TAXATION LAW REVIEW; VAT & REMEDIES CASES
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CASE FACTS
1. MEDICARD vs. CIR Petitioner MEDICARD is a Health Maintenance Organization
(2017) (HMO) that provides prepaid health and medical insurance
coverage to its clients.
Upon finding some discrepancies between MEDICARD’s ITRs
and VAT Returns, the CIR informed MEDICARD and issued a
Letter Notice. Subsequently, the CIR also issued a PAN
Against MEDICARD for deficiency VAT. Thereafter, On
January 4, 2008, MEDICARD received CIR’s FAN dated for
alleged deficiency VAT for taxable year 2006 in the total
amount of P196,614,476.69,10 inclusive of penalties.
According to the CIR, the taxable base of HMOs for VAT
purposes is its gross receipts without any deduction 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 the processing fees amounting to
P11.5 Million should be excluded from gross receipts
because P5.6 Million of which represent advances for
professional fees due from clients which were paid by
MEDICARD. It also raised the absence of LOA.
MEDICARD received CIR’s Final Decision on Disputed
Assessment dated May 15, 2009, denying MEDICARD’s
protest. CTA affirmed CIR.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
ISSUE RULING
1. Whether the absence of the 1.YES. The absence of an LOA violated MEDICARD’s
LOA is fatal; right to due process. It is clear that unless authorized
by the CIR himself or by his duly authorized
2. Whether the amounts that representative, through an LOA, an examination of
MEDICARD earmarked and the taxpayer cannot ordinarily be undertaken. The
eventually paid to the medical circumstances contemplated under Section 6
service providers should still form where the taxpayer may be assessed through best-
part of its gross receipts for vat evidence obtainable, inventory-taking, or
purposes. surveillance among others has nothing to do with
the LOA. These are simply methods of examining
the taxpayer in order to arrive at the correct
amount of taxes. Hence, unless undertaken by the
CIR himself or his duly authorized representatives,
other tax agents may not validly conduct any of
these kinds of examinations without prior authority.
In this case, there is no dispute that no LOA was
issued prior to the issuance of a PAN and FAN
against MEDICARD. Therefore no LOA was also
served on MEDICARD. The LN that was issued earlier
was also not converted into an LOA contrary to the
above quoted provision. Surprisingly, the CIR did not
even dispute the applicability of the above
provision of RMO No. 32-2005 in the present case
which is clear and unequivocal on the necessity of
an LOA for the assessment proceeding to be valid.
Hence, the CTA’s disregard of MEDICARD’s right to
due process warrant the reversal of the assailed
decision and resolution.
The following differences between an LOA and LN
are crucial.
First, an LOA addressed to a revenue officer is
specifically required under the NIRC before an
examination of a taxpayer may be had while an LN
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is not found in the NIRC and is only for the purpose
of notifying the taxpayer that a discrepancy is
found based on the BIR’s RELIEF System. Second, an
LOA is valid only for 30 days from date of issue while
an LN has no such limitation. Third, an LOA gives the
revenue officer only a period of 120 days from
receipt of LOA to conduct his examination of the
taxpayer whereas an LN does not contain such a
limitation. Due process demands, as recognized
under RMO No. 32-2005, that after an LN has served
its purpose, the revenue officer should have
properly secured an LOA before proceeding with
the further examination and assessment of the
petitioner. Unfortunately, this was not done in this
case.

2.NO. Based on industry practice, MEDICARD

informs its would-be member beforehand that 80%
of the amount would be earmarked for medical
utilization and only the remaining 20% comprises its
service fee. In the latter case, MEDICARD’s sale of its
services is exempt from VAT under Section 109(G).

HMO’s gross receipts shall be the total amount of

money or its equivalent representing the service fee
actually or constructively received during the
taxable period for the services performed or to be
performed for another person, excluding the value-
added tax. The compensation for their services
representing their service fee, is presumed to be the
total amount received as enrollment fee from their
members plus other charges received (RR No. 16-
2005).

By earmarking or allocating 80% of the amount,

MEDICARD unequivocally recognizes that its

Pain and struggles are temporary; LAW DEGREE IS FOREVER.

