4/2/2017 G.R.No.

167146

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RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.167146October31,2006

COMMISSIONEROFINTERNALREVENUE,petitioner,
vs.
PHILIPPINEGLOBALCOMMUNICATION,INC.,respondent.

DECISION

CHICONAZARIO,J.:

ThisisaPetitionforReviewonCertiorari,underRule45oftheRulesofCourt,seekingtosetasidetheenbanc
DecisionoftheCourtofTaxAppeals(CTA)inCTAEBNo.37dated22February2005,1orderingthepetitionerto
withdraw and cancel Assessment Notice No. 000688807333 issued against respondent Philippine Global
Communication, Inc. for its 1990 income tax deficiency. The CTA, in its assailed enbanc Decision, affirmed the
Decision of the First Division of the CTA dated 9 June 20042 and its Resolution dated 22 September 2004 in
C.T.A.CaseNo.6568.

Respondent,acorporationengagedintelecommunications,fileditsAnnualIncomeTaxReturnfortaxableyear
1990on15April1991.On13April1992,theCommissionerofInternalRevenue(CIR)issuedLetterofAuthority
No. 0002307, authorizing the appropriate Bureau of Internal Revenue (BIR) officials to examine the books of
account and other accounting records of respondent, in connection with the investigation of respondents 1990
income tax liability. On 22 April 1992, the BIR sent a letter to respondent requesting the latter to present for
examinationcertainrecordsanddocuments,butrespondentfailedtopresentanydocument.On21April1994,
respondent received a Preliminary Assessment Notice dated 13 April 1994 for deficiency income tax in the
amount of P118,271,672.00, inclusive of surcharge, interest, and compromise penalty, arising from deductions
thatweredisallowedforfailuretopaythewithholdingtaxandinterestexpensesthatwerelikewisedisallowed.On
thefollowingday,22April1994,respondentreceivedaFormalAssessmentNoticewithAssessmentNoticeNo.
000688807333,dated14April1994,fordeficiencyincometaxinthetotalamountofP118,271,672.00.3

On6May1994,respondent,throughitscounselPonceEnrileCayetanoReyesandManalastasLawOffices,filed
aformalprotestletteragainstAssessmentNoticeNo.000688807333.Respondentfiledanotherprotestletteron
23 May 1994, through another counsel Siguion Reyna Montecillo & Ongsiako Law Offices. In both letters,
respondentrequestedforthecancellationofthetaxassessment,whichtheyallegedwasinvalidforlackoffactual
andlegalbasis.4

On 16 October 2002, more than eight years after the assessment was presumably issued, the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices received from the CIR a Final Decision dated 8 October 2002
denying the respondents protest against Assessment Notice No. 000688807333, and affirming the said
assessmentintoto.5

On15November2002,respondentfiledaPetitionforReviewwiththeCTA.Afterduenoticeandhearing,theCTA
renderedaDecisioninfavorofrespondenton9June2004.6TheCTAruledontheprimaryissueofprescription
andfounditunnecessarytodecidetheissuesonthevalidityandproprietyoftheassessment.Itdecidedthatthe
protestlettersfiledbytherespondentcannotconstitutearequestforreinvestigation,hence,theycannottollthe
running of the prescriptive period to collect the assessed deficiency income tax.7 Thus, since more than three
years had lapsed from the time Assessment Notice No. 000688807333 was issued in 1994, the CIRs right to
collectthesamehasprescribedinconformitywithSection269oftheNationalInternalRevenueCodeof19778
(TaxCodeof1977).Thedispositiveportionofthisdecisionreads:
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WHEREFORE, premises considered, judgment is hereby rendered in favor of the petitioner. Accordingly,
respondentsFinalDecisiondatedOctober8,2002isherebyREVERSEDandSETASIDEandrespondent
isherebyORDEREDtoWITHDRAWandCANCELAssessmentNoticeNo.000688807333issuedagainst
the petitioner for its 1990 income tax deficiency because respondents right to collect the same has
prescribed.9

