitioner.
However, as to whether or not the Waiver of the Statute of Limitations is valid and binding on the petitioner is another question.
Since the subject assessments were issued beyond the three-year prescriptive period, it becomes imperative on our part to rule first on the
validity of the waiver allegedly executed on September 22, 1997, for if this court finds the same to be ineffective, then the assessments must
necessarily fail.
After carefully examining the questioned Waiver of the Statute of Limitations, this Court considers the same to be without any
binding effect on the petitioner for the following reasons:
The waiver is an unlimited waiver. It does not contain a definite expiration date. Under RMO No. 20-90, the phrase indicating
the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription should be filled up
Secondly, the waiver failed to state the date of acceptance by the Bureau which under the aforequoted RMO should likewise be
indicated
Finally, petitioner was not furnished a copy of the waiver. It is to be noted that 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.
It bears stressing that RMO No. 20-90 is directed to all concerned internal revenue officers. The said RMO even provides that
the procedures found therein should be strictly followed, under pain of being administratively dealt with should non-compliance result to
prescription of the right to assess/collect
Thus, finding the waiver executed by the petitioner on September 22, 1997 to be suffering from legal infirmities, rendering the
same invalid and ineffective, the Court finds Assessment/Demand No. 33-1-000757-94 issued on December 5, 1998 to be time-barred.
Consequently, the Warrant of Distraint and/or Levy issued pursuant thereto is considered null and void.
WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, the deficiency
income, value-added and expanded withholding tax assessments issued by the respondent against the petitioner on December 9, 1998, in the
total amount of P111,291,214.46 for the year 1994 are hereby declared CANCELLED, WITHDRAWN and WITH NO FORCE AND
EFFECT. Likewise, Warrant of Distraint and/or Levy No. 33-06-046 is hereby declared NULL and VOID.
SO ORDERED.[14]
After the motion for reconsideration of the Commissioner of Internal Revenue was denied by the CTA in a Resolution dated August 2, 2002, an appeal
was filed with the Court of Appeals on August 12, 2002.
In its decision dated August 5, 2003, the Court of Appeals disagreed with the ruling of the CTA, to wit:
The petition for review filed on 26 April 2000 with CTA was neither timely filed nor the proper remedy. 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 the thirty (30)-day reglementary period are not appealable. Thus, the CTA should not have entertained the petition at all.
[T]he 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. These grounds are merely formal in nature. The date of acceptance by the BIR does not categorically appear in the document but it
states at the bottom page that the BIR accepted and agreed to:, followed by the signature of the BIRs authorized representative.
Although the date of acceptance was not stated, the document was dated 22 September 1997. This date could reasonably be understood as
the same date of acceptance by the BIR since a different date was not otherwise indicated. As to the allegation that Phil. Journalists was not
furnished a copy of the waiver, this requirement appears ridiculous. Phil. Journalists, through its comptroller, Lorenza Tolentino, signed the
waiver. Why would it need a copy of the document it knowingly executed when the reason why copies are furnished to a party is to notify
it of the existence of a document, event or proceeding?
As regards the need for a definite expiration date, this is the biggest flaw of the decision. 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. These are the requirements for a valid extension of the prescriptive period. To these requirements provided by law, the
memorandum order adds that the length of the extension be specified by indicating its expiration date. This requirement could be
reasonably construed from the rule on extension of the prescriptive period. But this requirement does not apply in the instant case because
what we have here is not an extension of the prescriptive period but a waiver thereof. These are two (2) very different things. What Phil.
Journalists executed was a renunciation of its right to invoke the defense of prescription. This is a valid waiver. When one waives the
prescriptive period, it is no longer necessary to indicate the length of the extension of the prescriptive period since the person waiving may
no longer use this defense.
WHEREFORE, the 02 August 2002 resolution and 14 May 2002 decision of the CTA are hereby SET ASIDE. Respondent Phil.
Journalists is ordered [to] pay its assessed tax liability of P111,291,214.46.
SO ORDERED.[15]
Petitioners Motion for Reconsideration was denied in a Resolution dated March 31, 2004. Hence, this appeal on the following assignment of errors:
I.
The Honorable Court of Appeals committed grave error in ruling that it is outside the jurisdiction of the Court of Tax Appeals to entertain
the Petition for Review filed by the herein Petitioner at the CTA despite the fact that such case inevitably rests upon the validity of the
issuance by the BIR of warrants of distraint and levy contrary to the provisions of Section 7(1) of Republic Act No. 1125.
II.
The Honorable Court of Appeals gravely erred when it ruled that failure to comply with the provisions of Revenue Memorandum Order
(RMO) No. 20-90 is merely a formal defect that does not invalidate the waiver of the statute of limitations without stating the legal
justification for such conclusion. Such ruling totally disregarded the mandatory requirements of Section 222(b) of the Tax Code and its
implementing regulation, RMO No. 20-90 which are substantive in nature. The RMO provides that violation thereof subjects the erring
officer to administrative sanction. This directive shows that the RMO is not merely cover forms.
III.
The Honorable Court of Appeals gravely erred when it ruled that the assessment notices became final and unappealable. The assessment
issued is void and legally non-existent because the BIR has no power to issue an assessment beyond the three-year prescriptive period
where there is no valid and binding waiver of the statute of limitation.
IV.
The Honorable Court of Appeals gravely erred when it held that the assessment in question has became final and executory due to the
failure of the Petitioner to protest the same. Respondent had no power to issue an assessment beyond the three year period under the
mandatory provisions of Section 203 of the NIRC. Such assessment should be held void and non-existent, otherwise, Section 203, an
expression of a public policy, would be rendered useless and nugatory. Besides, such right to assess cannot be validly granted after three
years since it would arise from a violation of the mandatory provisions of Section 203 and would go against the vested right of the
Petitioner to claim prescription of assessment.
V.
The Honorable Court of Appeals committed grave error when it HELD valid a defective waiver by considering the latter a waiver of the
right to invoke the defense of prescription rather than an extension of the three year period of prescription (to make an assessment) as
provided under Section 222 in relation to Section 203 of the Tax Code, an interpretation that is contrary to law, existing jurisprudence and
outside of the purpose and intent for which they were enacted.[16]
We find merit in the appeal.
The first assigned error relates to the jurisdiction of the CTA over the issues in this case. The Court of Appeals ruled that only decisions of the BIR denying
a request for reconsideration or reinvestigation may be appealed to the CTA. Since the petitioner did not file a request for reinvestigation or reconsideration
within thirty (30) days, the assessment notices became final and unappealable. The petitioner now argue 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.
We agree with petitioner. Section 7(1) of Republic Act No. 1125, the Act Creating the Court of Tax Appeals, provides for the jurisdiction of that special
court:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein
provided
(1)
Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or
other laws or part of law administered by the Bureau of Internal Revenue; (Emphasis supplied).
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue 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 Bureau of Internal
Revenue. The wording of the provision is clear and simple. 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.
This is not the first case where the CTA validly ruled on issues that did not relate directly to a disputed assessment or a claim for refund. InPantoja v.
David,[17] we upheld the jurisdiction of the CTA to act on a petition to invalidate and annul the distraint orders of the Commissioner of Internal Revenue. Also,
in Commissioner of Internal Revenue v. Court of Appeals,[18] the decision of the CTA declaring several waivers executed by the taxpayer as null and void, thus
invalidating the assessments issued by the BIR, was upheld by this Court.
The second and fifth assigned errors both focus on Revenue Memorandum Circular No. 20-90 (RMO No. 20-90) on the requisites of a valid waiver of the
statute of limitations. The Court of Appeals 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.
The NIRC, under Sections 203 and 222,[19] 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. [20] 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. As was held in Republic of the Phils. v. Ablaza:[21]
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. (Emphasis supplied)
RMO No. 20-90 implements these provisions of the NIRC relating to the period of prescription for the assessment and collection of taxes. A cursory
reading of the Order supports petitioners argument that the RMO must be strictly followed, thus:
In the execution of said waiver, the following procedures should be followed:
1.
The waiver must be in the form identified hereof. This form may be reproduced by the Office concerned but there should be no
deviation from such form. The phrase but not after __________ 19___ should be filled up
2.
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
3.
The following revenue officials are authorized to sign the waiver.
A.
In the National Office

3.
Commissioner
For tax cases involving

more than P1M
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 of amount.
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. (Emphasis supplied)[22]
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. [23] 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. 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. [24] 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 three-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. (Emphasis supplied)
As found by the CTA, the Waiver of Statute of Limitations, signed by petitioners comptroller on September 22, 1997 is not valid and binding because
it does not conform with the provisions of RMO No. 20-90. 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 One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration of the three-year prescription period. For this, RMO No.
20-90 requires the Commissioner of Internal Revenue to sign for the BIR.
The case of Commissioner of Internal Revenue v. Court of Appeals,[25] dealt with waivers that were not signed by the Commissioner but were argued to
have been given implied consent by the BIR. We invalidated the subject waivers and ruled:
Petitioners submission is inaccurate
The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation, observing thus:
We cannot go along with the petitioners theory. Section 319 of the Tax Code earlier quoted is clear and
explicit that the waiver of the five-year [26] prescriptive period must be in writing and signed by both the BIR
Commissioner and the taxpayer.
Here, the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as
required by law.
We agree with the CTA in holding these waivers to be invalid and without any binding effect on
petitioner (Carnation) for the reason that there was no consent by the respondent (Commissioner of Internal
Revenue).
For sure, no such written agreement concerning the said three waivers exists between the petitioner and
private respondent Carnation.
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. 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 agreement is 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.[27] (Emphasis supplied)
The other defect noted in this case is the date of acceptance which makes it difficult to fix with certainty if the waiver was actually agreed before the
expiration of the three-year prescriptive period. The Court of Appeals 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 Sarmiento could not have accepted the waiver
yet because she was not the Revenue District Officer of RDO No. 33 on such date. Ms. Sarmientos transfer and assignment to RDO No. 33 was only signed by
the BIR Commissioner on January 16, 1998 as shown by the Revenue Travel Assignment Order No. 14-98. [28] The Court of Tax Appeals noted in its decision 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.[29]
Finally, the records show that petitioner was not furnished a copy of the waiver. Under RMO No. 20-90, the waiver must be executed in three copies with
the second copy for the taxpayer. The Court of Appeals 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.
The flaw in the appellate courts reasoning stems from its assumption 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 of RMO No. 20-90 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 three-year prescriptive period was not tolled or extended and continued to run until April 17,
1998. Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year
period. In the same manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void for having been
issued pursuant to an invalid assessment.
WHEREFORE, premises considered, the instant petition for review is GRANTED. The Decision of the Court of Appeals dated August 5, 2003 and its
Resolution dated March 31, 2004 are REVERSED and SET ASIDE. The Decision of the Court of Tax Appeals in CTA Case No. 6108 dated May 14, 2002,
declaring Warrant of Distraint and/or Levy No. 33-06-046 null and void, is REINSTATED.
SO ORDERED.
REVENUE,
Petitioner,
G.R. No. 178087

Present:
- versus -
CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
KUDOS METAL CORPORATION,

Promulgated:
Respondent.
May 5, 2010
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
The prescriptive period on when to assess taxes benefits both the government and the taxpayer. [1] Exceptions extending the period to assess must, therefore, be strictly
construed.
This Petition for Review on Certiorari seeks to set aside the Decision[2] dated March 30, 2007 of the Court of Tax Appeals (CTA) affirming the cancellation of the
assessment notices for having been issued beyond the prescriptive period and the Resolution[3] dated May 18, 2007 denying the motion for reconsideration.
Factual Antecedents
On April 15, 1999, respondent Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the taxable year 1998.
Pursuant to a Letter of Authority dated September 7, 1999, the Bureau of Internal Revenue (BIR) served upon respondent three Notices of Presentation of
Records. Respondent failed to comply with these notices, hence, the BIR issued a Subpeona Duces Tecum dated September 21, 2006, receipt of which was acknowledged by
respondents President, Mr. Chan Ching Bio, in a letter dated October 20, 2000.
A review and audit of respondents records then ensued.
On December 10, 2001, Nelia Pasco (Pasco), respondents accountant, executed a Waiver of the Defense of Prescription, [4] which was notarized on January 22, 2002,
received by the BIR Enforcement Service on January 31, 2002 and by the BIR Tax Fraud Division on February 4, 2002, and accepted by the Assistant Commissioner of the
Enforcement Service, Percival T. Salazar (Salazar).
This was followed by a second Waiver of Defense of Prescription [5] executed by Pasco on February 18, 2003, notarized on February 19, 2003, received by the BIR Tax
Fraud Division on February 28, 2003 and accepted by Assistant Commissioner Salazar.
On August 25, 2003, the BIR issued a Preliminary Assessment Notice for the taxable year 1998 against the respondent. This was followed by a Formal Letter of Demand
with Assessment Notices for taxable year 1998, dated September 26, 2003 which was received by respondent onNovember 12, 2003.
Respondent challenged the assessments by filing its Protest on Various Tax Assessments on December 3, 2003 and its Legal Arguments and Documents in Support of
Protests against Various Assessments on February 2, 2004.
On June 22, 2004, the BIR rendered a final Decision[6] on the matter, requesting the immediate payment of the following tax liabilities:
Kind of Tax
Income Tax
VAT
EWT
Withholding Tax-Compensation
Penalties
Total
Amount
P 9,693,897.85
13,962,460.90
1,712,336.76
247,353.24
8,000.00
P25,624,048.76
Ruling of the Court of Tax Appeals, Second Division

Believing that the governments right to assess taxes had prescribed, respondent filed on August 27, 2004 a Petition for Review[7] with the CTA. Petitioner in turn filed his
Answer.[8]
On April 11, 2005, respondent filed an Urgent Motion for Preferential Resolution of the Issue on Prescription.[9]
On October 4, 2005, the CTA Second Division issued a Resolution [10] canceling the assessment notices issued against respondent for having been issued beyond the
prescriptive period. It found the first Waiver of the Statute of Limitations incomplete and defective for failure to comply with the provisions of Revenue Memorandum Order (RMO)
No. 20-90. Thus:
First, the Assistant Commissioner is not the revenue official authorized to sign the waiver, as the tax case involves more than P1,000,000.00. In
this regard, only the Commissioner is authorized to enter into agreement with the petitioner in extending the period of assessment;
Secondly, the waiver failed to indicate the date of acceptance. Such date of acceptance is necessary to determine whether the acceptance was
made within the prescriptive period;
Third, the fact of receipt by the taxpayer of his file copy was not indicated on the original copy. 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 also of the acceptance by the BIR and the perfection of the agreement.
The subject waiver is therefore incomplete and defective. As such, the three-year prescriptive period was not tolled or extended and continued to
run. x x x[11]
Petitioner moved for reconsideration but the CTA Second Division denied the motion in a Resolution[12] dated April 18, 2006.
Ruling of the Court of Tax Appeals, En Banc
On appeal, the CTA En Banc affirmed the cancellation of the assessment notices. Although it ruled that the Assistant Commissioner was authorized to sign the waiver pursuant
to Revenue Delegation Authority Order (RDAO) No. 05-01, it found that the first waiver was still invalid based on the second and third grounds stated by the CTA Second
Division. Pertinent portions of the Decision read as follows:
While the Court En Banc agrees with the second and third grounds for invalidating the first waiver, it finds that the Assistant Commissioner of the
Enforcement Service is authorized to sign the waiver pursuant to RDAO No. 05-01, which provides in part as follows:
A.
For National Office cases

