G.R. No.

175097

ALLIED BANKING CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

DEL CASTILLO, J.:

The key to effective communication is clarity.

The Commissioner of Internal Revenue (CIR) as well as his duly authorized

representative must indicate clearly and unequivocally to the taxpayer whether an
action constitutes a final determination on a disputed assessment.1 Words must be
carefully chosen in order to avoid any confusion that could adversely affect the rights
and interest of the taxpayer.

Assailed in this Petition for Review on Certiorari2 under Section 12 of Republic Act (RA)
No. 9282,3 in relation to Rule 45 of the Rules of Court, are the August 23, 2006
Decision4 of the Court of Tax Appeals (CTA) and its October 17, 2006
Resolution5 denying petitioner’s Motion for Reconsideration.

Factual Antecedents

On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary
Assessment Notice (PAN) to petitioner Allied Banking Corporation for deficiency
Documentary Stamp Tax (DST) in the amount of ₱12,050,595.60 and Gross Receipts Tax
(GRT) in the amount of ₱38,995,296.76 on industry issue for the taxable year
2001.6 Petitioner received the PAN on May 18, 2004 and filed a protest against it on
May 27, 2004.7
On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to
petitioner, which partly reads as follows:8

It is requested that the above deficiency tax be paid immediately upon receipt hereof,
inclusive of penalties incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal the final decision within thirty (30) days
from receipt hereof, otherwise said deficiency tax assessment shall become final,
executory and demandable.

Petitioner received the Formal Letter of Demand with Assessment Notices on August
30, 2004.9

Proceedings before the CTA First Division

On September 29, 2004, petitioner filed a Petition for Review10 with the CTA which
was raffled to its First Division and docketed as CTA Case No. 7062.11

On December 7, 2004, respondent CIR filed his Answer.12 On July 28, 2005, he filed a
Motion to Dismiss13 on the ground that petitioner failed to file an administrative
protest on the Formal Letter of Demand with Assessment Notices. Petitioner opposed
the Motion to Dismiss on August 18, 2005.14

On October 12, 2005, the First Division of the CTA rendered a Resolution15 granting
respondent’s Motion to Dismiss. It ruled:

Clearly, it is neither the assessment nor the formal demand letter itself that is
appealable to this Court. It is the decision of the Commissioner of Internal Revenue on
the disputed assessment that can be appealed to this Court (Commissioner of Internal
Revenue vs. Villa, 22 SCRA 3). As correctly pointed out by respondent, a disputed
assessment is one wherein the taxpayer or his duly authorized representative filed an
administrative protest against the formal letter of demand and assessment notice
within thirty (30) days from date [of] receipt thereof. In this case, petitioner failed to file
an administrative protest on the formal letter of demand with the corresponding
assessment notices. Hence, the assessments did not become disputed assessments as
subject to the Court’s review under Republic Act No. 9282. (See also Republic v. Liam
Tian Teng Sons & Co., Inc., 16 SCRA 584.)

WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is hereby
DISMISSED for lack of jurisdiction.

SO ORDERED.16

Aggrieved, petitioner moved for reconsideration but the motion was denied by the First
Division in its Resolution dated February 1, 2006.17

Proceedings before the CTA En Banc

On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.18 The case
was docketed as CTA EB No. 167.

Finding no reversible error in the Resolutions dated October 12, 2005 and February 1,
2006 of the CTA First Division, the CTA En Banc denied the Petition for Review19as well
as petitioner’s Motion for Reconsideration.20

The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that
an administrative protest is an integral part of the remedies given to a taxpayer in
challenging the legality or validity of an assessment. According to the CTA En
Banc, although there are exceptions to the doctrine of exhaustion of administrative
remedies, the instant case does not fall in any of the exceptions.

Issue

Hence, the present recourse, where petitioner raises the lone issue of whether the
Formal Letter of Demand dated July 16, 2004 can be construed as a final decision of the
CIR appealable to the CTA under RA 9282.

Our Ruling
The petition is meritorious.

Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate
jurisdiction to review by appeal decisions of the CIR in cases involving disputed
assessments

The CTA, being a court of special jurisdiction, can take cognizance only of matters that
are clearly within its jurisdiction.21 Section 7 of RA 9282 provides:

Sec. 7. Jurisdiction. — The CTA shall exercise:

(a) 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 in
relation thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue, where the National Internal
Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial; (Emphasis supplied)

xxxx

The word "decisions" in the above quoted provision of RA 9282 has been interpreted to
mean the decisions of the CIR on the protest of the taxpayer against the
assessments.22 Corollary thereto, Section 228 of the National Internal Revenue Code
(NIRC) provides for the procedure for protesting an assessment. It states:
SECTION 228. Protesting of Assessment. – When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he shall first
notify the taxpayer of his findings: Provided, however, That a preassessment notice
shall not be required in the following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or

(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding taxable year; or

(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.

Within a period to be prescribed by implementing rules and regulations, the taxpayer

shall be required to respond to said notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized representative shall issue an assessment based on
his findings.

Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing rules and
regulations. Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred
eighty (180) days from submission of documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from
receipt of the said decision, or from the lapse of the one hundred eighty (180)-day
period; otherwise, the decision shall become final, executory and demandable.

In the instant case, petitioner timely filed a protest after receiving the PAN. In response
thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant
to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the
assessments by filing an administrative protest within 30 days from receipt thereof.
Petitioner, however, did not protest the final assessment notices. Instead, it filed a
Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the
Petition for Review by the CTA was proper.

The case is an exception to the

rule on exhaustion of administrative remedies

However, a careful reading of the Formal Letter of Demand with Assessment Notices
leads us to agree with petitioner that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the administrative
agency concerned.

In the case of Vda. De Tan v. Veterans Backpay Commission,23 the respondent

contended that before filing a petition with the court, petitioner should have first
exhausted all administrative remedies by appealing to the Office of the President.
However, we ruled that respondent was estopped from invoking the rule on exhaustion
of administrative remedies considering that in its Resolution, it said, "The opinions
promulgated by the Secretary of Justice are advisory in nature, which may either be
accepted or ignored by the office seeking the opinion, and any aggrieved party has the
court for recourse". The statement of the respondent in said case led the petitioner to
conclude that only a final judicial ruling in her favor would be accepted by the
Commission.

Similarly, in this case, we find the CIR estopped from claiming that the filing of the
Petition for Review was premature because petitioner failed to exhaust all
administrative remedies.

The Formal Letter of Demand with Assessment Notices reads:

Based on your letter-protest dated May 26, 2004, you alleged the following:

1. That the said assessment has already prescribed in accordance with the provisions of
Section 203 of the Tax Code.

2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been
deleted, the wording of Section 28(A)(7)(b) discloses that there are no other taxes
imposable upon FCDUs aside from the 10% Final Income Tax.

Contrary to your allegation, the assessments covering GRT and DST for taxable year
2001 has not prescribed for [sic] simply because no returns were filed, thus, the three
year prescriptive period has not lapsed.

With the implementation of the CTRP, the phrase "exempt from all taxes" was deleted.
Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you
were assessed for deficiency gross receipts tax on onshore income from foreign
currency transactions in accordance with the rates provided under Section 121 of the
said Tax Code. Likewise, deficiency documentary stamp taxes was [sic] also assessed on
Loan Agreements, Bills Purchased, Certificate of Deposits and related transactions
pursuant to Sections 180 and 181 of NIRC, as amended.

The 25% surcharge and 20% interest have been imposed pursuant to the provision of
Section 248(A) and 249(b), respectively, of the National Internal Revenue Code, as
amended.

It is requested that the above deficiency tax be paid immediately upon receipt hereof,
inclusive of penalties incident to delinquency. This is our final decision based on
investigation. If you disagree, you may appeal this final decision within thirty (30) days
from receipt hereof, otherwise said deficiency tax assessment shall become final,
executory and demandable.24 (Emphasis supplied)

It appears from the foregoing demand letter that the CIR has already made a final
decision on the matter and that the remedy of petitioner is to appeal the final decision
within 30 days.

In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue,25 we

considered the language used and the tenor of the letter sent to the taxpayer as the final
decision of the CIR.

In this case, records show that petitioner disputed the PAN but not the Formal Letter of
Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not
filing a protest against the Formal Letter of Demand with Assessment Notices since the
language used and the tenor of the demand letter indicate that it is the final decision of
the respondent on the matter. We have time and again reminded the CIR to indicate, in a
clear and unequivocal language, whether his action on a disputed assessment
constitutes his final determination thereon in order for the taxpayer concerned to
determine when his or her right to appeal to the tax court accrues.26 Viewed in the light
of the foregoing, respondent is now estopped from claiming that he did not intend the
Formal Letter of Demand with Assessment Notices to be a final decision.

Moreover, we cannot ignore the fact that in the Formal Letter of Demand with
Assessment Notices, respondent used the word "appeal" instead of "protest",
"reinvestigation", or "reconsideration". Although there was no direct reference for
petitioner to bring the matter directly to the CTA, it cannot be denied that the word
"appeal" under prevailing tax laws refers to the filing of a Petition for Review with the
CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms
"protest", "reinvestigation" and "reconsideration" refer to the administrative remedies a
taxpayer may take before the CIR, while the term "appeal" refers to the remedy
available to the taxpayer before the CTA. Section 9 of RA 9282, amending Section 11 of
RA 1125,27 likewise uses the term "appeal" when referring to the action a taxpayer
must take when adversely affected by a decision, ruling, or inaction of the CIR. As we see
it then, petitioner in appealing the Formal Letter of Demand with Assessment Notices to
the CTA merely took the cue from respondent. Besides, any doubt in the interpretation
or use of the word "appeal" in the Formal Letter of Demand with Assessment Notices
should be resolved in favor of petitioner, and not the respondent who caused the
confusion.

To be clear, we are not disregarding the rules of procedure under Section 228 of the
NIRC, as implemented by Section 3 of BIR Revenue Regulations No. 12-99.28 It is the
Formal Letter of Demand and Assessment Notice that must be administratively
protested or disputed within 30 days, and not the PAN. Neither are we deviating from
our pronouncement in St. Stephen’s Chinese Girl’s School v. Collector of Internal
Revenue,29 that the counting of the 30 days within which to institute an appeal in the
CTA commences from the date of receipt of the decision of the CIR on the disputed
assessment, not from the date the assessment was issued.1avvphi1

What we are saying in this particular case is that, the Formal Letter of Demand with
Assessment Notices which was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the CTA because the words used,
specifically the words "final decision" and "appeal", taken together led petitioner to
believe that the Formal Letter of Demand with Assessment Notices was in fact the final
decision of the CIR on the letter-protest it filed and that the available remedy was to
appeal the same to the CTA.

We note, however, that during the pendency of the instant case, petitioner availed of the
provisions of Revenue Regulations No. 30-2002 and its implementing Revenue
Memorandum Order by submitting an offer of compromise for the settlement of the
GRT, DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment
dated November 21, 2007.30 Accordingly, there is no reason to reinstate the Petition
for Review in CTA Case No. 7062.

WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision
and the October 17, 2006 Resolution of the Court of Tax Appeals
are REVERSED and SET ASIDE. The Petition for Review in CTA Case No. 7062 is hereby
DISMISSED based solely on the Bureau of Internal Revenue’s acceptance of petitioner’s
offer of compromise for the settlement of the gross receipts tax, documentary stamp tax
and value added tax, for the years 1998-2003.

SO ORDERED.

ALLIED BANKING CORPORATION v. CIR, GR No. 175097, 2010-02-05

Facts:

(BIR) issued a Preliminary Assessment Notice (PAN) to petitioner Allied Banking

Corporation for deficiency Documentary Stamp Tax (DST)

Petitioner received the PAN on May 18, 2004 and filed a protest against it on May 27,
2004.

the BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner,... that
the above deficiency tax be paid immediately

This is our final decision based on investigation.

disagree, you may appeal the final decision... petitioner filed a Petition for Review[10]
with the CTA... petitioner failed to file an administrative protest on the formal letter of
demand with the corresponding assessment notices.

the assessments did not become disputed assessments

The Petition for Review is hereby DISMISSED for lack of jurisdiction.

The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction.

Issues:

whether the Formal Letter of Demand dated July 16, 2004 can be construed as a final
decision of the CIR appealable to the CTA under RA 9282.

Ruling:

The word "decisions" in the above quoted provision of RA 9282 has been interpreted to
mean the decisions of the CIR on the protest of the taxpayer against the assessments.

petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR
issued a Formal Letter of Demand with Assessment Notices.
the proper recourse of petitioner was to dispute the assessments by filing... an
administrative protest within 30 days from receipt thereof.

it filed a Petition for Review with the CTA.

the instant case is an exception to the rule on exhaustion of administrative remedies,

i.e., estoppel on the part of the administrative agency... concerned.

we find the CIR estopped from claiming that the filing of the Petition for Review was
premature because petitioner failed to exhaust all administrative remedies.

It appears from the foregoing demand letter that the CIR has already made a final
decision on the matter and that the remedy of petitioner is to appeal the final decision
within 30 days.

records show that petitioner disputed the PAN but not the Formal Letter of Demand
with Assessment Notices.

we cannot blame petitioner for not filing a protest against the Formal Letter of Demand
with Assessment Notices since the language used and the... tenor of the demand letter
indicate that it is the final decision of the respondent

Viewed in the light of the foregoing, respondent is now estopped from claiming that he
did not intend the Formal Letter of Demand with Assessment

Notices to be a final decision.

under Section 228 of the NIRC, the terms "protest", "reinvestigation" and
"reconsideration" refer to the... administrative remedies a taxpayer may take before the
CIR, while the term "appeal" refers to the remedy available to the taxpayer before the
CTA.

As we see it then, petitioner in appealing the Formal Letter of Demand with Assessment
Notices to the CTA merely took the cue from respondent.

It is the Formal Letter of Demand and Assessment Notice that must be administratively
protested... or disputed within 30 days, and not the PAN.

the counting of the 30 days within which to institute an appeal in the CTA... commences
from the date of receipt of the decision of the CIR on the disputed assessment, not from
the date the assessment was issued.
G.R. No. 135210 July 11, 2001

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ISABELA CULTURAL CORPORATION, respondent.

PANGANIBAN, J.:

A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer
the immediate payment of a tax deficiency assessment previously made, is tantamount
to a denial of the taxpayer's request for reconsideration. Such letter amounts to a final
decision on a disputed assessment and is thus appealable to the Court of Tax Appeals
(CTA).

The Case

Before this Court is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules
of Court, seeking to set aside the August 19, 1998 Decision2 of the Court of
Appeals3 (CA) in CA-GR SP No. 46383 and ultimately to affirm the dismissal of CTA Case
No. 5211. The dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, the assailed decision is REVERSED and SET ASIDE. Accordingly,

judgment is hereby rendered REMANDING the case to the CTA for proper disposition."4
The Facts
The facts are undisputed. The Court of Appeals quoted the summary of the CTA as
follows:

"As succinctly summarized by the Court of Tax appeals (CTA for brevity), the antecedent
facts are as follows:

'In an investigation conducted on the 1986 books of account of [respondent, petitioner]

had the preliminary [finding] that [respondent] incurred a total income tax deficiency of
P9,985,392.15, inclusive of increments. Upon protest by [respondent's] counsel, the said
preliminary assessment was reduced to the amount of P325,869.44, a breakdown of
which follows:

Deficiency Income Tax P321,022.68

Deficiency Expanded Withholding Tax 4,846.76

Total P325,869.44

(pp. 187-189, BIR records)'

On February 23, 1990, [respondent] received from [petitioner] an assessment letter,

dated February 9, 1990, demanding payment of the amounts of P333,196.86 and
P4,897.79 as deficiency income tax and expanded withholding tax inclusive of surcharge
and interest, respectively, for the taxable period from January 1, 1986 to December 31,
1986. (pp. 204 and 205, BIR rec.)

In a letter, dated March 22, 1990, filed with the [petitioner's] office on March 23, 1990
(pp. 296-311, BIR rec.), [respondent] requested x x x a reconsideration of the subject
assessment.

Supplemental to its protest was a letter, dated April 2, 1990, filed with the [petitioner's]
office on April 18, 1990 (pp. 224 & 225, BIR rec.), to which x x x were attached certain
documents supportive of its protest, as well as a Waiver of Statute of Limitation, dated
April 17, 1990, where it was indicated that [petitioner] would only have until April 5,
1991 within which to asses and collect the taxes that may be found due from
[respondent] after the re-investigation.

