ASSIGN:

Other kinds of assessment and explain

1. As to basis of assessment:
a. Self-assessment – tax is assessed by the taxpayer himself
Ex: income tax, capital gains tax (although CGT is a form of income tax)
b. Deficiency assessment – made by the revenue officer for the following reasons:
i. Amount ascertained exceeds what is shown in the return
ii. No amount of tax is shown in the return
iii. Taxpayer did not file any return at all
-deficiency tax: interests and surcharges apply only to the deficiency amount
c. Illegal and void assessment – tax officer has no power to asses
d. Erroneous assessment – tax officer has power to asses but errs in the exercise thereof
e. Jeopardy assessment – without complete or partial audit by an authorized revenue officer when
assessment will be delayed due to:
i. Taxpayer fails to comply with submission of documents
ii. Taxpayer fails to substantiate deductions
–jeopardy assessment is made when period for assessment is about to lapse

What are the means employed in the assessment of taxes

Means Employed by the CIR in the Assessment of Taxes:
1. examination of returns and determination of the tax due
-notwithstanding any law requiring the prior authorization of any governmental agency or
instrumentality
-TRAIN: removed Presidential authority for the examination of income tax returns of government
officials, particularly the Cabinet members
2. assess the proper tax based on best evidence obtainable
-“best evidence” – why taxpayer is required to submit books of account; may refer to the use of a
subpoena duces tecum, or an informer
--letter of authority – required that it specifies documents to be presented and the taxable period
--informer’s reward – 20% of the tax collected (the informer makes an affidavit)
--CIR has the power to issue a subpoena duces tecum

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 3. conduct inventory taking, surveillance and prescribe presumptive gross sales and receipts
-matching done for declared inventory and income tax return inventory – if 30% discrepancy, taxpayer is
assumed to have incorrectly filed his return
-BIR officer may pose as a buyer for surveillance
4. issue jeopardy assessment and terminate tax period
a. taxpayer is retiring from business or intends to leave the country;
b. remove, hide, or conceal his property; or tend to obstruct the proceeding for the collection of
the tax totally or partially
-CIR may issue warrant of distraint on personal property or levy on execution of real property
wherein property may be sold at public auction without having to go to court – faster since
administrative case
5. prescribe real property values – “zonal valuation”
-TRAIN: additional conditions: (MAPBA)
c. mandatory consultation with private and public appraisers
d. prior notice to affected taxpayers
e. publication in the newspaper of general circulation in the province, city or municipality
concerned or posting of adjustments
f. basis of valuation and records of consultation done are public records open to the public
g. automatic adjustment once every 3 years

What are the important principles governing tax assessment

Important Principles Governing Tax Assessment:
 prima facie presumed correct and made in good faith
-since prima facie, it is rebuttable
 must be directed to the right party
Ex: sued against the corporation and thus must directed to the corporation not the company officers
 discretionary on the part of the CIR
-mandamus will not lie against the CIR to compel him to assess a taxpayer

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What is a Pre-Assessment Notice (PAN)
► Pre-Assessment Notice (PAN)
GR: PAN is issued when the taxpayer –
a) Fails to file a return
b) Files a return but fails to pay the tax
c) Files a return but made insufficient payment
-PAN is a requirement before a FAN is issued

When is a pre-assessment notice not required.

XPN: (where PAN is not required – straight to FAN)
1) When deficiency tax is due to a mathematical error;
2) Discrepancy between tax withheld and actually remitted;
3) When the claimant of the tax refund/credit had actually carried over and automatically applied said
amount against his tax liabilities for the quarter of succeeding taxable year
4) Excise tax due on excisable articles was not paid
5) When locally purchased or imported articles by an exempt person was sold, traded or transferred to
non-exempt person – since items cannot be removed from the loading docks without payment of excise
tax

What is a final assessment notice (FAN)

► Final Assessment Notice (FAN)
Issued when:
a) With or without reply to the PAN
b) Instances when PAN is not necessary – the 5 exceptions
-FAN becomes final and executory if not protested or disputed within 30 days from receipt by the taxpayer
--Disputed Assessment – FAN which was protested or disputed within 30 days from receipt thereof;
--appealable to the CTA
*PAN is not protested, but rather a reply is made to it
What are the requisites of the validity of a final assessment notice
-for FAN to be valid, it must contain:
1. facts and law must be stated upon which assessment is based
2. demand to pay – if only a request is made: it is invalid as if there was no assessment