TheCIRmovedforreconsiderationoftheaforesaidDecisionbutwasdeniedbytheCTAinaResolutiondated22
September 2004.10 Thereafter, the CIR filed a Petition for Review with the CTA en banc, questioning the
aforesaidDecisionandResolution.InitsenbancDecision,theCTAaffirmedtheDecisionandResolutioninCTA
CaseNo.6568.Thedispositivepartreads:

WHEREFORE, premises considered, the Petition for Review is hereby DISMISSED for lack of merit.
Accordingly,theassailedDecisionandResolutioninCTACaseNo.6568areherebyAFFIRMEDintoto.11

Hence,thisPetitionforReviewonCertiorariraisingthefollowinggrounds:

THECOURTOFTAXAPPEALS,SITTINGENBANC,COMMITTEDREVERSIBLEERRORINAFFIRMING
THE ASSAILED DECISION AND RESOLUTION IN CTA CASE NO. 6568 DECLARING THAT THE RIGHT
OFTHEGOVERNMENTTOCOLLECTTHEDEFICIENCYINCOMETAXFROMRESPONDENTFORTHE
YEAR1990HASPRESCRIBED

A.THEPRESCRIPTIVEPERIODWASINTERUPTEDWHENRESPONDENTFILEDTWOLETTERS
OF PROTEST DISPUTING IN DETAIL THE DEFICIENCY ASSESSMENT IN QUESTION AND
REQUESTING THE CANCELLATION OF SAID ASSESSMENT. THE TWO LETTERS OF PROTEST
ARE,BYNATURE,REQUESTSFORREINVESTIGATIONOFTHEDISPUTEDASSESSMENT.

B. THE REQUESTS FOR REINVESTIGATION OF RESPONDENT WERE GRANTED BY THE

BUREAUOFINTERNALREVENUE.12

ThisCourtfindsnomeritinthisPetition.

ThemainissueinthiscaseiswhetherornotCIRsrighttocollectrespondentsallegeddeficiencyincometaxis
barredbyprescriptionunderSection269(c)oftheTaxCodeof1977,whichreads:

Section269.Exceptionsastotheperiodoflimitationofassessmentandcollectionoftaxes.xxx

xxxx

c.Anyinternalrevenuetaxwhichhasbeenassessedwithintheperiodoflimitationaboveprescribedmay
becollectedbydistraintorlevyorbyaproceedingincourtwithinthreeyearsfollowingtheassessmentof
thetax.

The law prescribed a period of three years from the date the return was actually filed or from the last date
prescribedbylawforthefilingofsuchreturn,whichevercamelater,withinwhichtheBIRmayassessanational
internal revenue tax.13 However, the law increased the prescriptive period to assess or to begin a court
proceedingforthecollectionwithoutanassessmenttotenyearswhenafalseorfraudulentreturnwasfiledwith
theintentofevadingthetaxorwhennoreturnwasfiledatall.14Insuchcases,thetenyearperiodbegantorun
onlyfromthedateofdiscoverybytheBIRofthefalsity,fraudoromission.

IftheBIRissuedthisassessmentwithinthethreeyearperiodorthetenyearperiod,whicheverwasapplicable,
thelawprovidedanotherthreeyearsaftertheassessmentforthecollectionofthetaxduethereonthroughthe
administrative process of distraint and/or levy or through judicial proceedings.15 The threeyear period for
collectionoftheassessedtaxbegantorunonthedatetheassessmentnoticehadbeenreleased,mailedorsent
bytheBIR.16

Theassessment,inthiscase,waspresumablyissuedon14April1994sincetherespondentdidnotdisputethe
CIRs claim. Therefore, the BIR had until 13 April 1997. However, as there was no Warrant of Distraint and/or
LevyservedontherespondentsnoranyjudicialproceedingsinitiatedbytheBIR,theearliestattemptoftheBIR
tocollectthetaxduebasedonthisassessmentwaswhenitfileditsAnswerinCTACaseNo.6568on9January
2003,whichwasseveralyearsbeyondthethreeyearprescriptiveperiod.Thus,theCIRisnowprescribedfrom
collectingtheassessedtax.

