G.R. No.

221590

COMMISSIONER OF INTERNAL REVENUE, Petitioner

vs.
ASALUS CORPORATION, Respondent

DECISION

MENDOZA, J.:

This petition for review on certiorari seeks to reverse and set aside the July 30, 2015 Decision  and the November 6,
1

2015 Resolution  of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 1191, which affirmed the April 2, 2014
2

Decision  of the CTA Third Division (CTA Division).

3

The Antecedents

On December 16, 2010, respondent Asalus Corporation (Asalus) received a Notice of Informal Conference from
Revenue District Office (RDO) No. 47 of the Bureau of Internal Revenue (BIR). It was in connection with the
investigation conducted by Revenue Officer Fidel M. Bañares II (Bañares) on the Value-Added
Tax (VAT) transactions of Asalus for the taxable year 2007.  Asalus filed its Letter-Reply,  dated December 29,
4 5

2010, questioning the basis of Bañares' computation for its VAT liability.

On January 10, 2011, petitioner Commissioner of Internal Revenue (CIR) issued the Preliminary Assessment
Notice (PAN) finding Asalus liable for deficiency VAT for 2007 in the aggregate amount of ₱413, 378, 058.11,
inclusive of surcharge and interest. Asalus filed its protest against the PAN but it was denied by the CIR. 
6

On August 26, 2011, Asalus received the Formal Assessment Notice (FAN) stating that it was liable for deficiency
VAT for 2007 in the total amount of ₱95,681,988.64, inclusive of surcharge and interest. Consequently, it filed its
protest against the FAN, dated September 6, 2011. Thereafter, Asal us filed a supplemental protest stating that the
deficiency VAT assessment had prescribed pursuant to Section 203 of the National Internal Revenue Code (NIRC). 7

On October 16, 2012, Asal us received the Final Decision on Disputed Assessment  (FDDA) showing VAT
8

deficiency for 2007 in the aggregate amount of ₱106,761,025.17, inclusive of surcharge and interest and
₱25,000.00 as compromise penalty. As a result, it filed a petition for review before the CTA Division.

The CTA Division Ruling

In its April 2, 2014 Decision, the CT A Division ruled that the VAT assessment issued on August 26, 2011 had
prescribed and consequently deemed invalid. It opined that the ten (10)-year prescriptive period under Section 222
of the NIRC was inapplicable as neither the FAN nor the FDDA indicated that Asalus had filed a false VAT return
warranting the application of the ten (10)-year prescriptive period. It explained that it was only in the PAN where an
allegation of false or fraudulent return was made. The CTA stressed that after Asalus had protested the PAN, the
CIR never mentioned in both the FAN and the FDDA that the prescriptive period would be ten (10) years. It further
pointed out that the CIR failed to present evidence regarding its allegation of fraud or falsity in the returns.

The CTA wrote that "the three instances where the three-year prescriptive period will not apply must always be
alleged and established by clear and convincing evidence and should not be anchored on mere conjectures and
speculations,  before the ten (10) year prescriptive period could be considered. Thus, it disposed:
9

WHEREFORE, the instant Petition for Review is hereby GRANTED. Accordingly, the deficiency VAT assessment
for taxable year 2007 and the compromise penalty are hereby CANCELLED and WITHDRAWN, on ground of
prescription.

SO ORDERED. 10

The CIR moved for reconsideration but its motion was denied.
The CTA En Banc Ruling

In its July 30, 2015 Decision, the CTA En Banc sustained the assailed decision of the CT A Division and dismissed
the petition for review filed by the CIR. It explained that there was nothing in the FAN and the FDDA that would
indicate, the non-application of the three (3) year prescriptive period under Section 203 of the NIRC. It found that the
CIR did not present any evidence during the trial to substantiate its claim of falsity in the returns and again missed
its chance to do so when it failed to file its memorandum before the CTA Division.

The CTA En Banc further explained that the PAN alone could not be used as a basis because it was not the
assessment contemplated by law. Consequently, the allegation of falsity in Asalus' tax returns could not be
considered as it was not reiterated in the FAN. The dispositive portion thus reads:

WHEREFORE, premises considered, the present Petition for Review is hereby DENIED, and accordingly,
DISMISSED for lack of merit.

SO ORDERED. 11

The CIR sought the reconsideration of the decision of the CTA En Banc, but the latter upheld its decision in its
November 6, 2015 resolution.

Hence, this petition.

ISSUES

WHETHER PETITIONER HAD SUFFICIENTLY APPRISED RESPONDENT THAT THE FAN AND FDDA ISSUED
AGAINST THE LATTER FALLS UNDER SECTION 222(A) OF THE 1997 NIRC, AS AMENDED;

II

WHETHER RESPONDENT'S FAILURE TO REPORT IN ITS VAT RETURNS ALL THE FEES IT COLLECTED
FROM ITS MEMBERS APPLYING FOR HEALTHCARE SERVICES CONSTITUTES "FALSE" RETURN UNDER
SECTION 222(A) OF THE 1997 NIRC, AS AMENDED; AND

II

WHETHER PETITIONER'S RIGHT TO ASSESS RESPONDENT FOR ITS DEFICIENCY VAT FOR TAXABLE
YEAR 2007 HAD ALREADY PRESCRIBED. 12

The CIR, through the Office of the Solicitor General (OSG), argues that the VAT assessment had yet to prescribe as
the applicable prescriptive period is the ten (10)-year prescriptive period under Section 222 of the NIRC, and not the
three (3) year prescriptive period under Section 203 thereof. It claims that Asalus was informed in the PAN of the ten
(10)-year prescriptive period and that the FAN made specific reference to the PAN. In turn, the FDDA made
reference to the FAN. Asalus, on the other hand, only raised prescription in its supplemental protest to the FAN. The
CIR insists that Asalus was made fully aware that the prescriptive period under Section 222 would apply.

Moreover, the CIR asserts that there was substantial understatement in Asalus' income, which exceeded 30% of
what was declared in its VAT returns as appearing in its quarterly VAT returns; and the underdeclaration was
supported by the judicial admission of its lone witness that not all the membership fees collected from members
applying for healthcare services were reported in its VAT returns. Thus, the CIR concludes that there was prima
facie evidence of a false return.

The Position of Asalus

In its Comment/Opposition,  dated April 22, 2016, Asalus countered that the present petition involved a question of
13

fact, which was beyond the ambit of a petition for review under Rule 45. Moreover, it asserted that the findings of
fact of the CT A Division, which were affirmed by the CTA En Banc, were conclusive and binding upon the Court. It
posited that the CIR could not raise for the first time on appeal a new argument that "the FDDA and the FAN need
not explicitly state the applicability of the ten-year prescriptive period and the bases thereof as long as the totality of
the circumstances show that the taxpayer was 'sufficiently informed' of the facts in support of the assessment.
Based on the totality of the circumstances, it was informed of the facts in support of the assessment."  14

Asalus reiterated that the CIR, either in the FAN or the FDDA, failed to show that it had filed false returns warranting
the application of the extraordinary prescriptive period under Section 222 of the NIRC. It insisted that it was not
informed of the facts and law on which the assessment was based because the FAN did not state that it filed false
or fraudulent returns. For this reason, Asalus averred that the assessment had prescribed because it was made
beyond the three (3)-year period as provided in Section 203 of the NIRC.

