REMEDIES

1. What is an assessment?
Assess means to impose a tax; to charge with a tax; to declare a tax to be payable; to apportion a
tax to be paid or contributed, to fix a rate; to fix or settle a sum to be paid by way of tax; to set,
fix or charge a certain sum to each taxpayer; to settle determine or fix the amount of tax to be
paid (84 C.J.S 74-750)

An assessment is the notice to the effect that the amount therein stated is due from a taxpayer
as a tax with a demand for payment of the same within a stated period of time. (Commissioner v.
CTA, 27 SCRA 1159)

An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement
of a due tax liability that is there definitely set and fixed. A written communication containing a
computation by a revenue officer of the tax liability of a taxpayer and giving him an opportunity
to contest or disprove the BIR examiners findings is not an assessment since it is yet indefinite
(Adamson v. CA, G.R. No. 120935, March 21, 2009).

2. Is the issuance of tax assessment a precondition to the filing of criminal complaint against the
taxpayer?
No. In Section 222 of the NIRC:

Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return,
the tax may be assessed, or a proceeding in court for the collection of such tax may be filed
without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or
omission: Provided, That in a fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

In the seminal case of Ungab v. Cusi, this Court ruled that there was no need for precise
computation and formal assessment in order for criminal complaints to be filed against him. It
quoted Mertens Law of Federal Income Taxation, Vol. 10, Sec. 55A.05, p. 21, thus:

An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to

defeat and evade the income tax. A crime is complete when the violator has knowingly and
willfully filed a fraudulent return, with intent to evade and defeat the tax. The perpetration of the
crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate
return, and the governments failure to discover the error and promptly to assess has no
connections with the commission of the crime.

This hoary principle still underlies Section 269 (now 222) and related provisions of the present
Tax Code. (Adamson v. CA, G.R. No. 120935, March 21, 2009)

3. May the collection of internal revenue taxes be barred by prescription?

 Unless otherwise provided by the tax itself, taxes are imprescriptible. (CIR v. Ayala Securities
Corporation)

The law on prescription, being a remedial measure, should be liberally construed in order to afford
such protection. As a corollary, the exceptions to the law on prescription should perforce be
strictly construed. [Commissioner v. C.A., G.R.No. 104171 (1999)]

4. When do you start to count the 3 year prescriptive period for the issuance of the assessment by
the BIR?

Section 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed
by law for the filing of the return, and no proceeding in court without assessment for the
collection of such taxes shall be begun after the expiration of such period: Provided, That in a case
where a return is filed beyond the period prescribed by law, the three (3)-year period shall be
counted from the day the return was filed. For purposes of this Section, a return filed before the
last day prescribed by law for the filing thereof shall be considered as filed on such last day.

Illustration: Due date for filing of return: APRIL 15

Date of Actual Filing Running of Prescriptive Period

Before April 15, example, return filed on April 15
March 30
April 15 April 15
After April 15 Date return was actually filed, example April
17

5. What is the prescriptive period to collect internal revenue taxes?

Prescriptions found in statutes
(1) National Internal Revenue Code- statute of limitations (see Section 203 and 222) in the
assessment and collection of taxes therein imposed.

Where return filed was NOT NO RETURN

false or fraudulent:
Collection with Collection should be made
prior assessment within 5 years from the date of
assessment of the tax. (Sec.
FALSE OR FRAUDULENT RETURN
Collection should be made
within 5 years from the date of
assessment (based on Sec.
222(c), NIRC)
 203 in relation to Sec. 222,
NIRC) By distraint or levy, or by judicial
Proceedings
By distraint or levy, or by
judicial proceedings
Collection Collection should be made Collection should be made
without prior within 3 years from the date of within ten years after the
assessment filing of return or date return is discovery of the falsity, fraud or
due, whichever is LATER omission to file a return.
(TN: No distraint (based on Sec. 203,
or levy if no NIRC) By judicial proceedings
assessment)
By judicial proceedings

(2) Tariff and Customs Code- does not express any general statute of limitation; it provides,
however, that “when articles have been entered and passed free of duty or final adjustments of
duties made, with subsequent delivery, such entry and passage free of duty or settlements of
duties will, after the expiration of one (1) year, from the date of the final payment of duties, in the
absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final
and conclusive upon all parties, unless the liquidation of the import entry was merely tentative.”
(Sec. 1603)

(3) Local Government Code- prescribes prescriptive periods for the assessment (5 years) and
collection (5 years) of taxes. (seeSections 194 and 270, Rep. Act No. 7160).

