Philippine Journalists Inc. v CIRG.R No. 162852December 15, 2004

Facts: The Revenue District Office of the BIR issued a letter of authority for the examination of petitioner Philippine Journalists books of accounts. From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty. Then, petitioner, through its Comptroller, Lorenza Tolentino, executed a waiver of statute of limitations pursuant to Sec.223 and Sec.224 and consented 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.

Petitioner had a deficiency 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. A Final Notice Before Seizure was sent to the petitioner but the latter merely questioned the amount of the deficiency and how the same was arrived.

A Warrant of Distraint/Levy was received by petitioner for the deficiency.Petitioner filed a Petition for Review with the CTA, contending that no assessment was

received by him; that the warrant of distraint/levy was issued prematurely; and that the assessment was made beyond the 3-year period. Regarding the assessment, the CTA ruled that the assessment was sufficiently proven by the receipts of the Post Master. As to the premature distraint/levy and the assessment made beyond the 3-year period, the CTA ruled in favor of the petitioner. The waiver of statute of limitations by the petitioner was invalid which resulted in the lapse of the 3 year period for assessment. Consequently, the petition was granted, declaring the order for payment of deficiency tax null and void.

The CIR filed a motion for reconsideration but the same was denied. Undaunted, the CIR filed an appeal with the CA. The CA reversed the ruling of the CTA, stating that the waiver of limitations was valid and that the assessment notices was final and executory. Hence, this appeal.

Issue: Whether or not the waiver of limitations was invalid, making the assessment beyond the 3 year period?

Held: Yes, the court ruled that the waiver of limitation was invalid, making the assessment beyond the allowable period of 3 years. 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. 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. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.

As found by the CTA, the Waiver of Statute of Limitations, signed by petitioner’s comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus, petitioner’s waiver became unlimited in time, violating Section 222(b) of the NIRC.

Republic v AcebedoG.R No. L-20477March 29, 1968

Facts: A suit for collection of deficiency tax was filed against herein respondent Felix Acebedo in the amount of P5,962 for the year 1948. A notice of assessment was issued on September 24, 1949. The respondent filed a motion to dismiss on the ground of prescription. He claimed that the notice of levy/distraint was filed beyond the 5 year limitation from the assessment. The motion was granted by the lower court and the same dismissed the case.

Hence, the petitioner Republic filed an appeal with this court, contending that the various requests for reinvestigation made by the respondent suspended the 5 year period prescription period and that the waiver of statute of limitations duly executed in 1959 was sufficient to further suspend period of prescription.

Issue: Whether or not a request for a reinvestigation suspends the running of the period for filing an action for collection?Whether or not the waiver of limitations suspended the period?

Held: No. The court is aware that it was held in Commissioner of Internal Revenue, vs. Consolidated Mining Company that a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing when by his repeated requests or positive acts the Government has been, for good reasons, persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the Government. However, when a taxpayer asks for a reinvestigation of the tax assessment issued to him and such reinvestigation is made, on the basis of which the Government makes another assessment, the five-year period with which an action for collection may be commenced should be counted from this last assessment.

In this case, even after the request for reinvestigation was made, the petitioner did not act upon it, hence, the request for reinvestigation did not suspend the running of the period for filing an action for collection.

Moreover, up to October 4, 1955 the delay in collection could not be attributed to the defendant at all. His requests in fact had been unheeded until then, and there was nothing to impede enforcement of the tax liability by any of the means provided by law. By October 4, 1955, more than five years had elapsed since assessment in question was made, making subsequent events in connection with the said assessment irrelevant. Even the written waiver of the statute signed by the defendant on December 17, 1959 could no longer revive the right of action, for under the law such waiver must be executed within the original five-year period within which suit could be commenced.

Republic v Salud HIzonG.R 130340December 13, 1999

Facts: The BIR issued an income tax deficiency assessment to the respondent. The latter, not responding to assessment, was served notices of Levy/Distraint but the BIR no longer acted upon the attachment.

