1. Guagua Electric Light Plant Co. v.

CIR (1967)

Facts: Guagua Electric Light Plant Co. a grantee of municipal franchise by the municipal council of Guagua,
Pampanga under Resolution No. 42 (1927) and by the municipal council of Sexmoan, Pampanga under
Resolution No. 48 (1928) pursuant to Act 667. It paid franchises based on the 5% fixed by Section 259 of the
Tax Code. However, believing that it should pay franchise tax at the lower rates provided for in its franchises, it
filed a claim for refund. It was refunded. The SC categorically ruled in Hoa Hin Co., Inc. vs. David (1959) that
electric franchise holders under Act 567 are liable for franchise tax at the rate fixed by Section 259. The
Commissioner of Internal Revenue recomputed the tax liability. A surcharge was added on the deficiency tax.

Issue: WON Guagua is liable for the surcharge

Ruling: No. it is patently unfair on the part of the Government to require its payment inasmuch as the taxpayer
acted in good faith in paying the franchise tax at the lower rates fixed by its franchises.

2. CIR v. Connel Bros. Company Phil and CA [40 SCRA 416, Aug. 30, 1971]

FACTS: Connel filed petitions for review of the assessments made against it by the Commissioner. The
deficiency assessments arose from the disallowance by the Commissioner of deductions for bad debts,
depreciation, and excess in valuation of leasehold improvements claimed by the taxpayer in its income tax
return for said taxable years. The CTA ordered petitioner to pay the assessed amounts for 1954 and 1955 as
deficiency income taxes, plus the corresponding interests thereon, pursuant to Section 51 of the Tax Code.
CTA modified its decision upon motion for clarification by both parties and applied the provisions of RA No.
2343(effective June 20, 1959) when imposing the interest charges. Commissioner claims that the unamended
provisions of the Tax Code should be the one applicable and not the provisions amended by RA 2343. The CTA
reasoned that by its modification of the Commissioner’s assessment in the Apr. 1966 decision (applied RA
2343), the new assessment was made when the amended provision was already existing and in force.

ISSUE: WON the amended provisions of RA 2343 should be applied.

HELD: No. The unamended provisions apply. Sec. 13 of RA 2343 provides that the rates it provided shall only
apply to income received from Jan. 1, 1959 and for the fiscal periods ending after June 30, 1959. There is no
dispute here that the delinquency taxes became due and the assessments therefor were made before the
date prescribed by RA 2343 (1954 and 1955).

Book: Construing the same provisions of the old Section 51(e) and the present Section 51(d) of the Tax Code,
as amended by RA 2343, the Court has declared that the interests and 25% surcharge on deficiency tax are to
be imposed upon failure of the taxpayer to pay the tax on the date fixed in the law for payment thereof.
Deficiency exists not only from the assessment of the deficiency but from the very time the taxpayer failed to
pay the correct amount due from him.

3. Central Azucarera Don Pedro v CTA, GR L-23236 (1967)

Facts: Petitioner, a domestic corporation had been filing its income tax returns on the fiscal year basis ending
August 31, of every year. Respondent CIR assessed against petitioner a deficiency income tax and interest. It
paid the deficiency tax but protested the imposition of interest, claiming that the imposition of monthly
interest on its deficiency tax for fiscal year 1954-1958, pursuant to Section 51 (d) of the Revenue Code, as
amended by RA No. 2343, is illegal because the imposition of interest of deficiency income tax earned prior to
the effectivity of the amendatory law will be tantamount to giving it retroactive application.
Issue: Whether or not the time prescribed for payment of tax was fixed.
Ruling: Yes. The time prescribed for the payment of tax was fixed, whether or not a notice of the
assessment was given to the taxpayer. From a perusal and comparison of the above quoted sections of the
Tax Code, before and after its amendment, it will be observed that, although the Commissioner (formerly
Collector) of Internal Revenue, under the old Section 51 (a) was required to assess the tax due, based on the
taxpayer's return, and notify the taxpayer of said assessment, still, under subsection (b) of the same old
Section 51, the time prescribed for the payment of tax was fixed, whether or not a notice of the assessment
was given to the taxpayer. Under the new provision, the time of payment is also fixed and pre-determined
(usually coinciding with the filing of the return) without the necessity of giving notification of the assessment
to the taxpayer by the Commissioner.

4. Abad v. CTA
Facts: Armando L. Abad is engaged in business as a distiller and operates two (2) alcohol distilleries, a bonded
warehouse and bonded denaturing warehouse. the Commissioner of Internal Revenue wrote a letter to Abad,
assessing and demanding sales tax and surcharge on the gross selling price of completely denatured alcohol
appellant Abad claims exemption from specific tax on the theory that the mixing of denatured alcohol with
other materials, resulting into rubbing alcohol, varnish, bayrum, lacquer, etc., constitutes use in the arts or
industries, that is, frees the alcohol from tax under Section 128 of the Tax Code
Issue: W/N liable to pay tax
Ruling: Yes B: The rule has to be so because a deficiency tax indicates non-payment of the correct tax, and
such deficiency exists not only from the assessment thereof to pay the correct amount of tax when it should
have been paid; and the imposition thereof is mandatory even in the absence of fraud or willful failure to
pay the tax in full.
We agree with the Tax Court that this claim of appellant is untenable. Under the facts, as stipulated, what is
used or is marketed for use in arts and industries is not the denatured alcohol (as required by Section 128).
Since it loses its identity upon mixture or combination with other materials; what comes into use is the
resultant product, which is different from the denatured alcohol itself.

5. Perez vs. CTA

Facts:
Petitioner was assessed by the Collector with deficiency tax due to its increase in net worth. In making the
deficiency assessments, the Collector employed what is known as the "net worth" technique and started by
determining the opening net worth of petitioner at the start of the year 1947 which he fixed at P936.72. The
petitioner understated his income by 227% for 1946, 564% for 1947, 95% for 1948,486% for 1949,2,946% for
1950 and 490% for 1951. The Court of Tax Appeals found that the consistent under declaration of income,
unexplained acquisition of properties, and the fact of petitioner's having claimed fictitious losses evidenced
fraudulent intent, and ordered him to pay deficiency income taxes and surcharges.Hence, fraud penalty was
imposed.

Issue:

Whether or not fraud penalty imposed is proper.

Ruling.

Yes. The Court said these substantial under-declaration of income for six consecutive years eloquently
demonstrate the falsity or fraudulence of the income tax returns with intent to evade the payment of tax.
Hence, the imposition of the fraud penalty is proper.

6. US v. GOLDSTEIN

Facts:

The assessment notice was released on December 31, 1994 and the amount of deficiency tax, inclusive of
surcharge and deficiency interest, was computed up to January 30, 1995 which is the due date for payment
per assessment notice. The respondent taxpayer failed to pay such tax due, thus, interest was imposed.
Issue:

Whether or not the imposition of interest is proper.

Ruling:

YES.

The imposition of 1% (now 20% annual) interest is but a just compensation to the State for the delay in
paying the tax and for the concomitant use by the taxpayer of funds that rightfully should be in
government’s hand.

7. Aguinaldo Industries Corp v CIR

Facts

For the year 1957, petitioner filed two separate income tax returns — one for its Fish Nets Division and
another for its Furniture Division. After investigation of these returns, the examiners of the Bureau of Internal
Revenue found that the Fish Nets Division deducted from its gross income for that year the amount of
P61,187.48 as additional remuneration paid to the officers of petitioner. The examiner further found that this
amount was taken from the net profit of an isolated transaction (sale of land) not in the course of or carrying
on of petitioner's trade or business. Upon recommendation of aforesaid examiner that the said sum of
P61,187.48 be disallowed as deduction from gross income, with 5% surcharges and 1% interest on deficiency
assessment from date of delay which is November 3 1957. CTA affirmed hence this petition for review of the
decision.
Issue:
Wether or not the petitioner is liable for the interest for late payment
Ruling:
Yes. The applicable law is Section 51 of the Tax Code which, before its amendment by Republic Act
2343 effective June 20, 1959, reads as follows:
(e) Surcharge and interest in case of delinquency. — To any sum or sums due and unpaid after the dates
prescribed in subsections (b), (c) and (d) for the payment of the same, there shall be added the sum of five per
centum on the amount of tax unpaid and interest at the rate of one per centum a month upon said tax from
the time the same became due, except from the estates of insane, deceased, or insolvent persons.

Book: The fact that the interest charged is made proportionate to the period of delay constitutes the best
evidence that such interest is not penal but compensatory.

8. Commissioner of Internal Revenue vs. Fireman's Fund Ins. Co., 148 SCRA 315
Facts:
CIR assessed and demanded from respondent the payment of documentary stamp taxes for the years 1952 to
1958 in the total amount of P79,806.87 and plus compromise penalties, a total of P81,406.87. Respondent
refused to pay the penalties on the ground that it did not give its consent to compromise.
Issue: WON respondent can held liable of the compromise penalty.
Ruling:
No. A compromise penalty is a certain amount of money which the taxpayer pays to compromise a tax
violation that may be the subject of criminal prosecution. A compromise implies mutual agreement. Hence,
a compromise penalty cannot be imposed in the absence of a showing that the taxpayer consented thereto.
If the Commissioner’s offer of compromise is rejected by the taxpayer, the Commissioner cannot enforce it
but he may file a criminal action against the taxpayer for the tax violation. A penalty can be imposed only
on a filing of criminal liability.

9. Mithi ng Bayan Cooperative Marketing Association vs Araneta

Facts: This is an appeal under section 18, Republic Act No. 1125, by the Mithi Ng Bayan Cooperative
Marketing Association, Inc., from that part of a judgment dated 14 August 1948 rendered by the Court of Tax
Appeal upholding the decision of the Collector of Internal Revenue that denied the petitioner's claim for
refund of the sum of P3,590.53 paid by it as privilege or fixed tax upon business and percentage tax, and
surcharge due.

On 3 July 1953, Pedro Guevarra, an agent of the BIR, assigned in San Pablo City, reported to the provincial
revenue agent that the petitioner, an association of persons organized and incorporated as a cooperative
marketing association under the provisions of the Cooperative Marketing Law, Act No. 3425, as amended, and
the Cooperative Law, Act No. 1459, as amended, has been operating a rice mill in barrio Calios, Santa Cruz,
Laguna, where palay owned by members and non-members are milled; that a fee is charged and collected by
the petitioner from the owners for milling their palay; and that the petitioner paid the fixed tax of P10 due for
the year 1952 and the percentage tax of 2 per cent due on the total value of rice milled during the first and
second quarters of 1952 but did not pay the fixed tax due for the year 1953 and the percentage tax of 2 per
cent due on the total value of rice milled during the third quarter of 1952 to the first quarter of 1953. The
agent recommended that a letter be sent to the petitioner demanding payment of the total sum of P3,610.53.
After hearing, on December 1954 the Conference Staff recommended to the respondent Collector the
enforcement of the assessment dated 19 December 1953 for taxes and surcharge in the sum of P3,590.53 and
suggested the imposition upon the petitioner of a compromise penalty in the sum of P100. These were all paid
and the petitioner now seeks refund.

Issue: WON the commissioner may collect compromise penalties.

Ruling: No. With respect, to the sum of P100 as compromise penalty, the collection thereof being
unauthorized and illegal, respondent is ordered to refund the said amount, plus interest at the legal rate. The
Commissioner has no power to impose and collect the compromise penalties in the absence of a
compromise agreement validly entered into between the taxpayer and the Commissioner.

*10 omitted*

11. Modern Imaging Solutions Inc, vs CIR

Facts: CIR assessed Modern Imaging Solutions, Inc. (MISI), a Philippine branch of a US corporation, for alleged
deficiency income tax, withholding tax, and documentary stamp tax (DST) for taxable year 2009. The BIR
alleged that MISI has undeclared income from an unaccounted source of cash based on the finding that some
of the rental payments were not reflected in the Financial Statements. MISI protested the assessments but BIR
failed to act on its protest, MISI filed a Petition for Review at the CTA. The CTA Second Division ruled that MISI
is not liable for deficiency income tax. The BIR filed a Motion for Reconsideration and upon denial, a Petition
for Review at the CTA En Banc.

Issue: Whether or not petitioner has any remedy for the inaction of its protest by the BIR

Ruling: Yes. If the protest is denied in whole in part, or is not acted upon within 180 days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the CTA within 30 days
from receipt of the said decision, or from the lapse of the 180-day period; otherwise, the decision shall
become final, executory, and demandable. Should petitioner decide not to submit any supporting documents
within 60 days from the date of filing of the protest, the same does not render the assessment final and
executory. Considering that petitioner did submit any supporting documents within 60-day period provided by
law, the 180-day period shall be counted from the date of filing of the protest. (BOOK)
12. Corona vs. United Pilot Association

Facts:

In issuing Administrative Order No. 04-92 (PPA-AO No. 04-92), limiting the term of appointment of harbor pilots to one
year subject to yearly renewal or cancellation, the respondents United Harbor Pilots Association and the Manila Pilots
Association, through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the Department of
Transportation and Communication

Issue: Whether or not due process of law was complied with when PPA-AO No. 04-92 was issued

Ruling:
Yes. It is readily apparent that PPA-AO No. 04-92 unduly restricts the right of harbor pilots to enjoy their profession
before their compulsory retirement. It is this pre-evaluation cancellation which primarily makes PPA-AO No. 04-92
unreasonable and constitutionally infirm. In a real sense, it is a deprivation of property without due process of law.

When one speaks of due process of law, however, a distinction must be made between matters of procedure and
matters of substance. In essence, procedural due process "refers to the method or manner by which the law is
enforced," while substantive due process "requires that the law itself, not merely the procedures by which the law
would be enforced, is fair, reasonable, and just.

13. Meralco Securities v Savellano

Facts:
The late Juan G. Maniago (substituted in these proceedings by his wife and children) submitted to petitioner
Commissioner of Internal Revenue confidential denunciation against the Meralco Securities Corporation for tax evasion
for having paid income tax only on 25 % of the dividends it received from the Manila Electric Co, thereby allegedly
shortchanging the government of income tax due from 75% of the said dividends.

 Commissioner caused the investigation of the denunciation after which he found and held that no deficiency corporate
income tax was due from the Meralco Securities Corporation since under the law then prevailing (in the case of
dividends received by a domestic or foreign resident corporation liable to corporate income tax only 25% shall be
returnable for the purposes of the tax. The Commissioner rejected Maniago's contention that the Meralco from whom
the dividends were received is not a domestic corporation liable to tax.

In a letter, the Commissioner denied Maniago's claim for informer's reward on a non-existent deficiency. This action of
the Commissioner was sustained by the Secretary of Finance. Maniago filed a petition for mandamus to compel the
Commissioner to impose the alleged deficiency tax assessment on the Meralco Securities Corporation and to award to
him the corresponding informer's reward under the provisions of R.A. 2338.

The Commissioner filed a motion to dismiss, arguing that since in matters of issuance and non-issuance of
assessments, he is clothed under the National Internal Revenue Code and existing rules and regulations with
discretionary power in evaluating the facts of a case and since mandamus win not lie to compel the performance of a
discretionary power, he cannot be compelled to impose the alleged tax deficiency assessment. 

On the other hand, the Meralco Securities Corporation averred that since no taxes have actually been recovered
and/or collected, Maniago has no right to recover the reward prayed for

The respondent judge rendered a decision granting the writ prayed for and ordering the Commissioner to assess and
collect from the Meralco Securities Corporation the sum of P51,840,612.00 as deficiency corporate income tax plus
interests and surcharges due thereon and to pay 25% to Maniago as informer's reward.

Issue: 
Whether or not mandamus is proper in this case

Held:

No. It is furthermore a well-recognized rule that mandamus only lies to enforce the performance of a ministerial act or
duty and not to control the performance of a discretionary power. Purely administrative and discretionary functions may
not be interfered with by the courts. Discretion means the power or right conferred upon the office by law of acting
officially under certain circumstances according to the dictates of his own judgment and conscience and not controlled
by the judgment or conscience of others. Mandamus may not be resorted to so as to interfere with the manner in which
the discretion shall be exercised or to influence or coerce a particular determination
Moreover, since the office of the Commissioner of Internal Revenue is charged with the administration of revenue
laws, which is the primary responsibility of the executive branch of the government, mandamus may not be against
the Commissioner to compel him to impose a tax assessment not found by him to be due or proper for that would be
tantamount to a usurpation of executive functions.

In the case, after the Commissioner who is specifically charged by law with the task of enforcing and implementing the
tax laws and the collection of taxes had after a mature and thorough study rendered his decision or ruling that no tax is
due or collectible, and his decision is sustained by the Secretary, such decision or ruling is a valid exercise of discretion in
the performance of official duty and cannot be controlled much less reversed by mandamus.

No deficiency taxes may therefore be assessed and collected against the said corporation. Since no taxes are to be
collected, no informer's reward is due to private respondents as the informer's heirs. Since no assessment, much less
any collection, has been made in the instant case, respondent judge's writ for the Commissioner to pay respondents
25% informer's reward is gross error and without factual nor legal basis.

*Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls
within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals. 
*The determination of the correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable, falls
within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance.
Notes:
Informer's reward is contingent upon the payment and collection of unpaid or deficiency taxes. informer is entitled by
way of reward only to a percentage of the taxes actually assessed and collected. 

14. YUCONG VS. TRINIDAD

Facts: The petitioner, Yu Cong Eng, was charged with a violation of Act 2972, which provides that (Section 1) it
shall be unlawful for any person, company, or partnership or corporation engaged in commerce, industry or
any other activity for the purpose of profit in the Philippine Islands, in accordance with existing law, to keep its
account books in any language other than English, Spanish or any local dialect.
Issue: Whether or Not Act 2972 is unconstitutional. 
Held: Yes. Although tax statutes, like other legislation, enjoy the presumption of validity and constitutionality,
but we are clearly of opinion that it is not within the police power of the Philippine Legislature to prohibit all
Chinese merchants from maintaining a set of books in the Chinese language, and in the Chinese characters,
and thus prevent them from keeping advised of the status of their business and directing its conduct, because
it would be oppressive and arbitrary.

15. MANILA ELECTRIC COMPANY, recurrente, contra EL AUDITOR GENERAL y LA COMISION DE SERVICIOS
PUBLICOS, recurridos. (Yes, the full text was in Spanish. Me no habla espanol. I had to Google Translate it…
Sorry.)
FACTS:  Petitioner-appellant filed an appeal against the decision of the Auditor General, that denied her
request for reimbursement of the amount of P11,557.24, which she(Manila Electric Company) said she had
paid under protest, for having demanded the Commission of Public Services in 1939 to pay it, implying that it
was for rights corresponding to that year, under the provisions of Commonwealth Law No. 454, it was actually
filed within the 30-day period allowed by Law No .327 of the Commonwealth, excluding the last day for having
coincided with a holiday, (Thursday of Holy Week), followed by three others that were also holidays, (Friday
and Saturday of the same week and Sunday). The appellant contends that both the Commonwealth Law No.
146 and the Law No. 454 that the amendment are unconstitutional for not making any reference to the two, in
their respective titles, of rights to be charged for the duties expressed therein.
ISSUE: Were the assailed statues constitutional? And when can such tax statutes be attacked in the courts?
HELD: Yes. Since Law No. 454 is mere amendment of Law No. 146, so to speak expressly the same title, it is
unquestionable and clear that if it deals with things included in the title of the last one, that is Law No. 146,
although none of it is said in express terms in its own title, does not violate the constitutional provision that
every law should not embrace more than one subject and that this is expressed in its title.
(Book) A tax statute may be attacked in the courts not only by reason of non-observance or violation of the
constitutional limitations on the exercise of the taxing power, but also on account of violation or non-
observance of the procedure laid down by the fundamental law on the enactment of legislation.
16. ABS-CBN BROADCASTING CORPORATION v. CTA

Facts: Petitioner was engaged in the business of telecasting local as well as foreign films acquired from foreign
corporations not engaged in trade or business within the Philippines, for which petitioner paid rentals after
withholding income tax of 30% of one-half of the film rentals. In so far as the income tax on non-resident
corporations is concerned, section 24 (b) of the National Internal Revenue Code. On 1961, in implementation
of the aforequoted provision the CIR issued General Circular No. V-334. Petitioner dutifully withheld and
turned over to the BIR the amount of 30% of one-half of the film rentals paid by it to foreign corporations not
engaged in trade or business within the Philippines.  The last year that petitioner withheld taxes pursuant to
the foregoing Circular was in 1968.

