TAXATION II

REMEDIES

1. SMI-Ed Phil Technology Inc., vs Commissioner of Internal Revenue

GR No. 175410 – November 12, 2014
Facts:
 SMI-Ed Philippines is a PEZA-registered corporation. However, SMI-Ed Philippines "failed
to commence operations even after its registration or even after it constructed buildings and
purchased machineries and equipment.
 Its factory was temporarily closed and later it sold its buildings and some of its installed
machineries and equipment to Ibiden Philippines, Inc., another PEZA-registered enterprise.
After requesting the cancellation of its PEZA registration and amending its articles of
incorporation to shorten its corporate term, SMI-Ed Philippines filed an administrative claim
for the refund.
 Since BIR did not act on SMI-Ed Philippines’ claim, it prompted the latter to file a petition for
review before the Court of Tax Appeals which was denied. Later, the CTA second division
found that since SMI-Ed Philippines had not commenced operations, it was not entitled to
the incentives of either the income tax holiday or the 5% preferential tax rate. Payment of
the 5% preferential tax was erroneous.
Issue:
 Whether or not the determination of the Court of Tax Appeals was necessary to settle the
question regarding the tax consequence of the sale of the properties.
 Whether or not Petitioner is liable to pay any tax.
Held:
 The term "assessment" refers to the determination of amounts due from a person obligated
to make payments. In the context of national internal revenue collection, it refers the
determination of the taxes due from a taxpayer under the National Internal Revenue Code
of 1997. The power and duty to assess national internal revenue taxes are lodged with the
BIR.
 Only the presumed gain from the sale of petitioner’s land and/or building may be subjected
to the 6% capital gains tax. The income from the sale of petitioner’s machineries and
equipment is subject to the provisions on normal corporate income tax. However, the BIR
did not make a deficiency assessment for this declaration. Since more than a decade have
lapsed from the filing of petitioner's return, the BIR can no longer assess petitioner for
deficiency capital gains taxes.

2. Commissioner of Internal Revenue vs Fitness by Design Inc.,

GR No. 215957 – November 09, 2016
Facts:
 Fitness filed its Annual Income Tax Return for the taxable year of 1995 and later received a
copy of a Final Assessment Notice for deficiency. Fitness filed a protest to the Final
Assessment Notice since accordingly the Commissioner's period to assess had already
prescribed. Further, the assessment was without basis. Later, the Commissioner issued a
Warrant of Distraint and/or Levy. Fitness filed before the First Division of the Court of Tax
Appeals a Petition for Review.
 In its Answer, the Commissioner posited that the Warrant of Distraint and/or Levy was
issued in accordance with law. The Commissioner claimed that its right to assess had not
yet prescribed because the 1995 Income Tax Return filed by Fitness was false and
fraudulent for its alleged intentional failure to reflect its true sales. The alleged fraudulent
return was discovered through a tip from a confidential informant.
 The Court of Tax Appeals First Division granted Fitness' Petition on the ground that the
assessment has already prescribed. It cancelled and set aside the Final Assessment Notice
as well as the Warrant of Distraint and/or Levy issued by the Commissioner. It ruled that the
Final Assessment Notice is invalid for failure to comply with the requirements of Section
228 of the NIRC.
 The Commissioner's Motion for Reconsideration which were denied by the Court of Tax
Appeals First Division. Aggrieved, the Commissioner filed an appeal before the Court of
Tax Appeals En Banc. The Commissioner asserted that it had 10 years to make an
assessment due to the fraudulent income tax return filed by Fitness.
 Fitness argued that the Final Assessment Notice issued to it could not be claimed as a valid
deficiency assessment that could justify the issuance of a warrant of distraint and/or levy. It
asserted that it was a mere request for payment as it did not provide the period within which
to pay the alleged liabilities.
 The Court of Tax Appeals En Banc ruled in favor of Fitness. It affirmed the Decision of the
Court of Tax Appeals First Division.
 In its Comment, respondent argues that the Final Assessment Notice issued was merely a
request and not a demand for payment of tax liabilities. The Final Assessment Notice
cannot be considered as a final deficiency assessment because it deprived respondent of
due process when it failed to reflect its fixed tax liabilities. Moreover, it also gave
respondent an indefinite period to pay its tax liabilities. Respondent points out that an
assessment should strictly comply with the law for its validity. Jurisprudence provides that
"not all documents coming from the BIR containing a computation of the tax liability can be
deemed assessments, which can attain finality. Therefore, the Warrant of Distraint and/or
Levy cannot be enforced since it is based on an invalid assessment. Respondent likewise
claims that since the Final Assessment Notice was allegedly based on fraud, it must show
the details of the fraudulent acts imputed to it as part of due process.
Issue:
 Whether or not the Final Assessment Notice issued against respondent Fitness by Design,
Inc. is a valid assessment.
Held:
 An assessment refers to the determination of amounts due from a person obligated to make
payments. In the context of national internal revenue collection, it refers to the
determination of the taxes due from a taxpayer under the National Internal Revenue Code
of 1997.
 The assessment process starts with the filing of tax return and payment of tax by the
taxpayer. The initial assessment evidenced by the tax return is a self-assessment of the
taxpayer.58 The tax is primarily computed and voluntarily paid by the taxpayer without need
of any demand from government. If tax obligations are properly paid, the Bureau of Internal
Revenue may dispense with its own assessment.
 After filing a return, the Commissioner or his or her representative may allow the
examination of any taxpayer for assessment of proper tax liability. The failure of a
taxpayer to file his or her return will not hinder the Commissioner from permitting the
taxpayer's examination. The Commissioner can examine records or other data relevant to
his or her inquiry in order to verify the correctness of any return, or to make a return in case
of noncompliance, as well as to determine and collect tax liability.
 The revenue officer who audited the taxpayer's records shall state in his or her report
whether the taxpayer concurs with his or her findings of liability for deficiency taxes.
If the taxpayer does not agree, based on the revenue officer's report, the taxpayer shall be
informed in writing of the discrepancies in his or her payment of internal revenue taxes for
"Informal Conference. The informal conference gives the taxpayer an opportunity to present
his or her side of the case.
 The taxpayer is given 15 days from receipt of the notice of informal conference to
respond. If the taxpayer fails to respond, he or she will be considered in default. The
revenue officer endorses the case with the least possible delay to the Assessment Division
of the Revenue Regional Office or the Commissioner or his or her authorized
representative. The Assessment Division of the Revenue Regional Office or the
Commissioner or his or her authorized representative is responsible for the "appropriate
review and issuance of a deficiency tax assessment, if warranted.
 If, after the review conducted, there exists sufficient basis to assess the taxpayer
with deficiency taxes, the officer 'shall issue a preliminary assessment notice
showing in detail the facts, jurisprudence, and law on which the assessment is
based. The taxpayer is given 15 days from receipt of the pre-assessment notice to
respond. If the taxpayer fails to respond, he or she will be considered in default, and a
formal letter of demand and assessment notice will be issued.
 The formal letter of demand and assessment notice shall state the facts,
jurisprudence, and law on which the assessment was based; otherwise, these shall
be void. The taxpayer or the authorized representative may administratively protest the
formal letter of demand and assessment notice within 30 days from receipt of the notice.
 The issuance of a valid formal assessment is a substantive prerequisite for collection of
taxes. Neither the National Internal Revenue Code nor the revenue regulations provide for
a specific definition or form of an assessment. However, the National Internal Revenue
Code defines its explicit functions and effects. An assessment does not only include a
computation of tax liabilities; it also includes a demand for payment within a period
prescribed. Its main purpose is to determine the amount that a taxpayer is liable to pay.
 A pre-assessment notice does not bear the gravity of a formal assessment notice. A pre-
assessment notice merely gives a tip regarding the Bureau of Internal Revenue's findings
against a taxpayer for an informal conference or a clarificatory meeting. A final assessment
is a notice to the effect that the amount therein stated is due as tax and a demand for
payment thereof. This demand for payment signals the time when penalties and interests
begin to accrue against the taxpayer and enabling the latter to determine his
remedies. Thus, it must be sent to and received by the taxpayer, and must demand
payment of the taxes described therein within a specific period.
 The disputed Final Assessment Notice is not a valid assessment. First, it lacks the definite
amount of tax liability for which respondent is accountable. Second, there are no due dates
in the Final Assessment Notice.
 Petition is DENIED. The Decision of the Court of Tax Appeals En Banc and Resolution are
hereby AFFIRMED.

3. Philippine National Oil Company vs Court of Appeals

GR No. 109976 – April 26, 2005
Facts:
 Through his sworn statement, private respondent Savellano informed the BIR that PNB had
failed to withhold the 15% final tax on interest earnings and/or yields from the money
placements of PNOC with the said bank. BIR requested PNOC to settle its liability for taxes
on the interests earned by its money placements with PNB and which PNB did not withhold.
 Later, PNOC wrote the BIR and made an offer to compromise its tax liability. PNOC
proposed to set-off its tax liability against a claim for tax refund/credit of the National Power
Corporation (NAPOCOR), then pending with the BIR.
 Later, the BIR sent a demand letter to PNB, as withholding agent, for the payment of the
final tax on the interest earnings and/or yields from PNOC's money placements with the
bank and on the same date, the BIR also mailed a letter to PNOC informing it of the
demand letter sent to PNB.
 PNOC, in another letter, reiterated its proposal to settle its tax liability through the set-off of
the said tax liability against NAPOCOR'S pending claim for tax refund/credit. The BIR
replied that the proposal for set-off was premature since NAPOCOR's claim was still under
process.
Issue:
 Whether or not PNOC's tax liability could not be considered a delinquent account since it
was not self-assessed.
Held:
 Where tax liabilities are self-assessed, the compromise payment shall be computed
based on the tax return filed by the taxpayer. On the other hand, where the BIR
already issued an assessment, the compromise payment shall be computed based
on the tax due on the assessment notice.
 A self-assessed tax, as the term implies, is self-assessed by the taxpayer without the
intervention of an assessment by the taxing authority to create the tax liability. A self-
assessed tax means a tax that the taxpayer himself assesses or computes and pays to the
taxing authority. A self-assessed tax is one where "no further assessment by the
government is required to create the tax liability." A self-assessed tax falls due without need
of any prior assessment by the BIR, and non-payment of a self-assessed tax on the date
prescribed by law results in penalties even in the absence of any assessment by the BIR.

4. Commissioner of Internal Revenue v Liquigaz Philippines Corporation

GR No. 215534 – April 18, 2016
Facts:
 Liquigaz received an undated letter purporting to be a Notice of Informal Conference (NIC),
as well as the detailed computation of its supposed tax liability. Subsequently, it received a
copy of the Preliminary Assessment Notice (PAN) together with the attached details of
discrepancies for the calendar year. Thereafter, it received a Formal Letter of Demand
(FLD)/Formal Assessment Notice (FAN), together with its attached details of discrepancies,
for the calendar year.
 Liquigaz filed its protest against the FLD/FAN and subsequently submitted its supporting
documents. However, it received a copy of the Final Decision on Disputed Assessment
(FDDA) covering the tax audit under an LOA for the calendar year. As reflected in the
FDDA, the CIR still found Liquigaz liable for deficiency withholding tax liabilities, inclusive of
interest. Consequently, Liquigaz filed its Petition for Review before the CTA Division
assailing the validity of the FDDA issued by the CIR. The CTA Division noted that unlike the
PAN and the FLD/FAN, the FDDA issued did not provide the details thereof, hence,
Liquigaz had no way of knowing what items were considered by the CIR in arriving at the
deficiency assessments.
Issue:
 Whether or not there was a valid final decision on disputed assessment.
Held:
 Under Section 228 of the NIRC, a taxpayer shall be informed in writing of the law and the
facts on which the assessment is made, otherwise, the assessment shall be void. However,
 a void FDDA does not ipso facto render the assessment void. A decision of the CIR
on a disputed assessment differs from the assessment itself. Hence, the invalidity of
one does not necessarily result to the invalidity of the other—unless the law or
regulations otherwise provide. The taxpayer may then appeal the decision on the
disputed assessment or the inaction of the CIR. As such, the FDDA is not the only means
that the final tax liability of a taxpayer is fixed, which may then be appealed by the taxpayer.
Under the law, inaction on the part of the CIR may likewise result in the finality of a
taxpayer's tax liability as it is deemed a denial of the protest filed by the latter, which may
also be appealed before the CTA.

5. Commissioner of Internal Revenue vs Ayala Securities Corporation

L-29485 – March 31, 1976
Facts:
 Respondent Ayala Securities Corporation, a domestic corporation organized and existing
under the laws of the Philippines, filed its income tax returns with the office of the petitioner
for its fiscal year which ended on September 30, 1955. Attached to its income tax return
was the audited financial statements of the respondent corporation as of September 30,
1955, showing a surplus. The income tax due on the return of the respondent corporation
was duly paid for within the time prescribed by law.
 Later, Petitioner advised the respondent corporation of the assessment on its accumulated
surplus reflected on its income tax return for the fiscal year which ended September 30,
1955. The respondent corporation, on the other hand, in a letter dated April 19, 1961,
protested against the assessment on its retained and accumulated surplus pertaining to the
taxable year 1955 and sought reconsideration thereof for the reasons (1) that the
accumulation of the surplus was for a bona fide business purpose and not to avoid the
imposition of income tax on the individual shareholders, and (2) that the said assessment
was issued beyond the five-year prescriptive period. Eventually, respondent corporation
received a letter dated February 18, 1963, from Office of herein petitioner calling the
attention of the respondent corporation to its outstanding and unpaid tax and thereby
requesting for the payment.
 Believing the aforesaid letter to be a denial of its protest, the herein respondent corporation
filed with the Court of Tax Appeals a Petition for Review of the assessment. After trial the
Court of Tax Appeals rendered its decision cancelling the assessment and declaring it of no
force and effect.
Issue:
 Whether or not the instant case falls within the jurisdiction of the respondent Court of Tax
Appeals.
 Whether or not the applicable provision of law to this case is Section 331 of the National
Internal Revenue Code, which provides for a five-year period of prescription of assessment
from the filing of the return.
Held:
 The applicable provision of law in this case is Section 331 of the National Internal Revenue
Code which provides that except as provided in the succeeding section, internal revenue
taxes shall be assessed within five years after the return was filed, and no
proceeding in court without assessment for the collection of such taxes shall be
begun after the expiration of such period. For the purposes of this section, a return filed
before the last day prescribed by law for the filing thereof shall be considered as filed on
such last day.
 Fraud is a question of fact and the circumstances constituting fraud must be alleged and
proved in the court below. The finding of the trial court as to its existence and non-
 existence is final and cannot be reviewed here unless clearly shown to be erroneous. As
the assessment received by the Ayala Securities Corporation was made beyond the five-
year period prescribed under Section 331 of said Code, the same was made after the
prescriptive period had expired and, therefore, was no longer binding on the Ayala
Securities Corporation.

6. Basilan Estates vs Commissioner of Internal Revenue

GR No. L-22492 – September 05, 1967
Facts:
 Petitioner filed on March 24, 1954 its income tax returns for 1953. On February 26, 1959,
the Commissioner of Internal Revenue, per examiners' report, assessed Basilan Estates,
Inc., a deficiency income tax and a 25% surtax on unreasonably accumulated profits. On
non-payment of the assessed amount, a warrant of distraint and levy was issued but the
same was not executed because Basilan Estates, Inc. succeeded in getting the Deputy
Commissioner of Internal Revenue to order the Director of the district in Zamboanga City to
hold execution and maintain constructive embargo instead. Because of its refusal to waive
the period of prescription, the corporation's request for reinvestigation was not given due
course, and a notice was eventually served to the corporation that the warrant of distraint
and levy would be executed.
 The assessment of the deficiency tax was made on February 26, 1959; but the petitioner
claims that it never received notice of such assessment or if it did, it received the notice
beyond the five-year prescriptive period. The notice of assessment shows the assessment
to have been made on February 26, 1959, well within the five-year period. On the right side
of the notice is also stamped "Feb. 26, 1959" — denoting the date of release, according to
Bureau of Internal Revenue practice.
Issue:
 Whether or not the assessment was made beyond the prescriptive period.
Held:
 Under Section 331 of the Tax Code requiring five years within which to assess deficiency
taxes, the assessment is deemed made when notice to this effect is released, mailed
or sent by the Collector to the taxpayer and it is not required that the notice be
received by the taxpayer within the aforementioned five-year period.

7. Medicard Philippines Inc., vs Commissioner of Internal Revenue

GR No. 222743 – April 5, 2017
Facts:
 Upon finding some discrepancies between MEDICARD's Income Tax Returns (ITR) and
VAT Returns, the CIR informed MEDICARD and, in lieu of an LOA, an LN was issued to
MEDICARD informing it of the discrepancies between its ITRs and VAT Returns and this
procedure is authorized under a Revenue Memorandum Order. Subsequently, the CIR
issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. A
Memorandum was likewise issued recommending the issuance of a Formal Assessment
Notice (FAN) against MEDICARD. Later, MEDICARD received CIR's FAN for alleged
deficiency VAT inclusive of penalties. The CIR argued that since MEDICARD. does not
actually provide medical and/or hospital services, but merely arranges for the same, its
services are not VAT exempt.
 MEDICARD argued that: (1) the services it render is not limited merely to arranging for the
provision of medical and/or hospital services by hospitals and/or clinics but include actual
and direct rendition of medical and laboratory services; (2) some membership fees was
 received from clients that are registered with the Philippine Export Zone Authority (PEZA)
and/or Bureau of Investments, among others.
 The CIR issued a Tax Verification Notice authorizing Revenue Officer (RO) to verify the
supporting documents of MEDICARD's Protest. MEDICARD also submitted additional
supporting documentary evidence in aid of its Protest. Subsequently, MEDICARD received
CIR's Final Decision on Disputed Assessment denying its protest.
 Consequently, MEDICARD proceeded to file a petition for review before the CTA,
reiterating its position before the tax authorities. However, the CTA Division rendered a
Decision affirming with modifications the CIR's deficiency VAT assessment. Undaunted,
MEDICARD filed a Motion for Reconsideration but it was denied. Hence, MEDICARD
elevated the matter to the CTA en banc. In a Decision, the CTA en banc partially granted
the petition only insofar as the 10% VAT rate is concerned but sustained the findings of the
CTA Division in all other matters
Issue:
 Whether or not the absence of the LOA is fatal.
Held:
 An 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. An LOA is premised on the fact that the examination of a taxpayer who has
already filed his tax returns is a power that statutorily belongs only to the CIR himself or his
duly authorized representatives. Unless authorized by the CIR himself or by his duly
authorized representative, through an LOA, an examination of the taxpayer cannot
ordinarily be undertaken. The absence of an LOA violated MEDICARD's right to due
process.
 Petition is hereby GRANTED. The Decision and Resolution issued by the Court of Tax
Appeals en bane are REVERSED and SET ASIDE.

8. Commissioner of Internal Revenue vs GJM Philippines Manufacturing

GR No. 202695 – February 29, 2016
Facts:
 GJM filed its Annual Income Tax Return and thereafter, its parent company, Warnaco (HK)
Ltd., underwent bankruptcy proceedings, resulting in the transfer of ownership over GJM
and its global affiliates to Luen Thai Overseas Limited. Consequently, GJM informed the
Revenue District Officer regarding the cancellation of its registered address in Makati, and
the transfer of its tax registration in another address in Cavite. GJM's request for transfer of
its tax registration was confirmed through a Transfer Confirmation Notice.
 Later, the Bureau of Internal Revenue (BIR) sent a letter of informal conference informing
GJM that the report of investigation on its income and business tax liabilities had been
submitted. The report disclosed that GJM was still liable for an income tax deficiency and
the corresponding interest, as well as for the compromise penalty. Said tax deficiency
allegedly resulted from certain disallowances/understatements.
 Subsequently, the Bureau of Internal Revenue (BIR) issued a Pre-Assessment Notice and
Details of Discrepancies against GJM and it issued an undated Assessment Notice,
indicating a deficiency income tax assessment. Later, the BIR issued a Preliminary
Collection Letter requesting GJM to pay said income tax deficiency for the taxable year.
Said letter was addressed to GJM's former address in Makati. Although the BIR sent a Final
Notice Before Seizure to GJM's address in Cavite, the latter claimed that it did not receive
the same.
 GJM received a Warrant of Distraint and/or Levy from the BIR Makati. The company then
filed its Letter Protest which the BIR denied. Hence, GJM filed a Petition for Review before
the CTA. The CTA First Division rendered a Decision in favor of GJM. When its Motion for
Reconsideration was denied, the CIR brought the case to the CT A En Banc. However, the
CTA En Banc denied the CIR's petition
Issue:
 Whether or not the BIR is under the obligation to prove that GJM did, in fact, received the
Final Notice.
Held:
 The CIR has three (3) years from the date of the actual filing of the return or from the
last day prescribed by law for the filing of the return, whichever is later, to assess
internal revenue taxes. Here, GJM filed its Annual Income Tax Return for the taxable year
1999 on April 12, 2000. The three (3)-year prescriptive period, therefore, was only until April
15, 2003. The records reveal that the BIR sent the FAN through registered mail on
April 14, 2003, well-within the required period. The Court has held that when an
assessment is made within the prescriptive period, as in the case at bar, receipt by the
taxpayer may or may not be within said period. But it must be clarified that the rule does
not dispense with the requirement that the taxpayer should actually receive the
assessment notice, even beyond the prescriptive period. GJM, however, denies ever
having received any FAN.
 If the taxpayer denies having received an assessment from the BIR, it then becomes
incumbent upon the latter to prove by competent evidence that such notice was
indeed received by the addressee. Here, the onus probandi has shifted to the BIR to
show by contrary evidence that GJM indeed received the assessment in the clue course of
mail. It has been settled that while a mailed letter is deemed received by the addressee in
the course of mail, this is merely a disputable presumption subject to controversion, the
direct denial of which shifts the burden to the sender to prove that the mailed letter was, in
fact, received by the addressee.
 To prove the fact of mailing, it is essential to present the registry receipt issued by
the Bureau of Posts or the Registry return card which would have been signed by the
taxpayer or its authorized representative. And if said documents could not be located,
the CIR should have, at the very least, submitted to the Court a certification issued by the
Bureau of Posts and any other pertinent document executed with its intervention. The BIR's
failure to prove GJM's receipt of the assessment leads to no other conclusion but
that no assessment was issued. Consequently, the government's right to issue an
assessment for the said period has already prescribed.
 The CIR offered in evidence Transmittal Letter prepared and signed by the Chief of the
Assessment Division of BIR Makati, to show that the FAN was actually served upon GJM.
However, it never presented Guerrero to testify on said letter, considering that GJM
vehemently denied receiving the subject FAN and the Details of Discrepancies. Also, the
CIR presented the Certification signed by the Postmaster of Cavite, which supposedly
proves the fact of mailing of the FAN and Details of Discrepancy. It also adduced evidence
of mail envelopes which were meant to prove that the Preliminary Assessment Notice
(PAN) and the FAN were delivered. However, according to the Postmaster's Certification, of
all the mail matters addressed to GJM which were received by the Cavite Post Office only
two (2) came from the Makati Central Post Office. These two (2) were received by the
Cavite Post Office but the registered mail could not have been the PAN since, although
mailed, was not proven to be the mail received as the FAN. The CIR likewise failed to show
that said mail matters received indeed came from it. It could have simply presented the
registry receipt or the registry return card accompanying the envelope purportedly
 containing the assessment notice, but it offered no explanation why it failed to do so.
Hence, the CTA aptly ruled that the CIR failed to discharge its duty to present any evidence
to show that GJM indeed received the FAN sent through registered mail.
 Petition is DENIED. The Decision of the Court of Tax Appeals En Banc and its Resolution
are hereby AFFIRMED.

