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GUIDE NOTES ON REMEDIES

Q: Who are the Philippine tax authorities?
* (1) Bureau of Internal Revenue - The BIR is the agency of the government which is primarily in
charge of the administration and enforcement of tax laws under the 1997 Tax Code.
(2) Bureau of Customs - The BOC is in charge of the enforcement of tariff and customs tax laws.
(3) Assessors and Treasurers of Local Government Units – The assessors and treasurers of
LGUs are in charge of the enforcement of local and real property tax laws.
Q: How are taxes assessed?
* (1) Self-Assessment - Taxpayers are required to file tax returns for various kinds of income
earned which may be subject to tax. Examples are income tax, capital gains tax, donor’s tax, and
estate tax. When a taxpayer files the tax return, he is actually making a self-assessment.
(2) Deficiency Assessment - Deficiency assessment is an assessment made by the BIR after the
conduct of an investigation or audit when it finds that the tax return filed by the taxpayer contains,
for example, an under-declaration of income, or when the taxpayer does not at all file a tax return.
[NOTE: The provisions on tax remedies found in the 1997 Tax Code refer to the government’s
right to make deficiency assessments.]
** The case of Philippine National Oil Company v. Court of Appeals made a distinction between a
self-assessed tax and a BIR-assessed tax. At issue in this case was the validity of the
compromise agreement executed by PNOC pursuant to EO No. 44. Under said law, the CIR was
authorized to compromise delinquent accounts arising, among others, from a self-assessed tax.
According to the Supreme Court, PNOC could not avail of the benefits of EO No. 44 because, for
one, its tax liability was not a self-assessed tax. The High Court differentiated a self-assessed tax
and a BIR-assessed tax in this sense: where tax liabilities are self-assessed, the compromise
payment shall be based on the tax return filed by the taxpayer; on the other hand, where the BIR
already issued an assessment, the compromise payment shall be computed based on the tax
due on the assessment notice.
[Philippine National Oil Company v. Court of Appeals, GR Nos. 109976 and 112800, 26 April
2005.]
Q: How are remedies in taxation classified?
* Remedies in taxation may be grouped as follows:
(1) Remedies of the Government –
(a) to make deficiency assessments within 3 or 10 years
(b) to enforce deficiency assessments and collect taxes within 5 years –
(i) to effect distraint of personal property
(ii) to effect levy on real property
(iii) to pursue judicial proceeding to collect
(iv) to compromise, abate, or cancel taxes
(v) to enforce tax liens
(vi) to enforce statutory penal provisions
(vii) to enforce forfeiture or property
(2) Remedies of the Taxpayer –
(a) to protest against an assessment (administrative claim)
(b) to appeal a decision on a protest to the Court of Tax Appeals (judicial claim)
(c) to compromise taxes
(d) to release property before sale at public auction
(e) to redeem property after sale at public auction
(f) to avail of tax amnesty benefits
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CHAPTER I - REMEDIES IN GENERAL

Sec. 202, Final Deed to Purchaser. - In case the taxpayer shall not redeem the property as herein
provided, the Revenue District Officer shall, as grantor, execute a deed conveying to the purchaser so much of
the property as has been sold, free from all liens of any kind whatsoever, and the deed shall succinctly recite all
the proceedings upon which the validity of the sale depends.

Section 202 shall be discussed in relation to Section 214, which reads:
Sec. 214, Redemption of Property Sold. - Within one (1) year from the date of
sale, the delinquent taxpayer, or any one for him, shall have the right of paying to the
Revenue District Officer the amount of the public taxes, penalties, and interest thereon
from the date of delinquency to the date of sale, together with interest on said purchase
price at the rate of fifteen percent (15%) per annum from the date of purchase to the date
of redemption, and such payment shall entitle the person paying to the delivery of the
certificate issued to the purchaser and a certificate from the said Revenue District Officer
that he has thus redeemed the property, and the Revenue District Officer shall forthwith
pay over to the purchaser the amount by which such property has thus been redeemed,
and said property thereafter shall be free form the lien of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the said property and
shall be entitled to the rents and other income thereof until the expiration of the time
allowed for its redemption.

Q: What is the redemption period for properties of a delinquent taxpayer sold at public auction?
[NOTE: Make a distinction between properties of a delinquent taxpayer and tax delinquent
properties.]
* The case of City Mayor of Quezon City v. Rizal Commercial Banking Corporation dealt with the
interpretation of the redemption period under RA No. 7160, otherwise known as the 1991 Local
Government Code (real property taxes imposed by LGUs), but may be relevant in the
determination of the starting point of the redemption period provided in the 1997 Tax Code
(internal revenue taxes imposed by the National Government).
In the above case, the Supreme Court held that: (1) under PD No. 464, or the Real Property Tax
Code, the one-year redemption period for tax delinquent properties sold at public auction was
counted from the date of registration of sale of the property; (2) under RA No. 7160, or the 1991
Local Government Code, the reckoning point of the redemption period was the date of sale of the
property; and (3) the latter law effectively superseded the older law, such that the redemption
period for tax delinquent properties should be counted from the date of sale of the property.
However, the Supreme Court likewise took note of the Quezon City Revenue Code of 1993,
which provided that the redemption period for tax delinquent properties within the city was
counted from the date of annotation of sale of the property at the proper registry. A special law
prevails over a general law. Thus, the Quezon City Revenue Code of 1993 prevailed over the
1991 Local Government Code in that the redemption period in the case at bar was reckoned, not
from the date of sale of the property, but from the date of annotation of sale of the property at the
proper registry.
[City Mayor of Quezon City v. Rizal Commercial Banking Corporation, GR No. 171033, 3 August
2010.]
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.

Q: Explain the statute of limitations on assessment and collection of taxes.

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* The CIR has three years counted from the date of actual filing of the return or from the last date
prescribed by law for the filing of such return, whichever comes later, to assess a national internal
revenue tax. When the CIR validly issues an assessment, he has another five years to collect the
national internal revenue tax due thereon by distraint, levy, and/or court proceeding.
[NOTE: Under the 1977 Tax Code, the government had five (5) years to assess and another five
(5) years to collect. By virtue of a 1984 amendment to the 1977 Tax Code, the assessment and
collection periods were both reduced to three (3) years. Today, under the 1997 Tax Code, the
government has three (3) years to assess and five (5) years to collect.]
** The provisions on the statute of limitations on assessment and collection of taxes shall be
construed and applied liberally in favor of the taxpayer and strictly against the government.
*** According to CIR v. Philippine Global Communication, Inc., which cited other promulgated
Supreme Court decisions, the statute of limitations for the collection of taxes must benefit both
the Government and the taxpayer. Significantly, it intends to afford protection to the taxpayer
against unreasonable investigation.
In this case, the assessment was issued on 14 April 1994. [The 1977 Tax Code, as amended,
was the governing law; the CIR had 3 years to assess and another 3 years to collect. Hence, the
CIR had until 13 April 1997 to collect the tax due.] The earliest attempt of the CIR to collect the
tax due based on this assessment was when it filed its Answer in the CTA case on 9 January
2003 which was several years beyond the three-year prescriptive period to collect. The Supreme
Court ruled that the CIR was barred from collecting the assessed tax.
[CIR v. Philippine Global Communication, Inc., GR No. 167146, 31 October 2006.]
Q: How should the statute of limitations or prescriptive period be computed?
* In CIR v. Primetown Property Group, Inc., the taxpayer filed a claim for tax refund or credit of
income tax paid in 1997. Pursuant to Section 229 of the 1997 Tax Code, it had 2 years from the
filing of its final adjusted return to file a claim for tax refund or credit. The CIR’s argument was
hinged on Article 13 of the Civil Code which states that a year is understood to mean 365 days.
Hence, the taxpayer had 730 days to file its claim for tax refund or credit. The CIR maintained
st
that the taxpayer filed its claim beyond the two-year prescriptive period, i.e., on the 731 day,
given that the year 2000 was a leap year. On the other hand, the taxpayer’s contention was
based on Section 31, Chapter VIII, Book I of the Administrative Code of 1987 which says that a
th
year consists of 12 calendar months. Having filed its claim on the last day of the 24 calendar
month from the filing of its final adjusted return, it maintained that its claim was filed within the
prescriptive period.
Clarifying the difference in treatment of legal periods by the Civil Code and the Administrative
Code of 1987, the Supreme Court held that:
(1) Under the Civil Code, a year is equivalent to 365 days, whether it be a regular year or a leap
year.
(2) There exists a manifest incompatibility in the manner of computing legal periods under the two
laws. However, given that the Administrative Code of 1987 is the more recent law, its treatment of
a year, i.e., 24 calendar months, governs the computation of legal periods.
Hence, the taxpayer’s claim was filed within the reglementary period.
[CIR v. Primetown Property Group, Inc., GR No. 162155, 28 August 2007.]
Q: What is the reckoning point with respect to amended returns?
* In CIR v. Phoenix Assurance Co., Ltd., the taxpayer filed its income tax return for 1952 on 1
April 1953. It amended said return on 30 August 1955. Thereafter, on 24 July 1958, the CIR
assessed deficiency income tax on the basis of the amended return. The CIR contended that his
right to assess had not prescribed inasmuch as the same was availed of within 5 years from the
filing of the amended return. [This case was governed by the old law granting the CIR 5 years to
assess and another 5 years to collect.] The Supreme Court held that where the deficiency
assessment is based on the amended return, which is substantially different from the original
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204. Roxas Securities. i. 21 May 2009. and a direct denial of the receipt thereof shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee.000. 29 June 1999.  GRUBA   S/Y  2011-­‐2012   4   .] *** In Barcelon.] Sec. the Supreme Court had occasion to say that an assessment is deemed to have been made within the three-year prescriptive period if notice to that effect was released. . “While a mailed letter is deemed received by the addressee in the ordinary course of mail. 7 August 2006. exclusion of certain items from the gross income. Inc. and was not meant to be a notice of the tax due and a demand to the taxpayer for payment thereof. such as the registry receipt of the assessment notice or a certification from the Bureau of Posts. A written communication containing a computation by a revenue officer of the tax liability of a taxpayer and giving him an opportunity to contest or disprove the BIR examiner’s findings is not an assessment since it is yet indefinite. Thus. 120935. petitioner denied receiving the assessment notice and the CIR failed to present substantial evidence that such notice was indeed mailed or sent by the CIR before his right to assess had prescribed and that said notice was received by petitioner. the period of limitation of the right to issue the same should be counted from the filing of the amended return. v. the Supreme Court ruled that independent evidence.” [Adamson v. even beyond the prescriptive period. Inc. and For other cases. v. [Barcelon. Here. did not constitute an assessment. Additionally. mailed. L-19727. It signals the time when penalties and interests begin to accrue against the taxpayer.. Ltd. mailed. a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax.e..000) or where the settlement offered is less than the prescribed minimum rates. when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists. the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. Court of Appeals. the assessment notice which was timely released. 128315. or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. GR No. GR No. the changes and alterations embodied in the amended return constituted substantial ones. TAX  2  SYLLABUS   DEAN  LILY  K.] ** At issue in Adamson v. would be acceptable. GR No. 20 May 1965. Roxas Securities.The Commissioner may – 204(A) Compromise the payment of any internal revenue tax.. Receipt by the taxpayer within the prescriptive period is not necessary. CIR. The Supreme Court ruled that the BIR examiners’ Joint Affidavit. an assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed. but also a demand for payment within a prescribed period. Where the basic tax involved exceeds One million pesos (P1. which was attached to the criminal complaint filed with the Department of Justice against the taxpayer. The Supreme Court held that the recommendation letter was not equivalent to a formal assessment. Pascor Realty and Development Corporation.return. this is still merely a disputable presumption subject to controversion. CIR. the taxpayer should actually receive. Authority of the Commissioner to Compromise.” Here.] Q: What constitutes a valid assessment? * In CIR v. or sent. Abate and Refund or Credit Taxes. a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. it was said that an assessment not only contains a computation of tax liabilities. [CIR v. or sent by the CIR to the taxpayer within said period. Phoenix Assurance Co. However. Court of Appeals was whether the CIR’s recommendation letter for the filing of a criminal complaint against a taxpayer for fraudulent returns and tax evasion can be considered a formal assessment. 157064. Pascor Realty and Development Corporation. GR No. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity. [CIR v. “In the context in which it is used in the NIRC. the CIR’s deficiency assessment was not barred by prescription. The Joint Affidavit served the purpose of supporting and substantiating the criminal complaint for tax evasion.

