Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-18804 May 27, 1965

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WESTERN PACIFIC CORPORATION, respondent. Office of the Solicitor General for petitioner. R. Melo and A. S. Velasquez for respondent. PAREDES, J.: On March 2, 1959, the respondent Western Pacific Corporation, was assessed for P3,731.00, as deficiency income tax for the year 1953. This assessment was brought about by the disallowance of P8,265.82, listed in respondent's return for 1953, as expense items, and P10,387.50, as written off "bad debts." The assessment was received by respondent on the same date (March 2, 1959). On March 5, 1959, the Commissioner of Internal Revenue wrote the respondent corporation a letter of demand for the payment of the amount, including therein a breakdown of said assessment. Under date of June 29, 1959, respondent corporation, thru Ruifino Melo & Company, Consulting and Examining Auditors, requested for non-assessment, claiming that there has been prescription in making the assessment, that the expense items and bad debts were allowable deduction. The letter was accompanied by a Resolution of the corporation, dated February 2, 1954, where it was resolved to write off the debts of the people appearing in another annex. The Commissioner on July 30, 1959 replied to the request, denying the same, and demanding the payment of the amount due within thirty (30) days from receipt of said demand. On September 19, 1958, respondent corporation requested that it be permitted until September 25, 1959, to submit formal objections to the assessment. The formal objections appearing in the letter of September 22, 1959, were identical to those of the June 29, 1959 communication, reason for which the Commissioner did not give any favorable action. The last letter of the Commissioner, dated October 28, 1959, among others, requested payment of the assessment within ten (10) days from receipt thereof. On December 18, 1959, respondent Western Pacific Corporation, presented with the Court of Tax Appeals a petition for Review of assessment made by the Commissioner, on three (3) counts, to wit: (1) whether or not the making of the assessment had prescribed; (2) whether expenses incurred in securing IGC Licenses are capital expenditures, and, as such, not deductible from the income; and (3) whether the bad debts written off should likewise be deducted. When the issues were joined, by the filing of the Answer, and after hearing, the CTA rendered judgment absolving the Western Pacific Corporation from the assessment. It, however, ruled out prescription, stating that March 2, 1959, was the last day of the five (5) year period within which to make the assessment. On this point, the CTA ruled:

However, we do not agree with petitioner that the assessment in question was issued beyond the 5-year statutory limitation. February 28, 1959 fell on a Saturday. Pursuant to Republic Act No. 1880, as, implemented by Executive Order No. 25, effective July 1, 1959, all bureaus and offices of the government, except schools, court, hospitals and health clinics, hold office only five days a week or from Monday to Friday. Saturday and Sunday, are constituted public holidays or days of exemption from labor or work as far as government offices, including that of respondent Commissioner, are concerned. The offices and bureaus concerned are officially closed on those days. So that on February 28, 1959 and March 1, 1959, which were Saturday and Sunday, respectively, the office of respondent was officially closed. And where the last day for doing an act required by law falls on a holiday, the act may be done on the next succeeding business day. (Section 31, Revised Administrative Code.) Similarly, in computing any period of time prescribed by statute, the day of the act after which the designated period of time begins to run is not included. But the last day of the period so computed is to be included, unless it is a Sunday or a legal holiday, in which event the time shall run until the end of the next day which is neither a Sunday or a holiday (Section 1, Rule 28, Rules of Court). Consequently, since February 28, 1959 was a Saturday and the next day, March 1, 1959, a Sunday, respondent had until the next succeeding business day, March 2, 1959, Monday, within which to issue the deficiency assessment. The assessment in question having been issued on March 2, 1959, it was, therefore, seasonably made. We concur in the above findings and conclusions, convinced as We are, that they are actually and legally correct.. The above ruling notwithstanding, the Commissioner of Internal Revenue appealed against the judgment which absolved respondent Western Pacific Corporation from liability, alleging that the CTA erred:. (1) In taking cognizance of the case, notwithstanding lack of jurisdiction; and (2) Granting it had jurisdiction, in considering the expense items and the written off bad debts as deductible.
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Without going into the merits of the decision absolving the respondent corporation of tax liability, We find that the assessment made by the Commissioner should be maintained, for the simple reason that when the petition for review was brought to the CTA by the respondent corporation, the said Court no longer had jurisdiction to entertain the same. The assessment had long become final. A petition for review should be presented, within the reglementary period, as provided for in Section 11, Republic Act No. 1125, which is "thirty (30) days from receipt of the assessment." The thirty (30) day period is jurisdictional (Pangasinan Transportation Co. vs. Blaquera, L-13101, April 29, 1960). It will be noted that the assessment was received by the respondent corporation on March 2, 1959. It was only on June 29, 1959, when said corporation formally assailed the assessment, on the grounds of prescription in making the assessment and the impropriety of the disallowance of the listed deductions. From March 3 to June 29, 1959, manifestly more than thirty (30) days had lapsed and the assessment became final, executory and demandable (Ventanilla vs. Bd. of Tax Appeals, et al., L-7384, Dec. 19, 1955). Of course, in the interim, a number of communications were exchanged between the parties, the latest of which was dated October 28, 1959. Even if this date is considered as the commencement of the thirty (30) day period, still the petition for review with the CTA was out of time, because it was only on December 18, 1959, that said petition was presented. Failure to comply with the thirty-day statutory period would bar appeal and deprive the CTA of its jurisdiction to

entertain and determine the correctness of the assessment (Gibbs & Gibbs vs. Coll. of Int. Rev. & CTA, L-13453, Feb. 29, 1960). IN VIEW OF THE FOREGOING, the decision of the CTA is hereby set aside for having been rendered without jurisdiction, the assessment in question having been already final, executory and demandable before the petition for review was presented; and another entered, ordering respondent Western Pacific Corporation to pay the assessment made by the Collector of Internal Revenue, and the further amount of 5% surcharge and 1% monthly interest on the amount assessed, from April 1, 1959 until date of full payment. Costs against the respondent corporation. Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19727 May 20, 1965

THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. PHOENIX ASSURANCE CO., LTD., respondent. ----------------------------G.R. No. L-19903 May 20, 1965

PHOENIX ASSURANCE, CO., LTD., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent. Office of the Solicitor General for petitioner-respondent Commissioner of Internal Revenue. Sycip, Salazar, Luna & Associates and A. S. Monzon, B. V. Abela & J. M. Castillo for respondentpetitioner Phoenix Assurance Co., Ltd. BENGZON, J.P., J.: From a judgment of the Court of Tax Appeals in C.T.A. Cases Nos. 305 and 543, consolidated and jointly heard therein, these two appeals were taken. Since they involve the same facts and interrelated issues, the appeals are herein decided together. 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 agree 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.
1äwphï1.ñët

filed its Philippine income tax return for 1953 and claimed therein a deduction from gross income of P33." On April 1. the sum of P1. filed its Philippine income tax return for 1950.838.88 as head office expenses allocable to its Philippine business. claiming therein. The Commissioner assumed that "ninety and third.75 P246.00 as deficiency income tax.04 .69 upon which the Commissioner of Internal Revenue. equivalent to 5%.25 as part of the head office expenses incurred for its Philippine business. Phoenix Assurance Co. The Commissioner of Internal Revenue disallowed P11. On August 30.884. Ltd..912.772.082. among others.826.082.00...526.812. 1955 it amended its income tax return for 1952 by excluding from its gross income the amount of P316. as follows: Year Amount Ceded 1952 1953 1954 P316.04 as net addition to marine insurance reserve equivalent to 40% of the gross marine insurance premiums received during the year. days are approximately the length of time required before shipments reach their destination or before claims are received by the insurance companies. 1958. declaring therein a deduction from gross income of P35. a deduction of P37.. On August 30.966. filed its Philippine income tax return for 1952. 1953. 1954.57 of such claim for deduction and subsequently assessed against Phoenix Assurance Co.75 representing reinsurance premiums ceded to foreign reinsurers and further eliminating deductions corresponding to the coded premiums...070. The amended return showed an income tax due in the amount of P2.147.Pursuant to such reinsurance treaties. ceded portions of the premiums it earned from its underwriting business in the Philippines. The Commissioner of Internal Revenue disallowed P15. 1958. Phoenix Assurance Co.68 48. Ltd. assessed the following withholding tax: Year 1952 1953 1954 Total Withholding Tax P 75.35 of the claimed deduction for head office expenses and assessed a deficiency tax of P5.502. On April 30. computed at 5% on its gross Philippine income.526.32 P183. of its gross Philippine income. The disallowance resulted from the fixing by the Commissioner of the net addition to the marine insurance reserve at 100% of the marine insurance premiums received during the last three months of the year.667. 1955 it amended its 1953 income tax return to exclude from its gross income the amount of P246. Ltd.42 ============= On April 1. Phoenix Assurance Co.04 P203. 1951. Ltd.42 59.00 on July 24.059.384. by letter of May 6. Phoenix Assurance Co. Ltd.

Phoenix Assurance Co. . . . . .50 10. . . a deduction from gross income of P99. . .00 36. .337. . . 1958 the Bureau of Internal Revenue released the following assessment for deficiency income tax for the years 1952 and 1954 against Phoenix Assurance Co. . Ltd. . .90 P 15. filed its Philippine income tax return for 1954 claiming therein.409.00 =========== P 12.61 .23 P170.737. . . It also excluded from its gross income the amount of P203.: 1952 Net income per audited return Unallowable deduction & additional income: Overclaimed Head Office expenses: Amount claimed . To avoid the prescriptive period provided for in Section 306 of the Tax Code.10 of the deduction representing head office expenses allocable to Philippine business thereby reducing the refundable amount to P20. Net income per investigation Tax due thereon Less: amount already assessed DEFICIENCY TAX DUE P29.826. . . At the same time.69 representing reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines. 1956 in the Court of Tax Appeals praying for such refund. it filed a petition for review on April 11.384.41 P 39. After verification of the amended income tax return the Commissioner of Internal Revenue disallowed P12.25 Amount allowed . . .75 as head office expenses allocable to its Philippine business. . . Net income per investigation Tax due thereon 1954 Net income per audited Unallowable deduction & additional income: Overclaimed Head Office expenses: Amount claimed .00.21 20. .085.representing reinsurance premiums ceded to foreign reinsurers. 1955.912..489. . . . . . . .624.320. .890. .00 as overpaid income tax for 1953. computed at 5% of its gross Philippine income. . . .35 P 28. it requested the refund of P23. .16. among others. P 35. On August 1.667. On April 29. .180.455. Amount allowed . . .304.00 P160. .624. .96 P 5. Ltd. . .73 19..511.

00 as income tax for 1954. Phoenix Assurance Co. 1953 and 1954.as net addition to reserve for the year 1950 is excessive. Ltd.502.P 2. for head office expenses allocable to Philippine business for the years 1952. 1953 showing a loss of P199. 1953 and 1954 are excessive. Ltd. L-20501. the .583.68 and P48. as head office expenses allocable to its business in the Philippines fixed by the Commissioner at 5% of the net Philippine income instead of 5% of the gross Philippine income as claimed in the returns. the Court of Tax Appeals allowed in full the decision claimed by Phoenix Assurance Co.059. provided that the maximum amount that may be collected as interest shall not exceed the amount corresponding to a period of three (3) years. the respondent Commissioner is ordered to refund to petitioner the sum of P20. Ltd. Ltd..00 as overpaid income tax for 1953. appealed to the Court of Tax Appeals. 1965.. which sum is to be deducted from the total sum of P186. April 30. rendered the following judgment: WHEREFORE. Ltd.. there shall be collected a surcharge of 5% of the tax unpaid. as withholding tax for the years 1952.42 within thirty (30) days from the date this decision becomes final. Ltd.v. petitioner Phoenix Assurance Company. is hereby ordered to pay the Commissioner of Internal Revenue the respective amounts of P75. has prescribed.00 =========== The above assessment resulted from the disallowance of a portion of the deduction claimed by Phoenix Assurance Co. The question of whether or not reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to contracts executed abroad are income from sources within the Philippines subject to withholding tax under Sections 53 and 54 of the Tax Code has already been resolved in the affirmative in British Traders' Insurance Co. On July 24. plus interest at the rate of 1% a month from the date of delinquency to the date of payment. (2) Whether or not the right of the Commissioner of Internal Revenue to assess deficiency income tax for the year 1952 against Phoenix Assurance Co. 1955 reporting a tax liability of P2. protested against the aforesaid assessments for withholding tax and deficiency income tax. Upon the other hand. and..42. 1962.32.. determined the allowable head office expenses allocable to Philippine business to be 5% of the net income in the Philippines.180.42 due as taxes. 1958. If any amount of the tax is not paid within the time prescribed above. or the total sum of P186..966. 1 We come to the issue of prescription..847.685.93.. In a decision dated February 14.. absolved Phoenix Assurance Co. the Commissioner of Internal Revenue denied such protest. (3) Whether or not the deduction of claimed by the Phoenix Assurance Co. Commisioner of Internal Revenue. filed its income tax return for 1952 on April 1. Ltd. from payment of the statutory penalties for non-filing of withholding tax return. It amended said return on August 30.. and P2. Ltd. Without pronouncement as to costs. and the Commissioner of Internal Revenue have appealed to this Court raising the following issues: (1) Whether or not reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to reinsurance contracts executed abroad are subject to withholding tax. declared the right of the Commissioner of Internal Revenue to assess deficiency income tax for 1952 to have prescribed.. However. Phoenix Assurance Co. after examination of the amended return.847. Ltd.685.. Subsequently. (4) Whether or not the deductions claimed by Phoenix Assurance Co. Ltd. Ltd. Phoenix Assurance Co. Ltd.812. Phoenix Assurance Co. for 1950 as net addition to marine insurance reserve.00. P59.

That this limitation shall not apply to cases already investigated prior to the approval of this Code. to July 24. states: SEC. the mere disallowance of part of the head office expenses could not probably result in said loss being completely wiped out and Phoenix being liable to deficiency tax. the Commissioner's view should be sustained. From August 30.00. when the amended return was filed. when the . 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. the period of limitation of the right to issue the same should be counted from the filing of the amended income tax return.. — Except as provided in the succeeding section internal revenue taxes shall be assessed within five years after the return was filed. a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day: Provided..93. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. was claimed also in the original return. on the basis of the original return filed on April 1.583. 1958. for considering that the declared loss amounted to P199. 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.35. Considering that the deficiency assessment was based on the amended return which. counting the running of the period from August 30.93 therein which would have more than offset such disallowance of P15.. the prescriptive period should be counted from the filing of said original return. On the other hand. as aforestated. Section 331 of the Tax Code. the Commissioner of Internal Revenue maintains that: ". which limits the right of the Commissioner of Internal Revenue to assess income tax within five years from the Filipino of the income tax return. Furthermore. is substantially different from the original return. Ltd. On the other hand. or assessed. the deficiency income tax in question could not possibly be determined. although the deduction for head office expenses allocable to Philippine business. hence. the date when the amended return was filed.Commissioner of Internal Revenue assessed deficiency income tax in the sum of P5.. For the purposes of this section. 1955. 331. 1955 could the Commissioner assess the deficiency income tax in question. The question is: Should the running of the prescriptive period commence from the filing of the original or amended return? The Court of Tax Appears that the original return was a complete return containing "information on various items of income and deduction from which respondent may intelligently compute and determine the tax liability of petitioner.826. Ltd. whose disallowance gave rise to the deficiency tax. 1955. the same having been exercised more than five years from the date the original return was filed. he would wish to press for the counting of the prescriptive period from the filing of the amended return. To our mind. 1953. The Court of Tax Appeals found the right of the Commissioner of Internal Revenue barred by prescription. the Commissioner could not have possibly determined a deficiency tax thereunder because Phoenix Assurance Co. Period of limitation upon assessment and collection. Not until the amended return was filed on August 30. declared a loss of P199.667.583. 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." Accordingly.'s London head office.

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 reserve called for in Section 186 is a safeguard to the general public and should be strictly followed not only because it is an express provision but also as a matter of public policy. required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts may be deducted from their gross income: Provided.147.. The right of the Commissioner to assess the deficiency tax on such amended return has not prescribed. . To strengthen our opinion. For purposes of the Insurance Law. not to enhance tax avoidance to its prejudice.deficiency assessment was issued. this Court therefore cannot countenance the same.47 which is equivalent to 100% of all marine insurance premiums received during the last months of the year... Provided. and should therefore be fully allowed. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein. or not to claim any deduction at all. the Commissioner of Internal Revenue reduced the same to P25. the same cannot be and is not excessive. less than five years elapsed. the net additions. We next consider Phoenix Assurance Co. * . Ltd.'s claim for deduction of P37.. — In the case of insurance companies. Phoenix Assurance Co. Ltd. and the Commissioner of Internal Revenue — 40% of premiums received during the year and 100% of premiums received during the last three months of the year.374.. we believe that to hold otherwise. — (a) Special deductions allowed to insurance companies. However. That for marine risks the insuring company shall be required to charge as the liability for reinsurance fifty per centum of the premiums written in the policies upon yearly risks. and the full premiums written in the policies upon all other marine risks not terminated (Emphasis supplied. Ltd. It may be noteworthy to observe that the formulas for determining the marine reserve employed by Phoenix Assurance Co. The object of the Tax Code is to impose taxes for the needs of the Government. if any.04 being less than the amount required in Section 186 of the Insurance Law. Special provisions regarding income and deductions of insurance companies. whether domestic or foreign. 186. Section 186 of the Insurance Law requires the setting up of reserves for liability on marine insurance: SEC.147. except domestic life insurance companies and foreign life insurance companies doing business in the Philippines. 32.04 for 1950 representing net addition to reserve computed at 40% of the marine insurance premiums received during the year. Paragraph (a) of Section 32 of the Tax Code states: SEC. That the released reserve be treated as income for the year of release.'s claim for deduction of P37. Said determination runs short of the requirement.) The reserve required for marine insurance is determined on two bases: 50% of premiums under policies on yearly risks and 100% of premiums under policies of marine risks not terminated during the year. respectively — do not comply with Section 186. for income tax purposes a taxpayer is free to deduct from its gross income a lesser amount. Treating said said deduction to be excessive. however. Section 32 (a) of the Tax Code quoted above allows the full amount of such reserve to be deducted from gross income.

1953 and 1954. from the payments of which the Court of Tax Appeals absolved the Phoenix Assurance Co.. it must not be applied retroactively on withholding tax for the years 1952. resulting from partial disallowance of deduction representing head office expenses. subsection (a).059. and the sums of P5. 1953 and 1954.68 and P48.. which should be deducted from the amount of P192. Ltd.667. The parties are agreed as to the percentage — 5% — but differ as to the basis of computation. Consequently. there should be collected a surcharge and interest as provided for in Section 51(c) (2) of the Tax Code.352.) Consequently. the amount of P20.352.. respectively. 1953. are sustained. insists that the 5% head office expenses be determined from the gross income. This conclusion finds support in paragraph 2. This part of the ruling of the lower court ought not to be disturbed. needs to be resolved is: Should the 5% be computed on the gross or net income? The record shows that the gross income of Phoenix Assurance Co. while the Commissioner wants the computation to be made on the net income. of Internal Revenue the amount of P75. Ltd. If the amount of P192. Finally. Lt. the expenses deductible are the. WHEREFORE.847. Ltd's net income thereby partially disallowing the latter's claim. the decision appealed from is modified. and 1954 allocable to its Philippine business computed at 5% of its gross income in the Philippines The Commissioner of Internal Revenue redetermined such deduction at 5% on Phoenix Assurance Co. is hereby ordered to pay the Commissioner.812. quoted hereunder: (2) Expenses allowable to non-resident alien individuals and foreign corporations. What. P59. 1953 and 1954. therefore.00 as overpaid income tax for 1953. Since the items of income not belonging to its Philippine business are not taxable to its Philippine branch. they should be excluded in determining the head office expenses allowable to said Philippine branch.966. Ltd. 1959.00 and P2. Phoenix Assurance Co. The imposition of interest on unpaid taxes is one of the statutory penalties for tax delinquency. 1962. consists of income from its Philippine business as well as reinsurance premiums received for its head office in London and reinsurance premiums ceded to foreign reinsurance.42. He contends that since such limitation was incorporated into Section 51 of the Tax Code by Republic Act 2343 which took effect only on June 20.32 as withholding tax for the years 1952.180.We come now to the controversy on the taxpayer's claim for deduction on head office expenses incurred during 1952. necessary expenses paid or incurred in carrying on any business or trade conducted within the Philippines exclusively. after Republic Act 2343 took effect. No costs. The Commissioner of Internal Revenue is ordered to refund to Phoenix Assurance Co.00 as income tax for 1952 and 1954 or a total of P192. It is so ordered..42 or a portion thereof is not paid within thirty (30) days from the date this judgment becomes final. Section 30 of the Tax Code. on the equitable ground that the latter's failure to pay the withholding tax was due to the Commissioner's opinion that no withholding tax was due.. Phoenix Assurance Co.42. Ltd. the Commissioner of Internal Revenue assails the dispositive portion of the Tax Court's decision limiting the maximum amount of interest collectible for deliquency of an amount corresponding to a period of three years.352. (Emphasis supplied. the taxpayer could be held liable for the payment of statutory penalties only upon its failure to comply with the Tax Court's judgment rendered on February 14. .42. In the case of a non-resident alien individual or a foreign corporation. the deficiency assessments for 1952.

wharfage stevedoring and other costs in the Philippines. L-20601 February 28. Bautista Angelo. 965. . McCoach D. U..L. v. ordering petitioner herein. L-19392. Republic of the Philippines SUPREME COURT Manila EN BANC G. that the FOB prices included costs of loading. Inc.: Appeal from a decision of the Court of Tax Appeals. HON. quantity and measurement specifications of the logs were certified by the Bureau of Forestry. Concepcion. 905. as found and stated by the lower court in its decision. petitioner. also in Agusan). 324 U. Butuan Sawmill. Pa 218 F. 1953. 1965. Nitafan for the petitioner... it sold logs to Japanese firms at prices FOB Vessel Magallanes. REYES. interpreting charges for liability on insurance contracts as reserves. are in full accord with the evidences presented therein. to pay respondent Commissioner of Internal Revenue the sum of P36. State Board of Equalization of Taxes. 1966 BUTUAN SAWMILL. Makalintal and Zaldivar. Ed. v. 1953. 1951 to June 8. COURT OF TAX APPEALS. v. C.L. Footnotes 1 See also Alexander Howden & Co. 251 U. 342. 154. 1951 to June 8.B.C. Ltd. JJ. respondents. . L-22074. April 14. that during the period from January 31. April 30. David G. 89 L. Barrera. Duel..Bengzon.74 as deficiency sales tax and surcharge due on its sales of logs to buyers in Japan from January 31.L. in its CTA Case No. Agusan (in some cases FOB Vessel.S.J..J. Office of the Solicitor General for the respondents. . concur. Regala. hence.S. and the payments of the logs were effected by means of irrevocable letters of credit in favor of petitioner and payable through the Philippine National Bank or any other bank named by it. J. Upon investigation by the Bureau of Internal Revenue. 297. 64 L. Nasipit. it was ascertained that no sales tax return was filed by the petitioner and neither did it pay the corresponding tax on the sales.. that the freight was paid by the Japanese buyers. State Farm Mutual Automotive Insurance Company v.R. Ed. Dizon. 416. INC. J. * See Maryland Casualty Co.. 81 N.. Inc. Commissioner of Internal Revenue.S. Reyes.. J. Paredes. City of Newark v. vs. ET AL. 79343. The facts. that the quality.B.. No. Philippine Guaranty Co. Insurance Company of North America v. we quote them hereunder: . Commissioner of Internal Revenue. 1965.107. 812.

the same is merely a prima facie presumption which yields to contrary proof such as that the logs were made deliverable to the "order of the shipper" and the logs were shipped at the risk of the shipper.74 (Exh. The imposition of the compromise penalty was. and. it points out that the "FOB" feature of the sales contract was made only to fix its price and not to fix the place of delivery. p. determined against petitioner the sum of P40. BIR rec. Thus. it is admitted that the agreed price was "F.: Exh. even assuming that the "FOB" feature of the disputed sales determines thesitus of transfer of ownership.On the basis of agent Antonio Mole's report dated September 17. and. considered as determinative of the place of transfer of ownership of the logs sold.004. 14. not subject to the taxing jurisdiction of our Government. this Court declared: . 1960. were domestic or "local" sales. CTA rec.). Exh. rules. 14. pp.917. which circumstances. p. would negate the above implications. And in consequence of a reinvestigation. BIR rec. in the light of our previous decisions1. as amended by Republic Acts Nos. ruling that the sales in question. respondent. Agusan". . surcharge and compromise penalty on its sales [tax. respondent. 79-80. Hence. and whether or not the assessment thereof was made within the prescriptive period provided by law therefor. pp. p.). 186 and 209 of the National Internal Revenue Code (Exhibit "E". BIR rec. Exh. and was not a part of the sales arrangement. 558 and 594. therefore. Subsequent requests for reconsideration of the amended assessment having been denied (Exh. and that the payment of prices by means of irrevocable letters of credit is but a common established business practice to secure payment of the price to the seller. "G". 1äw phï1. "I". and that the assessment thereof was made well within the ten-year period prescribed by Section 332(a) of the same Code. "F". BIR rec. in previous decisions (Cf. which this Court had. . eliminated therefrom for want of agreement between the taxpayer and the Collector (now Commissioner) of Internal Revenue. if considered. In a decided case with practically identical set of facts obtaining in the case at bar. quantity. amended the amount of the previous assessment to P38. petitioner filed the instant petition for review on November 7. petitioner herein interposed the present appeal before this Court. that the payment of freight by the Japanese buyers is not an uncommon feature of "FOB" shipments.ñët On the first issue. p. that the requirement of certification of quality. for purposes of taxation. BIR rec. although prima facie. thus indicating. 1958. the lower court upheld the legality and correctness of the amended assessment of the sales tax and surcharge. that the parties intended the title to pass to the buyer upon delivery of the logs in .. 55. 1957. 75-76. The issues presented in this appeal are: whether or not petitioner herein is liable to pay the 5% sales tax as then prescribed by Section 186 of the Tax Code on its sales of logs to the Japanese buyers.B. and regulations. footnote [1]). "H". petitioner herein insists that the circumstances enumerated in the above finding.. It also insists that. and measurement specifications of the logs by local authorities was done to comply with local laws. however. on August 27.01 representing sales tax. subject to sales tax under the provision of section 186 of the Tax Code. BIR rec. "J". petitioner herein contends that the disputed sales were consummated in Japan.). since petitioner herein omitted to file its sales tax returns for the years 1951. 52. and this omission was discovered only on September 17. The above contentions of petitioner are devoid of merit. A motion to reconsider said decision having been denied. surcharge and compromise penalty on its sales] of logs from January 1951 to June 1953 pursuant to Sections 183. 81. 1958. are not in themselves evidentiary indications to show that the parties intended the title of the logs to pass to the Japanese buyers in Japan. On the bases of the above-quoted findings and circumstances. & p. 1952 and 1953. 1957. on November 6. therefore.O.

subject to sales tax therein. accordingly. vs. Upon the foregoing facts and authority of Bislig (Bay) Lumber Co. accepted them.. 3. But. L-15716. Collector of Internal Revenue (56 Off. 1958). Inc. 4. the seller thereby reserves the ownership in the goods. and by the bill of lading the goods are deliverable to the seller or his agent. 7. vs. vs. The petitioner collected the purchase price of every shipment of logs by surrendering the covering letter of credit. which was indorsed in blank. 2. we find that the allegation is not borne out by the law or the evidence. bill of lading. Collector of Internal Revenue. 1961). Collector of Internal Revenue. Irrevocable letters of credit were opened by the Japanese buyers in favor of the petitioners. vs. Misamis Lumber Co. invoice and export entry.. No. Inc. Inc. it is clear that said export sales had been consummated in the Philippines and were. Inc. L-11710. tally sheet. said prima facie proof was bolstered up by the following circumstances. 6. June 30. Moreover. the ownership would have passed to the buyer on shipment of the goods. No. Payment of freight charges of every shipment by the Japanese buyers. The logs purchased by the Japanese buyers were measured by a representative of the Director of Forestry and such measurement was final. the sellers's property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract. if except for the form of the bill of lading. The Japanese buyers chartered the ships that carried the logs they purchased from the Philippines to Japan. With respect to petitioner's contention that there are proofs to rebut the prima facie finding and circumstances that the disputed sales were consummated here in the Philippines. but were granted a corresponding credit based on the contract price. That the specification in the bill of lading to the effect that the goods are deliverable to the order of the seller or his agent does not necessarily negate the passing of title to the goods upon delivery to the carrier is clear from the second part of paragraph 2 of Article 1503 of the Civil Code of the Philippines (which appellant's counsel improperly omits from his citation): Where goods are shipped.R. 517) andWestern Mindanao Lumber Development Co..R." (Taligaman Lumber Co. . March 31. thereby making the Government of the Philippines a sort of agent of the Japanese buyers. G. or to the order of the seller or of his agent. No. In case of natural defects in logs shipped to the buyers discovered in Japan. to the corresponding bank in Manila of the Japanese agent bank with whom the Japanese buyers opened letters of credit.R. G. Court of Tax Appeals. namely: 1. 5. instead of returning such defective logs. 1962). (G. Gaz. L-13186 (January 28. et al.Agusan.. The Japanese buyers insured the shipment of logs and collected the insurance coverage in case of loss in transit. on board the vessels that took the goods to Japan.

as it is hereby affirmed.R.. L-10370 January 31. May 29.R. Court of Tax Appeals & Collector of Internal Revenue vs. wherein the proceeds of the disputed sales were declared.R. Inc.. should be applied to the case at bar. J. and not Section 332(a). and that under Section 332(a) of the Tax Code assessment thereof may be made within ten (10) years from and after the discovery of the omission to file the return. Section 331. Zaldivar and Sanchez. with costs against petitioner. L-8556. 1957. G. On the second issue. L-12100 & L-11812. Dizon.. it is evident that the lower court correctly held that the assessment and collection of the sales tax in question has not yet prescribed. therefore. Bengzon. Thus. we held that an income tax return cannot be considered as a return for compensating tax for purposes of computing the period of prescription under Section 331 of the Tax Code. if he does not file a return.. the same should also be ruled as devoid of merit. Inc. and it having been found that there is no proof to substantiate the foregoing contention of petitioner. and that the taxpayer must file a return for the particular tax required by law in order to avail himself of the benefits of Section 331 of the Tax Code. otherwise. L-7938 & L-9771. only questions of law may be raised and may be passed upon by this Court" (Gutierrez vs. September 30. Bautista Angelo. No.Moreover. Bisaya Land Transportation Co.P.J. MATIAS H. Nos. C. and. vs. 1957). Regala. Since petitioner filed its income tax returns for the years 1951. the decision appealed from should be. Concepcion. concur. JJ. petitioner avers that the filing of its income tax returns. and the assessment was made in 1957 only. is substantial compliance with the requirement of filing a sales tax return. if there should be deemed a return filed. Barrera. and this omission was discovered only on September 17. Republic of the Philippines SUPREME COURT Manila EN BANC G. it has been "a settled rule that in petitions to review decisions of the Court of Tax Appeals. Makalintal. The principle enunciated in this last cited case is applicable by analogy to the case at bar. petitioner. respondents. Gutierrez. of the Tax Code providing for a five-year prescriptive period within which to make an assessment and collection of the tax in question from the time the return was deemed filed.. it further contends that the assessment of the sales tax corresponding to the years 1951 and 1952 has already prescribed for having been made outside the five-year period prescribed in Section 331 of the Tax Code and should. cited in Sanchez vs. 1959). No. 1957.R. . The above contention has already been raised and rejected as not meritorious in a previous case decided by this Court. G. an assessment may be made within the time stated in Section 332(a) of the same Code (Bisaya Land Transportation Co. 1952 and 1953. vs. be deducted from the assessment of the deficiency sales tax made by respondent. Collector of Internal Revenue & Collector of Internal Revenue vs. It being undisputed that petitioner failed to file a return for the disputed sales corresponding to the years 1951. Nos. Wherefore. AZNAR and THE COURT OF TAX APPEALS. Bengzon. Commissioner of Customs. 1952 and 1953. 1958 THE COLLECTOR OF INTERNAL REVENUE.. G. May 21.

and Special Attorney Librada del Rosario-Natividad for petitioner. and this instruction was supposedly complied with by the latter official in virtue of a warrant of distraint and levy dated February 17. 1953. placing the properties of Matias H.999. that the warrant of garnishment served on the Philippine National Bank in Manila on August 14. It appears on record that the Collector of Internal Revenue also instructed the City Treasurer of Cebu to place the properties of said taxpayer under constructive distraint to guarantee the satisfaction of the taxes thus assessed (Exh. and served on taxpayer Aznar on February 20. in a resolution dated February 8. hearing on the matter was duly conducted by the lower Court. the lower Court. and that even if the court a quo could have lawfully issued the same. was made beyond the 3-year prescriptive period as provided by Section 51-(d) of the National Internal Revenue Code. The facts of the case are as follows: In a letter dated November 28. 1955. From this resolution. Aznar under constructive distraint and levy and which was supposedly received by said taxpayer on February 20. on the ground that the right of the respondent Collector to effect the collection of the taxes demanded of said taxpayer by extra judicial methods had already prescribed. . 11). Upon receipt of the corrected assessment. 1956. An exchange of communications between the Internal Revenue Office and the taxpayer ensued as a result of which a reinvestigation of the income tax assessment of the latter was made and the same was finally reduced from P380.70. and that the petition was not merely intended to delay the payment of the taxes because petitioner stood on an even chance of winning the case if given a day in court (Annex B of the petition). was null and void in view of the respondent's failure to furnish the taxpayer with a copy of the same and that at the placing of the properties of the taxpayer under constructive distraint and levy on April 28. 1125. 1955. Case No.: This is a petition filed by the Collector of Internal Revenue to review by certiorari the resolution of the Court of Tax Appeals dated February 8. FELIX. Sato and Jose P. the taxpayer filed with the Court of Tax Appeals a petition to review the same and subsequently an urgent petition was also filed to restrain therein respondent Collector of Internal Revenue from proceeding with the collection of the alleged tax deficiencies by means of the summary methods of distraint and levy (Annex B of petition). 1953 (Exh. J. Primitivo N. demanded from Matias H. said tribunal acted with grave abuse of discretion when it did not require the taxpayer to file a bond as exhorted by Section 11 of Republic Act No. the Collector of Internal Revenue brought the matter to this Court in a petition to review by certiorari contending that collection of taxes cannot be restrained by injunction. 9).T.032. the Collector of Internal Revenue. 1953. through the office of the City Treasurer of Cebu. was not actually served on petitioner Aznar. After the parties had filed their respective memoranda and rested their case. 1956.66 allegedly representing the latter's income tax deficiencies for the tax years 1945 to 1951. in C. The Collector of Internal Revenue set up an opposition against the grant of this petition and consequently. Rosete.Office of the Solicitor General Ambrosio Padilla. issued an injunction prayed for enjoining the Collector of Internal Revenue from proceeding with the collection of the taxes by means of the summary methods of distraint and levy after finding that the warrant issued by the Treasurer of the City of Cebu dated February 17. Solicitor Felicisimo R. 1953. Enad for respondent Aznar. that the employment of these means would cause petitioner injustice and irreparable injury. Aznar the payment of P732. Aznar was correspondingly informed of this correction in a communication dated February 16. 1952. Aznar through summary administrative method. 109 enjoining him from enforcing collection of the alleged income tax liability of Matias H. 1953.A. specifically stating that this later figure superseded the previous one sent by the Bureau of Internal Revenue.

Sambrano vs.132. may no longer be effected by means of administrative methods but only through judicial proceedings (Collectors of Internal Revenue vs. in view of the existence of the provisions of Section 11 of Republic Act No. 42669. on March 1.. fraudulent or erroneous had been filed. 1948. and granting the Court of Tax Appeals could issue an injunction. 1955. but Aznar took exception to the employment of this administrative method to effect collection of the taxes allegedly due by him. 327. 53 Off. offered in evidence Exhibit 11. 1950 and 1951 by extra-judicial methods would proper and the resolution of the Court of Tax Appeals as far as it concerns this later period would be erroneous. 520. the Collector of Internal Revenue. 1953. 2 months and 5 days after he ahd filed his income tax returns for the year 1951.. placing the propertiesof the taxpayer under constructive destraint and levy. 1949. 1955. 65 Phil. Posadas. for 1948 on February 28. Aznar through the summary methods of distraint and levy and. 53 Off. for 1950. Reyes. Collector vs. and Mrs. And we have since then and even before.P. were We to consider as valid andin order the disputed warrant dated February 17. [9] 6532. but it is not controverted that his tax returns for 1947 was filed on March 1. 1125 (Collector of Internal Revenue vs. 68 Phil. for 1949 on March 1. Collector vs. 554.. 1952. 1125 allowing the Tax Court to issue said writ of injunction subject certain limitations. 216. which was reduced to P380. 1953. Avelino. 1953. on March 1. trying to establish the fact that the properties of the taxpayer were already placed under constructive distraint and levy as of February 20. During the hearing had in the court below. supra. Gaz. Villegas. 1950. the collection of thetaxes for 1949.. Aznar's alleged income tax deficiencies were assessed at P723. 101 Phil..R. 100 Phil.66 on November 28. Avelino. 822. Gaz. G. 872. El Gobierno de las Islas Filipinas. 56 Phil. whether the Court of Tax Appeals erred in issuing the injunction restraining said official from employing the same. Gaz. 29. Jan. the questions at issue in the instant case are: whether the Collector of Internal Revenue could enforce collection of the alleged deficiency income taxes of Matias H. Juan de la Vifla vs. 645). whether said tribunal erred in not requiring the taxpayer to make a deposit. Aznar had with the Philippine National Bank was also served on said banking institution on August 14. In the light of the aforementioned ruling. There is likewise no controversy that the City Treasurer of Cebu levied upon certain real properties belonging to the taxpayer on May 6. although summary administrative means would nolonger be the proper recourse for the collection of taxes corresponding to1948 and the years previous to that as 3 years. 1951. 1. and allegedly received by Aznar on February 20 of the same year.. but the taxpayer once again interposed an objection to the use of this measure on the ground that he was not notified thereof pursuant to the provision of Section 319 of the Tax Code and asserted that the issuance of said warrant was null and void. 1952. adhered to the doctrine that the collection of income taxes. Aznar.. consequently.. it having been issued 3 years. 100 Phil. 305) must be deemed to have modified by the later enactment-Republic Act No. purportedly a duplicate of the warrant dated February 17. [15] 4839..999. It appears on record of a warrant of garnishment to distrain the deposits Mr. Haygood. We agree with petitioner that Section 305 of the National Internal Revenue Code precludes the use of injunction to restrain the collection of taxes. but as this Court has already pronounced. 1953. Court of Tax Appeals. Inc. 11 months and 22 days has already elapsed from the time the income tax return for that year was filed. 1938. 100 Phil.There appears no record as to when Matias H. 53 Off. however disputed the authenticity of Exhibit 11 maintaining that it was never served on him. Aznar filed his income tax returns for the years 1945 and 1946. the former (Sec. Philippine Sugar Estate Development Co. Collector of Internal Revenue vs. Collector vs. and therefore beyond the 3-year prescriptive period required by Section 51-d of the Tax Code. after the lapse of three years from the date the income tax return said to be false. and for 1951. A. Zulueta. There is likewise no dispute that Matias H. . Actually. No. vs.70 on March 17.

by filing in the Court a quo a notice of appeal and with this Court a petition for review within 30 days from the date he receives notice of said ruling. Premised on these provisions. the person receiving the same. 1956. We find that on March 1. 1125) and not in petitions forcertiorari (Sec. in the case at bar. 13. this Court in passing upon petitionsto review by certiorari decisions or rulings of the Court of Tax Appeals may review. first. CTA Records). respondent Collector of Internal Revenue filed with the Court of Tax Appeals a notice of appeal from the resolution of said Court that is now subject of this recourse (p. 18. reverse. 19. revise. But the personel of the office of the City Treasurer of Cebu admitted it was lost and for this reason thier affidavits recounting said service were executed (Exhs. oversight or negligence. by causing such ruling. i. R. We may interchangeably consider petitions for review as petitions for a writ of certiorari and vice-versa. by reason of certain inconcistencies in their declarations during the extensive cross examination conducted by counsel for respondent Aznar. order or decision of the Court of Tax Appeals likewise reviewed by Us upon a writ of certiorari in proper cases (Sec. and as courts have to construe statutes as they are found and not to amend or change them under the guise of construction (82 C.probably through omission. On substantial points—as to who and how the warrant in question was served. Moreover.). amend or modify not only the legalissues involved therein but also the findings of fact upon which said decision or ruling is based. 16 and 17—p. Act 1125). it may be stated that any party adverselyaffected by any rulign. In answer to these possible arguments We may say that when the interest of justice so demands. Having all this in mind. We must remember. 19. this Court could only pass upon issues involving questions of law. We could go over the evidence on record and pass upon the questions of fact. it is but natural for the human brain not to pick up certain details of an event that transpired sometime ago and thus expect minor inconsistencies in the testimonies of several witnesses. R. however. 1955. Moreover we find in the records a decisive factor that props up the contention of petitioner Collector .The respondent Court of Tax Appeals. 68-79. as otherwise he would not have filed said notice of appeal which is required in petitions for review (Sec. but that in cases of review upon petition for a writ of certiorari. No. a requisite that is necessary in petitions for certiorari. Rep. id. 15. We are inclined to consider the question of facts invoved in the present controversy. made a finding that while itmay be true that Exhibit 11 could have been prepared at the time referred to.A.J.A. however. that considering the time that had lasped when the incident took place and the date they were questioned under oath as regard their affidavits recounting the event. Notwithstanding the foregoing. 1953. that there are proofs supporting petitioner's contention that Exhibit 11 was properly executed. order or decision adverse to him (Sec. and in going over the evidence presented We find contrary to the conclusion arrived at by the court a quo. the witnesses are in unison in their declarations.S. 14. 18. and if We have the power to consider the evidence to determine the facts in the cases of review. As Republic Act No 1125 creating the Court of Tax Appeals keep silence as to matters left open to Usfor review or the issues that We may take conizance of. same was not executed and thus actually the properties of the taxpayer were only placed underconstructive distraint and levy on May 6. It is true that exhibit 11 is merely a duplicate copy of the warrant and that the original thereof could nowhere be found. It is also to be noted that in the instant case of the Solicitor General has not filed any motion for the reconsideration of said resolution. it may be alleged that when a case is taken up to this Court by petition for review. order or decision of the Court of Tax Appeals has by law two ways of elevating his case to the Supreme Court. and other facts surrounding said service. and second. No.e. 1125). The respondent Court refused to give credence to the employees of the City Treasurer's Office who claimed to have served the converted warrant on the taxpayer on February 20. We find no plausible reason for depriving this Court of such power in petitions for certiorari specially if We consider that in the latter cases the petitioner oftenly charges the respondent Court with the commission of grave abuse of discretion the determination of which usually depends on the facts and circumstances of the points in controversy. 530). it could not conceal that respondent's intention was to appeal the matter to this Court. 466.. CTA records) and no matter how inappropriatemay be the wording of the petition filed in this instance.

