Commissioner of Internal Revenue vs.
Court of Appeals, Court of Tax Appeals, On August 5, 1987, Carnation received BIRs letter of demand dated July 29, 1987 asking
Carnation Philippines Inc.
June 21, 1978 | Aquino, J. | Probate
SUMMARY: On January 15, 1982 and November 20, 1981 – Carnation filed its annual
income tax and percentage tax returns for the fiscal year ending September 30, 1981.
Subsequently, it signed three separate waivers of the Statute of Limitations Under the
National Internal Revenue Code wherein it: “waived the running of the prescriptive period
provided for in sections 318 and 319 and other related provisions of the National Internal
Revenue Code.”
The CIR, however, assessed Carnations income and sales tax on July 29, 1987.
This was beyond the five-year prescriptive period under the NIRC. So the question in this
case was, whether or not the waiver signed by Carnation was valid or not? The Supreme
Court said no, they were not, because the waivers were not signed by the BIR
Commissioner or any of his agents.
DOCTRINE: SEC. 319. Exceptions as to period of limitation of assessment and collection
of taxes… (b) Where before the expiration of the time prescribed in the preceding section
for the assessment of the tax, both the Commissioner of Internal Revenue and the
taxpayer have consented in writing to its assessment after such time, the tax may be
assessed at any time prior to the expiration of the period agreed upon. The period so agreed
upon may be extended by subsequent agreement in writing made before the expiration of
the period previously agreed upon.
FACTS:
On January 15, 1982, Carnation Phils. Inc. (Carnation), filed its Corporation Annual
Income Tax Return for taxable year ending September 30, 1981; and its
Manufacturers/Producers Percentage Tax Return for the quarter ending September 30,
1981.
On October 13, 1986, March 16, 1987 and May 18, 1987, Carnation, through its Senior
Vice President Jaime O. Lardizabal, signed three separate waivers of the Statute of
Limitations Under the National Internal Revenue Code wherein it: “waived the
running of the prescriptive period provided for in sections 318 and 319 and other related
provisions of the National Internal Revenue Code and consents to the assessment and
collection of the taxes which may be found due after reinvestigation and reconsideration at
any time before or after the lapse of the period of limitations fixed by said sections 318 and
319 and other relevant provisions of the National Internal Revenue Code, but not after (13
April 1987 for the earlier-executed waiver, or June 14, 1987 for the later waiver, or July 30,
1987 for the subsequent waiver, as the case may be). However, the taxpayer (petitioner
herein) does not waive any prescription already accrued in its favor.”
The waivers were not signed by the BIR Commissioner or any of his agents.
the said corporation to pay P1,442,586.56 as deficiency income tax, P14,152,683.85 as
deficiency sales tax and P3,939,913.03 as deficiency sales tax on undeclared sales, all for
the year 1981.
In a basic protest dated August 17, 1987, Carnation disputed the assessments and requested
a reconsideration and reinvestigation thereof. These protests were denied by the BIR
Commissioner in a letter dated March 15, 1988
Hence, Carnation appealed to the CTA.
CTA granted Carnation’s appeal: Assessments were null and void for being issued beyond
the 5-year prescriptive period allowed by law.
Hence, this petition by the CIR.
Issue: Whether or not the three (3) waivers signed by the private respondent are valid and
binding as to toll the running of the prescriptive period for assessment and not bar the
Government from issuing subject deficiency tax assessments? No, the waivers are not
binding.
Preliminary Note: Why is this issue important?
Here are the facts:
January 15, 1982, and November 20, 1981 - Carnation filed its annual income tax and
percentage tax returns for the fiscal year ending September 30, 1981
January 14, 1987 and Nov 19, 1986 – following the NIRC, private respondents could not
only assess the 1981 income and sales taxes until these dates. BUT, Carnations income and
sales taxes were assessed only on July 29, 1987, beyond the five-year prescriptive
period.
Since, the assessments were made beyond the prescriptive period. The only
Question is whether or not the waiver of the prescriptive period by Carnation was
valid.
Stand of BIR Commissioner: Waivers signed by Carnation were valid although
not signed by the BIR Commissioner because:
When the BIR agents/examiners extended the period to audit and investigate Carnations tax
returns, the BIR gave its implied consent to such waivers
the signature of the Commissioner is a mere formality and the lack of it does not vitiate the
binding effect of the waivers; and
that a waiver is not a contract but a unilateral act of renouncing ones right to avail of the
defense of prescription and remains binding in accordance with the terms and conditions
set forth in the waiver.
SC: No! Inaccurate!
The same tax code is clear on the matter. Sec 319 states: SEC. 319. Exceptions as to
period of limitation of assessment and collection of taxes… (b) Where before the
expiration of the time prescribed in the preceding section for the assessment of the tax,
both the Commissioner of Internal Revenue and the taxpayer have consented in
writing to its assessment after such time, the tax may be assessed at any time prior to the
expiration of the period agreed upon. The period so agreed upon may be extended by
subsequent agreement in writing made before the expiration of the period previously
agreed upon.
Court cited the CA’s decision with approval, which said: Section 319 of the Tax code
earlier quoted is clear and explicit that the waiver of the five-year prescriptive period must
be in writing and signed by both the BIR Commissioner and the taxpayer. Here, the three
waivers signed by Carnation do not bear the written consent of the BIR Commissioner as
required by law. Here, the waivers are invalid invalid and without any binding effect on
petitioner (Carnation) for the reason that there was no consent by the respondent
(Commissioner of Internal Revenue).
Court cited the case of Collector of Internal Revenue vs. Solano, where the Court said: x x
x The only agreement that could have suspended the running of the prescriptive period for
the collection of the tax in question is, as correctly pointed out by the Court of Tax
Appeals, a written agreement between Solano and the Collector, entered into before the
expiration of the of the five-year prescriptive period, extending the limitation prescribed by
law.
Lastly, the waivers in question reveal that they are in no wise unequivocal, and therefore
necessitates for its binding effect the concurrence of the Commissioner of Internal
Revenue.
In fact, in his reply dated April 18, 1995, the Solicitor General, representing the
Commissioner of Internal Revenue, admitted that subject waivers executed by Carnation
were for and in consideration of the approval by the Commissioner of Internal Revenue of
its request for reinvestigation and/or reconsideration of its internal revenue case involving
tax assessments for the fiscal year ended September 30, 1981 which were all pending at the
time.
On this basis neither implied consent can be presumed nor can it be contended that the
waiver required under Sec. 319 of the Tax Code is one which is unilateral nor can it be said
that concurrence to such an agreement is a mere formality because it is the very signatures
of both the Commissioner of Internal Revenue and the taxpayer which give birth to such a
valid agreement.
CIR v. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010
CIRv. KUDOS
G.R. No. 178087, May 5, 2010 ,
PETITIONERS :CIR
RESPONDENTS:Kudos Metal
SUMMARY. BIR reviewed and audited Kudos Metal’s records after the latter filed its
income tax return. Meanwhile, Pasco, the corporation’s accountant, executed two waivers
of raising the defense of prescription so that the BIR may complete its investigation even
after the 3-year period of assessment expires. The waivers, however, were executed with
defects (see ratio 1). When BIR issued the Assessment notices, Kudos protested, claiming
that the government’s right to assess taxes had prescribed. SC ruled in favor of Kudos
because the waivers allowing the extension of the period were void.
DOCTRINE. The doctrine of estoppel cannot be applied in the present case as an
exception to the statute of limitations on the assessment of taxes considering that there is a
detailed procedure for the proper execution of the waiver, which the BIR must strictly
follow. The doctrine of estoppel cannot give validity to an act that is prohibited by law or
one that is against public policy.
The prescriptive period on when to assess taxes benefits both the government and the
taxpayer. Exceptions extending the period to assess must be strictly construed.
FACTS.
1. This Petition for Review on Certiorari seeks to set aside
a. the Decision (March 30, 2007) of the CTA affirming the cancellation of
the assessment notices for having been issued beyond the prescriptive
period
b. and the Resolution (May 18, 2007) denying the motion for
reconsideration.
2. On April 15, 1999, Kudos filed its Annual ITR for the taxable year 1998.
3. Pursuant to a Letter of Authority, the BIR, served upon respondent three Notices
of Presentation of Records.
4. Respondent failed to comply with these notices, hence, the BIR issued a
Subpeona, receipt of which was acknowledged by respondent's President, Mr.
Chan Ching Bio, in a letter. A review and audit of respondent's records then
ensued.
5. On Dec 10, 2001, Nelia Pasco, respondent's accountant, executed a Waiver of
Defense of Prescription received by the BIR Enforcement Service on January 31,
2002 and by the BIR Tax Fraud Division on February 4, 2002, and accepted by
the Assistant Commissioner of the Enforcement Service.
 6. This was followed by a second Waiver of Defense of Prescription executed by
Pasco on February 18, 2003 received by BIR Tax Fraud Division on February 28,
2003 and accepted by Assistant Comm. Salazar.
7. On August 25, 2003, BIR issued a Preliminary Assessment Notice for the taxable
year 1998 against the respondent. This was followed by a Formal Letter of
Demand with Assessment Notices for taxable year 1998, dated September 26,
2003 which was received by respondent on November 12, 2003.
8. Respondent challenged the assessments.
9. On June 22, 2004, the BIR rendered a final Decision on the matter, requesting the
immediate payment of the following tax.
10. Believing that the government's right to assess taxes had prescribed, respondent
filed on August 27, 2004 a Petition for Review with the CTA.
ISSUES & RATIO.
1. WON government's right to assess unpaid taxes or respondent prescribed--
NO.
The waivers executed by respondent's accountant did not extend the period within
which the assessment can be made.
Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to
comply with RMO 20-90 and RDAO 05-01, which the BIR itself issued.
 Having caused the defects in the waivers, the BIR must bear the consequence.
 It cannot shift the blame to the taxpayer.
 Waiver of the statute of limitations, being a derogation of the taxpayers right to
security against prolonged and unscrupulous investigations, must be carefully and
strictly construed
 Sec. 222(B), NIRC provides the period to assess and collect taxes may only be
extended upon a written agreement between the CIR and the taxpayer executed
before the expiration of 17 the three-year period.
 RMO 20-90 issued on April 4, 1990 and 18 RDAO 05-01 issued on August 2,
2001 lay down the procedure for the proper execution of the waiver, to wit:
1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase "but
not after ___19 _", which indicates the expiry date of the period agreed upon to
assess/collect the tax after the regular 3-year period of prescription, should be
filled up.
2. must be signed by the taxpayer himself or his duly authorized representative. In
the case of a corporation, the waiver must be signed by any of its responsible
officials. In case the authority is delegated by the taxpayer to a representative,
such delegation should be in writing and duly notarized.
3. Should be duly notarized.
4. CIR or the revenue official authorized by him must sign the waiver indicating that
the BIR has accepted and agreed to the waiver. The date of such acceptance by the
BIR should be indicated. However, before signing the waiver, the CIR or the
revenue official authorized by him must make sure that the waiver is in the
prescribed form, duly notarized, and executed by the taxpayer or his duly
authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau
should be before the expiration of the period of prescription or before the lapse of
the period agreed upon in case a subsequent agreement is executed.
