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Preliminaries%

! Course% Objec=ve% % this% course% is% primarily%


designed% to% provide% the% students% with% a%
fundamental%understanding%of:%
" Rights% and% remedies% of% the% government% and%
TAX$2$ taxpayers;%%
" Estate%and%donors%tax;%%
Rights$and$Remedies$of$the$ " Business%taxes;%%
Government$Under$the$NIRC$ " Local%and%real%property%taxa=on,%and%
" Selected%provisions%of%the%TCCP%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%2%

Preliminaries% Preliminaries%

! Course%Materials%%% ! Responsibility% for% Assigned% Readings/Topics% % each% student% is%


responsible%for%the%assigned%readings/topics,%whether%or%not%actually%
" Na=onal%Internal%Revenue%Code,%Titles%I,%III%Q%X% taken%up%in%class%
! Academic% Honesty% % the% maintenance% of% academic% integrity% is% the%
" IRR% % selected% Rev.% Regs.% and% other% BIR% responsibility% of% each% student.% Any% form% of% dishonesty,% whether% in%
issuances% recita=on% or% in% exams,% is% a% serious% oense% and% will% be% dealt% with%
severely%%%
" Case%law% ! Grade%Distribu=on%%recita=on,%midterms,%nals%%35/30/35%%
" Textbook%%none%required;%some%suggested% ! Recita=on%Policy%%
" If%a%student%is%not%present%when%called%upon%to%recite,%he/she%gets%
o Mamalateo%(Remedies,%VAT)% a%grade%of%70%%
o Aban%(Remedies)% " If% a% student% is% present% but% is% unprepared% when% called% upon% to%
recite,%he/she%gets%a%grade%no%lower%than%80%%
o Vitug%&%Acosta%% ! NoQgadget%policy%(laptops/tablets/smart%phones)%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%3% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%4%


Powers%of%the%BIR%

! Self%assessment%system%%system%under%which%
TP% makes% a% declara=on% in% the% return% on% the%
basis%of%his%assessment%and%calculate%the%tax%
due%
" Usually%accompanied%by%payment%(payQasQ
youQle%%Sec.%56(A)(1),%NIRC)%
! How%do%tax%authori=es%determine%whether%TP%
I. POWER$OF$THE$BIR$TO$OBTAIN$ made% a% correct% return% and% paid% the% correct%
INFORMATION$AND$MAKE$AN$ taxes?%
ASSESSMENT$
A"y.%Terence%Conrad%H.%Bello%% 5% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%6%

Powers%of%the%BIR% Power%of%BIR%to%Obtain%Informa=on%and%Make%an%Assessment%

Sources%of%info%and%means%to%obtain%them%("5"&"6)%
! Power%to%interpret%the%provisions%of%the% ! Examine%books,%papers,%records%or%other%data%(5(A))%
N I R C% a n d% t h e% p o w e r% t o% m a k e% ! TPI%("5(B))%

assessment% !
!
Subpoena%duces"tecum%("5(C))%
Subpoena%ad"tes3candum%("5(D))%
! Assessment%based%on%actual%facts%%basic% ! Tax%mapping%("5(E))%
! Examina=on%of%returns%("6(A))%
principle%in%tax%assessments% ! Best%evidence%obtainable%("6(B))%

! %5%&%6%Q%sources%of%factual%informa=on% ! InventoryQtaking,% surveillance,% and% presump=ve% gross% sales% and% receipts%


("6(C))%
and%allowable%means%to%obtain%them% ! Termina=on%of%taxable%period%("6(D))%
! Fixing%of%real%property%values%("6(E))%
! Inquiry%of%bank%deposits%("6(F))%
! Accredita=on%and%registra=on%of%tax%agents%("6(G))%
! Prescribe%addi=onal%procedural%or%documentary%requirements%("6(H))%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%7% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%8%
Inves=ga=ve%Authority% Inves=ga=ve%Authority%

! Sec.% 5% authorizes% CIR% to% obtain% info% and% to% ! Sec.%6%authorizes%CIR%to%make%assessment%and%


summon,% examine% and% take% tes=mony% of% prescribe% addl% requirements% for% tax%
persons%to:% administra=on%and%enforcement%
" Ascertain% correctness% of% return% (or% in% making% a%
return%where%none%was%made)%
" Determine% liability% for% any% internal% revenue% tax%
liability%(and%to%collect%such%liability)%
" Evaluate%tax%compliance%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%9% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%10%

Inves=ga=ve%Authority% Inves=ga=ve%Authority%

1. Administra=ve%summons%to%TP%%5(C),%6(C)% 2. Third%party%summons%%5(B),%(C)%
In%connec=on%with%a%tax%audit,%BIR%may%summon% In% connec=on% with% a% tax% audit,% BIR% may% obtain%
TP% or% any% ocer% or% employee% to% appear% before% info%from%persons%other%than%the%TP%
the% BIR% and% bring% with% him/her% books% of% BIR%does%not%limit%infoQgathering%from%TP%
accounts% and% other% accoun=ng% records% and% Info%from%third%party%used%to%cross%check%against%
documents%%subpoena"duces"tecum%% info% obtained% from% TP% % discrepancy% could% be%
basis%for%deciency%assessment%
E.g.,% VAT% payments% of% TP% per% return% are% crossQ
checked% against% importa=ons% made% by% TP% per%
BOC%records%%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%11% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%12%


Inves=ga=ve%Authority% Inves=ga=ve%Authority%

! Informers% Reward% % major% source% of% ! Informers%Reward%


informa=on%of%the%BIR% ! Meralco"Securi3es"Corp."v."Savellano"
! Informers%reward:%requirements%(%282)% " Decision% of% CIR% that% no% taxes% due% is% a% valid%
exercise% of% discre=on% in% the% performance% of%
" Qualied%person% ocial% duty% which% cannot% be% controlled% or%
" Denite%and%sworn%info% reversed%by%mandamus%
" Not%yet%in%BIRs%possession% " Since% respondent% judge% may% not% order% by%
mandamus% the% CIR% to% issue% the% assessment,% no%
" Reward% based% on% amount% actually% deciency%tax%can%be%assessed%and%collected%
recovered%or%collected%
" Since%nothing%is%collected,%informers%reward%not%
" 10%%of%P1%million,%whichever%is%lower% due%

