REPUBLIC V.

JOSE RAZON AND JAI-ALAI CORPORATION

FACTS: Haig Assadourian was an Egyptian citizen who was admitted to the Philippines. From October 1940-January
1945, he was the general manager of the Jai-Alai Corporation, a duly organized entity under the laws of the Philippines
engaged during all that time, under the name of Jai-Alai Stadium, in a form of legalized gambling, in which corporation
Assadourian and his wife owned 200 shares of stock. He appointed Jose Razon as his attorney-in-fact or agent for the
purpose of filing his tax returns, paying, and compromising the taxes which may be assessed against him during his
absence. And after securing a tax clearance upon the guaranty of one Jack George, Assadorian left the Philippines for the
US. Since then he had been residing in Los Angeles, California. His re-entry permit expired. On August 5, 1947, in the
US, the Jai-Alai, represented by its Vice President Jose Razon, entered into a contract with Assadourian, whereby in
consideration of the sum of P200,000, the later acknowledged full payment of all his claim for percentages earned by the
Jai-Alai Stadium for the years 1940 to 1945, and to be earned during the years 1946 to 1950. It was shown that in 1947,
the amount of 40,000 was paid directly by the Jai-Alai by a telegraphic transfer. Also in the same year,four different
amounts of 20,000 cash were paid, the first two by Jai-Alai Corp. and the remaining two by Madrigal and Company, Inc. to
Jose Razon. The latter remitted all said amounts to Assadourian. In the year 1948, they paid the remaining 80,000.
Unsatisfied with the findings of the CTA, both the Republic and Jose Razon, Jai-Alai Corp. made two appeals to the SC.
As the two appeals were interrelated and involve common issues, the SC considered the jointly in the decision.
ISSUES:
1. Whether or not Jai-Alai and Razon are considered to be the withholding agents of Assadourian and thus liable for
withholding taxes.
2. Whether or not the cause of action of the Republic to recover the withholding taxes had already prescribed.

HELD:
1. YES! Jai-Alai contented that the sum of 200,000 paid to Assadourian was the purchase price of certain inchoate
or contingent interest. However, the undisputed facts show beyond cavil that the said amount was in payment of
percentages or income earned by Assadourian out of the profits realized by the Jai-Alai Stadium. Being so, it was
taxable, and the corresponding withholding tax should have been withheld by “such persons, corporations, and
general co-partnerships who had the control, receipt, custody, disposal ,or payment thereof to the person entitled
to it.”
But both the Jai-Alai and Razon claim not to fall under the provisions of Section 53 (b) of the National Internal Revenue
Code precisely because they did not have the control, receipt, custody, or disposal of the alleged taxable amount.
With respect to the P40,000.00 sent or paid by the Jai-Alai itself by telegraphic transfer to Assadourian, its liability is
beyond question.
With respect to the two different amounts of P20,000.00, each paid to Jose Razon, it is also clear that it was the Jai Alai,
through its then Vice-President Jose Razon, who had custody and had disposed of and paid said amounts.
In relation to the different amounts of P20,000.00 each paid to Jose Razon under similar circumstances, it is claimed that
they were not payments made by the Jai-Alai but by Madrigal & Company, Inc., and that inasmuch as the former did not
have the control over said amounts and did not dispose of or pay them to Assadourian or his representative, the legal
provision already referred to does not apply to it. In fact, the payments of P20,000.00 each made in the name of Madrigal
& Company, Inc. were charged to the personal account of Vicente Madrigal. Therefore, piercing the veil of corporate
fiction, it can be said that said payments, albeit made in the name of Madrigal & Company, Inc. and later charged to the
personal account of Vicente Madrigal, were really payments made by the Jai-Alai.
What has been said heretofore leads us inexorably to the conclusion that the Jai-Alai was a withholding Agent, and as
such should have withheld the corresponding tax from the total amount of P200,000.00, pursuant to Section 53,
subparagraph (b) and (c) of the Revised Internal Revenue Code.
Razon or his Intestate Estate, however, may be held liable in the same capacity only as regards the total amount of
P160,000.00 which he had received and disposed of simultaneously as Vice-President of the Jai-Alai and as attorney-in-
fact of Assadourian, because he had no part in the payment of the first amount of P40,000.00 by the Jai-Alai through
telegraphic transfer sent directly to Assadourian in the City of Los Angeles, California.