unless the applicant-taxpayer invokes provisions of law that cast doubt on the taxpayer’s obligation to withhold. Criminal tax fraud cases confirmed as such by the Commissioner of Internal Revenue or his duly authorized representative. Criminal violations already filed in court. viz: 1. Civil tax cases being disputed before the courts. exemptions. Revenue District Offices. Large Taxpayer Service (LTS). (2) bases for acceptance of compromise settlement. as amended by RR No.Q: What is meant by compromise? * Article 2028 of the Civil Code defines compromise as “an agreement whereby the parties. 6.  GRUBA   S/Y  2011-­‐2012   5   . the parties concerned are the taxpayer and the CIR. Enforcement Service and other offices in the National Office. 2. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose. Delinquent accounts. other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis. Collection Service. 5. Collection cases filed in courts. Delinquent accounts with duly approved schedule of installment payments. be the subject matter of compromise settlement.” As applied to taxation. BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT. Doubtful validity of the assessment. or (c) The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment and there is reason to believe that the assessment is lacking in legal and/or factual basis. upon taxpayer’s compliance with the basis set forth under Section 3 of these Regulations. 4. .The following cases may. Cases under administrative protest after issuance of the Final Assessment Notice to the taxpayer which are still pending in the Regional Offices. SEC. appearing to be based on presumptions and there is reason to believe that it is lacking in legal and/or factual basis. by making reciprocal concessions. Q: When may taxes be subject of a compromise? * Read RR No. 08-04. (3) prescribed minimum percentages of compromise settlement. or (d) The taxpayer failed to file a request for reinvestigation/reconsideration within 30 TAX  2  SYLLABUS   DEAN  LILY  K. (4) documentary requirements. 3. EXCEPTIONS: 1. Cases which become final and executory after final judgment of a court. and (5) approving authorities of compromise offers. 30-02. 2. Withholding tax cases. Legal Service. 4. which implements Section 204(A) of the 1997 Tax Code on compromise. . Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer.The offer to compromise a delinquent account or disputed assessment under these Regulations on the ground of reasonable doubt as to the validity of the assessment may be accepted when it is shown that: (a) The delinquent account or disputed assessment is one resulting from a jeopardy assessment (For this purpose. Criminal violations. where compromise is requested on the ground of doubtful validity of the assessment. 2. It states in part: SEC. and 7.The Commissioner may compromise the payment of any internal revenue tax on the following grounds: 1. . CASES WHICH MAY BE COMPROMISED. other than those already filed in court or those involving criminal tax fraud. 3. 3. “jeopardy assessment” shall refer to a tax assessment which was assessed without the benefit of complete or partial audit by an authorized revenue officer. who has reason to believe that the assessment and collection of a deficiency tax will be jeopardized by delay because of the taxpayer’s failure to comply with the audit and investigation requirements to present his books of accounts and/or pertinent records. On the other hand. avoid litigation or put an end to one already commenced. These RRs identify: (1) cases which may be compromised and exceptions thereto. 5. or (b) The assessment seems to be arbitrary in nature. or to substantiate all or any of the deductions. or credits claimed in his return).

or (b) The taxpayer.] TAX  2  SYLLABUS   DEAN  LILY  K.related transactions) from total assets (net of prepaid expenses.The offer to compromise based on financial incapacity may be accepted upon showing that: (a) The corporation ceased operation or is already dissolved. 19 May 2004. 226. no offer of compromise shall be entertained unless and until the taxpayer waives in writing his privilege of the secrecy of bank deposits under Republic Act No. or (d) The taxpayer is a compensation income earner with no other source of income and the family’s gross monthly compensation income does not exceed the levels of compensation income provided for under Sec. or (c) The taxpayer is suffering from a networth deficit (total liabilities exceed total assets) computed by deducting total liabilities (net of deferred credits and amounts payable to stockholders/owners reflected as liabilities. [Revenue Regulations No. provided that in the case of an individual taxpayer. except business. 2.  GRUBA   S/Y  2011-­‐2012   6   . as reflected in its latest Balance Sheet supposed to be filed with the Bureau of Internal Revenue. or (e) The taxpayer has been declared by any competent tribunal/authority/body/government agency as bankrupt or insolvent. is suffering from surplus or earnings deficit resulting to impairment in the original capital by at least 50%. other than his family home. Moreover. and provided further that the taxpayer has no sufficient liquid asset to satisfy the tax liability. Presence of circumstances that would place the taxpayer-applicant’s inability to pay in serious doubt can be a ground to deny the application for compromise based on financial incapacity of the taxpayer to pay the tax. as well as appraisal increases in fixed assets). 30-02. Revenue Regulations No. and such waiver shall constitute as the authority of the Commissioner to inquire into the bank deposits of the taxpayer.1. or (i) The assessment is based on an issue where a court of competent jurisdiction made an adverse decision against the Bureau. . Department of Finance One-Stop-Shop Tax Credit and Duty Drawback Center (Tax Revenue Group or Investment Incentive Group) and/or the courts. where the demand notice allegedly failed to comply with the formalities prescribed under Sec. The Commissioner shall not consider any offer for compromise settlement on the ground of financial incapacity of a taxpayer with Tax Credit Certificate (TCC). or (h) The assessment was issued within the prescriptive period for assessment as extended by the taxpayer’s execution of Waiver of the Statute of Limitations the validity or authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to prove that it is not authentic. deferred charges. on hand or in transit. 228 of the National Internal Revenue Code of 1997. or (e) The taxpayer failed to elevate to the Court of Tax Appeals (CTA) an adverse decision of the Commissioner. in some cases. and it appears that the taxpayer possesses no other leviable or distrainable assets. or with pending claim for tax refund or tax credit with the Bureau of Internal Revenue. that tax liabilities corresponding to the Subscription Receivable or Assets distributed/distributable to the stockholders representing return of capital at the time of cessation of operation or dissolution of business shall not be considered for compromise. taken from the latest audited financial statements.days from receipt of final assessment notice and there is reason to believe that the assessment is lacking in legal and/or factual basis. but for which the Supreme Court has not decided upon with finality. 1998. issued under the National Internal Revenue Code of 1997 or Executive Order No. Financial incapacity. 1405 or under other general or special laws. or with existing finalized agreement or prospect of future agreement with any party that resulted or could result to an increase in the equity of the taxpayer at the time of the offer for compromise or at a definite future time. or (f) The assessments were issued on or after January 1. preoperating expenses. 08-04. 4. within 30 days from receipt thereof and there is reason to believe that the assessment is lacking in legal and/or factual basis. he has no other leviable properties under the law other than his family home. Provided. or his authorized representative. 16 December 2002. provided that amounts payable or due to stockholders other than business-related transactions which are properly includible in the regular “accounts payable” are by fiction of law considered as part of capital and not liability. or (g) Assessments made based on the “Best Evidence Obtainable Rule” and there is reason to believe that the same can be disputed by sufficient and competent evidence.1 of these Regulations.

Court of Tax Appeals. 130838. the violation shall be referred to the appropriate office for criminal action in the event the taxpayer refuses to pay the suggested compromise penalty. Court of Appeals was the validity of the compromise agreement executed by PNOC and Philippine National Bank pursuant to EO No. In ruling that the compromise agreement was invalid. without the Commissioner’s stamp of approval. [Philippine National Oil Company v. an assessment that fails to inform the taxpayer of the law and the facts on which it is made is void. 22 August 2006. Court of Appeals. L-22805 and L27858.] Q: Who may compromise taxes? * The case of Security Bank Corporation v. GR No.] ** The imposition of compromise penalty is warranted only when both the taxpayer and the CIR consented thereto. (2) their application for compromise was filed beyond the effectivity of EO No. cases involving fraud. it would be premature to declare that the compromise on the estate tax liability had been perfected and consummated. 30 June 1975. the CIR made an assessment against the taxpayer for deficiency sales and percentage taxes. On the other hand. the Supreme Court cited the following reasons: (1) the tax liabilities of PNOC and PNB could not be compromised under EO No. [Security Bank Corporation v. 44 and the 1977 Tax Code. the Supreme Court said. such as acts committed as means of tax evasion. GR Nos. and compromise penalties. and (3) the compromise was contrary to public policy. As a corollary. The Supreme Court affirmed the Court of Tax Appeals’ decision in deleting the compromise penalties in the absence of proof that the taxpayer agreed or gave his conformity thereto. Since compromise penalties are only amounts suggested in settlement of criminal liability and may therefore not be imposed on the taxpayer. [Revenue Memorandum Order No. 159694.** The issue in Philippine National Oil Company v. 8 August 2007. Reyes. not involving the commission of fraudulent acts. A compromise penalty shall be paid on top of the deficiency basic tax. CIR. was ultra vires and could not have any valid and binding legal effect upon the BIR. GR Nos. Reyes. 26 April 2005. In Wonder Mechanical Engineering Corporation v. The Supreme Court held that under Section 204 of the 1977 Tax Code (even the 1997 Tax Code). [CIR v. [Wonder Mechanical Engineering Corporation v. considering the earlier determination that the assessment against the estate was void. a void assessment cannot in turn be used as a basis for the perfection of a tax compromise.  GRUBA   S/Y  2011-­‐2012   7   . In the case at bar. Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made.] Q: May a void assessment serve as basis for a compromise? * According to CIR v. She was merely notified of the findings by the CIR. shall be referred directly to the appropriate office for criminal action. surcharge. the BIR Commissioner had the sole power and authority to compromise taxes. Court of Tax Appeals.] Q: What is a compromise penalty? * In all cases of criminal violations of the 1997 Tax Code. 25% surcharge. GR No. Consequently. 44. 27 January 2006. 109976 and 112800. The act of certain revenue officials in accepting Security Bank Corporation’s offer of payment. CIR dealt with the deficiency documentary stamp tax on Security Bank Corporation’s 1983 sales of securities under repurchase agreements.] TAX  2  SYLLABUS   DEAN  LILY  K. payment of compromise penalties may be suggested to the taxpayer in lieu of criminal prosecution. 19-07. 44. and interest.