Inves=ga=ve%Authority% Power%to%Make%Assessment%

! Informers%Reward% A. Examina=on%of%returns%%6(A)%
! Fitness"by"Design,"Inc."v."CIR" Examina=on% is% for% the% purpose% of% assessing% the%
correct%amount%of%taxes%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%16%
Power%to%Make%Assessment% Power%to%Make%Assessment%

B. Failure% to% submit% required% returns,% statements,% C. InventoryQtaking,%surveillance%%6(C)%


reports%and%other%docs%%6(B)% BIR% may% order% inventoryQtaking% as% basis% for%
When% a% report% required% by% law% as% basis% for% determining% internal% revenue% tax% liabili=es% %
assessment%not%forthcoming% rarely%exercised%by%BIR%
Or% when% there% is% reason% to% believe% that% such% BIR%may%conduct%surveillance%if%there%is%reason%to%
report%is%false,%incomplete%or%erroneous% believe% that% TP% not% declaring% correct% income% or%
CIR% may% assess% taxes% on% the% basis% of% the% best% sales/receipts%
evidence%obtainable% BIR%may%prescribe%presump=ve%gross%receipts%(if%
TP% failed% to% issue% O/Rs,% invoices;% or% there% is%
reason% to% believe% books% of% accounts% do% not%
correctly%reect%true%income)%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%17% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%18%

Power%to%Make%Assessment% Power%to%Make%Assessment%

D. Termina=on%of%Taxable%Period%%6(D):%% E. Prescribe%zonal%values%%6(E)%
If%TP%re=ring%from%business% CIR%may%prescribe%FMV%of%real%proper=es%
Intending%to%leave%PH% Upon% consulta=on% with% competent% appraisers%
Remove%or%conceal%property% both%from%private%and%public%sectors%
Performing% any% act% to% obstruct% proceedings% for% For% purposes% of% compu=ng% internal% revenue%
collec=on%for%current%or%past%quarter%or%year% taxes,% the% value% of% the% property% is% whichever% is%
CIR%may%declare%tax%period%terminated%and%shall% the%higher%between%the%zonal%value%and%the%FMV%
send% TP% no=ce% of% decision% with% demand% for% as%shown%in%the%schedule%of%values%of%provincial%
and%city%assessors%%
immediate%payment%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%19% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%20%


Power%to%Make%Assessment% Power%to%Make%Assessment%

E. Prescribe%zonal%values%%6(E)% F. Inquiry%into%bank%deposits%%6(F)%
CIR"v."Aquafresh"Seafoods,"Inc.% 6(F)%an%excep=on%to%RA%1405%
Reclassica=on% of% zonal% values% cannot% be% done% CIR% may% inquire% into% bank% deposits% of% decedent%
without% rst% complying% with% the% procedures% to%determine%gross%estate%
prescribed% by% law% (i.e.,% consult% with% competent%
And% of% TP% applying% for% compromise% of% internal%
appraisers)%
revenues% taxes% on% the% ground% of% nancial%
Ra=onale:% zonal% valua=on% was% established% with% the% incapacity%%
objec=ve%of%having%an%ecient%tax%administra=on%by%
minimizing% the% use% of% discre=on% in% the%
determina=on% of% the% tax% base% on% the% part% of% the%
administrator%on%one%hand%and%the%TP%on%the%other%
hand%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%21% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%22%

Power%to%Make%Assessment% Power%to%Make%Assessment%

G. Accredita=on%of%tax%agents%%6(G)% Issuance% of% FAN% % procedure% for% issuance% of%


assessment%per%%228%and%Rev.%Regs.%12Q99:%
Accredita=on%of%agents%who%prepare%and%le%tax% a. No=ce% for% informal% conference% % L/N;% 15% days% to%
returns,% statements,% protests% and% who% appear% respond,%otherwise%considered%in%default%
before%the%BIR%for%TPs% b. PAN% % 15% days% to% reply,% otherwise% considered% in%
Supposedly% to% professionalize% tax% prac=ce% and% default%
weed%out%xers%% ! Excep3ons" to" no3ce" for" informal" conference"
and" PAN:% (i)% mathema=cal% error;% (ii)%
Lawyers% exempted% from% this% requirement% (only% discrepancy% between% amount% withheld% and%
SC%can%regulate%the%prac=ce%of%law)% amount% remi"ed;% (iii)% double% claim;% (iv)% nonQ
payment% of% excise% tax;% and% (v)% exempt% person%
transfers%ar=cles%to%nonQexempt%persons%%
c. Formal% le"er% of% demand% and% FAN% % must% contain%
factual%and%legal%basis%of%assessment%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%23% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%24%
Power%to%Make%Assessment% Power%to%Make%Assessment%

Gen.%procedure%for%dispu=ng%assessment%("228)% What% cons=tutes% an% assessment?% % BIR% some=mes% not%


! File%wri"en%protest%within%30%days%from%receipt% clear%that%it%is%assessing%the%TP%
of%FAN%%must%contain%factual%and%legal%basis% CIR"v."Pascor"Realty"and"Dev."Corp."
! Submit% relevant% suppor=ng% documents% % ! Not%all%documents%coming%from%the%BIR%containing%
a% computa=on% of% tax% liability% can% be% deemed% an%
within%60%days%from%ling%wri"en%protest% assessment%
! Appeal%to%CTA%%within%30%days%from%receipt%of% ! An%assessment%must%be%sent%to%and%received%by%the%
nal%decision%on%disputed%assessment%or%within% TP,%and%must%demand%payment%of%the%taxes%within%
30% days% from% lapse% of% 180% days% from% a%prescribed%period%
submission%of%relevant%suppor=ng%documents% ! Thus,%a%criminal%complaint%for%tax%evasion%is%not%an%
assessment% since% it% does% not% state% a% demand% or%
period%for%payment;%it%is%addressed%to%the%DOJ%and%
not%to%the%TP%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%25% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%26%

