Tax Rev Notes Remedies

TAXATION LAW REVIEW
Based on the syllabus and lectures of Atty. Bobby Lock
III. REMEDIES UNDER THE NIRC
A. Letter of Authority / Audit Notice
1. Sec. 6(A) of the NIRC
Section 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for
Tax Administration and Enforcement. –
(A) Examination of Returns and Determination of Tax Due. — After a return has been filed as required
under the provisions of this Code, the Commissioner or his duly authorized representative may authorize
the examination of any taxpayer and the assessment of the correct amount of tax, notwithstanding any law
requiring the prior authorization of any government agency or instrumentality: Provided, however, That
failure to file a return shall not prevent the Commissioner from authorizing the examination of any
taxpayer. (As amended by Section 4 of Republic Act No. 10963)
The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner
or from his duly authorized representative.
Any return, statement of declaration filed in any office authorized to receive the same shall not be
withdrawn: Provided, That within three (3) years from the date of such filing , the same may be modified,
changed, or amended: Provided, further, That no notice for audit or investigation of such return,
statement or declaration has in the meantime been actually served upon the taxpayer.
(B) xxx
- Sec. 13 of the NIRC.
Section 13. Authority of a Revenue Offices. - Subject to the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer assigned to perform
assessment functions in any district may, pursuant to a Letter of Authority issued by the Revenue
Regional Director, examine taxpayers within the jurisdiction of the district in order to collect the correct
amount of tax, or to recommend the assessment of any deficiency tax due in the same manner that the
said acts could have been performed by the Revenue Regional Director himself.
2. Revenue Memorandum Order No. 43-90. (as cited in the SC Cases)
3. CIR vs. Sony Phils, Inc., G.R. No. 178697, November 17, 2010
The CIR insists that LOA 19734, although it states "the period 1997 and unverified prior years," should
be understood to mean the fiscal year ending in March 31, 1998. The Court cannot agree.
Based on Section 13 of the Tax Code, a Letter of Authority or LOA is the authority given to the
appropriate revenue officer assigned to perform assessment functions. It empowers or enables said
revenue officer to examine the books of account and other accounting records of a taxpayer for the
purpose of collecting the correct amount of tax. The very provision of the Tax Code that the CIR relies on
is unequivocal with regard to its power to grant authority to examine and assess a taxpayer.
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for
God bless and best of luck! Ora et labora.

1
TAXATION LAW REVIEW
(A)Examination of Returns and Determination of tax Due. – After a return has been filed as required
the examination of any taxpayer and the assessment of the correct amount of tax: Provided, however,
That failure to file a return shall not prevent the Commissioner from authorizing the examination of any
taxpayer. x x x [Emphases supplied]
Clearly, there must be a grant of authority before any revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer so authorized must not go beyond the authority
given. In the absence of such an authority, the assessment or examination is a nullity.
As earlier stated, LOA 19734 covered "the period 1997 and unverified prior years." For said reason, the
CIR acting through its revenue officers went beyond the scope of their authority because the deficiency
VAT assessment they arrived at was based on records from January to March 1998 or using the fiscal
year which ended in March 31, 1998. As pointed out by the CTA-First Division in its April 28, 2005
Resolution, the CIR knew which period should be covered by the investigation. Thus, if CIR wanted or
intended the investigation to include the year 1998, it should have done so by including it in the LOA or
issuing another LOA.
Upon review, the CTA-EB even added that the coverage of LOA 19734, particularly the phrase "and
unverified prior years," violated Section C of Revenue Memorandum Order No. 43-90 dated September
20, 1990, the pertinent portion of which reads:
3. A Letter of Authority should cover a taxable period not exceeding one taxable year. The practice of
issuing L/As covering audit of "unverified prior years is hereby prohibited. If the audit of a taxpayer shall
include more than one taxable period, the other periods or years shall be specifically indicated in the
L/A. [Emphasis supplied]
On this point alone, the deficiency VAT assessment should have been disallowed. Be that as it may, the
CIR’s argument, that Sony’s advertising expense could not be considered as an input VAT credit because
the same was eventually reimbursed by Sony International Singapore (SIS), is also erroneous.
The CIR contends that since Sony’s advertising expense was reimbursed by SIS, the former never
incurred any advertising expense. As a result, Sony is not entitled to a tax credit. At most, the CIR
continues, the said advertising expense should be for the account of SIS, and not Sony.
The Court is not persuaded. As aptly found by the CTA-First Division and later affirmed by the CTA-EB,
Sony’s deficiency VAT assessment stemmed from the CIR’s disallowance of the input VAT credits that
should have been realized from the advertising expense of the latter. It is evident under Section 110 of the
1997 Tax Code that an advertising expense duly covered by a VAT invoice is a legitimate business
expense. This is confirmed by no less than CIR’s own witness, Revenue Officer Antonio Aluquin. There
is also no denying that Sony incurred advertising expense. Aluquin testified that advertising companies
issued invoices in the name of Sony and the latter paid for the same. Indubitably, Sony incurred and paid
for advertising expense/ services. Where the money came from is another matter all together but will
definitely not change said fact.
The CIR further argues that Sony itself admitted that the reimbursement from SIS was income and, thus,
taxable. In support of this, the CIR cited a portion of Sony’s protest filed before it:

2
TAXATION LAW REVIEW
The fact that due to adverse economic conditions, Sony-Singapore has granted to our client a subsidy
equivalent to the latter’s advertising expenses will not affect the validity of the input taxes from such
expenses. Thus, at the most, this is an additional income of our client subject to income tax. We submit
further that our client is not subject to VAT on the subsidy income as this was not derived from the sale of
goods or services.
Insofar as the above-mentioned subsidy may be considered as income and, therefore, subject to income
tax, the Court agrees. However, the Court does not agree that the same subsidy should be subject to the
10% VAT. To begin with, the said subsidy termed by the CIR as reimbursement was not even exclusively
earmarked for Sony’s advertising expense for it was but an assistance or aid in view of Sony’s dire or
adverse economic conditions, and was only "equivalent to the latter’s (Sony’s) advertising expenses."
4. CIR vs. De La Salle, GR No. 198841 dated November 9, 2016
Commissioner of Internal Revenue v. De La Salle University

G. R. No. 196596, 9 November 2016
808 SCRA 156
Facts:
The BIR issued a letter of authority to De La Salle University (DLSU), authorizing the examination of the books of
accounts and other accounting records of the latter for all internal revenue taxes. The BIR assessed DLSU its
deficiency income tax on rental earnings from restaurant/canteens and bookstores operating within the campus,
value added tax on business income, and documentary stamp tax on loans and lease contracts. DLSU protested the
said assessment, in which the CIR failed to act on said protest. The CTA division ruled that DLSU should pay its
income tax, VAT and DST, but cancelled the assessment on the loan transactions. The CTA en banc sustained the
prior ruling.
Issue:
Whether or not the entire assessment should be voided because of the defective Letter of Authority.
Held:
DLSU objects to the CTA En Banc's conclusion that the LOA is valid for taxable year 2003 and insists that the
entire LOA should be voided for being contrary to RMO No. 43-90, which provides that if tax audit includes more
than one taxable period, the other periods or years shall be specifically indicated in the LOA.
A LOA is the authority given to the appropriate revenue officer to examine the books of account and other
accounting records of the taxpayer in order to determine the taxpayer's correct internal revenue liabilities and for the
purpose of collecting the correct amount of tax, in accordance with Section 5 of the Tax Code, which gives the CIR
the power to obtain information, to summon/examine, and take testimony of persons. The LOA commences the
audit process and informs the taxpayer that it is under audit for possible deficiency tax assessment.
Given the purposes of a LOA, is there basis to completely nullify the LOA issued to DLSU, and consequently,
disregard the BIR and the CTA's findings of tax deficiency for taxable year 2003?
We answer in the negative.
The relevant provision is Section C of RMO No. 43-90, the pertinent portion of which reads:
3. A Letter of Authority [LOA] should cover a taxable period not exceeding one taxable year. The practice of
issuing [LOAs] covering audit of unverified prior years is hereby prohibited. If the audit of a taxpayer shall
include more than one taxable period, the other periods or years shall be specifically indicated in the
[LOA].

3
TAXATION LAW REVIEW
What this provision clearly prohibits is the practice of issuing LOAs covering audit of unverified prior years. RMO
43-90 does not say that a LOA which contains unverified prior years is void. It merely prescribes that if the audit
includes more than one taxable period, the other periods or years must be specified. The provision read as a whole
requires that if a taxpayer is audited for more than one taxable year, the BIR must specify each taxable year or
taxable period on separate LOAs.
Read in this light, the requirement to specify the taxable period covered by the LOA is simply to inform the taxpayer
of the extent of the audit and the scope of the revenue officer's authority. Without this rule, a revenue officer can
unduly burden the taxpayer by demanding random accounting records from random unverified years, which may
include documents from as far back as ten years in cases of fraud audit.
In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior Years. The LOA
does not strictly comply with RMO 43-90 because it includes unverified prior years. This does not mean, however,
that the entire LOA is void.
As the CTA correctly held, the assessment for taxable year 2003 is valid because this taxable period is specified in
the LOA. DLSU was fully apprised that it was being audited for taxable year 2003. Corollarily, the assessments for
taxable years 2001 and 2002 are void for having been unspecified on separate LOAs as required under RMO No. 43-
90.
Lastly, the Commissioner's claim that DLSU failed to raise the issue of the LOA's validity at the CTA Division, and
thus, should not have been entertained on appeal, is not accurate.
On the contrary, the CTA En Banc found that the issue of the LOA's validity came up during the trial. DLSU then
raised the issue in its memorandum and motion for partial reconsideration with the CTA Division. DLSU raised it
again on appeal to the CTA En Banc. Thus, the CTA En Banc could, as it did, pass upon the validity of the
LOA. Besides, the Commissioner had the opportunity to argue for the validity of the LOA at the CTA En Banc but
she chose not to file her comment and memorandum despite notice.
5. Medicard Philippines, Inc. vs. CIR, GR No. 222743 dated April 5, 2017
An LOA is the authority given to the appropriate revenue officer assigned to perform assessment
functions. It empowers or enables said revenue officer to examine the books of account and other
accounting records of a taxpayer for the purpose of collecting the correct amount of tax. An LOA is
premised on the fact that the examination of a taxpayer who has already filed his tax returns is a power
that statutorily belongs only to the CIR himself or his duly authorized representatives. Section 6 of the
NIRC clearly provides as follows:
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for
(A) Examination of Return and Determination of Tax Due.- After a return has been filed as required
under the provisions of this Code, the Commissioner or his duly authorized representative may
authorize the examination of any taxpayer and the assessment of the correct amount of tax: Provided,
however, That failure to file a return shall not prevent the Commissioner from authorizing the
examination of any taxpayer.
x x x x (Emphasis and underlining ours)
Based on the afore-quoted provision, it is clear that unless authorized by the CIR himself or by his duly
authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be
undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed
through best-evidence obtainable, inventory-taking, or surveillance among others has nothing to do with
the LOA. These are simply methods of examining the taxpayer in order to arrive at .the correct amount of
4
TAXATION LAW REVIEW
taxes. Hence, unless undertaken by the CIR himself or his duly authorized representatives, other tax
agents may not validly conduct any of these kinds of examinations without prior authority.
With the advances in information and communication technology, the Bureau of Internal Revenue (BIR)
promulgated RMO No. 30-2003 to lay down the policies and guidelines once its then incipient centralized
Data Warehouse (DW) becomes fully operational in conjunction with its Reconciliation of Listing for
Enforcement System (RELIEF System). This system can detect tax leaks by matching the data available
under the BIR's Integrated Tax System (ITS) with data gathered from third-party sources. Through the
consolidation and cross-referencing of third-party information, discrepancy reports on sales and purchases
can be generated to uncover under declared income and over claimed purchases of Goods and services.
Under this RMO, several offices of the BIR are tasked with specific functions relative to the RELIEF
System, particularly with regard to LNs. Thus, the Systems Operations Division (SOD) under the
Information Systems Group (ISG) is responsible for: (1) coming up with the List of Taxpayers with
discrepancies within the threshold amount set by management for the issuance of LN and for the system-
generated LNs; and (2) sending the same to the taxpayer and to the Audit Information, Tax Exemption
and Incentives Division (AITEID). After receiving the LNs, the AITEID under the Assessment Service
(AS), in coordination with the concerned offices under the ISG, shall be responsible for transmitting the
LNs to the investigating offices [Revenue District Office (RDO)/Large Taxpayers District Office
(LTDO)/Large Taxpayers Audit and Investigation Division (LTAID)]. At the level of these investigating
offices, the appropriate action on the LN s issued to taxpayers with RELIEF data discrepancy would be
determined.
RMO No. 30-2003 was supplemented by RMO No. 42-2003, which laid down the "no-contact-audit
approach" in the CIR's exercise of its ·power to authorize any examination of taxpayer arid the
assessment of the correct amount of tax. The no-contact-audit approach includes the process of
computerized matching of sales and purchases data contained in the Schedules of Sales and Domestic
Purchases and Schedule of Importation submitted by VAT taxpayers under the RELIEF System pursuant
to RR No. 7-95, as amended by RR Nos. 13-97, 7-99 and 8-2002. This may also include the matching of
data from other information or returns filed by the taxpayers with the BIR such as Alphalist of Payees
subject to Final or Creditable Withholding Taxes.
Under this policy, even without conducting a detailed examination of taxpayer's books and records, if the
computerized/manual matching of sales and purchases/expenses appears to reveal discrepancies, the same
shall be communicated to the concerned taxpayer through the issuance of LN. The LN shall serve as a
discrepancy notice to taxpayer similar to a Notice for Informal Conference to the concerned taxpayer.
Thus, under the RELIEF System, a revenue officer may begin an examination of the taxpayer even prior
to the issuance of an LN or even in the absence of an LOA with the aid of a computerized/manual
matching of taxpayers': documents/records. Accordingly, under the RELIEF System, the presumption that
the tax returns are in accordance with law and are presumed correct since these are filed under the penalty
of perjury are easily rebutted and the taxpayer becomes instantly burdened to explain a purported
discrepancy.
Noticeably, both RMO No. 30-2003 and RMO No. 42-2003 are silent on the statutory requirement of an
LOA before any investigation or examination of the taxpayer may be conducted. As provided in the RMO
No. 42-2003, the LN is merely similar to a Notice for Informal Conference. However, for a Notice of
Informal Conference, which generally precedes the issuance of an assessment notice to be valid, the same
presupposes that the revenue officer who issued the same is properly authorized in the first place.

5
TAXATION LAW REVIEW
With this apparent lacuna in the RMOs, in November 2005, RMO No. 30-2003, as supplemented by
RMO No. 42-2003, was amended by RMO No. 32-2005 to fine tune existing procedures in handing
assessments against taxpayers'· issued LNs by reconciling various revenue issuances which conflict with
the NIRC. Among the objectives in the issuance of RMO No. 32-2005 is to prescribe procedure in the
resolution of LN discrepancies, conversion of LNs to LOAs and assessment and collection of deficiency
taxes.
xxx
In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN against
MED ICARD. Therefore no LOA was also served on MEDICARD. The LN that was issued earlier was
also not converted into an LOA contrary to the above quoted provision. Surprisingly, the CIR did not
even dispute the applicability of the above provision of RMO 32-2005 in the present case which is clear
and unequivocal on the necessity of an LOA for the· assessment proceeding to be valid. Hence, the CTA's
disregard of MEDICARD's right to due process warrant the reversal of the assailed decision and
resolution.
In the case of Commissioner of Internal Revenue v. Sony Philippines, Inc. , the Court said that:
Clearly, there must be a grant of authority before any revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer so authorized must not go beyond the authority
given. In the absence of such an authority, the assessment or examination is a nullity. (Emphasis and
underlining ours)
The Court cannot convert the LN into the LOA required under the law even if the same was issued by the
CIR himself. Under RR No. 12-2002, LN is issued to a person found to have underreported sales/receipts
per data generated under the RELIEF system. Upon receipt of the LN, a taxpayer may avail of the BIR's
Voluntary Assessment and Abatement Program. If a taxpayer fails or refuses to avail of the said program,
the BIR may avail of administrative and criminal .remedies, particularly closure, criminal action, or audit
and investigation. Since the law specifically requires an LOA and RMO No. 32-2005 requires the
conversion of the previously issued LN to an LOA, the absence thereof cannot be simply swept under the
rug, as the CIR would have it. In fact Revenue Memorandum Circular No. 40-2003 considers an LN as a
notice of audit or investigation only for the purpose of disqualifying the taxpayer from amending his
returns.
The following differences between an LOA and LN are crucial. First, an LOA addressed to a revenue
officer is specifically required under the NIRC before an examination of a taxpayer may be had while an
LN is not found in the NIRC and is only for the purpose of notifying the taxpayer that a discrepancy is
found based on the BIR's RELIEF System. Second, an LOA is valid only for 30 days from date of issue
while an LN has no such limitation. Third, an LOA gives the revenue officer only a period of 10days
from receipt of LOA to conduct his examination of the taxpayer whereas an LN does not contain such a
limitation. Simply put, LN is entirely different and serves a different purpose than an LOA. Due process
demands, as recognized under RMO No. 32-2005, that after an LN has serve its purpose, the revenue
officer should have properly secured an LOA before proceeding with the further examination and
assessment of the petitioner. Unfortunately, this was not done in this case.
Contrary to the ruling of the CTA en banc, an LOA cannot be dispensed with just because none of the
financial books or records being physically kept by MEDICARD was examined. To begin with, Section 6
of the NIRC requires an authority from the CIR or from his duly authorized representatives before an
examination "of a taxpayer" may be made. The requirement of authorization is therefore not dependent on

6
TAXATION LAW REVIEW
whether the taxpayer may be required to physically open his books and financial records but only on
whether a taxpayer is being subject to examination.
The BIR's RELIEF System has admittedly made the BIR's assessment and collection efforts much easier
and faster. The ease by which the BIR's revenue generating objectives is achieved is no excuse however
for its non-compliance with the statutory requirement under Section 6 and with its own administrative
issuance. In fact, apart from being a statutory requirement, an LOA is equally needed even under the
BIR's RELIEF System because the rationale of requirement is the same whether or not the CIR conducts a
physical examination of the taxpayer's records: to prevent undue harassment of a taxpayer and level the
playing field between the government' s vast resources for tax assessment, collection and enforcement, on
one hand, and the solitary taxpayer's dual need to prosecute its business while at the same time
responding to the BIR exercise of its statutory powers. The balance between these is achieved by ensuring
that any examination of the taxpayer by the BIR' s revenue officers is properly authorized in the first
place by those to whom the discretion to exercise the power of examination is given by the statute.
That the BIR officials herein were not shown to have acted unreasonably is beside the point because the
issue of their lack of authority was only brought up during the trial of the case. What is crucial is whether
the proceedings that led to the issuance of VAT deficiency assessment against MEDICARD had the prior
approval and authorization from the CIR or her duly authorized representatives. Not having authority to
examine MEDICARD in the first place, the assessment issued by the CIR is inescapably void.
At any rate, even if it is assumed that the absence of an LOA is not fatal, the Court still partially finds
merit in MEDICARD's substantive arguments.
6. Number of times a taxpayer may be audited
a. Sec. 235 of the NIRC
Section 235. Preservation of Books and Accounts and Other Accounting Records. - All the books of
accounts, including the subsidiary books and other accounting records of corporations, partnerships, or
persons, shall be preserved by them for a period beginning from the last entry in each book until the last
day prescribed by Section 203 within which the Commissioner is authorized to make an assessment. The
said books and records shall be subject to examination and inspection by internal revenue officers:
Provided, That for income tax purposes, such examination and inspection shall be made only once in a
taxable year, except in the following cases:
(a) Fraud, irregularity or mistakes, as determined by the Commissioner;
(b) The taxpayer requests reinvestigation;
(c) Verification of compliance with withholding tax laws and regulations;
(d) Verification of capital gains tax liabilities; and
(e) In the exercise of the Commissioner's power under Section 5(B) to obtain information from other
persons in which case, another or separate examination and inspection may be made. Examination and
inspection of books of accounts and other accounting records shall be done in the taxpayer's office or
place of business or in the office of the Bureau of Internal Revenue. All corporations, partnerships or
persons that retire from business shall, within ten (10) days from the date of retirement or within such
period of time as may be allowed by the Commissioner in special cases, submit their books of accounts,

7
TAXATION LAW REVIEW
including the subsidiary books and other accounting records to the Commissioner or any of his deputies
for examination, after which they shall be returned. Corporations and partnerships contemplating
dissolution must notify the Commissioner and shall not be dissolved until cleared of any tax liability.
Any provision of existing general or special law to the contrary notwithstanding, the books of accounts
and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to
examination by the Bureau of Internal Revenue for purposes of ascertaining compliance with the
conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if
any.
B. Tax Assessment
Commissioner of Internal Revenue v. Pascor Realty and Development Corporation

G. R. No. 128315, 29 June 1999
309 SCRA 402
Facts:
The Commissioner of Internal Revenue (CIR) authorized his revenue officers to examine the books of accounts and
other accounting records of Pascor Realty and Development Corporation for the years 1986-1988, in which it
recommended the assessment of taxes amounting P7,498,434.65 for 1986 and P3,015,236.35 for 1987. The CIR
filed a criminal charge against Pascor for tax evasion amounting P10,513,671.00. Pascor moved to reconsider the
assessment but was denied by the CIR, followed by its filing of a petition for review with the CTA. The CTA ruled
in favor of Pascor, which was affirmed by the CA.
Issue:
Whether or not Pascor is obliged to pay its taxes based on the assessment made by the CIR.
Held:
Petitioner argues that the filing of the criminal complaint with the Department of Justice cannot in any way be
construed as a formal assessment of private respondents’ tax liabilities. This position is based on Section 205 of the
National Internal Revenue Code (NIRC), which provides that remedies for the collection of deficient taxes may be
by either civil or criminal action. Likewise, petitioner cites Section 223(a) of the same Code, which states that in
case of failure to file a return, the tax may be assessed or a proceeding in court may be begun without assessment.
Respondents, on the other hand, maintain that an assessment is not an action or proceeding for the collection of
taxes, but merely a notice that the amount stated therein is due as tax and that the taxpayer is required to pay the
same. Thus, qualifying as an assessment was the BIR examiners’ Joint Affidavit, which contained the details of the
supposed taxes due from respondent for taxable years ending 1987 and 1988, and which was attached to the tax
evasion Complaint filed with the DOJ. Consequently, the denial by the BIR of private respondents’ request for
reinvestigation of the disputed assessment is properly appealable to the CTA.
We agree with petitioner. Neither the NIRC nor the revenue regulations governing the protest of assessments
provide a specific definition or form of an assessment. However, the NIRC defines the specific functions and effects
of an assessment. To consider the affidavit attached to the Complaint as a proper assessment is to subvert the nature
of an assessment and to set a bad precedent that will prejudice innocent taxpayers.
True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has tax liabilities.
But not all documents coming from the BIR containing a computation of the tax liability can be deemed
assessments.
To start with, an assessment must be sent to and received by a taxpayer, and must demand payment of the taxes
described therein within a specific period. Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due,
in case the taxpayer fails to pay the deficiency tax within the time prescribed for its payment in the notice of

8
TAXATION LAW REVIEW
assessment. Likewise, an interest of 20 percent per annum, or such higher rate as may be prescribed by rules and
regulations, is to be collected from the date prescribed for its payment until the full payment.
The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the
period within which to protest it. Section 203 of the NIRC provides that internal revenue taxes must be assessed
within three years from the last day within which to file the return. Section 222, on the other hand, specifies a period
of ten years in case a fraudulent return with intent to evade was submitted or in case of failure to file a return. Also,
Section 228 of the same law states that said assessment may be protested only within thirty days from receipt
thereof. Necessarily, the taxpayer must be certain that a specific document constitutes an assessment. Otherwise,
confusion would arise regarding the period within which to make an assessment or to protest the same, or whether
interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an assessment is
deemed made only when the collector of internal revenue releases, mails or sends such notice to the taxpayer.
In the present case, the revenue officers’ Affidavit merely contained a computation of respondents’ tax liability. It
did not state a demand or a period for payment. Worse, it was addressed to the justice secretary, not to the taxpayers.
2. SMI-ED Technology Corporation, Inc. vs. CIR, GR No. 175410 dated November 12, 2014.
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. Section 2 of the
National Internal Revenue Code of 1997 provides:
SEC. 2. Powers and Duties of the Bureau of Internal Revenue. - The Bureau of Internal Revenue shall be
under the supervision and control of the Department of Finance and its powers and duties shall
comprehend the assessment and collection ofall national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. The
Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code
or other laws. (Emphasis supplied) 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. Thus:
SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax
Administration and Enforcement.–
(A) Examination of Returns and Determination of Tax Due. - After a return has been filed as required
the examination of any taxpayer and the assessment of the correct amount of tax: Provided, however;
That failure to file a return shall not prevent the Commissioner from authorizing the examination of any
taxpayer. The tax or any deficiency tax so assessed shall be paid upon notice and demand from the
Commissioner or from his duly authorized representative.
....

9
TAXATION LAW REVIEW
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 preceeding 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. (Emphasis supplied)
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, 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:
SEC. 7. Jurisdiction.- The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under
the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under
the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where
the National Internal Revenue Code provides a specific period of action, in which case the inaction shall
be deemed a denial[.] (Emphasis supplied)
Based on these provisions, the following must be present for the Court of Tax Appeals to have
jurisdiction over a case involving the BIR’s decisions or inactions:
a) A case involving any of the following:
i. Disputed assessments;
ii. Refunds of internal revenue taxes, fees, or other charges, penalties in relation thereto; and
iii. Other matters arising under the National Internal Revenue Code of 1997.
b) Commissioner of Internal Revenue’s decision or inaction in a case submitted to him or her
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.

10
TAXATION LAW REVIEW
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.
From the taxpayer’s self-assessment and tax payment up to his or her request for refund and the BIR’s
inaction, the BIR’s participation is limited to the receipt of the taxpayer’s payment. The BIR does not
make an assessment; the BIR issues no decision; and there is no dispute yet involved. Since there is no
BIR assessment yet, the Court of Tax Appeals may not determine the amount of taxes due from the
taxpayer. There is also no decision yet to review. However, there was inaction on the part of the BIR.
That inaction is within the Court of Tax Appeals’ jurisdiction.
In other words, the Court of Tax Appeals may acquire jurisdiction over cases even if they do not involve
BIR assessments or decisions.
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.
Petitioner argued that the Court of Tax Appeals had no jurisdiction to subject it to 6% capital gains tax or
other taxes at the first instance. The Court of Tax Appeals has no power to make an assessment.
As earlier established, the Court of Tax Appeals has no assessment powers. In stating that petitioner’s
transactions are subject to capital gains tax, however, the Court of Tax Appeals was not making an
assessment. It was merely determining the proper category of tax that petitioner should have paid, in view
of its claim that it erroneously imposed upon itself and paid the 5% final tax imposed upon PEZA-
registered enterprises.

11
TAXATION LAW REVIEW
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 South African Airways v. Commissioner of Internal Revenue, South African Airways claimed for
refund of its erroneously paid 2½% taxes on its gross Philippine billings. This court did not immediately
grant South African’s claim for refund. This is because although this court found that South African
Airways was not subject to the 2½% tax on its gross Philippine billings, this court also found that it was
subject to 32% tax on its taxable income.
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.
3. CIR vs. Fitness By Design, Inc., GR No. 215957 dated November 9, 2016.
An 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 to the determination of the
taxes due from a taxpayer under the National Internal Revenue Code of 1997."
The assessment process starts with the filing of tax return and payment of tax by the taxpayer. The initial
assessment evidenced by the tax return is a self-assessment of the taxpayer. The tax is primarily computed
and voluntarily paid by the taxpayer without need of any demand from government. If tax obligations are
properly paid, the Bureau of Internal Revenue may dispense with its own assessment.
After filing a return, the Commissioner or his or her representative may allow the examination of any
taxpayer for assessment of proper tax liability. The failure of a taxpayer to file his or her return will not
hinder the Commissioner from permitting the taxpayer's examination. The Commissioner can examine
records or other data relevant to his or her inquiry in order to verify the correctness of any return, or to
make a return in case of noncompliance, as well as to determine and collect tax liability.

12
TAXATION LAW REVIEW
The indispensability of affording taxpayers sufficient written notice of his or her tax liability is a clear
definite requirement.64 Section 228 of the National Internal Revenue Code and Revenue Regulations No.
12-99, as amended, transparently outline the procedure in tax assessment. 65
Section 3 of Revenue Regulations No. 12-99, 66 the then prevailing regulation regarding the due process
requirement in the issuance of a deficiency tax assessment, requires a notice for informal
conference.67 The revenue officer who audited the taxpayer's records shall state in his or her report
whether the taxpayer concurs with his or her findings of liability for deficiency taxes. 68 If the taxpayer
does not agree, based on the revenue officer's report, the taxpayer shall be informed in writing 69 of the
discrepancies in his or her payment of internal revenue taxes for "Informal Conference." 70 The informal
conference gives the taxpayer an opportunity to present his or her side of the case. 71
The taxpayer is given 15 days from receipt of the notice of informal conference to respond. 72 If the
taxpayer fails to respond, he or she will be considered in default. 73 The revenue officer74 endorses the case
with the least possible delay to the Assessment Division of the Revenue Regional Office or the
Commissioner or his or her authorized representative. 75 The Assessment Division of the Revenue
Regional Office or the Commissioner or his or her authorized representative is responsible for the
"appropriate review and issuance of a deficiency tax assessment, if warranted." 76
If, after the review conducted, there exists sufficient basis to assess the taxpayer with deficiency taxes, the
officer 'shall issue a preliminary assessment notice showing in detail the facts, jurisprudence, and law on
which the assessment is based. 77 The taxpayer is given 15 days from receipt of the pre-assessment notice
to respond.78 If the taxpayer fails to respond, he or she will be considered in default, and a formal letter of
demand and assessment notice will be issued. 79
The formal letter of demand and assessment notice shall state the facts, jurisprudence, and law on which
the assessment was based; otherwise, these shall be void. 80 The taxpayer or the authorized representative
may administratively protest the formal letter of demand and assessment notice within 30 days from
receipt of the notice.81
II
The word "shall" in Section 228 of the National Internal Revenue Code and Revenue Regulations No. 12-
99 means the act of informing the taxpayer of both the legal and factual bases of the assessment is
mandatory.82 The law requires that the bases be reflected in the formal letter of demand and assessment
notice.83 This cannot be presumed.84 Otherwise, the express mandate of Section 228 and Revenue
Regulations No. 12-99 would be nugatory. 85 The requirement enables the taxpayer to make an effective
protest or appeal of the assessment or decision. 86
The rationale behind the requirement that taxpayers should be informed of the facts and the law on which
the assessments are based conforms with the constitutional mandate that no person shall be deprived of
his or her property without due process of law. 87 Between the power of the State to tax and an individual's
right to due process, the scale favors the right of the taxpayer to due process. 88
The purpose of the written notice requirement is to aid the taxpayer in making a reasonable protest, if
necessary.89Merely notifying the taxpayer of his or her tax liabilities without details or particulars is not
enough.90
Commissioner of Internal Revenue v. United Salvage and Towage (Phils.), Inc.91 held that a final
assessment notice that only contained a table of taxes with no other details was insufficient:

13
TAXATION LAW REVIEW
In the present case, a mere perusal of the [Final Assessment Notice] 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. Petitioner should have at least attached a detailed notice of discrepancy
or stated an explanation why the amount of P48,461.76 is collectible against respondent and how the
same was arrived at.92
Any deficiency to the mandated content of the assessment or its process will not be
tolerated.93 In Commissioner of Internal Revenue v. Enron,94 an advice of tax deficiency from the
Commissioner of Internal Revenue to an employee of Enron, including the preliminary five (5)-day letter,
were not considered valid substitutes for the mandatory written notice of the legal and factual basis of the
assessment.95 The required issuance of deficiency tax assessment notice to the taxpayer is different from
the required contents of the notice.96 Thus:
The law requires that the legal and factual bases of the assessment be stated in the formal letter of
demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of
Article 228 of the [National Internal Revenue Code] and [Revenue Regulations] No. 12-99 would be
rendered nugatory. The alleged "factual bases" in the advice, preliminary letter and "audit working
papers" did not suffice. There was no going around the mandate of the law that the legal and factual bases
of the assessment be stated in writing in the formal letter of demand accompanying the assessment
notice.97 (Emphasis supplied)
However, the mandate of giving the taxpayer a notice of the facts and laws on which the assessments are
based should not be mechanically applied. 98 To emphasize, the purpose of this requirement is to
sufficiently inform the taxpayer of the bases for the assessment to enable him or her to make an intelligent
protest.99
In Samar-I Electric Cooperative v. Commissioner of Internal Revenue, 100 substantial compliance with

Section 228 of the National Internal Revenue Code is allowed, provided that the taxpayer would be later
apprised in writing of the factual and legal bases of the assessment to enable him or her to prepare for an
effective protest.101 Thus:
Although the [Final Assessment Notice] and demand letter issued to petitioner were not accompanied by
a written explanation of the legal and factual bases of the deficiency taxes assessed against the petitioner,
the records showed that respondent in its letter dated April 10, 2003 responded to petitioner's October 14,
2002 letter-protest, explaining at length the factual and legal bases of the deficiency tax assessments and
denying the protest.
Considering the foregoing exchange of correspondence and documents between the parties, we find that
the requirement of Section 228 was substantially complied with. Respondent had fully informed
petitioner in writing of the factual and legal bases of the deficiency taxes assessment, which enabled the
latter to file an "effective" protest, much unlike the taxpayer's situation in Enron. Petitioner's right to due
process was thus not violated.
A final assessment notice provides for the amount of tax due with a demand for payment. 103 This is to
determine the amount of tax due to a taxpayer.104 However, due process requires that taxpayers be
informed in writing of the facts and law on which the assessment is based in order to aid the taxpayer in
making a reasonable protest.105 To immediately ensue with tax collection without initially substantiating a
valid assessment contravenes the principle in administrative investigations "that taxpayers should be able
to present their case and adduce supporting evidence."

14
TAXATION LAW REVIEW
Respondent filed its income tax return in 1995. 107 Almost eight (8) years passed before the disputed final
assessment notice was issued. Respondent pleaded prescription as its defense when it filed a protest to the
Final Assessment Notice. Petitioner claimed fraud assessment to justify the belated assessment made on
respondent.108If fraud was indeed present, the period of assessment should be within 10 years. 109 It is
incumbent upon petitioner to clearly state the allegations of fraud committed by respondent to serve the
purpose of an assessment notice to aid respondent in filing an effective protest.
C. Prescriptive period to assess and collect
1. Period for Assessment – General Rule/Ordinary Prescription - Sec. 203 of the NIRC.
Section 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.
2. Period for Collection – General Rule Sec. 222(C) of the NIRC.
Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
(a) xxx
(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in
paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five (5) years
following the assessment of the tax.
(d) xxx
3. False Return, Fraudulent Return, Omission to File a Return/Extraordinary Prescription
a. Sec. 222(A) of the NIRC. Correlate with Sec. 248(B) of the NIRC.
may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment,
cognizance of in the civil or criminal action for the collection thereof.
(b) xxx
Section 248. Civil Penalties. -
(A) xxx

15
TAXATION LAW REVIEW
(B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and
regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be
fifty percent (50%) of the tax or of the deficiency tax, in case, any payment has been made on the basis of
such return before the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the
Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall
constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report
sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a
claim of deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable
for substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as
mentioned herein.
b. Aznar vs. CTA, GR No. L-20569 dated August 23, 1974.
The first vital issue to be decided here is whether or not the right of the Commissioner of Internal
Revenue to assess deficiency income taxes of the late Matias H. Aznar for the years 1946, 1947, and 1948
had already prescribed at the time the assessment was made on November 28, 1952.
Petitioner's contention is that the provision of law applicable to this case is the period of five years
limitation upon assessment and collection from the filing of the returns provided for in See. 331 of the
National Internal Revenue Code. He argues that since the 1946 income tax return could be presumed filed
before March 1, 1947 and the notice of final and last assessment was received by the taxpayer on March
2, 1955, a period of about 8 years had elapsed and the five year period provided by law (Sec. 331 of the
National Internal Revenue Code) had already expired. The same argument is advanced on the taxpayer's
return for 1947, which was filed on March 1, 1948, and the return for 1948, which was filed on February
28, 1949. Respondents, on the other hand, are of the firm belief that regarding the prescriptive period for
assessment of tax returns, Section 332 of the National Internal Revenue Code should apply because, as in
this case, "(a) In the case of a false or fraudulent return with intent to evade tax or of a 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 falsity, fraud or omission"
(Sec. 332 (a) of the NIRC).
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 under
declarations 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.

16
TAXATION LAW REVIEW
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.
The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec. 331 of the
NIRC should be applicable to normal circumstances, but whenever the government is placed at a
disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to false
returns, fraudulent return intended to evade payment of tax or failure to file returns, the period of ten
years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity, fraud or omission
even seems to be inadequate and should be the one enforced.
There being undoubtedly false tax returns in this case, We affirm the conclusion of the respondent Court
of Tax Appeals that Sec. 332 (a) of the NIRC should apply and that the period of ten years within which
to assess petitioner's tax liability had not expired at the time said assessment was made.
c. CIR vs. Asalus Corporation, GR No. 22150 dated February 22, 2017.
Generally, internal revenue taxes shall be assessed within three (3) years after the ,last day prescribed by
law for the filing of the return, or where the return is filed beyond the period, from the day the return was
actually filed. 19Section 222 of the NIRC, however, provides for exceptions to the general rule. It states
that in the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the
assessment may be made within ten (10) years from the discovery of the falsity, fraud or omission.
In the oft-cited Aznar v. CTA,20the Court compared a false return to a fraudulent return in relation to the
applicable prescriptive periods for assessments, to wit:
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 under
declarations 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."
xxxx
xxx 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
assessmeμt, 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 seggregates 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.
The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec. 331 of the
NIRC should be applicable to normal circumstances, but whenever the government is placed, at a
disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to false
returns, fraudulent return intended to evade payment of tax or failure to file returns, the period of ten

17
TAXATION LAW REVIEW
years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity, fraud or omission
even seems to be inadequate and should be the one enforced.
There being undoubtedly false tax returns in this case, We affirm the conclusion of the respondent Court
of Tax Appeals that Sec. 332 (a) of the NIRC should apply and that the period of ten years within which
to assess petitioner's tax liability had not expired at the time said assessment was made. (Emphasis
supplied)
Thus, a mere showing that the returns filed by the taxpayer were false, notwithstanding the absence of
intent to defraud, is sufficient to warrant the application of the ten (10) year prescriptive period under
Section 222 of the NIRC.
d. CIR vs. Fitness By Design, Inc., GR No. 215957 dated November 9, 2016.
III
The prescriptive period in making an assessment depends upon whether a tax return was filed or whether
the tax return filed was either false or fraudulent. When a tax return that is neither false nor fraudulent has
been filed, the Bureau of Internal Revenue may assess within three (3) years, reckoned from the date of
actual filing or from the last day prescribed by law for filing. 110 However, in case of a false or fraudulent
return with intent to evade tax, Section 222(a) provides:
Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. –

cognizance of in the civil or criminal action for the collection thereof. (Emphasis supplied)
In Aznar v. Court of Tax Appeals, 111 this Court interpreted Section 332 112 (now Section 222[a] of the
National Internal Revenue Code) by dividing it in three (3) different cases: first, in case of false return;
second, in case of a fraudulent return with intent to evade; and third, in case of failure to file a
return.113 Thus:
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 aggregates the situations into three different classes, namely
"falsity'', "fraud" and "omission."114
This Court held that there is a difference between "false return" and a "fraudulent return." A false return
simply involves a "deviation from the truth, whether intentional or not" while a fraudulent return "implies
intentional or deceitful entry with intent to evade the taxes due."
Fraud is a question of fact that should be alleged and duly proven. 117 "The willful neglect to file the
required tax return or the fraudulent intent to evade the payment of taxes, considering that the same is
accompanied by legal consequences, cannot be presumed." 118 Fraud entails corresponding sanctions under
the tax law. Therefore, it is indispensable for the Commissioner of Internal Revenue to include the basis
for its allegations of fraud in the assessment notice.
During the proceedings in the Court of Tax Appeals First Division, respondent presented its President,
Domingo C. Juan Jr. (Juan, Jr.), as witness. 119 Juan, Jr. testified that respondent was, in its pre-operating

18
TAXATION LAW REVIEW
stage in 1995.120During that period, respondent "imported equipment and distributed them for market
testing in the Philippines without earning any profit." 121 He also confirmed that the Final Assessment
Notice and its attachments failed to substantiate the Commissioner's allegations of fraud against
respondent, thus:
More than three (3) years from the time petitioner filed its 1995 annual income tax return on April 11,
1996, respondent issued to petitioner a [Final Assessment Notice] dated March 17, 2004 for the year
1995, pursuant to the Letter of Authority No. 00002953 dated May 13, 2002. The attached Details of
discrepancy containing the assessment for income tax (IT), value-added tax (VAT) and documentary
stamp tax (DST) as well as the Audit Result/ Assessment Notice do not impute fraud on the part of
petitioner. Moreover, it was obtained on information and documents illegally obtained by a [Bureau of
Internal Revenue] informant from petitioner's accountant Elnora Carpio in 1996. 122 (Emphasis supplied)
Petitioner did not refute respondent's allegations. For its defense, it presented Socrates Regala (Regala),
the Group Supervisor of the team, who examined respondent's tax liabilities. 123 Regala confirmed that the
investigation was prompted by a tip from an informant who provided them with respondent's list of
sales.124 He admitted125 that the gathered information did not show that respondent deliberately failed to
reflect its true income in 1995.126
4. Suspension of the prescriptive period
a. Secs. 223 and 91(B) of the NIRC
Section 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations
provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy a
proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during
which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty (60) days thereafter; when the taxpayer requests for a reinvestigation
which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him
in the return filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs
the Commissioner of any change in address, the running of the Statute of Limitations will not be
suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property could be located;
and when the taxpayer is out of the Philippines.
Section 91. Payment of Tax. -
(A) xxx
(B) Extension of Time. - When the Commissioner finds that the payment on the due date of the estate tax
or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the
time for payment of such tax or any part thereof not to exceed five (5) years, in case the estate is settled
through the courts, or two (2) years in case the estate is settled extrajudicially. In such case, the amount in
respect of which the extension is granted shall be paid on or before the date of the expiration of the period
of the extension, and the running of the Statute of Limitations for assessment as provided in Section 203
of this Code shall be suspended for the period of any such extension.
Where the taxes are assessed by reason of negligence, intentional disregard of rules and regulations, or
fraud on the part of the taxpayer, no extension will be granted by the Commissioner.

19
TAXATION LAW REVIEW
If an extension is granted, the Commissioner may require the executor, or administrator, or beneficiary, as
the case may be, to furnish a bond in such amount, not exceeding double the amount of the tax and with
such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in
accordance with the terms of the extension.
(C) xxx
b. CIR vs. United Salvage and Towage (Phils.), Inc., GR No. 197515 dated July 2, 2014.
As to the last issue, petitioner avers that its right to collect the EWT for taxable year 1992 has not yet
prescribed. It argues that while the final assessment notice and demand letter on EWT for taxable year
1992 were all issued on January 9, 1996, the five (5)-year prescriptive period to collect was interrupted
when respondent filed its request for reinvestigation on March 14, 1997 which was granted by petitioner
on January 22, 2001 through the issuance of Tax Verification Notice No. 00165498 on even date. 53 Thus,
the period for tax collection should have begun to run from the date of the reconsidered or modified
assessment.54
This argument fails to persuade us.
The statute of limitations on assessment and collection of national internal revenue taxes was shortened
from five (5) years to three (3) years by virtue of Batas Pambansa Blg. 700. 55 Thus, petitioner has three
(3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to
commence court proceedings for the collection thereof without an assessment. 56 However, when it validly
issues an assessment within the three (3)-year period, it has another three (3) years within which to collect
the tax due by distraint, levy, or court proceeding. 57The assessment of the tax is deemed made and the
three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had
been released, mailed or sent to the taxpayer. 58
On this matter, we note the findings of the CTA-Special First Division that no evidence was formally
offered to prove when respondent filed its returns and paid the corresponding EWT and WTC for taxable
year 1992.59
Nevertheless, as correctly held by the CTA En Banc, the Preliminary Collection Letter for deficiency
taxes for taxable year 1992 was only issued on February 21, 2002, despite the fact that the FANs for the
deficiency EWT and WTC for taxable year 1992 was issued as early as January 9, 1996. Clearly, five (5)
long years had already lapsed, beyond the three (3)-year prescriptive period, before collection was
pursued by petitioner.
Further, while the request for reinvestigation was made on March 14, 1997, the same was only acted upon
by petitioner on January22, 2001, also beyond the three (3) year statute of limitations reckoned from
January 9, 1996, notwithstanding the lack of impediment to rule upon such issue. We cannot countenance
such inaction by petitioner to the prejudice of respondent pursuant to our ruling in Commissioner of
Internal Revenue v. Philippine Global Communication, Inc., 60 to wit:
The assessment, in this case, was presumably issued on 14 April 1994 since the respondent did not
dispute the CIR’s claim. Therefore, the BIR had until 13 April 1997. However, as there was no Warrant
of Distraint and/or Levy served on the respondents nor any judicial proceedings initiated by the BIR, the
earliest attempt of the BIR to collect the tax due based on this assessment was when it filed its Answer in
CTA Case No. 6568 on 9 January 2003, which was several years beyond the three-year prescriptive
period. Thus, the CIR is now prescribed from collecting the assessed tax. 61

20
TAXATION LAW REVIEW
Here, petitioner had ample time to make a factually and legally well-founded assessment and implement
collection pursuant thereto. Whatever examination that petitioner may have conducted cannot possibly
outlast the entire three (3)-year prescriptive period provided by law to collect the assessed tax. Thus, there
is no reason to suspend the running of the statute of limitations in this case.
Moreover, in Bank of the Philippine Islands, citing earlier jurisprudence, we held that the request for
reinvestigation should be granted or at least acted upon in due course before the suspension of the statute
of limitations may set in, thus:
In BPI v. Commissioner of Internal Revenue, the Court emphasized the rule that the CIR must first grant
the request for reinvestigation as a requirement for the suspension of the statute of limitations. The Court
said:
In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested for a thorough
reinvestigation of the assessment against him and placed at the disposal of the Collector of Internal
Revenue all the evidences he had for such purpose; yet, the Collector ignored the request, and the records
and documents were not at all examined. Considering the given facts, this Court pronounced that—
x x x The act of requesting a reinvestigation alone does not suspend the period. The request should first
be granted, in order to effect suspension. (Collector v. Suyoc Consolidated, supra; also Republic v.
Ablaza, supra). Moreover, the Collector gave appellee until April 1, 1949, within which to submit his
evidence, which the latter did one day before. There were no impediments on the part of the Collector to
file the collection case from April 1, 1949…
In Republic of the Philippines v. Acebedo, this Court similarly found that –
x x x T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a
reinvestigation thereof on October 11, 1949 (Exh. "A"). There is no evidence that this request was
considered or acted upon. In fact, on October 23, 1950 the then Collector of Internal Revenue issued a
warrant of distraint and levy for the full amount of the assessment (Exh. "D"), but there was follow-up of
this warrant. Consequently, the request for reinvestigation did not suspend the running of the period for
filing an action for collection.[Emphasis in the original] 62With respect to petitioner’s argument that
respondent’s act of elevating its protest to the CTA has fortified the continuing interruption of petitioner’s
prescriptive period to collect under Section 223 of the Tax Code, 63 the same is flawed at best because
respondent was merely exercising its right to resort to the proper Court, and does not in any way deter
petitioner’s right to collect taxes from respondent under existing laws.
On the strength of the foregoing observations, we ought to reiterate our earlier teachings that "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." 64 Thus, while "taxes are the lifeblood of
the government," the power to tax has its limits, in spite of all its plenitude. 65 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. 66
After all, the statute of limitations on the collection of taxes was also enacted to benefit and protect the
taxpayers, as elucidated in the case of Philippine Global Communication, Inc., 67 thus:

21
TAXATION LAW REVIEW
x x x The report submitted by the tax commission clearly states that these provisions on prescription
should be enacted to benefit and protect taxpayers:
Under the former law, the right of the Government to collect the tax does not prescribe. However, in
fairness to the taxpayer, the Government should be estopped from collecting the tax where it failed to
make the necessary investigation and assessment within 5 years after the filing of the return and where it
failed to collect the tax within 5 years from the date of assessment thereof. Just as the government is
interested in the stability of its collections, so also are the taxpayers entitled to an assurance that they will
not be subjected to further investigation for tax purposes after the expiration of a reasonable period of
time. (Vol. II, Report of the Tax Commission of the Philippines, pp. 321-322).
c. BPI vs. CIR, GR No. 139736 dated October 17, 2005.
The efforts of respondent Commissioner to collect on Assessment No. FAS-5-85-89-002054 were already
barred by prescription.
Anent the question of prescription, this Court disagrees in the Decisions of the CTA and the Court of
Appeals, and herein determines the statute of limitations on collection of the deficiency DST in
Assessment No. FAS-5-85-89-002054 had already prescribed.
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 of 1977, as amended,15 which provides that –
SEC. 203. Period of limitation upon assessment and collection. – Except as provided in the succeeding
section, internal revenue taxes shall be assessed within three 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-year period shall be counted from the day the return was filed. For
the 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.16
The three-year period of limitations on the assessment and collection of national internal revenue taxes set
by Section 203 of the Tax Code of 1977, as amended, can be affected, adjusted, or suspended, in
accordance with the following provisions of the same Code –
SEC. 223. – 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 begun without assessment, at any
time within ten 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.
(b) If before the expiration of the time prescribed in the preceding section for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its assessment after such time the tax
may be assessed within the period agreed upon. The period so agreed upon may be extended by
subsequent written agreement made before the expiration of the period previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation above-prescribed
may be collected by distraint or levy or by a proceeding in court within three years following the
assessment of the tax.

