CIR vs.
Pascor Realty and Development CIR then contended that CTA gravely abused
Corporation 309 SCRA 402
Assessment(Sec. 203, 222)
GALLO
FACTS: BIR Commissioner Jose U. Ong
authorized its Revenue Officers to examine
the books of accounts and other accounting
records of Pascor Realty and Development
Corporation. (PRDC) for the years ending
1986, 1987 and 1988. The said examination
resulted in a recommendation for the
issuance of an assessment in the amounts of
P7,498,434.65 and P3,015,236.35 for the
years 1986 and 1987, respectively.
On March 1, 1995, CIR filed a criminal
complaint before the DOJ against PRDC, its
President, and its Treasurer, alleging evasion
of taxes in the total amount of
P10,513,671.00. Consequently, PRDC filed an
Urgent Request for
Reconsideration/Reinvestigation disputing
the tax assessment and tax liability, which
then was denied by the CIR on the ground
that no formal assessment has as yet been
issued by the Commissioner. In effect, PRDC
elevated the CIRs decision to the CTA.
CIR then filed a Motion to Dismiss the
petition on the ground that the CTA has no
jurisdiction over the subject matter as there
was no formal assessment issued against
PRDC, but the same was denied by the CTA.
CTA Ruling: The criminal complaint for tax
evasion constitutes an assessment. The
amount and kind of tax due, and the period
covered, are sufficient details needed for an
assessment. Assessment is laying a tax.
The ultimate purpose of an assessment to
such a connection is to ascertain the amount
that each taxpayer is to pay. More
commonly, the word assessment means
the official valuation of a taxpayers property
for purpose of taxation. An assessment
simply states how much tax is due from a
taxpayer. Thus, based on these definitions,
the details of the tax as given in the Joint
Affidavit of respondents examiners, which
was attached to the tax evasion complaint,
more than suffice to qualify as an
assessment. This Court unquestionably
acquired jurisdiction over the instant
petition.
its discretion in denying the Motion to
Dismiss.
CA Ruling: The CTA committed no grave
abuse of discretion in ruling that the Criminal
Complaint for tax evasion filed by the CIR
with the DOJ constituted an assessment of
the tax due, and that the said assessment
could be the subject of a protest. By
definition, an assessment is simply the
statement of the details and the amount of
tax due from a taxpayer. Based on this
definition, the details of the tax contained in
the BIR examiners Joint Affidavit, which was
attached to the criminal Complaint,
constituted an assessment.
ISSUE: Whether or not the criminal
complaint for tax evasion can be construed
as an assessment.
RULING: The filing of the criminal complaint
with the Department of Justice cannot in any
way be construed as a formal assessment of
PRDCs tax liabilities. Neither the NIRC nor
the 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.
True, as pointed out by the private
respondents, an assessment informs the
taxpayer that he or she has tax liabilities.
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.
The issuance of an assessment is vital in
determining, the period of limitation
regarding its proper issuance and the period
within which to protest it. Section 203 of
the NIRC provides that internal revenue taxes
must be assessed within three years from
the last day within which to file the return.
Section 222, on the other hand, specifies a
period of ten years in case a fraudulent
return with intent to evade was submitted or
in case of failure to file a return. Also, Section
228 of the same law states that said
assessment may be protested only within
thirty days from receipt thereof. Necessarily,
the 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.
The 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
assessment. Although the revenue officers
recommended the issuance of an
assessment, the 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.
The purpose of the attached Joint Affidavit,
therefore, was merely to support and
substantiate the Criminal Complaint for tax
evasion. Clearly, it was not meant to be a
notice of the tax due and a demand to the
private respondents for payment thereof.
ISSUE: Is assessment necessary before filing
of Criminal Complaint?
RULING: No. PRDC maintain that the filing of
a criminal complaint must be preceded by an
assessment. This is 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.
CIR vs Reyes | GR No. 159694 and
163581 | Bonganciso, Wiem
Facts: In 1993, Maria Tancino died leaving
behind an estate worth P32 million. In 1997,
a tax audit was conducted on the estate.
Meanwhile, the National Internal Revenue
Code (NIRC) of 1997 was passed. Eventually
in 1998, the estate was issued a final
assessment notice demanding the estate to
pay P14.9 million in taxes inclusive of
surcharge and interest; the
estates liability was based on Section 229 of
the [old] Tax Code. Azucena Reyes, one of
the heirs, protested the FAN. The
Commissioner of Internal Revenue (CIR)
nevertheless issued a warrant of distraint
and/or levy. Reyes again protested the
warrant but in March 1999, she offered a
compromise and was willing to pay P1 million
in taxes. Her offer was denied. She continued
to work on another compromise but was
eventually denied. The case reached the
Court of Tax Appeals where Reyes was also
denied. In the Court of Appeals, Reyes
received a favorable judgment.