6. must be executed in 3 copies, the original copy to be attached to the docket of the
case, the second copy for the taxpayer and the third copy for the Office accepting
the waiver. The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was notified of the
acceptance of the BIR and the perfection of the agreement.
A perusal of the waivers executed by respondent's accountant reveals the ff.
infirmities:
1. The waivers were executed without the notarized written authority of Pasco to
sign the waiver in behalf of respondent.
2. The waivers failed to indicate the date of acceptance.
3. The fact of receipt by the respondent of its file copy was not indicated in the
original copies of the waivers.
2. WON estoppel can apply.– NO.
 The doctrine of estoppel cannot be applied in the present case as an exception to
the statute of limitations on the assessment of taxes considering that there is a
detailed procedure for the proper execution of the waiver, which the BIR must
strictly follow. The doctrine of estoppel cannot give validity to an act that is
prohibited by law or one that is against public policy.
 The BIR cannot hide behind the doctrine of estoppel to cover its failure to comply
with RMO 20-90 and RDAO 05-01, which the BIR itself issued.
DECISION: WHEREFORE, the petition is DENIED. The assailed Decision dated March
30, 2007 and Resolution dated May 18, 2007 of the Court of Tax Appeals are hereby
AFFIRMED.
September 7, 2011 | MENDOZA, J. | WAIVER OF PRESCRIPTIONS
PETITIONERS: RIZAL COMMERCIAL BANKING CORPORATION
RESPONDENTS: COMMISSIONER OF INTERNAL REVENUE
SUMMARY (recit ready)
RCBC's Corporate Annual Income Tax Return for Foreign Currency Deposit Unit for 1994
and 1995 was examined by the CIR. In 1997, it executed 2 Waivers of the Defense of
Prescription Under the Statute of Limitations for the years 1994-1995. In 2000, it received
an Assessment Notice of P4.1B. Upon protest, assessment was reduced to P300M. RCBC
paid 15M and assailed the assessment for deficiency onshore tax and documentary stamp
tax. CTA-En Banc ruled that by receiving, accepting and paying portions of the reduced
assessment, RCBC bound itself to the new assessment, implying that it recognized the
validity of the waivers. Before the SC, RCBC argues that the waivers were invalid since:
(1) Waivers were merely attested to by Sixto Esquivias, Coordinator for the CIR, and that
he failed to indicate acceptance or agreement of the CIR, as required under Section 223 (b)
of the 1977 Tax Code.
(2)Principle of estoppel cannot be applied against it because its payment of the other tax
assessments does not signify a clear intention on its part to give up its right to question the
validity of the waivers.
SC said that RCBC, through its partial payment of the revised assessments issued within
the extended period as provided for in the questioned waivers, impliedly admitted the
validity of those waivers. Had RCBC truly believed that the waivers were invalid and that
the assessments were issued beyond the prescriptive period, then it should not have paid
the reduced amount of taxes in the revised assessment.
As to RCBC's argument that it is the payor-borrower, as withholding agent, who is directly
liable for the payment of onshore tax, the SC said that while the payor-borrower can be
held accountable for its negligence in performing its duty to withhold the amount of tax
due on the transaction, RCBC, as the taxpayer and the one which earned income on the
transaction, remains liable for the payment of tax as the taxpayer shares the responsibility
of making certain that the tax is properly withheld by the withholding agent, so as to avoid
any penalty that may arise from the non-payment of the withholding tax due.
DOCTRINE
Partial payment of assessments issued within the extended period as provided for in the
questioned waivers, impliedly admitted the validity of those waivers
FACTS
1. RCBC filed its Corporation Annual Income Tax Returns for Foreign Currency Deposit
Unit for the calendar years 1994 and 1995. On August 15, 1996, RCBC received Letter of
Authority from CIR Liwayway Vinzons-Chato, authorizing a special audit team to examine
the books of accounts and other accounting records for all internal revenue taxes from
January 1, 1994 to December 31, 1995.
2. On January 23, 1997, RCBC executed two Waivers of the Defense of Prescription Under
the Statute of Limitations of the National Internal Revenue Code covering the internal
revenue taxes due for the years 1994 and 1995, effectively extending the period of the
Bureau of Internal Revenue (BIR) to assess up to December 31, 2000. On January 27,
2000, RCBC received a Formal Letter of Demand together with Assessment Notices from
the BIR for a total of P4.1B deficiency with penalty and interest.
3. RCBC filed a protest on February 24, 2000. On November 20, 2000, it also filed a
petition for review before the CTA, pursuant to Section 228 of the 1997 Tax Code. RCBC
received another Formal Letter of Demand with Assessment Notices dated October 20,
2000, for P300M. On the same day, RCBC paid 15M. RCBC refused to pay P287M for
deficiency onshore tax and documentary stamp tax which remained to be the subjects of its
petition for review. CTA partially granted the petition. It:
a) considered as closed and terminated the assessments for deficiency income tax,
deficiency gross receipts tax, deficiency final withholding tax, deficiency expanded
withholding tax, and deficiency documentary stamp tax (not an industry issue) for 1994
and 1995.
b) Upheld the assessment for deficiency final tax on FCDU onshore income and deficiency
documentary stamp tax for 1994 and 1995 and ordered RCBC to pay P171M.
7. Upon MR, CTA ordered payment of P132.6M.
8. RCBC elevated the case to the CTA-En Banc who denied the petition for lack of merit.
It ruled that by receiving, accepting and paying portions of the reduced assessment, RCBC
bound itself to the new assessment, implying that it recognized the validity of the waivers.
As to the deficiency onshore tax, it held that because the payor-borrower was merely
designated by law to withhold and remit the said tax, it would then follow that the tax
should be imposed on RCBC as the payee-bank.
9. RCBC filed its Manifestation informing the Court that this petition, relative to the DST
deficiency assessment, had been rendered moot and academic by its payment of the tax
deficiencies on DST on Special Savings Account (SSA) for taxable years 1994 and 1995
after the BIR approved its applications for tax abatement. CIR pointed out that the only
remaining issues raised in the present petition were those pertaining to RCBCs deficiency
tax on FCDU Onshore Income for taxable years 1994 and 1995 in the aggregate amount of
₱80,161,827.56 plus 20% delinquency interest per annum.
ISSUES/HELD
1. Whether petitioner, by paying the other tax assessment covered by the waivers of the
statute of limitations, is rendered estopped from questioning the validity of the said waivers
with respect to the assessment of deficiency onshore tax. - YES
2. Whether petitioner, as payee-bank, can be held liable for deficiency onshore tax, which
is mandated by law to be collected at source in the form of a final withholding tax. YES
RATIO
[ISSUE 1] [TOPIC]
1. RCBC's arguments:
(1) Waivers were merely attested to by Sixto Esquivias, Coordinator for the CIR, and that
he failed to indicate acceptance or agreement of the CIR, as required under Section 223 (b)
of the 1977 Tax Code.
(2)Principle of estoppel cannot be applied against it because its payment of the other tax 5. While the payor-borrower can be held accountable for its negligence in performing its
assessments does not signify a clear intention on its part to give up its right to question the duty to withhold the amount of tax due on the transaction, RCBC, as the taxpayer and the
validity of the waivers. one which earned income on the transaction, remains liable for the payment of tax as the
2. Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule taxpayer shares the responsibility of making certain that the tax is properly withheld by the
that an admission or representation is rendered conclusive upon the person making it, and withholding agent, so as to avoid any penalty that may arise from the non-payment of the
cannot be denied or disproved as against the person relying thereon. A party is precluded withholding tax due.
from denying his own acts, admissions or representations to the prejudice of the other party
in order to prevent fraud and falsehood. DISPOSITIVE: Petition is DENIED.
3. RCBC, through its partial payment of the revised assessments issued within the extended
period as provided for in the questioned waivers, impliedly admitted the validity of those
waivers. Had petitioner truly believed that the waivers were invalid and that the
assessments were issued beyond the prescriptive period, then it should not have paid the
reduced amount of taxes in the revised assessment. RCBCs subsequent action effectively
belies its insistence that the waivers are invalid. Thus, RCBC is estopped from questioning
the validity of the waivers. To hold otherwise and allow a party to gainsay its own act or
deny rights which it had previously recognized would run counter to the principle of equity
which this institution holds dear.

[ISSUE 2]
1. RCBC's argument: it is the payor-borrower, as withholding agent, who is directly liable
for the payment of onshore tax, citing Section 2.57(A) of Revenue Regulations No. 2-98:
"(A) Final Withholding Tax. Under the final withholding tax system the amount of income
tax withheld by the withholding agent is constituted as a full and final payment of the
income tax due from the payee on the said income. The liability for payment of the tax rests
primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the
tax or in case of under withholding, the deficiency tax shall be collected from the
payor/withholding agent. The payee is not required to file an income tax return for the
particular income."
2. RCBC erred in citing Revenue Regulations No. 2-98 because the same governs
collection at source on income paid only on or after January 1, 1998. The deficiency
withholding tax subject of this petition was supposed to have been withheld on income paid
during the taxable years of 1994 and 1995. Hence, Revenue Regulations No. 2-98
obviously does not apply in this case.
3. The purpose of the withholding tax system is three-fold: (1) to provide the taxpayer with
a convenient way of paying his tax liability; (2) to ensure the collection of tax, and (3) to
improve the governments cashflow.
4. Under the withholding tax system, the payor is the taxpayer upon whom the tax is
imposed, while the withholding agent simply acts as an agent or a collector of the
government to ensure the collection of taxes. His (agent) liability is direct and independent
from the taxpayer, because the income tax is still imposed on and due from the latter. The
agent is not liable for the tax as no wealth flowed into him he earned no income. The
government’s cause of action against the withholding agent is not for the collection of
income tax, but for the enforcement of the withholding provision of Section 53 of the Tax
Code, compliance with which is imposed on the withholding agent and not upon the
taxpayer
CIR v. Philippine Global Communication Inc.
October 31, 2006 | CHICO-NAZARIO, J. | Period of Limitation to Collect
PETITIONER: COMMISSIONER OF INTERNAL REVENUE
RESPONDENTS: PHILIPPINE GLOBAL COMMUNICATION, INC.,
SUMMARY
CIR assessed Philippine Global for deficiency income taxes in 1994. Philippine Global
protested. CIR denied Philippine Global’s protest and affirmed the assessment 8 years later
(in 2002). Philippine Global appealed to the CTA which decided in its favor holding that
since 3 years had lapsed since the assessment notice was issued, CIR’s right to collect the
deficiency income tax has prescribed. Protest letters filed by Philippine Global did not toll
the running of the prescriptive period since they did not constitute request for
reinvestigation— refers to a plea for reevaluation of an assessment on the basis of newly
discovered evidence or additional evidence— which tolls the running of the prescriptive
period.
DOCTRINE
Any internal revenue tax which has been assessed may be collected by distraint or levy or
by a proceeding in court within three years following the assessment of the tax.
Request for a reinvestigation which is granted by the Commissioner suspends the running
of the statute of limitation.
