STEAG STATE POWER, INC vs.

COMMISSIONER OF INTERNAL REVENUE

FACTS:
Steag State Power is a domestic corporation primarily engaged in power generation and sale of electricity
to the National Power Corporation under a Build, Operate, Transfer Scheme.
In 2003, Steag State Power started building its power plant inside the PHIVIDEC Industrial Estate-
Misamis Oriental. The construction was completed on November 15, 2006.
During the construction period, Steag State Power filed its quarterly value-added tax returns from the first
to fourth quarters of 2004 on April 26, 2004, July 26, 2004, October 25, 2004, and January 25, 2005. It
later filed amended value-added tax returns for the taxable quarters on December 16, 2004 and April 22,
2005.
Likewise, for the taxable quarters of 2005, Steag State Power filed its quarterly value-added tax returns
on April 22, 2005, July 26, 2005, October 25, 2005, and January 25, 2006.
Steag State Power filed before the Bureau of Internal Revenue (BIR) claims for refund of its allegedly
unutilized input value-added tax payments on capital goods in the total amount of P670,950,937.97.
Due to the Commissioner of Internal Revenue's (Commissioner) inaction on its administrative claims,
Steag State Power filed a Petition for Review on Certiorari before the Court of Tax Appeals.
The CTA denied the Petitions due to insufficiency of evidence. It held that the appeals for the
administrative claims for refund of input taxes for January 2004 to May 2005, or the first judicial claim,
were filed late. Meanwhile, the appeal of the refund claim of input taxes for June 2005 to October 2005,
or the second judicial claim, was prematurely filed. Nonetheless, the Court of Tax Appeals First Division
denied the second judicial claim for Steag State Power's failure to prove that its purchases and
importations related to the claimed input tax payments were treated as capital goods in its books of
accounts and were subjected to depreciation.
Thus, Steag State Power filed before the SC a petitioner for review on certiorari.
The SC denied the petition for failure to show any reversible error.
Petitioner filed a motion for reconsideration. It argues that although the claims were filed beyond the
120+30-day periods under Section 112 of the National Internal Revenue Code, as amended (Tax Code),
they were nonetheless filed within the two (2)-year period under Section 229 of the same law. It contends
that the timing was in accordance with Revenue Regulation No. 7-95, which establishes that appeals
before the Court of Tax Appeals may be made after the 120-day period and before the lapse of the two
(2)-year period. Petitioner avers that noncompliance with the 120+30-day periods is not a jurisdictional
defect, but only a case of a "lack of cause of action," which may be waived. Moreover, since respondent
admitted in the consolidated cases that the Petitions were filed within the allowable period, she cannot
claim otherwise.
ISSUE:
W/N the claim for tax refund has been belatedly filed.
RULING:
 YES. Petitioner's judicial claims were filed on April 20, 2006 and December 27, 2006; hence,
they were governed by the Tax Code, which clearly provided: (1) 120 days for the Commissioner to act
on a taxpayer's claim; and (2) 30 days for the taxpayer to appeal either from the Commissioner's decision
or from the expiration of the 120-day period in case of the Commissioner's inaction.
According to the tax code, in case of full or partial denial of the claim for tax credit
certificate/refund the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days
from the receipt of said denial, otherwise the decision shall become final. However, if no action on the
claim for tax credit certificate/refund has been taken by the Commissioner of Internal Revenue
after the one hundred twenty (120) day period from the date of submission of the application with
complete documents, the taxpayer may appeal to the CTA within 30 days from the lapse of the 120-
day period.
Here, since petitioner filed its judicial claims way beyond the 30-day period to appeal, the Court of Tax
Appeals lost its jurisdiction over the Petitions.
A claim for unutilized input value-added tax is in the nature of a tax exemption. Thus, strict adherence to
the conditions prescribed by the law is required of the taxpayer. Here, noncompliance with the 120+30-
day periods is fatal to the taxpayer's judicial claim.
Hence, the CTA En Banc properly dismissed the petition.
PHILIPPINE AIRLINES, INC. (PAL), Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE,
Respondent.

FACTS:

Sometime in 2002, Philippine Airlines (PAL) made US dollar and Philippine peso deposits and placements
in Chinabank, JPMorgan, PBCom, and Standard Chartered (collectively, Agent Banks). PAL earned
interest income from these deposits and the Agent Banks deducted final withholding taxes. PAL filed
with the Commissioner on November 3, 2003 a written request for a tax refund of the withheld amounts
on the basis of its alleged exemption from final withholding taxes under its franchise, Presidential
Decree No. 1590. The Commissioner failed to act on the request. Thus, PAL elevated the case to the
Court of Tax Appeals in Division. The Commissioner, in her answer, contended that PAL's claim was
subject to administrative routinary investigation or examination by the Bureau of Internal Revenue. She
also alleged that PAL's claim was not properly documented, and that it must show that it complied with
the prescriptive period for filing refunds under Sections 204(C) and 229 of the National Internal Revenue
Code. It likewise asserted that claims for refund are of the same nature as a tax exemption, and thus, are
strictly construed against the claimant.

PAL presented evidence to support its claim. The Commissioner then submitted the case for decision
based on the pleadings. The Court of Tax Appeals First Division partially granted PAL's Petition and
ordered the Commissioner to refund the final income tax withheld and remitted by JPMorgan. It denied
the remaining claim for refund of the final income tax withheld by Chinabank, PBCom, and Standard
Chartered. The Court of Tax Appeals Special First Division found that PAL was exempted from final
withholding tax on interest on bank deposits. However, it ruled that PAL failed to adequately
substantiate its claim because it did not prove that the Agent Banks, with the exception of JPMorgan,
remitted the withheld amounts to the Bureau of Internal Revenue. PAL only presented documents which
showed the total amount of final taxes withheld for all branches of the banks. As such, the amount of
tax withheld from and to be refunded to PAL could not be ascertained with particularity. It ruled that the
Certificates of Final Tax Withheld at Source are not sufficient to prove remittance. CTA En Banc affirmed
the decision of the Court of Tax Appeals Special First Division. The CTA En Banc sustained that PAL
needed to prove the remittance of the withheld taxes because although remittance is the responsibility
of the banks as withholding agents, remittance was put in issue in this case.

ISSUE: Whether or not PAL is required to prove the remittance to the Bureau of Internal Revenue of the
final withholding tax on its interest from currency bank deposits to be entitled to tax refund? (NO)

HELD:

PAL failed to prove the Agent Banks' remittance of the withheld taxes on its interest income, with the
exception of JP Morgan. However, the remittance need not be proven. PAL needs only to prove that
taxes were withheld from its interest income.

Under Presidential Decree No. 1590, as amended by Section 22 of Republic Act No. 9337, PAL is only
subject to Corporate Income Tax and Value Added Tax and is exempt from all other taxes, including
taxes on interest earned from deposits. Moreover, Presidential Decree No. 1590 provides that any
excess payment over taxes due from PAL's shall either be refunded or credited against its tax liability for
the succeeding taxable year. PAL is entitled to a tax refund or tax credit if excess payments are made on
top of the taxes due from it. Considering that PAL is not liable to pay the tax on interest income from
bank deposits, any payments made for that purpose are in excess of what is due from it. Thus, if PAL
erroneously paid for this tax, it is entitled to a refund. The taxes on interest income from bank deposits
are in the nature of a withholding tax. When a particular income is subject to a final withholding tax, it
means that a withholding agent will withhold the tax due from the income earned to remit it to the
Bureau of Internal Revenue. The liability for remitting the tax is on the withholding agent. To claim a
refund, PAL needs only to prove that taxes were withheld. Certificates of Final Taxes Withheld issued by
the Agent Banks are sufficient evidence to establish the withholding of the taxes. Applying the
pronouncement in the case of Commissioner of Internal Revenue v. Philippine National Bank, PAL need
not prove the remittance to the Bureau of Internal Revenue of the final withholding tax on its interest
from currency bank deposits to be entitled to tax refund.
SYSTRA PHILIPPINES vs. CIR

FACTS: Petitioner filed with the BIR its Annual ITR for the taxable year 2000 declaring revenues in the
amount of around P18.2 million, the bulk of which consists of income from management consultancy
services rendered to the Philippine Branch of Group Systra SA, France. Such income was subjected to 5%
CWT, consequently, an amount of around P4.7 million was declared by petitioner as CWTs for the
taxable year 2000. Same period reflected also total gross income of P3.7 million, net loss of P17.9
thousand and MCIT of P75 thousand. The MCIT was offset against the reported CWTs for the year and as
such, the remaining unutilized CWTs amounted to P4.6 million. Petitioner then opted to carry over the
said excess tax credit to the succeeding taxable year 2001.