The provisions on prescription in the assessment and collection of national internal revenue taxes became law
upontherecommendationofthetaxcommissionerofthePhilippines.Thereportsubmittedbythetaxcommission
clearlystatesthattheseprovisionsonprescriptionshouldbeenactedtobenefitandprotecttaxpayers:

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Under the former law, the right of the Government to collect the tax does not prescribe. However, in
fairnesstothetaxpayer,theGovernmentshouldbeestoppedfromcollectingthetaxwhereitfailedtomake
thenecessaryinvestigationandassessmentwithin5yearsafterthefilingofthereturnandwhereitfailedto
collectthetaxwithin5yearsfromthedateofassessmentthereof.Justasthegovernmentisinterestedin
the stability of its collections, so also are the taxpayers entitled to an assurance that they will not be
subjectedtofurtherinvestigationfortaxpurposesaftertheexpirationofareasonableperiodoftime.(Vol.
II,ReportoftheTaxCommissionofthePhilippines,pp.321322).17

Inanumberofcases,thisCourthasalsoclarifiedthatthestatuteoflimitationsonthecollectionoftaxesshould
benefitboththeGovernmentandthetaxpayers.Inthesecases,theCourtfurtherillustratedtheharmfuleffects
thatthedelayintheassessmentandcollectionoftaxesinflictsupontaxpayers.InCollectorofInternalRevenuev.
Suyoc Consolidated Mining Company,18 Justice Montemayor, in his dissenting opinion, identified the potential
losstothetaxpayeriftheassessmentandcollectionoftaxesarenotpromptlymade.

PrescriptionintheassessmentandinthecollectionoftaxesisprovidedbytheLegislatureforthebenefitof
boththeGovernmentandthetaxpayerfortheGovernmentforthepurposeofexpeditingthecollectionof
taxes,sothattheagencychargedwiththeassessmentandcollectionmaynottarrytoolongorindefinitely
totheprejudiceoftheinterestsoftheGovernment,whichneedstaxestorunitandforthetaxpayersothat
withinareasonabletimeafterfilinghisreturn,hemayknowtheamountoftheassessmentheisrequiredto
pay,whetherornotsuchassessmentiswellfoundedandreasonablesothathemayeitherpaytheamount
of the assessment or contest its validity in court x x x. It would surely be prejudicial to the interest of the
taxpayerfortheGovernmentcollectingagencytoundulydelaytheassessmentandthecollectionbecause
bythetimethecollectingagencyfinallygetsaroundtomakingtheassessmentormakingthecollection,the
taxpayermaythenhavelosthispapersandbookstosupporthisclaimandcontestthatoftheGovernment,
andwhatismore,thetaxisinthemeantimeaccumulatinginterestwhichthetaxpayereventuallyhastopay
.

In Republic of the Philippines v. Ablaza,19 this Court emphatically explained that the statute of limitations of
actionsforthecollectionoftaxesisjustifiedbytheneedtoprotectlawabidingcitizensfrompossibleharassment:

The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
GovernmentandtoitscitizenstotheGovernmentbecausetaxofficerswouldbeobligedtoactpromptlyin
the making of assessment, and to citizens because after the lapse of the period of prescription citizens
wouldhaveafeelingofsecurityagainstunscrupuloustaxagentswhowillalwaysfindanexcusetoinspect
thebooksoftaxpayers,nottodeterminethelattersrealliability,buttotakeadvantageofeveryopportunity
tomolest,peaceful,lawabidingcitizens.Withoutsuchlegaldefensetaxpayerswouldfurthermorebeunder
obligation to always keep their books and keep them open for inspection subject to harassment by
unscrupuloustaxagents.Thelawonprescriptionbeingaremedialmeasureshouldbeinterpretedinaway
conducive to bringing about the beneficient purpose of affording protection to the taxpayer within the
contemplationoftheCommissionwhichrecommendedtheapprovalofthelaw.

AndagainintherecentcaseBankofthePhilippineIslandsv.CommissionerofInternalRevenue,20thisCourt,in
confirmingtheseearlierrulings,pronouncedthat:

Thoughthestatuteoflimitationsonassessmentandcollectionofnationalinternalrevenuetaxesbenefits
both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against
unreasonableinvestigation.Theindefiniteextensionoftheperiodforassessmentisunreasonablebecause
itdeprivesthesaidtaxpayeroftheassurancethathewillnolongerbesubjectedtofurtherinvestigationfor
taxesaftertheexpirationofareasonableperiodoftime.