The Reply of the CIR

In its Reply,   dated August 15, 2016, the CIR argued that the findings of the CT A might be set aside on appeal if
15

they were not supported with substantial evidence or if there was a showing of gross error or abuse. It repeated that
there was presumption of falsity in light of the 30% underdeclaration of sales. The CIR emphasized that even
Asalus' own witness testified that not all the membership fees collected were reported in its VAT returns. It insisted
that Asalus was sufficiently informed of its assessment based on the prescriptive period under Section 222 of the
NIRC as early as when the PAN was issued.

On another note, the CIR manifested that Asalus' counsels made use of insulting words in its Comment, which could
have been dispensed with. Particularly, it highlighted the use of the following phrases as insulting: "even to the
uninitiated," "petitioner's habit of disregarding firmly established rules of procedure," "twist establish facts to suit her
ends," "just to indulge petitioner," and "she then tried to calculate, on her own but without factual basis." It asserted
that "[w]hile a lawyer has a complete discretion on what legal strategy to employ in a case, the overzealousness in
protecting his client's interest does not warrant the use of insulting and profane language in his pleadings xxx."  16

The Court's Ruling

There is merit in the petition.

It is true that the findings of fact of the CT A are, as a rule, respected by the Court, but they can be set aside in
exceptional cases. In Barcelon, Roxas Securities, Inc. (now known as UBP Securities, Inc.) v. Commissioner of
Internal Revenue, this Court in Toshiba Information Equipment (Phils.), Inc. v. Commissioner of Internal
Revenue,   explicitly pronounced-
17

Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the highest
respect. In Sea-Land Service, Inc. v. Court of Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-446],
this Court recognizes that the Court of Tax Appeals, which by the very nature of its function is dedicated exclusively
to the consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will
not be overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be
disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error
or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court
must presume that the CTA rendered a decision which is valid in every respect.  [Emphasis supplied]
18

After a review of the records and applicable laws and jurisprudence, the Court finds that the CTA erred in concluding
that the assessment against Asalus had prescribed.

Generally, internal revenue taxes shall be assessed within three (3) years after the ,last day prescribed by law for
the filing of the return, or where the return is filed beyond the period, from the day the return was actually
filed.   Section 222 of the NIRC, however, provides for exceptions to the general rule. It states that in the case of a
19

false or fraudulent return with intent to evade tax or of failure to file a return, the assessment may be made within
ten (10) years from the discovery of the falsity, fraud or omission.
In the oft-cited Aznar v. CTA, the Court compared a false return to a fraudulent return in relation to the applicable
20

prescriptive periods for assessments, to wit:

Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not file false and fraudulent
returns with intent to' evade tax, while respondent Commissioner of Internal Revenue insists contrariwise, with
respondent Court of Tax Appeals concluding that the very "substantial under declarations of income for six
consecutive years eloquently demonstrate the falsity or fraudulence of the income tax returns with an intent to
evade the payment of tax."

xxxx

xxx We believe that the proper and reasonable interpretation of said provision should be that in the three different
cases of (1) false return, (2) fraudulent return with intent to evade tax, (3) failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be begun without assessmeμt, at any time
within ten years after the discovery of the (1) falsity, (2) fraud, (3) omission. Our stand that the law should be
interpreted to mean a separation of the three different situations of false return, fraudulent return with intent
to evade tax, and failure to file a return is strengthened immeasurably by the last portion of the provision
which seggregates the situations into three different classes, namely "falsity", "fraud" and "omission." That
there is a difference between "false return" and "fraudulent return" cannot be denied. While the first merely
implies deviation from the truth, whether intentional or not, the second implies intentional or deceitful entry
with intent to evade the taxes due.

The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec. 331 of the NIRC
should be applicable to normal circumstances, but whenever the government is placed, at a disadvantage so as to
prevent its lawful agents from proper assessment of tax liabilities due to false returns, fraudulent return intended to
evade payment of tax or failure to file returns, the period of ten years provided for in Sec. 332 (a) NIRC, from the
time of the discovery of the falsity, fraud or omission even seems to be inadequate and should be the one enforced.

There being undoubtedly false tax returns in this case, We affirm the conclusion of the respondent Court of Tax
Appeals that Sec. 332 (a) of the NIRC should apply and that the period of ten years within which to assess
petitioner's tax liability had not expired at the time said assessment was made. (Emphasis supplied)

Thus, a mere showing that the returns filed by the taxpayer were false, notwithstanding the absence of intent to
defraud, is sufficient to warrant the application of the ten (10) year prescriptive period under Section 222 of the
NIRC.

Presumption of Falsity of Returns

In the present case, the CTA opined that the CIR failed to substantiate with clear and convincing evidence its claim
that Asalus filed a false return. As it noted that the CIR never presented any evidence to prove the falsity in the
returns that Asalus filed, the CTA ruled that the assessment was subject to the three (3) year ordinary prescriptive
period.

The Court is of a different view.

Under Section 248(B) of the NIRC,  there is a prima facie evidence of a false return if there is a substantial
21

underdeclaration of taxable sales, receipt or income. The failure to report sales, receipts or income in an amount
exceeding 30% what is declared in the returns constitute substantial underdeclaration. A prima facie evidence is
one which that will establish a fact or sustain a judgment unless contradictory evidence is produced.  22

In other words, when there is a showing that a taxpayer has substantially underdeclared its sales, receipt or income,
there is a presumption that it has filed a false return. As such, the CIR need not immediately present evidence to
support the falsity of the return, unless the taxpayer fails to overcome the presumption against it.

Applied in this case, the audit investigation revealed that there were undeclared VA Table sales more than 30% of
that declared in Asalus' VAT returns. Moreover, Asalus' lone witness testified that not all membership fees,
particularly those pertaining to medical practitioners and hospitals, were reported in Asalus' VAT returns. The
testimony of its witness, in trying to justify why not all of its sales were included in the gross receipts reflected in the
VAT returns, supported the presumption that the return filed was indeed false precisely because not all the sales of
Asalus were included in the VAT returns.

Hence, the CIR need not present further evidence as the presumption of falsity of the returns was not overcome.
Asalus was bound to refute the presumption of the falsity of the return and to prove that it had filed accurate returns.
Its failure to overcome the same warranted the application of the ten (10)-year prescriptive period for assessment
under Section 222 of the NIRC. To require the CIR to present additional evidence in spite of the presumption
provided in Section 248(B) of the NIRC would render the said provision inutile.

Substantial Compliance of Notice Requirement

The CTA also posited that the ordinary prescriptive period of three (3) years applied in this case because there was
no mention in the FAN or the FDDA that what would apply was the extraordinary prescriptive period and that the
CIR did not present any evidence to support its claim of false returns.

Again, the Court disagrees.