On 1968, Republic Act No. 5431 amended Section 24(b) of the Tax Code increasing the tax rate from 30% to
35% and revising the tax basis from "such amount" referring to rents, etc. to "gross income". The CIR issued
Revenue Memorandum Circular No. 4-71, revoking General Circular No. V-334, and holding that the latter was
"erroneous for lack of legal basis," because "the tax therein prescribed should be based on gross income
without deduction whatever. Consequently, the ruling in General Circular No. V-334, allowing the deduction of
the proportionate cost of production or exhibition of motion picture films from the rental income of non-
resident foreign corporations, is erroneous for lack of legal basis. Henceforth, local films distributors and
exhibitors shall deduct and withhold 35% of the entire amount payable by them to non-resident foreign
corporations, as film rental or royalty, or whatever such payment may be denominated, without any
deduction whatever, pursuant to Section 24(b). CIR issued against petitioner a letter of assessment and
demand, requiring them to pay deficiency withholding income tax on the remitted film rentals for the years
1965 through 1968 and film royalty as of the end of 1968. Petitioner requested for a reconsideration and
withdrawal of the assessment. However, without acting thereon, respondent, issued a warrant of distraint and
levy over petitioner's properties. The CTA found it in accordance with law.

Issue: Whether CIR is correct.

Ruling: No. It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of
Internal Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers.
The prejudice to petitioner of the retroactive application of Memorandum Circular No. 4-71 is beyond
question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes
under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding
income tax was also made three years after 1968 for a period of time commencing in 1965. Petitioner was no
longer in a position to withhold taxes due from foreign corporations because it had already remitted all film
rentals and no longer had any control over them when the new Circular was issued. 

17. CIR v Benguet Corporation

FACTS: Benguet sold gold to the central bank relying on (BIR) VAT Ruling which declared that the sale of gold to Central
Bank was considered as export sale subject to VAT at zero-rate. It then filed applications for tax refunds/credits
corresponding to input VAT it paid, but these applications were either unacted upon or expressly disallowed by CIR. In
addition, CIR issued a deficiency assessment when, after applying Benguet’s creditable input VAT costs against the
retroactive 10% VAT levy, there resulted in a balance of output VAT payable.

ISSUE: WON the new BIR ruling which changed the VAT categorization of respondent’s transactions with the Central
Bank from zero-rated to 10% can be applied retroactively to Benguet’s sale of gold to the Central Bank.

RULING: NO. Applying the ruling retroactively would be prejudicial to the taxpayer. (BOOK)

At the time when the subject transactions were consummated, the prevailing BIR regulations relied upon by Benguet
ordained that gold sales to the Central Bank were zero-rated. Benguet should not be faulted for relying on the BIRs
interpretation of the said laws and regulations. While it is true, as CIR alleges, that government is not estopped from
collecting taxes which remain unpaid on account of the errors or mistakes of its agents and/or officials and there could
be no vested right arising from an erroneous interpretation of law, these principles must give way to exceptions based
on and in keeping with the interest of justice and fair play.

18. CIR vs. Michel Lhuilier Pawnshop [2003]

FACTS: On 1991, the CIR issued Revenue Memorandum Order (RMO) No. 15-91, which was clarified by RMO No. 43-91
imposing a 5% lending investors tax on pawnshops. It held that the principal activity of pawnshops is lending money at
interest and incidentally accepting personal property as security for the loan. Since pawnshops are considered as lending
investors effective, they also become subject to documentary stamp taxes.

On 1997, the Bureau of Internal Revenue (BIR) issued an Assessment Notice against Lhuillier demanding payment of
deficiency percentage.

Lhuillier filed an administrative protest with the Office of the Revenue Regional Director contending that neither the Tax
Code nor the VAT Law expressly imposes 5% percentage tax on the gross income of pawnshops; that pawnshops are
different from lending investors, which are subject to the 5% percentage tax under the specific provision of the Tax
Code; that RMO No. 15-91 is not implementing any provision of the Internal Revenue laws but is a new and additional
tax measure on pawnshops, which only Congress could enact, and that it impliedly amends the Tax Code, and that it is a
class legislation as it singles out pawnshops.

ISSUE:  Whether or not Revenue Memorandum Order No. 15-91 and Revenue Memorandum Circular 43-91 are valid.

RULING: No. Adding to the invalidity of the RMC No. 43-91 and RMO No. 15-91 is the absence of publication. While the
rule-making authority of the CIR is not doubted, like any other government agency, the CIR may not disregard legal
requirements or applicable principles in the exercise of quasi-legislative powers. The due observance of the
requirements of notice, hearing and publication should not have been ignored.

19. CIR vs Filinvest Dev. Corp

The owner of 80% of the outstanding shares of Filinvest Alabang, Inc. (FAI), Filinvest Development Corporation
(FDC) is a holding company which also owned 67.42% of the outstanding shares of Filinvest Land, Inc. (FLI).
FDC and FAI entered into a Deed of Exchange with FLI whereby the former both transferred in favor of the
latter parcels of land. In exchange for said parcels, 463,094,301 shares of stock of FLI were issued to FDC and
FAI. As a result of the exchange, FLI’s ownership structure was changed.

FDC received from the BIR a Formal Notice of Demand to pay deficiency income and documentary stamp
taxes, plus interests and compromise penalties. Respondent alleged that no taxable gain should have been
assessed from the subject Deed of Exchange since FDC and FAI collectively gained further control of FLI as a
consequence of the exchange; that correlative to the CIR's lack of authority to impute theoretical interests on
the cash advances FDC extended in favor of its affiliates, the rule is settled that interests cannot be demanded
in the absence of a stipulation to the effect; that not being promissory notes or certificates of obligations, the
instructional letters as well as the cash and journal vouchers evidencing said cash advances were not subject
to documentary stamp taxes; and, that no income tax may be imposed on the prospective gain from the
supposed appreciation of FDC's shareholdings in FAC.

Issue: W/N the assessments for deficiency income and documentary stamp taxes were valid.
Ruling: No.

BOOK
Sec. 43 of the Tax Code authorizes the CIR to distribute, allocate, or apportion gross income or deductions
between or among controlled corporations in order to prevent evasion of taxes. However, CIR does not
include the power to impute “theoretical interests” to the controlled taxpayer’s transactions. There must be
proof of actual or at least, probable receipt or realization by the controlled taxpayer of the item of gross
income sought to be distributed or allocated by CIR.

Here, CIR adduced no concrete proof that said funds were the source of the advances Filinvest provided its
facilities
*20 omitted*
21. Missouri Square vs CIR

Facts:
Petitioner received a PAN on January 14, 2013, finding petitioner liable for deficiency income tax and
VAT. Thereafter, petitioner received a FAN and Letter of demand on January 21, with attached details of
discrepancies from respondent , assessing petitioner for deficiency income tax and VAT, in the amount of
1618, 397.77, and 247, 281.58, respectively, inclusive of interest , for taxable year 2009 .

Issue: W/N the assessment was null and void

Ruling:
Yes. The assessment is null and void for having been issued within 15 days from receipt of the PAN. It
is undisputed that petitioner received the PAN on January 14 and seven (7) days thereafter, petitioner
received the FAN on January 21.
Failure to strictly comply with the requirements laid down by law and its own rules os a denial of the
taxpayer’s right to due process. Sec 3 of Revenue Regulations (RR) 12-99, provides the due process
requirements for the issuance of a deficiency tax assessment. In particular, Sec 3.1.2 referes to the due
process requirements for the issuance of the PAN and assessment notice. The taxpayer’s receipt of the FAN
7 days after the receipt of the PAn is a violation of the due process requirements in the issuance of a
deficiency tax assessment.
22. PNZ Marketing vs CIR
Facts:
 Petitioner is a corporation duly organized and existing under and by virtue of the Jaws of the Republic
of the Philippines, engaged in business as importer and dealer of powdered and skimmed milk and other
related products, with principal office ot 415 Arayat Street, Mandaluyong City. Petitioner received formal
assessment notice and Demand letter from herein Respondent stating therein Petitioner's alleged deficiency
income tax liability.
Petitioner, through its external auditor, Sycip Gorres Velayo and Company (SGV & Co.), duly filed with
the Bureau of Internal Revenue (BIR) an administrative protest Jetter.3 On July 6, 1998, Petitioner filed with
the BIR a supplemental protest letter, reiterating its disagreement to the subject income tax assessment. As no
action was undertaken by the Respondent on the aforesaid protest letters, Petitioner filed an appeal with this
Court on January 29,1999 in order to toll the running of the prescriptive period
Issue:
Whether or not the subject income tax assessment is void for failing to comply with the requirements
under Section 228 of the Tax code requiring that the law and the facts upon which the assessment is made
should be clearly stated;
Held:
No. A perusal of the records indicates a successful attempt on Respondent's part to comply with the
rules. The assessment notice, while vague at first glance is subsequently cured by the demand letter which
shows the legal and factual basis relied upon by the Respondent in issuing the assessment.
(BOOK)If the assessment notice was deemed insufficient insofar as compliance with Section 228 of
the Tax Code is concerned, such insufficiency can be cured if the demand letter can show the legal and
factual basis relied upon in the issuance of the assessment which the assessment notice failed to detail. The
rule requiring the Bir to inform the taxpayer in writing of the laws and the facts on which the assessment is
made runs parallel to the due process clause for it is believed that it is only through a detailed appraisal of
its basis that the taxpayer may be able to dispute the imposition or agree with it.

23. Tupaz v. Ulep G.R. No. 127777, October 1, 1999

FACTS:
State Prosecutor filed with the Metropolitan Trial Court (MeTC), Quezon City an information against
herein petitioner Petronila C. Tupaz and her late husband, Jose J. Tupaz, Jr., as corporate officers of El Oro
Engravers Corporation for nonpayment of deficiency in corporate income tax for the year 1979 but was later
dismissed and denied upon reconsideration.

Subsequently, the same prosecutor filed two (2) informations before Regional Trial Court (RTC), for the
same alleged non-payment of deficiency of corporate income tax for the year 1979, one was raffled to Branch
105 while the other to Branch 86.  Respondent Judge Ulep issued an order directing the prosecution to
withdraw the information in Branch 86 after discovering that said information was identical to that filed with
Branch 105.  The prosecutor withdrew the information and was granted. But later on filed a motion to
reinstate the same, stating that the motion to withdraw information was made through palpable mistake, and
the result of excusable neglect—to which the respondent Judge granted the motion over the objections of the
petitioner.  Petitioner files this petition assailing that respondent Judge committed a grave abuse of discretion
in reinstating the information because the offense has prescribed and exposed her to double jeopardy.

ISSUE: WON internal revenue taxes are self-assessing?

HELD:
Yes. At the outset, it must be stressed that internal revenue taxes are self-assessing and no further
assessment by the government is required to create the tax liability. An assessment, however, is not
altogether inconsequential; it is relevant in the proper pursuit of judicial and extra judicial remedies to enforce
taxpayer liabilities and certain matters that relate to it, such as the imposition of surcharges and interest, and
in the application of statues of limitations and in the establishment of tax liens.

An assessment contains not only a computation of tax liabilities, but also a demand for payment within
a prescribed period. The ultimate purpose of assessment is to ascertain the amount that each taxpayer is to
pay.18 An assessment is a notice to the effect that the amount therein stated is due as tax and a demand for
payment thereof.19 Assessments made beyond the prescribed period would not be binding on the taxpayer.

We agree with the Solicitor General that the shortened period of three (3) years prescribed under B.P.
Blg. 700 is not applicable to petitioner. B.P. Blg. 700, effective April 5, 1984, specifically states that the
shortened period of three years shall apply to assessments and collections of internal revenue taxes beginning
taxable year 1984. Assessments made on or after April 5, 1984 are governed by the five-year period if the
taxes assessed cover taxable years prior to January 1, 1984. 21 The deficiency income tax under consideration is
for taxable year 1979. Thus, the period of assessment is still five (5) years, under the old law. The income tax
return was filed in April 1980. Hence, the July 16, 1984 tax assessment was issued within the prescribed period
of five (5) years, from the last day of filing the return, or from the date the return is filed, whichever comes
later.
CHAPTER 30 – ASSESSMENT AND PROTEST

24. CIR vs CTA, 27 SCRA 1159, No. L-21483 April 28, 1969

Facts: Collector of Internal Revenue wrote respondent Vicente Kho demanding from the latter payment of his
deficiency income tax for the calendar year 1951 amounting to P1,128,444.00. It appears, however, that this
letter of demand and the accompanying assessment notice dated November 5, 1952 were not effectively
served upon respondent Vicente Kho in due course by reason of the fact that he had transferred his residence
from Guiuan, Samar, to Cebu City without the knowledge of the BIR Commissioner. Despite the fact that the
letter of demand and the assessment notice had not been effectively served upon respondent Vicente Kho, he
must have obtained personal knowledge of the assessment levied against him.

Issue: W/N the Assessment can be be in the form of a letter addressed to the taxpayer informing him of the
final action taken on his tax liability?

RULING: Yes. It is to be observed that the decision of the BIR Commissioner contemplated by the statute may
be in the form of a letter addressed to the taxpayer informing him of the final action taken on his tax liability.
Respondent taxpayer should have been more diligent in ascertaining the tenor of the letter-decision he
received from .the BIR
BOOK: An Assessment is the notice to the effect that the amount therein stated is due from a taxpayer as a tax
with a demand for payment of the same within a stated period of time.

25. BISAYA LAND TRANSPORTATION CO. v COLLECTOR

105 Phil. 1338; 1959

FACTS: Bisaya Land Transportation Co. acquired equipment from the United States Commercial Co. which it
used in the operation of its buses, without paying the corresponding compensating and specific taxes. On
investigation of its books by revenue agents, it was discovered that its gross receipts of the transportation
business from 1946 to 1951 were not declared for taxation. It was also found that from 1945 to 1952, the
petitioner issued freight receipts but the corresponding documentary stamps were not affixed thereto. A
deficiency additional residence tax was also determined. After a series of exchange of communications
between the petitioner and the respondent Collector of Internal Revenue, the latter assessed the petitioner
and demanded the total amount of P4,949.91, consisting of (1) compensating tax; (2) common carrier's
percentage tax; (3) documentary stamp tax; and (4) additional residence tax. 

ISSUE: What is an assessment?

HELD: It is also refer to the official action of an administrative officer in determining the amount of tax due
from a taxpayer.
26. TUPAZ v ULEP

FACTS: On January 10, 1991, 2 informations were filed before the RTC of Q.C. against Petitioner spouses for
the same alleged non-payment of deficiency corporate income tax for the year 1979.

Prior to this, petitioner was charged with nonpayment of deficiency corporate income tax for the year 1979,
which tax return was filed in April 1980. On July 16, 1984, the BIR issued a notice of assessment. Petitioner
contends that the July 16, 1984 assessment was made out of time.

Petitioner avers that while Sec. 318 and 319 of the 1977 NIRC provide a 5-year period of limitation for the
assessment and collection of internal revenue taxes, BP700, enacted on February 22, 1984, amended the 2
sections and reduced the period to 3 years to assess the tax liability, counted from the last day of filing the
return or from the date the return is filed, whichever comes later. Since the tax return was filed in April 1980,
the assessment made on July 16, 1984 was beyond the 3-year prescriptive period.

ISSUES: 1.) What is an assessment;

2.) W/N an assessment made beyond the prescribed period would still be binding on the taxpayer
RULING: 1.) YES. An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a prescribed period. The ultimate purpose of assessment is to ascertain the amount that
each taxpayer is to pay. An assessment is a notice to the effect that the amount therein stated is due as tax
and a demand for payment thereof.

2.) NO. Assessments made beyond the prescribed period would not be binding on the taxpayer.

27. Commissioner of Internal Revenue vs. Hantex Trading Co., Inc.

Facts: Respondent is engaged in plastic sale and imports materials for its production. According to the
informer, based on photocopies of 77 Consumption Entries furnished by another informer, the 1987
importations of the respondent were understated in its accounting records, thus the investigation of the
books. However, the respondent’s president and general manager refused to comply with the subpoena,
contending that its books of accounts and records of importation. had been investigated repeatedly by the
Bureau of Internal Revenue (BIR) on prior occasions. The IIPO explained that despite such previous
investigations, the EIIB was still authorized to conduct an investigation, but was still ignored by the
respondent. Petitioner now requested from SEC certified copies of the Profit and Loss Statemends but was
refused as the original had been eaten by termites, but was only sent machine copies thereof. Import entries
in the Port was also requested but failed to acquire the same as original copies were unavailable, but were
sent a list of payment of duties and taxes. These documents were the basis for the investigation which
concluded that respondent has indeed underdeclared their importation dues.

Issue: whether or not the assessment was valid.

Held: No. The CTA cancelled the deficiency assessments and ruled that the summary list of purchases
received by the BIR were not verified with other externally sourced data to check the integrity of the
information gathered. Indeed the Integrated Tax System of the BIR can only check or validate the format and
possible viruses in the computer program, but certainly not the content or substance of encoded summary
lists of purchases, according to the witness of the BIR. The court concluded that while it is true tax
assessments have the presumption of correctness and regularity in its favour, it is equally true that
assessments should not be based on mere presumptions, no matter how reasonable or logical the
presumption might be.
*28 omitted*
29. CIR v. Fort Bonifacio Development Corporation [CTA En Banc 481, Jan. 5, 2010]
FACTS: CIR assessed deficiency income tax and VAT against respondent, which arose from the discrepancy
based on the computerized matching conducted by the BIR on respondent’s sales and customer purchases for
the 4th quarter of 2002. Respondent protested the assessment, alleging that the assessment notices and the
corresponding formal letter of demand are null and void for failure to state clearly the law and facts on which
the assessments were made, contrary to the due process requirements. CTA first division cancelled the
deficiency VAT and sustained the deficiency income tax. Respondent filed petition for review with the CTA EB.
CTA EB cancelled the assessment notice. CIR filed MR, denied. CIR filed petition for review.

ISSUE: WON the CTA erred in cancelling the Assessment Notices

HELD: No. The “no contact-audit approach” implemented by RMO 42-2003 authorized BIR to conduct a
computerized matching of data/information from 3rd party sources/providers in relation to the return filed by
the taxpayers. However, since the procedure will not conduct an audit or investigation of the entire books of
account of the taxpayer, the BIR must show its basis to support the assessment based on the found
discrepancies. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts.
The presumption of correctness of assessment, being a mere presumption, cannot be made to rest on
another presumption.

30. Philippine Daily Inquirer v CIR, CTA 7853 (2012)

Facts: Respondent Commissioner of Internal Revenue assessed Petitioner Philippine Daily Inquirer for alleged
deficiency income tax and VAT for taxable year 2004 based on a computerized matching of information
provided by third party against petitioner’s VAT returns, the CIR claimed that petitioner under-declared its
purchases for 2004 which resulted in undeclared income that is subject to income tax and VAT.
Petitioner protested the assessment and argued, among others, that it did not under-declare its gross income
for 2004. As the CIR failed to act on the protest within the prescribed period, PDI filed a Petition for Review
with the CTA.
Issue: Whether or not petitioner is liable for deficiency VAT and income tax?
Ruling: No. The CIR’s theory that under declaration of purchases translates to taxable income for income tax
purposes and taxable gross receipts for VAT purposes has no basis. The whole income tax assessment and
part of the VAT assessment rest on the finding that there is under-declared input tax in the amount of
P12,715,371.17. Simply put, the theory of CIR is that since there is an under-declaration of input tax and
correspondingly, of purchases, the same should translate to taxable income for income tax purposes, and
taxable gross receipts, for VAT purposes. In the imposition of VAT, what is critical to be shown is that the
taxpayer received an amount of money or its equivalent, and not when there are under-declared input
taxes on purchases. Since it was erroneous for respondent to impose a deficiency income tax on the basis of
an under-declared input tax, the income tax return cannot be treated as false. Such being the case, the
prescriptive period to be applied is the three-year period. In this case, the CIR failed to offer proof that the
first, second, and third waivers were executed in three copies; hence, the assessments are cancelled and set
aside.
31. CIR v. Reyes
Facts: In 1997, The Regional District Office of South Makati conducted an investigation on the estate left by
Maria C. Tancinco who died in 1993. Based on the old Tax Code, a Letter of Authority was issued to Reyes, a
heir, without the submission of preliminary findings. In 1998, the CIR issued a Final Assessment Notice (FAN)
demanding a payment of 14.9M of taxes including surcharge and interest. The new Tax Reform Act was also
made effective in 1998. Reyes applied for compromise and paid 1M on Jan 29 2001.
In 2001, Reyes filed a motion that the assessment is settled through a perfected compromise. CTA favored the
CIR declaring that without the approval of NEB, the compromise cannot be perfected. Therefore, CTA denied
the petition and ordered Reyes to pay the deficiency estate tax of 19.5M plus delinquency interest.
ISSUE: Whether or not the assessment against the estate is valid and whether the compromise entered into is
valid.
Ruling: No. It is made clear and mandatory under Section 228 of the new Tax Code that taxpayers shall be
informed in writing of the law and the facts on which the assessment is made, otherwise, the assessment is
void. And a void assessment cannot be a basis for a valid compromise.
B:The general rule is that statutes apply prospectively, However, statutes that are remedial, or that do not
create new or take away vested rights, do not fall under the general rule. Clearly, Section 228 of the Tax
Code provides for the procedure in case an assessment is protested and does not create new or take away
vested rights. In both instances, it can surely be applied retroactively. Moreover, R.A. 8424 does not state
that pending actions are excepted from the operation of Section 228, or that applying it to pending
proceedings would impair vested right

32. UPS International vs. CTA

FACTS:
Petitioner UPS-Delbros Transport, Inc. is a corporation duly organized and existing under the laws of the
Republic of the Philippines. .On December 8, 2008, petitioner received a copy of the Preliminary Assessment
Notice (PAN) with attached Details of Discrepancies dated December 5, 2008, informing petitioner of the
proposed assessment of the alleged deficiency income tax, VAT and EWT for CY 2005. Petitioner filed its reply
to the PAN on December 23, 2008. On June 29, 2010, petitioner received the Final Assessment Notice (FAN)
with attached Details of Discrepancies, both dated June 28, 2010.