Thus, in Commissioner of Internal Revenue v. B.F. Goodrich,21 this Court affirmed that the law on prescription
shouldbeliberallyconstruedinordertoprotecttaxpayersandthat,asacorollary,theexceptionstothelawon
prescriptionshouldbestrictlyconstrued.

The Tax Code of 1977, as amended, provides instances when the running of the statute of limitations on the
assessment and collection of national internal revenue taxes could be suspended, even in the absence of a
waiver,underSection271thereofwhichreads:

Section224.Suspensionofrunningofstatute.TherunningofthestatuteoflimitationprovidedinSections268
and 269 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 Commissioner is
prohibitedfrommakingtheassessmentorbeginningdistraintorlevyoraproceedingincourtandforsixtydays
thereafterwhenthetaxpayerrequestsforareinvestigationwhichisgrantedbytheCommissionerwhen
thetaxpayercannotbelocatedintheaddressgivenbyhiminthereturnfileduponwhichataxisbeingassessed
orcollectedxxx.(Emphasissupplied.)

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Amongtheexceptionsprovidedbytheaforecitedsection,andinvokedbytheCIRasagroundforthispetition,is
the instance when the taxpayer requests for a reinvestigation which is granted by the Commissioner. However,
this exception does not apply to this case since the respondent never requested for a reinvestigation. More
importantly,theCIRcouldnothaveconductedareinvestigationwhere,asadmittedbytheCIRinitsPetition,the
respondentrefusedtosubmitanynewevidence.

RevenueRegulationsNo.1285,theProcedureGoverningAdministrativeProtestsofAssessmentoftheBureau
of Internal Revenue, issued on 27 November 1985, defines the two types of protest, the request for
reconsiderationandtherequestforreinvestigation,anddistinguishesonefromtheotherinthismanner:

Section6.Protest.Thetaxpayermayprotestadministrativelyanassessmentbyfilingawrittenrequestfor
reconsiderationorreinvestigationspecifyingthefollowingparticulars:

xxxx

Forthepurposeofprotestherein

(a) Request for reconsideration refers to a plea for a reevaluation of an assessment on the basis of
existingrecordswithoutneedofadditionalevidence.Itmayinvolvebothaquestionoffactoroflaworboth.

(b)Requestforreinvestigationreferstoapleaforreevaluationofanassessmentonthebasisofnewly
discovered evidence or additional evidence that a taxpayer intends to present in the investigation. It may
alsoinvolveaquestionoffactorlaworboth.

The main difference between these two types of protests lies in the records or evidence to be examined by
internal revenue officers, whether these are existing records or newly discovered or additional evidence. A re
evaluation of existing records which results from a request for reconsideration does not toll the running of the
prescriptionperiodforthecollectionofanassessedtax.Section271distinctlylimitsthesuspensionoftherunning
of the statute of limitations to instances when reinvestigation is requested by a taxpayer and is granted by the
CIR. The Court provided a clearcut rationale in the case of Bank of the Philippine Islands v. Commissioner of
InternalRevenue22explainingwhyarequestforreinvestigation,andnotarequestforreconsideration,interrupts
therunningofthestatuteoflimitationsonthecollectionoftheassessedtax:

Undoubtedly,areinvestigation,whichentailsthereceptionandevaluationofadditionalevidence,willtake
more time than a reconsideration of a tax assessment, which will be limited to the evidence already at
handthisjustifieswhytheformercansuspendtherunningofthestatuteoflimitationsoncollectionofthe
assessedtax,whilethelattercannot.

In the present case, the separate letters of protest dated 6 May 1994 and 23 May 1994 are requests for
reconsideration. The CIRs allegation that there was a request for reinvestigation is inconceivable since
respondent consistently and categorically refused to submit new evidence and cooperate in any reinvestigation
proceedings. This much was admitted in the Decision dated 8 October 2002 issued by then CIR Guillermo
Payarno,Jr.