On February 9, 1995, [respondent] received from [petitioner] a Final Notice Before

Seizure, dated December 22, 1994 (p. 340, BIR rec.). In said letter, [petitioner]
demanded payment of the subject assessment within ten (10) days from receipt thereof.
Otherwise, failure on its part would constrain [petitioner] to collect the subject
assessment through summary remedies.

[Respondent] considered said final notice of seizure as [petitioner's] final decision.

Hence, the instant petition for review filed with this Court on March 9, 1995.
The CTA having rendered judgment dismissing the petition, [respondent] filed the
instant petition anchored on the argument that [petitioner's] issuance of the Final
Notice Before Seizure constitutes [its] decision on [respondent's] request for
reinvestigation, which the [respondent] may appeal to the CTA."5

Ruling of the Court of Appeals

In its Decision, the Court of Appeals reversed the Court of Tax Appeals. The CA
considered the final notice sent by petitioner as the latter's decision, which was
appealable to the CTA. The appellate court reasoned that the final Notice before seizure
had effectively denied petitioner's request for a reconsideration of the commissioner's
assessment. The CA relied on the long-settled tax jurisprudence that a demand letter
reiterating payment of delinquent taxes amounted to a decision on a disputed
assessment.

Hence, this recourse.6

Issues

In his Memorandum,7 petitioner presents for this Court's consideration a solitary issue:

"Whether or not the Final Notice Before Seizure dated February 9, 1995 signed by
Acting Chief Revenue Collection Officer Milagros Acevedo against ICC constitutes the
final decision of the CIR appealable to the CTA."8

The Court's Ruling

The Petition is not meritorious.

Sole Issue:
The Nature of the Final Notice Before Seizure

The Final Notice Before Seizure sent by the Bureau of Internal Revenue (BIR) to
respondent reads as follows:

"On Feb. 9, 1990, [this] Office sent you a letter requesting you to settle the above-
captioned assessment. To date, however, despite the lapse of a considerable length of
time, we have not been honored with a reply from you.

In this connection, we are giving you this LAST OPPORTUNITY to settle the adverted
assessment within ten (10) days after receipt hereof. Should you again fail, and refuse to
pay, this Office will be constrained to enforce its collection by summary remedies of
Warrant of Levy of Road Property, Distraint of Personal Property or Warrant of
Garnishment, and/or simultaneous court action.

Please give this matter your preferential attention.

Very truly yours,

 ISIDRO B. TECSON, JR.
Revenue District Officer

By:

(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection Officer"9

Petitioner maintains that this Final Notice was a mere reiteration of the delinquent
taxpayer's obligation to pay the taxes due. It was supposedly a mere demand that
should not have been mistaken for a decision on a protested assessment. Such decision,
the commissioner contends, must unequivocably indicate that it is the resolution of the
taxpayer's request for reconsideration and must likewise state the reason therefor.
Respondent, on the other hand, points out that the Final Notice Before Seizure should be
considered as a denial of its request for reconsideration of the disputed assessment. The
Notice should be deemed as petitioner's last act, since failure to comply with it would
lead to the distraint and levy of respondent's properties, as indicated therein.

We agree with respondent. In the normal course, the revenue district officer sends the
taxpayer a notice of delinquent taxes, indicating the period covered, the amount due
including interest, and the reason for the delinquency. If the taxpayer disagrees with or
wishes to protest the assessment, it sends a letter to the BIR indicating its protest,
stating the reasons therefor, and submitting such proof as may be necessary. That letter
is considered as the taxpayer's request for reconsideration of the delinquent
assessment. After the request is filed and received by the BIR, the assessment becomes a
disputed assessment on which it must render a decision. That decision is appealable to
the Court of Tax Appeals for review.

Prior to the decision on a disputed assessment, there may still be exchanges between
the commissioner of internal revenue (CIR) and the taxpayer. The former may ask
clarificatory questions or require the latter to submit additional evidence. However, the
CIR's position regarding the disputed assessment must be indicated in the final decision.
It is this decision that is properly appealable to the CTA for review.

Indisputably, respondent received an assessment letter dated February 9, 1990, stating

that it had delinquent taxes due; and it subsequently filed its motion for reconsideration
on March 23, 1990. In support of its request for reconsideration, it sent to the CIR
additional documents on April 18, 1990. The next communication respondent received
was already the Final Notice Before Seizure dated November 10, 1994.

In the light of the above facts, the Final Notice Before Seizure cannot but be considered
as the commissioner's decision disposing of the request for reconsideration filed by
respondent, who received no other response to its request. Not only was the Notice the
only response received; its content and tenor supported the theory that it was the CIR's
final act regarding the request for reconsideration. The very title expressly indicated
that it was a finalnotice prior to seizure of property. The letter itself clearly stated that
respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties
would be subjected to distraint and levy. How then could it have been made to believe
that its request for reconsideration was still pending determination, despite the actual
threat of seizure of its properties?

Furthermore, Section 228 of the National Internal Revenue Code states that a
delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its
request for reconsideration remains unacted upon 180 days after submission thereof.
We quote:

"Sec. 228. Protesting an Assessment. – x x x

Within a period to be prescribed by implementing rules and regulations, the taxpayer

shall be required to respond to said notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized representative shall issue an assessment based on
his findings.

Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing rules and
regulations. Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred
eighty (180) days from submission of documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax Appeals within (30) days from
receipt of the said decision, or from the lapse of the one hundred eighty (180)-day
period; otherwise the decision shall become final, executory and demandable."10

In this case, the said period of 180 days had already lapsed when respondent filed its
request for reconsideration on March 23, 1990, without any action on the part of the
CIR.

Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes
may be considered a decision on a disputed or protested assessment. In Commissioner
of Internal Revenue v. Ayala Securities Corporation, this Court held:

"The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a
denial of the reconsideration or [respondent corporation's] x x x protest o[f] the
assessment made by the petitioner, considering that the said letter [was] in itself a
reiteration of the demand by the Bureau of Internal Revenue for the settlement of the
assessment already made, and for the immediate payment of the sum of P758,687.04 in
spite of the vehement protest of the respondent corporation on April 21, 1961. This
certainly is a clear indication of the firm stand of petitioner against the reconsideration
of the disputed assessment, in view of the continued refusal of the respondent
corporation to execute the waiver of the period of limitation upon the assessment in
question.
This being so, the said letter amount[ed] to a decision on a disputed or protested
assessment and, there, the court a quo did not err in taking cognizance of this case."11

Similarly, in Surigao Electric Co., Inc. v. Court of Tax Appeals12 and again in CIR v. Union
Shipping Corp.,13 we ruled:

"x x x. The letter of demand dated April 29, 1963 unquestionably constitutes the final
action taken by the commissioner on the petitioner's several requests for
reconsideration and recomputation. In this letter the commissioner not only in effect
demanded that the petitioner pay the amount of P11,533.53 but also gave warning that
in the event it failed to pay, the said commissioner would be constrained to enforce the
collection thereof by means of the remedies provided by law. The tenor of the letter,
specifically the statement regarding the resort to legal remedies, unmistakably
indicate[d] the final nature of the determination made by the commissioner of the
petitioner's deficiency franchise tax liability."

As in CIR v. Union Shipping,14 petitioner failed to rule on the Motion for

Reconsideration filed by private respondent, but simply continued to demand payment
of the latter's alleged tax delinquency. Thus, the Court reiterated the dictum that the BIR
should always indicate to the taxpayer in clear and unequivocal language what
constitutes final action on a disputed assessment. The object of this policy is to avoid
repeated requests for reconsideration by the taxpayer, thereby delaying the finality of
the assessment and, consequently, the collection of the taxes due. Furthermore, the
taxpayer would not be groping in the dark, speculating as to which communication or
action of the BIR may be the decision appealable to the tax court.15

In the instant case, the second notice received by private respondent verily indicated its
nature – that it was final. Unequivocably, therefore, it was tantamount to a rejection of
the request for reconsideration.

Commissioner v. Algue16 is not in point here. In that case, the Warrant of Distraint and
Levy, issued to the taxpayer without any categorical ruling on its request for
reconsideration, was not deemed equivalent to a denial of the request. Because such
request could not in fact be found in its records, the BIR cannot be presumed to have
taken it into consideration. The request was considered only when the taxpayer gave a
copy of it, duly stamp-received by the BIR. Hence, the Warrant was deemed
premature.1âwphi1.nêt

In the present case, petitioner does not deny receipt of private respondent's protest
letter. As a matter of fact, it categorically relates the following in its "Statement of
Relevant Facts":17

"3. On March 23, 1990, respondent ICC wrote the CIR requesting for a reconsideration
of the assessment on the ground that there was an error committed in the computation
of interest and that there were expenses which were disallowed (Ibid., pp. 296-311).

"4. On April 2, 1990, respondent ICC sent the CIR additional documents in support of its
protest/reconsideration. The letter was received by the BIR on April 18, 1990.
Respondent ICC further executed a Waiver of Statute of Limitation (dated April 17,
1990) whereby it consented to the BIR to assess and collect any taxes that may be
discovered in the process of reinvestigation, until April 3, 1991 (Ibid., pp. 296-311). A
copy of the waiver is hereto attached as Annex 'C'."

Having admitted as a fact private respondent's request for reconsideration, petitioner

must have passed upon it prior to the issuance of the Final Notice Before Seizure.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.

SO ORDERED.

CIR v. ISABELA CULTURAL CORPORATION

JULY 11, 2001 – GR. 135210

The Final Notice Before Seizure cannot but be considered as the Commissioner’s
decision disposing of the request for reconsideration filed by Isabela, who received no
other response to its request. Not only was the Notice the only response received; its
content and tenor supported the theory that it was the CIR’s final act regarding the
request for reconsideration. The very title expressly indicated that it was a final notice
prior to seizure of property. The letter itself clearly stated that Isabela was being given
“this Last Opportunity” to pay; otherwise, its properties would be subjected to distraint
and levy.

Sec. 228 of NIRC states that a delinquent taxpayer may nevertheless directly appeal a
disputed assessment, if its request for reconsideration remains unacted upon 180 days
after submission thereof. In this case, the period of 180 days had already lapsed when
Isabela filed its request for reconsideration on March 1990, without any action on the
part of the CIR.

Jurisprudence dictates that a final demand letter for payment of delinquent taxes may
be considered a decision on a disputed or protested assessment.

D. NON-RETROACTIVITY OF RULINGS

SEC. 246 OF NIRC

1) REVIEW, APPEAL TO SECRETARY OF FINANCE

SEC. 4 OF NIRC

[G.R. NO. 148380 December 9, 2005]

OCEANIC WIRELESS NETWORK, INC., Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, THE COURT OF TAX APPEALS, and THE COURT OF APPEALS, Respondents.

DECISION

AZCUNA, J.:

This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision
of the Court of Appeals dated October 31, 2000, and its Resolution dated May 3, 2001, in
"Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue" docketed as CA-
G.R. SP No. 35581, upholding the Decision of the Court of Tax Appeals dismissing the
Petition for Review in CTA Case No. 4668 for lack of jurisdiction.

Petitioner Oceanic Wireless Network, Inc. challenges the authority of the Chief of the
Accounts Receivable and Billing Division of the Bureau of Internal Revenue (BIR)
National Office to decide and/or act with finality on behalf of the Commissioner of
Internal Revenue (CIR) on protests against disputed tax deficiency assessments.

The facts of the case are as follows:

On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR)
deficiency tax assessments for the taxable year 1984 in the total amount
of P8,644,998.71, broken down as follows:

Kind of Tax Assessment No. Amount

Deficiency Income Tax FAR-4-1984-88-001130 P8,381,354.00

Penalties for late payment FAR-4-1984-88-001131 3,000.00

of income and failure to

file quarterly returns

Deficiency Contractor's FAR-4-1984-88-001132 29,849.06

Tax

Deficiency Fixed Tax FAR-4 - -88-001133 12,083.65

Deficiency Franchise Tax FAR-4 84-88-001134 ___227,712.00

T o t a l - - - - - - - - P8,644,998.71

Petitioner filed its protest against the tax assessments and requested a reconsideration
or cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and
Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying
petitioner's request for reinvestigation in a letter1 dated January 24, 1991, thus:
"Note: Your request for re-investigation has been denied for failure to submit the
necessary supporting papers as per endorsement letter from the office of the Special
Operation Service dated 12-12-90."

Said letter likewise requested petitioner to pay the total amount ofP8,644,998.71 within
ten (10) days from receipt thereof, otherwise the case shall be referred to the Collection
Enforcement Division of the BIR National Office for the issuance of a warrant of
distraint and levy without further notice.

Upon petitioner's failure to pay the subject tax assessments within the prescribed
period, the Assistant Commissioner for Collection, acting for the Commissioner of
Internal Revenue, issued the corresponding warrants of distraint and/or levy and
garnishment. These were served on petitioner on October 10, 1991 and October 17,
1991, respectively.2

On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax
Appeals (CTA) to contest the issuance of the warrants to enforce the collection of the tax
assessments. This was docketed as CTA Case No. 4668.

The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16,
1994, declaring that said petition was filed beyond the thirty (30)-day period reckoned
from the time when the demand letter of January 24, 1991 by the Chief of the BIR
Accounts Receivable and Billing Division was presumably received by petitioner, i.e.,
"within a reasonable time from said date in the regular course of mail pursuant to
Section 2(v) of Rule 131 of the Rules of Court."3

The decision cited Surigao Electric Co., Inc. v. Court of Tax Appeals4 wherein this Court
considered a mere demand letter sent to the taxpayer after his protest of the
assessment notice as the final decision of the Commissioner of Internal Revenue on the
protest. Hence, the filing of the petition on November 8, 1991 was held clearly beyond
the reglementary period.5

The court a quo likewise stated that the finality of the denial of the protest by petitioner
against the tax deficiency assessments was bolstered by the subsequent issuance of the
warrants of distraint and/or levy and garnishment to enforce the collection of the
deficiency taxes. The issuance was not barred by prescription because the mere filing of
the letter of protest by petitioner which was given due course by the Bureau of Internal
Revenue suspended the running of the prescription period as expressly provided under
the then Section 224 of the Tax Code:

SEC. 224. Suspension of Running of the Statute of Limitations. 'The running of the
Statute of Limitations provided in Section 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 (60) days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer cannot be
located in the address given by him in the return files upon which a tax is being
assessed or collected: Provided, That if the taxpayer inform the Commissioner of any
change of address, the running of the statute of limitations 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 located; and when the taxpayer is out of the Philippines.6 (Underscoring
supplied.)

Petitioner filed a Motion for Reconsideration arguing that the demand letter of January
24, 1991 cannot be considered as the final decision of the Commissioner of Internal
Revenue on its protest because the same was signed by a mere subordinate and not by
the Commissioner himself.7

With the denial of its motion for reconsideration, petitioner consequently filed a
Petition for Review with the Court of Appeals contending that there was no final
decision to speak of because the Commissioner had yet to make a personal
determination as regards the merits of petitioner's case.8

The Court of Appeals denied the petition in a decision dated October 31, 2000, the
dispositive portion of which reads:

"WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED."

Petitioner's Motion for Reconsideration was likewise denied in a resolution dated May
3, 2001.

Hence, this petition with the following assignment of errors:9

THE HONORABLE RESPONDENT CA ERRED IN FINDING THAT THE DEMAND LETTER

ISSUED BY THE (THEN) ACCOUNTS RECEIVABLE/BILLING DIVISION OF THE BIR
NATIONAL OFFICE WAS THE FINAL DECISION OF THE RESPONDENT CIR ON THE
DISPUTED ASSESSMENTS, AND HENCE CONSTITUTED THE DECISION APPEALABLE TO
THE HONORABLE RESPONDENT CTA; AND,

II

THE HONORABLE RESPONDENT CA ERRED IN DECLARING THAT THE DENIAL OF THE

PROTEST OF THE SUBJECT ALLEGED DEFICIENCY TAX ASSESSMENTS HAD LONG
BECOME FINAL AND EXECUTORY FOR FAILURE OF THE PETITIONER TO INSTITUTE
THE APPEAL FROM THE DEMAND LETTER OF THE CHIEF OF THE ACCOUNTS
RECEIVABLE/BILLING DIVISION, BIR NATIONAL OFFICE, TO THE HONORABLE
RESPONDENT CTA, WITHIN THIRTY (30) DAYS FROM RECEIPT THEREOF.

