CIR vs.

Western Pacific Corporation

G.R. No. L-18804 May 27, 1965

Facts:
Respondent was assessed for P3,731.00, as deficiency income tax for the year
1953 which was brought about by the disallowance of P8,265.82, listed in
respondent's return for 1953, as expense items, and P10,387.50, as written
off "bad debts." The assessment was received by respondent on the same
date (March 2, 1959). On March 5, 1959, the CIR wrote a letter of demand
for the payment of the amount, including a breakdown of said assessment.
Under date of June 29, 1959, respondent requested for non-assessment,
claiming that there has been prescription in making the assessment, that the
expense items and bad debts were allowable deduction. The Commissioner on
July 30, 1959 denied the same, and demanded for payment within 30 days
from receipt of said demand. On September 19, 1959, respondent requested
that it be permitted until September 25, 1959, to submit formal objections to
the assessment. The formal objections appearing in the letter of September
22, 1959, were identical to those of the June 29, 1959 communication. The
last letter of the Commissioner, dated October 28, 1959, among others,
requested payment of the assessment within 10 days from receipt.

Respondent appealed to the CTA, which absolved respondent but not based
on prescription.

Issue:
Whether or not the action has prescribed

Ruling: YES
The Court that the assessment made by the Commissioner should be
maintained, for the simple reason that when the petition for review was
brought to the CTA who no longer had jurisdiction to entertain the same. The
assessment had long become final. A petition for review should be presented,
within the reglementary period, which is 30 days from receipt of the
assessment. The 30 day period is jurisdictional. The assessment was received
on March 2, 1959. It was only on June 29, 1959, when said corporation
formally assailed the assessment, on the grounds of prescription in making
the assessment and the impropriety of the disallowance of the listed
deductions. From March 3 to June 29, 1959, manifestly more than the 30 days
had lapsed and the assessment became final, executory and demandable.
JUAREZ, Andrea B.

Failure to comply with the 30 day statutory period would bar appeal and
deprive the CTA of its jurisdiction. The decision of the CTA is set aside for
having been rendered without jurisdiction, the assessment in question having
been already final, executory and demandable before the petition for review
was presented.
1
 CIR vs. Primetown Property Group, Inc.,
GR 161155 August 28, 2007

Facts:
On March 11, 1999, Gilbert Yap, vice chair of Primetown Property Group, Inc.,
applied for the refund or credit of income tax respondent paid in 1997. 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. As a consequence, respondent suffered losses,
and it was, therefore, not liable for income taxes but still paid its quarterly
corporate income tax and remitted creditable withholding tax. Therefore,
respondent was entitled to tax refund or tax credit.

On May 13, 1999, revenue officer required respondent to submit additional

documents to support its claim. Respondent complied but its claim was not
acted upon. Thus, on April 14, 2000, it filed a petition for review in the CTA.

On December 15, 2000, the CTA dismissed the petition as it was filed beyond
the two-year prescriptive period and applied Article 13 of the Civil Code, CA
reversed and set aside the decision of the CTA.

Issue:
Whether or not Article 13 of the Civil Code should be applied in computing the
legal period

Ruling: NO
EO 292 (Administrative Code of 1987) should be applied as it is the more
recent law governing the computation of legal period. Both Article 13 of the
Civil Code and sec. 31 of the Administrative Code deal with the same subject
matter. Under the Civil Code a year is equivalent to 365 days regardless of
whether it is a leap year or not. According to the Admin Code, it is composed
of 12 calendar months, regardless of the number of days. In the present case,
the petition which was filed on April 14, 2000, was filed within the
reglementary period as it was filed in the last day of the 24 th calendar month
from the day it filed its final return.
JUAREZ, Andrea B.

2
 Republic of the Philippines vs. Marsman Development Company
G.R. No. L-18956 April 27, 1972

Facts:
On October 15, 1953 the Deputy Collector of Internal Revenue demanded
respondent (timber licensee) to pay forest charges due from May 18, 1950 to
September 30, 1953, and a surcharge of 25%. On September 13, 1954, after
further investigation another assessment was sent to the defendant
demanding sum of P45,541.66 representing deficiency sales tax, forest
charges, surcharges and penalties. On November 8, 1954 another assessment
was addressed for the payment of P456.12 as 25% surcharge for discharging
lumber without permit. The three assessments totalling P59,133.78 are the
subject matter. Defendant Corporation also protested, among others, the
sending of final notices and requested that they be countermanded or
withheld. Finding no merit in the protests of the defendant corporation, a
warrant of distraint and levy was issued against it by the BIR on July 3, 1956.
According to the Record on Appeal, and as additionally stated also by the trial
court, the original complaint filed on September 5, 1958 prayed for the
payment of only P13,695.96, and it was only in an amended complaint filed
on August 26, 1959 and admitted on September 23, 1959 that, for the first
time, the amount of P59,133.78 was judicially demanded to be paid.