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 3. addressed to taxpayer himself
-FAN should be accompanied with the FLD – reference to #2

Distinguish between PAN and FAN

PAN
1. as a rule, issued before the FAN
2. will not become final and executory
► 3. Cannot be converted to a disputed assessment
(only a reply may be made to it)
► 4. Not appealable to the CTA
FAN
1. issued with or without a reply to the PAN
2. final and executory if not protested or disputed
within 30 days from receipt
3. can be converted into a disputed assessment
4. appealable to the CTA

Is an assessment required before the government can collect taxes through legal action.
YES because taxpayer has to be informed on the law and the facts on which the assessment is based before the
enforcement of collection. (Note: can’t find the answer, this is only my guess, ano sagot nyo? :p)

What are the grounds for the suspension of the period to assess and collect taxes
Grounds for Suspension of Statute of Limitations:
-period: 3 years for deficiency or delinquency taxes
1. Taxpayer is out of the country
2. Government is legally prevented to assess or collect
Ex: writ of injunction. When injunction may lie?
-GR: NIRC – regular courts prevented to enjoin the collection of internal revenue taxes/NIRC taxes
-XPN:
--CTA in the exercise of its appellate jurisdiction on internal revenue taxes PROVIDED there is
irreparable injury and compliance with Rule 58 of the ROC on posting of a bond
--Regular courts may issue injunction on local taxes or RPT (no prohibition under the LGC)
1. Taxpayer files a motion for reinvestigation coupled with a valid waiver of the statute
of limitations
-“reinvestigation” is different from reconsideration; the latter is on where no new merits is raised such
as for payment extension or payment in installment, while the former suspends (if it comes with a
valid waiver) the statute of limitations where new issues/evidence is presented

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 2. Taxpayer cannot be located (EXCEPT if he confirms with the CIR of his change of
address)
-every January a general information sheet is filled up to update details
→if notice is questioned as to its service: burden is on the CIR to prove receipt
3. Warrant of distraint/levy was served although it did not materialize – suspension is for
60 days only
-prescriptive period: 3 years from April 15 or date of actual filing, whichever is later
Ex: filed April 15 but later amended the return
→it is material to note if the amendment is only a typographical/mathematical error OR
--reckoned on the filing or on the due date
→if amendment is substantial
--3-year period reckoned at the time amended return is filed

What are the requisites of a valid waiver of statute of limitations

New/Current Requirements on Valid Waiver of Statute of Limitations [RMO 14-2016, April 4, 2016]
1. Waiver may not necessarily be in the form prescribed by RMO 20-90 or RDAO 05-01
-what is important is that it is in writing
2. Executed before the expiration of the period to assess or collect
3. Signed by the taxpayer himself, his duly authorized representative or by any of the responsible officials
of the corporations
-no longer need an SPA, as long as the representative duly participates in the process
4. Expiry date of the period agreed upon to assess or collect the tax is indicated
5. Need not specify the taxes to be assessed nor the amount thereof
EXCEPT in cases of waiver for collection of taxes
-now no need to specify tax year and taxes to be investigated in the waiver of the statute of limitations
(vs. waiver of the collection of taxes)
6. Taxpayer has the burden to ensure that the waiver is validly executed by its authorized representative
-he cannot thereafter be invalidated on the ground that the taxpayer’s representative who participated
in the conduct of the audit is not authorized to sign the waiver
7. Notarization of the waiver is optional
-before it was mandatory

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 8. Can be accepted by the CIR’s authorized representative as prescribed in existing regulations, the
revenue district officer or the group of supervisors designated in the LOA for the audit

9. To be valid, there are only 2 dates that need to be present in the waiver:
a. Date of execution; and
b. Expiry date of the period the taxpayer waives the statute of limitations

Discuss the assessment process of internal revenue taxes

► The Assessment Process
1) Filing of the return – as regards self-assessing taxes, e.g. income tax, CGT, withholding tax
2) Issuance of the Letter of Authority
Letter of Authority (LOA) – authority of a revenue officer assigned to perform examination and
assessment functions; only issued by the CIR (can’t be passed or transferred)
-revenue officer must be identified in the LOA (LOA addressed from the examiner)
-LOA should indicate: name of examiner, name of taxpayer, taxable period, taxes subject of examination
(the LOA is left with the taxpayer)
*absence of a LOA – invalid examination