2. NO. In connection with the defense of defendant Jai-Alai Corporation that the right to collect the tax has already
prescribed, the record shows that it failed to file a withholding tax return for the amount of P80,000.00 paid to Haig
Assadourian in 1947. For its omission to file a withholding tax return, Section 332 (c) of the Tax Code, which
provides that 'a proceeding in court for the collection of such tax may be begun without assessment, at any time
within ten years after the discovery of the . . . omission,' should be applied. The failure to file a return was
discovered in 1949, during the investigation conducted by BIR examiner Narciso Rosales. The judicial suit was
initiated on January 16, 1953 when the Jai-Alai Corporation was included as party defendant in the amended
complaint. Only four (4) years elapsed from the time of the discovery of the omission to file a return to the filing of
a judicial action against the Jai-Alai Corporation consequently, the right to judicially collect the withholding tax has
not prescribed.

Now, to the last point raised in the brief of the Jai-Alai as appellant to the effect that the cause of action of the Republic to
recover the withholding taxes in question had already prescribed when the action was commenced below. In refutation
thereof, We deem it sufficient to quote the following portion of the decision under review:
In connection with the defense of defendant Jai-Alai Corporation that the right to collect the tax has already prescribed,
the record shows that it failed to file a withholding tax return for the amount of P80,000.00 paid to Haig Assadourian in
1947. For its omission to file a withholding tax return, Section 332 (c) of the Tax Code, which provides that 'a proceeding
in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of
the . . . omission,' should be applied. The failure to file a return was discovered in 1949, during the investigation
conducted by BIR examiner Narciso Rosales. The judicial suit was initiated on January 16, 1953 when the Jai-Alai
Corporation was included as party defendant in the amended complaint. Only four (4) years elapsed from the time of the
discovery of the omission to file a return to the filing of a judicial action against the Jai-Alai Corporation consequently, the
right to judicially collect the withholding tax has not prescribed.

Samar-I Electric Cooperative

FACTS: Samar-I Electric Cooperative, Inc. (Petitioner) is an electric cooperative, with principal office at Barangay
Carayman, Calbayog City.
July 13, 1999 and April 17, 2000 –
Petitioner filed its 1998 and 1999 income tax returns, respectively. Petitioner filed its 1997, 1998, and 1999 Annual
Information Return of Income Tax Withheld on Compensation, Expanded and Final Withholding Taxes on February 17,
1998, February 1, 1999, and February 4, 2000, in that order.

November 13, 2000 -

respondent issued a duly signed Letter of Authority (LOA) No. 1998 00023803.

Petitioner cooperated in the audit and investigation conducted by the Special Investigation Division of the BIR by
submitting the required documents on December 5, 2000.

October 19, 2001 -

Respondent sent a Notice for Informal Conference which was received by petitioner in November 2001; indicating the
allegedly income and withholding tax liabilities of petitioner for 1997 to 1999.

In response, petitioner sent a letter dated November 26, 2001 to respondent maintaining its indifference to the latter’s
findings and requesting details of the assessment.

December 13, 2001 –

Petitioner executed a Waiver of the Defense of Prescription under the Statute of Limitations, good until March 29, 2002.

February 28, 2002 -

Respondent issued a Preliminary Assessment Notice (PAN). The PAN was received by petitioner on April 9, 2002, which
was protested on April 18, 2002.

July 8, 2002 -
Respondent dismissed petitioner’s protest and recommended the issuance of a Final Assessment Notice

September 15, 2002 -

Petitioner received a demand letter and assessments notices (Final Assessment Notices) for the alleged 1997, 1998, and
1999 deficiency withholding tax in the amount of [P]3,760,225.69, as well as deficiency income tax covering the years
1998 to 1999 in the amount of [P]440,545.71, or in the aggregate amount of [P]4,200,771.40.