In year 2001, petitioner reported taxable income of P1.9 million with P619.7 thousand as the
corresponding normal income tax due. Considering the same, petitioner utilized its prior year excess tax
credits to pay for its current year tax due. By the end of 2001, petitioner’s unutilized tax credits
amounted to around P5.4 million (both from the 2000 and 2001 revenues). Petitioner indicated in the
2001 ITR the option "To be issued a Tax Credit Certificate" relative to its tax overpayments.

In August 2002, petitioner filed a claim for tax refund on its unused tax credits. The BIR failed to act on
the same. Thus, petitioner filed a petition for review with the CTA to protect its right to claim. The CTA
then partially granted the petition and ordered the issuance of a tax credit certificate amounting to P1.1
million which represented the unused tax credits generated by the 2001 revenues. The other P4.6
million was denied the issuance of tax credit certificate as petitioner exercised its option of carry over.

ISSUE: WON the exercise of the option to carry over excess income tax credits under Section 76 of the
National Internal Revenue Code of 1997, as amended (Tax Code) bars a taxpayer from claiming the
excess tax credits for refund even if the amount remains unutilized in the succeeding taxable year?

RULING:

Yes, it does. Section 76 of the Tax Code provides: Every corporation liable to tax under Section 27 shall
file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year.
If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax
due on the entire taxable net income of that year the corporation shall either: (A) Pay the balance of tax
still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid,
as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable
years. Once the option to carry-over and apply the excess quarterly income tax against income tax due
for the taxable quarters of the succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no application for cash refund or issuance of a tax
credit certificate shall be allowed therefor.

A corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes paid has
two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax credit certificate
or to claim a cash refund. If the option to carry over the excess credit is exercised, the same shall be
irrevocable for that taxable period.

In exercising its option, the corporation must signify in its annual corporate adjustment return (by
marking the option box provided in the BIR form) its intention either to carry over the excess credit or to
claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one
precludes the other. This is known as the irrevocability rule and is embodied in the last sentence of
Section 76 of the Tax Code. The rule prevents a taxpayer from claiming twice the excess quarterly taxes
paid: (1) as automatic credit against taxes for the taxable quarters of the succeeding years for which no
tax credit certificate has been issued and (2) as a tax credit either for which a tax credit certificate will be
issued or which will be claimed for cash refund.

Section 76 of the present Tax Code formulates an irrevocability rule which stresses and fortifies the
nature of the remedies or options as alternative, not cumulative. It also provides that the excess tax
credits "may be carried over and credited against the estimated quarterly income tax liabilities for the
taxable quarters of the succeeding taxable years" until fully utilized.

Since petitioner elected to carry over its excess credits for the year 2000 in the amount of P4.6 million as
tax credits for the following year, it could no longer claim a refund. Again, at the risk of being repetitive,
once the carry over option was made, actually or constructively, it became forever irrevocable
regardless of whether the excess tax credits were actually or fully utilized. Nevertheless, as held in
Philam Asset Management, Inc., the amount will not be forfeited in favor of the government but will
remain in the taxpayer’s account. Petitioner may claim and carry it over in the succeeding taxable years,
creditable against future income tax liabilities until fully utilized.
CIR vs ACOSTA

FACTS: Respondent is an employee of Intel Manufacturing Phils., Inc and was assigned in a foreign
country. For the period January 1, 1996 to December 31, 1996, Intel withheld the taxes due on
respondent’s compensation income and remitted to the BIR the amount ofP308,084.56. On March 21,
1997, respondent and her husband filed with the BIR their Joint Individual Income Tax Return for the
year 1996. Later, on June 17, 1997, respondent, through her representative, filed an amended return
and a Non-Resident Citizen Income Tax Return, and paid the BIR P17,693.37 plus interests. On October
8, 1997, she filed another amended return indicating an overpayment of P358,274.63. Claiming that the
income taxes withheld and paid by Intel and respondent resulted in an overpayment, respondent filed
on April 15, 1999 a petition for with the CTA. In its Resolution, the CTA dismissed respondent’s petition.
The CTA ruled that respondent failed to file a written claim for refund with the CIR, a condition
precedent to the filing of a petition for review before the CTA. Upon review, the CA reversed the CTA
and directed the latter to resolve respondent’s petition for review. Petitioner sought reconsideration,
but it was denied. Hence, this instant petition.

ISSUE: Whether or not the amended return filed by respondent indicating an overpayment constitute
the written claim for refund required by law.

RULING: The requirements under Section 230 for refund claims are as follows:

1. A  written claim  for refund or tax credit must be filed by the taxpayer with the Commissioner;

2. The claim for refund must be a  categorical demand  for reimbursement;

3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be commenced
in court  within two (2) years from date of payment of the tax or penalty regardless of any supervening
cause. 

The Court ruled in the negative. In its view, Section 230 of the Tax Code is clear. A claimant must first
file a written claim for refund, categorically demanding recovery of overpaid taxes with the CIR, before
resorting to an action in court. This obviously is intended, first, to afford the CIR 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. Entrenched in our jurisprudence is the principle that tax refunds are in the nature of tax
exemptions which are construed strictissimi juris against the taxpayer and liberally in favor of the
government. As tax refunds involve a return of revenue from the government, the claimant must show
indubitably the specific provision of law from which her right arises; it cannot be allowed to exist upon a
mere vague implication or inference nor can it be extended beyond the ordinary and reasonable
intendment of the language actually used by the legislature in granting the refund.
Moreover, under the circumstances of this case, the Court cannot agree that the amended return filed
by respondent constitutes the written claim for refund required by the old Tax Code, the law prevailing
at that time.

Philam Asset Mgt vs CIR

FACTS:

In April 1998, petitioner filed its 1997 annual ITR with the BIR reflecting a net loss of P2.6 million.
Consequently, it was unable to use its CWTs amounting to P522,092 which arose out of professional
fees. It filed a claim for refund but the same was left unacted by the BIR. Thus, it filed a petition for
review before the CTA which denied the same.

In April 1999, petitioner filed its 1998 annual ITR and declared a net loss of P1.5 million. Its
unused CWT for that year amounted to P459,756. In the 2000, petitioner declared in its 1999 annual ITR
tax due amounting to P80,042 and unused CWT amounting to P915,995 plus the P459,756 1998 CWTs.

In November 2000, petitioner filed a claim for tax refund with respect to the 1998 CWTs
amounting to P459,756. No action was done by the BIR, thus a Petition for Review was filed before the
CTA. Such petition was denied by the CA.

ISSUE:

1. WON the failure of the petitioner to indicate in its annual ITR the option to refund its creditable
withholding tax is fatal to its claim for refund?

2. WON petitioner is entitled to a refund of its creditable taxes withheld for taxable years 1997 and
1998?

RULING: (Section 76 offers two options to a taxable corporation, whose total quarterly income tax
payments in a given taxable year, exceeds its total income tax due. These options are (1) filing for a tax
refund or (2) availing of a tax credit. The first option means that any tax on income that is paid in excess
of the amount due the government may be refunded, provided that a taxpayer properly applies for the
refund. The second option works by applying the refundable amount, as shown on the FAR of a given
taxable year, against the estimated quarterly income tax liabilities of the succeeding taxable year.

1. No, it is not. Failure to signify one’s intention in the FAR does not mean outright barring of a valid
request for a refund, should one still choose this option later on. A tax credit should be construed
merely as an alternative remedy to a tax refund under Section 76, subject to prior verification and
approval by respondent.
The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration,
particularly the self-assessment and collection aspects. A taxpayer that makes a choice expresses
certainty or preference and thus demonstrates clear diligence. Conversely, a taxpayer that makes no
choice expresses uncertainty or lack of preference and hence shows simple negligence or plain
oversight.

In the present case, although petitioner did not mark the refund box in its 1997 FAR, neither did it
perform any act indicating that it chose a tax credit. On the contrary, it filed on September 11, 1998, an
administrative claim for the refund of its excess taxes withheld in 1997. In none of its quarterly returns
for 1998 did it apply the excess creditable taxes. Under these circumstances, petitioner is entitled to a
tax refund of its 1997 excess tax credits in the amount of P522,092.

2. Petitioner is entitled to tax refund for the 1997 CWTs but not for the 1998. For the 1997, refer to No.1
above.

The carry-over option under Section 76 is permissive. A corporation that is entitled to a tax refund or a
tax credit for excess payment of quarterly income taxes may carry over and credit the excess income
taxes paid in a given taxable year against the estimated income tax liabilities of the succeeding quarters.
Once chosen, the carry-over option shall be considered irrevocable for that taxable period, and no
application for a tax refund or issuance of a tax credit certificate shall then be allowed.

According to petitioner, it neither chose nor marked the carry-over option box in its 1998 FAR. As this
option was not chosen, it seems that there is nothing that can be considered irrevocable. In other
words, petitioner argues that it is still entitled to a refund of its 1998 excess income tax payments. The
court disagreed and considered the subsequent acts of petitioner, which revealed that it has effectively
chosen the carry-over option.