07 because this figure as correctedshould properly be P380. notice or other papers in an action or special proceeding (See Wigmore on Evidence. datedFebruary 16. and such properties could not have been mentioned in the document if said properties had not been taken from and returned to taxpayer Aznar who has not denied that same were his. 1125 contains the following: SEC 11.. 1952. Vol. p.— xxx xxx xxx. distraint and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law. 1955. however. WHO MAY APPEAL. inquiring as to what action the City Treasurer of Cebu had taken on the tax case of Matias H. BIR records) and not in connection with the assessment of November 28. The issuance of another warrant by theTreasurer's Office on April 28.levy. and 11 months and 19 days after he did so far for the year 1951. Section 11 of Republic Act No. Exhibit 11. 311. but it must be noted that this second warrantcovers 2 buildings belonging to the taxpayer found in the province of Leytewhich were not included among those listed in the first warrant. We cannot simply disregard this form of evidence not only because affidavits are admissable to prove the service of a summons. 6. which was2 years. The lower Court also placed much stress on the supposition that the Collector of Internal Revenue should not have sent the communications dated March 15 and March 28. it is clear to our mind thatthe warrant placing the properties of Matias H. 1 year 11 months and 19 days after he had filedhis returns for 1950. Anzar. Anzar under constructive distraint and levy was served on the latter on February 20.032. It may be seen that the Court is allowed by law to suspend the collectionof taxes subject to certain limitations. No appeal taken to the Court of Appeals from the decision of the Collector of Internal Revenue or the Collector of Customs shall suspend the payment. 42-49. for We must not lose sight of the fact that Exhibit 11 contains a list of the properties of Matias H. It is correct that a mistake wascommitted by said office in stating therein that the income tax deficiencies of Matiaz H.of Internal Revenue. BIR records). 11 months and 10 days after the taxpayer had filed his income tax return of the tax year 1949. this warrant was issued because the properties covered by thefirst writ would not be sufficient to satisfy the amount demanded by the Government. of which the Treasurer's Office was also duly notified (p. Provided. EFFECT OF APPEAL. 1953.) but also because respondent taxpayer was given opportunity to cross-examine the affiants before the Municipal Court of Cebu. Thus. piecing the evidence together. 1955 (p. Anzar amounted to P723. A close scrutiny of the letters referred to reveals that they were in connection with the correctedassessment sent by the Internal Revenue Office to Matias H. 3rd ed. of the same year was likewise taken by the Tax Court to contradict the existence of Exhibit 11. That when in the opinion of the Court the collection by the Bureauof Internal Revenue or the Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of theproceeding may suspend the said collection and require the taxpayer eitherto deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. held that the requirement of a bond before a writ of .As explained. 1955 and which the was admittedly received byAnzar on May 6. Teh second question posed herein is whether the Court of Tax Appeals couldissue an injunction to suspend such collection without requiring the taxpayerto make a deposit or file a bond? This Court. 315.999. as acknowledged by the latter in said exhibit. Aznar if the latter had really sent the original of Exhibit 11 to respondent Collector.70. Aznar which were levied upon by the City Treasurer of Cebu and which the Treasurer in turn placed in the possession of said owner for safe keeping. resolving the same question in similae case.

C. Reyes. As regards 1949 to 1951. would the Court.P. Aznar. A. Aznar isordered to deposit with said court the amount demanded from him for the years1949 to 1951 or furnis a surety bond for not more than double said amount.supra. to secure the payment of alleged income taxdeficiencies for the tax years 1945 to 1951...L. 1953. explains: SECTION 11 of Republic Act No. whereas. J. 1946. that the Court a quo would have required the petitioner to post the bond in question that the taxpayer would refuse or fall to furnish said bond. concur. placed the properties of the taxpayer under distraint andlevy only on February 20. A. for the sake of argument. Let us suppose. The court.J. 1947 and 1948. It is so ordered. the respondent Court didnot err in enjoining the Collector from using summary administrative methodswithout requiring the taxpayer to post a bond or make a deposit as far as thetax years 1945. and the following the ruling adopted by this Court as regards theissuance by the Tax Court of writs of injunction. Pending the disposition of this case in the lower Court. the resolution of the Court of Tax Apeals dated February 8. Reyes. JJ. Sambrano vs.. and then what is suspended in the act of collecting. concur.is set aside and this case is hereby remanded to the lower Court for furtherproceedings so that it may determine the income tax liabilities of MatiasH.Costs are taxed against respondent Matias H.J. 1956. Bautista Angelo. Padilla. respondent Matias H. though We must have in mind that the cuort a quo acted on the erroneuos assumption that the period for said summary adminstrative methods had already lapsed and that the effect of its ruling isa fait accompli.in upholding this theory. require the petitioner to deposit or file a bond as aprerequisite for the issuance of a writ of injunction.. supra). Wherefore.on the same breath. Bengzon. As the Collector of Internal Revenue.the answer is all too obvious. 1125 is therefore promised on the assumptionthat the collection by summary proceedings is by itself in accordance with existing law. CTA. Paras. Montemayor. thought the Office of the City Treasurer of Cebu. and as with respect to the taxesdemanded for the yeatr 1945. It certainly would be an absurdityon the part of the Court of Tax Appeals to declare that the collection bysummary methods of distraint and levyt was violative of the law. in the case at bar what the respondent Court suspended was the use of methodemployed to verify the collection which was evidently illegal after the lapse of the three-year limitation period. the said warrant was issuedbeyond the 3year period of limitations as prescribed by Section 51-d of the Tax Code. a quo be obliged to authorize or allow the Collector to proceed with the collection from the petitioner of the taxesdue by a means it previously declared to the contrary to law? (Collector vs. Republic of the Philippines SUPREME COURT Manila EN BANC . Aznar that have not prescribed under the terms and period fixed by Sections 331 and 332 of the National Internal Revenue. and then. The respondent Court issued the injunction in question on the basis of its findings that the means of intended to be used by the petitioner in the collection of the alleged deficiency taxes were in violation of law.B. 1946 and 1948 are concerned.injunctioncould be issued by the Tax Court applies only to cases where the means soughtbe employed for the enforcement of the collection of the tax are by themselves legal and not where same were declared null and void. after the 3-year prescriptive period as provided bySection 51-d of the Internal Revenue Code has already elapsed (Collector ofInternal Revenue vs. supra). 1946.Reyes. as where thesummary methods of distraint and levy would be utilized in the collection ofdeficiency income taxes. and Endencia. and Reyes. in the result.

: Appellee Rita Lim de Yu filed her yearly income tax returns from 1948 through 1953. Period of limitation upon assessment and collection. but also 50% thereof as surcharge. (c) Where the assessment of any internal revenue. at any time within ten years after the discovery of the falsity fraud.G. tax has been made within the period of limitation above prescribed such tax may be collected by distraint or levy or by a proceeding .379. 332. vs. SEC. The Bureau of Internal Revenue assessed the taxes due on each return.50. an action for collection was filed against her in the Court of First Instance of Cotabato on May 11. defendant-appellee. covered not only the basic deficiency income taxes. (b) Where before the expiration of the time prescribed in the preceding section for the assessment of the tax. and (2) in dismissing the case on the ground that the right of appellant to collect the deficiency income tax assessment had already prescribed. 331. Exceptions as to period of limitation of assessment and collection of taxes. 1949 and 1956 were not assessed on time. — Except as provided in the succeeding section. MAKALINTAL. or on July 18. J. That this limitation shall not apply to cases already investigated prior to the approval of this Code. or omission. 1956 the Bureau issued to appellee deficiency income tax assessments for the years 1945 to 1953 in the total amount of P22. Thereafter.450. 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. 1959. both the Commissioner of Internal Revenue and the taxpayer have consented in writing to its assessment after such time. Sections 331 and 332 of the Tax Code provide: SEC. and appellee paid them accordingly. or a proceeding in court for the collection of such tax may be begun without assessment.63. the Bureau issued to her income tax assessment notices for the years 1948 to 1953 totalling P35. No. like the one issued in 1956. She protested the assessments and requested a reinvestigation. the tax may be assessed. This last assessment. plaintiff-appellant. and the Government appealed to the Court of Appeals. Upon appellee's failure to pay. Office of the Solicitor General for plaintiff-appellant. On August 30. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. — (a) In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. On July 17. L-17438 April 30. Ignacio M. RITA LIM DE YU. 1964 REPUBLIC OF THE PHILIPPINES. Orendain for defendant-appellee. the issues involved being purely legal. internal revenue taxes shall be assessed within five years after the return was filed. 1956 she signed a "waiver" of the statute of limitations under the Tax Code as condition to the reinvestigation requested. the tax may be assessed at any time prior to the expiration of the period agreed upon.R. After trial the suit was dismissed. 1958. Appellant claims that the lower court erred (1) in ruling that the deficiency income taxes due from appellee for the years 1948. which forwarded the case to this Court.

1946 and 1947. or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner of Internal Revenue and the taxpayer before the expiration of such five-year period. Attention may likewise be drawn to the fact that in paragraph 3 of the complaint appellant seeks to collect appellee the sum of P28. and using such figures as basis assessed her deficiency taxes in the total amount of P22. as the latter do not include the taxes corresponding to the years 1945. notwithstanding the fact admitted in the stipulation. may be extended upon agreement of the Commissioner and the taxpayer. Tax Code). The first issue raised by appellant is whether or not the returns filed by appellee for the years 1948 to 1953 are false and fraudulent. Section 332 of the Tax Code. unpaid tax for the year 1948. it accepted appellee's yearly statements of income from 1945 to 1953 and assessed her a total tax P2. the waiver was not necessary for the effectivity of the assessment made on July 18. 1955. therefore. Fraud not having been proven.53. 1958. (a).e. counted from the date the return is filed. Note that the disparity between the 1956 and the 1958 assessments is really much greater than what appears at first glance. Finally.63. July 18. the expiration of the original period (Section 332 [b]. the period of limitation for assessment or collection was five years from the filing of the return. On three different occasions it arrived at three highly different computation. The clear import of the provision is that it does not authorize extension once prescription has attached. but such agreement must be made before. considerably higher than those stated in the returns. i. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.50. The right to assess or collect the income taxes for the years 1948 to 1950 had already prescribed. since such assessment was well within the original five-year period provided by law. appellee can no longer question correctness of the assessment in view of her failure to the Court of Tax Appeals to review the same. but only if begun (1) within five years after the assessment of the tax. appellant had five years within which to file suit for collection pursuant to Section 332 (c) of the tax code. And since. 1958.in court. It is one thing to say that the correctness of the last assessment made by appellant. and consequently. Appellee's theory that collection could be made only up to the end of the period of extension stated in the . The waiver validly covers only the tax years 1951 and 1952. plus a surcharge of 50%. she should be ordered to pay the amounts being collected. it has ten years from the date of the discovery of the fraud or falsity. under par.37.. The tax years 1948 to 1950 cannot be deemed included in the "waiver of the statute of limitations under the National Internal Revenue Code" executed by appellee on August 30.450. with respect to which the five-year period had not yet elapsed when the said waiver was executed. according to Section 331 of the tax code. it is further contended. Indeed the Bureau itself appears none too sure as to the amounts of her net incomes for those years.732. within which to assess the taxes or file a suit for collection without assessment. Appellant maintains they are because the yearly net incomes reported in her returns are much less than as computed by the Bureau. Then in 1956 the Bureau came up with a different set of figures for the same period. 1954. when the Bureau of Internal Revenue issued the deficiency income tax assessments on July 17. in 1958 the Bureau made another computation of appellee's net incomes for years 1948 to 1953. 1956.379. and assessed her deficiency taxes in the sum of P35. that appellee filed her return that year and duly paid the said amount. as to which the return was filed by appellee on March 1. which she paid. May 25. The five-year period for assessment. But while fraud is alleged in the complaint. With respect to the tax year 1953. After the assessment on July 18. First. the same has not been established. not after. may no longer be challenged on the technical ground just stated and quite another thing to say that appellee committed a deliberate fraud in declaring small incomes for the years in which she filed her returns. 1958. 1956.

but essential to warrant distraint. the legal period for that purpose. J.P.. which was actually filed in 1959.waiver.. although under the waiver appellee consented to the "assessment and collection" if made not later than December 31. namely. Office of the Solicitor General for respondents. Bautista Angelo. paragraph (c) of the same section is concerned with the collection of the tax after assessment.L. the period does not apply.: . Paredes and Dizon. Insofar as collection is concerned. J. to establish a cause for "judicial action" as the phrase is. Concepcion.B. Section 331 gives the Government five years from filing of the return (which is not false or fraudulent) within which to assess the tax due. took no part. L-12026. BENGZON.. The Collector of Internal Revenue. also. respondents. 1958 until payment of the full obligation.182. INC. concur. On the other hand. THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS. petitioner. Reyes.J.R. if still feasible.. Padilla. is without merit. Labrador. Bengzon. Republic of the Philippines SUPREME COURT Manila EN BANC G. Gulfin and Antonio S. 1967 BASILAN ESTATES. 1959). L-22492 September 5. Felix A.. used in section 316 of the Tax Code . It is a step preliminary. December 31.expiration date must be deemed to refer only to the extension of the assessment period. Appellant therefore had five years from 1958 within which to file his action. the appealed decision is modified by ordering appellee to pay appellant the sum of P26. with costs. regardless of whether the assessment was made during the original fiveyear period or within an agreed period of extension. May 29. 1952 and 1953.00 as deficiency income taxes for the years 1951. 1958. Alano for petitioner. C. for otherwise the effect of the waiver would be to shorten. vs. No. such . Barrera. WHEREFORE. (Alhambra Cigar and Cigarette Manufacturing Company v. JJ. plus 5% surcharge and 1% monthly interest thereon from July 31. Collection then may be effected within five years after assessment or within the "period for collection agreed upon in writing by the Commissioner of Internal Revenue and the taxpayer before the expiration of such five-year period. Paragraph (b) of Section 332 allows the extension of this period by means of a written agreement between the taxpayer and the Commissioner of Internal Revenue. not extend. Assessment and collection are two different processes. It is merely a notice to the effect that the amount therein stated is due as tax and a demand for the payment thereof. An assessment is not an action or proceeding for the collection of taxes.. J.. and. 1958." Thus.

. Because of its refusal to waive the period of prescription. should the 25% surtax be imposed on the balance of the entire surplus from 1947-1953. On February 21. the annotation on the notice (Exhibit 10. the case was appealed to Us by the taxpayer. 1960. according to Bureau of Internal Revenue practice. p. assessed Basilan Estates. the last date of the five-year period within which to assess deficiency tax. travelling and miscellaneous expenses.912 for 1953 and P86. alleging prescription of the period for assessment and collection. In the letter of the Regional Director forwarding the case to the Chief of the Investigation Division which the latter received on March 10. filed before the Court of Tax Appeals a petition for review of the Commissioner's assessment. it received the notice beyond the five-year prescriptive period. 54-A of the BIR records) "No accompanying letter 11/25/" is advanced as indicative of the fact that receipt of the notice was after March 24. 26. the Commissioner of Internal Revenue. 1959. Inc. and on December 2. 1959. 1963. The Commissioner himself in his letter (Exh. We cannot accept this interpretation of the petitioner. Is the petitioner exempt from the penalty tax under Republic Act 1823 amending Section 25 of the Tax Code? PRESCRIPTION There is no dispute that the assessment of the deficiency tax was made on February 26. 1959. Inc. No. The notice of assessment shows the assessment to have been made on February 26. per examiners' report of February 19. Although the evidence is not clear on this point. a deficiency income tax of P3. but the petitioner claims that it never received notice of such assessment or if it did. error in disallowing claimed depreciations. On December 20.876.A Philippine corporation engaged in the coconut industry. ACR. considering the presence of circumstances that lead Us to presume regularity in the performance of official functions. notice of assessment was said to have . since the original returns were filed on March 24. 1954. On non-payment of the assessed amount. upon the following issues: 1. Have there been unreasonably accumulated profits? If so.. Inc. a warrant of distraint and levy was issued but the same was not executed because Basilan Estates. 52. On the right side of the notice is also stamped "Feb. and error in finding the existence of unreasonably accumulated profits and the imposition of 25% surtax thereon. succeeded in getting the Deputy Commissioner of Internal Revenue to order the Director of the district in Zamboanga City to hold execution and maintain constructive embargo instead. Basilan Estates. p. To show prescription.85 as 25% surtax on unreasonably accumulated profits as of 1953 pursuant to Section 25 of the Tax Code. well within the five-year period. 1959 (p. Inc. On February 26. asserts that notice had been sent to petitioner. with principal offices in Basilan City. the Court of Tax Appeals found that there was no prescription and affirmed the deficiency assessment in toto. 1959. 1954 its income tax returns for 1953 and paid an income tax of P8. 1959" — denoting the date of release. Basilan Estates. filed on March 24. H. 71 of the BIR records). or only for 1953? 4. 1964. On October 31. 84 of BIR records) answering petitioner's request to lift. 1960. 1959.028. Has the Commissioner's right to collect deficiency income tax prescribed? 2. notice was served the corporation that the warrant of distraint and levy would be executed. the warrant of distraint and levy. the corporation's request for reinvestigation was not given due course. Was the disallowance of items claimed as deductible proper? 3.

96 11. claimed deductions for the depreciation of its assets up to 1949 on the basis of their acquisition cost. even granting that notice had been received by the petitioner late. Depreciation. 1959 (p.06 P59.759.702. Subsequently.75 P90. under Section 331 of the Tax Code requiring five years within which to assessdeficiency taxes. — Basilan Estates. mailed or sent by the Collector to the taxpayer and it is not required that the notice be received by the taxpayer within the aforementioned five-year period.00 P3.49 6. expenses disallowed Officer's travelling expenses disallowed Net Income per Investigation 20% tax on P59.17 2.00 86.912.45 .40 DEDUCTIONS A.759.1 ASSESSMENT The questioned assessment is as follows: Net Income per return Add: Over-claimed depreciation Mis.96 Less: Tax already assessed Deficiency income tax Add: Additional tax of 25% on P347.507.been sent to petitioner.40 19.142.500.876. Besides.560. as alleged.00 8. the year involved in this case. There it was alleged that notice was already sent to petitioner on February 26.500.49 6.300. 1950 it changed the depreciable value of said assets by increasing it to conform with the increase in cost for their replacement. the Chief of the Investigation Division indorsed on March 18. In 1953. As of January 1.940. from 1950 to 1953 it deducted from gross income the value of depreciation computed on the reappraised value.702.53 3.90 P10. Accordingly.028. 1959.01 Tax Due & Collectible P40. 24 of the BIR records) the case to the Chief of the Law Division. Inc.75 ========= The Commissioner disallowed: Over-claimed depreciation Miscellaneous expenses Officer's travelling expenses P10. taxpayer claimed the following depreciation deduction: Reappraised assets New assets consisting of hospital building and equipment P47.788.910.342. the assessment is deemed made when notice to this effect is released.17 2. These circumstances pointing to official performance of duty must necessarily prevail over petitioner's contrary interpretation.300.

04. at least.7 Moreover. the original investment remains as it was in the beginning.Total depreciation P51. And for the year 1952. That when the allowance authorized under this subsection shall equal the capital invested by the taxpayer . the depreciation allowable on said assets to be P36. but it is its duty to its bond and stockholders. The question for resolution therefore is whether depreciation shall be determined on the acquisition cost or on the reappraised value of the assets.500. Section 30 (f) (1) which states: (1)In general. free of income tax.500. affirmed by the Court of Tax Appeals. — A reasonable allowance for deterioration of property arising out of its use or employment in the business or trade.6 They are not created by implication but upon clear expression in the law. and. the Commissioner of Internal Revenue found that the reappraised assets depreciated in 1953 were the same ones upon which depreciation was claimed in 1952. the use of which in the trade or business is definitely limited in duration.2 Depreciation commences with the acquisition of the property and its owner is not bound to see his property gradually waste. The term is also applied to amortization of the value of intangible assets.49. The income tax law does not authorize the depreciation of an asset beyond its acquisition cost. the law permits the taxpayer to recover gradually his capital investment in wasting assets free from income tax. It is entitled to see that from earnings the value of the property invested is kept unimpaired.842. without making provision out of earnings for its replacement. the Commissioner pegged the deductible depreciation for 1953 on the same old assets at P36. . the claim for depreciation beyond P36.3 Accordingly. in the case of a public service corporation. . its plain duty to the public. with taxpayer's concurrence. The determination. so that at the end of any given term of years. Accordingly. the Commissioner had already determined. a deduction over and above such cost cannot be claimed and allowed. Hence. the recovery. .04 and disallowed the excess thereof in the amount of P10. Hence. . For then what the taxpayer would recover will be. .5 not matters of right.4 Precisely.98 Upon investigation and examination of taxpayer's books and papers.842. therefore. Depreciation is the gradual diminution in the useful value of tangible property resulting from wear and tear and normal obsolescense. but also some profit. . allows a deduction from gross income for depreciation but limits the recovery to the capital invested in the asset being depreciated. Recovery in due time thru depreciation of investment made is the philosophy behind depreciation allowance. or out of its not being used: Provided. not only the acquisition cost.252. is sustained. of an amount more than the invested capital in an asset will transgress the underlying purpose of a depreciation allowance. computed on their acquisition cost at rates fixed by the taxpayer.49 has no justification in the law. It is not only the right of a company to make such a provision.04 or in the amount of P10.842. The reason is that deductions from gross income are privileges. the idea of profit on the investment made has never been the underlying reason for the allowance of a deduction for depreciation. of the Commissioner of Internal Revenue disallowing said amount. no further allowance shall be made.

as that tax. 62-68 of BIR records): 1. the corporation had considerable capital adequate to meet the reasonable needs of the business amounting to P327. petitioner's accountant. 5. Additional tax on corporations improperly accumulating profits or surplus — (a) Imposition of tax. including penalties.31 or a ratio of 6:1. 1959.40 P9. for each taxable year. is formed or availed of for the purpose of preventing the imposition of the tax upon its shareholders or members or the shareholders or members of another corporation. for under Section 337 of the Tax Code. there is levied and assessed against such corporation.69 (assets less liabilities).00 while the liabilities amounted to only P61.300. 1962). the petitioner may be sustained.617. On this ground. — The next item involves disallowed expenses incurred in 1953. Strong financial position of the petitioner as of December 31. or personal holding companies. explained the P6. when the Bureau of Internal Revenue decided to investigate. 1953.059. Felix Gulfin. the papers in support of these miscellaneous and travelling expenses were not included for the reason that by February 9.nèt The Commissioner found that in violation of the abovequoted section. based on the following circumstances (Examiner's Report pp. As of 1953.40 was the president's travelling expenses to and from Manila as to the vouchers and receipts of these. 25. he said the same were made but got burned during the Basilan fire on March 30. insurance companies.117. Petitioner further argues that when it sent its records to Manila in February. 41 of same TSN). 1959. 2. except banks.17 2.01. provides: Sec. said five years had lapsed.17 was actual expenses credited to the account of the president of the corporation incurred in the interest of the corporation during the president's trip to Manila (pp. Expenses.499.759. Assets were P388. 1aw phîl.507. 33-34 of TSN of Dec.57 These were disallowed on the ground that the nature of these expenses could not be satisfactorily explained nor could the same be supported by appropriate papers. he stated that the P2. receipts and papers supporting such expenses need be kept by the taxpayer for a period of five years from the last entry. a tax equal to twenty-five per centum of the undistributed portion of its accumulated profits or surplus which shall be in addition to the tax imposed by section twenty-four. UNREASONABLY ACCUMULATED PROFITS Section 25 of the Tax Code which imposes a surtax on profits unreasonably accumulated. 1962 (p.759. and shall be computed. broken as follows: Miscellaneous expenses Officer's travelling expenses Total P6. through the medium of permitting its gains and profits to accumulate instead of being divided or distributed. 40 of same TSN).300. At the time of the investigation. . whether domestic or foreign.B. Taxpayer's stand on this issue is therefore sustained. petitioner had unreasonably accumulated profits as of 1953 in the amount of P347. collected and paid in the same manner and subject to the same provisions of law. — If any corporation. petitioner had no more obligation to keep the same since five years had lapsed from the time these expenses were incurred (p.

1953. 7. In 1953.3. The P250. current assets are converted into cash and with the income realized from the business as the year goes. 237-238 of TSN of Dec. labor. 235-237 of TSN of Dec. Petitioner argues that since it has P560. This shows all the more the unreasonable accumulation.000 for malaria control which were reserved way back in 1948 (p. If there were any plans for these amounts to be used in further expansion through projects. without any intent to channel the same to some particular future projects in mind. drainage. it did not appear in the records as was properly indicated in 1948 when such amounts were reserved. 1962). Inc.000 for electrification of driers and mechanization and P50. of large sums of money as personal loans. In the unreasonable accumulation of P347.000 reverted to the general fund was sought to be explained as later used elsewhere: "part of it in the Hilano Industries. (pp.44 as its expenses for the year 1953. Such reversion therefore gave occasion for the Government to consider the same for tax purposes. 6. 67 of the BIR records) but reverted to the general fund only in 1953.507."9 The reversion here was made because the reserved amount was not enough for the projects intended. no such intention was shown.01. repair. The P200. in 1953 upon reversion to the general fund. the capital stock was increased to P500.507. 117 of TSN of Dec. 4. these expenses may well be taken care of (pp. 1962) totalling P59. 6. the examiner did not take into account the possible expenses for cultivation.8has it that: "In order to determine whether profits were accumulated for the reasonable needs of the business or to avoid the surtax upon shareholders. while in 1948 it was already clear that the money was intended to go to future projects. part of it was spent in the facilities for the waterworks system and for industrialization of the coconut industry" (p. 7. not subsequently declared intentions which are merely the products of after-thought. . This is not sufficient explanation. they were already included as part of the working capital (pp. irrigation. 103-105 of TSN of Dec.232.01 is not unreasonably accumulated. 1962).72. 1962). 7. the controlling intention of the taxpayer is that which is manifested at the time of the accumulation.794.794. there is no need to have such a large amount at the beginning of the following year because during the year.01 are included P200. a surplus of P347.72 was spent — yet as of that date there was still a surplus of P347.507.000 reserved for electrification of drier and mechanization and the P50. As aptly answered by the examiner himself. it does not mean that the accumulations are reasonable as a matter of law."10 In fact. 1953 already P59."11 Petitioner tried to show that investments were made with Basilan Coconut Producers Cooperative Association and Basilan Hospital (pp. 238 of TSN of Dec. . Investment of undistributed earnings in assets having no proximate connection with the business — as hospital building and equipment worth P59. Persuasive jurisprudence on the matter such as those in the United States from where our tax law was derived. As rightly contended by the Government. 5. 6. with an increase of surplus amounting to P677. Petitioner tried to show that in considering the surplus. however. Withdrawal by shareholders.72 as of December 31. etc. 1962). in building the factory site and buildings to house technical men . As of December 31. Thus.717. fertilitation. just because the fatal accumulations are less than 70% of the annual operating expenses of the year.01.000 although there was no need for such increase. .794.000 reserved for malaria control were reverted to its surplus in 1953. Thus. it is erroneous to say that the taxpayer is entitled to retain enough liquid net assets in amounts approximately equal to current operating needs for the year to cover "cost of goods sold and operating expenses" for "it excludes proper consideration of funds generated by the collection of notes receivable as trade accounts during the course of the year.

The exemption was by virtue of Republic Act 1823 which amended Sec. the examiner traced the accumulation process from 1947 until 1953.507. the unspent balance was retained by the stockholders without refunding them to petitioner at the end of each year.01 was left as of December 31. There was no error in the process applied.42 =========== .39 Less: Tax already assessed Deficiency income tax Add: 25% surtax on P347.39 P10.100.142. 1823. ALLEGED EXEMPTION Petitioner wishes to avail of the exempting proviso in Sec. since accumulations prior to the year involved may have been sufficient to cover the business needs and additional accumulations during the year involved would not reasonably be necessary.643. These advances were in fact indirect loans to the stockholders indicating the unreasonable accumulation of surplus beyond the needs of the business. Inc. "In determining whether accumulations of earnings or profits in a particular year are within the reasonable needs of a corporation. computed as follows: Net Income per return Add: Over-claimed depreciation Net income per finding 20% tax on P50.876.507. For the year 1953 alone these totalled P197.49 P50.Petitioner questions why the examiner covered the period from 1948-1953 when the taxable year on review was 1953.977. 1953. As correctly held by the Court of Tax Appeals. whereby accumulated profits or surplus if invested in any dollar-producing or dollar-earning industry or in the purchase of bonds issued by the Central Bank. The surplus of P347. may not be subject to the 25% surtax.67 8.00 P2.229. We have but to point out that the unreasonable accumulation was in 1953.500.507.42. for previous accumulations should be considered in determining unreasonable accumulations for the year concerned.90 10. In resume.643. 1957 — more than three years after the period covered by the assessment. it is neccessary to take into account prior accumulations. and petitioner's figure stood out to be correct."12 Another factor that stands out to show unreasonable accumulation is the fact that large amounts were withdrawn by or advanced to the stockholders. approved June 22.977.67 86. is liable for the payment of deficiency income tax and surtax for the year 1953 in the amount of P88.26.75 P88. 25 of the Internal Revenue Code as amended by R. To check the figure arrived at.01 was taken by the examiner from the balance sheet of petitioner for 1953. We find unacceptable petitioner's explanation that these were advances made in furtherance of the business purposes of the petitioner.028. 1957. Basilan Estates.128.01 Total tax due and collectible P40. 25 only on June 22.A. Yet the surplus of P347. while certain expenses of the corporation were credited against these amounts.

. Makalintal. We find no error committed by said court. Soriano for respondents-appellees. The trial court dismissed the petition. filed suit on December 29.WHEREFORE. Hence. the Republic represented by the Bureau of Internal Revenue Regional. ARCHES. his motion to reconsider having been denied also.25 as deficiency income tax and additional residence tax for 1953..100. Arches then moved to dismiss the complaint on the ground that it did not expressly show the approval of the Revenue Commissioner. BENGZON.000. Petitioner-appellant.01.876. based on an uncontested assessment.75 as 25% surtax on the unreasonably accumulated profit of P347.. J. ANACLETO I. Sanchez. concur.507. Dizon. was one merely for the recovery of a sum of money where the amount demanded constitutes the jurisdictional test. in the municipal court of Roxas City.ñët The municipal court denied the motion.S. S. or on February 26. So ordered. petitioner-appellant. Office of the Solicitor General Arturo A. C. No.L. No costs. Republic of the Philippines SUPREME COURT Manila EN BANC G. Arches for petitioner-appellant. and on the further ground of prescription of the action. the judgment appealed from is modified to the extent that petitioner is allowed its deductions for travelling and miscellaneous expenses.2 .R. deficiency income tax and residence tax assessments were issued against him. Reyes. 1954 his income tax return for 1953. BELLOSILLO and JAIME ARANETA. Angeles and Fernando. respondents-appellees. J.. 1959. Solicitor A. Within five years thereafter. Said assessments not having been disputed. Concepcion. JJ. Zaldivar.J. but affirmed insofar as the petitioner is liable for P2.00.P. 1960.B.441. J. 1äw phï1.B. vs. The municipal court had jurisdiction over the parties and over the subject matter. as required by Section 308 of the Tax Code.1 The suit below instituted by the Republic. this appeal.67 as deficiency income tax for 1953 and P86. The order was predicated upon the impropriety of the writ. the amount demanded being less than P5. L-23534 May 16. Jose A. Director. 1967 JOSE A.: Petitioner-appellant Jose Arches filed on February 27. The only question here is the correctness of dismissal of the petition by the Court of First Instance. Alafriz. Afurong and Atty. to recover from petitioner-appellant the sum of P4. Castro. resorted to the Court of First Instance of Capiz on a petition for certiorari and prohibition assailing the order denying his motion to dismiss.

Petitioner-appellant would make much of the lack of approval of the Revenue Commissioner. First of all, in this case, such requisite is not jurisdictional, but one relating to capacity to sue or affecting the cause of action only.3So, in ruling on said question, whatever error — if any — the municipal court committed, was merely an error of judgment, not correctible by certiorari.4 Neither was there grave abuse of the discretion on the part of the municipal court in ruling that the express approval of the Revenue Commissioner himself was not necessary. The court relied upon Memorandum Order No. V-634 of the Revenue Commissioner, approved by the Finance Secretary of July 1, 1956, wherein the former's functions regarding the administration and enforcement of revenue laws and regulations — powers broad enough to cover the approval of court actions as required in Section 308 of the Tax Code — were expressly delegated to the Regional Directors. This regulation, the issuance of which was authorized by statute, has the force and effect of law.5 To rely upon it, hence, would not be tantamount to whimsical, capricious and arbitrary exercise of judgment. The verification by the Regional Director of the complaint constitutes sufficient approval thereof already. It states,inter alia, that said Director has caused the preparation of the complaint and that he has read the allegations thereof and they are true and correct to the best of his knowledge and belief. Pleadings are to be liberally construed.6 Assuming, therefore, in gratia argumenti, that the suit is being erroneously — but not invalidly — entertained, for lack of express approval of the Commissioner or the Regional Director, certiorari would still not lie. An order denying a motion to dismiss is interlocutory and the remedy of the unsuccessful movant is to await the judgment on the merits and then appeal therefrom.7 And, as the Court of First Instance rightly observed, there was no showing of a special reason or urgent need to stop the proceedings at such early stage in the municipal court. Petitioner-appellant would also raise the question of prescription. Again, this is not jurisdictional. And, We have already ruled8 that the proper prescriptive period for bringing civil actions is five years from the date of the assessment, under Section 332 of the Tax Code. The three-year period urged by petitioner-appellant under Section 51 (d) refers only to the summary remedies of distraint and levy. Here, the action was commenced one year, ten months and three days after the assessments were made; hence, well within the period. Wherefore, the dismissal of appellant's petition for certiorari by the Court of First Instance is hereby affirmed. Costs against petitioner-appellant. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur. Footnotes
1

Sec. 88, Judiciary Act, as amended by Sec. 10, Rep. Act No. 2613.

2

Ventanilla vs. B.T.A., L-7384, Dec. 19, 1955; Republic vs. Gamboa, L- 16504, Oct. 27, 1961.
3

In this it differs from petitions for adoption or guardianship, where notice to or consent of specified persons is jurisdictional, since the latter are specified proceedings, in rem, whereas the suit for collection in question is a simple money claim.

4

Gala vs. Cui, 25 Phil. 522; Villa Rey Transit vs. Hon. Bello, L-18957, April 23, 1963; J.R.S. Business Corp. vs. Imperial Insurance, L-19891, July 31, 1964.
5

Art. 7, Civil Code; Re Huttman, 70 Fed. 669; Re Weeks, 82 Fed. 729; Gratiot vs. U.S., 4 How. 80; U.S. vs. Elliason, 16 Pet. 291.
6

Rule 6, Sec. 15, Rev. Rules of Court.

7

Harrison Foundry & Machinery vs. Harrison Foundry Worker's Assn., L-18432, June 20, 1963; Bautista vs. de la Cruz, L-21107, Dec. 24, 1963; 3 Moran, 1953 ed., pp. 152-153.
8

Republic vs. Ledesma, L-18759, Feb. 28, 1967.

ATLAS CONSOLIDATED MINING

[G.R. No. 31230-32. February 14, 2000] COMMISSIONER OF INTERNAL REVENUE vs. CMS LOGGING, INC., et al. THIRD DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated FEB 14 2000. G.R. No. 31230-32 (Commissioner of Internal Revenue vs. CMS Logging, Inc. and Court of Tax Appeals.) Assailed in this petition for review is the decision of the Court of Tax Appeals (CTA) promulgated on August 30, 1969 in CTA Cases Nos. 1569, 1674 and 1804 entitled "CMS Logging, Inc. vs. Commissioner of Internal Revenue." CMS Logging, Inc., a domestic corporation, is a duly licensed forest concessionaire operating in Baganga, Davao. Pursuant to Section 5 of republic Act (RA) No. 1435, CMS Logging filed several claims for tax refund for 25% of the specific taxes on fuel and lubricants used by it in its logging operation, enumerated as follows: 1. On June 21, 1962, the sum of P4,894.63, covering the period from July 1 to December 31, 1961; 2. On November 5, 1962, the sums of P6,294.26 covering the period from January 1, to June 30, 1962;

3. On August 6, 1963, the sum of P5,998.46, covering the period from July 1 to December 31, 1962. 4. On January 20, 1964, the sum of P4,918.00, covering the period from January 1, to June 30, 1963; 5. On September 25, 1964, the sum of P4,932.96, covering the period from July 1 to December 31, 1963; 6. On May 31, 1965, the sum P5,859.84, covering the period from January 1 to July 31, 1964; 7. On June 16, 1965, the sum of P5,707.01, covering the period from August 1, 1964 to February 23, 1965; 8. On September 27, 1966, the sum of P6,135.24 covering the period from March 1 to August 31, 1965. The first five claims and the seventh were denied by the Commissioner of Internal Revenue in six separate letters addressed to private respondent. However, no letters of denial were received by private as to the sixth and eight claims. Private respondent’s motion for reconsideration of the denials of the first five claims were similarly rejected. Private respondent filed three separate cases with the CTA, which were docketed as CTA Cases Nos. 1569, 1674 and 1804.1 CTA Cases Nos. 1569, 1674 and 1804 were filed on February 8, 1965, August 5, 1965 and October 6, 1966, respectively. CTA Case No. 1569 involved the first five claims, the sixth and seventh claims constituted CTA Case No. 1674 and the eighth claim was dealt with CTA Case No. 1804.2 CTA Decision, 1-2;Rollo, 8283.

After a joint hearing, the Court of Tax Appeals rendered the assailed decision, the dispositive portion of which provides – IN VIEW OF THE FOREGOING, the petitions for review filed by petitioner in CTA Case No. 1569 is dismissed with regard to the 1st, 2nd, 3rd, 5th, and part of the 4th causes of action. Respondent is hereby ordered to refund or grant a tax credit to petitioner [in] the sums of P3,893.44, corresponding to the period from February 8 to June 30, 1963 in CTA Case No. 1569; P11,566.85 in CTA Case No. 1674; and P6,135.25 in CTA Case No. 1804, representing 25% of the specific taxes paid on manufactured oils and other fuels. Without pronouncement as to costs.

per liter of volume capacity. 3 The appeal of private respondent was docketed as G." was approved and took effect on June 14. Its full text is reproduced herein: Sec. 1996. Rollo. 4. however. Specific Tax on manufactured oils and other fuels. "(b) Lubricating oils. No. one centavo: Provided. 31140-42. in compliance with our December 15. The parties agree that the sole issue in this case is whether the 25% specific tax exemption granted by Section 5 of RA 1435 on manufactured oils and other fuels used by miners and forest concessionaires in their operation is limited to a period of five (5) years from the effectivity of RA 1435 on June 14. per liter of volume capacity. manifested on January 7. which dismissal became final and executory on June 5.R. We are therefore resolving the petition filed by the Commissioner of Internal Revenue. 1435. in our Resolution dated February 21. 42. 1956. per liter of volume capacity. 180-181. eight centavos. gasoline. we dismissed private respondent’s petition for lack of interest to prosecute. That if the . and "(d) On denatured alcohol to be used for motive power. – On refined and manufactured mineral oils and motor fuels. 1996. However. Republic Act No. Answer. two and one-half centavos. 100. is further amended to read as follows: "Sec.SO ORDERED. 1 Rollo. there shall be collected the following taxes: "(a) Kerosene or petroleum. per liter of volume capacity. Petitioner. 9. 2000 that he is still interested in continuing his appeal since there have been no supervening events which would render the present case moot and academic.4 Rollo. seven centavos. as amended.5 Petition. entitled "An Act To Provide Means For Increasing The Highway Special Fund. 1. Both parties appealed to this Court from CTA’s decision. Section one hundred and forty-two of the National Internal Revenue Code. "(c) Naptha. 1956. 1999 Resolution. and all other similar products of distillation.

nineteen hundred and fifty-two. the affidavit of the president of the association or federation. the specific tax on which has already been paid. the purpose of this subsection. during the five years from June eighteen. "(2) Should the producer belong to any producer’s association or federation. or in lieu thereof. a sworn certificate satisfactory to the Collector proving that the said oils were actually used in aviation: Provided. used in agriculture and aviation. attesting to the fact that the oils were actually used in agriculture.denatured alcohol is mixed with gasoline. unless shown to the contrary. "(3) In the case of aviation oils." . "Whenever any of the oils mentioned above are. fifty percentum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon the submission of the following: "(1) A sworn affidavit of the producer and two disinterested persons proving that the said oils were actually used in agriculture. the removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety percentum absolute alcohol) shall be deemed to have been removed for motive power. duly registered with the Securities and Exchange Commission. that no such refunds shall be granted in respect to the oils used in aviation by citizens and corporations of foreign countries which do not grant equivalent refunds or exemptions in respect to similar oils used in aviation by citizen and corporation of the Philippines.