9. Barcelon Roxas Securities Inc., vs Commissioner of Internal Revenue

GR No. 157064 – August 7, 2006
Facts:
 After petitioner filed its Annual Income Tax Return, an audit investigation conducted by the
Bureau of Internal Revenue (BIR), respondent Commissioner of Internal Revenue (CIR)
issued an assessment for deficiency income tax arising from the disallowance of the item
on salaries, bonuses and allowances as part of the deductible business expense. This
assessment was covered by a Formal Assessment Notice, which, respondent alleges, was
sent to petitioner through registered mail. However, petitioner denies receiving the formal
assessment notice.
 Later, Petitioner was served with a Warrant of Distraint and/or Levy to enforce collection of
the deficiency income tax. Petitioner filed a formal protest against the Warrant of Distraint
and/or Levy, requesting for its cancellation. However, petitioner received a letter from the
respondent denying the protest with finality.
 Petitioner filed a petition for review with the CTA. After due notice and hearing, the CTA
rendered a decision in favor of petitioner (Barcelona). The CTA ruled on the primary issue
of prescription and found it unnecessary to decide the issues on the validity and propriety of
the assessment. It maintained that while a mailed letter is deemed received by the
addressee in the course of mail, this is merely a disputable presumption. It reasoned that
the direct denial of the petitioner shifts the burden of proof to the respondent that the mailed
letter was actually received by the petitioner. The CTA found the BIR records submitted by
the respondent immaterial, self-serving, and therefore insufficient to prove that the
assessment notice was mailed and duly received by the petitioner.
 Respondent moved for reconsideration of the aforesaid decision but was denied by the
CTA in a Resolution. Thereafter, respondent appealed to the Court of Appeals. In reversing
the CTA decision, the Court of Appeals found the evidence presented by the respondent to
be sufficient proof that the tax assessment notice was mailed to the petitioner; therefore the
legal presumption that it was received should apply.
 Petitioner moved for reconsideration of the said decision but the same was denied by the
Court of Appeals
Issue:
 Whether or not the court of appeals was correct in reversing the subject decision of the
court of tax appeals.
Held:
 While the general rule is that factual findings of the Court of Appeals are binding on this
Court, there are, however, recognized exceptions thereto, such as when the findings are
contrary to those of the trial court or, in this case, the CTA.
 Jurisprudence is replete with cases holding that if the taxpayer denies ever having received
an assessment from the BIR, it is incumbent upon the latter to prove by competent
evidence that such notice was indeed received by the addressee. The onus probandi was
shifted to respondent to prove by contrary evidence that the Petitioner received the
assessment in the due course of mail. The Supreme Court has consistently held that
while a mailed letter is deemed received by the addressee in the course of mail, this is
merely a disputable presumption subject to controversion and a direct denial thereof shifts
 the burden to the party favored by the presumption to prove that the mailed letter was
indeed received by the addressee (Republic vs. Court of Appeals, 149 SCRA 351).
 The facts to be proved to raise this presumption are (a) that the letter was properly
addressed with postage prepaid, and (b) that it was mailed. Once these facts are
proved, the presumption is that the letter was received by the addressee as soon as
it could have been transmitted to him in the ordinary course of the mail. But if one of
the said facts fails to appear, the presumption does not lie. In the instant case,
Respondent utterly failed to discharge this duty. No substantial evidence was ever
presented to prove that the assessment notice or other supposed notices subsequent
thereto were in fact issued or sent to the taxpayer.
 What is essential to prove the fact of mailing is the registry receipt issued by the Bureau of
Posts or the Registry return card which would have been signed by the Petitioner or its
authorized representative. And if said documents cannot be located, Respondent at the
very least, should have submitted to the Court a certification issued by the Bureau of Posts
and any other pertinent document which is executed with the intervention of the Bureau of
Posts. This Court does not put much credence to the self serving documentations made by
the BIR personnel especially if they are unsupported by substantial evidence establishing
the fact of mailing.
 While the Court has held that an assessment is made when sent within the prescribed
period, even if received by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista,
L-12250 and L-12259, May 27, 1959), this ruling makes it the more imperative that the
release, mailing or sending of the notice be clearly and satisfactorily proved. Mere notations
made without the taxpayer’s intervention, notice or control, without adequate supporting
evidence cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue
offices, without adequate protection or defense (Nava vs. CIR, 13 SCRA 104, January 30,
1965). The failure of the respondent to prove receipt of the assessment by the
Petitioner leads to the conclusion that no assessment was issued. Consequently, the
government’s right to issue an assessment for the said period has already
prescribed.
 Jurisprudence has consistently shown that this Court accords the findings of fact by the
CTA with the highest respect. In Sea-Land Service Inc. v. Court of Appeals, this Court
recognizes that the Court of Tax Appeals, which by the very nature of its function is
dedicated exclusively to the consideration of tax problems, has necessarily developed an
expertise on the subject, and its conclusions will not be overturned unless there has been
an abuse or improvident exercise of authority. Such findings can only be disturbed on
appeal if they are not supported by substantial evidence or there is a showing of gross error
or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to
the contrary, this Court must presume that the CTA rendered a decision which is valid in
every respect.
 Petition is GRANTED. The assailed Decision of the Court of Appeals is hereby REVERSED
and SET ASIDE, and the Decision of the Court of Tax Appeals cancelling the Deficiency
Tax Assessment against Barcelon, Roxas Securitites, Inc. (now known as UPB Securities,
Inc.) for being barred by prescription, is hereby REINSTATED.

10. Fishwealth Canning Corp., vs Commissioner of Internal Revenue

GR No. 179343 – January 21, 2010
Facts:
 The Commissioner of Internal Revenue (respondent), by Letter of Authority, ordered the
examination of the internal revenue taxes of Fishwealth Canning Corp. (petitioner). The
 investigation disclosed that petitioner was liable for income tax, value added tax (VAT),
withholding tax deficiencies and other miscellaneous deficiencies.
 Respondent reinvestigated petitioner’s books of accounts and other records of internal
revenue taxes for the purpose of which it issued a subpoena duces tecum requiring
petitioner to submit its records and books of accounts. Petitioner requested the cancellation
of the subpoena on the ground that the same set of documents had previously been
examined.
 As petitioner did not heed the subpoena, respondent thereafter filed a criminal complaint
against petitioner which complaint was dismissed for insufficiency of evidence. Respondent
sent then petitioner a Final Assessment Notice of income tax and VAT deficiencies which
assessment was contested by petitioner.
 Respondent thereafter issued a Final Decision on Disputed Assessment (FDDA) which
denied petitioner’s letter of protest, apprising it of its income tax and VAT liabilities, and
requesting the immediate payment thereof, inclusive of penalties incident to delinquency.
Respondent added that if petitioner disagreed, it may appeal to the Court of Tax Appeals
(CTA) within thirty (30) days from date of receipt hereof, otherwise our said deficiency
income and value-added taxes assessments shall become final, executory, and
demandable.
 Instead of appealing to the CTA, petitioner filed a Letter of Reconsideration on September
06, 2005. By a Preliminary Collection Letter, respondent demanded payment of petitioner’s
tax liabilities, drawing petitioner to file a Petition for Review before the CTA on October 20,
2005.
 In his Answer, respondent argued, among other things, that the petition was filed out of time
which argument the First Division of the CTA upheld and accordingly dismissed the petition.
Petitioner filed a Motion for Reconsideration which was denied. Consequently, petitioner
filed a petition for review before the CTA En Banc which held that the petition before the
First Division, as well as that before it, was filed out of time.
Issue:
 Whether or not petitioner’s appeal before the CTA was filed out of time.
Held:
 Section 228 of the 1997 Tax Code provides that an assessment may be protested
administratively by filing a request for reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such form and manner as may be prescribed
by implementing rules and regulations. Within sixty (60) days from filing of the protest, all
relevant supporting documents shall have been submitted; otherwise, the assessment shall
become final.
 If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision
or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the
decision shall become final, executory and demandable.
 Since petitioner received the denial of its administrative protest on August 4, 2005, it had
until September 3, 2005 to file a petition for review before the CTA Division. It filed one,
however, on October 20, 2005, hence, it was filed out of time. For a motion for
reconsideration of the denial of the administrative protest does not toll the 30-day
period to appeal to the CTA.
 Petition is DISMISSED.

11. Commissioner of Intetnal Revenue vs Asalus Corporation

GR No. 221590 – February 22, 2017
Facts:
 Respondent Asalus Corporation received a Notice of Informal Conference from the Bureau
of Internal Revenue (BIR). It was in connection with the investigation conducted by
Revenue Officer Fidel M. Bañares II (Bañares) on the Value-Added Tax (VAT) transactions
of Asalus. Consequently, Asalus filed its Letter-Reply questioning the basis of Bañares'
computation for its VAT liability.
 Petitioner Commissioner of Internal Revenue (CIR) issued the Preliminary Assessment
Notice (PAN) finding Asalus liable for deficiency VAT, inclusive of surcharge and interest.
Asalus filed its protest against the PAN but it was denied by the CIR.
 Later, Asalus received the Formal Assessment Notice (FAN) stating that it was liable for
deficiency VAT. Consequently, it filed its protest against the FAN. Thereafter, Asalus filed a
supplemental protest stating that the deficiency VAT assessment had prescribed.
Subsequently, Asalus received the Final Decision on Disputed Assessment (FDDA)
showing VAT deficiency, inclusive of surcharge and interest and compromise penalty. As a
result, it filed a petition for review before the CTA Division.
 The CTA Division ruled that the VAT assessment issued had prescribed and consequently
deemed invalid. It opined that the ten (10)-year prescriptive period was inapplicable as
neither the FAN nor the FDDA indicated that Asalus had filed a false VAT return warranting
the application of the ten (10)-year prescriptive period. It explained that it was only in the
PAN where an allegation of false or fraudulent return was made.
 On appeal, the CTA En Banc sustained the assailed decision of the CT A Division and
dismissed the petition for review filed by the CIR. It explained that there was nothing in the
FAN and the FDDA that would indicate, the non-application of the three (3) year
prescriptive period under Section 203 of the NIRC. It found that the CIR did not present any
evidence during the trial to substantiate its claim of falsity in the returns and again missed
its chance to do so when it failed to file its memorandum before the CTA Division. It further
explained that the PAN alone could not be used as a basis because it was not the
assessment contemplated by law. Consequently, the allegation of falsity in Asalus' tax
returns could not be considered as it was not reiterated in the FAN.
 CIR asserts that there was substantial understatement in Asalus' income, which exceeded
30% of what was declared in its VAT returns as appearing in its quarterly VAT returns; and
the underdeclaration was supported by the judicial admission of its lone witness that not all
the membership fees collected from members applying for healthcare services were
reported in its VAT returns. Thus, the CIR concludes that there was prima facie evidence of
a false return. The CIR moved for reconsideration but its motion was denied.
Issue:
 Whether or not petitioner correctly held that respondent filed a false return.
Held:
 Under Section 248(B) of the NIRC, there is a prima facie evidence of a false return if
there is a substantial underdeclaration of taxable sales, receipt or income. The failure
to report sales, receipts or income in an amount exceeding 30% what is declared in
the returns constitute substantial underdeclaration. A prima facie evidence is one
which that will establish a fact or sustain a judgment unless contradictory evidence is
produced. Applied in this case, the audit investigation revealed that there were undeclared
VA Table sales more than 30% of that declared in Asalus' VAT returns.
 Generally, internal revenue taxes shall be assessed within three (3) years after the ,last day
prescribed by law for the filing of the return, or where the return is filed beyond the period,
from the day the return was actually filed. Section 222 of the NIRC, however, provides for
exceptions to the general rule. It states that in the case of a false or fraudulent return with
 intent to evade tax or of failure to file a return, the assessment may be made within ten (10)
years from the discovery of the falsity, fraud or omission.
 Applied in this case, the audit investigation revealed that there were undeclared VATable
sales more than 30% of that declared in Asalus' VAT returns. Moreover, Asalus' lone
witness testified that not all membership fees, particularly those pertaining to medical
practitioners and hospitals, were reported in Asalus' VAT returns. The testimony of its
witness, in trying to justify why not all of its sales were included in the gross receipts
reflected in the VAT returns, supported the presumption that the return filed was indeed
false precisely because not all the sales of Asalus were included in the VAT returns.
 Hence, the CIR need not present further evidence as the presumption of falsity of the
returns was not overcome. Asalus was bound to refute the presumption of the falsity of the
return and to prove that it had filed accurate returns. Its failure to overcome the same
warranted the application of the ten (10)-year prescriptive period for assessment under
Section 222 of the NIRC. To require the CIR to present additional evidence in spite of the
presumption provided in Section 248(B) of the NIRC would render the said provision inutile.
 Petition is GRANTED. The Decision and the Resolution of the Court of Tax Appeals En
Banc are REVERSED and SET ASIDE. The case is ordered REMANDED to the Court of
Tax Appeals for the determination of the Value Added Tax liabilities of the Asalus
Corporation.

12. Commissioner of Internal Revenue vs Fitness by Design Inc.,

GR No. 215957 – November 09, 2016
Facts:
 Fitness filed its Annual Income Tax Return for the taxable year of 1995 and later received a
copy of a Final Assessment Notice for deficiency. Fitness filed a protest to the Final
Assessment Notice since accordingly the Commissioner's period to assess had already
prescribed. Further, the assessment was without basis. Later, the Commissioner issued a
Warrant of Distraint and/or Levy. Fitness filed before the First Division of the Court of Tax
Appeals a Petition for Review.
 In its Answer, the Commissioner posited that the Warrant of Distraint and/or Levy was
issued in accordance with law. The Commissioner claimed that its right to assess had not
yet prescribed because the 1995 Income Tax Return filed by Fitness was false and
fraudulent for its alleged intentional failure to reflect its true sales. The alleged fraudulent
return was discovered through a tip from a confidential informant.
 The Court of Tax Appeals First Division granted Fitness' Petition on the ground that the
assessment has already prescribed. It cancelled and set aside the Final Assessment Notice
as well as the Warrant of Distraint and/or Levy issued by the Commissioner. It ruled that the
Final Assessment Notice is invalid for failure to comply with the requirements of Section
228 of the NIRC.
 The Commissioner's Motion for Reconsideration which were denied by the Court of Tax
Appeals First Division. Aggrieved, the Commissioner filed an appeal before the Court of
Tax Appeals En Banc. The Commissioner asserted that it had 10 years to make an
assessment due to the fraudulent income tax return filed by Fitness.
 Fitness argued that the Final Assessment Notice issued to it could not be claimed as a valid
deficiency assessment that could justify the issuance of a warrant of distraint and/or levy. It
asserted that it was a mere request for payment as it did not provide the period within which
to pay the alleged liabilities.
 The Court of Tax Appeals En Banc ruled in favor of Fitness. It affirmed the Decision of the
Court of Tax Appeals First Division.
 In its Comment, respondent argues that the Final Assessment Notice issued was merely a
request and not a demand for payment of tax liabilities. The Final Assessment Notice
cannot be considered as a final deficiency assessment because it deprived respondent of
due process when it failed to reflect its fixed tax liabilities. Moreover, it also gave
respondent an indefinite period to pay its tax liabilities. Respondent points out that an
assessment should strictly comply with the law for its validity. Jurisprudence provides that
"not all documents coming from the BIR containing a computation of the tax liability can be
deemed assessments, which can attain finality. Therefore, the Warrant of Distraint and/or
Levy cannot be enforced since it is based on an invalid assessment. Respondent likewise
claims that since the Final Assessment Notice was allegedly based on fraud, it must show
the details of the fraudulent acts imputed to it as part of due process.
Issue:
 Whether or not the right of the Commissioner to assess Fitness has already prescribed.
Held:
 The word "shall" in Section 228 of the National Internal Revenue Code and Revenue
Regulations No. 12-99 means the act of informing the taxpayer of both the legal and
factual bases of the assessment is mandatory. The law requires that the bases be
reflected in the formal letter of demand and assessment notice. This cannot be presumed.
Otherwise, the express mandate of Section 228 and Revenue Regulations No. 12-99 would
be nugatory. The requirement enables the taxpayer to make an effective protest or appeal
of the assessment or decision.
 The rationale behind the requirement that taxpayers should be informed of the facts and the
law on which the assessments are based conforms with the constitutional mandate that no
person shall be deprived of his or her property without due process of law. Between the
power of the State to tax and an individual's right to due process, the scale favors the right
of the taxpayer to due process. The purpose of the written notice requirement is to aid the
taxpayer in making a reasonable protest, if necessary. Merely notifying the taxpayer of his
or her tax liabilities without details or particulars is not enough.
 A final assessment notice provides for the amount of tax due with a demand for payment.
This is to determine the amount of tax due to a taxpayer. However, due process requires
that taxpayers be informed in writing of the facts and law on which the assessment is
based in order to aid the taxpayer in making a reasonable protest. To immediately
ensue with tax collection without initially substantiating a valid assessment contravenes the
principle in administrative investigations "that taxpayers should be able to present their case
and adduce supporting evidence."
 Respondent filed its income tax return in 1995. Almost eight (8) years passed before the
disputed final assessment notice was issued. Respondent pleaded prescription as its
defense when it filed a protest to the Final Assessment Notice. Petitioner claimed fraud
assessment to justify the belated assessment made on respondent. If fraud was
indeed present, the period of assessment should be within 10 years. It is incumbent
upon petitioner to clearly state the allegations of fraud committed by respondent to serve
the purpose of an assessment notice to aid respondent in filing an effective protest.
 Fraud is a question of fact that should be alleged and duly proven. The willful neglect
to file the required tax return or the fraudulent intent to evade the payment of taxes,
considering that the same is accompanied by legal consequences, cannot be presumed.
Fraud entails corresponding sanctions under the tax law. Therefore, it is indispensable for
the Commissioner of Internal Revenue to include the basis for its allegations of fraud in the
assessment notice.
 During the proceedings in the Court of Tax Appeals First Division, respondent presented its
President who confirmed that the Final Assessment Notice and its attachments failed to
 substantiate the Commissioner's allegations of fraud against respondent. Petitioner did not
refute respondent's allegations. For its defense, it presented the Group Supervisor of the
team who examined respondent's tax liabilities. Regala confirmed that the investigation was
prompted by a tip from an informant who provided them with respondent's list of sales. He
admitted that the gathered information did not show that respondent deliberately
failed to reflect its true income in 1995.

13. Bank of the Philippine Islands vs Commissioner of Internal Revenue

GR No. 174942 – March 7, 2008
Facts:
 Respondent thru its Revenue Service Chief issued to the petitioner a pre-assessment
notice (PAN). Consequently, Petitioner requested for the details of the amounts alleged as
1982-1986 deficiency taxes mentioned in said PAN. On April 7, 1989, respondent issued to
the petitioner, assessment/demand notices to which petitioner, on On April 20, 1989, filed a
protest and a supplemental protest.
 On March 12, 1993, petitioner requested for an opportunity to present (reinvestigation) or
submit additional documentation. Petitioner then executed several Waivers of the Statutes
of Limitations.
 On August 9, 2002, respondent issued a final decision on petitioner’s protest ordering the
withdrawal and cancellation of the deficiency withholding tax assessment and considered
the same as closed and terminated. On the other hand, the deficiency DST assessment
was reiterated and the petitioner was ordered to pay the said amount within thirty (30) days
from receipt of such order. Petitioner received a copy of the said decision and thereafter
filed a Petition for Review before the Tax Court, to which the Court rendered a Decision
denying the petitioner’s Petition for Review for lack of merit. Petitioner filed a Motion for
Reconsideration with regard the Decision which was, again, denied for lack of merit.
 Later, petitioner filed with the Tax Court En Banc a Motion for Extension of Time to File
Petition for Review praying for an extension of fifteen (15) days which was granted.
However, the Tax Court ruled that BPI’s protest and supplemental protest should be
considered requests for reinvestigation which tolled the prescriptive period provided by law
to collect a tax deficiency by distraint, levy, or court proceeding.
 In its Petition for Review, BPI argues that the government’s right to collect the DST had
already prescribed because the Commissioner of Internal Revenue (CIR) failed to issue any
reply granting BPI’s request for reinvestigation manifested in the protest letters.
 The Office of the Solicitor General (OSG) filed a Comment on behalf of the CIR asserting
that the prescriptive period was tolled by the protest letters filed by BPI which were granted
and acted upon by the CIR. The OSG cites the case of Collector of Internal Revenue v.
Suyoc Consolidated Mining Company, et al. (Suyoc case) in support of its argument that
BPI is already estopped from raising the defense of prescription in view of its repeated
requests for reinvestigation which allegedly induced the CIR to delay the collection of the
assessed tax.
 In its Reply, BPI argues against the application of the Suyoc case on two points: first, it
never induced the CIR to postpone tax collection; second, its request for reinvestigation
was not categorically acted upon by the CIR within the three-year collection period after
assessment. BPI maintains that it did not receive any communication from the CIR in reply
to its protest letters.
Issue:
 Whether or not Tax Court erred in holding that the collection of alleged deficiency tax has
not prescribed.
Held:
 The statute of limitations on assessment and collection of national internal revenue
taxes was shortened from five (5) years to three (3) years by Batas Pambansa Blg.
700. Thus, the CIR has three (3) years from the date of actual filing of the tax return to
assess a national internal revenue tax or to commence court proceedings for the
collection thereof without an assessment.
 When it validly issues an assessment within the three (3)-year period, it has another
three (3) years within which to collect the tax due by distraint, levy, or court
proceeding. The assessment of the tax is deemed made and the three (3)-year period
for collection of the assessed tax begins to run on the date the assessment notice
had been released, mailed or sent to the taxpayer.
 Petition is GRANTED. The Decision of the Court of Tax Appeals and its Resolution are
hereby REVERSED and SET ASIDE.

