CIR v. RAUL M. GONZALEZ, GR No.

177279, 2010-10-13
Facts:
conducted a fraud investigation for all internal revenue taxes to ascertain/determine the tax liabilities of
respondent L. M. Camus Engineering Corporation (LMCEC) for the... taxable years 1997, 1998 and 1999.
a criminal complaint was instituted by the Bureau of Internal Revenue (BIR) against LMCEC on January 19,
2001
Based on data obtained from an "informer" and various clients of LMCEC... it was discovered that LMCEC
filed fraudulent tax returns with substantial underdeclarations of taxable income for the years 1997, 1998
and 1999.
Petitioner thus assessed the... company of total deficiency taxes
The Preliminary Assessment Notice (PAN) was received by LMCEC on February 22, 2001.
In view of the above findings, assessment notices together with a formal letter of demand dated August 7,
2002 were sent to LMCEC through personal service on October 1, 2002
On May 21, 2003, petitioner,... referred to the Secretary of Justice for preliminary investigation its complaint
against LMCEC... it was alleged that despite the receipt of the final assessment notice and formal demand
letter on
October 1, 2002, LMCEC failed and refused to pay the deficiency tax assessment... which had become final
and executory as a result of the said taxpayer's failure to file a protest thereon within the thirty (30)-day...
reglementary period... contending that LMCEC cannot be held liable whatsoever for the alleged tax
deficiency which had become due and demandable
They also assail as invalid the assessment notices which bear no serial numbers... petitioner disagreed with
the contention of LMCEC that the complaint filed is not criminal in nature, pointing out that LMCEC and its
officers Camus and Mendoza were being charged for the criminal offenses... defined and penalized under
Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful Failure to Pay Tax) of the NIRC.
On the lack of control number in the assessment notice, petitioner explained that such is a mere office
requirement in the Assessment Service for the purpose of internal control and monitoring; hence, the
unnumbered assessment notices should not be interpreted as irregular or... anomalous
On September 22, 2003, the Chief State Prosecutor issued a Resolution[27] finding no sufficient evidence to
establish probable cause against respondents LMCEC, Camus and Mendoza.
On... the required prior determination of fraud... ruled that (1) there was no prior determination of fraud
Petitioner appealed to respondent Secretary of Justice but the latter denied its petition for review
On the allegation of fraud, respondent Secretary ruled that petitioner failed to establish the existence of the
following circumstances indicating fraud in the settlement of LMCEC's tax liabilities: (1) there must be
intentional and substantial understatement of tax liability by... the taxpayer; (2) there must be intentional and
substantial overstatement of deductions or exemptions; and (3) recurrence of the foregoing circumstances.
second, the claim... that the tax fraud investigation was precipitated by an alleged "informant" has not been
corroborated nor was it clearly established, hence there is no other conclusion but that the Bureau engaged
in a "fishing expedition"
Petitioner filed the criminal complaint against the private respondents for violation of the following provisions
of the NIRC,... Respondent Secretary concurred with the Chief State Prosecutor's conclusion that there is
insufficient evidence to establish probable cause to charge private respondents... the assessment notices...
are unnumbered, hence irregular and suspect
Issues:
whether LMCEC and its corporate officers may be prosecuted for violation of Sections 254 (Attempt to
Evade or Defeat Tax) and 255 (Willful Failure to Supply Correct and Accurate Information and Pay Tax).
Ruling:
a preliminary investigation should first be conducted to determine if a... prima facie case for tax fraud exists
[t]he crime is complete when the [taxpayer] has x x x knowingly and willfully filed [a] fraudulent [return] with
intent to evade and defeat x x x the tax."  Thus, respondent
Secretary erred in holding that petitioner committed forum shopping when it filed the... present criminal
complaint during the pendency of its appeal from the City Prosecutor's dismissal of I.S. No. 00-956 involving
the act of disobedience to the summons in the course of the... preliminary investigation on LMCEC's correct
tax liabilities for taxable years 1997, 1998 and 1999.
Respondent Secretary, however, fully concurred with private respondents' contention that the assessment
notices were invalid for being unnumbered and the tax liabilities therein stated have already been settled
and/or terminated.
As it is, the formality of a control number in the assessment notice is not a requirement for its validity but
rather the contents thereof which should inform the taxpayer of the declaration of deficiency tax against said
taxpayer. Both the formal letter of demand and the notice... of assessment shall be void if the former failed
to state the fact, the law, rules and regulations or jurisprudence on which the assessment is based, which is
a mandatory requirement under Section 228 of the NIRC.

CIR vs. Metrostar Superama, Inc. (8 December 2010)

FACTS:

The BIR through a Letter of Authority caused the examination of respondent’s books of accounts and other accounting
records for income tax and other internal revenue taxes for the taxable year 1999. For the latter’s failure to comply with
several requests of the presentation of records and subpoena duces tecum, the BIR Legal Division issued an Indorsement
to proceed with the investigation based on the best evidence obtainable preparatory to the issuance of assessment notice.

Respondent received a preliminary 15-day letter on 09 November 2001 and a Formal Letter of Demand on 11 April 2002
assessing it with deficiency VAT and withholding tax for the taxable year 1999.

ISSUE(S):

Whether or not the failure to strictly comply with notice requirements prescribed under Section 228 of the NIRC of 1997
and R.R. No. 12-99 is tantamount to a denial of due process.

HELD:

YES. 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 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. 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.
CIR vs. Azucena Reyes (27 January 2006)
Facts:  By virtue of a sworn affidavit for reward by one Abad, an investigation was conducted by BIR on the estate of the deceased Maria
Tancinco who died in 1993 leaving a residential lot and old house in Dasma.  Without submitting a preliminary finding report, an LOA
was issued and received by Reyes, one of the heirs on 14 March 1997. 

Then on 12 Feb 1998, a PAN was issued against the estate, and a FAN as well as demand letter was issued on 22 April 1998. For the
assessment of P14.9M for estate tax of the estate of Maria Tancinco.    On March 11, 1999, the heirs proposed a compromise settlement
of P1,000,000.00.

During those dates, RA 8424 Tax Reform Act was already in effect. RA 8424 stated that the taxpayer must be informed of
both the law and facts on which the assessment was based.The notice required under the old law was no longer
sufficient under the new law. 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.

Due to failure to pay tax on the deadline BIR notified on June 6, 2000 that the subject property would be sold at public auction on August
8, 2000. Reyes filed a protest with the BIR.  Hence the petition for review filed by Reyes in CTA and a TRO to desist and refrain from
proceeding with the auction sale of the subject property or from issuing a warrant pending determination of the case and/or unless a
contrary order is issued.

CIR filed a motion saying CTA has no jurisdiction since the assessment against the estate is already final and executory; and (ii) that the
petition was filed out of time

CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax amounting to 19M. CTA ratiocinated that there can only be a
perfected and consummated compromise of the estate’s tax liability[,] if the NEB has approved [Reyes’s] application for compromise in
accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

CA – Partly granted petition. SC – Affirmed, petition w/o merit.

