TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
OTHER PERCENTAGE TAXES
JANUARY 18, 2020 | Transcribed by: Herz Ann Apostol &
Neil Dante Baban
For Other Percentage Taxes, the important thing to determine
is sino yung mga liable for percentage taxes. Who are the
persons liable. Kasi if liable ka to percentage taxes,
automatically in general, you are not liable for VAT. Para
either one or another lang siya. So as we said from the
previous meetings, pag non-vat registered ka, tapos your
gross sales or receipts do not exceed 3 million tapos other
than exempt transactions, automatically you will be liable for
percentage taxes. So, hindi meaning na nasa exempt
transactions ka, automatically wala ka nang bayarang taxes,
pwede ka parin liable for percentage taxes. Unless yung mga
specific exempt transactions on VAT. Pag exempt transaction
on VAT, except yung 3 million provisions, the tax payer will
not be liable for any VAT or percentage taxes. If VAT
registered ka, kahit na ang gross sales or receipts mo exceed
3 million or is below 3 million, pag VAT registered ka, VAT
liable ka. In contrast, if your gross sales or receipts exceed 3
million then you should register to VAT. Kasi, we said last
meeting na pag di ka nagregister to VAT you will be liable to
output tax without the benefit of input tax credit plus pwede
kapa ma temporarily closed. The BIR can issue a temporary
closure order against you.
SEC. 116. Tax on Persons Exempt from Value-Added Tax (VAT). -
Any person whose sales or receipts are exempt under Section 109(V)
of this Code from the payment of value-added tax and who is not a
VAT-registered person shall pay a tax equivalent to three percent (3%
) of his gross quarterly sales or receipts: Provided, That cooperatives
shall be exempt from the three percent (3%) gross receipts tax herein
imposed.
SEC. 117. Percentage Tax on Domestic Carriers and Keepers of
Garages. - Cars for rent or hire driven by the lessee, transportation
contractors, including persons who transport passengers for hire, and
other domestic carriers by land, for the transport of passengers [
except owners of bancas] and owners of animal-drawn two wheeled
vehicle), and keepers of garages shall pay a tax equivalent to three
percent (3%) of their quarterly gross receipts.
The gross receipts of common carriers derived from their incoming
and outgoing freight shall not be subjected to the local taxes imposed
under Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.
In computing the percentage tax provided in this Section, the following
shall be considered the minimum quarterly gross receipts in each
particular case:
Jeepney for hire -  
1. Manila and other Cities P 2,
2. Provincial 400
Public utility bus -    1,
Not exceeding 30 passengers 200
Exceeding 30 but not exceeding 50  
passengers P 3,
Exceeding 50 passengers 600
Taxis -     6,
1. Manila and other Cities 000
2. Provincial    7,
Car for hire (with chauffer) 200
Car for hire (without chauffer)  
P 3,
600
   2,
400
P 3,
000
1,800
SEC. 118 Percentage Tax on International Carriers.
(A)  International air carriers doing; business in the Philippines on
their gross receipts derived from transport of cargo from the
Philippines to another country shall pay a tax of three percent (3%) of
their quarterly gross receipts.
(B)  International shipping carriers doing business in the Philippines
on their gross receipts derived from transport of cargo from the
Philippines to another country shall pay a tax equivalent to three
percent (3%) of their quarterly gross receipts.
SEC. 119. Tax on Franchises. - Any provision of general or special
law to the contrary notwithstanding, there shall be levied, assessed
and collected in respect to all franchises on radio and/or television
broadcasting companies whose annual gross receipts of the
preceding year do not exceed Ten million pesos (P10,000.00), subject
to Section 236 of this Code, a tax of three percent (3%) and on gas
and water utilities, a tax of two percent (2%) on the gross receipts
derived from the business covered by the law granting the franchise:
Provided, however, That radio and television broadcasting companies
referred to in this Section shall have an option to be registered as a
value-added taxpayer and pay the tax due thereon: Provided, further,
That once the option is exercised, said option shall not be irrevocable.
The grantee shall file the return with, and pay the tax due thereon to
the Commissioner or his duly authorized representative, in
accordance with the provisions of Section 128 of this Code, and the
return shall be subject to audit by the Bureau of Internal Revenue, any
provision of any existing law to the contrary notwithstanding.
SEC. 120. Tax on Overseas Dispatch, Message or Conversation
Originating from the Philippines. -
(A) Persons Liable. - There shall be collected upon every overseas
dispatch, message or conversation transmitted from the Philippines
by telephone, telegraph, telewriter exchange, wireless and other
communication equipment service, a tax of ten percent (10%) on the
amount paid for such services. The tax imposed in this Section shall
be payable by the person paying for the services rendered and shall
be paid to the person rendering the services who is required to collect
and pay the tax within twenty (20) days after the end of each quarter.
(B) Exemptions. - The tax imposed by this Section shall not apply to:
(1) Government. - Amounts paid for messages transmitted by the
Government of the Republic of the Philippines or any of its political
subdivisions or instrumentalities;
(2) Diplomatic Services. - Amounts paid for messages transmitted
by any embassy and consular offices of a foreign government;
(3) International Organizations. - Amounts paid for messages
transmitted by a public international organization or any of its
agencies
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
based in the Philippines enjoying privileges, exemptions and
immunities which the Government of the Philippines is committed to
recognize pursuant to an international agreement; and
(4) News Services. - Amounts paid for messages from any
newspaper, press association, radio or television newspaper,
broadcasting agency, or newstickers services, to any other
newspaper, press association, radio or television newspaper
broadcasting agency, or newsticker service or to a bona fide
correspondent, which messages deal exclusively with the collection of
news items for, or the dissemination of news item through, public
press, radio or television broadcasting or a newsticker service
furnishing a general news service similar to that of the public press.
SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries
Performing Quasi- Banking Functions. - There shall be collected a
tax on a gross receipt derived from sources within the Philippines by
all banks and non-bank financial intermediaries in accordance with
the following schedule:
(a) On interest, commissions and discounts from lending activities as
well as income from financial leasing, on the basis of remaining
maturities of instruments from which such receipts are derived:
Maturity period is five years or less 5%
Maturity period is more than five years 1%
(b) On dividends and equity shares and net income of subsidiaries
0%
(c) On royalties, rentals of property, real or personal, profits, from
exchange and all other items treated as gross income under Section
32 of this Code 7%
(d) On net trading gains within the taxable year on foreign currency,
debt securities, derivatives, and other similar financial instruments
7%
Provided, however, That in case the maturity period referred to in
paragraph (a) is shortened thru pre-termination, then the maturity
period shall be reckoned to end as of the date of pre-termination for
purposes of classifying the transaction and the correct rate of tax shall
be applied accordingly.
Provided, finally, That the generally accepted accounting principles as
may be prescribed by the Bangko Sentral ng Pilipinas for the bank or
non0bank financial intermediary performing quasi-banking functions
shall likewise be the basis for the calculation of gross receipts.
Nothing in this Code shall preclude the Commissioner from imposing
the same tax herein provided on persons performing similar banking
activities.
SEC. 122. Tax on Other Non-Bank Financial Intermediaries. -
There shall be collected a tax of five percent (5%) on the gross
receipts derived by other non-bank financial intermediaries doing
business in the Philippines, from interests, commissions, discounts
and all other items treated as gross income under this code.: Provided
, That interests, commissions and discounts from lending activities, as
well as income from financial leasing, shall be taxed on the basis of
the remaining maturities of the instruments from which such receipts
are derived, in accordance with the following schedule:
Maturity period is five years or less 5%
Maturity period is more than five years 1%
Provided, however, That in case the maturity period is shortened thru
pre-termination, then the maturity period shall be reckoned to end as
of the date of pre-termination for purposes of classifying the
transaction and the correct rate of tax shall be applied accordingly.
Provided, finally, That the generally accepted accounting principles as
may be prescribed by the Securities and Exchange Commission for
other non-bank financial intermediaries shall likewise be the basis for
the calculation of gross receipts.
Nothing in this Code shall preclude the Commissioner from imposing
the same tax herein provided on persons performing similar financing
activities.
SEC. 123. Tax on Life Insurance Premiums. - There shall be
collected from every person, company or corporation (except purely
cooperative companies or associations) doing life insurance business
of any sort in the Philippines a tax of two percent (2%) [87] of the total
premium collected, whether such premiums are paid in money, notes,
credits or any substitute for money; but premiums refunded within six
(6) months after payment on account of rejection of risk or returned
for other reason to a person insured shall not be included in the
taxable receipts; nor shall any tax be paid upon reinsurance by a
company that has already paid the tax; nor upon doing business
outside the Philippines on account of any life insurance of the insured
who is a nonresident, if any tax on such premium is imposed by the
foreign country where the branch is established nor upon premiums
collected or received on account of any reinsurance , if the insured, in
case of personal insurance, resides outside the Philippines, if any tax
on such premiums is imposed by the foreign country where the
original insurance has been issued or perfected; nor upon that portion
of the premiums collected or received by the insurance companies on
variable contracts (as defined in Section 232(2) of Presidential Decree
No. 612), in excess of the amounts necessary to insure the lives of
the variable contract workers.
'Cooperative companies or associations' are such as are conducted
by the members thereof with the money collected from among
themselves and solely for their own protection and not for profit.
SEC. 124. Tax on Agents of Foreign Insurance Companies. -
Every fire, marine or miscellaneous insurance agent authorized under
the Insurance Code to procure policies of insurance as he may have
previously been legally authorized to transact on risks located in the
Philippines for companies not authorized to transact business in the
Philippines shall pay a tax equal to twice the tax imposed in Section
123: Provided, That the provision of this Section shall not apply to
reinsurance: Provided, however, That the provisions of this Section
shall not affect the right of an owner of property to apply for and
obtain for himself policies in foreign companies in cases where said
owner does not make use of the services of any agent, company or
corporation residing or doing business in the Philippines. In all cases
where owners of property obtain insurance directly with foreign
companies, it shall be the duty of said owners to report to the
Insurance Commissioner and to the Commissioner each case where
insurance has been so effected, and shall pay the tax of five percent (
5%)on premiums paid, in the manner required by Section 123.
SEC. 125. Amusement Taxes. - There shall be collected from the
proprietor, lessee or operator of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball games, Jai-Alai and
racetracks, a tax equivalent to:
(a) Eighteen percent (18%) in the case of cockpits;
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
(b) Eighteen percent (18%) in the case of cabarets, night or day clubs;
(c) Ten percent (10%) in the case of boxing exhibitions: Provided,
however, That boxing exhibitions wherein World or Oriental
Championships in any division is at stake shall be exempt from
amusement tax: Provided, further, That at least one of the contenders
for World or Oriental Championship is a citizen[s] of the Philippines
and said exhibitions are promoted by a citizen/s of the Philippines or
by a corporation or association at least sixty percent (60%) of the
capital of which is owned by such citizens;
(d) Fifteen percent (15%) in the case of professional basketball
games as envisioned in Presidential Decree No. 871: Provided,
however, That the tax herein shall be in lieu of all other percentage
taxes of whatever nature and description; and
(e) Thirty percent (30%) in the case of Jai-Alai and racetracks - of
their gross receipts, irrespective, of whether or not any amount is
charged for admission.
For the purpose of the amusement tax, the term 'gross receipts'
embraces all the receipts of the proprietor, lessee or operator of the
amusement place. Said gross receipts also include income from
television, radio and motion picture rights, if any. A person or entity or
association conducting any activity subject to the tax herein imposed
shall be similarly liable for said tax with respect to such portion of the
receipts derived by him or it.
The taxes imposed herein shall be payable at the end of each quarter
and it shall be the duty of the proprietor, lessee or operator concerned
, as well as any party liable, within twenty (20) days after the end of
each quarter, to make a true and complete return of the amount of the
gross receipts derived during the preceding quarter and pay the tax
due thereon.
SEC. 126. Tax on Winnings. - Every person who wins in horse races
shall pay a tax equivalent to ten percent (10%) of his winnings or '
dividends', the tax to be based on the actual amount paid to him for
every winning ticket after deducting the cost of the ticket: Provided,
That in the case of winnings from double, forecast/quinella and trifecta
bets, the tax shall be four percent (4%). In the case of owners of
winning race horses, the tax shall be ten percent (10%) of the prizes.
The tax herein prescribed shall be deducted from the 'dividends'
corresponding to each winning ticket or the 'prize' of each winning
race horse owner and withheld by the operator, manager or person in
charge of the horse races before paying the dividends or prizes to the
persons entitled thereto.
The operator, manager or person in charge of horse races shall,
within twenty (20) days from the date the tax was deducted and
withheld in accordance with the second paragraph hereof, file a true
and correct return with the Commissioner in the manner or form to be
prescribed by the Secretary of Finance, and pay within the same
period the total amount of tax so deducted and withheld.
SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock
Listed and Traded through the Local Stock Exchange or through
Initial Public Offering. -
(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and
Traded through the Local Stock Exchange.- There shall be levied,
assessed and collected on every sale, barter, exchange, or other
disposition of shares of stock listed and traded through the local stock
exchange other than the sale by a dealer in securities, a tax at the
rate of one-half of one percent (1/2 of 1%) of the gross selling price or
gross value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed which shall be paid by the seller or
transferor.
(B) Tax on Shares of Stock Sold or Exchanged Through Initial Public
Offering. - There shall be levied, assessed and collected on every
sale, barter, exchange or other disposition through initial public
offering of shares of stock in closely held corporations, as defined
herein, a tax at the rates provided hereunder based on the gross
selling price or gross value in money of the shares of stock sold,
bartered, exchanged or otherwise disposed in accordance with the
proportion of shares of stock sold, bartered, exchanged or otherwise
disposed to the total outstanding shares of stock after the listing in the
local stock exchange:
Up to twenty-five percent (25%) 4%
Over twenty-five percent (25%) but not over thirty-three and one third
percent (33 1/3%) 2%
Over thirty-three and one third percent
(33 1/3%) 1%
The tax herein imposed shall be paid by the issuing corporation in
primary offering or by the seller in secondary offering.
For purposes of this Section, the term 'closely held corporation'
means any corporation at least fifty percent (50%) in value of
outstanding capital stock or at least fifty percent (50%) of the total
combined voting power of all classes of stock entitled to vote is owned
directly or indirectly by or for not more than twenty (20) individuals.
For purposes of determining whether the corporation is a closely held
corporation, insofar as such determination is based on stock
ownership, the following rules shall be applied:
(1) Stock Not Owned by Individuals. - Stock owned directly or
indirectly by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by its shareholders,
partners or beneficiaries.
(2) Family and Partnership Ownerships. - An individual shall be
considered as owning the stock owned, directly or indirectly, by or for
his family, or by or for his partner. For purposes of the paragraph, the
'family of an individual' includes only his brothers and sisters (whether
by whole or half-blood), spouse, ancestors and lineal descendants.
(3) Option. - If any person has an option acquire stock, such stock
shall be considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option and each one of a
series of options shall be considered as an option to acquire such
stock.
(4) Constructive Ownership as Actual Ownership. - Stock
constructively owned by reason of the application of paragraph (1) or (
3) hereof shall, for purposes of applying paragraph (1) or (2), be
treated as actually owned by such person; but stock constructively
owned by the individual by reason of the application of paragraph (2)
hereof shall not be treated as owned by him for purposes of again
applying such paragraph in order to make another the constructive
owner of such stock.
(C) Return on Capital Gains Realized from Sale of Shares of Stocks. -
(1) Return on Capital Gains Realized from Sale of Shares of Stock
Listed and Traded in the Local Stock Exchange. - It shall be the duty
of every stock broker who effected the sale subject to the tax imposed
herein to collect the tax and remit the same to the Bureau of Internal
Revenue within five (5) banking days from the date of collection
thereof and to submit on Mondays of each week to the secretary of
the stock exchange, of which he is a member, a true and complete
return which shall contain a declaration of all the transactions effected
through him during the preceding week and of taxes collected by him
and turned over to the Bureau Of Internal Revenue.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
(2) Return on Public Offerings of Shares of Stock. - In case of
primary offering, the corporate issuer shall file the return and pay the
corresponding tax within thirty (30) days from the date of listing of the
shares of stock in the local stock exchange. In the case of secondary
offering, the provision of Subsection (C) (1) of this Section shall apply
as to the time and manner of the payment of the tax.
(D) Common Provisions. - any gain derived from the sale, barter,
exchange or other disposition of shares of stock under this Section
shall be exempt from the tax imposed in Sections 24(C), 27(D)(2), 28(
A)(8)(c), and 28(B)(5)(c) of this Code and from the regular individual
or corporate income tax. Tax paid under this Section shall not be
deductible for income tax purposes.
Section 116 also provides na cooperatives are exempt from
3% percentage taxes, so note lang.
Who are subject to percentage tax?
1. Those whose gross sales or receipts do not exceed
3 million who are not VAT-registered;
2. Domestic carriers by land and keepers of garages (
Section 117)
− For this provision (Section 117) please take
note also of Section 108, yung zero-rated
provision. So nakalagay dun na
magtransport of passenger and cargo by air
or sea vessels, these would be subject to
zero rate percent VAT. SO dito sa
Percentage taxes, passengers lang and by
land.
3. International Carriers
− So basahin niyo nalang kung ilang percent
and ano yung reservations, basta general
rule, they are subject to percentage tax
4. Franchises
− Also yung mga nakalagay lang ditto, so
radio and/or television broadcasting
companies and gas and water utilities. Pag
hindi franchise na on those items or those
businesses, 12% VAT ka.
5. Overseas communications tax
− Overseas Dispatch, Message or
Conversation Originating from the
Philippines
6. Banks and Non-Bank Financial Intermediaries
Performing Quasi- Banking Functions
7. Other Non-Bank Financial Intermediaries
8. Life insurance premiums
− In life insurance premiums, yung life
insurance lang above nun again 12% VAT
ka (So ganun lang yung Rules sa OPT and
VAT, kahit na di kasali sa coverage ng bar
ang OPT, its good parin to familiarize
yourselves kasi related parin siya in a sense
to VAT)
9. Agents of Foreign Insurance Companies
10. Amusement Taxes
11. Taxes on Winnings
From the Discussions of Atty. Kriska Marna A. Buena, CPA
− Diba meron ding provision on this on
income taxes, so not limited to income
taxes yung winning ng person, pwede din
maging liable to percentage taxes
12. Tax on Sale, Barter or Exchange of Shares of Stock
Listed and Traded through the Local Stock Exchange
or through Initial Public Offering
− Eto note that these are sales made other
than by a dealer in securities. SO what is a
dealer in securities? He is one who buys
and sells securities in his ordinary course of
business.
− Also tax on initial public offering or IPO tax,
sabi dito, the tax herein imposed shall be
paid by the issuing corporation in primary
offering or by the seller in secondary
offering, so note na pwede secondary
offering not limited to primary offering. So
primary offering meaning yung original sale
made to the investing public. So it is issued
by the issuer corporation on his unissued
shares of stocks. Yun yung traditional
concept of an IPO. Secondary offering,
these are sales made by existing
shareholders of their securities which is
conducted during an IPO, or subsequent
sale after the IPO.
− Note that also under Sec 127, any gain
derived from the sale, barter, exchange or
other disposition of shares of stock under
this Section shall be exempt from the tax
imposed in Sections 24(C), 27(D)(2), 28(A)(
8)(c), and 28(B)(5)(c) of this Code, so
tignan niyo nalang kung ano yung mga
taxes nay un na exempt because subject na
siya to percentage taxes
− Also, the tax paid under this Section shall
not be deductible for income tax purposes,
OPT will not be deductible for income tax
purposes kahit na yung sa provision on
allowable deduction provision on taxes, diba
walang nakaspecify doon na OPT
pertaining to these kind of transaction is not
deductible. So additional item ito to that list
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

SEC. 128. Returns and Payment of Percentage Taxes. -

(A) Returns of Gross Sales, Receipts or Earnings and Payment of
Tax. -
(1) Persons Liable to Pay Percentage Taxes. - Every person
subject to the percentage taxes imposed under this Title shall file a
quarterly return of the amount of his gross sales, receipts or earnings
and pay the tax due thereon within twenty-five (25) days after the end
of each taxable quarter: Provided, That in the case of a person whose
VAT registration is cancelled and who becomes liable to the tax
imposed in Section 116 of this Code, the tax shall accrue from the
date of cancellation and shall be paid in accordance with the
provisions of this Section.
(2) Person Retiring from Business. - Any person retiring from a
business subject to percentage tax shall notify the nearest internal
revenue officer, file his return and pay the tax due thereon within
twenty (20) days after closing his business.
(3) Exceptions. - The Commissioner may, by rules and regulations,
prescribe:
(a) The time for filing the return at intervals other than the time
prescribed in the preceding paragraphs for a particular class or
classes of taxpayers after considering such factors as volume of sales
, financial condition, adequate measures of security, and such other
relevant information required to be submitted under the pertinent
provisions of this Code; and
(b) The manner and time of payment of percentage taxes other than
as hereinabove prescribed, including a scheme of tax prepayment.
(4) Determination of Correct Sales or Receipts. - When it is found
that a person has failed to issue receipts or invoices, or when no
return is filed, or when there is reason to believe that the books of
accounts or other records do not correctly reflect the declarations
made or to be made in a return required to be filed under the
provisions of this Code, the Commissioner, after taking into account
the sales, receipts or other taxable base of other persons engaged in
similar businesses under similar situations or circumstances, or after
considering other relevant information may prescribe a minimum
amount of such gross receipts, sales and taxable base and such
amount so prescribed shall be prima facie correct for purposes of
determining the internal revenue tax liabilities of such person.
(B) Where to File. -  Except as the Commissioner otherwise permits,
every person liable to the percentage tax under this Title may, at his
option, file a separate return for each branch or place of business, or
a consolidated return for all branches or places of business with the
authorized agent bank, Revenue District Officer, Collection Agent or
duly authorized Treasurer of the city or municipality where said
business or principal place of business is located, as the case may be
. (2) More than Five hundred pesos (P500) -Seven hundred
So the Returns and Payment of Percentage Taxes, quarterly
din katulad ng VAT, 25 days din after the close of the quarter.
SO same time sila.
Sa excise taxes, ang important thing is classification. Yung
cases on excise taxes usually pertain to classification and
after classification its pretty boring na because you just apply
the tax rate.
SEC.129. Goods subject to Excise Taxes. - Excise taxes apply to
goods manufactured or produced in the Philippines for domestic sales
or consumption or for any other disposition and to things imported.
The excise tax imposed herein shall be in addition to the value-added
tax imposed under Title IV.
For purposes of this Title, excise taxes herein imposed and based on
weight or volume capacity or any other physical unit of measurement
shall be referred to as 'specific tax' and an excise tax herein imposed
and based on selling price or other specified value of the good shall
be referred to as 'ad valorem tax.'
There are two classifications on excise taxes:
1. Specific Tax
− yung based on weight or volume capacity or
any other physical unit of measurement of
the goods. For example cigarettes, if you’ve
read he provisions on cigarettes, per pack
siya na tax
2. Ad valorem tax
− imposed and based on selling price or other
specified value of the good. For example,
fermented liquor, beer or wine so based
siya sa selling price ng wine or beer
So for example, Section 142,
SEC. 142. Wines. - [91] On wines, there shall be collected per
liter of volume capacity effective on January 1, 2013, the
following excise taxes:
(a) Sparkling wines/champagnes regardless of proof, if the net
retail price per bottle of seven hundred fifty milliliter (750 ml.)
volume capacity (excluding the excise tax and value-added
tax) is:
(1) Five hundred pesos (P500) or less - Two hundred fifty
pesos (P250.00); and
pesos (P700.00)

Dito sa percentage taxes, what is notable to me is yung

provision that the Commissioner can actually prescribe a
minimum amount of gross receipts. Personally, I assume na
based on reasonable grounds and amount siya. Pero I think
na since 3 million yung cap ng percentage taxes diba, kaya
siguro may power si commissioner to prescribe a minimum
amount ofcourse in cases lang in failure to file a return when
there is reason to believe that the books of account of the
taxpayer is misleading or not accurate.

So that’s it for Percentage taxes.

EXCISE TAXES

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
(b) Still wines containing and carbonated wines containing
fourteen percent (14%) of alcohol by volume or less, Thirty
pesos (P30.00); and
(c) Still wines and carbonated wines containing more than
fourteen percent (14%) but not more than twenty-five percent
(25%) of alcohol by volume, Sixty pesos (P60.00).
The rates of tax imposed under this Section shall be
increased by four percent (4%) every year thereafter effective
on January 1, 2014, through revenue regulations issued by
the Secretary of Finance.
So ganun yung kanyang classification, but it seems simple,
madali lang I-classify but in practice, marami siyang issues,
which we will not go into, kasi nga daanan lang daw. (class
laughs*) I mean kasi hindi siya kasama sa coverage.
So excise taxes are imposed for the following reasons:
• First to curtail the consumption of, for example
cigarettes, because it is harmful for the individual and
the society as a whole. (Super mahaba ang
discussions ng senate and house hearings on this
topic because they are trying to balance the interests
of the public, public health and the interests of the
tobacco farmers and industry.)
• Second, to protect domestic industries from
competition caused by similar imported products, for
example jewelries, so diba, meron higher excise
taxes for imported jewelry, for locally produced
walang excise taxes, para may competitive
advantage and locally produced so support locally
produced jewelries (☺).
• Third, to distribute the tax burden in proportion to the
benefit derived from a particular government service.
Example, Petroleum, kaya may excise taxes on
premium gasoline because the government
presumes that the benefit, or most of the benefit is by
the car owners, kasi sila yung nagbebenefit from the
use of roads, constructed by the government, the
funds of which are from the taxpayers. So para ma-
offset.
• Underlying all these purposes (Primary Purpose) Is
to raise the revenues of the government.
So the pertinent provisions on Excise Taxes:
SEC. 130. Filing of Return and Payment of Excise Tax on
Domestic Products. -
(A) Persons Liable to File a Return, Filing of Return on Removal
and Payment of Tax. -
(1) Persons Liable to File a Return. - Every person liable to pay
excise tax imposed under this Title shall file a separate return for each
place of production setting forth, among others the description and
quantity or volume of products to be removed, the applicable tax base
and the amount of tax due thereon: Provided, however, That in the
case of indigenous petroleum, natural gas or liquefied natural gas, the
excise tax shall be paid by the first buyer, purchaser or transferee for
local sale, barter or transfer, while the excise tax on exported
products shall be paid by the owner, lessee, concessionaire or
operator of the mining claim.
Should domestic products be removed from the place of production
without the payment of the tax, the owner or person having
possession thereof shall be liable for the tax due thereon.
(2) Time for Filing of Return and Payment of the Tax. - Unless
otherwise specifically allowed, the return shall be filed and the excise
tax paid by the manufacturer or producer before removal of domestic
products from place of production: Provided, That the excise tax on
locally manufactured petroleum products and indigenous petroleum
levied under Sections 148 and 151(A)(4), respectively, of this Title
shall be paid within ten (10) days from the date of removal of such
products for the period from January 1, 1998 to June 30, 1998; within
five (5) days from the date of removal of such products for the period
from July 1, 1998 to December 31, 1998; and, before removal from
the place of production of such products from January 1, 1999 and
thereafter: Provided, further, That the excise tax on nonmetallic
mineral or mineral products, or quarry resources shall be due and
payable upon removal of such products from the locality where mined
or extracted, but with respect to the excise tax on locally produced or
extracted metallic mineral or mineral products, the person liable shall
file a return and pay the tax within fifteen (15) days after the end of
the calendar quarter when such products were removed subject to
such conditions as may be prescribed by rules and regulations to be
promulgated by the Secretary of Finance, upon recommendation of
the Commissioner. For this purpose, the taxpayer shall file a bond in
an amount which approximates the amount of excise tax due on the
removals for the said quarter. The foregoing rules notwithstanding, for
imported mineral or mineral products, whether metallic or nonmetallic,
the excise tax due thereon shall be paid before their removal from
customs custody.
(3) Place of Filing of Return and Payment of the Tax. - Except as
the Commissioner otherwise permits, the return shall be filed with and
the tax paid to any authorized agent bank or Revenue Collection
Officer, or duly authorized City or Municipal Treasurer in the
Philippines.
(4) Exceptions. - The Secretary of Finance, upon recommendation of
the Commissioner may, by rules and regulations, prescribe:
(a) The time for filing the return at intervals other than the time
prescribed in the preceding paragraphs for a particular class or
classes of taxpayers after considering factors such as volume of
removals, adequate measures of security and such other relevant
information required to be submitted under the pertinent provisions of
this Code; and
(b) The manner and time of payment of excise taxes other than as
herein prescribed, under a tax prepayment, advance deposit or similar
schemes. In the case of locally produced of extracted minerals and
mineral products or quarry resources where the mine site or place of
extraction is not the same as the place of processing or production,
the return shall be filed with and the tax paid to the Revenue District
Office having jurisdiction over the locality where the same are mined,
extracted or quarried: Provided, however, That for metallic minerals
processed abroad, the return shall be filed and the tax due thereon
paid to the Revenue District Office having jurisdiction over the locality
where the same are mined, extracted or quarried.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

(B) Determination of Gross Selling Price of Goods Subject to Ad
Valorem Tax. - Unless otherwise provided, the price, excluding the
value-added tax, at which the goods are sold at wholesale in the
place of production or through their sales agents to the public shall
constitute the gross selling price. If the manufacturer also sells or
allows such goods to be sold at wholesale in another establishment of
which he is the owner or in the profits of which he has an interest, the
wholesale price in such establishment shall constitute the gross
selling price. Should such price be less than the cost of manufacture
plus expenses incurred until the goods are finally sold, then a
proportionate margin of profit, not less than ten percent (10%) of such
manufacturing cost and expenses, shall be added to constitute the
gross selling price.
(C) Manufacturer's or Producer's Sworn Statement. - Every
manufacturer or producer of goods or products subject to excise taxes
shall file with the Commissioner on the date or dates designated by
the latter, and as often as may be required, a sworn statement
showing, among other information, the different goods or products
manufactured or produced and their corresponding gross selling price
or market value, together with the cost of manufacture or production
plus expenses incurred or to be incurred until the goods or products
are finally sold.
(D) Credit for Excise tax on Goods Actually Exported. - When
goods locally produced or manufactured are removed and actually
exported without returning to the Philippines, whether so exported in
their original state or as ingredients or parts of any manufactured
goods or products, any excise tax paid thereon shall be credited or
refunded upon submission of the proof of actual exportation and upon
receipt of the corresponding foreign exchange payment: Provided,
That the excise tax on mineral products, except coal and coke,
imposed under Section 151 shall not be creditable or refundable even
if the mineral products are actually exported.
So note na sa excise taxes, unlike yung income tax return,
VAT return, Percentage tax returns, diba they are filed and
paid after na the taxable quarter na nangyari or na-earn yung
income. Sa excise taxes, they are, pwede natin sabihin na
prepaid. Kasi before the goods or articles are released from
the place of production, the manufacturing plant, processing
plant, for importation, dapat bayad muna ang taxes. So for
example diyan sa Coca-cola bottling plant, before ka
magrelease ng coke bottles for distribution, dapat bayad
muna ang Excise taxes on that. But merong reservation kasi
diba for example, Christmas break tapos close ang banks.
What to do? So pwede may deposit. I think nag issue ang BIR
ng Revenue Regulation or Circular na guidelines on that to
facilitate the payment of excise taxes para kahit walang
bangko pwede parin makarelease ng goods ang
manufacturers.
But there are reservations like in cases of Christmas breaks or
holidays where the bank is closed, pwede may deposits. I
think the BIR issues revenues regulations or circulars as
guidelines on that or to facilitate payment on excise taxes,
deposits on excise taxes, para kahit walang banks, the goods
of the manufacturers may still be released. The return shall
be filed and the excise tax paid before removal of the
domestic products from place of production. Anyway, there
are exceptions to this rule under section 130 basahin niyo
nalang.
Determination of Gross Selling Price of Goods Subject to
Ad Valorem Tax
Okay so to determine the Gross selling price for ad valorem
excise taxes, exclude the vat component of the price. In
contrast, to determine diba yung vat on importation, yung
computation mo kasama yung excise taxes. So baliktad sila.
Manufacturer’s or Producer’s Sworn Statement
This is a very common provision sa excise taxes that the
manufacturer is required to file a sworn statement showing the
goods manufactured and their value and there are penalties in
case of failure of the manufacturer to comply. There are
penalties because the BIR actually uses the sworn statement
to assess and to compare the sworn statement to the taxes
you have paid.
Payment of excise tax in imported articles
Same rule. The taxes must be paid before the goods are
released from the custom houses.
Tax free articles subsequently sold
Kung tax free yung article na inimport mo, kunyari books, oh
diba walang tax, but if you subsequently sell such item, the
purchaser of the tax-free goods will be subject to tax. He will
be liable for tax.
Importations by duty free
Importations by the duty free are exempted from all applicable
duties. Meron case nito na nasa CTA pa wherein the duty free
argued that the tax exemption includes excise taxes as well
since ang nakalagay sa code ay applicable duties lang, but in
their history never pa silang nagbayad ng excise taxes.
However, sa CTA palang siya. It is not yet decided. It would
be interesting kasi medyo Malaki panaman yata ang value
nun kas inga never pa sila nagbayad ng excise tax.
CONDITIONAL TAX FREE REMOVAL OF CERTAIN
ARTICLES

And their exception pala, so basahin niyo nalang, there are

exception to these rules under Section 130.

To determine the gross selling price for Ad Valorem excise

taxes, exclude the VAT components of the price.

Excise taxes
They are those na pwde nating sabihing prepaid kasi before
the goods or articles are released from the place of production
, processing plant, customs houses for importation, dapat
bayad muna yung taxes. Kunyari dun sa Coca-cola na plant,
before ka mag release ng mga bottles for distribution sa mga
provinces dpat bayad na yung mga excise taxes on that.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
GR: Taxes must be paid before goods are released from
custom houses
XPN: Some articles may be withdrawn or remove from the
warehouse in the case of production subject to the fulfillment
of certain conditions, and most notably, that it is subject to the
payment of a bond.
Also other articles are exempt from payment of excise taxes.
Siguro basahin niyo nalang straight forward naman siya para
madtermine niyo lng ano yung mga exempt. Also, I forgot
pwde may mix na taxes. Pwdeng specific tax and ad valorem
tax. I forgot the article but pwde ang specific and ad valorem
tax on one article.
Section 133. Removal of Wines and distilled Spirits for Treatment
of Tobacco Leaf. – Upon issuance of a permit from the
Commissioner and subject to the rules and regulations prescribed by
the Secretary of Finance, manufacturers of cigars and cigarettes may
withdraw from bond, free of excise tax, local and imported wines and
distilled spirits in specific quantities and grades for use in the
treatment of tobacco leaf to be used in the manufacture of cigars and
cigarettes; but such wines and distilled spirits must first be suitably
denatured.
Section 134. Domestic Denatured Alcohol. – Domestic alcohol of
not less than one hundred eighty degrees (180°) proof (ninety percent
(90%) absolute alcohol) shall, when suitably denatured and rendered
unfit for oral intake, be exempt from the excise tax prescribed in
Section 141: Provided, however, That such denatured alcohol shall be
subject to tax under Section 106(A) of this Code: Provided, further,
That if such alcohol is to be used for motive power, it shall be taxed
under Section 148(d) of this Code: Provided, finally, That any alcohol,
previously rendered unfit for oral intake after denaturing but
subsequently rendered fit for oral intake after undergoing fermentation
, dilution, purification, mixture or any other similar process shall be
taxed under Section 141 of this Code and such tax shall be paid by
the person in possession of such reprocessed spirits.
Section 135. Petroleum Products Sold to International Carriers
and Exempt Entities or Agencies. – Petroleum products sold to the
following are exempt from excise tax: (a) International carriers of
Philippine or foreign registry on their use or consumption outside the
Philippines: Provided, That the petroleum products sold to these
international carriers shall be stored in a bonded storage tank and
may be disposed of only in accordance with the rules and regulations
to be prescribed by the Secretary of Finance, upon recommendation
of the Commissioner; (b) Exempt entities or agencies covered by tax
treaties, conventions and other international agreements for their use
of consumption: Provided, however, That the country of said foreign
international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers, entities or
agencies; and (c) Entities which are by law exempt from direct and
indirect taxes.
Section 136. Denaturation, Withdrawal and Use of Denatured
Alcohol. – Any person who produces, withdraws, sells, transports or
knowingly uses, or is in possession of denatured alcohol, or articles
containing denatured alcohol in violation of laws or regulations now or
hereafter in force pertaining thereto shall be required to pay the
corresponding tax, in addition to the penalties provided for under Title
X of this Code.
Section 137. Removal of Spirits Under Bond for Rectification. –
Spirits requiring rectification may be removed from the place of
production to another establishment for the purpose of rectification
without prepayment of the excise tax: Provided, That the distiller
removing such spirits and the rectifier receiving them shall file with the
Commissioner their joint bond conditioned upon the payment by the
rectifier of the excise tax due on the rectified alcohol: Provided, further
, That in cases where alcohol has already been rectified either by
original and continuous distillation or by redistillation, no loss for
rectification and handling shall be allowed and the rectifier thereof
shall pay the excise tax due on such losses: Provided, finally, That
where a rectifier makes use of spirits upon which the excise tax has
not been paid, he shall be liable for the payment of the tax otherwise
due thereon.
Section 138. Removal of Fermented Liquors to Bonded
Warehouse. – Any brewer may remove or transport from his brewery
or other place of manufacture to a bonded warehouse used by him
exclusively for the storage or sale in bulk of fermented liquors of his
own manufacture, any quantity of such fermented liquors, not less
than one thousand (1,000) liters at one removal, without prepayment
of the tax thereon under a permit which shall be granted by the
Commissioner. Such permit shall be affixed to every package so
removed and shall be cancelled or destroyed in such manner as the
Commissioner may prescribe. Thereafter, the manufacturer of such
fermented liquors shall pay the tax in the same manner and under the
same penalty and liability as when paid at the brewery.
Section 139. Removal of Damaged Liquors Free of Tax. – When
any fermented liquor has become sour or otherwise damaged so as to
be unfit for use as such, brewers may sell and after securing a special
permit from the Commissioner, under such conditions as may be
prescribed in the rules and regulations prescribed by the Secretary of
Finance, remove the same without the payment of tax thereon in cask
or other packages, distinct from those ordinarily used for fermented
liquors, each containing not less than one hundred seventy-five (175)
liters with a note of their contents permanently affixed thereon.
Section 140. Removal of Tobacco Products without Prepayment
of Tax. – Products of tobacco entirely unfit for chewing or smoking
may be removed free of tax for agricultural or industrial use, under
such conditions as may be prescribed in the rules and regulations
prescribed by the Secretary of Finance. Stemmed leaf tobacco, fine-
cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings,
clippings, stems, or midribs, and sweepings of tobacco may be sold in
bulk as raw material by one manufacturer directly to another without
payment of the tax, under such conditions as may be prescribed in
the rules and regulations prescribed by the Secretary of Finance.
‘Stemmed leaf tobacco,’ as herein used, means leaf tobacco which
has had the stem or midrib removed. The term does not include
broken leaf tobacco.
Section 141. Distilled Spirits. – On distilled spirits, subject to the
provisions of Section 133 of this Code, an excise tax shall be levied,
assessed and collected based on the following schedules:
(a) Effective on January 1, 2013
(1) An ad valorem tax equivalent to fifteen percent (15%) of
the net retail price (excluding the excise tax and the value-added tax)
per proof; and
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

(2) In addition to the ad valorem tax herein imposed, a specific tax of
Twenty pesos (PhP20.00) per proof liter.
(b) Effective on January 1, 2015
(1) An ad valorem tax equivalent to twenty percent (20%) of
the net retail price (excluding the excise tax and the valueadded tax)
per proof; and
(2) In addition to the ad valorem tax herein imposed, a
specific tax of Twenty pesos (PhP20.00) per proof liter.
(c) In addition to the ad valorem tax herein imposed, the specific tax
rate of Twenty pesos (PhP20.00) imposed under this Section shall be
increased by four percent (4%) every year thereafter effective on
January 1, 2016, through revenue regulations issued by the Secretary
of Finance.
Medicinal preparations, flavoring extracts, and all other preparations,
except toilet preparations, of which, excluding water, distilled spirits
form the chief ingredient, shall be subject to the same tax as such
chief ingredient.
manufacturer or importer liable for additional excise tax equivalent to
the tax due and difference between the understated suggested net
retail price and the actual net retail price.
Distilled spirits introduced in the domestic market after the effectivity
of this Act shall be initially taxed according to their suggested net
retail prices.
‘Suggested net retail price’ shall mean the net retail price at which
locally manufactured or imported distilled spirits are intended by the
manufacturer or importer to be sold on retail in major supermarkets or
retail outlets in Metro Manila for those marketed nationwide, and in
other regions, for those with regional markets. At the end of three (3)
months from the product launch, the Bureau of Internal Revenue shall
validate the suggested net retail price of the new brand against the
net retail price as defined herein and initially determine the correct tax
on a newly introduced distilled spirits. After the end of nine (9) months
from such validation, , the Bureau of Internal Revenue shall revalidate
the initially validated net retail price against the net retail price as of
the time of revalidation in order to finally determine the correct tax on
a newly introduced distilled spirits.

This tax shall be proportionally increased for any strength of the spirits
All distilled spirits existing in the market at the time of the effectivity of
taxed over proof spirits, and the tax shall attach to this substance as
this Act shall be taxed according to the tax rates provided above
soon as it is in existence as such, whether it be subsequently
based on the latest price survey of the distilled spirits conducted by
separated as pure or impure spirits, or transformed into any other
the Bureau of Internal Revenue.
substance either in the process of original production or by any
subsequent process.
The methodology and all pertinent documents used in the conduct of
the latest price survey shall be submitted to the Congressional
‘Spirits or distilled spirits’ is the substance known as ethyl alcohol,
Oversight Committee on the Comprehensive Tax Reform Program
ethanol or spirits of wine, including all dilutions, purifications and
created under Republic Act No. 8240.
mixtures thereof, from whatever source, by whatever process
produced, and shall include whisky, brandy, rum, gin and vodka, and
other similar products or mixtures. Manufacturers and importers of distilled spirits shall, within thirty (30)
days from the effectivity of this Act, and within the first five (5) days of
every third month thereafter, submit to the Commissioner a sworn
‘Proof spirits’ is liquor containing one-half (1/2) of its volume of alcohol
statement of the volume of sales for each particular brand of distilled
of a specific gravity of seven thousand nine hundred and thirty-nine
spirits sold at his establishment for the three-month period
ten thousandths (0.7939) at fifteen degrees centigrade (15°C). A
immediately preceding.
‘proof liter’ means a liter of proof spirits.
Any manufacturer or importer who, in violation of this Section,
‘Net retail price’ shall mean the price at which the distilled spirits is
misdeclares or misrepresents in his or its sworn statement herein
sold on retail in at least five (5) major supermarkets in Metro Manila,
required any pertinent data or information shall, upon final findings by
excluding the amount intended to cover the applicable excise tax and
the Commissioner that the violation was committed, be penalized by a
the value-added tax. For distilled spirits which are marketed outside
summary cancellation or withdrawal of his or its permit to engage in
Metro Manila, the ‘net retail price’ shall mean the price at which the
business as manufacturer or importer of distilled spirits.
distilled spirits is sold in at least five (5) major supermarkets in the
region excluding the amount intended to cover the applicable excise
tax and the value-added tax. Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount
of deficiency taxes, surcharges and interest which may be assessed
Major supermarkets, as contemplated under this Act, shall be those
pursuant to this Section. Any person liable for any of the acts or
with the highest annual gross sales in Metro Manila or the region, as
omissions prohibited under this Section shall be criminally liable and
the case may be, as determined by the National Statistics Office, and
penalized under Section 254 of this Code.
shall exclude retail outlets or kiosks, convenience or sari-sari stores,
and others of a similar nature: Provided, That no two (2)
supermarkets in the list to be surveyed are affiliated and/or branches Any person who willfully aids or abets in the commission of any such
of each other: Provided, finally, That in case a particular distilled spirit act or omission shall be criminally liable in the same manner as the
is not sold in major supermarkets, the price survey can be conducted
in retail outlets where said distilled spirit is sold in Metro Manila or the
region, as the case may be, upon the determination of the
Commissioner of Internal Revenue.