It is true that neither the FAN nor the FDDA explicitly stated that the applicable prescriptive period was the ten (10)-
year period set in Section 222 of the NIRC. They, however, made reference to the PAN, which categorically stated
that "[t]he running of the three-year statute of limitation I as provided un4er Section 203 of the 1997 National Internal
Revenue Code (NIRC) is not i applicable xxx but rather to the ten (10) year prescriptive period pursua11t to Section
222(A) of the tax code xxx."   In Samar-I Electric Cooperative v. COMELEC, the Court ruled that it sufficed that the
23 24

taxpayer was substantially informed of the legal and factual bases of the assessment enabling him to file an
effective protest, to wit:

Although, the FAN and demand letter issued to petitioner were not accompanied by a written explanation of the
legal and factual bases of the deficiency taxes assessed against the petitioner, the records showed that respondent
in its letter dated April 10, 2003 responded to petitioner's October 14, 2002 letter-protest, explaining at length the
factual and legal bases of the deficiency tax assessments and denying the protest.

Considerirg the foregoing exchange of correspondence and Document between the parties, we find that the
requirement of Section 228 was substantially complied with. Respondent had fully informed I petitioner in
writing of the factual and legal bases of the deficiency taxes assessment, which enabled the latter to file an
"effective" protest, much unlike the taxpayer's situation in Enron. Petitioner's right to due process was thus not
violated. [Emphasis supplied]

Thus, substantial compliance with the requirement as laid down under Section 228 of the NIRC suffices, for what is
important is that the taxpayer has been sufficiently informed of the factual and legal bases of the assessment so that
it may file an effective protest against the assessment. In the case at bench, Asalus was sufficiently informed that
with respect to its tax liability, the extraordinary period laid down in Section 222 of the NIRC would apply. This was
categorically stated in the PAN and all subsequent communications from the CIR made reference to the PAN.
Asalus was eventually able to file a protest addressing the issue on prescription, although it was done only in its
supplemental protest to the FAN.

Considering the existing circumstances, the assessment was timely made because the applicable prescriptive
period was the ten (10)-year prescriptive period under Section 222 of the NIRC. To reiterate, there was a prima
facie showing that the returns filed by Asalus were false, which it failed to controvert. Also, it was adequately
informed that it was being assessed within the extraordinary prescriptive period.

A Reminder

A lawyer is indeed expected to champion the cause of his client with utmost zeal and competence. Such
exuberance, however, must be tempered to meet the standards of civility and decorum. Rule 8.01 of the Code of
Professional Responsibility mandates that "[a] lawyer shall not, in his professional dealings, use language which is
abusive, offensive or otherwise improper." In Noble v. Atty. Ailes,   the Court cautioned lawyers to be careful in
25

their: choice of words as not to unduly malign the other party, to wit:
Though a lawyer's language may be forceful and emphatic, it should always be dignified and respectful, befitting the
dignity of the legal profession.  The use of intemperate language and unkind ascriptions has no place in the dignity
1âwphi1

of the judicial forum. In Buatis Jr. v. People, the Court treated a lawyer's use of the words "lousy," "inutile," "carabao
English," "stupidity," and "satan" in a letter addressed to another colleague as defamatory and injurious which
effectively maligned his integrity. Similarly, the hurling of insulting language to describe the opposing counsel is
considered conduct unbecoming of the legal profession.

xxx

On this score, it must be emphasized that membership in the bar is a privilege burdened with conditions
such that a lawyer's words and actions directly affect the public's opinion of the legal profession. Lawyers
are expected to observe such conduct of nobility and uprightness which should remain with them, whether
in their public or private lives, and may be disciplined in the event their conduct falls short of the standards imposed
upon them. Thus, in this case, it is inconsequential that the statements were merely relayed to Orlando's brother in
private. As a member of the bar, Orlando should have been more circumspect in his words, being fully
aware that they pertain to another lawyer to whom fairness as well as candor is owed. It was highly improper
for Orlando to interfere and insult Maximino to his client.

Indulging in offensive personalities in the course of judicial proceedings, as in this case, constitutes unprofessional
conduct which subjects a lawyer to disciplinary action. While a lawyer is entitled to. present his case with vigor
and courage, such enthusiasm does not justify the use of offensive and abusive language. The Court has
consistently reminded the members of the bar to abstain from all offensive personality and to advance no fact
prejudicial to the honor and reputation of a party. xxx  [Emphases supplied]
26

While the Court recognizes and appreciates the passion of Asalus' counsels in promoting and protecting its interest,
they must still be reminded that they should be more circumspect in their choice of words to argue their client's
position. As much as possible, words which undermine the integrity, competence and ability of the opposing party,
or are otherwise offensive, must be avoided especially if the message may be delivered in a respectful, yet equally
emphatic manner. A counsel's mettle will not be viewed any less should he choose to pursue his cause without
denigrating the other party.

WHEREFORE, petition is GRANTED. The July 30, 2015 Decision and the November 6, 2015 Resolution of the
Court of Tax Appeals En Banc are REVERSED and SET ASIDE. The case is ordered REMANDED to the Court of
Tax Appeals for the determination of the Value Added Tax liabilities of the Asalus Corporation.

SO ORDERED.

G.R. No. 227544

COMMISSIONER OF INTERNAL REVENUE, Petitioner

vs.
TRANSITIONS OPTICAL PHILIPPINES, INC., Respondent

DECISION

LEONEN, J.:

Estoppel applies against a taxpayer who did not only raise at the earliest opportunity its representative's lack of
authority to execute two (2) waivers of defense of prescription, but was also accorded, through these waivers, more
time to comply with the audit requirements of the Bureau of Internal Revenue. Nonetheless, a tax assessment
served beyond the extended period is void.

This Petition for Review on Certiorari  seeks to nullify and set aside the June 7, 2016 Decision  and September 26,
1 2

2016 Resolution  of the Court of Tax Appeals En Banc in CTA EB No. 1251. The Court of Tax Appeals En Banc
3

affirmed its First Division's September 1, 2014 Decision,  cancelling the deficiency assessments against Transitions
4

Optical Philippines, Inc. (Transitions Optical).

On April 28, 2006, Transitions Optical received Letter of Authority No. 00098746 dated March 23, 2006 from
Revenue Region No. 9, San Pablo City, of the Bureau of Internal Revenue. It was signed by then Officer-in-Charge-
Regional Director Corazon C. Pangcog and it authorized Revenue Officers Jocelyn Santos and Levi Visaya to
examine Transition Optical's books of accounts for internal revenue tax purposes for taxable year 2004. 5

On October 9, 2007, the parties allegedly executed a Waiver of the Defense of Prescription (First Waiver).  In this
6

supposed First Waiver, the prescriptive period for the assessment of Transition Optical's internal revenue taxes for
the year 2004 was extended to June 20, 2008.  The document was signed by Transitions Optical's Finance
7

Manager, Pamela Theresa D. Abad, and by Bureau of Internal Revenue's Revenue District Officer; Myrna S.
Leonida. 8

This was followed by another supposed Waiver of the Defense of Prescription (Second Waiver) dated June 2, 2008.
This time, the prescriptive period was supposedly extended to November 30, 2008. 9