That whenever any oils mentioned above are used by miners or forest concessionaires in their operations. lubricating oil and other fuels. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected. 2. notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code. levy an additional tax of not exceeding twenty-five per cent of the rates fixed in said sections. Section one hundred and forty-five of the National Internal Revenue Code." Sec. shall be set aside exclusively for amortizing loans or bonds that may have been authorized for the construction.On fuel oil commercially known as diesel fuel oil. The method of collecting said additional tax shall be prescribe by the municipal board or council concerned. Municipal boards or councils may. having more or less the same generating power. is further amended to read as follows: "Sec. as a result of the amendment of sections one hundred and forty-two and one hundred and forty-five of the National Internal revenue Code as above provided. airplane fuel. 145. Specific Tax on Diesel fuel oil. The proceed of the increased taxes accruing to the Highway Special Fund. Sec. and on all similar fuel oils. however. whenever such liquidation is recommended by the Secretary of Public Works and Communication and approved by the President. per metric ton. That municipal taxes heretofore levied by cities through city ordinances on gasoline. twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar conditions enumerated in subparagraphs one and two of section one hereof. there shall be collected. 3. Sec. on manufactured oils sold or distributed within the limits of the city or the municipality: Provided.Sec. amending section one hundred forty-two . as amended. are hereby ratified and declared valid. 4. . Provided. reconstruction or improvement for highways including bridges as well as for liquidating toll bridges constructed from revolving funds authorized under Act Numbered Thirty-five hundred. as hereinabove amended. as amended. one peso.

1965 since said period is obviously beyond the five-year period. Thus.of the Internal Revenue Code: Provided. In passing upon this issue. 9-10. 1956. 1961 are subject to the full tax prescribe in Section 142 of the National Internal Revenue Code (NIRC). oil used in such concessions after June 14. vs. which is squarely applicable to the case at bench. 4-5.7 104 SCRA 710 (1981).6 Petition. the date of effectivity of said law. Rollo. Sec. The Commissioner denied the company’s claim for refund on the ground that the privileged of partial tax refund granted by Section 5 of RA 1435 to those using oil in the operation of forest and mining concessions is limited to a period of five (5) years from June 14. 1956. This issue has already been resolved in Insular Lumber Co. The petition must fail. It is petitioner’s contention that the 25% tax refund of specific tax paid on oils used by miners or forest concessionaires granted by Section 5 RA 1435 should be limited to a period of five years to be counted from June 14. In Insular Lumber.921. it is very apparent that the partial refund of specific tax paid for oils in agriculture and aviation is limited to five years while there is no time limit for the partial refund of specific tax paid for oils used by miners and forest concessionaires. Court of Tax Appeals.37 representing 25% of the specific tax paid on manufactured oil and fuel used in its operations pursuant to Section 5 of RA 1435. as required in section twenty-six of the Philippine Highway Act of 1953. That no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System. 1963 to August 31. 1956. further. as is the case in the partial tax refund of specific tax paid on oils used in agriculture and aviation granted by Section 142 of the National Internal Revenue Code. a licensed forest concessionaire filed a claim with the Commissioner of Internal revenue for refund of P19. 6. the Court held that – Based on the aforequoted provisions. as amended by Section 1 of RA 1435. Approved. June 14. the date of effectivity of RA 1435. Petitioner maintains that the Court of Tax Appeals erred in ordering him to grant tax refunds to private respondents corresponding to the period from February 8. We find no basis in applying the limitation of the operative period provided for oils used in agriculture and aviation . This Act shall take effect upon its approval.

11 Id. This express reference cannot be expanded in scope to include the limitation to include the limitation of the period of refund. 207 SCRA 549 (1992). SO ORDERED. Rio Tuba Nickel Mining Corporation. Rio Tuba Nickel Mining Corporation. Rio Tuba Nickel Mining Corporation. Very truly yours. 2093-2107. there would have been no need of dealing with oil used in mining and forest concessions separately and Section 5 should very well have been included in Section 1 of Republic Act No.. The rationale for extending a tax privilege to lumber and mining companies was explained in Commissioner of Internal Revenue vs. Commissioner of Internal Revenue vs.8 Id. If the limitations of the period of refund of specific taxes on oils used in aviation and agriculture is intended to cover similar taxes paid on oil use by miners and forest concessionaires. 1435. 3rd Congress. 1967. 1674.9 Commissioner of Internal Revenue vs. No.10 202 SCRA 137 (1991).) JULIETA Y. CARREON Clerk of Court . Citing the congressional deliberations on RA 1435. 3rd Regular Session. and 1804 is AFFIRMED. 207 SCRA 549 (1992).to the provisions on the refund to miners and forest concessionaires. WHEREFORE. 1569. we explained that it would be unfair to subject miners and forest concessionaires to the increased rates and in effect make them subsidize the construction of highways from which they did not directly benefit since these companies seldom used the national highways because they have roads and compounds of their own. in a recent case we declared that mining and logging companies were entitled to the refund privilege granted by RA 1435 on specific taxes paid up to 1985. It should be noted that Section 5 makes reference to subparagraphs 1 and 2 of Section 1 only for the purpose of prescribing the procedure for refund. after which the Highway Special Fund was abolished.. pp. the petition is DENIED. 67. (Sgd. citing Congressional record. The challenged decision of the Court of Tax Appeals in CTA Cases Nos. In fact. III. 7. 718719. Vol. notwithstanding the different rate of exemption.

finds the assessments for allegedly deficient income and sales taxes for petitioner's fiscal year ending September 30. 1981 covered by Demand Letter NO. .R. and its Manufacturers/Producers Percentage Tax Return for the quarter ending September 30. 1981. 3 The undisputed facts of the case as recited in the Decision (Annex "A") of the Court of Appeals. 1999 COMMISSIONER OF INTERNAL REVENUE. are: 4 On January 15. Carnation. 1994. petitioner. filed its Corporation Annual Income Tax Return for taxable year ending September 30. J.: Before the Court is an appeal from the decision of the Court of Appeals 1 dated May 31. signed three separate "waivers of the Statute of Limitations Under the National Internal Revenue Code" wherein it: . 1981. 1987. 5 On October 13. PURISIMA. COURT OF TAX APPEALS and CARNATION PHILIPPINES. March 16. which affirmed in toto the decision of the Court of Tax Appeals 2 dated January 26. COURT OF APPEALS. 1982.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. FAS-1-81-87-005824. but not after (13 April 1987 for the earlier-executed waiver. FAS-1B-81-87 and Assessment Notices Nos. FAS-4-81-87005825 and FAS-4-81-87-005826 (all dated July 29. 1987) in the total amount of P19.183.). 1986. (now merged with Nestle Phils. . Carnation Phils. Inc. vs. No. 1987 and May 18. respondent. (Carnation).535. 1993. . Inc. or June 14. INC.44 to be NULL AND VOID for having been issued beyond the five-year prescriptive period provided by law. Lardizabal. the Court. 115712 February 25. through its Senior Vice President Jaime O. the dispositive portion of which reads: WHEREFORE. waives the running of the prescriptive period provided for in sections 318 and 319 and other related provisions of the National Internal Revenue Code and consents to the assessment and collection of the taxes which may be found due after reinvestigation and reconsideration at anytime before or after the lapse of the period of limitations fixed by said sections 318 and 319 and other relevant provisions of the National Internal Revenue Code.

This demand letter was accompanied by assessment Notices Nos. all for the year 1981. The waivers were not signed by the BIR Commissioner or any of his agents. the dispositive portion of which reads: WHEREFORE.56 as deficiency income tax. P14. a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day: Provided. For the purpose of this section. — Except as provided in the succeeding section. On August 5. On January 26. Sec. 1988. FAS-4-81-87-005824. the Court finds the assessments for allegedly deficient income and sales taxes for petitioner's fiscal year ending September 30. FAS4-81-87-005825.683. the law then applicable reads: Sec 318.442. and FAS-4-81-87-005826 (all dated July 29. FAS-4-81-87-005825 and FAS-481-87-005826. 1987. In a basic protest dated August 17.586. internal revenue taxes shall be assessed within five years after the return was filed.1987 for the later waiver. 1987. 1987 asking the said corporation to pay P1. Period of Limitations upon assessment and collection. 1981 covered by Demand Letter No.183. FAS-1B-81-87 and assessment Notices No. 1987 for the subsequent waiver. the CTA issued the questioned order. FAS-1-81-87-005824. 1987) in the total amount of P19.44 to be NULL AND VOID for having been issued beyond the five-year prescriptive period provided by law.03 as deficiency sales tax on undeclared sales.85 as deficiency sales tax and P3. The pivot of inquiry here is whether or not the three (3) waivers signed by the private respondent are valid and binding 6 as to toll the running of the prescriptive period for assessment and not bar the Government from issuing subject deficiency tax assessments. as the case may be).535. 1993. or July 30. Carnation received BIR's letter of demand dated July 29. 318 (now Section 203) of the National Internal Revenue Code. the taxpayer (petitioner herein) does not waive any prescription already accrued in its favor. 7 (emphasis ours) . Carnation appealed to the CTA. These protests were denied by the BIR Commissioner in a letter dated March 15. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. Carnation disputed the assessments and requested a reconsideration and reinvestigation thereof.152. That this limitation shall not apply to cases already investigated prior to the approval of this Code. On September 30. Whereupon. However.939.913. 1987. Carnation filed a supplemental protest.

the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as required by law. the tax may be assessed at anytime prior to the expiration of the period agreed upon. 1986. . 1981. 12 Petitioner's submission is inaccurate. a written agreement between Solano and the Collector. . as correctly pointed out by the Court of Tax Appeals. 1982 8 and November 20. entered into before the ." The ruling of the Supreme Court in Collector of Internal Revenue vs. 9 respectively. 319. 1981 on January 15. respectively.The decision of the Court of Appeals affirming what the Court of Tax Appeals decided. to wit: Sec. 1987 were issued outside the statutory prescriptive period. . (b) Where before the expiration of the time prescribed in the preceding section for the assessment of the tax. The period so agreed upon may be extended by subsequent agreement in writing made before the expiration of the period previously agreed upon. both the Commissioner of Internal Revenue and the taxpayer have consented in writing to its assessment after such time. Exceptions as to period of limitation of assessment and collection of taxes. established that subject assessments of July 29. Carnation's income and sales taxes were assessed only on July 29. (b) the signature of the Commissioner is a mere formality and the lack of it does not vitiate binding effect of the waivers. The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation. Carnation filed its annual income tax and percentage tax returns for the fiscal year ending September 30. private respondent's 1981 income and sales taxes could have been validly assessed only until January 14. the BIR gave its implied consent to such waivers. In accordance with the above-quoted provision of law. 1987 and November 19. 1987. thus: . We agree with the CTA in holding "these "waivers" to be invalid and without any binding effect on petitioner (Carnation) for the reason that there was no consent by the respondent (Commissioner of Internal Revenue). and (c) that a waiver is not a contract but a unilateral act of renouncing ones right to avail of the defense of prescription and remains binding in accordance with the terms and conditions set forth in the waiver. Section 319 of the Tax code earlier quoted is clear and explicit that the waiver of the five-year prescriptive period must be in writing and signed by both the BIR Commissioner and the taxpayer. Solano 13 is in point. observing thus: We cannot go along with the petitioner's theory. beyond the five-year prescriptive period. The same tax code is clear on the matter. 10 However. Here. 11 Petitioner BIR Commissioner contends that the waivers signed by Carnation were valid although not signed by the BIR Commissioner because (a) when the BIR agents/examiners extended the period to audit and investigate Carnation's tax returns. —(a) . . The only agreement that could have suspended the running of the prescriptive period the collection of the tax in question is.

by the very nature of its function. As a matter of principle. the waivers in question reveal that they are in no wise unequivocal. representing the Commissioner of Internal Revenue. On this basis neither implied consent can be presumed nor can it be contended that the waiver required under Sec.expiration of the of the five-year prescriptive period. Thus. concur. Indeed. For sure. 15 Besides being a reiteration of the holding of the Court of Tax Appeals. In fact. such decision should be accorded respect. JJ. this Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals which is.R. we discern no basis for overruling the aforesaid conclusions arrived at by the Court of Appeals. J. 1981 which were all pending at the time". Romero. WHEREFORE. dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject. 104171 February 24. 18 What is more. the Court held in Philippine Refining Co. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. vs. there is every reason to leave undisturbed the said conclusions. Court of Appeals. the decision of the Court of Appeals is hereby AFFIRMED. and therefore necessitates for its binding effect the concurrence of the Commissioner of Internal Revenue. In fact. Vitug. 1999 . SO ORDERED.. 319 of the Tax Code is one which is unilateral nor can it be said that concurrence to such an agreements a mere formality because it is the very signatures of both the Commissioner of Internal Revenue and the taxpayer which give birth to such a valid agreement. unless there has been an abuse or improvident exercise of authority. abroad on official business. extending the limitation prescribed by law. much less grave abuse of discretion. we find the decision of the latter affirming that of the former free from any palpable error. No pronouncement as to costs. 1995. 17 This point becomes more evident in the case under consideration where the findings and conclusions of bath the Court of Tax Appeals and the Court of Appeals appear untainted by any abuse of authority. no such written agreement concerning the said three waivers exists between the petitioner and private respondent Carnation. No. 16 that the Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. admitted that subject waivers executed by Carnation were "for end in consideration of the approval by the Commissioner of Internal Revenue of its request for reinvestigation and/or reconsideration of its internal revenue case involving tax assessments for the fiscal year ended September 30. the Solicitor General. having in mind the precept that all doubts as to the correctness of such conclusions will be resolved in favor of the Court of Appeals. in his reply dated April 18. Panganiban and Gonzaga-Reyes. 14 Verily.

the BIR also issued Letters of Authority Nos. on the ground that the previous assessment was insufficient or based on a "false" return? The Case This is the main question raised before us in this Petition for Review on Certiorari assailing the Decision 1 dated February 14. Siltown Realty Philippines. 25100. the Central Bank of the Philippines required that it should develop a rubber plantation.COMMISSIONER OF INTERNAL REVENUE. private respondent purchased from the Philippine government in 1961. its Basilan landholding for P500. As a condition for approving the manufacture by private respondent of tires and other rubber products. 10115 dated April 14. under the Public Land Act and the Parity Amendment to the 1935 Constitution. 1974. the BIR commissioner issued against private respondent on October 10. Subsequently.850. 1974. In compliance with this requirement. On the basis of this examination. with an extension of another 25 years at the latter's option. private respondent sold to Siltown Realty Philippines. on August 2. the books and accounts of private respondent were examined for the purpose of determining its tax liability for taxable year 1974. PANGANIBAN. promulgated by the Court of Appeals 2 in CA-GR SP No.005. 1973. an assessment for deficiency in donor's tax in the amount of P1. was an American-owned and controlled corporation previous to July 3. 1975 assessment of private respondent for deficiency income tax in the amount of P6. 749157 for the purpose of examining Siltown's business. the justice secretary rendered an opinion stating that.35. 074420 RR and 074421 RR and Memorandum Authority Reference No. Basilan. B..F. 1980. may the Bureau of Internal Revenue (BIR) still assess a taxpayer even after the latter has already paid the tax due. in relation to the previously mentioned sale of its Basilan landholdings to Siltown. INC. The Facts The facts undisputed. The assailed Decision reversed the Court of Tax Appeals (CTA) 3 which upheld the BIR commissioner's assessments made beyond the five-year statute of limitations. income and tax liabilities. the ownership rights of Americans over public agricultural lands. including the right to dispose or sell their real estate. leased the said parcels of land to private respondent for a period of 25 years. and there developed a rubber plantation. and the difference between the fair market value and the actual purchase price a taxable donation. respondents. Inc.) and THE COURT OF APPEALS. INC. the BIR deemed the consideration for the sale insufficient. vs. 4 Private Respondent BF Goodrich Phils. GOODRICH PHILS. certain parcels of land located in Tumajubong. In accord with the terms of the sale. upon the expiration of the Parity Amendment on July 3. 1992. Inc. Apparently. (now SIME DARBY INTERNATIONAL TIRE CO.. Based on the BIR's Letter of Authority No. The examination resulted in the April 23.000 payable in installments. 1975. On the basis of this Opinion. . would be lost. (now Sime Darby International Tire Co. petitioner. Inc.: Notwithstanding the expiration of the five-year prescriptive period. 1974. J.). Inc.020. More than a decade later.. which it duly paid. on January 21.

. 1981. and mistake". 6 Hence. interest and compromise penalty. it received another assessment dated March 16. Section 337 utilizes the very specific terms "fraud.311. 1705. Falsity suffices for an assessment. SO ORDERED. as amended by P. petitioner raises the following issues: I Whether or not petitioner's right to assess herein deficiency donor's tax has indeed prescribed as ruled by public respondent Court of Appeals II Whether or not the herein deficiency donor's tax assessment for 1974 is valid and in accordance with law Prescription is the crucial issue in the resolution of this case. private respondent contested this assessment. the assessment must be based on the grounds provided in Section 337. which reversed the CTA. surcharge. 1980. "Falsity does not appear to be included in this enumeration. this Petition for Review under Rule 45 of the Rules of Court. the CTA rendered its Decision dated March 29. then.D. which increased to P 1. 1981. 7 The Issues Before us. Private respondent appealed the correctness and the legality of these last two assessments to the CTA.In a letter dated November 24. irregularity. On April 9. irregularity and mistake" on the part of the taxpayer. nor is it one within the 5-year period stated in Section 331 above. which is a first assessment made within the five-year period. Since what is involved in this case is a multiple assessment beyond the five-year period. it may be validly justified only by "fraud. private respondent elevated the matter to the Court of Appeals. After trial in due course. 1980.179.949 the amount demanded for the alleged deficiency donor's tax. as follows: What is involved here is not a first assessment. No.092. the decision of the Commissioner of Internal Revenue assessing petitioner deficiency gift tax is MODIFIED land petitioner is ordered to pay the amount of P1. which took effect on August 1.01 plus 10% surcharge and 20% annual interest from March 16. and not on Section 15 of the 1974 Tax Code. 5 Undaunted. the dispositive portion of which reads as follows: WHEREFORE. 1981 until fully paid provided that the maximum amount that may be collected as interest on delinquency shall in no case exceed an amount corresponding to a period of three years pursuant to Section 130(b)(l) and (c) of the 1977 Tax Code. 1991. When it is a subsequent assessment made beyond the fiveyear period.

— Except as provided in the succeeding section. the salient portion of which reads: Falsity is what we have here. Main Issue: Prescription The petitioner contends that the Court of Appeals erred in reversing the CTA on the issue of prescription. was made beyond the period expressly set in Section 331 of the National Internal Revenue Code . . For the purposes of this section. . . in the absence of any showing that it had been tainted with gross error or grave abuse of discretion. it is clear that the October 16. 1981. 1975 and acknowledged by Letter of Confirmation No. but on the latter's application of the law on prescription. 331. 1980 modified. 8 The Court is not persuaded. 1980. That this limitation shall not apply to cases already investigated prior to the approval of this Code. 101155 terminating the examination on this subject. The Court has thoroughly studied the records of this case and found no basis to disregard the five-year period of prescription. internal-revenue taxes shall be assessed within five years after the return was filed. Sec.The Court's Ruling The petition has no merit. 331 of the National Internal Revenue Code provides: Sec. a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day: Provided. Applying this provision of law to the facts at hand. 10 Petitioner relies on the CTA ruling. 1974 — was made on April 13. Involved in this petition is the income of the petitioner for the year 1974. the Court of Appeals ruled not on the truth or falsity of the facts found by the CTA. the CTA's application of the law to the facts of this controversy is an altogether different matter. 9 In the present case. a question of fact involves the truth or falsehood of alleged facts. The returns for the year 1974 were duly filed by the petitioner. and no proceeding in court without assessment for the collection of such taxes shall be begun after expiration of such period. violates the law. 1981) of the Commissioner was well-advised having been made in contemplation of his power under Section 15 of the 1974 Code (now Section 16. 1981. Period of limitation upon assessment and collection. the returns for which were required to be filed on or before April 15 of the succeeding year. There is a question of law when the issue is the application of the law to a given set of facts. of NIRC) to assess the proper tax on thebest evidence obtainable "when there is . and for that matter. by that of March 16. we hasten to add that the second assessment (March 16. The subsequent assessment of October 10. the factual findings of the CTA are generally not disturbed on appeal when supported by substantial evidence and in the absence of gross error or grave abuse of discretion. True. modified by that of March 16. On the other hand. because its ruling was based on factual findings that should have been left undisturbed on appeal. As succinctly pronounced by the Court of Appeals: The subsequent assessment made by the respondent Commissioner on October 40. However. for it involves a legal question. 1980 and the March 1981 assessments were issued by the BIR beyond the five-year statute of limitations. and assessment of taxes due for such year — including that on the transfer of properties on June 21.

the law on prescription. private respondent declared the sale in its 1974 return submitted to the BIR. the fact that private respondent sold its real property for a price less than its declared fair market value did not by itself justify a finding of false return. or omission: . In other words. incomplete. This can be regarded as another consideration on the price. 13 It is possible that real property may be sold for less than adequate consideration for a bona fide business purpose. carelessness or ignorance. the sale remains an "arm's length" transaction. beyond the five-year prescriptive period. fraud. or when there is reason to believe that any such report is false. Exceptions as to period of limitation of assessment and collection of taxes. the Commissioner of Internal Revenue shall assess the proper tax on the best evidence obtainable. More. the private respondent was compelled to sell the property even at a price less than its market value. 76 (Dec. Nor is petitioner's claim of falsity sufficient to take the questioned assessments out of the ambit of the statute of limitations. 5. 15 of the NIRC. incomplete or erroneous. in such event." Clearly. Moreover. the ordinary period of limitation upon assessment and collection does not apply so that contrary to the averment of petitioner. the exceptions to the law on prescription should perforce be strictly construed. or erroneous. At the same time. or a proceeding in court for the collection of such tax may be begun without assessment.467 + P207. . .700) (seeDeclaration of Real Property form. What is the considered falsity? The transfer through sale of the parcels of land in Tumajubong. however. being a remedial measure. which enumerates the exceptions to the period of prescription. it was able to lease the property for 25 years. Furthermore. This it did not do. . Basilan in favor of Siltown Realty for the sum of P500. provides that "[w]hen a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation. Petitioner insists that private respondent committed "falsity" when it sold the property for a price lesser than its declared fair market value.00 only whereas said lands had been sworn to under Presidential Decree No. Sec. and p. renewable for another 25. 1972) as having a value of P2. our tax law provides a statute of limitations in the collection of taxes. In the present case.reason to believe that a report of a taxpayer is false. 332. should be liberally construed in order to afford such protection.683. 11 For the purpose of safeguarding taxpayers from any unreasonable examination. 15. when there is falsity with intent to evade tax as in this case.475.000. during all those five years. 28. The relevant part of then Section 332 of the NIRC. provides: Sec. the BIR could have issued the questioned assessment. — (a) In the case of a false or fraudulent return with intent to evade a tax or of a failure to file a return.467 (P2. Having made its initial assessment in the manner prescribed. 14 Within the five-year prescriptive period. Lamitan. 6. because it would have lost all ownership rights over it upon the expiration of the parity amendment. Thus. on the other hand. p. 12 As a corollary. the right to assess respondent has not prescribed. Section 15 does not provide an exception to the statute of limitations on the issuance of an assessment. by allowing the initial assessment to be made on the basis of the best evidence available. investigation or assessment. private respondent was attempting to minimize its losses. the tax may be assessed. because the declared fair market value of said property was of public record. Indeed. BIR Record). the second and the third assessments under consideration before us. the commissioner could not have been authorized to issue. at any time within ten years after the discovery of the falsity. no. This fact alone did not constitute a false return which contains wrong information due to mistake. the .

considering that the prescriptive period was precisely intended to give them peace of mind." 16 is different from capital gains tax. Bernardo for petitioner. vs.BIR failed to prove that respondent's 1974 return had been filed fraudulently.: Suyoc Consolidated Mining Company. In other words. on official leave. Vitug. Based on the foregoing. J. SUYOC CONSOLIDATED MINING COMPANY. Office of the Solicitor General Ambrosio Padilla and Solicitor Sumilang V. 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. Such instances of negligence or oversight on the part of the BIR cannot prejudice taxpayers. Since the BIR failed to demonstrate clearly that private respondent had filed a fraudulent return with the intent to evade tax. 17 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.. a mining corporation operating before the war. 722 which extended the filing of tax returns for 1941 up to . Equally significant was its failure to prove respondent's intent to evade the payment of the correct amount of tax. a tax on the gain from the sale of the taxpayer's property forming part of capital assets. BAUTISTA ANGELO. Romero.. JJ. the period for assessments has obviously prescribed. was unable to file in 1942 its income tax return for the year 1941 due to the last war. respondents. Velilla and Balongkita for respondents. L-11527 November 25. 1958 THE COLLECTOR OF INTERNAL REVENUE..R. No. WHEREFORE. After liberation. Republic of the Philippines SUPREME COURT Manila EN BANC G. 15 Moreover. SO ORDERED. a discussion of the validity and legality of the assailed assessments has become moot and unnecessary. petitioner. Congress enacted Commonwealth Act No. Ineludibly. concur. ET AL. even though a donor's tax. No costs. or that it had failed to file a return at all. J. Purisima and Gonzaga-Reyes. Ohnick. 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. 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. the Petition for Review is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.

it set aside the ruling of the Collector of Internal Revenue.57 as interest up to April 30.50 as surcharge. which was granted. This new assessment was made on March 7. Petitioner granted an extension of only three months. Within the reglementary period. The company filed three income tax returns for the calendar year ending December 31. the court rendered its decision upholding this defense and. without surcharge and interest. On February 12. 1952. 1946. 1947. reserving its right to question the correctness of the assessment.894. On April 18. P1. and of this new assessment the company was notified on July 28. The Collector interposed the present petition for review. Under the law. On April 6.289.96 as income tax for 1941. Upon receipt of this assessment respondent requested for at least one year within which to pay the amount assessed although it reserved its right to question the correctness of the assessment before actual payment.934. 1950 demanding payment of the tax due as assessed. The Collector granted an extension of only three months from March 20. 1945.414. National Internal Revenue Code). plus P1. such tax may be collected by distraint or levy or by a proceeding in court but only if the same is begun (1) within five years after assessment or (2) within the period that may be agreed upon in writing between the Collector and the taxpayer before the expiration of the 5-year period [Section 332 (c). the company filed with the Court of Tax Appeals a petition for review of this assessment made on July 26. it filed a tentative return as it had not yet completely reconstructed its records. 1947 within which to pay the amount assessed. 1946 was made on February 11.099. After several other negotiations conducted at the request of respondent. 1947. the Collector assessed against it the sum of P28. but the Collector made another assessment against the company in the sum of P33. the assessment was finally reduced by the Collector to P24. 1952 and P40 as compromise. accordingly. 1941. 1946.December 31. it filed a second final return on the basis of the records it has been able to reconstruct at that time. 1951.96 as income tax.829.289. it filed its third amended final return on the basis of the available records which to that date it had been able to reconstruct. the company asked for an extension of at least one year from February 28. Idem. 1946 to February 28. On February 6. 1952. the case being assigned to another examiner. which was granted until February 15. or a total of P33. 1947. 1946. 1947. The law also provides that where an assessment of internal revenue tax is made within the above period. P20. an internal revenue tax shall be assessed within five years after the return is filed by the taxpayer and no proceeding in court for its collection shall be begun after the expiration of such period (Section 331. 1950 demanding payment of the tax as . and the company was authorized to file its return for 1941 on the basis of the best evidence obtainable. After the case was heard. 1946. The assessment was made on February 11. On February 21. 1947.26. including an appeal to the Conference Staff created to act on such matters in the Bureau of Internal Revenue. It appears that the first assessment made against respondent based on its second final return filed on November 28.66. On November 28.414. the company asked for a reconsideration and reinvestigation of the assessment. When it failed to pay the tax within the period extended. petitioner sent respondent a letter on November 28. 1950. plus surcharge and interest up to December 31. On the basis of the second final return filed by the company on November 28. 1947.438. 1955 on the main ground that the right of the Government to collect the tax has already prescribed. the Collector revised this last assessment and required the company to pay the sum of P28.50 as 5 per cent surcharge and P3. 1955. the company requested the Collector of Internal Revenue to grant it an extension of time to file its return. The company failed to pay the tax within the period granted to it and so the Collector sent to it a letter on November 28.96. Its records having been lost or destroyed.80 as 1 per cent monthly interest from March 1.].

S.assessed. title 26.C. as was aptly said. based on weighty reasons. 870. lasted for several months." ' "(R. 75 L. Justice Cardozo has said: "The applicable principle is fundamental and unquestioned. Because of such requests. a credit against a liability in respect of any taxable year shall be "void" if it has been made against a liability barred by limitation. The limitation may have been postponed by force of a simple . 335. chap. there was to be no exercise in invitum of governmental power. If nothing more than this appeared. This is the ruling which is now being questioned after a protracted negotiation on the ground that the collection of the tax has already prescribed.S.C. for the law says to him in effect "this is your own act. Supp. as the record shows. 588]. 875. 1955. 852. 506 (b) (c). but there are several precedents that may be invoked in American jurisprudence. The plaintiff is now estopped and should not be permitted to raise the defense of the Statute of Limitations. 'He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned. 791. 1953. and upon receipt of the letter respondent asked for a reinvestigation and reconsideration of the assessment. but the government withheld action at the specific request of the plaintiff. as we view it.. (DC-WIS). 1952. which was denied on May 6. 609. H. 1955. 852. was to invalidate such a credit if made by the Commissioner of his own motion without the taxpayer's approval or with approval failing short of inducement or request. 1928 (chap. It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by proceeding in court within the 5-year period from the filing of the second amended final return due to the several requests of respondent for extension to which petitioner yielded to give it every opportunity to prove its claim regarding the correctness of the assessment. ed. Revenue Act of 1928. which denial was appealed to the Conference Staff. 45 Stat. vs. supra. for good reasons. 78 L. and as a result of these various negotiations. The aim of that provision. U. And when such situation comes to pass there are authorities that hold. U. and therefore you are not damnified.. To know whether liability has been barred by limitation it will not do to refer to the flight of time alone. United States. ed. see. Stange vs.. 871. The appeal was heard by the Conference Staff from September 2. 51 S. 647). persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. sec. After inducing petitioner to delay collection as he in fact did. As Mr. This case has no precedent in this jurisdiction for it is the first time that such has risen. Cf. 791." [Newport Co. 1953 to July 16. "The tax could have been collected. several reinvestigations were made and a hearing was even held by the Conference Staff organized in the collection office to consider claims of such nature which. S. the assessment was finally reduced on July 26. When this request was denied.S. 270. U. it is most unfair for respondent to now take advantage of such desistance to elude his deficiency income. But the aim of the statute suggests a restraint upon its meaning. 45 Stat. vs. tax liability to the prejudice of the Government invoking the technical ground of prescription. respondent again requested for a reconsideration on April 25. title 26. there are cases however where a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts the Government has been. sec. Or. 145. 34 F. Stearns Co. U. 2609). at L. The following authorities cited in the brief of the Solicitor General are in point: The petitioner makes the point that by the Revenue Act of May 29. at L. 1062a. While we may agree with the Court of Tax Appeals that a mere request for reexamination or reinvestigation may not have the effect of suspending the running of the period of limitation for in such case there is need of a written agreement to extend the period between the Collector and the taxpayer. sec.S. that such an attitude or behavior should not be countenanced if only to protect the interest of the Government. 282 U. Ct.

13. Contr.S.Y. Tull. Sometimes the resulting disability has been characterized as an estoppel. It may have been postponed by deliberate persuasion to withhold official action. B. Here at the time of the request. 263. when the statute had run on collection. 19 L.. Ct. C. 13 L." ' " Dolan vs. . vs. Tobey. 647. 1926. supra. No costs. Supp. Stearns Company vs. JJ. J. 102 U. and therefore you are not damnified. Upon the making of the assessment the Commissioner sought to make collection. 519. R. ed. sec. C. U. Y. L. The decision of the Collector of Internal Revenue rendered on July 26. Seamens. H.) Wherefore. 42 N.E. 263. 325. Swain vs. United States. 489. concur. 11 How. 228 N. sometimes as a waiver. 895. 46. 1. 402. 78 L. supra. . 493.) . quoting West vs. A suit may not be built on an omission induced by him who sues. 167.S.. ed. 147 N. 26 L. 729.Y. but the authorized representative of the Lattimores strenuously objected to the collection and urged the Commissioner to withhold collection. the liability was still alive. Peck. 274. Rogers.waiver. 127 N. the principle that no one shall be permitted to found any claim upon his own inequity or take advantage of his own wrong. the decision appealed from is reversed. vs. The request in its fair meaning reached forward into the future and prayed for the postponement of collection till the audits for later years had been completed in the usual course. for the law says to him in effect "this is your own act. 689. and Endencia. New Zealand Shipping Co. Tull. 457. It is admitted that these assessments were timely made in August 1923. 12 F. The procedure carried out was that requested by plaintiffs. Y. further claims for refund and protests were filed.. In the meantime. Enough for present purposes that the disability has its roots in a principle more nearly ultimate than either waiver or estoppel.. 949. "He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned. 560. and they cannot now be heard to say that the collection was not timely. 1955 is hereby affirmed. unaffected as yet by any statutory bar. Paras. Labrador. conferences were held and consideration was given to the settlement of the controversy. and the matter was not finally disposed of until 1926. 54 S. the suspended collection might be effected by credit or by distraint or by other methods prescribed by law. Blakeway. 447. 9 Wall. 6-H. The label counts for little.Emphasis supplied. vs. 554. pending adjustment of the controversy between them and the Commissioner. H. Stearns Co. ed. 44 N. which must then be made in adherence to the statutory forms. 491. (R.E. 2 Williston. 751. 54. Reyes.E. 291 U. Congress surely did not mean that a credit was to be void if made by the Government in response to such prayer. 2 Mann. J. 254.. 64. Thomson vs. 784. 447. 133 Eng. & G. which was after the statute had run on collection. Imperator Realty Co. or so we now assume. Separate Opinions . The Commissioner yielded to their request and postponed collection until August 19. 149 N. L. 940.E.S. We think it an unreasonable construction that would view the prohibition of the statute as over-riding the doctrine of estoppel (Randon vs. Poor. Concepcion. 127 N. vs. 91. Societe des Ateliers (1919) A. 795) and invalidating a credit made at the taxpayer's request. U. Bengzon. Reprint. which likewise was at a time when the statute had not ran on collection. Ed. and Imperator Realty Co. United States vs. 228 N. (Lattimore vs. This having been done. The applicable principle is fundamental and unquestioned.S.

(Amount — P33.26). up to June 20. 1950 April 6. Then on April 18. Receipt of respondent said assessment. at the same time reserving its right to question the validity of the assessment. Notice of 1st assessment (Based on the final return sent to the respondent) (Amount of assessment — P33.289. 1946. J.289. 1952. and P40. the respondent Suyoc Consolidated Mining Company was unable to file in 1942 its income tax return for the year 1941. P1.438. but strange to say. but reserving right to question its validity. dissenting: As stated in the majority opinion. Petitioner revised the assessment made on March 7. Respondent asked for reconsideration and reinvestigation of the assessment.96) February 14. 1952 after various negotiations. 1952 (Now it is P50. (Now it is P24. He was given only three months from March 20. Petitioner demanded payment of tax assessed.03) Petitioner reduced the assessment of April 18. Suyoc asked for an extension of time of one year within which to make payment. on February 11. 1946. 1947.679. Respondent asked for extension of time (one year) to pay the assessment.697. 1951 March 7. that is to say. 1952 April 18. 1947 Respondent filed its "tentative return". 1952. 1947 to November 28. 1950). P20. Suyoc asked for reconsideration and reinvestigation. that is.MONTEMAYOR. 1951.96 as income tax. 1947.829. which was larger than his first assessment by about P800.57 as interest up to April 30.00 as compromise. 1957.03. It was only on November 28. 1955 It will be noticed that petitioner Collector made his first assessment based on the final return submitted by Suyoc on November 28. February 12. After about a year. After said deadline. Respondent filed its amended final return".. 1947 February 21. 1947. Notice of 2nd assessment (Based on the amended final return) was sent to respondent.099.66. 1946 February 6. the Collector made a revised third assessment of P28. the Collector should immediately have demanded payment or resorted to the administrative remedy of distraint and levy.50 as surcharge. For purposes of reference I am listing below in chronological order. the dates which are material and relevant for purposes of computation of the period of prescription. on March 7.96). The assessment was in the amount of P33. but it was granted only three months from March 20. the Collector did not act and allowed more than three years to pass (from June 20. it finally filed the first income tax return (tentative) on February 12. because of the last war. the Collector made a second assessment of P33. which all added up to the staggering amount of P50.414. Respondent filed its "final return".934.26. On April 6. far different .099. 1950 that the Collector demanded payment on the basis of his assessment. 1947 November 28. Acting upon an extension granted by Commonwealth Act 722 and by the Collector of Internal Revenue. 1952 July 26. 1946 November 28. 1952. 1947 February 11.

and the ruling contained in the majority opinion that the right of the Collector to collect the tax assessed by it has not prescribed. The sole issue raised at this time for resolution of this Court is. 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. that this limitation shall not apply to cases already investigated prior to the approval of this Code. the best argument against the contention of the Collector. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. (c) Where the assessment of any internal revenue tax has been made within the period of limitation above prescribed such tax may be collected by distraint or levy or by a proceeding in court. When this case was called for hearing counsel for petitioner asked that the question of prescription be first resolved before hearing the case on the question involving the correctness of the assessment. without interest and without any amount as compromise. and that the petitions or petitions filed by Suyoc for investigation and revision of the assessment extended the period of prescription. 1955 to only P24. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. but only if begun (1) within five years after the assessment of the tax. Suspension of running of statute. — The running of the statute of limitations provided in section three hundred thirty-one or three hundred thirty-two on the making of "assessments and the beginning of distraint or levy or a proceeding in court for collection. 331. 332. — . After several negotiations. SEC. . and for sixty days thereafter. It is this last assessment which Suyoc appealed to the Court of Tax Appeals. I am reproducing with approval the pertinent portions of said decision: Petitioner filed the instant petition for review on the grounds that certain losses were improperly disallowed by respondent as deductions from its gross income. confined to the question of prescription. To me. without surcharge. Period of limitation upon assessment and collection.000.438. is the well written and reasoned decision (Resolution) of the Court of Tax Appeals. including appeal to the conference staff created to act on such matters in the Bureau of Internal Revenue.from and much larger than the first and second assessment by almost P17. — Except as provided in the succeeding section. in respect of any deficiency.96. it appears that the last and final assessment made by respondent covering the income tax due from petitioner for the year . Exceptions as to period of limitation of assessment and collection of taxes. internal revenue taxes shall be assessed within five years after the return was filed. or (2) prior to the expiration of any period for collection agreed upon in writing by the Collector of Internal Revenue and the taxpayer before the expiration of such five-year period. . if any is due. therefore. Upon the evidence submitted and admitted by the parties. Umali to which I agree. I am reproducing the pertinent sections of the National Internal Revenue Code: SEC. Provided. SEC. has prescribed. 333. shall be suspended for the period during which the Collector of Internal Revenue is prohibited from making the assessment or beginning distraint or levy or a proceeding in court. and that the right of the Government to collect the tax. through Judge Roman M. the assessment was finally reduced on July 26. . For purposes of reference.

) . judicially or otherwise. on the theory that the assessment in this case was made within five years from the date the return was filed. and sixty day thereafter. prescribed pursuant to Section 331 of the National Internal Revenue which requires that the assessment be made within five years from the date the return was filed. The statute of limitations upon assessment and collection of national internal revenue taxes provided in Sections 331 and 332 of the Revenue Code may be suspended only "for the period during which the Collector of Internal Revenue is prohibited from making the assessment or beginning destraint or levy or a proceeding in court. the taxpayer may request reinvestigation or re-examination of the assessment.1941 was made on July 26. a period of more than 8 years. National Internal Revenue Code. 1955 had to be promulgated.) From whatever angle the case is viewed. 1947. has the effect of suspending the running of the statute of limitations. 1955. 213: "(a) The taxpayer shall put the specific grounds of his protest in writing and under oath. therefore. subject to the following requirements prescribed in paragraph 3 of Department Order No. respondent having failed at any time from February 14." (Emphasis supplied. and (c) He shall sign a statement that he is waiving the periods of prescription involved in the assessment and collection of the deficiency tax in question. 1946. Revenue Code. to institute appropriate proceedings. is the one to be considered in determining whether or not the assessment was made within the statutory period it follows that it must have to be considered also as the starting point from which the period within which the right to collect should be computed. 332 [c]. 1947 up to the time the instant petition for review was filed on September 19. 333. This may he inferred from the fact that General Circular No. the right of the Government to collect the tax assessed has prescribed. 1947. accompanied by such additional documents and evidence supporting his protest. or from the date the amended final return' was filed on February 6. (See Sec.) Nowhere does the law recognize that a simple request for reconsideration of an assessment. for the collection of the tax. (b) He shall pay one-half (1/2) of the total assessment and file a bond to guarantee the payment of the balance together with the penalties that shall have accrued at the time of final payment. V-182 dated January 17. unaccompanied by any positive indication that the taxpayer is waiving his right to assert the defense of prescription. But it is insisted that the requests of petitioner for reconsideration of the assessment. Accordingly. Paragraph 6 of said circular provides: 6. The right of respondent to assess the tax has. had the effect of suspending the running of the statute of limitations. Even granting that the first assessment made on February 11. more than five years from the date the "amended return" was filed on November 28. we find that the right of the Government to collect the income tax assessed against petitioner for the year 1941 has prescribed. 1955. and while the same were pending consideration by respondent." (Sec. That a request for re-examination or reconsideration of an assessment does not suspend the running of the statute of limitations seems to be the prevailing opinion in the Bureau of Internal Revenue. Within thirty (30) days from the receipt of the deficiency tax assessment notice.