amount compromised or abated. or (b) those involving fraud. was involved in a series of claims for tax refund or credit for excise taxes paid on its purchases of aviation jet fuel from Petron Corporation for different taxable periods. That the said report shall be presented to the Oversight Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived of revenues. further. First Express Pawnshop Company. the buyer. [CIR v. the seller. it is abated or canceled. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided. in his discretion.” The Supreme Court went on to say that: “The BIR may therefore abate or cancel the whole or any unpaid portion of a tax liability. inclusive of increments. It defined abatement as the “diminution or decrease in the amount of tax imposed. stating therein the following facts and information. The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representatives. [People v. were made part of the purchase price of the aviation jet fuel. The Supreme Court ruled that based on Section 204(c) of the 1997 Tax Code. GR Nos.] 204(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority.” such that to abate is “to nullify or reduce in value or amount.  GRUBA   S/Y  2011-­‐2012   8   . That the original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided. however. excessively assessed. 152532. in the absence of showing that the taxpayer accepted the same. for which the taxpayer is directly liable. the Supreme Court found that although referred to in the pleadings as a compromise. and reasons for the exercise of power: Provided. because an excessive or erroneous tax is not compromised. First Express Pawnshop Company. excluding withholding taxes. amount involved. being the manufacturer of the aviation jet fuel) was the proper party TAX  2  SYLLABUS   DEAN  LILY  K. No mutual concessions need be made. All criminal violations may be compromised except: (a) those already filed in court. GR No. Q: Who may file a claim for tax refund or credit under this provision? * Silkair (Singapore) Pte. 16 August 2005. the agreement between the parties was actually an abatement or a cancellation of an unjust. 16 June 2009. a report on the exercise of his powers under this Section. every six (6) months. whereas in abatement or cancellation. has a similar set of facts. among others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise. subject to the provisions of Section 230 of this Code: Provided. Q: How is compromise different from abatement? * In People v. refund the value of internal revenue stamps when they are returned in good condition by the purchaser. the statutory taxpayer (Petron in this case. As between Petron. Compromise is marked by mutual concessions. Ltd. being indirect taxes. That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. no mutual concessions between the taxpayer and the CIR are made. it paid the excise taxes due on the transactions because said taxes. if its assessment is excessive or erroneous.*** CIR v. or if the administration costs involved do not justify the collection of the amount due..” Here. the Supreme Court explained abatement or cancellation of a tax. Sandiganbayan. and unreasonable tax. and. Silkair’s main argument was that it was exempt from payment of excise tax by virtue of Section 135(b) of the 1997 Tax Code and Article 4(2) of the RP-Singapore Air Transport Agreement. and Silkair.] 204(B) Abate or cancel a tax liability. or (2) The administration and collection costs involved do not justify the collection of the amount due. redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax. Any request for conversion into refund of unutilized tax credits may be allowed. when: (1) The tax or any portion thereof appears to be unjustly or excessively assessed. 172045-46. Sandiganbayan. the latter contended that in reality. Inc. Inc. That a return filed showing an overpayment shall be considered as a written claim for credit or refund. Only correct taxes should be paid. The Supreme Court affirmed the Court of Tax Appeals’ decision in deleting the compromise penalty in addition to the deficiency documentary stamp taxes.

the 1997 Tax Code was already in effect. before resorting to an action in court.] ** On the basis of CIR v.. Bhd. GR No. as withholding agent was allowed to file the claim for tax refund on behalf of Prism Transactive (M) Sdn. 12 September 2008. Acosta sought to refund an overpayment of taxes withheld on her compensation income in the year 1996.. [CIR v. in case the taxpayer does not file a claim for refund of withholding taxes. “a return filed showing an overpayment shall be considered as a written claim for credit or refund. Mirant Pagbilao Corporation revolved around whether MPC was entitled to a claim for tax refund or credit of unutilized input VAT from 1993 to 1996. Protesting of Assessment. Under Section 204(c) of the 1997 Tax Code. 25 August 2010. however. For this purpose. GR No. GR No. Smart Communications. Ltd. a claimant must first file a written claim for refund. .that can claim the refund. That a preassessment notice shall not be required in the following cases: (a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. categorically demanding recovery of overpaid taxes with the CIR. also.] CHAPTER II . [CIR v. or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. In view of the foregoing. Smart Communications. GR No. CIR. 25 February 2010. not the 1997 Tax Code. the taxpayer and the withholding agent need not be related parties. 184823. was inapplicable as it pertained to taxes erroneously or illegally paid. v. v. [CIR v. he shall first notify the taxpayer of his findings: provided. 171383. GR Nos. Under Section 230 of the 1977 Tax Code. Inc.] Q: Is a written claim for tax credit or refund always required to be filed? * In CIR v..CIVIL REMEDIES FOR COLLECTION OF TAXES To put the topic of remedies of the government in perspective. However. Corollarily. 172129. 179045-46. for failure to file a written claim for refund which consisted of a categorical demand of reimbursement. Inc. 154068. 3 August 2007. CIR. 228. the Supreme Court held that the two-year prescriptive period under Section 204(C) of the 1997 Tax Code (which commences from the date of payment of the tax). Silkair (Singapore) Pte. Smart Communications. CIR v. Inc. or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable TAX  2  SYLLABUS   DEAN  LILY  K. 6 October 2010. a Malaysian corporation. the person entitled to claim a tax refund is the taxpayer.] Q: When does the two-year prescriptive period under Section 204 apply? When does it not apply? * The issue in CIR v. 184398. The Supreme Court resolved that the prevailing law at that time was the 1977 Tax Code. Acosta. Mirant Pagbilao Corporation. At issue was whether her amended return indicating an overpayment of taxes was sufficient compliance with the requirement of a written claim for refund.When the Commissioner or his duly authorized representative finds that proper taxes should be assessed. Ltd. read Section 228. Acosta. applying the old Tax Code.  GRUBA   S/Y  2011-­‐2012   9   .” Hence. GR No. Sec. Acosta’s claim must be denied. Inc. the withholding agent may file the claim. At the time she filed her judicial claim. it applied the two-year prescriptive period under Section 112(A) of the 1997 Tax Code (the starting point of which is the close of the taxable quarter when the sales where made). 14 November 2008.. In ruling that MPC’s claim was filed out of time. Section 204(C) of the 1997 Tax Code states in part: “No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty:” [Silkair (Singapore) Pte. Aichi Forging Company of Asia.

or from the lapse of one hundred eighty (180)-day period. abate. *** If the taxpayer timely files a protest and such protest is denied (or is not acted upon). the assessment shall become final. **** The government may also: (1) compromise. the government may resort to distraint. Failure to protest and submit all relevant supporting documents shall cause the assessment to become final. and by levy upon real property and interest in rights to real property. as well as of real property and improvements thereon. credits. otherwise. but not limited to. or judicial proceeding to collect. capital equipment. and (b) By civil or criminal action. or effects. such as. Remedies for the Collection of Delinquent Taxes. Within a period to be prescribed by implementing rules and regulations. the government may resort to distraint. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made. all relevant supporting documents shall have been submitted. At this point. including stocks and other securities. (3) enforce statutory penal provisions. is the approval of the probate court necessary? * The issue in Marcos v. Thereafter. The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided.  GRUBA   S/Y  2011-­‐2012   10   . Failure to appeal shall cause the assessment to become final. without the cognition and authority of the court sitting in probate over the supposed will of the deceased. including the preservation or transportation of personal property distrained and the advertisement and sale thereof. The Supreme Court answered in this wise: “There is nothing in the Tax Code. traded or transferred to non-exempt persons. bank accounts and interest in and rights to personal property. 205. the Commissioner or his duly authorized representative shall issue an assessment based on his findings. levy.The civil remedies for the collection of internal revenue taxes. the taxpayer must submit all revelant supporting documents. otherwise. the taxpayer shall be required to respond to said notice. (2) enforce tax liens. . has been sold. debts. and any increment thereto resulting from delinquency shall be: (a) By distraint of goods. Sec. If the taxpayer fails to respond. and (4) enforce forfeiture of property. If the protest is denied in whole or in part. the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision. Within sixty (60) days from filing of the protest. and other personal property of whatever character. and in the pertinent remedial laws that implies the necessity of the probate or estate TAX  2  SYLLABUS   DEAN  LILY  K. Q: For the enforcement and collection of deficiency estate taxes. the taxpayer may respond to and seek clarification of the same. or judicial proceeding to collect. At this point. vehicles. the decision shall become final. the assessment shall be void. fees or charges. 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. estate tax deficiencies. That the remedies of distraint and levy shall not be availed of where the amount of tax involve is not more than One hundred pesos (P100). executory and demandable. Court of Appeals was whether the BIR had the authority to collect. the taxpayer may appeal to the CTA by filing a petition for review. or cancel taxes. chattels. or is not acted upon within one hundred eighty (180) days from submission of documents. * Upon receipt of a valid Preliminary Assessment Notice (PAN). or (d) When the excise tax due on exciseable articles has not been paid. levy.withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year. otherwise. The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner. by the summary remedy of levying upon and sale of real properties of the decedent. or (e) When the article locally purchased or imported by an exempt person. the taxpayer may protest against it by filing a request for reconsideration or reinvestigation. machineries and spare parts. however. ** Upon receipt of a valid Final Assessment Notice (FAN).