After 3 years, the respondent asked for reconsideration regarding the deficiency but the same was denied. Hence, the respondent moved for dismissal based on the ground that: 1.the assessment was not filed upon the authority of the Commissioner since the complaint was not signed by the Commissioner and 2.the action for collection was barred by the 3-year prescription period. The court granted the respondent’s motion and dismissed the case.

Hence, this petition.

Issue: Whether or not the assessment was filed upon the authority of the Commissioner?Whether or not the action for collection was barred by prescription?

Held: On the first issue, the Court ruled that the assessment was in fact filed with the authority of the Commissioner. Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and Prosecution Section of the Legal Division of regional district offices to institute the necessary civil and criminal actions for tax collection. As the complaint filed in this case was signed by the BIR’s Chief of Legal Division for Region 4 and verified by the Regional Director, there was, therefore, compliance with the law. Furthermore, Sec 7 of R.A 8424 of the NIRC authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher, except the following:

The power to recommend the promulgation of rules and regulations by the Secretary of Finance; The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling

of the Bureau; The power to compromise or abate under §204(A) and (B) of this Code, any tax

deficiency: Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500,000.00) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and

The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.

Hence, the Court held that the assessment was filed with the proper authority from the Commissioner.

However, the Court ruled that the assessment, although filed with the authority of the Commissioner, was barred by prescription. Petitioner argued that respondent’s request for reinvestigation of her tax deficiency assessment on November 3, 1992 effectively suspended the running of the period of prescription such that the government could still file a case for tax collection. The court does not agree with the petitioner. The request for reconsideration was not filed within the 30 day period hence no request for reconsideration was actually made. So, the period for prescription was not suspended. Consequently, the action is barred by the 3 year prescription period.

BPI v CIRG.R No. 139786October 17, 2005

Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner filed a protest letter, requesting for reconsideration with BIR however the latter did not reply. Instead, BIR issued a warrant for distraint/levy against petitioner BPI. The petitioner did not hear from BIR until September 11, 1997 when then Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration.

Subsequently, the petitioner filed a petition for review with the CTA, raising the defense of prescription. The CTA denied the petition and held that the period of prescription had not yet prescribed nonetheless, it held that the petitioner was not liable for the deficiency of DST.

On appeal, the CA reversed the ruling of CTA on the issue of DST tax and held that the petitioner was indeed liable for DST.

ISSUE: Whether or not the right of the respondent to collect from petitioner BPI is barred by prescription?

Held: Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. When the BIR validly issues an assessment, within either the three-year or ten-year period, whichever is appropriate, then the BIR has another three years after the assessment within which to collect the national internal revenue tax due thereon by distraint, levy, and/or court proceeding. 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, mailed or sent by the BIR to the taxpayer.

In their Decisions, 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. This Court, however, takes the opposing view, and, based on the succeeding discussion, 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.

The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus, shall be construed liberally in his favor.

Ursal v Court of Tax AppealsG.R. Nos. L-10123 and L-10355 April 26, 1957

Facts: The petitioner is a City Assessor of Cebu and made an assessment on the real properties of Consuelo Noel and Jesusa Samson. The Latter taxpayers, on protest, brought the issue to the Cebu Board of Assessment Appeals, who reduced the valuation.

In questioning the valuation of the Cebu Board of Assessment Appeals, the petitioner took the matter to the CTA. However, the CTA dismissed the case, ruling that the petitioner, pursuant to R.A 1125 or the law creating the Court of Tax Appeals, did not have the personality to bring the matter to the CTA.

Hence, this petition.

Issue: Whether or not the petitioner has personality to file the case with the CTA?

Held: No, he does not. Under section 11 of Republic Act No. 1125 reads as follows:

SEC. 11. Who may appeal; effect of appeal. — Any person, association or corporation adversely affected by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling.

The petitioner was not adversely affected him. At most it was the City of Cebu which was affected since they were unable to collect the higher amount of tax.

Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any and all tax disputes. Defining such special court's jurisdiction, the Act necessarily limited its authority to those matters enumerated therein.

CIR v Manila Electric CompanyG.R No. 121666October 10, 2007

Facts: The respondent Manila Electric Company filed a refundable amount of P101.897 with the BIR.

Meanwhile, on a yearly routine Letter of Authority, the petitioner found that respondent was liable for: 1. deficiency income tax in the amount of P2,340,902.52; and 2. deficiency franchise tax in the amount of P2,838,335.84.

The respondent amended its final corporate income tax return and filed for a refund/credit in the amount of P107,649,729 representing overpaid income taxes for the years 1987 and 1988 but the CIR did not act upon such refund/credit. Hence, the respondent filed a judicial claim for refund/credit with the CTA.

While the claim was pending with the CTA, the respondent paid the deficiency franchise tax in the amount of P2,838,335.84. It protested the payment of the alleged deficiency income tax and claimed as an alternative remedy the deduction thereof from its claim for refund or credit but this was refused by the petitioner.

CTA decided in favor of the respondent and ordered the petitioner to issue a certificate of credit for the unused credits of the respondent. The petitioner questioned the ruling of the CTA and filed an appeal. On appeal, the CA affirmed the CTA’s decision.

Hence, this petition. The petitioner contends that a claim for tax refund is construed strictly against the claimant as it partakes of the nature of exemption from taxes.

ISSUE: Whether or not the respondent is entitled to credit?

Held: Yes, the respondent is entitled to the credit. Under Sec 69 of the NIRC provides Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either: 1. pay the excess due or 2. be refunded the excess amount paid. A corporate taxpayer’s option to avail of tax credit does not, however, mean that it is ipso facto granted. For petitioner has still to investigate and ascertain the veracity of the claim. It bears noting that the tax court and the appellate court found respondent’s claim for tax refund or credit meritorious on the basis of the testimonial and documentary evidence adduced by the parties. The issue of whether respondent adduced sufficient evidence to prove its entitlement to a refund is a question of fact which cannot be brought to the supreme court. Hence, the findings of fact by the CTA and the CA will be upheld.

CIR v Manila Mining CorporationG.R No. 153204August 31, 2005

Facts: The respondent is a VAT- registered corporation that engaged in the sale of gold to the Central Bank amounting to P200,832. Seeking for tax refund/credit of the input VAT it paid pursuant to Sec. 2 of E.O 581, the respondent file an application for tax refund.

As CIR failed to act upon respondent’s application within sixty (60) days from the dates of filing, the respondent filed a petition for review with the CTA, seeking the issuance of tax credit certificates.

Nonetheless, the CTA denied the respondent’s claim for refund of input VAT for failure to prove that it paid the amounts claimed as such for the year 1991, no sales invoices, receipts or other documents as required.

The respondent appealed to the CA contending the CTA erred in denying the refund for insufficiency of evidence. The CA reversed the decision of the CTA and granted the respondent’s claim for refund or issuance of tax credit certificates. In granting the refund, the appellate court held that there was no need for respondent to present the photocopies of the purchase invoices or receipts evidencing the VAT paid in view of Rule 26, Sec. 2 of the Revised Rules of Court.

Issue: Whether or not respondent is entitled to a refund/credit despite the lack of photocopies of the purchase invoices or receipts?

Held: No, the court held that the respondent is not entitled to the refund or credit for failure to provide the required purchase receipts and invoices. As export sales, the sale of gold to the Central Bank is zero-rated, hence, no tax is chargeable to it as purchaser. Zero rating is primarily intended to be enjoyed by the seller-respondent, herein, which charges no output VAT but can claim a refund of or a tax credit certificate for the input VAT previously charged to it by suppliers. For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase invoices or official receipts. The respondent failed to do so. Its contention that the certification of the independent CPA should be sufficient to establish the purchase invoices cannot be given merit.

