Rizal Commercial Banking Corporation v CIR (September 7 2011)

FACTS:
RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001.
As the protest was not acted upon, it filed a Petition for Review with the Court of Tax Appeals
(CTA) on April 30, 2002, or more than 30 days after the lapse of the 180-day period reckoned
from the submission of complete documents. The CTA dismissed the Petition for lack of
jurisdiction since the appeal was filed out of time.
ISSUE:
Has the action to protest the assessment judicially prescribed?
HELD:
YES. The assessment has become final. The jurisdiction of the CTA has been expanded to
include not only decision but also inactions and both are jurisdictional such that failure to
observe either is fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the
CTA within 30 days from the lapse of the 180-day period OR (2) await the final decision of the
CIR and appeal such decision to the CTA within 30 days after receipt of the decision. These
options are mutually exclusive and resort to one bars the application of the other. Thus, if
petitioner belatedly filed an action based on inaction, it can not subsequently file another petition
once the decision comes out.
Commissioner of Internal Revenue v Standard Chartered Bank (July 29 2015)
FACTS:

Respondent received CIR's Formal Letter of Demand for alleged deficiency income tax, final
income tax, withholding tax - final and compensation, and increments for the taxable year worth
P 33,326,211.37.

Respondent protested the said assessment by filing a letter-protest with the CIR requesting the
assessment to be withdrawn.

In the middle of things, respondent paid the BIR the assessed deficiency for both the
withholding taxes.

Respondent then filed for a petition for the cancellation and setting aside of the assessments
which the CTA granted. The CTA held that it has already prescribed as it covered the taxable
year of 1998. 

The NIRC provides that the assessments should have been issued within the three-year
prescriptive period. The CIR also presented the Waivers of Statute of Limitations executed by
the parties which extended the period to assess respondent. The CTA held that the CIR failed to
strictly comply and conform with the provisions of Revenue Memorandum Order No. 20-90. The
CTA held that the waivers were invalid.

ISSUE: Whether the assessments were already prescribed. Whether the waiver was invalid.

RULING:

Yes and yes.

The NIRC is clear that in a case where a return is filed beyond the period prescribed by law, the
three-year period shall be counted from the day the return was filed.

The waiver, as also provided by the NIRC, is an exception to the three-day prescription. But, as
the CTA first held, the provisions of the RMO should have been strictly complied with. Failing to
comply renders a waiver defective and ineffectual.
Republic of the Philippines v Lim de Yu (April 30 1964)

FACTS:
Appellee Rita Lim de Yu filed her yearly income tax returns from 1948 through 1953. The
Bureau of Internal Revenue assessed the taxes due on each return, and appellee paid them
accordingly. On July 17, 1956 the Bureau issued to appellee deficiency income tax
assessments for the years 1945 to 1953 in the total amount of P22,450.50. She protested the
assessments and requested a reinvestigation. On August 30, 1956 she signed a "waiver" of the
statute of limitations under the Tax Code as a condition to the reinvestigation requested.
Thereafter, or on July 18, 1958, the Bureau issued to her income tax assessment notices for the
years 1948 to 1953, totalling P35,379.63. This last assessment, like the one issued in 1956,
covered not only the basic deficiency income taxes, but also 50% thereof as surcharge. Upon
appellee's failure to pay, an action for collection was filed against her in the Court of First
Instance of Cotabato on May 11, 1959. After trial the suit was dismissed, and the Government
appealed to the Court of Appeals.
ISSUE:
Whether or not in dismissing the case on the ground that the right of appellant to collect the
deficiency income tax assessments had already prescribed.
RULING:
Fraud not having been proven, the period of limitation for assessment or collection was five
years from the filing of the return, according to Section 331 of the tax code. The right to assess
or collect the income taxes for the years 1948 to 1950 had already prescribed, therefore, when
the Bureau of Internal Revenue issued the deficiency income tax assessments on July 17,
1956.
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,
1956. The five-year period for assessment, counted from the date the return is filed, may be
extended upon agreement of the Commissioner and the taxpayer, but such agreement must be
made before, not after, the expiration of the original period (Section 332 [b], Tax Code). The
clear import of the provision is that it does not authorize extension once prescription has
attached.
An assessment is not an action or proceeding for the collection of taxes. It is merely a notice to
the effect that the amount therein stated is duo as tax and a demand for the payment thereof. It
is a step preliminary, but essential to warrant distraint, if still feasible, and, also, to establish a
cause for judicial action as the phrase is used in section 816 of the Tax Code * * *" (Alhambra
Cigar and Cigarette Manufacturing Company vs. The Collector of Internal Revenue, L-12026,
May 29, 1959)
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. Paragraph (b) of Section 332 allows the
extension of this period by means of 3 written agreement between the taxpayer and the
Commissioner of Internal Revenue. On the other hand, paragraph (c) of the same section is
concerned with the collection of the tax after assessment, regardless of whether the
assessment was made during the original five-year period or within an agreed period of
extension. 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." Thus, although under the waiver
appellee consented to the "assessment and collection" if made not later than December 31,
1958, such expiration date must be deemed to refer only to the extension of the assessment
period. Insofar as collection is concerned, the period does not apply, for otherwise the effect of
the waiver would be to shorten, not extend, the legal period for that purpose. Appellant therefore
had five years from 1958 within which to file his action, which was actually filed in 1959.
Republic of the Philippines v Heirs of Cesar Jalandoni (September 20 1965)
Aznar v CTA (August 23 1974)

FACTS:
The CIR having doubts on the veracity of the reported income of the obviously wealthy
deceased taxpayer, the latter’s assets and liabilities during the period of 1941 to 1951 were
ascertained. The findings clearly indicated that said taxpayer did not correctly declare the
income reported in his income tax returns from 1946 to 1951, as the yearly increases in his net
worth were very much more than what was reported during said period. Respondent CIR issued
an assessment notice which, after reinvestigation, significantly reduced the assessed deficiency
income tax.
ISSUE(S):
Whether or not fraud with intent to evade taxes could be presumed from the deceased’s
erroneous income tax returns.
HELD:
NO. The fraud contemplated by law is actual and not constructive. It must be intentional fraud,
consisting of deception willfully and deliberately done or resorted to in order to induce another to
give up some legal right. Negligence, whether slight or gross, is not equivalent to the fraud with
intent to evade tax. It must amount to intentional wrongdoing with the sole object of avoiding the
tax. It necessarily follows that a mere mistake cannot be considered as fraudulent intent. If both
petitioner and respondent CIR committed mistakes in making entries in the returns and in the
assessment, respectively, it would be unfair to treat the mistakes of the petitioner as tainted with
fraud and those of respondent as made in good faith.
Commissioner of Internal Revenue v Asalus Corporation (February 22 2017)
FACTS:
Respondent filed before the CTA Division a petition for review of petitioner’s Final Decision on
Disputed Assessment (FDDA) showing deficiency VAT for 2007, where there was a finding of
under declaration of more than 30% of its declared VAT sales. In its 02 April 2014 Decision, the
CTA Division ruled that the VAT assessment had prescribed and consequently deemed invalid
because petitioner failed to present evidence regarding its allegation of fraud or falsity in the
returns.
ISSUE(S):
Whether or not a false return may be presumed.
HELD:
YES. When there is a showing that a taxpayer has substantially underdeclared its sales,
receipts or income, there is a presumption that it has filed a false return. As such, the CIR need
not immediately present evidence to support the falsity of the return, unless the presumption
has been overcome.
Commissioner of Internal Revenue v Ayala Securities Corporation (November 21 1980)
FACTS:
Before the Court is petitioner Commissioner of Internal Revenue's motion for reconsideration of
the Court's decision of April 8, 1976 wherein the Court affirmed in toto the appealed decision of
respondent Court of Tax Appeals: cancelled and declared of no force and effect. This Court's
decision under reconsideration held that the assessment made on February 21, 1961 by
petitioner against respondent corporation (and received by the latter on March 22, 1961) in the
sum of P758,687.04 on its surplus of P2,758,442.37 for its fiscal year ending September 30,
1955 fell under the five-year prescriptive period provided in section 331 of the National Internal
Revenue Code and that the assessment had, therefore, been made after the expiration of the
said five-year prescriptive period and was of no binding force and effect . Ayala Securities Corp
filed its ITR w/ the CIR for the fiscal year w/c ended on Sept 30, 1955. Attached to its ITR was
the audited financial statements showing a surplus of P2M+. Income tax due on the return was
duly paid w/in the period prescribed by law. CIR then advised Ayala for the assessment of
P758k unpaid tax on its accumulated surplus. Ayala protested ate assessment and sought
reconsideration given that the accumulation was 1) for a bona fide business purpose and not to
avoid imposition of tax, and 2) assessment was issued beyond 5 yrs. CTA and SC both held
that the assessment was made beyond the 5-year period and thus had no binding force and
effect.
ISSUE: Whether or not the assessment was done beyond the prescriptive period
HELD: YES. In this case, the applicable provision is NOT Sec 332a but Sec 331. Sec 332
should apply when there is fraud / falsity on the return with intent to evade payment of tax.
There is no evidence presented by the CIR in this case as to any fraud/falsity on the return w/
intent to avoid payment. Fraud is a question of fact, circumstances must be proven and alleged.
In this case, the assessment issued on Feb 21, 1961, received by Ayala on March 22, 1961,
was made BEYOND the 5 year period prescribed under Sec331 (Ayala could file its income tax
on or before Jan 1956 thus, assessment must be made NOT later than Jan 1961). Thus, it was
no longer binding on Ayala Securities.
Commissioner of Internal Revenue v BASF Coating + Inks Phils, Inc (November 26 2014)
FACTS:
Respondent, after its dissolution, moved out of its address in Las Piñas City and transferred to
Laguna. It submitted various documents among which is BIR Form No. 1905, which refers to an
update of information contained in its tax registration.
At various times, BIR officials conducted examination and investigation of respondent’s tax
liabilities at the latter’s new address in Laguna. The BIR also sent respondent a letter informing
it of the results of their investigation and inviting it to an informal conference. It, however, sent
by registered mail a Formal Assessment Notice (FAN) for deficiency taxes to respondent’s
former address in Las Piñas.
ISSUE(S):
Whether or not respondent’s change of address tolled the running of the statute of limitations.
HELD:
NO. Petitioner, by all indications, is well aware that respondent had moved to its new address in
Laguna. Despite the absence of a formal written notice of respondent’s change of address, the
fact remains that petitioner became aware of respondent’s new address as shown by
documents replete in its records. As a consequence, the running of the three-year period to
assess respondent was not suspended and has already prescribed.
Refining Company v. CA
G.R. No. 118794 May 8, 1996
REGALADO, J.

Lessons Applicable: deductibility of bad debts, penalties of 25% surcharge, interest of

20, civil penalties are compensatory (not penal), civil penalties and interest are automatic

Laws Applicable:

FACTS:

 Petitioner Philippine Refining Company (PRC) was assessed by respondent

Commissioner of Internal Revenue (Commissioner) to pay a deficiency tax for the year
1985 in the amount of P1,892,584
 PRC protested that the amounts are bad debts and interest expense which are allowable
and legl deductions.  But, CIR ignored it and issued a warrant of garnishment against
PRC's deposits at City Trust Bank.
 PRC filed a Petition for Review with the CTA who reversed the interest expense
disallowance but maintained the 13 bad debts disallowance. 
 PRC elevated the case to CA who dismissed the case for failing to satisfy the
requirements of worthlessness of a debt:
 (1) there is a valid and subsisting debt
 (2) debt must be actually ascertained to be worthless and uncollectible during the
taxable year
 (3) debt must be charged off during the taxable year
 (4) debt must arise from the business or trade of the taxpayer
 (5) uncollectible even in the future
 (6) exerted diligent effort to collect
ISSUES:
1. W/N bad debts requirements are met to be deductible as assessed by the CA
2. W/N PRC should be liable for penalties and interests

HELD: petition at bar is DENIED

1. NO.

 Furthermore, there are steps outlined to be undertaken by the taxpayer to prove that he
exerted diligent efforts to collect the debts, viz: (1) sending of statement of accounts; (2)
sending of collection letters; (3) giving the account to a lawyer for collection; and (4) filing
a collection case in court.
  The only evidentiary support given by PRC for its aforesaid claimed deductions was the
explanation or justification posited by its financial adviser or accountant.  Not a single
document was offered to show that the Remoblas Store and CM Variety Store were
burned, even just a police report or an affidavit attesting to such loss by fire.  The
account of Tomas Store in the amount of P16,842.79 is uncollectible, claims petitioner
PRC, since the owner thereof was murdered and left no visible assets which could
satisfy the debt. Withal, just like the accounts of the two other stores just mentioned,
petitioner again failed to present proof of the efforts exerted to collect the debt, other
than the aforestated asseverations of its financial adviser.  The accounts of Aboitiz
Shipping Corporation and J. Ruiz Trucking in the amounts of P89,483.40 and
P69,640.34, respectively, both of which allegedly arose from the hijacking of their cargo
and for which they were given 30% rebates by PRC, are claimed to be uncollectible.
Again, petitioner failed to present an iota of proof, not even a copy of the supposed
policy regulation of PRC that it gives rebates to clients in case of loss arising from
fortuitous events or force majeure, which rebates it now passes off as uncollectible
debts. 
 Findings of the CTA having recognized expertise will not ordinarily be reviewed absent a
showing of gross error or abuse on its part.
2.  YES.

