TAX REMEDIES (National Internal
Revenue Code)
I. BUREAU OF INTERNAL REVENUE
A. Organizational Structure
1. Chief Officials of the Bureau of
Internal Revenue (Section 3)
2. Agents of the Commissioner of
Internal Revenue (Section 12)
B. Powers and Duties of the BIR
1. Powers and Duties of the Bureau of
Internal Revenue (Section 2)
2. Power of the Commissioner to
Interpret Tax Laws and to Decide
Tax Cases (Section 4)
3. Power of the Commissioner to
Obtain Information, and to
Summon, Examine, and Take
Testimony of Persons (Section 5)
a. CIR v. Raul M. Gonzales, G.R. No.
177279, 13 October 2010
CIR V. RAUL M. GONZALES
G.R. NO. 177279, 13 OCTOBER 2010
VILLARAMA, JR., J
FACTS: Pursuant to Letter of Authority issued
by then Commissioner of Internal Revenue
(petitioner) Dakila B. Fonacier, and officers of
the Tax Fraud Division (TFD), National Office,
conducted a fraud investigation against
respondent L. M. Camus Engineering
Corporation (LMCEC) for the taxable years 1997,
1998 and 1999. The audit and investigation
against LMCEC were precipitated by the
information provided by an "informer" that
LMCEC had substantial under declared income
for the said period.
LMCEC failed and refused to pay the deficiency
tax assessment which had become final and
executory as a result of the said taxpayer's
failure to file a protest thereon within the 30-day
reglementary period contending that LMCEC
cannot be held liable whatsoever for the alleged
tax deficiency which had become due and
demandable. They also assail as invalid the
assessment notices which bear no serial
numbers. CIR disagreed with the contention of
LMCEC that the complaint filed is not criminal
in nature, pointing out that LMCEC and its
officers Camus and Mendoza were being charged
for the criminal offenses defined and penalized
under Sections 254 (Attempt to Evade or Defeat
Tax) and 255 (Willful Failure to Pay Tax) of the
NIRC. On the lack of control number in the
assessment notice, CIR explained that such is a
mere office requirement in the Assessment
Service for the purpose of internal control and
monitoring; hence, the unnumbered assessment
notices should not be interpreted as irregular or
anomalous
On September 22, 2003, the Chief State
Prosecutor issued a Resolution finding no
sufficient evidence to establish probable cause
against respondents LMCEC, Camus and
Mendoza. On the required prior determination of
fraud, the Chief State Prosecutor ruled that
there was no prior determination of fraud. CIR
appealed to respondent Secretary of Justice but
the latter denied its petition for review
ISSUE: Whether LMCEC and its corporate
officers may be prosecuted for violation of
Sections 254 (Attempt to Evade or Defeat Tax)
and 255 (Willful Failure to Supply Correct and
Accurate Information and Pay Tax).
RULING: Yes. In the Details of Discrepancies
attached as Annex B of the PAN, private
respondents were already notified that inasmuch
as the revenue officers were not given the
opportunity to examine LMCECs books of
accounts, accounting records and other
documents, said revenue officers gathered
information from third parties. Such procedure is
authorized under Section 5 of the NIRC, which
provides:
SEC. 5. Power of the Commissioner to
Obtain Information, and to Summon,
Examine, and Take Testimony of Persons.
In ascertaining the correctness of any
return, or in making a return when none
has been made, or in determining the
liability of any person for any internal
revenue tax, or in collecting any such
liability, or in evaluating tax compliance,
the Commissioner is authorized:
(A) To examine any book, paper,
record or other data which may be
relevant or material to such
inquiry;
(B) To obtain on a regular basis
from any person other than the
 person whose internal revenue tax
liability is subject to audit or
investigation, or from any office or
officer of the national and local
governments, government agencies
and instrumentalities, including
the Bangko Sentral ng Pilipinas
and government-owned or - does not preclude this Court and the CA from
controlled corporations, any
information such as, but not
limited to, costs and volume of
production, receipts or sales and
gross incomes of taxpayers, and
the names, addresses, and
financial statements of
corporations, mutual fund
companies, insurance companies,
regional operating headquarters of
multinational companies, joint
accounts, associations, joint
ventures or consortia and
registered partnerships, and their
members;
(C) To summon the person liable
for tax or required to file a return,
or any officer or employee of such
person, or any person having
possession, custody, or care of the
books of accounts and other
accounting records containing
entries relating to the business of
the person liable for tax, or any
other person, to appear before the
Commissioner or his duly
authorized representative at a
time and place specified in the
summons and to produce such
books, papers, records, or other
data, and to give testimony;
(D) To take such testimony of the
person concerned, under oath, as
may be relevant or material to
such inquiry
The determination of probable cause is part of
the discretion granted to the investigating
prosecutor and ultimately, the Secretary of
Justice. However, this Court and the CA possess
the power to review findings of prosecutors in
preliminary investigations. Although policy
considerations call for the widest latitude of
deference to the prosecutor’s findings, courts
should never shirk from exercising their power,
when the circumstances warrant, to determine
whether the prosecutor’s findings are supported
by the facts, or by the law. In so doing, courts do
not act as prosecutors but as organs of the
judiciary, exercising their mandate under the
Constitution, relevant statutes, and remedial
rules to settle cases and controversies. Clearly,
the power of the Secretary of Justice to review
intervening and exercising our own powers of
review with respect to the DOJs findings, such as
in the exceptional case in which grave abuse of
discretion is committed, as when a clear
sufficiency or insufficiency of evidence to support
a finding of probable cause is ignored.
b. Fitness by Design v. CIR, G.R.
No. 177982, 17 October 2008
FITNESS BY DESIGN V. CIR
G.R. NO. 177982, 17 OCTOBER 2008
CARPIO MORALES, J
FACTS: On March 17, 2004, the Commissioner
on Internal Revenue (respondent) assessed
Fitness by Design, Inc. (petitioner) for deficiency
income taxes for the tax year 1995 in the total
amount of ₱10,647,529.69. Petitioner protested
the assessment on the ground that it was issued
beyond the three-year prescriptive. On February
1, 2005, respondent issued a warrant of distraint
and/or levy against Fitness by Design. In his
answer, CIR alleged that failure of Fitness by
Design to file a VAT return and for filing a
fraudulent income tax return for the year 1995,
the corresponding taxes may be assessed at any
time within ten (10) years after the discovery of
such omission or fraud pursuant to Section
222(a) of the 1997 Tax Code. The subject
deficiency tax assessments have already become
final, executory and demandable for failure of the
petitioner to file a protest within the
reglementary period provided for by law. Thus,
the CIR has legal basis to collect the tax liability
either by distraint and levy or civil action.
The Bureau of Internal Revenue (BIR) filed on
March 10, 2005 a criminal complaint before the
Department of Justice against the officers and
accountant of petitioner for violation of the
provisions of "The National Internal Revenue
Code of 1977, as amended, covering the taxable
year 1995." During the preliminary hearing,
Fitness by Design’s former bookkeeper attested
that a former colleague – certified public
accountant Leonardo Sablan (Sablan) – illegally
took custody of petitioner’s accounting records,
invoices, and official receipts and turned them
over to the BIR.
Fitness subpoenaed Sablan for the hearing
before the CTA but he failed to appear. Fitness
submitted written interrogatories addressed to
Sablan but was denied by the CTA as it sought
that such testimony, documents, and admissions
sought are not relevant and it violates Section 2
of Republic Act No. 2338 proscribing the
revelation of identities of informers of violations
of internal revenue laws.
ISSUE: Whether or not the BIR can obtain
information without the consent of Fitness by
Design?
RULING: Yes. The questioned resolutions were
not tainted by arbitrariness.
The law allows the BIR access to all relevant or
material records and data in the person of the
taxpayer (pursuant to Section 5 of the Tax Code),
and the BIR can accept documents which cannot
be admitted in a judicial proceeding where the
Rules of Court are strictly observed. To require
the consent of the taxpayer would defeat the
intent of the law to help the BIR assess and
collect the correct amount of taxes.
A CTA Case is not a criminal prosecution where
petitioner can cross examine the witness against
him and to have compulsory process issued to
secure the attendance of witnesses and the
production of other evidence in his behalf does
not lie. Petition is DISMISSED.
4. Power of the Commissioner to Make
Assessments and Prescribe Additional
Requirements for Tax Administration and
Enforcement (Section 6)
a. Revenue Memorandum
Circular No. 23-2000
b. Oceanic Wireless Network, Inc.
v. CIR, G.R. No. 148380, 9
December 2005
OCEANIC WIRELESS NETWORK, INC. V.
CIR
G.R. NO. 148380, 9 DECEMBER 2005
AZCUNA, J
FACTS: Petitioner received from the Bureau of
Internal Revenue (BIR) deficiency tax
assessments for the taxable year 1984. Petitioner
filed a protest against the tax assessments and
requested a reconsideration or its cancellation in
a letter to the BIR Commissioner dated April 12,
1988. Acting in behalf of the BIR Commissioner,
the then Chief of the BIR Accounts Receivable
and Billing Division, Mr. Severino B. Buot,
reiterated the tax assessments while denying
petitioner's request for reinvestigation. He
likewise demanded the petitioner to pay the total
amount of P8, 644,998.71 within ten (10) days
from receipt thereof, otherwise the case shall be
referred to the Collection Enforcement Division
of the BIR National Office for the issuance of a
warrant of distraint and Levy without further
notice. Upon petitioner’s failure to pay the
subject tax assessments within the prescribed
period, the Assistant Commissioner for
Collection, acting for the Commissioner of
Internal Revenue, issued the corresponding
warrants of distraint and/or levy and
garnishment. These were served on petitioner on
October 10, 1991 and October 17, 1991,
respectively.
Petitioner filed a Petition for Review with the
Court of Tax Appeals (CTA) to contest the
issuance of the warrants to enforce the collection
of the tax assessments.
The CTA dismissed the petition for lack of
jurisdiction in a decision dated September 16,
1994, declaring that said petition was filed
beyond the thirty (30)-day period reckoned from
the time when the demand letter of January 24,
1991 by the Chief of the BIR Accounts Receivable
and Billing Division was presumably received.
ISSUE: Whether the demand letter for tax
deficiency assessments issued and signed by a
subordinate officer who was acting in behalf of
the Commissioner of Internal Revenue, is
deemed final and executory and subject to an
appeal to the Court of Tax Appeals or not.
RULING: YES. A demand letter for payment of
delinquent taxes may be considered a decision on
a disputed or protested assessment. The
determination on whether or not a demand letter
is final is conditioned upon the language used or
the tenor of the letter being sent to the taxpayer.
We laid down the rule that the Commissioner of
Internal Revenue should always indicate to the
taxpayer in clear and unequivocal language what
constitutes his final determination of the
disputed assessment, thus:
. . . we deem it appropriate to state that
the Commissioner of Internal Revenue
should always indicate to the taxpayer in
clear and unequivocal language whenever
his action on an assessment questioned by
a taxpayer constitutes his final
determination on the disputed
assessment, as contemplated by Sections
7 and 11 of Republic Act No. 1125, as
amended. On the basis of his statement
indubitably showing that the
Commissioner’s communicated action is
his final decision on the contested
assessment, the aggrieved taxpayer would
then be able to take recourse to the tax
court at the opportune time. Without
needless difficulty, the taxpayer would be
able to determine when his right to appeal
to the tax court accrues.
The rule of conduct would also obviate all desire
and opportunity on the part of the taxpayer to
continually delay the finality of the assessment –
and, consequently, the collection of the amount
demanded as taxes – by repeated requests for
recomputation and reconsideration. On the part
of the Commissioner, this would encourage his
office to conduct a careful and thorough study of
every questioned assessment and render a
correct and definite decision thereon in the first
instance. This would also deter the
Commissioner from unfairly making the
taxpayer grope in the dark and speculate as to
which action constitutes the decision appealable
to the tax court. Of greater import, this rule of
conduct would meet a pressing need for fair play,
regularity, and orderliness in administrative
action.