FACTS
 Philippine Global (RESP) filed its Annual ITR for 1990
 RESP received a Formal Assessment Notice for deficiency income tax (P118M)
dated April 14 1994
o Arising from disallowed deductions
 RESP filed a protest
 More that 8 years later (Oct 2002), CIR issued a Final Decision denying RESP’s
protest and affirmed the assessment
 RESP filed a petition for review with CTA
 CTA decided in favor of RESP
o Since more than 3 years had lapsed from the time Assessment Notice was
issued, CIR’s right to collect the same has prescribed (Sec. 269 of NIRC)
o Protest letters filed by RESP cannot constitute request for reinvestigation.
Hence, they cannot toll the running of the prescriptive period
ISSUE/HELD:
WON CIR’s right to collect is barred by prescription— YES
RATIO
1. PRESCRIPTIVE PERIOD: 3 YEARS after the assessment for the collection of
the tax due thereon through the administrative process of distraint and/or levy or
through judicial proceedings.
2. The earliest attempt in this case to collect— when it filed its answer in CTA
case— JANUARY 2003
3. RATIONALE: Just as the government is interested in the stability of its
collections, so also are the taxpayers entitled to an assurance that they will not be
subjected to further
4. investigation for tax purposes after the expiration of a reasonable period of time.
5. NIRC provides instances when the running of the statute of limitations could be
suspended. Among the exceptions is the instance when the taxpayer requests for a
reinvestigation which is granted by the Commissioner.
o However, this exception does not apply to this case since the respondent
never requested for a reinvestigation.
o What RESP filed is a request for reconsideration.
o (a) Request for reconsideration refers to a plea for a reevaluation of an
assessment on the basis of existing records without need of additional
evidence. It may involve both a question of fact or of law or both.
o (b) Request for reinvestigation—refers to a plea for reevaluation of an
assessment on the basis of newly discovered evidence or additional
evidence that a taxpayer intends to present in the investigation. It may
also involve a question of fact or law or both.
o WHY ONLY REQUEST FOR INVESTIGATION TOLLS THE
RUNNING OF THE STATUTE OF LIMITATIONS— A
reinvestigation, which entails the reception and evaluation of additional
evidence, will take more time than a reconsideration of a tax assessment,
which will be limited to the evidence already at hand; this justifies why
the former can suspend the running of the statute of limitations on
collection of the assessed tax, while the latter cannot.
DISPOSITIVE: PETITION DENIED.
CTA decision cancelling Assessment Notice against Philippine Global for its 1990 income
tax deficiency for the reason that it is barred by prescription, is hereby AFFIRMED.
CIR v. Hambrecht & Quist Philippines, Inc.
November 17, 2010 | Leonardo-De Castro, J. | Period of limitation to collect
PETITIONER: Commissioner of Internal Revenue
RESPONDENTS: Hambrecht & Quist Philippines, Inc.
SUMMARY
Hambrecht & Quist Philippines, Inc. was assessed a deficiency income and expanded
withholding taxes for the taxable year 1989 amounting to P2,936,560.87. Hambrecht filed a
protest letter. After nearly 8 years from filing the said protest letter, the respondent received
a letter from the CIR rendering a final decision denying its protest as it was allegedly filed
beyond the 30-day reglementary period prescribed in then Sec 229 of the NIRC. CIR
claimed that the period to collect was suspended because it had granted respondent’s
request for re-investigation. The Court held that the CIR did not grant such as there was no
indication that petitioner acted upon respondent’s protest. The period to enforce collection
has prescribed.
DOCTRINE
The mere filing of a protest letter which is not granted does not operate to suspend the
running of the period to collect taxes.
As per Section 224 of the 1986 NIRC, two requisites must concur before the period to
enforce collection may be suspended: (a) that the taxpayer requests for reinvestigation, and
(b) that petitioner grants such request.
FACTS
1. November 4, 1993—Hambrecht & Quist Philippines, Inc. (respondents) received a
tracer letter/follow-up letter dated 11 October 1993, issued by the Accounts
Receivable/Billing Division of the BIR National Office, demanding for payment of alleged
deficiency income and expanded withholding taxes for the taxable year 1989 amounting to
P2,936,560.87. Prior to its reception, respondent informed the BIR of its change of
business address through a letter and was acknowledged by the BIR on February 18, 1993.
2. The alleged deficiency income tax assessment apparently resulted from an adjustment
made to respondent’s taxable income for 1989, on account of the disallowance of certain
items of expense, namely, professional fees paid, donations, repairs and maintenance,
salaries and wages, and management fees (made up bulk of disallowance as respondent
allegedly failed to withhold the appropriate tax).
3. December 3, 1993—Respondent filed its protest letter against the alleged deficiency
tax assessments for 1989.
4. November 7, 2001 (nearly 8 years later)—Respondent received a letter from the CIR
dated October 27, 2001 advising the respondent that CIR had rendered a final decision
denying its protest on the ground that the protest against the disputed tax assessment was
allegedly filed beyond the 30-day reglementary period prescribed in then Section 229 of
the NIRC.
5. December 6, 2001-- Respondent filed a Petition for Review before the CTA,
pursuant to Section 7 of RA No. 1125, otherwise known as an Act Creating the Court of
Tax Appeals and Section 228 of the NIRC, to appeal the CIR final decision denying its
protest.
6. CTA: Subject assessment notice sent by registered mail on January 8, 1993 to
respondent’s former place of business was valid and binding since they only gave formal
notice of its change of address on February 18, 1993. The assessment had become final and
unappealable for failure of respondent to file a protest within the 30-day period provided by
law. HOWEVER, CTA ruled that CIR failed to collect the assessed taxes within the
prescriptive period and directed the cancellation and withdrawal of the assessment notice.
Petitioner’s MR and Supplemental MR were denied for lack of merit. Petitioner’s Petition
for Review with the CTA En Banc was also denied.
ISSUES/HELD
1. WON the CTA has jurisdiction to rule that the government’s right to collect the tax has
prescribed – CTA has jurisdiction.
2. WON the period to collect the assessment has prescribed– YES
RATIO
The CTA has jurisdiction over the case
Petitioner CIR: CTA has no jurisdiction since CTA itself had ruled that the assessment had
become final and unappealable. After the lapse of the 30-day period to protest, respondent
may no longer dispute the correctness of the assessment. The CTA’s pronouncement that it
had jurisdiction to decide other matters related to the tax assessment such as the issue on
the right to collect the same was erroneous because when the law says that the CTA has
jurisdiction over other matters, it presupposes that the tax assessment has not become final
and unappealable.
Court: The appellate jurisdiction of the CTA is not limited to cases which involve decisions
of the CIR on matters relating to assessments or refunds. Section 7 (1) of RA No. 1125
covers other cases that arise out of the NIRC or related laws administered by the BIR. To
wit:
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise 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 imposed in relation thereto, or other matters arising under the National
Internal Revenue Code or other law as part of law administered by the Bureau of
Internal Revenue.
The term “other matters” is limited only by the qualifying phrase that follows it. In Section
7(1), “other matters” covers the issue of prescription of the BIR’s right to collect taxes. The
said provision denotes an intent to view the CTA’s jurisdiction over disputed assessments
and over other matters arising under the NIRC or other laws administered by the BIR as
separate and independent of each other. This runs counter to petitioner’s theory that the
latter is qualified by the status of the former, i.e., “other matter” must not be a final and
unappealable tax assessment or, alternatively, must be a disputed assessment.
The 30-day period in the filing of appeals (Sec 11, RA 1125) provides that the mere
existence of an adverse decision, ruling or inaction along with the timely filing of an appeal
operates to validate the exercise of jurisdiction by the CTA.
The fact that an assessment has become final for failure of the taxpayer to file a protest
within the time allowed only means that the validity or correctness of the assessment may
no longer be questioned on appeal. However, the validity of the assessment itself is a
separate and distinct issue from the issue of whether the right of the CIR to collect the
validly assessed tax has prescribed. This issue of prescription, being a matter provided for
by the NIRC, is well within the jurisdiction of the CTA to decide.
Section 223(c) of the 1986 NIRC bars the collection of taxes after the three-year period
following assessment
Section 223(c). Any internal revenue tax which has been assessed within the period of
limitation above-prescribed may be collected by distraint or levy or by a proceeding in
court within three years following the assessment of the tax.
Petitioner CIR: The prescriptive period to collect tax deficiency was suspended by
respondent’s request for reinvestigation.
Court: Section 224 of the 1986 NIRC dictates that two requisites must concur before the
period to enforce collection may be suspended: (a) that the taxpayer requests for
reinvestigation, and (b) that the CIR grants such request.
Records show that respondent filed a request for reinvestigation on December 3, 1993,
however, there is no indication that the CIR acted upon respondent’s protest. Petitioner did
not hear anything from the respondent nor did they receive any communication from the
respondent relative to its protest, not until eight years later when the final decision of the
Commissioner was issued. The mere filing of a protest letter which is not granted does not
operate to suspend the running of the period to collect taxes. The CTA was correct in
concluding that the request for reinvestigation was not granted.
The Court held that it is contradictory for the CIR to argue that respondent’s December 3,
1993 protest which contained a request for reinvestigation was filed beyond the
reglementary period, but still claim that the same request for reinvestigation was implicitly
granted by virtue of its October 27, 2001 letter.
DISPOSITIVE
Wherefore, petition is DENIED. The Decision of the Court of Tax Appeals En Banc is
AFFIRMED.
G.R. No. L-11527 November 25, 1958 - COLLECTOR OF INTERNAL REVENUE v.
SUYOC CONSOLIDATED MINING COMPANY, ET AL. J. Bautista Angelo
NOTE: I think the summary/doctrine is enough for recitation, but there is a dissent at
the end -Meg
SUMMARY: Due to the chaos caused by World War II, Congress extended the filing of
income tax returns for the year 1941. The extension was up to December 31, 1945.
However, Suyoc Consolidated Mining Company (SCMC) due to lost records requested the
Commissioner of Internal Revenue (CIR) for further extension. The same was granted and
SCMC was allowed to file its return until February 15, 1946. On February 12, 1946,
SCMC filed a tentative income tax return. On November 28, 1946, SCMC filed a second
final return. In February 1947, the CIR made an assessment notifying SCMC that is liable
for P33k in taxes. The CIR gave SCMC 3 months to pay but the latter failed to make
payment. What followed was a series of negotiations as SCMC repeatedly asked for
reconsideration and reinvestigation. Due to SCMC’s requests, the CIR had to revise the
assessment several times. Eventually in July 1955, the CIR made a final assessment notice
notifying SCMC that it is liable for P24k in taxes. This time, SCMC questioned the validity
of the assessment as it now alleged that it was issued beyond the 5 year prescriptive period.
(NOTE: Under the National Internal Revenue Code of 1997, prescriptive period for normal
assessment is 3 years). The issue reached the Court of Tax Appeals (CTA) which ruled that
the assessment issued is void because in the first place, when SCMC requested for a
reinvestigation, there was no agreement as to the extension of the prescriptive period; that a
mere request for reinvestigation does not automatically suspend the running of the
prescriptive period. The CTA ruled that the FAN issued in 1955 was already way beyond
the 5 year prescriptive period.
DOCTRINE: This is one case where a taxpayer is barred from setting up the defense of
prescription even though there was not a written agreement. It is true that when a request
for reinvestigation is made by the taxpayer, the same does not toll the running of the
prescriptive period unless there is a written agreement between the CIR and the taxpayer.