April 10, 2003 –

Final Decision on Disputed Assessment, petitioner was still held liable for the alleged tax liabilities

DECISION OF LOWER COURT:

(1) CTA First Division - ordered petitioner to pay CIR deficiency withholding tax on compensation in the aggregate
amount of P2,690,850.91

ISSUE:
whether the 1997 and 1998 assessments on withholding tax on compensation were issued within the prescriptive period
provided by law; and whether the assessments were issued in accordance with Section 228 of the NIRC of 1997.

RULING:
Yes.

SEC. 203. Period of Limitation Upon Assessment and Collection. – Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed
by law for the filing of the return, and no proceeding in court without assessment for the collection
of such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted
from the day the return was filed. For 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.

Section 203 sets the three-year prescriptive period to assess, the following exceptions are
provided under Section 222 of the NIRC of 1997, viz.:

SEC. 222. 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 for the collection of such tax may be filed
without assessment, at any time within ten (10) 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 the collection
thereof.

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its assessment after such time,
the tax may be assessed within the period agreed upon. The period so agreed upon may be
extended by subsequent written agreement made before the expiration of the period previously
agreed upon.

(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed
in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five
(5) years following the assessment of the tax.

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided
in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court
 within the period agreed upon in writing before the expiration of the five (5)-year period. The
period so agreed upon may be extended by subsequent written agreements made before the
expiration of the period previously agreed upon.

(e) Provided, however, That nothing in the immediately preceding Section and paragraph (a)
hereof shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree. (Emphasis
supplied.)

it was petitioner’s substantial underdeclaration of withholding taxes in the amount of P2,690,850.91 which constituted the
“falsity” in the subject returns – giving respondent the benefit of the period under Section 222 of the NIRC of 1997 to
assess the correct amount of tax “at any time within ten (10) years after the discovery of the falsity, fraud or omission.”

the proper and reasonable interpretation of said provision should be that in the three different cases of
(1) false return,
(2) fraudulent return with intent to evade tax,
(3) failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun
without assessment, at any time within ten years after the discovery of the (1) falsity,
(2) fraud,
(3) omission.

There is a difference between “false return” and “fraudulent return” cannot be denied. While the
first merely implies deviation from the truth, whether intentional or not, the second implies
intentional or deceitful entry with intent to evade the taxes due.

The ordinary period of prescription of 3 years within which to assess tax liabilities and should be applicable to normal
circumstances, but whenever the government is placed at a disadvantage so as to prevent its lawful agents from proper
assessment of tax liabilities due to false returns, fraudulent return intended to evade payment of tax or failure to file
returns, the period of ten years from the time of the discovery of the falsity, fraud or omission even seems to be
inadequate and should be the one enforced.

SEC. 228. Protesting of Assessment. – x x x xxx x

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.

3.1.4 Formal Letter of Demand and Assessment Notice. – The formal letter of demand and
assessment notice shall be issued by the Commissioner or his duly authorized representative.
The letter of demand calling for payment of the taxpayer’s deficiency tax or taxes shall state the
facts, the law, rules and regulations, or jurisprudence on which the assessment is based,
otherwise, the formal letter of demand and assessment notice shall be void. The same shall be
sent to the taxpayer only by registered mail or by personal delivery. x x x

Both Section 228 of the NIRC of 1997 and Section 3.1.4 of RR No. 12-99 clearly require the written details on the nature,
factual and legal bases of the subject deficiency tax assessments.

Considering the foregoing exchange of correspondence and documents between the parties, we find that the requirement
of Section 228 was substantially complied with. Respondent had fully informed petitioner in writing of the factual and legal
bases of the deficiency taxes assessment, which enabled the latter to file an "effective" protest, ·much unlike the
taxpayer's situation in Enron. Petitioner's right to due process was thus not violated.