14. Commissioner of Internal Revenue vs United Salvage and Towage

GR No. 197515 – July 02, 2014
Facts:
 Petitioner found respondent liable for deficiency income tax, withholding tax, value-added
tax (VAT) and documentary stamp tax (DST). Petitioner issued demand letters with
attached assessment notices for withholding tax on compensation (WTC) and expanded
withholding tax (EWT for taxable years 1992, 1994 and 1998). On January 29, 1998 and
October 24, 2001, USTP filed administrative protests against the 1994 and 1998 EWT
assessments. On February 21, 2003, USTP appealed by way of Petition for Review before
the Court alleging that the Notices of Assessment are bereft of any facts, law, rules and
regulations or jurisprudence; thus, the assessments are void and the right of the
government to assess and collect deficiency taxes from it has prescribed on account of the
failure to issue a valid notice of assessment within the applicable period.
 During the pendency of the proceedings, USTP moved to withdraw the aforesaid Petition
because it availed of the benefits of the Tax Amnesty Program. Having complied with all the
requirements therefor, the CTA-Special First Division partially granted the Motion to
Withdraw and declared the issues on income tax, VAT and DST deficiencies closed and
terminated. Consequently, the case was submitted for decision covering the remaining
issue on deficiency EWT and WTC.
 The CTA-Special First Division held that the Preliminary Assessment Notices (PANs) for
deficiency EWT for taxable years 1994 and 1998 were not formally offered. Hence, the
Court neither considered the same as evidence nor rule on their validity. As regards the
Final Assessment Notices (FANs) for deficiency EWT for taxable years 1994 and 1998, the
CTA-Special First Division held that the same do not show the law and the facts on which
the assessments were based and, therefore, void; and the only remaining valid assessment
is for taxable year 1992.
 Nevertheless, the CTA-Special First Division declared that the right of petitioner to collect
the deficiency for taxable year 1992 had already lapsed. Dissatisfied, petitioner moved to
reconsider. However, in a Resolution, the CTA-Special First Division denied the same for
lack of merit. Petitioner then filed a Petition for Review with the CTA En Banc praying that
the Decision of the CTA-Special First Division be set aside. The CTA En Banc promulgated
a Decision which affirmed the Decision of the CTA-SFD.
Issue:
 Whether or not petitioner’s right to collect the EWT has not yet prescribed.
Held:
 The statute of limitations on assessment and collection of national internal revenue
taxes was shortened from five (5) years to three (3) years by virtue of Batas
 Pambansa Blg. 700. Thus, petitioner has three (3) years from the date of actual filing of the
tax return to assess a national internal revenue tax or to commence court proceedings for
the collection thereof without an assessment. However, when it validly issues an
assessment within the three (3)-year period, it has another three (3) years within which to
collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is
deemed made and the three (3)-year period for collection of the assessed tax begins to run
on the date the assessment notice had been released, mailed or sent to the taxpayer.
 As correctly held by the CTA En Banc, five (5) long years had already lapsed, beyond
the three (3)-year prescriptive period, before collection was pursued by petitioner.
 Further, while the request for reinvestigation was made on March 14, 1997, the same was
only acted upon by petitioner on January22, 2001, also beyond the three (3) year statute of
limitations reckoned from January 9, 1996, notwithstanding the lack of impediment to rule
upon such issue.
 Petitioner had ample time to make a factually and legally well-founded assessment and
implement collection pursuant thereto. Whatever examination that petitioner may have
conducted cannot possibly outlast the entire three (3)-year prescriptive period provided by
law to collect the assessed tax. Thus, there is no reason to suspend the running of the
statute of limitations in this case.
 The request for reinvestigation should be granted or at least acted upon in due
course before the suspension of the statute of limitations may set in. The rule is that
the CIR must first grant the request for reinvestigation as a requirement for the suspension
of the statute of limitations. The act of requesting a reinvestigation alone does not suspend
the period. The request should first be granted, in order to effect suspension.
 In balancing the scales between the power of the State to tax and its inherent right to
prosecute perceived transgressors of the law on one side, and the constitutional rights of a
citizen to due process of law and the equal protection of the laws on the other, the scales
must tilt in favor of the individual, for a citizen’s right is amply protected by the Bill of Rights
under the Constitution. Thus, while taxes are the lifeblood of the government," the power to
tax has its limits, in spite of all its plenitude.
 Under the former law, the right of the Government to collect the tax does not
prescribe. However, in fairness to the taxpayer, the Government should be estopped
from collecting the tax where it failed to make the necessary investigation and
assessment within 5 years after the filing of the return and where it failed to collect the tax
within 5 years from the date of assessment thereof. 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 investigation for tax purposes after the expiration of a
reasonable period of time.
 Petition is DENIED. The Decision of the Court of Tax Appeals En Banc is hereby
AFFIRMED.

15. Petronila Tupaz vs Hon. Benedicto Ulep

GR No. 127777 – October 01, 1999
316 SCRA 118
Facts:
 Petitioner and her late husband were charged with non-payment of deficiency corporate
income tax for 1979 which tax return was filed in April 1980. On July 16, 1984, the Bureau
of Internal Revenue (BIR) issued a notice of assessment. Petitioner contends that the July
16, 1984 assessment was made out of time. Petitioner avers that while Sections 318 and
319 of the NIRC of 1977 provide a five (5) year period of limitation for the assessment and
collection of internal revenue taxes, Batas Pambansa Blg. 700, enacted on February 22,
 1984, amended the two sections and reduced the period to three (3) years. Petitioner
submits that B.P. Blg. 700 must be given retroactive effect since it is favorable to the
accused. Under B.P. Blg. 700, the BIR has three (3) years to assess the tax liability,
counted from the last day of filing the return, or from the date the return is filed, whichever
comes later. Since the tax return was filed in April 1980, the assessment made on July 16,
1984 was beyond the three (3) year prescriptive period.
 The Solicitor General maintains that the prescriptive period for assessment and collection of
petitioner's deficiency corporate income tax was five (5) years. The Solicitor General
asserts that the shortened period of three (3) years provided under B.P. Blg. 700 applies to
assessments and collections of internal revenue taxes beginning taxable year 1984. Since
the deficiency corporate income tax was for taxable year 1979, then petitioner was still
covered by the five (5) year period. Thus, the July 16, 1984 tax assessment was made
within the prescribed period.
 Petitioner also asserts that the offense has prescribed. Petitioner invokes Section 340 (now
281 of 1997 NIRC) of the Tax Code which provides that violations of any provision of the
Code prescribe in five (5) years. Petitioner asserts that in this case, it began to run in 1979,
when she failed to pay the correct corporate tax due during that taxable year. Hence, when
the BIR instituted criminal proceedings on June 8, 1989, by filing a complaint for violation of
the Tax Code with the Department of Justice for preliminary investigation it was beyond the
prescriptive period of five (5) years. At most, the BIR had until 1984 to institute criminal
proceedings.
 On the other hand, the Solicitor General avers that the information for violation of the Tax
Code was filed within the prescriptive period of five (5) years provided in Section 340 (now
281 in 1997 NIRC) of the Code. It is only when the assessment has become final and
unappealable that the five (5) year period commences to run. A notice of assessment was
issued on July 16, 1984. When petitioner failed to question or protest the deficiency
assessment thirty (30) days therefrom, or on August 16, 1984, it became final and
unappealable. Consequently, it was from this period that the prescriptive period of five (5)
years commenced. Thus, the complaint filed with the Department of Justice on June 8,
1989 was within the prescribed period.
Issue:
 Whether or not the action against the offense of non-payment has prescribed.
Held:
 The offense has not prescribed. The Court agrees with the Solicitor General that the
shortened period of three (3) years prescribed under B.P. Blg. 700 is not applicable to
petitioner. B.P. Blg. 700, effective April 5, 1984, specifically states that the shortened
period of three years shall apply to assessments and collections of internal revenue
taxes beginning taxable year 1984. Assessments made on or after April 5, 1984 are
governed by the five-year period if the taxes assessed cover taxable years prior to January
1, 1984. The deficiency income tax under consideration is for taxable year 1979. Thus, the
period of assessment is still five (5) years, under the old law. The income tax return was
filed in April 1980. Hence, the July 16, 1984 tax assessment was issued within the
prescribed period of five (5) years, from the last day of filing the return, or from the date the
return is filed, whichever comes later.
 Petitioner was charged with failure to pay deficiency income tax after repeated demands by
the taxing authority. In Lim, Sr. v. Court of Appeals, the Court has stated that by its nature
the violation could only be committed after service of notice and demand for payment of the
deficiency taxes upon the taxpayer. Hence, it cannot be said that the offense has been
committed as early as 1980, upon filing of the income tax return. This is so because prior
to the finality of the assessment, the taxpayer has not committed any violation for
 non-payment of the tax. The offense was committed only after the finality of the
assessment coupled with taxpayer's willful refusal to pay the taxes within the allotted
period. In this case, when the notice of assessment was issued on July 16, 1984, the
taxpayer still had thirty (30) days from receipt thereof to protest or question the assessment.
Otherwise, the assessment would become final and unappealable. As he did not protest,
the assessment became final and unappealable on August 16, 1984. Consequently, when
the complaint for preliminary investigation was filed with the Department of Justice on June
8, 1989, the criminal action was instituted within the five (5) year prescriptive period.
However, the reinstatement of the information would expose her to double jeopardy.
 Petition is Granted. The lower court is enjoined from trying the Criminal Case and ordered
its dismissal.

16. China Banking Corporation vs City Treasurer of Manila

GR No. 204117 – July 01, 2015
Facts:
 On the basis of the reported income of CBC, it was assessed by the City Treasurer of
Manila consisting of local business tax, business permits, and other fees. CBC paid under
protest on the ground that it is not liable of said additional business tax and the imposition
of business tax under Section 21 constitutes double taxation. The City acknowledged
receipt of CBC's payment under protest of the assessed amount and further informed CBC
that she will await for respondent’s formal protest.
 Respondent CBC wrote a letter-reply to respondent's Letter reiterating that respondent
already protested the additional assessment under Section 21 of the Manila Revenue
Code. In the same Letter, respondent averred that considering that respondent received the
Letter four days after the deadline to decide and petitioner did not even resolve the protest,
petitioner formally demanded the refund representing the business tax collected under
Section 21 of the Manila Revenue Code.
 Respondent CBC filed a Petition for Review with the RTC which rendered its decision
granting the petition filed by CBC and ordered the City Treasurer to refund the payment.
The RTC resolved to deny the motion for reconsideration filed by the City Treasurer.
 CTA Division reversed the decision of the RTC, effectively dismissing CBC’s protest against
the disputed assessment. Although the CTA Division dismissed the City Treasurer’s
contention that CBC’s petition for review should have been filed with the Metropolitan Trial
Court (MeTC), nevertheless it found that the RTC did not have jurisdiction over the said
petition for because it was filed out of time. CBC sought reconsideration of the decision, but
its motion was denied by the CTA Division. On appeal, the CTA En Banc affirmed the ruling
of the CTA Division in toto, reiterating that the petition for review was filed out of time. CBC
filed its motion for reconsideration of the said decision but the CTA En Banc denied the
same.
 CBC asserts that it filed the proper written protest but for lack of any action from the City
Treasurer, it was prompted to file its petition for review with the RTC. The petitioner insists
on the invalidity of the City Treasurer’s assessment. It pointed out that the basis of the
assessment (Ordinance 7988 and 8011) had been declared unconstitutional, and that the
Office of the Mayor of Manila even directed the City Treasurer to cease and desist from
assessing and imposing Section 21 of the said ordinances.
 For her part, the City Treasurer filed her Memorandum where she contended that CBC
never filed a formal letter of protest to state the grounds for its objection while admitting that
it had paid the assessed amount under protest. She claimed that CBC simply filed a petition
for review with the RTC without filing a formal letter of protest. Without a formal letter of
protest, the City Treasurer argued that its claim for refund should be dismissed because the
 Local Government Code stated that no case or proceeding shall be maintained in any court
for recovery of any tax, fee or charged erroneously or illegally collected until a written claim
for refund has been filed with the local treasurer.
Issue:
 Whether or not CBC was able to file the proper written protest.
Held:
 Under the current state of law, there can be no doubt that the law does not prescribe any
formal requirement to constitute a valid protest. To constitute a valid protest, it is
sufficient if what has been filed contains the spontaneous declaration made to
acquire or keep some right or to prevent an impending damage. Accordingly, a protest
is valid so long as it states the taxpayer’s objection to the assessment and the
reasons therefor.
 In this case, the Court finds that the City Treasurer’s contention that CBC was not able to
properly protest the assessment to be without merit. The Court is of the view that CBC was
able to properly file its protest against the assessment of the City Treasurer when it filed its
letter questioning the imposition while paying the assessed amount. The petitioner was
unequivocal in its objection, stating that it took exception to the assessment made by the
City Treasurer under Section 21 of the city’s revenue code, arguing that it was not liable to
pay the additional tax imposed under the subject ordinance and that the imposition
constituted double taxation and, for said reason, invalid.
 The Court, however, is of the view that the period within which the City Treasurer must act
on the protest, and the consequent period to appeal a denial due to inaction, should be
reckoned from January 15, 2007 (time CBC protested), the date CBC filed its protest, and
not March 27, 2007 (expiration of limitation of inaction). Consequently, the Court finds that
the CTA En Banc did not err in ruling that CBC had lost its right to challenge the City
Treasurer’s denial due to inaction. The Court finds that the claim of petitioner CBC for
refund should be dismissed not only for being filed out of time but also for not being filed
before a court of competent jurisdiction.
 Petition is DENIED.

17. Allied Banking Corporation vs Commissioner of Internal Revenue

GR No. 175097 – February 05, 2010
Facts:
 The Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to
petitioner Allied Banking Corporation for deficiency. Petitioner received the PAN on May 18,
2004 and filed a protest against it on May 27, 2004.
 On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to
petitioner requesting that the deficiency tax be paid immediately upon receipt. And that if
petitioner disagrees, it may appeal the final decision within thirty (30) days from receipt,
otherwise said deficiency tax assessment shall become final, executory and demandable.
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30,
2004.
 Petitioner then immediately filed a Petition for Review with the CTA (First Division) on
September 29, 2004. The First Division rendered a Resolution granting respondent’s
Motion to Dismiss holding that it is the decision of the Commissioner of Internal Revenue on
the disputed assessment that can be appealed to the Court and not the assessment nor the
formal demand letter.
 Finding no reversible error, the CTA En Banc denied petitioner’s Petition for Review as well
as Petitioner’s Motion for Reconsideration. It declared that it is absolutely necessary for the
taxpayer to file an administrative protest in order for the CTA to acquire jurisdiction. It
 emphasized that an administrative protest is an integral part of the remedies given to a
taxpayer in challenging the legality or validity of an assessment. According to the CTA En
Banc, although there are exceptions to the doctrine of exhaustion of administrative
remedies, the instant case does not fall in any of the exceptions.
Issue:
 Whether or not the Formal Letter of Demand dated July 16, 2004 can be construed as a
final decision of the CIR appealable to the CTA
Held:
 If the protest is denied in whole or in part, or is not acted upon within one hundred
eighty (180) days from submission of documents, the taxpayer adversely affected by
the decision or inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of the one hundred eighty
(180)-day period; otherwise, the decision shall become final, executory and demandable.
 In the instant case, petitioner timely filed a protest after receiving the PAN. In
response thereto, the BIR issued a Formal Letter of Demand with Assessment
Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was
to dispute the assessments by filing an administrative protest within 30 days from
receipt thereof. Petitioner, however, did not protest the final assessment notices.
Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules,
the dismissal of the Petition for Review by the CTA was proper.
 However, a careful reading of the Formal Letter of Demand with Assessment Notices
leads us to agree with petitioner that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the administrative
agency concerned.
 In this case, records show that petitioner disputed the PAN but not the Formal Letter
of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for
not filing a protest against the Formal Letter of Demand with Assessment Notices
since the language used and the tenor of the demand letter, it appears from the
foregoing demand letter that the CIR has already made a final decision on the matter
and that the remedy of petitioner is to appeal the final decision within 30 days
indicate that it is the final decision of the respondent on the matter. The Court has time and
again reminded the CIR to indicate, in a clear and unequivocal language, whether his action
on a disputed assessment constitutes his final determination in order for the taxpayer
concerned to determine when his or her right to appeal to the tax court accrues. Viewed in
the light of the foregoing, respondent is now estopped from claiming that he did not intend
the Formal Letter of Demand with Assessment Notices to be a final decision.
 In this particular case is that, the Formal Letter of Demand with Assessment Notices which
was not administratively protested by the petitioner can be considered a final decision of the
CIR appealable to the CTA because the words used, specifically the words "final decision"
and "appeal", taken together led petitioner to believe that the Formal Letter of Demand with
Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and
that the available remedy was to appeal the same to the CTA.
 Petition is hereby GRANTED. The assailed Decision and the Resolution of the Court of Tax
Appeals are REVERSED and SET ASIDE.

18. Lascona Land Co., vs Commissioner of Internal Revenue

GR No. 171251 – March 05, 2012
Facts:
 The Commissioner of Internal Revenue (CIR) issued an Assessment Notice against
Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax.
 Consequently, Lascona filed a letter protest on April 20, 1998, but was denied by the
Officer-in-Charge (OIC), Regional Director (RD), Bureau of Internal Revenue considering
that the request to cancel or set aside the assessment notice issued was not elevated to
the Court of Tax Appeals as mandated by the Tax Code; and by virtue thereof, the said
assessment notice has become final, executory and demandable.
 Later, Lascona appealed the decision before the CTA. Lascona alleged that the RD erred in
ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-
day period rendered the assessment final and executory.
 The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA
after the lapse of the 180-day reglementary period provided under Section 228 of the
National Internal Revenue Code (NIRC) resulted to the finality of the assessment.
 The CTA, in its Decision, nullified the subject assessment. It held that in cases of inaction
by the CIR on the protested assessment, Section 228 of the NIRC provided two options for
the taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse of the one
hundred eighty (180)-day period, or (2) wait until the Commissioner decides on his protest
before he elevates the case. The CTA likewise denied CIR’s Motion for Reconsideration.
 Dissatisfied, the CIR filed an appeal before the CA which granted the CIR's petition and set
aside the Decision of the CTA and its Resolution. It further declared that the subject
Assessment Notice as final, executory and demandable.
Issue:
 Whether or not the subject assessment has become final, executory and demandable due
to the failure of petitioner to file an appeal before the CTA within thirty (30) days from the
lapse of the One Hundred Eighty (180)-day period.
Held:
 If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision
or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said
decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the
decision shall become final, executory and demandable.
 The taxpayer has two options, either: (1) file a petition for review with the CTA within 30
days after the expiration of the 180-day period; or (2) await the final decision of the
Commissioner on the disputed assessment and appeal such final decision to the CTA
within 30 days after the receipt of a copy of such decision, these options are mutually
exclusive and resort to one bars the application of the other.
 Considering that Lascona opted to await the final decision of the Commissioner on
the protested assessment, it then has the right to appeal such final decision to the
Court by filing a petition for review within thirty days after receipt of a copy of such
decision or ruling, even after the expiration of the 180-day period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. The option is
granted to the taxpayer; hence, the CIR cannot state that the appeal to the CTA is late
if the taxpayer chooses to wait for the final decision, even if it is beyond the 180-day
period.
 Petition is GRANTED. The Decision and the Resolution of the Court of Appeals are
REVERSED and SET ASIDE. Accordingly, the Decision 0 of the Court of Tax Appeals and
its Resolution are REINSTATED.