Designated Revenue Official
1.
Assistant Commissioner (ACIR),

Enforcement Service
2.
ACIR, Large Taxpayers Service
3.
ACIR, Legal Service
4.
ACIR, Assessment Service (AS)
For tax fraud and policy

cases
For large taxpayers cases
other than those cases falling under Subsection B hereof
For cases pending
verification and awaiting
resolution of certain legal issues prior to prescription and for
issuance/compliance of Subpoena Duces Tecum
For cases which are
pending in or subject to
review or approval by the ACIR, AS
Based on the foregoing, the Assistant Commissioner, Enforcement Service is authorized to sign waivers in tax fraud cases. A perusal of the
records reveals that the investigation of the subject deficiency taxes in this case was conducted by the National Investigation Division of the BIR, which was
formerly named the Tax Fraud Division. Thus, the subject assessment is a tax fraud case.
Nevertheless, the first waiver is still invalid based on the second and third grounds stated by the Court in Division. Hence, it did not extend the
prescriptive period to assess.
Moreover, assuming arguendo that the first waiver is valid, the second waiver is invalid for violating Section 222(b) of the 1997 Tax Code which
mandates that the period agreed upon in a waiver of the statute can still be extended by subsequent written agreement, provided that it is executed prior to the
expiration of the first period agreed upon. As previously discussed, the exceptions to the law on prescription must be strictly construed.
In the case at bar, the period agreed upon in the subject first waiver expired on December 31, 2002. The second waiver in the instant case which
was supposed to extend the period to assess to December 31, 2003 was executed on February 18, 2003 and was notarized on February 19, 2003. Clearly, the
second waiver was executed after the expiration of the first period agreed upon. Consequently, the same could not have tolled the 3-year prescriptive period to
assess.[13]
Petitioner sought reconsideration but the same was unavailing.
Issue
Hence, the present recourse where petitioner interposes that:
THE COURT OF TAX APPEALS EN BANC ERRED IN RULING THAT THE GOVERNMENTS RIGHT TO ASSESS UNPAID TAXES OF
RESPONDENT PRESCRIBED.[14]
Petitioners Arguments
Petitioner argues that the governments right to assess taxes is not barred by prescription as the two waivers executed by respondent, through its accountant, effectively tolled
or extended the period within which the assessment can be made. In disputing the conclusion of the CTA that the waivers are invalid, petitioner claims that respondent is estopped from
adopting a position contrary to what it has previously taken. Petitioner insists that by acquiescing to the audit during the period specified in the waivers, respondent led the government
to believe that the delay in the process would not be utilized against it. Thus, respondent may no longer repudiate the validity of the waivers and raise the issue of prescription.
Respondents Arguments
Respondent maintains that prescription had set in due to the invalidity of the waivers executed by Pasco, who executed the same without any written authority from it, in clear
violation of RDAO No. 5-01. As to the doctrine of estoppel by acquiescence relied upon by petitioner, respondent counters that the principle of equity comes into play only when the
law is doubtful, which is not present in the instant case.
Our Ruling
The petition is bereft of merit.
Section 203[15] of the National Internal Revenue Code of 1997 (NIRC) mandates the government to assess internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive
period is no longer valid and effective. Exceptions however are provided under Section 222[16] of the NIRC.
The waivers executed by respondents accountant did not extend the period within which the assessment
can be made
Petitioner does not deny that the assessment notices were issued beyond the three-year prescriptive period, but claims that the period was extended by the two waivers
executed by respondents accountant.
We do not agree.
Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed
before the expiration of the three-year period. RMO 20-90[17] issued on April 4, 1990 and RDAO 05-01[18]issued on August 2, 2001 lay down the procedure for the proper execution of
the waiver, to wit:
1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase but not after ______ 19 ___, which indicates the expiry date of the period
agreed upon to assess/collect the tax after the regular three-year period of prescription, should be filled up.
2. The waiver must 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. In case the authority is delegated by the taxpayer to a representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has accepted and agreed to the waiver. The date of such
acceptance by the BIR should be indicated. However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that
the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative.
5. 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.
6. The waiver must be executed in three 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 must be indicated in the original copy to show that the taxpayer
was notified of the acceptance of the BIR and the perfection of the agreement.[19]
A perusal of the waivers executed by respondents accountant reveals the following infirmities:
1.
The waivers were executed without the notarized written authority of Pasco to sign the waiver in behalf of respondent.
2.
The waivers failed to indicate the date of acceptance.
3.
The fact of receipt by the respondent of its file copy was not indicated in the original copies of the waivers.
Due to the defects in the waivers, the period to assess or collect taxes was not extended. Consequently, the assessments were issued by the BIR beyond the three-year
period and are void.
Estoppel does not apply in this case
We find no merit in petitioners claim that respondent is now estopped from claiming prescription since by executing the waivers, it was the one which asked for additional
time to submit the required documents.
In Collector of Internal Revenue v. Suyoc Consolidated Mining Company,[20] the doctrine of estoppel prevented the taxpayer from raising the defense of prescription against
the efforts of the government to collect the assessed tax. However, it must be stressed that in the said case, estoppel was applied as an exception to the statute of limitations
on collection of taxes and not on the assessment of taxes, as the BIR was able to make an assessment within the prescribed period. More important, there was a finding that the
taxpayer made several requests or positive acts to convince the government to postpone the collection of taxes, viz:
It appears that the first assessment made against respondent based on its second final return filed on November 28, 1946 was made on February
11, 1947. Upon receipt of this assessment respondent requested for at least one year within which to pay the amount assessed although it reserved its right to
question the correctness of the assessment before actual payment. Petitioner granted an extension of only three months. When it failed to pay the tax within the
period extended, petitioner sent respondent a letter on November 28, 1950 demanding payment of the tax as assessed, and upon receipt of the letter respondent
asked for a reinvestigation and reconsideration of the assessment. When this request was denied, respondent again requested for a reconsideration on April 25,
1952, which was denied on May 6, 1953, which denial was appealed to the Conference Staff. The appeal was heard by the Conference Staff from September
2, 1953 to July 16, 1955, and as a result of these various negotiations, the assessment was finally reduced on July 26, 1955. This is the ruling which is now
being questioned after a protracted negotiation on the ground that the collection of the tax has already prescribed.
It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by proceeding in court within the 5-year
period from the filing of the second amended final return due to the several requests of respondent for extension to which petitioner yielded to give it every
opportunity to prove its claim regarding the correctness of the assessment. Because of such requests, several reinvestigations were made and a hearing was even
held by the Conference Staff organized in the collection office to consider claims of such nature which, as the record shows, lasted for several months. After
inducing petitioner to delay collection as he in fact did, it is most unfair for respondent to now take advantage of such desistance to elude his deficiency income
tax liability to the prejudice of the Government invoking the technical ground of prescription.
While we may agree with the Court of Tax Appeals that a mere request for reexamination or reinvestigation may not have the effect of suspending
the running of the period of limitation for in such case there is need of a written agreement to extend the period between the Collector and the taxpayer, there are
cases however where a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing as when by his
repeated requests or positive acts the Government has been, for good reasons, persuaded to postpone collection to make him feel that the demand was not
unreasonable or that no harassment or injustice is meant by the Government. And when such situation comes to pass there are authorities that hold, based on
weighty reasons, that such an attitude or behavior should not be countenanced if only to protect the interest of the Government.
This case has no precedent in this jurisdiction for it is the first time that such has risen, but there are several precedents that may be invoked in
American jurisprudence. As Mr. Justice Cardozo has said: 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. (R. H. Stearns Co. vs. U.S., 78 L. ed., 647). Or, as was aptly said, The tax could have been collected, but the government withheld action
at the specific request of the plaintiff. The plaintiff is now estopped and should not be permitted to raise the defense of the Statute of Limitations. [Newport Co.
vs. U.S., (DC-WIS), 34 F. Supp. 588].[21]
Conversely, in this case, the assessments were issued beyond the prescribed period. Also, there is no showing that respondent made any request to persuade the BIR to
postpone the issuance of the assessments.
The doctrine of estoppel cannot be applied in this case as an exception to the statute of limitations on the assessment of taxes considering that there is a detailed procedure for
the proper execution of the waiver, which the BIR must strictly follow. As we have often said, the doctrine of estoppel is predicated on, and has its origin in, equity which, broadly
defined, is justice according to natural law and right. [22] As such, the doctrine of estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. [23] It
should be resorted to solely as a means of preventing injustice and should not be permitted to defeat the administration of the law, or to accomplish a wrong or secure an undue
advantage, or to extend beyond them requirements of the transactions in which they originate.[24] Simply put, the doctrine of estoppel must be sparingly applied.
Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-90 and RDAO 05-01, which the BIR itself issued. As stated
earlier, the BIR failed to verify whether a notarized written authority was given by the respondent to its accountant, and to indicate the date of acceptance and the receipt by the
respondent of the waivers. Having caused the defects in the waivers, the BIR must bear the consequence. It cannot shift the blame to the taxpayer. To stress, a waiver of the statute of
limitations, being a derogation of the taxpayers right to security against prolonged and unscrupulous investigations, must be carefully and strictly construed.[25]
As to the alleged delay of the respondent to furnish the BIR of the required documents, this cannot be taken against respondent. Neither can the BIR use this as an excuse
for issuing the assessments beyond the three-year period because with or without the required documents, the CIR has the power to make assessments based on the best evidence
obtainable.[26]
WHEREFORE, the petition is DENIED. The assailed Decision dated March 30, 2007 and Resolution dated May 18, 2007 of the Court of Tax Appeals are
hereby AFFIRMED.
SO ORDERED.
FISHWEALTH CANNING CORPORATION,

Petitioner,
G.R. No. 179343

Present:
- versus -
COMMISSIONER OF INTERNAL REVENUE,

Respondent.

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.
Promulgated:
January 21, 2010
x-------------------------------------------------- x
DECISION
CARPIO MORALES, J.:

The Commissioner of Internal Revenue (respondent), by Letter of Authority dated May 16, 2000,[1] ordered the examination of the internal revenue
taxes for the taxable year 1999 of Fishwealth Canning Corp. (petitioner). The investigation disclosed that petitioner was liable in the amount of P2,395,826.88
representing income tax, value added tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies. Petitioner eventually settled these obligations
on August 30, 2000.[2]
On August 25, 2000, respondent reinvestigated petitioners books of accounts and other records of internal revenue taxes covering the same period for the
purpose of which it issued a subpoena duces tecum requiring petitioner to submit its records and books of accounts. Petitioner requested the cancellation of the
subpoena on the ground that the same set of documents had previously been examined.
As petitioner did not heed the subpoena, respondent thereafter filed a criminal complaint against petitioner for violation of Sections 5 (c) and 266 of the
1997 Internal Revenue Code, which complaint was dismissed for insufficiency of evidence.[3]
Respondent sent, on August 6, 2003, petitioner a Final Assessment Notice of income tax and VAT deficiencies totaling P67,597,336.75 for the taxable
year 1999,[4] which assessment petitioner contested by letter of September 23, 2003.[5]
Respondent thereafter issued a Final Decision on Disputed Assessment dated August 2, 2005, which petitioner received on August 4, 2005, denying its
letter of protest, apprising it of its income tax and VAT liabilities in the amounts of P15,396,905.24 and P63,688,434.40 [sic], respectively, for the taxable year
1999,[6] and requesting the immediate payment thereof, inclusive of penalties incident to delinquency. Respondent added that if petitioner disagreed, it may
appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt hereof, otherwise our said deficiency income and value-added taxes
assessments shall become final, executory, and demandable. [7]
Instead of appealing to the CTA, petitioner filed, on September 1, 2005, a Letter of Reconsideration dated August 31, 2005.[8]
By a Preliminary Collection Letter dated September 6, 2005, respondent demanded payment of petitioners tax liabilities, [9] drawing petitioner to file
on October 20, 2005 a Petition for Review[10] before the CTA.
In his Answer,[11] respondent argued, among other things, that the petition was filed out of time which argument the First Division of the CTA upheld and
accordingly dismissed the petition.[12]
Petitioner filed a Motion for Reconsideration [13] which was denied.[14] The Resolution denying its motion for reconsideration was received by petitioner
on October 31, 2006.[15]
On November 21, 2006, petitioner filed a petition for review before the CTA En Banc [16] which, by Decision[17] of July 5, 2007, held that the petition
before the First Division, as well as that before it, was filed out of time.
Hence, the present petition,[18] petitioner arguing that the CTA En Banc erred in holding that the petition it filed before the CTA First Division as well as
that filed before it (CTA En Banc) was filed out of time.
The petition is bereft of merit.
Section 228 of the 1997 Tax Code provides that an assessment
x x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of
the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from
filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable. (underscoring supplied)
In the case at bar, petitioners administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent
and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondents denial
of its protest to the CTA.
Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the
CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative
protest does not toll the 30-day period to appeal to the CTA.
On petitioners final contention that it has a meritorious case in view of the dismissal of the above-mentioned criminal case filed against it for violation
of the 1997 Internal Revenue Code,[19] the same fails. For the criminal complaint was instituted not to demand payment, but to penalize the taxpayer for violation
of the Tax Code.[20]
WHEREFORE, the petition is DISMISSED.
Costs against petitioner.
SO ORDERED.
G.R. No. L-11527
November 25, 1958
THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
SUYOC CONSOLIDATED MINING COMPANY, ET AL., respondents.
Office of the Solicitor General Ambrosio Padilla and Solicitor Sumilang V. Bernardo for petitioner.
Ohnick, Velilla and Balongkita for respondents.
BAUTISTA ANGELO, J.:

Suyoc Consolidated Mining Company, a mining corporation operating before the war, was unable to file in 1942 its income tax return for the year
1941 due to the last war. After liberation, Congress enacted Commonwealth Act No. 722 which extended the filing of tax returns for 1941 up to
December 31, 1945. Its records having been lost or destroyed, the company requested the Collector of Internal Revenue to grant it an extension of
time to file its return, which was granted until February 15, 1946, and the company was authorized to file its return for 1941 on the basis of the best
evidence obtainable.
The company filed three income tax returns for the calendar year ending December 31, 1941. On February 12, 1946, it filed a tentative return as it
had not yet completely reconstructed its records. On November 28, 1946, it filed a second final return on the basis of the records it has been able
to reconstruct at that time. On February 6, 1947, it filed its third amended final return on the basis of the available records which to that date it had
been able to reconstruct.
On the basis of the second final return filed by the company on November 28, 1946, the Collector assessed against it the sum of P28,289.96 as
income tax for 1941, plus P1,414.50 as 5 per cent surcharge and P3,894.80 as 1 per cent monthly interest from March 1, 1946 to February 28,
1947, or a total of P33,099.26. The assessment was made on February 11, 1947. On February 21, 1947, the company asked for an extension of at
least one year from February 28, 1947 within which to pay the amount assessed, reserving its right to question the correctness of the assessment.
The Collector granted an extension of only three months from March 20, 1947.
The company failed to pay the tax within the period granted to it and so the Collector sent to it a letter on November 28, 1950 demanding payment
of the tax due as assessed, plus surcharge and interest up to December 31, 1950. On April 6, 1951, the company asked for a reconsideration and
reinvestigation of the assessment, which was granted, the case being assigned to another examiner, but the Collector made another assessment
against the company in the sum of P33,829.66. This new assessment was made on March 7, 1952. On April 18, 1952, the Collector revised this
last assessment and required the company to pay the sum of P28,289.96 as income tax, P1,414.50 as surcharge, P20,934.57 as interest up to
April 30, 1952 and P40 as compromise.
After several other negotiations conducted at the request of respondent, including an appeal to the Conference Staff created to act on such matters
in the Bureau of Internal Revenue, the assessment was finally reduced by the Collector to P24,438.96, without surcharge and interest, and of this
new assessment the company was notified on July 28, 1955. Within the reglementary period, the company filed with the Court of Tax Appeals a
petition for review of this assessment made on July 26, 1955 on the main ground that the right of the Government to collect the tax has already
prescribed. After the case was heard, the court rendered its decision upholding this defense and, accordingly, it set aside the ruling of the Collector
of Internal Revenue. The Collector interposed the present petition for review.
Under the law, an internal revenue tax shall be assessed within five years after the return is filed by the taxpayer and no proceeding in court for its
collection shall be begun after the expiration of such period (Section 331, National Internal Revenue Code). The law also provides that where an
assessment of internal revenue tax is made within the above period, such tax may be collected by distraint or levy or by a proceeding in court
butonly if the same is begun (1) within five years after assessment or (2) within the period that may be agreed upon in writing between the Collector
and the taxpayer before the expiration of the 5-year period [Section 332 (c),Idem.].
It appears that the first assessment made against respondent based on its second final return filed on November 28, 1946 was made on February
11, 1947. Upon receipt of this assessment respondent requested for at least one year within which to pay the amount assessed although it
reserved its right to question the correctness of the assessment before actual payment. Petitioner granted an extension of only three months. When
it failed to pay the tax within the period extended, petitioner sent respondent a letter on November 28, 1950 demanding payment of the tax as
assessed, and upon receipt of the letter respondent asked for a reinvestigation and reconsideration of the assessment. When this request was
denied, respondent again requested for a reconsideration on April 25, 1952, which was denied on May 6, 1953, which denial was appealed to the
Conference Staff. The appeal was heard by the Conference Staff from September 2, 1953 to July 16, 1955, and as a result of these various
negotiations, the assessment was finally reduced on July 26, 1955. This is the ruling which is now being questioned after a protracted negotiation
on the ground that the collection of the tax has already prescribed.
It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by proceeding in court within the 5-year period
from the filing of the second amended final return due to the several requests of respondent for extension to which petitioner yielded to give it every
opportunity to prove its claim regarding the correctness of the assessment. Because of such requests, several reinvestigations were made and a
hearing was even held by the Conference Staff organized in the collection office to consider claims of such nature which, as the record shows,
lasted for several months. After inducing petitioner to delay collection as he in fact did, it is most unfair for respondent to now take advantage of
such desistance to elude his deficiency income, tax liability to the prejudice of the Government invoking the technical ground of prescription.
While we may agree with the Court of Tax Appeals that a mere request for reexamination or reinvestigation may not have the effect of suspending
the running of the period of limitation for in such case there is need of a written agreement to extend the period between the Collector and the
taxpayer, there are cases however where a taxpayer may be prevented from setting up the defense of prescription even if he has not previously
waived it in writing as when by his repeated requests or positive acts the Government has been, for good reasons, persuaded to postpone
collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. And when such
situation comes to pass there are authorities that hold, based on weighty reasons, that such an attitude or behavior should not be countenanced if
only to protect the interest of the Government.
This case has no precedent in this jurisdiction for it is the first time that such has risen, but there are several precedents that may be invoked in
American jurisprudence. As Mr. Justice Cardozo has said: "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." ' "(R. H. Stearns Co. vs. U.S., 78 L. ed., 647). Or, as was aptly said, "The tax could have been collected,
but the government withheld action at the specific request of the plaintiff. The plaintiff is now estopped and should not be permitted to raise the
defense of the Statute of Limitations." [Newport Co. vs. U.S., (DC-WIS), 34 F. Supp. 588].
The following authorities cited in the brief of the Solicitor General are in point:
The petitioner makes the point that by the Revenue Act of May 29, 1928 (chap. 852, 45 Stat. at L. 791, 875, sec. 609, U.S.C. title 26, sec.
2609), a credit against a liability in respect of any taxable year shall be "void" if it has been made against a liability barred by limitation.
The aim of that provision, as we view it, was to invalidate such a credit if made by the Commissioner of his own motion without the
taxpayer's approval or with approval failing short of inducement or request. Cf. Stange vs. United States, 282 U. S. 270, 75 L. ed. 335, 51
S. Ct. 145, supra; Revenue Act of 1928, sec. 506 (b) (c), chap. 852, 45 Stat. at L. 791, 870, 871, U.S.C. title 26, see. 1062a. If nothing
more than this appeared, there was to be no exercise in invitum of governmental power. But the aim of the statute suggests a restraint
upon its meaning. To know whether liability has been barred by limitation it will not do to refer to the flight of time alone. The limitation
may have been postponed by force of a simple waiver, which must then be made in adherence to the statutory forms, or so we now
assume. It may have been postponed by deliberate persuasion to withhold official action. We think it an unreasonable construction that
would view the prohibition of the statute as over-riding the doctrine of estoppel (Randon vs. Tobey, 11 How. 493, 519, 13 L. ed. 784, 795)
and invalidating a credit made at the taxpayer's request. Here at the time of the request, the liability was still alive, unaffected as yet by
any statutory bar. The request in its fair meaning reached forward into the future and prayed for the postponement of collection till the
audits for later years had been completed in the usual course. This having been done, the suspended collection might be effected by
credit or by distraint or by other methods prescribed by law. Congress surely did not mean that a credit was to be void if made by the
Government in response to such prayer.
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," ' " Dolan vs. Rogers, 149 N. Y. 489, 491, 44 N.E. 167, and Imperator Realty Co. vs. Tull, 228 N. Y. 447, 457, 127 N.E. 263,
quoting West vs. Blakeway, 2 Mann. & G. 729, 751, 133 Eng. Reprint, 940, 949. Sometimes the resulting disability has been
characterized as an estoppel, sometimes as a waiver. The label counts for little. Enough for present purposes that the disability has its
roots in a principle more nearly ultimate than either waiver or estoppel, the principle that no one shall be permitted to found any claim
upon his own inequity or take advantage of his own wrong. Imperator Realty Co. vs. Tull, 228 N.Y. 447, 127 N.E. 263, supra. A suit may
not be built on an omission induced by him who sues. Swain vs. Seamens, 9 Wall. 254, 274, 19 L. ed. 554, 560; United States vs. Peck,
102 U.S. 64, 26 L. ed. 46; Thomson vs. Poor, 147 N.Y. 402, 42 N.E. 13; New Zealand Shipping Co. vs. Societe des Ateliers (1919) A. C.
1, 6-H. L.; 2 Williston, Contr. sec. 689. (R. H. Stearns Co. vs. U.S., supra; Emphasis supplied.)
. . . It is admitted that these assessments were timely made in August 1923. Upon the making of the assessment the Commissioner
sought to make collection, which likewise was at a time when the statute had not ran on collection, but the authorized representative of
the Lattimores strenuously objected to the collection and urged the Commissioner to withhold collection, pending adjustment of the
controversy between them and the Commissioner. The Commissioner yielded to their request and postponed collection until August 19,
1926, which was after the statute had run on collection. In the meantime, further claims for refund and protests were filed, conferences
were held and consideration was given to the settlement of the controversy, and the matter was not finally disposed of until 1926, when
the statute had run on collection. The procedure carried out was that requested by plaintiffs, and they cannot now be heard to say that
the collection was not timely. R. H. Stearns Company vs. United States, 291 U.S. 54, 54 S. Ct. 325, 78 L. Ed. 647. (Lattimore vs. U.S., 12
F. Supp. 895, 91.)
Wherefore, the decision appealed from is reversed.
The decision of the Collector of Internal Revenue rendered on July 26, 1955 is hereby affirmed. No costs.
Paras, C. J., Bengzon, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ., concur.
Separate Opinions
MONTEMAYOR, J., dissenting:
As stated in the majority opinion, the respondent Suyoc Consolidated Mining Company was unable to file in 1942 its income tax return for the year
1941, because of the last war. Acting upon an extension granted by Commonwealth Act 722 and by the Collector of Internal Revenue, it finally filed
the first income tax return (tentative) on February 12, 1946. For purposes of reference I am listing below in chronological order, the dates which are
material and relevant for purposes of computation of the period of prescription.
February 12, 1946
Respondent filed its "tentative return".
November 28, 1946
Respondent filed its "final return".
February 6, 1947
Respondent filed its amended final return".
February 11, 1947
Notice of 1st assessment (Based on the final return sent to the respondent) (Amount of
assessment P33,099.26).
February 14, 1947
Receipt of respondent said assessment.
February 21, 1947
Respondent asked for extension of time (one year) to pay the assessment, but reserving right to
question its validity. He was given only three months from March 20, 1957.
November 28, 1950
Petitioner demanded payment of tax assessed.
April 6, 1951
Respondent asked for reconsideration and reinvestigation of the assessment.
March 7, 1952
Notice of 2nd assessment (Based on the amended final return) was sent to respondent. (Amount
P33,289.96).
April 18, 1952
Petitioner revised the assessment made on March 7, 1952 (Now it is P50,697.03)
July 26, 1955
Petitioner reduced the assessment of April 18, 1952 after various negotiations. (Now it is P24,438.96)
It will be noticed that petitioner Collector made his first assessment based on the final return submitted by Suyoc on November 28, 1946, on
February 11, 1947. The assessment was in the amount of P33,099.26. Suyoc asked for an extension of time of one year within which to make
payment, at the same time reserving its right to question the validity of the assessment, but it was granted only three months from March 20, 1947,
that is to say, up to June 20, 1947. After said deadline, the Collector should immediately have demanded payment or resorted to the administrative
remedy of distraint and levy, but strange to say, the Collector did not act and allowed more than three years to pass (from June 20, 1947 to
November 28, 1950). It was only on November 28, 1950 that the Collector demanded payment on the basis of his assessment. On April 6, 1951,
Suyoc asked for reconsideration and reinvestigation. After about a year, that is, on March 7, 1952, the Collector made a second assessment of
P33,829.66, which was larger than his first assessment by about P800. Then on April 18, 1952, the Collector made a revised third assessment of
P28,289.96 as income tax, P1,414.50 as surcharge, P20,934.57 as interest up to April 30, 1952, and P40.00 as compromise, which all added up to
the staggering amount of P50,679.03, far different from and much larger than the first and second assessment by almost P17,000. After several
negotiations, including appeal to the conference staff created to act on such matters in the Bureau of Internal Revenue, the assessment was finally
reduced on July 26, 1955 to only P24,438.96, without surcharge, without interest and without any amount as compromise. It is this last assessment
which Suyoc appealed to the Court of Tax Appeals.
For purposes of reference, I am reproducing the pertinent sections of the National Internal Revenue Code:
SEC. 331. Period of limitation upon assessment and collection. Except as provided in the succeeding section, internal revenue taxes
shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period. For the purposes of this section a return filed before the last day prescribed by
law for the filing thereof shall be considered as filed on such last day; Provided, that this limitation shall not apply to cases already
investigated prior to the approval of this Code.
SEC. 332. Exceptions as to period of limitation of assessment and collection of taxes. . . . .
(c) Where the assessment of any internal revenue tax has been made within the period of limitation above prescribed such tax may be
collected by distraint or levy or by a proceeding in court, but only if begun (1) within five years after the assessment of the tax, 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.
SEC. 333. Suspension of running of statute. The running of the statute of limitations provided in section three hundred thirty-one or
three hundred thirty-two on the making of "assessments and the beginning of distraint or levy or a proceeding in court for collection, in
respect of any deficiency, shall be suspended for the period during which the Collector of Internal Revenue is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court, and for sixty days thereafter.
To me, the best argument against the contention of the Collector, and the ruling contained in the majority opinion that the right of the Collector to
collect the tax assessed by it has not prescribed, and that the petitions or petitions filed by Suyoc for investigation and revision of the assessment
extended the period of prescription, is the well written and reasoned decision (Resolution) of the Court of Tax Appeals, through Judge Roman M.
Umali to which I agree. I am reproducing with approval the pertinent portions of said decision:
Petitioner filed the instant petition for review on the grounds that certain losses were improperly disallowed by respondent as deductions
from its gross income, and that the right of the Government to collect the tax, if any is due, has prescribed. When this case was called for
hearing counsel for petitioner asked that the question of prescription be first resolved before hearing the case on the question involving
the correctness of the assessment. The sole issue raised at this time for resolution of this Court is, therefore, confined to the question of
prescription.
Upon the evidence submitted and admitted by the parties, it appears that the last and final assessment made by respondent covering the
income tax due from petitioner for the year 1941 was made on July 26, 1955, more than five years from the date the "amended return"
was filed on November 28, 1946, or from the date the amended final return' was filed on February 6, 1947. The right of respondent to
assess the tax has, therefore, prescribed pursuant to Section 331 of the National Internal Revenue which requires that the assessment
be made within five years from the date the return was filed.
Even granting that the first assessment made on February 11, 1947, is the one to be considered in determining whether or not the
assessment was made within the statutory period it follows that it must have to be considered also as the starting point from which the
period within which the right to collect should be computed. Accordingly, on the theory that the assessment in this case was made within
five years from the date the return was filed, the right of the Government to collect the tax assessed has prescribed, respondent having
failed at any time from February 14, 1947 up to the time the instant petition for review was filed on September 19, 1955, a period of more
than 8 years, to institute appropriate proceedings, judicially or otherwise, for the collection of the tax. (See Sec. 332 [c], National Internal
Revenue Code.)
From whatever angle the case is viewed, we find that the right of the Government to collect the income tax assessed against petitioner
for the year 1941 has prescribed. But it is insisted that the requests of petitioner for reconsideration of the assessment, and while the
same were pending consideration by respondent, had the effect of suspending the running of the statute of limitations. The statute of
limitations upon assessment and collection of national internal revenue taxes provided in Sections 331 and 332 of the Revenue Code
may be suspended only "for the period during which the Collector of Internal Revenue is prohibited from making the assessment or
beginning destraint or levy or a proceeding in court, and sixty day thereafter." (Sec. 333, Revenue Code.) Nowhere does the law
recognize that a simple request for reconsideration of an assessment, unaccompanied by any positive indication that the taxpayer is
waiving his right to assert the defense of prescription, has the effect of suspending the running of the statute of limitations.
That a request for re-examination or reconsideration of an assessment does not suspend the running of the statute of limitations seems
to be the prevailing opinion in the Bureau of Internal Revenue. This may he inferred from the fact that General Circular No. V-182 dated
January 17, 1955 had to be promulgated.
Paragraph 6 of said circular provides:
6. Within thirty (30) days from the receipt of the deficiency tax assessment notice, the taxpayer may request reinvestigation or reexamination of the assessment, subject to the following requirements prescribed in paragraph 3 of Department Order No. 213:
"(a) The taxpayer shall put the specific grounds of his protest in writing and under oath, accompanied by such additional documents and
evidence supporting his protest;
(b) He shall pay one-half (1/2) of the total assessment and file a bond to guarantee the payment of the balance together with the
penalties that shall have accrued at the time of final payment; and
(c) He shall sign a statement that he is waiving the periods of prescription involved in the assessment and collection of the deficiency tax
in question." (Emphasis supplied.)
If a simple request for reinvestigation or re-examination of an assessment suspends the running of the statute of limitations, as alleged
by respondent, there is no necessity for the requirement that a taxpayer must sign a statement that he is waiving the periods of
prescription' as a condition for the granting of the request for reinvestigation or re-examination. General Circular No. V-182 obviously in
line with Section 332 (c) of the Revenue Code which provides that the waiver of the taxpayer must be contained in an agreement
in writing extending the five year period of limitation upon the right of the respondent to collect internal revenue taxes.
FOR THE FOREGOING CONSIDERATIONS We are of the opinion that the right of the Government to collect from petitioner the sum of
P24,438.96 as income tax for the year 1941 has prescribed. Accordingly, the decision appealed from is hereby set aside, without
pronouncement as to costs.
I fully agree with the Court of Tax Appeals that whether we consider February 11, 1947 or July 26, 1955, as the date of the assessment, the right of
the Collector, either to make collection within five years from February 11, 1947 or to make assessment within five years from February 6, 1947,
has prescribed. I do not believe that a mere petition for revision or reinvestigation can be regarded as an agreement of the taxpayer to extend the
period of prescription. The very law clearly so states. Section 333 says that the running of the statute of limitations provided in Sections 331 and
332 shall be suspended only when the Collector is prohibited from making the assessment or beginning the distraint. No such prohibition or inability
to make assessment or begin the distraint is claimed for the Collector. And Section 332 (c) says that the period for collection may be extended only
by express agreement in writing by the taxpayer and the Collector. Evidently, nothing short of such express written agreement to extend will
suspend the running of the period.
It will be observed that Suyoc made only one petition for extension, that is, for one year within which to pay the assessment, but reserving its right
to question the validity thereof. It was given only three months. Thereafter, it never asked for any other extension. True, it asked for revision and
reconsideration of the different assessments made by the Collector, but this in no way can be regarded as an express agreement to extend the
period; and the Collector was well aware of the fact that a mere petition to amend, modify, revise or revive the assessment or reinvestigate the case
cannot extend the period of prescription, as evidenced by the very General Circular No. V-182, promulgated for the guidance of the Bureau of
Internal Revenue. Said circular among other things provides that in order that there be an extension of the period of prescription and presumably,
for the protection of the Government, the taxpayer must sign a statement that he is waiving the period of prescription involved in the collection of
the tax.
The trouble with the actuations of the Collector in this case is that he would appear to have unduly delayed definite and affirmative action on the
assessment and collection as shown by the wide gaps first, a period of more than three years from February 14, 1947, when Suyoc received
notice of the first assessment (extended by the Collector to June 20, 1947) to November 28, 1950, when the Collector demanded payment; then
another period of about two years from November 28, 1950 to March 7, 1952 when he made the second assessment.
Not only was there undue delay on the part of the Collector, but his actuations would seem to have been characterized by indecision and
uncertainty. First, he made an assessment in the amount of P33,099.26. Then he increased this to P33,829.66. Then on April 18, 1952, he again
increased this assessment to P50,678.03, until on July 26, 1955, this sum of over P50,000 was reduced to P24,438.96, without surcharge, without
interest and without any amount as compromise. Why all this difference or differences in the amounts of the assessment?
One could well imagine and understand that a first assessment more or less hastily prepared may be revised within a reasonable time, say a few
months or even a year, either increasing it or decreasing it. But when the Collector over a period of more than eight years kept changing his
assessment, increasing the same by substantial amounts and then decreasing the same substantially, and at the same time utterly forgetting the
period of prescription set by the law and also forgetting to protect the interest of the Government by requiring the taxpayer to agree expressly and
in writing to extend the period of such prescription; and equally important, forgetting and failing up to the present time to institute proceedings,
administrative by distraint and levy or judicial by court action, to collect, the Government has no one to blame but itself and its officials, certainly not
the taxpayer who did nothing but ask for revision of the assessment to obtain a correct figure while it finally got but too late, after a wait of over
eight years.
The majority opinion places much reliance on the case of R. H. Stearns Company vs. U.S., 291 U.S., 54, and makes extensive quotation therefrom.
After reading said case, I agree with counsel for Suyoc that it not applicable, for the reason that in that case, the taxpayer signed two waivers of the
period of limitation; that although the second waiver was not signed by the Commissioner, nevertheless, the taxpayer on several ocassions had
requested him to withhold collection. Naturally, the United States Supreme Court was constrained to hold that when the taxpayer not only signed
waivers but had deliberately asked and persuaded the Commissioner to postpone collection, he cannot invoke the benefit of prescription to the
running of which he has contributed. Our law expressly and clearly provides that in order to suspend the period of prescription or to extend it, the
taxpayer and the Collector must sign an agreement to that effect. Nothing short of this will effect said extension or suspension of the period of
limitation. Mere petitions for revision or reinvestigation by the taxpayer cannot suspend the running of the period of prescription. The taxpayer may
make as many requests for revision or examination as he wishes, but the Collector need not act upon them to the prejudice of the Government;
and even if he does act upon said petitions, he should always keep an eye on the running of the period, on the dead line, so that for the protection
of the Government, he could enforce collection before it is too late.
Prescription in the assessment and in the collection of taxes is provided by the Legislature for the benefit of both the Government and taxpayer; for
the Government for the purpose of expediting the collection of taxes, so that the agency charged with the assessment and collection may not tarry
too long or indefinitely to the prejudice of the interests of the Government which needs said taxes to run it; and for the taxpayer so that within a
reasonable time after filing his return, he may know the amount of the assessment which he is required to pay, whether or not such assessment is
well founded and reasonable so that he may either pay the amount of the assessment or contest its validity in court, either by filing an action for the
refund, if already paid, under the old law, or appeal the disputed assessment to the Court of Tax Appeals under the present law creating the Tax
Court. It would surely be prejudicial to the interest of the taxpayer for the Government collecting agency to unduly delay the assessment and the
collection because by the time that the collecting agency finally gets around to making the assessment or making the collection, the taxpayer may
then have lost his papers and books to support his claim and contest that of the Government, and what is more, the tax is in the meantime
accumulating interest which the taxpayer eventually has to pay.
In connection with this extension of the period of prescription or limitation for the Government to collect taxes, it will be noticed from Section 332(c)
of the Internal Revenue Code that even If the taxpayer and the Collector agree to extend the period of limitation, said period has to be specific or
fixed, and if said period of extension is to be further extended, another agreement has to be made again specifying the period of said further
extension. From all this, it is evident that to extend the period of limitation or prescription, an express agreement in writing to that effect, signed by
the Collector and the taxpayer is necessary. Naturally, a mere petition by the taxpayer for revision or re-examination of the assessment cannot and
will not automatically extend the period of limitation. However, under the theory espoused by the majority, let the taxpayer just ask, not for an
extension of the time to pay or the Government to collect, but for a mere re-examination or revision of the assessment, and lo, and behold, all the
carefully prepared provisions of the tax law about prescription and statutory limitation are laid aside, and the collecting agency of the Government
may then postpone and delay the collection indefinitely, until such time as it is good and ready to resume proceedings from where it left off, and if
the taxpayer complains of the delay or invokes prescription, he is instantly met with and silenced by the done of estoppel. I believe that is not what
the law and the Legislature contemplated.
To me, this matter of the extension of the period of limitation is quite clear, but assuming for a moment that there were any doubt about it, then we
have the time honored and well settled rule of statutory construction that tax laws should be interpreted liberally in favor of the taxpayer and strictly
against the Government, except in the matter of tax exemptions, in which case the rule is reversed. In the case of Manila Railroad Co. vs. Collector
of Customs, 52 Phil. 952, this Tribunal said:
. . . . It is the general rule in the interpretation of statutes levying taxes or duties not to extend their provisions beyond the clear import of
the language used. In every case of doubt, such statutes are construed most strongly against the Government and in favor of the citizen,
because burdens are not to be imposed, nor presumed to be imposed, beyond what the statutes expressly and clearly import. (U. S. vs.
Wigglesworth [1842], 2 Story, 369; Froehlich & Kuttner vs. Collector of Customs [1911], 19 Phil., 461.)
Years ago, the Supreme Court of the United States, through Chief Justice Marshall, in the case of McCulloch vs. The State of Maryland, 4 Law Ed.
579, said that the power to tax is the power to destroy. Evidently, to moderate this awesome and dangerous taxing power of the Legislature, and in
order to temper the rigor of tax laws, this sound and salutary rule of liberal construction of tax laws in favor of the taxpayer has been evolved and
laid down.
For the foregoing reasons, I dissent.
Padilla, J., concurs.
ALLIED BANKING
CORPORATION,
G.R. No. 175097

