Chapter 9 Tax Remedies

 Concept of Assessment
An assessment contains not only a computation of tax liabilities but also a demand for
payment within the prescriptive period. There is no form for an assessment. It can be
written anywhere as long as it is signed by the BIR. Any notice sent to the taxpayer
demanding the tax liability is an assessment.

General rule: Taxes are self-assessing and do not require the issuance of an assessment
notice in order to establish the tax liability of a taxpayer.
(By nature, internal revenue taxes are self-assessing. When the taxpayer earns income, he has the responsibility to compute, file and
pay his tax to the BIR. Hence, the taxpayer creates his tax liability even without the government’s assessment.) TBValencia & Roxas
Exceptions:
1. Tax period of a taxpayer is terminated (Sec.6d, NIRC)
2. Deficiency tax liability arising from a tax audit conducted by a BIR (Sec 56b, ibid.)
3. Tax lien (Sec. 219, ibid.)
4. Dissolving Corporation (Sec. 52c, ibid.)

Requisites of a valid assessment:

1. The taxpayers shall be informed in writing
2. Must state the law and the facts on which the assessment is made; otherwise, the
assessment shall be void. (Sec. 228, ibid.)

Assessments prima facie correct

Tax assessments by tax examiners are presumed correct and made in good faith. The
taxpayer has the duty to prove otherwise. (Sy Po v. CTA, GRN L- 81446 August 18, 1988.)

Assessment discretionary on the part of Commissioner

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. (Meralco Securities vs. Savellano, L-
36181 and L-36748, Oct. 23, 1992)

Void vs. Illegal Assessment

An assessment is illegal and void when the assessor has no power to act at all. It is
erroneous when the assessor has the power but errs in the exercise of that power. It
is settled in our jurisdiction that where an assessment is illegal and void, the remedy
of a taxpayer, who has already paid the realty tax under protest, is to sue for refund in
the competent court. On the other hand, where the assessment is merely erroneous,
his recourse is to file an appeal in the Provincial Board of Assessment Appeals within
60 days from receipt of the assessment. (GR L-24213 March 13, 1968)

Prescriptive periods for the assessment and collection of taxes rationale

The periods are designated to secure the taxpayers against unreasonable investigation
after the lapse of the period prescribed. They are also beneficial to the government
because tax officers will be obligated to act promptly.

Rules on prescription
1. When the tax law itself is silent on prescription, the tax is imprescriptible
2. When no return is required, tax is imprescriptible.
Note: Remedy of taxpayer is to file a return
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Prescriptive period for the assessment of taxes

General rule:
3 years after the date the return is due or filed, whichever is later (Sec 203, ibid.)

Exceptions:
1. Failure to file return: 10 years from date of discovery of the omission to file the
return (Sec 222A, ibid.)
2. False or fraudulent return with intention to evade the tax: 10 years from the
date of the discovery of the falsity or fraud (Sec 222A, ibid.)

If before the expiration of the 3 year period for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its assessment after such
time, the tax may be assessed within the period agreed upon. The period so agreed
upon may be extended by subsequent written agreement made before the expiration
of the period previously agreed upon. (Sec. 222 b, ibid.)

Nothing in Sec 222A shall be construed to authorize the examination and

investigation or inquiry into any tax return filed in accordance with the provisions of
any tax amnesty law or decree.

Fraud must be alleged and proved as a fact. It must be the product of a deliberate
intent to evade taxes. It may be established by the:
 Intentional and substantial understatement of the tax liability by the
taxpayer (substantial under declaration of income; >30% of that declared
[Sec. 248, ibid.])
 Intentional and substantial overstatement of deductions of exemptions
(>30% of the actual deductions [Sec. 248, ibid.])
 Recurrence of the above circumstances
Falsity constitutes a deviation from the truth due to mistake, carelessness or
ignorance.
There is fraud in the following cases:
 Fraud must be the product of a deliberate intent to evade taxes (Jalandoni
V.Republic)
 Simple statement that return filed was not fraudulent does not disprove
existence of fraud (Tayengco V.Collector)
 Substantial under-declarations of income for six consecutive years
demonstrate fraudulence of returns (Perez V. CTA)
 Presence of fictitious expenses, with no evidence presented, proves
existence of fraud (Tan Guan V. CIR)
No fraud in the following cases:
 Mere understatement in the tax return will not necessarily imply fraud
(Jalandoni V. Republic)
 Sale of real property for less than FMV is not necessarily a false return
( CIR v.Ayala Securities)
 Fraud is a question of fact and the circumstances constituting fraud must
be alleged and proved in the trial court (CIR v. Ayala Securities)
 Fraud is never imputed and the courts never sustain findings of fraud
upon circumstances that only create suspicion ( CIR v. Javier)

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 Mistakes of revenue officers on three different occasions remove element

of fraud (Aznar V. CTA and Collector)

Notice of the assessment is released, mailed or sent to the taxpayer also within the 3
year period. It is not required that the notice be received by the taxpayer within the
prescribed period. But the sending of the notice must clearly be proven. (Basilan Estate v.
CIR, 21 SCRA 17)
 
Suspension of prescriptive periods: (Sec. 223, ibid.)
1. Periods suspended:
 Periods for assessment in Sec. 203 and 222
 Beginning of distraint or levy
 Proceeding in court for collection

2. Grounds for suspension of prescriptive periods:

 Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for 60 days thereafter 
 Taxpayer requests for reinvestigation which is granted
 Taxpayer cannot be located in the address given in the return filed, except
if the taxpayer informs the Commissioner of a change in address the
prescriptive period will not be suspended
 When the warrant is duly served upon the taxpayer and no property could
be located
 When the taxpayer is out of the Phils.

Amendment of return
1. If the amended return is substantially different from the original return, the
prescriptive period shall be counted from the filing of the amended return. But the
said period shall run from the filing of the original return, if the same is sufficiently
complete to enable the CIR to make proper assessment (CIR v. Phoenix Assurance Co.)
2. Within 3 years from the date of such filing, the same may be modified, changed
or amended, provided that no notice for audit or investigation of such return,
statement, or declaration has in the mean time been actually served upon the
taxpayer.
3. Effect of filing a wrong return: the 10 year prescriptive period for cases where
returns are not filed applies.

 Assessment Process

The audit process commences with the issuance of a Letter of Authority

The letter of authority is an official document that empowers a Revenue Officer to examine
and scrutinize a taxpayer’s books of accounts and other accounting records, in order to
determine the taxpayer’s correct internal revenue tax liabilities. LA must be served to the
concerned taxpayer within thirty (30) days from its date of issuance; otherwise, it shall
become null and void.

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Who issues LA?