Issue:
Whether or not the action was filed within the reglementary

Ruling: YES
The facts proven show that when Atty. Moya acknowledged receipt on
December 28, 1954, on behalf of appellant corporation, of the Bureau of
Internal Revenue's assessments of September 1954 and November 1954,
requesting for a reinvestigation, he was informed that his request for
investigation would not be given due course unless his client complied within
10 days from February 11, 1955, the date of the letter of the Bureau, with the
provisions of Department Order No. 213, dated November 2, 1954, which
required that requests for reinvestigation or reexamination of tax assessments
should be made in writing and under oath of the taxpayer concerned,
specifying the grounds relied upon and accompanied by the documents relied
upon as well as by the payment of one-half of the total assessments, plus a
bond to guarantee payment of the balance, but appellants failed to comply.
Respondent, by its own omission, made it impossible for the BIR to act on its
JUAREZ, Andrea B.

motion for reconsideration. Mere filing of such a motion does not suspend the
running of the period for the collection of the tax, which implies that any
assessment made by the Bureau is supposed to be final and executory, insofar
as the taxpayer is concerned.

3
 Butuan Sawmill, Inc. v. Court of Tax Appeals
G.R. No L-20601 February 28, 1966

Facts:
The BIR, upon investigation, ascertained that no sales tax return was filed by
the petitioner and neither did it pay the corresponding tax on the logs it sold
to Japanese firms. Respondent, on August 27, 1958, determined against
petitioner the sum of P40,004.01 representing sales tax, surcharge and
compromise penalty on its sales from January 1951 to June 1953 pursuant to
Sections 183, 186 and 209 of the National Internal Revenue Code. In
consequence of a reinvestigation, respondent, on November 6, 1958,
amended the amount of the previous assessment to P38,917.74 Subsequent
requests for reconsideration of the amended assessment having been denied
prompting petitioner to file the instant petition for review on November 7,
1960. The lower court upheld the legality and correctness of the amended
assessment of the sales tax and surcharge, ruling that the sales in question
were domestic or "local" sales, and, therefore, subject to sales tax under the
section 186 of the Tax Code, and that the assessment thereof was made well
within the ten-year period prescribed by Section 332(a) of the same Code,
since petitioner omitted to file its sales tax returns for the years 1951, 1952
and 1953, and this omission was discovered only on September 17, 1957.

Issue:
Whether or not the assessment was made within the prescriptive period

Ruling: YES
The petitioner failed to file a return for the disputed sales corresponding to
the years 1951, 1952 and 1953, and this omission was discovered only on
September 17, 1957, and that under Section 332(a) of the Tax Code
assessment thereof may be made within 10 years from and after the discovery
of the omission to file the return. According to a previous case decided by the
court, an income tax return cannot be considered as a return for compensating
tax for purposes of computing the period of prescription under Section 331 of
the Tax Code, and that the taxpayer must file a return for the particular tax
required by law in order to avail himself of the benefits of Section 331 of the
Tax Code; otherwise, if he does not file a return, an assessment may be made
within the time stated in Section 332(a) of the same Code.
JUAREZ, Andrea B.

4
 CIR vs. Kudos Metal Corporation
G.R. No. 178087 May 5, 2010

Facts:
Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the
taxable year 1998. BIR served respondent 3 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 in a letter dated October 20,
2000. Respondent accountant, executed 2 Waiver of the Defense of
Prescription. BIR issued a Preliminary Assessment Notice for the taxable year
1998 against the respondent followed by a Formal Letter of Demand with
Assessment Notices for taxable year 1998. BIR rendered a final Decision
requesting the immediate payment of the Respondents tax liabilities.
Respondent filed a Petition for Review with the CTA. CTA cancelled the
assessment notices issued against respondent for having been issued beyond
the prescriptive period. Petitioner moved for reconsideration but the CTA
Second Division denied the motion. On appeal, the CTA affirmed the
cancellation of the assessment notices. Petitioner sought reconsideration but
it was also denied.

Issue:
Whether or not the Governments right to assess the unpaid taxes has
prescribed

Ruling: YES
Section 203 of the 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. An assessment notice issued after the three-year prescriptive period is
no longer valid and effective. Exceptions however are provided under Section
222 of the NIRC. The waivers executed by respondents did not extend the
period within which the assessment can be made. The petitioner does not
deny that the assessment notices were issued beyond the 3-year prescriptive
period, but claims that the period was extended by the two waivers executed
by respondents accountant. 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 period. In the present case, the assessments were issues beyond the
JUAREZ, Andrea B.

period and 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 there is a detailed procedure for the proper execution
of the waiver, which the BIR must strictly follow.

5
 Rizal Commercial Banking Corporation vs. CIR
G.R. No. 170257 September 7, 2011

Facts:
Petitioner seasonably filed its Corporation Annual Income Tax Returns for
Foreign Currency Deposit Unit for the calendar years 1994 and 1995. On
August 15, 1996, RCBC received Letter of Authority issued by CIR authorizing
a special audit team to examine the books of accounts and other accounting
records for all internal revenue taxes from January 1, 1994 to December 31,
1995. On January 23, 1997, RCBC executed two Waivers of the Defense of
Prescription covering the internal revenue taxes due for the years 1994 and
1995, effectively extending the period of the BIR to assess up to December
31, 2000. Subsequently, on January 27, 2000, RCBC received a Formal Letter
of Demand together with Assessment Notices from the BIR for deficiency tax
assessments. Disagreeing with the assessment, RCBC filed a protest on
February 24, 2000 and submitted the relevant documentary evidence. On
November 20, 2000, it filed a petition for review before the CTA. On December
6, 2000, RCBC received another Formal Letter of Demand with Assessment
Notices dated October 20, 2000, following the reinvestigation, which
drastically reduced the original amount of deficiency taxes. RCBC paid the
deficiency taxes as assessed by the BIR but refused to pay the deficiency
onshore tax and documentary stamp tax. The CTA-En Banc 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. 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.