Petitioner,
Present:
- versus -
COMMISSIONER OF
INTERNAL REVENUE,
Respondent.
x --------------------------------------------------------x

BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
Promulgated:
February 5, 2010
DECISION
DEL CASTILLO, J.:
The key to effective communication is clarity.

The Commissioner of Internal Revenue (CIR) as well as his duly authorized representative must indicate clearly and unequivocally to the taxpayer whether an action
constitutes a final determination on a disputed assessment. [1] Words must be carefully chosen in order to avoid any confusion that could adversely affect the rights and interest of the
taxpayer.
Assailed in this Petition for Review on Certiorari[2] under Section 12 of Republic Act (RA) No. 9282, [3] in relation to Rule 45 of the Rules of Court, are the August 23, 2006
Decision[4] of the Court of Tax Appeals (CTA) and its October 17, 2006 Resolution[5] denying petitioners Motion for Reconsideration.
Factual Antecedents
On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to petitioner Allied Banking Corporation for deficiency
Documentary Stamp Tax (DST) in the amount of P12,050,595.60 and Gross Receipts Tax (GRT) in the amount ofP38,995,296.76 on industry issue for the taxable year 2001.
[6]
Petitioner received the PAN on May 18, 2004 and filed a protest against it on May 27, 2004.[7]
On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner, which partly reads as follows: [8]
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision
based on investigation. If you disagree, you may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment
shall become final, executory and demandable.
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30, 2004.[9]
Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for Review[10] with the CTA which was raffled to its First Division and docketed as CTA Case No. 7062.[11]
On December 7, 2004, respondent CIR filed his Answer.[12] On July 28, 2005, he filed a Motion to Dismiss[13] on the ground that petitioner failed to file an administrative
protest on the Formal Letter of Demand with Assessment Notices. Petitioner opposed the Motion to Dismiss on August 18, 2005.[14]
On October 12, 2005, the First Division of the CTA rendered a Resolution[15] granting respondents Motion to Dismiss. It ruled:
Clearly, it is neither the assessment nor the formal demand letter itself that is appealable to this Court. It is the decision of the Commissioner of
Internal Revenue on the disputed assessment that can be appealed to this Court (Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). As correctly
pointed out by respondent, a disputed assessment is one wherein the taxpayer or his duly authorized representative filed an administrative protest against the
formal letter of demand and assessment notice within thirty (30) days from date [of] receipt thereof. In this case, petitioner failed to file an administrative
protest on the formal letter of demand with the corresponding assessment notices. Hence, the assessments did not become disputed assessments as subject to
the Courts review under Republic Act No. 9282. (See also Republic v. Liam Tian Teng Sons & Co., Inc., 16 SCRA 584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.[16]
Aggrieved, petitioner moved for reconsideration but the motion was denied by the First Division in its Resolution dated February 1, 2006.[17]
Proceedings before the CTA En Banc
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.[18] The case was docketed as CTA EB No. 167.
Finding no reversible error in the Resolutions dated October 12, 2005 and February 1, 2006 of the CTA First Division, the CTA En Bancdenied the Petition for
Review[19]as well as petitioners Motion for Reconsideration.[20]
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an
administrative protest is an integral part of the remedies given to a taxpayer in challenging the legality or validity of an assessment. According to the CTA En Banc, although there are
exceptions to the doctrine of exhaustion of administrative remedies, the instant case does not fall in any of the exceptions.
Issue
Hence, the present recourse, where petitioner raises the lone issue of whether the Formal Letter of Demand dated July 16, 2004 can be construed as a final decision of the
CIR appealable to the CTA under RA 9282.
Our Ruling
The petition is meritorious.
Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate jurisdiction
to review by appeal decisions of the CIR in cases involving disputed assessments
The CTA, being a court of special jurisdiction, can take cognizance only of
matters that are clearly within its jurisdiction.[21] Section 7 of RA 9282 provides:
Sec. 7.
(a)
Jurisdiction. The CTA shall exercise:

Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1)
Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2)
Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial; (Emphasis supplied)
xxxx
The word decisions in the above quoted provision of RA 9282 has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the
assessments.[22] Corollary thereto, Section 228 of the National Internal Revenue Code (NIRC) provides for the procedure for protesting an assessment. It states:
SECTION 228. Protesting of Assessment. When the Commissioner or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided, however, That a preassessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return;
or
(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have
carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable
year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and
spare parts, has been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails
to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of
the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all
relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer
adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse
of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal Letter of Demand with Assessment
Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from receipt
thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the
Petition for Review by the CTA was proper.
The case is an exception to the
rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission,[23] the respondent contended that before filing a petition with the court, petitioner should have first exhausted
all administrative remedies by appealing to the Office of the President. However, we ruled that respondent was estopped from invoking the rule on exhaustion of administrative
remedies considering that in its Resolution, it said, The opinions promulgated by the Secretary of Justice are advisory in nature, which may either be accepted or ignored by the office
seeking the opinion, and any aggrieved party has the court for recourse. The statement of the respondent in said case led the petitioner to conclude that only a final judicial ruling in her
favor would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for Review was premature because petitioner failed to exhaust all administrative
remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1.
That the said assessment has already prescribed in accordance with the provisions of Section 203 of the Tax Code.
2.
That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted, the wording of Section 28(A)(7)(b)
discloses that there are no other taxes imposable upon FCDUs aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001 has not prescribed for [sic] simply because no returns were
filed, thus, the three year prescriptive period has not lapsed.
With the implementation of the CTRP, the phrase exempt from all taxes was deleted. Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax
Code. Accordingly, you were assessed for deficiency gross receipts tax on onshore income from foreign currency transactions in accordance with the rates
provided under Section 121 of the said Tax Code. Likewise, deficiency documentary stamp taxes was [sic] also assessed on Loan Agreements, Bills Purchased,
Certificate of Deposits and related transactions pursuant to Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision of Section 248(A) and 249(b), respectively, of the National Internal Revenue
Code, as amended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision
based on investigation. If you disagree, you may appeal this final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable.[24] (Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision on the matter and that the remedy of petitioner is to appeal the final decision
within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, [25] we considered the language used and the tenor of the letter sent to the taxpayer as the final
decision of the CIR.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not
filing a protest against the Formal Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter indicate that it is the final decision of the
respondent on the matter. We have time and again reminded the CIR to indicate, in a clear and unequivocal language, whether his action on a disputed assessment constitutes his final
determination thereon in order for the taxpayer concerned to determine when his or her right to appeal to the tax court accrues.[26] Viewed in the light of the foregoing, respondent is now
estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices, respondent used the word appeal instead of protest,
reinvestigation, or reconsideration. Although there was no direct reference for petitioner to bring the matter directly to the CTA, it cannot be denied that the word appeal under
prevailing tax laws refers to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms protest, reinvestigation
and reconsideration refer to the administrative remedies a taxpayer may take before the CIR, while the term appeal refers to the remedy available to the taxpayer before the CTA.
Section 9 of RA 9282, amending Section 11 of RA 1125, [27] likewise uses the term appeal when referring to the action a taxpayer must take when adversely affected by a decision,
ruling, or inaction of the CIR. As we see it then, petitioner in appealing the Formal Letter of Demand with Assessment Notices to the CTA merely took the cue from respondent. Besides,
any doubt in the interpretation or use of the word appeal in the Formal Letter of Demand with Assessment Notices should be resolved in favor of petitioner, and not the respondent
who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as implemented by Section 3 of BIR Revenue Regulations No. 12-99. [28] It is the
Formal Letter of Demand and Assessment Notice that must be administratively protested or disputed within 30 days, and not the PAN. Neither are we deviating from our
pronouncement in St. Stephens Chinese Girls School v. Collector of Internal Revenue,[29] that the counting of the 30 days within which to institute an appeal in the CTA commences
from the date of receipt of the decision of the CIR on the disputed assessment, not from the date the assessment was issued.
What we are saying in this particular case is that, the Formal Letter of Demand with Assessment Notices which was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the CTA because the words used, specifically the words final decision and appeal, taken together led petitioner to believe that the
Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the
CTA.
We note, however, that during the pendency of the instant case, petitioner availed of the provisions of Revenue Regulations No. 30-2002 and its implementing Revenue
Memorandum Order by submitting an offer of compromise for the settlement of the GRT, DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment
dated November 21, 2007.[30] Accordingly, there is no reason to reinstate the Petition for Review in CTA Case No. 7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision and the October 17, 2006 Resolution of the Court of Tax Appeals
are REVERSED and SET ASIDE. The Petition for Review in CTA Case No. 7062 is hereby DISMISSED based solely on the Bureau of Internal Revenues acceptance of
petitioners offer of compromise for the settlement of the gross receipts tax, documentary stamp tax and value added tax, for the years 1998-2003.
SO ORDERED.
REVENUE,
Petitioner,
- versus FAR EAST BANK & TRUST
COMPANY (NOW BANK OF
THE PHILIPPINE ISLANDS),
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 173854

Present:
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
Promulgated:
March 15, 2010
DECISION
DEL CASTILLO, J.:
Entitlement to a tax refund is for the taxpayer to prove and not for the government to disprove.
This Petition for Review on Certiorari assails the January 31, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 56773 which reversed and set aside the
October 4, 1999 Decision[2] of the Court of Tax Appeals (CTA) in CTA Case No. 5487. Also assailed is the July 19, 2006 Resolution[3] of the CA denying the motion for
reconsideration.
The CTA found that respondent Far East Bank & Trust Company failed to prove that the income derived from rentals and sale of real property from which the taxes were
withheld were reflected in its 1994 Annual Income Tax Return. The CA found otherwise.
Factual Antecedents
On April 10, 1995, respondent filed with the Bureau of Internal Revenue (BIR) two Corporate Annual Income Tax Returns, one for its Corporate Banking Unit (CBU)
and another for its Foreign Currency Deposit Unit (FCDU), [5] for the taxable year ending December 31, 1994. The return for the CBU consolidated the respondents overall income
tax liability for 1994, which reflected a refundable income tax ofP12,682,864.00, computed as follows:
[4]
Gross Income
Less: Deductions
FCDU
P13,319,068
1,397,157
CBU
5,348,080,630
5,432,828,719
11,921,911
35%
[84,748,089]
35%
Net Income
Tax Rate
Income Tax Due Thereon
4,172,669
NIL
_______________________________________
Consolidated Tax Due for