On July 26, 2010, petitioner filed a protest letter against the FAN, requesting the cancellation and withdrawal
of deficiency income tax, VAT and EWT assessments for CY 2005. On the same date, petitioner submitted
several documents in support of its request for the cancellation of the deficiency tax assessments. Thereafter,
petitioner flied the instant Petition for Review before this Court on June 5, 2015. In the Answer filed through
registered mail on August 12, 2015 and received by this Court on August 28, 2015, respondent interposed
special and affirmative defenses. Respondent argued that during the administrative investigation of the instant
case by the BIR, petitioner allegedly failed to substantiate or submit supporting evidence against the BIR
findings, more specifically shown under the Details of Discrepancies attached to the PAN, the FAN, and the
FDDA. The aforesaid discrepancy was properly subjected to tax as shown in the Alphalist/BIR Form No. 1601F
but was not part of the expenses declared per Financial Statements (FS).

ISSUE: Whether or not CIR’s decision is proper

RULING: NO. By reproducing the document verbatim, the demand letter only stated the computation and
discrepancies , but there was really no statement regarding the legal bases. The evidence of the CIR tried to
show to prove that he apprised the taxpayer of such legal bases was a memorandum that was actually a mere
internal memorandum issued to the BIR’s regional director. UPS correctly appealed the decision the CIR, and
not that of the Regional Director before the court, and it timely filed its petition.

33. SAMAR ELECTRIC COOP v. CIR

Facts:

The PAN dated February 28, 2002 was received on April 9, 2002. Attached to the PAN was the detailed
explanation of particular provision of law and regulation. Petitioner questioned the PAN. On May 27, 2002, BIR
answers the the arguments and demanded payment. The second protest dated June 23, 2002 was sent by
petitioner and answered by respondent on July 8, 2002. On September 24, 2002, the FAN was received and
protested on October 14, 2002. According to the petitioner, the taxpayer was not informed in writing of the
law and the facts on which the assessment was made, thus violating SEC. 228 which states that “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.”

Issue:
Whether or not the assessment is void.

Ruling:

NO.

Although the FAN and demand letter were not accompanied by a written explanation of the legal and
factual bases, 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. Considering the exchange of correspondence and
documents between the parties, Section 228 was substantially complied with.

34. CIR v BPI

Facts:
In two notices dated October 28, 1988, petitioner Commissioner of Internal Revenue (CIR) assessed
respondent Bank of the Philippine Islands’ (BPI’s) deficiency percentage and documentary stamp taxes for the
year 1986 in the total amount of ₱129,488,656.63:
In a letter dated December 10, 1988, BPI, through counsel, replied with a phrase saying “we shall
inform you of the taxpayer’s decision on whether to pay or protest the assessment”. On June 27, 1991, BPI
received a letter from CIR dated May 8, 1991 stating that:… although in all respects, your letter failed to qualify
as a protest…this constitutes the final decision. BPI made a motion for reconsideration but denied. CTA
dismissed the petition for review of BPI. CA reversed CTA. Because the notice was not valid for it did not
inform BPI of legal and factual basis of the assessment. CIR elevated the case to the SC.
Issue:
Wether or not the assessment was proper
Ruling:
Yes. Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of
the deficiency taxes were made. He merely notified BPI of his findings, consisting only of the computation of
the tax liabilities and a demand for payment thereof within 30 days after receipt. He relied on the former
section 270 of the tax code prior to amendment by RA 8424. In CIR v reyes, the only requirement is to notify
the taxpayer. Nothing in the old law required the a written statement of law and fact. Court cannot read into
the law what was not intended by Congress that would be a judicial legislation.
Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax
liabilities, the amount the taxpayer was to pay and a demand for payment within a prescribed period. The
sentence [t]he taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void was not in the old Section 270 but was only later on inserted in
the renumbered Section 228 in 1997. Evidently, the legislature saw the need to modify the former Section
270 by inserting the aforequoted sentence the inserted sentence in the renumbered Section 228 was not an
affirmation of what the law required under the former Section 270. The amendment introduced by RA 8424
was an innovation and could not be reasonably inferred from the old law.
Considering that the October 28, 1988 notices were valid assessments, BPI should have protested the
same within 30 days from receipt thereof. HOWEVER The December 10, 1988 reply it sent to the CIR did not
qualify as a protest since the letter itself stated that "[a]s soon as this is explained and clarified in a proper
letter of assessment, we shall inform you of the taxpayer’s decision on whether to pay or protest the
assessment. Thus, bpi’s failure to protest the assessment made it final and executory. The assessment is
presumed to be correct.

35. Hermano v CIR CTA 8914 (2012)

Facts:
Hermano is seeking the cancellation of Final Assessment Notice (FAN) issued by the BIR for VAT deficiency
amounting to P2,607,933.07, arising from its sale of pharmacy items to its in-patients, in line with its rendering
of “hospital services.”
Hermano’ grounds are: (1) The FAN is void for they merely showed a mathematical computation of
petitioner's tax liability without stating the factual and legal bases of the same; (2) CIR failed to take into
consideration that its sales of pharmacy items to its in-patients are exempt from VAT pursuant to Section
109(L).
Issue: WON petitioner was denied due process.
Ruling:
No. Here, in the "Details of Discrepancies", attached to the assessment, the details contained therein showed
that the factual basis for assessing petitioner for deficiency VAT was the discrepancy from RELIEF and Third-
Party Matching. In a long line of cases, the SC has ruled that the requirement of the law to inform the taxpayer
of the basis of the assessment does not necessarily mean that it be a full narration of the facts and laws on
which the assessment is based. So long as the parties are notified and given the opportunity to explain their
side, the requirements of due process are satisfactorily complied with. In this case, the petitioner has
intelligently made its protest by stating that its sales of pharmaceutical items in favor of its in-patients are
exempt from VAT. This circumstance proves that petitioner was sufficiently informed of the facts and the
law as to why assessment has been issued against it.

36. Big AA corporation vs CIR CTA

Facts: Petitioner is a domestic corporation duly created and registered under the law with principal address at
No. 305, Zaragosa Street, Tondo, Manila. It is engaged mainly in the distributorship of San Miguel beer and
soft drinks products. BIR found that there was a discrepancy in the amount of total purchases made by
petitioner based on the List of Sales and Purchases of San Miguel Corporation and the original returns filed by
petitioner in the amount of P211,467,735.02 or 94.49% of the total and actual purchases. Thus, Letter Notice
No. VAT-S-237-01-02 dated November 28, 2002 was issued by the respondent, requiring petitioner to avail of
the Voluntary Assessment and Abatement Program (VAAP) pursuant to Revenue Regu lations No. 12-2002.
Having received no reply from the petitioner, respondent then issued the 2nd Notice dated January 15, 2003.
Due to petitioner's disregard of respondent's notices and orders, a criminal complaint against petitioner's
General Manager, Erlinda L Stohner, was then filed. On November 5, 2004, while the criminal complaint
before the City Prosecutor's Office of the City of Manila was still pending further investigation, petitioner filed
this instant Petition for Review questioning the validity of Revenue Memorandum Circular No. 40-2003 which
clarified that a Letter Notice is considered as a Notice of Audit or Investigation for purposes of barring
petitioner in amending its income and value-added tax returns for the taxable year 2001. Meanwhile, on May
2, 2005, the City Prosecutor of Manila rendered a Resolution dismissing the criminal case filed by the
respondent.
Issue: Whether or not the receipt of the LN issued by the respondent to the petitioner barred the latter to
amend its Income and Quarterly VAT Returns for the taxable year 2001.
Ruling: Yes. Under the provisions of Section 6(A) of the NIRC of 1997, a taxpayer can no longer amend its tax
returns once a notice of audit or investigation is issued against it within the three-year period allowed by law
for such amendment. A notice of audit or investigation, as the name implies, is a letter informing the taxpayer
that there exists certain discrepancies or inconsistencies in its annual returns, thus, there is a need to inspect
or examine its books of account. In practice, the respondent issues Letters of Authority (LOA) in cases where
there are inconsistencies between petitioner's returns filed and respondent's records of documents, a Tax
Verification Notice (TVN) for refund cases filed by taxpayers. Nonetheless, their designations may be different,
but an LOA or a TVN also constitutes an audit or investigation.
Book: The issuance of an issue-based letter of authority to cover specifically “income tax, VAT, percentage
tax, and withholding taxes due to discrepancy reflected in the letter notice” must be issued by the BIR. A
Notice of Informal Conference, together with the letter of authority, shall be served to the taxpayer.

37. MEDICARD PHILIPPINES INC. vs CIR

FACTS:
MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and medical insurance
coverage to its clients. Individuals enrolled in its health care programs pay an annual membership fee.
MEDICARD filed its VAT Returns through Electronic Filing and Payment System (EFPS). Upon finding some
discrepancies between Income Tax Returns (ITR) and VAT Returns, the CIR informed petitioner and issued a
Letter Notice and then a Preliminary Assessment Notice (PAN) for deficiency VAT. A Formal Assessment
Notice was thereafter issued. The examination and assessment conducted by revenue officers, however, were
done without a letter of authority (LOA) issued.
ISSUE: W/N the examination and assessment were a nullity.
RULING: YES
There must be a grant of authority before any revenue officer can conduct an examination or assessment.
Equally important is that the said officer so authorized must not go beyond the authority given. In the
absence of such an authority, the assessment or examination is a nullity.
An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It
empowers or enables said revenue officer to examine the books of account and other accounting records of a
taxpayer for the purpose of collecting the correct amount of tax. Section 6 of the NIRC clearly provides that
unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination
of the taxpayer cannot ordinarily be undertaken. Hence, unless undertaken by the CIR himself or his duly
authorized representatives, other tax agents may not validly conduct any of these kinds of examinations
without prior authority. The court cannot convert a letter notice into a LOA.
*38 omitted*

39. GuaGua Electric Company vs. CIR

Facts:

Believing that it should pay franchise tax at the lower rates provided for in its franchises instead of 5% fixed by Section
259 of the Tax Code, petitioner filed a claim for refund for allegedly overpaid franchise tax which Commissioner of
Internal Revenue denied on the ground that the right to its refund had prescribed.

On August 21, 1961 the appellate division of the Bureau of Internal Revenue recommended that the right to assess
and collect the tax corresponding to the period prior to January 1, 1956 has prescribed.

The Commissioner of Internal Revenue seeks the recovery of the amount of P16,593.87 allegedly erroneously refunded
to Guagua Electric.

Issue: Whether or not the right of the petitioner for refund has prescribed

Ruling:

No. As stated above, a demand on the taxpayer for payment of franchise tax representing the difference between the
tax computed at five percent pursuant to section 259 of the Tax Code and the tax at one percent or two percent under
it’s franchises covering the period which was previously refunded erroneously by the BIR is in effect an assessment for
deficiency franchise tax.

And being so, the right to assess or collect the same is governed by Section 331 of the Tax Code rather than by Article
1145 of the Civil Code. A special law (Tax Code) shall prevail over a general law.

40. Commissioner of Internal Revenue vs Pascor Realty & Development Corporation

FACTS: BIR Commissioner authorized revenue officers to examined the books of accounts and accounting records of
Pascor Realty (PRDC). Such examination resulted in a recommendation for the issuance of an assessment amounting to
P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively. Commissioner of Internal Revenue filed a
criminal complaint before the Department of Justice against the PRDC, its President Rogelio A. Dio, and its Treasurer
Virginia S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00. Pascor filed a request for
reconsideration/reinvestigation which the CIR denied prompting the respondents to elevate the CIR’s decision to the
CTA. CIR filed a Motion to Dismiss on the ground that CTA has no jurisdiction over the subject matter since no formal
assessment has been issued against PRDC. The CTA denied the Motion stating that the criminal case for tax evasion is
already an assessment. The amount and kind of tax due and the covered period are sufficient details for an assessment.
CA agreed with the decision of the CTA.

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

RULING: NO. Neither the NIRC nor the revenue regulations governing the protest of assessments provide a specific
definition or form of an assessment. However, the NIRC defines the specific functions and effects of an assessment. To
consider the affidavit attached to the Complaint as a proper assessment is to subvert the nature of an assessment and
to set a bad precedent that will prejudice innocent taxpayers.

41. CIR vs. WESTERN PACIFIC CORPORATION

FACTS: On March 2, 1959 the respondent Western Pacific Corporation, was assessed for deficiency income tax
for the disallowance listed in respondent's return for 1953.The CIR wrote the respondent a letter of demand
for the payment. Respondent corporation, requested for non-assessment, claiming that on Feb 28, 1959 was
the last day of the five (5) year period within which to make the assessment.

ISSUE: Whether or not the making of the assessment had already prescribed.

RULING. NO. We do not agree with petitioner that the assessment in question was issued beyond the 5-year
statutory limitation. February 28, 1959 fell on a Saturday. If the date on which the assessment is due to
prescribed falls on a Saturday, the following day being a Sunday, it is understood that the Governmaent has
until the next succeeding business day or Monday within which to assess the tax.
42. NATIONAL MARKETING CORPORATION vs. TECSON
FACTS: Tecson lost in a civil case and was ordered to pay Price Stabilization Corporation (PSC) the sum of
P7,200.00 plus 7% interest, and attorney’s fees. Copy of this decision was, on November 21, 1955, served
upon the defendants in said case. On December 21, 1965, the National Marketing Corporation, as successor of
PSC, instituted a case for revival of judgement. Tecson moved to dismiss on the ground of prescription, since it
has already been more than ten years. His argument was based on the fact that 1960 and 1964 were both leap
years. Hence, this present case was filed two days late.
ISSUE: Has the action in the case at bar prescribed?
HELD: Yes.  The explicit provision of Art. 13 of the Civil Code of the Philippines limit the connotation of each
"year" — as the term is used in our laws — to 365 days.
(Book) In counting the three-year period where there is a leap year (which has 366 days), the Supreme Court
ruled that the Administrative Code explicitly ordains that the term ‘year’ shall be understood to have 365 days.
43. Luang v CIR

Facts: Petitioner Luang is a Filipino businessman who owned a refilling station of Unioil Petroleum Philippines,
Inc. Petitioner sent a letter dated June 21, 2005 to the BIR to inform said office that his business operations
would cease by the middle of the year 2005 and that taxes were to be incurred only up to June 30, 2005. Said
letter was also meant to inform the BIR of the cessation of reportorial requirements that must be complied
with by the taxpayer pursuant to the operation of a business entity. Petitioner filed his 2 nd quarter VAT return
on July 26, 2005. Petitioner received a copy of a Formal Letter of Demand and a FAN on November 5, 2008 for
alleged deficiency VAT, deficiency income tax, and compromise penalties for the year 2005. Petitioner then
filed a Protest to the FAN on December 5, 2008 or 30 days after receipt of the FAN, arguing that the findings
therein are devoid of any legal and factual bases, and moving that the same be cancelled and withdrawn. On
February 3, 2009, within 60 days after the filing of the protest, petitioner submitted his supporting documents.
Thus, respondent has 180 days or until July 31, 2009, within which to resolve petitioner's protest. The 180-day
period lapsed on July 31, 2009 without respondent acting on the protest; hence, petitioner has 30 days or until
August 28, 2009 to file a Petition for Review. Accordingly, Formal Letter of Demand and Assessment
Notice/Demand were CANCELLED.
Issue: Whether Luang was accorded due process.
Ruling: No. BIR witness testified that the post reporting notice was sent by registered mail, but during the
cross examination, the witness confirmed that he has no document or evidence to prove that the PAN was
actually received by Luang. Jurisprudence holds that if the taxpayer denied receiving an assessment from the
BIR, it is incumbent upon the BIR to prove that such notice was indeed received. It held that the failure to
strictly comply with notice requirements prescribed under Section 228 of the National Internal Revenue
Code of 1997 and Revenue Regulations No.12-99 is tantamount to a denial of due process. The undated PAN
and FAN are void.
44. Philippine Aerospace Development v CIR

Facts: CIR issued LOA to examine PADC's books of accounts and other records covering its internal revenue
taxes for January to December 2003. P ADC received a (PAN) assessing PADC the following for 2003: (1)
Deficiency Income Tax of P26,923,253.31, and (2) Deficiency VAT of P1 3,806,086.05. This was followed by a
(FAN), received on the same date, assessing PADC the following: Deficiency Income Tax of 1>27,206,784.07,
and (2) Deficiency VAT of 1>13,948,613.42. PADC filed it protest against the FAN. PADC filed a supplement to
its protest, which expounded the bases of its protest and included supporting documents. PADC received a
letter from the BIR denying its protest. PADC moved for reconsideration of the denial of its protest. BIR
Revenue Region 8 informed PADC that the tax docket of the case would be referred to Revenue District Office
Pasig City, for verification, evaluation and appropriate action. PADC received respondent's Final Decision on
Disputed Assessment (FDDA) denying P ADC's protest for alleged failure to submit supporting documents. BIR
Revenue Region 8 then assessed PADC the following deficiency taxes.

Issue: WON the assessments against PADC have factual and legal bases?

Ruling: YES. We see no reason to disturb the holdings on this issue by the First Division, as upheld by the
Special First Division. It is well for petitioner to remember the rule that tax deductions, being in the nature of
tax exemptions, are to be construed in strictissimi juris against the taxpayer. An examination of the instant
petition reveals that the petitioner was generally remiss in adducing specific legal provisions authorizing
entitlement to deductions. It is not for this Court to conduct the research necessary to establish the legal
bases of the petitioner's claims, for that burden is for him alone to discharge, failure in which would render its
claims self-serving and leave this Court no choice but to uphold the presumptive correctness of the
assessment. Petitioner should be reminded that "tax assessments by tax examiners are presumed correct and
made in good faith, and all presumptions are in favor of the correctness of a tax assessment unless proven
otherwise."The burden of proof is on the taxpayer to show the contrary.

45. WATERFRONT CEBU CITY HOTEL VS. CIR [2012]

FACTS: BIR issued a letter of authority for the investigation of plaintiff’s business operations and books of accounts for
calendar year 2006; that a formal letter of demand was issued by the BIR, which was duly protested by Waterfront; and
that a final decision on disputed assessment was subsequently issued seeking collection of deficiency assessments

The disputed deficiency income tax assessment of P2,579,289.43 (inclusive of interest) for year 2006 stems from the BIR'
s findings of discrepancy, particularly, an overstatement on declared prior year's excess tax credits by P1,506,576.00 in
view of the erroneous carry-over of the amount of P12,785,038.00 in respondent's 2006 income tax return (ITR), instead
of the P11,278,461.95 tax overpayment declared in year 2005, and disallowance of creditable tax withheld at source
amounting to P212,950.27. 5.

ISSUE: Whether or not Waterfront is liable for the deficiency income tax.

RULING: No. The CTA ruled that the assessed income tax of 1.5 million due to excess tax credits would not give rise to
deficiency income tax considering that it does not affect or pertain to income or expense which would affect the
company’s income tax due for 2006, and Waterfront’s p8m overpayment in 2006 is significantly higher than the
company’s tax assessment. Therefore, plaintiff has a tax overpayment in the amount of P-7,770,596.95 which it may
carry over to the succeeding taxable year.

46. United Distribution Management vs CIR CTA

Assessment Notice and demand letter and details of discrepancy show that United Distribution Management
was assessed for deficiency final tax of 10% on payments to stockholders and interest payments made to
them.

There is nothing in the records which would show that UDM filed a return for the final withholding tax on
payments to stockholders treated as dividends subject to final tax. As testified to by that external auditor,
petitioner made some payments to stockholders for their advances to the corporation but did not declare and
pay dividends to its shareholders in 2004.

The minutes of the board meetings were examined and hey did not come across any document authorizing
declaration of dividends.

Issue: W/N was assessment was valid

Ruling: No.