Section 76 remains clear and unequivocal. Once the carry-over option is taken, actually or
constructively, it becomes irrevocable. Petitioner has chosen that option for its 1998 creditable
withholding taxes. Thus, it is no longer entitled to a tax refund of P459,756, which corresponds to its
1998 excess tax credit. Nonetheless, the amount will not be forfeited in the government’s favor,
because it may be claimed by petitioner as tax credits in the succeeding taxable years.
OMMISSIONER OF INTERNAL REVENUE vs PRIMETOWN PROPERTY GROUP, INC.

FACTS:

Gilbert Yap, Vice Chair of Primetown applied on March 11, 1999 for a refund or credit of
income tax which Primetown paid in 1997. The petitioner suffered losses due to the real
estate slowdown therefore was entitled of tax refund or credit.

Revenue officer Elizabeth Y. Santos required respondent to submit additional

documents to support its claim. Respondent complied but its claim was not acted upon.
Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals (CTA).
The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its
right to claim a refund or credit commenced on that date.CTA dismissed the petition as
it was filed beyond the two-year prescriptive period for filing a judicial claim for tax
refund or tax credit. The two-year prescriptive period under Section 229 of the NIRC for
the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a
leap year, respondent’s petition, which was filed 731 days

Court of Appeals reversed and set aside the decision of the CTA. The rule that a year
has 365 days applies, notwithstanding the fact that a particular year is a leap year.
Petitioners contend that tax refunds, being in the nature of an exemption, should be
strictly construed against claimants.

ISSUE

Whether or not petition was filed within the two-year period

HELD:

Yes, the Respondents petition is filed (April 14, 2000) on the last day of 24th calendar
month from the day the respondent filed its final adjusted return (April 14, 1998) . The
CA’s decision is correct but the basis is wrong. Article 13 of the Civil Code and Section
31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject
matter — the computation of legal periods. Under the Civil Code, a year is equivalent to
365 days whether it be a regular year or a leap year. Under the Administrative Code
of 1987, however, a year is composed of 12 calendar months.There obviously exists
a manifest incompatibility in the manner of computing legal periods. For this reason, we
hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the
more recent law, governs the computation of legal periods.

Respondent’s petition (filed on April 14, 2000) was filed on the last day of the 24th
calendar month from the day respondent filed its final adjusted return. Hence, it was
filed within the reglementary period.

FERDINAND R. MARCOS II, PETITIONER,

-versus- COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE
FACTS:
On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA. On June
27, 1990, a Special Tax Audit Team was created to conduct investigations and examinations of the
tax liabilities and obligations of the late president, as well as that of his family, associates and
"cronies". Said audit team concluded its investigation with a Memorandum dated July 26, 1991. The
investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent,
an estate tax returns, as well as several income tax returns covering the years 1982 to 1986, — all
in
violation of the National Internal Revenue Code (NIRC). The Commissioner of Internal Revenue
thereby caused the preparation and filing of the Estate Tax Return for the estate of the late
president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the
Income Tax Returns of petitioner Ferdinand "Bongbong" Marcos II for the years 1982 to 1985.
On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment no. FAC-2-89-
91-002464 (against the estate of the late president Ferdinand Marcos in the amount of P23,
293,607,638.00 Pesos); (2) Deficiency income tax assessment no. FAC-1-85-91-002452 and
Deficiency income tax assessment no. FAC-1-86-91-002451 (against the Spouses Ferdinand and
Imelda Marcos in the amounts of P149,551.70 and P184,009,737.40 representing deficiency income
tax for the years 1985 and 1986); (3) Deficiency income tax assessment nos. FAC-1-82-91-002460
to FAC-1-85-91-002463 (against petitioner Ferdinand "Bongbong" Marcos II in the amounts of
P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency
income taxes for the years 1982 to 1985).
The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other
heirs of the late president, within 30 days from service of said assessments. On February 22, 1993,
the BIR Commissioner issued twenty-two notices of levy on real property against certain parcels of
land owned by the Marcoses — to satisfy the alleged estate tax and deficiency income taxes of
Spouses Marcos. On May 20, 1993, four more Notices of Levy on real property were issued for the
purpose of satisfying the deficiency income taxes. On May 26, 1993, additional four (4) notices of
Levy on real property were again issued. The foregoing tax remedies were resorted to pursuant to
Sections 205 and 213 of the National Internal Revenue Code (NIRC).
On June 25, 1993, petitioner Ferdinand "Bongbong" Marcos II filed the instant petition
for certiorari and prohibition under Rule 65 of the Rules of Court, with prayer for temporary
restraining order and/or writ of preliminary injunction.
It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the
collection of taxes, is of paramount importance for the sustenance of government.
ISSUE:
Whether or not the proper avenues of assessment and collection of the said tax obligations were
taken by the respondent Bureau? (NO)
HELD:
the Government has two ways of collecting the taxes in question. One, by going after all the heirs
and collecting from each one of them the amount of the tax proportionate to the inheritance received.
Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and
rights to property belong to the taxpayer for unpaid income tax, is by subjecting said property of the
estate which is in the hands of an heir or transferee to the payment of the tax due the estate.
From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement
tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot
therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties
allegedly owned by the late President, on the ground that it was required to seek first the probate
court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's claim for estate taxes,
before the same can be enforced and collected.
Jose B. Tiongco vs. Philippine Veterans Bank

Alicia Arnaldo mortgaged to the Philippine Veterans Bank (PVB) three (3) lots to secure the loan
amounting to PhP 290,000.  Upon default, the mortgaged was foreclosed and said lots were sold at public
auction, with Tiongco as the highest bidder.  When the property was not redeemed, Tiongco requested
PVB for the delivery of the owner's duplicate copy, having been unheeded, petitioner filed with the RTC a
petition to require PVB to surrender such document.  PVB denied the allegations in the petition, averred
that it was not served with a notice of the auction sale, it then set up the defense that the sale of the
property was irregular and that the right of petitioner over the property as a purchaser may be respected
only upon the release of the mortgage and that the property was sold for a scandalously low amount and
thus, it is shocking to the corresponds to the delinquent taxes to be recovered; considering that there is a
subsisting mortgage obligation of PhP 290,000 plus interest, annotated on the title, the auction sale was
the product of an illicit machination and actionable collusion between city officials and the purchaser.

ISSUE: WON inadequancy of price would invalidate the sale?

HELD:

It is well-settled that "while in ordinary sales for reasons of equity  a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the court
to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is
made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect
redemption."

Then too, petitioner purchased the property fully cognizant of the risk that he could eventually lose it in a
foreclosure sale conducted to satisfy the mortgage, unless he was prepared to pay PhP 290,000 more,
with interest due them, as well as the other charges and penalties which the contract of mortgage or the
promissory note secured by it has stipulated, without any hope of seeking reimbursement from the
mortgagor.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, -versus – UNITED SALVAGE AND
TOWAGE (PHILS.), INC., Respondent.
FACTS
Respondent is engaged in the business of sub-contracting work for service contractors engaged in
petroleum operations in the Philippines. During the taxable years in question, it had entered into
various contracts and/or sub-contracts with several petroleum service contractors, such as Shell
Philippines Exploration, B.V. and Alorn Production Philippines for the supply of service vessels.
In the course of respondent’s operations, petitioner found respondent liable for deficiency income
tax, withholding tax, value-added tax (VAT) and documentary stamp tax (DST) for taxable years
1992,1994, 1997 and 1998. Particularly, petitioner, through BIR officials, issued demand letters
with attached assessment notices for withholding tax on compensation (WTC) and expanded
withholding tax (EWT) for taxable years 1992, 1994 and 1998.
On January 29, 1998 and October 24, 2001, USTP filed administrative protests against the 1994 and
1998 EWT assessments, respectively.
On February 21, 2003, USTP appealed by way of Petition for Review before the Court in action
(which was thereafter raffled to the CTA-Special First Division) alleging that the Notices of
Assessment are bereft of any facts, law, rules and regulations or jurisprudence; thus, the
assessments are void and the right of the government to assess and collect deficiency taxes from it
has prescribed on account of the failure to issue a valid notice of assessment within the applicable
period.
During the pendency of the proceedings, USTP moved to withdraw the aforesaid Petition because it
availed of the benefits of the Tax Amnesty Program under Republic Act (R.A.) No. 9480. Having
complied with all the requirements therefor, the CTA-Special First Division partially granted the
Motion to Withdraw and declared the issues on income tax, VAT and DST deficiencies closed and
terminated in accordance with the pronouncement in Philippine Banking Corporation v.
Commissioner of Internal Revenue. Consequently, the case was submitted for decision covering the
remaining issue on deficiency EWT and WTC, respectively, for taxable years 1992, 1994 and 1998.
The CTA-Special First Division held that the Preliminary Assessment Notices (PANs) for deficiency
EWT for taxable years 1994 and 1998 were not formally offered; hence, pursuant to Section 34,
Rule 132 of the Revised Rules of Court, the Court shall neither consider the same as evidence nor
rule on their validity. As regards the Final Assessment Notices (FANs) for deficiency EWT for
taxable years 1994 and 1998, the CTA-Special First Division held that the same do not show the law
and the facts on which the assessments were based. Said assessments were, therefore, declared
void for failure to comply with Section 228 of the 1997 National Internal Revenue Code (Tax Code).
From the foregoing, the only remaining valid assessment is for taxable year 1992.
Nevertheless, the CTA-Special First Division declared that the right of petitioner to collect the
deficiency EWT and WTC, respectively, for taxable year 1992 had already lapsed pursuant to
Section 203 of the Tax Code. Thus, in ruling for USTP, the CTA-Special First Division cancelled
Assessment Notice Nos. 25-1-00546-92 and 25-1-000545-92, both dated January 9, 1996 and
covering the period of 1992.
Petitioner moved to reconsider the aforesaid ruling however it was denied the same for lack of
merit.
Upon appeal, the CTA En Banc affirmed with modification the of the CTA-Special First Division. The
CTA En Banc upheld the 1998 EWT assessment. In addition to the basic EWT deficiency of
₱14,496.79, USTP is ordered to pay surcharge, annual deficiency interest, and annual delinquency
interest from the date due until full payment pursuant to Section 249 of the 1997 NIRC.