Issue: Is the formal assessment notice is
valid?
Ruling: No. The NIRC of 1997 was already in
effect when the final assessment notice was
issued. Under Section 228 of the NIRC,
taxpayers shall be informed in writing of the
law and the facts on which the assessment is
made: otherwise, the assessment shall be
void. In the case at bar, the final assessment
notice merely stated the amount of liability
to be shouldered by the estate and the law
upon which such liability is based. However,
the estate was not informed in writing of the
facts on which the assessment of estate
taxes had been made. The estate was merely
informed of the findings of the CIR. Section
228 of the NIRC being remedial in nature can
be applied retroactively even though the tax
investigation was conducted prior to the
laws passage. Consequently, the invalid final
assessment notice cannot be a basis of a
compromise, any proceeding emanating from
the invalid final assessment notice is void
including the issuance of the warrant of
distraint and/or levy.
CIR vs BPI-Du
GR 134062, 17 April 2007
FACTS: On 28 October 1988 petitioner
Commissioner of Internal Revenue (CIR)
assessed respondent Bank of the Philippine
Islands (BPI) deficiency percentage and
documentary stamp taxes in the total
amount of P129,488,656.63. In a letter dated
10 December 1988, BPI requested for the CIR
to state or to inform the taxpayer why he is
being assessed a deficiency, and as to what
particular percentage tax the assessment
refers to. Subsequently, BPI received a letter
on 27 June 1991 dated May 8, 1991 from CIR
stating that it constitutes the final decision
on the matter, and the basis of the
assessments. BPI filed a petition for review in
the CTA but the latter dismissed the case for
lack of jurisdiction since the subject
assessments had become final and
unappealable. The CTA ruled that BPI failed
to protest on time under Section 270 of the
National Internal Revenue Code (NIRC) and
Section 7 in relation to Section 11 of RA
1125. On appeal, the CA reversed the tax
courts decision and resolution and
remanded the case to the CTA for a decision
on the merits. It ruled that the October 28,
1988 notices were not valid assessments
because they did not inform the taxpayer of
the legal and factual bases. It declared that
the proper assessments were those
contained in the May 8, 1991 letter which
provided the reasons for the claimed
deficiencies. Thus, it held that BPI filed the
petition for review in CTA on time.
Hence, CIR filed this case.
ISSUES:
1) Were the October 28, 1988 notices valid
assessments?
RULING:
Yes the notices sufficiently met the
requirements of a valid assessment under
the old law and jurisprudence. The CIR
merely relied on the provisions of the former
Section 270 prior to its amendment by RA
8424 (Tax Reform Act of 1997). Accordingly,
when the assessments were made pursuant
to the former Section 270, the only
requirement was for the CIR to notify or
inform the taxpayer of his findings.
Nothing in the old law required a written
statement to the taxpayer of the law and
facts on which the assessments were based.
Jurisprudence, on the other hand, simply
required that the assessments contain a
computation of tax liabilities, the amount the
taxpayer was to pay and a demand for
payment within a prescribed period. The
sentence The taxpayers shall be informed in
writing of the law and the facts on which the
assessments is made; otherwise, the
assessments shall be void was not in the old
Section of 270 but was later on inserted in
the renumbered Section 228 in
1997.Evidently, the legislature saw the need
to modify the former Section 270 by inserting
the aforequoted sentence. The fact that the
amendment was necessary showed that,
prior to the introduction of the amendment,
the statute had an entirely different
meaning. The amendment introduced by RA
8424 was an innovation and could not be
reasonably inferred from the old law. Clearly,
the legislature intended to insert a new
provision regarding the form and substance
of assessments issued by the CIR.
Under the former Section 270, there were
two instances when an assessment became
final and unappealable: 1) when it was not
protested within 30 days and 2) when the
adverse decision on the protest was not
appealed to the CTA within 30 days from
receipt of the final decision.
2) Whether or not the assessments made by
the CIR were valid, final, and unappealable?
Failure to protest within the 30-day period: 1)
final and unappealable; 2) presumption of
correctness
RULING: Yes, BPI should have protested
within 30 days from receipt of the notices
dated October 28, 1988. BPIs failure to
protest meant that the assessments made
are final and unappealable. The December
10, 1988 reply it sent to the CIR did not
qualify as a protest since BPI did not even
consider the October 28, 1988 notices as
valid or proper assessments. Moreover, BPI
was from then on barred from disputing the
correctness of the assessments or invoking
any defense that would reopen the question
of its liability on the merits.