19. Winebrenner & Iñigo Insurance Brokers, Inc., vs Commissioner of Internal Revenue
GR No. 206526 – January 28, 2015
Facts:
 About two years after filing its Annual ITR (2003), petitioner applied for the administrative
tax claim/refund claiming entitlement to the refund of its excess or unutilized Creditable
Withholding Tax (CWT) for that year. There being no action taken on the said claim, a
petition for review was filed by petitioner before the CTA. In Its Decision, the CTA Division
partially granted petitioner’s claim for refund of excess and unutilized CWT.
 Petitioner filed a Motion for Partial Reconsideration praying that an amended decision be
issued granting the entirety of its claim for refund. Respondent Commissioner of Internal
Revenue (CIR) also moved for reconsideration, praying for the denial of the entire amount
of refund because petitioner failed to present the quarterly Income Tax Returns (ITRs) for
CY 2004. To the CIR, the presentation of the 2004 quarterly ITRs was indispensable in
proving petitioner’s entitlement to the claimed amount because it would prove that no carry-
over of unutilized and excess CWT for the four (4) quarters of CY 2003 to the succeeding
four (4) quarters of CY 2004 was made. In the absence of said ITRs, no refund could be
granted. In the CIR’s view, this was in accordance with the irrevocability rule under Section
76 of the NIRC.
 Consequently, the CTA-Division reversed itself. In an Amended Decision, it denied the
entire claim of petitioner. It reasoned out that petitioner should have presented as evidence
its first, second and third quarterly ITRs for the year 2004 to prove that the unutilized CWT
being claimed had not been carried over to the succeeding quarters. Aggrieved, petitioner
elevated the case to the CTA En Bancpraying for the reversal of the Amended Decision of
the CTA Division.
 Later, the CTA-En Banc affirmed the Amended Decision of the CTA-Division. It stated that
before a cash refund or an issuance of tax credit certificate for unutilized excess tax credits
could be granted, it was essential for petitioner to establish and prove, by presenting the
quarterly ITRs of the succeeding years, that the excess CWT was not carried over to the
succeeding taxable quarters considering that the option to carry over in the succeeding
taxable quarters could not be modified in the final adjustment returns (FAR). Because
petitioner did not present the first, second and third quarterly ITRs for CY 2004, despite
having offered and submitted the Annual ITR/FAR for the same year, the CTA-En Banc
stated that the petitioner failed to discharge its burden, hence, no refund could be granted.
Issue:
 Whether or not the original Decision of the CTA should be affirmed.
Held:
 The Court recognizes, as it always has, that the burden of proof to establish entitlement
to refund is on the claimant taxpayer. Being in the nature of a claim for exemption refund
is construed in strictissimi juris against the entity claiming the refund and in favor of the
taxing power. This is the reason why a claimant must positively show compliance with
the statutory requirements provided for under the NIRC in order to successfully
pursue one’s claim. As implemented by the applicable rules and regulations and as
interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess and
unutilized CWT must:
1) File the claim with the CIR within the two year period from the date of payment of the
tax;
2) Show on the return that the income received was declared as part of the gross income;
and
3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of tax withheld.
 There is no question that those who claim must not only prove its entitlement to the
excess credits, but likewise must prove that no carry-over has been made in cases
where refund is sought. However, proving that no carry-over has been made does
 not absolutely require the presentation of the quarterly ITRs. Requiring that the ITR or
the FAR of the succeeding year be presented to the BIR in requesting a tax refund has no
basis in law and jurisprudence.
 First, Section 76 of the Tax Code does not mandate it. The law merely requires the
filing of the FAR for the preceding – not the succeeding – taxable year. Second,
Section 5 of RR 12-94, amending Section 10(a) of RR 6-85, merely provides that
claims for refund of income taxes deducted and withheld from income payments
shall be given due course only (1) when it is shown on the ITR that the income
payment received is being declared part of the taxpayer’s gross income; and (2)
when the fact of withholding is established by a copy of the withholding tax
statement, duly issued by the payor to the payee, showing the amount paid and the
income tax withheld from that amount. The logic in not requiring quarterly ITRs of the
succeeding taxable years to be presented remains true to this day. What Section 76
requires, just like in all civil cases, is to prove the prima facie entitlement to a claim,
including the fact of not having carried over the excess credits to the subsequent quarters
or taxable year. It does not say that to prove such a fact, succeeding quarterly ITRs are
absolutely needed.
 The means of ascertainment of a fact is best left to the party that alleges the same. The
Court’s power is limited only to the appreciation of that means pursuant to the prevailing
rules of evidence. To stress, what the NIRC merely requires is to sufficiently prove the
existence of the non-carryover of excess CWT in a claim for refund.
 An annual ITR contains the total taxable income earned for the four (4) quarters of a
taxable year, as well as deductions and tax credits previously reported or carried
over in the quarterly income tax returns for the subject period. It goes without saying
that the annual ITR (including any other proof that may be sufficient to the Court) can
sufficiently reveal whether carry over has been made in subsequent quarters even if
the petitioner has chosen the option of tax credit or refund in the immediately 2003
annual ITR. The total taxable income contains the combined income for the four quarters of
the taxable year, as well as the deductions and excess tax credits carried over in the
quarterly income tax returns for the same period.
 It must be remembered that taxes computed in the quarterly returns are mere estimates. It
is the annual ITR which shows the aggregate amounts of income, deductions, and credits
for all quarters of the taxable year. It is the final adjustment return which shows whether a
corporation incurred a loss or gained a profit during the taxable quarter. Thus, the
presentation of the annual ITR would suffice in proving that prior year’s excess credits were
not utilized for the taxable year in order to make a final determination of the total tax due.
The presentation of the quarterly ITRs of the subsequent year is not mandatory on the part
of the claimant to prove its claims.
 The absence of any amount written in the Prior Year excess Credit – Tax Withheld
portion of petitioner’s 2004 annual ITR clearly shows that no prior excess credits
were carried over in the first four quarters of 2004. And since petitioner was able to
sufficiently prove that excess tax credits in 2003 were not carried over to taxable
year 2004 by leaving the item "Prior Year’s Excess Credits" as blank in its 2004
annual ITR, then petitioner is entitled to a refund. At best, the existence of quarterly
ITRs would have the effect of strengthening a proven fact. And as such, may only be
considered corroborative evidence, obviously not indispensable in character.
 Once the requirements laid down by the NIRC have been met, a claimant should be
considered successful in discharging its burden of proving its right to refund.
Thereafter, the burden of going forward with the evidence, as distinct from the general
burden of proof, shifts to the opposing party, that is, the CIR.
 The CIR espouses the view that it must be given ample opportunity to investigate the
veracity of the claims. Yet, nothing was produced during trial to destroy the prima facie right
of the petitioner by counterchecking the claims with the quarterly ITRs the CIR has on its
file. To the Court, it seems that the CIR languished on its duties to ascertain the veracity of
the claims and just hoped that the burden would fall on the petitioner’s head once the issue
reaches the courts.
 The CIR has the equally important responsibility of contradicting petitioner’s claim by
presenting proof readily on hand once the burden of evidence shifts to its side. Claims for
refund are civil in nature and as such, petitioner, as claimant, though having a heavy
burden of showing entitlement, need only prove preponderance of evidence in order to
recover excess credit in cold cash.
 Failure to present the quarterly ITRs and AFR to support its contention against the
grant of a tax refund to a claimant is certainly fatal. However, the verification process
is not incumbent on any claimant for that matter; but is the duty of the CIR to verify
whether the excess income taxes have been carried over. Should there be a possibility
that a claimant may have violated the irrevocability rule and thereafter claim twice from its
credits, no one is to be blamed but the CIR for not discharging its burden of evidence to
destroy a claimant’s right to a refund.
 The CTA, which by the very nature of its functions of dedicating itself exclusively to
the consideration of the tax problems has necessarily developed an expertise on the
subject. It being the case, the Court partly grants this petition to the extent of reinstating
the April 23, 2010 original decision of the CTA Division.
 Court partly grants the petition. The Decision of the Court of Tax Appeals En Banc is
REVERSED. The Decision of the Court of Tax Appeals Special First Division is
REINSTATED. Respondent Commissioner of Internal Revenue is ordered to REFUND.

20. Republic of the Philippines vs Marsman Development Company

GR No. L-18956 – April 27, 1972
Facts:
 An investigation was conducted on the business operation and activities of the Respondent,
leading to the discovery that certain taxes were due from it on logs produced from its
concession. Later, the Deputy Collector of Internal Revenue demanded the payment of
forest charges due, and a surcharge. After further investigation another assessment was
sent to the defendant corporation by the Bureau of Internal Revenue demanding from it
deficiency sales tax, forest charges, surcharges and penalties. Another assessment was
addressed to the defendant corporation for the payment of 25% surcharge for discharging
lumber without permit.
 The first acknowledgment by the defendant corporation of its receipt of assessment
contained in the letter was the letter of the defendant corporation under the signature of its
counsel, Atty. Pedro L. Moya wherein it is requested that said defendant be furnished with
an itemized statement of the said taxes and wherein notice is served of its intention to
question the validity and the legality of the assessments and to appear before the
Conference Staff of the Bureau of Internal Revenue in connection with the said tax.
 In reply, the Bureau of Internal Revenue wrote Atty. Moya a letter informing him that before
the case may be acted upon by the Conference Staff, it was necessary that the defendant
corporation comply within 10 days from date of said letter requiring, among others, that
requests for reinvestigation or re-examination of tax assessments shall be made in writing
under oath of the taxpayer concerned, specifying the ground or grounds relied upon for the
revision of the assessment and accompanied by such documents and other documents
relied upon in support of the request; and that, as a general rule, the revision will be granted
 only upon payment of one-half of the total assessments and upon filing of a bond to
guarantee the payment of the balance of the tax.
Issue:
 Whether or not the lower court erred in declaring that the notices of the commissioner of
internal revenue were the "assessments," and that the same became final and executory.
Held:
 It may be stated that regardless of what might have been alleged in appellee's pleadings
and memoranda, the facts proven by evidence, which are not alleged to have been
objected to as varying supposed judicial admissions, unmistakably show that when Atty.
Pedro L. Moya acknowledged receipt on behalf of appellant corporation of the Bureau of
Internal Revenue's assessments requesting at the same time for a reinvestigation before
the Conference Staff, he was informed that his request for investigation would not be given
due course unless his client priorly complied within ten (10) days requiring that requests for
reinvestigation or re-examination of tax assessments should be made in writing and under
oath of the taxpayer concerned, specifying the ground or grounds relied upon for the
requested revision and accompanied by the documents relied upon, in support of the
request, as well as by the payment of one-half of the total assessments, plus a bond to
guarantee payment of the balance, but appellants failed to comply with said conditions.
 It is plain that His Honor committed no error in holding that the period to question the tax
assessments herein involved had already expired when the Commissioner of Internal
Revenue initiated this suit against defendants. Defendant corporation aknowledged receipt
of the said assessments and, in fact, it requested for a reinvestigation before the
Conference Staff, but when the Bureau demanded compliance with the prerequisites
aforementioned of such reinvestigation, the corporation failed to comply. The corporation
did ask for exemption, but when this request was denied, again there was no compliance.
In view of such non-compliance, in its letter, the Bureau unequivocally warned the
corporation that should it fail further to comply, within five days from receipt thereof, the
assessments would be considered final. Still no compliance came. Subsequent follow-up
letters brought no better results.
 Appellant Corporation, by its own omission, made it impossible for the Bureau of Internal
Revenue to act on its motion for reconsideration. Not that it would have otherwise mattered,
for it has been held that the mere filing of such a motion does not suspend the running of
the period for the collection of the tax, which implies that any assessment made by the
Bureau is supposed to be final and executory, insofar as the taxpayer is concerned, unless
revised by the Bureau in accordance with law and regulations, but it is to be emphasized
that a taxpayer cannot delay the collection of taxes by the simple expedient of barely asking
for clarification or reconsideration, very often unnecessary and unwarranted, without doing
anything to comply with the statutory and reglementary requirements for the reconsideration
of the assessment made against him.
 Since it does not appear, however, that appellant corporation had filed any return in relation
to the taxes herein involved, and it was incumbent upon appellants to show that such a
return had been submitted, the pertinent provision applicable herein is Section 332 (a)
which provides that in case of a false or fraudulent return or of a failure to file a return, the
tax may be assessed at anytime within ten years after the discovery of the falsity, fraud or
omission. The assessments made were all within the aforecited 10-year period for the
assessment of the tax. Even if the Court were to consider, as appellants suggest, the fact
brought out in their brief but not found by the trial court that what are being sought to be
collected are deficiency taxes, thereby implying a return must have been filed, nothing can
he gained by appellants, for in order that the filing of a return may serve as the starting
point of the period for the making of an assessment, the return must be as substantive
 complete as to include the needed details on which the full assessment may be made, and
appellants have not shown that such was the nature of the return they would infer had been
filed by the corporation.
 In order that the filing of a return may serve as the starting point of the period for the
making of an assessment, the return must be substantially complete as to include
the needed details on which the full assessment may be made.
 Judgment of the trial court is affirmed.

21. Republic of the Philippines vs Court of Appeals

GR No. L-38540 – April 30, 1987
Facts:
 In a demand letter, the Commissioner of Internal Revenue assessed private respondent
deficiency taxes. Later, Petitioner reiterated its demand upon private respondent for
payment of said amount. Private respondent did not contest the assessment in the Court of
Tax Appeals. On the theory that the assessment had become final and executory, petitioner
filed a complaint for collection of the said amount against private respondent. However, for
failure to serve summons upon private respondent, the complaint was dismissed, without
prejudice. On motion, the order of dismissal was set aside, at the same time giving
petitioner sixty (60) days within which to serve summons upon private respondent.
 For failure anew to serve summons, the Court issued an order dismissing Case without
prejudice. The order of dismissal later became final. Subsequently, the complaint against
private respondent for collection of the same tax was refiled, but the same was erroneously
docketed with the same case previously dismissed without prejudice. Without correcting
this error, another complaint was filed. The Court a quo rendered a decision against the
private respondent.
 On appeal to the respondent Court of Appeals, the decision was reversed. Petitioner,
Republic of the Philippines, filed a motion for reconsideration which was likewise denied by
said Court.
Issue:
 Whether or not the Court of Appeals erred in not holding that private respondent failed to
rebut the presumption that the letter assessment having been duly directed and mailed was
received in the regular course of the mail and that official duty has been regularly
performed.
Held:
 As correctly observed by the respondent court in its appealed decision, while the
contention of petitioner is correct that a mailed letter is deemed received by the
addressee in the ordinary course of mail, stilt this is merely a disputable
presumption, subject to controversion, and a direct denial of the receipt thereof
shifts the burden upon the party favored by the presumption to prove that the mailed
letter was indeed received by the addressee.
 Appellee contends that the notice was released and mailed to the appellant by the BIR
under the signature of the Chief, Records Section, Office; that since the original thereof was
not returned to the appellee, the presumption is that the appellant received the mailed
notice. But this being merely a mere disputable presumption, the same is subject to
controversion, and a direct denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter was received by the addressee.
 Appellee, however, argues that since notice was released and mailed and the fact of its
release was admitted by the appellant the admission is proof that he received the mailed
notice of assessment. We do not think so. It is true the Court a quo made such a finding of
fact, but as pointed out by the appehant in its brief, and as borne out by the records, no
 such admission was ever made by the appellant in the answer or in any other pleading, or
in any declaration, oral or documentary before the trial court. We note that the appellee has
not met this challenge, and after a review of the records, we find appeflant's assertion well-
taken. Petitioner, on the other hand, has not adduced proof that private respondent had in
fact received the demand letter of 16 July 1955, it cannot be assumed that private
respondent received said letter.
 Since petitioner has not adduced proof that private respondent had in fact received the
demand letter of 16 July 1955, it can not be assumed that private respondent received said
letter. Records, however, show that petitioner wrote private respondent a follow-up
letter dated 19 September 1956, reiterating its demand for the payment of taxes as
originally demanded in petitioner's letter dated 16 July 1955. This follow-up letter is
considered a notice of assessment in itself which was duly received by private
respondent in accordance with its own admission.
 Under Section 7 of Republic Act No. 1125, the assessment is appealable to the Court
of Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer's failure
to appeal in due time, as in the case at bar, makes the assessment in question final,
executory and demandable. Thus, private respondent is now barred from disputing
the correctness of the assessment or from invoking any defense that would reopen
the question of its liability on the merits.
 In a suit for collection of internal revenue taxes, as in this case, where the
assessment has already become final and executory, the action to collect is akin to
an action to enforce a judgment. No inquiry can be made therein as to the merits of
the original case or the justness of the judgment relied upon.
 Appealed decision is hereby reversed.

22. Gonzalo Nava vs Commissioner of Internal Revenue

GR No. L-19470 – January 30, 1975
Facts:
 Nava filed his income tax return and, on the same date, he was assessed by respondent
Commissioner based solely on said return. Nava paid one-half of the tax due.
Subsequently, Nava offered his backpay certificate to pay said balance, but respondent
refused the offer. Later, he requested the respondent to hold in abeyance the collection of
said balance until the question of whether or not he was entitled to pay the same out of his
backpay shall have been decided, but this was also rejected by the latter. This rejection
was followed by two more letters or notices demanding payment of the balance.
 After investigation of petitioner's income tax return, respondent issued a deficiency income
tax assessment notice requiring petitioner to pay the balance plus surcharge. Several
notices of this revised assessment are alleged to have been issued to the taxpayer, but
Nava claims to have learned of it for the first time. More than five years since the original
tax return was filed, and testified to that effect in the court. Nava called attention to the fact
that more than six years had elapsed. He protested the assessment and contended that it
was a closed issue. The Director insisted upon his demand that the new assessment be
paid. Nava asked for reconsideration, and later was informed that reinvestigation would be
granted provided the taxpayer waived the statute of limitations, a condition that was
rejected. Thereupon, the reconsideration of the assessment was denied by the Collector's
letter. Nava filed a petition for review with the Court of Tax Appeals. The latter reduced the
deficiency and cancelled the surcharge.
 The Court of Tax Appeals ruled that the assessment had not prescribed. The fact that
petitioner admitted receipt of the "second final notice" without protest is an indication that he
received the previous notices, and assuming that petitioner received the income tax
 assessment notice in due course of mail, the assessment was made within the five-year
period, and even granting that the ten-year period applicable to fraud cases does not apply
to this case.
Issue:
 Whether or not the enforcement of the tax assessment has prescribed.
Held:
 Petitioner Nava denied having received the original copy of said notice. The Revenue
Commissioner, on the other hand, presented a witness Mr. Pablo Sangil, an
employee clerk of the B.I.R who attempted to establish that the original copy thereof
was actually issued or sent on March 30, 1955. This witness, however, disclaimed
having personal knowledge of its issuance or release on said date either by mail or
personal delivery because, according to him, he was assigned in the income tax
section of the Bureau of Internal Revenue in October 1956 only. Insofar as the
testimony of this witness is concerned, he only declared as to the fact that there appears in
his record book a note (Exhibit "10") that a letter dated March 15, 1957 was mailed by
special delivery with return card to Gonzalo P. Nava. He admitted, however, that he was not
the one who prepared such entry in the record book. What was the nature of the letter does
not appear; at any rate, it was mailed beyond the 5-year limitation period.
 Although witness Sangil testified as to the meaning of the dates, his testimony cannot be
given much credence because those supposed notices were sent on or before August 25,
1956 at the latest, and, as hereinabove pointed out, the witness was assigned in the
income tax section of the Bureau of Internal Revenue since October, 1956 only.
 Thus, contrary to the finding of the Court of Tax Appeals, respondent utterly failed to prove
by substantial evidence that the assessment notice dated March 30, 1955 and the other
supposed written demand letters or notices subsequent thereto were in fact issued or sent
to taxpayer Nava. The presumption that a letter duly directed and mailed was received in
the regular course of mail cannot be applied to the case at bar.
 Deficiency income tax assessments cannot be enforced where the tax collector
cannot prove that said assessments were served on the taxpayer. Mere notations
made without the taxpayer's intervention, notice, or control, without adequate supporting
evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue
offices, without adequate protection or defense.
 Decision of the Court of Tax Appeals under review is reversed

23. Jose Aznar vs Court of Tax Appeals

GR No. L-20569 – August 23, 1974
Facts:
 When the late Matias H. Aznar filed his income tax returns. The Commissioner of Internal
Revenue, having his doubts on the veracity of the reported income of one obviously
wealthy, caused to ascertain the taxpayer's true income. The assets and liabilities of the
taxpayer were ascertained and it was discovered that his net worth had increased every
year, which increases in net worth was very much more than the income reported. The
findings clearly indicated that the taxpayer did not declare correctly the income reported in
his income tax returns.
 Based on the above findings, respondent Commissioner, in his letter, notified the taxpayer
of the assessed tax delinquency plus compromise penalty. The taxpayer requested a
reinvestigation which was granted for the purpose of verifying the merits of the various
objections of the taxpayer to the deficiency income tax assessment. After the
reinvestigation, another deficiency assessment reducing the amount superseded the
previous assessment and notice thereof was received by Matias H. Aznar.
 Later, Respondent Commissioner placed the properties of Matias H. Aznar under distraint
and levy to secure payment of the deficiency income tax in question. Matias H. Aznar filed
his petition for review of the case with the Court of Tax Appeals. With a subsequent petition
immediately thereafter to restrain respondent from collecting the deficiency tax by summary
method, the latter petition being granted without requiring petitioner to file a bond.
Issue:
 Whether or not the Commissioner of Internal Revenue correctly assessed the deficiency
income taxes of the late Matias H. Aznar as fraudulent.
Held:
 Petitioner's contention is that the provision of law applicable to this case is the period of five
years limitation upon assessment and collection from the filing of the returns provided for in
See. 331 of the National Internal Revenue Code. He argues that since the 1946 income tax
return could be presumed filed before March 1, 1947 and the notice of final and last
assessment was received by the taxpayer on March 2, 1955, a period of about 8 years had
elapsed and the five year period provided by law (Sec. 331 of the National Internal
Revenue Code) had already expired. Respondents, on the other hand, are of the firm belief
that regarding the prescriptive period for assessment of tax returns, Section 332 of the
National Internal Revenue Code should apply because, as in this case, "(a) In the case of a
false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may
be assessed, or a proceeding in court for the collection of such tax may be begun without
assessment, at any time within ten years after the discovery of the falsity, fraud or omission.
 Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not
file false and fraudulent returns with intent to evade tax, while respondent Commissioner of
Internal Revenue insists contrariwise, with respondent Court of Tax Appeals concluding that
the very "substantial under declarations of income for six consecutive years eloquently
demonstrate the falsity or fraudulence of the income tax returns with an intent to evade the
payment of tax.
 The Court dispensed with these controversial arguments on facts, although they do not
deny that the findings of facts by the Court of Tax Appeals, supported as they are by very
substantial evidence, carry great weight, by resorting to a proper interpretation of Section
332 of the NIRC. The Court believes that the proper and reasonable interpretation of said
provision should be that in the three different cases of (1) false return, (2) fraudulent return
with intent to evade tax, (3) failure to file a return, the tax may be assessed, or a proceeding
in court for the collection of such tax may be begun without assessment, at any time within
ten years after the discovery of the (1) falsity, (2) fraud, (3) omission. The Court stands that
the law should be interpreted to mean a separation of the three different situations of false
return, fraudulent return with intent to evade tax, and failure to file a return is strengthened
immeasurably by the last portion of the provision which segregates the situations into three
different classes, namely falsity, fraud and "omission. That there is a difference between
false return and fraudulent return cannot be denied. While the first merely implies
deviation from the truth, whether intentional or not, the second implies intentional or
deceitful entry with intent to evade the taxes due. The importance lies in the
application of the penalty surcharge. Actual fraud, not constructive, is subject to the
50% surcharge. For the surcharge to apply, it must be intentional fraud, consisting of
deception wilfully and deliberately done or resorted to in order to induce another to
give up some legal right.
 The ordinary period of prescription of 5 years within which to assess tax liabilities under
Sec. 331 of the NIRC should be applicable to normal circumstances, but whenever the
government is placed at a disadvantage so as to prevent its lawful agents from proper
assessment of tax liabilities due to false returns, fraudulent return intended to evade
 payment of tax or failure to file returns, the period of ten years provided for in Sec. 332 (a)
NIRC, from the time of the discovery of the falsity, fraud or omission even seems to be
inadequate and should be the one enforced. There being undoubtedly false tax returns
in this case, We affirm the conclusion of the respondent Court of Tax Appeals that
Sec. 332 (a) of the NIRC should apply and that the period of ten years within which to
assess petitioner's tax liability had not expired at the time said assessment was
made.