Power%to%Make%Assessment% Power%to%Make%Assessment%

What%cons=tutes%an%assessment?%%% What%cons=tutes%an%assessment?%%%
FBDC"v."CIR" Summary:"Pascor"Realty"and"FBDC"
! An% assessment% is% a% wri"en% no=ce% and% demand%
made% by% the% BIR% on% the% TP% for% the% se"lement% of% a% ! An% assessment% must% be% sent% to% and%
due%tax%liability%that%is%there%denitely%set%and%xed% received% by% the% TP,% and% must% demand%
! Thus,%undated%le"er%direc=ng%TP%to%pay%an%amount% payment% of% the% taxes% within% a% prescribed%
equivalent% to% disallowed% input% tax,% surcharge,% period%
penal=es%and%interest%to%be%veried%by%Assessment%
Division% of% the% BIR% was% held% not% equivalent% to% an% ! An% assessment% is% a% wri"en% no=ce% and%
assessment% since% TPs% liability% was% neither% denite% demand%made%by%the%BIR%on%the%TP%for%the%
and%nal%considering%that%the%same%was%s=ll%subject% se"lement% of% a% due% tax% liability% that% is%
to% audit% verica=on% nor% was% payment% demanded% there%denitely%set%and%xed%
from%TP%within%a%prescribed%period%%%%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%27% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%28%
Power%to%Make%Assessment% Power%to%Make%Assessment %
What%cons=tutes%an%assessment?%%Eect%of%followQup%le"er%%% Presump=on%of%correctness%of%assessment%%
Republic"v."CA" Sy"Po"v."CTA%%
! Held:%Presump=on%that%mailed%le"er%is%received% ! Where% TP% appeals% on% the% ground% that% the% CIRs% assessment% is%
by%addressee%in%the%ordinary%course%of%the%mail%is% erroneous,% it% is% incumbent% upon% him% to% prove% what% is% the%
correct% and% just% liability% by% a% full% and% fair% disclosure% of% all%
merely% a% presump=on,% and% is% subject% to% per=nent% data% in% his% possession.% Otherwise,% if% TP% connes%
controversion,%and%a%direct%denial%of%the%receipt% himself% to% proving% that% the% tax% assessment% is% wrong,% the% tax%
thereof%shiss%the%burden%on%the%party%favored%by% court%proceedings%would%se"le%nothing,%and%the%way%would%be%
the%presump=on%to%prove%that%the%mailed%le"er% les% open% for% subsequent% assessments% and% appeals% in%
was%indeed%received%by%the%addressee& interminable%succession%
! However,% CIR% wrote% TP% a% followQup% le"er% dated% ! Tax% assessments% by% tax% examiners% are% presumed% correct% and%
made%in%good%faith.%%TP%has%the%duty%to%prove%otherwise.%%In%the%
September% 19,% 1956;% this% le"er% is% a% no=ce% of% absence% of% proof% of% any% irregulari=es% in% the% performance% of%
assessment% in% itself% which% was% duly% received% by% du=es,% an% assessment% duly% made% by% a% BIR% examiner% and%
TP%in%accordance%with%its%own%admission%%% approved% by% his% superior% ocers% will% not% be% disturbed.% % All%
presump=ons%are%in%favor%of%the%correctness%of%tax%assessments%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%29% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%30%

Power%to%Make%Assessment% Power%to%Make%Assessment%

Assessment%must%be%based%on%actual%facts% Assessment%must%be%based%on%actual%facts%
CIR"v."Benipayo% CIR"v."Benipayo%
! Assessment% based% on% ndings% that% during% ! In%order%to%stand%the%test%of%judicial%scru=ny,%
1949% to% 1951,% ra=o% of% adults% and% children% an% assessment% must% be% based% on% actual%
patronizing%theatre%was%3%to%1% facts%
! However,% during% years% in% ques=on% (1952% to% ! The% presump=on% of% correctness% of% an%
1955),%trend%was%reversed,%i.e.,%1%to%3% assessment,% being% a% mere% presump=on,%
! Examiner% concluded% that% TP% must% have% cannot% be% made% to% rest% on% another%
fraudulently% issued% taxQfree% childrens% =ckets% presump=on%
to%avoid%payment%of%amusement%tax% ! Assessment% should% not% be% based% on% mere%
! Held:%assessment%void%for%lack%of%factual%basis& presump=ons,% no% ma"er% how% logical% said%
presump=ons%may%be%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%31% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%32%
Power%to%Make%Assessment% A. Power%of%BIR%to%Obtain%Informa=on%and%Make%an%Assessment%

Assessment%must%be%based%on%actual%facts% Assessment%issued%outside%scope%of%L/A%
Chemical"Ind."of"the"Phil.,"Inc."v."CIR% Sony"Phil.,"Inc."v."CIR%
! Assessment% arising% from% disallowance% of% ! Assessment% for% deciency% VAT% based% on%
interest% on% a% loan% the% proceeds% of% which% 1998% documents% held% void% since% L/A% issued%
were% allegedly% used% to% purchase% stock% of% to% ROs% authorized% them% to% audit% tax%
aliate%without%factual%basis% liabili=es%for%1997%
! BIR% ndings% that% loan% proceeds% used% for% ! Assessment% void% since% examiners% went%
nonQbusiness% purpose% based% on% increase% in% beyond% the% scope% of% their% authority% under%
Investments%in%Aliated%Cos%account% the%L/A%%
! TP,% however,% was% able% to% explain% why%
account%increased%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%33% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%34%

A. Distraint,%Garnishment,%Levy%and%Seizure%

What%are%the%remedies%of%the%government%for%the%collec=on%
of%delinquent%taxes?%
a. Summary%remedies%of%distraint%and%levy%(administra=ve)%
b. Civil%ac=on%(judicial)%
c. Criminal%ac=on%(judicial)%
# These%remedies%may%be%pursued%singly%or%simultaneously%
at%the%discre=on%of%revenue%authori=es%
What%are%the%summary%remedies%available%to%the%BIR?%
II. COLLECTION$OF$UNPAID$TAXES$ a. Distraint% (actual% or% construc=ve)% % refers% to% personal%
property%
b. Levy%%refers%to%real%property%

A"y.%Terence%Conrad%H.%Bello%% 35% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%36%