TAXATION LAW REVIEW; VAT & REMEDIES CASES
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2. Power Sector Petitioner Power Sector Assets and Liabilities Management 1. Whether or not DOJ acted 1. YES. DOJ is vested by law with jurisdiction over
Assets and Corporation (PSALM) is a GOCC created by virtue of EPIRA.
Liabilities Mngmnt
Corp. vs. CIR The law states that the principal purpose of PSALM is to
(2017) manage the orderly sale, disposition, and privatization of the
NPC generation assets, real estate and other disposable
assets, and Independent Power Producer (IPP) contracts
with the objective of liquidating all NPC financial obligations
and stranded contract costs in an optimal manner.
PSALM conducted public biddings for the privatization of the
Pantabangan-Masiway Hydroelectric Power Plant and
Magat Hydroelectric Power Plant. First Gen Hydropower
Corporation with its $129 Million bid and SN Aboitiz Power
Corporation with its $530 Million bid were the winning bidders
for the Pantabangan-Masiway Plant and Magat Plant,
respectively.
The NPC received a letter from the (BIR) demanding
immediate payment of P3M+ deficiency (VAT) for the sale of
the Plants. The NPC indorsed BIR’s demand letter to PSALM.
The BIR, NPC, and PSALM executed a Memorandum of
Agreement (MOA). In compliance with the MOA, PSALM
remitted under protest to the BIR the amount of P3M+,
representing the total basic VAT due. Thus, the sale is subject
to
VAT.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
possession of the funds is not in the concept of
owner but as a mere administrator of the same. For
this reason, at most, MEDICARD’s right in
relation to these amounts is a mere inchoate owner
which would ripen into actual ownership if, and only
if, there is underutilization of the membership fees at
the end of the fiscal year.
with jurisdiction in this case. this case. This case involves a dispute between
2. Whether or not the sale of the PSALM and NPC, which are both wholly
power plants is subject to VAT. government-owned corporations, and the BIR, a
government office, over the imposition of VAT on
the sale of the two power plants. There is no
question that original jurisdiction is with the CIR,
who issues the preliminary and the final tax
assessments. However, if the government entity
disputes the tax assessment, the dispute is
already between the BIR (represented by the
CIR) and another government entity, in this case,
the petitioner PSALM. Under Presidential Decree
No. 242 (PD 242), all disputes and claims solely
between government agencies and offices,
including government-owned or - controlled
corporations, shall be administratively settled or
adjudicated by the Secretary of Justice, the
SolGen, or the Government Corporate Counsel,
depending on the issues and government
agencies involved. As regards cases involving
only questions of law, it is the Secretary of Justice
who has jurisdiction.
2. NO. Jurisprudence provides that the phrase ‘in
the course of trade or business’ means the
regular conduct or pursuit of a commercial or an
economic activity, including transactions
incidental thereto, by any person regardless of
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PSALM filed with the Department of Justice (DOJ) a petition
for the adjudication of the dispute with the BIR to resolve the
issue of whether the sale of the power plants should be
subject to VAT. DOJ favoured PSALM.
The BIR moved for reconsideration, alleging that the DOJ
had no jurisdiction since the dispute involved tax laws
administered by the BIR and therefore within the jurisdiction
Of the (CTA). Furthermore, the BIR stated that the sale of the
subject power plants by PSALM to private entities is in the
course of trade or business
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
whether or not the person engaged therein is a
nonstock, nonprofit private organi zation
(irrespective of the disposition of its net income
and whether or not it sells exclusively to
members or their guests), or government entity.
In this case, since the disposition or sale of the
assets is a consequence of PSALM’s mandate to
ensure the orderly sale or disposition of the
property and thereafter to liquidate the
outstanding loans and obligations of NPC,
utilizing the proceeds from sales and other
property contributed to it, including the
proceeds from the Universal Charge, and not
conducted in pursuit of any commercial or
profitable activity, including transactions
incidental thereto, the same will be considered
an isolated transaction, which will therefore not
be subject to VAT.
The sale of the power plants is not in pursuit of a
commercial or economic activity but a
governmental function mandated by law to
privatize NPC generation assets. PSALM was
created primarily to liquidate all NPC financial
obligations and stranded contract costs in an
optimal manner.
Under the EPIRA law, the ownership of the
generation assets, real estate, IPP contracts, and
other disposable assets of the NPC was
transferred to PSALM. Clearly, PSALM is not a
mere trustee of the NPC assets but is the owner
thereof. Precisely, PSALM, as the owner of the
NPC assets, is the government entity tasked
under the EPIRA law to privatize such NPC assets
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3. CIR vs. Toledo Toledo Power Corporation (TPC) is a general partnership
Power Company principally engaged in the business of power generation
(2015) and sale of electricity.
On December 22, 2003, TPC filed with the BIR an
administrative claim for refund or credit of its unutilized input
VAT for the taxable year 2002 in the total amount of
P14,254,013.27 under the Electric Power Industry Reform Act
of 2001 (EPIRA) and the NIRC.
Due to the inaction of the CIR, TPC filed with the CTA a
Petition for Review. CTA Division rendered a Decision partially
granting TPC’s claim in the reduced amount of
P7,598,279.29. Since NPC is exempt from the taxes, including
the payment of all VAT, the CTA Division allowed TPC to
claim a refund or credit of its unutilized input VAT attributable
to its zero-rated sales of electricity to NPC for the taxable
year 2002. However, denied the claim attributable to TPC’s
sales of electricity to CEBECO, ACMDC and AFC due to the
failure of TPC to prove that it is a generation company under
the EPIRA.
TPC moved for partial reconsideration contending that as an
existing generation company, it was not required to obtain a
COC from the ERC as a prerequisite for its operations, and
that the issue of whether it is a generation company was
never raised during the trial
CIR argued that the administrative claim was merely pro
Forma since TPC failed to submit the complete documents
required under RMO No. 53-98,17 which were necessary to
ascertain the correct amount to be refunded in the
administrative claim
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
1. Whether the administrative and
the judicial claims for tax refund or
credit were timely and validly
filed.
2. Whether the TPC is entitled to
the full amount of its claim for tax
refund or credit.
1. YES. In CIR v. San Roque Power Corporation, we
said that the 120+30-day period must be strictly
observed except from the date of issuance of BIR
Ruling No. DA-489-03 on December 10, 2003, which
allowed taxpayers to file a judicial claim without
waiting for the end of the 120-day period, up to the
date of promulgation of CIR v. Aichi Forging
Company of Asia, Inc. on October 6, 2010, where
we declared that compliance with the 120+30-day
period is mandatory and jurisdictional.
In this case, TPC applied for a claim for refund or
credit of its unutilized input VAT for the taxable year
2002 on December 22, 2003. Since the CIR did not
act on its application within the 120-day period, TPC
appealed the inaction on April 22, 2004. Clearly,
both the administrative and the judicial claims were
filed within the prescribed period provided in
Section 112 of the NIRC.
Also, the administrative claim was not pro forma as
TPC submitted documents to support its claim for
refund and even manifested its willingness to submit
additional documents if necessary. The CIR,
however, never requested TPC to submit additional
documents. Thus, she cannot now raise the issue
that TPC failed to submit the complete documents.
2. NO. there is no question that TPC is entitled to a
refund or credit of its unutilized input VAT
attributable to its zero-rated sales of electricity to
NPC.
Section 651 of the EPIRA provides that the sale of
generated power by generation companies shall
be zero rated. Section 4(x) of the same law states
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that a generation company “refers to any person or
entity authorized by the ERC to operate facilities
used in the generation of electricity.” Corollarily, to
be entitled to a refund or credit of unutilized input
VAT attributable to the sale of electricity under the
EPIRA, a taxpayer must establish: (1) that it is a
generation company, and (2) that it derived sales
from power generation. In this case, TPC failed to
present a COC from the ERC
during the trial.

