Tax 2

REMEDIES
GENERAL PRINCIPLES ON REMEDIES
CASE TITLE FACTS RULING DOCTRINE
(01) Tupaz v. Ulep in 1979, two informations were filed against Sps. Tupaz 5 years. An assessment contains not only a computation of
GR 127777 | Oct 1, 1999 for non-payment of deficiency tax. One of the cases tax liabilities, but also a demand for payment within
“Assessment” was withdrawn for being identical then it was again Assessments made on or after April 5, 1984 are a prescribed period. An assessment is a notice to
reinstated by Judge Ulep. Tupaz argues that it exposes governed by the five-year period if the taxes the effect that the amount therein stated is due as
- Petitioner: Tupaz (accused of her to double jeopardy and that the assessment has assessed cover taxable years prior to January 1, 1984. tax and a demand for payment thereof.
non-payment of deficiency tax) already prescribed (3 years based on BP 700). OSG Assessments made beyond the prescribed period
- Respondent: Ulep (RTC Judge) argues that BP700 is not applicable because said law would not be binding on the taxpayer.
only applies to assessments beginning taxable year When the notice of assessment was issued on July 16,
1984 and thus the prescriptive period should be 5 1984, the taxpayer still had thirty (30) days from
years based on the NIRC. receipt thereof to protest or question the assessment.
Otherwise, the assessment would become final and
WON the prescriptive period is 3 or 5 years 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.

(02) SMI-ED PHILIPPINES TECHNOLOGY, INC. v. SMI-Ed Philippines is a PEZA-registered corporation The BIR first has to make an assessment of the Assessment is defined as the determination of
CIR authorized "to engage in the business of taxpayer’s liabilities. When the BIR makes the amounts due from a person obligated to make
G.R. NO. 175410 | November 12, 2014 manufacturing ultra high-density microprocessor unit assessment, the taxpayer is allowed to dispute that payments. In the context of national internal
“Jurisdiction of CIR” assessment before the BIR. If the BIR issues a decision revenue collection, it refers the determination of the
package." The company failed to commence
that is unfavorable to the taxpayer or if the BIR fails to taxes due from a taxpayer under the NIRC of 1997.
● Petitioner - SMI-ED PHILIPPINES operations. In its quarterly income tax return for year act on a dispute brought by the taxpayer, the BIR’s The power and duty to assess national internal
TECHNOLOGY, INC 2000, the petitioner subjected the entire gross sales of decision or inaction may be brought on appeal to revenue taxes are lodged with the BIR.
● Respondent - CIR its properties to 5% final tax on PEZA registered the CTA. The CTA then acquires jurisdiction over the
corporations. It paid taxes amounting to case.

P44,677,500.00 and then filed an administrative claim
When the BIR’s unfavorable decision is brought on
for the refund of the said amount with the BIR alleging appeal to the CTA, the CTA reviews the correctness
that the amount was erroneously paid. CTA denied of the BIR’s assessment and decision. In reviewing the
claim for refund. Thereafter, petitioner filed a petition BIR’s assessment and decision, the CTA had to make
for review with the CTA en banc, wherein it affirmed its own determination of the taxpayer’s tax liabilities.
the decision of CTA second division. Now, the The CTA may not make such determination before
the BIR makes its assessment and before a dispute
petitioner argues that the CTA has no jurisdiction to
involving such assessmeCTACourt of Tax Appeals on
make an assessment since its jurisdiction, with respect appeal.
to the decisions of respondent, is merely appellate.
In this case, the CTA’s jurisdiction was acquired
WON CTA has jurisdiction - YES because petitioner brought the case on appeal
before the CTA after the BIR had failed to act on
petitioner’s claim for refund of erroneously paid
taxes. The CTA did not acquire jurisdiction as a result
of a disputed assessment of a BIR decision.
(03) PNOC v. CA Savellano informed the BIR that PNB failed to withhold E.O. No. 44 granted the BIR Commissioner or his duly Where tax liabilities are self-assessed, the
G.R. No. 109976|April 26, 2005 the 15% final tax on interest earnings and/or yields authorized representatives the power to compromise compromise payment shall be computed based on
Self assessment tax v. BIR assessed tax from the money placements of PNOC with the said any disputed assessment or delinquent account the tax return filed by the taxpayer. On the other
bank, in violation of PD No. 1931. BIR sent a demand pending as of 31 December 1985, upon the payment hand, where the BIR already issued an assessment,
● Petitioner - PNOC and PNB letter to PNB, as withholding agent, for the payment of of an amount equal to 30% of the basic tax assessed. the compromise payment shall be computed
● Respondent - CA, CTA, CIR, the final tax on the interest earnings and/or yields from Delinquent account refers to the amount of tax due based on the tax due on the assessment notice.
Savellano PNOC’s money placements with the bank. PNOC on or before December 31, 1985 from a taxpayer
made another offer to the BIR to settle its tax liability. who failed to pay the same within the time
PNOC proposed a compromise representing 30% of its prescribed for its payment arising from (1) a
tax assessment, which was accepted by the BIR self-assessed tax, whether or not a tax return was
Commissioner. However, upon appoinment of the filed, or (2) a deficiency assessment issued by the BIR
new BIR Commissioner, he demanded that PNB pay which has become final and executory.
deficiency withholding tax on the interest earnings PNOC’s tax liability could not be considered
and/or yields from PNOC’s money placements. The delinquent account since (1) it was not self-assessed
CTA, affirmed by the CA held that the judgment is since the BIR conducted an investigation and
ACAMPADO | ALONZO |BALBANERO | CABRERA | CATALAN | CIGARAL | ENCARNACION | GALANG |GO | IGNACIO | LEACHON | MIRADOR | ONG | ROMERO | SALUD | SARMIENTO | UY | YRREVERRE
rendered declaring the COMPROMISE AGREEMENT assessment of PNOC and PNB after obtaining
between the BIR and PNOC and PNB as WITHOUT information regarding the non-withholding of tax
FORCE AND EFFECT. Thus, the CIR can ENFORCE the from Savellano; and (2) the demand letter, issued
ASSESSMENT against PNB.
against it could not have been a deficiency

Whether the compromise agreement between the CIR assessment that became final and executory by 31
and PNB and PNOC was valid – NO December 1985.
(04) MEDINA v. CIR The CIR imposed a tax assessment on Antonio Medina On the pre-nuptial agreement: it was never The CIR and other internal revenue officers and
G.R. No. l-15113 |January 28, 1961 who acquired forest concessions in Isabela. produced agents may require the production of books of
Meanwhile, his wife Antonia acquired a lumber accounts and other records from a taxpayer.
business. Thereafter, Antonio sold all his logs to On the CIR: The Government is always an interested
● Petitioner - Antonio Medina Antonia, who in turn sold them through an agent in party to all matters involving taxable transactions
● Respondent - CIR and CTA Manila. and qualified to question their validity or legitimacy
whenever necessary to block tax evasion.
The CIR considered the sales made by Antonia
through the agent as Antonio’s original sales taxable Moreover, it is settled in this jurisdiction that illegally
on the ground that the sales by Antonio to his wife obtained documents and papers are admissible in
were void pursuant to Art. 1410 of the Civil Code. Art. evidence, if they are found to be competent and
1410 forbids the sale of property between husband relevant to the case.
and wife except when there is a separation of
property under Art. 191 or in the marriage settlements.
Thus it imposed a deficiency tax. Antonio claims that
there exists a pre-nuptial agreement of absolute
separation of property; he also protested the use of
seized documents in arriving the assessment.