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.
The above conclusion finds support
in Commissioner of Internal Revenue v. Ayala
Securities Corporation, where we held:
The letter of February 18, 1963 (Exh. G),
in the view of the Court, is tantamount to
a denial of the reconsideration or
[respondent corporation’s]…protest o[f]
the assessment made by the petitioner,
considering that the said letter [was] in
itself a reiteration of the demand by the
Bureau of Internal Revenue for the
settlement of the assessment already
made, and for the immediate payment of
the sum of P758,687.04 in spite of the
vehement protest of the respondent
corporation on April 21, 1961. This
certainly is a clear indication of the firm
stand of petitioner against the
reconsideration of the disputed
assessment…This being so, the said letter
amount[ed] to a decision on a disputed or
protested assessment, and, there, the
court a quo did not err in taking
cognizance of this case.
Similarly, in Surigao Electric Co., Inc v. Court of
Tax Appeals, and in CIR v. Union Shipping
Corporation, we held:
". . . In this letter, the commissioner not
only in effect demanded that the
petitioner pay the amount of ₱11,533.53
but also gave warning that in the event it
failed to pay, the said commissioner would
be constrained to enforce the collection
thereof by means of the remedies provided
by law. The tenor of the letter, specifically
the statement regarding the resort to
legal remedies, unmistakably indicate[d]
the final nature of the determination
made by the commissioner of the
petitioner’s deficiency franchise tax
liability."
The demand letter received by petitioner verily
signified a character of finality. Therefore, it was
tantamount to a rejection of the request for
reconsideration. As correctly held by the Court of
Tax Appeals, "while the denial of the protest was
in the form of a demand letter, the notation in
the said letter making reference to the protest
filed by petitioner clearly shows the intention of
the respondent to make it as [his] final decision."
This now brings us to the crux of the matter as to Section 6 of the Code further provides:
whether said demand letter indeed attained "SEC. 6. Power of the Commissioner to Make
finality despite the fact that it was issued and Assessments and Prescribe Additional
signed by the Chief of the Accounts Receivable Requirements for Tax Administration and
and Billing Division instead of the BIR Enforcement. –
Commissioner. (A) Examination of Returns and
The general rule is that the Commissioner of Determination of Tax Due. - After a
Internal Revenue may delegate any power vested return has been filed as required under
upon him by law to Division Chiefs or to officials the provisions of this Code,
of higher rank. He cannot, however, delegate the the Commissioner or his duly
four powers granted to him under the National authorized representative may
Internal Revenue Code (NIRC) enumerated in authorize the examination of any
Section 7. taxpayer and the assessment of the
As amended by Republic Act No. 8424, Section 7 correct amount of tax; Provided, however,
of the Code authorizes the BIR Commissioner to That failure to file a return shall not
delegate the powers vested in him under the prevent the Commissioner from
pertinent provisions of the Code to any authorizing the examination of any
subordinate official with the rank equivalent to a taxpayer.
division chief or higher, except the following: The tax or any deficiency tax so assessed shall be
(a) The power to recommend the paid upon notice and demand from
promulgation of rules and regulations by the Commissioner or from his duly
the Secretary of Finance; authorized representative. . .." (Emphasis
(b) The power to issue rulings of first supplied)
impression or to reverse, revoke or modify Thus, the authority to make tax assessments
any existing ruling of the Bureau; may be delegated to subordinate officers. Said
(c) The power to compromise or abate assessment has the same force and effect as that
under Section 204(A) and (B) of this Code, issued by the Commissioner himself, if not
any tax deficiency: Provided, reviewed or revised by the latter such as in this
however, that assessments issued by the case.
Regional Offices involving basic deficiency A request for reconsideration must be made
taxes of five hundred thousand pesos within thirty (30) days from the taxpayer’s
(P500,000) or less, and minor criminal receipt of the tax deficiency assessment,
violations as may be determined by rules otherwise, the decision becomes final,
and regulations to be promulgated by the unappealable and therefore, demandable. A tax
Secretary of Finance, upon the assessment that has become final, executory and
recommendation of the Commissioner, enforceable for failure of the taxpayer to assail
discovered by regional and district the same as provided in Section 228 can no
officials, may be compromised by a longer be contested, thus:
regional evaluation board which shall be "SEC. 228. Protesting of Assessment. –
composed of the Regional Director as When the Commissioner or his duly
Chairman, the Assistant Regional authorized representative finds that
Director, heads of the Legal, Assessment proper taxes should be assessed, he shall
and Collection Divisions and the Revenue first notify the taxpayer of his
District Officer having jurisdiction over findings…Such assessment may be
the taxpayer, as members; and protested administratively by filing a
(d) The power to assign or reassign request for reconsideration or
internal revenue officers to reinvestigation within thirty (30) days
establishments where articles subject to from receipt of the assessment in such
excise tax are produced or kept. form and manner as may be prescribed by
It is clear from the above provision that the act of implementing rules and regulations.
issuance of the demand letter by the Chief of the Within sixty (60) days from filing of the
Accounts Receivable and Billing Division does protest, all relevant supporting
not fall under any of the exceptions that have documents shall have been submitted;
been mentioned as non-delegable.
 otherwise, the assessment shall become
final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred (180) days
from submission of documents, the taxpayer
adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision,
or from the lapse of the one hundred eighty (180)
- day period; otherwise, the decision shall become
final, executory and demandable."
Here, petitioner failed to avail of its right to
bring the matter before the Court of Tax Appeals
within the reglementary period upon the receipt
of the demand letter reiterating the assessed
delinquent taxes and denying its request for
reconsideration which constituted the final
determination by the Bureau of Internal
Revenue on petitioner’s protest. Being a final
disposition by said agency, the same would have
been a proper subject for appeal to the Court of
Tax Appeals.
The rule is that for the Court of Tax Appeals to
acquire jurisdiction, an assessment must first be
disputed by the taxpayer and ruled upon by the
Commissioner of Internal Revenue to warrant a
decision from which a petition for review may be
taken to the Court of Tax Appeals. Where an
adverse ruling has been rendered by the
Commissioner of Internal Revenue with
reference to a disputed assessment or a claim for
refund or credit, the taxpayer may appeal the
same within thirty (30) days after receipt thereof
c. CIR v. Kudos Metal Corp., G.R.
No. 178087, 5 May 2010
CIR V. KUDOS METAL CORP.
G.R. NO. 178087, 5 MAY 2010
DEL CASTILLO, J
FACTS: Kudos Metal Corp’s records were
reviewed and audited after it failed to comply
with the three Notices of Presentation of Records
served by the BIR.
Kudos Metal Corp.’s accountant, Nelia Pasco
executed a Waiver of the Defense of Prescription
on December 10, 2001 which was notarized on
January 22, 2002. It was received by the BIR
Enforcement Service on January 31, 2002 and by
the BIR Tax Fraud Division on February 4, 2002,
and accepted by the Assistant Commissioner of
the Enforcement Service, Percival T. Salazar.
A second Waiver of Defense of Prescription was
again executed by Pasco on February 18, 2003,
notarized on February 19, 2003, received by the
BIR Tax Fraud Division on February 28, 2003
and accepted by Assistant Commissioner
Salazar.
The BIR issued a Preliminary Assessment Notice
for the taxable year 1998 against the Kudos
Metal Corp. This was followed by a Formal
Letter of Demand with Assessment Notices for
taxable year 1998, dated September 26, 2003
which was received by respondent on November
12, 2003.
ISSUE: Whether the Assistant Commissioner of
the Enforcement Service is authorized to sign a
Waiver of the Defense of Presentation.
Note: This issue was not raised to the Supreme
Court but was decided upon by the CTA, En
Banc.
RULING: Yes, the Assistant Commissioner of
the Enforcement Service is authorized to
sign the waiver.
The CTA found that the Assistant
Commissioner of the Enforcement Service is
authorized to sign the waiver pursuant to
RDAO No. 05-01, which provides in part as
follows:
A. For National Office cases:
Designated Revenue Official
1. Assistant Commissioner (ACIR),
For tax fraud and policy Enforcement
Service cases
2. ACIR, Large Taxpayers Service For
large taxpayers’ cases other than
those cases falling under Subsection B
hereof
3. ACIR, Legal Service For cases
pending verification and awaiting
resolution of certain legal issues prior
to prescription and for
issuance/compliance of Subpoena
Duces Tecum
4. ACIR, Assessment Service (AS) For
cases which are pending in or subject
to review or approval by the ACIR, AS
Based on the foregoing, the Assistant
Commissioner, Enforcement Service is
authorized to sign waivers in tax fraud cases. A
perusal of the records reveals that the
investigation of the subject deficiency taxes in
this case was conducted by the National
Investigation Division of the BIR, which was
formerly named the Tax Fraud Division. Thus,
the subject assessment is a tax fraud case.
d. Republic v. Aquafresh Seafoods,
Inc., G.R. No. 170389, 20
October 2010
REPUBLIC V. AQUAFRESH SEAFOODS,
INC.
G.R. NO. 170389, 20 OCTOBER 2010
PERALTA, J
FACTS: Aquafresh Seafoods Inc. sold to Philips
Seafoods, Inc. two parcels of land, including
improvements thereon, for Php 3,100, 000.00.
Aquafresh paid Php 186,000.00, representing the
Capital Gains Tax (CGT) and Php 46,500.00,
representing the Documentary Stamp Tax (DST)
due from the said sale.
The Bureau of Internal Revenue (BIR) received a
report that the lots sold were undervalued for
taxation purposes. After an investigation, BIR
concluded that the subject properties were
commercial with a zonal value of Php 2,000.00
per square meter. BIR assessed Aquafresh of
CGT and DST defencies in the sum of Php
1,372,171.46 and Php 356,267.62, respectively.
Aquafresh protested the assessments.
Aquafresh's argued that the subject properties
were located in Barrio Banica, Roxas, where the
pre-defined zonal value was Php 650.00 per
square meter based on the ―Revised Zonal Values
of Real Properties in the City of Roxas‖.
Aquafresh argued that since there was already a
pre-defined zonal value for properties located in
Barrio Banica, the BIR officials had no business
re-classifying the subject properties to
commercial. The CTA ruled in favor of
respondent. Hence, the petitioner filed the
instant petition.
ISSUES:
1.) Whether the requirement of consultation with
competent appraisers both from private and
public sectors in determining the fair market
value of the subject lots were applicable in the
instant case.
2.) Whether the CTA erred in applying the fair
market value based on the zonal valuation of
residential land as tax base for computation of
the deficiencies.
RULING:
1.) Yes.
While the Commission of Internal Revenue has
the authority to prescribe real property values
and divide the Philippine into zones as provided
under Section 6(E) of the National Internal
Revenue Code, the law is clear that the same has
to be done upon consultation with competent
appraisers both from the public and private
sectors. Petitioner’s act of re-classifying the
subject properties from residential to commercial
cannot be done without first complying with the
procedures prescribed by law.
2.) No.
As observed by the CTA en banc, that the
―Revised Zonal Values of Real Properties‖ was
drafted by petitioner, with representatives from
both public and private sectors, duly satisfied the
requirement of the law for its validity. It
indicates the zonal values and classified the
properties in Barrio Banica as residential.
Hence, it is proper application.
As regards the contention of petitioner that the
act of classifying the subject properties was in
accordance with the section 1(b) and 2 Zonal
Value Guidelines, the Court ruled that it was not
applicable in the instant case. Section 1(b) does
not apply because said proviso operates only
when no zonal valuation has been prescribed and
section 2 shall apply only when the real property
is located in an area or zone where the properties
are not yet classified and their respective zonal
valuation are not yet determined.