 Sec. 248 and 249 of the tax code clearly provides that civil penalty is imposed in case of
failure to pay the tax within the prescribed time for its payment and deficiency tax or any
surcharge or interest on the due date appearing in the notice and demand of the
commissioner.  Thus, penalties of 25% surcharge and interest of 20% shall accrue from
April 11, 1989. 
 Tax laws imposing penalties for delinquencies, so we have long held, are intended to
hasten tax payments by punishing evasions or neglect of duty in respect thereof. If
penalties could be condoned for flimsy reasons, the law imposing penalties for
delinquencies would be rendered nugatory, and the maintenance of the Government and
its multifarious activities will be adversely affected.
Commissioner of Internal Revenue v Republic Cement Corp (August 10 1983)
Facts:
The sales tax assessments involved in these cases run to a magnitude of about P38.5 million.
Petitioner Commissioner of Internal Revenue had ruled that cement is a "manufactured product"
and therefore subject to sales tax.
On appeal, this ruling was overruled by the Court of Tax Appeals (CTA) which adjudged cement
to be a "mineral product" within the meaning of Section 246 of the Tax Code and consequently
exempt from sales tax under Section 188 (c) of the same Code, as said laws stood at the time
of the questioned assessments.
Respondents are domestic corporations engaged in the manufacture of cement . . .
On separate dates, petitioner Commissioner of Internal Revenue issued assessments against
the respondents for deficiency sales tax and surcharge due as manufacturers of cement.

Issue:
Whether cement is a "mineral product" the sale of which is exempt from sales tax, or a
"manufactured product "which is subject to sales tax

Ruling:
it is clear that cement qua cement was never considered as a mineral product within the
meaning of Section 246 of the Tax Code, notwithstanding that at least 80% of its components
are minerals, for the simple reason that cement is the product of a manufacturing process and is
no longer the mineral product" contemplated in the Tax Code (i.e., minerals subjected to simple
treatments) for the purpose of imposing the ad valorem tax.
Cagayan Electric Power & Light Co. Inc. v CIR GR No. L-60126, September 25, 1985

FACTS:
Cagayan Electric is a holder of a legislative franchise under RA 3247 where payment of 3% tax
on gross earning is in lieu of all taxes and assessments upon privileges. In 1968, RA 5431
amended the franchise by making all corporate taxpayers liable for income tax. In 1969, through
RA 6020, its franchise was extended to two other towns and the tax exemption was reenacted.
The commissioner required the company to pay deficiency income taxes for the intervening
period (1968-1969).

ISSUE:
Is CEPALCO liable for the tax?

RULING:
Yes. Congress could impair the company’s legislative franchise by making it liable for income
tax. The Constitution
provides that a franchise is subject to amendment, alteration or repeal by the Congress when
the public interest so requires. However, it cannot be denied that the said 1969 assessment
appears to be highly controversial. It had reason not to pay income tax because of the tax
exemption its franchise. For this reason, it should be liable only for tax proper and should not be
held liable for surcharge and interest.
Commissioner vs. Air India
GR L-72443, 29 January 1988
Facts: Air India is a foreign corporation and an off-line international carrier not engaged in the
business of air transportation in the Philippines. Air India sells airplane tickets in the Philippines
through its general sales agent, Philippine Airlines. Said tickets are serviced by Air India outside
the Philippines. The Commissioner of Internal Revenue assessed against Air India the amount
of P142,471.68 representing 2.55 income tax on its gross Philippine billings pursuant to Section
24 (b) (2) of the Tax Code, as amended, inclusive of th e50% surcharge and interest for willful
neglect to file a return as provided under Section 72 of the same Code. Air India appealed to the
Court of Tax Appeals.
Issue: Whether the revenue derived by an international air carrier from sles of tickets in the
Philippines for air transportation, while having no landing rights in the country, constitutes
income of said carrier from Philippine sources, and thus taxable under Section 24 (b) (2) of the
Tax Code.
Held: Based on the doctrine enunciated in British Overseas Airways Corp., the revenue derived
by Air India from the sales of airplane tickets, through its agent in the Philippines, must be
considered taxable income. As correctly assessed by the Commissioner, such income is subject
to a 2.5% tax pursuant to PD 1355, amending section 24 (b) (2) of the Tax Code.
UNGAB vs. CUSI
97 SCRA 877
GR No. L-41919-24 May 30, 1980
"An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to
defeat and evade the income tax."

FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer,
for allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequently
filed a motion to quash on the ground that (1) the information are null and void for want of
authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2)that
the trial court has no jurisdiction to take cognizance of the case in view of his pending protest
against the assessment made by the BIR examiner. The trial court denied the motion prompting
the petitioner to file a petition for certiorari and prohibition with preliminary injunction and
restraining order to annul and set aside the information filed.

ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yet
resolved the protest against the tax assessment tenable?

HELD: No. The contention is without merit. 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.
An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to
defeat and evade the income tax. A crime is complete when the violator has knowingly and
wilfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the
crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate
return, and the government's failure to discover the error and promptly to assess has no
connections with the commission of the crime.
CIR vs. CA
257 SCRA 200
GR No. 119322 June 4, 1996
"Before one is prosecuted for willful attempt to evade or defeat any tax, the fact that a tax is due
must first be proved."

FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos representing deficiency
income, ad valorem and value-added taxes for the year 1992 to which Fortune moved for
reconsideration of the assessments. Later, the CIR filed a complaint with the Department of
Justice against the respondent Fortune, its corporate officers, nine (9) other corporations and
their respective corporate officers for alleged fraudulent tax evasion for supposed non-payment
by Fortune of the correct amount of taxes, alleging among others the fraudulent scheme of
making simulated sales to fictitious buyers declaring lower wholesale prices, as allegedly shown
by the great disparity on the declared wholesale prices registered in the "Daily Manufacturer's
Sworn Statements" submitted by the respondents to the BIR. Such documents when requested
by the court were not however presented by the BIR, prompting the trial court to grant the
prayer for preliminary injuction sought by the respondent upon the reason that tax liabiliity must
be duly proven before any criminal prosecution be had. The petitioner relying on the Ungab
Doctrine sought the lifting of the writ of preliminary mandatory injuction issued by the trial court.

ISSUE: Whose contention is correct?

HELD: In view of the foregoing reasons, misplaced is the petitioners' thesis citing Ungab v. Cusi,
that the lack of a final determination of Fortune's exact or correct tax liability is not a bar to
criminal prosecution, and that while a precise computation and assessment is required for a civil
action to collect tax deficiencies, the Tax Code does not require such computation and
assessment prior to criminal prosecution.
Reading Ungab carefully, the pronouncement therein that deficiency assessment is not
necessary prior to prosecution is pointedly and deliberately qualified by the Court with following
statement quoted from Guzik v. U.S.: "The crime is complete when the violator has knowingly
and wilfully filed a fraudulent return with intent to evade and defeat a part or all of the tax." In
plain words, for criminal prosecution to proceed before assessment, there must be a prima facie
showing of a wilful attempt to evade taxes. There was a wilful attempt to evade tax in Ungab
because of the taxpayer's failure to declare in his income tax return "his income derived from
banana sapplings." In the mind of the trial court and the Court of Appeals, Fortune's situation is
quite apart factually since the registered wholesale price of the goods, approved by the BIR, is
presumed to be the actual wholesale price, therefore, not fraudulent and unless and until the
BIR has made a final determination of what is supposed to be the correct taxes, the taxpayer
should not be placed in the crucible of criminal prosecution. Herein lies a whale of difference
between Ungab and the case at bar.
Commissioner of Internal Revenue vs Pascor Realty & Development Corporation
FACTS: BIR Commissioner authorized revenue officers to examined the books of accounts and
accounting records of Pascor Realty (PRDC). Such examination resulted in a recommendation
for the issuance of an assessment amounting to P7,498,434.65 and P3,015,236.35 for the
years 1986 and 1987, respectively. Commissioner of Internal Revenue filed a criminal complaint
before the Department of Justice against the PRDC, its President Rogelio A. Dio, and its
Treasurer Virginia S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00.
Pascor filed a request for reconsideration/reinvestigation which the CIR denied prompting the
respondents to elevate the CIR’s decision to the CTA. CIR filed a Motion to Dismiss on the
ground that CTA has no jurisdiction over the subject matter since no formal assessment has
been issued against PRDC. The CTA denied the Motion stating that the criminal case for tax
evasion is already an assessment. The amount and kind of tax due and the covered period are
sufficient details for an assessment. CA agreed with the decision of the CTA.

ISSUE: Whether or not the criminal complaint for tax evasion can be construed as an
assessment.

