Tax 2 Digest by M.

Dizon
Administrative Protest of an Assessment
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CIR v. Phil. Global Communication, Inc.
G.R. No. 167146 | October 31, 2006 | Chico-Nazario, J.

Parties:

PETITIONER RESPONDENT

Commission of Internal Revenue (CIR) Phil. Global Communication, Inc. (PGC)

Doctrine:
The 3-year collection period can only be suspended if the taxpayer files a protest through a request
for reinvestigation, not a request for reconsideration.
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CASE SUMMARY
Trigger word/s: 8 years before collection

FACTS: PGC filed its annual ITR for taxable year 1990. PGC received a PAN for deficiency income tax, as
well as a FAN with an assessment notice, dated April 14, 1994. PGC filed two formal protest letters against
the Assessment notice, alleging that it was invalid for lack of factual and legal bases. More than 8 years after
the assessment was presumably issued, CIR denied PGC’s protest against the Assessment Notice and
affirmed the assessment. The CTA ruled that, since more than 3 years had lapsed from the time the
Assessment Notice was issued, the CIR’s right to collect the same has prescribed in conformity with the Tax
Code. The CTA en banc affirmed the CTA decision.

ISSUE: W/N CIR’s right to collect PGC’s alleged deficiency income tax is barred by prescription—YES.

HELD: The law provided another 3 years after the assessment for the collection of the tax due through the
administrative process of distraint and/or levy, or through judicial proceedings. The period for collection runs
on the date the assessment notice head been released, mailed or sent by the BIR. ITC, as there was no
Warrant of Distraint and/or Levy served on PGC, the earliest attempt of the BIR to collect the tax due was
several years beyond the 3-year prescriptive period, through the filing of its Answer in the CTA case on
January 9, 2003. Thus, the CIR is prescribed from collecting the assessed tax.

Furthermore, the protest letters filed by PGC were requests for reconsideration, not reinvestigation, which do
not toll the running of the prescription period for the collection of an assessed tax.
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FACTS
• PGC filed its annual ITR for taxable year 1990 on April 15, 1995. On April 13, 1992, the CIR issued a
LOA authorizing the appropriate BIR officials to examine PGC’s books of account and other
accounting records in connection with the investigation of PGC’s 1990 income tax liability.
o BIR sent a letter to PGC requesting it to present examination on certain records and
documents, but PGC failed to present anything. Hence, PGC received a PAN (dated April 13,
1994; received April 21, 1994) for deficiency income tax arising from deductions that were
disallowed for failure to pay the withholding tax and interest expenses that were likewise
disallowed.
o The following day, PGC received a FAN with an Assessment Notice, dated April 14, 1994, for
deficiency income tax.
• On May 6, 1994, PGC filed a formal protest letter against the Assessment Notice, and another protest
letter on May 23, 1994; in both letters, PGC requested for the cancellation of the tax assessment,
which they alleged was invalid for lack of factual and legal bases.
• On October 16, 2002, more than 8 years after the assessment was presumably issued, PGC’s
counsel received a Final Decision dated October 8, 2002 from the CIR denying PGC’s protest against
the Assessment Notice and affirming the assessment in toto.
• On November 15, 2002, PGC filed a petition for review with the CTA.

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Tax 2 Digest by M. Dizon
Administrative Protest of an Assessment
CASE TRAIL
• CTA – ruled in favor of PGC. It ruled on the primary issue of prescription and found it unnecessary
to decide the issues on the validity and propriety of the assessment; that the protest letters filed by
PGC cannot constitute a request for reinvestigation and hence cannot toll the running of the
prescriptive period to collect the assessed deficiency income tax.
o Since more than 3 years had lapsed from the time the Assessment Notice was issued, the
CIR’s right to collect the same has prescribed in conformity with Sec. 269 of the NIRC
1977.
• CTA en banc – affirmed the CTA decision.
• CIR filed a petition for review on certiorari with the SC.
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ISSUES & HELD

W/N CIR’s right to collect PGC’s alleged deficiency income tax is barred by prescription under Sec.
269(c) of the Tax Code of 1977—YES.
● The law prescribes the period within which the BIR may assess a national revenue tax: either
three years form the date the return was actually filed, or from the last date prescribed by law for
the filing of the return, whichever came later.
o The law provided another 3 years after the assessment for the collection of the tax due
through the administrative process of distraint and/or levy, or through judicial proceedings.
The period for collection runs on the date the assessment notice head been released,
mailed or sent by the BIR.
o ITC, as there was no Warrant of Distraint and/or Levy served on PGC, the earliest attempt
of the BIR to collect the tax due was several years beyond the 3-year prescriptive period,
through the filing of its Answer in the CTA case on January 9, 2003. Thus, the CIR is
prescribed from collecting the assessed tax.
● CIR v. BF Goodrich – the law on prescription should be liberally construed in order to protect
taxpayers and that, as a corollary, the exceptions to the law on prescription should be strictly
construed.
o Instances when the running of the statute of limitations on the assessment and collection
of national internal revenue taxes could be suspended, even in the absence of a waiver,
under Sec. 271. Among these exceptions, and invoked by the CIR ITC as a ground for the
petition, is the instance when the taxpayer requests for a reinvestigation which is
granted by the Commissioner.
o However, ITC, the exception does not apply since PGC never requested for a
reinvestigation; CIR also could not have conducted a reinvestigation since PGC refused
to submit new evidence.

Two Types of Protest under RR 12-85

Request for Reconsideration Request for Reinvestigation

A plea for a re-evaluation of an
assessment on the basis of existing
records, without need of additional
evidence. May involve a question of fact,
or law, or both.
Does NOT toll the running of the
prescription period for the collection of
an assessed tax.
A plea for re-evaluation of an assessment
on the basis of newly-discovered evidence
or additional evidence that a taxpayer
intends to present in the investigation. May
also involve a question of fact, or law, or
both.
Suspends the running of the statute of
limitations when requested by the taxpayer
and granted by the CIR, as it will take more
time than a reconsideration.

• The distinction between the two is important because if both types can interrupt the running of the
statute of limitations, an erroneous assessment may never prescribe.

On the other hand, if a taxpayer files the protest on a patently erroneous assessment, the statute of
limitations would automatically be suspended and the tax may be collected long after it was assessed,
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Tax 2 Digest by M. Dizon
Administrative Protest of an Assessment
while the interest on the deficiencies and the surcharges continue to accumulate. Taxpayers would
also remain uncertain and burdened with the costs of preserving their books and records for an
unrestricted number of years.
o ITC, the two letters of protest sent by PGC are requests for reconsideration. It cannot be a
request for reinvestigation since PGC refused to submit new evidence and cooperate in any
reinvestigation proceedings. Hence, the running of statute of limitations cannot be interrupted.
o Furthermore, PGC did nothing to prevent BIR from collecting the tax. BIR should have denied
PGC’s protest and initiated proceedings for the collection and allow PGC to contest the
assessment before the CTA.
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RULING:
Petition DENIED. CTA en banc decision AFFIRMED.
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