829. as the date of the assessment.000 was reduced to P24. I fully agree with the Court of Tax Appeals that whether we consider February 11. 1947) to November 28. for one year within which to pay the assessment. but reserving its right to question the validity thereof. for the protection of the Government. nothing short of such express written agreement to extend will suspend the running of the period. but this in no way can be regarded as an express agreement to extend the period. he made an assessment in the amount of P33. but his actuations would seem to have been characterized by indecision and uncertainty. No such prohibition or inability to make assessment or begin the distraint is claimed for the Collector. it never asked for any other extension. until on July 26. he again increased this assessment to P50. a period of more than three years from February 14.26. 1955. 1947. that is. there is no necessity for the requirement that a taxpayer must sign a statement that he is waiving the periods of prescription' as a condition for the granting of the request for reinvestigation or reexamination.96. 1952. when the Collector demanded payment. It was given only three months. revise or revive the assessment or reinvestigate the case cannot extend the period of prescription. and the Collector was well aware of the fact that a mere petition to amend. as alleged by respondent. without surcharge. The trouble with the actuations of the Collector in this case is that he would appear to have unduly delayed definite and affirmative action on the assessment and collection as shown by the wide gaps — first. either to make collection within five years from February 11. Then on April 18. without interest and without any amount as compromise. Said circular among other things provides that in order that there be an extension of the period of prescription and presumably. modify. V-182. Not only was there undue delay on the part of the Collector. FOR THE FOREGOING CONSIDERATIONS We are of the opinion that the right of the Government to collect from petitioner the sum of P24. Evidently. 1950 to March 7.099. Then he increased this to P33. the right of the Collector. 1947.If a simple request for reinvestigation or re-examination of an assessment suspends the running of the statute of limitations. 1952 when he made the second assessment. 1947 or July 26. True. V-182 obviously in line with Section 332 (c) of the Revenue Code which provides that the waiver of the taxpayer must be contained in an agreement in writing extending the five year period of limitation upon the right of the respondent to collect internal revenue taxes. the taxpayer must sign a statement that he is waiving the period of prescription involved in the collection of the tax. 1947 or to make assessment within five years from February 6.438. I do not believe that a mere petition for revision or reinvestigation can be regarded as an agreement of the taxpayer to extend the period of prescription.96 as income tax for the year 1941 has prescribed. And Section 332 (c) says that the period for collection may be extended only by express agreement in writing by the taxpayer and the Collector. The very law clearly so states. it asked for revision and reconsideration of the different assessments made by the Collector. 1950. First.03. when Suyoc received notice of the first assessment (extended by the Collector to June 20. then another period of about two years from November 28. Accordingly. without pronouncement as to costs. has prescribed. the decision appealed from is hereby set aside. It will be observed that Suyoc made only one petition for extension. this sum of over P50. Section 333 says that the running of the statute of limitations provided in Sections 331 and 332 shall be suspended only when the Collector is prohibited from making the assessment or beginning the distraint. Why all this difference or differences in the amounts of the assessment? . as evidenced by the very General Circular No.678. 1955. General Circular No.438. promulgated for the guidance of the Bureau of Internal Revenue. Thereafter.66.

One could well imagine and understand that a first assessment more or less hastily prepared may be revised within a reasonable time, say a few months or even a year, either increasing it or decreasing it. But when the Collector over a period of more than eight years kept changing his assessment, increasing the same by substantial amounts and then decreasing the same substantially, and at the same time utterly forgetting the period of prescription set by the law and also forgetting to protect the interest of the Government by requiring the taxpayer to agree expressly and in writing to extend the period of such prescription; and equally important, forgetting and failing up to the present time to institute proceedings, administrative by distraint and levy or judicial by court action, to collect, the Government has no one to blame but itself and its officials, certainly not the taxpayer who did nothing but ask for revision of the assessment to obtain a correct figure while it finally got but too late, after a wait of over eight years. The majority opinion places much reliance on the case of R. H. Stearns Company vs. U.S., 291 U.S., 54, and makes extensive quotation therefrom. After reading said case, I agree with counsel for Suyoc that it not applicable, for the reason that in that case, the taxpayer signed two waivers of the period of limitation; that although the second waiver was not signed by the Commissioner, nevertheless, the taxpayer on several ocassions had requested him to withhold collection. Naturally, the United States Supreme Court was constrained to hold that when the taxpayer not only signed waivers but had deliberately asked and persuaded the Commissioner to postpone collection, he cannot invoke the benefit of prescription to the running of which he has contributed. Our law expressly and clearly provides that in order to suspend the period of prescription or to extend it, the taxpayer and the Collector must sign an agreement to that effect. Nothing short of this will effect said extension or suspension of the period of limitation. Mere petitions for revision or reinvestigation by the taxpayer cannot suspend the running of the period of prescription. The taxpayer may make as many requests for revision or examination as he wishes, but the Collector need not act upon them to the prejudice of the Government; and even if he does act upon said petitions, he should always keep an eye on the running of the period, on the dead line, so that for the protection of the Government, he could enforce collection before it is too late. Prescription in the assessment and in the collection of taxes is provided by the Legislature for the benefit of both the Government and taxpayer; for the Government for the purpose of expediting the collection of taxes, so that the agency charged with the assessment and collection may not tarry too long or indefinitely to the prejudice of the interests of the Government which needs said taxes to run it; and for the taxpayer so that within a reasonable time after filing his return, he may know the amount of the assessment which he is required to pay, whether or not such assessment is well founded and reasonable so that he may either pay the amount of the assessment or contest its validity in court, either by filing an action for the refund, if already paid, under the old law, or appeal the disputed assessment to the Court of Tax Appeals under the present law creating the Tax Court. It would surely be prejudicial to the interest of the taxpayer for the Government collecting agency to unduly delay the assessment and the collection because by the time that the collecting agency finally gets around to making the assessment or making the collection, the taxpayer may then have lost his papers and books to support his claim and contest that of the Government, and what is more, the tax is in the meantime accumulating interest which the taxpayer eventually has to pay. In connection with this extension of the period of prescription or limitation for the Government to collect taxes, it will be noticed from Section 332(c) of the Internal Revenue Code that even If the taxpayer and the Collector agree to extend the period of limitation, said period has to be specific or fixed, and if said period of extension is to be further extended, another agreement has to be made again specifying the period of said further extension. From all this, it is evident that to extend the period of limitation or prescription, an express agreement in writing to that effect, signed by the Collector and the taxpayer is necessary. Naturally, a mere petition by the taxpayer for revision or reexamination of the assessment cannot and will not automatically extend the period of limitation. However, under the theory espoused by the majority, let the taxpayer just ask, not for an extension

of the time to pay or the Government to collect, but for a mere re-examination or revision of the assessment, and lo, and behold, all the carefully prepared provisions of the tax law about prescription and statutory limitation are laid aside, and the collecting agency of the Government may then postpone and delay the collection indefinitely, until such time as it is good and ready to resume proceedings from where it left off, and if the taxpayer complains of the delay or invokes prescription, he is instantly met with and silenced by the done of estoppel. I believe that is not what the law and the Legislature contemplated. To me, this matter of the extension of the period of limitation is quite clear, but assuming for a moment that there were any doubt about it, then we have the time honored and well settled rule of statutory construction that tax laws should be interpreted liberally in favor of the taxpayer and strictly against the Government, except in the matter of tax exemptions, in which case the rule is reversed. In the case of Manila Railroad Co. vs. Collector of Customs, 52 Phil. 952, this Tribunal said: . . . . It is the general rule in the interpretation of statutes levying taxes or duties not to extend their provisions beyond the clear import of the language used. In every case of doubt, such statutes are construed most strongly against the Government and in favor of the citizen, because burdens are not to be imposed, nor presumed to be imposed, beyond what the statutes expressly and clearly import. (U. S. vs. Wigglesworth [1842], 2 Story, 369; Froehlich & Kuttner vs. Collector of Customs [1911], 19 Phil., 461.) Years ago, the Supreme Court of the United States, through Chief Justice Marshall, in the case of McCulloch vs. The State of Maryland, 4 Law Ed. 579, said that the power to tax is the power to destroy. Evidently, to moderate this awesome and dangerous taxing power of the Legislature, and in order to temper the rigor of tax laws, this sound and salutary rule of liberal construction of tax laws in favor of the taxpayer has been evolved and laid down. For the foregoing reasons, I dissent. Padilla, J., concurs. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 162852 December 16, 2004

PHILIPPINE JOURNALISTS, INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

DECISION

YNARES-SANTIAGO, J.: This is a petition for review filed by Philippine Journalists, Incorporated (PJI) assailing the Decision1 of the Court of Appeals dated August 5, 2003,2 which ordered petitioner to pay the assessed tax liability of P111,291,214.46 and the Resolution3 dated March 31, 2004 which denied the Motion for Reconsideration. The case arose from the Annual Income Tax Return filed by petitioner for the calendar year ended December 31, 1994 which presented a net income of P30,877,387.00 and the tax due of P10,807,086.00. After deducting tax credits for the year, petitioner paid the amount of P10,247,384.00. On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal Revenue (BIR) issued Letter of Authority No. 871204 for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and other accounting records for internal revenue taxes for the period January 1, 1994 to December 31, 1994. From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty in the following amounts: Value Added Tax Income Tax Withholding Tax Total P 229,527.90 125,002,892.95 2,748,012.35 P 127,980,433.20

In a letter dated August 29, 1997, Revenue District Officer Jaime Concepcion invited petitioner to send a representative to an informal conference on September 15, 1997 for an opportunity to object and present documentary evidence relative to the proposed assessment. On September 22, 1997, petitioner’s Comptroller, Lorenza Tolentino, executed a "Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)".5 The document "waive[d] the running of the prescriptive period provided by Sections 223 and 224 and other relevant provisions of the NIRC and consent[ed] to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of the investigation".6 On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending the issuance of an assessment and finding that petitioner had deficiency taxes in the total amount of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section, issued Assessment/Demand No. 33-1-000757-947 on December 9, 1998 stating the following deficiency taxes, inclusive of interest and compromise penalty: Income Tax Value Added Tax Expanded Withholding P108,743,694.88 184,299.20 2,363,220.38

Panganiban to the petitioner to pay the assessment within ten (10) days from receipt of the letter. for if this court finds the same to be ineffective. Respondent also showed proof that in claiming Registered Letter No. 33-1-000757-94. 33-06-04611 signed by Deputy Commissioner Romeo Panganiban for the BIR was received by the petitioner. (c) that the assessment. this Court rules in the affirmative.46 was reached and requested an extension of thirty (30) days from receipt of the clarification within which to reply. Mr. 1998 addressed to Phil. 1999. 1999. … However. at Journal Bldg. then the assessments must necessarily fail. 2000.291.214..Tax Total P111. 76134. On May 14. a Warrant of Distraint and/or Levy No. as to whether or not the Waiver of the Statute of Limitations is valid and binding on the petitioner is another question. To disprove petitioner’s allegation of non-receipt of the aforesaid assessment notices. Sanchez presented three identification cards. the CTA rendered its decision.10 Petitioner also contested that the assessment had no factual and legal basis. 2000.13 to wit: As to whether or not the assessment notices were received by the petitioner. and (e) that the grave prejudice that will be sustained if the warrant is enforced is enough basis for the issuance of the writ of preliminary injunction. Since the subject assessments were issued beyond the three-year prescriptive period. petitioner asked to be clarified how the tax liability of P111. a Final Notice Before Seizure8 was issued by the same deputy commissioner giving the petitioner ten (10) days from receipt to pay. Railroad St. one of which is his company ID with herein petitioner. Manila was duly delivered to and received by a certain Alfonso Sanchez. 1997.46 On March 16. Petitioner filed a Petition for Review12 with the Court of Tax Appeals (CTA) which was amended on May 12. (Authorized Representative) on January 8. … . is null and void. 1999. respondent presented a certification issued by the Post Master of the Central Post Office.9 The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt of Tax Assessment/Demand No. having been made beyond the 3-year prescriptive period. Region No. 2002. On November 10. (b) that the warrant of distraint and/or levy was without factual and legal bases as its issuance was premature. Manila to the effect that Registered Letter No. a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. On March 28. it becomes imperative on our part to rule first on the validity of the waiver allegedly executed on September 22.291. Journalists. (d) that the issuance of the warrant without being given the opportunity to dispute the same violates its right to due process. Petitioner received a copy of the final notice on November 24. Inc. Jr. 1999. By letters dated November 26. 1999. 76134 sent by the BIR. 6. Petitioner complains: (a) that no assessment or demand was received from the BIR. Manila on December 15.214..

14 After the motion for reconsideration of the Commissioner of Internal Revenue was denied by the CTA in a Resolution dated August 2. petitioner was not furnished a copy of the waiver. in the total amount of P111. the Warrant of Distraint and/or Levy issued pursuant thereto is considered null and void. It does not contain a definite expiration date. the waiver must be executed in three (3) copies. under pain of being administratively dealt with should non-compliance result to prescription of the right to assess/collect… Thus. Consequently. In its decision dated August 5. 33-1-000757-94 issued on December 5. 1998 to be time-barred. 2002. this Court considers the same to be without any binding effect on the petitioner for the following reasons: The waiver is an unlimited waiver. the instant Petition for Review is hereby GRANTED. finding the waiver executed by the petitioner on September 22. Mere assessment notices which have become . an appeal was filed with the Court of Appeals on August 12. the Court of Appeals disagreed with the ruling of the CTA.214. value-added and expanded withholding tax assessments issued by the respondent against the petitioner on December 9. 1997 to be suffering from legal infirmities. The said RMO even provides that the procedures found therein should be strictly followed.291. 20-90. 1998. It is to be noted that under RMO No. the deficiency income. Warrant of Distraint and/or Levy No.46 for the year 1994 are hereby declared CANCELLED. Likewise. 2003. 20-90. It bears stressing that RMO No. respondent failed to comply. to wit: … The petition for review filed on 26 April 2000 with CTA was neither timely filed nor the proper remedy. Only decisions of the BIR. 20-90 is directed to all concerned internal revenue officers.After carefully examining the questioned Waiver of the Statute of Limitations. 2002. denying the request for reconsideration or reinvestigation may be appealed to the CTA. the phrase indicating 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… … Secondly. the waiver failed to state the date of acceptance by the Bureau which under the aforequoted RMO should likewise be indicated… … Finally. Accordingly. SO ORDERED. 33-06-046 is hereby declared NULL and VOID. Under RMO No. WHEREFORE. It is likewise required that the fact of receipt by the taxpayer of his/her file copy be indicated in the original copy. rendering the same invalid and ineffective. in view of all the foregoing. the second copy of which is for the taxpayer. Again. WITHDRAWN and WITH NO FORCE AND EFFECT. the Court finds Assessment/Demand No.

Why would it need a copy of the document it knowingly executed when the reason why copies are furnished to a party is to notify it of the existence of a document.214. WHEREFORE. the document was dated 22 September 1997. the 02 August 2002 resolution and 14 May 2002 decision of the CTA are hereby SET ASIDE.46. But this requirement does not apply in the instant case because what we have here is not an extension of the prescriptive period but a waiver thereof. . Thus. 2004. and (3) Phil. followed by the signature of the BIR’s authorized representative. Journalists. To these requirements provided by law. Although the date of acceptance was not stated. As to the allegation that Phil. through its comptroller. II. This date could reasonably be understood as the same date of acceptance by the BIR since a different date was not otherwise indicated. These grounds are merely formal in nature. The date of acceptance by the BIR does not categorically appear in the document but it states at the bottom page that the BIR "accepted and agreed to:"…. (2) it does not state the date of acceptance by the BIR. What Phil. SO ORDERED. signed the waiver. Journalists was not furnished a copy of the waiver. … … [T]he CTA found the waiver executed by Phil. this requirement appears ridiculous. This requirement could be reasonably construed from the rule on extension of the prescriptive period. 1125. Phil. Hence. When one waives the prescriptive period. the CTA should not have entertained the petition at all. the taxpayer. this appeal on the following assignment of errors: I. The Honorable Court of Appeals committed grave error in ruling that it is outside the jurisdiction of the Court of Tax Appeals to entertain the Petition for Review filed by the herein Petitioner at the CTA despite the fact that such case inevitably rests upon the validity of the issuance by the BIR of warrants of distraint and levy contrary to the provisions of Section 7(1) of Republic Act No. Journalists executed was a renunciation of its right to invoke the defense of prescription. the memorandum order adds that the length of the extension be specified by indicating its expiration date. Lorenza Tolentino. Journalist.final after the lapse of the thirty (30)-day reglementary period are not appealable. Journalists is ordered [to] pay its assessed tax liability of P111. Respondent Phil. The period of prescription for the assessment of taxes may be extended provided that the extension be made in writing and that it be made prior to the expiration of the period of prescription. These are the requirements for a valid extension of the prescriptive period. it is no longer necessary to indicate the length of the extension of the prescriptive period since the person waiving may no longer use this defense.15 Petitioner’s Motion for Reconsideration was denied in a Resolution dated March 31. was not furnished a copy of the waiver.291. this is the biggest flaw of the decision. These are two (2) very different things. event or proceeding? … As regards the need for a definite expiration date. This is a valid waiver. Journalists to be invalid for the following reasons: (1) it does not indicate a definite expiration date.

would be rendered useless and nugatory. The assessment issued is void and legally non-existent because the BIR has no power to issue an assessment beyond the three-year prescriptive period where there is no valid and binding waiver of the statute of limitation. Section 7(1) of Republic Act No. The Honorable Court of Appeals gravely erred when it held that the assessment in question has became final and executory due to the failure of the Petitioner to protest the same. existing jurisprudence and outside of the purpose and intent for which they were enacted. The petitioner now argue that the case was brought to the CTA because the warrant of distraint or levy was illegally issued and that no assessment was issued because it was based on an invalid waiver of the statutes of limitations. Since the petitioner did not file a request for reinvestigation or reconsideration within thirty (30) days. otherwise. Jurisdiction. 7. We agree with petitioner. 20-90 which are substantive in nature. such right to assess cannot be validly granted after three years since it would arise from a violation of the mandatory provisions of Section 203 and would go against the vested right of the Petitioner to claim prescription of assessment. The Honorable Court of Appeals gravely erred when it ruled that the assessment notices became final and unappealable. an interpretation that is contrary to law. III. The Honorable Court of Appeals committed grave error when it HELD valid a defective waiver by considering the latter a waiver of the right to invoke the defense of prescription rather than an extension of the three year period of prescription (to make an assessment) as provided under Section 222 in relation to Section 203 of the Tax Code. Such ruling totally disregarded the mandatory requirements of Section 222(b) of the Tax Code and its implementing regulation. The first assigned error relates to the jurisdiction of the CTA over the issues in this case. Section 203. This directive shows that the RMO is not merely cover forms. IV. The RMO provides that violation thereof subjects the erring officer to administrative sanction. as herein provided – .16 We find merit in the appeal. Besides. 1125. The Court of Appeals ruled that only decisions of the BIR denying a request for reconsideration or reinvestigation may be appealed to the CTA. V. Such assessment should be held void and non-existent. the Act Creating the Court of Tax Appeals.The Honorable Court of Appeals gravely erred when it ruled that failure to comply with the provisions of Revenue Memorandum Order (RMO) No. Respondent had no power to issue an assessment beyond the three year period under the mandatory provisions of Section 203 of the NIRC. 20-90 is merely a formal defect that does not invalidate the waiver of the statute of limitations without stating the legal justification for such conclusion. RMO No. an expression of a public policy. the assessment notices became final and unappealable. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal. provides for the jurisdiction of that special court: SEC.

and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers. to the Government because tax officers would be obliged to act promptly in the making of assessment. The wording of the provision is clear and simple. As was held in Republic of the Phils. The Court of Appeals held that the requirements and procedures laid down in the RMO are only formal in nature and did not invalidate the waiver that was signed even if the requirements were not strictly observed. not to determine the latter’s real liability.(Emphasis supplied) RMO No. In Pantoja v. in Commissioner of Internal Revenue v. A cursory reading of the Order supports petitioner’s argument that the RMO must be strictly followed.(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments.19 provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected. Ablaza:21 The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens. The second part of the provision covers other cases that arise out of the NIRC or related laws administered by the Bureau of Internal Revenue. was upheld by this Court. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law. The NIRC. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue on matters relating to assessments or refunds.18 the decision of the CTA declaring several waivers executed by the taxpayer as null and void.17 we upheld the jurisdiction of the CTA to act on a petition to invalidate and annul the distraint orders of the Commissioner of Internal Revenue. the following procedures should be followed: . Without such a 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. thus: In the execution of said waiver. David.20Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. under Sections 203 and 222. Also. 20-90 implements these provisions of the NIRC relating to the period of prescription for the assessment and collection of taxes. or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue. The second and fifth assigned errors both focus on Revenue Memorandum Circular No. (Emphasis supplied). thus invalidating the assessments issued by the BIR. 20-90) on the requisites of a valid waiver of the statute of limitations. but to take advantage of every opportunity to molest peaceful. 20-90 (RMO No. lawabiding citizens. Court of Appeals. refunds of internal revenue taxes. fees or other charges. penalties imposed in relation thereto. This is not the first case where the CTA validly ruled on issues that did not relate directly to a disputed assessment or a claim for refund. v.

the Commissioner of Internal Revenue or the revenue official authorized by him.23 The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals. The Revenue District Officer with respect to tax cases still pending investigation and the period to assess is about to prescribe regardless of amount. A. the exceptions to the law on prescription should perforce be strictly construed. investigation or assessment. our tax law provides a statute of limitations in the collection of taxes. The phrase "but not after __________ 19___" should be filled up… 2. Thus. The following revenue officials are authorized to sign the waiver. Any revenue official found not to have complied with this Order resulting in prescription of the right to assess/collect shall be administratively dealt with. … Soon after the waiver is signed by the taxpayer.24 RMO No. The date of such acceptance by the Bureau should be indicated… 3. … 5. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. 20-90 explains the rationale of a waiver: . the law on prescription. The foregoing procedures shall be strictly followed. being a remedial measure. For the purpose of safeguarding taxpayers from any unreasonable examination. should be liberally construed in order to afford such protection. This indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription. The phrase "but not after _________ 19___" should be filled up. shall sign the waiver indicating that the Bureau has accepted and agreed to the waiver. (Emphasis supplied)22 A waiver of the statute of limitations under the NIRC. The period agreed upon shall constitute the time within which to effect the . is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. to a certain extent..1. as hereinafter provided. This form may be reproduced by the Office concernedbut there should be no deviation from such form. The waiver must be in the form identified hereof. In the Regional Offices 1. In the National Office … 3. As a corollary. Commissioner For tax cases involving more than P1M B..

(Emphasis supplied) As found by the CTA. This case involves taxes amounting to more than One Million Pesos (P1. 20-90. the Waiver of Statute of Limitations. … What is more. Section 319 of the Tax Code earlier quoted is clear and explicit that the waiver of the five-year26 prescriptive period must be in writing and signed by both the BIR Commissioner and the taxpayer.assessment/collection of the tax in addition to the ordinary prescriptive period. The waiver is also defective from the government side because it was signed only by a revenue district officer. Court of Appeals. the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as required by law. The case of Commissioner of Internal Revenue v. and therefore necessitates for its binding effect the concurrence of the Commissioner of Internal Revenue…. but is a bilateral agreement between two parties to extend the period to a date certain. observing thus: We cannot go along with the petitioner’s theory. signed by petitioner’s comptroller on September 22. petitioner’s waiver became unlimited in time. On this basis neither implied consent can be presumed nor can it be contended that the waiver required under Sec. 20-90." … For sure. We invalidated the subject waivers and ruled: Petitioner’s submission is inaccurate… … The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation. within which the former may assess and collect revenue taxes. Here. not the Commissioner.00) and executed almost seven months before the expiration of the threeyear prescription period. The waiver is not a unilateral act by the taxpayer or the BIR. It did not specify a definite agreed date between the BIR and petitioner. RMO No. no such written agreement concerning the said three waivers exists between the petitioner and private respondent Carnation. the waivers in question reveal that they are in no wise unequivocal. For this.000. The conformity of the BIR must be made by either the Commissioner or the Revenue District Officer.000. Thus. violating Section 222(b) of the NIRC. We agree with the CTA in holding "these ‘waivers’ to be invalid and without any binding effect on petitioner (Carnation) for the reason that there was no consent by the respondent (Commissioner of Internal Revenue).25 dealt with waivers that were not signed by the Commissioner but were argued to have been given implied consent by the BIR. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR. 1997 is not valid and binding because it does not conform with the provisions of RMO No. 319 of the Tax Code is one which is . as mandated by the NIRC and RMO No.

Sarmiento’s transfer and assignment to RDO No. 2000 is also null and void for having been issued pursuant to an invalid assessment.28 The Court of Tax Appeals noted in its decision that it is unlikely as well that Ms. and Azcuna. Jr. is REINSTATED. Warrant of Distraint and/or Levy No. 2090.J. 2003 and its Resolution dated March 31. 33-06-046 null and void. Under RMO No. concur. 1997 could reasonably be understood as the same date of acceptance by the BIR. 2004 are REVERSED and SET ASIDE. event or proceeding. JJ. 14-98. Ms. 2002. 1998 because "Revenue Officials normally have to conduct first an inventory of their pending papers and property responsibilities. 2090 only after the taxpayer received a copy of the waiver accepted by the BIR. In the same manner.unilateral nor can it be said that concurrence to such an agreement is a mere formality because it is the very signatures of both the Commissioner of Internal Revenue and the taxpayer which give birth to such a valid agreement. 33-06-046 which petitioner received on March 28. The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or extended and continued to run until April 17. When the petitioner’s comptroller signed the waiver on September 22. 33-1-000757-94 issued on December 9. Sarmiento made the acceptance on January 16. the Assessment/Demand No. Petitioner points out however that Revenue District Officer Sarmiento could not have accepted the waiver yet because she was not the Revenue District Officer of RDO No.27 (Emphasis supplied) The other defect noted in this case is the date of acceptance which makes it difficult to fix with certainty if the waiver was actually agreed before the expiration of the three-year prescriptive period. 1998. Quisumbing. There is compliance with the provision of RMO No. C. The Court of Appeals held that the date of the execution of the waiver on September 22. the waiver must be executed in three copies with the second copy for the taxpayer. The Decision of the Court of Appeals dated August 5. 6108 dated May 14. 1998 was invalid because it was issued beyond the three (3) year period. 1998 as shown by the Revenue Travel Assignment Order No. the instant petition for review is GRANTED. The requirement to furnish the taxpayer with a copy of the waiver is not only to give notice of the existence of the document but of the acceptance by the BIR and the perfection of the agreement. 33 was only signed by the BIR Commissioner on January 16. Davide. declaring Warrant of Distraint and/or Levy No."29 Finally. Carpio. premises considered. The Court of Appeals did not think this was important because the petitioner need not have a copy of the document it knowingly executed. It stated that the reason copies are furnished is for a party to be notified of the existence of a document. SO ORDERED. Republic of the Philippines SUPREME COURT Baguio City EN BANC .. WHEREFORE. 1997. it was not yet complete and final because the BIR had not assented. Consequently.. 33 on such date. The Decision of the Court of Tax Appeals in CTA Case No. the records show that petitioner was not furnished a copy of the waiver. The flaw in the appellate court’s reasoning stems from its assumption that the waiver is a unilateral act of the taxpayer when it is in fact and in law an agreement between the taxpayer and the BIR. (Chairman).

she and the rest of her family would be killed. Appellant was jobless and stayed at home. appellant removed the girl's short pants and underwear. AAA was born on April 30. J. Cabalquinto. R. Province of Catanduanes.7 On March 25. The personal circumstances of the victims or any other information tending to establish or compromise their identities will likewise be withheld. the Court is confronted with remedial questions on (a) specificity of dates in the Information. Appellant would rape her whenever they were left alone in the house. Expectedly. appellant again imposed his bestial urges on AAA.2-b At that time. JERRY NAZARENO. Subsequently. appellant positioned himself behind the girl and then inserted his penis into her vagina. For Our final review is the Decision1 of the Court of Appeals (CA) affirming with modification appellant's conviction for rape of his two minor daughters. All of her siblings were playing in their yard. DECISION REYES.G.: IN this rape case. No. appellant forcibly entered AAA from behind.6 CCC was rarely home because she attended to farm work and accepted laundry jobs from neighbors to support the family. We will instead use fictitious initials to represent them throughout the decision. All that time. Just as he did before. 2008 THE PEOPLE OF THE PHILIPPINES.2-a BBB. and (c) concurrence of allegation and proof.2 the real names of the rape victims will not be disclosed. She feared for her life as well as that of her mother and siblings. Unexpectedly. Three more children sprang from the marriage since then. (b) quantum of proof. the second child of the union. At around 2:00 p. appellee. The Facts In line with Our ruling in People v. appellant's hands . was born on June 24. and without saying a word. vs.T. He then proceeded to remove his own undergarments. Private complainants AAA and BBB are the legitimate daughters of appellant Jerry Nazareno with CCC. inserting his penis into the girl's vagina.. AAA distinctly remembered the incident because she graduated from primary school on that day.. 1996. AAA was inside a room in their house located at Barangay Codon. He told AAA to remove her shorts and panty. He then directed AAA to crouch on the floor and raise her buttocks (baka-bakahan). 1984. While in that position. Municipality of San Andres. 167756 April 8. She was seven. appellant entered the room.3 Sometime in 1990.4 Appellant threatened AAA not to reveal what happened to her to anyone. It was only in 1987 that the couple formally tied the knot in simple church ceremonies. appellant.R. held AAA tightly.m. AAA suffered in silence. appellant and CCC were yet to wed. or else. 1983. Appellant then asked her to crouch on the floor and raise her buttocks.5 AAA's ordeal with her father became a regular fare. appellant and AAA were left alone in the house.

BBB felt extreme pain from the nails protruding from her father's fingers.14 CCC narrated that she was shocked when she heard her two daughters complain that they were raped by their own father. The lacerations suggested that the two girls were no longer in a virgin state. Suddenly. CCC was convinced that appellant might make good his threats to kill all of them. She failed to act immediately on her daughters' plight for fear of her husband. CCC. unlawfully. Arcilla. CCC testified as to the age of the victims AAA and BBB at the time of the commission of the crimes. 1998. appellant would threaten her that he would kill all of them should she tell anyone what was happening between them. 1999. She knew appellant to be temperamental. 2638 for the rape of BBB. 6 o'clock and 9 o'clock positions. Every time. Appellant positioned himself at BBB's rear and then inserted his penis into the young girl's vagina. 1984. using the girl for his sexual gratification every other day. Philippines. AAA accidentally found that BBB was likewise being subjected to sexual abuses by their father. she uncovered old healed hymenal lacerations on both AAA and BBB at the 3 o'clock. CCC was devastated. secretly went to the Municipal Building of San Andres. 1998.17 . Arcilla narrated that she examined both AAA and BBB on February 16.10 Appellant continued raping BBB. 1999. appellant and BBB were left alone in their house. violence and intimidation did then and there willfully. appellant told BBB to kneel on all fours (pig baka-baka). Sometime in January 1992. AAA's graduation from elementary school also marked the end of appellant's sexual abuses. CONTRARY TO LAW. appellant again attempted to force himself on BBB. appellant would rape her fifteen times in a month. 1983 while BBB was born on June 24. He inserted his finger into BBB's vagina.15 Dr. with AAA and BBB. Province of Catanduanes. She affirmed that AAA was born on April 30. 1998. AAA and BBB found the courage to tell their mother CCC what appellant had been doing to them. He then removed his maong pants. AAA and BBB tearfully recounted to their mother their individual ordeals. BBB suffered the same fate as her older sister AAA.8 Coincidentally.9 Appellant then removed BBB's shorts and panties. BBB was only seven years old and was a Grade II pupil. in Barangay Codon.12 On December 6. The information reads: That sometime and between January 1992 up to December 06. That was the last time appellant abused BBB. From BBB's account. During her examination. AAA and BBB were immediately attended to by personnel from the Department of Social Welfare and Development. He would hit AAA and BBB at the slightest provocation. and within the jurisdiction of this Honorable Court.16 On March 17.were clutching the girl's back.13 On February 16. Gathering strength from one another. 1999. Municipality of San Andres. Catanduanes to file a complaint against appellant for the rape of AAA and BBB.11 On October 27. appellant Jerry Nazareno was indicted for violation of Article 266-A of the Revised Penal Code in Criminal Case No. The two were later examined at the JMA District Hospital by Dr. Erlinda H. the above-named accused by means of force. At the time of the rape. feloniously and repeatedly made sexual intercourse with his daughter BBB at the age of 7 through 14 years old against her will.

another Information docketed as Criminal Case No. the prosecution having proved the guilt of the accused beyond reasonable doubt. the trial court handed down a joint judgment of conviction.00) as moral damages and the cost of suit.18 The case for the People. Catanduanes. and within the jurisdiction of the Honorable Court. 2002. The defense. 2638 and the same penalty for raping AAA in Criminal Case No.20 Conformably with the pronouncement in People v. . He denied having raped his daughters. the said accused.000. 2650 in accordance with Article 335 of the Revised Penal Code as amended by R.On May 3. married. CCC. revolved around the combined testimonies of AAA. in view of all the foregoing. he is sentenced to suffer the extreme penalty of DEATH for raping BBB in Criminal Case No. imposing upon appellant the capital punishment of death in both cases. and Dr. he was in the motor launch that plies the San Andres and Caramoran route. 7659. to pay each of them the amount of Fifty Thousand Pesos (P50. he could not molest the complainants because they are his daughters. The indictment is worded thus: That from sometime in January 1990 up to December 1998 in barangay Codon. Mateo21 providing for an intermediate review by the CA of cases in which the penalty imposed is death.19 RTC and CA Dispositions On October 25.00) each. was summed up by the trial court in this wise: The defense presented JERRY NAZARENO. Catanduanes. for the rape of AAA. was levelled against appellant. Catanduanes. reclusion perpetua or life imprisonment. The fallo of the RTC decision reads: WHEREFORE. fisherman. municipality of San Andres.000. He said that he sometimes beat his children because he is strict with them in their studies especially during weekdays. he was opposed to his marriage to CCC. did then and there willfully. being the father of the complainant. anchored on denial. San Andres. the accused himself who testified that he is 34 years old. which portrayed the foregoing facts. then five years old up to the time when she was 15-years-old against her will. the Court issued a Resolution dated September 21. CONTRARY TO LAW. 2650. a resident of Codon. He did not want them to watch television during schooldays. 1999.22 transferring the case to the appellate court for appropriate action and disposition. Though he is strict. The accused is further ordered to indemnify both complainants the amount of Fifty Thousand Pesos (P50. feloniously and criminally repeatedly had sexual intercourse with her daughter AAA. SO ORDERED.A. 2004. BBB. the last molestation of BBB. He also said that in December 1998. He said that the reason why his daughters filed these cases against him was because his father-in-law wants him to be incarcerated for the reason that from the very start. Erlinda Arcilla of the JMA District Hospital in San Andres. his daughter.

disposing as follows: WHEREFORE. an accused cannot be convicted of an offense unless it is clearly charged in the complaint or information. In a manifestation dated December 6. 335 of the Revised Penal Code as amended by Anti Rape Law of 1997.00 for each case is AFFIRMED. for the People. with the aggravating circumstance of relationship and minority. within thirty (30) days from notice. Let the records of this case be transmitted to the Supreme Court for appropriate action. We also award P25.00 each. 2638 and 2650 is hereby AFFIRMED. appellant argues that the Informations charging him with the rape of AAA and BBB are defective for failure to state with specificity the approximate date of the commission of the offenses. The award of civil indemnity is MODIFIED and INCREASED to P75. and the place where the offense has been committed. Verily.24 The Office of the Solicitor General. the twin convictions have no basis in law because the People violated his constitutional right to be informed of the nature and cause of the accusations against him. it must embody the essential elements of the crime charged by setting forth the facts and circumstances that have a bearing on the culpability and liability of the accused. representing appellant Jerry Nazareno. Thus. the CA affirmed with modification the RTC judgment. informed the Court that it is adopting its main brief on record. 2005.000. the name of the offended party.000. finding the accused guilty beyond reasonable doubt of the crime of rape as defined and penalized under Art. the information should state the name of the accused. SO ORDERED. to ensure that the constitutional right of the accused to be informed of the nature and cause of the accusation against him is not violated.On February 22.00 as exemplary damages in each case.28 . a statement of the acts or omissions so complained of as constituting the offense. the decision of the court a quo sentencing him to death in both Criminal Cases Nos. so that he can properly prepare for and undertake his defense. 2006. The argument is specious. An information is intended to inform an accused of the accusations against him in order that he could adequately prepare his defense. if they so desired. 2638 AND 2650 ARE INSUFFICIENT TO SUPPORT A JUDGMENT OF CONVICTION FOR ITS (SIC) FAILURE TO STATE THE PRECISE DATES OF THE COMMISSION OF THE OFFENSE CHARGED.25 Appellant stands by the same lone error he raised before the appellate court: THE TRIAL COURT ERRED (IN) NOT FINDING THAT THE INFORMATION(S) IN CRIMINAL CASE NO[S]. in both cases. similarly opted to dispense with the filing of a supplemental brief in its manifestation dated March 9.27 Further. the Court resolved to require the parties to submit their respective supplemental briefs. the approximate time and date of the commission of the offense.000.26 (Corrections and underscoring supplied) Our Ruling In the main. According to him. the Public Attorney's Office.23 Issues On September 27. the designation given to the offense by the statute. 2005. The award of moral damages ofP50. 2005.

39 Appellant failed to raise the issue of defective informations before the trial court.33 In the case under review. the information averred that "from sometime in January 1990 up to December 1998 in Barangay Codon.35 the Court found the appellant liable for rape under an information charging that he perpetrated the offense "sometime in the year 1982 and dates subsequent thereto" and "sometime in the year 1995 and subsequent thereto. 1998 in Barangay Codon. In People v. On the contrary." Indeed. . The doctrine was reiterated with greater firmness in People v. We now tackle appellant's convictions for the multiple rape of AAA and BBB. More than that. he slumbered on his rights and awakened too late. the recitals in the informations sufficiently comply with the constitutional requirement that the accused be informed of the nature and cause of the accusation against him. as long as it alleges that the offense was committed "at any time as near to the actual date at which the offense was committed. 1994. Espejon. 1998" for Criminal Case No.However."37 and "on or about and sometime in the year 1988"38constitute sufficient compliance with Rule 110. it is not necessary for the information to allege the date and time of the commission of the crime with exactitude unless time is an essential ingredient of the offense.31 the Court ruled that the time of the commission of rape is not an element of the said crime as it is defined in Article 335 of the Revised Penal Code. To the mind of the Court. and (3) when the woman is under twelve years of age or is demented. and that the complaint will be sustained if the proof shows that the offense was committed at any time within the period of the statute of limitations and before the commencement of the action." In Criminal Case No. 1994. 2632 and "sometime in January 1990.34 the Court upheld a conviction for ten counts of rape based on an Information which alleged that the accused committed multiple rapes "from November 1990 up to July 21. Province of Catanduanes. Section 11 of the 2000 Rules of Criminal Procedure. Province of Catanduanes. this Court has ruled that allegations that rapes were committed "before and until October 15. Salalima32 and in People v." AAA was raped by appellant. Bugayong. Municipality of San Andres. the information in Criminal Case No. i. appellant actively participated in the trial. appellant did not object to the presentation of the evidence for the People contending that the offenses were committed "sometime and between January 1992 up to December 6. the Court notes that the matter of particularity of the dates in the information is being raised for the first time on appeal. up to December 1998" in Criminal Case No. He could have moved to quash the informations or at least for a bill of particulars. Lizada.e. The rule is well-entrenched in this jurisdiction that objections as to matter of form or substance in the information cannot be made for the first time on appeal. 2638 alleged that the rape of BBB transpired "sometime and between January 1992 up to December 6. 2650.30 the Court held that when the time given in the information is not the essence of the offense. In accordance with Rule 110. Gianan. The gravamen of the crime is the fact of carnal knowledge under any of the circumstances enumerated therein. Simply put. Garcia. Too. (2) when the woman is deprived of reason or otherwise unconscious. Clearly. Section 11 of the 2000 Rules of Criminal Procedure. 2650." an information is sufficient. he cannot now be heard to complain that he was unable to defend himself in view of the vagueness of the recitals in the informations. Municipality of San Andres.29 In People v. offering denial and alibi as his defenses." In People v.: (1) by using force or intimidation. He did not. In People v."36"sometime in the year 1991 and the days thereafter. the time need not be proven as alleged.

40 Tersely put. the lone testimony of the offended party. Sir. the Court is guided by the following jurisprudential guidelines: (a) an accusation of rape can be made with facility. By the very nature of this crime. (b) due to the nature of the crime of rape in which only two persons are usually involved. it is usually only the victim who can testify as to its occurrence. In reviewing rape cases. AAA narrated: Q Why. Sir. and (c) the evidence for the prosecution must stand or fall on its own merits and cannot be allowed to draw strength from the weakness of the evidence for the defense.In an effort to exculpate himself. Q But how did your father rape you. natural. Q Where particularly in your house? A In our room.41 In her testimony before the trial court. to disprove. how old were you then? A Seven (7) years old. Sir. do you remember how he raped you in 1990. though innocent. the credibility of the offended party is crucial in determining the guilt of a person accused of rape. if credible. you said your father raped you in 1990? A I could no longer remember the date. Sir. According to appellant. his father-in-law has an axe to grind against him. when I was in Grade I until I was in Grade VI. Q When you were in Grade I. Sir. appellant contends that the charges for rape are mere fabrications and lies. Sir. His in-law disdained him from the very beginning and wanted him out of CCC's life. Q Can you remember the first time. convincing and consistent with human nature and the normal course of things. . the accused may be convicted solely on the basis of the testimony of the victim. provided that such testimony is credible. He insists his daughters were instigated by his father-in-law to file the complaints. Q Do you remember where did he tell you to make that position? A No. when were you particularly raped by your father? A Since 1990. Thus. in rape cases. the testimony of complainant must be scrutinized with extreme caution. suffices to warrant a conviction for rape. Sir. the first time? A Yes. Elsewise stated. Q Could you please tell us how he raped you for the first time? A I was croaching with raised buttocks. it is difficult to prove but more difficult for the person accused.

