TAX8.19 Hermano Miguel Febres Cordero Medical Foundation v.

CIR

FACTS: Hermano is seeking the cancellation of Final Assessment Notice (FAN) issued by the BIR for VAT deficiency
amounting to P2,607,933.07, arising from its sale of pharmacy items to its in-patients, in line with its rendering of “hospital
services.” Hermano’ grounds are: (1) The FAN is void for they merely showed a mathematical computation of petitioner's
tax liability without stating the factual and legal bases of the same; (2) CIR failed to take into consideration that its sales
of pharmacy items to its in-patients are exempt from VAT pursuant to Section 109(L).

ISSUE: Whether the cancellation must be granted

RULING: The Court rules that the requirement of the law to inform the taxpayer of the basis of the assessment does not
necessarily mean that it will be a narration of the full facts and laws on which the assessment is based. The purpose of the
assessment is to enable the taxpayer to know the law and the facts on which the assessment in based. In this case, the
petitioner has intelligently made its protest by stating that its sales of pharmaceutical items are in favor of its in-patients
are exempt from VAT. The circumstance proves that petitioner was sufficiently informed of the facts and the law as to
why the assessment has been issued against it.

TAX8.20 Waterfront Cebu City Hotel v. CIR

TAX8.21 Villamin v. CTA

FACTS: An assessment was issued by the Provincial Revenue agent of Oriental Mindoro against Tomas B. Villamin. In
1955, Villamin requested reconsideration of the assessment, but which was denied by the Collector of Internal Revenue,
through the Acting Chief of the Assessment Department on 7 June 1955.

ISSUE: Whether the letter signed by the Acting Chief of the Assessment Department is the decision contemplated by
law.

RULING: The issue is of no moment considering that Memorandum Order V-603 (15 March 1956) of the Bureau of
Internal Revenue, which authorizes said official (Acting Chief of Assessment Department) to sign letters of demand
involving assessment in behalf of the Collector of Internal Revenue. Moreover, the subsequent letters signed by the
Collector affirming and upholding the correctness of the assessment made by his Assessment Department Constitutes
evident proof that the official who signed the letter of 7 June 1955 was duly authorized to do so.

TAX8.22 Republic v. CA & Nielson & Co.

FACTS: The petitioner sought the review on certiorari of the decision of the respondent Court of Appeals reversing the
decision of the then Court of First Instance of Manila which ordered private respondent Nielson & Co., Inc. to pay the
Government the amount of P11,496.00 as ad valorem tax, occupation fees, additional residence tax and 25% surcharge for
late payment, for the years 1949 to 1952. Petitioner claims that the demand letter of 16 July 1955 showed an imprint
indicating that the original thereof was released and mailed on 4 August 1955 by the Chief, Records Section of the Bureau
of Internal Revenue, and that the original letter was not returned to said Bureau; thus, said demand letter must be considered
to have been received by the private respondent. According to petitioner, if service is made by ordinary mail, unless the
actual date of receipt is shown, service is deemed complete and effective upon the expiration of five (5) days after mailing.
As the letter of demand dated 16 July 1955 was actually mailed to private respondent, there arises the presumption that the
letter was received by private respondent in the absence of evidence to the contrary. More so, where private respondent
did not offer any evidence, except the self-serving testimony of its witness, that it had not received the original copy of the
demand letter dated 16 July 1955.

ISSUE: Was notice of assessment or demand properly served to the respondent? Should the receipt by the respondent of
the succeeding follow-up demand notices be construed as receipt of the original demand?

RULING: The Court ruled that it is important that the correct address of the taxpayer is indicated in the demand letter or
notice. Records, however, show that petitioner wrote private respondent a follow-up letter dated September 19, 1955,
reiterating its demand for the payment of taxes as originally demanded in petitioner’s letter dated July 16, 1955. This
follow-up letter is considered a notice of assessment in itself which was duly received by private respondent in accordance
with its own admission.

TAX8.23 Commissioner v. Ayala Securities Corp and CTA

FACTS: Ayala Securities Corp. (Ayala) failed to file returns of their accumulated surplus so Ayala was charged with 25%
surtax by the Commissioner of internal Revenue. The CTA (Court of Tax Appeals) reversed the Commissioner’s decision
and held that the assessment made against Ayala was beyond the 5-yr prescriptive period as provided in section 331 of the
National Internal Revenue Code. Commissioner now files a motion for reconsideration of this decision. Ayala invokes the
defense of prescription against the right of the Commissioner to assess the surtax.

ISSUE: Whether or not the right to assess and collect the 25% surtax has prescribed after five years.

RULING: No. There is no such time limit on the right of the Commissioner to assess the 25% surtax since there is no
express statutory provision limiting such right or providing for its prescription. Hence, the collection of surtax is
imprescriptible. The underlying purpose of the surtax is to avoid a situation where the corporation unduly retains its surplus
earnings instead of declaring and paying dividends to its shareholders. SC reverses the ruling of the CTA.

TAX8.24 Phil. Journalist, Inc. v. CIR

FACTS: The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of Authority for Revenue
Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and other
accounting records for internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to send a
representative to an informal conference for an opportunity to object and present documentary evidence relative to the
proposed assessment. Petitioner’s Comptroller, LorenzaTolentino, executed a “Waiver of the Statute of Limitation Under
the National Internal Revenue Code (NIRC)”. Records show that, it did not bear the date of acceptance, that petitioner was
not furnished a copy of the waiver, and the waiver was signed only by the Revenue District Officer. The tax liability
exceeds One Million Pesos (P1,000,000.00).

ISSUE: Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year prescriptive period
under the NIRC.