WON THE DOCUMENTS SEIZED CAN BE USED A BASIS
FOR ASSESSMENT - YES
(05) CIR v. HANTEX Hantex Trading Co., Inc. is a domestic corporation The Supreme Court ruled that the CIR has the power The "best evidence" envisaged in Section 16 of the
G.R. No. 136975| March 31, 2005 engaged in the sale of plastic products. It imports to make assessments and prescribe additional 1977 NIRC, as amended, includes the corporate
synthetic resin and other chemicals for the requirements for tax administration and enforcement and accounting records of the taxpayer who is the
as provided in Section 16 of the NIRC which provides subject of the assessment process, the accounting
manufacture of its products. For this purpose, it is
● Petitioner: CIR that: records of other taxpayers engaged in the same
● Respondent: HANTEX TRADING required to le an Import Entry and Internal Revenue line of business, including their gross profit and net
CO., INC. Declaration (Consumption Entry) with the Bureau of “(b) Failure to submit required returns, statements, profit sales. Such evidence also includes data,
Customs under Section 1301 of the Tariff and Customs reports and other documents. — When a report record, paper, document or any evidence
Hantex basically does not want to submit the Code. required by law as a basis for the assessment of any gathered by internal revenue officers from other
documents requested by the BIR for national internal revenue tax shall not be taxpayers who had personal transactions or from
assessment. BIR then resorted to getting the The Counter-Intelligence Division of the Economic and forthcoming within the time fixed by law or regulation whom the subject taxpayer received any income;
relevant documents from other government Investigation Bureau (EIIB) received confidential or when there is reason to believe that any such and record, data, document and information
agencies. Now Hantex is arguing that the report is false, incomplete or erroneous, the secured from government offices or agencies, such
information that Hantex had imported synthetic resin
asssement is invalid since it is based on Commissioner shall assess the proper tax on the best as the SEC, the Central Bank of the Philippines, the
alleged documents which are inadmissible in amounting to P115,599,018.00 but only declared evidence obtainable. Bureau of Customs, and the Tariff and Customs
either administrative or judicial proceedings. P45,538,694.57. Due to Hantex’s non-compliance with Commission.
SC said the BIR has power to assess proper the submission of supporting documents, the EIIB was In case a person fails to file a required return or other
tax on best evidence available (Section 16, forced to rely on certified copies of document from document at the time prescribed by law, or willfully The law allows the BIR access to all relevant or
NIRC). However, in this case, the best the SEC, as well as uncertified photocopies of customs or otherwise les a false or fraudulent return or other material records and data in the person of the
evidence available was not obtained since document, the Commissioner shall make or amend taxpayer. It places no limit or condition on the type
entries from the Bureau of Customs( BOC), to arrive at
the BIR relied mainly on photocopies for its the return from his own knowledge and from such or form of the medium by which the record subject
assessment. SC remanded the case in order its final report. information as he can obtain through testimony or to the order of the BIR is kept. The purpose of the
for Hantex to prove its correct tax liability. otherwise, which shall be prima facie correct and law is to enable the BIR to get at the taxpayer's
WHETHER THE BIR HAS THE POWER TO ASSESS TAX
sufficient for all legal purposes.” records in whatever form they may be kept. Such
LIABILITY ON THE BASIS OF EXTERNAL DOCUMENTS NOT records include computer tapes of the said records
PRODUCED/PROVIDED BY THE COMPANY- YES The Supreme Court held that this rule applies when prepared by the taxpayer in the course of business.
the CIR performs its administrative duty of assessing In this era of developing information-storage
the proper tax againsts against a taxpayer, to make technology, there is no valid reason to immunize
a return in case of a taxpayer’s failure to file one, or companies with computer-based, record-keeping
to amend a return already filed in BIR. capabilities from BIR scrutiny. The standard is not the
form of the record but where it might shed light on
the accuracy of the taxpayer's return.

It is true that the BIR is not bound by strict rules of
evidence. It is also true that the best evidence rule
under the NIRC should not be equated to the best
evidence rule under the Rules of Court. That being,
the best evidence rule under the NIRC may even
mean that the best evidence obtainable may consist
of hearsay evidence, such as the testimony of third
parties or accounts or other records of other
taxpayers similarly circumstanced as the taxpayer
subject of the investigation – which are inadmissible
in a regular proceeding in the regular courts.
However in this case, the xerox copies are not the
best evidence obtainable. The official copies of the
Consumption Entries are not solely kept in the
Collection Division (where such records were
destroyed by termites). The NSO (National Statistics
Office) also keep such records. In fact, there are at
least four copies of such Consumption Entries. There
was no showing that BIR tried to obtain the copies
held by NSO.
(06) CIR v. Kudos Metal Corp. Kudos filed its ATR for the taxable year of 1998. BIR Section 203 of the NIRC mandates the govtto assess The delay of the taxpayer providing BIR with
G.R. No. 178087. May 5, 2010 served Kudos with 3 Notices of Presentation of internal revenue taxes within 3 years from the last day documents to support its assessments cannot
Records which Kudos failed to comply with. BIR issued prescribed by law for the filing of the tax return or the excuse BIR’s failure to act within the prescriptive
● Petitioner: CIR a subpoena duces tecum. An audit of Kudos’ records actual date of filing of such return, whichever comes period, as the law provides that BIR has the power
● Respondent: Kudos Metal Corp were made. later. Hence, an assessment notice issued after the to obtain evidence to support its assessments based
three-year prescriptive period is no longer valid and on the best evidence obtainable.
CIR cannot use the excuse that the Kudos’ accountant executed a Waiver of the Defense effective.
respondent submitted its documents late of Prescription which was notarized and received by
which is why the former’s assessments were the BIR Enforcement Service, BIR tax fraud, and The CIR does not deny that the assessment notices
filed beyond the prescriptive period. The CIR assistant commissioner of the enforcement service were issued beyond the three-year prescriptive
has the power, by law, to obtain evidence to (salazar). period, but claims that the period was extended by
support its assessments and hence, the delay the two waivers executed by respondent's
in submission of documents by respondent is A second waiver of defense of prescription was accountant. SC disagrees.
not an excuse. executed 2 years after.
NIRC provides that the period to assess and collect
Aug. 25 2003 - BIR issued a Prelim. Assessment Notice taxes may only be extended upon a written
for the taxable year 1998 with a Formal Letter of agreement between the CIR and the taxpayer
Demand (dated Sept. 26, 2003 and received on Nov. executed before the expiration of the three-year
12, 2003) period.

Respondent challenged them by filing a Protest on The procedure for proper execution of waiver is laid
Various Tax Assessments and its Legal Arguments and down in RMO 20-90 and RDAO 05-01.
Documents in Support of Protests. Kudos argues that
the govt’s right to assess taxes had prescribed. CTA A perusal of the waivers executed by respondent's
cancelled the assessment notices for being issued accountant reveals the following infirmities:
beyond prescriptive period. It found the first waiver
defective for failure to comply with a certain RMO. 1. The waivers were executed without the notarized
CTA en banc affirmed. written authority of Pasco to sign the waiver in behalf
of respondent.
CIR argues, among others, that the delay of the
taxpayer in providing documents to the BIR excuses 2. The waivers failed to indicate the date of
BIR’s failure to act within the prescriptive period. acceptance.

Whether the govt’s right to assess unpaid taxes of 3. The fact of receipt by the respondent of its file
Kudos has prescribed? Yes copy was not indicated in the original copies of the
waivers

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.