Thereafter, the Commissioner of Inte1nal Revenue, through Regional Director Jaime B. Santiago (Director
Santiago), issued a Preliminary Assessment Notice (PAN) dated November 11, 2008, assessing Transitions Optical
for its deficiency taxes for taxable year 2004. Transitions Optical filed a written protest on November 26, 2008. 10

The Commissioner of Internal Revenue, again through Director Santiago, subsequently issued against Transitions
Optical a Final Assessment Notice (FAN) and a Formal Letter of Demand (FLD) dated November 28, 2008 for
deficiency income tax, value-added tax, expanded withholding tax, and final tax for taxable year 2004 amounting to
₱l 9, 701,849.68.11

In its Protest Letter dated December 8, 2008 against the FAN, Transitions Optical alleged that the demand for
deficiency taxes had already prescribed at the time the FAN was mailed on December 2, 2008. In its Supplemental
Protest, Transitions Optical pointed out that the FAN was void because the FAN indicated 2006 as the return period,
but the assessment covered calendar year 2004. 12

Years later, the Commissioner of Internal Revenue, through Regional Director Jose N. Tan, issued a Final Decision
on the Disputed Assessment dated January 24, 2012, holding Transitions Optical liable for deficiency taxes in the
total amount of ₱l9,701,849.68 for taxable year 2004, broken down as follows;

Tax Amount
Income Tax ₱3,153,371.04
Value-Added Tax 1,231,393.4 7
Expanded Withholding Tax 175,339.51
Final Tax on Royalty 14,026,247.90
Final Tax on Interest Income 1,115,497. 76
Total ₱19,701,849.68 13

On March 16, 2012, Transitions Optical filed a Petition for Review before the Court of Tax Appeals. 14

In her Answer, the Commissioner of Internal Revenue interposed that Transitions Optical's claim of prescription was
inappropriate because the executed Waiver of the Defense of Prescription extended the assessment period. She
added that the posting of the FAN and FLD was within San Pablo City Post Office's exclusive control. She averred
that she could not be faulted if the FAN and FLD were posted for mailing only on December 2, 20081 since
November 28, 2008 fell on a Friday and the next supposed working day, December 1, 2008, was declared a Special
Holiday.15

After trial and upon submission of the parties' memoranda, the First Division of the Court of Tax Appeals (First
Division) rendered a Decision on September 1, 2014.  It held:
16
In summary therefore, the Court hereby finds the subject Waivers to be defective and therefore void. Nevertheless,
granting for the sake of argument that the subject Waivers were validly executed, for failure of respondent however
to present adequate supporting evidence to prove that it issued the FAN and the FLD within the extended period
agreed upon in the 2nd Waiver, the subject assessment must be cancelled for being issued beyond the prescriptive
period provided by law to assess.

WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is hereby GRANTED.
Accordingly, the Final Assessment Notice, Formal Letter of Demand and Final Decision on Disputed Assessment
finding petitioner Transitions Optical Philippines, Inc. liable for deficiency income tax, deficiency expanded
withholding tax, deficiency value-added tax and deficiency final tax for taxable year 2004 in the total amount of
₱19,701,849.68 are hereby CANCELLEU and SET ASIDE.

SO ORDER.ED.  (Emphasis in the original)

17

The Commissioner of Internal Revenue filed a Motion for Reconsideration, which was denied by the First Division in
its Resolution  dated November 7, 2014.
18

The Court of Tax Appeals En Banc affirmed the First Division Decision  and subsequently denied the Commissioner
19

of Internal Revenue's Motion for Reconsideration. 20

Hence, this Petition was filed before this Court. Transitions Optical filed its Comment. 21

Petitioner contends that "[t]he two Waivers executed by the parties on October 9, 2007 and June 2, 2008
substantially complied with the requirements of Sections 203 and 222 of the [National Internal Revenue
Code]."  She adds that technical rules of procedure of administrative bodies, such as those provided in Revenue
22

Memorandum Order (RMO) No. 20-90 issued on April 4, 1990 and Revenue Delegation Authority Order (RDAO) No.
05-01 issued on August 2, 2001, must be liberally applied to promote justice.  At any rate, petitioner maintains that
23

respondent is estopped from questioning the validity of the waivers since their execution was caused by the delay
occasioned by respondent's own failure to comply with the orders of the Bureau of Internal Revenue to submit
documents for audit and examination. 24

Furthermore, petitioner argues that the assessment required to be issued within the three (3)-year period provided
in Sections 203 and 222 of the National Internal Revenue Code refer to petitioner's actual issuance of the notice of
assessment to the taxpayer or what is usually known as PAN, and not the FAN issued in case the taxpayer files a
protest. 25

On the other hand, respondent contends that the Court of Tax Appeals properly found the waivers defective, and
therefore, void. It adds that the three (3)-year prescriptive period for tax assessment primarily benefits the taxpayer,
and any waiver of this period must be strictly scrutinized in light of the requirements of the laws and
rules.  Respondent posits that the requirements for valid waivers are not mere technical rules of procedure that can
26

be set aside. 27

Respondent further asserts that it is not estopped from questioning the validity of the waivers as it raised its
objections at the earliest opportunity.  Besides, the duty to ensure compliance with the requirements of RMO No.
28

20-90 and RDAO No. 05-01, including proper authorization of the taxpayer's representative, fell primarily on
petitioner and her revenue officers. Thus, petitioner came to court with unclean hands and cannot be permitted to
invoke the doctrine of estoppel.  Respondent insists that there was no clear showing that the signatories in the
29

waivers were duly sanctioned to act on its behalf. 30

Even assuming that the waivers were valid, respondent argues that the assessment would still be void as the FAN
was served only on December 4, 2008, beyond the extended period of November 30, 2008.  Contrary to petitioner's
31

stance, respondent counters that the assessment required to be served within the three (3)-year prescriptive period
is the FAN and FLD, not just the PAN.  According to respondent, ''it is the FAN and FLD that formally notifly] the
32

taxpayer, and categorica1ly [demand] from him, that a deficiency tax is due." 33

The issues for this Court's resolution are:

First, whether or not the two (2) Waivers of the Defense of Prescription entered into by the parties on October 9,
2007 and June 2, 2008 were valid; and

Second, whether or not the assessment of deficiency taxes against respondent Transitions Optical Philippines, Inc.
for taxable year 2004 had prescribed.

This Court denies the Petition. The Court of Tax Appeals committed no reversible error in cancelling the deficiency
tax assessments.

As a general rule, petitioner has three (3) years to assess taxpayers from the filing of the return. Section 203 of the
National Internal Revenue Code provides:

Section 203. Period of Limitation Upon Assessment m1d Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return,
and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of
such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year
period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be considered as filed on such last day.

An exception to the rule of prescription is found in Section 222(b) and (d) of this Code, viz:

Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -

....

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax. both the
Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed
within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement
made before the expiration of the period previously agreed upon.

....

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b)
hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in
writing before the expiration of the five (5) - year period. The period so agreed upon may be extended by
subsequent written agreements made before the expiration of the period previously agreed upon.

Thus, the period to assess and collect taxes may be extended upon the Commissioner of Internal Revenue and the
taxpayer's written agreement, executed before the expiration of the three (3)-year period.