Nanox Phil., Inc. v. CIR (CTA EB No. 1629, April 15, 2019)
-the power to examine was not statutorily given to the revenue officer; and for the latter to exercise
such power, authority must be given by the CIR or his duly authorized representative with the LOA

3) Notice of discrepancy
-previously: “notice of informal conference” and “informal conference proper” where presentation of
required documents was made
-to fully afford the taxpayer with an opportunity to present and explain his side on the discrepancies
found (RR 22-2020 effectivity in October 2020)
-Discussion of Discrepancy – no case extends beyond 30 days from receipt (must present documents)
→failure to appear on date and time sent in the notice: deemed a waiver and admittance of the
discrepancy
→after 30 days: issuance of the PAN within 10 days
4) Issuance of Preliminary Assessment Notice (PAN)

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 5) Taxpayer has 15 days to file reply to PAN
6) If –
a. After said period and no reply
-issuance of a formal letter of demand and final assessment notice (FLD/FAN)
b. If taxpayer replies within 15 days:
-CIR has 15 days from receipt of said reply to issue FLD/FAN
-whether or not there is a reply, a FAN is issued (difference is the BIR has 15 days if with a reply)
-PAN is issued after informal conference
-when FAN issued, it must come with a FLD/final letter of demand

When does a final assessment notice become final and executory

-FAN becomes a disputed assessment if contested within 30 days; otherwise, the FAN becomes final and
executory

How are the waivers of statute on the statute of limitations construed

The provisions on 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.

Instances when the CIR can compromise and cannot compromise taxes
GROUNDS when the CIR can compromise the payment of any internal revenue tax:
(a) A reasonable doubt as to the validity of the claim against the taxpayer exists; (40%) or
(b) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. (10%)

For cases of financial incapacity, the minimum compromise of 10% of the basic assessed tax shall be observed.
For other cases, the minimum compromise rate is 40%.

Where the basic tax involved exceeds P1,000,000 or where the settlement offer is less than the prescribed
minimum rates, the compromise shall be subject to the approval of the National Evaluation Board which is
composed of the Commissioner and 4 Deputy Commissioners; Provided, that where the basic tax involved
amounts to P500,000 or less and cases involving minor criminal violations, the compromise shall be subject to
the approval of the Regional Evaluation Board; provided further, that where the basic tax involved amounts to

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more than P500,000 but not exceeding P1,000,000, the approval of the Commissioner of Internal Revenue shall
be necessary for the compromise.

All criminal violations may be compromised, EXCEPT:

1. Those already filed in court; or
2. Those involving fraud

SPECIFIC CASES WHICH CAN BE COMPROMISED:

1. Delinquent accounts
2. Pending cases under administrative protest
3. Civil taxes cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations other than those already filed in court or those involving criminal tax fraud

CASES CANNOT BE COMPROMISED:

1. Withholding taxes
2. Criminal tax fraud cases
3. Criminal violations already filed in court; and
4. Delinquent accounts with duly approved schedulre of instalment payments.

Compromise
-basis/grounds for compromise: (whether delinquent or disputed assessment)
1. Doubtful validity of the assessment
-applies to delinquent account or disputed assessment
-minimum corporate rate: 40% of the basic tax assessed
2. Financial incapacity of the taxpayer
a) minimum compromise rate is 20% of the basic tax assessed for:
i) dissolved corporations
ii) non-operating companies for less than 3 years
iii) earnings deficit resulting to impairment in original capital by at least 50%
b) other taxpayers – 10% of the basic tax assessed

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What is the effect of the taxpayer is renege of his commitment under the compromise agreement

1. Enforce the compromise

a. If it is a judicial compromise, it can be enforced by mere execution. A judicial compromise is one
where a decision based on the compromise agreement is rendered by the court on request of the parties.
b. Any other compromise is extrajudicial and like any other contract can only be enforced by court action

2. Regard it as rescinded and insist upon original demand (Art. 2041, NCC).

Distinguish between abatement, tax amnesty and compromise

As to: Abatement Compromise Tax Amnesty
Nature Involves the Involves a reduction of This is a general pardon. It
cancellation of the the taxpayer’s liability partakes of an absolute waiver
entire tax liability of through a mutual of the government of its right to
a taxpayer agreement collect what is due it and to give
tax evaders who wish to relent a
chance to start with a clean
slate.
Authorized CIR CIR, NEB, REB
Officer
Grounds 1. The tax or any 1. Reasonable doubt as Grantee: General pardon given
to the validity of
portion thereof to all erring taxpayers
assessment;
appears to be 2. Financial incapacity of
the taxpayer
unjustly or Scope of immunity: Immunity
excessively assessed; from all criminal, civil and
or administrative obligations
2. The administration arising from non-payment of
and collection costs taxes
involved do not

Taxation Review 1 – ’20-’21 | 9

 justify the collection
of the amount due.