As to the alleged delay of the respondent to furnish
the BIR of the required documents, this cannot be
taken against respondent. Neither can the BIR use
this as an excuse for issuing the assessments beyond
the three-year period because with or without the
required documents, the CIR has the power to make
assessments based on the best evidence obtainable.
(07) CIR VS. AQUAFRESH Aquafresh Seafoods sold two parcels of located at 1. YES. In determining the value of CGT and The CIR has the power to divide the Philippines into
G.R. No. 170389 Oct. 20, 2010 Barrio Banica in Roxas City and paid the DST arising from the sale of a property, the different zones or areas and determine the FMV of
corresponding CGT and DST due on the sale. power of the CIR to assess is subject to real properties in each zone or area, upon
However, the BIR received a report that the lots sold Sec. 6(E) of the NIRC petitioner's act of consultation with component appraisers from
Petitioner: CIR were undervalued for tax purposes and after re-classifying the subject properties from private and public sectors. The first sentence of Sec.
Respondent: Aquafresh Seafood investigation the Special Division of the BIR valued the residential to commercial cannot be done 6(E) sets the limitation or condition in the exercise of
land at 2k per square meter. The BIR assessed without first complying with the procedures such power by requiring respondent to consult with
Aquafresh Seafoods based on its conclusion that the prescribed by law. CIR, thus, cannot competent appraisers both from private and public
lots were classified as commercial and not residential unilaterally change the zonal valuation of sectors
as claimed by Aquafresh. Aquafresh protested the such properties to commercial without first
assessment but it was denied. Aquafresh Seafood’s conducting a re-evaluation of the zonal PAGE FOUND IN BOOK: 28-30
defense was that there was already a pre-defined values as mandated under Section 6(E) of
zonal value for the said lots at php650 per square the NIRC.
meter and that it was classified as residential thus the 2. YES. Zonal valuation was established with
BIR could not reclassify the same to be commercial the objective of having an efficient tax
lots. CTA Division and CTA En Banc ruled in favor of administration by minimizing the use of
Aquafresh, hence this petition by BIR. discretion in the determination of the tax
based on the part of the administrator on
1. W/N consultation with competent one hand and the taxpayer on the other
appraisers from the private and public sectors in hand. REVENUE MEMORANDUM 58-69
determining the FMV of the lots is mandatory provides for procedure in establishing
2. W/N the FMV based on the zonal valuation zonal values of properties. (too long,
of a residential land is the tax base of the CPG and please see p. 29 of book, right side)
DST deficiencies
DEFICIENCY ASSESSMENT
(08) CIR v SONY The CIR issued Letter of Authority (LOA 19734) Revenue Memorandum Order No. 43-90 was As a general rule, the CIR is vested with the power
G.R. 178697 | Nov. 17, 2010 authorizing certain revenue officers to examine Sony's violated. The coverage of LOA 19734, particularly the to authorize the examination of a taxpayer and the
books of accounts and other accounting records phrase "and unverified prior years” violated Section C assessment of the correct tax. However, an
● Petitioner - CIR regarding revenue taxes for "the period 1997 and assessment is valid only when:
of the said RMO. The RMO States: A Letter of
● Respondent - Sony Philippines unverified prior years.” A preliminary assessment for 1. there is a grant of authority given to the
1997 deficiency taxes and penalties was issued by the Authority should cover a taxable period not revenue officer, and
CIR which Sony protested. The CIR issued final exceeding one taxable year. The practice of issuing 2. The authorized revenue officer must not
assessment notices, the formal letter of demand and L/As covering audit of "unverified prior years is hereby go beyond the authority given
the details of discrepancies. prohibited. If the audit of a taxpayer shall include The Court opined that the failure to comply with
Sec. C of RMO 43-90 invalidated the assessment.
more than one taxable period, the other periods or
WN the assessments arising from the LOA are valid -
NO years shall be specifically indicated in the L/A. On this
point alone, the deficiency VAT assessment should
have been disallowed.
(09) CIR vs. DLSU In 2004, BIR issued an LOA csovering the tax audit of The LOA issued to DLSU is void only as far as the An LOA that states a particular year and unverified
G.R. No. 196596 | Nov. 9, 2016 DLSU’s fiscal year 2003 and unverified prior years. unverified prior years are concerned. However, the taxable years is not entirely void. The assessment for
Consequently, a Preliminary Assessment Notice LOA and Final Notice are valid as to 2003. the year mentioned is valid even if the others are
Petitioner: CIR (PAN) was issued and eventually, a Formal Letter of not.
Respondent: De La Salle University Demand was issued assessing DLSU for deficiency RMO 43-90 prohibits the issuance of LOA covering
income tax on rental of property, VAT on business audit of unverified prior years. However, the rule does RMO 43-90 Sec. C provides that LOAs should cover
and DST on loans in the amount of Php17M for the not say that such LOA is void. periods not exceeding one taxable year, and that
years 2001, 2002, and 2003. the practice of issuing LOA covering audit of
BIR agued that while DLSU is a non-stock non-profit It merely prescribes that if the audit includes several “unverified prior years” is prohibited.
school, it is liable for taxes on income from its years, the periods must be specified. Otherwise, the
property. audit of the unspecified years shall be void. Thus, if What this provision prohibits is the practice of issuing
DLSU questioned the assessment saying the LOA is the LOA covers 2003 and unverified prior years, it’s LOAs covering audit of unverified prior years. It does
void as it covers unverified prior years. Moreover, not entirely void--the audit for 2003 will be valid. not say that an LOA which contains unverified prior
they insisted that it is not liable to the assessed years is void. It merely prescribes that if the audit
deficiency taxes because all its income/revenues includes more than one taxable epriod, the other
are actually, directly, and exclusively used for periods or years must be specified. The provision as
educational purposes. a whole requires that if a taxpayer is audited for
more than one taxable year, the BIR must specify
W/N the assessment based on LOA covering each taxable year on separate LOAs.
unverified prior years is valid -
VOID ONLY IN SO FAR AS THE UNVERIFIED PRIOR YEARS
ARE CONCERNED.
(10) Medicard Philippines Inc. v. CIR MEDICARD is a Health Maintenance Organization A LOA is the authority given to the appropriate (The SC held that an LN cannot be used to substitute
G.R. No. 222743 | April 5, 2017 (HMO) that provides prepaid health and medical revenue officer assigned to perform assessment an LOA in an assessment.))
insurance coverage to its clients. Individuals enrolled functions. It empowers or enables said revenue officer
● Petitioner: Medicard Philippines to examine the books of account and other The following differences between an LOA and LN
in its health care programs pay an annual
Inc. accounting records of a taxpayer for the purpose of are crucial. First, an LOA addressed to a revenue
● Respondent: CIR membership fee and are entitled to various collecting the correct amount of tax. Section 6 of the officer is specifically required under the NIRC before
preventive, diagnostic and curative medical services NIRC clearly provides as follows: “After a return has an examination of a taxpayer may be had while an
provided by duly licensed physicians, specialists and been filed as required under the provisions of this LN is not found in the NIRC and is only for the purpose
other professional technical staff participating in the Code, the Commissioner or his duly authorized of notifying the taxpayer that a discrepancy is found
representative may authorize the examination of any based on the BIR's RELIEF System. Second, an LOA is
group practice health delivery system at a hospital or
taxpayer …” Based on the afore-quoted provision, it is valid only for 30 days from date of issue while an LN
clinic owned, operated or accredited by it. clear that unless authorized by the CIR himself or by his has no such limitation. Third, an LOA gives the
MEDICARD filed its First, Second, Third, and Fourth duly authorized representative, through an LOA, an revenue officer only a period of 10 days from receipt
Quarterly VAT Returns Through Electronic Filing and examination of the taxpayer cannot ordinarily be of LOA to conduct his examination of the taxpayer
Payment System (EFPS) on 20 April 2006, 25 July 2006, undertaken. whereas an LN does not contain such a limitation.
20 October 2006, and 25 January 2007, respectively. Simply put, LN is entirely different and serves a
With the advances in information and communication different purpose than an LOA. Due process
Upon finding some discrepancies between
technology, the BIR promulgated several Revenue demands, as recognized under RMO No. 32-2005,
MEDICARD’s Income Tax Returns (ITR) and VAT Memorandum Orders: that after an LN has serve its purpose, the revenue
Returns, the CIR informed MEDICARD and issued a RMO No. 30-2003: lay down the policies and officer should have properly secured an LOA before
Letter Notice (LN). According to the CIR, the taxable guidelines once its then incipient centralized Data proceeding with the further examination and
base of HMOs for VAT purposes is its gross receipts Warehouse (DW) becomes fully operational in assessment of the petitioner. Unfortunately, this was
conjunction with its Reconciliation of Listing for not done in this case.
without any deduction under Section 4.108.3(k) of
Enforcement System (RELIEF System). This system can
Revenue Regulation (RR) No. 16-2005 (since Medicard detect tax leaks by matching the data available
does not actually provide Medical and/or hospital under the BIR's Integrated Tax System (ITS) with data
services. Subsequently, Medicard received a CIR’s gathered from third-party sources. It also provides that
Formal Assessment Notice (FAN) stating alleged the Systems Operations Division (SOD) under the
deficiency VAT in the amount of P196,614,476.69. CTA Information Systems Group (ISG) is responsible for
coming up with the List of Taxpayers with
affirmed CIR with modification on the amount, i.e.
discrepancies within the threshold amount set by
P223,173,208.35. CTA held that determination of management for the issuance of LN and for the
deficiency VAT is not limited to the issuance of Letter system-generated LNs.
of Authority (LOA) alone as CIR is granted vast powers
to perform examination and assessment functions and It was supplemented by RMO No. 42-2003 which laid
down no-contact-audit approach. This includes the
that in lieu of an LOA, an LN was issued. CTA en banc
process of computerized matching of sales and
also affirmed with modification (P220,234,609.48). purchases data submitted by VAT taxpayers under the
RELIEF System. Under this policy, even without
WHETHER THE ABSENCE OF LOA IS FATAL. - YES.
conducting a detailed examination of taxpayer's
books and records, if the computerized/manual
matching of sales and purchases/expenses appears
to reveal discrepancies, the same shall be
communicated to the concerned taxpayer through
the issuance of LN. Thus, under the RELIEF System, a
revenue officer may begin an examination of the
taxpayer even prior to the issuance of an LN or even in
the absence of an LOA with the aid of a
computerized/manual matching of taxpayers':
documents/records.

RMO No. 30-2003, as supplemented by RMO No.
42-2003, was amended by RMO No. 32-2005 to fine
tune existing procedures in handing assessments
against taxpayers' issued LNs by reconciling various
revenue issuances which conflict with the NIRC.
Among the objectives in the issuance of RMO No.
32-2005 is to prescribe procedure in the resolution of
LN discrepancies, conversion of LNs to LOAs and
assessment and collection of deficiency taxes.

In this case, there is no dispute that no LOA was issued
prior to the issuance of a PAN and FAN against MED
ICARD. Therefore no LOA was also served on
MEDICARD. The LN that was issued earlier was also not
converted into an LOA pursuant to RMO No. RMO No.
32-2005. Hence, the CTA's disregard of MEDICARD's
right to due process warrant the reversal of the
assailed decision and resolution. In the case of
Commissioner of Internal Revenue v. Sony Philippines,
Inc., the Court said that: “In the absence of such an
authority, the assessment or examination is a nullity.”

The Court cannot convert the LN into the LOA
required under the law even if the same was issued by
the CIR himself. Since the law specifically requires an
LOA and RMO No. 32-2005 requires the conversion of
the previously issued LN to an LOA, the absence
thereof cannot be simply swept under the rug, as the
CIR would have it. In fact Revenue Memorandum
Circular No. 40-2003 considers an LN as a notice of
audit or investigation only for the purpose of
disqualifying the taxpayer from amending his returns.