5. Authority of the
Commissioner to Delegate Power
(Section 7)
The Commissioner may delegate
the powers vested in him under
the pertinent provisions of this
Code to any or such subordinate
officials with the rank equivalent
to a division chief or higher,
subject to such limitations and
restrictions as may be imposed
under rules and regulations to be
promulgated by the Secretary of
Finance, upon recommendation of
the Commissioner: Provided,
however, That the following
powers of the Commissioner shall excise tax are produced or
not be delegated: kept.

(a) The power to

recommend the
6. Duty of the Commissioner to Ensure the
promulgation of rules and
Provision and Distribution of Forms, Receipts,
regulations by the
Certificates, and Appliances, and the
Secretary of Finance;
Acknowledgment of Payment of Taxes (Section 8)
(b) The power to issue
(A) Provision and Distribution
rulings of first impression
to Proper-Officials. - Any law to
or to reverse, revoke or
the contrary notwithstanding, it
modify any existing ruling
shall be the duty of the
of the Bureau;
Commissioner, among other
things, to prescribe, provide, and
(c) The power to
distribute to the proper officials
compromise or abate,
the requisite licenses; internal
under Sec. 204 (A) and (B)
revenue stamps; unique, secure
of this Code, any tax
and non-removable identification
liability: Provided,
markings (hereafter called unique
however, That
identification markings), such as
assessments issued by the
codes or stamps, be affixed to or
regional offices involving
form part of all unit packets and
basic deficiency taxes of
packages and any outside
Five hundred thousand
packaging of cigarettes and bottles
pesos (P500,000) or less,
of distilled spirits; labels and other
and minor criminal
forms; certificates; bonds; records;
violations, as may be
invoices; books; receipts;
determined by rules and
instruments; appliances and
regulations to be
apparatus used in administering
promulgated by the
the laws falling within the
Secretary of finance, upon
jurisdiction of the Bureau. For this
recommendation of the
purpose, internal revenue stamps,
Commissioner, discovered
or other markings and labels shall
by regional and district
be caused by the Commissioner to
officials, may be
be printed with adequate security
compromised by a regional
features.
evaluation board which
Internal revenue stamps, whether
shall be composed of the
of a bar code or fuson design, or
Regional Director as
other markings shall be firmly and
Chairman, the Assistant
conspicuously affixed or printed on
Regional Director, the
each pack of cigars and cigarettes
heads of the Legal,
and bottles of distilled spirits
Assessment and Collection
subject to excise tax in the manner
Divisions and the Revenue
and form as prescribed by the
District Officer having
Commissioner, upon approval of
jurisdiction over the
the Secretary of Finance.
taxpayer, as members; and
To further improve tax
(d) The power to assign or
administration, cigarette and
reassign internal revenue
alcohol manufacturers shall be
officers to establishments
required to install automated
where articles subject to
volume-counters of packs and
 bottles to deter over-removals and
misdeclaration of removals.
(B) Receipts for Payment
Mode. - It shall be the duty of the
Commissioner or his duly
authorized representative or an
authorized agent bank to whom
any payment of any tax is made
under the provisions of this Code
to acknowledge the payment of
such tax, expressing the amount
paid and the particular account for
which such payment was made in
a form and manner prescribed
therefor by the Commissioner.
II. PRESCRIPTIVE PERIODS
A. Imprescriptibility of taxes
Exceptions:
1. Section 222
Exceptions as to Period of
Limitation of Assessment and
Collection of Taxes.
(a) In the case of a false or
fraudulent return with intent to
evade tax or of failure to file a
return, the tax may be assessed, or
a proceeding in court for the
collection of such tax may be filed
without assessment, at any time
within ten (10) years after the
discovery of the falsity, fraud or
omission: Provided, That in a fraud
assessment which has become final
and executory, the fact of fraud
shall be judicially taken cognizance
of in the civil or criminal action for
the collection thereof.
(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.
(c) Any internal revenue tax which
has been assessed within the
period of limitation as prescribed
in paragraph (a) hereof may be
collected by distraint or levy or by
a proceeding in court within five
(5) years following the assessment
of the tax.
(d) 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.
(e) Provided, however, that nothing
in the immediately preceding and
paragraph (a) hereof shall be
construed to authorize the
examination and investigation or
inquiry into any tax return filed in
accordance with the provisions of
any tax amnesty law or decree.
2. Section 430, RA No. 10863
Sec. 430. Period of Limitation. –
In the absence of fraud and
when the goods have been
finally assessed and released,
the assessment shall be
conclusive upon all parties
three (3) years from the date of
final payment of duties and
taxes, or upon completion of
the post clearance audit.
3. Section 194, LGC
Periods of Assessment and
Collection. -
(a) Local taxes, fees, or
charges shall be assessed
within five (5) years from
the date they became due.
No action for the collection
of such taxes, fees, or
charges, whether
administrative or judicial,
shall be instituted after the
expiration of such period:
Provided, That. taxes, fees
or charges which have
accrued before the
effectivity of this Code may
be assessed within a period
of three (3) years from the
date they became due.
(b) In case of fraud or intent
to evade the payment of
taxes, fees, or charges, the
same may be assessed
within ten (10) years from
discovery of the fraud or
intent to evade payment.
(c) Local taxes, fees, or
charges may be collected
within five (5) years from
the date of assessment by
administrative or judicial
action. No such action shall
be instituted after the
expiration of said period:
Provided, however, That,
taxes, fees or charges
assessed before the
effectivity of this Code may
be collected within a period
of three (3) years from the
date of assessment.
(d) The running of the
periods of prescription
provided in the preceding
paragraphs shall be
suspended for the time
during which:
(1) The treasurer is
legally prevented
from making the
assessment of
collection;
(2) The taxpayer
requests for a
reinvestigation and
executes a waiver in
writing before
expiration of the
period within which
to assess or collect;
and
(3) The taxpayer is
out of the country or
otherwise cannot be
located.
4. Section 270, LGC
Periods Within Which To
Collect Real Property Taxes. -
The basic real property tax and
any other tax levied under this
Title shall be collected within five
(5) years from the date they
become due. No action for the
collection of the tax, whether
administrative or judicial, shall be
instituted after the expiration of
such period. In case of fraud or
intent to evade payment of the tax,
such action may be instituted for
the collection of the same within
ten (10) years from the discovery of
such fraud or intent to evade
payment.
The period of prescription within
which to collect shall be suspended
for the time during which:
(1) The local treasurer is
legally prevented from
collecting the tax;
(2) The owner of the
property or the person
having legal interest
therein requests for
reinvestigation and
executes a waiver in writing
before the expiration of the
period within which to
collect; and
(3) The owner of the
property or the person
having legal interest
therein is out of the country
 or otherwise cannot be
located.
B. Sections 203, 222, 223
SEC. 223. Suspension of
Running of Statute of
Limitations. - The running of the
Statute of Limitations provided in
Sections 203 and 222 on the
making of assessment and the
beginning of distraint or levy a
proceeding in court for collection,
in respect of any deficiency, shall
be suspended for the period during
which the Commissioner is
prohibited from making the
assessment or beginning distraint
or levy or a proceeding in court and
for sixty (60) days thereafter; when
the taxpayer requests for a
reinvestigation which is granted by
the Commissioner; when the
taxpayer cannot be located in the
address given by him in the return
filed upon which a tax is being
assessed or collected: Provided,
that, if the taxpayer informs the
Commissioner of any change in
address, the running of the Statute
of Limitations will not be
suspended; when the warrant of
distraint or levy is duly served
upon the taxpayer, his authorized
representative, or a member of his
household with sufficient
discretion, and no property could
be located; and when the taxpayer
is out of the Philippines.
1. Fraud v. Fraudulent Return
2. See Section 248(B)
(B) In case of willful neglect
to file the return within the
period prescribed by this
Code or by rules and
regulations, or in case a
false or fraudulent return is
willfully made, the penalty
to be imposed shall be fifty
percent (50%) of the tax or
of the deficiency tax, in case,
any payment has been made
on the basis of such return
before the discovery of the
falsity or fraud: Provided,
That a substantial under-
declaration of taxable sales,
receipts or income, or a
substantial overstatement
of deductions, as determined
by the Commissioner
pursuant to the rules and
regulations to be
promulgated by the
Secretary of Finance, shall
constitute prima facie
evidence of a false or
fraudulent return: Provided,
further, That failure to
report sales, receipts or
income in an amount
exceeding thirty percent
(30%) of that declared per
return, and a claim of
deductions in an amount
exceeding (30%) of actual
deductions, shall render the
taxpayer liable for
substantial under-
declaration of sales, receipts
or income or for
overstatement of
deductions, as mentioned
herein.
3. Cases:
a. Talento v. Escalada
556 SCRA 491 (2008)
EMERLINDA S. TALENTO, IN HER
CAPACITY AS THE PROVINCIAL
TREASURER OF THE PROVINCE OF
BATAAN V. HON. REMIGIO M. ESCALADA,
JR., PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF BATAAN,
BRANCH 3, AND PETRON CORPORATION
G.R. NO. 180884 (JUNE 27, 2008)
YNARES-SANTIAGO, J.
FACTS: Petron received from the Provincial
Assessor’s Office of Bataan a notice of revised
assessment over its machineries and pieces of
equipment. Based on said revised assessment,
Provincial Treasurer of Bataan issued a notice
informing Petron that it has a deficiency real
property tax due. Petron was given 60 days
within which to file an appeal with the Local
Board of Assessment Appeals (LBAA). Petron
filed a petition with the LBAA contesting the
revised assessment. It also sent a letter to
Provincial Treasurer stating that in view of the
pendency of its appeal with the LBAA, any action
on the subject properties would be premature.
But Petron received a notice of sale of its
properties from the Provincial Treasurer. Petron
filed with the RTC for prohibition with prayer for
TRO and preliminary injunction. RTC ruled in
favor of Petron. The Provincial Treasurer
received the order of the RTC on November 6,
2007. Hence, it had only up to November 21,
2007 to file a petition for review. However, the
petition was filed to the Supreme Court only on
January 4, 2008, or 43 days late.
ISSUE: Whether the action of the Provincial
Assessor’s Office against Petron already
prescribed.
RULING: Yes.
The Provincial Treasurer’s failure to file an
appeal within the reglementary period rendered
the order of the trial court final and executory,
justifying the dismissal of the Provincial
Treasurer’s petition.
b. CIR v. Goodrich, Phils.,
104171, 24 February 1999
COMMISSIONER OF INTERNAL REVENUE
V. B.F. GOODRICH PHILS., INC. (NOW
SIME DARBY INTERNATIONAL TIRE CO.,
INC.) AND THE COURT OF APPEALS
G.R. NO. 104171 FEBRUARY 24, 1999
PANGANIBAN, J.
FACTS: The facts undisputed. Private
Respondent BF Goodrich Phils., Inc. (now Sime
Darby International Tire Co, Inc.), was an
American-owned and controlled corporation
previous to July 3, 1974. As a condition for
approving the manufacture by private
respondent of tires and other rubber products,
the Central Bank of the Philippines required
that it should develop a rubber plantation. In
compliance with this requirement, private
respondent purchased from the Philippine
government in 1961, under the Public Land Act
and the Parity Amendment to the 1935
Constitution, certain parcels of land located in
Tumajubong, Basilan, and there developed a
rubber plantation.
More than a decade later, on August 2, 1973, the
justice secretary rendered an opinion stating
that, upon the expiration of the Parity
Amendment on July 3, 1974, the ownership
rights of Americans over public agricultural
lands, including the right to dispose or sell their
real estate, would be lost. On the basis of this
Opinion, private respondent sold to Siltown
Realty Philippines, Inc. on January 21, 1974, its
Basilan landholding for P500,000 payable in
installments. In accord with the terms of the
sale, Siltown Realty Philippines, Inc. leased the
said parcels of land to private respondent for a
period of 25 years, with an extension of another
25 years at the latter's option.