However, in this case, due to the repeated requests of SCMC which were acted upon by the
government for good reasons the government was persuaded to delay the final assessment.
The applicable principle is fundamental and unquestioned. ‘He who prevents a thing from
being done may not avail himself of the nonperformance which he has himself occasioned,
for the law says to him in effect “this is your own act, and therefore you are not
damnified.” ‘ The tax could have been collected, but the government withheld action at the
specific request of SCMC. SCMC is now estopped and should not be permitted to raise the
defense of the Statute of Limitations.
FACTS:
 Suyoc Consolidated Mining Company (SCMC for brevity), a mining corporation
operating before the war, was unable to file in 1942 its income tax return (ITR) for
the year 1941 due to the last war. After liberation, Congress enacted C.A. 722
 which extended the filing of tax returns for 1941 up to 31 Dec. 1945. Its records
having been lost or destroyed, SCMC requested the Collector of Internal Revenue
to grant it an extension of time to file its return, which was granted until 15 Feb.
1946, and SCMC was authorized to file its return for 1941 on the basis of the best
evidence obtainable.
 SCMC filed 3 ITRs for the calendar year ending 31 Dec. 1941. On 12 Feb. 1946,
it filed a tentative return as it had not yet completely reconstructed its records. On Summary of dates as taken from the dissenting opinion:
28 Nov. 1946, it filed a 2nd final return or, as otherwise referred to in the case as
on the basis of the records it has been able to reconstruct at that time. On 6 Feb.
1947, it filed its 3rd amended final return on the basis of the available records
which to that date it had been able to reconstruct. On the basis of the 2nd final
return, Collector assessed against it P28,289.96 as income tax for 1941, plus
P1,414.50 as 5% surcharge and P3,394.80 as 1% monthly interest from 1 March
1946 to 28 Feb. 1947 —> a total of P33,099.26. The assessment was made on 11
Feb. 1947. On 21 Feb. 1947, SCMC asked for an extension of at least one year
(from 28 Feb.1947) to pay the amount assessed, reserving its right to question the
correctness of the assessment. Collector granted an extension of only 3 months
(from March 20, 1947).
 SCMC failed to pay the tax within the period granted. Collector sent to it a letter
on 28 Nov. 1950 demanding payment of the tax due as assessed, plus surcharge
and interest up to 31 Dec.1950. On 6 April 1951, SCMC asked for a
reconsideration and reinvestigation of the assessment, which was granted, the case
being assigned to another examiner, but the Collector made another assessment
against SCMC for P33,829.66 (7 March 1952). On 18 April 1952, Collector
revised this last assessment and required SCMC to pay the sum of P28,289.96 as
income tax, P1,414.50 as surcharge, P20,934.57 as interest up to 30 April 1952
and P40 as compromise.
 After several other negotiations conducted at the request of SCMC, including an
appeal to the Conference Staff created to act on such matters in the BIR, the
assessment was finally reduced to P24,438.96, without surcharge and interest, and
of this new assessment SCMC was notified on 28 July 1955. Within the
reglementary period, SCMC filed with CTA a petition for review of this
assessment made on 26 July 1955 on the main ground that the right of the
Government to collect the tax has already prescribed. CTA rendered its decision
upholding this defense and, accordingly, it set aside the ruling of CIR. Collector
interposed the present petition for review.
ISSUE: WON the CTA is correct—NO.

RATIO:
 Under the law, an internal revenue tax shall be assessed within 5 years after the
return is filed by the taxpayer and no proceeding in court for its collection shall be
begun after the expiration of such period (Sec.331, NIRC). The law also provides
that where an assessment of internal revenue tax is made within the above period,
such tax may be collected by distraint or levy or by a proceeding in court but only
if the same is begun (1) within five years after assessment or (2) within the period
that may be agreed upon in writing between the Collector and the taxpayer before
the expiration of the 5-year period (Sec. 332(c), NIRC).
 The first assessment made against SCMC based on its 2nd final return (filed on 28
Nov. 1946) was made on 11 Feb. 1947. Upon receipt of this assessment SCMC
requested for at least 1 year within which to pay the amount assessed although it
reserved its right to question the correctness of the assessment before actual
payment. Petitioner granted an extension of only three months. When it failed to
pay the tax within the period extended, petitioner sent SCMC a letter on 28 Nov.
1950 demanding payment of the tax as assessed, and upon receipt of the letter
SCMC asked for a reinvestigation and reconsideration of the assessment. When
this request was denied, respondent again requested for a reconsideration on 25
April 1952, which was denied on 6 May 1953, which denial was appealed to the
Conference Staff. The appeal was heard by the Conference Staff from 2 Sept.
1953 to 16 July 1955, and as a result of these various negotiations, the assessment
was finally reduced on 26 July 1955. This is the ruling which is now being
questioned after a protracted negotiation on the ground that the collection of the
tax has already prescribed.
 It is obvious from the foregoing that petitioner refrained from collecting the tax by
distraint or levy or by proceeding in court within the 5-year period from the filing
of the 2nd amended final return due to the several requests of SCMC for extension
to which petitioner yielded to give it every opportunity to prove its claim
regarding the correctness of the assessment. Because of such requests, several
reinvestigations were made and a hearing was even held by the Conference Staff
organized in the collection office to consider claims of such nature which, as the
record shows, lasted for several months. After inducing petitioner to delay
collection as he in fact did, it is most unfair for SCMC to now take advantage of
such desistance to elude his deficiency income tax liability to the prejudice of the
Government invoking the technical ground of prescription.
 While we may agree with CTA that a mere request for reexamination or
reinvestigation may not have the effect of suspending the running of the period of
limitation for in such case there is need of a written agreement to extend the
period between the Collector and the taxpayer, there are cases however where a
taxpayer may be prevented from setting up the defense of prescription even if he
has not previously waived it in writing as when by his repeated requests or
positive acts the Government has been, for good reasons, persuaded to postpone
 collection to make him feel that the demand was not unreasonable or that no
harassment or injustice is meant by the Government. And when such situation
comes to pass there are authorities that hold, based on weighty reasons, that such
an attitude or behavior should not be countenanced if only to protect the interest of
the Government.
 This case has no precedent in this jurisdiction for it is the first time that such has
risen, but there are several precedents that may be invoked in American
jurisprudence.
 As Mr. Justice Cardozo has said: "The applicable principle is fundamental and
unquestioned ‘He who prevents a thing from being done may not avail himself of
the nonperformance which he has himself occasioned, for the law says to him in
effect "this is your own act, and therefore you are not damnified.”
 Or "The tax could have been collected, but the government withheld action at the
specific request of the plaintiff. The plaintiff is now estopped and should not be
permitted to raise the defense of the Statute of Limitations."
 The following authorities cited in the brief of the SolGen are in "The petitioner
makes the point that by the Revenue Act of 29 May 1928 a credit against a
liability in respect of any taxable year shall be ‘void’ if it has been made against a
liability barred by limitation. The aim of that provision was to invalidate such a
credit if made by the Commissioner of his own motion without the taxpayer’s
approval or with approval falling short of inducement or request. There was to be
no exercise in invitum of governmental power. But the aim of the statute suggests
a restraint upon its meaning. To know whether liability has been barred by
limitation it will not do to refer to the flight of time alone. The limitation may
have been postponed by force of a simple waiver, which must then be made in
adherence to the statutory forms, or so we now assume. It may have been
postponed by deliberate persuasion to withhold official action. We think it an
unreasonable construction that would view the prohibition of the statute as
overriding the doctrine of estoppel and invalidating a credit made at the taxpayer’s
request. Here at the time of the request, the liability was still alive, unaffected as
yet by any statutory bar. The request in its fair meaning reached forward into the
future and prayed for the postponement of collection till the audits for later years
had been completed in the usual course. This having been done, the suspended
collection might be effected by credit or by distraint or by other methods
prescribed by law. Congress surely did not mean that a credit was to be void if
made by the Government in response to such prayer.
 "The applicable principle is fundamental and unquestioned. ‘He who prevents a
thing from being done may not avail himself of the nonperformance which he has
himself occasioned, for the law says to him in effect "this is your own act, and
therefore you are not damnified," Sometimes the resulting disability has been
characterized as an estoppel, sometimes as a waiver. The label counts for little.
Enough for present purposes that the disability has its roots in a principle more
nearly ultimate than either waiver or estoppel, the principle that no one shall be
permitted to found any claim upon his own inequity or take advantage of his own
wrong. A suit may not be built on an omission induced by him who sues.
 ". . . It is admitted that these assessments were timely made in August 1923. Upon
the making of the assessment the Commissioner sought to make collection, which
likewise was at a time when the statute had not run on collection, but the
authorized representative of the Lattimores strenuously objected to the collection
and urged the Commissioner to withhold collection, pending adjustment of the
controversy between them and the Commissioner. The Commissioner yielded to
their request and postponed collection until August 19, 1926, which was after the
statute had run on collection. In the meantime, further claims for refund and
protests were filed, conferences were held and consideration was given to the
settlement of the controversy, and the matter was not finally disposed of until
1926, when the statute had run on collection. The procedure carried out was that
requested by plaintiffs, and they cannot now be heard to say that the collection
was not timely.
Wherefore, the decision appealed from is reversed. The decision of the Collector of
Internal Revenue rendered on July 26, 1955 is hereby affirmed. No costs.
DISSENTING OPINION, J. Montemayor (J. Padilla concurs with this):
Note: I just included an excerpt which, I think, is the most important part because this
dissent is longer than the case -Meg
“Prescription in the assessment and in the collection of taxes is provided by the Legislature
for the benefit of both the Government and taxpayer; for the Government for the purpose of
expediting the collection of taxes, so that the agency charged with the assessment and
collection may not tarry too long or indefinitely to the prejudice of the interests of the
Government which needs said taxes to run it; and for the taxpayer so that within a
reasonable time after filing his return, he may know the amount of the assessment which he
is required to pay, whether or not such assessment is well founded and reasonable so that
he may either pay the amount of the assessment or contest its validity in court, either by
filing an action for the refund, if already paid, under the old law, or appeal the disputed
assessment to the Court of Tax Appeals under the present law creating the Tax Court. It
would surely be prejudicial to the interest of the taxpayer for the Government collecting
agency to unduly delay the assessment and the collection because by the time that the
collecting agency finally gets around to making the assessment or making the collection,
the taxpayer may then have lost his papers and books to support his claim and contest that
of the Government, and what is more, the tax is in the meantime accumulating interest
which the taxpayer eventually has to pay. In connection with this extension of the period of
prescription or limitation for the Government to collect taxes, it will be noticed from
Section 332 (c) of the Internal Revenue Code that even if the taxpayer and the Collector
agree to extend the period of limitation, said period has to be specific or fixed, and if said
period of extension is to be further extended, another agreement has to be made again
specifying the period of said further extension. From all this, it is evident that to extend the
period of limitation or prescription, an express agreement in writing to that effect, signed
by the Collector and the taxpayer is necessary. Naturally, a mere petition by the taxpayer
for revision or re-examination of the assessment cannot and will not automatically extend
the period of limitation. However, under the theory espoused by the majority, let the
taxpayer just ask, not for an extension of the time to pay or the Government to collect, but
for a mere re-examination or revision of the assessment, and to, and behold, all the
carefully prepared provisions of the tax law about prescription and statutory limitation are
laid aside, and the collecting agency of the Government may then postpone and delay the
collection indefinitely, until such time as it is good and ready to resume proceedings from
where it left off, and if the taxpayer complains of the delay or invokes prescription, he is
instantly met with and silenced by the doctrine of estoppel. I believe that is not what the
law and the Legislature contemplated. To me, this matter of the extension of the period of
limitation is quite clear, but assuming for a moment that there were any doubt about it, then
we have the time honored and well settled rule of statutory construction that tax laws
should be interpreted liberally in favor of the taxpayer and strictly against the Government,
except in the matter of tax exemptions, in which case the rule is reversed. In the case of
Manila Railroad Co. v. Collector of Customs, this Tribunal said ". . . It is the general rule in
the interpretation of statutes levying taxes or duties not to extend their provisions beyond
the clear import of the language used. In every case of doubt, such statutes are construed
most strongly against the Government and in favor of the citizen, because burdens are not
to be imposed, nor presumed to be imposed, beyond what the statutes expressly and clearly
import." Years ago, the Supreme Court of the US, in McCulloch v. The State of Maryland
(CJ. Marshall) said that the power to tax is the power to destroy. Evidently, to moderate
this awesome and dangerous taxing power of the Legislature, and in order to temper the
rigor of tax laws, this sound and salutary rule of liberal construction of tax laws in favor of
the taxpayer has been evolved and laid down.”