(11) CIR v METRO STAR SUPERAMA An LOA was issued to examine Respondent’s books of CI R failed to discharge its duty and present any The issuance of the PAN to the taxpayer is part of
G.R. No. 185371 | Dec. 8, 2010 accounts and other accounting records for income evidence to show that Metro Star received the PAN. the due process requirement, the absence of which
tax and other internal revenue taxes for the taxable renders any subsequent assessment null and void.
● Petitioner: CIR year 1999. Respondent failed to comply with the The PAN is an essential part of government’s process
● Respondent: METRO STAR - requests for the presentation of records and of assessment.
domestic corp. organized under Subpoena Duces Tecum. BIR issued a Preliminary
PH laws 15-Day Letter stating that a post audit review was held Indeed, Section 228 of the Tax Code clearly requires
and ascertained that there was deficiency of value that the taxpayer must first be informed that he is
added and withholding taxes of Php 292,874.16. liable for deficiency taxes through the sending of a
Subsequently Respondent received a Formal Letter of PAN. He must be informed of the facts and the law
Demand (FLD) assessing deficiency of the same upon which the assessment is made.
amount. Finally, a Final Notice of Seizure was sent to
respondent giving the latter last opportunity to settle The law imposes a substantive, not merely a formal,
its deficiency tax liabilities within 10 days from receipt. requirement. To proceed heedlessly with tax
The BIR also issued Warrants of Distraint and/or Levy collection without first establishing a valid assessment
(WLD). is evidently violative of the cardinal principle in
administrative investigations - that taxpayers should
Metro Star denied receiving a Preliminary Assessment be able to present their case and adduce supporting
Notice (PAN) and claiming it was not accorded due evidence
process hence the petition for review.

W/N CIR was able to prove that it issued Metro Star a
PAN? NO
12 International Exchange Bank v. CIR International Exchange Bank (IEB) received an LOA for The taxpayer is given a 15-day period from receipt of The due process requirement may be substantially
CTA EB No. 87 | Jan. 30, 2006 the examination of its books of account and the PAN within which to reply. In case of failure to complied with even when a PAN is issued before the
accounting records for the year ending 1997 and reply, the taxpayer shall be considered in default expiration of the taxpayer’s 15-day period to
Petitioner: International Exchange Bank “unverified prior years.” IEB received a Notice of formal demand letter and an assessment notice shall respond via a Reply.
Respondent: CIR Informal Conference on Nov. 16, 1999. IEB then settled be issued by the respondent.
the deficiency taxes. It subsequently received an
undated PAN with attached “Details of However, the requirement of due process under
Discrepancies.” That PAN stated that IEB had 15 days Section 3 of RR 12-99 was substantially complied with.
to “see the Assistant Commissioner-Enforcement
Service to clarify issues arising from the investigation 1st - the purpose of such informal conference is to
and/or review of [its] tax case" should petitioner be afford the taxpayer an opportunity to present his side
"not agreeable to the findings.” 6 days later, before of the case. Thus, even during such informal
the expiry of the 15-day period, IEB filed a protest on conference, petitioner was already given the
the assessment, stating that its right to due process opportunity to present its side of the case
was violated when the assessment notice was sent
prior to the expiry of the 15-day period.
2nd - while petitioner was not able to file its reply to
the pre-assessment notice, it was nevertheless, given
the opportunity to protest the notices as it even
requested for a reinvestigation.
(end of first assignment)
13 St. Stephen’s Association and St. Stephen’s Petitioner St. Stephen’s Assoc, turned over the amount Where a taxpayer questions an assessment and asks Where a taxpayer questions an assessment and asks
Chinese Girls School v. CIR of P9,252.48 to the St. Stephen’s Chinese Girls School, the Collector to reconsider or cancel the same the Collector to reconsider or cancel the same
GR No. L-11238 | August 21, 1958 and the transfer of funds was entered in the books as because the taxpayer believes he is not liable because the taxpayer believes he is not liable
“donation” from the Association. An examiner of the therefor, the assessment becomes a “disputed therefor, the assessment becomes a “disputed
Petitioner: St. Stephen’s Assoc. and St. BIR reported the donation to the Collector and assessment,” that the Collector must decide, and the assessment,” that the Collector must decide, and
Stephen’s Chinese Girls School thereafter the CIR sent petitioners Assessment Notice taxpayer can appeal to the CTA only upon receipt of the taxpayer can appeal to the CTA only upon
Respondent: CIR demanding payment of P98.70 and P699.07 as the decision of the Collector on the disputed receipt of the decision of the Collector on the
donor’s and donee’s gift taxes. Petitioners requested assessment. disputed assessment.
the cancellation and withdrawal of the assessment
notice. Petitioners contend that the amount of The period for appeal in this case must, therefore, be
P9,252.48 was erroneously entered as a donation, computed from the time petitioners received the
when in truth it was obtained by means of small decision of the respondent CIR kn the disputed
contributions from the public and allocated to the assessment, and not from the time they received said
School for its maintenance. assessment. Must consider the second letter of CIR
CIR denied. CTA: dismissed; the period for petitioner’s denying their second request that assessment be
appeal started to run from their receipt of the cancelled and withdrawn since the CIR considers this
assessment in question (Nov 12, 1954), was interrupted letter as his final decision. Petitioners having filed their
by filing of cancellation of assessment, then started to appeal on the 19th day from the receipt of this
run again when requests were denied (Aug 13, 1955). decision, their appeal was filed on time.
Filed out of time (beyond 30 days).

ALLIED BANKING CORP v. CIR On April 30, 2004, the Bureau of Internal Revenue (BIR) Section 7 of RA 9282 expressly provides that the CTA A disputed assessment is one wherein the taxpayer
GR No. 175097 | February 5, 2010 issued a Preliminary Assessment Notice (PAN) to exercises exclusive appellate jurisdiction to review by or his duly authorized representative filed an
petitioner Allied Banking Corporation for deficiency appeal decisions of the CIR in cases involving administrative protest against the formal letter of
Petitioner: Allied Banking Corporation Documentary Stamp Tax (DST) in the amount of disputed assessments. The CTA, being a court of demand and assessment notice within 30 days from
Respondent: CIR P12,050,595.60 and Gross Receipts Tax (GRT) in the special jurisdiction, can take cognizance only of date of receipt thereof.
amount of P38,995,296.76 on industry issue for the matters that are clearly within its jurisdiction.
taxable year 2001. Petitioner received the PAN on
May 18, 2004 and filed a protest against it on May 27, The word “decisions” in the above quoted provision
2004. of RA 9282 has been interpreted to mean the
decisions of the CIR on the protest of the taxpayer
On July 16, 2004, the BIR wrote a Formal Letter of against the assessments. Corollary thereto, Section
Demand with Assessment Notices to petitioner. 228 of the National Internal Revenue Code (NIRC)
Petitioner received the Formal Letter of Demand with provides for the procedure for protesting an
Assessment Notices on August 30, 2004. assessment.
On September 29, 2004, petitioner filed a Petition for
Review with the CTA which was raffled to its First In the instant case, petitioner timely filed a protest
Division and docketed as CTA Case No. 7062. after receiving the PAN. In response thereto, the BIR
issued a Formal Letter of Demand with Assessment
On December 7, 2004, respondent CIR filed his Notices. Pursuant to Section 228 of the NIRC, the
Answer. On July 28, 2005, he filed a Motion to Dismiss proper recourse of petitioner was to dispute the
on the ground that petitioner failed to file an assessments by filing an administrative protest within
administrative protest on the Formal Letter of Demand 30 days from receipt thereof. Petitioner, however,
with Assessment Notices. did not protest the final assessment notices. Instead,
it filed a Petition for Review with the CTA. Thus, if we
On October 12, 2005, the First Division of the CTA strictly apply the rules, the dismissal of the Petition for
rendered a Resolution granting respondent’s Motion Review by the CTA was proper.
to Dismiss. It ruled:
“Clearly, it is neither the assessment nor the formal However, In this case, records show that petitioner
demand letter itself that is appealable to this Court. It disputed the PAN but not the Formal Letter of
is the decision of the Commissioner of Internal Demand with Assessment Notices. Nevertheless, we
Revenue on the disputed assessment that can be cannot blame petitioner for not filing a protest
appealed to this Court. As correctly pointed out by against the Formal Letter of Demand with Assessment
respondent, a disputed assessment is one wherein the Notices since the language used and the tenor of
taxpayer or his duly authorized representative filed an the demand letter indicate that it is the final decision
administrative protest against the formal letter of of the respondent on the matter. We have time and
demand and assessment notice within thirty (30) days again reminded the CIR to indicate, in a clear and
from date [of] receipt thereof. In this case, petitioner unequivocal language, whether his action on a
failed to file an administrative protest on the formal disputed assessment constitutes his final
letter of demand with the corresponding assessment determination thereon in order for the taxpayer
notices. Hence, the assessments did not become concerned to determine when his or her right to
disputed assessments as subject to the Courts review appeal to the tax court accrues. Viewed in the light
under Republic Act No. 9282.” of the foregoing, respondent is now estopped from
claiming that he did not intend the Formal Letter of
The petitioner appealed. The CTA En Banc declared Demand with Assessment Notices to be a final
that it is absolutely necessary for the taxpayer to file decision.
an administrative protest in order for the CTA to
acquire jurisdiction. It emphasized that an The Formal Letter of Demand with Assessment
administrative protest is an integral part of the Notices which was not administratively protested by
remedies given to a taxpayer in challenging the the petitioner can be considered a final decision of
legality or validity of an assessment. the CIR appealable to the CTA because the words
used, specifically the words “final decision” and
WHETHER THE FORMAL LETTER OF DEMAND WAS FINAL “appeal”, taken together led petitioner to believe
DECISION OF THE CIR WHICH WAS APPEALABLE TO THE that the Formal Letter of Demand with Assessment
CIR? - YES 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.
CIR v. SVI INFORMATION SERVICES, INC. In 2008, Petitioner sent a Letter of Authority SVI, Section 7 (a) (1) of Republic Act ("RA") No. 1125, as The term disputed assessment covers assessments
CTA EB CASE NO 1148 | MARCH 3, 2016 authorizing the former to examine the books of amended, provides that this Court has exclusive wherein the taxpayer is accorded the opportunity
accounts of the latter and other relevant financial appellate jurisdiction to review by appeal decisions to challenge the same, which presupposes that a
Petitioner: CIR documents. This was eventually followed by a Post of the CIR involving disputed assessments or other valid assessment was issued by the petitioner.
Respondent: SVI Information Service reporting Notice whereby the latter was given a matters arising under the National Internal Revenue
tentative figure involving deficiency income tax, VAT, Code of 1997.
EWT, and withholding tax on compensation of
liabilities for the year 2007. A FLD and a FAN was On the other hand, Section 3 (a) (1), Rule 4 of the
eventually sent to respondent, which showed that it Revised Rules of the CTA implements the foregoing
had tax liabilities totaling to P14.5M. Finally, a by stating that the CTA, in Division, has exclusive
Preliminary Collection letter (PCL) was received by original or appellate jurisdiction to review by appeal
respondent, which also showed the tax liability of the decisions of the CIR involving disputed
respondent. assessments or other matters arising under the 1997
NIRC.
Petitioner argues that the CTA has no jurisdiction to
decide on the validity of the PCL because the same The term "disputed assessment" covers assessments
would be tantamount to suspending the payment, wherein the taxpayer is accorded the opportunity to
levy, distraint, and/or sale of any property of challenge the same, which presupposes that a valid
respondent to satisfy its tax liability. Further, the CTA assessment was issued by petitioner.
only acquires exclusive original jurisdiction when the
principal amount of taxes and fees, exclusive of The Court ruled that the determination of the validity
charges and penalties, in tax collection cases is at of the PCL falls within the exclusive appellate
least P1M. In any case, petitioner argues that the jurisdiction of the CTA in Division under the term
present case is not a collection case but a question "other matters arising from the NIRC."
on the validity of the PCL, a subject which the CTA
has no jurisdiction over. Finally, petitioner posits that
respondent's failure to submit the pertinent
documents within sixty (60) days from the filing of the
protest results in the CTA's lack of jurisdiction to rule on
the matter.