6. When do you consider the service of the assessment notice valid?

On the matter of service of a tax assessment, a further perusal of our ruling in Barcelon is
instructive, viz:

Jurisprudence is replete with cases holding that if the taxpayer denies ever having received an
assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that
such notice was indeed received by the addressee. The onus probandi was shifted to
respondent to prove by contrary evidence that the Petitioner received the assessment in the
due course of mail. The Supreme Court has consistently held that while a mailed letter is
deemed received by the addressee in the course of mail, this is merely a disputable presumption
subject to controversion and a direct denial thereof shifts the burden to the party favored by
the presumption to prove that the mailed letter was indeed received by the addressee (Republic
vs. Court of Appeals, 149 SCRA 351). Thus as held by the Supreme Court in Gonzalo P. Nava vs.
Commissioner of Internal Revenue, 13 SCRA 104, January 30, 1965:

"The facts to be proved to raise this presumption are (a) that the letter was properly
addressed with postage prepaid, and (b) that it was mailed. Once these facts are proved, the
presumption is that the letter was received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mail. But if one of the said facts fails to appear,
the presumption does not lie. (VI, Moran, Comments on the Rules of Court, 1963 ed, 56-57
citing Enriquez vs. Sunlife Assurance of Canada, 41 Phil 269)."

x x x. What is essential to prove the fact of mailing is the registry receipt issued by the Bureau
of Posts or the Registry return card which would have been signed by the Petitioner or its
authorized representative. And if said documents cannot be located, Respondent at the very
least, should have submitted to the Court a certification issued by the Bureau of Posts and any
other pertinent document which is executed with the intervention of the Bureau of Posts. This
Court does not put much credence to the self serving documentations made by the BIR
personnel especially if they are unsupported by substantial evidence establishing the fact of
mailing. Thus:

"While we have held that an assessment is made when sent within the prescribed period, even
if received by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-
12259, May 27, 1959), this ruling makes it the more imperative that the release, mailing or
sending of the notice be clearly and satisfactorily proved. Mere notations made without the
taxpayers intervention, notice or control, without adequate supporting evidence cannot suffice;
otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate
protection or defense." (Nava vs. CIR, 13 SCRA 104, January 30, 1965).

x x x.

The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the
conclusion that no assessment was issued. Consequently, the governments right to issue an
assessment for the said period has already prescribed. (Industrial Textile Manufacturing Co. of
the Phils., Inc. vs. CIR CTA Case 4885, August 22, 1996).

R.R. No. 12-99

Section 3.1.4 Formal Letter of Demand and Assessment Notice. The formal letter of demand and
assessment notice shall be issued by the Commissioner or his duly authorized representative.
The letter of demand calling for payment of the taxpayer's deficiency tax or taxes shall state the
facts, the law, rules and regulations, or jurisprudence on which the assessment is based,
otherwise, the formal letter of demand and assessment notice shall be void (see illustration in
ANNEX B hereof).

The same shall be sent to the taxpayer only by registered mail or by personal delivery.

If sent by personal delivery, the taxpayer or his duly authorized representative shall
acknowledge receipt thereof in the duplicate copy of the letter of demand, showing the
following: (a) His name; (b) signature; (c) designation and authority to act for and in behalf of
the taxpayer, if acknowledged received by a person other than the taxpayer himself; and (d)
date of receipt thereof.
 (CIR v. Metrostar Superama, G.R. No. 185371, December 8, 2010)

7. What is the effect if the taxpayer has amended his tax return or statement filed with the BIR?

In Revenue Memorandum Circular No. 50-13 covering the filing of “tentative” annual income tax
returns (ITRs), the BIR categorically states that the filing of amended tax returns has the effect of
extending the three-year period within which the BIR is allowed to examine the taxpayer’s books
of accounts and accounting records. It does not provide for any qualification as to the extent of
the amendments to the tax returns to affect the extension of the prescriptive period.

The courts, however, require that the returns be substantially modified before it will affect the
counting of the three-year prescriptive period to assess the taxpayer’s internal revenue tax
liabilities.

Finding support in a Supreme Court ruling, the Court of Tax Appeals (CTA), in a 23 November 2015
decision, held that the statute of limitations should be counted from the date the amended return
was filed only if the changes thereon are substantial.

So the question is -- how substantial is “substantial”?

In that decision, the CTA did not set out any express guidelines on how to determine what
constitutes a substantial amendment. In deciding on each of the relevant amended returns, the
court decided as follows:
 The change in the amount of minimum corporate income tax was not deemed
substantial because the higher regular corporate income tax was used in the
computation of tax payable;
 Revision in the number of attached pages is not substantial;
 The change in the amount to be paid, which was based merely on the reflection of
payment accompanied by the filing of the original return, is likewise insubstantial;
and
 The 2.7% increase in the total amount of tax due as a result of increased income is
considered substantial change.

As a consequence, the CTA counted the three-year prescriptive period from the filing date of the
original return when it resolved that changes on the tax returns were insubstantial.

In the jurisprudence cited by the CTA, the taxpayer reported a loss in its original tax return. Due
to exclusions of revenue and expense items, the amended tax return yielded a taxable income.
Considering that the alterations were substantial, the Supreme Court ruled that the prescriptive
 period to assess should be counted from the filing of the amended income tax return and not
from the filing date of the original return.

From the decisions in the above cases, one can surmise that if an amendment changes the
computation resulting in a change in the amount of tax due, it would be considered substantial.
Otherwise, it would be insubstantial.