’ In the mind of the trial court and the Court of Appeals. Meanwhile.’ In plain words. not fraudulent and unless and until the BIR has made a final determination of what is supposed to be the correct taxes. Court of Appeals. Herein lies a whale of difference between [Ungab v. 119322. U. In this case. which he filed a protest against. the taxpayer should not be placed in the crucible of criminal prosecution. through declaration of registered wholesale prices lower than the actual wholesale prices resulting in underpayment of income. say. GR No. 120880. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return. (The “Notice of Taxpayer” they had earlier received was not equivalent to a formal assessment. having already become final. and demandable. Later. [Marcos v.S.” [Ungab v. His contention was that the filing of the informations was premature because the CIR had not yet resolved his protest on the assessment. six informations were filed against Ungab. there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution.” The High Court went on to say that the deficiency tax assessment. the CIR filed a complaint for violation of the criminal provisions of the Tax Code. GR Nos. the Supreme Court held that an assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. there must be a prima facie showing of a willful attempt to evade taxes. executory.] Q: A precise computation and assessment is required for a civil action to collect tax deficiencies. Court of Appeals. L-41919-24. In holding that Ungab v. Fortune’s situation is quite apart factually since the registered wholesale price of the goods. and forest charges. There was a willful attempt to evade tax in [Ungab v.” [CIR v. the Supreme Court clarified the Ungab v. ad valorem. 5 June 1997. The facts of this case are as follows: Upon examination of the income tax returns filed by Ungab for the calendar year ended 31 December 1973. is presumed to be the actual wholesale price. Cusi.  GRUBA   S/Y  2011-­‐2012   11   . the complaints filed before the DOJ for investigation charged private respondents with fraudulent concealment of the actual price of products sold. before the same can be enforced and collected. respondents were involved in sales of common shares of stock for which they had paid capital gains tax and value-added tax. Ungab received an assessment representing income tax. the CIR sent them a “Notice of Taxpayer” informing them of deficiencies on their payment of capital gains tax and value-added tax. and value-added taxes. Respondents sought to suspend the criminal proceedings as there was yet no final assessment on their tax liability. 30 May 1980. the BIR examiner discovered that Ungab failed to declare his income derived from banana saplings. GR No. for criminal prosecution to proceed before assessment. Is such computation and assessment necessary prior to criminal prosecution for.] ** Sixteen years later. The Supreme Court ruled that while there can be no civil action to enforce collection before the assessment procedures have been followed. Court of Appeals. tax evasion? * In Ungab v. Meanwhile. Cusi. the pronouncement therein that deficiency assessment is not necessary prior to prosecution is pointedly and deliberately qualified by the Court with the following statement quoted from Guzik v. therefore. Court of Appeals was promulgated. Cusi] carefully. Cusi decision in this wise: “Reading [Ungab v. business tax. Cusi] and the case at bar. “A crime is complete when the violator has knowingly and wilfullly filed a fraudulent return with intent to evade and defeat the tax.) TAX  2  SYLLABUS   DEAN  LILY  K.settlement court’s approval of the state’s clam for estate taxes. the decision in CIR v.] *** In Adamson v. Cusi was inapplicable. 4 June 1996. approved by the BIR.: ‘The crime is complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. could already be collected through the summary remedy of distraint or levy pursuant to Section 205 of the 1997 Tax Code. and the government's failure to discover the error and promptly to assess has no connections with the commission of the crime. Cusi] because of the taxpayer’s failure to declare in his income tax return ‘his income derived from banana saplings.

e.To safeguard the interest of the Government. 16 February 1997. in the presence of two (2) witnessed. The issue was whether the Sandiganbayan had jurisdiction over the person of Azarcon. Q: Does a custodian of a distrained property.000. or charge.” An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the tax. a complaint was filed against Azarcon. (The Sandiganbayan generally has jurisdiction over crimes or offenses committed by: (1) a public officer. together with any increment thereto incident to delinquency. GR No. Otherwise stated. for malversation of public funds. was decided differently because the facts surrounding it varied from the situation in Ungab v..in sufficient quantity to satisfy the tax. bank accounts. Sandiganbayan. [Adamson v. become a public officer for that purpose? * In Azarcon v. Later.] [NOTE: Reconciling these three cases together. Summary Remedies. or the Revenue District Officer. the Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who. the Commissioner or his duly authorized representative. The Supreme Court held that when fraudulent tax returns are involved. the CIR failed to point to a specific law or rule which required that the tax base must be the (higher) actual wholesale price. and interests in and rights to personal property of such persons . now Section 222(a) of the 1997 Tax Code says that “a proceeding in court for the collection of such tax may be filed without assessment. GR No. Court of Appeals. In CIR v. if the amount involved is One million pesos (P1. there arose a legal question on the proper tax base. 120935.000) or less. the Supreme Court said. The second case. Here. Cusi and Adamson v. whether it should be the (lower) registered wholesale price or the (higher) actual wholesale price.] Sec.Upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same at the time required. 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 issue was whether the filing of the criminal complaints by the DOJ was premature for lack of a formal assessment. credits.000).  GRUBA   S/Y  2011-­‐2012   12   . stating that the BIR’s power to authorize a private individual to act as a depositary or custodian could not be stretched to include the power to appoint him as a public officer. and (2) a private individual when the complaint charges that private individual either as a co-principal. who is a private individual. . if the amount involved is in excess of One million pesos (P1.000. accomplice. leave a copy thereof in the premises where the property distrained is located. the gross disparity in the taxes due and the amounts actually declared by the private respondents constitutes badges of fraud. or is intending to leave the Philippines or to remove his property therefrom or to hide or conceal his property or to perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him. or accessory of a public officer. “[a]rguably. it appears that the general rule still is that a gross disparity in the taxes due and the amounts actually declared by the taxpayer gives cause for the CIR to pursue his/its criminal prosecution for filing a fraudulent tax return. 21 May 2009. non-compliance of which was tantamount to a criminal violation. and the expenses of the distraint and the cost of the TAX  2  SYLLABUS   DEAN  LILY  K. including stocks and other securities. after which the said property shall be deemed to have been placed under constructive distraint. fraud or omission. chattels or effects. Sandiganbayan. Court of Appeals. in his opinion. 116033.] Sec. a private individual. regardless of whether a deficiency assessment has been made. 206. Constructive Distraint of the Property of A Taxpayer. Court of Appeals. the revenue officer effecting the constructive distraint shall proceed to prepare a list of such property and. [Azarcon v.) The Supreme Court ruled in the negative. shall seize and distraint any goods. is retiring from any business subject to tax. The constructive distraint of personal property shall be affected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner whatever. at any time within ten (10) years from discovery of the falsity. Court of Appeals. Cusi. i. debts. the BIR effected a constructive distraint over the truck owned by a certain Ancla which was in the possession of Azarcon. The latter signed the receipt for the distrained property. and the personal property.” The Supreme Court likewise confirmed the applicability of and upheld the decision in Ungab v. . 207(A) Distraint of Personal Property. CIR v. without the express authority of the Commissioner. 207.

Within ten (10) days after receipt of the warrant. the corporation. other than the officer referred to in Section 208 of this Code shall. real property may be levied upon. manager. if required to do so.subsequent sale. or if there be none. a copy of the warrant of distraint. be submitted by the distraining officer to the Revenue District Officer. . at public auction. That the Commissioner or his duly authorized representative.After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in this Section. Sec. TAX  2  SYLLABUS   DEAN  LILY  K. . A report on the distraint shall. 207(B) Levy on Real Property. a report on any levy shall be submitted by the levying officer to the Commissioner or his duly authorized representative: Provided. any internal revenue officer designated by the Commissioner or his duly authorized representative shall prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty due from him. transfer the stocks or other securities sold in the name of the buyer. written notice of the levy shall be mailed to or served upon the Register of Deeds for the province or city where the property is located and upon the delinquent taxpayer. or effects or other personal property were taken. according to rules and regulations prescribed by the Secretary of Finance. within ten (10) days from receipt of the warrant. to the occupant of the property in question. further. That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary. including expenses. shall have the authority to lift warrants of levy issued in accordance with the provisions hereof. the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the Government. Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits. specifying. however. subject to rules and regulations promulgated by the Secretary of Finance.the sale. That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary: Provided. the time and place of sale and the articles distrained. and issue. Sec. The time of sale shall not be less than twenty (20) days after notice. In the case of Stocks and other securities. signed by himself. effects or other personal property distrained. and no charge shall be imposed for the services of the local internal revenue officer or his deputy. and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency.  GRUBA   S/Y  2011-­‐2012   13   . At the same time. a copy of which. before simultaneously or after the distraint of personal property belonging to the delinquent.The Revenue District Officer or his duly authorized representative. One place for the posting of such notice shall be at the Office of the Mayor of the city or municipality in which the property is distrained. The expenses chargeable upon each seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending . including stocks and other securities so distrained. chattels. chattels. to his agent or the manager of the business in respect to which the liability arose. proceed with the levy on the taxpayer's real property. treasurer or other responsible officer of the corporation. and a copy thereof furnished the corporation. the Commissioner or his duly authorized representative shall. Upon receipt of the copy of the bill of sale. Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president. Said certificate shall operate with the force of a legal execution throughout the Philippines. forthwith cause a notification to be exhibited in not less than two (2) public places in the municipality or city where the distraint is made. which issued the said stocks or securities.The officer serving the warrant of distraint shall make or cause to be made an account of the goods. To this end. company or association shall make the corresponding entry in its books. through duly licensed commodity or stock exchanges. or at the dwelling or place of business of such person and with someone of suitable age and discretion. Sale of Property Distrained and Disposition of Proceeds. subject to rules and regulations promulgated by the Secretary of Finance. manager. and to the Revenue Regional Director: Provided. In case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on personal property. treasurer or other responsible officer of the bank. Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president. At the time and place fixed in such notice. the said revenue officer shall sell the goods. chattels. or with his agent. The warrant of distraint shall be sufficient authority to the person owning the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits. have the power to lift such order of distraint: Provided. or if he be absent from the Philippines. shall be left either with the owner or person from whose possession such goods. company or association. Levy shall be affected by writing upon said certificate a description of the property upon which levy is made. to which list shall be added a statement of the sum demanded and note of the time and place of sale. or with the approval of the Commissioner. within thirty (30) days after execution of the distraint. or other personal property. shall be returned to the owner of the property sold. Any residue over and above what is required to pay the entire claim. to the highest bidder for cash. . Upon receipt of the warrant of garnishment. upon recommendation of the Commissioner. the corresponding certificates of stock or other securities. the officer making the sale shall execute a bill of sale which he shall deliver to the buyer. or effects. That the Commissioner or his duly authorized representative shall. 209. Procedure for Distraint and Garnishment. further. upon recommendation of the Commissioner. company or association which issued the stocks or other securities. upon recommendation of the Commissioner. 208.