Based on the BIR's Letter of Authority No. 10115
dated April 14, 1975, the books and accounts of
private respondent were examined for the
purpose of determining its tax liability for
taxable year 1974. The examination resulted in
the April 23, 1975 assessment of private
respondent for deficiency income tax in the
amount of P6,005.35, which it duly paid.
Subsequently, the BIR also issued Letters of
Authority Nos. 074420 RR and 074421 RR and
Memorandum Authority Reference No. 749157
for the purpose of examining Siltown's business,
income and tax liabilities. On the basis of this
examination, the BIR commissioner issued
against private respondent on October 10, 1980,
an assessment for deficiency in donor's tax in the
amount of P1,020,850, in relation to the
previously mentioned sale of its Basilan
landholdings to Siltown. Apparently, the BIR
deemed the consideration for the sale
insufficient, and the difference between the fair
market value and the actual purchase price a
taxable donation.
In a letter dated November 24, 1980, private
respondent contested this assessment. On April
9, 1981, it received another assessment dated
March 16, 1981, which increased to P 1,092,949
the amount demanded for the alleged deficiency
donor's tax, surcharge, interest and compromise
penalty.
Private respondent appealed the correctness and
the legality of these last two assessments to the
CTA. The CTA modified the decision of the CIR
and ordered petitioner to pay the amount of
P1,311,179.01 plus 10% surcharge and 20%
annual interest from March 16, 1981 until fully
paid.
Undaunted, private respondent elevated the
matter to the Court of Appeals, which reversed
the CTA.
Hence, this Petition for Review under Rule 45 of
the Rules of Court.
ISSUE: Whether or not petitioner's right to
assess herein deficiency donor's tax has indeed
prescribed as ruled by public respondent Court of
Appeals.
RULING: The petition has no merit.
Sec. 331 of the National Internal Revenue Code
provides:
Sec. 331. Period of limitation upon
assessment and collection. —
Except as provided in the
succeeding section, internal-
revenue taxes shall be assessed
within five years after the return
was filed, and no proceeding in
court without assessment for the
collection of such taxes shall be
begun after expiration of such
period. For the purposes of this
section, a return filed before the
last day prescribed by law for the
filing thereof shall be considered as
filed on such last day: Provided,
that this limitation shall not apply
to cases already investigated prior
to the approval of this Code.
Applying this provision of law to the facts at
hand, it is clear that the October 16, 1980 and
the March 1981 assessments were issued by the
BIR beyond the five-year statute of limitations.
The Court has thoroughly studied the records of
this case and found no basis to disregard the five-
year period of prescription.
For the purpose of safeguarding taxpayers from
any unreasonable examination, investigation or
assessment, our tax law provides a statute of
limitations in the collection of taxes. Thus, the
law on prescription, being a remedial measure,
should be liberally construed in order to afford
such protection. As a corollary, the exceptions to
the law on prescription should perforce be
strictly construed.
Ineludibly, the BIR failed to show that private
respondent's 1974 return was filed fraudulently
with intent to evade the payment of the correct
amount of tax. Moreover, even though a donor's
tax, which is defined as "a tax on the privilege of
transmitting one's property or property rights to
another or others without adequate and full
valuable consideration," is different from capital
gains tax, a tax on the gain from the sale of the
taxpayer's property forming part of capital
assets, the tax return filed by private
respondent to report its income for the year 1974
was sufficient compliance with the legal
requirement to file a return. In other words, the
fact that the sale transaction may have partly
resulted in a donation does not change the fact
that private respondent already reported its
income for 1974 by filing an income tax return.
Since the BIR failed to demonstrate clearly that
private respondent had filed a fraudulent return
with the intent to evade tax, or that it had failed
to file a return at all, the period for assessments
has obviously prescribed. Such instances of
negligence or oversight on the part of the BIR
cannot prejudice taxpayers, considering that the
prescriptive period was precisely intended to give
them peace of mind.
c. See Section 6(A)
A. Examination of Return
and Determination of Tax
Due. After a return has been
filed as required under the
provisions of this Code, the
Commissioner or his duly
authorized representative may
authorize the examination of
any taxpayer and the
assessment of the correct
amount of tax: Provided,
however, That failure to file a
return shall not prevent the
 Commissioner from authorizing
the examination of any
taxpayer.
The tax or any deficiency tax so
assessed shall be paid upon notice
and demand from the
Commissioner or from his duly
authorized representative.
Any return, statement of
declaration filed in any office
authorized to receive the same
shall not be withdrawn: Provided,
That within three (3) years from
the date of such filing, the same
may be modified, changed, or
amended: Provided, further, That
no notice for audit or investigation
of such return, statement or
declaration has in the meantime
been actually served upon the
taxpayer.
d. CIR v. United Salvage and
Towage, 729 SCRA 113
COMMISSIONER OF INTERNAL REVENUE
V. UNITED SALVAGE AND TOWAGE
(PHILS.), INC.
G.R. NO. 197515 (JULY 2, 2014)
PERALTA, J.
FACTS: USTP, a business engaged in sub-
contracting work in petroleum operations,
protested against the Notices of Assessment
issued by the CIR that demanded the payment of
deficiency withholding tax amounting to
₱135,407.40. USTP won the case in the Supreme
Court, and the case was remanded to the CTA-
Special First Division.
During the pendency of the proceedings, USTP
moved to withdraw their petition because it
availed of the benefits of the Tax Amnesty
Program under R.A. 9480. The CTA partially
granted their motion, dismissing the aspects of
the case other than that involving withholding
tax. They decided that the withholding taxes in
1994 and 1998 were void for not showing the law
and facts on which they were based, and those
made in 1992 had already lapsed pursuant to
Section 203 of the Tax Code.
CIR avers that its right to collect the tax in 1992
has not yet prescribed because, while the final
assessment and demand letter was issued in
1996, the 5-year prescriptive period to collect was
interrupted when USTP filed its request for
reinvestigation in 1997 which was granted in
2001. Thus, the period for tax collection should
have begun from the date of the modified
assessment.
ISSUE: Whether the right of CIR to collect the
withholding tax for 1992 has prescribed
RULING: Yes.
The statute of limitations on assessment and
collection of national internal revenue taxes was
shortened from 5 years to 3 years by virtue of
B.P. 700. Thus, petitioner has 3 years from the
date of actual filing of the tax return to assess a
national internal revenue tax or to commence
court proceedings for the collection thereof
without an assessment. However, when it validly
issues an assessment within the 3-year period, it
has another 3 years within which to collect the
tax due by distraint, levy, or court proceeding.
The assessment of the tax is deemed made and
the 3-year period for collection of the assessed
tax begins to run on the date the assessment
notice had been released, mailed or sent to the
taxpayer.
The collection letter was issued by CIR in 2002,
despite that the Final Assessment Notices for the
deficiency was issued in 1996; clearly, 5 years
had already lapsed, beyond the 3-year
prescriptive period. Further, the request for
reinvestigation in 1997 was only acted upon in
2001, also beyond the 3-year statute of
limitations from 1996. Also, the assessment
issued in 1994 warranted that the collection be
in 1997; however, the earliest attempt of the BIR
to collect was made in 2003, several years after
the 3-year prescriptive period.
e. BPI v. CIR, G.R. No. 139736,
17 October 2005
BANK OF THE PHILIPPINE ISLANDS V.
COMMISSIONER OF INTERNAL
REVENUE
 G.R. NO. 139736 (OCTOBER 17, 2005)
CHICO-NAZARIO, J
FACTS: On two separate occasions, particularly
on 06 June 1985 and 14 June 1985, BPI sold
United States (US) $500,000.00 to the Central
Bank of the Philippines (Central Bank), for the
total sales amount of US$1,000,000.00.
On 10 October 1989, the Bureau of Internal
Revenue (BIR) issued Assessment No. FAS-5-85-
89-002054, finding petitioner BPI liable for
deficiency DST on its afore-mentioned sales of
foreign bills of exchange to the Central Bank
Petitioner BPI received the Assessment, together
with the attached Assessment Notice, on 20
October 1989.Petitioner BPI, through its counsel,
protested the Assessment in a letter dated 16
November 1989, and filed with the BIR on 17
November 1989.
Petitioner BPI did not receive any immediate
reply to its protest letter. However, on 15
October 1992, the BIR issued a Warrant of
Distraint and/or Levy against petitioner BPI for
the assessed deficiency DST for taxable year
1985, in the amount of P27,720.00 (excluding the
compromise penalty of P300.00). It served the
Warrant on petitioner BPI only on 23 October
1992.
Then again, petitioner BPI did not hear from the
BIR until 11 September 1997, when its counsel
received a letter, dated 13 August 1997, signed
by then BIR Commissioner Liwayway Vinzons-
Chato, denying its' 'request for reconsideration.
BPI in its reply admitted that while industry
practice or market convention has the force of
law between the members of a particular
industry, it is not binding with the BIR since it is
not a party thereto. The same should, therefore,
not be allowed to prejudice the Bureau of its
lawful task of collecting revenues necessary to
defray the expenses of the government. (Art. 11
in relation to Art. 1306 of the New Civil Code.)
Upon receipt of the above-cited letter from the
BIR, petitioner BPI proceeded to file a Petition
for Review with the CTA on 10 October 1997.
BPI raised in its Petition for Review before the
CTA, the defense of prescription of the right of
respondent BIR Commissioner to enforce
collection of the assessed amount. It alleged that
respondent BIR Commissioner only had three
years to collect on Assessment No. FAS-5-85-89-
002054, but she waited for seven years and nine
months to deny the protest.
In her Answer and subsequent Memorandum,
respondent BIR Commissioner merely reiterated
her position, as stated in her letter to petitioner
BPI, dated 13 August 1997, which denied the
latter's protest; and remained silent as to the
expiration of the prescriptive period for collection
of the assessed deficiency DST
ISSUE: Whether the right of respondent BIR
Commissioner to collect from petitioner BPI the
alleged deficiency DST for taxable year 1985 had
prescribed.
RULING: Yes.
The efforts of respondent Commissioner to collect
on Assessment No. FAS-5-85-89 002054 were
already barred by prescription. The period for the
BIR to assess and collect an internal revenue tax
is limited to three years by Section 203 of the
Tax Code of 1977, as amended.
In the present Petition, there is no
controversy on the timeliness of the
issuance of the Assessment, only on the
prescription of the period to collect the
deficiency DST following its Assessment.
Counting the three-year prescriptive
period, for a total of 1,095 days, from 20
October 1989, then the BIR only had until
19 October 1992 within which to collect
the assessed deficiency DST. Although the
Warrant was issued on 15 October 1992,
previous to the expiration of the period for
collection on 19 October 1992, the same
was served on petitioner BPI only on 23
October 1992.
If the service of the Warrant of Distraint
and/or Levy on petitioner BPI on 23
October 1992 was already beyond the
prescriptive period for collection of the
deficiency DST, which had expired on 19
October 1992, then what more the letter
of respondent BIR Commissioner, dated
13 August 1997 and received by the
counsel of the petitioner BPI only on 11
September 1997, denying the protest of
petitioner BPI and requesting payment of
the deficiency DST?
The Court also ruled that there is no valid
ground for the suspension of the running
of the prescriptive period for collection of
the assessed DST under the Tax Code of
1977, as amended. The statute of
limitations on assessment and
collection of taxes is for the protection
of the taxpayer and, thus, shall be
construed liberally in his favor.
The indefinite extension of the period for
assessment is unreasonable because it
deprives the said taxpayer of the
assurance that he will no longer be
subjected to further investigation for
taxes after the expiration of a reasonable
period of time. The statute of limitations
on collection may only be interrupted or
suspended by a valid waiver executed in
accordance with paragraph (d) of Section
223 of the Tax Code of 1977, as amended,
and the existence of the circumstances
enumerated in Section 224 of the same
Code, which include a request for
reinvestigation granted by the BIR
Commissioner.