In another decision in 2008, the Supreme Court decision reaffirmed the principle that only a
substantial change in an amended tax return will affect the reckoning point of the BIR’s period to
conduct a tax investigation. However, the rule was just mentioned in passing and was not really
tackled or explained: COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs. FMF DEVELOPMENT CORPORATION, G.R. No. 167765, June 30, 2008 viz:

:In fine, Assessment Notice No. 33-1-00487-95 dated October 25, 1999, was issued beyond the
three-year prescriptive period. The waiver was incomplete and defective and thus, the three-year
prescriptive period was not tolled nor extended and continued to run until April 15, 1999. Even if
the three-year period be counted from May 8, 1996, the date of filing of the amended return,
assuming the amended return was substantially different from the original return, a case which
affects the reckoning point of the prescriptive period,22 still, the subject assessment is definitely
considered time-barred.

CITING 22 See B. Aban, Law of Basic Taxation in the Philippines 271 (Rev. Ed., 2001),
citing Commissioner of Internal Revenue v. Phoenix Assurance Co., Ltd., No. L-19727, May 20,
1965, 14 SCRA 52, 59.

8. When the tax assessment has become final, executory and demandable, does the taxpayer have
other available remedies?

Yes, petition for review with the CTA Division filed within 30 days from the decision or within 30
days from lapse of 180 day period from submission of documents in the tax protest in case of
inaction of the CIR

Remedies of Taxpayer to Action by Commissioner

(a) In case of denial of protest - If the Commissioner DENIES THE PROTEST filed by the taxpayer,
the latter may appeal to the CTA within 30 days from receipt of the decision denying the protest
(Sec. 228, NIRC)
(1) The 30-day period starts when the taxpayer receives the decision of the
Commissioner denying the protest.
(2) The decision of the Commissioner must categorically state that his action on
the disputed assessment is final, otherwise period to appeal will not commence
to run. (Advertising Associates Vs. CA)
 Note: A Division of the CTA shall hear the appeal. (Sec. 11, RA 1125 as amended
by RA
9282 [2004])

(b) In case of inaction by Commissioner within 180 days from submission of documents - If the
Commissioner did NOT ACT UPON THE PROTEST within 180 days from the time the documents
were submitted, the taxpayer may either:
(1) Appeal to the CTA within thirty days from the lapse of the 180-day period OR
(2) Wait until the Commissioner decides before he elevates the case to the CTA.

RCBC v. CIR (2007): In case the Commissioner failed to act on the disputed assessment within the
180- day period from date of submission of documents, a taxpayer can either:
(1) file a petition for review with the Court of Tax Appeals within 30 days after the
expiration of the 180-day period; OR
(2) await the final decision of the Commissioner on the disputed assessments and
appeal such final decision to the Court of Tax Appeals within 30 days after receipt
of a copy of such decision.
However, these options are mutually exclusive, and resort to one bars the
application of the other.

Remedy if the taxpayer is not satisfied with the CTA Division’s ruling:
FIRST, he may file a motion for reconsideration before the same Division of the CTA within fifteen
(15) days from notice thereof. (Sec. 11, RA 1125 as amended by RA 9282 [2004])
THEN, a party adversely affected by a resolution of a Division of the CTA on a motion for
reconsideration may file a petition for review with the CTA en banc.
(Sec. 18, RA 1125 as amended by RA 9282 [2004])

Remedy if the taxpayer is not satisfied with the decision of the CTA en banc:
A party adversely affected by a decision or ruling of the CTA en banc may file with the Supreme
Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Court.
(Sec. 19, RA 1125 as amended by RA 9282 [2004])
(c) Effect of failure to appeal
If the taxpayer fails to file an appeal, the assessment shall become final, executory and
demandable.

9. Can prescription be raised as a defense by the taxpayer on appeal?

NO, as held in RCBC v CIR, G.R. No. 168498, April 24, 2007, viz:

Lastly, we note that petitioner is raising the issue of prescription for the first time in the instant
motion for reconsideration. Although the same was raised in the petition for review, it was
dismissed for late filing. No motion for reconsideration was filed hence the disputed assessment
became final, demandable and executory. Thereafter, petitioner filed with the Court of Tax
 Appeals a petition for relief from judgment. However, it failed to raise the issue of prescription
therein. After its petition for relief from judgment was denied by the Court of Tax Appeals for lack
of merit, petitioner filed a petition for review before this Court without raising the issue of
prescription. It is only in the instant motion for reconsideration that petitioner raised the issue of
prescription which is not allowed.The rule is well-settled that points of law, theories, issues and
arguments not adequately brought to the attention of the lower court need not be considered by
the reviewing court as they cannot be raised for the first time on appeal,[8] much more in a motion
for reconsideration as in this case, because this would be offensive to the basic rules of fair play,
justice and due process.[9] This last ditch effort to shift to a new theory and raise a new matter in
the hope of a favorable result is a pernicious practice that has consistently been rejected.

10. When does the Court of Tax Appeals have jurisdiction over internal revenue tax cases?

Only when the decision of the CIR in the exercise of quasi-judicial function (disputed assessments,
refunds etc under Section 4, para 2) is already final: Section 7, RA 1125 as amended by RA 9282
"a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
"1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
"2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period
of action, in which case the inaction shall be deemed a denial;