BOOK
CIR failed to prove that the payments to the stockholder and the interest paid were indeed dividends. The CIR
merely assumed that said payments were dividends, which has neither legal nor factual basis. Well-settled is
the rule that the presumption of correctness of assessment, being a mere presumption, cannot be made to
rest on another presumption.
47. REYES v CIR
GR No. 163581, 27 January 2006

Facts: BIR investigated the estate of the deceased Maria Tancinco who left a residential lot and an old house.  
Without submitting a preliminary finding report, an LOA was issued and received by Reyes, one of the heirs.

A PAN was issued against the estate, and a FAN as well as demand letter was issued for the assessment of
P14.9M for estate tax of the estate of Maria Tancinco.  

Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been
made. She was merely notified of the findings by the CIR.

ISSUE: WON whether the assessment against the estate is valid

HELD: No. Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers
must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the
assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax
compromise. This was clear and mandatory under Section 228.

To be simply informed in writing of the investigation being conducted and of the recommendation for the
assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly
assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which
the assessment was based. It does not at all conform to the compulsory requirement under Section 228.
Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of
investigation and was not even the requisite notice under the law.

48. Republic vs Limaco & De Guzman

Facts: Respondent was engaged in the importation of cigarettes. On June 27, 1946, the company filed with the
BoCustoms entry papers covering shipment of 2M “spud” cigarettes it had imported from New York. The
specific tax due amounted to P6000. They paid the tax with 1000(cash) and 5000(PNB check). The cigarettes
were released to the company but the check bounced. On June 17, 1948, the CIR demanded the payment of
the deficiency specific tax when letter of demand for the amount of the rubber check was sent to the
company. Amount remained unpaid.
On April 15, 1951, the company requested that action be deferred as it intends to settle the matter
amicably with the BIR. The Republic filed a complaint for the forfeiture of the bonds, and the payment of the
sum P5000 plus interest. The company invoked the defense of estoppel and prescription.

Issue: W.N the action has prescribed

Ruling: No. The ‘issue date’ is necessarily anterior to the date of the actual release or mailing of the demand
letter. It is not the issue date of the demand letter and/or notice of assessment that is the reckoning point in
prescription, but rather, the date when said demand letter or notice of assessment is released, mailed or
sent to the taxpayer that constitutes actual assessment.
Under Sec 332 (c) Tax Code, the collection of the tax by summary method or by judicial action shall be
effected within 5 years after the assessment of the tax. Herein, the assessment was made on June17, 1948.
Even assuming that the latter date is the date of assessment, the action is still not barred by the statute of
limitations as the statute was suspended when the company acknowledged the debt in writing in april 1951,
and requested the deferment of the judicial action to be taken by the government towards the collection of
the obligation, so that the company could make representations with the Collector to settle matter amicably.
Prescription has not set in.

49. Bautista and Tan vs Collector GR L-21159

Facts:
 Spouses Pedro B. Bautista and Dativa Corrales Tan each filed a separate income tax and both of them
also claimed personal exemptions for being married or head of family. BIR consolidated said returns and
assessed deficiency tax for alleged under declaration. On appeal CTA rendered a decision against petitioner
ordering to pay deficiency income tax plus surcharges.
Issue:
Whether or not CTA erred in it decision overruling the defense of petitioner of prescription
Held:
No.
With respect to prescription, the income tax returns of the Bautistas for 1947 are deemed filed as of
March 1, 1948. Section 331 of the Tax Code provides that the deficiency assessment must be made within five
years after the return was filed, and the assessment is deemed made when the notice to this effect is released,
mailed or sent by the Collector to the taxpayer, for the purpose of giving effect to said assessment. Said
section does not require that the notice be received by the taxpayer within the said period of five years. In the
case at bar, the Collector assessed the deficiency tax on January 21, 1953 and notice to this effect was sent or
given due course prior to March 1, 1953, for it was received in the Office of the City Treasurer of Quezon City,
on February 13, 1953, and, hence, before the expiration of said period
(BOOK) An assessment is deemed made when the notice to that effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to the assessment.
50. REPUBLIC OF THE PHILIPPINES vs LEONOR DE LA RAMA, ET AL G.R. No. L-21108 November 29, 1966
FACTS:
The estate of the late Esteban de la Rama was the subject of Special Proceedings. The executor-
administrator, Eliseo Hervas, filed on March 12, 1951, income tax returns of the estate corresponding to the
taxable year 1950. The Bureau of Internal Revenue later claimed that it had found out that there had been
received by the estate in 1950 from the De la Rama Steamship Company, Inc. cash dividend which amount was
not declared in the income tax return of the estate for the year 1950. The Bureau of Internal Revenue then, on
March 7, 1956, made an assessment as deficiency income tax against the estate. The Collector of Internal
Revenue wrote a letter, dated February 29, 1956, to Mrs. Lourdes de la Rama-Osmeña informing her of the
deficiency income tax and asking payment thereof. On March 13, 1956 the latter's counsel wrote to the
Collector acknowledging receipt of the assessment but contended that Lourdes de la Rama-Osmeña had no
authority to represent the estate, and that the assessment should be sent to Leonor de la Rama who was
pointed to by said counsel as the administratrix of the estate of her late father.

ISSUE: WON assessment is deemed made in this case?

HELD:
NO. The estate was still under the administration of Eliseo Hervas as regards the collection of said
dividends. The administrator was the representative of the estate, whose duty it was to pay and discharge all
debts and charges on the estate and to perform all orders of the court by him to be performed (Rule 71,
Section 1), and to pay the taxes and assessments due to the Government or any branch or subdivision thereof
(Section 7, Rule 89, Old Rules of Court). The tax must be collected from the estate of the deceased, and it is
the administrator who is under obligation to pay such claim. The notice of assessment, therefore, should have
been sent to the administrator. In this case, notice was first sent to Lourdes de la Rama-Osmeña on February
29, 1956, and later to Leonor de la Rama on November 27, 1956, neither of whom had authority to represent
the estate. As the lower court said in its decision: "Leonor de la Rama was not the administratrix of the estate
of the late Esteban de la Rama and as such the demand unto her, Exh. Def. 8, p. 112, was not a correct
demand before November 27, 1956, because the real administrator was the late Eliseo Hervas; . . . ." (p. 45,
Record on Appeal) The notice was not sent to the taxpayer for the purpose of giving effect to the
assessment, and said notice could not produce any effect. In the case of Bautista and Corrales Tan v.
Collector of Internal Revenue, L-12259, May 27, 1959, this Court had occasion to state that "the assessment
is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of
giving effect to said assessment." It appearing that the person liable for the payment of the tax did not
receive the assessment, the assessment could not become final and executory (R. A. 1125, Section 11).

51. Nava vs CIR, 13 SCRA 104 (When is a tax assessment made or deemed made?)

Facts: Nava filed his income tax return for the year 1950, and, on the same date, he was assessed by
respondent Commissioner of Internal Revenue in the sum of P4,952.00, based solely on said return. Nava paid
one-half of the tax due, leaving a balance of P2,491.00. On March 30, 1955, after investigation of petitioner’s
1950 income tax return, respondent Collector issued a deficiency income tax assessment notice.

Several notices of this revised assessment are alleged to have been issued to the taxpayer, but Nava claims to
have learned of it for the first time on December 19, 1956, more than five years since the original tax return
was filed. 1st Notice – 4/10/1965 ; 2nd Notice – 7/3/1965; Final Notice – 9/25/1965

In addition to the written notice sent to petitioner, he was also personally interviewed. A report on these
written notices and personal interviews appears in the memorandum of an agent of the Bureau of Internal
Revenue dated December 10, 1956, report of which was also provided to the taxpayer, which the taxpayer
personally received and acknowledged.

Issue: W/N the admission of the receipt of the ‘second final notice’ without protest is an indication that he
received the previous notices.

RULING: No.

BOOK: The fact that Nava acknowledged receipt of the second final notice personally delivered to him is no
proof that he received the first notice by mail. There is a difference between receiving a second final notice
and receiving a final notice for the second time.

*52 omitted*

53. REPUBLIC v CA and NIELSON

FACTS: The petitioner sought the review on certiorari of the decision of the respondent CA reversing the
decision of the then CFI of Manila which ordered private respondent Nielson & Co., Inc. to pay the
Government ad valorem tax, occupation fees, additional residence tax and 25% surcharge for late payment,
for the years 1949 to 1952.
Petitioner claims that the demand letter of 16 July 1955 showed an imprint indicating that the original thereof
was released and mailed on 4 August 1955 by the Chief, Records Section of the BIR, and that the original letter
was not returned to said Bureau; thus, said demand letter must be considered to have been received by the
private respondent. According to petitioner, if service is made by ordinary mail, unless the actual date of
receipt is shown, service is deemed complete and effective upon the expiration of five (5) days after mailing.
As the letter of demand dated 16 July 1955 was actually mailed to private respondent, there arises the
presumption that the letter was received by private respondent in the absence of evidence to the contrary.
More so, the private respondent did not offer any evidence, except the self-serving testimony of its witness,
that it had not received the original copy of the demand letter dated 16 July 1955.

ISSUE: W/N there exists a presumption of receipt in the course of mail in this case?

RULING: NONE. Where the taxpayer-addressee makes a direct denial of receipt of a mailed demand letter,
such denial shifts the burden to the Government to prove that such letter was indeed received by the
taxpayer. Significantly, it should be noted that the party favored by the presumption of receipt under Sec.
3(v), Rule 131 of the Rules of Court is the Government. It is important though that the correct address of the
taxpayer is indicated in the demand letter or notice. Records, however, show that petitioner wrote private
respondent a follow-up letter dated Sept. 19, 1955, reiterating its demand for the payment of taxes as
originally demanded in petitioner’s letter dated July 16, 1955. This follow up letter is considered a notice of
assessment in itself which was duly received by private respondent in accordance with its own admission.

54. Enriquez vs. Sun Life Assurance Co. of Canada.

Facts: This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin Ma. Herrer to
recover from the defendant life insurance company the sum of pesos 6,000 paid by the deceased for a life
annuity. The trial court gave judgment for the defendant. Plaintiff appeals.
Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for
a life annuity. Two days later he paid the sum of P6,000 to the manager of the company’s Manila office and
was given a receipt. The application was given to the head office in Canada. The oofice gave acceptance by
cable on November 26, 1917. The policy was issued on December 4.
The attorney, Mr. Torres then wrote to the Manila office of the company stating that Herrer desired to
withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had
been issued, and called attention to the notification. This letter was received by Mr. Torres on the morning of
December 21, 1917 and Mr. Herrer died on December 20, 1917.
(Whether on the same day the cable was received notice was sent by the Manila office of Herrer that the
application had been accepted, is a disputed point, which will be discussed later.)
Issue: whether or not the letter was received.
Held: No. The presumption that a letter duly directed and mailed was received in the regular course of mail
cannot apply where none of the required facts to raise this presumption, ie, that the letter was properly
addressed with postage prepaid and that it was mailed, have been shown. Pnce these facts are proved, the
presumption is that the letter was received by the addressee as soon as it could have been transmitted to him
in the ordinary course of the mails. But if one of the said facts fails to appear the presumption does not lie.

55. Basilan Estates v Collector 21 SCRA 17 (1967)

Facts: Engaged in coconut industry, Basilan Estate, Inc. filed on March 24, 1954 its ITR for 1953 and paid an
income tax of P8,028. On February 26, 1959, the Commissioner assessed a deficiency income tax of P3,912 for
1953 and P86,867.85 as 25% surtax on unreasonably accumulated profits as of 1953. But the petitioner claims
that it never received notice of such assessment or if it did, it received the notice beyond the five-year
prescriptive period.
Issue: Whether or not the assessment can be deemed made in accordance with law
Ruling: Under Section 331 of the Tax Code requiring 5 years within which to assess deficiency taxes, the
assessment is deemed made when notice to this effect is released, mailed or sent by the Collector of
Internal Revenue to the taxpayer, and it is not required that the notice be received by the taxpayer within the
aforementioned 5-year period. (even though the same is actually received by the taxpayer upon the
expiration of the prescriptive period.)
56. Finley J. Gibbs, et al. v. CIR and CTA [15 SCRA 318, Nov. 29, 1965]

FACTS: The Commissioner issued against petitioners a deficiency income tax assessment, demanding that such
tax be paid on or before Mar. 15, 1956. On Mar. 14, 1956, Allison J. Gibbs, signing as the attorney-in-fact of his
brother Finley, acknowledge receipt of such assessment notice and notified CIR that Finley was living in
California at the time and that the latter was notified by him of the said deficiency assessment. Petitioners
filed request for refund, which was denied—there being no basis to grant such request. They filed petition for
review. CTA upheld CIR’s claim that petitioners’ causes of action were barred by prescription as the petition
for review was filed beyond the 30-day period. The petitioners contend that the respondent court erred in
ruling that their petition for review was filed outside the 30-day period, alleging that they never received a
copy of the letter denying the request for refund. That Allison merely acted as an attorney-in-fact and not as
their legal counsel.

ISSUE: WON the receipt of tax notice by the taxpayer’s attorney-in-fact is binding upon the taxpayer

HELD: Yes. Receipt of the tax notice by the taxpayer’s attorney-in-fact is binding upon the taxpayer. Allison
acknowledged for the petitioners’ receipt of the deficiency income tax assessment, formally protested the
same in writing, paid the assessment and likewise formally demanded in writing its refund. There can be no
question, therefore, that the receipt of the Oct. 26, 1956 letter-decision of the respondent Commissioner by
Allison was receipt of the same by the petitioners, the former being then the latter's legal counsel. In the
premises, the respondent court did not err in computing the 30-day prescriptive period in question from the
date the said letter was received by Allison J. Gibbs.

57. Villamin v CTA, GR L-11536 (1960)

Facts: This is a petition for review of a CTA resolution dismissing the petition for review of a CIR decision involving the
assessment of certain sales taxes on logs sold during the period from 1948-1950 and from 1951-1954.
It appears that correspondent wrote several letters of demand to petitioner. Prior to these letters of demand,
petitioner requested reconsideration of the assessment which the Provincial Revenue Agent of Orient
Mindoro attempted to collect from him. Respondent denied said request. which was received by petitioner.
Subsequently, petitioner wrote another letter to respondent offering to settle his case amicably, which
request was also denied. Petitioner again requested for reconsideration of the decision which was likewise
denied. Respondent filed a motion to dismiss on the ground that the petition for review was filed beyond the
30-day period prescribed by Section 11 of RA No. 1125. This motion was sustained. Hence the present appeal.
The letter was signed by the Acting Chief of the Assessment Department.
Issue: Whether or not signing of notice of assessment may be delegated to subordinate officers.
Ruling: Yes. Since it is the Commissioner that is specified in the law as the one empowered to make
assessments, the question of whether the power may be delegated by him or exercised by lesser officials in
the BIR has arisen. It has been held that the signing of a notice of assessment may be delegated to
subordinate officers. As regards the contention that the letter signed by the Acting Chief of the Assessment
Department is not the decision contemplated in the law, the same is of no moment, considering
Memorandum Order of BIR, which authorizes said official to sign letter of demand involving assessment in
behalf of the Collector of Internal Revenue. Moreover, the subsequent letters signed by the Collector affirming
and upholding the correctness of the assessment made by his Assessment Department constitute evident
proof that the official who signed the letter was duly authorized to do so.
58. Collector v. Bohol Land Transportation Co
Facts: The Bohol Land Transportation Co. was issued deficiency assessments
the company filed in the Court of Tax Appeals an appeal contesting the validity of the deficiency assessments
made by the Collector as well as of the warrant of distraint and levy issued by him. The company argues that
its failure to substantiate its defense insofar as the years 1945 to 1950 are concerned should not be held
against it for there is no validity to the prima facie correctness of the Collector’s findings since the assessments
are signed not by the Collector, nor by the chief of income tax division, but by one Casto Ayeras, who did not
even reveal his position, nor state if he had any authority to sign for his chief.
Issue: W/N assessment valid
Ruling: Yes. B:An assessment signed by the Chief of the Income Tax Division or by a Provincial Revenue
Officer with delegated powers is a valid assessment .
An examination of the assessment notices will show that they were duly signed by Ayeras in behalf of his chief,
the Collector. Under the set-up of the Bureau of Internal Revenue, the chief of the income tax division as
regards tax assessments is possessed of delegated powers to issue assessment notices in behalf of the
Collector of Internal Revenue.

59. Fluor Daniel Phil vs. CIR

FACTS
A Formal Letter of Demand was sent by respondent assessing petitioner deficiency taxes for 2004 comprising
Income Tax, VAT and Expanded Withholding Tax. Included in the EWT assessment was the alleged deficient on
petitioner’s payments of maintenance service fees for software maintenance to Fluor International, Inc. (FII).
Respondent stating that since there was no documentary evidence to show the true nature of the contract,
the fees should be treated as income from services and thus, subject to EWT at 32%.

Petitioner then filed a protest requesting reinvestigation or reconsideration and applied for abatement of
penalties, surcharges and interest. In response to petitioner's protest, respondent issued a Final
Decision on Disputed Assessment (FDDA) cancelling the deficiency EWT but issuing an assessment for Final
Withholding Tax (FWT) on the same software fees albeit using a lower 15% rate under the RP-US Tax Treaty as
provided in RMC-44-054.

ISSUE
W/N petitioner was deprived of due process when the FDDA changed the assessment from deficiency EWT to
deficiency FWT.

RULING Yes. The change of the assessment in the FDDA itself constituted a new assessment. As such, the
taxpayer should have given the chance to dispute the same via the process laid down in the Tax Code which
is by way of filing a protest. Given that this is was not complied with and what was issued was already an
FDDA, the circumstances certainly deprived the petitioner of a reasonable opportunity to be heard and
submit evidence in support of its defense which is a clear violation of due process requirements.
The concept of “license generating royalty income” in RMC 44-05 is nowhere to be found in RMC 77-03,
hence, the retroactive application by the CIR of RMC 44-05 has no leg to stand on.

60. COLLECTOR v. BATANGAS TRANSPORTATION CORPORATION

Facts:

This case is an appeal of the CTA decision which reversed the assessment and decision of the CIR assessing and
demanding from respondents Batangas Transportation and Laguna Bus the amount of Php54,143.54 which
represent deficiency income tax and compromise for the year 1946-1949. Pending then appeal to the CTA, and
before the CIR filed his answer, the latter increased the assessment to P148,890.14.

Issue:

whether or not the CIR, after appeal from his decision to the Court of Tax Appeals has been perfected, he has
filed his answer, may still modify his assessment by increasing the same.

Ruling:

YES.

The Commissioner has the authority to make subsequent assessments or modify or revise the original
assessment to collect additional sums covered by the original assessment as long as the modification or
revision is done within the prescriptive period for making assessments, and even while the appeal of the
taxpayer from the original assessment is still pending in the Court of Tax Appeals so as to avoid multiplicity
of suits.

61. CIR v Bf Goodrich

Facts:
Private respondent Bf Goodrich sold to Siltown Realty Philippines, Inc. on January 21, 1974, its Basilan
landholding for P500,000 payable in installments. In accord with the terms of the sale, Siltown Realty
Philippines, Inc. leased the said parcels of land to private respondent for a period of 25 years, with an
extension of another 25 years at the latter's option. Based on the BIR's Letter of Authority No. 10115 dated
April 14, 1975, the books and accounts of private respondent were examined for the purpose of determining
its tax liability for taxable year 1974. The examination resulted in the April 23, 1975 assessment of private
respondent for deficiency income tax in the amount of P6,005.35, which it duly paid.
Subsequently, the BIR also issued Letters of Authority Nos. 074420 RR and 074421 RR and
Memorandum Authority Reference No. 749157 for the purpose of examining Siltown's business, income and
tax liabilities. On the basis of this examination, the BIR commissioner issued against private respondent on
October 10, 1980, an assessment for deficiency in donor's tax in the amount of P1,020,850, in relation to the
previously mentioned sale of its Basilan landholdings to Siltown. In a letter dated November 24, 1980, private
respondent contested this assessment. On April 9, 1981, it received another assessment dated March 16,
1981, which increased to P 1,092,949 the amount demanded for the alleged deficiency donor's tax, surcharge,
interest and compromise penalty. CTA Affirmed. CA reverse coz multiple assessment beyond the five-year
period or prescription.
Issue:
Whether or not petitioner's right to assess herein deficiency donor's tax has indeed prescribed as ruled
by public respondent Court of Appeals
Ruling:
Yes. Sec. 15 now sec 6 B of the NIRC, on the other hand, provides that "[w]hen a report required by law
as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time
fixed by law or regulation, or when there is reason to believe that any such report is false, incomplete, or
erroneous, the Commissioner of Internal Revenue shall assess the proper tax on the best evidence
obtainable." Clearly, Section 15 does not provide an exception to the statute of limitations on the issuance of
an assessment, by allowing the initial assessment to be made on the basis of the best evidence available.
Having made its initial assessment in the manner prescribed, the commissioner could not have been
authorized to issue, beyond the five-year prescriptive period, the second and the third assessments under
consideration before us. Ineludibly, the BIR failed to show that private respondent's 1974 return was filed
fraudulently with intent to evade the payment of the correct amount of tax.
62. Tan Guan v Nable 24 SCRA 93 (1968)
Facts:
Tan Guan and one Gonzalo Padua were cashier and president, respectively, as well as the main partners of
Imperial, a partnership organized in 1950. The Commissioner demanded from Imperial, through Padua, the
payment of P72,450, as specific tax after finding out its fictitious transactions. The main defense set up by Tan
Guan is that of prescription of action. He maintains that the same was made on January 21, 1953, whereas,
the aforementioned civil action for the recovery of said sum and that of P128,800 was filed on May 7, 1958, or
beyond the prescriptive period of five (5) years which, Tan Guan maintains, is applicable thereto.
Issue: WON the action of the CIR has prescribed.
Ruling:
No. The five-year prescriptive period for collection of internal revenue taxes under Sec. 331 of the National
Internal Revenue Code is interrupted by the taxpayer’s appeal of the disputed assessment to the Conference
Staff of the Bureau of Internal Revenue. It should be noted, however, that the running of said period was
interrupted on February 9, 1953, when Padua, acting on behalf of Imperial, appealed the disputed assessment
to the conference staff and that, on May 8, 1953, the Commissioner reiterated the demand for the payment of
said sum of P72,450 in addition to P10,000 as compromise penalty. Accordingly, from May 8, 1953 to May 7,
1958, when the civil action was commenced, less than five (5) years had elapsed. The period between the
request for reinvestigation or reconsideration and the revised assessment must be subtracted from the total
prescriptive period prescribed in Sec. 318 (now Sec. 223, NIRC).
63. Querol vs Collector

Facts: In 1951, CIR issued an income tax assessment notice against Querol, charging petitioner with income
tax for expenses incurred for the repair of his house. Petitioner requested reconsideration of this opinion –
which was partly granted.

