You are on page 1of 4

Page | 1


After having filed its income tax return, the respondent corporation was
required by the BIR to present for examination certain records. But
respondent failed. A Preliminary Assessment Notice was issued for
deficiency income tax On the following day respondent received a
Formal Assessment Notice with Assessment Notice. Respondent,
through its counsel Ponce Enrile Cayetano Reyes and Manalastas Law
Offices, filed a formal protest against the formal Assessment Notice it
filed another protest letter on 23 May 1994, through another counsel
Siguion Reyna Montecillo & Ongsiako Law Offices. In both letters they
alleged the assessments was invalid for lack of factual and legal basis.
On 16 October 2002,(8 years after assessment) the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices received a Final Decision
from CIR denying the protest and affirming the said assessment in toto.
The CTA ruled in favor of respondent. The CTA ruled on the primary
issue of prescription. It decided that the protest letters filed by the
respondent cannot constitute a request for reinvestigation; hence, they
cannot toll the running of the prescriptive period (3 years) to collect
the assessed deficiency income tax. CTA denied the motion for
reconsideration and upon appeal to CTA en banc, latter affirmed the
ISSUE: Is the CIRs right to collect respondents alleged deficiency
income tax barred by prescription under Section 269(c) of the Tax Code
of 1977?

reinvestigation where, as admitted by the CIR in its Petition, the

respondent refused to submit any new evidence.
(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. It may involve both a question of fact or of law or
both. (b) Request for reinvestigationrefers to a plea for re-evaluation
of an assessment on the basis of newly-discovered evidence or
additional evidence that a taxpayer intends to present in the
investigation. It may also involve a question of fact or law or both.
FACTS: Leonardo S. Villa, doctor of medicine, and his wife filed joint
income tax returns for the years 1951, 1952, 1953, 1954, 1955 and
1956 on April 2, 1952, March 30, 1953, February 26, 1954, March 31,
1955, April 2, 1956 and March 23, 1957, respectively. Subsequently,
the BIR determined the income of the Villa spouses by the use of
networth method and accordingly issued on February 23, 1961
assessments for deficiency income tax for said years. Dr. Villa received
the assessments on April 7, 1961. Without contesting the said
assessments in the BIR, he filed on a petition for review in the CTA. It
took cognizance of the appeal, tried the case on the merits and
rendered the following judgment:
The petitioner is ordered to pay to the Commissioner or his
representative the sum of P244.00, as additional residence tax and
surcharge without pronouncement as to costs.
ISSUE: Is the appeal to the CTA defective?

HELD: Yes, The Provision provides: par (c) Any internal revenue tax
which has been assessed within the period of limitation aboveprescribed may be collected by distraint or levy or by a proceeding in
court within three years following the assessment of the tax. Section
224. Suspension of running of statute. The running of the statute of
limitation provided in Sections 268 and 269 shall be
suspended... ...when the taxpayer requests for a reinvestigation
which is granted by the Commissioner. However, this exception
does not apply to this case since the respondent never requested for a
reinvestigation. More importantly, the CIR could not have conducted a

HELD: Yes, the SC set aside the CTA decision for lack of jurisdiction.
Sec. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal as herein provided (1)
Decisions of the Collector 4of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue.
The word "decisions" in paragraph 1, Section 7 of Republic Act 1125,
quoted above, has been interpreted to mean the decisions of the

Page | 2
Commissioner of Internal Revenue on the protest of the taxpayer
against the assessments. Definitely, said word does not signify the
assessment itself.
Note that the law uses the word "decisions", not "assessments", further
indicating the legislative intention to subject to judicial review the
decision of the Commissioner on the protest against an assessment but
not the assessment itself. 6
Since in the instant case the taxpayer appealed the assessment of the
Commissioner of Internal Revenue without previously contesting the
same, the appeal was premature and the Court of Tax Appeals had no
jurisdiction to entertain said appeal. For, as stated, the jurisdiction of
the Tax Court is to review by appeal decisions of Internal Revenue on
disputed assessments. The Tax Court is a court of special jurisdiction.
As such, it can take cognizance only of such matters as are clearly
within its jurisdiction.
Revenue Officer was authorized to examine petitioners books of
accounts for income tax and other internal revenue taxes for the
taxable year 1999. For petitioners failure to comply with several
requests for the presentation of records BIR Legal Division issued an
Indorsement informing the District Officer of Legazpi City to proceed
with the investigation based on the best evidence obtainable
preparatory to the issuance of assessment notice. On November 8,
2001, Revenue District Officer issued a Preliminary 15-day Letter,
stating that a post audit review was held and it was ascertained that
there was deficiency value-added and withholding taxes due from
petitioner in the amount of P 292,874.16. On April 11, 2002, petitioner
received a Formal Letter of Demand. On May 12, 2003 the District
office sent a Final Notice of Seizure. On February 6, 2004, petitioner
received from Revenue District Office No. 67 a Warrant of Distraint
and/or Levy. On July 30, 2004, petitioner filed Motion for
Reconsideration but was denied by the commissioner, hence it
appealed to CTA denying that it did not receive preliminary assessment
notice depriving petitioner of due process. CTA granted the appeal
stating that the direct denial of the receipt of mail shifts the burden to