The net retail price shall be determined by the Bureau of Internal

Revenue (B1R) through a price survey under oath.

The methodology and all pertinent documents used in the conduct of

the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.

Understatement of the suggested net retail price by as much as

fifteen percent (15%) of the actual net retail price shall render the

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
principal. If the offender is not a citizen of the Philippines, he shall be
deported immediately after serving the sentence, without further
proceedings for deportation.
Section 142. Wines. – On wines, there shall be collected per liter of
volume capacity effective on January 1, 2013, the following excise
taxes:
(a) Sparkling wines/champagnes regardless of proof, if the net retail
price per bottle of seven hundred fifty milliliter (750 ml.) volume
capacity (excluding the excise tax and the value-added tax) is:
(1) Five hundred pesos (PhP500.00) or less – Two hundred
fifty pesos (PhP250.00); and
(2) More than Five hundred pesos (PhP500.00) – Seven
hundred pesos (PhP700.00).
(b) Still wines and carbonated wines containing fourteen percent (14%
) of alcohol by volume or less, Thirty pesos (PhP30.00); and
(c) Still wines and carbonated wines containing more than fourteen
percent (14%) but not more than twenty-five percent (25%) of alcohol
by volume, Sixty pesos (PhP60.00).
The rates of tax imposed under this Section shall be increased by four
percent (4%) every year thereafter effective on January 1, 2014,
through revenue regulations issued by the Secretary of Finance.
Fortified wines containing more than twenty-five percent (25%) of
alcohol by volume shall be taxed as distilled spirits. ‘Fortified wines’
shall mean natural wines to which distilled spirits are added to
increase their alcohol strength.
‘Net retail price’ shall mean the price at which sparkling wine/
champagne is sold on retail in at least five (5) major supermarkets in
Metro Manila, excluding the amount intended to cover the applicable
excise tax and the value-added tax. For sparkling wines/champagnes
which are marketed outside Metro Manila, the ‘net retail price’ shall
mean the price at which the wine is sold in at least five (5) major
supermarkets in the region excluding the amount intended to cover
the applicable excise tax and the value-added tax.
Major supermarkets, as contemplated under this Act, shall be those
with the highest annual gross sales in Metro Manila or the region, as
the case may be, as determined by the National Statistics Office, and
shall exclude retail outlets or kiosks, convenience or sari-sari stores,
and others of a similar nature: Provided, That no two (2)
supermarkets in the list to be surveyed are affiliated and/or branches
of each other: Provided, finally, That in case a particular sparkling
wine/champagne is not sold in major supermarkets, the price survey
can be conducted in retail outlets where said sparkling wine/
champagne is sold in Metro Manila or the region, as the case may be,
upon the determination of the Commissioner of Internal Revenue.
The net retail price shall be determined by the Bureau of Internal
Revenue through a price survey under oath.
The methodology and all pertinent documents used in the conduct of
the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.
Understatement of the suggested net retail price by as much as
fifteen percent (15%) of the actual net retail price shall render the
manufacturer or importer liable for additional excise tax equivalent to
the tax due and difference between the understated suggested net
retail price and the actual net retail price.
Sparkling wines/champagnes introduced in the domestic market after
the effectivity of this Act shall be initially tax classified according to
their suggested net retail prices.
‘Suggested net retail price’ shall mean the net retail price at which
locally manufactured or imported sparkling wines/champagnes are
intended by the manufacturer or importer to be sold on retail in major
supermarkets or retail outlets in Metro Manila for those marketed
nationwide, and in other regions, for those with regional markets. At
the end of three (3) months from the product launch, the Bureau of
Internal Revenue shall validate the suggested net retail price of the
sparkling wine/champagne against the net retail price as defined
herein and initially determine the correct tax bracket to which a newly
introduced sparkling wine/champagne shall be classified. After the
end of nine (9) months from such validation, the Bureau of Internal
Revenue shall revalidate the initially validated net retail price against
the net retail price as of the time of revalidation in order to finally
determine the correct tax bracket to which a newly introduced
sparkling wine/champagne shall be classified.
The proper tax classification of sparkling wines/champagnes, whether
registered before or after the effectivity of this Act, shall be
determined every two (2) years from the date of effectivity of this Act.
All sparkling wines/champagnes existing in the market at the time of
the effectivity of this Act shall be classified according to the net retail
prices and the tax rates provided above based on the latest price
survey of the sparkling wines/champagnes conducted by the Bureau
of Internal Revenue.
The methodology and all pertinent documents used in the conduct of
the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.
Manufacturers and importers of wines shall, within thirty (30) days
from the effectivity of this Act, and within the first five (5) days of every
month thereafter, submit to the Commissioner a sworn statement of
the volume of sales for each particular brand of wines sold at his
establishment for the three-month period immediately preceding.
Any manufacturer or importer who, in violation of this Section,
misdeclares or misrepresents in his or its sworn statement herein
required any pertinent data or information shall, upon final findings by
the Commissioner that the violation was committed be penalized by a
summary cancellation or withdrawal of his or its permit to engage in
business as manufacturer or importer of wines.
Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount
of deficiency taxes, surcharges and interest which may be assessed
pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under
this Section shall be criminally liable and penalized under Section 254
of this Code. Any person who willfully aids or abets in the commission
of any such act or omission shall be criminally liable in the same
manner as the principal. If the offender is not a citizen of the
Philippines, he
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
shall be deported immediately after serving the sentence, without
further proceedings for deportation.
Section 143. Fermented Liquors. – There shall be levied, assessed
and collected an excise tax on beer, lager beer, ale, porter and other
fermented liquors except tuba, basi, tapuy and similar fermented
liquors in accordance with the following schedule:
Effective on January 1, 2013
(a) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is Fifty pesos and sixty
centavos (PhP50.60) or less, the tax shall be Fifteen pesos (PhP15.
00) per liter; and
(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty pesos
and sixty centavos (PhP50.60), the tax shall be Twenty pesos (PhP20
.00) per liter.
Effective on January 1, 2014
(a) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is Fifty pesos and sixty
centavos (PhP50.60) or less, the tax shall be Seventeen pesos (
PhP17.00) per liter; and
(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty pesos
and sixty centavos (PhP50.60), the tax shall be Twenty-one pesos (
PhP21.00) per liter.
Effective on January 1, 2015
(a) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is Fifty pesos and sixty
centavos (PhP50.60) or less, the tax shall be Nineteen pesos (PhP19.
00) per liter; and
(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty pesos
and sixty centavos (PhP50.60), the tax shall be Twenty-two pesos (
PhP22.00) per liter.
Effective on January 1, 2016
(a) If the net retail price (excluding the excise tax and the
value added tax) per liter of volume capacity is Fifty pesos and sixty
centavos (PhP50.60) or less, the tax shall be Twenty-one pesos (
PhP21.00) per liter; and
(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty pesos
and sixty centavos (PhP50.60), the tax shall be Twenty-three pesos (
PhP23.00) per liter.
Effective on January 1, 2017, the tax on all fermented liquors shall be
Twenty-three pesos and fifty centavos (PhP23.50) per liter.
The rates of tax imposed under this Section shall be increased by four
percent (4%) every year thereafter effective on January 1, 2018,
through revenue regulations issued by the Secretary of Finance.
However, in case of fermented liquors affected by the ‘no downward
reclassification’ provision prescribed under this Section, the four
percent (4%) increase shah apply to their respective applicable tax
rates.
Fermented liquors which are brewed and sold at micro-breweries or
small establishments such as pubs and restaurants shall be subject to
the rate of Twenty-eight pesos (PhP28.00) per liter effective on
January 1, 2013: Provided, That this rate shall be increased by four
percent (4%) every year thereafter effective on January 1, 2014,
through revenue regulations issued by the Secretary of Finance.
Fermented liquors introduced in the domestic market after the
effectivity of this Act shall be initially tax classified according to their
suggested net retail prices.
‘Suggested net retail price’ shall mean the net retail price at which
locally manufactured or imported fermented liquor are intended by the
manufacturer or importer to be sold on retail in major supermarkets or
retail outlets in Metro Manila for those marketed nationwide, and in
other regions, for those with regional markets. At the end of three (3)
months from the product launch, the Bureau of Internal Revenue shall
validate the suggested net retail price of the newly introduced
fermented liquor against the net retail price as defined herein and
initially determine the correct tax bracket to which a newly introduced
fermented liquor, as defined above, shall be classified. After the end
of nine (9) months from such validation, the Bureau of Internal
Revenue shall revalidate the initially validated net retail price against
the net retail price as of the time of revalidation in order to finally
determine the correct tax bracket which a newly introduced fermented
liquor shall be classified.
‘Net retail price’ shall mean the price at which the fermented liquor is
sold on retail in at least five (5) major supermarkets in Metro Manila (
for brands of fermented liquor marketed nationally), excluding the
amount intended to cover the applicable excise tax and the value-
added tax. For brands which are marketed outside Metro Manila, the
‘net retail price’ shall mean the price at which the fermented liquor is
sold in at least five (5) major supermarkets in the region excluding the
amount intended to cover the applicable excise tax and the value-
added tax.
Major supermarkets, as contemplated under this Act, shall be those
with the highest annual gross sales in Metro Manila or the region, as
the case may be, as determined by the National Statistics Office, and
shall exclude retail outlets or kiosks, convenience or sari-sari stores,
and others of a similar nature: Provided, That no two (2)
supermarkets in the list to be surveyed are affiliated and/or branches
of each other: Provided, finally, That in case a particular fermented
liquor is not sold in major supermarkets, the price survey can be
conducted in retail outlets where said fermented liquor is sold in Metro
Manila or the region, as the case may be, upon the determination of
the Commissioner of Internal Revenue.
The net retail price shall be determined by the Bureau of Internal
Revenue (BIR) through a price survey under oath.
The methodology and all pertinent documents used in the conduct of
the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.
Understatement of the suggested net retail price by as much as
fifteen percent (15%) of the actual net retail price shall render the
manufacturer or importer liable for additional excise tax equivalent to
the tax due and difference between the understated suggested net
retail price and the actual net retail price.
Any downward reclassification of present categories, for tax purposes,
of fermented liquors duly registered at the time of the effectivity of this
Act which will reduce the tax imposed herein, or the payment thereof,
shall be prohibited.
The proper tax classification of fermented liquors, whether registered
before or after the effectivity of this Act, shall be determined every two
(2) years from the date of effectivity of this Act.
All fermented liquors existing in the market at the time of the effectivity
of this Act shall be classified according to the net retail prices and the
tax rates provided above based on the latest price survey of the
fermented liquors conducted by the Bureau of Internal Revenue.
The methodology and all pertinent documents used in the conduct of
the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

Every brewer or importer of fermented liquor shall, within thirty (30)
days from the effectivity of this Act, and within the first five (5) days of
every month thereafter, submit to the Commissioner a sworn
statement of the volume of sales for each particular brand of
fermented liquor sold at his establishment for the three-month period
immediately preceding.
Any brewer or importer who, in violation of this Section, misdeclares
or misrepresents in his or its sworn statement herein required any
pertinent data or information shall, upon final findings by the
Commissioner that the violation was committed, be penalized by a
summary cancellation or withdrawal of his or its permit to engage in
business as brewer or importer of fermented liquor.
Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount
of deficiency taxes, surcharges and interest which may be assessed
pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under
this Section shall be criminally liable and penalized under Section 254
of this Code. Any person who willfully aids or abets in the commission
of any such act or omission shall be criminally liable in the same
manner as the principal.
If the offender is not a citizen of the Philippines, he shall be deported
immediately after serving the sentence, without further proceedings
for deportation.
Tobacco products imported into the Philippines and destined for
foreign countries shall not be allowed entry without posting a bond
equivalent to the amount of customs duty, excise and value-added
taxes due thereon if sold domestically.
Manufacturers and importers of tobacco products shall, within thirty (
30) days from the effectivity of this Act, and within the first five (5)
days of every month thereafter, submit to the Commissioner a sworn
statement of the volume of sales for each particular brand of tobacco
products sold for the three-month period immediately preceding.
Any manufacturer or importer who, in violation of this Section,
misdeclares or misrepresents hi his or its sworn statement herein
required any pertinent data or information shall, upon final findings by
the Commissioner that the violation was committed, be penalized by a
summary cancellation or withdrawal of his or its permit to engage in
business as manufacturer or importer of cigars or cigarettes.
Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount
of deficiency taxes, surcharges and interest which may be assessed
pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under
this Section shall be criminally liable and penalized under Section 254
of this Code. Any person who willfully aids or abets in the commission
of any such act or omission shall be criminally liable in the same
manner as the principal.

Section 144. Tobacco Products. – There shall be collected an
excise tax of One peso and seventy-five centavos (PhP1.75) effective
on January 1, 2013 on each kilogram of the following products of
tobacco:
(a) Tobacco twisted by hand or reduced into a condition to be
consumed in any manner other than the ordinary mode of drying and
curing;
(b) Tobacco prepared or partially prepared with or without the use of
any machine or instruments or without being pressed or sweetened
except as otherwise provided hereunder; and
(c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and
sweepings of tobacco except as otherwise provided hereunder.
If the offender is not a citizen of the Philippines, he shall be deported
immediately after serving the sentence, without further proceedings
for deportation.
Section 145. Cigars and Cigarettes. – (A) Cigars. – There shall be
levied, assessed and collected on cigars an excise tax in accordance
with the following schedule:
(1) Effective on January 1, 2013
(a) An ad valorem tax equivalent to twenty percent (20%) of
the net retail price (excluding the excise tax and the value-added tax)
per cigar; and

Stemmed leaf tobacco, tobacco prepared or partially prepared with or

without the use of any machine or instrument or without being
pressed or sweetened, fine-cut shorts and refuse, scraps, clippings,
cuttings, stems, midribs, and sweepings of tobacco resulting from the
handling or stripping of whole leaf tobacco shall be transferred,
disposed of, or otherwise sold, without any prepayment of the excise
tax herein provided for, if the same are to be exported or to be used in
the manufacture of cigars, cigarettes, or other tobacco products on
which the excise tax will eventually be paid on the finished product,
under such conditions as may be prescribed in the rules and
regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.

On tobacco specially prepared for chewing so as to be unsuitable for

use in any other manner, on each kilogram, One peso and fifty
centavos (PhP1.50) effective on January 1, 2013. The rates of tax
imposed under this Section shall be increased by four percent (4%)
every year thereafter effective on January 1, 2014, through revenue
regulations issued by the Secretary of Finance.

No tobacco products manufactured in the Philippines and produced

for export shall be removed from their place of manufacture or
exported without posting of an export bond equivalent to the amount
of the excise tax due thereon if sold domestically: Provided, however,
That tobacco products for export may be transferred from the place of
manufacture to a bonded facility, upon posting of a transfer bond,
prior to export.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
(b) In addition to the ad valorem tax herein imposed, a specific tax of
Five pesos (PhP5.00) per cigar.
(2) In addition to the ad valorem tax herein imposed, the specific tax
rate of Five pesos (PhP5.00) imposed under this subsection shall be
increased by four percent (4%) effective on January 1, 2014 through
revenue regulations issued by the Secretary of Finance.
(B) Cigarettes Packed by Hand. – There shall be levied, assessed
and collected on cigarettes packed by hand an excise tax based on
the following schedules:
Effective on January 1, 2018 until June 30, 2018, Thirtytwo pesos and
fifty centavos (PhP32.50) per pack;
Effective on July 1, 2018 until December 31, 2019, Thirtyfive pesos (
PhP35.00) per pack;
Effective on January 1, 2020 until December 31, 2021, Thirty-seven
pesos and fifty centavos (PhP37.50) per pack; and
Effective on January 1, 2022 until December 31, 2023, Forty pesos (
PhP40.00) per pack.
The rates of tax imposed under this subsection shall be increased by
four percent (4%) every year effective on January 1, 2024, through
revenue regulations issued by the Secretary of Finance.
Duly registered cigarettes packed by hand shall only be packed in
twenties and other packaging combinations of not more than twenty.
‘Cigarettes packed by hand’ shall refer to the manner of packaging of
cigarette sticks using an individual person’s hands and not through
any other means such as a mechanical device, machine or equipment
. products. So what the government does is meron silang
(C) Cigarettes Packed by Machine. – There shall be levied, assessed
and collected on cigarettes packed by machine a tax at the rates
prescribed below:
Effective on January 1, 2018 until June 30, 2018, the tax on all
cigarettes packed by machine shall be Thirty-two pesos and fifty
centavos (PhP32.50) per pack;
Effective on July 1, 2018 until December 31, 2019, the tax on all
cigarettes packed by machine shall be Thirty-five pesos (PhP35.00)
per pack;
Effective on January 1, 2020 until December 31, 2021, the tax on all
cigarettes packed by machine shall be Thirtyseven pesos and fifty
centavos (PhP37.50) per pack; and
Effective on January 1, 2022 until December 31, 2023, the tax on all
cigarettes packed by machine shall be Forty pesos (PhP40.00) per
pack.
The rates of tax imposed under this Subsection shall be increased by
four percent (4%) every year thereafter effective on January 1, 2024,
through revenue regulations issued by the Secretary of Finance.
Section 146. Inspection Fee. – For inspection made in accordance
with this Chapter, there shall be collected a fee of Fifty centavos (
PhP0.50) for each thousand cigars or fraction thereof; Ten centavos (
PhP0.10) for each thousand cigarettes of fraction thereof; Two
centavos (PhP0.02) for each kilogram of leaf tobacco or fraction
thereof; and Three centavos (PhP0.03) for each kilogram or fraction
thereof, of scrap and other manufactured tobacco.
The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other
tobacco products as defined in Section 147 of this Code shall be paid
by the wholesaler, manufacturer, producer, owner or operator of
redrying plant, as the case may be, immediately before removal
thereof from the establishment of the wholesaler, manufacturer,
owner or operator of the redrying plant. In case of imported leaf
tobacco and products thereof, the inspection fee shall be paid by the
importer before removal from customs’ custody.
Fifty percent (50%) of the tobacco inspection fee shall accrue to the
Tobacco Inspection Fund created by Section 12 of Act No. 2613, as
amended by Act No. 3179, and fifty percent (50%) shall accrue to the
Cultural Center of the Philippines.
Section 147. Definition of Terms. – When used herein and in
statements or official forms prescribed hereunder, the following terms
shall have the meaning indicated:
(a) ‘Cigars’ mean all rolls of tobacco or any substitute thereof,
wrapped in leaf tobacco.
(b) ‘Cigarettes’ mean all rolls of finely-cut leaf tobacco, or any
substitute therefor, wrapped in paper or in any other material.
(c) ‘Wholesale price’ shall mean the amount of money or price paid for
cigars or cigarettes purchased for the purpose of resale, regardless of
quantity.
(d) ‘Retail price’ shall mean the amount of money or price which an
ultimate consumer or end-user pays for cigars or cigarettes
purchased.
EXCISE TAX ON PETROLEUM PRODUCTS
Remember when the barrel of the crude oil increased? There
was a suspension of the increase on excise taxes on oils, dito
siya galling. Amendment siya ng train , under manufactured
oil and other fuels.
Also a new provision, the mandatory marking of all petroleum
special chemical na nilalagay sa oil so that everytime you pay
excise tax on the oil or fuel, lalagyan ng chemical to make it
easier to determine whether yung oil nay un is paid na for its
excise taxes and to determine whether the oil is smuggled.
Section. 148–A. Mandatory Marking of All Petroleum Products. –
In accordance with rules and regulations to be issued by the
Secretary of Finance, in consultation with the Commissioner of
Internal Revenue and Commissioner of Customs and in coordination
with the Secretary of Energy, the Secretary of Finance shall require
the use of an official fuel marking or similar technology on petroleum
products that are refined, manufactured, or imported into the
Philippines, and that are subject to the payment of taxes and duties,
such as but not limited to, unleaded premium gasoline, kerosene, and
diesel fuel oil after the taxes and duties thereon have been paid. The
mandatory marking of all petroleum products shall be in accordance
with the following: XXX
Excise tax on miscellaneous articles
(“basahin niyo nalang” friend nose-lift story)
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

DOCUMENTARY STAMP TAX transfer. But in Debt instrument no DST in transfer na.

DST is in the nature of an excise tax because it is levied upon In the FILINVEST case, the BIR assessed FILINVEST for
the privileged to enter into transactions. DST is a tax on the DST on its advances (between or among related parties).
transaction. So kahit na it is tax on the document, the tax is Since such advances are between or among related parties
actually levied on the transaction. For now, It is important to hindi siya formal, evidenced lng siya by vouchers, or verbal
know that DST is a tax on the transaction. agreements by presidents of subsidiaries, but sa accounting
books mo hindi pwde verbal lng dapat may vouchers to
Who is liable for DST? evidence the transaction. In this case, the BIR assessed the
It depends upon the agreement of the parties. If exempt yung advances kahit na journal voucher lng siya kahit walang
isang party, the other party will be the one liable to pay the formal loan agreement. Filinvest contended that section 179 is
DST. If BOTH of the parties are exempt, the NO DST of limited to the debt instrument indicated or enumerated in the
course. But, I other cases it depends upon the agreement of provision. Notably, when you take a look at the provision no
the parties. informal documents like vouchers are included in the
enumeration. Lahat ng nandiyan puro formal documents. That
WHAT ARE THE TRANSACTION SUBJECT TO DST? was the argument of FILINVEST.
The amendments in cases of DST are mostly sa dates lng
and sa rates but in sa transactions subject to DST wala silang However, the Supreme Court said that since DST is
dinagdag or binawas. essentially a TAX on the transaction kahit na journal voucher
lng yan, DST may still be imposed. Yung ibang DST basahin
1. Stamp Taxes Upon Documents, Loan Agreements, niyo nalang. Siguro na neneglect is yung DST on GPA and
Instruments and Papers SPA. Actually the importance of DST is in case of failure to
2. Stamp Tax on Original Issue of Shares of Stock pay DST. Kasi pag walang DST ang isang document walang
3. Stamp Tax on Sales, Agreements to Sell, stamp ng DST ang isang document, you CANNOT USE IT AS
Memoranda of Sales, Deliveries or Transfer of EVIDENCE SA COURT. The court will automatically treat it as
Shares or Certificates of Stock a mere scrap of paper. So ifamiliarise tlga dapat ninyo kung
4. Stamp Tax on Bonds, Debentures, Certificates of ano yung kailangan ng DST.
Stock or Indebtedness Issued in Foreign Countries
5. Stamp Tax on Certificates of Profits or Interest in DOCUMENTS NOT SUBJECT TO DST
Property or Accumulations. Section 199 list documents that are not subject to DST.
6. Stamp Tax on Bank Checks, Drafts, Certificates of Basahin niyo nalang. Again medyo straightforward naman
Deposit not Bearing Interest, and Other Instruments. siya.
7. Stamp Tax on All Debt Instruments
8. Stamp Tax on All Bills of Exchange or Drafts Section 199. Documents and Papers Not Subject to Stamp Tax. –
The provisions of Section 173 to the contrary notwithstanding, the
9. Stamp Tax Upon Acceptance of Bills of Exchange
following instruments, documents and papers shall be exempt from
and Others the documentary stamp tax:
10. Stamp Tax on Foreign Bills of Exchange and Letters (a) Policies of insurance or annuities made or granted by a fraternal or
of Credit beneficiary society, order, association or cooperative company,
11. Stamp Tax on Life Insurance Policies operated on the lodge system or local cooperation plan and organized
12. Stamp Tax on Policies of Insurance Upon Property and conducted solely by the members thereof for the exclusive benefit
13. Stamp Tax on Fidelity Bonds and Other Insurance of each member and not for profit.
Policies
14. Stamp Tax on Policies of Annuities and Pre-Need (b) Certificates of oaths administered to any government official in his
Plans official capacity or of acknowledgment by any government official in
15. Stamp Tax on Indemnity Bonds. the performance of his official duties, written appearance in any court
16. Stamp Tax on Certificates by any government official, in his official capacity; certificates of the
17. Stamp Tax on Warehouse Receipts administration of oaths to any person as to the authenticity of any
paper required to be filed in court by any person or party thereto,
18. Stamp Tax on Jai-alai, Horse Race, Tickets, Lotto or
whether the proceedings be civil or criminal; papers and documents
Other Authorized Numbers Games
19. Stamp Tax on Bills of Lading or Receipts
20. Stamp Tax on Proxies
21. Stamp Tax on Powers of Attorney
22. Stamp Tax on Leases and Other Hiring Agreements
23. Stamp Tax on Mortgages, Pledges and Deeds of
Trust.
24. Stamp Tax on Deeds of Sale, Conveyances and
Donation of Real Property
25. Stamp Tax on Charter Parties and Similar
Instruments.
26. Stamp Tax on Assignments and Renewals of Certain
Instruments

DST ON DEBT INSTRUMENT

DST is only the original issue of Debt instruments. In contrast,
like bonds, certificate of stock, transfer of shares, DST is per

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

filed in courts by or for the national, provincial, city or municipal

governments; affidavits of poor persons for the purpose of proving
poverty; statements and other compulsory information required of
persons or corporations by the rules and regulations of the national,
provincial, city or municipal governments exclusively for statistical
purposes and which are wholly for the use of the bureau or office in
which they are filed, and not at the instance or for the use or benefit of
the person filing them; certified copies and other certificates placed
upon documents, instruments and papers for the national, provincial,
city or municipal governments, made at the instance and for the sole
use of some other branch of the national, provincial, city or municipal
governments; and certificates of the assessed value of lands, not
exceeding Two hundred pesos (PhP200) in value assessed, furnished
by the provincial, city or municipal Treasurer to applicants for
registration of title to land.

(c) Borrowing and lending of securities executed under the Securities

Borrowing and Lending Program of a registered exchange, or in
accordance with regulations prescribed by the appropriate regulatory
authority: Provided, however, That any borrowing or lending of
securities agreement as contemplated hereof shall be duly covered by
a master securities borrowing and lending agreement acceptable to
the appropriate regulatory authority, and which agreements is duly
registered and approved by the Bureau of Internal Revenue.

(d) Loan agreements or promissory notes, the aggregate of which

does not exceed Two hundred fifty thousand pesos (PhP250,000), or
any such amount as may be determined by the Secretary of Finance,
executed by an individual for his purchase on installment for his
personal use or that of his family and not for business or resale, barter
or hire of a house, lot, motor vehicle, appliance or furniture: Provided,
however, That the amount to be set by the Secretary of Finance shall
be in accordance with a relevant price index but not to exceed ten
percent (10%) of the current amount and shall remain in force at least
for three (3) years.

[(e) Sale, barter or exchange of shares of stock listed and traded

through the local stock exchange. (deleted)]

(f) Assignment or transfer of any mortgage, lease or policy of

insurance, or the renewal or continuance of any agreement, contract,
charter, or any evidence of obligation or indebtedness, if there is no
change in the maturity date or remaining period of coverage from that
of the original instrument.

(g) Fixed income and other securities traded in the secondary market
or through an exchange.

(h) Derivatives: Provided, That for purposes of this exemption,

repurchase agreements and reverse repurchase agreements shall be
treated similarly as derivatives.

(i) Interbranch or interdepartmental advances within the same legal

entity.

(j) All forbearances arising from sales or service contracts including

credit card and trade receivables: Provided, That the exemption be
limited to those executed by the seller or service provider itself.

(k) Bank deposit accounts without a fixed term or maturity.

(l) All contracts, deeds, documents and transactions related to the

conduct of business of the Bangko Sentral ng Pilipinas.

(m) Transfer of property pursuant to Section 40(c)(2) of the National

Internal Revenue Code of 1997, as amended.

(n) Interbank call loans with maturity of not more than seven (7) days
to cover deficiency in reserves against deposit liabilities, including
those between or among banks and quasibanks.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
RIGHTS AND REMEDIES OF THE
GOVERNMENT UNDER THE NIRC
JANUARY 21, 2020 | Transcribed by: Patricia Nicole Balgoa,
Carla Louise Bayquen & James Adrian Cagas
I. Rights and Remedies of the Government under the
NIRC
Section 5. Power of the Commissioner to Obtain Information,
and to Summon, Examine, and Take Testimony of Persons. – In
ascertaining the correctness of any return, or in making a return when
none has been made, or in determining the liability of any person for
any internal revenue tax, or in collecting any such liability, or in
evaluating tax compliance, the Commissioner is authorized:
(A) To examine any book, paper, record, or other data which may be
relevant or material to such inquiry;
(B) To obtain on a regular basis from any person other than the
person whose internal revenue tax liability is subject to audit or
investigation, or from any office or officer of the national and local
governments, government agencies and instrumentalities, including
the Bangko Sentral ng Pilipinas and government owned or -controlled
corporations, any information such as, but not limited to, costs and
volume of production, receipts or sales and gross incomes of
taxpayers, and the names, addresses, and financial statements of
corporations, mutual fund companies, insurance companies, regional
operating headquarters of multinational companies, joint accounts,
associations, joint ventures or consortia and registered partnerships,
and their members: Provided, That the Cooperative Development
Authority shall submit to the Bureau a tax incentive report, which shall
include information on the income tax, value-added tax, and other tax
incentives availed of by cooperatives registered and enjoying
incentives under Republic Act No. 6938, as amended: Provided,
further, That the information submitted by the Cooperative
Development Authority to the Bureau shall be submitted to the
Department of Finance and shall be included in the database created
under Republic Act No. 10708, otherwise known as ‘The Tax
Incentives Management and Transparency Act (TIMTA);
(C) To summon the person liable for tax or required to file a return, or
any officer or employee of such person, or any person having
possession, custody, or care of the books of accounts and other
accounting records containing entries relating to the business of the
person liable for tax, or any other person, to appear before the
Commissioner or his duly authorized representative at a time and
place specified in the summons and to produce such books, papers,
records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as
may be relevant or material to such inquiry; and
(E) To cause revenue officers and employees to make a canvass
from time to time of any revenue district or region and inquire after
and concerning all persons therein who may be liable to pay any
internal revenue tax, and all persons owning or having the care,
management or possession of any object with respect to which a tax
is imposed.
The provisions of the foregoing paragraphs notwithstanding, nothing
in this Section shall be construed as granting the Commissioner the
authority to inquire into bank deposits other than as provided for in
Section 6(F) of this Code.
Section 6. Power of the Commissioner to Make Assessments and
Prescribe Additional Requirements for Tax Administration and
Enforcement. –
(A) Examination of Return and Determination of Tax Due. —
After a return has been filed as required under the provisions of this
Code, the Commissioner or his duly authorized representative may
authorize the examination of any taxpayer and the assessment of the
correct amount of tax, notwithstanding any law requiring the prior
authorization of any government agency or instrumentality: Provided,
however, That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer.
The tax or any deficiency tax so assessed shall be paid upon notice
and demand from the Commissioner or from his duly authorized
representative.
Any return, statement of declaration filed in any office authorized to
receive the same shall not be withdrawn: Provided, That within three (
3) years from the date of such filing, the same may be modified,
changed, or amended: Provided, further, That no notice for audit or
investigation of such return, statement or declaration has in the
meantime been actually served upon the taxpayer.
(B) Failure to Submit Required Returns, Statements, Reports and
other Documents. –
When a report required by law as a basis for the assessment of any
national internal revenue tax shall not be forthcoming within the time
fixed by laws or rules and regulations or when there is reason to
believe that any such report is false, incomplete or erroneous, the
Commissioner shall assess the proper tax on the best evidence
obtainable.
In case a person fails to file a required return or other document at the
time prescribed by law, or willfully or otherwise files a false or
fraudulent return or other document, the Commissioner shall make or
amend the return from his own knowledge and from such information
as he can obtain through testimony or otherwise, which shall be prima
facie correct and sufficient for all legal purposes.
(C) Authority to Conduct Inventory-taking, Surveillance and to
Prescribe Presumptive Gross Sales and Receipts. –
The Commissioner may, at any time during the taxable year, order
inventory-taking of goods of any taxpayer as a basis for determining
his internal revenue tax liabilities, or may place the business
operations of any person, natural or juridical, under observation or
surveillance if there is reason to believe that such person is not
declaring his correct income, sales or receipts for internal revenue tax
purposes. The findings may be used as the basis for assessing the
taxes for the other months or quarters of the same or different taxable
years and such assessment shall be deemed prima facie correct.
When it is found that a person has failed to issue receipts and
invoices in violation of the requirements of Sections 113 and 237 of
this Code, or when there is reason to believe that the books of
accounts or other records do not correctly reflect the declarations
made or to be made in a return required to be filed under the
provisions of this Code, the
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Commissioner, after taking into account the sales, receipts, income or
other taxable base of other persons engaged in similar businesses
under similar situations or circumstances or after considering other
relevant information may prescribe a minimum amount of such gross
receipts, sales and taxable base, and such amount so prescribed
shall be prima facie correct for purposes of determining the internal
revenue tax liabilities of such person.
(D) Authority to Terminate Taxable Period. –
When it shall come to the knowledge of the Commissioner that a
taxpayer is retiring from business subject to tax, or is intending to
leave the Philippines or to remove his property therefrom or to hide or
conceal his property, or is performing any act tending to obstruct the
proceedings for the collection of the tax for the past or current quarter
or year or to render the same totally or partly ineffective unless such
proceedings are begun immediately, the Commissioner shall declare
the tax period of such taxpayer terminated at any time and shall send
the taxpayer a notice of such decision, together with a request for the
immediate payment of the tax for the period so declared terminated
and the tax for the preceding year or quarter, or such portion thereof
as may be unpaid, and said taxes shall be due and payable
immediately and shall be subject to all the penalties hereafter
prescribed, unless paid within the time fixed in the demand made by
the Commissioner.
(E) Authority of the Commissioner to Prescribe Real Property Values.-
The Commissioner is hereby authorized to divide the Philippines into
different zones or areas and shall, upon mandatory consultation with
competent appraisers both from the private and public sectors, and
with prior notice to affected taxpayers, determine the fair market value
of real properties located in each zone or area, subject to automatic
adjustment once every three (3) years through rules and regulations
issued by the Secretary of Finance based on the current Philippine
valuation standards: Provided, That no adjustment in zonal valuation
shall be valid unless published in a newspaper of general circulation
in the province, city or municipality concerned, or in the absence
thereof, shall be posted in the provincial capitol, city or municipal hall
and in two (2) other conspicuous public places therein: Provided,
further, That the basis of any valuation, including the records of
consultations done, shall be public records open to the inquiry of any
taxpayer. For purposes of computing any internal revenue tax, the
value of the property shall be, whichever is the higher of:
(1) the fair market value as determined by the Commissioner; or
(2) the fair market value as shown in the schedule of values of the
Provincial and City Assessors.
(F) Authority of the Commissioner to Inquire into Bank Deposit
Accounts and Other Related Information Held by Financial Institutions
.–
Notwithstanding any contrary provision of Republic Act No. 1405,
Republic Act No. 6426, otherwise known as the Foreign Currency
Deposit Act of the Philippines, and other general or special laws, the
Commissioner is hereby authorized to inquire into the bank deposits
and other related information held by financial institutions of:
(1) A decedent to determine his gross estate.
(2) Any taxpayer who has filed an application for compromise of his
tax liability under Section 204(A)(2) of this Code by reason of financial
incapacity to pay his tax liability.
In case a taxpayer files an application to compromise the payment of
his tax liabilities on his claim that his financial position demonstrates a
clear inability to pay the tax assessed, his application shall not be
considered unless and until he waives in writing his privilege under
Republic Act No. 1405, Republic Act No. 6426, otherwise known as
the Foreign Currency Deposit Act of the Philippines, or under other
general or special laws, and such waiver shall constitute the authority
of the Commissioner to inquire into the bank deposits of the taxpayer.
(3) A specific taxpayer or taxpayers subject of a request for the supply
of tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which the
Philippines is a signatory or a party of: Provided, That the information
obtained from the banks and other financial institutions may be used
by the Bureau of Internal Revenue for tax assessment, verification,
audit and enforcement purposes.
In case of a request from a foreign tax authority for tax information
held by banks and financial institutions, the exchange of information
shall be done in a secure manner to ensure confidentiality thereof
under such rules and regulations as may be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
The Commissioner shall provide the tax information obtained from
banks and financial institutions pursuant to a convention or agreement
upon request of the foreign tax authority when such requesting foreign
tax authority has provided the following information to demonstrate
the foreseeable relevance of the information to the request:
(a) The identity of the person under examination or investigation;
(b) A statement of the information being sought including its nature
and the form in which the said foreign tax authority prefers to receive
the information from the Commissioner;
(c) The tax purpose for which the information is being
sought;
(d) Grounds for believing that the information requested is held in the
Philippines or is in the possession or control of a person within the
jurisdiction of the Philippines;
(e) To the extent known, the name and address of any person
believed to be in possession of the requested information;
(f) A statement that the request is in conformity with the law and
administrative practices of the said foreign tax authority, such that if
the requested information was within the jurisdiction of the said
foreign tax authority then it would be able to obtain the information
under its laws or in the normal course of administrative practice and
that it is conformity with a convention or international agreement; and
(g) A statement that the requesting foreign tax authority has
exhausted all means available in its own territory to obtain the
information, except those that would give rise to disproportionate
difficulties.
The Commissioner shall forward the information as promptly as
possible to the requesting foreign tax authority.
To ensure a prompt response, the Commissioner shall confirm receipt
of a request in writing to the requesting tax authority and shall notify
the latter of deficiencies in the request, if any, within sixty (60) days
from the receipt of the request.
If the Commissioner is unable to obtain and provide the information
within ninety (90) days from the receipt of the request, due to
obstacles encountered in furnishing the information or when the bank
or financial institution refuses to furnish the information, he shall
immediately inform the requesting tax authority of the same,
explaining the nature of the obstacles encountered or the reasons for
refusal.
The term ‘foreign tax authority’, as used herein, shall refer to the tax
authority or tax administration of the requesting State under the tax
treaty or convention to which the Philippines is a signatory or a party
of.
(G) Authority to Accredit and Register Tax Agents. –
The Commissioner shall accredit and register, based on their
professional competence, integrity and moral fitness, individuals and
general professional partnerships and their representatives who
prepare and file tax returns, statements, reports, protests, and other
papers with or who appear before, the Bureau for taxpayers.
Within one hundred twenty (120) days from January 1, 1998, the
Commissioner shall create national and regional accreditation boards,
the members of which shall serve for three (3) years, and shall
designate from among the senior officials of the Bureau, one (1)
chairman and two (2) members for each board, subject to such rules
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

and regulations as the Secretary of Finance shall promulgate upon
the recommendation of the Commissioner.
Individuals and general professional partnerships and their
representatives who are denied accreditation by the Commissioner
and/or the national and regional accreditation boards may appeal
such denial to the Secretary of Finance, who shall rule on the appeal
within sixty (60) days from receipt of such appeal. Failure of the
Secretary of Finance to rule on the Appeal within the prescribed
period shall be deemed as approval of the application for
accreditation of the appellant.
(H) Authority of the Commissioner to Prescribe Additional Procedural
or Documentary Requirements. –
The Commissioner may prescribe the manner of compliance with any
documentary or procedural requirement in connection with the
submission or preparation of financial statements accompanying the
tax returns.
Our topic today is about sections 5 and 6 of the Tax Code.
From these 2 sections, we can learn that medyo maraming
powers ang commissioner of internal revenue. Siguro the
broader classification is first, his power to interpret tax laws
and tax provisions that are subject to review by the Secretary
of Finance. Second, the power to decide disputed
assessments refunds, and all the powers that are collateral to
that general power. Example, the power to obtain information.
This power—the power to decide disputed assessments,
refunds, and other matters—is subject to the exclusive
appellate jurisdiction of the Court of Tax Appeals. So dalawa
yan, ang classification of the powers of the Commissioner of
Internal Revenue.
A. Power of the BIR to obtain information and make an
assessment
• Investigative Authority
• Power to Make Assessment
Q: When do we FILE an Income Tax Return?
A: April 15
Q: Why is there a need for tax authorities to determine
correctness?
A: It is because usually may mga mistakes. Even if, for
example, the taxpayer is in good faith, they believe
wholeheartedly na wala silang mali sa paf-file nila or sap ag-
declare nila ng income or sap ag-compute nila ng expenses
and taxes. The tax authorities also need to check on
underdeclarations or no declarations.
GENERAL STAGES OF TAX COLLECTION:
1. Self-assessment
2. Audit and Investigation
-BIR will obtain information and will check the tax
returns for any mistake.
Q: How does the BIR know kung anong mga returns
ang e che-check nila for correctness?
A: Usually there is a BIR Audit Program. It provides
for a list of qualifications of the taxpayer to prioritize
in assessing taxes. For example, in Kim Henares’
time, she had a policy that every Thursday, they
would file a criminal case against tax evaders before
the DOJ. Her targets were high profile taxpayers like
celebrities. Certain factors are taken into
consideration. For example, large taxpayers, are
usually subject to audit. I’m not sure of the specific
parameters, but I had a client before who was a large
taxpayer and she had a BIR audit for years 2010 and
2011, but wala sa 2012, because I think hindi
pwedeng 3 consecutive years. So 2013 and 2014,
wala sa 2015, 2016 and 2017, so ganun siya pag
large taxpayer. Dito yata sa Davao, since ka ka-open
lang ng large taxpayers [division] ng BIR, I think
medyo ‘booming’ ang tax practice. So nagkaroon ng
ma maraming problema ang business owners.
3. Assessment
-BIR issues findings and report. In this stage, stricter
procedural compliance is required of the BIR. There
is

Q: If the taxpayer follows the fiscal year?

A: It should be filed on the 15th day of the 4th month following
the close of the taxable year.

Q: When do you PAY your income tax?

A: Same as the date of filing, because we follow the pay-as-
you-file system.

Once you file your income tax return and pays the income tax
due, walang kinalaman ang BIR. There is as yet no
interference from the BIR, because we have what we a call a
self-assessment system. So the taxpayer assesses himself,
for example, if a particular item is income or not, or whether a
particular sale is VAT-taxable or not. The taxpayer determines
and calculates for itself kung magkano ang tax due niya and
then it files for itself. The BIR, at this stage, will have no
involvement at all.

Q: When does the BIR involve itself?