Inthesaidconferencehearing,RevenueOfficerAlamedabasicallytestifiedthatPhilcom,despiterepeated
demands, failed to submit documentary evidences in support of its claimed deductible expenses. Hence,
exceptfortheitemofinterestexpensewhichwasdisallowedforbeingnotordinaryandnecessary,therest
oftheclaimedexpensesweredisallowedfornonwithholding.Inthesametoken,RevenueOfficerEscober
testifiedthatuponhisassignmenttoconductthereinvestigation,heimmediatelyrequestedthetaxpayerto
present various accounting records for the year 1990, in addition to other documents in relation to the
disalloweditems(p.171).Thiswasfollowedbyotherrequestsforsubmissionofdocuments(pp.199&217)
but these were not heeded by the taxpayer. Essentially, he stated that Philcom did not cooperate in his
reinvestigationofthecase.

InresponsetothetestimoniesoftheRevenueOfficers,PhilcomthruAtty.Consunji,emphasizedthatitwas
denieddueprocessbecauseoftheissuanceofthePreAssessmentNoticeandtheAssessmentNoticeon
successivedates.xxxCounselforthetaxpayerevenquestionedtheproprietyoftheconferencehearing
inasmuch as the only question to resolved (sic) is the legality of the issuance of the assessment. On the
disallowed items, Philcom thru counsel manifested that it has no intention to present documents and/or
evidencesallegedlybecauseofthependinglegalquestiononthevalidityoftheassessment.23

PriortotheissuanceofRevenueRegulationsNo.1285,whichdistinguishesarequestforreconsiderationanda
requestforreinvestigation,therehavebeencaseswhereinthesetwotermswereusedinterchangeably.Butupon
closerexamination,thesecasesallinvolvedareinvestigationthatwasrequestedbythetaxpayerandgrantedby
theBIR.

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InCollectorofInternalRevenuev.SuyocConsolidatedMiningCompany,24 the Court weighed the considerable

time spent by the BIR to actually conduct the reinvestigations requested by the taxpayer in deciding that the
prescriptionperiodwassuspendedduringthistime.

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
unfairforrespondenttonowtakeadvantageofsuchdesistancetoeludehisdeficiencyincometaxliability
totheprejudiceoftheGovernmentinvokingthetechnicalgroundofprescription.

AlthoughtheCourtusedtheterm"requestsforreconsideration"inreferencetotheletterssentbythetaxpayerin
thecaseofQuerolv.CollectorofInternalRevenue,25ittookintoaccountthereinvestigationconductedsoonafter
theseletterswerereceivedandtherevisedassessmentthatresultedfromthereinvestigations.

ItistruethattheCollectorrevisedtheoriginalassessmentonFebruary9,1955andappellantaversthat
this revision was invalid in that it was not made within the fiveyear prescriptive period provided by law
(Collector vs. Pineda, 112 Phil. 321). But that fact is that the revised assessment was merely a result of
petitioner Querols requests for reconsideration of the original assessment, contained in his letters of
December 14, 1951 and May 25, 1953. The records of the Bureau of Internal Revenue show that after
receivingtheletters,theBureauconductedareinvestigationofpetitionerstaxliabilities,and,infact,senta
tax examiner to San Fernando, La Union, for that purpose that because of the examiners report, the
Bureaurevisedtheoriginalassessment,xxx.Inotherwords,thereconsiderationwasgrantedinpart,and
theoriginalassessmentwasaltered.Consequently,theperiodbetweenthepetitionforreconsiderationand
therevisedassessmentshouldbesubtractedfromthetotalprescriptiveperiod(Republic vs. Ablaza, 108
Phil1105).

The Court, in Republic v. Lopez,26 even gave a detailed accounting of the time the BIR spent for each
reinvestigationinordertodeductitfromthefiveyearperiodsetatthattimeinthestatuteoflimitations:

ItisnowasettledruledinourjurisdictionthatthefiveyearprescriptiveperiodfixedbySection332(c)ofthe
InternalRevenueCodewithinwhichtheGovernmentmaysuetocollectanassessedtaxistobecomputed
from the last revised assessment resulting from a reinvestigation asked for by the taxpayer and (2) that
whereataxpayerdemandsareinvestigation,thetimeemployedinreinvestigatingshouldbedeductedfrom
thetotalperiodoflimitation.

xxxx

Thefirstreinvestigationwasgranted,andareducedassessmentissuedon29May1954,fromwhichdate
theGovernmenthadfiveyearsforbringinganactiontocollect.