22
TAXATION LAW REVIEW
(d) Any internal revenue tax which has been assessed within the period agreed upon as provided in
paragraph (b) hereinabove may be collected by distraint or levy or by a proceeding in court within the
period agreed upon in writing before the expiration of the three-year period. The period so agreed upon
may be extended by subsequent written agreements made before the expiration of the period previously
agreed upon.
(e) Provided, however, That nothing in the immediately preceding section and paragraph (a) hereof shall
be construed to authorize the examination and investigation or inquiry into any tax returns filed in
accordance with the provisions of any tax amnesty law or decree.
SEC. 224. Suspension of running of statute. – The running of the statute of limitation provided in
Section[s] 203 and 223 on the making of assessment and the beginning of distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer requests for a reinvestigation which
is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the
return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the
Commissioner of any change in address, the running of the statute of limitations will not be suspended;
when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could be located; and when the
taxpayer is out of the Philippines.
As enunciated in these statutory provisions, the BIR has three years, counted from the date of actual filing
of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to
assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an
assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return
at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of
the falsity, fraud, or omission. When the BIR validly issues an assessment, within either the three-year or
ten-year period, whichever is appropriate, then the BIR has another three years 19 after the assessment
within which to collect the national internal revenue tax due thereon by distraint, levy, and/or court
proceeding. The assessment of the tax is deemed made and the three-year period for collection of the
assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR
to the taxpayer.
In the present Petition, there is no controversy on the timeliness of the issuance of the Assessment, only
on the prescription of the period to collect the deficiency DST following its Assessment. While
Assessment No. FAS-5-85-89-002054 and its corresponding Assessment Notice were both dated 10
October 1989 and were received by petitioner BPI on 20 October 1989, there was no showing as to when
the said Assessment and Assessment Notice were released, mailed or sent by the BIR. Still, it can be
granted that the latest date the BIR could have released, mailed or sent the Assessment and Assessment
Notice to petitioner BPI was on the same date they were received by the latter, on 20 October 1989.
Counting the three-year prescriptive period, for a total of 1,095 days, 21 from 20 October 1989, then the
BIR only had until 19 October 1992 within which to collect the assessed deficiency DST.
The earliest attempt of the BIR to collect on Assessment No. FAS-5-85-89-002054 was its issuance and
service of a Warrant of Distraint and/or Levy on petitioner BPI. Although the Warrant was issued on 15
October 1992, previous to the expiration of the period for collection on 19 October 1992, the same was
served on petitioner BPI only on 23 October 1992.

23
TAXATION LAW REVIEW
Under Section 223(c) of the Tax Code of 1977, as amended, it is not essential that the Warrant of
Distraint and/or Levy be fully executed so that it can suspend the running of the statute of limitations on
the collection of the tax. It is enough that the proceedings have validly began or commenced and that their
execution has not been suspended by reason of the voluntary desistance of the respondent BIR
Commissioner. Existing jurisprudence establishes that distraint and levy proceedings are validly begun or
commenced by the issuance of the Warrant and service thereof on the taxpayer. 22 It is only logical to
require that the Warrant of Distraint and/or Levy be, at the very least, served upon the taxpayer in order to
suspend the running of the prescriptive period for collection of an assessed tax, because it may only be
upon the service of the Warrant that the taxpayer is informed of the denial by the BIR of any pending
protest of the said taxpayer, and the resolute intention of the BIR to collect the tax assessed.
If the service of the Warrant of Distraint and/or Levy on petitioner BPI on 23 October 1992 was already
beyond the prescriptive period for collection of the deficiency DST, which had expired on 19 October
1992, then what more the letter of respondent BIR Commissioner, dated 13 August 1997 and received by
the counsel of the petitioner BPI only on 11 September 1997, denying the protest of petitioner BPI and
requesting payment of the deficiency DST? Even later and more unequivocally barred by prescription on
collection was the demand made by respondent BIR Commissioner for payment of the deficiency DST in
her Answer to the Petition for Review of petitioner BPI before the CTA, filed on 08 December 1997. 23
II
There is no valid ground for the suspension of the running of the prescriptive period for collection of the
assessed DST under the Tax Code of 1977, as amended.
In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a
protest letter suspended the running of the prescriptive period for collecting the assessed DST. This Court,
however, takes the opposing view, and, based on the succeeding discussion, concludes that there is no
valid ground for suspending the running of the prescriptive period for collection of the deficiency DST
assessed against petitioner BPI.
A. The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer
and, thus, shall be construed liberally in his favor.
Though the statute of limitations on assessment and collection of national internal revenue taxes benefits
both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against
unreasonable investigation. The indefinite extension of the period for assessment is unreasonable because
it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation
for taxes after the expiration of a reasonable period of time. 24 As aptly explained in Republic of the
Philippines v. Ablaza25 –
The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act promptly
in the making of assessment, and to citizens because after the lapse of the period of prescription citizens
would have a feeling of security against unscrupulous tax agents who will always find an excuse to
inspect the books of taxpayers, not to determine the latter’s real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers would
furthermore be under obligation to always keep their books and keep them open for inspection subject to
harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be
interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the
taxpayer within the contemplation of the Commission which recommend the approval of the law.

24
TAXATION LAW REVIEW
In order to provide even better protection to the taxpayer against unreasonable investigation, the Tax
Code of 1977, as amended, identifies specifically in Sections 223 and 224 26 thereof the circumstances
when the prescriptive periods for assessing and collecting taxes could be suspended or interrupted.
To give effect to the legislative intent, these provisions on the statute of limitations on assessment and
collection of taxes shall be construed and applied liberally in favor of the taxpayer and strictly against the
Government.
B. The statute of limitations on assessment and collection of national internal revenue taxes may be
waived, subject to certain conditions, under paragraphs (b) and (d) of Section 223 of the Tax Code of
1977, as amended, respectively. Petitioner BPI, however, did not execute any such waiver in the case at
bar.
According to paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended, the prescriptive
periods for assessment and collection of national internal revenue taxes, respectively, could be waived by
agreement, to wit –
SEC. 223. – Exceptions as to period of limitation of assessment and collection of taxes. –
...
(b) If before the expiration of the time prescribed in the preceding section for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its assessment after such time the tax
may be assessed within the period agreed upon. The period so agreed upon may be extended by
subsequent written agreement made before the expiration of the period previously agreed upon.
...
(d) Any internal revenue tax which has been assessed within the period agreed upon as provided in
paragraph (b) hereinabove may be collected by distraint or levy or by a proceeding in court within the
period agreed upon in writing before the expiration of the three-year period. The period so agreed upon
agreed upon.
The agreements so described in the afore-quoted provisions are often referred to as waivers of the statute
of limitations. The waiver of the statute of limitations, whether on assessment or collection, should not be
construed as a waiver of the right to invoke the defense of prescription but, rather, an agreement between
the taxpayer and the BIR to extend the period to a date certain, within which the latter could still assess or
collect taxes due. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription
unequivocally.
A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 223 of the Tax Code
of 1977, as amended, must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer;
(3) before the expiration of the ordinary prescriptive periods for assessment and collection; and (4) for a
definite period beyond the ordinary prescriptive periods for assessment and collection. The period agreed
upon can still be extended by subsequent written agreement, provided that it is executed prior to the
expiration of the first period agreed upon. The BIR had issued Revenue Memorandum Order (RMO) No.
20-90 on 04 April 1990 to lay down an even more detailed procedure for the proper execution of such a
waiver. RMO No. 20-90 mandates that the procedure for execution of the waiver shall be strictly

25
TAXATION LAW REVIEW
followed, and any revenue official who fails to comply therewith resulting in the prescription of the right
to assess and collect shall be administratively dealt with.
This Court had consistently ruled in a number of cases that a request for reconsideration or reinvestigation
by the taxpayer, without a valid waiver of the prescriptive periods for the assessment and collection of
tax, as required by the Tax Code and implementing rules, will not suspend the running thereof.
In the Petition at bar, petitioner BPI executed no such waiver of the statute of limitations on the collection
of the deficiency DST per Assessment No. FAS-5-85-89-002054. In fact, an internal memorandum of the
Chief of the Legislative, Ruling & Research Division of the BIR to her counterpart in the Collection
Enforcement Division, dated 15 October 1992, expressly noted that, "The taxpayer fails to execute a
Waiver of the Statute of Limitations extending the period of collection of the said tax up to December 31,
1993 pending reconsideration of its protest. . ." 30 Without a valid waiver, the statute of limitations on
collection by the BIR of the deficiency DST could not have been suspended under paragraph (d) of
Section 223 of the Tax Code of 1977, as amended.
xxx
III
The suspension of the statute of limitations on collection of the assessed deficiency DST from petitioner
BPI does not find support in jurisprudence.
It is the position of respondent BIR Commissioner, affirmed by the CTA and the Court of Appeals, that
the three-year prescriptive period for collecting on Assessment No. FAS-5-85-89-002054 had not yet
prescribed, because the said prescriptive period was suspended, invoking the case of Commissioner of
Internal Revenue v. Wyeth Suaco Laboratories, Inc. 42 It was in this case in which this Court ruled that the
prescriptive period provided by law to make a collection is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment.
Petitioner BPI, on the other hand, is requesting this Court to revisit the Wyeth Suaco case contending that
it had unjustifiably expanded the grounds for suspending the prescriptive period for collection of national
internal revenue taxes.
This Court finds that although there is no compelling reason to abandon its decision in the Wyeth
Suaco case, the said case cannot be applied to the particular facts of the Petition at bar.
A. The only exception to the statute of limitations on collection of taxes, other than those already
provided in the Tax Code, was recognized in the Suyoc case.
As had been previously discussed herein, the statute of limitations on assessment and collection of
national internal revenue taxes may be suspended if the taxpayer executes a valid waiver thereof, as
provided in paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended; and in specific
instances enumerated in Section 224 of the same Code, which include a request for reinvestigation
granted by the BIR Commissioner. Outside of these statutory provisions, however, this Court also
recognized one other exception to the statute of limitations on collection of taxes in the case of Collector
of Internal Revenue v. Suyoc Consolidated Mining Co.
In the said case, the Collector of Internal Revenue issued an assessment against taxpayer Suyoc
Consolidated Mining Co. on 11 February 1947 for deficiency income tax for the taxable year 1941.
Taxpayer Suyoc requested for at least a year within which to pay the amount assessed, but at the same

26
TAXATION LAW REVIEW
time, reserving its right to question the correctness of the assessment before actual payment. The
Collector granted taxpayer Suyoc an extension of only three months to pay the assessed tax. When
taxpayer Suyoc failed to pay the assessed tax within the extended period, the Collector sent it a demand
letter, dated 28 November 1950. Upon receipt of the demand letter, taxpayer Suyoc asked for a
reinvestigation and reconsideration of the assessment, but the Collector denied the request. Taxpayer
Suyoc reiterated its request for reconsideration on 25 April 1952, which was denied again by the
Collector on 06 May 1953. Taxpayer Suyoc then appealed the denial to the Conference Staff. The
Conference Staff heard the appeal from 02 September 1952 to 16 July 1955, and the negotiations resulted
in the reduction of the assessment on 26 July 1955. It was the collection of the reduced assessment that
was questioned before this Court for being enforced beyond the prescriptive period. 44
In resolving the issue on prescription, this Court ratiocinated thus –
It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by
proceeding in court within the 5-year period from the filing of the second amended final return due to the
several requests of respondent for extension to which petitioner yielded to give it every opportunity to
prove its claim regarding the correctness of the assessment. Because of such requests, several
reinvestigations were made and a hearing was even held by the Conference Staff organized in the
collection office to consider claims of such nature which, as the record shows, lasted for several months.
After inducing petitioner to delay collection as he in fact did, it is most unfair for respondent to now take
advantage of such desistance to elude his deficiency income tax liability to the prejudice of the
Government invoking the technical ground of prescription.
While we may agree with the Court of Tax Appeals that a mere request for reexamination or
reinvestigation may not have the effect of suspending the running of the period of limitation for in such
case there is need of a written agreement to extend the period between the Collector and the taxpayer,
there are cases however where a taxpayer may be prevented from setting up the defense of prescription
even if he has not previously waived it in writing as when by his repeated requests or positive acts the
Government has been, for good reasons, persuaded to postpone collection to make him feel that the
demand was not unreasonable or that no harassment or injustice is meant by the Government. And
when such situation comes to pass there are authorities that hold, based on weighty reasons, that such an
attitude or behavior should not be countenanced if only to protect the interest of the Government.
By the principle of estoppel, taxpayer Suyoc was not allowed to raise the defense of prescription against
the efforts of the Government to collect the tax assessed against it. This Court adopted the following
principle from American jurisprudence: "He who prevents a thing from being done may not avail himself
of the nonperformance which he has himself occasioned, for the law says to him in effect ‘this is your
own act, and therefore you are not damnified.’"
In the Suyoc case, this Court expressly conceded that a mere request for reconsideration or reinvestigation
of an assessment may not suspend the running of the statute of limitations. It affirmed the need for a
waiver of the prescriptive period in order to effect suspension thereof. However, even without such
waiver, the taxpayer may be estopped from raising the defense of prescription because by his repeated
requests or positive acts, he had induced Government authorities to delay collection of the assessed tax.
Based on the foregoing, petitioner BPI contends that the declaration made in the later case of Wyeth
Suaco, that the statute of limitations on collection is suspended once the taxpayer files a request for
reconsideration or reinvestigation, runs counter to the ruling made by this Court in the Suyoc case.

27
TAXATION LAW REVIEW
B. Although this Court is not compelled to abandon its decision in the Wyeth Suaco case, it finds that
Wyeth Suaco is not applicable to the Petition at bar because of the distinct facts involved herein.
In the case of Wyeth Suaco, taxpayer Wyeth Suaco was assessed for failing to remit withholding taxes on
royalties and dividend declarations, as well as, for deficiency sales tax. The BIR issued two assessments,
dated 16 December 1974 and 17 December 1974, both received by taxpayer Wyeth Suaco on 19
December 1974. Taxpayer Wyeth Suaco, through its tax consultant, SGV & Co., sent to the BIR two
letters, dated 17 January 1975 and 08 February 1975, protesting the assessments and requesting their
cancellation or withdrawal on the ground that said assessments lacked factual or legal basis. On 12
September 1975, the BIR Commissioner advised taxpayer Wyeth Suaco to avail itself of the compromise
settlement being offered under Letter of Instruction No. 308. Taxpayer Wyeth Suaco manifested its
conformity to paying a compromise amount, but subject to certain conditions; though, apparently, the said
compromise amount was never paid. On 10 December 1979, the BIR Commissioner rendered a decision
reducing the assessment for deficiency withholding tax against taxpayer Wyeth Suaco, but maintaining
the assessment for deficiency sales tax. It was at this point when taxpayer Wyeth Suaco brought its case
before the CTA to enjoin the BIR from enforcing the assessments by reason of prescription. Although the
CTA decided in favor of taxpayer Wyeth Suaco, it was reversed by this Court when the case was brought
before it on appeal. According to the decision of this Court –
Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or
by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of
the assessment. . .
...
Although the protest letters prepared by SGV & Co. in behalf of private respondent did not categorically
state or use the words "reinvestigation" and "reconsideration," the same are to be treated as letters of
reinvestigation and reconsideration…
These letters of Wyeth Suaco interrupted the running of the five-year prescriptive period to collect the
deficiency taxes. The Bureau of Internal Revenue, after having reviewed the records of Wyeth Suaco,
in accordance with its request for reinvestigation, rendered a final assessment… It was only upon
receipt by Wyeth Suaco of this final assessment that the five-year prescriptive period started to run again.
The foremost criticism of petitioner BPI of the Wyeth Suaco decision is directed at the statement made
therein that, "settled is the rule that the prescriptive period provided by law to make a collection by
distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or
reconsideration of the assessment."48 It would seem that both petitioner BPI and respondent BIR
Commissioner, as well as, the CTA and Court of Appeals, take the statement to mean that the filing alone
of the request for reconsideration or reinvestigation can already interrupt or suspend the running of the
prescriptive period on collection. This Court therefore takes this opportunity to clarify and qualify this
statement made in the Wyeth Suaco case. While it is true that, by itself, such statement would appear to be
a generalization of the exceptions to the statute of limitations on collection, it is best interpreted in
consideration of the particular facts of the Wyeth Suaco case and previous jurisprudence.
The Wyeth Suaco case cannot be in conflict with the Suyoc case because there are substantial differences
in the factual backgrounds of the two cases. The Suyoc case refers to a situation where there were
repeated requests or positive acts performed by the taxpayer that convinced the BIR to delay collection of
the assessed tax. This Court pronounced therein that the repeated requests or positive acts of the taxpayer
prevented or estopped it from setting up the defense of prescription against the Government when the
latter attempted to collect the assessed tax. In the Wyeth Suaco case, taxpayer Wyeth Suaco filed a

28
TAXATION LAW REVIEW
request for reinvestigation, which was apparently granted by the BIR and, consequently, the prescriptive
period was indeed suspended as provided under Section 224 of the Tax Code of 1977, as amended. 49
To reiterate, Section 224 of the Tax Code of 1977, as amended, identifies specific circumstances when the
statute of limitations on assessment and collection may be interrupted or suspended, among which is a
request for reinvestigation that is granted by the BIR Commissioner. The act of filing a request for
reinvestigation alone does not suspend the period; such request must be granted. 50 The grant need not be
express, but may be implied from the acts of the BIR Commissioner or authorized BIR officials in
response to the request for reinvestigation.51
This Court found in the Wyeth Suaco case that the BIR actually conducted a reinvestigation, in
accordance with the request of the taxpayer Wyeth Suaco, which resulted in the reduction of the
assessment originally issued against it. Taxpayer Wyeth Suaco was also aware that its request for
reinvestigation was granted, as written by its Finance Manager in a letter dated 01 July 1975, addressed to
the Chief of the Tax Accounts Division, wherein he admitted that, "[a]s we understand, the matter is now
undergoing review and consideration by your Manufacturing Audit Division…" The statute of limitations
on collection, then, started to run only upon the issuance and release of the reduced assessment.
The Wyeth Suaco case, therefore, is correct in declaring that the prescriptive period for collection is
interrupted or suspended when the taxpayer files a request for reinvestigation, provided that, as clarified
and qualified herein, such request is granted by the BIR Commissioner.
Thus, this Court finds no compelling reason to abandon its decision in the Wyeth Suaco case. It also now
rules that the said case is not applicable to the Petition at bar because of the distinct facts involved herein.
As already heretofore determined by this Court, the protest filed by petitioner BPI was a request for
reconsideration, which merely required a review of existing evidence and the legal basis for the
assessment. Respondent BIR Commissioner did not require, neither did petitioner BPI offer, additional
evidence on the matter. After petitioner BPI filed its request for reconsideration, there was no other
communication between it and respondent BIR Commissioner or any of the authorized representatives of
the latter. There was no showing that petitioner BPI was informed or aware that its request for
reconsideration was granted or acted upon by the BIR.
IV
Conclusion
To summarize all the foregoing discussion, this Court lays down the following rules on the exceptions to
the statute of limitations on collection.
The statute of limitations on collection may only be interrupted or suspended by a valid waiver executed
in accordance with paragraph (d) of Section 223 of the Tax Code of 1977, as amended, and the existence
of the circumstances enumerated in Section 224 of the same Code, which include a request for
reinvestigation granted by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or
there is no request for reinvestigation that had been granted by the BIR Commissioner, the taxpayer may
still be held in estoppel and be prevented from setting up the defense of prescription of the statute of
limitations on collection when, by his own repeated requests or positive acts, the Government had been,
for good reasons, persuaded to postpone collection to make the taxpayer feel that the demand is not
unreasonable or that no harassment or injustice is meant by the Government, as laid down by this Court in
the Suyoc case.

29
TAXATION LAW REVIEW
Applying the given rules to the present Petition, this Court finds that –
(a) The statute of limitations for collection of the deficiency DST in Assessment No. FAS-5-85-89-
002054, issued against petitioner BPI, had already expired; and
(b) None of the conditions and requirements for exception from the statute of limitations on collection
exists herein: Petitioner BPI did not execute any waiver of the prescriptive period on collection as
mandated by paragraph (d) of Section 223 of the Tax Code of 1977, as amended; the protest filed by
petitioner BPI was a request for reconsideration, not a request for reinvestigation that was granted by
respondent BIR Commissioner which could have suspended the prescriptive period for collection under
Section 224 of the Tax Code of 1977, as amended; and, petitioner BPI, other than filing a request for
reconsideration of Assessment No. FAS-5-85-89-002054, did not make repeated requests or performed
positive acts that could have persuaded the respondent BIR Commissioner to delay collection, and that
would have prevented or estopped petitioner BPI from setting up the defense of prescription against
collection of the tax assessed, as required in the Suyoc case.
This is a simple case wherein respondent BIR Commissioner and other BIR officials failed to act
promptly in resolving and denying the request for reconsideration filed by petitioner BPI and in enforcing
collection on the assessment. They presented no reason or explanation as to why it took them almost eight
years to address the protest of petitioner BPI. The statute on limitations imposed by the Tax Code
precisely intends to protect the taxpayer from such prolonged and unreasonable assessment and
investigation by the BIR.
Considering that the right of the respondent BIR Commissioner to collect from petitioner BPI the
deficiency DST in Assessment No. FAS-5-85-89-002054 had already prescribed, then, there is no more
need for this Court to make a determination on the validity and correctness of the said Assessment for the
latter would only be unenforceable.
d. CIR vs. BASF Coating + Inks Phils., Inc., GR No. 198677 dated November 26, 2014.
Petitioner contends that, insofar as respondent's alleged deficiency taxes for the taxable year1999 are
concerned, the running of the three-year prescriptive period to assess, under Sections 203 and 222 of the
National Internal Revenue Act of 1997 (Tax Reform Act of 1997) was suspended when respondent failed
to notify petitioner, in writing, of its change of address, pursuant to the provisions of Section 223 of the
same Act and Section 11 of BIR Revenue Regulation No. 12-85.
Sections 203, 222 and 223 of the Tax Reform Act of 1997 provide, respectively:
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. (emphasis supplied)
Sec. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -

30
TAXATION LAW REVIEW
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be
assessed within the period agreed upon.
The period so agreed upon may be extended by subsequent written agreement made before the expiration
of the period previously agreed upon.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in
paragraph (b) hereinabove, may be collected bydistraint or levy or by a proceeding in court within the
period agreed upon in writing before the expiration of the five (5) -year period. The period so agreed upon
agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof shall be
construed to authorize the examination and investigation or inquiry into any tax return filed in accordance
with the provisions of any tax amnesty law or decree.
Sec. 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations
provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy a
proceeding in court and for sixty (60) days thereafter; when the taxpayer requests for a reinvestigation
which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him
in the return filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs
the Commissioner of any change in address, the running of the Statute of Limitations will not be
suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property could be located;
and when the taxpayer is out of the Philippines. (emphasis supplied)
In addition, Section 11 of BIR Revenue Regulation No. 12-85 states:
Sec. 11. Change of Address. – In case of change of address, the taxpayer must give a written notice
thereof to the Revenue District Officer or the district having jurisdiction over his formerlegal residence
and/or place of business, copy furnished the Revenue District Officer having jurisdiction over his new
legal residence or place of business, the Revenue Computer Center and the Receivable Accounts
Division, BIR, National Office, Quezon City, and in case of failure to do so, any communication referred
to in these regulations previously sent to his former legal residence or business address as appear in is tax
return for the period involved shall be considered valid and binding for purposes of the period within
which to reply.

31
TAXATION LAW REVIEW
It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the Statute of Limitations
provided under the provisions of Sections 203 and 222 of the same Act shall be suspended when the
taxpayer cannot be located in the address given by him in the return filed upon which a tax is being
assessed or collected. In addition, Section 11 of Revenue Regulation No. 12-85 states that, in case of
change of address, the taxpayer is required to give a written notice thereof to the Revenue District Officer
or the district having jurisdiction over his former legal residence and/or place of business. However, this
Court agrees with both the CTA Special First Division and the CTA En Banc in their ruling that the above
mentioned provisions on the suspension of the three-year period to assess apply only if the BIR
Commissioner is not aware of the whereabouts of the taxpayer.
In the present case, petitioner, by all indications, is well aware that respondent had moved to its new
address in Calamba, Laguna, as shown by the following documents which form partof respondent's
records with the BIR:
1) Checklist on Income Tax/Withholding Tax/Documentary Stamp Tax/Value-Added Tax and Other

Percentage Taxes;17
2) General Information (BIR Form No. 23-02);18
3) Report on Taxpayer's Delinquent Account, dated June 27, 2002; 19
4) Activity Report, dated October 17, 2002;20
5) Memorandum Report of Examiner, dated June 27, 2002; 21
6) Revenue Officer's Audit Report on Income Tax; 22
7) Revenue Officer's Audit Report on Value-Added Tax; 23
8) Revenue Officer's Audit Report on Compensation Withholding Taxes; 24
9) Revenue Officer's Audit Report on Expanded Withholding Taxes; 25
10) Revenue Officer's Audit Report on Documentary Stamp Taxes. 26
The above documents, all of which were accomplished and signed by officers of the BIR, clearly show
that respondent's address is at Carmelray Industrial Park, Canlubang, Calamba, Laguna. The CTA also
found that BIR officers, at various times prior to the issuance of the subject FAN, conducted examination
and investigation of respondent's tax liabilities for 1999 at the latter's new address in Laguna as evidenced
by the following, in addition to the above mentioned records:
1) Letter, dated September 27, 2001, signed by Revenue Officer I Eugene R. Garcia; 27
2) Final Request for Presentation of Records Before Subpoena Duces Tecum, dated March 20, 2002,
signed by Revenue Officer I Eugene R. Garcia. 28
Moreover, the CTA found that, based on records, the RDO sent respondent a letter dated April 24, 2002
informing the latter of the results of their investigation and inviting it to an informal
conference.29 Subsequently, the RDO also sent respondent another letter dated May 30, 2002,
acknowledging receipt of the latter's reply to his April 24, 2002 letter. 30 These two letters were sent to

32
TAXATION LAW REVIEW
respondent's new address in Laguna. Had the RDO not been informed or was not aware of respondent's
new address, he could not have sent the said letters to the said address.
Furthermore, petitioner should have been alerted by the fact that prior to mailing the FAN, petitioner sent
to respondent's old address a Preliminary Assessment Notice but it was "returned to sender." This was
testified to by petitioner's Revenue Officer II at its Revenue District Office 39 in Quezon City. 31 Yet,
despite this occurrence, petitioner still insisted in mailing the FAN to respondent's old address.
Hence, despite the absence of a formal written notice of respondent'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.
It bears stressing that, in a number of cases, this Court has explained that the statute of limitations on the
collection of taxes primarily benefits the taxpayer. In these cases, the Court exemplified the detrimental
effects that the delay in the assessment and collection of taxes inflicts upon the taxpayers. Thus, in
Commissioner of Internal Revenue v. Philippine Global Communication, Inc., 32 this Court echoed Justice
Montemayor's disquisition in his dissenting opinion in Collector of Internal Revenue v. Suyoc
Consolidated Mining Company,33 regarding the potential loss to the taxpayer if the assessment and
collection of taxes are not promptly made, thus:
Prescription in the assessment and in the collection of taxes is provided by the Legislature for the benefit
of both the Government and the taxpayer; for the Government for the purpose of expediting the collection
of taxes, so that the agency charged with the assessment and collection may not tarry too long or
indefinitely tothe prejudice of the interests of the Government, which needs taxes to run it; and for the
taxpayer so that within a reasonable time after filing his return, hemay know the amount of the
assessment he is required to pay, whether or not such assessment is well founded and reasonable so that
he may either pay the amount of the assessment or contest its validity in court x x x. It would surely be
prejudicial to the interest of the taxpayer for the Government collecting agency to unduly delay the
assessment and the collection because by the time the collecting agency finally gets around to making the
assessment or making the collection, the taxpayer may then have lost his papers and books to support his
claim and contest that of the Government, and what is more, the tax is in the meantime accumulating
interest which the taxpayer eventually has to pay.
Likewise, in Republic of the Philippines v. Ablaza, 35 this Court elucidated that the prescriptive period for
the filing of actions for collection of taxes is justified by the need to protect law-abiding citizens from
possible harassment. Also, in Bank of the Philippine Islands v. Commissioner of Internal Revenue, 36 it
was held that the statute of limitations on the assessment and collection of taxes is principally intended to
afford protection to the taxpayer against unreasonable investigations as the indefinite extension of the
period for assessment deprives the taxpayer of the assurance that he will no longer be subjected to further
investigation for taxes after the expiration of a reasonable period of time. Thus, in Commissioner of
Internal Revenue v. B.F. Goodrich Phils., Inc., 37 this Court ruled that the legal provisions on prescription
should be liberally construed to protect taxpayers and that, as a corollary, the exceptions to the rule on
prescription should be strictly construed.
It might not also be amiss to point out that petitioner's issuance of the First Notice Before Issuance of
Warrant of Distraint and Levy 38 violated respondent's right to due process because no valid notice of
assessment was sent to it. An invalid assessment bears no valid fruit. 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

33
TAXATION LAW REVIEW
should be able to present their case and adduce supporting evidence. 39 In the instant case, respondent has
not properly been informed of the basis of its tax liabilities. Without complying with the unequivocal
mandate of first informing the taxpayer of the government’s claim, there can be no deprivation of
property, because no effective protest can be made.
xxx
As to the second assigned error, petitioner's reliance on the provisions of Section 3.1.7 of BIR Revenue
Regulation No. 12-9944 as well as on the case of Nava v. Commissioner of Internal Revenue 45 is
misplaced, because in the said case, one of the requirements ofa valid assessment notice is that the letter
or notice must be properly addressed. It is not enough that the notice is sent by registered mail as
provided under the said Revenue Regulation. In the instant case, the FAN was sent tothe wrong address.
Thus, the CTA is correct in holding that the FAN never attained finality because respondent never
received it, either actually or constructively.
5. Waiver of the Statute of Limitations
a. New Requirements under RMO No. 14-2016 dated April 4, 2016.
III. Guidelines
1. The waiver may be, but not necessarily, in the form prescribed by RMO No. 20-90 or RDAO No. 05-
01. The taxpayer’s failure to follow the aforesaid forms does not invalidate the executed waiver, for as
long as the following are complied with:
a) The Waiver of the Statute of Limitations under Section 222(b) and (d) shall be executed before the
expiration of the period to assess or to collect taxes. The date of execution shall be specifically indicated
in the waiver.
b) The waiver shall 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;
c) The expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of
prescription should be indicated;
2. Except for waiver of collection of taxes which shall indicate the particular taxes assessed, the waiver
need not specify the particular taxes to be assessed nor the amount thereof, and it may simply state “all
internal revenue taxes” considering that during the assessment stage, the Commissioner of Internal
Revenue or her duly authorized representative is still in the process of examining and determining the tax
liability of the taxpayer.
3. Since the taxpayer is the applicant and the executor of the extension of the period of limitation for its
benefit in order to submit the required documents and accounting records, the taxpayer is charged with
the burden of ensuring that the waivers of statute of limitation are validly executed by its authorized
representative. The authority of the taxpayer’s representative who participated in the conduct of audit or
investigation shall not be thereafter contested to invalidate the waiver.
4. The waiver may be notarized. However, it is sufficient that the waiver is in writing as specifically
provided by the NIRC, as amended.

34
TAXATION LAW REVIEW
5. Considering that the waiver is a voluntary act of the taxpayer, the waiver shall take legal effect and be
binding on the taxpayer upon its execution thereof.
6. It shall be the duty of the taxpayer to submit its duly executed waiver to the Commissioner of Internal
Revenue or official/s previously designated in existing issuances or the concerned revenue district officer
or group supervisor as designated in the Letter Of Authority/Memorandum of Assignment who shall then
indicate acceptance by signing the same. Such waiver shall be executed and duly accepted prior to the
expiration of the period to assess or to collect. The taxpayer shall have the duty to retain a copy of the
accepted waiver.
7. Note that there shall only be two (2) material dates that need to be present on the waiver:
a) The date of execution of the waiver by the taxpayer or its authorized representative; and
b) The expiry date of the period the taxpayer waives the statute of limitations.
8. Before the expiration of the period set on the previously executed waiver, the period earlier set may be
extended by subsequent written waiver made in accordance with this Order.
b. Phil. Journalists, Inc. vs. CIR, GR No. 162852 dated December 16, 2004.
The second and fifth assigned errors both focus on Revenue Memorandum Circular No. 20-90 (RMO No.
20-90) on the requisites of a valid waiver of the statute of limitations. The Court of Appeals held that the
requirements and procedures laid down in the RMO are only formal in nature and did not invalidate the
waiver that was signed even if the requirements were not strictly observed.
The NIRC, under Sections 203 and 222, 19 provides for a statute of limitations on the assessment and
collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable
investigation.20Unreasonable investigation contemplates cases where the period for assessment extends
indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to
further investigation for taxes after the expiration of a reasonable period of time. As was held in Republic
of the Phils. v. Ablaza:
The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act promptly
in the making of assessment, and to citizens because after the lapse of the period of prescription citizens
would have a feeling of security against unscrupulous tax agents who will always find an excuse to
inspect the books of taxpayers, not to determine the latter’s real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers would
furthermore be under obligation to always keep their books and keep them open for inspection subject to
harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be
interpreted in a way conducive to bringing about the beneficent purpose of affording protection to
the taxpayer within the contemplation of the Commission which recommend the approval of the
law. (Emphasis supplied)
RMO No. 20-90 implements these provisions of the NIRC relating to the period of prescription for the
assessment and collection of taxes. A cursory reading of the Order supports petitioner’s argument that the
RMO must be strictly followed, thus:
In the execution of said waiver, the following procedures should be followed:

35
TAXATION LAW REVIEW
1. The waiver must be in the form identified hereof. This form may be reproduced by the Office
concerned but there should be no deviation from such form. The phrase "but not after __________
19___" should be filled up…
2. …
Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue
official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau
has accepted and agreed to the waiver. The date of such acceptance by the Bureau should be
indicated…
3. The following revenue officials are authorized to sign the waiver.
A. In the National Office
…
3. Commissioner For tax cases involving
more than P1M
B. In the Regional Offices
1. The Revenue District Officer with respect to tax cases still pending investigation and the period to
assess is about to prescribe regardless of amount.
5. The foregoing procedures shall be strictly followed. Any revenue official found not to have
complied with this Order resulting in prescription of the right to assess/collect shall be
administratively dealt with. (Emphasis supplied)22
A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers’
right to security against prolonged and unscrupulous investigations and must therefore be carefully and
strictly construed.23The waiver of the statute of limitations is not a waiver of the right to invoke the
defense of prescription as erroneously held by the Court of Appeals. It is an agreement between the
taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date
certain. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription
unequivocally particularly where the language of the document is equivocal. For the purpose of
safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law
provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to
the law on prescription should perforce be strictly construed. 24 RMO No. 20-90 explains the rationale of a
waiver:
... The phrase "but not after _________ 19___" should be filled up. This indicates the expiry date of the
period agreed upon to assess/collect the tax after the regular three-year period of prescription. The period
agreed upon shall constitute the time within which to effect the assessment/collection of the tax in
addition to the ordinary prescriptive period. (Emphasis supplied)

36
TAXATION LAW REVIEW
As found by the CTA, the Waiver of Statute of Limitations, signed by petitioner’s comptroller on
September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No.
20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former
may assess and collect revenue taxes. Thus, petitioner’s waiver became unlimited in time, violating
Section 222(b) of the NIRC.
The waiver is also defective from the government side because it was signed only by a revenue district
officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a
unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the
period to a date certain. The conformity of the BIR must be made by either the Commissioner or the
Revenue District Officer. This case involves taxes amounting to more than One Million Pesos
(P1,000,000.00) and executed almost seven months before the expiration of the three-year prescription
period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR.
The case of Commissioner of Internal Revenue v. Court of Appeals,25 dealt with waivers that were not
signed by the Commissioner but were argued to have been given implied consent by the BIR. We
invalidated the subject waivers and ruled:
Petitioner’s submission is inaccurate…
The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation, observing
thus:
We cannot go along with the petitioner’s theory. Section 319 of the Tax Code earlier quoted is clear and
explicit that the waiver of the five-year 26 prescriptive period must be in writing and signed by both the
BIR Commissioner and the taxpayer.
Here, the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as
required by law.
We agree with the CTA in holding "these ‘waivers’ to be invalid and without any binding effect on
petitioner (Carnation) for the reason that there was no consent by the respondent (Commissioner of
Internal Revenue)."
For sure, no such written agreement concerning the said three waivers exists between the petitioner and
private respondent Carnation.
What is more, the waivers in question reveal that they are in no wise unequivocal, and therefore
necessitates for its binding effect the concurrence of the Commissioner of Internal Revenue…. On this
basis neither implied consent can be presumed nor can it be contended that the waiver required
under Sec. 319 of the Tax Code is one which is unilateral nor can it be said that concurrence to such
an agreement is a mere formality because it is the very signatures of both the Commissioner of
Internal Revenue and the taxpayer which give birth to such a valid agreement. 27 (Emphasis supplied)

37
TAXATION LAW REVIEW
The other defect noted in this case is the date of acceptance which makes it difficult to fix with certainty
if the waiver was actually agreed before the expiration of the three-year prescriptive period. The Court of
Appeals held that the date of the execution of the waiver on September 22, 1997 could reasonably be
understood as the same date of acceptance by the BIR. Petitioner points out however that Revenue
District Officer Sarmiento could not have accepted the waiver yet because she was not the Revenue
District Officer of RDO No. 33 on such date. Ms. Sarmiento’s transfer and assignment to RDO No. 33
was only signed by the BIR Commissioner on January 16, 1998 as shown by the Revenue Travel
Assignment Order No. 14-98.28 The Court of Tax Appeals noted in its decision that it is unlikely as well
that Ms. Sarmiento made the acceptance on January 16, 1998 because "Revenue Officials normally have
to conduct first an inventory of their pending papers and property responsibilities." 29
Finally, the records show that petitioner was not furnished a copy of the waiver. Under RMO No. 20-90,
the waiver must be executed in three copies with the second copy for the taxpayer. The Court of Appeals
did not think this was important because the petitioner need not have a copy of the document it knowingly
executed. It stated that the reason copies are furnished is for a party to be notified of the existence of a
document, event or proceeding.
The flaw in the appellate court’s reasoning stems from its assumption that the waiver is a unilateral act of
the taxpayer when it is in fact and in law an agreement between the taxpayer and the BIR. When the
petitioner’s comptroller signed the waiver on September 22, 1997, it was not yet complete and final
because the BIR had not assented. There is compliance with the provision of RMO No. 20-90 only after
the taxpayer received a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer
with a copy of the waiver is not only to give notice of the existence of the document but of the acceptance
by the BIR and the perfection of the agreement.
The waiver document is incomplete and defective and thus the three-year prescriptive period was not
tolled or extended and continued to run until April 17, 1998. Consequently, the Assessment/Demand No.
33-1-000757-94 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year
period. In the same manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on
March 28, 2000 is also null and void for having been issued pursuant to an invalid assessment.
c. CIR vs. Kudos Metal, GR No. 178087 dated May 5, 2010 – take note of old rule.
Section 20315 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 22216 of the NIRC.
The waivers executed by respondent’s accountant did not extend the period within which the assessment
can be made
Petitioner does not deny that the assessment notices were issued beyond the three-year prescriptive
period, but claims that the period was extended by the two waivers executed by respondent’s accountant.
We do not agree.
Section 222 (b) of the NIRC provides that 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-

38
TAXATION LAW REVIEW
year period. RMO 20-9017 issued on April 4, 1990 and RDAO 05-01 18 issued on August 2, 2001 lay down
the procedure for the proper execution of the waiver, to wit:
1. 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.
2. 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.
3. The waiver should be duly notarized.
4. 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.
5. 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.
6. 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
A perusal of the waivers executed by respondent’s accountant reveals the following infirmities:
1. The waivers were executed without the notarized written authority of Pasco to sign the waiver in behalf
of respondent.
2. The waivers failed to indicate the date of acceptance.
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.
Estoppel does not apply in this case
We find no merit in petitioner’s claim that respondent is now estopped from claiming prescription since
by executing the waivers, it was the one which asked for additional time to submit the required
documents.
In Collector of Internal Revenue v. Suyoc Consolidated Mining Company, 20 the doctrine of estoppel
prevented the taxpayer from raising the defense of prescription against the efforts of the government to
collect the assessed tax. However, it must be stressed that in the said case, estoppel was applied as an

39
TAXATION LAW REVIEW
exception to the statute of limitations on collection of taxes and not on the assessment of taxes, as the BIR
was able to make an assessment within the prescribed period. More important, there was a finding that the
taxpayer made several requests or positive acts to convince the government to postpone the collection of
taxes, viz:
It appears that the first assessment made against respondent based on its second final return filed on
November 28, 1946 was made on February 11, 1947. Upon receipt of this assessment respondent
requested for at least one year within which to pay the amount assessed although it reserved its right to
question the correctness of the assessment before actual payment. Petitioner granted an extension of only
three months. When it failed to pay the tax within the period extended, petitioner sent respondent a letter
on November 28, 1950 demanding payment of the tax as assessed, and upon receipt of the letter
respondent asked for a reinvestigation and reconsideration of the assessment. When this request was
denied, respondent again requested for a reconsideration on April 25, 1952, which was denied on May 6,
1953, which denial was appealed to the Conference Staff. The appeal was heard by the Conference Staff
from September 2, 1953 to July 16, 1955, and as a result of these various negotiations, the assessment
was finally reduced on July 26, 1955. This is the ruling which is now being questioned after a protracted
negotiation on the ground that the collection of the tax has already prescribed.
It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by
proceeding in court within the 5-year period from the filing of the second amended final return due to the
several requests of respondent for extension to which petitioner yielded to give it every opportunity to
prove its claim regarding the correctness of the assessment. Because of such requests, several
reinvestigations were made and a hearing was even held by the Conference Staff organized in the
collection office to consider claims of such nature which, as the record shows, lasted for several months.
After inducing petitioner to delay collection as he in fact did, it is most unfair for respondent to now take
advantage of such desistance to elude his deficiency income tax liability to the prejudice of the
Government invoking the technical ground of prescription.
While we may agree with the Court of Tax Appeals that a mere request for reexamination or
reinvestigation may not have the effect of suspending the running of the period of limitation for in such
case there is need of a written agreement to extend the period between the Collector and the taxpayer,
there are cases however where a taxpayer may be prevented from setting up the defense of prescription
even if he has not previously waived it in writing as when by his repeated requests or positive acts the
Government has been, for good reasons, persuaded to postpone collection to make him feel that the
demand was not unreasonable or that no harassment or injustice is meant by the Government. And when
such situation comes to pass there are authorities that hold, based on weighty reasons, that such an
attitude or behavior should not be countenanced if only to protect the interest of the Government.
This case has no precedent in this jurisdiction for it is the first time that such has risen, but there are
several precedents that may be invoked in American jurisprudence. As Mr. Justice Cardozo has said: "The
applicable principle is fundamental and unquestioned. ‘He who prevents a thing from being done may not
avail himself of the nonperformance which he has himself occasioned, for the law says to him in effect
"this is your own act, and therefore you are not damnified."’ "(R. H. Stearns Co. vs. U.S., 78 L. ed., 647).
Or, as was aptly said, "The tax could have been collected, but the government withheld action at the
specific request of the plaintiff. The plaintiff is now estopped and should not be permitted to raise the
defense of the Statute of Limitations." [Newport Co. vs. U.S., (DC-WIS), 34 F. Supp. 588].
Conversely, in this case, the assessments were issued beyond the prescribed period. Also, there is no
showing that respondent made any request to persuade the BIR to postpone the issuance of the
assessments.

40
TAXATION LAW REVIEW
The doctrine of estoppel cannot be applied in this case as an exception to the statute of limitations on the
assessment of taxes considering that there is a detailed procedure for the proper execution of the waiver,
which the BIR must strictly follow. As we have often said, the doctrine of estoppel is predicated on, and
has its origin in, equity which, broadly defined, is justice according to natural law and right. 22 As such, the
doctrine of estoppel cannot give validity to an act that is prohibited by law or one that is against public
policy.23 It should be resorted to solely as a means of preventing injustice and should not be permitted to
defeat the administration of the law, or to accomplish a wrong or secure an undue advantage, or to extend
beyond them requirements of the transactions in which they originate. 24 Simply put, the doctrine of
estoppel must be sparingly applied.
Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO
20-90 and RDAO 05-01, which the BIR itself issued. As stated earlier, the BIR failed to verify whether a
notarized written authority was given by the respondent to its accountant, and to indicate the date of
acceptance and the receipt by the respondent of the waivers. Having caused the defects in the waivers, the
BIR must bear the consequence. It cannot shift the blame to the taxpayer. To stress, a waiver of the statute
of limitations, being a derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed.
As to the alleged delay of the respondent to furnish the BIR of the required documents, this cannot be
taken against respondent. Neither can the BIR use this as an excuse for issuing the assessments beyond
the three-year period because with or without the required documents, the CIR has the power to make
assessments based on the best evidence obtainable. 26
d. RCBC vs. CIR, GR No. 170257 dated September 7, 2011.
RCBC assails the validity of the waivers of the statute of limitations on the ground that the said waivers
were merely attested to by Sixto Esquivias, then Coordinator for the CIR, and that he failed to indicate
acceptance or agreement of the CIR, as required under Section 223 (b) of the 1977 Tax Code. 28 RCBC
further argues that the principle of estoppel cannot be applied against it because its payment of the other
tax assessments does not signify a clear intention on its part to give up its right to question the validity of
the waivers.
The Court disagrees.
Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule that "an admission
or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon." A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and falsehood.
Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment of the revised
assessments issued within the extended period as provided for in the questioned waivers, impliedly
admitted the validity of those waivers. Had petitioner truly believed that the waivers were invalid and that
the assessments were issued beyond the prescriptive period, then it should not have paid the reduced
amount of taxes in the revised assessment. RCBC’s subsequent action effectively belies its insistence that
the waivers are invalid. The records show that on December 6, 2000, upon receipt of the revised
assessment, RCBC immediately made payment on the uncontested taxes. Thus, RCBC is estopped from
questioning the validity of the waivers. To hold otherwise and allow a party to gainsay its own act or deny
rights which it had previously recognized would run counter to the principle of equity which this
institution holds dear.