Applying the given rules to the present Petition,
this Court finds that:
(a) The statute of limitations for collection
of the deficiency DST in Assessment No.
FAS-5-85-89-002054, issued against
petitioner BPI, had already expired; and
(b) None of the conditions and
requirements for exception from the
statute of limitations on collection exists
herein: Petitioner BPI did not execute any
waiver of the prescriptive period on
collection as mandated by paragraph (c) of
Section 223 of the Tax Code of 1977, as
amended; the protest filed by petitioner
BPI was a request for reconsideration, not
a request for reinvestigation that was
granted by respondent BIR Commissioner
which could have suspended the
prescriptive period for collection under
Section 224 of the Tax Code of 1977, as
amended; and, petitioner BPI, other than
filing a request for reconsideration of
Assessment No. FAS-5-85-89-002054, did
not make repeated requests or performed
positive acts that could have persuaded
the respondent BIR Commissioner to
delay collection, and that would have
prevented or estopped petitioner BPI from
setting up the defense of prescription
against collection of the tax assessed, as
required in the Suyoc case.
f. Commissioner of Internal
Revenue v. Transitions
Optical Philippines, Inc., G.R.
No. 227544, 22 November
2017
COMMISSIONER OF INTERNAL REVENUE
V. TRANSITIONS OPTICAL PHILIPPINES,
INC.
G.R. NO. 227544 NOVEMBER 22, 2017
LEONEN, J.
FACTS: Transitions Optical received Letter of
Authority from the BIR to examine Transition
Optical's books of accounts for internal revenue
tax purposes for taxable year 2004. On 2007, the
parties executed a Waiver of the Defense of
Prescription. This was followed by another
supposed Waiver of the Defense of Prescription
(Second Waiver), extending the prescriptive
period to November 30, 2008.
Thereafter, the CIR issued a PAN. Transitions
Optical filed a written protest. Then the CIR
issued against Transitions Optical a Final
Assessment Notice (FAN) and a Formal Letter of
Demand (FLD) mailed on December 2, 2008.
Transitions Optical alleged that the demand for
deficiency taxes had already prescribed at the
time the FAN was mailed on December 2, 2008.
The CTA division found the waivers to be
defective and void. Granting for the sake of
argument that the subject Waivers were validly
executed, the assessment must be cancelled for
being issued beyond the prescriptive period
provided by law to assess. The CTA en banc
affirmed the division.
The CIR maintains that Transitions is estopped
from questioning the validity of the waivers since
their execution was delayed by Transition’s own
failure to comply with the orders of the BIR to
submit documents.
On the other hand, even assuming that the
waivers were valid, Transitions argues that the
assessment would still be void as the FAN was
served only on December 4, 2008, beyond the
extended period of November 30, 2008.
ISSUE: Whether or not the assessment of
deficiency taxes against Transitions Optical for
taxable year 2004 had prescribed.
RULING: Yes.
Transitions repeatedly failed to comply with
CIR’s notices. Having benefitted from the
Waivers executed at its instance, Transitions is
estopped from claiming that they were invalid
and that prescription had set in.
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.
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.
g. Republic of The Philippines
v. GMCC United
Development Corporation,
G.R. No. 191856, 07
December 2016
REPUBLIC OF THE PHILIPPINES VS
GMCC UNITED DEVELOPMENT
CORPORATION
GR NO. 191856 (DECEMBER 7, 2016)
LEONEN, J.
FACTS: On March 28, 2003
 Bureau of Internal Revenue National
Investigation Division issued a Letter of
Authority, authorizing its revenue officers
to examine the books of accounts and
other accounting records of GMCC United
Development Corporation (GMCC)
covering taxable years 1998 and 1999.
April 3, 2003
 GMCC was served a copy of said Letter of
Authority and was requested to present
its books of accounts and other accounting
records. GMCC failed to respond to the
Letter of Authority as well as the
subsequent letters requesting that its
records and documents be produced.
 Due to GMCC's failure to act on the
requests, the Assistant Commissioner of
the Enforcement Service of the Bureau of
Internal Revenue issued a Subpoena
Duces Tecum on GMCC president, Jose C.
Go. When GMCC still failed to comply
with the Subpoena Duces Tecum, the
revenue officers were constrained to
investigate GMCC through Third Party
Information.
 The investigation revealed that in 1998,
GMCC, through Go, executed two dacion
en pago agreements to pay for the
obligations of GMCC's sister companies.
GMCC allegedly failed to declare the
income it earned from these agreements
for taxation purposes in 1998.
 It was also discovered that in 1999,
GMCC sold condominium units and
parking slots for a total amount of
P5,350,000.00 to a Valencia K. Wong.[15]
However, GMCC did not declare the
income it earned from these transactions
in its 1999 Audited Financial Statements.
November 17, 2003
 Bureau of Internal Revenue issued a
Notice to Taxpayer to GMCC, which
GMCC ignored.
On December 8, 2003
 Bureau of Internal Revenue issued a
Preliminary Assessment Notice.
November 23, 2004
 GMCC protested the issuance of the Final
Assessment Notice citing that the period
to assess and collect the tax had already
prescribed. The Bureau of Internal
Revenue denied the protest in a Final
Decision dated February 10, 2005.
October 7, 2005
 BIR filed with the Department of Justice
a criminal complaint for violation of
Sections 254, [21] 255, [22] and 267, [23]
of the National Internal Revenue Code
against GMCC, its president, Jose C. Go,
and its treasurer, Xu Xian Chun. The
president countered that the complaint be
dismissed because the action has already
prescribed and GMCC did not defraud the
Government.

ISSUE: Is the applicable prescription period for
the tax assessment the 10-year period or the
three (3) year period?
RULING: The case falls under section 203 of the
Tax Code. The three (3) year prescription period
should be applied.
In the case, the last day prescribed by law for
filing its 1998 tax return was April 15, 1999. The
petitioner had three (3) years (2002) to make an
assessment. The preliminary assessment was
made only on December8, 2003 thus the period to
assess the tax had already expired.
For the 10-year period under section 222 (a) to
apply, it is not enough that the fraud is alleged
in the complaint. It must be established by clear
and convincing evidence.
h. CIR v. FMF Dev. Corp., 556
SCRA 698
COMMISSIONER OF INTERNAL REVENUE
V FMF DEVELOPMENT CORPORATION
G.R. NO. 167765 JUNE 30, 2008
QUISUMBING, J.
FACTS: For taxable year 1995, the BIR sent
FMF pre-assessment notices, all dated October 6,
1998, informing it of its alleged tax liabilities.
FMF filed a protest against these notices with
the BIR and requested for a RULING: Yes.
reconsideration/reinvestigation. The Revenue
Officer advised FMF of the informal conference
set on February 2, 1999 to allow it to present
evidence to dispute the BIR assessments.
On February 9, 1999, FMF President executed a
waiver of the three-year prescriptive period for
the BIR to assess internal revenue taxes, hence
extending the assessment period until October
31, 1999. The waiver was accepted and signed by
RDO.
On October 18, 1999, FMF received amended
pre-assessment notices dated October 6, 1999
from the BIR. FMF immediately filed a protest
on November 3, 1999 but on the same day, it
received BIR’s Demand Letter and Assessment
Notice reflecting FMF’s alleged deficiency taxes
and accrued interests.
FMF invoked the defense of prescription by
reason of the invalidity of the waiver. In its
reply, the BIR insisted that the waiver is valid
because it was signed by the RDO, a duly
authorized representative of petitioner. It also
ordered FMF to immediately settle its tax
liabilities; otherwise, judicial action will be
taken.
CTA granted the petition and cancelled the
Assessment Notice because it was already time-
barred. The CTA ruled that the waiver did not
extend the three-year prescriptive period within
which the BIR can make a valid assessment
because it did not comply with the procedures
laid down in Revenue Memorandum Order. First,
the waiver did not state the dates of execution
and acceptance of the waiver, by the taxpayer
and the BIR, respectively; thus, it cannot be
determined with certainty if the waiver was
executed and accepted within the prescribed
period. Second, the CTA also found that FMF
was not furnished a copy of the waiver signed by
RDO. Third, the CTA pointed out that since the
case involves an amount of more than P1 million,
and the period to assess is not yet about to
prescribe, the waiver should have been signed by
the Commissioner of Internal Revenue, and not a
mere RDO. The CA affirmed the CTA.
ISSUE: Whether or not the period to assess had
prescribed.
The waiver in question here was defective and
did not validly extend the original three-year
prescriptive period. Firstly, it was not proven
that respondent was furnished a copy of the BIR-
accepted waiver. Secondly, the waiver was signed
only by a revenue district officer, when it should
have been signed by the Commissioner as
mandated by the NIRC.
The Assessment Notice dated October 25, 1999,
was issued beyond the three-year prescriptive
period. The waiver was incomplete and defective
and thus, the three-year prescriptive period was
not tolled nor extended.
i. CIR vs. Stanley Works
(Phils.) Incorporated, GR No.
187859, 3 December 2014
COMMISSIONER OF INTERNAL REVENUE
V.
THE STANLEY WORKS SALES (PHILS.),
INCORPORATED
G.R. NO. 187589 (DECEMBER 3, 2014)
SERENO, CJ
FACTS: On April 16, 1990, respondent filed with
the BIR its Annual Income Tax Return for
taxable year 1989.
On March 19, 1993, pursuant to Letter of
Authority dated July 3, 1992, the BIR issued
against respondent a Pre-Assessment Notice
(PAN) No. 002523 for 1989 deficiency income
tax.
On March 29, 1993, respondent received its copy
of the PAN.
On April 12, 1993, petitioner, through OTC
Domingo C. Paz of Revenue Region No. 4B-2 of
Makati, issued to respondent Assessment Notice
No. 002523-89-6014 for deficiency income tax for
taxable year 1989. The Notice was sent on April
15, 1993 and respondent received it on April 21,
1993.
On May 19, 1993, respondent, through its
external auditors Punongbayan & Araullo, filed a
protest letter and requested reconsideration and
cancellation of the assessment.
On November 16, 1993, a certain Mr. John Ang,
on behalf of respondent, executed a "Waiver of
the Defense of Prescription Under the Statute of
Limitations of the National Internal Revenue
Code" (Waiver). Under the terms of the Waiver,
respondent waived its right to raise the defense
of prescription under Section 223 of the NIRC of
1977 insofar as the assessment and collection of
any deficiency taxes for the year ended December
31, 1989, but not after June 30, 1994. The
Waiver was not signed by petitioner or any of his
authorized representatives and did not state the
date of acceptance as prescribed under Revenue
Memorandum Order No. 20-90. Respondent did
not execute any other Waiver or similar
document before or after the expiration of the
November 16, 1993 Waiver on June 30, 1994.
On March 22, 2004, petitioner rendered a
Decision denying respondents request for
reconsideration and ordering respondent to pay
the deficiency income tax plus interest that may
have accrued.
On March 30, 2004, respondent received its copy
of the assailed Decision. Hence, on April 28,
2004, respondent filed before the Court in
Division a Petition for Review.
The CTA First Division found that although the
assessment was made within the prescribed
period, the period within which petitioner may
collect deficiency income taxes had already
lapsed.
The CTA Division ruled that the request for
reconsideration did not suspend the running of
the prescriptive period to collect deficiency
income tax. There was no valid waiver of the
statute of limitations, as the following infirmities
were found: (1) there was no conformity, either
by respondent or his duly authorized
representative; (2) there was no date of
acceptance to show that both parties had agreed
on the Waiver before the expiration of the
prescriptive period; and (3) there was no proof
that respondent was furnished a copy of the
Waiver. Applying jurisprudence and relevant
BIR rulings, the waiver was considered defective;
thus, the period for collection of deficiency
income tax had already prescribed.
