TAX1.26 Republic v.

Lim de Yu

FACTS: same with 10.24

ISSUE: Whether the tax return filed were fraudulent with intent to evade the payment of the tax

RULING: No. The mistakes of revenue officers on 3 different occasions remove the element of fraud. The presence of
fraud was quite unlikely in an assessment where the BIR itself appeared ‘not too sure” as to the real amount of taxpayer‘s
net income as BIR had arrived at three highly different computations.

TAX2.26 Aznar v. CTA

FACTS: The lower court in three instances supported petitioner’s stand on the wrong inclusions in his lists of assets made
by the Commissioner, resulting in the very substantial reduction of petitioner’s tax liability by the lower court. The foregoing
shows that it was not only Mr. Aznar who committed mistakes in his report of income but also the respondent Commissioner
who committed mistakes in his use of the inventory method. The CTA imposed penalty on Aznar.

ISSUE: Whether the fraud penalty imposed is justified.

RULING: No. The mistakes of the Commissioner which also involve very substantial amounts were also repeated yearly,
and yet we cannot presume therefrom the existence of any taint of official fraud. It necessarily follows that a mere mistake
cannot be considered as fraudulent intent, and if both petitioner and respondent CIR committed mistakes in making entries
in the returns and in the assessment, respectively, under the inventory method of determining tax liability, it would be unfair
to treat the mistakes of the petitioner as tainted with fraud and those of the respondent as made in good faith.

TAX3.26 Commissioner v. Gonzales

See book page 686

TAX4.26 Yutivo Sons Hardware Co. v. CTA

Facts:
1. Until 1946 Yutivo bought a number of cars and trucks from General Motors (GM), an American corporation doing
business in the Philippines. As importer, GM paid sales tax. Yutivo paid no further sales tax on its sales to the
public.
2. In June 1946, Southern Motors (SM) organized to engage in the business of selling cars, trucks and spare parts.
After the incorporation of SM and until the withdrawal of GM from Phil, the cars and trucks were purchased by
Yutivo from GM then sold by Yutivo to SM and then SM sold these to the public.
3. The same way that GM used to pay taxes on the basis of its sales to Yutivo, Yutivo paid taxes on the basis of its
sales to SM. SM paid no taxes on its sales to the public.
4. CIR made an assessment and charged Yutivo deficiency tax plus surcharge.

Issue: Whether the failure of the Commissioner to prove fraud can be fatal to the assessment as when a tax liability is
assessed beyond the usual 3-year prescriptive period.

Ruling: Yes. The fact that the Commissioner did not include the fraud penalty in his deficiency assessment which was
issued after the filing of the taxpayer’s return is an indication that the Commissioner himself does not believe that there was
fraud. There was no fraud if the Commissioner merely relied upon an alleged substantial under-declaration of income tax.
The mere understatement of income in itself does not prove fraud.

TAX5.26 CIR v. Estate of Benigno Toda, Jr.

FACTS:
1. Cibeles Insurance Corp. (CIC) authorized Toda, President and Owner of 99.991% of outstanding capital stock, to
sell the Cibeles Building and 2 parcels of land which he sold to Altonaga for P100M who then sold it on the same
day to Royal Match Inc. for P200M. CIC included gains from sale of real property of in its annual ITR while
Altonaga paid a 5% CGT.
2. Toda sold his shares to Choa for P 12.5M and the deed of sale of shares of stock provides that the buyer is free from
all income tax liabilities for 1987- 1989. Toda died 3 years later.
3. BIR sent an assessment notice and demand letter to CIC for deficiency of income tax. BIR sent the same to the
estate of Toda.
4. Estate filed a protest which was dismissed - fraudulent sale to evade the 35% corporate income tax for the additional
gain of P 100M and that there is in fact only 1 sale.

ISSUE: Whether there is falsity or fraud resulting to tax evasion rather than tax avoidance so the period for assessment has
not prescribed.

HELD: YES. See book. Page 688

TAX6.26 Cargill Philippines v. CIR

FACTS:

The PAN and FAN and FDDA for deficiency VAT covering the period September 1, 2004 to August 31, 2005 were issued
only on September 9, 2008, September 25, 2008 and September 10, 2009, respectively.

ISSUE: Whether or not the assessment for deficiency VAT is barred by prescription.

RULING: Yes. The three-year period to assess commences from the date of actual filing of the return or from the last day
prescribed by law for the filing of such return, whichever comes later. In case of VAT, the filing of the quarterly returns
must be made within 25 days after the close of each taxable quarter prescribed by each taxpayer.

TAX7.26 Central Cement Corp. v. Commissioner

No case found.