41
TAXATION LAW REVIEW
e. CIR vs. Next Mobile, Inc., GR No. 212825 dated December 29, 2015.
Section 2033 of the 1997 NIRC mandates the BIR 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 not
valid and effective. Exceptions to this rule are provided under Section 222 4 of the NIRC.
Section 222(b) of the NIRC provides that 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 issued on April 4, 1990 and RDAO 05-01 5 issued on August 2, 2001 provide the
procedure for the proper execution of a waiver. RMO 20-90 reads:
April 4, 1990
REVENUE MEMORANDUM ORDER NO. 20-90
Subject: Proper Execution of the Waiver of the Statute of Limitations under the National Internal
Revenue Code
To: All Internal Revenue Officers and Others Concerned
Pursuant to Section 223 of the Tax Code, internal revenue taxes may be assessed or collected after the
ordinary prescriptive period, if before its expiration, both the Commissioner and the taxpayer have agreed
in writing to its assessment and/or collection after said period. The period so agreed upon may be
extended by subsequent written agreement made before the expiration of the period previously agreed
upon. This written agreement between the Commissioner and the taxpayer is the so-called Waiver of the
Statute of Limitations. In the execution of said waiver, the following procedures should be followed:
1. The waiver must be in the form identified hereof. This form may be reproduced by the Office
concerned but there should be no deviation from such form. The phrase "but not after ______ 19____"
should be filled up. This indicates the expiry date of the period agreed upon to assess/collect the tax after
the regular three-year period of prescription. The period agreed upon shall constitute the time within
which to effect the assessment/collection of the tax in addition to the ordinary prescriptive period.
2. The waiver shall 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.
Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue .or the revenue
official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has
accepted and agreed to the waiver. The date of such acceptance by the Bureau should be indicated. 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.
3. The following revenue officials are authorized to sign the waiver:
xxxx
4. The waiver must be executed in three (3) copies, the original copy to be attached to the docket of the

42
TAXATION LAW REVIEW
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 shall be indicated in the original copy.
5. The foregoing procedures shall be strictly followed. Any revenue official found not to have complied
with this Order resulting in prescription of the right to assess/collect shall be administratively dealt with.
This Revenue Memorandum Order shall take effect immediately.
(SGD.)JOSE U. ONG
Commissioner of Internal Revenue
The Court has consistently held that a waiver of the statute of limitations must faithfully comply with the
provisions of RMO No. 20-90 and RDAO 05-01 in order to be valid and binding.
In Philippine Journalists, Inc. v. Commissioner of Internal Revenue 6 the Court declared the waiver
executed by petitioner therein invalid because: (1) it did not specify a definite agreed date between the
BIR and petitioner within which the former may assess and collect revenue taxes; (2) it was signed only
by a revenue district officer, not the Commissioner; (3) there was no date of acceptance; and (4) petitioner
was not furnished a copy of the waiver.
Philippine Journalists tells us that since a waiver of the statute of limitations is a derogation of the
taxpayer's right to security against prolonged and unscrupulous investigations, waivers of this kind must
be carefully and strictly construed. Philippine Journalists also clarifies that a waiver of the statute of
limitations is not a waiver of the right to invoke the defense of prescription but rather an agreement
between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is
extended to a date certain. It is not a unilateral act by the taxpayer of the BIR but is a bilateral agreement
between two parties.
In Commissioner of Internal Revenue v. FMF Development Corporation 7 the Court found the waiver in
question defective because: (1) it was not proved that respondent therein was furnished a copy of the BIR-
accepted waiver; (2) the waiver was signed by a revenue district officer instead of the Commissioner as
mandated by the NIRC and RMO 20-90 considering that the case involved an amount of more than
P1,000,000.00, and the period to assess was not yet about to prescribe; and (3) it did not contain the date
of acceptance by the CIR. The Court explained that the date of acceptance by the CIR is a requisite
necessary to determine whether the waiver was validly accepted before the expiration of the original
period.
In CIR v. Kudos Metal Corporation,9 the waivers executed by Kudos were found ineffective to extend the
period to assess or collect taxes because: (1) the accountant who executed the waivers had no notarized
written board authority to sign the waivers in behalf of respondent corporation; (2) there was no date of
acceptance indicated on the waivers; and (3) the fact of receipt by respondent of its file copy was not
indicated in the original copies of the waivers.
The Court rejected the CIR's argument that since it was the one who asked for additional time, Kudos
should be considered estopped from raising the defense of prescription. The Court held that the BIR
cannot hide behind the doctrine of estoppel to cover its failure to comply with its RMO 20-90 and RDAO
05-01. Having caused the defects in the waivers, the Court held that the BIR must bear the
consequence.10 Hence, the BIR assessments were found to be issued beyond the three-year period and
declared void.11 Further, the Court stressed that there is compliance with RMO 20-90 only after the
taxpayer receives a copy of the waiver accepted by the BIR, viz:

43
TAXATION LAW REVIEW
The flaw in the appellate court's reasoning stems from its assumption that the waiver is a unilateral act of
the taxpayer when it is in fact and in law an agreement between the taxpayer and the BIR. When the
petitioner's comptroller signed the waiver on September 22, 1997, it was not yet complete and final
because the BIR had not assented. There is compliance with the provision of RMO No. 20-90 only after
the taxpayer received a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer
with a copy of the waiver is not only to give notice of the existence of the document but of the acceptance
by the BIR and the perfection of the agreement.12ChanRoblesVirtualawlibrary
The deficiencies of the Waivers in this case are the same as the defects of the waiver in Kudos. In the
instant case, the CTA found the Waivers because of the following flaws: (1) they were executed without a
notarized board authority; (2) the dates of acceptance by the BIR were not indicated therein; and (3) the
fact of receipt by respondent of its copy of the Second Waiver was not indicated on the face of the
original Second Waiver.
To be sure, both parties in this case are at fault.
Here, respondent, through Sarmiento, executed five Waivers in favor of petitioner. However, her authority
to sign these Waivers was not presented upon their submission to the BIR. In fact, later on, her authority
to sign was questioned by respondent itself, the very same entity that caused her to sign such in the first
place. Thus, it is clear that respondent violated RMO No. 20-90 which states that in case of a corporate
taxpayer, the waiver must be signed by its responsible officials 13 and RDAO 01-05 which requires the
presentation of a written and notarized authority to the BIR.
Similarly, the BIR violated its own rules and was careless in performing its functions with respect to these
Waivers. It is very clear that under RDAO 05-01 it is the duty of the authorized revenue official to ensure
that the waiver is duly accomplished and signed by the taxpayer or his authorized
representative before affixing his signature to signify acceptance of the same. It also instructs that in
case the authority is delegated by the taxpayer to a representative, the concerned revenue official
shall see to it that such delegation is in writing and duly notarized. Furthermore, it mandates that the
waiver should not be accepted by the concerned BIR office and official unless duly notarized.
Vis-a-vis the five Waivers it received from respondent, the BIR has failed, for five times, to perform its
duties in relation thereto: to verify Ms. Sarmiento's authority to execute them, demand the presentation of
a notarized document evidencing the same, refuse acceptance of the Waivers when no such document was
presented, affix the dates of its acceptance on each waiver, and indicate on the Second Waiver the date of
respondent's receipt thereof.
Both parties knew the infirmities of the Waivers yet they continued dealing with each other on the
strength of these documents without bothering to rectify these infirmities. In fact, in its Letter Protest to
the BIR, respondent did not even question the validity of the Waivers or call attention to their alleged
defects.
In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies
it caused to avoid the tax liability determined by the BIR during the extended assessment period. It must
be remembered that by virtue of these Waivers, respondent was given the opportunity to gather and
submit documents to substantiate its claims before the CIR during investigation. It was able to postpone
the payment of taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these
benefits, respondent challenged the validity of the Waivers when the consequences thereof were not in its

44
TAXATION LAW REVIEW
favor. In other words, respondent's act of impugning these Waivers after benefiting therefrom and
allowing petitioner to rely on the same is an act of bad faith.
On the other hand, the stringent requirements in RMO 20-90 and RDAO 05-01 are in place precisely
because the BIR put them there. Yet, instead of strictly enforcing its provisions, the BIR defied the
mandates of its very own issuances. Verily, if the BIR was truly determined to validly assess and collect
taxes from respondent after the prescriptive period, it should have been prudent enough to make sure that
all the requirements for the effectivity of the Waivers were followed not only by its revenue officers but
also by respondent. The BIR stood to lose millions of pesos in case the Waivers were declared void, as
they eventually were by the CTA, but it appears that it was too negligent to even comply with its most
basic requirements.
The BIR's negligence in this case is so gross that it amounts to malice and bad faith. Without doubt, the
BIR knew that waivers should conform strictly to RMO 20-90 and RDAO 05-01 in order to be valid. In
fact, the mandatory nature of the requirements, as ruled by this Court, has been recognized by the BIR
itself in its issuances such as Revenue Memorandum Circular No. 6-2005, 16 among others. Nevertheless,
the BIR allowed respondent to submit, and it duly received, five defective Waivers when it was its duty to
exact compliance with RMO 20-90 and RDAO 05-01 and follow the procedure dictated therein. It even
openly admitted that it did not require respondent to present any notarized authority to sign the questioned
Waivers.17 The BIR failed to demand respondent to follow the requirements for the validity of the
Waivers when it had the duty to do so, most especially because it had the highest interest at stake. If it
was serious in collecting taxes, the BIR should have meticulously complied with the foregoing orders,
leaving no stone unturned.
The general rule is that when a waiver does not comply with the requisites for its validity specified under
RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess
taxes. However, due to its peculiar circumstances, We shall treat this case as an exception to this rule and
find the Waivers valid for the reasons discussed below.
First, the parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two
parties to a controversy are equally culpable or guilty and they shall have no action against each other.
However, although the parties are in pari delicto, the Court may interfere and grant relief at the suit of
one of them, where public policy requires its intervention, even though the result may be that a benefit
will be derived by one party who is in equal guilt with the other.
Here, to uphold the validity of the Waivers would be consistent with the public policy embodied in the
principle that taxes are the lifeblood of the government, and their prompt and certain availability is an
imperious need. Taxes are the nation's lifeblood through which government agencies continue to operate
and which the State discharges its functions for the welfare of its constituents. As between the parties, it
would be more equitable if petitioner's lapses were allowed to pass and consequently uphold the Waivers
in order to support this principle and public policy.
Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Parties
who do not come to court with clean hands cannot be allowed to benefit from their own
wrongdoing. Following the foregoing principle, respondent should not be allowed to benefit from the
flaws in its own Waivers and successfully insist on their invalidity in order to evade its responsibility to
pay taxes.
Third, respondent is estopped from questioning the validity of its Waivers. While it is true that the Court
has repeatedly held that the doctrine of estoppel must be sparingly applied as an exception to the statute

45
TAXATION LAW REVIEW
of limitations for assessment of taxes, the Court finds that the application of the doctrine is justified in this
case. Verily, the application of estoppel in this case would promote the administration of the law, prevent
injustice and avert the accomplishment of a wrong and undue advantage. Respondent
executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely on
them and did not raise any objection against their validity until petitioner assessed taxes and penalties
against it. Moreover, the application of estoppel is necessary to prevent the undue injury that the
government would suffer because of the cancellation of petitioner's assessment of respondent's tax
liabilities.
Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one
hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it
caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules.
The BIR's negligence in the performance of its duties was so gross that it amounted to malice and bad
faith. Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers.
Such a situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their
responsibility to pay taxes by mere expedient of hiding behind technicalities.
It is true that petitioner was also at fault here because it was careless in complying with the requirements
of RMO No. 20-90 and RDAO 01-05. Nevertheless, petitioner's negligence may be addressed by
enforcing the provisions imposing administrative liabilities upon the officers responsible for these
errors.23 The BIR's right to assess and collect taxes should not be jeopardized merely because of the
mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad
faith.
As regards petitioner's claim that the 10-year period of limitation within which to assess deficiency taxes
provided in Section 222(a) of the 1997 NIRC is applicable in this case as respondent allegedly filed false
and fraudulent returns, there is no reason to disturb the tax court's findings that records failed to
establish, even by prima facie evidence, that respondent Next Mobile filed false and fraudulent
returns on the ground of substantial underdeclaration of income in respondent Next Mobile's
Annual ITR for taxable year ending December 31, 2001.
While the Court rules that the subject Waivers are valid, We, however, refer back to the tax court the
determination of the merits of respondent's petition seeking the nullification of the BIR Formal Letter of
Demand and Assessment Notices/Demand No. 43-734.
f. Asian Transmission Corporation vs. CIR, GR No. 230861 dated September 19, 2018.
To be noted is that the CTA En Banc cited Commissioner of Internal Revenue v. Kudos Metal

Corporation,12 whereby the Court reiterated that RMO 20-90 and RDAO 05-01 governed the proper
execution of a valid waiver of the statute of limitations; and pointed to Commissioner of Internal Revenue
v. Next Mobile Inc., supra, to highlight the recognized exception to the strict application of RMO 20-90
and RDAO 05-01.
In Commissioner of Internal Revenue v. Next Mobile Inc., the Court declared that as a general rule a
waiver that did not comply with the requisites for validity specified in RMO No. 20-90 and RDAO 01-05
was invalid and ineffective to extend the prescriptive period to assess the deficiency taxes. However, due
to peculiar circumstances obtaining, the Court treated the case as an exception to the rule, and considered
the waivers concerned as valid for the following reasons, viz.:

46
TAXATION LAW REVIEW
First, the parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two
parties to a controversy are equally culpable or guilty and they shall have no action against each other.
However, although the parties are in pari delicto, the Court may interfere and grant relief at the suit of
one of them, where public policy requires its intervention, even though the result may be that a benefit
will be derived by one party who is in equal guilt with the other.
Here, to uphold the validity of the Waivers would be consistent with the public policy embodied in the
principle that taxes are the lifeblood of the government, and their prompt and certain availability is an
imperious need. Taxes are the nation's lifeblood through which government agencies continue to operate
and which the State discharges its functions for the welfare of its constituents. As between the parties, it
would be more equitable if petitioner's lapses were allowed to pass and consequently uphold the Waivers
in order to support this principle and public policy.
Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Parties
who do not come to court with clean hands cannot be allowed to benefit from their own wrongdoing.
Following the foregoing principle, respondent should not be allowed to benefit from the flaws in its own
Waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes.
Third, respondent is estopped from questioning the validity of its Waivers. While it is true that the Court
has repeatedly held that the doctrine of estoppel must be sparingly applied as an exception to the statute
of limitations for assessment of taxes, the Court finds that the application of the doctrine is justified in this
case. Verily, the application of estoppel in this case would promote the administration of the law, prevent
injustice and avert the accomplishment of a wrong and undue advantage. Respondent
executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely on
them and did not raise any objection against their validity until petitioner assessed taxes and penalties
against it. Moreover, the application of estoppel is necessary to prevent the undue injury that the
government would suffer because of the cancellation of petitioner's assessment of respondent's tax
liabilities.
Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one
hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it
caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules.
The BIR's negligence in the performance of its duties was so gross that it amounted to malice and bad
faith. Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers.
Such a situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their
responsibility to pay taxes by mere expedient of hiding behind technicalities.
It is true that petitioner was also at fault here because it was careless in complying with the requirements
of RMO No. 20-90 and RDAO 01-05. Nevertheless, petitioner's negligence may be addressed by
enforcing the provisions imposing administrative liabilities upon the officers responsible for these errors.
The BIR's right to assess and collect taxes should not be jeopardized merely because of the mistakes and
lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith.
In this case, the CTA in Division noted that the eight waivers of ATC contained the following defects, to
wit:
1. The notarization of the Waivers was not in accordance with the 2004 Rules on Notarial Practice;
2. Several waivers clearly failed to indicate the date of acceptance by the Bureau of Internal
Revenue;
3. The Waivers were not signed by the proper revenue officer; and

47
TAXATION LAW REVIEW
4. The Waivers failed to specify the type of tax and the amount of tax due.
We agree with the holding of the CTA En Banc that ATC's case was similar to the case of the taxpayer
involved in Commissioner of Internal Revenue v. Next Mobile Inc. The foregoing defects noted in the
waivers of ATC were not solely attributable to the CIR. Indeed, although RDAO 01-05 stated that the
waiver should not be accepted by the concerned BIR office or official unless duly notarized, a careful
reading of RDAO 01-05 indicates that the proper preparation of the waiver was primarily the
responsibility of the taxpayer or its authorized representative signing the waiver. Such responsibility did
not pertain to the BIR as the receiving party. Consequently, ATC was not correct in insisting that the act
or omission giving rise to the defects of the waivers should be ascribed solely to the respondent CIR and
her subordinates.
Moreover, the principle of estoppel was applicable. The execution of the waivers was to the advantage of
ATC because the waivers would provide to ATC the sufficient time to gather and produce voluminous
records for the audit. It would really be unfair, therefore, were ATC to be permitted to assail the waivers
only after the final assessment proved to be adverse. Indeed, the Court observed in Commissioner of
Internal Revenue v. Next Mobile Inc. that:
In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies
it caused to avoid the tax liability determined by the BIR during the extended assessment period. It must
be remembered that by virtue of these Waivers, respondent was given the opportunity to gather and
submit documents to substantiate its claims before the CIR during investigation. It was able to postpone
the payment of taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these
benefits, respondent challenged the validity of the Waivers when the consequences thereof were not in its
favor. In other words, respondent's act of impugning these Waivers after benefiting therefrom and
allowing petitioner to rely on the same is an act of bad faith.
Thus, the CTA En Banc did not err in ruling that ATC, after having benefitted from the defective waivers,
should not be allowed to assail them. In short, the CTA En Banc properly applied the equitable principles
of in pari delicto, unclean hands, and estoppel as enunciated in Commissioner of Internal Revenue v. Next
Mobile case.
D. Procedure in issuing an assessment / Requisites of a valid assessment / Due Process
1. Sec. 228 of the NIRC.
Section 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: provided,
however, That a preassessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the
tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted
by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over and automatically applied the same amount claimed
against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or

48
TAXATION LAW REVIEW
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-
exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or

reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be
prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been
submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the
Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of one
hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.
2. RR No. 12-1999 dated September 6, 1999, as amended by RR No. 18-2013 dated November 28, 2013,
further amended by RR No. 7-2018.
SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment. —
3.1 Mode of procedure in the issuance of a deficiency tax assessment:
3.1.1. Notice for Informal Conference. – The Revenue Officer who audited the taxpayer’s records shall,
among others, state in his report whether or not the taxpayer agrees with his findings that the taxpayer is
liable for deficiency tax or taxes. If the taxpayer is not amenable, based on the said Officer’s submitted
report of investigation, the taxpayer shall be informed, in writing, by the Revenue District Office or by
the Special Investigation Division, as the case may be (in the case of Revenue Regional Offices) or by the
Chief of Division concerned (in the case of the BIR National Office) of the discrepancy or discrepancies
in the taxpayer’s payment of his internal revenue taxes, for the purpose of “Informal Conference,” in
order to afford the taxpayer with an opportunity to present his side of the case.
The Informal Conference shall in no case extend beyond thirty (30) days from receipt of the notice for
informal conference. If it is found that the taxpayer is still liable for deficiency tax or taxes after
presenting his side, and the taxpayer is not amenable, the Revenue District Officer or the Chief of the
Special Investigation Division of the Revenue Regional Office, or the Chief of Division in the National
Office, as the case may be, shall endorse the case within seven (7) days from the conclusion of the
Informal Conference to the Assessment Division of the Revenue Regional Office or to the Commissioner
or his duly authorized representative for issuance of a deficiency tax assessment.

49
TAXATION LAW REVIEW
Failure on the part of Revenue Officers to comply with the periods indicated herein shall be meted with
penalty as provided by existing laws, rules and regulations.
3.1.2 Preliminary Assessment Notice (PAN). — If after review and evaluation by the Commissioner or
his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to
assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to the taxpayer a
Preliminary Assessment Notice (PAN) for the proposed assessment. It shall show in detail the facts and
the law, rules and regulations, or jurisprudence on which the proposed assessment is based (see
illustration in ANNEX “A” hereof).
If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN, he shall be
considered in default, in which case, a Formal Letter of Demand and Final Assessment Notice
(FLD/FAN) shall be issued calling for payment of the taxpayer's deficiency tax liability, inclusive of the
applicable penalties.
If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that he/it disagrees
with the findings of deficiency tax or taxes, an FLD/FAN shall be issued within fifteen (15) days from
filing/submission of the taxpayer’s response, calling for payment of the taxpayer's deficiency tax liability,
inclusive of the applicable penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. — Pursuant to Section 228 of the Tax Code, as
amended, a PAN shall not be required in any of the following cases:
(i) When the finding for any deficiency tax is the result of mathematical error in the computation of
the tax appearing on the face of the tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax
for a taxable period was determined to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable
year; or
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person, such as, but not limited to,
exempt persons.
In the above-cited cases, a FLD/FAN shall be issued outright.
3.1.4 Formal Letter of Demand and Final Assessment Notice (FLD/FAN). — The Formal Letter of
Demand and Final Assessment Notice (FLD/FAN) shall be issued by the Commissioner or his duly
authorized representative. The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes
shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based;
otherwise, the assessment shall be void (see illustration in ANNEX “B” hereof).

50
TAXATION LAW REVIEW
3.1.5 Disputed Assessment. — The taxpayer or its authorized representative or tax agent may protest
administratively against the aforesaid FLD/FAN within thirty (30) days from date of receipt thereof. The
taxpayer protesting an assessment may file a written request for reconsideration or reinvestigation defined
as follows:
(i) Request for reconsideration — refers to a plea of re-evaluation of an assessment on the basis of
existing records without need of additional evidence. It may involve both a question of fact or of law or
both.
(ii) Request for reinvestigation — refers to a plea of re-evaluation of an assessment on the basis of
newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may
also involve a question of fact or of law or both.
The taxpayer shall state in his protest (i) the nature of protest whether reconsideration or reinvestigation,
specifying newly discovered or additional evidence he intends to present if it is a request for
reinvestigation, (ii) date of the assessment notice, and (iii) the applicable law, rules and regulations, or
jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without
force and effect.
If there are several issues involved in the FLD/FAN but the taxpayer only disputes or protests against the
validity of some of the issues raised, the assessment attributable to the undisputed issue or issues shall
become final, executory and demandable; and the taxpayer shall be required to pay the deficiency tax or
taxes attributable thereto, in which case, a collection letter shall be issued to the taxpayer calling for
payment of the said deficiency tax or taxes, inclusive of the applicable surcharge and/or interest.
If there are several issues involved in the disputed assessment and the taxpayer fails to state the facts, the
applicable law, rules and regulations, or jurisprudence in support of his protest against some of the several
issues on which the assessment is based, the same shall be considered undisputed issue or issues, in which
case, the assessment attributable thereto shall become final, executory and demandable; and the taxpayer
shall be required to pay the deficiency tax or taxes attributable thereto and a collection letter shall be
issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the applicable surcharge
and/or interest.
For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of
his protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment
shall become final. The term “relevant supporting documents” refer to those documents necessary to
support the legal and factual bases in disputing a tax assessment as determined by the taxpayer. The sixty
(60)-day period for the submission of all relevant supporting documents shall not apply to requests for
reconsideration. Furthermore, the term “the assessment shall become final” shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly discovered or
additional evidence, and the FDDA shall consequently be denied.
If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from date of
receipt thereof, the assessment shall become final, executory and demandable. No request for
reconsideration or reinvestigation shall be granted on tax assessments that have already become final,
executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner’s duly authorized representative, the
taxpayer may either: (i) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision; or (ii) elevate his protest through request for reconsideration to the

51
TAXATION LAW REVIEW
Commissioner within thirty (30) days from date of receipt of the said decision. No request for
reinvestigation shall be allowed in administrative appeal and only issues raised in the decision of the
Commissioner’s duly authorized representative shall be entertained by the Commissioner.
If the protest is not acted upon by the Commissioner’s duly authorized representative within one hundred
eighty (180) days counted from the date of filing of the protest in case of a request reconsideration; or
from date of submission by the taxpayer of the required documents within sixty (60) days from the date of
filing of the protest in case of a request for reinvestigation, the taxpayer may either: (i) appeal to the CTA
within thirty (30) days after the expiration of the one hundred eighty (180)-day period; or (ii) await the
final decision of the Commissioner’s duly authorized representative on the disputed assessment.
If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by the
Commissioner, the taxpayer may appeal to the CTA within thirty (30) days from date of receipt of the
said decision. Otherwise, the assessment shall become final, executory and demandable. A motion for
reconsideration of the Commissioner’s denial of the protest or administrative appeal, as the case may be,
shall not toll the thirty (30)-day period to appeal to the CTA.
If the protest or administrative appeal is not acted upon by the Commissioner within one hundred eighty
(180) days counted from the date of filing of the protest, the taxpayer may either: (i) appeal to the CTA
within thirty
(30) days from after the expiration of the one hundred eighty (180)-day period; or (ii) await the final
decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA
within thirty (30) days after the receipt of a copy of such decision.
It must be emphasized, however, that in case of inaction on protested assessment within the 180-day
period, the option of the taxpayer to either: (1) file a petition for review with the CTA within 30 days after
the expiration of the 180-day period; or (2) await the final decision of the Commissioner or his duly
authorized representative on the disputed assessment and appeal such final decision to the CTA within 30
days after the receipt of a copy of such decision, are mutually exclusive and the resort to one bars the
application of the other.
3.1.6 Final Decision on a Disputed Assessment (FDDA). — The decision of the Commissioner or his
duly authorized representative shall state the (i) facts, the applicable law, rules and regulations, or
jurisprudence on which such decision is based, otherwise, the decision shall be void (see illustration in
ANNEX “C” hereof), and (ii) that the same is his final decision.
3.1.7 Modes of Service. — The notice (PAN/FLD/FAN/FDDA) to the taxpayer herein required may be
served by the Commissioner or his duly authorized representative through the following modes:
(i) The notice shall be served through personal service by delivering personally a copy thereof to the
party at his registered or known address or wherever he may be found. A known address shall mean a
place other than the registered address where business activities of the party are conducted or his place of
residence.
In case personal service is not practicable, the notice shall be served by substituted service or by mail.
(ii) Substituted service can be resorted to when the party is not present at the registered or known
address under the following circumstances:

52
TAXATION LAW REVIEW
The notice may be left at the party’s registered address, with his clerk or with a person having charge
thereof.
If the known address is a place where business activities of the party are conducted, the notice may be left
with his clerk or with a person having charge thereof.
If the known address is the place of residence, substituted service can be made by leaving the copy with a
person of legal age residing therein.
If no person is found in the party’s registered or known address, the revenue officers concerned shall
bring a barangay official and two (2) disinterested witnesses to the address so that they may personally
observe and attest to such absence. The notice shall then be given to said barangay official. Such facts
shall be contained in the bottom portion of the notice, as well as the names, official position and
signatures of the witnesses.
Should the party be found at his registered or known address or any other place but refuse to receive the
notice, the revenue officers concerned shall bring a barangay official and two (2) disinterested witnesses
in the presence of the party so that they may personally observe and attest to such act of refusal. The
notice shall then be given to said barangay official. Such facts shall be contained in the bottom portion of
the notice, as well as the names, official position and signatures of the witnesses.
“Disinterested witnesses” refers to persons of legal age other than employees of the Bureau of Internal
Revenue.
(iii) Service by mail is done by sending a copy of the notice by registered mail to the registered or
known address of the party with instruction to the Postmaster to return the mail to the sender after ten (10)
days, if undelivered. A copy of the notice may also be sent through reputable professional courier service.
If no registry or reputable professional courier service is available in the locality of the addressee, service
may be done by ordinary mail.
The server shall accomplish the bottom portion of the notice. He shall also make a written report under
oath before a Notary Public or any person authorized to administer oath under Section 14 of the NIRC, as
amended, setting forth the manner, place and date of service, the name of the person/barangay
official/professional courier service company who received the same and such other relevant information.
The registry receipt issued by the post office or the official receipt issued by the professional courier
company containing sufficiently identifiable details of the transaction shall constitute sufficient proof of
mailing and shall be attached to the case docket.
Service to the tax agent/practitioner, who is appointed by the taxpayer under circumstances prescribed in
the pertinent regulations on accreditation of tax agents, shall be deemed service to the taxpayer.”
3. CIR vs. Metro Star Superama, Inc., G.R. No. 185371 dated December 8, 2010.
The general rule is that the Court will not lightly set aside the conclusions reached by the CTA which, by
the very nature of its functions, has accordingly developed an exclusive expertise on the resolution unless
there has been an abuse or improvident exercise of authority. 12 In Barcelon, Roxas Securities, Inc. (now
known as UBP Securities, Inc.) v. Commissioner of Internal Revenue, 13 the Court wrote:
Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the
highest respect. In Sea-Land Service Inc. v. Court of Appeals [G.R. No. 122605, 30 April 2001, 357

53
TAXATION LAW REVIEW
SCRA 441, 445-446], this Court recognizes that the Court of Tax Appeals, which by the very nature of its
function is dedicated exclusively to the consideration of tax problems, has necessarily developed an
expertise on the subject, and its conclusions will not be overturned unless there has been an abuse or
improvident exercise of authority. Such findings can only be disturbed on appeal if they are not supported
by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the
absence of any clear and convincing proof to the contrary, this Court must presume that the CTA
rendered a decision which is valid in every respect.
On the matter of service of a tax assessment, a further perusal of our ruling in Barcelon is instructive, viz:
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 (Republic
vs. Court of Appeals, 149 SCRA 351). Thus as held by the Supreme Court in Gonzalo P. Nava vs.
Commissioner of Internal Revenue, 13 SCRA 104, January 30, 1965:
"The facts to be proved to raise this presumption are (a) that the letter was properly addressed with
postage prepaid, and (b) that it was mailed. Once these facts are proved, the presumption is that the letter
was received by the addressee as soon as it could have been transmitted to him in the ordinary course of
the mail. But if one of the said facts fails to appear, the presumption does not lie. (VI, Moran, Comments
on the Rules of Court, 1963 ed, 56-57 citing Enriquez vs. Sunlife Assurance of Canada, 41 Phil 269)."
x x x. What is essential to prove the fact of mailing is the registry receipt issued by the Bureau of Posts or
the Registry return card which would have been signed by the Petitioner or its authorized representative.
And if said documents cannot be located, Respondent at the very least, should have submitted to the
Court a certification issued by the Bureau of Posts and any other pertinent document which is executed
with the intervention of the Bureau of Posts. This Court does not put much credence to the self serving
documentations made by the BIR personnel especially if they are unsupported by substantial evidence
establishing the fact of mailing. Thus:
"While we have held that an assessment is made when sent within the prescribed period, even if received
by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959),
this ruling makes it the more imperative that the release, mailing or sending of the notice be clearly and
satisfactorily proved. Mere notations made without the taxpayer’s intervention, notice or control, without
adequate supporting evidence cannot suffice; otherwise, the taxpayer would be at the mercy of the
revenue offices, without adequate protection or defense." (Nava vs. CIR, 13 SCRA 104, January 30,
1965).
x x x.
The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the conclusion
that no assessment was issued. Consequently, the government’s right to issue an assessment for the said
period has already prescribed. (Industrial Textile Manufacturing Co. of the Phils., Inc. vs. CIR CTA Case
4885, August 22, 1996). (Emphases supplied.)

54
TAXATION LAW REVIEW
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.
This now leads to the question: Is the 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? Specifically, are the requirements of due process satisfied if only
the FAN stating the computation of tax liabilities and a demand to pay within the prescribed period was
sent to the taxpayer?
The answer to these questions require an examination of Section 228 of the Tax Code which reads:
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative
however, that a preassessment notice shall not be required in the following cases:
exempt persons.

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.

55
TAXATION LAW REVIEW
(Emphasis supplied).
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.14
This is confirmed under the provisions R.R. No. 12-99 of the BIR which pertinently provide:
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Notice for informal conference. — The Revenue Officer who audited the taxpayer's records shall,
liable for deficiency tax or taxes. If the taxpayer is not amenable, based on the said Officer's submitted
the Special Investigation Division, as the case may be (in the case Revenue Regional Offices) or by the
in the taxpayer's payment of his internal revenue taxes, for the purpose of "Informal Conference," in order
to afford the taxpayer with an opportunity to present his side of the case. If the taxpayer fails to respond
within fifteen (15) days from date of receipt of the notice for informal conference, he shall be considered
in default, in which case, the Revenue District Officer or the Chief of the Special Investigation Division
of the Revenue Regional Office, or the Chief of Division in the National Office, as the case may be, shall
endorse the case with the least possible delay to the Assessment Division of the Revenue Regional Office
or to the Commissioner or his duly authorized representative, as the case may be, for appropriate review
and issuance of a deficiency tax assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN). — If after review and evaluation by the Assessment
Division or by the Commissioner or his duly authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said
Office shall issue to the taxpayer, at least by registered mail, a Preliminary Assessment Notice (PAN) for
the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence
on which the proposed assessment is based (see illustration in ANNEX A hereof). If the taxpayer fails to
respond within fifteen (15) days from date of receipt of the PAN, he shall be considered in default, in
which case, a formal letter of demand and assessment notice shall be caused to be issued by the said
Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. — The notice for informal conference and the
preliminary assessment notice shall not be required in any of the following cases, in which case, issuance
of the formal assessment notice for the payment of the taxpayer's deficiency tax liability shall be
sufficient:
(i) When the finding for any deficiency tax is the result of mathematical error in the computation of the
tax appearing on the face of the tax return filed by the taxpayer; or

56
TAXATION LAW REVIEW
(ii) When a discrepancy has been determined between the tax withheld and the amount actually remitted
(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person, such as, but not limited to,
exempt persons.
3.1.4 Formal Letter of Demand and Assessment Notice. — The formal letter of demand and assessment
notice shall be issued by the Commissioner or his duly authorized representative. The letter of demand
calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand
and assessment notice shall be void (see illustration in ANNEX B hereof).
The same shall be sent to the taxpayer only by registered mail or by personal delivery.
If sent by personal delivery, the taxpayer or his duly authorized representative shall acknowledge receipt
thereof in the duplicate copy of the letter of demand, showing the following: (a) His name; (b) signature;
(c) designation and authority to act for and in behalf of the taxpayer, if acknowledged received by a
person other than the taxpayer himself; and (d) date of receipt thereof.
x x x.
From the provision quoted above, it is clear that the sending of a PAN to taxpayer to inform him of the
assessment made is but part of the "due process requirement in the issuance of a deficiency tax
assessment," the absence of which renders nugatory any assessment made by the tax authorities. The use
of the word "shall" in subsection 3.1.2 describes the mandatory nature of the service of a PAN. The
persuasiveness of the right to due process reaches both substantial and procedural rights and the failure of
the CIR to strictly comply with the requirements laid down by law and its own rules is a denial of Metro
Star’s right to due process.15 Thus, for its failure to send the PAN stating the facts and the law on which
the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR
is void.
The case of CIR v. Menguito 16 cited by the CIR in support of its argument that only the non-service of the
FAN is fatal to the validity of an assessment, cannot apply to this case because the issue therein was the
non-compliance with the provisions of R. R. No. 12-85 which sought to interpret Section 229 of the old
tax law. RA No. 8424 has already amended the provision of Section 229 on protesting an assessment. The
old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998
to informing the taxpayer of not only the law, but also of the facts on which an assessment would be
made. Otherwise, the assessment itself would be invalid. 17 The regulation then, on the other hand, simply
provided that a notice be sent to the respondent in the form prescribed, and that no consequence would
ensue for failure to comply with that form.
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.

57
TAXATION LAW REVIEW
4. CIR vs. Asalus Corporation, GR No. 22150 dated February 22, 2017.
The CTA also posited that the ordinary prescriptive period of three (3) years applied in this case because
there was no mention in the FAN or the FDDA that what would apply was the extraordinary prescriptive
period and that the CIR did not present any evidence to support its claim of false returns.
Again, the Court disagrees.
It is true that neither the FAN nor the FDDA explicitly stated that the applicable prescriptive period was
the ten (10)-year period set in Section 222 of the NIRC. They, however, made reference to the PAN,
which categorically stated that "[t]he running of the three-year statute of limitation I as provided un4er
Section 203 of the 1997 National Internal Revenue Code (NIRC) is not i applicable xxx but rather to the
ten (10) year prescriptive period pursua11t to Section 222(A) of the tax code xxx." 23 In Samar-I Electric
Cooperative v. COMELEC,24the Court ruled that it sufficed that the taxpayer was substantially informed
of the legal and factual bases of the assessment enabling him to file an effective protest, to wit:
Although, the FAN and demand letter issued to petitioner were not accompanied by a written explanation
of the legal and factual bases of the deficiency taxes assessed against the petitioner, the records showed
that respondent in its letter dated April 10, 2003 responded to petitioner's October 14, 2002 letter-protest,
explaining at length the factual and legal bases of the deficiency tax assessments and denying the protest.
Considering the foregoing exchange of correspondence and Document between the parties, we find
that the requirement of Section 228 was substantially complied with. Respondent had fully informed I
process was thus not violated. [Emphasis supplied]
Thus, substantial compliance with the requirement as laid down under Section 228 of the NIRC suffices,
for what is important is that the taxpayer has been sufficiently informed of the factual and legal bases of
the assessment so that it may file an effective protest against the assessment. In the case at bench, Asalus
was sufficiently informed that with respect to its tax liability, the extraordinary period laid down in
Section 222 of the NIRC would apply. This was categorically stated in the PAN and all subsequent
communications from the CIR made reference to the PAN. Asalus was eventually able to file a protest
addressing the issue on prescription, although it was done only in its supplemental protest to the FAN.
Considering the existing circumstances, the assessment was timely made because the applicable
prescriptive period was the ten (10)-year prescriptive period under Section 222 of the NIRC. To reiterate,
there was a prima facie showing that the returns filed by Asalus were false, which it failed to controvert.
Also, it was adequately informed that it was being assessed within the extraordinary prescriptive period.
5. CIR vs. Fitness By Design, Inc., GR No. 215957 dated November 9, 2016.
IV
The issuance of a valid formal assessment is a substantive prerequisite for collection of taxes. 127 Neither
the National Internal Revenue Code nor the revenue regulations provide for a "specific definition or form
of an assessment." However, the National Internal Revenue Code defines its explicit functions and
effects."128 An assessment does not only include a computation of tax liabilities; it also includes a demand
for payment within a period prescribed. Its main purpose is to determine the amount that a taxpayer is
liable to pay.

58
TAXATION LAW REVIEW
A pre-assessment notice "do[es] not bear the gravity of a formal assessment notice." A pre-assessment
notice merely gives a tip regarding the Bureau of Internal Revenue's findings against a taxpayer for an
informal conference or a clarificatory meeting.
A final assessment is a notice "to the effect that the amount therein stated is due as tax and a demand for
payment thereof."133 This demand for payment signals the time "when penalties and interests begin to
accrue against the taxpayer and enabling the latter to determine his remedies[.]" 134 Thus, it must be "sent
to and received by the taxpayer, and must demand payment of the taxes described therein within a
specific period."
The disputed Final Assessment Notice is not a valid assessment.
First, it lacks the definite amount of tax liability for which respondent is accountable. It does not purport
to be a demand for payment of tax due, which a final assessment notice should supposedly be. An
assessment, in the context of the National Internal Revenue Code, is a "written notice and demand made
by the [Bureau of Internal Revenue] on the taxpayer for the settlement of a due tax liability that is there:
definitely set and fixed." Although the disputed notice provides for the computations of respondent's tax
liability, the amount remains indefinite. It only provides that the tax due is still subject to modification,
depending on the date of payment. Thus:
The complete details covering the aforementioned discrepancies established during the investigation of
this case are shown in the accompanying Annex 1 of this Notice. The 50% surcharge and 20% interest
have been imposed pursuant to Sections 248 and 249 (B) of the [National Internal Revenue Code], as
amended. Please note, however, that the interest and the total amount due will have to be adjusted if prior
or beyond April 15, 2004.137 (Emphasis Supplied)
Second, there are no due dates in the Final Assessment Notice. This negates petitioner's demand for
payment.138Petitioner's contention that April 15, 2004 should be regarded as the actual due date cannot be
accepted. The last paragraph of the Final Assessment Notice states that the due dates for payment were
supposedly reflected in the attached assessment:
In view thereof, you are requested to pay your aforesaid deficiency internal revenue tax liabilities through
the duly authorized agent bank in which you are enrolled within the time shown in the enclosed
assessment notice.139 (Emphasis in the original)
However, based on the findings of the Court of Tax Appeals First Division, the enclosed assessment
pertained to remained unaccomplished.140
Contrary to petitioner's view, April 15, 2004 was the reckoning date of accrual of penalties and
surcharges and not the due date for payment of tax liabilities.1avvphi1 The total amount depended upon
when respondent decides to pay. The notice, therefore, did not contain a definite and actual demand to
pay.
Compliance with Section 228 of the National Internal Revenue Code is a substantative requirement. 141 It
is not a mere formality.142 Providing the taxpayer with the factual and legal bases for the assessment is
crucial before proceeding with tax collection. Tax collection should be premised on a valid assessment,
which would allow the taxpayer to present his or her case and produce evidence for substantiation. 143

59
TAXATION LAW REVIEW
The Court of Tax Appeals did not err in cancelling the Final Assessment Notice as well as the Audit
Result/Assessment Notice issued by petitioner to respondent for the year 1995 covering the "alleged
deficiency income tax, value-added tax and documentary stamp tax amounting to ₱10,647,529.69,
inclusive of surcharges and interest" 144 for lack of due process. Thus, the Warrant of Distraint and/or Levy
is void since an invalid assessment bears no valid effect. 145
6. Samar-I Electric Cooperative vs. CIR, GR No. 193100 dated December 10, 2014.
Anent the issue of violation of due process in the issuance of the final notice of assessment and letter of
demand, Section 228 of the NIRC of 1997 provides:
SEC. 228. Protesting of Assessment. – x x x
xxxx
The taxpayers shall be informed in writing of the law and the factson which the assessment is made:
Petitioner contends that as the Final Demand Letter and Assessment Notices (FAN) were silent as to the
nature and basis of the assessments, it was denied due process, 18 and the assessments must be declared
void. It likewise invokes Revenue Regulations(RR) No. 12-99 which states, viz.:
3.1.4 Formal Letter of Demand and Assessment Notice.– The formal letter of demand and assessment
calling for payment of the taxpayer’s deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand
and assessment notice shall be void. The same shall be sent to the taxpayer only by registered mail or by
personal delivery.
xxx
We uphold the assessments issued to petitioner.
Both Section 228 of the NIRC of 1997 and Section 3.1.4 of RR No. 12-99 clearly require the written
details on the nature, factual and legal bases of the subject deficiency tax assessments. The reason for the
mandatory nature of this requirement isexplained in the case of Commissioner of Internal Revenue v.
Reyes:19
A void assessment bears no valid fruit.
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. In the instant case, respondent has not been informed of the basis of the estate tax liability.
Without complying with the unequivocal mandate of first informing the taxpayer of the government’s
claim, there can be no deprivation of property, because no effective protest can be made. The haphazard
shot at slapping an assessment, supposedly based on estate taxation’s general provisions that are expected
to be known by the taxpayer, is utter chicanery.

60
TAXATION LAW REVIEW
Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the
lack of basis for – not to mention the insufficiency of – the gross figures and details of the itemized
deductions indicated in the notice and the letter. This Court cannot countenance an assessment based on
estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the lifeblood
of the government, their assessment and collection "should be made in accordance with law as any
arbitrariness will negate the very reason for government itself." (Emphasis supplied; citations omitted)
In Commissioner of Internal Revenue v. Enron Subic Power Corporation, 20 we held that the law requires
that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment
notice, and that the alleged "factual bases" in the advice, preliminary letter and "audit working papers" did
not suffice. Thus:
Both the CTA and the CA concluded that the deficiency tax assessment merely itemized the deductions
disallowed and included these in the gross income. It also imposed the preferential rate of 5% on some
items categorized by Enron as costs. The legal and factual bases were, however, not indicated.
The CIR insists that an examination of the facts shows that Enron was properly apprised of its tax
deficiency. During the pre-assessment stage, the CIR advised Enron’s representative of the tax deficiency,
informed it of the proposed tax deficiency assessment through a preliminary five-day letter and furnished
Enron a copy of the audit working paper allegedly showing in detail the legal and factual bases of the
assessment. The CIR argues that these steps sufficed to inform Enron of the laws and facts on which the
deficiency tax assessment was based.
We disagree. The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the
preliminary five-day letter, were not valid substitutes for the mandatory notice in writing of the legal and
factual bases of the assessment. These steps were mere perfunctory discharges of the CIR’s duties in
correctly assessing a taxpayer. The requirement for issuing a preliminary or final notice, as the case may
be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the
requirement of what such notice must contain. Just because the CIR issued an advice, a preliminary letter
during the pre-assessment stage and a final notice, in the order required by law, does not necessarily mean
that Enron was informed of the law and facts on which the deficiency tax assessment was
made.21 (Emphasis supplied)
In this case, we agree with the respondent that petitioner was sufficiently apprised of the nature, factual
and legal bases, as well as how the deficiency taxes being assessed against it were computed. Records
reveal that on October 19, 2001, prior to the conduct of an informal conference, petitioner was already
informed of the results and findings of the investigations made by the respondent, and was duly furnished
with a copy of the summary of the report submitted by Revenue Officer Elisa G. Ponferrada-Rapatan of
the Special Investigation Division. Said summary report contained an explanation of Findings of
Investigation stating the legal and factual bases for the deficiency assessment. In a letter dated February
27, 2002 petitioner requested for copies of working papers indicating how the deficiency withholding
taxes were computed.22 Respondent promptly responded in a letter-reply dated February 28, 2002 stating:
please be informed that the cooperative’s deficiency withholding taxes on compensation were due to the
failure of the cooperative to withhold taxes on the taxable 13th month pay and other benefits in excess of
₱30,000.00 threshold pursuant to Section 3 of Revenue Regulation No. 2-95 implementing Republic Act
No. 7833 and Section 2.78/1 B 11 of Revenue Regulation 2-98 implementing Section 32 B e of Republic
Act No. 8424. Further, we are providing you hereunder the computational format on how deficiency
withholding taxes were computed and sample computation from our working papers, for your information
and guidance.23

61
TAXATION LAW REVIEW
On April 9, 2002, petitioner received the PAN dated February 28, 2002 which contained the computations
of its deficiency income and withholding taxes. Attached to the PAN was the detailed explanation of the
particular provision of law and revenue regulation violated, thus:
DETAILS OF DISCREPANCIES
1. Deficiency income taxes for 1998 and 1999 respectively result from non-payment of the minimum
corporate income tax (MCIT) imposed pursuant to Section 27(E) of the 1997 Tax Reform Act.
2. Deficiency Withholding Taxes on Compensation for 1997-1999 are the total withholding taxes on
compensation of all employees of SAMELCO[-]I resulting from failureof employer to withhold taxes on
the taxable 13th month pay and other benefits in excess of [P]30,000.00 threshold pursuant to Revenue
Regulation 2-98.24
The above information provided to petitioner enabled it to protest the PAN by questioning respondent's
interpretation of the laws cited as legal basis for the computation of the deficiency withholding taxes and
assessment of minimum corporate income tax despite petitioner's position that it remains exempt
therefrom.25 In its letter-reply dated May 27, 2002, respondent answered the arguments raised by
petitioner in its protest, and requested it to pay the assessed deficiency on the date of payment stated in
the PAN. A second protest letter dated June 23, 2002 was sent by petitioner, to which respondent replied
(letter dated July 8, 2002) answering each of the two issues reiterated by petitioner: ( 1) validity of EO 93
withdrawing the tax exemption privileges under PD 269; and (2) retroactive application of RR No. 8-
2000.26 The FAN was finally received by petitioner on September 24, 2002, and protested by it in a letter
dated October 14, 2002 which reiterated in lengthy arguments its earlier interpretation of the laws and
regulations upon which the assessments were based. 27
Although the FAN and demand letter issued to petitioner were not accompanied by a written explanation
E. Protesting an assessment
1. Reinvestigation vs. Reconsideration
a. RR No. 18-2013 dated November 28, 2013.
3.1.5 Disputed Assessment. — The taxpayer or its authorized representative or tax agent may protest
administratively against the aforesaid FLD/FAN within thirty (30) days from date of receipt thereof. The
taxpayer protesting an assessment may file a written request for reconsideration or reinvestigation defined
as follows:

62
TAXATION LAW REVIEW
(i) Request for reconsideration — refers to a plea of re-evaluation of an assessment on the basis of
both.
(ii) Request for reinvestigation — refers to a plea of re-evaluation of an assessment on the basis of
newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may
also involve a question of fact or of law or both.
The taxpayer shall state in his protest (i) the nature of protest whether reconsideration or reinvestigation,
specifying newly discovered or additional evidence he intends to present if it is a request for
reinvestigation, (ii) date of the assessment notice, and (iii) the applicable law, rules and regulations, or
jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without
force and effect.
If there are several issues involved in the FLD/FAN but the taxpayer only disputes or protests against the
validity of some of the issues raised, the assessment attributable to the undisputed issue or issues shall
become final, executory and demandable; and the taxpayer shall be required to pay the deficiency tax or
taxes attributable thereto, in which case, a collection letter shall be issued to the taxpayer calling for
payment of the said deficiency tax or taxes, inclusive of the applicable surcharge and/or interest.
If there are several issues involved in the disputed assessment and the taxpayer fails to state the facts, the
applicable law, rules and regulations, or jurisprudence in support of his protest against some of the several
issues on which the assessment is based, the same shall be considered undisputed issue or issues, in which
case, the assessment attributable thereto shall become final, executory and demandable; and the taxpayer
shall be required to pay the deficiency tax or taxes attributable thereto and a collection letter shall be
issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the applicable surcharge
and/or interest.

63
TAXATION LAW REVIEW
within thirty
days from after the expiration of the one hundred eighty (180)-day period; or (ii) await the final decision
of the Commissioner on the disputed assessment and appeal such final decision to the CTA within thirty
(30) days after the receipt of a copy of such decision.
b. BPI vs. CIR, GR No. 139736 dated October 17, 2005.
C. The protest filed by petitioner BPI did not constitute a request for reinvestigation, granted by the
respondent BIR Commissioner, which could have suspended the running of the statute of limitations on
collection of the assessed deficiency DST under Section 224 of the Tax Code of 1977, as amended.
The Tax Code of 1977, as amended, also recognizes instances when the running of the statute of
limitations on the assessment and collection of national internal revenue taxes could be suspended, even
in the absence of a waiver, under Section 224 thereof, which reads –
SEC. 224. Suspension of running of statute. – The running of the statute of limitation provided in
Section[s] 203 and 223 on the making of assessment and the beginning of distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer requests for a reinvestigation which
is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the
return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the
Commissioner of any change in address, the running of the statute of limitations will not be suspended;
when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could be located; and when the
taxpayer is out of the Philippines.31

64
TAXATION LAW REVIEW
Of particular importance to the present case is one of the circumstances enumerated in Section 224 of the
Tax Code of 1977, as amended, wherein the running of the statute of limitations on assessment and
collection of taxes is considered suspended "when the taxpayer requests for a reinvestigation which is
granted by the Commissioner."
This Court gives credence to the argument of petitioner BPI that there is a distinction between a request
for reconsideration and a request for reinvestigation. Revenue Regulations (RR) No. 12-85, issued on 27
November 1985 by the Secretary of Finance, upon the recommendation of the BIR Commissioner,
governs the procedure for protesting an assessment and distinguishes between the two types of protest, as
follows –
PROTEST TO ASSESSMENT
SEC. 6. Protest. The taxpayer may protest administratively an assessment by filing a written request for
reconsideration or reinvestigation. . .
...
For the purpose of the protest herein –
(a) Request for reconsideration. – refers to a plea for a re-evaluation of an assessment on the basis of
both.
(b) Request for reinvestigation. – refers to a plea for re-evaluation of an assessment on the basis of
newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may
also involve a question of fact or law or both.
With the issuance of RR No. 12-85 on 27 November 1985 providing the above-quoted distinctions
between a request for reconsideration and a request for reinvestigation, the two types of protest can no
longer be used interchangeably and their differences so lightly brushed aside. It bears to emphasize that
under Section 224 of the Tax Code of 1977, as amended, the running of the prescriptive period for
collection of taxes can only be suspended by a request for reinvestigation, not a request for
reconsideration. Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional
evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the
evidence already at hand; this justifies why the former can suspend the running of the statute of
limitations on collection of the assessed tax, while the latter can not.
The protest letter of petitioner BPI, dated 16 November 1989 and filed with the BIR the next day, on 17
November 1989, did not specifically request for either a reconsideration or reinvestigation. A close
review of the contents thereof would reveal, however, that it protested Assessment No. FAS-5-85-89-
002054 based on a question of law, in particular, whether or not petitioner BPI was liable for DST on its
sales of foreign currency to the Central Bank in taxable year 1985. The same protest letter did not raise
any question of fact; neither did it offer to present any new evidence. In its own letter to petitioner BPI,
dated 10 September 1992, the BIR itself referred to the protest of petitioner BPI as a request for
reconsideration.32 These considerations would lead this Court to deduce that the protest letter of petitioner
BPI was in the nature of a request for reconsideration, rather than a request for reinvestigation and,
consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension of the running of the
statute of limitations should not apply.