ISSUE:  WON whether the assessment against the estate is valid; and, second, whether the compromise entered into is also valid.

HELD: No. Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing
of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in
turn be used as a basis for the perfection of a tax compromise. This was clear and mandatory under Section 228.
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 22913 prior to its amendment by
Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes
due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to mean that
Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the compulsory requirement
under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of
investigation and was not even the requisite notice under the law.

CIR vs. Enron Subic Power Corporation (19 January 2009)

FACTS:

During the pre-assessment stage of the investigation of respondent for the year 1996, petitioner advised Enron’s
representative of the latter’s tax deficiency, informed it of the proposed tax deficiency 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. On 26 May 1999, respondent received a formal assessment notice, itemizing therein the deductions
disallowed and imposing the preferential rate of 5% on some items respondent categorized as costs. The legal and factual
bases were, however, not indicated.

ISSUE(S):

Whether or not the assessment notice sent to respondent was valid.

HELD:

NO. 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 of 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.
 Samar-I Electric Cooperative (SIEC) v. CIR
GR 193100
December 10, 2014

FACTS: Samar-I Electric Cooperative, Inc. (Petitioner) is an electric cooperative, with principal office at Barangay Carayman,
Calbayog City.

On July 13, 1999 and April 17, 2000, petitioner filed its 1998 and 1999 income tax returns, respectively. Petitioner filed its 1997,
1998, and 1999 Annual Information Return of Income Tax Withheld on Compensation, Expanded and Final Withholding Taxes on
February 17, 1998, February 1, 1999, and February 4, 2000, in that order.

On November 13, 2000, respondent issued a duly signed Letter of Authority (LOA) covering the examination of petitioner's books of
account and other accounting records for income and withholding taxes for the period 1997 to 1999. Petitioner cooperated in the audit
and investigation conducted by the Special Investigation Division of the BIR by submitting the required documents on December 5,
2000. On October 19, 2001, respondent sent a Notice for Informal Conference which was received by petitioner in November 2001;
indicating the allegedly income and withholding tax liabilities of petitioner for 1997 to 1999. Attached to the letter is a summary of the
report, with an explanation of the findings of the investigators. In response, petitioner sent a letter dated November 26, 2001 to
respondent maintaining its indifference to the latter's findings and requesting details of the assessment.On December 13, 2001,
petitioner executed a Waiver of the Defense of Prescription under the Statute of Limitations, good until March 29, 2002.
Consequently, on September 15, 2002, petitioner received a demand letter and assessments notices (Final Assessment Notices) for the
alleged 1997, 1998, and 1999 deficiency withholding tax in the amount of [P]3,760,225.69, as well as deficiency income tax covering
the years 1998 to 1999 in the amount of [P]440,545.71, or in the aggregate amount of [P]4,200,771.40.

CTA EB: It ruled that SAMELCO-I is exempted in the payment of the Minimum Corporate Income Tax (MCIT); that due process
was observed in the issuance of the assessments in accordance with Section 228 of the Tax Code; and that the 1997 and 1998
assessments on deficiency withholding tax on compensation have not prescribed.

Petitioner moved for reconsideration.

In a Resolution dated July 28, 2010, the CTA EB denied the motion.

Petitioner contends that the subject 1997 and 1998 withholding tax assessments on compensation were issued beyond the
prescriptive period of three years under Section 203 of the NIRC of 1997. Under this section, the government is allowed a period of
only three years to assess the correct tax liability of a taxpayer, viz.:

SEC. 203. Period of Limitation Upon Assessment and Collection. — Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed
before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.

Relying on Section 203, petitioner argues that the subject deficiency tax assessments issued by respondent on September 15,
2002 was issued beyond the three-year prescriptive period. Petitioner filed its Annual Information Return of Income Tax
Withheld on Compensation, Expanded and Final Withholding Taxes on the following dates: on February 17, 1998 for the
taxable year 1997; and on February 1, 1999 for the year taxable 1998. Thus, if the period prescribed under Section 203 of
the NIRC of 1997 is to be followed, the three-year prescriptive period to assess for the taxable years 1997 and 1998 should
have ended on February 16, 2001 and January 31, 2002, respectively.

ISSUE:

(1) won the 1997 and 1998 assessments on withholding tax on compensation were issued within the prescriptive period
provided by law;

HELD:

(1) YES. While petitioner is correct that Section 203 sets the three-year prescriptive period to assess, the following exceptions are
provided under Section 222 of the NIRC of 1997, viz.:
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. —
 (a) In the case of a false or fraudulent return with intent to evade tax or of failure
to file a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be filed without assessment, at any time within ten
(10) years after the discovery of the falsity, fraud or omission: Provided,That in
a fraud assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection
thereof.

In the case at bar, it was petitioner's substantial underdeclaration of withholding taxes in the
amount of P2,690,850.91 which constituted the "falsity" in the subject returns — giving respondent
the benefit of the period under Section 222 of the NIRC of 1997 to assess the correct amount of tax
"at any time within ten (10) years after the discovery of the falsity, fraud or omission."

The case of Aznar v. Court of Tax Appeals discusses what acts or omissions may constitute falsity, viz.:

Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not
file false and fraudulent returns with intent to evade tax, while respondent
Commissioner of Internal Revenue insists contrariwise, with respondent Court of Tax
Appeals concluding that the very "substantial underdeclarations of income for six
consecutive years eloquently demonstrate the falsity or fraudulence of the income tax
returns with an intent to evade the payment of tax."

To our minds we can dispense with these controversial arguments on facts, although we
do not deny that the findings of facts by the Court of Tax Appeals, supported as they
are by very substantial evidence, carry great weight, by resorting to a proper
interpretation of Section 332 of the NIRC. We believe that the proper and reasonable
interpretation of said provision should be that in the three different cases of (1) false
return, (2) fraudulent return with intent to evade tax, (3) failure to file a return, the tax
may be assessed, or a proceeding in court for the collection of such tax may be begun
without assessment, at any time within ten years after the discovery of the (1) falsity,
(2) fraud, (3) omission. Our stand that the law should be interpreted to mean a
separation of the three different situations of false return, fraudulent return with intent
to evade tax, and failure to file a return is strengthened immeasurably by the last portion
of the provision which segregates the situations into three different classes, namely
"falsity," "fraud" and "omission." That there is a difference between "false return" and
"fraudulent return" cannot be denied. While the first merely implies deviation from the
truth, whether intentional or not, the second implies intentional or deceitful entry with
intent to evade the taxes due.