A: It involves itself pag na file na ng taxpayer ang kanyang
income tax return. The BIR will now have the power to obtain
information and/or make assessments. Bale, e che-check ng
BIR kung ‘yung return na fi-nile mo is tam aba. It will check on
whether it is mathematically correct, whether it is substantively
correct.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
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also a certain number of days that you have to
observe in order, for example, for the BIR to attain
jurisdiction, or to effectively appeal.
4. Collection
Under the second stage (Audit and Investigation), dito
papasok ang powers ni BIR under sections 5 and 6.
Q: What are the powers of the BIR?
A: [Read Sections 5 and 6]
Section 5 (C): “To summon the person liable for tax or
required to file a return, or any officer or employee of such
person, or any person having possession, custody, or care of
the books of account.” The BIR is empowered to summon the
taxpayer, the officers or employees of the taxpayer, and bring
the pertinent book of accounts, the accounting records, and
basically any information that the BIR wants, as long as it
pertains to the audit, provided that BIR issues a subpoena
duces tecum or a proof for that purpose. There is also a
third-party summons. Meaning, the BIR could summon not
only the taxpayer, but could also summon third parties. As
long as it is connected to the tax audit, the BIR may obtain
information from third parties to cross-check the information
presented or disclosed by the taxpayer. For example, the VAT
payments of the taxpayer may be cross-checked against the
records of Customs. I’ve also mentioned that there is what we
call a summary list of sales and purchases where the sales
and purchases of taxpayers are listed. Ang sale ko, as a
taxpayer, meaning merong nag-purchase. Ang customer ko,
meron din siyang summary ng list of purchases. The BIR
could actually cross-check these 2 lists and see if the
declared amounts coincide.
LETTER OF AUTHORITY
What usually triggers an investigation is a letter of authority (
LA). This LA is addressed to the president of the corporation-
taxpayer or any of its officer. This is important because
without an LA, a BIR officer cannot, under any circumstance
at all, examine the books of a taxpayer. Marami na kasing
naloko nito before, lalo na sa mga far-flung areas na may
malalaking taxpayer. BIR officers would go these businesses
and identifies themselves as BIR officers, asks to check their
books, and then asks the taxpayers for money so that the BIR
would not file a case against them. This is why the BIR
required the issuance of an LA. This LA is issued directly by
the system. Thus, it is not really manually signed. This LA
states who are authorized to issue. So hindi pwede na kahit
na sinong BIR officer pwedeng pumunta sa taxpayer then
audit and examine the books. Kung sino ang nakasulat sa LA,
yun lang sila ang pwedeng mag-examine. This will also
provide for the specific taxable year to be examined. If, for
example, what was written in the LA is the taxable year 2019,
so the BIR officers are not allowed to look at the 2018 books.
The taxpayer could also verify kung sino ang mga people na
nakasulat sa LA. The taxpayer could also verify the
authenticity of the LA. Moreover, when BIR officers go to the
premises of the taxpayer, the latter could actually require
identification from the BIR.
Obviously, kailangan ng examination of returns kasi dito
makikita kung magkano ang tax due and kung magkano ang
deficiency.
Informer’s Reward
MERALCO vs Savellano
G.R. No. L-36181 October 23, 1982
Facts:
⁃ Maniago submitted to the CIR confidential denunciation
against the Meralco Securities Corporation for tax evasion
for having paid income tax only on 25 % of the dividends it
received from the Manila Electric Co. for the years 1962-
1966, thereby allegedly shortchanging the government of
income tax due from 75% of the said dividends.
⁃ The Commissioner accordingly rejected Maniago's
contention that the Meralco from whom the dividends were
received is "not a domestic corporation liable to tax under
this Chapter." Commissioner informed Maniago denied
Maniago's claim for informer's reward on a non-existent
deficiency. This action of the Commissioner was sustained
by the Secretary of Finance.
⁃ On August 28, 1970, Maniago filed a petition for
mandamus, and subsequently an amended petition for
mandamus, in the CFI of Manila, against the Commissioner
of Internal Revenue and the Meralco Securities Corporation
to compel the Commissioner to impose the alleged
deficiency tax assessment on the Meralco Securities
Corporation and to award to him the corresponding informer'
s reward under the provisions of R.A. 2338.
⁃ MERALCO interposed as special and/or affirmative
defenses that the petition states no cause of action, that the
action is premature, that mandamus win not lie to compel
the Commissioner of Internal Revenue to make an
assessment and/or effect the collection of taxes upon a
taxpayer, that since no taxes have actually been recovered
and/or collected, Maniago has no right to recover the reward
prayed for, that the action of petitioner had already
prescribed and that respondent court has no jurisdiction
over the subject matter as set forth in the petition, the same
being cognizable only by the Court of Tax Appeals.

Section 5 (E): “To cause revenue officers and employees to

make a canvass from time to time of any revenue district or
region…” is also referred to as tax-mapping.

Section 6 (A): “Examination of Return and Determination of Tax Due

.”

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
⁃ On January 10, 1973, the respondent judge rendered
a decision granting the writ prayed for and ordering the
Commissioner of Internal Revenue to assess and collect
from the Meralco Securities Corporation the sum of P51,840
,612.00 as deficiency corporate income tax for the period
1962 to 1969 plus interests and surcharges due thereon and
to pay 25% thereof to Maniago as informer's reward.
Issue: Whether or not the CFI of Manila has jurisdiction over
the subject matter of the case? No
Ruling: Since the office of the Commissioner of Internal
Revenue is charged with the administration of revenue laws,
which is the primary responsibility of the executive branch of
the government, mandamus may not lie against the
Commissioner to compel him to impose a tax assessment not
found by him to be due or proper for that would be tantamount
to a usurpation of executive functions. Such discretionary
power vested in the proper executive official, in the absence
of arbitrariness or grave abuse so as to go beyond the
statutory authority, is not subject to the contrary judgment or
control of others.
If the taxpayer would like to appeal, the proper remedy is
before the Court of Tax Appeals.
Q: Why is there no income tax deficiency?
A: The dividends which were received by MERALCO was not
subject to tax.
Discussion:
Here, Savellano really wanted to have a reward.
CIR vs Fitness by Design
G.R. No. 215957, November 09, 2016
Facts:
⁃ On June 9, 2004, Fitness received a copy of the Final
Assessment Notice dated March 17, 2004 for the year
1995 (ITR filed in1996).
⁃ Fitness filed a protest to the Final Assessment Notice
saying that the Commissioner's period to assess had
already prescribed.
⁃ Fitness filed before the First Division of the Court of Tax
Appeals a Petition for Review.
⁃ Fitness claimed that its right to assess had not yet
prescribed under Section 222(a) of the National Internal
Revenue Code. Because the 1995 Income Tax Return filed
by Fitness was false and fraudulent for its alleged intentional
failure to reflect its true sales, Fitness' respective taxes may
be assessed at any time within 10 years from the discovery
of fraud or omission.
⁃ The Commissioner denied that there was a protest to
the Final Assessment Notice filed by Fitness. Therefore,
the Commissioner had sufficient basis to collect the tax
deficiency through the Warrant of Distraint and/or Levy.
⁃ The alleged fraudulent return was discovered through a
tip from a confidential informant. The revenue officers'
investigation revealed that Fitness had been operating
business with sales operations amounting to P7,156,336.08
in 1995, which it neglected to report in its ITR.
⁃ Fitness' failure to report its income resulted in deficiencies to
its income tax and value-added tax, as well as the
documentary stamp tax with regard to capital stock
subscription. Through the report, the revenue officers
recommended the filing of a civil case for collection of
taxes and a criminal case for failure to declare Fitness'
purported sales in its 1995 Income Tax Return. Hence, a
criminal complaint against Fitness was filed before the
Department of Justice. The Court of Tax Appeals First
Division granted Fitness' Petition on the ground that the
assessment has already prescribed.
⁃ The Commissioner filed an appeal before the Court of Tax
Appeals En Banc. The Commissioner asserted that it had
10 years to make an assessment due to the fraudulent
income tax return filed by Fitness.
⁃ The Court of Tax Appeals En Banc ruled in favor of
Fitness. Hence, the Commissioner of Internal Revenue filed
before this Court a Petition for Review.
Issue: Whether the Final Assessment Notice issued against
respondent Fitness by Design, Inc. is a valid assessment
under Section 228 of the National Internal Revenue Code and
Revenue Regulations No. 12-99.—NO.
Ruling: It failed to comply with Section 228.
The prescriptive period in making an assessment
depends upon whether a tax return was filed or whether
the tax return filed was either false or fraudulent. The
prescriptive period in making an assessment depends upon
whether a tax return was filed or whether the tax return filed
was either false or fraudulent. When a tax return that is
neither false nor fraudulent has been filed, the Bureau of
Internal Revenue may assess within three (3) years, reckoned
from the date of actual filing or from the last day prescribed by
law for filing.
However, in case of a false or fraudulent return with intent to
evade tax, Section 222(a) provides:
Exceptions as to Period of Limitation of Assessment and
Collection of Taxes. - (a) In the case of a false or fraudulent
return with intent to evade tax or of failure to file a return, the
tax may be assessed, or a proceeding in court for the
collection of such tax may be filed without assessment, at any
time within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment
which has become final and executory, the fact of fraud shall
be judicially taken cognizance of in the civil or criminal action
for the collection thereof.
Q: Where did the Commissioner get its information?
A: From a confidential informant.
Q: Was it confirmed by the taxpayer Fitness by Design?
A: The FAN just mentioned the facts and bases. However, it
didn’t mention anything about fraud.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Q: Regarding Fraud
A: If you claim that a fraudulent return was filed, the facts on
which the fraud was based post be communicated and
alleged.
Q: What are the requirements for an informer to have a
reward? Based on the provision.
A: Information shall not refer to a case already pending or
previously investigated or examined by the Commissioner or
any of his deputies, agents or examiners, or the Secretary of
Finance or any of his deputies or agents.
The informer must not be an internal revenue official or
employee, or other public official or employee, or his relative
within the sixth
degree of consanguinity.
Q: How much will the reward be?
A: A sum equivalent to ten percent (10%) of the revenues,
surcharges or fees recovered and/or fine or penalty imposed
and collected or One Million Pesos (P1,000,000) per case,
whichever is lower.
Discussion: This case would have been a good opportunity
for the Supreme Court to rule in an important issue. In this
case the information was given by maybe a disgruntled
employee (the accountant of Fitness by Design).
The President of Fitness by Design said that the information
was illegally obtained. If the SC ruled on the matter, we
could’ve had jurisprudence on that.
In other jurisdictions just like in Germany, there can be
illegally obtained information. The CEO in the Deutsches (not
sure about the spelling) case, he has money placed in other
jurisdictions because Germany is strict with regard to such
funds. But even if he placed it in other jurisdictions, there’s an
employee in such bank that sold that information to Germany.
The Germany was able to examine and investigate and found
that there were really illegally obtained funds by the top
company officers including Deutsches. It resulted into a
scandal causing the CEO to Resign.
Here in the Philippines, at most we can use is the
Constitutional right against searches and seizure (if
government official). But what about if the information was
obtained by a private citizen, what will happen? Grey area
siya.
Power to Make Assessment
Examination of returns- obviously it must be examined.
Failure to submit required returns, statements, reports
and other documents
The BIR is empowered to use the best evidence obtainable.
BEST EVIDENCE OBTAINABLE
For the taxpayer to present their books of account for
examination for the taxable years that is involved in the
proceeding.
If they would not comply the commissioner has the power to
examine such books.
Discussion: It is used when the taxpayer refuses to
cooperate. A tax audit is adversarial. Meaning the taxpayer
and the BIR inherently have an adverse interest. Even if it is
adversarial the taxpayer is expected to cooperate with the BIR
. If BIR asks for documents, it is expected that such will be
produced by the taxpayer.
Some taxpayers are belligerent; refuses to coordinate and talk
to BIR officials. Such in the case of Sy Po.
Sy Po vs. CTA
G.R. No. 81446, August 18, 1988
Facts:
⁃ Petitioner Po Bien Sing died. He was engaged in business
of manufacture and sale of compounded liquors.
⁃ On the basis of a denunciation against Silver Cup allegedly "
for tax evasion amounting to millions of pesos" the then
Secretary of Finance directed the Finance-BIR-NBI team to
conduct the corresponding investigation.
⁃ Accordingly, a letter and a subpoena duces tecum were
issued against Silver Cup requesting production of the
accounting records and other related documents for the
examination of the team.
⁃ However, they were not able to present such.
⁃ The commissioner issued a request for examination
purposes and had an investigation to see whether the
alleged fraudulent activities of Silver Cup was indeed
happening.
⁃ On the basis of the team's report of investigation, the CIR
assessed Mr. Po Bien Sing deficiency income tax
Comments:
The best evidence obtainable rule refers to the power of the
commissioner to use whatever is available. In that case
tiningnan nya yung mga inventory ng taxpayer so yun yung
ginamit nya.
Sa experience ko when the CIR uses the best evidence
obtainable usually talaga floated yung amount nya. But is it
wrong kahit na bloated sya to use the best evidence
obtainable? No di ba because it is the taxpayers own fault to
prevent the BIR from using the evidence obtainable just give
them the books just give them the documents, or data they
are requesting kasi magamit mo lang yung best evidence
obtainable rule pag the taxpayer refuses to cooperate with the
BIR.
Inventory Takings, Surveillance yun yung SY PO vs CTA yun
nagconduct din ng inventory taking si BIR in that case so it
may order inventory taking it may also survey the place like
tingnan nya kung ilan ang customers mo, tapos average
customers tapos i timex 12 parang ganun.
The BIR is empowered to do such things also termination of
taxable period.
MAAM: when can the BIR terminate the taxable period?
STUDENT: There are 3 instances maam:
1.) When it comes to the knowledge of the BIR that the
taxpayer is retiring his business subject to tax.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
2.) If the taxpayer is intending to leave the Philippines.
3.) If the Taxpayer is concealing its property for tax purposes.
The BIR can terminate the tax period and send a notice and
request for another payment of the tax.
MAAM: prescribing the zonal values also is the power of the
commissioner. AQUAFRESH?
AQUAFRESH vs CTA
Facts:
Aqua fresh sold to Philip seafoods 2 parcels of land for 3.1
Million so it filed a Capital Gains Tax return and application for
certification of registration and paid the amount of 186k
representing the capital gains tax and also for DST amounting
to 46,500. The BIR received a report that the land sold were
undervalued. The BIR said that the lot had a value of 2000
per sq meter however in here it was only declared for 650 per
sq meter and according to aquafresh this was based on the
revised zonal values of real property in the City of Roxas with
a zonal value of 650 pesos per sq meter. The argument of
CIR here that the consultation between competent appraiser
is real property values is mandatory when formulation or
changes is made in the scheduled zonal values
Issue: Whether the fair market value based on the zonal
value of residential land should be applied as tax base for
computing the capital gains tax and DST.
The 2 lots were originally classified as residential lots by the
revised zonal values of real property in the CITY of Roxas.
However, the commissioner classified these lots as
commercial.
Ruling:
While the CIR has the authority to prescribe zonal values for
real property and divide into zones the law is clear on the
procedure on how it is done. There must be prior consultation
with competent appraisers both form the public and the
private sectors. Furthermore, there are other requirements like
for example the publication in the newspaper of general
circulation and in the absence of that the posting in the
provincial/municipal hall and then conspicuous public places.
In this case, these were not complied by the BIR. The BIR
here had ceded its authority given by the NIRC as it did not
comply with the requisites of the law on reclassifying zonal
values.
COMMENTS: All internal revenue taxes di ba of the same
days pag real property yung pinaguusapan the Gross selling
price of the fair market value whichever is higher. The CIR
may prescribe the Fair Market Value of real properties only
upon consultation with both public and private sector.
RATIONALE:
In the case of Aquafresh hndi pwede ireclassify to residential
to commercial and commercial to residential because it
breeds corruption pag may discretion yung BIR officers to
change the FMV of the property or to reclassify the property
from one classification to another.
Usually mas mataas ang zonal value ng BIR because pag sa
City hall usually merong political process happening behind
parang mas mababa sya kasi for election purposes.
PROTESTING OF AN ASSESSMENT
JANUARY 30, 2020 | Transcribed by: Mark Virgilio, Kristal
Alaban & Ana Altiso
So as pointed out by Mr. Lagat last meeting, yung inquiry as
to bank deposits and accreditation of tax agents, I think
amended na sila kasi hindi sila kasama sa TRAIN.
So now, let us proceed to protesting of an assessment.
If may makitang discrepancy si BIR, ano pwede niyang gawin
? According to RR 7-2018,
1. The Revenue Officer assigned to the case should inform
the taxpayer of his right to an informal conference. There is a
notice of informal conference. This is like a document
informing a taxpayer of deficiency. This gives a taxpayer the
opportunity to give his defense and explanations to the BIR. 
2. The conference must not extend beyond 30 days from
receipt of the notice.
3. After this conference happens and the BIR determines
deficiency, then the RDO must forward the case to the
Regional Office (BIR).
4. After the elevation of the case to the Region, the latter now
issues the PAN. This PAN is only preliminary and not the
notice contemplated by the tax code. 
5. After the PAN, the taxpayer has 15 days to reply but he
may not make a reply kasi nga this is not the legal notice
required by the law. So kahit hindi nag reply, the BIR still has
to send a FAN.
Q: What are the exceptions to the issuance of the
preliminary assessment notice?
SEC. 228. Protesting of Assessment. - When the Commissioner or
his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a pre-assessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on
the face of the return; or
(b) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding
agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of
excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding taxable year; or
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

(d) When the excise tax due on excisable articles has not been paid;
or
(e) When the article locally purchased or imported by an exempt
person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred
to non-exempt persons.
xxx
Maam: on (d): Excise Taxes lang kasi ang sanctioned dyan is
smuggled goods.
In all other cases, kailangan ng PAN otherwise, denial of due
process by the BIR and the assessment will be declared void.
3.1 Mode of procedure in the issuance of a deficiency tax
assessment:
3.1.1 Preliminary Assessment Notice (PAN). — If after review and
evaluation by the Commissioner or his duly authorized representative,
as the case may be, it is determined that there exists sufficient basis
to assess the taxpayer for any deficiency tax or taxes, the said Office
shall issue to the taxpayer a Preliminary Assessment Notice (PAN) for
the proposed assessment. It shall show in detail the facts and the law,
rules and regulations, or jurisprudence on which the proposed
assessment is based (see illustration in ANNEX “A” hereof).
If the taxpayer fails to respond within fifteen (15) days from date of
receipt of the PAN, he shall be considered in default, in which case, a
Formal Letter of Demand and Final Assessment Notice (FLD/FAN)
shall be issued calling for payment of the taxpayer's deficiency tax
liability, inclusive of the applicable penalties.

CONT…
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be
void.
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
If the taxpayer, within fifteen (15) days from date of receipt of the PAN
, responds that he/it disagrees with the findings of deficiency tax or
taxes, an FLD/FAN shall be issued within fifteen (15) days from
filing/submission of the taxpayer’s response, calling for payment of
the taxpayer's deficiency tax liability, inclusive of the applicable
penalties.

Such assessment may be protested administratively by filing a

request for reconsideration or reinvestigation within thirty (30) days
from receipt of the assessment in such form and manner as may be
prescribed by implementing rules and regulations. Within sixty (60)
days from filing of the protest, all relevant supporting documents shall
have been submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within

one hundred eighty (180) days from submission of documents, the
taxpayer adversely affected by the decision or inaction may appeal to
the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of one hundred eighty (180)-day
period; otherwise, the decision shall become final, executory and
demandable.

After the issuance of the PAN and after the reply by the
taxpayer or wala mang reply by the taxpayer, the BIR should
issue the Final Assessment Notice (FAN) and Formal
Letter of Demand (FLD). Itong FAN, this is the assessment
meant by the Tax Code and this must contain the legal and
factual basis of the assessment. The prescriptive period, it is
important to distinguish between PAN and FAN because
prescription is reckoned from the PAN. Also, the Fan triggers
the administrative machinery. Appeal process, sa FAN sa
nagsisimula and hindi sa PAN.

After the issuance of the FAN, the taxpayer should reply;

otherwise the assessment shall be final and executory. The
taxpayer shall reply within 30 days. It could be either a
request for reconsideration or reinvestigation. In case of
reinvestigation, the taxpayer shall be given 60 days to file its
supporting documents. After the 60 day period, there will be a
final decision on the disputed assessment si BIR, the taxpayer
can now appeal to the CA.

R.R. 12-99 as amended by R.R. 18-2013:

SECTION 3. Due Process Requirement in the Issuance of a

Deficiency Tax Assessment. —

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
3.1.2 Exceptions to Prior Notice of the Assessment. — Pursuant
to Section 228 of the Tax Code, as amended, a PAN shall not be
required in any of the following cases:
(i)  When the finding for any deficiency tax is the
result of mathematical error in the computation of the tax
appearing on the face of the tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined
between the tax withheld and the amount actually remitted by the
withholding agent; or
(iii) When a taxpayer who opted to claim a refund or
tax credit of excess creditable withholding tax for a taxable period
was determined to have carried over and automatically applied
the same amount claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding taxable year; or
(iv) When the excise tax due on excisable articles
has not been paid; or
(v) When an article locally purchased or imported by
an exempt person, such as, but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
In the above-cited cases, a FLD/FAN shall be issued outright.
3.1.3 Formal Letter of Demand and Final Assessment Notice (
FLD/FAN). — The Formal Letter of Demand and Final Assessment
Notice (FLD/FAN) shall be issued by the Commissioner or his duly
authorized representative. The FLD/FAN 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 assessment shall be void (see illustration in ANNEX
“B” hereof).
3.1.4 Disputed Assessment. — The taxpayer or its authorized
representative or tax agent may protest administratively against
the aforesaid FLD/FAN within thirty (30) days from date of
receipt thereof. The taxpayer protesting an assessment may file
a written request for reconsideration or reinvestigation defined as
follows:
(i) Request for reconsideration — refers to a plea of re-evaluation of
an assessment on the basis of existing records without need of
additional evidence. It may involve both a question of fact or of law or
both.
(ii)Request for reinvestigation — refers to a plea of re-evaluation of an
assessment on the basis of newly discovered or additional evidence
that a taxpayer intends to present in the reinvestigation. It may also
involve a question of fact or of law or both.
The taxpayer shall state in his protest (i) the nature of protest whether
reconsideration or reinvestigation, specifying newly discovered or
additional evidence he intends to present if it is a request for
reinvestigation, (ii) date of the assessment notice, and (iii) the
applicable law, rules and regulations, or jurisprudence on which his
protest is based, otherwise, his protest shall be considered void and
without force and effect.
If there are several issues involved in the FLD/FAN but the taxpayer
only disputes or protests against the validity of some of the issues
raised, the assessment attributable to the undisputed issue or issues
shall become final, executory and demandable; and the taxpayer shall
be required to pay the deficiency tax or taxes attributable thereto, in
which case, a collection letter shall be issued to the taxpayer calling
for payment of the said deficiency tax or taxes, inclusive of the
applicable surcharge and/or interest.
If there are several issues involved in the disputed assessment and
the taxpayer fails to state the facts, the applicable law, rules and
regulations, or jurisprudence in support of his protest against some of
the several issues on which the assessment is based, the same shall
be considered undisputed issue or issues, in which case, the
assessment attributable thereto shall become final, executory and
demandable; and the taxpayer shall be required to pay the deficiency
tax or taxes attributable thereto and a collection letter shall be issued
to the taxpayer calling for payment of the said deficiency tax, inclusive
of the applicable surcharge and/or interest.
For requests for reinvestigation, the taxpayer shall submit all relevant
supporting documents in support of his protest within sixty (60) days
from date of filing of his letter of protest, otherwise, the assessment
shall become final. The term “relevant supporting documents” refer to
those documents necessary to support the legal and factual bases in
disputing a tax assessment as determined by the taxpayer. The sixty (
60)-day period for the submission of all relevant supporting
documents shall not apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall
mean the taxpayer is barred from disputing the correctness of the
issued assessment by introduction of newly discovered or additional
evidence, and the FDDA shall consequently be denied. If the taxpayer
fails to file a valid protest against the FLD/FAN within thirty (30) days
from date of receipt thereof, the assessment shall become final,
executory and demandable. No request for reconsideration or
reinvestigation shall be granted on tax assessments that have already
become final, executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner’s
duly authorized representative, the taxpayer may either: (i) appeal to
the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision; or (ii) elevate his protest through request
for reconsideration to the Commissioner within thirty (30) days from
date of receipt of the said decision. No request for reinvestigation
shall be allowed in administrative appeal and only issues raised in the
decision of the Commissioner’s duly authorized representative shall
be entertained by the Commissioner.
If the protest is not acted upon by the Commissioner’s duly authorized
representative within one hundred eighty (180) days counted from the
date of filing of the protest in case of a request reconsideration; or
from date of submission by the taxpayer of the required documents
within sixty (60) days from the date of filing of the protest in case of a
request for reinvestigation, the taxpayer may either: (i) appeal to the
CTA within thirty (30) days after the expiration of the one hundred
eighty (180)-day period; or (ii) await the final decision of the
Commissioner’s duly authorized representative on the disputed
assessment.
If the protest or administrative appeal, as the case may be, is denied,
in whole or in part, by the Commissioner, the taxpayer may appeal to
the CTA within thirty (30) days from date of receipt of the said
decision. Otherwise, the assessment shall become final, executory
and demandable. A motion for reconsideration of the Commissioner’s
denial of the protest or administrative appeal, as the case may be,
shall not toll the thirty (30)-day period to appeal to the CTA.
If the protest or administrative appeal is not acted upon by the
Commissioner within one hundred eighty (180) days counted from the
date of filing of the protest, the taxpayer may either: (i) appeal to the
CTA within thirty (30) days from after the expiration of the one
hundred eighty (180)-day period; or (ii) await the final decision of the
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Commissioner on the disputed assessment and appeal such final
decision to the CTA within thirty (30) days after the receipt of a copy
of such decision.
It must be emphasized, however, that in case of inaction on protested
assessment within the 180-day period, the option of the taxpayer to
either: (1) file a petition for review with the CTA within 30 days after
the expiration of the 180-day period; or (2) await the final decision of
the Commissioner or his duly authorized representative on the
disputed assessment and appeal such final decision to the CTA within
30 days after the receipt of a copy of such decision, are mutually
exclusive and the resort to one bars the application of the other.
3.1.5 Final Decision on a Disputed Assessment (FDDA). — The
decision of the Commissioner or his duly authorized representative
shall state the (i) facts, the applicable law, rules and regulations, or
jurisprudence on which such decision is based, otherwise, the
decision shall be void (see illustration in ANNEX “C” hereof), and (ii)
that the same is his final decision.
CIR vs PASCOR REALTY (1999)
An assessment contains not only a computation of tax
liabilities, but also a demand for payment within a prescribed
period. It also signals the time when penalties and protests
begin to accrue against the taxpayer. To enable the taxpayer
to determine his remedies thereon, due process requires that
it must be served on and received by the taxpayer.
Accordingly, an affidavit, which was executed by revenue
officers stating the tax liabilities of a taxpayer and attached to
a criminal complaint for tax evasion, cannot be deemed an
assessment that can be questioned before the Court of Tax
Appeals.
FACTS:
BIR Commissioner Jose U. Ong authorized Revenue Officers
to examine the books of accounts and other accounting
records of Pascor Realty and Development Corporation. (
PRDC) for the years ending 1986, 1987 and 1988. The said
examination resulted in a recommendation for the issuance of
an assessment in the amounts of P7,498,434.65 and P3,015,
236.35 for the years 1986 and 1987, respectively.
On March 1, 1995, the Commissioner of Internal Revenue
filed a criminal complaint before the Department of Justice
against the PRDC, its President Rogelio A. Dio, and its
Treasurer Virginia S. Dio, alleging evasion of taxes in the total
amount of P10,513,671.00. Private respondents PRDC, et. al.
filed an Urgent Request for Reconsideration/Reinvestigation
disputing the tax assessment and tax liability.
CIR: Denied the urgent request for
reconsideration/reinvestigation of the private respondents on
the ground that no formal assessment of the has as yet been
issued by the Commissioner.
Private respondents then elevated the Decision of the CIR to
the CTA on a petition for review. The CIR filed a Motion to
Dismiss the petition on the ground that the CTA has no
jurisdiction over the subject matter of the petition, as there
was no formal assessment issued against the petitioners. The
CTA Denied the said motion to dismiss and ordered the CIR
to file an answer within thirty (30) days from receipt of said
resolution. The CIR did not file an answer nor did she move to
reconsider the resolution.
CTA: The criminal complaint for tax evasion is the
assessment issued, and that the letter denial of the decision
properly appealable to it. Respondent’s ground of denial,
therefore, that there was no formal assessment issued, is
untenable.
CA: Sustained the CTA and dismissed the petition for review.
It held that the tax court committed no grave abuse of
discretion in ruling that the Criminal Complaint for tax evasion
filed by the Commissioner of Internal Revenue with the
Department of Justice constituted an "assessment" of the tax
due, and that the said assessment could be the subject of a
protest. By definition, an assessment is simply the statement
of the details and the amount of tax due from a taxpayer.
Based on this definition, the details of the tax contained in the
BIR examiners' Joint Affidavit, which was attached to the
criminal Complaint, constituted an assessment. Since the
assailed Order of the CTA was merely interlocutory and
devoid of grave abuse of discretion, a petition for certiorari did
not lie.
ISSUES:
(1) Whether or not the criminal complaint for tax evasion
can be construed as an assessment. NO.
Petitioner’s contention: The filing of the criminal complaint
with the Department of Justice cannot in any way be
construed as a formal assessment of private respondents' tax
liabilities.
Respondents’ contention: An assessment is not an action
or proceeding for the collection of taxes, but merely a notice
that the amount stated therein is due as tax and that the
taxpayer is required to pay the same. Thus, qualifying as an
assessment was the BIR examiners' Joint Affidavit, which
contained the details of the supposed taxes due from
respondent for taxable years ending 1987 and 1988, and
which was attached to the tax evasion Complaint filed with the
DOJ. Consequently, the denial by the BIR of private
respondents' request for reinvestigation of the disputed
assessment is properly appealable to the CTA.
SC: Agrees with Petitioner. Neither the NIRC nor the
regulations governing the protest of assessments provide a
specific definition or form of an assessment. To consider the
affidavit attached to the Complaint as a proper assessment is
to subvert the nature of an assessment and to set a bad
precedent that will prejudice innocent taxpayers.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
True, as pointed out by the private respondents, an
assessment informs the taxpayer that he or she has tax
liabilities. But not all documents coming from the BIR
containing a computation of the tax liability can be deemed
assessments.
To start with, an assessment must be sent to and received by
a taxpayer, and must demand payment of the taxes described
therein within a specific period. Thus, the NIRC imposes a 25
percent penalty, in addition to the tax due, in case the
taxpayer fails to pay deficiency tax within the time prescribed
for its payment in the notice of assessment. Likewise, an
interest of 20 percent per annum, or such higher rates as may
be prescribed by rules and regulations, is to be collected form
the date prescribed for its payment until the full payment. The
issuance of an assessment is vital in determining, the period
of limitation regarding its proper issuance and the period
within which to protest it. Section 203 of the NIRC provides
that internal revenue taxes must be assessed within three
years from the last day within which to file the return. Section
222, on the other hand, specifies a period of ten years in case
a fraudulent return with intent to evade was submitted or in
case of failure to file a return. Also, Section 228 of the same
law states that said assessment may be protested only within
thirty days from receipt thereof. Necessarily, the taxpayer
must be certain that a specific document constitutes an
assessment. Otherwise, confusion would arise regarding the
period within which to make an assessment or to protest the
same, or whether interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice
duly sent to the taxpayer. Indeed, an assessment is deemed
made only when the collector of internal revenue releases,
mails or sends such notice to the taxpayer.
In the present case, the revenue officers' Affidavit merely
contained a computation of respondents' tax liability. It did not
state a demand or a period for payment. Worse, it was
addressed to the justice secretary, not to the taxpayers.
That the BIR examiners' Joint Affidavit attached to the
Criminal Complaint contained some details of the tax liabilities
of private respondents does not ipso facto make it an
assessment. The purpose of the Joint Affidavit was merely to
support and substantiate the Criminal Complaint for tax
evasion. Clearly, it was not meant to be a notice of the tax due
and a demand to the private respondents for payment thereof.
The fact that the Complaint itself was specifically directed and
sent to the Department of Justice and not to private
respondents shows that the intent of the commissioner was to
file a criminal complaint for tax evasion, not to issue an
assessment. Although the revenue officers recommended the
issuance of an assessment, the commissioner opted instead
to file a criminal case for tax evasion. What private
respondents received was a notice from the DOJ that a
criminal case for tax evasion had been filed against them, not
a notice that the Bureau of Internal Revenue had made an
assessment.
In addition, what private respondents sent to the
commissioner was a motion for a reconsideration of the tax
evasion charges filed, not of an assessment.
(2) Whether or not an assessment is necessary before
criminal charges for tax evasion may be instituted. NO
Private respondents’ contention: The filing of a criminal
complaint must be preceded by an assessment.
SC: Incorrect because Section 222 of the NIRC specifically
states that in cases where a false or fraudulent return is
submitted or in cases of failure to file a return such as this
case, proceedings in court may be commenced without an
assessment. Furthermore, Section 205 of the same Code
clearly mandates that the civil and criminal aspects of the
case may be pursued simultaneously.
Private respondents’ contention: Section 222 should be
read in relation to Section 255 of the NLRC,which penalizes
failure to file a return. They add that a tax assessment should
precede a criminal indictment.
SC: SC disagrees. To reiterate, said Section 222 states that
an assessment is not necessary before a criminal charge can
be filed. This is the general rule. Private respondents failed to
show that they are entitled to an exception. Moreover, the
criminal charge need only be supported by a prima facie
showing of failure to file a required return. This fact need not
be proven by an assessment.
The issuance of an assessment must be distinguished from
the filing of a complaint. Before an assessment is issued,
there is, by practice, a pre-assessment notice sent to the
taxpayer. The taxpayer is then given a chance to submit
position papers and documents to prove that the assessment
is unwarranted. If the commissioner is unsatisfied, an
assessment signed by him or her is then sent to the taxpayer
informing the latter specifically and clearly that an assessment
has been made against him or her. In contrast, the criminal
charge need not go through all these. The criminal charge is
filed directly with the DOJ. Thereafter, the taxpayer is notified
that a criminal case had been filed against him, not that the
commissioner has issued an assessment. It must be stressed
that a criminal complaint is instituted not to demand payment,
but to penalize the taxpayer for violation of the Tax Code.
M: Instead a formal assessment notice, what did the BIR do?
S: Attached BIR examiners' Joint Affidavit to the criminal
Complaint.
Presumption of correctness of assessment
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
The assessment by tax examiners are presumed correct.
PORTILO vs CIR (1991)
US CA 5th Circuit
Facts: Ramon Portillo is a self-employed painting
subcontractor who lived and worked in El Paso, Texas during
1984, the tax year in question.
According to Portillo, the general contractor he subcontracted
for would pay him weekly, usually by check, for the work his
crew performed. Portillo would then record his total receipts in
the gross receipt portion of a ledger book he kept for his
business. Since Portillo did not have a bank account, he
would cash the contractor's check and then pay his workers in
cash. Portillo kept a separate ledger to record his payroll
expenses.
Typically, Portillo purchased all of his own supplies for his
work. Portillo purchased most of these supplies from the
Hanley Paint Store. Each Friday he would pay the supply
store for the week's supplies and record these payments into
the ledger as costs of goods sold. As a favor to Portillo,
Hanley Paint Store kept copies of their invoices for these
supplies, apparently with the intention that they would return
them to Portillo each year end.
At the end of the year, Portillo would meet with Mrs. Rosales,
a bookkeeper, so that she could prepare his taxes. Portillo
would total the gross receipts from his ledger and give them to
Rosales as a basis for his Form 1040 gross income. Portillo
used the Form 1099's from his various employers to confirm
the gross receipts amounts.
In 1984, however, Portillo had not received a 1099 from one
of the contractors, Mr. Navarro, when Rosales was preparing
his Form 1040. Therefore, Portillo determined his gross
receipts from Navarro solely from his ledger.
On his 1984 federal income tax return, Portillo reported gross
receipts in the amount of $142,108.93 and deductions of $30,
917 for costs of goods sold. Included in the amount of gross
receipts was $10,800 reported as the amount Navarro paid to
Portillo. Sometime in mid-1985, Navarro filed a Form 1099
reporting payments to Portillo in the amount of $35,305, which
was significantly more than Portillo had reported receiving
from him.
In January 1987, the I.R.S. audited Portillo's 1984 tax return.
At the time of the audit, Portillo could not produce any records
or receipts concerning his gross receipts for 1984 and the
invoices for materials and supplies purchased during eighteen
weeks in 1984.
Based on the discrepancy between Navarro's 1099 and
Portillo's 1040 forms, I.R.S. Agent Shumate determined that
Portillo had not reported $24,505 in income from Navarro.
Although Portillo acknowledged that he inadvertently
neglected to report $3,125 in income from Navarro, Portillo
denied receiving any more than $13,925 from Navarro.
Shumate contacted Navarro who could produce copies of
checks paid to Portillo in the amount of $13,925, but could not
produce records justifying the remaining $21,380 he claims he
paid Portillo in cash.
Shumate used an indirect method of reconstructing Portillo's
income and made an adjustment to incorporate the increased
amount into Portillo's income for the year. An I.R.S. reviewer,
Glenda Jackson, analyzed Shumate's report. She did not
believe the indirect method of confirming the income
supported Shumate's adjustment. The I.R.S. took the position
that Navarro's Form 1099 was presumed correct. Therefore
the I.R.S. issued a statutory notice of deficiency for federal
income taxes of $8,473 for the taxable year 1984, plus
penalties.
The Portillos filed a petition for redetermination of this alleged
tax deficiency in Tax Court. The Tax Court held for the
government, finding that Portillo had not met his burden of
proving that he had not received the additional income from
Navarro. The Tax Court also found that Portillo failed to
demonstrate that he was entitled to a deduction for costs of
goods sold in excess of the amount allowed.
Issue: Whether or not the Commissioner's determination that
Portillo had received unreported income of $24,505 from
Navarro was proper – NO. The determination was arbitrary.
Portillo’s contention: Portillo argues that if this court should
find that the Commissioner did in fact make a substantive
determination, the ensuing notice of deficiency was
nevertheless arbitrary and erroneous.
US CA: Well settled is the principle that the government's
deficiency assessment is generally afforded a presumption of
correctness.
This presumption is a procedural device that places the
burden of producing evidence to rebut the presumption on the
taxpayer.
In a Tax Court deficiency proceeding, like this one, once the
taxpayer has established that the assessment is arbitrary and
erroneous, the burden shifts to the government to prove the
correct amount of any taxes owed. In a refund suit, on the
other hand, the taxpayer bears the burden of proving both the
excessiveness of the assessment and the correct amount of
any refund to which he is entitled. The presumption of
correctness generally prohibits a court from looking behind the
Commissioner's determination even though it may be based
on hearsay or other evidence inadmissible at trial. Justification
for the presumption of correctness lies in the government's
strong need to accomplish swift collection of revenues and in
the need to encourage taxpayer recordkeeping.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
The need for tax collection does not serve to excuse the
government, however, from providing some factual foundation
for its assessments.
IN THIS CASE:
The notice of deficiency lacks any "ligaments of fact." As the
Supreme Court has held, the presumption of correctness does
not apply when the government's assessment falls within a
narrow but important category of a "`naked' assessment
without any foundation whatsoever. . . ." Several courts,
including this one, have noted that a court need not give effect
to the presumption of correctness in a case involving
unreported income if the Commissioner cannot present some
predicate evidence supporting its determination.
Although a number of these cases involved unreported illegal
income, given the obvious difficulties in proving the nonreceipt
of income, we agree with the Third Circuit that this principle
should apply whether the unreported income was allegedly
obtained legally or illegally.
Therefore, before we will give the Commissioner the benefit of
the presumption of correctness, he must engage in one final
foray for truth in order to provide the court with some indicia
that the taxpayer received unreported income. The
Commissioner would merely need to attempt to substantiate
the charge of unreported income by some other means, such
as by showing the taxpayer's net worth, bank deposits, cash
expenditures, or source and application of funds.
In these types of unreported income cases, the Commissioner
would not be able to choose to rely solely upon the naked
assertion that the taxpayer received a certain amount of
unreported income for the tax period in question.
In this case the Commissioner's determination that Portillo
had received unreported income of $24,505 from Navarro was
arbitrary. The Commissioner's determination was based solely
on a Form 1099 Navarro sent to the I.R.S. indicating that he
paid Portillo $24,505 more than Portillo had reported on his
return. The Commissioner merely matched Navarro's Form
1099 with Portillo's Form 1040 and arbitrarily decided to
attribute veracity to Navarro and assume that Portillo's Form
1040 was false. Navarro, however, was not able to document
$21,380 of cash payments he allegedly made to Portillo. In a
situation like this, the Commissioner had some duty to
investigate Navarro's bald assertion of payment and
determine if Navarro's position was supported by his books,
receipts, or other records.
In addition, the Commissioner failed to substantiate by any
other means, such as analyzing Portillo's cash expenditures
or his source and application of funds, his charge that Portillo
received unreported income. Instead, the Commissioner
merely chose to rely upon the presumption of correctness. We
hold in situations like this involving unreported income, the
presumption of correctness does not apply to the notice of
deficiency.
Therefore, the judgment below regarding unreported income
must be reversed.
M: Yang 1099 para syang 2316. Yung yun inissue ng…
kunwari doctors sa hospital; they are independent contractors
so no EE-ER Relationship. Pagnagwithhold ang hospital from
the fees of the doctor, the hospital has to issue sa doctors
Form 2316 and dun nakalagay kung magkano ang fee,
withholding tax.
Also, the presumption does not apply because it’s a naked
assessment or it has no legal basis.
CIR vs HANTEX (2005)
Sometime in October 1989, Economic Intelligence and
Investigation Bureau (EIIB), received confidential information
that the respondent had umderdeclared the amount of its
importation of synthetic resin amounting. According to the
informer, based on photocopies of 77 Consumption Entries
furnished by another informer, the 1987 importations of the
respondent were understated in its accounting records.
Acting on the said report, then Commissioner Almonte of the
EIIB, issued Mission Order for the audit and investigation of
the importations of Hantex for 1987. The IIPO issued
subpoena duces tecum and ad testificandum for the president
and general manager of the respondent to appear in a hearing
and bring several documents. However, the respondent’s
president and general manager refused to comply with the
subpoena,
Flores, Chief of the Investigation Division, and Lt. Dionela, Lt.
Amoto and Lt. Gatmaitan conducted an investigation. They
relied on the certified copies of the respondent’s Profit and
Loss Statement for 1987 and 1988 on file with the SEC; the
machine copies of the Consumption Entries, Series of 1987,
submitted by the informer; as well as excerpts from the entries
(after the payment of duties and taxes) certified by Port of
Manila Collection Division Chief Tomas and Bureau of
Customs Collection Division Acting Chief Danganan.
Based on the documents/records on hand, the EIIB found that
the respondent had unreported sales in the amount of P63,
032,989.17, and its corresponding income tax liability was P
41,916,937.78, inclusive of penalty charge and interests.
Later, the petitioner, the Commissioner of Internal Revenue,
sent a Letter dated April 15, 1991 to the respondent
demanding payment of its deficiency income tax and
deficiency sales tax, inclusive of surcharge and interest.
Appended thereto were the Assessment Notices of Tax
Deficiency.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
The respondent wrote the BIR Commissioner on July 12,
1993 questioning the assessment on the ground that the EIIB
representative failed to present the original, or authenticated,
or duly certified copies of the Consumption and Import Entry
Accounts, or excerpts thereof if the original copies were not
readily available; or, if the originals were in the official custody
of a public officer, certified copies thereof as provided for in
Section 12, Chapter 3, Book VII, Administrative Procedure,
Administrative Order of 1987. It stated that the only copies of
the Consumption Entries submitted to the Hearing Officer
were mere machine copies furnished by an informer of the
EIIB. It asserted that the letters of Tomas and Danganan were
unreliable
ISSUE: Whether the tax deficiency assessment against the
respondent based on the certified copies of the Profit and
Loss Statement submitted by the respondent to the SEC in
1987 and 1988, as well as certifications of Tomas and
Danganan, is arbitrary, capricious and illegal.
HELD: YES.
CIR’s contention: Since the respondent refused to cooperate
and show its 1987 books of account and other accounting
records, it was proper for her to resort to the best evidence
obtainable – the photocopies of the import entries in the
Bureau of Customs and the respondent’s financial statement
filed with the SEC.
Hantex’s contention: The resort to the best evidence
obtainable method was illegal.
Central to the second issue is Section 16 of the NIRC of 1977,
as amended, which provides that the Commissioner of
Internal Revenue has the power to make assessments and
prescribe additional requirements for tax administration and
enforcement. Among such powers are those provided in
paragraph (b) thereof:
(b) Failure to submit required returns, statements, reports and
other documents. – When a report required by law as a basis
for the assessment of any national internal revenue tax shall
not be forthcoming within the time fixed by law or regulation or
when there is reason to believe that any such report is false,
incomplete or erroneous, the Commissioner shall assess the
proper tax on the best evidence obtainable.
In case a person fails to file a required return or other
document at the time prescribed by law, or willfully or
otherwise files a false or fraudulent return or other document,
the Commissioner shall make or amend the return from his
own knowledge and from such information as he can obtain
through testimony or otherwise, which shall be prima facie
correct and sufficient for all legal purposes.
This provision applies when the Commissioner of Internal
Revenue undertakes to perform her administrative duty of
assessing the proper tax against a taxpayer, to make a return
in case of a taxpayer’s failure to file one, or to amend a return
already filed in the BIR.
The petitioner may avail herself of the best evidence or other
information or testimony by exercising her power or authority
under paragraphs (1) to (4) of Section 7 of the NIRC:
(1) To examine any book, paper, record or other data which
may be relevant or material to such inquiry;
(2) To obtain information from any office or officer of the
national and local governments, government agencies or its
instrumentalities, including the Central Bank of the Philippines
and government owned or controlled corporations;
(3) To summon the person liable for tax or required to file a
return, or any officer or employee of such person, or any
person having possession, custody, or care of the books of
accounts and other accounting records containing entries
relating to the business of the person liable for tax, or any
other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the
summons and to produce such books, papers, records, or
other data, and to give testimony;
(4) To take such testimony of the person concerned, under
oath, as may be relevant or material to such inquiry; …
The "best evidence" envisaged in Section 16 of the 1977
NIRC, as amended, includes the corporate and accounting
records of the taxpayer who is the subject of the assessment
process, the accounting records of other taxpayers engaged
in the same line of business, including their gross profit and
net profit sales. Such evidence also includes data, record,
paper, document or any evidence gathered by internal
revenue officers from other taxpayers who had personal
transactions or from whom the subject taxpayer received any
income; and record, data, document and information secured
from government offices or agencies, such as the SEC, the
Central Bank of the Philippines, the Bureau of Customs, and
the Tariff and Customs Commission.
The law allows the BIR access to all relevant or material
records and data in the person of the taxpayer. It places no
limit or condition on the type or form of the medium by which
the record subject to the order of the BIR is kept. The purpose
of the law is to enable the BIR to get at the taxpayer’s records
in whatever form they may be kept. Such records include
computer tapes of the said records prepared by the taxpayer
in the course of business. In this era of developing information
-storage technology, there is no valid reason to immunize
companies with computer-based, record-keeping 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.
We agree with the contention of the petitioner that the best
evidence obtainable may consist of hearsay evidence, such
as
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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the testimony of third parties or accounts or other records of
other taxpayers similarly circumstanced as the taxpayer
subject of the investigation, hence, inadmissible in a regular
proceeding in the regular courts. Moreover, the general rule is
that administrative agencies such as the BIR are not bound by
the technical rules of evidence. It can accept documents
which cannot be admitted in a judicial proceeding where the
Rules of Court are strictly observed. It can choose to give
weight or disregard such evidence, depending on its
trustworthiness.
However, the best evidence obtainable under Section 16 of
the 1977 NIRC, as amended, does not include mere
photocopies of records/documents. The petitioner, in making
a preliminary and final tax deficiency assessment against a
taxpayer, cannot anchor the said assessment on mere
machine copies of records/documents. Mere photocopies of
the Consumption Entries have no probative weight if offered
as proof of the contents thereof. The reason for this is that
such copies are mere scraps of paper and are of no probative
value as basis for any deficiency income or business taxes
against a taxpayer.
In Collector of Internal Revenue v. Benipayo, the Court ruled
that the assessment must be based on actual facts. The rule
assumes more importance in this case since the xerox copies
of the Consumption Entries furnished by the informer of the
EIIB were furnished by yet another informer. While the EIIB
tried to secure certified copies of the said entries from the
Bureau of Customs, it was unable to do so because the said
entries were allegedly eaten by termites. It bears stressing
that under Section 1306 of the Tariff and Customs Code, the
Consumption Entries shall be the required number of copies
as prescribed by regulations. The Consumption Entry is
accomplished in sextuplicate copies and quadruplicate copies
in other places. In Manila, the six copies are distributed to the
Bureau of Customs, the Tariff and Customs Commission, the
Declarant (Importer), the Terminal Operator, and the Bureau
of Internal Revenue. Inexplicably, the Commissioner and the
BIR personnel ignored the copy of the Consumption Entries
filed with the BIR and relied on the photocopies supplied by
the informer of the EIIB who secured the same from another
informer. The BIR, in preparing and issuing its preliminary and
final assessments against the respondent, even ignored the
records on the investigation made by the District Revenue
officers on the respondent’s importations for 1987.
The original copies of the Consumption Entries were of prime
importance to the BIR. This is so because such entries are
under oath and are presumed to be true and correct under
penalty of falsification or perjury. Admissions in the said
entries of the importers’ documents are admissions against
interest and presumptively correct.
In fine, then, the petitioner acted arbitrarily and capriciously in
relying on and giving weight to the machine copies of the
Consumption Entries in fixing the tax deficiency assessments
against the respondent.
The rule is that in the absence of the accounting records of a
taxpayer, his tax liability may be determined by estimation.
The petitioner is not required to compute such tax liabilities
with mathematical exactness. Approximation in the calculation
of the taxes due is justified. However, the rule does not apply
where the estimation is arrived at arbitrarily and capriciously.
We agree with the contention of the petitioner that, as a
general rule, tax assessments by tax examiners are
presumed correct and made in good faith. All
presumptions are in favor of the correctness of a tax
assessment. It is to be presumed, however, that such
assessment was based on sufficient evidence. Upon the
introduction of the assessment in evidence, a prima facie
case of liability on the part of the taxpayer is made. If a
taxpayer files a petition for review in the CTA and assails the
assessment, the prima facie presumption is that the
assessment made by the BIR is correct, and that in preparing
the same, the BIR personnel regularly performed their duties.
However, the prima facie correctness of a tax assessment
does not apply upon proof that an assessment is utterly
without foundation, meaning it is arbitrary and capricious
. Where the BIR has come out with a "naked assessment
," i.e., without any foundation character, the
determination of the tax due is without rational basis.
IN THIS CASE: The computations of the EIIB and the BIR on
the quantity and costs of the importations of the respondent in
the amount of P105,761,527.00 for 1987 have no factual
basis, hence, arbitrary and capricious. The petitioner cannot
rely on the presumption that she and the other employees of
the BIR had regularly performed their duties. Admittedly, the
respondent did not adduce evidence to prove its correct tax
liability. However, considering that it has been established that
the petitioner’s assessment is barren of factual basis, arbitrary
and illegal, such failure on the part of the respondent cannot
serve as a basis for a finding by the Court that it is liable for
the amount contained in the said assessment; otherwise, the
Court would thereby be committing a travesty.
CASE REMANDED TO CTA.
CIR vs BENIPAYO (1962)
Respondent Benipayo is the owner and operator of the
Lucena Theater located in the municipality of Lucena, Quezon
. Internal Revenue Agent Romeo de Guia investigated
respondent's amusement tax liability in connection with the
operation of said theater. Based on De Guia’s report,
respondent allegedly had disproportionately issued tax-free 20
-centavo children's tickets. His finding was that during the
years 1949 to 1951 the average ratio of adults and children
patronizing the Lucena Theater was 3 to 1, i.e., for every three
adults entering the theater, one child was also admitted, while
during the period in question, the
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