COMMISSIONER OF INTERNAL REVENUE, vs HON. RAUL M. GONZALEZ, Secretary of Justice, L. M. CAMUS

ENGINEERING CORPORATION (represented by LUIS M. CAMUS and LINO D. MENDOZA) – Prima facie evidence
of Fraud

Facts: Pursuant to Letter of Authority (LA), a fraud investigation was conducted against the tax liabilities of respondent L.
M. Camus Engineering Corporation (LMCEC) for the taxable years 1997, 1998 and 1999. Based on the data gathered by
the informer, it was discovered that respondent filed fraudulent tax returns. A complaint was then filed against the
president and comptroller of the corporation. It was alleged by the examiner that despite final assessment, respondent
failed to pay the total amount of P630,164,631.61 which had become final and executory as a result of the failure to
protest the said assessment within the 30-day reglementary period. Respondent however countered stating that the suit is
a simple action for collection and not a case for tax evasion. It further alleged that it availed of the Economic Recovery
Assistance Payment [ERAP] Program and the Voluntary Assessment Program [VAP] and thus the petitioner is now
estopped from further taking any action against it. The chief prosecutor then issued a resolution finding no sufficient
evidence to establish probable cause against respondents. It held that payment under ERAP and VAP estopps the BIR to
file criminal complaints. Petitioner then appealed to the Secretary of Justice but it was denied on the ground that fraud
was not established. The CA likewise denied its appeal.

Issue: WON respondent officers of LMCEC may be prosecuted for tax evasion.

Discussion: There is no dispute that prior to the filing of the complaint with the DOJ, the report on the tax fraud
investigation conducted on LMCEC disclosed that it made substantial under declarations in its income tax returns for
1997, 1998 and 1999. PAN was sent to the respondent but the latter failed to comply with the subpoena.
SEC. 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take Testimony of Persons. –
In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the
liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the
Commissioner is authorized:
(A) To examine any book, paper, record or other data which may be relevant or material to such inquiry;
(B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to
audit or investigation, or from any office or officer of the national and local governments, government agencies and
instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned or -controlled corporations, any
information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers,
and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies,
regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia and
registered partnerships, and their members;
(C) To summon the person liable for tax or required to file a return, or any officer or employee of such person, or any
person having possession, custody, or care of the books of accounts and other accounting records containing entries
relating to the business of the person liable for tax, or any other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the summons and to produce such books, papers, records, or
other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry; x x x

As to the notice of assessment, the respondent alleged that they were invalid for being unnumbered and the tax liabilities
therein stated have already been settled and/or terminated. This is without merit. [A] declaration of deficiency taxes issued
to a [t]axpayer who fails to respond to a Pre-Assessment Notice (PAN) within the prescribed period of time, or whose
reply to the PAN was found to be without merit. The Notice of Assessment shall inform the [t]axpayer of this fact, and that
the report of investigation submitted by the Revenue Officer conducting the audit shall be given due course.
The formal letter of demand calling for payment of the taxpayer’s deficiency tax or taxes shall state the fact, the law,
rules and regulations or jurisprudence on which the assessment is based, otherwise the formal letter of demand
and the notice of assessment shall be void.44
As it is, the formality of a control number in the assessment notice is not a requirement for its validity but rather the
contents thereof which should inform the taxpayer of the declaration of deficiency tax against said taxpayer. Both the
formal letter of demand and the notice of assessment shall be void if the former failed to state the fact, the law, rules and
regulations or jurisprudence on which the assessment is based, which is a mandatory requirement under Section 228 of
the NIRC.