Both CBU and FCDU Operations
P 4,172,669
Less:
Quarterly Income Tax Payments
CBU -1st Quarter
-2nd Quarter
FCDU -1st Quarter
-2nd Quarter
633,085
11,844,333
955, 280
1,104,942
Less:
Creditable Taxes
Withheld at Source
Refundable Income Tax
2,317,893
[P12,682,864][6]
Pursuant to Section 69[7] of the old National Internal Revenue Code (NIRC),
the amount of P12,682,864.00 was carried over and applied against respondents income tax liability for the taxable year ending December 31, 1995. On April 15, 1996, respondent
filed its 1995 Annual Income Tax Return, which showed a total overpaid income tax in the amount ofP17,443,133.00, detailed as follows:
Gross Income
Less: Deductions
FCDU
P16,531,038
1,327,549
CBU
7,076,497,628
7,086,821,354
15,203,539
35%
5,321,239
[10,423,728]
35%
NIL
Net Income
Tax Rate
Income Tax Due Thereon
_______________________________________
Consolidated Tax Due for

Both CBU and FCDU Operations
P 5,321,239
Less:
Prior years (1994) excess
income tax credit
Additional prior years excess
income tax credit
Creditable Taxes
Withheld at Source
Refundable Income Tax
12,682,864
6,283,484
3,798,024
[P17,443,133][8]
Out of the P17,433,133.00 refundable income tax, only P13,645,109.00 was sought to be refunded by respondent. As to the remainingP3,798,024.00, respondent opted
to carry it over to the next taxable year.
On May 17, 1996, respondent filed a claim for refund of the amount of P13,645,109.00 with the BIR. Due to the failure of petitioner Commissioner of Internal Revenue (CIR)
to act on the claim for refund, respondent was compelled to bring the matter to the CTA on April 8, 1997via a Petition for Review docketed as CTA Case No. 5487.
After the filing of petitioners Answer, trial ensued.
To prove its entitlement to a refund, respondent presented the following documents:
Exhibits
Nature and Description
Corporate Annual Income Tax Return covering income of respondents CBU for the year
ended December 31, 1994 together with attachments
Corporate Annual Income Tax Return covering income of respondents FCDU for the year
Corporate Annual Income Tax Return covering income of respondents CBU for the year
Corporate Annual Income Tax Return covering income of respondents FCDU for the year
N to Z;
AA to UU
VV
Certificates
of
Creditable
Withholding
Tax and Monthly Remittance Returns of Income Taxes Withheld issued by various
withholding agents for the year ended December 31, 1994
Letter claim for refund dated May 8, 1996 filed with the Revenue District Office No. 33 on May 17,
1996[9]
Petitioner, on the other hand, did not present any evidence.

Ruling of the Court of Tax Appeals
On October 4, 1999, the CTA rendered a Decision denying respondents claim for refund on the ground that respondent failed to show that the income derived from rentals and
sale of real property from which the taxes were withheld were reflected in its 1994 Annual Income Tax Return.
On October 20, 1999, respondent filed a Motion for New Trial based on excusable negligence. It prayed that it be allowed to present additional evidence to support its
claim for refund.
However, the motion was denied on December 16, 1999 by the CTA. It reasoned, thus:
[Respondent] is reminded that this case was originally submitted for decision as early as September 22, 1998 (p. 497, CTA Records). In
view, however, of the Urgent Motion to Admit Memorandum filed on April 27, 1999 by Atty. Louella Martinez, who entered her appearance as collaborating
counsel of Atty. Manuel Salvador allegedly due to the latter counsels absences, this Court set aside its resolution of September 22, 1998 and considered this
case submitted for decision as of May 7, 1999. Nonetheless, it took [respondent] another five months after it was represented by a new counsel and after a
decision unfavorable to it was rendered before [respondent] realized that an additional material documentary evidence has to be presented by way of a new
trial, this time initiated by a third counsel coming from the same law firm. x x x
Furthermore, in ascertaining whether or not the income upon which the taxes were withheld were included in the returns of the [respondent], this
Court based its findings on the income tax returns and their supporting schedules prepared and reviewed by the [respondent] itself and which, to Us, are
enough to support the conclusion reached.
WHEREFORE, in view of the foregoing, [respondents] Motion for New Trial is hereby DENIED for lack of merit.
SO ORDERED.[10]
Ruling of the Court of Appeals
On appeal, the CA reversed the Decision of the CTA. The CA found that
respondent has duly proven that the income derived from rentals and sale of real property upon which the taxes were withheld were included in the return as part of the gross income.
Hence, this present recourse.
Issue
The lone issue presented in this petition is whether respondent has proven its entitlement to the refund.[11]
Our Ruling
We find that the respondent miserably failed to prove its entitlement to the refund. Therefore, we grant the petition filed by the petitioner CIR for being meritorious.
A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply with the following requisites:
1)
The claim must be filed with the CIR within the two-year period from the date of payment of the tax;
2)
It must be shown on the return that the income received was declared as part of the gross income; and
3)
The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax
withheld.[12]
The two-year period requirement is based on Section 229 of the NIRC of 1997 which provides that:
SECTION 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding shall be maintained in any court for the recovery of
any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed
with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless
of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit
any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Formerly Section 230
of the old NIRC)
While the second and third requirements are found under Section 10 of Revenue Regulation No. 6-85, as amended, which reads:
Section 10. Claims for tax credit or refund. Claims for tax credit or refund of income tax deducted and withheld on income payments shall be
given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is
established by a copy of the statement duly issued by the payer to the payee (BIR Form No. 1743.1) showing the amount paid and the amount of tax withheld
therefrom.
Respondent timely filed its claim for refund.

There is no dispute that respondent complied with the first requirement. The filing of respondents administrative claim for refund on May 17, 1996 and judicial claim for
refund on April 8, 1997 were well within the two-year period from the date of the filing of the return on April 10, 1995.[13]
Respondent failed to prove that the income derived from rentals and sale of real property were included
in the gross income as reflected in its return.
However, as to the second and third requirements, the tax court and the appellate court arrived at different factual findings.
The CTA ruled that the income derived from rentals and sales of real property were not included in respondents gross income. It noted that in respondents 1994 Annual
Income Tax Return, the phrase NOT APPLICABLE was printed on the space provided for rent, sale of real property and trust income. The CTA also declared that the certifications
issued by respondent cannot be considered in the absence of the Certificates of Creditable Tax Withheld at Source. The CTA ruled that:
x x x the Certificates of Creditable Tax Withheld at Source submitted by [respondent] pertain to rentals of real property while the Monthly Remittance Returns
of Income Taxes Withheld refer to sales of real property. But, if we are to look at Schedules 3, 4, and 5 of the Annual Income Tax Return of [respondent] for
1994 (Exhibit A), there was no showing that the Rental Income and Income from Sale of Real Property were included as part of the gross income
appearing in Section A of the said return. In fact, under the said schedules, the phrase NOT APPLICABLE was printed by [respondent]. Verily,
the income of [respondent] coming from rent and sale of real property upon which the creditable taxes withheld were based were not duly
reflected. As to the certifications issued by the [respondent] (Exh. UU), the same cannot be considered in the absence of the requisite Certificates of
Creditable Tax Withheld at Source.
Based on the foregoing, [respondent] has failed to comply with two essential requirements for a valid claim for refund. Consequently, the
same cannot be given due course. [14] (Emphasis supplied)
On the other hand, the CA found thus:
We disagree with x x x CTAs findings. In the case of Citibank, N.A. vs. Court of Appeals (280 SCRA 459), the Supreme Court held that:
a refund claimant is required to prove the inclusion of the income payments which were the basis of the
withholding taxes and the fact of withholding. However, a detailed proof of the truthfulness of each and every item in the income
tax return is not required. x x x
x x x The grant of a refund is founded on the assumption that the tax return is valid; that is, the facts stated therein are true and
correct. x x x
In the case at bench, the BIR examined [respondent] Banks Corporate Annual Income Tax Returns for the years 1994 and 1995 when they were
filed onApril 10, 1995 and April 15, 1996, respectively. Presumably, the BIR found no false declaration in them because it did not allege any false declaration
thereof in its Answer (to the petition for review) filed before x x x CTA. Nowhere in the Answer, did the BIR dispute the amount of tax refund being claimed
by [respondent] Bank as inaccurate or erroneous. In fact, the reason given by the BIR (in its Answer to the petition for review) why the claimed tax refund
should be denied was that x x x the amount of P13,645,109.00 was not illegally or erroneously collected, hence, the petition for review has no basis [see
Record, p. 32]. The amount ofP17,433,133.00 reflected as refundable income tax in [respondent] Banks Corporate Annual Income Tax Return for the year
1995 was not disputed by the BIR to be inaccurate because there were certain income not included in the return of the [respondent]. Verily, this leads Us to a
conclusion that [respondent] Banks Corporate Annual Income Tax Returns submitted were accepted as regular and even accurate by the BIR.
Incidentally, under Sec. 16 of the NIRC, the Commissioner of the BIR is tasked to make an examination of returns and assess the correct
amount of tax, to wit:
Sec. 16. Power of the Commissioner to make assessment and prescribe additional requirements for tax administration
and enforcement.
(a) After a return is filed as required under the provision of this Code, the Commissioner shall examine it and assess the
correct amount of tax. x x x
which the [petitioner] Commissioner undeniably failed to do. Moreover, noteworthy is the fact that during the hearing of the petition for review before
the CTA, [petitioner] Commissioner of the BIR submitted the case for decision in view of the fact that he has no evidence to present nor records to submit
relative to the case x x x
Thus, although it is a fact that [respondent] failed to indicate said income payments under the appropriate Schedules 3, 4, and 5 of Section C of its
1994 Annual Income Tax Return (Exhibit A), however, We give credence to [respondent] Banks assertion that it reported the said income payments
as part of its gross income when it included the same as part of the Other Income, Trust Income, and Interest Income stated in the Schedule of
Income (referred to as an attachment in Section C of Exhibit A, x x x and in the 1994 audited Financial Statements (FS) supporting [respondents] 1994
Annual Corporate Income Tax Return. The reason why the phrase NOT APPLICABLE was indicated in schedules 3, 4, and 5 of Section C of [respondents]
1994 Annual Income Tax Return is due to the fact that [respondent] Bank already reported the subject rental income and income from sale of real property in
the Schedule of Income under the headings Other Income/Earnings, Trust Income and Interest Income. Therefore, [respondent] Bank still complied with
the second requirement that the income upon which the taxes were withheld are included in the return as part of the gross income.
xxxx
[Respondent] Banks various documentary evidence showing that it had satisfied all requirements under the Tax Code vis--vis the Bureau of
Internal Revenues failure to adduce any evidence in support of their denial of the claim, [respondent] Bank should, therefore, be granted the present
claim for refund.[15] (Emphasis supplied)
Between the decision of the CTA and the CA, it is the formers that is based on the evidence and in accordance with the applicable law and jurisprudence.
To establish the fact of withholding, respondent submitted Certificates of Creditable Tax Withheld at Source and Monthly Remittance Returns of Income Taxes Withheld,
which pertain to rentals and sales of real property, respectively. However, a perusal of respondents 1994 Annual Income Tax Return shows that the gross income was derived solely
from sales of services. In fact, the phrase NOT APPLICABLE was printed on the schedules pertaining to rent, sale of real property, and trust income. [16] Thus, based on the entries
in the return, the income derived fromrentals and sales of real property upon which the creditable taxes were withheld were not included in respondents gross income as
reflected in its return. Since no income was reported, it follows that no tax was withheld. To reiterate, it is incumbent upon the taxpayer to reflect in his return the income upon which
any creditable tax is required to be withheld at the source.[17]
Respondents explanation that its income derived from rentals and sales of real properties were included in the gross income but were classified as Other Earnings in its
Schedule of Income[18] attached to the return is not supported by the evidence. There is nothing in the Schedule of Income to show that the income under the heading Other Earnings
includes income from rentals and sales of real property. No documentary or testimonial evidence was presented by respondent to prove this. In fact, respondent, upon realizing its
omission, filed a motion for new trial on the ground of excusable negligence with the CTA. Respondent knew that it had to present additional evidence showing the breakdown of the
Other Earnings reported in its Schedule of Income attached to the return to prove that the income from rentals and sales of real property were actually included under the heading
Other Earnings.[19] Unfortunately, the CTA was not convinced that there was excusable negligence to justify the granting of a new trial.
Accordingly, the CA erred in ruling that respondent complied with the second requirement.
Respondent failed to present all the Certificates of Creditable Tax Withheld at Source.
The CA likewise failed to consider in its Decision the absence of several Certificates of Creditable Tax Withheld at Source. It immediately granted the refund without first
verifying whether the fact of withholding was established by the Certificates of Creditable Tax Withheld at Source as required under Section 10 of Revenue Regulation No. 6-85. As
correctly pointed out by the CTA, the certifications (Exhibit UU) issued by respondent cannot be considered in the absence of the required Certificates of Creditable Tax Withheld at
Source.
The burden is on the taxpayer to prove its entitlement to the refund.
Moreover, the fact that the petitioner failed to present any evidence or to
refute the evidence presented by respondent does not ipso facto entitle the respondent to a tax refund. It is not the duty of the government to disprove a taxpayers claim for
refund. Rather, the burden of establishing the factual basis of a claim for a refund rests on the taxpayer.[20]
And while the petitioner has the power to make an examination of the returns and to assess the correct amount of tax, his failure to exercise such powers does not create a
presumption in favor of the correctness of the returns. The taxpayer must still present substantial evidence to prove his claim for refund. As we have said, there is no automatic grant of a
[21]
tax refund.
Hence, for failing to prove its entitlement to a tax refund, respondents claim must be denied. Since tax refunds partake of the nature of tax exemptions, which are
construed strictissimi juris against the taxpayer, evidence in support of a claim must likewise be strictissimi scrutinized and duly proven.[22]
WHEREFORE, the petition is GRANTED. The assailed January 31, 2006 Decision of the Court of Appeals in CA-G.R. SP No. 56773 and its July 19, 2006 Resolution
are REVERSED and SET ASIDE. The October 4, 1999 Decision of the Court of Tax Appeals denying respondents claim for tax refund for failure to prove that the income derived
from rentals and sale of real property from which the taxes were withheld were reflected in its 1994 Annual Income Tax Return, is REINSTATED and AFFIRMED.
SO ORDERED.
RIZAL COMMERCIAL BANKING CORPORATION,

Petitioner,
G.R. No. 170257

Present:
VELASCO, JR., J.,Chairperson,
PERALTA,
ABAD,
VILLARAMA, JR., and
MENDOZA, JJ.
- versus -
COMMISSIONER OF INTERNAL REVENUE,