1.
2.
3.
4.
5.
6.
7.
REPUBLIC v KER & CO., LTD.
September 29, 1966 | Bengzon, J.P., J. | Suspension of running the prescription period (Sec.
223)
PETITIONERS: Republic
RESPONDENTS: Ker & Co., LTD.
SUMMARY
KER filed its income tax returns for the years 1947, 48, 49, 50 to which the BIR issued
assessments for deficiency. The Republic, after KER’s refusal to pay the deficiency taxes,
commenced action for collection. KER argued that Republic’s cause of action had already
prescribed as more than five years have already lapsed since it filed its returns. Republic
contends that the filing of KER’s petition for review with the CTA stopped the running of
the prescription period. The SC, applying Sec. 333 of the Tax Code, held that the running
of the prescriptive period to collect tax was suspended for the period CIR was prohibited
from instituting a proceeding in court and for sixty days thereafter. In light of the
circumstances, CIR was effectively barred from commencing an action to collect taxes as
KER filed with the CTA a petition for review.
DOCTRINE
Under Section 333 of the Tax Code, the running of the prescriptive period to collect the tax
shall be suspended for the period during which the CIR is prohibited from beginning a
distraint and levy or instituting a proceeding in court, and for sixty days thereafter.
FACTS
Ker & Co., LTD. (KER) filed its income tax returns for the years 1947, 1948, 1949, and
1950.
In 1953, the BIR audited KER and issued assessments for deficiency income tax. The 1948
and 1950 assessments carried the surcharge of 50% under Sec. 72, Tax Code for the filing
of fraudulent returns.
On 1956, KER filed with the CTA a petition for review the assessments – CTA
DISMISSED. SC AFFIRMED DISMISSAL.
When BIR demanded payment on 1962, KER refused to pay, alleging:
a. Defense of prescription of the Commissioner’s right to collect the tax
Republic filed a complaint with the CFI Manila seeking collection.
a. Note: their complaint did not allege fraud in the filing of any income tax
returns; nor did it pray for the payment of the corresponding 50%
surcharge.
KER moved for dismissal, alleging:
a. The Court did not acquire jurisdiction over the person of the defendant
(because summons was filed with their counsel)
b. Plaintiff’s COA has prescribed
CFI dismissed Republic’s claim for the collection of deficiency taxes for 1947. KER to pay
deficiency income taxes for 1948, 1949, and 1950.
8. Both parties filed their respective MRs.
a. Republic, alleging:
i. Right of CIR to collect deficiency assessment for 1947 did not
prescribed by a lapse merely of 5-YRS and 3-MOS because taxpayer’s
income tax return was fraudulent
ii. Because it is fraudulent, prescription sets in 10-YRS from Oct.
1951, when the fraud was discovered (Sec. 332a, Tax Code)
b. KER, alleginging:
i. CFI did not acquire jurisdiction over its person
ii. Right of CIR to collect tax has prescribed
1. Since complaint was filed 9-YRS, 1-MO, and 11-
DAYS after the deficiency assessments for 1948, 1949,
and 1950
2. Since the filing of KER’s petition for review with
CTA did not stop the running of the period for
prescription
ISSUES:
1. Did the Court of First Instance acquire jurisdiction over the person of defendant Ker &
Co., Ltd.? – YES, when Messrs. Leido and Associates received the summons, they were
still acting for and in behalf of Ker & Co., Ltd. Perforce, they were the taxpayer's agent
when summons was served. Under Section 13 of Rule 7, aforequoted, service upon the
agent of a corporation is sufficient.
2. Did the right of the Commissioner of Internal Revenue to assess deficiency income tax
for the year 1947 prescribe? – YES. Because Section 331 of the Revenue Code explicitly
provides, in mandatory terms, that "Internal Revenue taxes shall be assessed within 5 years
after the return was filed, and no proceedings in court without assessment, for the
collection of such taxes, shall be begun after expiration of such period. The attempt by the
CIR to make an assessment on July 25, 1953, on the basis of a return filed on April 12,
1948 (for YEAR 1947), is an exercise of authority against the explicit and mandatory
limitations of statutory law. Acts committed against the provisions of mandatory or
prohibitory laws shall be void.[1]
[TOPIC] 3. Did the filing of a petition for review by the taxpayer in the Court of Tax
Appeals suspend the running of the statute of limitations to collect the deficiency income
for the years 1948, 1949 and 1950? – YES. The pendency of the taxpayer's appeal in the
CTA and in the SC had the effect of legally preventing the CIR from instituting an action
in the CFI for the collection of the tax.
4. When did the delinquency interest on the deficiency income tax for the years 1948, 1949
and 1950 accrue? – YES. The letter of assessment shows that the deficiency income tax for
1948 and 1949 became due on March 15, 1953 and that for 1950 accrued on February 15,
1954 in accordance with Section 51(d) of the Tax Code. Since the tax in question remained
unpaid, delinquency interest accrued and became due starting from said due dates.
RATIO
[TOPIC] 3. Did the filing of a petition for review by the taxpayer in the Court of Tax
Appeals suspend the running of the statute of limitations to collect the deficiency income
for the years 1948, 1949 and 1950? – YES. In light of the circumstances, the CIR was
effectively prohibited from collecting the deficiency. This being so, the provisions of
Section 333 of the Tax Code will apply.
Arguments:
KER arguments: Since the Republic filed the complaint for the collection of the deficiency income tax for the
years 1948, 1949 and 1950 only on March 27, 1962, or 9Y, 1M and 11D, from February 16, 1953, the date the tax
was assessed, the right to collect the same has prescribed pursuant to Section 332 (c) of the Tax Code.
Republic contends: The running of the prescriptive period was interrupted by the filing of the taxpayer's petition
for review in the CTA on March 1, 1956. (If the period during which the case was pending in the Court of Tax
Appeals and in the Supreme Court were not counted in reckoning the prescriptive period, less than five years
would have elapsed, hence, the right to collect the tax has not prescribed.)
1. That from March 1, 1956 when KER filed a petition for review in the CTA contesting
the legality of the assessments, until the termination of its appeal in the SC, the CIR was
prevented, from filing an ordinary action in the CFI to collect the tax.
2. That CIR urgently filed a MTD the taxpayer's petition for review with a view to
terminating the proceedings in the shortest possible time in order that he could file a
collection case in the CFI before his right to do so is cut off by the passage of time.
3. That by the time the SC affirmed the order of dismissal of the CTA case of KER on
January 31, 1962, more than 5 years had elapsed since the final assessments were made on
January 5, 1954.
4. That thereafter, the CIR demanded extra-judicially the payment of the deficiency tax in
question. By then, in reply, the taxpayer, by its letter dated March 28, 1962, advised the
CIR that the right to collect the tax has prescribed pursuant to Section 332 (c) of the Tax
Code.
5. That in light of the circumstances, the CIR was effectively prohibited from collecting the
deficiency. This being so, the provisions of Section 333[2] of the Tax Code should apply.
6. Under Section 333 of the Tax Code, the running of the prescriptive period to collect the
tax shall be suspended for the period during which the CIR is prohibited from beginning a
distraint and levy or instituting a proceeding in court, and for sixty days thereafter.
7. That herein taxpayer’s actions produced the effect of temporarily staying the hands of
the CIR in view of delaying the payment of taxes and ultimately avoiding the same. This is
an act that cannot be sustained by the Court.
DISPOSITIVE
WHEREFORE, the decision appealed from is affirmed with the modification that the
delinquency interest at the rate of 1% per month shall be computed from March 15, 1953
for the deficiency income tax for 1948 and 1949 and from February 15, 1954 for the
deficiency income tax for 1950. With costs against Ker & Co., Ltd. So ordered.

[1] It would be worth mentioning that since the assessment for deficiency income tax for 1947 has become final and
executory, Ker & Co., Ltd. may not anymore raise defenses which go into the merits of the assessment, i.e.,
prescription of the Commissioner's right to assess the tax. Such was our ruling in previous cases. In this case
however, Ker & Co., Ltd. raised the defense of prescription in the proceedings below and the Republic of the
Philippines, instead of questioning the right of the defendant to raise such defense, litigated on it and submitted the
issue for resolution of the court. By its actuation, the Republic of the Philippines should be considered to have waived
its right to object to the setting up of such defense.
[2] SEC. 333. Suspension of running of statute.—The running of the statute of limitations provided in Section 331 or three
hundred thirty-two on the making of assessments and the beginning, of distraint or levy or a proceeding in court for collection, in
respect of any deficiency, shall be suspended for the period during which the Collector of Internal Revenue is prohibited from
making the assessment or beginning distraint or levy or a proceeding in court, and for sixty days thereafter.
Republic v. Acebedo, G.R. No. L-20477, March 29, 1968 - Amil
SUMMARY.
A suit for collection of deficiency tax was filed against herein respondent Felix Acebedo in
the amount of P5,962 for the year 1948. A notice of assessment was issued on September
24, 1949. The respondent filed a motion to dismiss on the ground of prescription. He
claimed that the notice of levy/distraint was filed beyond the 5 year limitation from the
assessment. The motion was granted by the lower court and the same dismissed the case
Hence, the petitioner Republic filed an appeal with this court, contending that the various
requests for reinvestigation made by the respondent suspended the 5 year period
prescription period and that the waiver of statute of limitations duly executed in 1959 was
sufficient to further suspend period of prescription. The SC here held that the right to
collect had already prescribed.
DOCTRINE
The plaintiff’s contention was that the period of prescription was suspended by the
defendant's various requests for reinvestigation or reconsideration of the tax assessment.