CASES:

BPI vs CIR, GR 139736, Oct 17, 2005.

FACTS:
Petitioner BPI is a commercial banking corporation organized and existing under the laws of the
Philippines. On two separate occasions, particularly on 06 June 1985 and 14 June 1985, it sold United
States (US) $500,000.00 to the Central Bank of the Philippines (Central Bank), for the total sales amount of
US$1,000,000.00.

On 10 October 1989, the Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-85-89-002054,3
finding petitioner BPI liable for deficiency DST on its afore-mentioned sales of foreign bills of exchange to
the Central Bank.

Petitioner BPI, through its counsel, protested the Assessment in a letter dated 16 November 1989,
and filed with the BIR on 17 November 1989.

1. Under established market practice, the documentary stamp tax on telegraphic transfers or sales of
foreign exchange is paid by the buyer. Thus, when BPI sells to any party, the cost of documentary stamp tax
is added to the total price or charge to the buyer and the seller affixes the corresponding documentary
stamp on the document. Similarly, when the Central Bank sells foreign exchange to BPI, it charges BPI for
the cost of the documentary stamp on the transaction. 2. In the two transactions subject of your
assessment, no documentary stamps were affixed because the buyer, Central Bank of the Philippines, was
exempt from such tax. And while it is true that under P.D. 1994, a proviso was added to sec. 222 (now sec.
186) of the Tax Code "that whenever one party to a taxable document enjoys exemption from the tax herein
imposed, the other party thereto who is not exempt shall be the one directly liable for the tax," this proviso
(and the other amendments of P.D. 1994) took effect only on January 1, 1986’

Petitioner BPI did not receive any immediate reply to its protest letter. However, on 15 October 1992, the
BIR issued a Warrant of Distraint and/or Levy6 against petitioner BPI for the assessed deficiency DST for
taxable year 1985, in the amount of ₱27,720.00 (excluding the compromise penalty of ₱300.00). It served
the Warrant on petitioner BPI only on 23 October 1992.

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Then again, petitioner BPI did not hear from the BIR until 11 September 1997, when its counsel
received a letter, dated 13 August 1997, signed by then BIR Commissioner Liwayway Vinzons-Chato,
denying its "request for reconsideration," and addressing the points raised by petitioner BPI in its
protest letter, dated 16 November 1989. CIR denied the motion for reconsideration of BPI.

On Petition for Review on Certiorari before the CTA, the CTA held that the prescriptive period to
collect taxes has not prescribed. The MR of BPI effectively tolled the running of prescriptive period.
On the DST issue, the BPI is not held liable for deficiency DST. CA affirmed CA’s decision.

ISSUE

1. whether or not the right of respondent BIR Commissioner to collect from petitioner BPI the alleged
deficiency DST for taxable year 1985 had prescribed; and – YES.
2. whether or not the sales of US$1,000,000.00 on 06 June 1985 and 14 June 1985 by petitioner BPI to the
Central Bank were subject to DST

RULING:

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 years19 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.

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

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 1997.2

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.

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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.

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

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.

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.

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.

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

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.

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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 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 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

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.

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.

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.

(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; anNone 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

Taxation Review 1 – ’20-’21 | 13

 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.

Petition is GRANTED

2. Lascona Land Company vs. CIR, GR No. 171251, March 5, 2012

FACTS:

On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice No. 0000047-
93-4075 against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax
for the year 1993 in the amount of ₱753,266.56.

Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-inCharge (OIC), Regional Director,
Bureau of Internal Revenue, Revenue Region No. 8, Makati City

On April 12, 1999, Lascona appealed the decision before the CTA and was docketed as C.T.A. Case No. 5777.
Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30)
days from the lapse of the 180-day period rendered the assessment final and executory

The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA after the lapse of the
180- day reglementary period provided under Section 228 of the National Internal Revenue Code (NIRC) resulted
to the finality of the assessment.