A careful examination of the evidence on record yields to no other conclusion but that petitioner
failed to withhold taxes from its employees' 13th month pay and other benefits in excess of thirty
thousand pesos (P30,000.00) amounting to P2,690,850.91 for the taxable years 1997 to 1999 —
resulting to its filing of the subject false returns. Petitioner failed to refute this finding, both in fact
and in law, before the courts a quo.

CIR vs. Fitness by Design, Inc. (9 November 2016)

FACTS:

On 09 June 2004, respondent received a copy of the Final Assessment Notice dated 17 March 2004
issued by petitioner notifying the former of its internal revenue tax liabilities for the year 1995.
Respondent filed a protest to the said notice pleading prescription. In its Answer, petitioner
claimed that its right to assess had not yet prescribed because the 1995 income tax return filed by
respondent was false and fraudulent for its alleged intentional failure to reflect its true sales.

ISSUE(S):

Whether or not fraud may be presumed .

HELD:

NO. 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 or fraudulent has been filed, the BIR may assess within three years, reckoned from the date of
actual filing or from the last day prescribed by law for filing. However, in case of a false or
fraudulent return with intent to evade tax, it may assess at anytime within ten years after the
discovery of the falsity, fraud or omission.

Fraud is a question of fact that should be alleged and proven. The willful neglect to file the required
tax return or the fraudulent intent to evade the payment of taxes, considering the same is
accompanied by legal consequences, cannot be presumed. 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.

FLUOR DANIEL PHILIPPINES INC. vs. CIR CTA Case No. 7793 April 17, 2012

FACTS
A Formal Letter of Demand was sent by respondent assessing petitioner deficiency taxes
for 2004 comprising Income Tax, VAT and Expanded Withholding Tax. Included in the
EWT assessment was the alleged deficient on petitioner’s payments of maintenance
service fees for software maintenance to Fluor International, Inc. (FII). Respondent stating
that since there was no documentary evidence to show the true nature of the contract, the
fees should be treated as income from services and thus, subject to EWT at 32%.
Petitioner then filed a protest requesting reinvestigation or reconsideration and applied for
abatement of penalties, surcharges and interest. In response to petitioner's protest,
respondent issued a Final Decision on Disputed Assessment (FDDA) cancelling the
deficiency EWT but issuing an assessment for Final Withholding Tax (FWT) on the same
software fees albeit using a lower 15% rate under the RP-US Tax Treaty.
ISSUE
W/N petitioner was deprived of due process when the FDDA changed the assessment from
deficiency EWT to deficiency FWT
RULING
Yes. The change of the assessment in the FDDA itself constituted a new assessment. As
such, the taxpayer should have given the chance to dispute the same via the process laid
down in the Tax Code which is by way of filing a protest. Given that this is was not
complied with and what was issued was already an FDDA, the circumstances certainly
deprived the petitioner of a reasonable opportunity to be heard and submit evidence in
support of its defense which is a clear violation of due process requirements.

RCBC vs. CIR (16 June 2006)

CIR v. FIRST EXPRESS PAWNSHOP
G.R. Nos.  172054-46,  16 June 2009

Facts:  

In this case, respondent a pawnshop company received the tax assessment on 3 January 2002. On 1 February
2002, respondent submitted its protest and attached the GIS and Balance Sheet as of 31 December 1998. Since
petitioner did not act on the protest during the 180-day period,respondent filed a petition before the CTA on 28
August 2002 and contended that petitioner did not consider the supporting documents on the interest expenses
and donations which resulted in the deficiency income tax. 
         
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. 

Issue: WON assessment has become final

HELD: NO.  The assessment did not 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. 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.

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.  Respondent has complied with the requisites in disputing an
assessment pursuant to Section 228 of the Tax Code.

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.  

RIZAL COMMERCIAL BANKING CORPORATION v. CIR, GR NO. 168498, 2007-04-

24
Facts:
Petitioner reiterates its claim that its former counsel's failure to file petition for review
with the Court of Tax Appeals within the period set by Section 228
Issues:
PETITIONER TIMELY FILED ITS PETITION FOR REVIEW BEFORE THE COURT OF
TAX APPEALS; THUS, THE COURT OF TAX APPEALS HAD JURISDICTION OVER
THE CASE.
Ruling:
In case the Commissioner failed to act on the disputed assessment within the 180-day
period from date of submission of documents, a taxpayer can either: 1) file a petition for
review with the Court of Tax Appeals within 30 days after the expiration of the 180-day
period; or 2)... await the final decision of the Commissioner on the disputed
assessments and appeal such final decision to the Court of Tax Appeals within 30 days
after receipt of a copy of such decision. However, these options are mutually exclusive,
and resort to one bars the application of... the other.
In the instant case, the Commissioner failed to act on the disputed assessment within
180 days from date of submission of documents. Thus, petitioner opted to file a petition
for review before the Court of Tax Appeals. Unfortunately, the petition for review was
filed out of... time, i.e., it was filed more than 30 days after the lapse of the 180-day
period. Consequently, it was dismissed by the Court of Tax Appeals for late filing.
Petitioner did not file a motion for reconsideration or make an appeal; hence, the
disputed assessment became final,... demandable and executory.
Based on the foregoing, petitioner 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.

Philippine Amusement and Gaming Corporation vs. CIR (27 January 2016)
CIR vs. Liquigaz Philippines Corporation (18 April 2016)

FACTS:

Respondent received the following notices issued by the BIR relative to the latter’s conduct of an
investigation of the former’s internal revenue taxes for taxable year 2005: (1) an undated Notice
of Informal Conference; (2) a copy of the Preliminary Assessment Notice (PAN) dated 28 May
2008; and (3) a Formal Letter of Demand (FLD)/Formal Assessment Notice (FAN); and (4) a copy
of the Final Decision on Disputed Assessment (FDDA) after respondent filed on 25 July 2008 its
protest against the FLD/FAN.

Respondent on 29 July 2010 assailed the validity of the FDDA in a petition for review before the
CTA Division which ruled that while the decision indicated the legal provisions relied upon for the
assessment but not the factual bases thereof . The FDDA being void, the assessment was also
declared void.

ISSUE(S):

Whether or not a void FDDA leads to a void assessment.

HELD:

NO. 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 assessment or the inaction of the CIR.
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.

Lascona Land Co. Inc. v. Commissioner of Internal Revenue, G.R. No. 171251, 05 March 2012

24NOV

[PERALTA, J.]

FACTS

The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona Land Co., Inc.
(Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the
amount of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was
denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal
Revenue, Revenue Region No. 8, Makati City. On April 12, 1999, Lascona appealed the decision
before the CTA. 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.

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.

HELD

NO.

[T]he 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. These options are mutually exclusive and resort to one bars the application of the
other.

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.

CIR vs. Meralco (9 June 2014)

FACTS:

Respondent obtained two loans from the Singapore branch of a German bank. Pursuant to the loan
agreements, respondent paid/remitted to the BIR the corresponding 10% final withholding tax
(FWT) on its interest payments on the loan covering the period from January 1999 to September
2003.