Thus, the main issue is whether or not a demand letter for tax deficiency assessments
issued and signed by a subordinate officer who was acting in behalf of the
Commissioner of Internal Revenue, is deemed final and executory and subject to an
appeal to the Court of Tax Appeals.
We rule in the affirmative.

A demand letter for payment of delinquent taxes may be considered a decision on a

disputed or protested assessment. The determination on whether or not a demand
letter is final is conditioned upon the language used or the tenor of the letter being sent
to the taxpayer.

We laid down the rule that the Commissioner of Internal Revenue should always
indicate to the taxpayer in clear and unequivocal language what constitutes his final
determination of the disputed assessment, thus:

. . . we deem it appropriate to state that the Commissioner of Internal Revenue should

always indicate to the taxpayer in clear and unequivocal language whenever his action
on an assessment questioned by a taxpayer constitutes his final determination on the
disputed assessment, as contemplated by Sections 7 and 11 of Republic Act No. 1125, as
amended. On the basis of his statement indubitably showing that the Commissioner's
communicated action is his final decision on the contested assessment, the aggrieved
taxpayer would then be able to take recourse to the tax court at the opportune time.
Without needless difficulty, the taxpayer would be able to determine when his right to
appeal to the tax court accrues.

The rule of conduct would also obviate all desire and opportunity on the part of the
taxpayer to continually delay the finality of the assessment - and, consequently, the
collection of the amount demanded as taxes - by repeated requests for recomputation
and reconsideration. On the part of the Commissioner, this would encourage his office
to conduct a careful and thorough study of every questioned assessment and render a
correct and definite decision thereon in the first instance. This would also deter the
Commissioner from unfairly making the taxpayer grope in the dark and speculate as to
which action constitutes the decision appealable to the tax court. Of greater import, this
rule of conduct would meet a pressing need for fair play, regularity, and orderliness in
administrative action.10

In this case, the letter of demand dated January 24, 1991, unquestionably constitutes
the final action taken by the Bureau of Internal Revenue on petitioner's request for
reconsideration when it reiterated the tax deficiency assessments due from petitioner,
and requested its payment. Failure to do so would result in the "issuance of a warrant of
distraint and levy to enforce its collection without further notice."11 In addition, the
letter contained a notation indicating that petitioner's request for reconsideration had
been denied for lack of supporting documents.

The above conclusion finds support in Commissioner of Internal Revenue v. Ayala

Securities Corporation,12 where we held:

The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a
denial of the reconsideration or [respondent corporation's] protest o[f] the assessment
made by the petitioner, considering that the said letter [was] in itself a reiteration of the
demand by the Bureau of Internal Revenue for the settlement of the assessment already
made, and for the immediate payment of the sum of P758,687.04 in spite of the
vehement protest of the respondent corporation on April 21, 1961. This certainly is a
clear indication of the firm stand of petitioner against the reconsideration of the
disputed assessment This being so, the said letter amount[ed] to a decision on a
disputed or protested assessment, and, there, the court a quo did not err in taking
cognizance of this case.

Similarly, in Surigao Electric Co., Inc v. Court of Tax Appeals,13 and in CIR v. Union
Shipping Corporation,14 we held:

". . . In this letter, the commissioner not only in effect demanded that the petitioner pay
the amount of P11,533.53 but also gave warning that in the event it failed to pay, the
said commissioner would be constrained to enforce the collection thereof by means of
the remedies provided by law. The tenor of the letter, specifically the statement
regarding the resort to legal remedies, unmistakably indicate[d] the final nature of the
determination made by the commissioner of the petitioner's deficiency franchise tax
liability."

The demand letter received by petitioner verily signified a character of finality.

Therefore, it was tantamount to a rejection of the request for reconsideration. As
correctly held by the Court of Tax Appeals, "while the denial of the protest was in the
form of a demand letter, the notation in the said letter making reference to the protest
filed by petitioner clearly shows the intention of the respondent to make it as [his] final
decision."15

This now brings us to the crux of the matter as to whether said demand letter indeed
attained finality despite the fact that it was issued and signed by the Chief of the
Accounts Receivable and Billing Division instead of the BIR Commissioner.

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 National Internal Revenue
Code (NIRC) enumerated in Section 7.

As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR
Commissioner to delegate the powers vested in him under the pertinent provisions of
the Code to any subordinate official with the rank equivalent to a division chief or
higher, except the following:

(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 Section 204(A) and (B) of this Code, any
tax deficiency: Provided, however, that assessments issued by the Regional Offices
involving basic deficiency taxes of five hundred thousand pesos (P500,000) or less, and
minor criminal violations as may be determined by rules and regulations to be
promulgated by the Secretary of Finance, upon the recommendation of the
Commissioner, discovered by regional and district officials, may be compromised by a
regional evaluation board which shall be composed of the Regional Director as
Chairman, the Assistant Regional Director, heads of the Legal, Assessment and
Collection Divisions and the Revenue District Officer having jurisdiction over the
taxpayer, as members; andcralawlibrary

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

It is clear from the above provision that the act of issuance of the demand letter by the
Chief of the Accounts Receivable and Billing Division does not fall under any of the
exceptions that have been mentioned as non-delegable.

Section 6 of the Code further provides:

"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional

Requirements for Tax Administration and Enforcement.'

(A) Examination of Returns and Determination of Tax Due. - After a return has been
filed as required under the provisions of this Code, theCommissioner or his duly
authorized representative may authorize the examination of any taxpayer and the
assessment of the correct amount of tax; Provided, however, That failure to file a return
shall not prevent the Commissioner from authorizing the examination of any taxpayer.

The tax or any deficiency tax so assessed shall be paid upon notice and demand from
the Commissioner or from his duly authorized representative. . . ." (Emphasis
supplied)ςrαlαωlιbrαrÿ

Thus, the authority to make tax assessments may be delegated to subordinate officers.
Said assessment has the same force and effect as that issued by the Commissioner
himself, if not reviewed or revised by the latter such as in this case.16

A request for reconsideration must be made within thirty (30) days from the taxpayer's
receipt of the tax deficiency assessment, otherwise, the decision becomes final,
unappealable and therefore, demandable. A tax assessment that has become final,
executory and enforceable for failure of the taxpayer to assail the same as provided in
Section 228 can no longer be contested, thus:

"SEC. 228. Protesting of Assessment. 'When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings' Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation within thirty (30) days from receipt of
the assessment in such form and manner as may be prescribed by implementing rules
and regulations. Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred
(180) days from submission of documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from
receipt of the said decision, or from the lapse of the one hundred eighty (180) - day
period; otherwise, the decision shall become final, executory and demandable."

Here, petitioner failed to avail of its right to bring the matter before the Court of Tax
Appeals within the reglementary period upon the receipt of the demand letter
reiterating the assessed delinquent taxes and denying its request for reconsideration
which constituted the final determination by the Bureau of Internal Revenue on
petitioner's protest. Being a final disposition by said agency, the same would have been
a proper subject for appeal to the Court of Tax Appeals.

The rule is that for the Court of Tax Appeals to acquire jurisdiction, an assessment must
first be disputed by the taxpayer and ruled upon by the Commissioner of Internal
Revenue to warrant a decision from which a Petition for Review may be taken to the
Court of Tax Appeals. Where an adverse ruling has been rendered by the Commissioner
of Internal Revenue with reference to a disputed assessment or a claim for refund or
credit, the taxpayer may appeal the same within thirty (30) days after receipt thereof.17

We agree with the factual findings of the Court of Tax Appeals that the demand letter
may be presumed to have been duly directed, mailed and was received by petitioner in
the regular course of the mail in the absence of evidence to the contrary. This is in
accordance with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the
period to appeal has commenced to run from the time the letter of demand was
presumably received by petitioner within a reasonable time after January 24, 1991, the
period of thirty (30) days to appeal the adverse decision on the request for
reconsideration had already lapsed when the petition was filed with the Court of Tax
Appeals only on November 8, 1991. Hence, the Court of Tax Appeals properly dismissed
the petition as the tax delinquency assessment had long become final and executory.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated October
31, 2000 and its Resolution dated May 3, 2001 in CA-G.R. SP No. 35581 are
hereby AFFIRMED. The petition is accordingly DENIED for lack of merit.

SO ORDERED

OCEANIC WIRELESS NETWORK v. CIR, GR NO. 148380, 2005-12-09

Facts:

petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax
assessments

Petitioner filed its protest against the tax assessments and requested a reconsideration
or cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and
Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying
petitioner's request for reinvestigation... likewise requested petitioner to pay the total
amount of P8,644,998.71 within ten (10) days from receipt thereof, otherwise the case
shall be referred to the Collection Enforcement Division of the BIR National Office for
the issuance of a warrant of distraint and... levy without further notice.

the Assistant Commissioner for Collection, acting for the Commissioner of Internal
Revenue, issued the corresponding warrants of distraint and/or levy and garnishment.

petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the
issuance of the warrants to enforce the collection of the tax assessments.

The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16,
1994, declaring that said petition was filed beyond the thirty (30)-day period reckoned
from the time when the demand letter of January 24, 1991 by the Chief of the BIR
Accounts Receivable... and Billing Division was presumably received

Issues:

whether or not a demand letter for tax deficiency assessments issued and signed by a
subordinate officer who was acting in behalf of the Commissioner of Internal Revenue,
is deemed final and executory and subject to an appeal to the Court of Tax

Appeals.

whether said demand letter indeed attained finality despite the fact that it was issued
and signed by the Chief of the Accounts Receivable and Billing Division instead of the
BIR Commissioner.

Ruling:

We rule in the affirmative.

A demand letter for payment of delinquent taxes may be considered a decision on a

disputed or protested assessment. The determination on whether or not a demand
letter is final is conditioned upon the language used or the tenor of the letter being sent
to the taxpayer.

the Commissioner of Internal Revenue should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final determination of the disputed
assessment... the letter of demand dated January 24, 1991, unquestionably constitutes
the final action taken by the Bureau of Internal Revenue on petitioner's request for
reconsideration when it reiterated the tax deficiency assessments due from petitioner,
and requested its... payment. Failure to do so would result in the "issuance of a warrant
of distraint and levy... contained a notation indicating that petitioner's request for
reconsideration had been... denied for lack of supporting documents.

The demand letter received by petitioner verily signified a character of finality.

Therefore, it was tantamount to a rejection of the request for reconsideration.
the Commissioner of Internal Revenue may delegate any power vested upon him by law
to Division Chiefs or to officials of higher rank.

cannot, however, delegate the four powers granted to him under the National Internal
Revenue Code (NIRC) enumerated... in Section 7.

to recommend the promulgation of rules and regulations... o issue rulings of first

impression or to reverse, revoke or modify any existing ruling... to compromise or
abate... to assign or reassign internal revenue officers... the act of issuance of the
demand letter by the Chief of the Accounts Receivable and Billing Division does not fall
under any of the exceptions that have been mentioned as non-delegable.

the authority to make tax assessments may be delegated to subordinate officers.

has the same force and effect as that issued by the Commissioner himself, if not
reviewed or revised by the latter such as in this case.

A request for reconsideration must be made within thirty (30) days from the taxpayer's
receipt of the tax deficiency assessment, otherwise, the decision becomes final,
unappealable and therefore, demandable.

can no longer be contested... petitioner failed to avail of its right to bring the matter
before the Court of Tax Appeals within the reglementary period upon the receipt of the
demand letter reiterating the assessed delinquent taxes and denying its request for
reconsideration which constituted the... final determination by the Bureau of Internal
Revenue on petitioner's protest.

for the Court of Tax Appeals to acquire jurisdiction, an assessment must first be
disputed by the taxpayer and ruled upon by the Commissioner of Internal Revenue to
warrant a decision from which a petition for review may be taken to the Court of Tax
Appeals.

adverse ruling has been rendered by the Commissioner of Internal Revenue with
reference to a disputed assessment or a claim for refund or credit, the taxpayer may
appeal the same within thirty (30) days after receipt thereof.

BDO vs. REPUBLIC OF THE PHILIPPINES, G.R. No. 198756, Case Digest

The term ‘deposit substitutes’ shall mean an alternative form of obtaining funds from
the public (the term 'public' means borrowing from twenty (20) or more individual or
corporate lenders at any one time) other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrower’s own account, for
the purpose of relending or purchasing of receivables and other obligations, or
financing their own needs or the needs of their agent or dealer.

Under the 1997 National Internal Revenue Code, Congress specifically defined “public”
to mean “twenty (20) or more individual or corporate lenders at any one time.” Hence,
the number of lenders is determinative of whether a debt instrument should be
considered a deposit substitute and consequently subject to the 20% final withholding
tax.

20-lender rule

Petitioners contend that “there [is] only one (1) lender (i.e. RCBC) to whom the BTr
issued the Government Bonds.”169 On the other hand, respondents theorize that the
word “any” “indicates that the period contemplated is the entire term of the bond and
not merely the point of origination or issuance[,]”170 such that if the debt instruments
“were subsequently sold in secondary markets and so on, in such a way that twenty
(20) or more buyers eventually own the instruments, then it becomes indubitable that
funds would be obtained from the “public” as defined in Section 22(Y) of the NIRC.”171
Indeed, in the context of the financial market, the words “at any one time” create an
ambiguity.

Meaning of “at any one time”

Thus, from the point of view of the financial market, the phrase “at any one time” for
purposes of determining the “20 or more lenders” would mean every transaction
executed in the primary or secondary market in connection with the purchase or sale of
securities.

For example, where the financial assets involved are government securities like bonds,
the reckoning of “20 or more lenders/investors” is made at any transaction in
connection with the purchase or sale of the Government Bonds

G.R. No. 169225 November 17, 2010

COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
HAMBRECHT & QUIST PHILIPPINES, INC., Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision1dated August 12, 2005 of the Court of Tax Appeals (CTA) En
Banc in C.T.A. E.B. No. 73 (C.T.A. Case No. 6362), entitled "Commissioner of Internal
Revenue vs. Hambrecht & Quist Philippines, Inc.," which affirmed the Decision2dated
September 24, 2004 of the CTA Original Division in C.T.A. Case No. 6362 canceling the
assessment issued against respondent for deficiency income and expanded withholding
tax for the year 1989 for failure of petitioner Commissioner of Internal Revenue (CIR) to
enforce collection within the period allowed by law.

The CTA summarized the pertinent facts of this case, as follows:

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 ₱2,936,560.87.

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 and the case is
accordingly DISMISSED for lack of merit.4

Hence, the instant Petition wherein the following issues are raised:

WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO RULE THAT
THE GOVERNMENT’S RIGHT TO COLLECT THE TAX HAS PRESCRIBED.

II

WHETHER OR NOT THE PERIOD TO COLLECT THE ASSESSMENT HAS PRESCRIBED.5

The petition is without merit.

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.1avvphi1 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.

SO ORDERED

COMMISSIONER OF INTERNAL REVENUE vs. HAMBRECHT & QUIST PHILIPPINES, INC.-

Tax Assessment and Protest
FACTS:

The assessment against Hambrecht & Quist had become final and unappelable since
there was a failure to protest the same within the 30-day period provided by law.
However, the CTA held that the BIR failed to collect within the prescribed time and thus
ordered the cancellation of the assessment notice. The CIR disputed the jurisdiction of
the CTA arguing that since the assessment had become final and unappealable, the
taxpayer can no longer dispute the correctness of the assessment even before the CTA.

ISSUE:

Can the CTA still take cognizance of an assessment case which has become ‘final and
unappealable’ for failure of the taxpayer to protest within the 30-day protest period?

HELD:

YES. 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 CTA law clearly bestows
jurisdiction to the CTA even on “other matters arising under the National Internal
Revenue Code”. Thus, the issue of whether the right of the CIR to collect has prescribed,
collection being one of the duties of the BIR, is considered covered by the term “other
matters”. The fact that assessment has become final for failure to protest only means
that the validity or correctness of the assessment may no longer be questioned on
appeal. However, this issue is entirely distinct from the issue of whether the right to
collect has in fact prescribed.

The Court ruled that the right to collect has indeed prescribed since there was no proof
that the request for reinvestigation was in fact granted/acted upon by the CIR. Thus,
the period to collect was never suspended.

G.R. No. 162852 December 16, 2004

PHILIPPINE JOURNALISTS, INC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review filed by Philippine Journalists, Incorporated (PJI) assailing
the Decision1 of the Court of Appeals dated August 5, 2003,2 which ordered petitioner
to pay the assessed tax liability of P111,291,214.46 and the Resolution3 dated March
31, 2004 which denied the Motion for Reconsideration.