proportion is reversed - three children to one adult. From this Discussion: The first presumption of the BIR was that yung
he concluded that respondent must have fraudulently sold two dalawang children’s tickets were for adults in fact. So basing
tax-free 20-centavo tickets, in order to avoid payment of the on that presumption, dun sila nag argue na because may
amusement tax prescribed in Section 260 of the National presumption of correctness yung assessment so the taxpayer
Internal Revenue Code. Based on the average ratio between should prove na children talaga yung nanood ng movies. So
adult and children attendance in the past years, Examiner de yun yung presumption on top of a presumption.
Guia recommended a deficiency amusement tax assessment
against respondent. CIR v. Sony Philippines, Inc.,
G.R. No. 178697, November 17, 2010
Petitioner issued a deficiency amusement tax assessment
against respondent, demanding from the latter the payment of
FACTS: On November 24, 1998, the CIR issued Letter of
the taxes. Respondent filed the corresponding protest with the
Authority No. 000019734 (LOA 19734) authorizing certain
Conference Staff of the Bureau of Internal Revenue.
revenue officers to examine Sony’s books of accounts and
other accounting records regarding revenue taxes for “the
ISSUE: Whether or not there is sufficient evidence in the period 1997 and unverified prior years.” On December 6, 1999
record showing that respondent, during the period under , a preliminary assessment for 1997 deficiency taxes and
review, sold and issued to his adult customers two tax-free 20 penalties was issued by the CIR which Sony protested.
-centavo children's tickets, instead of one 40-centavo ticket for Thereafter, acting on the protest, the CIR issued final
each adult customer; to cheat or defraud the Government. assessment notices, the formal letter of demand and the
details of discrepancies including VAT deficiency - 11,141,014
HELD: NO. .41. The deficiency VAT assessment they arrived at was
based on records from January to March 1998 or using the
The SC sustained the CTA’s decision, which held: fiscal year which ended in March 31, 1998.
To our mind, the appealed decision has no factual basis and
After trial, the CTA-First Division (also the decision of CTA-EB
must be reversed. An assessment fixes and determines the
) disallowed the deficiency VAT assessment because the
tax liability of a taxpayer. As soon as it is served, an obligation
subsidized advertising expense paid by Sony which was duly
arises on the part of the taxpayer concerned to pay the
covered by a VAT invoice resulted in an input VAT credit. As
amount assessed and demanded. Hence, assessments
regards the EWT, the CTA-First Division maintained the
should not be based on mere presumptions no matter how
deficiency EWT assessment on Sony’s motor vehicles and on
reasonable or logical said presumptions may be. Assuming
professional fees paid to general professional partnerships. It
arguendo that the average ratio of adults and children
also assessed the amounts paid to sales agents as
patronizing the Lucena Theater from 1949 to 1951 was 3 to 1,
commissions with five percent (5%) EWT pursuant to Section
the same does not give rise to the inference that the same
1(g) of Revenue Regulations No. 6-85. The CTA-First Division
conditions existed during the years in question (1952 and
, however, disallowed the EWT assessment on rental expense
1953). The fact that almost the same ratio existed during the
since it found that the total rental deposit of P10,523,821.99
month of July, 1955 does not provide a sufficient inference on
was incurred from January to March 1998 which was again
the conditions in 1952 and 1953.
beyond the coverage of LOA 19734. Except for the
compromise penalties, the CTA-First Division also upheld the
In order to stand the test of judicial scrutiny, the assessment
penalties for the late payment of VAT on royalties, for late
must be based on actual facts. The presumption of
remittance of final withholding tax on royalty as of December
correctness of assessment being a mere presumption cannot
1997 and for the late remittance of EWT by some of Sony’s
be made to rest on another presumption that the
branches.[8]
circumstances in 1952 and 1953 are presumed to be the
same as those existing in 1949 to 1951 and July 1955. In the
case under consideration there are no substantial facts to In sum, the CTA-First Division partly granted Sony’s petition
support the assessment in question. by cancelling the deficiency VAT assessment but upheld a
modified deficiency EWT assessment as well as the penalties
To sustain the deficiency tax assessed against respondent
would amount, in effect, to a finding that he had, for a
considerable period of time, cheated and defrauded the
government by selling to each adult 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.

Comment: Here, the first presumption of the BIR was that

yung 2 children’s tickets were for 1 adult. Based on that
presumption, dun na nag argue and BIR, na because there is
presumption of correctness of assessment, then the taxpayer
should prove that the tickets were really for children. BUT the
Supreme Court said that the presumption of correctness
cannot rest on another presumption.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
(expanded withholding tax (EWT) in the amount of P1,035,
879.70 and the penalties for late remittance of internal
revenue taxes in the amount of P1,269, 593.90.)
ISSUES: 1. Whether or not respondent (Sony) is liable for
the deficiency VAT in the amount of P11,141,014.41; NO.
The CIR insists that LOA 19734, although it states “the period
1997 and unverified prior years,” should be understood to
mean the fiscal year ending in March 31, 1998. The Court
cannot agree.
Based on Section 13 of the Tax Code, a Letter of Authority or
LOA is the authority given to the appropriate revenue officer
assigned to perform assessment functions. It empowers or
enables said revenue officer to examine the books of account
and other accounting records of a taxpayer for the purpose of
collecting the correct amount of tax.[15] The very provision of
the Tax Code that the CIR relies on is unequivocal with regard
to its power to grant authority to examine and assess a
taxpayer.
SEC. 6. Power of the Commissioner to Make Assessments
and Prescribe Additional Requirements for Tax Administration
and Enforcement. –
(A)Examination of Returns and Determination of tax Due. –
After a return has been filed as required under the provisions
of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer
and the assessment of the correct amount of tax: Provided,
however, That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any
taxpayer. x x x [Emphases supplied]cralaw
Clearly, there must be a grant of authority before any revenue
officer can conduct an examination or assessment. Equally
important is that the revenue officer so authorized must not go
beyond the authority given. In the absence of such an
authority, the assessment or examination is a nullity.
As earlier stated, LOA 19734 covered “the period 1997 and
unverified prior years.” For said reason, the CIR acting
through its revenue officers went beyond the scope of their
authority because the deficiency VAT assessment they
arrived at was based on records from January to March 1998
or using the fiscal year which ended in March 31, 1998. As
pointed out by the CTA-First Division in its April 28, 2005
Resolution, the CIR knew which period should be covered by
the investigation. Thus, if CIR wanted or intended the
investigation to include the year 1998, it should have done so
by including it in the LOA or issuing another LOA.
Upon review, the CTA-EB even added that the coverage of
LOA 19734, particularly the phrase “and unverified prior years
,” violated Section C of Revenue Memorandum Order No. 43-
90 dated September 20, 1990, the pertinent portion of which
reads:
3. A Letter of Authority should cover a taxable period not
exceeding one taxable year. The practice of issuing L/As
covering audit of “unverified prior years is hereby
prohibited. If the audit of a taxpayer shall include more
than one taxable period, the other periods or years shall
be specifically indicated in the L/A.[16]
xxx
2. Whether or not the withholding assessment with
respect to the 5% withholding tax on rental deposit in the
amount of P10,523,821.99 is proper; NO.
The Court also affirms the findings of both the CTA-First
Division and the CTA-EB on the deficiency EWT assessment
on the rental deposit. According to their findings, Sony
incurred the subject rental deposit in the amount of P10,523,
821.99 only from January to March 1998. As stated earlier,
in the absence of the appropriate LOA specifying the
coverage, the CIR’s deficiency EWT assessment from
January to March 1998, is not valid and must be
disallowed.
4. Whether or not the remittance of final withholding tax
on royalties covering the period January to March 1998
was filed outside of time.
The CIR initially assessed Sony to be liable for penalties for
belated remittance of its FWT on royalties (i) as of December
1997; and (ii) for the period from January to March 1998.
Again, the Court agrees with the CTA-First Division when it
upheld the CIR with respect to the royalties for December
1997 but cancelled that from January to March 1998.
The CIR insists that under Section 3[28] of Revenue
RegulationsNo. 5-82 and Sections 2.57.4 and 2.58(A)(2)(a)[29
] of Revenue Regulations No. 2-98, Sony should also be
made liable for the FWT on royalties from January to March of
1998. At the same time, it downplays the relevance of the
Manufacturing License Agreement (MLA) between Sony and
Sony-Japan, particularly in the payment of royalties.
The above revenue regulations provide the manner of
withholding remittance as well as the payment of final tax on
royalty. Based on the same, Sony is required to deduct and
withhold final taxes on royalty payments when the royalty is
paid or is payable. After which, the corresponding return and
remittance must be made within 10 days after the end of each
month. The question now is when does the royalty become
payable?
Under Article X(5) of the MLA between Sony and Sony-Japan,
Sony was to pay Sony-Japan royalty within two (2) months
after every semi-annual period which ends in June 30 and
December
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
31. However, the CTA-First Division found that there was
accrual of royalty by the end of December 1997 as well as by
the end of June 1998. Given this, the FWTs should have been
paid or remitted by Sony to the CIR on January 10, 1998 and
July 10, 1998. Thus, it was correct for the CTA-First Division
and the CTA-EB in ruling that the FWT for the royalty from
January to March 1998 was seasonably filed. Although the
royalty from January to March 1998 was well within the semi-
annual period ending June 30, which meant that the royalty
may be payable until August 1998 pursuant to the MLA, the
FWT for said royalty had to be paid on or before July 10, 1998
or 10 days from its accrual at the end of June 1998. Thus,
when Sony remitted the same on July 8, 1998, it was not yet
late.
COLLECTION OF UNPAID TAXES
Once the BIR denies the protest, kunwari may FDA na, the
taxpayer now becomes.. actually sa FAN palang na level,
when the BIR issues the FAN and the taxpayer protests, the
taxpayer becomes a delinquent taxpayer and when the
taxpayer becomes a delinquent taxpayer, the BIR can actually
collect now from the taxpayer.
Q; What are the remedies of the government for the collection
of unpaid taxes?
A: 4 remedies. Distraint, Levy, Civil and Criminal action.
Distraint, garnishment, levy & seizure
Distraint pertains to personal property. Levy pertains to real
property but same lang sila. These remedies may be
individually or simultaneously. Well of course, you cannot
have double recovery. Kung nakarecover ka na sa first
remedy mo, then di ka na makarecover through another
remedy.
The typical enforcement remedy of the BIR is the garnishment
of bank deposit. What they do is they send a letter to all
offices ng bank saying itong taxpayer na ito meron siyang
deficiency or kung meron siyang accounts with you, kailangan
ifreeze. Medyo mahirap siya sa taxpayer kung andun ka na
sa stage na yun kasi sa bank account mo siya and we all
need money.
Before naman sa actual freezing of account, marami namang
warning si BIR (I think tatlong warnings). Well usually yung
mga taxpayers, iniignore nila ang mga ganun until hindi na ma
ignore, so usually small medium enterprises yun yung
problema nila kasi andun na sila sa garnishment level so
medyo mahirap na siyang gawan ng paraan. Marami pa
namang paraan but mahirap na siya.
Actual vs. constructive distraint
Actual distraint is physical possession of the property so the
taxpayer should be a delinquent taxpayer and there should be
assessment. Same with constructive distraint, the taxpayer
should be delinquent meaning there is a FAN issued to him
and there must be an assessment unless if not required ibig
sabihin merong instances na nakalagay sa code when the
assessment is not needed, for instance when the taxpayer is
retiring from business or is intending to leave the Philippines.
Basahin niyo nalang.
How is constructive distraint made? Nasa code din siya. So
the taxpayer will sign a receipt saying that it will preserve the
property. It will not dispose of the property without the
authority of the Commisioner and if the taxpayer refuses to do
so, then the BIR I think will have to leave the receipt in the
premises of the business and in the presence of witnesses.
SEC. 205. Remedies for the Collection of Delinquent Taxes. -
The civil remedies for the collection of internal revenue taxes, fees or
charges, and any increment thereto resulting from delinquency shall
be:
(a) By distraint of goods, chattels, or effects, and other personal
property of whatever character, including stocks and other securities,
debts, credits, bank accounts and interest in and rights to personal
property, and by levy upon real property and interest in rights to real
property; and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in
the discretion of the authorities charged with the collection of such
taxes: Provided, however, That the remedies of distraint and levy
shall not be availed of where the amount of tax involve is not more
than One hundred pesos (P100).
The judgment in the criminal case shall not only impose the penalty
but shall also order payment of the taxes subject of the criminal case
as finally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed
to defray costs of collection by means of civil or criminal action,
including the preservation or transportation of personal property
distrained and the advertisement and sale thereof, as well as of real
property and improvements thereon.
SEC. 206. Constructive Distraint of the Property of A Taxpayer. -
To safeguard the interest of the Government, the Commissioner may
place under constructive distraint the property of a delinquent
taxpayer or any taxpayer who, in his opinion, is retiring from any
business subject to tax, or is intending to leave the Philippines or to
remove his property therefrom or to hide or conceal his property or to
perform any act tending to obstruct the proceedings for collecting the
tax due or which may be due from him.
The constructive distraint of personal property shall be affected
by requiring the taxpayer or any person having possession or
control of such property to sign a receipt covering the property
distrained and obligate himself to preserve the same intact and
unaltered and
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

not to dispose of the same ;in any manner whatever, without the
express authority of the Commissioner.
In case the taxpayer or the person having the possession and
control of the property sought to be placed under constructive
distraint refuses or fails to sign the receipt herein referred to, the
revenue officer effecting the constructive distraint shall proceed
to prepare a list of such property and, in the presence of two (2)
witnesses, leave a copy thereof in the premises where the
property distrained is located, after which the said property shall
be deemed to have been placed under constructive distraint.
provisions hereof.
SEC. 208. Procedure for Distraint and Garnishment. - The officer
serving the warrant of distraint shall make or cause to be made an
account of the goods, chattels, effects or other personal property
distrained, a copy of which, signed by himself, shall be left either with
the owner or person from whose possession such goods, chattels, or
effects or other personal property were taken, or at the dwelling or
place of business of such person and with someone of suitable age
and discretion, to which list shall be added a statement of the sum
demanded and note of the time and place of sale.

SEC. 207. Summary Remedies. -
(A) Distraint of Personal Property. - Upon the failure of the person
owing any delinquent tax or delinquent revenue to pay the same at
the time required, the Commissioner or his duly authorized
representative, if the amount involved is in excess of One million
pesos (P1,000,000), or the Revenue District Officer, if the amount
involved is One million pesos (P1,000,000) or less, shall seize and
distraint any goods, chattels or effects, and the personal property,
including stocks and other securities, debts, credits, bank accounts,
and interests in and rights to personal property of such persons in
sufficient quantity to satisfy the tax, or charge, together with any
increment thereto incident to delinquency, and the expenses of the
distraint and the cost of the subsequent sale.
A report on the distraint shall, within ten (10) days from receipt of the
warrant, be submitted by the distraining officer to the Revenue District
Officer, and to the Revenue Regional Director: Provided, That the
Commissioner or his duly authorized representative shall, subject to
rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, have the power to lift such
order of distraint: Provided, further, That a consolidated report by the
Revenue Regional Director may be required by the Commissioner as
often as necessary.
(B) Levy on Real Property. - After the expiration of the time required
to pay the delinquent tax or delinquent revenue as prescribed in this
Section, real property may be levied upon, before simultaneously or
after the distraint of personal property belonging to the delinquent. To
this end, any internal revenue officer designated by the Commissioner
or his duly authorized representative shall prepare a duly
authenticated certificate showing the name of the taxpayer and the
amounts of the tax and penalty due from him. Said certificate shall
operate with the force of a legal execution throughout the Philippines.
Stocks and other securities shall be distrained by serving a copy of
the warrant of distraint upon the taxpayer and upon the president,
manager, treasurer or other responsible officer of the corporation,
company or association, which issued the said stocks or securities.
Debts and credits shall be distrained by leaving with the person owing
the debts or having in his possession or under his control such credits
, or with his agent, a copy of the warrant of distraint. The warrant of
distraint shall be sufficient authority to the person owning the debts or
having in his possession or under his control any credits belonging to
the taxpayer to pay to the Commissioner the amount of such debts or
credits.
Bank accounts shall be garnished by serving a warrant of
garnishment upon the taxpayer and upon the president, manager,
treasurer or other responsible officer of the bank. Upon receipt of the
warrant of garnishment, the bank shall turn over to the Commissioner
so much of the bank accounts as may be sufficient to satisfy the claim
of the Government.
SEC. 209. Sale of Property Distrained and Disposition of
Proceeds. - The Revenue District Officer or his duly authorized
representative, other than the officer referred to in Section 208 of this
Code shall, according to rules and regulations prescribed by the
Secretary of Finance, upon recommendation of the Commissioner,
forthwith cause a notification to be exhibited in not less than two (2)
public places in the municipality or city where the distraint is made,
specifying; the time and place of sale and the articles distrained. The
time of sale shall not be less than twenty (20) days after notice to the
owner or possessor of the property as above specified and the
publication or posting of such notice. One

Levy shall be affected by writing upon said certificate a description of

the property upon which levy is made. At the same time, written notice
of the levy shall be mailed to or served upon the Register of Deeds for
the province or city where the property is located and upon the
delinquent taxpayer, or if he be absent from the Philippines, to his
agent or the manager of the business in respect to which the liability
arose, or if there be none, to the occupant of the property in question.

In case the warrant of levy on real property is not issued before or

simultaneously with the warrant of distraint on personal property, and
the personal property of the taxpayer is not sufficient to satisfy his tax
delinquency, the Commissioner or his duly authorized representative
shall, within thirty (30) days after execution of the distraint, proceed
with the levy on the taxpayer's real property.

Within ten (10) days after receipt of the warrant, a report on any levy
shall be submitted by the levying officer to the Commissioner or his
duly authorized representative: Provided, however, That a
consolidated report by the Revenue Regional Director may be
required by the Commissioner as often as necessary: Provided,
further, That the Commissioner or his duly authorized representative,
subject to rules and regulations promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, shall have the
authority to lift warrants of levy issued in accordance with the

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
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place for the posting of such notice shall be at the Office of the Mayor
of the city or municipality in which the property is distrained.
At the time and place fixed in such notice, the said revenue officer
shall sell the goods, chattels, or effects, or other personal property,
including stocks and other securities so distrained, at public auction,
to the highest bidder for cash, or with the approval of the
Commissioner, through duly licensed commodity or stock exchanges.
In the case of Stocks and other securities, the officer making the sale
shall execute a bill of sale which he shall deliver to the buyer, and a
copy thereof furnished the corporation, company or association which
issued the stocks or other securities. Upon receipt of the copy of the
bill of sale, the corporation, company or association shall make the
corresponding entry in its books, transfer the stocks or other
securities sold in the name of the buyer, and issue, if required to do
so, the corresponding certificates of stock or other securities.
Any residue over and above what is required to pay the entire claim,
including expenses, shall be returned to the owner of the property
sold. The expenses chargeable upon each seizure and sale shall
embrace only the actual expenses of seizure and preservation of the
property pending the sale, and no charge shall be imposed for the
services of the local internal revenue officer or his deputy.
SEC. 210. Release of Distrained Property Upon Payment Prior to
Sale. - If at any time prior to the consummation of the sale all proper
charges are paid to the officer conducting the sale, the goods or
effects distrained shall be restored to the owner.
SEC. 211. Report of Sale to Bureau of Internal Revenue. - Within
two (2) days after the sale, the officer making the same shall make a
report of his proceedings in writing to the Commissioner and shall
himself preserve a copy of such report as an official record.
SEC. 212. Purchase by Government at Sale Upon Distraint. -
When the amount bid for the property under distraint is not equal to
the amount of the tax or is very much less than the actual market
value of the articles offered for sale, the Commissioner or his deputy
may purchase the same in behalf of the national Government for the
amount of taxes, penalties and costs due thereon.
Property so purchased may be resold by the Commissioner or his
deputy, subject to the rules and regulations prescribed by the
Secretary of Finance, the net proceeds therefrom shall be remitted to
the National Treasury and accounted for as internal revenue.
consultation with the Revenue district Officer, shall then make out and
deliver to the purchaser a certificate from his records, showing the
proceedings of the sale, describing the property sold stating the name
of the purchaser and setting out the exact amount of all taxes,
penalties and interest: Provided, however, That in case the proceeds
of the sale exceeds the claim and cost of sale, the excess shall be
turned over to the owner of the property.
The Revenue Collection Officer, upon approval by the Revenue
District Officer may, out of his collection, advance an amount
sufficient to defray the costs of collection by means of the summary
remedies provided for in this Code, including the preservation or
transportation in case of personal property, and the advertisement
and subsequent sale, both in cases of personal and real property
including improvements found on the latter. In his monthly collection
reports, such advances shall be reflected and supported by receipts.
SEC. 214. Redemption of Property Sold. - Within one (1) year from
the date of sale, the delinquent taxpayer, or any one for him, shall
have the right of paying to the Revenue District Officer the amount of
the public taxes, penalties, and interest thereon from the date of
delinquency to the date of sale, together with interest on said
purchase price at the rate of fifteen percent (15%) per annum from the
date of purchase to the date of redemption, and such payment shall
entitle the person paying to the delivery of the certificate issued to the
purchaser and a certificate from the said Revenue District Officer that
he has thus redeemed the property, and the Revenue District Officer
shall forthwith pay over to the purchaser the amount by which such
property has thus been redeemed, and said property thereafter shall
be free from the lien of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the
said property and shall be entitled to the rents and other income
thereof until the expiration of the time allowed for its redemption.
SEC. 215. Forfeiture to Government for Want of Bidder. - In case
there is no bidder for real property exposed for sale as herein above
provided or if the highest bid is for an amount insufficient to pay the
taxes, penalties and costs, the Internal Revenue Officer conducting
the sale shall declare the property forfeited to the Government in
satisfaction of the claim in question and within two (2) days thereafter,
shall make a return of his proceedings and the forfeiture which shall
be spread upon the records of his office. It shall be the duty of the
Register

SEC. 213. Advertisement and Sale. - Within twenty (20) days after
levy, the officer conducting the proceedings shall proceed to advertise
the property or a usable portion thereof as may be necessary to
satisfy the claim and cost of sale; and such advertisement shall cover
a period of a least thirty (30) days. It shall be effectuated by posting a
notice at the main entrance of the municipal building or city hall and in
public and conspicuous place in the barrio or district in which the real
estate lies and by publication once a week for three (3) weeks in a
newspaper of general circulation in the municipality or city where the
property is located. The advertisement shall contain a statement of
the amount of taxes and penalties so due and the time and place of
sale, the name of the taxpayer against whom taxes are levied, and a
short description of the property to be sold. At any time before the day
fixed for the sale, the taxpayer may discontinue all proceedings by
paying the taxes, penalties and interest. If he does not do so, the sale
shall proceed and shall be held either at the main entrance of the
municipal building or city hall, or on the premises to be sold, as the
officer conducting the proceedings shall determine and as the notice
of sale shall specify.

Within five (5) days after the sale, a return by the distraining or levying
officer of the proceedings shall be entered upon the records of the
Revenue Collection Officer, the Revenue District officer and the
Revenue Regional Director. The Revenue Collection Officer, in

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

of Deeds concerned, upon registration with his office of any such
declaration of forfeiture, to transfer the title of the property forfeited to
the Government without the necessity of an order from a competent
court.
Within one (1) year from the date of such forfeiture, the taxpayer, or
any one for him, may redeem said property by paying to the
Commissioner or the latter's Revenue Collection Officer the full
amount of the taxes and penalties, together with interest thereon and
the costs of sale, but if the property be not thus redeemed, the
forfeiture shall become absolute.
SEC. 217. Further Distraint or Levy. - The remedy by distraint of
personal property and levy on realty may be repeated if necessary
until the full amount due, including all expenses, is collected.
Forfeiture to the government for want of bidder
SEC. 268. Other Crimes and Offenses. -
(A) Misdeclaration or Misrepresentation of Manufacturers
Subject to Excise Tax. - Any manufacturer who, in violation of the
provisions of Title VI of this Code, misdeclares in the sworn statement
required therein or in the sales invoice, any pertinent data or
information shall be punished by a summary cancellation or
withdrawal of the permit to engage in business as a manufacturer of
articles subject to excise tax.
practicable, in the same manner and under the same conditions as
the public notice and the time and manner of sale as are prescribed
for sales of personal property distrained for the non-payment of taxes.
Distilled spirits, liquors, cigars, cigarettes, other manufactured
products of tobacco, and all apparatus used I or about the illicit
production of such articles may, upon forfeiture, be destroyed by
order of the Commissioner, when the sale of the same for
consumption or use would be injurious to public health or prejudicial
to the enforcement of the law.
All other articles subject to excise tax, which have been manufactured
or removed in violation of this Code, as well as dies for the printing or
making of internal revenue stamps and labels which are in imitation of
or purport to be lawful stamps, or labels may, upon forfeiture, be sold
or destroyed in the discretion of the Commissioner.
Forfeited property shall not be destroyed until at least twenty (20)
days after seizure.
SEC. 226. Disposition of funds Recovered in Legal Proceedings
or Obtained from Forfeitures. - all judgments and monies recovered
and received for taxes, costs, forfeitures, fines and penalties shall be
paid to the Commissioner or his authorized deputies as the taxes
themselves are required to be paid, and except as specially provided,
shall be accounted for and dealt with the same way.

(B) Forfeiture of Property Used in Unlicensed Business or Dies

Civil action
Used for Printing False Stamps, Etc. - All chattels, machinery, and
removable fixtures of any sort used in the unlicensed production of Kasi nasa remedies tayo of the government, usually ang
articles subject to excise tax shall be forfeited. Dies and other government pupunta siya sa Court for a civil suit upon
equipment used for the printing or making of any internal revenue collection. Ito usually sa collection. Meron ding civil action sa
stamp, label or tag which is in imitation of or purports to be a lawful remedies of taxpayer. Yun yung nag aappeal sila sa CTA.
stamp, label or tag shall also be forfeited. So pag natapos na yung civil action, so collection na kaya
siya naging remedy ng government.
(C) Forfeiture of Goods Illegally Stored or Removed. - Unless
otherwise specifically authorized by the Commissioner, all articles SEC. 220. Form and Mode of Proceeding in Actions Arising
subject to excise tax should not be stored or allowed to remain in a under this Code. - Civil and criminal actions and proceedings
distillery, distillery warehouse, bonded warehouse or other place instituted in behalf of the Government under the authority of this Code
where made, after the tax thereon has been paid; otherwise, all such or other law enforced by the Bureau of Internal Revenue shall be
articles shall be forfeited. Articles withdrawn from any such place or brought in the name of the Government of the Philippines and shall be
from customs custody or imported into the country without the conducted by legal officers of the Bureau of Internal Revenue but no
payment of the required tax shall likewise be forfeited. civil or criminal action for the recovery of taxes or the enforcement of
any fine, penalty
SEC. 262. Shipment or Removal of Liquor or Tobacco Products
under False Name or Brand or as an Imitation of any Existing or
Otherwise Known Product Name or Brand. - Any person who ships
, transports or removes spirituous, compounded or fermented liquors,
wines or any manufactured products of tobacco under any(sic) other
than the proper name or brand known to the trade as designating the
kind and quality of the contents of the cask, bottle or package
containing the same or as an imitation of any existing or otherwise
known product name or brand or causes such act to be done, shall,
upon conviction for each act or omission, be punished by a fine of not
less than Twenty thousand pesos (P20,000) but not more than One
hundred thousand pesos (P100,000) and suffer imprisonment of not
less than six (6) years and one (1) day but not more than twelve (12)
years.

SEC. 224. Remedy for Enforcement of Forfeitures. - The forfeiture

of chattels and removable fixtures of any sort shall be enforced by the
seizure and sale, or destruction, of the specific forfeited property. The
forfeiture of real property shall be enforced by a judgment of
condemnation and sale in a legal action or proceeding, civil or
criminal, as the case may require.

SEC. 225. When Property to be Sold or Destroyed. - Sales of

forfeited chattels and removable fixtures shall be effected, so far as

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
or forfeiture under this Code shall be filed in court without the
approval of the Commissioner.
Republic v. Lim Tian Teng Sons & Co.,
G.R. No. L-21731, March 31, 1966
FACTS: Lim Tian Teng Sons & Co., Inc. (LTT), a domestic
corporation with principal office in Cebu City, engaged in 1951
and 1952, among others, in the exportation of copra. Lim
Tian then filed its income tax return for 1952 based on
accrued income and expenses. Its return showed a loss of
P56,109.98.
CIR assessed Lim Tian of deficiency income tax and 50%
surcharge thereon amounting to P5,037.00 and demanded
payment thereof not later than February 15, 1957. Lim Tian
requested reinvestigation of its income tax liability. CIR did
NOT reply but instead referred the case to the SolGen for
collection by judicial action. SolGen demanded from Lim Tian
payment w/in 5 days, stating that otherwise judicial action
would be instituted without further notice.
Lim Tian thus wrote CIR and SolGen, reiterating its request
for reinvestigation. It requested that it be allowed to present its
explanation together w/ supporting papers relative to its
income tax liability.
Deputy Collector of CIR informed the taxpayer that its request
for reinvestigation would be granted provided it executed
within 10 days a WAIVER of the statute of limitations as
required in General Circular V-258 dated August 20, 1957.
The Deputy Collector extended the period within which to
execute and file with him the waiver of the statute of
limitations to December 31, 1957, but advised that if no waiver
is forthcoming on or before said date, judicial action for
collection would be instituted without further notice.
HOWEVER, Lim Tian failed to file a waiver.
CIR thus instituted 8 months after an action in the CFI of Cebu
for the collection of deficiency income tax.
CFI declared the CIR's assessment as valid, final and
executory, condemning Lim Tian to pay CIR w/ interest at 1%
monthly until fully paid.
ISSUES:
WON lower court has jurisdiction to entertain the case
given that CIR has NOT yet issued its final decision on
request for reinvestigation.
Yes. Nowhere in the Tax Code is the CIR required to rule first
on a taxpayer's request for reinvestigation before he can go to
court for the purpose of collecting the tax assessed. On the
contrary, Section 305 of the same Code withholds from all
courts, except the CTA under Section 11 of Republic Act 1125
, the authority to restrain the collection of any national internal-
revenue tax, fee or charge, thereby indicating the legislative
policy to allow the CIR much latitude in the speedy and
prompt collection of taxes. The reason is obvious. It is upon
taxation that the government chiefly relies to obtain the means
the carry on its operations,
Section 11 of Republic Act 1125 states in part: No appeal
taken to the Court of Tax Appeals from the decision of the
Collector of Internal Revenue ... shall suspend the payment,
levy, distraint, and/or sale of any property of the taxpayer for
the satisfaction of his tax liability as provided by existing law
EXCEPT if it may jeopardize interest of the gov and/or
taxpayer.
2. WON court erred in considering as final and executory
the assessment contained in the letter of the CIR dated
January 16, 1957. – NO, court was correct in considering
assessment final and executory
No. In this case, Lim Tian received said assessment on
January 30, 1957 and on the following day requested
reinvestigation of its tax liability. The CIR however did NOT
reply to the request for reinvestigation. Instead, he referred
the case to the Solicitor General for collection of the tax. The
lower court interpreted this action of the Collector of Internal
Revenue as a denial of defendant's request for reinvestigation
.
Instead of appealing to the Tax Court, however, Lim Tian
reiterated its request for reinvestigation.
Even if we do not count the period from October 8, 1957 (the
date when taxpayer received notice of the denial of its request
for reinvestigation) to December 31, 1957 (the deadline for the
submission of the written waiver of the statute of limitations) in
reckoning the 30-day period within which the taxpayer may
appeal to the CTA, said period had long lapsed when the CIR
filed the complaint in this case on September 2, 1958.
Taxpayer’s failure to appeal to the CTA in due time made
the assessment in question final, executory and
demandable.
And when the action was instituted on September 2, 1958 to
enforce the deficiency assessment in question, it was already
barred from disputing the correctness of the assessment or
invoking any defense that would reopen the question of his
tax liability on merits. Otherwise, the period of 30 days for
appeal to the Court of Tax Appeals would make little sense.
San Juan v. Vasquez
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
G.R. No. L-16814, September 19, 1961
Facts: Petitioner San Juan in this case filed a special civil
action of certiorari and prohibition against the lower court
judge from taking cognizance of a collection case filed against
him by the Commissioner of IR. The antecedent facts showed
that on June 50, 1954, the Collector of Internal Revenue wrote
the accountant of petitioner informing him that the latter is
given a period of grace up to July 16, 1954, to pay the
deficiency taxes without penalty, or until July 31, 1954, within
which to submit evidence to show that the assessments of the
respondent Commissioner are incorrect. The Accountant sent
a communication to the Commissioner on July 30, 1954
explaining why the claimed amount is not due and owing from
respondent. Nothing was heard from the Commisioner on the
matter until on February 25, 1959 when the Collector brought
the action in the CFI which the petitioner seeks to enjoin.
ISSUE: WON the CFI has jurisdiction to take cognizance
of a collection case filed on the basis of a disputed
assessment.
HELD: No, the CFI has no jurisdiction. The Court found
that the assessment was duly disputed by the petitioner for
San Juan citing a sufficient basis – in fact and in law – to
support his claim that the amount is not due and owing and
filing a timely appeal at the CTA. The Collector may not
overlook the fact that the assessment had been disputed as
the objections to the assessment had been made at the
opportune time. He may not ignore the positive dispute
against the assessment by immediately bringing an action to
collect, thus depriving the taxpayer of his right to appeal the
disputed assessment. As the legality and correctness of the
assessment is in dispute, the CTA has exclusive appellate
jurisdiction based on RA 1125, Section 7.
SEC. 7. The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided –
(1) Decisions of the Collector of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue;
Furthermore, we have decided against the jurisdiction of the
Courts of First Instance in a similar case, thus:It is our
considered opinion that the determination of the correctness
or incorrectness of a tax assessment to which the taxpayer is
not agreeable falls within the jurisdiction of the Court of Tax
Appeals and not of the Court of First Instance, for under the
aforequoted provision of law, the Court of Tax Appeals has
exclusive appellate jurisdiction to review on appeal any
decision of the Collector of Internal Revenue in cases
involving disputed assessments and other matters arising
under the National Internal Revenue Code or other law or part
of law administered by the Bureau of Internal Revenue. (
Blaquera v. Rodriguez, G.R. No. L-10935, April 28, 1958).
Yabes v. Flojo,
G.R. No. L-46954, July 20, 1982
Doroteo Yabes of Calamaniugan Cagayan, who was for
sometime an exclusive dealer of products of the International
Harvester Macleod, Inc., received on or about May 1, 1962, a
letter from the Commissioner of Internal Revenue dated
March 27, 1962, demanding payment of the amount of P15,
976.81, as commercial broker's fixed and percentage
taxes plus surcharges and the sum of P2,530 as
compromise penalty alledgely due from Yabes for the years
1956-1960; 
On May 11, 1962, Doroteo Yabes, through his counsel, filed
with the Commissioner's Office his letter dated May 10, 1962,
protesting the assessment of commercial broker's fixed
and percentage taxes plus penalties against him on the
ground that his agreements with the International Harvester
Macleod, Inc. were of purchase and sale, and not of
agency, hence he claimed he was not able to pay such kind
of taxes; 
Thereafter, there ensued an exchange of correspondence
between the lawyers of DoroteoYabes and the Commissioner;
The Commissioner in a letter dated August 3, 1962,
informed DoroteoYabes that he acted as a commercial
broker "in accordance with the ruling of this Office in the case
of Cirilo D. Constantino;
In turn, DoroteoYabes, in a letter dated August 22, 1962,
requested for the reinvestigation, or review of the case by the
appellate division of the Bureau of Internal Revenue in
accordance with standing rules, regulations or practice on the
matter;  
Yabes also wrote the Commissioner on August 24, 1962,
requesting that the appeal be held in abeyance pending final
decision of the Case of Cirilo D. Constantino;  
In reply, the Commissioner informed DoroteoYabes in a letter
dated September 18, 1962, that the latter's request for
reinvestigation was denied on the ground that he has "not
submitted any evidence to offset the findings of this Office as
to warrant a reinvestigation thereof"; but eight days later or on
September 26, 1962, the Commissioner wrote a letter
advising DoroteoYabes that "the administrative appeal ... will
be held in
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

abeyance pending the resolution of the issues in a similar
case (obviously referring to the aforesaid Constantino case)";
To give time for the Commissioner to study the case and
several other cases similar thereto, the lawyers of
DoroteoYabes agreed to file, and their client, DoroteoYabes
did file a tax waiver on October 20, 1962, extending the period
of prescription to December 31, 1967; 
DoroteoYabes died on March 13, 1963 and no estate
proceedings were instituted for the settlement of his estate;
his widow also died during the pendency of the case; the
petitioners are the children of the deceased taxpayer;
in CTA Case No. 2216, and subsequently filed a
memorandum in support of said motion to dismiss, on the
ground that the assessment against DoroteoYabes had
already become final, executory and incontestable, and the
Court of Tax Appeals had no jurisdiction over the case;
ISSUE: WON the CFI has jurisdiction over the case.
RULING: NO.
We are constrained to agree with the Court of Tax Appeals,
when it denied the Commissioner's motion to dismiss CTA
Case No. 2216, that:

On March 14, 1966, the Court of Tax Appeals decided the The period for appeal to this Court should not be counted from
Constantino "test" case. The Court of Tax Appeals ruled that September 18, 1962. In a letter of July 27, 1967, respondent
agreements entered into by Constantino with the informed petitioners that a resolution of their protest was
International Harvester Macleod, Inc. were of purchase and being held in abeyance until the Supreme Court renders a
sale, and not of agency, hence no commercial broker's decision on a similar case "involving the same factual and
fixed and percentage fees could be collected from the legal issues". As a matter of fact, in an earlier letter dated
said taxpayer; however, this Court (SC) on February 27, September 26, 1962, respondent also informed petitioners'
1970, in G.R. No. L-25926 reversed the Court of Tax Appeals counsel that "administrative appeal for and in behalf of their
and ruled in favor of the Commissioner of Internal Revenue;  clients win be held in abeyance pending resolution of the
issues on a similar case which was appealed by you to the
After a lapse of about five years, the heirs of the deceased Court of Tax Appeals". It is thus clear in these letters that
DoroteoYabes, through their lawyers, received on August 4, respondent reconsidered the finality of his decision of August
1967, a letter from the Commissioner dated July 27, 1967, 3, 1962, assuming arguendo that the letter had a tenor of
requesting that they "waive anew the Statute of Limitations" finality. 
and further confirming the previous understanding that the
final resolution of the protest of the deceased DoroteoYabes The Court of Tax Appeals in CTA Case No. 2216, stated
was "being held in abeyance until the Supreme Court renders further:
its decision on a similar case involving the same factual and
legal issues brought to it on appeal" (referring to the
The records show that a warrant of distraint and levy was
Constantino "test" case);conformably with the request of the
issued on October 2, 1970. Had this been served on
Commissioner, the heirs of DoroteoYabes filed a revised
DoroteoYabes, it would have been equivalent to a final
waiver further extending the period of prescription to
decision, ... There is, however, nothing to show that it was
December 31, 1970;
ever served on Yabes. Neither is there anything in the record
to show that a formal decision of denial was made after
Thereafter, no word was received by the petitioners or their respondent's letter of July 27, 1967. 
lawyers during the interim of more than three (3) years, but on
January 20, 1971, petitioners as heirs of the deceased
There is no reason for Us to disagree from or reverse the
Doroteo Yabes received the summons and a copy of the
Court of Tax Appeals' conclusion that under the
complaint filed by the Commissioner on December 4, 1970
circumstances of this case, what may be considered as final
with the Court of First Instance of Cagayan which seeks to
decision or assessment of the Commissioner is the filing of
collect from the petitioners the sum of P 15,976.82, as
the complaint for collection in the respondent Court of First
deficiency commercial broker's fixed and percentage taxes,
Instance of Cagayan, the summons of which was served on
including surcharges and interest thereon, due from their
petitioners on January 20, 1971, and that therefore the appeal
predecessor-in-interest, DoroteoYabes, by reason of the latter'
with the Court of Tax Appeals in CTA Case No. 2216 was filed
s income derived from transactions as dealer of the products
on time. The respondent Court of First Instance of
of the International Harvester Macleod, Inc.;
Cagayan can only acquire jurisdiction over this case filed
against the heirs of
Taking the complaint as the final decision of the
Commissioner on the disputed assessment against the
deceased taxpayer DoroteoYabes, petitioners filed on
February 12, 1971, a petition for review of said disputed
assessment with the Court of Tax Appeals; later on the same
day, February 12, 1971, petitioners filed their answer to the
complaint of the Commissioner before the Court of First
Instance of Cagayan; 19 and alleged therein, by way of special
defense, that the Court of Tax Appeals has exclusive
jurisdiction of the action and that there is another action of the
same nature between the parties relating to the same
assessment pending before the Court of Tax Appeals;
On the other hand, the Commissioner filed a motion to
dismiss dated March 24, 1971, with the Court of Tax Appeals

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

the taxpayer if the assessment made by the

Commissioner of Internal Revenue had become final and
incontestable. If the contrary is established, as this Court
holds it to be, considering the aforementioned conclusion of
the Court of Tax Appeals on the finality and incontestability of
the assessment made by the Commissioner is correct, then
the Court of Tax Appeals has exclusive jurisdiction over this
case. Petitioners received the summons in Civil Case No. II-7
of the respondent Court of First Instance of Cagayan on
January 20, 1971, and petitioners filed their appeal with the
Court of Tax Appeals in CTA Case No. 2216, on February 12,
1971, well within the thirty-day prescriptive period under
Section 11 of Republic Act No. 1125. The Court of Tax
Appeals has exclusive appellate jurisdiction to review on
appeal any decision of the Collector of Internal Revenue in
cases involving disputed assessments and other matters
arising under the National Internal Revenue Code.  na dismiss yung criminal case tapos walang assessment kasi
For want of jurisdiction over the case, the Court of First
Instance of Cagayan should have dismissed the complaint
filed in Civil Case No. II-7.
The recommendation of the Solicitor General that the lower
court hold in abeyance any action or proceeding in Civil Case
No. II-7 until after the Court of Tax Appeals shall have finally
decided CTA Case No. 2216, is untenable since the lower
court has no jurisdiction over the case. Jurisdiction over an
action includes jurisdiction over all interlocutory matters
incidental to the case and deemed necessary to preserve the
subject matter of the suit or protect interests of the parties.
Absent jurisdiction over the case, it would be improper for the
Court of First Instance of Cagayan to take cognizance over
the case and act upon interlocutory matters of the case, as
well.
The dismissal of the complaint, however, is not sufficient. The
ends of justice would best be served by considering the
complaint filed in Civil Case No. II-7 not only as a final notice
of assessment but also as a counterclaim in CTA Case No.
2216, in order to avoid mutiplicity of suits, as well as to
expedite the settlement of the controversy between the parties
. After all, the two cases involve the same parties, the same
subject matter, and the same issue, which is the liability of the
heirs of the deceased DoroteoYabes for commercial broker's
fixed and percentage taxes due from the said deceased.
February 4, 2020 | Transcribed by: James Adrian Cagas,
Ingrid Corinne Chua, Erven Jan Claros, Hannah Keziah Dela
Cerna & Francis Jerick Emuy
MAAM: what is the ratio decidendi of Pascor Realty?
Student: In this case the court ruled that not all documents
bear the liabilities of a taxpayer is an assessment.
MAAM: Assessment is not necessary for the CIR to
commence criminal action against the taxpayer. Sa CTA in my
experience the BIR sometimes does this no it doesnt wait for
an assessment to be issued before filing a criminal case
against the accused.
What is the disadvantage of such action?
Well. sa observation ko because di ba as i have said last
meeting the assessment pertain to the tax code is the FAN,
the BIR issues a FAN tapos may criminal action na so what if
the criminal action will be dismissed but merong
preponderance of evidence against the taxpayer na may
deficiency sa tax nya then the BIR will have no recourse kasi
the civil action is deemed instituted in the criminal action pag
nasa PAN stage ka palang so dismissed din yung civil case
mo. Wala kang habol sa taxpayer, that is the disadvantage for
the BIR.
But again because of I think commissioner Henares before
kasi may deadline sila dapat thursday meron kang criminal
complaint na maifile sa DOJ kundi yung BIR officer yung may
penalty so wala silang choice kailangan nilang magfile kahit
pa hndi kumpleto yung evidence nila.
Republic vs Patanao
FACTS: Patanao was a holder of a timber license in Agusan.
He was engaged in the business of logs and lumber. He failed
to file income tax returns for the years 1953 and 1954. There
was a deficiency. The CIR sent a demand letter against
Patanao and the latter did not pay the said taxes so the CIR
said that the assessment had become final and executory
since it was not contested before the CTA. Patanao argues
that the action is barred by prior judgment since he was
acquitted of a criminal case in the same court for failure to file
income tax return.
Issue: Whether the action filed by CIR is barred by prior
judgment
Ruling:
No, the SC held that the acquittal of the taxpayer from the
criminal action for failure to file a tax return does not carry with
it the acquittal of the taxpayer from any action arising from
such

MAAM: As to Criminal action?

Student: The failure to file the return after the assessment
can be criminally liable. A tax assessment is not necessary
before the filing of the criminal complaint against the taxpayer
because the Supreme Court ruled that the filing of an
assessment should be differentiated from the filing of the
criminal complaint that it is not required under the NIRC that
taxes assessment should issue to the taxpayer before criminal
complaint be filed against him.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
failure to file a tax return. So the SC held here that the CIR
may rightfully file a civil case against Patanao.
UNGAB vs CUSI
Facts: BIR examiner ...... filed by Petitioner in this case. Now
they found out that Pet failed to report the income from
banana sapling now it was assessed with deficiency taxes.
Pet wrote to the BIR protesting the taxes. BIR was convinced
that he filed a fraudulent income tax return. Information were
filed against Petitioner for fraudulent return. He argues that
the State prosecutor has no jurisdiction.
Issue: Whether the State Prosecutor has power to prosecute
the information filed against Petitioner in relation to the
alleged income tax return.
Ruling:
Yes, under AO 116 the state prosecutor has power to
prosecute fraudulent filing of tax return and assist fiscals for
violations of the NIRC.
Issue: Whether the filing of information is premature
Ruling: No, assessment is not necessary before the filing of a
criminal action because once a taxpayer files a fraudulent
income tax return the crime is already committed. Hence, it is
not necessary that an assessment be first conducted
I’m not sure kung dito ko na-mention yung rate cases. So ito
yung every Thursday nag fa-file sila ng complaint-affidavit sa
DOJ.
So Rate cases, I’m not sure kung hanggang ngayon meron
parin I think wala na, but in any case, I will discuss it briefly.
Yung Rate Cases kasi, dun nanggaling yung more than
majority of criminal cases sa CTA and SC. So what does the
BIR officers do?
1. They conduct a no-contact audit against the taxpayer.
Parang initial assessment siya, kung meron ba siyang
enough evidence against the taxpayer to file a criminal
action
2. Issuance of LOA (which is not the normal process of BIR,
because usually, LOA first then investigation).
Pero sa Rate Cases, investigate first tapos issue ng LOA
si BIR officer. So sa second step siya mag i-initiate ng
contact sa taxpayer, sa first step, wala.
3. If the evidence gathered by the BIR officer is enough to
prove the guilt of the taxpayer beyond reasonable doubt,
then he will file a criminal action, if not, then a civil action
but with 50% surcharge.
So how else will a taxpayer know kung may rate case na ba
siya, kung like may criminal action na ba against him/her?
Usually rate cases are filed or initiated by the National
Investigation Division Unit of the BIR.
So may sariling RMC ang rate cases, so may sarili siyang
rules. As usual sometimes hindi siya nasusunod ni BIR
example in the case of the former chief justice Corona. 2
weeks after his impeachment, a criminal case was filed
against him for tax evasion and one of his family members.
The criminal case against him was dismissed kasi walang
LOA. So yung mga ganun diba parang basic lang pero
merong mga instances na wala. So pwede nyo yung bantayan
yan pag lawyers na kayo.
People v Kintanar
CTA EB Crim No. 006, Dec 3, 2010
In Feb 7, 2006, 2 informations were filed against respondent
for violation of sec 255 of the NIRC. Based on the information,
Respondent is engaged in distributing of Forever Living
Products and according to the information, respondent failed
to file her ITR for the year 2000 and 2001
A confidential information was received by the national
Investigation Division of the BIR on the alleged tax evasion
scheme of the spouses Benjamin and Gloria Kintanar for non-
filing of ITR. The Chief of the Tax fraud Division of the BIR
issued and Access Letter to the RDO of Parañaque to furnish
to the investigating team of the ITR of the sps Kintanar, the
VAT returns, Percentage tax returns and BIR registration
certificate. An Access letter was also sent to the manager of
Forever Living Products (FLPPI) to furnish the investigating
team with the certification of the total income payment and
commission and bonuses received by the sps Kiintanar, as
well as the taxes withheld for calendar years 1996-2001
The RDO issued a certification stating that the sps have no
record or file for the years 1999-2001 and the FLPPI sent a
letter indicating the total income of Gloria Kintanar for the
years 1999-2001
After the initial investigation, the team found that the sps
Kintanar were able to generate a large amount of income as
distributors of FLPPI. A Letter of Authority was issued by the
BIR authorizing the investigating team to examine the books
and accounting records for all internal revenue taxes for TY
1999-2002 of sps Kintanar. The LOA was received by the
respondent’s husband but despite several notices, the sps
failed to submit the required documentss.
June 11, 2003 a subpoena duces tecum was issued ordering
sps Kintanar to appear before the Chief Prosecution Division
and to bring their books and records for the TY 1999-2002 in
which the sps failed to comply again.
On Dec 9, 2003, a PAN for the TY 199-2002 was issued by
the BIR to the sps giving them 15 days to explain the
discrepancies which the sps again failed to comply. A
Memorandum dated Feb 26, 2004 was submitted to the
deputy commissioner stating that sps Kintanar failed to file
their protest within 15 days and recommended for the
issuance of a Formal Demand Letter and Assessment. The
demand letter with the assessment notices were issued
against the sps
Aug 31, 2004, the husband of petitioner sent to the chief of
the Natl Investigation Division a letter of protest and a
photocopy of their joint income tax return for 2000-2002. Chief
of the NID informed the sps that they have 60d or until Nov 3,
2004 to submit their protest and supporting docs in which the
sps failed to comply. So their protest is considered denied for
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
the failure to submit the required docs
Based on the investigation and the documents obtained by
the prosecution, it found that the petitioner failed to file her
ITR for the TY 1999-2001 and found her liable for deficiency
income taxes from hear income earned with FLPPI
The respondent testified that she filed her ITS for the TY 2000
and 2001 and denies having willfully, unlawfully and
feloniously failed to filed her ITR; that she has no personal
knowledge of the actual filing of the said returns because it
was her husband who filed their ITRs
The husband also testified that he was the one who filed their
ITR for the TY 1997-2004 thru their accountant; that he gave
all the necessary docs for filing the ITRs; that he merely relied
on the accountant in preparing the ITRs
CTA 2ndDiv: guilty for sviolation of sec 255 of the NIRC and
ordered to pay the deficiency income tax for the TY 2000 plus
penalties, surcharges and interest
Issue:
1) WON the sps are guilty of violating sec 255 of the NIRC.
Yes
2) WON resp intentionally disregarded her tax
responsibilities. Yes
Ruling:
Sec 255 of the NIRC contemplates 4 situations punishable by
law, each of which constitutes failure to perform in a timely
manner
(a)To pay any tax
(b)To make a return
(c)To keep any record and
(d)To supply correct and accurate information
In the case at bar, Respondent is being accused for
FAILURE TO MAKE OR FILE A RETURN
The elements for failure to maker or file a return are as
follows:
1) The accused is a person REEQUIRED to make or file a
return
2) The accused failed to make or file the return at the time
required by law;
3) That failure to make or file the return was willful
In this case, as proven by the prosecution, all elements are
present in this case because:
1) Based on Sec 51 and Sec 74 of the NIRC, petitioner is
duty bound to make a return. Petitioner and her husband
were engaged in business and earned income in the form
of commissions as distributors of FLPPI. Since petitioner
earned a substantial income as distributor of FLPPI, she
is required to make/file her annual tax return
2) Petitioner was supposed to register, file her ITR and pay
the income taxes due with the authorized agent bank,
RDO, Collection Agent or Treasurer of the City where she
has her legal residence as established by the prosecution
. However, petitioner has NO RECORD of filing the
required ITRs within the period provided in Sec 51 in
Parañaque City. The only existing record of petitioner is
that she was registered as a one-time transaction
taxpayer for CGT and DST in Cavite.
Petitioner presented ITRs for TY 2000-2001 and the 2
undated Certifications issued by the RDO of Novaliches City
but such docs cannot be given credence as the same are
doubtful and materially flawed with irregularities.
3) Willful in tax crimes means voluntary, intentional violation
of a known legal duty. Bad faith or bad purpose need not
be shown. An act or omission is willfully done if done
voluntarily and intentionally and with specific intent to do
something the law forbids, or with specific intent to fail to
do something the law requires to be done; that is, with
bad purpose to either disobey or disregard the law.
A WILLFUL ACT may be described as one done intentionally,
knowingly and purposely, without justifiable excuse
Contention of Resp: she did not actively participate in the filing
of the ITR because she entrusted her husband of such duty
and that her husband hired an accountant to handle their tax
obligations, thus no intentional or malicious filing of ITR)
In this case, such defense is not tenable. Her reliance to her
husband is not a defense because she knew from the start
that she and her husband are mandated by law to file their
ITRs and also, being a businesswoman, she ought to know all
the matters concerning her business and this includes
knowledge of her tax obligations (Rule 131 of the Rules of
Evidence).
Also, no affirmative acts on the part of petitioner to make sure
that her obligations to file her ITRs had been fully complied
with. She did not even bother to inquire or determine the facts
surrounding the filing of her ITRs. Such neglect is tantamount
to deliberate ignorance or conscious avoidance.
\It was also established that the petitioner was informed that
no ITRs were filed and recorded under her name. Several
notices were sent by the BIR to comply her tax obligations but
she did not comply despite the many notices sent to her.
Judy Anne Santos v People
GR 173176, August 26, 2008
On Nov 3, 2005, an information against Juday was filed for
violation of sec 255 of the NIRC for willfully, unlawfully and
feloniously filing a false and fraudulent ITR for TY 2002 by not
stating her complete income
Dec 9, 2005, the court found probable cause and a warrant of
arrest was issued but on Dec 21, 2005, the accused
voluntarily appeared and posted the required bail bond. May
23, 2006, the accused was arraigned and pleaded not guilty
For the Prosecution: the prosecution presented
documentary evidence and the testimonies of 14 witnesses.
The prosecution submitted the Annual ITR for the TY 2002
filed on April 15, 2003 and several Certificate of Creditable tax
withheld at source for the period from Jan 1, 2002 – Dec 31,
2002 and several other documents which show the tax
withheld by various agencies that the petitioner had worked.
All in all, it was established that the accused had received
more income than what she has reported.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
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Aznar v CTA and CIR: fraud cannot be presumed but proven.

For the Defense: she also presented documentary evidence
and 2 witnesses. The petitioner denied the allegations that
she willfully filed a false and fraudulent ITR for the TY 2002.
That it was her manager who is in-charge of filing the relevant
return and paying the taxes
Issue: WON the accused may be held liable for violation of
Sec 255 of the NIRC. No
Ruling:
Based on Sec 255, the provision enumerates the ff offenses:
1) Willful failure to pay tax
2) Willful failure to make a return
3) Willful failure to keep any record
4) Willful failure to supply correct and accurate information
5) Willful failure to withhold or remit taxes withheld; or
6) Willful failure to refund excess taxes withheld on
compensation
In this case, the one being attributed to the accused is the
willful failure to supply correct and accurate information which
have the ff essential elements:
1) A person is required to supply correct and accurate
information
2) There is failure to supply correct and accurate information
at the time/s required by law or rules and regulation; and
3) Such failure to supply correct and accurate info is done
WILLFULLY.
The fraudulent intent cannot be deduced from mistakes
however frequent they may be especially if the mistakes
emanate from erroneous entries or erroneous classification of
items in accounting methods.
The fraud contemplated by law is actual and not constructive.
It must be intentional fraud, consisting of deception willfully
and deliberately done or resorted to in order to induce another
to five up some legal right. Negligence is not equivalent to
fraud with intent to evade tax. It must amount to intentional
wrong doing with the sole objective of avoiding the tax.
In this case, the prosecution was able to prove that the
accused failed to supply correct and accurate information in
her ITR for TY 2002 for her failure to declare her other income
payments from other source. However it is well-settled that
mere understatement of a tax is not itself proof of fraud for the
purpose of tax evasion. The records are bereft of any
evidence to establish the element of willfulness on the part of
the accused to supply the correct and accurate information on
her

In this case, based on the elements:

1) Every Filipino citizen residing in the Philippines is
required not only to file and ITR on income from all
sources, on/before the 15th day of April of each year,
covering the income for the preceding TY, but also to
supply correct and accurate information thereof. Even
under the creditable tax system, the income recipient is
still required to file an ITR and to report the income and/or
pay the difference between the tax withheld and the tax
due.
So being an entertainer since 8 and a resident Filipino citizen,
accused is required to file and ITR. The prosecution was able
to prove that the accused is required to file an income tax and
the accused apparently supplied the CORRECT and
ACCURATE information thereof
2) The prosecution was able to presented both documentary
and testimonial evidence as proof of the accused’s
undeclared income earned from ABS-CBN, Viva
Productions, Star Cinema Productions,, Regal
Entertainment, Century Canning Corporation
3) Willful is defined as voluntary and intentional violation of a
known legal duty. The element of willful failure to supply
correct and accurate information must be fully established
as a positive act or state of mind. It cannot be presumed
nor attributed to mere inadvertent or negligent acts.
In this case, Juday entrusted everything to her manager
including the payment of taxes and she maintains that it is her
intention to settle the case were it not for the opposition of her
manager and counsel. Also based on the testimony of her
accountant, she accounted all the papers provided by the
manager of the accused

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

subject return. however, That when in the opinion of the Court the
collection by the aforementioned government agencies
Juday, however, must pay the income tax deficiency for the may jeopardize the interest of the Government and/or the
taxable year 2002, including penalties and interests taxpayer the Court any stage of the proceeding may
suspend the said collection and require the taxpayer
So how does it differ with Kintanar? either to deposit the amount claimed or to file a surety
In Kintanar, Gloria was a business woman and as such, she bond for not more than double the amount with the Court.
had to know the aspects of her business, also she was also "In criminal and collection cases covered respectively by
sent several notices by the BIR as to her tax liability. Gloria Section 7(b) and (c) of this Act, the Government may directly
knew but chose to ignore such fact. In this case of Judy Anne, file the said cases with the CTA covering amounts within its
there is no willfulness on her part to supply the wrong or exclusive and original jurisdiction."
fraudulent information in the ITR. (note: not corrected by
maam) Sec 11, RA 9282. Section 18 of the same Act is hereby
amended as follows:
e. Anti-injuction Rule
SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No
NIRC, Section 218. Injunction not Available to Restrain civil proceeding involving matter arising under the National
Collection of Tax. – No court shall have the authority to grant Internal Revenue Code, the Tariff and Customs Code or the
an injunction to restrain the collection of any national internal Local Government Code shall be maintained, except as
revenue tax, fee, or charge imposed by this Code. herein provided, until and unless an appeal has been
previously filed with the CTA and disposed of in accordance
with the provisions of this Act.
Section 9. RA 9282. Section 11 of the same Act is hereby
amended to read as follows: "A party adversely affected by a resolution of a Division of the
CTA on a motion for reconsideration or new trial, may file a
"SEC. 11. Who May Appeal; Mode of Appeal; Effect of petition for review with the CTA en banc."
Appeal. - Any party adversely affected by a decision, ruling or "SEC. 19. Review by Certiorari. - A party adversely affected
inaction of the Commissioner of Internal Revenue, the by a decision or ruling of the CTA en banc may file with the
Commissioner of Customs, the Secretary of Finance, the Supreme Court a verified petition for review on certiorari
Secretary of Trade and Industry or the Secretary of pursuant to Rule 45 of the 1997 Rules of Civil Procedure."
Agriculture or the Central Board of Assessment Appeals or
the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or
ruling or after the expiration of the period fixed by law for What is the anti-injunction rule?
action as referred to in Section 7(a)(2) herein. It is where the courts are prohibited from enjoining the
collection of internal revenue taxes.
"Appeal shall be made by filing a petition for review under a
procedure analogous to that provided for under Rule 42 of the What is the exception of this?
1997 Rules of Civil Procedure with the CTA within thirty (30) When it would jeopardize the interest of the Government or
days from the receipt of the decision or ruling or in the case of taxpayer.
inaction as herein provided, from the expiration of the period
fixed by law to act thereon. A Division of the CTA shall hear So in practice, what the parties do is that the counsel, when
the appeal: Provided, however, That with respect to decisions they file the petition for review, meron na silang motion to
or rulings of the Central Board of Assessment Appeals and suspend
the Regional Trial Court in the exercise of its appellate
jurisdiction appeal shall be made by filing a petition for review
under a procedure analogous to that provided for under rule
43 of the 1997 Rules of Civil Procedure with the CTA, which
shall hear the case en banc. 
"All other cases involving rulings, orders or decisions filed with
the CTA as provided for in Section 7 shall be raffled to its
Divisions. A party adversely affected by a ruling, order or
decision of a Division of the CTA may file a motion for
reconsideration of new trial before the same Division of the
CTA within fifteens (15) days from notice thereof: Provide,
however, That in criminal cases, the general rule applicable in
regular Courts on matters of prosecution and appeal shall
likewise apply.
"No appeal taken to the CTA from the decision of the
Commissioner of Internal Revenue or the Commissioner of
Customs or the Regional Trial Court, provincial, city or
municipal treasurer or the Secretary of Finance, the Secretary
of Trade and Industry and Secretary of Agriculture, as the
case may be shall suspend the payment, levy, distraint,
and/or sale of any property of the taxpayer for the satisfaction
of his tax liability as provided by existing law: Provided,

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
the collection of taxes. Pwede din naman na afterwards like
before sila mag hearing. So the CTA will grant the hearing
para sa motion to suspend, and after the hearing, issue the
suspension order for the collection of taxes, then it usually
requires a bond. Diba meron ng case si Pacquiao, may
deficiency taxes siya which amounted to billions. If the CTA
will require Manny to provide a bond for the suspension (
which it actually did), the monthly fee was 4 million plus, then
sabi ni Manny na unfair kasi may exhorbitant siya na monthly
fee and hindi pa naman sure na liable siya sa billion na
deficiency. So it went to the SC, then the SC said that the
CTA can grant a suspension order even without a bond. So
yun lang yung pacquiao case.
CHURCHILL v. RAFFERTY
G.R. No. L-10572 December 21, 1915
FACTS:
The judgment appealed from in this case perpetually restrains and
prohibits the defendant and his deputies from collecting and enforcing
against the plaintiffs and their property the annual tax mentioned and
described in subsection (b) of section 100 of Act No. 2339, effective
July 1, 1914, and from destroying or removing any sign, signboard, or
billboard, the property of the plaintiffs, for the sole reason that such
sign, signboard, or billboard is, or may be, offensive to the sight; and
decrees the cancellation of the bond given by the plaintiffs to secure
the issuance of the preliminary injunction granted soon after the
commencement of this action.
ISSUE: WON the court may restrain the collection of taxes by
injunction?
RULING: NO.
The first question is one of the jurisdiction and is of vital importance to
the Government. The sections of Act No. 2339, which bear directly
upon the subject, are 139 and 140.
The first expressly forbids the use of an injunction to stay the
collection of any internal revenue tax; the second provides a remedy
for any wrong in connection with such taxes, and this remedy was
intended to be exclusive, thereby precluding the remedy by injunction,
which remedy is claimed to be constitutional.
The two sections, then, involve the right of a dissatisfied taxpayers to
use an exceptional remedy to test the validity of any tax or to
determine any other question connected therewith, and the question
whether the remedy by injunction is exceptional.
Preventive remedies of the courts are extraordinary and are not the
usual remedies. The origin and history of the writ of injunction show
that it has always been regarded as an extraordinary, preventive
remedy, as distinguished from the common course of the law to
redress evils after they have been consummated. No injunction issues
as of course, but is granted only upon the oath of a party and when
there is no adequate remedy at law.
The Government does, by section 139 and 140, take away the
preventive remedy of injunction, if it ever existed, and leaves the
taxpayer, in a contest with it, the same ordinary remedial actions
which prevail between citizen and citizen. The Attorney-General, on
behalf of the defendant, contends that there is no provisions of the
paramount law which prohibits such a course.
While, on the other hand, counsel for plaintiffs urge that the two
sections are unconstitutional because (a) they attempt to deprive
aggrieved taxpayers of all substantial remedy for the protection of
their property, thereby, in effect, depriving them of their property
without due process of law, and (b) they attempt to diminish the
jurisdiction of the courts, as conferred
upon them by Acts Nos. 136 and 190, which jurisdiction was ratified
and confirmed by the Act of Congress of July 1, 1902.
In the first place, it has been suggested that section 139 does not
apply to the tax in question because the section, in speaking of a "tax
," means only legal taxes; and that an illegal tax (the one complained
of) is not a tax, and, therefore, does not fall within the inhibition of the
section, and may be restrained by injunction.
There is no force in this suggestion. The inhibition applies to all
internal revenue taxes imposes, or authorized to be imposed, by Act
No. 2339. (Snyder vs. Marks, 109 U.S., 189.) And, furthermore, the
mere fact that a tax is illegal, or that the law, by virtue of which it is
imposed, is unconstitutional, does not authorize a court of equity to
restrain its collection by injunction.
There must be a further showing that there are special circumstances
which bring the case under some well recognized head of equity
jurisprudence, such as that irreparable injury, multiplicity of suits, or a
cloud upon title to real estate will result, and also that there is, as we
have indicated, no adequate remedy at law. This is the settled law in
the United States, even in the absence of statutory enactments such
as sections 139 and 140.
Side Issue
In the consideration of the plaintiffs' second proposition, we will
attempt to show (1) that the Philippine courts never have had, since
the American occupation, the power to restrain by injunction the
collection of any tax imposed by the Insular Government for its own
purpose and benefit, and (2) that assuming that our courts had or
have such power, this power has not been diminished or curtailed by
sections 139 and 140.
Sections 139 and 140 of Act No. 2339 contain, as we have indicated,
the same prohibition and remedy. The result is that the courts have
been expressly forbidden, in every act creating or imposing taxes or
imposts enacted by the legislative body of the Philippines since the
American occupation, to entertain any suit assailing the validity of any
tax or impost thus imposed until the tax shall have been paid under
protest. The only taxes which have not been brought within the
express inhibition were those included in that part of the old Spanish
system which completely disappeared on or before January 1, 1905,
and possibly the old customs duties which disappeared in February,
1902.
Section 56 of the Organic Act (No. 136), effective June 16, 1901,
provides that "Courts of First Instance shall have original jurisdiction:
2. In all civil actions which involve the ... legality of any tax, impost, or
assessment, 7. Said courts and their judges, or any of them, shall
have power to issue writs of injunction, mandamus, certiorari,
prohibition, quo warranto, and habeas corpus in their respective
provinces and districts, in the manner provided in the Code of Civil
Procedure.
The provisions of the Code of Civil Procedure (Act No. 190), effective
October 1, 1901, which deals with the subject of injunctions, are
sections 162 to 172, inclusive. Injunctions, as here defined, are of two
kinds; preliminary and final. The former may be granted at any time
after the commencement of the action and before final judgment, and
the latter at the termination of the trial as the relief or part of the relief
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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prayed for (sec. 162). Any judge of the Supreme Court may grant a
preliminary injunction in any action pending in that court or in any
Court of First Instance. A preliminary injunction may also be granted
by a judge of the Court of First Instance in actions pending in his
district in which he has original jurisdiction (sec. 163). But such
injunctions may be granted only when the complaint shows facts
entitling the plaintiff to the relief demanded (sec. 166), and before a
final or permanent injunction can be granted, it must appear upon the
trial of the action that the plaintiff is entitled to have commission or
continuance of the acts complained of perpetually restrained (sec.
171).
These provisions authorize the institution in Courts of First Instance of
what are known as "injunction suits," the sole object of which is to
obtain the issuance of a final injunction. They also authorize the
granting of injunctions as aiders in ordinary civil actions. We have
defined in Davesavs.Arbes (13 Phil. Rep., 273), an injunction to be "A
"special remedy" adopted in that code (Act 190) from American
practice, and originally borrowed from English legal procedure, which
was there issued by the authority and under the seal of a court of
equity, and limited, as in other cases where equitable relief is sought,
to those cases where there is no "plain, adequate, and complete
remedy at law,"which will not be granted while the rights between the
parties are undetermined, except in extraordinary cases where
material and irreparable injury will be done,"which cannot be
compensated in damages . . .
By paragraph 2 of section 56 of Act No. 136, supra, and the
provisions of the various subsequent Acts heretofore mentioned, the
Insular Government has consented to litigate with aggrieved persons
the validity of any original tax or impost imposed by it on condition that
this be done in ordinary civil actions after the taxes or exactions shall
have been paid.
But it is said that paragraph 2 confers original jurisdiction upon Courts
of First Instance to hear and determine "all civil actions" which involve
the validity of any tax, impost or assessment, and that if the all-
inclusive words "all" and "any" be given their natural and unrestricted
meaning, no action wherein that question is involved can arise over
which such courts do not have jurisdiction. (Barramedavs.Moir, 25
Phil. Rep., 44.) This is true. But the term "civil actions" had its well
defined meaning at the time the paragraph was enacted. The same
legislative body which enacted paragraph 2 on June 16, 1901, had,
just a few months prior to that time, defined the only kind of action in
which the legality of any tax imposed by it might be assailed. (Sec. 84,
Act 82, enacted January 31, 1901, and sec. 17, Act No. 83, enacted
February 6, 1901.) That kind of action being payment of the tax under
protest and an ordinary suit to recover and no other, there can be no
doubt that Courts of First Instance have jurisdiction over all such
actions. The subsequent legislation on the same subject shows
clearly that the Commission, in enacting paragraph 2, supra, did not
intend to change or modify in any way section 84 of Act No. 82 and
section 17 of Act No. 83, but, on the contrary, it was intended that "
civil actions," mentioned in said paragraph, should be understood to
mean, in so far as testing the legality of taxes were concerned, only
those of the kind and character provided for in the two sections above
mentioned. It is also urged that the power to restrain by injunction the
collection of taxes or imposts is conferred upon Courts of First
Instance by paragraph 7 of section 56, supra. This paragraph does
empower those courts to grant injunctions, both preliminary and final,
in any civil action pending in their districts, provided always, that the
complaint shows facts entitling the plaintiff to the relief demanded.
Injunction suits, such as the one at bar, are "civil actions," but of a
special or extraordinary character. It cannot be said that the
Commission intended to give a broader or different meaning to the
word "action," used in Chapter 9 of the Code of Civil Procedure in
connection with injunctions, than it gave to the same word found in
paragraph 2 of section 56 of the Organic Act. The Insular Government
, in exercising the power conferred upon it by the Congress of the
United States, has declared that the citizens and residents of this
country shall pay certain specified taxes and imposts. The power to
tax necessarily carries with it the power to collect the taxes. This
being true, the weight of authority supports the proposition that the
Government may fix the conditions upon which it will consent to
litigate the validity of its original taxes. (Tennessee vs. Sneed, 96 U.S
., 69.)
We must, therefore, conclude that paragraph 2 and 7 of section 56 of
Act No. 136, construed in the light of the prior and subsequent
legislation to which we have referred, and the legislative and judicial
history of the same subject in the United States with which the
Commission was familiar, do not empower Courts of firstInstance to
interfere by injunction with the collection of the taxes in question in
this case.
The legislative body of the Philippine Islands has declared from the
beginning (Act No. 82) that payment under protest and suit to recover
is an adequate remedy to test the legality of any tax or impost, and
that this remedy is exclusive. Can we say that the remedy is not
adequate or that it is not exclusive, or both? The plaintiffs in the case
at bar are the first, in so far as we are aware, to question either the
adequacy or exclusiveness of this remedy.
Q: What did the taxpayer contend?
A: That the no-injunction rule violates the due process clause
of the taxpayer.
Atty. B: The Taxpayer was contending that it may opt out of
paying the tax because the law was unconstitutional anyway.
Q: How did the Supreme Court rule?
A: A provision in an internal revenue law prohibiting the courts
from enjoining the collection for an internal revenue tax is not
invalid as opposed to the due process and equal protection of
the law clauses of the bill of rights of the Organic Act.
Such legislation has been upheld by the United States
Supreme Court.
From the Full Text: An examination of the sections of our Internal
Revenue Law and of the circumstances under which and the
purposes for which they were enacted, will show that, unlike the
statutes under consideration in the above cited case, their enactment
involved no attempt on the part of the Legislature to prevent
dissatisfied taxpayers "from resorting to the courts to test the validity
of the legislation;" ho effort to prevent any inquiry as to their validity.
While section 139 does prevent the testing of the validity of
subsection (b) of section 100 in injunction suits instituted for the
purpose of restraining the collection of internal revenue taxes, section
140 provides a complete remedy for that purpose.
And furthermore, the validity of subsection (o) does not depend upon
"the existence of a fact which can be determined only after
investigation
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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of a very complicated and technical character," but the jurisdiction of
the Legislature over the subject with which the subsection deals "is
complete in any event."
CIR v. CEBU PORTLAND CEMENT CO.
G.R. No. L-29059. December 15, 1987
Facts:
By virtue of a decision of the Court of Tax Appeals rendered
, as modified on appeal by the Supreme Court, the Commissioner of
Internal Revenue was ordered to refund to the Cebu Portland Cement
Company the amount of P359,408.98, representing overpayments of
ad valorem taxes on cement produced and sold by it after October
1957. CEBU PORTLAND moved for a writ of execution to enforce the
said judgment.
The motion was opposed by the CIR on the ground that the CEBU
PORTLAND had an outstanding sales tax liability to which the
judgment debt had already been credited. In fact, it was stressed,
there was still a balance owing on the sales taxes in the amount of P4
,789,279.85 plus 28% surcharge. The Court of Tax Appeals **
granted the motion, holding that the alleged sales tax liability of the
CEBU PORTLAND was still being questioned and therefore could not
be set-off against the refund.
Contentions:
CEBU PORTLAND:
• disclaims liability for the sales taxes, on the ground that
cement is not a manufactured product but a mineral product. As such
, it was exempted from sales taxes under Section 188 of the Tax
Code after the effectivity of Rep. Act No. 1299 on June 16, 1955, in
accordance with Cebu Portland Cement Co. v. Collector of Internal
Revenue, 9 decided in 1968. Here Justice Eugenio Angeles declared
that "before the effectivity of Rep. Act No. 1299, amending Section
246 of the
National Internal Revenue Code, cement was taxable as a
manufactured product under Section 186, in connection with Section
194(4) of the said Code," thereby implying that it was not considered
a manufactured product afterwards.
• Also, the alleged sales tax deficiency could not as yet be
enforced against it because the tax assessment was not yet final, the
same being still under protest and still to be definitely resolved on the
merits.
• Besides, the assessment had already prescribed, not
having been made within the reglementary five-year period from the
filing of the tax returns.
Commissioner of Internal Revenue claims:
• that the refund should be charged against the tax deficiency
of the private respondent on the sales of cement since cement is a
manufactured and not a mineral product and therefore not exempt
from sales taxes.
• He adds that enforcement of the said tax deficiency was
properly effected through his power of distraint of personal property
under Sections 316 and 318 5 of the said Code and,
• moreover, the collection of any national internal revenue tax
may not be enjoined under Section 305, subject only to the exception
prescribed in Rep. Act No. 1125. This is not applicable to the instant
case.
• The petitioner also denies that the sales tax assessments
have already prescribed because the prescriptive period should be
counted from the filing of the sales tax returns, which had not yet
been done by the private respondent.
Issues:
1. Whether cement is a manufactured product and therefore not
exempt from sales tax? Yes.
Ruling: It is clear that cement qua cement was never considered as a
mineral product within the meaning of Section 246 of the Tax Code,
notwithstanding that at least 80% of its components are minerals, for
the simple reason that cement is the product of a manufacturing
process and is no longer the 'mineral product' contemplated in the
Tax Code (i.e.; minerals subjected to simple treatments) for the
purpose of imposing the ad valorem tax.
"The decision sought to be reconsidered here referred to the
legislative history of Republic Act No. 1299 which introduced a
definition of the terms 'mineral' and 'mineral products' in Sec. 246 of
the Tax Code. Given the legislative intent, the holding in the CEPOC
case (G.R. No. L-20563) that cement was subject to sales tax prior to
the effectivity of Republic Act No. 1299 cannot be construed to mean
that, after the law took effect, cement ceased to be so subject to the
tax. To erase any and all misconceptions that may have been
spawned by reliance on the case of Cebu Portland Cement Co. v.
Collector of Internal Revenue, L-20563, October 29, 1968 (28 SCRA
789) penned by Justice Eugenio Angeles, the Court has expressly
overruled it insofar as it may conflict with the decision of August 10,
1983, now subject of these motions for reconsideration."
2. Whether or not the assessment has prescribed as it is beyond 5
years? No.
On the question of prescription, the private respondent claims that the
five-year reglementary period for the assessment of its tax liability
started from the time it filed its gross sales returns on June 30, 1962.
Hence, the assessment for sales taxes made on January 16, 1968
and March 4, 1968, were already out of time. We disagree. This
contention must fail for what CEPOC filed was not the sales returns
required in Section 183(n) but the ad valorem tax returns required
under Section 245 of the Tax Code.
CEPOC argues that said returns contain the information necessary for
the assessment of the sales tax. The Commissioner does not
consider such returns as compliance with the requirement for the filing
of tax returns so as to start the running of the five-year prescriptive
period.Absent a return, or when the return is false or fraudulent, the
applicable period is ten (10) days from the discovery of the fraud,
falsity or omission
3. Whether there is merit on the contention that assessment cannot
as yet be enforced because it is still being contested? No.
The argument that the assessment cannot as yet be enforced
because it is still being contested loses sight of the urgency of the
need to collect taxes as "the lifeblood of the government." If the
payment of taxes could be postponed by simply questioning their
validity, the machinery of the state would grind to a halt and all
government functions would be paralyzed. That is the reason why,
save for the exception already noted, the Tax Code provides:
"Sec. 291. Injunction not available to restrain collection of tax. — No
court shall have authority to grant an injunction to restrain the
collection of any national internal revenue tax, fee or charge imposed
by this Code."
It goes without saying that this injunction is available not only when
the assessment is already being questioned in a court of justice but
more so if, as in the instant case, the challenge to the assessment is
still —
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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and only — on the administrative level. There is all the more reason to instant protest, or upon protest within ten days, and shall there upon
apply the rule here because it appears that even after crediting of the request the decision of the Collector of Internal Revenue. If the
refund against the tax deficiency, a balance of more than P4 million is decision
still due from the private respondent. of the Collector of Internal Revenue is adverse, or if no decision is
To require the petitioner to actually refund to the private respondent made by him within six months from the date when his decision was
the amount of the judgment debt, which he will later have the right to requested, the taxpayer may proceed, at any time within two years
distrain for payment of its sales tax liability is in our view an idle ritual. after the payment of the tax, to bring an action against the Collector of
We hold that the respondent Court of Tax Appeals erred in ordering Internal Revenue for the recovery of the sum alleged to have been
such a charade. illegally collected, the process to be served upon him, upon the
provincial treasurer, or upon the officer collecting the tax."
Section 141 of the same Act provides:
BANK OF THE PHILIPPINE ISLANDS vs. WENCESLAO TRINIDAD "SEC. 141. Action to contest forfeiture of chattel. — In case of the
, Collector of Internal Revenue, seizure of personal property under claim of forfeiture the owner,
G.R. No. 16014; October 4, 1921 desiring to contest the validity of the forfeiture, may at any time before
sale or destruction of the property bring an action against the person
FACTS: seizing the property or having possession thereof to recover the same
, and upon giving proper bond may enjoin the sale; or after the sale
Collector of Internal Revenue, through his duly authorized agent,
and within six months he may bring an action to recover the net
seized and distrained certain personal property, consisting of
proceeds realized at the sale."
machinery for sawing lumber and advertised the same for sale, to
realize the sum of P2,159.79, alleged to be due to the Government The lower court was of the opinion that the plaintiff should have
from Pujalte& Co., as forestry charges. CIR claimed that said proceeded under the latter section above quoted and not under the
personality belonged to the said company, was used in the business former. It cannot be maintained that the personal property here in
on which the taxes were due, and was liable to seizure to cover said question was seized by the defendant "under claim of forfeiture;" nor
taxes. could it have been legally seized under claim of forfeiture. It was
seized to enforce an alleged tax lien, under section 149 of Act No.
On the other hand, BPI claimed to be the owner of said property by
2339 (sec. 1588, Act No. 2711), which was quoted by the lower court
virtue of chattel mortgage conveyed as security for payment to BPI of
in its decision (p. 19, B. of E.) and which in no way provides for the
two promissory notes for the sum of P180,000 owed to him by Pujalte
forfeiture of the property on which such a lien attaches. Forfeiture is "
& Co., It was duly registered and, on that date, the property is free
the divestiture of property without compensation, in consequence of
from all tax lien.BPI demanded its release. The demand being denied,
an offense. The effect of such forfeiture is to transfer the title to the
BPI paid to CIR the said sum of P2,159.79 under protest to prevent
specific thing from the owner to the sovereign power." (12 R. C. L.,
the sale of said property, and immediately brought the present action
124.) There is a great difference between a seizure under forfeiture
in the Court of First Instance of Zamboanga to recover the same. The
and a seizure to enforce a tax lien. In the former all the proceeds
lower court, after due trial, dismissed the BPI’s complaint and
derived from the sale of the thing forfeited are turned over to the
absolved CIR from all liability thereunder for the following reason:
Collector of Internal Revenue (sec. 148, Act No. 2339); in the latter.
1. That the party who was liable to pay the taxes for which the
the residue of such proceeds over and above what is required to pay
property in question was distrained was not BPI but Pujalte& Co.; and
the tax sought to be realized, including expenses, is returned to the
that BPI, having "voluntarily and spontaneously" paid the debt of the
owner of the property (second paragraph, sec. 152, Act No. 2339).
latter, had no cause of action against the defendant collector, and
Clearly, the remedy applicable to the present case is that provided for
could only recover the sum so paid by it from Pujalte& Co., under
in section 140, above quoted, and which the plaintiff invoked. (See
article 1158 of the Civil Code (p. 15, B. of E. ); that the plaintiff should
Hongkong & Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145
have proceeded under section 141 of Act No. 2339 (now sec. 1580 of
, 147.)
Act No. 2711), and not under section 140 of the said Act (sec. 1579 of
Second. At the time of the seizure of the property here in question,
Act No. 2711).
the plaintiff held a valid and subsisting chattel mortgage on the same,
2. That "even supposing for a moment" that BPI had a right of action
duly registered in the registry of deeds. "A chattel mortgage is a
against the CIR to recover the sum paid by it to the latter, yet this
conditional sale of personal property as security for the payment of a
action must fail because the property in question, having been used
debt, or the performance of some other obligation specified therein,
by Pujalte& Co. in its business of cutting and sawing lumber, was
the condition being that the sale shall be void upon the seller paying
liable to seizure and distraint under section 149 of Act No. 2339.
the purchaser a sum of money or doing some other act named." (Sec.
ISSUE: Whether recovery by BPI is proper? Yes. 3, Act No. 1508.) "Therefore, so long as the mortgage exists, the
RULING: dominion with respect to the mortgaged personal property rests with
We are of the opinion that neither of the foregoing reasons is sound, the creditor-pledgee from the time of the inscription of the mortgage in
and that the judgment of the lower court should be revoked. the registry, and the furniture ceases to be the property of the debtor
First. There is absolutely no basis for the finding of the trial court that " for the reason that it has become the property of the creditor, in like
the plaintiff bank had voluntarily and spontaneously paid the debt of a manner as the dominion
third party, that is, that of the firm of Pujalte& Co." (p. 15, B. of E.).
Paragraph 7 of the plaintiff's complaint alleges: "That thereupon,
involuntarily and under due protest in writing, the plaintiff bank made
payment of the required sum of P2,159.79 in order to secure the
release of its seized property." These allegations were specifically
admitted by the defendant (par. 5, stipulation, Plaintiff's Exhibit G).
Section 140 of the Internal Revenue Law (Act No. 2389) provides as
follows:
"SEC. 140. Recovery of tax paid under protest. — When the validity of
any tax is questioned, or amount disputed, or other question raised as
to, liability therefor, the person against whom or against whose
property the same is sought to be enforced shall pay the tax under