Issue:
Whether or not the expanded withholding tax assessment issued against the respondent for
the year 1994 were valid.

Held:
No. The law requires that the legal and factual bases of the assessment be stated in the
formal letter of demand and assessment notice. Such cannot be presumed. The alleged
factual bases in the advance, preliminary letter and audit working papers did not suffice. It is
clear 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 the present case, a mere perusal of the FAN for the deficiency EWT for taxable year 1994 will
show that other than a tabulation of the alleged deficiency taxes due, no further detail regarding the
assessment was provided by petitioner. Only the resulting interest, surcharge and penalty were anchored
with legal basis.45 Petitioner should have at least attached a detailed notice of discrepancy or stated an
explanation why the amount of ₱48,461.76 is collectible against respondent46 and how
the same was arrived at. Any short-cuts to the prescribed content of the assessment or the process
thereof should not be countenanced.
 Allied Bank vs CIR
GR 175097, 5 February 2010

FACTS: In April 2004, the Bureau of Internal Revenue (BIR) issued a preliminary assessment notice (PAN)
to Allied Banking Corporation (ABC) demanding payment of P50 million in taxes. ABC then filed a protest
in May 2004. In July 2004, the BIR issued a formal assessment notice (FAN). The FAN included a formal
demand as well as this phrase:

This is our final decision based on investigation. If you disagree, you may appeal this final decision within
thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final,
executory and demandable.

Instead of filing a protest an administrative protest on the formal letter demand Allied Banking
Corporation appealed on the court of tax appeals (CTA). Respondent CIR filed a motion to dismiss for
lack of jurisdiction, were the court granted the dismissal of the case. Petitioner ABC files a motion for
reconsideration but was denied. Petitioner ABC appealed the dismissal to the CTA en banc. The CTA En
Banc declared that it is absolutely necessary for the taxpayer to file an administrative protest in order
for the CTA to acquire jurisdiction. It emphasized that an administrative protest is an integral part of the
remedies given to a taxpayer in challenging the legality or validity of an assessment. According to the
CTA En Banc, although there are exceptions to the doctrine of exhaustion of administrative remedies,
the instant case does not fall in any of the exceptions.

ISSUE: Whether or not, the formal letter of demand issued by the BIR can be construed as final decision
of the CIR appealable to CTA under RA 9282?

RULING: Yes. A careful reading of the Formal Letter of Demand with Assessment Notices leads us to
agree with petitioner that the instant case is an exception to the rule on exhaustion of administrative
remedies, i.e., estoppel on the part of the administrative agency concerned. In this case, records show
that petitioner disputed the PAN but not the Formal Letter of Demand with Assessment Notices.
Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand
with Assessment Notices since the language used and the tenor of the demand letter indicate that it is
the final decision of the respondent on the matter. We have time and again reminded the CIR to
indicate, in a clear and unequivocal language, whether his action on a disputed assessment constitutes
his final determination thereon in order for the taxpayer concerned to determine when his or her right
to appeal to the tax court accrues. Respondent is now estopped from claiming that he did not intend the
Formal Letter of Demand with Assessment Notices to be a final decision.

Formal Letter of Demand with Assessment Notices, respondent used the word "appeal" instead of
"protest", "reinvestigation", or "reconsideration". Although there was no direct reference for petitioner
to bring the matter directly to the CTA, it cannot be denied that the word "appeal" under prevailing tax
laws refers to the filing of a Petition for Review with the CTA. Under Section 228 of the NIRC, the terms
"protest", "reinvestigation" and "reconsideration" refer to the administrative remedies a taxpayer may
take before the CIR, while the term "appeal" refers to the remedy available to the taxpayer before the
CTA. Section 9 of RA 9282, amending Section 11 of RA 1125.

The Supreme Court said that, the Formal Letter of Demand with Assessment Notices which was not
administratively protested by the petitioner can be considered a final decision of the CIR appealable to
the CTA because the words used, specifically the words "final decision" and "appeal", taken together led
petitioner to believe that the Formal Letter of Demand with Assessment Notices was in fact the final
decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to
the CTA.
 Lascona Land vs CIR
GR 171251, 5 March 2012

FACTS: On March 27, 1998, CIR issued Assessment Notice No. 0000047-93-407 against Lascona Land
Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the
amount of P753,266.56.

Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio,
Officer-in-Charge , Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City,
stating that by virtue of the last paragraph of Section 228 of the Tax Code, the assessment notice has
become final, executory and demandable.

ISSUE: Whether or not the subject assessment has become final, executory and demandable due to the
failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One
Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC.

RULING: No, Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, maintains that in case of
inaction by the CIR on the protested assessment, it has the option to either: (1) appeal to the CTA within
30 days from the lapse of the 180-day period; or (2) await the final decision of the Commissioner on the
disputed assessment even beyond the 180-day period − in which case, the taxpayer may appeal such
final decision within 30 days from the receipt of the said decision. Corollarily, petitioner posits that when
the Commissioner failed to act on its protest within the 180-day period, it had the option to await for
the final decision of the Commissioner on the protest.

When the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a
single remedy of filing of an appeal after the lapse of the 180-day prescribed period. . A taxpayer cannot
be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment.

It must be emphasized, however, these options are mutually exclusive and resort to one bars the
application of the other.
AMAR-I ELECTRIC COOPERATIVE (SIEC), Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE,
Respondent