24. Commissioner of Internal Revenue vs Enron Subic Power Corp.

GR No. 166387 – January 19, 2009
Facts:
 Enron, a domestic corporation registered with the Subic Bay Metropolitan Authority as a
freeport enterprise filed its annual income tax return. It indicated a net loss. Subsequently,
the Bureau of Internal Revenue, through a preliminary five-day letter, informed it of a
proposed assessment of an alleged P2,880,817.25 deficiency income tax. Enron disputed
the proposed deficiency assessment in its first protest letter.
 Later, Enron received from the CIR a formal assessment notice requiring it to pay the
alleged deficiency income tax of P2,880,817.25 for the taxable year 1996. Enron protested
this deficiency tax assessment. Due to the non-resolution of its protest within the 180-day
period, Enron filed a petition for review in the Court of Tax Appeals. It argued that the
deficiency tax assessment disregarded the provisions of Section 228 of the National
Internal Revenue Code, as amended, and Section 3.1.4 of Revenue Regulations No. 12-99
by not providing the legal and factual bases of the assessment. Enron likewise questioned
the substantive validity of the assessment.
 In a decision, the CTA granted Enrons petition and ordered the cancellation of its deficiency
tax assessment. The CTA reasoned that the assessment notice sent to Enron failed to
comply with the requirements of a valid written notice under Section 228 of the NIRC and
RR No. 12-99. The CIRs motion for reconsideration of the CTA decision was denied in a
resolution.
 CIR appealed the CTA decision to the CA but the CA affirmed it. The CA held that the audit
working papers did not substantially comply with Section 228 of the NIRC and RR No. 12-
99 because they failed to show the applicability of the cited law to the facts of the
assessment. The CIR filed a motion for reconsideration but this was deemed abandoned
when he filed a motion for extension to file a petition for review in this Court.
Issue:
 Whether or not the Respondent was validly informed of the legal and factual bases of the
deficiency assessment against it.
Held:
 The well-established doctrine that as a matter of practice and principle, the Court will not
set aside the conclusion reached by an agency, like the CTA, especially if affirmed by the
CA. By the very nature of its function, it has dedicated itself to the study and consideration
of tax problems and has necessarily developed an expertise on the subject, unless there
has been an abuse or improvident exercise of authority on its part, which is not present
here.
 A notice of assessment is a declaration of deficiency taxes issued to a taxpayer who fails to
respond to a Pre-Assessment Notice (PAN) within the prescribed period of time, or whose
reply to the PAN was found to be without merit. The Notice of Assessment shall inform the
taxpayer of this fact, and that the report of investigation submitted by the Revenue Officer
conducting the audit shall be given due course.
 Section 228 of the NIRC provides that the taxpayer shall be informed in writing of the law
and the facts on which the assessment is made. Otherwise, the assessment is void.
 It is clear from the foregoing that a taxpayer must be informed in writing of the legal and
factual bases of the tax assessment made against him. The use of the word shall in these
legal provisions indicates the mandatory nature of the requirements laid down therein. The
CIR merely issued a formal assessment and indicated therein the supposed tax, surcharge,
interest and compromise penalty due thereon. The Revenue Officers of the [the CIR] in the
issuance of the Final Assessment Notice did not provide Enron with the written bases of the
law and facts on which the subject assessment is based. The CIR did not bother to explain
how it arrived at such an assessment. Moreso, he failed to mention the specific provision of
the Tax Code or rules and regulations which were not complied with by Enron.
 Both the CTA and the CA concluded that the deficiency tax assessment merely itemized
the deductions disallowed and included these in the gross income. It also imposed the
preferential rate of 5% on some items categorized by Enron as costs. The legal and factual
bases were, however, not indicated.
 CIR insists that an examination of the facts shows that Enron was properly apprised of its
tax deficiency. During the pre-assessment stage, the CIR advised Enrons representative of
the tax deficiency, informed it of the proposed tax deficiency assessment through a
preliminary five-day letter and furnished Enron a copy of the audit working paper allegedly
showing in detail the legal and factual bases of the assessment.
 However, the advice of tax deficiency, given by the CIR to an employee of Enron, as
well as the preliminary five-day letter, were not valid substitutes for the mandatory
notice in writing of the legal and factual bases of the assessment. These steps were
mere perfunctory discharges of the CIRs duties in correctly assessing a taxpayer.
The requirement for issuing a preliminary or final notice, as the case may be, informing a
taxpayer of the existence of a deficiency tax assessment is markedly different from the
requirement of what such notice must contain. Just because the CIR issued an advice, a
preliminary letter during the pre-assessment stage and a final notice, in the order required
by law, does not necessarily mean that Enron was informed of the law and facts on which
the deficiency tax assessment was made.
 The law requires that the legal and factual bases of the assessment be stated in the formal
letter of demand and assessment notice. Thus, such cannot be presumed.
 The Court notes that the old law merely required that the taxpayer be notified of the
assessment made by the CIR. This was changed in 1998 and the taxpayer must now be
informed not only of the law but also of the facts on which the assessment is made. Such
amendment is in keeping with the constitutional principle that no person shall be deprived of
property without due process. In view of the absence of a fair opportunity for Enron to be
informed of the legal and factual bases of the assessment against it, the assessment in
question was void.
 Petition is hereby DENIED. The decision of the Court of Appeals is AFFIRMED.

25. Butuan Sawmill vs Court of Tax Appeals

GR No. L-20601 – February 28, 1966
Facts:
 Petitioner sold logs to Japanese firms. Upon investigation by the Bureau of Internal
Revenue, it was ascertained that no sales tax return was filed by the petitioner and neither
did it pay the corresponding tax on the sales. On the basis of agent Antonio Mole's report
respondent, determined against petitioner representing sales tax, surcharge and
compromise penalty on its sales tax, surcharge and compromise penalty on its sales of
logs, and in consequence of a reinvestigation, respondent amended the amount of the
 previous assessment. Subsequent requests for reconsideration of the amended
assessment having been denied, petitioner filed the instant petition.
 Later, the lower court upheld the legality and correctness of the amended assessment of
the sales tax and surcharge, ruling that the sales in question, in the light of our previous
decisions, were domestic or "local" sales, and, therefore, subject to sales tax under the
provision of the Tax Code; and that the assessment thereof was made well within the ten-
year period prescribed by the same Code, since petitioner herein omitted to file its sales tax
returns for the years 1951, 1952 and 1953, and this omission was discovered only on
September 17, 1957. The imposition of the compromise penalty was, however, eliminated
therefrom for want of agreement between the taxpayer and the Collector (now
Commissioner) of Internal Revenue. A motion to reconsider said decision having been
denied, petitioner herein interposed the present appeal before this Court.
Issue:
 Whether or not the assessment thereof was made within the prescriptive period provided by
law therefor.
Held:
 Petitioner herein insists that the circumstances enumerated in the above finding, which this
Court had, in previous decisions, considered as determinative of the place of transfer of
ownership of the logs sold, for purposes of taxation, are not in themselves evidentiary
indications to show that the parties intended the title of the logs to pass to the Japanese
buyers in Japan. Thus, it points out that the "FOB" feature of the sales contract was made
only to fix its price and not to fix the place of delivery; that the requirement of certification of
quality, quantity, and measurement specifications of the logs by local authorities was done
to comply with local laws, rules, and regulations, and was not a part of the sales
arrangement; that the payment of freight by the Japanese buyers is not an uncommon
feature of "FOB" shipments; and that the payment of prices by means of irrevocable letters
of credit is but a common established business practice to secure payment of the price to
the seller. It also insists that, even assuming that the "FOB" feature of the disputed sales
determines the situs of transfer of ownership, the same is merely a prima facie presumption
which yields to contrary proof such as that the logs were made deliverable to the "order of
the shipper" and the logs were shipped at the risk of the shipper, which circumstances, if
considered, would negate the above implications. Hence, petitioner herein contends that
the disputed sales were consummated in Japan, and, therefore, not subject to the taxing
jurisdiction of our Government.
 It is clear that said export sales had been consummated in the Philippines and were,
accordingly, subject to sales tax therein.
 The specification in the bill of lading to the effect that the goods are deliverable to the order
of the seller or his agent does not necessarily negate the passing of title to the goods upon
delivery to the carrier is clear from the second part of paragraph 2 of Article 1503 of the
Civil Code of the Philippines.
 it has been a settled rule that in petitions to review decisions of the Court of Tax Appeals,
only questions of law may be raised and may be passed upon by this Court; and it having
been found that there is no proof to substantiate the foregoing contention of petitioner, the
same should also be ruled as devoid of merit.
 Since petitioner filed its income tax returns for the years 1951, 1952 and 1953, and the
assessment was made in 1957 only, it further contends that the assessment of the sales
tax corresponding to the years 1951 and 1952 has already prescribed for having been
made outside the five-year period prescribed in Section 331 of the Tax Code and should,
therefore, be deducted from the assessment of the deficiency sales tax made by
respondent.
 The above contention has already been raised and rejected as not meritorious in a previous
case decided by this Court. Thus, we held that an income tax return cannot be considered
as a return for compensating tax for purposes of computing the period of prescription under
Section 331 of the Tax Code, and that the taxpayer must file a return for the particular tax
required by law in order to avail himself of the benefits of Section 331 of the Tax Code;
otherwise, if he does not file a return, an assessment may be made within the time stated in
Section 332(a) of the same Code.
 It being undisputed that petitioner failed to file a return for the disputed sales
corresponding to the years 1951, 1952 and 1953, and this omission was discovered
only on September 17, 1957, and that under Section 332(a) of the Tax Code
assessment thereof may be made within ten (10) years from and after the discovery
of the omission to file the return, it is evident that the lower court correctly held that the
assessment and collection of the sales tax in question has not yet prescribed.
 If the taxpayer files the wrong return, it as though he filed no return at all. This true
even if all the necessary information was reflected in the erroneous return. In
situations like this, the 10-year prescriptive period will apply.
 Decision appealed from should be, as it is hereby affirmed.

26. Commissioner of Internal Revenue vs Pascor Realty

GR No. 128315 – June 29, 1999
309 SCRA 402
Facts:
 By virtue of an LOA, the BIR Commissioner authorized its Revenue Officers to examine the
books of accounts and other accounting records of Petitioner for three (3) taxable years
(1986, 1987 & 1988). On March 1, 1995, the Commissioner of Internal Revenue filed a
criminal complaint before the DoJ against PRDC, its President, and its Treasurer, alleging
evasion of taxes. Private respondents PRDC filed an Urgent Request for
Reconsideration/Reinvestigation disputing the tax assessment and tax liability. CIR denied
the urgent request for reconsideration/reinvestigation of the private respondents on the
ground that no formal assessment has yet been issued by the Commissioner.
 Private respondents then elevated the Decision of the CIR to the Court of Tax Appeals. The
CIR filed a Motion to Dismiss the petition on the ground that the CTA has no jurisdiction
over the subject matter of the petition, as there was no formal assessment issued against
the petitioners. The CTA denied the said motion to dismiss agreeing that the criminal
complaint for tax evasion is the assessment issued, and that the letter of denial is the
decision properly appealable. It is the Court's honest belief, that the criminal case for tax
evasion is already an assessment. The complaint contains the details of the assessment
like the kind and amount of tax due, and the period covered) and ordered the CIR to file an
answer within thirty (30) days from receipt of said resolution. The CIR received the
resolution but did not file an answer nor did she move to reconsider the resolution.
 Instead, the CIR filed a petition for review (45) before the Supreme Court alleging that
Respondent Court of Tax Appeals acted with grave abuse of discretion and without
jurisdiction in considering the affidavit/report of the revenue officer and the indorsement of
said report to the secretary of justice as assessment which may be appealed to the Court of
Tax Appeals.
 On appeal, the Court of Appeals sustained the CTA and dismissed the petition.
Issue:
 Whether or not the Complaint filed by herein petitioner can be construed as an assessment.
Held:
 Neither the NIRC nor the regulations governing the protest of assessments provide a
specific definition or form of an assessment. However, the NIRC defines the specific
functions and effects of an assessment. To consider the affidavit attached to the Complaint
as a proper assessment is to subvert the nature of an assessment and to set a bad
precedent that will prejudice innocent taxpayers. An assessment informs the
taxpayer that he or she has tax liabilities. But not all documents coming from the BIR
containing a computation of the tax liability can be deemed assessments.
 An assessment must be sent to and received by a taxpayer, and must demand
payment of the taxes described therein within a specific period. Thus, the NIRC
imposes a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay
deficiency tax within the time prescribed for its payment in the notice of assessment.
Likewise, an interest of 20 percent per annum, or such higher rates as may be prescribed
by rules and regulations, is to be collected from the date prescribed for its payment until the
full payment.
 The issuance of an assessment is vital in determining, the period of limitation
regarding its proper issuance and the period within which to protest it. Section 203 of
the NIRC provides that internal revenue taxes must be assessed within three years from
the last day within which to file the return. Section 222, on the other hand, specifies a period
of ten years in case a fraudulent return with intent to evade was submitted or in case of
failure to file a return. Also, Section 228 of the same law states that said assessment may
be protested only within thirty days from receipt thereof. Necessarily, the taxpayer must be
certain that a specific document constitutes an assessment. Otherwise, confusion would
arise regarding the period within which to make an assessment or to protest the same, or
whether interest and penalty may accrue thereon.
 In the present case, the revenue officers' Affidavit merely contained a computation of
respondents' tax liability. It did not state a demand or a period for payment. Worse, it
was addressed to the justice secretary, not to the taxpayers.
 The issuance of an assessment must be distinguished from the filing of a complaint.
Before an assessment is issued, there is, by practice, a pre-assessment notice sent
to the taxpayer. The taxpayer is then given a chance to submit position papers and
documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied,
an assessment signed by him or her is then sent to the taxpayer informing the latter
specifically and clearly that an assessment has been made against him or her. In contrast,
the criminal charge need not go through all these. The criminal charge is filed
directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had
been filed against him, not that the commissioner has issued an assessment. It must
be stressed that a criminal complaint is instituted not to demand payment, but to penalize
the taxpayer for violation of the Tax Code.
 Petition is hereby GRANTED. The assailed Decision is REVERSED and SET ASIDE.

27. Commissioner of Internal Revenue vs Dominador Menguito

GR No. 167560 – September 17, 2008
587 Phil. 234
Facts:
 BIR received information that Respondent has undeclared income prompting BIR to
conduct another investigation. Through a letter, Respondents were informed by the BIR that
they have under declared sales.
 Subsequently, the assessment notices subject of the instant petition were issued. These
were protested by Ms. Jeanne Menguito on the ground that the 40% deduction allowed on
their computed gross revenue, is unrealistic. Ms. Jeanne Menguito requested for a period of
 thirty (30) days within which to coordinate with the BIR regarding the contested
assessment.
 BIR Baguio replied informing the Spouses that the source of assessment was not through
the disallowance of claimed expenses but on data received from their business in Baguio.
Said letter gave the spouses ten (10) days to present evidence.
 In an effort to clear an alleged confusion regarding their business respondent submitted to
BIR Baguio a photocopy of the SEC Registration of Copper Kettle Catering Services, Inc.
 BIR wrote a *letter to Spouses Menguito, informing the latter that a reinvestigation or
reconsideration cannot be given due course by the mere submission of an uncertified
photocopy of the Certificate of Incorporation. Thus, it avers that the amendment issued is
still valid and enforceable.
 Respondent filed a case, praying for the cancellation and withdrawal of the deficiency
income tax and percentage tax assessments on account of prescription, whimsical factual
findings, violation of procedural due process on the issuance of assessment notices,
erroneous address of notices and multiple credit/ investigation by the Petitioner of
Respondents’ books of accounts and other related records for the same tax year.
 Instead of filing an Answer, Petitioner moved to dismiss (dismissed for lack of merit) the
petition on the ground of lack of jurisdiction. According to Petitioner, the assessment had
long become final and executory when respondent failed to comply with the *LETTER.
 Respondent opposed said motion claiming that the final decision on Respondent’s protest
is the letter of the Regional Office; therefore, the filing of the action within thirty (30) days
from receipt of the said letter was seasonably filed. Moreover, Respondent asserted that
granting that the letter in question could not be construed to mean as a denial or final
decision of the protest, still Respondent’s appeal was timely filed since Petitioner issued a
Warrant of Distraint and/or Levy against the Respondent which warrant constituted a final
decision of the Petitioner on the protest of the taxpayer.
 Petitioner then filed his Answer alleging that Respondent filed false or fraudulent income
and percentage tax returns with intent to evade tax and that duplication of investigation of
Respondent by the BIR is justified by the finding of fraud on the part of the Respondent.
 Subsequently, CTA rendered a Decision ordering Respondents to pay the deficiency.
Respondent filed a motion for reconsideration but the CTA denied the same.
 Through a Petition for Review filed with the CA, respondent questioned the CTA Decision
and Resolution mainly on the ground that Copper Kettle Catering Services, Inc. (CKCS,
Inc.) was a separate and distinct entity from Copper Kettle Cafeteria Specialist (CKCS); the
sales and revenues of CKCS, Inc. could not be ascribed to CKCS.
 Based on the unrefuted CTA summary, the CA rendered the Decision reversing the
Decision by the CTA.
Issue:
 Whether or not Court of Appeals erred in reversing the decision of the Court of Tax Appeals
and in holding that Copper Kettle Cafeteria Specialist owned by respondent and Copper
Kettle Catering Services, Inc. owned and managed by respondent's wife are not one and
the same.
 Whether or not the Court of Appeals erred in holding that respondent was denied due
process for failure of petitioner to validly serve respondent with the post-reporting and pre-
assessment notices
Held:
 When the owner of one directs and controls the operations of the other, and the
payments effected or received by one are for the accounts due from or payable to the
other; or when the properties or products of one are all sold to the other, which in
turn immediately sells them to the public, as substantial evidence in support of the
 finding that the two are actually one juridical taxable personality. In the present case,
overwhelming evidence supports the CTA in disregarding the separate identity of CKCS,
Inc. from CKCS and in treating them as one taxable entity.
 While the lack of a post-reporting notice and pre-assessment notice is a deviation
from the requirements under Section 1 and Section 2 of Revenue Regulation No. 12-
85, the same cannot detract from the fact that formal assessments were issued to
and actually received by respondents in accordance with Section 228 of the National
Internal Revenue Code which was in effect at the time of assessment. It should be
emphasized that the stringent requirement that an assessment notice be
satisfactorily proven to have been issued and released or, if receipt thereof is denied,
that said assessment notice have been served on the taxpayer, applies only to formal
assessments prescribed under Section 228 of the National Internal Revenue Code,
but not to post-reporting notices or pre-assessment notices. The issuance of a valid
formal assessment is a substantive prerequisite to tax collection, for it contains not
only a computation of tax liabilities but also a demand for payment within a
prescribed period, thereby signaling the time when penalties and interests begin to
accrue against the taxpayer and enabling the latter to determine his remedies
therefor. Due process requires that it must be served on and received by the taxpayer
 A post-reporting notice and pre-assessment notice do not bear the gravity of a
formal assessment notice. The post-reporting notice and pre-assessment notice
merely hint at the initial findings of the BIR against a taxpayer and invites the latter to
an informal conference or clarificatory meeting. Neither notice contains a declaration
of the tax liability of the taxpayer or a demand for payment thereof. Hence, the lack of
such notices inflicts no prejudice on the taxpayer for as long as the latter is properly
served a formal assessment notice. In the case of respondent, a formal assessment
notice was received by him as acknowledged in his Petition for Review and Joint
Stipulation; and, on the basis thereof, he filed a protest with the BIR, Baguio City and
eventually a petition with the CTA.
 Petition is GRANTED. Decision of the Court of Appeals is REVERSED and SET ASIDE and
the Decision and Resolution of the Court of Tax Appeals are REINSTATED.

28. Commissioner of Internal Revenue vs Metro Star Suprema, Inc.

GR No. 185371 – December 08, 2010
637 SCRA 633, 647
Facts:
 For respondent’s failure to comply with several requests for the presentation of records and
Subpoena Duces Tecum, the BIR issued an Indorsement for the investigation based on the
best evidence obtainable preparatory to the issuance of assessment notice.
 BIR then issued a Preliminary 15-day Letter which respondent received. The said letter
stated that a post audit review was held and it was ascertained that there was deficiency
value-added and withholding taxes due from respondent. Subsequently, respondent
received a Formal Letter of Demand from BIR assessing petitioner for deficiency value-
added and withholding taxes.
 Later, the BIR sent a copy of the Final Notice of Seizure which respondent received, giving
the latter last opportunity to settle its deficiency tax liabilities within ten (10) days from
receipt, otherwise respondent BIR shall be constrained to serve and execute the Warrants
of Distraint and/or Levy and Garnishment to enforce collection. Consequently, petitioner
received from the Revenue District Office (RO) a Warrant of Distraint and/or Levy
demanding payment of deficiency value-added tax and withholding tax payment.
 Respondent filed a Motion for Reconsideration. However, respondent Commissioner issued
a Decision denying petitioner’s Motion for Reconsideration. Denying that it received a
Preliminary Assessment Notice (PAN) and claiming that it was not accorded due process,
Metro Star filed a petition for review with the CTA.
Issue:
 Whether or not there is a failure to strictly comply with notice requirements as found by the
CTA.
Held:
 The general rule is that the Court will not lightly set aside the conclusions reached by
the CTA which, by the very nature of its functions, has accordingly developed an
exclusive expertise on the resolution unless there has been an abuse or improvident
exercise of authority. If the taxpayer denies ever having received an assessment from the
Bureau of Internal Revenue (BIR), it is incumbent upon the latter to prove by competent
evidence that such notice was indeed received by the addressee.
 The Court agrees with the CTA that the CIR failed to discharge its duty and present
any evidence to show that Metro Star indeed received the PAN. It could have simply
presented the registry receipt or the certification from the postmaster that it mailed the PAN,
but failed. Neither did it offer any explanation on why it failed to comply with the
requirement of service of the PAN. It merely accepted the letter of Metro Star’s chairman
that stated that he had received the FAN but not the PAN; that he was willing to pay the tax
as computed by the CIR; and that he just wanted to clarify some matters with the hope of
lessening its tax liability.
 Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that
he is liable for deficiency taxes through the sending of a PAN. He must be informed of the
facts and the law upon which the assessment is made. The law imposes a substantive, not
merely a formal, requirement. To proceed heedlessly with tax collection without first
establishing a valid assessment is evidently violative of the cardinal principle in
administrative investigations that taxpayers should be able to present their case and
adduce supporting evidence.
 The case of CIR v. Menguito cited by the CIR in support of its argument that only the
non-service of the FAN is fatal to the validity of an assessment, cannot apply to this
case because the issue therein was the non-compliance with the provisions of R. R.
No. 12-85 which sought to interpret Section 229 of the old tax law, RA No. 8424, has
already amended the provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR’s findings was changed in
1998 to informing the taxpayer of not only the law, but also of the facts on which an
assessment would be made. Otherwise, the assessment itself would be invalid. The
regulation then, on the other hand, simply provided that a notice be sent to the
respondent in the form prescribed, and that no consequence would ensue for failure
to comply with that form.
 It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is
but part of the "due process requirement in the issuance of a deficiency tax assessment,"
the absence of which renders nugatory any assessment made by the tax authorities. The
use of the word "shall" in subsection 3.1.2 describes the mandatory nature of the service of
a PAN. The persuasiveness of the right to due process reaches both substantial and
procedural rights and the failure of the CIR to strictly comply with the requirements laid
down by law and its own rules is a denial of Metro Star’s right to due process.
 Petition is DENIED.

