PHILIPPINE JOURNALISTS, INC. V.

COMMISSIONER OF INTERNAL REVENUE

FACTS

The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of Authority
for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine
petitioner’s books of account and other accounting records for internal revenue taxes. Revenue
District Officer Jaime Concepcion invited petitioner to send a representative to an informal
conference for an opportunity to object and present documentary evidence relative to the
proposed assessment. Petitioner’s Comptroller, Lorenza Tolentino, executed a “Waiver of the
Statute of Limitation. Under the National Internal Revenue Code (NIRC)”. Records show that, it
did not bear the date of acceptance that petitioner was not furnished a copy of the waiver, and the
waiver was signed only by the Revenue District Officer. The tax liability exceeds One Million
Pesos (P1,000,000.00).

ISSUE

Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year
prescriptive period under the NIRC.

HELD

NO.

The waiver document is incomplete and defective and thus the three-year prescriptive period was
not tolled or extended and continued to run. Consequently, the Assessment/Demand was invalid
because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint
and/or Levy which petitioner received thereafter is also null and void for having been issued
pursuant to an invalid assessment.

The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment
and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against
unreasonable investigation. Unreasonable investigation contemplates cases where the period for
assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no
longer be subjected to further investigation for taxes after the expiration of a reasonable period of
time.

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the
taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore
be carefully and strictly construed. xxx Thus, the law on prescription, being a remedial measure,
should be liberally construed in order to afford such protection.

The waiver is also defective from the government side because it was signed only by a revenue
district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The
waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two
parties to extend the period to a date certain. The conformity of the BIR must be made by either
the Commissioner or the Revenue District Officer. This case involves taxes amounting to more
than One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration
of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner of
Internal Revenue to sign for the BIR.

COMMISSIONER OF INTERNAL REVENUE VS. KUDOS METAL CORPORATION

FACTS:

CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the Statute of
Limitations was executed on December 2001. The CTA issued a Resolution canceling the
assessment notices issued against Petitioner for having been issued beyond the prescriptive
period as the waiver purportedly failed to (a) have the valid officer execute the same (i.e., only
the Assistant Commissioner signed it and not the CIR); (b) the date of acceptance was not
indicated; (c) the fact of receipt by the taxpayer was not indicated in the original copy.

ISSUE:

Has the CIR’s right to assess prescribed?

HELD:

YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-01 are
mandatory to give effect to Section 222 of the Tax Code. Specifically, the flaws in the waiver
executed by Kudos Metal were as follows: (a) there was no notarized written authority in favor
of the signatory for the company; (b) there is no stated date of acceptance by the Commissioner
or his representative; and (c) the fact of the receipt of the copy was not indicated in the original
waivers.

Neither can it be said that by merely executing the waiver the taxpayer is already estopped from
disputing an action by the CIR beyond the statutory 3-year period since the exception under the
Suyoc case (i.e., when the delays were due to taxpayer’s acts) does not apply.

Note: Requisites of a valid waiver: (i) acceptance date; (ii) expiry date; (iii) signed by authorized
officer of taxpayer and BIR; (iv) notarized; (v) fact of receipt must be indicated in the copies.

CIR vs. SYSTEMS TECHNOLOGY

FACTS

Respondent filed its Amended Annual Income Tax Return for fiscal year 2003 on August 15,
2003. Filed its quarterly VAT Returns on July 23, 2002, October 25, 2002, January 24, 2003 and
May 23, 2003. And likewise filed its Expanded Withholding Tax from May 10, 2002 to April 15,
2003. Sangalang, of STI signed a Waiver of Defense of Prescription under the Statute of
Limitations of the National Internal Revenue Code with the proviso that the Assessment and
Collection of taxes of fiscal year shall come “no later than December 31, 2006”. The waiver was
accepted by Large Taxpayers District Office of Makati. Prior to the lapse of the first waiver,
another waiver was executed extending for the same purpose. And in the third waiver was
executed extending further the assessment and collection to June 30, 2007. The respondent
received a Formal Assessment Notice from the CIR for deficiency Income Tax, VAT and EWT
for fiscal year 2003 in the aggregate amount of Php 161,835,737.98 within the extended period
in the waiver. It filed a request for reconsideration/reinvestigation. And finally received from the
CIR the Final Decision on Disputed Assessment finding the respondent liable for deficiency
income tax, VAT and EWT in the lesser amount of Php 124,257,764.20. A petition for review
was filed by the respondent with the CTA. And the later promulgated its Decision denying the
assessment on the ground of prescription. The waivers were found to be defective for failing to
strictly comply with the requirements provided by Revenue Memorandum Order No. 20-90 and
Revenue Delegation Authority Order No. 05-01. Failure to comply will render the assessment
and collection not be extended and will not bar the respondent from questioning the validity
thereof or invoking the defense of prescription.

