Updated 22 Mar 2013

PM REYES NOTES ON TAXATION II:

REMEDIES
1. Tax Administration Q3.Describe briefly the structure of the BIR?

The BIR is under the supervision and control of the

Composition, Powers, and Duties of the
BIR
(Read Sections 2-3, 9-20, 244-246 and 290, Tax
Code)
Q1.What is the basic composition of the
BIR?
Section 3 of the Tax Code provides that the BIR shall
consist of a chief known as the Commissioner of
Internal Revenue1 and four (4) assistant chiefs to be
known as Deputy Commissioners.2 (see SECTION 3,
T AX CODE)
Q2.What are the powers and duties of the
BIR?
Department of Finance (DOF). It is headed by the
Commissioner of Internal Revenue and assisted by 6
Deputy Commissioners. Each region of the country
has a Revenue Regional Director. The country is also
divided into Internal Revenue districts headed by
Revenue District Officers.
Q4.Give some notable powers and duties of
a Revenue Regional Director?
1. Implement tax laws in the regional area
2. Administer and enforce tax laws including
assessment and collection of all internal
revenue taxes
3. Issue Letters of Authority (LOA) for the
examination of taxpayers in the region (see
SECTION 11, T AX CODE)

The powers and duties of the BIR shall comprehend:
1. The assessment and collection of all national
internal revenue taxes, fees and charges
2. The enforcement of all forfeitures, penalties
and fines connected therewith
3. Including the execution of judgments in all
cases decided in its favor by the CTA and the
ordinary courts
4. The Bureau shall give effect to and
administer the supervisory and police powers
conferred to it by this Code or other laws
(see SECTION 2, T AX CODE)
Q5.What is the authority given to a Revenue
Officer
The Revenue Officer, pursuant to a LOA, may
examine taxpayers within the jurisdiction of the
district to collect the correct amount of tax or to
recommend the assessment of any deficiency tax.
(see SECTION 13, T AX CODE)
Q6.Who promulgates revenue rules and
regulations?
The Secretary of Finance, upon recommendation of
the CIR, shall promulgate all needful rules and
regulations for the enforcement of tax laws. (see
SECTION 244, T AX CODE)

Q6.1. Give examples of revenue

1
The present Commissioner for Internal Revenue is Kim Jacinto- regulations made pursuant to
Henares.
2
Section 244 of the Tax Code
Note that under the approved BIR Rationalization Plan [June 29,
2010], the BIR shall have six (6) Deputy Commissioners to head
the following functional groups: (1) Operations Group (2) Legal and RR 14-2008 [NOVEMBER 26, 2008]
Enforcement Group (3) Information Systems Group (4) Resource Amends RR 2-98 increasing the coverage of
Management Group (5)Tax Reform Administration Group (new)
and (6) Special Concerns Group (new)
withholding tax agents required to withhold 1%

PM REYES NOTES ON TAXATION II: REMEDIES

BY PIERRE M ARTIN DE LEON REYES

Special thanks to BUTCH RAMIRO for assisting me in synthesizing the doctrines of the cases in the discussion of the jurisdiction of the CTA.
This reviewer is a compilation of personal notes in Taxation Two and notes and lectures from Atty. Gruba, Atty. Montero and Atty. Mamalateo.
References have also been made to the following books: DE LEON & DE LEON, JR. THE FUNDAMENTALS OF TAXATION (2012); DE LEON & DE
LEON, JR. COMPREHENSIVE REVIEW OF TAXATION (2010); VITUG & ACOSTA. TAX LAW AND JURISPRUDENCE (2006); DOMONDON, TAXATION VOLUME
II: INCOME TAX (2009); CO-U NTIAN, JR. TAX DIGEST (2009); MAMALATEO, REVIEWER ON TAXATION (2008). This reviewer is best used with
SACDALAN-CASASOLA, NIRC AND OTHER LAWS (2012).

Possessors are granted the right to reproduce and distribute this reviewer as well as the right to convert the work to any medium for the
purpose of preservation and/or continued distribution provided that the author’s name remains clearly associated with the work and that no
alterations of the form and content are made.
 Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
from regular supplier of goods and 2% from services and void ab initio.
from top 10,000 private corporations to top 20,000 Revenue are issuances that publish
private corporations Memorandum pertinent and applicable
Circular (RMCs) portions, as well as
RR 16-2002 [OCTOBER 11, 2002] amplifications, of laws, rules,
Amends RR4-97 on provisions relating to acceptable regulations and precedents
modes of payment of internal revenue taxes coursed issued by the BIR and other
through authorized agent banks, the recording of agencies/offices.
such payments and issuance of validated BIR- Revenue Bulletins refer to periodic issuances,
prescribed deposit slips and the control mechanisms (RB) notices and official
to deter and detect diversion of tax payments. announcements of the
Commissioner of Internal
Q7.Enumerate and define the tax-related Revenue that consolidate the
administrative issuances Bureau of Internal Revenue’s
positions of the Tax Code,
relevant tax laws and other
Revenue are issuances signed by the
issuances for the guidance of
Regulations (RRs) Secretary of Finance, upon
the public.
recommendation of the
BIR Rulings are official position of the
Commissioner of Internal
Bureau to Queries raised by
Revenue, the specify,
taxpayers and other
prescribe or define rules and
stakeholders relative to
regulations for the effective
clarification and interpretation
enforcement of the provisions
of tax laws.
of the National Internal
BIR ITAD Rulings are issued by the BIR
Revenue Code (NIRC) and
International Tax Affairs
related statutes.
Division to rule on certain
Revenue are issuances that provide
issues relating to
Memorandum directives or instructions;
interpretations of international
Orders (RMOs) prescribe guideline; and
tax treaty provision under
outline processes, operations,
which certain taxpayers or
activites, workflows, methods
transactions can avail of tax
and procedures necessary in
exemptions or preferential tax
the implementation of stated
rates.
policies, goals, objectives,
plans and programs of the
Bureau in all areas of 2. CIR’s Powers and Duties
operations, except auditing.
Revenue are rulings, opinions and (Read Sections 4-8, Tax Code)
Memorandum interpretations of the
Rulings (RMRs) Commissioner of Internal Q8.What are the powers of the CIR?
Revenue with respect to the
provisions of the Tax Code 1. To interpret tax laws and to decide cases
and other tax laws, as applied 2. To obtain information and to summon,
to a specific set of facts, with examine and take testimony of persons
or without established 3. To make assessment and prescribe
precedents, and which the additional requirements for tax administration
Commissioner may issue from and enforcement
time to time for the purpose of 4. To delegate power
providing taxpayers guidance 5. To ensure the provision and distribution of
on the tax consequences in forms, receipts, certificates, and appliances
specific situations. BIR and acknowledgment of payment of taxes
Rulings, therefore, cannot
contravene duly issued RMRs;
otherwise, the Rulings are null