29. Commissioner of Internal Revenue vs BASF Coating

 GR No. 198677 – November 26, 2014
743 SCRA 126
Facts:
 Respondent, by majority of the members, resolved to dissolve the corporation by shortening
its corporate term. Subsequently, respondent moved out of its address in Las Piñas City
and transferred to Laguna.
 Later, respondent submitted two (2) letters to the BIR RDO. The first letter was a notice of
respondent's dissolution, and the second letter was a manifestation indicating the
submission of various documents supporting respondent's dissolution.
 Thereafter, in a Formal Assessment Notice (FAN), petitioner assessed respondent for
deficiencies. The FAN was sent by registered mail to respondent's former address in Las
Piñas. Later, the BIR issued a First Notice Before Issuance of Warrant of Distraint and
Levy, which was sent to the residence of one of respondent's directors.
 Consequently, respondent filed a protest letter citing lack of due process and prescription
as grounds, respondent also filed a supplemental letter of protest. Subsequently,
respondent submitted a letter wherein it attached documents to prove the defenses raised
in its protest letters. After 180 days had lapsed without action on the part of petitioner on
respondent's protest, the latter filed a Petition for Review with the CTA.
 Upon trial on the merits, the CTA Special First Division promulgated its Decision granting
Respondent’s petition, cancelling the assessment made by Petitioner. The CTA Special
First Division ruled that since petitioner was actually aware of respondent's new address,
the former's failure to send the Preliminary Assessment Notice and FAN to the said address
should not be taken against the latter. Consequently, since there are no valid notices sent
to respondent, the subsequent assessments against it are considered void.
 Petitioner then filed a Petition for Review with the CTA En Banc which denied Petitioner’s
petition for lack of merit. The CTA En Banc held that petitioner's right to assess respondent
for deficiency taxes for the taxable year 1999 has already prescribed and that the FAN
issued to respondent never attained finality because respondent did not receive it.
Petitioner’s motion for reconsideration was likewise denied by the CTA En Banc.
Issue:
 Whether or not the Honorable Court of Tax Appeals En Banc, erred in ruling that the Formal
Assessment Notice (FAN) for respondent's deficiency has not yet become final, executory
and demandable.
Held:
 In the present case, petitioner, by all indications, is well aware that respondent had
moved to its new address in Laguna. The CTA also found that BIR officers, at various
times prior to the issuance of the subject FAN, conducted examination and investigation of
respondent's tax liabilities for 1999 at the latter's new address in Laguna.
 It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the
Statute of Limitations provided under the provisions of Sections 203 and 222 of the
same Act shall be suspended when the taxpayer cannot be located in the address
given by him in the return filed upon which a tax is being assessed or collected. In
addition, Section 11 of Revenue Regulation No. 12-85 states that, in case of change
of address, the taxpayer is required to give a written notice thereof to the Revenue
District Officer or the district having jurisdiction over his former legal residence
and/or place of business. However, this Court agrees with both the CTA Special First
Division and the CTA En Banc in their ruling that the above mentioned provisions on
the suspension of the three-year period to assess apply only if the BIR
Commissioner is not aware of the whereabouts of the taxpayer.
 It bears stressing that, in a number of cases, this Court has explained that the statute of
limitations on the collection of taxes primarily benefits the taxpayer. In these cases,
the Court exemplified the detrimental effects that the delay in the assessment and collection
of taxes inflicts upon the taxpayers.
 Prescription in the assessment and in the collection of taxes is provided by the
Legislature for the benefit of both the Government and the 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 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 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. 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
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.
 It might not also be amiss to point out that petitioner's issuance of the First Notice Before
Issuance of Warrant of Distraint and Levy violated respondent's right to due process
because no valid notice of assessment was sent to it. An invalid assessment bears no valid
fruit. The law imposes a substantive, not merely a formal, requirement. To proceed
heedlessly with tax collection without first establishing a valid assessment is evidently
violative of the cardinal principle inadministrative investigations: that taxpayers should be
able to present their case and adduce supporting evidence. In the instant case, respondent
has not properly been informed of the basis of its tax liabilities. Without complying with the
unequivocal mandate of first informing the taxpayer of the government’s claim, there can be
no deprivation of property, because no effective protest can be made.
 Petition is DENIED. The Decision of the Court of Tax Appeals En Banc and its Resolution
are AFFIRMED.

30. Commissioner of Internal Revenue vs Hambrecht & Quist

GR No. 169225 – November 17, 2010
635 SCRA 162
Facts:
 Respondent informed the Bureau of Internal Revenue (BIR) of its change of business
address from the Paseo de Roxas, Makati City to the PCIB Tower II, Makati Avenue. Said
letter was duly received by the BIR-West Makati. Later, respondent received a tracer letter
or follow-up letter issued by the BIR demanding for payment of alleged deficiency.
 Consequently, respondent filed its protest letter against the alleged deficiency tax indicated
in the said tracer letter. Nearly eight (8) years later, respondent’s external auditors received
a letter from herein petitioner Commissioner of Internal Revenue advising the respondent
that petitioner 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.
 Respondent filed a Petition for Review before the Court of Tax Appeals to appeal the final
decision of the Commissioner of Internal Revenue. The CTA rendered its decision holding
that the subject assessment notice sent by registered mail to respondent’s former place of
business was valid and binding since respondent only gave formal notice of its change of
address much later. Thus, the assessment had become final and unappealable for failure of
 respondent to file a protest within the 30-day period provided by law. However, the CTA (a)
held that the CIR failed to collect the assessed taxes within the prescriptive period; and (b)
directed the cancellation and withdrawal of Assessment Notice.
Issue:
 Whether or not the court of tax appeals has jurisdiction to rule that the government’s right to
collect the tax has prescribed.
Held:
 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. 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.
 The plain and unambiguous wording of Section 224 of the 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 petitioner grants such request. In order to
suspend the running of the prescriptive periods for assessment and collection, the request
for reinvestigation must be granted by the CIR. Consequently, the mere filing of a protest
letter which is not granted does not operate to suspend the running of the period to collect
taxes. In the case at bar, the records show that respondent filed a request for
reinvestigation, however, there is no indication that petitioner acted upon respondent’s
protest. It is evident that the respondent did not conduct a reinvestigation, the protest
having been dismissed on the ground that the assessment has become final and executory.

31. Bank of the Philippine Island vs Commissioner of Internal Revenue

GR No. 174942 – March 07, 2008
548 SCRA 105
Facts:
 Respondent issued to the petitioner a pre-assessment notice (PAN). Consequently,
Petitioner requested for the details of the amounts alleged as deficiency taxes mentioned in
said PAN. Later, respondent issued to the petitioner, assessment/demand notices to which
petitioner filed a protest and a supplemental protest.
 Subsequently, petitioner requested for an opportunity to present (reinvestigation) or submit
additional documentation. Petitioner then executed several Waivers of the Statutes of
Limitations.
 Then respondent issued a final decision on petitioner’s protest ordering the withdrawal and
cancellation of the deficiency withholding tax assessment and considered the same as
closed and terminated. On the other hand, the deficiency DST assessment was reiterated
and the petitioner was ordered to pay the said amount within thirty (30) days from receipt of
such order. Petitioner received a copy of the said decision and thereafter filed a Petition for
Review before the Tax Court, to which the Court rendered a Decision denying the
petitioner’s Petition for Review for lack of merit. Petitioner filed a Motion for Reconsideration
with regard the Decision which was, again, denied for lack of merit.
 Later, petitioner filed with the Tax Court En Banc a Motion for Extension of Time to File
Petition for Review praying for an extension of fifteen (15) days which was granted.
However, the Tax Court ruled that BPI’s protest and supplemental protest should be
 considered requests for reinvestigation which tolled the prescriptive period provided by law
to collect a tax deficiency by distraint, levy, or court proceeding.
 In its Petition for Review, BPI argues that the government’s right to collect the DST had
already prescribed because the Commissioner of Internal Revenue (CIR) failed to issue any
reply granting BPI’s request for reinvestigation manifested in the protest letters.
Issue:
 Whether or not BPI’s protest and supplemental protest tolls the running of the prescriptive
period.
Held:
 In order to suspend the running of the prescriptive periods for assessment and
collection, the request for reinvestigation must be granted by the CIR. There is a
difference between a request for reconsideration and a request for reinvestigation. A
mere request for reinvestigation without corresponding action on the part of the CIR
will not interrupt the running of the period. The request must be granted by the CIR.
 The Court went on to declare that the burden of proof that the request for reinvestigation
had been actually granted shall be on the CIR. Such grant may be expressed in its
communications with the taxpayer or implied from the action of the CIR or his authorized
representative in response to the request for reinvestigation. There is nothing in the
records of this case which indicates, expressly or impliedly, that the CIR had granted
the request for reinvestigation filed by BPI. What is reflected in the records is the
piercing silence and inaction of the CIR on the request for reinvestigation, as he considered
BPI’s letters of protest to be. In fact, it was only in his comment to the present petition that
the CIR, through the OSG, argued for the first time that he had granted the request for
reinvestigation.
 Neither did the waiver of the statute of limitations signed by BPI suspend the
prescriptive period. The CIR himself contends that the waiver is void as it shows no
date of acceptance in violation of RMO No. 20-90.16 At any rate, the records of this case
do not disclose any effort on the part of the Bureau of Internal Revenue to collect the
deficiency tax after the expiration of the waiver until eight (8) years thereafter when it finally
issued a decision on the protest.
 The law prescribing a limitation of actions for the collection of the income tax is
beneficial both to the Government and to its citizens; to the Government because tax
officers would be obliged to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription citizens would have a feeling of
security against unscrupulous tax agents who will always find an excuse to inspect the
books of taxpayers, not to determine the latters real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers
would furthermore be under obligation to always keep their books and keep them open for
inspection subject to harassment by unscrupulous tax agents. The law on prescription
being a remedial measure should be interpreted in a way conducive to bringing about the
beneficent purpose of affording protection to the taxpayer within the contemplation of the
Commission which recommend the approval of the law.
 Petition is GRANTED. The Decision of the Court of Tax Appeals and its Resolution are
hereby REVERSED and SET ASIDE.

32. Commissioner of Internal Revenue vs Union Shipping Corp.

GR No. L-66160 – May 21, 1990
185 SCRA 547
Facts:
 In a letter, herein petitioner Commissioner of Internal Revenue assessed against Yee Fong
Hong, Ltd. and/or herein private respondent Union Shipping Corporation as deficiency
income taxes due. Said letter was received on January 4, 1975, and in a letter, received by
petitioner on January 13, 1975, private respondent protested the assessment.
 Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy which was
served on private respondent's counsel. In a letter received by petitioner on November 29,
1976 private respondent reiterated its request for reinvestigation of the assessment and for
the reconsideration of the summary collection thru the Warrant of Distraint and Levy.
 Petitioner, again, without acting on the request for reinvestigation and reconsideration of the
Warrant of Distraint and Levy, filed a collection suit before the RTC. Later, private
respondent filed with the CTA a Petition for Review where petitioner's assessment of
Respondent’s deficiency income taxes was reversed.
Issue:
 Whether or not the issuance of a warrant of distraint and levy is proof of the finality of an
assessment.
Held:
 There appears to be no dispute that petitioner did not rule on private respondent's motion
for reconsideration but contrary to the above ruling of this Court, left private respondent in
the dark as to which action of the Commissioner is the decision appealable to the Court of
Tax Appeals. Had he categorically stated that he denies private respondent's motion for
reconsideration and that his action constitutes his final determination on the disputed
assessment, private respondent without needless difficulty would have been able to
determine when his right to appeal accrues and the resulting confusion would have been
avoided. The Commissioner of Internal Revenue must state whether his action on
questioned assessment is final. It cannot be implied from mere issuance of warrant of
distraint and levy.
 Under the circumstances, the Commissioner of Internal Revenue, not having clearly
signified his final action on the disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when private respondent received the summons on
the civil suit for collection of deficiency income on December 28, 1978 that the period to
appeal commenced to run.
 Instant petition is hereby DISMISSED and the assailed decision of the Court of Tax Appeals
is hereby AFFIRMED.

33. Surigao Electric Co., vs Court of Tax Appeals

GR No. L-25289 – June 28, 1974
57 SCRA 523, 528
Facts:
 Petitioner, a grantee of a legislative electric franchise, received a warrant of distraint and
levy to enforce the collection from "Mainit Electric" of a deficiency franchise tax plus
surcharge. In a letter to the Commissioner of Internal Revenue, the petitioner contested this
warrant, stating that it did not have a franchise in Mainit, Surigao.
 Thereafter the Commissioner, advised the petitioner to take up the matter with the General
Auditing Office. Subsequently, in a letter to the Auditor General, the petitioner asked for
reconsideration of the assessment, admitting liability only for the 2% franchise tax in
accordance with its legislative franchise and not at the higher rate of 5% imposed by
section 259 of the National Internal Revenue Code.
 An exchange of correspondence between the petitioner, on the one hand, and the
Commissioner and the Auditor General, on the other, ensued, all on the matter of the
petitioner's liability for deficiency franchise tax.
 The controversy culminated in a revised assessment, representing the petitioner's
deficiency franchise-tax and surcharges thereon. The petitioner then requested a
recomputation of the revised assessment in a letter to the Commissioner sent by registered
mail. The Commissioner, however, in a letter, denied the request for recomputation.
Subsequently, the petitioner appealed to the Court of Tax Appeals which dismissed the
appeal on the ground that the appeal was filed beyond the thirty-day period of appeal.
Issue:
 Whether or not the petitioner's appeal to the Court of Tax Appeals was time-barred.
Held:
 The thirty-day period prescribed by section 11 of Republic Act 1125, as amended,
within which a taxpayer adversely affected by a decision of the Commissioner of
Internal Revenue should file his appeal with the tax court, is a jurisdictional
requirement, and the failure of a taxpayer to lodge his appeal within the prescribed
period bars his appeal and renders the questioned decision final and executor.
 Prescinding from all the foregoing, we deem it appropriate to state that the Commissioner of
Internal Revenue should always indicate to the taxpayer in clear and unequivocal language
whenever his action on an assessment questioned by a taxpayer constitutes his final
determination on the disputed assessment, as contemplated by sections 7 and 11 of
Republic Act 1125, as amended. On the basis of this indicium indubitably showing that the
Commissioner's communicated action is his final decision on the contested assessment,
the aggrieved taxpayer would then be able to take recourse to the tax court at the
opportune time. Without needless difficulty, the taxpayer would be able to determine when
his right to appeal to the tax court accrues. This rule of conduct would also obviate all
desire and opportunity on the part of the taxpayer to continually delay the finality of the
assessment — and, consequently, the collection of the amount demanded as taxes — by
repeated requests for recomputation and reconsideration. On the part of the Commissioner,
this would encourage his office to conduct a careful and thorough study of every questioned
assessment and render a correct and definite decision thereon in the first instance. This
would also deter the Commissioner from unfairly making the taxpayer grope in the dark and
speculate as to which action constitutes the decision appealable to the tax court. Of greater
import, this rule of conduct would meet a pressing need for fair play, regularity, and
orderliness in administrative action.
 The decision of the Court of Tax Appeals is affirmed.

34. Commissioner of Internal Revenue vs Isabela Cultural Corp.,

G.R. No. 135210 – July 11, 2001
361 SCRA 71
Facts:
 In an investigation conducted on the books of account of respondent, petitioner had the
preliminary finding that respondent incurred a total income tax. Upon protest by
respondent's counsel, the said preliminary assessment was reduced.
 In a letter filed with the petitioner's office, respondent requested a reconsideration of the
subject assessment. Supplemental to its protest was a letter filed with the petitioner's office
to which were attached certain documents supportive of its protest, as well as a Waiver of
Statute of Limitation. Respondent received from petitioner a Final Notice Before Seizure. In
said letter, petitioner demanded payment of the subject assessment within ten (10) days
from receipt thereof. Otherwise, failure on its part would constrain petitioner to collect the
subject assessment through summary remedies.
 Respondent considered said final notice of seizure as petitioner's final decision. Hence,
filed a petitioner for Review before the Court of Tax Appeals.
Issue:
 Whether or not the Final Notice Before Seizure sent by Petitioner constituted a final
decision thereby making the case appealable before the CTA.
Held:
 A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the
immediate payment of a tax deficiency assessment previously made, is tantamount to a
denial of the taxpayer's request for reconsideration. Such letter amounts to a final decision
on a disputed assessment and is thus appealable to the Court of Tax Appeals (CTA).

35. Commissioner of Internal Revenue vs PL Management Int’l

GR No. 160949 – April 04, 2011
647 SCRA 72, 81
Facts:
 Respondent earned an income from its professional services rendered to UEM-MARA
Philippines Corporation (UMPC), from which income UMPC withheld an amount as the
respondent's withholding agent. In its 1997 income tax return (ITR) filed on April 13, 1998,
the respondent reported a net loss but expressly signified that it had a creditable
withholding tax for taxable year 1997 to be claimed as tax credit in taxable year 1998. On
April 13, 1999, the respondent submitted its ITR for taxable year 1998, in which it declared
a net loss. Due to its net-loss position, the respondent was unable to claim the 1997
creditable withholding tax as tax credit. On April 13, 1999, respondent filed with the
petitioner a written claim for the refund of the unutilized creditable withholding tax for
taxable year 1997. However, the petitioner did not act on the claim. Due to the petitioner's
inaction, the respondent filed a petition for review in the CTA on April 14, 2000. However,
the CTA denied the respondent's claim on the ground of prescription. On appeal to the
Court of Appeals, the Appellate Court reversed the decision of the CTA based on equity.
Issue:
 Whether or not the Court of Appeals erred in holding that the two-year prescriptive period
under section 229 of the tax code is not jurisdictional, thus the claim for refund of
respondent is suspended for reasons of equity.
Held:
 It is worthy to note that unlike the option for refund of excess income tax, which prescribes
after two years from the filing of the FAR, there is no prescriptive period for the carrying
over of the same. Therefore, the excess income tax credit of BPI, which it acquired in 1998
and opted to carry over, may be repeatedly carried over to succeeding taxable years, i.e., to
1999, 2000, 2001, and so on and so forth, until actually applied or credited to a tax liability
of BPI.
 Inasmuch as the respondent already opted to carry over its unutilized creditable withholding
tax to the next taxable year, the carry-over could no longer be converted into a claim for tax
refund because of the irrevocability rule provided in Section 76 of the NIRC of 1997.
Thereby, the respondent became barred from claiming the refund. However, in view of it
irrevocable choice, the respondent remained entitled to utilize that amount as tax credit in
succeeding taxable years until fully exhausted. In this regard, prescription did not bar it from
applying the amount as tax credit considering that there was no prescriptive period for the
carrying over of the amount as tax credit in subsequent taxable years.

36. Belle Corporation vs Commissioner of Internal Revenue

GR No. 181298 – January 10, 2011
Facts:
 Petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for
the first quarter of 1997 which petitioner paid on even date through an Authorized Agent
Bank of the BIR. Later, petitioner filed with the BIR its second quarter ITR, declaring an
overpayment of income taxes. In view of the overpayment, no taxes were paid for the
second and third quarters. Instead of claiming the amount as a tax refund, petitioner
decided to apply it as a tax credit to the succeeding taxable year. For the taxable year
1998, petitioner’s amended ITR showed an overpayment.
 Three years later, petitioner filed with the BIR an administrative claim for refund of its
unutilized excess income tax payments for 1997. Notwithstanding the filing of the
administrative claim for refund, petitioner carried over the amount to the taxable year 1999.
 Due to the inaction of the respondent Commissioner of Internal Revenue (CIR) and in order
to toll the running of the two-year prescriptive period, petitioner appealed its claim for refund
of unutilized excess income tax payments for the taxable year 1997 with the CTA.
Subsequently, the CTA rendered a Decision denying petitioner’s claim for refund.
Eventually, petitioner elevated the matter to the Court of Appeals which denied Petitioner’s
appeal.
Issue:
 Whether or not petitioner is entitled to a refund of its excess income tax payments for the
taxable year 1997.
 Whether or not petitioner may carry-over the excess tax payments only to the succeeding
year.
Held:
 Under the new law, in case of overpayment of income taxes, the remedies are still the
same; and the availment of one remedy still precludes the other. But unlike Section 69 of
the old NIRC, the carry-over of excess income tax payments is no longer limited to the
succeeding taxable year. Unutilized excess income tax payments may now be carried
over to the succeeding taxable years until fully utilized. In addition, the option to
carry-over excess income tax payments is now irrevocable. Hence, unutilized excess
income tax payments may no longer be refunded. In the instant case, both the CTA and
the CA applied Section 69 of the old NIRC in denying the claim for refund. We find,
however, that the applicable provision should be Section 76 of the 1997 NIRC because at
the time petitioner filed its 1997 final ITR, the old NIRC was no longer in force.
 Section 69 of the old National Internal Revenue Code (NIRC) allows unutilized tax
credits to be refunded as long as the claim is filed within the prescriptive period.
This, however, no longer holds true under Section 76 of the 1997 NIRC as the option
to carry-over excess income tax payments to the succeeding taxable year is now
irrevocable.