Under R.A 1125, the CTA is described as a court of record. As cases filed before it are litigated de novo, party litigants should prove every minute aspect of their cases. No evidentiary value can be given the purchase invoices or receipts submitted to the BIR as the rules on documentary evidence require that these documents must be formally offered before the CTA.

For failure of respondent then not only to strictly comply with the rules of procedure but also to establish the factual basis of its claim for refund, this Court has to deny its claim. A claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

RCBC v CIRG.R 168498April 24, 2007

Facts: Petitioner Rizal Commercial Banking Corporation received a Formal Letter of Demand dated May 25, 2001 from the respondent Commissioner of Internal Revenue for its tax liabilities particularly for Gross Onshore Tax in the amount of P53,998,428.29 and Documentary Stamp Tax.

The petitioner filed a protest but the respondent failed to act upon the same. So, the petitioner filed a Petition for Review with the CTA for the cancellation of the above-mentioned assessments.

The respondent filed a motion to resolve first the issue of CTA’s jurisdiction, which was granted by the CTA. The petition for review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from petitioner’s submission of documents in support of its protest, as pursuant to Section 228 of the NIRC and R.A. No. 1125. The same became final and executory due to the negligence of the petitioner’s counsel.

Hence, this petition

Issue: Whether or not the petitioner was denied the opportunity to be heard?Whether or not the petitioner can still file the appeal despite the lapse of the 30-day period?

Held: No, the Court held that he "essence of due process is a hearing before conviction and before an impartial and disinterested tribunal" but due process as a constitutional precept does not, always and in all situations, require a trial-type proceeding. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one’s defense. In this case, the petitioner’s counsel was present on the scheduled hearing and in fact orally argued its petition and that is sufficiently complies with the right to be heard.

In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the case at bar, especially since petitioner had squandered the various opportunities available to it at the different stages of this case.

Regarding the 30-day period, the petitioner can no longer file an appeal. Assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. In this case, the failure to comply with the 30-day statutory period bars the appeal and deprives the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessment.

Ungab v CusiG.R. No. L-41919-24 May 30, 1980

Facts: BIR Examiner Garcia examined the income tax returns filed by the herein petitioner Ungab. He discovered that the petitioner failed to report his income derived from sales of banana saplings. As a result, the BIR sent a Notice to the petitioner, informing him that he had a tax liability of P104,980 representing income, business tax and forest charges for the year 1973.

As a result, the petitioner filed a protest but the same was denied. The BIR examiner was fully convinced that the petitioner had filed a fraudulent income tax return so he recommended the issue be brought to the Tax Fraud Unit of the BIR. The latter found sufficient proof that the herein petitioner is guilty of tax evasion. The case was further recommended to the Chief of the Prosecution Division who filed 6 informations against petitioner regarding his fraudulent income tax return.

The petitioner filed a motion to quash the informations upon the grounds that there was no authority on the part of the State Prosecutor and that the TC has no jurisdiction to take cognizance of the cases.However, the motion was denied.

Hence, this petition.

Issue: 1. Whether or not the respondent State Prosecutor has authority to prosecute the informations filed against petitioner in relation to the alleged fraudulent income tax return?2. Whether or not the filing of the informations was premature since the CIR has not yet resolved his protests against the assessments?

Held: Yes, the State Prosecutor had the authority to prosecute. Contrary to the petitioner’s claim, the rule on authority of the State Prosecutor was not violated. The respondent State Prosecutor, although believing that he can proceed independently of the City Fiscal in the investigation and prosecution of these cases, first sought permission from the City Fiscal of Davao City before he started the preliminary investigation of these cases, and the City Fiscal, after being shown Administrative Order No. 116, designating the said State Prosecutor to assist all Provincial and City fiscals throughout the Philippines in the investigation and prosecution of all violations of the National Internal Revenue Code, as amended, and other related laws, graciously allowed the respondent State Prosecutor to conduct the investigation of said cases, and in fact, said investigation was conducted in the office of the City Fiscal.