It discovered sometime in 2001 that the bank is a foreign government-owned financing institution
in Germany and confirmed with the BIR that the interest payments made to the German bank are
exempt from the 10% FWT.

On 13 July 2004, respondent filed with petitioner a claim for tax refund or issuance of tax credit
certificate for the erroneously paid or overpaid final withholding tax on interest payments made to
the German bank. Petitioner on 05 November 2004, however, denied its claim for tax refund on the
basis that the same had already prescribed.

ISSUE(S):

Whether or not respondent’s right to claim a tax refund/credit relative to its payment of FWT on
interest payments made from January 1999 to September 2003 has prescribed.

HELD:

YES. 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 date of payment of tax, and not upon the discovery by the
taxpayer of the erroneous or excessive payment of taxes.

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 the prescribed
period.

Vda. De Aguinaldo vs. CIR (26 February 1965)

Felisa Vda. de San Agustin vs. CIR (10 September 2001)
Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, 06
October 2010

24NOV

[DEL CASTILLO, J.]

FACTS

Respondent Aichi filed a claim for refund/credit of input VAT for the period July 1, 2002 to
September 30, 2002, with the petitioner Commissioner of Internal Revenue (CIR), through the
Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center.On even date, respondent filed a Petition for Review with the CTA for the
refund/credit of the same input VAT.  The CTA partially granted the petition. In a Motion for
Reconsideration, petitioner argued that the simultaneous filing of the administrative and the
judicial claims contravenes Sections 112 and 229 of the NIRC and a prior filing of an
administrative claim is a “condition precedent” before a judicial claim can be filed. The CTA En
Banc affirmed the division ruling.

ISSUE

Whether the respondent’s judicial and administrative claims for tax refund/credit were filed
within the two-year prescriptive period as provided in Sections 112(A) and 229 of the NIRC.

HELD

NO.

The two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September
30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim was
timely filed.The filing of the judicial claim was premature. However, notwithstanding the timely
filing of the administrative claim, [the Supreme Court is] constrained to deny respondent’s claim
for tax refund/credit for having been filed in violation of Section 112(D). Section 112(D) of the
NIRC clearly provides that the CIR has “120 days, from the date of the submission of the
complete documents in support of the application [for tax refund/credit],” within which to grant
or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an
appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after
the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the
taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

Hedcor vs. CIR (15 July 2015)

Pilipinas Total Gas, Inc. vs Commissioner of Internal Revenue. G.R. No. 207112. December 8,
2015.

FACTS:

Total Gas filed its Amended Quarterly VAT Returns. Total claims that they incurred unused input
VAT credits. 

On May 15, 2008, Total filed an administrative claim for the refund. On August 28, 2008, Total
submitted to the BIR additional documents. On January 23, 2009, Total elevated the case to the
CTA. 

The CTA dismissed the case citing that the case was prematurely filed as the neccesary
documents were incomplete; that the 120 day period allowed to the CIR to decide on the claim
under Section 112 of the NRC has not started to run.

With the CTA en banc, the case was again dismissed reiterating the decision of the Division. The
en banc also stated that the reckoning point of the 120 day period was on May 2008 thus the
petition filed on January 2009 was considered belatedly filed.

ISSUE: Whether the claim has prescribed. 

RULING:

NO. 

The SC held that Total timely filed its judicial claim on January 2009.

The NIRC provides that the CIR has 120 days from the date of submission of complete documents
to decide on the claim for tax credits. Upon inaction of the BIR after 120 days, the taxpayer may,
within 30 days, appeal on the CTA.

The BIR did not give notice to Total with regard to the documents submitted on August 2008.
Thus the counting of the 120 day period should start from August 2008 or when Total made its
submission of complete documents to support its application. The BIR had until December 2008
to decide. Because of the BIR's inaction, Total had until January 25, 2009 to file their judicial
claim. 
CIR vs. Air Liquide Philippines, Inc. (29 July 2015)

Miramar Fish Company, Inc. vs. CIR (4 June 2014)

Mitsubishi Corporation - Manila Branch Vs. Commissioner of Internal Revenue

G.R. No. 175722

June 5, 2017
Facts:

On June 11, 1987, the governments of Japan and the Philippines executed an Exchange of Notes,
whereby the former agreed to extend a loan amounting to Forty Billion Four Hundred Million
Japanese Yen (¥40,400,000,000) to the latter through the then Overseas Economic Cooperation
Fund (OECF, now Japan Bank for International Cooperation) for the implementation of the Calaca
II Coal-Fired Thermal Power Plant Project (Project). In Paragraph 5 (2) of the Exchange of Notes,
the Philippine Government, by itself or through its executing agency, undertook to assume all
taxes imposed by the Philippines on Japanese contractors engaged in the Project.

Consequently, the OECF and the Philippine Government entered into Loan Agreement No. PH-
P768 dated September 25, 1987 for Forty Billion Four Hundred Million Japanese Yen
(¥40,400,000,000). Due to the need for additional funding for the Project, they also executed
Loan Agreement No. PH-P1419 dated December 20, 1994 for Five Billion Five Hundred Thirteen
Million Japanese Yen (¥5,513,000,000). Meanwhile, on June 21, 1991, the National Power
Corporation (NPC), as the executing government agency, entered into a contract with Mitsubishi
Corporation (i.e., petitioner's head office in Japan) for the engineering, supply, construction,
installation, testing, and commissioning of a steam generator, auxiliaries, and associated civil
works for the Project (Contract). The Contract's foreign currency portion was funded by the OECF
loans. In line with the Exchange of Notes, Article VIII (B) (1) of the Contract indicated NPC's
undertaking to pay any and all forms of taxes that are directly imposable under the Contract.

Petitioner completed the project on December 2, 1995, but it was only accepted by NPC on
January 31, 1998 through a Certificate of Completion and Final Acceptance. On July 15, 1998,
petitioner filed its Income Tax Return for the fiscal year that ended on March 31, 1998 with the
Bureau of Internal Revenue (BIR). Petitioner included in its income tax due the amount of P
44,288,712.00, representing income from the OECF-funded portion of the Project. On the same
day, petitioner also filed its Monthly Remittance Return of Income Taxes Withheld and remitted
P 8,324,100.00 as BPRT for branch profits remitted to its head office in Japan out of its income for
the fiscal year that ended on March 31, 1998.

In a Decision dated December 17, 2003, the CTA Division granted the petition and ordered the
CIR to refund to petitioner the amounts it erroneously paid as income tax and BPRT. It held that
based on the Exchange of Notes, the Philippine Government, through the NPC as its executing
agency, bound itself to assume or shoulder petitioner's tax obligations. Therefore, petitioner's
payments of income tax and BPRT to the CIR, when such payments should have been made by
the NPC, undoubtedly constitute erroneous payments under Section 229 of the NIRC.