1. CIR – for those units reporting directly under him
2. Regional Directors – for taxpayers covered by his particular region. If the CIR has
already issued an LA to investigate a particular taxpayer, the Regional Director
shall desist from issuing another LA for the same taxpayer

Where no letter of authority needed:

1. Cases involving civil/criminal tax fraud which fall under the jurisdiction of the tax
fraud division of the enforcement services, and
2. Policy cases under audit by the special teams in national offices.

Pre-assessment stage
Step 1: Notice of informal conference
 Notice for informal conference is a written notice informing a taxpayer that
the findings of the audit conducted on his books of accounts and
accounting records indicate that additional taxes or deficiency
assessments have to be paid.
 If, after the culmination of an audit, a Revenue Officer recommends the
imposition of deficiency tax assessments, this recommendation is
communicated by the Bureau to the taxpayer concerned during an
informal conference called for this purpose, the taxpayer shall have 15
days from receipt of the notice of informal conference to explain his side.
STEP 2: Informal conference
Matters taken up:
 Discussion on the merits of the assessment
 Attempt of taxpayer to convince the examiner to conduct a re-
investigation and or re-examination
 Taxpayer to advise the examiner if position paper 

Jeopardy assessment a tax assessment made by an authorized

revenue officer without the benefit of a complete or partial audit if the
officer believes that the assessment and collection will be jeopardized by
the delay caused by the taxpayer’s failure to
a) comply with audit and investigation requirements to present his
books of accounts and or pertinent records;
b) substantiate all or any of the deductions, exemptions or credits
claimed in his return.
It is usually when statutory prescriptive periods for the assessment or
collection of taxes are about to lapse due to taxpayer’s fault.
STEP 3: Issuance of Preliminary Assessment Notice (PAN)
 Pre-assessment notice is a communication issued by the Regional
Assessment Division or any other concerned BIR office, informing a
taxpayer who has been audited of the findings of the Revenue Officer,
following the review of these findings.
 If the taxpayer disagrees with the findings in the PAN, he has 15 days to
file a written reply contesting the proposed assessment.

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When PAN no longer required:

1. mathematical errors
2. discrepancy has been determined between tax withheld and amount actually
remitted by the withholding agent
3. 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 
4. when the excise tax due has not been paid, or 
5. when an article locally purchased or imported by an exempt person has been sold,
traded, or transferred to a non-exempt person.

Burden of proof:
There is a presumption of correctness and good faith on the part of the CIR, thus, the
burden lies on the taxpayer. Otherwise, the finding of the CIR will be conclusive and
he will assess the taxpayer. The same is true even if the CIR is wrong, if the taxpayer
does not controvert it (Cagayan Robina Sugar Milling V. CA)
Reasons:
 lifeblood theory
 presumption of regularity in the performance of public functions
Note: Assessments by the BIR must have on its face the law and facts upon which
the presumption is made.

Formal assessment stage

Notice of Assessment is a formal letter of demand where a declaration of deficiency taxes
is issued to a taxpayer who fails to respond to a pre-assessment notice within the
prescribed period of time, or whose reply to the PAN was found to be without merit. This is
commonly known as the Final Assessment Notice. An assessment contains not only a
computation of under declaration of taxable sales, receipts or income, or a substantial
overstatement of deductions. (Files protest within 30 days from receipt of  assessment. See Remedies Available to
the Taxpayer)

Failure to report sales, receipts, or income in an amount exceeding 30% of that declared
per return, and a claim of deductions exceeding 30% of actual deductions constitute
substantial under declaration or over declaration.

The state cannot be estopped by the neglect of its agents and officers. The rule of estoppel
cannot be invoked by the taxpayer in order to preclude the collection of taxes that is
rightfully due the government.

Prescriptive period for the collection of taxes

1. 5 years – from assessment or within period for collection agreed upon in writing
before expiration of the 5 year period (Sec. 222, NIRC)
2. 10 years – after discovery in case of false or fraudulent return with intent to evade
or failure to file return, without need for an assessment (Sec. 222, ibid.)

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Prescriptive period where the government’s action is on a bond which the taxpayer
executes in order to secure the payment of his tax obligation
10 years under Art. 1144 (1) of the Civil Code and not 3 years under the NIRC. In this
case the taxpayers failed to pay the installments due despite demand. Hence, the
Government sued on the bond which is a separate and distinct obligation of the
parties thereto. The action is for the enforcement of a contractual obligation. (Republic
v.Araneta, GR No. L-14142, May 30, 1961)

Grounds for suspension of the running of the statute of limitation

1. When the CIR is prohibited from making the assessment or beginning the distraint
or levy or a proceeding in court, and for 60 days thereafter 
2. When the taxpayer requests for a reconsideration which is granted by the CIR
3. When the taxpayer cannot be located in the address given by him in the return,
unless he informs the CIR of any change in his address
4. When the warrant of distraint or levy is duly served and no property is located
5. When the taxpayer is out of the Philippines (Sec. 223, NIRC)

A tax return is considered filed for purposes of starting the running of the period of
limitation
1. The return is valid - it has complied substantially with the requirements of the law.
2. The return is appropriate - it is a return for the particular tax required by law.
3. A defective tax return is the same as if no return was filed at all.

Prescriptive period for the violation of any provision of the tax code (Sec. 281, ibid.)
Should be filed 5 years from the (1) day of the commission of the violation of the law,
and if the same shall be not known, from the (2) discovery thereof and the institution
of the judicial proceedings for its investigation and punishment (Lim v. CA 190 SCRA 616)
1. Charge is failure or refusal to pay deficiency income - committed only after the
finality of the assessment coupled with the taxpayer’s willful refusal to pay the
taxes within the allotted period
2. Charge is filing of false or fraudulent return with intent to evade the assessment –
in addition to the fact of discovery, there must be a judicial proceedings for the
investigation and punishment of the tax offense before the 5 year prescriptive
period begins to run.

When tax deemed collected:

1. By summary remedies – when the government avails of the summary method of
distraint and levy procedure
2. By judicial remedies – by filing a complaint through the proper court

Note: if the decision of the CIR on protested assessment is appealed to the CTA,
the collection of tax is considered begun when the government filed its answer to
the taxpayer’s petition for review. (Fernandez Hermanos v. CIR)

 Informer’s Reward
Informer’s reward is given to persons instrumental in the discovery of violations of the
NIRC and in the discovery and seizure of smuggled goods.