Thus, the CIR conducted a reinvestigation of petitioner’s tax liabilities. Following such, CIR issued a revised tax
assessment notice in 1955. December 14, 1951, in two letters addressed to [1] respondent Collector and [2] to
the Municipal Treasurer of San Fernando, La Union separately, petitioner requested reconsideration of this
opinion of the Collector on the ground that there was nothing added to the house to increase its original
value, and, therefore, said amount cannot be made part of the asset. February 9, 1955, respondent Collector
issued a revised tax assessment notice of P753.51 for 1947. He also issued assessment tax notices for the
years 1948 to 1950. CIR issued a warrant of distraint and levy against petitioner's properties to satisfy the
amount of P1,808.10, petitioner's total income tax liability for the years 1947 to 1950, plus its legal
increments. On appeal, the Tax Court ordered Querol to pay the deficiency income taxes for 1947. Petitioner
argues that the right to collect had already prescribed.

Issue: WON the CIR’s action to collect the tax due on his income during 1947 has prescribed.

Ruling: No. The judicial action to recover the taxes in the present case was made when the Collector asked the
Court, in April of 1959, to order payments thereof, less than 5years after the revised assessment (February 9,
1955) was made. The period between the petition for reconsideration and the revised assessment should be
subtracted from the total prescriptive period. When an assessment is reconsidered, it is the date the
reconsidered assessment is notified to the taxpayer that tolls the five-year period of limitation, on the
theory that an assessment that has been set aside or cancelled is no assessment at all.

64. UPSI PROPERTY HOLDINGS VS CIR

FACTS:
Petitioner filed an omnibus motion for cancel an deficiency assessment made on expanded withholding tax
(EWT) alleging that CIR during the pendency of the proceedings of its petition for review, issued a Revised
Audit Report reducing the EWT. On this basis, petitioner paid the lower deficiency EWT. CIR argued, however,
that the original amount of the deficiency EWT remains valid as the lower amount in the audit report was not
approved and signed by the appropriate officers.

ISSUE: W/N the Revised Audit Report is valid.

RULING: YES
The revised report being the work product of revenue officers in the exercise of their official duties, enjoys the
presumption of regularity. They have the competence as well as the authority to determine the amount of
petitioner's deficiency taxes and issue an audit report stating the same. Here, CIR failed to adduce evidence
that the Revised Audit Report was invalid and therefore not yet final.

65. FISHWEALTH Canning Corp vs. CIR

Facts: Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax
Appeals issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with the
CIR instead of appealing the same to the Court of Tax Appeals within 30 days. The CIR then issued a
Preliminary Collection Letter which prompted the Petitioner to file its Petition with the Court of Tax Appeals.
CIR argued that the Petition with the Court of Tax Appeals was filed out of time.

Issue: Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax
Appeals?

Ruling: NO. A Motion for Reconsideration of the denial of the administrative protest does not toll the 30-day
period to appeal to the Court of Tax Appeals.

66. CIR vs. Isabela Cultural Corp

Facts:

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.

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.

Issue:

Ruling:

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
In other words what is appealable to the CTA is the decision of the CIR on the disputed assessment and (not
the decision of the subordinate official on the protest of the taxpayer) pursuant to the express provision of
Section 4 and 228 of the 1997 Tax Code. It is the disputed assessment that is appealable to the Court of Tax
Appeals for review

67. Republic of the Phils. vs. Ablaza, 108 Phil. 1105, No. L-14519 July 26, 1960

Labrador, J.

Facts: The Collector of Internal Revenue assessed income taxes for the years 1945, 1946, 1947 and 1948 on
the income tax returns of defendant-appellee to a total P5,254.70.Respondent requested a reinvestigation of
tax liability which was granted by the Collector of Internal Revenue. Final assessment was fixed at P2,066.56.
Respondent protested the assessment contending that the income taxes are no longer collectible for the
reason that they have already prescribed. As the Collector did not agree to the alleged claim of prescription,
action was instituted for the recovery of the amount assessed. The Court of First Instance upheld the
contention of Ablaza that the action to collect the said income taxes had prescribed. Thus this appeal.

Issue:

Whether or not the letter in question (Exhibit L) is a letter asking for another investigation that would warrant
the suspension of the prescriptive period.

Held:

Yes. Judgment of the lower court dismissing the action is affirmed. 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 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 liberally in a way conducive to bringing about the beneficial
purpose of affording protection to the taxpayers

68. CIR VS. ATLAS CONSOLIDATED MINING & DEV. CORP.

FACTS: Petitioner issued an assessment letter, dated April 12, 1985, against respondent demanding payment
of delinquent taxes. In response to the said assessment letter, respondent filed a letter-protest on May 13,
1985, which petitioner denied. Respondent appealed to the Court of Tax Appeals, which reversed the decision
of petitioner. The Court of Tax Appeals held that petitioner could no longer enforce the assessment letter
because of prescription. Petitioner alleges that, as respondent filed a letter-protest from the assessment
letter, the period within which petitioner may collect delinquent taxes. Hence, petitioner can still enforce the
assessment letter as prescription has not yet set in.
ISSUE: Whether or not the letter-protest filed by the taxpayer is considered as request for reinvestigation
and tolled the running of the prescription to enforce the assessment.
RULING. NO. Significantly, in the instant case, respondent categorically stated in its letter-protest dated May
13, 1985 that it is not requesting for "reconsideration or reinvestigation or a plea for accommodation in any
sense." Thus, the prescriptive period was not suspended, as there was nothing to prevent petitioner from
collecting the delinquent taxes by distraint, levy, or court proceeding. Hence, the Court of Appeals correctly
upheld the finding of the Court of Tax Appeals that petitioner can no longer enforce the assessment letter
issued against respondent.
69. RIZAL COMMERCIAL BANKING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
FACTS: Petitioner Rizal Commercial Banking Corporation received a Formal Letter of Demand dated May 25,
2001 from the respondent Commissioner of Internal Revenue for its tax liabilities particularly for Gross
Onshore Tax. Petitioner filed a protest letter/request for reconsideration/reinvestigation. As the protest was
not acted upon by the respondent, petitioner filed on April 30, 2002 a Petition for Review with the CTA.
Respondent filed a motion to resolve first the issue of CTA's jurisdiction, which was granted by the CTA in a
Resolution. The Petition for Review was dismissed because it was filed beyond the 30-day period following the
lapse of 180 days from petitioner's submission of documents in support of its protest. Petitioner did not file a
motion for reconsideration or an appeal to the CTA En Banc from the dismissal of its Petition for Review.
Consequently, the Resolution became final and executory. Thereafter, respondent sent a Demand Letter to
petitioner for the payment of the deficiency tax assessments. Petitioner filed a Petition for Relief from
Judgment on the ground of excusable negligence of its counsel's secretary who allegedly misfiled and lost the
Resolution.
ISSUE: Was the Petitioner denied due process?
HELD: No. Petitioner was given the opportunity to be heard. Relief cannot be granted on the flimsy excuse
that the failure to appeal was due to the neglect of petitioner's counsel. Otherwise, all that a losing party
would do to salvage his case would be to invoke neglect or mistake of his counsel as a ground for reversing or
setting aside the adverse judgment, thereby putting no end to litigation.
(Book) A request for reinvestigation is a plea for re-evaluation of the assessment on the basis of additional or
newly discovered evidence which are to be introduced for examination for the first time. It suspends the
running of the prescriptive period to collect. The 180-day period within which the BIR shall act on the protest
starts only from the date of submission of the additional or newly discovered evidence. In fine, the failure to
comply with the 30-day statutory period would bar the appeal and deprive the Court of Tax Appeals of its
jurisdiction to entertain and determine the correctness of the assessment.
70. Lacsona Land Cp v CIR
Facts: On March 27, 1998, the CIR issued a formal assessment notice (FAN) to Lascona Land Co., Inc.
demanding the company to pay P753,266.56 income taxes. Lascona filed a protest on April 20, 1998. CIR
promulgated its decision on March 3, 1999. Lascona received a copy of the decision on March 12, 1999. On
April 12, 1999, Lascona appealed the decision to the Court of Tax Appeals. The CIR moved for the dismissal
of the appeal on the ground that under a revenue regulation issued by the Bureau of Internal Revenue (RR No.
12-99), if the CIR or its representative failed to act on a protest within the 180-day period the taxpayer may
appeal within 30 days from the lapse of the 180-day period to the CTA otherwise, the decision shall become
final and executor and that Lascona having failed to appeal within the said period, CTA has no jurisdiction over
the case.

Issue: Whether or not the contention of the CIR is correct.

Ruling: No. The SC ruled that the revenue regulation to which the CIR anchored its contention is invalid.
Section 228 of the National Internal Revenue Code provides that a taxpayer has two remedies if the CIR failed
to act on his protest within the 180-day period, to wit;

1) The taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of the
decision, or 2) May appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day
period.

From the above provision, the taxpayer was given two options in case CIR failed to act on their claim. First is
to appeal to the CTA within 30 days from the lapse of the 180 day period; or second, wait for the CIR to
issue the decision and then appeal, if adverse, to the CTA within 30 days from the receipt of the decision by
the taxpayer.

In the case at bar, Lascona waited for the CIR to decide on the case and it did not appeal within 30 days from
the lapse of the 180-day period. Lascona received the adverse decision of the CIR on March 12, 1999. It
appealed on April 12, 1999 which is still within the 30-day period to appeal to the CTA. The
revenue regulation in question is invalid because in effect, it limited the remedy provided for by the law.
Section 228 of the NIRC prevails over the said revenue regulation. The said revenue regulation cannot
validly take away the option of the taxpayer to continue waiting, even after the lapse of the 180 day period,
for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIR’s ruling is adverse.

71. Chan Kian v CTA

Facts: 1955, the Collector  of  Customs of Manila ordered  the forfeiture in favor of the Government of 7,166
bales and  bundles  of old newspaper consigned to Ting Soy Factory for failure of the importers to secure a
certificate of the merchandise. As no appeal was presented within 15 days,  the Collector  of  Customs
required  the importer  to pay the amount  of the  surety bonds filed to secure the release of said
merchandise. The importer moved to reconsider. The Collector of Customs denied  the MR.  Appeal against
the order and the order of denial was made to  the Commissioner of Customs but the latter also denied and
dismissed the appeal.   A petition for review was filed with the Court of Tax Appeals, but this court also
dismissed the petition on the ground that the court had no jurisdiction because the petitioner failed to
appeal within the time provided for by law.  It is against this order of the Court of Tax Appeals that the
present petition is presented.

Issue: WON the disputed assessment became final and executory?

Ruling: YES. Petitioner maintains that its counsel’s neglect in not filing the petition for review within the
reglementary period due to the fault of the counsel’s secretary was excusable. Since the petition for review
was filed out of time (more than 30 days after the lapse of the 180 days), and petitioner did not file the MR or
appeal, the disputed assessment became final and executory. The court ruled that the 3-day period to appeal
is jurisdictional and failure of petitioner to comply thereon would bar the appeal and deprive the CTA of its
jurisdiction. Such period is mandatory and it is beyond the power of the courts to extend the same. (BOOK)

72. RIZAL COMMERCIAL BANKING CORPORATION VS. CIR

FACTS: For resolution is petitioner's Motion for Reconsideration of a Decision dated June 16, 2006 affirming the Decision
of the Court of Tax Appeals En Banc dated June 7, 2005 in C.T.A. EB No. 50, which affirmed the Resolutions of the Court
of Tax Appeals Second Division dated May 3, 2004 and November 5, 2004 in C.T.A. Case No. 6475, denying petitioner's
Petition for Relief from Judgment and Motion for Reconsideration, respectively.

Petitioner reiterates its claim that its former counsel's failure to file Petition for Review with the Court of Tax Appeals
within the period set by Section 228 of the National Internal Revenue Code of 1997 (NIRC) was excusable. It alleges that
the counsel's secretary misplaced the Resolution hence the counsel was not aware of its issuance and that it had
become final and executory.

ISSUE: Whether or not petitioner’s failure to file a petition for review with the CTA within the statutory period
rendered the disputed assessment final, executory and demandable.

Ruling: YES. Tax assessments by tax examiners are presumed correct and made in good faith, and all presumptions are in
favor of the correctness of a tax assessment unless proven otherwise. Also, petitioner's failure to file a Petition for
Review with the Court of Tax Appeals within the statutory period rendered the disputed assessment final, executory and
demandable, thereby precluding it from interposing the defenses of legality or validity of the assessment and
prescription of the Government's right to assess.
BOOK: The option granted to the taxpayer in case of inaction by the CIR is mutually exclusive and resort one option bars
the application of the other. After availing of the first option (filing the petition for review with the CTA), petitioner
cannot successfully resort to the second option (awaiting final decision of the CIR) on the pretext that there is yet no
final decision on the disputed assessment because of the CIR’s inaction. Moreover, assessments are presumed to be
correct, unless otherwise proven.

73. Misnet Inc vs. CIR CTA

Respondent issued Letter of Authority authorizing the examination of Petitioner's books of accounts and other
accounting records. Petitioner received the PAN which stated that petitioner had deficiency expanded
withholding tax and final withholding tax on VAT. Petitioner protested the PAN.

Respondent issued a FAN. Respondent issued a Final Decision onDisputed Assessment ("FDDA") which was
received by petitioner on March 28, 2011, with Amended Assessment Notice.
Petitioner filed a request for reconsideration. Respondent replied denying petitioner’s request and informing
it that the case is now final, executory and demandable.

Issue: W/N Petitioner’s judicial appeal has already prescribed.

Ruling: Yes.

Book:
In a case where the protest was denied by the Regional Director who subsequently denied such protest, the
reply letter/motion for reconsideration filed by the taxpayer with the Regional Director did not suspend the
running of the 30-day period to appeal to the CTA; hence, petition was dismissed because the assessment had
already become final, executory and demandable and the Court has no jurisdiction to act on the instant
petition.

Explanation:
On March 28 2011, petitioner received the Final Decision on Disputed Assessment. Hence, counting from
March 28 2011, Petitioner has thirty (30) days from the said date or until April 27 2011, within which to file an
appeal with this Honorable Court. However, instead of filing a judicial appeal to the Court of Tax Appeals,
petitioner just filed a Letter Reply .Obviously, petitioner violated the requirements under Section 228 of the
1997 Tax Code, considering the fact that its Petition for Review with the Court of Tax Appeals (CTA) was filed
only on July 29. 2011. Therefore, petitioner's judicial appeal with this Honorable Court has already prescribed.
74. Allied Banking v CIR
FACTS: Allied Banking Corporation received a PAN from the BIR which it timely disputed. In response, the BIR
issued a Formal Letter of Demand with Assessment Notices. Instead of protesting the FAN, the petitioner filed
a Petition for Review with the CTA. The CTA dismissed the Petition stating that it is neither the assessment nor
the formal demand letter itself that is appealable before it but instead it should be the decision of the CIR on
the disputed assessment.
ISSUES: Can the Formal Letter of Demand be construed as the final decision of the CIR appealable to the CTA
under Republic Act 9282?

HELD: YES. The word “decisions” in RA 9282 means decisions of the CIR on the protest of the taxpayer against
the assessment that is appealable to the CTA.

Strictly speaking, the dismissal of the CTA was proper. However, a careful reading of the demand letter &
assessment notices leads the Supreme Court to agree with the petitioner. The statement of the CIR led the
petitioner to conclude that only a final judicial ruling in her favor would be accepted by the BIR. Thus, the final
assessment notice & demand letter may be considered as the final decision appealable to the CTA. Although
there was no direct reference to bring the matter directly to the CTA, “appeal” refers to petition for review
with the CTA. The terms “protest” and “request for reconsideration or reinvestigation” refer to administrative
remedies before the CIR.

75. CIR v Liquigaz

Facts:
Liquigaz PH Corp received a copy of Letter of Authority (LOA) issued by the CIR authorizing
investigation of all internal revenue taxes for 2005. It also received a copy of the PAN on May 20, 2008 and
was assessed to have a deficiency tax. On June 25, 2008, it received a FAN together with its attached details of
discrepancies for Dec. 31, 2005. Liquigaz filed a protest (Jul 25, 2008) and submitted documents (Sept 23,
2008).
It received a copy of Final Decision on Disputed Assessment (FDDA) (July 1, 2010). Liquigaz filed a
petition for review to the CTA division. CTA division - partially granted Liquigaz’s petition to cancel Expanded
w/holding tax and fringe benefit tax assessments. CTA en banc - affirmed the CTA division.

Issue: w/n the assessment made by the CIR is valid

Ruling:
No. The importance of providing of the taxpayer the adequate written notice of his tax liability is
undeniable. Sec. 228 of the NIRC declares that an assessment is void if the taxpayer is not notified in writing of
the facts and law on which it is made. Sec. 3.1.4 of RR no 12-99 requires that the FLD (formal letter of demand)
must state the facts and law on which it is based, otherwise, the FLD/FAN itself shall be void.
Moreover, Sec 3.1.6 RR 12-99 specifically requires that the decision of the CIR or his duly authorized
representative on a disputed assessment shall state the facts, law, and rules and regulations, or jurisprudence
on which the decision is based. Failure to do so would invalidate the FDDA. The decision of the CIR on a
disputed assessment differs from the assessment itself. Hence, the invalidity of one does not necessarily result
to the invalidity of the other - unless the law or regulations otherwise provide.
76. Gig-A Snacks Inc. vs. Cir CTA Oct 21, 2011
Facts:
Respondent alleges that petitioner considered the Final Notice Before Seizure (Final Notice) issued by
Revenue District Officer Gerry 0. Dumayas (RDO Dumayas), as a denial of its protest and deemed it the
decision of the Commissioner of Internal Revenue (CIR) that is appealable to the Court.
However, a reading of the Final Notice would show that the same is not respondent's final decision on
petitioner's protest letter filed on February 10, 2011, as mandated under Section 3, Rule 4 of the Revised Rules
of Court of Tax Appeals. Hence, respondent concludes that the 30-day period to file a RESOLUTION CTA CASE
NO. 8303 Page 2 of 4 appeal was yet to commence, rendering the instant Petition for Review premature.
Respondent maintains that the tenor of the Final Notice did not suggest finality of the decision. Respondent
adds that the subject Final Notice was signed by ROO Dumayas, who cannot be deemed an alter-ego of
respondent for purposes of issuing a final decision on petitioner's protest under a delegated authority. Lastly,
respondent argues that petitioner failed to submit a valid protest letter. In view thereof, respondent prays
that the instant Petitioner for Review be dismissed for lack of jurisdiction.
Issue:
Whether or not CTA has jurisdiction over the case?
Held:
No.
While it is undisputed that the CTA may review the decision of the CIR, in this case, the questioned
decision was merely issued by the Revenue District Officer (RDO), and not the CIR herself. And while it is
undisputed that Section 7 of the Tax Code, as amended, allows the CIR to delegate her vested powers, except
those enumerated therein, to any subordinate official with the rank equivalent to a division chief or higher,
the petitioners have failed to demonstrate that the RDO issued the same under the authority of the
Commissioner. There is nothing in the Tax Code provisions defining the powers of the RDO, which would show
that an RDO can issue decisions that are appealable to the CTA; hence, the subject petition must be dismissed
for being premature.
77. Belle Corporation vs CIR CTA 8175, September 18, 2012
FACTS:
Petitioner filed its EWT and FWT Returns for taxable year 2002. Petitioner received a Formal Letter of
Demand/Final Assessment Notice (FLD/F AN) dated April 16, 2008. Petitioner filed a protest to the FLD/FAN.