Issue:
Whether or not the petitioner, by paying the other tax assessment is rendered
estopped from questioning the validity of the said waivers with respect to the
assessment of deficiency onshore tax

Ruling: YES
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
JUAREZ, Andrea B.

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.
6
 Republic of the Philippines vs. Damian P. Ret
G.R. No. L-13754 March 31, 1962

Facts:
On February 23, 1949, Ret filed with the Bureau of Internal Revenue his ITR
for 1948, where he made it appear that his net income was only P2,252.53
with no income tax liability at all. The BIR found out later that the return was
fraudulent since Ret's income, derived from his sales totaled P94,198.76. The
BIR assessed him P34,907.33, as deficiency income tax for 1948, inclusive of
the 50% surcharge for rendering a false and/or fraudulent return.
Defendant Ret failed to file his Income Tax return for 1949. His income, as
assessed for tax purposes, showed a deficiency tax of P68,338.40 for 1949,
inclusive of the 50% surcharge. On January 13, 1951, the Collector demanded
for payment but Ret failed and/or refused to pay said amounts. On January
20, 1951, the Collector issued income tax assessment notices to Ret, urging
him to pay the sums mentioned, but with the same result. Upon
recommendation of the Collector, Ret was prosecuted was sentenced to pay a
fine. After his conviction, on September 21, 1957, the Republic filed the
present complaint for the recovery of Ret's deficiency taxes in the total sum
of P103,245.73, plus 5% surcharge and 1% monthly interest. Ret presented
a Motion to Dismiss on February 8, 1958, claiming that the "cause of action
had already prescribed".

Issue:
Whether or not the cause of action has already prescribed

Ruling: YES
The petitioner made the assessment on January 20, 1951 and had up to
January 20, 1956 to file the necessary action. It was only on September 5,
1957, that an action was filed in Court for the collection of alleged deficiency
income tax which was far beyond the 5-year period. The present case is not
for the recovery of civil liability arising from the offense of falsification; it is
for the collection of deficiency income tax. The provisions of Section 1, Rule
107 that "after a criminal action has been commenced, no civil action arising
from the same offense can be prosecuted", is not applicable. The said criminal
cases would not effect, one way or another, the running of the prescriptive
period for the commencement of the civil suit. The criminal actions are entirely
separate and distinct from the present civil suit. There is nothing in the law
which would have stopped the petitioner from filing this civil suit
JUAREZ, Andrea B.

simultaneously with or during the pendency of the criminal cases.

7
 Republic of the Philippines vs. Felix B. Acebedo
G.R. No. L-20477 March 29, 1968

Facts:
This is a suit for collection of deficiency income tax for the year 1948. The
corresponding notice of assessment was issued on September 24, 1949. The
complaint was filed on December 27, 1961. After the defendant filed his
answer but before trial started he moved to dismiss on the ground of
prescription. The court received evidence on the motion, and on September
1, 1962 issued an order finding the same meritorious and hence dismissing
the complaint. The present suit was not begun within five years after the
assessment of the tax, which was in 1949. The only evidence of such written
agreement, in the form of a "waiver of the statute of limitations" signed by
the defendant dated December 17, 1959.

Issue:
Whether or not the suit begun prior to the expiration of any period for
collection agreed upon in writing before the expiration of such 5-year period

Ruling:
A mere request for reinvestigation or reconsideration of an assessment does
not have the effect of such suspension, otherwise there would be no point to
the legal requirement that the extension of the original period be agreed upon
in writing. When a taxpayer asks for a reinvestigation of the tax assessment
issued to him and such reinvestigation is made, on the basis of which the
Government makes another assessment, the 5-year period with which an
action for collection may be commenced should be counted from this last
assessment. In the present case, the defendant, after receiving the
assessment notice of September 24, 1949, asked for a reinvestigation on
October 11, 1949. There is no evidence that this request was considered or
acted upon. On October 23, 1950 the then Collector issued a warrant of
distraint and levy for the full amount of the assessment at, but there was no
follow up of this warrant. Consequently, the request for reinvestigation did not
suspend the running of the period for filing an action for collection. Up to
October 4, 1955 the delay in collection could not be attributed to the defendant
at all. His requests had been unheeded until then, and there was nothing to
impede enforcement of the tax liability by any of the means provided by law.
By October 4, 1955, more than five years had elapsed since assessment in
question was made, and hence prescription had already set in, making
JUAREZ, Andrea B.

subsequent events in connection with the said assessment entirely immaterial.

Even the written waiver of the statute signed by the defendant on December
17, 1959 could no longer revive the right of action, for under the law such
waiver must be executed within the original five-year period within which suit
could be commenced.
8
 Republic of the Philippines vs. Benito H. Lopez
G.R. No. L-18007 March 30, 1963

Facts:
On 6 December 1950 Lopez filed his income tax return for 1950, for which an
assessment was issued by the BIR on 13 November 1952 demanding payment
of deficiency income tax. Lopez, through counsel, in a communication dated
30 November 1952, requested for reconsideration, which was eventually
reduced 29 May 1954. Defendant manifested in his letter of 1 July 1954 that
he will settle the obligation by the end of the month but on 9 July 1955,
pleaded for another reinvestigation, which was granted by the BIR. As a result,
an assessment was issued demanding payment but Lopez did not pay, despite
repeated demands. On 16 January and 11 February 1956, Lopez prayed for a
third reinvestigation which was granted by the BIR in its letter of 25 February
1956, provided he waives the statute of limitations. Instead of executing an
unconditional waiver, defendant imposed a deadline of 31 December 1957
within which the government should finish the third reinvestigation. Ignoring
the same, on 23 March 1960, the BIR issued an assessment. For non-
payment, a collection suit was filed with the court on 13 August 1960.