65
TAXATION LAW REVIEW
Even if, for the sake of argument, this Court glosses over the distinction between a request for
reconsideration and a request for reinvestigation, and considers the protest of petitioner BPI as a request
for reinvestigation, the filing thereof could not have suspended at once the running of the statute of
limitations. Article 224 of the Tax Code of 1977, as amended, very plainly requires that the request for
reinvestigation had been granted by the BIR Commissioner to suspend the running of the prescriptive
periods for assessment and collection.
That the BIR Commissioner must first grant the request for reinvestigation as a requirement for
suspension of the statute of limitations is even supported by existing jurisprudence.
In the case of Republic of the Philippines v. Gancayco,33 taxpayer Gancayco requested for a thorough
reinvestigation of the assessment against him and placed at the disposal of the Collector of Internal
Revenue all the evidences he had for such purpose; yet, the Collector ignored the request, and the records
and documents were not at all examined. Considering the given facts, this Court pronounced that –
. . .The act of requesting a reinvestigation alone does not suspend the period. The request should first
be granted, in order to effect suspension. (Collector vs. Suyoc Consolidated, supra; also Republic vs.
Ablaza, supra). Moreover, the Collector gave appellee until April 1, 1949, within which to submit his
evidence, which the latter did one day before. There were no impediments on the part of the Collector to
file the collection case from April 1, 1949. . . .34
In Republic of the Philippines v. Acebedo,35 this Court similarly found that –
. . . [T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a
reinvestigation thereof on October 11, 1949 (Exh. A). There is no evidence that this request was
considered or acted upon. In fact, on October 23, 1950 the then Collector of Internal Revenue issued a
warrant of distraint and levy for the full amount of the assessment (Exh. D), but there was no follow-up of
this warrant. Consequently, the request for reinvestigation did not suspend the running of the period for
filing an action for collection.
The burden of proof that the taxpayer’s request for reinvestigation had been actually granted shall be on
respondent BIR Commissioner. The grant may be expressed in communications with the taxpayer or
implied from the actions of the respondent BIR Commissioner or his authorized BIR representatives in
response to the request for reinvestigation.
In Querol v. Collector of Internal Revenue, 36 the BIR, after receiving the protest letters of taxpayer
Querol, sent a tax examiner to San Fernando, Pampanga, to conduct the reinvestigation; as a result of
which, the original assessment against taxpayer Querol was revised by permitting him to deduct
reasonable depreciation. In another case, Republic of the Philippines v. Lopez,37 taxpayer Lopez filed a
total of four petitions for reconsideration and reinvestigation. The first petition was denied by the BIR.
The second and third petitions were granted by the BIR and after each reinvestigation, the assessed
amount was reduced. The fourth petition was again denied and, thereafter, the BIR filed a collection suit
against taxpayer Lopez. When the taxpayers spouses Sison, in Commissioner of Internal Revenue v.
Sison,38 contested the assessment against them and asked for a reinvestigation, the BIR ordered the
reinvestigation resulting in the issuance of an amended assessment. Lastly, in Republic of the Philippines
v. Oquias,39 the BIR granted taxpayer Oquias’s request for reinvestigation and duly notified him of the
date when such reinvestigation would be held; only, neither taxpayer Oquias nor his counsel appeared on
the given date.
In all these cases, the request for reinvestigation of the assessment filed by the taxpayer was evidently
granted and actual reinvestigation was conducted by the BIR, which eventually resulted in the issuance of
an amended assessment. On the basis of these facts, this Court ruled in the same cases that the period

66
TAXATION LAW REVIEW
between the request for reinvestigation and the revised assessment should be subtracted from the total
prescriptive period for the assessment of the tax; and, once the assessment had been reconsidered at the
taxpayer’s instance, the period for collection should begin to run from the date of the reconsidered or
modified assessment.40
The rulings of the foregoing cases do not apply to the present Petition because: (1) the protest filed by
petitioner BPI was a request for reconsideration, not a reinvestigation, of the assessment against it; and
(2) even granting that the protest of petitioner BPI was a request for reinvestigation, there was no showing
that it was granted by respondent BIR Commissioner and that actual reinvestigation had been conducted.
Going back to the administrative records of the present case, it would seem that the BIR, after receiving a
copy of the protest letter of petitioner BPI on 17 November 1989, did not attempt to communicate at all
with the latter until 10 September 1992, less than a month before the prescriptive period for collection on
Assessment No. FAS-5-85-89-002054 was due to expire. There were internal communications, mostly
indorsements of the docket of the case from one BIR division to another; but these hardly fall within the
same sort of acts in the previously discussed cases that satisfactorily demonstrated the grant of the
taxpayer’s request for reinvestigation. Petitioner BPI, in the meantime, was left in the dark as to the status
of its protest in the absence of any word from the BIR. Besides, in its letter to petitioner BPI, dated 10
September 1992, the BIR unwittingly admitted that it had not yet acted on the protest of the former –
This refers to your protest against and/or request for reconsideration of the assessment/s of this Office
against you involving the amount of ₱28,020.00 under FAS-5-85-89-002054 dated October 23, 1989 as
deficiency documentary stamp tax inclusive of compromise penalty for the year 1985.
In this connection, it is requested that the enclosed waiver of the statute of limitations extending the
period of collection of the said tax/es to December 31, 1993 be executed by you as a condition
precedent of our giving due course to your protest…41
When the BIR stated in its letter, dated 10 September 1992, that the waiver of the statute of limitations on
collection was a condition precedent to its giving due course to the request for reconsideration of
petitioner BPI, then it was understood that the grant of such request for reconsideration was being held off
until compliance with the given condition. When petitioner BPI failed to comply with the condition
precedent, which was the execution of the waiver, the logical inference would be that the request was not
granted and was not given due course at all.
2. Submission of relevant documents / 60-day period
xxx

67
TAXATION LAW REVIEW
b. CIR vs. First Express Pawnshop, GR Nos. 172045-06 dated June 16, 2009.
Section 228 of the Tax Code provides:
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided,
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to,
exempt persons.
The taxpayer shall be informed in writing of the law and the facts on which the assessment is made;

relevant supporting documents shall have been submitted; otherwise, the assessment shall become
final.
Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the
one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and
demandable. (Boldfacing supplied)

68
TAXATION LAW REVIEW
Section 228 of the Tax Code provides the remedy to dispute a tax assessment within a certain period of
time. It states that an assessment may be protested by filing a request for reconsideration or
reinvestigation within 30 days from receipt of the assessment by the taxpayer. Within 60 days from filing
of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment
shall become final.
In this case, respondent received the tax assessment on 3 January 2002 and it had until 2 February 2002 to
submit its protest. On 1 February 2002, respondent submitted its protest and attached the GIS and Balance
Sheet as of 31 December 1998. Respondent explained that it received ₱800,000 as a deposit with the
possibility of applying the same as payment for the future issuance of capital stock.
Within 60 days from the filing of protest or until 2 April 2002, respondent should submit relevant
supporting documents. Respondent, having submitted the supporting documents together with its
protest, did not present additional documents anymore.
In a letter dated 12 March 2002, petitioner requested respondent to present proof of payment of DST on
subscription. In a letter-reply, respondent stated that it could not produce any proof of DST payment
because it was not required to pay DST under the law considering that the deposit on subscription was an
advance made by its stockholders for future subscription, and no stock certificates were issued.
Since respondent has not allegedly submitted any relevant supporting documents, petitioner now claims
that the assessment has become final, executory and demandable, hence, unappealable.
We reject petitioner’s view that the assessment has become final and unappealable. It cannot be said that
respondent failed to submit relevant supporting documents that would render the assessment final because
when respondent submitted its protest, respondent attached the GIS and Balance Sheet. Further, petitioner
cannot insist on the submission of proof of DST payment because such document does not exist as
respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription.
The term "relevant supporting documents" should be understood as those documents necessary to support
the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the
taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents
should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the
production of documents that a taxpayer cannot submit.
After respondent submitted its letter-reply stating that it could not comply with the presentation of the
proof of DST payment, no reply was received from petitioner.
Section 228 states that if the protest is not acted upon within 180 days from submission of documents, the
taxpayer adversely affected by the inaction may appeal to the CTA within 30 days from the lapse of the
180-day period. Respondent, having submitted its supporting documents on the same day the protest was
filed, had until 31 July 2002 to wait for petitioner’s reply to its protest. On 28 August 2002 or within 30
days after the lapse of the 180-day period counted from the filing of the protest as the supporting
documents were simultaneously filed, respondent filed a petition before the CTA.
Respondent has complied with the requisites in disputing an assessment pursuant to Section 228 of the
Tax Code. Hence, the tax assessment cannot be considered as final, executory and demandable. Further,
respondent’s deposit on subscription is not subject to the payment of DST. Consequently, respondent is
not liable to pay the deficiency DST of ₱12,328.45.

69
TAXATION LAW REVIEW
F. Decision / Inaction on the Pending Protest / Appeal to the Court of Tax Appeals
1. The 180-day period to Decide
a. Sec. 228 of the NIRC.
exempt persons.

b. RR No. 18-2013 dated November 28, 2013.

70
TAXATION LAW REVIEW
within thirty (30) days from after the expiration of the one hundred eighty (180)-day period; or (ii) await
the final decision of the Commissioner on the disputed assessment and appeal such final decision to the
CTA within thirty (30) days after the receipt of a copy of such decision.
2. Final Decision on a Disputed Assessment (“FDDA”)
3.1.6 Final Decision on a Disputed Assessment (FDDA). — The decision of the Commissioner or his
duly authorized representative shall state the (i) facts, the applicable law, rules and regulations, or
ANNEX “C” hereof), and (ii) that the same is his final decision.
b. CIR vs. Liquigaz Philippines Corporation, GR No. 215534 dated April 18, 2016.
Central to the resolution of the issue is Section 228 [11] of the NIRC and RR No. 12-99,[12] as amended.
They lay out the procedure to be followed in tax assessments. Under Section 228 of the NIRC, a taxpayer
shall be informed in writing of the law and the facts on which the assessment is made, otherwise, the
assessment shall be void. In implementing Section 228 of the NIRC, RR No. 12-99 reiterates the
requirement that a taxpayer must be informed in writing of the law and the facts on which his tax liability
was based, to wit:
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Notice for informal conference. — The Revenue Officer who audited the taxpayer's records shall,
liable for deficiency tax or taxes. If the taxpayer is not amenable, based on the said Officer's submitted
the Special Investigation Division, as the case may be (in the case Revenue Regional Offices) or by the

71
TAXATION LAW REVIEW
in the taxpayer's payment of his internal revenue taxes, for the purpose of "Informal Conference," in order
to afford the taxpayer with an opportunity to present his side of the case. If the taxpayer fails to respond
within.fifteen (15) days from date of receipt of the notice for informal conference, he shall be considered
in default, in which case, the Revenue District Officer or the Chief of the Special Investigation Division
of the Revenue Regional Office, or the Chief of Division in the National Office, as the case may be, shall
endorse the case with the least possible delay to the: Assessment Division of the Revenue Regional Office
or to the Commissioner or his duly authorized representative, as the case may be, for appropriate review
and issuance of a deficiency tax assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN). — If after review and evaluation by the Assessment Division
or by the Commissioner or his duly authorized representative, as the case may be, it is determined that
there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall
issue to the taxpayer, at least by registered, mail, a Preliminary Assessment Notice (PAN) for the
proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on
which the proposed assessment is based (see illustration in ANNEX A hereof). If the taxpayer fails to
respond within fifteen (15) days from date of receipt of the PAN, he shall be considered in default, in
which case, a formal letter of demand and assessment notice shall be caused to be issued by the said
Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
xxx
3.1.4 Formal Letter of Demand and Assessment Notice. — The formal letter of demand and assessment
calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of
demand and assessment notice shall be void (see illustration in ANNEX B hereof), xxx
3.1.5 Disputed Assessment. — The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment notice within thirty (30)
days from date of receipt thereof. If there are several issues involved in the formal letter of demand and
assessment notice but the taxpayer only disputes or protests against the validity of some of-the issues
raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed
issues, in which case, a collection letter shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest. No action shall be taken on the
taxpayer's disputed issues until the taxpayer has paid the deficiency tax or taxes attributable to the said
undisputed issues. The prescriptive period for assessment or collection of the tax or taxes attributable to
the disputed issues shall be suspended, xxx
3.1.6 Administrative Decision on a Disputed Assessment. — The decision of the Commissioner or his

duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or
ANNEX C hereof), in which case, the same shall not be considered a decision on a disputed assessment;
and (b) that the same is his final decision. [Emphases and Underscoring Supplied]
The importance of providing the taxpayer of adequate written notice of his tax liability is undeniable.
Section 228 of the NIRC declares that an assessment is void if the taxpayer is not notified in writing of
the facts and law on which it is made. Again, Section 3.1.4 of RR No. 12-99 requires that the FLD must
state the facts and law on which it is based, otherwise, the FLD/FAN itself shall be void. Meanwhile,
Section 3.1.6 of RR No. 12-99 specifically requires that the decision of the CIR or his duly authorized

72
TAXATION LAW REVIEW
representative on a disputed assessment shall state the facts, law and rules and regulations, or
jurisprudence on which the decision is based. Failure to do so would invalidate the FDDA.
The use of the word "shall" in Section 228 of the NIRC and in RR No. 12-99 indicates that the
requirement of informing the taxpayer of the legal and factual bases of the assessment and the decision
made against him is mandatory. [13] The requirement of providing the taxpayer with written notice of the
factual and legal bases applies both to the FLD/FAN and the FDDA.
Section 228 of the NIRC should not be read restrictively as to limit the written notice only to the
assessment itself. As implemented by RR No. 12-99, the written notice requirement for both the FLD and
the FAN is in observance of due process—to afford the taxpayer adequate opportunity to file a protest on
the assessment and thereafter file an appeal in case of an adverse decision.
To rule otherwise would tolerate abuse and prejudice. Taxpayers will be unable to file an intelligent
appeal before the CTA as they would be unaware on how the CIR or his' authorized representative
appreciated the defense raised in connection with the assessment. On the other hand, it raises the
possibility that the amounts reflected in the FDDA were arbitrarily made if the factual and legal bases
thereof are not shown.
A void FDDA does not

ipso facto render the
assessment void
The CIR arid Liquigaz are at odds with regards to the effect of a void FDDA. Liquigaz harps that a void
FDDA will lead to a void assessment because the FDDA ultimately determines the final tax'liability of
a'taxpayer, which may then be appealed before the CTA. On the other hand, the CIR believes that a void
FDDA does not ipso facto result in the nullification of the assessment.
In resolving the issue on the effects of a void FDDA, it is necessary to differentiate an "assessment" from
a "decision." In St. Stephen's Association v. Collector of Internal Revenue,[14] the Court has long
recognized that a "decision"- differs from an "assessment," to wit:
In the first place, we believe the respondent court erred in holding that the assessment in question is the
respondent Collector's decision or ruling appealable to it, and that consequently, the period of thirty days
prescribed by section li of Republic Act No. 1125 within which petitioner should have appealed to the
respondent court must be counted from its receipt of said assessment. Where a taxpayer questions an
assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he
is not liable therefor, the assessment becomes a "disputed assessment" that the Collector must decide, and
the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on
the disputed assessment, in accordance with paragraph (1) of section 7, Republic Act No. 1125,
conferring appellate jurisdiction upon the Court of Tax Appeals to review "decisions of the Collector of
Internal Revenue in cases involving disputed assessment..."
The difference is likewise readily apparent in Section 7 [15] of R.A. 1125,[16] as amended, where the CTA is
conferred with appellate jurisdiction over the decision of the CIR in cases involving disputed assessments,
as well as inaction of the CIR in disputed assessments. From the foregoing, it is clear that what is
appealable to the CTA is the "decision" of the CIR on disputed assessment and not the assessment itself.
An assessment becomes a disputed assessment after a taxpayer has filed its protest to the assessment in
the administrative level. Thereafter, the CIR either issues a decision on the disputed assessment or fails to
act on it and is, therefore, considered denied. The taxpayer may then appeal the decision on the disputed

73
TAXATION LAW REVIEW
assessment or the inaction of the CIR. As such, the FDDA is not the only means that the final tax liability
of a taxpayer is fixed, which may then be appealed by the taxpayer. Under the law, inaction on the part of
the CIR may likewise result in the finality of a taxpayer's tax liability as it is deemed a denial of the
protest filed by the latter, which may also be appealed before the CTA.
Clearly, a decision of the CIR on a disputed assessment differs from the assessment itself. Hence, the
invalidity of one does not necessarily result to the invalidity of the other—unless the law or regulations
otherwise provide.
Section 228 of the NIRC provides that an assessment shall be void if the taxpayer is not informed in
writing of the law and the facts on which it is based. It is, however, silent with regards to a decision on a
disputed assessment by the CIR which fails to state the law and facts on which it is based. This void is
filled by RR No. 12-99 where it is stated that failure of the FDDA to reflect the facts and law on which it
is based will make the decision void. It, however, does not extend to the nullification of the entire
assessment.
With the effects of a void FDDA expounded, the next issue to be addressed is whether the assailed FDDA
is void for failure to state the facts and law on which it was based.
The FDDA must state the

facts and law on which it
is based to provide the
taxpayer the opportunity
to file an intelligent
appeal
The CIR and Liquigaz are also in disagreement whether the FDDA issued was compliant with the
mandatory requirement of written notice laid out in the law and implementing rules and regulations.
Liquigaz argues that the FDDA is void as it did not contain the factual bases of the assessment and merely
showed the amounts of its alleged tax liabilities.
A perusal of the FDDA issued in the case at bench reveals that it merely contained a table of Liquigaz's
supposed tax liabilities, without providing any details. The CIR explains that the FDDA still complied
with the requirements of the law as it was issued in connection with the PAN and FLD/FAN, which had
an attachment of the details of discrepancies. Hence, the CIR concludes that Liquigaz was sufficiently
informed in writing of the factual bases of the assessment.
The reason for requiring that taxpayers be informed in writing of the facts and law on which the
assessment is made is the constitutional guarantee that no person shall be deprived of his property without
due process of law.[17] Merely notifying the taxpayer of its tax liabilities without elaborating on its details
is insufficient. In CIR v. Reyes,[18] the Court further explained:.
In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of
estate taxes had been made:. She was merely notified of the findings by the CIR, who had simply relied
upon the provisions of former Section 229 prior to its amendment by Republic Act (RA) No. 8424,
otherwise known as the Tax Reform Act of 1997.
First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old
-requirement- of merely notifying the taxpayer of the CIR's findings was changed in 1998 to informing
the taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise,
the assessment itself would be invalid, xxx

74
TAXATION LAW REVIEW
At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer must
be informed of both the law and facts on which the assessment was based. Thus, the CIR should have
required the assessment officers of the Bureau of Internal Revenue (BIR) to follow the clear mandate of
the new law. The old regulation governing the issuance of estate tax assessment notices ran afoul of the
rule that tax regulations — old as they were — should be in harmony with, and not supplant or modify,
the law. Xxx
Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due
process. Not only was the law here disregarded, but no valid notice was sent, either. A void assessment
bears no valid fruit.
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. In the instant case, respondent has not been informed of the basis of the estate tax
liability. Without complying with the unequivocal mandate of first informing the taxpayer of the
government's claim, there can be no deprivation of property, because no effective protest can be
made. The haphazard shot at slapping an assessment, supposedly based on estate taxation's general
provisions that are expected to be known by the taxpayer, is utter chicanery.
Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the
lack of basis for — not to mention the insufficiency of — the gross figures and details of the itemized
deductions indicated in the notice and the letter. This Court cannot countenance an assessment based
on estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the
lifeblood of the government, their assessment .and collection "should be made in accordance with law as
any arbitrariness will negate the very reason for government itself." [Emphases Supplied]
In CIR v. United Salvage and Towage (Phils.), Inc.,[19] the Court struck down an assessment where the
FAN only contained a table of the taxes due without providing further detail thereto, to wit:
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. Petitioner should have at least attached a detailed notice of discrepancy or stated an
explanation why the amount of P48,461.76 is collectible against respondent 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, in consonance with the ruling in Commissioner of Internal Revenue v. Enron Subic
Power Corporation to wit:
The CIR insists that an examination of the facts shows that Enron was properly apprised of its tax
deficiency. During the pre-assessment stage, the CIR advised Enron's representative of the tax deficiency,
informed it of the proposed tax deficiency assessment through a preliminary five-day letter and furnished
Enron a copy of the audit working paper allegedly showing in detail the legal and factual bases of the
assessment. The CIR argues that these steps sufficed to inform Enron of the laws and facts on which the
deficiency tax assessment was based.
We disagree. The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the
preliminary five-day letter, were not valid substitutes for the mandatory notice in writing of the legal and
factual bases of the assessment. These steps were mere perfunctory discharges of the CIR's duties in

75
TAXATION LAW REVIEW
correctly assessing a taxpayer. The requirement for issuing a preliminary or final notice, as the case may
be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the
requirement of what such notice must contain. Just because the CIR issued an advice, a preliminary letter
during the pre-assessment stage and a final notice, in the order required by law, does not necessarily mean
that Enron was informed of the law and facts on which the deficiency tax assessment was made.
The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand
and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228
of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged "factual bases" in the advice,
preliminary letter and "audit working papers" did not suffice. There was no going around the mandate of
the law that the legal and factual bases of the assessment be stated in writing in the formal letter of
demand accompanying the assessment notice.
We note that the old law merely required that the taxpayer be notified of the assessment made by the CIR.
This was changed in 1998 and the taxpayer must now be informed not only of the law but also of the facts
on which the assessment is made. Such amendment is in keeping with the constitutional principle that no '
person shall be deprived of property without due process. In view of the absence of a fair opportunity for
Enron to be informed of the legal and factual bases of the assessment against it, the assessment in
question was void.....
xxx
Applying the aforequoted rulings to the case at bar, it is clear that the assailed deficiency tax assessment
for the EWT in 1994 disregarded the provisions of Section 228 of the Tax Code, as amended, as well as
Section 3.1.4 of Revenue Regulations No. 12-99 by not providing the legal and factual bases of« the
assessment. Hence, the formal letter of demand and the notice of assessment issued relative thereto are
void. [Emphasis Supplied]
Nevertheless, the requirement of providing the taxpayer with written notice of the facts and law used as
basis for the assessment is not to be mechanically. applied. Emphasis on the purpose of the written notice
is important. The requirement should be in place so that the taxpayer could be adequately informed of the
basis of the assessment enabling him to prepare an intelligent protest or appeal of the assessment or
decision. In Samar-I Electric Cooperative v. CIR,[20] the Court elaborated:
The above information provided to petitioner enabled it to protest the PAN by questioning respondent's
interpretation of the laws cited as legal basis for the computation of the deficiency withholding taxes and
assessment of minimum corporate income tax despite petitioner's position that it remains exempt
therefrom. In its letter-reply dated May 27, 2002, respondent answered the arguments raised by petitioner
in its protest, and requested it to pay the assessed deficiency on the date of payment stated in the PAN. A
second protest letter dated June 23, 2002 was sent by petitioner, to which respondent replied (letter dated
July 8, 2002) answering each of the. two issues reiterated by petitioner: (1) validity of EO 93 withdrawing
the tax exemption privileges under PD 269; and (2) retroactive application of RR No. 8-2000. The FAN
was finally received by petitioner on September 24, 2002, and protested by it in a letter dated October 14,
2002 which reiterated in lengthy arguments its earlier interpretation of the laws and regulations upon
which the assessments were based.
Although the FAN and demand letter issued to petitioner were not accompanied by a written explanation

76
TAXATION LAW REVIEW
Thus, substantial compliance with the requirement under Section 228 of the NIRC is permissible,
provided that the taxpayer would be eventually apprised in writing of the factual and legal bases of the
assessment to allow him to file an effective protest against.
The above-cited cases refer to the compliance of the FAN/FLD of the due process requirement embodied
in Section 228 of the NIRC and RR No. 12-99. These may likewise applied to the FDDA, which is
similarly required to include a written notice of the factual and legal bases thereof. Without sounding
repetitious, it is important to note that Section 228 of the NIRC did not limit the requirement of stating the
facts and law only to the FAN/FLD. On the other hand, RR No. 12-99 detailed the process of assessment
and required that both the FAN/FLD and the FDDA state the law and facts on which it is based.
Guided by the foregoing, the Court now turns to the FDDA in issue.
It is undisputed that the FDDA merely showed Liquigaz' tax liabilities without any details on the specific
transactions which gave rise to its supposed tax deficiencies. While it provided for the legal bases of the
assessment, it fell short of informing Liquigaz of the factual bases thereof. Thus, the FDDA as regards the
EWT and FBT tax deficiency did not comply with the requirement in Section 3.1.6 of RR No. 12-99, as
amended, for failure to inform Liquigaz of the factual basis thereof.
The CIR erred in claiming that Liquigaz was informed of the factual bases of the assessment because the
FDDA made reference to the PAN and FAN/FLD, which were accompanied by details of the alleged
discrepancies. The CTA En Banc highlighted that the amounts in the FAN and the FDDA were different.
As pointed out by the CTA, the FLD/FAN and the FDDA reflected the following amounts:
Basic Expanded Withholding Fringe Total

Deficiency Withholding Tax on Benefits Tax
Tax Tax Compensation
Per FLD P3,675,048.78 P2,981,841.84 P9,501,564-07 P16,158,454.72
Per FDDA P1,823,782.67 P2,366,836.98 P7,572,236.16 P11,762,855.81
Difference P1,851,266.11 P615,004.80 P1,929,327.91 P4,395,598.91
As such, the Court agrees with the tax court that it becomes even more imperative that the FDDA contain
details of the discrepancy. Failure to do so would deprive Liquigaz adequate opportunity to prepare an
intelligent appeal. It would have no way of determining what were considered by the CIR in the: defenses
it had raised in the protest to the FLD. Further, without the details of the assessment, it would open the
possibility that the reduction of the assessment could have been arbitrarily or capriciously arrived at.
The Court, however, finds that the CTA erred in concluding that the assessment on EWT and FBT
deficiency was void because the FDDA covering the same was void. The assessment remains valid
notwithstanding the nullity of the FDDA because as discussed above, the assessment itself differs from a
decision on the disputed assessment.
77
TAXATION LAW REVIEW
As established, an FDDA that does not inform the taxpayer in writing of the facts and law on which it is
based renders the decision void. Therefore, it is as if there was no decision rendered by the CIR. It is
tantamount to a denial by inaction by the CIR, which may still be appealed before the CTA and the
assessment evaluated on the basis of the available evidence and documents. The merits of the EWT and
FBT assessment should have been discussed and not merely brushed aside on account of the void FDDA.
On the other hand, the Court agrees that the FDDA substantially informed Liquigaz of its tax liabilities
with regard to its WTC assessment. As highlighted by the CTA, the basis for the assessment was the same
for the FLD and the FDDA, where the salaries reflected in the ITR and the alphalist were compared
resulting in a discrepancy of P9,318,255.84. The change in the amount of assessed deficiency withholding
taxes on compensation merely arose from the modification of the tax rates used— 32% in the FLD and
the effective tax rate of 25.40% in the FDDA. The Court notes it was Liquigaz itself which proposed the
rate of 25.40% as a more appropriate tax rate as it represented the effective tax on compensation paid for
taxable year 2005.[22] As such, Liquigaz was effectively informed in writing of the factual bases of its
assessment for WTC because the basis for the FDDA, with regards to the WTC, was identical with the
FAN— which had a detail of discrepancy attached to it.
Further, the Court sees no reason to reverse the decision of the CTA as to the amount of WTC liability of
Liquigaz. It is a time-honored doctrine that the findings and conclusions of the CTA are accorded the
highest respect and will not be lightly set aside because by the very nature of the CTA, it is dedicated
exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject.
[23]
The issue of Liquigaz' WTC liability had been thoroughly discussed in the courts a quo and even the
court-appointed independent accountant had found that Liquigaz was unable to substantiate its claim
concerning the discrepancies in its WTC.
To recapitulate, a "decision" differs from an "assessment" and failure of the FDDA to state the facts and
law on which it is based renders the decision void—but not necessarily the assessment. Tax laws may not
be extended by implication beyond the clear import of their language, nor their operation enlarged so as
to embrace matters not specifically provided.
3. Inaction during the 180-day period / Appeal to the Court of Tax Appeals

78
TAXATION LAW REVIEW
exempt persons.

b. RR No. 18-2013 dated November 28, 2013.
c. Revised Rules of the CTA, AM No. 05-11-07-CTA dated November 22, 2005, as amended on
September 16, 2008.
d. Lascona Land vs. CIR, GR No. 171251 dated March 5, 2012.
Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the
Commissioner on the protested assessment, to wit:
SEC. 228. Protesting of Assessment. − x x x
xxxx


79
TAXATION LAW REVIEW
Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one
hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable.
(Emphasis supplied).
Respondent, however, insists that in case of the inaction by the Commissioner on the protested
assessment within the 180-day reglementary period, petitioner should have appealed the inaction to the
CTA. Respondent maintains that due to Lascona's failure to file an appeal with the CTA after the lapse of
the 180-day period, the assessment became final and executory.
We do not agree.
In RCBC v. CIR,12 the Court has held that in case the Commissioner failed to act on the disputed
assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1)
file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day
period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such
final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. 13
This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax Appeals, 14 to wit:
SEC. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under
the National Internal Revenue Code or other applicable law provides a specific period for action:
Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue
within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall
be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not
necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case;
Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal
Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the
taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and
Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the
taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under
Section 229 of the National Internal Revenue Code; (Emphasis ours)
In arguing that the assessment became final and executory by the sole reason that petitioner failed to
appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period,
respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just
one, that is - to appeal the inaction of the Commissioner on its protested assessment after the lapse of the
180-day period. This is incorrect.

80
TAXATION LAW REVIEW
As early as the case of CIR v. Villa,15 it was already established that the word "decisions" in paragraph 1,
Section 7 of Republic Act No. 1125, quoted above, has been interpreted to mean the decisions of the
Commissioner of Internal Revenue on the protest of the taxpayer against the assessments. Definitely, said
word does not signify the assessment itself. We quote what this Court said aptly in a previous case:
In the first place, we believe the respondent court erred in holding that the assessment in question is the
respondent Collector's decision or ruling appealable to it, and that consequently, the period of thirty days
prescribed by section 11 of Republic Act No. 1125 within which petitioner should have appealed to the
respondent court must be counted from its receipt of said assessment. Where a taxpayer questions an
assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he
is not liable therefor, the assessment becomes a "disputed assessment" that the Collector must decide, and
the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on
the disputed assessment, . . . 16
Therefore, as in Section 228, 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. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either
positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the
CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a
scenario where the CIR will decide on the protested assessment.
It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while
we reiterate − the taxpayer has two options, either: (1) file a petition for review with the CTA within 30
days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the
disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy
of such decision, these options are mutually exclusive and resort to one bars the application of the
other.
Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the
protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for
review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the
180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed
assessments.17 Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt
of the Letter18 dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within
30 days after receipt of the copy of the decision.
Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its inaction on the
protested assessment. It is imperative that the taxpayers are informed of its action in order that the
taxpayer should then at least be able to take recourse to the tax court at the opportune time. As correctly
pointed out by the tax court:
x x x to adopt the interpretation of the respondent will not only sanction inefficiency, but will likewise
condone the Bureau's inaction. This is especially true in the instant case when despite the fact that
respondent found petitioner's arguments to be in order, the assessment will become final, executory and
demandable for petitioner's failure to appeal before us within the thirty (30) day period.
e. RCBC vs. CIR, GR No. 168498 dated April 24, 2007.
As correctly observed by the Court of Tax Appeals in its Decision dated June 7, 2005:

81
TAXATION LAW REVIEW
If indeed there was negligence, this is obviously on the part of petitioner’s own counsel whose prudence
in handling the case fell short of that required under the circumstances. He was well aware of the motion
filed by the respondent for the Court to resolve first the issue of this Court’s jurisdiction on July 15, 2003,
that a hearing was conducted thereon on August 15, 2003 where both counsels were present and at said
hearing the motion was submitted for resolution. Petitioner’s counsel apparently did not show enthusiasm
in the case he was handling as he should have been vigilant of the outcome of said motion and be
prepared for the necessary action to take whatever the outcome may have been. Such kind of negligence
cannot support petitioner’s claim for relief from judgment.
Besides, tax assessments by tax examiners are presumed correct and made in good faith, and all
presumptions are in favor of the correctness of a tax assessment unless proven otherwise. Also,
petitioner’s failure to file a petition for review with the Court of Tax Appeals within the statutory period
rendered the disputed assessment final, executory and demandable, thereby precluding it from interposing
the defenses of legality or validity of the assessment and prescription of the Government’s right to assess.
The Court of Tax Appeals is a court of special jurisdiction and can only take cognizance of such matters
as are clearly within its jurisdiction. Section 7 of Republic Act (R.A.) No. 9282, amending R.A. No.
1125, otherwise known as the Law Creating the Court of Tax Appeals, provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
be deemed a denial;
Also, Section 3, Rule 4 and Section 3(a), Rule 8 of the Revised Rules of the Court of Tax Appeals state:
RULE 4
Jurisdiction of the Court
xxxx
SECTION 3. Cases Within the Jurisdiction of the Court in Divisions. — The Court in Divisions shall
exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:

82
TAXATION LAW REVIEW
within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall
Section 229 of the National Internal Revenue Code;
xxxx
RULE 8
Procedure in Civil Cases
xxxx
SECTION 3. Who May Appeal; Period to File Petition. — (a) A party adversely affected by a decision,
ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for
refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary
of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the
Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally
collected, the taxpayer must file a petition for review within the two-year period prescribed by law from
payment or collection of the taxes. (n)
From the foregoing, it is clear that the jurisdiction of the Court of Tax Appeals has been expanded to
include not only decisions or rulings but inaction as well of the Commissioner of Internal Revenue. The
decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals
with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such
decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the
Commissioner to act on the disputed assessments. This 30-day period within which to file an appeal is
jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals
of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely
directory but mandatory and it is beyond the power of the courts to extend the same.
In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of
submission of documents, a taxpayer can either: 1) file a petition for review with the Court of Tax
Appeals within 30 days after the expiration of the 180-day period; or 2) await the final decision of the
Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals
within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive,
and resort to one bars the application of the other.

83
TAXATION LAW REVIEW
In the instant case, the Commissioner failed to act on the disputed assessment within 180 days from date
of submission of documents. Thus, petitioner opted to file a petition for review before the Court of Tax
Appeals. Unfortunately, the petition for review was filed out of time, i.e., it was filed more than 30 days
after the lapse of the 180-day period. Consequently, it was dismissed by the Court of Tax Appeals for late
filing. Petitioner did not file a motion for reconsideration or make an appeal; hence, the disputed
assessment became final, demandable and executory.
Based on the foregoing, petitioner can not now claim that the disputed assessment is not yet final as it
remained unacted upon by the Commissioner; that it can still await the final decision of the
Commissioner and thereafter appeal the same to the Court of Tax Appeals. This legal maneuver cannot be
countenanced. After availing the first option, i.e., filing a petition for review which was however filed out
of time, petitioner can not successfully resort to the second option, i.e., awaiting the final decision of the
Commissioner and appealing the same to the Court of Tax Appeals, on the pretext that there is yet no
final decision on the disputed assessment because of the Commissioner’s inaction.
Lastly, we note that petitioner is raising the issue of prescription for the first time in the instant motion for
reconsideration. Although the same was raised in the petition for review, it was dismissed for late filing.
No motion for reconsideration was filed hence the disputed assessment became final, demandable and
executory. Thereafter, petitioner filed with the Court of Tax Appeals a petition for relief from judgment.
However, it failed to raise the issue of prescription therein. After its petition for relief from judgment was
denied by the Court of Tax Appeals for lack of merit, petitioner filed a petition for review before this
Court without raising the issue of prescription. It is only in the instant motion for reconsideration that
petitioner raised the issue of prescription which is not allowed. The rule is well-settled that points of law,
theories, issues and arguments not adequately brought to the attention of the lower court need not be
considered by the reviewing court as they cannot be raised for the first time on appeal, much more in a
motion for reconsideration as in this case, because this would be offensive to the basic rules of fair play,
justice and due process. This last ditch effort to shift to a new theory and raise a new matter in the hope of
a favorable result is a pernicious practice that has consistently been rejected.
f. PAGCOR vs. BIR, GR No. 208731 dated January 27, 2016.
The CTA 1st Division and CTA En Banc both established that PAGCOR received a FAN on 17 January
2008, filed its protest to the FAN addressed to RD Misajon on 24 January 2008, filed yet another protest
addressed to the CIR on 14 August 2008, and then filed a petition before the CTA on 11 March 2009.
There was no action on PAGCOR's protests filed on 24 January 2008 and 14 August 2008. PAGCOR
would like this Court to rule that its protest before the CIR starts a new period from which to determine
the last day to file its petition before the CTA.
The CIR, on the other hand, denied PAGCOR's claims of exemption with the issuance of its 18 July 2011
letter. The letter asked PAGCOR to settle its obligation of P46,589,507.65, which consisted of tax,
surcharge and interest. PAGCOR's failure to settle its obligation would result in the issuance of a Warrant
of Distraint and/or Levy and a Warrant of Garnishment.
The relevant portions of Section 228 of the NIRC of 1997 provide:
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: x x x.
xxxx

84
TAXATION LAW REVIEW

Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section 228 above, provides:
3.1.5. Disputed Assessment. - The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment notice within thirty (30)
days from date of receipt thereof.xx x.
xxxx
If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within
thirty (30) days from date of receipt thereof, the assessment shall become final, executory and
demandable.
If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the Court of
Tax Appeals within thirty (30) days from the date of receipt of the said decision, otherwise, the
assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized
representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of
receipt of the said decision, otherwise, the assessment shall become final executory and demandable:
Provided, however, that if the taxpayer elevates his protest to the Commissioner within thirty (30) days
from date of receipt of the final decision of the Commissioner's duly authorized representative, the latter's
decision shall not be considered final, executory and demandable, in which case, the protest shall be
decided by the Commissioner.
If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one
hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support
of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse
of the said 180-day period, otherwise the assessment shall become final, executory and demandable.
Following the verba legis doctrine, the law must be applied exactly as worded since it is clear, plain, and
unequivocal. A textual reading of Section 3.1.5 gives a protesting taxpayer like PAGCOR only three
options:

85
TAXATION LAW REVIEW
1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the
taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial of the protest.
2. If the protest is wholly or partially denied by the CIR's authorized representative, then the taxpayer may
appeal to the CIR within 30 days from receipt of the whole or partial denial of the protest.
3. If the CIR or his authorized representative failed to act upon the protest within 180 days from
submission of the required supporting documents, then the taxpayer may appeal to the CTA within 30
days from the lapse of the 180-day period.
To further clarify the three options: A whole or partial denial by the CIR's authorized representative may
be appealed to the CIR or the CTA. A whole or partial denial by the CIR may be appealed to the CTA.
The CIR or the CIR's authorized representative's failure to act may be appealed to the CTA. There is no
mention of an appeal to the CIR from the failure to act by the CIR's authorized representative.
PAGCOR did not wait for the RD or the CIR's decision on its protest. PAGCOR made
separate and successive filings before the RD and the CIR before it filed its petition with the CTA. We
shall illustrate below how PAGCOR failed to follow the clear directive of Section 228 and Section 3.1.5.
PAGCOR's protest to the RD on 24 January 2008 was filed within the 30-day period prescribed in Section
228 and Section 3.1.5. The RD did not release any decision on PAGCOR's protest; thus, PAGCOR was
unable to make use of the first option as described above to justify an appeal to the CTA. The effect of the
lack of decision from the RD is the same, whether we consider PAGCOR's April 2008 submission of
documents or not.
Under the third option described above, even if we grant leeway to PAGCOR and consider its unspecified
April 2008 submission, PAGCOR still should have waited for the RD's decision until 27 October 2008, or
180 days from 30 April 2008. PAGCOR then had 30 days from 27 October 2008, or until 26 November
2008, to file its petition before the CTA. PAGCOR, however, did not make use of the third option.
PAGCOR did not file a petition before the CTA on or before 26 November 2008.
Under the second option, PAGCOR ought to have waited for the RD's whole or partial denial of its
protest before it filed an appeal before the CIR. PAGCOR rendered the second option moot when it
formulated its own rule and chose to ignore the clear text of Section 3.1.5. PAGCOR "elevated an appeal"
to the CIR on 13 August 2008 without any decision from the RD, then filed a petition before the CTA on
11 March 2009. A textual reading of Section 228 and Section 3 .1.5 will readily show that neither Section
228 nor Section 3 .1.5 provides for the remedy of an appeal to the CIR in case of the RD's failure to act.
The third option states that the remedy for failure to act by the CIR or his authorized representative is to
file an appeal to the CTA within 30 days after the lapse of 180 days from the submission of the required
supporting documents. PAGCOR clearly failed to do this.
If we consider, for the sake of argument, PAGCOR's submission before the CIR as a separate protest and
not as an appeal, then such protest should be denied for having been filed out of time. PAGCOR only had
30 days from 17 January 2008 within which to file its protest. This period ended on 16 February 2008.
PAGCOR filed its submission before the CIR on 13 August 2008.
When PAGCOR filed its petition before the CTA, it is clear that PAGCOR failed to make use of any of
the three options described above. A petition before the CTA may only be made after a whole or
partial denial of the protest by the CIR or the CIR's authorized representative. When PAGCOR
filed its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's protest by

86
TAXATION LAW REVIEW
either the RD or the CIR. Therefore, under the first option, PAGCOR's petition before the CTA had no
cause of action because it was prematurely filed. The CIR made an unequivocal denial of PAGCOR's
protest only on 18 July 2011, when the CIR sought to collect from PAGCOR the amount of
P46,589,507.65. The CIR's denial further puts PAGCOR in a bind, because it can no longer amend its
petition before the CTA.
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied by
an amended or supplemental pleading alleging the existence or accrual of a cause of action while the case
is pending. Such an action is prematurely brought and is, therefore, a groundless suit, which should be
dismissed by the court upon proper motion seasonably filed by the defendant. The underlying reason for
this rule is that a person should not be summoned before the public tribunals to answer for complaints
which are [premature]. As this Court eloquently said in Surigao Mine Exploration Co., Inc. v. Harris:
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at
all there must be some cause of action at the commencement of the suit. As observed by counsel for
appellees, there are reasons of public policy why there should be no needless haste in bringing up
litigation, and why people who are in no default and against whom there is yet no cause of action should
not be summoned before the public tribunals to answer complaints which are groundless. We say
groundless because if the action is [premature], it should not be entertained, and an action prematurely
brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals which are
thereby regarded as abandoned (Reynes vs. Compañia General de Tabacos [1912], 21 Phil. 416; Ruyman
and Farris vs. Director of Lands [1916], 34 Phil. 428) and that "the complaint and answer having been
superseded by the amended complaint and answer thereto, and the answer to the original complaint not
having been presented in evidence as an exhibit, the trial court was not authorized to take it into
account." (Bastida vs. Menzi & Co. [1933], 58 Phil. 188.) But in none of these cases or in any other case
have we held that if a right of action did not exist when the original complaint was filed, one could be
created by filing an amended complaint. In some jurisdictions in the United States what was termed an
"imperfect cause of action" could be perfected by suitable amendment (Brown vs. Galena Mining &
Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this is virtually permitted
in Banzon and Rosaura vs. Sellner ([1933], 58 Phil. 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935],
62 Phil. 683); and recently in Ramos vs. Gibbon (38 Off. Gaz. 241). That, however, which is no cause of
action whatsoever cannot by amendment or supplemental pleading be converted into a cause of
action: Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting cause of
action at the time his action is commenced, the defect cannot be cured or remedied by the acquisition or
accrual of one while the action is pending, and a supplemental complaint or an amendment setting up
such after-accrued cause of action is not permissible. (Italics ours)
PAGCOR has clearly failed to comply with the requisites in disputing an assessment as provided by
Section 228 and Section 3.1.5. Indeed, PAGCOR's lapses in procedure have made the BIR's assessment
final, executory and demandable, thus obviating the need to further discuss the issue of the propriety of
imposition of fringe benefits tax.
g. Fishwealth Canning Corp. vs. CIR, GR No. 179343 dated January 21, 2010.
Section 228 of the 1997 Tax Code provides that an assessment

87
TAXATION LAW REVIEW
x x x 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.
demandable. (underscoring supplied)1avvphi1
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.
On petitioner’s final contention that it has a meritorious case in view of the dismissal of the above-
mentioned criminal case filed against it for violation of the 1997 Internal Revenue Code, the same fails.
For the criminal complaint was instituted not to demand payment, but to penalize the taxpayer for
violation of the Tax Code.
h. Allied Banking Corporation vs. CIR, GR No. 175097 dated February 5, 2010.
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within
its jurisdiction.21 Section 7 of RA 9282 provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
be deemed a denial; (Emphasis supplied)
xxxx

88
TAXATION LAW REVIEW
The word "decisions" in the above quoted provision of RA 9282 has been interpreted to mean the
decisions of the CIR on the protest of the taxpayer against the assessments. 22 Corollary thereto, Section
228 of the National Internal Revenue Code (NIRC) provides for the procedure for protesting an
assessment. It states:
SECTION 228. Protesting of Assessment. – When the Commissioner or his duly authorized representative
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to,
exempt persons.

relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR
issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the NIRC, the
proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30
days from receipt thereof. Petitioner, however, did not protest the final assessment notices. Instead, it
filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the Petition
for Review by the CTA was proper.

89
TAXATION LAW REVIEW
The case is an exception to the

rule on exhaustion of administrative remedies
However, 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 the case of Vda. De Tan v. Veterans Backpay Commission, 23 the respondent contended that before
filing a petition with the court, petitioner should have first exhausted all administrative remedies by
appealing to the Office of the President. However, we ruled that respondent was estopped from invoking
the rule on exhaustion of administrative remedies considering that in its Resolution, it said, "The opinions
promulgated by the Secretary of Justice are advisory in nature, which may either be accepted or ignored
by the office seeking the opinion, and any aggrieved party has the court for recourse". The statement of
the respondent in said case led the petitioner to conclude that only a final judicial ruling in her favor
would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for Review
was premature because petitioner failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1. That the said assessment has already prescribed in accordance with the provisions of Section 203 of the
Tax Code.
2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted, the
wording of Section 28(A)(7)(b) discloses that there are no other taxes imposable upon FCDUs aside from
the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001 has not
prescribed for [sic] simply because no returns were filed, thus, the three year prescriptive period has not
lapsed.
With the implementation of the CTRP, the phrase "exempt from all taxes" was deleted. Please refer to
Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you were assessed for deficiency gross
receipts tax on onshore income from foreign currency transactions in accordance with the rates provided
under Section 121 of the said Tax Code. Likewise, deficiency documentary stamp taxes was [sic] also
assessed on Loan Agreements, Bills Purchased, Certificate of Deposits and related transactions pursuant
to Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision of Section 248(A) and
249(b), respectively, of the National Internal Revenue Code, as amended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of
penalties incident to delinquency. 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. 24 (Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision on the matter
and that the remedy of petitioner is to appeal the final decision within 30 days.

90
TAXATION LAW REVIEW
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, 25 we considered the language
used and the tenor of the letter sent to the taxpayer as the final decision of the CIR.
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. 26 Viewed in the light of the foregoing, respondent is now
estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to
be a final decision.
Moreover, we cannot ignore the fact that in the 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. As aptly pointed out by petitioner, 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, 27 likewise uses the term "appeal" when referring to the
action a taxpayer must take when adversely affected by a decision, ruling, or inaction of the CIR. As we
see it then, petitioner in appealing the Formal Letter of Demand with Assessment Notices to the CTA
merely took the cue from respondent. Besides, any doubt in the interpretation or use of the word "appeal"
in the Formal Letter of Demand with Assessment Notices should be resolved in favor of petitioner, and
not the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as
implemented by Section 3 of BIR Revenue Regulations No. 12-99. 28 It is the Formal Letter of Demand
and Assessment Notice that must be administratively protested or disputed within 30 days, and not the
PAN. Neither are we deviating from our pronouncement in St. Stephen’s Chinese Girl’s School v.
Collector of Internal Revenue,29 that the counting of the 30 days within which to institute an appeal in the
CTA commences from the date of receipt of the decision of the CIR on the disputed assessment, not from
the date the assessment was issued.
What we are saying in this particular case is 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.
We note, however, that during the pendency of the instant case, petitioner availed of the provisions of
Revenue Regulations No. 30-2002 and its implementing Revenue Memorandum Order by submitting an
offer of compromise for the settlement of the GRT, DST and VAT for the period 1998-2003, as
evidenced by a Certificate of Availment dated November 21, 2007. Accordingly, there is no reason to
reinstate the Petition for Review in CTA Case No. 7062.
4. Administrative Appeal with the CIR

91
TAXATION LAW REVIEW
within thirty (30) days from after the expiration of the one hundred eighty (180)-day period; or (ii) await
the final decision of the Commissioner on the disputed assessment and appeal such final decision to the
CTA within thirty (30) days after the receipt of a copy of such decision.
G. Collection / Remedies of the Government
1. Prescriptive period to collect
a. Secs. 222(C) and 222(A) of the NIRC.