The second reinvestigation was asked on 16 January 1956, and lasted until it was decided on 22 April
1960,oraperiodof4years,3months,and6days,duringwhichthelimitationperiodwasinterrupted.

TheCourtreiteratedtherulinginRepublicv.LopezinthecaseofCommissionerofInternalRevenuev.Sison,27
"thatwhereataxpayerdemandsareinvestigation,thetimeemployedinreinvestigatingshouldbedeductedfrom
the total period of limitation." Finally, in Republic v. Arcache,28 the Court enumerated the reasons why the
taxpayerisbarredfrominvokingthedefenseofprescription,oneofwhichwasthat,"Inthefirstplace,itappears
obvious that the delay in the collection of his 1946 tax liability was due to his own repeated requests for
reinvestigationandsimilarlyrepeatedrequestsforextensionoftimetopay."

Inthiscase,theBIRadmittedthattherewasnoneworadditionalevidencepresented.ConsideringthattheBIR
issueditsPreliminaryAssessmentNoticeon13April1994anditsFormalAssessmentNoticeon14April1994,
justonedaybeforethethreeyearprescriptionperiodforissuingtheassessmentexpiredon15April1994,ithad
ampletimetomakeafactuallyandlegallywellfoundedassessment.AddedtothefactthattheFinalDecisionthat
the CIR issued on 8 October 2002 merely affirmed its earlier findings, whatever examination that the BIR may
have conducted cannot possibly outlast the entire threeyear prescriptive period provided by law to collect the
assessed tax, not to mention the eight years it actually took the BIR to decide the respondents protest. The
factual and legal issues involved in the assessment are relatively simple, that is, whether certain income tax
deductionsshouldbedisallowed,mostlyforfailuretopaywithholdingtaxes.Thus,thereisnoreasontosuspend
therunningofthestatuteoflimitationsinthiscase.

The distinction between a request for reconsideration and a request for reinvestigation is significant. It bears
repetition that a request for reconsideration, unlike a request for reinvestigation, cannot suspend the statute of
limitationsonthecollectionofanassessedtax.Ifbothtypesofprotestcaneffectivelyinterrupttherunningofthe
statuteoflimitations,anerroneousassessmentmayneverprescribe.Ifthetaxpayerfailstofileaprotest,thenthe
erroneousassessmentwouldbecomefinalandunappealable.29Ontheotherhand,ifthetaxpayerdoesfilethe
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protestonapatentlyerroneousassessment,thestatuteoflimitationswouldautomaticallybesuspendedandthe
tax thereon may be collected long after it was assessed. Meanwhile the interest on the deficiencies and the
surchargescontinuetoaccumulate.Andforanunrestrictednumberofyears,thetaxpayersremainuncertainand
are burdened with the costs of preserving their books and records. This is the predicament that the law on the
statuteoflimitationsseekstoprevent.

TheCourt,insustainingforthefirsttimethesuspensionoftherunningofthestatuteoflimitationsincaseswhere
thetaxpayerrequestedforareinvestigation,gavethisjustification:

A taxpayer may be prevented from setting up the defense of prescription even if he has not previously
waiveditinwritingaswhenbyhisrepeatedrequestsorpositiveactstheGovernmenthasbeen,forgood
reasons,persuadedtopostponecollectiontomakehimfeelthatthedemandwasnotunreasonableor
thatnoharassmentorinjusticeismeantbytheGovernment.

xxxx

Thiscasehasnoprecedentinthisjurisdictionforitisthefirsttimethatsuchhasrisen,butthereareseveral
precedents that may be invoked in American jurisprudence. As Mr. Justice Cardozo has said: "The
applicableprincipleisfundamentalandunquestioned.Hewhopreventsathingfrombeingdonemay
not avail himself of the nonperformance which he himself occasioned, for the law says to him in
effect"thisisyourownact,andthereforeyouarenotdamnified."(R.H.StearnsCo.v.U.S.,78L.ed.,
647).(Emphasissupplied.)30