On January 4, 2000, the CTA, in its Decision,7 nullified the subject assessment. It held that in cases of inaction by
the CIR on the protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal
to the CTA within thirty (30) days from the lapse of the one hundred eighty (180)-day period, or (2) wait until the
Commissioner decides on his protest before he elevates the case

CIR moved for reconsideration and contended that: 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.

Court of Appeals granted the CIR's petition and set aside the Decision.

Taxation Review 1 – ’20-’21 | 14

Petitioner Lascona, invoking Section 3,11 Rule 4 of the Revised Rules of the Court of Tax Appeals, maintains that
in case of inaction by the CIR on the protested assessment, it has the option to either: (1) appeal to the CTA
within 30 days from the lapse of the 180-day period; or (2) await the final decision of the Commissioner on the
disputed assessment even beyond the 180-day period − in which case, the taxpayer may appeal such final
decision within 30 days from the receipt of the said decision. Corollarily, petitioner posits that when the
Commissioner failed to act on its protest within the 180-day period, it had the option to await for the final
decision of the Commissioner on the protest, which it did

ISSUE:

Whether the subject assessment has become final, executory and demandable due to the failure of petitioner to
file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period
pursuant to Section 228 of the NIRC.

RULING:

SEC. 228. Protesting of Assessment

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 (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.

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.

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

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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

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the
other hand, such collection should be made in accordance with law as any arbitrariness will negate the very
reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good,
may be achieved.20 Thus, 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

the petition is GRANTED.

3. CIR vs Systems Technology Institute, GR No. 220835, July 26, 2017

FACTS:
STI filed its Amended Annual Income Tax Return for fiscal year 2003 on August 15, 2003; its Quarterly VAT
Returns on July 23, 2002, October 25, 2002, January 24, 2003, and May 23, 2003; and its Bureau of Internal
Revenue (BIR) Form 1601E for EWT from May 10, 2002 to April 15, 2003.

On May 30, 2006, STI's Amiel C. Sangalang signed a Waiver of the Defense of Prescription Under the Statute of
Limitations of the National Internal Revenue Code (NIRC), with the proviso that the assessment and collection of
taxes of fiscal year 2003 shall come "no later than December 31, 2006."6 On June 2, 2006, the waiver was
accepted by Virgilio R. Cembrano, Large Taxpayers District Officer of Makati and was notarized on even date.

Subsequent waivers were further executed. On September 11, 2009, STI received from the CIR the Final
Decision on Disputed Assessment (FDDA) dated August 17, 2009 finding STI liable for deficiency income tax, VAT
and EWT in the lesser amount of ₱124,257,764.20

CTA Second Division promulgated its Decision denying the assessment on the ground of prescription.

The CTA Division found the waivers executed by STI defective for failing to strictly comply with the requirements
provided by Revenue Memorandum Order (RMO) No. 20-90 issued on April 4, 1990 and Revenue Delegation

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Authority Order (RDAO) No. 05-01 issued on August 2, 2001. Consequently, the periods for the CIR to assess or
collect internal revenue taxes were never extended; and the subject assessment for deficiency income tax, VAT
and EWT against STI, which the CIR issued beyond the three-year prescriptive period provided by law, was
already barred by prescription

CTA En Banc affirmed CTA Second Division.

The CIR asserts that prescription had not set in on the subject assessments because the waivers executed by the
parties are valid.24 It also claims that STI' s active participation in the administrative investigation by filing a
request for reinvestigation, which resulted in a reduced assessment, amounts to estoppel that prescription can
no longer be invoked.25 To support its contention, the CIR cites the case of Rizal Commercial Banking
Corporation v. Commissioner of Internal Revenue,26 where the Court considered the taxpayer's partial payment
of the revised assessment as an implied admission of the validity of the waivers

For its part, STI contends that the requisites under RMO No. 20-90 are mandatory and no less than this Court
has affirmed that the failure to comply therewith results in the nullity of the waiver and consequently, the
assessments.28 Tested against these requisites and settled jurisprudence, the subject waivers are defective and
invalid and, thus, did not extend the period to assess