As already stated, the substantial underdeclared income in the returns filed by LMCEC for 1997, 1998 and 1999 in
amounts equivalent to more than 30% (the computation in the final assessment notice showed underdeclarations of
almost 200%) constitutes prima facie evidence of fraudulent return under Section 248(B) of the NIRC. Prior to the
issuance of the preliminary and final notices of assessment, the revenue officers conducted a preliminary investigation on
the information and documents showing substantial understatement of LMCEC’s tax liabilities which were provided by the
Informer, following the procedure under RMO No. 15-95.56 Based on the prima facie finding of the existence of fraud,
petitioner issued LA No. 00009361 for the TFD to conduct a formal fraud investigation of LMCEC. 57 Consequently,
respondent Secretary’s ruling that the filing of criminal complaint for violation of Sections 254 and 255 of the NIRC cannot
prosper because of lack of prior determination of the existence of fraud, is bereft of factual basis and contradicted by the
evidence on record.

Tax assessments by tax examiners are presumed correct and made in good faith, and all presumptions are in favor of the
correctness of a tax assessment unless proven otherwise.58 We have held that a taxpayer’s failure to file a petition for
review with the Court of Tax Appeals within the statutory period rendered the disputed assessment final, executory and
demandable, thereby precluding it from interposing the defenses of legality or validity of the assessment and prescription
of the Government’s right to assess.59 Indeed, any objection against the assessment should have been pursued following
the avenue paved in Section 229 (now Section 228) of the NIRC on protests on assessments of internal revenue taxes. 60

Records bear out that the assessment notice and Formal Letter of Demand dated August 7, 2002 were duly served on
LMCEC on October 1, 2002. Private respondents did not file a motion for reconsideration of the said assessment notice
and formal demand; neither did they appeal to the Court of Tax Appeals. Section 228 of the NIRC61 provides the remedy
to dispute a tax assessment within a certain period of time. It states that an assessment may be protested by filing a
request for reconsideration or reinvestigation within 30 days from receipt of the assessment by the taxpayer. No such
administrative protest was filed by private respondents seeking reconsideration of the August 7, 2002 assessment notice
and formal letter of demand. Private respondents cannot belatedly assail the said assessment, which they allowed to
lapse into finality, by raising issues as to its validity and correctness during the preliminary investigation after the BIR has
referred the matter for prosecution under Sections 254 and 255 of the NIRC.

As we held in Marcos II v. Court of Appeals62:

It is not the Department of Justice which is the government agency tasked to determine the amount of taxes due upon the
subject estate, but the Bureau of Internal Revenue, whose determinations and assessments are presumed correct and
made in good faith. The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the
performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is
upon the complaining party to show clearly that the assessment is erroneous. Failure to present proof of error in the
assessment will justify the judicial affirmance of said assessment. x x x.

CIR VS CA & CARNATION PHILS

On January 15, 1982, Carnation Phils. Inc. (Carnation), filed its Corporation Annual Income Tax Return for taxable
year ending September 30, 1981; and its Manufacturers/Producers Percentage Tax Return for the quarter ending
September 30, 1981.5

On October 13, 1986, March 16, 1987 and May 18, 1987, Carnation, through its Senior Vice President Jaime O.
Lardizabal, signed three separate "waivers of the Statute of Limitations Under the National Internal Revenue
Code" wherein it:
. . . waives the running of the prescriptive period provided for in sections 318 and 319 and other related
provisions of the National Internal Revenue Code and consents to the assessment and collection of the taxes
which may be found due after reinvestigation and reconsideration at anytime before or after the lapse of the
period of limitations fixed by said sections 318 and 319 and other relevant provisions of the National Internal
Revenue Code, but not after (13 April 1987 for the earlier-executed waiver, or June 14, 1987 for the later waiver, or
July 30, 1987 for the subsequent waiver, as the case may be). However, the taxpayer (petitioner herein) does not
waive any prescription already accrued in its favor.
The waivers were not signed by the BIR Commissioner or any of his agents.

On August 5, 1987, Carnation received BIR's letter of demand dated July 29, 1987 asking the said corporation to
pay P1,442,586.56 as deficiency income tax, P14,152,683.85 as deficiency sales tax and P3,939,913.03 as
deficiency sales tax on undeclared sales, all for the year 1981. This demand letter was accompanied by
assessment Notices Nos. FAS-4-81-87-005824, FAS-4-81-87-005825 and FAS-4-81-87-005826.

