Digests and Doctrines Tax 2 (OMEGA)

Tax Digests and Doctrines of 3D BATCH 2012 under Atty.
Gonzales
TCC, LGC and Remedies under the Tax Code of 1997
DIGESTS FOR TARIFFS AND CUSTOMS CODE Collector of Customs, who, under the Constitution,
(Cua and Muli) was "a responsible officer authorized by law" to
issue them. Sections 2208 of the Tariff and
Chia v Collector
177 SCRA 755 Customs Code provide:
Facts: Electronic and electrical equipment and
SEC. 2208. RIGHT OF POLICE OFFICER TO ENTER
others articles found in 2 stores (Toms Electronics INCLOSURE For the more effective discharge of his
and Sony Merchandizing) were seized by the Anti official duties, any person exercising the powers
Smuggling Center by virtue of the warrant issued herein conferred, may at any time enter, pass
by the Collector of Customs. Items seized were through or search any land or inclosure or any
warehouse, store or other building, not being a
allegedly illegally imported into the Philippines by
dwelling house.
foreign ships in transit through Philippines soil
without passing through the Bureau of Customs, A warehouse, store or other building or inclosure
thereby evading corresponding custom duties and used for the keeping or storage of articles does
taxes. Petitioner Chia seeks to nullify the warrants not become a dwelling house within the meaning
issued. hereof merely by reason of the fact that a person
employed as watchman lives in the place, nor will
Issue: W/N seizure is justified by the warrants the fact that his family stays there with him alter
issued by the Collector of Customs? Yes the case.
Held/Doctrine: The petition is devoid of merit Lastly, upon effecting the seizure of the goods,
because not only may goods be seized without a Bureau of Customs acquired jurisdiction not only
search and seizure warrant under Section 2536 of over the case but also over the goods seized for
the Customs and Tariff Code, when such goods are the purpose of enforcing the tariff and customs
openly offered for sale or kept in storage in a store taxes. A part dissatisfied by the decision of the
as in this case, but the fact is that petitioner's Collector may appeal to the Commissioner of
stores Tom's Electronics" and "Sony Customs, whose decision is appealable to the CTA
Merchandising (Phil.)" were searched upon then to the SC. Since petitioner did not exhaust all
warrants of search and detention issued by the
[1]
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales
administrative remedies, his recourse to this court was searched. Nonetheless, respondent judge
is premature. quashed the warrant.
Issue: W/N there was grave abuse of discretion on

the part of the judge in quashing the search
warrant? Yes
Viduya v. Berdiago
73 SCRA 553 Held/Ratio: Petition is granted. As the car was kept
Facts: The search warrant issued by petitioner
in a dwelling house in Wakas, Barrio San Dionisio,
Viduya who was the former Collector of Customs
Paraaque, Rizal, petitioner through two of his
is quashed by the lower court upon motion by
officers in the Customs Police Service applied for
private respondent Berdiago. The warrant of
and was able to obtain the search warrant. Had
seizure and detention was issued on the basis of
there been no such move on the part of petitioner,
reliable intelligence that fraudulent documents
the duties expressly enjoined on him by law
were used by Berdiago in securing the release
namely to assess and collect all lawful revenues,
from the Bureau of Customs of a Rolls Royce, it
to prevent and suppress smuggling and other
being made to appear that such car was a 1961
frauds, and to enforce tariff and customs law
model instead of a 1966, thus enabling
would not have been performed.
respondent to pay lower custom duties. There was
a demand for the correct amount due and
Respondent expressed his willingness to pay. LLamado v. Collector of Customs
Unfortunately, he was not able to live up to his 122 SCRA 118
promise so a search warrant was issued, pursuant Facts: A Cessna plane containing de gaza lamps
to Section 2099 of the TCC which requires a was unloaded at the Alabat airstrip. Later that
search warrant if such goods are located in a night, that, a motorized boat carrying Fortune
dwelling house because the car was located in the Blue Seal Cigarettes unloaded the goods and was
Yabut Compound. Morever, it was not shown that later loaded in a DC-3 plane. The DC-3 plane took
Berdiago did not own the dwelling house which off using the de gaza lamps as a guide to safety
take off from the airstrip. A few days after, a
[2]
warrant was issued for seizure and detention of A province has no authority to impose the taxes
the Cessna Plane. Petitioners argue that the on gravel, sand, stones, earth and other quarry
Cessna was not used to transport the contraband resources extracted from private lands.
A province may not levy excise taxes on articles
goods but only bring the de gaza lamps.
already taxed by the NIRC
Issue: W/N the Cessna plane was used in the
(by Gran) Facts: In 1992, the Sangguniang
unlawful importation of cigagrtes within the Panlalawigan of Bulacan passed Provincial
meaning of Section 2530 of the TCC which Ordinance No. 3, Sec 21 of which provides:
provides that
Sec 21. There is hereby levied & collected a tax of 10% of
Held/Ratio: Petition Dismissed. It is not necessary the FMV in the locality per cubic meter of ordinary stones,
sand, gravel, earth & other quarry resources, such, but not
that the vessel or aircraft mist itself carry the limited to marble, granite, volcanic cinders, basalt, tuff and
contraband. There is nothing in the law that rock phosphate, extracted from public lands or from beds of
requires. In the case at bar, it is undeniable that seas, lakes, rivers, streams, creeks and other public waters
within its territorial jurisdiction.
the Cessna plane was deliberately used to ensure
the DC-3 plane take off without peril and transport In a letter dated Nov. 11, 1993, the Provincial
the goods to Pampanga. Treasurer assessed Republic Cement Corp (RCC)
P2,524,692 for extracting limestone, shale and
silica from several parcels of private land in the
province during in 1992 & 1993.
LOCAL GOVERNMENT TAXATION
On Dec. 23, 1993, RCC formally contested the
Doctrines are from ANGEL NOTES, Digests
assessment, which was, denied by the Provincial
from our classmates
Treasurer on Jan. 17, 1994. Thus, on Feb. 14,
1994, RCC filed a petition for declaratory relief
with the RTC of Bulacan.
1. The Province of Bulacan v CA & Republic
The RTC, upon motion of the province, dismissed
Cement Corp
RCCs petition on the ground that the declaratory
G.R. No. 126232. November 27, 1998
relief was improper, allegedly because a breach of
DOCTRINE:
the ordinance had been committed by RCC.
[3]
On July 11, 1994, RCC filed a petition 65, but an appeal by certiorari under Rule
for certiorari with the SC which, in a resolution, 45. Even law students know that certiorari under
referred the same to the CA. Rule 45 is a mode of appeal.
In the interim, the Province issued a warrant of
levy against RCC for its unpaid tax liabilities. In 2) WON the province of Bulacan, on the basis of
an agreement and modus vivendi between the the ordinance, has authority to impose taxes on
parties, RCC agreed to pay under protest 50% of quarry resources extracted from private lands.
the tax assessed, in exchange for the lifting of the NO. Although Sec 186 of the LGC allows a
warrant of levy. Also, the parties agreed, with the province to levy taxes other than those
approval of the CA, to limit the issue for to the specifically enumerated in the LGC, the same is
question as to WON the provincial government subject to certain conditions. One of these
could impose and/or assess taxes on quarry limitations is Sec 133(h) of the LGC which
resources extracted by RCC from private provides that a province may not levy excise taxes
lands. The CA ruled in favor of RCC, hence this on articles already taxed by the NIRC. Under Sec
petition for certiorari. 151 of the NIRC, an excise tax is levied
Issues & Rulings: on all quarry resources, regardless of origin,
1) WON the remedy against the RTCs dismissal of whether extracted from public or private land.
the petition of RCC is certiorari. In this case, since the tax imposed by the Province
The remedy against a final order [motion to is an excise tax (being a tax upon the
dismiss] is an appeal, and not a petition performance, carrying on, or exercise of an
for certiorari under Rule 65 regardless of the activity), it may not ordinarily impose taxes on
questions sought to be raised on appeal, whether stones, sand, gravel, earth and other quarry
of fact or of law, whether involving jurisdiction or resources, as the same are already taxed under
grave abuse of discretion of the trial court. The the NIRC.
party aggrieved does not have the option to However, as to sand, gravel, earth and other
substitute the special civil action quarry resources extracted from public lands, a
for certiorari under Rule 65 for the remedy of province may do so because Sec 138 of the LGC
appeal. The existence and availability of the right expressly empowers a province to impose taxes
of appeal are antithetical to the availment of the thereon.
special civil action for certiorari. Moreover, even if the limitation set by Section 133
However, contrary to the allegation of petitioners, of the LGC is disregarded, petitioners may not
RCC did not file a petition for certiorari under Rule impose taxes on quarry resources extracted from
[4]
private lands on the basis of Sec 21 of Provincial moving vehicles or vessels either by land, sea or
Ordinance No. 3 as the latter clearly applies only water.
to quarry resources extracted from public lands. On June 15, 1994, FPIC filed with the RTC of
Batangas City a complaint for tax refund with
2. First Phil Industrial Corp v. CA prayer for a writ of preliminary injunction against
G.R. No. 125948. December 29, 1998 the City of Batangas and the City Treasurer.
DOCTRINE: On October 3, 1994, the trial court rendered a
The local government has no authority to impose decision dismissing the complaint. FPIC assailed
another tax on the the decision of the lower court via a petition for
common carriers as the same is already taxed review to the SC, which referred the case to the
under the Local CA. The CA affirmed the trial court's ruling and
Government Code denied FPICs motion for reconsideration hence,
To tax the same again would defeat the purpose this petition.
of the Code
Issue: WON FPIC is a common carrier or a
(by Gran) Facts: FPIC is a grantee of a pipeline transportation contractor and thus not liable for
concession to contract, install and operate oil paying the local business tax.
pipelines. Sometime in Jan 1995, it applied for a YES. Under the following laws, PFIC is considered
mayor's permit with the Office of the Mayor of a common carrier:
Batangas City. However, before it could be issued, a. Art 1732 of the Civil Code defines a Common
the respondent City Treasurer required it to pay a Carrier as "any person, corporation, firm or
contractors business tax on its gross receipts for association engaged in the business of carrying
FY1993 pursuant to Sec 143(e) of the LGC. or transporting passengers or goods or both, by
FPIC paid the tax under protest and on January 20, land, water, or air, for compensation, offering
1994, it filed a letter-protest addressed to the City their services to the public."
Treasurer. On March 8, 1994, the protest was Thus, the test for determining whether a party
denied on the ground that since FPIC is not is a common carrier of goods is:
considered engaged in transportation business, it 1. must be engaged in the business of carrying
cannot claim exemption under Sec 133(j) of the goods for others as a public employment, and
LGC as said exemption applies only to common must hold himself out as ready to engage in
carriers transporting goods & passengers through the transportation of goods for person
[5]
generally as a business and not as a casual As FPIC is a common carrier, it is therefore,