Issue:
Whether or not the time limit of 31 December 1957 is binding

Ruling: NO
The 5-year prescriptive period fixed by section 332 (c) of the IRC within which
the Government may sue to collect an assessed tax is to be counted from the
last revised assessment resulting from a reinvestigation asked for by the
taxpayer; and where a taxpayer demands a reinvestigation, the time
employed in reinvestigation should be deducted from the total period of
limitation. When action was brought by the Republic, the prescriptive period
of 5 years had not elapsed from the revision of 1954. If from the period that
intervened between the first revised assessment and the filing of the
complaint is deducted the time consumed in considering and deciding the
taxpayer's subsequent petition for reconsideration and reinvestigation it will
be seen that less than 5 years can be counted against the Government. The
fixing by the taxpayer of a prescriptive period operates to reduce the time
available to the government for the collection of the tax from 29 May 1954 to
31 December 1957 only, which is much less than the 5 years prescribed by
law. Even though of the court disregard the lack of written conformity thereto
JUAREZ, Andrea B.

by the Collector, it is seriously to be doubted that the said official could validly
agree to reduce the prescriptive period to less than that granted by law to the
detriment of the state, since it diminishes the opportunities of collecting taxes
due to the Republic.

9
 Republic of the Philippines vs. Rita Lim de Yu
G.R. No. L-17438 April 30, 1964

Facts:
Rita Lim de Yu filed her yearly income tax returns from 1948 through 1953.
The BIR assessed the taxes due on each return, and appellee paid them
accordingly. On July 17, 1956 the Bureau issued to appellee deficiency income
tax assessments for the years 1945 to 1953, to which she protested the
assessments and requested a reinvestigation. On August 30, 1956 she signed
a "waiver" of the statute of limitations under the Tax Code as condition to the
reinvestigation requested. On July 18, 1958, the Bureau issued to her income
tax assessment notices for the years 1948 to 1953. This last assessment
covered not only the basic deficiency income taxes, but also 50% thereof as
surcharge. Upon appellee's failure to pay, an action for collection was filed
against her on May 11, 1959. Trial court dismissed, and the Government
appealed to the Court of Appeals, which forwarded the case to this Court.

Issue:
Whether or not the right to collect the deficiency has already prescribed

Ruling: YES
Republic claims that the returns filed are false or fraudulent because the yearly
net incomes reported in her returns are much less than as computed by the
Bureau, and consequently, under par. (a), Section 332 of the Tax Code, it has
ten years from the date of the discovery of the fraud or falsity within which to
assess the taxes or file a suit for collection without assessment. And since, it
is further contended, appellee can no longer question correctness of the
assessment in view of her failure to ask the Court of Tax Appeals to review
the same, she should be ordered to pay the amounts being collected. But while
fraud is alleged in the complaint, the same has not been established. Fraud
not having been proven, the period of limitation for assessment or collection
was five years from the filing of the return. The right to assess or collect the
income taxes for the years 1948 to 1950 had already prescribed when the BIR
issued the deficiency income tax assessments on July 17, 1956. The tax years
1948 to 1950 cannot be deemed included in the "waiver of the statute of
limitations under the National Internal Revenue Code" executed. The five-year
period for assessment, counted from the date the return is filed, may be
extended upon agreement of the Commissioner and the taxpayer, but such
agreement must be made before, not after, the expiration of the original
JUAREZ, Andrea B.

period. The waiver validly covers only the tax years 1951 and 1952, with
respect to which the five-year period had not yet elapsed when the said waiver
was executed.

10
 Republic of the Philippines vs. Heirs of Cesar Jalandoni
G.R. No. L-18384 September 20, 1965

Facts:
Isabel Ledesma died intestate. On November 19, 1948, Cesar Jalandoni, one
of the heirs, filed an estate and inheritance tax return and on the basis of
such, the BIR made an assessment on November 20, 1948 calling for the
payment of estate and inheritance taxes, respectively, stating that the
assessment was "to be considered partial pending investigation of the return."
These sums were paid by Cesar Jalandoni. After a preliminary investigation
was made, another demand was made on Bernardino Jalandoni stating the
same, which were paid by Bernardino Jalandoni on February 28, 1953. True
to the foregoing reservation, the BIR conducted another investigation found
that the market value was underdeclared, 7 lots were omitted from the return,
and the shares of stock were underdecalred.

