Allied Banking Corporation vs.

CIR
G.R. No. 175097 February 5, 2010
Del Castillo, J.:

Facts:

In April 2004, the Bureau of Internal Revenue (BIR) issued a preliminary assessment notice
(PAN) to Allied Banking Corporation (ABC) demanding payment of P50 million in taxes. ABC
then filed a protest in May 2004. In July 2004, the BIR issued a formal assessment notice (FAN).
The FAN included a formal demand as well as this phrase:
xxx
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.

ABC then appealed the FAN with the Court of Tax Appeals (CTA). The Commissioner of
Internal Revenue (CIR) then filed a motion to dismiss on the ground that ABC did not exhaust
all administrative remedies for failing to file a protest against the FAN.

Issue: Whether or not the appeal before the CTA is proper. The case is an exception to the
rule on exhaustion of administrative remedies

Ruling: Yes the appeal before the CTA is proper.

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 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

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.

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.

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.

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.

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.