occupation; exempt from the business tax as provided for in
2. He must undertake to carry goods of the Sec 133 (j) of the LGC.
kind to which his business is confined; It is clear that the legislative intent in excluding
3. He must undertake to carry by the method from the taxing power of the LGU the imposition
by which his business is conducted and over of business tax against common carriers is to
his established roads; and prevent a duplication of the so-called common
4. The transportation must be for hire. carrier's tax already imposed under the NIRC. FPIC
PFIC is engaged in the business of transporting is already paying 3% common carrier's tax on its
or carrying goods, i.e. petroleum products, for gross sales/earnings under the NIRC. To tax it
hire as a public employment. It undertakes to again on its gross receipts in its transportation of
carry for all persons indifferently, that is, to all petroleum business would defeat the purpose of
persons who choose to employ its services, and the LGC.
transports the goods by land and for
compensation. The fact that petitioner has a 3. Mactan cebu vs. marcos, et. al.
limited clientele does not exclude it from the G.R. 120082 SEPT. 11, 1996
definition of a common carrier. Also, the Civil
Code makes no distinction as to the means of
transporting, as long as it is by land, water or 4. LTO VS. CITY OF BUTUAN
air. It does not provide that the transportation G.R. 131512 JAN. 20, 2000
of the passengers or goods should be by motor DOCTRINE:
vehicle. In fact, in the US, oil pipe line Registration and licensing functions are vested in
operators are considered common carriers. the LTO while franchising and regulatory
b. Petroleum Act of the Phils also considers FPIC a responsibilities has been vested in the LTFRB.
common carrier and that such petroleum LGUS have the power to regulate the operation of
operation is a public utility. tricyclesforhire and to grant franchises for the
c. The BIR in BIR RULING 69-83 likewise said that operation thereof
since PFIC is a pipeline concessionaire that is The power is however subject to the guidelines
engaged only in transporting petroleum prescribed by the Department of Transportation
products, it is considered a common carrier and Communications
under Republic Act No. 387.
[6]
5. City govt. of san pablo vs. reyes of real property, for social housing, imposed new
G.R. 127708 MARCH 25, 1999 rates of business tax and an annual Ad valorem
DOCTRINE: tax on real property. These ordinances were
The tax exemptions or incentives granted to or alleged to be unconstitutional by petitioners
presently enjoyed by natural or juridical persons because they were promulgated without previous
are withdrawn upon the effectivity of the LGC public hearing thereby constituting deprivation of
except with respect to those entities expressly property without due process of law. The appeal
enumerated was dismissed for being filed out of time or more
than 30 days after the effectivity of the
6. Meralco vs. province of laguna ordinances. Their petition having been denied,
GR. NO. 131359 MAY 5, 1999 they filed with the Court of Appeals a petition for
DOCTRINE: certiorari and prohibition which affirmed the
Local government units have the inherent power Secretary of Justice.
to tax except to the extent that such power might
be delegated to them either by basic law or by ISSUES:
statute a. Whether or not the CA erred in affirming the
decision of the Secretary of Justice who dismissed
7. Reyes vs. CA the prohibition suit, on the ground that it was filed
G.R. 118233 DEC. 10, 1999 out of time?
DOCTRINE: The law requires that the dissatisfied b. Whether or not the lack of mandatory public
taxpayer who questions the validity of the tax hearings prior to the enactment of the ordinances
ordinance must file his appeal to the Secretary of render them void on the grounds of deprivation of
Justice, within 30 days from effectivity thereof. In property without due process?
case the Secretary decides the appeal, a period of
also 30 days is allowed for the aggrieved party to RULING:
go the court. But if the Secretary doesn't decide, a. The law clearly requires that the dissatisfied
after the lapse of 60 days, a party could already taxpayer who questions the validity or legality of a
proceed to seek relief in court. tax ordinance must file his appeal to the Secretary
of Justice, within 30 days from effectivity thereof.
(by Dela Cruz) Facts: The Sangguniang Bayan In case the Secretary of Justice decides the
of San Juan implemented several tax ordinances appeal, a period of 30 days is allowed for an
on printing and publication, on the sale or transfer aggrieved party to go to court. But if the
[7]
Secretary does not act thereon, after the lapse of HELD:

60 days, a party could already proceed to court to Thus, reading together Section 133, 232 and 234
seek relief. These 3 separate periods are given for of the LGC, we conclude that as a general rule, as
compliance as a prerequisite before seeking laid down in Section 133 the taxing powers of
redress in court. For this reason, the courts local government units cannot extend to the levy
construe these provisions as mandatory. of inter alia, "taxes, fees, and charges of any kind
of the National Government, its agencies and
b. In accordance with the presumption of validity instrumentalties, and local government units";
in favor of an ordinance, their constitutionality or however, pursuant to Section 232, provinces,
legality should be upheld in the absence of cities, municipalities in the Metropolitan Manila
evidences showing that procedure prescribed by Area may impose the real property tax except on,
law was not observed in their enactment. In this inter alia, "real property owned by the Republic of
case, petitioners have not proved that the the Philippines or any of its political subdivisions
Sangguniang Bayan of San Juan failed to conduct except when the beneficial used thereof has been
the required public hearings before enacting said granted, for consideration or otherwise, to a
ordinances taxable person", as provided in item (a) of the first
paragraph of Section 234. As to tax exemptions or
incentives granted to or presently enjoyed by
REAL PROPERTY TAX (Digests here are taken natural or juridical persons, including government
from ANGEL NOTES) owned and controlled corporations, Section 193 of
the LGC prescribes the general rule, viz., they are
1. Mactan cebu vs. marcos, et. al. withdrawn upon the effectivity of the LGC, except
G.R. 120082 SEPT. 11, 1996 upon the effectivity of the LGC, except those
FACTS: The MCIAA was created under a special granted to local water districts, cooperatives duly
law and was granted exemption from taxes that registered under R.A. No. 6938, non stock and
may be imposed by the national government or nonprofit hospitals and educational institutions,
any of its instrumentalities. and unless otherwise provided in the LGC. The
However, the local government of Cebu assessed latter proviso could refer to Section 234, which
it for realty tax for parcels of land. It contested enumerates the properties exempt from real
this and since the local government wanted to property tax. But the last paragraph of Section
issue a warrant of levy, it sought declaratory 234 further qualifies the retention of the
relief. exemption in so far as the real property taxes are
[8]
concerned by limiting the retention only to those NAPOCOR was the owner of real properties
enumerated therein; all others not included in the comprising its hydroelectric power plant complex.
enumeration lost the privilege upon the effectivity It was assessed by the local government for
of the LGC. Moreover, even as the real property is payment of realty taxes. Letters of demand were
owned by the Republic of the Philippines, or any of sent up to the extent of scheduling an auction
its political subdivisions covered by item (a) of the sale. Petitioner filed for a restraining order and
first paragraph of Section 234, the exemption is was granted.
withdrawn if the beneficial use of such property HELD:
has been granted to taxable person for The exemption is not only legally defensible, but
consideration or otherwise. also logically unassailable. The properties in
question comprise the site of the entire Agus II
Since the last paragraph of Section 234 Hydroelectric Power Plant Complex, which
unequivocally withdrew, upon the effectivity of generates and supplies relatively cheap electricity
the LGC, exemptions from real property taxes to the island of Mindanao. These are government
granted to natural or juridical persons, including properties, wholly owned by petitioner and
governmentowned or controlled corporations, devoted directly and solely for public service and
except as provided in the said section, and the utilized in the implementation of the state policy
petitioner is, undoubtedly, a government owned of bringing about the total electrification of the
corporation, it necessarily follows that its country at the least cost to the public, through the
exemption from such tax granted it in Section 14 development of power from all sources to meet
of its charter, R.A. No. 6958, has been withdrawn. the needs of industrial development and rural
Any claim to the contrary can only be justified if electrification. It can be noted, from RA 6395, PD
the petitioner can seek refuge under any of the 380 and PD 938, that petitioner's nonprofit
exceptions provided in Section 234, but not under character has been maintained throughout its
Section 133, as it now asserts, since, as shown existence, and that petitioner is mandated to
above, the said section is qualified by Section 232 devote all its returns from capital investment and
and 234. excess revenues from operations to its expansion.
On account thereof, and to enable petitioner to
pay its indebtedness and obligations and in
2. Napocor vs. province of Lanao furtherance of the state policy on electrification
G.R. 96700 NOV. 19, 1996 and power generation, petitioner has always been
exempted from taxes.
[9]
Consequently, the assessment and levy on (as shall be appraised at the current and fair market
well as the sale of) the properties of petitioner by value prevailing in the locality where the property
respondents were null and void for having been in is situated."
made in violation of Section 10 of P.D. 938 and Contrary to petitioner's contention, acquisition
Section 40 (a) of the Real Property Tax Code. cost cannot be and is not the sole basis of the
current and fair market value of a property. The
At this juncture, we hasten to point out that the current value of like properties and their actual or
foregoing ruling is solely with respect to the potential uses, among others, are also considered.
purported realty tax liabilities of petitioner for the
period from June 14, 1984 to December 31, 1989. 4. Antonio Callanta vs. Ombudsman
G.R. 11525374 JAN 30, 1998
3. Raul Sesbreno vs. CBAA May officials and employees of the Office of the
G.R. 106588 MAR. 24, 1997 City Assessor reduce the new assessed values of
FACTS: real properties upon requests of the affected
Sesbreno bought real property to which it property owners? To forestall the practice of
constructed a residential property. He duly initially setting unreasonably high reassessment
registered the same for taxation purposes and values only to eventually change them to
declared therein he owned a residential house unreasonably lower values upon "requests" of
made of strong materials. However, the field property owners, the law gives no such authority
inspectors found otherwisewhat he constructed to the city assessor or his subalterns. Seemingly
was a 5storey building made of materials. As innocuous occasions for mischief and veiled
such, they increased by 1000% the assessment opportunities for graft should be excised from the
made on the property, to which petitioner public system. Builtin checks should be zealously
naturally contested. observed so that the ingenious and shrewd cannot
HELD: circumvent them and the audacious cannot
The cited provision merely defines "market value." violate them with impunity.
It does not in any way direct that the market value
as defined therein should be used as basis in FACTS:
determining the value of a property for purposes It is alleged that ageneral revision of assessment
of real property taxation. On the other hand, was conducted by the Office of the City Assessor
Section 5 of PD 464 provides unequivocally that in 1988 and sometime thereafter. Notices of
"(a)ll real property, whether taxable or exempt, assessment together with the new tax
[10]
declarations were subsequently sent to the expressly prohibiting the assessor from making
property owners. Thereafter, respondents, without adjustments or corrections in the assessment of
the authority of the Local Board of Assessment real properties, and upon the longstanding
Appeals, reassessed the values of certain practice of the city assessor's office in making
properties, in contravention of Sec. 30 of P.D. 464. such adjustments/corrections believed in good
The said assessment resulted in the reduction of faith to be sanctioned under Sec. 22, PD 464.
assessed values of the properties. This is bereft of any merit. Under the procedure,
In several similarly worded lettercomplaints the issuance of a notice of assessment by the
dated December 19, 1991, the City of Cebu local assessor shall be his last action on a
simultaneously filed criminal and administrative particular assessment. On the side of the property
charges against the above-enumerated officers owner, it is this last action which gives him [the]
and staff of the City Assessor's Office for right to appeal to the Local Board of Assessment
"violations of Section 106 of the Real Property Tax Appeals. The above procedure also, does not
Code[,] for gross negligence or willful grant the property owner the remedy of filing a
underassessment of real properties within the motion for reconsideration before the local
city's taxing jurisdiction and for violation of Sec. 3 assessor.
(e) of R.A. 3019, otherwise known as the Anti The act of herein petitioners in providing the
Graft and Corrupt Practices Act[,] for the act of corresponding notices of assessment the chance
causing undue injury to the City Government by for the property owners concerned to file a motion
giving private persons unwarranted benefits, for reconsideration and for acting on the motions
advantages or preferences in the discharge of filed is not in accordance with law and in excess of
their official and administrative functions through their authority and therefore constitutes ultra
manifest partiality, evident bad faith or gross vires acts.
inexcusable negligence by reassessing the real
properties of taxpayers without any authority 5. BELEN FIGUERRAS VS. CA
whatsoever, thereby resulting in the reduction of G.R. 119172 MAR. 25, 1999
tax assessments to the prejudice of the city Petitioner was the owner of a parcel of land. She
government received an assessment from the municipal
assessor by virtue of two ordinances issued by the
HELD: SBone fixing fair market values and another
Petitioners anchor the validity of their acts upon issuing the assessment levels corresponding to
the absence of a specific provision of law
[11]
each. This prompted the petitioner to file for of its approval, and posted in at least two (2)
prohibition but this was overruled by the CA. prominent places in the provincial capitol, city,
HELD: municipal, or barangay hall for a minimum of
Petitioner is right in contending that public three (3) consecutive weeks.
hearings are required to be conducted prior to the Apart from her allegations, petitioner has not
enactment of an ordinance imposing real property presented any evidence to show that the subject
taxes. R.A. No. 7160 provides that an ordinance ordinances were nor disseminated in accordance
levying taxes, fees, or charges "shall not be with these provisions of R.A. No. 7160. On the
enacted without any prior public hearing other hand, the Municipality of Mandaluyong
conducted for the purpose." However, it is presented a certificate, dated November 12, 1993,
noteworthy that apart from her bare assertions, of Williard S. Wong, Sanggunian Secretary of the
petitioner Figuerres has not presented any Municipality of Mandaluyong that "Ordinance No.
evidence to show that no public hearings were 125, S1993 . . . has been posted in accordance
conducted prior to the enactment of the with 59(b) of R.A. No. 7160, otherwise known as
ordinances in question. On the other hand, the the Local Government Code of 1991."
Municipality of Mandaluyong claims that public
hearings were indeed conducted before the 6. TY VS. TRAMPE
subject ordinances were adopted, although it G.R. NO. 117577, DEC. 1, 1995.
likewise failed to submit any evidence to establish FACTS:
this allegation. However, in accordance with the Petitioners were assessed by the municipal
presumption of validity in favor of an ordinance, assessor for realty taxes over their real properties.
their constitutionality or legality should be upheld They asked for reconsideration and thinking this is
in the absence of evidence showing that the not yet enough, they filed a petition for prohibition
procedure prescribed by law was not observed in in the RTC.
their enactment. In view of 188 and 511(a) of R.A. HELD:
No. 7160, an ordinance fixing the assessment Coming down to specifics, Sec. 9 of P.D. 921
levels applicable to the different classes of real requires that the schedule of values of real
property in a local government unit and imposing properties in the Metropolitan Manila area shall be
penal sanctions for violations thereof (such as prepared jointly by the city assessors in the
Ordinance No. 125) should be published in full for districts created therein: while Sec. 212 of R.A.
three (3) consecutive days in a newspaper of local 7160 states that the schedule shall be prepared
circulation, where available, within ten (10) days "by the provincial, city and municipal assessors of
[12]
the municipalities within the Metropolitan Manila sanggunian concerned for enactment by
Area for the different classes of real property ordinance, per Sec. 212, R.A. 7160.
situated in their respective local government units
for enactment by ordinance of the sanggunian Although as a rule, administrative remedies must
concerned. . . ." It is obvious that harmony in first be exhausted before resort to judicial action
these provisions is not only possible, but in fact can prosper, there is a wellsettled exception in
desirable, necessary and consistent with the cases where the controversy does not involve
legislative intent and policy. By reading together questions of fact but only of law. In the present
and harmonizing these two provisions, we arrive case the parties, even during the proceedings in
at the following steps in the preparation of the the lower court on 11 April 1994, already agreed
said schedule, as follows: "that the issues in the petition are legal", and
thus, no evidence was presented in said court.
1. The assessor in each municipality or city in the In laying down the powers of the Local Board of
Metropolitan Manila area shall prepare his/her Assessment Appeals, R.A. 7160 provides in Sec.
proposed schedule of values, in accordance with 229 (b) that "(t)he proceedings of the Board shall
Sec. 212, R.A. 7160. be conducted solely for the purpose of
2. Then, the Local Treasury and Assessment ascertaining the facts . . . ." It follows that appeals
District shall meet, per Sec. 9, P.D. 921. In the to this Board may be fruitful only where questions
instant case, that district shall be composed of the of fact are involved. Again, the protest
assessors in Quezon City, Pasig, Marikina, contemplated under Sec. 252 of R.A. 7160 is
Mandaluyong and San Juan, pursuant to Sec. 1 of needed where there is a question as to the
said P.D. In this meeting, the different assessors reasonableness of the amount assessed. Hence, if
shall compare their individual assessments, a taxpayer disputes the reasonableness of an
discuss and thereafter jointly agree and produce a increase in a real estate tax assessment, he is
schedule of values for their district, taking into required to "first pay the tax" under protest.
account the preamble of said P.D. that they should Otherwise, the city or municipal treasurer will not
evolve "a progressive revenue raising program act on his protest. In the case at bench however,
that will not unduly burden the taxpayers" the petitioners are questioning the very authority
3. The schedule jointly agreed upon by the and power of the assessor, acting solely and
assessors shall then be published in a newspaper independently, to impose the assessment and of
of general circulation and submitted to the the treasurer to collect the tax. These are not
questions merely of amounts of the increase in
[13]
the tax but attacks on the very validity of any (4) Furthermore, RA 7227 clearly vests in the
increase. President the authority to delineate the metes and
bounds of the SSEZ.
REVISION OF THE JURISDICTION OF THE CTA 2. PHILIPPINE MATCH CO VS. CITY OF CEBU
1. TIU VS. COURT OF APPEALS L30745 JAN. 18 1978 WHERE THE SALE WAS
G.R. 127410 JANUARY 20, 1999 BOOKED
FACTS: FACTS:
The Congress passed into law RA 7227 entitled Ordinance No. 279 of Cebu City (approved by the
An Act Accelerating the Conversion of Military mayor on March 10, 1960 and also approved by
Reservations Into Other Productive Uses, Creating the provincial board) is "an ordinance imposing a
the Bases Conversion and Development Authority quarterly tax on gross sales or receipts of
for this Purpose, Providing Funds Therefore and for merchants, dealers, importers and manufacturers
Other Purposes, creating the Subic Special of any commodity doing business" in Cebu City. It
Economic Zone (SSEZ). SSEZ has multiple benefits imposes a sales tax of one percent (1%) on the
such as (1) free flow or movement of goods and gross sales, receipts or value of commodities sold,
capital; (2) tax and dutyfree importations of raw bartered, exchanged or manufactured in the city
materials, capital and equipment; (3) no exchange in excess of P2,000 a quarter. Section 9 of the
control policy; (4) banking and finance shall be ordinance provides that, for purposes of the tax,
liberalized. "all deliveries of goods or commodities stored in
the City of Cebu, or if not stored are sold" in that
HELD: city, "shall be
(1) The equalprotection guarantee does not considered as sales" in the city and shall be
require territorial uniformity of laws. taxable. Thus, it would seem that under the tax
(2) The fundamental right of equal protection of ordinance sales of matches consummated outside
the law is not absolute, but is subject to of the city are taxable as long as the matches sold
reasonable classification. are taken from the company's stock stored in
(3) Classification, to be valid, must (1) rest on Cebu City.
substantial distinctions, (2) be germane to the The Philippine Match Co., Ltd., whose principal
purpose of the law, (3) not be limited to existing office is in Manila, is engaged in the manufacture
conditions only, and (4) apply equally to all of matches. Its factory is located at Punta, Sta.
members of the same class. Ana, Manila. It ships cases or cartons of matches
[14]
from Manila to its branch office in Cebu City for Cebu City, and also from the dismissal of its claim
storage, sale and distribution within the territories for damages against the city treasurer.
and districts under its Cebu branch or the whole
VisayasMindanao region. Cebu City itself is just HELD:
one of the eleven districts under the company's We hold that the appeal is devoid of merit bemuse
Cebu City branch office. Philippine Match sought the city can validly tax the sales of matches to
the refund of a portion of the sales tax collected customers outside of the city as long as the orders
from them by virtue of a part of it was assessed were booked and paid for in the company's branch
based on sales which transpired outside of the city office in the city. Those matches can be regarded
and that some of the matches were just stored in as sold in the city, as contemplated in the
the city and delivered directly to customers ordinance, because the matches were delivered to
outside of Cebu. This was denied by the City the carrier in Cebu City. Generally, delivery to the
Treasurer, prompting Philippine Match to file a carrier is delivery to the buyer. A different
case in court. The trial court invalidated the tax on interpretation would defeat the tax ordinance in
transfers of matches to salesmen assigned to question or encourage tax evasion through the
different agencies outside of the city and on simple expedient of arranging for the delivery of
shipments of matches to provincial customers the matches at the out. skirts of the city through
pursuant to the instructions of the newsmen It the purchase were effected and paid for in the
ordered the defendants to refund to the plaintiff company's branch office in the city.
the sum of P8,923.55 as taxes paid out the said
outoftown deliveries with legal rate of interest The taxing power of cities, municipalities and
from the respective dates of payment. municipal districts may be used (1) "upon any
The trial court characterized the tax on the other person engaged in any occupation or business, or
two transactions as a "storage tax" and not a exercising any privilege" therein; (2) for services
sales tax. It assumed that the sales were rendered by those political subdivisions or
consummated outside of the city and, hence, rendered in connection with any business,
beyond the city's taxing power. The city did not profession or occupation being conducted therein,
appeal from that decision. The company appealed and (3) to levy, for public purposes, just and
from that portion of the decision upholding the tax uniform taxes, licenses or fees.
on sales of matches to customers outside of the
city but which sales were booked and paid for in Applying that jurisdictional test to the instant
case, it is at once obvious that sales of matches to
[15]
customers outside oil Cebu City, which sales were 1. distribution of softdrinks
booked and paid for in the company's branch 2. manufacture of softdrinks, and
office in the city, are subject to the city's taxing 3. bottling of softdrinks within the territorial
power. The sales in the instant case were in the jurisdiction of the City of Iloilo.
city and the matches sold were stored in the city. There is no question that after it transferred its
The fact that the matches were delivered to plant to Pavia, Iloilo province, Iloilo Bottlers, Inc.
customers, whose places of business were outside no longer manufactured/bottled its softdrinks
of the city, would not place those sales beyond within Iloilo City. Thus, it cannot be taxed as one
the city's taxing power. Those sales formed part of falling under the second or the third type of
the merchandising business being assigned on by business. The resolution of this case therefore
the company in the city. In essence, they are the hinges on whether the company may be
same as sales of matches fully consummated in considered engaged in the distribution of
the city. softdrinks in Iloilo City, even after it had
transferred its bottling plant to Pavia, so as to be
3. ILOILO BOTTLERS INC. VS. CITY OF ILOILO within the purview of the ordinance.
G.R. NO. 52019 AUG 19, 1988
Iloilo Bottlers, Inc. disclaims liability on two
FACTS: grounds: First, it contends that since it is not
Plaintiff was an operator of a bottling plant in engaged in the independent business of
Pavia, Iloilo. In the meanwhile, city government of distributing softdrinks, but that its activity of
Iloilo enacted an ordinance ordering the payment selling is merely an incident to, or is a necessary
of municipal tax by bottling, manufacturing and consequence of its main or principal business of
distributing plants, regardless of destination of bottling, then it is NOT liable under the city tax
deliveries. Plaintiff purchased a bottling plant in ordinance Second, it claims that only
Iloilo City but subsequently closed the same and manufacturers or bottlers having their plants
moved all to its original plant. Thereafter, the city inside the territorial jurisdiction of the city are
government assessed it for municipal taxes. covered by the ordinance.
The second ground is manifestly devoid of merit.
HELD: It is clear from the ordinance that three types of
The tax ordinance imposes a tax on persons, activities are covered: (1) distribution, (2)
firms, and corporations engaged in the manufacture and (3) bottling of softdrinks. A
business of:
[16]
person engaged in any or all of these activities is stores or warehouses maintained by the company.
subject to the tax. Anyone who desires to purchase the product may
go to the store or warehouse and there purchase
The first ground, however, merits serious the merchandise. The stores and warehouses
consideration. serve as selling centers.
This Court has always recognized that the right to
manufacture implies the right to sell/distribute the Entities operating under the first system are NOT
manufactured products. Hence, for tax purposes, considered engaged in the separate business of
a manufacturer does not necessarily become selling or dealing in their products, independent of
engaged in the separate business of selling simply their manufacturing business. Entities operating
because it sells the products it manufactures. In under the second system are considered engaged
certain cases, however, a manufacturer may also in the separate business of selling.
be considered as engaged in the separate In the case at bar, the company distributed its
business of selling its products. To determine softdrinks by means of a fleet of delivery trucks
whether an entity engaged in the principal which went directly to customers in the different
business of manufacturing, is likewise engaged in places in lloilo province. Sales transactions with
the separate business of selling, its marketing customers were entered into and sales were
system or sales operations must be looked into. perfected and consummated by route salesmen.
This Court had occasion to distinguish two Truck sales were made independently of
marketing systems: Under the first system, the transactions in the main office. The delivery trucks
manufacturer enters into sales transactions and were not used solely for the purpose of delivering
invoices the sales at its main office where softdrinks previously sold at Pavia. They served as
purchase orders are received and approved before selling units. They were what were called, until
delivery orders are sent to the company's recently, "rolling stores". The delivery trucks were
warehouses, where in turn actual deliveries are therefore much the same as the stores and
made. No warehouse sales are made; nor are warehouses under the second marketing system.
separate stores maintained where products may Iloilo Bottlers, Inc. thus falls under the second
be sold independently from the main office. The category above. That is, the corporation was
warehouses only serve as storage sites and engaged in the separate business of selling or
delivery points of the products earlier sold at the distributing softdrinks, independently of its
main office. Under the second system, sale business of bottling them. The tax imposed under
transactions are entered into and perfected at Ordinance No. 5 is an excise tax. It is a tax on the
[17]
privilege of distributing, manufacturing or bottling otherwise. He declared that all the procedural
softdrinks. Being an excise tax, it can be levied by requirements had been observed in the
the taxing authority only when the acts, privileges enactment of the Manila Revenue Code and that
or businesses are done or performed within the the City of Manila had not been able to prove such
jurisdiction of said authority. compliance before the Secretary only because he
had given it only five days within which to gather
and present to him all the evidence (consisting of
4. DRILON VS. LIM 25 exhibits) later submitted to the trial court.
G.R. NO. 112497 AUG 4, 1994 HELD:
Section 187 authorizes the Secretary of Justice to
FACTS: review only the constitutionality or legality of the
Question on the constitutionality of Section 187 tax ordinance and, if warranted, to revoke it on
which empowers the Secretary of Justice either or both of these grounds. When he alters or
regarding constitutionality or legality of tax modifies or sets aside a tax ordinance, he is not
ordinances. In his resolution, Secretary Drilon also permitted to substitute his own judgment for
declared that there were no written notices of the judgment of the local government that
public hearings on the proposed Manila Revenue enacted the measure. Secretary Drilon did set
Code that were sent to interested parties as aside the Manila Revenue Code, but he did not
required by Art. 276(b) of the Implementing Rules replace it with his own version of what the Code
of the Local Government Code nor were copies of should be. He did not pronounce the ordinance
the proposed ordinance published in three unwise or unreasonable as a basis for its
successive issues of a newspaper of general annulment. He did not say that in his judgment it
circulation pursuant to Art. 276(a). No minutes was a bad law. What he found only was that it was
were submitted to show that the obligatory public illegal. All he did in reviewing the said measure
hearings had been held. Neither were copies of was determine if the petitioners were performing
the measure as approved posted in prominent their functions in accordance with law, that is,
places in the city in accordance with Sec. 511(a) with the prescribed procedure for the enactment
of the Local Government Code. Finally, the Manila of tax ordinances and the grant of powers to the
Revenue Code was not translated into Pilipino or city government under the Local Government
Tagalog and disseminated among the people for Code. As we see it, that was an act not of control
their information and guidance, conformably to but of mere supervision. An officer in control lays
Sec. 59(b) of the Code. Judge Palattao found down the rules in the doing of an act. If they are
[18]
not followed, he may, in his discretion, order the general circulation will satisfy due process. It has
act undone or redone by his subordinate or he also not been shown that the text of the ordinance
may even decide to do it himself. Supervision has been translated and disseminated, but this
does not cover such authority. The supervisor or requirement applies to the approval of local
superintendent merely sees to it that the rules are development plans and public investment
followed, but he himself does not lay down such programs of the local government unit and not to
rules, nor does he have the discretion to modify or tax ordinances.
replace them. If the rules are not observed, he
may order the work done or redone but only to
conform to the prescribed rules. He may not
prescribe his own manner for the doing of the act. TAX REMEDIES UNDER THE TAX CODE
He has no judgment on this matter except to see
to it that the rules are followed. In the opinion of Tax Delinquency v Tax Deficiency
the Court, Secretary Drilon did precisely this, and CIR V Island Garment- Siron
no more nor less than this, and so performed an The respondent corporation filed its appeal
act not of control but of mere supervision. The seasonably, i.e. within the 30-day period
issue of noncompliance with the prescribed prescribed under R.A. No. 1125, the Act which
procedure in the enactment of the Manila created the CTA.
Revenue Code is another matter. The procedural Respondent corporations letter, contesting
requirements have indeed been observed. Notices petitioners use of mathematical computation,
of the public hearings were sent to interested amounted to a motion for reconsideration which
parties as evidenced by Exhibits G1 to 17. The interrupted the running of the 30-day period for
minutes of the hearings are found in Exhibits M, appeal. Its a valid request for reconsideration of
M1, M2, and M3. Exhibits B and C show that the petitioners letter since it raises new and valid
proposed ordinances were published in the Balita issues. A request for reconsideration of the
and the Manila Standard on April 21 and 25, 1993, decision of respondent is pro forma if it merely
respectively, and the approved ordinance was reiterates the ground already stated in the first
published in the July 3, 4 5, 1993 issues of the request for cancellation or withdrawal of the
Manila Standard and in the July 6, 1993 issue of assessment. Here, the request is not merely pro
Balita, as shown by Exhibits Q, Q1, Q2, and Q3. forma as it did not merely reiterate the grounds
The only exceptions are the posting of the stated in its first request for cancellation of the
ordinance as approved but this omission does not
affect its validity, considering that its publication
[19]
assessments but also called attention to those protested assessment. The determination on
facts or arguments which have been disregarded whether or not a demand letter is final is
in the disputed decision of petitioner. conditioned upon the language used or the tenor
of the letter being sent to the taxpayer.
Assessment Process
Phil Journalist v CIR Siron Here, the letter of demand, unquestionably
The NIRC, under Sections 203 and 222, provides constitutes the final action taken by the BIR on
for a statute of limitations on the assessment and petitioners request for reconsideration when it
collection of internal revenue taxes in order to reiterated the tax deficiency assessments due
safeguard the interest of the taxpayer against from petitioner, and requested its payment.
unreasonable investigation. Unreasonable Failure to do so would result in the issuance of a
investigation refers to where the period of warrant of distraint and levy to enforce its
assessment extends indefinitely since this collection without further notice. In addition, the
deprives the taxpayer of the assurance that it will letter contained a notation indicating that
no longer be subjected to further investigation petitioners request for reconsideration had been
after the expiration of the reasonable period of denied for lack of supporting documents. As to
time. whether it has become final despite the fact that
RMC No. 20-90 implements these provisions of the it was only issued and signed by the chief of a
NIRC, and must be strictly followed, such that in division of the BIR, the general rule is that the CIR
its execution, the phrase but not after ___19__ may delegate any power vested upon him by law
should be filled up, indicating the expiry date of to Division Chiefs or to officials of higher rank,
the period agreed upon to assess/collect the tax subject only to the four (4) exceptions mentioned
after the regular three-year period of prescription. in the NIRC, as amended. The act of issuance of
It must also be signed by the Commissioner or the the demand letter by the Chief of the Accounts
Revenue District Officer, as the case may be. The Receivable and Billing Division does not fall under
waiver is not a unilateral act by the taxpayer or any of the exceptions that have been mentioned
the BIR, but is a bilateral agreement between two as non-delegable.
parties to extend the period to a date certain.
Oceanic Wireless network v CIR Siron Mirant Navotas Corp v CIR Siron
A demand letter for payment of delinquent taxes Section 112(A) of the Tax Code provides that any
may be considered a decision on a disputed or VAT-registered person, whose sales are zero-rated
[20]
or effectively zero-rated, may, within two years The tax payers contention that the final decision
after the close of the taxable quarter when the of the Collector of Internal Revenue on the
sales were made, apply for the issuance of a tax disputed assessment is a condition precedent to
credit certificate or refund of creditable input tax the filing of an action in the CFI for the collection
due or paid attributable to such sales. It is clear of taxes must fail. Nowhere in the Tax Code is the
that the two-year period within which the refund CIR required to decide with finality a disputed
may be applied should be reckoned from the close assessment/request for reinvestigation before the
of the taxable quarter when the relevant sales CIR can file an action for the collection of tax
pertaining to the input VAT were made, not from liabilities. RA 1125 allows the taxpayer to question
the date the tax was paid. Claims filed beyond this the correctness of an assessment in both
period will be disallowed. administrative and judicial levels at the same
time; thus, the law does not restrict the CIR from
collecting the tax liability through any of the
CIR v Enron Subic Power Corp. - Fajardo means provided in the Tax Code.
PNZ Marketing v Com * - Fajardo
Artex dev Co. v NLRC *- Fajardo Arches v Bellosillo *- Francisco
In assailing the action brought by the BIR for the
CIR v Global Communication -Alciso collection of tax liabilities, petitioner claims that
Oceanic Wireless Network v Comm - Alciso the approval of the Revenue Commissioner is
Collector v Batangas Transportation Co.- jurisdictional, and the lack of which strips the
Alciso court of any authority to hear the tax collection
case. The court has ruled in a line of cases that
Lascona Realty Corp v Comm. Alciso the lack of approval by the Commissioner is not
IMPORTANT CASE jurisdictional, it only affects the parties or the
cause of action. Further, Memorandum Order V-
634 delegated the power of the Revenue
Tax Remedies Commissioner regarding the administration and
A. Remedies of the Government enforcement of revenue laws and regulations to
the respective Regional Directors. Here, it was the
1. Collection of Tax Liability Regional Director himself who instituted the case,
leaving it unnecessary for further approval.
Republic v Lim Tian Teng Francisco
[21]
Republic v Salud Hizon Francisco fraudulent returns with intent to evade and defeat
The issues in this case revolve around the lack of a part or all of the tax.1
approval of the CIR in filing the collection case
and the summary nature of collection cases in People v Patanao Cruz
relation to the prescription of an action for Criminal action does not amount to a decision for
collection. The court ruled that in accordance with unpaid taxes. Criminal liability gives birth to the
Sec. 221 of the NIRC as implemented by RAO 5- civil obligation while such is the opposite under
83, the authority to file complaints for collection of the income tax law. Civil liability to pay taxes
tax liabilities has been validly delegated to the arises from the fact that one has engaged himself
Revenue Regions particularly to the Special in business and not because of any criminal act
Attorneys and Special Counsels designated by the committed by him. The acquittal in the said
Regional Director. As such, approval of the CIR is criminal cases cannot operate to discharge one
no longer necessary. In the case at bar, it was the from the duty of paying the taxes which the law
Chief of the Legal Division with the approval of the requires to be paid, since that duty is imposed by
Regional Director who instituted the case. Anent statute prior to and independently of any
the second issue, the petitioner is incorrect in attempts by the taxpayer to evade payment.
saying that the action has prescribed. When the
BIR served warrants of distraint or levy on Hizon, CIR v CA *- Cruz
the running of the period to collect was Before one is prosecuted for wilful attempt to
suspended. The summary nature of collection by evade or defeat any tax under Sections 253 and
distraint or levy allows the enforcement of such 255 of the Tax code, the fact that a tax is due
collection to proceed beyind the statutory period. must first be proved.2
1
Logically, it has been ruled that a petition for reconsideration of
Ungab v Cusi * - Cruz an assessment may affect the suspension of the prescriptive
While there can be no civil action to enforce period for the collection of taxes, but not the prescriptive period of
collection before the assessment, there is no a criminal action for violation of law
2
the registered wholesale price of the goods, approved by the BIR,
requirement for the precise computation and is presumed to be the actual wholesale price, therefore, not
assessment of the tax before there can be a fraudulent and unless and until the BIR has made a final
criminal prosecution. The crime is complete when determination of what is supposed to be the correct taxes, the
taxpayer should not be placed in the crucible of criminal
the violator has knowingly and willfully filed prosecution. Herein lies a whale of difference between Ungab and
the case at bar
[22]
Marcos v CA * - Cruz was issued by the Court and that at the time of
The Government has two ways of collecting the the writs issuance, the barges were no longer
taxes in question. One, by going after all the heirs properties of the debtor Company. Hence, the
and collecting from each one of them the amount court has no jurisdiction over the properties
of the tax proportionate to the inheritance because the power of the court in execution of
received. Another remedy, pursuant to the lien judgments extends only to properties
created by Section 315 of the Tax Code, is by unquestionably belonging to the judgment debtor.
subjecting said property of the estate which is in
the hands of an heir or transferee to the payment
of the tax due the estate. The approval of the B. Deficiency Tax Assesment
court, sitting in probate, or as a settlement Republic v Ricarte Dela Cruz
tribunal over the deceased is not a mandatory The BIRs action to collect the deficiency tax will
requirement in the collection of estate taxes. not hold because collection should be made within
If there is any issue as to the validity of the BIR's 5 years after tax assessment. In this case,
decision to assess the estate taxes, this should although notice of assessment was allegedly
have been pursued through the proper made and sent, no evidence was presented to
administrative and judicial avenues provided for show that it was actually received. The
by law such as protest of assessment under prescriptive period is counted from the time
Section 209. assessment was made on April 1959, however,
from said date until the filing of the case at bar, 6
2. Forfeiture years and 9 months had already lapsed.
Republic v Enriquez Dela Cruz
The warrant of distraint issued by the CIR should Tupaz v Ulep Dela Cruz
be upheld over the writ of execution issued by the In this case, the collection of deficiency tax may
RTC because it is settled that the claim of the be upheld having been made within the 5 year
government predicated on a tax lien is superior to prescriptive period from the last day of filing the
the claim of a private litigant predicated on a return or from the date the return is filed
judgment. The tax lien attaches not only from the whichever comes later. The violation of non-
service of the warrant of distraint of personal payment of taxes can only be committed after
property but from the time the tax became due service of notice and demand for payment of
and payable. In this case, the distraint and notice deficiency taxes upon the taxpayer. This is so
of seizure were made before the writ of execution because prior to the finality of the assessment,
[23]
the taxpayer has not committed any violation for assessment should be considered as erroneous. In
nonpayment of the tax. The offense is deemed which event, Victoria's remedy, pursuant to
committed only after the finality of the Section 17 of the Assessment Law, was to appeal
assessment coupled with the taxpayers refusal to to the Provincial Board of Assessment Appeals. By
pay the taxes within the period allowed by law. the doctrine of primacy of administrative remedy,
the Provincial Board of Assessment Appeals had
Victorias Milling Co. Inc. * - Dela Cruz jurisdiction over the dispute to the exclusion of
In this case, the Provincial Board of Assessment the Court of First Instance.
Appeals had jurisdiction over the dispute to the
exclusion of the Court of First Instance.
Petitioners claim that the assessments are illegal
and void will not hold because assessments only 3. Principles Governing Assessments
become illegal and void when the assessor has no CIR V Pascor Realty - Venzuela
power to act at all. On the other hand, an An assessment is deemed made only when the
assessment is considered erroneous when the CIR releases, mails or sends such notice to the
assessor has the power but errs in the exercise of taxpayer. It must be sent to and received by a
that power. Since the Provincial Assessor had the taxpayer, and must demand payment of the taxes
power to make the assessments, but in the described therein within a specific period.
exercise of such power he deviated from the Necessarily, the taxpayer must be certain that a
procedure set down by law, in that he employed specific document constitutes an assessment. A
the "fixed percentage of diminishing book value revenue officers affidavit showing a computation
method"3 instead of the "straight line method" 4 in of tax liability, without demand or period of
depreciating the machineries, logically, the payment cannot be considered an assessment. In
3
addition, the filing of a criminal complaint need
Fixed percentage of diminishing book value method the rate of yearly
depreciation remains the same but the base (book value) upon which the rate is not be preceded by an assessment, because in
applied diminishes from year to year. cases of false or fraudulent returns, or failure to
Fixed diminishing book value method: (P100,000 cost of
machinery)
Book ValueDepreciation1st year5% of100,0005,0002nd
year5% of95,0004,7503rd year5% of90,2504,512.50*same Book ValueDepreciation1st year5% of100,0005,0002nd
rate but diminishing base year5% of95,0005,0003rd year5% of90,0005,000*fixed
depreciation rate
4
Straight line method the rate and the base (cost) are constant.
Straight-line method: (P100,000 cost of machinery)
[24]
file a return, proceedings in court may be of error in the assessment will justify the judicial
commenced without an assessment (Sec. 222). affirmance of said assessment.
Bonifacia sy po v CTA- Venzuela