RULING: NO. Neither the NIRC nor the revenue regulations governing the protest of
assessments provide a specific definition or form of an assessment. However, the NIRC defines
the specific functions and effects of an assessment. To consider the affidavit attached to the
Complaint as a proper assessment is to subvert the nature of an assessment and to set a bad
precedent that will prejudice innocent taxpayers.
LUCAS G. ADAMSON v. CA, GR No. 120935, 2009-05-21
Facts:
president, treasurer and secretary
Adamson Management
Corporation
Lucas Adamson and AMC sold 131,897 common shares of stock in Adamson and
Adamson, Inc. (AAI) to APAC Holding Limited (APAC)
P7,789,995.00.
P159,363.21 was paid as capital gains tax f
AMC sold to APAC Philippines, Inc. another 229,870 common shares of stock in AAI for
P17,718,360.00.
capital... capital gains tax of P352,242.96.
Commissioner issued a "Notice of Taxpayer... deficiencies on their payment of capital
gains tax and Value Added Tax (VAT)... notice contained a schedule... for preliminary
conference.
Commissioner... filed with the DOJ a motion to suspend proceedings on the ground of
prejudicial question, pendency of a civil case with the Supreme Court, and pendency of
their letter-request for re-investigation with the
Commissioner
State Prosecutor Alfredo P. Agcaoili found probable cause.
charged before the Regional Trial Court... filed a Motion to Dismiss or Suspend the
Proceedings.
there was yet no final assessment of their tax liability... there were still pending relevant
Supreme Court and CTA cases... averred that it was not a condition prerequisite that a
formal assessment should first be given to the private... respondents before she may file
the aforesaid criminal complaints against them... criminal complaints for tax evasion may
proceed independently from the assessment cases pending before the CTA.
filed a letter request for re-investigation with the Commissioner of the "Examiner's Findings"...
before the Commissioner could act on their letter-request, AMC, Lucas G. Adamson, Therese
June D. Adamson and Sara S. de los Reyes filed a Petition for Review with the CTA.
Commissioner moved to dismiss the petition, on the ground that it was premature, as
she had not yet issued a formal assessment of the tax liability of therein petitioner... with
regard to the protest provided under Section 229 of the NIRC, there must first be a formal
assessment issued by the Commissioner,... she had not yet issued a formal assessment
of tax liability, and the tax deficiency amounts mentioned in her criminal complaint with
the DOJ were given only to show the difference... between the tax returns filed and the
audit findings of the revenue examiner.
an assessment... simply understood to mean:
A notice to the effect that the amount therein stated is due as tax and a demand for payment
thereof."[18]... respondents maintain that the filing of a criminal complaint must be preceded by
an assessment
Issues:
WHETHER OR NOT AN ASSESSMENT IS REQUIRED UNDER THE SECOND CATEGORY
OF THE OFFENSE IN SECTION 253 OF THE NIRC.
WHETHER OR NOT THERE WAS A VALID ASSESSMENT
WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT (FORMAL
OR OTHERWISE) OF THE TAX LIABILITY
WHETHER THERE IS BASIS FOR THE CRIMINAL CASES FOR TAX EVASION... whether the
Commissioner's recommendation letter can be considered as a formal assessment of private
respondents' tax liability.
whether the filing of the criminal complaints against the private respondents by the DOJ is
premature for lack of a formal assessment.
Ruling:
trial court granted the Motion... and... complaints for tax evasion filed by the Commissioner
should be regarded as a decision of the Commissioner regarding the tax... liabilities of Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes, and appealable to the CTA.
cases cannot proceed independently of the assessment case pending before the CTA, which
has jurisdiction to determine the civil and... criminal tax liability of the respondents therein.
Petition
Court of Appeals reversed the trial court's decision and reinstated the criminal complaints.
in a criminal prosecution for tax evasion, assessment of tax deficiency is not required
because the offense of tax evasion... is complete or consummated when the offender has
knowingly and willfully filed a fraudulent return with intent to evade the tax.
ruled that private respondents filed false and fraudulent returns with intent to evade taxes, and
acting... thereupon, petition... er filed an Affidavit of Complaint... without an accompanying
assessment of the tax deficiency of private respondents, in order to commence criminal action
against the latter for tax evasion.
the
CTA denied the Motion to Dismiss.  It considered the criminal... complaint filed by the
Commissioner with the DOJ as an implied formal assessment, and the filing of the criminal
informations with the RTC as a denial of petitioners' protest regarding the tax deficiency.
BIR Commissioner Jose U. Ong authorized revenue officers to examine the books of accounts
and other accounting records of Pascor Realty and Development Corporation
(PRDC)... resulted in a recommendation for the issuance of an assessment in the amounts
Commissioner filed a criminal complaint before the DOJ against PRDC... alleging evasion of
taxes in the total amount of P10,513,671.00.
Private respondents filed an Urgent Request for
Reconsideration/Reinvestigation disputing the tax assessment and tax liability.
denied the urgent request for reconsideration/reinvestigation because she had not yet issued a
formal assessment.
respondents then elevated the Decision of the Commissioner to the CTA on a petition for review
Commissioner filed a Motion to Dismiss the petition on the ground that the CTA has no
jurisdiction over the subject matter of the pe
CTA denied the said motion to dismiss and ordered the Commissioner to file an answer within
thirty (30) day
Commissioner did not file an answer nor did she move to reconsider the resolution... ls
Commissioner filed a petition for review of the CTA decision with the Court of Appeal
Court of Appeals upheld the CTA order.
Court reversed the Court of Appeals decision and the CTA order, and orde... assessment
contains not only a computation of tax liabilities, but also a demand for payment within a
prescribed perio... r.
signals the time when penalties and interests begin to accrue against the taxpayer
To enable the taxpayer to determine his... remedies thereon, due process requires that it must
be served on and received by the taxpayer.
affidavit, which was executed by revenue officers stating the tax liabilities of a taxpayer and
attached to a criminal complaint for tax evasion, cannot be deemed... an assessment that can
be questioned before the Court of Tax Appeals.
To consider the affidavit... attached to the Complaint as a proper assessment is to subvert the
nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers.
But not all documents coming from the BIR containing a computation of the tax liability can be
deemed assessments.
To start with, an assessment must be sent to and received by a taxpayer, and must demand
payment of the taxes described therein within a specific period.
issuance of an assessment is vital in determining the period of limitation regarding its proper
issuance and the period within which to protest it... internal revenue taxes must be assessed
within three... years from the last day within which to file the return... period of ten years in case
a fraudulent return with intent to evade was submitted or in case of failure to file a retur...
assessment may be protested only within thirty days from receipt thereof.
taxpayer must be certain that a specific document constitutes an assessment.  Otherwise,
confusion would... arise regarding the period within which to make an assessment or to protest
the same, or whether interest and penalty may accrue thereon.
said document is a notice duly sent to the taxpayer... evenue officers' Affidavit merely contained
a computation of respondents' tax liability.  It did not state a demand or a period for payment.
fact that the Complaint itself was specifically directed and sent to the Department of Justice and
not to private respondents shows that the intent of the commissioner was to file a criminal
complaint for tax evasion, not to issue an assessmen... commissioner opted instead to file a
criminal case for tax evasion.
What private respondents received was a notice from the DOJ that a criminal case for tax
evasion had been filed against them, not a notice that the Bureau of Internal Revenue had
made an assessment.
incorrect, because Section 222 of the NIRC specifically states that in cases where a false or
fraudulent return is submitted or in cases of failure to file a... return such as this case,
proceedings in court may be commenced without an assessment.
civil and criminal aspects of the case may be pursued simultaneously.
protests could not stop or suspend the criminal action which was independent of the... resolution
of the protest in the CTA. assessment is not necessary before a criminal charge can be filed.
respondents failed to show that they are entitled to an exception.  Moreover, the criminal charge
need only be supported by a prima... facie showing of failure to file a required return.  This fact
need not be proven by an assessment.
issuance of an assessment must be distinguished from the filing of a complaint.
Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the
taxpayer.
criminal charge is filed directly with the DOJ
Commissioner denied that she issued a formal assessment of the tax liability... r[22]
addressed... to the Secretary of the DOJ recommending the filing of criminal complaints
A written communication containing a computation by a revenue... officer of the tax liability of a
taxpayer and giving him an opportunity to contest or disprove the BIR examiner's findings is not
an assessment since it is yet indefinite.[23]... recommendation letter of the Commissioner
cannot be considered a formal assessment... not addressed to the taxpayers.
no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein.
never mailed or sent to the taxpayers by the Commissioner.
When fraudulent tax returns are involved as in the cases at bar, a proceeding in court
after the collection of such tax may be begun without assessment.
no need for precise computation and formal assessment in order for criminal complaints
to be filed against... him
People of the Philippines vs. Gloria Kintanar (CTA Crim case no. 006, 3 December 2010;
affirmed by the SC ina minute resolution [GR No.196340] dated February 2012]

NATURE OF THE CASE: A Petition for Review of the decision rendered by the Former
Second Division of the CTA which found Gloria Kintanar guilty of failure to file her Income Tax
returns for years 2000 and 2001.

FACTS: Spouses Benjamin Kintanar and Gloria V. Kintanar were distributors or independent
contractors of Forever Living Products Phils. Inc. (FLPPI). It all began when the Investigation
Division of the BIR received confidential information of an alleged tax evasion scheme of the
Spouses Kintanar. As a result thereof, BIR issued a Letter of Authority to examine the books of
accounts and other accounting records for taxable years 1999 to 2002. The LOA was received
by Mr. Kintanar on April 3, 2003. Gloria Kintanar failed to submit the required documents.
Thereafter, several notices and a subpoena were sent to her, by the BIR but the she remained
uncompliant.
On August 31, 2004 the husband of Gloria Kintanar filed a protest to the Letter of Demand and
Assessment notices sent by the BIR. Photocopies of the spouses’ joint income tax returns for
the years 2000- 2002 were attached to the protest.
In response thereto, the BIR required the spouses to submit additional documents within 60
days. Again, the spouses failed to comply with the said request; consequently, the assessment
and the demand letter became final, executory and demandable.
The prosecution proved that Gloria Kintanar failed to file her ITR’s for the years 1999-2001 and
found her liable for deficiency income taxes arising from income earned from FLPPI.
Gloria Kintanar testified that she filed her ITR’s for taxable years 2000-2001. She denied having
willfully, unlawfully and feloniously failed to file her ITR on said years as she has no personal
knowledge of the actual filing of the said returns because it was her husband who filed the
ITR’s. Her husband on the other hand testified that he filed the ITR’s for the years 1997-2004
through their hired accountant who prepared and filed their returns. Because he relied upon his
accountant, he only browsed the returns; therefore, he has no knowledge to the amount stated
thereon and to the address which their accountant filed their returns to.
The Former Second Division found Gloria Kintanar guilty beyond reasonable doubt of Violation
of Section 255 of the NIRC of 1997. Hence, Gloria Kintanar filed this instant petition before the
CTA En Banc.
ISSUES: Did Petitioner Gloria Kintanar violate Sec. 255 of the NIRC for failure to make or file
her returns? Was her failure to make or file a return willful?
ANSWER/RATIONALE/HELD: Yes, Gloria Kintanar is guilty beyond reasonable doubt for
failure to make or file a return under Section 255 of the NIRC.
Yes, she the Court found her to have willfully and deliberately failed to file her returns for the
taxable years 2000-2001.
Section 255 contemplates four different situations punishable by law, for failure to:
1. To pay any tax;
2. To make a return;
3. To keep any record; and
4. To supply correct and accurate information.

Petitioner Gloria Kintanar is charged with failure to make or file a return. The elements of which
are the following:
a. the accused is a person required to make or file a return;
b. the accused failed to make or file a return at the time required by law; and
c. That failure to make or file a return was willful.

All of the aforementioned elements are present in this case.

As to the 1st element, Gloria Kintanar is duty bound to make or file a return under Section 51 of
the NIRC. Considering that the she earned a substantial income as distributor of FLPPI; she is
therefore required to make or file her annual income tax return pursuant to Sec. 51 of the NIRC.
As to 2nd element, she failed to make or file her ITR’s for the taxable years 2000-2001. Gloria
Kintanar had no record that she filed the required ITR’s within the reglementary period to any of
the Rev. District Offices of the BIR. The only record the BIR has was when she was registered
as a one-time transaction tax payer for capital gains and documentary stamp in Cavite. The
petitioner presented 2 ITR’s allegedly filed in the RDO of Novaliches. However, the court did not
give credence to the authenticity of the document as it contained material flaws. The ITR’s were
in itself incomplete, filed in an RDO having no jurisdiction over the place of residence of Mrs.
Kintanar and even her husband admitted that he did not even read the contents of the ITR and
does not know where these ITR’s were supposedly filed by their accountant. The 2 certifications
submitted by Kintanar were likewise tainted with various defects to wit; a) the certificates are
undated; the certificates were issued by the RDO in Novaliches which has the jurisdiction over
the address reflected on the accused’s ITR. However, the ITR’s were stamped received by the
RDO in Cubao; and lastly, the signatory of the certificate was not presented nor was there an
attempt to present him to attest the veracity of the certificates.

As regards the 3rd element of "willfulness", it was sufficiently proven beyond reasonable doubt
that petitioner deliberately failed to make or file a return.
Willful in the tax crimes statutes means voluntary, intentional violation of a known legal duty,
and bad faith or bad purpose need not be shown [Mertens' Law of Federal Income Taxation,
Chapter 47.05, page 28, Volume 13, see U.S. v. Green, 757
F2d 116,85-1 USTC 9178 (CA7 1985), in which the
Court, Citing U.S. v. Moore, 627 F2d 830 (CA7 1980) and U.S. v. Verkuilen, 690 F2d 6-18, 82-2
USTC 9618 (CA7 1982), upheld the conviction of a tax protester for willful failure to file
returns.
An act or omission is "willfully" done if done voluntarily and intentionally and with specific intent
to do something the law forbids, or with specific intent to fail to do something the law requires to
be done; that is, with bad purpose to either disobey or disregard the law. A willful act may be
described as one done intentionally, knowingly and purposely, without justifiable excuse
(Black's Law Dictionary, 51ed. p.1434).
Under the law, Gloria and her husband are obliged to file their ITRs for taxable years 2000 and
2001. Thus, Gloria’s sole reliance on her husband to file their ITRs is not a valid reason to justify
her non- filing. Being an experienced businesswoman and having been an independent
distributor of FLPPI since 1996, she ought to know and understand all the matters concerning
her business. This includes knowledge and awareness of her tax obligation in connection with
her business. She should know how much are her tax dues, the details stated on the ITRs,
where the same are filed, and other important facts related to the filing of her ITRs; after all,
these matters concern her finances. There were no affirmative acts on the part of Gloria
Kintanar to make sure that her obligation to file her ITRs had been fully complied with. Such
neglect or omission, as aptly founded by the Former Second Division, is tantamount to
"deliberate ignorance” or "conscious avoidance".
Likewise, Gloria Kintanar was duly informed that no ITRs were filed, nor recorded under her
name. There were several notices sent to her by the BIR to comply with her tax obligations, but
she opted not to comply. Evidently, such non-compliance with the BIR’s notices clearly shows
her intent not to file her ITRs.
Finding no reversible error, the Court En Banc affirms the assailed decision and Resolution of
the Former Second Division of this Court.
RULING: WHEREFORE, premises considered, the present Petition for Review is hereby
DENIED. The assailed Decision dated August 26, 2009 and Resolution dated November 26,
2009 of the Former Second Division are hereby AFFIRMED.

SO ORDERED.
People of the Philippines vs. Judy Anne Santos, CTA CRIM. CASE NO. O -012, January 16, 2013 Bautista,
J.
Facts:

The accused, Judy Anne Santos is charged for filing a false and fraudulent Income Tax Return (“ITR”) for the
taxable year 2002 by indicating therein a gross income of P 8, 003,332.70, when in truth and in fact her correct
income for taxable year 2002 is P 16, 396, 234.70. She is prosecuted for violation Section 255 of the 1997 NIRC
as amended for her failure to supply correct and accurate information, which resulted to an income tax deficiency
in the amount of P 1, 395,116.24, excluded interest and penalties thereon in the amount of P 1, 319, 500. 94, or
in the aggregate income tax deficiency of P 2, 714,617.18.
Issue:

Whether or not the accused may be held liable for violation of Section 255 of the National Internal Revenue
Code, as amended.
Held:
Section 255 enumerates the following offenses:
a. Willful failure to pay tax;
b. Willful failure to make a return;
c. Willful failure to keep any record;
d. Willful failure to supply correct and accurate information;
e. Willful failure to withhold or remit taxes withheld; or
f. Willful failure to refund excess taxes withheld on compensation.