the Internal Revenue Officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter. Sec. Purchase by Government at Sale Upon Distraint.In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes. a return by the distraining or levying officer of the proceedings shall be entered upon the records of the Revenue Collection Officer. . penalties or costs arising under this Code or in compromise or adjustment of any claim therefore. The Revenue Collection Officer. in consultation with the Revenue district Officer. . .When the amount bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of the articles offered for sale. such advances shall be reflected and supported by receipts. Report of Sale to Bureau of Internal Revenue. the excess shall be turned over to the owner of the property. . subject to the rules and regulations prescribed by the Secretary of Finance. the name of the taxpayer against whom taxes are levied. sell and dispose of the same of public auction or with TAX  2  SYLLABUS   DEAN  LILY  K. 214. 215. Property so purchased may be resold by the Commissioner or his deputy. upon registration with his office of any such declaration of forfeiture. 216. the taxpayer. That in case the proceeds of the sale exceeds the claim and cost of sale. but if the property be not thus redeemed. to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court. Forfeiture to Government for Want of Bidder. and a short description of the property to be sold. Redemption of Property Sold. however.  GRUBA   S/Y  2011-­‐2012   14   . the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall.If at any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale. upon approval by the Revenue District Officer may. 213. penalties. Sec. the Revenue District officer and the Revenue Regional Director. and the Revenue District Officer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed. the officer making the same shall make a report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an official record. describing the property sold stating the name of the purchaser and setting out the exact amount of all taxes. advance an amount sufficient to defray the costs of collection by means of the summary remedies provided for in this Code. . The owner shall not. 210. and the advertisement and subsequent sale. . or any one for him. the officer conducting the proceedings shall proceed to advertise the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale. penalties and costs due thereon. be deprived of the possession of the said property and shall be entitled to the rents and other income thereof until the expiration of the time allowed for its redemption. and said Commissioner may. by publication once a week for three (3) weeks in a newspaper of general circulation in the municipality or city where the property is located. together with interest on said purchase price at the rate of fifteen percent (15%) per annum from the date of purchase to the date of redemption. upon the giving of not less than twenty (20) days notice. Release of Distrained Property Upon Payment Prior to Sale.Within two (2) days after the sale. It shall be the duty of the Register of Deeds concerned. as the officer conducting the proceedings shall determine and as the notice of sale shall specify. penalties and interest: Provided. the forfeiture shall become absolute. . penalties and interest. Sec. Resale of Real Estate Taken for Taxes. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale. or any one for him may redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer the full amount of the taxes and penalties. out of his collection. the delinquent taxpayer. penalties and costs. Within one (1) year from the date of such forfeiture. and such payment shall entitle the person paying to the delivery of the certificate issued to the purchaser and a certificate from the said Revenue District Officer that he has thus redeemed the property. 211. Sec. If he does not do so. or on the premises to be sold.Sec. shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. together with interest thereon and the costs of sale. however. 212.The Commissioner shall have charge of any real estate obtained by the Government of the Philippines in payment or satisfaction of taxes. Sec. including. At any time before the day fixed for the sale. the preservation or transportation in case of personal property. Sec. and interest thereon from the date of delinquency to the date of sale. The Revenue Collection Officer. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in public and conspicuous place in the barrio or district in which the real estate lies and.Within twenty (20) days after levy. the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue. shall then make out and deliver to the purchaser a certificate from his records. the Commissioner or his deputy may purchase the same in behalf of the national Government for the amount of taxes. the taxpayer may discontinue all proceedings by paying the taxes. and said property thereafter shall be free form the lien of such taxes and penalties.Within one (1) year from the date of sale. the goods or effects distrained shall be restored to the owner. Advertisement and Sale. and such advertisement shall cover a period of a least thirty (30) days. In his monthly collection reports. Within five (5) days after the sale. both in cases of personal and real property including improvements found on the latter. shall have the right of paying to the Revenue District Officer the amount of the public taxes. showing the proceedings of the sale.

218. 9334. Section 218 of the 1997 Tax Code does not have a counterpart provision in the 1991 Local Government Code. and disposing the properties of Angeles Electric Corporation. [David v. penalties.] Sec. including all expenses. not to local taxes.] *** Previously.The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due. effectively imposing tax on all importations of the abovementioned products in to the Subic Special Economic Freeport Zone. 31 October 1951. Sec. Moreover. Thus. GR No. and wines into the Subic Special Economic Freeport Zone. 29 June 2010. However. 166134.  GRUBA   S/Y  2011-­‐2012   15   . the proceeds of the sale shall be deposited with the National Treasury. 9334. have no jurisdiction to restrain the collection of taxes. Q: Explain the government’s policy on injunctions that restrain the collection of taxes. Section 6 of RA No. That this lien shall not be valid against any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the Commissioner in the office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located. Angeles Electric Corporation. 219. eventually ruling that Courts of First Instance. distilled spirits. the High Court likewise noted that injunctions enjoining the collection of local taxes are frowned upon. Further Distraint or Levy. Section 131 of the 1997 Tax Code exempted from payment of tax all importations of cigars. and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided. [Republic v. No public record could be consulted TAX  2  SYLLABUS   DEAN  LILY  K. the Supreme Court upheld the RTC’s decision in ordering the issuance of the writ of preliminary injunction enjoining Angeles City and its City Treasurer from levying. is collected. Ramos answered in the negative. L-4300. which was enacted in 2005. Nature and Extent of Tax Lien. Angeles Electric Corporation. dispose of the same at private sale. fee or charge imposed by this Code. amended Section 131 of the 1997 Tax Code. .000 ties in February 1015. GR No. [Angeles City v. fermented liquors.If any person.] ** In Angeles City v. Caguioa was the preliminary injunction granted by Judge Caguioa which stayed the implementation of RA No. . Q: What is the nature of a tax lien? * Does the lien for internal revenue tax follow the property subject to the tax into the hands of a third party when at the time of transfer. there was nothing to show that Pujalte & Co. the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid. and an accounting of the same shall rendered to the Chairman of the Commission on Audit. At issue in Republic v. The case provided a survey of cases discussing the prohibition against injunctions that restrain the collection of taxes. partnership. Sec. In either case. * On whether the courts can restrain the collection of taxes on the ground that their validity is disputed by the taxpayer. Rafferty. joint-account (cuentas en participacion).prior approval of the Secretary of Finance. David v. the Supreme Court stated that the suspension of the implementation of the assailed law was tantamount to an injunction that restrained the collection of taxes. The Supreme Court nullified Judge Caguioa’s order granting the preliminary injunction on the ground that no clear case of abuse was established. corporation. association or insurance company liable to pay an internal revenue tax.No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax. Caguioa. . 168584. neglects or refuses to pay the same after demand. were delinquent taxpayers [for forest charges]. Injunction not Available to Restrain Collection of Tax. selling. now Regional Trial Courts. the ruling of the Supreme Court was that the prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applied only to national internal revenue taxes. no demand had been made and the purchaser had no notice of the existence of the lien? In Hongkong & Shanghai Banking Corporation v. GR No. with interests. Ramos. 15 October 2007. the Supreme Court answered in this wise: “When the Hongkong & Shanghai Banking Corporation purchased and acquired these 2. 217. cigarettes.

Later. Two final assessment notices were issued in February 1991. Thereafter. [CIR v. Enriquez. Tulio. in CIR v. L-13188. Enriquez. ** In CIR v. GR No. the CIR served a warrant of distraint over four barges owned by Maritime Company of the Philippines to satisfy various deficiency taxes of said company. as the particular situation may require. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable. GR No. or a proceeding in court for the collection of such tax may be filed without assessment. [CIR v.” Besides. Enriquez. .Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be conducted by legal officers of the Bureau of Internal Revenue but no civil or criminal action for the recovery of taxes or the enforcement of any fine. L-78391. falsification. the same two barges were subject to levy on execution by virtue of a civil case filed and won against Maritime Company of the Philippines.] ** In Republic v.” As in the previous case. 21 October 1988. That in a fraud assessment which has become final and executory. the distraint was also made long before the writ of execution was issued to implement the levy on execution. at any time within ten (10) years after the discovery of the falsity. Later. GR No. 222. (2) filing a fraudulent return with intent to evade tax. the same four barges were levied upon execution to satisfy a judgment for unpaid wages and other benefits of employees of Maritime Company of the Philippines.” [Hongkong & Shanghai Banking Corporation v. . 222(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return.] TAX  2  SYLLABUS   DEAN  LILY  K. NLRC. and (3) failure to file a return. 74965.The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action. or omission. there was no valid subsisting lien upon the ties. the tax may be assessed. GR No. the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. Form and Mode of Proceeding in Actions Arising under this Code. 25 October. NLRC.] Sec. Tulio. On this date. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.to protect the purchaser from loss by reason of the existence of a secret lien. A business of ordinary prudence could not be expected to foresee that the personal property which he had taken in satisfaction of a debt was burdened by a tax. fraud or omission: Provided. 9 November 1994. here. Remedy for Enforcement of Statutory Penal Provisions. Sec. Sec. the Supreme Court held that “the claim of the government predicated on a tax lien is superior to the claim of a private litigant predicated on a judgment. penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner. The period within which to assess tax is ten years from discovery of the fraud. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable. the distraint was made long before the writ of execution was issued to implement the levy on execution. the CIR discovered Tulio’s omission. the CIR has another five years to collect. 2005. 220. They are: (1) filing a false return. Q: Cite instances when the ten-year prescriptive period to assess applies. 139858. because no demand had been made and because the plaintiff had no notice of the tax. 15 November 1918. * Section 222(a) of the 1997 Tax Code specifies three instances when the running of the threeyear prescriptive period does not apply.  GRUBA   S/Y  2011-­‐2012   16   . 221. The Supreme Court’s ruling was that the two assessments were issued well within the ten-year prescriptive period. Rafferty. The Supreme Court ruled that “the claim of the government predicated on a tax lien is superior to the claim of a private litigant predicated on a judgment. In September 1989. the CIR served a warrant of distraint over two barges owned by Maritime Company of the Philippines to satisfy various deficiency taxes of said company. subject to the approval of the Commissioner.] *** Related to the previous case. Adopting the rationale in Republic v. [Republic v. Tulio failed to file his tax returns (covering percentage taxes) for 1986 and 1987.

the exceptions to the law on prescription should perforce be strictly construed. For the purpose of safeguarding taxpayers from any unreasonable examination. 4 April 1990. both the Commissioner and the taxpayer have agreed in writing to its assessment after such time. 20-90. and (4) the taxpayer was not furnished a copy of the waiver. The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals.” In this case. 16 December 2004. As a corollary. the law on prescription. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. 20-90.222(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax. Hence. (2) it was signed only by a revenue district officer. 2 August 2001. should be liberally construed in order to afford such protection. FMF Development Corporation. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. the Supreme Court found that the waiver of the statute of limitations was invalid and not binding for the following reasons: (1) the waiver did not specify a definite agreed date between the BIR and the taxpayer within which the former could assess and collect revenue taxes. [Revenue Memorandum Order No. the second copy for the taxpayer. 162852. being a remedial measure. followed by an amended return filed the next month. Revenue Delegation Authority Order No. (3) the date of acceptance by the BIR could not be ascertained.  GRUBA   S/Y  2011-­‐2012   17   . Among these rules are the following: (1) The waiver must be in proper form prescribed by RMO No. investigation or assessment. CIR explained the rationale of a waiver of the statute of limitations. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. CIR. 20-90. should be filled up. 05-01. (6) The waiver must be in three copies: the original copy to be attached to the docket of the case. In February 1999. and not by the CIR. to wit: (1) the taxpayer was not furnished a copy of the waiver. thus: “A waiver of the statute of limitations under the NIRC. In dispute was the validity of the waiver. the waiver did not validly extend the assessment period. Thus. v. v. Inc. [Philippine Journalists. and the date of such acceptance by the BIR should be indicated. which would have extended the assessment period until October 1999. the corporation’s president executed a waiver of the statute of limitations. to a certain extent. The Supreme Court held that the waiver was incomplete and defective for non-compliance with the procedures laid down in RMO No. our tax law provides a statute of limitations in the collection of taxes. and (3) it did not contain the date of acceptance by the BIR.] *** In the case of CIR v. Inc. Q: What is a waiver of the statute of limitations? What are the requirements for a valid waiver of the statute of limitations? * RMO No. and the third copy for the Office accepting the waiver. (2) The waiver must be signed by the taxpayer himself or his duly authorized representative. (2) the waiver was signed only by a revenue district officer. 20-90 and RDAO No. 05-01 set the rules for the proper execution of the waiver. is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. the tax may be assessed within the period agreed upon. TAX  2  SYLLABUS   DEAN  LILY  K. (5) Both the date of execution by the taxpayer and the date of acceptance by the BIR should be prior to the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed. the corporation filed its annual income tax return in April 1996. (3) The waiver must be duly notarized.] ** Philippine Journalists. GR No. and not by the CIR. The phrase “but not after ___ [20___]. (4) The CIR or the revenue official authorized by him must sign the waiver indicating the BIR’s acceptance and agreement to the waiver.” which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription.