WHETHER THE CTA HAS JURISDICTION TO DETERMINE THE
VALIDITY OF THE PCL? - YES

14 COLLECTOR OF INTERNAL REVENUE VS. Respondent Benipayo is the owner and operator of The claim that respondent admitted having resorted Fraud is a serious charge, and to be sustained, must
ALBERTO D. BENIPAYO the Lucena Theater in Quezon. The Internal Revenue to the anomalous practice already mentioned is not be supported by clear and convincing proof.
G.R. NO. L-13656 | (JANUARY 31, 1962) Agent De Guia investigated that respondent had entirely correct.. What respondent appears to have
● Petitioner - CIR amusement tax liability and recommended a admitted was that during a certain limited period he
● Respondent - Alberto Benipayo deficiency amusement tax assessment in the sum of had adopted a sort of rebate ystem applicable to
Php 11, 193. 34, He further averred that respondent, in cases where adults and children came in group and
order to avoid payment of amusement tax, were all charged 20 centavo admission tickets. This
disproportionately issued tax-free 20-centavo practice was, however, discontinued when he was
children's tickets. Petitioner issued a deficiency informed by the Bureau of Internal Revenue that it
amusement tax assessment against respondent, was not in accordance with law.
demanding from the latter the payment.
It should be borne in mind that to sustain the
deficiency tax assessed against respondent would
W/N there is sufficient evidence in the record showing amount, in effect, to a finding that he had, for a
that respondent cheated or defrauded the considerable period of time, cheated and
Government in disproportionately issuing tax-free defrauded the government by selling to each adult
20-centavo tickets (NONE) patron two children's tax-free tickets instead of one
ticket subject to the amusement tax provided for in
Section 260 of the National Internal Revenue Code.
Fraud is a serious charge and, to be sustained, it must
be supported by clear and convincing proof which,
in the present case, is lacking.
15. CIR V. PASCOR REALTY The BIR examined the books of account of Pascor WHETHER THE CRIMINAL COMPLAINT FOR TAX The requirements and steps that must be
309 SCRA 402 Realty and Devt Corp. (PRDC) for the years 1986, 1987 EVASION CAN BE CONSTRUED AS AN ASSESSMENT – undertaken by BIR can be summarized as follows:
and 1988, from which a tax liability of P10.5M was NO 1. The assessment must contain a
PETITIONER - CIR found. Subsequently, the CIR filed a criminal An assessment not only contains a computation computation of tax liabilities, a demand
RESPONDENT - Pascor Realty Development complaint against PRDC with the DOJ for tax evasion. of tax liabilities, but also a demand for payment for payment within a prescribed period
Corp. Attached to the criminal complaint was a Joint within a prescribed period. It signals the time and specifies the time when penalties
Affidavit executed by the tax examiners. PRDC filed when penalties and interests begin to accrue and interests begin to accrue against the
"An assessment is not necessary before a an Urgent Request for against the taxpayer. taxpayer
criminal charge can be filed." Reconsideration/Reinvestigation with the CIR, In the case at bar, the BIR examiners’ Joint 2. It must be served on and received by the
disputing the tax assessment and tax liability, but was Affidavit which was attached to the criminal taxpayer. An assessment is deemed
denied upon the ground that no formal assessment complaint filed with the DOJ against PRDC, did made only when the collector of internal
has yet been issued by the Commissioner. not constitute an assessment. The Joint Affidavit revenue releases, mails or sends such
served the purpose of supporting and notice to the taxpayer.
PRDC elevated the decision to the CTA. PRDC substantiating the criminal complaint for tax
averred that the Joint Affidavit attached to the evasion, and was not meant to be a notice of Section 222 of the NIRC specifically states that in
criminal complaint is tantamount to a formal the tax due and a demand to the taxpayer cases where a false or fraudulent return is submitted
assessment notice and hence can be subjected to (PRDC) for payment thereof. or in cases of failure to file a return such as this case,
protest; that there is a simultaneous assessment and proceedings in court may be commenced without
filing of criminal case; that the same is contrary to due WHETHER AN ASSESSMENT IS NECESSARY BEFORE an assessment. Furthermore, Section 205 of the
process because it is its theory that an assessment CRIMINAL CHARGES FOR TAX EVASION MAY BE same Code clearly mandates that the civil and
should come first before a criminal case of tax evasion INSTITUTED – NO criminal aspects of the case may be pursued
should be filed. The CIR filed a Motion to Dismiss the ● Section 222 of the NIRC states that an simultaneously.
petition on the ground that the CTA has no jurisdiction assessment is not necessary before a criminal
over the subject matter of the petition, as there was charge can be filed. This is the general rule.
no formal assessment issued against the petitioners. Private respondents failed to show that they are
entitled to an exception. Moreover, the criminal
The CTA denied the said motion to dismiss. It ruled that charge need only be supported by a prima
the Joint Affidavit constitutes an assessment; that an facie showing of failure to file a required return.
assessment is defined as simply the statement of the This fact need not be proven by an assessment.
details and the amount of tax due from a taxpayer; ● The issuance of an assessment must be
thus the Joint Affidavit which contains a computation distinguished from the filing of a complaint.
of the tax liability of PRDC is in effect an assessment Before an assessment is issued, there is, by
which can be the subject of a protest. CA affirmed practice, a pre-assessment notice sent to the
the CTA. 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.
16 PHILIPPINE AEROSPACE V. CIR CIR issued Letter of Authority authorizing Revenue ISSUE: tax assessments by tax examiners are presumed
CTA CASE 7830 | 2015 District Office 51, Pasay City, to examine PADC's books whether or not the assessments against PADC have correct and made in good faith, and all
of accounts and other records covering its internal factual and legal bases? YES presumptions are in favor of the correctness of a tax
revenue taxes for January to December 2003.
On December 27, 2006, PADC received a Preliminary RULING assessment unless proven otherwise." The burden of
Assessment Notice (PAN) dated assessing PADC the Petitioner had only itself to blame, for, among others, proof is on the taxpayer to show the contrary.
following for 2003: (1) Deficiency Income Tax of failure "to substantiate the amount of inventories
P26,923,253.31, and (2) Deficiency Value Added Tax allegedly turned over by its former subsidiaries";
(VAT) of P13,806,086.05. "failure to reconcile the discrepancy of
This was followed on January 12, 2007 by a Formal P18,493,926.37" in purchases from Rolls-Royce and to
Assessment Notiyce (FAN), received on the same overcome the presumptive correctness of the tax
date. assessment; its admission of the use of the accrual
method; failure to show that director's fees formed
PADC filed it protest against the Formal Assessment part of the employees' compensation income
Notice then filed a supplement to its protest, which subjected to withholding tax and that taxes; failure to
expounded the bases of its protest and included subject to EWT consultants' fees in the month
supporting documents. following the accrual; and income not declared or
accounted
PADC received a letter from the BIR denying its
protest. PADC moved for reconsideration of the The petitioner was generally remiss in adducing
denial of its protest. specific legal provisions authorizing entitlement to
PADC received respondent's Final Decision on deductions. It is not for this Court to conduct the
Disputed Assessment (FDDA) denying PADC's protest research necessary to establish the legal bases of the
for alleged failure to submit supporting documents. petitioner's claims, for that burden is for him alone to
discharge, failure in which would render its claims
self-serving and leave this Court no choice but to
uphold the presumptive correctness of the
assessment. Petitioner should be reminded that "tax
assessments by tax examiners are presumed correct
and made in good faith, and all presumptions are in
favor of the correctness of a tax assessment unless
proven otherwise." The burden of proof is on the
taxpayer to show the contrary.
17 CIR v. MINDANAO SANITARIUM Mindanao Sanitarium and Hospital (MSH) is a The CTA held that, A valid assessment contains not only a computation
CTA Case 8108 | Dec. 16, 2013 non-stock non-profit corporation, which, no part of its “A valid assessment contains not only a computation of tax liabilities but also a demand for payment
net income shall inure to the benefit of any of its of tax liabilities but also a demand for payment within within a prescribed period.
● Petitoner - CIR members. It is a charitable institution which primarily a prescribed period. The ultimate purpose thereof is
● Respondent - Mindanao does medical missionary work. to ascertain the amount that the taxpayer has to The elements of a valid assessment are: (1) a
Sanitarium and Hospital Inc. pay. It signals the time when penalties and interests computation of tax liabilities; (2) a demand for
CIR issued a Letter of Authority (LOA) dated June 16, begin to accrue against the taxpayer, and enables payment within the prescribed period; and (3) a
2008 for the purpose of investigating MSH’s tax the taxpayer to determine his remedies thereon. statement of the legal and factual basis/bases
liabilities. A Formal Letter of Demand was then used.”
received by MSH on November 6, 2009, which From the foregoing, it can be gathered that the
provided that MSH had a total deficiency tax of elements of a valid assessment are: (1) a
P37,245,025.16. This was followed by the sentence, “In computation of tax liabilities; (2) a demand for
view thereof, you are requested to pay your aforesaid payment within the prescribed period; and (3) a
deficiency internal revenue tax liabilities through the statement of the legal and factual basis/bases
duly authorized agent bank in which you are enrolled used.”
within the time shown in the enclosed assessment
notice.” And “[p]lease note that the interest and total To recall, the FLD contained the following statements:
amount due shall be adjusted if paid beyond “In view thereof, you are requested to pay your
10/16/09.” MSH filed a protest with the BIR. aforesaid deficiency internal revenue tax liabilities
through the duly authorized agent bank in which you
While its protest with the BIR remained unsolved, MSH are enrolled within the time shown in the enclosed
was able to secure a ruling, confirming that, MSH assessment notice.” And “[p]lease note that the
being "a corporation organized for charitable interest and total amount due shall be adjusted if
purposes as contemplated under Section 30 (E) of the paid beyond 10/16/09.”
Tax Code of 1997 . . . it is exempt from the payment of
income tax on income received by it as such The FLD did not make a clear and categorical
organization, and therefore, need not file an income demand for payment of the tax liabilities as it was a
tax return concerning such income." mere request for payment, Neither can the date
provided be considered a deadline for payment as
MSH filed a petition for review before the CTA. It the FLD itself refers to the enclosed assessment notice
contended that CIR violated its right to due process for the due date (which was not sent to MSH).
when the CIR failed to issue the FAN as required under
Sec 228 of the NIRC, and because of such failure, the
assessment was void.

