REYES v CIR

GR Nos. 159694 & 163581, 27 January 2006

Doctrine: Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be
informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void.
Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise.

Facts: By virtue of a sworn affidavit for reward by one Abad, an investigation was conducted by BIR on the estate
of the deceased Maria Tancinco who died in 1993 leaving a residential lot and old house in Dasmarinas. Without
submitting a preliminary finding report, a Letter Of Authority was issued and received by Reyes, one of the heirs on
14 March 1997.

Then on 12 Feb 1998, a PAN was issued against the estate, and a FAN as well as demand letter was issued on 22
April 1998. For the assessment of P14.9M for estate tax of the estate of Maria Tancinco. On March 11, 1999, the
heirs proposed a compromise settlement of P1,000,000.00.

Due to failure to pay tax on the deadline BIR notified on June 6, 2000 that the subject property would be sold at
public auction on August 8, 2000. Reyes filed a protest with the BIR. Hence the petition for review filed by Reyes
in CTA and a TRO to desist and refrain from proceeding with the auction sale of the subject property or from
issuing a warrant pending determination of the case and/or unless a contrary order is issued.

On January 29, 2001, Reyes moved for postponement of the hearing set on February 6, 2001, this time on the
ground that she had already paid the compromise amount of P1,062,778.20 but was still awaiting approval of the
National Evaluation Board (or ‘NEB’). The CTA granted the motion and reset the hearing to February 27, 2001.

On February 19, 2001, Reyes filed a Motion to Declare Application for the Settlement of Disputed Assessment as a
Perfected Compromise. In said motion, she alleged that the CIR had not yet signed the compromise because of
procedural red tape requiring the initials of four Deputy Commissioners on relevant documents before the
compromise is signed by the CIR. Reyes posited that the absence of the requisite initials and signatures on said
documents does not vitiate the perfected compromise.

CIR countered that without the approval of the NEB, Reyes’ application for compromise with the BIR cannot be
considered a perfected or consummated compromise.

CIR filed a motion saying CTA has no jurisdiction since the assessment against the estate is already final and
executory; and (ii) that the petition was filed out of time

CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax amounting to 19M. CTA ratiocinated that there
can only be a perfected and consummated compromise of the estate’s tax liability, if the NEB has approved Reyes
application for compromise in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

CA – Partly granted petition.

ISSUE:

1. WON whether the assessment against the estate is valid; -NO

2. Whether the compromise entered into is also valid. –SC did not decide

HELD:

1. Validity of the assessment

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed
in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being
invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise. This was clear and
mandatory under Section 228.

Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been
made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former
Section 229 prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of
1997.

To be simply informed in writing of the investigation being conducted and of the recommendation for the
assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a
taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which the assessment
was based. It does not at all conform to the compulsory requirement under Section 228. Moreover, the Letter of
Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and was not even
the requisite notice under the law.

2. Validity of Compromise.

It would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and
consummated, considering the earlier determination that the assessment against the estate was void. Nothing has
been settled or finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million
pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the
approval of the NEB composed of the petitioner and four deputy commissioners. Finally, as correctly held by the
appellate court, this provision applies to all compromises, whether government-initiated or not. Ubi lex non
distinguit, nec nos distinguere debemos. Where the law does not distinguish, we should not distinguish.

ASIATRUST v. CIR
ASIATRUST DEVELOPMENT BANK, INC., Petitioners vs. COMMISSIONER OF INTERNAL REVENUE,
Respondents
G.R. No. 201530 / G.R. Nos. 201680-81
April 19, 2017

Facts:

Asiatrust Development Bank, Inc. (Asiatrust), on separate dates in February 2000, received from the Commissioner
of Internal Revenue (CIR) three Formal Letters of Demand (FLD) with Assessment Notices for deficiency internal
revenue taxes in the amounts of P131,909,161.85, P83,012,265.78, and ₱l44,012,918.42 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 praying for the cancellation of the tax assessments for deficiency income tax,
documentary stamp tax (DST) - regular, DST - industry issue, final withholding tax, expanded withholding tax, and
fringe benefits tax issued against it by the CIR.