The case arose from the Annual Income Tax Return filed by petitioner for the calendar
year ended December 31, 1994 which presented a net income of P30,877,387.00 and
the tax due of P10,807,086.00. After deducting tax credits for the year, petitioner paid
the amount of P10,247,384.00.

On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal Revenue
(BIR) issued Letter of Authority No. 871204 for Revenue Officer Federico de Vera, Jr.
and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and
other accounting records for internal revenue taxes for the period January 1, 1994 to
December 31, 1994.

From the examination, the petitioner was told that there were deficiency taxes,
inclusive of surcharges, interest and compromise penalty in the following amounts:

Value Added Tax P 229,527.90

Income Tax 125,002,892.95

Withholding Tax 2,748,012.35

Total P 127,980,433.20

In a letter dated August 29, 1997, Revenue District Officer Jaime Concepcion invited
petitioner to send a representative to an informal conference on September 15, 1997
for an opportunity to object and present documentary evidence relative to the proposed
assessment. On September 22, 1997, petitioner’s Comptroller, Lorenza Tolentino,
executed a "Waiver of the Statute of Limitation Under the National Internal Revenue
Code (NIRC)".5 The document "waive[d] the running of the prescriptive period
provided by Sections 223 and 224 and other relevant provisions of the NIRC and
consent[ed] to the assessment and collection of taxes which may be found due after the
examination at any time after the lapse of the period of limitations fixed by said Sections
223 and 224 and other relevant provisions of the NIRC, until the completion of the
investigation".6

On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending the
issuance of an assessment and finding that petitioner had deficiency taxes in the total
amount of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR
issued Pre-Assessment Notices which informed petitioner of the results of the
investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section,
issued Assessment/Demand No. 33-1-000757-947 on December 9, 1998 stating the
following deficiency taxes, inclusive of interest and compromise penalty:
 Income Tax P108,743,694.88

Value Added Tax 184,299.20

Expanded Withholding Tax 2,363,220.38

Total P111,291,214.46

On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner
Romeo S. Panganiban to the petitioner to pay the assessment within ten (10) days from
receipt of the letter. On November 10, 1999, a Final Notice Before Seizure8 was issued
by the same deputy commissioner giving the petitioner ten (10) days from receipt to
pay. Petitioner received a copy of the final notice on November 24, 1999. By letters
dated November 26, 1999, petitioner asked to be clarified how the tax liability of
P111,291,214.46 was reached and requested an extension of thirty (30) days from
receipt of the clarification within which to reply.9

The BIR received a follow-up letter from the petitioner asserting that its (PJI) records
do not show receipt of Tax Assessment/Demand No. 33-1-000757-94.10 Petitioner also
contested that the assessment had no factual and legal basis. On March 28, 2000, a
Warrant of Distraint and/or Levy No. 33-06-04611 signed by Deputy Commissioner
Romeo Panganiban for the BIR was received by the petitioner.

Petitioner filed a Petition for Review12 with the Court of Tax Appeals (CTA) which was
amended on May 12, 2000. Petitioner complains: (a) that no assessment or demand was
received from the BIR; (b) that the warrant of distraint and/or levy was without factual
and legal bases as its issuance was premature; (c) that the assessment, having been
made beyond the 3-year prescriptive period, is null and void; (d) that the issuance of
the warrant without being given the opportunity to dispute the same violates its right to
due process; and (e) that the grave prejudice that will be sustained if the warrant is
enforced is enough basis for the issuance of the writ of preliminary injunction.

On May 14, 2002, the CTA rendered its decision,13 to wit:

As to whether or not the assessment notices were received by the petitioner, this Court
rules in the affirmative.

To disprove petitioner’s allegation of non-receipt of the aforesaid assessment notices,

respondent presented a certification issued by the Post Master of the Central Post
Office, Manila to the effect that Registered Letter No. 76134 sent by the BIR, Region No.
6, Manila on December 15, 1998 addressed to Phil. Journalists, Inc. at Journal Bldg.,
Railroad St., Manila was duly delivered to and received by a certain Alfonso Sanchez, Jr.
(Authorized Representative) on January 8, 1999. Respondent also showed proof that in
claiming Registered Letter No. 76134, Mr. Sanchez presented three identification cards,
one of which is his company ID with herein petitioner.
…

However, as to whether or not the Waiver of the Statute of Limitations is valid and
binding on the petitioner is another question. Since the subject assessments were
issued beyond the three-year prescriptive period, it becomes imperative on our part to
rule first on the validity of the waiver allegedly executed on September 22, 1997, for if
this court finds the same to be ineffective, then the assessments must necessarily fail.

After carefully examining the questioned Waiver of the Statute of Limitations, this Court
considers the same to be without any binding effect on the petitioner for the following
reasons:

The waiver is an unlimited waiver. It does not contain a definite expiration date. Under
RMO No. 20-90, the phrase indicating the expiry date of the period agreed upon to
assess/collect the tax after the regular three-year period of prescription should be filled
up…

Secondly, the waiver failed to state the date of acceptance by the Bureau which under
the aforequoted RMO should likewise be indicated…

Finally, petitioner was not furnished a copy of the waiver. It is to be noted that under
RMO No. 20-90, the waiver must be executed in three (3) copies, the second copy of
which is for the taxpayer. It is likewise required that the fact of receipt by the taxpayer
of his/her file copy be indicated in the original copy. Again, respondent failed to comply.

It bears stressing that RMO No. 20-90 is directed to all concerned internal revenue
officers. The said RMO even provides that the procedures found therein should be
strictly followed, under pain of being administratively dealt with should non-
compliance result to prescription of the right to assess/collect…

Thus, finding the waiver executed by the petitioner on September 22, 1997 to be
suffering from legal infirmities, rendering the same invalid and ineffective, the Court
finds Assessment/Demand No. 33-1-000757-94 issued on December 5, 1998 to be time-
barred. Consequently, the Warrant of Distraint and/or Levy issued pursuant thereto is
considered null and void.

WHEREFORE, in view of all the foregoing, the instant Petition for Review is
hereby GRANTED. Accordingly, the deficiency income, value-added and expanded
withholding tax assessments issued by the respondent against the petitioner on
December 9, 1998, in the total amount of P111,291,214.46 for the year 1994 are hereby
declared CANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise,
Warrant of Distraint and/or Levy No. 33-06-046 is hereby declared NULL and VOID.

SO ORDERED.14
After the motion for reconsideration of the Commissioner of Internal Revenue was
denied by the CTA in a Resolution dated August 2, 2002, an appeal was filed with the
Court of Appeals on August 12, 2002.

In its decision dated August 5, 2003, the Court of Appeals disagreed with the ruling of
the CTA, to wit:

… The petition for review filed on 26 April 2000 with CTA was neither timely filed nor
the proper remedy. Only decisions of the BIR, denying the request for reconsideration
or reinvestigation may be appealed to the CTA. Mere assessment notices which have
become final after the lapse of the thirty (30)-day reglementary period are not
appealable. Thus, the CTA should not have entertained the petition at all.

… [T]he CTA found the waiver executed by Phil. Journalists to be invalid for the
following reasons: (1) it does not indicate a definite expiration date; (2) it does not state
the date of acceptance by the BIR; and (3) Phil. Journalist, the taxpayer, was not
furnished a copy of the waiver. These grounds are merely formal in nature. The date of
acceptance by the BIR does not categorically appear in the document but it states at the
bottom page that the BIR "accepted and agreed to:"…, followed by the signature of the
BIR’s authorized representative. Although the date of acceptance was not stated, the
document was dated 22 September 1997. This date could reasonably be understood as
the same date of acceptance by the BIR since a different date was not otherwise
indicated. As to the allegation that Phil. Journalists was not furnished a copy of the
waiver, this requirement appears ridiculous. Phil. Journalists, through its comptroller,
Lorenza Tolentino, signed the waiver. Why would it need a copy of the document it
knowingly executed when the reason why copies are furnished to a party is to notify it
of the existence of a document, event or proceeding? …

As regards the need for a definite expiration date, this is the biggest flaw of the decision.
The period of prescription for the assessment of taxes may be extended provided that
the extension be made in writing and that it be made prior to the expiration of the
period of prescription. These are the requirements for a valid extension of the
prescriptive period. To these requirements provided by law, the memorandum order
adds that the length of the extension be specified by indicating its expiration date. This
requirement could be reasonably construed from the rule on extension of the
prescriptive period. But this requirement does not apply in the instant case because
what we have here is not an extension of the prescriptive period but a waiver thereof.
These are two (2) very different things. What Phil. Journalists executed was a
renunciation of its right to invoke the defense of prescription. This is a valid waiver.
When one waives the prescriptive period, it is no longer necessary to indicate the length
of the extension of the prescriptive period since the person waiving may no longer use
this defense.

WHEREFORE, the 02 August 2002 resolution and 14 May 2002 decision of the CTA are
hereby SET ASIDE. Respondent Phil. Journalists is ordered [to] pay its assessed tax
liability of P111,291,214.46.
SO ORDERED.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated March 31,
2004. Hence, this appeal on the following assignment of errors:

I.

The Honorable Court of Appeals committed grave error in ruling that it is outside the
jurisdiction of the Court of Tax Appeals to entertain the Petition for Review filed by the
herein Petitioner at the CTA despite the fact that such case inevitably rests upon the
validity of the issuance by the BIR of warrants of distraint and levy contrary to the
provisions of Section 7(1) of Republic Act No. 1125.

II.

The Honorable Court of Appeals gravely erred when it ruled that failure to comply with
the provisions of Revenue Memorandum Order (RMO) No. 20-90 is merely a formal
defect that does not invalidate the waiver of the statute of limitations without stating
the legal justification for such conclusion. Such ruling totally disregarded the mandatory
requirements of Section 222(b) of the Tax Code and its implementing regulation, RMO
No. 20-90 which are substantive in nature. The RMO provides that violation thereof
subjects the erring officer to administrative sanction. This directive shows that the RMO
is not merely cover forms.

III.

The Honorable Court of Appeals gravely erred when it ruled that the assessment notices
became final and unappealable. The assessment issued is void and legally non-existent
because the BIR has no power to issue an assessment beyond the three-year
prescriptive period where there is no valid and binding waiver of the statute of
limitation.

IV.

The Honorable Court of Appeals gravely erred when it held that the assessment in
question has became final and executory due to the failure of the Petitioner to protest
the same. Respondent had no power to issue an assessment beyond the three year
period under the mandatory provisions of Section 203 of the NIRC. Such assessment
should be held void and non-existent, otherwise, Section 203, an expression of a public
policy, would be rendered useless and nugatory. Besides, such right to assess cannot be
validly granted after three years since it would arise from a violation of the mandatory
provisions of Section 203 and would go against the vested right of the Petitioner to
claim prescription of assessment.

V.

The Honorable Court of Appeals committed grave error when it HELD valid a defective
waiver by considering the latter a waiver of the right to invoke the defense of
prescription rather than an extension of the three year period of prescription (to make
an assessment) as provided under Section 222 in relation to Section 203 of the Tax
Code, an interpretation that is contrary to law, existing jurisprudence and outside of the
purpose and intent for which they were enacted.16

We find merit in the appeal.

The first assigned error relates to the jurisdiction of the CTA over the issues in this case.
The Court of Appeals ruled that only decisions of the BIR denying a request for
reconsideration or reinvestigation may be appealed to the CTA. Since the petitioner did
not file a request for reinvestigation or reconsideration within thirty (30) days, the
assessment notices became final and unappealable. The petitioner now argue that the
case was brought to the CTA because the warrant of distraint or levy was illegally issued
and that no assessment was issued because it was based on an invalid waiver of the
statutes of limitations.

We agree with petitioner. Section 7(1) of Republic Act No. 1125, the Act Creating the
Court of Tax Appeals, provides for the jurisdiction of that special court:

SEC. 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate
jurisdiction to review by appeal, as herein provided –

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under the National Internal Revenue Code
or other laws or part of law administered by the Bureau of Internal Revenue; (Emphasis
supplied).

The appellate jurisdiction of the CTA is not limited to cases which involve decisions of
the Commissioner of Internal Revenue on matters relating to assessments or refunds.
The second part of the provision covers other cases that arise out of the NIRC or related
laws administered by the Bureau of Internal Revenue. The wording of the provision is
clear and simple. It gives the CTA the jurisdiction to determine if the warrant of
distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of
Limitations was validly effected.

This is not the first case where the CTA validly ruled on issues that did not relate
directly to a disputed assessment or a claim for refund. In Pantoja v. David,17 we upheld
the jurisdiction of the CTA to act on a petition to invalidate and annul the distraint
orders of the Commissioner of Internal Revenue. Also, in Commissioner of Internal
Revenue v. Court of Appeals,18 the decision of the CTA declaring several waivers
executed by the taxpayer as null and void, thus invalidating the assessments issued by
the BIR, was upheld by this Court.

The second and fifth assigned errors both focus on Revenue Memorandum Circular No.
20-90 (RMO No. 20-90) on the requisites of a valid waiver of the statute of limitations.
The Court of Appeals held that the requirements and procedures laid down in the RMO
are only formal in nature and did not invalidate the waiver that was signed even if the
requirements were not strictly observed.
The NIRC, under Sections 203 and 222,19 provides for a statute of limitations on the
assessment and collection of internal revenue taxes in order to safeguard the interest of
the taxpayer against unreasonable investigation.20Unreasonable investigation
contemplates cases where the period for assessment extends indefinitely because this
deprives the taxpayer of the assurance that it will no longer be subjected to further
investigation for taxes after the expiration of a reasonable period of time. As was held
in Republic of the Phils. v. Ablaza:21

The law prescribing a limitation of actions for the collection of the income tax is
beneficial both to the Government and to its citizens; to the Government because tax
officers would be obliged to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription citizens would have a feeling of
security against unscrupulous tax agents who will always find an excuse to inspect the
books of taxpayers, not to determine the latter’s real liability, but to take advantage of
every opportunity to molest peaceful, law-abiding citizens. Without such a legal defense
taxpayers would furthermore be under obligation to always keep their books and keep
them open for inspection subject to harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be interpreted in a way conducive to
bringing about the beneficent purpose of affording protection to the taxpayer within the
contemplation of the Commission which recommend the approval of the law. (Emphasis
supplied)

RMO No. 20-90 implements these provisions of the NIRC relating to the period of
prescription for the assessment and collection of taxes. A cursory reading of the Order
supports petitioner’s argument that the RMO must be strictly followed, thus:

In the execution of said waiver, the following procedures should be followed:

1. The waiver must be in the form identified hereof. This form may be reproduced by
the Office concernedbut there should be no deviation from such form. The phrase "but
not after __________ 19___" should be filled up…

2. …

Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue
or the revenue official authorized by him, as hereinafter provided, shall sign the waiver
indicating that the Bureau has accepted and agreed to the waiver. The date of such
acceptance by the Bureau should be indicated…

3. The following revenue officials are authorized to sign the waiver.

A. In the National Office

3. Commissioner For tax cases involving more

than P1M

B. In the Regional Offices

1. The Revenue District Officer with respect to tax cases still pending investigation and
the period to assess is about to prescribe regardless of amount.

5. The foregoing procedures shall be strictly followed. Any revenue official found not to
have complied with this Order resulting in prescription of the right to assess/collect
shall be administratively dealt with. (Emphasis supplied)22

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation
of the taxpayers’ right to security against prolonged and unscrupulous investigations
and must therefore be carefully and strictly construed.23The waiver of the statute of
limitations is not a waiver of the right to invoke the defense of prescription as
erroneously held by the Court of Appeals. It is an agreement between the taxpayer and
the BIR that the period to issue an assessment and collect the taxes due is extended to a
date certain. The waiver does not mean that the taxpayer relinquishes the right to
invoke prescription unequivocally particularly where the language of the document is
equivocal. For the purpose of safeguarding taxpayers from any unreasonable
examination, investigation or assessment, our tax law provides a statute of limitations
in the collection of taxes. Thus, the law on prescription, being a remedial measure,
should be liberally construed in order to afford such protection. As a corollary, the
exceptions to the law on prescription should perforce be strictly construed.24 RMO No.
20-90 explains the rationale of a waiver:

... The phrase "but not after _________ 19___" should be filled up. This indicates the expiry
date of the period agreed upon to assess/collect the tax after the regular three-year
period of prescription. The period agreed upon shall constitute the time within which to
effect the assessment/collection of the tax in addition to the ordinary prescriptive
period. (Emphasis supplied)

As found by the CTA, the Waiver of Statute of Limitations, signed by petitioner’s

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

The waiver is also defective from the government side because it was signed only by a
revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No.
20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral
agreement between two parties to extend the period to a date certain. The conformity
of the BIR must be made by either the Commissioner or the Revenue District Officer.
This case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and
executed almost seven months before the expiration of the three-year prescription
period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign
for the BIR.
The case of Commissioner of Internal Revenue v. Court of Appeals,25 dealt with waivers
that were not signed by the Commissioner but were argued to have been given implied
consent by the BIR. We invalidated the subject waivers and ruled:

Petitioner’s submission is inaccurate…

The Court of Appeals itself also passed upon the validity of the waivers executed by
Carnation, observing thus:

We cannot go along with the petitioner’s theory. Section 319 of the Tax Code earlier
quoted is clear and explicit that the waiver of the five-year26 prescriptive period must
be in writing and signed by both the BIR Commissioner and the taxpayer.