WHETHER THE ASSESSMENT WAS VALID? - NO
18 Samar-l Electronic v. CIR Samar-I filed its 1998 and 1999 ITRs in 1999 and 2000 SC held that Petitioner was sufficiently apprised of the A “Detail of Discrepancies” which explains in detail
G.R. No. 193100 | Dec. 10, 2014 respectively and its 1997, 1998, and 1999 Annual nature, factual, and legal bases, as well as how the the explanation of the particular provision of law
Deficiency Assessment Information Return of Income Tax Withheld on deficiency taxes being assessed against it were and revenue regulation violated, together with a
Compensation, Expanded and Final Withholding computed. This is based on the factual letter-reply by the CIR explaining at length the
● Petitioner - Samar-I, an electric Taxes on 1998, 1999, and 2000. circumstances of the case. factual and legal bases of the deficiency tax
cooperative assessments constitutes substantial compliance with
● Respondent - CIR CIR sent a Notice for Informal Conference indicating On April 9, 2002, Samar-I received the PAN dated Sec. 228 of the NIRC.
the alleged income and withholding tax liabilities of Feb. 28, 2002 which contained the computations of
PAN/FAN - Preliminary/Final Assessment Petitioner for 1997 to 1999. Attached to the letter was its deficiency income and withholding taxes.
Notice a summary of the report, with an explanation of the Attached to the PAN was the “Details of
findings of the investigators. Petitioner replied and Discrepancies” with the detailed explanation of the
requested for details of the assessment. particular provision of law and revenue regulation
violated. The information in the “Details of
Petitioner again sent a letter asking for detailed Discrepancies” enabled Samar-I to protest the PAN
computation of the deficiency withholding tax on by questioning the CIR’s interpretation of the laws
compensation. A PAN was issued against Samar-I for which were cited as legal basis for the computation
alleged 1997, 1998, and 1999 deficiency withholding of the deficiency taxes. And although the FAN and
tax, and deficiency income tax for the years demand letter issued to Petitioner were not
1998-1999 (P4,200,771.40). The CIR’s reply contained accompanied by a written explanation of the legal
the explanation of the legal basis of the issuance of and factual bases of the deficiency taxes assessed
questioned tax assessments. Petitioner later on against the petitioner, Respondent, in a letter
received a demand letter and FAN for the taxes replying to Petitioner’s letter protest, explained at
identified in the PAN. length the factual and legal bases of the deficiency
tax assessments and denied the protest.
CIR and CTA ruled that the 1997 and 1998 returns on
withholding tax submitted by Samar-I were not filed in
good faith and that there was underdeclaration of
income; and that the right of the Government to
assess and collect has not prescribed.

Samar-I contends that the FAN and FLD issued against
it were silent as to the nature and basis of the
assessments; as such, the assessments should be
declared void as violative of due process (based on
Sec. 228 of the 1997 NIRC which requires that the
taxpayer be informed in writing of the facts and the
law on which the assessment made is based)

WHETHER THE ASSESSMENT WAS VALID - YES.
19 CIR v. UNITED CIR found United liable for deficiency income tax, Section 228 of the Tax Code provides that the A taxpayer must be informed in writing of the legal
GR 197515 July 2, 2014 EWT, VAT, and DST for years 92, 94, 97, and 98. BIR sent taxpayer shall be informed in writing of the law and and factual bases of the tax assessment made
demand letters with attached assessment notices. the facts on which the assessment is made. against him. The use of the word "shall" in these legal
Petitioner: CIR United filed administrative protests for years 94 and 98. Otherwise, the assessment is void. To implement the provisions indicates the mandatory nature of the
Respondent: United - sub-contracting firm for CTA-Special Division ruled that the Preliminary aforesaid provision, Revenue Regulation No. requirements laid down therein.
petroleum companies Assessment Notices failed to show the law and the 12-99was enacted by the BIR, of which Section 3.1.4
facts on which they were based (it was just a table thereof reads:
with numbers). CTA-En banc partially granted CIR’s 3.1.4. Formal Letter of Demand and
appeal and ordered United to pay EWT for 1998. Assessment Notice. –The formal letter of
demand and assessment notice shall be
WON the EWT assessment was without factual and issued by the Commissioner or his duly
legal basis - YES authorized representative. T he letter of
demand calling for payment of the
taxpayer’s deficiency tax or taxes shall
state the facts, the law, rules and
regulations, or jurisprudence on which the
assessment is based, otherwise, the formal
letter of demand and assessment notice
shall be void. The same shall be sent to the
taxpayer only by registered mail or by
personal delivery. x x x

A mere perusal of the FAN for the deficiency EWT for
taxable year 1994 will show that other than a
tabulation of the alleged deficiency taxes due, no
further detail regarding the assessment was provided
by petitioner. Only the resulting interest, surcharge
and penalty were anchored with legal basis.