PIERRE MARTIN DE LEON REYES 2


PM REYES NOTES ON TAXATION II:
REMEDIES
To interpret tax laws and decide cases
Q8.1. Differentiate the power of the CIR
to interpret tax laws and the power
to decide tax cases.
The power to interpret tax laws is under the exclusive
and original jurisdiction of the CIR, subject to the
review by the Secretary of Finance
On the other hand, the power to decide tax cases,
while vested also in the CIR, is subject to the
exclusive appellate jurisdiction of the CTA.
Q8.1.1. Can the Secretary of Finance
motu proprio review a ruling
of the CIR?
Yes. DOF ORDER NO. 007-02 [MAY 7, 2002] provides
that the Secretary of Finance may, of his own accord,
review a ruling issued by the CIR.
Q8.2. Explain the rule on non-
retroactivity of rulings
General Rule: Revenue Regulations, Rulings,
Circulars and other administrative issuances
have retroactive application
Exception: If prejudicial to the taxpayer, they
shall have retroactive application
Exception to the Exception: Even if prejudicial
to the taxpayer, they shall have retroactive effect
in the following cases –
1. The taxpayer deliberately misstates or omits
material facts
2. The facts subsequently gathered are different
from the facts on which the ruling was based
3. The taxpayer acted in bad faith
Q8.2.1. If a ruling was subsequently
found by the CIR to be null
and void, does the non-
retroactivity principle still
apply?
No. The non-retroactivity principle does not apply
when the ruling involved is null and void for being
contrary to law.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
In BIR RULING NO. 370-2011 [OCTOBER 7, 2011], the
CIR affirmed its position that the Poverty Alleviation
and Eradication Certificates (PEAce) Bonds are not
tax-exempt and subject to a 20% FWT. Previously,
2001 BIR Rulings have considered such instruments
as tax-exempt. The CIR concluded that no right has
been vested by virtue of the 2001 Rulings as they
were null and void for being contrary to law.
Q8.2.2. What is the effect of RR 5-2012
[April 5, 2012] on rulings issued
prior to January 1, 1998?
RR 5-2012 [APRIL 5, 2012] provides that all rulings
issued prior to January 1, 1998 will no longer have
any binding effect. They can no longer be invoked as
basis for any current business transaction/s or as a
basis for securing legal tax opinions and rulings.
RMC 22-2012 [MAY 7, 2012] clarified that BIR Rulings
prior to January 1, 1998 remains valid:
1. To the taxpayer who was issued the ruling
2. Covering the specific transaction which is
subject of the ruling
To obtain information, summon, examine
and take testimony of persons
Q8.3. Can the BIR obtain information
without the consent of the
taxpayer?
Yes. As ruled in FITNESS BY DESIGN V. CIR [OCTOBER
17, 2008], the BIR can obtain all relevant records and
data in the person of the taxpayer without his consent
Q8.4. Does the CIR’s power to obtain
information include the power to
inquire into bank deposits?
No as a general rule. However, the CIR is authorized
to inquire into the bank deposits of:
1. A decedent to determine his gross estate
2. Any taxpayer who has filed an application for
compromise of his tax liability under Section
204(A)(2) of the Tax Code by reason of
financial incapacity to pay his tax liability.
In addition as provided under RA 10021 (Exchange
of Information on Tax Matters Act of 2009) –
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PM REYES NOTES ON TAXATION II:
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3. Specific taxpayers subject of a request for
exchange of information by a foreign tax
authority pursuant to an international
convention or agreement on tax matters to
which the Philippines is a signatory or a party
of.3 (see RR 10-2010 [OCTOBER 6, 2010])
To make assessments and prescribe
additional requirements for tax
administration and enforcement
Q8.5. Enumerate those acts which fall
within the power of the CIR to
make assessments and prescribe
additional requirements for tax
administration and enforcement.
1. Examination of returns and determination of
tax due
2. Failure to submit required returns,
statements, reports, and other documents
3. Authority to conduct inventory-taking,
surveillance, and to prescribe presumptive
gross sales and receipts
4. Authority to terminate the taxable period
5. Authority to prescribe real estate values
6. Authority to inquire into bank deposits
7. Authority to accredit and register tax agents
8. Authority to prescribe additional procedural
or documentary requirements
Q8.5.1. When a taxpayer files his
return, can he still (1)
withdraw it; or (2) amend it?
Once filed, the taxpayer may no longer withdraw it
but he may amend it subject to the following
requirements:
1. It is made within 3 years from filing
2. No notice for audit or investigation has been
actually served to him
Q8.5.2. Explain the best obtainable
evidence rule.
The rule is that an assessment must made based on
the best evidence obtainable. In CIR V. HANTEX
T RADING [MARCH 31, 2005], the Supreme Court
opined that assessments must be based on actual
3
For income tax returns it shall be upon order of the President.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
facts. It ruled that “best evidence” includes the
corporate and accounting records of the taxpayer
who is subject of the assessment process while the
best evidence obtainable does not include mere
photocopies of records and documents. Such
photocopies have no probative value and cannot be
used as basis for any deficiency taxes against the
taxpayer.
Q8.5.3. In what instances can the CIR
terminate the taxable period of a
taxpayer?
When the taxpayer is:
1. Retiring from business
2. Intending to leave the country
3. Removing his property
4. Obstructing tax collection
Q8.5.4. Does the CIR’s power to
prescribe real estate values
include the power to unilaterally
reclassify the zonal valuation of
properties?
As held in CIR V. AQUAFRESH SEAFOODS [OCTOBER
20, 2010], the Supreme Court ruled that although the
CIR has the authority to prescribe real property
values and divide the Philippines into zones, the law
is clear that the same should be done upon
consultation with competent appraisers both from the
public and private sectors.
Q8.5.5. Who are tax practitioners/tax
agents?
RR 11-2006 [JUNE 15, 2006] defines a tax
practitioner/agent as those who are:
1. engaged in the regular preparation,
certification, audit and filing of tax returns,
information returns or other statements or
reports
2. engaged in the regular preparation of
requests for ruling, petitions for
reinvestigation, protests, requests for refund
or tax credit certificates, compromise
settlement and/or abatement of tax liabilities
and other official papers and correspondence
3. regularly appear in meetings, conferences,
and hearings before any office of the BIR
officially on behalf of a taxpayer or client in all
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PM REYES NOTES ON TAXATION II:
REMEDIES
matters relating to a client's rights, privileges,
or liabilities
Tax practitioners and agents are required to apply for
accreditation. RR 11-2006 [JUNE 15, 2006], as
amended by RR 4-2010 [FEBRUARY 24, 2010] and
RR 14-2010 [NOVEMBER 25, 2010] provide for the
guidelines on accreditation of tax practitioners/agents
as a pre-requisite for their practice and
representation before the BIR.
Q9.What powers of the CIR are non-
delegable?
1. To recommend the promulgation of rules and
regulations
2. Issuance of first impression rulings
3. Compromise or abatement if the amount is
over P500,000
4. Assign officers in charge of excisable articles
Q9.1. A is the assistant commissioner of
the BIR. Upon inquiry by ABC and
XYZ company on the applicable
excise tax rates, A signed a letter
informing ABC and XYZ of the
conduct of the survey, the results
thereof and the applicable excise
tax rates. ABC and XYZ contend
that that A acted without authority
and that it should be the CIR who
signed such issuance. Are ABC
and XYZ correct?
No. Under Section 7 of the NIRC, the CIR is
authorized to delegate to his subordinates the powers
vested in him except, among others, the power to
issue rulings of first impression. Here, the subject
matter of the letter does not involve the exercise of
the power to rule on novel issues. It merely
implemented the revenue regulations then in force
(see PARAYNO VS. LA SUERTE CIGAR AND CIGARETTE
FACTORY [JUNE 11, 2009])
Q9.2. May the CIR delegate the power to
approve the filing of tax collection
cases?
Yes. The CIR may validly delegate to subordinates
the power to approve the filing of tax collection cases
in court. In REPUBLIC VS. HIZON [DECEMBER 13, 1999],
the Supreme Court upheld the delegation of that
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
power to the Chief of Legal Division of Region IV, the
act having been likewise verified by the Regional
Director.
3. Power/Remedy of Assessment4
(Read Sections 56 and 71, Tax Code and RR
12-99)
Q10. Define “assess” for purposes of
taxation
“Assess” means to impose a tax; to charge a tax; to
declare a tax to be payable; to settle, determine or fix
the amount of tax to be paid.
Q10.1. May the CIR be compelled by
mandamus to make an
assessment?
No. In MERALCO SECURITIES CORP V. SAVELLANO [
OCTOBER 23, 1982], the Supreme Court held that
mandamus cannot lie to compel the CIR to impose a
deficiency tax assessment. The CIR’s power to
assess is a discretionary one.
Q11. How are taxes assessed? 5
1. Self-assessment – Taxpayers are required
to file tax returns for various kinds of income
earned which may be subject to tax. When a
taxpayer files the tax return, he is actually
making a self-assessment.
2. Deficiency assessment – is an assessment
made by the BIR after the conduct of an
investigation or audit when it finds that the
tax return filed by the taxpayer contains an
under-declaration of income or when the
taxpayer does not at all file a tax return6
4
The discussion here will leave out those relating to the protest of
an assessment.
5
In PNOC V. CA [APRIL 26, 2005], the Supreme Court
differentiated self-assessment and deficiency assessment in this
sense: Where tax liabilities are self-assessed, the compromise
payment shall be based on the tax return filed by the taxpayer. On
the other hand, where the BIR already issued an assessment, the
compromise payment shall be computed based on the tax due on
the assessment notice.
6
The term “deficiency” means:
1. The amount by which the tax imposed exceeds the
amount shown as the tax by the taxpayer upon his return
2. If no amount is shown as the tax by the taxpayer upon
his return, then the amount by which the tax exceeds the
amount previously assessed (or collected without
assessment)
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PM REYES NOTES ON TAXATION II:
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Q12. Describe the assessment process.
1. Assessment starts with the self-assessment
by the taxpayer of his tax liability, the filing of
his return and the payment of the tax due
shown in his return
2. Issuance of a Letter of Authority (LOA)7
3. Examination of books of accounts and other
records of taxpayers by revenue officers to
8
determine correct tax liability (Tax Audit)
4. Preparation of tentative findings and holding
of informal conference (Issuance of a Notice
of Informal Conference or NIC)9
5. Issuance of a Preliminary Assessment Notice
(PAN) which may be objected to via a
10
“Reply”
6. Issuance of a Formal Assessment Notice
(FAN) and letter of demand which may be
objected to via a “Protest”11
(see RR 12-99 [SEPTEMBER 6, 1999])12
Q12.1. What is the pay-as-you-file
system?
Section 56, Tax Code provides that, as a general
rule, the total amount of the tax shall be paid at the
time the return is filed. This is otherwise known as the
pay-as-you-file system.
Q12.2. What is a Letter of Authority
(LOA)?
The Letter of Authority is the authority given to the
revenue officer to perform assessment functions.
Q12.2.1. A LOA was issued to cover
an audit of “unverified prior
years.” Is the LOA valid?
No. A LOA should cover a taxable period not
exceeding one taxable year. The practice of issuing
LOAs covering audit of “unverified prior years” is
7
RM0 69-2010 [August 11, 2010] provides for the guidelines for
the issuance of electronic LOAs
8
RMO 5-2009 [JANUARY 22, 2009] delineates the investigating
offices that has jurisdiction to audit/ examine taxpayers.
9
If the taxpayer fails to respond within 15 days from date of receipt
of the NIC, he shall be considered in default and the case shall be
endorsed for assessment.
10
The taxpayer has 15 days to respond via a reply.
11
The taxpayer may protest administratively the formal letter of
demand and assessment notice within 30 days from receipt
thereof. This will be discussed in greater detail later.
12
This is a must read.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
prohibited. If the audit of a taxpayer shall include
more than one taxable period, the other periods shall
be specifically indicated. (see RMO 43-90
[SEPTEMBER 20, 1990].
In CIR V. SONY PHILIPPINES [NOVEMBER 17, 2010], a
Letter of Authority was issued covering the period
1997 and unverified prior years. The deficiency VAT
assessment was based on records from January to
March 1998. The Supreme Court held that the CIR
went beyond the scope of their authority as indicated
in the LOA. Further, the fact that the LOA covers
unverified prior years invalidates it and a VAT
deficiency assessment made on the basis thereof
must be disallowed.
Q12.2.2. What is a Letter Notice?
A Letter Notice (LN) is a discrepancy notice issued
by the CIR after conducting data matching
processes, informing the taxpayer of findings of
discrepancy.
A LN covers only a tax indicated therein on a given
particular period or quarter (e.g. VAT liabilities for
2002 3rd quarter)
It must be noted, however, that under RMC 40-2003
[JULY 7, 2003] and RMO 55-2010 [JUNE 15, 2010], a
LN shall be treated as a “notice of audit or
investigation” in the absence of evident error or clear
abuse of discretion. In order to expedite the
processing of LN cases, the issuance of NICs may
immediately commence, even without prior issuance
of LOAs.13
Q12.2.3. What constitutes as a valid
assessment?
Previously, it is sufficient that the taxpayer be
“notified” of the findings of the CIR. The rule now is
that the taxpayer must be “informed” of not only the
law but also of the facts on which an assessment
would be made. (see CIR V. REYES [JANUARY 27,
2006].
An assessment must be based on actual facts and
not on mere presumptions (see CIR V. BENIPAYO
[JANUARY 31, 1962])
In CIR V. PASCOR REALTY [JUNE 29, 1999], the
Supreme court held that an assessment must not
13
Thus, in this case, a LN is effectively equated to a LA.
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PM REYES NOTES ON TAXATION II:
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only contain a computation of tax liabilities but also a
deman for payment within the prescribed period.
In ADAMSON V. CA [MAY 21, 2009], at issue was
whether the CIR’s recommendation letter for the filing
of a criminal complaint against the taxpayer for
fraudulent returns and tax evasion can be considered
a formal assessment. The Supreme Court held that
such was not equivalent to a formal assessment. An
assessment is a written notice and demand may by
the BIR on the taxpayer for the settlement of a due
tax liability that is there definitely set and fixed. A
written communication containing a computation and
giving him an opportunity to contest or disprove the
findings is not an assessment since it is yet indefinite.
Q12.2.4. Does the lack of a control
number in the assessment
notice invalidate it?
No. As held in CIR V. GONZALEZ [OCTOBER 12, 2010],
the formality of a control number in the assessment
notice is not a requirement for its validity bur tather
the contents thereof which should inform the taxpayer
of the declaration of deficiency tax against the said
taxpayer.
Q12.2.5. Is an assessment presumed
to be correct and made in
good faith?
Yes. In BONIFACIO SY PO V. CTA [AUGUST 18, 1988],
the Supreme Court held that tax assessments by tax
examiners are presumed correct and made in good
faith. The taxpayer has the duty to provide otherwise.
However, that is the general rule. In CIR V. HANTEX
T RADING [MARCH 31, 2005], the Supreme Court held
that the rule does not apply when the CIR comes out
with a naked assessment (an assessment that is
without any foundation and hence, arbitrary and
capricious).
Q12.2.6. Discuss the rule that the PAN
must be issued prior to the
FAN and demand letter and
the exceptions thereto.
General Rule: The PAN must be issued by the BIR
before issuing the FAN and letter of demand.
Exceptions: A PAN is not required in the following
instances –
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
1. Assessment is purely mathematical error
2. Discrepancy between tax withheld and
remitted
3. Claim for refund is filed when it was
previously carried over (Section 76, Tax
Code)
4. Excise tax on excisable article not paid
5. Goods imported by tax-exempt entity are
sold to a taxable entity.
In CIR V. METRO STAR SUPERAMA [DECEMBER 8,
2010], where the taxpayer received only a FAN, the
Supreme Court ruled that such amounted to a denial
of due process. The taxpayer must be informed of the
facts and law upon which the assessment is made.
The law imposes a substantive, not merely a formal
requirement
4. Prescription of government’s right to
assess
(Read Sections 203 and 222-223, Tax Code)
.
Q13. How should the provisions on statute of
limitations on assessment and
collection of taxes be construed and
applied?
Such provisions should be construed and applied
liberally in favor of the taxpayer and strictly against
the government.
In CIR V. B.F. GOODRICH PHILS [FEBRUARY 24, 1999],
the Supreme Court noted that our tax laws provides
for a statute of limitations in the collection of taxes for
the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or
assessment.
Q13.1. A filed a claim for tax refund of
income tax paid in 1997. Pursuant
to Section 229 of the Tax Code, A
had two years from the filing of its
final adjusted return to file a claim
for tax refund or credit. The CIR
argued that the taxpayer had 730
days to file its claim given that
Article 13 of the Civil Code states
that a year is understood to mean
365 days. The taxpayer contended
that under the Administrative
7

PM REYES NOTES ON TAXATION II:
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Code, a year consists of 12
calendar months and having filed
the claim on the last day of the 24 th
calendar month, the claim was
filed within the prescriptive period.
Which contention is correct?
Updated 22 Mar 2013
In comparison, the right to collect the tax prescribes
in 5 years.
Q14.1. May there be a proceeding in court
when no assessment is made
within the 3 year period?

The taxpayer is correct. In CIR V. PRIMETOWN
PROPERTY [AUGUST 28, 2007], the Supreme Court
held that there exists a manifest incompatibility
between the manner of computing legal periods
under the Civil Code and the Administrative Code.
Given that the Administrative Code is the more recent
law, its treatment of a year governs the computation
of legal periods.
Q13.2. The last day of the 36th calendar
month falls on a Saturday. Can the
BIR issue the assessment on
Monday instead?
General Rule: There must be an assessment within
the 3 year period.
Exceptions: Section 222, Tax Code provides for the
following instances –
1. A false or fraudulent return is filed with intent
to evade tax
2. There is a failure to file a return
In such cases, the tax may be assessed or a
proceeding in court for collection may be filed without
assessment at any time within 10 years from
discovery of the falsity, fraud, or omission.