Tax assessments by tax examiners are presumed CIR v Benipayo * - Noel
correct and made in good faith. The taxpayer has The assessment determines the tax liability of a
the duty to prove otherwise. In the absence of taxpayer. As it is imperative to be accurate, the
proof of any irregularities in the performance of assessment must be based on actual facts.
duties, an assessment duly made by the BIR Although there is a presumption of correctness in
examiner and approved by his superior officers the assessment, such presumption cannot be
will not be disturbed. All presumptions are in based on another presumption as well, not matter
favour of the correctness of tax assessments. how reasonable or logical such may be. The basis
of the presumption of correctness must be actual
CIR v Antonio Tuason - Venzuela facts.
All presumptions are in favour of the correctness
of CIRs assessment against the taxpayer. It is Meralco Securities v Savellano Noel
incumbent upon the taxpayer to prove the Mandamus cannot lie to compel the Commissioner
contrary. to impose a deficiency tax assessment.
Mandamus only lies when the act is ministerial in
Marcos v CA Venzuela nature, and not discretionary, as assessments are,
The determinations and assessments made by the with regard to the Commissioner. Should the
BIR are presumed correct and made in good faith. Commissioner choose not to impose deficiency
The taxpayer has the duty of proving otherwise. In tax assessments due to want of proof, the courts
the absence of proof of any irregularities in the cannot interfere with such discretionary function.
performance of official duties, an assessment will
not be disturbed. Even an assessment based on
estimates is prima facie valid and lawful where it City Lumber v Domingo Noel
does not appear to have been arrived at arbitrarily The order in question only applies to subordinate
or capriciously. The burden of proof is upon the officers, and not the Commissioner himself. The
complaining party to show clearly that the Regional Directors merely reviewed the case and
assessment is erroneous. Failure to present proof recommended a lower assessment. The
Commissioner may validly delegate the power to
[25]
assess, however, such assessment is not binding meaning of Section 230 of the NIRC. It is only
on him. Thus, if the Commissioner makes a upon such time that the refund is ascertained.
different final assessment, he may do so validly. When it cannot be ascertained whether there has
been an overpayment, in line with the provisions
of Section 230 which provides for a two-year
Republic v Delarama Mendoza, R period of prescription counted from the date of
The tax must be collected from the estate of the the payment of tax for actions for refund of
deceased, and it is the administrator who is under corporate income tax, the two-year period should
the obligation to pay such claim. The notice of be computed from the time of actual filing of the
assessment should have been sent to the Adjustment Return or Annual Income Tax Return
administrator to give effect to such assessment. at this point, the it can already be determined if
Since the person liable for the payment of the tax there has been an overpayment
did not receive the assessments, the assessment
could not have become final and executory.
Commissioner must state in a clear and
unequivocal language the decision
Republic v Dela Rama- Mendoza, R CIR v Union Shipping Corp. - Fabia, K
The government cannot collect because there is The CIR assessed Yee Fong Hong, Ltd the total
no clear evidence of the transfer of dividends to sum of 500K, as deficiency income taxes due for
the heirs. Since there is no clear showing that the years 1971 and 1972. Respondent Yee
income in the form of said dividends had really protested the assessment.
been received, which is the verb used in Section
21 of the NIRC by the Estate whether actually or November 25, 1976 the CIR, without ruling on
constructively and the income tax being collected the protest by Yee, issued a Warrant of Distraint
by the Governemt then would be without any and Levy, which was served on private
basis. respondent's counsel.
November 27, 1976 Yee reiterated its request for
CIR v CA * - Mendoza, R the reinvestigation of the assessment. However
The two-year prescriptive period should be the CIR, again, without acting on the request for
computed from April 2, 1984, when the final reinvestigation and reconsideration of the Warrant
adjustment return was actually filed because that of Distraint and Levy, filed a collection suit before
is the time of payment of the tax within the the CFI.
[26]
January 10, 1976 Respondent filed its Petition for final determination on the disputed assessment,
Review of the petitioner's assessment of its private respondent without needless difficulty
deficiency income taxes in the Court of Tax would have been able to determine when his right
Appeals. to appeal accrues and the resulting confusion
would have been avoided. Under the
According to the petitioner, the Court of Tax circumstances, the CIR, not having clearly
Appeals has no jurisdiction over this case. It signified his final action on the disputed
claims that the warrant of distraint and levy is assessment, legally the period to appeal has not
proof of the finality of an assessment and is commenced to run.
tantamount to an outright denial of a motion for
reconsideration of an assessment. Among others,
petitioner contends that the warrant was issued Advertising Assoc. Inc. - Fabia, K
after the respondent filed a request for On June 18, 1973 and March 5, 1974 Advertising
reconsideration of subject assessment, thus Associates received a deficiency tax assessment.
constituting petitioner's final decision in the They were required to pay taxes for being a
disputed assessments. Therefore, the period to business agent and independent contractor. April
appeal to the CTA commenced from the receipt of 18 and May 25, 1978, the warrants of distraint
the warrant on November 25, 1976 so that on and levy were served upon Advertising Associates.
January 10, 1976 when respondent corporation
sought redress, it has long become final and Advertising Associates filed a protest and there
executory. were subsequent litigation about the nature of
Advertising Assoiates's business. The enforcement
ISSUE: W/N the CTA has jurisdiction over the case of the warrant of distraint and levy was not
implemented. When the issue was finally
HELD: Yes resolved, the CIR sought to collect the taxes.
There is no dispute that petitioner did not rule on Again, Advertising filed an opposition claiming
private respondent's motion for reconsideration that the collection of tax had already prescribed
but left private respondent in the dark as to which because it was done beyond the 5-year period.
action of the Commissioner is the decision According to Advertising, Sec, 319 of the Tax Code
appealable to the CTA. Had he categorically stated provides that the tax may be collected by distraint
that he denies private respondent's motion for or levy or by a judicial proceeding begun within 5
reconsideration and that his action constitutes his years after the assessment of the tax.
[27]
immaterial. The estate failed to pay its taxes and