ISSUE: WON the instant petition was filed out of time?

HELD:
No. "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:
Provided, however, That a pre-assessment notice shall not be required in the following cases: XXX XXX 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."(Emphasis
ours)

Pursuant to the above provision, a taxpayer may file an administrative protest, within thirty (30) days
from receipt of the assessment. Consequently, if the protest is denied, the taxpayer adversely affected by the
decision may appeal to the CT A, within thirty (30) days from receipt of the said decision; otherwise, the
decision shall become final, executory and demandable. ~ In this case, records show that petitioner received
the FLD/F AN on April 21, 2008 and filed its administrative protest on May 21, 2008, well within the thirty (30)
day period prescribed by law. On May 25, 2009, petitioner received a FDDA dated May 8, 2009 issued by
Zenaida Garcia, OIC-Assistant Commissioner, Large Taxpayers Service. Applying Section 228, petitioner had
until June 24, 2009 within which to appeal said decision to this Court. However, on June 24, 2009, instead of
filing an appeal to this Court, petitioner filed an Appeal to then Commissioner Sixto Esquivas IV, pursuant to RR
12-99. Respondent CIR maintains that the assessment had long become final and executory for failure of
petitioner to appeal the FDDA dated May 8, 2009 to this Court and the appeal to the Commissioner did not toll
the running of the prescribed thirty (30) day period to appeal to the CTA from petitioner's receipt of the FDDA
on May 25, 2009.

The court does not agree. Pursuant to SEC. 3 .1.5 Disputed Assessment, Pursuant to the above
provision, a taxpayer may still elevate his protest to the Commissioner, within thirty (30) days from date of
receipt of the final decision of the Commissioner's duly authorized representative, and the latter's decision
shall not be considered final, executory and demandable. Section 3.1. 5 of RR 12-99, implementing Section 228
of the NIRC of 1997, as amended, provides for a remedy of appeal to the Commissioner in cases where the
protest is decided by the Commissioner's duly authorized representative. Applying the foregoing, considering
that the FDDA dated May 8, 2009 was issued by Zenaida Garcia, OIC-Assistant Commissioner, Large Taxpayers
Service, this Court finds that petitioner's appeal to then Commissioner Sixto Esquivas IV is with legal basis.
Indirect Denial of Protest

78. CIR vs Union Shipping Corp, 185 SCRA 547

Facts: In a letter dated December 27, 1974 herein petitioner Commissioner of Internal Revenue assessed
against Tee Fong Hong Ltd. and/or herein private respondent Union Shipping Corporation, the total sum of
Php583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received on
January 4, 1975, and in a letter dated January 10, 1975, received by petitioner on January 13, 1975, private
responded protested the assessment. Petitioner, without ruling on the protest, issued a warrant of distraint
and levy, which was served on private respondent’s counsel, Clemente Celso, on November 25, 1976. In a
letter dated November 27, 1976, received by petitioner on November 29, 1976, private respondent reiterated
its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru
the warrant of distraint and levy. Petitioner again, without acting on the request for reinvestigation and
reconsideration of the warrant of distraint and levy, filed a collection suit before branch XXI of the the CFI of
Manila and docketed as civil case no. 120459 against private respondent. Summons in the said collection case
issued to private respondent on December 28, 1978.

Issue: Whether or not issuance of writ of distraint and levy is a proof of finality of an assessment.

RULING: Yes

BOOK: There is no dispute that the Commissioner did not rule on respondent’s MR an thus left respondent in
the dark as to which action is the decision appealable to the CTA. Had he categorically stated that he denies
respondent’s MR and that his action constitutes his final determination on the disputed assessment,
respondent w/o needless difficulty would have been able to determine when his right to appeal accrues and
the resulting confusion would have been avoided. Under the circumstances, the Commissioner, not having
clearly signified his final action on the disputed assessment, the period to appeal has not legally commenced
to run. It was only when respondent received the summons on the civil action for the collection of deficiency
income tax that the period to appeal commenced to run.

79. REPUBLIC v. LIM TIAN TENG SONS

GR. No. L-21731; 1966

FACTS: Lim Tian Teng Sons & Co., a domestic corporation was engaged in 1951 and 1952 in the exportation of
copra. On March 30, 1953 Lim Tian Teng Sons & Co. filed its income tax return for 1952 based on
accrued income and expenses. In the audit and examination of taxpayer’s 1952 income tax return, the CIR
assessed a deficiency income tax and demanded payment thereof not later than February 15, 1954. On
January 31, 1957 Lim Tian requested for reinvestigation of its 1952 income tax liability. The CIR did not reply;
instead he referred the case to the solicitor general for collection by judicial action. On September 20, 1957
the solicitor general demanded from Lim Tian the payment within five days, stating that otherwise judicial
action would be instituted without further notice. Thereupon, the Deputy Collector of Internal Revenue, by his
letter dated October 15, 1957 informed the taxpayer that its request for reinvestigation would be granted
provided it executed within 10 days a signed waiver of the statute of limitations. As him Tian  failed to file a
waiver of the statute of limitations, the collector of I.R. instituted 8 months after, or on September 2, 1958
an action in the CFI for the collection of deficiency income tax. The CFI rendered decision ordering the
defendant to pay the plaintiff as the assessment is valid.

ISSUE: Whether or not the Commissioner is required to rule first on the taxpayer’s request for reinvestigation
before he can go to court for collecting the tax assessed.
RULING: NO. The Collector of the Internal Revenue did not reply to the request for reinvestigation. Instead he
referred the case to the Solicitor General for collection of the tax. The lower court interpreted this action of
the Collector as a denial of defendant’s request for reinvestigation. According to the Supreme Court, the lower
court committed no error. For what is more indicative of the Collector’s decision against reinvestigation that
his insistence to collect the tax? This decision was communicated to defendant in a letter dated September 20,
1957 of the Office of the Solicitor General which must have been received by defendant not later than October
8, 1957 for on the said date, it acknowledged receipt thereof. It had 30 days from October 8, 1957 within
which to appeal to CTA.
80. CIR v Ayala Securities Corp and CTA

FACTS: Respondent, in a letter dated April 19, 1961, protested against the assessment issued by petitioner in a
letter dated February 21, 1961 on its retained and accumulated surplus pertaining to the taxable year 1955
and sought reconsideration thereof. On February 21, 1963, respondent received a letter dated February 18,
1963 from Petitioner calling the attention of the Respondent to its outstanding and unpaid tax and thereby
requesting for the payment of the same within 5 days from receipt of the said letter.

Believing the aforesaid letter to be a denial of its protest, respondent corporation filed a petition for review
with the CTA.

ISSUE: W/N the February 18 letter amounted to a denial of respondent’s protest

RULING: YES. It is tantamount to a denial of the reconsideration or protest of the respondent corporation on
the assessment made by the petitioner, considering that the said letter is in itself a reiteration of the
demand by the BIR for the settlement of the assessment already made, and for the immediate payment of
the tax in spite of the vehement protest of the respondent corporation. 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 amounts to a decision on a disputed or protested
assessment, and therefore, the respondent court did not err in taking cognizance of the case.

*81 omitted*

82. CIR v Isabela Cultural Corp 361 SCRA 71 (2001)

Facts: On February 23, 1990, ICC received from CIR an assessment letter. ICC requested reconsideration.
Supplemental to its protest was a letter, with certain documents supportive of its protest, as well as a Waiver
of Statute of Limitation. ICC received from [CIR] a Final Notice Before Seizure, dated December 22, 1994. In
said letter, [CIR] demanded payment of the subject assessment within ten (10) days from receipt thereof.
Otherwise, failure on its part would constrain [CIR] to collect the subject assessment through summary
remedies. ICC filed a petition for review with the CTA. CTA dismissed. CA reversed.
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
Ruling: Yes. The action of the CIR is deemed a denial of the request for reconsideration of the taxpayer,
thus entitling him to appeal to the CTA. The Notice was the only response received by the taxpayer and its
content and tenor supports the theory that it was the BIR’s final act regarding the request for
reconsideration. The very title of the Notice indicated that it was a “Final Notice Before Seizure” which
means that the taxpayer’s properties will be subjected to seizure to enforce the deficiency assessment.
Thus, in one decided case, the Supreme Court ruled that the Final Notice Before Seizure is a final decision of
the Commissioner on the disputed assessment.

83. Maria Carla Pirovano, et al. v. CIR [14 SCRA 832, July 31, 1965]

FACTS: Enrico Pirovano was the President and Gen. Manager of De la Rama Steamship Co. De la Rama insured
his life. Enrico died. De la Rama renounced its rights and interest to the insurance proceeds in favor of Enrico’s
minor children. The CIR assessed gift tax, surcharges, interests and other penalties against petitioners.
Petitioners contested the assessment. CTA ruled in favor of CIR, ordering petitioners to pay the assessed
amounts. Petitioners appealed, contending that the imposition of the surcharge of 5% and interest of 1% per
month from March 8, 1955 was not justified because the proceeds of the life insurance policies were actually
received on April 6, 1955 and May 12, 1955 only and in accordance with Section 115(c) of the Tax Code; the
filing of the returns of such tax became due on March 1, 1956 and the tax became payable on May 15, 1956,
as provided for in Section 116(a) of the same Code. In other words, petitioners maintain that the assessment
and demand for donees' gift taxes was prematurely made and of no legal effect; hence, they should not be
held liable for such surcharge and interest.

ISSUE: WON the CTA erred in imposing interest and surcharge against petitioners.

HELD: No. The imposition of interest and surcharge is just and legal. It is also mandatory and may not be
waived by the CIR or by the courts. An appeal to the CTA shall not suspend the enforcement of the tax
liability, unless a motion for injunction shall have been presented in court and granted by it, on the basis
that such collection will jeopardize the interest of the taxpayer or the Government. Petitioners did not file in
the lower court any motion for the suspension of payment or collection of the amount of assessment made
against them.

84. CIR v Union Shipping Corp, 185 SCRA 548 (1990)

Facts: Petitioner Commissioner of Internal Revenue assessed against Yee Fong Hong, Ltd. and/or herein
private respondent Union Shipping Corporation deficiency income taxes due for the years 1971 and 1972.
Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy, which was served on private
respondent's counsel, Clemente Celso.
Private respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of
the summary collection thru the Warrant of Distraint and Levy.
Petitioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of
Distraint and Levy, filed a collection suit.
Private respondent filed with respondent court its Petition for Review of the petitioner's assessment of its
deficiency income taxes wherein it prays that after hearing, judgment be rendered holding that it is not liable
for the payment of the income tax herein involved, or which may be due from foreign ship owner Yee Fong
Hong, Ltd.
Respondent Tax Court ruled in favor of private respondent.
Issue: Whether or not BIR can file the civil action for collection, pending decision on the administrative
protest.
Ruling: Yes, because there is no prohibition for this procedure considering that the filing of a civil action for
collection during the pendency of an administrative protest constitutes the final decision of the Commissioner
on the protest.
85. Yabes v. Flojo
Facts: Doroteo Yabes for sometime an exclusive dealer of products of the International Harvester Macleod,
Inc. She received a letter from the Commissioner of Internal Revenue demanding payment as commercial
broker’s fixed and percentage taxes plus surcharges and the sum of P2,530 as compromise penalty. Yabes,
protested the assessment on the ground that his agreements with the International HarvesterMacleod, Inc.
were of purchase and sale, and not of agency. The Commissioner filed a claim with RTC ofCagayan and
likewise filed a motion to dismiss dated March 24, 1971, with theCourt of Tax Appeals in CTA Case No. 2216,
and subsequently filed a memorandum in support of said motion to dismiss,on the ground that the
assessment against Doroteo Yabes had already become final, executory and incontestable, and theCourt of
Tax Appeals had no jurisdiction over the case
Issue:Whether or not CTA has jurisdiction over the case and not the CFI of Cagayan
Ruling: Yes. B:Once the appeal to the CTA is filed on time the CTA has exclusive jurisdiction over the case.
Hence, the collection case in the RTC should be dismissed.
Petitioners received the summons in Civil Case No. II-7 ofthe respondent Court of First Instance of Cagayan on
January 20, 1971, and petitioners filed their appeal with the Courtof Tax Appeals in CTA Case No. 2216, on
February 12, 1971, well within the thirty-dayprescriptive period under Section11 of Republic Act No. 1125. The
Court of Tax Appeals has exclusive appellate jurisdiction to review on appeal any decisionof the Collector of
Internal Revenue in cases involving disputed assessments and other matters arising under the NationalInternal
Revenue Code

86. LASCONA LAND VS. CIR

FACTS The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona Land Co., Inc.
(Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount
of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R.
Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati
City. On April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the Regional
Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-
day period rendered the assessment final and executory. The CIR, however, maintained that Lascona’s failure
to timely file an appeal with the CTA after the lapse of the 180-day reglementary period provided under
Section 228 of the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.

ISSUE
Whether the subject assessment has become final, executory and demandable due to the failure of petitioner
to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day
period pursuant to Section 228 of the NIRC.

HELD
NO. The Court has held that in case the Commissioner failed to act on the disputed assessment within the
180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review
with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the
final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court
of Tax Appeals within 30 days after receipt of a copy of such decision. These options are mutually exclusive
and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not
intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period.
Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or
negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the
protested assessment. More so, because the law and jurisprudence have always contemplated a scenario
where the CIR will decide on the protested assessment.

87. REPUBLIC v. ABLAZA

Facts:

The Collector of Internal Revenue assessed income taxes for the years 1945, 1946, 1947 and 1948 on the
income tax returns of defendant-appellee to a total P5,254.70. Respondent requested a reinvestigation of tax
liability which was granted by the Collector of Internal Revenue. Final assessment was fixed at P2,066.56.
Respondent protested the assessment contending that the income taxes are no longer collectible for the
reason that they have already prescribed.

Issue :

Whether or not the claim of prescription by the respondent is valid.

Ruling :

YES. 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 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 liberally in a way conducive to bringing about the beneficial purpose of affording protection to
the taxpayers.

88. Guagua electric light plant v CIR and CTA

Facts:
Guagua Electric Light Plant Co. (hereinafter called Guagua Electric Company for short), a grantee of
municipal franchise by the municipal council of Guagua, Pampanga, realized and reported a gross income in
the sum of P1,133,003.44. Believing that it should pay franchise tax at the lower rates provided for in its
franchises1instead of 5% fixed by Section 259 of the Tax Code, it filed on March 25, 1957 a claim for refund for
allegedly overpaid franchise tax amounting to P35,593.98 on its gross receipts realized from January 1, 1947 to
November 1956. The Commissioner of Internal Revenue denied refund of franchise tax corresponding to the
period prior to the fourth quarter of 1951 on the ground that the right to its refund had
prescribed. Commissioner of Internal Revenue on march 30 1961 assessed against Guagua Electric deficiency
franchise tax for 16,593.87 from year 1956.
Guagua Electric contested the deficiency assessment in its letter dated March 30, 1961 contending that
the same is violative of its franchises; that the computation of the gross receipts is contrary to rules; and that
the right to assess and/or collect the tax has prescribed. Commissioner of Internal Revenue further maintains
that the prescription of his right to recover the amount of P16,593.87 is governed by Article 1145(2) in relation
to Articles 1154 and 1155 of the Civil Code. Hence, prescription will set in only after the expiration of six years
from 1957 and 1959,

Issue

whether or not CIR’s right to assess the deficiency has prescribed.

Ruling:

yes. A special law (Tax Code) shall prevail over a general law (Civil Code) a general law. In a case the
court ruled that the demand on the taxpayer to pay the tax is in effect as assessment for deficiency franchise
tax, the right to assess or collect the same is governed by section 331 of the tax code rather than by article
1145(2) in relation to article 1154 and 1155 of the civil code which allows 6 years from date of refund within
which to file an action. Deficiency franchise taxes for the period prior to January 1, 1956 cannot be assessed
and collected in March, 1961 inasmuch as the five-year prescriptive period for assessing and collecting the
same had already expired.

89. Republic v Arcache 10 SCRA 337 (1964)

Facts:
Arcache, after admitting some of the averments made in the complaint and denying others, interposed the
defense of prescription, and alleged further that he was "compelled against his will" to execute the surety
bond sought to be forfeited, because the Bureau of Internal Revenue refused to issue him a tax clearance—
which he needed to make a business trip abroad—unless he executed said bond to secure the payment of his
alleged tax obligation.
Issue: WON the defense of prescription will apply.
Ruling:
No. In a suit brought by the government for the forfeiture of the bond put up for unpaid taxes, the taxpayer is
barred from invoking the defense of prescription by the following circumstances: (1) the delay was due to his
repeated requests for reinvestigation and for extensions of time to pay; (2) he admitted in writing his tax
obligation, made repeated promises to pay the same, and actually made two partial payments; (3) the action
on the bond is on a written contractual obligation for which the prescriptive period is 10 years and said period
had not yet elapsed when the action was filed; and (4) the giving of the bond amounts to a renewal of the tax
obligation and a waiver of the defense of prescription. However, when the Government proceeds by court
action to forfeit a bond, the action is for the enforcement of a contractual obligation, the prescriptive period
for which is 10 years under Article 1144 (1) of the Civil Code.
90. CIR vs B.F. Goodrich Philis

Facts: Private respondent BF Goodrich Philippines Inc. was an American corporation prior to July 3, 1974. As a
condition for approving the manufacture of tires and other rubber products, private respondent was required
by the Central Bank to develop a rubber plantation. In compliance therewith, private respondent bought from
the government certain parcels of land in Tumajubong Basilan, in 1961 under the Public Land Act and the
Parity Amendment to the 1935 constitution, and there developed a rubber plantation.

On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over Public
agricultural lands, including the right to dispose or sell their real estate, would be lost upon expiration on July
3, 1974 of the Parity Amendment. Thus, private respondent sold its Basilan land holding to Siltown Realty Phil.
Inc., (Siltown) for P500,000 on January 21, 1974. Under the terms of the sale, Siltown would lease the property
to private respondent for 25 years with an extension of 25 years at the option of private respondent.
Deficiency income tax was assessed, which it duly paid. Siltown’s books of accounts were also examined, and
on the basis thereof, on October 10, 1980, the Collector of Internal Revenue assessed deficiency donor’s tax of
P1,020,850 in relation to said sale of the Basilan landholdings. Private respondent contested this assessment
on November 24, 1980. Another assessment dated March 16, 1981, increasing the amount demanded. On
review, CA reversed the decision of the court finding that the assessment was made beyond the 5-year
prescriptive period in Section 331 of the Tax Code.

Issue: Whether or not petitioner’s right to assess has prescribed.

Ruling: Yes. Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive
period for making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments were
issued by the BIR beyond the 5-year statute of limitations. The court thoroughly studied the records of this
case and found no basis to disregard the 5-year period of prescription, expressly set under Sec. 331 of the Tax
Code, the law then in force.

The law on prescription, being a remedial measure, should be liberally construed in order to afford such
protections. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.
Moreover, negligence or oversight on the part of the BIR cannot prejudice taxpayers, considering that the
prescriptive period was precisely intended to give them peace of mind. For the purpose of safeguarding
taxpayers from unreasonable examination, investigation or assessment, our tax law provides a statue of
limitations in the collection of taxes.