1996. we are only trying here the rape that occurred on March 25. what did your father do next? A He positioned behind me and s[tar]ted raping me. because it is not included in the information. maybe several times before that. Q Now after that first time. Q Do you remember how long the period was between the first and the second time he raped you? A I could not longer remember. Sir. and my mother was at work. Sir. because all my other siblings are playing outside the house. the court cannot do something about that. Q Who were with you in your house during that time? A No one. so if you can prove to us really. Sir. Q When you were in that position with your buttocks raised and hands and knees on the floor.Q Do you still remember the date. Q You mean your father inserted his penis to your vagina? A Yes. Q When you used the term "rape. Q Between the first time that your father raped you and the last time that your father raped you. the thing that your father had been doing to you? . did you not report this to anybody. the first time he raped you? A No." what do you mean? A He inserted his penis into my vagina. Sir. Sir. Sir. do you remember the second time that he did it to you? A I could not remember anymore. Sir. AYO Q So when was the last time that your father raped you? A When I graduated from the elementary school. Sir. Q When was that? A March 24. COURT Fiscal. Sir.

he would not only kill me but the rest of us. Q And what did he do again when you are in that position? A He told me to remove my shorts and my panty. you said you have been raped by your father in the time that you are in Grade I up to the time that you were in Grade VI. Q Why? A Because I was threatened by my father that if we tell this matter to anybody. Sir. Q How did he rape you? A I was croaching with raised buttocks. COURT Recess for ten (10) minutes. Sir. Q Where? A In our house. COURT (After ten minutes) Court session resumed.A I did not report this to anybody. Q And did you do it? A Yes. whenever your father raped you. Q How old were you then? A Thirteen (13) years old. Sir. what did your father do to you? CABRERA The question is vague. Q Then what did he do next? . because there is no definite date. Sir. Sir. Sir. Q What other things did your father do when you said that he raped you. Sir. 1996. Sir. AYO Q Do you remember the last time that your father raped you? A March 25.

42 Upon the other hand. Q When you used the term "Pig baka-baka. Sir. Q And that was the first time your father raped with that position? A Yes. where was (sic) his hands? A His hands were on my back. Q And what was your father doing aside from having that position? A He removed my shorts and panty. Miss witness. do you remember what clothes he was wearing in that position? A He was wearing maong pants. because that has been sometime already. Sir. . Sir. Q Do you recall the circumstances when you were first raped by your father in 1992? A I was made to lie on top of my father. Q In 1992." will you please demonstrate to us how it is done? A (Witness demonstrating by kneeling and had her two hands on the floor. if you can still remember? A Yes. Q What grade were you in when your father first raped you? A Grade II. Sir. you said your first rape by your father in 1992. Sir. Sir. Q And what clothes were you wearing at that time when you were at that position. a position similar to four-legged animal. I can remember. do you remember the specific time when he first raped you? A I could no longer recall the date.A He positioned behind me and he raped me. Sir. Sir. were you already in school then? A Yes. and she stated that her father is at her rear portion). Sir. Q In that position while he was raping you. BBB testified thus: AYO Q Now. Sir. Q How about your father. I was wearing shorts.

Sir. Q And who were the persons in the house. correct? A He kepts (sic) on telling me that I should do that position. what did he do? A My father inserted his penis in my vagina. do you remember when he raped you. . Q Where were your companions in the home? A By that time. Sir.m.Q And after removing your shorts and panty. Q How about the second time. Q You could only remember the month and the year? A Yes. Sir. Sir. the second time? A I could not. Q You were only told in mild manner. my ate is in school. Sir. Sir. and the rest of my siblings are playing outside. I could not remember the date. sometime in 1992. he kepts (sic) on prodding me. Q What was your age then at the time you were allegedly raped? A I was eight years old. Sir. will you tell us what time is that alleged incident committed to you? A About 2:00 p. although I don't like it. Q You were never forced to have that position of "baka-bakahan"? A I was forced to do that. BBB stated that: CABRERA Q You said you were allegedly raped by your own father. Q Do you remember the date again. Sir. the first time that he raped you? A I could no longer remember the exact date. Sir. Q That was the first time you said he raped you? A Yes.. Sir. Sir. at around 2:00 o'clock in the afternoon? A The two of us only. my mother is working in the farm.43 On cross-examination. but I remember only the month and the year.

Q Why. Q And that yard was the playing ground of the children while your father was telling you that position of "baka-bakahan"? A They were playing in our yard. but they are playing near the house of our neighbor. Q Will you tell us what was the nature of your father's work at that time you were allegedly raped? A He is jobless. Sir.Q At that time your father was telling you on a very low voice. Sir. Q Who is the one providing for your subsistence? A My mother. Sir. Sir. because you were near to the children who are playing? A They were playing.. Sir. Q Who were those children playing outside the house? A My three (3) siblings are playing outside the house. Q Your house has a window fronting the yard. Sir. what is the elevation of your house from the ground floor? A The flooring of our house is quite elevated.m. Sir. Sir. correct? A Yes. Q And those children could hear what your father is saying? A They could not have heard what my father said. Q How far is the house of your neighbor to your house? A (Witness demonstrating a distance of one two-arms length). Sir. because they were playing. Q What time did you eat your lunch? A I took my lunch at 11:00 o'clock a. Q From where does your mother get your subsistence? . Q Will you describe to us your house. what kind of game they are playing? A They were playing hide and seek. (Witness is demonstrating a height of about one [1] foot).

Sir. Sir. will you tell us what happened to your vagina after the alleged rape? A My vagina became painful. Sir. what I could feel was the pain. after the rape? A There was none. Sir. Q Was there any occasion on the part of your mother and you that you were alone without the presence of your father. if your story is correct. did you wear your panty? A Yes. or after the rape? A Before I was raped. Sir. Sir. he threatened me again after he committed the rape. he did not threaten you anymore? A Yes. he is jobless. Q After the alleged intercourse. Q Was there blood that oozed in your vagina? A I do not know if there was blood. Sir. Sir. Q You mean your father was always in your house? A There are times that he stays outside the house. Sir. Q After you were allegedly raped. Q If your story is correct that you were allegedly raped. because I was afraid of my father. Q Since you were still a child. why did you not tell your mother that you were allegedly raped at 2:00 o'clock in the afternoon? A I did not tell my mother because he threatened me. he hangs around.A She is doing some laundry works and works in the farm. but then I could not tell my mother. what did your father tell you? A He told me that if you will tell anybody. I am going to kill all of you. Q Would you tell us the exact words. did you have any occasion in the evening to talk to your mother immediately after this alleged rape? A There are. Sir. Q After the rape. Q And you were silent after the rape. Sir. what time did your mother arrive in your home? A My mother arrived at about 4:00 o'clock in the afternoon. . Q Were you threatened before. during. Sir.

because of your mischievous acts? A We do not considered that a discipline. is that correct? A Yes. Sir.Q But there was an occasion that you were together with your mother and you could have told her what happened to you. he will not do anything to you without any reason? A Yes. but the first rape is not important to you? . Q When was that? A Right after that evening. Sir. Q What is important to you is the fifteen (15) times. is it not a fact that as a loving father he tried to discipline you. I did not do anything wrong. although we feel we did not do anything wrong. Sir. Sir. he keeps on punishing us. Q Was there any occasion that actually happened after that threat when you were harmed by your father? A Yes. Sir. Q You are a young child then. but I could not because of the threat of my father. Sir. because every time he has no money. Q But you can recall the fifteen (15) times? A Yes. but then he does that too when my mother is not around. Sir. Q Where was your mother when your father is trying to harm you? A She is at work. Q Do you tell that to your mother that your father punished you without any reason? A Yes. because he is not tempered. because he wanted to gamble. the first you were abused by your father in the year 1992? A I could no longer remember the date. Q Your father is not insane. Sir. he just punished us. he punishes us every time we did something wrong. there were occasions and opportunities that I could tell my mother. he becomes ill tempered. Q You mean he tried to harm you when your mother is out? A When my mother is around. Q Will you tell us the date. because he is ill tempered. Sir. Sir.

the scant or full realization of the solemnity of an oath. or the furtive glance. Q What he used is finger only? A Yes. Sir. Sir."45 We find no cogent reason not to apply here the oft-repeated rule that the matter of assigning values to the declaration of witnesses on the stand is a matter best left to the discretion of the trial court. the heat. the yawn.44 (Underscoring supplied) The trial court observed that AAA's and BBB's testimonies bear the hallmarks of truth. Sir. Q You said you were last raped on February 16. the sigh. Sir. is that correct? A No. The trial court has the advantage of observing the witnesses through the different indicators of truthfulness or falsehood. Sir. 1998? A He used his finger. convincing and highly-credible. the blush of conscious shame. such as the angry flush of an insisted assertion or the sudden pallor of a discovered lie or the tremulous mutter of a reluctant answer or the forthright tone of a ready reply.46 This doctrine assumes greater significance when the determination of the trial court on the credibility of a witness has been affirmed by the appellate court. Their testimonies are "spontaneous. undergo medical examination. then subject herself to the stigma and .47 The Court has consistently ruled that no young girl would concoct a sordid tale of defloration at the hands of her own father. the hesitation. Q Could it be possible that there was inside your vagina and your father is trying to remove it? A There is none. the candor or lack of it. Q Was there any nail in the finger? A Yes. but we told her that we could not manage to do it. the carriage and mien. 1998. 1998. Sir. Q And how did you feel when your father used his finger? A It is painful. Sir. Q How were you raped on December 6. December 16. Sir. did you tell your mother about this? A Yes. the calmness. Q And what did your mother say? A My mother told us that we report the matter. Sir. February 16 was when we reported to the police. Q This last incident. the sincere or the flippant or sneering tone.A Yes.

Baby Jane's testimony on the first rape charge was explicit. and only one qualified rape. Rule 120 of the 2000 Rules of Criminal Procedure. Verily. both blundered in convicting appellant of multiple rape of AAA and BBB. the possibility that it could be much less than 27 cannot be discounted. detailing the participation of each appellant in the offense and clearly illustrating all the elements of the offense of rape. alibi must be buttressed by strong evidence of non-culpability. Verily.49 Certainly. 2650. However.52Appellant dismally failed to discharge this onus. The RTC and the CA convicted appellant of multiple rapes under two separate informations. the number could be more. under Criminal Case No. Denial and alibi. the elements of rape for each charge.embarrassment of a public trial. a rape victim or any other member of her family would not dare to publicly expose the dishonor of the family. The legal basis for conviction for as many offenses as are charged and proved is Section 3. each of the eight other rape charges should be proven beyond reasonable doubt. As this Court has reiterated often enough.54 In People v.51 The positive. Matugas. consistent and straightforward testimonies of the victims and the other witnesses for the People sufficiently established appellant's culpability. accused must prove not only that he was at some other place at the time of the commission of the crime. both the trial and appellate courts erroneously sentenced him to a single death penalty for each information. Criminal Cases Nos. not multiple. being weak defenses. We find that appellant is guilty of two qualified rapes. if such accusation is against a fellow member of the family. 1998. In order to merit credibility. however. 2638. we cannot ascertain the exact number of times she was actually raped. in fact.53 It is axiomatic that each and every charge of rape is a separate and distinct crime. respectively. denial and alibi cannot prevail over positive identification of the accused by the prosecution witnesses. more specifically. but also that it was physically impossible for him to be at the locus criminis or its immediate vicinity. cannot overcome the positive testimonies of the offended parties and their witnesses. . for the said defense to prosper. each of the alleged incidents of rape charged should be proven beyond reasonable doubt. While we do not doubt that she was raped on other dates.48 A rape victim's testimony against her parent is entitled to great weight since Filipino children have a natural reverence and respect for their elders. unless the crime was. and it is unthinkable for a daughter to brazenly concoct a story of rape if such were not true. The prosecution is required to establish. The trial court and the CA.57 the Court held that: Each and every charge of rape is a separate and distinct crime.50 We sustain the trial court and the CA's rejection of appellant's defense founded on denial and alibi. committed. It must be remembered that each and every charge of rape is a separate and distinct crime so that each of the 27 other alleged incidents of rape charged should be proven beyond reasonable doubt. by the necessary quantum of proof. If. instead of multiple rapes under Criminal Case No. hence. De la Torre.55 the Court aptly ruled: This Court cannot thus sustain the conviction of accused-appellant for 29 counts of rape because only two incidents were sufficiently proven by the prosecution.56 In People v. if her motive were other than a fervent desire to seek justice. These values are so deeply ingrained in Filipino families. as complainant claimed. 2638 and 2650. from January 1990 to December 1998 and from January 1992 up to December 6.

58 In the case under review. threat or intimidation. However. 1996. only the rape alleged to have been committed on September 1992 was proven beyond reasonable doubt and the appellants may be penalized only for this offense. that day was of significance to her since she graduated from primary school on that day. She further disclosed that appellant repeatedly abused her. 2638. AAA was categorical that she was first raped by appellant sometime in 1990. – Rape is committed – 1) By a man who shall have carnal knowledge of a woman under any of the following circumstances: a) Through force. what is extant from the records is that appellant succeeded in raping her in January 1992. appellant should have been convicted. When asked by the court to clarify what she meant. as amended by Republic Act (R. the evidence bear out that what were proved by the People beyond reasonable doubt in Criminal Case No. According to her.59 Applying De la Torre. even though none of the circumstances mentioned above be present. when and how committed. c) By means of fraudulent machination or grave abuse of authority. 8353. 1998. in Criminal Case No. Thus.61 What appellant did was rape by sexual assault. failed to give an account of the alleged rape subsequent to January 1992 when she testified in the court below. 2650. 1998.) No. BBB. Rape. Her account of the first rape was vivid. With respect to private complainant BBB in Criminal Case No. Likewise borne by the records is the insertion of appellant's finger into BBB's vagina on December 6.60 As with AAA. Her testimony was too general as it failed to focus on material details as to how each of the subsequent acts was committed. only of the qualified rape of AAA sometime in 1990 and then again on March 25. like AAA. In fine. 1998 is too general and unconvincing. The said law provides: Art. AAA failed to supply the details. We hold that BBB's account of the rapes subsequent to January 1992 but before December 6. 2650 were the rapes committed by appellant on AAA sometime in 1990 and then again on March 25. when asked by the court to clarify her claim that the sexual abuses were repeated. Her testimony was too general as it failed to focus on material details as to how each of the subsequent acts was committed. Even her testimony on cross-examination did not add anything to support her accusations of subsequent rape. We hold that AAA's assertion that the subsequent rapes occurred in exactly the same manner as in previous incidents is clearly inadequate and grossly insufficient to establish to a degree of moral certainty the guilt of appellant insofar as the other rape incidents are concerned.However her simple assertion that the subsequent rapes occurred in exactly the same manner as in previous incidents is clearly inadequate and grossly insufficient to establish to a degree of moral certainty the guilt of the appellants insofar as the eight rape charges are concerned. and d) When the offended party is under twelve (12) years of age or is demented. BBB testified that appellant raped her for the last time on December 6. BBB disclosed that appellant inserted his finger into her vagina. b) When the offended party is deprived of reason or otherwise unconscious. 266-A. punishable under Article 266-A.A. candid and straightforward. paragraph 2 of the Revised Penal Code. 1996. But she was able to recount the last incident of rape on March 25. 1996. .

however.2) By any person who. 1998. The People. 2000. At that time. Sections 8 and 9 of the 2000 Rules of Criminal Procedure state: Sec. He is also guilty of raping BBB in January 1992.A. That is fatal. When and how rape is committed. Cause of the accusation. under any of the circumstances mentioned in paragraph 1 hereof. Designation of the offense. 9. Otherwise stated. although proven. the same may be applied retroactively because it is a cardinal rule that rules of criminal procedure are given retroactive application insofar as they benefit the accused.62 (Underscoring supplied) Rape by sexual assault was introduced into our penal system via the amendatory Anti-Rape Law of 1997 (R. If there is no designation of the offense. into the genital or anal orifice of another person. We go now to the penalty and the award of damages. 2638. 7659. Although the rule took effect on December 1.64 In sum. aver the acts or omissions constituting the offense.A. the information or complaint must state the designation of the offense given by the statute and specify its qualifying and generic aggravating circumstances. No. appellant should have been convicted only of the qualified rape of BBB in January 1992. With these amendments. rape was reclassified as a crime against person and not merely a crime against chastity. and specify its qualifying and aggravating circumstances. failed in this regard. No. The said law provides: Art. as amended by R. Under the new rules. 8. 1998. Sec. – The acts or omissions complained of as constituting the offense and the qualifying and aggravating circumstances must be stated in ordinary and concise language and not necessarily in the language used in the statute but in terms sufficient to enable a person of common understanding to know what offense is being charged as well as its qualifying and aggravating circumstances for the court to pronounce judgment. shall commit an act of sexual assault by inserting his penis into another person's mouth or anal orifice. which took effect on October 22. 1996. The rape by sexual assault committed on December 6. xxxx . or any instrument or object. he should have been prosecuted and tried for rape by sexual assault and not under the traditional definition of rape. 335.63 Considering that the law was already in force at the time of the insertion of appellant's finger into BBB's vagina on December 6. in Criminal Case No. should not have been considered by the trial and appellate courts for lack of a proper allegation in the information. reference shall be made to the section or subsection of the statute punishing it. 8353). 1997. the accused will not be convicted for the offense proved during the trial if it was not properly alleged in the information. – The complaint or information shall state the designation of the offense given by the statute. the law penalizing rape was still Article 335 of the Revised Penal Code. Appellant is liable for the rape of AAA sometime in 1990 and on March 25.

shall not be eligible for parole under Act No. another P75. without eligibility for parole. Persons convicted of offenses punished with reclusion perpetua. the penalty to be meted out to appellant shall be reclusion perpetua.00 to P75. Notwithstanding the reduction of the penalty imposed on appellant.00 in moral damages and P25. (2) In Criminal Case No. Civil indemnity of P75. appellant is found GUILTY of one count of qualified rape and is sentenced toreclusion perpetua without eligibility for parole. as amended. when the law violated does not make use of the nomenclature of the penalties of the Revised Penal Code. for each count.000.00 without need of pleading or proof of basis. ascendant. . "An Act Prohibiting the Imposition of Death Penalty in the Philippines. He is further ordered to indemnify the victim in the amount of P75. the same must be modified. which provides: Section 3. or whose sentences will be reduced to reclusion perpetua. When the victim is under eighteen (18) years of age and the offender is a parent. when the law violated makes use of the nomenclature of the penalties of the Revised Penal Code. In view of the passage of R. the appealed judgment is AFFIRMED WITH MODIFICATION.000. step-parent.65 The award of additionalP25.00 is warranted if the crime is qualified by circumstances which warrant the imposition of the death penalty.000. as follows: (1) In Criminal Case No. The CA correctly increased the amount of indemnity from P50.00.000.The death penalty shall also be imposed if the crime of rape is committed with any of the following attendant circumstances: 1. the CA erred in affirming the RTC award of moral damages of P50.000. 2638.67 WHEREFORE. he is not eligible for parole following Section 3 of the said law. otherwise known as the Indeterminate Sentence Law.000.00 each by way of exemplary damages deserves affirmance due to the presence of the qualifying circumstances of minority and relationship. He is likewise ordered to pay the complainant P75. 2650.00 as civil indemnity.000." the death penalty should be downgraded. P75. relative by consanguinity or affinity within the third civil degree. guardian. appellant Jerry Nazareno is hereby found GUILTY of two counts of qualified rape and is sentenced to reclusion perpetua for each felony. SO ORDERED.00 each for AAA and BBB.000.00 which should be increased toP75.000.00 as moral damages and P25.66 However. 9346 entitled. or the common-law spouse of the parent of the victim.00 in exemplary damages. 4103. the following shall be imposed: (a) the penalty of reclusion perpetua.000. In lieu of the death penalty.000.A. With regard to the award of damages. No. Pursuant to Section 2 of the said law. or (b) the penalty of life imprisonment.00 as exemplary damages. by reason of this Act.000. Said section reads: Section 2.

No.720. P 18.30 (Sec.000.000. Carpio-Morales.00 Add: Suggested compromise penalty…………. Azcuna.3 finding petitioner BPI liable for deficiency DST on its afore-mentioned sales of foreign bills of exchange to the Central Bank.: This Petition for Review on Certiorari. Respondent. Ynares-Santiago. Corona.Puno. it sold United States (US) $500.000.000.00 Petitioner BPI received the Assessment. together with the attached Assessment Notice. JJ. J. Nachura. Quisumbing.00 as deficiency documentary stamp tax (DST) for the taxable year 1985. On two separate occasions. 51271. Chico-Nazario. inclusive of the compromise penalty.00 300. dated 11 August 1999. C. Tinga.00 Tax Due Thereon: P18.. Carpio.00 to the Central Bank of the Philippines (Central Bank). .480.00. Velasco. Austria-Martinez. There is hardly any controversy as to the factual antecedents of this Petition. assails the Decision of the Court of Appeals in CA-G.1 which reversed and set aside the Decision of the Court of Tax Appeals (CTA). 182 NIRC). under Rule 45 of the 1997 Rules of Civil Procedure..2 and which reinstated Assessment No.020. particularly on 06 June 1985 and 14 June 1985. Petitioner. COMMISSIONER OF INTERNAL REVENUE. DECISION CHICO-NAZARIO.. Republic of the Philippines SUPREME COURT SECOND DIVISION G. Leonardo-de Castro.4 on 20 October 1989. Jr. P200. the Bureau of Internal Revenue (BIR) issued Assessment No.00 P 28. SP No.R.…… TOTAL AMOUNT DUE AND COLLECTIBLE…. vs. concur. computed as follows – 1985 Deficiency Documentary Stamp Tax Foreign Bills of Exchange………………………….J..R. On 10 October 1989.480. dated 02 February 1999. FAS-5-85-89-002054 requiring petitioner Bank of the Philippine Islands (BPI) to pay the amount of P28. 139736 October 17. for the total sales amount of US$1. 2005 BANK OF THE PHILIPPINE ISLANDS. 27.020.000. Brion. Petitioner BPI is a commercial banking corporation organized and existing under the laws of the Philippines. FAS-5-85-89002054.00 x P0.

Petitioner BPI. no documentary stamps were affixed because the buyer. In the two transactions subject of your assessment.00 on June 6. according to sec. we have the honor to protest your assessment against it for deficiency documentary stamp tax for the year 1985 in the amount of P28.7 . $500. on 15 October 1992. the other party thereto who is not exempt shall be the one directly liable for the tax. It served the Warrant on petitioner BPI only on 23 October 1992.D. 1986.00. the liability for the documentary stamp tax could not be shifted to the seller. 2.S. the documentary stamp tax on telegraphic transfers or sales of foreign exchange is paid by the buyer.D. The said protest letter is reproduced in full below – November 16. protested the Assessment in a letter dated 16 November 1989.00 on June 14. 49 of P. the cost of documentary stamp tax is added to the total price or charge to the buyer and the seller affixes the corresponding documentary stamp on the document. we request that the assessment be revoked and cancelled. Hence. was exempt from such tax. And while it is true that under P. JR. 1985. 1989 The Commissioner of Internal Revenue Quezon City Attention of: Mr. and filed with the BIR on 17 November 1989." this proviso (and the other amendments of P. arising from its sale to the Central Bank of U. Commissioner for Collection Sir: On behalf of our client. Very truly yours. Similarly. it charges BPI for the cost of the documentary stamp on the transaction.5 Petitioner BPI did not receive any immediate reply to its protest letter. when BPI sells to any party. 1994) took effect only on January 1. However. through its counsel.00 (excluding the compromise penalty of P300.020. Thus. in the amount of P27. a proviso was added to sec. 1994. 222 (now sec.000. Pedro C. the BIR issued a Warrant of Distraint and/or Levy6 against petitioner BPI for the assessed deficiency DST for taxable year 1985. $500. 1985 and another U. Central Bank of the Philippines. PADILLA LAW OFFICE By: (signed) SABINO PADILLA.S. Under established market practice. Bank of the Philippine Islands (BPI). Aguillon Asst. 1. 1994.D.720.00). In view of the foregoing. when the Central Bank sells foreign exchange to BPI. 186) of the Tax Code "that whenever one party to a taxable document enjoys exemption from the tax herein imposed.000.

filed an Answer on 08 December 1997. 1984 – "x x x Thus. this Office finds the above argument to be legally untenable. where one party to the contract is exempt from said tax. thus – In reply. in which it identified two primary issues in the controversy between petitioner BPI and respondent BIR Commissioner: (1) whether or not the right of respondent BIR Commissioner to collect from petitioner BPI the alleged deficiency . 245 (now Sec.J. who is not exempt.8 Upon receipt of the above-cited letter from the BIR. then it is the one liable therefore." 2. The same should. 222 (now Sec. the CTA rendered a Decision on 02 February 1999. or transferring the instrument. which denied the latter’s protest. and remained silent as to the expiration of the prescriptive period for collection of the assessed deficiency DST. signing." Premised on all the foregoing considerations. (Art. After due trial. dated 13 August 1997. Accordingly. represented by the Office of the Solicitor General. is not exempt from said tax.Then again. 144-84 dated September 3. signed by then BIR Commissioner Liwayway VinzonsChato. This interpretation was further strengthened by the following BIR Rulings which in substance state: 1. It is admitted that while industry practice or market convention has the force of law between the members of a particular industry. therefore. since A. In her Answer and subsequent Memorandum.L. it is not binding with the BIR since it is not a party thereto.9 to which respondent BIR Commissioner. Construction Corporation. as amended. petitioner BPI proceeded to file a Petition for Review with the CTA on 10 October 1997.) Moreover. BIR Ruling No. petitioner BPI did not hear from the BIR until 11 September 1997. let it be stated that even before the amendment of Sec. in relation to Sec. document or paper. FAS-5-85-89002054. It alleged that respondent BIR Commissioner only had three years to collect on Assessment No. BIR Unnumbered Ruling dated May 30.10 Petitioner BPI raised in its Petition for Review before the CTA. 173) of the Tax Code. dated 16 November 1989. the other party who is not exempt should be liable. not be allowed to prejudice the Bureau of its lawful task of collecting revenues necessary to defray the expenses of the government. both of the Tax Code of 1977. respondent BIR Commissioner merely reiterated her position. 1306 of the New Civil Code. please be informed that after a thorough and careful study of the facts of the case as well as the law and jurisprudence pertinent thereto. 196). as amended. your request for reconsideration is hereby DENIED. 1977 – "x x x Documentary stamp taxes are payable by either person. shall be liable therefore." and addressing the points raised by petitioner BPI in its protest letter. 173). in addition to the arguments presented in its protest letter. the defense of prescription of the right of respondent BIR Commissioner to enforce collection of the assessed amount. dated 13 August 1997. the other party to the contract and the one assuming the payment of the expenses incidental to the registration in the vendee’s name of the property sold. the other party. issuing. accepting. pursuant to Sec. the same was already interpreted to hold that the other party who is not exempt from the payment of documentary stamp tax liable from the tax. when its counsel received a letter. 11 in relation to Art. dated 16 November 1989. but she waited for seven years and nine months to deny the protest. as stated in her letter to petitioner BPI. 222 (now Sec. denying its "request for reconsideration. It is now settled that where one party to the instrument is exempt from said taxes.

No. 1995. 76281. Commissioner of Internal Revenue was affirmed by the Court of Appeals in its decision dated March 31. 1985.. 35930. We rule that prescription has not set in against the government. G. 1984 to March 9.000. As such. 35-85 of the Fiscal Incentive Review Board dated March 3. In the case at bar. v. 1985 of the Fiscal Incentive Review Board. Wyeth Suaco Laboratories. This Court further expounded that said tax exemption of the Central Bank was modified beginning January 1. In resolving the issue of prescription.DST for taxable year 1985 had prescribed. Inc. This aforecited case of Consolidated Bank vs. . 202 SCRA 125. there can be no conclusion other than that said protest stopped the running of the prescriptive period of the Commissioner to collect. as the latter who is the purchaser of the subject currencies is the one liable thereof. petitioner cannot be held liable for DST on its 1985 sales of foreign currencies to the Central Bank. However. as buyer of the foreign currency. The CTA answered the first issue in the negative and held that the statute of limitations for respondent BIR Commissioner to collect on the Assessment had not yet prescribed. shall suspend the prescriptive period to collect. and (2) whether or not the sales of US$1. Said decision was in turn affirmed by the Supreme Court in . it can be gleaned that the Central Bank. including the payment of documentary stamp tax (DST) pursuant to Resolution No.D. 1986 when Presidential Decree (P. the Supreme Court laid to rest the first issue. neither the petitioner nor the Central Bank is liable for the payment of the documentary stamp tax for the former’s 1985 sales of foreign currencies to the latter. September 30. Applying the above decision to the case at bar. Taking into consideration this provision of law and the aforementioned ruling of the Supreme Court in Wyeth Suaco which specifically and categorically states that a protest could be considered as a request for reinvestigation. the CTA reasoned that – In the case of Commissioner of Internal Revenue vs. . Section 320 (now 223) of the Tax Code.. 1987 enjoyed tax exemption privilege.00 on 06 June 1985 and 14 June 1985 by petitioner BPI to the Central Bank were subject to DST.. the liability for DST on sales of foreign currency to the Central Bank is shifted to the seller. since the Central Bank is exempt from all taxes during 1985 by virtue of Resolution No. the Central Bank. The underscored portion above does not mean that the Commissioner will cancel the subject assessment but should be construed as when the same was entertained by the Commissioner by not issuing any warrant of distraint or levy on the properties of the taxpayer or any action prejudicial to the latter unless and until the request for reinvestigation is finally given due course.R. is exempt from paying the documentary stamp tax for the period above-mentioned. No.) 1994 took effect. 1991. Under this decree. during the period June 11. CA-GR Sp. .000.12 the CTA reached the conclusion that the sales of foreign currency by petitioner BPI to the Central Bank in taxable year 1985 were not subject to DST – From the abovementioned decision of this Court. 35-85 dated May 3.Consolidated Bank & Trust Co. 1989. Referring to its own decision in an earlier case.11 The CTA had likewise resolved the second issue in the negative. The Commissioner of Internal Revenue. It categorically ruled that a "protest" is to be treated as request for reinvestigation or reconsideration and a mere request for reexamination or reinvestigation tolls the prescriptive period of the Commissioner to collect on an assessment. there being no dispute that petitioner filed its protest on the subject assessment on November 17. clearly states that a request for reinvestigation which is granted by the Commissioner.

the Court of Appeals reversed the CTA on the second issue and basically adopted the position of the respondent BIR Commissioner that the sales of foreign currency by petitioner BPI to the Central Bank in taxable year 1985 were subject to DST.000. inclusive of the compromise penalty. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided. to reiterate: (1) whether or not the right of respondent BIR Commissioner to collect from petitioner BPI the alleged deficiency DST for taxable year 1985 had prescribed. In the same Decision.000. Herein respondent BIR Commissioner appealed the Decision of the CTA to the Court of Appeals.020.15 which provides that – SEC.13 In sum. and herein determines the statute of limitations on collection of the deficiency DST in Assessment No. I The efforts of respondent Commissioner to collect on Assessment No.16 The three-year period of limitations on the assessment and collection of national internal revenue taxes set by Section 203 of the Tax Code of 1977. this Court disagrees in the Decisions of the CTA and the Court of Appeals. as amended. FAS-5-85-89-002054 had already prescribed. the prescriptive period for collection on the Assessment had not yet lapsed. the three-year period shall be counted from the day the return was filed.00 as deficiency DST for taxable year 1985. ordered the reinstatement of Assessment No. a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. it still ordered the cancellation of the said Assessment because the sales of foreign currency by petitioner BPI to the Central Bank in taxable year 1985 were tax-exempt.its resolution denying the petition filed by Consolidated Bank dated November 20. FAS-5-85-89-002054 had not yet prescribed. however. FAS-5-85-89002054 was suspended when herein petitioner BPI filed a protest on 17 November 1989 and. In its Decision dated 11 August 1999. thus. therefore. – Except as provided in the succeeding section. nonetheless. adjusted. 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. The Court of Appeals. Anent the question of prescription. and (2) whether or not the sales of US$1.00 on 06 June 1985 and 14 June 1985 by petitioner BPI to the Central Bank were subject to DST. 1995 with the Supreme Court under Entry of Judgment dated March 1. FAS-5-85-89-002054 were already barred by prescription. as amended. can be affected. 203. in accordance with the following provisions of the same Code – .14 the Court of Appeals sustained the finding of the CTA on the first issue. the CTA decided that the statute of limitations for respondent BIR Commissioner to collect on Assessment No. internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return. FAS-5-85-89-002054 which required petitioner BPI to pay the amount of P28. For the purposes of this section. 1996. that the running of the prescriptive period for collection on Assessment No. seeking resolution of the same two legal issues raised and discussed in the courts below. Comes now petitioner BPI before this Court in this Petition for Review on Certiorari. Period of limitation upon assessment and collection. or suspended. That in a case where a return is filed beyond the period prescribed by law.

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 agreements made before the expiration of the period previously agreed upon. (c) Any internal revenue tax which has been assessed within the period of limitation aboveprescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.SEC. or omission. or a member of his household with sufficient discretion. if the taxpayer informs the Commissioner of any change in address. counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. and when the taxpayer is out of the Philippines. and/or court proceeding. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. 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 days thereafter. (e) Provided. the running of the statute of limitations will not be suspended. When the BIR validly issues an assessment. fraud. or a proceeding in court for the collection of such tax may be begun without assessment. (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 three-year period.20 . then the BIR has another three years19 after the assessment within which to collect the national internal revenue tax due thereon by distraint. 224. the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity. when the warrant of distraint and levy is duly served upon the taxpayer. or omission: Provided. the BIR has three years. at any time within ten years after the discovery of the falsity. – The running of the statute of limitation provided in Section[s] 203 and 223 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection. the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. – Exceptions as to period of limitation of assessment and collection of taxes.17 SEC. levy. his authorized representative. Suspension of running of statute. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all. whichever comes later. within either the three-year or ten-year period. 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. 223. whichever is appropriate. the tax may be assessed.That. – (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return. however. to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment.18 As enunciated in these statutory provisions. and no property could be located. That nothing in the immediately preceding section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax returns filed in accordance with the provisions of any tax amnesty law or decree. fraud. in respect of any deficiency. mailed or sent by the BIR to the taxpayer. (b) If before the expiration of the time prescribed in the preceding section for the assessment of the tax. That in a fraud assessment which has become final and executory.

Still. and the resolute intention of the BIR to collect the tax assessed. FAS-5-85-89-002054 was its issuance and service of a Warrant of Distraint and/or Levy on petitioner BPI. only on the prescription of the period to collect the deficiency DST following its Assessment. The earliest attempt of the BIR to collect on Assessment No. A. filed on 08 December 1997. previous to the expiration of the period for collection on 19 October 1992. denying the protest of petitioner BPI and requesting payment of the deficiency DST? Even later and more unequivocally barred by prescription on collection was the demand made by respondent BIR Commissioner for payment of the deficiency DST in her Answer to the Petition for Review of petitioner BPI before the CTA. Under Section 223(c) of the Tax Code of 1977. because it may only be upon the service of the Warrant that the taxpayer is informed of the denial by the BIR of any pending protest of the said taxpayer. as amended.22 It is only logical to require that the Warrant of Distraint and/or Levy be. concludes that there is no valid ground for suspending the running of the prescriptive period for collection of the deficiency DST assessed against petitioner BPI. thus. for a total of 1. it can be granted that the latest date the BIR could have released. takes the opposing view. The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and. as amended. 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.In the present Petition. it is not essential that the Warrant of Distraint and/or Levy be fully executed so that it can suspend the running of the statute of limitations on the collection of the tax. and. the same was served on petitioner BPI only on 23 October 1992. served upon the taxpayer in order to suspend the running of the prescriptive period for collection of an assessed tax. then the BIR only had until 19 October 1992 within which to collect the assessed deficiency DST. . In their Decisions. mailed or sent the Assessment and Assessment Notice to petitioner BPI was on the same date they were received by the latter.21 from 20 October 1989. dated 13 August 1997 and received by the counsel of the petitioner BPI only on 11 September 1997. then what more the letter of respondent BIR Commissioner. This Court. both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protest letter suspended the running of the prescriptive period for collecting the assessed DST. Counting the three-year prescriptive period. FAS-5-85-89-002054 and its corresponding Assessment Notice were both dated 10 October 1989 and were received by petitioner BPI on 20 October 1989. on 20 October 1989.23 II 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. which had expired on 19 October 1992. however. While Assessment No. shall be construed liberally in his favor. at the very least. mailed or sent by the BIR. based on the succeeding discussion. Although the Warrant was issued on 15 October 1992. Existing jurisprudence establishes that distraint and levy proceedings are validly begun or commenced by the issuance of the Warrantand service thereof on the taxpayer.095 days. It is enough that the proceedings have validly began or commenced and that their execution has not been suspended by reason of the voluntary desistance of the respondent BIR Commissioner. there was no showing as to when the said Assessment and Assessment Notice were released. there is no controversy on the timeliness of the issuance of the Assessment.

law-abiding citizens.. respectively. 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..24 As aptly explained in Republic of the Philippines v. (b) If before the expiration of the time prescribed in the preceding section for the assessment of the tax. In order to provide even better protection to the taxpayer against unreasonable investigation. The statute of limitations on assessment and collection of national internal revenue taxes may be waived. to wit – SEC.. – Exceptions as to period of limitation of assessment and collection of taxes. the Tax Code of 1977. could be waived by agreement. subject to certain conditions. did not execute any such waiver in the case at bar. as amended. these provisions on the statute of limitations on assessment and collection of taxes shall be construed and applied liberally in favor of the taxpayer and strictly against the Government. to the Government because tax officers would be obliged to act promptly in the making of assessment.. the prescriptive periods for assessment and collection of national internal revenue taxes.Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer. 223. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. Without such a 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. To give effect to the legislative intent. as amended. as amended. According to paragraphs (b) and (d) of Section 223 of the Tax Code of 1977. 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. (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 three-year period. and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers. . Ablaza25 – The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens. under paragraphs (b) and (d) of Section 223 of the Tax Code of 1977. B. but to take advantage of every opportunity to molest peaceful. The period so . The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law. Petitioner BPI. not to determine the latter’s real liability. identifies specifically in Sections 223 and 22426 thereof the circumstances when the prescriptive periods for assessing and collecting taxes could be suspended or interrupted. it principally intends to afford protection to the taxpayer against unreasonable investigation. however. – . respectively.

expressly noted that. – The running of the statute of limitation provided in Section[s] 203 and 223 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection. The BIR had issued Revenue Memorandum Order (RMO) No. as required by the Tax Code and implementing rules.27 The agreements so described in the afore-quoted provisions are often referred to as waivers of the statute of limitations. an agreement between the taxpayer and the BIR to extend the period to a date certain.28 A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 223 of the Tax Code of 1977. FAS-5-85-89-002054. will not suspend the running thereof. RMO No. provided that it is executed prior to the expiration of the first period agreed upon. The Tax Code of 1977.29 In the Petition at bar. petitioner BPI executed no such waiver of the statute of limitations on the collection of the deficiency DST per Assessment No. The period agreed upon can still be extended by subsequent written agreement. 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 days thereafter. which reads – SEC. The waiver of the statute of limitations. which could have suspended the running of the statute of limitations on collection of the assessed deficiency DST under Section 224 of the Tax Code of 1977. when the taxpayer cannot be located in the . C. . (3) before the expiration of the ordinary prescriptive periods for assessment and collection. whether on assessment or collection. as amended. 224. as amended. 20-90 mandates that the procedure for execution of the waiver shall be strictly followed. 1993 pending reconsideration of its protest. must be: (1) in writing. without a valid waiver of the prescriptive periods for the assessment and collection of tax. "The taxpayer fails to execute a Waiver of the Statute of Limitations extending the period of collection of the said tax up to December 31. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally. as amended. should not be construed as a waiver of the right to invoke the defense of prescription but. dated 15 October 1992. as amended. . In fact. within which the latter could still assess or collect taxes due. Suspension of running of statute. under Section 224 thereof. granted by the respondent BIR Commissioner. (2) agreed to by both the Commissioner and the taxpayer. rather.agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon."30 Without a valid waiver. and (4) for a definite period beyond the ordinary prescriptive periods for assessment and collection. even in the absence of a waiver. the statute of limitations on collection by the BIR of the deficiency DST could not have been suspended under paragraph (d) of Section 223 of the Tax Code of 1977. and any revenue official who fails to comply therewith resulting in the prescription of the right to assess and collect shall be administratively dealt with. in respect of any deficiency. This Court had consistently ruled in a number of cases that a request for reconsideration or reinvestigation by the taxpayer. Ruling & Research Division of the BIR to her counterpart in the Collection Enforcement Division. also recognizes instances when the running of the statute of limitations on the assessment and collection of national internal revenue taxes could be suspended. The protest filed by petitioner BPI did not constitute a request for reinvestigation. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. 20-90 on 04 April 1990 to lay down an even more detailed procedure for the proper execution of such a waiver. an internal memorandum of the Chief of the Legislative.

Undoubtedly. – refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. upon the recommendation of the BIR Commissioner. The taxpayer may protest administratively an assessment by filing a written request for reconsideration or reinvestigation. It bears to emphasize that under Section 224 of the Tax Code of 1977. The protest letter of petitioner BPI. which will be limited to the evidence already at hand. wherein the running of the statute of limitations on assessment and collection of taxes is considered suspended "when the taxpayer requests for a reinvestigation which is granted by the Commissioner. which entails the reception and evaluation of additional evidence. dated 10 September 1992. Revenue Regulations (RR) No. dated 16 November 1989 and filed with the BIR the next day. A close review of the contents thereof would reveal. as follows – PROTEST TO ASSESSMENT SEC. whether or not petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in taxable year 1985. as amended. The same protest letter did not raise any question of fact. Protest. In its own letter to petitioner BPI. the BIR itself referred to the protest of petitioner . on 17 November 1989. 12-85 on 27 November 1985 providing the above-quoted distinctions between a request for reconsideration and a request for reinvestigation. It may involve both a question of fact or of law or both. . that it protested Assessment No. . his authorized representative. as amended. when the warrant of distraint and levy is duly served upon the taxpayer.31 Of particular importance to the present case is one of the circumstances enumerated in Section 224 of the Tax Code of 1977. issued on 27 November 1985 by the Secretary of Finance. neither did it offer to present any new evidence. or a member of his household with sufficient discretion. (b) Request for reinvestigation. 6. not a request for reconsideration. and no property could be located.address given by him in the return filed upon which a tax is being assessed or collected: Provided. this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax. .. however. and when the taxpayer is out of the Philippines. For the purpose of the protest herein – (a) Request for reconsideration. will take more time than a reconsideration of a tax assessment. governs the procedure for protesting an assessment and distinguishes between the two types of protest. a reinvestigation. – refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. the two types of protest can no longer be used interchangeably and their differences so lightly brushed aside. the running of the statute of limitations will not be suspended. 12-85. With the issuance of RR No. It may also involve a question of fact or law or both. the running of the prescriptive period for collection of taxes can only be suspended by a request for reinvestigation. FAS-585-89-002054 based on a question of law." This Court gives credence to the argument of petitioner BPI that there is a distinction between a request for reconsideration and a request for reinvestigation. while the latter can not.. if the taxpayer informs the Commissioner of any change in address.That. in particular. did not specifically request for either a reconsideration or reinvestigation.