The CIR moved for reconsideration but was denied in a Resolution dated April 23, 2004; thus, the
CIR elevated the matter to the CTA En Banc. In a Decision dated May 24, 2006, the CTA En Banc
reversed the CTA Division's rulings and declared that petitioner is not entitled to a refund of the
taxes it paid to the CIR. Petitioner sought reconsideration, but the CTA En Banc denied the
motion in a Resolution dated December 4, 2006.

Issues:

Whether or not Mitsubishi Corporation – Manila Branch is entitled to a refund. Whether or not
the Bureau of Internal Revenue should be the authorized government agency where the tax
refund be claimed.

Held:
Yes, the petitioner is entitled to a refund. The CIR subsequently affirmed petitioner's non-liability
for taxes and entitlement to tax refunds by issuing Revenue Memorandum Order (RMO) No. 24-
200547 addressed to specified BIR offices. The RMO provides: Pursuant to the provisions of RMC
No. 32-99 as amended by RMC No. 42-99, Japanese contractors and nationals engaged in OECF
funded projects in the Philippines shall not be required to shoulder the fiscal levies or taxes
associated with the project. Therefore, the concerned Japanese contractors are entitled to claim
for the refund of all taxes paid and shouldered by them relative to the conduct of the Project.
Also, considering that petitioner paid the subject taxes in the aggregate amount of P
52,612,812.00, which it was not required to pay, the BIR erroneously collected such amount.

On another issue, yes, the Bureau of Internal Revenue should be the authorized government
agency where the tax refund be claimed. The Supreme Court held that in Sections 204 (C) of the
NIRC grants the CIR the authority to credit or refund taxes which are erroneously collected by the
government. The authority of the CIR to refund erroneously collected taxes is likewise reflected
in Section 229 of the NIRC.

In this case, it is fairly apparent that the subject taxes in the amount of P 52,612,812.00 was
erroneously collected from petitioner, considering that the obligation to pay the same had
already been assumed by the Philippine Government by virtue of its Exchange of Notes with the
Japanese Government. Case law explains that an exchange of notes is considered as an executive
agreement, which is binding on the State even without Senate concurrence.

Hence, the petition is GRANTED. The Decision dated May 24, 2006 and the Resolution dated
December 4, 2006 of the Court of Tax Appeals (CTA) En Banc are REVERSED and SET ASIDE. The
Decision dated December 17, 2003 of the CTA is REINSTATED.

Gibbs vs. CIR (29 February 1960)

CIR v Palanca, Jr.
GR No L-16626, October 29, 1966

FACTS:
The late Don Carlos Palanca, Sr. donated in favor of his son, Carlos Palanca, Jr. shares of stock in La Tondeña
Inc.
amounting to 12,500 shares. Later, the BIR considered the donation as transfer in contemplation of death;
consequently, the BIR assessed against the respondent, Palanca Jr., the sum of P191,591.62 as estate and
inheritance taxes on the transfer of said 12,500 shares of stock, including therein interest for delinquency of
P60,581.80. The respondent then filed an amended income tax return, claiming an additional deduction in the
amount P60,581.80; hence, his new income tax due is only P428. He attached a letter requesting the refund of
P20,624.01. However, the said request for refund was denied by the BIR. Court of tax appeals ordered the
refund. Hence, this petition.

ISSUES:

1. Whether the interest on the delinquent estate and inheritance tax is deductible from the gross income
2. Whether the respondent’s claim for refund has prescribed
RULING:

1. Yes, the interest is deductible. The rule is settled that although taxes already due have not, strictly
speaking, the same
concept as debts, they are, however, obligations that may be considered as such. In CIR v Prieto, the
Court explicitly announced that while the distinction between “taxes” and “debts” was recognized in
this jurisdiction, the variance in their legal conception does not extend to the interests paid on them.

2. No, respondent’s claim has not yet prescribed. Considering that it is the interest paid on this latter-
assessed estate and inheritance tax that respondent is claiming for refund, then the 30-day period for
prescription under RA 1125 should be computed from the receipt of the final denial by the BIR of the
said claim.
Inasmuch as the said account was paid by him by installment, then the computation of the two-year
prescriptive period, under Section 306 of the National Internal Revenue Code, should be from the date
of the last installment.
Respondent Palanca paid the last installment on his 1955 income tax account on August 14, 1956. His
claim for refund was filed on August 13, 1958. It was, therefore, still timely instituted. 

Far East Bank and Trust Company vs. CIR (2 May 2006)
CIR vs. Sweeney (21 August 1959)
Philex Mining Corporation vs. (21 April 1999)

TAX EXEMPTION; Since the partial refund authorized under sec. 5, R.A. 1435 is in
the nature of a tax exemption, it must be construed stictissimi juris against the
grantee.

FACTS: Petitioner Philex Mining Corporation entered into a Mining License

Agreement with the then Ministry of Natural Resources (now the Department of
Environment and Natural Resources). From the period 1980 to 1981, petitioner
purchased from several oil companies, refined and manufactured mineral oils,
motor fuels and diesel fuel oils. The specific taxes passed on to the petitioner
amounted to P 2,492,677.22. Thereafter, pursuant to R.A. 1435, petitioner filed a
claim for tax refund with the Commissioner of Internal Revenue for P 623,169.30,
representing 25% of the specific taxes actually paid. Pending CIR action, petitioner
filed a case for tax refund with the Court of Tax Appeals. The CTA rendered its
decision, granting the petitioner's claim, but only to the extent of P 16,747.36. The
Court of Appeals affirmed the decision of the CTA. Petitioner now contends that
since it paid the taxes based on the increased rates (under the NIRC), its 25%
refund must also be based on the increased rates.

ISSUE: Whether or not respondent court erred in basing the tax refund under sec. 1
and 2 of R.A. 1435, instead of the increased rates imposed by sec. 142 and 145 of
the National Internal Revenue Code, as amended.

HELD: The Supreme Court ruled in the negative. Although Philex Mining

corporation paid the taxes on their oil and fuel purchases based on the increased
rates pursuant to the provisions of the NIRC, the latter law did not specifically
provide for a refund based on the increased rates. Since the grant of refund
privileges must be strictly construed against the taxpayer, the basis for the refund
remains to be the amounts deemed paid under sec. 1 and 2 of R.A. 1435. Since the
partial refund authorized under sec. 5, R.A. 1435 is in the nature of a tax
exemption, it must be construed stictissimi juris against the grantee. For this
reason, petitioner's claim for refund on the basis of the specific taxes it actually paid
must expressly be granted in a statute stated in a language too clear to be
mistaken. When the law itself does not explicitly provide that a refund under R.A.
1435 may be based on higher rates which were non-existent at the time of its
enactment, the Court cannot presume otherwise. A legislative lacuna cannot be
filled by judicial fiat. [Philex Mining Corporation vs. Commissioner of Internal
Revenue and CA; G.R. No. 120324; April 21, 1999; Second Division---
Quisumbing, J.]
 

CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of income and common carrier’s
taxes amounting to P107,142.75 since no receipt was realized from its charter agreement. BIR failed to act
promptly on the claim and thus it was elevated to the Court of Tax Appeals which decided in favor of the refund.
Hence, this petition for review on certiorari.

ISSUE:
Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of taxes

RULING:
Yes. 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”. Fair deal is expected by taxpayers from
the BIR and the duty demands that BIR should refund without unreasonable delay the erroneous collection. 
Philippine Bank of Communications cs. CIR (28 January 1999)

Lessons Applicable: Lifeblood Theory, Due process of law under the Constitution in Required in
Taxation, BIR function, statute > RMC, State not estopped by mistake of its agents, Claim for
refund in the nature of tax exemption, remedies of refund and tax credit are alternative

Laws Applicable:

FACTS:

 Petitioner PBCom reported on its annual Income Tax Return for the year 1985 and
1986 a net loss of P 25, 317, 228 and P 14, 129 602 respectively.  But during both
year, PBCom's lessees withheld creditable taxes of P 282 795.50 in 1985 and P
234, 077.69 in 1986.
 August 7, 1987: PBCom requested a tax credit for the overpayment of taxes in the
1st and 2nd quarters.
 July 25, 1988: PBCom filed a claim for refund of creditable taxes withheld by
lessees.
 Pending the investigation, it filed a Petition for Review before the CTA who denied
its request for filing beyond the 2-year reglementary period provided by Sec. 292
and 295 of the NIRC and the claim for 1986 was denied based on the assumption
that it was automatically credited for the succeeding year as shown in its 1986
adjusted final corporate annual tax return.  
 PBCom filed a Motion for Reconsideration and then a Petition for Review with
the CA which affirmed the CTA's decision. 
 It raised the matter to the SC where it argues that it relief on Rev. Memorandum
Circular No. 285 issued April 1, 1985 that provides that the prescriptive period for
overpayment is NOT 2 years but 10 years under Art. 114 of the Civil Code
ISSUE:
1. W/N PBCom can rely on RMC No. 785 changing the prescriptive period from 2 to 10 years
2. W/N PBCom can be assumed to assail of tax crediting

HELD: petition is hereby DENIED

1. No.

 Taxes are the lifeblood of the nation.  Due process of law under the Constitution
does not require judicial proceedings in tax cases. This must necessarily be so
because it is upon taxation that the government chiefly relies to obtain the means to
carry on its operations and it is of utmost importance that the modes adopted to
enforce the collection of taxes levied should be summary and interfered with as little
as possible.  
 From the same perspective, claims for refund or tax credit should be exercised
within the time fixed by law because the BIR being an administrative body enforced
to collect taxes, its functions should not be unduly delayed or hampered by
incidental matters.
 Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229,
NIRC of 1997) provides for the prescriptive period for filing a court proceeding with
the CIR for the recovery of tax erroneously or illegally collected  within 2 years after
payment of tax (computed from the time of filing the Adjustment Return and final
payment of the tax for the year), before any suit in CTA is commenced.  
 Through the issuance of RMC 7-85, the BIR did NOT simply interpret the law but
legislated guidelines contrary to the statute passed by Congress
 RMCs are considered administrative ruling in the same of more specific and
less specific and less general interpretations of tax laws issued by the CIR. 
It is entitled great respect by the courts. Nevertheless, such interpretation is
not conclusive and will be ignored if judicially found to be erroneous.  
  Art. 8 of the Civil Code 26 recognizes judicial decisions, applying or
interpreting statutes as part of the legal system of the country. But
administrative decisions do not enjoy that level of recognition.  
 Fundamental is the rule that the State cannot be put in estoppel by the mistakes or
errors of its officials or agents 
 Non-retroactivity of rulings by the Commissioner of Internal Revenue is not
applicable in this case because the nullity of RMC No. 7-85 was declared by
respondent courts and not by the Commissioner of Internal Revenue
 Claim for refund is in the nature of a claim for exemption and should be construed in
strictissimi juris against the taxpayer. 
2. Yes.

 Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC) provides that any excess
of the total quarterly payments over the actual income tax computed in the
adjustment or final corporate income tax return, shall either (a) be refunded to the
corporation, or (b) may be credited against the estimated quarterly income tax
liabilities for the quarters of the succeeding taxable year. 
 Remedies are in the alternative, and the choice of one precludes the other.
 Since credit is opted, can no longer refund.

CIR vs. CA (21 January 1999)

CIR v. PHILIPPINE AMERICAN LIFE INSURANCE CO., GR No. 105208, 1995-05-29
Facts:
On May 30, 1983, private respondent Philamlife paid to the Bureau of Internal Revenue
(BIR) its first quarterly corporate income tax for Calendar Year (CY) 1983
On August 29, 1983, it paid... for the Second Quarter of 1983.
For its Fourth and final quarter... private respondent suffered a loss and thereby had no
income tax liability.
On September 26, 1984, private respondent filed a claim for its 1982 income tax refund
On November 22, 1984, it filed a petition for review with the Court of Tax Appeals...
with respect to its 1982 claim for refund
On January 2, 1986, private respondent filed a petition for review with the CTA...
regarding its 1983 and 1984 claims for refund
Pacific Procon Ltd. v. Court of Tax Appeals
Pacific Procon Ltd. v. Court of Tax Appeals, et al
Petitioner states that the phrase "regardless of supervening cause that may arise after
payment"... the reckoning period of prescription under Section 292 (now Section 230) is
from the date of payment of tax regardless of financial loss (the
"supervening cause").
Thus, the claim for refund of the amounts of P3,246,141.00 and P396,874.00 paid on
May 30, 1983 and August 29, 1983, respectively, has prescribed.
Issues:
The issue in this case is the reckoning date of the two-year prescriptive period
Ruling:
Clearly, the prescriptive period of two years should commence to run only from the time
that the refund is ascertained, which can only be determined after a final adjustment
return is accomplished.  In the present case, this date is April 16, 1984, and two years
from this... date would be April 16, 1986.  The record shows that the claim for refund
was filed on December 10, 1985 and the petition for review was brought before the
CTA on January 2, 1986.  Both dates are within the two-year reglementary period.
Private respondent being a... corporation, Section 292 (now Section 230) cannot serve
as the sole basis for determining the two-year prescriptive period for refunds.  As we
have earlier said in the TMX Sales case, Sections 68, 69, and 70 on Quarterly
Corporate Income Tax Payment and Section 321 should... be considered in conjunction
with it.

CIR vs. PNB (25 October 2005)

Philam Asset Management, Inc.vs. CIR (14 December 2005)
Asiaworld Properties Philippines Corporation vs. CIR (29 July 2010)
CIR vs. Far East Bank & Trust Company (15 March 2010)
CIR vs. Smart Communication, Inc. (25 August 2010)

FACTS:

On 24 September 2003, respondent filed with the BIR, through the latter’s International Tax
Affairs Division, an administrative claim for refund.