Here, the three waivers signed by Carnation do not bear the written consent of the BIR
Commissioner as required by law.

We agree with the CTA in holding "these ‘waivers’ to be invalid and without any binding
effect on petitioner (Carnation) for the reason that there was no consent by the
respondent (Commissioner of Internal Revenue)."

For sure, no such written agreement concerning the said three waivers exists between
the petitioner and private respondent Carnation.

What is more, the waivers in question reveal that they are in no wise unequivocal, and
therefore necessitates for its binding effect the concurrence of the Commissioner of
Internal Revenue…. On this basis neither implied consent can be presumed nor can it be
contended that the waiver required under Sec. 319 of the Tax Code is one which is
unilateral nor can it be said that concurrence to such an agreement is a mere formality
because it is the very signatures of both the Commissioner of Internal Revenue and the
taxpayer which give birth to such a valid agreement.27 (Emphasis supplied)

The other defect noted in this case is the date of acceptance which makes it difficult to
fix with certainty if the waiver was actually agreed before the expiration of the three-
year prescriptive period. The Court of Appeals held that the date of the execution of the
waiver on September 22, 1997 could reasonably be understood as the same date of
acceptance by the BIR. Petitioner points out however that Revenue District Officer
Sarmiento could not have accepted the waiver yet because she was not the Revenue
District Officer of RDO No. 33 on such date. Ms. Sarmiento’s transfer and assignment to
RDO No. 33 was only signed by the BIR Commissioner on January 16, 1998 as shown by
the Revenue Travel Assignment Order No. 14-98.28 The Court of Tax Appeals noted in
its decision that it is unlikely as well that Ms. Sarmiento made the acceptance on January
16, 1998 because "Revenue Officials normally have to conduct first an inventory of their
pending papers and property responsibilities."29
Finally, the records show that petitioner was not furnished a copy of the waiver. Under
RMO No. 20-90, the waiver must be executed in three copies with the second copy for
the taxpayer. The Court of Appeals did not think this was important because the
petitioner need not have a copy of the document it knowingly executed. It stated that
the reason copies are furnished is for a party to be notified of the existence of a
document, event or proceeding.

The flaw in the appellate court’s reasoning stems from its assumption that the waiver is
a unilateral act of the taxpayer when it is in fact and in law an agreement between the
taxpayer and the BIR. When the petitioner’s comptroller signed the waiver on
September 22, 1997, it was not yet complete and final because the BIR had not assented.
There is compliance with the provision of RMO No. 20-90 only after the taxpayer
received a copy of the waiver accepted by the BIR. The requirement to furnish the
taxpayer with a copy of the waiver is not only to give notice of the existence of the
document but of the acceptance by the BIR and the perfection of the agreement.

The waiver document is incomplete and defective and thus the three-year prescriptive
period was not tolled or extended and continued to run until April 17, 1998.
Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9,
1998 was invalid because it was issued beyond the three (3) year period. In the same
manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on
March 28, 2000 is also null and void for having been issued pursuant to an invalid
assessment.

WHEREFORE, premises considered, the instant petition for review is GRANTED. The
Decision of the Court of Appeals dated August 5, 2003 and its Resolution dated March
31, 2004 are REVERSED and SET ASIDE. The Decision of the Court of Tax Appeals in
CTA Case No. 6108 dated May 14, 2002, declaring Warrant of Distraint and/or Levy No.
33-06-046 null and void, is REINSTATED.

SO ORDERED

G.R. No. 185588 February 2, 2010

PHILIPPINE BRITISH ASSURANCE COMPANY, INC., Petitioner,

vs.
REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS
(BOC), Respondent.

DECISION
VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks to reverse and set aside the
July 23, 20081 and November 28, 20082 Resolutions of the Court of Appeals (CA) in CA-
G.R. CV No. 88786, entitled Republic of the Philippines represented by the Bureau of
Customs (BOC) v. Philippine British Assurance Company, Inc.

The Facts

Petitioner Philippine British Assurance Company, Inc. is an insurance company duly

organized and existing under and by virtue of the laws of the Republic of the
Philippines. As such, petitioner issues customs bonds to its clients in favor of the BOC.
These bonds secure the release of imported goods in order that the goods may be
released from the BOC without prior payment of the corresponding customs duties and
taxes. Under these bonds, petitioner and its clients jointly and severally bind themselves
to pay the BOC the face value of the bonds, in the event that the bonds expire without
either the imported goods being re-exported or the proper duties and taxes being paid.

On December 9, 2003, the Republic, represented by the BOC, filed a Complaint dated
December 3, 20033 against petitioner for Collection of Money with Damages before the
Regional Trial Court, Branch 20 in Manila. The case was docketed as Civil Case No. 03-
108583, entitled Republic of the Philippines represented by the Bureau of Customs v.
Philippine British Assurance Company, Inc. It was alleged in the Complaint that
petitioner had outstanding unliquidated customs bonds with the BOC.1avvph!1

After hearing, the trial court issued a Decision dated September 21, 2006,4 the
dispositive portion of which states:

PREMISES CONSIDERED, the Court finds for the Plaintiff Republic of the Philippines
represented by the Bureau of Customs and the defendant British Assurance Company,
Inc., is hereby ordered to pay the plaintiff the amount of Php736,742.03 representing
defendant’s unpaid/unliquidated customs bonds plus legal interest from the finality of
this Decision. Defendant’s counterclaims are hereby DISMISSED.

SO ORDERED.

From such Decision, petitioner filed a motion for reconsideration which the trial court
denied in an Order dated February 5, 2007.

Thus, petitioner appealed the Decision to the CA.

The CA thereafter issued the first assailed Resolution dated July 23, 2008 dismissing the
case for lack of jurisdiction.

Petitioner, thus, filed a Motion for Reconsideration dated August 11, 2008.5 It was,
however, denied by the CA in its second assailed Resolution.

Hence, we have this petition.

The Issues

A.

The [CA] committed serious error of law when it ruled that it has no jurisdiction over
the appeal and the same lies with the Court of Tax Appeals because the instant case is a
tax collection case.

B.

The [CA] committed serious error of law when it failed to rule that customs bonds are in
the nature of a contract between the surety and the Bureau of Customs.6

The Court’s Ruling

This petition must be granted.

The CA Has Jurisdiction over the Instant Case

The CA ruled in the first assailed Resolution that it had no jurisdiction over the subject
matter of the appeal, thus:

With the foregoing in mind, it cannot be denied that the issuance of such bonds is rooted
on, based upon, and interrelated with the payment of taxes and customs duties. Strictly
speaking, therefore, BOC’s suit against British Assurance is one for collection of taxes.
Taking in mind that this appeal, filed on March 13, 2007, involves a tax case decided by
the RTC in the exercise of its original jurisdiction, it necessarily follows that jurisdiction
over the same is with the Court of Tax Appeals pursuant to Republic Act No. 9282.7

On the other hand, petitioner argues that "in as much as Respondent’s right was initially
based on its right to collect duties and taxes, the same was converted to a right arising
out of a contract, the bond being a contract between Respondent and Petitioner x x
x."8 In support of such contention, petitioner cites Republic of the Philippines v.
Mambulao Lumber (Mambulao),9 wherein we ruled:

Although the original obligation of the lumber company arose from non-payment of
taxes, the complaint against said Company and the Surety is predicated upon the bond
executed by them. In other words, plaintiff’s right originally arising from law has
become a right based upon a written contract, enforceable within ten (10) years x x x.

We agree with petitioner’s contention.

Republic Act No. (RA) 928210 amended Section 7 of RA 1125 to read as follows:

Section 7. Section 7 of the same Act is hereby amended to read as follows:

"Sec. 7. Jurisdiction. - The CTA shall exercise:

"a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxxx
"3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction. (Emphasis supplied.)

In the instant case, the original complaint filed with the trial court was in the nature of a
collection case, purportedly to collect on the obligation of petitioner by virtue of the
bonds executed by it in favor of respondent, essentially a contractual obligation.

As petitioner correctly points out, an action to collect on a bond used to secure the
payment of taxes is not a tax collection case, but rather a simple case for enforcement of
a contractual liability.

In Mambulao, Mambulao Lumber Company (MLC) was liable for deficiency sales tax to
the Republic. The parties agreed to an installment plan, whereby MLC obligated itself to
pay such obligation in 12 equal monthly installments. To secure the installment
payments, MLC and Mambulao Insurance and Surety Corporation executed a surety
bond in favor of the Republic. MLC defaulted in the payment of its obligation. Thus, the
Republic proceeded against the surety bond. MLC sought the dismissal of the case
against it on the ground of prescription, arguing that under Sec. 331, in relation to Sec.
183(A), of the National Internal Revenue Code (NIRC), internal revenue taxes must be
assessed within five (5) years from the filing of the corresponding return.

Thus, we ruled in that case that the NIRC was inapplicable to the case and that the
Republic had ten (10) years from default of payment within which to collect the
indebtedness of MLC. We explained that an action based upon a surety bond cannot be
considered a tax collection case. Rather, such action would properly be a case based on
a contract.

In a more succinct ruling in Republic of the Philippines v. Xavier Gun Trading,11 we

decided:

The present actions by the government are for the forfeiture of the bonds in question.
Although the subject matter of said bonds are internal revenue taxes, it cannot be
denied that upon the execution of said bonds, the tax-payer, as principal and the
bondsman, as surety, assumed a new and entirely distinct obligation and became
subject to an entirely different kind of liability. Thus, it has been held:

However, as soon as the bond was executed, the taxpayer assumed a second and
entirely distinct obligation, and became subject to a new and entirely different kind of
liability ... The new liability was voluntary and contractual. It was in form a direct and
primary obligation, not to pay a tax, but to pay the sum of $12,635.00, defeasible only
upon payment by the tax-payer of a certain amount, to be fixed by subsequent action of
the Commissioner. No limitation was put upon the time within which the Commissioner
was required to act in fixing such sum. Inasmuch as the Collector had the right to
proceed immediately for the collection of the tax, it follows that he also had the right to
require, as the price of forbearance from such action, a general promise to pay such
amount as might be found due at any time, either before or after the expiration of the
statutory period . . . (McCaughn v. Philadelphia Barge Co., 27 F [2d] 628)
The making of the bond gives the United States a cause of action separate and distinct
from an action to collect taxes which it already had. The statutes now pleaded to bar the
suit can not be extended by implication to a suit upon a subsequent and substituted
contract. The postponement of the collection of taxes returned was a waiver of the
statutory limitation of five years that would have applied had the voluntary return of
the taxpayer stood and no bond been given. If there is any limitation applicable to a suit
on the bond, it is conceded that it has not yet become effective. (United States v. Barth
Co., 73 L. Ed. 746; U.S. 278-279) (Emphasis supplied.)

Verily, the instant case is not a tax collection case; hence, the CA has jurisdiction over
the case.

In addition, it must be stressed that even the BOC did not consider the case as one for
tax collection. In its Complaint dated December 3, 2003, the BOC stated:

10. Plaintiff thus sent defendant PHILIPPINE BRITISH a letter dated October 5, 2001
informing said defendant that it had an outstanding unliquidated customs bonds with
the Bureau of Customs in the sum of PHP 4,457,290.00 and that if defendant failed to
explain within five days from receipt of such letter why these bonds have not been
liquidated as set forth in Paragraph 6 hereof, then plaintiff will forfeit the said customs
bonds and institute collection against the said bonds. x x x (Emphasis supplied.)

Pursuant to such letter, the BOC instituted a complaint against petitioner for collection
of money, decidedly not a tax collection case, before the trial court. Moreover, as
correctly pointed out by petitioner, the BOC purposefully did not follow the procedure
in the proper prosecution of a tax collection case. This may only be explained with the
fact that the BOC itself did not consider the action that it instituted as a tax collection
case.

Certainly, the administrative agencies tasked with the prosecution of cases within their
specific area of concern should know the nature of the action to be filed and the proper
procedure by which they can collect on liabilities to it. Here, the BOC’s actions reveal its
position that indeed the case was not a tax collection case but an action for the
enforcement of a contractual obligation. Hence, appellate jurisdiction over the petition
properly lies with the CA and not the Court of Tax Appeals.

WHEREFORE, this petition is GRANTED. The CA’s July 23, 2008 and November 28, 2008
Resolutions in CA-G.R. CV No. 88786 are accordingly REVERSED and SET ASIDE. This
case is hereby REMANDED to the CA for hearing on the merits.

No costs.

SO ORDERED
[ G.R. No. 209830, June 17, 2015 ]

MITSUBISHI MOTORS PHILIPPINES CORPORATION, PETITIONER, VS. BUREAU OF

CUSTOMS, RESPONDENT.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Resolutions dated June 7,
2013[2] and November 4, 2013[3] of the Court of Appeals (CA) in CA-G.R. CV No. 99594,
which referred the records of the instant case to the Court of Tax Appeals (CTA) for
proper disposition of the appeal taken by respondent Bureau of Customs (respondent).

The Facts

The instant case arose from a collection suit[4] for unpaid taxes and customs duties in
the aggregate amount of P46,844,385.00 filed by respondent against petitioner
Mitsubishi Motors Philippines Corporation (petitioner) before the Regional Trial Court
of Manila, Branch 17 (RTC), docketed as Civil Case No. 02-103763 (collection case).

Respondent alleged that from 1997 to 1998, petitioner was able to secure tax credit
certificates (TCCs) from various transportation companies; after which, it made several
importations and utilized said TCCs for the payment of various customs duties and
taxes in the aggregate amount of P46,844,385.00.[5] Believing the authenticity of the
TCCs, respondent allowed petitioner to use the same for the settlement of such customs
duties and taxes. However, a post-audit investigation of the Department of Finance
revealed that the TCCs were fraudulently secured with the use of fake commercial and
bank documents, and thus, respondent deemed that petitioner never settled its taxes
and customs duties pertaining to the aforesaid importations.[6] Thereafter, respondent
demanded that petitioner pay its unsettled tax and customs duties, but to no avail.
Hence, it was constrained to file the instant complaint.[7]

In its defense,[8] petitioner maintained, inter alia, that it acquired the TCCs from their
original holders in good faith and that they were authentic, and thus, their remittance to
respondent should be considered as proper settlement of the taxes and customs duties
it incurred in connection with the aforementioned importations.[9]

Initially, the RTC dismissed[10] the collection case due to the continuous absences of
respondent’s counsel during trial.[11] On appeal to the CA,[12] and eventually the
Court,[13] the said case was reinstated and trial on the merits continued before the
RTC.[14]
After respondent’s presentation of evidence, petitioner filed a Demurrer to Plaintiff’s
Evidence[15] on February 10, 2012, essentially contending that respondent failed to
prove by clear and convincing evidence that the TCCs were fraudulently
procured,[16] and thus, prayed for the dismissal of the complaint.[17] In turn,
respondent filed an Opposition[18] dated March 7, 2012 refuting petitioner’s
contentions.

The RTC Ruling

In an Order[19] dated April 10, 2012, the RTC granted petitioner’s Demurrer to
Plaintiff’s Evidence, and accordingly, dismissed respondent’s collection case on the
ground of insufficiency of evidence.[20] It found that respondent had not shown any
proof or substantial evidence of fraud or conspiracy on the part of petitioner in the
procurement of the TCCs.[21] In this connection, the RTC opined that fraud is never
presumed and must be established by clear and convincing evidence, which petitioner
failed to do, thus, necessitating the dismissal of the complaint.[22]

Respondent moved for reconsideration,[23] which was, however, denied in an

Order[24] dated August 3, 2012. Dissatisfied, it appealed[25] to the CA.