37. Systra Philippines Inc., vs Commissioner of Internal Revenue

GR No. 176290 – September 21, 2007
533 SCRA 776
Facts:
 Petitioner instituted a claim for refund or issuance of a tax credit certificate with the BIR of
its unutilized creditable withholding taxes as of December 31, 2001. Due to the inaction of
the BIR on petitioner’s claim for refund and to preserve its right to claim for the refund to its
unutilized CWT for CYs 2000 and 2001 by judicial action, petitioner filed a petition for
review with the Court in Division which partially granted the petition and ordered the
issuance of a tax credit certificate to petitioner representing the excess or unutilized
creditable withholding taxes for taxable year 2001. The CTA, however, denied petitioner’s
claim for refund of the excess tax credits for the year 2000. It ruled that petitioner was
 precluded from claiming a refund thereof or requesting a tax credit certificate. Once it was
made for a particular taxable period, the option to carry over became irrevocable.
 Petitioner moved for reconsideration but it was denied to which it elevated the case to the
CTA en banc which rendered a decision denying Petitioner’s petition for review on technical
grounds.
Issue:
 Whether or not the exercise of the option to carry-over excess income tax credits under
Section 76 of the Tax Code bars a taxpayer from claiming the excess tax credits for refund
even if the amount remains unutilized in the succeeding taxable year.
Held:
 Once the option to carry-over and apply the excess quarterly income tax against
income tax due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall be allowed
therefor.
 A corporation entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid has two options: (1) to carry over the excess credit or (2) to apply for the
issuance of a tax credit certificate or to claim a cash refund. If the option to carry over the
excess credit is exercised, the same shall be irrevocable for that taxable period. In
exercising its option, the corporation must signify in its annual corporate adjustment return
(by marking the option box provided in the BIR form) its intention either to carry over the
excess credit or to claim a refund. To facilitate tax collection, these remedies are in the
alternative and the choice of one precludes the other. This is known as the irrevocability
rule and is embodied in the last sentence of Section 76 of the Tax Code. The phrase "such
option shall be considered irrevocable for that taxable period" means that the option to carry
over the excess tax credits of a particular taxable year can no longer be revoked. The rule
prevents a taxpayer from claiming twice the excess quarterly taxes paid: (1) as
automatic credit against taxes for the taxable quarters of the succeeding years for
which no tax credit certificate has been issued and (2) as a tax credit either for which
a tax credit certificate will be issued or which will be claimed for cash refund.
 Since petitioner elected to carry over its excess credits for the year 2000 in the amount of
₱4,627,976 as tax credits for the following year, it could no longer claim a refund.

38. Commissioner of Internal Revenue vs Goodyear Philippines Inc.

GR No. 216130 – August 03, 2016
Facts:
 Respondent is a domestic corporation duly organized and existing under the laws of the
Philippines, and registered with the Bureau of Internal Revenue (BIR). Later, the authorized
capital stock of respondent was increased. Consequently, all the preferred shares were
solely and exclusively subscribed by Goodyear Tire and Rubber Company (GTRC), which
was a foreign company.
 Subsequently, the Board of Directors of respondent authorized the redemption of GTRC's
preferred shares. Respondent then filed an application for relief from double taxation before
the International Tax Affairs Division of the BIR to confirm that the redemption was not
subject to Philippine income tax. This notwithstanding, respondent still took the
conservative approach, and thus, withheld and remitted fifteen percent (15%) FWT,
computed based on the difference of the redemption price and aggregate par value of the
shares.
 On October 21, 2010, respondent filed an administrative claim for refund or issuance of
TCC, representing 15% FWT before the BIR. Thereafter, on November 3, 2010, it filed a
 judicial claim, by way of petition for review, before the CTA. In a Decision, the CTA Division
granted the petition and thereby ordered petitioner to refund or issue a TCC to respondent
for being erroneously withheld and remitted as FWT.
 Petitioner contends that by filing the administrative and judicial claims only 13 days apart,
respondent, in effect, pursued an empty remedy before the BIR, and thereby deprived the
latter of the opportunity to ascertain the validity of the claim. In this regard, petitioner
maintained that the mere filing of the administrative claim before the BIR did not outrightly
satisfy the requirement of exhaustion of administrative remedy.
Issue:
 Whether or not the judicial claim of respondent should be dismissed for non-exhaustion of
administrative remedies
Held:
 Section 229 of the Tax Code states that judicial claims for refund must be filed within two
(2) years from the date of payment of the tax or penalty, providing further that the same
may not be maintained until a claim for refund or credit has been duly filed with the
Commissioner of Internal Revenue (CIR).
 The primary purpose of filing an administrative claim was to serve as a notice of warning to
the CIR that court action would follow unless the tax or penalty alleged to have been
collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code – [then
Section 306 of the old Tax Code] – however does not mean that the taxpayer must await
the final resolution of its administrative claim for refund, since doing so would be
tantamount to the taxpayer's forfeiture of its right to seek judicial recourse should the two
(2)-year prescriptive period expire without the appropriate judicial claim being filed.
 Petition is DENIED

39. Commissioner of Internal Revenue vs Manila Electric Company (MERALCO)

GR No. 181459 – June 09, 2014
Facts:
 Respondent obtained two loans from Norddeutsche Landesbank Girozentrale (NORD/LB)
Singapore Branch with ING Barings South East Asia Limited (ING Barings) and later with
Citicorp International Limited as Agent. Under the foregoing loan agreements, the income
received by NORD/LB, by way of respondent MERALCO’s interest payments, shall be paid
in full without deductions, as respondent MERALCO shall bear the obligation of
paying/remitting to the BIR the corresponding final withholding tax. Pursuant thereto,
respondent MERALCO paid/remitted to the Bureau of Internal Revenue (BIR) the said
withholding tax on its interest payments to NORD/LB.
 However, respondent MERALCO discovered that NORD/LB is a foreign government-owned
financing institution of Germany. Thus, respondent MERALCO filed a request for a BIR
Ruling with petitioner Commissioner of Internal Revenue (CIR) with regard to the tax
exempt status of NORD/LB.
 Later, the BIR issued declaring that the interest payments made to NORD/LB Singapore
Branch are exempt from the ten percent (10%) final withholding tax, since it is a financing
institution owned and controlled by the foreign government of Germany. Consequently,
relying on the aforesaid BIR Ruling, respondent MERALCO filed with petitioner a claim for
tax refund or issuance of tax credit c ertificate representing the erroneously paid or overpaid
final withholding tax on interest payments made to NORD/LB.
 Later, respondent MERALCO received a letter from petitioner denying its claim for tax
refund on the basis that the same had already prescribed. Aggrieved, respondent
MERALCO filed a Petition for Review with the Court of Tax Appeals (CTA) which rendered
a Decision partially granting respondent MERALCO’s Petition.
Issue:
 Whether or not respondent MERALCO is entitled to a tax refund/credit relative to its
payment of final withholding taxes on interest payments made to NORD/LB.
Held:
 No suit or proceeding shall be filed after the expiration of two (2) years from the date
of payment of the tax or penalty regardless of any supervening cause that may arise
after payment: Provided, however, That the Commissioner may, even without a
written claim therefor, refund or credit any tax, where on the face of the return upon
which payment was made, such payment appears clearly to have been erroneously
paid.
 The prescriptive period provided is mandatory regardless of any supervening cause
that may arise after payment. It should be pointed out further that while the
prescriptive period of two (2) years commences to run from the time that the refund
is ascertained, the propriety thereof is determined by law (in this case, from the date
of payment of tax), and not upon the discovery by the taxpayer of the erroneous or
excessive payment of taxes. The issuance by the BIR of the Ruling declaring the tax-
exempt status of NORD/LB, if at all, is merely confirmatory in nature. As aptly held by the
CTA-First Division, there is no basis that the subject exemption was provided and
ascertained only through BIR Ruling No. DA-342-2003, since said ruling is not the operative
act from which an entitlement of refund is determined. In other words, the BIR is tasked
only to confirm what is provided under the Tax Code on the matter of tax exemptions as
well as the period within which to file a claim for refund.
 Petitioner is misguided when it relied upon the six (6)-year prescriptive period for initiating
an action on the ground of quasi contract or solutio indebiti under Article 1145 of the New
Civil Code. There is solutio indebiti where: (1) payment is made when there exists no
binding relation between the payor, who has no duty to pay, and the person who received
the payment; and (2) the payment is made through mistake, and not through liberality or
some other cause. Here, there is a binding relation between petitioner as the taxing
authority in this jurisdiction and respondent MERALCO which is bound under the law to act
as a withholding agent of NORD/LB Singapore Branch, the taxpayer. Hence, the first
element of solutio indebitiis lacking. Moreover, such legal precept is inapplicable to the
present case since the Tax Code, a special law, explicitly provides for a mandatory
period for claiming a refund for taxes erroneously paid.
 Tax refunds are based on the general premise that taxes have either been
erroneously or excessively paid. Though the Tax Code recognizes the right of
taxpayers to request the return of such excess/erroneous payments from the
government, they must do so within a prescribed period. Further, "a taxpayer must
prove not only his entitlement to a refund, but also his compliance with the
procedural due process as non-observance of the prescriptive periods within which
to file the administrative and the judicial claims would result in the denial of his
claim."
 Petition is DENIED.

40. Commissioner of Internal Revenue vs Smart Communications

GR No. 179045-46 – August 25, 2010
629 SCRA 342
Facts:
 Respondent entered into three Agreements for Programming and Consultancy Services
with Prism Transactive (M) Sdn. Bhd. (Prism), a non-resident corporation duly organized
and existing under the laws of Malaysia. Under the agreements, Prism was to provide
 programming and consultancy services for the installation of the Service Download
Manager (SDM) and the Channel Manager (CM), and for the installation and
implementation of Smart Money and Mobile Banking Service SIM Applications (SIM
Applications) and Private Text Platform (SIM Application).
 Thinking that these payments constitute royalties, respondent withheld 25% royalty tax
under the RP-Malaysia Tax Treaty. Later, respondent filed its Monthly Remittance Return of
Final Income Taxes Withheld. Within the two-year period to claim a refund, respondent filed
with the Bureau of Internal Revenue (BIR), through the International Tax Affairs Division
(ITAD), an administrative claim for refund of the royalties paid.
 Due to the failure of the petitioner Commissioner of Internal Revenue (CIR) to act on the
claim for refund, respondent filed a Petition for Review with the CTA. In its Petition for
Review, respondent claimed that it is entitled to a refund because the payments made to
Prism are not royalties but business profits taxable in the Philippines only if attributable to a
permanent establishment in the Philippines. The payments made to Prism, a Malaysian
company with no permanent establishment in the Philippines, should not be taxed.
 In its Answer, petitioner argued that respondent, as withholding agent, is not a party-in-
interest to file the claim for refund,17 and that assuming for the sake of argument that it is
the proper party, there is no showing that the payments made to Prism constitute business
profits.
 In Its Decision, the Second Division of the CTA upheld respondent’s right, as a withholding
agent, to file the claim for refund.
Issue:
 Whether respondent has the right to file the claim for refund.
Held:
 The person entitled to claim a tax refund is the taxpayer. However, in case the
taxpayer does not file a claim for refund, the withholding agent may file the claim. In
Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing
Corporation,40 a withholding agent was considered a proper party to file a claim for refund
of the withheld taxes of its foreign parent company.
 Petitioner, however, submits that this ruling applies only when the withholding agent and
the taxpayer are related parties, i.e., where the withholding agent is a wholly owned
subsidiary of the taxpayer. Although such relation between the taxpayer and the
withholding agent is a factor that increases the latter’s legal interest to file a claim for
refund, there is nothing in the decision to suggest that such relationship is required or
that the lack of such relation deprives the withholding agent of the right to file a
claim for refund. Rather, what is clear in the decision is that a withholding agent has a
legal right to file a claim for refund for two reasons. First, he is considered a
"taxpayer" under the NIRC as he is personally liable for the withholding tax as well
as for deficiency assessments, surcharges, and penalties, should the amount of the
tax withheld be finally found to be less than the amount that should have been
withheld under law. Second, as an agent of the taxpayer, his authority to file the
necessary income tax return and to remit the tax withheld to the government
impliedly includes the authority to file a claim for refund and to bring an action for
recovery of such claim.
 Petition is DENIED. The assailed Decision and the Resolution of the Court of Tax Appeals
En Banc are hereby AFFIRMED.

41. Silkair PTE, Ltd., vs Commissioner of Internal Revenue

GR No. 173594 – February 06, 2008
544 SCRA 100
Facts:
 Petitioner, Silkair (Singapore) Pte. Ltd. (Silkair), a corporation organized under the laws of
Singapore which has a Philippine representative office, is an online international air carrier.
Silkair filed with the Bureau of Internal Revenue (BIR) a written application for the refund of
excise taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation. As
the BIR had not yet acted on the application after seven (7) days, Silkair filed a Petition for
Review before the CTA.
 Opposing the petition, respondent Commissioner on Internal Revenue (CIR) alleged in his
Answer that Petitioner failed to prove that the sale of the petroleum products was directly
made from a domestic oil company to the international carrier. The excise tax on petroleum
products is the direct liability of the manufacturer/producer, and when added to the cost of
the goods sold to the buyer, it is no longer a tax but part of the price which the buyer has to
pay to obtain the article.
 By a Decision, the Second Division of the CTA denied Silkair’s petition on the ground that
as the excise tax was imposed on Petron Corporation as the manufacturer of petroleum
products, any claim for refund should be filed by the latter; and where the burden of tax is
shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an
added cost of the goods purchased.
Issue:
 Whether or not the petitioner is the proper party to claim for refund or tax credit.
Held:
 The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides
that unless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled
to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air
Transport Agreement between RP and Singapore. Even if Petron Corporation passed on to
Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but
part of the price which Silkair had to pay as a purchaser.

42. Angeles City vs Angeles City Electric Co.

GR No. 166134 – June 29, 2010
622 SCRA 43
Facts:
 AEC was granted a legislative franchise to construct, maintain, operate and sell energy.
When the Local Government Code (LGC) of 1991 was passed into law, it conferred upon
provinces and cities the power to impose tax on businesses enjoying franchise. In
accordance with the LGC, the Sangguniang Panlungsod enacted the Revised Revenue
Code of Angeles City (RRCAC).
 Consequently, a petition seeking the reduction of the tax rates and a review of the
provisions of the RRCAC was filed with the Sangguniang Panlungsod. There being no
action taken by the Sangguniang Panlungsod on the matter, the petition was eleated to the
Department of Finance, which referred the same to the Bureau of Local Government
Finance (BLGF). In the petition, it was alleged that the RRCAC is oppressive, excessive,
unjust and confiscatory; that it was published only once, and that no public hearings were
conducted prior to its enactment. Acting on the petition, the BLGF issued a First
Indorsement to the City Treasurer to make the appropriate amendment of the RRCAC in
order to ensure compliance with the provisions of the LGC.
 Thereafter, AEC has been paying the local franchise tax to the Office of the City Treasurer
on a quarterly basis, in addition to the national franchise tax it pays every quarter to the
Bureau of Internal Revenue (BIR).
 Later, the City Treasurer issued a Notice of Assessment to AEC for payment of business
tax. AEC protested the assessment claiming that (1) it is exempt from paying local business
tax, (2) the payment of business tax would result in double taxation, (3) the period to assess
had prescribed, and (4) the assessment and collection of taxes under the RRCAC cannot
be made retroactive. However, the City Treasurer denied the protest for lack of merit and
requested AEC to settle its tax liabilities.
 Aggrieved, AEC appealed the denial of its protest to the RTC. It was found that the City
Treasurer levied on the real properties of AEC. This prompted AEC to file with the RTC an
Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction to enjoin the City and its City Treasurer from levying, annotating the levy, seizing,
confiscating, garnishing, selling and disposing at public auction the properties of AEC.
Issue:
 Whether or not the right of petitioner to collect taxes cannot be enjoined by the RTC.
Held:
 A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the
government should be collected promptly, without unnecessary hindrance or delay. In line
with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly provides
that no court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the code. An exception to this rule
obtains only when in the opinion of the Court of Tax Appeals (CTA) the collection thereof
may jeopardize the interest of the government and/or the taxpayer.
 The situation, however, is different in the case of the collection of local taxes as there is no
express provision in the LGC prohibiting courts from issuing an injunction to restrain local
governments from collecting taxes. Unlike the National Internal Revenue Code, the Local
Tax Code does not contain any specific provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or intent, however it may be viewed, may
have allowed preliminary injunction where local taxes are involved but cannot negate the
procedural rules and requirements under Rule 58.

43. Spouses Emmanuel Pacquiao vs Court of Tax Appeals

GR No. 213394 – April 06, 2016
Facts:
 Pacquiao filed his income tax return reporting his Philippine-sourced income. It was
subsequently amended to include his US-sourced income. Later, Pacquiao received a
Letter of Authority from the Bureau of Internal Revenue (BIR) for the examination of his
books of accounts and other accounting records. The following year Pacquiao filed his
income tax return, which although reflecting his Philippines-sourced income, failed to
include his income derived from his earnings in the US.
 Finding the need to directly conduct the investigation and determine the tax liabilities of the
petitioners, respondent Commissioner on Internal Revenue (CIR) issued another Letter of
Authority authorizing the BIR's National Investigation Division (NID) to examine the books of
accounts and other accounting records of both Pacquiao and Jinkee for the last 15 years.
 Due to these developments, the petitioners, through counsel, wrote a letter questioning the
propriety of the CIR investigation. According to the petitioners, they were already subjected
to an earlier investigation by the BIR, and no fraud was ever found to have been committed.
 In its letter, the NID informed the counsel of the petitioners that the new LA issued by the
CIR had effectively cancelled and superseded the previous LA.
 After conducting its own investigation, the CIR made its initial assessment finding that the
petitioners were unable to fully settle their tax liabilities. Thus, the CIR issued its Notice of
Initial Assessment-Informal Conference (NIC) addressed to the petitioners, informing them
that based on the best evidence obtainable, they were liable for deficiency taxes. After
being informed of this development, the counsel for the petitioners sought to have the
conference reset but he never received a response.
 Later, the CIR issued the Preliminary Assessment Notice (PAN) informing the petitioners
that based on third-party information, they found the petitioners liable not only for deficiency
income taxes, but also for their non-payment of their VAT liabilities.
 Consequently, petitioners filed their protest against the PAN. After denying the protest, the
BIR issued its Formal Letter Demand (FLD) finding the petitioners liable for deficiency
income tax and VAT. Again, the petitioners questioned the findings of the CIR.
 Subsequently, the BIR issued its Final Decision on Disputed Assessment (FDDA),
addressed to Pacquiao only, informing him that the CIR found him liable for deficiency
income tax and VAT.
 Although they no longer questioned the BIR’s assessment of their deficiency VAT liability,
the petitioners requested that they be allowed to pay the same in four (4) quarterly
installments. Aggrieved that they were being made liable for deficiency income taxes,
petitioners sought redress and filed a petition for review with the CTA. Before the CTA, the
petitioners contended that the assessment of the CIR was defective because it was
predicated on its mere allegation that they were guilty of fraud. The CTA, however, saw no
justification that the petitioners should deposit less than the disputed amount.
 The petitioners sought partial reconsideration which, however, was denied.
Issue:
 Whether or not an Appeal will not suspend the collection of tax
 Whether or not Petitioner correctly filed their appeal under Rule 65 of the Revised Rules of
Court.
Held:
 An appeal to the CTA from the decision of the CIR will not suspend the payment,
levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his
tax liability as provided by existing law. When, in the view of the CTA, the collection
may jeopardize the interest of the Government and/or the taxpayer, it may suspend
the said collection and require the taxpayer either to deposit the amount claimed or
to file a surety bond. No appeal taken to the CTA from the decision of the Commissioner
of Internal Revenue or the Commissioner of Customs or the Regional Trial Court,
provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade
and Industry and Secretary of Agriculture, as the case may be shall suspend the payment,
levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax
liability as provided by existing law: Provided, however, That when in the opinion of the
Court the collection by the aforementioned government agencies may jeopardize the
interest of the Government and/or the taxpayer, the Court at any stage of the
proceeding may suspend the said collection and require the taxpayer either to
deposit the amount claimed or to file a surety bond for not more than double the
amount with the Court. Despite the amendments to the law, the Court still holds that the
CTA has ample authority to issue injunctive writs to restrain the collection of tax and
to even dispense with the deposit of the amount claimed or the filing of the required
bond, whenever the method employed by the CIR in the collection of. tax jeopardizes
the interests of a taxpayer for being patently in violation of the law. Such authority
emanates from the jurisdiction conferred to it not only by Section 11 of R.A. No. 1125, but
also by Section 7 of the same law. The authority of the courts to issue injunctive writs
 to restrain the collection of tax and to dispense with the deposit of the amount
claimed or the filing of the required bond is not simply confined to cases where
prescription has set in. As explained by the Court in those cases, whenever it is
determined by the courts that the method employed by the Collector of Internal
Revenue in the collection of tax is not sanctioned by law, the bond requirement
under Section 11 of R.A. No. 1125 should be dispensed with. The purpose of the rule is
not only to prevent jeopardizing the interest of the taxpayer, but more importantly, to
prevent the absurd situation wherein the court would declare "that the collection by the
summary methods of distraint and levy was violative of law, and then, in the same breath
require the petitioner to deposit or file a bond as a prerequisite for the issuance of a writ of
injunction."
 Absent any evidence and preliminary determination by the CTA, the Court cannot make any
factual finding and settle the issue of whether the petitioners should comply with the
security requirement under Section 11, R.A. No. 1125. The determination of whether the
methods, employed by the CIR in its assessment, jeopardized the interests of a
taxpayer for being patently in violation of the law is a question of fact that calls for
the reception of evidence which would serve as basis. In this regard, the CTA is in a
better position to initiate this given its time and resources. The remand of the case to
the CTA on this question is, therefore, more sensible and proper. In the conduct of its
preliminary hearing, the CTA must balance the scale between the inherent power of
the State to tax and its right to prosecute perceived transgressors of the law, on one
side; and the constitutional rights of petitioners to due process of law and the equal
protection of the laws, on the other. In case of doubt, the tax court must remember that
as in all tax cases, such scale should favor the taxpayer, for a citizen's right to due process
and equal protection of the law is amply protected by the Bill of Rights under the
Constitution.