At this point, a distinction must be made between a

generation facility and a generation company. A
generation facility is defined under the EPIRA Rules
and Regulations as “a facility for the production of
electricity. While a generation company, as
previously mentioned, “refers to any person or entity
authorized by the ERC to operate facilities used in
the generation of electricity.” What differentiates a
generation facility from a generation company is
that the latter is authorized by the ERC to operate, as
evidenced by a COC.

NO DEFICIENCY VAT. In this case, TPC filed a claim

for tax refund or credit under Section 112 of the
NIRC, where the issue to be resolved is whether TPC
is entitled to a refund or credit of its unutilized input
VAT for the taxable year 2002. And since it is not a
claim for refund under Section 229 of the NIRC, the
correctness of TPC’s VAT returns is not an issue. Thus,
there is no need for the court to determine whether
TPC is liable for deficiency VAT.
4. Coral Bay Nickel The petitioner, a domestic corporation engaged in the Whether or not the petitioner, an NO. The petitioner’s principal office was located in
Corporation vs. CIR manufacture of nickel and/or cobalt mixed sulphide, is a entity located within an Barangay Rio Tuba, Bataraza, Palawan.21 Its plant
(2016) VAT entity registered with the BIR. It is also registered with the ECOZONE, entitled to the refund site was specifically located inside the Rio Tuba
PEZA. of its unutilized input taxes Export Processing Zone — a special economic zone

Pain and struggles are temporary; LAW DEGREE IS FOREVER.