92
TAXATION LAW REVIEW
(b) xxx
(d) xxx
2. Administrative remedies / Summary Remedies / Judicial Collection
a. Secs. 205 and 220 of the NIRC.
Section 205. Remedies for the Collection of Delinquent Taxes. - The civil remedies for the collection of
internal revenue taxes, fees or charges, and any increment thereto resulting from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts and interest in and rights to personal property,
and by levy upon real property and interest in rights to real property; and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in the discretion of the authorities
charged with the collection of such taxes: Provided, however, That the remedies of distraint and levy shall
not be availed of where the amount of tax involve is not more than One hundred pesos (P100).
The judgment in the criminal case shall not only impose the penalty but shall also order payment of the
taxes subject of the criminal case as finally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means
of civil or criminal action, including the preservation or transportation of personal property distrained and
the advertisement and sale thereof, as well as of real property and improvements thereon.
Section 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and criminal
actions and proceedings instituted in behalf of the Government under the authority of this Code or other
law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the
Philippines and shall be conducted by legal officers of the Bureau of Internal Revenue but no civil or
criminal action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this
Code shall be filed in court without the approval of the Commissioner.
b. Republic vs. Hizon, GR No. 130430 dated December 13, 1997.
First. In sustaining respondent's contention that petitioner's complaint was filed without the authority of
the BIR Commissioner, the trial court stated:

93
TAXATION LAW REVIEW
There is no question that the National Internal Revenue Code explicitly provides that in the matter of
filing cases in Court, civil or criminal, for the collection of taxes, etc., the approval of the commissioner
must first be secured. . . . [A]n action will not prosper in the absence of the commissioner's approval.
Thus, in the instant case, the absence of the approval of the commissioner in the institution of the action is
fatal to the cause of the plaintiff . . . .
The trial court arrived at this conclusion because the complaint filed by the BIR was not signed by then
Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
Form and mode of proceeding in actions arising under this Code. — Civil and criminal actions and
proceedings instituted in behalf of the Government under the authority of this Code or other law enforced
by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and
shall be conducted by the provincial or city fiscal, or the Solicitor General, or by the legal officers of the
Bureau of Internal Revenue deputized by the Secretary of Justice, but no civil and criminal actions for the
recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall begun
without the approval of the Commissioner. (Emphasis supplied)
To implement this provision Revenue Administrative Order No. 5-83 of the BIR provides in pertinent
portions:
The following civil and criminal cases are to be handled by Special Attorneys and Special Counsels
assigned in the Legal Branches of Revenues Regions:
x x x x x x x x x
II. Civil Cases
1. Complaints for collection on cases falling within the jurisdiction of the Region . . . .
In all the abovementioned cases, the Regional Director is authorized to sign all pleadings filed in
connection therewith which, otherwise, requires the signature of the Commissioner.
x x x x x x x x x
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and Prosecution Section of
the Legal Division of regional district offices to institute the necessary civil and criminal actions for tax
collection. As the complaint filed in this case was signed by the BIR's Chief of Legal Division for Region
4 and verified by the Regional Director, there was, therefore, compliance with the law.
However, the lower court refused to recognize RAO No. 10-95 and, by implication, RAO No. 5-83. It
held:
[M]emorand[a], circulars and orders emanating from bureaus and agencies whether in the purely public or
quasi-public corporations are mere guidelines for the internal functioning of the said offices. They are not
laws which courts can take judicial notice of. As such, they have no binding effect upon the courts for
such memorand[a] and circulars are not the official acts of the legislative, executive and judicial
departments of the Philippines. . . . 5

94
TAXATION LAW REVIEW
This is erroneous. The rule is that as long as administrative issuances relate solely to carrying into effect
the provisions of the law, they are valid and have the force of law. 6 The governing statutory provision in
this case is §4(d) of the NIRC which provides:
Specific provisions to be contained in regulations. — The regulations of the Bureau of Internal Revenue
shall, among other things, contain provisions specifying, prescribing, or defining:
x x x x x x x x x
(d) The conditions to be observed by revenue officers, provincial fiscals and other officials respecting the
institution and conduct of legal actions and proceedings.
RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the present Code
authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of
the Code to any subordinate official with the rank equivalent to a division chief or higher, except the
following:
(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of
the Bureau;
(c) The power to compromise or abate under §204 (A) and (B) of this Code, any tax
deficiency: Provided, however, that assessment issued by the Regional Offices involving basic deficiency
taxes of five hundred thousand pesos (P500,000.00) or less, and minor criminal violations as may be
determined by rules and regulations to be promulgated by the Secretary of Finance, upon the
recommendation of the Commissioner, discovered by regional and district officials, may be compromised
by a regional evaluation board which shall be composed of the Regional Director as Chairman, the
Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue
District Officer having jurisdiction over the taxpayer, as members; and
(d) The power to assign or reassign internal revenue officers to establishments where articles subject to
excise tax are produced or kept.
None of the exceptions relates to the Commissioner's power to approve the filing of tax collection cases.
Second. With regard to the issue that the case filed by petitioner for the collection of respondent's tax
deficiency is barred by prescription, §223(c) of the NIRC provides:
Any internal revenue tax which has been assessed within the period of limitation above-prescribed may
be collected by distraint or levy or by a proceeding in court within three years 7 following the assessment
of the tax.
The running of the three-year prescriptive period is suspended 8 —
for the period during which the Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address

95
TAXATION LAW REVIEW
given by him in the return filed upon which the tax is being assessed or collected; provided, that, if the
taxpayer informs the Commissioner of any change in address, the running of the statute of limitations will
not be suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative or a member of his household with sufficient discretion, and no property could be located;
and when the taxpayer is out of the Philippines.
Petitioner argues that, in accordance with this provision, respondent's request for reinvestigation of her
tax deficiency assessment on November 3, 1992 effectively suspended the running of the period of
prescription such that the government could still file a case for tax collection. 9
The contention has no merit. Sec. 229 10 of the Code mandates that a request for reconsideration must be
made within 30 days from the taxpayer's receipt of the tax deficiency assessment, otherwise the
assessment becomes final, unappealable and, therefore, demandable. 11 The notice of assessment for
respondent's tax deficiency was issued by petitioner on July 18, 1986. On the other hand, respondent
made her request for reconsideration thereof only on November 3, 1992, without stating when she
received the notice of tax assessment. She explained that she was constrained to ask for a reconsideration
in order to avoid the harassment of BIR collectors. 12 In all likelihood, she must have been referring to the
distraint and levy of her properties by petitioner's agents which took place on January 12, 1989. Even
assuming that she first learned of the deficiency assessment on this date, her request for reconsideration
was nonetheless filed late since she made it more than 30 days thereafter. Hence, her request for
reconsideration did not suspend the running of the prescriptive period provided under §223(c). Although
the Commissioner acted on her request by eventually denying it on August 11, 1994, this is of no moment
and does not detract from the fact that the assessment had long become demandable.
Nonetheless, it is contended that the running of the prescriptive period under §223(c) was suspended
when the BIR timely served the warrants of distraint and levy on respondent on January 12,
1989. 13 Petitioner cites for this purpose our ruling in Advertising Associates Inc., v. Court of
Appeals. 14 Because of the suspension, it is argued that the BIR could still avail of the other remedy under
§223(c) of filing a case in court for collection of the tax deficiency, as the BIR in fact did on January 1,
1997.
Petitioner's reliance on the Court's ruling in Advertising Associates Inc. v. Court of Appeals is misplaced.
What the Court stated in that case and, indeed, in the earlier case of Palanca v. Commissioner of Internal
Revenue, 15 is that the timely service of a warrant of distraint or levy suspends the running of the period to
collect the tax deficiency in the sense that the disposition of the attached properties might well take time
to accomplish, extending even after the lapse of the statutory period for collection. In those cases, the BIR
did not file any collection case but merely relied on the summary remedy of distraint and levy to collect
the tax deficiency. The importance of this fact was not lost on the Court. Thus, in Advertising Associates,
it was held: 16 "It should be noted that the Commissioner did not institute any judicial proceeding to
collect the tax. He relied on the warrants of distraint and levy to interrupt the running of the statute of
limitations.
Moreover, if, as petitioner in effect says, the prescriptive period was suspended twice, i.e., when the
warrants of distraint and levy were served on respondent on January 12, 1989 and then when respondent
made her request for reinvestigation of the tax deficiency assessment on November 3, 1992, the three-
year prescriptive period must have commenced running again sometime after the service of the warrants
of distraint and levy. Petitioner, however, does not state when or why this took place and, indeed, there
appears to be no reason for such. It is noteworthy that petitioner raised this point before the lower court
apparently as an alternative theory, which, however, is untenable.

96
TAXATION LAW REVIEW
For the foregoing reasons, we hold that petitioner's contention that the action in this case had not
prescribed when filed has no merit. Our holding, however, is without prejudice to the disposition of the
properties covered by the warrants of distraint and levy which petitioner served on respondent, as such
would be a mere continuation of the summary remedy it had timely begun. Although considerable time
has passed since then, as held in Advertising Associates Inc. v. Court of Appeals 17 and Palanca
v. Commissioner of Internal Revenue, 18 the enforcement of tax collection through summary proceedings
may be carried out beyond the statutory period considering that such remedy was seasonably availed of.
c. CIR vs. Hambrecht & Quist Philippines, Inc., GR No. 169225 dated November 17, 2010.
Anent the first issue, petitioner argues that the CTA had no jurisdiction over the case since the CTA itself
had ruled that the assessment had become final and unappealable. Citing Protector’s Services, Inc. v.
Court of Appeals,6 the CIR argued that, after the lapse of the 30-day period to protest, respondent may no
longer dispute the correctness of the assessment and its appeal to the CTA should be dismissed. The CIR
took issue with the CTA’s pronouncement that it had jurisdiction to decide "other matters" related to the
tax assessment such as the issue on the right to collect the same since the CIR maintains that when the
law says that the CTA has jurisdiction over "other matters," it presupposes that the tax assessment has not
become final and unappealable.
We cannot countenance the CIR’s assertion with regard to this point. The jurisdiction of the CTA is
governed by Section 7 of Republic Act No. 1125, as amended, and the term "other matters" referred to by
the CIR in its argument can be found in number (1) of the aforementioned provision, to wit:
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided –
of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law as part of law administered by the
Bureau of Internal Revenue. (Emphasis supplied.)
Plainly, the assailed CTA En Banc Decision was correct in declaring that there was nothing in the
foregoing provision upon which petitioner’s theory with regard to the parameters of the term "other
matters" can be supported or even deduced. What is rather clearly apparent, however, is that the term
"other matters" is limited only by the qualifying phrase that follows it.
Thus, on the strength of such observation, we have previously ruled that the appellate jurisdiction of the
CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or
refunds. The second part of the provision covers other cases that arise out of the National Internal
Revenue Code (NIRC) or related laws administered by the Bureau of Internal Revenue (BIR). 7
In the case at bar, the issue at hand is whether or not the BIR’s right to collect taxes had already
prescribed and that is a subject matter falling under Section 223(c) of the 1986 NIRC, the law applicable
at the time the disputed assessment was made. To quote Section 223(c):

97
TAXATION LAW REVIEW
Any internal revenue tax which has been assessed within the period of limitation above-prescribed may
be collected by distraint or levy or by a proceeding in court within three years following the assessment
of the tax. (Emphases supplied.)
In connection therewith, Section 3 of the 1986 NIRC states that the collection of taxes is one of the duties
of the BIR, to wit:
Sec. 3. Powers and duties of Bureau. - The powers and duties of the Bureau of Internal Revenue shall
comprehend the assessment and collection of all national internal revenue taxes, fees, and charges and
the enforcement of all forfeitures, penalties, and fines connected therewith including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said
Bureau shall also give effect to and administer the supervisory and police power conferred to it by this
Code or other laws. (Emphasis supplied.)
Thus, from the foregoing, the issue of prescription of the BIR’s right to collect taxes may be considered
as covered by the term "other matters" over which the CTA has appellate jurisdiction.
Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTA’s jurisdiction
over disputed assessments and over "other matters" arising under the NIRC or other laws administered by
the BIR as separate and independent of each other. This runs counter to petitioner’s theory that the latter
is qualified by the status of the former, i.e., an "other matter" must not be a final and unappealable tax
assessment or, alternatively, must be a disputed assessment.
Likewise, the first paragraph of Section 11 of Republic Act No. 1125, as amended by Republic Act No.
9282, belies petitioner’s assertion as the provision is explicit that, for as long as a party is adversely
affected by any decision, ruling or inaction of petitioner, said party may file an appeal with the CTA
within 30 days from receipt of such decision or ruling. The wording of the provision does not take into
account the CIR’s restrictive interpretation as it clearly provides that the mere existence of an adverse
decision, ruling or inaction along with the timely filing of an appeal operates to validate the exercise of
jurisdiction by the CTA.
To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest within
the time allowed only means that the validity or correctness of the assessment may no longer be
questioned on appeal. However, the validity of the assessment itself is a separate and distinct issue from
the issue of whether the right of the CIR to collect the validly assessed tax has prescribed. This issue of
prescription, being a matter provided for by the NIRC, is well within the jurisdiction of the CTA to
decide.
3. No injunction to restrain collection of taxes
Section 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the authority to
grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed
by this Code.
b. Rule 10, Revised Rules of the CTA, AM No. 05-11-07-CTA dated November 22, 2005, as amended on
September 16, 2008.
RULE 10
SUSPENSION OF COLLECTION OF TAX

98
TAXATION LAW REVIEW
SECTION 1. No suspension of collection of tax, except as herein prescribed. - No appeal taken to the
Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the
satisfaction of tax liability as provided under existing laws, except as hereinafter prescribed. (a) (As
amended on September 16, 2008)
SEC. 2. Who may file. – Where the collection of the amount of the taxpayer’s liability, sought by means
of a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by whatever means,
as provided under existing laws, may jeopardized the interest of the Government or the taxpayer, an
interested party may file a motion for the suspension of the collection of the tax liability. (RCTA, Rule
12, sec. 1a)
SEC. 3. When to file. – The motion for the suspension of the collection of the tax may be filed together
with the petition for review or with the answer, or in a separate motion filed by the interested party at any
stage of the proceedings. (RCTA, Rule 12, sec. 2)
SEC. 4. Contents and attachments of the motion. – The motion for the suspension of the collection of the
tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon in support
of the motion. Affidavits and other documentary evidence in support thereof shall be attached thereto,
which, if uncontroverted, would be admissible in evidence as proof of the facts alleged in the motion.
(RCTA, Rule 12, sec. 3a)
SEC. 5. Opposition. – Unless a shorter period is fixed by the Court because of the urgency of the motion,
the adverse party shall, within five days after receipt of a copy of the motion, file an opposition thereto, if
any, which shall state clearly and distinctly the facts and the grounds relied upon in support of the
opposition. (RCTA, Rule 12, sec. 4)
SEC. 6. Hearing of the motion. – The movant shall, upon receipt of the opposition, set the motion for
hearing at the next available motion day, and the Court shall give preference to the motion over all other
cases, except criminal cases. At the hearing, both parties shall submit their respective evidence. If
warranted, the Court may grant the motion if the movant shall deposit with the Court an amount in cash
equal to the value of the property or goods under dispute or filing with the Court of an acceptable surety
bond in an amount not more than double the disputed amount or value. However, for the sake of
expediency, the Court, motu proprio or upon motion of the parties, may consolidate the hearing of the
motion for the suspension of the collection of the tax with the hearing on the merits of the case. (RCTA,
Rule 12, sec. 5a)
SEC. 7. Corporate surety bonds. – In the selection and qualification of surety companies, the parties and
the Court shall be guided by Supreme Court Circular A.M. No. 04-7-02-SC, dated July 20, 2004. (n)
c. Spouses Pacquiao vs. the CTA, GR No. 213394 dated April 6, 2016.
Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, [53] embodies the rule that an appeal to the
CTA from the decision of the CIR will not suspend the payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction of his tax liability as provided by existing law. When, in the
view of the CTA, the collection may jeopardize the interest of the Government and/or the taxpayer, it may
suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a
surety bond.

99
TAXATION LAW REVIEW
The application of the exception to the rule is the crux of the subject controversy. Specifically, Section 11
provides:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central
Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty
(30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for
action as referred to in Section 7(a)(2) herein.
xxxx
No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the
Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may
be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided by existing law:
Provided, however, That when in the opinion of the Court the collection by the aforementioned
government agencies may jeopardize the interest of the Government and/or the taxpayer, the Court
at any stage of the proceeding may suspend the said collection and require the taxpayer either to
deposit the amount claimed or to file a surety bond for not more than double the amount with the
Court.
xxxx
[Emphasis Supplied]
Essentially, the petitioners ascribe grave abuse of discretion on the part of the CTA when it issued the
subject resolutions requiring them to deposit-the amount of P3,298,514,894.35 or post a bond in the
amount of P4,947,772,341.53 as a condition for its order enjoining the CIR from collecting the taxes from
them. The petitioners anchor their contention on the premise that the assessment and collection processes
employed by the CIR in exacting their tax liabilities were in patent violation of their constitutional right to
due process of law. They, thus, posit that pursuant to Avelino and Zulueta, the tax court should have not
only ordered the CIR to suspend the collection efforts it was pursuing in satisfaction of their tax liability,
but also dispensed with the requirement of depositing a cash or filing a surety bond.
To recall, the Court in Avelino upheld the decision of the CTA to declare the warrants of garnishment,
distraint and levy and the notice of sale of the properties of Jose Avelino null and void and ordered the
CIR to desist from collecting the deficiency income taxes which were assessed for the years 1946 to 1948
through summary administrative methods. The Court therein found that the demand of the then CIR was
made without authority of law because it was made five (5) years and thirty-five (35) days after the last
two returns of Jose Avelino were filed - clearly beyond the three (3)-year prescriptive period provided
under what was then Section 51(d) of the National Internal Revenue Code. Dismissing the contention of
the CIR that the deposit of the amount claimed or the filing of a bond as required by law was a requisite
before relief was granted, the Court therein concurred with the opinion of the CTA that the courts were
clothed with authority to dispense with the requirement "if the method employed by the Collector of
Internal Revenue in the collection of tax is not sanctioned by law."[54]
In Zulueta, the Court likewise dismissed the argument that the CTA erred in issuing the injunction

100
TAXATION LAW REVIEW
without requiring the taxpayer either to deposit the amount claimed or to file a surety bond for an amount
not more than double the tax sought to be collected. The Court cited Collector of Internal Revenue v.
Aurelio P. Reyes and the Court of Tax Appeals[55] where it was written:
Xxx. At first blush it might be as contended by the Solicitor General, but a careful analysis of the second
paragraph of said Section 11 will lead Us to the conclusion that the requirement of the bond as a condition
precedent to the issuance of a writ of injunction applies only in cases where the processes by which the
collection sought to be made by means thereof are carried out in consonance with law for such cases
provided and not when said processes are obviously in violation of the law to the extreme that they have
to be SUSPENDED for jeopardizing the interests of the taxpayer.[56] [Italics included]
The Court went on to explain the reason for empowering the courts to issue such injunctive writs. It
wrote:
"Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the collection
by summary proceedings is by itself in accordance with existing laws; and then what is suspended is the
act of collecting, whereas, in the case at bar what the respondent Court suspended was the use of the
method employed to verify the collection which was evidently illegal after the lapse of the three-year
limitation period. The respondent Court issued the injunction in question on the basis of its findings that
the means intended to be used by petitioner in the collection of the alleged deficiency taxes were in
violation of law. It would certainly be an absurdity on the part of the Court of Tax Appeals to
declare that the collection by the summary methods of distraint and levy was violative of the law,
and then, on the same breath require the petitioner to deposit or file a bond as a prerequisite of the
issuance of a writ of injunction. Let us suppose, for the sake of argument, that the Court a quo would
have required the petitioner to post the bond in question and that the taxpayer would refuse or fail to
furnish said bond, would the Court a quo be obliged to authorize or allow the Collector of Internal
Revenue to proceed with the collection from the petitioner of the taxes due by a means it previously
declared to be contrary to law?"[57] [Italics included. Emphases and Underlining Supplied]
Thus, despite the amendments to the law, the Court still holds that the CTA has ample authority to issue
injunctive writs to restrain the collection of tax and to even dispense with the deposit of the amount
claimed or the filing of the required bond, whenever the method employed by the CIR in the collection
of. tax jeopardizes the interests of a taxpayer for being patently in violation of the law. Such authority
emanates from the jurisdiction conferred to it not only by Section 11 of R.A. No. 1125, but also by
Section 7 of the same law, which, as amended provides:
Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise:
l. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue or other laws administered by the Bureau of Internal
Revenue;
x x x x [Emphasis Supplied]
From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to restrain the
collection of tax and to dispense with the deposit of the amount claimed or the filing of the required
bond is not simply confined to cases where prescription has set in. As explained by the Court in those

101
TAXATION LAW REVIEW
cases, whenever it is determined by the courts that the method employed by the Collector of Internal
Revenue in the collection of tax is not sanctioned by law, the bond requirement under Section 11 of
R.A. No. 1125 should be dispensed with. The purpose of the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly, to prevent the absurd situation wherein the court would
declare "that the collection by the summary methods of distraint and levy was violative of law, and then,
in the same breath require the petitioner to deposit or file a bond as a prerequisite for the issuance of a
writ of injunction."[58]
The determination of whether

the petitioners.' case falls
within the exception provided
under Section 11, R.A No. 1125
cannot be determined
at this point
Applying the foregoing precepts to the subject controversy, the Court finds no sufficient basis in the
records for the Court to determine whether the dispensation of the required cash deposit or bond provided
under Section 11, R.A No. 1125 is appropriate.
It should first be highlighted that in rendering the assailed resolution, the CTA, without stating the facts
and law, made a determination that the illegality of the methods employed by the CIR to effect the
collection of tax was not patent. To quote the CTA:
In this case, the alleged illegality of the methods employed by respondent to effect the collection of tax is
not at all patent or evident as in the foregoing cases. At this early stage of the proceedings, it is
premature for this Court to rule on the issues of whether or not the warrants were defectively issued; or
whether the service thereof was done in violation of the rules; or whether or not respondent's assessments
were valid. These matters are evidentiary in nature, the resolution of which can only be made after
a full blown trial.
Apropos, the Court finds no legal basis to apply Avelino and Zulueta to the instant case and exempt
petitioners from depositing a cash bond or filing a surety bond before a suspension order may be effected.
[59]
Though it may be true that it would have been premature for the CTA to immediately determine whether
the assessment made against the petitioners was valid or whether the warrants were properly issued and
served, still, it behooved upon the CTA to properly determine, at least preliminarily, whether the
CIR, in its assessment of the tax liability of the petitioners, and its effort of collecting the same, complied
with the law and the pertinent issuances of the BIR itself. The CTA should have conducted a
preliminary hearing and received evidence so it could have properly determined whether the requirement
of providing the required security under Section 11, R.A. No. 1125 could be reduced or dispensed
with pendente lite.
The Court cannot make a

preliminary determination
on whether the CIR used
methods not sanctioned by law
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual

102
TAXATION LAW REVIEW
finding and settle the issue of whether the petitioners should comply with the security requirement under
Section 11, R.A. No. 1125. The determination of whether the methods, employed by the CIR in its
assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a question
of fact that calls for the reception of evidence which would serve as basis. In this regard, the CTA is in
a better position to initiate this given its time and resources. The remand of the "case to the CTA on this
question is, therefore, more sensible and proper.
For the Court to make any finding of fact on this point would be premature. As stated earlier, there is no
evidentiary basis. All the arguments are mere allegations from both sides. Moreover, any finding by the
Court would pre-empt the CTA from properly exercising its jurisdiction and settle the main issues
presented before it, that is, whether the petitioners were afforded due process; whether the CIR has valid
basis for its assessment; and whether the petitioners should be held liable for the deficiency taxes.
Petition to be remanded to
the CTA; CTA to conduct
preliminary hearing
As the CTA is in a better, position to make such a preliminary determination, a remand to the CTA is in
order. To resolve the issue of whether the petitioners should be required to post the security bond under
Section 11 of R.A. No. 1125, and, if so, in what, amount, the CTA must take into account, among others,
the following:
First. Whether the requirement of a Notice of Informal Conference was complied with - The petitioners
contend that the BIR issued the PAN without first sending a NIC to petitioners. One of the first
requirements of Section 3 of Revenue Regulation (R.R.) No. 12-99,[60] the then prevailing regulation on
the due process requirement in tax audits and/or investigation, [61] is that a NIC be first accorded to the
taxpayer. The use of the word "shall" in subsection 3.1.1 describes the mandatory nature of the service of
a NIC. As with the other notices required under the regulation, the purpose of sending a NIC is but part of
the "due process requirement in the issuance of a deficiency tax assessment," the absence of which
renders nugatory any assessment made by the tax authorities. [62]
Second. Whether the 15-year period subject of the CIR's investigation is arbitrary and excessive . -
Section 203[63] of the Tax Code provides a 3-year limit for the assessment. of internal revenue taxes.
While the prescriptive period to assess deficiency taxes may be extended to 10 years in cases where there
is false, fraudulent, or non-filing of a tax return - the fraud contemplated by law must be actual. It must be
intentional, consisting of deception willfully and deliberately done or resorted to in order to induce
another to give up some right.[64]
Third. Whether fraud was duly established. - In its letter, dated December 13, 2010, the NID had been
conducting a fraud investigation against the petitioners under its RATE program and that it found that
"fraud had been established in the instant case as determined by the Commissioner." Under Revenue
Memorandum Order (RMO) No. 27-10, it is required that a preliminary investigation must first be
conducted before a LA is issued. [65]
Fourth. Whether the FLD issued against the petitioners was irregular. - The FLD issued against the
petitioners allegedly stated that the amounts therein were "estimates based on best possible sources." A
taxpayer should be informed in writing of the law and the facts on which the assessment is made,
otherwise, the assessment is void. [66]An assessment, in order to stand judicial scrutiny, must be based on
facts. The presumption of the correctness of an assessment, being a mere presumption, cannot be made to
rest on another presumption.[67]

103
TAXATION LAW REVIEW
To stress, the petitioners had asserted that the assessment of the CIR was not based on actual transactions
but on "estimates based on best possible sources." This assertion has not been satisfactorily addressed
by the CIR in detail. Thus, there is a need for the CTA to conduct a preliminary hearing.
Fifth. Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint and/or Levy were validly
issued. In its hearing, the CTA must also determine if the following allegations of the petitioners have
merit:,
a. The FDDA and PCL were issued against petitioner Pacquiao only. The Warrant of Distraint and/or
Levy/Garnishment issued by the CIR, however, were made against the assets of both petitioners;
b. The warrants of garnishment had been served on the banks of both petitioners even before the
petitioners received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the petitioners was allegedly made prior to
the expiration of the period allowed for the petitioners to pay the assessed deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners failed to take into consideration
that the deficiency VAT was already paid in full; and
e. Petitioners were not given a copy of the Warrants. Sections 207[68] and 208[69] of the Tax Code
require the Warrant of Distraint and/or Levy/Garnishment be served upon the taxpayer.
Additional Factors
In case the CTA finds that the petitioners should provide the necessary security under Section 11 of R.A.
1125, a recomputation of the amount thereof is in order.- If there would be a need for a bond or to reduce
the same, the CTA should take note that the Court, in A.M. No. 15-92-01-CTA, resolved to approve the
CTA En Banc Resolution No. 02-2015, where the phrase "amount claimed" stated in Section 11 of R.A.
No. 1125 was construed to refer to the principal amount of the deficiency taxes, excluding penalties,
interests and surcharges.
Moreover, the CTA should also consider the claim of the petitioners that they already paid a total of
P32,196,534.40 deficiency VAT assessed against' them.. Despite said payment, the CIR still assessed
them the total amount of P3,298,514,894.35, including the amount assessed as VAT deficiency, plus
surcharges, penalties and interest. If so, these should also be deducted from the amount of the bond to be
computed and required.
In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power of
the State to tax and its right to prosecute perceived transgressors of the law, on one side; and the
constitutional rights of petitioners to due process of law and the equal protection of the laws, on the other.
In case of doubt, the tax court must remember that as in all tax cases, such scale should favor the
taxpayer, for a citizen's right to due process and equal protection of the law is amply protected by the Bill
of Rights under the Constitution.
d. Tridharma Marketing Corporation vs. CTA, GR No. 215950 dated June 20, 2016.

104
TAXATION LAW REVIEW
Section 11 of Republic Act No. 1125 (R.A. No. 1125), 15 as amended by Republic Act No. 9282 (RA
9282)16it is stated that:
Sec. 11. Who may appeal; effect of appeal. — x x x
xxxx
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or the
Collector of Customs shall suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That
when in the opinion of the Court the collection by the Bureau of Internal Revenue or the
Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer the
Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to
deposit the amount claimed or to file a surety bond for not more than double the amount with the
Court. (bold Emphasis supplied.)
Clearly, the CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1)
deposits the amount claimed; or (2) files a surety bond for not more than double the amount.
The petitioner argues that the surety bond amounting to P4,467,391,881.76 greatly exceeds its net worth
and makes it legally impossible to procure the bond from bonding companies that are limited in their risk
assumptions.17 As shown in its audited financial statements for the year ending December 31, 2013, its net
worth only amounted to P916,768,767.00,18 making the amount of P4,467,391,881.76 fixed for the bond
nearly five times greater than such net worth.
The surety bond amounting to P4,467,391,881.76 imposed by the CTA was within the parameters
delineated in Section 11 of R.A. 1125, as amended. The Court holds, however, that the CTA in Division
gravely abused its discretion under Section 11 because it fixed the amount of the bond at nearly five times
the net worth of the petitioner without conducting a preliminary hearing to ascertain whether there were
grounds to suspend the collection of the deficiency assessment on the ground that such collection would
jeopardize the interests of the taxpayer. Although the amount of P4,467,391,881.76 was itself the amount
of the assessment, it behoved the CTA in Division to consider other factors recognized by the law itself
towards suspending the collection of the assessment, like whether or not the assessment would jeopardize
the interest of the taxpayer, or whether the means adopted by the CIR in determining the liability of the
taxpayer was legal and valid. Simply prescribing such high amount of the bond like the initial 150% of
the deficiency assessment of P4,467,391,881.76 (or P6,701,087,822.64), or later on even reducing the
amount of the bond to equal the deficiency assessment would practically deny to the petitioner the
meaningful opportunity to contest the validity of the assessments, and would likely even impoverish it as
to force it out of business.
At this juncture, it becomes imperative to reiterate the principle that the power to tax is not the power to
destroy. In Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue,19 the Court has
stressed that:
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who is to pay it. So potent
indeed is the power that it was once opined that the power to tax involves the power to destroy.
Petitioner claims that the assessed DST to date which amounts to P376 million is way beyond its net

105
TAXATION LAW REVIEW
worth of P259 million. Respondent never disputed these assertions. Given the realities on the ground,
imposing the DST on petitioner would be highly oppressive. It is not the purpose of the government to
throttle private business. On the contrary, the government ought to encourage private enterprise.
Petitioner, just like any concern organized for a lawful economic activity, has a right to maintain a
legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally
and uniformly, lest the tax collector "kill the hen that lays the golden egg."
Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses
because of a tax imposition may be an acceptable consequence but killing the business of an entity is
another matter and should not be allowed. It is counter productive and ultimately subversive of the
nation's thrust towards a better economy which will ultimately benefit the majority of our people.
Moreover, Section 11 of R.A. 1125, as amended, indicates that the requirement of the bond as a condition
precedent to suspension of the collection applies only in cases where the processes by which the
collection sought to be made by means thereof are carried out in consonance with the law, not when the
processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of
the taxpayer.
The petitioner submits that the patent illegality of the assessment was sufficient ground to dispense with
the bond requirement because the CIR was essentially taxing its sales revenues without allowing the
deduction of the cost of goods sold by virtue of the CIR refusing to consider evidence showing that it had
really incurred costs.21 However, the Court is not in the position to rule on the correctness of the
deficiency assessment, which is a matter still pending in the CTA. Conformably with the pronouncement
in Pacquiao v. Court of Tax Appeals, First Division, and the Commissioner of Internal Revenue,22 a ruling
that has precedential value herein, the Court deems it best to remand the matter involving the petitioner's
plea against the correctness of the deficiency assessment to the CTA for the conduct of a preliminary
hearing in order to determine whether the required surety bond should be dispensed with or reduced.
In Pacquiao, the petitioners were issued deficiency IT and VAT assessments for 2008 and 2009 in the
aggregate amount of P2,261,217,439.92, which amount was above their net worth of P1,185,984,697.00
as reported in their joint Statement of Assets, Liabilities and Net Worth (SALN). They had paid the VAT
assessments but appealed to the CTA the IT assessments. Notwithstanding their appeal, the CIR still
initiated collection proceedings against them by issuing warrants of distraint or levy against their
properties, and warrants of garnishment against their bank accounts. As a consequence, they went to the
CTA through an urgent motion to lift the warrants and to suspend the collection of taxes. The CTA in
Division found the motion to suspend tax collection meritorious, and lifted the warrant of distraint or levy
and garnishment on the condition that they post a cash bond of P3,298,514,894.35, or surety bond of
P4,947,772,341.53. They thus came to the Court to challenge the order to post the cash or surety bond as
a condition for the suspension of collection of their deficiency taxes. In resolving their petition, the Court
held and disposed:
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual
finding and settle the issue of whether the petitioners should comply with the security requirement under
Section 11, R.A. No. 1125. The determination of whether the methods, employed by the CIR in its
assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a question
of fact that calls for the reception of evidence which would serve as basis. In this regard, the CTA is in

106
TAXATION LAW REVIEW
a better position to initiate this given its time and resources. The remand of the case to the CTA on this
question is, therefore, more sensible and proper.
For the Court to make any finding of fact on this point would be premature. As stated earlier, there is no
evidentiary basis. All the arguments are mere allegations from both sides. Moreover, any finding by the
Court would pre-empt the CTA from properly exercising its jurisdiction and settle the main issues
presented before it, that is, whether the petitioners were afforded due process; whether the CIR has valid
basis for its assessment; and whether the petitioners should be held liable for the deficiency taxes.
xxxx
In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power of
the State to tax and its right to prosecute perceived transgressors of the law, on one side; and the
constitutional rights of petitioners to due process of law and the equal protection of the laws, on the other.
In case of doubt, the tax court must remember that as in all tax cases, such scale should favor the
taxpayer, for a citizen's right to due process and equal protection of the law is amply protected by the Bill
of Rights under the Constitution.
Consequently, to prevent undue and irreparable damage to the normal business operations of the
petitioner, the remand to the CTA of the questions involving the suspension of collection and the correct
amount of the bond is the proper course of action.
H. Claims for refund and credit of taxes
1. Taxpayer / Withholding Agent / Proper Party to file the claim for refund
a. CIR vs. Smart Communications, Inc., GR Nos. 179045-46 dated August 25, 2010.
Sections 204(c) and 229 of the National Internal Revenue Code (NIRC) provide:
Sec. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. – The
Commissioner may –
xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund
the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in
his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their
value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the
taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the
payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be maintained
in any court for the recovery of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without
authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a

107
TAXATION LAW REVIEW
claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of
payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided,
however, That the Commissioner may, even without a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment appears clearly to have
been erroneously paid. (Emphasis supplied)
Pursuant to the foregoing, the person entitled to claim a tax refund is the taxpayer. However, in case the
taxpayer does not file a claim for refund, the withholding agent may file the claim.
In Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation, 40 a
withholding agent was considered a proper party to file a claim for refund of the withheld taxes of its
foreign parent company. Pertinent portions of the Decision read:
The term "taxpayer" is defined in our NIRC as referring to "any person subject to tax imposed by the Title
[on Tax on Income]." It thus becomes important to note that under Section 53(c) 41 of the NIRC, the
withholding agent who is "required to deduct and withhold any tax" is made "personally liable for such
tax" and indeed is indemnified against any claims and demands which the stockholder might wish to
make in questioning the amount of payments effected by the withholding agent in accordance with the
provisions of the NIRC. The withholding agent, P&G-Phil., is directly and independently liable for the
correct amount of the tax that should be withheld from the dividend remittances. The withholding agent
is, moreover, subject to and liable for deficiency assessments, surcharges and penalties should the amount
of the tax withheld be finally found to be less than the amount that should have been withheld under law.
A "person liable for tax" has been held to be a "person subject to tax" and properly considered a
"taxpayer." The terms "liable for tax" and "subject to tax" both connote legal obligation or duty to pay a
tax. It is very difficult, indeed conceptually impossible, to consider a person who is statutorily made
"liable for tax" as not "subject to tax." By any reasonable standard, such a person should be regarded as a
party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes he
believes were illegally collected from him.
In Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, this Court pointed out that a
withholding agent is in fact the agent both of the government and of the taxpayer, and that the
withholding agent is not an ordinary government agent:
"The law sets no condition for the personal liability of the withholding agent to attach. The reason is to
compel the withholding agent to withhold the tax under all circumstances. In effect, the responsibility for
the collection of the tax as well as the payment thereof is concentrated upon the person over whom the
Government has jurisdiction. Thus, the withholding agent is constituted the agent of both the Government
and the taxpayer. With respect to the collection and/or withholding of the tax, he is the Government’s
agent. In regard to the filing of the necessary income tax return and the payment of the tax to the
Government, he is the agent of the taxpayer. The withholding agent, therefore, is no ordinary government
agent especially because under Section 53 (c) he is held personally liable for the tax he is duty bound to
withhold; whereas the Commissioner and his deputies are not made liable by law."
If, as pointed out in Philippine Guaranty, the withholding agent is also an agent of the beneficial owner of
the dividends with respect to the filing of the necessary income tax return and with respect to actual
payment of the tax to the government, such authority may reasonably be held to include the authority to
file a claim for refund and to bring an action for recovery of such claim. This implied authority is

108
TAXATION LAW REVIEW
especially warranted where, as in the instant case, the withholding agent is the wholly owned subsidiary
of the parent-stockholder and therefore, at all times, under the effective control of such parent-
stockholder. In the circumstances of this case, it seems particularly unreal to deny the implied authority of
P&G-Phil. to claim a refund and to commence an action for such refund.
xxxx
We believe and so hold that, under the circumstances of this case, P&G-Phil. is properly regarded as a
"taxpayer" within the meaning of Section 309, 42 NIRC, and as impliedly authorized to file the claim for
refund and the suit to recover such claim. (Emphasis supplied.)
Petitioner, however, submits that this ruling applies only when the withholding agent and the taxpayer are
related parties, i.e., where the withholding agent is a wholly owned subsidiary of the taxpayer.
We do not agree.
Although such relation between the taxpayer and the withholding agent is a factor that increases the
latter’s legal interest to file a claim for refund, there is nothing in the decision to suggest that such
relationship is required or that the lack of such relation deprives the withholding agent of the right to file a
claim for refund. Rather, what is clear in the decision is that a withholding agent has a legal right to file a
claim for refund for two reasons. First, he is considered a "taxpayer" under the NIRC as he is personally
liable for the withholding tax as well as for deficiency assessments, surcharges, and penalties, should the
amount of the tax withheld be finally found to be less than the amount that should have been withheld
under law. Second, as an agent of the taxpayer, his authority to file the necessary income tax return and to
remit the tax withheld to the government impliedly includes the authority to file a claim for refund and to
bring an action for recovery of such claim.
In this connection, it is however significant to add that while the withholding agent has the right to
recover the taxes erroneously or illegally collected, he nevertheless has the obligation to remit the same to
the principal taxpayer. As an agent of the taxpayer, it is his duty to return what he has recovered;
otherwise, he would be unjustly enriching himself at the expense of the principal taxpayer from whom the
taxes were withheld, and from whom he derives his legal right to file a claim for refund.
As to Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue 43 cited by the petitioner, we find
the same inapplicable as it involves excise taxes, not withholding taxes. In that case, it was ruled that the
proper party to question, or seek a refund of, an indirect tax "is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another."
In view of the foregoing, we find no error on the part of the CTA in upholding respondent’s right as a
withholding agent to file a claim for refund.
b. Honda Cars Philippines, Inc. vs. Honda Cars Technical Specialist and Supervisors Union, GR No.
204142 dated November 19, 2014.
Under paragraph 1, Section 4 of the NIRC, the CIR shall have the exclusive and original jurisdiction to
interpret the provisions of the NIRC and other tax laws, subject to review by the Secretary of Finance.
Consequently, if the company and/or the union desire/s to seek clarification of these issues, it/they should
have requested for a tax ruling17 from the Bureau of Internal Revenue (BIR). Any revocation,
modification or reversal of the CIR’s ruling shall not be given retroactive application if the revocation,
modification or reversal will be prejudicial to the taxpayers, except in the following cases:

109
TAXATION LAW REVIEW
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any document
required of him by the BIR;
(b) Where the facts subsequently gathered by the BIR are materially different from the facts on which the
ruling is based; or
(c) Where the taxpayer acted in bad faith. 18
On the other hand, if the union disputes the withholding of tax and desires a refund of the withheld tax, it
should have filed an administrative claim for refund with the CIR. Paragraph 2, Section 4 of the NIRC
expressly vests the CIR original jurisdiction over refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other tax matters. The union has no cause of action against the
company
Under the withholding tax system, the employer as the withholding agent acts as both the government and
the taxpayer’s agent. Except in the case of a minimum wage earner, every employer has the duty to
deduct and withhold upon the employee’s wages a tax determined in accordance with the rules and
regulations to be prescribed by the Secretary of Finance, upon the CIR’s recommendation. As the
Government’s agent, the employer collects tax and serves as the payee by fiction of law. As the
employee’s agent, the employer files the necessary income tax return and remits the tax to the
Government.
Based on these considerations, we hold that the union has no cause of action against the company. The
company merely performed its statutory duty to withhold tax based on its interpretation of the NIRC,
albeit that interpretation may later be found to be erroneous. The employer did not violate the employee's
right by the mere act of withholding the tax that may be due the government.
Moreover, the NIRC only holds the withholding agent personally liable for the tax arising from the breach
of his legal duty to withhold, as distinguished from his duty to pay tax. Under Section 79 (B) of the
NIRC, if the tax required to be deducted and withheld is not collected from the employer, the employer
shall not be relieved from liability for any penalty or addition to the unwithheld tax.
Thus, if the BIR illegally or erroneously collected tax, the recourse of the taxpayer, and in proper cases,
the withholding agent, is against the BIR, and not against the withholding agent. The union's cause of
action for the refund or non-withholding of tax is against the taxing authority, and not against the
employer. Section 229 of the NIRC provides:
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained
in any court for the recovery of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without
authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
c. Diageo Philippines, Inc. vs. CIR, GR No. 183553. (Perlas-Bernabe)
As defined in Section 22(N) of the Tax Code, a taxpayer means any person subject to tax. He is,
therefore, the person legally liable to file a return and pay the tax as provided for in Section 130(A). As
such, he is the person entitled to claim a refund.

110
TAXATION LAW REVIEW
Relevant is Section 204(C) of the Tax Code which provides:
Section 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes.- The
Commissioner may -
xxxx
his discretion, redeem or change unused stamps that have been rendered unfit for use and refined their
payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be
considered as a written claim for credit or refund. (Emphasis supplied)
Pursuant to the foregoing, the person entitled to claim a tax refund is the statutory taxpayer or the person
liable for or subject to tax. 29 In the present case, it is not disputed that the supplier of Diageo imported the
subject raw alcohol, hence, it was the one directly liable and obligated to file a return and pay the excise
taxes under the Tax Code before the goods or products are removed from the customs house. It is,
therefore, the statutory taxpayer as contemplated by law and remains to be so, even if it shifts the burden
of tax to Diageo. Consequently, the right to claim a refund, if legally allowed, belongs to it and cannot be
transferred to another, in this case Diageo, without any clear provision of law allowing the same.
Unlike the law on Value Added Tax which allows the subsequent purchaser under the tax credit method
to refund or credit input taxes passed on to it by a supplier, 30 no provision for excise taxes exists granting
non-statutory taxpayer like Diageo to claim a refund or credit. It should also be stressed that when the
excise taxes were included in the purchase price of the goods sold to Diageo, the same was no longer in
the nature of a tax but already formed part of the cost of the goods.
Finally, statutes granting tax exemptions are construed stricissimi juris against the taxpayer and liberally
in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language
in law too plain to be mistaken.31 Unfortunately, Diageo failed to meet the burden of proof that it is
covered by the exemption granted under Section 130(D) of the Tax Code.
In sum, Diageo, not being the party statutorily liable to pay excise taxes and having failed to prove that it
is covered by the exemption granted under Section 130(D) of the Tax Code, is not the proper party to
claim a refund or credit of the excise taxes paid on the ingredients of its exported locally produced liquor.
d. PAL vs. CIR, GR No. 198759 dated July 1, 2013. (Perlas-Bernabe)
The CIR argues that PAL has no personality to file the subject tax refund claim because it is not the
statutory taxpayer. As basis, it relies on the Silkair ruling which enunciates that the proper party to
question, or to seek a refund of an indirect tax, is the statutory taxpayer, or the person on whom the tax is
imposed by law and who paid the same, even if the burden to pay such was shifted to another. 19
PAL counters that the doctrine laid down in Silkair is inapplicable, asserting that it has the legal
personality to file the subject tax refund claim on account of its tax exemption privileges under its
legislative franchise which covers both direct and indirect taxes. In support thereof, it cites the case of
Maceda v. Macaraig, Jr.20 (Maceda).