Yes. As held in CIR V. WESTERN PACIFIC Q14.1.1. Is there a difference between

CORPORATION [MAY 27, 1965], where the last day for a false return and a
issuing a tax assessment falls on a Saturday, it may
fraudulent return?
be validly issued the following business day pursuant
to RA 1880 which ordains that certain offices like the
BIR are not required to observe office hours on such Yes. A false return merely implies deviation from the
day. truth, whether intentional or not, while a fraudulent
return refers to an intentional evasion of tax. (see
AZNAR V. CTA [AUGUST 23, 1974])
Q13.3. Can limitations on the right to
assess and collect be presumed?
Q14.1.2. A filed his tax return in 2000.
No. As held in CIR V. AYALA SECURITIES The CIR assessed A for
CORPORATION [NOVEMBER 21, 1980], limitations upon deficiency taxes in 2004
the right of the government to assess and collect alleging fraud in its
taxes will not be presumed in the absence of clear complaint. Has the right to
legislation to the contrary and that where th assess prescribed?
government has not by express statutory territory
provisions provided a limitation upon its right to Yes. As held in REPUBLIC V. LIM DE YU [APRIL 30,
assess unpaid taxes, such right imprescriptible. 1964], it is not enough the fraud is alleged in the
complaint, it must be proven and established.
Q14. When does the government’s right to
assess prescribe? Q14.1.3. The CIR contends that seven
lots were deliberately omitted
The government’s right to assess prescribes in 3 by A in his return filed as the
years from the date of the last day of filing. representative of the heirs. A
contends that the lots were
However: excluded because one
1. If the return is filed after such date, the 3 year
belonged to one of the heirs,
period is reckoned from date of actual filing
2. If the return is filed before the last day, then three were already declared
considered as filed on last day. in the return of the surviving
spouse, and three were

PIERRE MARTIN DE LEON REYES 8


PM REYES NOTES ON TAXATION II:
REMEDIES
actually included. Is there a
deliberate intent to evade
taxes on the part of A?
No. As held in REPUBLIC V. HEIRS OF CESAR
JALANDONI [SEPTEMBER 20, 1965], the omission
as described above was not deliberate and did
not amount to fraud indicative of an intention to
evade payment of the proper tax due the
government.
Q14.2. When is the running of the period
of prescription suspended?
It is suspended when:
1. The CIR was prohibited from making the
assessment or beginning distraint/levy and
for 60 days thereafter14
2. Taxpayer requests reinvestigation which is
granted by the CIR
3. Taxpayer cannot be located in address
4. A warrant of distraint and levy is served (not
only issued) and no property could be found
5. Taxpayer is out of the Philippines
Q14.3. What is the effect if the
assessment is made beyond the
prescribed period?
Assessments made beyond the prescribed period
would not be binding on the taxpayer. (see T UPAZ V.
ULEP [OCTOBER 1, 1999]; CIR v. AYALA SECURITIES
CORPORATION [MARCH 31, 1976]
Q14.4. Is there a need to prove that the
taxpayer actually received the
assessment notice within the
prescriptive period?
No. As a general rule, the assessment is deemed
made once the notice is mailed.15 (see BASILAN
ESTATES V. CIR [SEPTEMBER 5, 1967]).
14
An example would be when an injunction is allowed under the
CTA law is availed of
15
RR 12-99 [SEPTEMBER 6, 1999] provides that if the notice to the
taxpayer is served by registered mail and no response is received
from the taxpayer within the prescribed period from date of the
posting thereof in the mail, the same shall be considered actually
or constructively received by the taxpayer. Further, if the same is
personally served and the taxpayer refuses to acknowledge receipt
thereof, the same shall be constructively reserved on the taxpayer.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
Q14.4.1. What is the exception to the
above rule?
If the receipt is disputed and for this presumption of
receipt of mail to apply, the CIR must prove that:
1. The letter was properly addressed
2. The letter was mailed; otherwise,
presumption of receipt can’t apply. (see NAVA
V. CIR [JANUARY 30, 1965])
In REPUBLIC V. CA [APRIL 30, 1987], the Supreme
Court held that a direct denial of receipt of a mailed
demand letter by the addressee shifts the burden
upon the party favored by the presumption of receipt
of letter to prove that the mailed letter was indeed
received.16
Q14.5. Will service of an assessment
notice made to the agent of the
decedent after the decedent’s
death be effective?
No. As held in ESTATE OF L ATE JULIAN DIEZ V. CIR
[JANUARY 27, 2004], service of assessment notice on
the trust officer/agent of the decedent made after the
death is invalid since at that time the legal
relationship between the principal and his agent had
been automatically severed by the death of the
principal even if the agent continued to act as such
by filing the decedent’s ITR. The fact of failure to file
a notice of death will not later this effect but will only
expose the estate to penalties and will not continue
the relationship with the agent.
Q14.6. What is the significant of the
taxpayer’s indicating in the
previous year’s ITR its new
address?
As held in CIR V. BPI AS LIQUIDATOR OF PARAMOUNT
ACCEPTANCE CORP [SEPTEMBER 23, 2003], any
service of assessment notice on the old address
subsequent to such previous year invalidates the
assessment.
Q14.7. What is the reckoning point with
respect to amended returns?
16
Also important to note in this case is the ruling that a follow-up
letter which reiterates demand for payment of taxes is considered
a notice of assessment.
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PM REYES NOTES ON TAXATION II:
REMEDIES
From the filing of the amended return if the
amendment is substantial. In CIR V. PHOENIX [MAY
20, 1965], the taxpayer filed its ITR for 1952 on 1
April 1953. It amended the said return on 30 August
1955. Thereafter, on 24 July 1958, the CIR assessed
deficiency income tax on the basis of the amended
return contending that his right to assess has not yet
prescribed inasmuch as the same was availed of
17
within 5 years from the filing of the amended return.
The Supreme Court ruled that where the deficiency
assessment is based on the amended return, which
is substantially different from the original return, the
period of limitation of the right to issue the same
should be counted from the filing of the amended
return. In this case, the changes and alterations
embodied in the amended return constituted
substantial ones and thus the CIR’s deficiency
assessment was not barred by prescription.
Q14.8. What if the return is incomplete,
will the prescriptive period to
assess run?
No. As held in REPUBLIC V. MARSMAN DEVELOPMENT
COMPANY [APRIL 27, 1972], in order that the filing of a
return may serve as a starting point of the period for
making an assessment, the return must be as
substantially complete as to include the needed
details on which the full assessment may be made.
Q14.9. Can an income tax return be
deemed a return of sales tax
purposes?
No. As held in BUTUAN SAWMILL V. CTA [FEBRUARY
28, 1966], an income tax return cannot be considered
as a return for compensating tax or sales tax
purposes. The taxpayer must file a return for the
particular tax required by law in order to avail himself
of the benefits of the law.
Q14.10. What are the requirements of a
valid waiver of the statute of
limitations?18
1. The specified period
2. Signature of the proper authority (for Php 1
million or above, the CIR must sign)
17
Note that the case was governed under the old law which
provides for 6 tears to assess and another 5 years to collect.
18
RMC No. 29-2012 [June 29, 2012] provides for the form to be
used for waiver of the defense of prescription under the Statute of
Limitations.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
3. Taxpayer must be furnished a copy of the
waiver in order to perfect the agreement
since the waiver is not a mere unilateral act
(see PHILIPPINE JOURNALISTS INC. V. CIR [DECEMBER
16, 2004]).
Q14.10.1. Can the waiver cover taxes
already prescribed?
No. As held in REPUBLIC V. LIM DE YU [APRIL 30,
1964], the waiver of the statute of limitations
executed by the taxpayer cannot be deemed to
include taxes already prescribed.
Q14.10.2. Can the doctrine of estoppel
be applied as an exception to
the statute of limitations?
No. In CIR V. KUDOS METAL CORPORATION [MAY 5,
2010], the Supreme Court held that the doctrine of
estoppels cannot be applied as an exception to the
statute of limitations on the assessment of taxes
considering that there is a detailed procedure for the
proper execution of the waiver.
4. Imposition of Penalties
(Read Section 247-252, Tax Code and RR 12-
99 and RMO 19-2007 [August 10, 2007]19)
Q15. What are the civil penalties under the
Tax Code and in what instances are
they imposable?
1. 25% surcharge, which is imposable in case
of:
a. Failure to file a return and pay tax
due thereon
b. Filing with unauthorized revenue
office
c. Failure to pay within time prescribed
in assessment notice
d. Failure to pay part of the amount
shown in ITR
2. 20% interest, which is imposable in all
abovementioned cases except letter (d).
3. 50% surcharge, which is imposable in case
of:
19
This RMO contains the Consolidated Revised Schedule of
Compromise Penalties for Violations of the Tax Code.
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PM REYES NOTES ON TAXATION II:
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a. Willful neglect to file the return within
the period prescribed
b. False or fraudulent return is willfully
made
Q15.1. Is the collection of penalty and
interest in case of delinquency
mandatory?
Yes. As held in PHILIPPINE REFINING COMPANY V. CA
[MAY 8, 1996], it is mandatory to collect penalty and
interest at the stated rate in case of delinquency.
The intention of the law is to discourage the delay in
the payment of taxes due the Government, and, in
this sense, the penalty and interest is not penal but
compensatory for the concomitant use of the funds
by the taxpayer beyond the date when he is
supposed to have paid them to the government.
Q15.2. ABC is a cement company.
Initially, the BIR ruled that cement
is a mineral product rather than a
manufactured product and is
therefore subject to ad valorem
tax, not sales tax. Subsequently,
the CIR ruled that cement is a
manufactured product and
therefore subject to sales tax. The
BIR then assessed ABC for
deficiency sales tax and imposed
the 25% surcharge. Is the 25%
surcharge imposable?
No. In CIR V. REPUBLIC CEMENT CORP [AUGUST 10,
1983], the Supreme Court noted that the 25% penalty
contemplates a case where the liability for the tax is
undisputed or indisputable. In this case, the
assessments are disputed. The dispute as to the tax
liability of Republic Cement for sales tax arose not
simply because of ordinary divergence of views in
good faith vis-à-vis the interpretation of the law, the
position of Republic Cement was founded upon the
original stand of the BIR itself that cement is a
mineral product. Under such circumstances, the 25%
surcharge imposition must be deleted.
Q15.3. What is the nature of the fraud
contemplated in the act of making
a fraudulent return which would
subject the taxpayer to a 50%
surcharge?
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
In CIR V. AIR INDIA [JANUARY 29, 1988], the Supreme
Court explained the fraud contemplated by the law in
this way: “It must be intentional fraud, consisting of
deception willfully and deliberately done or resorted
to in order to induce another to give up some legal
right. Negligence, whether slight or gross, is not
equivalent to the fraud with intent to give up some
legal right. Negligence, whether slight or gross, is not
equivalent to the fraud with intent to evade the tax
contemplated by the law. It must amount to
intentional wrongdoing with the sole object of
avoiding the tax.”
Q15.4. When may interest on deficiency
tax be waived?
When the assessment is highly controversial as in
the case of CAGAYAN ELECTRIC POWER & LIGHT CO. V.
CIR [SEPTEMBER 25, 1985], where there was a
withdrawal of its exemption from income tax and a
subsequent reinstatement of such exemption. Thus,
non-payment during the short time when the taxpayer
was exempt was not subjected to interest payment.
Examples on Civil Penalty Impositions
Q15.5. If a taxpayer who files a return
subsequently realizes that the
return filed was insufficient, will
his amended return be subject to
the 25% surcharge?
No. As long as the taxpayer files the amended return
before the lapse of any demand by the BIR to pay his
deficiency assessment, the taxpayer is not liable for
any surcharge.
Q15.6. Taxpayer A filed and paid taxes on
April 15, 2009 worth 5 million. On
May 15, 2009, he realized he
should have paid 6 million and
thus pays the additional 1 million.
Is A subject to the 25% surcharge?
No. None of the violations mentioned was committed
by the taxpayer.
Q15.7. Taxpayer B filed and paid taxes on
April 15, 2009 worth 5 million. On
May 15, 2009, the BIR issued an
assessment and required B to pay
an additional 1 million on or before
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PM REYES NOTES ON TAXATION II:
REMEDIES
June 15, 2009. If B pays before
June 15, 2009, is he subject to the
25% surcharge?
No. None of the violations mentioned was committed
by the taxpayer.
Q15.8. Taxpayer C did not file any return
nor pay any taxes on April 15,
2009. On May 15, 2009, he realized
he should have paid 6 million and
thus pays the whole 6 million. Is
he subject to the 25% surcharge?
Yes. Taxpayer C failed to file a return and pay the tax
due thereon which is the first type of act which
requires a 25% surcharge imposition.
Q15.9. Taxpayer D filed and paid taxes on
April 15, 2009 worth 10 million. On
May 15, 2009, the BIR issued an
assessment and required D to pay
an additional 5 million on or before
June 15, 2009. If D pays before
June 15, 2009, is he subject to any
surcharge?
Yes. Taxpayer D will be subject to the 50% surcharge
since (a) he failed to pay within the time prescribed in
the notice of assessment; and (b) the under
declaration is 50% or in excess of the 30% threshold
which raises the prima facie presumption of a false or
fraudulent return. As such allegation is only prima
facie, it may be rebutted.
5. Criminal Action and other penalties
(Read Sections 253-280, Tax Code)
Q16. Does the dismissal of a civil acion carry
with it the dismissal of the civil aspect
of tax collection?
No. The proceedings in tax cases are different since
the tax liability is not deemed included in criminal
cases filed. In REPUBLIC V. PATANAO [JULY 21, 1967],
the Supreme Court held that since the taxpayer’s civil
liability is not included in the criminal action, his
acquittal in the criminal proceeding does not
necessarily entail exoneration from his liability to pay
taxes. His legal duty to pay taxes cannot be affected
by his attempt to evade taxes. Said obligation is not a
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
consequence of the criminal act charged nor is it a
mere civil liability arising from a crime that could be
wiped out by judicial declaration of non-existence of
the criminal acts charged.
Q17. Should the filing of a criminal complaint
be preceded by assessment?
No. In case of a false or fraudulent return,
proceedings in court may be commenced without an
assessment since under the Tax Code, civil and
criminal aspects may be pursued
In UNGAB V. CUSI [MAY 30, 1980]¸the Supreme Court
held that while there can be no civil action to enforce
collection before the assessment procedures
provided in the Tax Code have been followed, there
is no requirement for the precise computation and
assessment of the tax before there can be a criminal
prosecution under the Tax Code.
This was clarified further in CIR V. PASCOR REALTY
AND DEVELOPMENT CORP. [JUNE 29, 1999], the
taxpayer argued that a tax assessment should
precede a criminal indictment. The Supreme Court
disagreed. The Court noted that Section 222 of the
Tax Code specifically states that in cases where a
false or fraudulent return is submitted or in cases of
failure to file return, proceedings in court may be
commenced without an assessment. Further, Section
205 provides that the civil and criminal aspects may
be pursued simultaneously. An assessment is not
necessary before a criminal charge can be filed and
such criminal charge need only be supported by a
prima facie showing of failure to file a required
20
return.
This was likewise reiterated in Adamson v. CA [May
21, 2009] where the Court held that there is no need
for precise computation and formal assessment in
order for criminal complaints can be filed against the
taxpayer. An assessment is not necessary for a
criminal prosecution for willful attempt to defeat and
evade the income tax.
Q18. What are the elements of a violation of
Section 255 of the Tax Code for failure
to make or file a return?
1. The accused is a person required to make or
file a return
20
The Court also stressed that a criminal complaint is instituted not
to demand payment, but to penalize the taxpayer for violation of
the Tax Code.
12
 Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
2. The accused failed to make or file the return punishment of the tax offense
at the time required by law involving a fraudulent return
3. The failure to make or file the return was before the 5-year prescriptive
willful period begins?