In this case, two (2) waivers were supposedly executed by the parties extending the prescriptive periods for
assessment of income tax, value-added tax, and expanded and final withholding taxes to June 20, 2008, and then
to November 30, 2008.

The Court of Tax Appeals, both its First Division and En Banc, declared as defective and void the two (2) Waivers of
the Defense of Prescription for non-compliance with the requirements for the proper execution of a waiver as
provided in RMO No. 20-90 and RDAO No. 05-01. Specifically, the Court of Tax Appeals found that these Waivers
were not accompanied by a notarized written authority from respondent, authorizing the so-called representatives to
act on its behalf. Likewise, neither the Revenue District Office's acceptance date nor respondent's receipt of the
Bureau of Internal Revenue's acceptance was indicated in either document. 34

However, Presiding Justice Roman G. Del Rosario (Justice Del Rosario) in his Separate Concurring Opinion  in the35

Court of Tax Appeals June 7, 2016 Decision, found that respondent is estopped from claiming that the waivers were
invalid by reason of its own actions, which persuaded the government to postpone the issuance of the assessment.
He discussed:
In the case at bar, respondent performed acts that induced the BIR to defer the issuance of the assessment.
Records reveal that to extend the BIR's prescriptive period to assess respondent for deficiency taxes for taxable
year 2004, respondent executed two (2) waivers. The first Waiver dated October 2007 extended the period to
assess until June 20, 2008, while the second Waiver, which was executed on June 2, 2008, extended the period to
assess the taxes until November 30, 2008. As a consequence of the issuance of said waivers, petitioner delayed
the issuance of the assessment.

Notably, when respondent filed its protest on November 26, 2008 against the Preliminary Assessment Notice dated
November 11, 2008, it merely argued that it is not liable for the assessed deficiency taxes and did not raise as an
issue the invalidity of the waiver and the prescription of petitioner's right to assess the deficiency taxes. In its protest
dated December 8, 2008 against the FAN, respondent argued that the year being audited in the FAN has already
prescribed at the time such FAN was mailed on December 2, 2008. Respondent even stated in that protest that it
received the letter (referring to the FAN dated November 28, 2008) on December 5, 2008, which accordingly is five
(5) days after the waiver it issued had prescribed. The foregoing narration plainly does not suggest that respondent
has any objection to its previously executed waivers. By the principle of estoppel, respondent should not be allowed
to question the validity of the waivers.36

In Commissioner of Internal Revenue v. Next Mobile, Inc. (formerly Nextel Communications Phils., lnc.),  this Comi
37

recognized the doctrine of estoppel and upheld the waivers when both the taxpayer and the Bureau of Internal
Revenue were in part de lie to. The taxpayer's act of impugning its waivers after benefitting from them was
considered an act of bad faith:

In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies it caused
to avoid the tax liability determined by the BIR during the extended assessment period. It must be remembered that
by virtue of these Waivers, respondent was given the opportunity to gather and submit documents to substantiate its
claims before the [Commissioner of Internal Revenue] during investigation. It was able to postpone the payment of
taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these benefits, respondent
challenged the validity of the Waivers when the consequences thereof were not in its favor. In other words,
respondent's act of impugning these Waivers after benefiting therefrom and allowing petitioner to rely on the same is
an act of bad faith.
38

This Court found the taxpayer estopped from questioning the validity of its waivers:

Respondent executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely
on them and did not raise any objection against their validity until petitioner assessed taxes and penalties against it.
Moreover, the application of estoppel is necessary to prevent the undue injury that the government would suffer
because of the cancellation of petitioner's assessment of respondent's tax liabilities.  (Emphasis in the original)
39

Parenthetically, this Court stated that when both parties continued to deal with each other in spite of knowing and
without rectifying the defects of the waivers, their situation is "dangerous and open to abuse by unscrupulous
taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind technicalities." 40

Estoppel similarly applies in this case.

Indeed, the Bureau of Internal Revenue was at fault when it accepted respondent's Waivers despite their non-
compliance with the requirements of RMO No. 20-90 and RDAO No. 05-01.

Nonetheless, respondent's acts also show its implied admission of the validity of the waivers. First, respondent
never raised the invalidity of the Waivers at the earliest opportunity, either in its Protest to the PAN, Protest to the
FAN, or Supplemental Protest to the FAN.  It thereby impliedly recognized these Waivers' validity and its
41

representatives' authority to execute them. Respondent only raised the issue of these Waivers' validity in its Petition
for Review filed with the Court of Tax Appeals.  In fact, as pointed out by Justice Del Rosario, respondent's Protest
42

to the FAN clearly recognized the validity of the Waivers,  when it stated:
43

This has reference to the Final Assessment Notice ("[F]AN") issued by your office, dated November 28, 2008. The
said letter was received by Transitions Optical Philippines[,] Inc. (TOPI) on December 5, 2008, five days after the
waiver we issued which was valid until November 30, 2008 had prescribed.  (Emphasis supplied)
44
Second, respondent does not dispute petitioner's assertion  that respondent repeatedly failed to comply with
45

petitioner's notices, directing it to submit its books of accounts and related records for examination by the Bureau of
Internal Revenue. Respondent also ignored the Bureau of Internal Revenue's request for an Informal Conference to
discuss other "discrepancies" found in the partial documents submitted. The Waivers were necessary to give
respondent time to fully comply with the Bureau of Internal Revenue notices for audit examination and to respond to
its Informal Conference request to discuss the discrepancies.  Thus, having benefitted from the Waivers executed at
46

its instance, respondent is estopped from claiming that they were invalid and that prescription had set in.

II

But, even as respondent is estopped from questioning the validity of the Waivers, the assessment is nonetheless
void because it was served beyond the supposedly extended period.

The First Division of the Court of Tax Appeals found that "the date indicated in the envelope/mail matter containing
the FAN and the FLD is December 4, 2008, which is considered as the date of their mailing."  Since the validity
47

period of the second Waiver is only until November 30, 2008, prescription had already set in at the time the FAN
and the FLD were actually mailed on December 4, 2008.

For lack of adequate supp01ting evidence, the Court of Tax Appeals rejected petitioner's claim that the FAN and the
FLD were already delivered to the post office for mailing on November 28, 2008 but were actually processed by the
post office on December 2, 2008, since December 1, 2008 was declared a Special Holiday.  The testimony of
48

petitioner's witness, Dario A. Consignado, Jr., that he brought the mail matter containing the FAN and the FLD to the
post office on November 28, 2008 was considered self-serving, uncorroborated by any other evidence. Additionally,
the Certification presented by petitioner certifying that the FAN issued to respondent was delivered to its
Administrative Division for mailing on November 28, 2008 was found insufficient to prove that the actual date of
mailing was November 28, 2008.

This Court finds no clear and convincing reason to overturn these factual findings of the Court of Tax Appeals. 1âwphi1

Finally, petitioner's contention that the assessment required to be issued within the three (3)-year or extended
period provided in Sections 203 and 222 of the National Internal Revenue Code refers to the PAN is untenable.