The CTA En Banc affirmed the CTA First
Division Decision dated 6 May 2008 and
Resolution dated 14 July 2008. The Waiver
executed by respondent on 16 November 1993
could not be used by petitioner as a basis for
extending the period of assessment and
collection, as there was no evidence that the
latter had acted upon the waiver. Hence, the
unilateral act of respondent in executing said
document did not produce any effect on the
prescriptive period for the assessment and
collection of its deficiency tax.
ISSUES:
1. Whether the petitioner's right to collect the
deficiency income tax of respondent for taxable
year 1989 has prescribed.
2. Whether the respondent's repeated requests
and positive acts constitute "estoppel" from
setting up the defense of prescription under the
NIRC.
RULING:
1. Yes. The period to assess and collect deficiency
taxes may be extended only upon a written
agreement between the CIR and the taxpayer
prior to the expiration of the three-year
prescribed period in accordance with Section 222
(b) of the NIRC. In relation to the
implementation of this provision, the CIR issued
Revenue Memorandum Order (RMO) No. 20-
9010 on 4 April 1990 to provide guidelines on the
proper execution of the Waiver of the Statute of
Limitations
The BIR cannot claim the benefits of extending
the period to collect the deficiency tax as a
consequence of the Waiver when, in truth it was
the BIRs inaction which is the proximate cause
of the defects of the Waiver. The BIR has the
burden of ensuring compliance with the
requirements of RMO No. 20-90, as they have
the burden of securing the right of the
government to assess and collect tax deficiencies.
This right would prescribe absent any showing of
a valid extension of the period set by the law.
To emphasize, the Waiver was not a unilateral
act of the taxpayer; hence, the BIR must act on
it, either by conforming to or by disagreeing with
the extension. A waiver of the statute of
limitations, whether on assessment or collection,
should not be construed as a waiver of the right
to invoke the defense of prescription but, rather,
an agreement between the taxpayer and the BIR
to extend the period to a date certain, within
which the latter could still assess or collect taxes
due. The waiver does not imply that the taxpayer
relinquishes the right to invoke prescription
unequivocally.
Although we recognize that the power of taxation
is deemed inherent in order to support the
government, tax provisions are not all about
raising revenue. Our legislature has provided
safeguards and remedies beneficial to both the
taxpayer, to protect against abuse; and the
government, to promptly act for the availability
and recovery of revenues. A statute of limitations
on the assessment and collection of internal
revenue taxes was adopted to serve a purpose
that would benefit both the taxpayer and the
government.
The law prescribing a limitation of actions for the
collection of the income tax is beneficial both to
the Government and to its citizens; to the
Government because tax officers would be
obliged to act promptly in the making of
assessment, and to citizens because after the
lapse of the period of prescription citizens would
hav ea feeling of security against unscrupulous
tax agents who will always find an excuse to
inspect the books of taxpayers, not to determine
the latter's real liability, but to take advantage of
every opportunity to molest peaceful, law-abiding
citizens. Without such legal defense taxpayers
would furthermore be under obligation to always
keep their books and keep them open for
inspection subject to harassment by
unscrupulous tax agents. The law on prescription
being a remedial measure should be interpreted
in a way conducive to bringing about the
beneficient purpose of affording protection to the
taxpayer within the contemplation of the
Commission which recommends the approval of
the law.
2. No. The respondent is not barred from setting
up the defense of prescription.
True, respondent filed a Protest and asked for a
reconsideration and cancellation of the
assessment on 19 May 1993; however, it is
uncontested that petitioner failed to act on that
Protest until 29 November 2001, when the latter
required the submission of other supporting
documents. In fact, the Protest was denied only
on 22 March 2004.
Petitioner’s reliance on CIR v. Suyoc (Suyoc) is
likewise misplaced. In Suyoc, the BIR was
induced to extend the collection of tax through
repeated requests for extension to pay and for
reinvestigation, which were all denied by the
Collector. Contrarily, herein respondent filed
only one Protest over the assessment, and
petitioner denied it 10 years after. The
subsequent letters of respondent cannot be
construed as inducements to extend the period of
limitation, since the letters were intended to
urge petitioner to act on the Protest, and not to
persuade the latter to delay the actual collection.
Even assuming arguendo that the Waiver
executed by respondent on 16 November 1993 is
valid, the right of petitioner to collect the
deficiency income tax for the year 1989 would
have already prescribed by 2001 when the latter
first acted upon the protest, more so in 2004
when it finally denied the reconsideration.
Records show that the Waiver extends only for
the period ending 30 June 1994, and that there
were no further extensions or waivers executed
by respondent. Again, a waiver is not a
unilateral act of the taxpayer or the BIR, but is a
bilateral agreement between two parties to
extend the period to a date certain.
Since the Waiver in this case is defective and
therefore invalid, it produces no effect; thus, the
prescriptive period for collecting deficiency
income tax for taxable year 1989 was never
suspended or tolled. Consequently, the right to
enforce collection based on Assessment Notice
No. 002523-89-6014 has already prescribed.
j.
See RMC 6-2005 for the
format of the Waiver
k. Revenue Memorandum Order No. 14-2016
l. Revenue Memorandum Circular No. 141-
2019
m. CIR vs. Kudos Metal, GR No. 178087, 5
May 2010
COMMISSIONER OF INTERNAL REVENUE
V. KUDOS METAL CORPORATION
G.R. NO. 178087 (MAY 5, 2010)
DEL CASTILLO, J.
FACTS: Kudos Metal Corp’s records were
reviewed and audited after it failed to comply
with the three Notices of Presentation of Records
served by the BIR.
Kudos Metal Corp.’s accountant, Nelia Pasco
executed a Waiver of the Defense of Prescription
on December 10, 2001 which was notarized on
January 22, 2002. It was received by the BIR
Enforcement Service on January 31, 2002 and by
the BIR Tax Fraud Division on February 4, 2002,
and accepted by the Assistant Commissioner of
the Enforcement Service, Percival T. Salazar.
A second Waiver of Defense of Prescription was
again executed by Pasco on February 18, 2003,
notarized on February 19, 2003, received by the
BIR Tax Fraud Division on February 28, 2003
and accepted by Assistant Commissioner
Salazar.
The BIR issued a Preliminary Assessment Notice
for the taxable year 1998 against the Kudos
Metal Corp. This was followed by a Formal
Letter of Demand with Assessment Notices for
taxable year 1998, dated September 26, 2003
which was received by respondent on November
12, 2003.
ISSUE: Whether BIR’s right to assess unpaid
taxes of Kudos Metal Corp prescribed.
RULING: Yes. The Supreme Court found that
BIR’s right to assess unpaid taxes of Kudos
Metal Corp prescribed.
Section 203 of the National Internal Revenue
Code of 1997 (NIRC) mandates the government
to assess internal revenue taxes within three
years from the last day prescribed by law for the
filing of the tax return or the actual date of filing
of such return, whichever comes later. Hence, an
assessment notice issued after the three-year
prescriptive period is no longer valid and
effective. Exceptions however are provided under
Section 222 of the NIRC.
Section 222 (b) of the NIRC provides that the
period to assess and collect taxes may only be
extended upon a written agreement between the
CIR and the taxpayer executed before the
expiration of the three-year period. RMO 20-
90 issued on April 4, 1990 and RDAO 05-
01 issued on August 2, 2001 lay down the
procedure for the proper execution of the waiver,
to wit:
1. The waiver must be in the proper form
prescribed by RMO 20-90. The phrase
"but not after ______ 19 ___", which
indicates the expiry date of the period
agreed upon to assess/collect the tax after
the regular three-year period of
prescription, should be filled up.
2. The waiver must be signed by the
taxpayer himself or his duly authorized
representative. In the case of a
corporation, the waiver must be signed by
any of its responsible officials. In case the
authority is delegated by the taxpayer to
a representative, such delegation should
be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official
authorized by him must sign the waiver
indicating that the BIR has accepted and
agreed to the waiver. The date of such
 acceptance by the BIR should be
indicated. However, before signing the
waiver, the CIR or the revenue official
authorized by him must make sure that
the waiver is in the prescribed form, duly
notarized, and executed by the taxpayer
or his duly authorized representative.
5. Both the date of execution by the
taxpayer and date of acceptance by the
Bureau should be before the expiration of
the period of prescription or before the
lapse of the period agreed upon in case a
subsequent agreement is executed.
6. The waiver must be executed in three
copies, the original copy to be attached to
the docket of the case, the second copy for
the taxpayer and the third copy for the
Office accepting the waiver. The fact of
receipt by the taxpayer of his/her file copy
must be indicated in the original copy to
show that the taxpayer was notified of the
acceptance of the BIR and the perfection
of the agreement.
A perusal of the waivers executed by
respondent’s accountant reveals the following
infirmities:
1. The waivers were executed without the
notarized written authority of Pasco to
sign the waiver in behalf of respondent.
2. The waivers failed to indicate the date
of acceptance.
3. The fact of receipt by the respondent of
its file copy was not indicated in the
original copies of the waivers.
Due to the defects in the waivers, the period to
assess or collect taxes was not extended.
Consequently, the assessments were issued by
the BIR beyond the three-year period and are
void
n. RCBC v. CIR, G.R. No.
170257, 7 September 2011
RCBC V. CIR
G.R. NO. 170257 (SEPTEMBER 7, 2011)
MENDOZA, J
FACTS: RCBC received a Letter of Authority on
Aug. 15 ,1996 for the examination of it’s books
and records for all internal taxes for January
1,1994 to December 31, 1995.
On January 23, 1997, RCBC executed two
Waivers of the Defense of Prescription Under the
Statute of Limitations of the National Internal
Revenue Code covering the internal revenue
taxes due for the years 1994 and 1995, effectively
extending the period of the Bureau of Internal
Revenue (BIR) to assess up to December 31,
2000.
On January 27, 2000, RCBC received a formal
letter of demand with assessment notice for
deficiency taxes of around 4 billion pesos. RCBC
disagreed with the assessment and filed a protest
together with supporting documents.
On December 6, 2000, RCBC received another
Formal Letter of Demand with Assessment
Notices for deficiency taxes of around 300 million
pesos, on the same day RCBC paid an amount of
15 million pesos.
RCBC refused to pay the amount left and argued
that the waivers of the Statute of Limitations
which it executed on January 23, 1997 were not
valid because the same were not signed or
conformed to by the respondent CIR as required
under Section 222(b) of the Tax Code.
CIR on the other hand contends that RCBC is
now estopped from questioning the validity of the
said waivers.
ISSUE: Whether RCBC is estopped from
questioning the validity on the waivers of the
defense of prescription?
RULING: Yes.
Under Article 1431 of the Civil Code, the doctrine
of estoppel is anchored on the rule that "an
admission or representation is rendered
conclusive upon the person making it, and cannot
be denied or disproved as against the person
relying thereon." A party is precluded from
denying his own acts, admissions or
representations to the prejudice of the other
party in order to prevent fraud and falsehood.
Estoppel is clearly applicable to the case at
bench. RCBC, through its partial payment of the
revised assessments issued within the extended
period as provided for in the questioned waivers,
impliedly admitted the validity of those waivers.
Had petitioner truly believed that the waivers
were invalid and that the assessments were
issued beyond the prescriptive period, then it
should not have paid the reduced amount of
taxes in the revised assessment. RCBC’s
subsequent action effectively belies its insistence
that the waivers are invalid. The records show
that on December 6, 2000, upon receipt of the
revised assessment, RCBC immediately made
payment on the uncontested taxes. Thus, RCBC
is estopped from questioning the validity of the
waivers. To hold otherwise and allow a party to
gainsay its own act or deny rights which it had
previously recognized would run counter to the
principle of equity which this institution holds
dear.
o. CIR v. Phoenix Assurance
Inc., L-19727, 20 May 1965
PHOENIX ASSURANCE, CO., LTD. V.
COMMISSIONER OF INTERNAL REVENUE
G.R. NO. L-19903 (MAY 20, 1965)
BENGZON, J.P., J.