The CIR issued against Asiatrust new Assessment Notices for deficiency taxes in the amounts of ₱l 12,816,258.73,
₱53,314,512.72, and ₱133,013,458.73, covering the fiscal years ending June 30, 1996, 1997, and 1998, respectively
and Asiatrust partially paid said deficiency tax assessments thus leaving a balance of ₱124,040,016.41.
The CIR approved Asiatrust's Offer of Compromise of DST - regular assessments for the fiscal years ending June
30, 1996, 1997, and 1998. During the trial, Asiatrust manifested that it availed of the Tax 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 P4,187,683.27 and P6,097,825.03 for the said fiscal years,
respectively. Asiatrust also claimed that on March 6, 2008, it availed of the provisions of Republic Act (RA) No.
9480, otherwise known as the Tax Amnesty Law of 2007.

The CTA Division rendered a Decision that due to the failure of Asiatrust to present documentary and testimonial
evidence to prove its availment of the Tax Abatement Program and the Tax Amnesty Law, the CTA Division
affirmed the deficiency DST.

Asiatrust filed a Motion for Reconsideration attaching photocopies of its Application for Abatement Program, BIR
Payment Form, BIR Tax Payment Deposit Slip, Improved Voluntary Assessment Program Application Forms, Tax
Amnesty Return, Tax Amnesty Payment Form, Notice of Availment of Tax Amnesty and Statement of Assets and
Liabilities and Networth (SALN).

Asiatrust filed a Manifestation informing the CTA Division that the BIR issued a Certification that Asiatrust paid the
amounts of ₱4,187,683.27 and ₱6,097,825.03 at the Development Bank of the Philippines in connection with the
One-Time Administrative Abatement.

The CTA Division rendered an Amended Decision finding that Asiatrust is entitled to the immunities and privileges
granted in the Tax Amnesty Law.

Asiatrust moved for partial reconsideration insisting that the Certification issued by the BIR is sufficient proof of its
availment of the Tax Abatement Program considering that the CIR has not yet issued a termination letter. The CTA
Division issued a Resolution denying Asiatrust's motion. The CTA Division maintained that it cannot consider
Asiatrust's availment of the Tax Abatement Program in the absence of a termination letter from the BIR.
Both parties appealed to CTA En Banc. The CTA En Banc sustained the ruling of the CTA Division that in the
absence of a termination letter, it cannot be established that Asiatrust validly availed of the Tax Abatement Program.

The CTA En Banc denied the motions for partial reconsideration of Asiatrust. Hence, the instant consolidated
Petitions under Rule 45 of the Rules of Court.

Issue:

WON the petition for abatement by Asiatrust is considered approved. --NO

Ruling:

An application for tax abatement is considered approved only upon the issuance of a termination letter.

Section 204(B) of the 1997 National lnten1al Revenue Code (NIRC) empowers the CIR to abate or cancel a tax
liability. The BIR issued RR No. 15-06 prescribing the guidelines on the implementation of the one-time
administrative abatement of all penalties/surcharges and interest on delinquent accounts and assessments
(preliminary or final, disputed or not).

Based on the guidelines, the last step in the tax abatement process is the issuance of the
termination letter. The presentation of the termination letter is essential as it proves that the
taxpayer's application for tax abatement has been approved. Thus, without a termination letter, a
tax assessment cannot be considered closed and terminated.

In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a
Certification issued by the BIR to prove that it availed of the Tax Abatement Program and paid the
basic tax. It also attached copies of its BIR Tax Payment Deposit Slips and a Jetter issued by RDO
Nacar. These documents, however, do not prove that Asiatrust's application for tax abatement has
been approved. If at all, these documents only prove Asiatrust's payment of basic taxes, which is not
a ground to consider its deficiency tax assessment closed and terminated.

Since no termination letter has been issued 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 tem1ination 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.