TAXATION LAW REVIEW; VAT & REMEDIES CASES
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Petitioner filed its Amended VAT Return declaring unutilized
input tax from its domestic purchases of capital goods, other
than capital goods and services, for its third and fourth
quarters of 2002 totalling P50,124,086.75. On June 14, 2004, it
filed with RDO No. 36 in Palawan its Application for Tax
Credits/Refund together with supporting documents.
Due to the alleged inaction of the respondent, the petitioner
elevated its claim to the CTA on July 8, 2004 by petition for
review, praying for the refund of the aforesaid input VAT.
CTA Division and CTA En Banc: denied.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
incurred before it became a
PEZA-registered entity.
(ECOZONE) . As such, the purchases of goods and
services by the petitioner that were destined for
consumption within the ECOZONE should be free of
VAT (Cross Border Doctrine); hence, no input VAT
should then be paid on such purchases, rendering
the petitioner not entitled to claim a tax refund or
credit. Verily, if the petitioner had paid the input
VAT, the CTA was correct in holding that the
petitioner’s proper recourse was not against the
Government but against the seller who had shifted
to it the output VAT following RMC 42-03.
We should also take into consideration the nature of
VAT as an indirect tax. Although the seller is
statutorily liable for the payment of VAT, the amount
of the tax is allowed to be shifted or passed on to
the buyer. However, reporting and remittance of
the VAT paid to the BIR remained to be the
seller/supplier’s obligation. Hence, the proper party
to seek the tax refund or credit should be the
suppliers, not the petitioner.
SC explained why it gave due course to the petition
for review on certiorari despite the petitioner’s
premature filing of its judicial claim in the CTA:
The petitioner filed with the BIR on June 10, 2004 its
application for tax refund or credit representing the
unutilized input tax for the third and fourth quarters
of 2002. Barely 28 days later, it brought its appeal in
the CTA contending that there was inaction on the
part of the petitioner despite its not having waited
for the lapse of the 120-day period mandated by
Section 112(D) of the 1997 NIRC. At the time of the
petitioner’s appeal, however, the applicable rule
was that provided under BIR Ruling No. DA-489-
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5. Harte-Hanks Petitioner HHPI is a domestic corporation engaged in the
Philippines Inc. vs. business of providing outsourcing customer relationship
CIR (2016). management solutions through inbound and outbound call
services to its customers.
On March 23, 2010, HHPI filed a claim for refund of its
unutilized input VAT of P3,167,402.34 before the BIR. Asserting
that there was inaction on the part of the Commissioner of
Internal Revenue (CIR) and in order to toll the running of the
two-year period prescribed by law, HHPI elevated its claim
to the CTA on March 30, 2010.
CIR sought the dismissal of HHPI’s claim for refund due to the
prematurity of the appeal. According to the CIR, the 120-
day period under Section 112(C) of the (NIRC) of 1997 for
the CIR to act on the matter had not yet lapsed.
CTA granted the dismissal.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether or not the appeal to the
CTA was premature and therefore
warrants its dismissal.
03,14 issued on December 10, 2003.
As pronounced in Silicon Philippines, Inc. v.
Commissioner of Internal Revenue, 754 SCRA 279
(2015), the exception to the mandatory and
jurisdictional compliance with the 120+30-day
period is when the claim for the tax refund or credit
was filed in the period between December 10, 2003
and October 5, 2010 during which (BIR) Ruling No.
DA-489-03 was still in effect.
YES. It should be noted that the petition for review
was filed before the CTA on March 30, 2010, or
merely seven days after the administrative claim for
refund was filed before the BIR on March 23, 2010.
Evidently, HHPI failed to wait for the lapse of the
120-day period which is expressly provided for by
law for the CIR to grant or deny the application for
refund.
Moreover, a taxpayer’s failure to comply with the
prescribed 120-day waiting period would render the
petition premature and is violative of the principle
on exhaustion of administrative remedies.
Accordingly, the CTA does not acquire jurisdiction
over the same. This being so, “[w]hen a taxpayer
prematurely files a judicial claim for tax refund or
credit with the CTA without waiting for the decision
of the [CIR], there is no ‘decision’ of the [CIR] to
review and thus the CTA as a court of special
jurisdiction has no jurisdiction over the appeal.
The non-observance of the 120-day period is fatal
to the filing of a judicial claim to the CTA, the non-
observance of which will result in the dismissal of the
same due to prematurity. In fine, the premature
filing of the judicial claim for refund of the excess
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6. CIR vs. Next Mobile Respondent NMI received a copy of the LOA dated
Inc. (2015) September 8, 2003 signed by RD Nestor S. Valeroso
authorizing a revenue officer examine respondent’s books of
accounts and other accounting records for income and
withholding taxes for the period covering January 1, 2001 to
December 31, 2001.
Ma. Lida Sarmiento (Sarmiento), respondent’s Director of
Finance, subsequently executed several (5) waivers of the
statute of limitations to extend the prescriptive period of
assessment for taxes due in taxable year ending December
31, 2001. NMI received a PAN, then a FAN. NMI filed its
protest against the FLD and requested the reinvestigation of
the assessments. BIR denied its protest. Thus, NMI filed a
Petition for Review before the CTA.
CTA FD : granted respondent’s Petition and declared the
FLD and Assessment Notices/Demand No. 43-734 cancelled
and withdrawn for being issued beyond the 3-year
prescriptive period provided by law. Waivers executed by
Sarmiento did not validly extend the 3-year prescriptive
period to assess respondent for deficiency income tax, FWT,
EWT, increments for late remittance of tax withheld and
compromise penalty, for, as found, the Waivers were not
properly executed according to the procedure.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether or not the CIR’s right to
assess respondent’s deficiency
taxes had already prescribed.
input VAT of HHPI in the amount of P3,167,402.34
warrants a dismissal of the petition because the
latter acquired no jurisdiction over the same.
NO. The general rule is that when a waiver does not
comply with the requisites for its validity specified
under RMO 20-90 and RDAO 01-05, it is invalid and
ineffective to extend the prescriptive period to
assess taxes. However, due to its peculiar
circumstances, We shall treat this case as an
exception to this rule and find the Waivers valid.
To uphold the validity of the Waivers would be
consistent with the public policy embodied in the
principle that taxes are the lifeblood of the
government. As between the parties, it would be
more equitable if petitioner’s lapses were allowed
to pass and consequently uphold the Waivers in
order to support this principle and public policy.
The parties are in pari delicto. In this case, the
taxpayer, on the one hand, after voluntarily
executing waivers, insisted on their invalidity by
raising the very same defects it caused. On the
other hand, the BIR miserably failed to exact from
respondent compliance with its rules. The BIR’s
negligence in the performance of its duties was so
gross that it amounted to malice and bad faith.
Moreover, the BIR was so lax such that it seemed
that it consented to the mistakes in the Waivers.