ISSUE

Whether or not prescription had set in against the assessments for deficiency Income Tax,
deficiency VAT and deficiency Expanded Withholding Tax.

HELD

Yes. The waivers of Statute of Limitations being defective and invalid did not extend the
Commissioner of Internal Revenue period to issue the subject assessment. Thus, the right of the
government to assess or collect alleged deficiency taxes is already barred by prescription. Sec.
203 of the NIRC of 1997, as amended, limits the CIR’s period to assess and collect revenue taxes
to three years counted from the last day prescribed by law for the filing of the return or from the
day the return was filed whoever comes later so as to safeguard the interests of taxpayers from
unreasonable investigation. Compliance with the provisions of RMO 20-90 and RDAO 05-01 are
mandatory and must strictly be followed. And as observed, the CIR failed to recognize the
following deviations which rendered the waiver invalid. a. It became unlimited in time b. It was
signed by one other than the CIR or the latter’s duly authorized representative c. No date of
acceptance d. Taxpayer has no copy of the waiver e. No notarized written authority of the
taxpayer’s representative to sign the waiver on its behalf. f. Failure to specify the kind and
amount of the tax due. Likewise, the Doctrine of Estoppel cannot be applied as an exception to
the Statute of Limitations on the assessments of taxes considering that there is a detailed
procedure for the proper execution of the waiver which the BIR must strictly follow.

RIZAL COMMERCIAL BANKING CORPORATION vs. COMMISSIONER OF

INTERNAL REVENUE
FACTS:

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

ISSUE:

Has the action to protest the assessment judicially prescribed?

HELD:

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

However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the
CTA within 30 days from the lapse of the 180-day period OR (2) await the final decision of the
CIR and appeal such decision to the CTA within 30 days after receipt of the decision. These
options are mutually exclusive and resort to one bars the application of the other. Thus, if
petitioner belatedly filed an action based on inaction, it cannot subsequently file another petition
once the decision comes out.

CIR v. NEXT MOBILE, INC

FACTS

Respondent filed with the BIR taxes for 2001. Respondent, through Sarmiento, their director of
Finance, executed several waivers of the statute of limitations to extend the prescriptive period of
assessment for taxes. 

On 2005, respondent received from the BIR a PAN and a formal letter of demand to pay
deficiency income tax. The BIR denied respondent's protest.

With the CTA, it was held that the demand was beyond the three year prescription period under
the NIRC. That the case does not apply the 10 year prescription period as there was not false
return by the respondent. Also, the waivers did not validly extend the prescription because of
irregularities. 

ISSUE: Whether the period to pay has prescribed.

RULING:

NO.

The SC held that a waiver of the statute of limitations must faithfully comply with RMO No. 20-
90 and RDAO 05-01 in order to be valid. Sarmiento failed to show her authority to the BIR to
sign the waivers.

The BIR were also at fault having to neglect their ministerial duties. 

Both parties knew the infirmities of the waivers but still continued. Respondents were held in
bad faith as after having benefited by the waivers by giving them more time to pay, they used the
waivers they made themselves when the consequences were not in their favor.

The BIR's negligence amounts to malice and bad faith as they also knew the waivers did not
conform with RMO 20-90 and RDAO 05-01.

As both parties are in bad faith, the SC granted the petition on the issue of the nullification of the
formal letter of demand to the CTA.

CIR v. TRANSITIONS PHILIPPINES, GR No. 227544, 2017-11-22

FACTS:

April 28, 2006, Transitions Optical received Letter of Authority No. 00098746 dated March 23,
2006 from Revenue Region No. 9, San Pablo City, of the Bureau of Internal Revenue.

On October 9, 2007, the parties allegedly executed a Waiver of the Defense of Prescription (First
Waiver). In this supposed First Waiver, the prescriptive period for the assessment of Transition
Optical's internal revenue taxes for the year 2004 was extended to June 20, 2008. The document
was signed by Transitions Optical's Finance Manager, Pamela Theresa D. Abad, and by Bureau
of Internal Revenue's Revenue District Officer Myrna S. Leonida.
This was followed by another supposed Waiver of the Defense of Prescription (Second Waiver)
dated June 2, 2008. This time, the prescriptive period was supposedly extended to November 30,
2008.