A. Distraint,%Garnishment,%Levy%and%Seizure% A. Distraint,%Garnishment,%Levy%and%Seizure%

Two%types%of%distraint:% What%is%construc=ve%distraint%of%property?%("206)%
1. Actual%% ! It%is%a%preven=ve%remedy%of%the%Government%which%aims%at%
a. Who?% forestalling% a% possible% dissipa=on% of% the% TPs% assets% when%
delinquency% sets% in.% % Hence,% actual% delinquency% is% not%
! Delinquent%TP% necessary%before%this%can%be%resorted%to%
Assessment%needed% What% are% the% instances% when% construc=ve% distraint% may% be%
2. Construc=ve%% availed%of?%
a. Who?% ! When%the%CIR%believes%that%the%TP:%
! Delinquent%TP% is%re=ring%from%any%business%subject%to%tax;%or%%
Assessment%needed% intends%to%leave%the%Philippines;%or%%
! TP%intending%to%evade% intends%to%remove%his%property%from%the%Phil.;%or%%
Assessment% not% necessary;% enough% that% intends%to%hide%or%conceal%his%property%or%%
administra=ve% procedures% (leading% to% issuance% performs% any% act% tending% to% obstruct% the% proceedings%
of%an%assessment)%are%commenced% for%collec=ng%the%tax%due%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%37% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%38%

A. Distraint,%Garnishment,%Levy%and%Seizure% A. Distraint,%Garnishment,%Levy%and%Seizure%

How%is%construc=ve%distraint%eected?%
! The% TP% will% be% required% to% sign% a% receipt% covering% the% property%
What%is%the%procedure%for%levy%of%real%property?%%
distrained% and% obligate% himself% to% preserve% it% intact% and% unaltered% 1. Commencement%of%levy%proceedings%("207(B))%
and% not% to% dispose% of% it% in% any% manner% whatever,% without% express%
authority%of%CIR% 2. Service%of%warrant%of%levy%("207(B))%
! If% the% TP% refuses,% the% revenue% ocer% will% prepare% a% list% of% the%
proper=es%distrained%and%will%leave%a%copy%thereof%in%the%premises,%in% 3. Adver=sement%for%sale%("213)%
the%presence%of%witnesses%%
%
4. Public%sale%of%the%property%under%levy%
What%is%the%procedure%for%actual%distraint?%
1. Commencement%of%distraint%proceedings%("207(A))% 5. Redemp=on%of%property%sold%("214)%
2. Service%of%warrant%of%distraint%("208)%
3. No=ce%of%sale%of%distrained%property%("209)%
6. Forfeiture%to%the%govt%for%want%of%bidder%("215)%
4. Release%of%distrained%property,%prior%to%sale%("210)% 7. Resale%of%real%estate%taken%for%taxes%("216)%
5. Sale%of%property%distrained%("209)%
6. Purchase%by%Government%at%sale%upon%distraint%("212)%%% 8. Further%distraint%and%levy%("217)%%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%39% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%40%
B. Civil%Ac=on% B. Civil%Ac=on%

Requirement% for% the% ins=tu=on% of% civil% and% Republic"v."Lim"Tian"Teng"Sons"&"Co.%%


criminal%ac=ons%%% ! Republic%Act%1125%crea=ng%the%CTA%allows%the%
! Ins=tu=on%of%civil%and%criminal%ac=ons%for% TP%to%dispute%the%correctness%or%legality%of%an%
the%recovery%of%taxes%and%enforcement%of% assessment%both%in%the%purely%administra=ve%
any% ne,% penalty% or% forfeiture% under% the% level%and%in%said%court,%but%it%does%not%stop%or%
NIRC% requires% the% approval% of% the% CIR% (" prohibit% the% CIR% from% collec=ng% the% tax%
through% any% of% the% means% provided% for% in%
220) %% Sec=on% 316% of% the% Tax% Code,% except% when%
enjoined%by%said%CTA%under%sec.%11%
! Nowhere%in%the%Tax%Code%is%the%CIR%required%
to% rule% rst% on% a% TPs% request% for%
reinves=ga=on%before%he%can%go%to%court%for%
the%purpose%of%collec=ng%the%tax%assessed*%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%41% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%42%

B. Civil%Ac=on% B. Civil%Ac=on%

%San"Juan"v."Vasquez%% Yabes"v."Flojo"
! The% determina=on% of% the% correctness% or% ! The%CFI%cannot%lawfully%acquire%jurisdic=on%
incorrectness%of%a%tax%assessment%to%which%the%TP%
is%not%agreeable%falls%within%the%jurisdic=on%of%the% over%a%contested%assessment%made%by%the%
CTA%and%not%of%the%CFI,%for%under%the%aforequoted% CIR% against% the% deceased% TP,% which% has%
provision% of% law,% the% Court% of% Tax% Appeals% has% not% yet% become% nal% and% executory,% and%
exclusive% appellate% jurisdic=on% to% review% on%
appeal% any% decision% of% the% CIR% in% cases% involving% which% assessment% is% s=ll% pending% before%
disputed% assessments% and% other% ma"ers% arising% the%CTA%
under% the% NIRC% or% other% law% or% part% of% law%
administered%by%the%BIR% ! CTA% has% exclusive% jurisdic=on% over%
! Thus,% the% BIR% may% not% ins=tute% a% collec=on% case% disputed% assessments;% CFI% should% have%
before%regular%courts%while%the%TP%is%s=ll%dispu=ng% dismissed%the%case%
the%correctness%of%the%assessment%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%43% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%44%
B. Civil%Ac=on% B. Civil%Ac=on%