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Requisites to qualify for the reward:

1. Person is not an internal revenue official or employee, public official, or employee
or relative within the 6th degree of consanguinity
2. Voluntarily gives definite and sworn information:
 Not yet in the possession of the BIR
 Leading to discovery of frauds
 Resulting in the discovery of revenue, surcharges and fees, and/or,
conviction of the guilty party
 Not refer to a case already pending or previously investigated or
examined by the CIR or his agents or the SOF or his agents

Amount of reward
10% of the revenues, surcharges or fees recovered and/or fine/penalty imposed,
or P1,000,000 per case, whichever is lower. The cash rewards shall be subject to income
tax at the rate of 10% collected as a final withholding tax. (Sec. 282, NIRC)
Note:
 Status offering rewards must be liberally construed in favor of informers
and with regard to the purpose for which they are intended, with mere
technicality yielding to the substantive purpose of the law
 Same amount shall be given if the offender offered to compromise and
such offer has been accepted and collected by the CIR
 If no revenue, surcharge, or fees be actually collected, such person is not
entitled to a reward
 For discovery and seizure of smuggled goods - the cash reward is 10% of
the FMV of the smuggled and confiscated goods, or P1,000,000, per case
whichever is lower.

 Part I. Remedies Available to the Government 

In General
1. Compromise (Sec. 204, NIRC)
2. Distraint - actual and constructive (Sec. 205-208, ibid.)
3. Levy (Sec. 207b, ibid.)
4. Tax lien (Sec. 219, ibid.)
5. Civil action (Sec. 221, ibid.)
6. Criminal action (Sec. 221-222, ibid.)
7. Forfeiture of property (Sec. 224-225, ibid.)
8. Suspension of business operations in violations of VAT (Sec. 115, ibid.)
9. Enforcement of administrative fine

The remedies of disraint and levy as well as collection by civil and criminal actions
may in the discretion of the Commissioner, be pursued singly or independently of
each other, or all of them simultaneously.

No court shall have the authority to grant an injunction to restrain the collection of
any national internal revenue tax, fee, or charge imposed by the NIRC (Sec. 218, ibid.)

 Compromise
Compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation
or put an end to one already commenced. (Art. 2028, New Civil Code)
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Requisites:
1. The taxpayer have a tax liability
2. There must be an offer (by the taxpayer of an amount to be paid by the taxpayer)
3. There must be an acceptance (by the Commissioner or the taxpayer as the case
maybe) of the offer in the settlement of the original claim

When may taxes be compromised? 

1. A reasonable doubt as to the validity of the claim against the taxpayer exists:
 The delinquent account or disputed assessment is one resulting from a
jeopardy assessment; or 
 The assessment seems to be arbitrary in nature, appearing to be based
on presumptions and there is reason to believe that it is lacking in legal
and/or factual basis
2. The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax. (Sec. 204A, NIRC) in such case, the taxpayer should waive the
confidentiality privilege on bank deposits under RA 1405 (Sec 6 (F)(2) ibid).
 The corporation ceased operation or is already dissolved;
 The taxpayer is suffering from earning deficit resulting to an impairment in
the original capital by at least 50%
 The taxpayer is suffering from a net worth deficit computed by deducting
total liabilities form total assets, taken from the latest audited financial
statements
 The taxpayer is a compensation earner with no other sources of income
and the family’s gross monthly compensation does not exceed
(P10,500/month if single; P21,000/month if married) and that it appears
that the taxpayer possesses no other leviable/distrainable assets, other
than his family home;
 The taxpayer has been granted by the SEC or by any competent tribunals
a moratorium or suspension of payments to creditors or otherwise
declared bankrupt or insolvent (Sec 3, RR7-2001)

In general, the taxpayer's criminal liability arising from his violation of the

pertinent provision of the Code may be settled extra judicially instead of the
BIR instituting against the taxpayer a criminal action in Court.

A compromise in extra-judicial settlement of the taxpayer's criminal liability for

his violation is consensual in character, hence, may not be imposed on
the taxpayer without his consent . Hence, the BIR may only suggest settlement of
the taxpayer's liability through a compromise. (RR 012-99) 

Cases not subject to compromise:

1. Withholding tax cases
2. Criminal tax fraud cases
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases where final reports of reinvestigation or reconsideration have been issued
resulting to reduction in the original assessment and the taxpayer is agreeable to
such decision
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6. Cases which become final and executory after final judgment of a court (Sec 2 RR7-
2001).

Power to compromise 
1. Who has the power to compromise? 
 The Commissioner of Internal Revenue with respect to criminal and civil
cases arising from violations of the tax code (Sec 7c and 204, NIRC).
 If an offer of compromise is rejected by the taxpayer, the compromise
penalty cannot be enforced thru an action in court or by distraint and levy.
The CIR should file a criminal action if he believes that the taxpayer is
criminally liable for violation of the tax law as the only way to enforce a
penalty. (Commissioner vs. Abad, L-19627,June 27, 1968)
2. Limitations for compromise of tax liability: (sec. 204a, ibid.)
 Minimum compromise rate:
a) In case of financial incapacity, 10% of basic assessed tax
b) In other cases, 40% of basic assessed tax
 Compromise subject to approval of Evaluation Board (composed
of Commissioner and 4 Deputy Commissioners):
a) When basic tax involved exceeds P1,000,000 or
b) Where the settlement offered is less than the prescribed
minimum rates
3. Extent of the Commissioner’s discretion to compromise criminal violations 
 Before the complaint is filed with the prosecutor’s office: the CIR has full
discretion to compromise except those involving fraud
 After the complaint is filled with the prosecutor’s office but before the
information is filed with the court: the CIR can still compromise provided
the prosecutor must give consent
 After information is filed with the court: the CIR is no longer permitted to
compromise with or without the consent of the Prosecutor (Peoplevs. Magdaluyo,
April 20, 1961)
This is more so when the court has rendered a final judgment. As a mere
agent of the Government, the Commissioner is not authorized to accept
anything less than what is adjucated in favor of the government by virtue
of such final judgment, the government has already acquired a vested
rights.
4. Nature of a compromise in extrajudicial settlement of the taxpayer’s
criminal liability for his violation 
 It is consensual in character, hence; may not be imposed on the taxpayer
without his consent. The BIR may only suggest settlement of his tax
liability through a compromise. The extra-judicial settlement and the
amount of the suggested compromise penalty should conform with the
schedule of compromise penalties provided under the relevant BIR
regulations or orders.

Remedy in case the taxpayer refuses or fails to abide the tax compromise
1. Enforce the compromise
 If it is a judicial compromise, it can be enforced by mere execution. A
judicial compromise is one where a decision based on the compromise
agreement is rendered by the court on request of the parties

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Any other compromise is extrajudicial and like any other contract can only

be enforced by court action
2. Regard it as rescinded and insist upon original demand (Art 2041, Civil Code)

Other consideration on compromise agreements

1. Compromise penalty
 It is the amount of money which the taxpayer pays to compromise tax
violations. This is paid in lieu of criminal prosecution. A taxpayer cannot
be compelled to pay a compromise penalty if he does not want to pay, in
which case the CIR must institute a criminal action.