Considering the functions and effects of a PAN vis a vis a FAN, it is clear that the assessment contemplated in
Sections 203 and 222 of the National Internal Revenue Code refers to the service of the FAN upon the taxpayer.

A PAN merely informs the taxpayer of the initial findings of the Bureau of Internal Revenue.  It contains the
49

proposed assessment, and the facts, law, rules, and regulations or jurisprudence on which the proposed
assessment is based.  It does not contain a demand for payment but usually requires the taxpayer to reply within 15
50

days from receipt. Otherwise, the Commissioner of Internal Revenue will finalize an assessment and issue a FAN.

The PAN is a part of due process.  It gives both the taxpayer and the Commissioner of Internal Revenue the
51

opportunity to settle the case at the earliest possible time without the need for the issuance of a FAN.

On the other hand, a FAN contains not only a computation of tax liabilities but also a demand for payment within a
prescribed period.  As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the
52

amount assessed and demanded. It also signals the time when penalties and interests begin to accrue against the
taxpayer. Thus, the National Internal Revenue Code imposes a 25% penalty, in addition to the tax due, in case the
taxpayer fails to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment.  Likewise, an interest of 20% per annum, or such higher rate as may be prescribed by rules and
53

regulations, is to be collected from the date prescribed for payment until the amount is fully paid.  Failure to file an
54

administrative protest within 30 days from receipt of the FAN will render the assessment final, executory, and
demandable.

WHEREFORE, the Petition is DENIED. The June 7, 2016 Decision and September 26, 2016 Resolution of the Court
of Tax Appeals En Banc in CTAEB No. 1251 are AFFIRMED.

SO ORDERED.
G.R. No. 201530

ASIATRUST DEVELOPMENT BANK, INC., Petitioners,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondents

DECISION

DEL CASTILLO, J.:

An application for tax abatement is deemed approved only upon the issuance of a termination letter by the Bureau
of Internal Revenue (BIR).

These consolidated Petitions for Review on Certiorari  under Rule 45 of the Rules of Court assail the November 16,
1

2011 Decision  and the April 16, 2016 Resolution  of the Court of Tax Appeals (CTA) En Banc in CTA EB Case Nos.
2 3

614 and 677.

Factual Antecedents

On separate dates in February 2000, Asiatrust Development Bank, Inc. (Asiatrust) received from the Commissioner
of Internal Revenue (CIR) three Formal Letters of Demand (FLD) with Assessment Notices   for deficiency internal
4

revenue taxes in the amounts of P131,909,161.85, P83,012,265.78, and

₱l44,012,918.42 for fiscal years ending June 30, 1996, 1997, and 1998, respectively. 5

On March 17, 2000, Asiatrust timely protested the assessment notices. 6

Due to the inaction of the CIR on the protest, Asiatrust filed before the CTA a Petition for Review  docketed as CTA
7

Case No. 6209 praying for the cancellation of the tax assessments for deficiency income tax, documentary stamp
tax (DST) - regular, DST - industry issue, final withholding tax, expanded withholding tax, and fringe benefits tax
issued against it by the CIR.

On December 28, 2001, the CIR issued against Asiatrust new Assessment Notices for deficiency taxes in the
amounts of ₱l 12,816,258.73, ₱53,314,512.72, and ₱133,013,458.73, covering the fiscal years ending June 30,
1996, 1997, and 1998, respectively. 8

On the same day, Asiatrust partially paid said deficiency tax assessments thus leaving the following balances:
1awp++i1

Fiscal Year 1996

Documentary Stamp Tax ₱13,497,227.80

Final Withholding Tax – Trust 8,770,265.07

Documentary Stamp Tax - Industry Issue 88,584,931.39

TOTAL ₱110,852,424.26

Fiscal Year 1997

Documentary Stamp Tax ₱10,156,408.63
39,163,539.57
Documentary Stamp Tax - Industry Issue

TOTAL 49,319,948.20

Fiscal year 1998

Documentary Stamp Tax ₱20,425,770.07
 Final Withholding Tax – Trust ₱10,183,367.80

Documentary Stamp Tax - Industry Issue 93,430,878.54

TOTAL ₱124,040,016.41 9

On April 19, 2005, the CIR approved Asiatrust's Offer of Compromise of DST - regular assessments for the fiscal
years ending June 30, 1996, 1997, and 1998.  10

During the trial, Asiatrust manifested that it availed of the Tax Abatement Program for its deficiency final withholding
tax - trust assessments for fiscal years ending June 30, 1996 and 1998; and that on June 29, 2007, it paid the basic
taxes in the amounts of P4,187,683.27 and P6,097,825.03 for the said fiscal years, respectively.   Asiatrust also
11

claimed that on March 6, 2008, it availed of the provisions of Republic Act (RA) No. 9480, otherwise known as the
Tax Amnesty Law of 2007.  12

Ruling of the Court of Tax Appeals Division

On January 20, 2009, the CTA Division rendered a Decision  partially granting the Petition. The CTA Division
13

declared void the tax assessments for fiscal year ending June 30, 1996 for having been issued beyond the three-
year prescriptive period.   However, due to the failure of Asiatrust to present
14

documentary and testimonial evidence to prove its availment of the Tax Abatement Program and the Tax Amnesty
Law, the CTA Division affirmed the deficiency DST- Special Savings Account (SSA) assessments for the fiscal
years ending June 30, 1997 and 1998 and the deficiency DST - Interbank Call Loans (IBCL) and deficiency final
withholding tax - trust assessments for fiscal year ending June 30, 1998, in the total amount of
₱142,777,785.91.  Thus:
15

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly,
Assessment Notices issued against [ Asiatrust] for deficiency documentary stamp, final withholding, expanded
withholding, and fringe benefits tax assessments for the fiscal year ended June 30, 1996 are VOID for being
[issued] beyond the prescriptive period allowed by law.

The Assessment Notices issued by [CIR] against [Asiatrust] for deficiency income, documentary stamp - regular,
documentary stamp - trust, and fringe benefits tax assessments for the fiscal years ended June 30, 1997 & 1998 are
hereby ordered CANCELLED and WITHDRAWN. Moreover, [Asiatrust's] deficiency documentary stamp tax - IBCL
assessment for the fiscal year ended June 30, 1997 is ordered CANCELLED and WITHDRAWN.

However, [Asiatrust's] deficiency documentary stamp tax - Special Savings Account assessments for the fiscal
years ended June 30, 1997 & 1998, and deficiency documentary sta..111p tax - IBCL and deficiency final
withholding tax - trust assessments for the fiscal year ended June 30, 1998, in the aggregate amount of ?
142,777,785.91 are hereby i\FFIRMED. The said an1ount is broken down as follows:

Fiscal Year 1997

Documentary Stamp Tax - Industry Issue ₱39,163,539.57

Fiscal Year 1998
Final Withholding Tax – Trust 10,183,367.80
Documentary Stamp Tax - Industry Issue 93,430,878.54

Total Deficiency Tax ₱142,777,785.91

===============
SO ORDERED.  16

Asiatrust filed a Motion for Reconsideration   attaching photocopies of its Application for Abatement Program, BIR
17

Payment Form, BIR Tax Payment Deposit Slip, Improved Voluntary Assessment Program Application Forms, Tax
Amnesty Return, Tax Amnesty Payment Form, Notice of Availment of Tax Amnesty and Statement of Assets and
Liabilities and Networth (SALN) as of June 30, 2005.