Must%the%assessment%be%nal%and%executory%before%the%BIR%can%collect%the% How% do% you% reconcile% Yabes% and% San" Juan,% on% one% hand,%
tax%deciency?%
with%Lim"Tian"Teng,%on%the%other%hand?%%%
! It%depends%on%the%collec=on%remedy%availed%of%by%the%BIR%
The%assessment%need%not%be%nal%and%executory%before%the%BIR%
! Lim"Tian"Tengs"holding%that%nowhere%in%the%Tax%Code%
can%avail%of%the%summary%remedies%of%distraint%and%levy%(see%% is%the%[CIR]%required%to%rule%rst%on%a%[TPs]%request%for%
11,%RA%1125,%as%amended%by%RA%9282;%RP"v."Lim"Tian"Teng)% reinves=ga=on% before% he% can% go% to% court% for% the%
The%assessment%must%be%nal%and%executory%before%the%BIR%may% purpose% of% collec=ng% the% tax% assessed% is% an% obiter%
ins=tute% a% civil% case% for% collec=on% of% deciency% tax% (see% Yabes,% dictum%
San"Juan,%and%%7(b)(2)(c)%of%RA%1125,%as%amended%by%RA%9282)%
In%the%case%of%a%false%or%fraudulent%return%with%intent%to%evade%
! The%assessment%in%Lim"Tian"Teng%was%already%nal%and%
tax% or% of% failure% to% le% a% return% .% .% .% a% [civil% or% criminal]% executory% (TP% failed% to% appeal% the% decision% on% the%
proceeding% in% court% for% the% collec=on% of% such% tax% may% be% led% protest% QQ% the% referral% of% the% ma"er% to% the% OSG% for%
without%assessment%.%.%.%.%(%222(a),%NIRC)% collec=on% QQ% to% the% CTA);% hence,% the% civil% suit% for%
Note:%under%%7(b)(1)%of%RA%1125,%as%amended%by%RA%9282,% collec=on%was%proper%
the% civil% liability% is% deemed% ins=tuted% along% with% the%
criminal%ac=on;%no%right%to%reserve%civil%aspect%is%allowed% ! Yabes" and% San" Juan% involved% disputed% assessments%
(hence,%not%yet%nal%and%executory)%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%45% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%46%

B. Civil%Ac=on% C. Criminal%Ac=on%

Ques.on:% the% BIR% issued% a% FAN;% without% CIR"v."Pascor"Realty"and"Dev."Corp.%%


wai=ng% for% the% TP% to% le% a% protest,% the% BIR% ! Filing%of%criminal%case%need%not%be%preceded%
issued%a%warrant%of%distraint%and%levy%on%the% by%an%assessment%
proper=es% of% the% TP% to% collect% the% tax% ! NIRC% % 222% specically% states% that% in% case%
deciency.%%Is%the%BIRs%ac=on%valid?% where%a%false%or%fraudulent%return%is%led%or%
! While% an% assessment% need% not% be% nal% failure% to% le% a% return,% as% in% this% case,%
and%executory%before%the%BIR%may%avail%of% proceedings% in% court% may% be% commenced%
the% summary% remedies% of% distraint% and% without%an%assessment%
levy,% there% is% good% ground% to% argue% that% ! NIRC%%205%mandates%that%civil%and%criminal%
the%BIRs%ac=on%is%not%valid%on%the%ground% aspect%may%be%pursued%simultaneously%
of%denial%of%due%process%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%47% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%48%
C. Criminal%Ac=on% C. Criminal%Ac=on%

Ungab"v."Cusi"
Republic"v."Patanao"%"% ! Held:% What% is% involved% here% is% not% the% collec=on% of% taxes%
where% the% assessment% of% the% CIR% may% be% reviewed% by% the%
! Acqui"al% of% TP% in% the% criminal% CTA,% but% a% criminal% prosecu=on% for% viola=ons% of% the% NIRC%
which%is%cognizable%by%CFIs.%While%there%can%be%no%civil%ac=on%
proceeding% does% not" necessarily% entail% to% enforce% collec=on% before% the% assessment% procedures%
exonera=on%from%his%liability%to%pay%the% under%the%NIRC%have%been%followed,%there%is%no%requirement%
for% the% precise% computa=on% and% assessment% of% the% tax%
taxes%% before%there%can%be%a%criminal%prosecu=on%under%the%NIRC%
! An% assessment% not% necessary% to% a% criminal% prosecu=on% for%
willful% a"empt% to% defeat% and% evade% taxes.% A% crime% is%
complete%when%the%violator%has%knowingly%and%willfully%led%
a%fraudulent%return%with%intent%to%evade%and%defeat%the%tax.%
The% perpetra=on% of% the% crime% is% grounded% upon% knowledge%
on%the%part%of%the%TP%that%he%has%made%an%inaccurate%return,%
and%the%govts%failure%to%discover%the%error%and%promptly%to%
assess%has%no%connec=on%with%the%commission%of%the%crime%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%49% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%50%

C. Criminal%Ac=on% C. Criminal%Ac=on%

Steps%in%development%of%criminal%case%under%the%RATE%Program% ! Substan=al% underQdeclara=on% of% income% and%


(RMO%27Q2010):%%
! In% all% RATE% cases,% an% internal% preliminary% inves=ga=on% must%
substan=al% overstatement% of% deduc=ons% as%
be% rst% be% conducted% to% establish% prima" facie% evidence% of% prima"facie"evidence%of%fraud%(Sec.%248(B))%%
fraud%or%tax%evasion%%noQcontact%audit%
! LOA%issued%for%formal%inves=ga=on%%contact%audit%%
! If%evidence%not%enough%to%prove%TPs%guilt%beyond%reasonable%
doubt,% but% there% exists% clear% and% convincing% evidence% that%
fraud%has%been%commi"ed%%PAN/FAN%issued%with%50%%fraud%
surcharge%
! If% evidence% is% enough% to% prove% TPs% guilt% beyond% reasonable%
doubt,%complaint%adavit%will%be%prepared%for%ling%with%the%
DOJ%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%51% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%52%


C. Criminal%Ac=on% C. Criminal%Ac=on%

People"v."Kintanar:%Willful"Blindness"Doctrine" People"v."Judy"Anne"Santos"
! Willful% in% tax% crimes% means% voluntary,% inten=onal% viola=on% of% a%
known%legal%duty,%and%bad%faith%or%bad%purpose%need%not%be%shown% ! TP% acqui"ed;% all% elements% proven% except% element% of%
! TPs% sole% reliance% on% her% husband% to% le% their% ITRs% is% not% a% valid% willfulness%
reason%to%jus=fy%her%nonQling,%considering%that%she%knew%from%the% ! Willfulness% cannot% be% presumed% from% mere%
start% that% she% and% her% husband% are% mandated% by% law% to% le% their%
ITRs% inadvertent%or%negligent%acts%
! Being% an% experienced% businesswoman,% TP% ought% to% know% and% ! While%TP%negligent,%such%is%enough%to%convict%
understand% all% the% ma"ers% concerning% her% business.% This% includes%
knowledge%and%awareness%of%her%tax%obliga=on%in%connec=on%with% ! Negligence,% whether% slight% or% gross,% is% not% equivalent%
her% business.% TP% should% know% how% much% are% her% tax% dues,% the% to%the%fraud%with%intent%to%evade%tax%contemplated%by%
details% stated% on% the% ITRs,% where% the% same% are% led,% and% other%
important% facts% related% to% the% ling% of% her% ITRs;% aser% all,% these% law.% Fraud% must% amount% to% inten=onal% wrongdoing%
ma"ers%concern%her%nances% with%the%sole%objec=ve%of%avoiding%the%tax.%Court%also%
! Neglect% or% omission% (to% ensure% ling% of% ITR,% to% know% how% much% took%note%of%TPs%intent%to%se"le%which%negates%mo=ve%
taxes% are% due,% or% inquire% on% the% facts% surrounding% the% ITR)% is% to%commit%fraud%
tantamount%to%deliberate%ignorance%or%conscious%avoidance%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%53% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%54%