In a basic protest dated August 17, 1987, Carnation disputed the assessments and requested a reconsideration
and reinvestigation thereof. On September 30, 1987, Carnation filed a supplemental protest. These protests were
denied by the BIR Commissioner in a letter dated March 15, 1988. Whereupon, Carnation appealed to the CTA.
On January 26, 1993, the CTA issued the questioned order, the dispositive portion of which reads:
WHEREFORE, the Court finds the assessments for allegedly deficient income and sales taxes for petitioner's
fiscal year ending September 30, 1981 covered by Demand Letter No. FAS-1B-81-87 and assessment Notices No.
FAS-1-81-87-005824, FAS-4-81-87-005825, and FAS-4-81-87-005826 (all dated July 29, 1987) in the total amount of
P19,535,183.44 to be NULL AND VOID for having been issued beyond the five-year prescriptive period provided
by law.

The pivot of inquiry here is whether or not the three (3) waivers signed by the private respondent are valid and
binding6 as to toll the running of the prescriptive period for assessment and not bar the Government from issuing
subject deficiency tax assessments.
Sec. 318 (now Section 203) of the National Internal Revenue Code, the law then applicable reads:
Sec 318. Period of Limitations upon assessment and collection. — Except as provided in the succeeding section,
internal revenue taxes shall be assessed within five years after the return was filed, and no proceeding in court
without assessment for the collection of such taxes shall be begun after the expiration of such period. For the
purpose of this section, a return filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day: Provided, That this limitation shall not apply to cases already investigated
prior to the approval of this Code. 7 (emphasis ours)

The decision of the Court of Appeals affirming what the Court of Tax Appeals decided, established that subject
assessments of July 29, 1987 were issued outside the statutory prescriptive period. Carnation filed its annual
income tax and percentage tax returns for the fiscal year ending September 30, 1981 on January 15, 1982 8 and
November 20, 1981,9 respectively. In accordance with the above-quoted provision of law, private respondent's
1981 income and sales taxes could have been validly assessed only until January 14, 1987 and November 19,
1986, respectively. 10 However, Carnation's income and sales taxes were assessed only on July 29, 1987, beyond
the five-year prescriptive period.11

Petitioner BIR Commissioner contends that the waivers signed by Carnation were valid although not signed by
the BIR Commissioner because (a) when the BIR agents/examiners extended the period to audit and investigate
Carnation's tax returns, the BIR gave its implied consent to such waivers; (b) the signature of the Commissioner
is a mere formality and the lack of it does not vitiate binding effect of the waivers; and (c) that a waiver is not a
contract but a unilateral act of renouncing ones right to avail of the defense of prescription and remains binding
in accordance with the terms and conditions set forth in the waiver. 12