The CA Ruling

In a Resolution[26] dated June 7, 2013, the CA referred the records of the collection case
to the CTA for proper disposition of the appeal taken by respondent. While the CA
admitted that it had no jurisdiction to take cognizance of respondent’s appeal, as
jurisdiction is properly lodged with the CTA, it nevertheless opted to relax procedural
rules in not dismissing the appeal outright.[27] Instead, the CA deemed it appropriate to
simply refer the matter to the CTA, considering that the government stands to lose the
amount of P46,844,385.00 in taxes and customs duties which can then be used for
various public works and projects.[28]

Aggrieved, petitioner filed a motion for reconsideration[29] on June 23, 2013, arguing
that since the CA does not have jurisdiction over respondent’s appeal, it cannot perform
any action on it except to order its dismissal.[30]The said motion was, however, denied
in a Resolution[31] dated November 4, 2013, hence, this petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA correctly referred the
records of the collection case to the CTA for proper disposition of the appeal taken by
respondent.

The Court’s Ruling

The petition is meritorious.

Jurisdiction is defined as the power and authority of a court to hear, try, and decide a
case.[32] In order for the court or an adjudicative body to have authority to dispose of
the case on the merits, it must acquire, among others, jurisdiction over the subject
matter.[33] It is axiomatic that jurisdiction over the subject matter is the power to hear
and determine the general class to which the proceedings in question belong; it is
conferred by law and not by the consent or acquiescence of any or all of the parties or
by erroneous belief of the court that it exists.[34]Thus, when a court has no jurisdiction
over the subject matter, the only power it has is to dismiss the action.[35]

Guided by the foregoing considerations and as will be explained hereunder, the Court
finds that the CA erred in referring the records of the collection case to the CTA for
proper disposition of the appeal taken by respondent.

Section 7 of Republic Act No. (RA) 1125,[36] as amended by RA 9282,[37] reads:

Sec. 7. Jurisdiction. – The CTA shall exercise:

x x x x

c. Jurisdiction over tax collection cases as herein provided:

x x x x

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in
tax collection cases originally decided by them in their respective territorial jurisdiction.

xxxx

Similarly, Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, as
amended,[38] states:

Sec. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions
shall exercise:
x x x x

c. Exclusive jurisdiction over tax collections cases, to wit:

x x x x

2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the
Regional Trial Courts in tax collection cases originally decided by them within their
respective territorial jurisdiction.

Verily, the foregoing provisions explicitly provide that the CTA has exclusive appellate
jurisdiction over tax collection cases originally decided by the RTC.

In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot
perform any action on the same except to order its dismissal pursuant to Section 2, Rule
50[39] of the Rules of Court. Therefore, the act of the CA in referring respondent’s
wrongful appeal before it to the CTA under the guise of furthering the interests of
substantial justice is blatantly erroneous, and thus, stands to be corrected. In Anderson
v. Ho,[40] the Court held that the invocation of substantial justice is not a magic wand
that would readily dispel the application of procedural rules,[41] viz.:

x x x procedural rules are designed to facilitate the adjudication of cases. Courts and
litigants alike are enjoined to abide strictly by the rules. While in certain instances, we
allow a relaxation in the application of the rules, we never intend to forge a weapon for
erring litigants to violate the rules with impunity. The liberal interpretation and
application of rules apply only in proper cases of demonstrable merit and under
justifiable causes and circumstances. While it is true that litigation is not a game of
technicalities, it is equally true that every case must be prosecuted in accordance with
the prescribed procedure to ensure an orderly and speedy administration of
justice. Party litigants and their counsels are well advised to abide by rather than flaunt,
procedural rules for these rules illumine the path of the law and rationalize the pursuit
of justice. [42](Emphasis and underscoring supplied)

Finally, in view of respondent’s availment of a wrong mode of appeal via notice of

appeal stating that it was elevating the case to the CA – instead of appealing by way of a
petition for review to the CTA within thirty (30) days from receipt of a copy of the RTC’s
August 3, 2012 Order, as required by Section 11 of RA 1125, as amended by Section 9 of
RA 9282[43] – the Court is constrained to deem the RTC’s dismissal of respondent’s
collection case against petitioner final and executory. It is settled that the perfection of
an appeal in the manner and within the period set by law is not only mandatory, but
jurisdictional as well, and that failure to perfect an appeal within the period fixed by law
renders the judgment appealed from final and executory.[44] The Court’s
pronouncement in Team Pacific Corporation v. Daza[45] is instructive on this matter, to
wit:[46]
Although appeal is an essential part of our judicial process, it has been held, time and
again, that the right thereto is not a natural right or a part of due process but is merely a
statutory privilege. Thus, the perfection of an appeal in the manner and within the
period prescribed by law is not only mandatory but also jurisdictional and failure of a
party to conform to the rules regarding appeal will render the judgment final and
executory. Once a decision attains finality, it becomes the law of the case irrespective of
whether the decision is erroneous or not and no court — not even the Supreme Court —
has the power to revise, review, change or alter the same. The basic rule of finality of
judgment is grounded on the fundamental principle of public policy and sound practice
that, at the risk of occasional error, the judgment of courts and the award of quasi-
judicial agencies must become final at some definite date fixed by law.

WHEREFORE, the petition is GRANTED. Accordingly, the Resolutions dated June 7, 2013
and November 4, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 99594 are
hereby REVERSED and SET ASIDE. Accordingly, a new one is entered DISMISSING the
appeal of respondent Bureau of Customs to the Court of Appeals.

SO ORDERED

COMMISSIONER OF CUSTOMS v. MARINA SALES, GR No. 183868, 2010-11-22

Facts:

Respondent Marina Sales, Inc. (Marina) is engaged in the manufacture of Sunquick juice
concentrates.

in the Philippines.

As such, Marina usually... imports raw materials into the country for the purpose.

In the past, the Bureau of Customs (BOC) assessed said type of importation... with a 1%
import duty rate.

Marina's importation... arrived at the Manila International Container Port (MICP) on

board the vessel... supported by... documents

Marina computed and paid the duties... at 1% import duty rate.

however, the BOC examiners contested the tariff classification of Marina's Import Entry

BOC examiners recommended to the Collector of Customs... to reclassify Marina's

importation... as... covering composite concentrates for simple dilution with water to
make beverages) with a corresponding 7% import duty rate.

Marina requested the District Collector of the BOC to release Import Entry... under its
Tentative Release System
Marina undertook to pay the reclassified rate of duty... should it be finally determined
that such reclassification was correct.

The District Collector granted the request... another importation of Marina arrived at
the MICP... accompanied... following documents

Again, the BOC examiners disputed the tariff classification... and recommended to... that
the importation be classified... with the corresponding 7% duty rate.

to be released, Marina once again signed an undertaking under the Tentative Release
System.

attended the VCRC deliberation and submitted its explanation... in support of its claim
that the imported goods... should not be reclassified u... the VCRC reclassified Import
Entry... at 7% import duty rate

Marina appealed

VCRC's reclassification

Marina interposed a petition for review before the CTA... the CTA Second Division
ruled... that its classification under Tariff Heading H.S. 2106.90 10 was the most
appropriate and descriptive of the disputed importations

Marina's importations were raw materials used for the manufacture of its Sunquick
products, not ready-to-drink juice concentrates as argued by the Commissioner

Commissioner... elevated the case to the CTA-En Banc via a petition for review... the CTA
En Banc dismissed the petition... petitioner failed to file before the Second Division the
required Motion for Reconsideration before elevating his case to the CTA En Banc.

Section 1, Rule 8 of the Revised Rules of the Court of Tax Appeals

Issues:

Commissioner insists that Marina's two importations should be classified under Tariff
Heading H.S. 2106.90 50 with an import duty rate of 7% because the concentrates are
ready for consumption by mere dilution with water.

Ruling:

the Commissioner failed to comply with the mandatory provisions of Rule 8, Section 1
of the Revised Rules of the Court of Tax Appeals[31] requiring that "the petition for
review of a decision or... resolution of the Court in Division must be preceded by the
filing of a timely motion for reconsideration or new trial with the Division." The word
"must" clearly indicates the mandatory -- not merely directory -- nature of a
requirement.

Before the CTA En Banc could take cognizance of the petition for review concerning a
case falling under its exclusive appellate jurisdiction, the litigant must sufficiently show
that it sought prior reconsideration or moved for a new trial with the... concerned CTA
division.

the import duty rate of 1%... is correct.

food preparations to be used as raw material in preparing composite concentrates for

making beverages

H.S. 2106.90 50

7%

Covers composite concentrate for simple dilution with water to make beverages... to fit
into the category listed under the Tariff Harmonized System Headings calling for a
higher import duty rate of 7%, the imported articles must not lose its original character.

The report supported Marina's position that the subject importations are not yet ready
for human consumption.

In other words, the concentrates, to be consumable, must have to lose their original
character.

to fall under the assailed Tariff Harmonized System Headings, petitioner's (herein
respondent) articles of importation, as fruit juices/mixtures, should not have lost its
original character, in spite of the addition of certain "standardizing...
agents/constituents.

Since the item is compound which is composed of water, sugar, concentrated juice,
flavourings, citric acid, stabilizer, preservatives, vitamins C and colouring to produce
beverage ready to drink. Consequently the concentrated citrus juice has lost its
original... character due to the fact that it comprises only 12% of the total compound

To "manufacture" is to "make or fabricate raw materials by hand, art or machinery, and

work into forms convenient for use

Stated differently, it is to transform by any process into another form suitable for its
intended use. Marina, as the... manufacturing arm of CO-RO Food A/S of Denmark,
transforms said juice compounds, being raw materials, into a substance suitable for
human consumption.

evidence shows that the subject importations would have to undergo a laborious
method,... to achieve their... marketable juice consistency. Accordingly, the 1% tariff
import duty rate under Tariff Heading H.S. 2106.90 10 was correctly applied to the
subject importations.
G.R. No. 173176 August 26, 2008

JUDY ANNE L. SANTOS, petitioner,

vs.
PEOPLE OF THE PHILIPPINES and BUREAU OF INTERNAL REVENUE, respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised
Rules of Court filed by petitioner Judy Anne L. Santos (Santos) seeking the reversal and
setting aside of the Resolution,2 dated 19 June 2006, of the Court of Tax Appeals
(CTA) en banc in C.T.A. EB. CRIM. No. 001 which denied petitioner’s Motion for
Extension of Time to File Petition for Review. Petitioner intended to file the Petition for
Review with the CTA en banc to appeal the Resolutions dated 23 February 20063 and
11 May 20064 of the CTA First Division in C.T.A. Crim. Case No. 0-012 denying,
respectively, her Motion to Quash the Information filed against her for violation of
Section 255, in relation to Sections 254 and 248(B) of the National Internal Revenue
Code (NIRC), as amended; and her Motion for Reconsideration.

There is no controversy as to the facts that gave rise to the present Petition.

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L.

Parayno, Jr. wrote to the Department of Justice (DOJ) Secretary Raul M. Gonzales a
letter5 regarding the possible filing of criminal charges against petitioner. BIR
Commissioner Parayno began his letter with the following statement:
I have the honor to refer to you for preliminary investigation and filing of an
information in court if evidence so warrants, the herein attached Joint Affidavit
of RODERICK C. ABAD, STIMSON P. CUREG, VILMA V. CARONAN, RHODORA L. DELOS
REYES under Group Supervisor TEODORA V. PURINO, of the National Investigation
Division, BIR National Office Building, BIR Road, Diliman, Quezon City, recommending
the criminal prosecution of MS. JUDY ANNE LUMAGUI SANTOS for substantial
underdeclaration of income, which constitutes as prima facieevidence of false or
fraudulent return under Section 248(B) of the NIRC and punishable under Sections 254
and 255 of the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the investigating
BIR officers that petitioner, in her Annual Income Tax Return for taxable year 2002 filed
with the BIR, declared an income of P8,033,332.70 derived from her talent fees solely
from ABS-CBN; initial documents gathered from the BIR offices and those given by
petitioner’s accountant and third parties, however, confirmed that petitioner received
in 2002 income in the amount of at least P14,796,234.70, not only from ABS-CBN, but
also from other sources, such as movies and product endorsements; the estimated tax
liability arising from petitioner’s underdeclaration amounted to P1,718,925.52,
including incremental penalties; the non-declaration by petitioner of an amount
equivalent to at least 84.18% of the income declared in her return was considered a
substantial underdeclaration of income, which constituted prima facie evidence of false
or fraudulent return under Section 248(B)6 of the NIRC, as amended; and petitioner’s
failure to account as part of her income the professional fees she received from sources
other than ABS-CBN and her underdeclaration of the income she received from ABS-
CBN amounted to manifest violations of Sections 2547 and 255,8 as well as Section
248(B) of the NIRC, as amended.

After an exchange of affidavits and other pleadings by the parties, Prosecution Attorney
Olivia Laroza-Torrevillas issued a Resolution9 dated 21 October 2005 finding probable
cause and recommending the filing of a criminal information against petitioner for
violation of Section 255 in relation to Sections 254 and 248(B) of the NIRC, as amended.
The said Resolution was approved by Chief State Prosecutor Jovencito R. Zuno.

Pursuant to the 21 October 2005 DOJ Resolution, an Information10 for violation of

Section 255 in relation to Sections 254 and 248(B) of the NIRC, as amended, was filed
with the CTA on 3 November 2005 and docketed as C.T.A. Crim. Case No. 0-012.
However, the CTA First Division, after noting several discrepancies in the Information
filed, required the State Prosecutor to clarify and explain the same, and to submit the
original copies of the parties’ affidavits, memoranda, and all other evidence on
record.11

Consequently, Prosecution Attorney Torrevillas, on behalf of respondent People,

submitted on 1 December 2005 a Compliance with Ex Parte Motion to Admit Attached
Information.12 Prosecution Attorney Torrevillas moved that the documents submitted
be admitted as part of the record of the case and the first Information be substituted by
the attached second Information. The second Information13 addressed the
discrepancies noted by the CTA in the first Information, by now reading thus:

The undersigned Prosecution Attorney of the Department of Justice hereby

accuses JUDY ANNE SANTOS y Lumagui of the offense of violation of Section 255, of
Republic Act No. 8424, otherwise known as the "Tax Reform Act of 1997," as amended,
committed as follows:

"That on or about the 15th day of April, 2003, at Quezon City, Philippines, and within
the jurisdiction of this Honorable Court, the above-named accused did then and there,
willfully, unlawfully, and feloniously file a false and fraudulent income tax return for
taxable year 2002 by indicating therein a gross income of P8,033,332.70 when in truth
and in fact her correct income for taxable year 2002 is P16,396,234.70 or a gross
underdeclaration/difference of P8,362,902 resulting to an income tax deficiency
of P1,395,116.24 excluding interest and penalties thereon of P1,319,500.94 or a total
income tax deficiency of P2,714,617.18 to the damage and prejudice of the government
of the same amount.["]

In a Resolution14 dated 8 December 2005, the CTA First Division granted the
People’s Ex Parte Motion and admitted the second Information.
The CTA First Division then issued on 9 December 2005 a warrant for the arrest of
petitioner.15 The tax court lifted and recalled the warrant of arrest on 21 December
2005 after petitioner voluntarily appeared and submitted herself to its jurisdiction and
filed the required bail bond in the amount of P20,000.00.16

On 10 January 2006, petitioner filed with the CTA First Division a Motion to
Quash17 the Information filed in C.T.A. Crim. Case No. 0-012 on the following grounds:

1. The facts alleged in the INFORMATION do not constitute an offense;

2. The officer who filed the information had no authority to do so;

3. The Honorable Court of Tax Appeals has no jurisdiction over the subject matter of the
case; and

4. The information is void ab initio, being violative of due process, and the equal
protection of the laws.

In a Resolution18 dated 23 February 2006, the CTA First Division denied petitioner’s
Motion to Quash and accordingly scheduled her arraignment on 2 March 2006 at 9:00
a.m. Petitioner filed a Motion for Reconsideration and/or Reinvestigation,19 which was
again denied by the CTA First Division in a Resolution20 dated 11 May 2006.