D. An=QInjunc=on%Rule% D. An=QInjunc=on%Rule%

General%Rule%%% Churchill"v."Raerty%
! No% court% shall% have% the% authority% to% grant% an% ! The%mere%fact%that%a%tax%is%illegal,%or%that%the%law,%
injunc=on% to% restrain% the% collec=on% of% na=onal% b y% v i r t u e% o f% w h i c h% i t% i s% i m p o s e d ,% i s%
internal%revenue%tax,%fee%or%charge%imposed%by%the% uncons=tu=onal,% does% not% authorize% a% court% of%
NIRC%("218,"NIRC)%
equity%to%restrain%its%collec=on%by%injunc=on%
! No%appeal%taken%to%the%CTA%.%.%.%shall%suspend%the%
payment,% levy,% distraint% and/or% sale% of% any% ! Ra.o:& It% is% upon% taxa=on% that% the% Government%
property%of%the%taxpayer%for%the%sa=sfac=on%of%his% chiey% relies% to% obtain% the% means% to% carry% on% its%
tax% liability% (" 11," RA" 1125," as" amended" by" RA" opera=ons,%and%it%is%of%the%utmost%importance%that%
9282)% the% modes% adopted% to% enforce% the% collec=on% of%
Excep=on%%% the% taxes% levied% should% be% summary% and%
! Where% collec=on% of% the% tax% may% jeopardize% the% interfered%with%as%li"le%as%possible%%
interest% of% the% Government% and/or% the% TP% (RA"
1125""11;"Rule"10,"Revised"Rules"of"the"CTA)%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%55% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%56%
D. An=QInjunc=on%Rule% E. Compromise%and%Abatement%

CIR"v."Cebu"Portland"Cement"Co.%
! Held:%The%argument%that%the%assessment%cannot%as%yet%be%
! What% are% the% two% main% grounds% which%
enforced% because% it% is% s=ll% being% contested% loses% sight% of% authorizes% the% CIR% to% compromise% the%
the%urgency%of%the%need%to%collect%taxes%as%the%lifeblood%
of%the%government%% payment%of%internal%revenue%taxes?%
! If% the% payment% of% taxes% could% be% postponed% by% simply% i. Doubxul% validity% of% the% assessment% %
ques=oning% their% validity,% the% machinery% of% the% state%
would%grind%to%a%halt%and%all%government%func=ons%would% minimum% compromise% rate% is% 40%% of%
be%paralyzed%
! This% is% the% reason% for% the% existence% of% the% an=Qinjunc=on% basic%tax%assessed%
rule%
! To%require%CIR%to%actually%refund%to%TP%the%amount%of%the%
ii. Financial% incapacity% % minimum%
judgment% debt,% which% he% will% later% have% the% right% to% compromise% rate% is% 10%% of% basic% tax%
distrain%for%payment%of%its%sales%tax%liability%is%in%our%view%
an%idle%ritual% assessed%&
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%57% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%58%

F. Compromise%and%Abatement% F. Compromise%and%Abatement%

When% may% the% CIR% abate% or% cancel% a% tax% BIR"Rul."111h99"


liability?% ! Applica=on%for%abatement%appreciated%on%
i. When% the% tax% or% a% por=on% thereof% the% basis% of% the% merit% of% each% individual%
appears% to% be% unjustly% or% excessively% case%
assessed% ! Thus,% CIR% may% not% abate% en" masse%
ii. When% administra=ve% and% collec=on% costs% imposable%penal=es%on%the%895%barangays%
involved% do% not% jus=fy% the% collec=on% of% of% Manila% in% connec=on% with% delayed%
the%amount%due% remi"ance%of%withholding%taxes%
BIR"Rul."59h01"
! Reliance% in% good% faith% on% tax% ruling% as% a%
basis%for%abatement%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%59% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%60%
A. Civil%Penal=es%

When%does%the%25%%surcharge%apply%("248(A))?%
1. Failure%to%le%return%and%pay%tax%due%thereon%within%
prescribed%period%
2. Filing%return%with%internal%revenue%ocer%other%than%
with%whom%return%is%required%to%be%led%
3. Failure%to%pay%deciency%tax%within%=me%prescribed%
for%its%payment%in%the%no=ce%of%assessment%
4. Failure% to% pay% full% or% part% of% the% amount% of% tax%
shown%on%return%on%or%before%date%required%for%its%
III. IMPOSITION$OF$SURCHARGE,$ payment%
INTEREST$&$COMPROMISE$ 5. Failure%to%pay%full%amount%of%the%tax%due%for%which%
no% return% is% required% to% be% led% on% or% before% the%
PENALTY$ date%required%for%its%payment%%
A"y.%Terence%Conrad%H.%Bello%% 61% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%62%