91. CIR vs PROCTOR & GAMBLE PMC

FACTS:
Procter and Gamble Philippine Manufacturing Corporation ("P&G-Phil.") declared dividends payable to its
parent company and sole stockholder, Procter and Gamble Co., Inc. (USA) ("P&G-USA"), from which dividends
representing the 35% withholding tax at source was deducted.
Private respondent P&G-Phil. filed a claim for refund or tax credit claiming, among other things, that pursuant
to Section 24 (b) (1) of the NIRC, the applicable rate of withholding tax on the dividends remitted was only
fifteen percent (15%) (and not thirty-five percent [35%]) of the dividends.
There are certain preliminary aspects of the question of the capacity of P&G-Phil. to bring the present claim
for refund or tax credit, which need to be examined. This question was raised for the first time on appeal,  i.e.,
in the proceedings before this Court on the Petition for Review filed by the Commissioner of Internal Revenue.
The question was not raised by the Commissioner on the administrative level, and neither was it raised by him
before the CTA.
ISSUE: W/N Bureau of Internal Revenue ("BIR") should not be allowed to defeat an otherwise valid claim for
refund by raising this question of alleged incapacity for the first time on appeal before this Court.
RULING: YES
In the absence of explicit statutory provisions to the contrary, the government must follow the same rules
of procedure which bind private parties.
92. CIR vs. Ayala Securities

Facts: On February 21, 1961, the Commissioner of Internal Revenue made an assessment on Ayala Securities
Corporation in the sum of 758,687.04 as 25% surtax and interest on its accumulated surplus of 2,758,442.37
for its fiscal year ending September 30, 1955. Ayala invoked the defense of prescription against the right of CIR
to assess the said tax. It is contended that since its income tax return for 1957 was filed in 1958, and with the
clarification by Ayala in its letter dated May 14, 1963, that the amount sought to be collected was their surtax
liability under Section 25 rather than deficiency corporate income tax under Section 24 of the National Internal
Revenue Code, the assessment has already prescribed under Section 331 of the same Code. The Court of Tax
Appeals ruled that the assessment fell under the 5-year prescriptive period provided in Section 331 of the
NIRC and that the assessment had, therefore, been made after the expiration of the said five-year prescriptive
period and was of no binding force and effect.

Issue: Whether or not the right to assess and collect the 25% surtax has prescribed after five years.

Ruling: No. The Court is persuaded by the fundamental principle invoked by the Commission of Internal
Revenue that limitations upon the right of the government to assess and collect taxes will not be presumed in
the absence of clear legislation to the contrary and that where the government has not by express statutory
provision provided a limitation upon its right to assess unpaid taxes, such right is imprescriptible.There is no
such time limit on the right of the Commissioner to assess the 25% surtax since there is no express statutory
provision limiting such right or providing for its prescription. Hence, the collection of surtax is
imprescriptible. The underlying purpose of the surtax is to avoid a situation where the corporation unduly
retains its surplus earnings instead of declaring and paying dividends to its shareholders. SC reverses the
ruling of the CTA.

Shorter facts: Ayala Securities Corp. (Ayala) failed to file returns of their accumulated surplus so Ayala was
charged with 25% surtax by the Commissioner of internal Revenue. The CTA (Court of Tax Appeals) reversed
the Commissioner’s decision and held that the assessment made against Ayala was beyond the 5-yr
prescriptive period as provided in section 331 of the National Internal Revenue Code. Commissioner now files
a motion for reconsideration of this decision. Ayala invokes the defense of prescription against the right of the
Commissioner to assess the surtax.

93. FSM Cinemas vs. CIR

Facts:

FSM was assessed by respondent for deficiency expanded withholding and final withholding taxes for the taxable year
2000.

Issue: Whether or not respondent was correct in issuing the assessment against petitioner for deficiency expanded
withholding and final withholding taxes for the taxable year 2000.

Ruling:

No. The above law leaves no room for argument, the three-year period to assess commences from the date of the
actual filing of the return or from the last date prescribed by law, whichever comes later. Better stated, if the return
was filed earlier than the last day allowed by law, the period to assess shall still be counted from the last day
prescribed for the filing of the return. However, if the return was filed beyond the period prescribed by law, the three-
year period shall be counted from the day the return was filed.

Petitioner received the Formal Assessment Notice No. WE-4800-00- 05-0452 dated December 23, 2005 on January 2,
2006. 17 Clearly, the assessment for deficiency expanded withholding tax was made beyond the 3 year prescriptive
period provided by law; thus, it is void.

94. CIR vs Hoya Glass

Facts:

1. Hoya was assessed by CIR for penalties, interest and 50% surcharge, arising from the alleged late payment
of final withholding tax FWT on cash dividends paid to stockholders.
2. Hoya protested the assessment, and filed a reply with the CTA
3. Reason of Hoya: Not late in filing the FWT return and payment of the corresponding final tax due because
 a. December 22, 2006 – cash dividends were declared by the BOD to stockholders of record as of
march 31, 2006, and payable on or before Jan 31, 2007.
b. Feb 2, 2007 – actual payment of dividends
c. Mar 10, 2007 – payment of FWT on dividends

CIR asserts that Hoya is liable to pay the Php74,744,012.40 representing penalties for late payment of FWT on dividends.
CIR argues that the 50°/o surcharge is proper since there was a willful neglect to file the return within the period
prescribed by law. CIR further asserts that Hoya willfully filed a false return when it indicated that the FWT return was
for the month of February 2007 instead of January 2007 for it to evade the payment of surcharge and interest; that such
false entry in the FWT return is sufficient to justify the application of the tenyear prescriptive period under Section 222
(A) of the 1997 National Internal Revenue Code, as amended.

Hoya argues that the assessment is already barred by prescription having been issued almost three years after the
expiration of the three-year prescriptive period; and, that it did not file a false return with intent to evade tax which
would justify the application of the ten-year prescriptive period.

Issue: Whether the CIR's authority to assess Hoya for deficiency FWT on dividends is already barred by prescription.

Ruling: Yes. In the instant case, it is undisputed that Hoya filed its FWT return and paid FWT amounting to
Php145,205,453.93 on March 10, 2007. It is also undisputed that the PAN and FLD with assessment notice were
received by Hoya on January 28, 2013 and February 27, 2013, respectively. Clearly, more than three (3) years have
elapsed from the filing of the return on March 10, 2007 to the issuance of the PAN and FLD on January 28, 2013 and
February 27, 2013, respectively.

At the core of this case is whether Hoya's late declaration and payment of its FWT on dividends is sufficient to constitute
the said tax return as a false return which would necessitate the application of the ten-year prescriptive period under
Section 222(A) of the NIRC. This codal provision states: Sec. 222. Exceptions as to Period of Limitation of Assessment and
Collection of Taxes. - (A) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return,
the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any
time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which
has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for
the collection thereof.

*95 omitted*

96. PHILIPPINE JOURNALISTS, INC. vs. COMMISSIONER OF INTERNAL REVENUE

FACTS: On August 10, 1995 Bureau of Internal Revenue (BIR) issued Letter of Authority to examine petitioner’s
books of account and other accounting records for internal revenue taxes. October 5, 1998, the Assessment
Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation.
Thus, BIR issued Assessment/Demand on December 9, 1998 stating the following deficiency taxes, inclusive of
interest and compromise penalty. Petitioner contested that the assessment had no factual and legal basis. On
March 28, 2000, a Warrant of Distraint and/or Levy from the BIR was received by the petitioner. Petitioner
filed a Petition for Review  with the Court of Tax Appeals (CTA). Petitioner complains, among others: (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.
ISSUE: W/N the Honorable Court of Appeals gravely erred when it held that the assessment in question
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.
HELD: (Book) Yes. Since the assessment was issued beyond the prescriptive period to assess, the assessment
is invalid and any action to collect an invalid assessment is not warrant.
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.

97. Tan Guan v Nable

Facts: Tan Guan seeks a review of a decision of the CTA upholding 23 assessments made by the BIR. With
respect to the assessment for P72,450, he maintains that the same was made on January 21, 1953, whereas,
the civil action for the recovery of said sum and that of P128,800 was filed on May 7, 1958, or beyond the
prescriptive period of five (5) years.
The first represents specific taxes allegedly due for the quantity of cigarettes that could have been produced
out of 300 bobbins of cigarette paper disposed of by Imperial Tobacco Company of which Tan Guan is one of
the principal partners, whereas the second constitutes the specific taxes allegedly due on the cigarettes that
could have been manufactured out of the 800 bobbins of cigarette paper said to have been purchased by
Imperial from the Philippine Cigarette Manufacturing Co., Inc.

Accordingly, from May 8, 1953 to May 7, 1958, when the civil action was commenced, less than five (5) years
had elapsed. Moreover, the prescriptive period of five (5) years applies only when a return is filed.

ISSUE: Can the petitioner avail the benefits of Sec. 331 (now Sec. 203)?

RULING: No. It is incumbent upon a taxpayer, who wants to avail of such benefits by setting up prescription as
an affirmative defense, to prove he submitted a return. If he fails to do so, the conclusion should be that no
such return was filed, in which case, the government has 10 years within which to make the corresponding
assessments.

Extra: SEC. 203. Period of Limitation Upon Assessment and 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.

98. Republic v Lim de Yu

Facts: Respondent filed ITR for 1948 -1953. BIR assessed her taxes which she paid. BIR assessed her for income
tax deficiency for the same period (P22, 450.50). She requested a reinvestigation. She signed a “waiver on the
statute of limitations in the NIRC”. BIR assessed her for the third time for tax deficiency of P35, 379.63 which
included a 50% surcharge for the same tax periods. Upon her failure to pay for the taxes due, BIR filed a
collection case against. Respondent alleges that BIR’s action to assess and collect has already prescribed as the
5 year period has lapsed. BIR contends that it has 10 years from discovery of fraud to collect from Yu de Lim
as her return were fraudulent, as there was a great disparity from BIR’s assessment from the returns filed.

Issue: WON BIR’s contention is correct?

Ruling: No. Fraud was not established by BIR. For the 10-year period of limitation of assessment of taxes
under Section 222 to apply, it is not enough that fraud is alleged in the complaint; it must be established and
proved by clear and convincing proof. (Book)

99. GUTIERREZ VS. COLLECTOR [1965]

FACTS: Lino Gutierrez was primarily engaged in the business of leasing real property for which he paid real
estate broker's privilege tax. On February 23, 1955 Gutierrez filed his income tax return for 1954 and
on February 24, 1958 the Commissioner of Internal Revenue issued a warrant of distraint and levy to collect
the tax due thereunder. Gutierrez contends that the Commissioner's right to issue said warrant is barred, for
the same was issued more than 3 years from the time he filed his income tax return. On the other hand, the
Commissioner of Internal Revenue maintains that his right did not lapse inasmuch as from the last day
prescribed by law for the filing of the 1954 return to the date when he issued the warrant of distraint and levy
less than 3 years passed.
ISSUE: Has the right of the Commissioner of Internal Revenue to collect by distraint and levy the deficiency income tax
for 1964 prescribed?

Ruling: YES. Any internal tax which has been assessed within the period of limitation may be collected by distraint or
levy or by a proceeding in court within 5 years from date of assessment. The period of limitation to collect is counted
from the assessment of the tax, NOT from the time the income tax return was filed.  From February 23, 1955 when the
income tax return for 1954 was filed, to February 24, 1958, when the warrant of distraint and levy was issued, 3 years
and 2 days elapsed. The right of the Commissioner to issue said warrant of distraint and levy having lapsed by two days,

the warrant issued is null and void.

100. Republic vs Razon and Jai-Alai Corp

This is an action instituted by the Republic of the Philippines to collect from defendant Jose Razon the amount
of P73,522.62, as alleged income tax due from Haig Assadourian (general manager of the Jai-Alai Corporation)
for the year 1946, including surcharges and interests up to December 31, 1951, and from defendant Jose
Razon and Jai-Alai Corporation, jointly and severally, the sum of P30,080.00 exclusive of penalties, surcharges
and interests, as income taxes due from Haig Assadourian, for the years 1947 and 1948.

CTA ordered the Jai Alai to pay to the Republic the sum of P12,000.00 representing the 12% withholding tax,
plus surcharge, and dismissing the complaint, insofar as it concerned defendant Jose Razon, as well as the
cross-claim of the Jai-Alai against the latter.
Jai-Alai claims that the CTA erred in not holding that the right to recover said withholding tax from the Jai-Alai
had already prescribed.

Issue: W/N the right to collect the withholding tax through the assets has prescribed
Ruling: No.

Book
Where a withholding agents fails to file a withholding tax return, “a proceeding in court for the collection of
such tax may be begun without assessment, at any time within 10 years after the discovery of the omission.”

In the case at bar, the failure to file a return was discovered in 1949. Judicial suit was initiated on January 16
1953 when the Jai-Alai Corp was included as party defendant in the amended complaint. As only 4 years has
elapsed from the time of the discovery of the omission to file a return to the filing of a judicial action, the right
to collect the withholding tax through the assets had not yet prescribed.

101. Collector v Pineda

FACTS: Atanasio Pineda died. Internal Revenue examiner investigated the income tax liability of some heirs of
the deceased. In the course of her investigation, she allegedly found that no income tax return had been filed
on behalf of his estate. Income tax assessment notices were then sent to the said estate.

Later on, the CIR assessed and demanded from the estate the payment of real estate dealer’s fixed tax as
compromise penalty. The assessment was impugned by respondent on the ground that the income of the
estate had been consolidated with that of Mrs. Pineda in the income tax return.

Thereafter, upon reinvestigation made, owing to respondent’s aforementioned communication denying the
alleged tax delinquency of the estate of his father, the income tax assessment notices 3-A and 5- A, made on
August 1, 1951, as well as the income tax assessment notice Exhibit 7-A, dated October 20, 1952, were
cancelled and new income tax assessment notices (Exhibits 14, 15 and 16. pp. 10, 36 and 58, BIR rec.) were
issued on October 19, 1953

ISSUE: Whether or not the right of the CIR to assess and collect from the Estate of the deceased the taxes has
already prescribed

RULING: No. That fact that court action for the collection of real estate dealer’s fixed tax was instituted more
than five years after the period to which it refers, does not affect either the validity of any revised assessment
made or the right to enforce it by court proceedings, where no return for the said tax had been filed.

*102 omitetd*

103. Butuan Sawmill vs City of Butuan 16 SCRA 755 (1966)

Note: Facts does not state any relation to this topic.
Facts:
The Petitioner was granted a legislative franchise under RA 399 for an electric light, heat, and power system
in Butuan and Cabadbaran, Agusan, together with the issuance of a certificate of public convenience and
necessity by the Public Service Commission. However, the City of Butuan issued Ordinances numbered 11, 131
and 148 imposing a 2% tax on the gross sales or receipts of any business operated in the city.  Butuan Sawmill,
Inc. questioned the validity of the taxing ordinance which is deemed to have impaired the obligation of
contract thereby depriving the Petitioner of property without due process of law. On the other hand,
Respondent maintained that it was vested with the “power to provide for the levy and collection of taxes for
general and special purposes” as stipulated in its charter which was granted in 1950.
Issue:
Whether or not income tax return is considered to be a return for compensating tax.
Held:
No.
(BOOK) An income tax return cannot be considered as return for compensating tax (which was
replace by the value added tax). The taxpayer must file a return for the particular tax law. If he does not file
such return, an assessment may be made within 10 years from and after the discovery of the omission to
file the return. Even if an income tax return which happens to be the wrong return had been filed and even
considering that the income from said sales were all reflected therein, still this would not take the place of
the correct return which for purposes of the tax in question should actually be the percentage tax return.
Effect of Filing an amended return

*104 omitted & 105*

106. COMMISSIONER OF INTERNAL REVENUE vs. PHOENIX ASSURANCE CO., LTD.

14 SCRA 52; May 20, 1965

FACTS: Phoenix Assurance Co., Ltd., a foreign insurance corporation organized under the laws of Great Britain,
is licensed to do business in the Philippines with head office in London. On April 1, 1953, Phoenix Assurance
Co., Ltd. filed its Philippine income tax return for 1952, declaring therein a deduction from gross income as
part of the head office expenses incurred for its Philippine business. On August 30, 1955 it amended its income
tax return for 1952 by excluding from its gross income the amount representing reinsurance premiums ceded
to foreign reinsurers and further eliminating deductions corresponding to the ceded premiums. The
Commissioner of Internal Revenue disallowed a portion of the claimed deduction for head office expenses and
assessed a deficiency tax on July 24, 1958. On August 1, 1958 the Bureau of Internal Revenue released the
assessment for deficiency income tax for the years 1952 and 1954 against Phoenix Assurance Co, Ltd. which
the latter protested. However, the Commissioner of Internal Revenue denied such protest. Subsequently,
Phoenix Assurance Co., Ltd. appealed to the Court of Tax Appeals. The Court of Tax Appeals declared the right
of the Commissioner of Internal Revenue to assess deficiency income tax for 1952 to have prescribed.

ISSUE: Whether or not the contention of Phoenix is correct that the prescriptive period starts to run from the
filing of the original return.

HELD: NO. Where the amended return is substantially different from the original return, the right of the BIR to
assess the tax is counted from the filing of the amended return. As pointed out by the court, if the assessment
is counted from the filling of the original return, this would permit taxpayers to evade taxes by simply
reporting in their original return, heavy losses and amending the same after the lapse of the prescriptive
period when the Commissioner has already lost authority to assess the tax. In the original return, taxpayer
declared a net loss after deducting head office expenses allocable to the Philippine business. The objective of
the tax code is to impose taxes, not enhance tax avoidance to the prejudice of the Government.

107. AZNAR v CIR

FACTS: The CIR having doubts on the veracity of the reported income of the obviously wealthy deceased
taxpayer, the latter’s assets and liabilities during the period of 1941 to 1951 were ascertained. The findings
clearly indicated that said taxpayer did not correctly declare the income reported in his income tax returns
from 1946 to 1951, as the yearly increase in his net worth were very much more than what was reported
during said period. Respondent CIR issued an assessment notice which, after reinvestigation, significantly
reduced the assessed deficiency income tax.

Petitioner avers that according to the NIRC, the right of the CIR to assess deficiency income taxes of the late
Aznar for the years 1946, 1947, and 1948 had already prescribed at the time the assessment was made on
November 28, 1952; there being a five year limitation upon assessment and collection from the filing of the
returns. Meanwhile, respondents believe that the prescription period in the case at bar that is applicable is
under Sec. 332 of the NIRC which provides that: "(a) In the case of a false or fraudulent return with intent to
evade tax or of a 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 assessment, at any time within ten years after the discovery of the falsity,
fraud or omission". Petitioner argues said provision does not apply because the taxpayer did not file false and
fraudulent returns with intent to evade tax.

ISSUES: W/N the deceased Aznar filed false or fraudulent income tax returns

2) W/N the action has prescribed

RULING: 1.) NO. The lower court’s conclusion regarding the existence of fraudulent intent to evade payment
of taxes was based merely on a presumption and not on evidence establishing a willful filing of false and
fraudulent returns so as to warrant the imposition of the fraud penalty. The fraud contemplated by law is
actual and not constructive. It must be intentional fraud, consisting of deception willfully and deliberately
done or resorted to in order to induce another to give up some legal right. Negligence, whether slight or gross,
is not equivalent to the fraud with intent to evade the tax contemplated by the law.

2.) NO. 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 assessment,
at any time within ten years after the discovery of the (1) falsity, (2) fraud, (3) omission. The stand of the
court 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 segregates 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. he 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.

108. Ungab vs. Cusi, Jr.

FACTS: BIR Examiner Ben Garcia examined the income tax returns filed by Quirico P. Ungab, for the calendar
year ending December 31, 1973. In the course of his examination, he discovered that the petitioner failed to
report his income derived from sales of banana saplings. As a result, the BIR District Revenue Officer at Davao
City sent a "Notice of Taxpayer" to the petitioner informing him that there is due from him (Ungab) the
amount of P104,980.81, representing income, business tax and forest charges for the year 1973 and inviting
petitioner to an informal conference where the petitioner, duly assisted by counsel, may present his
objections to the findings of the BIR Examiner. Upon receipt of the notice, the petitioner wrote the BIR District
Revenue Officer protesting the assessment, claiming that he was only a dealer or agent on commission basis in
the banana sapling business and that his income. BIR Examiner Ben Garcia, however, was fully convinced that
the petitioner had filed a fraudulent income tax return so that he submitted a "Fraud Referral Report," to the
Tax Fraud Unit of the BIR. Consequently, the Special Investigation Division of the BIR found sufficient proof
that the herein petitioner is guilty of tax evasion for the taxable year 1973 and recommended his prosecution,
claiming that the fraudulent return is a prima facie evidence of the crime.

Issue: Whether or not the BIR is correct

Held: Yes. An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat
and evade the income tax. A crime is complete when the violator has knowingly and willfully filed a fraudulent
return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on
the part of the taxpayer that he has made an inaccurate return, and the government’s failure to discover the
error and promptly to assess has no connections with the commission of the crime.

Book: There is prima facie evidence of a false or fraudulent return when the taxpayer has wilfully and
knowingly filed it with the intent to evade a part or all of the tax legally due from him.
*109 omitted*
110. Eugenio Perez v. CTA [GR. L-10507, May 30, 1958]

FACTS: The Collector ordered petitioner to pay deficiency income tax and surcharges corresponding to the
years 1947-1950. In making the deficiency assessments, the Collector applied the net-worth technique, where
he found that there was a consistent underdeclaration of income, unexplained acquisition of properties, and
the fact of petitioner's having claimed fictitious losses evidenced fraudulent intent. CTA declared that the net-
worth method of determining understated income to have been validly and properly applied and ordered
petitioner to pay the deficiency income taxes and surcharges. Petitioner filed a petition for review with the SC.

ISSUE: WON the 50% surcharge imposed upon Perez is legal and justified.