Petitioner's submission is inaccurate. The same tax code is clear on the matter, to wit:
Sec. 319. Exceptions as to period of limitation of assessment and collection of taxes. —(a) . . .
(b) Where before the expiration of the time prescribed in the preceding section for the assessment of the tax,
both the Commissioner of Internal Revenue and the taxpayer have consented in writing to its assessment after
such time, the tax may be assessed at anytime prior to the expiration of the period agreed upon. The period so
agreed upon may be extended by subsequent agreement in writing made before the expiration of the period
previously agreed upon.
The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation, observing thus:
We cannot go along with the petitioner's theory. Section 319 of the Tax code earlier quoted is clear and explicit
that the waiver of the five-year 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)."
The ruling of the Supreme Court in Collector of Internal Revenue vs. Solano 13 is in point, thus:
. . . The only agreement that could have suspended the running of the prescriptive period the collection of the tax
in question is, as correctly pointed out by the Court of Tax Appeals, a written agreement between Solano and the
Collector, entered into before the expiration of the of the five-year prescriptive period, extending the limitation
prescribed by law.
For sure, no such written agreement concerning the said three waivers exists between the petitioner and private
respondent Carnation.14
What is more, the waivers in question reveal that they are in no wise unequivocal, and therefore necessitates for
its binding effect the concurrence of the Commissioner of Internal Revenue. In fact, in his reply dated April 18,
1995, the Solicitor General, representing the Commissioner of Internal Revenue, admitted that subject waivers
executed by Carnation were "for end in consideration of the approval by the Commissioner of Internal Revenue
of its request for reinvestigation and/or reconsideration of its internal revenue case involving tax assessments
for the fiscal year ended September 30, 1981 which were all pending at the time". On this basis neither implied
consent can be presumed nor can it be contended that the waiver required under Sec. 319 of the Tax Code is one
which is unilateral nor can it be said that concurrence to such an agreements a mere formality because it is the
very signatures of both the Commissioner of Internal Revenue and the taxpayer which give birth to such a valid
agreement.
Republic v Acebedo
Facts: A suit for collection of deficiency tax was filed against herein respondent Felix Acebedo in the amount of P5,962
for the year 1948. A notice of assessment was issued on September 24, 1949. The respondent filed a motion to dismiss
on the ground of prescription. He claimed that the notice of levy/distraint was filed beyond the 5 year limitation from the
assessment. The motion was granted by the lower court and the same dismissed the case. Hence, the petitioner Republic
filed an appeal with this court, contending that the various requests for reinvestigation made by the respondent suspended
the 5 year period prescription period and that the waiver of statute of limitations duly executed in 1959 was sufficient to
further suspend period of prescription.

Issue: Whether or not a request for a reinvestigation suspends the running of the period for filing an action for collection?
Whether or not the waiver of limitations suspended the period?

Held: No. The court is aware that it was held in Commissioner of Internal Revenue, vs. Consolidated Mining Company
that a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in
writing 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. However, when a taxpayer asks for a reinvestigation of the tax assessment issued to him and such
reinvestigation is made, on the basis of which the Government makes another assessment, the five-year period with
which an action for collection may be commenced should be counted from this last assessment. In this case, even after
the request for reinvestigation was made, the petitioner did not act upon it, hence, the request for reinvestigation did not
suspend the running of the period for filing an action for collection. Moreover, up to October 4, 1955 the delay in collection
could not be attributed to the defendant at all. His requests in fact had been unheeded until then, and there was nothing to
impede enforcement of the tax liability by any of the means provided by law. By October 4, 1955, more than five years
had elapsed since assessment in question was made, making subsequent events in connection with the said assessment
irrelevant. 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.

COMMISSIONER OF INTERNAL REVENUE v. BASF COATING + INKS PHILS., INC.,

Facts: BASF COATING + INKS PHILS., INC was a corporation which was duly organized under and by virtue of the laws
of the Republic of the Philippines on August 1, 1990 with a term of existence of fifty (50) years., Majority of the members
of the Board of Directors and the stockholders representing more than two-thirds (2/3) of the entire subscribed and
outstanding capital stock of herein respondent corporation, resolved to dissolve the corporation by shortening its
corporate term to March 31, 2001. Subsequently, respondent moved out of its address in Las Piñas City and transferred
to Carmelray Industrial Park, Canlubang, Calamba, Laguna.
On June 26, 2001, respondent submitted two (2) letters to the Bureau of Internal Revenue (BIR) Revenue District Officer
of Revenue District Office (RDO) No. 53, Region 8, in Alabang, Muntinlupa City. The first letter, dated April 26, 2001, was
a notice of respondent's dissolution, in compliance with the requirements of Section 52(c) of the National Internal Revenue
Code.4 On the other hand, the second letter, dated June 22, 2001, was a manifestation indicating the submission of
various documents supporting respondent's dissolution, among which was BIR Form No. 1905, which refers to an update
of information contained in its tax registration.5
Thereafter, in a Formal Assessment Notice (FA N) dated January 17, 2003, petitioner assessed respondent the aggregate
amount of P18,671,343.14 representing deficiencies in income tax, value added tax, withholding tax on compensation,
expanded withholding tax and documentary stamp tax, including increments, for the taxable year 1999. The FAN was sent
by registered mail on January 24, 2003 to respondent's former address in Las Piñas City.
On March 5, 2004, the Chief of the Collection Section of BIR Revenue Region No. 7, RDO No. 39, South Quezon City,
issued a First Notice Before Issuance of Warrant of Distraint and Levy, which was sent to the residence of one of
respondent's directors.7
On March 19, 2004, respondent filed a protest letter citing lack of due process and prescription as grounds. On April 16,
2004, respondent filed a supplemental letter of protest. Subsequently, on June 14, 2004, respondent submitted a letter
wherein it attached documents to prove the defenses raised in its protest letters.
The CTA En Banc held that petitioner's right to assess respondent for deficiency taxes for the taxable year 1999 has
already prescribed and that the FAN issued to respondent never attained finality because respondent did not receive it.