The assailed deficiency tax assessment for the EWT in
1994 disregarded the provisions of Section 228 of the
Tax Code, as amended, as well as Section 3.1.4 of
Revenue Regulations No. 12-99 by not providing the
legal and factual bases of the assessment. Hence,
the formal letter of demand and the notice of
assessment issued relative thereto are void.

20 Medtex v CIR Petitioner filed its Annual Information Return of The Court finds that the assessment is valid. A Medtex was not deprived of its right to due process
CTA Case no. 8508 | September 1, 2014 Creditable Income Taxes Withheld preliminary assessment notice preparatory to the having had the opportunity to file a protest to FAN
(Expanded)/Income Payments Exempt from issuance of a formal or final assessment notice is not, which is dispensable, unlike a protest to PAN.
● Petitioner - Medtex Corporation Withholding Tax. Respondent issued against petitioner legally speaking, an assessment even if it contains a
● Respondent - CIR the Preliminary Assessment Notice (PAN) with Details computation of the tax liabilities of a taxpayer and a
of Discrepancies assessing the latter for deficiency demand for payment of the computed tax liabilities
income tax, expanded withholding tax (EWT) and final was made in such preliminary assessment notice.
withholding tax (FWT) with compromise penalties.
The CTA En Banc h as likewise pronounced that a
Consequently, petitioner submitted a Letter to protest protest against the PAN, unlike the protest against
the revised PAN. However, on the same day, the FAN, is not indispensable. A preliminary
respondent issued the Formal Letter of Demand with assessment notice may or may not even be
Details of Discrepancies and Audit Results/ Assessment protested to by the taxpayer, and the fact of non-
Notices, assessing petitioner for deficiency taxes. protest shall not in any way make the preliminary
assessment notice final and unappealable. Thus, the
Respondent denied petitioner's request for issuance of the FAN before the lapse of the fifteen
cancellation of the assessment. Then petitioner (15)-day period for the taxpayer to file its protest to
protested the Formal Letter of Demand but the PAN, inflicts no prejudice on the taxpayer for as
respondent denied such protest. long as the latter is properly served a Formal
Assessment Notice and that it was able to intelligently
Petitioner contends that the deficiency tax contest the FAN by filing a protest letter within the
assessment was void for failure of respondent to period provided by law.
observe due process in the issuance of the said
assessment. The Formal Letter of Demand was issued Moreover, this Court observed that petitioner was
on March 23, 2013, which was the same day afforded the procedural due process required by law
petitioner submitted its protest letter against the when it was fully apprised of the legal and factual
revised Preliminary Assessment Notice. Petitioner bases of the assessment issued against it and that
alleges that it was deprived of its right to respond to petitioner was given the opportunity to substantially
the PAN. protest or dispute the assailed assessments via its
protest letter.
W/N the deficiency assessment against the petitioner
should be cancelled and withdrawn for failure of the
CIR to comply with the due process requirements - NO

21 BARCELON v. CIR Petitioner filed its Annual Income Tax Return for Under Section 203 of the Tax Code, respondent had An assessment is made within the prescriptive
G.R. No. 157064 |August 7, 2006 taxable year 1987. After an audit investigation three (3) years from the last day for the filing of the period if notice to this effect is released, mailed or
conducted by the BIR, respondent CIR issued an return to send an assessment notice to petitioner. In sent by the CIR to the taxpayer within said period.
● Petitioner - Barcelon, Roxas assessment for deficiency income tax arising from the the present case, records show that petitioner filed its Receipt thereof by the taxpayer within the
Securities, Inc. (now known as UBP disallowance of the item on salaries, bonuses and Annual Income Tax Return for taxable year 1987 on prescriptive period is not necessary.
Securities, Inc.) allowances as part of the deductible business 14 April 1988. The last day for filing by petitioner of its
● Respondent - CIR expense since petitioner failed to subject the salaries, return was on 15 April 1988, thus, giving respondent
bonuses and allowances to withholding taxes. · until 15 April 1991 within which to send an assessment
This assessment was covered by Formal Assessment notice. While respondent avers that it sent the
Notice which, respondent alleges, was sent to assessment notice on 6 February 1991, within the
petitioner through registered mail. However, petitioner three (3)-year period prescribed by law, petitioner
denies receiving the formal assessment notice. On 17 denies having received an assessment notice from
March 1992, petitioner was served with a Warrant of respondent. Petitioner alleges that it came to know
Distraint and/or Levy to enforce collection of the of the deficiency tax assessment only on 17 March
deficiency income tax for the year 1987. Petitioner 1992 when it was served with the Warrant of Distraint
filed a formal protest, which was denied. Upon review and Levy.
by the CTA, it reversed CIR’s ruling saying that the right When a mail matter is sent by registered mail, there
of the CIR to assess had already prescribed. CA exists a presumption that it was received in the
reversed. regular course of mail. The facts to be proved in
order to raise this presumption are: (a) that the letter
Whether the CIR’s right to assess the petitioner’s was properly addressed with postage prepaid; and
alleged deficiency income tax was barred by (b) that it was mailed. In order to rebut this
prescription – YES presumption, a direct denial must be made to place
the burden upon the other party to prove that the
mailed letter was indeed received by the addressee.
Such denial was made by the petitioner.
The release, mailing, or sending of the notice be
clearly and satisfactorily proved. Mere notations
made without the taxpayers intervention, notice, or
control, without adequate supporting evidence,
cannot suffice; otherwise, the taxpayer would be at
the mercy of the revenue offices, without adequate
protection or defense. In the present case, the
evidence offered by the respondent fails to convince
this Court that the notice was released, mailed, or
sent before the lapse of the period of limitation upon
assessment and collection prescribed.
(22) PROTECTORS SERVICES INC. v. CA Protector's Services, Inc. (PSI) is a contractor engaged The SC supported the CTA decision which found that The presumption are (a) that the letter was properly
G.R. No. 118176|April 12, 2000 in recruiting security guards for clients. After an audit the 1985 assessment which petitioner denied as addressed with postage prepaid; and (b) that it was
investigation conducted by the Bureau of Internal having been received was negated when the mailed. Once these facts are proved, the
Revenue (BIR), petitioner was assessed for deficiency respondent introduced documentary evidence presumption is that the letter was received by the
● Petitioner - Protector’s Services Inc. percentage taxes including surcharges, penalties and showing that it was mailed by registered mail. It was addressee as soon as it could have been
● Respondent - CA and CIR interests thereon (‘83-’85). In 1987, Commissioner sent further buttressed by the testimony of witness Mr. transmitted to him in the ordinary course of the
by registered mail, demand letters for payment of the Arnold C. Larroza, Chief Administrative Branch mails. However, such presumption is only disputable,
aforesaid assessments. However, Protectors alleged Mailing Section, Rev. Region No. 4B-1, Quezon City and may be rebutted; in fact, the direct denial of its
that it only received two letters for the years 1983 and that the 1983, 1984 and 1985 assessments were receipt shifts the burden to the party favored by the
1984, respectively. It denied receiving any notice of placed in one envelope when it was mailed by presumption to prove that the mail matter was
deficiency percentage tax for the year 1985. registered mail. Presumably, it was received in the indeed received by the addressee.
regular course of the mail. Once the facts (see
Protector’s sent a protest letter, to the BIR regarding doctrine) are proved, the presumption is that the
the 1983 and 1984 assessments. It was denied. letter was received by the addressee as soon as it
could have been transmitted to him in the ordinary
Protector’s then filed a petition for review with the course of the mails.
CTA, claiming among others that the period for
collecting the 1985 percentage tax had prescribed The same assessment is also considered final and
because it did not receive the assessment letter for unappealable for failure of the petitioner to protest
such year. The CTA dismissed the petition ruling that the same within the reglementary period provided by
the receipt of the assessment is supported by law (5 years).
testimony of the BIR personnel and that all the
assessment letters for the years 1983, 1984, and 1985
were included in one envelope and mailed together.)