Respondent.
Promulgated:
September 7, 2011
x --------------------------------------------------------------------------------------- x
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 seeking to set aside the July 27, 2005 Decision [1] and October 26, 2005 Resolution [2] of the
Court of Tax Appeals En Banc (CTA-En Banc) in C.T.A. E.B. No. 83 entitled Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue.
THE FACTS
Petitioner Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in general banking operations. It seasonably filed its Corporation
Annual Income Tax Returns for Foreign Currency Deposit Unit for the calendar years 1994 and 1995. [3]
On August 15, 1996, RCBC received Letter of Authority No. 133959 issued by then Commissioner of Internal Revenue (CIR) Liwayway VinzonsChato, authorizing a special audit team to examine the books of accounts and other accounting records for all internal revenue taxes fromJanuary 1,
1994 to December 31, 1995.[4]
On January 23, 1997, RCBC executed two Waivers of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue
Code covering the internal revenue taxes due for the years 1994 and 1995, effectively extending the period of the Bureau of Internal Revenue (BIR) to assess up to
December 31, 2000.[5]
Subsequently, on January 27, 2000, RCBC received a Formal Letter of Demand together with Assessment Notices from the BIR for the following
deficiency tax assessments:[6]
Particulars
Deficiency Income Tax
1995 (ST-INC-95-0199-2000)
1994 (ST-INC-94-0200-2000)
Deficiency Gross Receipts Tax
1995 (ST-GRT-95-0201-2000)
1994 (ST-GRT-94-0202-2000)
Deficiency Final Withholding Tax
1995 (ST-EWT-95-0203-2000)
1994 (ST-EWT-94-0204-2000)
Deficiency Final Tax on FCDU
Onshore Income
1995 (ST-OT-95-0205-2000)
1994 (ST-OT-94-0206-2000)
Deficiency Expanded Withholding
Tax
1995 (ST-EWT-95-0207-2000)
1994 (ST-EWT-94-0208-2000)
Deficiency Documentary Stamp
Tax
1995 (ST-DST1-95-0209-2000)
1995 (ST-DST2-95-0210-2000)
1994 (ST-DST3-94-0211-2000)
1994 (ST-DST4-94-0212-2000)
TOTALS
Basic Tax
Interest
Compromise
Penalties
Total
252,150,988.01
216,478,397.90
191,496,585.96
207,819,261.99
25,000.00
25,000.00
443,672,573.97
424,322,659.89
13,697,083.68
2,488,462.38
12,428,696.21
2,755,716.42
2,819,745.52
25,000.00
28,945,525.41
5,269,178.80
64,365,610.12
53,058,075.25
58,757,866.78
59,047,096.34
25,000.00
25,000.00
123,148,477.15
112,130,171.59
81,508,718.20
34,429,503.10
61,901,963,.52
33,052,322.98
25,000.00
25,000.00
143,435,681.72
67,506,826.08
5,051,415.22
4,482,740.35
4,583,640.33
4,067,626.31
113,000.00
78,200.00
9,748,055.55
8,628,566.66
351,900,539.39
367,207,105.29
460,370,640.05
223,037,675.89
2,130,226,954.83
315,804,946.26
331,535,844.68
512,193,460.02
240,050,706.09
2,035,495,733.89
250,000.00
300,000.00
300,000.00
300,000.00
4,335,945.52
667,955,485.65
699,042,949.97
972,864,100.07
463,388,381.98
4,170,058,634.49
Disagreeing with the said deficiency tax assessment, RCBC filed a protest on February 24, 2000 and later submitted the relevant documentary evidence
to support it. Much later on November 20, 2000, it filed a petition for review before the CTA, pursuant to Section 228 of the 1997 Tax Code.[7]
On December 6, 2000, RCBC received another Formal Letter of Demand with Assessment Notices dated October 20, 2000, following the
reinvestigation it requested, which drastically reduced the original amount of deficiency taxes to the following: [8]
Particulars
1995 (INC-95-000003)
1994 (INC-94-000002)
1995 (GRT-95-000004)
1994 (GRT-94-000003)
1995 (FT-95-000005)
1994 (FT-94-000004)
Onshore Income
1995 (OT-95-000006)
1994 (OT-94-000005)
Deficiency Expanded Withholding Tax
1995 (EWT-95-000004)
1994 (EWT-94-000003)
Deficiency Documentary Stamp Tax
1995 (DST-95-000006)
1995 (DST2-95-000002)
1994 (DST-94-000005)
1994 (DST2-94-000001)
TOTALS
Basic Tax
Interest
Surcharge &/
Compromise
Total
374,348.45
1,392,366.28
346,656.92
1,568,605.52
2,000,926.96
138,368.61
3,322,589.63
161,872.32
362,203.47
188,746.43
351,287.75
220,807.47
713,491.22
409,553.90
81,508,718.20
34,429,503.10
79,052,291.08
40,277,802.26
160,561,009.28
74,707,305.36
520,869.72
297,949.95
505,171.80
348,560.63
25,000.00
25,000.00
1,051,041.03
671,510.58
126,155,645.38
149,972.68
6,238,460.62
226,266.18
4,260,026.21
12,291,947.73
749,863.40
31,192,303.08
1,131,330.92
21,300,131.05
303,160,496.55
599,890.72
24,953,842.46
905,064.74
17,040,104.84
164,712,903.44
721,005.37
2,960,971.80
1,367,222.04
6,690,738.63
300,240.93
On the same day, RCBC paid the following deficiency taxes as assessed by the BIR: [9]
Particulars
1994
2,965,549.44
300,695.84
1995
722,236.11
6,701,893.17
Total
3,687,785.55
7,002,589.01

Deficiency Expanded Withholding Tax
Deficiency Documentary Stamp Tax
TOTALS
410,174.44
672,490.14
1,131,330.92
5,480,240.78
714,682.02
1,052,753.48
749,863.40
9,941,428.18
1,124,856.46
1,725,243.62
1,881,194.32
15,421,668.96
RCBC, however, refused to pay the following assessments for deficiency onshore tax and documentary stamp tax which remained to be the subjects of its
petition for review:[10]
Particulars
Onshore Income
Basic
Interest
Sub Total
Deficiency Documentary Stamp
Tax
Basic
Surcharge
Sub Total
TOTALS
1994
1995
Total
34,429,503.10
40,277,802.26
74,707,305.36
81,508,718.20
79,052,291.08
160,561,009.28
115,938,221.30
119,330,093.34
235,268,314.64
17,040,104.84
4,260,026.21
21,300,131.05
96,007,436.41
24,953,842.46
6,238,460.62
31,192,303.08
191,753,312.36
41,993,947.30
10,498,486.83
52,492,434.13
287,760,748.77
RCBC argued that the waivers of the Statute of Limitations which it executed on January 23, 1997 were not valid because the same were not signed or
conformed to by the respondent CIR as required under Section 222(b) of the Tax Code. [11] As regards the deficiency FCDU onshore tax, RCBC contended that
because the onshore tax was collected in the form of a final withholding tax, it was the borrower, constituted by law as the withholding agent, that was primarily
liable for the remittance of the said tax.[12]
On December 15, 2004, the First Division of the Court of Tax Appeals (CTA-First Division) promulgated its Decision[13] which partially granted the
petition for review. It considered as closed and terminated the assessments for deficiency income tax, deficiency gross receipts tax, deficiency final withholding
tax, deficiency expanded withholding tax, and deficiency documentary stamp tax (not an industry issue) for 1994 and 1995. [14] It, however, upheld the assessment
for deficiency final tax on FCDU onshore income and deficiency documentary stamp tax for 1994 and 1995 and ordered RCBC to pay the following amounts plus
20% delinquency tax:[15]
Particulars
1994
1995
Total
Deficiency Final Tax on

FCDU Onshore Income
Basic
Interest
Sub Total
Deficiency Documentary
Stamp Tax (Industry Issue)
Basic
Surcharge
Sub Total
TOTALS
22,356,324.43
16,067,952.86
115,938, 221.30
26,153,837.08
15,583,713.19
119,330,093.34
48,510,161.51
31,651,666.05
119,330,093.34
17,040,104.84
4,260,026.21
24,953,842.46
6,238,460.62
41,993,947.30
10,498,486.83
21,300,131.05
31,192,303.08
52,492,434.13
69,810,292.56
62,843,969.13
171,822,527.47
Unsatisfied, RCBC filed its Motion for Reconsideration on January 21, 2005, arguing that: (1) the CTA erred in its addition of the total amount of deficiency
taxes and the correct amount should only be 132,654,261.69 and not 171,822,527.47; (2) the CTA erred in holding that RCBC was estopped from questioning
the validity of the waivers; (3) it was the payor-borrower as withholding tax agent, and not RCBC, who was liable to pay the final tax on FCDU, and (4) RCBCs
special savings account was not subject to documentary stamp tax.[16]
In its Resolution[17] dated April 11, 2005, the CTA-First Division substantially upheld its earlier ruling, except for its inadvertence in the addition of the total
amount of deficiency taxes. As such, it modified its earlier decision and ordered RCBC to pay the amount of 132,654,261.69 plus 20% delinquency tax.[18]
RCBC elevated the case to the CTA-En Banc where it raised the following issues:
I.
Whether or not the right of the respondent to assess deficiency onshore tax and documentary stamp tax for taxable year 1994 and
1995 had already prescribed when it issued the formal letter of demand and assessment notices for the said taxable years.
II.
Whether or not petitioner is liable for deficiency onshore tax for taxable year 1994 and 1995.
III.
Whether or not petitioners special savings account is subject to documentary stamp tax under then Section 180 of the 1993 Tax
Code.[19]
The CTA-En Banc, in its assailed Decision, denied the petition for lack of merit. It ruled that by receiving, accepting and paying portions of the
reduced assessment, RCBC bound itself to the new assessment, implying that it recognized the validity of the waivers. [20] RCBC could not assail the validity of
the waivers after it had received and accepted certain benefits as a result of the execution of the said waivers. [21] As to the deficiency onshore tax, it held that
because the payor-borrower was merely designated by law to withhold and remit the said tax, it would then follow that the tax should be imposed on RCBC as the
payee-bank.[22] Finally, in relation to the assessment of the deficiency documentary stamp tax on petitioners special savings account, it held that petitioners
special savings account was a certificate of deposit and, as such, was subject to documentary stamp tax. [23]
Hence, this petition.

While awaiting the decision of this Court, RCBC filed its Manifestation dated July 22, 2009, informing the Court that this petition, relative to the DST
deficiency assessment, had been rendered moot and academic by its payment of the tax deficiencies on Documentary Stamp Tax (DST) on Special Savings
Account (SSA) for taxable years 1994 and 1995 after the BIR approved its applications for tax abatement. [24]
In its November 17, 2009 Comment to the Manifestation, the CIR pointed out that the only remaining issues raised in the present petition were those
pertaining to RCBCs deficiency tax on FCDU Onshore Income for taxable years 1994 and 1995 in the aggregate amount of 80,161,827.56 plus 20%
delinquency interest per annum. The CIR prayed that RCBC be considered to have withdrawn its appeal with respect to the CTA-En Banc ruling on its DST on
SSA deficiency for taxable years 1994 and 1995 and that the questioned CTA decision regarding RCBCs deficiency tax on FCDU Onshore Income for the same
period be affirmed.[25]
THE ISSUES
Thus, only the following issues remain to be resolved by this Court:
Whether petitioner, by paying the other tax assessment covered by the waivers of the statute of limitations, is rendered estopped
from questioning the validity of the said waivers with respect to the assessment of deficiency onshore tax. [26]
and
Whether petitioner, as payee-bank, can be held liable for deficiency onshore tax, which is mandated by law to be collected at source
in the form of a final withholding tax.[27]
THE COURTS RULING
Petitioner is estopped from
questioning the validity of the waivers
RCBC assails the validity of the waivers of the statute of limitations on the ground that the said waivers were merely attested to by Sixto Esquivias,
then Coordinator for the CIR, and that he failed to indicate acceptance or agreement of the CIR, as required under Section 223 (b) of the 1977 Tax Code. [28] RCBC
further argues that the principle of estoppel cannot be applied against it because its payment of the other tax assessments does not signify a clear intention on its
part to give up its right to question the validity of the waivers.[29]
The Court disagrees.
Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule that an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying thereon. A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and falsehood. [30]
Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment of the revised assessments issued within the extended period as
provided for in the questioned waivers, impliedly admitted the validity of those waivers. Had petitioner truly believed that the waivers were invalid and that the
assessments were issued beyond the prescriptive period, then it should not have paid the reduced amount of taxes in the revised assessment. RCBCs subsequent
action effectively belies its insistence that the waivers are invalid. The records show that on December 6, 2000, upon receipt of the revised assessment, RCBC
immediately made payment on the uncontested taxes. Thus, RCBC is estopped from questioning the validity of the waivers. To hold otherwise and allow a party
to gainsay its own act or deny rights which it had previously recognized would run counter to the principle of equity which this institution holds dear.[31]
Liability for Deficiency

Onshore Withholding Tax
RCBC is convinced that it is the payor-borrower, as withholding agent, who is directly liable for the payment of onshore tax, citing Section 2.57(A) of
Revenue Regulations No. 2-98 which states:
(A) Final Withholding Tax. Under the final withholding tax system the amount of income tax withheld by the withholding
agent is constituted as a full and final payment of the income tax due from the payee on the said income. The liability for
payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the tax or in case of
under withholding, the deficiency tax shall be collected from the payor/withholding agent. The payee is not required to file an
income tax return for the particular income. (Emphasis supplied)
The petitioner is mistaken.
Before any further discussion, it should be pointed out that RCBC erred in citing the abovementioned Revenue Regulations No. 2-98 because the same
governs collection at source on income paid only on or after January 1, 1998. The deficiency withholding tax subject of this petition was supposed to have been
withheld on income paid during the taxable years of 1994 and 1995. Hence, Revenue Regulations No. 2-98 obviously does not apply in this case.
In Chamber of Real Estate and Builders Associations, Inc. v. The Executive Secretary,[32] the Court has explained that the purpose of the withholding tax
system is three-fold: (1) to provide the taxpayer with a convenient way of paying his tax liability; (2) to ensure the collection of tax, and (3) to improve the
governments cashflow. Under the withholding tax system, the payor is the taxpayer upon whom the tax is imposed, while the withholding agent simply acts as an
agent or a collector of the government to ensure the collection of taxes.[33]
It is, therefore, indisputable that the withholding agent is merely a tax collector and not a taxpayer, as elucidated by this Court in the case
ofCommissioner of Internal Revenue v. Court of Appeals,[34] to wit:
In the operation of the withholding tax system, the withholding agent is the payor, a separate entity acting no more than an
agent of the government for the collection of the tax in order to ensure its payments; the payer is the taxpayer he is the person
subject to tax imposed by law; and the payee is the taxing authority. In other words, the withholding agent is merely a tax
collector, not a taxpayer. Under the withholding system, however, the agent-payor becomes a payee by fiction of law. His
(agent) liability is direct and independent from the taxpayer, because the income tax is still imposed on and due from the latter. The
agent is not liable for the tax as no wealth flowed into him he earned no income. The Tax Code only makes the agent personally
liable for the tax arising from the breach of its legal duty to withhold as distinguished from its duty to pay tax since:
the governments cause of action against the withholding agent is not for the collection of income tax,
but for the enforcement of the withholding provision of Section 53 of the Tax Code, compliance with which is
imposed on the withholding agent and not upon the taxpayer. [35] (Emphases supplied)
Based on the foregoing, the liability of the withholding agent is independent from that of the taxpayer. The former cannot be made liable for the tax due
because it is the latter who earned the income subject to withholding tax. The withholding agent is liable only insofar as he failed to perform his duty to withhold
the tax and remit the same to the government. The liability for the tax, however, remains with the taxpayer because the gain was realized and received by him.
While the payor-borrower can be held accountable for its negligence in performing its duty to withhold the amount of tax due on the transaction, RCBC, as
the taxpayer and the one which earned income on the transaction, remains liable for the payment of tax as the taxpayer shares the responsibility of making certain
that the tax is properly withheld by the withholding agent, so as to avoid any penalty that may arise from the non-payment of the withholding tax due.
RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the payor-borrower as the withholding agent. As such, it is liable for
payment of deficiency onshore tax on interest income derived from foreign currency loans, pursuant to Section 24(e)(3) of the National Internal Revenue Code of
1993:
Sec. 24. Rates of tax on domestic corporations.
xxxx
(e) Tax on certain incomes derived by domestic corporations
xxxx
(3) Tax on income derived under the Expanded Foreign Currency Deposit System. Income derived by a depository bank
under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking
units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Central
Bank to transact business with foreign currency depository system units and other depository banks under the expanded
foreign currency deposit system shall be exempt from all taxes, except taxable income from such transactions as may be
specified by the Secretary of Finance, upon recommendation of the Monetary Board to be subject to the usual income tax
payable by banks: Provided, That interest income from foreign currency loans granted by such depository banks under said
expanded system to residents (other than offshore banking units in the Philippines or other depository banks under the expanded
system) shall be subject to a 10% tax. (Emphasis supplied)
As a final note, this Court has consistently held that findings and conclusions of the CTA shall be accorded the highest respect and shall be presumed
valid, in the absence of any clear and convincing proof to the contrary.[36] The CTA, as a specialized court dedicated exclusively to the study and resolution of tax
problems, has developed an expertise on the subject of taxation. [37] As such, its decisions shall not be lightly set aside on appeal, unless this Court finds that the
questioned decision is not supported by substantial evidence or there is a showing of abuse or improvident exercise of authority on the part of the Tax Court. [38]
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 147295
February 16, 2007
THE COMMISIONER OF INTERNAL REVENUE, Petitioner,