Ablaza. . Section 224 of the Tax Code of 1977. and considers the protest of petitioner BPI as a request for reinvestigation. That the BIR Commissioner must first grant the request for reinvestigation as a requirement for suspension of the statute of limitations is even supported by existing jurisprudence. inCommissioner of Internal Revenue v.38 contested the assessment against them and asked for a reinvestigation. Considering the given facts. 1949. The second and third petitions were granted by the BIR and after each reinvestigation. also Republic vs.34 In Republic of the Philippines v. thereafter. after receiving the protest letters of taxpayer Querol. Acebedo. There were no impediments on the part of the Collector to file the collection case from April 1. 1949. this Court pronounced that – . . as amended. . the BIR filed a collection suit against taxpayer Lopez. Lopez. Lastly. The grant may be expressed in communications with the taxpayer or implied from the actions of the respondent BIR Commissioner or his authorized BIR representatives in response to the request for reinvestigation. for the sake of argument. There is no evidence that this request was considered or acted upon.39 the BIR granted taxpayer Oquias’s request for . In the case of Republic of the Philippines v.36 the BIR. this Court glosses over the distinction between a request for reconsideration and a request for reinvestigation.BPI as a request for reconsideration. the assessed amount was reduced. as amended. 1950 the then Collector of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment (Exh. A). Sison. on October 23. . which the latter did one day before. inRepublic of the Philippines v. in order to effect suspension. [T]he defendant.33 taxpayer Gancayco requested for a thorough reinvestigation of the assessment against him and placed at the disposal of the Collector of Internal Revenue all the evidences he had for such purpose. . Moreover. rather than a request for reinvestigation and. the BIR ordered the reinvestigation resulting in the issuance of an amended assessment. (Collector vs. the filing thereof could not have suspended at once the running of the statute of limitations. asked for a reinvestigation thereof on October 11. within which to submit his evidence. 1949. Republic of the Philippines v. the Collector ignored the request. Article 224 of the Tax Code of 1977. very plainly requires that the request for reinvestigation had been granted by the BIR Commissioner to suspend the running of the prescriptive periods for assessment and collection. to conduct the reinvestigation. In Querol v. the original assessment against taxpayer Querol was revised by permitting him to deduct reasonable depreciation. the Collector gave appellee until April 1. Consequently. Suyoc Consolidated.The act of requesting a reinvestigation alone does not suspend the period. Even if. as a result of which.37 taxpayer Lopez filed a total of four petitions for reconsideration and reinvestigation. after receiving the assessment notice of September 24. . Pampanga. the request for reinvestigation did not suspend the running of the period for filing an action for collection. consequently. 1949 (Exh. supra). The fourth petition was again denied and. Gancayco. D). on the suspension of the running of the statute of limitations should not apply. sent a tax examiner to San Fernando. The first petition was denied by the BIR. Collector of Internal Revenue.32 These considerations would lead this Court to deduce that the protest letter of petitioner BPI was in the nature of a request for reconsideration. . The burden of proof that the taxpayer’s request for reinvestigation had been actually granted shall be on respondent BIR Commissioner. When the taxpayers spouses Sison. In another case.In fact.35 this Court similarly found that – . and the records and documents were not at all examined. supra. but there was no follow-up of this warrant. Oquias. yet. The request should first be granted.

then it was understood that the grant of such request for reconsideration was being held off until compliance with the given condition. because the said prescriptive period was suspended. It is the position of respondent BIR Commissioner. did not attempt to communicate at all with the latter until 10 September 1992. III The suspension of the statute of limitations on collection of the assessed deficiency DST from petitioner BPI does not find support in jurisprudence. 1989 as deficiency documentary stamp tax inclusive of compromise penalty for the year 1985. this Court ruled in the same cases that the period between the request for reinvestigation and the revised assessment should be subtracted from the total prescriptive period for the assessment of the tax. only. affirmed by the CTA and the Court of Appeals. neither taxpayer Oquias nor his counsel appeared on the given date. in its letter to petitioner BPI. but these hardly fall within the same sort of acts in the previously discussed cases that satisfactorily demonstrated the grant of the taxpayer’s request for reinvestigation. mostly indorsements of the docket of the case from one BIR division to another. invoking the case of Commissioner of Internal Revenue v. it is requested that the enclosed waiver of the statute of limitations extending the period of collection of the said tax/es to December 31. the logical inference would be that the request was not granted and was not given due course at all. There were internal communications.reinvestigation and duly notified him of the date when such reinvestigation would be held. Going back to the administrative records of the present case.42 It was in this case in which . FAS-5-85-89-002054 was due to expire. that the waiver of the statute of limitations on collection was a condition precedent to its giving due course to the request for reconsideration of petitioner BPI. the period for collection should begin to run from the date of the reconsidered or modified assessment. dated 10 September 1992. In this connection. it would seem that the BIR. When petitioner BPI failed to comply with the condition precedent. was left in the dark as to the status of its protest in the absence of any word from the BIR. which eventually resulted in the issuance of an amended assessment. there was no showing that it was granted by respondent BIR Commissioner and that actual reinvestigation had been conducted. Besides. in the meantime. of the assessment against it. which was the execution of the waiver. the BIR unwittingly admitted that it had not yet acted on the protest of the former – This refers to your protest against and/or request for reconsideration of the assessment/s of this Office against you involving the amount of P28. In all these cases.00 under FAS-5-85-89-002054 dated October 23. not a reinvestigation. less than a month before the prescriptive period for collection on Assessment No. Petitioner BPI. that the three-year prescriptive period for collecting on Assessment No. 1993 be executed by you as a condition precedent of our giving due course to your protest…41 When the BIR stated in its letter.40 The rulings of the foregoing cases do not apply to the present Petition because: (1) the protest filed by petitioner BPI was a request for reconsideration. dated 10 September 1992. once the assessment had been reconsidered at the taxpayer’s instance. Wyeth Suaco Laboratories. and. after receiving a copy of the protest letter of petitioner BPI on 17 November 1989. Inc. FAS-5-85-89-002054 had not yet prescribed. On the basis of these facts.020. the request for reinvestigation of the assessment filed by the taxpayer was evidently granted and actual reinvestigation was conducted by the BIR. and (2) even granting that the protest of petitioner BPI was a request for reinvestigation.

It was the collection of the reduced assessment that was questioned before this Court for being enforced beyond the prescriptive period. which was denied again by the Collector on 06 May 1953. dated 28 November 1950. As had been previously discussed herein. which include a request for reinvestigation granted by the BIR Commissioner. and in specific instances enumerated in Section 224 of the same Code. the statute of limitations on assessment and collection of national internal revenue taxes may be suspended if the taxpayer executes a valid waiver thereof. When taxpayer Suyoc failed to pay the assessed tax within the extended period. Taxpayer Suyoc then appealed the denial to the Conference Staff. The only exception to the statute of limitations on collection of taxes. Outside of these statutory provisions.44 In resolving the issue on prescription. This Court finds that although there is no compelling reason to abandon its decision in the Wyeth Suaco case. Upon receipt of the demand letter. was recognized in the Suyoc case. taxpayer Suyoc asked for a reinvestigation and reconsideration of the assessment. on 11 February 1947 for deficiency income tax for the taxable year 1941. however. reserving its right to question the correctness of the assessment before actual payment. is requesting this Court to revisit the Wyeth Suaco case contending that it had unjustifiably expanded the grounds for suspending the prescriptive period for collection of national internal revenue taxes. but the Collector denied the request. there are cases however where a taxpayer may be prevented from setting up the defense . the said case cannot be applied to the particular facts of the Petition at bar. as amended. Because of such requests. this Court ratiocinated thus – It is obvious from the foregoing that petitioner refrained from collecting the tax by distraint or levy or by proceeding in court within the 5-year period from the filing of the second amended final return due to the several requests of respondent for extension to which petitioner yielded to give it every opportunity to prove its claim regarding the correctness of the assessment. While we may agree with the Court of Tax Appeals that a mere request for reexamination or reinvestigation may not have the effect of suspending the running of the period of limitation for in such case there is need of a written agreement to extend the period between the Collector and the taxpayer.this Court ruled that the prescriptive period provided by law to make a collection is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. Taxpayer Suyoc reiterated its request for reconsideration on 25 April 1952. on the other hand. but at the same time. Suyoc Consolidated Mining Co. After inducing petitioner to delay collection as he in fact did. as the record shows. lasted for several months. as provided in paragraphs (b) and (d) of Section 223 of the Tax Code of 1977. it is most unfair for respondent to now take advantage of such desistance to elude his deficiency income tax liability to the prejudice of the Government invoking the technical ground of prescription.43 In the said case. and the negotiations resulted in the reduction of the assessment on 26 July 1955. the Collector of Internal Revenue issued an assessment against taxpayer Suyoc Consolidated Mining Co. The Conference Staff heard the appeal from 02 September 1952 to 16 July 1955. the Collector sent it a demand letter. A. this Court also recognized one other exception to the statute of limitations on collection of taxes in the case of Collector of Internal Revenue v. Taxpayer Suyoc requested for at least a year within which to pay the amount assessed. several reinvestigations were made and a hearing was even held by the Conference Staff organized in the collection office to consider claims of such nature which. Petitioner BPI. other than those already provided in the Tax Code. The Collector granted taxpayer Suyoc an extension of only three months to pay the assessed tax.

protesting the assessments and requesting their cancellation or withdrawal on the ground that said assessments lacked factual or legal basis. for the law says to him in effect ‘this is your own act. it finds that Wyeth Suaco is not applicable to the Petition at bar because of the distinct facts involved herein. through its tax consultant. In the case of Wyeth Suaco. but maintaining the assessment for deficiency sales tax. B. And when such situation comes to pass there are authorities that hold. and therefore you are not damnified. it was reversed by this Court when the case was brought before it on appeal.’"46 In the Suyoc case. the BIR Commissioner advised taxpayer Wyeth Suaco to avail itself of the compromise settlement being offered under Letter of Instruction No. that such an attitude or behavior should not be countenanced if only to protect the interest of the Government. even without such waiver. SGV & Co. apparently. taxpayer Suyoc was not allowed to raise the defense of prescription against the efforts of the Government to collect the tax assessed against it. taxpayer Wyeth Suaco was assessed for failing to remit withholding taxes on royalties and dividend declarations. dated 17 January 1975 and 08 February 1975. the said compromise amount was never paid. On 12 September 1975. as well as. Although the CTA decided in favor of taxpayer Wyeth Suaco. This Court adopted the following principle from American jurisprudence: "He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned. The BIR issued two assessments.. Taxpayer Wyeth Suaco manifested its conformity to paying a compromise amount. the BIR Commissioner rendered a decision reducing the assessment for deficiency withholding tax against taxpayer Wyeth Suaco. based on weighty reasons. However. that the statute of limitations on collection is suspended once the taxpayer files a request for reconsideration or reinvestigation. petitioner BPI contends that the declaration made in the later case of Wyeth Suaco. for deficiency sales tax. he had induced Government authorities to delay collection of the assessed tax. though. dated 16 December 1974 and 17 December 1974. Although this Court is not compelled to abandon its decision in the Wyeth Suaco case. persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government.. Taxpayer Wyeth Suaco.45 By the principle of estoppel. . It affirmed the need for a waiver of the prescriptive period in order to effect suspension thereof. runs counter to the ruling made by this Court in the Suyoc case. both received by taxpayer Wyeth Suaco on 19 December 1974.. for good reasons. the taxpayer may be estopped from raising the defense of prescription because by his repeated requests or positive acts. 308. According to the decision of this Court – Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. this Court expressly conceded that a mere request for reconsideration or reinvestigation of an assessment may not suspend the running of the statute of limitations. . .of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts the Government has been. On 10 December 1979. sent to the BIR two letters. It was at this point when taxpayer Wyeth Suaco brought its case before the CTA to enjoin the BIR from enforcing the assessments by reason of prescription. but subject to certain conditions. . Based on the foregoing.

"settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. it is best interpreted in consideration of the particular facts of the Wyeth Suaco case and previous jurisprudence.47 The foremost criticism of petitioner BPI of the Wyeth Suaco decision is directed at the statement made therein that.51 This Court found in the Wyeth Suaco case that the BIR actually conducted a reinvestigation. in behalf of private respondent did not categorically state or use the words "reinvestigation" and "reconsideration.50 The grant need not be express. The Suyoc case refers to a situation where there were repeated requests or positive acts performed by the taxpayer that convinced the BIR to delay collection of the assessed tax. the matter is now undergoing review and consideration by your Manufacturing Audit Division…" The statute of limitations on collection. This Court therefore takes this opportunity to clarify and qualify this statement made in the Wyeth Suaco case. wherein he admitted that." the same are to be treated as letters of reinvestigation and reconsideration… These letters of Wyeth Suaco interrupted the running of the five-year prescriptive period to collect the deficiency taxes. taxpayer Wyeth Suaco filed a request for reinvestigation. In the Wyeth Suaco case. in accordance with its request for reinvestigation."48 It would seem that both petitioner BPI and respondent BIR Commissioner. The Wyeth Suaco case. such statement would appear to be a generalization of the exceptions to the statute of limitations on collection. which resulted in the reduction of the assessment originally issued against it. The Wyeth Suaco case cannot be in conflict with the Suyoc case because there are substantial differences in the factual backgrounds of the two cases. which was apparently granted by the BIR and. is correct in declaring that the prescriptive period for collection is interrupted or suspended when the taxpayer files a request for reinvestigation. While it is true that. rendered a final assessment… It was only upon receipt by Wyeth Suaco of this final assessment that the five-year prescriptive period started to run again.Although the protest letters prepared by SGV & Co. as written by its Finance Manager in a letter dated 01 July 1975. as amended. as clarified and qualified herein. The Bureau of Internal Revenue. as amended. provided that. started to run only upon the issuance and release of the reduced assessment. as well as. consequently. by itself. in accordance with the request of the taxpayer Wyeth Suaco.49 To reiterate. This Court pronounced therein that the repeated requests or positive acts of the taxpayer prevented or estopped it from setting up the defense of prescription against the Government when the latter attempted to collect the assessed tax. addressed to the Chief of the Tax Accounts Division. identifies specific circumstances when the statute of limitations on assessment and collection may be interrupted or suspended. the CTA and Court of Appeals. such request must be granted. Section 224 of the Tax Code of 1977. "[a]s we understand. such request is granted by the BIR Commissioner. after having reviewed the records of Wyeth Suaco. but may be implied from the acts of the BIR Commissioner or authorized BIR officials in response to the request for reinvestigation. take the statement to mean that the filing alone of the request for reconsideration or reinvestigation can already interrupt or suspend the running of the prescriptive period on collection. therefore. the prescriptive period was indeed suspended as provided under Section 224 of the Tax Code of 1977. then. The act of filing a request for reinvestigation alone does not suspend the period. among which is a request for reinvestigation that is granted by the BIR Commissioner. Taxpayer Wyeth Suaco was also aware that its request for reinvestigation was granted. .

and. It also now rules that the said case is not applicable to the Petition at bar because of the distinct facts involved herein. 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. for good reasons. as laid down by this Court in the Suyoc case. other than filing a request for reconsideration of Assessment No. Applying the given rules to the present Petition. 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 (d) of Section 223 of the Tax Code of 1977. persuaded to postpone collection to make the taxpayer feel that the demand is not unreasonable or that no harassment or injustice is meant by the Government. issued against petitioner BPI. the Government had been. petitioner BPI. by his own repeated requests or positive acts. There was no showing that petitioner BPI was informed or aware that its request for reconsideration was granted or acted upon by the BIR. this Court finds that – (a) The statute of limitations for collection of the deficiency DST in Assessment No. IV Conclusion To summarize all the foregoing discussion. which merely required a review of existing evidence and the legal basis for the assessment. After petitioner BPI filed its request for reconsideration. as amended. did not make repeated requests or performed positive acts that could have persuaded the respondent BIR Commissioner to delay collection. additional evidence on the matter. had already expired. As already heretofore determined by this Court. . the protest filed by petitioner BPI was a request for reconsideration. which include a request for reinvestigation granted by the BIR Commissioner. FAS-5-85-89-002054. This is a simple case wherein respondent BIR Commissioner and other BIR officials failed to act promptly in resolving and denying the request for reconsideration filed by petitioner BPI and in enforcing collection on the assessment. the protest filed by petitioner BPI was a request for reconsideration. the taxpayer may still be held in estoppel and be prevented from setting up the defense of prescription of the statute of limitations on collection when. as amended. there was no other communication between it and respondent BIR Commissioner or any of the authorized representatives of the latter. FAS-5-85-89002054. The statute on limitations imposed by the Tax Code precisely intends to protect the taxpayer from such prolonged and unreasonable assessment and investigation by the BIR. Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or there is no request for reinvestigation that had been granted by the BIR Commissioner. this Court finds no compelling reason to abandon its decision in the Wyeth Suaco case. They presented no reason or explanation as to why it took them almost eight years to address the protest of petitioner BPI. as required in the Suyoc case. as amended. and the existence of the circumstances enumerated in Section 224 of the same Code. and that would have prevented or estopped petitioner BPI from setting up the defense of prescription against collection of the tax assessed. Respondent BIR Commissioner did not require. neither did petitioner BPI offer. this Court lays down the following rules on the exceptions to the statute of limitations on collection. 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.Thus.

Assessment No.Considering that the right of the respondent BIR Commissioner to collect from petitioner BPI the deficiency DST in Assessment No. MINITA V. The Decision of the Court of Appeals in CA-G. Associate Justice DANTE O. TINGA Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. SP No. ALICIA AUSTRIA-MARTINEZ Associate Justice ROMEO J. REYNATO S. FAS-585-89-002054 requiring petitioner BPI to pay the amount of P28. Wherefore. 51271. FAS-5-85-89-002054 is hereby ordered CANCELED. SR. FAS-5-85-89-002054 had already prescribed. dated 11 August 1999. PUNO Associate Justice Chairman. the instant Petition is GRANTED. PUNO Associate Justice Chairman MA. then.R. CHICO-NAZARIO Associate Justice WE CONCUR: REYNATO S.00 as deficiency documentary stamp tax for the taxable year 1985. based on the foregoing. SO ORDERED. inclusive of the compromise penalty. there is no more need for this Court to make a determination on the validity and correctness of the said Assessment for the latter would only be unenforceable.020. which reinstated Assessment No. Second Division CERTIFICATION . is REVERSED and SET ASIDE. CALLEJO.

DAVIDE. Section 13 of the Constitution. a domestic corporation.67 12.R. defendant-appellant. 1953 Feb.651. HILARIO G. 1966 REPUBLIC OF THE PHILIPPINES.. JR.. Perez and Associates for defendant-appellant. and the Division Chairman’s Attestation.: Ker & Co.. 1949 May 15. 1953 Feb. Chief Justice Republic of the Philippines SUPREME COURT Manila EN BANC G. BENGZON. No.342. 1953 Feb. 1948 April 30.. 1949 and 1950 on the following dates: Year 1947 1948 1949 1950 Date Filed April 12.'s returns and books of accounts and subsequently issued the following assessments for deficiency income tax: Year 1947 1948 1949 1950 Amount P42. 1950 May 9. Andrada. J. 16. LTD. L-21609 September 29. Ltd. Office of the Solicitor General for plaintiff-appellant. KER & COMPANY. respectively. 16. 1949 and June 30. 1953 .813. 16. 1948.. plaintiff-appellant. 1950.30 18.Pursuant to Article VIII. filed its income tax returns for the years 1947.P. vs.87 139. In 1953 the Bureau of Internal Revenue examined and audited Ker & Co. J. it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.00 Date Assessed July 25. Leido. Ltd. 1951 It amended its income tax returns for 1948 and 1949 on May 11.

1956 Ker & Co. the Republic of the Philippines filed on March 27. 1962. Ker & Co.542. for said court dismissed the appeal for having been instituted beyond the 30-day period provided for in Section 11 of Republic Act 1125. 1948. On September 18. P139. Ltd. its counsel in the proceedings before the Bureau of Internal Revenue and the Court of Tax Appeals. but orders defendant taxpayer to pay the deficiency income taxes for 1948.00. the dispositive portion of which states: WHEREFORE. 1962 a complaint with the Court of First Instance of Manila seeking collection of the aforesaid deficiency income tax for the years 1947. This motion was denied and defendant filed a motion for reconsideration. plus 5% surcharge thereon on each amount and interest of 1% a month computed from March 27. moved for the dismissal of the complaint on the ground that the court did not acquire jurisdiction over the person of the defendant and that plaintiff's cause of action has prescribed. On April 14.. its counsel. was deferred until trial of the case on the merits. Perez & Associates. The complaint did not allege fraud in the filing of any of the income tax returns for the years involved. Jose Leido. in the amounts of P18.87. Ltd. 1962 Ker & Co..651. Subsequently.67 and P8. Ltd.. On January 30. Upon request of Ker & Co.28 and for the year 1950 from P12. instead in its letters dated March 28. imposed the 50% surcharge for the year 1947 and eliminated the same surcharge from the assessment for the year 1950. 1962 and April 10. 1962. nor did it pray for the payment of the corresponding 50% surcharge. Leido and Associates. 1963 the Republic of the Philippines filed a motion for reconsideration contending that the right of the Commissioner of Internal Revenue to collect the deficiency .00 to P8.. 1962. through its counsel. 1 On March 15. We affirmed the order of dismissal of L-12396.due and payable on dates indicated in the accompanying notices of assessment. this Court dismisses the claim for the collection of deficiency income taxes for 1947. in answer to which Ker & Co. 1949 and 1950. however. 1949 and 1950. through Atty. the Bureau of Internal Revenue reduced the assessments for the year 1947 from P42..542. Ker & Co. 1962. Resolution on said motion.30 to P27. adopted the same answer which it had filed on May 18. Ltd. Ltd. On May 18.813. the Bureau of Internal Revenue demanded payment of the aforesaid assessments together with a surcharge of 5% for late payment and interest at the rate of 1% monthly. Andrada. filed its answer to the complaint interposing therein the defense set up in its motion to dismiss of April 14. filed with the Court of Tax Appeals a petition for review with preliminary injunction. respectively.026. Ltd. 1962 it set up the defense of prescription of the Commissioner's right to collect the tax. 1962 the Republic of the Philippines amended its complaint.342. 1962 and until full payment thereof is made. 1963 the Court of First Instance rendered judgment.00. On March 1. On February 20. plus the costs of suit.. The assessments for years 1948 and 1949 remained the same. but it prayed for the payment of 5% surcharge for late payment and interest of 1% per month without however specifying from what date interest started to accrue. No preliminary injunction was issued. refused to pay. The assessments for 1948 and 1950 carried the surcharge of 50% authorized under Section 72 of the Tax Code for the filing of fraudulent returns.. Leido. Summons was served not on the defendant taxpayer but upon Messrs.

Service upon private domestic corporation or partnership. The issues in this case are: 1. they were still acting for and in behalf of Ker & Co. 1951. 2which reads: SEC. Andrada. Leido and Associates received the summons. 1962. it was Messrs. service may be made on the president. Perez & Associates who replied in behalf of Ker & Co. 1949 and 1950 accrue? First Issue Ker & Co. by letter dated March 15. in two letters. when it appealed said case to the Court of Tax Appeals and later to this Court. agent.. dated March 28. 1962 when Messrs. 3. Ltd. both parties appealed directly to this Court. 1962. pursuant to Section 332 (a) of the Tax Codes and that the payment of delinquency interest of 1% per month should commence from the date it fell due as indicated in the assessment notices instead of on the date the complaint was filed.? . in connection with its tax liability ... 1949 and 1950? 4. The same counsel represented Ker & Co. Did the right of the Commissioner of Internal Revenue to assess deficiency income tax for the year 1947 prescribe? . Rule 7 of the Rules of Court.. Ltd. demanded the payment of the deficiency income tax in question. Ltd. secretary. manager. 13. when the Deputy Commissioner of Internal Revenue. one month and eleven days after the deficiency assessments for 1948. both after the complaint in this case was filed. the date of discovery of the fraud. The two motions for reconsideration having been denied. Ltd. Did the Court of First Instance acquire jurisdiction over the person of defendant Ker & Co. 1963 Ker & Co. When did the delinquency interest on the deficiency income tax for the years 1948. 1949 and 1950 were made and since the filing of its petition for review in the Court of Tax Appeals did not stop the running of the period of limitations. Ltd. Messrs.. 1962 and April 10. Leido. Did the filing of a petition for review by the taxpayer in the Court of Tax Appeals suspend the running of the statute of limitations to collect the deficiency income for the years 1948. when this tax case was in its administrative stage. and maintaining that since the complaint was filed nine years. On March 6.—If the defendant is a corporation formed under the laws of the Philippines or a partnership duly registered. Leido and Associates who do not come under any of the class of persons upon whom summons should be served as enumerated in Section 13. At least therefore on April 2. Ltd.assessment for 1947 has not prescribed by a lapse of merely five years and three months. Leido and Associates acted as counsel for Ker Co. maintains that the court a quo did not acquire jurisdiction over its person inasmuch as summons was not served upon it but upon Messrs. because the taxpayer's income tax return was fraudulent in which case prescription sets in ten years from October 31. or any of its directors. Subsequently.. cashier. the right of the Commissioner of Internal Revenue to collect the tax in question has prescribed. also filed a motion for reconsideration reiterating its assertion that the Court of First Instance did not acquire jurisdiction over its person. Ltd.. 2..

the Republic of the Philippines insists that the taxpayer's income tax return was fraudulent. We observe that the motion to dismiss filed on April 14. 1962. they were the taxpayer's agent when summons was served. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor.5 A defendant can not be permitted to speculate upon the judgment of the court by objecting to the court's jurisdiction over its person if the judgment is adverse to it. Settled in our system is the rule that acts committed against the provisions of mandatory or prohibitory laws shall be void (Art. prayed for dismissal of the complaint on the ground that plaintiff's cause of action has prescribed. Said the lower court: The Court resolves the second issue in the negative. because Section 331 of the Revenue Code explicitly provides. if any. who. Ltd. Perforce. 1951 pursuant to Section 322(a) of the Tax Code. service upon the agent of a corporation is sufficient. for the collection of such taxes. aforequoted. Ltd. . 1953 after a lapse of five years.involved in this case. that "Internal Revenue taxes shall be assessed within 5 years after the return was filed. on the basis of a return filed on April 12. Ltd. Under Section 13 of Rule 7. and acceding to jurisdiction over its person if and when the judgment sustains its defenses. Ker & Co. is an exercise of authority against the aforequoted explicit and mandatory limitations of statutory law. therefore the Commissioner of Internal Revenue may assess the tax within ten years from discovery of the fraud on October 31. On the other hand. The court a quo. In reply to the lower court's conclusion. .. in mandatory terms. and no proceedings in court without assessment. 5.4 Such defect.. The attempt by the Commissioner of Internal Revenue to make an assessment on July 25. it necessarily had to acquire jurisdiction upon the latter's person. the finding of the . By interposing such second ground in its motion to dismiss. 1953. three months and thirteen days from the date (April 12. 1948) it filed its income tax return. being the proponent of the affirmative defense. Said court resolved the issue without touching upon fraudulence of the return. if any... Second Issue Ker & Co. aside from disputing the lower court's jurisdiction over defendant's person. which has become final and executory. the Republic of the Philippines maintains in its brief that Ker & Co. filed a false return and since the fraud penalty of 50% surcharge was imposed in the deficiency income tax assessment. For the court to validly decide the said plea of defendant Ker & Co. contends that under Section 331 of the Tax Code the right of the Commissioner of Internal Revenue to assess against it a deficiency income tax for the year 1947 has prescribed because the assessment was issued on July 25.3 Voluntary appearance cures defects of summons. . New Civil Code). The reason is that the complaint alleged no fraud. was further cured when defendant filed its answer to the complaint. shallbe begun after expiration of such period. The stand of the Republic of the Philippines hinges on whether or not taxpayer's income tax return for 1947 was fraudulent. should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court. Ltd. confining itself to determining whether or not the assessment of the tax for 1947 was issued within the five-year period provided for in Section 331 of the Tax Code. ruled that the right of the Commissioner of Internal Revenue to assess the tax has prescribed. nor did the plaintiff present evidence to prove fraud. 1948..

may not anymore raise defenses which go into the merits of the assessment. prescription of the Commissioner's right to assess the tax. i. it must be supported by clear and convincing proof. Under Section 333 of the Tax Code. in respect of any deficiency. 1962. The taxpayer counters that the filing of the petition for review in the Court of Tax Appeals could not have stopped the running of the prescriptive period to collect because said court did not have jurisdiction over the case.9 In this case however. Precisely. The Republic of the Philippines however contends that the running of the prescriptive period was interrupted by the filing of the taxpayer's petition for review in the Court of Tax Appeals on March 1. shall be suspended for the period during which the Collector of Internal Revenue is prohibited from making the assessment or beginning distraint or levy or a proceeding in court.Commissioner of Internal Revenue as to the existence of the fraud has also become final and need not be proved. Ltd. Third Issue Ker & Co. the appeal having been interposed beyond the 30-day period set forth in Section 11 of Republic Act 1125. If the period during which the case was pending in the Court of Tax Appeals and in the Supreme Court were not counted in reckoning the prescriptive period. Ltd. one month and eleven days from February 16. the right to collect the tax has not prescribed. it adds. Ker & Co. the Republic of the Philippines should be considered to have waived its right to object to the setting up of such defense.. the date the tax was assessed. On these premises We therefore sustain the ruling of the lower court upon the point of prescription. By its actuation.e... the Tax Court dismissed the appeal for lack of jurisdiction and said dismissal was affirmed by the Supreme Court in L-12396 aforementioned. instead of questioning the right of the defendant to raise such defense.. litigated on it and submitted the issue for resolution of the court.7Fraud is a serious charge and. the running of the prescriptive period to collect the tax shall be suspended for the period during which the Commissioner of Internal Revenue is prohibited from beginning a distraint and levy or instituting a proceeding in court. the right to collect the same has prescribed pursuant to Section 332 (c) of the Tax Code.—The running of the statute of limitations provided in Section 331 or three hundred thirty-two on the making of assessments and the beginning. impresses upon Us that since the Republic of the Philippines filed the complaint for the collection of the deficiency income tax for the years 1948. less than five years would have elapsed. Ltd. Ker & Co. of distraint or levy or a proceeding in court for collection. quoted hereunder: SEC. It would be worth mentioning that since the assessment for deficiency income tax for 1947 has become final and executory. Suspension of running of statute. 1956. to be sustained. This contention suffers from a flaw in that it fails to consider the well-settled principle that fraud is a question of fact6 which must be alleged and proved. hence. . 1953. and for sixty days thereafter. Such was our ruling in previous cases. 1949 and 1950 only on March 27. and for sixty days thereafter.8 Accordingly. raised the defense of prescription in the proceedings below and the Republic of the Philippines. fraud should have been alleged and proved in the lower court. 333. or nine years.

1962. This being so. the Tax Court dismissed the case and Ker & Co. et al. Ltd. 1954 the projected memorandum was filed. By the time the Supreme Court affirmed the order of dismissal of the Court of Tax Appeals in L-12396 on January 31. So much so. 1956 when Ker & Co. As requested. filed a petition for review in the Court of Tax Appeals contesting the legality of the assessments in question. Section 51 (e) of the Tax Code states: .. 1954. in view of the pendency of the taxpayer's petition for review in the Court of Tax Appeals. he had already lost. As moved. Ltd. et al. We would be encouraging taxpayers to delay the payment of taxes in the hope of ultimately avoiding the same. 1awphîl.. From March 1. the Commissioner of Internal Revenue was prevented. 12 However. no tax was collected..nèt Thus. 10 from filing an ordinary action in the Court of First Instance to collect the tax. by judicial action. supra. Thereafter. Fourth Issue The Republic of the Philippines maintains that the delinquency interest on the deficiency income tax for 1948.. by its letter dated March 28. the Commissioner of Internal Revenue demanded extra-judicially the payment of the deficiency tax in question and in reply the taxpayer. instead of from the date the complaint was filed as determined in the decision appealed from. And. by prescription. Ltd. an independent ordinary action in the Court of First Instance was not available to the Commissioner pursuant to Our ruling in Ledesma. that on March 1. 1956 when Ker & Co. pursuant to Section 51(e) of the Tax Code. the Commissioner of Internal Revenue had but one remedy left to collect the tax. Besides.Did the pendency of the taxpayer's appeal in the Court of Tax Appeals and in the Supreme Court have the effect of legally preventing the Commissioner of Internal Revenue from instituting an action in the Court of First Instance for the collection of the tax? Our view is that it did. as recognized in this Court's ruling in Ledesma. 1954. the Commissioner of Internal Revenue was in effect prohibited from collecting the tax in question. filed a petition for review in the Court of Tax Appeals. Under the circumstances. but as of that date the Commissioner's right to collect by warrant of distraint and levy the deficiency tax for 1950 had already prescribed. Precisely he urgently filed a motion to dismiss the taxpayer's petition for review with a view to terminating therein the proceedings in the shortest possible time in order that he could file a collection case in the Court of First Instance before his right to do so is cut off by the passage of time. advised the Commissioner of Internal Revenue that the right to collect the tax has prescribed pursuant to Section 332 (c) of the Tax Code. Court of Tax Appeals. 1949 and 1950 accrued and should commence from the date of the assessments as shown in the assessment notices. did the taxpayer produce the effect of temporarily staying the hands of the Commissioner of Internal Revenue simply through a choice of remedy. the right to collect the tax (except that for 1950) by the summary method of warrant of distraint and levy. On May 22. the provisions of Section 333 of the Tax Code will apply. 1962 more than five years had elapsed since the final assessments were made on January 5. immediately thereafter requested suspension of the collection of the tax without penalty incident to late payment pending the filing of a memorandum in support of its views. v. until the termination of its appeal in the Supreme Court. v. if We were to sustain the taxpayer's stand. 11 It would be interesting to note that when the Commissioner of Internal Revenue issued the final deficiency assessments on January 5. as stated. that is. Court of Tax Appeals. to do so would be to violate the judicial policy of avoiding multiplicity of suits and the rule on lis pendens. appealed to the Supreme Court. Ker & Co. Ltd.

January 29. Sanchez and Castro. Tarachand and Rewachand. Makalintal. Inc. Lim Tian Teng Sons & Co. 1966. 67 Phil. Regala. 44 Phil. (c) and (d) for the payment of the same. Zurbito. now Par. v. the decision appealed from is affirmed with the modification that the delinquency interest at the rate of 1% per month shall be computed from March 15. C. 11 12 . May 31. Menghra vs. 2 Now Section 13. (d). 746. Rules of Court. Toledo and Santiong. Rule 8). Surcharge and interest in case of delinquency. Ramos v. L-12996. L-13656. 37 Phil. except from the estates of insane. Barrera. 1958. Par. Gutierrez v.SEC. See Sec. 1953 and that for 1950 accrued on February 15. Reyes.. 1953 for the deficiency income tax for 1948 and 1949 and from February 15. Benipayo. Tax Code. Albert. (emphasis supplied) Exhibit "F" — the letter of assessment — shows that the deficiency income tax for 1948 and 1949 became due on March 15. Section 1. delinquency interest accrued and became due starting from said due dates. With costs against Ker & Co. Rules of Court. Court of Tax Appeals. 840. 316. Rule 8. Ltd. 270. 3 4 5 6 7 8 9 Republic of the Philippines v. 1954 for the deficiency income tax for 1950. concur. et al. promulgated on January 31. Mañalac.—To any sum or sums due and unpaid after the dates prescribed in subsections (b).. Flores v. Section 12. So ordered. Rule 15 (now Section 5. 1961. 834. or insolvent persons. L-9771. Rule 14. 10 L-11343. Concepcion. JJ. (g). Footnotes 1 Ker & Company. Zaldivar. WHEREFORE. L-9738. deceased. 286. Republic of the Philippines v. January 31...B. Since the tax in question remained unpaid. J.J. 89 Phil. 1962. Dizon. March 31. 1962. Collector of Internal Revenue v.. Rule 16. Ltd..L. The Court of Tax Appeals and The Collector of Internal Revenue. 1957. L-21731. there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of one per centum a month upon said tax from the time the same became due. The decision appealed from should therefore be modified accordingly.. Section 1. Infante v. 51(e). 1954 in accordance with Section 51(d) of the Tax Code. December 28.

Republic of the Philippines SUPREME COURT Manila EN BANC G. vs. subsection (c). Exemptions as to period of limitation of assessment and collection of taxes. Was it. dated December 17. which reads: SEC. defendant-appellee. of the National Internal Revenue Code. 1962 issued an order finding the same meritorious and hence dismissing the complaint. 1949. The corresponding notice of assessment was issued on September 24.R. 1959. Angel C. FELIX B. MAKALINTAL. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. 4). Facundo for defendant-appellee. however. J. plaintiff-appellant. begun prior to the expiration of any period for collection agreed upon in writing by the Commissioner of Internal Revenue and the defendant before the expiration of such five-year period? The only evidence of such written agreement. The complaint was filed on December 27. and on September 1. L-20477 March 29. The court received evidence on the motion. No.83. but only if begun (1) within five years after the assessment of the tax. ACEBEDO. The trial court rejected . 332. The plaintiff contends that the period of prescription was suspended by the defendant's various requests for reinvestigation or reconsideration of the tax assessment. The present suit was not begun within five years after the assessment of the tax.: This is a suit for collection of deficiency income tax for the year 1948 in the amount of P5. 1961. which was in 1949. 1968 REPUBLIC OF THE PHILIPPINES. After the defendant filed his answer but before trial started he moved to dismiss on the ground of prescription. — xxx xxx xxx xxx xxx xxx (c) Where the assessment of any internal-revenue tax has been made with the period of limitation above prescribed such tax may be collected by distraint or levy or by a proceeding in court. is Exhibit U (also Exh.962. in the form of a "waiver of the statute of limitations" signed by the defendant. But this waiver was ineffective because it was executed beyond the original five-year limitation. The statute of limitations which governs this case is Section 332. or (2) prior to the expiration of any period for collection agreed upon in writing by the Collector of Internal Revenue and the taxpayer before the expiration of such five-year period. The case is before us on appeal by the plaintiff from the order of dismissal.. Office of the Solicitor General for plaintiff-appellant.

asked for a reinvestigation thereof on October 11.. concur.. 1954. Commissioner v. 1958: . 1955. 1963.this contention. or on October 4. The last part of the letter was a warning that unless the waiver "was accomplished and submitted within 10 days the collection of the deficiency taxes would be enforced by means of the remedies provided for by law. when a taxpayer asks for a reinvestigation of the tax assessment issued to him and such reinvestigation is made. the five-year period with which an action for collection may be commenced should be counted from this last assessment.. according to some. otherwise there would be no point to the legal requirement that the extension of the original period be agreed upon in writing. 1950 the then Collector of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment at (Exh. but there was no follow up of this warrant.. Consequently. (Emphasis supplied. took no part." It will be noted that up to October 4. does not rule out a situation where the taxpayer may be in estoppel to claim prescription. 25. To be sure. again requesting a reinvestigation of his tax liability (Exh. Lopez. Dizon. and hence prescription had already set in. The order appealed from is affirmed. this legal provision. JJ. after receiving the assessment notice of September 24. vs. for good reasons. the request for reinvestigation did not suspend the running of the period for filing an action for collection. In fact. The next communication of record is a letter signed for the defendant by one Troadio Concha and dated October 6. A). Bengzon. Nothing came of this request either. et al. 1äw phï1. Sanchez. Then on February 9. L-11527. J. 1951.L. Nov. the defendant. Zaldivar. the defendant's lawyers wrote the Collector of Internal Revenue informing him that the books of their client were ready at their office for examination (Exh. (Republic vs. saying that a mere request for reinvestigation or reconsideration of an assessment does not have the effect of such suspension. when the Collector bestirred himself for the first time in connection with the reinvestigation sought. . J. E). March 30.) Likewise.) In the case at bar. persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. without pronouncement as to costs.B. 1949 (Exh.. Thus we said in Commissioner of Internal Revenue. and there was nothing to impede enforcement of the tax liability by any of the means provided by law. 1963. and required that the defendants specify his objections to the assessment and execute "the enclosed forms for waiver.P..ñët Reyes. Sison. His requests in fact had been unheeded until then. C)." (Exh. on the basis of which the Government makes another assessment. There are cases however where a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts the Government has been. of the statute of limitations. decisions of this Court. D).. for under the law such waiver must be executed within the original five-year period within which suit could be commenced. making subsequent events in connection with the said assessment entirely immaterial. There is no evidence that this request was considered or acted upon. 1955. Consolidated Mining Co. on October 23. L13739. 1955 the delay in collection could not be attributed to the defendant at all. April 30. more than five years had elapsed since assessment in question was made. Castro.. J. B). Angeles and Fernando. 1949. L-18007. Even the written waiver of the statute signed by the defendant on December 17. By October 4. The ruling is logical. 1959 could no longer revive the right of action. The reply was dated more than a year later.

respondents. Eligio G. upon demand by the Collector of Internal Revenue. filed with the Court of Tax Appeals a petition for review of a decision of the Collector of Internal Revenue (now Commissioner of Internal Revenue) denying the claim for refund of the following sums of money allegedly overpaid as franchise tax for the periods stated before each item: 1st quarter. 1951 Jan. and that said reconsideration was denied on February 3. L-14421 April 29. including copy of said franchise.94 2. which came to petitioner's knowledge on December 16. sometime in December 1956. petitioner.. Lagman for petitioner. 1961 THE GUAGUA ELECTRIC LIGHT PLANT COMPANY. the Guagua Electric Light Plant Co. dated August 27. 1. Inc.Republic of the Philippines SUPREME COURT Manila EN BANC G.95 2. INC. 1957. that petitioner's records..R.93 Petitioner alleged that on December 13. 1958. as provided in section 259 of the Internal Revenue Code. were destroyed in consequence of the last world war. it obtained from the municipality of Guagua a franchise to furnish electric light in said municipality. J. 1957.. that said franchise prescribes a franchise tax of 1% of the gross earnings for the first twenty (20) years of the existence of the corporation and 2% of said earnings for the remaining fifteen (15) years of its existence. that. 1958. Office of the Solicitor General for respondents. petitioner moved for a reconsideration of said decision. On February 28. that the same was denied in a decision of said officer. 31. who misrepresented that the franchise tax due was 5% of the gross income. that on December 17.616. that on March 27.04 P18. COURT OF TAX APPEALS. 1954 June 15. CONCEPCION. that it paid the amounts above mentioned in excess of said rates. a domestic corporation engaged in supplying electricity. 1954 TOTAL P13. it filed with the Collector of Internal Revenue a claim for refund.948. 1927. 1947 — 3rd quarter. THE COLLECTOR OF INTERNAL REVENUE and THE HON. 1957. reading: .404. 1954 — Dec. Respondent moved to dismiss said petition for review upon the ground that it had been filed beyond the period prescribed in section 306 of the Revised Internal Revenue Code. 1957. petitioner found a copy of said franchise among the salvaged records of the Provincial Board of Pampanga.: Appeal from a resolution of the Court of Tax Appeals granting a motion to dismiss of respondent Collector of Internal Revenue. vs.969. 1954 — June 15. No.

which misrepresentation was discovered by petitioner sometime in December 1956. L-10574 (May 28. As your franchise (Resolution No. you were authorized on April 17. the petition for review filed with this Court. Very respectfully. but such suit or proceeding may be maintained.. SILVERIO BLAQUERA Deputy Collector of Internal Revenue . G. Pampanga GENTLEMEN: With reference to your letter dated December 4. penalty.) The Court of Tax Appeals. or of any sum alleged to have been excessive or in any manner wrongfully collected.501. Said amount represents the 2% difference between the 7% franchise tax collected by the Deputy Provincial Treasurer of that Municipality and 5610 franchise tax provided for in section 259 of the Tax Code. whether or not such tax. as well as its petition for review in the Court of Tax Appeals. the claim for refund having been filed beyond said period. were filed beyond the period stated in said section 306 of the Tax Code. or of any penalty claimed to have been collected without authority. This not withstanding. you are subject to the 5% franchise tax provided for in said section of the Tax Code. Hence. and (2) upon the authority ofPanay Electric Co. In any event. your request for refund of alleged overpayment of P7. 1953. (Sgd). The other Associate Judge of said court concurred in the result. no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty. concurred in by an Associate Judge. until a claim for refund or credit has been duly filed with the Collector of Internal Revenue. It is not denied that petitioner's claim for refund. petitioner maintains that the motion to dismiss filed by respondent with the Court of Tax Appeals should have been denied. a tax credit of P4. Inc. reading: January 29. 1958). In view thereof.R. granted the motion and dismissed the petition for review. I have the honor to inform you that. Guagua. upon the ground that it had been filed beyond the period of two (2) years fixed in said section 306. by the vote of its Presiding Judge. Collector of Internal Revenue..42 against your franchise tax beginning the first quarter of 1953. vs. 39. (Emphasis supplied. as amended. (1) because the amounts sought to be recovered by petitioner were paid by the same through misrepresentation by respondent.02 is hereby denied. 1954 The Guagua Electric Light Plant Co. 1953.958. No. during the period from the 4th quarter of 1950 to the 3rd quarter of 1952. according to our records. The first argument is based upon a letter of the Deputy Collector of Internal Revenue. series of 1928 of the Municipal Council of that Municipality) does not fix the rate of franchise tax to be paid by you. or sum has been paid under protest or duress.No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected.