Issue:
Whether or not the returns were false or fraudulent

Ruling: NO
From the report of Examiner, it may be gleaned that of the seven lots alleged
to have been excluded from the return, three were actually included, with the
particularity that they were the most valuable. The three lots were already
declared in the return submitted by Bernardino Jalandoni as part of his
property and his wife for purposes of income tax, there is reason to believe
that their omission from the return submitted by Cesar Jalandoni was merely
due to an honest mistake or inadvertence as properly explained by appellants.
The same thing may be said with regard to the alleged undervaluation of
certain sugar and rice lands reported. The deficiency assessment, moreover,
was made by the Collector of Internal Revenue more than five years from the
filing of the return, and experience shows that such an intervening period is
sufficiently long to, warrant an increase in value of real estate which is
precisely what was found by the Collector of Internal Revenue with regard to
the lands in question. It is certainly an error to impute fraud based on an
honest difference of opinion. Having reached the conclusion that the heirs of
the deceased have not committed any act indicative of an intention to evade
the payment of the inheritance or estate taxes due the government, as
evidenced by their willingness in the past to pay all the taxes properly
assessed against them, it is evident that the instant claim of appellee has
JUAREZ, Andrea B.

already prescribed under Section 331 of the National Internal Revenue Code.

11
Republic of the Philippines vs. Limaco & De Guzman Commercial Co.
G.R. No. L-13081 August 31, 1962

Facts:
In 1946, Respondents was engaged in the importation of cigarettes. To
guarantee payment of the revenue taxes due to the government, the
respondent and the Visayan Surety & Insurance Corporation, as surety,
executed two importers Bonds holding themselves jointly and severally liable
to pay the said sum. On July 15, 1946, respondent paid to the Bureau of
Customs the sum on account of said tax which were, however dishonored by
the bank, for lack of funds, and returned to the maker. On June 17, 1948, the
Collector demanded the payment of deficiency specific tax, due on the
imported cigarette. On February 18, 1953, Republic filed a complaint praying
for the forfeiture of the bonds and payment plus interest. On March 7, 1953,
the surety filed its answer, disclaiming its liability under the bonds, contesting
the validity of the assessment and invoking the defense of estoppel and
prescription. On February 5, 1954 the respondent filed its answer, contesting
the validity of the tax assessment, on the ground of prescription.

Issue:
Whether or not the action has prescribed

Ruling: NO
According to section 306 of the Tax Code, a taxpayer must first file "a claim
for refund or tax credit with the Collector of Internal Revenue", before
maintaining a suit or proceeding in any court for the recovery of any internal
revenue tax alleged to have been erroneously or illegally assessed or
collected, which is mandatory and a condition precedent to the prosecution of
a suit for the recovery of taxes said to have been erroneously or illegally
collected, the non-compliance of which bars the action, nay, it subjects the
claim to dismissal, for lack of cause of action. The letter dated March 14, 1955
cannot be considered as claim for refund, because it merely informed the
Collector that it was tendering payment. The law governing an action for the
recovery of taxes is section 306 of the Tax Code, whether or not the recovery
is by counterclaim or a separate action. Under the Tax Code, the collection of
the tax summary methods or by judicial action shall be effected within 5 years
after the assessment of the tax. The assessment in question was issued on
June 17, 1948. When the Collector of Internal Revenue received information
from the Bureau of Customs that the said sum was not paid, he immediately
JUAREZ, Andrea B.

issued a letter demanding the payment. It was then that the unpaid specific
tax was deemed to have been assessed. Moreover, the present case is
essentially one to collect on the bonds which is an action separate and distinct
from an action to collect taxes.

12
 CIR vs. Ayala Securities Corporation
G.R. No. L-29485 November 21, 1980

Facts:
On November 29, 1955, respondent filed its ITR with the office of the
petitioner for its fiscal year which ended on September 30, 1955 with
attachment of audited financial statements of the respondent showing a
surplus. The income tax due on the return was duly paid for within the time
prescribed by law. In a letter dated February 21, 1961, petitioner advised the
respondent of the assessment of its accumulated surplus reflected on its
income tax return for the fiscal year which ended September 30, 1955. The
respondent, in a letter dated April 19, 1961, protested against the assessment
on its retained and accumulated surplus pertaining to the taxable year 1955
and sought reconsideration. On May 30, 1961, petitioner wrote respondent
with the request for reconsideration will be the subject matter of further
reinvestigation upon the execution of your client of the enclosed form for
waiver of the defense of prescription which the respondent did not execute,
claiming the defense of prescription. On February 21, 1963, respondent
received a letter requesting for the payment within 5 days from receipt of the
said letter. Believing the letter to be a denial of its protest, the herein
respondent corporation filed with the Court of Tax Appeals a Petition for
Review of the assessment.

Issue:
Whether or not the action has prescribed

Ruling: YES
The letter of February 18, 1963 is tantamount to a denial of the
reconsideration or protest of the respondent corporation on the assessment
made by the petitioner. Under Section 46(d) of the NIRC, the Ayala Securities
Corporation designated September 30, 1955, as the last day of the closing of
its fiscal year, and under Section 46(b) the ITR for the said corporation shall
be filed on or before the fifteenth (15th) day of the fourth (4th) month
following the close of its fiscal year. The Ayala Securities Corporation could,
therefore, file its income tax returns on or before January 15, 1956. The
assessment by the CIR shall be made within 5 years from January 15, 1956,
or not later than January 15, 1961, in accordance with Section 331 of the
NIRC. As the assessment issued on February 21, 1961, which was received by
the Ayala Securities Corporation on March 22, 1961, was made beyond the 5-
JUAREZ, Andrea B.

year period prescribed under Section 331, the same was made after the
prescriptive period had expired and, therefore, was no longer binding on the
Ayala Securities Corporation.