[Wrong] A mere request for reinvestigation or reconsideration of an assessment does not
have the effect of such suspension. The ruling is logical, otherwise there would be no point
to the legal requirement that the extension of the original period be agreed upon in writing.
[See Ratio]
FACTS:
This is a suit for collection of deficiency income tax for the year 1948 in the amount of
P5,962.83.
The corresponding notice of assessment was issued on September 24, 1949.

The complaint was filed on December 27, 1961.

After the defendant filed his answer but before trial started he moved to dismiss on the
ground of prescription.
The court received evidence on the motion, and on September 1, 1962 issued an order
finding the same meritorious and hence, dismissing the complaint.
Plaintiff appealed from the order of dismissal.
ISSUE: Whether or not the right to collect has already prescribed.
HELD: YES
The statute of limitations which governs this case is Section 332, subsection (c), of the
National Internal Revenue Code, which provides for an exemption as to the period of
limitation that tax may be collected by distraint or levy or by a proceeding in court, but
only if begun (1) within five years after the assessment of the tax, or (2) prior to the
expiration of any period for collection agreed upon in writing by the Collector of Internal
Revenue and the taxpayer before the expiration of such five-year period. The period so
agreed upon may be extended by subsequent agreements in writing made before the
expiration of the period previously agreed upon.
The present suit was not begun within five years after the assessment of the tax, which was
in 1949.
I2: Was it, however, begun prior to the expiration of any period for collection agreed
upon in writing by the Commissioner of Internal Revenue and the defendant before
the expiration of such five-year period? NO.
The only evidence of such written agreement, in the form of a "waiver of the statute of
limitations" signed by the defendant, dated December 17, 1959. But this waiver was
ineffective because it was executed beyond the original five-year limitation.
The plaintiff contends that the period of prescription was suspended by the defendant's
various requests for reinvestigation or reconsideration of the tax assessment. The trial court
rejected this contention, saying that a mere request for reinvestigation or reconsideration of
an assessment does not have the effect of such suspension. The ruling is logical, otherwise
there would be no point to the legal requirement that the extension of the original period be
agreed upon in writing.
There are certain decisions where the taxpayer may be in estoppel to claim prescription as a
defense even if he has not previously waived it in writing:

In the case of CIR vs Consolidated Mining the SC ruled that when by his repeated requests
or positive acts, the government has been for good reasons, persuaded to postpone
collection.
Likewise, when a taxpayer asks for a reinvestigation of the tax assessment issued to him
and such reinvestigation is made, on the basis of which the Government makes another
assessment, the five-year period with which an action for collection may be commenced
should be counted from this last assessment.
In the case at bar, the defendant, after receiving the assessment notice of September 24,
1949, asked for a reinvestigation thereof on October 11, 1949. There is no evidence that
this request was considered or acted upon. In fact, on October 23, 1950 the then
Collector of Internal Revenue issued a warrant of distraint and levy for the full
amount of the assessment at (Exh. D), but there was no follow up of this warrant.
Consequently, the request for reinvestigation did not suspend the running of the
period for filing an action for collection.
The next communication of record is a letter signed for the defendant by one Troadio
Concha and dated October 6, 1951, again requesting a reinvestigation of his tax
liability (Exh. B). Nothing came of this request either.
Then on February 9, 1954, the defendant's lawyers wrote the Collector of Internal
Revenue informing him that the books of their client were ready at their office for
examination (Exh. C). The reply was dated more than a year later, or on October 4,
1955, when the Collector bestirred himself for the first time in connection with the
reinvestigation sought, and required that the defendants specify his objections to the
assessment and execute "the enclosed forms for waiver, of the statute of limitations."
The last part of the letter was a warning that unless the waiver "was accomplished
and submitted within 10 days the collection of the deficiency taxes would be enforced
by means of the remedies provided for by law."
It will be noted that up to October 4, 1955 the delay in collection could not be
attributed to the defendant at all. His requests in fact had been unheeded until then,
and there was nothing to impede enforcement of the tax liability by any of the means
provided by law.
By October 4, 1955, more than five years had elapsed since assessment in question
was made, and hence prescription had already set in, making subsequent events in
connection with the said assessment entirely immaterial. Even the written waiver of
the statute signed by the defendant on December 17, 1959 could no longer revive the
right of action, for under the law such waiver must be executed within the original
five-year period within which suit could be commenced.
CIR v. WYETH SUACO
Sept. 30, 1991 | Fernan, C.J. | Suspension of Running of Prescription Period | TAN
PETITIONERS: COMMISSIONER OF INTERNAL REVENUE
RESPONDENTS: WYETH SUACO LABORATORIES, INC. and THE COURT OF
TAX APPEALS
SUMMARY: Wyeth was assessed deficiency taxes in Dec. 1974. In 1975, he filed a letter
protesting the assessments and requesting their cancellation or withdrawal for lack of
factual or legal basis. The protest was denied and warrants of distraint or levy were served
in March 1980. CTA held that the right to collect deficiency taxes has already prescribed
since the warrants of distraint (1980) were served beyond 5 years from the assessments
(1974). CIR argues that the filing of the letter of protest suspended the prescriptive period,
since they were actually requests for reinvestigation or reconsideration. Wyeth argued that
the letter of protest only requested the cancellation or withdrawal of the assessments. SC
ruled in favor of CIR.
DOCTRINE: The statutory period of limitation for collection may be interrupted if, by the
taxpayer's repeated requests or positive acts the Government has been, for good reasons,
persuaded to postpone collection to make him feel that the demand was not unreasonable or
that no harassment or injustice is meant by the Government.
FACTS:
1. Private respondent Wyeth Suaco Laboratories, Inc. (Wyeth Suaco for brevity) is a
domestic corporation engaged in the manufacture and sale of assorted
pharmaceutical and nutritional products.
2. On December 16 and 17, 1974, the Commissioner of Internal Revenue (CIR)
issued two assessment notices to Wyeth Suaco Laboratories, Inc. (Wyeth). Wyeth
allegedly failed to remit withholding tax at source for the fourth (4th) quarter of
1973 on accrued royalties, remuneration for technical services and cash dividends,
resulting in a deficiency withholding tax at source in the aggregate amount of
P3,178,994.15.2
3. Moreover, it was reported that from 1972 to 1973, Wyeth Suaco deducted the cost
of non-deductible raw materials, resulting in its alleged failure to pay the correct
amount of advance sales tax. There was reportedly also a short payment of
advance sales tax in its importation of "Mega Polymycin D". All these resulted in
a deficiency sales tax of P61,155.21.
4. Thereafter, Wyeth Suaco through its tax consultant SGV &Co., sent the Bureau of
Intemal Revenue two (2) letters dated January 17, 1975 and February 8, 1975,
protesting the assessments and requesting their cancellation or withdrawal on the
ground that said assessments lacked factual or legal basis.
5. In December 1979, Wyeth’s protest was denied.
 6. The CIR then issued a warrant of distraint/levy in February 1980. These were
served on Private Respondent on March 1980.
7. The CTA held that CIR’s right to collect deficiency taxes has already prescribed.
8. Petitioner argues that the five-year prescriptive period provided by law to mak a
collection by distraint or levy or by a proceeding in court has not yet prescribed.
Although he admits that more than five (5) years have already lapsed from the
time the assessment notices were received by private respondent on December 19,
1974 up to the time the warrants of distraint and levy were served on March 12,
1980, he avers that the running of the prescriptive period was stayed or interrupted
when Wyeth Suaco protested the assessments. Petitioner argues that the protest
letters sent by SGV & Co. in behalf of Wyeth Suaco dated January 17, 1975 and
February 8, 1975, requesting for withdrawal and cancellation of the assessments
were actually requests for reinvestigation or reconsideration, which could interrupt
the running of the five-year prescriptive period.
9. Wyeth Suaco, on the other hand, maintains the position that it never asked for a
reinvestigation nor reconsideration of the assessments. What it requested was the
cancellation and withdrawal of the assessments for lack of legal and factual basis.
Thus, its protest letters dated January 17, 1975 and February 8, 1975 did not
suspend or interrupt the running of the five-year prescriptive period.
ISSUE: W/N Wyeth Suaco sought reinvestigation or reconsideration of the deficiency tax
assessments issued by the Bureau of Internal Revenue which resulted in the suspension of
the prescriptive period?
RATIO:
1. Settled is the rule that the prescriptive period provided by law to make a collection
by distraint or levy or by a proceeding in court is interrupted once a taxpayer
requests for reinvestigation or reconsideration of the assessment. In the case of
Commissioner of Internal Revenue vs. Capitol Subdivision, Inc., this Court held:
a. The period of prescription of action to collect a taxpayer's deficiency
income tax assessment is interrupted when the taxpayer request for a
review or reconsideration of said assessment, and starts to run again
when said request is denied.
2. In another case, this Court stated that the statutory period of limitation for
collection may be interrupted if by the taxpayer's repeated requests or positive acts
the Government has been, for good reasons, persuaded to postpone collection to
make him feel that the demand was not unreasonable or that no harassment or
injustice is meant by the Government. Also in the case of Cordero vs. Gonda, we
held:
. Partial payment would not prevent the government from suing the
taxpayer. Because, by such act of payment, the government is not thereby
"persuaded to postpone collection to make him feel that the demand was
not unreasonable or that no harassment or injustice is meant." This is the
underlying reason behind the rule that the prescriptive period is arrested
by the taxpayer's request for re-examination or reinvestigation — even if
he "has not previously waived it (prescription in writing)"
3. After carefully examining the records of the case, we find that Wyeth Suaco
admitted that it was seeking reconsideration of the tax assessments as shown in a
letter of James A. Gump, its President and General Manager, dated April 28,
1975, the relevant portion of which is quoted hereunder, to wit:
. “We submit this letter as a follow-up to our protest filed with your office,
through our tax advisers, Sycip, Gorres, Velayo & Co., on January 20
and February 10, 1975 regarding alleged deficiency on withholding tax at
source of P3,178,994.15 and on percentage tax of P60,855.21, including
interest and surcharges, on which we are seeking reconsideration.”
4. Furthermore, when Wyeth Suaco thru its tax consultant SGV & Co. sent the
letters protesting the assessments, the Bureau of Internal Revenue, Manufacturing
Audit Division, conducted a review and reinvestigation of the assessments. This
fact was admitted by Wyeth Suaco thru its Finance Manager in a letter dated July
1, 1975 addressed to the Chief, Tax Accounts Division. The pertinent portion of
said letter reads as follows:
. “This will acknowledge receipt of your letter dated May 22, 1975
regarding our alleged income and business tax deficiencies for fiscal year
1972/73.
Nevertheless, please be advised that the deficiency tax stated in your
letter is what we are protesting on pursuant to the letters we filed with the
Bureau of Internal Revenue on January 20, 1975 and on February 10,
1975.
As we understand, the matter is now undergoing review and
consideration by your Manufacturing Audit Division. Pending the
outcome of their decision, we regret our inability to make settlement.”
5. Although the protest letters prepared by SGV & Co. in behalf of private
respondent did not categorically state or use the words "reinvestigation" and
"reconsideration," the same are to be treated as letters of reinvestigation and
reconsideration. By virtue of these letters, the Bureau of Internal Revenue ordered
its Manufacturing Audit Division to review the assessment made. Furthermore,
private respondent's claim that it did not seek reinvestigation or reconsideration of
the assessments is belied by the subsequent correspondence or letters written by
its officers, as shown above.