44. Tridharma Marketing vs Court of Tax Appeals

GR No. 215950 – June 20, 2016
Facts:
 Petitioner received a Preliminary Assessment Notice (PAN) from the Bureau of Internal
Revenue (BIR) assessing it with various deficiency taxes. A substantial portion of the
deficiency income tax and VAT arose from the complete disallowance by the BIR of the
petitioner's purchases from Etheria Trading.
 Later, the petitioner received from the BIR a Formal Letter of Demand assessing it with
deficiency taxes inclusive of surcharge and interest. It filed a protest against the formal
letter of demand. Respondent Commissioner of Internal Revenue (CIR) required the
petitioner to submit additional documents in support of its protest, and the petitioner
complied.
 Subsequently, Petitioner received a Final Decision on Disputed Assessment and thereafter
filed with the CIR a protest through a Request for Reconsideration. However, the CIR
denied the request for reconsideration.
 Prior to the CIR's decision, the petitioner paid the deficiency assessments, inclusive of
interest. It likewise reiterated its offer to compromise the alleged deficiency assessments on
IT and VAT.
 Petitioner appealed the CIR's decision to the CTA which granted said petition suspending
the collection of the deficiency assessment.
Issue:
 Whether or not the CTA may Order the suspension of the Collection of Assessed Taxes.
Held:
 The CTA may order the suspension of the collection of taxes provided that the
taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not
more than double the amount. Section 11 of R.A. No. 1125, as amended, indicates that
the requirement of the bond as a condition precedent to suspension of the collection applies
only in cases where the processes by which the collection sought to be made by means
thereof are carried out in consonance with the law, not when the processes are in plain
violation of the law that they have to be suspended for jeopardizing the interests of the
taxpayer.

45. Bureau of Internal Revenue vs Lepanto Ceramics Inc.

GR No. 224764 – April 24, 2017
Facts:
 Respondent Lepanto Ceramics, Inc. (LCI) filed a petition for corporate rehabilitation.
Essentially, LCI alleged that due to the financial difficulties it has been experiencing dating
back to the Asian financial crisis, it had entered into a state of insolvency considering its
inability to pay its obligations as they become due. Notably, LCI admitted in the annexes
attached to the aforesaid Petition its tax liabilities to the national government.
 Later, the Rehabilitation Court issued a Commencement Order which (a) declared LCI to be
under corporate rehabilitation; (b) suspended all actions or proceedings, in court or
otherwise, for the enforcement of claims against LCI; (c) prohibited LCI from making any
payment of its liabilities outstanding as of even date, except as may be provided under RA
10142; and (d) directed the BIR to file and serve on LCI its comment or opposition to the
petition, or its claims against LCI. Accordingly, the Commencement Order was published in
a newspaper of general circulation and the same, together with the petition for corporate
rehabilitation, were personally served upon LCI's creditors, including the BIR.
 Despite the foregoing, BIR sent LCI a notice of informal conference informing the latter of
its deficiency internal tax liabilities for the Fiscal Year. In response, LCI's court-appointed
receiver, sent BIR a letter-reply reminding the latter of the pendency of LCI's corporate
rehabilitation proceedings, as well as the issuance of a Commencement Order in
connection therewith. Undaunted, the BIR sent LCI a Formal Letter of Demand requiring
LCI to pay deficiency taxes. This prompted LCI to file a petition for indirect contempt against
petitioners before RTC asserting that petitioners' act of pursuing the BIR's claims for
deficiency taxes against LCI outside of the pending rehabilitation proceedings in spite of the
Commencement Order issued by the Rehabilitation Court is a clear defiance of the
aforesaid Order.
Issue:
 Whether or not the BIR may issue an assessment despite the issuance of the Court of a
Commencement Order.
Held:
 The acts of sending a notice of informal conference and a Formal Letter of Demand are part
and parcel of the entire process for the assessment and collection of deficiency taxes from
a delinquent taxpayer. An action or proceeding for the enforcement of a claim which should
have been suspended pursuant to the Commencement Order.
 In order to achieve such objectives, Section 16 of RA 10142 provides, inter alia, that upon
the issuance of a Commencement Order - which includes a Stay or Suspension Order - all
actions or proceedings, in court or otherwise, for the enforcement of "claims" against the
distressed company shall be suspended. Under the same law, claim "shall refer to all
claims or demands of whatever nature or character against the debtor or its property,
whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or
unmatured, disputed or undisputed, including, but not limited to; (1) all claims of the
 government, whether national or local, including taxes, tariffs and customs duties; and (2)
claims against directors and officers of the debtor arising from acts done in the discharge of
their functions falling within the scope of their authority: Provided, That, this inclusion does
not prohibit the creditors or third parties from filing cases against the directors and officers
acting in their personal capacities.
 Petitioners' insistence that: (a) Misajon, et al. only performed such acts to toll the
prescriptive period for the collection of deficiency taxes; and (b) to cite them in indirect
contempt would unduly interfere with their function of collecting taxes due to the
government, cannot be given any credence. As aptly put by the RTC Br. 35, they could
have easily tolled the running of such prescriptive period, and at the same time,
perform their functions as officers of the BIR, without defying the Commencement
Order and without violating the laudable purpose of RA 10142 by simply ventilating
their claim before the Rehabilitation Court. After all, they were adequately notified of the
LCI's corporate rehabilitation and the issuance of the corresponding Commencement
Order. In sum, it was improper for Misajon, et al. to collect, or even attempt to collect,
deficiency taxes from LCI outside of the rehabilitation proceedings concerning the latter,
and in the process, willfully disregard the Commencement Order lawfully issued by the
Rehabilitation Court.

46. Commissioner of Internal Revenue vs Kudos Metal Corp.

GR No. 178087 – May 05, 2010
620 SCRA 232
Facts:
 Respondent filed its Annual Income Tax Return (ITR). Pursuant to a Letter of Authority, the
Bureau of Internal Revenue (BIR) served upon respondent three Notices of Presentation of
Records. Respondent failed to comply with these notices, hence, the BIR issued a
Subpeona Duces Tecum, receipt of which was acknowledged by respondent’s President.
 Later, respondent’s accountant, executed a Waiver of the Defense of Prescription, duly
received by the BIR. This was followed by a second Waiver of Defense of Prescription
executed by the same accountant.
 Subsequently, the BIR issued a Preliminary Assessment Notice against the respondent.
This was followed by a Formal Letter of Demand with Assessment Notices duly received by
respondent.
 Respondent challenged the assessments by filing its "Protest on Various Tax Assessments.
Later, BIR then rendered a final Decision on the matter, requesting the immediate payment
of the following tax liabilities.
 Believing that the government’s right to assess taxes had prescribed, respondent filed a
Petition for Review with the CTA. The CTA Division issued a Resolution cancelling the
assessment notices issued against respondent for having been issued beyond the
prescriptive period. It found the first Waiver of the Statute of Limitations incomplete and
defective for failure to comply with the provisions of Revenue Memorandum Order (RMO)
No. 20-90.
Issue:
 Whether or not the government’s right to assess taxes is not barred by prescription as the
two waivers executed by respondent, through its accountant, effectively tolled or extended
the period within which the assessment can be made.
Held:
 Section 222 (b) of the NIRC provides that 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 the three-year period. RMO 20-90 issued on April 4,
 1990 and 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; 2. The waiver must be signed by the taxpayer himself or his duly authorized
representative; 3. The waiver should be duly notarized; 4. The CIR or the revenue official
authorized by him must sign the waiver indicating that the BIR has accepted and agreed to
the waiver; 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; and 6. The waiver
must be executed in three 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.
 Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the
government to assess internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual date of filing of such return,
whichever comes later. Hence, an assessment notice issued after the three-year
prescriptive period is no longer valid and effective. Exceptions however are provided under
Section 222 of the NIRC. Section 222 (b) of the NIRC provides that 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 the three-year period. Due to the defects in the
waivers, the period to assess or collect taxes was not extended. Consequently, the
assessments were issued by the BIR beyond the three-year period and are void.
 A perusal of the waivers executed by respondent’s accountant reveals that: (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, and (3) The fact of
receipt by the respondent of its file copy was not indicated in the original copies of the
waivers.

47. University Physicians Services Inc., vs Commissioner of Internal Revenue

GR No. 205955 – March 07, 2018
Facts:
 Petitioner filed its Annual Income Tax Return (ITR) with the Bureau of Internal Revenue
(BIR), reflecting an income tax overpayment. Subsequently, petitioner filed an Annual ITR
for the short period fiscal year reflecting the income tax overpayment from the previous
period. On the same date, petitioner filed an amended Annual ITR for the short period of
the fiscal year reflecting the removal of the amount of the instant claim.
 Later, petitioner filed with the respondent's office, a claim for refund and/or issuance of a
Tax Credit Certificate (TCC), representing the alleged excess and unutilized creditable
withholding taxes. In view of the fact that respondent has not acted upon the foregoing
claim for refund/tax credit, petitioner filed with a Petition for Review with the Court of Tax
Appeals (CTA).
 After trial, the CTA Division denied the petition for review for lack of merit. It reasoned that
UPSI-MI effectively exercised the carry-over option. On motion for reconsideration, UPSI-MI
argued that the irrevocability rule under Section 76 of the NIRC is not applicable for the
reason that it did not carry over to the succeeding taxable period the excess income tax
credit. UPSI-MI added that the subject excess tax credits were inadvertently included in its
original ITR, and such mistake was rectified in the amended ITR. Thus, UPSI-MI insisted
that what should control is its election of the option "To be issued a Tax Credit Certificate"
in its amended ITR.
Issue:
 Whether or not UPSI-MI is barred by Section 76 of the NIRC from claiming a refund of its
excess tax credits
Held:
 When a corporation overpays its income tax liability as adjusted at the close of the taxable
year, it has two options: (1) to be refunded or issued a tax credit certificate, or (2) to carry
over such overpayment to the succeeding taxable quarters to be applied as tax credit
against income tax due. Once the carry-over option is taken, it becomes irrevocable such
that the taxpayer cannot later on change its mind in order to claim a cash refund or the
issuance of a tax credit certificate of the very same amount of overpayment or excess
income tax credit.
 The law does not prevent a taxpayer who originally opted for a refund or tax credit
certificate from shifting to the carry-over of the excess creditable taxes to the taxable
quarters of the succeeding taxable years. However, in case the taxpayer decides to
shift its option to carryover, it may no longer revert to its original choice due to the
irrevocability rule. As Section 76 unequivocally provides, once the option to carry
over has been made, it shall be irrevocable. Furthermore, the provision seems to
suggest that there are no qualifications or conditions attached to the rule on
irrevocability. Law and jurisprudence unequivocally support the view that only the
option of carry-over is irrevocable.
 Petition is DENIED for lack of merit.

48. Commissioner of Internal Revenue vs Philippine Global Communication

GR No. 167146 – October 31, 2006
Facts:
 Respondent, a corporation engaged in telecommunications, filed its Annual Income Tax
Return. To which the Commissioner of Internal Revenue (CIR) issued a Letter of Authority
authorizing the appropriate Bureau of Internal Revenue (BIR) officials to examine the books
of account and other accounting records of respondent. Subsequently, the BIR requested
respondent to present for examination certain records and documents; but respondent
failed to present any document. Later, respondent received a Preliminary Assessment
Notice for deficiency income tax arising from deductions that were disallowed for failure to
pay the withholding tax and interest expenses that were likewise disallowed. On the
following day, respondent received a Formal Assessment Notice with Assessment Notice
for deficiency income tax.
 Respondent, through its counsel filed a formal protest against the Assessment Notice.
Later, Respondent filed another protest through another counsel. In both letters, respondent
requested for the cancellation of the tax assessment, which they alleged was invalid for lack
of factual and legal basis.
 More than eight years after the assessment was presumably issued, the the CIR issued a
Final Decision on the first protest, denying the respondent’s protest against the Assessment
Notice. This prompted respondent to filed a Petition for Review with the CTA. After due
notice and hearing, the CTA rendered a Decision in favor of respondent. The CTA ruled on
the primary issue of prescription and found it unnecessary to decide the issues on the
validity and propriety of the assessment. It decided that the protest letters filed by the
respondent cannot constitute a request for reinvestigation, hence, they cannot toll the
running of the prescriptive period to collect the assessed deficiency income tax. Thus, since
more than three years had lapsed from the time Assessment Notice was issued, the CIR’s
right to collect the same has prescribed in conformity with Section 269 of the National
Internal Revenue Code of 1977.
Issue:
 Whether or not CIR’s right to collect respondent’s alleged deficiency income tax is barred
by prescription.
Held:
 The law prescribed a period of three years from the date the return was actually filed or
from the last date prescribed by law for the filing of such return, whichever came later,
within which the BIR may assess a national internal revenue tax. However, the law
increased the prescriptive period to assess or to begin a court proceeding for the collection
without an assessment to ten years when a false or fraudulent return was filed with the
intent of evading the tax or when no return was filed at all. In such cases, the ten-year
period began to run only from the date of discovery by the BIR of the falsity, fraud or
omission.
 The three-year statute of limitations on the collection of an assessed tax provided under
Section 269(c) of the Tax Code of 1977, a law enacted to protect the interests of the
taxpayer, must be given effect. In providing for exceptions to such rule in Section 271, the
law strictly limits the suspension of the running of the prescription period to, among
other instances, protests wherein the taxpayer requests for a reinvestigation. In this
case, where the taxpayer merely filed two protest letters requesting for a
reconsideration, and where the BIR could not have conducted a reinvestigation
because no new or additional evidence was submitted, the running of statute of
limitations cannot be interrupted. The tax which is the subject of the Decision issued by
the CIR on 8 October 2002 affirming the Formal Assessment issued on 14 April 1994 can
no longer be the subject of any proceeding for its collection. Consequently, the right of the
government to collect the alleged deficiency tax is barred by prescription.
 Instant Petition is DENIED.

49. Commissioner of Internal Revenue vs Philippine Daily Inquirer, Inc.,

GR No. 213943 – March 22, 2017
Facts:
 PDI it filed its Annual Income Tax Return. PDI later received a letter from BIR alleging that
there was underdeclaration in PDI's declaration on its VAT Returns of its domestic
purchases from its suppliers. Subsequently, PDI executed a Waiver of the Statute of
Limitation (First Waiver) consenting to the assessment and/or collection of taxes. The First
Waiver was received on 23 March 2007. Later, BIR invited PDI to an informal conference to
present any objections that it might have on the BIR's findings. On 5 June 2007, PDI
executed a Waiver of the Statute of Limitation (Second Waiver), which BIR accepted on 8
June 2007.
 In a Preliminary Assessment Notice (PAN) dated 15 October 2007 issued by the BIR, PDI
was assessed for alleged deficiency income tax. PDI received the PAN on 4 December
2007. PDI then sought reconsideration of the PAN and expressed its willingness to execute
another Waiver (Third Waiver), which it did on the same date, thus extending BIR's right to
assess and/or collect from it until 30 April 2008. BIR accepted the Third Waiver on 20
December 2007. On 17 April 2008, PDI received a Formal Letter of Demand dated 11
March 2008 from the BIR, demanding for the payment of alleged deficiency. On 16 May
2008, PDI filed its protest. On 12 December 2008, PDI filed a Petition for Review against
the Commissioner of Internal Revenue (CIR) alleging that the 180-day period within which
the BIR should act on its protest had already lapsed. After the presentation of evidence the
CTA First Division ruled that the period of limitation in the assessment and collection of
taxes is within three (3) years. Thus, CTA found that the assessment made by CIR was
made out of time.
Issue:
 Whether or not the CTA erred in finding that the CIR made its assessment beyond the
prescriptive period.
Held:
 Under Section 203 of the NIRC, the prescriptive period to assess is set at three years. This
rule is subject to the exceptions provided under Section 222 of the NIRC. The fraud
contemplated by law is actual and not constructive. It must be intentional fraud, consisting
of deception willfully and deliberately done or resorted to in order to induce another to give
up some legal right. Negligence, whether slight or gross, is not equivalent to fraud with
intent to evade the tax contemplated by law. It must amount to intentional wrongdoing with
the sole object of avoiding the tax. While the filing of a fraudulent return necessarily implies
that the act of the taxpayer was intentional and done with intent to evade the taxes due, the
filing of a false return can be intentional or due to honest mistake. The entry of wrong
information due to mistake, carelessness, or ignorance, without intent to evade tax, does
not constitute a false return. In this case, we do not find enough evidence to prove fraud or
intentional falsity on the part of PDI. Since the case does not fall under the exceptions,
Section 203 of the NIRC should apply.
 Section 222(b) of the NIRC provides that 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 the three-year period. The Waivers executed by the
BIR and PDI were meant to extend the three-year prescriptive period, and would have
extended such period were it not for the defects found by the CTA. The defects in the
Waivers resulted to the non-extension of the period to assess or collect taxes, and
made the assessments issued by the BIR beyond the three-year prescriptive period
void.

50. People of the Philippines vs Jean Arnault

GR No. L-4288 – November 20, 1952
Facts:
 Jean L. Arnault was authorized to act for and represent the same as attorney in fact of
Ernest H. Burt, a non-resident alien, in the resale of two Haciendas. Being the proper
person having the receipt, custody and control or disposal of the payment, a demand was
made to him for the payment of the corresponding income tax. However, despite repeated
demands, to make such payment of the income tax, he allegedly failed, neglected and
refused to pay the same. Hence, he was later accused of a violation of section 55 of the
National Internal Revenue Code as amplified be section 206 of Revenue Regulations No. 2,
in relation to section 121, of the same Code.
 In the course of the trial and after five witnesses for the prosecution had testified, the
defendant thru counsel asked that he be allowed to withdraw his plea of not guilty provided
that all previous proceedings had be cancelled and stricken from the record. With consent
from the prosecution, the court granted the request and upon re-arraignment appellant
entered a plea of guilty. Thereafter, he was sentenced to indemnify the government with
subsidiary imprisonment in case of insolvency.
Issue:
 Whether or not the trial court erred in penalizing the accused to indemnify the Government
with subsidiary imprisonment in case of insolvency.
Held:
 While section 73 of the National Internal Revenue Code provides for the imposition of
the penalty for refusal or neglect to pay income tax or to make a return thereof, by
imprisonment or fine, or both, it fails to provide for the collection of said tax in
criminal proceedings. As well contended by counsel for appellant, Chapters I and II of
Title IX of the National Internal Revenue Code provide only for civil remedies for the
collection of the income tax, and under section 316, the civil remedy is either by distraint of
 goods, chattels, etc. or by judicial action. It is a commonly accepted principle of law that the
method prescribed by statute for the collection of taxes is generally exclusive, and unless a
contrary intent can be gathered from the statute, it shall be followed strictly.
 Moreover, section 353 (Subsidiary Penalty) of our Internal Revenue Code throws some light
on the intention of the Legislature on this point. Said provision provides that if the person
convicted for violation of any of the provisions of this code has no property with
which to meet the fine imposed upon him by the court, or is unable to pay such fine,
he shall be subject to any subsidiary personal liability at the rate of one day for each
two pesos and fifty centavos, subject to the rules established in article 39 of the
Revised Penal Code. If the law really contemplated the inclusion of the indemnity in a
conviction for violation of the provisions of the code, particularly the income tax law,
the above-cited section 353 could have easily provided for subsidiary imprisonment
for failure to pay any indemnity included in the decision of conviction. The absence
of such provision is clearly indicative of the desire of the Legislature to exclude the
collection and payment of a tax from the criminal prosecution; and leave it to the civil
remedies provided in the code, which are quite adequate and effective, particularly
that by the distraint.
 The principle and philosophy underlying the civil liability of one violating a punishable act
under the Penal Code are wholly different from one incurring criminal liability under the
Internal Revenue Code. Under the Penal Code the offender incurs civil liability because of
his criminal act. In other words the civil obligation flows from and is created by the criminal
liability. Under the Income Tax Law, however, it is the reverse. A person convicted incurs
criminal obligation because of failure to fulfill his civil obligation. The civil obligation to pay
tax precedes the criminal liability. This lack of similarity or analogy between criminal liability
under the Revised Penal Code and the Criminal liability under the Income Tax Law is
another reason for not imposing the payment of civil indemnity in case of a violation of the
Income Tax Law.
 Unless expressly provided by law, conviction for failure or neglect to pay a tax does not
include payment of indemnity to the State in the amount of the tax not paid. So, it was grave
error on the part of the trial court to sentence appellant to pay this indemnity; so was that
part of the decision imposing subsidiary imprisonment in case of insolvency in the payment
of the indemnity. In this connection, and to avoid any doubt, we may say that the
Government is free to avail itself of the civil remedies provided by the Internal Revenue
Code to collect the tax herein involved.
 The Solicitor General holds that considering the large amount of the tax delinquency
involved, appellant should have been sentenced to a higher penalty which should include
both fine and imprisonment. We have given considerable thought to his recommendation.
That the tax delinquency is enormous, there is no question. That the penalty should be
proportionate is also reasonable. In our deliberations, someone suggested that in imposing
only a fine, without imprisonment, the trial court exercised its discretion, which discretion
should not be disturbed unless it be found that there had been abused thereof. Others
however believe that it is highly possible that the trial court may have thought that by
sentencing appellant to pay the indemnity of P1,089,270 with subsidiary imprisonment in
case of insolvency, the offense had been sufficiently punished, which indemnity and
subsidiary imprisonment we are now excluding from the decision. After more or less
extensive deliberations the great majority believe that because of the relatively large
amount of the tax delinquency, the penalty should be increased as recommended by the
Solicitor General. In addition to the fine of P1,000 with subsidiary imprisonment in case of
insolvency, we hereby sentence appellant to three (3) months imprisonment, with the
accessories of the law.