FACTS: Samar-I Electric Cooperative, Inc. (Petitioner) is an electric cooperative, with principal office at
Barangay Carayman, Calbayog City. On July 13, 1999 and April 17, 2000, petitioner filed its 1998 and
1999 income tax returns, respectively. Petitioner filed its 1997, 1998, and 1999 Annual Information
Return of Income Tax Withheld on Compensation, Expanded and Final Withholding Taxes on February
17, 1998, February 1, 1999, and February 4, 2000, in that order. On November 13, 2000, respondent
issued a duly signed Letter of Authority (LOA) covering the examination of petitioner's books of account
and other accounting records for income and withholding taxes for the period 1997 to 1999. Petitioner
cooperated in the audit and investigation conducted by the Special Investigation Division of the BIR by
submitting the required documents on December 5, 2000. On October 19, 2001, respondent sent a
Notice for Informal Conference which was received by petitioner in November 2001; indicating the
allegedly income and withholding tax liabilities of petitioner for 1997 to 1999. Attached to the letter is a
summary of the report, with an explanation of the findings of the investigators. In response, petitioner
sent a letter dated November 26, 2001 to respondent maintaining its indifference to the latter's findings
and requesting details of the assessment.On December 13, 2001, petitioner executed a Waiver of the
Defense of Prescription under the Statute of Limitations, good until March 29, 2002. Consequently, on
September 15, 2002, petitioner received a demand letter and assessments notices (Final Assessment
Notices) for the alleged 1997, 1998, and 1999 deficiency withholding tax in the amount of
[P]3,760,225.69, as well as deficiency income tax covering the years 1998 to 1999 in the amount of
[P]440,545.71, or in the aggregate amount of [P]4,200,771.40. CTA ruled that SAMELCO-I is exempted in
the payment of the Minimum Corporate Income Tax (MCIT); that due process was observed in the
issuance of the assessments in accordance with Section 228 of the Tax Code; and that the 1997 and
1998 assessments on deficiency withholding tax on compensation have not prescribed. Petitioner
moved for reconsideration. In a Resolution dated July 28, 2010, the CTA EB denied the motion.
Petitioner contends that the subject 1997 and 1998 withholding tax assessments on compensation were
issued beyond the prescriptive period of three years under Section 203 of the NIRC of 1997. Under this
section, the government is allowed a period of only three years to assess the correct tax liability of a
taxpayer, viz.: SEC. 203. Period of Limitation Upon Assessment and Collection. — Except as provided in
Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed
by law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is
filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the
return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the
filing thereof shall be considered as filed on such last day. Relying on Section 203, petitioner argues that
the subject deficiency tax assessments issued by respondent on September 15, 2002 was issued beyond
the three-year prescriptive period. Petitioner filed its Annual Information Return of Income Tax
Withheld on Compensation, Expanded and Final Withholding Taxes on the following dates: on February
17, 1998 for the taxable year 1997; and on February 1, 1999 for the year taxable 1998. Thus, if the
period prescribed under Section 203 of the NIRC of 1997 is to be followed, the three-year prescriptive
period to assess for the taxable years 1997 and 1998 should have ended on February 16, 2001 and
January 31, 2002, respectively.||| ISSUE: Whether or not the 1997 and 1998 assessments on
withholding tax on compensation were issued within the prescriptive period provided by law; RULING:
YES. While petitioner is correct that Section 203 sets the three-year prescriptive period to assess, the
following exceptions are provided under Section 222 of the NIRC of 1997, viz.: SEC. 222. 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. In the case at bar, it was petitioner's substantial
underdeclaration of withholding taxes in the amount of P2,690,850.91 which constituted the "falsity" in
the subject returns — giving respondent the benefit of the period under Section 222 of the NIRC of 1997
to assess the correct amount of tax "at any time within ten (10) years after the discovery of the falsity,
fraud or omission."||| The case of Aznar v. Court of Tax Appeals discusses what acts or omissions may
constitute falsity, viz.: Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer
did not file false and fraudulent returns with intent to evade tax, while respondent Commissioner of
Internal Revenue insists contrariwise, with respondent Court of Tax Appeals concluding that the very
"substantial underdeclarations of income for six consecutive years eloquently demonstrate the falsity or
fraudulence of the income tax returns with an intent to evade the payment of tax." To our minds we can
dispense with these controversial arguments on facts, although we do not deny that the findings of facts
by the Court of Tax Appeals, supported as they are by very substantial evidence, carry great weight, by
resorting to a proper interpretation of Section 332 of the NIRC. We believe that the proper and
reasonable interpretation of said provision should be that in the three different cases of (1) false return,
(2) fraudulent return with intent to evade tax, (3) failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be begun without assessment, at any time within
ten years after the discovery of the (1) falsity, (2) fraud, (3) omission. Our stand that the law should be
interpreted to mean a separation of the three different situations of false return, fraudulent return with
intent to evade tax, and failure to file a return is strengthened immeasurably by the last portion of the
provision which segregates the situations into three different classes, namely "falsity," "fraud" and
"omission." That there is a difference between "false return" and "fraudulent return" cannot be denied.
While the first merely implies deviation from the truth, whether intentional or not, the second implies
intentional or deceitful entry with intent to evade the taxes due. A careful examination of the evidence
on record yields to no other conclusion but that petitioner failed to withhold taxes from its employees'
13th month pay and other benefits in excess of thirty thousand pesos (P30,000.00) amounting to
P2,690,850.91 for the taxable years 1997 to 1999 — resulting to its filing of the subject false returns.
Petitioner failed to refute this finding, both in fact and in law, before the courts a quo.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, -versus- METRO STAR SUPERAMA,
INC.,
Respondent
FACTS:
On November 8, 2001, Revenue District Officer Socorro O. Ramos-Lafuente issued a Preliminary 15-
day Letter, which Metro Star received on November 9, 2001. The said letter stated that a post audit
review was held and it was ascertained that there was deficiency value-added and withholding
taxes due from respondent in the amount of ₱ 292,874.16.
On April 11, 2002, Metro Star received a Formal Letter of Demand dated April 3, 2002 from
Revenue
District No. 67, Legazpi City, assessing Metro Star the amount of Two Hundred Ninety Two
Thousand Eight Hundred Seventy Four Pesos and Sixteen Centavos (₱292,874.16.) for deficiency
value-added and withholding taxes for the taxable year 1999.
Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice of Seizure dated May
12,
2003, which Metro Star received on May 15, 2003, giving the latter last opportunity to settle its
deficiency tax liabilities within ten (10) [days] from receipt thereof, otherwise respondent BIR shall
be constrained to serve and execute the Warrants of Distraint and/or Levy and Garnishment to
enforce collection.
On February 6, 2004, Metro Star received from Revenue District Office No. 67 a Warrant of Distraint
and/or Levy No. 67-0029-23 dated May 12, 2003 demanding payment of deficiency value-added tax
and withholding tax payment in the amount of ₱292,874.16.
Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was not
accorded due process, Metro Star filed a petition for review with the CTA which ruled in its favor.
Aggrieved, the CIR filed a petition for review with the CTA-En Banc, but the petition was dismissed
after a determination that no new matters were raised
ISSUE:
Whether failure to strictly comply with notice requirements prescribed under Section 228 of the
National Internal Revenue Code of 1997 and Revenue Regulations (R.R.) No. 12-99 tantamount to a
denial of due process (YES)
RULING:
Jurisprudence is replete with cases holding that if the taxpayer denies ever having received an
assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such
notice was indeed received by the addressee. The onus probandi was shifted to respondent to
prove
by contrary evidence that the Petitioner received the assessment in the due course of mail. 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
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. 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.
Indeed, 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.
The Court 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.
It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of
property without due process of law. In balancing the scales between the power of the State to tax
and its inherent right to prosecute perceived transgressors of the law on one side, and the
constitutional rights of a citizen to due process of law and the equal protection of the laws on the
other, the scales must tilt in favor of the individual, for a citizen’s right is amply protected by the Bill
of Rights under the Constitution. Thus, while "taxes are the lifeblood of the government," the power
to tax has its limits, in spite of all its plenitude. Hence in Commissioner of Internal Revenue v. Algue,
Inc. it was said –
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. On the other hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile
the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may be achieved.
Even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his
succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the
taxpayer can demonstrate x x x that the law has not been observed.
Estate of the Late Juliana Diez Vda. De Gabriel v.
Commissioner of Internal Revenue
G.R. No. 155541, 27 January 2004

FACTS:

During the lifetime of the decedent, Juliana Vda. De Gabriel, her business affairs were managed by
the Philippine Trust Company (Philtrust). Two days after her death, Philtrust, through its Trust
Officer, Atty. Antonio M. Nuyles, filed her Income Tax Return for 1978. The return did not indicate
that the decedent had died. Philtrust also filed a verified petition for appointment as Special
Administrator wit. The court a quo appointed one of the heirs as Special Administrator. Philtrust’s
motion for reconsideration was denied by the probate court.

The court a quo issued an Order relieving Mr. Diez of his appointment, and appointed Antonio Lantin
to take over as Special Administrator. Subsequently, Mr. Lantin was also relieved of his
appointment, and Atty. Vicente Onosa was appointed in his stead.

In the meantime, the BIR conducted an administrative investigation on the decedent’s tax liability
and found a deficiency income tax for the year 1977 in the amount of P318,233.93. Thus, on
November 18, 1982, the BIR sent by registered mail a demand letter and Assessment Notice No.
NARD-78-82-00501 addressed to the decedent “c/o Philippine Trust Company, Sta. Cruz, Manila”
which was the address stated in her 1978 Income Tax Return. No response was made by Philtrust.
The BIR was not informed that the decedent had actually passed away.

ISSUE:

Whether the service of deficiency tax assessment against the estate of Juliana Diez Vda. de Gabriel
was a valid service in order to bind the Estate.

RULING:

The relationship between the decedent and Philtrust was one of agency, which is a personal
relationship between agent and principal. Under Article 1919 (3) of the Civil Code, death of the agent
or principal automatically terminates the agency. In this instance, the death of the decedent on April
3, 1979 automatically severed the legal relationship between her and Philtrust, and such could not
be revived by the mere fact that Philtrust continued to act as her agent when, on April 5, 1979, it filed
her Income Tax Return for the year 1978.

Since the relationship between Philtrust and the decedent was automatically severed at the moment
of the Taxpayer’s death, none of Philtrust’s acts or omissions could bind the estate of the Taxpayer.
Service on Philtrust of the demand letter and Assessment Notice No. NARD-78-82-00501 was
improperly done.

It must be noted that Philtrust was never appointed as the administrator of the Estate of the
decedent, and, indeed, that the court a quo twice rejected Philtrust’s motion to be thus appointed. As
of November 18, 1982, the date of the demand letter and Assessment Notice, the legal relationship
between the decedent and Philtrust had already been non-existent for three years.

CIR vs Hantex Trading Co., Inc.