RULING: No. The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled
or extended and continued to run. Consequently, the Assessment/Demand was invalid because it was issued beyond the
three (3) year period. In the same manner, Warrant of Distraint and/or Levy which petitioner received thereafter is also
null and void for having been issued pursuant to an invalid assessment. A waiver of the statute of limitations under the
NIRC, to a certain extent, is a derogation of the taxpayers’ right to security against prolonged and unscrupulous
investigations and must therefore be carefully and strictly construed. xxx Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection. The waiver is also defective from the government
side because it was signed only by a revenue district officer, not the Commissioner.

TAX8.25 Jalandoni v. Republic

FACTS: Isabel Ledesma died intestate leaving real properties and personal properties consisting of shares of stock
in various domestic corporations. One of the heirs, filed an estate and inheritance tax return. On the basis of this return, the
BIR made two separate partial assessments calling for the payment deficiency estate and inheritance taxes. The BIR then
demanded payment from the heirs while stating that the same was still "to be considered partial pending investigation of
the return." defendant Bernardino Jalandoni wrote a letter to the collector of internal revenue setting up the defense
of prescription. He argued that the required deficiency in the estate and inheritance taxes payment can no longer
be collected since more than five years had already elapsed from the filing of the return. As a rejoinder, the collector
retorted claiming that such defense is not valid since the estate and inheritance tax return filed by them contained omissions
which amount to fraud indicative of an intention to evade payment of the proper tax due the government. Hence, the
collector concluded that the taxes could still be demanded within ten years from the discovery of the falsity or omission
pursuant to section 332(a) of said code. The heirs appealed the case arguing that fraud cannot be imputed against them
since there was no evidence on record showing that said return was filed in bad faith.

ISSUE: Was there an intention on the part of the heirs to evade payment of the proper tax?

RULING: NO. The omission and under declaration of the properties was not deliberate and did not amount to fraud indicative of
an intention to evade payment of the proper tax due the government. Fraud, in order to justify an assessment based on the
10-year prescriptive period, must be the product of a deliberate intent to evade taxes. As regards to the claim of
the government that the seven lots were deliberately omitted from the tax returns filed by the representative of the heirs: it
appears, however, that three of the seven lots alleged to have been excluded were actually included in the returns; that one
lot was not included because it belonged to one of the heirs; and that the three remaining lots were already declared in the
return submitted by bernardino jalandoni as part of the conjugal property for purposes of income tax.

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

FACTS: Guagua Electric Light Plant Co. is a grantee of municipal franchises by the municipal councils of Guagua and
Sexmoan, Pampanga. It reported a gross income of P1,133,003.44 for 1947 go 1956 and paidthereon a franchise tax of
P56,664.97 computed at 5% in accordance with Section 259 of the Tax Code. Believing that it should pay a lower franchise
tax as provided by its franchises, it filed a claim for refund on25 March 1957 for overpayment. The Commissioner denied
the refund of franchise tax for the period prior to the 4th quarter of 1951 on the ground that the right to refund has
prescribed. The Commissioner allowed there fund of P16,593.87. Later however, due to the holding in Hoa Hin Co. vs.
David, the Commissioner assessed against the company deficiency franchise tax subject to a 25% surcharge, and thereby
including the amount previously allowed by the Commissioner to be refunded.

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

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

TAX8.27 Pelican v. Commissioner

FACTS: This resolves petitioner's Motion to Cancel Assessment on the Ground of Prescription. Petitioner was assessed
for deficiency income tax for the calendar year 1999. It requested for reinvestigation and it also executed a Waiver of
Statute of Limitations which was accepted and agreed to by OIC Asst. Regional Director Romeo P. Buan. Subsequently,
respondent issued a preliminary assessment notice for deficiency income tax penalties to petitioner for its failure to file
quarterly income tax, use of unregistered books and registration fees.

Petitioner is now contesting the said waiver and argues that the waiver is void as it failed to conform to the requirements
set forth in RMO No. 20-90, to wit: (a) it does not show on its face the date of acceptance thereof by respondent; and (b)
it does not show on its face the fact of receipt of a copy thereof by petitioner. It also cited the Court's ruling that a waiver
suffering from legal infirmities is invalid and, hence, there is no valid extension of the period within which respondent
may issue an assessment notice In opposing petitioner's motion, respondent argues that the right of respondent to assess
and collect deficiency tax has not yet prescribed because the Waiver of the Statute of Limitations executed by petitioner
on March 21, 2003 extended the period of assessment up to October 15, 2003.

ISSUE: Whether or not the right of respondent to assess and to collect the alleged deficiency income tax for taxable year
1999 is already barred by prescription

RULING: A close scrutiny of the waiver revealed that no period was agreed upon within which the respondent may validly
assess the petitioner after the regular 3-year period of prescription provided for by the law. The Court ruled that the said
waiver is invalid and without any binding effect on the petitioner for the reason that there were no consent by the respondent
(CIR) and no period was set or agreed upon for subsequent assessment.

TAX8.28 Collector v. Codinera

FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Restituto Codiñera
for collection of certain deficiency specific tax. However, it could not be effected in view of the attachment of the said
properties of the CFI-Manila of another case. After seven years, the Collector of Internal Revenue issued a warrant of
distraint and levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effects and other personal
property of whatever character, and levy upon the real property and interest in or rights to real property of the estate of the
deceased. The heirs of the deceased filed the action with the CTA barring the government to collect said deficiency on the
ground of prescription therefore praying to declare null and void, and of no legal force and effect the warrant of distraint
and levy which the respondent issued on March 7, 1955.

ISSUE: Does the attachment made by a court in a civil case over certain properties of a taxpayer bar the government from
enforcing a warrant of distraint and levy over the aforesaid properties in order to collect the taxes due?

RULING: The prescriptive period to collect is not suspended during the period that the property of the taxpayer is in
custodial egis because it may still be distrained subject to the prior lien of the attachment creditor.