ISSUE: W/N the prescriptive period had already so on June 6, 2000, Reyes was informed that the
elapsed due to the failure to enforce the warrant property would be sold at a public auction. On
of distraint and levy. June 13, 2000, she filed a protest with the BIR
Appellate Devision, asserting that the whole tax
HELD: No proceeding are VOID. Without acting on Reyes'
The taxpayer received on June 19, 1973 and protest and offer, the BIR scheduled the property
MArch 5, 1974, the deficiency assessments to be sold.
herein. The warrants were served on Paril 18 and
May 25, 1975, or within five years after the But then, a law was passed allowing tax
assessment of the tax. Obviously, the warrants delinquents to compromise their taxes with the
were issued to interrupt the 5-year prescriptive BIR. Reyes filed an application for compromise
period. Its enforcement was not implemented with the BIR. Later on, with the acquiescence of
because of the pending protests of the taxpayer the Secretary of Finance, Reyes paid the 1M and
and its requests for withdraway of the warrants. claimed that she was only waiting for the approval
of the NEB (Note: the NIRC requires the approval
CIR v Reyes v CIR - Fabia, K of the NEB in compromise agreements where the
A certain person died and left behind a property in tax is more than 1M OR the settlement offered is
Dasmarinas Village wirth 34M. The BIR issued a less than the prescribed minimum rates.) Oddly
preliminary assessment notice in the amount of enough, she filed a Motion to Declare the
14 M. Sumbillo protested the assessment on Compromise Agreement as valid. The CIR
behalf of the heirs. Later on, the Commissioner of countered, saying that there compromise had not
Internal Revenue issued a preliminary collection been signed by the NEB.
letter to Reyes (one of the heirs). Subsequently, a
Warrant of Distraint or Levy was served upon the ISSUE: Was the assessment against the estate
estate, followed by Notices of Levy. Reyes valid? Was the compromise agreement valid?
protested the notice of levy and eventually
proposed a compromise agreement of 1M Pesos. HELD:
No, the assessment was invalid.
This was rejected by the CIR. According to the CIR, Reyes was not informed in writing of the law and
since the estate tax is a charge on the estate and the facts on which the assessment of the estate
not on the heirs, the latter's financial incapacity is had been made. She was merely notified of the
[28]
findings by the CIR, who had simply relied upon The formal letter of demand calling for payment
the provisions of RA 8424 or the Tax Reform Act. of the taxpayer's deficiency tax shall state the
To be simply informed in writing of the fact, the law, rules and regulations or
investigation being conducted and of the jurisprudence on which the assessment is based,
recommendation for the assessment due is otherwise the formal letter of demand and the
nothing but a perfunctory discharge of the tax notice of assessment shall be VOID.
function of correctly assessing a taxpayer. The act
canot be taken to mean that Reyes already knew The finding was that the CIR only wrote the taxes
the law and the facts on which the assessment due and the surcharges as well as the penalties,
was based. but there was nothing about the law upon which it
was based. It was only an itemization of the
No, the compromise was invalid. deductions and rates. According to the CIR, the 5-
It would be premature for the SC to declare that day letter should be sufficient in informing Enron
the compromise on the estate tax liability has about the legal bases of the assessment. The SC
been perfected and consummated, considering disagreed. The advice of tax deficiency given by
that the assessment was VOID. Since the the CIR to an employee of Enron, as well as the
assessment is void it cannot, in turn, be used as a preliminary five-day letter, were not valid
basis for the perfection of a tax compromise. substitutes for the mandatory notice in writing of
Furthermore, nothing has been final and settled. the legal and factual bases of the assessment.
Under Sec 204 (A) where the basic tax involved This does not necessarily mean that Enron was
exceeds one million pesos or the settlement informed of the law and facts on which the
offered is less than the prescribed minimum rates, deficiency tax assessment was made.
the compromise shall be subject to the approval
of the National Evaluation Board (NEB) composed
of the petitioner and four deputy commissioners. CIR v BPI- Clavio
In this case, the petitioner paid the value of the Tax laws cannot be applied retroactively. It can
compromise but she had no approval from the only operate prospectively. Hence, assessments
NEB. made pursuant to the (old) law in force at that
time, when the only requirement was for CIR to
notify the taxpayers of his findings, is valid. The
CIR v Enron Subic Power Corp. - Fabia, K CIR cannot later require an assessment based on
law and facts under the amendatory law.
[29]
Fraud Cases 4. No Estoppel Against the Governmnet