] 222(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. if the taxpayer informs the Commissioner of any change in address. which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove. GR No. [CIR v. (2) the waivers failed to indicate the date of acceptance. 222(e) Provided. the running of the statute of limitations on assessment and collection of taxes is considered suspended “when the taxpayer requests for a reinvestigation which is granted by the Commissioner.] TAX  2  SYLLABUS   DEAN  LILY  K. The Supreme Court enumerated the defects in the waivers. the corporation’s accountant executed two Waivers of the Defense of Prescription on different dates. and no property could be located. thus: (1) the waivers were executed without the notarized written authority of the representative to sign the waiver in behalf of the taxpayer. and (3) the fact of receipt by the taxpayer of its file copy was not indicated in the original copies of the waivers. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon.] [NOTE: Remember that any suspension of the running of the statute of limitations works to the detriment of the taxpayer in that the tax authorities are given more time to assess and/or to collect. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. Consequently. FMF Development Corporation.” [Section 223.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 both cases.] * Bank of the Philippine Islands v.] 222(d) Any internal revenue tax. the Supreme Court made the following points: (1) A request for reconsideration or reinvestigation by the taxpayer. 178087. The CIR banked on these waivers to sustain the validity of the assessment made against the corporation. the period to assess or collect taxes was not extended. 5 May 2010. [NOTE: Recall that the government has either 3 years or 10 years to assess. [Emphasis supplied. Due to the defects in the waivers. the government has 5 years to collect. 30 June 2008. 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. his authorized representative.] Q: Cite instances on the suspension or interruption of the running of statute of limitations. Suspension of Running of Statute of Limitations.] **** In CIR v. [Relate the following cases to Section 222(c). CIR is instructive on the topic of suspension of running of the statute of limitations on collection. The Supreme Court ruled against the CIR as the two waivers were not compliant with the procedures laid down in RMO No. Kudos Metal Corporation. when the warrant of distraint or levy is duly served upon the taxpayer. that. 1997 Tax Code. and when the taxpayer is out of the Philippines. in respect of any deficiency. or a member of his household with sufficient discretion. will not suspend the running thereof. . the running of the Statute of Limitations will not be suspended. Sec. 167765. 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. the assessments were issued by the CIR beyond the three-year period and are void. 05-01. 223. without a valid waiver of the prescriptive periods for the assessment and collection of tax. That nothing in the immediately preceding 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. Kudos Metal Corporation.] In ruling that the government’s right to collect had already prescribed. (2) Even in the absence of a waiver. 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. 20-90 and RDAO No. however. GR No. [This case was governed by the provisions of the 1977 Tax Code. the CIR was unable to assess Kudos Metal Corporation of its tax liability for the taxable year 1998 within the three-year prescriptive period stated in Section 203 of the 1997 Tax Code. However.[CIR v.  GRUBA   S/Y  2011-­‐2012   18   .

or if the same be paid by the person used shall be repaid or reimbursed to him. and all apparatus used I or about the illicit production of such articles may. Sec. shall be accounted for and dealt with the same way. citing CIR v. any judgment. or costs shall be paid or reimbursed in behalf of a person who has acted negligently or in bad faith. and except as specially provided.] Sec.] ** Read also CIR v. which provides one other exception to the statute of limitations on collection of taxes. other manufactured products of tobacco. upon forfeiture. Generally. or destruction. through the Solicitor General.The forfeiture of chattels and removable fixtures of any sort shall be enforced by the seizure and sale. he has induced government authorities to delay collection of the assessed tax. must be preceded by a waiver of the statute of limitations. . upon approval of the Secretary of Finance. or labels may. 225. All other articles subject to excise tax. Remedy for Enforcement of Forfeitures. Forfeited property shall not be destroyed until at least twenty (20) days after seizure. According to CIR v. GR No. as the case may require. Distilled spirits. CIR. Philippine Global Communications. 104 Phil. 224. where the taxpayer merely filed two protest letters requesting for a reconsideration. [Bank of the Philippine Islands v. Suyoc Consolidated Mining Co. The burden of proof that the taxpayer’s request for reinvestigation had been actually granted shall be on the BIR Commissioner. .. [CIR v. where the Supreme Court said: “In this case.When the Commissioner or his duly authorized representative finds that proper taxes should be assessed. Suyoc Consolidated Mining Co. (4) The request for reinvestigation must also be granted by the BIR Commissioner to suspend the running of the statute of limitations. a request for reconsideration or reinvestigation by the taxpayer. ETC. The forfeiture of real property shall be enforced by a judgment of condemnation and sale in a legal action or proceeding.When an action is brought against any Internal Revenue officer to recover damages by reason of any act done in the performance of official duty. Philippine Global Communications. Sec. the taxpayer may be estopped from raising the defense of prescription when by his repeated requests or positive acts. 139736. CHAPTER III – PROTESTING AN ASSESSMENT. Suyoc Consolidated Mining Co. even in the absence of waiver. Inc. while a request for reinvestigation refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. forfeitures. and the Commissioner is notified of such action in time to make defense against the same. be destroyed by order of the Commissioner. Satisfaction of Judgment Recovered Against any Internal Revenue Officer. REFUND.  GRUBA   S/Y  2011-­‐2012   19   . which have been manufactured or removed in violation of this Code. Sec. damages or costs recovered in such action shall be satisfied by the Commissioner. be sold or destroyed in the discretion of the Commissioner. he shall first notify the taxpayer of his findings: provided. 17 October 2005. the government’s right to collect the alleged deficiency tax was barred by prescription. or with willful oppression. 228. (5) The Supreme Court had occasion to discuss the case of CIR v. fines and penalties shall be paid to the Commissioner or his authorized deputies as the taxes themselves are required to be paid. That a preassessment notice shall not be required in the following cases: (a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as TAX  2  SYLLABUS   DEAN  LILY  K. . 227. . in the same manner and under the same conditions as the public notice and the time and manner of sale as are prescribed for sales of personal property distrained for the non-payment of taxes.” Consequently. Sec. costs. civil or criminal. liquors. . so far as practicable. cigarettes.All judgments and monies recovered and received for taxes. 167146. as well as dies for the printing or making of internal revenue stamps and labels which are in imitation of or purport to be lawful stamps. When Property to be Sold or Destroyed. 819 (1958).(3) A request for reconsideration refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. in order to suspend the running of the statute of limitations. GR No. and where the BIR could not have conducted a reinvestigation because no new or additional evidence was submitted. upon forfeiture. of the specific forfeited property. cigars. No such judgment. Protesting of Assessment.Sales of forfeited chattels and removable fixtures shall be effected.. 31 October 2006. when the sale of the same for consumption or use would be injurious to public health or prejudicial to the enforcement of the law. Inc. the running of statute of limitations cannot be interrupted. Disposition of Funds Recovered in Legal Proceedings or Obtained from Forfeitures. 226. damages. however..

the assessment shall become final. capital equipment. or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. Assessment in general Filing of return Issuance of Letter of Authority (LA) Audit Notice of Informal Conference Preliminary Assessment Notice (PAN) Final Assessment Notice (FAN) TAX  2  SYLLABUS   DEAN  LILY  K. the decision shall become final. or (d) When the excise tax due on exciseable articles has not been paid. all relevant supporting documents shall have been submitted. the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Within a period to be prescribed by implementing rules and regulations. has been sold. or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year. but not limited to. If the protest is denied in whole or in part. 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.  GRUBA   S/Y  2011-­‐2012   20   . If the taxpayer fails to respond. or is not acted upon within one hundred eighty (180) days from submission of documents. traded or transferred to non-exempt persons. otherwise. otherwise. or (e) When the article locally purchased or imported by an exempt person. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made. otherwise. the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision. machineries and spare parts. executory and demandable. Within sixty (60) days from filing of the protest. the taxpayer shall be required to respond to said notice. the assessment shall be void. vehicles.appearing on the face of the return. such as. or from the lapse of one hundred eighty (180)-day period.

 GRUBA   S/Y  2011-­‐2012   21   .When a Preliminary Assessment Notice is not required Filing of return Final Assessment Notice (FAN) If protest is denied Final Assessment Notice (FAN) Taxpayer files protest within 30 days Relevant supporting documents are submitted within 60 days CIR denies protest Appeal to the CTA within 30 days Appeal to the CTA En Banc Appeal to the Supreme Court TAX  2  SYLLABUS   DEAN  LILY  K.