In the instant case, the CTA found the Waivers
because of the following flaws: (1) they were
executed without a notarized board authority; (2)
the dates of acceptance by the BIR were not
indicated therein; and (3) the fact of receipt by
respondent of its copy of the Second Waiver was
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7. CIR vs. Asalus On December 16, 2010, respondent Asalus Corporation
(2017) (Asalus) received a Notice of Informal Conference from
Revenue District Office No. 47 of the Bureau of Internal
Revenue (BIR). It was in connection with the investigation
conducted by Revenue Officer Fidel M. Bañares II on the
Value-Added Tax transactions of Asalus for the taxable year
2007. Asalus filed its Letter-Reply, dated December 29, 2010,
questioning the basis of Bañares' computation for its VAT
liability.
On January 10, 2011, petitioner Commissioner of Internal
Revenue issued the Preliminary Assessment Notice finding
Asalus liable for deficiency VAT for 2007 in the aggregate
amount of P413,378,058.11.
On August 26, 2011, Asalus received the Formal Assessment
Notice stating that it was liable for deficiency VAT for 2007 in
the total amount of P95,681,988.64, inclusive of surcharge
and interest. Consequently, it filed its protest against the
FAN, dated September 6, 2011.
On October 16, 2012, Asalus received the Final Decision on
Disputed Assessment showing VAT deficiency for 2007 in the
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether petitioner’s right to assess
respondent for its deficiency vat
for taxable year 2007 had already
prescribed
not indicated on the face of the original Second
Waiver.
Petitioner was also at fault here because it was
careless in complying with the requirements of RMO
20-90 and RDAO 01-05. Nevertheless, petitioner’s
negligence may be addressed by enforcing the
provisions imposing administrative liabilities upon the
officers responsible for these errors. The BIR’s right to
assess and collect taxes should not be jeopardized
merely because of the mistakes and lapses of its
officers, especially in cases like this where the
taxpayer is obviously in bad faith.
NO. The 10-year period, not 3-year period applies.
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 whichever is LATER. 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.
Under Section 248(B) of the NIRC,21 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. When
there is a showing that a taxpayer has substantially
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aggregate amount of P106,761,025.17, inclusive of surcharge
and interest and P25,000.00 as compromise penalty. As a
result, it filed a petition for review before the CTA Division.
In its April 2, 2014 Decision, the CTA Division ruled that the
VAT assessment issued on August 26, 2011 had prescribed
and consequently deemed invalid. The CTA En Banc further
explained that the PAN alone could not be used as a basis
because it was not the assessment contemplated by law.
The CIR, through the (OSG), argues that the VAT assessment
had yet to prescribe as the applicable prescriptive period is
the ten (10)-year prescriptive period under Section 222 of the
NIRC, and not the three (3)-year prescriptive period under
Section 203 thereof. It claims that Asalus was informed in the
PAN of the ten (10)-year prescriptive period and that the
FAN made specific reference to the PAN. In turn, the FDDA
made reference to the FAN. Asalus, on the other hand, only
raised prescription in its supplemental protest to the FAN.
8. Asiatrust On February 2000, Asiatrust received from the CIR three
Development Bank Formal Letters of Demand (FLD) with Assessment Notices for
Inc. vs. CIR (2017) deficiency internal revenue taxes in the amounts of
P131,909,161.85, P83,012,265.78, and P144,012,918.42 for
fiscal years ending June 30, 1996, 1997, and 1998,
respectively. Asiatrust timely protested the assessment
notices. Due to the inaction of the CIR on the protest,
Asiatrust filed before the CTA a Petition for Review
CIR issued against Asiatrust new Assessment Notices for
deficiency taxes in the amounts of P112M+ , P53M+ , and
P133M+, covering the fiscal years ending June 30, 1996,
1997, and 1998, respectively. Asiatrust partially paid said
deficiency tax assessments.
During the trial, Asiatrust manifested that it availed of the Tax
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
underdeclared its sales, receipt or income, there is
a presumption that it has filed a false return. As
such, the CIR need not immediately present
evidence to support the falsity of the return, unless
the taxpayer fails to overcome the presumption
against it.
Notice substantially complied with. In the case at
bench, Asalus was sufficiently informed that with
respect to its tax liability, the extraordinary period
laid down in Section 222 of the NIRC would apply.
This was categorically stated in the PAN and all
subsequent communications from the CIR made
reference to the PAN.
1. Whether or not the CTA en 1. NO. Section 1, Rule 8 of the Revised Rules of the
banc committed reversible CTA states: Review of cases in the Court en
error when it dismissed CIR’s bane. - In cases falling under the exclusive
petition for review on the appellate jurisdiction of the Court en bane, the
ground that the latter petition for review of a decision or resolution of
allegedly failed to comply the Court in Division must be preceded by the
with Sec 1, rule 8 of the filing of a timely motion for reconsideration or
revised rules of the CTA new trial with the Division.
2. Whether or not a termination Thus, in order for the CTA En Banc to take
letter is necessary for the cognizance of an appeal via a petition for
claim of abatement to review, a timely motion for reconsideration or
prosper. new trial must first be filed with the CTA Division
that issued the assailed decision or resolution.
Failure to do so is a ground for the dismissal of
the appeal as the word "must" indicates that the
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Abatement Program for its deficiency final withholding tax —
trust assessments for fiscal years ending June 30, 1996 and
1998; and that on June 29, 2007, it paid the basic taxes in the
amounts of P4M+ and P6M+ for the said fiscal years,
respectively. Asiatrust also claimed that it availed of the
provisions of the Tax Amnesty Law of 2007.
CTA Division rendered an Amended Decision finding that
Asiatrust is entitled to the immunities and privileges granted
in the Tax Amnesty Law. However, it reiterated its ruling that
in the absence of a termination letter from the BIR, it cannot
consider Asiatrust’s availment of the Tax Abatement
Program.
CTA En Banc denied the CIR’s appeal for failure to file a prior
motion for reconsideration of the Amended Decision, while it
denied Asiatrust’s appeal for lack of
merit.41
9. CIR vs. Transitions On April 28, 2006, Transitions Optical received Letter of
Optical (2017) Authority No. 00098746.
On October 9, 2007, the parties allegedly executed a Waiver
of the Defense of Prescription (First Waiver). In
this supposed First Waiver, the prescriptive period for the
assessment of Transition Optical’s internal revenue taxes for
the year 2004 was extended to June 20, 2008. The document
was signed by Transitions Optical’s Finance Manager,
Pamela Theresa D. Abad, and by BIR’s RDO Myrna S.
Leonida.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
2. YES. Since no termination letter has been issued
whether or not the two (2) 1. NO. the period to assess and collect taxes may
Waivers of the Defense
of Prescription entered into by the
parties on October 9,
2007 and June 2, 2008 were valid
Whether respondent is estopped
to question the validity of the
waivers.
whether or not the assessment of
deficiency taxes against