(see PEOPLE V. KINTANAR [CTA CRIM . CASE NO. 006, Yes. In LIM, SR. V. CA [OCTOBER 18, 1990], the
DECEMBER 3, 2010]) Supreme Court held adopted the view of the Solicitor
General to the effect that, in addition to the fact of
Q18.1. Define “willful” in the context of discovery, there must be a judicial proceeding for the
the third element of a violation of investigation and punishment of the tax offense
the Tax Code for failure to make before the five-year limiting period begins. Also,
or file the return?
Q19.2. In what instances is the
In PEOPLE V. KINTANAR [CTA CRIM . CASE NO. 006, prescriptive period interrupted?
DECEMBER 3, 2010, affirmed by the Supreme Court
in a minute resolution [G.R. 196340] dated 1. When proceedings are instituted against the
February 2012], the Supreme Court defined “willful” guilty persons (and shall run again if the
in this light: “willful in the tax crimes statutes means proceedings are dismissed for reasons not
voluntary, intentional violation of a known legal duty, constituting jeopardy)
and bad faith or bad purpose need not be shown. 2. When the offender is absent from the
Further, the Supreme Court stated that an act or Philippines
omission is "willfully" done if done voluntarily and
intentionally and with specific intent to do something 7. Informer’s Reward
the law forbids, or with specific intent to fail to do
something the law requires to be done; that is, with
(Read Section 282, Tax Code)
bad purpose to either disobey or disregard the law. A
willful act may be described as one done
intentionally, knowingly and purposely, without Q20. What is the reward given to persons
justifiable excuse.” instrumental to the discovery of
violations of the Tax Code?
6. Prescription of Criminal Action
A sum equivalent to 10% of the revenues,
surcharges, or fees recovered and/or fine or penalty
(Read Section 281, Tax Code)
imposed and collected or P1 million, whichever is
lower.
Q19. What is the prescriptive period for
violations of the Tax Code? Entitlement to
Informer’s Reward
All violations of any provision of the Tax Code shall The offender offered to Yes
prescribe after 5 years. compromise
No revenue, surcharges or No
Q19.1. When does the prescriptive fees were actually
period begin? recovered
The information refers to No
Prescription shall begin to run from: case already pending or
previously investigated
1. The day of the commission of the violation
2. If the same is not known, from the discovery Q20.1. Who are disqualified from
and the institution of judicial proceedings for availing of the informer’s
its investigation and punishment. reward?
Q19.1.1. In addition to discovery, must 1. A BIR official or employee or any other
there be a judicial proceeding incumbent public official or employee;
for the investigation and

PIERRE MARTIN DE LEON REYES 13

 Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
2. Relative within the sixth (6th) civil degree of and executory assessments for
consanguinity of a BIR official or employee, taxes, fees, charges and
or other public official or employee; and penalties?
3. Though already retired or otherwise
separated from service, BIR officials or 1. The CTA if the principal amount of taxes and
employees or other public officials who fees, exclusive of charge and penalties is
acquired the information in the course of the Php 1 million and above.
performance of their duties during their 2. The proper MTC or RTC if the principal
incumbency. (see RR 16-2010 [NOVEMBER amount of taxes and fees, exclusive of
25, 2010])
charge and penalties, is less than Php 1
million.
9. Power/Remedy of Collection
Q22.1.1. Assuming that the principal
Q21. What are the remedies available for the amount of taxes and fees is less
collection of taxes? than Php 1 million, can the lower
court acquire jurisdiction over a
1. Tax Lien21 a tax collection case while there
2. Compromise22 is a pending case in the CTA
3. Distraint of goods disputing the assessment?
4. Levy of real property
5. Civil or criminal action No. As held in YABES V. FLOJO [JULY 20, 1982], the
6. Forfeiture Supreme Court held that the lower court can acquire
7. Suspension of business operations jurisdiction over a claim for collection of deficiency
8. Enforcement of administrative fines taxes only after the assessment made by the CIRT
has become final and unappealable, not where there
The remedies may be resorted to all at the same time is still a pending CTA case.
but distraint of goods and levy of real property is not
available if less than 100 pesos. Q22.2. When an assessment has
become final for failure to
Collection in cases where assessment protest, can the taxpayer still
has become final and appealable raise the issue of prescription?

(Read Section 205, Tax Code) Yes. As held in CIR V. HAMBRECHT & QUIST
PHILIPPINES [NOVEMBER 17, 2010], the Supreme
Court held that the fact that an assessment has
Q22. What is the effect of the failure of the become final for failure of the taxpayer to file a
taxpayer to appeal the denial of the protest within the time allowed only means that the
protest by the CIR to the CTA in due validity or the correctness of the assessment may no
time? longer be questioned on appeal. However, the
validity of the assessment itself is a separate and
Failure of the taxpayers to appeal to the CTA in due distinct issue from the issue of whether the right of
time make the assessments in question, final, the CIR to collect the validly assessed tax has
executory and demandable. (see DAYRIT V. CRUZ prescribed.
23
[SEPTEMBER 26, 1988]).
Q22.3. May an assessment for
Q22.1. Which court has exclusive deficiency estate tax attain
original jurisdiction in tax finality when there is a pending
collection cases involving final case in the probate court?

21 Yes. In MARCOS II V. CA [JUNE 5, 1997], the Supreme

See Section 209, Tax Code
22
See Section 204, Tax Code Court held that the approval of the probate court is
23
The Court also stated that a suit for collection of internal revenue not a mandatory requirement in the collection of
taxes where the assessment has already become final and estate taxes. In this case, the estate tax assessment
executory is akin to an action to enforce judgment.

PIERRE MARTIN DE LEON REYES 14


PM REYES NOTES ON TAXATION II:
REMEDIES
had become final and unappealable by the failure of
the taxpayer to contest or appeal the assessment
made. The deficiency tax assessment, being final,
executory, and demandable may now be collected.
Q23. Is a decision on a request for
reinvestigation a condition precedent to
the filing of an action of taxes already
assessed?
No. In REPUBLIC V. LIM T IAN T ENG SONGS & CO
[MARCH 31, 1966], the Supreme Court ruled that a
decision on a request for reinvestigation is not a
condition precedent to the filing of an action of taxes
already assessed. Nowhere in the Tax Code is the
CIR required to rule first on a taxpayer’s request for
reconsideration before he can go to court for the
purpose of collecting the tax assessed.
The requirement to rule on disputed assessments
before bringing action for collection is applicable only
on where the assessment was actually disputed,
adducing reasons in support thereto. In this case, the
taxpayer did not actually contest the assessment by
stating the basis thereof. (see DAYRIT V. CRUZ
[SEPTEMBER 26, 1988])
Tax Lien
(Read Section 219, Tax Code)
Q24. Does the tax lien follow the property
subject to the tax into the hands of a
third party when at the time of transfer,
no demand had been made and the
purchaser had no notice of the
existence of the lien?
No. In HSBC V. RAFFERTY [NOVEMBER 15,
1918], the Supreme Court held that a business
of ordinary prudence could not be expected to
foresee that the property which he had teken in
satisfaction of a debt was burdened by a tax.
Because no demand had been made and
because the business had no notice of the tax,
there was no valid subsisting lien upon the
ties.24
24
It must be noted that Section 219 of the Tax Code provides that
the lien shall not be valid against any mortgagee, purchaser or
judgment creditor until notice of such lien shall be filed by the CIR
in the Office of the Register of Deeds of the province or city where
the property of the taxpayer is situated or located.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
Q25. The CIR served a warrant of distraint
over four barges owned by ABC
Company to satisfy various deficiency
taxes. Later, the same four barges were
levied upon execution to satisfy a
judgment for unpaid wages and other
benefits of the employees of ABC
Company. Which claim is superior?
The claim of the government is superior. As held in
CIR v. NLRC [November 9, 1994] reiterating the
doctrine laid down in REPUBLIC V. ENRIQUEZ
[OCTOBER 21, 1988], the claim of the government
predicated on a tax lien is superior to the claim of a
private litigant predicted on a judgment. The tax lien
attaches not only from the service of the warrant of
distraint of personal property but from the time the tax
had become due and payable. In both cases, the
distraint was made long before the writ of execution
was issued to implement the levy on execution.
Compromise & Abatement
(Read Section 204, Tax Code, RR 30-2002 [for
compromise], RR 13-01 [for abatement])25
Q26. What is a compromise?
A compromise is an agreement whereby the parties,
by making reciprocal concessions, avoid litigation or
put an end to one already commenced (see ART.
2208, CIVIL CODE)
Q26.1. Can a compromise be made after
final judgment?
No. In Rovero v. Amparo [May 5, 1952], the
Supreme Court stressed that a compromise is
resorted to, to avoid litigation or to end a suit already
instituted. There can no longer be a compromise at a
stage of judicial proceedings where a final judgment
has already been rendered because there is nothing
to compromise as the Government has definitely and
finally won the litigation.
Q26.2. What are the grounds for the
compromise of payment of
internal revenue taxes?26
25
RMO 20-2007 [AUGUST 13, 2007] provides for the guidelines for
the simplified processing of applications for compromise and
abatements.
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PM REYES NOTES ON TAXATION II:
REMEDIES
1. Doubtful validity of the assessment
2. Financial incapacity
Q26.3. What are the minimum amounts
for compromise settlements?
1. For cases of financial incapacity, the
minimum compromise rate is 10% of the
basis assessed tax.
2. For other cases (including doubtful validity),
the minimum compromise rate is 40% of the
basic assessed tax.
Q26.3.1. Can the compromise offer of a
taxpayer be lower than the
prescribed rates?
Yes, but the approval by the Evaluation Board which
is composed of the CIR and the 4 Deputy
Commissioners is required.
Q26.4. Can a void assessment serve as
basis for a compromise?
No. As held in CIR V. REYES [JANUARY 27, 2006], the
Supreme Court reiterated that an assessment that
fails to inform the taxpayer of the law and the facts on
which it is made is void. As a corollary, a void
assessment cannot in turn be used as basis for
perfection of a tax compromise.
Q26.5. Can criminal violations of the
Tax Code be compromised?
Yes, except (a) those already filed in court and (b)
those involving fraud.
Q27. What is abatement?
An abatement is a diminution or decrease in the
amount of tax imposed such that to abate is to nullify
or reduce in value or amount.
Q27.1. How is it different from a 27 27
compromise?
A compromise is marked by mutual concessions,
whereas in abatement or cancellation, no mutual
concessions between the taxpayer and the CIR are
26
Refer to RR 30-2002 [December 16, 2002] for the instances
where the tax can be compromised under these two grounds.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
made (see PEOPLE V. SANDIGANBAYAN [AUGUST 16,
2005].
Q27.2. What are the grounds for
abatement?27
1. If the assessment is excessive or erroneous
2. If the administration costs involved do not
justify the collection of the amount due
Civil Remedies for Collection (Distraint &
Levy)
(Read Section 205-217, Tax Code)
Q28. In what instances can the CIR place
under constructive distraint28 the
property of a taxpayer?
1. Delinquent taxpayer
2. Taxpayer is retiring from any business
subject to tax
3. Taxpayer is intending to leave the Philippines
4. Taxpayer is intending to remove his property
therefrom
5. Taxpayer is intending to hide or conceal his
property
6. Taxpayer is intending to perform any act
tending to obstruct the proceedings for
collecting the tax due or which may be due
from him
(see SECTION 206, T AX CODE; RMO 42-2010 [MAY 4,
2010])
Q29. When can there be (a) distraint and (b)
levy?
1. For distraint – upon failure of the person
owing any delinquent tax or delinquent
revenue to pay the same at the time required
Refer to RR 13-2001 [September 27, 2001] for the instances
where the tax can be compromised under these two grounds. Note
that RR 13-2001 was amended by RR 4-2012 [March 28, 2012].
Previously, one of the instances is when there is late payment of
the tax under meritorious circumstances. One day late filing and
remittance due to failure to beat bank cut-off time fall under this
instance in RR 13-2001. RR 4-2012 deleted the same.
28
In a constructive distraint, the taxpayer or any person having
possession or control of the property will sign a receipt covering
the property distrained and obligate himself to preserve the same
intact and unaltered and not to dispute the same without authority
from the CIR.
16
 Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
2. For levy – after the expiration of the time
required to pay the delinquent tax or 10. Prescription of government’s right to
delinquent revenue and after the distraint of collect
the property
(Read Section 203, and 222-223, Tax Code)
Q30. When can warrants of distraint and
garnishment and/or levy on disputed Q32. When may collection of taxes be
assessments finally decided by the BIR made?30
against the taxpayer and on
assessments upheld by the CTA be It may be made within 5 years from assessment.
issued and served ?
Q32.1. Summarize the prescriptive
1. For disputed assessments finally decided by periods for the collection of taxes.
the BIR, upon issuance of the CIR or
Regional Director of the final decision on the
Regular ITR No ITR, False ITR,
disputed assessment
Fraudulent ITR
2. For assessments upheld by the CTA, upon
Collection w/ prior assessment
issuance by the CTA in division or En Banc
of its decision Assess within 3 years Assess within 10 years
from actual filing or last from discovery of fraud,
(see RMO 39-07 [DECEMBER 12, 2007]) day to file, whichever is falsity or omission
later
Injunction Collect within 5 years Collection within 5 years
from date of assessment from date of assessment
(Read 218, Tax Code) by summary or judicial by summary or judicial31
Collection w/o prior assessment
Q31. Can an injunction be issued to restrain Cannot be done anymore Collection within 10 years
the collection of any internal revenue because there must be from date of discovery of
tax, fee or charge? an assessment before the falsity, fraud,
collection in the case of a omission by judicial
General Rule: No court can issued an injunction, as regular ITR proceedings only.
provided under Section 218, Tax Code.29
Q32.1.1. What are the alternatives of the
Exception: Section 11, RA 9282 provides that an CIR in cases of a false,
injunction may be issued by the CTA to restrain the fraudulent return or the failure to
collection of taxes “when in the opinion of the Court file a return in terms of
the collection may jeopardize the interest of the collection?
Government and/or the taxpayer, the Court at any
stage of the proceeding may suspend the said As held in REPUBLIC V. RET [MARCH 31, 1962],32 the
collection and require the taxpayer either to deposit CIR has two alternatives:
the amount claimed or to file a surety bond for not
more than double the amount with the Court.” 1. Assess the tax within 10 years from the
discovery of the falsity, fraud or failure and
TROs and injunctions issued by courts other than the then collect within 5 years by judicial or
CTA against the BIR should be annulled and summary proceedings
cancelled for lack of jurisdiction [see RMO 042-10
[MAY 4, 2010].)
30
Refer to Q14.3
31
The rule is to the effect that once there is already an
29
Note however that as held in ANGELES CITY V. ANGELES assessment, the period to collect is always 5 years even if the
ELECTRIC CORPORATION [JUNE 29, 2010], the prohibition on the return is fraudulent, false, or was not filed.
32
issuance of a writ of injunction to enjoin the collection of taxes is In the said case, the Supreme Court noted that Section 332 (no
applied only to national internal revenue taxes, not to local taxes. w Section 222) does not apply in the collection of income taxes by
However, the Supreme Court noted that such injunctions enjoining summary proceedings. But when the collection of income taxes is
the collection of local taxes are frowned upon. to be effected by court action, the provision is controlling.