111
TAXATION LAW REVIEW
The Court agrees with PAL.
Under Section 129 of the National Internal Revenue Code (NIRC), 21 as amended, excise taxes are
imposed on two (2) kinds of goods, namely: (a) goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition; and (b) things imported. 22
With respect to the first kind of goods, Section 130 of the NIRC states that, unless otherwise specifically
allowed, the taxpayer obligated to file the return and pay the excise taxes due thereon is the
manufacturer/producer.23
On the other hand, with respect to the second kind of goods, Section 131 of the NIRC states that the
taxpayer obligated to file the return and pay the excise taxes due thereon is the owner or importer, unless
the imported articles are exempt from excise taxes and the person found to be in possession of the same is
other than those legally entitled to such tax exemption. 24
While the NIRC mandates the foregoing persons to pay the applicable excise taxes directly to the
government, they may, however, shift the economic burden of such payments to someone else – usually
the purchaser of the goods – since excise taxes are considered as a kind of indirect tax.
Jurisprudence states that indirect taxes are those which are demanded in the first instance from one person
with the expectation and intention that he can shift the economic burden to someone else. 25 In this regard,
the statutory taxpayer can transfer to its customers the value of the excise taxes it paid or would be liable
to pay to the government by treating it as part of the cost of the goods and tacking it on to the selling
price.26 Notably, this shifting process, otherwise known as "passing on," is largely a contractual affair
between the parties. Meaning, even if the purchaser effectively pays the value of the tax, the
manufacturer/producer (in case of goods manufactured or produced in the Philippines for domestic sales
or consumption or for any other disposition) or the owner or importer (in case of imported goods) are still
regarded as the statutory taxpayers under the law. To this end, the purchaser does not really pay the tax;
rather, he only pays the seller more for the goods because of the latter’s obligation to the government as
the statutory taxpayer.27
In this relation, Section 204(c)28 of the NIRC states that it is the statutory taxpayer which has the legal
personality to file a claim for refund. Accordingly, in cases involving excise tax exemptions on petroleum
products under Section 13529 of the NIRC, the Court has consistently held that it is the statutory taxpayer
who is entitled to claim a tax refund based thereon and not the party who merely bears its economic
burden.30
For instance, in the Silkair case, Silkair (Singapore) Pte. Ltd. (Silkair Singapore) filed a claim for tax
refund based on Section 135(b) of the NIRC as well as Article 4(2) 31 of the Air Transport Agreement
between the Government of the Republic of the Philippines and the Government of the Republic of
Singapore. The Court denied Silkair Singapore’s refund claim since the tax exemptions under both
provisions were conferred on the statutory taxpayer, and not the party who merely bears its economic
burden. As such, it was the Petron Corporation (the statutory taxpayer in that case) which was entitled to
invoke the applicable tax exemptions and not Silkair Singapore which merely shouldered the economic
burden of the tax. As explained in Silkair:
The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.
Section 130(A)(2) of the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be

112
TAXATION LAW REVIEW
filed and the excise tax paid by the manufacturer or producer before removal of domestic products from
place of production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to
claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport
Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to
Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser. 32 (Emphasis
supplied)
However, the abovementioned rule should not apply to instances where the law clearly grants the party to
which the economic burden of the tax is shifted an exemption from both direct and indirect
taxes.1âwphi1 In which case, the latter must be allowed to claim a tax refund even if it is not considered
as the statutory taxpayer under the law. Precisely, this is the peculiar circumstance which differentiates
the Maceda case from Silkair.
To elucidate, in Maceda, the Court upheld the National Power Corporation’s (NPC) claim for a tax refund
since its own charter specifically granted it an exemption from both direct and indirect taxes, viz:
x x x [T]he Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to
pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the
economic burden of such taxation is expected to be passed on through the channels of commerce to the
user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct and
indirect taxation, the NPC must be held exempted from absorbing the economic burden of indirect
taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all or part
of the economic burden of the taxes previously paid to BIR, which they could shift to NPC if NPC did not
enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to pay
the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes
previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil
companies — because to do so may be more convenient and ultimately less costly for NPC than NPC
itself importing and hauling and storing the oil from overseas — NPC is entitled to be reimbursed by the
BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil
company-vendor to the BIR.33(Emphasis and underscoring supplied)
Notably, the Court even discussed the Maceda ruling in Silkair, highlighting the relevance of the
exemptions in NPC’s charter to its claim for tax refund:
Silkair nevertheless argues that it is exempt from indirect taxes because the Air Transport Agreement
between RP and Singapore grants exemption "from the same customs duties, inspection fees and other
duties or taxes imposed in the territory of the first Contracting Party." It invokes Maceda v. Macaraig, Jr.
which upheld the claim for tax credit or refund by the National Power Corporation (NPC) on the ground
that the NPC is exempt even from the payment of indirect taxes.
Silkair’s argument does not persuade. In Commissioner of Internal Revenue v. Philippine Long Distance
Telephone Company, this Court clarified the ruling in Maceda v. Macaraig, Jr., viz:
It may be so that in Maceda vs. Macaraig, Jr., the Court held that an exemption from "all taxes" granted to
the National Power Corporation (NPC) under its charter includes both direct and indirect taxes. But far
from providing PLDT comfort, Maceda in fact supports the case of herein petitioner, the correct lesson of
Maceda being that an exemption from "all taxes" excludes indirect taxes, unless the exempting statute,
like NPC’s charter, is so couched as to include indirect tax from the exemption. Wrote the Court:

113
TAXATION LAW REVIEW
x x x However, the amendment under Republic Act No. 6395 enumerated the details covered by the
exemption. Subsequently, P.D. 380, made even more specific the details of the exemption of NPC to
cover, among others, both direct and indirect taxes on all petroleum products used in its operation.
Presidential Decree No. 938 [NPC’s amended charter] amended the tax exemption by simplifying the
same law in general terms. It succinctly exempts NPC from "all forms of taxes, duties[,] fees…"
The use of the phrase "all forms" of taxes demonstrates the intention of the law to give NPC all the tax
exemptions it has been enjoying before. . .
xxxx
It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax exemption of NPC
from all forms of taxes including indirect taxes as provided under R.A. No. 6395 and P.D. 380 if it is to
attain its goals.
The exemption granted under Section 135(b) of the NIRC of 1997 and Article 4(2) of the Air Transport
Agreement between RP and Singapore cannot, without a clear showing of legislative intent, be construed
as including indirect taxes. Statutes granting tax exemptions must be construed in strictissimi juris against
the taxpayer and liberally in favor of the taxing authority, and if an exemption is found to exist, it must
not be enlarged by construction. 34(Emphasis and underscoring supplied)
Based on these rulings, it may be observed that the propriety of a tax refund claim is hinged on the kind
of exemption which forms its basis. If the law confers an exemption from both direct or indirect taxes, a
claimant is entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the
other hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded
as the proper party to file the refund claim.
In this case, PAL’s franchise grants it an exemption from both direct and indirect taxes on its purchase of
petroleum products. Section 13 thereof reads:
SEC. 13. In consideration of the franchise and rights hereby granted, the grantee [PAL] shall pay to the
Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder
will result in a lower tax:
(a) The basic corporate income tax based on the grantee's annual net taxable income computed in
accordance with the provisions of the National Internal Revenue Code; or
(b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources,
without distinction as to transport or nontransport operations; provided, that with respect to international
air-transport service, only the gross passenger, mail, and freight revenues from its outgoing flights shall
be subject to this tax.
The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties,
royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed,
levied, established, assessed, or collected by any municipal, city, provincial, or national authority or
government agency, now or in the future, including but not limited to the following:
1. All taxes, duties, charges, royalties, or fees due on local purchases by the grantee of aviation gas, fuel,
and oil, whether refined or in crude form, and whether such taxes, duties, charges, royalties, or fees are

114
TAXATION LAW REVIEW
directly due from or imposable upon the purchaser or the seller, producer, manufacturer, or importer of
said petroleum products but are billed or passed on the grantee either as part of the price or cost thereof or
by mutual agreement or other arrangement; provided, that all such purchases by, sales or deliveries of
aviation gas, fuel, and oil to the grantee shall be for exclusive use in its transport and nontransport
operations and other activities incidental thereto;
2. All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by
the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering
supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or
materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its
transport and transport operations and other activities incidental thereto and are not locally available in
reasonable quantity, quality, or price; (Emphasis and underscoring supplied)
xxxx
Based on the above-cited provision, PAL’s payment of either the basic corporate income tax or franchise
tax, whichever is lower, shall be in lieu of all other taxes, duties, royalties, registration, license, and other
fees and charges, except only real property tax. 35 The phrase "in lieu of all other taxes" includes but is not
limited to taxes that are "directly due from or imposable upon the purchaser or the seller, producer,
manufacturer, or importer of said petroleum products but are billed or passed on the grantee either as part
of the price or cost thereof or by mutual agreement or other arrangement." 36 In other words, in view of
PAL’s payment of either the basic corporate income tax or franchise tax, whichever is lower, PAL is
exempt from paying: (a) taxes directly due from or imposable upon it as the purchaser of the subject
petroleum products; and (b) the cost of the taxes billed or passed on to it by the seller, producer,
manufacturer, or importer of the said products either as part of the purchase price or by mutual agreement
or other arrangement. Therefore, given the foregoing direct and indirect tax exemptions under its
franchise, and applying the principles as above-discussed, PAL is endowed with the legal standing to file
the subject tax refund claim, notwithstanding the fact that it is not the statutory taxpayer as contemplated
by law.
2. Requisites for a valid claim for refund / Creditable Withholding Tax Cases
a. CIR vs. Meralco, GR No. 181459 dated June 9, 2014.
Notwithstanding the foregoing, however, we uphold the ruling of the CTA En Banc that the claim for tax
refund in the aggregate amount of Thirty-Nine Million Three Hundred Fifty-Nine Thousand Two
Hundred Fifty-Four Pesos and Seventy-Nine Centavos (₱39,359,254.79) pertaining to the period from
January 1999 to July2002 must fail since the same has already prescribed under Section 229 of the Tax
Code, to wit:
Section 229. Recovery of Tax Erroneously or Illegally Collected. − No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have
been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected
without authority, of any sum alleged to have been excessively or in any manner wrongfully collected
without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

115
TAXATION LAW REVIEW
been erroneously paid.33
As can be gleaned from the foregoing, the prescriptive period provided is mandatory regardless of any
supervening cause that may arise after payment. It should be pointed out further that while the
prescriptive period of two (2) years commences to run from the time that the refund is ascertained, the
propriety thereof is determined by law (in this case, from the date of payment of tax), and not upon the
discovery by the taxpayer of the erroneous or excessive payment of taxes. The issuance by the BIR of the
Ruling declaring the tax-exempt status of NORD/LB, if at all, is merely confirmatory in nature. As aptly
held by the CTA-First Division, there is no basis that the subject exemption was provided and ascertained
only through BIR Ruling No. DA-342-2003, since said ruling is not the operative act from which an
entitlement of refund is determined. 34 In other words, the BIR is tasked only to confirm what is provided
under the Tax Code on the matter of tax exemptions as well as the period within which to file a claim for
refund.
In this regard, petitioner is misguided when it relied upon the six (6)-year prescriptive period for initiating
an action on the ground of quasi contract or solutio indebiti under Article 1145 of the New Civil Code.
There is solutio indebiti where: (1) payment is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made
through mistake, and not through liberality or some other cause. 35 Here, there is a binding relation
between petitioner as the taxing authority in this jurisdiction and respondent MERALCO which is bound
under the law to act as a withholding agent of NORD/LB Singapore Branch, the taxpayer. Hence, the first
element of solutio indebitiis lacking. Moreover, such legal precept is inapplicable to the present case since
the Tax Code, a special law, explicitly provides for a mandatory period for claiming a refund for taxes
erroneously paid.
Tax refunds are based on the general premise that taxes have either been erroneously or excessively paid.
Though the Tax Code recognizes the right of taxpayers to request the return of such excess/erroneous
payments from the government, they must do so within a prescribed period. Further, "a taxpayer must
prove not only his entitlement to a refund, but also his compliance with the procedural due process as
non-observance of the prescriptive periods within which to file the administrative and the judicial claims
would result in the denial of his claim." In the case at bar, respondent MERALCO had ample opportunity
to verify on the tax-exempt status of NORD/LB for purposes of claiming tax refund. Even assuming that
respondent MERALCO could not have emphatically known the status of NORD/LB, its supposition of
the same was already confirmed by the BIR Ruling which was issued on October 7, 2003. Nevertheless, it
only filed its claim for tax refund on July 13, 2004, or ten (10) months from the issuance of the aforesaid
Ruling. We agree with the CTA-First Division, therefore, that respondent MERALCO's claim for refund
in the amount of Two Hundred Twenty-Four Million Seven Hundred Sixty Thousand Nine Hundred
Twenty-Six Pesos and Sixty-Five Centavos (₱224,760,926.65) representing erroneously paid and remitted
final income taxes for the period January 1999 to July 2002 should be denied on the ground of
prescription.
b. CIR vs. Far East Bank, GR No. 173854 March 15, 2010.
A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply with the
following requisites:
1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax;

116
TAXATION LAW REVIEW
2) It must be shown on the return that the income received was declared as part of the gross income; and
3) The fact of withholding must be established by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of the tax withheld. 12
The two-year period requirement is based on Section 229 of the NIRC of 1997 which provides that:
SECTION 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding shall be
without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected,
been erroneously paid. (Formerly Section 230 of the old NIRC)
While the second and third requirements are found under Section 10 of Revenue Regulation No. 6-85, as
amended, which reads:
Section 10. Claims for tax credit or refund. — Claims for tax credit or refund of income tax deducted and
withheld on income payments shall be given due course only when it is shown on the return that the
income payment received was declared as part of the gross income and the fact of withholding is
established by a copy of the statement duly issued by the payer to the payee (BIR Form No. 1743.1)
showing the amount paid and the amount of tax withheld therefrom.
Respondent timely filed its claim for refund.
There is no dispute that respondent complied with the first requirement. The filing of respondent’s
administrative claim for refund on May 17, 1996 and judicial claim for refund on April 8, 1997 were well
within the two-year period from the date of the filing of the return on April 10, 1995. 13
Respondent failed to prove that the income derived from rentals and sale of real property were included in
the gross income as reflected in its return.
However, as to the second and third requirements, the tax court and the appellate court arrived at different
factual findings.
The CTA ruled that the income derived from rentals and sales of real property were not included in
respondent’s gross income. It noted that in respondent’s 1994 Annual Income Tax Return, the phrase
"NOT APPLICABLE" was printed on the space provided for rent, sale of real property and trust income.
The CTA also declared that the certifications issued by respondent cannot be considered in the absence of
the Certificates of Creditable Tax Withheld at Source. The CTA ruled that:
x x x the Certificates of Creditable Tax Withheld at Source submitted by [respondent] pertain to rentals of
real property while the Monthly Remittance Returns of Income Taxes Withheld refer to sales of real
property. But, if we are to look at Schedules 3, 4, and 5 of the Annual Income Tax Return of [respondent]

117
TAXATION LAW REVIEW
for 1994 (Exhibit "A"), there was no showing that the Rental Income and Income from Sale of Real
Property were included as part of the gross income appearing in Section A of the said return. In fact,
under the said schedules, the phrase "NOT APPLICABLE" was printed by [respondent]. Verily, the
income of [respondent] coming from rent and sale of real property upon which the creditable taxes
withheld were based were not duly reflected. As to the certifications issued by the [respondent] (Exh.
UU), the same cannot be considered in the absence of the requisite Certificates of Creditable Tax
Withheld at Source.
Based on the foregoing, [respondent] has failed to comply with two essential requirements for a valid
claim for refund. Consequently, the same cannot be given due course. 14 (Emphasis supplied)
On the other hand, the CA found thus:
We disagree with x x x CTA’s findings. In the case of Citibank, N.A. vs. Court of Appeals (280 SCRA
459), the Supreme Court held that:
"a refund claimant is required to prove the inclusion of the income payments which were the basis of the
withholding taxes and the fact of withholding. However, a detailed proof of the truthfulness of each and
every item in the income tax return is not required. x x x
x x x The grant of a refund is founded on the assumption that the tax return is valid; that is, the facts
stated therein are true and correct. x x x"
In the case at bench, the BIR examined [respondent] Bank’s Corporate Annual Income Tax Returns for
the years 1994 and 1995 when they were filed on April 10, 1995 and April 15, 1996, respectively.
Presumably, the BIR found no false declaration in them because it did not allege any false declaration
thereof in its Answer (to the petition for review) filed before x x x CTA. Nowhere in the Answer, did the
BIR dispute the amount of tax refund being claimed by [respondent] Bank as inaccurate or erroneous. In
fact, the reason given by the BIR (in its Answer to the petition for review) why the claimed tax refund
should be denied was that "x x x the amount of ₱13,645,109.00 was not illegally or erroneously collected,
hence, the petition for review has no basis" [see Record, p. 32]. The amount of ₱17,433,133.00 reflected
as refundable income tax in [respondent] Bank’s Corporate Annual Income Tax Return for the year 1995
was not disputed by the BIR to be inaccurate because there were certain income not included in the return
of the [respondent]. Verily, this leads Us to a conclusion that [respondent] Bank’s Corporate Annual
Income Tax Returns submitted were accepted as regular and even accurate by the BIR.
c. Metrobank vs. CIR, GR No. 182582 dated April 17, 2017. (Perlas-Bernabe)
Section 204 of the National Internal Revenue Code, as amended, 23 provides the CIR with, inter alia, the
authority to grant tax refunds. Pertinent portions of which read:
Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -The
Commissioner may-
xxxx
value upon proof of destruction.1âwphi1No credit or refund of taxes or penalties shall be allowed

118
TAXATION LAW REVIEW
unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two
(2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund. (Emphasis and underscoring
supplied)
In this relation, Section 229 of the same Code provides for the proper procedure in order to claim for such
refunds, to wit:
Section 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be

maintained in any court for the recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner;
but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund
or credit any tax, where on the face of the return upon which payment was made, such payment appears
clearly to have been erroneously paid. (Emphases and underscoring supplied)
As may be gleaned from the foregoing provisions, a claimant for refund must first file an administrative
claim for refund before the CIR, prior to filing a judicial claim before the CTA. Notably, both the
administrative and judicial claims for refund should be filed within the two (2)-year prescriptive period
indicated therein, and that the claimant is allowed to file the latter even without waiting for the resolution
of the former in order to prevent the forfeiture of its claim through prescription. In this regard, case law
states that "the primary purpose of filing an administrative claim [is] to serve as a notice of warning to the
CIR that court action would follow unless the tax or penalty alleged to have been collected erroneously or
illegally is refunded. To clarify, Section 229 of the Tax Code - then Section 306 of the old Tax Code -
however does not mean that the taxpayer must await the final resolution of its administrative claim for
refund, since doing so would be tantamount to the taxpayer's forfeiture of its right to seek judicial
recourse should the two (2)-year prescriptive period expire without the appropriate judicial claim being
filed."24
In this case, Metrobank insists that the filing of its administrative and judicial claims on December 27,
2002 and September 10, 2003, respectively, were well-within the two (2)-year prescriptive period.
Citing ACCRA Investments Corporation v. Court of Appeals, 25 CIR v. TMX Sales, Inc.,26 CIR v.
Philippine American Life Insurance, Co., 27 and CIR v. CDCP Mining Corporation, 28 Metrobank
contends that the aforesaid prescriptive period should be reckoned not from April 25, 2001 when it
remitted the tax to the BIR, but rather, from the time it filed its Final Adjustment Return or Annual
Income Tax Return for the taxable year of 2001, or in April 2002, as it was only at that time when its
right to a refund was ascertained.
Metrobank's contention cannot be sustained.
As correctly pointed out by the CIR, the cases cited by Metrobank involved corporate income taxes, in
which the corporate taxpayer is required to file and pay income tax on a quarterly basis, with such
payments being subject to an adjustment at the end of the taxable year. As aptly put in CIR v.TMX Sales,
Inc., "payment of quarterly income tax should only be considered [as] mere installments of the annual tax

119
TAXATION LAW REVIEW
due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts
and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the
annual income tax due, to be adjusted at the end of the calendar or fiscal year. x x x Consequently, the
two-year prescriptive period x x x should be computed from the time of filing of the Adjustment Return
or Annual Income Tax Return and final payment of income tax." Verily, since quarterly income tax
payments are treated as mere "advance payments" of the annual corporate income tax, there may arise
certain situations where such "advance payments" would cover more than said corporate taxpayer's entire
income tax liability for a specific taxable year. Thus, it is only logical to reckon the two (2)-year
prescriptive period from the time the Final Adjustment Return or the Annual Income Tax Return was
filed, since it is only at that time that it would be possible to determine whether the corporate taxpayer
had paid an amount exceeding its annual income tax liability.
3. Refunds where written claim is not needed
a. Secs. 204(C) and 229 of the NIRC.
Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The
Commissioner may -
(A) xxx
A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any
internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. Any request
for conversion into refund of unutilized tax credits may be allowed, subject to the provisions of Section
230 of this Code: Provided, That the original copy of the Tax Credit Certificate showing a creditable
balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided,
further, That in no case shall a tax refund be given resulting from availment of incentives granted
pursuant to special laws for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the
Senate and House of Representatives, every six (6) months, a report on the exercise of his powers under
this Section, stating therein the following facts and information, among others: names and addresses of
taxpayers whose cases have been the subject of abatement or compromise; amount involved; amount
compromised or abated; and reasons for the exercise of power: Provided, That the said report shall be
presented to the Oversight Committee in Congress that shall be constituted to determine that said powers
are reasonably exercised and that the government is not unduly deprived of revenues.
Section 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be
without authority, of any sum alleged to have been excessively or in any manner wrongfully collected
without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected,

120
TAXATION LAW REVIEW
been erroneously paid.
4. Refunds of Corporate taxpayers / Irrevocability Rule
Section 76. Final Adjustment Return. - 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 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.
b. CIR vs. TMX Sales, Inc., GR No. 83736 dated January 15, 1992.
A re-examination of the aforesaid minute resolution of the Court in the Pacific Procon case is warranted
under the circumstances to lay down a categorical pronouncement on the question as to when the two-
year prescriptive period in cases of quarterly corporate income tax commences to run. A full-blown
decision in this regard is rendered more imperative in the light of the reversal by the Court of Tax
Appeals in the instant case of its previous ruling in the Pacific Procon case.
Section 292 (now Section 230) of the National Internal Revenue Code should be interpreted in relation to
the other provisions of the Tax Code in order to give effect to legislative intent and to avoid an
application of the law which may lead to inconvenience and absurdity. In the case of People
vs. Rivera (59 Phil 236 [1933]), this Court stated that statutes should receive a sensible construction, such
as will give effect to the legislative intention and so as to avoid an unjust or an absurd
conclusion. INTERPRETATIO TALIS IN AMBIGUIS SEMPER FRIENDA EST, UT EVITATUR
INCONVENIENS ET ABSURDUM. Where there is ambiguity, such interpretation as will avoid
inconvenience and absurdity is to be adopted. Furthermore, courts must give effect to the general
legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in
order to discover said intent, the whole statute, and not only a particular provision thereof, should be

121
TAXATION LAW REVIEW
considered. (Manila Lodge No. 761, et al. v. Court of Appeals, et al., 73 SCRA 162 [1976]) Every
section, provision or clause of the statute must be expounded by reference to each other in order to arrive
at the effect contemplated by the legislature. The intention of the legislator must be ascertained from the
whole text of the law and every part of the act is to be taken into view. (Chartered Bank v. Imperial, 48
Phil. 931 [1921]; Lopez v. El Hogar Filipino, 47 Phil. 249, cited in Aboitiz Shipping Corporation v. City
of Cebu, 13 SCRA 449 [1965]).
Thus, in resolving the instant case, it is necessary that we consider not only Section 292 (now Section
230) of the National Internal Revenue Code but also the other provisions of the Tax Code, particularly
Sections 84, 85 (now both incorporated as Section 68), Section 86 (now Section 70) and Section 87 (now
Section 69) on Quarterly Corporate Income Tax Payment and Section 321 (now Section 232) on keeping
of books of accounts. All these provisions of the Tax Code should be harmonized with each other.
Section 292 (now Section 230) provides a two-year prescriptive period to file a suit for a refund of a tax
erroneously or illegally paid, counted from the tile the tax was paid. But a literal application of this
provision in the case at bar which involves quarterly income tax payments may lead to absurdity and
inconvenience.
Section 85 (now Section 68) provides for the method of computing corporate quarterly income tax which
is on a cumulative basis, to wit:
Sec. 85. Method of computing corporate quarterly income tax. — Every corporation shall file in duplicate
a quarterly summary declaration of its gross income and deductions on a cumulative basis for the
preceding quarter or quarters upon which the income tax, as provided in Title II of this Code shall be
levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid
or assessed during the preceding quarters and shall be paid not later than sixty (60) days from the close
of each of the first three (3) quarters of the taxable year, whether calendar or fiscal year. (Emphasis
supplied)
while Section 87 (now Section 69) requires the filing of an adjustment returns and final payment of
income tax, thus:
Sec. 87. Filing of adjustment returns final payment of income tax. — On or before the fifteenth day of
April or on or before the fifteenth day of the fourth month following the close of the fiscal year, every
taxpayer covered by this Chapter shall file an Adjustment Return covering the total net taxable income of
the preceding calendar or fiscal year and if the sum of the quarterly tax payments made during that year
is not equal to the tax due on the entire net taxable income of that year the corporation shall either (a)
pay the excess tax still due or (b) be refunded the excess amount paid as the case may be. . . . (Emphasis
supplied)
In the case at bar, the amount of P247,010.00 claimed by private respondent TMX Sales, Inc. based on its
Adjustment Return required in Section 87 (now Section 69), is equivalent to the tax paid during the first
quarter. A literal application of Section 292 (now Section 230) would thus pose no problem as the two-
year prescriptive period reckoned from the time the quarterly income tax was paid can be easily
determined. However, if the quarter in which the overpayment is made, cannot be ascertained, then a
literal application of Section 292 (Section 230) would lead to absurdity and inconvenience.
xxx
Based on the above hypothetical data appearing in the Final Adjustment Return, the taxpayer is entitled
under Section 87 (now Section 69) of the Tax Code to a refund of P6,250.00. If Section 292 (now Section

122
TAXATION LAW REVIEW
230) is literally applied, what then is the reckoning date in computing the two-year prescriptive period?
Will it be the 1st quarter when the taxpayer paid P12,500.00 or the 3rd quarter when the taxpayer also
paid P12,500.00? Obviously, the most reasonable and logical application of the law would be to compute
the two-year prescriptive period at the time of filing the Final Adjustment Return or the Annual Income
Tax Return, when it can be finally ascertained if the taxpayer has still to pay additional income tax or if
he is entitled to a refund of overpaid income tax.
Furthermore, Section 321 (now Section 232) of the National Internal Revenue Code requires that the
books of accounts of companies or persons with gross quarterly sales or earnings exceeding Twenty Five
Thousand Pesos (P25,000.00) be audited and examined yearly by an independent Certified Public
Accountant and their income tax returns be accompanied by certified balance sheets, profit and loss
statements, schedules listing income producing properties and the corresponding incomes therefrom and
other related statements.
It is generally recognized that before an accountant can make a certification on the financial statements or
render an auditor's opinion, an audit of the books of accounts has to be conducted in accordance with
generally accepted auditing standards.
Since the audit, as required by Section 321 (now Section 232) of the Tax Code is to be conducted yearly,
then it is the Final Adjustment Return, where the figures of the gross receipts and deductions have been
audited and adjusted, that is truly reflective of the results of the operations of a business enterprise. Thus,
it is only when the Adjustment Return covering the whole year is filed that the taxpayer would know
whether a tax is still due or a refund can be claimed based on the adjusted and audited figures.
Therefore, the filing of quarterly income tax returns required in Section 85 (now Section 68) and
implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere
installments of the annual tax due. These quarterly tax payments which are computed based on the
cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be
treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or
fiscal year. This is reinforced by Section 87 (now Section 69) which provides for the filing of adjustment
returns and final payment of income tax. Consequently, the two-year prescriptive period provided in
Section 292 (now Section 230) of the Tax Code should be computed from the time of filing the
Adjustment Return or Annual Income Tax Return and final payment of income tax.
In the case of Collector of Internal Revenue v. Antonio Prieto (2 SCRA 1007 [1961]), this Court held that
when a tax is paid in installments, the prescriptive period of two years provided in Section 306 (Section
292) of the National internal Revenue Code should be counted from the date of the final payment. This
ruling is reiterated in Commission of Internal Revenue v. Carlos Palanca (18 SCRA 496 [1966]), wherein
this Court stated that where the tax account was paid on installment, the computation of the two-year
prescriptive period under Section 306 (Section 292) of the Tax Code, should be from the date of the last
installment.
In the instant case, TMX Sales, Inc. filed a suit for a refund on March 14, 1984. Since the two-year
prescriptive period should be counted from the filing of the Adjustment Return on April 15, 1982, TMX
Sales, Inc. is not yet barred by prescription.
c. Systra Phils. Inc. vs. CIR, GR No. 176290 dated September 21, 2007.
Section 76 of the Tax Code provides:

123
TAXATION LAW REVIEW
SEC. 76. Final Adjustment Return. – 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
taxable net income of that year the corporation shall either:
(B) Carry-over the excess credit; or
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.(emphasis supplied)
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.20
This is known as the irrevocability rule and is embodied in the last sentence of Section 76 of the Tax
Code. The phrase "such option shall be considered irrevocable for that taxable period" means that the
option to carry over the excess tax credits of a particular taxable year can no longer be revoked.
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.21
In this case, it was in the year 2000 that petitioner derived excess tax credits and exercised the irrevocable
option to carry them over as tax credits for the next taxable year. Under Section 76 of the Tax Code, a
claim for refund of such excess credits can no longer be made. The excess credits will only be applied
"against income tax due for the taxable quarters of the succeeding taxable years."
The legislative intent to make the option irrevocable becomes clearer when Section 76 is viewed in
comparison to Section 69 of the (old) 1977 Tax Code:
SECTION 69. Final Adjustment Return. – Every corporation liable to tax under Section 24 shall file a
final adjustment return covering the total net 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:

124
TAXATION LAW REVIEW
(A) Pay the excess tax still due; or
(B) Be refunded the excess amount paid, as the case may be.
paid, the refundable amount shown on its final adjustment return may be credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable year.
Under Section 69 of the 1977 Tax Code, there was no irrevocability rule. Instead of claiming a refund, the
excess tax credits could be "credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable year," that is, the immediately following year only. In contrast, 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.
Furthermore, this case is closely similar to Philam Asset Management, Inc. v. Commissioner of Internal
Revenue. In that case, Philam Asset Management, Inc. had an unapplied creditable withholding tax in the
amount of ₱459,756.07 for the year 1998. It carried over the said excess tax to the following taxable year,
1999. In the next succeeding year, it had a tax due in the amount of ₱80,042 and a creditable withholding
tax in the amount of ₱915,995.1âwphi1 As such, the amount due for the year 1999 (₱80,042) was credited
to its ₱915,995 creditable withholding tax for that year. Thus, its 1998 creditable withholding tax in the
amount of ₱459,756.07 remained unutilized. Thereafter, it filed a claim for refund with respect to the
unapplied creditable withholding tax of ₱459,756.07 for the year 1998. The Court denied the claim and
ruled:
Section 76 [is] 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 ₱459,756.07, 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. (emphasis supplied)
Since petitioner elected to carry over its excess credits for the year 2000 in the amount of ₱4,627,976 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.
d. Winbrenner & Inigo Insurance Brokers, Inc., v. CIR, GR No. 206526 dated January 28, 2015.
The Court recognizes, as it always has, that the burden of proof to establish entitlement to refund is on the
claimant taxpayer. Being in the nature of a claim for exemption, refund is construed in strictissimi juris
against the entity claiming the refund and in favor of the taxing power. This is the reason why a claimant
must positively show compliance with the statutory requirements provided for under the NIRC in order to
successfully pursue one’s claim. As implemented by the applicable rules and regulations and as
interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT
must:

125
TAXATION LAW REVIEW
1) File the claim with the CIR within the two year period from the date of payment of the tax;
2) Show on the return that the income received was declared as part of the gross income; and
3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the payee
showing the amount paid and the amount of tax withheld.
The original decision of the CTA-Division made plain that the petitioner complied with the above
requisites in so far as the reduced amount of ₱2,737,903.34 was concerned. In the amended decision,
however, it was pointed out that because petitioner failed to present the quarterly ITRs of the subsequent
year, there was an impossibility of determining compliance with the irrevocability rule under Section 76
of the NIRC as in those documents could be found evidence of whether the excess CWT was applied to
its income tax liabilities in the quarters of 2004. The irrevocability rule under Section 76 of the NIRC
means that once an option, either for refund or issuance of tax credit certificate or carry-over of CWT has
been exercised, the same can no longer be modified for the succeeding taxable years. For said reason, the
CTA-En Banc affirmed the conclusion in the amended decision that because of the said impossibility, the
claim for refund was not substantiated.
The CIR agrees with the disposition of the CTA-En Banc, stressing that the petitioner failed to carry out
the burden of showing that no carryover was made when it did not present the quarterly ITRs for CY
2004.
Petitioner disagrees, as the dissents did, that the non-submission of quarterly ITRs is fatal to its claim.
Hence, the issue on the indispensability of quarterly ITRs of the succeeding taxable year in a claim for
refund.
The Court finds for the petitioner.
There is no question that those who claim must not only prove its entitlement to the excess credits, but
likewise must prove that no carry-over has been made in cases where refund is sought.
In this case, the fact of having carried over petitioner’s 2003 excess credits to succeeding taxable year is
in issue. According to the CTA-En Banc and the CIR, the only evidence that can sufficiently show that
carrying over has been made is to present the quarterly ITRs. Some members of this Court adhere to the
same view.
The Court however cannot.
Proving that no carry-over has been made does not absolutely require the presentation of the quarterly
ITRs.
In Philam, the petitioner therein sought for recognition of its right to the claimed refund of unutilized
CWT. The CIR opposed the claim, on the grounds similar to the case at hand, that no proof was provided
showing the non-carry over of excess CWT to the subsequent quarters of the subject year. In a categorical
manner, the Court ruled that the presentation of the quarterly ITRs was not necessary. Therein, it was
written:

126
TAXATION LAW REVIEW
Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in requesting a tax
refund has no basis in law and jurisprudence.
First, Section 76 of the Tax Code does not mandate it. The law merely requires the filing of the FAR for
the preceding – not the succeeding – taxable year. Indeed, any refundable amount indicated in the FAR of
the preceding taxable year may be credited against the estimated income tax liabilities for the taxable
quarters of the succeeding taxable year. However, nowhere is there even a tinge of a hint in any
provisions of the [NIRC] that the FAR of the taxable year following the period to which the tax credits
are originally being applied should also be presented to the BIR.
Second, Section 5 of RR 12-94, amending Section 10(a) of RR 6-85, merely provides that claims for
refund of income taxes deducted and withheld from income payments shall be given due course only (1)
when it is shown on the ITR that the income payment received is being declared part of the taxpayer’s
gross income; and (2) when the fact of withholding is established by a copy of the withholding tax
statement, duly issued by the payor to the payee, showing the amount paid and the income tax withheld
from that amount.
It has been submitted that Philam cannot be cited as a precedent to hold that the presentation of the
quarterly income tax return is not indispensable as it appears that the quarterly returns for the succeeding
year were presented when the petitioner therein filed an administrative claim for the refund of its excess
taxes withheld in 1997.
It appears however that there is misunderstanding in the ruling of the Court in Philam. That factual
distinction does not negate the proposition that subsequent quarterly ITRs are not indispensable. The logic
in not requiring quarterly ITRs of the succeeding taxable years to be presented remains true to this day.
What Section 76 requires, just like in all civil cases, is to prove the prima facie entitlement to a claim,
including the fact of not having carried over the excess credits to the subsequent quarters or taxable year.
It does not say that to prove such a fact, succeeding quarterly ITRs are absolutely needed.
This simply underscores the rulethat any document, other than quarterly ITRs may be used to establish
that indeed the non-carry over clause has been complied with, provided that such is competent, relevant
and part of the records. The Court is thusnot prepared to make a pronouncement as to the indispensability
of the quarterly ITRs in a claim for refund for no court can limit a party to the means of proving a fact for
as long as they are consistent with the rules of evidence and fair play. The means of ascertainment of a
fact is best left to the party that alleges the same. The Court’s power is limited only to the appreciation of
that means pursuant to the prevailing rules of evidence. To stress, what the NIRC merely requires is to
sufficiently prove the existence of the non-carry over of excess CWT in a claim for refund.
e. University Physicians Services, Inc. – Management vs. CIR, GR No. 205955 dated March 7, 2018.
We cannot subscribe to the suggestion that the irrevocability rule enshrined in Section 76 of the National
Internal Revenue Code (NIRC) applies to either of the options of refund or carry-over. Our reading of the
law assumes the interpretation that the irrevocability is limited only to the option of carry-over such that a
taxpayer is still free to change its choice after electing a refund of its excess tax credit. But once it opts to
carry over such excess creditable tax, after electing refund or issuance of tax credit certificate, the carry-
over option becomes irrevocable. Accordingly, the previous choice of a claim for refund, even if
subsequently pursued, may no longer be granted.
The aforementioned Section 76 of the NIRC provides:

127
TAXATION LAW REVIEW
SECTION 76. Final Adjustment Return. - 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 income of that year, the corporation shall either:
(B) Carry over the excess credit; or
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. (emphasis supplied)
Under the cited law, there are two options available to the corporation whenever it overpays its income
tax for the taxable year: (1) to carry over and apply the overpayment as tax credit against the estimated
quarterly income tax liabilities of the succeeding taxable years (also known as automatic tax credit) until
fully utilized (meaning, there is no prescriptive period); and (2) to apply for a cash refund or issuance of
a tax credit certificate within the prescribed period. Such overpayment of income tax is usually
occasioned by the over-withholding of taxes on the income payments to the corporate taxpayer.
The irrevocability rule is provided in the last sentence of Section 76. A perfunctory reading of the law
unmistakably discloses that the irrevocable option referred to is the carry-over option only. There appears
nothing therein from which to infer that the other choice, i.e., cash refund or tax credit certificate, is also
irrevocable. If the intention of the lawmakers was to make such option of cash refund or tax credit
certificate also irrevocable, then they would have clearly provided so.
In other words, the law does not prevent a taxpayer who originally opted for a refund or tax credit
certificate from shifting to the carry-over of the excess creditable taxes to the taxable quarters of the
succeeding taxable years. However, in case the taxpayer decides to shift its option to carryover, it may no
longer revert to its original choice due to the irrevocability rule. As Section 76 unequivocally provides,
once the option to carry over has been made, it shall be irrevocable. Furthermore, the provision seems to
suggest that there are no qualifications or conditions attached to the rule on irrevocability.
Law and jurisprudence unequivocally support the view that only the option of carry-over is irrevocable.
Aside from the uncompromising last sentence of Section 76, Section 228 of the NIRC recognizes such
freedom of a taxpayer to change its option from refund to carry-over. This law affords the government a
remedy in case a taxpayer, who had previously claimed a refund or tax credit certificate (TCC) of excess
creditable withholding tax, subsequently applies such amount as automatic tax credit. The pertinent text
of Section 228 reads:
however, That a pre-assessment notice shall not be required in the following cases:

128
TAXATION LAW REVIEW
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for
a taxable period was determined to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable
year; or
exempt persons.
otherwise, the assessment shall be void. x x x (emphasis supplied)
The provision contemplates three scenarios:
(1) Deficiency in the payment or remittance of tax to the government (paragraphs [a], [b] and [d]);
(2) Overclaim of refund or tax credit (paragraph [ c ]); and
(3) Unwarranted claim of tax exemption (paragraph [e]).
In each case, the government is deprived of the rightful amount of tax due it. The law assures recovery of
the amount through the issuance of an assessment against the erring taxpayer. However, the usual two-
stage process in making an assessment is not strictly followed. Accordingly, the government may
immediately proceed to the issuance of a final assessment notice (FAN), thus dispensing with the
preliminary assessment (PAN), for the reason that the discrepancy or deficiency is so glaring or
reasonably within the taxpayer's knowledge such that a preliminary notice to the taxpayer, through the
issuance of a PAN, would be a superfluity.
Pertinently, paragraph (c) contemplates a double recovery by the taxpayer of an overpaid income tax that
arose from an over-withholding of creditable taxes. The refundable amount is the excess and unutilized
creditable withholding tax.
This paragraph envisages that the taxpayer had previously asked for and successfully recovered from
the BIR its excess creditable withholding tax through refund or tax credit certificate; it could not be
viewed any other way. If the government had already granted the refund, but the taxpayer is determined
to have automatically applied the excess creditable withholding tax against its estimated quarterly tax
liabilities in the succeeding taxable year(s), the taxpayer would undeservedly recover twice the same
amount of excess creditable withholding tax. There appears, therefore, no other viable remedial recourse
on the part of the government except to assess the taxpayer for the double recovery. In this instance, and
in accordance with the above rule, the government can right away issue a FAN.

129
TAXATION LAW REVIEW
If, on the other hand, an administrative claim for refund or issuance of TCC is still pending but the
taxpayer had in the meantime automatically carried over the excess creditable tax, it would appear not
only wholly unjustified but also tantamount to adopting an unsound policy if the government should
resort to the remedy of assessment.
First, on the premise that the carry-over is to be sustained, there should be no more reason for the
government to make an assessment for the sum (equivalent to the excess creditable withholding tax) that
has been justifiably returned already to the taxpayer (through automatic tax credit) and for which the
government has no right to retain in the first place. In this instance, all that the government needs to do is
to deny the refund claim.
Second, on the premise that the carry-over is to be disallowed due to the pending application for refund, it
would be more complicated and circuitous if the government were to grant first the refund claim and then
later assess the taxpayer for the claim of automatic tax credit that was previously disallowed. Such
procedure is highly inefficient and expensive on the part of the government due to the costs entailed by an
assessment. It unduly hampers, instead of eases, tax administration and unnecessarily exhausts the
government's time and resources. It defeats, rather than promotes, administrative feasibility. Such could
not have been intended by our lawmakers. Congress is deemed to have enacted a valid, sensible, and just
law.
Thus, in order to place a sensible meaning to paragraph (c) of Section 228, it should be interpreted as
contemplating only that situation when an application for refund or tax credit certificate had already been
previously granted. Issuing an assessment against the taxpayer who benefited twice because of the
application of automatic tax credit is a wholly acceptable remedy for the government.
Going back to the case wherein the application for refund or tax credit is still pending before the BIR, but
the taxpayer had in the meantime automatically carried over its excess creditable tax in the taxable
quarters of the succeeding taxable year(s), the only judicious course of action that the BIR may take is to
deny the pending claim for refund. To insist on giving due course to the refund claim only because it was
the first option taken, and consequently disallowing the automatic tax credit, is to encourage inefficiency
or to suppress administrative feasibility, as previously explained. Otherwise put, imbuing upon the choice
of refund or tax credit certificate the character of irrevocability would bring about an irrational situation
that Congress did not intend to remedy by means of an assessment through the issuance of a FAN without
a prior PAN, as provided in paragraph (c) of Section 228. It should be remembered that Congress'
declared national policy in passing the NIRC of 1997 is to rationalize the internal revenue tax system of
the Philippines, including tax administration.
The foregoing simply shows that the lawmakers never intended to make the choice of refund or tax credit
certificate irrevocable. Sections 76 and 228, paragraph (c), unmistakably evince such intention.
f. Rhombus Energy, Inc. CIR, GR No. 206362 dated August 1, 2018.
The irrevocability rule is enunciated in Section 76 of the National Internal Revenue Code (NIRC), viz.:
Section 76. Final Adjusted Return. - Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar of fiscal year. If the sum of
taxable income of that year, the corporation shall either:
(A) Pay the balance of the tax still due; or

130
TAXATION LAW REVIEW
(B) Carry over the excess credit; or
the option to carry over and apply the excess quarterly income tax against income tax due for the taxable
years 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. (Bold underscoring supplied to highlight the relevant portion)
The application of the irrevocability rule is explained in Republic v. Team (Phils.) Energy Corporation
(formerly Mirant [Phils.] Energy Corporation,[7] where the Court stated:
In Commissioner of Internal Revenue v. Bank of the Philippine Isands, the Court, citing the
pronouncement in Philam Asset Management, Inc., points out that Section 76 of the NIRC of 1997 is
clear and unequivocal in providing that the carry-over option, once actually or constructively chosen by a
corporate taxpayer, becomes irrevocable. The Court explains:
Hence, the controlling factor for the operation of the irrevocability rule is that the taxpayer chose an
option; and once it had already done so, it could no longer make another one. Consequently, after the
taxpayer opts to carry-over its excess tax credit to the following taxable period, the question of whether or
not it actually gets to apply said tax credit is irrelevant. Section 76 of the NIRC of 1997 is explicit in
stating that once the option to carry over has been made, "no application for tax refund or issuance of a
tax credit certificate shall be allowed therefor."
The last sentence of Section 76 of the NIRC of 1997 reads: "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 tax refund or issuance of a tax credit certificate shall be allowed therefor." The phrase "for
that taxable period" merely identifies the excess income tax, subject of the option, by referring to the
taxable period when it was acquired by the taxpayer. In the present case, the excess income tax credit,
which BPI opted to carry over, was acquired by the said bank during the taxable year 1998. The option of
BPI to carry over its 1998 excess income tax credit is irrevocable; it cannot later on opt to apply for a
refund of the very same 1998 excess income tax credit.
The Court of Appeals mistakenly understood the phrase "for that taxable period" as a prescriptive period
for the irrevocability rule. This would mean that since the tax credit in this case was acquired in 1998, and
BPI opted to carry it over to 1999, then the irrevocability of the option to carry over expired by the end of
1999, leaving BPI free to again take another option as regards its 1998 excess income tax credit. This
construal effectively renders nugatory the irrevocability rule. The evident intent of the legislature, in
adding the last sentence to Section 76 of the NIRC of 1997, is to keep the taxpayer from flip-flopping on
its options, and avoid confusion and complication as regards said taxpayer's excess tax credit. The
interpretation of the Court of Appeals only delays the flip-flopping to the end of each succeeding taxable
period.
The Court similarly disagrees in the declaration of the Court of Appeals that to deny the claim for refund
of BPI, because of the irrevocability rule, would be tantamount to unjust enrichment on the part of the
government. The Court addressed the very same argument in Philam, where it elucidated that there would

131
TAXATION LAW REVIEW
be no unjust enrichment in the event of denial of the claim for refund under such circumstances, because
there would be no forfeiture of any amount in favor of the government. The amount being claimed as a
refund would remain in the account of the taxpayer until utilized in succeeding taxable years, as provided
in Section 76 of the NIRC of 1997. It is worthy to note that unlike the option for refund of excess income
tax, which prescribes after two years from the filing of the FAR, there is no prescriptive period tor the
carrying over of the same. Therefore, the excess income tax credit of BPI, which it acquired in 1998 and
opted to carry over, may be repeatedly carried over to succeeding taxable years, i.e., to 1999, 2000, 2001,
and so on and so forth, until actually applied or credited to a tax liability of BPI.
The CTA First Division duly noted the exercise of the option by Rhombus in the following manner:
The evidence on record shows that petitioner clearly signified its intention to be refunded of its excess
creditable tax withheld for calendar year 2005 in its Annual ITR for the said year. Petitioner under Line
31 of the said ITR marked "x" on the box "To be refunded". Moreover, petitioner's 2006 and 2007 Annual
ITRs do not have any entries in Line 28A "Prior Year's Excess Credits" which only prove that petitioner
did not carry-over its 2005 excess/unutilized creditable withholding tax to the succeeding taxable years or
quarters. (Bold underscoring is supplied for emphasis)
Although the CTA En Banc recognized that Rhombus had actually exercised the option to be refunded, it
nonetheless maintained that Rhombus was not entitled to the refund for having reported the prior year's
excess credits in its quarterly ITRs for the year 2006, viz.:
Based on the records, it is clear that respondent marked the box "To be refunded" in its Annual Income
Tax Return. It is also clear that the 2005 excess CWT were included in the prior year's excess credits
reported in the 2006 Quarter ITRs. The 2006 Annual ITR did not reflect the 2005 excess CWT in the
prior year's excess credits. (Emphasis supplied)
The CTA En Banc thereby misappreciated the fact that Rhombus had already exercised the option for its
unutilized creditable withholding tax for the year 2005 to be refunded when it filed its annual ITR for the
taxable year ending December 31, 2005. Based on the disquisition in Republic v. Team (Phils.) Energy
Corporation, supra, the irrevocability rule took effect when the option was exercised. In the case of
Rhombus, therefore, its marking of the box "To be refunded" in its 2005 annual ITR constituted its
exercise of the option, and from then onwards Rhombus became precluded from carrying-over the excess
creditable withholding tax. The fact that the prior year's excess credits were reported in its 2006 quarterly
ITRs did not reverse the option to be refunded exercised in its 2005 annual ITR. As such, the CTA En
Banc erred in applying the irrevocability rule against Rhombus.
It is relevant to mention the requisites for entitlement to the refund as listed in Republic v. Team (Phils.)
Energy Corporation, supra, to wit:
That the claim for refund was filed within the two-year reglementary period pursuant to Section 229 of
the NIRC;
When it is shown on the ITR that the income payment received is being declared part of the taxpayer's
gross income; and
When the fact of withholding is established by a copy of the withholding tax statement, duly issued by the
payor to the payee, showing the amount paid and income tax withheld from that amount.
Finding that Rhombus met the foregoing requisites based on its examination of the documents submitted,
the CTA First Division rendered the following findings:

132
TAXATION LAW REVIEW
x x x [P]etitioner filed its Annual ITR for the year 2005 on April 17, 2006. Counting from the said date,
petitioner had until April 17, 2008, within which to file both its administrative and judicial claim for
refund or issuance of a tax credit certificate. Clearly, petitioner's administrative claim filed on December
29, 2006 and judicial claim via the instant Petition for Review filed on December 07, 2007, were within
the two-year prescriptive limit.
To comply with the second requisite, petitioner presented Certificates of Creditable Tax Withheld at
Source issued by its sole customer Distileria Bago, Inc., a wholly owned subsidiary of La Tondeña, Inc.
(now Ginebra San Miguel, Inc.). The details of the said certificates are summarized as follows:
xxxx
To show compliance with the third requisite that petitioner declared in its return the income related to the
creditable withholding taxes of Php28,523,295.45, it presented the following documents:
Annual Income tax Return for the year ended December 31, 2005 with attached audited financial
statements and Account Information Form marked as Exhibit "B";
Certificates of Creditable Tax Withheld at Source issued to petitioner for the first three quarters of taxable
year 2005 marked as Exhibits "J", "Y", "L" and "K";
Summary of invoices issued for taxable year 2005 marked as Exhibit "M"; and
The sales invoices issued for taxable year 2005 marked as Exhibits "O-1" to "O-14".
The withholding tax certificates reveal that the creditable income taxes of Php28,523,295.45 were
withheld from petitioner's energy service fees of Php9,313,272.54 and from the sale of its generation
facility amounting to Php472,283,838.00. The energy fees paid by Distileria Bago, Inc. in the amount of
Php9,313,272.54 from which creditable withholding tax in the aggregate amount of Php186,265.45 was
withheld was reported by petitioner as part of its "Sales/Revenues/Receipts/Fees" amounting to
Php59,551,116.00 in Item No. 15A of its 2005 Annual ITR.
As regards the income from the sale of power generation facility in the amount of Php472,283,838.00
from which the amount of Php28,337,030.00 creditable withholding tax was withheld, petitioner reported
a gain of only Php209,320,181.00 as appearing under Item 18B (Non-Operating and Other Income) of
petitioner's Annual ITR marked as Exhibit B. There was nothing fallacious in doing so for petitioner
could deduct valid cost (i.e. Book Value of the asset) from the selling price to arrive at the amount of
"Non-operating and Other Income" to be reported in its 2005 Annual ITR.
The members of the CTA First Division were in the best position as trial judges to examine the
documents submitted in relation thereto, and to make the proper findings thereon. Given their expertise on
the matter, we accord weight and respect to their finding that Rhombus had satisfied the requirements for
its claim for refund of its excess creditable withholding taxes for the year 2005.
I. The Court of Tax Appeals
a. RA No. 9282, as amended by RA No. 9503.
REPUBLIC ACT NO. 9282

133
TAXATION LAW REVIEW
AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA),

ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL
JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE
CERTAIN SECTIONS OR REPUBLIC ACT NO. 1125, AS AMENDED, OTHERWISE KNOWN
AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Section 1 of Republic Act No. 1125, as amended is hereby further amended to read as follows:
"SECTION 1. Court; Justices; Qualifications; Salary; Tenure. - There is hereby created a Court of Tax
Appeals (CTA) which shall be of the same level as the Court of Appeals, possessing all the inherent
powers of a Court of Justice, and shall consist of a Presiding Justice and five (5) Associate Justices. The
incumbent Presiding Judge and Associate Judges shall continue in office and bear the new titles of
Presiding Justice and Associate Justices. The Presiding Justice and the most Senior Associate Justice shall
serve as chairmen of the two (2) Divisions. The additional three (3) Justices and succeeding members of
the Court shall be appointed by the President upon nomination by the Judicial and Bar Council. The
Presiding Justice shall be so designated in his appointment, and the Associate Justices shall have
precedence according to the date of their respective appointments, or when the appointments of two (2) or
more of them shall bear the same date, according to the order in which their appointments were issued by
the President. They shall have the same qualifications, rank, category, salary, emoluments and other
privileges, be subject to the same inhibitions and disqualifications, and enjoy the same retirements and
other benefits as those provided for under existing laws for the Presiding Justice and Associate Justices of
the Court of Appeals.
"Whenever the salaries of the Presiding Justice and the Associate Justices of the Court of Appeals are
increased, such increases in salaries shall be deemed correspondingly extended to and enjoyed by the
Presiding Justice and Associate Justices of the CTA.
"The Presiding Justice and Associate Justices shall hold office during good behavior, until they reach the
age of seventy (70), or become incapacitated to discharge the duties of their office, unless sooner
removed for the same causes and in the same manner provided by law for members of the judiciary of
equivalent rank."
Section 2. Section 2 of the same Act is hereby amended to read as follows:
"SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - The CTA may sit en banc or in two (2)
Divisions, each Division consisting of three (3) Justices.
"Four (4) Justices shall constitute a quorum for sessions en banc and two (2) Justices for sessions of a
Division: Provided, That when the required quorum cannot be constituted due to any vacancy,
disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice shall designate any
Justice of other Divisions of the Court to sit temporarily therein.
"The affirmative votes of four (4) members of the Court en banc or two (2) members of a Division, as the
case may be, shall be necessary for the rendition of a decision or resolution."