filing of a prior motion is mandatory, and not
merely directory. In this case, the CIR's failure to
move for a reconsideration of the Amended
Decision of the CTA Division is a ground for the
dismissal of its Petition for Review before the CTA
En Banc. Thus, the CTA En Banc did not err in
denying the CIR's appeal on procedural
grounds.
by the BIR, there is no reason for the Court to
consider as closed and terminated the tax
assessment on Asiatrust’s final withholding tax
for fiscal year ending June 30, 1998. Asiatrust’s
application for tax abatement will be deemed
approved only upon the issuance of a
termination letter, and only then will the
deficiency tax assessment be considered
closed and terminated. However, in case
Asiatrust’s application for tax abatement is
denied, any payment made by it would be
applied to its outstanding tax liability. For this
reason, Asiatrust’s allegation of double taxation
must also fail.
be extended upon the Commissioner of Internal
Revenue and the taxpayer’s written agreement,
executed before the expiration of the three (3)-
year period.
In this case, two (2) waivers were supposedly
executed by the parties extending the
prescriptive periods for assessment of income
tax, value-added tax, and expanded and final
withholding taxes to June 20, 2008, and then to
November 30, 2008.
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This was followed by another supposed Waiver of the
Defense of Prescription (Second Waiver) dated June 2,
2008. This time, the prescriptive period was supposedly
extended to November 30, 2008.9
In its Protest Letter dated December 8, 2008 against the FAN,
Transitions Optical alleged that the demand for deficiency
taxes had already prescribed at the time the FAN was
mailed on December 2, 2008. Years later, the Commissioner
of Internal Revenue, through RD Jose N. Tan, issued a Final
Decision on the Disputed Assessment dated January 24,
2012, holding Transitions Optical liable for deficiency taxes in
the total amount of P19,701,849.68 for taxable year 2004.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
respondent Transitions Optical
Philippines,
Inc. for taxable year 2004 had
prescribed.
2. YES. Respondent is estopped from claiming that
3. YES. But, even as respondent is estopped from
The CTA found that these waivers were not
accompanied by a notarized written authority
from respondent, authorizing the so-called
representatives to act on its behalf. Likewise,
neither the Revenue District Office’s
acceptance date nor respondent’s receipt of
the Bureau of Internal Revenue’s acceptance
was indicated in either document.
the waivers were invalid by reason of its own
actions, which persuaded the government to
postpone the issuance of the assessment.
Estoppel similarly applies in this case. Indeed, the
BIR was at fault when it accepted respondent’s
Waivers despite their noncompliance with the
requirements of RMO No. 20-90 and RDAO No.
05-01. Nonetheless, respondent’s acts also show
its implied admission of the validity of the
waivers. Respondent never raised the invalidity
of the Waivers at the earliestopportunity, either in
its Protest to the PAN, Protest to the FAN, or
Supplemental Protest to the FAN.
questioning the validity of the Waivers, the
assessment is nonetheless void because it was
served beyond the supposedly extended period.
The First Division of the CTA found that “the date
indicated in the envelope/mail matter
containing the FAN and the FLD is December 4,
2008, which is considered as the date of their
mailing.” Since the validity period of the second
Waiver is only until November 30, 2008,
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10. Samar-I vs. CIR Samar-I Electric Cooperative, Inc. (Petitioner) is an electric
(2014) Cooperative.
On July 13, 1999 and April 17, 2000, petitioner filed its 1998
and 1999 income tax returns, respectively.
On November 13, 2000, respondent issued a duly signed
(LOA) No. 1998 00023803; covering the examination of
petitioner’s books of account and other accounting records
for income and withholding taxes for the period 1997 to
1999. The
LOA was received by petitioner on November 14, 2000.
Petitioner executed a Waiver of the Defense of Prescription
under the Statute of Limitations, good until March 29, 2002.
On September 15, 2002, petitioner received a demand letter
and assessments notices FAN for the alleged 1997, 1998, and
1999 deficiency withholding tax as well as deficiency
income tax.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
1.Whether the
1997 and 1998 assessments on
withholding tax on
compensation were issued within
the prescriptive period
provided by law;
2.Whether the assessments were
issued in accordance with Section
228 of the NIRC of 1997.
prescription had already set in at the time the
FAN and the FLD were actually mailed on
December 4, 2008.
Petitioner’s contention that the assessment
required to be issued within the three (3)-year or
extended period provided in Sections 203 and
222 of the NIRC refers to the PAN is untenable. It
is clear that the assessment contemplated in
Sections 203 and 222 of the NIRC refers to the
service of the FAN upon the taxpayer.
1. YES. NIRC provides that in the case of a false or
fraudulent return with intent to evade tax or of
failure to file a return, the tax may be assessed,
or a proceeding in court for the collection of
such tax may be filed without assessment, at
any time within ten (10) years after the
discovery of the falsity, fraud or omission.
In the case at bar, it was petitioner’s substantial
underdeclaration of withholding taxes in the
amount of P2,690,850.91 which constituted the
“falsity” in the subject returns — giving
respondent the benefit of the period under
Section 222 of the NIRC of 1997 to assess the
correct amount of tax “at any time within ten
(10) years after the discovery of the falsity, fraud
or omission.
2. YES. NIRC provides that the taxpayers shall be
informed in writing of the law and the facts on
which the assessment is made: otherwise, the
assessment shall be void.
In this case, although the FAN and demand
letter issued to petitioner were not
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|Agot Gaid|
11. CIR vs. Liquigaz On June 25, 2008, it received a Formal Letter of
(2016) Demand(FLD)/Formal Assessment Notice(FAN). Liquigaz filed
its protest against the FLD/FAN and subsequently submitted
its supporting documents on September 23, 2008.
CTA Division partially granted Liquigaz’s petition cancelling
the EWT and FBT assessments but affirmed with modification
the WTC assessment. It ruled that the portion of the FDDA
relating to the EWT and the FBT assessment was void.
Both the CIR and Liquigaz moved for reconsideration,
but their respective motions were denied.
CTA En Banc affirmed the assailed decision of the CTA
Division. It reiterated its pronouncement that the requirement
that the taxpayer should be informed in writing of the law
and the facts on which the assessment was made applies to
the FDDA — otherwise the assessment would be void. The
CTA En Banc explained that the FDDA determined the final
tax liability of the taxpayer, which may be the subject of an
appeal before the CTA.
It emphasized the need for stating the factual bases as the
FDDA reflected different amounts than that contained in the
FLD/FAN. It sustained Liquigaz’ WTC assessment. It observed
that the basis for the assessment was the same for the FLD
and the FDDA, which was a comparison of the salaries
declared in the Income Tax Return (ITR) and the Alphalist
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether or not the assailed FDDA
is void for failure to state the facts
and law on which it was based.
accompanied by a written explanation of the
legal and factual bases of the deficiency taxes
assessed against the petitioner, the records