Aznar v CIR * - Clavio CIR v Abad Mendoza, J
The 5-yr prescriptive period to assess tax is The CIR made a mistake in classifying the end
applicable only under normal circumstances. But product of respondents to be denatured alcohol
when false returns, fraudulent returns are filed or which if true would exempt it from specific tax.
there is failure to file returns, the 10-yr Respondents argue that since they were not part
prescriptive period counted from the time of the in the committee which examined the end
discovery of the falsity, fraud or omission should product, it should not be held against them. SC
apply. refuted this by saying that the manufacturer is
responsible for the quality of his products and he
Fraud contemplated by law is actual and not cannot escape responsibility by showing that the
constructive. It must be intentional and denaturing committee of the BIR has certified his
deliberate, to avoid or evade tax liability. Mere products to be denatured alcohol. He cannot claim
mistake or negligence (whether slight or gross) is ignorance because the permit issued to him
not equivalent to fraud so as to warrant the stated that the manufacture of the denatured
imposition of 50% fraud penalty. alcohol should be under his exclusive
responsibility.
CIR v Toda * - Clavio
Transactions (sale/transfer of property) prompted Visayan Cebu Terminal v CIR Mendoza, J
to mitigate tax liability (from 35% corporate tax to Petitioner had agreed with Bureau of Customs
5% individual CGT) than for legitimate business (BOC) that 28% of its gross receipt would go to
purposes constitute tax evasion. The transaction the latter. BIR however assessed petitioner for
is tainted with fraud. deficiency in the 3% percentage tax since the
petitioner is still a contractor. The contention is
Assuming there was no fraud, however, ITRs not the base of the percentage tax of w/n the 28
reflecting the true/actual amount gained from the percent that goes to the BOC would still be
transaction are false. Therefore, the 10-yr included. As contractor, petitioner is liable for
prescriptive period to assess, counted from the percentage tax but the 28 percent which goes to
date of discovery of the falsity, should be applied. the BOC should be excluded in computation of the
Hence, assessment was still within the percentage tax. Although petitioner pays to BOC,
prescriptive period.
[30]
it does not preclude them to be classified as a from collecting taxes legally due because of
contractor. mistakes or errors of its agents; but like other
principles of law, this admits of exceptions in the
Phil Bank of Com v CIR Mendoza, J interest of justice and fair play, as where injustice
Petitioner pleas for a tax refund after it was filed 2 will result to the taxpayer.
years after it was due. It relied on RMC No. 785
which extended the prescriptive period from 2
years and now to 10 years contrary to Tax code CIR v CA * Exception Martinez 1999
limiting it to only 2 years. The Court refuted this Central Vegetable Manufacturing Co. Inc was
argument providing that RMC 785 is a mere assessed 1.5M deficiency miller's tax. CVMC
administrative ruling and is not conclusive and claims that boxes are not "raw materials and
may be ignored if erroneous. The State cannot be supplies used in the milling process" that cannot
put in estoppel by the mistakes of its officials. The be claimed as a tax credit against miller's tax due
RMC, a mere interpretation of the Tax Code, under the old tax code. BIR says otherwise. CTA,
cannot be given effect if it goes contrary to the CA, SC ruled in favor of CVMC applying the
express provision of a statute which in this case statcon rule that exceptions to the general rule
the Tax code 0f 1977 Sec. 230. should be strictly construed.
CIR v CA * Exception Martinez 1997 A similar ruling had been issued four years earlier
Alhambra Cigar used BIR Ruling 473-88 to in favor of CVMC, but BIR claims that this cannot
compute their excise tax; thereafter, the BIR be adhered to because the government cannot be
issued Ruling 017-91 repealing said ruling, then estopped by the mistakes of its agents; but this
assessed Alhambra for deficiency excise tax. rule admits of exceptions in the interest of justice
Alhambra claims that the ruling cannot be applied and fairplay.
retroactively to them; the BIR claims that they
cannot be estopped by the mistakes of their
agents.
5. Disputable Presumption
BIR states that Alhambra acted in bad faith; Basilan Estates v CIR Martinez delegated
however, their failure to consult the BIR before to Paeng
applying BIR Ruling 473-88 is not a sign of bad Republic v CA Martinez delegated to
faith. Admittedly the government is not estopped Paeng
[31]
An assessment is deemed made only when the