One of the offenses above-enumerated is willful failure to supply correct and accurate information, which is
being attributed to the accused. The elements of the said offense are as follows:
1. That a person is required to supply correct and accurate information;
2. That there is failure to supply correct and accurate information at the time or times required by law or
rules and regulations; and
3. That such failure to supply correct and accurate information is done wilfully.
Require to supply Correct and Accurate Information

Based on the records of the case, the accused unequivocally admitted that as early as eight (8) years old, she
entered the entertainment industry, and that at present is an established movie actress, celebrity endorser and
showbiz personality. Further, for the subject taxable year 2002, she admitted that she entered into contracts for
her engagement as a professional entertainer, movie actress, and product endorser. With this, accused is required
to file an income tax return for all her income from all sources.
People of the Philippines vs. Valeriano (12 October 2016)

FACTS:
The Regional Director (RD) of the BIR, Revenue Region No. 6, wrote a Letter to the City
Prosecutor of Manila, recommending the criminal prosecution of Valeriano as
president/authorized officer of the Capital Insurance & Surety Co., Inc. (Corporation) for failure
to pay the following internal revenue tax obligations of the Corporation in violation of Section
255 (failure to file return, supply correct and accurate information, pay tax, withhold and remit
tax, and refund excess taxes withheld on compensation) in relation to Section 253(d) and
Section 256 (penal liability of corporations) of the 1997 NIRC. Thus, an Information was filed
with the CTA by Assistant City Prosecutor Suwerte L. Ofrecio-Gonzales against Valeriano for
said violations of the 1997 NIRC.

CTA First Division:

- issued a Resolution, whereby ACP Gonzales was ordered to submit within five days
from receipt thereof proof that the filing of the criminal case was with the written approval of the
BIR Commissioner, and not by the RD, in compliance with Section 220 of the 1997 NIRC, as
amended.

- another Resolution, it ordered ACP Orrecio-Gonzales to comply with the earlier

resolution, within a final and non-extendible period of five days from receipt of the Resolution.
However, Assistant City Prosecutor Ofrecio-Gonzales failed to comply with the order to submit
the approval of the Commissioner (to file the criminal action), as required.

- dismissed the case against Valeriano for failure to prosecute.

Thereafter, a Special Attorney from the Legal Division of BIR Revenue Region No. 6 filed an
"Entry of Appearance with Leave to Admit Manifestation and Motion for
Reconsideration." Attached thereto was a photocopy of the supposed written approval of the
BIR Commissioner to file the criminal case against Valeriano.

CTA Special First Division:

- promulgated an Order, requiring Valeriano to comment on the Motion with Leave to
Admit Manifestation and Motion for Reconsideration filed by the counsel of the BIR
Commissioner. However, the records disclose that Valeriano had already moved out of her
address of record.
- issued a Resolution, denying the petitioner's motion for reconsideration for lack of merit.

Aggrieved, the petitioner filed a Petition for Review with the CTA en banc, arguing that it was
not at fault when Assistant City Prosecutor Ofrecio-Gonzales failed to comply with the orders of
the CTA Special First Division and that the government is not bound by the errors committed by
its agents.

CTA en banc:

- directed Valeriano to file her comment. But as with the other documents sent to her, the
resolution was returned unserved with the notation "RTS moved out." As Valeriano failed to file
Comment. In another Resolution, directed the parties to submit their respective memoranda.
Only the petitioner filed a Memorandum, after which the case was submitted for decision.

- sustained the dismissal of the case, noting that the petitioner failed to comply with the
Resolutions of the CTA Special First Division. While the petitioner did attach to its motion for
reconsideration an alleged written approval of the BIR Commissioner, it was merely a
photocopy which was hardly readable. Hence, there was no compliance with the resolutions
even when the lawyer of the BIR, deputized as special prosecutor, took over in the filing of the
motion for reconsideration.

ISSUE:
Whether the required approval of the Commissioner provided under Section 220 was complied
with in relation to Section 7 of the Tax Code.

RULING:

YES.
The records of the case reveal that the petitioner had earlier submitted a letter of the RD of BIR
Revenue Region No. 6, recommending the criminal prosecution of Valeriano. This letter was
attached to the Information along with other documents pertinent to the case. However, this was
not deemed as compliance with Section 220, as the letter was not from the BIR Commissioner
himself.

After the dismissal decreed by the CTA Special First Division, the petitioner, through a motion
for reconsideration, presented an alleged copy of the written approval dated July 2006 signed
by then BIR Commissioner Jose Mario C. Buñag. Yet, as the CTA en banc found, the contents
of the photocopied letter were faded and almost imperceptible.

The prerequisite approval of the BIR Commissioner in the filing of a civil or criminal action is
provided under Section 220 of the 1997 NIRC, which states that:
Sec. 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and criminal
actions and proceedings instituted in behalf of the Government under the authority of this Code
or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the
Government of the Philippines and shall be conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of taxes or the enforcement of any fine,
penalty or forfeiture under this Code shall be filed in court without the approval of the
Commissioner.

The required approval of the Commissioner provided under Section 220 of the 1997 NIRC
aside, Section 7 thereof allows the delegation of powers of the Commissioner to any
subordinate official with the rank equivalent to a division chief or higher, save for the instances
specified thereunder, viz:
Section 7. Authority of the Commissioner to Delegate Power. - The Commissioner may delegate
the powers vested in him under the pertinent provisions of this Code to any or

such subordinate officials with the rank equivalent to a division chief or higher, subject to such
limitations and restrictions as may be imposed under rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioner: Provided, however,
That the following powers of the Commissioner shall not be delegated:

(a) The power to recommend the promulgation of rules and regulations by the Secretary of
Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing
ruling of the Bureau;
(c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax
liability: 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
[F]inance, upon 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, the heads of the Legal,
Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over
the taxpayer, as members; and
(d) The power to assign or reassign internal revenue officers to establishments where
articles subject to excise tax are produced or kept.

In Republic v. Hizon, the Court upheld the validity of a complaint for collection of tax deficiency
which was signed by the Chief of the Legal Division of BIR Region 4 and verified by the RD of
Pampanga. Citing Section 7 of the 1997 NIRC, the Court ratiocinated that "[n]one of the
exceptions relates to the Commissioner's power to approve the filing of tax collection cases."

The Court made a similar pronouncement in Oceanic Wireless Network, Inc. v. Commissioner of
Internal Revenue, where the authority of the Chief of the BIR Accounts Receivable and Billing
Division to issue a demand letter was questioned. The Court ruled that "the general rule is that
the Commissioner of Internal Revenue may delegate any power vested upon him by law to
Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers
granted to him under the [NIRC] enumerated in Section 7. The act of issuance of the demand
letter by the Chief of the Accounts Receivable and Billing Division did not fall under any of the
exceptions that have been specified as non-delegable.

In the same manner, the approval of filing of a criminal action is not one of the non-delegable
functions of the Commissioner. As previously stated, the petitioner had earlier submitted a
written recommendation from the RD to file the instant case against Valeriano. Therefore, the
recommendation of the RD to file the instant case constitutes as compliance with the
requirement under Section 220 of the 1997 NIRC.

Notwithstanding the foregoing, the petitioner is cautioned to take the initiative of periodically
checking on the progress of its cases to avoid a similar instance where its counsel's negligence
or failure to comply with court orders would result to delay or worse, constitute as bar in the
prosecution of criminal tax cases.

WHEREFORE, the petition is hereby GRANTED. The case is REMANDED to the Court of Tax
Appeals for further proceedings.
Lim vs CA 190 SCRA 616

Facts:
Spouses Lim were engaged in the dealership of various household appliances.
The NBI conducted a raid on Oct. 5, 1959 on their Business Address: No. 336 Nueva Street, Manila and 111-12th
Street, Quezon City.Seized from the Lim couple were business and accounting records which served as bases for an
investigation undertaken by the BIR. On Sept. 30, 1964, Senior Revenue Examiner Raphael S. Daet submitted a
memorandum that the income tax returns filed by the spouses Lim for 1958 and 1959 were false or fraudulent. The
assessment should be: P835, 127. Acting Commissioner Benjamin M. Tabios informed the couple that there
deficiency income taxes are P922, 913.04.
On April 10, 1965, spouses requested an re-investigation.BIR expressed willingness on the following conditions:

1. 1.)  written waiver of the defense of prescription under the statute of limitations;
2. 2.)  depositing 1⁄2 of the assessment and securing the other 1⁄2 with a surety bond.

Spouses Lim refused to comply with the conditions and reiterated his request. BIR rendered a final decision holding
that there was no cause for reversal of the assessment against the Lim couple. The final notice and demand for
payment was served through their daughter in law on July 3, 1968 for the amount of P1,237,190.55 including interest,
surcharges and penalty for late payment. BIR referred the matter to the Manila’s Fiscal’s Office for investigation and
prosecution.RTC Manila found petitioners guilty

Issues:

1. WON the offenses prescribe after 5 years (Lim) or 10 years (government’s position)
2. WON the prescriptive period commenced to runfrom 1965 date of 1stassessment or discovery(accdg to Lim
spouses) or
from final notice on 1968(government)
3. WON the RTC had jurisdiction over the tax collection case
4. WON the death of Emilio S. Lim, Sr. extinguished his civil liabilities

Ruling:

1. 5 years – but the government instituted the case within the prescriptive period
2. Commenced from the date of the final notice.In criminal cases, statutes of limitations are acts of grace, a
surrendering by the sovereign of its right to prosecute. They receive strict construction in favor of the
Government and limitations in such cases will not be presumed in the absence of clear legislation.
3. No, because the criminal case was instituted on June 23, 1970 and PD 69 which mandates RTC to order
payment of the taxes took effect only on Jan. 1, 1973. It has no retroactive application.The law applicable
was SECTION 316 which does not sanction such imposition.
4. Yes. The liability of Emilio S. Lim, Sr. is extinguished by his death in accordancewith SECTION 89 of the
RPC; but the fine imposed in the 4 criminal cases is affirmed in the case of petitioner Antonia Sun Lim in
accordance with NIRC SECTION 73. 