6. Verily, the original assessments dated December 16 and 17, 1974 were both
received by Wyeth Suaco on December 19, 1974. However, when Wyeth Suaco
protested the assessments and sought its reconsideration in two (2) letters received
by the Bureau of Internal Revenue on January 20 and February 10, 1975, the
prescriptive period was interrupted. This period started to run again when the
Bureau of Internal Revenue served the final assessment to Wyeth Suaco on
January 2, 1980. Since the warrants of distraint and levy were served on Wyeth
 Suaco on March 12, 1980, then, only about four (4) months of the five-year
prescriptive period was used.
Querol v. Collector of Internal Revenue, G.R. No. L-16705, October 30, 1962 - Irvette
CIR v. Sony Philippines Inc.
Nov. 17 2010 | J. Mendoza| Issuance of Letter of Authority
PETITIONER: CIR
RESPONDENT: SONY PHILIPPINES, INC.,
SUMMARY
CIR issued a Letter of Authority authorizing revenue officers to examine Sony’s books
regarding taxes for the period 1997 and unverified prior years. CIR issued deficiency VAT
assessment based on records from Jan to Mar 1998. CTA disallowed the assessment
because it was made beyond the coverage of LOA. SC affirmed.
DOCTRINE
There must be a grant of authority before any revenue officer can conduct an examination
or assessment. Equally important is that the revenue officer so authorized must not go
beyond the authority given. In the absence of such an authority, the assessment or
examination is a nullity.
FACTS
1. CIR issued a Letter of Authority (LOA) authorizing certain revenue officers to
examine Sony’s books of accounts and other accounting records regarding
revenue taxes for the period 1997 and unverified prior years.
2. A preliminary assessment for 1997 deficiency taxes and penalties was issued by
CIR.
3. Sony protested.
4. CIR issued final assessment notices, formal letter of demand and the details of the
discrepancies.
5. CTA-First Division disallowed deficiency VAT assessment
a. Beyond the coverage of the LOA
i. Deficiency VAT Assessment arrived at was based on records
from Jan to Mar 1998
6. CTA en banc dismissed petition for review
7. Hence, this petition
. CIR’s argument-- the LOA, although it states the period 1997 and
unverified prior years, should be understood to mean the fiscal year
ending in March 1998
ISSUES/HELD
1. WON deficiency VAT assessment should be cancelled--- YES
RATIO
1. There must be a grant of authority before any revenue officer can conduct an
examination or assessment. Equally important is that the revenue officer so
authorized must not go beyond the authority given. In the absence of such an
authority, the assessment or examination is a nullity.
a. SEC. 6. NIRC. Power of the Commissioner to Make Assessments and
Prescribe Additional Requirements for Tax Administration and
Enforcement.
b. (A)Examination of Returns and Determination of tax Due. After a return
has been filed as required under the provisions of this Code, the
Commissioner or his duly authorized representative may authorize the
examination of any taxpayer and the assessment of the correct amount of
tax: Provided, however, That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer. x x x
[Emphases supplied]
2. A Letter of Authority or LOA is the authority given to the appropriate revenue
officer assigned to perform assessment functions. It empowers or enables said
revenue officer to examine the books of account and other accounting records of a
taxpayer for the purpose of collecting the correct amount of tax.
3. As earlier stated, the LOA covered the period 1997 and unverified prior years.
4. CIR acting through its revenue officers went beyond the scope of their authority
because the deficiency VAT assessment they arrived at was based on records from
January to March 1998 or using the fiscal year which ended in March 31, 1998.
5. If CIR wanted or intended the investigation to include the year 1998, it should
have done so by including it in the LOA or issuing another LOA.
6. The coverage of the LOA, particularly the phrase and unverified prior years,
violated Section C of Revenue Memorandum Order No. 4390 dated September
20, 1990, the pertinent portion of which reads:
. A Letter of Authority should cover a taxable period not exceeding one
taxable year. The practice of issuing L/As covering audit of unverified
prior years is hereby prohibited. If the audit of a taxpayer shall include
more than one taxable period, the other periods or years shall be
specifically indicated in the L/A.[16] [Emphasis supplied]
7. On this point alone, the deficiency VAT assessment should have been disallowed.
DISPOSITIVE
Petition denied. CTA affirmed.
Fitness by Design, Inc v. CIR
October 17, 2008 | Carpio-Morales, J. | Third Party Information
PETITIONER: Fitness by Design Inc
RESPONDENTS: Commissioner on Internal Revenue
SUMMARY
Petitioner was questioning the validity of the use of BIR of accounting documents which
was obtained from a former bookkeeper of the petitioner without their authority. SC ruled
that under Section 5 of the Tax Code BIR is authorized to obtain from any person other
than the person whose internal revenue tax liability is subject to audit or investigation and
can even summon any person having possession, custody or care of the books of
accountants and other accounting records containing entries relating to the business of the
person liable for tax.
DOCTRINE
Sec. 5 of the Tax Code provides that the BIR is authorized to obtain from any person other
than the person whose internal revenue tax liability is subject to audit or investigation and
can even summon any person having possession, custody or care of the books of
accountants and other accounting records containing entries relating to the business of the
person liable for tax. This includes even those which cannot be admitted in a judicial
proceeding where the Rules of Court are strictly observed. CTA case is not a criminal
prosecution where he can cross examine the witness against him. CTA can enforce its
order by citing them for indirect contempt.
FACTS
1. March 17, 2004: CIR assessed Fitness by Design Inc. for deficiency Income Taxes
for the year of 1995 for P 10,647, 529.69
2. February 1, 2005: CIR issued a warrant of distraint and levy against petitioner
which prompted petitioner to file a Petition for Review before the CTA where he
alleged his defense of prescription based on Sec. 203 of the Tax Code.
3. CIR answer: Tax return was false and fraudulent for deliberately failing to declare
its true sales of P 7,156,336.08 and failure to file a VAT return for it. Since
petitioner failed to file a protest, it is subject to either distraint or levy. Moreover,
it cited Sec. 222 (a) of 1997 Tax Code where false and fraudulent return with
intent to evade tax or failure to file a return prescribe 10 years after the discovery
of the falsity, fraud or omission.
4. March 10, 2005: BIR filed a criminal complaint before the DOJ against the
officers and accountant of petitioner for violation against the 1977 NIRC.
5. During the preliminary hearing on the issue of prescription, petitioner's former
bookkeeper attested that his former colleague, CPA Sablan, illegally took custody
of accounting records and turned them over to the BIR.
a. Petitioner then requested a subpoena ad testificandum for Sablan who
failed to appear.
6. CTA: Denied the motion for issuance of subpoena and disallowed the submission
of written interrogatories to Sablan who is NOT a party to the case nor was his
testimony relevant. It also violates Section 2 of Republic Act No. 2338, as
implemented by Section 12 of Finance Department Order No. 46-66, proscribing
the revelation of identities of informers of violations of internal revenue laws,
except when the information is proven to be malicious or false. Moreover, the
subpoena is NOT needed to obtain affidavit of the informer.
ISSUES/HELD
1. W/N BIR can use the information without petitioner's consent? - YES
RATIO
PETITIONER: BIR cannot use such document without our consent.
SC: Petitioners lack of consent does not, however, imply that the BIR obtained them
illegally or that the information received is false or malicious. Nor does the lack of consent
preclude the BIR from assessing deficiency taxes on petitioner based on the documents.
Thus Section 5 of the Tax Code provides:
In ascertaining the correctness of any return, or in making a return when none has been
made, or in determining the liability of any person for any internal revenue tax, or in
collecting any such liability, or in evaluating tax compliance, the Commissioner is
authorized:
(A) To examine any book, paper, record or other data which may be relevant or
material to such query;
(B) To obtain on a regular basis from any person other than the person whose
internal revenue tax liability is subject to audit or investigation, or from any office or
officer of the national and local governments, government agencies and instrumentalities,
including the Bangko Sentral ng Pilipinas and government-owned and controlled
corporations, any information such as, but not limited to, costs and volume of production,
receipts or sales and gross incomes of taxpayers, and the names, addresses, and financial
statements of corporations, mutual fund companies, insurance companies, regional
operating headquarters of multinational companies, joint accounts, associations, joint
ventures or consortia and registered partnerships and their members;
(C) To summon the person liable for tax or required to file a return, or any officer
or employee of such person, or any person having possession, custody, or care of the
books of accounts and other accounting records containing entries relating to the
business of the person liable for tax, or any other person, to appear before the
Commissioner or his duly authorized representatives at a time and place specified in the
summons and to produce such books, papers, records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as may be
relevant or material to such inquiry; and
(E) To cause revenue officers and employees to make a canvass from time to time
of any revenue district or region and inquire after and concerning all persons therein who
may be liable to pay any internal revenue tax, and all persons owning or having the care,
management or possession of any object with respect to which a tax is imposed.
The law thus allows the BIR access to all relevant or material records and data in the
person of the taxpayer, and the BIR can accept documents which cannot be admitted in a
judicial proceeding where the Rules of Court are strictly observed. To require the consent
]
of the taxpayer would defeat the intent of the law to help the BIR assess and collect the
correct amount of taxes.
Petitioners invocation of the rights of an accused in a criminal prosecution to cross examine
the witness against him and to have compulsory process issued to secure the attendance of
witnesses and the production of other evidence in his behalf does not lie. CTA Case No.
7160 is not a criminal prosecution, and even granting that it is related to I.S. No. 2005-203,
the respondents in the latter proceeding are the officers and accountant of petitioner-
corporation, not petitioner. From the complaint and supporting affidavits in I.S. No. 2005-
203, Sablan does not even appear to be a witness against the respondents therein.
AT ALL EVENTS, issuance of subpoena duces tecum for the production of the documents
requested by the petitioner which documents petitioner claims to be crucial to its defense is
unnecessary in view of the CTA order for respondent to certify and forward to it all the
records of the case. If the order has not been complied with, the CTA can enforce it by
citing respondent for indirect contempt
DISPOSITIVE
Wherefore, petition is DISMISSED.
BONIFACIA SY PO vs. CTA and CIR
18 Aug 1988 | Sarmiento | Best evidence obtainable
PET: BONIFACIA SY PO
RESPS: Court of Tax Appeals, Commissioner of Internal Revenue
SUMMARY: Sec. of Finance VIRATA had SILVERCUP investigated upon allegations
that it was guilty of tax evasion. Owner PO BIEN SING refused to deliver SILVERCUP’s
accounting records for examinations so NBI seized the untaxed alcohol products at
SILVERCUP’s factory. It was also assessed deficiency taxes. PO BIEN SING’S widow,
BONIFACIA SY PO, protested the deficiency assessment but also failed to present the
books of accounts for examinations. Hence, they failed to substantiate their claim and thus
the presumption of good faith in making the assessment stands.
DOCTRINE: The rule on the "best evidence obtainable" (Sec 16 (b)) applies when a tax
report required by law for the purpose of assessment is not available or when the tax report
is incomplete or fraudulent.