Marcos v CA Cajucom collector releases, mails, or sends such notice to
In the absence of proof of any irregularities in the the taxpayer. Furthermore, an assessment is not
performance of official duties, an assessment will necessary before a criminal complaint can be filed
not be disturbed. Even an assessment based on but is necessary for collection such that an
estimates is prima facie valid and lawful where it affidavit may not take the place of an assessment.
does not appear to have been arrived at arbitrarily
or capriciously. The burden of proof is upon the
complaining party to show clearly that the C. Prescription of Right to Assess and
assessment is erroneous. Failure to present proof Collect Taxes
of error in the assessment will justify the judicial 1. Prescription of Right to Asses
affirmance of said assessment. Cases
Comm v Gonzales Calalang
CIR v Bautista Cajucom Facts: Matias Yusay, a resident of Pototan, Iloilo,
Same doctrine as Basilan. died intestate leaving two heirs: Jose Yusay, a
legitimate child and Lilia Yusay Gonzales, an
Basilan Estates v CIR Cajucom acknowledged natural child. Jose was appointed
An assessment is deemed made when notice to as the administrator of his etate. On May 11,
this effect is released, mailed, or sent by the CIR 1949, he filed an estate and inheritance tax return
to the taxpayer and it is not required that the with the BIR declaring certain properties. This
notice be received by the taxpayer within the return did not mention any heir.
period of prescription. On February 13, 1958 the BIR commissioner
issued an assessment of estate and inheritance
Nava v CIR Olympia tax plus surcharge, interest, and compromise
The presumption that a letter duly directed and payment. Because Jose passed away, the said
mailed was received in the regular course of mail assessment was sent to his widow, Florencia Vda.
cannot apply where none of the required facts to De Yusay, who succeeded him in the
raise this presumption have been shown. These administration of the estate of Matias.
facts are: that the letter was properly addressed No payment having been made, the BIR
with postage pre-paid and that it was mailed. Commissioner filed a proof of claim for the estate
and inheritance taxes due and a motion for its
CIR v Pasco Realty * - Olympia allowance with the settlement court. Thereafter,
[32]
on November 17, 1959, Lilia disputed the legality section lists down the requirement/contents of a
of the assessment claiming that the right to make return)
the same has already prescribed because more Accordingly, Section 332 of the Tax Code is
than 5 years have elapsed since the filing of the applicable. This section states that in case of a
estate and inheritance tax return. false or fraudulent return or when no return is
On April 13, 1960, Lilia filed a petition for review filed, the tax may be assessed within 10 years
with the CTA assailing the legality of the said after the discovery of the falsity, fraud, or
assessment. The CTA decided in favor of Lilia, omission. In the case at bar, the Commissioner
ruling that the right of the BIR Commissioner to came to know of the identity of the heirs on
assess the taxes have already prescribed. September 24, 1953 and the underdeclaration in
the gross estate of Matias on July 12, 1957. From
Issue: Whether or not the right of the BIR this latter date up to February 13, 1958(date of
Commissioner to make an assessment has already assessment), less than 10 years have elapsed.
prescribed. Thus, the right of the Commissioner to assess the
tax herein imposed has not prescribed.
Ruling: No, the right has not prescribed.
The Commissioner claims that the period to make Guagua Electric v Collector Calalang
an assessment should be 10 years rather than 5 Guagua Electric Light Co. is a a grantee of a
years from the filing of the return because the municipal franchise of Guagua , Pampangga and
return filed by Jose Yusay was fraudulent as it Sexmoan, Pampangga. For the period of January
failed to mention any heir of Matias Yusay. The SC 1, 1947 to November 1956, it reported its gross
said that fraud must be alleged and proved in the income and paid the corresponding franchise tax
court a quo. Since the same was not done, the SC of 5% in accordance with Section 259 of the tax
deemed not to entertain the Commissioners code.
assertion that the return was fraudulent. However, Believing, however, that it should pay a lower
the return filed by Jose, albeit not fraudulent, was franchise tax as provided for in its franchise, it
not a return at all since it is substantially defective filed a claim for refund on March 25, 1957. The
because there was an underdeclaration of 92 Commissioner denied the same on the ground
parcels of land and it did not mention any heir. that the right to its refund had already prescribed.
Guagua Electric elevated the case on appeal with
Therefore, the return filed was no return at all as the CTA but the same was dismissed.
required by Section 93 of the Tax Code. (Said Subsequently, the SC, in the case of Hoa Hin Co.
[33]
Vs. David, held that franchise holders under Act without merit. In paragraph 10 of the
57 are liable for 5% franchise tax under the tax Commisioners answer, he admitted the
code. Due to this, the Commissioner assessed allegations in paragraph 13 of the petition for
deficiency franchise taxes against Guagua review. Paragraph 13 alleged the facts, supported
Electric. by annexes, constituting prescription. There was
In a letter dated March 30, 1961, Guagua Electric therefore no need for the taxpayer to present
contested the latter assessment stating, among further evidence in the point.
others that the right of the Commissioner to With respect to the issue on surcharge, the SC
assess and/or collect the taxes had already held that Guagua Electric should not be liable for
prescribed. Due to a recommendation by the the same because it acted in good faith when it
appellate division of the BIR, the Commissioner paid its franchise taxes, albeit lower than that
issued a revised assessment reducing the taxes prescribed in the tax code. It only paid in
due against Guagua. It eliminated the deficiency accordance with its franchise.
taxes due for the period prior to January 1, 1956
as the right to assess and/or collect these taxes,
according to the recommendation, have already CIR v Suyoc Calalang
prescribed. Facts: Suyoc Consolidated Mining Company is a
Guagua Electric still appealed to the CTA which mining company operating before the war. It failed
affirmed the decision of the Comissioner. The CTA to file its income tax return on 1942 for the year
ruled that Guagua did not raise the issue of of 1941 due to the last war. After liberation, the
prescription. Congress enacted a law extending the period to
Hence, this appeal. file returns for 1941 up to December 31, 1945.
Issue :Whether or not Guagua Electric failed to Because its records were destroyed as an offshoot
raise the issue of prescription of the right of the of the war, Suyoc Consolidated requested for an
government to assess/collect the franchise taxes. extension to file its return until February 15, 1946.
Ruling: No, Guagua Electric did not fail to raise The request was granted by the Commissioner. On
the issue of prescription. In its letter dated March February 12, 1946, it filed its tentative return. On
30, 1961, it already assailed the right of to November 28, 1946, it filed its second amended
assess/collect the tax on the ground of return. Lastly, on February 6, 1947, it filed its third
prescription. Moreover, the contention of the amended return. The reason for these successive
Commissioner that Guagua failed to adduce filings is that Suyoc has not yet completely
evidence to prove that prescription has set in is reconstructed its records.
[34]
On the bases of the second amended return, the take advantage of such desistance to elude his
Collector assessed the companys income tax deficiency income tax liability to the prejudice of
liability on February 11, 1947. The company asked the government invoking the ground of
for 1 year extension to pay the amount assessed. prescription.
The request was granted but only for an extension The SC said that there is no precedent in this
of 3 months. jurisdiction dealing with the matter at hand.
Suyoc failed to pay within the 3 month period. However, it took a look at several American cases.
Accordingly, the Collector sent a letter on One of which states that He who prevents a thing
November 28, 1950, demanding payment on the from being done may not avail himself of the non-
tax so assessed. On April 6, 1951, Suyoc asked for performance which he has himself occasioned, for
a reconsideration and reinvestigation of the the law says to him in effect this is your own act,
assessment which was granted. After a change of and therefore you are not damnified.
the examiner and a series of negotiations, the
income tax due the petitioner was reduced by the
Collector to P 24, 438.96. The company was Republic v Lopez Martin
notified of this new assessment on July 28, 1955. The five-year prescriptive period fixed by Section
The company then filed a petition for review with 332(c) of the Internal Revenue Code within which
the CTA on the ground that the right of the the Government may sue to collect an assessed
government to collect the tax has prescribed.
tax is to be counted from the last revised
Issue: Whether or not the right of the
government to collect the income taxes of Suyoc assessment resulting from a reinvestigation asked
Consolidated has prescribed. for by the taxpayer. Where a taxpayer demands a
Ruling: No, the right of the government to collect reinvestigation, the time employed in
the income taxes has not prescribed. The reinvestigating should be deducted from the total
petitioner refrained from collecting the tax by period of limitation. Hence, from the period that
distraint or levy or by a proceeding in court within intervened between the first revised assessment
the 5 year period from the filing of the second
(29 May 1954) and the filing of the complaint (13
amended final return due to the several requests
of respondent. (Requests for extension and August 1960) is deducted the time consumed in
requests for reconsideration and reinvestigation) considering and deciding the taxpayer's
After inducing petitioner to delay collection as he subsequent petition for reconsideration and
in fact did, it is most unfair for respondent to now
[35]
reinvestigation (from 16 January 1956 to 22 April return, then an assessment may be made within
1960), it will be seen that only one (1) year, three the time stated in section 332(a).
(3) months, and six (6) days, counted against the
Butuan Sawmill v CTA Martin
government. Thus, Prescription has not set in.
CIR v Ayala Securities Docena
Comm v Sison Martin The 10-year prescriptive period is only applicable
The period of time between June 1952 to October to fraud cases or falsity of return. If there is no
1956, should be excluded from the computation of proof of fraud, or falsity of return with an intention
the five-year prescription, because of the petition to evade taxes, said period is inapplicable. The
made by the Sisons for re-consideration or re- period applicable is the 5-year prescriptive period.
investigation. It is settled that the five-year period
of Sec. 332 of the Internal Revenue Code Aznar v CIR Docena
(prescription, like 331) is to be counted from the Fraud cannot be presumed but must be proven.
last revised assessment resulting from a Fraudulent intent could not be deduced from
reinvestigation asked for by the taxpayer; and mistakes however frequent they may be,
that where a taxpayer demands a reinvestigation, especially if such mistakes emanate from
the time employed in reinvestigating should be erroneous entries or erroneous classification of
deducted from the total period of limitation. items in accounting methods utilized for
determination of tax liabilities. The 50% fraud
Bisaya Land Transpo v Collector Martin penalty cannot be imposed if fraud is not proved.
When there is no explicit provision imposing the
duty to file a return, and penalizing non- CIR v Javier Jr. Docena
compliance therewith, duty to file a return but the The rule in fraud cases is that the proof must be
tax is such that its amount cannot be ascertained clear and convincing such that it would be
without data pertinent thereto, the Collector of sufficient to sustain a judgment on the issue of
Internal Revenue may by appropriate regulations correctness of the deficiency itself apart from the
require the filing of the necessary returns. In any fraud penalty. If fraud is not proved, there is no
event, with or without such regulations, it is to the reason for imposing the 50% surcharge provided
interest of the taxpayer to file said return if he in the code.
wishes to avail himself of the benefits of section
331. If, this notwithstanding, he does not file a Castro v Collector Docena
[36]
Laws are generally prospective, not retroactive. limitations which should be done before the
An amendment introduced to the Tax Code expiration of the original period.
several years after the assessment on a taxpayer
cannot be applied retroactively. CIR v BF Goodrich - Ursua
Boise Cascade v CIR- Ursua
Republic v Acevedo Jularbal Carnation v CIR - Ursua
An action for collection of deficiency income tax Marcos V CA Ursua
must be commenced within five years after the
assessment of the tax. Any waiver of the statute CIR v Rascor Raso
of limitations must also be executed within the The issuance of an assessment is vital in
original five-year period within which suit could be determining the period of limitation regarding its
commenced. A request for reinvestigation which is proper issuance and the period within which to
not acted upon does not suspend the running of protest it. Section 203 of the NIRC provides that
the period for filing an action for collection. internal revenue taxes must be assessed within
three years from the last day within which to file
Sinforosa Alca v CA Jularbal the return. Section 222, on the other hand,
An extension of the period of limitation is different specifies a period of ten years in case a fraudulent
from the waiver of prescription. A waiver made return with intent to evade was submitted or in
after the action to collect has already prescribed is case of failure to file a return. Also, Section 228 of
not just an extension of the period of limitation the same law states that said assessment may be
but a renunciation of the right to invoke the protested only within thirty days from receipt
defense of prescription which was then already thereof. Necessarily, the taxpayer must be
available to the taxpayer. There is nothing certain that a specific document constitutes an
unlawful nor immoral about this kind of waiver; assessment. Otherwise, confusion would arise
just like any other right, the right to avail of the regarding the period within which to make an
defense of prescription is waivable. assessment or to protest the same, or whether
interest and penalty may accrue thereon.
RP v Lim De Yu Jularbal
If fraud is not proved, the period of limitation for Tupaz v Ulep Raso
assessment is five years from the filing of the A new law (BP 700) shortening the assessment
return. The five-year period for assignment may period from five years to three years shouldnt
be extended via waiver of the statute of apply to the petitioner and shouldnt constitute as
[37]
grounds for prescription of the action since the waiver or there is no request for reinvestigation
law expressly stated the year that it would take that had been granted by the BIR Commissioner,
effect and the non-payment of taxes occurred the taxpayer may still be held in estoppel and be
prior to the effectivity of the said law. prevented from setting up the defense of
prescription of the statute of limitations on
Internal revenue taxes are self-assessing and no collection when, by his own repeated requests or
further assessment by the government is required positive acts, the Government had been, for good
to create the tax liability. An assessment, reasons, persuaded to postpone collection to
however, is not altogether inconsequential; it is make the taxpayer feel that the demand is not
relevant in the proper pursuit of judicial and extra unreasonable or that no harassment or injustice is
judicial remedies to enforce taxpayer liabilities meant by the Government, as laid down by this
and certain matters that relate to it, such as the Court in the Suyoc case.
imposition of surcharges and interest, and in the
application of statues of limitations and in the CIR v Primetown Property Group - Raso
establishment of tax liens Under Section 229 of the Tax Code, a such suit or
proceeding shall be filed after the expiration of two (2)
BPI v CIR Raso years from the date of payment of the tax or penalty
The filing of a protest letter doesnt constitute as regardless of any supervening cause that may arise
after payment. The subject of contention is how long
a valid ground to suspend the running of the
exactly is the period of two years to determine the
prescriptive period. date of prescription. In this case, the Court applied
manner in which the Administrative Code of 1987
The statute of limitations on collection may only counts legal period. In the said code, acalendar month
be interrupted or suspended by a valid waiver is a month designated in the calendar without regard
executed in accordance with (at the time of the to the number of days it may contain. It is the period
case) paragraph (d) of Section 223 of the Tax of time running from the beginning of a certain
Code of 1977, as amended, and the existence of numbered day up to, but not including, the
the circumstances enumerated in Section 224 of corresponding numbered day of the next month, and if
the same Code, which include a request for there is not a sufficient number of days in the next
reinvestigation granted by the BIR Commissioner. month, then up to and including the last day of that
month.[ To illustrate, one calendar month from
December 31, 2007 will be from January 1, 2008 to
Even when the request for reconsideration or January 31, 2008; one calendar month from January
reinvestigation is not accompanied by a valid
[38]
31, 2008 will be from February 1, 2008 until February A request for detailed computation of an alleged
29, 2008. tax liability is not a request for reinvestigation
which will toll/suspend the prescriptive period to
2. Prescription of Right to Collect collect.
Comm v Wyett Suaco * - Fragante
A request for reconsideration or reinvestigation CIR v Capitol Subd- Dialino
tolls the prescriptive period to collect and starts to The period for prescription of the action to collect
run again when the request is denied. Even taxes is interrupted when the taxpayer requests
though a letter or request is not captioned as a for a review or reconsideration of the assessment,
reconsideration or reinvestigation of the and starts to run again when said request is
assessment it will be deemed such a request if the denied.
ultimate relief or remedy asked by the taxpayer Capitol did not specifically used the words
will result in the audit or examination of the review or reconsideration but its requests for
records of the taxpayer to determine the tax information on disallowed items, for explanation
liability. of disallowances, and for reinvestigation of the
same, all of which were denied, interrupted the
period of prescription to collect the taxes.
3. Suspension of Prescriptive Period
Palanca V CIR- Dialino
Cases A judicial action for the collection of taxes is
CIR v Sison Fragante begun by the filing of the complaint with the
The five-year period of sec. 332 of the Internal proper court of first instance, or where the
Revenue Code (prescription, like 331) is to be assessment is appealed to the CTA, by filing an
counted from the last revised assessment answer to the taxpayers petition for review
resulting from a reinvestigation asked for by the wherein payment of the tax is prayed for. The
taxpayer; and that where a taxpayer demands a summary remedy of distraint and levy is begun by
reinvestigation, the time employed in the issuance of a warrant of distraint and levy
reinvestigating should be deducted from the total which stops the running of prescription of the
period of limitation. right to collect taxes although the warrant is not
actually executed or carried out.
Republic v Ablaza Fragante The estates many requests for postponement,
reinvestigation, revaluation of the properties, or
[39]
other matters delayed the execution of the only when the private respondent was definitely
warrant. Were it not for said requests, the warrant informed of the implied rejection of the said
would have been fully executed well within the protest and the warrant was finally served on it.
period prescribed by law.
CIR v Wyeth Suaco Laboratories- Arriola
Republic v Ker Dialino Settled is the rule that the prescriptive period
The running of the prescriptive period to collect provided by law to make a collection by distraint
taxes shall be suspended for the period during or levy or by a proceeding in court is interrupted
which the CIR is prohibited from beginning a once a taxpayer requests for reinvestigation or
distraint and levy or instituting a proceeding in reconsideration of the assessment. Wyeth Suaco
court. admitted that it was seeking reconsideration of
Kers petition for review in the CTA and its appeal the tax assessments as shown in a letter of its
to the SC legally prevented the Commissioner President and General Manager. Although the
from instituting an action in the CFI for the protest letters did not categorically state or use
collection of taxes. Thus, even though the CTAs the words reinvestigation and reconsideration,
dismissal and the SCs affirmation were made five the same are to be treated as letters of
years after the final assessment, the CIR is not reinvestigation and reconsideration. These letters
prohibited from collecting the taxes due. of Wyeth Suaco interrupted the running of the
five-year prescriptive period to collect the
CIR v Algue- Arriola deficiency taxes. The period started to run again
According to RA 1125, the appeal may be made when the BIR served the final assessment to
within 30 days after receipt of the decision or Wyeth Suaco.
ruling challenged. It is true that as a rule the
warrant of distraint and levy is proof of the CIR v Union Shipping Corp- Arriola
finality of the assessment; Exception is where Commissioner should always indicate to the
there is a letter of protest after receipt of notice of taxpayer in clear and unequivocal language what
assessment. The proven facts is that 4 days after constitutes his final determination of the disputed
private respondent received the petitioner's notice assessment. Petitioner did not rule on private
of assessment, it filed its letter of protest. It thus respondent's motion for reconsideration which left
had the effect of suspending the reglementary private respondent in the dark as to which action
period which started on the date the assessment of the CIR is the decision appealable to the CTA.
was received. The period started running again The CIR, not having clearly signified his final
[40]
action on the disputed assessment, legally the The taxpayer did not contest the asessment,
period to appeal has not commenced to run. Thus, hence it becomes final. Then the BIR files a civil
its was only when private respondent received the case (i.e., collection suit) with CFI. At this stage,
summons on the civil suit for collection of the taxpayer can no longer contest/appeal the
deficiency income that the period to appeal assessment. After the assessment has been
commenced to run. made, the proper remedy it to file an appeal with
the Tax Court. Having failed to do so, the
assessment has become final.
D. Remedies of the Taxpayer
1. Remedies before payment of the tax Current rule: Section 7 (a) (1) of RA 1125 as
Delta Motors Co. v CIR * - Escueta (CTA Case amended by RA 9282 provides that the CTA shall
3782, May 21, 1986) exercise exclusive appellate jurisdiction to review
A taxpayer may contest the assessment made by by appeal decisions of the CIR in cases involving
the BIR by presenting evidence to substantiate disputed assessments, refunds of internal revenue
the errors that are claimed to have been taxes, fees or other charges, penalties in relation
committed by the CIR in making the assessments. thereto, or other matters arising under the
All presumptions are in favor of the correctness of National internal revenue or other laws
the tax assessments. The burden of proof is on administered by the BIR.
the purchaser to show the contrary.
Note: The entire Section 7 enumerates the
Upon failure to appear, prosecute for an jurisdiction of the CTA.
unreasonable length of time, the petition, upon
motion may be dismissed and adjudicated based Marcos v CA Escueta
on merits, unless otherwise provided by the If there is any isue as to the validity of the BIRs
Courts. decision to assess the taxes the proper remedy is
to pursue the proper admiistrative and judicial
Basa v Republic * (compare with CTA avenues provided by law (i.e., Section 228 if the
Jurisdiction now) Escueta NIRC: Protesting of an assessment and not via
Appeals by the taxpayer regarding assessments of Petition for Certiorari under the pretext of grave
the BIR should be made to the Tax Courts not to abuse of discretion.
the CFI.
[41]
2. Taxpayers Defenses against the the tax due on said corporation taxes deemed to
assessment have been paid in the Philippines.
Aguinaldo Industries Co v CIR Imperial
Since exemptions are only statutory graces, in
claiming items as deductibles, the taxpayer must 3. Remedies after payment of tax
show that its claimed deductions clearly come Bermejo v Collector * -Gran
within the language of the law, otherwise they will Chemphil v CIR *- Gran
not be allowed. CIR v Ca * -Gran
CC & CIR v CA & Planters * - Gran
Abra Valley College v Aquino Imperial Gibbs v CIR * - Cua
The Constitution provided for exemptions of all ACCRA Investment Corp v CA - Cua
lands buildings and improvements used CIR v TMX Sales - Cua
exclusively for educational purposes. The test of Citibank v CIR - Cua
exemption is the use of the property for purposes CIR v Wander Phil Inc - Plazo
mentioned in the Constitution. Reasonable CIR v P&G - Plazo
interpretation of the phrase used exclusively CIR v Jose Concepcion - Plazo
extends to those facilities which are incidental to
and reasonably necessary for the accomplishment 4. Judicial Remedies
of the said purposes. Lascona Land v CIR * - Plazo
CIR v P&G Imperial Surigao electric v CA * Sia