STI further claims, that contrary to the CIR's insistence, it is not estopped from invoking the defense of
prescription because: (1) STI did not admit the validity or correctness of the deficiency assessments; (2) it did not
receive or accept any benefit from the execution of the waivers since it continued to dispute the assessment;
and (3) STI did not, in any way, lead the CIR to believe that the waivers were valid

ISSUE:

WHETHER OR NOT PRESCRIPTION HAD SET IN AGAINST THE ASSESSMENTS FOR DEFICIENCY INCOME TAX,
DEFICIENCY VAT AND DEFICIENCY EXPANDED WITHHOLDING TAX.- YES

RULING:

The petition lacks merit. The Waivers of Statute of Limitations, being defective and invalid, did not extend the
CIR's period to issue the subject assessments. Thus, the right of the government to assess or collect the
alleged deficiency taxes is already barred by prescription.

Section 203 of the NIRC of 1997, as amended, limits the CIR's period to assess and collect internal revenue taxes
to three (3) years counted from the last day prescribed by law for the filing of the return or from the day the
return was filed, whichever comes later. 32 Thus, assessments issued after the expiration of such period are no
longer valid and effective

In SMI-Ed Philippines Technology, Inc. v. Commissioner of Internal Revenue,34 the Court explained the primary
reason behind the prescriptive period on the CIR's right to assess or collect internal revenue taxes: that is, to
safeguard the interests of taxpayers from unreasonable investigation.35 Accordingly, the government must
assess internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive 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

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In this regard, the CTA Division found that the last day for the CIR to issue an assessment on STI's income tax for
fiscal year ending March 31, 2003 was on August 15, 2006; while the latest date for the CIR to assess STI of EWT
for the fiscal year ending March 31, 2003 was on April 17, 2006; and the latest date for the CIR to assess STI of
deficiency VAT for the four quarters of the same fiscal year was on May 25, 2006.37 Clearly, on the basis of
these dates, the final assessment notice dated June 16, 2007,38 assessing STI for deficiency income tax, VAT and
EWT for fiscal year 2003, in the aggregate amount of ₱l61,835,737.98, which STI received on June 28, 2007,39
was issued beyond the three-year prescriptive period.

To implement the foregoing provisions, the BIR issued RMO 20-90 and RDAO 05-01, outlining the procedures for
the proper execution of a valid waiver, viz.: 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.1âwphi1 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

These requirements are mandatory and must strictly be followed. To be sure; in a number of cases, this Court
did not hesitate to strike down waivers which failed to strictly comply with the provisions of RMO 20-90 and
RDAO 05- 01

In Philippine Journalists, Inc. v. Commissioner of Internal Revenue,41 the Court declared the waiver invalid
because: (1) it did not specify the date within which the BIR may assess and collect revenue taxes, such that the
waiver became unlimited in time; (2) it was signed only by a revenue district officer, and not the CIR; (3) there
was no date of acceptance; and (4) the taxpayer was not furnished a copy of the waiver

In Commissioner of Internal Revenue v. FMF Development Corporation,43 the waiver was found defective and
thus did not validly extend the original three-year prescriptive period because: (1) it was not proven that the
taxpayer was furnished a copy of the waiver; (2) it was signed only by a revenue district officer, and not the CIR
as mandated by law; and (3) it did not contain the date of acceptance by the CIR, which is necessary to
determine whether the waiver was validly accepted before the expiration of the original three-year period.

Verily, considering the foregoing defects in the waivers executed by STI, the periods for the CIR to assess or
collect the alleged deficiency income tax, deficiency EWT and deficiency VAT were not extended. The
assessments subject of this case, which were issued by the BIR beyond the three-year prescriptive, are
therefore considered void and of no legal effect. Hence, the CT A committed no reversible error in cancelling
and setting aside the subject assessments on the ground of prescription.

STI is not estopped from invoking the defense of prescription.

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As correctly stated by the CTA, RCBC is not on all fours with the instant case. The estoppel upheld in the said
case arose from the taxpayer's act of payment and not on the reduction in the amount of the assessed taxes.
The Court explained that RCBC's partial payment of the revised assessments effectively belied its insistence that
the waivers are invalid and the assessments were issued beyond the prescriptive period. Here, as no such
payment was made by STI, mere reduction of the amount of the assessment because of a request for
reinvestigation should not bar it from raising the defense of prescription

The petition for review is hereby DENIED.

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