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
of a thing sold is transferred to the purchaser and ceases to belong to
the vendor from the moment of the delivery thereof, as a result of the
sale." (Meyers vs. Thein, 15 Phil., 303, 308-309; see also Bachrach
vs. Mantel, 25 Phil., 410; In re Du Tec Chuan, 34 Phil., 488, 490.)
The chattel mortgage in question was registered in the registry of
deeds on the 26th day of December, 1912. The forest charges sought
to be collected by the defendant were found to be due from Pujalte&
Co. on the 13th day of July, 1916, and on that date the property
covered by said chattel mortgage was seized by the defendant to
enforce the payment of said forest charges. It is clear from these facts
and from the legal provisions and jurisprudence above quoted that the
plaintiff-mortgagee, and not Pujalte& Co., the mortgagor, was, and
had been for more than three years, the legal owner of the property in
question at the time the same was seized by the defendant. And even
granting, without deciding, that the forest charges area tax on
business or occupation within the meaning of section 149 of Act No.
2339 (sec. 1588, Act No. 2711), yet we are of the opinion and so
decide that the mere fact that said property was used in the business
of Pujalte& Co. could not and did not make such property liable for the
payment of taxes due from said company, said property belonging as
it did to an innocent third party. "The property used in the business or
occupation," referred to in said section 149, can only mean property
belonging to the owner of the business or occupation. Any other
construction would be unwarranted and unjust.
Q: What are the 2 main grounds for compromise
A: SEC. 204. Authority of the Commissioner to Compromise,
Abate and Refund or Credit Taxes. -
The Commissioner may -
(A) Compromise the payment of any internal revenue tax,
when:
(1) A reasonable doubt as to the validity of the claim against
the taxpayer exists; or
(2) The financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax.
Q: How about the Minimum amounts?
A: Sec 204 (Continued)
The compromise settlement of any tax liability shall be subject
to the following minimum amounts:
For cases of financial incapacity, a minimum compromise rate
equivalent to ten percent (10%) of the basic assessed tax;
and
For other cases, a minimum compromise rate equivalent to
forty percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,
000.000) or where the settlement offered is less than the
prescribed minimum rates, the compromise shall be subject to
the approval of the Evaluation Board which shall be
composed of the Commissioner and the four (4) Deputy
Commissioners.
Q: What is the difference between compromise and
abatement?
A: An abatement is a diminution or decrease in the amount of
tax imposed such that to abate is to nullify or reduce in value
or amount.
A compromise is an agreement whereby the parties, by
making reciprocal concessions, avoid litigation or put an end
to one already commenced
A compromise is marked by mutual concessions, whereas in
abatement or cancellation, no mutual concessions between
the taxpayer and the CIR are made ( PEOPLE V.
SANDIGANBAYAN [AUGUST 16, 2005].
Q: When may the CIR abate the liability?
A: Sec 204 (continued)
Abate or cancel a tax liability, when:
(1) The tax or any portion thereof appears to be unjustly or
excessively assessed; or
(2) The administration and collection costs involved do not
justify the collection of the amount due.
All criminal violations may be compromised except: (a) those
already filed in court, or (b) those involving fraud.
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 OfAuthority 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.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
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Due to failure to pay tax on the deadline BIR notified on June 6, 2000 2. Validity of Compromise.
that the subject property would be sold at public auction on August 8, It would be premature for this Court to declare that the compromise
2000. Reyes filed a protest with the BIR. Hence the petition for on the estate tax liability has been perfected and consummated,
review filed by Reyes in CTA and a TRO to desist and refrain from considering the earlier determination that the assessment against the
proceeding with the auction sale of the subject property or from estate was void. Nothing has been settled or finalized. Under Section
issuing a warrant pending determination of the case and/or unless a 204(A) of the Tax Code, where the basic tax involved exceeds one
contrary order is issued. million pesos or the settlement offered is less than the prescribed
On January 29, 2001, Reyes moved for postponement of the hearing minimum rates, the compromise shall be subject to the approval of
set on February 6, 2001, this time on the ground that she had already the NEB composed of the petitioner and four deputy commissioners.
paid the compromise amount of P1,062,778.20 but was still awaiting Finally, as correctly held by the appellate court, this provision applies
approval of the National Evaluation Board (or ‘NEB’). The CTA to all compromises, whether government-initiated or not.
granted the motion and reset the hearing to February 27, 2001. Ubilex non distinguit, nec nos distinguere debemos. Where the law
On February 19, 2001, Reyes filed a Motion to Declare Application for does not distinguish, we should not distinguish.
the Settlement of Disputed Assessment as a Perfected Compromise.
In said motion, she alleged that the CIR had not yet signed the Compromise Abatement
compromise because of procedural red tape requiring the initials of
four Deputy Commissioners on relevant documents before the The Minimum tax rates are the In practice, this is only for
compromise is signed by the CIR. Reyes posited that the absence of limitations of the power of the surcharge and interest.
the requisite initials and signatures on said documents does not vitiate BIR Commisioner because it is
the perfected compromise. discretionary on the part of the
CIR countered that without the approval of the NEB, Reyes’ BIR to grant a compromise.
application for compromise with the BIR cannot be considered a
And the minimum tax rates,
perfected or consummated compromise.
limitation yun.
CIR filed a motion saying CTA has no jurisdiction since the
assessment against the estate is already final and executory; and (ii) Also, another limitation is for
that the petition was filed out of time yung mga exceeding 1,000,000
CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax php.
amounting to 19M. CTA ratiocinated that there can only be a
perfected and consummated compromise of the estate’s tax liability, if For the basic tax, if gusto mong paliitin or palitan yung tax don ka
the NEB sa compromise.
has approved Reyes application for compromise in accordance with
RR No. 6-2000, as implemented by RMO No. 42-2000.
Asiatrust v. CIR
CA – Partly granted petition. GR No. 201530, April 19, 2017

Issues Facts: Asiatrust Development Bank, Inc. (Asiatrust) received

from the Commissioner of Internal Revenue (CIR) three
1. WON whether the assessment against the estate is valid; -NO Formal Letters of Demand (FLD) with Assessment Notices for
deficiency internal revenue taxes.
2. Whether the compromise entered into is also valid. –SC did
not decide
Asiatrust timely protested the assessment notices. Due to the
Ruling: inaction of the CIR on the protest, Asiatrust filed before the
CTA a Petition for Review praying for the cancellation of the
tax assessments.
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 The CIR issued against Asiatrust new Assessment Notices for
law and the facts upon which a tax assessment is based; otherwise, deficiency taxes and Asiatrust partially paid said deficiency tax
the assessment is void. Being invalid, the assessment cannot in turn assessments leaving a balance.
be used as a basis for the perfection of a tax compromise. This was
clear and mandatory under Section 228. During the trial, Asiatrust manifested that it availed of the Tax
Reyes was not informed in writing of the law and the facts on which Abatement Program for its deficiency final withholding tax -
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.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
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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.
CTA Division
The CTA Division rendered a Decision partially granting the
Petition and declared void the tax assessments for fiscal year
ending June 30, 1996 for having been issued beyond the
three-year prescriptive period. However, 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- Special Savings Account (SSA) assessments for the
fiscal years ending June 30, 1997 and 1998 and the
deficiency DST - Interbank Call Loans (IBCL) and deficiency
final withholding tax - trust assessments for fiscal year ending
June 30, 1998, in the total amount of ₱142,777,785.91.
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). The CIR, on the other hand,
filed a Motion for Partial Reconsideration of the assessments .
The CIR appealed the Decision and the Resolution before the
CTA En Banc via a Petition for Review. The CTA En Banc
however dismissed the Petition for being premature
considering that the proceedings before the CTA Division was
still pending.
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. However, it reiterated its ruling that in
the absence of a termination letter from the BIR, it cannot
consider Asiatrust’s availment of the Tax Abatement Program.
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.
Issue: Whether or not the tax abatement should be applied. -
NO.
Held:
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). Section 4
of RR No. 15-06 provides:
SECTION 4. Who May Avail. - Any person/ taxpayer, natural or
juridical, may settle thru this abatement program any delinquent
account or assessment which has been released as of June 30, 2006,
by paying an amount equal to One Hundred Percent (100%) of the
Basic Tax assessed with the Accredited Agent Bank (AAB) of the
Revenue District Office (RDO)/Large Taxpayers Service (LTS)/Large
Taxpayers District Office (LTDO) that has jurisdiction over the
taxpayer. In the absence of an AAB, payment may be made with the
Revenue Collection Officer/Deputized Treasurer of the RDO that has
jurisdiction over the taxpayer. After payment of the basic tax, the
assessment for penalties/surcharge and interest shall be cancelled by
the concerned BIR Office following existing rules and procedures.
Thereafter, the docket of the case shall be forwarded to the Office of
the Commissioner, thru the Deputy Commissioner for Operations
Group, for issuance of Termination Letter.
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 letter 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.
Additional Question (Asked by Ma’am): What about the
issue with regard to the Motion for Reconsideration?
Answer: The motion for reconsideration must first be timely
filed with the division before the en banc can act on it.
IN THE CASE AT BAR: There was an appeal to the CTA en
banc without filing an MR in the division. Kasi daw nagfile na
sila ng MR before the amended decision tas lumabas yung
amended decision. Pero this case said na you have to file a
separate Motion for Reconsideration for the amended
decision.
Q: When does the 25% surcharge apply?
SEC. 248. Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to
be paid, a penalty equivalent to twenty-five percent (25%) of
the amount due, in the following cases:
(1)  Failure to file any return and pay the tax due thereon as
required under the provisions of this Code or rules and
regulations on the date prescribed; or
(2)  Unless otherwise authorized by the Commissioner, filing a
return with an internal revenue officer other than those with
whom the return is required to be filed; or
(3)  Failure to pay the deficiency tax within the time prescribed
for its payment in the notice of assessment; or
(4)  Failure to pay the full or part of the amount of tax shown
on any return required to be filed under the provisions of this
Code or rules and regulations, or the full amount of tax due for
which no return is required to be filed, on or before the date
prescribed for its payment.
Ma’am’s Dicussion:
1. Failure to File a Return Within the time prescribed
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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So failure to file a return within the time prescribed by law.
So for example ang ITR ang deadline mo is April 15. Tapos
diba usually pag April 15 ang haba na ng pila sa BIR and
sa banks. And BIR closes at 5pm and banks closes at 3pm.
So kung maabutan ka ng cut off, you have no choice but to
file the next day, April 16. The 25 surcharge will apply.
2. Filing a return with an internal revenue officer other
than those with whom the return is required to be filed
Siguro an example is People v. Kintanar diba. Sa People v.
Kintanar, si Gloria Kintanar finile niya sa Novaliches when
her residence is in Paranaque.
3. Failure to pay the deficiency tax within the time
prescribed for its payment in the notice of assessment
Kaya dapat may nakalagay sa notice of assessment na
deadline of a specific date of specific number of days so
that if lumampas ka dun malalaman mo. Kaya di automatic
sa notice of assessments ang 25% surcharge kasi diba
dapat after failure to pay within the time prescribed pa diba.
Error or mistake if law is NOT fraud. The fraud to warrant a
50% surcharge must be an INTENTIONAL fraud and a mere
mistake cannot be considered as fraudulent intent.
Issue: Whether or not a taxpayer who merely states as a
footnote in his ITR that a sum of money that he erroneously
received and already spent is the subject of pending litigation
and did not declare it as income, is liable to pay the 50%
surcharge for filing a fraudulent return. -NO.
There is no Fraud. - Taxpayer was the recipient of some
money from abroad which he presumed to be a gift but turned
out to be an error and is now subject to litigation. Such was
only an error of mistake of fact or law. Such notation was
practically an invitation for investigation on his part.
Definition of Intentional Fraud: Consists of deception
willfully and deliberately done or resorted to in order to induce
another to give up some legal right (Aznar v. CTA).

4. Failure to pay the full or part of the amount of tax
shown on any return required to be filed under the
provisions of this Code or rules and regulations, or the
full amount of tax due for which no return is required to
be filed, on or before the date prescribed for its payment.
For example you have an IT and you filed it on time pero di
mo kaya mabayaran ang amount of the income tax due. So
10million yung income tax due tas 8m lang nabayaran mo.
So yung 2m may 25% surcharge when you pay unless
installment siya. You apply to the BIR for an installment
option.
CIR v. Japan Airlines
GR No. 60714, October 4, 1991
Facts: JAL received deficiency income tax assessments for
the years 1959 to 1963 with 50% surcharge. JAL protested
this and alleged that as non-resident foreign corporation, it
was taxable only on income from sources in the Philippines.
And because there was no such income for those years, it
was not liable.

Q: When does the 50% surcharge apply?

(B) In case of willful neglect to file the return within the period
prescribed by this Code or by rules and regulations, or in case
a false or fraudulent return is willfully made, the penalty to be
imposed shall be fifty percent (50%) of the tax or of the
deficiency tax, in case, any payment has been made on the
basis of such return before the discovery of the falsity or
fraud: Provided, That a substantial under-declaration of
taxable sales, receipts or income, or a substantial
overstatement of deductions, as determined by the
Commissioner pursuant to the rules and regulations to be
promulgated by the Secretary of Finance, shall constitute
prima facie evidence of a false or fraudulent return: Provided,
further, That failure to report sales, receipts or income in an
amount exceeding thirty percent (30%) of that declared per
return, and a claim of deductions in an amount exceeding (
30%) of actual deductions, shall render the taxpayer liable for
substantial under-declaration of sales, receipts or income or
for overstatement of deductions, as mentioned herein.

Q: What is the presumption as to willfulness under this section

?
A: The substantial underdeclaration shall constitute prima
facie evidence of a false or fraudulent return.

Q: How can you know na substantial siya?

A: More than 30% ang underdeclaration mo.

CIR v. Javier
GR No. 78953, July 31, 1991

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Summary of Ruling on First Issue: JAL’s liability was
established (NOT relevant to topic).
Issue: Was the 50% surcharge imposed proper? -NO.
Held:
As held in the case of CIR vs. Air India:
"The 50% surcharge or fraud penalty provided in Section 72 of
the National Internal Revenue Code is imposed on a
delinquent taxpayer who willfully neglects to file the required
tax return within the period prescribed by the law, or who
willfully files a false or fraudulent tax return, x x x.
 
"x x x x x x
"On the other hand, the same Section provides that if the
failure to file the required tax return is not due to willful neglect
, a penalty of 25% is to be added to the amount of the tax due
from the taxpayer."
Nowhere in the records of the case can be found that JAL
deliberately failed to file its income tax returns for the years
covered by the assessment. There was not even an attempt
by petitioner to prove the same or justify the imposition of the
50% surcharge. All that petitioner did was to cite the provision
of law upon which the surcharge was based without
explaining why it was applicable to respondent's case. Such
cannot be countenanced for mere allegations are definitely
not acceptable. The willful neglect to file the required tax
return or the fraudulent intent to evade the payment of taxes,
considering that the same is accompanied by legal
consequences, cannot be presumed (CIR vs. Air India, supra
). The fraud contemplated by law is actual and constructive. It
must be intentional fraud, consisting of deception willfully and
deliberately done or resorted to in order to induce another to
give up some legal right. Negligence, whether slight or gross,
is not equivalent to the fraud with intent to evade the tax
contemplated by the law.
It must amount to intentional wrongdoing with the sole object
of evading the tax (Aznar v. Court of Tax Appeals, G.R. No. L-
20569, August 23, 1974, 58 SCRA 519). This was not proven
to be so in the case of JAL as it believed in good faith that it
need not file the tax return for it had no taxable income then.
The element of fraud is lacking.
At most, only negligence may be imputed to JAL for not
ascertaining the dispensability of filing the tax returns. As
such, JAL may be subjected only to the 25% surcharge
prescribed by the aforequoted law.
PICOP v. CA
GR No. 106949-50, December 1, 1995
Issue: Whether or not PICOP is liable for interest and
surcharge.
Held: NO. Under Section 51 and 72 of the NIRC, the
surcharged imposed are only limited to those taxes that are
within a certain title of the NIRC and since the transaction tax
is not under those two areas/portions of the tax code, thus
PICOP may not be held liable for the surcharge.
Q: Pero Currently?
A: There is no longer any limit as to what taxes surcharges
can be imposed on.
Q: May the BIR waive the 25% surcharge? In your own
opinion?
A (student): I think yes because they have the power to offer
compromises so it necessarily follows that they can waive
surcharges on a case to case basis.
Ma’am’s Discussion: So the BIR marami siyang rulings na
nagwaive siya ng surcharge. For example if may bagong
policy ang BIR that causes confusion or under justifiable
circumstances.
Q: The 50% surcharge? Can it be waived? What do you think
?
A (student): No. Since it is grounded on fraud, it connotes bad
faith. The commissioner cannot waive this. The 25%
surcharge can be waived because some tax payers are
confused and are liable only because of mistake or
negligence.
Ma’am: 50% surcharge is automatically imposable if may
fraud or willfulness sa pagfile ng return. For fraud assessment
the 50% surcharge is automatically imposable kahit walang
failure to pay. Hindi kagaya ng 25% na need may failure to
pay.
Lets say the FAN was issued on September 1 and the tax is
payable on October 1, then you have 1 month to pay. if the
tax payer fails to pay on October 1, then the 25% surcharge
will be automatically imposable on the tax due, but for a fraud
assessment the 50% surcharge is automatically imposable
even if you paid on time.
Interest
Section 249. Interest. – (A) In General. – There shall be
assessed and collected on any unpaid amount of tax, interest
at the rate of double the legal interest rate for loans or
forbearance of any money in the absence of an express
stipulation as set by the Bangko Sentral ng Pilipinas from the
date prescribed for payment until the amount is fully paid:
Provided, That in no case shall the deficiency and the
delinquency interest prescribed under Subsections (B) and (C
) hereof, be imposed simultaneously.
(B) Deficiency Interest. – Any deficiency in the tax due, as the
term is defined in this Code, shall be subject to the interest
prescribedin Subsection (A) hereof, which interest shall be
assessed and collected from the date prescribed for its
payment
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
until the full payment thereof, or upon issuance of a notice and
demand by the Commissioner of Internal Revenue, whichever
comes earlier.
(C) Delinquency Interest. – In case of failure to pay: (1) The
amount of the tax due on any return required to be filed, or (2)
The amount of the tax due for which no return is required, or (
3) A deficiency tax, or any surcharge or interest thereon on
the due date appearing in the notice and demand of the
Commissioner, there shall be assessed and collected on the
unpaid amount, interest at the rate prescribed in Subsection (
A) hereof until the amount is fully paid, which interest shall
form part of the tax.
(D) Interest on Extended Payment. – If any person required to
pay the tax is qualified and elects to pay the tax on installment
under the provisions of this Code, but fails to pay the tax or
any installment hereof, or any part of such amount or
installment on or before the date prescribed for its payment, or
where the Commissioner has authorized an extension of time
within which to pay a tax or a deficiency tax or any part
thereof, there shall be assessed and collected interest at the
rate hereinabove prescribed on the tax or deficiency tax or
any part thereof unpaid from the date of notice and demand
until it is paid
Difference between deficiency interest and delinquency
interest
Deficiency is for the amount short of the full tax due and
should be paid to the government. Delinquency, on the other
hand, is defined as the failure of the taxpayer to pay the tax
due  5431, in amending section 24 of the Tax Code by subjecting
Let’s look back how the CTA previously decided cases. The
CTA says that it is until actual payment. It’s clear in the tax
code that the deficiency payment is until actual payment.
The Train law adopted the BIR ruling because it is mentioned
there that in no case shall the deficiency and the delinquency
interest prescribed under Subsections (B) and (C) hereof, be
imposed simultaneously. This means that if you have
delinquency, Then you will have no deficiency interest. You
will only have delinquency interest.
CAGAYAN ELECTRIC POWER & LIGHT CO. v. CIR & CTA
Facts: This case is about the liability of petitioner Cagayan
Electric Power & Light Co. (CEPALCO for brevity) for income
tax amounting to P75,149.73 for the more than seven-month
period of the year 1969 in addition to franchise tax.
The petitioner, Cagayan Electric Power & Light Co., is the
holder of a legislative franchise, Republic Act No. 3247, under
which its payment of 3% tax on its gross earnings from the
sale of electric current is "in lieu of all taxes and assessments
of whatever authority upon privileges, earnings, income,
franchise, and poles, wires, transformers, and insulators of the
grantee, from which taxes and assessments the grantee is
hereby expressly exempted (Section 3).”
RA 5431 Amended Section 24 of Tax Code (1968) On June
27, 1968, Republic Act No. 5431 amended section 24 of the
Tax Code by making liable for income tax all corporate
taxpayers not specifically exempt under paragraph (c) (1) of
said section and section 27 of the Tax Code notwithstanding
the "provisions of existing special or general laws to the
contrary". Thus, franchise companies were subjected to
income tax in addition to franchise tax.
Petitioner’s Franchise Amended by RA 6020 (1969) However,
in petitioner's case, its franchise was amended by Republic
Act No. 6020, effective August 4, 1969, by authorizing the
petitioner to furnish electricity to the municipalities of
Villanueva and Jasaan, Misamis Oriental in addition to
Cagayan de Oro City and the municipalities of Tagoloan and
Opol. The amendment reenacted the tax exemption in its
original charter or neutralized the modification made by
Republic Act No. 5431 more than a year before.
CIR’s Demand Letter to Petitioner
By reason of the amendment to section 24 of the Tax Code,
the Commissioner of Internal Revenue in a demand letter
dated February 15, 1973 required the petitioner to pay
deficiency income taxes for 1968-to 1971. The petitioner
contested the assessments. The Commissioner cancelled the
assessments for 1970 and 1971 but insisted on those for
1968 and 1969.
Issue : Is CEPALCO liable for income tax?
Ruling: YES, but only for the period from January 1 to August
3, 1969.
RA 5431 Withdrew Petitioner’s Exemption. - Republic Act No.
to income tax all corporate taxpayers not expressly exempted
therein and in section 27 of the Code, had the effect of
withdrawing petitioner's exemption from income tax. RA 6020
- The Tax Court acted correctly in holding that the exemption
was restored by the subsequent enactment on August 4, 1969
of Republic Act No. 6020 which reenacted the said tax
exemption. Hence, the petitioner is liable only for the income
tax for the period from January 1 to August 3, 1969 when its
tax exemption was modified by Republic Act No. 5431. It is
relevant to note that franchise companies, like the Philippine
Long Distance Telephone Company, have been paying
income tax in addition to the franchise tax.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Issue: Is CEPALCO liable for interest?
Ruling: NO. Only liable for tax proper.
However, it cannot be denied that the said 1969 assessment
appears to be highly controversial. The Commissioner at the
outset was not certain as to petitioner's income tax liability. It
had reason not to pay income tax because of the tax
exemption in its franchise. For this reason, it should be liable
only for tax proper and should not be held liable for the
surcharge and interest.
WHEREFORE, the judgment of the Tax Court is affirmed with
the modification that the petitioner is liable only for the tax
proper and that it should not pay the delinquency penalties.
No costs.
So interest may be waived.
RP v. HERAS
G.R. No. L-26742, April 30, 1970
Facts:
Antonio Heras filed his income tax return for 1958. The BIR
found as due and collectible from said taxpayer the sum of
P13,962.00. The corresponding demand therefor was made
under Income Tax Assessment Notice on May 1959. On
August 1959, the taxpayer paid the tax said to be due to the
by means of negotiable certificates of indebtedness in the
sum of P13,934.55 and cash in the amount of P27.45, or a
total of P13,962.00. Revenue office notified the taxpayer that,
pursuant to BIR General Circular No. V-289, payment of
income taxes with indorsed negotiable backpay certificates is
not allowed, and thus required that the tax supposedly
unsettled be paid. And when another demand for payment,
made on 7 April 1964, remained unheeded, an action was
instituted by the Republic of the Philippines against taxpayer
Antonio Heras in the Court of First Instance of Rizal Quezon
City, Civil Case No. Q-7987) for collection of the alleged
deficiency income tax in the sum of P13,934.55; P697.00, as
5% surcharge thereon; plus 1% monthly interest on the
amount from 31 May 1959 amounting to P5,016.00, 1 or a
total of P19,637.04. Traversing the allegations of the
complaint, defendant taxpayer set up as affirmative defenses (
a) the validity of his tax payment to the Municipal Treasurer of
Bacoor, Cavite, on 17 August 1959; (b) that having accepted
such payment plaintiff Republic of the Philippines was
estopped from pursuing the complaint; and (3) that the opinion
of the Secretary of Justice (Op. No. 69, s. 1959), upon which
Circular No. V-289 of the Internal Revenue Office was based,
is not binding upon the courts.
Issue: WON appellee is liable for surcharge and interest on
the unpaid tax.
Ruling: YES Under Section 51-e(2) and (3) of the Internal
Revenue Code, where deficiency tax is not paid in full, there
shall be collected upon the unpaid amount, as part of the tax,
interest of 1% a month, but not to exceed the amount
corresponding to 3 years, plus 5% surcharge, such surcharge
and interests to be computed from notice of the assessment
or demand therefor by the Commissioner.
After being informed of the basis of the demand by the
Commissioner, the refusal of the taxpayer to pay the
demanded tax cannot be considered as made in good faith
that would relieve him of liability for payment of surcharges
and interests. It may even be mentioned that, in the present
case, appellee’s act of tendering payment, with backpay
certificates, of the deficiency tax is an acknowledgment that
the said tax is really due and demandable. There having been
, , an invalid payment of appellee’s tax liability, which
constituted no payment at all, the collection of surcharges and
interests thereon from said taxpayer becomes mandatory on
the Commissioner of Internal Revenue and the courts.
The interests collectible here is not punitive in nature, an
appellee would like to impress, but compensatory, it is
compensation to the state for the delay in the payment of tax.
What is the nature of interest on unpaid taxes?
The interest collectible is not punitive in nature, but
compensatory; it is a compensation to the State for the delay
in the payment of the tax. It is the charge for the use by the
taxpayer of funds that rightfully should have been in the
government coffers and utilized for the ends thereof 
First Lepanto v. CIR
Imposition of delinquency interest is proper The Court likewise
holds the imposition of delinquency interest under Section 249
(c) (3) of the 1997 NIRC to be proper, because failure to pay
the deficiency tax assessed within the time prescribed for its
payment justifies the imposition of interest at the rate of
twenty percent (20%) per annum, which interest shall be
assessed and collected from the date prescribed for its
payment until full payment is made. It is worthy to note that
tax revenue statutes are not generally intended to be liberally
construed. Moreover, the CTA being a highly specialized court
particularly created for the purpose of reviewing tax and
customs cases, it is settled that its findings and conclusions
are accorded great respect and are generally upheld by this
Court, unless there is a clear showing of a reversible error or
an improvident exercise of authority. Absent such errors, the
challenged decision should be maintained.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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Compromise Penalty
CIR v. LIANGA BAY LOGGING
G.R. No. L-35266, January 21, 1991
Issue 2: Whether or not the compromise penalty was proper?
NO As to the "compromise penalty" of P300.00 also sought to
be imposed, there is no basis therefor, and, as the Court of
Tax Appeals finally declares, "the imposition of the same
without the conformity of the taxpayer is illegal and
unauthorized.
A compromise penalty is different from a compromise. A
taxpayer may opt to pay a compromise penalty instead of the
BIR filing a criminal action. But a compromise penalty must be
with the consent of the taxpayer.
RIGHTS AND REMEDIES OF THE TAXPAYER
UNDER THE NIRC
FEBRUARY 11, 2019 | Transcribed by: Najim Guinomla,
Dianne Marie Isidor, JSalem Lagat & April John Latorza
Section 6. Power of the Commissioner to Make assessments and
Prescribe additional Requirements for Tax Administration and
Enforcement. –
(A) Examination of Returns and Determination of Tax Due. - After a
return has been filed as required under the provisions of this Code,
the Commissioner or his duly authorized representative may authorize
the examination of any taxpayer and the assessment of the correct
amount of tax: Provided, however; That failure to file a return shall not
prevent the Commissioner from authorizing the examination of any
taxpayer.
The tax or any deficiency tax so assessed shall be paid upon notice
and demand from the Commissioner or from his duly authorized
representative.
Any return, statement of declaration filed in any office authorized to
receive the same shall not be withdrawn: Provided, That within three (
3) years from the date of such filing , the same may be modified,
changed, or amended: Provided, further, That no notice for audit or
investigation of such return, statement or declaration has in the
meantime been actually served upon the taxpayer.
Q: May a taxpayer amend his return as a matter of right?
What are the conditions?
Ma’am: Yes. Provided, there has been no audit or
investigation. Meaning, hindi pa na issuehan ng letter of
authority ang taxpayer. Once the letter of authority has been
issued, or that the three (3) years have passed, the taxpayer
may no longer amend.
Also take note, once the taxpayer amends his return, may
kasama ng interest and surcharge.
Section 228. Protesting of Assessment. - When the Commissioner
or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: provided,
however, That a preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on the
face of the return; or
(b) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of
excess creditable withholding tax for a taxable period was determined
to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has not been paid;
or
(e) When the article locally purchased or imported by an exempt
person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred to
non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be
void.
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation within thirty (30) days
from receipt of the assessment in such form and manner as may be
prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the
taxpayer adversely affected by the decision or inaction may appeal to
the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of one hundred eighty (180)-day
period; otherwise, the decision shall become final, executory and
demandable.
CIR vs Metro Star Superama
GR No. 185371
December 8,2010
Issue 1: Whether or not Metro Star was denied of due
process?
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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Ruling: The Court ruled in the AFFIRMATIVE.
Rule: The Supreme Court has consistently held that while a
mailed letter is deemed received by the addressee in the
course of mail, this is merely a disputable presumption subject
to controversion and a direct denial thereof shifts the burden
to the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee (Republic
vs. Court of Appeals, 149 SCRA 351).
In this case, the Court agrees with the CTA that the CIR failed
to discharge its duty and present any evidence to show that
Metro Star indeed received the PAN dated January 16, 2002.
It could have simply presented the registry receipt or the
certification from the postmaster that it mailed the PAN, but
failed. Neither did it offer any explanation on why it failed to
comply with the requirement of service of the PAN. It merely
accepted the letter of Metro Star’s chairman dated April
29, 2002, that stated that he had received the FAN dated
April 3, 2002, but not the PAN; that he was willing to pay the
tax as computed by the CIR; and that he just wanted to clarify
some matters with the hope of lessening its tax liability.
Issue 2: Are the requirements of due process satisfied if
only the FAN stating the computation of tax liabilities and
a demand to pay within the prescribed period was sent to
the taxpayer?
Ruling: The Court ruled in the NEGATIVE.
Section 228 of the Tax Code clearly requires that the
taxpayer must first be informed that he is liable for
deficiency taxes through the sending of a PAN. He must
be informed of the facts and the law upon which the
assessment is made. The law imposes a substantive, not
merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is
evidently violative of the cardinal principle in administrative
investigations - that taxpayers should be able to present their
case and adduce supporting evidence.
This is confirmed under the provisions R.R. No. 12-99 of the
BIR which pertinently provide:
SECTION 3. Due Process Requirement in the Issuance of
a Deficiency Tax Assessment. —
XXX
3.1.2 Preliminary Assessment Notice (PAN). — If after
review and evaluation by the Assessment Division or by the
Commissioner or his duly authorized representative, as the
case may be, it is determined that there exists sufficient basis
to assess the taxpayer for any deficiency tax or taxes, the
said Office shall issue to the taxpayer, at least by
registered mail, a Preliminary Assessment Notice (PAN)
for the proposed assessment, showing in detail, the facts
and the law, rules and regulations, or jurisprudence on
which the proposed assessment is based (see illustration
in ANNEX A hereof). If the taxpayer fails to respond within
fifteen (15) days from date of receipt of the PAN, he shall be
considered in default, in which case, a formal letter of demand
and assessment notice shall be caused to be issued by the
said Office, calling for payment of the taxpayer's deficiency tax
liability, inclusive of the applicable penalties.
XXX
XXX
From the provision quoted above, it is clear that the sending
of a PAN to taxpayer to inform him of the assessment made is
but part of the "due process requirement in the issuance of a
deficiency tax assessment," the absence of which renders
nugatory any assessment made by the tax authorities. The
use of the word "shall" in subsection 3.1.2 describes the
mandatory nature of the service of a PAN. The
persuasiveness of the right to due process reaches both
substantial and procedural rights and the failure of the CIR to
strictly comply with the requirements laid down by law and its
own rules is a denial of Metro Star’s right to due process.15
 Thus, for its failure to send the PAN stating the facts and the
law on which the assessment was made as required by
Section 228 of R.A. No. 8424, the assessment made by the
CIR is void.
Defense of CIR citing CIR vs Menguito:
The Court ruled that, the case of CIR v. Menguito16
 cited by the CIR in support of its argument that only the
non-service of the FAN is fatal to the validity of an
assessment, cannot apply to this case because the issue
therein was the non-compliance with the provisions of R.
R. No. 12-85 which sought to interpret Section 229 of the
old tax law. RA No. 8424 has already amended the provision
of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR’s
findings was changed in 1998 to informing the taxpayer of not
only the law, but also of the facts on which an assessment
would be made. Otherwise, the assessment itself would be
invalid.17 The regulation then, on the other hand, simply
provided that a notice be sent to the respondent in the form
prescribed, and that no consequence would ensue for failure
to comply with that form.
Metro Star’s failure to file a PROTEST:
The Court ruled that, it need not belabor to discuss the
matter of Metro Star’s failure to file its protest, for it is well-
settled that a void assessment bears no fruit.
PNZ Marketing vs CIR
CTA Case No. 5726
December 14, 2001
Facts:
Petitioner is a domestic corporation.
On April 8,1998, it received a formal assessment notice and
a demand letter from respondent due to its alleged deficiency
income tax liability for the year 1994. This was based on its
filed Income Tax Return.
On May 7, 1998, it filed its administrative protest letter. Two
months thereafter or on July 6, 1998, it also filed its
supplemental protest letter.
However, due to the inaction of respondent, petitioner was
prompted to file a petition for review before the Court of Tax
Appeals on January 29,1999.
Issue: Whether or not the income tax assessment issued
to PNZ was valid and sufficient insofar as Section 228 of
the Tax Code is concerned?
From the Discussions of Atty. Kriska Marna A. Buena, CPA
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Ruling: The Court ruled in the AFFIRMATIVE.
As a rule, Section 228 of the Tax Code obliges the CIR not
only to lay down the law from which the assessment is based
but more importantly, the surrounding circumstances
supporting the assessment.
Issue:
Whether there was non-compliance with Section 228 of
the Tax COde in the issuance of the assessments
resulting to violation of petitioner’s right to due process.
Ruling: The Court ruled in the NEGATIVE.

In this case, a perusal of the records indicates a successful
attempt on Respondent’s part to comply with the rules.
The assessment notice while vague at first glance is
subsequently cured by the demand letter which shows the
legal and factual basis relied upon by the respondent in
issuing the assessment.
It is undisputed that on December 5,1997, the BIR sent a
letter to the petitioner informing the latter that a report of
investigation on its income and business tax returns had been
submitted to a Revenue District Officer for appropriate action.
Attached thereto were report of investigation and a
memorandum from a Revenue Officer recommending, among
others, the issuance of an assessment notice.

The demand letter reflects some notable disallowance on the
Business expense of the petitioner for reasons such as the
following:
A) interest income has no supporting document pursuant to
Sec. 29;
B) That the income is unrecorded which is factual; and
C)That there is discrepancy in the declared salary expense as
provided in RR No. 4-93.
To the Court, these explanations are sufficient compliance
with the requirements of Sec. 228 of the Tax Code.
Philippine Mining Service Corporation vs CIR
CTA Case No. 5725
July 25, 2002
The attached investigation report of the Revenue Officer
contained the detailed findings made by the latter, the facts
and the law on which the resommended assessments were
based. The recommended assessments were basically the
same amounts that were finally assessed against petitioner.
They differed only because of the period covered for the
imposition of the interest charges.
Moreover, in its protest letter, petitioner was able to
effectively contest the subject assessments and submit
documents to support its claim that the assessments were
erroneous. Indeed, at the time the assessments were issued,
petitioner knew very well the law and the facts on which they
were based. Since the requiremnt under Section 228of the
Tax Code has been sufficiently met, it follows then that the
assessments dated April 6,1998 were not null and void.

Facts:

Petitioner is a domestic corporation. It entered into a service

contract with Dolomite Mining Corporation(DMC) wherein
petitioner shall act as its exclusive mining service contractor.

On December 5, 1997, the BIR sent a letter to petitioner

informing the latter that a report of investigation on its
income and business tas returns has been submitted to a
Revenue District Officer. Attached thereto were report of
investigation and a memorandum from a Revenue Officer
recommending, among others, the issuance of an
assessment notice.

It later on received a Pre-Assessment Notices on its alleged

deficiency income tax, excise tax and VAT.However, these
various assessment notices merely contained the
amounts of the alleged deficiency income tax, VAT and
excise tax that petitioner was being assessed of without
any showing as to how said amounts were arrived at or
computed.