vs.
ACESITE (PHILIPPINES) HOTEL CORPORATION, Respondent.
DECISION
VELASCO, JR., J.:
The Case
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the November 17, 2000 Decision 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 56816, which affirmed the January 3, 2000 Decision 3 of the Court of Tax Appeals (CTA) in CTA Case No. 5645
entitled Acesite (Philippines) Hotel Corporation v. The Commissioner of Internal Revenue for Refund of VAT Payments.
The Facts
The facts as found by the appellate court are undisputed, thus:
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations Avenue in Manila. It leases 6,768.53 square meters
of the hotels premises to the Philippine Amusement and Gaming Corporation [hereafter, PAGCOR] for casino operations. It also caters food and
beverages to PAGCORs casino patrons through the hotels restaurant outlets. For the period January (sic) 96 to April 1997, Acesite incurred VAT
amounting to P30,152,892.02 from its rental income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the said
taxes to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to pay the taxes on account of its tax exempt
status.1awphi1.net
Thus, PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while the latter paid the VAT to the Commissioner of Internal
Revenue [hereafter, CIR] as it feared the legal consequences of non-payment of the tax. However, Acesite belatedly arrived at the conclusion that
its transaction with PAGCOR was subject to zero rate as it was rendered to a tax-exempt entity. On 21 May 1998, Acesite filed an administrative
claim for refund with the CIR but the latter failed to resolve the same. Thus on 29 May 1998, Acesite filed a petition with the Court of Tax Appeals
[hereafter, CTA] which was decided in this wise:
As earlier stated, Petitioner is subject to zero percent tax pursuant to Section 102 (b)(3) [now 106(A)(C)] insofar as its gross income from rentals
and sales to PAGCOR, a tax exempt entity by virtue of a special law. Accordingly, the amounts of P21,413,026.78 and P8,739,865.24, representing
the 10% EVAT on its sales of food and services and gross rentals, respectively from PAGCOR shall, as a matter of course, be refunded to the
petitioner for having been inadvertently remitted to the respondent.
Thus, taking into consideration the prescribed portion of Petitioners claim for refund of P98,743.40, and considering further the principle of solutio
indebiti which requires the return of what has been delivered through mistake, Respondent must refund to the Petitioner the amount of
P30,054,148.64 computed as follows:
Total amount per claim
30,152,892.02
Less Prescribed amount (Exhs A, X, & X-20)
January 1996
P 2,199.94
February 1996
26,205.04
March 1996
70,338.42
98,743.40
P30,054,148.64
vvvvvvvvvvvvvv
WHEREFORE, in view of all the foregoing, the instant Petition for Review is partially GRANTED. The Respondent is hereby ORDERED to
REFUND to the petitioner the amount of THIRTY MILLION FIFTY FOUR THOUSAND ONE HUNDRED FORTY EIGHT PESOS AND SIXTY FOUR
CENTAVOS (P30,054,148.64) immediately.
SO ORDERED.4
The Ruling of the Court of Appeals
Upon appeal by petitioner, the CA affirmed in toto the decision of the CTA holding that PAGCOR was not only exempt from direct taxes but was
also exempt from indirect taxes like the VAT and consequently, the transactions between respondent Acesite and PAGCOR were "effectively zerorated" because they involved the rendition of services to an entity exempt from indirect taxes. Thus, the CA affirmed the CTAs determination by
ruling that respondent Acesite was entitled to a refund of PhP 30,054,148.64 from petitioner.
The Issues
Hence, we have the instant petition with the following issues: (1) whether PAGCORs tax exemption privilege includes the indirect tax of VAT to
entitle Acesite to zero percent (0%) VAT rate; and (2) whether the zero percent (0%) VAT rate under then Section 102 (b)(3) of the Tax Code (now
Section 108 (B)(3) of the Tax Code of 1997) legally applies to Acesite.
The petition is devoid of merit.
In resolving the first issue on whether PAGCORs tax exemption privilege includes the indirect tax of VAT to entitle Acesite to zero percent (0%) VAT
rate, we answer in the affirmative. We will however discuss both issues together.
PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the payment of taxes. Section 13 of P.D. 1869
pertinently provides:
Sec. 13. Exemptions.
xxxx
(2) Income and other taxes. (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of
whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any
form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue
or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected
by any municipal, provincial, or national government authority.
xxxx
(b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the
payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to
corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in
connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or
other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the
Corporation or operator. (Emphasis supplied.)
Petitioner contends that the above tax exemption refers only to PAGCORs direct tax liability and not to indirect taxes, like the VAT.
We disagree.
A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with no distinction on whether the taxes are direct or
indirect. We are one with the CA ruling that PAGCOR is also exempt from indirect taxes, like VAT, as follows:
Under the above provision [Section 13 (2) (b) of P.D. 1869], the term "Corporation" or operator refers to PAGCOR. Although the law does not
specifically mention PAGCORs exemption from indirect taxes, PAGCOR is undoubtedly exempt from such taxes because the law exempts
from taxes persons or entities contracting with PAGCOR in casino operations. Although, differently worded, the provision clearly exempts
PAGCOR from indirect taxes. In fact, it goes one step further by granting tax exempt status to persons dealing with PAGCOR in casino
operations. The unmistakable conclusion is that PAGCOR is not liable for the P30,152,892.02 VAT and neither is Acesite as the latter is effectively
subject to zero percent rate under Sec. 108 B (3). R.A. 8424. (Emphasis supplied.)
Indeed, by extending the exemption to entities or individuals dealing with PAGCOR, the legislature clearly granted exemption also from indirect
taxes. It must be noted that the indirect tax of VAT, as in the instant case, can be shifted or passed to the buyer, transferee, or lessee of the goods,
properties, or services subject to VAT. Thus, by extending the tax exemption to entities or individuals dealing with PAGCOR in casino operations, it
is exempting PAGCOR from being liable to indirect taxes.
The manner of charging VAT does not make PAGCOR liable to said tax
It is true that VAT can either be incorporated in the value of the goods, properties, or services sold or leased, in which case it is computed as 1/11 of
such value, or charged as an additional 10% to the value. Verily, the seller or lessor has the option to follow either way in charging its clients and
customer. In the instant case, Acesite followed the latter method, that is, charging an additional 10% of the gross sales and rentals. Be that as it
may, the use of either method, and in particular, the first method, does not denigrate the fact that PAGCOR is exempt from an indirect tax, like VAT.
VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable for the payment of it as it is exempt in this
particular transaction by operation of law to pay the indirect tax. Such exemption falls within the former Section 102 (b) (3) of the 1977 Tax Code, as
amended (now Sec. 108 [b] [3] of R.A. 8424), which provides:
Section 102. Value-added tax on sale of services (a) Rate and base of tax There shall be levied, assessed and collected, a value-added tax
equivalent to 10% of gross receipts derived by any person engaged in the sale of services x x x; Provided, that the following services performed in
the Philippines by VAT-registered persons shall be subject to 0%.
xxxx
(b) Transactions subject to zero percent (0%) rated.
xxxx
(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a
signatory effectively subjects the supply of such services to zero (0%) rate (emphasis supplied).
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of such exemption to entities or individuals dealing
with PAGCOR in casino operations are best elucidated from the 1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons,
Inc.,5 where the absolute tax exemption of the World Health Organization (WHO) upon an international agreement was upheld. We held in said
case that the exemption of contractee WHO should be implemented to mean that the entity or person exempt is the contractor itself who
constructed the building owned by contractee WHO, and such does not violate the rule that tax exemptions are personal because the manifest
intention of the agreement is to exempt the contractor so that no contractors tax may be shifted to the contractee WHO. Thus, the proviso
in P.D. 1869, extending the exemption to entities or individuals dealing with PAGCOR in casino operations, is clearly to proscribe any indirect tax,
like VAT, that may be shifted to PAGCOR.
Acesite paid VAT by mistake
Considering the foregoing discussion, there are undoubtedly erroneous payments of the VAT pertaining to the effectively zero-rate transactions
between Acesite and PAGCOR. Verily, Acesite has clearly shown that it paid the subject taxes under a mistake of fact, that is, when it was not
aware that the transactions it had with PAGCOR were zero-rated at the time it made the payments. In UST Cooperative Store v. City of Manila,6 we
explained that "there is erroneous payment of taxes when a taxpayer pays under a mistake of fact, as for the instance in a case where he is not
aware of an existing exemption in his favor at the time the payment was made."7 Such payment is held to be not voluntary and, therefore, can be
recovered or refunded.8
Moreover, it must be noted that aside from not raising the issue of Acesites compliance with pertinent Revenue Regulations on exemptions during
the proceedings in the CTA, it cannot be gainsaid that Acesite should have done so as it paid the VAT under a mistake of fact. Hence, petitioners
argument on this point is utterly tenuous.
Solutio indebiti applies to the Government
Tax refunds are based on the principle of quasi-contract or solutio indebiti and the pertinent laws governing this principle are found in Arts. 2142
and 2154 of the Civil Code, which provide, thus:
Art. 2142. Certain lawful, voluntary, and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it
arises.
When money is paid to another under the influence of a mistake of fact, that is to say, on the mistaken supposition of the existence of a specific
fact, where it would not have been known that the fact was otherwise, it may be recovered. The ground upon which the right of recovery rests is
that money paid through misapprehension of facts belongs in equity and in good conscience to the person who paid it.9
The Government comes within the scope of solutio indebiti principle as elucidated in Commissioner of Internal Revenue v. Firemans Fund
Insurance Company, where we held that: "Enshrined in the basic legal principles is the time-honored doctrine that no person shall unjustly enrich
himself at the expense of another. It goes without saying that the Government is not exempted from the application of this doctrine." 10
Action for refund strictly construed; Acesite discharged the burden of proof
Since an action for a tax refund partakes of the nature of an exemption, which cannot be allowed unless granted in the most explicit and categorical
language, it is strictly construed against the claimant who must discharge such burden convincingly.11 In the instant case, respondent Acesite had
discharged this burden as found by the CTA and the CA. Indeed, the records show that Acesite proved its actual VAT payments subject to refund,
as attested to by an independent Certified Public Accountant who was duly commissioned by the CTA. On the other hand, petitioner never disputed
nor contested respondents testimonial and documentary evidence. In fact, petitioner never presented any evidence on its behalf.
One final word. The BIR must release the refund to respondent without any unreasonable delay. Indeed, fair dealing is expected by our taxpayers
from the BIR and this duty demands that the BIR should refund without any unreasonable delay what it has erroneously collected. 12
WHEREFORE, the petition is DENIED for lack of merit and the November 17, 2000 Decision of the CA is hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. 163445
December 18, 2007
ASIA INTERNATIONAL AUCTIONEERS, INC. and SUBIC BAY MOTORS CORPORATION, petitioners,
vs.
HON. GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue (BIR), THE REGIONAL
DIRECTOR, BIR, Region III, THE REVENUE DISTRICT OFFICER, BIR, Special Economic Zone, and OFFICE OF THE SOLICITOR
GENERAL, respondents.
DECISION
PUNO, C.J.:
At bar is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 79329 declaring the
Regional Trial Court (RTC) of Olongapo City, Branch 74, without jurisdiction over Civil Case No. 275-0-2003.
The facts are undisputed.
Congress enacted Republic Act (R.A.) No. 7227 creating the Subic Special Economic Zone (SSEZ) and extending a number of economic or tax
incentives therein. Section 12 of the law provides:
(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local
Government Code, the [SSEZ] shall be developed into a self-sustaining, industrial, commercial, financial and investment center to
generate employment opportunities in and around the zone and to attract and promote productive foreign investments;
(b) The [SSEZ] shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital
within, into and exported out of the [SSEZ], as well as provide incentives such as tax and duty-free importations of raw materials, capital
and equipment. However, exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine
territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the
Philippines;
(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed
within the [SSEZ]. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprise within the
[SSEZ] shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of
the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one
percent (1%) of the gross income earned by all business and enterprise within the [SSEZ] to be utilized for the development of
municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.
In case of conflict between national and local laws with respect to tax exemption privileges in the [SSEZ], the same shall be resolved in
favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and
maintained in the [SSEZ]; (emphasis supplied)
On January 24, 1995, then Secretary of Finance Roberto F. De Ocampo, through the recommendation of then Commissioner of Internal Revenue
(CIR) Liwayway Vinzons-Chato, issued Revenue Regulations [Rev. Reg.] No. 1-95,2 providing the "Rules and Regulations to Implement the Tax
Incentives Provisions Under Paragraphs (b) and (c) of Section 12, [R.A.] No. 7227, [o]therwise known as the Bases Conversion and Development
Act of 1992." Subsequently, Rev. Reg. No. 12-973 was issued providing for the "Regulations Implementing Sections 12(c) and 15 of [R.A.] No. 7227
and Sections 24(b) and (c) of [R.A.] No. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All Businesses and Enterprises Within
the Subic, Clark, John Hay, Poro Point Special Economic Zones and other Special Economic Zones under PEZA." On September 27, 1999, Rev.
Reg. No. 16-994 was issued "Amending [RR] No. 1-95, as amended, and other related Rules and Regulations to Implement the Provisions of
paragraphs (b) and (c) of Section 12 of [R.A.] No. 7227, otherwise known as the Bases Conversion and Development Act of 1992 Relative to the
Tax Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone."
On June 3, 2003, then CIR Guillermo L. Parayno, Jr. issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines
on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction." The
assailed portions of the RMC read:
II. Tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones and
subsequent sale thereof through public auction.Pursuant to existing revenue issuances, the following are the uniform tax treatments that are to
be adopted on the different transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones that
are subsequently sold through public auction:
A. Importation of motor vehicles into the freeport zones
1. Motor vehicles that are imported into the Freeport zones for exclusive use within the zones are, as a general rule, exempt from
customs duties, taxes and other charges, provided that the importer-consignee is a registered enterprise within such freeport zone.
However, should these motor vehicles be brought out into the customs territory without returning to the freeport zones, the customs
duties, taxes and other charges shall be paid to the BOC before release thereof from its custody.
xxx
3. For imported motor vehicles that are imported by persons that are not duly registered enterprises of the freeport zones, or that the
same are intended for public auction within the freeport zones, the importer-consignee/auctioneer shall pay the value-added tax (VAT)
and excise tax to the BOC before the registration thereof under its name with the LTO and/or the conduct of the public auction.
xxx
B. Subsequent sale/public auction of the motor vehicles
1. Scenario One The public auction is conducted by the consignee of the imported motor vehicles within the freeport zone
xxx
1.2. In case the consignee-auctioneer is a registered enterprise and/or locator not entitled to the preferential tax treatment or if
the same is entitled from such incentive but its total income from the customs territory exceeds 30% of its entire income
derived from the customs territory and the freeport zone, the income derived from the public auction shall be subjected to the
regular internal revenue taxes imposed by the Tax Code.
xxx
1.4. In the event that the winning bidder shall bring the motor vehicles into the customs territory, the winning bidder shall be
deemed the importer thereof and shall be liable to pay the VAT and excise tax, if applicable, based on the winning bid price.
However, in cases where the consignee-auctioneer has already paid the VAT and excise tax on the motor vehicles before the
registration thereof with LTO and the conduct of public auction, the additional VAT and excise tax shall be paid by winning
bidder resulting from the difference between the winning bid price and the value used by the consignee-auctioneer in payment
of such taxes. For excise tax purposes, in case the winning bid price is lower than the total costs to import,
reconditioning/rehabilitation of the motor vehicles, and other administrative and selling expenses, the basis for the computation
of the excise tax shall be the total costs plus ten percent (10%) thereof. The additional VAT and excise taxes shall be paid to
the BIR before the auctioned motor vehicles are registered with the LTO.
1.5 In case the services of a professional auctioneer is employed for the public auction, the final withholding tax of 25%, in
case he/she is a non-resident citizen or alien, or the expanded withholding tax of 20%, in case he/she is a resident citizen or
alien, shall be withheld by the consignee-auctioneer from the amount of consideration to be paid to the professional auctioneer
and shall be remitted accordingly to the BIR.
This was later amended by RMC No. 32-2003,5 to wit:
II. The imported motor vehicles after its release from Customs custody are sold through public auction/negotiated sale by the consignee
within or outside of the Freeport Zone:
A. The gross income earned by the consignee-seller from the public auction/negotiated sale of the imported vehicles shall be
subject to the preferential tax rate of five percent (5%) in lieu of the internal revenue taxes imposed by the National Internal
Revenue Code of 1997, provided that the following conditions are present:
1.That the consignee-seller is a duly registered enterprise entitled to such preferential tax rate as well as a registered
taxpayer with the Bureau of Internal Revenue (BIR).
2.That the total income generated by the consignee-seller from sources within the customs territory does not exceed
thirty percent (30%) of the total income derived from all sources.
B. In case the consignee-seller is a registered enterprise and/or locator not entitled to the preferential tax treatment or if the
same is entitled from such incentive but its total income from the customs territory exceeds thirty percent (30%) of its entire
income derived from the customs territory and the freeport zone, the sales or income derived from the public
auction/negotiated sale shall be subjected to the regular internal revenue taxes imposed by the Tax Code. The consignee-
seller shall also observe the compliance requirements prescribed by the Tax Code. When public auction or negotiated sale is
conducted within or outside of the freeport zone, the following tax treatment shall be observed:
1. Value Added Tax (VAT)/ Percentage Tax (PT) VAT or PT shall be imposed on every public auction or negotiated
sale.
2. Excise Tax The imposition of excise tax on public auction or negotiated sale shall be held in abeyance pending
verification that the importers selling price used as a basis by the Bureau of Customs in computing the excise tax is
correctly determined.
Petitioners Asia International Auctioneers, Inc. (AIAI) and Subic Bay Motors Corporation are corporations organized under Philippine laws with
principal place of business within the SSEZ. They are engaged in the importation of mainly secondhand or used motor vehicles and heavy
transportation or construction equipment which they sell to the public through auction.
Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being unconstitutional and
an ultra vires act. The complaint was docketed as Civil Case No. 275-0-2003 and raffled to Branch 74. Subsequently, petitioners filed their "First
Amended Complaint to Declare Void, Ultra Vires, and Unconstitutional [RMC] No. 31-2003 dated June 3, 2003 and [RMC] No. 32-2003 dated June
5, 2003, with Application for a Writ of Temporary Restraining Order and Preliminary Injunction" 6 to enjoin respondents from implementing the
questioned RMCs while the case is pending. Particularly, they question paragraphs II(A)(1) and (3), II(B)(1.2), (1.4) and (1.5) of RMC No. 31-2003
and paragraphs II(A)(2) and (B) of RMC No. 32-2003. Before a responsive pleading was filed, petitioners filed their Second Amended Complaint 7 to
include Rev. Reg. Nos. 1-95, 12-97 and 16-99 dated January 24, 1995, August 7, 1997 and September 27, 1999, respectively, which allegedly
contain some identical provisions as the questioned RMCs, but without changing the cause of action in their First Amended Complaint.
The Office of the Solicitor General (OSG) submitted its "Comment (In Opposition to the Application for Issuance of a Writ of Preliminary
Injunction)."8 Respondents CIR, Regional Director and Revenue District Officer submitted their joint "Opposition (To The Prayer for Preliminary
Injunction and/or Temporary Restraining Order by Petitioners)."9
Then Secretary of Finance Jose Isidro N. Camacho filed a Motion to Dismiss the case against him, alleging that he is not a party to the suit and
petitioners have no cause of action against him.10 Respondents CIR, BIR Regional Director and BIR Revenue District Officer also filed their joint
Motion to Dismiss on the grounds that "[t]he trial court has no jurisdiction over the subject matter of the complaint" and "[a] condition precedent, that
is, exhaustion of administrative remedies, has not been complied with."11 Petitioners filed their "Motion to Expunge from the Records the
Respondents[] Motion to Dismiss"12 for allegedly failing to comply with Section 4, Rule 15 of the Rules of Court. To this, the respondents filed their
Opposition.13
Meantime, BIR Revenue District Officer Rey Asterio L. Tambis sent a 10-Day Preliminary Notice 14 to the president of petitioner AIAI for unpaid VAT
on auction sales conducted on June 6-8, 2003, as per RMC No. 32-2003.
On August 1, 2003, the trial court issued its order15 granting the application for a writ of preliminary injunction. The dispositive portion of the order
states:
WHEREFORE, premises considered, petitioners application for the issuance of a writ of preliminary injunction is hereby GRANTED. Let
the writ issue upon the filing and approval by the court of an injunction bond in the amount of Php 1 Million.
SO ORDERED.16
Consequently, respondents CIR, the BIR Regional Director of Region III, the BIR Revenue District Officer of the SSEZ, and the OSG filed with the
CA a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction to enjoin the trial court from exercising jurisdiction over the case.17
Meantime, BIR Regional Director Danilo A. Duncano sent a Preliminary Assessment Notice 18 to the President of AIAI, informing him of the VAT due
from the company for the auction sales conducted on June 6-8, 2003 as per RMC No. 32-2003, plus surcharge, interest and compromise penalty.
Thereafter, a Formal Letter of Demand19 was sent to the President of petitioner AIAI by the Officer-in-Charge of the BIR Office of the Regional
Director.
On March 31, 2004, the CA issued its assailed decision, the dispositive portion of which states:
WHEREFORE, the petition is GRANTED. Public respondent Regional Trial Court, Branch 74, of Olongapo City is hereby declared bereft
of jurisdiction to take cognizance of Civil Case No. 275-0-2003. Accordingly, said Civil Case No. 275-0-2003 is hereby DISMISSED and
the assailed Order dated August 1, 2003, ANNULLED and SET ASIDE.
SO ORDERED.20
Hence, this Petition for Review on Certiorari21 with an application for a temporary restraining order and a writ of preliminary injunction to enjoin
respondents "from pursuing sending letters of assessments to petitioners." Petitioners raise the following issues:
[a] [W]hether a petition for certiorari under Rule 65 of the New Rules is proper where the issue raised therein has not yet been resolved
at the first instance by the Court where the original action was filed, and, necessarily, without first filing a motion for reconsideration;
[b] [W]hich Court- the regular courts of justice established under Batas Pambansa Blg. 129 or the Court of Tax Appeals is the proper
court of jurisdiction to hear a case to declare Revenue Memorandum Circulars unconstitutional and against an existing law where the
challenge does not involve the rate and figures of the imposed taxes;
[c] [D]ependent on an affirmative resolution of the second issue in favor of the regular courts of justice, whether the writ of preliminary
injunction granted by the Court at Olongapo City was properly and legally issued.22
Petitioners contend that there were fatal procedural defects in respondents petition for certiorari with the CA. They point out that the CA resolved
the issue of jurisdiction without waiting for the lower court to first rule on the issue. Also, respondents did not file a motion for reconsideration of the
trial courts order granting the writ of preliminary injunction before filing the petition with the CA.
The arguments are unmeritorious.
Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23 The issue is so basic that it may be raised at any stage
of the proceedings, even on appeal.24 In fact, courts may take cognizance of the issue even if not raised by the parties themselves.25 There is thus
no reason to preclude the CA from ruling on this issue even if allegedly, the same has not yet been resolved by the trial court.
As to respondents failure to file a motion for reconsideration, we agree with the ruling of the CA, which states:
It is now settled that the filing of a motion for reconsideration is not always sine qua non before availing of the remedy of
certiorari.26 Hence, the general rule of requiring a motion for reconsideration finds no application in a case where what is precisely being
assailed is lack of jurisdiction of the respondent court.27 And considering also the urgent necessity for resolving the issues raised herein,
where further delay could prejudice the interests of the government,28 the haste with which the Solicitor General raised these issues
before this Court becomes understandable.29
Now, to the main issue: does the trial court have jurisdiction over the subject matter of this case?
Petitioners contend that jurisdiction over the case at bar properly pertains to the regular courts as this is "an action to declare as unconstitutional,
void and against the provisions of [R.A. No.] 7227" the RMCs issued by the CIR. They explain that they "do not challenge the rate, structure or
figures of the imposed taxes, rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes." They claim
that the challenge on the authority of the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA).
Petitioners arguments do not sway.
R.A. No. 1125, as amended, states:
Sec. 7. Jurisdiction.The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue
Code or other laws or part of law administered by the Bureau of Internal Revenue; x x x (emphases supplied)
We have held that RMCs are considered administrative rulings which are issued from time to time by the CIR.30
Rodriguez v. Blaquera31 is in point. This case involves Commonwealth Act No. 466, as amended by R.A. No. 84, which imposed upon firearm
holders the duty to pay an initial license fee of P15 and an annual fee of P10 for each firearm, with the exception that in case of "bona fide and
active members of duly organized gun clubs and accredited by the Provost Marshal General," the annual fee is reduced to P5 for each firearm.
Pursuant to this, the CIR issued General Circular No. V-148 which stated that "bona fide and active members of duly organized gun clubs and
accredited by the Provost Marshal General shall pay an initial fee of fifteen pesos and an annual fee of five pesos for each firearm held on
license except caliber .22 revolver or rifle." The General Circular further provided that "[m]ere membership in the gun club does not, as a matter of
right, entitle the member to the reduced rates prescribed by law. The licensee must be accredited by the Chief of Constabulary [and] the firearm
covered by the license of the member must be of the target model in order that he may be entitled to the reduced rates." Rodriguez, as manager of
the Philippine Rifle and Pistol Association, Inc., a duly accredited gun club, in behalf of the members who have paid under protest the regular
annual fee ofP10, filed an action in the Court of First Instance (now RTC) of Manila for the nullification of the circular and the refund of P5. On the
issue of jurisdiction, plaintiff similarly contended that the action was not an appeal from a ruling of the CIR but merely an attempt to nullify General
Circular No. V-148, hence, not within the jurisdiction of the CTA. The Court, in finding this argument unmeritorious, explained:
We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of taxes and license fees to
adhere strictly to the interpretation given by the defendant to the statutory provision above mentioned, as set forth in the circular. The
same incorporates, therefore, a decision of the Collector of Internal Revenue (now Commissioner of Internal Revenue) on the manner of
enforcement of said statute, the administration of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within
the purview of [R.A.] No. 1125, section 7 of which provides that the [CTA] "shall exercise exclusive appellate jurisdiction to review by
appeal * * * decisions of the Collector of Internal Revenue in * * * matters arising under the National Internal Revenue Code or other law
or part of law administered by the Bureau of Internal Revenue." Besides, it is plain from plaintiffs original complaint that one of its main
purposes was to secure an order for the refund of the sums collected in excess of the amount he claims to be due by way of annual fee
from the gun club members, regardless of the class of firearms they have. Although the prayer for reimbursement has been eliminated
from his amended complaint, it is only too obvious that the nullification of General Circular No. V-148 is merely a step preparatory to a
claim for refund.
Similarly, in CIR v. Leal,32 pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue Code, as amended) which
states that "[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of their gross income. Lending investors shall pay a tax
equivalent to five (5%) per cent, of their gross income," the CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending
investors tax on pawnshops based on their gross income and requiring all investigating units of the BIR to investigate and assess the lending
investors tax due from them. The issuance of RMO No. 15-91 was an offshoot of the CIRs finding that the pawnshop business is akin to that of
"lending investors" as defined in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91 subjecting pawn tickets to
documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of Josefinas Pawnshop, asked for a reconsideration of both RMO
No. 15-91 and RMC No. 43-91, but the same was denied by petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo,
Rizal, seeking to prohibit petitioner CIR from implementing the revenue orders. The CIR, through the OSG, filed a motion to dismiss on the ground
of lack of jurisdiction. The RTC denied the motion. Petitioner filed a petition for certiorari and prohibition with the CA which dismissed the petition
"for lack of basis." In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the trial court and ordering the dismissal of the case
before the trial court, the Supreme Court held that "[t]he questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the
Commissioner implementing the Tax Code on the taxability of pawnshops." They were issued pursuant to the CIRs power under Section 245 33 of
the Tax Code "to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including ruling on the
classification of articles of sales and similar purposes." The Court held that under R.A. No. 1125 (An Act Creating the Court of Tax Appeals), as
amended, such rulings of the CIR are appealable to the CTA.
In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax
treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that "exportation or
removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the
Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the
National Internal Revenue Code,34 viz:
Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.-- The power to interpret the provisions of this
Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the
Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal
Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (emphases
supplied)
Petitioners point out that the CA based its decision on Section 7 of R.A. No. 1125 that the CTA "shall exercise exclusive appellate jurisdiction to
review by appeal" decisions of the CIR. They argue that in the instant case, there is no decision of the respondent CIR on any disputed
assessment to speak of as what is being questioned is purely the authority of the CIR to impose and collect value-added and excise taxes.
Petitioners failure to ask the CIR for a reconsideration of the assailed revenue regulations and RMCs is another reason why the instant case
should be dismissed. It is settled that the premature invocation of the court's intervention is fatal to one's cause of action. If a remedy within the
administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his
jurisdiction, then such remedy must first be exhausted before the courts power of judicial review can be sought. 35 The party with an administrative
remedy must not only initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before seeking
judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and
premature resort to the court. 36
Petitioners insistence for this Court to rule on the merits of the case would only prove futile. Having declared the court a quo without jurisdiction
over the subject matter of the instant case, any further disquisition would beobiter dictum.
IN VIEW WHEREOF, the petition is DENIED.
SO ORDERED.
Sandoval-Gutierrez, Corona, Azcuna, Leonardo-de Castro, JJ., concur.