Compromise vs. Abatement

Compromise Abatement
Involves a mere reduction There’s a cancellation of
of the tax the entire tax liability

Abatement
The commissioner may abate or cancel a tax liability when:
1. The tax or any portion thereof appears to be unjustly or excessively assessed (Sec
204 b, ibid.)
 When the filing of the return/payment is made at the wrong venue
 When the taxpayer’s mistake in payment of his tax is due to erroneous
written official advice of a revenue officer 
 When the taxpayer fails to file the return and pay the tax on time due to
substantial losses from prolonged labor dispute, force majure, legitimate
business reverses, provided, the abatement shall only cover the
surcharges and the compromise penalty and not the interest imposed
under Sec. 249
 When the assessment is brought about or the result of taxpayer’s non-
compliance with the law due to a difficult interpretation of said law
 When the taxpayer fails to file the return and pay the correct tax on time
due to circumstances beyond his control, provided, the abatement shall
cover only the surcharges and the compromise penalty and not the
interest imposed under Sec 249
 Late payment of the tax under meritorious circumstances (Sec.2, RR 13-2001)
2. The administration and collection costs involved do not justify the collection of the
amount due. (Sec 204 b, NIRC)
3. Abatement of penalties on assessment confirmed by the lower court but appealed
by the taxpayer to a higher court
4. Abatement of penalties on withholding tax assessment under meritorious
circumstances
5. Abatement of penalties on delayed installment payment under meritorious
circumstances
6. Abatement of penalties on assessment reduced after reinvestigation but taxpayer
is still contesting reduced assessment
7. Such other circumstances which the Commissioner may deem analogous to the
enumerations above (Sec. 3, RR13-2001)

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 Distraint (Only For Personal Property)

Distraint is the seizure by the government of personal property, tangible or intangible to
enforce the payment of taxes on the goods, chattels or effects of the taxpayer including
other personal property of whatever character. The property may be offered in a public sale
if taxes are not voluntarily paid. It is a summary remedy.

The warrant is a summary procedure forcing the taxpayer to pay. The receipt of a warrant
may or may not partake the character of a final decision. If it is an indication of a final
decision, the taxpayer may appeal to the CTA within 30 days from service of the warrant.

Types of Distraint
1. Actual distraint
 There is taking of possession of the personal property from the taxpayer
by the government. Physical transfer of possession is not always
required. This is true in case of intangible property such as stocks and
credits.
 Resorted to only when the taxpayer becomes delinquent.
 There is actual seizure of the property of the delinquent taxpayer.
 Resorted to when there is actual delinquency in tax payment.
2. Constructive distraint
 There may be no actual delinquency.
 Taxpayer is prohibited from disposing of the property and must preserve
the same

Requisites for the exercise of the remedy of distraint:

1. The taxpayer must be delinquent (except in constructive distraint) in the payment
of taxes
2. There must be a subsequent demand for its payment
3. The taxpayer must have failed to pay the tax at the time required; and
4. The period within which to assess or collect the tax has not yet prescribed.
 
Actual distraint vs. Constructive distraint
Actual distraint Constructive distraint
Made only on the property of a delinquent Made on the property of any taxpayer,
taxpayer whether delinquent or not
There is taking or possession The taxpayer is merely prohibited from
disposing of his property
Effected by leaving a list of distrained Effected by requiring the taxpayer to
property or by service of a warrant of distraint sign a receipt of the property or by the
or garnishment revenue officer preparing and leaving a
list of such property
An immediate step for collection of taxes Not necessarily an immediate step
for collection of taxes
Both
 Are summary remedies for the collection of taxes
 Refer only to personal property
 Cannot be availed of where the amount of the tax involved is not more
than P100

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Distraint of personal property (Actual distraint)

Who may effect distraint Amount involved
Commissioner or his duly authorized In excess of P1,000,000
representative
Revenue District Officer (Sec.207 a, NIRC) P1,000,000 or less

Property seized or distrained:

1. Goods, chattels, effects and other personal property
2. Including stocks and other securities, debts, credits, bank accounts, interests in
and rights to personal property

Procedure for the actual distraint or garnishment

1. Report on the distraint (commencement of distraint proceedings)
 by the distraining officer 
a) submitted within 10 days from receipt of the warrant
b) submitted to the Revenue District Officer and to the Revenue
Regional Director 
 by the Revenue Regional Director – a consolidated report, as may be
required by the Commissioner 
The order of Distraint may be lifted by the Commissioner or his
representative (Sec.207 A, ibid.)
2. Service of warrant of distraint
 Procedure with respect to:
a) Goods, effects, chattels and other personal property (1) a copy of
an account of the property distrained, signed by the officer, shall
be left either with the owner or the person from whom the
property was taken or at the dwelling or place of business of such
person and with someone of suitable age and discretion (2)
together with a statement of the sum demanded (3) and also a
note of the time and place of sale
b) Stocks and other Securities (1) serving a copy of the warrant
upon the taxpayer and upon the president, manager, treasurer or
other responsible officer of the issuing corporation, company,
association
c) Debts and Credits (1) leaving a copy of the warrant with the
person owing the debts or having in his possession such credits
or his agent
The warrant shall be sufficient authority to the person served to
pay to the Commissioner the amount of such debts or credits
d) Bank accounts (garnishment) (1) serve a warrant of garnishment
upon the taxpayer and upon the president, manager, treasurer or
other responsible officer of the bank (2) bank shall turn over to
the Commissioner so much of the bank accounts as may be
sufficient (Sec.208, ibid.)
3. Posting of notice (Sec. 209, ibid.)
 Notice specifying the time and place of sale and the articles distrained.
 The posting shall be made in not less than 2 public places in the city or
municipality where the distraint is made.
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 One of the places for posting of such notice is the Office of the Mayor of
such city or municipality
4. Sale of property distrained

Constructive distraint
1. When may this occur? (Sec. 206, ibid.)
 Taxpayer is delinquent
 Taxpayer is retiring from any business subject to tax
 Taxpayer is intending to leave the PH or to remove his property therefrom
 Taxpayer hides or conceals his property
 Taxpayer performs any act tending to obstruct the proceedings for
collection of any tax due
2. Procedure
 Require the taxpayer or any person having possession/control of the
property to
a) sign a receipt covering property distrained; and
b) obligate himself to preserve the same intact and unaltered; and
c) not to dispose of the property in any manner, without the express
authority of the Commissioner.
 Where taxpayer or person in possession refuses to sign:
a) Distraining officer shall prepare a list of the property distrained
b) In the presence of 2 witnesses
c) Leave a copy in the premises where the property is located. After
which the said property shall be deemed to have been placed
under constructive distraint (Sec. 206, ibid.)