No. On the second issue, the Court ruled that what is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code.

CIR vs. BPIG.R. No. 134062 April 17, 2007

FACTS: In October 28, 1988, petitioner assessed BPI of deficiency percentage and documentary stamp tax for the year 1986, in the total amount of P129, 488,056.63. A letter reply by respondent was sent on December 10, 1988 stating among other: “... we shall inform you the taxpayer’s decision on whether to pay of protest the assessment, CTA ruled that BPI failed to protest on time under Sec 270 of NIRC of 1986.”

ISSUE: Whether or not the assessments issued to BPI for the deficiency percentage and documentary stamp taxes were valid?

RULING: Yes, the assessments issued to BPI were valid. The CIR contends that there was no law or jurisprudence then that required notices to state the reasons for assessing deficiency tax liabilities. BPI counters that due process demanded that the facts, data and law upon which the assessments were based be provided to the taxpayer. The contention of CIR was given merit. According to Sec. 228. Protesting of Assessment. — When the [CIR] or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings. Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of the deficiency taxes were made. He merely notified BPI of his findings, consisting only of the computation of the tax liabilities and a demand for payment thereof within 30 days after receipt.In merely notifying BPI of his findings, the CIR relied on the provisions of the former Section 270 prior to its amendment by RA 8424 (also known as the Tax Reform Act of 1997). Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to "notify" or inform the taxpayer of his "findings." Nothing in the old law required a written statement to the taxpayer of the law and facts on which the assessments were based. But worthy of mentioning, although not applicable in this case, that the old requirement of merely notifying the taxpayer of the CIR's findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid Tax assessments by tax examiners are presumed correct and are made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the performance of duties, an assessment duly made by BIR examiner and approved by his superior officers will not be distributed. All presumptions are in favor of the correctness of tax assessments.

CIR V PASCOR REALTYG.R 128315June 29, 1999

Facts: The CIR authorized certain BIR officers to examine the books of accounts and other accounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively.

On March 1, 1995, Commissioner filed a criminal complaint for tax evasion against PRDC, its president and treasurer before the DOJ. Private respondents filed immediately an urgent request for reconsideration on reinvestigation disputing the tax assessment andtax liability.

On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondent’s request for reconsideration (reinvestigation on the ground that no formal assessment has been issued which the latter elevated to the CTA on a petition for review. The Commissioner’s motion to dismiss on the ground of the CTA’s lack of jurisdiction inasmuch as no formal assessment was issued against private respondent was denied by CTA and ordered the Commissioner to file an answer but did not instead filed a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the endorsement of said report as assessment which may be appealed to he CTA. The CA sustained the CTA decision and dismissed the petition.

Issues: 1. Whether or not the criminal complaint for tax evasion can be construed as an assessment.2. Whether or not an assessment is necessary before criminal chargesfor tax evasion may be instituted.

Held: The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither the Tax Code nor the revenue regulations governing the protest assessments provide a specific definition or form of an assessment.An assessment must be sent to and received by the taxpayer, and must demand payment of the taxes described therein within a specific period. The revenue officer’s affidavit merely contained a computation of respondent’s tax liability. It did not state a demand or period for payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint for tax evasion; it was not meant to be a notice of tax due and a demand to private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows that commissioner intended to file a criminal complaint for tax evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be filed. Acriminal charge need not only be supported by a prima facie showing of failure to file a required return. The CIR had, in such tax evasioncases, discretion on whether to issue an assessment, or to file acriminal case against the taxpayer, or to do both.

Estate of Gabriel v CommissionerG.R 1555541January 1, 1, 2004

Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her death, PhilTrust filed her income tax return for 1978 not indicating that the decedent had died. The BIR conducted an administrative investigation of the decedent’s tax liability and found a deficiency income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by registered mail a demand letter and assessment notice addressed to the decedent “c/o PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce the collection of decedent’s deficiency income tax liability and serve the same upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim with probate court for the deficiency tax. The Court denied BIR’s claim against the estate on the ground that no proper notice of the tax assessment was made on the proper party. On appeal, the CA held that BIR’s service on PhilTrust of the notice of assessment was binding on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedent’s death. Consequently, as the estate failed to question the assessment within the statutory period of thirty days, the assessment became final, executory, and incontestable.