Tax assessments by tax examiners are presumed correct and made in good faith. The
taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the
performance of duties, an assessment duly made by a Bureau of Internal Revenue examiner
and approved by his superior officers will not be disturbed. All presumptions are in favor
of the correctness of tax assessments.
FACTS
1. Petitioner Bonifacia Sy Po is the widow of the late Mr. Po Bien Sing who died on
September 7, 1980. In the taxable years 1964 to 1972, the deceased Po Bien Sing
was the sole proprietor of Silver Cup Wine Factory, in Talisay Cebu, which was
engaged in the business of manufacture and sale of compounded liquors.
2. Upon an allegation that Silvercup was guilty of Tax Evasion, then Secretary of
Finance Cesar Virata directed the Finance-BIR--NBI team constituted under
Finance Department Order No. 13-70 to investigate the same. Letters of subpoena
were issued against Silver Cup requesting production of the accounting records
and other related documents for examination, which Mr Po Bien Sing did not do.
The NBI team thus entered the factory bodega of Silver Cup and seized different
brands, consisting of 1,555 cases of alcohol products, and upon the team's report,
CIR assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 in the
amount of P7,154,685. and for deficiency specific tax for January 2,1964 to
January 19, 1972 in the amount of P5,595,003.68.
3. Petitioner protested the deficiency assessments through letters, which protests
were referred for reinvestigation. The corresponding report once again
recommended the reiteration of the assessments in view of the taxpayer's
persistent failure to present the books of accounts for examination.
ISSUE: WoN the assessments made have valid and legal bases? YES.

RULING: Petition DENIED. Court of Tax Appeals decision AFFIRMED.
RATIO:
1. The applicable legal provision is Section 16(b) of the National Internal Revenue
Code of 1977 as amended, which reads:
a. "Sec. 16. Power of the Commissioner of Internal Revenue to
make assessments.- (b) Failure to submit required returns, statements,
reports and other documents. - When a report required by law as a basis
for the assessment of an national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when there is
reason to believe that any such report is false, incomplete, or erroneous,
the Commissioner of Internal Revenue shall assess the proper tax on the
best evidence obtainable. In case a person fails to file a required return or
other document at the time prescribed by law, or willfully or otherwise,
files a false or fraudulent return or other documents, the Commissioner
shall make or amend the return from his own knowledge and from such
information as he can obtain through testimony or otherwise, which shall
be prima facie correct and sufficient for all legal purposes."
2. The law is specific and clear. The rule on the "best evidence obtainable" applies
when a tax report required by law for the purpose of assessment is not available or
when the tax report is incomplete or fraudulent. In the instant case, the failure of
the Po Bien Sing and petitioner to present their books of accounts for examination
left the Commissioner of Internal Revenue no other legal option except to resort to
the power under Section 16 of the Tax Code.
3. Petitioner's claim that the CIR's figures are arbitrary are wrong. Under CIR v
Reyes, the Court ruled that "when the taxpayer is appealing to the tax court on the
ground that the Collector's assessment is erroneous, it is incumbent upon him to
prove there what is the correct and just liability by a full and fair disclosure of all
pertinent data in his possession." Tax assessments are presumed correct and made
in good faith, with the taxpayer having to duty to prove otherwise.
4. The fraudulent acts detailed in the decision under review had not been
satisfactorily rebutted by the petitioner. There are indeed clear indications on the
part of the taxpayer to deprive the Government of the taxes due. This allegation of
fraud is taken from the testimony of the Assistant Factory Superintendent of Silver
Cup, Nelson Po, who mentioned a secret tunnel within the bodega itself inside the
compound of Silver Cup, as well as the Factory Personnel Manager testified that
false entries were entered in the official register book. The existence of fraud as
found by the respondents can not be lightly set aside absent substantial evidence
presented by the petitioner to counteract such finding.
CIR v. Hantex Trading Co., Inc., [G.R. No. 136975. March 31, 2005]
CIR vs. HANTEX TRADING CO
31 March 2005 | Callejo, Sr. J | Best evidence obtainable
SUMMARY: CIR based its assesment on photocopies of Hantex’s consumption entries
because the originals in their repository were eaten by termites. SC said it was improper to
use the photox copies as proof of Hantex’s liability it is not the best evidence obtainable.
There were official copies kept in NSO and it was not shown that the CIR tried to obtain
these copies.
DOCTRINE: Photocopies are not the best evidence available. These have no probative
weight if offered as proof of the contents thereof. The reason for this is that such copies are
mere scraps of paper and are of no probative value as basis for any deficiency income or
business taxes against a taxpayer.
FACTS
1. In 1989, an informant informed the Counter-Intelligence Division of the
Economic Intelligence and Investigation Bureau that Hantex Trading Co., Inc.
underdeclared its importations in the year 1987.
2. The said informant based its report from another informant and the photocopied
documents provided to him.
3. The photocopies were copies of Hantex’s Consumption Entries for the year
1987 where it was stated that Hantex’s importations amounted to Php 115 M.
Hantex only declared Php 45 M.
4. The original copies of Consumption Entries cannot be produced because the
copies in the possession of the Collection Division (official repository of said
records) were eaten by termites. Hantex did not want to produce the said
records because it alleged that it has been the subject of numerous
investigations already and if they will provide their records, there will be no end
to the investigation.
5. As such, the Investigation Division, in determining Hantex’s alleged tax
deficiency, relied on the photocopied (xerox) copies submitted to them by
their informant.
6. After investigation, it was found that Hantex’s importations amounted to Php 105
M.
7. Hantex contested the findings as it averred that the same was based on
incompetent evidence considering that it was based merely on xerox copies which
were not even authenticated or certified.
8. The Commissioner however argued that under the National Internal Revenue
Code, under the best evidence rule, if the taxpayer does not want to provide the
required documents for taxation purposes, the taxing authorities can rely on other
evidences, in this case, the xerox copies, to determine tax liabilities.
9. Hantex however averred that the best evidence rule was not complied with or
was erroneously availed of because the said xerox copies were not properly
authenticated.
 10. To this the Commissioner argued that the BIR is not bound by the technical rules four copies of such Consumption Entries. There was no showing that BIR
of evidence. tried to obtain the copies held by NSO.
 Further, it was not contested that Hantex was indeed subjected to various
investigations for its 1987 tax liabilities. And those tax investigations resulted
to a finding that Hantex was only liable for the minimum tax due. Such
ISSUE: Whether or not it is proper to use the photocopies of the Consumption Entries of findings, done by the BIR and the BOC (Bureau of Customs) themselves, are
Hantex Trading Co., Inc. as proof of its tax liabilities. - NO presumed to be regularly done. There was even no showing that the investigating
officers were negligent.
HELD:  In fine, then, the CIR acted arbitrarily and capriciously in relying on and giving
 Section 16 (b) of the NIRC provides: “Failure to submit required returns, weight to the machine copies of the Consumption Entries in fixing the tax
statements, reports and other documents. – When a report required by law as a deficiency assessments against Hantex.
basis for the assessment of any national internal revenue tax shall not be  The rule is that in the absence of the accounting records of a taxpayer, his tax
forthcoming within the time fixed by law or regulation or when there is reason to liability may be determined by estimation. CIR is not required to compute such
believe that any such report is false, incomplete or erroneous, the Commissioner tax liabilities with mathematical exactness.
shall assess the proper tax on the best evidence obtainable.”  Approximation in the calculation of the taxes due is justified. To hold otherwise
 The “best evidence” includes would be tantamount to holding that skillful concealment is an invincible barrier
o the corporate and accounting records of the taxpayer to proof. However, the rule does not apply where the estimation is arrived at
o the accounting records of other taxpayers engaged in the same line of arbitrarily and capriciously.
business
o data, record, paper, document or any evidence gathered by internal
revenue officers from other taxpayers who had personal transactions or
from whom the subject taxpayer received any income
o record, data, document and information secured from government offices
or agencies, such as the SEC, the Central Bank of the Philippines, the
Bureau of Customs, and the Tariff and Customs Commission.
 However, the best evidence obtainable does not include mere photocopies of
records/documents.
 It is true that the BIR is not bound by strict rules of evidence. It is also true that
the best evidence rule under the NIRC should not be equated to the best evidence
rule under the Rules of Court.
o best evidence rule under the NIRC may even mean that the best evidence
obtainable may consist of hearsay evidence, such as the testimony of
third parties or accounts or other records of other taxpayers
 In this case, the photocopies are not the best evidence obtainable. The
petitioner, in making a preliminary and final tax deficiency assessment against a
taxpayer, cannot anchor the said assessment on mere machine copies of
records/documents.
o mere photocopies of the Consumption Entries have no probative weight
if offered as proof of the contents thereof.
o The reason for this is that such copies are mere scraps of paper and are of
no probative value as basis for any deficiency income or business taxes
against a taxpayer.
 The official copies of the Consumption Entries are not solely kept in the
Collection Division (where such records were destroyed by termites). The NSO
(National Statistics Office) also keep such records. In fact, there are at least
CIR vs. Embroidery & Garments Industries Phils | 1999 | J. Pardo

SUMMARY: Petitioner assessed respondent deficiency income tax and advance sales tax
on the basis of a sworn report of an informer. CTA found that evidence not competent as
compared to what respondent adduced which were records from Customs. SC favored the
respondent.
DOCTRINE: Assessments must be based on actual facts and proved by competent
evidence, not imposed based on unverified information supplied by an informant, or
disputed presumptions.
FACTS:
1. Petitioner assessed respondent sum of P436,846.44, inclusive of 75% surcharge
and penalty as advance sales tax for the years 1959 to 1961 and, on March 23,
1966, assessed deficiency income tax in the sum of P4,799.641.95, inclusive of
50% surcharge and % monthly interest for the years 1960 and 1961.
2. Respondent protested and petitioner issued a revised assessment requiring the
latter to pay the amount of P2,756,241.68, inclusive of 50% surcharge and %
monthly interest as deficiency income tax for the years 1959 to 1961. On
December 22, 1970, petitioner required respondent to pay P3,500,798.47, as
advance sales tax and 75% surcharge corresponding to the same years.
3. CTA found respondent NOT LIABLE for deficiency income tax and advance
sales tax saying assessments were of doubtful validity as they were based on
incompetent evidence consisting of an informants report and the sworn statement
of a disgruntled former general manager of respondent that in the years in question
respondent sold all its dollar quotas to local Chinese textile traders at an overprice
or premium on the dollar value of textile importation of 80% for suiting materials
and 70% for womens clothing materials and faked its invoices to reduce its costs
of importation.
a. On the other hand, respondent adduced evidence consisting of official
records of the Bureau of Customs that its tax-free importations had been
re-exported to their suppliers in accordance with the Embroidery Law
and cleared by the Bureau of Customs.
4. CA affirmed. MR denied.

ISSUE/RATIO:
1. WoN respondent is liable for deficiency income tax and advance sales tax? NO.
Issue is clearly factual and must be resolved on the basis of the evidence adduced
before the tax court. This case does not come within any of the exceptions of an
appeal via certiorari which generally tackles only questions of law.

WHEREFORE, the Court hereby AFFIRMS the appealed decision of the Court of Appeals
in CA-G.R. SP No. 20813.