Petitioner received a copy of the 11 May 2006 Resolution of the CTA First Division on
17 May 2006. On 1 June 2006, petitioner filed with the CTA en banc a Motion for
Extension of Time to File Petition for Review, docketed as C.T.A. EB. CRIM. No. 001. She
filed her Petition for Review with the CTA en banc on 16 June 2006. However, in its
Resolution21 dated 19 June 2006, the CTA en banc denied petitioner’s Motion for
Extension of Time to File Petition for Review, ratiocinating that:

In the case before Us, the petitioner is asking for an extension of time to file her Petition
for Review to appeal the denial of her motion to quash in C.T.A. Crim. Case No. 0-012. As
stated above, a resolution denying a motion to quash is not a proper subject of an
appeal to the Court En Banc under Section 11 of R.A. No. 9282 because a ruling denying
a motion to quash is only an interlocutory order, as such, it cannot be made the subject
of an appeal pursuant to said law and the Rules of Court. Section 1 of Rule 41 of the
Rules of Court provides that "no appeal may be taken from an interlocutory order" and
Section 1 (i) of Rule 50 provides for the dismissal of an appeal on the ground that "the
order or judgment appealed from is not appealable". Time and again, the Supreme Court
had ruled that the remedy of the accused in case of denial of a motion to quash is for the
accused to enter a plea, go to trial and after an adverse decision is rendered, to appeal
therefrom in the manner authorized by law.

Since a denial of a Motion to Quash is not appealable, granting petitioner’s Motion for
Extension of Time to File Petition for Review will only be an exercise in futility
considering that the dismissal of the Petition for Review that will be filed by way of
appeal is mandated both by law and jurisprudence.22

Ultimately, the CTA en banc decreed:

WHEREFORE, premises considered, petitioner’s Motion for Extension of Time to File
Petition for Review filed on June 1, 2006 is hereby DENIED for lack of merit.23

Now comes petitioner before this Court raising the sole issue of:

WHETHER A RESOLUTION OF A CTA DIVISION DENYING A MOTION TO QUASH IS A

PROPER SUBJECT OF AN APPEAL TO THE CTA EN BANC UNDER SECTION 11 OF
REPUBLIC ACT NO. 9282, AMENDING SECTION 18 OF REPUBLIC ACT NO. 1125.24

Section 18 of Republic Act No. 1125,25 as amended by Republic Act No.

9282,26 provides:

SEC. 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceedings involving
matters arising under the National Internal Revenue Code, the Tariff and Customs Code
or the Local Government Code shall be maintained, except as herein provided, until and
unless an appeal has been previously filed with the CTA and disposed of in accordance
with the provisions of this Act.

A party adversely affected by a resolution of a Division of the CTA on a motion for

reconsideration or new trial, may file a petition for review with the CTA en banc.

Petitioner’s primary argument is that a resolution of a CTA Division denying a motion to

quash is a proper subject of an appeal to the CTA en banc under Section 18 of Republic
Act No. 1125, as amended, because the law does not say that only a resolution that
constitutes a final disposition of a case may be appealed to the CTA en banc. If the
interpretation of the law by the CTA en banc prevails, a procedural void is created
leaving the parties, such as petitioner, without any remedy involving erroneous
resolutions of a CTA Division.

The Court finds no merit in the petitioner’s assertion.

The petition for review under Section 18 of Republic Act No. 1125, as amended, may be
new to the CTA, but it is actually a mode of appeal long available in courts of general
jurisdiction.

Petitioner is invoking a very narrow and literal reading of Section 18 of Republic Act No.
1125, as amended.

Indeed, the filing of a petition for review with the CTA en banc from a decision,
resolution, or order of a CTA Division is a remedy newly made available in proceedings
before the CTA, necessarily adopted to conform to and address the changes in the CTA.

There was no need for such rule under Republic Act No. 1125, prior to its amendment,
since the CTA then was composed only of one Presiding Judge and two Associate
Judges.27 Any two Judges constituted a quorum and the concurrence of two Judges was
necessary to promulgate any decision thereof.28

The amendments introduced by Republic Act No. 9282 to Republic Act No. 1125
elevated the rank of the CTA to a collegiate court, with the same rank as the Court of
Appeals, and increased the number of its members to one Presiding Justice and five
Associate Justices.29 The CTA is now allowed to sit en banc or in two Divisions with
each Division consisting of three Justices. Four Justices shall constitute a quorum for
sessions en banc, and the affirmative votes of four members of the Court en banc are
necessary for the rendition of a decision or resolution; while two Justices shall
constitute a quorum for sessions of a Division and the affirmative votes of two members
of the Division shall be necessary for the rendition of a decision or resolution.30

In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court delineated the jurisdiction
of the CTA en banc31 and in Divisions.32 Section 2, Rule 4 of the Revised CTA Rules
recognizes the exclusive appellate jurisdiction of the CTA en banc to review by appeal
the following decisions, resolutions, or orders of the CTA Division:

SEC. 2. Cases within the jurisdiction of the Court en banc. – The Court en banc shall
exercise exclusive appellate jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in
Divisions in the exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of
Customs, Department of Finance, Department of Trade and Industry, Department of
Agriculture;

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original
jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their
original jurisdiction involving final and executory assessments for taxes, fees, charges
and penalties, where the principal amount of taxes and penalties claimed is less than
one million pesos;

xxxx

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the
Court in Division in the exercise of its exclusive original jurisdiction over cases involving
criminal offenses arising from violations of the National Internal Revenue Code or the
Tariff and Customs Code and other laws administered by the Bureau of Internal
Revenue or Bureau of Customs.

(g) Decisions, resolutions or order on motions for reconsideration or new trial of the
Court in Division in the exercise of its exclusive appellate jurisdiction over criminal
offenses mentioned in the preceding subparagraph; x x x.

Although the filing of a petition for review with the CTA en banc from a decision,
resolution, or order of the CTA Division, was newly made available to the CTA, such
mode of appeal has long been available in Philippine courts of general jurisdiction.
Hence, the Revised CTA Rules no longer elaborated on it but merely referred to existing
rules of procedure on petitions for review and appeals, to wit:

RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS
SEC. 1. Applicability of the Rules of the Court of Appeals. – The procedure in the
Court en banc or in Divisions in original and in appealed cases shall be the same as
those in petitions for review and appeals before the Court of Appeals pursuant to the
applicable provisions of Rules 42, 43, 44 and 46 of the Rules of Court, except as
otherwise provided for in these Rules.

RULE 8
PROCEDURE IN CIVIL CASES

xxxx

SEC. 4. Where to appeal; mode of appeal. –

xxxx

(b) An appeal from a decision or resolution of the Court in Division on a motion for
reconsideration or new trial shall be taken to the Court by petition for review as
provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal.

xxxx

RULE 9
PROCEDURE IN CRIMINAL CASES

SEC. 1. Review of cases in the Court. – The review of criminal cases in the Court en banc
or in Division shall be governed by the applicable provisions of Rule 124 of the Rules of
Court.

xxxx

SEC. 9. Appeal; period to appeal. –

xxxx

(b) An appeal to the Court en banc in criminal cases decided by the Court in Division
shall be taken by filing a petition for review as provided in Rule 43 of the Rules of
Court within fifteen days from receipt of a copy of the decision or resolution appealed
from. The Court may, for good cause, extend the time for filing of the petition for review
for an additional period not exceeding fifteen days. (Emphasis ours.)

Given the foregoing, the petition for review to be filed with the CTA en banc as the mode
for appealing a decision, resolution, or order of the CTA Division, under Section 18 of
Republic Act No. 1125, as amended, is not a totally new remedy, unique to the CTA, with
a special application or use therein. To the contrary, the CTA merely adopts the
procedure for petitions for review and appeals long established and practiced in other
Philippine courts. Accordingly, doctrines, principles, rules, and precedents laid down in
jurisprudence by this Court as regards petitions for review and appeals in courts of
general jurisdiction should likewise bind the CTA, and it cannot depart therefrom.

General rule: The denial of a motion to quash is an interlocutory order which is not the
proper subject of an appeal or a petition for certiorari.
According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from
the Regional Trial Courts (RTCs) to the Court of Appeals, an appeal may be taken only
from a judgment or final order that completely disposes of the case or of a matter
therein when declared by the Rules to be appealable. Said provision, thus, explicitly
states that no appeal may be taken from an interlocutory order.33

The Court distinguishes final judgments and orders from interlocutory orders in this
wise:

Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nly final judgments or
orders shall be subject to appeal." Interlocutory or incidental judgments or orders do
not stay the progress of an action nor are they subject of appeal "until final judgment or
order is rendered for one party or the other." The test to determine whether an order or
judgment is interlocutory or final is this: "Does it leave something to be done in the trial
court with respect to the merits of the case? If it does, it is interlocutory; if it does not, it
is final". A court order is final in character if it puts an end to the particular matter
resolved or settles definitely the matter therein disposed of, such that no further
questions can come before the court except the execution of the order. The term "final"
judgment or order signifies a judgment or an order which disposes of the cause as to all
the parties, reserving no further questions or directions for future determination. The
order or judgment may validly refer to the entire controversy or to some definite and
separate branch thereof. "In the absence of a statutory definition, a final judgment,
order or decree has been held to be x x x one that finally disposes of, adjudicates, or
determines the rights, or some right or rights of the parties, either on the entire
controversy or on some definite and separate branch thereof, and which concludes
them until it is reversed or set aside." The central point to consider is, therefore, the
effects of the order on the rights of the parties. A court order, on the other hand, is
merely interlocutory in character if it is provisional and leaves substantial proceeding
to be had in connection with its subject. The word "interlocutory" refers to "something
intervening between the commencement and the end of a suit which decides some point
or matter but is not a final decision of the whole controversy."34

In other words, after a final order or judgment, the court should have nothing more to
do in respect of the relative rights of the parties to the case. Conversely, "an order that
does not finally dispose of the case and does not end the Court's task of adjudicating the
parties' contentions in determining their rights and liabilities as regards each other, but
obviously indicates that other things remain to be done by the Court, is
interlocutory."35

The rationale for barring the appeal of an interlocutory order was extensively discussed
in Matute v. Court of Appeals,36 thus:

It is settled that an "interlocutory order or decree made in the progress of a case is

always under the control of the court until the final decision of the suit, and may be
modified or rescinded upon sufficient grounds shown at any time before final judgment
. . ." Of similar import is the ruling of this Court declaring that "it is rudimentary that
such (interlocutory) orders are subject to change in the discretion of the court."
Moreover, one of the inherent powers of the court is "To amend and control its process
and orders so as to make them conformable to law and justice. In the language of Chief
Justice Moran, paraphrasing the ruling in Veluz vs. Justice of the Peace of Sariaya, "since
judges are human, susceptible to mistakes, and are bound to administer justice in
accordance with law, they are given the inherent power of amending their orders or
judgments so as to make them conformable to law and justice, and they can do so before
they lose their jurisdiction of the case, that is before the time to appeal has expired and
no appeal has been perfected." And in the abovecited Veluz case, this Court held that "If
the trial court should discover or be convinced that it had committed an error in its
judgment, or had done an injustice, before the same has become final, it may, upon its
own motion or upon a motion of the parties, correct such error in order to do justice
between the parties. . . . It would seem to be the very height of absurdity to prohibit a
trial judge from correcting an error, mistake, or injustice which is called to his attention
before he has lost control of his judgment." Corollarily, it has also been held "that a
judge of first instance is not legally prevented from revoking the interlocutory order of
another judge in the very litigation subsequently assigned to him for judicial action."

Another recognized reason of the law in permitting appeal only from a final order or
judgment, and not from an interlocutory or incidental one, is to avoid multiplicity of
appeals in a single action, which must necessarily suspend the hearing and decision on
the merits of the case during the pendency of the appeal. If such appeal were allowed,
the trial on the merits of the case would necessarily be delayed for a considerable length
of time, and compel the adverse party to incur unnecessary expenses, for one of the
parties may interpose as many appeals as incidental questions may be raised by him,
and interlocutory orders rendered or issued by the lower court.37

There is no dispute that a court order denying a motion to quash is interlocutory. The
denial of the motion to quash means that the criminal information remains pending
with the court, which must proceed with the trial to determine whether the accused is
guilty of the crime charged therein. Equally settled is the rule that an order denying a
motion to quash, being interlocutory, is not immediately appealable,38 nor can it be the
subject of a petition for certiorari. Such order may only be reviewed in the ordinary
course of law by an appeal from the judgment after trial.39

The Court cannot agree in petitioner’s contention that there would exist a procedural
void following the denial of her Motion to Quash by the CTA First Division in its
Resolutions dated 23 February 2006 and 11 May 2006, leaving her helpless. The
remedy of an accused from the denial of his or her motion to quash has already been
clearly laid down as follows:

An order denying a Motion to Acquit (like an order denying a motion to quash) is

interlocutory and not a final order. It is, therefore, not appealable. Neither can it be the
subject of a petition for certiorari. Such order of denial may only be reviewed, in the
ordinary course of law, by an appeal from the judgment, after trial. As stated in Collins
vs. Wolfe, and reiterated in Mill vs. Yatco, the accused, after the denial of his motion to
quash, should have proceeded with the trial of the case in the court below, and if final
judgment is rendered against him, he could then appeal, and, upon such appeal, present
the questions which he sought to be decided by the appellate court in a petition
for certiorari.
In Acharon vs. Purisima, the procedure was well defined, thus:

"Moreover, when the motion to quash filed by Acharon to nullify the criminal cases filed
against him was denied by the Municipal Court of General Santos his remedy was not to
file a petition for certiorari but to go to trial without prejudice on his part to reiterate
the special defenses he had invoked in his motion and, if, after trial on the merits, an
adverse decision is rendered, to appeal therefrom in the manner authorized by law. This
is the procedure that he should have followed as authorized by law and precedents.
Instead, he took the usual step of filing a writ of certiorari before the Court of First
Instance which in our opinion is unwarranted it being contrary to the usual course of
law."40

Hence, the CTA en banc herein did not err in denying petitioner’s Motion for Extension
of Time to File Petition for Review, when such Petition for Review is the wrong remedy
to assail an interlocutory order denying her Motion to Quash.

While the general rule proscribes the appeal of an interlocutory order, there are also
recognized exceptions to the same. The general rule is not absolute. Where special
circumstances clearly demonstrate the inadequacy of an appeal, then the special civil
action of certiorari or prohibition may exceptionally be allowed.41 This Court
recognizes that under certain situations, recourse to extraordinary legal remedies, such
as a petition for certiorari, is considered proper to question the denial of a motion to
quash (or any other interlocutory order) in the interest of a "more enlightened and
substantial justice";42 or to promote public welfare and public policy;43 or when the
cases "have attracted nationwide attention, making it essential to proceed with dispatch
in the consideration thereof";44 or when the order was rendered with grave abuse of
discretion.45Certiorari is an appropriate remedy to assail an interlocutory order (1)
when the tribunal issued such order without or in excess of jurisdiction or with grave
abuse of discretion; and (2) when the assailed interlocutory order is patently erroneous,
and the remedy of appeal would not afford adequate and expeditious relief.46

Recourse to a petition for certiorari to assail an interlocutory order is now expressly

recognized in the ultimate paragraph of Section 1, Rule 41 of the Revised Rules of Court
on the subject of appeal, which states:

In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65.

As to whether the CTA en banc, under its expanded jurisdiction in Republic Act No.
9282, has been granted jurisdiction over special civil actions for certiorari is not raised
as an issue in the Petition at bar, thus, precluding the Court from making a definitive
pronouncement thereon. However, even if such an issue is answered in the negative, it
would not substantially affect the ruling of this Court herein, for a party whose motion
to quash had been denied may still seek recourse, under exceptional and meritorious
circumstances, via a special civil action for certiorari with this Court, refuting
petitioner’s assertion of a procedural void.

The CTA First Division did not commit grave abuse of discretion in denying petitioner’s
Motion to Quash.
Assuming that the CTA en banc, as an exception to the general rule, allowed and treated
petitioner’s Petition for Review in C.T.A. EB. CRIM. No. 001 as a special civil action
for certiorari, 47 it would still be dismissible for lack of merit.