PIERRE MARTIN DE LEON REYES 17


PM REYES NOTES ON TAXATION II:
REMEDIES
2. Do not assess and instead collect the tax
without assessment within 10 years from the
discovery of the falsity, fraud or failure by
judicial proceedings only.
Thus, when there is an assessment, the 10 year
period to collect from discovery of falsity, fraud, and
failure is not applicable.
Q32.2. The CIR maintains that the
prescription of his right to collect
the amount of deficiency taxes is
governed by Article 1145 of the
Civil Code, which gives him 6
years. Is the CIR correct?
No. As held in GUAGUA ELECTRIC LIGHT COMPANY V.
CIR [APRIL 24, 1967], the right to assess and collect
is governed by the Tax Code and not by Article 1145
of the Civil Code. A special law (Tax Code) shall
prevail over a general law (Civil Code).
Q32.3. Can the prescriptive period to
collect be waived?
Yes, provided the requirements of a valid waiver are
present:
1. Specified period
2. Signed by the proper authority (for 1 million
or above, the CIR must sign)
3. Taxpayer must be furnished copy of the
waiver in order to perfect the agreement
since waiver is not a mere unilateral act.
Q32.3.1. A tax was assessed in
September 27, 1999. The CIR
filed a suit to collect deficiency
taxes in December 27, 2009. The
CIR claims that there was a
waiver of the 5-year prescriptive
period and presented a waiver
dated December 17, 2005. Is the
waiver valid?
No. As held in REPUBLIC V. ABECEDO [MARCH 29,
1968], the waiver must be executed within the 5 year
period. A waiver executed beyond the five-year
limitation is in effective and, as such, the CIR can no
longer revive the right of action.
Q32.3.2. What is effect of the failure of
the waiver to bear the written
consent of the CIR?
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
In CIR V. CA [FEBRUARY 25, 1999], the Supreme
Court reiterated that waiver of the five-year
prescriptive period must be in writing and signed by
both the BIR Commissioner and the taxpayer. Hence,
a waiver which does not have the consent of the CIR
is invalid and without any binding effect.
Q32.3.3. How should the waiver be
construed when the specified
period in the waiver refers to
both assessment and
collection?
If the waiver refers to both assessment and collection
and interpreting such will in effect shorten the
collection period, then such waiver is deemed to refer
to assessment only and not collection (see REPUBLIC
V. LIM DE YU APRIL 30, 1964])
Q32.4. Is the government barred by
prescription from claiming
deficiency taxes against an
estate?
No. In VERA V. FERNANDEZ [MARCH 30, 1979], the
Supreme Court held that claims for taxes are
collectible even after distribution of decedent’s estate
among his heirs who are liable in proportion of their
share in the inheritance to the payment of taxes.
Claims for taxes against the estate are excepted from
the statute of non-claims and are not barred forever.
Q32.5. Can a letter of demand be deemed
an assessment such that the 5-
year period for collection shall
commence from the time such
letter was sent?
Yes. In REPUBLIC V. LIMACO & DE GUZMAN [AUGUST
31, 1962], the Supreme Court held that a letter of
demand should be deemed an assessment if it
declares and fizes th tax to be payable against the
party liable thereto and demands the settlement
thereof. Hence, the 5-year period for collection of the
tax due should commence anew from time said letter
of demand was sent to the taxpayer.
Q32.6. What is the effect of pendency of
appeal on the running of the
prescriptive period?
Under SECTION 223 OF THE T AX CODE, the running of
the prescriptive period to collect deficiency taxes
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PM REYES NOTES ON TAXATION II:
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shall be suspended for the period during which the
CIR is prohibited from beginning a distraint or levy or
instituting a proceeding in court and for 60 days
thereafter.
In REPUBLIC V. KER & CO. [SEPTEMBER 29, 1966], the
Supreme Court held that the pendency of a
taxpayer’s appeal has the effect of temporarily
staying the hands of the CIR. The running of the
prescriptive period is suspended.
In PROTECTOR’S SERVICES V. CA [APRIL 12, 2000], the
Supreme Court held that the act of a taxpayer in filing
a petition before the CTA to prevent the collection of
the assessed deficiency tax and in elevating the case
to the Supreme Court for review after the CTA
dismissed the petition suspended the running of the
statute of limitations.
Q32.7. An informer filed a case with the
CTA against the taxpayer and BIR.
The informer was seeking to (1)
declare the taxpayer as having an
assessment; and (2) as a
consequence, to collect his
informer’s reward. This case was
filed by the informer within 3 years
from the time that the taxpayer
filed his return. However, apart
from this action initiated by the
informer, no other action was filed
by the government seeking to
collect against the taxpayer. Has
the right to collect already
prescribed?
No. In PNOC V. CA [APRIL 26, 2005], the Supreme
Court held that the BIR is deemed to be compliant
with the requirement that collection be made within
the 5 years from time of assessment since if the
informant won, the CTA would have ordered the
erring parties to pay the tax. At the very least, the
filing by the informer of the case would have
suspended the running of the period because the BIR
is prohibited from making collection because there
was a pending case.
Q32.8. What is the effect or a 33
reinvestigation on the period to
collect?
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
The period utilized for reinvestigation is deducted
from the period within which to collect. (see REPUBLIC
33
V. LOPEZ [MARCH 30, 1963])
Q32.8.1. Can a taxpayer invoke the
defense of prescription when he
made repeated requests for
reinvestigation and repeated
requests for extension of time to
pay?
No. As held explained by the Supreme Court in
REPUBLIC V. ARCACHE [FEBRUARY 29, 1964]: “While
we may argue with the Court of Tax Appeals that a
mere request for re-examination or re-investigation
may not have the effect of suspending the running of
the period of limitation for in such a case there is
need of a written agreement to extend the period
between the Collector and the taxpayer, there are
cases however where a taxpayer may be prevented
from setting up the defense of prescription even if he
has no previously waived it in writing as when by his
repeated requests or positive acts the Government
has been, for good reasons, persuaded to postpone
collection to make him feel that the demand was not
unreasonable or that no harassment or injustice is
meant by the Government.
Q32.8.2. What happens if the CIR does
not consider or act upon the
request for reinvestigation?
As there was no evidence that the request was
considered or acted upon, it did not suspend the
running of the period for filing an action for collection
(see REPUBLIC V. ABECEDO [MARCH 29, 1968])
In BPI v. CA [OCTOBER 17, 2005] as reiterated in BPI
V. CA [M ARCH 17, 2008], the Supreme Court
emphasized that the BIR must first grant the request
for reinvestigation as a requirement for the
suspension of the statute of limitations.
Q32.8.3. What is the difference between a
request for reinvestigation and a
request for reconsideration for
purposes of tolling the running
Example: If the assessment was made on 1/1/2000 and the
collection was made on 1/1/2006 but it was shown that from
1/1/2000 to 1/1/2003 or a period of 2 years that the assessment
was being reinvestigated, the action to collect has not yet
prescribed since deducting the 2 year period when reinvestigation
was made will only amount to 4 years and is thus still within the 5
year period to collect.
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PM REYES NOTES ON TAXATION II:
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of the prescriptive period to
collect?
A request for reconsideration is a reevaluation on the
basis of existing records whereas a reinvestigation is
a reevaluation on the basis of newly-discovered or
additional evidence. It is the request for
reinvestigation acted upon which suspends the
prescriptive period to collect. (see BPI V. CIR
[OCTOBER 17, 2005]; CIR V. PHILIPPINE GLOBAL
34
COMMUNICATIONS [OCTOBER 31, 2006])
11. Taxpayer’s Remedies
Protest
(Read Section 228, Tax Code and RR 12-99)
Q33. Outline the steps in disputing an
assessment starting from the filing of
the return until the appeal to the
Supreme Court.
1. Filing of the Return - period begins on date
of filing or last day required by law,
whichever is later)
2. Issuance of LA – served to the taxpayer
within 30 days from issuance
3. Audit – within 120 days from date of receipt
of LA by taxpayer
4. Notice of Informal Conference – taxpayer
submits explanation within 15 days from
receipt of notice
5. Preliminary Assessment Notice (PAN)35 –
taxpayer submits reply within 15 days from
receipt of notice
6. Final Assessment Notice
7. Taxpayer files protest – within 30 days from
receipt of FAN and Formal Notice of Demand
8. Relevant supporting documents – 2012])
submitted within 60 days from filing of letter
of protest
9. CIR’s denial of protest or inaction for 180
days
10. Appeal to CTA Division – within 30 days
from date of receipt of CIR’s denial or from
the lapse of 180 days of inaction counted
from submission of documents to CIR. CTA
34
The ruling in CIR V. CAPITOL SUBDIVISION [APRIL 30, 1964] to the
effect that the prescriptive period to collect a deficiency tax is
interrupted when there is a request for review or reconsideration is
no longer controlling.
35
when PAN is not required, from filing of return, a final
assessment notice will be issued.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
Division has to decide the case within 30
days after submission for decision. Motion for
Reconsideration or New Trial to CTA Division
within 15 days from receipt of decision.
11. Appeal to CTA En Banc – within 15 days
from receipt of resolution. Motion for
Reconsideration to the CTA En Banc within
15 days from receipt of decision
12. Appeal to the SC – within 15 days from
receipt of resolution under Rule 45
Q33.1. What is the nature of the
requirement that the assessment
must first state the facts and the
law on which the assessment is
based?
Such is not merely a procedural requirement but a
substantive requirement which determines the
taxpayer’s ability to protest. Thus, the same must be
complied with otherwise the assessment is void.
Thus, assessment notices which only have
computations are invalid. This is the reason why the
new Tax Code provides that the taxpayer be
informed and not merely notified. Given that this new
rule benefits the taxpayer, the same may be applied
retroactively (CIR V. AZUCENA REYES [JANUARY 27,
2006]
In CIR V. GONZALEZ [OCTOBER 13, 2010],36 the
Supreme Court reiterated that the assessment must
state the fact, the law, the rules and regulations or
jurisprudence on which the assessment is based,
otherwise the assessment shall be void
(see also CIR V. METRO STAR SUPERAMA [DECEMBER
8, 2010] and CIR v. ENRON SUBIC POWER
CORPORATION [JANUARY 19, 2009]; FLUOR DANIEL
PHILIPPINES V. CIR [CTA CASE NO. 7793, APRIL 17,
Q33.2. Is the requirement that the appeal
of the decision of the CIR to the
CTA be brought within 30 days
jurisdictional?
In RCBC V. CIR [JUNE 16, 2006], the Supreme Court
held that while the right to appeal a decision of the
36
Further, 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.
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PM REYES NOTES ON TAXATION II:
REMEDIES
CIR to the CTA is merely a statutory remedy,
nevertheless the requirement that it must be brought
within 30 days is jurisdictional. If a statutory remedy
provides as a condition precedent that the action to
enforce it must be commenced within a prescribed