GR 136975, 31 March 2005

FACTS: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of
plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For
this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry)
with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October
1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and
Investigation Bureau (EIIB), received confidential information that the respondent had imported
synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a
subpoena to present its books of account which it failed to do. The bureau cannot find any original
copies of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau
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 certified by Tomas and Danganan. The case was submitted to the
CTA which ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau.
The CA ruled that the income and sales tax deficiency assessments issued by the petitioner were
unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax
of the respondent were not duly authenticated by the public officer charged with their custody, nor
verified under oath by the EIIB and the BIR investigators.

ISSUE: Whether or not the final assessment of the petitioner against the respondent for deficiency
income tax and sales tax for the latter’s 1987 importation of resins and calcium bicarbonate is based on
competent evidence and the law.

RULING: 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), which provides that “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.” 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 “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. 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.
SMI-ED PHILIPPINES TECHNOLOGY, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE,
Respondent.

FACTS The petitioner SMI-ED Philippines Technology, Inc. is a PEZA-registered corporation that has
never commenced operations. During its existence, it subjected itself to 5% final tax imposed upon
PEZAregistered corporations. The amount of tax it paid is Php 44M. However, upon finding that it made
erroneous payment of taxes, it filed with the BIR an administrative claim for tax refund. The BIR,
however, did not act in its claim. Court of Tax Appeals, after finding that SMI-Ed Philippines sold
properties that were capital assets under Section 39(A)(1) of the National Internal Revenue Code of
1997, the Court of Tax Appeals Second Division subjected the sale of SMI-Ed Philippines’ assets to 6%
capital gains tax under Section 27(D)(5) of the same Code and Section 2 of Revenue Regulations No. 8-
98. It was found liable for capital gains tax amounting to P53,613,000.00 Therefore, SMI-Ed Philippines
must still pay the balance of P8,935,500.00 as deficiency tax, “which respondent should perhaps look
into. By way of petition for review, the Court of Tax Appeals En Banc affirmed the decision of Court of
Tax Appeals Division. Hence, the current petition. Petitioner argued that the Court of Tax Appeals has no
jurisdiction to make an assessment since its jurisdiction, with respect to the decisions of respondent, is
merely appellate. Moreover, the power to make assessment had already prescribed under Section 203
of the National Internal Revenue Code of 1997 since the return for the erroneous payment was filed on
September 13, 2000. This is more than three (3) years from the last day prescribed by law for the filing
of the return. Petitioner also argued that the Court of Tax Appeals En Banc erroneously subjected
petitioner’s machineries to 6% capital gains tax. Section 27(D)(5) of the National Internal Revenue Code
of 1997 is clear that the 6% capital gains tax on domestic corporations applies only on the sale of lands
and buildings and not to machineries and equipment. ISSUE

Whether or not the Court of Tax Appeals can make a tax assessment within its appellate jurisdiction.
RULING Yes. The term “assessment” refers to the determination of amounts due from a person
obligated to make payments. In the context of national internal revenue collection, it refers the
determination of the taxes due from a taxpayer under the National Internal Revenue Code of 1997. The
power and duty to assess national internal revenue taxes are lodged with the BIR. The BIR is not
mandated to make an assessment relative to every return filed with it. Tax returns filed with the BIR
enjoy the presumption that these are in accordance with the law. Tax returns are also presumed correct
since these are filed under the penalty of perjury. Generally, however, the BIR assesses taxes when it
appears, after a return had been filed, that the taxes paid were incorrect, false, or fraudulent. The BIR
also assesses taxes when taxes are due but no return is filed. The Court of Tax Appeals has no power to
make an assessment at the first instance. On matters such as tax collection, tax refund, and others
related to the national internal revenue taxes, the Court of Tax Appeals’ jurisdiction is appellate in
nature. Section 7(a)(1) and Section 7(a)(2) of Republic Act No. 1125,51 as amended by Republic Act No.
9282, provide that the Court of Tax Appeals reviews decisions and inactions of the Commissioner of
Internal Revenue in disputed assessments and claims for tax refunds. Thus, the BIR first has to make an
assessment of the taxpayer’s liabilities. When the BIR makes the assessment, the taxpayer is allowed to
dispute that assessment before the BIR. If the BIR issues a decision that is unfavorable to the taxpayer or
if the BIR fails to act on a dispute brought by the taxpayer, the BIR’s decision or inaction may be brought
on appeal to the Court of Tax Appeals. The Court of Tax Appeals then acquires jurisdiction over the case.
When the BIR’s unfavorable decision is brought on appeal to the Court of Tax Appeals, the Court of Tax
Appeals reviews the correctness of the BIR’s assessment and decision. In reviewing the BIR’s assessment
and decision, the Court of Tax Appeals had to make its own determination of the taxpayer’s tax
liabilities. The Court of Tax Appeals may not make such determination before the BIR makes its
assessment and before a dispute involving such assessment is brought to the Court of Tax Appeals on
appeal. The Court of Tax Appeals’ jurisdiction is not limited to cases when the BIR makes an assessment
or a decision unfavorable to the taxpayer. Because Republic Act No. 1125 also vests the Court of Tax
Appeals with jurisdiction over the BIR’s inaction on a taxpayer’s refund claim, there may be instances
when the Court of Tax Appeals has to take cognizance of cases that have nothing to do with the BIR’s
assessments or decisions. When the BIR fails to act on a claim for refund of voluntarily but mistakenly
paid taxes, for example, there is no decision or assessment involved. Taxes are generally self-assessed.
They are initially computed and voluntarily paid by the taxpayer. The government does not have to
demand it. If the tax payments are correct, the BIR need not make an assessment. The self-assessing and
voluntarily paying taxpayer, however, may later find that he or she has erroneously paid taxes.
Erroneously paid taxes may come in the form of amounts that should not have been paid. Thus, a
taxpayer may find that he or she has paid more than the amount that should have been paid under the
law. Erroneously paid taxes may also come in the form of tax payments for the wrong category of tax.
Thus, a taxpayer may find that he or she has paid a certain kind of tax that he or she is not subject to. In
these instances, the taxpayer may ask for a refund. If the BIR fails to act on the request for refund, the
taxpayer may bring the matter to the Court of Tax Appeals. In this case, the Court of Tax Appeals’
jurisdiction was acquired because petitioner brought the case on appeal before the Court of Tax Appeals
after the BIR had failed to act on petitioner’s claim for refund of erroneously paid taxes. The Court of Tax
Appeals did not acquire jurisdiction as a result of a disputed assessment of a BIR decision.

The determination of the proper category of tax that petitioner should have paid is an incidental matter
necessary for the resolution of the principal issue, which is whether petitioner was entitled to a refund.
The issue of petitioner’s claim for tax refund is intertwined with the issue of the proper taxes that are
due from petitioner. A claim for tax refund carries the assumption that the tax returns filed were
correct. If the tax return filed was not proper, the correctness of the amount paid and, therefore, the
claim for refund become questionable. In that case, the court must determine if a taxpayer claiming
refund of erroneously paid taxes is more properly liable for taxes other than that paid. In this case,
petitioner’s claim that it erroneously paid the 5% final tax is an admission that the quarterly tax return it
filed in 2000 was improper. Hence, to determine if petitioner was entitled to the refund being claimed,
the Court of Tax Appeals has the duty to determine if petitioner was indeed not liable for the 5% final
tax and, instead, liable for taxes other than the 5% final tax. As in South African Airways, petitioner’s
request for refund can neither be granted nor denied outright without such determination. If the
taxpayer is found liable for taxes other than the erroneously paid 5% final tax, the amount of the
taxpayer’s liability should be computed and deducted from the refundable amount. Any liability in
excess of the refundable amount, however, may not be collected in a case involving solely the issue of
the taxpayer’s entitlement to refund. The question of tax deficiency is distinct and unrelated to the
question of petitioner’s entitlement to refund. Tax deficiencies should be subject to assessment
procedures and the rules of prescription. The court cannot be expected to perform the BIR’s duties
whenever it fails to do so either through neglect or oversight. Neither can court processes be used as a
tool to circumvent laws protecting the rights of taxpayers.

CIR vs Kudos Metal

GR 178087, 5 May 2010

FACTS: On April 15, 1999, Kudos Metal Corporation filed its Annual Income Tax Return for the taxable
year 1998. The BIR served upon respondent 3 Notices of Presentation of Records which the latter failed
to comply. The BIR issued a Subpeona Duces Tecum  which was acknowledged by respondent’s President
on October 20, 2000. On December 10, 2001 and February 18, 2003, respondent’s accountant, executed
two Waiver of the Defense of Prescription, respectively. On August 25, 2003, the BIR issued a
Preliminary Assessment Notice for the taxable year 1998 against the respondent. This was followed by a
Formal Letter of Demand with Assessment Notices for taxable year 1998, dated September 26, 2003
which was received by respondent on November 12, 2003. Respondent challenged the assessments
arguing that the government’s right to assess has already prescribed. Petitioner, on the other hand, does
not deny that the assessment notices were issued beyond the three-year prescriptive period but claims
that the period was extended by such two waivers.