This rationale is not applicable to the present case where the respondent did nothing to prevent the BIR from
collectingthetax.ItdidnotpresenttotheBIRanynewevidenceforitsreevaluation.Attheearliestopportunity,
respondentinsistedthattheassessmentwasinvalidandmadecleartotheBIRitsrefusaltoproducedocuments
thattheBIRrequested.Ontheotherhand,theBIRalsocommunicatedtotherespondentitsunwaveringstance
thatitsassessmentiscorrect.Giventhatbothpartieswereatadeadlock,thenextlogicalstepwouldhavebeen
fortheBIRtoissueaDecisiondenyingtherespondentsprotestandtoinitiateproceedingsforthecollectionof
theassessedtaxand,thus,allowtherespondent,shoulditsochoose,tocontesttheassessmentbeforetheCTA.
Postponingthecollectionforeightlongyearscouldnotpossiblymakethetaxpayerfeelthatthedemandwasnot
unreasonable or that no harassment or injustice is meant by the Government. There was no legal, or even a
moral,obligationpreventingtheCIRfromcollectingtheassessedtax.Inasimilarcase,Corderov.Conda,31the
Courtdidnotsuspendtherunningoftheprescriptionperiodwheretheactsofthetaxpayerdidnotpreventthe
governmentfromcollectingthetax.

The government also urges that partial payment is "acknowledgement of the tax obligation", hence a
"waiveronthedefenseofprescription."Butpartialpaymentwouldnotpreventthegovernmentfromsuing
the taxpayer. Because, by such act of payment, the government is not thereby "persuaded to postpone
collection to make him feel that the demand was not unreasonable or that no harassment or injustice is
meant." Which, as stated in Collector v. Suyoc Consolidated Mining Co., et al., L11527, November 25,
1958,istheunderlyingreasonbehindtherulethatprescriptiveperiodisarrestedbythetaxpayersrequest
forreexaminationorreinvestigationevenif"hehasnotpreviouslywaivedit[prescription]inwriting."

TheCourtremindsus,inthecaseofCommissionerofInternalRevenuev.Algue,Inc.,32oftheneedtobalance
theconflictinginterestsofthegovernmentandthetaxpayers.

Taxesarethelifebloodofthegovernmentandsoshouldbecollectedwithoutunnecessaryhindrance.On
theotherhand,suchcollectionshouldbemadeinaccordancewithlawasanyarbitrarinesswillnegatethe
veryreasonforgovernmentitself.Itisthereforenecessarytoreconciletheapparentlyconflictinginterestof
the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of common
good,maybeachieved.

Thus,thethreeyearstatuteoflimitationsonthecollectionofanassessedtaxprovidedunderSection269(c)of
theTaxCodeof1977,alawenactedtoprotecttheinterestsofthetaxpayer,mustbegiveneffect.Inprovidingfor
exceptions to such rule in Section 271, the law strictly limits the suspension of the running of the prescription
periodto,amongotherinstances,protestswhereinthetaxpayerrequestsforareinvestigation.Inthiscase,where
thetaxpayermerelyfiledtwoprotestlettersrequestingforareconsideration,andwheretheBIRcouldnothave
conducted a reinvestigation because no new or additional evidence was submitted, the running of statute of
limitations cannot be interrupted. The tax which is the subject of the Decision issued by the CIR on 8 October
2002affirmingtheFormalAssessmentissuedon14April1994cannolongerbethesubjectofanyproceeding
for its collection. Consequently, the right of the government to collect the alleged deficiency tax is barred by
prescription.

INVIEWOFTHEFOREGOING,theinstantPetitionisDENIED.TheassailedenbancDecisionoftheCTAinCTA
EBNo.37dated22February2005,cancellingAssessmentNoticeNo.000688807333issuedagainstPhilippine

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GlobalCommunication,Inc.forits1990incometaxdeficiencyforthereasonthatitisbarredbyprescription,is
herebyAFFIRMED.Nocosts.

SOORDERED.

Panganiban,C.J.(Chairperson),YnaresSantiago,AustriaMartinez,andCallejo,Sr.,JJ.,concur.