A. Civil%Penal=es% A. Civil%Penal=es%

When%does%the%50%%surcharge%apply%("248(B))?% CIR"v."Javier%
1. Willful% neglect% to% le% the% return% within% the% ! Fraud% contemplated% by% law% is% actual% not%
construc=ve%
prescribed%period%
! It% must% be% inten=onal% fraud,% consis=ng% of%
2. False%or%fraudulent%return%is%willfully%made% decep=on% willfully% and% deliberately% done% or%
! Ques.on:&When%is%there%prima%facie%evidence%of% resorted%to%in%order%to%induce%another%to%give%
a%false%or%fraudulent%return?% up%some%legal%right%
! Answer:& substan=al% (i.e.,% more% than% 30%)% ! Negligence,% whether% slight% or% gross,% is% not%
equivalent% to% the% fraud% with% intent% to% evade%
underdeclara=on% of% sales,% receipts% or% income;% tax%
substan=al%overstatement%of%deduc=ons&
! It% must% amount% to% inten=onal% wrongQdoing%
with%the%sole%objec=ve%of%avoiding%the%tax%%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%63% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%64%

where presumed to be criminally liable;


technical malversation
SALN
A. Civil%Penal=es% A. Civil%Penal=es%

CIR"v."Japan"Airlines% PICOP"v."CIR%
! Fraud% is% not% presumed% (mere% allega=on% of% ! Where% TP% failed% to% pay% taxes% on% account% of%
fraud% not% enough);% must% be% established% as% a% the%fact%that%it%based%its%ac=ons%upon%reliance%
fact%by%the%BIR% to% certain% ocial% acts% or% rulings,% the% 25%%
! Good% faith% as% a% defense% against% fraud% surcharge%is%not%imposable%upon%TP%as%it%was%
surcharge%%%%% only% ac=ng% in% complete% honesty% and% good%
faith%when%it%did%not%pay%the%sales%tax%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%65% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%66%

gr: imposition of 25 sc is
mandatory

gf will always negate 25%


surcharge

if 50% sc, always. cannot be


negated

A. Civil%Penal=es% A. Civil%Penal=es%

BIR"Rul."2h95" BIR"Rul."48h99"
! TP% requested% waiver% of% surcharges% and% ! TP%paid%DST%on%purchase%of%real%property%at%wrong%
penal=es%arising%from%failure%to%withhold%and% venue% (paid% at% RDO% of% buyer;% should% have% been%
remit%withholding%taxes% paid%at%sellers%RDO)&
! Ruling:%25%%surcharge%waived%
! TP% cited% lack% of% funds% following% the%
! RMO%direc=ng%payment%at%sellers%RDO%at%the%=me%
demoli=on% of% the% YMCA% building,% which% was%
of% the% sale% was% at% its% experimental% stage% and% had%
its%main%source%of%income& not%yet%been%widely%disseminated%so%as%to%inform%
! Ruling:% imposi=on% of% surcharge% mandatory,% taxpaying% public% about% the% repeal% of% previous%
therefore%cannot%be%waived% rulings% allowing% payment% of% DST% at% payors%
residence%%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%67% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%68%
A. Civil%Penal=es% A. Civil%Penal=es%

BIR"Rul."205h99" BIR"Rul."78h98"
! TP%suered%business%reverses% ! TP%unable%to%pay%withholding%taxes%on%the%last%day%due%
to%change%in%payment%system;%RDO%ocials%also%could%
! Had%no%cash%ow%to%pay%income%tax%liabili=es%
not% give% a% deni=ve% answer% on% the% new% payment%
! Intended%to%use%its%TCCs%to%pay%taxes% system%
! Revalida=on%of%TCCs,%however,%took%some%=me%to% ! TPs%tender%of%a%managers%check%was%not%accepted%by%
secure% despite% best% eorts% exerted% by% TP% AAB&
(repeated% followQups,% phone% calls% and% personal% ! Ruling:%penal=es%and%surcharges%waived%
visits)% ! CIR% was% convinced% that% TP% a"empted% to% pay%
! Ruling:% in% view% of% jus=able% circumstances,% withholding%tax%on%the%last%day%(thru%the%MC),%but%due%
surcharge%and%penalty%waived,%but%not%interest%%%% to% confusion% on% the% implementa=on% of% new% payment%
system%was%unable%to%do%so%%%%%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%69% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%70%

A. Civil%Penal=es% A. Civil%Penal=es%

4. May%the%BIR%waive%the%imposi=on%of%the%25%%surcharge?% 6. Ques=ons%%
a. General$rule:%no;%imposi=on%of%the%25%%surcharge%is% a. Example%1%(penalty%for%deciency%tax):%
mandatory%for%cases%falling%under%248(A)%
! TP%led%its%ITR%for%taxable%year%1997%in%April%15,%1998%
b. ExcepPon:% the% BIR% has% waived% the% 25%% surcharge% in% and%paid%income%tax%of%P100,000%
jus=able%circumstances,%e.g.:%
i. TP%mistakes%arising%from%a%dicult%interpreta=on% ! Aser%a%tax%inves=ga=on,%the%BIR%disallowed%P200,000%
of%the%law% of% the% TPs% representa=on% expenses% for% failure% to%
ii. Change% in% BIR% payment% policies% resul=ng% in% meet%the%statutory%requisites%for%deduc=bility%
confusion% ! Disallowance%resulted%in%a%deciency%tax%of%P70,000;%
iii. Other%jus=able%circumstances% TP%issued%an%assessment%
5. May% the% BIR% waive% the% 50%% fraud% in% cases% of% willful% ! Ques.on:%should%BIR%impose%a%25%%surcharge%on%the%
neglect% to% le% return,% or% false% or% fraudulent% returns% P20,000%deciency%tax%in%the%assessment?%%
willfully%made?%No.%%Are%there%excep=ons?%%None%
%% ! (No;%see""248(A)(3))%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%71% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%72%