ISSUES:

Whether or not the government’s right to assess unpaid taxes of the respondent has already prescribed
despite the Waiver of Prescription executed by the respondent

RULING:

Yes. Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the government to
assess internal revenue taxes within three years from the last day prescribed by law for the filing of the
tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment
notice issued after the three-year prescriptive period is no longer valid and effective.

Exceptions however are provided under Section 222 of the NIRC, to wit, “the period to assess and collect
taxes may only be extended upon a written agreement between the CIR and the taxpayer executed
before the expiration of the three-year period.” RMO 20-90 (April 4, 1990) and RDAO 05-01 (August 2,
2001) lay down the procedure for the proper execution of the waiver, to wit:
 i. The waiver must be in the proper form prescribed by RMO 20-90. The phrase "but not
after ______ 19 ___", which indicates the expiry date of the period agreed upon to
assess/collect the tax after the regular three-year period of prescription, should be filled
up.

ii. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of its
responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.

iii. The waiver should be duly notarized.

iv. The CIR or the revenue official authorized by him must sign the waiver indicating that
the BIR has accepted and agreed to the waiver. The date of such acceptance by the BIR
should be indicated. However, before signing the waiver, the CIR or the revenue official
authorized by him must make sure that the waiver is in the prescribed form, duly
notarized, and executed by the taxpayer or his duly authorized representative.

v. Both the date of execution by the taxpayer and date of acceptance by the Bureau
should be before the expiration of the period of prescription or before the lapse of the
period agreed upon in case a subsequent agreement is executed.

vi. The waiver must be executed in three copies, the original copy to be attached to the
docket of the case, the second copy for the taxpayer and the third copy for the Office
accepting the waiver. The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was notified of the acceptance
of the BIR and the perfection of the agreement. 19

In the case at bar, the waivers executed by respondent’s accountant, however, were (1) executed
without the notarized written authority of the latter to sign the waiver in behalf of respondent; (2) failed
to indicate the date of acceptance; and, (3) the fact of receipt by the respondent of its file copy was not
indicated in the original copies of the waivers. Due to the defects in the waivers, the period to assess or
collect taxes was not extended. Consequently, the assessments were issued by the BIR beyond the
three-year period and are void.
CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE,
Petitioner, vs. BASF COATING + INKS PHILS., INC., Respondent.
(G.R. No. 198677; November 26, 2014)

2/3 of BC's board members and stockholders decided to dissolve the corporation
by cutting its 50-year term of existence (from 1990) short (only until March 31,
2001). Subsequently, BC moved out of its address in Las Piñas City and
transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna

On June 26, 2001, BC submitted 2 letters to BIR. The first was a notice of
dissolution. The send was a manifestation with documents supporting said
dissolution such as BIR Form 1905 which refers to an update of information
contained in its tax registration. Thereafter, a FAN was sent to BC's former
address in Las Piñas City. The FAN indicated an amount of 18 million pesos
representing income tax, VAT, WTC, EWT and DST for the taxable year of 1999.

On March 5, 2004, BIR's RDO No. 39, South Quezon City, issued a First Notice
Before Issuance of Warrant of Distraint and Levy (FNB), which was sent to the
residence of one of BC's directors.

On March 19, 2004, BC filed a protest letter citing lack of due process and
prescription as grounds.

After 180 days without action on the part of the CIR, BC filed a petition for review
with the CTA. Trial ensued.

The CTA 1D ruled that since the CIR was actually aware of BC's new address and
such error in sending should not be taken against BC. According to the CTA 1D,
since there are no valid notices sent to BC, the subsequent assessments against it
are considered void.

CIR filed an MR. It was denied. So, it went to CTA en banc. The CTA En Banc
held that CIR's right to assess respondent for deficiency taxes for the taxable year
1999 has already prescribed and that the FAN issued to respondent never
attained finality because BC did not receive it.

CIR filed an MR. Denied.

Issue: Whether or not the running of the 3-year prescriptive period to
assess suspended when BC failed to notify the CIR of its change of
address?

No, the 3-year prescriptive period to assess was not suspended in favor of the CIR
even if BC failed notify regarding its change of address.

It is true that, under the Tax Code, the running of the Statute of Limitations shall
be suspended when the taxpayer cannot be located in the address given in the
return filed upon which a tax is being assessed or collected. In addition, Section
11 of RR 12-85 states that, in case of change of address, the taxpayer is required to
give a written notice thereof to the RDO or the district having jurisdiction over
his former legal residence and/or place of business.

However, the Supreme Court ruled that the above-mentioned provisions on the
suspension of the 3-year period to assess apply only if the CIR is not aware of the
whereabouts of the taxpayer.

In the present case, the CIR, by all indications, was well aware that BC had moved
to its new address in Calamba, Laguna, as shown by the documents which formed
part of respondent's records with the BIR.

Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter
regarding the results of its investigation and an invitation to an information
conference. This could not have been done without being aware of BC's new
address. Finally, the PAN was "returned to sender" before the FAN was sent.

Hence, despite the absence of a formal written notice of Bc's change of address,
the fact remains that petitioner became aware of respondent's new address as
shown by documents replete in its records. As a consequence, the running of the
three-year period to assess respondent was not suspended and has already
prescribed.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, -versus – THE STANLEY WORKS SALES (PHILS.),
INCORPORATED, Respondent.

FACTS Respondent is a domestic corporation duly organized and existing under Philippine laws and duly
registered with the Securities and Exchange Commission. On March 19, 1993, the BIR issued to Stanley
Works a Pre-Assessment Notice No. 002523 for 1989 deficiency income tax. It was received by the
corporation on April 21, 1993. On May 19, 1993, Stanley Works through its external auditors
Punongbayan & Araullo, filed a protest letter and requested reconsideration and cancellation of the
assessment. On November 16, 1993, a certain Mr. John Ang, on behalf of the corporation, executed a
"Waiver of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue
Code" (Waiver). The Waiver was not signed by Stanley Works or any of its authorized representatives
and did not state the date of acceptance as prescribed under Revenue Memorandum Order No. 20-90.
Under the terms of the Waiver, Stanley Works waived its right to raise the defense of prescription under
Section 223 of the NIRC of 1977 insofar as the assessment and collection of any deficiency taxes for the
year ended December 31, 1989, but not after June 30, 1994. On March 4, 2002, Stanley Works
submitted a Supplemental Memorandum alleging that CIR’s right to collect the alleged deficiency
income tax has prescribed. The CTA Division ruled that the request for reconsideration did not suspend
the running of the prescriptive period to collect deficiency income tax. This decision was affirmed by the
CTA en banc. CIR rendered a Decision denying respondent’s request for reconsideration and ordering
respondent to pay the deficiency income tax plus interest that may have accrued. Stanley Works
assailed the decision before the Court of Tax Appeals Division which ordered the cancellation of the
assessment ruling that although the assessment was made within the prescribed period, the period
within which petitioner may collect deficiency income taxes had already lapsed. Upon appeal, the CTA
En Banc affirmed the CTA First Division Decision ISSUE Whether or not petitioner’s right to collect the
deficiency income tax of respondent for taxable year 1989 has prescribed. (YES)

Held:

The period to assess and collect deficiency taxes may be extended only upon a written agreement
between the CIR and the taxpayer prior to the expiration of the three-year prescribed period in
accordance with Section 222 (b) of the NIRC. In this case, the Supreme Court upheld the ruling of the
CTA Division that there were infirmities on the Waiver executed by respondent on 16 November 1993.
The Court found that the following requisites were absent: (1) Conformity of either petitioner or a duly
authorized representative; (2) Date of acceptance showing that both parties had agreed on the Waiver
before the expiration of the prescriptive period; and (3) Proof that respondent was furnished a copy of
the Waiver.
FISHWEALTH CANNING CORPORATION, petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE,
respondent.

FACTS: Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax
Appeals issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with
the CIR instead of appealing the same to the Court of Tax Appeals within 30 days. The CIR then issued a
Preliminary Collection Letter which prompted the Petitioner to file its Petition with the Court of Tax
Appeals. CIR argued that the Petition with the Court of Tax Appeals was filed out of time. ISSUE:
Whether or not the filing of a Motion for Reconsideration tolls the running of the 30-day period to
appeal to the Court of Tax Appeals. RULING:

In the case at bar, petitioner’s administrative protest was denied by Final Decision on Disputed
Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4,
2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal
respondent’s denial of its protest to the CTA. Since petitioner received the denial of its administrative
protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA
Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for
reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to
the CTA.
RIZAL COMMERCIAL BANKING CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE- Protest
Tax Assessments

FACTS:

RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001.
As the protest was not acted upon, it filed a Petition for Review with the Court of Tax Appeals
(CTA) on April 30, 2002, or more than 30 days after the lapse of the 180-day period reckoned
from the submission of complete documents. The CTA dismissed the Petition for lack of
jurisdiction since the appeal was filed out of time.