Note: Constructive distraint is an additional remedy because the government

can resort to it while the remedy of actual distraint is not yet available,
meaning the assessment process is still to be done.

 Levy (Only on Real Property)

Levy is the seizure of real property of the taxpayer and interests or rights to such property
for the satisfaction of taxes due from the delinquent taxpayer to enforce the payment
thereof. The property may be offered in a public sale, if after seizure, the taxes are not
voluntarily paid.

When may levy be effected?

It is effected by issuing a warrant of levy and giving a written notice to the taxpayer and the
register of deeds, after which the real property shall be sold at a public sale to satisfy the
tax obligation of the taxpayer.
When exercised: Before, simultaneously or after the distraint of personal property
belonging to the taxpayer 

Procedure of levy on real property

1. Prepare certificate of levy
 Internal revenue officer shall prepare a duly authenticated certificate
showing:
a) The name of taxpayer 
b) Amounts of tax and penalty due
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 Enforceable as a legal execution throughout the Philippines

 Officer shall write upon the certificate a description of the property upon
which levy is made

2. Written notice of levy shall be mailed or served upon:

 The delinquent taxpayer, or If he is absent from the Philippines, to his
agent or manager if the business in respect to which the liability arose,
or If there be no agent, to the occupant of the property.
 The Register of Deeds where the property is located (Sec. 207 B, ibid.)
3. Advertisement of the time and place of sale, which shall contain
 the amount of tax and penalties due
 name of the taxpayer 
 short description of the property to be sold.
4. The advertisement shall be made within 20 days after the levy, and the same shall
be for a period of at least 30 days. It shall be effected by:
 Posting a notice at the main entrance of the municipal building or the city
hall and in public and conspicuous place in the barrio or district where the
property is located
 By publication once a week for 3 consecutive weeks in newspaper of
general circulation in the municipality or city where the property is located
(Sec. 213, ibid.)
5. Sale
 Awarded to the highest bidder 
 In case the proceeds of the sale exceeds the claim and costs of sale, the
excess shall be turned over to the owner of the property.
 At any time before the day fixed for the sale, the taxpayer may
discontinue all proceedings by paying the taxes, penalties, and interests.

Distraint vs. Levy

Distraint Levy
Refers to personal property Involves real property

Forfeiture of the property in favor of Forfeiture authorized if: There is

the government is not provided no bidder or If the highest bid is
insufficient to pay the taxes,
penalties and costs
There is no right of redemption on There is a right of redemption in
the personal property case of real property levied upon
and sold or forfeited to the
government
Both:
 Summary remedies for collection
 Cannot be availed of where amount involved do not
exceed P100

Redemption of property sold

Within 1 year from the date of sale, the property may be redeemed by the delinquent
taxpayer or anyone from him, upon the payment of the taxes, penalties and interest
thereon from the date of delinquency to the date of sale together with interest on purchase
price at 15% per annum from the date of sale to the date of redemption. (Sec.214, ibid.)
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The taxpayer-owner shall not be deprived of possession of said property and shall be
entitled to rents and other income until the expiration of the period for redemption.

Forfeiture to the Government

If there is no bidder in the public sale or if the amount of the highest bid is insufficient to
pay the taxes, penalties and costs, the real property shall be forfeited to the Government
(Sec. 215, ibid.)

Further Distraint and Levy

The remedy of distraint and levy may be repeated if necessary until the full amount of  the
tax delinquency due including all expenses is collected from the taxpayer. (Sec 217, ibid.)

Otherwise, a clever taxpayer who is also able to conceal most of the valuable part of his
property would escape payment of his tax liability by sacrificing an insignificant portion of
his holdings.

 Tax Lien
Tax lien is a legal claim or charge on property, either real or personal, established by law
as a security in default of the payment of taxes [51 AmJur 881]. Generally, it attaches to the
property irrespective of ownership or transfer thereof.

Nature: a lien in favor of the Government of the Philippines when a person liable to
pay a tax neglects or refuses to do so upon demand
Duration: lien exists from the time assessment is made by the Commissioner until
paid, with interests, penalties and costs that may accrue in addition thereto
Extent: upon all property and rights to property belonging to the taxpayer
Effectivity against third persons: only when notice of such lien is filed by the
Commissioner in the Register of Deeds in the province/city where the property is
situated [Sec. 219, NIRC]

A tax lien is superior to judgment claim of private person. Attaches not only from the
time the warrant was served but from the time tax was due and demandable (from the
time when the assessment was made [Sec. 219, ibid.].

Lien vs. Distraint

Lien
Directed against the property
subject to the tax
Regardless of the owner of the
property
Distraint
Need not be directed against the
property subject to tax
Property seized must be owned
by the taxpayer

 Civil Actions
For tax remedy purposes, civil actions are actions instituted by the government to
collect internal revenue taxes. It includes filing by the government with the probate court
claims against the deceased taxpayer.

Resorted to when the tax liability becomes final and unappealable, or when the decision of
the Commissioner becomes final or executory. When:
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1. A tax is assessed and the assessment becomes final and unappealable because
the taxpayer fails to file an administrative protest with the BIR within 30 days from
the receipt of the assessment.
2. When an administrative protest filed by the taxpayer against the assessment is
 denied, in whole and in part or 
 is not acted upon within 180 days from submission of the documents, and
 the taxpayer adversely affected by the decision or inaction fails to file an
appeal with the CTA within 30 days from receipt of said decision or from
the lapse of the 180 day period.

Where to file
1. Court of Tax Appeals - where the principal amount of taxes and fees exclusive
of charges and penalties claimed is one million pesos and above
2. RTC, Mun. TC, Metro TC - where the principal amount of taxes and fees,
exclusive of charges and penalties claimed is less than P1,000,000.00 (Sec 7[c], RA
9282)
3. The approval of the CIR is essential in civil cases (Sec. 220, NIRC). However under
Sec. 7 of NIRC, the Commissioner may delegate such power to a Regional
Director.

Defenses which are precluded by final and executory assessment

1. Invalidity or illegality of the assessment and
2. Prescription of the government’s right to assess

 Criminal Actions
The judgment in the criminal cases shall not only impose the penalty but shall also
order the payment of taxes subject of the criminal case as finally decided by the
Commissioner. (Sec 205, ibid.)