On May 12, 1998, petitioner filed with the BIR a protest letter
and was later on followed by a supplemental protest letter.
However, respondent failed to act on the protest. Hence,
petitioner filed a Petition for Review before the Court of Tax
Appeals.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

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Oceanic Wireless Network vs CIR
CTA EB Case No. 76
June 22,2006
Facts:
Petitioner is a domestic corporation. It filed its Corporate
Annual ITR on April 5, 1996. It thereafter received a Letter of
Authority from the CIR for the examination of its accounts and
records for the period of January to December of 1995.
On May 18, 1999, a PAN was issued on petitioner and was
also requested to attend an informal conference. A month
later or on July 19,1999, it received another PAN and was
advised to either file its written protest or request for an office
conference where it opted for the latter.
On July 31,1999, a FAN was issued gainst it. It thereafter
filed its protest on August 16,1999. Due to the inaction of
the respondent, petitioner filed a Petition For Review
before the Court of Tax Appeals. However, the CTA
division dismissed its petition for it was filed out of time.
Issue 1: Whether or not the assessment is void for failure
to state/contain the facts and the law pertinent thereto?
Ruling: The CTA En Banc ruled in the NEGATIVE.
It ruled that respondent has substantially complied with the
requirement pronounced under Sec. 228 of the Tax Code for
the following reasons:
1. In the demand letter, the basis for the disallowed expenses
was specifically stated therein as RR No. 6-85.
2. In fact, the petitioner made an intelligent protest out of the
said letter. Hence, this implies that it had actual knwoledge of
the factual and legal bases of the assessments.
3. Moreover, petitioner was furnished with the computation
and brief explanation of how the assessment was arrived at.
Issue 2: Whether or not the inaction of respondent on the
protest was a gross violation of the petitioner’s right to
protest under Sec. 228?
Ruling: The CTA En Banc ruled in the NEGATIVE.
parties. Hence, the reckoning of the 180 day period would be
the day the protest was filed － August 16, 1999.
However, CIR failed to render its decision within such period
or until Feb. 12,2000. Thus, the remedy of petitiomer was to
file within 30 days or until March 13,2000 an appeal before
the CTA. But herein petitioner only filed its petition on May
12, 2000 which was definitely beyond the date prescribed
by law.
Comments:
So, CTA cases yung tatlo di ba? If you’ve noticed, the CTA
broadly interpreted the law.
In Philippine Mining case, db, pwede na yung investigation
report. In Oceanic case, as long as the taxpayer was able to
intelligently file its protest then the BIR is deemed to have
complied with Sec. 228 requirement to indicate in writing the
facts and basis of the law.
CIR vs Enron Subic Power Corporation
G.R. No. 166387
January 19,2009
Facts:
Enron, a domestic corporation registered with the Subic Bay
Metropolitan Authority as a freeport enterprise,2 filed its
annual income tax return for the year 1996 on April 12, 1997.
Subsequently, the Bureau of Internal Revenue, through a
preliminary five-day letter,3 informed it of a proposed
assessment of an alleged deficiency income tax.4 Enron
disputed the proposed deficiency assessment in its first
protest letter.
On May 26, 1999, Enron received from the CIR a formal
assessment notice6 requiring it to pay the alleged deficiency
income tax. It protested this deficiency tax assessment.
Due to the non-resolution of its protest within the 180-day
period, Enron filed a petition for review in the Court of Tax
Appeals (CTA). It argued that the deficiency tax assessment
disregarded the provisions of Section 228 of the National
Internal Revenue Code (NIRC), as amended,8and Section
3.1.4 of Revenue Regulations (RR) No. 12-999 by not
providing the legal and factual bases of the assessment.
Enron likewise questioned the substantive validity of the
assessment.

Record shows that it was given the opportunity to protest the

assailed assessments and to present its position and submit
supporting evidence. Petitioner was, however found not to
have submitted any supporting evidence.

Issue 3: Timeliness of the filing of the Petition for review

before the CTA.

Ruling: The CTA En Banc affirmed the decision of the CTA

Division that the petition was FILED OUT OF TIME.

In this case, the petitioner failed to submit supporting

documents contrary to what was jointly stipulated by the

From the Discussions of Atty. Kriska Marna A. Buena, CPA

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The CTA granted Enron’s petition and ordered the
cancellation of its deficiency tax assessment. The CIR
appealed the CTA decision to the CA but the CA affirmed it.
The CA held that the audit working papers did not
substantially comply with Section 228 of the NIRC and RR No.
12-99 because they failed to show the applicability of the cited
law to the facts of the assessment.
Hence, this case.
Issue: Whether or not the notice of assessment made by
the CIR has complied with the requirements under the
NIRC and RR No. 12-99?
Ruling: The Court ruled in the NEGATIVE.
The CIR errs in insisting that the notice of assessment in
question complied with the requirements of the NIRC and RR
No. 12-99.
A notice of assessment is:
[A] declaration of deficiency taxes issued to a [t]axpayer who
fails to respond to a Pre-Assessment Notice (PAN) within the
prescribed period of time, or whose reply to the PAN was
found to be without merit. The Notice of Assessment shall
inform the [t]axpayer of this fact, and that the report of
investigation submitted by the Revenue Officer conducting the
audit shall be given due course.
The formal letter of demand calling for payment of the
taxpayer’s deficiency tax or taxes shall state the fact, the
law, rules and regulations or jurisprudence on which the
assessment is based, otherwise the formal letter of
demand and the notice of assessment shall be void. (
emphasis supplied)It is clear from the foregoing that a
taxpayer must be informed in writing of the legal and factual
bases of the tax assessment made against him. The use of
the word “shall” in these legal provisions indicates the
mandatory nature of the requirements laid down therein.
In [this] case, [the CIR] merely issued a formal
assessment and indicated therein the supposed tax,
surcharge, interest and compromise penalty due thereon.
The Revenue Officers of the [the CIR] in the issuance of the
Final Assessment Notice did not provide Enron with the
written bases of the law and facts on which the subject
assessment is based. [The CIR] did not bother to explain how
it arrived at such an assessment. Moreso, he failed to mention
the specific provision of the Tax Code or rules and regulations
which were not complied with by Enron.13
Both the CTA and the CA concluded that the deficiency tax
assessment merely itemized the deductions disallowed and
included these in the gross income. It also imposed the
preferential rate of 5% on some items categorized by Enron
as costs. The legal and factual bases were, however, not
indicated.
Contention of the CIR:
The CIR insists that during the pre-assessment stage, the CIR
advised Enron’s representative of the tax deficiency, informed
it of the proposed tax deficiency assessment through a
preliminary five-day letter and furnished Enron a copy of the
audit working paper. To its mind, these steps sufficed to
inform Enron of the laws and facts on which the deficiency tax
assessment was based.
However, the Court ruled that these steps were not valid
substitutes for the mandatory notice in writing of the
legal and factual bases of the assessment. These were
mere perfunctory discharges of the CIR’s duties in
correctly assessing a taxpayer.  The requirement for issuing
a preliminary or final notice, as the case may be, informing a
taxpayer of the existence of a deficiency tax assessment is
markedly different from the requirement of what such notice
must contain. Just because the CIR issued an advice, a
preliminary letter during the pre-assessment stage and a final
notice, in the order required by law, does not necessarily
mean that Enron was informed of the law and facts on which
the deficiency tax assessment was made
Under the Old law:
It merely required that the taxpayer be notified of the
assessment made by the CIR.
Under the New law(1998):
The taxpayer must now be informed not only of the law but
also of the facts on which the assessment is made.16 Such
amendment is in keeping with the constitutional principle that
no person shall be deprived of property without due process.
Hence, in view of the absence of a fair opportunity for Enron
to be informed of the legal and factual bases of the
assessment against it, the assessment in question was void.
Comment/s:
So, actually in this case, the BIR issued a copy of the audit
working paper to the taxpayer. In practice, medyo ano sya
common. So that the taxpayer usually sa negotiation stage,
the BIR will send the audit working paper so that the taxpayer
can know. Kasi usually titingnan nya kung tama ba ang
computations ng BIR.
But the Supreme Court in the case of Enron said na it’s
insufficient.
Q. Again, what is the effect if the BIR fails to inform the
taxpayer of the law and facts the assessment is based?
A: The assessment is void.
Q: How many days should the taxpayer submit the supporting
documents?
A: Within 60 days
Q: If the taxpayer fails to submit?
A: It is deemed abandoned.
Q: And the assessment will become?
A: The assessment will become final and executory/
Q: Who decides what documents will be submitted to the BIR
?
A: The taxpayer
Q: What if the BIR wants a certain document and the taxpayer
cannot produce it? What can the BIR do? In your opinion, if
you’re the BIR,
Tambunting Pawnshop vs CIR
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
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Facts:
H. Tambunting Pawnshop, Inc., a domestic corporation duly licensed
and authorized to engage in the pawnshop business, appeals the
adverse decision promulgated on April 24, 2006, whereby the CTA
En Banc affirmed the decision of the CTA First Division ordering it to
pay deficiency income taxes in the amount of ₱4,536,687.15 for
taxable yaar 1997, plus 20% delinquency interest computed from
August 29, 2000 until full payment, but cancelling the compromise
penalties for lack of basis.
On June 26, 2000, the BIR, issued assessment notices and demand
letters, all numbered 32-1-97, assessing Tambunting for deficiency
percentage tax, income tax and compromise penalties for taxable
year 1997.
Contention:
Tambunting argues that the CTA should have allowed its deductions
because it had been able to point out the provisions of law authorizing
the deductions; that it proved its entitlement to the deductions through
all the documentary and testimonial evidence presented in court; that
the provisions of Section 34 (A)(1)(b) of the 1997 NIRC, governing the
types of evidence to prove a claim for deduction of expenses, were
applicable because the law took effect during the pendency of the
case in the CTA; that the CTA had allowed deductions for ordinary
and necessary expenses on the basis of cash vouchers issued by the
taxpayer or certifications issued by the payees evidencing receipt of
interest on loans as well as agreements relating to the imposition of
interest; that it had thus shown beyond doubt that it had incurred the
losses in its auction sales; and that it substantially complied with the
requirements of Revenue Regulations No. 12-77 on the deductibility
of its losses.
documents.
First Express said that it cannot provide such for it does not
issue such documents. In its failure to submit, the assessment
became final and executory.
Issue: WON the assessment became final and executory.
Ruling: NO.
The CIR cannot insist on the submission of additional
documents because such documents do not exist. The term "
relevant supporting documents" should be understood as
those documents necessary to support the legal bases
disputing the assessment as determined by the taxpayer.
The BIR can only inform the taxpayer to submit additional
evidence. The BIR cannot demand on what type of document
should be submitted. Otherwise, the taxpayer will always be at
the mercy of the BIR, which may require the production of the
documents, which the taxpayer cannot submit at all.
First Express, having submitted its supporting documents on
the same day the protest was filed, had until 31 July 2002 to
wait for BIR’s reply to its protest. On 28 August 2002 or within
30 days after the lapse of the 180-day period counted from
the filing of the protest as the supporting documents were
simultaneously filed, First Express filed a petition before the
CTA.

Issue: does the "rematado" and "subasta" books sufficient

documents to evidence loss on auction sale?

Ruling:

To prove the loss on auction sale, petitioner submitted in

evidence its “Rematado” and “Subasta” books and the
“Schedule of Losses on Auction Sale”. The “Rematado” book
contained a record of items foreclosed by the pawnshop while
the “Subasta” book contained a record of the auction sale of
pawned items foreclosed.

However, as elucidated by the petitioner, the gain or loss on

auction sale represents the difference between the capital (the
amount loaned to the pawnee, the unpaid interest and other
expenses incurred in connection with such loan) and the price
for which the pawned articles were sold, as reflected in the
“Subasta” Book.

Furthermore, it explained that the amounts appearing in the

“Rematado” book do not reflect the total capital of petitioner
as it merely reflected the amounts loaned to the pawnee.
Likewise, the amounts appearing in the “Subasta” book, are
not representative of the amount of sale made during the
“subastas” since not all articles are eventually sold and
disposed of by petitioner.

CIR VS FIRST EXPRESS PAWNSHOP

Facts:

First Express Pawnshop was assessed of DST deficiency on

its subscription. In its protest, it claimed that it was not subject
to DST. However, BIR required First Express to submit certain

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
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First Express has complied with the requisites in disputing an
assessment pursuant to Section 228 of the Tax Code. Hence,
the tax assessment cannot be considered as final, executory
and demandable.
DAYRIT v CRUZ
Facts:
Petitioners are the legitimate children and heirs of the
deceased spouses Marta J. Teodoro who died intestate on
July 1, 1965 and Don Toribio Teodoro who died testate on
August 30, 1965.
Thereafter, the heirs of the deceased filed separate estate
and inheritance tax returns for the estates of the late spouses
with the BIR. On August 9,1972, the respondent CIR issued
the following deficiency estate and inheritance tax
assessments which was received by petitioner Dayrit on
August 14, 1972.
Dayrit asked for a reconsideration of the said assessments
alleging that the same are contrary to law and not supported
by sufficient evidence.
In the same letter, they requested a period of 30 days within
which to submit their position paper in support of their claim
but it was not submitted. Meanwhile, on October 16, 1972,
Presidential Decree (P.D) No. 23, entitled "Proclaiming Tax
Amnesty Subject to Certain Conditions.”
Claiming the tax amnesty, in a tax return dated March 31,
1973, petitioner Cecilia Teodoro-Dayrit declared an additional
amount of P3,655,595.78 as part of the estates of the
Teodoro spouses, for additional valuation over and above the
amount declared in the previous return for estates and
inheritance taxes of the said late spouses.
Pursuant to the BIR’s tax acceptance orders, the estates and
heirs of the deceased spouses Teodoro paid amounting to a
total of P285,046.68. On March 14, 1974, CIR filed a motion
for Allowance of Claim against the estates of spouses
Teodoro and for an order of payment of taxes with the CFI,
praying that Dayrit be ordered to pay the BIR the sum of P6,
470,396.81 plus surcharges and interest.
finally instituting the action for collection.
From the date of receipt of the copy of the Commissioner's
letter for collection of estate and inheritance taxes against the
estates of the late Teodoro spouses, petitioners must contest
or dispute the same and, upon a denial thereof, the petitioners
have a period of thirty (30) days within which to appeal the
case to the Court of Tax Appeals. This they failed to avail of.
Tax assessments made by tax examiners are presumed
correct and made in good faith. A taxpayer has to prove
otherwise. Failure of the petitioners to appeal to the Court of
Tax Appeals in due time made the assessments in question,
final, executory and demandable.
Issue:
Whether CFI has jurisdiction and not the CTA? YES.
Ruling: The assessments having become final and executory,
the CFI properly acquired jurisdiction.
Neither is there merit in petitioners' claim that the exclusive
jurisdiction of the CTA applies in the case. The aforesaid
exclusive jurisdiction of the CTA arises only in cases of
disputed tax assessments.
As noted earlier, petitioners' letter dated October 7, 1972
asking for reconsideration of the questioned assessments
cannot be considered as one disputing the assessments
because petitioners failed to substantiate their claim that the
deficiency assessments are contrary to law. Petitioners asked
for a period of thirty (30) days within which to submit their
position paper but they failed to submit the same nonetheless.
Hence, petitioners' letter for a reconsideration of the
assessments is nothing but a mere scrap of paper.
Comments:
And therefore, the case before the CFI is with, is filed…ano
implication niya sa claim ng CIR before the CFI. This was a
Court of First Instance case, diba?
The CTA…final na yung assessment. The CIR filed case
before the CFI. Ngayon, since final yung assessment, the CFI
properly acquired jurisdiction.

Petitioners contended that the estate and inheritance taxes

sought to be collected have already been settled in
accordance with the provisions of P.D. No. 23, that at any
rate, the assessments have not become final and executory,
that the CFI lacks jurisdiction over the subject of the case as
it is under the exclusive jurisdiction of the CTA and that the
absence of a decision on their request for reconsideration.

Issue:
Whether the tax assessments against the estates are final.

Ruling:

Petitioner’s failure to file position paper, which would embody

their grounds for reconsideration, was construed as
abandonment of the petitioners' request for reconsideration.

It took the Commissioner a period of more than 1 year and 5

months, from October 7, 1972 to March 14, 1974, before

From the Discussions of Atty. Kriska Marna A. Buena, CPA

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SCOPE OF JURISDICTION OF CTA RULING: No.

The SC ruled that the revenue regulation to which
Hindi ko na ipa-recite ang jurisdiction ng CTA. Basuhin nyo na the CIR anchored its contention is invalid. Section 228 of the
lang yung sa disputed assessment part. National Internal Revenue Code provides that a taxpayer
has two remedies if the CIR failed to act on his protest within
CIR vs VILLA the 180-day period, to wit; (RCBC v. CIR, 2007)
1) the taxpayer adversely affected by the decision
may appeal to the CTA within 30 days from receipt of the
Facts: decision, or
Spouses Leonardo Villa filed ITR. However it was assessed 2) may appeal to the CTA within 30 days from the
deficiency income tax (years 1951-54, 56), and residential tax lapse of the one hundred eighty (180)-day period.
(1951-57). Without contesting the said assessments in the
From the above provision, the taxpayer was given two
Bureau of Internal Revenue, he filed on May 4, 1961 a petition
options in case CIR failed to act on their claim.
for review in the Court of Tax Appeals.
FIRST is to appeal to the CTA within 30 days from
the lapse of the 180-day period; or
SECOND, wait for the CIR to issue the decision
ISSUE: WON the Court of Tax Appeals had jurisdiction to and then appeal, if adverse, to the CTA within 30 days from
entertain the appeal of the taxpayer the receipt of the decision by the taxpayer.
These options are mutually exclusive and resort
RULING: NO to one bars the application of the other.
—The word "decisions" in paragraph 1, Section 7 of Republic In the case at bar, Lascona waited for the CIR to
Act 1125, quoted above, has been interpreted to mean the decide on the case and it did not appeal within 30 days from
decisions of the Commissioner of Internal Revenue on the the lapse of the 180-day period. Lascona received the
protest of the taxpayer against the assessments. Definitely, adverse decision of the CIR on March 12, 1999. It appealed
said word does not signify the assessment itself. on April 12, 1999 which is still within the 30-day period to
appeal to the CTA.
The revenue regulation in question is invalid
Note that the law uses the word "decisions", not "assessments because in effect, it limited the remedy provided for by the
," thus further indicating the legislative intention to subject to law. Section 228 of the NIRC prevails over the said revenue
judicial review the decision of the Commissioner on the regulation. The said revenue regulation cannot validly take
protest against an assessment but not the assessment itself. away the option of the taxpayer to continue waiting, even
after the lapse of the 180 day period, for the CIR to decide
Since in the instant case the taxpayer appealed from on the case and just appeal, within 30 days from receipt, if
the assessment of the CIR without previously contesting the the CIR’s ruling is adverse.
same, the appeal was premature and the CTA had no
jurisdiction to entertain said appeal. For, as stated, the
RCBC v CIR
jurisdiction of the Tax Court is to review by appeal decisions
of the CIR on disputed assessments. The Tax Court is a court GR 170257 (2011 CASE)
of special jurisdiction. As such, it can take cognizance only of FACTS:
such matters as are clearly within its jurisdiction. January 23, 1997, RCBC executed 2 waivers of
Defense of Prescription.  Under the statute of limitation of
the NIRC covering the Internal Revenue Taxes due for 1994
Lascona vs CIR and 1995 extending the assessment up to Dec. 31, 2000.  
GR No. 171251
FACTS:
On March 27, 1998, the CIR issued a formal
assessment notice (FAN) to Lascona Land Co., Inc.
demanding the company to pay P753,266.56 income taxes.
Lascona filed a protest on April 20, 1998.
CIR promulgated its decision on March 3, 1999.
Lascona received a copy of the decision on March
12, 1999.
On April 12, 1999, Lascona appealed the decision
to the Court of Tax Appeals.
The CIR moved for the dismissal of the appeal on
the ground that under a revenue regulation issued by the
Bureau of Internal Revenue (RR No. 12-99), if the CIR or its
representative failed to act on a protest within the 180-day
period the taxpayer may appeal within 30 days from the
lapse of the 180-day period to the CTA otherwise, the
decision shall become final and executor and that Lascona
having failed to appeal within the said period, CTA has no
jurisdiction over the case
ISSUE: Whether or not the contention of the CIR is correct.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

January 27, 2000: RCBC received a formal letter of demand
together with assessment notices for deficiency taxes.  CTA’s jurisdiction, which was granted by the CTA in a
RCBC filed a Protest and then, a Petition for Review
 before the CTA pursuant to Sec. 228 of the 1997 Tax Code.
Dec. 6, 2000: It again received a letter of demand which
drastically reduced the deficiency tax except from the
onshore tax and document stamp tax (DST).  provided under Sec. 228 of the NIRC and Section 11 of RA
RCBC argued the validity of the waivers for not being
signed and for the onshore tax, it should not be primarily
liable since it is only a withholding agent.
CTA terminated the assessment for other deficiencies
except for the FCDU shore tax and DST charging 20%
deficiency tax.  Being denied in CTA en banc, it raised the
matter to the Supreme Court.  While the case is pending, the
DST deficiency was paid after the BIR approved its
application for abatement
ISSUE: W/N RCBC as payee bank can be held liable for
deficiency on shore tax which is mandatory by law to be
collected at source in the form of a final withholding tax.
RULING:
Petition is denied.  As held in Chamber of Real Estate and
Builder's Association Inc. v. Executive Sec., the purpose of
the withholding tax system are:
1. to provide the taxpayer with a convenient way of
paying his tax liability
2. to ensure the collection of tax
3. to improve the governments cashflow.
Under the withholding tax system, the payor is the
taxpayer upon whom the tax is imposed, while the
withholding agent simply acts as an agent or a collector of
the government to ensure the collection of taxes
The liability of the withholding agent is independent from
that of the taxpayer.  The rules of procedure are intended to help secure, not
The former cannot be made liable for the tax due because
it is the latter who earned the income subject to withholding
tax.  of RCBC’s counsel, and his negligence cannot support
The withholding agent is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to
the government. The liability for the tax, however, remains
with the taxpayer because the gain was realized and
received by him.
RCBC cannot evade its liability for FCDU Onshore Tax by
shifting the blame on the payor-borrower as the withholding
agent.  interposing the defenses of legality or validity of the
 The CTA, as a specialized court dedicated exclusively to
the study and resolution of tax problems, has developed an
expertise on the subject of taxation and shall be accorded
the highest respect and shall be presumed valid, in the
absence of any clear and convincing proof to the contrary
July 15 2003: CIR filed a motion to resolve the issue of
resolution dated September 10 2003. The petition for review
was dismissed because it was filed beyond the 30-day
period following the lapse of 180 days from RCBC’S
submission of documents in support of its protest, as
1125
CTA denied RCBC’s petition for review, and RCBC did
not file a MR or an appeal.
RCBC then filed a petition for relief from judgment on
the ground of excusable negligence but this was denied by
the CTA.
The SC said that:
FIRST, RCBC was not denied due process when
its petition for relief was denied because it was given ample
opportunity to be heard, and the negligence it alleged was
not excusable.
SECOND, even if the petition for relief was granted,
the action for the cancellation of its assessments had
already prescribed.
According to the law, If the protest (against the tax) is
denied in whole or in part, or is not acted upon within 180
days from submission of documents, the taxpayer may
appeal to the CTA within 30 days from receipt of the said
decision, or from the lapse of the 180-day period; otherwise
the decision shall become final, executory and demandable.
ISSUE: Should RCBC’s petition for relief have been denied,
even if based on a technicality?
RULING: YES.
RCBC argument: the case should have been re-opened
considering that it was allegedly not accorded its day in court
when the CTA dismissed its petition for review for late filing.
override, substantial justice.
SC: If indeed there was negligence, it would be on the part
RCBC’s claim for relief from judgment. Besides, 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.
ALSO, RCBC’s failure to file a petition for review with the
CTA within the statutory period rendered the assessment
final, executory and demandable, thereby precluding it from
assessment and prescription of the Government’s right to
assess.

RCBC v CIR
GR 168498 (2007 Case) (MR Case)
FACTS:
July 5 2001: RCBC received a Formal Letter of Demand
dated May 25 2001 from CIR for its tax liabilities for Gross
Onshore Tax and Documentary Stamp Tax for the taxable
year 1997.
July 20: RCBC filed a protest letter/request for
reconsideration/reinvestigation pursuant to Section 228 of
the NIRC. As the protest was not acted upon by the CIR,
RCBC filed on April 30, 2002 a petition for review with the
CTA for the cancellation of the assessments.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

The CTA is a court of special jurisdiction and can only take February 20, 2020 | Transcribed by: April John Latorza,
cognizance of such matters as are clearly within its Kemarie Manligoy, Nice Mondragon & Kindy Pamaos
jurisdiction. Section 7 of RA 9282, amending RA 1125,
otherwise known as the Law Creating the Court of Tax REVIEW: Let us review the jurisdiction of the CTA. The CTA
Appeals. The Court also cited Rule 4, Sec. 3(a)(2). has jurisdiction over the decisions of the CIR on disputed
From the foregoing, it is clear that the jurisdiction of assessments, refunds and other matters. For disputes
the Court of Tax Appeals has been expanded to include not assessments, the meaning of this is assessments denied by
only decisions or rulings but inaction as well of the the BIR or protest denied by the BIR. And if the assessment
Commissioner of Internal Revenue. The decisions, rulings or and refund becomes final and executory, the CTA has
inaction of the Commissioner are necessary in order to vest jurisdiction.
the Court of Tax Appeals with jurisdiction to entertain the
appeal, provided it is filed within 30 days after the receipt of But di lang decisions, pwede rin inactions on disputed
such decision or ruling, or within 30 days after the expiration assessments because for refunds of taxes other than input
of the 180-day period fixed by law for the Commissioner to taxes pwedeng inaction by the CIR but in other input taxes as
act on the disputed assessments. This 30-day period within we have discussed sa VAT hindi pwede ang inaction. Dalawa
which to file an appeal is jurisdictional and failure to comply kasi yun which we will discuss later.
therewith would bar the appeal and deprive the Court of Tax
Appeals of its jurisdiction to entertain and determine the WHAT CONSTITUTES DENIAL OF PROTEST OR
correctness of the assessments. Such period is not merely DECISION ON DISPUTED ASSESSMENT
directory but mandatory and it is beyond the power of
the courts to extend the same.
In case the Commissioner failed to act on the
disputed assessment within the 180-day period from date of
submission of documents, a taxpayer can either:
1. file a Petition for Review with the Court of Tax
Appeals within 30 days after the expiration of the 180-day
period; or
2. await the final decision of the Commissioner on
the disputed assessments and appeal such final decision to
the Court of Tax Appeals within 30 days after receipt of a
copy of such decision.
However, these options are mutually exclusive,
and resort to one bars the application of the other.
In the instant case, the Commissioner failed to act
on the disputed assessment within 180 days from date of
submission of documents. Thus, petitioner opted to file a
Petition for Review before the Court of Tax Appeals.
Unfortunately, the Petition for Review was filed out of time, i.
e., it was filed more than 30 days after the lapse of the 180-
day period. Consequently, it was dismissed by the Court of
Tax Appeals for late filing. Petitioner did not file a motion for
reconsideration or make an appeal; hence, the disputed
assessment became final, demandable and executory.
Based on the foregoing, petitioner cannot now
claim that the disputed assessment is not yet final as it
remained unacted upon by the Commissioner; that it can still
await the final decision of the Commissioner and thereafter
appeal the same to the Court of Tax Appeals. This legal
maneuver cannot be countenanced. After availing the first
option, i.e., filing a Petition for Review which was however
filed out of time, petitioner cannot successfully resort to the
second option, i.e., awaiting the final decision of the
Commissioner and appealing the same to the Court of Tax
Appeals, on the pretext that there is yet no final decision on
the disputed assessment because of the Commissioner's
inaction.

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

In the case of Isabela, instead of FDDA, what did the BIR

issue? Final Notice

CIR v ISABELA CULTURAL CORPORATION

GR 1772231
FACTS:
In an investigation conducted on the 1986 books of account of
respondent, petitioner had the preliminary finding that
respondent incurred a total income tax deficiency of P9,985
,392.15, inclusive of increments. Upon protest by
respondent’s counsel, the said preliminary assessment was
reduced to the amount of P325,869.44.

On February 23, 1990, respondent received from petitioner an

assessment letter, dated February 9, 1990, demanding
payment of the amounts of P333,196.86 and P4,897.79 as
deficiency income tax and expanded withholding tax inclusive
of surcharge and interest, respectively, for the taxable period
from January 1, 1986 to December 31, 1986.

On February 9, 1995, respondent received from petitioner a

Final Notice Before Seizure, dated December 22, 1994. In
said letter, petitioner demanded payment of the subject
assessment within ten (10) days from receipt thereof.
Otherwise, failure on its part would constrain petitioner to
collect the subject assessment through summary
remedies.

The Final Notice Before Seizure sent by the Bureau of Internal

Revenue (BIR) to respondent reads as follows:

On Feb.9, 1990, [this] Office sent you a letter requesting you

to settle the above-captioned assessment. To date, however,
despite the lapse of a considerable length of time, we have
not been honored with a reply from you. In this connection, we
are giving you this LAST OPPORTUNITY to settle the
adverted assessment within ten (10) days after receipt hereof.
Should you again fail, and refuse to pay, this Office will be
constrained to enforce its collection by summary remedies of
Warrant of Levy of Road Property, Distraint of Personal
Property or Warrant of Garnishment, and/or simultaneous
court action. Please give this matter your preferential attention
.

Very truly yours,

ISIDRO B. TECSON, JR.
Revenue District Officer

By:(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection Officer

ISSUE:
Whether or not the Final Notice Before Seizure
constitutes the final decision of the CIR appealable to the
CTA. - YES

RULING:
[Overview of Procedure]
1. In the normal course, the revenue district officer sends
the taxpayer a notice of delinquent taxes, indicating the period
covered, the amount due including interest, and the reason for