TAX  2  SYLLABUS   DEAN  LILY  K.If protest is not acted upon Final Assessment Notice (FAN) Taxpayer files protest within 30 days Relevant supporting documents are submitted within 60 days 1 CIR’s inaction for 180 days Appeal to the CTA within 30 days Appeal to the CTA En Banc Appeal to the Supreme Court                                                                                                                   1 When the taxpayer files the protest and submits his/her/its supporting documents on the same date.  GRUBA   S/Y  2011-­‐2012   22   . the one hundred eighty-day period shall be reckoned from such date.

g. the Supreme Court spoke of the now mandatory requirement to inform the taxpayer of the law and the facts on which the assessment is made. the Letter of Authority (LA/LOA) is the authority given to the revenue officer to perform assessment functions.” should be understood to mean the fiscal year ended 31 March 1998. 5510.] [Revenue Memorandum Order No. the deficiency VAT assessment the CIR arrived at was based on records from January to March 1998. Hence. 43-90. 55-10. upon recommendation of the Commissioner.] ** RMO No. e. it appears that an LN is effectively equated to an LA. The Supreme Court held that clearly. the relevant Letter of Authority covered “the period 1997 and unverified prior years. 11 June 2010. It said: “To be simply TAX  2  SYLLABUS   DEAN  LILY  K. although it stated “the period 1997 and unverified prior years.” In order to expedite the processing of LN cases. [CIR v. a Revenue Officer assigned to perform assessment functions in any district may. Inc. e. electronic LAs shall be issued through the Letter of Authority Monitoring System (LAMS). the other periods shall be specifically indicated in the LA. In place thereof. informing the taxpayer of findings of discrepancy. VAT liabilities for 2002 3 quarter. [Revenue Memorandum Order No.. the manual issuance of LAs has been discontinued. but also of the facts on which an assessment would be made. ** A Letter of Authority should cover a taxable period not exceeding one taxable year. examine taxpayers within the jurisdiction of the district in order to collect the correct amount of tax. Sony Philippines.g. 23 October 2003.. even without the prior issuance of Letters of Authority. In CIR v. the CIR.. On the basis of RMO No. Q: What is a Letter Notice? Is it equivalent to a Letter of Authority? * A Letter Notice is a discrepancy notice issued by the CIR after conducting data matching processes.] **** Effective 1 July 2010. [Revenue Memorandum Order No. went beyond the scope of their authority as indicated in the LA. pursuant to a Letter of Authority issued by the Revenue Regional Director. Inc. GR No.” In other words. [NOTE: Relate this revenue issuance to Section 13 of the 1997 Tax Code which essentially states that a revenue officer shall be authorized to perform assessment functions on the strength of an LA. Sony Philippines. 17 November 2010. Compared with a Letter of Authority. acting through the revenue officers. 42-2003. or to recommend the assessment of any deficiency tax due in the same manner that the said acts could have been performed by the Revenue Regional Director himself. under-declared sales and overclaimed purchases. An LN shall cover only the tax indicated therein on a given particular period rd or quarter. Reyes. and not merely an LN.] Q: What constitutes a valid assessment? * The old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998 to informing the taxpayer of not only the law. The practice of issuing LAs covering audit of “unverified prior years” is prohibited.” However. the coverage of an LA is more comprehensive than that of an LN. 55-10 provides that a Letter Notice shall be treated as a “notice of audit or investigation in the absence of evident error or clear abuse of discretion.   Q: What is a Letter of Authority? * Section 13 of the 1997 Tax Code provides that: “Subject to the rules and regulations to be prescribed by the Secretary of Finance. 20 September 1990. the deficiency VAT assessment made on the basis thereof must be disallowed.. If the audit of a taxpayer shall include more than one taxable period.  GRUBA   S/Y  2011-­‐2012   23   . 178697. It was the CIR’s contention that the LA. the issuance of Notices of Informal Conference may immediately commence.] *** In CIR v.

The act cannot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. Court of Tax Appeals. i. the late Po Bien Sing was the sole proprietor of Silver Cup Wine Factory.] Q: Discuss the rule that all presumptions are in favor of the correctness of a tax assessment. arbitrary and capricious. 185371. GR No.. In ruling that the deficiency assessments were valid.. Court of Tax Appeals. the CIR issued subpoena duces tecum and ad testificandum against it. Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. thus: “Indeed. the Supreme Court noted that the BIR’s resort to the “best evidence obtainable” was warranted by the circumstances as the taxpayer failed to respond to the BIR’s subpoena duces tecum. Prompted by confidential information that the taxpayer under-declared its importations for 1987. [CIR v.] * In CIR v. The taxpayer has the duty to prove otherwise. At issue was whether the deficiency assessments had valid and legal bases. not merely a formal. Is there an exception to the rule? * In Sy Po v.” [CIR v.e. 159694. without the Preliminary Assessment Notice. 27 January 2006. an assessment that is without any foundation and hence. Bank of the Philippine Islands. 18 August 1988.] ** In CIR v. Inc.] Q: Is receipt by the taxpayer of the Final Assessment Notice.. Moreover. sufficient? * In CIR v. the taxpayer was engaged in the importation of synthetic resin. Hantex Trading Co.] Q: What happens when a taxpayer fails to timely protest an assessment? [NOTE: Remember that appealable to the CTA is a decision that refers not to the assessment itself. Moreover.informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. tax assessments by tax examiners are presumed correct and made in good faith.. as well as sworn statements of the proprietorship’s former employees.” [CIR v.” [Sy Po v. 8 December 2010..  GRUBA   S/Y  2011-­‐2012   24   . 136975. However. while the Supreme Court agreed that as a general rule. engaged in the manufacture and sale of compounded liquors. Inc. The CIR then issued a deficiency income tax assessment on the basis of photocopies of import entries and financial statements. Inc. The Supreme Court held that under Section 16 of the 1977 Tax Code (now Section 6 of the 1997 Tax Code). The law imposes a substantive. GR No. Hantex Trading Co. the taxpayer received a Final Assessment Notice.. Reyes. 31 March 2005. but to one made on the protest against such assessment. The issue was whether receipt of only the FAN amounted to a denial of due process. the taxpayer failed to comply with said subpoena. He must be informed of the facts and the law upon which the assessment is made. Inc. Metro Star Superama. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations – that taxpayers should be able to present their case and adduce supporting evidence. L-81446. “best evidence obtainable” does not include mere photocopies of records or documents. “Tax assessments by tax examiners are presumed correct and made in good faith. Metro Star Superama. but denied receiving a Preliminary Assessment Notice. It does not at all conform to the compulsory requirement under Section 228. the taxpayer failed to timely file a protest on the assessment made against it. The Supreme Court discussed the implications of a taxpayer’s TAX  2  SYLLABUS   DEAN  LILY  K. He was assessed deficiency income tax and specific tax for various years after the BIR conducted investigation. The Supreme Court answered in the affirmative. requirement. GR No.. GR No. the rule does not apply when the CIR comes out with a naked assessment. the High Court found that the tax figures arrived at by the CIR after investigation were by no means arbitrary as they were made on the basis of the quantity of wine bottles seized during the raid conducted.

the taxpayer filed its protest and submitted all relevant supporting documents on the same date. Ltd. [CIR v. v. the taxpayer has 30 days from the lapse thereof to file a judicial claim. he has 60 days from filing of the protest to submit all relevant supporting documents. The taxpayer will then be barred from disputing the correctness of the assessment or invoking any defense that will reopen the question of its liability on the merits. The Supreme Court held that procedurally. Hence. GR No. and demandable. the judicial claim was not premature. CIR. (2) There arises a presumption of correctness of the tax assessment. citing Ker & Company. As a consequence of the taxpayer’s failure to appeal to the CTA within the thirty-day period. 134062. Within 30 days upon the lapse of 180 days from that date. GR No. Isabela Cultural Corporation and Oceanic Wireless Network. CIR. petitioner failed to exhaust its administrative remedies. [CIR v.] *** In Allied Banking Corporation v. CIR. the taxpayer has 30 days from receipt thereof to file a judicial claim. Additionally. [Rizal Commercial Banking Corporation v. 148380. The Supreme Court ruled that the starting point of the 180 days was the date the protest and the relevant supporting documents were simultaneously filed. Bank of the Philippine Islands. If the protest is not acted upon within 180 days from submission of documents. Inc. the taxpayer failed to appeal to the CTA within 30 days upon the lapse of 180 days from submission of documents. If the protest is not acted upon within 180 days from submission of documents. 17 April 2007. Isabela Cultural Corporation. the Supreme Court stated that a final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. Petitioner filed a protest against it. However. 11 July 2001. Court of Tax Appeals. and thus may be appealed to the CTA. v. the taxpayer has 30 days from the lapse thereof to file a judicial claim. The Supreme Court held that compliance with the thirty-day period was jurisdictional. the taxpayer appealed to the CTA. if the letter indicates to the taxpayer in clear and unequivocal language that it constitutes the CIR’s final action on the disputed assessment. i. If the rules were to be strictly applied. 168498. In Rizal Commercial Banking Corporation v. L-12396. in response to which petitioner filed a claim with the CTA. 9 December 2005. The Formal Letter of Demand could be considered a final decision of the CIR appealable to the CTA because the words used taken together led petitioner to believe that it was 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. CIR. petitioner received a Formal Letter of Demand with Assessment Notices. First Express Pawnshop Company. CIR. If the protest is not acted upon within 180 days from submission of documents. 16 June 2006. In CIR v. and not the PAN. without filing a protest against the Formal Letter of Demand.  GRUBA   S/Y  2011-­‐2012   25   . In CIR v. At issue was whether in filing the judicial claim. the Supreme Court indicated that the term “relevant supporting documents” were TAX  2  SYLLABUS   DEAN  LILY  K. GR No. it is the FAN. the dismissal of the judicial claim was proper for failure to exhaust administrative remedies. he has 60 days from filing of the protest to submit all relevant supporting documents.] ** When a taxpayer files a protest. Thereafter. Inc. Inc.failure to protest an assessment within the thirty-day period. 31 January 1962.] Q: What happens when a taxpayer fails to timely appeal to the CTA? * When a taxpayer files a protest. GR No.e. estoppel on the party of the administrative agency concerned. 5 February 2010. GR No.] ** When a taxpayer files a protest and the CIR acts upon said protest. which should be protested administratively. the assessment became final. v. the taxpayer has 30 days from the lapse thereof to file a judicial claim. The issue was whether the judicial claim was premature. GR No. a Preliminary Assessment Notice was sent to Allied Banking Corporation for deficiency documentary stamp tax and gross receipts tax. CIR. 175097.. executory. [Allied Banking Corporation v. (1) The assessment shall become final. 135210. the Supreme Court likewise held that the case constituted an exception to the rule on exhaustion of administrative remedies. Oceanic Wireless Network..

Article 1144 of the Civil Code prevails and that period would be 10 years. a lump sum payment to cover future tax obligations.“those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer.No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected. where on the face of the return upon which payment was made. even without a written claim therefor.  GRUBA   S/Y  2011-­‐2012   26   . 25. TAX  2  SYLLABUS   DEAN  LILY  K. or sum has been paid under protest or duress. and not for the recovery of erroneously. but such suit or proceeding may be maintained. 16 June 2009. Oct. a taxpayer will be at the mercy of the BIR. whether or not such tax. or of any sum alleged to have been excessively or in any manner wrongfully collected. Recovery of Tax Erroneously or Illegally Collected.” [CIR v. which may require the production of documents that a taxpayer cannot submit. The BIR can only inform the taxpayer to submit additional documents. refund or credit any tax. no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided. 2005): When the taxpayer files a claim for refund of its advance income tax payment. That the Commissioner may. In any case. until a claim for refund or credit has been duly filed with the Commissioner. First Express Pawnshop Company. Procedure for recovery of internal revenue tax Payment Administrative claim filed with the CIR within 2 years Claim is denied 2 Claim is not acted upon Appeal to the CTA within 30 days but always within 2 years from payment Judicial claim filed with the CTA within 2 years from payment                                                                                                                 2 CIR v. GR No.e. the 2-year prescriptive period does not apply. The BIR cannot demand what type of supporting documents should be submitted. illegally or wrongfully collected tax or penalty. 172045.R. No.] Sec.. 229. excessively. PNB (G. 161997. Inc. or of any penalty claimed to have been collected without authority. Otherwise. . penalty. of any sum alleged to have been excessively or in any manner wrongfully collected without authority. however. Instead. such payment appears clearly to have been erroneously paid. i.