Resorted not only for the collection of the taxes but also for the enforcement of statutory
penalties of all sorts.

Where to file
1. Court of Tax Appeals - on criminal offenses arising from violations of the NIRC or
TCC and other laws administered by the BIR and the BOC, where the principal
amount of taxes and fees, exclusive of charges and penalties claimed is
P1,000,000.00 and above.
2. RTC, Mun. TC, Metro TC - on criminal offenses arising from violations of the NIRC
or TCC and other laws administered by the BIR and the BOC, where the principal
amount of taxes and fees exclusive of charges and penalties claimed is less than
P1,000,000.00 or where there is no specified amount claimed (Sec 7[b], RA 9282)

Acquittal of the taxpayer in criminal case does not exonerate him from liability to
pay taxes
Under the Penal Code the civil liability is incurred by reason of the offender's criminal
act. Stated differently, the criminal liability gives birth to the civil obligation such that
generally, if one is not criminally liable under the Penal Code, he cannot
become civilly liable thereunder. The situation under the income tax law is the exact
opposite. Civil liability to pay taxes arises from the fact, for instance, that one has
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engaged himself in business, and not because of any criminal act committed by him.
The criminal liability arises upon failure of the debtor to satisfy his civil obligation. The
incongruity of the factual premises and foundation principles of the two cases is one
of the reasons for not imposing civil indemnity on the criminal infractor of the income
tax law. (Republic vs. Patanao)
While there can be no civil action to enforce collection before the assessment
procedures provided in the Code have been followed, there is no requirement for the
precise computation and assessment of the tax before there can be a
criminal prosecution under the Code. (Ungab vs. Cusi L- 41919-24, 30 May 1980, 97 SCRA 877)

Effect of subsequent satisfaction of civil liability

The subsequent satisfaction of civil liability by payment or prescription does not
extinguish the taxpayer’s criminal liability.

No subsidiary imprisonment
In case of insolvency on the part of the taxpayer subsidiary imprisonment cannot be
imposed as regards the tax which he is sentenced to pay. However, it may be
imposed in cases of failure to pay the fine imposed. (Sec 280, NIRC)

Criminal action may be filed during the pendency of an administrative protest in the
BIR
It is not a requirement for the filing thereof that there be a precise computation and
assessment of the tax, since what is involved in the criminal action is not the
collection of tax but a criminal prosecution for the violation of the NIRC. Provided,
however, that there is a prima facie showing of a willful attempt to evade taxes.

An assessment of a deficiency is not necessary to a criminal prosecution for willful

attempt to defeat and evade the income tax. A crime is complete when the violator
has knowingly and willfuly filed a fraudulent return with intent to evade and defeat the
tax. The perpetration of the crime is grounded upon knowledge on the part of the
taxpayer that he has made an in accurate return, and the government's failure to
discover the error and promptly to assess has no connections with the commission of
the crime. (Ungab v. Cusi,L-41919-24, 30 May 1980, 97 SCRA 877) See also CIR vs. Pascor Realty, GR No.128315,
June 29, 1999, which reached the same conclusion as in Ungab. However, in the case of 
CIR vs. CA, CTA,& Fortune Tobacco (GR No. 119761, Aug.29, 1996) , the CIR held a contrary position.

Civil and criminal actions:

1. Must be brought in the name of the Government of the Philippines
2. Conducted by legal officers of the BIR
3. In case of actions for recovery of taxes or enforcement of a fine, penalty or
forfeiture, must be filed with the approval of the Commissioner. (Sec. 220, NIRC)

 Forfeiture
Forfeiture is the divestiture of property without compensation, in consequence of a default
or offense. Forfeited property shall not be destroyed until at least 20 days from seizure.

Enforcement of remedy of forfeiture:

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Personal Property Seizure and sale or destruction of specific

forfeited property
Real Property Judgment of condemnation and sale

Distilled spirits, liquors, cigars, cigarettes
manufactured, products of tobacco and
apparatus used for their production
Other articles subject to excise tax which
have been manufactured or removed in
violation of the Code, dies for printing or
making fake revenue stamps and labels
Upon forfeiture, may be destroyed by order of
the CIR where the sale maybe injurious to
public health or prejudicial to law enforcement
Upon forfeiture may be sold or destroyed at the
discretion of the CIR. Forfeited property shall
not be destroyed until at least 20 days from
seizure

Effect of the forfeiture of property

1. The effect is to transfer the title to the specific thing from the owner to the
government. All the proceeds in case of a sale goes to the coffers of the
government. The provisions in the Code which entitles the taxpayer to the balance
of the proceeds in excess of the tax liability is entirely inapplicable to forfeited
property. It relates solely to the sale of property distrained to pay taxes
of delinquents and the disposition of the proceeds thereof. (US v. Surla, 20 Phil 163)
2. There is a great difference between a seizure under forfeiture and a seizure to
enforce a tax lien. In the former all the proceeds derived from the sale of the thing
forfeited are turned over to the Collector of Internal Revenue; in the latter the
residue of such proceeds over and above what is required to pay the tax sought to
be realized, including expenses, is returned to the owner of the property. (Bank of Phil.
Island v. Trinidad, 42 Phil 220)

 Part II. Remedies Available to the Taxpayer 

General remedies
1. Administrative
 Before payment of taxes
a) Protest of assessment
A protest is a vital document which is a formal declaration of
resistance of the taxpayer. It is a repository of all arguments. It can
be used in court in case of administrative remedies have been
exhausted. It is also the formal act of the taxpayer questioning the
official actuations of the CIR. This is equivalent to a pleading.
(1) Filing a petition for reconsideration or reinvestigation
within 30 days from receipt of assessment.
 Request for reinvestigation - a plea for re-
evaluation of an assessment on the basis of newly
discovered or additional evidence that a
taxpayer intends to present in the reinvestigation.
Involves a question of fact or law or both.
 Request for reconsideration - a plea for re-
evaluation of the assessment on the basis of
existing records without need of additional
evidence. Involves a question of fact or law or
both. (Revenue Regulation No.12-85)

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(2) Within 60 days from filing, all relevant documents

should be filed, otherwise assessment becomes final
and cannot be appealed (Sec. 228, ibid.)
Submission of documents within the 60 days period is
optional to the taxpayer. The relevant supporting documents
mentioned in the law refers to such documents which the
taxpayer feels would be necessary to support this protest
and not what the Commissioner feels should be submitted,
otherwise the taxpayer would always be at the mercy of the
BIR which may require production of such documents which
taxpayer could not produce. (Standard Chartered Bank v. CTA,Case No.
5696, Aug. 16, 2001) 
b) Entering into a compromise (Sec. 204, ibid.)