WON PROTECTOR’S IS LIABLE FOR THE 1985
ASSESSMENT- YES

23.BASILAN ESTATES v. CIR Basilan Estates, Inc. is a Philippine corporation There are factual circumstances in the present case Book:
G.R. No. L-22492. engaged in coconut industry. It filed its income tax that lead Us to presume regularity in the Notice of Assessment is deemed made on the date
September 5, 1967 return on March 24, 1954 and paid an income tax of performance of official functions. The notice of when the demand letter is released, mailed or sent,
P8,028. On February 26, 1959, CIR assessed Basilan assessment shows the assessment to have been even though the same is actually received by the
Petitioner: Basilan Estates, Inc. Estates, Inc., a deficiency income tax of P3,912 for made on February 26, 1959, well within the ve-year taxpayer AFTER the expiration of the prescribed
Respondent: THE COMMISSIONER OF 1953 and P86,867.85 as 25% surtax on unreasonably period. period.
INTERNAL REVENUE and THE COURT OF TAX accumulated profits. Because of its refusal to waive ● On the right side of the notice is also
APPEALS the period of prescription, the corporation's request for stamped "Feb. 26, 1959" — denoting the However, although receipt within the prescriptive
reinvestigation was not given due course, and on date of release, according to Bureau of period is not necessary, the rule does not dispense
December 2, 1960, notice was served the corporation Internal Revenue practice. with the requirement that the taxpayer should
that the warrant of distraint and levy would be ● The Commissioner himself in his letter ACTUALLY RECEIVE the Assessment Notice.
Basically, Basilan is trying to argue that it did executed. answering petitioner's request to lift the
not receive the Assessment notice within the warrant of distraint and levy, asserts that
5-year prescriptive period, hence the Basilan elevated the case to CTA alleging prescription notice had been sent to petitioner.
Assessment by CIR is invalid. SC said, CIR sent of the period of assessment of collection. CTA denied.
the assessment within the 5-year prescriptive ● In the letter of the Regional Director
period hence valid regardless if Basilan There is no dispute that the assessment of the forwarding the case to the Chief of the
receives it within or AFTER the prescriptive deficiency tax was made on February 26, 1959; but Investigation Division which the latter
period. the petitioner claims that it never received notice of received on March 10, 1959), notice of
such assessment or if it did, it received the notice assessment was said to have been sent to
beyond the five-year prescriptive period. Hence, the petitioner. Subsequently, the Chief of the
assessment is invalid. Investigation Division indorsed on March
18, 1959 the case to the Chief of the Law
Division. There it was alleged that notice
was already sent to petitioner on February
ISSUE: 26, 1959.
WON the CIR has sent the notice within the 5-year These circumstances pointing to official performance
prescriptive period- YES of duty must necessarily prevail over petitioner's
contrary interpretation.

Besides, even granting that notice had been
received by the petitioner late, as alleged, under
Section 331 of the Tax Code requiring five years
within which to assess defficiency 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.
24 CIR v. COOLMATE CORP CIR assessed Coolmate for alleged deficiency income The FAN is void for it was never received by the A direct denial of receipt of the demand letter shifts
CTA EB No. 1226 (June 8, 2016) tax in the amount of around 17M pesos for taxable taxpayer. The notice to BIR of taxpayer’s change in the burden to the CIR to prove that it was indeed
year 2006. RDO No 48 sent Coolmate a Letter of address need not be formal. What is important is that received.
Petitioner: CIR Authority to examine the latter’s books for all internal the BIR is notified and becomes aware of the
Respondent: Coolmate Corp revenue taxes. Coolmate compiled and submitted taxpayer’s new address so that the running of the For the presumption of notice to apply, the CIR must
pertinent documents. However, Sept 2007, Coolmate prescription in the assessment and collection of taxes prove that: (1) that the letter was properly
moved offices so that its home RDO transferred from are not suspended. Here, BIR sent Coolmate several addressed with postage prepaid, (2) that it was
No 48 to no. 49. other notices at its new address. Thus the period to mailed.
assess Coolmate was not suspended and already
When the Formal Assessment Notice (FAN) was issued prescribed. It was proven that the FAN was sent
against Coolmate in 2009, it was sent to the latter’s through registered mail and was returned to the CIR.
old address. As such, the FAN was returned to sender Hence, Coolmate did not receive the fan.
on the ground that the addressee had moved out.
[on effect of an invalid assessment]
Despite this, CIR issued a warrant of distraint and levy An invalid assessment cannot be made the basis of a
addressed to Metrobank to have Coomate’s Warrant of Distraint and Levy. If the taxpayer denies
accounts frozen to the extent of its alleged delinquent having received an assessment, it then becomes
taxes. CTA declared that both the FAN and its warrant incumbent upon the latter to prove by competent
were void for they violated Coolmate’s right to due evidence that such notice was indeed received by
process. the addressee.

CIR argued that: It has been settled that while a mailed letter is
(1) Coolmate failed to update its address deemed received by the addressee in the course of
mail, this is merely a disputable presumption subject
ISSUE: Whether the FAN is void? YES 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.
25 NAVA vs. CIR Nava filed his income tax return in 1950 and the CIR YES. CIR failed to prove by substantial evidence that Mere notations made without the taxpayer’s
L- 19470 | Jan. 30 1965 assessed him for deficiency income tax in 1951. Nava the assessment notice in 1955 and other supposed intervention, notice, or control, without adequate
paid ½ of the due, and then offered to pay using his demand letters were in fact issued or sent to Nava. supporting evidence, cannot suffice. Otherwise, the
Peititoner: Gonzalo P Nava backpay certificate to pay the balance but the CIR The presumption that a letter duly directed and taxpayer would be at the mercy of the revenue
Respondent: CIR refused. In 1955, the CIR issued a deficiency income mailed was received in the regular course of mail offices without adequate protection or defense.
tax assessment against Nava, however Nava alleges cannot be applied to the case at bar. The period to
that he learned the assessment for the first time on assess Nava for deficiencies had already prescribed
December 1956, more than 5 years after the original in 1956 counted from the date the original income
tax return has been filed. Nava asked for tax return was made in 1951. Mere notations made
reconsideration but in June 1958 he was informed that without the taxpayer’s intervention, notice, or
the reinvestigation would be granted provided he control, without adequate supporting evidence,
waived the statute of limitations. Nava refused and cannot suffice. Otherwise, the taxpayer would be at
said that the CIR’s right to assess him has already the mercy of the revenue offices without adequate
prescribed. protection or defense.

W/N the period to assess of the CIR has already
prescribed? YES

26 Sy Po v CTA The sole proprietor of Silver Cup, the late husband of The persistent failure of the late Po Bien Sing and The burden of proving that a tax assessment was
G.R. No. 81446 |Aug. 18, 1988 petitioner, did not produce his books of accounts petitioner to present their books of accounts for not conducted in compliance with the
● Petitioner- Bonificia Sy Po despite the subpoena issued against him. This examination for the taxable years involved left the requirements stated by law is always on the
● Respondent- CTA and CIR prompted the investigating team to enter the factory CIR no other legal option except to resort to the taxpayer.
bodega and seized the different brands. On the basis power conferred upon him under Sec. 16 of the Tax
of the team’s report of investigation, the Code.
Commissioner of Internal Revenue assessed Mr. Po
Bien Sing for deficiency income tax. As to its correctness, Tax assessments by tax
examiners are presumed correct and made in good
WN the assessment can be made on the basis of the faith. The taxpayer has the duty to prove otherwise.
seized items by the investigating team - YES In the absence of proof of any irregularities in the
performance of duties, an assessment duly made by
a BIR examiner and approved by his superior officers
will not be disturbed. All presumptions are in favor of
the correctness of tax assessments.
(27) CIR vs. BASF BASF is a domestic corporation with its BIR registered True that under Sec. 223 of the Tax Reform Act of If a taxpayer is successful in defeating the
G.R. No. 198677 | Nov. 26, 2014 address in Las Piñas City. In a 2001 meeting, the board 1997, running of prescriptive period shall be presumption of correctness of the tax assessment,
resolved to dissolve BASF by March 2001. BASF moved suspended when the taxpayer can’t be found in the such assessment will have no effect or value
Petitioner - CIR out of its old office and moved to one in Canlubang, address found in the return upon which a tax is being whatsoever.
Respondent - BASF Coating + Inks PH Laguna. It sent 2 letters to the BIR RDO-Alabang, one assessed or collected, and that Sec. 11 of RR 12-85
to notify BIR of the dissolution, and the other to says written notice to the RDO is required in change “An invalid assessment bears no valid fruit. The law
manifest the submission of various documents of address situations. However these do not apply in imposes substantive, and not merely formal,
supporting the dissolution. These documents had the the instant case. requirement. To proceed heedlessly with tax
new address of BASF. collection without first establishing a valid
CIR is actually well aware of the change of address assessment is evidently violative of the cardinal
A FAN was issued in 2003 in the aggregate amount of of BASF since several documents were in the BIR principle in administrative investigations: that
Php18.6 M for various deficiency taxes to the old record, containing the new address. BIR officers also taxpayers should be able to present their case and
address in Las Piñas. Thus in 2004, a first notice before conducted examination and investigation of their tax adduce supporting evidence.”
warrant of distraint or levy was sent to the residence of liabilities for 1999 in the Laguna office evidenced by
one director. BASF protested the assessment citing several records signed by a revenue officer. The RDO
lack of due process and prescription. also sent BASF letters to the new address in Laguna.
Petitioner should have also been alerted to the
W/N BASF is liable for the deficiency since it did not address since the FAN sent to the old address was
receive the FAN, which was delivered to its old office? marked “return to sender.” Despite lack of formal
NO, not liable. written notice of change of address, CIR is deemed
to actually be aware of the new address.

The first notice before issuance of warrant of distraint
and levy also violated the right of BASF to due
process since no valid FAN was first sent.


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