Commissioner of Internal Revenue, through Regional Director Jaime B. Santiago (Director

Santiago), issued a Preliminary Assessment Notice (PAN) dated November 11, 2008, assessing
Transitions Optical for its deficiency taxes for taxable year 2004. Transitions Optical filed a
written protest on November 26, 2008.

The Commissioner of Internal Revenue, again through Director Santiago, subsequently issued
against Transitions Optical a Final Assessment Notice (FAN) and a Formal Letter of Demand
(FLD) dated November 28, 2008 for deficiency income tax, value-added tax, expanded
withholding tax, and final tax for taxable year 2004 amounting to P19,701,849.68.

In its Protest Letter dated December 8, 2008 against the FAN, Transitions Optical alleged that
the demand for deficiency taxes had already prescribed at the time the FAN was mailed on
December 2, 2008. In its Supplemental Protest, Transitions Optical pointed out that the FAN was
void because the FAN indicated 2006 as the return period, but the assessment covered calendar
year 2004. Years later, the Commissioner of Internal Revenue, through Regional Director Jose
N. Tan, issued a Final Decision on the Disputed Assessment dated January 24, 2012, holding
Transitions Optical liable for deficiency taxes in the total amount of P19,701,849.68 for taxable
year 2004,... Transitions Optical filed a Petition for Review before the Court of Tax Appeals...
her Answer, the Commissioner of Internal Revenue interposed that Transitions Optical's claim of
prescription was inappropriate because the executed Waiver of the Defense of Prescription
extended the assessment period... summary therefore, the Court hereby finds the subject Waivers
to be defective and therefore void.

Court of Tax Appeals En Bane affirmed the First Division Decision and subsequently denied the
Commissioner of Internal Revenue's Motion for Reconsideration.

Hence, this Petition was filed before this Court.

ISSUES

First, whether or not the two (2) Waivers of the Defense of Prescription entered into by the
parties on October 9, 2007 and June 2, 2008 were valid; and Second, whether or not the
assessment of deficiency taxes against respondent Transitions Optical Philippines, Inc. for
taxable year 2004 had prescribed.

RULING

This Court denies the Petition. The Court of Tax Appeals committed no reversible error in
cancelling the deficiency tax assessments.
In this case, two (2) waivers were supposedly executed by the parties extending the prescriptive
periods for assessment of income tax, value-added tax, and expanded and final withholding taxes
to June 20, 2008, and then to November 30, 2008.The Court of Tax Appeals, both its First
Division and En Banc, declared as defective and void the two (2) Waivers of the Defense of
Prescription for non-compliance with the requirements for the proper execution of a waiver as
provided in RMO No. 20-90 and RDAO No. 05-01. Specifically, the Court of Tax Appeals
found that these Waivers were not accompanied by a notarized written authority from
respondent, authorizing the so-called representatives to act on its behalf. Likewise, neither the
Revenue District Office's acceptance date nor respondent's receipt of the Bureau of Internal
Revenue's acceptance was indicated in either document.

However, Presiding Justice Roman G. Del Rosario (Justice Del Rosario) in his Separate
Concurring Opinion in the Court of Tax Appeals June 7, 2016 Decision, found that respondent is
estopped from claiming that the waivers were invalid by reason of its own actions, which
persuaded the government to postpone the issuance of the assessment. He discussed:

Parenthetically, this Court stated that when both parties continued to deal with each other in spite
of knowing and without rectifying the defects of the waivers, their situation is "dangerous and
open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes
by mere expedient of hiding behind technicalities."

Estoppel similarly applies in this case. Indeed, the Bureau of Internal Revenue was at fault when
it accepted respondent's Waivers despite their non-compliance with the requirements of RMO
No. 20-90 and RDAO No. 05-01.Nonetheless, respondent's acts also show its implied admission
of the validity of the waivers. First, respondent never raised the invalidity of the Waivers at the
earliest opportunity, either in its Protest to the PAN, Protest to the FAN, or Supplemental Protest
to the FAN. It thereby impliedly recognized these Waivers' validity and its representatives'
authority to execute them. Respondent only raised the issue of these Waivers' validity in its
Petition for Review filed with the Court of Tax Appeals. In fact, as pointed out by Justice Del
Rosario, respondent's Protest to the FAN clearly recognized the validity of the Waivers, when it
states

But, even as respondent is estopped from questioning the validity of the Waivers, the assessment
is nonetheless void because it was served beyond the supposedly extended period

The First Division of the Court of Tax Appeals found that "the date indicated in the
envelope/mail matter containing the FAN and the FLD is December 4, 2008, which is considered
as the date of their mailing." Since the validity period of the second Waiver is only until
November 30, 2008, prescription had already set in at the time the FAN and the FLD were
actually mailed on December 4, 2008.
The testimony of petitioner's witness, Dario A. Consignado, Jr., that he brought the mail matter
containing the FAN and the FLD to the post office on November 28, 2008 was considered self-
serving, uncorroborated by any other evidence.