Characteristics of a valid protest:

(1) It is made in writing, and addressed to the
Commissioner of Internal Revenue.
(2) It contains information as specified in RR12-85.
(3) It states the facts, applicable law, rules and regulations
or jurisprudence on which his protest is based,
otherwise the protest shall be considered void and
without force and effect.
(4) It is filed within the period prescribed by law.
 After payment of taxes
a) Claim for refund or tax credit
Within 2 years from the date of payment regardless of any
supervening cause. (Sec. 228, ibid.)

2. Judicial relief
 Civil action
a) Appeal to the CTA 
(1) Within 30 days from receipt of the decision on the
protest or from the lapse of the 180 days inaction of the
Commissioner (Sec. 228, ibid.)
(2) Within the 30 day period to appeal, the taxpayer must
file several motions for reconsideration with the
Commissioner instead of at once filing his petition
for review before the CTA. The subsequent motion for
reconsideration tolls the running of the prescriptive
period. The prescriptive period begins to run again
when the taxpayer receives the letter denying its
request/motion for recon. He then only has the
remainder of the original 30-day period to appeal to the
CTA. (Surigao Electric Co. vs. CA, 1974)
(3) A division of the CTA shall hear the appeal. (sec. 11, RA
1125)
b) Action to contest forfeiture of chattel

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(1)
At any time before the sale or destruction thereof, to
recover the same, and upon giving proper bond, enjoin
the sale; or 
(2) After the sale and within 6 months, an action to recover
the net proceeds realized at the sale (Sec. 231, ibid.)
c) Action for damages
(1) Against a revenue officer by reason of any act done in
the performance of official duty (Sec. 227, ibid.)

3. Criminal action
 Against erring BIR officials and employees
 Injunction
a) When the CTA in its opinion the collection by the BIR may
jeopardize the taxpayer. Court may require deposit of an amount
or surety bond for not more than double the amount
b) With the enactment of RA 9282, the CTA has now jurisdiction
over criminal cases

Denial of protest:
1. Direct denial
 The decision of the Commissioner or his duly authorized rep. shall
a) state the facts, applicable law, rules and regulations or
jurisprudence on which his protest is based, otherwise the protest
shall be considered void and without force and effect, in which
case the same shall not be considered a decision a disputed
assessment and
b) that the same is his final decision. (Sec. 3.1.5, RR 12-99)
2. Indirect denial
 Commissioner did not rule on the taxpayer’s MR of the assessment – it
was only when respondent received summons on the civil action for the
collection of deficiency income tax that the period to appeal commenced
to run. (CIR vs. Union ShippingCorp.)
 Referral by the Commissioner of request for reinvestigation to the Solicitor
General (Republic vs.Lim Tian Teng Sons)
 Reiterating the demand for immediate payment of the deficiency tax due
to taxpayer’s continued refusal to execute waiver (CIR vs. Ayala Securities Corp.)
 Preliminary collection letter may serve as assessment notice (United Int’l
Pictures vs. CIR)

Acts of BIR Commissioner considered as denial of protest which serves as a basis

for appeal to CTA
1. Filing by the BIR of a civil suit for collection of the deficiency tax (CIR v. Union
Shipping Corp. 185 SCRA 547)
2. Indication to the taxpayer by the Commissioner in clear and unequivocal language
of his final denial. (CIR v. Union Shipping Corp.)
3. BIR demand letter reiterating his previous demand to pay, sent to taxpayer after
his protest of the assessment (Surigao Electric Co. Inc. v. CTA, 57 SCRA 523)
4. The actual issuance of a warrant of distraint and levy in certain cases cannot be
considered as final decision on a disputed settlement (CIR v. Union Shipping Corp.)

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Filing of claim for tax refund or tax credit

General rule: The person entitled to ask for a refund is the taxpayer who paid the same.

What is the nature of as a claim for refund?

It partakes of the nature of an exemption and is strictly construed against the claimant. The
burden of proof is on the taxpayer claiming the refund that he is entitled to the same. (CIR v.
Tokyo)

When are there erroneously paid, or illegally assessed or collected taxes?

Taxes are erroneously paid when a taxpayer pays under a mistake of fact, such as, he is
not aware of an existing exemption in his favor at the time that payment is made. Taxes
are illegally collected when payments are made under duress.

Grounds for tax refunded or credited:

1. Taxes erroneously or illegally received
2. Penalties imposed without authority
3. Any sum alleged to have been excessively or in any manner wrongfully collected
4. Refund the value of internal revenue stamps when returned in good condition by
the purchaser 
5. Redeem or change unused stamps rendered unfit for use and refund their value
upon proof of destruction, in the discretion of the Commissioner 

Procedure for credit/refund

1. Taxpayer files in writing with the Commissioner a claim for credit or refund
2. Application must be filed within 2 yrs after the payment of the tax or penalty (no
suit or proceeding shall begun after the expiration of the said 2 yrs regardless of
any supervening cause that may arise after the payment)
3. A return filed showing an overpayment shall be considered a written claim
for credit or refund

Tax refund vs. Tax credit

Tax refund
Tax refund takes place when there is
actually a reimbursement of tax.
Tax credit
The government issues a Tax Credit
Certificate covering the amount determined to
be reimbursable, which is applied after proper
verification against any sum that may be due
to the taxpayer.
Tax Credit Certificate:
a) may be applied against any internal
revenue tax, except withholding
taxes
b) original copy is surrendered to the
revenue officer
c) no tax refund will be given resulting
from availment of incentives granted
by law where no actual payment
was made (Sec. 204 C, NIRC)

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Essential requisites for claim of refund

1. a claim for refund or credit has been filed with the Commissioner
2. the suit may be maintained whether or not such tax/penalty/sum has been paid
under protest
3. in any case, suit must be filed in court within 2 yrs. from date of payment of the
tax/penalty regardless of any supervening cause that may arise after payment
4. the Commissioner may, even without a written claim, refund or credit a tax, where
on the face of the return upon which payment was made, payment appears to be
erroneous. (Sec. 204 C, 229, ibid.)

Forfeiture of cash refund/tax credit:

1. Forfeiture of refund in favor of the government when a refund check or warrant
remains unclaimed or uncashed within 5 yrs. from date of mailing or delivery
2. Forfeiture of Tax Credit – a tax credit certificate which remains unutilized after 5
yrs. from date of issue, shall be invalid, unless revalidated. (Sec. 230, ibid.)

 The Court of Tax Appeals (CTA)

What is the new law governing the CTA?