CIR v. HAMBRECHT, GR No. 169225, 2010-11-17

Facts:
In a letter dated February 15, 1993, respondent informed the Bureau of Internal Revenue (BIR),
through its West-Makati District Office of its change of business address from the 2nd Floor
Corinthian Plaza, Paseo de Roxas, Makati City to the
22nd Floor PCIB Tower II, Makati Avenue corner H.V. De la Costa Streets, Makati City. Said
letter was duly received by the BIR-West Makati on February 18, 1993.
On November 4, 1993, respondent received a tracer letter or follow-up letter dated October 11,
1993 issued by the Accounts Receivable/Billing Division of the BIR's National Office and signed
by then Assistant Chief Mr. Manuel B. Mina, demanding for payment of alleged deficiency...
income and expanded withholding taxes for the taxable year 1989 amounting to P2,936,560.87.
On December 3, 1993, respondent, through its external auditors, filed with the same Accounts
Receivable/Billing Division of the BIR's National Office, its protest letter against the alleged
deficiency tax assessments for 1989 as indicated in the said tracer letter dated October
11, 1993.
The alleged deficiency income tax assessment apparently resulted from an adjustment made to
respondent's taxable income for the year 1989, on account of the disallowance of certain items
of expense, namely, professional fees paid, donations, repairs and maintenance, salaries and...
wages, and management fees. The latter item of expense, the management fees, made up the
bulk of the disallowance, the examiner alleging, among others, that petitioner failed to withhold
the appropriate tax thereon. This is also the same basis for the imposition of the... deficiency
withholding tax assessment on the management fees. Revenue Regulations No. 6-85 (EWT
Regulations) does not impose or prescribe EWT on management fees paid to a non-resident.
On November 7, 2001, nearly eight (8) years later, respondent's external auditors received a
letter from herein petitioner Commissioner of Internal Revenue dated October 27, 2001. The
letter advised the respondent that petitioner had rendered a final decision denying its protest...
on the ground that the protest against the disputed tax assessment was allegedly filed beyond
the 30-day reglementary period prescribed in then Section 229 of the National Internal Revenue
Code.
On December 6, 2001, respondent filed a Petition for Review docketed as CTA Case No. 6362
before the then Court of Tax Appeals, pursuant to Section 7 of Republic Act No. 1125,
otherwise known as an `Act Creating the Court of Tax Appeals' and Section 228 of the NIRC, to
appeal... the final decision of the Commissioner of Internal Revenue denying its protest against
the deficiency income and withholding tax assessments issued for taxable year 1989.[3]
In a Decision dated September 24, 2004, the CTA Original Division held that the subject
assessment notice sent by registered mail on January 8, 1993 to respondent's former place of
business was valid and binding since respondent only gave formal notice of its change of
address... on February 18, 1993.  Thus, the assessment had become final and unappealable for
failure of respondent to file a protest within the 30-day period provided by law. However, the
CTA (a) held that the CIR failed to collect the assessed taxes within the prescriptive period;...
and (b) directed the cancellation and withdrawal of Assessment Notice No. 001543-89-5668.
Petitioner's Motion for Reconsideration and Supplemental Motion for Reconsideration of said
Decision filed on October 14, 2004 and November 22, 2004, respectively, were denied for lack
of... merit.
Undaunted, the CIR filed a Petition for Review with the CTA En Banc but this was denied in a
Decision dated August 12, 2005, the dispositive portion reads:
WHEREFORE, the Petition for Review is DENIED DUE COURSE
Issues:
WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO RULE THAT
THE GOVERNMENT'S RIGHT TO COLLECT THE TAX HAS PRESCRIBED.
Ruling:
The petition is without merit.
Principles:
Anent the first issue, petitioner argues that the CTA had no jurisdiction over the case since the
CTA itself had ruled that the assessment had become final and unappealable. Citing Protector's
Services, Inc. v. Court of Appeals,[6] the CIR argued... that, after the lapse of the 30-day period
to protest, respondent may no longer dispute the correctness of the assessment and its appeal
to the CTA should be dismissed. The CIR took issue with the CTA's pronouncement that it had
jurisdiction to decide "other matters" related to... the tax assessment such as the issue on the
right to collect the same since the CIR maintains that when the law says that the CTA has
jurisdiction over "other matters," it presupposes that the tax assessment has not become final
and unappealable.
We cannot countenance the CIR's assertion with regard to this point. The jurisdiction of the CTA
is governed by Section 7 of Republic Act No. 1125, as amended, and the term "other matters"
referred to by the CIR in its argument can be found in number (1) of the aforementioned...
provision, to wit:
Section 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
law... as part of law administered by the Bureau of Internal Revenue. (Emphasis supplied.)
Plainly, the assailed CTA En Banc Decision was correct in declaring that there was nothing in
the foregoing provision upon which petitioner's theory with regard to the parameters of the term
"other matters" can be supported or even deduced. What is rather clearly... apparent, however,
is that the term "other matters" is limited only by the qualifying phrase that follows it.
Thus, on the strength of such observation, we have previously ruled that the appellate
jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters
relating to assessments or refunds.  The second part of the provision covers other cases that...
arise out of the National Internal Revenue Code (NIRC) or related laws administered by the
Bureau of Internal Revenue (BIR).[7]
In the case at bar, the issue at hand is whether or not the BIR's right to collect taxes had already
prescribed and that is a subject matter falling under Section 223(c) of the 1986 NIRC, the law
applicable at the time the disputed assessment was made. To quote Section
223(c):
Any internal revenue tax which has been assessed within the period of limitation above-
prescribed may be collected by distraint or levy or by a proceeding in court within three years
following the assessment of the tax. (Emphases... supplied.)
In connection therewith, Section 3 of the 1986 NIRC states that the collection of taxes is one of
the duties of the BIR, to wit:
Sec. 3.  Powers and duties of Bureau. - The powers and duties of the Bureau of Internal
Revenue shall comprehend the assessment and collection of all national internal revenue taxes,
fees, and charges and the enforcement of all forfeitures, penalties, and... fines connected
therewith including the execution of judgments in all cases decided in its favor by the Court of
Tax Appeals and the ordinary courts.  Said Bureau shall also give effect to and administer the
supervisory and police power conferred to it by this Code or other... laws. (Emphasis supplied.)
Thus, from the foregoing, the issue of prescription of the BIR's right to collect taxes may be
considered as covered by the term "other matters" over which the CTA has appellate
jurisdiction.
Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTA's
jurisdiction over disputed assessments and over "other matters" arising under the NIRC or other
laws administered by the BIR as separate and independent of each other.  This runs... counter
to petitioner's theory that the latter is qualified by the status of the former, i.e., an "other matter"
must not be a final and unappealable tax assessment or, alternatively, must be a disputed
assessment.
Likewise, the first paragraph of Section 11 of Republic Act No. 1125,... as amended by Republic
Act No. 9282,[8] belies petitioner's assertion as the provision is explicit that, for as long as a
party is adversely affected by any decision, ruling or inaction of petitioner, said party may file an
appeal with the CTA within 30... days from receipt of such decision or ruling.  The wording of the
provision does not take into account the CIR's restrictive interpretation as it clearly provides that
the mere existence of an adverse decision, ruling or inaction along with the timely filing of an
appeal... operates to validate the exercise of jurisdiction by the CTA.
To be sure, the fact that an assessment has become final for failure of the taxpayer to file a
protest within the time allowed only means that the validity or correctness of the assessment
may no longer be questioned on appeal.  However, the validity of the assessment... itself is a
separate and distinct issue from the issue of whether the right of the CIR to collect the validly
assessed tax has prescribed.  This issue of prescription, being a matter provided for by the
NIRC, is well within the jurisdiction of the CTA to decide.
With respect to the second issue, the CIR insists that its right to collect the tax deficiency it
assessed on respondent is not barred by prescription since the prescriptive period thereof was
allegedly suspended by respondent's request for reinvestigation.
Based on the facts of this case, we find that the CIR's contention is without basis.  The pertinent
provision of the 1986 NIRC is Section 224, to wit:
Section 224. Suspension of running of statute. - The running of the statute of limitations
provided in Sections 203 and 223 on the making of assessment 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 Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the
taxpayer requests for a re-investigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return
filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the
Commissioner of any change in address, the statute will not be suspended;... when the warrant
of distraint and levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could be located; and when
the taxpayer is out of the Philippines. (Emphasis supplied.)
The plain and unambiguous wording of the said provision dictates that two requisites must
concur before the period to enforce collection may be suspended: (a) that the taxpayer requests
for reinvestigation, and (b) that petitioner grants such request.
On this point, we have previously held that:
The above section is plainly worded. In order to suspend the running of the prescriptive periods
for assessment and collection, the request for reinvestigation must be granted by the CIR.[9]
(Emphasis supplied.)
Consequently, the mere filing of a protest letter which is not granted does not operate to
suspend the running of the period to collect taxes. In the case at bar, the records show that
respondent filed a request for reinvestigation on December 3, 1993, however, there is no...
indication that petitioner acted upon respondent's protest.  As the CTA Original Division in
C.T.A. Case No. 6362 succinctly pointed out in its Decision, to wit:
It is evident that the respondent did not conduct a reinvestigation, the protest having been
dismissed on the ground that the assessment has become final and executory.  There is nothing
in the record that would show what action was taken in connection with the... protest of the
petitioner. In fact, petitioner did not hear anything from the respondent nor received any
communication from the respondent relative to its protest, not until eight years later when the
final decision of the Commissioner was issued (TSN, March 7, 2002, p.
24).  In other words, the request for reinvestigation was not granted. x x x.[10] (Emphasis
supplied.)
Since the CIR failed to disprove the aforementioned findings of fact of the CTA which are borne
by substantial evidence on record, this Court is constrained to uphold them as binding and true. 
This is in consonance with our oft-cited ruling that instructs this Court to not... lightly set aside
the conclusions reached by the CTA, which, by the very nature of its functions, is dedicated
exclusively to the resolution of tax problems and has accordingly developed an expertise on the
subject unless there has been an abuse or improvident exercise of... authority.[11]
Indeed, it is contradictory for the CIR to argue that respondent's December 3, 1993 protest
which contained a request for reinvestigation was filed beyond the reglementary period but still
claim that the same request for reinvestigation was implicitly granted by virtue of its
October 27, 2001 letter.  We find no cogent reason to reverse the CTA when it ruled that the
prescriptive period for the CIR's right to collect was not suspended under the circumstances of
this case.
WHEREFORE, the petition is DENIED.  The assailed Decision of the Court of Tax Appeals
(CTA) En Banc dated August 12, 2005 is AFFIRMED.  No costs.

Dayrit vs. Cruz GR L-39910, 26 September 1988

Facts:
Cecilia Teodoro Dayrit, Toribia Teodoro Castaneda, Prudencio Teodor, Francisco Teodoro and
Josefina Teodoro Tiongson are legitimate children and heirs of the deceased spouses Marta
and Toribio Teodoro who died intestate on 1 July 1965 and 30 August 1965. The heirs
separately filed estate and inheritance tax returns for the estates of the spouses with the BIR. In
1972, the BIR issued deficiency estate and inheritance tax assessments for P1,662,072,34 and
P1,747,790.94 respectively for the Estate of Dona Marta and P1,542,293.01 amd P518,458.72,
respectively for the Estate of Don Toribio.
The heirs asked for reconsideration as the assessment was allegedly contrary to law and not
supported by sufficient evidence. In a tax return dated 31 March 1973, Dayrit declared an
additional amount of P3,655,595.78 as part of the estates of the Teodoro spouses. The BIR
issued tax payment acceptance orders, as the heirs and estate have paid a total of
P285,046.88. In 1974, the Commissioner filed a motion for allowance of claim against the
estates, and for an order of payment of taxes before the trial court, praying that Dayrit be
ordered to pay the BIR the sum of P6,470,391.91 plus surcharges and interest. Dayrit filed
oppositions contending that the taxes have been settled according to the provisions of PD 23,
as amended by PD 67.
Issue: Whether the assessment is final, executory, and demandable.

Held: The act of the Commissioner, in filing an action for allowance of the claim for estate and
inheritance taxes, may be construed as a denial of the taxpayers’ request for reconsideration.
From the date of receipt of the copy of the Commissioner’s letter for collection of taxes, the
taxpayers must contest and dispute the same, and upon denial thereof, they have a period of 30
days to appeal the case to the Court of Tax Appeals. Tax assessment made by tax examiners
are presumed correct and made in good faith. A taxpayer has to prove otherwise. Failure of the
taxpayers to appeal to the Court of Tax Appeals in due time made the assessments fina,
executory and demandable.

MARCOS II vs. CA
273 SCRA 47, GR No. 120880, June 5, 1997
Facts:
Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's
petition to levy the properties of the late Pres. Marcos to cover the payment of his tax
delinquencies during the period of his exile in the US. The Marcos family was assessed by the
BIR after it failed to file estate tax returns. However the assessment were not protested
administratively by Mrs. Marcos and the heirs of the late president so that they became final and
unappealable after the period for filing of opposition has prescribed. Marcos contends that the
properties could not be levied to cover the tax dues because they are still pending probate with
the court, and settlement of tax deficiencies could not be had, unless there is an order by the
probate court or until the probate proceedings are terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of
Levy on the Marcos properties were issued beyond the allowed period, and are therefore null
and void.
Issue:
Whether or not the contentions of Bongbong Marcos are correct
Ruling:
No. The deficiency income tax assessments and estate tax assessment are already final and
unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This
summary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil
actions and Criminal actions), and is not affected or precluded by the pendency of any other tax
remedies instituted by the government.
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's
estate is not a mandatory requirement in the collection of estate taxes. On the contrary, under
Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the
executor or judicial administrator of the decedent's estate to deliver any distributive share to any
party interested in the estate, unless it is shown a Certification by the Commissioner of Internal
Revenue that the estate taxes have been paid. This provision disproves the petitioner's
contention that it is the probate court which approves the assessment and collection of the
estate tax.
On the issue of prescription, the omission to file an estate tax return, and the subsequent failure
to contest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as under
Sec.223 of the NIRC, in case of failure to file a return, the tax may be assessed at anytime
within 10 years after the omission, and any tax so assessed may be collected by levy upon real
property within 3 years (now 5 years) following the assessment of the tax. Since the estate tax
assessment had become final and unappealable by the petitioner's default as regards protesting
the validity of the said assessment, there is no reason why the BIR cannot continue with the
collection of the said tax.