13
 Philippine Refining Company vs. Court of Appeals
G.R. No. 118794 May 8, 1996

Facts:
Petitioner PRC was assessed by respondent CIR to pay a deficiency tax for the
year 1985 in the amount of P1,892,584.00 which was timely protested by on
April 1989, on the ground that it was based on the erroneous disallowances
of bad debts and interest expense although the same are both allowable and
legal deductions. Respondent issued a warrant of garnishment against the
deposits of petitioner. Petitioner filed a petition for review with the CTA on the
same assignment of error. CTA modified the findings by reducing the
deficiency income tax assessment to P237,381.26, with surcharge and
interest. Petitioner elevated the case to Court of Appeals which denied due
course to the petition for review and dismissed the same on August 24, 1994.
Petitioner further argues that the imposition of the 25% surcharge and the
20% delinquency interest due to delay in its payment of the tax assessed is
improper and unwarranted, considering that the assessment of the
Commissioner was modified by the CTA and the decision of said court has not
yet become final and executory.

Issue:
Whether or not the petitioner is liable for surcharges and interests

Ruling: YES
Section 248 of the Tax Code provides that there shall be imposed, in addition
to the tax required to be paid, a penalty equivalent to 25% of the amount due
if there is failure to pay the tax within the time prescribed for its payment.
With respect to the penalty of 20% interest, Section 249 provides that
there shall be assessed and collected on any unpaid amount of tax, interest
at the rate of 20% per annum, or such higher rate as may be prescribed by
regulations, from the date prescribed for payment until the amount is fully
paid. The deficiency tax assessment should have been paid within 30 days
from receipt. By reason of petitioners default thereon, the delinquency
penalties of 25% surcharge and interest of 20% accrued from April 11, 1989.
The fact that petitioner appealed the assessment to the CTA and that the same
was modified does not relieve petitioner of the penalties incident to
delinquency. The reduced amount of P237,381.25 is but a part of the original
assessment of P1,892,584.00.
JUAREZ, Andrea B.

It is mandatory to collect penalty and interest at the stated rate in case of

delinquency. The intention of the law is to discourage delay in the payment of
taxes due the Government and, in this sense, the penalty and interest are not
penal but compensatory for the concomitant use of the funds by the taxpayer
beyond the date when he is supposed to have paid them to the Government.
14
Commissioner of Internal Revenue vs. Republic Cement Corporation
G.R. No. L-35668-72, L-35683 August 10, 1983

Facts:
Respondents are domestic corporations engaged in the manufacture of
cement. On separate dates, petitioner Commissioner of Internal Revenue
issued assessments against the respondents for deficiency sales tax and
surcharge due as manufacturers of cement. Respondents argue that cement
is a mineral product, the sale of which is exempt from sales tax. CIR ruled
that cement is a "manufactured product" and therefore subject to sales tax.
On appeal, this ruling was overruled by the CTA which adjudged cement to be
a "mineral product" within the meaning of Section 246 of the Tax Code and
consequently exempt from sales tax under Section 188 (c) of the same Code,
as said laws stood at the time of the questioned assessments. A 25%
surcharge was imposed due to delinquency.

Issue:
Whether or not respondent is liable for surcharges

Ruling: NO
The assessments are not undisputed or indisputable. The dispute as to the tax
liability of private respondents for sales tax on the sale of cement arose not
simply because of ordinary divergence of views in good faith vis-a-vis the
interpretation of the law.

JUAREZ, Andrea B.

15
 Commissioner of Internal Revenue vs. Air India
G.R. No. 72443 January 29, 1988

Facts:
Air India is a foreign corporation organized under the laws of India. It is not
licensed to do business in the Philippines as an international carrier. It is
represented in the Philippines by its general sales agent, Philippine Air Lines,
which sells airplane tickets in the Philippine through this agent. These tickets
are serviced by Air India airplanes outside the Philippines. The total sales of
airplane tickets transacted by Philippine Air Lines, Inc. for the private
respondent during the fiscal year ending March 31, 1976 amounted to
P2,968,156.00. On account of the same, CIR held the private respondent
liable for the payment of P142,471.68.
From the action taken by the petitioner, the private respondent brought an
Appeal to the Court of Tax Appeals. 2 The thrust of the Appeal is, inter alia,
that the private respondent cannot be held liable to pay the said imposition
because it did not derive any income from sources with the Philippines during
the said fiscal year and that the amount of P2,968,156.00 mentioned in the
assessment made by the petitioner was derived exclusively from sources
outside the Philippines.

On the other hand, the petitioner argued that the amount of P2,968,156.00
was realized in the Philippines and was, therefore, derived from sources within
the Philippines. Petitioner also stressed that in case of any doubt, the
presumption is that the tax assessment is correct.

Issue:
Whether or not the revenue derived by an international air carrier from sales
of tickets in the Philippines for air transportation, while having no landing
rights in the country, constitutes income of the said international air carrier
from Philippine sources

Ruling: YES
The definition of gross income is broad and comprehensive to include
proceeds from sales of transport documents.

The source of an income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the
Philippines, it is sufficient that the income is derived from activity within the
JUAREZ, Andrea B.

Philippines.