R.A. 9282, an act expanding the jurisdiction of the CTA, and elevating it to the level of the
Court of Appeals

What is the composition of the CTA and how may the CTA rule?
CTA shall consist of a Presiding Justice and five (5) Associate Justice
They may rule as follows:
1. En banc
2. Sitting in 2 divisions, each division with 3 justices each

What is the quorum?

The affirmative votes of 4 Justices for sessions En Banc and 2 Justices for sessions of a
Division shall be necessary for the rendition of a decision or resolution. When the required
quorum cannot be constituted, the Presiding Justice shall designate any Justice of other
Divisions of the court to sit temporarily therein.

 Jurisdiction of the Court of Tax Appeals

What is the appellate jurisdiction of the CTA?
The CTA shall exercise exclusive appellate jurisdiction to review by appeal:
1. Decisions of CIR
2. Inaction of CIR
3. Decisions of RTC on local tax cases
4. Decisions of Commissioner of Customs
5. Decisions of CBAA (on exercise of appellate jurisdiction over RPT tax cases
decided by LBAA)
6. Decisions of DOF on customs cases elevated to him on automatic review due to
adverse decision versus the government
7. Decisions of DTI (on non-agricultural products) and Department of Agriculture (on
agricultural products) involving dumping and countervailing duties
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Does the CTA have jurisdiction over criminal cases?

Yes, the CTA have jurisdiction over the following cases involving criminal offenses:
1. Original jurisdiction over all criminal offenses arising from violation of the NIRC
and TCC and other laws administered by BIR and BOC where the principal
amount of taxes and fees, exclusive of charges and penalties claimed, is
P1,000,000 or more.
2. Appellate jurisdiction over appeals from the judgments, resolutions or order of
the RTC in their original jurisdiction in criminal offenses arising from violation of
NIRC and TCC and other laws administered by BIR and BOC where the principal
amount is less than P1,000,000 or there is no specified amount.
3. Over petitions for review of the decisions of the RTC in the exercise of their
appellate jurisdiction over tax cases originally decided by the MTC.

Judicial action for collection of taxes

The CTA have jurisdiction over the following cases involving tax collection:
1. Original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is P1,000,000 or
more.
2. Appellate jurisdiction over appeals from the judgment, resolutions or orders of the
RTC in tax collection cases originally decided by them within their respective
jurisdiction.
3. Over petitions for review of the decisions of the RTC in exercise of their appellate
jurisdiction over tax collection cases originally decided by MTC.

What is the Procedure? (Sec. 9, R.A. 9282)

1. Appeal within 30 days from receipt of decision or period of inaction of CIR, COC,
Secretary of Finance, Secretary of Trade and Industry or Secretary of Agriculture,
or the CBAA or the RTC:
 Generally, appeal will be to a Division
 Except: appeal by filing a petition for review to En Banc in case of
decisions of CBAA or RTC in the exercise of its appellate jurisdiction
2. In case the decision of the Division is adverse, file MR with same Division within
15 days from notice thereof
3. In case resolution of Division on the MR or new trial is still adverse, file petition for
review with CTA En Banc
4. In case the decision of the CTA En Banc is adverse, file a review on certiorari with
the SC pursuant to Rule 45 of Rules of Court

Where can you appeal a decision of a local assessment board? (Sec. 9, R.A. 9282)
1. To the Central Board of Assessment Appeals (CBAA) and not yet to the CTA.
2. It is only after the CBAA has ruled that an appeal may be made to the CTA
3. In which case, the appeal shall be by petition for review to the CTA En Banc

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What is the rule on suspension of collection?

General rule: No injunction to restrain collection of taxes

Exception: Under Section 9 of R.A. 9282, suspension is allowed when the following
conditions concur:
1. It is an appeal to the CTA from a decision of CIR, COC or the RTC, provincial,
municipal treasurer, or the Secretary of Finance, Secretary of Trade and Industry
or Secretary of Agriculture, as the case may be; and
2. In the opinion of the Court, the collection by the aforementioned government
agencies may jeopardize the interest of the Government and/or taxpayer

In case of suspension, what is the taxpayer required to do?

The taxpayer will be required to either deposit the amount claimed or file a surety bond for
not more than double the amount with the Court.

General rule: No injunction to restrain collection of taxes.

Exception: Suspension is allowed when the following conditions concur:

1. There is an appeal to the CTA, and
2. In the opinion of the court, the collection by the government agencies may
jeopardize the interest of the Government and/or the taxpayer, and
3. Taxpayer either to deposit the amount claimed or to file a surety bond for not more
than the double the amount with the Court.

Doctrine discussion
 The jurisdiction of the CTA is to review by appeal decisions of the CIR on
disputed assessments. When a taxpayer does not protest an assessment,
and appeals the assessment itself to the CTA, his appeal is premature.
(CIR v. Villa)
 A final demand letter for payment of delinquent taxes may be considered
a decision on a disputed or protested assessment. Thus, the taxpayer can
file an appeal with the CTA. (CIR v. Isabela Cultural)
 The jurisdiction of the CTA has been expanded to include not only
decisions or rulings but inaction as well of the CIR. (RCBC v CIR)

Taxpayer’s suit
Not every action filed by a taxpayer can qualify to challenge the legality of official acts done
by the government. A taxpayer's suit can prosper only if the governmental acts being
questioned involve disbursement of public funds upon the theory that the expenditure of
public funds by an officer of the state for the purpose of administering an unconstitutional
act constitutes a misapplication of such funds, which may be enjoined at the request of a
taxpayer. (Dean Jose Coya v. PCCG G.R. No. 96541, August 24, 1993)

A taxpayer’s suit is properly brought only when there is an exercise of the spending or
taxing power of Congress. Automotive Industry Workers Alliance v. Romulo (G.R. No. 157509. January 18, 2005)

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Distinguished from citizen’s suit

Taxpayers are allowed to sue, for example, where there is a claim of illegal disbursement
of public funds or where a tax measure is assailed as unconstitutional. Voters are allowed
to question the validity of election laws because of their obvious interest in the validity of
such laws. Concerned citizens can bring suits if the constitutional question they raise is of
"transcendental importance" which must be settled early. Legislators are allowed to sue to
question the validity of any official action which they claim infringes their prerogatives qua
legislators. KILOSBAYAN v. Morato, (G.R. No. 118910, November 16, 1995)

Case law in most jurisdictions now allows both "citizen" and "taxpayer" standing in public
actions. De Castro v. JBC, (G.R. No. 191002, March 17, 2010)

The distinction was first laid down in Beauchamp v. Silk:

 The plaintiff in a taxpayer's suit is in a different category from the plaintiff
in a citizen's suit.
 In the former, the plaintiff is affected by the expenditure of public funds,
while in the latter, he is but the mere instrument of the public concern.

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