time, such requirement is jurisdictional and failure to
comply may be raised in a motion to dismiss.
Q33.3. What happens if the protest is not
acted upon within 180 days by the
CIR?
The taxpayer adversely affected by the inaction may
appeal to the CTA within 30 days from the lapse of
the 180-day period from submission of the
documents. (see CIR V. FIRST EXPRESS PAWNSHOP
COMPANY, INC [JUNE 16, 2009]).
In RCBC V. CA [APRIL 24, 2007], the Supreme Court
stated that in case the CIR fails to act on the disputed
assessment within the 180-day period from date of
submission of documents, the taxpayer can either:
1. file a petition for review with the CTA within
30 days after the expiration of the 180 day
period
2. await the final decision of the CIR on the
disputed assessment and appeal such final
decision to the CTA within 30 days after
receipt of a copy of such decision
However, after availing of the first option (filing of the
petition for review) which was however filed out of
time, a taxpayer cannot successfully resort to the
second option (await final decision and appeal the
same to the CTA) on the pretext that there is yet no
final decision on the disputed assessment because of
the CIR’s inaction. (see also LASCONA LAND V. CIR
[MARCH 5, 2012])
Refund
(Read Sections 72, 204, and 229-23, Tax Code)
Q34. Outline the steps for tax refund/credit of
erroneously or illegally collected
internal revenue tax (except VAT)
1. Payment – period begins on the date of
payment of tax or penalties regardless of any
supervening cause
2. Administrative claim within 2 years from
payment – filed with the CIR
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
3. Submission of additional and relevant
support documents – within 60 days from
filing of claim
4. Appeal to CTA Division – within 30 days
from receipt of notice of denial or from
inaction of the CIR37 counted from
submission of documents. Appeal should
always be within the 2 years prescriptive
period. Motion for Reconsideration or New
Trial to CTA Division within 15 days from
receipt of decision.
5. Appeal to CTA En Banc – within 15 days
from receipt of resolution. Motion for
Reconsideration to the CTA En Banc within
15 days from receipt of decision
6. Appeal to the SC – within 15 days from
receipt of resolution under Rule 45
Q34.1. Are the steps provided above
applicable to the refund/credit of
VAT?
No. For the tax refund/credit of VAT, the steps are as
follows:
1. Filing and Payment
2. Administrative claim within 2 years –
counted from the close of the taxable quarter
when the relevant sales were made
37
Montero says that the CIR must act within a period of 120 days.
That period, however, is found in Section 112(A) which applies to
VAT refunds. Further, the 180 day period provided in Section 228
applies to a protest. The better view is to follow the 120 days as
that governs refunds. In any case, Section 3(A)(2), Rule 4 of the
Revised Rules of the CTA provides that “Provided, that in case of
disputed assessments, the inaction of the Commissioner of
Internal Revenue within the one hundred eighty day-period under
Section 228 of the National Internal revenue Code shall be
deemed a denial for purposes of allowing the taxpayer to appeal
his case to the Court and does not necessarily constitute a formal
decision of the Commissioner of Internal Revenue on the tax case;
Provided, further, that should the taxpayer opt to await the final
decision of the Commissioner of Internal Revenue on the disputed
assessments beyond the one hundred eighty day-period
abovementioned, the taxpayer may appeal such final decision to
the Court under Section 3(a), Rule 8 of these Rules; and
Provided, still further, that in the case of claims for refund of
taxes erroneously or illegally collected, the taxpayer must file
a petition for review with the Court prior to the expiration of
the two-year period under Section 229 of the National Internal
Revenue Code. Thus, it is submitted that whether we follow the
120 day or 180 period is irrelevant as the taxpayer may already
appeal to the CTA even if such periods have not yet expired
provided that the 2 year period is about to lapse and not decision
as yet been given.
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PM REYES NOTES ON TAXATION II:
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3. Submission of additional and relevant
support documents – within 60 days from
filing of claim
4. Appeal to CTA Division – within 30 days
from receipt of notice of denial or from lapse
of 120 days of inaction counted from
submission of documents. The appeal need
not be made within the 2-year prescriptive
38
period. The Motion for Reconsideration or
New Trial to CTA Division within 15 days
from receipt of decision.
5. Appeal to CTA En Banc – within 15 days
from receipt of resolution. Motion for
Reconsideration to the CTA En Banc within
15 days from receipt of decision
6. Appeal to the SC – within 15 days from
receipt of resolution under Rule 45
Q34.2. What is the nature of a claim for tax
refund?
A claim for tax refund is in the nature of a claim for
exemption and should be construed strictissimi juris
against the taxpayer. (see CIR V. T OKYO SHIPPING
[MAY 26, 1995])
Q34.3. Who is the proper party to claim a
tax credit/refund?
The proper party to seek a refund is the statutory
taxpayer, who is the person on whom the tax is
imposed by law and who paid the same, even if that
person shifted the tax to another (see SILKAIR
SINGAPORE V. CIR [NOVEMBER 14, 2008])
Q34.4. Is a written claim by the taxpayer
within two years required before the
CIR can exercise his authority to
grant a credit or refund?
Yes. As held in VDA. DE AGUINALDO V. CIR [FEBRUARY
26, 1965], such requirement is a condition precedent
and non-compliance precludes the CIR from
exercising the authority to grant the credit or refund.
Q34.5. A, signing as attorney-in-fact,
acknowledged for B (taxpayer)
receipt of the deficient tax
assessment. A formally protested
the same in writing, paid the
38
As held in CIR V. AICHI FORGING COMPANY OF ASIA [OCTOBER 6,
2010].
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
assessment, and formally demanded
in writing its refund. In one of his
letters to the CIR, he stated that if
his demand was not effected, he
would collect from the CIR the
attorneys’ fees. Will the 30-day
period in which to file an appeal to
the CTA run from A’s receipt of the
notice of the CIR’s decision denying
the claim?
Yes. As held in GIBBS V. CIR [NOVEMBER 29, 1965],
the Supreme Court held that the circumstances show
that he acted not merely as an agent or attorney-in-
fact of the taxpayer but as their legal counsel. His
receipt therefore of the CIR’s decision denying the
claim for refund was receipt of the same by the
taxpayer and the 30-day period for the filing of a
petition for review should be computed from the date
of such receipt.
Q34.6. From when do we compute the 2
year prescriptive period?
The two year prescriptive period is reckoned from the
date of filing of the Final Adjustment Return. It is at
this point that it can already be determined whether
there has been an overpayment of the taxpayer. (see
CIR V. PHILAMLIFE [MAY 29, 1995])
Further, Section 56 of the Tax Code provides that
payment is made at the time the return is filed, thus,
in consonance with Section 229 which provides tha
the two-year period should be counted from the date
of the payment of the tax.
Q34.6.1. What are the special rules in
computing the two-year
prescriptive period?
For income taxes From the time of
filing of Final
Adjustment Return
(and final payment
39
of tax)
39
For actions for refund of corporate income tax, the two-year
prescriptive period is counted from the time of actual filing of the
Final Adjustment Return or Annual Income Tax Return. (see CIR V.
CA [JANUARY 21, 1999])
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PM REYES NOTES ON TAXATION II:
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Tax paid in installments From the time of
payment of last
40
installment
For VAT From the time of
filing of the quarterly
VAT return, i.e.
within 25 days after
the close of each
taxable quarter
Q34.7. Is the RMC stating that the 2 year
period to file a claim for refund is
extended to make it 10 years valid?
No, the RMC cannot go beyond what is provided in
the law and the State cannot be put into estoppels
(see PBCOM V. CIR [JANUARY 28, 1999])
Q34.8. What must the taxpayer do in case
of a situation where the CIR is taking
time to decide the claim and the
period of 2 years is about to end?
Similar to assessments, taxpayers may appeal the
inaction of the BIR to the CTA even for refund cases.
However, the period is different since the BIR is given
120 days to act on a refund; otherwise, the taxpayer
may already appeal the inaction. However, if the 2
year period is about to lapse and no decision has not
yet been given, the taxpayer may already appeal to
the CTA even if the 120 day period to decide has not
yet expired.41
In GIBBS V. COLLECTOR OF I NTERNAL REVENUE
[FEBRUARY 29, 1960], the Supreme Court noted that
if the CIR takes time in deciding the claim and the
period of two years is about to end, the suit or
proceeding must be started in the CTA before the
end of the 2 year period without awaiting the decision
of the CIR.
In CIR V. SWEENEY [AUGUST 21, 1959], the Supreme
Court stated that “taxpayers need not wait for the
action of the CIR on the request for refund before
taking the matter to Court.”
Compare this with the prevailing rule for VAT
refund/credit: In CIR V. AICHI FORGING COMPANY OF
ASIA [OCTOBER 6, 2010], the Supreme Court ruled
40
Where the tax account was paid by installment, then the
computation of the 2 year prescriptive period should be from the
date of last installment (see CIR v. PALANCA [OCTOBER 29, 1966])
41
The 120 day period here is in consonance with the view of the
majority including Atty. Montero.
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
that filing the judicial claim within the 2-year
prescriptive period is premature. Such period applies
only to the administrative claim.
Q34.9. Will the filing of a supplemental
petition be sufficient to toll the
prescriptive period for the claim for
refund?
No. The claim for refund has been barred by
prescription since the supplemental petition was not
admitted. While retirement funds/employment trusts
are still absolutely exempt from income tax
regardless of the nature of tax, the taxpayer’s claim
was barred by prescription since the filing of the
supplemental petition (and not an original action) was
not granted and therefore “it did not have any judicial
effect” to toll the running of the 2 year period. It was
only when a subsequent petition for review was filed
did the prescriptive period toll. Further, this is not a
case where the 2-year period can be considered non-
jurisdictional since there are no “exceptional or
supervening circumstances” to speak of. (see FAR
EAST BANK AND T RUST COMPANY V. CIR [MAY 2,
2006])
Q34.10. Is the 2-year prescriptive period
jurisdictional and may it be
suspended?
Even if the 2 year prescriptive period, if applicable,
had already lapsed, the same is not jurisdictional and
may be suspended for reasons of equity and other
special circumstances. (see CIR V. PHILAMLIFE [MAY
29, 1995]; CIR v. PNB [OCTOBER 25, 2005])
Q34.11. Name some reasons of equity and
other special circumstances that
jurisprudence has considered to
extend the 2 year prescriptive
period.
1. When the taxpayer made advance income
tax payment heeding former President
Corazon Aquino’s call and was made to
believe that its request for tax credit will be
acted upon and favourably considering that
its carry over was unutilized since the
company suffered losses for the next 4 years
(see PNB V. CA [OCTOBER 25, 2005])
2. When the taxpayer and the CIR agreed to
wait for the result of another case having the
23