it applied the two-year prescriptive period under Section 112(A) of the 1997 Tax Code (the starting point of which is the close of the taxable quarter when the sales where made).] Q: Who may file a claim for tax refund or credit under this provision? * Silkair (Singapore) Pte. In Philippine Bank Communications v. In CIR v. 173854. It stated that overpaid income taxes were not covered by the two-year prescriptive period under the 1977 Tax Code and that taxpayers could claim tax refunds or credits for the excess quarterly income tax with the BIR within 10 years under Article 1144 of the Civil Code. CIR. In ruling that MPC’s claim was filed out of time. The Supreme Court ruled in favor of the bank. [CIR v. 172129. GR No. Philippine National Bank. It also failed to prove the fact of withholding as ordinarily established by Certificates of Creditable Tax Withheld at Source. as in this case. 6-85]. 28 January 1999. RMC No. GR No. Thereafter. the Supreme Court held that the two-year prescriptive period under Section 204(C) of the 1997 Tax Code (which commences from the date of payment of the tax). 6 October 2010. 12 September 2008. Having relied on RMC No. petitioner invoked the applicability of said nullified revenue issuance. Far East Bank & Trust Company. was inapplicable as it pertained to taxes erroneously or illegally paid.. [CIR v. The Supreme Court denied petitioner’s claim. CIR v. 7-85 was nullified for being inconsistent with the 1977 Tax Code. Silkair’s main argument was that it was exempt from payment of excise tax by virtue of Section 135(b) of the 1997 Tax Code and Article 4(2) of the RP-Singapore Air Transport TAX  2  SYLLABUS   DEAN  LILY  K. 184823. The CIR denied the bank’s request. 7-85 was issued. RMC No. 7-85. [CIR v. (2) It must be shown on the return that the income received was declared as part of the gross income [RR No. Hence. Philippine National Bank. the bank issued to the BIR a check for Php 180 million. Mirant Pagbilao Corporation. Far East Bank & Trust Company. GR No. holding that an availment of tax credit due for reasons other than the erroneous or wrongful collection of taxes. the period would be 10 years. Later. GR No.  GRUBA   S/Y  2011-­‐2012   27   .] ** Sometime in 1985. 25 October 2005. 1997 Tax Code]. representing its advance income tax payment for its 1991 operations and was remitted in response to the late President Aquino’s call to generate more revenues for national development. would not be covered by the two-year prescriptive period. Mirant Pagbilao Corporation revolved around whether MPC was entitled to a claim for tax refund or credit of unutilized input VAT from 1993 to 1996. it failed to prove that its income derived from rentals and sale of real property was included in its gross income as reflected in its return.Q: When does the two-year prescriptive period under Section 204 in relation to Section 229 apply? When does it not apply? * A taxpayer claiming for a tax refund or credit of creditable withholding tax must comply with the following requisites: (1) The administrative and judicial claims must be filed within two years from the date of payment of the tax [Section 229. 112024. By virtue of Article 1144 of the Civil Code. CIR. also. the bank requested that it be allowed to apply its unutilized advance income tax payment of about Php 73. was involved in a series of claims for tax refund or credit for excise taxes paid on its purchases of aviation jet fuel from Petron Corporation for different taxable periods. Aichi Forging Company of Asia.] **** The issue in CIR v. petitioner’s claim was filed beyond the two-year prescriptive period. while the taxpayer timely filed its claim for refund.3 million to its future gross receipts tax liability. Corollarily. 15 March 2010.] *** In CIR v. but within the ten-year period. Ltd. the bank’s claim for tax credit was not yet barred by prescription. [Philippine Bank Communications v. Inc. and (3) The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld [RR No. GR No. but the latter dismissed the judicial claim for having been filed beyond the two-year prescriptive period under Section 229 of the 1997 Tax Code. The bank appealed to the CTA. 6-85]. 161997.

Bhd.A refund check or warrant issued in accordance with the pertinent provisions of this Code. shall.A tax credit certificate issued in accordance with the pertinent provisions of this Code. v. which remains unutilized or has a creditable balance as of said date. 230(C) Transitory Provision. Forfeiture of Cash Refund and of Tax Credit. GR Nos. In view of the foregoing. GR No. within 25 days after the close of each taxable quarter Sec. 230. Ltd. the withholding agent may file the claim. a Malaysian corporation. 1998. as withholding agent was allowed to file the claim for tax refund on behalf of Prism Transactive (M) Sdn. – 230(A) Forfeiture of Refund.Agreement. seized or distrained Purchase by or forfeiture in favor of Government Excise tax on domestic petroleum products Excise tax on imported petroleum products Value-added tax and other percentage taxes the From the time of filing of Final Adjustment Return and final payment of tax From the time of payment of last installment At the time of application of proceeds to tax deficiency At the time of purchase or forfeiture At the time of removal from place of production At the time of release from customshouse From the time of filing of quarterly VAT return. 1998.. . which shall remain unclaimed or uncashed within five (5) years from the date the said warrant or check was mailed or delivered.e. CIR. CIR. v. Inc. i. Smart Communications.For purposes of the preceding Subsection. shall be presented for revalidation with the Commissioner or his duly authorized representative or on before June 30. which shall remain unutilized after five (5) years from the date of issue. Ltd.. the latter contended that in reality. a tax credit certificate issued by the Commissioner or his duly authorized representative prior to January 1.] Q: What are the special rules in computing the two-year prescriptive period for filing suit? In the case of corporations Tax paid in installments Sale of property levied. unless revalidated. Silkair (Singapore) Pte. For this purpose. Inc. 25 August 2010. the seller. and the amount covered by the certificate shall revert to the general fund. and Silkair.. 25 February 2010. were made part of the purchase price of the aviation jet fuel. Smart Communications. Section 204(C) of the 1997 Tax Code states in part: “No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty:” [Silkair (Singapore) Pte. 14 November 2008. being indirect taxes. and shall not be allowed as payment for internal revenue tax liabilities of the taxpayer. the person entitled to claim a tax refund is the taxpayer. shall be forfeited in favor of the Government and the amount thereof shall revert to the general fund. . in case the taxpayer does not file a claim for refund of withholding taxes. being the manufacturer of the aviation jet fuel) was the proper party that can claim the refund. Inc. it paid the excise taxes due on the transactions because said taxes. the buyer. 184398. GR No. TAX  2  SYLLABUS   DEAN  LILY  K. [CIR v. As between Petron. 171383. The Supreme Court ruled that based on Section 204(c) of the 1997 Tax Code. the statutory taxpayer (Petron in this case. the taxpayer and the withholding agent need not be related parties. . 230(B) Forfeiture of Tax Credit. be considered invalid. 179045-46. Smart Communications. However.] ** On the basis of CIR v.  GRUBA   S/Y  2011-­‐2012   28   .

bring an action against the person seizing the property or having possession thereof to recover the same. may enjoin the sale. 9480. as well as additions thereto. [Philippine Health Care Providers.In case of the seizure of personal property under claim of forfeiture. he may bring an action to recover the net proceeds realized at the sale. 9480.] ** In Philippine Health Care Providers. and upon giving proper bond. Q: Does a taxpayer have any other remedy apart from those provided in the 1997 Tax Code? * Every so often. at any time before sale or destruction of the property. Inc. GR No. . or after the sale and within six (6) months. v. the owner desiring to contest the validity of the forfeiture may. [Republic Act No.Sec. CIR. 9480. see RA No. 18 September 2009. and the appurtenant civil. the Supreme Court categorically stated that documentary stamp taxes are within the coverage of RA No. Inc. 9480.  GRUBA   S/Y  2011-­‐2012   29   . 167330. Under Section 6(a) of RA No. the National Government enacts tax amnesty laws covering unpaid internal revenue taxes for specific taxable periods. in view of the taxpayer’s compliance with the requirements of said tax amnesty law. 231. Action to Contest Forfeiture of Chattel. the taxpayer shall be immune from the payment of taxes. For example.] TAX  2  SYLLABUS   DEAN  LILY  K. criminal or administrative penalties under the 1997 Tax Code arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. its tax liabilities were extinguished. v. a tax amnesty law covering the taxable year 2005 and prior years. CIR. 24 May 2007. to enhance revenue administration and collection. Hence.

] *** As a general rule. 246. Inc.====== Sec. modification or reversal will be prejudicial to the taxpayers.] TAX  2  SYLLABUS   DEAN  LILY  K. * Rulings or circulars promulgated by the CIR have no retroactive application where to so apply them would be prejudicial to taxpayers. issuances by the BIR shall not be given retroactive application if it would be prejudicial to the taxpayer. 12 October 1981. the Supreme Court had occasion to say that there must be convincing evidence of bad faith which “imports dishonest purpose or some moral obliquity and conscious doing of wrong. Benguet Corporation. 159694 & 163581. 145559.e. and not declarative of certain rights and corresponding obligations.  GRUBA   S/Y  2011-­‐2012   30   . the date of effectivity of the 1997 Tax Code. 24 April 2007. Q: Discuss the rule on non-retroactivity of rulings. the retroactive application of revenue issuances was disallowed because the taxpayer would have suffered substantial economic prejudice.” In this instance. In CIR v. GR Nos. or benefit or belief of facts which render transaction unconscientious. Philippine Health Care Providers. defined good faith as "that state of mind denoting honesty of intention and freedom from knowledge of circumstances which ought to put the holder upon inquiry. – Any revocation. a breach of a known duty through some motive of interest or ill will. is given retroactive effect as of the date of effectivity of the statute. CIR v." Likewise in this case.e. modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation. [CIR v. notice. The taxpayer was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them. Philippine Health Care Providers. GR No. the Supreme Court disallowed the retroactive application of a Revenue Memorandum Circular because to do so would hold the taxpayer liable for deficiency withholding income taxes three years after the fact. CIR v. an honest intention to abstain from taking any unconscientious advantage of another. 6 February 1997. Court of Appeals.. except when. L-52306. for instance. Court of Tax Appeals.. CIR v. or (c) Where the taxpayer acted in bad faith. assessment and payment of deficiency taxes in large sums. the Supreme Court found that the taxpayer was not guilt of acting with bad faith. 19 June 1986. the Supreme Court found that the taxpayer was not guilty of acting with bad faith. 27 January 2006. together with absence of all information. Court of Appeals. i..] ** In several cases. Inc. GR No. except in the following cases: (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue. [CIR v. On the other hand. 14 July 2006. Reyes. i. L-66653. 168129. (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based. Burroughs Limited. It partakes of the nature of fraud. the taxpayer acted in bad faith. Non-Retroactivity of Rulings. a Revenue Regulation issued in September 1999 was made to retroact to 1 January 1998. [ABS-CBN Broadcasting Corporation v. GR No. Court of Tax Appeals. [CIR v. In ABS-CBN Broadcasting Corporation v. GR No. GR No. even through technicalities of law.] **** An administrative rule interpretative of a statute. 117982. In CIR v. Reyes.