134
TAXATION LAW REVIEW
"SEC. 3. Clerk of Court; Division Clerks of Court; Appointment; Qualification; Compensation. - The
CTA shall have a Clerk of Court and three (3) Division Clerks of Court who shall be appointed by the
Supreme Court. No person shall be appointed Clerk of Court or Division Clerk of Court unless he is duly
authorized to practice law in the Philippines. The Clerk of Court and Division Clerks of Court shall
exercise the same powers and perform the same duties in regard to all matters within the Court's
jurisdiction, as are exercised and performed by the Clerk of Court and Division Clerks of Court of the
Court of Appeals, in so far as the same may be applicable or analogous; and in the exercise of those
powers and the performance of those duties they shall be under the direction of the Court. The Clerk of
Court and the Division Clerks of Court shall have the same rank, privileges, salary, emoluments,
retirement and other benefits as those provided for the Clerk of Court and Division Clerks of Court of the
Court of Appeals, respectively.”
"SEC. 4. Other Subordinate Employees. - The Supreme Court shall appoint all officials and employees of
the CTA, in accordance with the Civil Service Law. The Supreme Court shall fix their salaries and
prescribe their duties."
"SEC. 5. Disqualifications. - No Justice or other officer or employee of the CTA shall intervene, directly
or indirectly, in the management or control of any private enterprise which in any way may be affected by
the functions of the Court. Justices of the Court shall be disqualified from sitting in any case on the same
grounds provided under Rule one hundred thirty-seven of the Rules of Court for the disqualification of
judicial officers. No person who has once served in the Court in a permanent capacity, either as Presiding
Justice or as Associate Justice thereof, shall be qualified to practice as counsel before the Court for a
period of one (1) year from his retirement or resignation."
"SEC. 6. Place of Office. - The CTA shall have its principal office in Metro Manila and shall hold
hearings at such time and place as it may, by order in writing, designate."
"Sec. 7. Jurisdiction. - The CTA shall exercise:
"a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
"1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
"2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
be deemed a denial;

135
TAXATION LAW REVIEW
"3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction;
"4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties
in relation thereto, or other matters arising under the Customs Law or other laws administered by the
Bureau of Customs;
"5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board of assessment appeals;
"6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of
the Tariff and Customs Code;
"7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or
article, and the Secretary of Agriculture in the case of agricultural product, commodity or article,
involving dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and
Customs Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the
decision to impose or not to impose said duties.
"b. Jurisdiction over cases involving criminal offenses as herein provided:
"1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal
Revenue or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this
paragraph where the principal amount o taxes and fees, exclusive of charges and penalties, claimed is less
than One million pesos (P1,000,000.00) or where there is no specified amount claimed shall be tried by
the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of
Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and
jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil action
separately from the criminal action will be recognized.
"2. Exclusive appellate jurisdiction in criminal offenses:
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.
"b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
"c. Jurisdiction over tax collection cases as herein provided:
"1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for
taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of

136
TAXATION LAW REVIEW
taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.
"2. Exclusive appellate jurisdiction in tax collection cases:
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them, in their respective territorial jurisdiction.
"b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
Exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction."
"SEC. 10. Power to Administer Oaths; Issue Subpoena; Punish for Contempt. - The Court shall have the
power to administer oaths, receive evidence, summon witnesses by subpoena duces tecum, subject in all
respects to the same restrictions and qualifications as applied in judicial proceedings of a similar nature.
The Court shall, in accordance with Rule seventy-one of the Rules of Court, have the power to punish for
contempt for the same causes, under the same procedure and with the same penalties provided therein."
"SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
"Appeal shall be made by filing a petition for review under a procedure analogous to that provided for
under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt
of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period
fixed by law to act thereon. A Division of the CTA shall hear the appeal: Provided, however, That with
respect to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court
in the exercise of its appellate jurisdiction appeal shall be made by filing a petition for review under a
procedure analogous to that provided for under rule 43 of the 1997 Rules of Civil Procedure with the
CTA, which shall hear the case en banc.
"All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7
shall be raffled to its Divisions. A party adversely affected by a ruling, order or decision of a Division of
the CTA may file a motion for reconsideration of new trial before the same Division of the CTA within
fifteens (15) days from notice thereof: Provide, however, That in criminal cases, the general rule
applicable in regular Courts on matters of prosecution and appeal shall likewise apply.
"No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the
Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may
be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion
of the Court the collection by the aforementioned government agencies may jeopardize the interest of the

137
TAXATION LAW REVIEW
Government and/or the taxpayer the Court any stage of the proceeding may suspend the said collection
and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than
double the amount with the Court.
"In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the Government
may directly file the said cases with the CTA covering amounts within its exclusive and original
jurisdiction."
"SEC. 13. Decision, Maximum Period for Termination of Cases. - Cases brought before the Court shall be
decided in accordance with Section 15, paragraph (1), Article VIII (Judicial Department) of the 1987
Constitution. Decisions of the Court shall be in writing, stating clearly and distinctly the facts and the law
on which they are based, and signed by the Justices concurring therein. The Court shall provide for the
publication of its decision in the Official Gazette in such form and manner as may best be adopted for
public information and use.
"The Justices of the Court shall each certify on their applications for leave, and upon salary vouchers
presented by them for payment, or upon the payrolls under which their salaries are paid, that all
proceedings, petitions and motions which have been submitted to the Court for determination or decision
for a period required by the law or the Constitution, as the case may be, have been determined or decided
by the Court on or before the date of making the certificate, and no leave shall be granted and no salary
shall be paid without such certificate."
Section 11. Section 18 of the same Act is hereby amended as follows:
"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matter arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code
shall be maintained, except as herein provided, until and unless an appeal has been previously filed with
the CTA and disposed of in accordance with the provisions of this Act.
"A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or
new trial, may file a petition for review with the CTA en banc."
"SEC. 19. Review by Certiorari. - A party adversely affected by a decision or ruling of the CTA en banc
may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the
1997 Rules of Civil Procedure."
Section 13. Distraint of Personal Property and/or Levy on Real Property. - Upon the issuance of any
ruling, order or decision by the CTA favorable to the national government, the CTA shall issue an order
authorizing the Bureau of Internal Revenue, through the Commissioner to seize and distraint any goods,
chattels, or effects, and the personal property, including stocks and other securities, debts, credits, bank
accounts, and interests in and rights to personal property and/or levy the real property of such persons in
sufficient quantity to satisfy the tax or charge together with any increment thereto incident to
delinquency. This remedy shall not be exclusive and shall not preclude the Court from availing of other
means under the Rules of Court.
Section 14. Retention of Personnel; Security of Tenure; Upgrading of Positions and Salaries. - All
existing permanent personnel of the CTA shall not be adversely affected by this Act. They shall continue
in office and shall not be removed or separated from the service except for cause as provided for by

138
TAXATION LAW REVIEW
existing laws. Further, the present positions and salaries of personnel shall be upgraded to the level of
their counterparts in the Court of Appeals.
Section 15. Transitory Provisions. - In consonance with the above provision, the incumbent Presiding
Judge and Associate Judges shall comprise a Division pending the constitution of the entire Court.
Section 16. Appropriations. - The amount necessary to carry out the provisions of this Act shall be
included in the General Appropriations Act of the year following its enactment into law and thereafter.
Section 17. Repealing Clause. - All laws, executive orders, executive issuances or letter of instructions, or
any part thereof, inconsistent with or contrary to the provisions of this Act are hereby deemed repealed,
amended or modified accordingly.
Section 18. Separability Clause. - If for any reason, any section or provision of this Act shall be declared
unconstitutional or invalid, the other parts thereof not affected thereby shall remain valid.
Section 19. Effectivity Clause - This Act shall take effect after fifteen (15) days following its publication
in at least (2) newspapers of general circulation.
Approved: March 30, 2004
REPUBLIC ACT NO. 9503
AN ACT ENLARGING THE ORGANIZATIONAL STRUCTURE OF THE COURT OF TAX

APPEALS, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF THE LAW
CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::
SECTION 1. Section 1 of Republic Act No. 1125, as amended, is hereby further amended to read as
follows:
"SECTION 1. Court; Justices, Qualifications; Salary; Tenure. - There is hereby created a Court of Tax
Appeals (CTA) which shall be of the same level as the Court of Appeals, possessing all the inherent
powers of a Court of Justice, and shall consist of a Presiding Justice and eight (8) Associate Justices. The
incumbent Presiding Judge and Associate Judges shall continue in office and bear the new titles of
Presiding Justice and Associate Justices. The Presiding Justices and the two (2) most Senior Associate
Justices, all of whom are incumbent, shall serve as chairmen of the three (3) Divisions. The other three (3)
incumbent Associate Justices and the three (3) additional Associate Justices shall serve as members of the
Divisions. The additional three (3) Justices as provided herein and the succeeding members of the Court
shall be appointed by the President upon nomination by the Judicial and Bar Council. The Presiding
Justice shall be so designated in his appointment, and the Associate Justices shall have precedence
according to the date of their respective appointment or when the appointments of two (2) or more of
them shall bear the same date, according to the order in which their appointments were issued by the
President. They shall have the same qualifications, rank, category, salary, emoluments and other
privileges, be subject to the same inhibitions and disqualifications, and enjoy the same retirement and
other benefits as those provided for under existing laws for the Presiding Justice and Associate Justices of
the Court of Appeals.

139
TAXATION LAW REVIEW
"Whenever the salaries of the Presiding Justice and the Associate Justices of the Court of Appeals are
increased, such increases in salaries shall be deemed correspondingly extended to and enjoyed by the
Presiding Justice and Associate Justices of the CTA.
"The Presiding Justice and Associate Justices shall hold office during good behavior, until they reach the
age of seventy (70), or become incapacitated to discharge the duties of their office, unless sooner
removed for the same causes and in the same manner provided by law for members of the judiciary of
equivalent rank."
SEC. 2. Section 2 of the same Act, as amended, is hereby further amended, to reach as follows:
"SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - The CTA may sit en banc or in three (3)
Divisions, each Division consisting of three (3) Justices.
"Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for sessions of a
Division. Provided, That when the required quorum cannot be constituted due to any vacancy,
disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice shall designate any
Justice of other Divisions of the Court to sit temporarily therein.
"The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse a decision
of a Division but a simple majority of the Justices present necessary to promulgate a resolution or
decision in all other cases or two (2) members of a Division, as the case may be, shall be necessary for the
rendition of a decision or resolution in the Division Level."
SEC. 3. Appropriations. - The amount of Twenty million pesos (20,000,000.00) necessary to carry out
the provisions of this Act shall be appropriated immediately to be generated from whatever source that
are available in the National Treasury, based on a special supplemental budget to be submitted to the
Department of Budget and Management (DBM) which shall not exceed the herein appropriation.
SEC. 4. Repealing Clause. - - All laws, executive orders, executive issuances or letters of instruction or
any part thereof inconsistent with or contrary to the provisions of this Act are hereby deemed repealed,
amended or modified accordingly.
SEC. 5. Separability Clause. - If, for any reason, any section or provision of this Act shall be declared
unconstitutional or invalid, the other parts thereof not affected thereby shall remain valid.
SEC. 6. Effectivity Clause. - This Act shall take effect after fifteen (15) days following its publication in
at least two (2) newspapers of general circulation.
Approved: June 12, 2008
b. Jurisdiction in civil and criminal cases.
c. Revised Rules of the CTA, AM No. 05-11-07-CTA dated November 22, 2005, as amended on
September 16, 2008.
REVISED RULES OF THE COURT OF TAX APPEALS

140
TAXATION LAW REVIEW
Pursuant to Section 8 of Republic Act No. 1125, as further amended by Republic Act No. 9282, the Court
of Tax Appeals (hereinafter referred to as the Court) hereby adopts and promulgates the following Rules
for the conduct of its business:
RULE 1
TITLE AND CONSTRUCTION
SECTION 1. Title of the Rules – These Rules shall be known and cited as the Revised Rules of the Court
of Tax Appeals (RRCTA). (RCTA, Rule 1, sec. 1a)
SEC. 2. Liberal construction.- The Rules shall be liberally construed in order to promote their objective
of securing a just, speedy, and inexpensive determination of every action and proceeding before the
Court. (RCTA, Rule 1, sec. 2a)
SEC. 3. Applicability of the Rules of Court. – The Rules of Court in the Philippines shall apply
suppletorily to these Rules. (n)
RULE 2
THE COURT, ITS ORGANIZATION AND FUNCTIONS
Section 1. Composition of the Court. – The Court is composed of a presiding justice and eight (8)
associate justices appointed by the President of the Philippines. In appropriate cases, the court shall sit en
banc, or in three (3) Divisions of three (3) justices each, including the presiding justice, who shall be the
Chairperson of the First Division and the two (2) most Senior Associate Justices shall be served as
Chairpersons of the Second Divisions, respectively. (a) (As amended on September 16, 2008)
SEC. 2. Exercise of powers and functions. – The Court shall exercise its adjudicative powers, functions
and duties en banc or in Divisions.
The Court shall sit en banc in the exercise of its administrative, ceremonial and non-adjudicative
functions. (n)
Sec. 3. Court en banc; quorum and voting. - The presiding justice or, if absent, the most senior justice in
attendance shall preside over the sessions of the Court en banc. The attendance of five (5) justices of the
Court shall constitute a quorum for its session en banc. The presence at the deliberation and the
affirmative vote of five (5) members of the Court en banc shall be necessary to reverse a decision of a
decision of a Division but only a simple majority of the justices present to promulgate a resolution or
decision in all cases. Where the necessary majority vote cannot be had, the petition shall be dismissed; in
appealed cases, the judgement or order appealed from shall stand affirmed; and on all incidental matters,
the petition or motion shall be denied. (a) (As amended on September 16, 2008)
Sec. 4. The Court Division: quorum and voting. - The Chairperson of the Division or, if absent, the most
senior member shall preside over the sessions of the Court in Division . The attendance of at least two (2)
justices of the court shall be necessary to constitute a quorum for its sessions in Divisions. The presence
at the deliberation and the affirmative vote of at least two justices shall be required for the pronouncement
of a judgement or final resolution of the Court Decision. (a) (As amended on September 16, 2008)
SEC. 5. Hearings. – The Court en banc or in Divisions shall conduct hearings on such days and at such
times and at such places as it may fix, with notice to the parties concerned. However, the Friday of each
week shall be devoted to hearing motions, unless, for special reasons, the Court en banc or in Divisions

141
TAXATION LAW REVIEW
shall, motu proprio or upon motion of a party, fix another day for the hearing of any motion. (RCTA,
Rule 3, sec. 2a)
Sec. 6. Disqualification of justices. -
(a) Mandatory - No justices or other officer or employee of the Court shall intervene, directly or
indirectly, in the management or control of any private enterprises which in any way may be affected by
the function of the Court. Justices of the Court shall be disqualified from sitting in any case on the same
grounds provided under the first paragraph, Section 1, Rule of Court. No person who has once served in
the Court either as presiding justice or as associate justices shall be qualified to practice as counsel before
the Court for a period of one year from that person's retirement or resignation as such. (a)
(b) Disclosure and consent of parties and lawyers. - A justice disqualified under the first paragraph,
Section 1 of Rule 137 of the Rules of Court, may instead of withdrawing from a case proceeding, disclose
on the records the parties and lawyers, independently of the justice's participation, all agree in writing that
the reason for the inhibitation is immaterial or unsubstantial, the justice may participate in the action or
proceeding. The agreement, signed by all parties and lawyers, shall be incorporated in the record of the
action or proceeding.
(c) Voluntary. - A justice of the Court may in the exercise of sound discretion, disqualify voluntarily from
sitting in a case proceeding for just or valid reasons other than those mentioned above.
A justice of the Court who inhibits from sitting in a case proceeding shall immediately notify in writing
the presiding justice and the members of the Division where the said justice belongs. (a) (As amended on
September 16, 2008)
Sec. 7. Motion to inhibit a justice. - When a motion for inhibition of a justice is filed, the Court, en banc
or in Division shall act upon motion. However, if the motion for inhibition is based on a discretionary
ground, the Court shall refer the motion to the justice involved for appropriate action (a) (As amended on
September 16, 2008)
Sec. 8. Disqualification of clerk of court or assistant clerk of court or division clerk of court or assistant
division clerk of court. -The disqualification under the first paragraph, Section 1, Rule 137 of the Rules of
Court shall likewise apply to the Clerk of Court or Assistant Clerk of Court or Division Clerk of Court or
Assistant Division Clerk of Court of this Court insofar as it is relevant to them in the performance of their
respective functions and duties.
Such person must immediately notify in writing the Presiding Justice and the members of the Court en
banc, or the Chairperson and the Members of the Division, whichever is applicable, stating the grounds
and the reasons for inhibition and further indicate the case number and title. The Presiding Justice or
Chairperson of the Division may approve the request for inhibition and in such event appoint a temporary
Clerk of Court to hear and handle the case.(n) (As amended on September 16, 2008)
RULE 3
PLACE OF OFFICE, SEAL AND OFFICE HOURS
SECTION 1. Place of office. – The Court shall have its principal office in Metro Manila. RCTA, Rule 3,
sec. 1a)
SEC. 2. Court seal. – The seal of the Court shall be circular in form and shall be of the usual size. It shall
bear, in its center, a design of the coat of arms of the Republic of the Philippines with the words “BATAS

142
TAXATION LAW REVIEW
AT BAYAN” immediately underneath the design. On the upper margin running from left to right are the
words “COURT OF TAX APPEALS,” and on its lower margin the words “REPUBLIKA NG
PILIPINAS.” (RCTA, Rule 2, sec. 1a)
SEC. 3. Seal, where affixed. – The seal of the Court shall be affixed to all summons, subpoena, notices,
decisions, orders or resolutions, certified copies of official records and such other papers that the Court
may require to be sealed. (n)
SEC. 4. Office hours. – The Office of the Clerk of Court shall be open for the transaction of business and
receiving petitions, complaints, pleadings, motions, and other papers, during the hours from eight o’clock
in the morning to four-thirty o’clock in the afternoon on Mondays to Fridays, except on such days as may
be designated by law or executive proclamation as non-working official holidays. (RCTA, Rule 3, sec.
3a)
RULE 4
JURISDICTION OF THE COURT
SECTION 1. Jurisdiction of the Court. – The Court shall exercise exclusive original jurisdiction over or
appellate jurisdiction to review by appeal the cases specified in Republic Act No. 1125, Section 7, as
amended by Republic Act No. 9282, Section 7. (n)
SEC. 2. Cases within the jurisdiction of the Court en banc. – The Court en banc shall exercise exclusive
appellate jurisdiction to review by appeal the following:
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the
exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of Customs,
Department of Finance, Department of Trade and Industry, Department of Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction; and
(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their original jurisdiction
involving final and executory assessments for taxes, fees, charges and penalties, where the principal
amount of taxes and penalties claimed is less than one million pesos;
(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by
them in the exercise of their appellate jurisdiction;
(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or
resolved by them in the exercise of their appellate jurisdiction;
(d) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in
the exercise of its exclusive original jurisdiction over tax collection cases;
(e) Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally decided by the
provincial or city board of assessment appeals;

143
TAXATION LAW REVIEW
(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in
the exercise of its exclusive original jurisdiction over cases involving criminal offenses arising from
violations of the National Internal Revenue Code or the Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or Bureau of Customs;
(g) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in
the exercise of its exclusive appellate jurisdiction over criminal offenses mentioned in the preceding
subparagraph; and
(h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of their appellate
jurisdiction over criminal offenses mentioned in subparagraph (f). (n)
SEC. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:
(a) Exclusive original over or appellate jurisdiction to review by appeal the following:
within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall
Section 229 of the National Internal Revenue Code;
(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by
them in the exercise of their original jurisdiction;
(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges, seizure, detention or release of property affected, fines, forfeitures of other penalties
in relation thereto, or other matters arising under the Customs Law or other laws administered by the
Bureau of Customs;
(5) Decisions of the Secretary of Finance on customs cases elevated for automatic review from decisions
of the Commissioner of Customs adverse to the Government under Section 2315 of the Tariff and
Customs Code; and (a) (As amended on September 16, 2008)
(6) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or
article, and the Secretary of Agriculture, in the case of agricultural product, commodity or article,

144
TAXATION LAW REVIEW
decision to impose or not to impose said duties;
(b) Exclusive jurisdiction over cases involving criminal offenses, to wit:
(1) Original jurisdiction over all criminal offenses arising from violations of the National internal
Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal
Revenue of the Bureau of Customs, where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is one million pesos or more; and
(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in their original jurisdiction in criminal offenses arising from violations of the National Internal
Revenue or Bureau of Customs, where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than one million pesos or where there is no specified amount claimed;
(c) Exclusive jurisdiction over tax collections cases, to wit:
(1) Original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees,
charges and penalties, where the principal amount of taxes and fees, exclusive of charges and penalties,
claimed is one million pesos or more; and
(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in tax collection cases originally decided by them within their respective territorial jurisdiction. (n)
RULE 5
FORM AND STYLE OF PAPERS
SECTION 1. Style. – All papers filed with the Court shall be either printed or typewritten, and fastened
on the upper left hand corner. All such papers shall have a caption, date and signature, and copies, as
specified below. (RCTA, Rule 4, sec. 1a)
SEC. 2. Size and specifications. – Printed or typewritten papers shall be typed doubled-spaced on good
quality, unglazed and plain white paper eight and a half inches wide by thirteen inches long (legal-size),
or eight and a quarter inches wide by eleven and three-fourths inches long (A4-size), at least substance
twenty and printed on one side only without covers. There shall be a margin at the left-hand side of each
page of not less than one and one-half inches in width and at the top, bottom and right-hand side of each
page of not less than one inch in width. (RCTA, Rule 4, sec. 3a)
SEC. 3. Citations. – Citations shall be indented at least one inch from the inside margin and typed single-
spaced. (RCTA, Rule 4, sec. 4a)
SEC. 4. Number of copies. – The parties shall file eleven signed copies of every paper for cases before
the Court en banc and six signed copies for cases before a Division of the Court in addition to the signed
original copy, except as otherwise directed by the Court. Papers to be filed in more than one case shall
include one additional copy for each additional case. (RCTA, Rule 4, sec. 5a)
SEC. 5. Clear and legible copies. – All copies shall be clear and legible. (RCTA, Rule 4, sec. 6a)

145
TAXATION LAW REVIEW
RULE 6
PLEADINGS FILED WITH THE COURT
SECTION 1. Complaint; contents. – The complaint shall contain allegations showing jurisdiction of the
Court and a concise statement of the complete facts of the plaintiff’s cause or causes of action. The
complaint shall be verified and must contain a certification against forum shopping as provided in
Sections 4 and 5, Rule 7 of the Rules of Court. (n)
SEC. 2. Petition for review; contents. – The petition for review shall contain allegations showing the
jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the issues
involved in the case, as well as the reasons relied upon for the review of the challenged decision. The
petition shall be verified and must contain a certification against forum shopping as provided in Section 3,
Rule 46 of the Rules of Court. A clearly legible duplicate original or certified true copy of the decision
appealed from shall be attached to the petition. (RTCA, Rule 5, sec. 2a)
SEC. 3. Payment of docket fees. – The Clerk of Court shall not receive a petition for review for filing
unless the petitioner submits proof of payment of the docket fees. Upon receipt of the petition or the
complaint, it will be docketed and assigned a number, which shall be placed by the parties on all papers
thereafter filed in the proceeding. The Clerk of Court will then issue the necessary summons to the
respondent or defendant. (RCTA, Rule 5, sec. 3a)
SEC. 4. Bill of particulars. –
(a) Requirement for bill of particulars. - The Court, on its own initiative or upon motion of either party
filed before responding to a pleading or, if no responsive pleading is permitted by these Rules, within ten
days after service of the pleading, may order a party to submit a detailed statement of the nature of the
claim or defense or of any matter stated in any pleading, which is not averred with sufficient definiteness
or particularity. Such order or motion shall point out the defects complained of and the details desired.
After service of the bill of particulars or of a more definite pleading, the moving or adverse party may file
a responsive pleading within ten days. (As amended on September 16, 2008)
(b) Failure to comply. – If the order issued by the Court pursuant to paragraph (a) above is not complied
with within ten days after notice of the order, or within such other time as the Court may fix, the Court
may strike out the pleading to which the motion was directed or may make such other order as it deems
just. The Court may upon motion set aside the order, or modify it in the interest of justice. (RCTA, Rule
8, sec. 2a)
(c) Motion for bill of particulars when not allowed. – No motion for bill of particulars shall be allowed in
cases falling under Sections 3(a)(3) and 3(c)(2) of Rule 4 of these Rules. (n)
SEC. 5. Answer. –
(a) Time for filing and contents. – Within fifteen days after service of summons, the respondent or the
defendant shall file an answer to the petition or complaint which shall include all defenses in law and the
specific provisions of law and applicable jurisprudence and grounds for dismissal of the petition or
complaint, or which shall prevent and bar recovery.
(Rule of Procedure for Civil Forfeiture, Asset Preservation and Freeze Order, Sec. 9, par. 2a; and RCTA,
Rule 7, sec. 1a)

146
TAXATION LAW REVIEW
(b) Transmittal of records. - The respondent Commissioner of Internal Revenue, Commissioner of

Customs, the Secretary of Finance, the Secretary of Agriculture, or the Secretary of Trade and Industry,
within ten days after filing an answer, the Chairperson of the Central Board of Assessment Appeals and
the presiding judges of the Regional Trial Courts, within ten days from receipt of notice, shall certify and
forward to the Court all the records of the case in their possession, with the pages duly numbered, and, if
the records are in separate folders, then the folders will also be numbered. If there are no records, such
fact shall be manifested to the Court within the same period of ten days. The Court may, on motion, and
for good cause shown, grant an extension of time within which to submit the aforesaid records of the
case. Failure to transmit the records within the time prescribed herein or within the time allowed by the
Court may constitute indirect contempt of court. (a) (RCTA, Rule 7, sec. 2a) (As amended on September
16, 2008)
Sec. 6. Entry of appearance. - An attorney may enter an appearance by signing the initial pleading. An
attorney may later enter an appearance only by filing an entry of appearance with the written conformity
of the client.
The initial pleading or entry of appearance must contain the following:
(1) The attorney's specific address, which must not be a Post Office Box number;
(2) The Roll of Attorney's Number;
(3) The date and number of current membership due in the Integrated Bar of the Philippines (IBP) per
Official Receipt, or Lifetime Member Number;
(4) The Current Professional Tax Receipt (PTR) number together with date and place of issuance; and
(5) The MCLE certificate number and date of issue, unless exempt.
The attorney or party entering an appearance shall serve a copy of the entry of appearance upon the
opposing party. An attorney who appears in open court without previously having filed a written
appearance must give the said counsel's business address to the Clerk of Court and file a written
appearance within forty-eight hours from such open court appearance. An attorney or party who has filed
an appearance and who changes address of record shall notify the Clerk of Court and the adverse party of
such change of address, and a separate notice of such change of address shall be filed for each additional
case. (a) (As amended on September 16, 2008)
RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS
SECTION 1. Applicability of the Rules of the Court of Appeals, exception. – The procedure in the Court
en banc or in Divisions in original and in appealed cases shall be the same as those in petitions for review
and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46
of the Rules of Court, except as otherwise provided for in these Rules. (n)
RULE 8
PROCEDURE IN CIVIL CASES
SECTION 1. Review of cases in the Court en banc. – In cases falling under the exclusive appellate
jurisdiction of the Court en banc, the petition for review of a decision or resolution of the Court in

147
TAXATION LAW REVIEW
Division must be preceded by the filing of a timely motion for reconsideration or new trial with the
Division. (n)
SEC. 2. Review of cases in the Court in Division. – In appealed cases falling under the jurisdiction of the
Court in Division in Sections 3(a)(1) to 3(a)(6) and 3(c)(2) of Rule 4, the party filing the case shall be
called the Petitioner and the party against whom the case is filed shall be called the Respondent. The
pleading shall be entitled Petition for Review.
In tax collection cases originally filed with the Court under Section 3(c)(1) of Rule 4, the party filing the
case shall be called the Plaintiff and the party against whom the case is filed shall be called the
Defendant. The pleading shall be entitled Complaint. In appealed tax collection cases, the original
captions shall be retained. The party filing the appeal shall be called the Appellant and the party against
whom the appeal is filed shall be called the Appellee. (RCTA, Rule 5, Sec. 1a)
SEC. 3. Who may appeal; period to file petition. – (a) A party adversely affected by a decision, ruling or
the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of
internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the
Commissioner of Internal revenue on claims for refund of internal revenue taxes erroneously or illegally
collected, the taxpayer must file a petition for review within the two-year period prescribed by law from
payment or collection of the taxes. (n)
(b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for
reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen
days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the
payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration
of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen
days from the expiration of the original period within which to file the petition for review. (Rules of
Court, Rule 42, sec. 1a)
(c) A party adversely affected by a decision or ruling of the Central Board of Assessment Appeals and the
Regional Trial Court in the exercise of their appellate jurisdiction may appeal to the Court by filing before
it a petition for review within thirty days from receipt of a copy of the questioned decision or ruling. (n)
SEC. 4. Where to appeal; mode of appeal. – (a) An appeal from a decision or ruling or the inaction of the
Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes
erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in
the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for
review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal. (n)
(b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or
new trial shall be taken to the Court by petition for review as provided in Rule 43 of the Rules of Court.
The Court en banc shall act on the appeal. (n)

148
TAXATION LAW REVIEW
(c) An appeal from a decision or ruling of the Central Board of Assessment Appeals or the Regional Trial
Court in the exercise of their appellate jurisdiction shall be taken to the Court by filing before it a petition
for review as provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal. (n)
RULE 9
PROCEDURE IN CRIMINAL CASES
SECTION 1. Review of cases in the Court. – The review of criminal cases in the Court en banc or in
Division shall be governed by the applicable provisions of Rule 124 of the Rules of Court. (n)
SEC. 2. Institution of criminal actions. – All criminal actions before the Court in Division in the exercise
of its original jurisdiction shall be instituted by the filing of an information in the name of the People of
the Philippines. In criminal actions involving violations of the National Internal Revenue Code and other
laws enforced by the Bureau of Internal Revenue, the Commissioner of Internal Revenue must approve
their filing. In criminal actions involving violations of the tariff and Customs Code and other laws
enforced by the Bureau of Customs, the Commissioner of Customs must approve their filing. (Rules of
Court, Rule 110, sec. 2a; n)
The institution of the criminal action shall interrupt the running of the period of prescription. (Rules of
Court, Rule 110, sec. 1, par. 2a)
SEC. 3. Prosecution of criminal actions. – All criminal actions shall be conducted and prosecuted under
the direction and control of the public prosecutor. In criminal actions involving violation of the National
Internal Revenue Code or other laws enforced by the Bureau of Internal Revenue, and violations of the
Tariff and Customs Code or other laws enforced by the Bureau of Customs, the prosecution may be
conducted by their respective duly deputized legal officers. (Rules of Court, Rule 110, sec. 5, par. 6a)
Sec. 4. Warrant of arrest. - Within ten days from the filing of the information, the Division of the Court
to which the case was raffled shall evaluate the resolution of the public prosecutor and its supporting
evidence. The Division may immediately dismiss the case if it finds that the evidence on record clearly
fails to establish probable cause. If the Division finds probable cause, it shall issue a warrant of arrest
signed by the Chairperson of the Division may order the prosecutor to present additional evidence, ex
parte, within five days from notice. (a) (As amended on September 16, 2008)
Sec. 5. When search warrant may issue. - The Division may issue a search warrant signed by its
Chairperson following the requirements of Rule 126 of the Rules of Court. (a) (As amended on
September 16, 2008)
Sec. 6. Bail, how amount fixed; approval. - The amount of bail to be posted in a case filed with the Court
shall be fixed and approved by the Division to which the case is raffled: Provided, however, that where
the accused is arrested, detained or otherwise placed in custody outside the Metropolitan Manila area, any
judge of the Regional Trial Court of the place where the arrest is made may accept and approve the bail
for release of the accused and appearance before the Division to which the case is assigned. The judge
who accepted the bail and released the accused shall inform the Division that issued the order of arrest of
the action and forward to it the papers relative to the case. (a) (As amended on September 16, 2008)
Sec. 7. Conditions of the bail. - The conditions of the bail are that the accused shall appear and answer the
complaint or information in the Division of the Court to which it is raffled or transferred for trial and
submit the same to its orders and processes. If convicted, and the case is appealed to the Court en banc or
to the Supreme Court, the accused will surrender for the execution of such judgement as the Court en

149
TAXATION LAW REVIEW
banc or the Supreme Court may render; or that, in the event the case is to be tried anew or remanded for a
new trial, the same shall appear before the Division to which it may be remanded and submit to its orders
and processes. (a) (As amended on September 16, 2008)
SEC. 8. Release order. – The Clerk of Court shall issue the corresponding release order. (Rules of Court,
Rule 114, sec. 3a)
SEC. 9. Appeal; period to appeal. – (a) An appeal to the Court in criminal cases decided by a Regional
Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal pursuant to
Sections 3(a) and 6, Rule 122 of the Rules of Court within fifteen days from receipt of a copy of the
decision or final order with the court which rendered the final judgment or order appealed from and by
serving a copy upon the adverse party. The Court in Division shall act on the appeal.
(b) An appeal to the Court en banc in criminal cases decided by the Court in Division shall be taken by
filing a petition for review as provided in Rule 43 of the Rules of Court within fifteen days from receipt
of a copy of the decision or resolution appealed from. The Court may, for good cause, extend the time for
filing of the petition for review for an additional period not exceeding fifteen days.
(c) An appeal to the Court in criminal cases decided by the Regional Trial Courts in the exercise of their
appellate jurisdiction shall be taken by filing a petition for review as provided in Rule 43 of the Rules of
Court within fifteen days from receipt of a copy of the decision or final order appealed from. The Court
en banc shall act on the appeal. (n)
Sec. 10. Solicitor General as counsel for the People and government officials sued in their official
capacity. - The Solicitor General shall represent the People of the Philippines and government officials
sued in their official capacity in all cases brought to the Court in the exercise of its appellate jurisdiction.
The former may deputize the legal officers of the Bureau of Internal Revenue in cases brought under the
National Internal Revenue Code or other laws enforced by the Bureau of Internal Revenue, or the legal
officers of the Bureau of Customs in cases brought under the Tariff and Customs Code of the Philippines
or other laws enforced by the Bureau of Customs, to appear in behalf of the officials of said agencies sued
in their official capacity: Provided, however, such duly deputized legal officers shall remain at all times
under the direct control and supervision of the Solicitor General. (a) (As amended on September 16,
2008)
SEC. 11. Inclusion of civil action in criminal action. – In cases within the jurisdiction of the Court, the
criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties
shall be deemed jointly instituted in the same proceeding. The filing of the criminal action shall
necessarily carry with it the filing of the civil action. No right to reserve the filing of such civil action
separately from the criminal action shall be allowed or recognized. (Rules of Court, Rule 111, sec. 1[a],
par. 1a)
RULE 10
SUSPENSION OF COLLECTION OF TAX
SECTION 1. No suspension of collection of tax, except as herein prescribed. - No appeal taken to the
Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the
satisfaction of tax liability as provided under existing laws, except as hereinafter prescribed. (a) (As

150
TAXATION LAW REVIEW
SEC. 2. Who may file. – Where the collection of the amount of the taxpayer’s liability, sought by means
of a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by whatever means,
as provided under existing laws, may jeopardized the interest of the Government or the taxpayer, an
interested party may file a motion for the suspension of the collection of the tax liability. (RCTA, Rule
12, sec. 1a)
SEC. 3. When to file. – The motion for the suspension of the collection of the tax may be filed together
with the petition for review or with the answer, or in a separate motion filed by the interested party at any
stage of the proceedings. (RCTA, Rule 12, sec. 2)
SEC. 4. Contents and attachments of the motion. – The motion for the suspension of the collection of the
tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon in support
of the motion. Affidavits and other documentary evidence in support thereof shall be attached thereto,
which, if uncontroverted, would be admissible in evidence as proof of the facts alleged in the motion.
(RCTA, Rule 12, sec. 3a)
SEC. 5. Opposition. – Unless a shorter period is fixed by the Court because of the urgency of the motion,
the adverse party shall, within five days after receipt of a copy of the motion, file an opposition thereto, if
any, which shall state clearly and distinctly the facts and the grounds relied upon in support of the
opposition. (RCTA, Rule 12, sec. 4)
SEC. 6. Hearing of the motion. – The movant shall, upon receipt of the opposition, set the motion for
hearing at the next available motion day, and the Court shall give preference to the motion over all other
cases, except criminal cases. At the hearing, both parties shall submit their respective evidence. If
warranted, the Court may grant the motion if the movant shall deposit with the Court an amount in cash
equal to the value of the property or goods under dispute or filing with the Court of an acceptable surety
bond in an amount not more than double the disputed amount or value. However, for the sake of
expediency, the Court, motu proprio or upon motion of the parties, may consolidate the hearing of the
motion for the suspension of the collection of the tax with the hearing on the merits of the case. (RCTA,
Rule 12, sec. 5a)
SEC. 7. Corporate surety bonds. – In the selection and qualification of surety companies, the parties and
the Court shall be guided by Supreme Court Circular A.M. No. 04-7-02-SC, dated July 20, 2004. (n)
RULE 11
PRE-TRIAL
SECTION 1. Applicability. – The rule on pre-trial under Rules 18 and 118 of the Rules of Court, as
amplified in A.M. No. 03-1-09-SC dated July 13, 2004 (Re: Rule on Guidelines to be Observed by Trial
Court Judges and Clerk of Court in the Conduct of Pre-Trial and Use of Deposition-Discovery Measures),
shall apply to all cases falling within the original jurisdiction of the Court, except that the parties may not
be allowed to compromise the criminal liability or submit the case to mediation, arbitration or other mode
of alternative dispute resolution. (n)
SEC. 2. Mandatory pre-trial. – In civil cases, the Clerk of Court shall set the case for pre-trial on the first
available date immediately following the tenth day after the filing of the answer.
In criminal cases, the Clerk of Court shall set the case for pre-trial not later than ten days after
arraignment, if the accused is detained, nor later than thirty days if the accused is on bail. (RCTA, Rule
11, sec. 1a)

151
TAXATION LAW REVIEW
Sec. 3. Setting for an earlier date. - Where due to the urgency of the case, either party desires that the pre-
trial be set on an earlier date, such party shall so state in the pleading in which event the Clerk of Court
shall set the pre-trial on the first available date immediately after the filling of the answer. (a) (As
SEC. 4. Duty of the Court. – The Court shall confer with the parties in pre-trial conferences with a view
to narrowing the issues, making admissions of or stipulating on facts, simplifying the presentation of
evidence, or otherwise assisting in the preparation for trial or possible disposition of the case in whole or
in part without trial. (n)
SEC. 5. Procedure in civil cases. – In civil cases, the parties shall submit, at least three days before the
pre-trial, their respective pre-trial briefs containing the following:
(a) A statement of their willingness to compromise the civil liability indicating its desired terms, except
that the case shall not be subject to referral to mediation, arbitration or other mode of alternative dispute
resolution;
(b) A summary of admitted facts and proposed stipulation of facts;
(c) The issues to be tried or resolved;
(d) The documents or exhibits to be presented, stating their purpose. No evidence shall be allowed to be
presented and offered during the trial in support of a party’s evidence-in-chief other than those that had
been pre-marked and identified, unless allowed by the Court to prevent manifest injustice;
(e) A manifestation of their having availed themselves of discovery procedures or referral to

commissioners; and
(f) The numbers and names of the witnesses, the substance of their testimonies and the approximate
number of hours that will be required by the parties for the presentation of their respective witnesses.
The consequence on the party at fault shall be the same as the effect of failure to appear.
Failure to file the pre-trial brief or to comply with its required contents shall have the same effect as
failure to appear at the pre-trial. (Rules of Court, Rule 18, sec. 6a)
SEC. 6. Procedure in criminal cases. –
(a) Before the preliminary conference. – Before the pre-trial conference, the Court may issue an order
referring the case to the Division Clerk of Court for a preliminary conference of the parties at least three
days prior to the pre-trial:
(1) To mark the documents or exhibits to be presented by the parties and copies to be attached to the
records after comparison;
(2) To consider other matters as may aid in its disposition; and
(3) To inform the parties that no evidence shall be allowed to be presented and offered during the trial
other than those identified and marked during the pre-trial unless allowed by the Court to prevent
manifest injustice.

152
TAXATION LAW REVIEW
(Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-trial
and Use of Deposition-Discovery Measures, Sec. 1B[2]a)
(b) During the preliminary conference. – The Division Clerk of Court shall:
(1) Mark the documents to be presented as exhibits and copies attached to the records after comparison;
(2) Ascertain from the parties the undisputed facts and admission on the genuineness and due execution
of documents marked as exhibits; and
(3) Consider such other matters as may aid in the prompt disposition of the case.
The proceedings during the preliminary conference shall be recorded in the minutes of preliminary
conference to be signed by both parties and counsel. The Division Clerk of Court shall attach the minutes
of preliminary conference and the exhibits to the case record before the pre-trial. (Rule on Guidelines to
be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-trial and Use of Deposition-
Discovery Measures, Sec. IB[3]a)
(c) During the pre-trial conference. – The Court at the pre-trial conference shall consider the following:
(1) Stipulation of facts and issues raised;
(2) Marking for identification of evidence of the parties;
(3) Waiver of objections to admissibility of evidence;
(4) Modification of order of trial; and
(5) Such matters as will promote a fair and expeditious trial of the criminal and civil aspects of the case.
(Rules of Court, Rule 118, sec. 1a).
All agreements or admissions made or entered during the pre-trial conference shall be in writing and
signed by the accused and counsel; otherwise, they cannot be used in evidence against the accused. The
agreements shall be subject to the approval of the Court.
(Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-trial
and Use of Deposition –Discovery Measures, Sec. IB[8]a; and Rules of Court, Rule 118, sec. 2a)
The Court may impose appropriate sanctions or penalties on the accused or counsel or the prosecutor who
does not appear at the pre-trial conference and does not offer an acceptable excuse for the said person's
absence and lack of cooperation. (a) (As amended on September 16, 2008)
(d) Pre-trial order. – After the pre-trial conference, the Court shall issue a pre-trial order reciting the
actions taken, the facts stipulated, the admissions made, evidence marked, and such other matters covered
during the pre-trial conference. The order shall bind the parties, limit the trial to matters not disposed of
and control the course of the action during the trial, unless modified by the Court to prevent manifest
injustice. (Rules of Court, Rule 118, sec. 4a)
RULE 12
TRIAL

153
TAXATION LAW REVIEW
SECTION 1. Procedure. – The Court shall conduct the trial in accordance with Rule 30 of the Rules of
Court in civil cases and Rule 119 thereof in criminal cases. (n)
SEC. 2. Power of the Court to receive evidence. – The Court may receive evidence in the following
cases:
(a) In all cases falling within the original jurisdiction of the Court in Division pursuant to Section 3, Rule
4 of these Rules; and
(b) In appeals in both civil and criminal cases where the Court grants a new trial pursuant to Section 2,
Rule 53 and Section 12, Rule 124 of the Rules of Court.
(n)
Sec. 3. Taking of evidence by a justice. - The Court may motu proprio or upon proper motion, direct that a
case, or any issue therein be assigned to one of its members for the taking of evidence, when the
determination of a question of fact arises at any stage of the proceedings, or when the taking of an
account is necessary or when the determination of an issue of fact requires the examination of a long
account. The hearing before such justice shall proceed in all respects as though the same had been made
before the Court.
Upon the completion of such hearing the justice concerned shall promptly submit to the Court a written
report thereon, stating therein the findings and conclusions. Thereafter, the Court shall render its decision
on the case adopting, modifying, or rejecting the report in whole or in part, or the Court may in its
discretion, recommit it to the justice with instructions, or receive further evidence. (a) (As amended on
September 16, 2008)
Sec. 4. Taking of evidence by Court official. - In default or ex parte hearings or in any case where the
parties agree in writing the Court may delegate the reception of evidence to the Clerk of Court, the
Division Clerks of Court their assistants who are members of the Philippine bar or any Court attorney.
The reception of documentary evidence by a Court official shall be for the sole purpose of marking
comparison with the original and identification by witnesses of such documentary evidence. The Court
official shall have no power to rule on objections shall be resolved by the Court upon submission of
exhibits, which objections shall be resolved by the Court upon submission of the report and the transcripts
within ten days from termination of the hearing. (a) (As amended on September 16, 2008)
Sec. 5. Presentation of voluminous documents or long accounts. - In the interest of speedy administration
of justice the following rules shall govern the presentation of voluminous documents or long accounts
such as receipts invoices and vouchers as evidence to establish certain facts:
(a) Summary and CPA certification. – The party who desires to introduce in evidence such voluminous
documents or long accounts must, upon motion and approval by the Court, refer the voluminous
documents to an independent Certified Public Accountant (CPA) for the purpose of presenting:
(1) a summary containing, among other matters, a chronological listing of the numbers, dates and
amounts covered by the invoices or receipts and the amount(s) of taxes paid and
(2) a certification of an independent CPA attesting to the correctness of the contents of the summary after
making an examination, evaluation and audit of voluminous receipts, invoices or long accounts.