. No. however. is not subject to any qualification. it is not claimed that the Collector of Internal Revenue was aware of the pertinent provisions of petitioner's municipal franchise. Pampanga.R. . that in a communication to the Collector of Internal Revenue dated January 2. a tax on the latter's franchise at the rate of SEVEN (7%) PERCENTUM every quarter. Indeed. recently discovered that under Republic Act 418 the tax collectible on the corporate franchise as an electric utility is only FIVE (5%) PERCENTUM for every quarter and this is in fact the rate being paid by other utilities in the province. L-10574 (May 28. Panay Electric Co. charged and collected from the corresponding gross earnings of the GUAGUA ELECTRIC LIGHT PLANT CO. it applies regardless of the conditions under which the payment has been made. under these special circumstances. against respondent Collector was not yet deemed barred by Section 306 of the Tax Code. p. however. no suit or proceeding for refund or credit of any national internal revenue tax erroneously or illegally assessed or collected shall be begun after the expiration of two (2) years from the date of payment. so that the Supreme Court considered that the period under said section 306 had been suspended insofar as it referred to the payments of franchise taxes made subsequent to the institution of the suit and while the same was pending.(Exhibit 4. said officer had no reason to believe otherwise. Consequently. petitioner stated: . . 95 BIR rec. . the filing of the suit for the recovery of the tax by the Panay Electric Co. INC. pursuant to section 306 of the Tax Code. the Court of Tax Appeals had the following to say. andsecond: the Collector of Internal Revenue in that case agreed to abide by the decision of the Supreme Court as to the collection of taxes relative thereto. G. Hence. until the third quarter of 1952. In that case the Supreme Court took into account the special circumstances of the case in which. 418. In any event. Collector of Internal Revenue. 1958). as regards the payment made of the franchise taxes subsequent to the institution of the suit. the Supreme Court in that case allowed the taxpayer. vs.It appears. With respect to the second argument. Consequently.) (Emphasis supplied. the claim of misrepresentation is devoid of factual foundation. the Collector of Internal Revenue was the one induced by petitioner to believe that it was subject to a franchise tax of 5% of its gross income. hence. with which we are fully in agreement: While petitioner cited the case of Panay Electric Co. amending section 259 of the Tax Code. . to claim the alleged overpayment of the tax in the sense that the institution of the suit which was then pending in the Supreme Court had the effect of suspending or waiving the prescriptive period provided for under Section 306 of the Tax Code. As of and beginning the fourth quarter of 1950 the Bureau of Internal Revenue thru the Treasurer's Office of Guagua. the contents of which were allegedly unknown to the very petitioner herein. which is mandatory. 1957). dated March 27.) Thus. 1953. We have. we find the circumstances in that case entirely different from the case at bar. that said provision of the Tax Code amended all previous special laws on the same subject. Moreover. . for such is the rate fixed by the Tax Code (as amended) for franchises in general. and. . This provision. as provided in Republic Act No. first: there was a pending litigation between the two parties as to the proper tax to be paid and of the proper interpretation of the taxpayer's charter in relation to Section 259 of the Tax Code. and he seemed to be under the impression (deductible from the above mentioned communication of the petitioner to the Collector of Internal Revenue. as authority in support of its case.

WHEREFORE. resulting in a deficiency withholding tax at source in the aggregate amount of P3. By virtue of Letter of Authority No. Inc. FERNAN. the resolution appealed from is hereby affirmed.B..:p The sole issue in this petition for review on certiorari is whether or not petitioner's right to collect deficiency withholding tax at source and sales tax liabilities from private respondent is barred by prescription. Inc.994. vs. 1974.J. C. JJ. 1974 issued by then Commissioner of Internal Revenue Misael P. (Wyeth Suaco for brevity) is a domestic corporation engaged in the manufacture and sale of assorted pharmaceutical and nutritional products. the right of petitioner to claim for refund or tax credit for the amounts in controversy can no longer be made by judicial action as the two-year period under Section 306 of the Revenue Code has barred the same. Revenue Examiner Dante Kabigting conducted an investigation and examination of the books of accounts of Wyeth Suaco. 2 . it allegedly failed to remit withholding tax at source for the fourth (4th) quarter of 1973 on accrued royalties. therefore. The report disclosed that Wyeth Suaco was paying royalties to its foreign licensors as well as remuneration for technical services to Wyeth International Laboratories of London. 1991 COMMISSIONER OF INTERNAL REVENUE. However. Under the herein set of facts. Bautista Angelo. The antecedent facts are as follows: Private respondent Wyeth Suaco Laboratories. 52415 dated June 17.We find the aforesaid circumstances absent in the instant case. Paredes and Dizon. Bengzon. Reyes. WYETH SUACO LABORATORIES. INC. respondents. concur. and THE COURT OF TAX APPEALS. Labrador. 1 On October 15.J. There has been no pending case between the two parties and neither has respondent Collector of Internal Revenue manifested that he would be bound by any particular decision such as was cited in the said Panay Electric Case. J. petitioner. Wyeth Suaco was also found to have declared cash dividends on September 27. Padilla. Guagua Electric Light Plant Company.15. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.L. Barrera. Vera..R.. Its accounting period is on a fiscal year basis ending October 31 of every year. 1973 and these were paid on October 31. C. he submitted a report containing the result of his investigation. with costs against petitioner. remuneration for technical services and cash dividends.178. 76281 September 30. 1973. No.

952.155.00 on its importation of "Mega Polymycin D. 1973 to October 31. 1979. sent the Bureau of Intemal Revenue two (2) letters dated January 17.. was due to the use of estimated amounts by the Bureau of Customs and to foreign exchange differential. On December 10. There was reportedly also a short payment of advance sales tax in its importation of "Mega Polymycin D" on October 3. 1975.855. 4 Thereafter. 6 . the Bureau of Internal Revenue assessed Wyeth Suaco on the aforesaid tax liabilities in two (2) notices dated December 16. Wyeth Suaco maintained that the difference between its landed cost figure (which is the basis for computing the advancesales tax) and that of the revenue examiner. 1972 and January 1. These assessment notices were both received by Wyeth Suaco on December 19. In its answer.155.00 or a total amount of P61.391.21 and compromise penalty in the amount of P300. With regard to what the Bureau of Internal Revenue claimed as the amount of P2. it was reported that during the periods from November 1." 5 On September 12.00 forming part of the cash dividends declared in 1973. admitted liability with respect to the short payment of advance sales tax in the amount of P1.Moreover. Wyeth Suaco deducted the cost of non-deductible raw materials. On the matter of the withholding tax at source on remuneration for technical services.000. Again. Wyeth Suaco insisted that it was up-to-date in remitting the corresponding withholding tax on this income to the Bureau of Internal Revenue. the amount of P61. Wyeth Suaco manifested its conformity to a 10% compromise provided it be applied only to the basic sales tax. thru then acting Commissioner of Internal Revenue Ruben B. 1975. 1974. 1974. Wyeth Suaco however. As to the assessed deficiency sales tax. the Commissioner of Internal Revenue asked Wyeth Suaco to avail itself of the compromise settlement under LOI 308. Wyeth Suaco's contention was that a withholding tax at source on royalties and dividends becomes due and payable only upon their actual payment or remittance. Wyeth Suaco through its tax consultant SGV &Co. Wyeth Suaco argued that it was not liable to pay withholding tax at source on the accrued royalties and dividends because they have yet to be remitted or paid abroad. 1972. Thus. Ancheta. However. petitioner. 1975 and February 8. excluding surcharge and interest. As to the deficiency withholding tax at source. rendered a decision reducing the assessment of the withholding tax at source for 1973 to P1.86. 3 Consequently. 289 allowing remittance of royalties up to fifty percent (50%) only. Wyeth Suaco alleged that the same was due its foreign stockholders. 1970. 1972 to December 31. protesting the assessments and requesting their cancellation or withdrawal on the ground that said assessments lacked factual or legal basis. Wyeth took exception on the ground that it involves purely a legal question and some of the amounts included in the assessment have already bee paid.21. All these resulted in a deficiency sales tax in the amount of P60. resulting in its alleged failure to pay the correct amount of advance sales tax. 1974 and December 17.973. It claimed that it was not able to remit the balance of fifty percent (50%) of the accrued royalties to its foreign licensors because of Central Bank Circular No. Wyeth Suaco was not able to remit these dividends because of the restriction of the Central Bank in a memorandum implementing CB Circular No.112. 289 dated February 21. 1973.21 as deficiency sales tax remained the same.

pursuant to Section 51 (e) of the Tax Code of 1977. 8 However.Thereafter. the decision appealed from is hereby reversed and respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency withholding tax at source for the fourth quarter of 1973 as well as the deficiency sales tax assessed against petitioner (Wyeth Suaco). the right of petitioner to collect the same has already prescribed. 1973 to October 31. . 1980. petitioner filed his answer to Wyeth Suaco's petition for review praying. internal revenue taxes shall be assessed within five years after the return was filed. 9 On May 30. 11 The basis of the above decision was the finding of the Tax Court that while the assessments for the deficiency taxes were made within the five-year period of limitation. this recourse by petitioner. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. The applicable laws in the instant case are Sections 318 and 319 (c) of the National Internal Revenue Code of 1977 (now Sections 203 and 224 of the National Internal Revenue Code of 1986).86 as deficie withholding tax at source for the 4th quarter of 1973 plus 5% surcharge and 14% per annum interest thereon from December 16. 1980. that private respondent be declared liable to pay the amount of P61. to wit: SEC. 1972 to December 31. 1974 to December 16. These were served on private respondent on March 12. but only if begun within five (5) years after the assessment of the tax.. Exceptions as to period of limitations of assessment and collection of taxes.21 as deficiency sales tax for the periods November 1. 1986. as amended. 1977. 1980. among others. Hence. 1972 and January 1. the Court of Tax Appeals rendered a decision enjoining the Commissioner of Internal Revenue from collecting the deficiency taxes. 7 On February 7.112. — xxx xxx xxx . SEC. 318. Period of limitation upon assessment and collection — Except as provided in the succeeding section. 10 On August 29.973. collection of the deficiency taxes by virtue of warrants of distraint and levy was enjoined by respondent court upon motion of Wyeth Suaco in a resolution dated May 22. plus 14% annual interest thereon from December 17. The said law provides that an assessment of any internal revenue tax within the five-year period of limitation may be collected by distraint or levy or by a proceeding in court. 1980. petitioner issued a warrant of distrain of personal property and warrant of levy of real property again private respondent to enforce collection of the deficiency taxes. 319. in accordance with Section 319 (c) of the Tax Code of 1977. praying that lpeti tioner be enjoined from enforcing the assessments by reason of prescription and that the assessments be declared null and void for lack of legal and factual basis. the dispositive portion of which reads as follows: WHEREFORE. Without pronouncement as to costs. 1973.155. and the amount of P1. Wyeth Suaco filed a petition for review in Court of Tax Appeals on January 18. 1974 until payment thereof pursuant to Section 183 (now Section 193) of the Tax Code.. 1980.

in behalf of Wyeth Suaco dated January 17. its protest letters dated January 17. on the other hand. maintains the position that it never asked for a reinvestigation nor reconsideration of th assessments. which could interrupt the running of the fiveyear prescriptive period. 1975. the government is not thereby "persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant.. 13 Also in the case of Cordero vs. . Inc. Wyeth Suaco. Capitol Subdivision. 14 we held: Partial payment would not prevent the government from suing the taxpayer. this Court stated that the statutory period of limitation for collection may be interrupted if by the taxpayer's repeated requests or positive acts the Government has been. In the case of Commissioner of Internal Revenue vs. . he avers that the running of the prescriptive period was stayed or interrupted when Wyeth Suaco protested the assessments. 1975 and February 8. by such act of payment. Petitioner argues that the protest letters sent by SGV & Co. 12 this Court held: The period of prescription of action to collect a taxpayer's deficiency income tax assessment is interrupted when the taxpayer request for a review or reconsideration of said assessment. but only if begun (1) within five years after the assessment of the tax. Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. 1974 up to the time the warrants of distraint and levy were served on March 12. and starts to run again when said request is denied. for good reasons. the pivotal issue in this case is whether or not Wyeth Suaco sought reinvestigation or reconsideration of the deficiency tax assessments issued by the Bureau of Internal Revenue. Because. Although he admits that more than five (5) years have already lapsed from the time the assessment notices were received by private respondent on December 19. Gonda. Thus. persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Goverrument. 1975 did not suspend or interrupt the running of the five-year prescriptive period. (emphasis supplied) Thus. or (2) prior the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such five-year period. (emphasis supplied) The main thrust of petitioner for the allowance of this petition is that the five-year prescriptive period provided by law to mak a collection by distraint or levy or by a proceeding in court has not yet prescribed.. 1980. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. What it requested was the cancellation and with drawal of the assessments for lack of legal and factual basis.(c) Where the assessment of any internal revenue tax has been made within the period of limitation above-prescribed such tax may be collected by distraint or levy by a proceeding in court. 1975 and February 8." This is the underlying reason behind the rule that the prescriptive period is arrested by the taxpayer's request for re-examination or reinvestigation — even if he "has not previously waived it (prescription in writing)". requesting for withdrawal and cancellation of the assessments were actually requests for reinvestigation or reconsideration.. In another case.

private respondent's claim that it did not seek reinvestigation or reconsideration of the assessments is belied by the subsequent correspondence or letters written by its officers. These letters of Wyeth Suaco interrupted the running of the five-year prescriptive period to collect the deficiency taxes. . through our tax advisers. 16 (Emphasis supplied) Although the protest letters prepared by SGV & Co. 15 (emphasis supplied) Furthermore. Velayo & Co. 1975. to wit: We submit this letter as a follow-up to our protest filed with your office.855. the relevant portion of which is quoted hereunder. Verily. please be advised that the deficiency tax stated in your letter is what we are protesting on pursuant to the letters we filed with the Bureau of Internal Revenue on January 20. as shown above. 1979 and received by private respondent on January 2. xxx xxx xxx Nevertheless. This final assessment issue by then Acting Commissioner Ruben B. This period started to run again when the .112. after having reviewed the record of Wyeth Suaco.. However. 1975 and on February 10. when Wyeth Suaco protested the assessments and sought its reconsideration in two (2) letters received by the Bureau of Internal Revenue on January 20 and February 10. It was only upon receipt by Wyeth Suaco of this final assessment that the five-year prescriptive period started to run again.178.155. Sycip. The pertinent portion of said letter reads as follows: This will acknowledge receipt of your letter dated May 22. dated April 28.. 1974. Gump. The Bureau of Internal Revenue. the original assessments dated December 16 and 17. Manufacturing Audit Division. 1975 regarding our alleged income and business tax deficiencies for fiscal year 1972/73. we find that Wyeth Suaco admitted that it was seeking reconsideration of the tax assessments as shown in a letter of James A. including interest and surcharges. conducted a review and reinvestigation of the assessments. By virtue of these letters. in accordance with its request for reinvestigation. fixed its tax liability at P1. rendered a final assessment.21 as deficiency sales tax. 1980. the Bureau of Internal Revenue ordered its Manufacturing Audit Division to review the assessment made.After carefully examining the records of the case. the prescriptive period was interrupted. Gorres. 1975. Tax Accounts Division. the Bureau of Internal Revenue.994.86 as deficiency withholding tax at source and P61. the matter is now undergoing review and consideration by your Manufacturing Audit Division. when Wyeth Suaco thru its tax consultant SGV & Co. 1974 were both received by Wyeth Suaco on December 19.21. Furthermore." the same are to be treated as letters of reinvestigation and reconsideration. sent the letters protesting the assessments. on January 20 and February 10. 1975. in behalf of private respondent did not categorically state or use th words "reinvestigation" and "reconsideration. on which we are seeking reconsideration. This fact was admitted by Wyeth Suaco thru its Finance Manager in a letter dated July 1.973.15 and on percentage tax of P60. Ancheta was date December 10.. we regret our inability to make settlement. 1975 addressed to the Chief. xxx xxx xxx As we understand. its President and General Manager. Pending the outcome of their decision. 1975 regarding alleged deficiency on withholding tax at source of P3.

states the principle in detail. It is said that taxes are what we pay for civilized society. an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed. 20 where this Court cited 51 Am. require the withholding agents to pay or deposit the taxes deducted and withheld at more frequent intervals when necessary to protect the interest of the government. The "Report of Investigation" submitted by the tax examiner indicated that accrual was the basis of the taxpayer's return. It is the lifeblood of the government and so should be collected without unnecessary hindrance . With regard to the accuracy of the assessment on deficiency sales tax. private respondent recorded accrued royalties and dividends payable as well as the withholding tax at source payable on these incomes. 1980. with the approval of the Secretary of Finance. private respondent was obligated to remit the same to the Bureau of Internal Revenue. This is in line with our ruling in several cases wherein we said that tax assessments by tax examiners are presumed correct and made in good faith. 685 effective July 1. Having deducted and withheld the tax at source and having recorded the withholding tax at source payable in its books of accounts. the records show that Wyeth Suaco adopted the accrual method of accounting wherein the effect of transactions and other events on assets and liabilities are recognized and reported in the time periods to which they relate rather than only when cash is received or paid. private respondent avers that it was not liable to remit the taxes withheld at source on royalties and dividends unless these incomes have been actually paid to its foreign licensors and stockholders. All presumptions are in favor of the correctness of tax assessments. thus: All presumptions are in favor of the correctness of tax assessments. 620-621. It maintains the stand that withholding tax at source should only be remitted to the Bureau of Internal Revenue once the incomes subject to withholding tax at source have actually been paid.. The taxpayer has the duty to prove otherwise.. In the absence of proof of any irregularities in the performance of duties. They will be presumed to have taken into consideration all the facts to which their attention was called.. Having resolved the issue of prescription. we now come to the merits of the case. Without taxes. requires the filing of monthly return and payment of taxes withheld at source within (10) days after the end of each month. The return shall be filed and the payment made within 25 days from the close of each calendar quarter". the government would be paralyzed for lack of the motive power to activate and operate it.. Thus. . . 17 In line with this principle. particularly Section 54 (a) [now Section 51 (a)] provides that "the Commissioner of Internal Revenue may. No presumption can be indulged that all of the public officials of the State in the various counties who have to do with the assessment of property for taxation will knowingly violate the duties imposed upon them by law. 18 Thus. then. Moreover. only about four (4) months of the five-year prescriptive period was used. Inc. Since the warrants of distraint and levy were served on Wyeth Suaco on March 12. Presently. the Tax Code. in the absence of proof submitted by Wyeth Suaco to the contrary. pp. 1980. Construction Resources of Asia..19 The case of Commissioner of Internal Revenue vs. 1985. The good faith of tax assessors and the validity of their actions are presumed. we rule that the examiner's assessment should be given full weight and credit.Bureau of Internal Revenue served the final assessment to Wyeth Suaco on January 2. Jur. Revenue Regulation No. Wyeth Suaco questions the legality of the regulation imposed by the Bureau of Intemal Revenue of requiring a withholding agent or taxpayer to remit the taxes deducted and withheld at source on incomes which have not yet been paid.

1990 COMMISSIONER OF INTERNAL REVENUE. without ruling on the protest. UNION SHIPPING CORPORATION and THE COURT OF TAX APPEALS.: This is a petition for review on certiorari of the December 9. on November 25. L-66160 May 21. Costs against private respondent. Inc. 2989 reversing the Commissioner of Internal Revenue.155.855. private respondent protested the assessment.. Gutierrez. Clemente Celso. Ltd. respondents. Wyeth Suaco deducted non-deductible raw materials which were not subjected to advance sales tax thereby resulting in its failure to pay the correct amount of sales tax under Section 183.22 as deficiency income taxes due for the years 1971 and 1972. vs. 1983 decision * of the Court of Tax Appeals in CTA Case No. 1975.. with interest and surcharge in accordance with law.. in relation to Section 186 and 186-B of the Tax Code. 69. Artemio M. Wyeth Suaco was not able to refute this by submitting supporting documents. which was served on private respondent's counsel. 1975. the total sum of P583.973. Petitioner. J. issued a Warrant of Distraint and Levy (Exhibit "C"). It was ascertained that during the investigation. concur. the petition is GRANTED. 1974 (Exhibit "A") herein petitioner Commissioner of Internal Revenue assessed against Yee Fong Hong. petitioner.21 as deficiency sales tax with interest and surcharge in accordance with law.R. Wyeth Suaco Laboratories. Bidin and Davide. and/or herein private respondent Union Shipping Corporation. No. Said letter was received on January 4. prior to and after amendment by Presidential Decree No. is also ordered to pay the Bureau of Internal Revenue the amount of P60. 1975 (Exhibit "B"). received by petitioner on January 13. Feliciano. JJ. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. and in a letter dated January 10. is hereby ordered to pay the Bureau of Internal Revenue the amount of P1. Jr. Jr. 1976.86 as deficiency withholding tax at source. In a letter dated December 27. Wyeth Suaco Laboratories. Inc. PARAS. without prejudice to any reduction brought about by payments or remittance made. .The final assessment issued by the Bureau of Internal Revenue declared the issuance of deficiency sales tax assessments to be legal and valid.112. 21 WHEREFORE. SO ORDERED. Lobrin for private respondent.

1978. 156). pp. interest and compromise penalties. 1985. 1985 (Rollo. petitioner contends that the warrant of distraint and levy was issued after respondent corporation filed a request for reconsideration of subject assessment. petitioner's decision has long become final and executory. p. On January 10. judgment be rendered holding that it is not liable for the payment of the income tax herein involved. 1976. In compliance. filed their brief on June 6. filed a collection suit before Branch XXI of the then Court of First Instance of Manila and docketed as Civil Case No. respectively. petitioner filed his brief on May 10. p. The main thrust of this petition is that the issuance of a warrant of distraint and levy is proof of the finality of an assessment because it is the most drastic action of all media of enforcing the collection of tax. 1979.958.. after the filing of the required pleadings. docketed therein as CTA Case No. Ltd.22 for the years 1971 and 1972. 9 and 12). thus constituting petitioner's final decision in the disputed assessments (Brief for petitioner. again. assessing against and demanding from petitioner the payment of deficiency income tax. Petitioner. whether or not the Court of Tax Appeals has jurisdiction over this case and (b) on the merits. Respondent Tax Court. Among others. 1976 (Exhibit "D-1") private respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru the Warrant of Distraint and Levy. is liable for payment of taxes on the gross receipts or earnings of the latter. 2989 (Rollo. 1976 (Exhibit "D"). and is tantamount to an outright denial of a motion for reconsideration of an assessment. wherein it prays that after hearing. resolved to give due course to the petition. Hence. 1979 when respondent corporation sought redress from the Tax Court. 1979 (Rollo. 1974. The Second Division of this Court. pp. in the amounts of P73. the instant petition. The main issues in this case are: (a) on the procedural aspect. p. 50-53). Respondents.76 and P583. is reversed. to file his brief (Rollo. pp. 1985 (Rollo. . on the other hand. On this issue. private respondent filed with respondent court its Petition for Review of the petitioner's assessment of its deficiency income taxes in a letter dated December 27. whether or not Union Shipping Corporation acting as a mere "husbanding agent" of Yee Fong Hong Ltd. in a decision dated December 9. Summons (Exhibit "E") in the said collection case was issued to private respondent on December 28. received by petitioner on November 29. 120459 against private respondent. Petitioner argues therefore that the period to appeal to the Court of Tax Appeals commenced to run from receipt of said warrant on November 25. or which may be due from foreign shipowner Yee Fong Hong. 44-49). in a resolution dated January 28. 151). inclusive of 50% surcharge.155. this Court had already laid down the dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. 1983. 145). ruled in favor of private respondent — WHEREFORE. without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy.In a letter dated November 27. and directed petitioner therein. to which petitioner filed his answer on March 29. so that on January 10. the decision of the Commissioner of Internal Revenue appealed from.

the taxpayer would be able to determine when his right to appeal to the tax court accrues. (Surigao Electric Co. [1974]). 528. . it was found fully substantiated by the Court of Tax Appeals that. as amended. regularity and orderliness in administrative action. the Commissioner of Internal Revenue. . Had he categorically stated that he denies private respondent's motion for reconsideration and that his action constitutes his final determination on the disputed assessment. This 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. 1978 that the period to appeal commenced to run. 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. consequently. 133 SCRA 769 [1984] emphasis supplied). not having clearly signified his final action on the disputed assessment. There appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration but contrary to the above ruling of this Court. v. Inc. private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided. Without needless difficulty. So. Of greater import.Specifically. On the part of the Commissioner. as follows: . it consumed a total of only thirteen (13) days well within the thirty day period to appeal pursuant to Section 11 of R. 1125. Ltd. 57 SCRA 523. that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals and not the warrants of distraint (Advertising Associates. Court of Appeals. that the reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner.T. left private respondent in the dark as to which action of the Commissioner is the decision appealable to the Court of Tax Appeals. it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28. the collection of the amount demanded as taxes — by repeated requests for recomputation and reconsideration. 1979 when private respondent filed the appeal with the Court of Tax Appeals. regularity. v.A. 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. this Court ruled: . The request for reinvestigation and reconsideration was in effect considered denied by petitioner when the latter filed a civil suit for collection of deficiency income. that on January 10.. as contemplated by sections 7 and 11 of Republic Act 1125. Much later. 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. the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. respondent corporation is the husbanding agent of the vessel Yee Fong Hong. On the basis of this statement indubitably showing that the Commissioner's communicated action is his final decision on the contested assessment.A. It was likewise stressed that the procedure enunciated is demanded by the pressing need for fair play. C. this Court reiterated the above-mentioned dictum in a ruling applicable on all fours to the issue in the case at bar. legally the period to appeal has not commenced to run. On the merits. Thus. Inc. this rule of conduct would meet a pressing need for fair play. Under the circumstances.. and orderliness in administrative action.

Inc. p. 64-66). Ltd. A careful scrutiny of the records reveals no cogent reason to disturb the findings of the Court of Tax Appeals. Vera. "if an individual or corporation like the petitioner in this case. Ltd. Ltd. is not in the actual possession. for and in representation. (3) it had not collected any freight income or receipts for the said Yee Fong Hong.s.Coming to the second issue. concur. it can neither be physically nor legally liable or obligated to pay the so-called withholding tax on income claimed by Yee Fong Hong. over the funds representing payment by Philippine shippers for cargo loaded on said vessels (pp. (4) it never had possession or control. ibid. July 16. petitioner contended and was substantiated by satisfactory uncontradicted testimonies of Clemente Celso. 58-59). any sum of money representing freight incomes of Yee Fong Hong. a non-resident taxpayer.. (2) it never solicited or procured cargo or freight in the Philippines or elsewhere for loading in said vessels of Yee Fong Hong. or control of the funds. Nov. Neither can private respondent be liable for withholding tax under Section 53 of the Internal Revenue Code since it is not in possession. actual or constructive. 21 & 38. et al. Ltd. (p.. pp.s. JJ.n. Ltd. Rollo. Exhibit "I". SO ORDERED. (pp. the Commissioner of Internal Revenue Misael P. 48. or its vessels or otherwise negotiated or procured cargo to be loaded in the vessels of Yee Fong Hong.)." (Rollo. 22 & 38. pp. ibid). Melencio-Herrera. On the same issue. Cabalquinto. It is well-settled that in passing upon petitions for review of the decisions of the Court of Tax Appeals. the instant petition is hereby DISMISSED and the assailed decision of the Court of Tax Appeals is hereby AFFIRMED. Manila Machinery & Supply Company. t. 21 & 38.n. (ITEMCOP) v. PREMISES CONSIDERED.. 135 SCRA 8 [1985]).. President and General Manager. t. ibid. and (5) that the freight payments made for cargo loaded in the Philippines for foreign destination were actually paid directly by the shippers to the said Yee Fong Hong. ibid. (Rollo. this Court is generally confined to questions of law. Padilla. Sarmiento and Regalado. of petitioner that it is actually and legally the husbanding agent of the vessel of Yee Fong Hong. 63. (136 SCRA 549 [1985]). on query of respondent's counsel. Ltd. pp. custody. it must be stated that factual findings of the Court of Tax Appeals are binding on this Court (Industrial Textiles Manufacturing Company of the Phil. Ltd. 1980. as (1) it neither performed nor transacted any shipping business. Ltd. 67). As correctly ruled by the Court of Tax Appeals. Footnotes . Ltd. p. 46 & 48. (p. 14. (pp. Finally. 21. Ltd. petitioner never remitted to Yee Fong Hong.. ibid. upon arrival of the goods in the foreign ports. and Rodolfo C. p. p. Certified Public Accountant. Commissioner of Internal Revenue.). ibid). 21. custody or control of the funds received by and remitted to Yee Fong Hong.. opined that respondent corporation being merely a husbanding agent is not liable for the payment of the income taxes due from the foreign ship owners loading cargoes in the Philippines (Rollo. 1980). 48. The findings of fact of said Court are not to be disturbed unless clearly shown to be unsupported by substantial evidence (Commissioner of Internal Revenue v. of Yee Fong Hong.

On September 30. 1 The facts as found by the trial court and affirmed by the Appellate Court are substantially as follows: Petitioner spouses Emilio E. Fornier. L-48134-37 October 18. were engaged in the dealership of various household appliances They filed income tax returns for the years 1958 and 1959. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES. with business address at No. Lim.127. 1960. 336 Nueva Street. Quezon City. Branch VI in four (4) Criminal cases constituted by the Bureau of Internal Revenue against petitioners. On October 5. 1990 EMILIO E. petitioners. giving them until May 7. 1965 to pay the amount. Accordingly. A similar raid was made on petitioners' premises at 111 12th Street. Associate Judge Alex Z. 1959. Santiago. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. Manila. 1964 Senior Revenue Examiner Raphael S.913. Roaquin and concurred in by Presiding Judge Amante Filler.R. 1965.00 be made against the petitioners. on April 7. Benjamin M. the Chief of the Investigation Division of the BIR informed petitioners that revenue examiners had been authorized to examine their books of account. On October 14.: The instant petition for review on certiorari seeks the reversal of the Court of Appeals decision dated September 1. Daet submitted a memorandum with the findings that the income tax returns filed by petitioners for the years 1958 and 1959 were false or fraudulent. and ANTONIA SUN LIM. SR.* Penned by Associate Judge Constante C. LIM.04 as deficiency income taxes for 1958 and 1959. .Tinga & Associates for petitioners. respondents. then Acting Commissioner of the BIR. Cornejo of the City Court of Manila. Sr. C. 1977 which affirmed in toto the judgments of the then Court of First Instance of Manila. vs. Daet recommended that an assessment of P835.J. a raid was conducted at their business address by the National Bureau of Investigation by virtue of a search warrant issued by Judge Wenceslao L. Seized from the Lim couple were business and accounting records which served as bases for an investigation undertaken by the Bureau of Internal Revenue (BIR). Reyes dissented in a separate opinion. Tabios informed petitioners that there was due from them the amount of P922. FERNAN. and Antonia Sun Lim. Nos.

On April 10, 1965, petitioner Emilio E. Lim, Sr., requested for a reinvestigation. The BIR expressed willingness to grant such request but on condition that within ten days from notice, Lim would accomplish a waiver of defense of prescription under the Statute of Limitations and that one half of the deficiency income tax would be deposited with the BIR and the other half secured by a surety bond. If within the ten-day period the BIR did not hear from petitioners, then it would be presumed that the request for reinvestigation had been abandoned. Petitioner Emilio E. Lim, Sr. refused to comply with the above conditions and reiterated his request for another investigation. On January 31, 1967, the BIR Commissioner informed petitioners that their deficiency income tax liabilities for 1958 and 1959 had been assessed at P934,000.54 including interest and compromise penalty for late payment. Petitioners were given until March 7, 1967 to submit their objections with the admonition that if they failed to do so, it would be assumed that they were agreeable to the assessment and a formal demand would issue. On March 15, 1967, petitioners wrote the BIR to protest the latest assessment and repeated their request for a reinvestigation. On October 10, 1967, the BIR rendered a final decision holding that there was no cause for reversal of the assessment against the Lim couple. Petitioners were required to pay deficiency income taxes for 1958 and 1959 amounting to P1,237,190.55 inclusive of interest, surcharges and compromise penalty for late payment. The final notice and demand for payment was served on petitioners through their daughter-in-law on July 3, 1968. Still, no payment was forthcoming from the delinquent taxpayers. Accordingly on September 1, 1969, the matter was referred by the BIR to the Manila Fiscal's Office for investigation and prosecution. On June 23, 1970, four (4) separate criminal informations were filed against petitioners in the then Court of First Instance of Manila, Branch VI for violation of Sections 45 and 51 in relation to Section 73 of the National Internal Revenue Code. 2 Trial ensued. On August 19, 1975, the trial court rendered two (2) joint decisions finding petitioners guilty as charged. The dispositive portions read: In Criminal Cases Nos. 1789 and 1788:
WHEREFORE, in view of the foregoing considerations, the Court finds the accused Emilio E. Lim, Sr. and Antonia Sun Lim guilty of a violation of Section 51 penalized under Section 73 of the National Internal Revenue Code and each is hereby sentenced in each case to pay a fine of P2,000.00 and to pay the government pursuant to Presidential No. 69 the amounts of P580,588.75 and P656,601.80 as deficiency income taxes for the years 1958 and 1959, respectively, and the costs of the proceedings. 3

In Criminal Cases Nos. 1790 and 1791:
WHEREFORE, in view of the foregoing considerations, the Court finds the accused Emilio E. Lim, Sr. and Antonia Sun Lim guilty of a violation of Section 45 in relation to Section 332 of the National Internal Revenue Code as amended, penalized under Section 73 of the same Code and hereby sentences each to pay a fine of P4,000.00 in each case and the costs of the proceedings. 4

Petitioners appealed the foregoing decisions to the Court of Appeals. 5 In its judgment dated September 1, 1977, the Court of Appeals affirmed in toto the twin decisions of the lower court. Twenty-three days (23) later or on September 24, 1977, petitioner Emilio E. Lim, Sr. died. On September 26, 1977, petitioners moved for a reconsideration of the decision dated September 1, 1977. On April 4, 1978, the Court of Appeals promulgated a resolution as follows:
WHEREFORE, pursuant to Article 89 of the Revised Penal Code, by the death of appellant Emilio E. Lim, Sr. his criminal liability is totally extinguished but his counsel is hereby required to inform the Court as to who are the heirs of the deceased following which the caption should be modified so as to reflect the civil aspect and substitution of the heirs, as defendants. In all other respects, the decision of this Court promulgated September 1, 1977, stands. 6

Hence the present petition for review by certiorari. In their Brief, petitioners contend that the Appellate Court erred in holding that the offenses charged in Criminal Case Nos. 1790 and 1791 prescribed in ten (10) years, instead of five (5) years; that the prescriptive period in Criminal Cases Nos. 1788 and 1789 commenced to run only from July 3, 1968, the date of the final assessment; that Section 316 of the Tax Code as amended by Presidential Decree No. 69 was applicable to the case at bar; and that the civil obligation of petitioner Emilio E. Lim, Sr. arising from the crimes charged was not extinguished by his death. 7 Preliminarily, it must be made clear that what we are dealing here are criminal prosecutions for filing fraudulent income tax returns and for refusing to pay deficiency taxes. The governing penal provision of the National Internal Revenue Codes 8 is Section 73 in conjunction with Section 354. The dispute centers on the interpretation of Section 354 because in an effort to exculpate themselves, petitioners have raised the defense of prescription. On the five-year prescriptive period, both parties are in agreement. They differ however in the manner of computation, specifically as to when the period should commence. Thus: Section 73. Penalty for failure to file return or to pay tax. — Anyone liable to pay the tax, to make a return or to supply information required under this Code, who refuses or neglects to pay such tax, to make such return or to supply such information at the time or times herein specified in each year, shall be punished by a fine of not more than two thousand pesos or by imprisonment for not more than six months, or both. Any individual or any officer of any corporation, or general co-partnership ..., required by law to make, render, sign or verify any return or to supply any information, who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this Code to be made, shall be punished by a fine of not exceeding four thousand pesos or by imprisonment for not exceeding one year, or both. Section 354. Prescription for violations of any provisions of this Code. — All violations of any provision of this Code shall prescribe after five years. Prescription shall been to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceeding for its investigation and punishment.