Presumption of Correctness. There arose a
presumption of correctness when BPI failed
to protest the assessments: Tax assessments
by tax examiners are presumed correct and
made in good faith. The taxpayer has the
duty to prove otherwise. In the absence of
proof of any irregularities an assessment
duly made by a Bureau of Internal Revenue
examiner and approved by his superior
officers will not be disturbed. All
presumptions are in favor of the correctness
of tax assessments. Even if we consider the
December 10, 1988 letter as a protest, BPI
must nevertheless be deemed to have failed
to appeal the CIRs final decision within the
30-day period. The CIR, in his May 8, 1991
response, stated that it was his final
decision on the matter. BPI therefore had 30
days from the time it received the decision
on June 27, 1991 to appeal but it did not.
Instead, it filed a request for reconsideration
and lodged its appeal in the CTA.
BPI is still liable under the subject tax
assessments: That state will be deprived of
the taxes validly due it and the public will
suffer if taxpayers will not be held liable for
the proper taxes assessed against them:
Taxes are the lifeblood of the government,
for without taxes, the government can
neither exist nor endure. A principal attribute
of sovereignty, the exercise of taxing power
derives its source from the very existence of
the state whose social contract with its
citizens obliges it to promote public interest
and common good. The theory behind the
exercise of the power to tax emanates from
necessity; without taxes, government cannot
fulfill its mandate of promoting general
welfare and well-being of the people.
Barcelon v. CIR
August 7, 2006
Julius Anthony Ragay
Facts: Barcelon is a corporation engaged in
the trading of securities. On 14 April 1988,
Barcelon filed its Annual Income Tax Return
for taxable year 1987. After an audit
investigation conducted by the BIR, the CIR
issued an assessment for deficiency income
tax in the amount of P826,698.31 arising
from the disallowance of the item on
salaries, bonuses and allowances in the
amount of P1,219,093,93 as part of the
deductible business expense since Barcelon
failed to subject the salaries, bonuses and
allowances to withholding taxes. This
assessment was covered by Formal
Assessment Notice No. FAN-1- 87-91- 000649
dated 1 February 1991, which, the CIR
alleges, was sent to Barcelon through
registered mail on 6 February
1991. However, Barcelon denies receiving
the formal assessment notice.
CIR denied the protest
CTA in favor of Barcelon
CA in favor of CIR
Issue: has the action of the CIR prescribed?
Ruling: yes.
Under Section 203 of the National Internal
Revenue Code (NIRC), the CIR had three (3)
years from the last day for the filing of the
return to send an assessment notice to
petitioner. An assessment is made within the
prescriptive period if notice to this effect is
released, mailed or sent by the CIR to the
taxpayer within said period. Receipt thereof
by the taxpayer within the prescriptive
period is not necessary. At this point, it
should be clarified that the rule does not
dispense with the requirement that the
taxpayer should actually receive, even
beyond the prescriptive period, the
assessment notice which was timely
released, mailed and sent.
In the present case, records show that
Barcelon filed its Annual Income Tax Return
for taxable year 1987 on 14 April 1988. The
last day for filing by Barcelon of its return
was on 15 April 1988, thus, giving the CIR
until 15 April 1991 within which to send an
assessment notice. Barcelon denies having
received an assessment notice from
respondent.
When a mail matter is sent by registered
mail, there exists a presumption that it was
received in the regular course of mail. The
facts to be proved in order to raise this
presumption are: (a) that the letter was
properly addressed with postage prepaid;
and (b) that it was mailed. While a mailed
letter is deemed received by the addressee
in the ordinary course of mail, this is still
merely a disputable presumption subject
to controversion, and a direct denial of the
receipt thereof shifts the burden upon the
party favored by the presumption to prove
that the mailed letter was indeed received by
the addressee.
The CIR was unable to present substantial
evidence that such notice was, indeed,
mailed or sent by the respondent before
the BIRs right to assess had prescribed and
that said notice was received by the
petitioner. Furthermore, independent
evidence, such as the registry receipt of the
assessment notice, or a certification from the
Bureau of Posts, could have easily been
obtained. Yet the CIR failed to present such
evidence.
In the present case, the evidence offered by
the CIR fails to convince the Court that
Formal Assessment Notice No. FAN-1- 87-91-
000649 was released, mailed, or sent
before 15 April 1991, or before the lapse of
the period of limitation upon assessment and
collection prescribed by Section 203 of the
NIRC. Such evidence, therefore, is insufficient
to give rise to the presumption that the
assessment notice was received in the
regular course of mail. Consequently, the
right of the government to assess and collect
the alleged deficiency tax is barred by
prescription.