WHEREFORE, the Petition is DENIED.

ASIAN TRANSMISSION CORPORATION VS. CIR (2018)

FACTS

ATC is a manufacturerof motor vehicle transmission component parts and engines of Mitsubishi 
vehicles.On January 3, 2003 and March 3, 2003, ATC filed its Annual Information Return of
Income Taxes Withheld on Compensation and Final Withholding Taxes and Annual Information
Return of Creditable Income Taxed Withheld (Expanded)/Income Payments Exempt from
Withholding Tax, respectively. On August 11, 2004, ATC received Letter of Authority [(LOA)]
No. 200000003557 where [the CIR] informed ATC that its revenue officers from the Large
Taxpayers Audit and Investigation Division II shall examine its books of accounts and other
accounting records for the taxable year 2002.Thereafter, [the CIR] issued a Preliminary
Assessment Notice (PAN) to ATC. Consequently, on various dates, ATC, through its Vice
President for Personnel and Legal Affairs, Mr. Roderick M. Tan, executed several documents
denominated as "Waiver of the Defense of Prescription Under the Statute of Limitations of the
National Internal Revenue Code".

Meanwhile, on February 28, 2008, ATC availed of the Tax Amnesty Program under Republic
Act No.9480.On July 15, 2008, ATC received a Formal Letter of Demand from [the] CIR for
deficiency [WTC] in the amount of Php62,977,798.02, [EWT] in the amount of
Php6,916,910.51, [FWT] in the amount of Php501,077.72. On August 14, 2008, ATC filed its
Protest Letter in regard thereto. Accordingly, on April 14, 2009, ATC received the Final
Decision on Disputed Assessment where [the]CIR found ATC liable to pay deficiency tax in the
amount of Php75,696,616.75.

Thus, on May 14, 2009, ATC filed an appeal letter/request for reconsideration with [the] CIR.
On April 10, 2012, ATC received the Decision of [the] CIR dated November 15, 2011, denying
its request for reconsideration. As such, on April 23, 2012, ATC filed the instant Petition for
Review (with Application for Preliminary Injunction and Temporary Restraining Order).On
November 28, 2014, the CTA in Division rendered its decision granting the petition for review
of ATC. It held that ATC was not estopped from raising the invalidity of the waivers inasmuch
as the Bureau of Internal Revenue (BIR) had itself caused the defects thereof.
On August 9, 2016, the CTA En Banc promulgated the assailed decision reversing and setting
aside the decision of the CTA in Division, and holding that the waivers were valid. It observed
that the CIR's right to assess deficiency withholding taxes for CY 2002 against ATC had not yet
prescribed.

ISSUES

WoN the waivers executed by ATC are valid

YES. In this case, the CTA in Division noted that the eight waivers of ATC contained

the following defects, to wit:

 1. The notarization of the Waivers was not in accordance with the 2004 Rules on Notarial

Practice;

 2. Several waivers clearly failed to indicate the date of acceptance by the Bureau of Internal

Revenue;

 3. The Waivers were not signed by the proper revenue officer; and

 4. The Waivers failed to specify the type of tax and the amount of tax due.

 We agree with the holding of the CTA En Banc that ATC's case was similar to the case of the
taxpayer involved in Commissioner of Internal Revenue v. Next Mobile Inc.

The foregoing defects noted in the waivers of ATC were not solely attributable to the CIR.
Indeed, although RDAO 01-05 stated that the waiver should not be accepted by the concerned
BIR office or official unless duly notarized, a careful reading of RDAO 01-05 indicates that the
proper preparation of the waiver was primarily the responsibility of the taxpayer or its authorized
representative signing the waiver. Such responsibility did not pertain to the BIR as the receiving
party. Consequently, ATC was not correct in insisting that the act or omission giving rise to the
defects of the waivers should be ascribed solely to the respondent CIR and her subordinates.

Moreover, the principle of estoppel was applicable. The execution of the waivers was to the
advantage of ATC because the waivers would provide to ATC the sufficient time to gather and
produce voluminous records for the audit. It would really be unfair, therefore, were ATC to be
permitted to assail the waivers only after the final assessment proved to be adverse.