In claims for refunds or tax credits, a written claim The failure of a taxpayer to lodge his appeal
must be filed with the BIR by a taxpayer which is within the prescribed period of 30 days from the
defined as any person who is subject to tax. As a notice of final assessment bars his appeal and
withholding agent is made personally liable for renders the questioned decision final and
such tax which he is required to deduct and executory.
withhold, he is deemed a taxpayer for purposes of Remark on the case:
claiming refunds or tax credits. Likewise, for the The Court, in its obiter, pointed out that the
reduced rate of 15% to apply, the NIRC does not Commissioner of Internal Revenue should always
require that the domicile of the non-resident indicate to the taxpayer in clear and unequivocal
foreign corporation give a deemed paid tax language whenever his action on an assessment
credit but only that it shall allow a credit against
[42]
questioned by a taxpayer constitutes his final The remedy of an aggrieved taxpayer is not
determination on the disputed assessment. without any limitation. A taxpayer's right to
Although the Court pointed this out, it still contest assessments, particularly the right to
construed the letters of the commissioner appeal to the Court of Tax Appeals, may be
demanding for payment and a threat of legal waived or lost as in this case.
action in case of default as final assessment In this case, the assessment has already become
already (In this case, the Court did not mention final and executory because even if the
that the Commissioner said in clear and petitioners requested a 30 day extension to file
unequivocal language that the assessment was their position paper, they did not file any. Hence,
final.) petitioners' letter for a reconsideration of the
assessments is nothing but a mere scrap of paper.
CIR v Villa* - Sia
A taxpayer must first contest an assessment in
the Bureau of Internal Revenue before filing a
petition for review in the Court of Tax Appeals. Procedure of Appeal
Absent said contest renders the appeal premature
and the Court of Tax Appeals will have no CTA Finding of fact conclusive
jurisdiction to entertain said appeal. Nasiad v CTA * - Fabia, F
Advertising Assoc Inc V CIR Sia Appeal of CTA Decisions

The Commissioner should always indicate to the
taxpayer in clear and unequivocal language what DBP v CA * Fabia, F
constitutes his final determination of the disputed RCBC v CIR * Fabia, F
assessment. That procedure is demanded by the
pressing need for fair play, regularity and E. Statutory Offenses and Penalties
orderliness in administrative action. CIR v ESSO - Olympia
Remark:
This doctrine was actually from surigao case but
was merely an obiter therein.
Dayrit v Cruz * - Sia Prescription for violations of NIRC

Lim v CA & People - Olympia
[43]
Com v JAL - Fajardo
Informers Reward CIR v COA Soller

Issue :Whether an informers reward should be
Meralco Securities v Savellano Soller given to Savellano when the tax delinquents
(Same as the Meralco Case above) An informer concern government agencies:
cannot file a mandamus to compel the CIR to Held: YES. The law makes no distinction between
issue an assessment for deficiency corporate delinquent taxpayers, whether private persons or
income tax of a corporation (Meralco). Informers corporations, or public or quasi-public agencies, it
reward is contingent upon payment and collection being sufficient for its operation that the person or
of unpaid or deficiency taxes. An informer is entity concerned is subject to and violated
entitled by way of reward only to a percentage of revenue laws, and the informers report resulted
the taxes actually assessed and collected. Since in the recovery of revenues.
no assessment, much less any collection, has
been made, it is gross error for the trial court to
issue a writ against the CIR to pay respondent 25
% informers reward.
Penid v Virata Soller

Issue: Whether or not an informers reward should
be given to an informer when the corporation (Pan
Fil) was not included in the companies listed in the
information (criminal complaint).
Held: YES. The inclusion of Pan Fil among the firms
investigated was the direct, logical, and necessary
consequence of the information given by the
petitioners during their interview. The
investigation was extended to include other
companies not listed in the Information, which in
turn led to the discovery and recovery of income.
[44]

Digests and Doctrines Tax 2 (OMEGA)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Digests and Doctrines Tax 2 (OMEGA)

Uploaded by

Copyright:

Available Formats

Tax Digests and Doctrines of 3D BATCH 2012 under Atty.

Issue: W/N there was grave abuse of discretion on

generally as a business and not as a casual As FPIC is a common carrier, it is therefore,

Secretary does not act thereon, after the lapse of HELD:

Bonifacia sy po v CTA- Venzuela

immaterial. The estate failed to pay its taxes and

Fraud Cases 4. No Estoppel Against the Governmnet

An assessment is deemed made only when the

CIR v P&G Imperial Surigao electric v CA * Sia

Advertising Assoc Inc V CIR Sia Appeal of CTA Decisions

Dayrit v Cruz * - Sia Prescription for violations of NIRC

Com v JAL - Fajardo

Informers Reward CIR v COA Soller

Penid v Virata Soller

You might also like