Footnotes

1PennedbyAssociateJusticeJuanitoC.Castaeda,Jr.withPresidingJusticeErnestoD.Acosta,
AssociateJusticeErlindaP.Uy,AssociateJusticeLovellR.Baustista,AssociateJusticeOlgaPalanca
EnriquezandAssociateJusticeCaesarA.Casanova,concurring.Rollo,pp.2936.
2Id.at3745.

3Id.at3738.

4Id.at38.

5Id.at38.

6Id.at3745.

7Id.at44.

8TheCTAinadvertentlyreferredtothisprovisionasSection223,whichisthesectionwherethisprovision
fallsunderthepresenttaxcode,theNationalInternalRevenueCodeof1997.However,intheTaxCodeof
1977,asamended,whichwasthelawapplicabletothiscase,thisprovisionwasunderSection269,which
reads:

Section269.Exceptionsastotheperiodoflimitationofassessmentandcollectionoftaxes.xxx

xxxx

c.Anyinternalrevenuetaxwhichhasbeenassessedwithintheperiodoflimitationaboveprescribedmay
becollectedbydistraintorlevyorbyaproceedingincourtwithinthreeyearsfollowingtheassessmentof
thetax.
9Rollo,p.45.

10Id.at4753.

11Id.at35.

12Id.at15.

13Section268.Periodoflimitationuponassessmentandcollection.Exceptasprovidedinthe
succeedingsection,internalrevenuetaxesshallbeassessedwithinthreeyearsafterthelastday
prescribedbylawforthefilingofthereturn,andnoproceedingincourtwithoutassessmentforthe
collectionofsuchtaxesshallbebegunaftertheexpirationofsuchperiod:Provided,Thatinacasewherea
returnisfiledbeyondtheperiodprescribedbylaw,thethreeyearperiodshallbecountedfromthedaythe
returnwasfiled.Forthepurposesofthissection,areturnfiledbeforethelastdayprescribedbylawforthe
filingthereofshallbeconsideredasfiledonsuchlastday.
14Section269.Exceptionsastoperiodoflimitationsofassessmentandcollectionoftaxes.(a)Inthe
caseofafalseorfraudulentreturnwithintenttoevadeoroffailuretofileareturn,thetaxmaybe
assessed,oraproceedingincourtforthecollectionofsuchtaxmaybebegunwithoutassessment,atany
timewithintenyearsafterthediscoveryofthefalsity,fraudoromissionxxx.

15Section269.Exceptionsastotheperiodoflimitationofassessmentandcollectionoftaxes.xxx

xxxx

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(c)Anyinternalrevenuetaxwhichhasbeenassessedwithintheperiodoflimitationaboveprescribedmay
becollectedbydistraintorlevyorbyaproceedingincourtwithinthreeyearsfollowingtheassessmentof
thetax.
16BankofthePhilippineIslandsv.CommissionerofInternalRevenue,G.R.No.139736,17October2005,
473SCRA205,223.
17RepublicofthePhilippinesv.Ablaza,108Phil.1105,11071108(1960).

18104Phil.819,833834(1958).

19108Phil.1105,1108(1960).

20G.R.No.139736,17October2005,473SCRA205,225.

21363Phil.169,178(1999).

22G.R.No.139736,17October2005,473SCRA205,230231.

23Rollo,p.104

24104Phil.819,822823(1958).

25116Phil.615,618619(1962).

26117Phil.575,578(1963).

27117Phil.892,895(1963).

28119Phil.604,610(1964).

29RevenueRegulationsNo.1285providesthat:

Section7.WhentoFileProtestAprotestmustbefiledwithinthirty(30)daysfromreceiptofthe
assessment.

Section9.FinalityofAssessmentsIfataxpayerwhoreceivesanassessmentfromtheBureauofInternal
RevenuefailstofileaprotestwithintheperiodprescribedinSection7oftheseregulations,thesaid
assessmentshallbecomefinalandunappealableandthetaxpayeristherebyprecludedfromdisputingthe
assessment.
30CollectorofInternalRevenuev.SuyocConsolidatedMiningCompany,104Phil.819,823(1958).

31124Phil.927,932(1966).

32G.R.No.L18896,17February1988,158SCRA9,11.

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