ISSUE:

Has the action to protest the assessment judicially prescribed?

HELD:

YES. The assessment has become final. The jurisdiction of the CTA has been expanded to
include not only decision but also inactions and both are jurisdictional such that failure to
observe either is fatal.

However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the
CTA within 30 days from the lapse of the 180-day period OR (2) await the final decision of the
CIR and appeal such decision to the CTA within 30 days after receipt of the decision. These
options are mutually exclusive and resort to one bars the application of the other. Thus, if
petitioner belatedly filed an action based on inaction, it can not subsequently file another petition
once the decision comes out.
CIR v. BPI
G.R. No. 134062, April 17, 2007
521 SCRA 373
FACTS:
Sometime in 1988 the CIR sent two notices of assessment to the respondent of their deficiency percentage
and documentary stamp taxes for the year 1986 in the total amount of P129,488,656.63.
In response, respondent alleged that they were not properly informed of the deficiency in tax assessment
made against them by the CIR which violated the rule set forth in NIRC. Whereas in the said law the taxpayer
shall be informed in writing of the law and the facts on which the assessment is made otherwise, the
assessment shall be void.
ISSUE:
Whether or not respondent was properly informed of the assessment made by the CIR?
HELD:
Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was
for the CIR to "notify" or inform the taxpayer of his "findings." Nothing in the old law required a written
statement to the taxpayer of the law and facts on which the assessments were based. The Court cannot read
into the law what obviously was not intended by Congress. That would be judicial legislation, nothing less.
Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax
liabilities, the amount the taxpayer was to pay and a demand for payment within a prescribed period.
From all the foregoing discussions, We can now conclude that [BPI] was indeed aware of the nature and basis
of the assessments, and was given all the opportunity to contest the same but ignored it despite the notice
conspicuously written on the assessments which states that "this ASSESSMENT becomes final and
unappealable if not protested within 30 days after receipt." Counsel resorted to dilatory tactics and
dangerously played with time.

Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A
principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the
state whose social contract with its citizens obliges it to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being of the people.
 CIR vs Reyes
GR 159594, 27 January 2006

FACTS: In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a tax audit was
conducted on the estate. Meanwhile, the National Internal Revenue Code (NIRC) of 1997 was
passed. Eventually in 1998, the estate was issued a final assessment notice (FAN) demanding the estate
to pay P14.9 million in taxes inclusive of surcharge and interest; the estate’s liability was based on
Section 229 of the [old] Tax Code. Azucena Reyes, one of the heirs, protested the FAN. The
Commissioner of Internal Revenue (CIR) nevertheless issued a warrant of distraint and/or levy. Reyes
again protested the warrant but in March 1999, she offered a compromise and was willing to pay P1
million in taxes. Her offer was denied. She continued to work on another compromise but was
eventually denied. The case reached the Court of Tax Appeals where Reyes was also denied. In the Court
of Appeals, Reyes received a favorable judgment.

ISSUE: Whether or not the formal assessment notice is valid.

RULING: No. The NIRC of 1997 was already in effect when the FAN was issued. Under Section 228 of the
NIRC, taxpayers shall be informed in writing of the law and the facts on which the assessment is made:
otherwise, the assessment shall be void. In the case at bar, the FAN merely stated the amount of liability
to be shouldered by the estate and the law upon which such liability is based. However, the estate was
not informed in writing of the facts on which the assessment of estate taxes had been made. The estate
was merely informed of the findings of the CIR. Section 228 of the NIRC being remedial in nature can be
applied retroactively even though the tax investigation was conducted prior to the law’s passage.
Consequently, the invalid FAN cannot be a basis of a compromise, any proceeding emanating from the
invalid FAN is void including the issuance of the warrant of distraint and/or levy.
BPI vs. CIR

FACTS:

                  On June 6 and 14, 1985, petitioner bank sold $500,000.00 to the Central Bank, for the total
sale amount of $1M. BIR issued deficiency assessment for DST in the amount of 28,020.00 for the said
sales. On October 20,1989, petitioner received the notice and consequently filed a protest in November
16,1989. Petitioner did not receive a reply but soon after, October 15, 1992, BIR issued a Warrant of
distraint, and finally in August 13, 1997, BPI received a letter denying its request for reconsideration.
Petitioner alleged prescription to CTA but the latter denied the same. CTA likewise ruled in the negative
that the sales of currency by petitioner was not subject to DST. CA sustained first issue but reinstated
the second.

ISSUE:

                  Whether or not the right to collect has prescribed;

                  Request for reconsideration

It will not suspend the running of the statute of limitations because reconsideration of tax assessment is
limited to the evidence.

                  Request for reinvestigation

will suspend the running of statute of limitations because it entails the reception and re-evaluation of
additional evidence. It will take more time.

RULING:

                  The period for the BIR to assess and collect an internal revenue tax is limited to three years by
Section 203 of the Tax Code. This period is limited by Section 223

Exemptions… 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 begun
without assessment, at any time within 10 years after the discovery of the falsity, fraud or omission…

                  BPI executed no waiver of the Statute of Limitations, thus it did not suspend running of the
prescription. Likewise, BPI requested for a reconsideration and suspension of the running of the statute
of limitations shouldn’t apply. The statute of limitations for collection “against BPI had expired; none of
the conditions from the statute of limitations on collection exists herein.”
 Southern Cross vs CMAP
GR 158540, 3 August 2005

Jurisdiction of Court on Tax Appeals; Delegability of tariff power to President

FACTS: Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with
the Department of Trade and Industry (DTI) a petition seeking the imposition of safeguard measures on
gray Portland cement, in accordance with the Safeguard Measures Act (SMA). After the (DTI) issued a
provisional safeguard measure, the application was referred to the Tariff Commission for a formal
investigation pursuant to Section 9 of the SMA and its Implementing Rules and Regulations, in order to
determine whether or not to impose a definitive safeguard measure on imports of gray Portland
cement. The Tariff Commission held public hearing and conducted its own investigation and issued its
Formal Investigation Report that “no definitive general safeguard measure be imposed on the
importation of gray Portland cement.” The DTI Secretary then promulgated a decision expressing its
disagreement with the conclusions of the Tariff Commission but at the same time denying Philcemcor’s
application for safeguard measures in light of the Tariff Commission’s negative findings. Philcemcor
challenged this decision of the DTI Secretary by filing with the Court of Appeals a petition for certiorari,
Prohibition and Mandamus seeking to set aside the DTI Decision as sell as the Tariff Commission’s
Report. The appellate court partially granted the petition and ruled that it had jurisdiction over the
petition for certiorari since it alleged grave abuse of discretion and also held that DTI Secretary was not
bound by the factual findings of the Tariff Commission. The Southern Cross then filed the present
petition, arguing that the Court of Appeals has no jurisdiction over Philcemcor’s petition. Despite the
fact the Court of Appeal’s Decision had not yet became final, its binding force was cited by the DTI
Secretary when he issued a new Decision, wherein he imposed a definitive safeguard measure on the
importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of
P20.60/40 kg. bag for three years on imported gray Portland Cement.

Southern Cross filed a Temporary Restraining Order and/or A Writ of Preliminary Injunction with the
Court, seeking to enjoin the DTI Secretary from enforcing his new issued Decision. Philcemcor then filed
its opposition stating that it is not the CA but the Court of Tax Appeals (CTA) that has jurisdiction over
the application under the law.

Southern Cross then filed with the CTA a Petition for Review against the Decision which imposed the
definite safeguard measure but did not promptly inform CA about the filing. Philcemcor argued with the
CTA that Southern Cross resorted to forum shopping. The Court in its decision granted Southern Cross’s
Petition which nullified the Decision of the DTI secretary and declared the Decision of the Court of
Appeals null and void, and also concluded that the same had not committed forum shopping for there
was no malicious intent to subvert procedural rules.

Philcemcor and the DTI Secretary then promptly filed their respective motions for reconsideration. The
Court En Banc then resolve the two central issues pertaining to the jurisdictional aspect and to the
substantive aspect of whether the DTI Secretary may impose a general safeguard measure despite a
negative determination by the Tariff Commission and whether the Tariff Commission could validly
exercise quasi-judicial powers in the exercise of its mandate under the SMA. In its resolution, the Court
directed the parties to maintain the status quo and until further orders from this Court.

ISSUES:

II. Reviewability of the Tariff Commission’s Report

HELD

II. The DTI Secretary is not bound by the Tariff Commission’s recommendations. The Power to impose
Tariffs is essentially legislative; it is delegable only to the president. The application of safeguard
measures, while primarily intended to protect domestic industries, is essentially in the nature of a tariff
imposition. Pursuant to the Constitution, the imposition of tariffs and taxes is a highly prized legislative
prerogative. Pursuant also to the Constitution, such power to fix tariffs may as an exception, be
delegated by Congress to the President. Section 28 of Article VI of the Constitution provides for that
exception.