Issue: Whether or not the service of deficiency tax assessment on Juliana through PhilTrust was a valid service as to bind the estate?

Whether or not the respondent’s claim for collection was filed beyond the 5 –year prescriptive period?

Held: No, there was no valid service to bind State. Since the relationship between PhilTrust and the decedent was automatically severed the moment of the taxpayer’s death, none of the PhilTrust’s acts or omissions could bind the estate of the taxpayer. Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedent’s death, the consequence thereof merely refer to the imposition of certain penal sanction on the administrator. These do not include the indefinite tolling of the prescriptive period for making deficiency tax assessment or waiver of the notice requirement for such assessment.The assessment was served not even on an heir or the estate but on a completely disinterested party. This improper service was clearly not binding on the petitioner. The most crucial point to be remembered is that PhilTust had absolutely no legal relationship with the deceased or to her Estate.

Yes, the respondent’s claim was beyond the prescribed period. There was no assessment served on the estate as to the alleged underpayment of tax. Absent this assessment, no proceeding could be initiated in court for collection of said tax; therefore, it could not have become final, executory and incontestable. Respondent’s claim for collection filed with the court only on November 22, 1984 was barred for having been made beyond the five-year prescriptive period set by law.

Republic v Ker & Co.G.R. No. L-21609 September 29, 1966

FACTS: In 1953 the Bureau of Internal Revenue examined and audited Ker & Co., Ltd.'s returns and books of accounts for the years 1947-1950 and issued corresponding assessments for deficient amounts. The assessments included 50% surcharges authorized under Sec. 2 of the Tax Code for filing fraudulent returns.

Ker & Co., Ltd. filed with the Court of Tax Appeals a petition for review with preliminary injunction. No preliminary injunction was issued, for said court dismissed the appeal for having been instituted beyond the 30-day period.

The BIR sent demand letters for the collection of the amounts but the respondent refused and put up the defense of prescription of period for collection. So, the BIR filed a complaint for the collection of payment for taxes. The lower court dismissed the BIR’s claim for the year 1947 but ordered the respondent to pay the deficiency taxes from year 1948-1950.

Hence, this petition.The petitioner contends that the Republic of the Philippines filed a motion for

reconsideration contending that the right of the Commissioner of Internal Revenue to collect the deficiency assessment for 1947 has not prescribed by a lapse of merely five years and three months, because the taxpayer's income tax return was fraudulent in which case prescription sets in ten years from October 31, 1951, the date of discovery of the fraud, pursuant to Section 332 (a) of the Tax Code.

The respondent counters by contesting that since the complaint was filed nine years, one month and eleven days after the deficiency assessments for 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, the right of the Commissioner of Internal Revenue to collect the tax in question has prescribed.

ISSUE: Whether or not the BIR was barred by prescription?

HELD: No. Under Sec. 333, the running of the statute of limitations provided in Section 331 or three hundred thirty-two on the making of assessments and the beginning, of distraint or levy or a proceeding in court for collection, in respect of any deficiency, 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 for sixty days thereafter. When the respondent filed its petition for review with the CTA the petitioner BIR was prohibited from filing an action for the collection of the deficiency, hence, from that time until such petition for review was dismissed, there was a suspension of the prescription period. To rule in the otherwise would be encouraging taxpayers to resort to delay the payment of taxes in order to ultimately avoid the paying of the same.

CIR V ENRON SUBICG.R 166387July 13, 2009

FACTS: Enron received from the CIR a formal assessment notice requiring it to pay the alleged deficiency income tax of P2,880,817.25 for the taxable year 1996. Enron protested this deficiency tax assessment.