16
 CIR vs. Court of Appeals and Dagupan Combined Commodities et al.
G.R. No. 119322 June 4, 1996

Facts:
The CIR Revenue issued a Revenue Memorandum Circular No. 37-93
reclassifying best selling cigarettes bearing the brands Hope, More, and
Champion as cigarettes of foreign brands subject to a higher rate of tax.
Respondent Fortune questioned the validity of the reclassification of said
brands of cigarettes as violative of its right to due process and equal protection
of law. The CTA ruled that the reclassification is of doubtful legality and
enjoined its enforcement. The CIR assessed against Fortune the total amount
of P7M representing deficiency income, ad valorem and value-added tax for
the year 1992 with the request that the said amount be paid within thirty (30)
days upon receipt. Fortune on September 17, 1993 moved for reconsideration
of the assessments. The CIR filed a complaint with the DOJ against respondent
Fortune for alleged fraudulent tax evasion for supposed non-payment by
Fortune of the correct amount of income tax, ad valorem tax and value-added
tax for the year 1992, alleging that Fortune declared a net taxable income of
P183M and an income tax due of P64M. Based mainly on documentary
evidence submitted by the taxpayer itself, these declarations are false and
fraudulent because the correct taxable income of the corporation for the said
year is P1B. This underdeclaration resulted in the evasion of the amount of
P723M as deficiency income tax.

Issue:
Whether or not there is fraudulent tax evasion

Ruling: NO
Fraud cannot be presumed. If there was fraud or wilful attempt to evade
payment of ad valorem taxes by private respondents through the manipulation
of the registered wholesale price of the cigarettes, it must have been with the
connivance or cooperation of certain BIR officials and employees who
supervised and monitored Fortunes production activities to see to it that the
correct taxes were paid. But there is no allegation, much less evidence, of BIR
personnels malfeasance. In the very least, there is the presumption that the
BIR personnel performed their duties in the regular course in ensuring that
the correct taxes were paid by Fortune.
JUAREZ, Andrea B.

17
 Lucas Adamson vs. Court of Appeals
G.R. No. 120935 May 21, 2009

Facts:
On June 20, 1990, petitioner sold 131,897 common shares of stock in AAI to
APAC valued at P7,789,995.00. On June 22, 1990, P159,363.21 was paid as
capital gains tax for the transaction. On October 12, 1990, AMC sold to APAC
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 CIR 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. Petitioners file a Petition for Review with the CTA,
but the CIR moved to dismiss on the ground that it was premature, as she
had not yet issued a formal assessment. CTA denied the Motion and
considered the criminal complaint filed by the CIR as an implied formal
assessment.

Issue:
1. Whether or not the CIR issued an assessment
2. Whether or not a criminal prosecution for tax evasion be preceded by a
deficiency tax assessment

Ruling:
1. NO - 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 information.
2. YES - 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
JUAREZ, Andrea B.

AAI shares, first to APAC and then to APAC Philippines, Limited. The
examiners also found that the VAT had not been paid for VAT-liable 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.
18
 CIR vs. National Labor Relations Commission
G.R. No. 74965 November 9, 1994

Facts:
On January 12, 1984 the CIR sent two letters of demand to the respondent
Maritime Company of the Philippines for deficiency common carrier's tax, fixed
tax, 6% Commercial Broker's tax, documentary stamp tax, income tax and
withholding taxes in the total amount of P17,284,882.45 which became final
and executory as private respondent did not contest it. But as private
respondent did not pay its tax liability either, the CIR issued warrants of
distraint of personal property and levy of real property of private respondent.
On April 16, 1985 a "Receipt for Goods, Articles, and Things Seized under
Authority of the National Internal Revenue Code" was executed, which is
required by NIRC as proof of the constructive distraint of property. 4 of the
barges placed under constructive distraint were levied upon execution by
respondent deputy sheriff to satisfy a judgment for unpaid wages and other
benefits of employees.

Issue:
Whether or not the warrant of distraint served is valid

Ruling: YES
In case the taxpayer or the person having the possession and control of the
property sought to be placed under constructive distraint refuses or fails to
sign the receipt herein referred to, the revenue officer effecting the
constructive distraint shall proceed to prepare a list of such property and in
the presence of two witnesses leave a copy thereof in the premises where the
property distrained is located, after which the said property shall be deemed
to have been placed under constructive distraint. Labor Arbiter nevertheless
held that there was no valid distraint of personal property on the ground that
the receipt of property distrained had not been signed by the taxpayer as
required above.

The "Notice of Seizure of Personal Property," a copy of which was received by

Atty. Redentor R. Melo in behalf of Maritime Company of the Philippines,
together with the receipt of the Coast Guard, belies the claim of respondent
deputy sheriff that when he levied upon the four barges there was no
indication that the barges had previously been placed under distraint by the
CIR.
JUAREZ, Andrea B.

19
 Tranquilino Rovero vs. Rafael Amparo
G.R. No. L-5482 May 5, 1952

Facts:
Rovero arrived at the Makati Air Port on board a PAL plane which came from
Bangkok, Siam. He brought with him several pieces of baggage, among which
was a Chinese vase which he declared and valued at P15. In the course of the
examination of the vase, it was found that it had a false bottom which upon
being broken open was seen to hold a tin can containing 259 pieces of jewelry
with precious stones, which the Customs officials appraised at P23,736.
Rovero was found guilty of violating section 2703 of the Revised
Administrative Code. After promulgation of the decision of the Supreme Court,
Rovero wrote to the Commissioner of Customs a letter petitioning for a
reappraisal of said jewelry who forwarded the papers to the Secretary of
Finance requesting information as to whether the original appraisement of
P23,736 of the jewelry involved, which appraisal the Commissioner found to
be excessive, may be set aside and the reappraisement made by the
Committee considered in the determination of the duties and fines that Rovero
had to pay. On August 23, 1951, the Honorable, the Secretary of Finance
granted authority "for the setting aside of the original appraisement and for
the collection of the fine imposed by the Supreme Court and of the customs
duties and charges based on the reappraisement value of P9,800."