showed that respondent in its letter dated April
10, 2003 responded to petitioner’s October 14,
2002 letter-protest, explaining at length the
factual and legal bases of the deficiency tax
assessments and denying the protest
YES, but a void FDDA does not ipso facto render the
assessment void. RR No. 12-99 where it is stated that
failure of the FDDA to reflect the facts and law on
which it is based will make the decision void. It,
however, does not extend to the nullification of the
entire assessment.
The Court, however, finds that the CTA erred in
concluding that the assessment on EWT and FBT
deficiency was void because the FDDA covering
the same was void. The assessment remains valid
notwithstanding the nullity of the FDDA because as
discussed above, the assessment itself differs from a
decision on the disputed assessment.
An FDDA that does not inform the taxpayer in
writing of the facts and law on which it is based
renders the decision void. Therefore, it is as if there
was no decision rendered by the CIR. It is
tantamount to a denial by inaction by the CIR,
which may still be appealed before the CTA and
the assessment evaluated on the basis of the
available evidence and documents. The merits of
the EWT and FBT assessment should have been
discussed and not merely brushed aside on
account of the void FDDA.
On the other hand, the Court agrees that the FDDA
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|Agot Gaid|
that resulted in a discrepancy of P9,318,255.84.
Liquigaz asserts that like its assessment for EWT and FBT
deficiency, the WTC assessment should have been
invalidated because the FDDA did not provide for the facts
on which the assessment was based. It argues that it was
deprived of due process because in not stating the factual
basis of the assessment, the CIR did not consider the
defenses and supporting documents it presented.
12. People vs. Kintanar Spouses Benjamin Kintanar and Gloria V. Kintanar were
distributors or independent contractors of Forever Living
Products Phils. Inc. (FLPPI). It all began when the Investigation
Division of the BIR received confidential information of an
alleged tax evasion scheme of the Spouses Kintanar. As a
result thereof, BIR issued a Letter of Authority to examine the
books of accounts and other accounting records for taxable
years 1999 to 2002. The LOA was received by Mr. Kintanar on
April 3, 2003. Gloria Kintanarfailed to submit the required
documents.
Thereafter, several notices and a subpoena were
sent to her, by the BIR but the she remained uncompliant.
On August 31, 2004the husband of Gloria Kintanar
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether or not petitioner Gloria
Kintanar violated Sec. 255 of the
NIRC for failure to make or file her
returns. Whether or not her failure
to make or file a return wilful.
substantially informed Liquigaz of its tax liabilities
with regard to its WTC assessment. As highlighted by
the CTA, the basis for the assessment was the same
for the FLD and the FDDA, where the salaries
reflected in the ITR and the alphalist were
compared resulting in a discrepancy of
P9,318,255.84. The change in the amount of
assessed deficiency withholding taxes on
compensation merely arose from the modification
of the tax rates used — 32% in the FLD and the
effective tax rate of 25.40% in the FDDA.
The Court notes it was Liquigaz itself which
proposed the rate of 25.40% as a more appropriate
tax rate as it represented the effective tax on
compensation paid for taxable year 2005. As such,
Liquigaz was effectively informed in writing of the
factual bases of its assessment for WTC because the
basis for the FDDA, with regards to the WTC, was
identical with the FAN — which had a detail of
discrepancy attached to it.
Yes, Gloria Kintanar is guilty beyond reasonable
doubt for failure to make or file a return under
Section 255 of the NIRC .
The Court found her to have willfully and
deliberately failed to file her returns for the taxable
years 2000-2001.
Section 255 contemplates four different situations
punishable by law, for failure to:
1. To pay any tax;
2. To make a return;
3. To keep any record; and
4. To supply correct and accurate
information.
TAXATION LAW REVIEW; VAT & REMEDIES CASES
|Agot Gaid|
filed a protest to the Letter of Demand and Assessment
notices sent by the BIR. Photocopies of the spouses’ joint
income tax returns for the years 2000-2002 were attached to
the protest.
In response thereto, the BIR required the spouses to
submit additional documents within 60 days. Again, the
spouses failed to comply with the said request;
consequently, the assessment and the demand letter
became final, executory and demandable.
The prosecution proved that Gloria Kintanar failed to
file her ITR’s for the years 1999-2001 and found her liable for
deficiency income taxes arising from income earned from
FLPPI.
Gloria Kintanar testified that she filed her ITR’s for
taxable years 2000-2001. She denied having willfully,
unlawfully and feloniously failed to file her ITR on said years
as she has no personal knowledge of the actual filing of the
said returns because it was her husband who filed the ITR’s.
Her husband on the other hand testified that he filed the
ITR’s for the years 1997-2004 through their hired accountant
who prepared and filed their returns. Because he relied
upon his accountant, he only browsed the returns; therefore,
he has no knowledge to the amount stated thereon and to
the address which their accountant filed their returns to.
The Former Second Division found Gloria Kintanar
guilty beyond reasonable doubt of Violation of Section 255
of the NIRC of 1997. Hence, Gloria Kintanar filed this instant
petition before the CTA En Banc.
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Petitioner Gloria Kintanar is charged with failure to
make or file a return. The elements of which are the
following:
a. the accused is a person required to make
or file a return;
b. the accused failed to make or file a
return at the time required by law; and
c. That failure to make or file a return was
willful.
All of the aforementioned elements are present in
this case.
As to the 1st element, Gloria Kintanar is duty bound
to make or file a return under Section 51 of the
NIRC. Considering that the she earned a substantial
income as distributor of FLPPI; she is therefore
required to make or file her annual income tax
return pursuant to Sec. 51 of the NIRC.
As to 2nd element, she failed to make or file her ITR’s
for the taxable years 2000-2001. Gloria Kintanar had
no record that she filed the required ITR’s within the
reglementary period to any of the Rev. District
Offices of the BIR. The only record the BIR has was
when she was registered as a one-time transaction
tax payer for capital gains and documentary stamp
in Cavite. The petitioner presented 2 ITR’s allegedly
filed in the RDO of Novaliches. However, the court
did not give credence to the authenticity of the
document as it contained material flaws. The ITR’s
were in itself incomplete, filed in an RDO having no
jurisdiction over the place of residence of Mrs.
Kintanar and even her husband admitted that he
did not even read the contents of the ITR and does
not know where these ITR’s were supposedly filed by
TAXATION LAW REVIEW; VAT & REMEDIES CASES
|Agot Gaid|
their accountant. The 2 certifications submitted by
Kintanar were likewise tainted with various defects
to wit; a) the certificates are undated; the
certificates were issued by the RDO in Novaliches
which has the jurisdiction over the address reflected
on the accused’s ITR. However, the ITR’s were
stamped received by the RDO in Cubao; and lastly,
the signatory of the certificate was not presented
nor was there an attempt to present him to attest
the veracity of the certificates.