Due to the non-resolution of its protest within the 180-day period, Enron filed a petition for review in the Court of Tax Appeals (CTA). It argued that the deficiency tax assessment disregarded the provisions of Section 228 of the National Internal Revenue Code (NIRC), as amended, and Section 3.1.4 of Revenue Regulations (RR) No. 12-99 by not providing the legal and factual bases of the assessment.

The CTA granted Enron’s petition and ordered the cancellation of its deficiency tax assessment for the year 1996. The CTA reasoned that the assessment notice sent to Enron failed to comply with the requirements of a valid written notice under Section 228 of the NIRC.

The CIR appealed the CTA decision to the CA but the CA affirmed it. The CIR now argues that respondent was informed of the legal and factual bases of the

deficiency assessment against it. The CIR insists that an examination of the facts shows that Enron was properly apprised of its tax deficiency. During the pre-assessment stage, the CIR advised Enron’s representative of the tax deficiency, informed it of the proposed tax deficiency assessment through a preliminary five-day letter and furnished Enron a copy of the audit working paper allegedly showing in detail the legal and factual bases of the assessment. The CIR argues that these steps sufficed to inform Enron of the laws and facts on which the deficiency tax assessment was based.

ISSUE: Whether or not CIR sufficiently complied with Sec. 228?

HELD: No, Section 228 of the NIRC clearly provides that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made. Otherwise, the assessment is void. The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the preliminary five-day letter, were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the assessment. These steps were mere perfunctory discharges of the CIR’s duties in correctly assessing a taxpayer. The requirement for issuing a preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the requirement of what such notice must contain. Just because the CIR issued an advice, a preliminary letter during the pre-assessment stage and a final notice, in the order required by law, does not necessarily mean that Enron was informed of the law and facts on which the deficiency tax assessment was made.

The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged “factual bases” in the advice, preliminary letter and “audit working papers” did not suffice.

Case Digest In Taxation II(cases under TAX REMEDIESand PROCEDURES)

Submitted to:Atty. Marion P. Allam

Submitted by:Carolyn D. Clarin

Table of Contents:

1. Philipppine Journalists v CIR2. BPI v Commissioner g.r 1397363. Republic v Acebedo4. Republic v Salud Hizon5. Republic v Ker & Co.6. Ursal v CTA7. CIR V MERALCO8. CIR V Manila Mining Corporation9. Estate of Gabriel v Commissioner10.RCBC v CIR11.CIR v PASCOR Realty12.CIR V BPI g.r 13406213. Ungab v Cusi14.CIR v Enron Subic15.Asia International Auctioneers v Parayno, Jr.

ASIA INTERNATIONAL AUCTIONEERS V PARAYNO, JR.G.R no. 103445December 18, 2007

FACTS: Then CIR Guillermo L. Parayno, Jr. and herein respondent, issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction."

The petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being unconstitutional and an ultra vires act. The RTC granted TRO and a preliminary injunction pending the determination of constitutionality.

In response, the respondents filed with the CA a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the trial court from exercising jurisdiction over the case. The same was granted and the CA declared the RTC of Olongapo City bereft of jurisdiction and the TRO and preliminary injunction issued by the same null and void. The CA held that the proper court with jurisdiction over the matter is the CTA and not the RTC.

Hence, the petitioners filed this petition. Petitioners contend that jurisdiction over the case at bar properly pertains to the regular courts as this is "an action to declare as unconstitutional, void”. They explain that they "do not challenge the rate, structure or figures of the imposed taxes, rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes." They claim that the challenge on the authority of the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA).

ISSUE: Whether or not the CTA is the proper court of jurisdiction to hear a case to declare Revenue Memorandum Circulars unconstitutional and against an existing law where the challenge does not involve the rate and figures of the imposed taxes?

HELD: Yes, the court held that the CTA is the proper court to decide the case. Under Sec. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided—(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code.