The CIR, on the other hand, filed a Motion for Partial Reconsideration of the assessments assailing the CTA
Division's finding of prescription and cancellation of assessment notices for deficiency income, DST - regular, DST -
trust, and fringe benefit tax for fiscal years ending June 30, 1997 and 1998.  18

On July 6, 2009, the CTA Division issued a Resolution   denying the motion of the CIR while partially granting the
19

motion of Asiatrust. The CTA Division refused to consider Asiatrust's availment of the Tax Abatement Program due
to its failure to submit a termination letter from the BIR.   However, as to Asiatrust's availment of the Tax Amnesty
20

Law, the CTA Division resolved to set the case for hearing for the presentation of the originals of the documents
attached to Asiatrust' s motion for reconsideration. 
21

Meanwhile, the CIR appealed the January 20, 2009 Decision and the July 6, 2009 Resolution before the CTA En
Banc via a Petition for Review  docketed as CTA EB No. 508. The CTA En Banc however dismissed the Petition for
22

being premature considering that the proceedings before the CT A Division was still pending. 23

On December 7, 2009, Asiatrust filed a Manifestation  informing the CTA Division that the BIR issued a
24

Certification  dated August 20, 2009 certifying that Asiatrust paid the amounts of ₱4,187,683.27 and ₱6,097,825.03
25

at the Development Bank of the Philippines in connection with the One-Time Administrative Abatement under
Revenue Regulations (RR) No. 15-2006.  26

On March 16, 20l0, the CTA Division rendered an Amended Decision   finding that Asiatrust is entitled to the
27

immunities and privileges granted in the Tax Amnesty Law.   However, it reiterated its ruling that in the absence of a
28

termination letter from the BIR, it cannot consider Asiatrust's availment of the Tax Abatement Program.   Thus, the
29

CTA Division disposed of the case in this wise:

WHEREFORE, premises considered, [Asiatrust's] Motion for Reconsideration is hereby PARTIALLY GRANTED and
this Court's Decision dated January 20, 2009 is hereby MODIFIED. Accordingly, the above-captioned case as
regards [Asiatrust's] liability for deficiency documentaly stamp tax is CLOSED and TERMINATED, subject to the
provisions of R.A. No. 9480. However, (Asiatmst's] liability for deficiency final withholding tax assessment for fiscal
year ended June 30, 1998, subject of this litigation, in the amount of ₱l0,183,367.80, is hereby REAFFIRMED.

SO ORDERED. 30

Still unsatisfied, Asiatrust moved for partial reconsideration  insisting that the Certification issued by the BIR is
31

sufficient proof of its availment of the Tax Abatement Program considering that the CIR, despite Asiatrust's request,
has not yet issued a termination letter. Asiatrust attached to the motion photocopies of its letter'' dated March 17,
2009 requesting the BIR to issue a termination letter, Payment Form   BIR Tax Payment Deposit Slips,   Improved
33 34

Voluntary Assessment Program (IV AP) Payment Fonn,  and a letter  dated October 17, 2007 issued by Revenue
35 36

District Officer (RDO) Ms. Clavelina S. Nacar.

On July 28, 2010, the CTA Division issued a Resolution   denying Asiatrust's motion. The CTA Division maintained
37

that it cannot consider Asiatrust's availment of the Tax Abatement Program in the absence of a termination letter
from the BIR.   As to the Certification issued by BIR, the CTA Division noted that it pertains to fiscal period July 1,
38

1995 to June 30, 1996.  39

Both parties appealed to CTA En Banc.

Ruling of the Court of Tax Appeals En Banc

On November 16, 2011, the CTA En Banc denied both appeals. It denied the CIR' s appeal for failure to file a prior
motion for reconsideration of the Amended Decision,40 while it denied Asiatrust's appeal for lack of merit.  The41
CTA En Banc sustained the ruling of the CT A Division that in the absence of a termination letter, it cannot be
established that Asiatrust validly availed of the Tax Abatement Program.   As to the Certification issued by the BIR,
42

the CTA En Banc noted that it only covers the fiscal year ending June 30, 1996.  As to the letter issued by RDO
43

Nacar and the various BIR Tax Payment Deposit Slips, the CTA En Banc pointed out that these have no probative
value because these were not authenticated nor formally offered in evidence and are mere photocopies of the
purported documents.  44

On April 16, 2012, the CTA En Banc denied the motions for partial reconsideration of the CIR and Asiatrust.45

Issues Hence, the instant consolidated Petitions under Rule 45 of the Rules of Court, with the following issues.

G.R. No. 201530

WHETHER XX X THE [CTA] EN BANC ERRED IN FINDING THAT [ASIATRUST] IS LIABLE FOR DEFICIENCY
FINAL WITHHOLDING TAX FOR FISCAL YEAR ENDING JUNE 30, 1998.

II.

WHETHER X X X THE ORDER OF THE [CTA] EN BANC FOR PETITIONER TO PAY AGAIN THE FINAL
WITIIBOLDING TAX FOR FISCAL YEAR ENDING JUNE 30, 1998 WOULD AMOUNT TO DOUBLE TAXATION.

III.

WHETHER XX X THE [CTA] EN BANC ERRED IN RESOLVING THE ISSUE OF ALLEGED DEFICIENCY FINAL
WrI1ffiOLDING TAX FOR FISCAL YEAR ENDING JUNE 30, 1998 BASED ON MERE TECHNICALITIES.46

G.R. Nos. 201680-81

I.

WHETHER XX X THE [CTA] EN BANC COMMITTED REVERSIBLE ERROR WHEN IT DISMISSED [THE CIR'S]
PETITION FOR REVIEW ON THE GROUND THAT THE LATTER ALLEGEDLY FAILED TO COMPLY WITH
SECTION 1, RULE 8 OF THE REVISED RULES OF THE [CTA].

II.

WHETHER X X X THE [CTA] EN BANC COMMITTED REVERSIBLE ERROR WHEN IT SUSTAINED THE
AMENDED DECISION DATED 16 MARCH 2010 OF THE FIRST DIVISION DECLARING CLOSED AND
TERMINATED RESPONDENT'S LIABILITY FOR DEFICIENCY DOCUMENTARY STAMP TAX FOR TAXABLE
YEARS 1997 AND 1998. 47

G.R. No. 201530

Asiatrust's Arguments

Asiatrust contends that the CTA En Banc erred in affirming the assessment for deficiency final withholding tax for
fiscal year ending June 30, 1998 considering that it already availed of the Tax Abatement Program as evidenced by
the Ce1tification issued by the BIR, the letter issued by RDO Nacar, and the BIR Tax Payment Deposit
Slips.  Asiatrust maintains that the BIR Certification is sufficient proof of its availment of the Tax Abatement Program
48

considering the CIR's unjustifiable refusal to issue a termination letter.  And although the letter and the BIR Tax
49