A. Civil%Penal=es% A. Civil%Penal=es%

6. Ques=ons%% 3. Ques=ons%%
a. Example%2%(50%%fraud%penalty):%
! TP% led% its% ITR% for% taxable% year% 1997% in% April% 15,% 1998% a. Example%3%(late%payment%of%a%deciency%tax%assessed):%
with%a%net%taxable%income%of%P500,000% ! Based% on% example% 2,% assuming% that% the% 1997%
! Aser% a% tax% inves=ga=on,% the% BIR% discovered% that% the% deciency% income% tax% assessment% against% the% TP,%
TPs% ITR% is% false% or% fraudulent% since% it% did% not% report%
willfully%certain%income%amoun=ng%to%P500,000%% consis=ng% of% the% basic% tax% of% P175,000% +% 50%%
! On% its% net% income% per% inves=ga=on% of% P1% million,% the% surcharge%+%interest,%is%paid%only%by%the%TP%on%July%
income% tax% due% is% P350,000;% the% resul=ng% basic% tax% 31,% 1999;% assuming% further% that% the% assessment%
deciency%is%P175,000%since%the%TP%paid%only%income%tax%
of% P175,000% per% its% return% led;% assessment% issued% on% became% nal% and% executory% for% failure% to% le% a%
May%31,%1999%demanding%payment%of%the%deciency%tax% =mely%protest%
on%or%before%June%30,%1999%
! Ques.on:% should% BIR% impose% a% 50%% surcharge% on% the% ! Is%the%TP%liable%for%an%addi=onal%25%%surcharge?%%
P175,000%deciency%tax%in%the%assessment?%% ! (Yes,% under% " 248(A)(3);% liable% also% for% addi=onal%
! (Yes;% ling% of% a% false% or% fraudulent% return% triggers% the% interest% on% the% en=re% amount% (which% includes% the%
automa=c% imposi=on% of% the% 50%% surcharge% under% "
248(B))%% 50%%surcharge%and%interest)%%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%73% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%74%

B. Interest% B. Interest%

Cagayan"Electric"v."CIR% ! Statutory%basis:%Sec.%249%
! However,% it% cannot% be% denied% that% the% 1969% ! Two%types%of%interest:%
assessment%was%highly%controversial.% %The%CIR%at%
the%outset%was%not%certain%as%to%TPs%income%tax% " Deciency%interest%%20%%interest%imposed%on%
liability.% % TP% had% reason% not% to% pay% income% tax% the% deciency% in% the% basic% tax% due;% accrues%
because%of%the%tax%exemp=on%in%its%franchise% from%the%date%prescribed%for%its%payment%un=l%
! For% this% reason,% TP% should% only% be% liable% for% the% full%payment%
tax% proper,% and% should% not% be% held% liable% for% " Delinquency% interest% % 20%% imposed% in% case%
surcharge%and%interest%%%%%% of% failure% to% pay% a% deciency% tax,% or% any%
surcharge%or%interest%thereon%on%the%due%date%
appearing% in% the% no=ce% and% demand% (i.e.,%
FAN/FLD)%%&

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%75% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%76%


B. Interest% B. Interest%

! Relevant%periods:%% ! Relevant%periods:%%
" Due%date%prescribed%for%payment%of%the%basic% " Due%date%prescribed%for%payment%of%the%basic%
tax;%% tax;%%
" Due%date%appearing%in%the%no=ce%and%demand% " Due%date%appearing%in%the%no=ce%and%demand%
of%the%Commissioner;%and%% of%the%Commissioner;%and%%
" Date%of%actual%payment% " Date%of%actual%payment%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%77% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%78%

B. Interest B. Interest

Due Date for Due Date in Actual Due Date for Due Date in Actual
Payt Demand Payment Payt Demand Payment

20% Delinquency
20% Deficiency Interest
20% Deficiency 20% Delinquency Interest
Interest Interest 40%!

A"y.%Terence%Conrad%H.%Bello%% Slide%No.%79% A"y.%Terence%Conrad%H.%Bello%% Slide%No.%80%


B. Interest% B. Interest%

! Overlapping%20%%interest%prescribed%by%the%CTA%in% Republic"v."Heras%
decided%assessment%cases% ! Collec=on%of%interest%is%not%puni=ve%in%nature,%
! Manner%of%compu=ng%interest%adopted%by%the%BIR%in% but% compensatory;% it% is% compensa=on% to% the%
Rev.%Regs.%18Q2013%% State%for%the%delay%in%the%payment%of%the%tax%
! It%is%the%charge%for%the%use%by%the%taxpayer%of%
! Is%this%legal?%%
funds% that% righxully% should% have% been% in% the%
government% coers% and% u=lized% for% the% ends%
thereof%%%%%%%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%81% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%82%

B. Interest% B. Interest%

! RP"v."Heras,%32%SCRA%507%(1970)%%Collec=on%of% ! Taxable% year% 2000;% deciency% income% tax% of% P1% million% that%
has%become%nal%and%executory%
interest%is%not%puni=ve%in%nature,%but%compensatory;% ! Deadline% for% payment% prescribed% in% assessment% is% April% 15,%
it%is%compensa=on%to%the%State%for%the%delay%in%the% 2003%
payment%of%the%tax% ! Payment%made%on%April%15,%2004%

! Only%penal=es%that%the%BIR%is%authorized%to%impose% Basic%deciency%tax% P1,000,000%


in%addi=on%to%the%deciency%tax%those%found%in%Sec.% Surcharge%(25%)% 250,000%
248(A)%and%(B)%%25%%or%50%%surcharge% Deciency%interest%(20%%on%P1M):%4/16/01%% 600,000%
4/15/04%
! Double% imposi=on% of% 20%% interest% amounts% to%
Total%amount%due% P1,850,000%
an% unjust% collec=on% of% an% addi=onal% penalty,%
Add:%delinquency%interest%(20%%on%P1M):% 200,000%
rather%than%mere%compensa=on%to%the%State%for%
4/15/03%%4/15/04%
delay%in%the%payment%of%the%tax%
Total%amount%due% P2,050,000%
A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%83% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%84%
B. Interest% C. Compromise%Penalty%

Basic%deciency%tax% P1,000,000% ! Criminal% viola=ons% may% be% compromised,%


except:%
Surcharge%(25%)% 250,000%
Deciency%interest%(20%%on%P1M):%4/16/01%% 400,000%
" Those%already%led%in%court,%or%
4/15/03% " Those%involving%fraud%
Total%amount%due% P1,650,000%
Add:%delinquency%interest%(20%%on%P1.65M):% 330,000%
4/16/03%%4/15/04%
Total%amount%due% P1,980,000%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%85% A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%86%

C. Compromise%Penalty%

CIR"v."Lianga"Bay"Logging"Co.,"Inc.%"
! BIR% assessed% TP% 25%% surcharge% for% allegedly%
removing% forest% products% without% auxiliary%
invoices;% TP% assessed% also% compromise%
penalty&
! Held:%Imposi=on%of%compromise%penalty%must%
be% with% the% conformity% of% the% TP,% otherwise%
the%imposi=on%is%illegal%%%%%%%%%

A"y.%Terence%Conrad%H.%Bello%% %Slide%No.%87%