From the Discussions of Atty. Kriska Marna A. Buena, CPA

 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
the delinquency.
2. If the taxpayer disagrees with or wishes to protest the
assessment, it sends a letter to the BIR indicating its protest,
stating the reasons therefor, and submitting such proof as
may be necessary. That letter is considered as the taxpayers
request for reconsideration of the delinquent assessment.
3. After the request is filed and received by the BIR, the
assessment becomes a disputed assessment on which it
must render a decision. That decision is appealable to the
Court of Tax Appeals for review.
4.Prior to the decision on a disputed assessment, there
may still be exchanges between the commissioner of internal
revenue (CIR) and the taxpayer. The former may ask
clarificatory questions or require the latter to submit additional
evidence. However, the CIRs position regarding the disputed
assessment must be indicated in the final decision. It is this
decision that is properly appealable to the CTA for review.
Indisputably, respondent received an assessment letter
dated February 9, 1990, stating that it had delinquent taxes
due; and it subsequently filed its motion for
reconsideration on March 23, 1990. In support of its request
for reconsideration, it sent to the CIR additional documents on
April 18, 1990. The next communication respondent
received was already the Final Notice Before Seizure dated
November 10, 1994.
In the light of the above facts, the Final Notice Before Seizure
cannot but be considered as the commissioner’s decision
disposing of the request for reconsideration filed by
respondent, who received no other response to its request.
Not only was the Notice the only response received; its
content and tenor supported the theory that it was the CIRs
final act regarding the request for reconsideration. The very
title expressly indicated that it was a final notice prior to
seizure of property. The letter itself clearly stated that
respondent was being given this LAST OPPORTUNITY to
pay; otherwise, its properties would be subjected to distraint
and levy. How then could it have been made to believe that its
request for reconsideration was still pending determination,
despite the actual threat of seizure of its properties?
Furthermore, Section 228 of the National Internal Revenue
Code states that a delinquent taxpayer may nevertheless
directly appeal a disputed assessment, if its request for
reconsideration remains unacted upon 180 days after
submission thereof.
In this case, the said period of 180 days had already lapsed
when respondent filed its request for reconsideration on
March 23, 1990, without any action on the part of the CIR.
This being so, the said letter amounted to a decision on a
disputed or protested assessment and, there, the court a quo
did not err in taking cognizance of this case.
In the case of Ayala, what did the BIR issue? Demand Letter
CIR v AYALA SECURITIES CORPORATION & CTA
GR L-29485
FACTS: On November 29, 1955, respondent Ayala Securities
Corporation, a domestic corporation organized and existing
under the laws of the Philippines, filed its income tax returns
with the office of the petitioner for its fiscal year which ended
on September 30, 1955. Attached to its income tax return was
the audited financial statements of the respondent corporation
as of September 30, 1955, showing a surplus of P2,758,442.
37. The income tax due on the return of the respondent
corporation was duly paid for within the time prescribed by law
.
In a letter dated February 21, 1961, petitioner advised the
respondent corporation of the assessment of P758.687.04
on its accumulated surplus reflected on its income tax return
for the fiscal year which ended September 30, 1955. The
respondent corporation, on the other hand, in a letter dated
April 19, 1961, protested against the assessment on its
retained and accumulated surplus pertaining to the taxable
year 1955 and sought reconsideration thereof for the reasons:
a. that the accumulation of the surplus was for a bona
fide business purpose and not to avoid the imposition of
income tax on the individual shareholders, and
b. that the said assessment was issued beyond the five-
year prescriptive period.
On February 21, 1963, respondent corporation received a
letter dated February 18, 1963, from the Chief, Manila
Examiners, of the Office of the herein petitioner, calling the
attention of the respondent corporation to its outstanding and
unpaid tax in the amount of P708,687.04 and thereby
requesting for the payment of the said amount within five (5)
days from receipt of the said letter. Believing the aforesaid
letter to be a denial of its protest, the herein respondent
corporation filed with the Court of Tax Appeals a Petition for
Review of the assessment, docketed as CTA Case No. 1346.
ISSUE: Whether or not the instant case falls within the
jurisdiction of the respondent Court of Tax Appeals. -Yes
RULING: It is to be noted that the respondent Court of Tax
Appeals is a court of special appellate jurisdiction created
under R. A. No. 1125. Thus under Section 7 (1), R. A. 1125,
the Court of Tax Appeals exercises exclusive appellate
jurisdiction to review by appeal "decisions of the Collector of
Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part
of law administered by the Bureau of Internal Revenue".
The letter of February 18, 1963, in the view of the Court, is
tantamount to a denial of the reconsideration or protest
of the respondent corporation on the assessment made
by the petitioner, considering that the said letter is in itself a
reiteration of the demand by the Bureau of Internal Revenue
for the settlement of the assessment already made, and for
the immediate payment of the sum of P758, 687.04 in spite of
the vehement protest of the respondent corporation on April
21, 1961.
This certainly is a clear indication of the firm stand of
petitioner against the reconsideration of the disputed
assessment in view of the continued refusal of the respondent
corporation to execute the waiver of the period of limitation
upon the assessment in question.
This being so, the said letter amounts to a decision on a
disputed or protested assessment and, therefore, the court a
quo did not err in taking cognizance of this case.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Q: In the case of Surigao, what did the court issue? What
happened in this case?
A: The BIR issued a revised assessment instead of FDTA, but
there is already a warrant of distraint and levy before
everything, before the revised assessment.
Q: Upon reissuance of the revised assessment by the BIR
, what happened then?
A: The petitioner then requested a re-computation of the
revised assessment in a letter to the Commissioner dated
June 6, 1963 (sent by registered mail on June 7, 1963). The
Commissioner, however, in a letter dated June 28, 1963 (
received by the petitioner on July 16, 1963), denied the
request for re-computation.
Q: When did the court reckon the finality of the decision
of the BIR?
A: April 29, 1963
Q: Why is April 29, 1963 considered as the final demand
by the BIR?
A: Moreover, the letter of demand dated April 29, 1963
unquestionably constitutes the final action taken by the
Commissioner on the petitioner's several requests for
reconsideration and re-computation. In this letter, the
Commissioner not only in effect demanded that the petitioner
pay the amount of P11,533.53 but also gave warning that in
the event it failed to pay, the said Commissioner would be
constrained to enforce the collection thereof by means of the
remedies provided by law. The tenor of the letter, specifically,
the statement regarding the resort to legal remedies,
unmistakably indicates the final nature of the determination
made by the Commissioner of the petitioner's deficiency
franchise tax liability.
Surigao Electric Co. Inc. v. CTA & CIR
G.R. No. L-25289, June 28, 1974
FACTS:
In November 1961 the petitioner Surigao Electric Co., Inc.,
grantee of a legislative electric franchise, received a warrant
of distraint and levy to enforce the collection from "Mainit
Electric" of a deficiency franchise tax plus surcharge in the
total amount of P718.59. In a letter to the Commissioner of
Internal Revenue, the petitioner contested this warrant, stating
that it did not have a franchise in Mainit, Surigao.
The controversy culminated in a revised assessment dated
April 29, 1963 (received by the petitioner on May 8, 1963) in
the amount of P11,533.53, representing the petitioner's
deficiency franchise-tax and surcharges thereon for the period
from April 1, 1956 to June 30, 1959. The petitioner then
requested a re-computation of the revised assessment in a
letter to the Commissioner dated June 6, 1963 (sent by
registered mail on June 7, 1963). The Commissioner,
however, in a letter dated June 28, 1963 (received by the
petitioner on July 16, 1963), denied the request for re-
computation.
ISSUE: Whether or not petitioner's appeal to the Court of Tax
Appeals was time-barred. -Yes
RULING:
A close reading of the numerous letters exchanged between
the petitioner and the Commissioner clearly discloses that the
letter of demand issued by the Commissioner on April 29,
1963 and received by the petitioner on May 8, 1963
constitutes the definite determination of the petitioner's
deficiency franchise tax liability or the decision on the disputed
assessment and, therefore, the decision appealable to the tax
court.
This letter of April 29, 1963 was in response to the
communications of the petitioner, particularly the letter of
August 2, 1962 wherein it assailed the 4th Indorsement's data
and findings on its deficiency, franchise tax liability computed
at 5% (on the ground that its franchise precludes the
imposition of a rate higher than the 2% fixed in its legislative
franchise), and the letter of April 24, 1963 wherein it again
questioned the assessment and requested for a re-
computation (on the ground that the Government could make
an assessment only for the period from May 29, 1956 to June
30, 1959). Thus, as early as August 2, 1962, the petitioner
already disputed the assessment made by the Commissioner.
Moreover, the letter of demand dated April 29, 1963
unquestionably constitutes the final action taken by the
Commissioner on the petitioner's several requests for
reconsideration and recomputation. In this letter, the
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Commissioner not only in effect demanded that the petitioner
pay the amount of P11,533.53 but also gave warning that in
the event it failed to pay, the said Commissioner would be
constrained to enforce the collection thereof by means of the
remedies provided by law. The tenor of the letter, specifically,
the statement regarding the resort to legal remedies,
unmistakably indicates the final nature of the determination
made by the Commissioner of the petitioner's deficiency
franchise tax liability.
The foregoing-view accords with settled jurisprudence — and
this despite the fact that nothing in Republic Act 1125,1 as
amended, even remotely suggests the element truly
determinative of the appealability to the Court of Appeals of a
ruling of the Commissioner of Internal Revenue. Thus, this
Court has considered the following communications sent by
the Commissioner to taxpayers as embodying rulings
appealable to the tax court:
a) a letter which stated the result of the investigation
requested by the taxpayer and the consequent modification of
the assessment;
b) a letter which denied the request of the taxpayer for the
reconsideration cancellation, or withdrawal of the original
assessment;
c) a letter which contained a demand on the taxpayer for the
payment of the revised or reduced assessment; and
d) a letter which notified the taxpayer of a revision of previous
assessments.
The revised assessment embodied in the Commissioner's
letter dated April 29, 1963 being, in legal contemplation, the
final ruling reviewable by the tax court, the thirty-day appeal
period should be counted from May 8, 1963 (the day the
petitioner received a copy of the said letter). From May 8,
1963 to June 7, 1963 (the day the petitioner, by registered
mail, sent to the Commissioner its letter of June 6, 1963
requesting for further re-computation of the amount
demanded from it) saw the lapse of thirty days.
The June 6, 1963 request for further re-computation,
partaking of a motion for reconsideration, tolled the running of
the thirty-day period from June 7, 1963 (the day the petitioner
sent its letter by registered mail) to July 16, 1963 (the day the
petitioner received the letter of the Commissioner dated June
28, 1963 turning down its request). The prescriptive period
commenced to run again on July 16, 1963. The petitioner filed
its petition for review with the tax court on August 1, 1963 —
after the lapse of an additional sixteen days. The petition for
review having
been filed beyond the thirty-day period. We rule that the Court
of Tax Appeals correctly dismissed the same.
Comments:
In Tax, in practice, parang may misconception na yung mga
BIR officers and tax practitioners corrupt kasi binabayaran
lang sila. I want to point out that pwede kasi na even in the
NIC stage or PAN stage, pwede mo kausapin si BIR and lay
down the justifications of your client’s position and explain the
relevant laws, BIR rulings. Nakikinig naman ang BIR.
Q: the SC made an instruction to the BIR sa case na ‘to
A: from the FT:
Prescinding from all the foregoing, we deem it appropriate to state
that the Commissioner of Internal Revenue should always
indicate to the taxpayer in clear and unequivocal language
whenever his action on an assessment questioned by a taxpayer
constitutes his final determination on the disputed assessment,
as contemplated by sections 7 and 11 of Republic Act 1125, as
amended. On the basis of this indicium indubitably showing that the
Commissioner's communicated action is his final decision on the
contested assessment the aggrieved taxpayer would then be able to
take recourse to the tax court at the opportune time.
As to the Taxpayer
Without needless difficulty, the taxpayer would be able to
1. determine when his right to appeals to the tax court accrues.
2. This rule of conduct would also obviate all desire and opportunity
on the part of the taxpayer to continually delay the finality of the
assessment -- and, consequently, the collection of the amount
demanded as taxes -- by repeated requests for re-computation
and reconsideration.
As to the BIR
On the part of the Commissioner, this would
1. encourage his office to conduct a careful and thorough study of
every questioned assessment and render a correct and indefinite
decision thereon in the first instance.
2. This would also deter the Commissioner from unfairly making the
taxpayer grope in the dark and speculate as to which action
constitutes the decision appealable to the tax court.
3. Of greater import, this rule of conduct would meet a pressing
need for fair play, regularity, and orderliness in administrative
action.
Cir v. Union Shipping Corp & Cta
G.R. No. L-66160 May 21, 1990
Digest by: April Latorza
Facts:
In a letter dated December 27, 1974 herein petitioner
Commissioner of Internal Revenue assessed against Yee
Fong Hong, Ltd. and/or herein private respondent Union
Shipping Corporation, the total sum of P583,155.22 as
deficiency income taxes due for the years 1971 and 1972.
Said letter was received on January 4, 1975.
In a letter dated January 10, 1975, received by petitioner on
January 13, 1975, private respondent protested the
assessment.
Petitioner, without ruling on the protest, issued a Warrant of
Distraint and Levy (WDL), which was served on private
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
respondent's counsel, Clemente Celso, on November 25,
1976.
In a letter dated November 27, 1976, received by petitioner on
November 29, 1976 private respondent reiterated its request
for reinvestigation of the assessment and for the
reconsideration of the summary collection thru the Warrant of
Distraint and Levy.
CIR, without acting on the request for reinvestigation and
reconsideration of the Warrant of Distraint and Levy, filed a
collection suit against private respondent. Summons in the
said collection case was issued to private respondent on
December 28, 1978.
On January 10, 1979, private respondent filed with
respondent court its Petition for Review of the petitioner's
assessment of its deficiency income taxes in a letter dated
December 27, 1974, docketed therein as CTA Case No. 2989,
wherein it prays that after hearing, judgment be rendered
holding that it is not liable for the payment of the income tax
herein involved, or which may be due from foreign shipowner
Yee Fong Hong, Ltd.; to which petitioner filed his answer on
March 29, 1979.
CTA
The decision of the Commissioner of Internal Revenue
appealed from, assessing against and demanding from
petitioner the payment of deficiency income tax, inclusive of
50% surcharge, interest and compromise penalties, in the
amounts of P73,958.76 and P583,155.22 for the years 1971
and 1972, respectively, is reversed.
ISSUE: WON the DECISION OF THE CIR WAS ALREADY
FINAL AND EXECUTORY, THUS Court of Tax Appeals has
jurisdiction over the case.
RULING: NO
CIR’S CONTENTION:
✓ The issuance of a warrant of distraint and levy is proof of
the finality of an assessment because it is the most
drastic action of all media of enforcing the collection of
tax, and is tantamount to an outright denial of a motion for
reconsideration of an assessment.
✓ The warrant of distraint and levy was issued after
respondent corporation filed a request for reconsideration
of subject assessment, thus constituting petitioner's final
decision in the disputed assessments.
✓ Petitioner argues therefore that the period to appeal
to the Court of Tax Appeals commenced to run from
receipt of said warrant on November 25, 1976, so that
on January 10, 1979 when respondent corporation
sought redress from the Tax Court, petitioner's decision
has long become final and executory.
The SC had already laid down the dictum that the
Commissioner should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
determination of the disputed assessment.
Specifically, this Court ruled:
. . . we deem it appropriate to state that the Commissioner of
Internal Revenue should always indicate to the taxpayer in
clear and unequivocal language whenever his action on
an assessment questioned by a taxpayer constitutes his
final determination on the disputed assessment, as
contemplated by sections 7 and 11 of Republic Act 1125, as
amended.
On the basis of this statement indubitably showing that the
Commissioner's communicated action is his final decision on
the contested assessment, the aggrieved taxpayer would then
be able to take recourse to the tax court at the opportune time
.
Without needless difficulty, the taxpayer would be able to
determine when his right to appeal to the tax court accrues.
This rule of conduct would also obviate all desire and
opportunity on the part of the taxpayer to continually delay
the finality of the assessment — and, consequently, the
collection of the amount demanded as taxes — by repeated
requests for re-computation and reconsideration.
On the part of the Commissioner, this would encourage his
office to conduct a careful and thorough study of every
questioned assessment and render a correct and definite
decision thereon in the first instance. This would also deter
the Commissioner from unfairly making the taxpayer grope in
the dark and speculate as to which action constitutes the
decision appealable to the tax court. Of greater import, this
rule of conduct would meet a pressing need for fair play,
regularity, and orderliness in administrative action.
In the case at bar…
There appears to be no dispute that petitioner did not rule
on private respondent's motion for reconsideration but
contrary to the above ruling of this Court, left private
respondent in the dark as to which action of the
Commissioner is the decision appealable to the Court of Tax
Appeals. Had he categorically stated that he denies private
respondent's motion for reconsideration and that his action
constitutes his final determination on the disputed assessment
, private respondent without needless difficulty would have
been able to determine when his right to appeal accrues and
the resulting confusion would have been avoided.
Much later, this Court reiterated the above-mentioned dictum
in a ruling applicable on all fours to the issue in the case at
bar, that the reviewable decision of the Bureau of Internal
Revenue is that contained in the letter of its
Commissioner, that such constitutes the final decision on the
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
matter which may be appealed to the Court of Tax Appeals
and not the warrants of distraint. It was likewise stressed that
the procedure enunciated is demanded by the pressing need
for fair play, regularity and orderliness in administrative action.
Under the circumstances, the Commissioner of Internal
Revenue, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not
commenced to run.
WHEN THE PERIOD TO APPEAL COMMENCED TO RUN
Thus, it was only when private respondent received the
summons on the civil suit for collection of deficiency income
on December 28, 1978 that the period to appeal commenced
to run. The request for reinvestigation and reconsideration
was in effect considered denied by petitioner when the latter
filed a civil suit for collection of deficiency income.
So. that on January 10, 1979 when private respondent filed
the appeal with the Court of Tax Appeals, it consumed a
total of only thirteen (13) days well within the thirty-day period
to appeal pursuant to Section 11 of R.A. 1125.
Comment: The SC was lenient to Union Shipping here.
Pwede sana na i-reckon from the WDL but it reckoned the
date from the receipt of the summons.
CENTRAL CEMENT CORPORATION v. TAN
CTA 4312
Digest by: April Latorza
Facts:
A letter from the BIR dated March 9, 1988 was received by
petitioner on even date informing it of a proposed (tentative)
assessment for alleged deficiency income tax for fiscal year
ended June 30, 1987 in the total amount of P4,202,118.00,
inclusive of interest computed up to March 15, 1988.
A period of ten (10) days from receipt thereof was given
petitioner within which to dispute the proposed assessment
otherwise, it would become final and the necessary formal
assessment notice will be issued.
Petitioner seasonably responded to respondent's letter on
March 18, 1988 (or 9 days from receipt of letter) by disputing
the proposed assessment.
There was no reply to petitioner's March 18, 1988 letter
instead, another letter from the BIR dated May 13, 1988 was
received by petitioner on May 19, 1988. This time the
proposed assessment amounted to P5,404,339.50, including
a 25% surcharge and 20% per annum interest. Comprising
the aforesaid assessment
are deficiency income tax ofP5,400,847.99 and deficiency
expanded withholding tax of P3,491.62. Again, petitioner was
granted ten (10) days from receipt thereof to dispute the
proposed assessment otherwise, it becomes "final and
executory".
On May 27, 1988 (or 8 days from receipt of letter), petitioner
through a letter of even date expressed vehement objections
to the proposed assessment and requested that it be
reviewed, reconsidered and thereafter withdrawn.
Instead of a reply thereto, petitioner received on September
20, 1988 from the BIR a final assessment notice for alleged
deficiency income tax and expanded withholding tax
computed as of August 15, 1988 amounting to P5,890,067.67.
A protest was seasonably lodged by petitioner with the
respondent Commissioner of Internal Revenue on September
23, 1988.
While awaiting resolution of the protest, an undated Warrant
of Levy on Real Property and an undated Warrant of
Distraint of Personal Property were served on petitioner on
December 1, 1988. Undated Warrants of Garnishment
were likewise served on two of petitioner's depository banks
namely, Philippine Commercial International Bank, PCI Bank
Towers, Makati and International Corporate Bank, 111 Paseo
de Roxas, Makati on December 6, 1988 and December 7,
1988, respectively. All the foregoing warrants were issued
under the signature of respondent.
Petitioner assailed the issuance of the warrants and
sought their recall in a letter filed with respondent on
December 12, 1988 on the ground that the warrants are null
and void for having been issued prematurely and in violation
of the taxpayer's right to due process, the protest filed not
having been acted upon by respondent.
The warrants were not recalled by respondent.
In view thereof, petitioner filed with this Court (CTA) on
December 15, 1988 the instant petition for review with
urgent motion for injunction. It is respectfully prayed that the
assessment be set aside for lack of legal and factual basis
and that respondent be restrained from enforcing the warrants
in question for being null and void.
On December 21, 1988, this Court found the issuance of
warrants of distraint and levy and warrants of
garnishment in violation of Section 207 of the National
Internal Revenue Code which only authorizes the issuance
of warrants "not earlier than three months nor later than six
months from receipt of the demand".
In its "Answer" dated February 24, 1989, respondent
reiterated the propriety of its assessments for deficiency
income and expanded withholding taxes for fiscal year ended
June 30, 1987.
CONTENTION OF THE CIR
The contention of respondent is that this Court has not
acquired jurisdiction to act on this petition. He claims there is
no decision yet on petitioner's protest. His issuance of the
warrants of distraint, levy and garnishment allegedly does not
constitute a decision on the protest which is appealable to
the Court of Tax Appeals.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Issue: WON the CTA has jurisdiction over this case.
Ruling: YES.
However, the matter of jurisdiction was neither raised by
respondent in his "Answer" nor in the trial on the merits of this
case. In fact, respondent through counsels actively
participated in the proceedings before this Court which run for
over two years without being heard to question the Court's
jurisdiction. It was only when the case was submitted for
decision that respondent raised for the first time in its
memorandum that this Court is without jurisdiction.
Jurisdiction is the authority to hear and determine a cause —
the right to act in a case. It is the power and authority
conferred on a court by the constitution and laws to hear and
determine causes between parties and to carry its judgments
into effect. In determining whether a case lies within or outside
the jurisdiction of a court resort to the consequent statutory
enactment is indispensable. Towards this end, what is crucial
in the determination of the jurisdiction of the court is the
averments in the pleadings taken as a whole. Once
jurisdiction is acquired it continues until the case is finally
terminated.
While lack of jurisdiction may be assailed at any stage, a party
's active participation in the proceedings before the court
without jurisdiction will estop such party from assailing such
lack of jurisdiction. One who subjects himself to the
jurisdiction of a court, even where he would not otherwise be
subject to suit, becomes subject to any valid claim asserted
against him directly relating to the subject of his voluntarily
initiated proceeding. To permit one to invoke the exercise of
jurisdiction within the general powers of the court and then to
reverse its orders upon the ground that it had no jurisdiction
would be to allow one to trifle with courts. The principle is one
of estoppel in the interest of a sound administration of the
laws.
IN THE CASE AT BAR. The CIR was estopped in
questioning the jurisdiction of the CIR.
The warrants of distraint, levy and garnishment were issued
by respondent knowing fully well that the deficiency
assessments were under protest by petitioner. Even when the
issuance of the warrants was objected to by petitioner for
being in violation of the Tax Code, respondent did not lift said
warrants. It is by respondent's own doing that administrative
remedies available
to petitioner were effectively shut-off thereby, leaving
petitioner with no recourse but to seek relief from this Court.
Taking cognizance of the petition for review with urgent
motion for injunction, this Court found the aforesaid motion
meritorious and granted the same. Respondents were
enjoined from enforcing the warrants pending "final
determination" of the case. (Ibid.) At this time, there was no
objection on the part of respondent. In its "Answer" it
reiterated its assessments and prayed that this Court order
petitioner to pay the same. In the subsequent proceedings
before this Court which lasted for over a couple of years and
where respondent actively participated, the question of
jurisdiction was never raised. By its own acts, respondents at
the very least recognized this court's jurisdiction over the case
and voluntarily submitted to its authority. It is therefore
estopped from assailing this court's jurisdiction over the case.
Accordingly, it cannot be allowed now to deny this court's
jurisdiction, for do so would be to make a mockery of the law
and judicial process.
Q: Who was estopped from raising prescription?
A: CIR.
Q: Why?
A: (Summary provide below, please refer to digest above)
1. The warrants of distraint, levy and garnishment were
issued by respondent knowing fully well that the
deficiency assessments were under protest by
petitioner. x x x It is by respondent's own doing that
administrative remedies available to petitioner were
effectively shut-off thereby, leaving petitioner with no
recourse but to seek relief from this Court.
2. By its own acts, respondents at the very least
recognized this court's jurisdiction over the case and
voluntarily submitted to its authority. (i.e. CIR actively
participated in the court proceedings)
CIR VS ALGUE, INC., & CTA
GR L-No. L-28896
FACTS: On January 14, 1965, Algue, a domestic corporation
engaged in engineering, construction and other allied activities,
received a letter from the CIR assessing it in the total amount of
P83,183.85 as delinquency income taxes for the years 1958 and
1959. On January 18, 1965,Algue flied a letter of protest or
request for reconsideration. 
On March 12, 1965, a warrant of distraint and levy was
presented to the private respondent, through its counsel, Atty.
Alberto Guevara, Jr., who refused to receive it on the ground of
the pending protest.  A search of the protest in the dockets of the
case proved fruitless. Atty. Guevara produced his file copy and
gave a photostat to BIR agent Ramon Reyes, who deferred
service of the warrant. 
On April 7, 1965, Atty. Guevara was finally informed that the
BIR was not taking any action on the protest and it was only then
that he accepted the warrant of distraint and levy earlier sought
to be served. Sixteen days later, on April 23, 1965, Algue filed
a petition for review of the decision of the Commissioner of
Internal Revenue with the Court of Tax Appeals.
ISSUE: WON the appeal of the private respondent from the
decision of the Collector of Internal Revenue was made on time
and in accordance with law.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
RULING: YES.
The above chronology shows that the petition was filed
seasonably. According to Rep. Act No. 1125, the appeal may be
made within thirty days after receipt of the decision or ruling
challenged.
It is true that as a rule the warrant of distraint and levy is "
proof of the finality of the assessment" and renders
hopeless a request for reconsideration," being "
tantamount to an outright denial thereof and makes the
said request deemed rejected." But there is a special
circumstance in the case at bar that prevents application
of this accepted doctrine.
The proven fact is that four days after the private respondent
received the petitioner's notice of assessment, it filed its letter of
protest. This was apparently not taken into account before the
warrant of distraint and levy was issued; indeed, such protest
could not be located in the office of the petitioner. It was only
after Atty. Guevara gave the BIR a copy of the protest that it was
, if at all, considered by the tax authorities. During the intervening
period, the warrant was premature and could therefore not be
served.
As the Court of Tax Appeals correctly noted," the protest filed by
private respondent was not pro forma and was based on strong
legal considerations. It thus had the effect of suspending on
January 18, 1965, when it was filed, the reglementary period
which started on the date the assessment was received, viz.,
January 14, 1965. The period started running again only on April
7, 1965, when the private respondent was definitely informed of
the implied rejection of the said protest and the warrant was
finally served on it. Hence, when the appeal was filed on April 23
, 1965, only 20 days of the reglementary period had been
consumed.
Discussion: The implication of the case is that the CIR
was not able to appreciate the protest of the Algue,
because 4 days pa lang after it filed its protest tapos
nawala pa sa dockets ni BIR so that’s why special
circumstance siya.
ADVERTISING ASSOCIATES V CA
G.R. No. L-59758 December 26, 1984
FACTS: Advertising Associates alleged that it sold in 1949 its
advertising agency business to Philippine Advertising
Counsellors. It contends that it paid sales taxes and 3%
contractor's tax for repairing electric signs. The Commissioner
required Advertising Associates to pay contractor's tax for 1967-
1971 and 1972,
From the Discussions of Atty. Kriska Marna A. Buena, CPA
respectively, including 25% surcharge. The basis of the
assessment is the fact that the taxpayer's articles of
incorporation provide that its primary purpose is to engage in
general advertising business. Its income tax returns indicate that
its business was advertising. Advertising Associates contested
the assessments. The taxpayer requested the cancellation of the
assessments. Inexplicably, for about four years there was no
movement in the case. Then, on March 31, 1978, the
Commissioner resorted to the summary remedy of issuing two
warrants of distraint.
ISSUE: Whether the collection of the tax had already prescribed
.
RULING: Section 332 of the 1939 Tax Code, now section 319
of the 1977 Tax Code, Presidential Decree No. 1158, effective
on June 3, 1977, provides that the tax may be collected by
distraint or levy or by a judicial proceeding begun 'within five
years after the assessment of the tax".
The taxpayer received on June 18, 1973 and March 5, 1974 the
deficiency assessments herein. The warrants of distraint were
served upon it on April 18 and May 25,1978 or within five years
after the assessment of the tax. Obviously, the warrants were
issued to interrupt the five-year prescriptive period. Its
enforcement was not implemented because of the pending
protests of the taxpayer and its requests for withdrawal of the
warrants which were eventually resolved in Commissioner Plana'
s letter of May 23, 1979.
It should be noted that the Commissioner did not institute any
judicial proceeding to collect the tax. He relied on the warrants of
distraint to interrupt the running of the statute of limitations. He
gave the taxpayer ample opportunity to contest the assessments
but at the same time safeguarded the Government's interest by
means of the warrants of distraint.
AVON PRODUCTS MANUFACTURING vs CIR
G.R. Nos. 201418-19| October 3, 2018
FACTS: Avon filed its VAT Returns and Monthly
Remittance Returns of Income Tax Withheld for the
taxable year 1999. They were served a Collection Letter
requiring them to pay P80, 246,459.15. These deficiency
assessments were the same deficiency taxes covered by
the Preliminary Assessment Notice. Hence, Avon filed a
letter protesting against the PAN. Without ruling on Avon'
s protest, the Commissioner prepared the Formal Letter
of Demand and Final Assessment Notices. Avon then
protested by resubmitting the protest. Avon informed the
revenue officers that all the documents necessary to
support its defenses had already been submitted. The
revenue officers allegedly expressed that they would
cancel the assessments resulting from the alleged
discrepancy in sales if Avon would pay part of the
assessments.
Avon paid the portions of the Final Assessment Notices.
However, in a Memorandum, the Bureau of Internal
Revenue's officers recommended the enforcement and
collection of the assessments on the sole justification that
Avon failed to submit supporting documents within the 60
-day period as required under Section 228 of the Tax
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Code.
The Commissioner did not act on Avon's request for
reconsideration. Thus, Avon was constrained to treat the
Collection Letter as denial of its protest.
ISSUE: Whether or not the collection letter dated July 9,
2004 was a final decision of the Commissioner which is
now appealable to the Court of Tax Appeals
RULING: Yes
Avon received the Collection Letter on July 14, 2004.
Hence, Avon's appeal to the Court of Tax Appeals filed
on August 13, 2004 was not time-barred.
In any case, even if this Court were to disregard the
Collection Letter as a final decision of the Commissioner
on Avon's protest, the Collection Letter constitutes an act
of the Commissioner on "other matters" arising under the
National Internal Revenue Code, which, pursuant to 
Philippine Journalists, Inc. v. CIR, may be the subject of
an appropriate appeal before the Court of Tax Appeals.
Due Process Discussion (Asked by Ma’am during
recitation but was not thoroughly discussed)
In Ang Tibay v. The Court of Industrial Relations, this
Court observed that although quasi-judicial agencies "
may be said to be free from the rigidity of certain
procedural requirements[, it] does not mean that it can, in
justiciable cases coming before it, entirely ignore or
disregard the fundamental and essential requirements of
due process in trials and investigations of an
administrative character." It then enumerated the
fundamental requirements of due process that must be
respected in administrative proceedings.
The Ang Tibay safeguards were subsequently "simplified
into four basic rights," as follows:
(a) [T]he right to notice, be it actual or constructive, of the
institution of the proceedings that may affect a person's
legal right; (b) reasonable opportunity to appear and
defend his rights and to introduce witnesses and relevant
evidence in his favor; (c) a tribunal so constituted as to
give him reasonable assurance of honesty and
impartiality, and one of competent jurisdiction; and (d) a
finding or decision by that tribunal supported by
substantial evidence
presented at the hearing or at least ascertained in the
records or disclosed to the parties.
The due process requirement before administrative
bodies are not as strict compared to judicial tribunals in
that it suffices that a party is given a reasonable
opportunity to be heard. Nevertheless, such "reasonable
opportunity" should not be confined to the mere
submission of position papers and/or affidavits and the
parties must be given the opportunity to examine the
witnesses against them. The right to a hearing is a right
which may be invoked by the parties to thresh out
substantial factual issues. It becomes even more
imperative when the rules itself of the administrative body
provides for one. While the absence of a formal hearing
does not necessarily result in the deprivation of due
process, it should be acceptable only when the party
does not invoke the said right or waives the same.
"[A] fair and reasonable opportunity to explain one's side"
is one aspect of due process. Another aspect is the due
consideration given by the decision-maker to the
arguments and evidence submitted by the affected party.
Administrative due process is anchored on fairness and
equity in procedure. It is satisfied if the party is properly
notified of the charge against it and is given a fair and
reasonable opportunity to explain or defend itself.
Moreover, it demands that the party's defenses be
considered by the administrative body in making its
conclusions, and that the party be sufficiently informed of
the reasons for its conclusions.
Appeals to CTA and Supreme Court - Secs. 11, 18 and 19,
RA9282
Section 11. Section 18 of the same Act is hereby amended as
follows:
"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil
proceeding involving matter arising under the National Internal
Revenue Code, the Tariff and Customs Code or the Local
Government Code shall be maintained, except as herein provided,
until and unless an appeal has been previously filed with the CTA and
disposed of in accordance with the provisions of this Act.
"A party adversely affected by a resolution of a Division of the CTA on
a motion for reconsideration or new trial, may file a petition for review
with the CTA en banc."
"SEC. 19. Review by Certiorari. - A party adversely affected by a
decision or ruling of the CTA en banc may file with the Supreme Court
a verified petition for review on certiorari pursuant to Rule 45 of the
1997 Rules of Civil Procedure."
BASA vs REPUBLIC and VILLASOR
G.R. No. L-45277 August 5, 1985
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
FACTS: In a demand letter dated August 31, 1967, the
Commissioner of Internal Revenue assessed against Augusto
Basa deficiency income taxes for 1957 to 1960 totaling P16,
353.12. The deficiencies were based on the taxpayer's failure
to report in full his capital gains on the sales of land. The
taxpayer did not contest the assessments. On the assumption
that the assessments had become final and incontestable, the
Commissioner on September 3, 1975 sued the taxpayer.
The trial court affirmed the assessments and ordered Basa to
pay his deficiency. Instead of appealing to the Supreme Court
directly since no factual issues are involved, Basa tried to
appeal to the Court of Appeals. He did not perfect his appeal
within the reglementary period, thus, the decision of the trial
court was rendered final and executory.
Basa filed the instant special civil action of certiorari wherein
he assailed the trial court's decision. However, the Supreme
Court held that the petition is devoid of merit.  The trial court
acted within its jurisdiction in rendering its decision and
dismissing Basa's appeal.  He should have appealed to the
Supreme Court.  His failure to do so rendered the decision
final and executory.  He has no cause of action for certiorari.
ISSUE: Whether or not petitioners’ cause of action has
prescribed.
RULING
The issue of prescription raised by him is baseless. If he
wanted to contest the assessments, he should have appealed
to the Tax Court. Not having done so, he could not contest
the same in the Court of First Instance.
The assessments were predicated on the fact that his income
tax returns, if not fraudulent, were false because he under
declared his income. In such a case, the deficiency
assessments may be made within ten years after the
discovery of the falsity or omission. The court action should be
instituted within five years after the assessment, but this
period is suspended during the time that the Commission is
prohibited from instituting a court action.
Basa's requests for reinvestigation tolled the prescriptive
period of five years within which court action may be brought.
Moreover, the issue of prescription should have been raised in
the Tax Court.
MAMBULAO LUMBER COMPANY vs. REPUBLIC OF THE
PHILIPPINES
GR. No. L-37061 September 5, 1984
FACTS: In 1957, BIR conducted an examination of the books
of accounts of herein petitioner Mambulao Lumber Company.
for the purpose of determining said taxpayer's forest charges
and percentage tax liabilities. Mambulao was assessed with
the corresponding forest charges in the total amount of P15,
443.65 including surcharges. The subject taxpayer contested
this assessment.
On August 29, 1958, the Acting CIR addressed a letter to
petitioner, informing them of their tax liability.
Petitioner requested for a reinvestigation of its tax liability.
Respondent Commissioner of Internal Revenue give petitioner
a period of twenty (20) days from receipt thereof to submit the
results of its verification of payments with a warning that
failure to comply therewith would be construed as an
abandonment of the request for reinvestigation.
For failure of petitioner to comply with the above letter-request
and/or to pay its tax liability despite demands for the payment
thereof, respondent Commissioner of Internal Revenue filed a
complaint for collection in the Court of First Instance of Manila
.
ISSUE: Whether or not the right to file a judicial action for the
collection of the forest charges and surcharges due from the
petitioner Mambulao Lumber Company has already
prescribed.
RULING: No.
The commencement of the five-year period should be
counted from August 29, 1958, the date of the letter of
demand of the Acting Commissioner of Internal Revenue
to petitioner Mambulao Lumber Company. The complaint
for collection was filed in the CFI of Manila on August 25,
1961, very much within the five-year period prescribed by
Section 332 (c) of the Tax Code. Consequently, the right of
the CIR to collect the forest charges and surcharges in
the amount of P15,443.55 has not prescribed.
Taxpayer's failure to appeal to the Court of Tax Appeals in
due time made the assessment in question final, executory
and demandable. And when the action was instituted on
September 2, 1958 to enforce the deficiency assessment in
question, it was already barred from disputing the correctness
of the assessment or invoking any defense that would reopen
the question of its tax liability. Otherwise, the period of thirty
days for appeal to the Court of Tax Appeals would make little
sense.
In a suit for collection of internal revenue taxes, as in this case
, where the assessment has already become final and
executory, the action to collect is akin to an action to enforce a
judgment. No inquiry can be made therein as to the merits of
the original case or the justness of the judgment relied upon.
Petitioner is thus already precluded from raising the defense
of prescription.
Where the taxpayer did not contest the deficiency income tax
assessed against him, the same became final and properly
collectible by means of an ordinary court action. The taxpayer
cannot dispute an assessment which is being enforced by
judicial action, He should have disputed it before it was
brought to court.
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
Court of Tax Appeals (Petition for Review)
What the taxpayer will file with the CTA is the Petition for
Review. The Court that will hear is the DIVISION. Take note
that in the Rule of Injunction, kahit na nag-appeal ka with the
CTA, it will not suspend the payment of the alleged deficiency
tax except if the interest of the government or the taxpayer will
be jeopardized.
**Motion for Reconsideration (MR) is important in this stage
because CTA En Banc will not have any jurisdiction to hear
the case pag walang MR, kasi nakalagay sa Sec. 18 is ruling
of the CTA division so kailangan ng MR.
Can the taxpayer appeal directly to the Supreme Court for
a pure question of law?
No, under RA 1125 as amended by RA 9282, nakalagay na
ang jurisdiction ng Supreme Court is only for the decisions of
the CTA En Banc. So kung walang decision ng CTA En Banc,
hindi ka pwede magdiretso sa Supreme Court.
Refunds For Erroneously Collected Taxes
This is different from refunds in excess of input taxes, which
we discussed in VAT.
Section 204 of the NIRC Governs Administrative Claims
(C) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue
stamps when they are returned in good condition by the purchaser,
and, in his discretion, redeem or change unused stamps that have
been rendered unfit for use and refund their value upon proof of
destruction. No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner a claim for
credit or refund within two (2) years after the payment of the tax or
penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or
refund.
While Section 229, Governs Judicial Claims
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no
suit or proceeding shall be maintained in any court for the recovery of
any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected or of any penalty
claimed to have been collected without authority of any sum alleged
to have been excessively or in any manner wrongfully collected
without authority or of any sum alleged to have been excessively or in
any manner wrongfully collected until a claim for refund or credit has
been duly filed with the Commissioner; but such suit or proceeding
may be maintained whether or not such tax Penalty or sum has been
paid under protest or duress.
In any case no such suit or proceeding shall be filed after the
expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after
payment: Provided however That the Commissioner may even
without a written claim therefor refund or credit any taxwhere on the
face of the return upon which payment was made such payment
appears clearly to have been erroneously paid. 
What Are The Requisites For A Taxpayer To Claim For
Erroneously Collected Taxes?
1. He must prove his entitlement to the refund
2. He must file a written claim with the administrative
agency, BIR. This is because the BIR or the CIR has
no motu proprio powers to grant refund claims.
Exception:
If the return itself shows overpayment. In that case, the
return shall be considered as written claim for refund. It is not
really an exception. It’s just that the return will be considered
as the written claim.
When Shall Taxpayer File His Written Claim?
The written claim with the BIR and the judicial claim under
Section 229 should be filed within two (2) from the date of
payment. Well it is still correct when you said upon filing of the
return because we follow the pay as you file system whereby
you pay upon filing of your return. But the correct term is
within two years from the date of payment regardless of the
supervening event.
SANTIAGO M. BERMEJO VS. THE COLLECTOR OF INTERNAL
REVENUE
G.R. No. L-3029, July 25, 1950
FACTS: In 1946, Bermejo was informed that for sales of nipa shingles
and charcoal, he owed the Government the sum of P1,083.75. He
objected to the assessment, contending mainly that the products were
agricultural, and as such, free from taxation; but after the exchange of
some correspondence he at last proposed to pay the tax by
installments. His request was granted. After paying the first
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
installment, he sued for recovery.
Defendant submitted a motion for dismissal of the complaint on the
ground that the plaintiff had not complied with the provisions of
section 306 of the Internal Revenue Law, inasmuch as said plaintiff
had not, before suing, filed a claim with the Collector for the refund of
the amount he had delivered.
RTC: Absolved the defendant on two grounds, to wit: (a) plaintiff failed
to comply with section 306; and (b) the tax had been properly
imposed.
Plaintiff argues that section 306 had been substantially complied with,
because previous to the institution of this proceeding, there were
letters sent to the Collector protesting against the tax.
ISSUE: Whether recovery is proper
RULING: NO.
The law clearly stipulates that after paying the tax, the citizen must
submit a claim for refund before resorting to the courts. This is, first, to
afford the Collector an opportunity to correct the action of subordinate
officers; and second, to notify the Government that such taxes have
been questioned, and the notice should then be borne in mind in
estimating the revenue available for expenditure. Previous objections
to the tax may not take the place of that claim for refund, because
there may be some reason to believe that, in paying, the taxpayer has
finally come to realize the validity of the assessment.
Going into the merits of the controversy, we notice that the issue is
the application of section 194(x) of the National Internal Revenue
Code to a person who, for profit, makes nipa shingles or produces
charcoal.
For convenience, said provision of law is reproduced:
"(x) 'Manufacturer' includes every person who by physical or chemical
process alters the exterior texture or form or inner substance of any
raw material or manufactured or partially manufactured product in
such manner as to prepare it for a special use or uses to which it
could not have been put in its original condition, or who by any such
process alters the quality of any such raw material or manufactured or
partially manufactured product so as to reduce it to marketable shape
or prepare it for any of the uses of industry, or who by any such
process combines any such raw material or manufactured or partially
manufactured products with other materials or product of the same or
of different kinds and in such manner that the finished product of such
process or manufacture can be put to a special use or uses to which
such raw material or manufactured or partially manufactured products
in their original condition could not have been put, and who in addition
alters such raw material or manufactured or partially manufactured
products, or combines the same to produce such finished products for
the purpose of their sale or distribution to others and not for his own
use or consumption. (Sec. 194[x], Com. Act No. 466)
Nipa shingles are made in this manner: Nipa leaves (the compound
leaves) are cut from nipa trees, which are grown and cultivated like
other plants. The small long leaflets are than removed from the stem
or stalk. These leaflets are folded over a bamboo stick of convenient
length and then sewed together with nipa midribs locally known as "
pipis". Then the shingle is ready for the market, for use as roofing
material. Unless converted into shingles, nipa leaves may not be used
, and are not used, for roofing; although they may be utilized for
partitions, windows and doors.
In the light of section 194(x), it seems clear that in making nipa
shingles, the plaintiff altered by physical process the exterior form of
the nipa leaves in such manner as to prepare them for special use (as
roofing material), to which the leaves could not be dedicated in their
original condition. He also combined nipa raw materials with other
materials (bamboo sticks) in such manner that the finished product (
nipa shingle) may be put to a special use (roofing) to which neither
the bamboo nor the nipa could have been destined.
On the other hand, charcoal is produced by plaintiff as follows: Trees
growing in the swamps are felled and cut into pieces of a certain
length and size. The pieces are piled in a pit or oven. They are
covered with cogon and earth. Then fire is set on them for several
days. When the smoke becomes clear, the pit or oven is closed, the
fire is extinguished and the wood has become charcoal.
The application of section 194(x) to charcoal is more easily
perceivable. The process is a chemical or physical process altering
the exterior texture and inner substance of the firewood in such
manner as to prepare it for special uses to which firewood may not be
dedicated. Wherefore, in making charcoal for the market, plaintiff
became a manufacturer within the meaning of the law.
COMMENTS:
Some taxpayers kasi what they do is they file an
administrative claim today and a judicial claim tomorrow with
the CTA. Weird but both of them are allowed since they can
be filed within two years from the date of payment.
COMMISSIONER OF INTERNAL REVENUE vs.MANILA
ELECTRIC COMPANY (MERALCO)
G.R. No. 181459 June 9, 2014
FACTS:
On July 6, 1998, respondent Manila Electric Company (MERALCO)
obtained 2 loans from Norddeutsche LandesbankGirozentrale (
NORD/LB) Singapore Branch.
Under the foregoing loan agreements, the income received by
NORD/LB, by way of respondent MERALCO’sinterest payments, shall
be paid in full without deductions, as respondent MERALCO shall
bear the obligation ofpaying/remitting to the BIR the corresponding
ten percent (10%) final withholding tax. Pursuant thereto,
respondentMERALCO paid/remitted to the Bureau of Internal
Revenue (BIR) the said withholding tax on its interest paymentsto
NORD/LB Singapore Branch, covering the period from January 1999
to September 2003 in the aggregate sum of₱264,120,181.
However, sometime in 2001, respondent MERALCO discovered that
NORD/LB Singapore Branch is a foreigngovernment-owned financing
institution of Germany. Thus, on December 20, 2001, respondent
MERALCO filed arequest for a BIR Ruling with petitioner
Commissioner of Internal Revenue (CIR) with regard to the tax
exemptstatus of NORD/LB Singapore Branch, in accordance with
Section 32(B)(7)(a) of the 1997 National InternalRevenue Code (Tax
Code), as amended.
On October 7, 2003, the BIR issued Ruling No. DA-342-2003
declaring that the interest payments made toNORD/LB Singapore
Branch are exempt from the ten percent (10%) final withholding tax,
since it is a financinginstitution owned and controlled by the foreign
government of Germany.
Consequently, on July 13, 2004, relying on the aforesaid BIR Ruling,
respondent MERALCO filed with petitioner aclaim for tax refund or
issuance of tax credit certificate in the aggregate amount of ₱264,120
,181.44, representingthe erroneously paid or overpaid final
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020
withholding tax on interest payments made to NORD/LB Singapore
Branch.
On November 5, 2004, respondent MERALCO received a letter from
petitioner denying its claim for tax refund onthe basis that the same
had already prescribed under Section 204 of the Tax Code, which
gives a taxpayer/claimanta period of two (2) years from the date of
payment of tax to file a claim for refund before the BIR. Agrieved,
respondent MERALCO filed a Petition for Review with the Court of
Tax Appeals (CTA).
CTA: petitioner’s claim in the amount of TWO HUNDRED TWENTY-
FOUR MILLIONSEVEN HUNDRED SIXTY THOUSAND NINE
HUNDRED TWENTY-SIX PESOS & SIXTY-FIVE CENTAVOS(₱224,
760,926.65) representing erroneously paid and remitted final income
taxes for the period January 1999 toJuly 2002 is hereby DENIED on
the ground of prescription.
respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT
CERTIFICATE to petitioner in theamount of THIRTYNINE MILLION
THREE HUNDRED FIFTY-NINE THOUSAND TWO HUNDRED
FIFTY-FOURPESOS & SEVENTY-NINE CENTAVOS (₱39,359,254.
79) representing the final withholding taxes erroneously paidand
remitted for the period December 2002 to September 2003.
ISSUE: Whether or not respondent MERALCO is entitled to a tax
refund/credit relativeto its payment of final withholding taxes on
interest payments made to NORD/LB from January 1999 to
September2003.
RULING: ONLY FOR THE WITHOLDING TAXES PAID FROM 2002
TO 2003. THOSE PAID FROM 1999 TO 2002 HAS ALREADY
PRESCRIBED.
FACTUAL BASIS FOR TAX REFUND
We find that respondent MERALCO hasdischarged the requisite
burden of proof in establishing the factual basis for its claim for tax
refund.
First, as correctly decided by the CTA En Banc, the certification
issued by the Embassy of the Federal Republic ofGermany, dated
March 27, 2002, explicitly states that NORD/LB is owned by the State
of Lower Saxony, Saxony-Anhalt and Mecklenburg-Western
Pomerania, and serves as a regional bank for the said states which
offers supportin the public sector financing.
Given that the same was issued by the Embassy of the Federal
Republic of Germany in the regular performance oftheir official
functions, and the due execution and authenticity thereof was not
disputed when it was presented intrial, the same may be admitted as
proof of the facts stated therein. Further, it is worthy to note that the
Embassy ofthe Federal Republic of Germany was in the best position
to confirm such information, being the representative ofthe Federal
Republic of Germany here in the Philippines.
To bolster this, respondent MERALCO presented as witness its Vice-
President and Head of Tax and Tariff, GermanF. Martinez, Jr., who
testified on and identified the existence of such certification.
The foregoing documentary and testimonial evidence were given
probative value as the First Division ruled thatthere was no strong
evidence to disprove the truthfulness of the said pieces of evidence,
considering that the CIRdid not present any rebuttal evidence to prove
otherwise.
Consequently, such certification was used by petitioner as basis in
issuing BIR Ruling No. DA-342-2003, whichcategorically declared that
the interest income remitted by respondent MERALCO to NORD/LB
Singapore Branch isnot subject to Philippine income tax, and
accordingly, not subject to ten percent (10%) withholding tax.1âwphi1
Contrary topetitioner’s view, therefore, the same constitutes a
compelling basis for establishing the tax exempt status ofNORD/LB
EXCLUSIONS FROM THE GORSS INCOME
MERALCO has shown clear and convincingevidence that NORD/LB
is owned, controlled or enjoying refinancing from the Federal Republic
of Germany, aforeign government, pursuant to Section 32(B)(7)(a) of
the Tax Code, as amended.
THE CLAIM FOR TAX REFUND PERTAINING TO THE PERIOD
FROM JANUARY 1999 TO JULY 2002 HAS ALREADY
PRESCRIBED
Section 229 of the Tax Code
to wit:Section 229. Recovery of Tax Erroneously or Illegally Collected.
− No suit or proceeding shall be maintained in anycourt for the
recovery of any national internal revenue tax hereafter alleged to have
been erroneously or illegallyassessed or collected
or of any penalty claimed to have been collected without authority of
any sum alleged tohave been excessively or in any manner wrongfully
collected without authority or of any sum alleged to have
beenexcessively or in any manner wrongfully collected
until a claim for refund or credit has been duly filed with
theCommissioner; but such suit or proceeding may be maintained
whether or not such tax penalty or sum has beenpaid under protest or
duress.
In any caseno such suit or proceeding shall be filed after the
expiration of two (2) years from the date of paymentof the tax or
penalty regardless of any supervening cause that may arise after
payment: Provided however That theCommissioner may even without
a written claim therefor refund or credit any tax where on the face of
the returnupon which payment was made such payment appears
clearly to have been erroneously paid.
As can be gleaned from the foregoing, the prescriptive period
provided is mandatory regardless of any superveningcause that may
arise after payment. It should be pointed out further that while the
prescriptive period of two (2)years commences to run from the time
that the refund is ascertained, the propriety thereof is determined by
law (inthis case, from the date of payment of tax), and not upon the
discovery by the taxpayer of the erroneous orexcessive payment of
taxes.
The issuance by the BIR of the Ruling declaring the tax-exempt
status of NORD/LB, ifat all, is merely confirmatory in nature. As
aptly held by the CTA-First Division, there is no basis that the
subjectexemption was provided and ascertained only through BIR
Ruling No. DA-342-2003, since said ruling is not theoperative act from
which an entitlement of refund is determined.34 In other words, the
BIR is tasked only to confirmwhat is provided under the Tax Code on
the matter of tax exemptions as well as the period within which to file
aclaim for refund.
PETITIONER IS MISGUIDED WHEN IT RELIED UPON THE SIX (6)-
YEAR PRESCRIPTIVE PERIOD FOR INITIATING AN ACTION ON
THE GROUND OF QUASI CONTRACT OR SOLUTIO INDEBITI
UNDER ARTICLE 1145 OF THE NEW CIVIL CODE.
There is solutio indebiti where:
(1) payment is made when there exists no binding relation between
the payor, who has no duty to pay, andthe person who received the
payment; and
From the Discussions of Atty. Kriska Marna A. Buena, CPA
 TAXATION II
CLASS TRANSCRIPTION | III-MANRESA B 2019-2020

(2) the payment is made through mistake, and not through liberality Q: Can you simultaneously file an administrative and judicial
orsome other cause. claim for refunds?
Here, there is a binding relation between petitioner as the taxing A: Yes. You can file simultaneously for refunds. This is
authority in this jurisdictionand respondent MERALCO which is bound because the prescriptive period for judicial and administrative
under the law to act as a withholding agent of NORD/LB claims is two years from payment.
SingaporeBranch, the taxpayer. Hence, the first element of solutio For example, the CTA granted a refund, the taxpayer can
indebitiis lacking. Moreover, such legal precept isinapplicable to the
claim it in the BIR. So the BIR can check if his claim for refund
present case since the Tax Code, a special law, explicitly provides for
a mandatory period forclaiming a refund for taxes erroneously paid.
is granted or denied. However if there is a discrepancy on the
TAX REFUNDS
amount of tax refund, it is the CTA that must be followed.
Tax refunds are based on the general premise that taxes have either EXAMPLE
been erroneously or excessively paid. Thoughthe Tax Code June 30, 2016, the claim is filed with the BIR.
recognizes the right of taxpayers to request the return of such August 22, 2016, there is a denial from the BIR.
excess/erroneous payments from thegovernment, they must do so
September22, 2016: The taxpayer has 30 days to appeal to
within a prescribed period. Further, "a taxpayer must prove not only
the CTA which is on September 22, 2016. He need not wait
his entitlement toa refund, but also his compliance with the procedural
due process as non-observance of the prescriptive periodswithin for the lapse of two years to file.
which to file the administrative and the judicial claims would result in
the denial of his claim." EXAMPLE
August 22, 2016, there was a denial
IN THE CASE ATBAR, respondent MERALCO had ample April 11, 2017, He filed a judicial claim.
opportunity to verify on the tax-exempt status of NORD/LB for
purposes ofclaiming tax refund. Even assuming that respondent That will be out of time since it is beyond the thirty days.
MERALCO could not have emphatically known the status ofNORD/LB
, its supposition of the same was already confirmed by the BIR Ruling EXAMPLE
which was issued on October 7,2003. Nevertheless, it only filed its April 11, 2017 ang denial, there is no thirty day period here.
claim for tax refund on July 13, 2004, or ten (10) months from the
issuance of theaforesaid Ruling. We agree with the CTA-First Division April 15, 2017, Kailangan mong magfile no matter what.
, therefore, that respondent MERALCO's claim for refund inthe
amount of Two Hundred Twenty-Four Million Seven Hundred Sixty COMMENTS:
Thousand Nine Hundred Twenty-Six Pesosand Sixty-Five Centavos ( ⮚If may decision, dapat within 2 years and apply the
₱224,760,926.65) representing erroneously paid and remitted final thirty day period to appeal.
income taxes for theperiod January 1999 to July 2002 should be ⮚But in action, if the two year prescriptive period will
denied on the ground of prescription. lapse and the BIR has no deficiency, you can file a
judicial claim.
EXAMPLE:
April 15, 2015- filing of the ITR. There is overpayment.
April 10, 2017- So taxpayer filed an administrative claim with
the BIR on. The BIR cannot really grant immediately the tax
refund within the said period unless it prioritise it. Hence, there
is an inaction.
April 15, 2017, should the taxpayer file a judicial claim or not?
Is there a fresh period? No, there is none.
So the tax payer should filed a claim with the CTA on April 15
kasi mag end na yung prescriptive period.
EXAMPLE:
June 30, 2016- taxpayer filed a claim with the BIR
April 11, 2017- there is a denial of the claim by the BIR.
April 15, 2017- Walang fresh period of 30 days. So mag file
ka parin nang judicial claim sa April 15.

From the Discussions of Atty. Kriska Marna A. Buena, CPA