As regards the 3rd element of "willfulness", it was

sufficiently proven beyond reasonable doubt
that petitioner deliberately failed to make or file a
return.

Willful in the tax crimes statutes means

voluntary, intentional violation of a known legal
duty, and bad faith or bad purpose need not be
shown, in which the Court, Citing U.S. v. Moore, 627
F2d 830 (CA7 1980) and U.S. v. Verkuilen, 690 F2d 6-
18, 82-2 USTC 9618 (CA7 1982), upheld the
conviction of a tax protester for willful failure to
file returns.

Under the law, Gloria and her husband are

obliged to file their ITRs for taxable years 2000 and
2001. Thus, Gloria’s sole reliance on her husband to
file their ITRs is not a valid reason to justify her non-
filing. Being an experienced businesswoman and
having been an independent distributor of FLPPI
since 1996, she ought to know and understand all
the matters concerning her business. This includes
knowledge and awareness of her tax obligation
in connection with her business. She should know
how much are her tax dues, the details stated

Pain and struggles are temporary; LAW DEGREE IS FOREVER.

TAXATION LAW REVIEW; VAT & REMEDIES CASES
|Agot Gaid|
13. Santos vs. CIR On 19 May 2005, then BIR Commissioner Parayno, Jr. wrote to
(2008) the (DOJ) Secretary Raul M. Gonzales a letter regarding the
possible filing of criminal charges against petitioner for
substantial underdeclaration of income, which constitutes as
prima facie evidence of false or fraudulent return.
Parayno summarized the findings of the investigating BIR
officers that petitioner, in her AITR for taxable year 2002 filed
with the BIR, declared an income of P8,033,332.70 derived
from her talent fees solely from ABS-CBN; initial documents
gathered from the BIR offices and those given by petitioner’s
accountant and third parties, however, confirmed that
petitioner received in 2002 income in the amount of at least
P14,796,234.70, not only from ABS-CBN, but also from other
sources, such as movies and product endorsements.
Parayno posits that the non-declaration by petitioner of an
amount equivalent to at least 84.18% of the income
Pain and struggles are temporary; LAW DEGREE IS FOREVER.
Whether a resolution of a CTA
division denying a motion to
quash is a proper subject of an
appeal to the CTA en banc under
Section 11 of RA NO. 9282,
amending section 18 of RA NO.
1125.
on the ITRs, where the same are filed, and
other important facts related to the filing of her
ITRs; after all, these matters concern her finances.
There were no affirmative acts on the part of Gloria
Kintanar to make sure that her obligation to file her
ITRs had been fully complied with. Such neglect or
omission, as aptly founded by the Former Second
Division, is tantamount to "deliberate ignorance” or
"conscious avoidance".
Likewise, Gloria Kintanar was duly informed that no
ITRs were filed, nor recorded under her name. There
were several notices sent to her by the BIR to
comply with her tax obligations, but she opted not
to comply. Evidently, such non-compliance with
the BIR’s notices clearly shows her intent not to
file her ITRs.
NO. General rule: The denial of a motion to quash is
an interlocutory order which is not the proper
subject of an appeal or a petition for certiorari.
There is no dispute that a court order denying a
motion to quash is interlocutory.
The denial of the motion to quash means that the
criminal information remains pending with the court,
which must proceed with the trial to determine
whether the accused is guilty of the crime charged
therein. Equally settled is the rule that an order
denying a motion to quash, being interlocutory, is
not immediately appealable, nor can it be the
subject of a petition for certiorari. Such order may
only be reviewed in the ordinary course of law by
an appeal from the judgment after trial.
In this case, the CTA en banc herein did not err in
TAXATION LAW REVIEW; VAT & REMEDIES CASES
|Agot Gaid|
declared in her return was considered a substantial
underdeclaration of income, which constituted prima facie
evidence of false or fraudulent return under Section 248(B)6
of the NIRC, as amended; and petitioner’s failure to account
as part of her income the professional fees she received
from sources other than ABS-CBN and her underdeclaration
of the income she received from ABS-CBN amounted to
manifest violations of Sections 2547 and 255,8 as well as
Section 248(B) of the NIRC, as amended.
denying petitioner’s Motion for Extension of Time to
File Petition for Review, when such Petition for
Review is the wrong remedy to assail an
interlocutory order denying her Motion to Quash.
The petition for review under Section 18 of Republic
Act No. 1125, as amended, may be new to the
CTA, but it is actually a mode of appeal long
available in courts of general jurisdiction.

An Information for violation of Section 255 in relation to

Sections 254 and 248(B) of the NIRC, as amended, was filed
with the CTA The CTA First Division then issued on a warrant
for the arrest of petitioner. The tax court lifted and recalled
the warrant of arrest after petitioner voluntarily appeared
and submitted herself to its jurisdiction and filed the required
bail bond in the amount of P20,000.00.
Petitioner filed with the CTA First Division a Motion to Quash
the Information filed in C.T.A. Crim. Case No. 0-012 on the
following grounds: 1. The facts alleged in the INFORMATION
do not constitute an offense; 2.The officer who filed the
information had no authority to do so;3.The Honorable CTA
has no jurisdiction over the subject matter of the case; and
4. The information is void ab initio, being violative of due
process, and the equal protection of the laws.

CTA First Division denied petitioner’s Motion to Quash and

accordingly scheduled her arraignment. Petitioner filed an
MR, but was denied.

Petitioner filed with the CTA en banc a Motion for Extension

of Time to File Petition for Review, docketed as C.T.A. EB.
CRIM. No. 001. She filed her Petition for Review with the CTA
en banc on 16 June 2006. However, the CTA en banc
denied petitioner’s Motion for Extension of Time to File
Petition

Pain and struggles are temporary; LAW DEGREE IS FOREVER.

TAXATION LAW REVIEW; VAT & REMEDIES CASES
|Agot Gaid|
for Review

CTA en banc ratio: In the case before Us, the petitioner is

asking for an extension of time to file her Petition for Review
to appeal the denial of her motion to quash.A resolution
denying a motion to quash is not a proper subject of an
appeal to the Court En Banc under Section 11 of R.A. No.
9282 because a ruling denying a motion to quash is only an
interlocutory order, as such, it cannot be made the subject
of an appeal pursuant to said law and the Rules of Court.
Time and again, the Supreme Court had ruled that the
remedy of the accused in case of denial of a motion to
quash is for the accused to enter a plea, go to trial and after
an adverse decision is rendered, to appeal therefrom in the
manner authorized by law.

Pain and struggles are temporary; LAW DEGREE IS FOREVER.