PM REYES NOTES ON TAXATION II:
REMEDIES
same issue (see PANAY ELECTRIC CO. V. CIR
[MAY 28, 1958])
3. When the CIR initially agreed to grant the
refund and later denied the same (see
NAGUIAT)
Q34.12. If the availment of the tax
credit/refund is due for reasons
other than the erroneous or
wrongful collection of taxes, what
prescriptive period shall apply?
As held in CIR v. PNB [OCTOBER 25, 2005] citing CIR
V. PHILAMLIFE [MAY 29, 1995], availment of a tax
credit due for reasons other than the erroneous or
wrongful collection of taxes may have a different
prescriptive period. Absent any specific provision in
the Tax Code or special laws, the period would be 10
years under Article 1144 of the Civil Code.
Q34.13. May interest on the tax refund be
awarded?
General Rule: No, the Government cannot be
required to pay interest (see CIR V. SWEENEY
[AUGUST 21, 1959])
Exceptions:
1. Authorized by law
2. The collection of the tax was attended by
arbitrariness (inexcusable or obstinate
disregard of legal provisions).
Note, however, that there is no arbitrariness when
there is room for two opinions (see PHILEX MINING V.
CIR [APRIL 21, 1999])
Q34.14. May a taxpayer ask for both a tax
refund and a tax credit?
No. As held in PHILAM ASSET MANAGEMENT V. CIR
[DECEMBER 14, 2005], a taxpayer may apply for either
a tax refund or tax credit, but not both. The choice of
one precludes the other. Failure to indicate a choice,
however, will not bar a valid request for a refund,
should this option be chosen by the taxpayer later on.
In ASIAWORLD PROPERTIES V. CIR [JULY 29, 2010], the
Supreme Court opined that once the taxpayer opts to
carry-over the excess income tax against the taxes
due for the succeeding taxable years (tax credit),
such option is irrevocanle for the whole amount of the
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
excess income tax, thus, prohibiting the taxpayer
from applying for a refund. The unutilized tax credits
will remain in the taxpayer’s account and will be
carried over and applied against the taxpayer’s
income tax liabilities in the succeeding taxable years
until fully utilized.
Q34.15. What are the requisites for calim
for tax credit or refund of a
creditable withholding tax?
1. Claim must be filed within the two-year
prescriptive period from date of payment of
the tax
2. It must be shown on the return that the
income received was declared as part of
gross income
3. The fact of withholding must be established
by a copy of a statement duly issued by the
payor to the payee showing the amount paid
and the amount of tax withheld.
(see CIR V. FAR EAST BANK & T RUST COMPANY
[MARCH 15, 2010])
Q34.16. May a withholding agent file a
claim for tax refund?
Generally, the person entitled to claim a tax refund is
the taxpayer. However, if the taxpayer does not file
the claim, the withholding agent may file the same. In
CIR V. SMART COMMUNICATIONS [AUGUST 25, 2010], it
was submitted that rule allowing the withholding
agent to file the claim is applicable only when the
withholding agent and the taxpayer are related
parties. The Supreme Court disagreed and stated
that such relationship is not required. A withholding
agent has a legal right to file a claim for refund. First,
he is considered a taxpayer under the Tax Code as
he is personally liable for the withholding tax as well
as for deficiency assessments, surcharges, and
penalties, should the amount withheld be finally found
to be less than the amount that should have been
withheld. Second, as an agent of the taxpayer, his
authority to file the income tax return and remit the
tax withheld to the government includes the authority
to file a claim for refund and to bring an action for
recovery of such claim.
Q34.16.1. Is the withholding agent who
filed the claim for tax refund
obliged to remit the same to
the taxpayer?
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PM REYES NOTES ON TAXATION II:
REMEDIES
Yes. In CIR V. SMART COMMUNICATIONS [AUGUST 25,
2010], the Supreme Court ruled 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 under the principle of unjust enrichment.
Q34.17. PSPC acquired some TCCs (tax
Credit Certificates) through the
One Stop Shop Inter-Agency Tax
Credit and Duty Drawback
Center from other BOI-registered
entities. PSPC then utilized the
said TCCs for its excise taxes
and were then issued TDM (Tax
Debit Memo) and ATAPs
(Authority to Accept Payment) by
the BIR. However, the BIR
assessed PSPC for delinquent
excise taxes alleging that PSPC
is not a qualified transferee of
the TCCs. CA ruled that the
PSPC was not entitled to the
benefit of the TCCs and thus
upheld the assessment. Was the
use of PSPC of the TCCs valid?
Yes. As held in PILIPINAS SHELL V. CIR [DECEMBER
21, 2007], there is no suspensive condition for the
validity of TCCs as they are feective immediately and
only computational errors are allowed as basis to
invalidate TCCs. Also, even if the source is defective,
it does not affect PSPC’s right as it acted in good
faith and the agencies approved of the use of TCCs.
In CIR V. PETRON [MARCH 21, 2012], the Supreme
Court had occasion to reiterate that TCCs are valid
and effective from their issuance and are not subject
to post-audit as a suspensive condition for their
validity.
Q34.17.1. What is the effect of RR 14-
2011 [JULY 29, 2011] on the
transferability of TCCs?
All Tax Credit Certificates (TCCs) issued by the BIR
are no longer transferable or assignable to any
person.
Q34.17.2. What is the effect of Executive
Order 68 on outstanding VAT
TCCs?
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
Executive Order 68 allows qualified VAT-registered
taxpayers to receive the cash equivalent of their
outstanding TCCs either:
1. Collecting in advance from a trustee bank a
discounted cash value of their TCCs or
2. Collect full cash value of their TCC upon a
certain maturity date to be determined by the
42
BIR and BOC
The monetization of outstanding TCCs under
Executive Order 68 only covers VAT refunds under
Section 112(A) of the Tax Code (zero-rated sales)
and Section 106(e) of the TCCP (drawbacks). Also,
beginning 2012, the BIR and BOC shall no longer
issue TCCs for VAT refund unless applied for by the
VAT taxpayer under the two aforesaid sections.
Q34.18. Is a tax refund automatically
granted?
No. As held in UNITED AIRLINES V. CIR
[SEPTEMBER 29, 2010], the grant of a refund is
founded on the assumption that the tax return is
valid, that is, the facts stated therein are true and
correct. Before granting the refund, the CIR must
determine the proper assessment and the tax due. In
this case, the CIR found that the tax return was not
valid and, thus, it was justified in denying the claim
after determining the proper assessment and the tax
due.
Q34.19. A was assessed deficiency
income tax. He protested the
same to the CIR. The CIR denied
the claim and contended that A
failed to file a written claim for
refund. A appeals the CIR’s
denial of the protest. The CTA
dismissed the petition for lack of
jurisdiction holding that the lack
of a written claim for refund was
fatal to A’s recourse to the CTA.
Are the contentions of the BIR
and CTA correct?
No. As held in VDA. DE SAN AGUSTIN V. CIR
[SEPTEMBER 10, 2001], to hold that the taxpayer has
lost the right to appeal from the ruling on the disputed
42
DOF Joint Circular 2-2012 provides that the monetization will
start in 2012 for TCCs issued prior to 2004 while those issued in
2011 and 2012 will be monetized in 2016.
25
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PM REYES NOTES ON TAXATION II:
REMEDIES
assessment but must prosecute his appeal under Q35.1. What are the modes of appeal in the
Section 306 (now Section 204 in relation to Section CTA?
229), which requires a taxpayer to file a claim for
refund of the taxes paid as a condition precedent to 1. Petition for review under Rule 42 (to be
his right to appeal, would in effect require him to go heard by division)
45

through a useless and neddelss ceremony that would
only delay disposition of the case. An appeal is
allowed from the decision of the CIR on a disputed
assessment as distinguished from a decision
involving refunds of internal revenue taxes.
12. CTA
(Read RA 9282, as amended by RA 9503; and
A.M. No. 05-11-07-CTA “Revised Rules of the
Court of Tax Appeals [November 22, 2005])
2. If from CBAA or RTC in the exercise of their
appellate jurisdiction, Rule 43 (to be heard en
banc)
3. From CTA division to en banc –petition
review
4. From the CTA en banc to the Supreme Court
– petition for review on certiorari under Rule
45
Q35.2. When is a decision appealable to the
CTA?

Q35. What is the jurisdiction of the Court of
Tax Appeals
A. Exclusive Appellate Jurisdiction
3. Decisions of the CIR
4. Inaction of the CIR
5. Decisions of the RTC on Local Tax Cases
6. Decisions of the BOC/COC
7. Decisions of the CBAA (in exercise of appeal
over RPT cases decided by the LBAA
8. Decisions of the DOF on Customs cases
elevated to him on automatic review due to
adverse decision vs. the Government
9. Decisions of the DTI (on non-agri products)
and DA (on agri. Products) involving dumping
and countervailing duties
B. Over Criminal Offenses
1. Original – For criminal acts under the Tax
Code and Tariffs and Customs Code
involving an amount of 1 million or above
2. Appellate – If the amount is less than 1
million or no specified amount.43
C. Over Tax Collection Cases
1. Original – if the amount is 1 million or above
2. Appellate – if the amount is less than 1
44
million
So long as the tenor of the decision is that the
dispute of the taxpayer is denied, it is appealable. To
let the taxpayer defer the period is to unduly put in his
hand the collection of taxes. The CIR should always
indicate in clear language the decision of the BIR
(see SURIGAO ELECTRIC V. CTA [JUNE 28, 1974])
Q35.2.1. Name some communications sent
by the CIR to taxpayers that are
deemed appealable to the CTA.
As provided in Surigao ELECTRIC V. CTA [JUNE 28,
1974]:
1. a letter which stated the result of the
investigation requested by the taxpayer and
the consequent modification of the
assessment;
2. letter which denied the request of the
taxpayer for the reconsideration cancellation,
or withdrawal of the original assessment
3. a letter which contained a demand on the
taxpayer for the payment of the revised or
reduced assessment; and
4. a letter which notified the taxpayer of a
revision of previous assessments
Q35.3. Is the final demand letter issued by
the BIR reiterating the demand for
immediate payment considered a
final decision appealable to the
CTA?

43
Regular courts first; if from RTC, appeal to the CTA/ if from MTC,
then RTC, then file a petition for review with the CTA
44
Regular courts first; if from RTC, appeal to the CTA/ if from
45
MTC, then RTC, then file a petition for review with the CTA RA 9282 elevates CTA to CA level

PIERRE MARTIN DE LEON REYES 26


PM REYES NOTES ON TAXATION II:
REMEDIES
Yes. As held in CIR v. ISABELA CULTURAL CORP
[JULY 11, 2001], the letter is deemed as the CIR’s
final act since failure to comply therewith exposes the
property o distraint and levy. The Supreme Court
stated that a final demand letter from BIR, reiterating
to the taxpayer the immediate payment of a tax
deficiency assessment previously made, is
tantamount to a denial of the taxpayer’s request for
reconsideration. Such letter amounts to a final
decision on a disputed assessment and is thus
appealable to the CTA. More importantly, Section
228 allows direct appeal to the CTA if protest is not
acted upon within 180 days.
In OCEANIC WIRELESS NETWORK VS. COMMISSIONER
OF I NTERNAL REVENUE [DECEMBER 9, 2005], the
Supreme Court reiterated that 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 dated January 24, 1991,
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.
Q35.4. AA Corp received a FAN for contractor’s
tax. It protested the assessments.
Thereafter, AA requested for the
cancellation of the assessments. 4
years passed and nothing happened.
CIR then issued 2 warrants of distraint
to collect the taxes. One year later, CIR
answered and denied AA’s request for
cancellation. The CIR, in its answer to
AA’s request for the cancellation of the
assessments, requested the taxpayer to
pay the deficiency taxes within ten days
from receipt of the demand; otherwise,
the Bureau would enforce the warrants
of distraint. He closed his demand letter
with this paragraph: “This constitutes
our final decision on the matter. If you
are not agreeable, you may appeal to
the Court of Tax Appeals within 30 days
from receipt of this letter.” What is the
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
reckoning point of the appeal period to
the CTA, the issuance of the warrant of
distraint, or the letter embodying the
final demand of payment??
The reviewable decision is the latter letter where the
CIR clearly directed the taxpayer to appeal to the
CTA and not the warrants of levy and distraint. No
amount of quibbling or sophistry can blink the fact
that said letter, as its tenor shows, embodies the
Commissioner's final decision. He even directed the
taxpayer to appeal it to the Tax Court. The directive is
in consonance with this Court's dictum that the
Commissioner should always indicate to the taxpayer
in clear and unequivocal language what constitutes
his final determination of the disputed assessment.
That procedure is demanded by the pressing need
for fair play, regularity and orderliness in
administrative action. (see ADVERTISING ASSOCIATES,
INC. VS. COURT OF APPEALS [DECEMBER 26, 1984])
Q35.5. U Corp was assessed deficiency income
taxes (FAN). U Corp protested the
assessment. BIR, without ruling on the
protest, issued a warrant of distraint
and levy. U Corp requested
reinvestigation and reconsideration of
issuance of the warrant. Thereafter, BIR
filed a collection suit to collect the
taxes. U Corp then filed a petition for
review with the CTA, on the theory that
its period to appeal only began to run
from its receipt of summons in the civil
collection case. BIR argued the appeal
was filed out of time, as the period
began to run when the warrant of
distrant and levy was issued. Who is
correct?
U Corp is correct. Under the circumstances, the
Commissioner of Internal Revenue didn’t clearly
signify his final action on the disputed assessment.
Thus, it was only when U Corp received the
summons on the civil suit for collection of deficiency
income that the period to appeal commenced to run.
The request for reinvestigation and reconsideration
was in effect considered denied by the CIR when the
latter filed a civil suit for collection of deficiency
income. [COMMISSIONER OF I NTERNAL REVENUE VS.
UNION SHIPPING CORPORATION (MAY 21, 1990)]
Q35.6. The City of Makati received
assessment notices imposing
deficiency taxes. Makati protested.
27