FACTS: Phoenix Assurance Co., Ltd., a foreign
insurance corporation organized under the laws
of Great Britain, is licensed to do business in the
Philippines with head office in London. Through
its head office, it entered in London into
worldwide reinsurance treaties with various
foreign insurance companies. It agreed to cede a
portion of premiums received on original
insurances underwritten by its head office,
subsidiaries, and branch offices throughout the
world, in consideration for assumption by the
foreign insurance companies of an equivalent
portion of the liability from such original
insurances.
Phoenix Assurance Co., Ltd. filed its income tax
return for 1952 on April 1, 1953 showing a loss of
P199,583.93. It amended said return on August
30, 1955 reporting a tax liability of P2,502.00. On
July 24, 1958, after examination of the amended
return, the Commissioner of Internal Revenue
assessed deficiency income tax in the sum of
P5,667.00. The Court of Tax Appeals found the
right of the Commissioner of Internal Revenue
barred by prescription, the same having been
exercised more than five years from the date the
original return was filed. On the other hand, the
Commissioner of Internal Revenue insists that
his right to issue the assessment has not
prescribed inasmuch as the same was availed of
before the 5-year period provided for in Section
331 of the Tax Code expired, counting the
running of the period from August 30, 1955, the
date when the amended return was filed.
ISSUE: Should the running of the prescriptive
period commence from the filing of the original or
amended return?
RULING: To our mind, the Commissioner's view
should be sustained. The changes and alterations
embodied in the amended income tax return
consisted of the exclusion of reinsurance
premiums received from domestic insurance
companies by Phoenix Assurance Co., Ltd.'s
London head office, reinsurance premiums ceded
to foreign reinsurers not doing business in the
Philippines and various items of deduction
attributable to such excluded reinsurance
premiums thereby substantially modifying the
original return. Furthermore, although the
deduction for head office expenses allocable to
Philippine business, whose disallowance gave
rise to the deficiency tax, was claimed also in the
original return, the Commissioner could not have
possibly determined a deficiency tax thereunder
because Phoenix Assurance Co., Ltd. declared a
loss of P199,583.93 therein which would have
more than offset such disallowance of
P15,826.35.
Considering that the deficiency assessment was
based on the amended return which, as
aforestated, 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 income tax
return. From August 30, 1955, when the
amended return was filed, to July 24, 1958, when
the deficiency assessment was issued, less than
five years elapsed. The right of the Commissioner
to assess the deficiency tax on such amended
return has not prescribed.
To strengthen our opinion, we believe that to
hold otherwise, we would be paving the way for
taxpayers to evade the payment of taxes by
simply reporting in their original return heavy
losses and amending the same more than five
years later when the Commissioner of Internal
Revenue has lost his authority to assess the
proper tax thereunder. The object of the Tax
Code is to impose taxes for the needs of the
Government, not to enhance tax avoidance to its
prejudice.
p. BPI v. CIR, G.R. No. 139736,
17 October 2005
BANK OF THE PHILIPPINE ISLANDS V.
COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 139736 (OCTOBER 17, 2005)
CHICO-NAZARIO, J
FACTS: On two separate occasions, particularly
on 06 June 1985 and 14 June 1985, BPI sold
United States (US) $500,000.00 to the Central
Bank of the Philippines (Central Bank), for the
total sales amount of US$1,000,000.00.
On 10 October 1989, the Bureau of Internal
Revenue (BIR) issued Assessment No. FAS-5-85-
89-002054, finding petitioner BPI liable for
deficiency DST on its afore-mentioned sales of
foreign bills of exchange to the Central Bank
Petitioner BPI received the Assessment, together
with the attached Assessment Notice, on 20
October 1989.Petitioner BPI, through its counsel,
protested the Assessment in a letter dated 16
November 1989, and filed with the BIR on 17
November 1989.
Petitioner BPI did not receive any immediate
reply to its protest letter. However, on 15
October 1992, the BIR issued a Warrant of
Distraint and/or Levy against petitioner BPI for
the assessed deficiency DST for taxable year
1985, in the amount of P27,720.00 (excluding the
compromise penalty of P300.00). It served the
Warrant on petitioner BPI only on 23 October
1992.
Then again, petitioner BPI did not hear from the
BIR until 11 September 1997, when its counsel
received a letter, dated 13 August 1997, signed
by then BIR Commissioner Liwayway Vinzons-
Chato, denying its' 'request for reconsideration.
BPI in its reply admitted that while industry
practice or market convention has the force of
law between the members of a particular
industry, it is not binding with the BIR since it is
not a party thereto. The same should, therefore,
not be allowed to prejudice the Bureau of its
lawful task of collecting revenues necessary to
defray the expenses of the government. (Art. 11
in relation to Art. 1306 of the New Civil Code.)
Upon receipt of the above-cited letter from the
BIR, petitioner BPI proceeded to file a Petition
for Review with the CTA on 10 October 1997.
BPI raised in its Petition for Review before the
CTA, the defense of prescription of the right of
respondent BIR Commissioner to enforce
collection of the assessed amount. It alleged that
respondent BIR Commissioner only had three
years to collect on Assessment No. FAS-5-85-89-
002054, but she waited for seven years and nine
months to deny the protest.
In her Answer and subsequent Memorandum,
respondent BIR Commissioner merely reiterated
her position, as stated in her letter to petitioner
BPI, dated 13 August 1997, which denied the
latter's protest; and remained silent as to the
expiration of the prescriptive period for collection
of the assessed deficiency DST.
ISSUE: Whether the right of respondent BIR
Commissioner to collect from petitioner BPI the
alleged deficiency DST for taxable year 1985 had
prescribed.
RULING: Yes.
The efforts of respondent Commissioner to collect
on Assessment No. FAS-5-85-89 002054 were
already barred by prescription. The period for the
BIR to assess and collect an internal revenue tax
is limited to three years by Section 203 of the
Tax Code of 1977, as amended.
In the present Petition, there is no
controversy on the timeliness of the
issuance of the Assessment, only on the
prescription of the period to collect the
deficiency DST following its Assessment.
Counting the three-year prescriptive
period, for a total of 1,095 days, from 20
October 1989, then the BIR only had until
19 October 1992 within which to collect
the assessed deficiency DST. Although the
Warrant was issued on 15 October 1992,
previous to the expiration of the period for
collection on 19 October 1992, the same
was served on petitioner BPI only on 23
October 1992.

If the service of the Warrant of Distraint
and/or Levy on petitioner BPI on 23
October 1992 was already beyond the
prescriptive period for collection of the
deficiency DST, which had expired on 19
October 1992, then what more the letter
of respondent BIR Commissioner, dated
13 August 1997 and received by the
counsel of the petitioner BPI only on 11
September 1997, denying the protest of
petitioner BPI and requesting payment of
the deficiency DST?
The Court also ruled that there is no valid
ground for the suspension of the running
of the prescriptive period for collection of
the assessed DST under the Tax Code of
1977, as amended. The statute of
limitations on assessment and
collection of taxes is for the protection
of the taxpayer and, thus, shall be
construed liberally in his favor.
The indefinite extension of the period for
assessment is unreasonable because it
deprives the said taxpayer of the
assurance that he will no longer be
subjected to further investigation for
taxes after the expiration of a reasonable
period of time. The statute of limitations
on collection may only be interrupted or
suspended by a valid waiver executed in
accordance with paragraph (d) of Section
223 of the Tax Code of 1977, as amended,
and the existence of the circumstances
enumerated in Section 224 of the same
Code, which include a request for
reinvestigation granted by the BIR
Commissioner.
Applying the given rules to the present Petition,
this Court finds that:
(a) The statute of limitations for collection
of the deficiency DST in Assessment No.
FAS-5-85-89-002054, issued against
petitioner BPI, had already expired; and
(b) None of the conditions and
requirements for exception from the
statute of limitations on collection exists
herein: Petitioner BPI did not execute any
waiver of the prescriptive period on
collection as mandated by paragraph (c) of
Section 223 of the Tax Code of 1977, as
amended; the protest filed by petitioner
BPI was a request for reconsideration, not
a request for reinvestigation that was
granted by respondent BIR Commissioner
which could have suspended the
prescriptive period for collection under
Section 224 of the Tax Code of 1977, as
amended; and, petitioner BPI, other than
filing a request for reconsideration of
Assessment No. FAS-5-85-89-002054, did
not make repeated requests or performed
positive acts that could have persuaded
the respondent BIR Commissioner to
delay collection, and that would have
prevented or estopped petitioner BPI from
setting up the defense of prescription
against collection of the tax assessed, as
required in the Suyoc case.
q. Aznar vs. CTA, GR No. L-
20569, 23 August 1974
JOSE B. AZNAR, IN HIS CAPACITY AS
ADMINISTRATOR OF THE ESTATE OF
THE DECEASED, MATIAS H. AZNAR V.
COURT OF TAX APPEALS AND
COLLECTOR OF INTERNAL REVENUE
GR NO. L-20569, 23 AUGUST 1974
ESGUERRA, J.
FACTS: Petitioner, as administrator of the
estate of the deceased, Matias H. Aznar, seeks a
review and nullification of the decision of the
Court of Tax Appeals ordering the petitioner to
pay the government the sum of P227,691.77
representing deficiency income taxes for the
years 1946 to 1951. An investigation by the
Commissioner of Internal Revenue (CIR)
ascertained the assets and liabilities of the
taxpayer and it was discovered that from 1946 to
1951, his net worth had increased every year,
which increases in net worth was very much
more than the income reported during said years.
The findings clearly indicated that the taxpayer
did not declare correctly the income reported in
his income tax returns for the aforesaid years.
Petitioner avers that according to the NIRC, the
right of the CIR to assess deficiency income taxes
of the late Aznar for the years 1946, 1947, and
1948 had already prescribed at the time the
assessment was made on November 28, 1952;
there being a five year limitation upon
assessment and collection from the filing of the
returns. Meanwhile, respondents believe that the
prescription period in the case at bar that is
applicable is under Sec. 332 of the NIRC which
provides that: "(a) In the case of a false or
fraudulent return with intent to evade tax or of a
failure to file a return, the tax may be assessed,
or a proceeding in court for the collection of such
tax may be begun without assessment, at any
time within ten years after the discovery of the
falsity, fraud or omission". Petitioner argues said
provision does not apply because the taxpayer
did not file false and fraudulent returns with
intent to evade tax.
ISSUE: Whether or not the action filed Aznar
has not prescribed.
RULING: The Sec. 332 of the NIRC does not
apply because the taxpayer did not file false and
fraudulent returns with intent to evade tax,
while respondent Commissioner of Internal
Revenue insists contrariwise, with respondent
Court of Tax Appeals concluding that the very
"substantial under declarations of income for six
consecutive years eloquently demonstrate the
falsity or fraudulence of the income tax returns
with an intent to evade the payment of tax."
The ordinary period of prescription of 5 years
within which to assess tax liabilities under Sec.
331 of the NIRC should be applicable to normal
circumstances, but whenever the government is
placed at a disadvantage so as to prevent its
lawful agents from proper assessment of tax
liabilities due to false returns, fraudulent return
intended to evade payment of tax or failure to file
returns, the period of ten years provided for in
Sec. 332 (a) NIRC, from the time of the discovery
of the falsity, fraud or omission even seems to be
inadequate and should be the one enforced.
There being undoubtedly false tax returns in this
case, We affirm the conclusion of the respondent
Court of Tax Appeals that Sec. 332 (a) of the
NIRC should apply and that the period of ten
years within which to assess petitioner's tax
liability had not expired at the time said
assessment was made.
r. CIR vs. Philippine Daily
Inquirer, GR No. 213943, 22
March 2017
COMMISSIONER OF INTERNAL REVENUE
V. PHILIPPINE DAILY INQUIRER
G.R. NO. 213943 (MARCH 22, 2017)
CARPIO, J
FACTS: BIR alleged that there was an
underdeclaration of domestic purchases in PDI's
declaration on its VAT Returns for taxable year
2004. In response, PDI submitted reconciliation
reports and executed a Waiver of the Statute of
Limitation (First Waiver) consenting to the
assessment and/or collection of taxes for the year
2004. BIR invited PDI to an informal conference
to present any objections that it might have on
the BIR's findings. On 5 June 2007, PDI
executed a Waiver of the Statute of Limitation
(Second Waiver).