ISSUE(S): Whether or not a withholding agent has a legal right to file a claim for tax refund.

HELD:

YES. First, a withholding agent is considered a taxpayer; under the NIRC as he is personally liable
for the withholding tax as well as for deficiency assesments, 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.

It is 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.
 CIR vs Petron Corporation, G.R. No. 185568, March
21, 2012

Facts:

Respondent Petron is a corporation engaged in the production of petroleum products

and is a Board of Investment (BOI) – registered enterprise in accordance with the provisions
of the Omnibus Investments Code of 1987 (E.O. 226) under Certificate of Registration Nos.
89- 1037 and D95-136. During the period covering the taxable years 1995 to 1998, Petron had
been an assignee of several Tax Credit Certificates (TCCs) from various BOI-registered
entities for which it utilized in the payment of its excise tax liabilities for the taxable years
1995 to 1998. The transfers and assignments of the said TCCs were approved by the
Department of Finance’s One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center
(DOF Center) composed of representatives from the appropriate government agencies.

Taking ground on a BOI letter issued on May 15, 1998 which states that ‘hydraulic
oil, penetrating oil, diesel fuels and industrial gases are classified as supplies and considered
the suppliers thereof as qualified transferees of tax credit, Petron acknowledged and accepted
the transfers of the TCCs from the various BOI-registered entities. Such acceptance and use
of the TCCs as payment of its excise tax liabilities for the taxable years 1995 to 1998 had
been continuously approved by the DOF as well as the BIR’s Collection Program Division.

On January 30, 2002, Petitioner CIR issued an Assessment against petitioner for
deficiency excise taxes for the taxable years 1995 to 1998 in the total amount of P
739,003,036.32, inclusive of surcharges and interests on the ground that the TCCs utilized by
petitioner in the payment of excise taxes have been cancelled by the DOF for having been
fraudulently issued and transferred. Thus, petitioner, through letters dated August 31, 1999
and September 1, 1999, was required by the DOF Center to submit copies of its sales invoices
and delivery receipts showing the consummation of the sale transaction to certain TCC
transferors.

Instead of submitting the said documents, Petron filed a protest on February 27, 2002.
On March 27, 2002, CIR served a Warrant of Distraint and/or Levy on petitioner to enforce
payment of the tax deficiencies without first acting on its letter-protest. Construing the
Warrant of Distraint and/or Levy as the final adverse decision of the BIR on its protest of the
assessment, Petron filed the petition before the CTA Second Division on April 2, 2002. On
May 4, 2007, the CTA Second Division promulgated a Decision ordering Petron to pay the
reduced amount of P600,769,353.95 representing deficiency excise taxes for the taxable years
1995 to 1998 and 25% late payment surcharge and 20% delinquency interest per annum on
the said amount, computed from June 27, 2002 until the amount is fully paid. Petron filed a
motion for reconsideration but was denied. Aggrieved, Petron appealed the Decision to the
CTA En Banc through a Petition for Review. The CTA en banc reversed and set aside the
CTA Second Division and absolved Petron from any deficiency excise tax liability for taxable
years 1995 to 1998. The CIR moved for the reconsideration of the CTA En Banc Decision,
but the motion was denied.

Issue:

Did CTA commit reversible error in holding that Petron is not liable for its excise tax
liabilities from 1995 to 1998?

Ruling:

No. Petron is a transferee in good faith and for value of the subject TCCs since the
CIR had no allegation that there was a deviation from the process for the approval of the
TCCs, which Petron used as payment to settle its excise tax liabilities for the years 1995 to
1998. The CIR’s claim that Petron have participated in the fraudulent issuance and transfer of
the TCCs is negated by the Joint Stipulation it entered into with Petron in the proceedings
before the CTA which states that Petron did not participate in the procurement and issuance
of the TCCs, which TCCs were transferred to Petron and later utilized by Petron in payment
of its excise taxes.
 This stipulation of fact by the CIR amounts to an admission and, having been made by the
parties in a stipulation of facts at pretrial, is treated as a judicial admission. The joint stipulation
made by the parties consequently obviated the opportunity of the CIR to present evidence on this
matter, as no proof is required for an admission made by a party in the course of the proceedings.
Thus, the CIR cannot be allowed to change its stand and renege on that admission.

Further, the post-audit report on which the CIR based its allegations does not have the
effect of a suspensive condition that would determine the validity of the TCCs. As held in Petron
v. CIR (G.R. No. 180385, 28 July 2010, 626 SCRA 100), which is on all fours with the instant
case, TCCs are valid and effective from their issuance and are not subject to a post- audit as a
suspensive condition for their validity. The implication on the instant case of the said earlier ruling
is that Petron has the right to rely on the validity and effectivity of the TCCs that were assigned to
it. The validity of those TCCs should not depend on the results of the DOF’s post-audit findings.

Taxes are the nation’s lifeblood through which government agencies continue to operate
and with which the State discharges its functions for the welfare of its constituents. As an
exception, however, this general rule cannot be applied if it would work injustice against an
innocent party. Petron, in this case, was not proven to have had any participation in or knowledge
of the CIR’s allegation of the fraudulent transfer and utilization of the subject TCCs. Respondent’s
status as a transferee in good faith and for value of these TCCs has been established and even
stipulated upon by petitioner. Respondent was thereby provided ample protection from the adverse
findings subsequently made by the Center. Given the circumstances, the CIR’s invocation of the
non-applicability of estoppel in this case is misplaced.

United Airlines, Inc. vs. CIR (29 September 2010)

Facts:
International airline, petitioner United Airlines, filed a claim for income tax refund.
Petitioner sought to be refunded the erroneously collected income tax from in the
amount of P5,028,813.23 on passenger revenue from tickets sold in the Philippines, the
uplifts of which did not originate in the Philippines, arguing that it cannot be considered
as income from sources within the Philippines. The airlines ceased operation originating
form the Philippines since February 21, 1998.

Court of tAx appeals ruled the petitioner is not entitled to a refund because under the
NIRC, income tax on GPB also includes gross revenue from carriage of cargoes from
the Philippines. And upon assessment by the CTA, it was found out that petitioner
deducted items from its cargo revenues which should have entitled the government to
an amount of P 31.43 million, which is obviously higher than the amount the petitioner
prayed to be refunded.

Petitioner argued that the petitioner’s supposed underpayment cannot offset his claim to
a refund as established by well-settled jurisprudence.

Issue:
Whether or not petitioner is entitled to a refund for its erroneously paid GPB  tax.

HELD:

IS PETITIONER SUBJECT TO GPB?

No, not anymore inasmuch as it ceased operations originating from the Philippines since
1998. 