154
TAXATION LAW REVIEW
The name of the Certified Public Accountant or partner of a professional partnership of certified public
accountants in change must be stated in the motion. The court shall issue a commission authorizing the
independent CPA to conduct an audit and, thereafter, testify relative to such summary and certification.
(As amended on September 16, 2008)
(b) Pre-marking and availability of originals. – The receipts, invoices, vouchers or other documents
covering the said accounts or payment to be introduced in evidence must be pre-marked by the party
concerned and submitted to the Court in order to be made accessible to the adverse party who desires to
check and verify the correctness of the summary and CPA certification. The original copies of the
voluminous receipts, invoices or accounts must be ready for verification and comparison in case doubt on
its authenticity is raised during the hearing or resolution of the formal offer of evidence. (n)
RULE 13
TRIAL BY COMMISSIONER
SECTION 1. Appointment of independent Certified Public Accountant (CPA). – A party desiring to

present voluminous documents in evidence before the Court may secure the services of an independent
certified Public Accountant (CPA) at its own expense. The Court shall commission the latter as an officer
of the Court solely for the purpose of performing such audit functions as the Court may direct. (n)
SEC. 2. Duties of independent CPA. – The independent CPA shall perform audit functions in accordance
with the generally accepted accounting principles, rules and regulations, which shall include:
(a) Examination and verification of receipts, invoices, vouchers and other long accounts;
(b) Reproduction of, and comparison of such reproduction with, and certification that the same are
faithful copies of original documents, and pre-marking of documentary exhibits consisting of voluminous
documents;
(c) Preparation of schedules or summaries containing a chronological listing of the numbers, dates and
amounts covered by receipts or invoices or other relevant documents and the amount(s) of taxes paid;
(d) Making findings as to compliance with substantiation requirements under pertinent tax laws,
regulations and jurisprudence;
(e) Submission of a formal report with certification of authenticity and veracity of findings and
conclusions in the performance of the audit;
(f) Testifying on such formal report; and
(g) Performing such other functions as the Court may direct.
SEC. 3. Findings of independent CPA. – The submission by the independent CPA of pre-marked
documentary exhibits shall be subject to verification and comparison with the original documents, the
availability of which shall be the primary responsibility of the party possessing such documents and,
secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be
challenged by the parties and shall not be conclusive upon the Court, which may, in whole or in part,
adopt such findings and conclusions subject to verification. (n)

155
TAXATION LAW REVIEW
SEC. 4. Other referral to commissioner. – Whenever practicable and convenient, the Court may apply the
procedure prescribed in Rule 32 of the Rules of Court. When the parties stipulate that a commissioner’s
findings of fact shall be final, only questions of law shall thereafter be considered. (n)
SEC. 5. Compensation of Commissioner. – The Court shall allow the commissioners such reasonable
compensation as the circumstances of the case may warrant. (Rules of Court, Rule 32, sec. 13a)
RULE 14
JUDGMENT, ITS ENTRY AND EXECUTION
SECTION 1. Rendition of judgment. – The Court shall decide the cases brought before it in accordance
with Section 15, paragraph (1), Article VIII of the 1987 Constitution. The conclusions of the Court shall
be reached in consultation by the Members on the merits of the case before its assignment to a Member
for the writing of the decision. The presiding justice or chairman of the Division shall include the case in
an agenda for a meeting of the Court en banc or in Division, as the case may be, for its deliberation. If a
majority of the justices of the Court en banc or in Division agree on the draft decision, the ponente shall
finalize the decision for the signature of the concurring justices and its immediate promulgation. Any
justice of the Court en banc or in Division may submit a separate written concurring or dissenting opinion
within twenty days from the date of the voting on the case. The concurring and dissenting opinions,
together with the majority opinion, shall be jointly promulgated and attached to the rollo.
In deciding the case, the Court may not limit itself to the issues stipulated by the parties but may also rule
upon related issues necessary to achieve an orderly disposition of the case. (2002 Internal Rules of the
Court of Appeals, Rule VI, secs. 9 and 10a; and Rules of Court, Rule 51, sec. 2a)
SEC. 2. Form of decision. – Every decision or final resolution of the Court shall be in writing, stating
clearly and distinctly the findings of fact and the conclusions of law on which it is based, and signed by
the justices concurring therein. Such findings and conclusions shall be contained in the decision or final
resolution itself. However, in appealed cases, the Court may adopt by reference the findings and
conclusions set forth in the decision, order or resolution appealed from.
Every decision of the Court shall be accompanied by a certification signed by the presiding justice or
acting presiding justice, chairman or most senior member as acting chairman of the Court en banc or in
Division in the following form:
“Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the
above decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court.”
(Rules of Court, Rule 51, sec 5a; and 2002 Internal Rules of the Court of Appeals, Rule VI, sec. 11a)
SEC. 3. Amended decision. – Any action modifying or reversing a decision of the Court en banc or in
Division shall be denominated as Amended Decision. (2002 Internal Rules of the Court of Appeals, Rule
VI, sec. 12a)
SEC. 4. Resolution. – Any disposition of the Court en banc or in Divisions other than on the merits shall
be embodied in a Resolution.
(2002 Internal Rules of the Court of Appeals, Rule VI, sec. 12a)
Sec. 5. Promulgation and notice of decision and resolution. - The Clerk of Court or Deputy Clerk of
Court shall have the direct responsibility for the promulgation of the decision and resolution of the Court

156
TAXATION LAW REVIEW
and shall see to it that such decision and resolution are properly signed by the concurring and dissenting
justices and the required certification is duty accomplished.
Promulgation consists of the filing of the decision or resolution with the Clerk of Court or Division Clerk
of Court, who shall forth with annotate the date and the time of receipt and attest to it by signing thereon.
The Clerk of Court or Division Clerk of Court shall serve notice of such decision resolution upon the
parties or their counsel, furnishing them with certified true copies thereof.
In criminal cases originally filed with and decided by The Court in Division , the Chairperson shall cause
the decision or resolution to be filed with the Division Clerk of Court in a sealed envelop, who shall
schedule its promulgation, giving notice to the prosecution, the accused personally or through bondsman
or warden, and counsel requiring their presence at the promulgation.
The promulgation shall consist of the reading by the Division Clerk of Court of the dispositive portion of
the decision or resolution in the presence of the accused and a justice of the Division that rendered the
same. If the accused is detained, the warden shall produce such person before the Court. However, if the
accused is detained outside Metro Manila, the Court having territorial jurisdiction over the place of
detention to promulgate the decision or resolution at such place. (a) (As amended on September 16, 2008)
SEC. 6. Entry of judgment and final resolution. – If no appeal or motion for reconsideration or new trial
is filed within the time provided in these Rules, the Clerk of Court shall forthwith enter the judgment or
final resolution in the book of judgment. The date when the judgment or final resolution becomes
executory shall be deemed the date of its entry. The entry shall contain the dispositive part of the
judgment or final resolution and shall be signed by the Clerk of Court, with a certification that such
judgment or resolution has become final and executory. (Rules of Court, Rule 51, sec. 10a)
SEC. 7. Execution of judgment. – Upon the expiration of the period to appeal from a judgment or order
that disposes of the action or proceeding and no appeal has been duly perfected, execution shall issue as a
matter of right, on motion.
If an appeal has been duly perfected and finally resolved, execution may be forthwith applied for in the
court of origin, on motion of the judgment oblige, submitting therewith a certified true copy of the
judgment or final order sought to be enforced and of its entry, with notice to the adverse party.
(Rules of Court, Rule 39, sec. 1a)
RULE 15
MOTION FOR RECONSIDERATION OR NEW TRIAL
SECTION 1. Who may and when to file motion. - Any aggrieved party may seek a reconsideration or
new trial of any decision, resolution or order of the Court by filing a motion for reconsideration or new
trial for fifteen days from the date of receipt of notice of the decision, resolution or order of the Court in
question,. (a) (as amended on September 16, 2008)
Sec. 2. Opposition. - the adverse party may file an opposition to the motion for reconsideration or new
trial within ten days after receipt of a copy of the motion for reconsideration or new trial of a decision,
resolution or order of the Court. (a) (as amended on September 16, 2008)
SEC. 3. Hearing of the Motion. – The motion for reconsideration or new trial, as well as the opposition
thereto, shall embody all supporting arguments and the movant shall set the same for hearing on the next
available motion day. Upon the expiration of the period set forth in the next preceding section, without

157
TAXATION LAW REVIEW
any opposition having been filed by the other party, the motion for reconsideration or new trial shall be
considered submitted for resolution, unless the Court deems it necessary to hear the parties on oral
argument, in which the case the Court shall issue the proper order. (RCTA, Rule 13, sec. 3a)
SEC. 4. Effect of filing the motion. – The filing of a motion for reconsideration or new trial shall suspend
the running of the period within which an appeal may be perfected. (RCTA, Rule 13, sec. 4a)
SEC. 5. Grounds of motion for new trial. – A motion for new trial may be based on one or more of the
following causes materially affecting the substantial rights of the movant:
(a) Fraud, accident , mistake or excusable negligence which ordinary prudence could not have guarded
against and by reason of which the rights of such aggrieved party has probably been impaired: or
(b)Newly discovered evidence, which the party could not, with reasonable diligence, have discovered and
produced at the trial and, which if presented, would probably alter the result. (As amended on September
16, 2008)
A motion for new trial shall include all grounds then available and those not included shall be deemed
waived.
SEC. 6. Contents of motion for reconsideration or new trial and notice. – The motion shall be in writing
stating its grounds, a written notice of which shall be served by the movant on the adverse party.
A motion for new trial shall be proved in the manner provided for proof of motions. A motion for the
cause mentioned in subparagraph (a) of the preceding section shall be supported by affidavits of merits
which may be rebutted by counter-affidavits. A motion for the cause mentioned in subparagraph (b) of the
preceding section shall be supported by affidavits of the witnesses by whom such evidence is expected to
be given, or by duly authenticated documents which are proposed to be introduced in evidence.
A motion for reconsideration or new trial that does not comply with the foregoing provisions shall be
deemed pro forma, which shall not toll the reglementary period for appeal.
SEC. 7. No second motion for reconsideration or for new trial. – No party shall be allowed to file a
second motion for reconsideration of a decision, final resolution or order; or for new trial. (Rules of
Court, Rule 52, sec. 2a)
SEC. 8. Ruling. – The Court shall resolve the motion for reconsideration or new trial within three months
from the time it is deemed submitted for resolution. (Rules of Court, Rule 52, sec. 3a)
RULE 16
APPEAL
SECTION 1. Appeal to Supreme Court by petition for review on certiorari. – A party adversely affected
by a decision or ruling of the Court en banc may appeal therefrom by filing with the Supreme Court a
verified petition for review on certiorari within fifteen days from receipt of a copy of the decision or
resolution, as provided in Rule 45 of the Rules of Court. If such party has filed a motion for
reconsideration or for new trial, the period herein fixed shall run from the party’s receipt of a copy of the
resolution denying the motion for reconsideration or for new trial. (n)

158
TAXATION LAW REVIEW
SEC. 2. Effect of appeal. – The motion for reconsideration or for new trial filed before the Court shall be
deemed abandoned if, during its pendency, the movant shall appeal to the supreme Court pursuant to
Section 1 of this Rule. (2002 Internal Rules of the Court of Appeals, Rule VI, sec. 15a)
RULE 17
LEGAL FEES AND COSTS
SECTION 1. Additional fees and costs. – In addition to the fees prescribed in Rule 141 of the Rules of
Court and all amendments thereto, the following legal fees and costs shall be collected:
(a) For reception of evidence by a Court official pursuant to Section 4, Rule 12 of these Rules five
hundred pesos for each day of actual sessions; and
(b) For any other services of the Clerk of Court and other Court officials not provided for in Rule 141 of
the Rules of Court, two hundred pesos.
RULE 18
EFFECTIVITY
SECTION 1. Effectivity of the Revised Rules. – These Rules shall take effect on the fifteenth day of
December 2005 following their publication in a newspaper of general circulation in the Philippines not
later than 25 November 2005. (n)
d. CIR vs. CTA and Petron Corporation, GR No. 207843 dated July 15, 2015. (Perlas-Bernabe)
The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax
disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the
validity of a ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers to
interpret tax laws. These observations may be deduced from a reading of Section 7 of RA 1125, 22 as
amended by RA 9282,23 entitled "An Act Creating the Court of Tax Appeals," enumerating the cases over
which the CT A may exercise its jurisdiction:
Sec. 7. Jurisdiction. -The CTA shall exercise:
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
be deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Comis in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction;

159
TAXATION LAW REVIEW
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau
of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of
the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or
article, and the Secretary of Agriculture in the case of agricultural product, commodity or article,
decision to impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal
Revenue or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this
paragraph where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
less than One million pesos (₱1,000,000.00) or where there is no specified amount claimed shall be tried
by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the
Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for
the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with,
and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed
to necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil
action separately from the criminal action will be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for
taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (₱1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:

160
TAXATION LAW REVIEW
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.
(Emphasis supplied)
In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave
effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkylate
among the articles subject to customs duties, hence, Petron's petition before the CTA ultimately
challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision. In
line with the foregoing discussion, however, the CIR correctly argues that the CT A had no jurisdiction to
take cognizance of the petition as its resolution would necessarily involve a declaration of the validity or
constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the
exclusive review by the Secretary of Finance and ultimately by the regular courts. In British American
Tobacco v. Camacho,24 the Court ruled that the CTA's jurisdiction to resolve tax disputes excludes the
power to rule on the constitutionality or validity of a law, rule or regulation, to wit:
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the
validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. x
x x.25
In asserting its jurisdiction over the present case, the CTA explained that Petron's petition filed before it
"simply puts in question" the propriety or soundness of the CIR's interpretation and application of Section
148 (e) of the NIRC (as embodied in CMC No. 164-2012) "in relation to" the imposition of excise tax on
Petron's importation of alkylate; thus, the CTA posits that the case should be regarded as "other matters
arising under [the NIRC]" under the second paragraph of Section 4 of the NIRC, therefore falling within
the CTA's jurisdiction:26
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and underscoring supplied)
The Court disagrees.
As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the second
paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters directly related
to the preceding phrase "disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto" and must therefore not be taken in isolation to invoke the
jurisdiction of the CTA.27 In other words, the subject phrase should be used only in reference to cases that
are, to begin with, subject to the exclusive appellate jurisdiction of the CTA, i.e., those controversies over

161
TAXATION LAW REVIEW
which the CIR had exercised her quasi-judicial functions or her power to decide disputed assessments,
refunds or internal revenue taxes, fees or other charges, penalties imposed in relation thereto, not to those
that involved the CIR's exercise of quasi-legislative powers.
In Enrile v. Court of Appeals,28 the Court, applying the statutory construction principle of ejusdem
generis,29explained the import of using the general clause "other matters arising under the Customs Law
or other law or part of law administered by the Bureau of Customs" in the enumeration of cases subject to
the exclusive appellate jurisdiction of the CTA, saying that: [T]he 'other matters' that may come under the
general clause should be of the same nature as those that have preceded them applying the rule of
construction known as ejusdem generis.30(Emphasis and underscoring supplied)
Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative
functions, the proper recourse against the subject tax ruling expressed in CMC No. 164-2012 is a review
by the Secretary of Finance and ultimately the regular courts. In Commissioner of Customs v. Hypermix
Feeds Corporation,31 the Court has held that:
The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts,
including the regional trial courts. This is within the scope of judicial power, which includes the authority
of the courts to determine in an appropriate action the validity of the acts of the political departments. x x
x.32
Besides, Petron prematurely invoked the jurisdiction of the CT A. Under Section 7 of RA 1125, as
amended by RA 9282, what is appealable to the CT A is the decision of the COC over a customs
collector's adverse ruling on a taxpayer's protest:
SEC. 7. Jurisdiction. -The CTA shall exercise:
xxxx
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau
of Customs;
xxxx
Section 11 of the same law is no less categorical in stating that what may be the subject of an appeal to
the CT A is a decision, ruling or inaction of the CIR or the COC, among others:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a

162
TAXATION LAW REVIEW
xxxx
In this case, there was even no tax assessment to speak of. While customs collector Federico Bulanhagui
himself admitted during the CTA's November 8, 2012 hearing that the computation he had written at the
back page of the IEIRD served as the final assessment imposing excise tax on Petron's importation of
alkylate,33 the Court concurs with the CIR's stance that the subject IEIRD was not yet the customs
collector's final assessment that could be the proper subject of review. And even if it were, the same
should have been brought first for review before the COC and not directly to the CTA. It should be
stressed that the CTA has no jurisdiction to review by appeal, decisions of the customs collector. 34 The
TCC prescribes that a party adversely affected by a ruling or decision of the customs collector may
protest such ruling or decision upon payment of the amount due and, if aggrieved by the action of the
customs collector on the matter under protest, may have the same reviewed by the COC. It is only after
the COC shall have made an adverse ruling on the matter may the aggrieved party file an appeal to the
CTA.
Notably, Petron admitted to not having filed a protest of the assessment before the customs collector and
elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would be costly
and impractical, and would unjustly delay the resolution of the issues which, being purely legal in nature
anyway, were also beyond the authority of the customs collector to resolve with finality. This admission
is at once decisive of the issue of the CTA's jurisdiction over the petition. There being no protest ruling by
the customs collector that was appealed to the COC, the filing of the petition before the CTA was
premature as there was nothing yet to review.
Verily, the fact that there is no decision by the COC to appeal from highlights Petron's failure to exhaust
administrative remedies prescribed by law. Before a party is allowed to seek the intervention of the
courts, it is a pre-condition that he avail of all administrative processes afforded him, such that if a
remedy within the administrative machinery can be resorted to by giving the administrative officer every
opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be exhausted
first before the court's power of judicial review can be sought, otherwise, the premature resort to the court
is fatal to one's cause of action. While there are exceptions to the principle of exhaustion of administrative
remedies, it has not been sufficiently shown that the present case falls under any of the exceptions.
e. Banco De Oro vs. Republic, GR No. 198756 dated January 13, 2015 and resolution on the Motion for
reconsideration, GR No. 198756 dated August 16, 2016. – compare with the Petron case.
(2015 ruling)
Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals), as amended by Republic Act
No. 9282,160such rulings of the Commissioner of Internal Revenue are appealable to that court, thus:
SEC. 7.Jurisdiction.- The CTA shall exercise:

163
TAXATION LAW REVIEW
....
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
(30) days after the receipt of such decision or rulingor after the expiration of the period fixed by law for
action as referred toin Section 7(a)(2) herein.
....
SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matters arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code
shall be maintained, except as herein provided, until and unless an appeal has been previously filed with
the CTA and disposed of in accordance with the provisions of this Act.
In Commissioner of Internal Revenue v. Leal, 161 citing Rodriguez v. Blaquera,162 this court emphasized

the jurisdiction of the Court of Tax Appeals over rulings of the Bureau of Internal Revenue, thus:
While the Court of Appeals correctly took cognizance of the petition for certiorari, however, let it be
stressed that the jurisdiction to review the rulings of the Commissioner of Internal Revenue pertains to the
Court of Tax Appeals, not to the RTC.
The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the
Commissioner implementing the Tax Code on the taxability of pawnshops.. . .
....
Such revenue orders were issued pursuant to petitioner's powers under Section 245 of the Tax Code,
which states:
"SEC. 245. Authority of the Secretary of Finance to promulgate rules and regulations. — The Secretary of
Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations
for the effective enforcement of the provisions of this Code.
The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a
rate of sales tax under certain category enumerated in Section 163 and 165 of this Code shall be without
prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in
connection with the implementation of the provisionsof internal revenue laws, including ruling on the
classification of articles of sales and similar purposes." (Emphasis in the original)
....
The Court, in Rodriguez, etc. vs. Blaquera, etc., ruled:
"Plaintiff maintains that this is not an appeal from a ruling of the Collector of Internal Revenue, but
merely an attempt to nullify General Circular No. V-148, which does not adjudicate or settle any
controversy, and that, accordingly, this case is not within the jurisdiction of the Court of Tax Appeals.

164
TAXATION LAW REVIEW
We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the
collection of taxes and license fees to adhere strictly to the interpretation given by the defendant tothe
statutory provisions abovementioned, as set forth in the Circular. The same incorporates, therefore, a
decision of the Collector of Internal Revenue (now Commissioner of Internal Revenue) on the manner of
enforcement of the said statute, the administration of which is entrusted by law to the Bureau of Internal
Revenue. As such, it comes within the purview of Republic Act No. 1125, Section 7 of which provides
that the Court of Tax Appeals ‘shall exercise exclusive appellate jurisdiction to review by appeal . . .
decisions of the Collector of Internal Revenue in . . . matters arising under the National Internal Revenue
Code or other law or part of the law administered by the Bureau of Internal Revenue.’" 163
In exceptional cases, however, this court entertained direct recourse to it when "dictated by public welfare
and the advancement of public policy, or demanded by the broader interest of justice, or the orders
complained of were found to be patent nullities, or the appeal was considered as clearly an inappropriate
remedy."164
In Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) v. The Secretary, Department of
Interior and Local Government, 165 this court noted that the petition for prohibition was filed directly
before it "in disregard of the rule on hierarchy of courts. However, [this court] opt[ed] to take primary
jurisdiction over the . . . petition and decide the same on its merits in viewof the significant constitutional
issues raised by the parties dealing with the tax treatment of cooperatives under existing laws and in the
interest of speedy justice and prompt disposition of the matter." 166
Here, the nature and importance of the issues raised 167 to the investment and banking industry with regard
to a definitive declaration of whether government debt instruments are deposit substitutes under existing
laws, and the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this
court in the first instance.
The tax provision on deposit substitutes affects not only the PEACe Bonds but also any other financial
instrument or product that may be issued and traded in the market. Due to the changing positions of the
Bureau of Internal Revenue on this issue, there isa need for a final ruling from this court to stabilize the
expectations in the financial market.
Finally, non-compliance with the rules on exhaustion of administrative remedies and hierarchy of courts
had been rendered moot by this court’s issuance of the temporary restraining order enjoining the
implementation of the 2011 BIR Ruling. The temporary restraining order effectively recognized the
urgency and necessity of direct resort to this court.
(2016 ruling)
The Court of Tax Appeals has undoubted jurisdiction to pass upon the constitutionality or validity of a tax
law or regulation when raised by the taxpayer as a defense in disputing or contesting an assessment or
claiming a refund. It is only in the lawful exercise of its power to pass upon all matters brought before it,
as sanctioned by Section 7 of Republic Act No. 1125, as amended.
This Court, however, declares that the Court of Tax Appeals may likewise take cognizance of cases
directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance
(revenue orders, revenue memorandum circulars, rulings).
Section 7 of Republic Act No. 1125, as amended, is explicit that, except for local taxes, appeals from the
decisions of quasi-judicial agencies66 (Commissioner of Internal Revenue, Commissioner of Customs,

165
TAXATION LAW REVIEW
Secretary of Finance, Central Board of Assessment Appeals, Secretary of Trade and Industry) on tax-
related problems must be brought exclusively to the Court of Tax Appeals.
In other words, within the judicial system, the law intends the Court of Tax Appeals to have exclusive
jurisdiction to resolve all tax problems. Petitions for writs of certiorari against the acts and omissions of
the said quasi-judicial agencies should, thus, be filed before the Court of Tax Appeals. 67
Republic Act No. 9282, a special and later law than Batas Pambansa Blg. 129 68 provides an exception to
the original jurisdiction of the Regional Trial Courts over actions questioning the constitutionality or
validity of tax laws or regulations. Except for local tax cases, actions directly challenging the
constitutionality or validity of a tax law or regulation or administrative issuance may be filed directly
before the Court of Tax Appeals.
Furthermore, with respect to administrative issuances (revenue orders, revenue memorandum circulars, or
rulings), these are issued by the Commissioner under its power to make rulings or opinions in connection
with the implementation of the provisions of internal revenue laws. Tax rulings, on the other hand, are
official positions of the Bureau on inquiries of taxpayers who request clarification on certain provisions of
the National Internal Revenue Code, other tax laws, or their implementing regulations. 69 Hence, the
determination of the validity of these issuances clearly falls within the exclusive appellate jurisdiction of
the Court of Tax Appeals under Section 7(1) of Republic Act No. 1125, as amended, subject to prior
review by the Secretary of Finance, as required under Republic Act No. 8424. 70
f. City of Manila vs. Grecia-Cuerdo, GR No. 175723 dated February 4, 2014.
A perusal of the above provisions would show that, while it is clearly stated that the CTA has exclusive
appellate jurisdiction over decisions, orders or resolutions of the RTCs in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction, there is no
categorical statement under RA 1125 as well as the amendatory RA 9282, which provides that th e CTA
has jurisdiction over petitions for certiorari assailing interlocutory orders issued by the RTC in local tax
cases filed before it.
The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied from
the mere existence of appellate jurisdiction. 20 Thus, in the cases of Pimentel v. COMELEC, 21 Garcia v. De
Jesus,22 Veloria v. COMELEC,23Department of Agrarian Reform Adjudication Board v. Lubrica, 24 and
Garcia v. Sandiganbayan,25 this Court has ruled against the jurisdiction of courts or tribunals over
petitions for certiorari on the ground that there is no law which expressly gives these tribunals such
power.26 It must be observed, however, that with the exception of Garcia v. Sandiganbayan, 27 these rulings
pertain not to regular courts but to tribunals exercising quasi-judicial powers. With respect to the
Sandiganbayan, Republic Act No. 824928 now provides that the special criminal court has exclusive
original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition, certiorari,
habeas corpus, injunctions, and other ancillary writs and processes in aid of its appellate jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme
Court, in the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus.
With respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the
appellate court, also in the exercise of its original jurisdiction, the power to issue, among others, a writ of
certiorari,whether or not in aid of its appellate jurisdiction. As to Regional Trial Courts, the power to

166
TAXATION LAW REVIEW
issue a writ of certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of BP
129.
The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested
in one Supreme Court and in such lower courts as may be established by law and that judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling
within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed
tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is
deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable
reason why the transfer should only be considered as partial, not total.
Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason & Co.,
Inc. v. Jaramillo, et al.29 that "if a case may be appealed to a particular court or judicial tribunal or body,
then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in
aid of its appellate jurisdiction."30 This principle was affirmed in De Jesus v. Court of Appeals, 31 where
the Court stated that "a court may issue a writ of certiorari in aid of its appellate jurisdiction if said court
has jurisdiction to review, by appeal or writ of error, the final orders or decisions of the lower court." The
rulings in J.M. Tuason and De Jesus were reiterated in the more recent cases of Galang, Jr. v.
Geronimo and Bulilis v. Nuez.
Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is
conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it
into effect may be employed by such court or officer.
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with
the CA, this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of
jurisdiction over basically the same subject matter – precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice. 35 The Court cannot accept that such was the legislative
motive, especially considering that the law expressly confers on the CTA, the tribunal with the
specialized competence over tax and tariff matters, the role of judicial review over local tax cases without
mention of any other court that may exercise such power. Thus, the Court agrees with the ruling of the
CA that since appellate jurisdiction over private respondents' complaint for tax refund is vested in the
CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order issued in the
said case should, likewise, be filed with the same court. To rule otherwise would lead to an absurd
situation where one court decides an appeal in the main case while another court rules on an incident in
the very same case.

167
TAXATION LAW REVIEW
Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed
with the RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against
interlocutory orders of the RTC but giving to the CTA the jurisdiction over the appeal from the decision
of the trial court in the same case. It is more in consonance with logic and legal soundness to conclude
that the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by the RTC carries
with it the power to issue a writ of certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction
should co-exist with, and be a complement to, its appellate jurisdiction to review, by appeal, the final
orders and decisions of the RTC, in order to have complete supervision over the acts of the latter.
A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it
effectively, to make all orders that will preserve the subject of the action, and to give effect to the final
determination of the appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate jurisdiction, has authority to
control all auxiliary and incidental matters necessary to the efficient and proper exercise of that
jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the performance of any act
which might interfere with the proper exercise of its rightful jurisdiction in cases pending before it.
Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction
should have powers which are necessary to enable it to act effectively within such jurisdiction. These
should be regarded as powers which are inherent in its jurisdiction and the court must possess them in
order to enforce its rules of practice and to suppress any abuses of its process and to defeat any attempted
thwarting of such process.
In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall
possess all the inherent powers of a court of justice.
Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of
jurisdiction, in addition to those expressly conferred on them. These inherent powers are such powers as
are necessary for the ordinary and efficient exercise of jurisdiction; or are essential to the existence,
dignity and functions of the courts, as well as to the due administration of justice; or are directly
appropriate, convenient and suitable to the execution of their granted powers; and include the power to
maintain the court's jurisdiction and render it effective in behalf of the litigants.
Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to
effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the
necessary and usual incidental powers essential to effectuate it, and, subject to existing laws and
constitutional provisions, every regularly constituted court has power to do all things that are reasonably
necessary for the administration of justice within the scope of its jurisdiction and for the enforcement of
its judgments and mandates."39 Hence, demands, matters or questions ancillary or incidental to, or
growing out of, the main action, and coming within the above principles, may be taken cognizance of by
the court and determined, since such jurisdiction is in aid of its authority over the principal matter, even
though the court may thus be called on to consider and decide matters which, as original causes of action,
would not be within its cognizance.
Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take
cognizance of petitions for certiorari questioning interlocutory orders issued by the RTC in a local tax
case is included in the powers granted by the Constitution as well as inherent in the exercise of its
appellate jurisdiction.

168
TAXATION LAW REVIEW
Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as quasi-judicial
tribunals are concerned, the authority to issue writs of certiorari must still be expressly conferred by the
Constitution or by law and cannot be implied from the mere existence of their appellate jurisdiction. This
doctrine remains as it applies only to quasi-judicial bodies.
g. Asiatrust Development Bank, Inc. vs. CIR, GR No. 201530, April 19, 2017.
Section 1, Rule 8 of the Revised Rules of the CTA states:
SECTION 1. Review of cases in the Court en bane. - In cases falling under the exclusive appellate
jurisdiction of the Court en bane, the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for reconsideration or new trial with the
Division.
Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely
motion for reconsideration or new trial must first be filed with the CTA Division that issued the assailed
decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the word "must"
indicates that the filing of a prior motion is mandatory, and not merely directory.
The same is true in the case of an amended decision. Section 3, Rule 14 of the same rules defines an
amended decision as "[a]ny action modifying or reversing a decision of the Court en bane or in Division."
As explained in CE Luzon Geothermal Power Company, Inc. v. Commissioner of Internal Revenue, an
amended decision is a different decision, and thus, is a· proper subject of a motion for reconsideration.
In this case, the CIR's failure to move for a reconsideration of the Amended Decision of the CTA
Division is a ground for the dismissal of its Petition for Review before the CTA En Banc. Thus, the
CTA En .Banc did not err in denying the CIR's appeal on procedural grounds.
Due to this procedural lapse, the Amended Decision has attained finality insofar as the CIR is concerned.
The CIR, therefore, may no longer question the merits of the case before this Court. Accordingly, there is
no reason for the Court to discuss the other issues raised by the CIR.
As the Court has often held, procedural rules exist to be followed, not to be trifled with, and thus, may be
relaxed only for the most persuasive reasons.
h. Power Sector Assets and Liabilities Management Corporation vs. CIR, GR No. 198146 dated August 8,
2017.
The primary issue in this case is whether the DOJ Secretary has jurisdiction over OSJ Case No. 2007-3
which involves the resolution of whether the sale of the Pantabangan-Masiway Plant and Magat Plant is
subject to VAT.
We agree with the Court of Appeals that jurisdiction over the subject matter is vested by the Constitution
or by law, and not by the parties to an action. 22 Jurisdiction cannot be conferred by consent or
acquiescence of the parties23 or by erroneous belief of the court, quasi-judicial office or government
agency that it exists.
However, contrary to the ruling of the Court of Appeals, we find that the DOJ is vested by law with
jurisdiction over this case. This case involves a dispute between PSALM and NPC, which are both wholly

169
TAXATION LAW REVIEW
government owned corporations, and the BIR, a government office, over the imposition of VAT on the
sale of the two power plants. There is no question that original jurisdiction is with the CIR, who issues
the preliminary and the final tax assessments. However, if the government entity disputes the tax
assessment, the dispute is already between the BIR (represented by the CIR) and another government
entity, in this case, the petitioner PSALM. Under Presidential Decree No. 24224 (PD 242), all disputes
and claims solely between government agencies and offices, including government-owned or
controlled· corporations, shall be administratively settled or adjudicated by the Secretary of
Justice, the Solicitor General, or the Government Corporate Counsel, depending on the issues and
government agencies involved. As regards cases involving only questions of law, it is the Secretary of
Justice who has jurisdiction. Sections 1, 2, and 3 of PD 242 read:
Section 1. Provisions of law to the contrary notwithstanding, all disputes, claims and controversies
solely between or among the departments, bureaus, offices, agencies and instrumentalities of the
National Government, including constitutional offices or agencies, arising from the interpretation
and application of statutes, contracts or agreements, shallhenceforth be administratively settled or
adjudicated as provided hereinafter: Provided, That, this shall not apply to cases already pending in
court at the time of the effectivity of this decree.
Section 2. In all cases involving only questions of law, the same shall be submitted to and settled or
adjudicated by the Secretary of Justice, as Attorney General and ex officio adviser of all government
owned or controlled corporations and entities, in consonance with Section 83 of the Revised
Administrative Code. His ruling or determination of the question in each case shall be conclusive and
binding upon all the parties concerned.
Section 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to
and settled or adjudicated by:
(a) The Solicitor General, with respect to disputes or claims [or] controversies between or among the
departments, bureaus, offices and other agencies of the National Government;
(b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or
among the government-owned or controlled corporations or entities being served by the Office of the
Government Corporate Counsel; and
(c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not fall
under the categories mentioned in paragraphs (a) and (b). (Emphasis supplied)
The use of the word "shall" in a statute connotes a mandatory order or an imperative obligation. 25 Its use
rendered the provisions mandatory and not merely permissive, and unless PD 242 is declared
unconstitutional, its provisions must be followed. The use of the word "shall" means that administrative
settlement or adjudication of disputes and claims between government agencies and offices, including
government-owned or controlled corporations, is not merely permissive but mandatory and imperative.
Thus, under PD 242, it is mandatory that disputes and claims "solely" between government agencies and
offices, including government-owned or controlled corporations, involving only questions of law, be
submitted to and settled or adjudicated by the Secretary of Justice.
The law is clear and covers "all disputes, claims and controversies solely between or among the
departments, bureaus, offices, agencies and instrumentalities of the National Government,
including constitutional offices or agencies arising from the interpretation and application of
statutes, contracts or agreements." When the law says "all disputes, claims and controversies solely"

170
TAXATION LAW REVIEW
among government agencies, the law means all, without exception. Only those cases already pending in
court at the time of the effectivity of PD 242 are not covered by the law.
The purpose of PD 242 is to provide for a speedy and efficient administrative settlement or
adjudication of disputes between government offices or agencies under the Executive branch, as
well as to filter cases to lessen the clogged dockets of the courts. As explained by the Court
in Philippine Veterans Investment Development Corp. (PHIVIDEC) v. Judge Velez:26
Contrary to the opinion of the lower court, P.D. No. 242 is not unconstitutional. It does not diminish the
jurisdiction of [the] courts but only prescribes an administrative procedure for the settlement of certain
types of disputes between or among departments, bureaus, offices, agencies, and instrumentalities of the
National Government, including government-owned or controlled corporations, so that they need not
always repair to the courts for the settlement of controversies arising from the interpretation and
application of statutes, contracts or agreements. The procedure is not much different, and no less
desirable, than the arbitration procedures provided in Republic Act No. 876 (Arbitration Law) and in
Section 26, R.A. 6715 (The Labor Code). It is an alternative to, or a substitute for, traditional litigation in
court with the added advantage of avoiding the delays, vexations and expense of court proceedings. Or, as
P.D. No. 242 itself explains, its purpose is "the elimination of needless clogging of court dockets to
prevent the waste of time and energies not only of the government lawyers but also of the courts, and
eliminates expenses incurred in the filing and prosecution of judicial actions." 27
PD 242 is only applicable to disputes, claims, and controversies solely between or among the

departments, bureaus, offices, agencies and instrumentalities of the National Government, including
government-owned or controlled corporations, and where no private party is involved. In other words,
PD 242 will only apply when all the parties involved are purely government offices and
government-owned or controlled corporations. 28Since this case is a dispute between PSALM arid
NPC, both government owned and controlled corporations, and the BIR, a National Government office,
PD 242 clearly applies and the Secretary of Justice has jurisdiction over this case. In fact, the MOA
executed by the BIR, NPC, and PSALM explicitly provides that "[a] ruling from the Department of
Justice (DOJ) that is favorable to NPC/PSALM shall be tantamount to the filing of an application for
refund (in cash)/tax credit certificate (TCC), at the option of NPC/PSALM." 29 Such provision indicates
that the BIR and petitioner PSALM and the NPC acknowledged that the Secretary of Justice indeed has
jurisdiction to resolve their dispute.
This case is different from the case of Philippine National Oil Company v. Court of Appeals,30 (PNOC v.
CA) which involves not only the BIR (a government bureau) and the PNOC and PNB (both government-
owned or controlled corporations), but also respondent Tirso Savellano, a private citizen. Clearly, PD
242 is not applicable to the case of PNOCv.CA. Even the ponencia in PNOC v. CA stated that the dispute
in that case is not covered by PD 242, thus:
Even if, for the sake of argument, that P.D. No. 242 should prevail over Rep. Act No. 1125, the present
dispute would still not be covered by P.D. No. 242. Section 1 of P.D. No. 242 explicitly provides that
only disputes, claims and controversies solely between or among departments, bureaus, offices, agencies,
and instrumentalities of the National Government, including constitutional offices or agencies, as well as
government-owned and controlled corporations, shall be administratively settled or adjudicated. While
the BIR is obviously a government bureau, and both PNOC and PNB are government-owned and
controlled corporations, respondent Savellano is a private. citizen. His standing in the controversy
could not be lightly brushed aside. It was private respondent Savellano who gave the BIR the information
that resulted in the investigation of PNOC and PNB; who requested the BIR Commissioner to reconsider
the compromise agreement in question; and who initiated the CTA Case No. 4249 by filing a Petition for
Review.31 (Emphasis supplied)

171
TAXATION LAW REVIEW
In contrast, since this case is a dispute solely between PSALM and NPC, both government-owned and
controlled corporations, and the BIR, a National Government office, PD 242 clearly applies and the
Secretary of Justice has jurisdiction over this case.
It is only proper that intra-governmental disputes be settled administratively since the opposing

government offices, agencies and instrumentalities are all under the President's executive control
and supervision. Section 17, Article VII of the Constitution states unequivocally that: "The President
shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws
be faithfully executed." In Carpio v. Executive Secretary, 32 the Court expounded on the President's control
over all the executive departments, bureaus and offices, thus:
This presidential power of control over the executive branch of government extends over all executive
officers from Cabinet Secretary to the lowliest clerk and has been held by us, in the landmark case
of Mondano vs. Silvosa, to mean "the power of [the President] to alter or modify or nullify or set aside
what a subordinate officer had done in the performance of his duties and to substitute the judgment of the
former with that of the latter." It is said to be at the very "heart of the meaning of Chief Executive."
Equally well accepted, as a corollary rule to the control powers of the President, is the "Doctrine of
Qualified Political Agency." As the President cannot be expected to exercise his control powers all at the
same time and in person, he will have to delegate some of them to his Cabinet members.
Under this doctrine, which recognizes the establishment of a single executive, "all executive and
administrative organizations are adjuncts of the Executive Department, the heads of the various executive
departments are assistants and agents of the Chief Executive, and, except in cases where the Chief
Executive is required by the Constitution or law to act in person on the exigencies of the situation demand
that he act personally, the multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the Secretaries of such departments,
performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the
Chief Executive presumptively the acts of the Chief Executive."
Thus, and in short, "the President's power of control is directly exercised by him over the members of the
Cabinet who, in turn, and by his authority, control the bureaus and other offices under their respective
jurisdictions in the executive department. "33
This power of control vested by the Constitution in the President cannot be diminished by law. As held
in Rufino v. Endriga,34 Congress cannot by law deprive the President of his power of control, thus:
The Legislature cannot validly enact a law· that puts a government office in the Executive branch outside
the control of the President in the guise of insulating that office from politics or making it independent. If
the office is part of the Executive branch, it must remain subject to the control of the President.
Otherwise, the Legislature can deprive the President of his constitutional power of control over "all
the executive x x x offices." If the Legislature can do this with the Executive branch, then the
Legislature can also deal a similar blow to the Judicial branch by enacting a law putting decisions
of certain lower courts beyond the review power of the Supreme Court.This will destroy the system
of checks and balances finely structured in the 1987 Constitution among the Executive, Legislative, and
Judicial branches.35 (Emphasis supplied)
Clearly, the President's constitutional power of control over all the executive departments, bureaus and
offices cannot be curtailed or diminished by law. "Since the Constitution has given the President the
power of control, with all its awesome implications, it is the Constitution alone which can curtail such

172
TAXATION LAW REVIEW
power."36 This. constitutional power of control of the President cannot be diminished by the CTA.
Thus, if two executive offices or agencies cannot agree, it is only proper and logical that the
President, as the sole Executive who under the Constitution has control over both offices or
agencies in dispute, should resolve the dispute instead of the courts. The judiciary should not
intrude in this executive function of determining which is correct between the opposing government
offices or agencies, which are both under the sole control of the President. Under his constitutional
power of control, the President decides the dispute between the two executive offices. The judiciary
cannot substitute its decision over that of the President. Only after the President has decided or settled
the dispute can the courts' jurisdiction be invoked. Until such time, the judiciary should not interfere since
the issue is not yet ripe for judicial adjudication. Otherwise, the judiciary would infringe on the
President's exercise of his constitutional power of control over all the executive departments, bureaus, and
offices.
Furthermore, under the doctrine of exhaustion of administrative remedies, it is mandated that
where a remedy before an administrative body is provided by statute, relief must be sought by
exhausting this remedy prior to bringing an action in court in order to give the administrative body
every opportunity to decide a matter that comes within its jurisdiction.37 A litigant cannot go to court
without first pursuing his administrative remedies; otherwise, his action is premature and his case is not
ripe for judicial determination.38 PD 242 (now Chapter 14, Book IV of Executive Order No. 292),
provides for such administrative remedy. Thus, only after the President has decided the dispute between
government offices and agencies can the losing party resort to the courts, if it so desires. Otherwise, a
resort to the courts would be premature for failure to exhaust administrative remedies. Non-observance of
the doctrine of exhaustion of administrative remedies would result in lack of cause of action, 39 which is
one of the grounds for the dismissal of a complaint.
The rationale of the doctrine of exhaustion. of administrative remedies was aptly explained by the Court
in Universal Robina Corp. (Corn Division) v. Laguna Lake Development Authority: 40
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system. The thrust
of the rule is that courts must allow administrative agencies to carry out their functions and discharge
their responsibilities within the specialized areas of their respective competence. The rationale for this
doctrine is obvious. It entails lesser expenses and provides for the speedier resolution of the controversies.
Comity and convenience also impel courts of justice to shy away from a dispute until the system of
administrative redress has been completed. 41
In requiring parties to exhaust administrative remedies before pursuing action in a court, the doctrine
prevents overworked courts from considering issues when remedies are available through administrative
channels.42Furthermore, the doctrine endorses a more economical and less formal means of resolving
disputes,43 and promotes efficiency since disputes and claims are generally resolved more quickly and
economically through administrative proceedings rather than through court litigations. 44
The Court of Appeals ruled that under the 1997 NIRC, the dispute between the parties is within the
authority of the CIR to resolve. Section 4 of the 1997 NIRC reads:
SEC 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds in internal revenue taxes, fees or other charges.
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions

173
TAXATION LAW REVIEW
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphasis supplied)
The first paragraph of Section 4 of the 1997 NIRC provides that the power of the CIR to interpret the
NIRC provisions and other tax laws is subject to review by the Secretary of Finance, who is the alter
ego of the President. Thus, the constitutional power of control of the President over all the executive
departments, bureaus, and offices45 is still preserved. The President's power of control, which cannot be
limited or withdrawn by Congress, means the power of the President to alter, modify, nullify, or set aside
the judgment or action of a subordinate in the performance of his duties. 46
The second paragraph of Section 4 of the 1997 NIRC, providing for the exclusive appellate jurisdiction of
the CTA as regards the CIR's decisions on matters involving disputed assessments, refunds in internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under
NIRC, is in conflict with PD 242. Under PD 242, all disputes and claims solely between government
agencies and offices, including government-owned or controlled corporations, shall be administratively
settled or adjudicated by the Secretary of Justice, the Solicitor General, or the Government Corporate
Counsel, depending on the issues and government agencies involved.
To harmonize Section 4 of the 1997 NIRC with PD 242, the following interpretation should be adopted:
(1) As regards private entities and the BIR, the power to decide disputed assessments, refunds of
the NIRC or other laws administered by the. BIR is vested in the CIR subject to the exclusive appellate
jurisdiction of the CTA, in accordance with Section 4 of the NIRC; and (2) Where the disputing parties
are all public entities (covers disputes between the BIR and other government entities), the case shall be
governed by PD 242.
Furthermore, it should be noted that the 1997 NIRC is a general law governing the imposition of national
internal revenue taxes, fees, and charges. 47 On the other hand, PD 242 is a special law that applies only
to disputes involving solely government offices, agencies, or instrumentalities. The difference
between a special law and a general law was clarified in Vinzons-Chato v. Fortune Tobacco
Corporation:48
A general statute is one which embraces a class of subjects or places and does not omit any subject or
place naturally belonging to such class. A special statute, as the term is generally understood, is one
which relates to particular persons or things of a class or to a particular portion or section of the state
only.
A general law and a special law on the same subject are statutes in pari materia and should, accordingly,
be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where
there are two acts, one of which is special and particular and the other general which, if standing alone,
would include the same matter and thus conflict with the special act, the special law must prevail since it
evinces the legislative intent more clearly than that of a general statute and must not be taken as intended
to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so
to construe it in order to give its words any meaning at all.
The circumstance that the special law is passed before or after the general act does not change the
principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the
prior general act; and where the general act is later, the special statute will be construed as remaining an
exception to its terms, unless repealed expressly or by necessary implication.

174
TAXATION LAW REVIEW
Thus, even if the 1997 NIRC, a general statute, is a later act, PD 242, which is a special law, will still
prevail and is treated as an exception to the terms of the 1997 NIRC with regard solely to
intragovernmental disputes. PD 242 is a special law while the 1997 NIRC is a general law, insofar as
disputes solely between or among government agencies are concerned. Necessarily, such disputes must be
resolved under PD 242 and not under the NIRC, precisely because PD 242 specifically mandates the
settlement of such disputes in accordance with PD 242. PD 242 is a valid law prescribing the procedure
for administrative settlement or adjudication of disputes among government offices, agencies, and
instrumentalities under the executive control and supervision of the President.
J. Abatement of Tax / Tax Compromise
a. Secs. 7 and 204 of the NIRC.
Section 7. Authority of the Commissioner to Delegate Power. - The Commissioner may delegate the
powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with
the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be
imposed under rules and regulations to be promulgated by the Secretary of finance, upon recommendation
of the Commissioner: Provided, However, That the following powers of the Commissioner shall not be
delegated:
(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of
the Bureau;
(c) The power to compromise or abate, under Section 204 (A) and (B) of this Code, any tax liability:
Provided, however, That assessments issued by the regional offices involving basic deficiency taxes of
Five hundred thousand pesos (P500,000) or less, and minor criminal violations, as may be determined by
rules and regulations to be promulgated by the Secretary of finance, upon recommendation of the
Commissioner, discovered by regional and district officials, may be compromised by a regional
evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional
Director, the heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer
having jurisdiction over the taxpayer, as members; and
(d) The power to assign or reassign internal revenue officers to establishments where articles subject to
excise tax are produced or kept.
Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The
Commissioner may -
(A) Compromise the payment of any internal revenue tax, when:
(1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
(2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
The compromise settlement of any tax liability shall be subject to the following minimum amounts:
For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (10%) of the
basic assessed tax; and

175
TAXATION LAW REVIEW
For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,000.000) or where the settlement offered is
less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation
Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners.
(B) Abate or cancel a tax liability, when:
(1) The tax or any portion thereof appears to be unjustly or excessively assessed; or
(2) The administration and collection costs involved do not justify the collection of the amount due.
All criminal violations may be compromised except: (a) those already filed in court, or (b) those
involving fraud.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any
internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. Any request
for conversion into refund of unutilized tax credits may be allowed, subject to the provisions of Section
230 of this Code: Provided, That the original copy of the Tax Credit Certificate showing a creditable
balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided,
further, That in no case shall a tax refund be given resulting from availment of incentives granted
pursuant to special laws for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the
Senate and House of Representatives, every six (6) months, a report on the exercise of his powers under
this Section, stating therein the following facts and information, among others: names and addresses of
taxpayers whose cases have been the subject of abatement or compromise; amount involved; amount
compromised or abated; and reasons for the exercise of power: Provided, That the said report shall be
presented to the Oversight Committee in Congress that shall be constituted to determine that said powers
are reasonably exercised and that the government is not unduly deprived of revenues.
K. Civil Penalties
1. Surcharge
Section 248. Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five
percent (25%) of the amount due, in the following cases:

176
TAXATION LAW REVIEW
(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or
rules and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer
other than those with whom the return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the
provisions of this Code or rules and regulations, or the full amount of tax due for which no return is
required to be filed, on or before the date prescribed for its payment.
(B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and
regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be
fifty percent (50%) of the tax or of the deficiency tax, in case, any payment has been made on the basis of
such return before the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the
Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall
constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report
sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a
claim of deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable
for substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as
mentioned herein.
2. New Rule on Interest
a. Sec. 249 of the NIRC. (as amended by RA 10963)
Section 249. Interest. -
(A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of
double the legal interest rate for loans or forbearance of any money in the absence of an express
stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the
amount is fully paid: Provided, That in no case shall the deficiency and the delinquency interest
prescribed under Subsections (B) and (C) hereof, be imposed simultaneously.
(B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be
subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected
from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and
demand by the Commissioner of Internal Revenue, whichever comes earlier. (As amended by Section 75
of Republic Act No. 10963)
(C) Delinquency Interest. - In case of failure to pay:
(1) The amount of the tax due on any return to be filed, or
(2) The amount of the tax due for which no return is required, or

177
TAXATION LAW REVIEW
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and
demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the
rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of
the tax.
(D) Interest on Extended Payment. - If any person required to pay the tax is qualified and elects to pay the
tax on installment under the provisions of this Code, but fails to pay the tax or any installment hereof, or
any part of such amount or installment on or before the date prescribed for its payment, or where the
Commissioner has authorized an extension of time within which to pay a tax or a deficiency tax or any
part thereof, there shall be assessed and collected interest at the rate hereinabove prescribed on the tax or
deficiency tax or any part thereof unpaid from the date of notice and demand until it is paid.
b. RR No. 21-2018.
SECTION 1. SCOPE. – Pursuant to the provisions of Sections 244 and 245 of the National Internal
Revenue Code of 1997 (Tax Code), as amended, and Section 84 of Republic Act (R.A.) No. 10963,
otherwise known as the “Tax Reform for Acceleration and Inclusion (TRAIN) Law, these Regulations are
hereby promulgated to implement Section 249 (Interest) of the Tax Code, as amended by the TRAIN
Law.
SECTION 2. RATE OF INTEREST. – There shall be assessed and collected on any unpaid amount of
tax, interest at the rate of double the effective legal interest rate for loans or forbearance of any money in
the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas (BSP) from the date
prescribed for payment until the amount is fully paid.
The rate of interest per BSP Memorandum No. 799 series of 2013 for loans or forbearance of any money
in the absence of an express stipulation is six percent (6%). Thus, the rate of legal interest imposable
under Section 249 of the Tax Code, as amended, shall be twelve percent (12%). A Circular shall be issued
by the Commissioner in case BSP prescribes new rate of interest.
SECTION 3. DEFICIENCY INTEREST. – Interest imposed on any deficiency tax due, which interest
shall be assessed and collected from the date prescribed for its payment until: (a) full payment thereof, or
(2) upon issuance of a notice and demand by the Commissioner or his authorized representative,
whichever comes first.
SECTION 4. DELINQUENCY INTEREST. – Interest imposed on the failure to pay:
(1) The amount of the tax due on any return to be filed; or
(2) The amount of the tax due for which no return is required; or
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and
demand of the Commissioner or his authorized representative until the amount is fully paid, which
interest shall form part of the tax.
SECTION 5. NO DOUBLE IMPOSITION OF INTEREST. – Upon the effectivity of the TRAIN

Law, in no case shall the deficiency and delinquency interest prescribed herein be imposed
simultaneously.

178
TAXATION LAW REVIEW
Illustration 1: Mr. A has been assessed deficiency income tax of P1,000,000.00, exclusive of interest and
surcharge, for taxable year 2018. The tax liability has remained unpaid despite the lapse of June 30, 2020,
the deadline for payment stated in the notice and demand issued by the Commissioner. Payment was
made by the taxpayer on February 10, 2021. The applicable interest shall be computed as follows:
Basic Tax Due – Income Tax P 1,000,000.00

Add: 25% Surcharge for late payment P 250,000.00
12% Deficiency Interest from 04.16.2019 to 06.30.2020
(442 days) 145,315.07 395,315.07
Total Amount Due, June 30, 2020 P 1,395,315.07
Add: 12% Delinquency Interest from 07.01.2020 to
02.10.2021 (225 days; based on total amount due of
P1,395,315.07 as of 06.30.2020) 103,215.09
Total Amount Due, February 10, 2021 P 1,498,530.16

179

Tax Rev Notes Remedies

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tax Rev Notes Remedies

Uploaded by

Copyright:

Available Formats

TAXATION LAW REVIEW

Based on the syllabus and lectures of Atty. Bobby Lock

III. REMEDIES UNDER THE NIRC

A. Letter of Authority / Audit Notice

1. Sec. 6(A) of the NIRC

- Sec. 13 of the NIRC.

2. Revenue Memorandum Order No. 43-90. (as cited in the SC Cases)

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

4. CIR vs. De La Salle, GR No. 198841 dated November 9, 2016

Commissioner of Internal Revenue v. De La Salle University

We answer in the negative.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

6. Number of times a taxpayer may be audited

a. Sec. 235 of the NIRC

(a) Fraud, irregularity or mistakes, as determined by the Commissioner;

(b) The taxpayer requests reinvestigation;

(c) Verification of compliance with withholding tax laws and regulations;

(d) Verification of capital gains tax liabilities; and

God bless and best of luck! Ora et labora.

Commissioner of Internal Revenue v. Pascor Realty and Development Corporation

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

SEC. 7. Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

a) A case involving any of the following:

b) Commissioner of Internal Revenue’s decision or inaction in a case submitted to him or her

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

In Samar-I Electric Cooperative v. Commissioner of Internal Revenue, 100 substantial compliance with

God bless and best of luck! Ora et labora.

C. Prescriptive period to assess and collect

2. Period for Collection – General Rule Sec. 222(C) of the NIRC.

Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

3. False Return, Fraudulent Return, Omission to File a Return/Extraordinary Prescription

Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

Section 248. Civil Penalties. -

God bless and best of luck! Ora et labora.

b. Aznar vs. CTA, GR No. L-20569 dated August 23, 1974.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. –

God bless and best of luck! Ora et labora.

4. Suspension of the prescriptive period

a. Secs. 223 and 91(B) of the NIRC

Section 91. Payment of Tax. -

God bless and best of luck! Ora et labora.

This argument fails to persuade us.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

c. BPI vs. CIR, GR No. 139736 dated October 17, 2005.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

SEC. 223. – Exceptions as to period of limitation of assessment and collection of taxes. –

God bless and best of luck! Ora et labora.

God bless and best of luck! Ora et labora.

In resolving the issue on prescription, this Court ratiocinated thus –

God bless and best of luck! Ora et labora.