REPUBLIC V LIM TIAN TENG SONS & CO. INC. March 31, 1968
Facts: Lim Tian Teng Sons & Co., a domestic corporation with principal office in Cebu City,
engaged in 1951 and 1952, among others, in the exportation of copra. The copra was weighted
before shipment in the port of departure and upon arrival in the port of destination. The weight
before shipment was called copra outturn. To allow for loss in weight due to shrinkage said
exporter collected only 95% of the amount appearing in the letter of credit covering every copra
outturn. The 5% balance remained outstanding until final liquidation and adjustment.
On March 30, 1953 Lim Tian Teng Sons & Co. filed its income tax return for 1952 based on
accrued income and expenses. Its return showed a loss of P55, 109.98. It took up as part of the
beginning inventory for 1952 the copra outturn shipped in 1951 in the sum of P95,500.00
already partially collected, as part of its outstanding stock as of December 31, 1951.
In the audit and examination of taxpayer’s 1952 income tax return, the CIR eliminated the
P95,500.00 outturn from the beginning inventory for 1952 and considered it as accrued income
for 1951. This increased taxpayer’s 1952 net taxable income. Accordingly, in a letter dated
January 16, 1957 received by Lim Tian. On January 30, 1957, the CIR assessed a deficiency
income tax of P10,074.00 and 50% surcharge them amounting to 5,037.00 and demanded
payment thereof not later than February 15, 1954.
On January 31, 1957 Lim Tian requested for reinvestigation of its 1952 income tax liability. The
CIR did not reply; instead he referred the case to the solicitor general for collection by judicial
action.
On September 20, 1957 the solicitor general demanded from Lim Tian the payment of
P15,111.50 within five days, stating that otherwise judicial action would be instituted without
further notice.
Thereupon, the Deputy Collector of Internal Revenue, by his letter dated October 15, 1957
informed the taxpayer that its request for reinvestigation would be granted provided it executed
within 10 days a waive of the statute of limitations. As him Tian failed to file a waiver of the
statute of limitations, the collector of I.R. instituted 8 months after, or on September 2, 1958 an
action in the CFI for the collection of deficiency income tax. The CFI rendered decision ordering
the defendant to pay the plaintiff as the assessment is valid.
Both parties appealed, raising only question of law.
Issue: Whether or not the Commissioner is required to rule first on the taxpayer’s request for
reinvestigation before he can go to count for collecting the tax assessed.
Held: Nowhere in the Tax Code is the Commissioner required to rule first on the taxpayer’s
request for reinvestigation before he can go to court for the purpose of collecting the tax
assessed. According to the court, the legislative policy is to give the Commissioner much
latitude in the speedy and prompt collection of taxes because it is on taxation that the
government depends to obtain the means to carry in its operations.
When the commissioner did not reply to the tax payer’s request for
reinvestigation/reconsideration and instead referred the case to the solicitor general for judicial
collection, this was indicative of his decision against reinvestigation.
YABES vs. FLOJO
Facts:
Doroteo Yabes of Calamaniugan Cagayan, is an exclusive dealer of products of the
International Harvester Macleod, Inc., received on or about May 1, 1962, a letter from the CIR
dated March 27, 1962, demanding payment of the amount of P15,976.81, as commercial
broker's fixed and percentage taxes plus surcharges and the sum of P2,530 as compromise
penalty allegedly due from Yabes for the years 1956-1960; On May 11, 1962, Doroteo Yabes,
through his counsel, filed with the Commissioner's Office his letter protesting the assessment of
commercial broker's fixed and percentage taxes plus penalties against him on the ground that
his agreements with the International Harvester Macleod, Inc. were of purchase and sale, and
not of agency, hence he claimed he was not able to pay such kind of taxes; Thereafter, there
ensued an exchange of correspondence between the lawyers of Doroteo Yabes and the
Commissioner; the Commissioner in a letter dated August 3, 1962, informed Doroteo Yabes that
he acted as a commercial broker "in accordance with the ruling of this Office in the case of Cirilo
D. Constantino;" in turn, Doroteo Yabes, in a letter dated August 22, 1962, requested for the
reinvestigation, or review of the case by the appellate division of the Bureau of Internal Revenue
in accordance with standing rules, regulations or practice on the matter; Yabes also wrote the
Commissioner on August 24, 1962, requesting that the appeal be held in abeyance pending
final decision of the Case of Cirilo D. Constantino; in reply, the Commissioner informed Doroteo
Yabes in a letter dated September 18, 1962, that the latter's request for reinvestigation was
denied on the ground that he has "not submitted any evidence to offset the findings of this
Office as to warrant a reinvestigation thereof‖, but eight days later or on September 26, 1962,
the Commissioner wrote a letter advising Doroteo Yabes that "the administrative appeal ... will
be held in abeyance pending the resolution of the issues in a similar case (obviously referring to
the aforesaid Constantino case)"; To give time for the Commissioner to study the case and
several other cases similar thereto, the lawyers of Doroteo Yabes agreed to file, and their client,
Doroteo Yabes did file a tax waiver on October 20, 1962, extending the period of prescription to
December 31, 1967; Then Doroteo Yabes died and no estate proceedings were instituted for
the settlement of his estate; his widow also died during the pendency of the case; the petitioners
are the children of the deceased taxpayer. On March 14, 1966, the Court of Tax Appeals
decided the Constantino "test" case. The Court of Tax Appeals ruled that agreements entered
into by Constantino with the International Harvester Macleod, Inc. were of purchase and sale,
and not of agency, hence no commercial broker's fixed and percentage fees could be collected
from the said taxpayer. However this Court on February 27, 1970, in G.R. No. L-25926 reversed
the Court of Tax Appeals and ruled in favor of the CIR . After a lapse of about five years, the
heirs of the deceased Doroteo Yabes, through their lawyers, received a letter from the
Commissioner dated July 27, 1967, requesting that they "waive anew the Statute of Limitations"
and further confirming the previous understanding that the final resolution of the protest of the
deceased Doroteo Yabes was "being held in abeyance until the Supreme Court renders its
decision on a similar case involving the same factual and legal issues brought to it on appeal"
(referring to the Constantino "test" case); conformably with the request of the Commissioner, the
heirs of Doroteo Yabes filed a revised waiver further extending the period of prescription to
December 31, 1970. Thereafter, no word was received by the petitioners or their lawyers during
the interim of more than three (3) years, but on January 20, 1971, petitioners as heirs of the
deceased Doroteo Yabes received the summons and a copy of the complaint filed by the
Commissioner. Taking the 11 complaint as the final decision of the Commissioner on the
disputed assessment against the deceased taxpayer Doroteo Yabes, petitioners filed on
February 12, 1971, a petition for review of said disputed assessment with the Court of Tax
Appeals; 18 later on the same day, February 12, 1971, petitioners filed their answer to the
complaint of the Commissioner before the Court of First Instance of Cagayan; 19 and alleged
therein, by way of special defense, that the Court of Tax Appeals has exclusive jurisdiction of
the action and that there is another action of the same nature between the parties relating to the
same assessment pending before the Court of Tax Appeals;

ISSUE: Whether or not the assessment made by the CIR against the deceased taxpayer
Doroteo Yabes, as contained in the letter dated March 27, 1962, has become final, executory
and incontestable, after Doroteo Yabes had received the Commissioner's letter dated August 3,
1962, denying the latter's protest against the said assessment on September 18, 1962 and his
failure to appeal therefrom within the 30day period contemplated under Section 11, of Republic
Act 1125.

Held: NO. There is no reason for Us to disagree from or reverse the Court of Tax Appeals'
conclusion that under the circumstances of this case, what may be considered as final decision
or assessment of the Commissioner is the filing of the complaint for collection in the respondent
Court of First Instance of Cagayan, the summons of which was served on petitioners on
January 20, 1971, and that therefore the appeal with the Court of Tax Appeals in CTA Case No.
2216 was filed on time. 36 The respondent Court of First Instance of Cagayan can only acquire
jurisdiction over this case filed against the heirs of the taxpayer if the assessment made by the
CIR had become final and incontestable. If the contrary is established, as this Court holds it to
be, considering the aforementioned conclusion of the Court of Tax Appeals on the finality and
incontestability of the assessment made by the Commissioner is correct, then the Court of Tax
Appeals has exclusive jurisdiction over this case. Petitioners received the summons in Civil
Case No. II-7 of the respondent Court of First Instance of Cagayan on January 20, 1971, and
petitioners filed their appeal with the Court of Tax Appeals in CTA Case No. 2216, on February
12, 1971, well within the thirty day prescriptive period under Section 11 of Republic Act No.
1125. The Court of Tax Appeals has exclusive appellate jurisdiction to review on appeal any
decision of the Collector of Internal Revenue in cases involving disputed assessments and other
matters arising under the National Internal Revenue Code.
 Tranquilino Rovero vs. Rafael Amparo

Facts:
Rovero arrived at the Makati Air Port on board a PAL plane which came from
Bangkok, Siam. He brought with him several pieces of baggage, among
which was a Chinese vase which he declared and valued at P15. In the
course of the examination of the vase, it was found that it had a false
bottom which upon being broken open was seen to hold a tin can containing
259 pieces of jewelry with precious stones, which the Customs officials
appraised at P23,736. Rovero was found guilty of violating section 2703 of
the Revised Administrative Code. After promulgation of the decision of the
Supreme Court, Rovero wrote to the Commissioner of Customs a letter
petitioning for a reappraisal of said jewelry who forwarded the papers to the
Secretary of Finance requesting information as to whether the original
appraisement of P23,736 of the jewelry involved, which appraisal the
Commissioner found to be excessive, may be set aside and the
reappraisement made by the Committee considered in the determination of
the duties and fines that Rovero had to pay. On August 23, 1951, the
Honorable, the Secretary of Finance granted authority "for the setting aside
of the original appraisement and for the collection of the fine imposed by the
Supreme Court and of the customs duties and charges based on the
reappraisement value of P9,800."

Issue:
Whether or not the compromise is valid

Ruling: NO
Supervision and control over the judicial proceedings cannot be extended to
the modification of a final decision of a court. The Commissioner of Customs
may supervise and control the filing of pleadings, the conduct of the hearing,
the presentation of evidence and even the taking of an appeal from the
decision of the Court of First Instance, adverse to the Government, to the
Supreme Court. But surely he cannot under the guise of supervision and
control of judicial proceedings, modify or alter a final decision of a court,
including an appellate court or stay execution of a final judgment in favor of
the Government by receiving of said Government anything less than what
the judgment calls for. Compromise is resorted to, to avoid a litigation or to
end a suit already instituted. It contemplates mutual concessions and mutual
gains to avoid expenses and trouble of litigation or, when litigation has
already been begun, to end it because of the uncertainty of the result
thereof. Here, as far as the Republic is concerned, the period for compromise
had definitely ended. The power to compromise is not absolute. The
Commissioner is not authorized to accept anything less than what is
adjudicated by the court in favor of the government in a decision that had
become final and executory.
Asiatrust Development bank vs CIR
Facts:
Asiatrust Development Bank, here known as “Asiatrust”, received from the Commissioner of
Internal Revenue three formal letters of Demand with assessment notices for deficiency of
internal revenue taxes in the amounts of  P131, 909, 161.85, Php 83, 012, 265. 78 and Php
144, 012, 918.42  for fiscal years ending June 30, 1996, 1997 and 1998 respectively.
Asiatrust protested such assessment notices. Due to the inaction of the  CIR of the protest of
Asiatrust,  the latter filed a petition for review with the Court of Tax Appeals, which Asiatrust
prayed for the cancellation of the tax assessments and deficiency income tax, documentary
stamp tax (DST), regular dst, industry issue, final withholding tax, expanded withholding tax,
and fringe benefit tax, issued against it by the CIR.
On December 28,2001, the CIR issued again a new assessments against Asiatrust, whereas
the deficiency taxes now by the Asiatrust are as follows; 1.) 12, 816,258. 73 2.) 53, 314, 512. 72
3.) 133, 013, 458.73, which covers the fiscal years ending June 30, 1996, 1997, 1998
respectively. On the same day Asia trust partially paid the assessment, leaving the following
balance to the assessment.  Fiscal year 1996- P 110, 852, 424. 26,  Fiscal year 1997- 49, 318,
948.20, Fiscal year 1998- 124, 040, 016.41.
On April 19, 2005, the CIR approved the offered  compromised by Asiatrust of DST- regular
assessment for the fiscal year of June 30, 1996, 1997, 1998.  However, Asiatrust claimed that it
availed of the Abatement program for its deficiency final withholding tax, trust assessments for
the said fiscal years, 1996 and 1998.  Where it paid the basic taxes in the amounts of Php
4,187, 683. 27 and Php 6, 097,825. 03. Also Asiatrust claimed that it availed Tax amnesty
program under R.A 9480.
The CTA division rendered its decision in favor of the CIR, where it stated that Asiatrust failed to
produce the necessary document to prove its Tax abatement application and the Tax amnesty
Law.
Asiatrust filed a motion for reconsideration, where it attached the photocopies of the application
for abatement program, the payment form, and the deposit slip, Improved Voluntary
Assessment Program Application Forms, Tax Amnesty Return, Tax Amnesty Payment Form,
Notice of Availment of Tax Amnesty and Statement of Assets and Liabilities and Networth
(SALN) as of June 30, 2005.. The CTA division refused to consider Asiatrust’s  availment of the
Abatement of the Tax abatement program by reason of failure to submit a termination letter from
the BIR.
The CIR appealed the January 20, 2009 decision and the july 6, 2009 resolution with the CTA
en banc via a petition for review, however it was dismissed for being premature.
Asiatrust was not satisfied with the decision alleging that mere certification is sufficient proof that
gives them the right under the Tax Abatement program. Hence this petition.
ISSUE: Whether or not the Certification issued by BIR, is sufficient proof that Asiatrust availed
of the Tax Abatement program.
Whether or not the CTA erred in dismissing the petition for review filed by the CIR
Ruling:
No, According to the High court, the BIR issued RR NO. 15-06 prescribing the guidelines of the
implementation of the tax abatement program, where the last step in the abatement process is
the issuance of the termination letter. Since this termination letter proves that the taxpayer’s
application for tax abatement has been approved, thus without a termination letter, a tax
assessment cannot be considered closed and terminated.  In the instant case, Asiatrust failed to
present the termination letter, it only presented the documentary proof that it applied for the
abatement program and the receipts as a proof that it paid, however it does not prove that such
application has been accepted.
No, since, due to the failure of CIR to file within the prescribed period their petition for
reconsideration as provided by Rule 8 section 1 of the Revised Rules of the CTA, whereas the
word “must” is indicated, failure to file the petition for review with the CTA division, who
rendered the assailed decision at the prescribed time is only rightful for the outright dismissal in
the CTA en banc.
Guagua Electric Light Plant Co. vs. Collector
Facts: Guagua Electric Light Plant Co. is a grantee of municipal franchises by the municpal
councils of Guagua and Sexmoan, Pampanga. It reported a gross income of P1,133,003.44 for
1947 go 1956 and paid thereon a franchise tax of P56,664.97 computed at 5% in accordance
with Section 259 of the Tax Code. Believing that it should pay a lower franchise tax as provided
by its franchises, it filed a claim for refund on 25 March 1957 for overpayment. The
Commissioner denied the refund of franchise tax for the period prior to the 4th quarter of 1951
on the ground that the right to refund has prescribed. The Commissioner allowed the refund of
P16,593.87. Later however, due to the holding in Hoa Hin Co. vs. David, the Commissioner
assessed against the company deficiency franchise tax subject to a 25% surcharge, and
thereby including the amount previously allowed by the Commissioner to be refunded.