An act of a court or tribunal may only be considered as committed in grave abuse of

discretion when the same was performed in a capricious or whimsical exercise of
judgment, which is equivalent to lack of jurisdiction. The abuse of discretion must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform a duty enjoined by law or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion or
personal hostility. In this connection, it is only upon showing that the court acted
without or in excess of jurisdiction or with grave abuse of discretion that an
interlocutory order such as that involved in this case may be impugned. Be that as it
may, it must be emphasized that this practice is applied only under certain exceptional
circumstances to prevent unnecessary delay in the administration of justice and so as
not to unduly burden the courts.48

Certiorari is not available to correct errors of procedure or mistakes in the judge’s

findings and conclusions of law and fact. It is only in the presence of extraordinary
circumstances evincing a patent disregard of justice and fair play where resort to a
petition for certiorari is proper. A party must not be allowed to delay litigation by the
sheer expediency of filing a petition forcertiorari under Rule 65 of the Revised Rules of
Court based on scant allegations of grave abuse.49

A writ of certiorari is not intended to correct every controversial interlocutory ruling: it

is resorted to only to correct a grave abuse of discretion or a whimsical exercise of
judgment equivalent to lack of jurisdiction. Its function is limited to keeping an inferior
court within its jurisdiction and to relieve persons from arbitrary acts – acts which
courts or judges have no power or authority in law to perform. It is not designed to
correct erroneous findings and conclusions made by the courts.50

The Petition for Review which petitioner intended to file before the CTA en banc relied
on two grounds: (1) the lack of authority of Prosecuting Attorney Torrevillas to file the
Information; and (2) the filing of the said Information in violation of petitioner’s
constitutional rights to due process and equal protection of the laws.

Anent the first ground, petitioner argues that the Information was filed without the
approval of the BIR Commissioner in violation of Section 220 of NIRC, as amended,
which provides:

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.
Petitioner’s argument must fail in light of BIR Commissioner Parayno’s letter dated 19
May 2005 to DOJ Secretary Gonzales referring "for preliminary investigation and filing
of an information in court if evidence so warrants," the findings of the BIR officers
recommending the criminal prosecution of petitioner. In said letter, BIR Commissioner
Parayno already gave his prior approval to the filing of an information in court should
the DOJ, based on the evidence submitted, find probable cause against petitioner during
the preliminary investigation. Section 220 of the NIRC, as amended, simply requires that
the BIR Commissioner approve the institution of civil or criminal action against a tax
law violator, but it does not describe in what form such approval must be given. In this
case, BIR Commissioner Parayno’s letter of 19 May 2005 already states his express
approval of the filing of an information against petitioner and his signature need not
appear on the Resolution of the State Prosecutor or the Information itself.

Still on the purported lack of authority of Prosecution Attorney Torrevillas to file the
Information, petitioner asserts that it is the City Prosecutor under the Quezon City
Charter, who has the authority to investigate and prosecute offenses allegedly
committed within the jurisdiction of Quezon City, such as petitioner’s case.

The Court is not persuaded. Under Republic Act No. 537, the Revised Charter of Quezon
City, the City Prosecutor shall have the following duties relating to the investigation and
prosecution of criminal offenses:

SEC. 28. The City Attorney - His assistants - His duties. –

xxxx

(g) He shall also have charge of the prosecution of all crimes, misdemeanors, and
violations of city ordinances, in the Court of First Instance and the municipal courts of
the city, and shall discharge all the duties in respect to the criminal prosecutions
enjoined by law upon provincial fiscals.

(h) He shall cause to be investigated all charges of crimes, misdemeanors, and violations
of ordinances and have the necessary information or complaints prepared or made
against the persons accused. He or any of his assistants may conduct such investigations
by taking oral evidence of reputable witnesses, and for this purpose may issue
subpoena, summon witnesses to appear and testify under oath before him, and the
attendance or evidence of an absent or recalcitrant witness may be enforced by
application to the municipal court or the Court of First Instance. No witness summoned
to testify under this section shall be under obligation to give any testimony which tend
to incriminate himself.

Evident from the foregoing is that the City Prosecutor has the power to investigate
crimes, misdemeanors, and violations of ordinances committed within the territorial
jurisdiction of the city, and which can be prosecuted before the trial courts of the said
city. The charge against petitioner, however, is already within the exclusive original
jurisdiction of the CTA,51 as the Information states that her gross underdeclaration
resulted in an income tax deficiency of P1,395,116.24, excluding interest and penalties.
The City Prosecutor does not have the authority to appear before the CTA, which is now
of the same rank as the Court of Appeals.
In contrast, the DOJ is the principal law agency of the Philippine government which shall
be both its legal counsel and prosecution arm.52 It has the power to investigate the
commission of crimes, prosecute offenders and administer the probation and correction
system.53 Under the DOJ is the Office of the State Prosecutor whose functions are
described as follows:

Sec. 8. Office of the Chief State Prosecutor. - The Office of the Chief State Prosecutor shall
have the following functions:

(1) Assist the Secretary in the performance of powers and functions of the Department
relative to its role as the prosecution arm of the government;

(2) Implement the provisions of laws, executive orders and rules, and carry out the
policies, plans, programs and projects of the Department relative to the investigation
and prosecution of criminal cases;

(3) Assist the Secretary in exercising supervision and control over the National
Prosecution Service as constituted under P.D. No. 1275 and/or otherwise hereinafter
provided; and

(4) Perform such other functions as may be provided by law or assigned by the
Secretary.54

As explained by CTA First Division in its Resolution dated 11 May 2006:

[T]he power or authority of the Chief State Prosecutor Jovencito Zuño, Jr. and his
deputies in the Department of Justice to prosecute cases is national in scope; and the
Special Prosecutor’s authority to sign and file informations in court proceeds from the
exercise of said person’s authority to conduct preliminary investigations.55

Moreover, there is nothing in the Revised Quezon City Charter which would suggest that
the power of the City Prosecutor to investigate and prosecute crimes, misdemeanors,
and violations of ordinances committed within the territorial jurisdiction of the city is to
the exclusion of the State Prosecutors. In fact, the Office of the State Prosecutor
exercises control and supervision over City Prosecutors under Executive Order No. 292,
otherwise known as the Administrative Code of 1987.

As regards petitioner’s second ground in her intended Petition for Review with the
CTA en banc, she asserts that she has been denied due process and equal protection of
the laws when similar charges for violation of the NIRC, as amended, against Regina
Encarnacion A. Velasquez (Velasquez) were dismissed by the DOJ in its Resolution
dated 10 August 2005 in I.S. No. 2005-330 for the reason that Velasquez’s tax liability
was not yet fully determined when the charges were filed.

The Court is unconvinced.

First, a motion to quash should be based on a defect in the information which is evident
on its face.56 The same cannot be said herein. The Information against petitioner
appears valid on its face; and that it was filed in violation of her constitutional rights to
due process and equal protection of the laws is not evident on the face thereof. As
pointed out by the CTA First Division in its 11 May 2006 Resolution, the more
appropriate recourse petitioner should have taken, given the dismissal of similar
charges against Velasquez, was to appeal the Resolution dated 21 October 2005 of the
Office of the State Prosecutor recommending the filing of an information against her
with the DOJ Secretary.57

Second, petitioner cannot claim denial of due process when she was given the
opportunity to file her affidavits and other pleadings and submit evidence before the
DOJ during the preliminary investigation of her case and before the Information was
filed against her. Due process is merely an opportunity to be heard. In addition,
preliminary investigation conducted by the DOJ is merely inquisitorial. It is not a trial of
the case on the merits. Its sole purpose is to determine whether a crime has been
committed and whether the respondent therein is probably guilty of the crime. It is not
the occasion for the full and exhaustive display of the parties’ evidence. Hence, if the
investigating prosecutor is already satisfied that he can reasonably determine the
existence of probable cause based on the parties’ evidence thus presented, he may
terminate the proceedings and resolve the case.58

Third, petitioner cannot likewise aver that she has been denied equal protection of the
laws.

The equal protection clause exists to prevent undue favor or privilege. It is intended to
eliminate discrimination and oppression based on inequality. Recognizing the existence
of real differences among men, the equal protection clause does not demand absolute
equality. It merely requires that all persons shall be treated alike, under like
circumstances and conditions, both as to the privileges conferred and liabilities
enforced.59

Petitioner was not able to duly establish to the satisfaction of this Court that she and
Velasquez were indeed similarly situated, i.e., that they committed identical acts for
which they were charged with the violation of the same provisions of the NIRC; and that
they presented similar arguments and evidence in their defense - yet, they were treated
differently.

Furthermore, that the Prosecution Attorney dismissed what were supposedly similar
charges against Velasquez did not compel Prosecution Attorney Torrevillas to rule the
same way on the charges against petitioner. In People v. Dela Piedra,60this Court
explained that:

The prosecution of one guilty person while others equally guilty are not prosecuted,
however, is not, by itself, a denial of the equal protection of the laws. Where the official
action purports to be in conformity to the statutory classification, an erroneous or
mistaken performance of the statutory duty, although a violation of the statute, is not
without more a denial of the equal protection of the laws. The unlawful administration
by officers of a statute fair on its face, resulting in its unequal application to those who
are entitled to be treated alike, is not a denial of equal protection unless there is shown
to be present in it an element of intentional or purposeful discrimination. This may
appear on the face of the action taken with respect to a particular class or person, or it
may only be shown by extrinsic evidence showing a discriminatory design over another
not to be inferred from the action itself. But a discriminatory purpose is not presumed,
there must be a showing of "clear and intentional discrimination." Appellant has failed
to show that, in charging appellant in court, that there was a "clear and intentional
discrimination" on the part of the prosecuting officials.

The discretion of who to prosecute depends on the prosecution’s sound assessment

whether the evidence before it can justify a reasonable belief that a person has
committed an offense. The presumption is that the prosecuting officers regularly
performed their duties, and this presumption can be overcome only by proof to the
contrary, not by mere speculation. Indeed, appellant has not presented any evidence to
overcome this presumption. The mere allegation that appellant, a Cebuana, was charged
with the commission of a crime, while a Zamboangueña, the guilty party in appellant’s
eyes, was not, is insufficient to support a conclusion that the prosecution officers denied
appellant equal protection of the laws.

There is also common sense practicality in sustaining appellant’s prosecution.

While all persons accused of crime are to be treated on a basis of equality before the
law, it does not follow that they are to be protected in the commission of crime. It would
be unconscionable, for instance, to excuse a defendant guilty of murder because others
have murdered with impunity. The remedy for unequal enforcement of the law in such
instances does not lie in the exoneration of the guilty at the expense of society x x x.
Protection of the law will be extended to all persons equally in the pursuit of their
lawful occupations, but no person has the right to demand protection of the law in the
commission of a crime.

Likewise, [i]f the failure of prosecutors to enforce the criminal laws as to some persons
should be converted into a defense for others charged with crime, the result would be
that the trial of the district attorney for nonfeasance would become an issue in the trial
of many persons charged with heinous crimes and the enforcement of law would suffer
a complete breakdown. (Emphasis ours.)

In the case at bar, no evidence of a clear and intentional discrimination against

petitioner was shown, whether by Prosecution Attorney Torrevillas in recommending
the filing of Information against petitioner or by the CTA First Division in denying
petitioner’s Motion to Quash. The only basis for petitioner’s claim of denial of equal
protection of the laws was the dismissal of the charges against Velasquez while those
against her were not.

And lastly, the Resolutions of the CTA First Division dated 23 February 2006 and 11
May 2006 directly addressed the arguments raised by petitioner in her Motion to Quash
and Motion for Reconsideration, respectively, and explained the reasons for the denial
of both Motions. There is nothing to sustain a finding that these Resolutions were
rendered capriciously, whimsically, or arbitrarily, as to constitute grave abuse of
discretion amounting to lack or excess of jurisdiction.

In sum, the CTA en banc did not err in denying petitioner’s Motion for Extension of Time
to File Petition for Review. Petitioner cannot file a Petition for Review with the CTA en
banc to appeal the Resolution of the CTA First Division denying her Motion to Quash.
The Resolution is interlocutory and, thus, unappealable. Even if her Petition for Review
is to be treated as a petition for certiorari, it is dismissible for lack of merit.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED.
Costs against petitioner.

SO ORDERED

JUDY ANNE L. SANTOS v. PEOPLE, GR No. 173176, 2008-08-26

Facts:

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L.

Parayno, Jr. wrote to the Department of Justice (DOJ) Secretary Raul M. Gonzales a
letter[5] regarding the possible filing of criminal charges against petitioner.

petitioner,... her return... substantial underdeclaration of income, which constituted

prima facie evidence of false or fraudulent return under Section 248(B)

Prosecution Attorney Olivia Laroza-Torrevillas issued a Resolution[9] dated 21 October

2005 finding probable cause and recommending the filing of a criminal information
against petitioner... for violation of Section 255 in relation to Sections 254 and 248(B) of
the NIRC, as amended.

Pursuant to the 21 October 2005 DOJ Resolution, an Information[10] for violation of

Section 255 in relation to Sections 254 and 248(B) of the NIRC, as amended, was filed
with the CTA on 3 November 2005

On 10 January 2006, petitioner filed with the CTA First Division a Motion to Quash

The officer who filed the information had no authority to do so;... the CTA First Division
denied petitioner's Motion to Quash

On 1 June 2006, petitioner filed with the CTA en banc a Motion for Extension of Time to
File Petition for Review

She filed... her Petition for Review with the CTA en banc on 16 June 2006.

a resolution denying a motion to quash is not a proper subject... of an appeal to the

Court En Banc under Section 11 of R.A. No. 9282 because a ruling denying a motion to
quash is only an interlocutory order, as such, it cannot be made the subject of an appeal
pursuant to said law and the Rules of Court.
Petitioner's primary argument is that a resolution of a CTA Division denying a motion to
quash is a proper subject of an appeal to the CTA en banc under Section 18 of Republic
Act No. 1125, as amended, because the law does not say that only a resolution that
constitutes a... final disposition of a case may be appealed to the CTA en banc.

Issues:

WHETHER A RESOLUTION OF A CTA DIVISION DENYING A MOTION TO QUASH IS A

PROPER SUBJECT OF AN APPEAL TO THE CTA EN BANC UNDER SECTION 11 OF
REPUBLIC ACT NO. 9282, AMENDING SECTION 18 OF REPUBLIC ACT NO. 1125

Ruling:

Section 18 of Republic Act No. 1125,[25] as amended by Republic Act No. 9282,[26]
provides:

SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceedings involving
matters arising under the National Internal Revenue Code... shall be maintained... until...
and unless an appeal has been previously filed with the CTA

A party adversely affected by a resolution of a Division of the CTA on a motion for

reconsideration or new trial, may file a petition for review with the CTA en banc.

The amendments introduced by Republic Act No. 9282 to Republic Act No. 1125
elevated the rank of the CTA to a collegiate court, with the same rank as the Court of
Appeals, and increased the number of its members to one Presiding Justice and five
Associate Justices

The CTA is now allowed to sit en banc or in two Divisions with each Division consisting
of three Justices. Four Justices shall constitute a quorum for sessions en banc, and the
affirmative votes of four members of the Court en banc are... necessary for the rendition
of a decision or resolution; while two Justices shall constitute a quorum for sessions of a
Division and the affirmative votes of two members of the Division shall be necessary for
the rendition of a decision or resolution

Although the filing of a petition for review with the CTA en banc from a decision,
resolution, or order of the CTA Division, was newly made available to the CTA, such
mode of appeal has long been available in Philippine courts of general jurisdiction.
Hence, the

Revised CTA Rules no longer elaborated on it but merely referred to existing rules of
procedure on petitions for review and appeals, to wit:... he petition for review to be filed
with the CTA en banc as the mode for appealing a decision, resolution, or order of the
CTA Division, under Section 18 of Republic Act No. 1125, as amended, is not a totally
new remedy, unique to the CTA, with a... special application or use therein.

To the contrary, the CTA merely adopts the procedure for petitions for review and
appeals long established and practiced in other Philippine courts.
General rule: The denial of a motion to quash is an interlocutory order which is not the...
proper subject of an appeal or a petition for certiorari.

The Petition for Review which petitioner intended to file before the CTA en banc relied
on two grounds: (1) the lack of authority of Prosecuting Attorney Torrevillas to file the
Information;

Anent the first ground, petitioner argues that the Information was filed without the
approval of the BIR Commissioner in violation of Section 220 of NIRC, as amended,
which provides:

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.

Petitioner's argument must fail in light of BIR Commissioner Parayno's letter dated 19
May 2005 to DOJ Secretary Gonzales referring "for preliminary investigation and filing
of an information in court if evidence so warrants," the findings of the BIR officers
recommending... the criminal prosecution of petitioner. In said letter, BIR
Commissioner Parayno already gave his prior approval to the filing of an information in
court should the DOJ, based on the evidence submitted, find probable cause against
petitioner during the preliminary... investigation. Section 220 of the NIRC, as amended,
simply requires that the BIR Commissioner approve the institution of civil or criminal
action against a tax law violator, but it does not describe in what form such approval
must be given. In this case, BIR

Commissioner Parayno's letter of 19 May 2005 already states his express approval of
the filing of an information against petitioner and his signature need not appear on the
Resolution of the State Prosecutor or the Information itself.