Issue:
Whether or not the compromise is valid

Ruling: NO
Supervision and control over the judicial proceedings cannot be extended to
the modification of a final decision of a court. The Commissioner of Customs
may supervise and control the filing of pleadings, the conduct of the hearing,
the presentation of evidence and even the taking of an appeal from the
decision of the Court of First Instance, adverse to the Government, to the
Supreme Court. But surely he cannot under the guise of supervision and
control of judicial proceedings, modify or alter a final decision of a court,
including an appellate court or stay execution of a final judgment in favor of
the Government by receiving of said Government anything less than what the
judgment calls for. Compromise is resorted to, to avoid a litigation or to end
a suit already instituted. It contemplates mutual concessions and mutual gains
to avoid expenses and trouble of litigation or, when litigation has already been
JUAREZ, Andrea B.

begun, to end it because of the uncertainty of the result thereof. Here, as far
as the Republic is concerned, the period for compromise had definitely ended.
The power to compromise is not absolute. The Commissioner is not authorized
to accept anything less than what is adjudicated by the court in favor of the
government in a decision that had become final and executory.
20
 Guagua Electric Light Plant Company, Inc. vs. CIR
G.R. No. L-23611 April 24, 1967

Facts:
Petitioner is a grantee of municipal franchise by the municipal council of
Guagua, realized and reported a gross income in the sum of P1,133,003.44
during the period from January 1, 1947 to November 1956 and a franchise
tax in the amount of P56,664.97 computed at 5%. Believing that it should pay
franchise tax at the lower rates provided for in its franchises instead of 5%
fixed by Section 259 of the Tax Code, it filed on March 25, 1957 a claim for
refund for allegedly overpaid franchise tax amounting to P35,593.98 on its
gross receipts realized from January 1, 1947 to November 1956. The
Commissioner of Internal Revenue denied refund of franchise tax
corresponding to the period prior to the fourth quarter of 1951 on the ground
that the right to its refund had prescribed but was granted refund for several
amounts.

Issue:
Whether or not government is precluded from recovering the sum it refunded
on the grounds of prescription

Ruling: YES
The Commissioner of Internal Revenue further maintains that the prescription
of his right to recover the amount of P16,593.87 is governed by Article
1145(2) in relation to Articles 1154 and 1155 of the Civil Code. Hence,
prescription will set in only after the expiration of six years from 1957 and
1959, the dates refunds were granted. Since the petition for review and
answer thereto were filed in the Court of Tax Appeals on February 14, and
May 4, 1962, he concludes that the prescriptive period of six years has not
expired.1wph1.t

As stated above, the demand on the taxpayer to pay the sum of P16,593.87
is in effect an assessment for deficiency franchise tax. And being so, the right
to assess or collect the same is governed by Section 331 of the Tax Code5
rather than by Article 1145 of the Civil Code. A special law (Tax Code) shall
prevail over a general law (Civil Code)
JUAREZ, Andrea B.

21
 Misael P. Vera vs. Hon. Jose F. Fernandez
G.R. No. L-31364 March 30, 1979

Facts:
A Motion for allowance of claim and for payment of taxes dated May 28, 1969
was filed on June 3, 1969 against the estate of Luis D. Tongoy which
represents the indebtedness to the government of the late Luis Tongoy for
deficiency income taxes. The Administrator opposed the motion solely on the
ground that the claim was barred under Section 5, Rule 86 of the Rules of
Court. Fernandez dismissed the motion for allowance of claim filed.

Issue:
Whether or not Section 5, Rule 86 of the New Rules of Court, bars claim of the
government for unpaid taxes

Ruling: NO
The Rule makes no mention of claims for monetary obligation of the decedent
created by law, such as taxes which is entirely of different character from the
claims expressly enumerated.

Citing CIR v. Pineda, payment of income tax shall be a lien in favor of the
Government from the time the assessment was made by the CIR until paid
with interests, penalties, etc. By virtue of such lien, this court held that the
property of the estate already in the hands of an heir or transferee may be
subject to the payment of the tax due the estate. A fortiori before the
inheritance has passed to the heirs, the unpaid taxes due the decedent may
be collected, even without its having been presented under Section 2 of Rule
86 of the Rules of Court. Until the property of the estate of the decedent has
vested in the heirs, the decedent, represented by his estate, continues as if
he were still alive, subject to the payment of such taxes as would be collectible
from the estate even after his death. Even assuming arguendo that claims for
taxes have to be filed within the time prescribed in Section 2, Rule 86 of the
Rules of Court, the claim in question may be filed even after the expiration of
the time originally fixed therein, as may be gleaned from the Rule. petitioners
filed an application which, though filed after the expiration of the time
previously limited but before an order of the distribution is entered, should
have been granted by the respondent court, in the absence of any valid
ground, as none was shown, justifying denial of the motion, specially
considering that it was for allowance of claim for taxes due from the estate,
JUAREZ, Andrea B.

which in effect represents a claim of the people at large, the only reason given
for the denial that the claim was filed out of the previously limited period,
sustaining thereby private respondents' contention, erroneously as has been
demonstrated.

22