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G.R. No.

L-41919-24 May 30, 1980

[G.R. No. 128315. June 29, 1999]

WHEREFORE, the petition is hereby GRANTED.

LUCAS G. ADAMSON, THERESE

is REVERSED and SET

ASIDE. CTA Case

G.R. No. 120935

- versus COURT OF APPEALS and

PUNO, C.J., Chairperson,

COURT OF APPEALS, COURT

In parallel circumstances, the following events preceded G.R. No. 124557:

WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT (FORMAL OR

G.R. No. 162155

April 15, 1998

May 14, 1998

BANK OF THE PHILIPPINE

G.R. No. 174942

BANK OF THE PHILIPPINE

PUNO, C.J., Chairperson,

1986 Deficiency Documentary Stamp Tax

Add: 25% surcharge

this constitutes the final decision of this office on the matter.[8]

This petition raises the following issues:

whether or not BPI was liable for the said taxes.

WERE THE OCTOBER 28, 1988

PHILIPPINE JOURNALISTS, INC.,

Davide, Jr., C.J. (Chairman),

December 16, 2004

The following revenue officials are authorized to sign the waiver.

In the National Office

For tax cases involving

In the Regional Offices

G.R. No. 178087

CARPIO, J., Chairperson,

KUDOS METAL CORPORATION,

Ruling of the Court of Tax Appeals, Second Division

For National Office cases

Assistant Commissioner (ACIR),

ACIR, Large Taxpayers Service

ACIR, Legal Service

ACIR, Assessment Service (AS)

For tax fraud and policy

The waivers failed to indicate the date of acceptance.

FISHWEALTH CANNING CORPORATION,

G.R. No. 179343

COMMISSIONER OF INTERNAL REVENUE,

PUNO, C.J., Chairperson,

CARPIO MORALES, J.:

G.R. No. L-11527

November 25, 1958

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

BAUTISTA ANGELO, J.:

Respondent filed its "tentative return".

November 28, 1946

Respondent filed its "final return".

Respondent filed its amended final return".

February 11, 1947

February 14, 1947

Receipt of respondent said assessment.

February 21, 1947

November 28, 1950

Petitioner demanded payment of tax assessed.

Respondent asked for reconsideration and reinvestigation of the assessment.