Thus, the CTA En Banc did not err in ruling that ATC, after having benefitted from the defective
waivers, should not be allowed to assail them. In short, the CTA En Banc properly applied the
equitable principles of in pari delicto, unclean hands, and estoppel as enunciated in
Commissioner of Internal Revenue v. Next Mobile case.
COMMISSIONER OF INTERNAL REVENUE vs. AVON PRODUCTS
MANUFACTURING, INC

FACTS

Avon filed its Value Added Tax (VAT) Returns and Monthly Remittance Returns of Income Tax
Withheld for the taxable year 1999. It signed two (2) Waivers of the Defense of Prescription in
the year 2002 which expires in 2003. In 2004, Avon was served a Collection Letter where it was
required to pay P80,246,459.15. These deficiency assessments were the same deficiency taxes
covered by the Preliminary Assessment Notice (PAN) it received in 2002.

Avon then filed a protest against the PAN. Without ruling on Avon's protest, the Commissioner
(CIR) prepared the Formal Letter of Demand (FLD) and Final Assessment Notices (FAN).
Except for the amount of interest, the FANs were the same as the PAN. Avon protested the
FANs. It also resubmitted its protest to the PAN and adopted the same as its protest to the FANs.
A conference was held where Avon informed all the revenue officers that all the documents
which support its defenses had already been submitted. The latter also allegedly expressed to
cancel the assessments should Avon pay portions of the assessments. Avon then complied and
paid portions of the FANs. However, in a Memorandum, BIR recommended the enforcement and
collection of the assessments holding that Avon failed to submit supporting documents within
the 60day period under Section 228 of the Tax Code.

A Collection Letter was then sent to Avon which was claimed to have included even those
assessments which Avon had paid pursuant to the FANs. Avon requested the reconsideration and
withdrawal of the Collection Letter. It argued that it was devoid of legal and factual basis, and
was premature as the CIR had not yet acted on its protest against the FANs. The matter was
elevated to the CTA which ruled that there was no deprivation of due process in the issuance by
the CIR of the assessments as Avon was afforded an opportunity to explain and present its
evidence.

ISSUE

Whether or not Avon Products Manufacturing, Inc., by paying the other tax assessments covered
by the Waivers of the Defense of Prescription, is estopped from assailing their validity

RULING

As a general rule, petitioner has three (3) years from the filing of the return to assess taxpayers.
Section 203 of the Tax Code provides:

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

An exception to the rule of prescription is found m Section 222, paragraphs (b) and (d) of the
same Code, viz:

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

....

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its assessment after such time,
the tax may be assessed within the period agreed upon. The period so agreed upon may be
extended by subsequent written agreement made before the expiration of the period previously
agreed upon.

....

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided
in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court
within the period agreed upon in writing before the expiration of the five (5)-year period. The
period so agreed upon may be extended by subsequent written agreements made before the
expiration of the period previously agreed upon.

Thus, the period to assess and collect taxes may be extended upon the Commissioner and the
taxpayer's written agreement, executed before the expiration of the three (3)-year period.

In this case, two (2) waivers were supposedly executed by the parties extending the prescriptive
periods for assessment of income tax, VAT, and expanded and final withholding taxes to January
14, 2003, and then to April 14, 2003.

The Court of Tax Appeals, both the Special First Division and En Banc, declared the two (2)
Waivers of the Defense of Prescription defective and void, for the Commissioner's failure to
furnish signed copies of the Waivers to Avon, in violation of the requirements provided in
Revenue Memorandum Order No. 20-90.

Indeed, a Waiver of the Defense of Prescription is a bilateral agreement between a taxpayer and
the Bureau of Internal Revenue to extend the period of assessment and collection to a certain
date. "The requirement to furnish the taxpayer with a copy of the waiver is not only to give
notice of the existence of the document but of the acceptance by the [Bureau of Internal
Revenue] and the perfection of the agreement."
Here, Avon claimed that it did not receive any benefit from the waivers. On the contrary, there
was even a drastic increase in the assessed deficiency taxes when the Commissioner increased
the alleged sales discrepancy from P15,700,000.00 in the preliminary findings to P62,900,000.00
in the Preliminary Assessment Notice and Final Assessment Notices. Furthermore, Avon was
compelled to pay a portion of the deficiency assessments "in compliance with the Revenue
Officer's condition in the hope of cancelling the assessments on the non-existent sales
discrepancy." Under these circumstances, Avon's payment of an insignificant portion of the
assessment cannot be deemed an admission or recognition of the validity of the waivers.