Issue: Whether the tax “refunded erroneously” should be imposed against the company, or if the
right to recover has prescribed.

Held: Guagua Electric would be paying the same deficiency tax for the period of 1 January to 30
November 1956 if it is required to pay P16,593.87 in addition to the sum of P19,938.12, the
difference between the tax computed at 5% pursuant to Section 259 of the Tax Code and the
franchise tax paid at 1% and 2% under the franchise. Further, by insisting on the payment of
P16,593.87 (September 1951 to November 1956), the Commissioner is trying to collect the
same deficiency tax where the right to assess the same, according to him, has been lost by
prescription. The demand on the taxpayer to pay the sum of P16,593.87 is in effect an
assessment of deficiency franchise tax. The right to assess, thus, and to collect is governed by
Section 331 of the Tax Code rather than by Article 1145 of the Civil Code, as a special law
prevails over a general law. Guagua Electric is absolved from the payment of P16,593.87.
Vera vs. Fernandez
No. L-31364, March 30, 1979
FACTS:
Petitioner CIR and BIR Regional Director filed an Allowance of Claim and for an Order of
Payment of Taxes in the Special Proceedings for the settlement of  intestate estate of Luis
Tongoy. The claim represents the indebtedness of the deceased to the government for the
deficiency income taxes for the years 1963 and 1964. The petitioners filed the motions after the
expiration of the time limited in the notice but before an order of the distribution is entered.
Respondent Judge Fernandez granted the opposition by the Administrator on the ground that
the claim has already prescribed.
ISSUE:
May the claim for taxes against the estate of a deceased person be still collected?
RULING:
Yes. The claim for taxes against a decedent’s estate is exempted from the application of the
statute of non-claims as taxes are the lifeblood of the government and their prompt and certain
availability are imperious need.
This is not a case of prescription. Claims for taxes may be collected even after the distribution of
the decedent’s estate among his heirs who shall be liable therefore in proportion of their share.
Tax obligations of decedent which are created by law are different from money claims against
decedent arising from contract provided by Section 5 Rule 85 of the Rules of Court. Taxes are
entirely of different character from the claims expressly enumerated in this provision, such
as: all claims for money against the decedent arising from contract, express or implied, whether
the same be due, not due or contingent, all claims for funeral expenses and expenses for the
last sickness of the decedent and judgment for money against the decedent.
Republic of the Philippines vs. Limcaco (31 August 1962)

Facts: In 1946, Limaco & De Guzman Co. was engaged in the importation of cigarettes. To
guarantee payment of revenue taxes, the company and the Visayan Surety and Insurance
Corp.. as surety, executed 2 importer bonds. On 27 June 1946, the company filed with the
Bureau of Customs entry papers covering shipment of 2 million “Spud” cigarettes it had
imported from New York. the specific tax due thereon amounted to P6,000. The company,
through its agent/broker J. O. Hiponia, paid the Bureau of Customs the tax with P1000 in cash
and P5,000 in a PNB Check on 15 July 1946. The cigarettes were released to the company but
the check bounced. On 17 June 1948, the Collector of Internal Revenue demanded the
payment of the deficiency specific tax. The amount remained unpaid. On 15 April 1951, the
company requested that action be deferred as it intends to settle the matter amicably with the
BIR. The Republic filed a complaint for the forfeiture of the bonds, and the payment of the sum
of P5,000 plus interest. The company invoked the defense of estoppel and prescription.

Issue: Whether the action has prescribed.

Held: Under Section 332 (c) of the Tax Code, the collection of the tax by summary method or by
judicial action shall be effected within 5 years after the assessment of the tax. To assess means
to impose a tax; to charge with a tax; to declare a tax to be payable; to apportion a tax to be
paid or contributed; to fix a rate, to fix or settle a sum to be paid by way of tax; to set, fix or
charge a certain sum to each taxpayer; to settle, determine or fix the amount of tax to be paid.
Herein, the assessment was made on 17 June 1948 (when a letter of demand for the amount of
the rubber check was sent to the company) and not on 15 Jne 1946 (the date of payment). Even
assuming that the latter date is the date of assessment, the action is still not barred by the
statute of limitations as teh statute was suspended when the company acknowledged the debt
in writing in April 1951, and requested the deferment of the judicial action to be taken by the
Government towards the collection of the obligation, so that the company could make
representations with the Collector to settle the matter amicably. Prescription has not set in.
Republic of the Philippines vs. Ret (31 March 1962)

Facts:
On February 23, 1949, Ret filed with the Bureau of Internal Revenue his ITR
for 1948, where he made it appear that his net income was only P2,252.53
with no income tax liability at all. The BIR found out later that the return
was fraudulent since Ret's income, derived from his sales totaled
P94,198.76. The BIR assessed him P34,907.33, as deficiency income tax for
1948, inclusive of the 50% surcharge for rendering a false and/or fraudulent
return.
Defendant Ret failed to file his Income Tax return for 1949. His income, as
assessed for tax purposes, showed a deficiency tax of P68,338.40 for 1949,
inclusive of the 50% surcharge. On January 13, 1951, the Collector
demanded for payment but Ret failed and/or refused to pay said amounts.
On January 20, 1951, the Collector issued income tax assessment notices to
Ret, urging him to pay the sums mentioned, but with the same result. Upon
recommendation of the Collector, Ret was prosecuted was sentenced to pay
a fine. After his conviction, on September 21, 1957, the Republic filed the
present complaint for the recovery of Ret's deficiency taxes in the total sum
of P103,245.73, plus 5% surcharge and 1% monthly interest. Ret presented
a Motion to Dismiss on February 8, 1958, claiming that the "cause of action
had already prescribed".

Issue:
Whether or not the cause of action has already prescribed

Ruling: YES
The petitioner made the assessment on January 20, 1951 and had up to
January 20, 1956 to file the necessary action. It was only on September 5,
1957, that an action was filed in Court for the collection of alleged deficiency
income tax which was far beyond the 5-year period. The present case is not
for the recovery of civil liability arising from the offense of falsification; it is
for the collection of deficiency income tax. The provisions of Section 1, Rule
107 that "after a criminal action has been commenced, no civil action arising
from the same offense can be prosecuted", is not applicable. The said
criminal cases would not effect, one way or another, the running of the
prescriptive period for the commencement of the civil suit. The criminal
actions are entirely separate and distinct from the present civil suit. There is
nothing in the law which would have stopped the petitioner from filing this
civil suit simultaneously with or during the pendency of the criminal cases.
Republic of the Philippines vs. Acebedo (29 March 1968)

Facts:
This is a suit for collection of deficiency income tax for the year 1948. The
corresponding notice of assessment was issued on September 24, 1949. The
complaint was filed on December 27, 1961. After the defendant filed his
answer but before trial started he moved to dismiss on the ground of
prescription. The court received evidence on the motion, and on September
1, 1962 issued an order finding the same meritorious and hence dismissing
the complaint. The present suit was not begun within five years after the
assessment of the tax, which was in 1949. The only evidence of such written
agreement, in the form of a "waiver of the statute of limitations" signed by
the defendant dated December 17, 1959.

Issue:
Whether or not the suit begun prior to the expiration of any period for
collection agreed upon in writing before the expiration of such 5-year period

Ruling:
A mere request for reinvestigation or reconsideration of an assessment does
not have the effect of such suspension, otherwise there would be no point to
the legal requirement that the extension of the original period be agreed
upon in writing. 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 5-year period with
which an action for collection may be commenced should be counted from
this last assessment. In the present case, the defendant, after receiving the
assessment notice of September 24, 1949, asked for a reinvestigation on
October 11, 1949. There is no evidence that this request was considered or
acted upon. On October 23, 1950 the then Collector issued a warrant of
distraint and levy for the full amount of the assessment at, but there was no
follow up of this warrant. Consequently, the request for reinvestigation did
not suspend the running of the period for filing an action for collection. Up to
October 4, 1955 the delay in collection could not be attributed to the
defendant at all. His requests 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, and hence prescription had already set
in, making subsequent events in connection with the said assessment
entirely immaterial. 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. KER, GR No. L-21609, 1966-09-29
Facts:
Ker & Co., Ltd., a domestic corporation, filed its income tax returns
In 1953 the Bureau of Internal Revenue examined and audited Ker & Co., Ltd.'s returns and
books of accounts
Upon request of Ker & Co., Ltd., through Atty. Jose Leido, its counsel, the Bureau of
Internal Revenue reduced the assessments for the year 1947 from P42,342.30 to
P27,026.28 and for the year 1950 from P12,813.00 to P8,542.00, imposed the 50%
surcharge for the year 1947... and eliminated the same surcharge from the assessment for
the year 1950.
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 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. Ker & Co., Ltd. refused to pay, instead in its
letters dated March 28, 1962 and April
10, 1962 it set up the defense of prescription of the Commissioner's right to collect the tax.
Summons was served not on the defendant taxpayer but upon Messrs. Leido and
Associates, its counsel in the proceedings before the Bureau of Internal Revenue and the
Court of Tax Appeals.
Ker & Co., Ltd. through its counsel, Leido, Andrada, Perez & Associates, moved for the
dismissal of the complaint on the ground that the court did not acquire jurisdiction over the
person of the defendant... the Court of First Instance rendered judgment
Ker & Co., Ltd. also filed a motion for reconsideration reiterating its assertion that the Court
of First Instance did not acquire jurisdiction over its person,
Issues:
Did the Court of First Instance acquire jurisdiction over the person of defendant Ker & Co.,
Ltd.?
Ruling:
"SEC. 13. Service upon private domestic corporations or partnership. If the defendant is a
corporation formed under the laws of the Philippines or a partnership duly registered,
service may be made on the president, manager, secretary, cashier, agent, or any of... its
directors."
Messrs. Leido and Associates acted as counsel for Ker & Co., Ltd. when this tax case was
in its administrative stage. The same counsel represented Ker & Co., Ltd. when it appealed
said case to the Court of Tax Appeals and later to this Court.
Leido and Associates received the summons, they were still acting for and in behalf of Ker
& Co., Ltd. in connection with its tax liability involved in this... case. Perforce, they were the
taxpayer's agent when summons was served. Under Section 13 of Rule 7, aforequoted,
service upon the agent of a corporation is sufficient.
Voluntary appearance cures defects of summons, if any. [4] Such defect, if any, was further
cured when defendant filed its answer to the complaint. [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, and acceding to jurisdiction over
its person if and when the judgment sustains its defenses.
Republic of the Philippines vs. Arcache (29 February 1964)

FACTS:

On July 7, 1958, the Republic of the Philippines filed an action against Joseph Arcache and
the Globe Assurance Company, Inc. for the forfeiture of the surety bond executed by them
(Arcache, as principal, and the Globe Assurance Company, Inc., as surety) to secure
payment of the sum of P22,524.41 representing Arcache’s income tax for the year 1946 and
surcharge, plus 1% monthly interest on the income tax proper amounting to P18,289.71,
from June 21, 1954 to August 31, 1956.

Arcache, after admitting some of the averments made in the complaint and denying others,
interposed the defense of prescription, and alleged further that he was compelled against
his will" to execute the surety bond sought to be forfeited, because the Bureau of Internal
Revenue refused to issue him a tax clearance — which he needed to make a business trip
abroad — unless he executed said bond to secure the payment of his alleged tax obligation.

The separate answer filed by the Globe Assurance Company, Inc. likewise admitted some of
the averments made in the complaint and denied the others, and further alleged that it
adopted the defense of fact and law raised by its co-defendant; that the surety bond sought
to be forfeited became null and void as against it after the lapse of one year from the date
of its execution, for lack of consideration, Arcache not having paid the required premium
thereon for the second year; and that, at any rate, it could not pay its obligation under the
aforesaid surety bond because of the injunction issued against it by the Court of First
Instance of Manila in Civil Case No. 30844. By way of cross-claim, it sought judgment
against its co-defendant for the entire amount that it might be sentenced to pay to the
plaintiff by reason of the surety bond heretofore mentioned, plus the sum of P863,43 as
unpaid premium on said bond.

Issue:

Whether or not the cause of action has already prescribed

Ruling:

Appellant is not barred from invoking the defense of prescription.

In the first place, 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.

In the second place, appellant admitted in writing his tax obligation and promised to pay the same, not once but
several times even after the date when — according to him — the government’s right to collect had already
prescribed. In fact, he not only made such repeated promise to settle his account but he actually made two partial
payments, the first of P2,000 and the last P1,000.

In the third place, it is to be noted that the present action was filed for the forfeiture of the bond Exhibit A in
satisfaction of the tax obligation of appellant. Thus, the action is for the enforcement of a written contractual
obligation, for which the prescriptive period is ten years — which in this case had not yet elapsed when the action
was filed. It is already settled in this connection that the giving of a bond as a condition of an extension of time for
the payment of income tax, even after the collection of the tax as such was barred by the statute of limitations,
does not preclude recovery on the bond.