If an international air carrier maintains flights to and from the Philippines, it shall be taxed
at the rate of 2% of its GPB, while international air carriers that do not have flights to and
from the Philippines but nonetheless earn income from other activities in the country will
be taxed at the rate of 32% of such income.

IS PETITIONER ENTITLED TO REFUND?

NO.

Petitioner was correct in averring that offsetting his claim of refund with his alleged tax
deficiency is unavailing in Article 1279 of the Civil Code. However, in citing Sec 72,
Chapter XI of the NIRC (as was applied in the case of CIR vs CTA, it was Sec 82 then in
the 1977 Tax Code), the grant of refund is founded on the assumption that the return is
valid, that is, the facts stated therein are true and correct.
"The finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the
1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner
is now put in doubt. " It's a basic principle in taxation that tax refunds, like tax
exemptions, are construed strictly against the taxpayer and liberally in favor of the
taxing authority. Having underpaid the GPB tax due, petitioner is not entitled to a refund.

Philippine Bank of Communications vs. CIR (20 June 2016)

CIR vs. Isabela Cultural Corporation (11 July 2001)

FACTS:

Respondent received an assessment letter dated 09 February 1990 stating that it had delinquent taxes
due. It subsequently filed its motion for reconsideration on 23 March 1990. In support of its request for
reconsideration, it sent to the CIR additional documents on 18 April 1990. The next communication
respondent received was already the Final Notice Before Seizure dated 10 November 1994.
ISSUE(S):

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

HELD:

YES. The Final Notice Before Seizure cannot but be considered as the CIR’s decision disposing of the
request for reconsideration filed by respondent, who received no other response to its request. Not only
was the Notice the only response received, its content and tenor supported the theory that it was the
CIR’s final act regarding the request for consideration. The very title expressly indicated that it was a
final notice prior to seizure of property. The letter itself clearly stated that respondent was being given
“this LAST OPPORTUNITY” to pay; otherwise, its properties would be subjected to distraint and levy.

Surigao Electric Co. vs. CTA (28 June 1974)

FACTS:

An exchange of correspondence between petitioner and the CIR ensued on petitioner’s liability for
deficiency franchise tax, after the latter issued against petitioner a warrant of distraint and levy in
November 1961 to enforce the collection of said franchise tax plus surcharge.

Petitioner requested a recomputation of the 29 April 1963 revised assessment it received on 08 May
1963. When the CIR denied its request, it appealed to the CTA on 01 August 1963.

ISSUE(S):

Whether or not petitioner timely appealed to the CTA.

HELD:

NO. The letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the
Commissioner on the petitioner’s several requests for reconsideration and recomputation. In this letter,
the Commissioner not only in effect demanded that the petitioner pay the tax deficiency but also gave
warning that in the event it failed to pay, the said Commissioner would be constrained to enforce the
collection thereof by means of the remedies provided by law. The tenor of the letter, specifically, the
statement regarding the resort to legal remedies, unmistakably indicates the final nature of the
determination made by the Commissioner of the petitioner’s deficiency franchise tax liability.

Hence, the thirty-day appeal period should be counted from the day the petitioner received a copy of
the Commissioner’s letter dated 29 April 1963.

Advertising Associates, Inc. vs. CA (16 December 1984)

CIR vs. Union Shipping Corporation (21 May 1990)

FACTS: In a letter dated December 27, 1974 petitioner assessed against

Yee Fong Hong, Ltd. and/or herein private respondent Union Shipping
Corporation for deficiency income taxes due for the years 1971 and 1972.
Private respondent protested the assessment.

Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy.

In a letter, private respondent reiterated its request for reinvestigation.
Petitioner, again, without acting on the request for reinvestigation and
reconsideration of the Warrant of Distraint and Levy, filed a collection suit
against private respondent.
In 1979, private respondent filed with respondent court a Petition for Review.
The CTA ruled in favor of private respondent. Hence, this is a petition for review
on certiorari

ISSUE: Whether or not the issuance of a warrant of distraint

and levy is proof of the finality of an assessment and is tantamount to an
outright denial of a motion for reconsideration of an assessment.

HELD: The Supreme Court had already laid down the dictum that the

Commissioner should always indicate to the taxpayer in clear and unequivocal
language what constitutes his final determination of the disputed assessment.

There appears to be no dispute that petitioner did not rule on private

respondent's motion for reconsideration but contrary to the above ruling of this
Court, left private respondent in the dark as to which action of the
Commissioner is the decision appealable to the Court of Tax Appeals. Had he
categorically stated that he denies private respondent's motion for
reconsideration and that his action constitutes his final determination on the
disputed assessment, private respondent without needless difficulty would have
been able to determine when his right to appeal accrues and the resulting
confusion would have been avoided.

Oceanic Wireless Network, Inc. vs. CIR (9 December 2005)

Facts: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax
assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest
against the tax assessments and requested a reconsideration or cancellation of the same in a letter to
the BIR Commissioner.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division,
Mr. Severino B. Buot, reiterated the tax assessments while denying petitioner’s request for
reinvestigation. Said letter likewise requested petitioner to pay within 10 days from receipt thereof,
otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for
the issuance of a warrant of distraint and levy without further notice.
Upon petitioner’s failure to pay the subject tax assessments within the prescribed period, the Assistant
Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding
warrants of distraint and/or levy and garnishment.

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the
warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of
jurisdiction.

Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as
the final decision of the Commissioner of Internal Revenue on its protest because the same was signed
by a mere subordinate and not by the Commissioner himself.

With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review
with the Court of Appeals contending that there was no final decision to speak of because the
Commissioner had yet to make a personal determination as regards the merits of petitioner’s case.

The Court of Appeals denied the petition.

Issue: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was
acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA.

Held: YES. A demand letter for payment of delinquent taxes may be considered a decision on a disputed
or protested assessment. The determination on whether or not a demand letter is final is conditioned
upon the language used or the tenor of the letter being sent to the taxpayer. In this case, the letter of
demand, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on
petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from
petitioner, and requested its payment. Failure to do so would result in the “issuance of a warrant of
distraint and levy to enforce its collection without further notice.” In addition, the letter contained a
notation indicating that petitioner’s request for reconsideration had been denied for lack of supporting
documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it
was tantamount to a rejection of the request for reconsideration.
This now brings us to the crux of the matter as to whether said demand letter indeed attained finality
despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division
instead of the BIR Commissioner.

The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him
by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers
granted to him under the National Internal Revenue Code (NIRC) enumerated in Section .

As amended by Republic Act No. 8424, Section 7 of the 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 Section 204(A) and (B) of this Code, any tax deficiency:
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 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.

It is clear from the above provision that the act of issuance of the demand letter by the Chief of the
Accounts Receivable and Billing Division does not fall under any of the exceptions that have been
mentioned as non-delegable.

Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment
has the same force and effect.