Invalidity of waiver may still be raised during the trial at CTA. – the contention of the respondent that failure of the petitioner
to raise the issue of prescription in its letter-protest, precluded it from invoking the same for the first time before this Court
is untenable. In the first place, the petitioner cannot raise the issue of prescription in its letter-protest file on July 15, 1993
because of its prior execution of a supposedly valid “waiver of the defense of prescription” on August 17, 1992. It was only
after a careful perusal of the records of the VBIR that the petitioner discovered the invalidity of the waiver signed by its
representative. Such knowledge prompted the petition to file a Motion to Allow Petitioner to Adduce Additional Rebuttal
Evidence, where in invoked the defense of prescription.

TAX8.26 Guagua Electric Light Plant Co. v. Collector

FACTS: same with 5.16

ISSUE: Whether the tax “refunded erroneously” should be imposed against the company, or if the right to
recover has prescribed.

RULING: When the taxpayer assailed the right of the government to assess and collect, alleged the facts constituting
prescription, supported by annexes, and the government admitted the allegation in its answer, there was no need for the
taxpayer to present further evidence on this point. The demand on the taxpayer to pay the amount erroneously refunded is
in effect as assessment for deficiency franchise tax.

TAX9.26 Visayan Electric Co. v. Commissioner

FACTS: Petitioner is a holder of a legislative franchise authorized to operate and maintain electric heat, light, and power
system. The CIR assessed and demanded from petitioner the payment of deficiency franchise tax. Upon denial of petitioner’s
request for reconsideration of the assessment, it interposed an appeal to the CTA. The latter ruled in favor of the CIR hence,
this appeal. Petitioner contended that the CTA erred in requiring it to pay deficiency taxes, for the years already barred by
prescription.

ISSUE: Whether the action to collect is already barred by prescription

RULING: No. Petitioner did not raise the defense of prescription neither in the BIR, nor in the CTA, nor in the petition for
review filed in this case. It is well-settled law in this jurisdiction that prescription as a defense is deemed waived if not
seasonably raised.

TAX10.26 Mambulao Lmber Co. v. Republic

FACTS: same with 11.12

ISSUE: Whether the collection is barred by the statute of limitations.

RULING: No. The commencement of the five-year period should be counted from Aug. 29, 1958, the date of the letter of
demand of the Acting CIR.

MAMALATEO: The plea of prescription is also deemed waived by the failure to allege in its answer.
TAX11.26 Sy Chiuco v. Collector

Facts: Sy Chiuco was the owner and operator of the La Loma Cabaret. The customers who patronized the cabaret were
charged P.030 per dance. P.010 to be paid before entering the dance hall and the remaining P.020 to be paid to
the “bailarinas” after the dance. Sy Chiuco did not declare for tax purposes the P.020 dance fee payable to the bailarinas
which petitioner collected as part of his business so CIR assessed against him a deficiency amusement tax. Sy Chiuco
contends that the action to collect payment has already prescribed.

Issue: Whether the action has prescribed

Held: No. It appears that this question was not raised as an issue in the petition for review filed by petitioner in the CTA.
There is, therefore, enough reason to believe that petitioner has waived this defense and so it cannot now be entertained.

TAX12.26 Sambrano v. CTA

FACTS:
1. Sambrano, the owner and operator of a fleet of trucks, received from the CIR a demand for the payment of his
income tax liabilities.
2. Petitioner signified his intention to file a surety bond to guarantee the payment of his tax liability and executed a
chattel mortgage on 67 of his buses in favor of the Government.
3. Petitioner was able to pay only the amount of P17K, and that of the 67 auto buses mortgaged, only 47 units were in
actual operation, a supplementary chattel mortgage covering 20 buses more was executed by petitioner, but same
was disapproved by the Public Service Commission and the CIR.
4. Petitioner failed to comply with the terms and conditions of the mortgage. Thereafter, CIR issued WDL covering
the taxpayer's properties.

ISSUE: Whether the taxpayer is estopped from questioning the issue of prescription?

RULING: YES. By virtue of the chattel mortgage executed by the petitioner in favor of the Government, petitioner in fact
acknowledged the existence of the tax liabilities and assumed the obligation to settle the same.

TAX13.26 Republic v. Lim de Yu

FACTS: same with 10.24

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

RULING: Yes. Well settled is the rule that prescription as a defense is waived if not seasonably interposed. It is deemed
waived by failure to allege it in the answer, failing to raise the issue on prescription in the petition for review, or by
acknowledgement of the obligation or renunciation of the benefit of prescription already obtained.

TAX14.26 Phil. Journalists v. Commissioner

FACTS: same with 8.24

ISSUE: Whether or not the Waiver of SOL is valid

RULING: No. The requirement to place the acceptance date is not merely formal. The waiver of the statute of limitations
is not a unilateral act by the taxpayer. The BIR has to accept it hence the need for a BIR representative to affix his signature
and the date of acceptance. There is also therefore a need to furnish a copy to the taxpayer for the latter to be apprised that
his waiver has been accepted.