PM REYES NOTES ON TAXATION II:
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The BIR stated that the assessments
were already final and executory.
Nonetheless, Makati requested fron
another reinvestigation. The
Revenue officer and deputy
Commissioner granted this request.
Did the reinvestigation of the case
reversed the finality of the
assessments?
No. Only the Commissioner of Internal Revenue has
the power to reverse, revoke or modify any existing
ruling of the Bureau of Internal Revenue (“BIR”),
which power cannot be delegated. In assessment
cases, a reopening/reinvestigation after a final
decision on disputed assessment (“FDDA”) has been
issued must be initiated by the commissioner.
Otherwise, the reopening / reinvestigation is without
authority and failure to appeal the FDDA to CTA
would render the assessment final and executory.
Here, the reinvestigation was merely granted by a
revenue officer and a deputy commissioner. (see
CITY OF MAKATI VS. COMMISSIONER OF I NTERNAL
REVENUE [CTA CASE NO. 641, SEPTEMBER 16, 2011])
Q35.7. The CIR filed a Motion to Dismiss the
Petition for Review commenced by
Festo Holdings on the ground of lack of
jurisdiction. The CIR argued that the
Revenue District Officer who signed the
letter which became the basis of the
instant petition, cannot be deemed an
alter ego of the CIR for purposes of
issuing a final decision on Festo’s
protest under a delegated authority. As
such, the subject letter is not the CIR's
final decision on Festo’s protest; thus,
the 30 day period to file an appeal was
yet to commence, rendering the instant
petition premature. Is the contention of
the CIR correct?
Yes, the appeal to the CTA was premature. As held
in FESTO HOLDINGS, INC. VS. COMMISSIONER OF
INTERNAL REVENUE [CTA CASE NO. 8226, SEPTEMBER
2, 2011], the Revenue District Officer who issued the
letter cannot be considered as the CIR's decision
appealable to this Court, in the absence of any proof
that the former was authorized to decide and act in
behalf of the latter on the protest of a taxpayer.
Nowhere is it provided that a Revenue District Officer
can issue decisions that are appealable to this Court.
Therefore, there being no decision of the CIR in the
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
present case, this Court cannot take cognizance of
the present case.
Q35.8. Is the denial by the BIR of the
protest on the PAN (not the FAN)
appealable to the CTA?
No, the denial of the CIR must be on the protest of
the FAN. In ALLIED BANKING CORPORATION VS.
COMMISSIONER OF I NTERNAL REVENUE [FEBRUARY 5,
2010], the Supreme Court ruled that it is the Formal
Letter of Demand and Assessment Notice (FAN) that
must be administratively protested or disputed within
30 days, and not the PAN.
Q35.8.1. BIR issued a PAN to AB Corp for
deficiency DST. AB protested
the PAN. Thereafter, BIR sent a
FAN to AB Corp. The letter
provided: “It is requested that
the above deficiency tax be paid
immediately upon receipt
hereof, inclusive of penalties
incident to delinquency. This is
our final decision based on
investigation. If you disagree,
you may appeal the final
decision within thirty (30) days
from receipt hereof, otherwise
said deficiency tax assessment
shall become final, executory
and demandable.” Thereafter,
AB immediately filed a petition
for review with the CTA. Should
the petition be dismissed?
No. Ordinarily, the procedure is that it’s the FAN that
must be administratively protested, as a prequisite to
subsequently filing a PFR with the CTA. However,
the SC ruled in this case that the CIR was estopped
from claiming the need for a protest. AB Corp can’t
be blamed for not filing a protest against the FAN
since the language used and the tenor of the FAN
indicate that it is the final decision of the CIR on the
matter. The CIR is required to indicate, in a clear and
unequivocal language, whether his action on a
disputed assessment constitutes his final
determination thereon in order for the taxpayer
concerned to determine when his or her right to
appeal to the tax court accrues. Thus, CIR is now
estopped from claiming that he did not intend the
FAN to be a final decision. Moreover in the Formal
Letter of Demand with Assessment Notices, CIR
used the word “appeal” instead of “protest”,
28

PM REYES NOTES ON TAXATION II:
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“reinvestigation”, or “reconsideration”. Although there
was no direct reference for petitioner to bring the
matter directly to the CTA, it cannot be denied that
the word “appeal” under prevailing tax laws refers to
the filing of a Petition for Review with the CTA (see
ALLIED BANKING CORPORATION VS. COMMISSIONER OF
INTERNAL REVENUE [FEBRUARY 5, 2010])
Q35.9. Can a Motion for Reconsideration or
Motion for New Trial be filed in the
CTA?
Yes, within 15 days from receipt of denial.
Q35.9.1. Does a Motion for
Reconsideration toll the 30 day
period to appeal the denial of
the protest of the FAN?
No. A motion for reconsideration of the denial of the
administrative protest does not toll the 30-day period
to appeal to the CTA. (see FISHWEALTH CANNING
CORPORATION VS. COMMISSIONER OF I NTERNAL
REVENUE [JANUARY 21, 2010])
Q35.9.2. Is a prior MR required before filing a
Petition for Review of a decision of a
CTA division?
Yes. On the procedure, the Court agrees with the
CTA En Banc that the Commissioner failed to comply
with the mandatory provisions of Rule 8, Section 1 of
the Revised Rules of the Court of Tax
Appeals requiring that “the petition for review of a
decision or resolution of the Court in Division must be
preceded by the filing of a timely motion for
reconsideration or new trial with the Division.” The
word "must" clearly indicates the mandatory -- not
merely directory -- nature of a requirement.” The
rules are clear. Before the CTA En Banc could take
cognizance of the petition for review concerning a
case falling under its exclusive appellate jurisdiction,
the litigant must sufficiently show that it sought prior
reconsideration or moved for a new trial with the
concerned CTA division. (see COMMISSIONER OF
CUSTOMS VS. MARINA SALES, INC. [NOVEMBER 22,
2010])
Q35.10. Juday was criminally charged in the
CTA for filing a fraudulent income tax
return. Thereafter, she filed a motion
st
to quash in the CTA 1 division. The
MTQ was denied. MR was also denied.
She then filed a motion for extension
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
of time to file her petition for review in
CTA en banc. Thereafter, she filed her
PFR with CTA en banc. CTA en banc
denied both the petition for extension,
and the petition for review, on the
theory that the denial of the motion to
quash was an interlocutory order, and
therefore, unappealable. Was the
dismissal by CTA en banc proper?
Yes. CTA en banc did not err in denying petitioner’s
Motion for Extension of Time to File Petition for
Review. Petitioner cannot file a Petition for Review
with the CTA en banc to appeal the Resolution of the
CTA First Division denying her Motion to Quash. The
Resolution is interlocutory and, thus, unappealable.
Even if her Petition for Review is to be treated as a
petition for certiorari, it is dismissible for lack of merit.
(see JUDY ANNE L. SANTOS VS. PEOPLE OF THE
PHILIPPINES AND BUREAU OF INTERNAL REVENUE
[AUGUST 26, 2008])
Q35.11. Sec 7(a)(1) of RA 1125 as amended by
RA 9262 provides that the CTA has
exclusive appellate jurisdiction to
review by appeal the decisions of the
Commissioner of Internal Revenue in
cases involving disputed
assessments, refunds of internal
revenue taxes, fees or other charges,
penalties in relation thereto, or other
matters arising under the National
Internal Revenue or other laws
administered by the Bureau of Internal
Revenue. Does the CTA also have
jurisdiction to determine the validity
of warrants of distraint/levy and the
waiver of statute of limitations?
Yes. The appellate jurisdiction of the CTA is not
limited to cases which involve decisions of the
Commissioner of Internal Revenue on matters
relating to assessments or refunds. The second part
of the provision covers other cases that arise out of
the NIRC or related laws administered by the Bureau
of Internal Revenue. The wording of the provision is
clear and simple. It gives the CTA the jurisdiction to
determine if the warrant of distraint and levy issued
by the BIR is valid and to rule if the Waiver of Statute
of Limitations was validly effected.
This is not the first case where the CTA validly ruled
on issues that did not relate directly to a disputed
assessment or a claim for refund. In Pantoja v. David,
we upheld the jurisdiction of the CTA to act on a
29

PM REYES NOTES ON TAXATION II:
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petition to invalidate and annul the distraint orders of
the Commissioner of Internal Revenue. Also, in
Commissioner of Internal Revenue v. Court of
Appeals, the decision of the CTA declaring several
waivers executed by the taxpayer as null and void,
thus invalidating the assessments issued by the BIR,
was upheld by this Court. (see PHILIPPINE
JOURNALISTS INC. VS. COMMISSIONER OF I NTERNAL
REVENUE [DECEMBER 16, 2004])
Q35.12. The CIR, pursuant to the NIRC, issued
a RMO imposing a 5% lending
investor’s tax on pawnshops. The
RMO identified pawnshops as a
lending investor due to the nature of
its activities. Leal, a pawnshop owner,
filed with the RTC a petition for
prohibition that sought to stop the CIR
from implementing the RMO. CIR filed
a motion to dismiss. CIR alleged RTC
had no jurisdiction over the matter.
Did the RTC have jurisdiction over the
action to nullify the RMO?
No, the CTA had exclusive jurisdiction. The
questioned is actually a ruling or opinion of the CIR in
implementing the Tax Code with regard taxability of
pawnshops. The RMO was issued pursuant to CIR’s
powers under Section 244 of the NIRC (providing for
the power of the Commissioner of Internal Revenue
to make rulings or opinions in connection with the
implementation of the provisions of internal revenue
laws, including ruling on the classification of articles
of sales and similar purposes). Thus, the petition
should have been filed with the CTA. (see
COMMISSIONER OF I NTERNAL REVENUE VS. LEAL
[NOVEMBER 18, 2002])
Similarly, in the case of ASIA I NTERNATIONAL
AUCTIONEERS, INC. VS. PARAYNO (DECEMBER 18,
2007], several RR’s and RMO’s were also considered
as rulings/opinions of the CIR on the tax treatment of
motor vehicles sold at public auction within the SSEZ.
They were deemed issued pursuant to the power of
the CIR to interpret provisions of the NIRC. Thus,
when an action to annul such RRs/RMOs was filed
with the RTC, SC held that such was improper, as it
was the CTA that had exclusive jurisdiction
Q35.13. CC Corp filed a petition in the RTC
to nullify an ordinance enacted by
the City of Manila. RTC dismissed
the petition. CC Corp filed a
petition for review with CTA. It was
PIERRE MARTIN DE LEON REYES
Updated 22 Mar 2013
argued that the petition for review
was filed out of time. What are the
rules governing the extensions of
time to file a petition for review to
the CTA?
As held in CITY OF MANILA VS. COCA-COLA BOTTLERS
PHILIPPINES, INC. [AUGUST 4, 2009], it is clear from the
46
Section 3 of the Revised Rules of the CTA that to
appeal an adverse decision or ruling of the RTC to
the CTA, the taxpayer must file a Petition for
Review with the CTA within 30 days from receipt of
said adverse decision or ruling of the RTC. It must be
pointed out that the rule is silent as to whether the 30
day period can be extended or not. However, Section
11 of Republic Act No. 9282 does state that the
Petition for Review shall be filed with the
CTA following the procedure analogous to Rule 42 of
the Revised Rules of Civil Procedure. Following by
analogy Section 1, Rule 42 of the Revised Rules of
Civil Procedure, the 30-day original period for filing a
Petition for Review with the CTA under Section 11 of
Republic Act No. 9282, as implemented by Section
3(a), Rule 8 of the Revised Rules of the CTA, may be
extended for a period of 15 days. No further
extension shall be allowed thereafter, except only for
the most compelling reasons, in which case the
extended period shall not exceed 15 days.47
Q35.14. B Corp is an insurance company.
It issued customs bonds to its
clients in favor of the BOC. These
secure the relaese of imported
goods. Under these bonds, B Corp
and its clients jointly and severally
bind themselves to pay the BOC
the face value of the bonds, in the
event that the bonds expire
without either the imported goods
being re-exported or the proper
duties and taxes being paid.
46
SEC 3. Who may appeal; period to file petition. – (a) A party
adversely affected by a decision, ruling or the inaction of the
Commissioner of Internal Revenue on disputed assessments or
claims for refund of internal revenue taxes, or by a decision or
ruling of the Commissioner of Customs, the Secretary of Finance,
the Secretary of Trade and Industry, the Secretary of Agriculture,
or aRegional Trial Court in the exercise of its original jurisdiction
may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration
of the period fixed by law for the Commissioner of Internal
Revenue to act on the disputed assessments. x x x. (Emphasis
supplied.)
47
In other words, two extensions (15 days each) allowed, with the
nd
2 allowable only for most compelling reasons.
30
 Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
Thereafter, BOC filed a collection
case in the RTC. It was alleged that
B Corp had unpaid customs bonds
with the BOC. RTC ordered B Corp
to pay under the bond. B Corp
appealed the decision to the CA.
CA dismissed for lack or
jurisdiction. CA found that it
should’ve been filed with the CTA,
as the case was actually one for
collection of taxes. Is CA correct?

No. In this case, the original complaint filed with the

trial court was in the nature of a collection case,
purportedly to collect on the obligation of B Corp by
virtue of the bonds executed by it in favor of BOC,
essentially a contractual obligation. An action to
collect on a bond used to secure the payment of
taxes is not a tax collection case, but rather a simple
case for enforcement of a contractual liability. Thus,
CA had jurisdiction. (SEE PHILIPPINE BRITISH
ASSURANCE COMPANY, INC. VS. REPUBLIC OF THE
PHILIPPINES (FEBRUARY 2, 2010)]

Q35.15. Are the remedies of (1) filing an

appeal on the BIR’ inaction and (2)
filing an appeal on the CIR’s
decision exclusive or alternative
remedies?

The options are mutually exclusive and resort ot one

bars the other. In RCBC V. CIR [APRIL 24, 2007], the
CIR failed to act on the disputed assessment within
180 days from date of submission of documents.
Thus, RCBC opted to file a petition for review before
the CTA but filed the same more than 30 days after
the lapse of the 180-day period. The Supreme Court
ruled that after availing the first option (filing a petition
for review) which was however filed out of time,
RCBC cannot successfully resort to the second
option (awaiting the final decision of the CIR and
appealing the same to the CTA on the pretext that
there is yet no final decision on the disputed
assessment because of the CIR’s inaction.

PIERRE MARTIN DE LEON REYES 31