prove that the mailed letter was indeed received by the addressee.
CTA 2nd division denied the reconsideration and the en banc dismissed
the appeal.
ISSUES: (1) Did the addressee deemed to have received the PAN? (2) Is
the failure to send PAN to taxpayer a deprivation of due process?
HELD: (1) No, jurisprudence is replete with cases holding that if the
taxpayer denies ever having received an assessment from the BIR, it is
incumbent upon the latter to prove by competent evidence that such
notice was indeed received by the addressee. The onus probandi was
shifted to respondent to prove by contrary evidence that the Petitioner
received the assessment in the due course of mail. CIR failed to
discharge its duty and present any evidence to show that Metro Star
indeed received the PAN dated January 16, 2002. It could have simply
presented the registry receipt or the certification from the postmaster
that it mailed the PAN, but failed. Neither did it offer any explanation
on why it failed to comply with the requirement of service of the PAN.
(2)Yes, Sec. 228 of the Tax Code requires it, unless it falls on one of the
exception on said provision, which it did not in the case at bar.
It is clear that the sending of a PAN to taxpayer to inform him of the
assessment made is but part of the "due process requirement in the
issuance of a deficiency tax assessment," the absence of which
renders nugatory any assessment made by the tax authorities. The use
of the word "shall" in subsection 3.1.2 describes the mandatory nature
of the service of a PAN. The persuasiveness of the right to due process
reaches both substantial and procedural rights and the failure of the
CIR to strictly comply with the requirements laid down by law and its
own rules is a denial of Metro Stars right to due process. 15 Thus, for its
failure to send the PAN stating the facts and the law on which the
assessment was made as required by Section 228 of R.A. No. 8424, the
assessment made by the CIR is void.


Page | 3
FACTS: In 1993, Maria Tancino died leaving behind an estate worth P32
million. In 1997, a tax audit was conducted on the estate. Meanwhile,
the National Internal Revenue Code (NIRC) of 1997 was passed.
Eventually in 1998, the estate was issued a final assessment notice
(FAN) demanding the estate to pay P14.9 million in taxes inclusive of
surcharge and interest; the estates liability was based on Section 229
of the [old] Tax Code. Azucena Reyes, one of the heirs, protested the
FAN. The Commissioner of Internal Revenue (CIR) nevertheless issued a
warrant of distraint and/or levy. Reyes again protested the warrant but
in March 1999, she offered a compromise and was willing to pay P1
million in taxes. Her offer was denied. She continued to work on
another compromise but was eventually denied. The case reached the
Court of Tax Appeals where Reyes was also denied. In the Court of
Appeals, Reyes received a favorable judgment.
ISSUE: Is the formal assessment notice is valid?
HELD: No, The NIRC of 1997 was already in effect when the FAN was
issued. Under Section 228 of the NIRC, taxpayers shall be informed
in writing of the law and the facts on which the assessment is
made: otherwise, the assessment shall be void. In the case at bar, the
FAN merely stated the amount of liability to be shouldered by the
estate and the law upon which such liability is based. However, the
estate was not informed in writing of the facts on which the
assessment of estate taxes had been made. The estate was merely
informed of the findings of the CIR. Section 228 of the NIRC being
remedial in nature can be applied retroactively even though the tax
investigation was conducted prior to the laws passage. Consequently,
the invalid FAN cannot be a basis of a compromise, any proceeding
emanating from the invalid FAN is void including the issuance of the
warrant of distraint and/or levy.


In two notices dated October 28, 1988 CIR assessed respondent BPIs
deficiency percentage and documentary stamp taxes for the year 1986

in the total amount of P129,488,656.63. BPI replied that they were not
informed, even in the vaguest terms, why it is being assessed a
deficiency and requested that the examiner concerned be required to
state why he believes the taxpayer has a deficiency documentary and
percentage taxes. CIR however, did not recognize the letter from BPI as
a valid protest. BPI requested a reconsideration of the assessments but
was denied.
Upon appeal by BPI on Feb. 1992, CTA dismissed the case for lack of
jurisdiction. It ruled that BPI failed to protest on time under Section 270
of the National Internal Revenue Code (NIRC) of 1986 and Section 7 in
relation to Section 11 of RA 1125.
The CA reversed the decision and resolution and ruled that the October
28, 1988 notices were not valid assessments because they did not
inform the taxpayer of the legal and factual bases therefor. It declared
that the proper assessments were those contained in the May 8, 1991
letter which provided the reasons for the claimed deficiencies. Thus, it
held that BPI filed the petition for review in the CTA on time. Hence, the
appeal by CIR.
ISSUE: Was BPI deprived of due process, as it was not accorded with
proper notice of assessment?
HELD: No, From all the foregoing discussions, SC concludes that BPI
was indeed aware of the nature and basis of the assessments, and was
given all the opportunity to contest the same but ignored it despite the
notices. Considering that the October 28, 1988 notices were valid
assessments, BPI should have protested the same within 30 days from
receipt thereof. The December 10, 1988 reply it sent to the CIR did not
qualify as a protest since the letter itself stated that as soon as this is
explained and clarified in a proper letter of assessment, we shall inform
you of the tax payers decision on whether to pay or protest the
assessment. Hence, by its own declaration, BPI did not regard this
letter as a protest against the assessments. As a matter of fact, BPI
never deemed this a protest since it did not even consider the October
28, 1988 notices as valid or proper assessments. The inevitable
conclusion is that BPIs failure to protest the assessments within the 30day period provided in the former Section 270 meant that they became

Page | 4
final and unappealable. Thus, the CTA correctly dismissed BPIs appeal
for lack of jurisdiction.
Tax assessments by tax examiners are presumed correct and made in
good faith. The taxpayer has the duty to prove otherwise. In the
absence of proof of any irregularities in the performance of duties, an
assessment duly made by a Bureau of Internal Revenue examiner and
approved by his superior officers will not be disturbed. All
presumptions are in favor of the correctness of tax assessments.

Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of
sovereignty, the exercise of taxing power derives its source from the
very existence of the state whose social contract with its citizens
obliges it to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from necessity;
without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.