The presumption shall be interrupted when proceedings are instituted against the guilty persons and sham begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. The term of prescription shall not run when the offender is absent from the Philippines. (Emphasis supplied) Indubitably, petitioners had filed false and fraudulent income tax returns for the years 1958 and 1959 by nondisclosure of sales in the aggregate amount of P2,197,742.92, thereby depriving the Government in the amount of P1,237,190.55, representing deficiency income taxes inclusive of interest, surcharges and compromise penalty for late payment. Considering that this occurred in the late 1950's, the defraudation was on a massive scale. Relative to Criminal Cases Nos. 1788 and 1789 which involved petitioners' refusal to pay the deficiency income taxes due, again both parties are in accord that by their nature, the violations as charged could only be committed after service of notice and demand for payment of the deficiency taxes upon the taxpayers. Petitioners maintain that the five-year period of limitation under Section 354 should be reckoned from April 7, 1965, the date of the original assessment while the Government insists that it should be counted from July 3, 1968 when the final notice and demand was served on petitioners' daughter-in-law. We hold for the Government. Section 51 (b) of the Tax Code provides: (b) Assessment and payment of deficiency tax. — After the return is filed, the Commissioner of internal Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency in tax so discovered shall be paid upon notice and demand from the Commissioner of Internal Revenue. (Emphasis supplied) Inasmuch as the final notice and demand for payment of the deficiency taxes was served on petitioners on July 3, 1968, it was only then that the cause of action on the part of the BIR accrued. This is so because prior to the receipt of the letter-assessment, no violation has yet been committed by the taxpayers. The offense was committed only after receipt was coupled with the wilful refusal to pay the taxes due within the alloted period. The two criminal informations, having been filed on June 23, 1970, are well-within the five-year prescriptive period and are not time-barred. With regard to Criminal Cases Nos. 1790 and 1791 which dealt with petitioners' filing of fraudulent consolidated income tax returns with intent to evade the assessment decreed by law, petitioners contend that the said crimes have likewise prescribed. They advance the view that the five-year period should be counted from the date ofdiscovery of the alleged fraud which, at the latest, should have been October 15, 1964, the date stated by the Appellate Court in its resolution of April 4, 1978 as the date the fraudulent nature of the returns was unearthed. 9 On behalf of the Government, the Solicitor General counters that the crime of filing false returns can be considered "discovered" only after the manner of commission, and the nature and extent of the fraud have been definitely ascertained. It was only on October 10, 1967 when the BIR rendered its final decision holding that there was no ground for the reversal of the assessment and therefore required the petitioners to pay P1,237,190.55 in deficiency taxes that the tax infractions were discovered. Not only that. The Solicitor General stresses that Section 354 speaks not only of discovery of the fraud but also institution of judicial proceedings. Note the conjunctive word "and" between the phrases "the discovery thereof" and "the institution of judicial proceedings for its investigation and

1788-1789. 11 the same argument came up before the Court but its conclusions on the issue of prescription did not bring us any closer to a categorical ruling. 1969 that the offenses subject of Criminal Cases Nos. 1950. did not give a definitive ruling which would have settled the question once and for all. Ching Lak 10 which had perfunctorily dismissed the Government's position in this wise: Anent the theory that in the present case the period of prescription should commence from the time the case was referred to the Fiscal's Office. in addition to the fact of discovery. and this fatal defect cannot be cured by the introduction of evidence. object to the introduction of evidence to defeat his claim of prescription. The Court is inclined to adopt the view of the Solicitor General. however. In criminal cases. For while that particular point might have been raised in the Ching Lak case. As Section 354 stands in the statute book (and to this day it has remained unchanged) it would indeed seem that tax cases. the Court. They receive a strict construction in favor of the Government and limitations in such cases will not be presumed in the absence of clear legislation. is impressed with merit insofar as it assails the inclusion in the judgment of the payment of deficiency taxes in Criminal Cases Nos. at most. but he did not. It opined: Evidence was adduced to show. But according to the Lim spouses. considered and found without merit in the case of People vs. then the informations were necessarily defective for that reason. Inasmuch as a preliminary investigation is a proceeding for investigation and punishment of a crime. The trial court had absolutely no . there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. however. Since the informations were filed on December 12. are practically imprescriptible for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment. Unless amended by the legislature.proceedings. that since the informations make no allegation that the offenses were not known at the time of the commission as to bring them within the exception to the statute of limitations. that the falsity of the returns filed by the appellant and his failure to preserve his books of accounts for at least five years from the date of the last entry in each book were all discovered only on December 16.. the trial court correctly ruled that the actions were all within the five-year period of limitation. at that time. 1790 and 1791 were indorsed to the Fiscal's Office for preliminary investigation. 13 The petition. the law says that prescription begins to run from . "the institution of judicial proceedings for its . Appellant argues. 1969 that the prescriptive period commenced. suffice it to state that the theory is not supported by any provision of law and we need not elucidate thereon. and the trial court so found. punishment. that argument had precisely been raised... such as the present ones. Prescription is a matter of defense and the information does not need to anticipate and meet it. It was on September 1. And as it is. (Emphasis supplied). Section 354 stays in the Tax Code as it was written during the days of the Commonwealth. 1955. The defendant could. must be applied regardless of its apparent one-sidedness in favor of the Government.. statutes of limitations are acts of grace." 12 (Emphasis supplied). Tierra." In other words. up to the filing of the information in court does not exceed five (5) years. In the case of People vs. a surrendering by the sovereign of its right to prosecute. Anyway. it was only on September 1.

etc. the civil remedy is either by distraint of goods. 69. However. it fails to provide for the collection of said tax in criminal proceedings. chattels. While Section 73 of the National Internal Revenue Code provides for the imposition of the penalty for refusal or neglect to pay income tax or to make a return thereof. The then Court of First Instance of Manila. pp. (3 Cooley. this is necessarily extinguished by his death in accordance with Section 89 of the Revised Penal Code. has extinguished his tax liability need not concern us. Thus: . Lim. In the case of People vs. SO ORDERED. are not time-barred pursuant to Section 354 of the National Internal Revenue Code. Section 1326. Presidential Decree No. Sr. which provides that "judgment in the criminal case shall not only impose the penalty but shall order payment of the taxes subject of the criminal case". . Branch 6 is devoid of jurisdiction to direct the collection and payment of the unpaid deficiency taxes in Criminal Case Nos. or both. having been instituted by the Government on June 23. Under the cited Tierra and Arnault cases. In resume we therefore rule: 1. The lower court erred in applying Presidential Decree No. because that decree took effect only on January 1. WHEREFORE. It is a commonly accepted principle of law that the method prescribed by statute for the collection of taxes is generally exclusive. Chapters I and II of Title IX of the National Internal Revenue Code provides only for civil remedies for the collection of the income tax. 2. No costs. 1973 whereas the criminal cases subject of this appeal were instituted on June 23. Criminal Cases Nos.. 3. Tierra. the question of whether or not the supervening death of petitioner Emilio E. Lim. 1970. 16 Considering that under Section 316 of the Tax Code prior to its amendment the trial could not order the payment of the unpaid taxes as part of the sentence. 14 we reiterated the ruling in People vs. Arnault. pursuant to Section 89 of the Revised Penal Code. Law on Taxation. As well contended by counsel for appellant. 1788-1789 and 1790-1791. and under Section 316. Save in the two specific instances. 621-623). Sr. 15 that there is no legal sanction for the imposition of payment of the civil indemnity to the Government in a criminal proceeding for violation of income tax laws. conformably with the abovestated ruling. or by judicial action. 69 has no retroactive application. it is clear that criminal conviction for a violation of any penal provision in the Tax Code does not amount at the same time to a decision for the payment of the unpaid taxes inasmuch as there is no specific provision in the Tax Code to that effect. 1788-1789 because prior to the amendment introduced by Presidential Decree No.jurisdiction in sentencing the Lim couple to indemnify the Government for the taxes unpaid. 1970. 69. by imprisonment or fine. the decision of the Court of Appeals under review is deemed MODIFIED. The fine imposed in the four (4) aforementioned criminal cases is hereby affirmed in the case of petitioner Antonia Sun Lim in accordance with the provision of Section 73 of the Tax Code. with regard to the pecuniary penalty of fine imposed on the deceased Lim. particularly Section 316 thereof... it should be followed strictly. such imposition was not sanctioned under Section 316. The fine is deemed extinguished in the ease of the deceased petitioner Emilio E. and unless a contrary intent be gathered from the statute.

both of the Court of Tax Appeals (CTA or tax court). No. 1986. 1986 PAN.. concur. .752. petitioner filed a protest on the demand/assessment notices. Attached to the letter dated June 17. for the years 1982 to 1986. Feliciano. petitioner requested for an opportunity to present or submit additional documentation on the Swap Transactions with the then Central Bank (page 240. Petitioner.. Swap Contracts with the Central Bank. 1993.82 and P24. 174942 March 7. On April 20. the surviving bank after its merger with Far East Bank and Trust Company. J.Bidin and Cortes. The following undisputed facts are culled from the CTA decision: Petitioner. Respondent thru then Revenue Service Chief Cesar M. petitioner..63.860. in a letter dated November 29. On March 12. Makati City. which ruled that BPI is liable for the deficiency documentary stamp tax (DST) on its cabled instructions to its foreign correspondent bank and that prescription had not yet set in against the government. 1986. respondent. JJ. 1989. in connection with the reinvestigation of the abovementioned assessment. BIR Records). petitioner filed a supplemental protest. respondent issued to the petitioner. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.174. On April 7. J. assessment/demand notices FAS-1-82 to 86/89-000 and FAS 5-82 to 86/89-000 for deficiency withholding tax at source (Swap Transactions) and DST involving the amounts of P190. COMMISSIONER OF INTERNAL REVENUE. respectively. vs.R. 1994.587. is a corporation duly created and existing under the laws of the Republic of the Philippines with principal office at Ayala Avenue corner Paseo de Roxas Ave. 1989. 2008 BANK OF THE PHILIPPINE ISLANDS (Formerly: Far East Bank and Trust Company).: The Bank of the Philippine Islands (BPI) seeks a review of the Decision1dated 15 August 2006 and the Resolution2dated 5 October 2006. requested for the details of the amounts alleged as 1982-1986 deficiency taxes mentioned in the November 26. petitioner submitted to the BIR. DECISION TINGA. Valdez. On May 8. is on leave. 1989. issued to the petitioner a pre-assessment notice (PAN) dated November 26.

On March 9. On August 31.Petitioner executed several Waivers of the Statutes of Limitations. petitioner filed with the Court En Banc a Motion for Extension of Time to File Petition for Review praying for an extension of fifteen (15) days from March 10. on January 24. the deficiency DST assessment in the amount ofP24. THIS HONORABLE COURT ERRED IN HOLDING THAT THE 4 MARCH 1987 MEMORANDUM OF THE LEGAL SERVICE CHIEF DULY APPROVED BY THE BIR COMMISISONER VESTS NO RIGHTS TO PETITIONER. On September 21. the petition is hereby DENIED for lack of merit. petitioner filed the instant Petition for Review. plus 20% interest starting February 14. On March 28. SO ORDERED. petitioner filed a Motion for Reconsideration of the abovementioned Decision which was denied for lack of merit in a Resolution dated February 14. I. 2003 until the amount is fully paid pursuant to Section 249 of the Tax Code. 2005. the Court rendered a Decision denying the petitioner’s Petition for Review. 2003.587.174. Accordingly. 1994. 2002. advancing the following assignment of errors.860. 1994.63 was reiterated and the petitioner was ordered to pay the said amount within thirty (30) days from receipt of such order. THIS TAX COURT ERRED IN HOLDING THAT THE COLLECTION OF ALLEGED DEFICIENCY TAXHAS NOT PRESCRIBED.82 and considered the same as closed and terminated. 2004. V. THIS HONORABLE COURT ERRED IN HOLDING THAT PETITIONER IS LIABLE FOR DOCUMENTARY STAMP TAX ON SWAP LOANS TRANSACTIONS FROM 1982 TO 1986. 2005 or until March 25. the last of which was effective until December 31.63 representing deficiency documentary stamp tax for the period 1982-1986. respondent issued a final decision on petitioner’s protest ordering the withdrawal and cancellation of the deficiency withholding tax assessment in the amount of P190. On the other hand. petitioner is ORDERED to PAY the respondent the amount of P24. III. II. 2005. (March 25 was Good Friday). Petitioner’s motion was granted in a Resolution dated March 16. Petitioner received a copy of the said decision on January 15. petitioner filed a Petition for Review before the Court. 2003. IV.587. the dispositive portion of which is quoted hereunder: IN VIEW OF ALL THE FOREGOING. 2004. Thereafter. On August 9.3 . 2005. 2005. 2005. THIS HONORABLE COURT ERRED IN HOLDING THAT RESPONDENT DID NOT VIOLATE PROCEDURAL DUE PROCESS IN THE ISSUANCE OF ASSESSMENT NOTICE RELATIVE TO DOCUMENTARY STAMP DEFICIENCY.752. THIS HONORABLE COURT OVERLOOKED THE SIGNIFICANCE OF THE WAIVER DULY AND VALIDLY AGREED UPON BY THE PARTIES AND EFFECTIVE UNTIL DECEMBER 31.174.

—Except as provided in the succeeding section. that the CIR acted on the request for reinvestigation. 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. applying the case of Commissioner of Internal Revenue v. or even until the expiration on 31 December 1994 of the last waiver of the statute of limitations signed by BPI. on behalf of the CIR. For the purposes of this section. Such action was allegedly communicated to BPI as. It was only through the 9 August 2002 Decision ordering BPI to pay deficiency DST. Wyeth Suaco Laboratories. In its Petition for Review5 dated 24 November 2006.. warranting the conclusion that prescription had already set in. Moreover.The CTA synthesized the foregoing issues into whether the collection of the deficiency DST is barred by prescription and whether BPI is liable for DST on its SWAP loan transactions. Thus. second. It further held. it never induced the CIR to postpone tax collection. in fact. the tax court. 318. The Office of the Solicitor General (OSG) filed a Comment6 dated 1 June 2007. BPI avers that the cabled instructions to its correspondent bank are not subject to DST because the National Internal Revenue Code of 1977 (Tax Code of 1977) does not contain a specific provision that cabled instructions on SWAP transactions are subject to DST. the same to be credited to the account of the Central Bank. In its Reply8dated 30 August 2007. et al. Suyoc Consolidated Mining Company. asserting that the prescriptive period was tolled by the protest letters filed by BPI which were granted and acted upon by the CIR. it was only upon BPI’s receipt on 13 January 2003 of the 9 August 2002 Decision that the period to collect commenced to run again. that BPI’s cabled instructions to its foreign correspondent bank to remit a specific sum in dollars to the Federal Reserve Bank. It further claims that the CIR was not precluded from collecting the deficiency within three (3) years from the time the notice of assessment was issued on 7 April 1989. or after the lapse of more than thirteen (13) years. ruled that BPI’s protest and supplemental protest should be considered requests for reinvestigation which tolled the prescriptive period provided by law to collect a tax deficiency by distraint. On the first issue. are in the nature of a telegraphic transfer subject to DST under Section 195 of the Tax Code. a return filed before the last day prescribed by law for the filing thereof shall be considered as . Section 3189 of the Tax Code of 1977 provides: Sec. We grant the petition. BPI argues that the government’s right to collect the DST had already prescribed because the Commissioner of Internal Revenue (CIR) failed to issue any reply granting BPI’s request for reinvestigation manifested in the protest letters dated 20 April and 8 May 1989. its request for reinvestigation was not categorically acted upon by the CIR within the three-year collection period after assessment. levy. Period of limitation upon assessment and collection. as regards the second issue. Inc. BPI argues against the application of the Suyoc case on two points: first. BPI maintains that it did not receive any communication from the CIR in reply to its protest letters. The OSG cites the case of Collector of Internal Revenue v.7(Suyoccase) in support of its argument that BPI is already estopped from raising the defense of prescription in view of its repeated requests for reinvestigation which allegedly induced the CIR to delay the collection of the assessed tax.4(Wyeth Suaco case). the latter submitted additional documents pertaining to its SWAP transactions in support of its request for reinvestigation. or court proceeding.

the Collector ignored the request. in order to effect suspension. Considering the given facts.13the Court emphasized the rule that the CIR must first grant the request for reinvestigation as a requirement for the suspension of the statute of limitations. In order to suspend the running of the prescriptive periods for assessment and collection. Gancayco. Suspension of running of statute. 700. 1949. when the warrant of distraint and levy is duly served upon the taxpayer. (Collector v. we need to examine Section 32012 of the Tax Code of 1977. In order to determine whether the prescriptive period for collecting the tax deficiency was effectively tolled by BPI’s filing of the protest letters dated 20 April and 8 May 1989 as claimed by the CIR. and the records and documents were not at all examined. and when the taxpayer is out of the Philippines. this Court pronounced that— x x x The act of requesting a reinvestigation alone does not suspend the period.—The running of the statute of limitations provided in Sections 318 or 319 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection. However. mailed or sent to the taxpayer. it was only on 9 August 2002 that the CIR ordered BPI to pay the deficiency. and no property could be located. which states: Sec. The Court said: In the case of Republic of the Philippines v. In BPI v. When it validly issues an assessment within the three (3)-year period. Suyoc Consolidated. it has another three (3) years within which to collect the tax due by distraint. within which to submit his evidence. the CIR had three (3) years from the time he issued assessment notices to BPI on 7 April 1989 or until 6 April 1992 within which to collect the deficiency DST. The statute of limitations on assessment and collection of national internal revenue taxes was shortened from five (5) years to three (3) years by Batas Pambansa Blg. yet. the CIR has three (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. 320. also Republic v. That if the taxpayer informs the Commissioner of any change in address. That this limitation shall not apply to cases already investigated prior to the approval of this Code.10 Thus. supra. 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.11 As applied to the present case. . Ablaza.filed on such last day: Provided. the request for reinvestigation must be granted by the CIR. the running of the statute of limitations will not be suspended. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. The request should first be granted. Moreover. in respect of any deficiency. when the taxpayer requests for a re-investigation which is granted by the Commissioner. or a member of his household with sufficient discretion. the Collector gave appellee until April 1. or court proceeding. 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 days thereafter. Commissioner of Internal Revenue. (Emphasis supplied) The above section is plainly worded. taxpayer Gancayco requested for a thorough reinvestigation of the assessment against him and placed at the disposal of the Collector of Internal Revenue all the evidences he had for such purpose. supra). his authorized representative. which the latter did one day before. levy.

without any assertion that the same had been granted or at least acted upon. as he considered BPI’s letters of protest to be. The records of the case showed that as a result of these protest letters. private respondent Wyeth Suaco Laboratories. the records of this case do not disclose any effort on the part of the Bureau of Internal Revenue to collect the deficiency tax after the expiration of the waiver until eight (8) years thereafter when it finally issued a decision on the protest. What is reflected in the records is the piercing silence and inaction of the CIR on the request for reinvestigation. [Emphasis in the original]14 The Court went on to declare that the burden of proof that the request for reinvestigation had been actually granted shall be on the CIR. The CIR himself contends that the waiver is void as it shows no date of acceptance in violation of RMO No. expressly or impliedly. it was only in his comment to the present petition that the CIR. 1949. after receiving the assessment notice of September 24. 1950 the then Collector of Internal Revenue issued a warrant of distraint and levy for the full amount of the assessment (Exh. sent letters seeking the reinvestigation or reconsideration of the deficiency tax assessments issued by the BIR. the request for reinvestigation did not suspend the running of the period for filing an action for collection. Acebedo. The records further showed that the company. Inc. As differentiated from the Wyeth Suaco case. but there was follow-up of this warrant. In fact. there is no evidence in this case that the CIR actually conducted a reinvestigation upon the request of BPI or that the latter was made aware of the action taken on its request.There were no impediments on the part of the Collector to file the collection case from April 1. "D"). 1949… In Republic of the Philippines v. thru its finance manager. There is no evidence that this request was considered or acted upon. on October 23. 20-90. this Court similarly found that— x x x T]he defendant. there is no basis for the tax court’s ruling that the filing of the request for reinvestigation tolled the running of the prescriptive period for collecting the tax deficiency. argued for the first time that he had granted the request for reinvestigation. There is nothing in the records of this case which indicates. the Collector of Internal Revenue refrained . Hence. We also find the Suyoc case inapplicable. communicated its inability to settle the tax deficiency assessment and admitted that it knew of the ongoing review and consideration of its protest.16 At any rate. Neither did the waiver of the statute of limitations signed by BPI supposedly effective until 31 December 1994 suspend the prescriptive period. His consistent stance invoking the Wyeth Suaco case. through the OSG. as reflected in the records. that the CIR had granted the request for reinvestigation filed by BPI. Consequently. asked for a reinvestigation thereof on October 11.15 In the Wyeth Suaco case. "A"). As a result. Such grant may be expressed in its communications with the taxpayer or implied from the action of the CIR or his authorized representative in response to the request for reinvestigation. is that the prescriptive period was tolled by BPI’s request for reinvestigation. In fact. In that case. 1949 (Exh. however. several requests for reinvestigation and reconsideration were filed by Suyoc Consolidated Mining Company purporting to question the correctness of tax assessments against it. the BIR Manufacturing Audit Division conducted a review and reinvestigation of the assessments.

Azcuna*. are hereby REVERSED and SET ASIDE. not to determine the latter’s real liability. SO ORDERED. No. WHEREFORE. 167146 October 31. much less granted. No pronouncement as to costs. the petition is GRANTED. JJ..from collecting the tax by distraint. cannot be said to have persuaded the CIR to postpone the collection of the deficiency DST. Ablaza:17 The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens. 2006 . Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. Jr. Carpio-Morales. In this case. to the Government because tax officers would be obliged to act promptly in the making of assessment. The Decisionof the Court of Tax Appeals dated 15 August 2006 and its Resolution dated 5 October 2006. and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers. The company. The inordinate delay of the CIR in acting upon and resolving the request for reinvestigation filed by BPI and in collecting the DST allegedly due from the latter had resulted in the prescription of the government’s right to collect the deficiency. the government was induced to delay the collection of taxes to make the company feel that the demand was not unreasonable or that no harassment or injustice was meant by the government. When the case reached this Court. we no longer deem it necessary to pass upon the validity of the assessment. concur. Acting Chairperson.R. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law. BPI’s letters of protest and submission of additional documents pertaining to its SWAP transactions. which were never even acted upon. As this Court declared in Republic of the Philippines v.18 Given the prescription of the government’s claim. Velasco. by its own action. Carpio. Without such a 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. filed a petition with the CTA claiming that the right of the government to collect the tax had already prescribed. however. levy or court proceeding in order to give the company every opportunity to prove its claim. we ruled that Suyoc could not set up the defense of prescription since. lawabiding citizens. The Collector also conducted several reinvestigations which eventually led to a reduced assessment.. but to take advantage of every opportunity to molest peaceful.

the CTA rendered a Decision in favor of respondent on 9 June 2004. On 13 April 1992. Respondent filed another protest letter on 23 May 1994. respondent requested for the cancellation of the tax assessment. a corporation engaged in telecommunications. Case No. under Rule 45 of the Rules of Court. On 22 April 1992.A. through another counsel Siguion Reyna Montecillo & Ongsiako Law Offices. Inc.672. vs. for its 1990 income tax deficiency. dated 14 April 1994.1 ordering the petitioner to withdraw and cancel Assessment Notice No. 37 dated 22 February 2005. which they alleged was invalid for lack of factual and legal basis. In both letters.4 On 16 October 2002. affirmed the Decision of the First Division of the CTA dated 9 June 20042 and its Resolution dated 22 September 2004 in C. respondent received a Preliminary Assessment Notice dated 13 April 1994 for deficiency income tax in the amount of P118.00. and compromise penalty. in connection with the investigation of respondent’s 1990 income tax liability.271.T..271.6 The CTA ruled on the primary issue of prescription and found it unnecessary to decide the issues on the validity and propriety of the assessment.3 On 6 May 1994.672. inclusive of surcharge. Respondent. filed a formal protest letter against Assessment Notice No. The CTA. hence. On the following day. the BIR sent a letter to respondent requesting the latter to present for examination certain records and documents. filed its Annual Income Tax Return for taxable year 1990 on 15 April 1991. the Ponce Enrile Cayetano Reyes and Manalastas Law Offices received from the CIR a Final Decision dated 8 October 2002 denying the respondent’s protest against Assessment Notice No.5 On 15 November 2002. INC.00.COMMISSIONER OF INTERNAL REVENUE. and affirming the said assessment in toto. 6568. the Commissioner of Internal Revenue (CIR) issued Letter of Authority No. respondent filed a Petition for Review with the CTA. 000688-80-7333 issued against respondent Philippine Global Communication. through its counsel Ponce Enrile Cayetano Reyes and Manalastas Law Offices. but respondent failed to present any document. 000688-807333. petitioner. more than eight years after the assessment was presumably issued. PHILIPPINE GLOBAL COMMUNICATION. respondent received a Formal Assessment Notice with Assessment Notice No. in its assailed en banc Decision.: This is a Petition for Review on Certiorari. J. 22 April 1994. It decided that the protest letters filed by the respondent cannot constitute a request for reinvestigation. for deficiency income tax in the total amount of P118. 0002307. 000688-80-7333. On 21 April 1994. After due notice and hearing. seeking to set aside the en bancDecision of the Court of Tax Appeals (CTA) in CTA EB No. 000688-80-7333. authorizing the appropriate Bureau of Internal Revenue (BIR) officials to examine the books of account and other accounting records of respondent. respondent. arising from deductions that were disallowed for failure to pay the withholding tax and interest expenses that were likewise disallowed. they cannot toll the running of the prescriptive period . interest. respondent. DECISION CHICO-NAZARIO.

–xxx xxxx c. the CIR filed a Petition for Review with the CTA en banc. Accordingly. THE PRESCRIPTIVE PERIOD WAS INTERUPTED WHEN RESPONDENT FILED TWO LETTERS OF PROTEST DISPUTING IN DETAIL THE DEFICIENCY ASSESSMENT IN QUESTION AND REQUESTING THE CANCELLATION OF SAID ASSESSMENT.12 This Court finds no merit in this Petition. The main issue in this case is whether or not CIR’s right to collect respondent’s alleged deficiency income tax is barred by prescription under Section 269(c) of the Tax Code of 1977. the Petition for Review is hereby DISMISSED for lack of merit. the CIR’s right to collect the same has prescribed in conformity with Section 269 of the National Internal Revenue Code of 19778(Tax Code of 1977). questioning the aforesaid Decision and Resolution. THE REQUESTS FOR REINVESTIGATION OF RESPONDENT WERE GRANTED BY THE BUREAU OF INTERNAL REVENUE. Accordingly. judgment is hereby rendered in favor of the petitioner. The dispositive part reads: WHEREFORE. SITTING EN BANC.to collect the assessed deficiency income tax. 2002 is hereby REVERSED and SET ASIDE and respondent is hereby ORDERED to WITHDRAW and CANCEL Assessment Notice No. B. 6568 DECLARING THAT THE RIGHT OF THE GOVERNMENT TO COLLECT THE DEFICIENCY INCOME TAX FROM RESPONDENT FOR THE YEAR 1990 HAS PRESCRIBED A. Any internal revenue tax which has been assessed within the period of limitation aboveprescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax. respondent’s Final Decision dated October 8. the assailed Decision and Resolution in CTA Case No. .9 The CIR moved for reconsideration of the aforesaid Decision but was denied by the CTA in a Resolution dated 22 September 2004. premises considered.11 Hence. COMMITTED REVERSIBLE ERROR IN AFFIRMING THE ASSAILED DECISION AND RESOLUTION IN CTA CASE NO. The dispositive portion of this decision reads: WHEREFORE. 6568. REQUESTS FOR REINVESTIGATION OF THE DISPUTED ASSESSMENT. premises considered.7 Thus. BY NATURE. In its en banc Decision. since more than three years had lapsed from the time Assessment Notice No.10 Thereafter. 000688-80-7333 was issued in 1994. Exceptions as to the period of limitation of assessment and collection of taxes. which reads: Section 269. 6568 are hereby AFFIRMED in toto. 000688-80-7333 issued against the petitioner for its 1990 income tax deficiency because respondent’s right to collect the same has prescribed. the CTA affirmed the Decision and Resolution in CTA Case No. THE TWO LETTERS OF PROTEST ARE. this Petition for Review on Certiorari raising the following grounds: THE COURT OF TAX APPEALS.

(Vol. whichever came later. II. Just as the government is interested in the stability of its collections. 6568 on 9 January 2003. which was several years beyond the three-year prescriptive period. within which the BIR may assess a national internal revenue tax. the Government should be estopped from collecting the tax where it failed to make the necessary investigation and assessment within 5 years after the filing of the return and where it failed to collect the tax within 5 years from the date of assessment thereof. the Court further illustrated the harmful effects that the delay in the assessment and collection of taxes inflicts upon taxpayers.17 In a number of cases. Prescription in the assessment and in the collection of taxes is provided by the Legislature for the benefit of both the Government and the taxpayer. which needs taxes to run it. Suyoc Consolidated Mining Company.14 In such cases. so also are the taxpayers entitled to an assurance that they will not be subjected to further investigation for tax purposes after the expiration of a reasonable period of time. If the BIR issued this assessment within the three-year period or the ten-year period. so that the agency charged with the assessment and collection may not tarry too long or indefinitely to the prejudice of the interests of the Government.15 The three-year period for collection of the assessed tax began to run on the date the assessment notice had been released.16 The assessment. Report of the Tax Commission of the Philippines. and for the taxpayer so that within a reasonable time after filing his return. in fairness to the taxpayer. for the Government for the purpose of expediting the collection of taxes. the right of the Government to collect the tax does not prescribe. as there was no Warrant of Distraint and/or Levy served on the respondents nor any judicial proceedings initiated by the BIR. the BIR had until 13 April 1997.18 Justice Montemayor. The report submitted by the tax commission clearly states that these provisions on prescription should be enacted to benefit and protect taxpayers: Under the former law.13 However. he may know the amount of the assessment he is required to pay. Therefore. in his dissenting opinion. was presumably issued on 14 April 1994 since the respondent did not dispute the CIR’s claim. In these cases. mailed or sent by the BIR. in this case. pp.The law prescribed a period of three years from the date the return was actually filed or from the last date prescribed by law for the filing of such return. It would surely be prejudicial to the interest of the taxpayer for the Government collecting agency to unduly delay the assessment and the collection because by the time the collecting agency finally . the law increased the prescriptive period to assess or to begin a court proceeding for the collection without an assessment to ten years when a false or fraudulent return was filed with the intent of evading the tax or when no return was filed at all. 321-322). However. this Court has also clarified that the statute of limitations on the collection of taxes should benefit both the Government and the taxpayers. In Collector of Internal Revenue v. However. whichever was applicable. the CIR is now prescribed from collecting the assessed tax. whether or not such assessment is well founded and reasonable so that he may either pay the amount of the assessment or contest its validity in court x x x. identified the potential loss to the taxpayer if the assessment and collection of taxes are not promptly made. the earliest attempt of the BIR to collect the tax due based on this assessment was when it filed its Answer in CTA Case No. fraud or omission. the law provided another three years after the assessment for the collection of the tax due thereon through the administrative process of distraint and/or levy or through judicial proceedings. The provisions on prescription in the assessment and collection of national internal revenue taxes became law upon the recommendation of the tax commissioner of the Philippines. Thus. the ten-year period began to run only from the date of discovery by the BIR of the falsity.

even in the absence of a waiver. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. the taxpayer may then have lost his papers and books to support his claim and contest that of the Government.21 this Court affirmed that the law on prescription should be liberally construed in order to protect taxpayers and that. this exception does not apply to this case since the respondent never . B. and what is more. pronounced that: Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer. (Emphasis supplied. Goodrich. peaceful. is the instance when the taxpayer requests for a reinvestigation which is granted by the Commissioner.20 this Court. in confirming these earlier rulings. Commissioner of Internal Revenue. provides instances when the running of the statute of limitations on the assessment and collection of national internal revenue taxes could be suspended. 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 x x x. And again in the recent case Bank of the Philippine Islands v.gets around to making the assessment or making the collection. the tax is in the meantime accumulating interest which the taxpayer eventually has to pay . the exceptions to the law on prescription should be strictly construed. in Commissioner of Internal Revenue v. 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. Ablaza. to the Government because tax officers would be obliged to act promptly in the making of assessment. lawabiding citizens. under Section 271 thereof which reads: Section 224. and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers. as a corollary. as amended. 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.19 this Court emphatically explained that the statute of limitations of actions for the collection of taxes is justified by the need to protect law-abiding citizens from possible harassment: The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens. but to take advantage of every opportunity to molest.F. and invoked by the CIR as a ground for this petition. it principally intends to afford protection to the taxpayer against unreasonable investigation. In Republic of the Philippines v. 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 days thereafter. The Tax Code of 1977.) Among the exceptions provided by the aforecited section. – The running of the statute of limitation provided in Sections 268 and 269 on the making of assessments and the beginning of distraint or levy or a proceeding in court for collection in respect of any deficiency. 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 recommended the approval of the law. Thus. However. Suspension of running of statute. not to determine the latter’s real liability.

The taxpayer may protest administratively an assessment by filing a written request for reconsideration or reinvestigation specifying the following particulars: xxxx For the purpose of protest herein— (a) Request for reconsideration-. Revenue Regulations No. the separate letters of protest dated 6 May 1994 and 23 May 1994 are requests for reconsideration. the respondent refused to submit any new evidence. defines the two types of protest. interrupts the running of the statute of limitations on the collection of the assessed tax: Undoubtedly. (b) Request for reinvestigation—refers to 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. A re-evaluation of existing records which results from a request for reconsideration does not toll the running of the prescription period for the collection of an assessed tax. In the said conference-hearing. It may also involve a question of fact or law or both. . whether these are existing records or newly discovered or additional evidence. issued on 27 November 1985. and distinguishes one from the other in this manner: Section 6. The main difference between these two types of protests lies in the records or evidence to be examined by internal revenue officers. which entails the reception and evaluation of additional evidence. this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax. the Procedure Governing Administrative Protests of Assessment of the Bureau of Internal Revenue. Hence. a reinvestigation. despite repeated demands. In the same token. he immediately requested the taxpayer to . the rest of the claimed expenses were disallowed for non-withholding. In the present case. Jr. 12-85.requested for a reinvestigation. Section 271 distinctly limits the suspension of the running of the statute of limitations to instances when reinvestigation is requested by a taxpayer and is granted by the CIR. as admitted by the CIR in its Petition. while the latter cannot. and not a request for reconsideration. More importantly. Revenue Officer Escober testified that upon his assignment to conduct the re-investigation. will take more time than a reconsideration of a tax assessment. Revenue Officer Alameda basically testified that Philcom. The CIR’s allegation that there was a request for reinvestigation is inconceivable since respondent consistently and categorically refused to submit new evidence and cooperate in any reinvestigation proceedings. the CIR could not have conducted a reinvestigation where.refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. Commissioner of Internal Revenue22 explaining why a request for reinvestigation. the request for reconsideration and the request for reinvestigation. It may involve both a question of fact or of law or both. The Court provided a clear-cut rationale in the case of Bank of the Philippine Islands v. except for the item of interest expense which was disallowed for being not ordinary and necessary. This much was admitted in the Decision dated 8 October 2002 issued by then CIR Guillermo Payarno. Protest. which will be limited to the evidence already at hand. failed to submit documentary evidences in support of its claimed deductible expenses.

Collector of Internal Revenue. in Republic v. the Bureau revised the original assessment.171). The Court.25 it took into account the reinvestigation conducted soon after these letters were received and the revised assessment that resulted from the reinvestigations. Although the Court used the term "requests for reconsideration" in reference to the letters sent by the taxpayer in the case of Querol v.23 Prior to the issuance of Revenue Regulations No. and. in addition to other documents in relation to the disallowed items (p. Pineda. there have been cases wherein these two terms were used interchangeably. that because of the examiner’s report. But that fact is that the revised assessment was merely a result of petitioner Querol’s requests for reconsideration of the original assessment. Consequently. In response to the testimonies of the Revenue Officers.24 the Court weighed the considerable time spent by the BIR to actually conduct the reinvestigations requested by the taxpayer in deciding that the prescription period was suspended during this time. On the disallowed items. Philcom thru counsel manifested that it has no intention to present documents and/or evidences allegedly because of the pending legal question on the validity of the assessment. for that purpose. the reconsideration was granted in part. emphasized that it was denied due process because of the issuance of the Pre-Assessment Notice and the Assessment Notice on successive dates.present various accounting records for the year 1990. Ablaza. Suyoc Consolidated Mining Company. After inducing petitioner to delay collection as he in fact did. This was followed by other requests for submission of documents (pp. Philcom thru Atty.199 &217) but these were not heeded by the taxpayer. 1955. it is most unfair for respondent to now take advantage of such desistance to elude his deficiency income tax liability to the prejudice of the Government invoking the technical ground of prescription. Because of such requests. 321). 108 Phil 1105). Consunji. Essentially. In Collector of Internal Revenue v. contained in his letters of December 14. But upon closer examination. Lopez. The records of the Bureau of Internal Revenue show that after receiving the letters. as the record shows. the Bureau conducted a reinvestigation of petitioner’s tax liabilities. sent a tax examiner to San Fernando. La Union. 1951 and May 25. he stated that Philcom did not cooperate in his reinvestigation of the case. the period between the petition for reconsideration and the revised assessment should be subtracted from the total prescriptive period (Republic vs. in fact. 1953. lasted for several months. x x x Counsel for the taxpayer even questioned the propriety of the conference-hearing inasmuch as the only question to resolved (sic) is the legality of the issuance of the assessment. x x x.26 even gave a detailed accounting of the time the BIR spent for each reinvestigation in order to deduct it from the five-year period set at that time in the statute of limitations: . these cases all involved a reinvestigation that was requested by the taxpayer and granted by the BIR. several reinvestigations were made and a hearing was even held by the Conference Staff organized in the collection office to consider claims of such nature which. and the original assessment was altered. 112 Phil. which distinguishes a request for reconsideration and a request for reinvestigation. and appellant avers that this revision was invalid in that it was not made within the five-year prescriptive period provided by law (Collector vs. In other words. It is true that the Collector revised the original assessment on February 9. 12-85.

Considering that the BIR issued its Preliminary Assessment Notice on 13 April 1994 and its Formal Assessment Notice on 14 April 1994. whether certain income tax deductions should be disallowed. Thus. unlike a request for reinvestigation. during which the limitation period was interrupted. And for an unrestricted number of years. This is the predicament that the law on the statute of limitations seeks to prevent. The Court reiterated the ruling in Republic v. from which date the Government had five years for bringing an action to collect. there is no reason to suspend the running of the statute of limitations in this case. Lopez in the case of Commissioner of Internal Revenue v. the time employed in reinvestigating should be deducted from the total period of limitation. or a period of 4 years. xxxx The first reinvestigation was granted. mostly for failure to pay withholding taxes. not to mention the eight years it actually took the BIR to decide the respondent’s protest." In this case. that is. If both types of protest can effectively interrupt the running of the statute of limitations. 3 months. the statute of limitations would automatically be suspended and the tax thereon may be collected long after it was assessed.28 the Court enumerated the reasons why the taxpayer is barred from invoking the defense of prescription.29 On the other hand. whatever examination that the BIR may have conducted cannot possibly outlast the entire three-year prescriptive period provided by law to collect the assessed tax. and a reduced assessment issued on 29 May 1954. Added to the fact that the Final Decision that the CIR issued on 8 October 2002 merely affirmed its earlier findings. The second reinvestigation was asked on 16 January 1956. in sustaining for the first time the suspension of the running of the statute of limitations in cases where the taxpayer requested for a reinvestigation. if the taxpayer does file the protest on a patently erroneous assessment. the taxpayers remain uncertain and are burdened with the costs of preserving their books and records. The factual and legal issues involved in the assessment are relatively simple. in Republic v.It is now a settled ruled in our jurisdiction that the five-year prescriptive period fixed by Section 332(c) of the Internal Revenue Code within which the Government may sue to collect an assessed tax is to be computed from the last revised assessment resulting from a reinvestigation asked for by the taxpayer and (2) that where a taxpayer demands a reinvestigation. cannot suspend the statute of limitations on the collection of an assessed tax." Finally. Sison. and lasted until it was decided on 22 April 1960. it had ample time to make a factually and legally well-founded assessment. Meanwhile the interest on the deficiencies and the surcharges continue to accumulate. it appears obvious that the delay in the collection of his 1946 tax liability was due to his own repeated requests for reinvestigation and similarly repeated requests for extension of time to pay. one of which was that. the time employed in reinvestigating should be deducted from the total period of limitation. then the erroneous assessment would become final and unappealable. just one day before the three-year prescription period for issuing the assessment expired on 15 April 1994. The distinction between a request for reconsideration and a request for reinvestigation is significant. an erroneous assessment may never prescribe. and 6 days. gave this justification: . If the taxpayer fails to file a protest. Arcache. the BIR admitted that there was no new or additional evidence presented. "In the first place.27"that where a taxpayer demands a reinvestigation. The Court. It bears repetition that a request for reconsideration.

a law enacted to protect the interests of the taxpayer. Inc. may be achieved. 1958. obligation preventing the CIR from collecting the assessed tax. for good reasons. November 25. et al. In a similar case. or even a moral.)30 This rationale is not applicable to the present case where the respondent did nothing to prevent the BIR from collecting the tax. On the other hand.. At the earliest opportunity." But partial payment would not prevent the government from suing the taxpayer. but there are several precedents that may be invoked in American jurisprudence. for the law says to him in effect "this is your own act.. There was no legal. Stearns Co." Which. and therefore you are not damnified. allow the respondent. should it so choose. must .S. as stated in Collector v."’ (R. Because. 32 of the need to balance the conflicting interests of the government and the taxpayers. (Emphasis supplied.H. Justice Cardozo has said: "The applicable principle is fundamental and unquestioned. As Mr. such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. which is the promotion of common good. It did not present to the BIR any new evidence for its re-evaluation. persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. Given that both parties were at a deadlock. Thus.A taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts the Government has been. Conda. the three-year statute of limitations on the collection of an assessed tax provided under Section 269(c) of the Tax Code of 1977. is the underlying reason behind the rule that prescriptive period is arrested by the taxpayer’s request for reexamination or reinvestigation – even if "he has not previously waived it [prescription] in writing. On the other hand.. the government is not thereby "persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant.31 the Court did not suspend the running of the prescription period where the acts of the taxpayer did not prevent the government from collecting the tax. xxxx This case has no precedent in this jurisdiction for it is the first time that such has risen. The government also urges that partial payment is "acknowledgement of the tax obligation"." The Court reminds us.. ‘He who prevents a thing from being done may not avail himself of the nonperformance which he himself occasioned. Algue. the BIR also communicated to the respondent its unwavering stance that its assessment is correct. U. to contest the assessment before the CTA. v. thus. Cordero v. 78 L.. L-11527. 647). It is therefore necessary to reconcile the apparently conflicting interest of the authorities and the taxpayers so that the real purpose of taxation. in the case of Commissioner of Internal Revenue v. ed. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Suyoc Consolidated Mining Co. Postponing the collection for eight long years could not possibly make the taxpayer feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. hence a "waiver on the defense of prescription. the next logical step would have been for the BIR to issue a Decision denying the respondent’s protest and to initiate proceedings for the collection of the assessed tax and. respondent insisted that the assessment was invalid and made clear to the BIR its refusal to produce documents that the BIR requested. by such act of payment.

the right of the government to collect the alleged deficiency tax is barred by prescription. (Chairperson). 37 dated 22 February 2005. among other instances. for its 1990 income tax deficiency for the reason that it is barred by prescription. The tax which is the subject of the Decision issued by the CIR on 8 October 2002 affirming the Formal Assessment issued on 14 April 1994 can no longer be the subject of any proceeding for its collection. No costs. where the taxpayer merely filed two protest letters requesting for a reconsideration. cancelling Assessment Notice No.. Austria-Martinez. concur. Panganiban. protests wherein the taxpayer requests for a reinvestigation. is hereby AFFIRMED. JJ. In providing for exceptions to such rule in Section 271. The assailed en banc Decision of the CTA in CTA EB No. Inc. the running of statute of limitations cannot be interrupted. Sr. and Callejo. . and where the BIR could not have conducted a reinvestigation because no new or additional evidence was submitted. IN VIEW OF THE FOREGOING. In this case. Consequently.be given effect. 000688-807333 issued against Philippine Global Communication.. Ynares-Santiago.J. the law strictly limits the suspension of the running of the prescription period to. SO ORDERED. the instant Petition is DENIED. C.