Philippine National Oil Corporation vs. CA (26 April 2005)

FACTS: After being informed through the sworn statement of private respondent of the failure of
the Philippine National Bank (PNB) to withhold the 15% final tax on interest earnings and/or
yields from the money placements of petitioner with the said bank, the BIR conducted its audit
and investigation of petitioner’s internal revenue tax liabilities. Subsequently, the BIR in a letter
dated 08 August 1986 requested petitioner to settle its liability for taxes on the interests earned
by its money placements with PNB and which PNB did not withhold.
Petitioner repeatedly made an offer to compromise its tax liability all of which were unacceptable
to the BIR. Finally, its 09 June 1987 proposal to pay 30% of its basic tax deficiency was
accepted by then BIR Commissioner.
ISSUE(S): Whether or not PNOC’s tax liability could be compromised.</p>
HELD: NO. PNOCs tax liability could not be considered a delinquent account since (1) it was
not self-assessed, because the BIR conducted an investigation and assessment of PNOC and
PNB after obtaining information regarding the non-withholding of tax from private respondent
Savellano; and (2) the demand letter, issued against it on 08 August 1986 could not have been
a deficiency assessment that became final and executory by 31 December 1985.
Neither was the assessment against PNOC an assessment that could have been disputed or
protested on or before 31 December 1985, having been issued on a later date.
Given that PNOCs tax liability did not constitute a delinquent account or a disputed assessment
as of 31 December 1985, then it could not be compromised under E.O. No. 44.
BPI vs. CIR (17 October 2005)

FACTS: On 10 October 1989, the BIR issued an assessment against petitioner finding the latter
liable for deficiency documentary stamp tax (DST) on its 1985 sales of US currency to the
Central Bank of the Philippines. Petitioner in a letter protested against the assessment,
requesting for reconsideration.
Petitioner did not receive any immediate reply to its protest letter. The BIR on 23 October 1992
served petitioner a Warrant of Distraint and/or Levy for the assessed deficiency DST for taxable
year 1985. On 11 September 1997, respondent received a letter dated 13 August 1997 and
signed by respondent denying petitioner’s request for reconsideration.
ISSUE(S): Whether or not respondent’s right to collect the deficiency DST was barred by
prescription.
HELD: YES. The running of the prescriptive period for collection of taxes can only be
suspended by a request for reinvestigation, not a request for reconsideration. Even if, for the
sake of argument, petitioner’s protest is considered a request for reinvestigation, it could not
have suspended at once the running of the statute of limitations because such request was not
granted. Petitioner was left in the dark as to the status of its protest in the absence of any word
from the BIR.
CHINA BANKING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

Tax Law; Statute of Limitations. A request for reinvestigation alone will not suspend the
statute of limitations. Two things must concur: there must be a request for
reinvestigation and the CIR must have granted it.
FACTS:
Petitioner CBC is a universal bank duly organized and existing under the laws of the Philippines.
For the taxable years 1982 to 1986, CBC was engaged in transactions involving sales of foreign
exchange to the Central Bank of the Philippines (now Bangko Sentral ng Pilipinas), commonly
known as SWAP transactions. Petitioner did not file tax returns or pay tax on the SWAP
transactions for those taxable years. Thus, CBC received an assessment from BIR of deficiency
documentary stamp tax on the amount of P11,383,165.50 plus increments accruing thereto.

The petitioner, through its vice-president, sent a letter of protest to the BIR. CBC raised the
following defenses: (1) double taxation, as the bank had previously paid the DST on all its
transactions involving sales of foreign bills of exchange to the Central Bank; (2) absence of
liability, as the liability for the DST in a sale of foreign exchange through telegraphic transfers to
the Central Bank falls on the buyer and in this case, the Central Bank;
(3) due process violation, as the bank’s records were never formally examined by the BIR
examiners; (4) validity of the assessment, as it did not include the factual basis therefore; (5)
exemption, as neither the tax-exempt entity nor the other party was liable for the payment of
DST before the effectivity of Presidential Decree Nos. (PD) 1177 and 1931 for the years 1982 to
1986. In the protest, the taxpayer requested a reinvestigation so as to substantiate its
assertions. On 11 March 2002, the CIR filed an Answer with a demand for CBC to pay the
assessed DST. More than 12 years after the filing of the protest, the Commissioner of Internal
Revenue (CIR) rendered a decision reiterating the deficiency DST assessment and ordered the
payment thereof plus increments within 30 days from receipt of the Decision. CBC filed a
petition for review before the CTA, but the same was denied, ruling that a SWAP arrangement
should be treated as a telegraphic transfer, and thus subject to documentary stamp tax. The
subsequent Motion for Reconsideration of CBC was denied. The CTA En Banc likewise
dismissed the appeal of CBC, and the subsequent MR. Hence, this petition.
ISSUE:
Whether or not the right of the BIR to collect the assessed DST from CBC is already barred by
prescription
HELD:
AFFIRMATIVE. The petition is granted on the ground that the right of the BIR to collect the
assessed DST is barred by the statute of limitations. The BIR’s Answer in the case filed before
the CTA could not, by any means, have qualified as a collection case as required by law. Under
the rule prevailing at the time the BIR filed its Answer, the regular courts, and not the CTA, had
jurisdiction over judicial actions for collection of internal revenue taxes. It was only on 23 April
2004, when Republic Act Number 9282 took effect, that the jurisdiction of the CTA was
expanded to include, among others, original jurisdiction over collection cases in which the
principal amount involved is one million pesos or more.
Furthermore, the fact that the taxpayer in this case may have requested a reinvestigation did not
toll the running of the three-year prescriptive period.
Under Section 320 of the 1977 Tax Code, a request for reinvestigation alone will not suspend
the statute of limitations. Two things must concur: there must be a request for reinvestigation
and the CIR must have granted it. Also, in the case of Republic vs. Gancayco, the Court ruled
that “(t)he act of requesting a reinvestigation alone does not suspend the period. The request
should first be granted, in order to effect suspension”.
There is no showing from the records that the CIR ever granted the request for reinvestigation
filed by CBC. That being the case, it cannot be said that the running of the three-year
prescriptive period was effectively suspended.
Commissioner of Internal Revenue vs. United Salvage & Towage (Phils.), Inc. (2 July 2014)

FACTS:
Petitioner found respondent United Salvage and Towage (Phils.), Inc. (USTP) liable to pay,
among others, deficiency expanded withholding tax (EWT) for taxable year 1994. A mere
perusal of the FAN for the deficiency EWT for taxable year 1994 will show that other than a
tabulation of the alleged deficiency taxes due, no further detail regarding the assessment was
provided by petitioner. Only the resulting interest, surcharge and penalty were anchored with
legal basis.
ISSUE(S):
Whether or not the EWT assessments issued against the respondent for taxable year 1994
were valid.
HELD:
NO. The law requires that the legal and factual bases of the assessment be stated in the formal
letter of demand and assessment notice. Such cannot be presumed. The alleged “factual
bases” in the advice, preliminary letter and “audit working papers” did not suffice. There was no
going around the mandate of the law that the legal and factual bases of the assessment be
stated in writing in the formal letter of demand accompanying the assessment notice.
BPI vs. CIR (7 March 2008)

FACTS: Petitioner filed on 20 April 1989 a protest on the demand/assessment notices issued against it
for deficiency withholding tax at source (Swap Transactions and DST for the years 1982 to 1986. On 09
August 2002, respondent issued a final decision on petitioner’s protest withdrawing and cancelling the
deficiency withholding tax assessment, but reiterating the deficiency DST assessment and ordering
petitioner to pay its tax liabilities within 30 days from receipt of such order. CTA denied petitioner’s
petition for review ruling 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, levy, or court proceeding.

ISSUE(S): Whether or not petitioner’s request for reinvestigation suspended the running of the
prescriptive period for assessment and collection.

HELD: NO. Section 320 of the 1977 Tax Code is plainly worded. In order to suspend the running of the
prescriptive periods for assessment and collection, the request for reinvestigation must be granted by
the CIR.

There is nothing in the records of this case which indicates, expressly or impliedly, that the CIR had
granted the request for reinvestigation filed by BPI. What is reflected in the records is the piercing
silence and inaction of the CIR on the request for reinvestigation, as he considered BPI’s letters of
protest to be.

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.
PROTECTOR’S SERVICES, INC., V CA ET. AL. G.R. No 118176, April 12, 2000

Facts: Petition Protector’s Services, Inc., (PSI) is a contractor engaged in recruiting security guards for
clients. After an audit investigation, the BIR assessed PSI deficiency percentage taxes including
surcharges, penalties and interests of P503,564.39, P831,464.30 and P1,514,047.86 for 1983, 1984 and
1985, respectively. On December 7, 1987, respondent CIR sent demand letters for payment of said
assessments for 1983 and 1984 on December 10, 1987, but denied receiving the notice of deficiency tax
for 1985.

Petitioner PSI, sent a protest letter dated January 12, 1988 regarding the 1983 and 1984 assessments,
claiming that gross receipts subject to percentage tax should exclude salaries of the security guards,
employer’s share of SSS, SIF and Medicare contributions. Without formally acting thereon, the BIR sent a
follow-up letter dated July 12, 1988 for the settlement of the taxes based on its computation, plus
additional documentary stamp taxes of P2,025 on PSI’s capitalization for 1983 and 1984 and as
deficiency expanded withholding tax of P703.41, thereby bringing the total unsettled tax to
P2,851,805.16.

On July 12, 1988, petition paid the P2,025 documentary stamp tax and P703.41 deficiency expanded
withholding tax. The following day, PSI filed its second protest for the 1983 and 1984 assessments and
included for the first time its protest against the 1985 assessment. On November 9, 1990, the BIR denied
the protests stating that salaries of security guards are part of taxable gross receipts for determination
of contractor’s tax.

PSI filed a petition for review on December 5, 1990 with the CTA averring that assessments for
documentary stamp and expanded withholding taxes and without basis having been paid on July 22,
1988; the period for collection of the 1985 assessment letter therefore, the period to collect the
percentage taxes for the first, second and third quarter of 1984 has lapsed, the assessment letter
therefore having been sent on December 10, 1987, or beyond 3 years from filing of the quarterly
returns, and that the base amount was erroneous since salaries of security guards, employer’s share of
SSS, SIF and medicare contributions should not form part of taxable gross receipts.
The CTA dismissed the petition stating that: (1) the assessments were made within the 3-year
prescriptive period which should be reckoned from January 20, 1985, the date of filing the final return;
(2) receipt of the 1985 assessment cannot be denied as all assessments were sent in 1 envelope, as
testified to by BIR personal; and (3) the protest letter having filed only on January 12, 1988, or 33 days
from December 10, 1987, the request for reinvestigation was filed out of time. On review by the CA, the
CTA’s decision was affirmed.

Issues:

• Whether or not the CTA has jurisdiction to act on the petition for review filed before it.

• Whether or not the assessments against PSI for deficiency percentage tax for 1983 and 1984 were
made within the prescriptive period.

• Whether or not the period for collection of taxes for taxable years 1983, 1984 and 1985 has already
prescribed.

• Whether or not the assessments are correct

Held: An assessment maybe administratively protested within 30 days from receipt thereof; otherwise,
the assessment shall become final and unappealable. In this case, PSI received the assessments on
December 10, 1987 and protested the 1983 and 1984 assessments on January 12, 1988, or 33 days
thereafter. Hence, the protests were filed out of time and PSI can no longer dispute the correctness of
assessment. The CTA correctly dismissed the appeal for lack of jurisdiction.

Petitioner’s contention that the Government’s right to assess and collect the 1983, 1984 and 1985
assessments had already prescribed in view of BP700, which reduced the prescriptive period for
assessment and collection of internal revenue taxes to 3 yrs, lacks merit BP700 was approved on April 5,
1984. The 3-year prescriptive period for assessment and collection of revenue taxes applied to taxes
paid beginning 1984. Clearly, the tax assessment made on December 10, 1987, for the par 1983 was still
covered by the 5-year statutory prescriptive period.

The 3-year prescriptive period for assessment of contractor’s tax should be computed at the time of
filing of the final annual percentage tax return, when it can be finally acclaimed if the taxpayer still has
an unpaid tax, and not from the tentative quarterly payments.

As to the contention that for failure of the BIR to commence collection of the 1983, 1984 and 1985
deficiency taxes either by judicial action or by distraint and levy, the government’s right to collect the
tax has prescribed, the court ruled that “the suspension of the running of the statute of limitations for
tax collection for the period during which the commissioner is prohibited from making the assessment
or beginning distraint or levy or a proceeding in court and 60 days thereafter.” In the instant case, PSI
filed a petition before the CTA to prevent the collection of the assessed deficiency tax. When the CTA
dismissed the case, petitioner elevated the case to the SC, hoping for a review in the favor. The actions
taken by petitioner before the CTA and the SC suspended the running of the statute of limitation.

As to the correctness of the assessment, it was held that contractor’s tax on gross receipts imposed on
business agents including private detective watchman agencies, was a tax on the sale of services or
labor, imposed on the exercise of a privilege. The term “gross receipts” means all amounts received by
the prime or principal contractor as the total price, undiminished by the amount paid to the
subcontractor under the subcontract arrangement. Hence, gross receipts could not be diminished by
employer’s SSS, SIF and medicare contributions. Furthermore, it has been consistently ruled by the BIR
that the salaries paid to security guards should form part of the gross receipts subject to tax.