Payment Deposit Slips were not formally offered in evidence, Asiatrust insists that the CTA En Banc should have
relaxed the rules as the Supreme Court in several cases has relaxed procedural rules in the interest of substantial
justice.  Moreover, Asiatrust posits that since it already paid the basic taxes, the affirmance of the deficiency final
50

withholding tax assessment for fiscal year ending June 30, 1998 would constitute double taxation as Asiatrust would
be made to pay the basic tax twice. 51
The CIR’s Arguments

The CIR, however, points out that the BIR Certification relied upon by Asiatrust does not cover fiscal year ending
June 30, 1998.  And even if the letter issued by RDO Nacar and the BIR Tax Payment Deposit Slips were admitted
52

in evidence, the result would still be the same as these are not sufficient to prove that Asiatrust validly availed of the
Tax Abatement Program.  53

G.R. Nos. 201680-81

The CIR's Arguments

The CIR contends that the CT A En Banc erred in dismissing his appeal for failing to file a motion for
reconsideration on the Amended Decision as a perusal of the Amended Decision shows that it is a mere resolution,
modifying the original Decision.  54

Furthermore, the CIR claims that Asiatrust is not entitled to a tax amnesty because it failed to submit its income tax
returns (ITR’s). 55 The CIR likewise imputes bad faith on the part of Asiatrust in belatedly submitting the documents
before the CTA Division.  56

Asiatrust's Arguments

Asiatrust on the other hand argues that the CTA En Banc correctly dismissed the CIR's appeal for failure to file a
motion for reconsideration on the Amended Decision.  It asserts that an amended decision is not a mere resolution
57

but a new decision. 58

Asiatrust insists that the CIR can no longer assail the Amended Decision of the CTA Division before the Court
9onsidering the dismissal of his appeal for failing to file a motion for reconsideration on the Amended Decision  . In 59

any case, Asiatrust claims that the submission of its IIRs is not required as the Tax Amnesty Law only requires the
submission of a SALN- as of December 31, 2005.  As to its belated submission of the documents, Asiatrust
60

contends that recent jurisprudence aJl9ws the presentation of evidence before the (.TA En Banc even after
trial.   Thus, it follows that the presentation of evidence before the CTA Division should likewise be allowed. 
61 62

Our Ruling

The Petitions lack merit.

G.R. No. 201530

An application for tax abatement is

considered approved only upon the
issuance of a termination letter.

Section 204(B)   of the 1997 National lnten1al Revenue Code (NIRC) empowers the CIR to abate or cancel a tax
63

liability.

On September 27, 2006, the BIR issued .RR No. 15-06 prescribing the guidelines on the implementation of the one-
time administrative abatement of all penalties/surcharges and interest on delinquent accounts and assessments
(preliminary or final, disputed or not) as of .June 30, 2006. Section 4 of RR No. 15-06 provides:

SECTION 4. Who May Avail, - Any person/ taxpayer, natural or juridical, may settle thru this abatement program any
delinquent account or assessment which has been released as of June 30, 2006, by paying an

Amount equal to One Hundred Percent (100%) of the Basic Tax assessed with the Accredited Agent Bank (AAB) of
the Revenue District Office (RDO)/Large Taxpayers Service (LTS)/Large Taxpayers District Office (LTDO) that has
jurisdiction over the taxpayer. In the absence of an AAB, payment may be made with the Revenue Collection
Officer/Deputized Treasurer of the RDO that has jurisdiction over the taxpayer. After payment of the basic tax, the
assessment for penalties/surcharge and interest shall be cancelled by the concerned BIR Office following existing
rules and procedures. Thereafter, the docket of the case shall be forwarded to the Office of the Commissioner, thru
the Deputy Commissioner for Operations Group, for issuance of Termination Letter. 1âwphi1

Based on the guidelines, the last step in the tax abatement process is the issuance of the termination letter. The
presentation of the termination letter is essential as it proves that the taxpayer's application for tax abatement has
been approved. Thus, without a termination letter, a tax assessment cannot be considered closed and terminated.

In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a Certification issued
by the BIR to prove that it availed of the Tax Abatement Program and paid the basic tax. It also attached copies of
its BIR Tax Payment Deposit Slips and a Jetter issued by RDO Nacar. These documents, however, do not prove
that Asiatrust's application for tax abatement has been approved. If at all, these documents only prove Asiatrust's
payment of basic taxes, which is not a ground to consider its deficiency tax assessment closed and terminated.

Since no tennination letter has been issued by the BIR, there is no reason for the Court to consider as closed and
terminated the tax assessment on Asiatrust's final withholding tax for fiscal year ending June 30, 1998. Asiatrust's
application for tax abatement will be deemed approved only upon the issuance of a tem1ination letter, and only then
will the deficiency tax assessment be considered closed and terminated. However, in case Asiatrust's application for
tax abatement is denied, any payment made by it would be applied to its outstanding tax liability. For this reason,
Asiatrust's allegation of double taxation must also fail.

Thus, the Court finds no error on the part of the CTA En Banc in affirming the said tax assessment.

G.R. Nos. 201680-81

An appeal to the CTA En Banc

must be preceded by the filing of a
timely motion for reconsideration or
new trial with the CTA Division.

Section 1, Rule 8 of the Revised Rules of the CTA states:

SECTION 1. Review of cases in the Court en bane. - In cases falling under the exclusive appellate jurisdiction of the
Court en bane, 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.

Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely motion for
reconsideration or new trial must first be filed with the CTA Division that issued the assailed decision or resolution.
Failure to do so is a ground for the dismissal of the appeal as the word "must" indicates that the filing of a prior
motion is mandatory, and not merely directory.  64

The same is true in the case of an amended decision. Section 3, Rule 14 of the same rules defines an amended
decision as "[a]ny action modifying or reversing a decision of the Court en bane or in Division." As explained in CE
Luzon Geothermal Power Company, Inc. v. Commissioner of Internal Revenue,   an amended decision is a different
65

decision, and thus, is a· proper subject of a motion for reconsideration.

In this case, the CIR's failure to move for a reconsideration of the Amended Decision of the CTA Division is a
ground for the dismissal of its Petition for Review before the CTA En Banc. Thus, the CTA En .Banc did not err in
denying the CIR's appeal on procedural grounds.

Due to this procedural lapse, the Amended Decision has attained finality insofar as the CIR is concerned. The CIR,
therefore, may no longer question the merits of the case before this Court. Accordingly, there is no reason for the
Court to discuss the other issues raised by the CIR.

As the Court has often held, procedural rules exist to be followed, not to be trifled with, and thus, may be relaxed
only for the most persuasive reasons.  66
WHEREFORE, the Petitions are hereby DENIED. The assailed November 16, 2011 Decision and the April 16, 2012
Resolution of the Court of Tax Appeals En .Banc in CTA EB Case Nos. 614 and 677 are
hereby AFFIRMED, without prejudice to the action of the Bureau of Internal Revenue on Asiatrust Development
Bank, Inc.'s application for abatement. The Bureau of Internal Revenue is DIRECTED to act on Asiatrust
Development Bank, Inc.'s application for abatement in view of Section 5, Revenue Regulations No. 13-2001.

SO ORDERED.