Petitioner’s claim: Insofar as respondent's alleged deficiency taxes for the taxable year 1999 are concerned, the running
of the three-year prescriptive period to assess, under Sections 203 and 222 of the National Internal Revenue Act of 1997
(Tax Reform Act of 1997) was suspended when respondent failed to notify petitioner, in writing, of its change of address,
pursuant to the provisions of Section 223 of the same Act and Section 11 of BIR Revenue Regulation No. 12-85.

Provision/s: Sec 203 of the National Internal Revenue Act

Sec. 203. Period of Limitation Upon Assessment and Collection.– Except as provided in Section 222,internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the return was filed. For 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.

Sec. 223. Suspension of Running of Statute of Limitations. — The running of the Statute of Limitations provided in
Sections 203 and 222 on the making of assessment and the beginning of distraint or levy 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 (60)
days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the
taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or
collected: 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 or 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.
In addition, Section 11 of BIR Revenue Regulation No. 12-85 states:

Sec. 11. Change of Address. — In case of change of address, the taxpayer must give a written notice thereof to the
Revenue District Officer or the district having jurisdiction over his former legal residence and/or place of business, copy
furnished the Revenue District Officer having jurisdiction over his new legal residence or place of business, the Revenue
Computer Center and the Receivable Accounts Division, BIR, National Office, Quezon City, and in case of failure to do so,
any communication referred to in these regulations previously sent to his former legal residence or business address as
appear in is tax return for the period involved shall be considered valid and binding for purposes of the period within which
to reply.

Held: Pettion DISMISSED. It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the Statute of
Limitations provided under the provisions of Sections 203 and 222 of the same Act shall be suspended 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. In
addition, Section 11 of Revenue Regulation No. 12-85 states that, in case of change of address, the taxpayer is required
to give a written notice thereof to the Revenue District Officer or the district having jurisdiction over his former legal
residence and/or place of business. However, this Court agrees with both the CTA Special First Division and the CTA En
Banc in their ruling that the abovementioned provisions on the suspension of the three-year period to assess apply only if
the BIR Commissioner is not aware of the whereabouts of the taxpayer.

Prescription in the assessment and in the collection of taxes is provided by the Legislature for the benefit of both
the Government and the 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 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 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 . . . . 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 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.

Likewise, in Republic of the Philippines v. Ablaza, this Court elucidated that the prescriptive period for the filing of actions
for collection of taxes is justified by the need to protect law-abiding citizens from possible harassment. Also, in Bank of the
Philippine Islands v. Commissioner of Internal Revenue, it was held that the statute of limitations on the assessment and
collection of taxes is principally intended to afford protection to the taxpayer against unreasonable investigations as the
indefinite extension of the period for assessment deprives the taxpayer of the assurance that he will no longer be
subjected to further investigation for taxes after the expiration of a reasonable period of time. Thus, in Commissioner of
Internal Revenue v. B.F. Goodrich Phils., Inc., this Court ruled that the legal provisions on prescription should be
liberally construed to protect taxpayers and that, as a corollary, the exceptions to the rule on prescription should
be strictly construed.