PDI received the PAN on 4 December 2007. On
12 December 2007, PDI sought reconsideration of
the PAN and expressed its willingness to execute
another Waiver (Third Waiver), which it did on
the same date, thus extending BIR's right to
assess and/or collect. PDI received a Formal
Letter of Demand dated 11 March 2008
PDI filed its protest, alleging that the period
within which the BIR should act on its protest
had already lapsed. The CTA First Division ruled
that the NIRC authorizes the extension of the
original three-year prescriptive period by the
execution of a valid waiver upon the agreement
in writing between the taxpayer and the BIR,
provided: (1) the agreement was made before the
expiration of the three-year period and (2) the
guidelines in the proper execution of the waiver
are strictly followed.
The CTA Division found that while the First and
Second Waivers were executed in three copies,
the BIR failed to provide the office accepting the
waivers with their respective third copies. The
CTA First Division found that the third copies
were still attached to the docket of the case. The
CTA First Division also found that the BIR failed
to prove that the Third Waiver was executed in
three copies. Further, the revenue official who
accepted the Third Waiver was not authorized to
do so. Thus, period has prescribed.
The CTA en banc affirmed the Division in toto.

ISSUE: Whether or not the prescriptive period to
assess deficiency tax has already prescribed.
RULING: The First Waiver was not properly
executed and thus, could not have extended the
three-year prescriptive period to assess and
collect taxes for the year 2004. To make matters
worse, the CIR committed the same error in the
execution of the Second Waiver. Even if we
consider that the First Waiver was validly
executed, the Second Waiver failed to extend the
prescriptive period because its execution was
contrary to the procedure set forth. Granting
further that the First and Second Waivers were
validly executed, the Third Waiver executed on
still failed to extend the three-year prescriptive
period because it was not executed in three
copies. In short, the records of the case showed
that the CIR's three-year prescriptive period to
assess deficiency tax had already prescribed due
to the defects of all the Waivers. Clearly, the
defects in the Waivers resulted to the non-
extension of the period to assess or collect taxes,
and made the assessments issued by the BIR
beyond the three-year prescriptive period void.
s. CIR vs. Asalus Corporation,
GR No. 221590, February 22,
2017
COMMISSIONER OF INTERNAL REVENUE
V. ASALUS CORPORATION
GR NO. 221590 (FEBRUARY 22, 2017)
MENDOZA J.
FACTS: On December 6, 2010, respondent
received a Notice of Informal Conference from
RDO 47 of BIR in connection with the
investigation conducted by Revenue Officer
Bañares on the VAT transactions of Asalus for
the taxable year 2007. Asalus filed a letter-reply
questioning the basis of the computation. On
January 10, 2011, CIR issued PAN finding
Asalus liable for deficiency VAT for 20p7
amounting to P413, 378, 058.11. Asalus filed a
protest, which CIT subsequently denied. On
August 26, 201, Asalus received the Formal
Assessment notice stating that it was liable for
P95, 681, 98i.64. Asalus filed a protest, then on
September 6, 2011, he filed a supplemental
protest stating that the deficiency VAT
assessment had prescribed pursuant to Section
203 of the NIRC. On October 16, 2012, Asalus
received FDDA showing VAT deficiency
amounting to P106, 761, 025.17 and P25, 000.00
as compromise penalty
ISSUE: Whether or not petitioner’s right to
asses respondent had already prescribed.
RULING: No.
Generally, internal revenue taxes shall be
assessed within 3 years after the last day
prescribed by law for filing the return, or where
the return is filed beyond the period from the day
the return was actually filed, and Section 222 of
the NIRC provides the exception, among which is
that in case of a false or fraudulent return with
intent to evade tax, or failure to file a return,
assessment may be made within 10 years from
discovery. When there is a showing that a
taxpayer has substantially undeclared its sales,
receipts, or income, there is presumption that it
has filed a false return, and CIR need not
present evidence immediately. And in the case at
bar, audit investigation revealed that there were
undeclared VATable sales more than 30% of that
declared in Asalus’ returns.
t. CIR v. Ayala Securities Corp.,
101 SCRA 231
COMMISSIONER OF INTERNAL REVENUE
V. AYALA SECURITIES CORPORATION
AND THE HONORABLE COURT OF TAX
APPEALS
G.R. NO. L-29485 (MARCH 31, 1976)
ESGUERRA, J.
FACTS: On November 29, 1955, Ayala
Securities Corporation, a domestic corporation
organized and existing under the laws of the
Philippines, filed its income tax returns with the
office of the petitioner for its fiscal year which
ended on September 30, 1955 showing a surplus
of P2,758,442.37.
On February 21, 1961, petitioner advised the
respondent corporation of the assessment of
P758.687.04 on its accumulated surplus reflected
on its income tax return for the fiscal year which
ended September 30, 1955. On April 19, 1961,
the respondent corporation protested against the
assessment on its retained and accumulated
surplus pertaining to the taxable year 1955 and
sought reconsideration thereof for the reason
that the said assessment was issued beyond the
five-year prescriptive period.
On May 30, 1961, petitioner wrote respondent
corporation's auditing and accounting firm with
the "advise that your request for reconsideration
will be the subject matter of further
reinvestigation and a thorough analysis of the
issues involved conditioned, however, upon the
execution of your client of the enclosed form for
waiver of the defense of prescription". However,
respondent corporation did not execute the
requested waiver of the statute of limitations,
considering its claim that the assessment in
question had already prescribed.
Respondent corporation in its Petition for Review
alleges that the assessment made by petitioner
Commissioner of Internal Revenue is illegal and
invalid considering that the assessment in
question, having been issued only on February
21, 1961, and received by the respondent
corporation on March 22, 1961, the same was
issued beyond the five-year period from the date
of the filing of respondent corporations income
tax return November 29, 1955, and, therefore,
petitioner's right to make the assessment has
already prescribed, pursuant to the provision of
Section 331 of the National Internal Revenue
Code.
Petitioner in his answer alleged that the
assessment made by his office on the
accumulated surplus of the corporation as
reflected on its income tax return for the taxable
year 1955 has not as yet prescribed and, further,
that the respondent corporation's accumulation
of surplus for the taxable year 1955 was
improper as the retention of such surplus was
availed of by the corporation to prevent the
imposition of the income tax upon the individual
shareholders or members of the said corporation.
ISSUE: Whether or not Section 331 of the
National Internal Revenue Code is applicable,
which provides for a five-year period of
prescription of assessment from the filing of the
return.
RULING: On the issue of whether Sec. 331 or
See. 332(a) of the National Internal Revenue
Code should apply to this case, there is no iota of
evidence presented by the petitioner as to any
fraud or falsity on the return with intent to
evade payment of tax, not even in the income tax
assessment nor in the letter-decision of February
18, 1963, nor in his answer to the petition for
review. Petitioner merely relies on the provisions
of Sec 25 of the National Internal Revenue Code,
violation of which, according to Petitioner,
presupposes the existence of fraud.
The applicable provision of law in this case is
Section 331 of the National Internal Revenue
Code, to wit:
SEC. 331. Period of limitation
upon assessment and collection. —
Except as provided in the
succeeding section, internal
revenue taxes shall be assessed
within five years after the return
was filed, and no proceeding in
court without assessment for the
collection of such taxes shall be
begun after the expiration of such
period. For the purposes of this
section, a return filed before the
last day prescribed by law for the
filing thereof shall be considered as
filed on such last day: Provided,
that this limitation shall not apply
to cases already investigated prior
to the approval of this Code.
Under Section 46(d) of the National Internal
Revenue Code, the Ayala Securities Corporation
designated September 30, 1955, as the last day of
the closing of its fiscal year, and under Section
46(b) the income tax returns for the said
corporation shall be filed on or before the
fifteenth (15th) day of the fourth (4th) month
following the close of its fiscal year. The Ayala
Securities Corporation could, therefore, file its
income tax returns on or before January 15,
1956. The assessment by the Commissioner of
Internal Revenue shall be made within five (5)
years from January 15, 1956, or not later than
January 15, 1961, in accordance with Section 331
of the National Internal Revenue Code herein
above-quoted. As the assessment issued on
February 21, 1961, which was received by the
Ayala Securities Corporation on March 22, 1961,
was made beyond the five-year period prescribed
under Section 331 of said Code, the same was
made after the prescriptive period had expired
and, therefore, was no longer binding on the
Ayala Securities Corporation.
For this reason, we are of the view that after
reaching the conclusion that the right of the
Commissioner of Internal Revenue to assess the
25% surtax had already prescribed under Section
331 of the National Internal Revenue Code.
u. CIR v. La Flor Dela Isabel,
Inc., GR No. 211289, January
1, 2019
COMMISSIONER OF INTERNAL REVENUE
V. LA FLOR DELA ISABEL, INC.
GR NO. 211289 (JANUARY 14, 2019)
REYES, J. JR., J.
FACTS: La Flor dela Isabela, Inc. is a domestic
corporation duly organized and existing under
Philippine Law. It filed monthly returns for the
Expanded Witholding Tax and Withholding Tax
on Compensation for Calendar Year 2005. Once
on 2008, and twice on 2009, it executed Waivers
of the Statute of Limitations. Later on, it
received four Formal Letters of Demand and
Final Assessment Notices. Subsequently, it filed
its Letter of Protest contesting the assessment
notices.
The CTA, later affirmed by the CA, subsequently
ruled in favour of La Flor cancelling the
deficiency tax assessments against it. It ruled
that based on the dates when La Flor filed its
returns for EWT and WTC, the CIR had until
February 15, 2008 to March 1, 2009 to issue an
assessment pursuant to the three-year
prescriptive period under Section 203 of the
NIRC. The Waivers entered into by the CIR and
La Flor did not effectively extend the prescriptive
period for the issuance of the tax assessments.
ISSUES:
1. Whether the prescriptive period under
section 203 of the NIRC applies to EWT
and WTC assessments.
2. Whether La Flor’s EWT and WTC
assessments for 2005 were barred by
prescription
RULING: Yes.
The prescriptive period under Section 203 of the
NIRC applies to EWT and WTC assessments.
Also, La Flor’s EWT and WTC assessments for
2005 were barred by prescription.
Withholding taxes are internal revenue taxes
covered by Section 203 of the NIRC: ―SEC. 203.
Period of Limitation Upon Assessment and
Collection. – Except as provided in Section 222,
internal revenue taxes shall be assessed within
three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding
in court without assessment for the collection of
such taxes shall be begun after the expiration of
such period: Provided, That in 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.‖
Under the existing withholding tax system, the
withholding agent retains a portion of the
amount received by the income earner. In turn,
the said amount is credited to the total income
tax payable in transactions covered by the EWT.
On the other hand, in cases of income payments
subject to WTC and Final Withholding Tax, the
amount withheld is already the entire tax to be
paid for the particular source of income. Thus, it
can readily be seen that the payee is the
taxpayer, the person on whom the tax is
imposed, while the payor, a separate entity, acts
as the government’s agent for the collection of
the tax in order to ensure its payment.
Thus, withholding tax assessments such as EWT
and WTC clearly contemplate deficiency internal
revenue taxes. Their aim is to collect unpaid
income taxes and not merely to impose a penalty
on the withholding agent for its failure to comply
with its statutory duty.
As to the second issue, in Commissioner of
Internal Revenue v. Systems Technology
Institute, Inc., the Court ruled that waivers
extending the prescriptive period of tax
assessments must be compliant with RMO No.
20-90 and must indicate the nature and amount
of the tax due.