HELD: Yes. Sec. 72 of the NIRC authorizes the Collector to impose a surcharge of 50% of the amount of the tax
or deficiency tax in a case of a false or fraudulent return. Petitioner contends that no fraud has been shown by
the Government to warrant the surcharge. In sustaining the Collector, the CTA expressed the view that
substantial under-declarations of income for 4 consecutive years eloquently demonstrate the falsity or
fraudulence of the income tax returns with an intent to evade the payment of tax. Hence, the imposition of
the fraud penalty is proper.

Note: The book ruling says 6 consecutive years, but in the actual case it’s 4 years lang.

111. Jalandoni v Republic, 15 SCRA 51 (1965)

Facts: Ledesma died intestate leaving real properties and personal properties consisting of shares of stock in
various domestic corporations. She left her husband Jalandoni and three children. Cesar Jalandoni, one of the
heirs, filed an estate and inheritance tax return. BIR made an assessment calling for payment of estate and
inheritance taxes. BIR conducted investigation and found out that there were understatements of properties
in the tax return.
Issue: Whether or not understatements in the tax return imply fraud.
Ruling: No. Mere understatement in the tax returns of seven property subject to estate tax will not
necessarily imply fraud. It appears that three of the seven lots alleged to have been excluded were actually
included in the returns; that one lot was not included because it belonged to one of the heirs; and that the
three remaining lots were already declared in the return submitted by the husband as part of the conjugal
property for purposes of income tax. The omission, therefore, was not deliberate and did not amount to fraud
indicative of an intention to evade payment of the proper tax due the government.
112. CIR v. Ayala Securities Co
Facts: Ayala Securities Corp. (Ayala) failed to file returns of their accumulated surplus so Ayala was charged
with 25% surtax by the Commissioner of internal Revenue. The CTA (Court of Tax Appeals) reversed the
Commissioner’s decision and held that the assessment made against Ayala was beyond the 5-yr prescriptive
period as provided in section 331 of the National Internal Revenue Code. Commissioner now files a motion for
reconsideration of this decision. Ayala invokes the defense of prescription against the right of the
Commissioner to assess the surtax.
Issue: Whether or not the applicable provision of law to this case is Section 331 of the National Internal
Revenue Code, which provides for a five-year period of prescription of assessment from the filing of the
return, or Section 332(a) of the same Code which provides for a ten-year period of limitation for the same
purpose;
Ruling: Yes. Section 331 applies. there is no iota of evidence presented by the petitioner as to any fraud or
falsity on the return with intent to evade payment of tax, not even in the income tax assessment (Exh. 5) nor
in the letter-decision of February 18, 1963 (Exh. G), nor in his answer to the petition for review. Petitioner
merely relies on the provisions of Sec 25 of the National Internal Revenue Code, violation of which, according
to Petitioner, presupposes the existence of fraud. But this is begging the question and We do not subscribe to
the view of the petitioner.
B:Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved in the
trial court.- The finding of the trial court as to its non-existence is final and cannot. be reviewed, unless
clearly shown to be erroneous. Fraud is never lightly to be presumed because it is a serious charge
113. CIR VS. JAVIER

Facts:

In 1977, Victoria Javier received a $1 Million remittance in her bank account from her sister abroad, Dolores Ventosa.
Melchor Javier, Jr., the husband of Victoria immediately withdrew the said amount and then appropriated it for
himself.Later, the Mellon Bank, a foreign bank in the U.S.A. filed a complaint against the Javiers for estafa. Apparently,
Ventosa only sent $1,000.00 to her sister Victoria but due to a clerical error in Mellon Bank, what was sent was the $1
Million.

Meanwhile, Javier filed his income tax return. In his return, he place a footnote which states:
Taxpayer was recipient of some money received from abroad which he presumed to be a gift but turned out to be an
error and is now subject of litigation.

The Commissioner of Internal Revenue (CIR) then assessed Javier a tax liability amounting to P4.8 Million. The CIR also
imposed a 50% penalty against Javier as the CIR deemed Javier’s return as a fraudulent return.

ISSUE: Whether or not Javier is liable to pay the 50% penalty.

HELD: No. It is true that a fraudulent return shall cause the imposition of a 50% penalty upon a taxpayer filing such
fraudulent return. However, in this case, although Javier may be guilty of estafa due to misappropriating money that
does not belong to him, as far as his tax return is concerned, there can be no fraud. There is no fraud in the filing of the
return. Javier’s notation on his income tax return can be considered as a mere mistake of fact or law but not fraud.
Such notation was practically an invitation for investigation and that Javier had literally “laid his cards on the table .
Fraud is never imputed and the courts never sustain findings of fraud upon circumstances which, at most create only
suspicion and the mere understatement of tax is not itself proof of fraud for the purpose of tax evasion. A
“fraudulent return is always an attempt to evade a tax but a merely “false return” may not be.

114. REPUBLIC v. LIM DE YU

Facts:

BIR accepted Yu de Lim’s yearly statement of income from 1945 to 1953 and assessed her for P2,732.37 which
respondent paid. In 1956, BIR came up with different figures for the same period. It assessed respondent with
P22, 450.50 as deficiency tax. In 1958, the Bureau assessed respondent P35, 379.63 for years 1948 to 1953,
inclusive of 50% surcharge notwithstanding the fact that respondent filed her return that year and paid for it.
BIR claims that the returns filed by Yu de Lim for 1948 to 1953 are fraudulent as they are much less than as
computed by the BIR and under par (a) Sec 332 of the Tax Code.
Issue:

WON the returns filed by respondent for the years 1948 to 1953 are false and fraudulent.

Ruling:

NO.

The presence of fraud was held quite unlikely in an assessment where the BIR itself appeared “not too sure”
as to the real amount of the taxpayer’s net income, as where the BIR had on three different occasions
arrived at three highly different computations.

115. CIR v Gonzales

Facts:

Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13, 1948, leaving two heirs, namely,
Jose S. Yusay, a legitimate child, and Lilia Yusay Gonzales,  Bureau of Internal Revenue assessed dated
February 13, 1958 the estate and inheritance taxes in the sums of P6,849.78 and P16,970.63, respectively. Lilia
Yusay disputed the legality of the assessment She claimed that the right to make the same had prescribed
inasmuch as more than five years had elapsed since the filing of the estate and inheritance tax return on May
11, 1949.

CTA reversed CIR. CIR believed the return filed on May 11, 1949 was false or fraudulent in the sense
that the value of the properties were underdeclared and that the said return was also incomplete as the heirs
to the estate were not specified hence, their assessment is not prescribed by way of exception But the
allegation of fraud was raised only in its memorandum to the tax court after it rested its case and fraud was
not imputed in the assessment or in its answer.

Issue:

Wether or not fraud was raised on the proper time, so that CIR is not barred by prescription in its
assessment, When must fraud be raised by the government.

Ruling:
No. The Commissioner claims that fraud attended the filing of the return; that this being so, Section 332(a) of
the Tax Code would apply. It may be well to note that the assessment letter itself (Exhibit 22) did not impute
fraud in the return with intent to evade payment of tax. Precisely, no surcharge for fraud was imposed. In his
answer to the petition for review filed by Lilia Yusay in the Court of Tax Appeals, the Commissioner alleged
no fraud. Instead, he broached the insufficiency of the return as barring the commencement of the running of
the statute of limitations. He raised the point of fraud for the first time in the proceedings, only in his
memorandum filed with the Tax Court subsequent to resting his case. Said Court rejected the plea of fraud
for lack of allegation and proof, and ruled that the return, although not accurate, was sufficient to start the
period of prescription. Fraud should have been raised in the Court of Tax Appeals or assigned as error before
this Court. Assessment letter should also impute fraud.
 Fraud is a question of fact. The circumstances constituting it must be alleged and proved in the court below.
And the finding of said court as to its existence and non-existence is final unless clearly shown to be
erroneous. As the court a quo found that no fraud was alleged and proved therein, We see no reason to
entertain the Commissioner's assertion that the return was fraudulent.The Court of First Instance acting as a
settlement court is not the proper tribunal to pass upon such defense, therefore it would be but futile to raise
it therein. Moreover, the Tax Code does not bar the right to contest the legality of the tax after a taxpayer
pays it. Under Section 306 thereof, he can pay the tax and claim a refund therefor. A fortiori his willingness to
pay the tax is no waiver to raise defenses against the tax's legality.
116. Yutivo Sons Hardware Co v CTA 1 SCRA 160
Facts:
the Collector of Internal Revenue made an assessment upon Yutivo and demanded -from the latter
Pl,804,769.85 as deficiency sales tax plus surcharge. The assessment was disputed by the petitioner, and a
reinvestigation of the case having been made by the agents of the Bureau of Internal Revenue, the respondent
Collector in his letter dated November 15, 1952 countermanded his demand for sales tax deficiency on the
ground that "after several investigations conducted into the matter no sufficient evidence could be gathered
to sustain the assessment of this Office based on the theory that Southern Motors is a mere instrumentality or
subsidiary of Yutivo."
Issue: WON the petitioner’s understatement of income proves fraud.
Ruling:
No. The Commissioner’s failure to prove fraud can be fatal to the assessment as when a tax liability is
assessed beyond the usual three-year prescriptive period. The fact that the Commissioner did not include
the fraud penalty in his deficiency assessment which was issued after the filing of the taxpayer’s return is an
indication that the Commissioner himself does not believe that there was fraud. There was no fraud if the
Commissioner merely relied upon an alleged substantial under-declaration of income tax resulting from his
own computation of the cost basis of the lands and improvements sold by the taxpayer to the Government.
It appeared that the taxpayer honestly believe in a different cost bass and had explained the nature of the
improvements introduced on the lands. Mere understatement of tax in itself does not prove fraud.
117. CIR vs Estate of Benigno Toda JR

Facts: The CIR wants to assail the decision of the CTA holding the Estate of Toda not liable for the deficiency IT
of Cibeles Insurance Corporation (CIC) in the amount of 79 million pesos for 1989, and ordered the
cancellation and setting aside of the CIR's assessment. The case at bar stemmed from a notice of assessment
(NOA) sent to CIC arising from an alleged simulated sale of a 16-storey commercial building known as Cibeles
Building, situated on two parcels of land on Ayala Avenue, Makati City. It is undisputed that CIC authorized
Toda, Jr., President and owner of 99.991% of CIC, to sell the Cibeles Building and the two parcels of land on
which the building stands for an amount of not less than P90 million. Toda sold it to Altonaga for 100 million
pesos who then sold it on the same day to Royal Match Inc. (RMI) for 200 million. All these transactions are
evidenced by notarized deeds of sale.

For the sale of the property to RMI, Altonaga paid capital gains tax in the amount of P10 million. CIC paid  26
million pesos for its gains from the sale of said property. 3 years before Toda died, he had sold his entire
shares of stocks in CIC to Choa for 12.5 million pesos. The BIR issued the 79-million NOA and demand letter
against CIC. CIC moved to reconsider because it has a new set of stockholders which it called "new CIC." It also
pointed out Toda's undertaking to keep CIC and its stockholdings free from all tax liabilities during the period
within which the realty was sold. The issued a NOA against the Estate of Toda. Estate filed a protest which was
dismissed - fraudulent sale to evade the 35% corporate income tax for the additional gain of P 100M and that
there is in fact only 1 sale.

Issue: W/N this is a case of tax evasion.

Ruling: Yes. “Tax avoidance” is the tax saving device within the means sanctioned by law. This method
should be used by the taxpayer in good faith and at arm’s length. “Tax evasion” on the other hand, is a
scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further
or additional civil or criminal liabilities. Tax evasion connotes the integration of three factors: (1) payment
of tax less than legally due; (2) a state of mind being evil, in bad faith, willful,or deliberate and not
accidental; and (3) unlawful course of action. The intermediary transaction, i.e., the sale of Altonaga, which
was prompted more on the mitigation of tax liabilities than for legitimate business purposes, constitutes one
of tax evasion. To allow a taxpayer to deny tax liability on the ground that the sale was made through another
and distinct entity when it is proved that the latter was merely a conduit is to sanction a circumvention of our
tax laws. Hence, the sale to Altonaga should be disregarded for income tax purposes

118. CARGILL PH VS CTA

FACTS:
Petitioner Cargill Philippines, Inc. is a domestic corporati.on. Respondent is the duly pointed Commissioner of
the Bureau of Internal Revenue (BIR)

Petitioner received a copy of the Pre-Assessment Notice, Final Assessment Notice and Final Decision of a
disputed VAT assessment covering the period of September 1, 2004 to August 31, 2005 were only issued on
September 9 and 25 2008 as well as September 10,2009, respectively,

ISSUE: Whether or not the assessment for deficiency VAT is barred by prescription.
RULING: YES
The deficiency VAT for the second to fourth quarter of year 2005 are already barred by prescription. A 3year
period for the assessment commences from the date of actual filing of the return or from the last day
prescribed by law for the filing of such return, whichever comes later Also, BIR may not assess deficiency VAT,
despite the fact that the taxpayer has excess unutilized input VAT taxes. The CTA ruled that it cannot be
assessed any deficiency output tax.

119. FSM Cinemas Inc vs. CIR, CTA

Facts: CIR issued the Letter of Authority to examine FSM's books of accounts and other accounting records for
all internal revenue taxes, which was received by FSM on July 13, 2009. CIR issued a Preliminary Assessment
Notice (PAN). On June 27, 2011, FSM received a FAN and filed with the CIR, Its written protest against the
assessments. FSM received the Final Decision on Disputed Assessment (FDDA) to pay its deficiencies. FSM
filed a Petition for Review before the Court in Division. CIR filed his Answer to the Petition for Review basically
arguing that FSM's claim for the cancellation of the assessment issued against it has no basis in fact and in law.
Further, FSM failed to submit the breakdown/schedule of its sale items as proof. Thus, it cannot now assail the
validity of said assessment. To further advance his position, the CIR argued that the invocation of prescription
must be clearly shown since prescription is an affirmative defense, for which FSM failed.

Issue: Whether or not the invocation of prescription must clearly be shown

Ruling: Yes. Since no return for final withholding tax was filed in this case, the final withholding tax may be
assessed anytime within 10 years after the discovery of the omission. Nevertheless, in counting the 10 year
prescriptive period, records reveal that the actual date of discovery of the omission was not established. Be
that as it may, in view of the presumption of regularity the BIR is presumed to have issued the subject
deficiency final withholding tax assessment on time. (BOOK)

“Additional Info from the book: However, the petitioner was able to overturn the presumption of correctness
of the assessment for deficiency withholding tax issued by the BIR while BIR failed to controvert the evidence
presented by petitioner.

120. Central Cement Corporation vs. CIR

Facts:

On October 16, 1989, petitioner filed its annual income tax return for fiscal year ending June 30, 1989 (Exh. "T").
Thereafter, on August 17 1 992, petitioner executed waiver of the Defense of Prescription under the Statute of
Limitation. Thereaafter, petitioner protested CIR’s assessment.
It contends that the assessment was issued by the respondent based on the Annual Income Tax Return filed by the
petitioner on October 16, 1989 hence, respondent had only up to October 14, 1992 (1992 or three years from the date
of filing, to make a valid assessment.

In its Comment, dated June 14, 1996 (pp. 2b0-261, Cl A recs.), respondent averred that the issue of prescnption was
never raised by the petitioner in its letter-protest dated July 15, 199J, thereby precluding the latter from invoking the
same for the first time before the Court.

Issue: Whether or not the assessment has prescribed

Ruling:

The contention of the respondent that failure of tile petitioner to raise the issue of prescription in its letter-protest,
preciuded it from invoking the same for the first time before this Court is untenable. In the first place, the petitioner
cannot raise the issue of prescription in its letter-protest filed on July 5, 1993 because of its prior execution of a
supposedly valid "Waiver of the Defense of Prescription" on August 17, 1982. It was only after a careful perusal of the
records of the Bureau of Internal Revenue where the waiver was filed and during the pendency of the case before this
Court, that the petitioner discovered the invalidity of the Waiver signed by its representative. Such knowledge prompted
the petitioner to file a Motion to Allow Petitioner to Adduce Additional Rebuttal Evidence where it invoked the defense
of prescription.

121. VISAYAN ELECTRIC CO VS CIR

FACTS: This is an appeal from a decision of the Court of Tax Appeals in C.T.A. Case No. 1105 sentencing petitioner to
pay respondent Commissioner of Internal Revenue or his authorized representative the sum of P78,670.55 as
deficiency franchise tax and surcharge.

According to the record, petitioner, a holder of a legislative franchise (Act No. 2701) authorizing it to operate and
maintain an electric light, heat and power system in the City of Dumaguete, Oriental Negros, realized more than two
million pesos as gross receipts from the operation of its electrical plant during the period from April 1, 1952 to
December 31, 1959, having paid thereon the 2% franchise tax prescribed in its franchise (Section 8 of Act 2701) instead
of the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code, as amended by Republic Act
418. Accordingly, on December 14, 1960, the respondent Commissioner assessed and demanded from petitioner the
payment of the sum of P62,936.44 as deficiency franchise tax, plus the sum of P15,734.11 as 26% surcharge, or a total
sum of P78,670.55. Upon denial of petitioner's request for a reconsideration of the assessment it interposed an appeal
to the Court of Tax Appeals where, as already stated, the parties submitted the case for decision on the pleadings.

Thereafter the Court of Tax Appeals rendered the appealed decision, and subsequently also denied the motion for
reconsideration seasonably filed by petitioner. Petitioner contends (First Assignment of Error), that the Court of Tax
Appeals erred in holding that it should pay the 5% franchise tax prescribed in section 259 of the National Internal
Revenue Code instead of the 2% tax provided for in its franchise.

Petitioner's last contention is that the Court of Tax Appeals erred in requiring it to pay deficiency taxes, with
penalties, for the years already barred by prescription.

Issue: Whether or not it is barred by prescription

Ruling: No. Upon the facts disclosed by the record, this point merits no extensive discussion as it appears that
petitioner did not raise the defense of prescription neither in the Bureau of Internal Revenue, nor in the Court of Tax
Appeals, nor in the petition for review filed in this case. It is the settled law in this jurisdiction that prescription as a
defense is deemed waived if not seasonably raised .

Petitioner's contention that the defense of prescription assumed subsidiary and alternative role because of the prayer
for general relief made in its petition for review in the Court of Tax Appeals is, likewise, without merit. Well known is
the rule that the prayer for relief made in a pleading (complaint or petition for review) does not form part of the body
thereof where the ultimate facts constituting the cause of action or defense must be set forth. The only legal effect of
a prayer for general relief in to authorize the court, upon rendering judgment, to grant such relief as may be justified by
the pleadings although such relief was not one of those specifically prayed for in the winning party's affirmative
pleading.

122. MAMBULAO LUMBER VS. REPUBLIC

FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to Mambulao Lumber Co.
demanding for the payment of forest charges and surcharges. Mambulao protested the assessment. On
August 29,1958, the BIR likewise wrote a letter to the company demanding payment, which Mambulao
subsequently requested reinvestigation. For failure to comply and failure to pay its tax liability despite
demands, CIR filed a complaint for collection. Petitioner argued that the collection is barred by the statute of
limitations as stated, the collection should be made within the five (5) year period. From 1949 (date when the
Bureau of Forestry assessed and demand payment as forestry charges and surcharges) up to 1961 (date of
filing of complaint), it is already more than five years.

ISSUE: Has the period of filing of collection complaint prescribed?

Ruling: No. The action for collection is not barred by prescription. The basis of the complaint filed on August
1961 was the demand letter made by the CIR on August 29, 1958 and not the demand letter of the Bureau of
Forestry on January 1949. So that the reckoning date of the 5-year period should be from the date of the BIR
letter and not that of the Bureau of Forestry. This must be so because forest charges are internal revenue
taxes and the BIR has the sole power and duty to collect them. In addition, The plea of prescription is also
deemed WAIVED by the failure to allege it in the answer.

123. SY CHIUCO v. COLLECTOR OF INTERNAL REVENUE

FACTS: Petitioner was the owner and operator of the La Loma Cabaret. Having failed to declare for tax
purposes the P0.20 dance fee payable to the "bailarinas" which petitioner collected as part of his business,
respondent assessed against him a deficiency amusement tax, including 50 per cent surcharge, in the amount
of P17,616.05 for the period from January, 1947 to August, 1950. From the above assessment, petitioner took
the case on appeal to the Court of Tax Appeals where, after due hearing, said court rendered decision
affirming the contention of respondent.
ISSUE: Was the defense of prescription waived?
HELD: Yes. As regards the contention that the collection of the tax in question has already prescribed, it
appears that this question was not raised as an issue in the petition for review filed by petitioner in the Court
of Tax Appeals. It was not even touched by him in the memorandum he submitted. There is, therefore, enough
reason to believe that petitioner has waived this defense and so it cannot now be entertained. To hold
otherwise would be to deprive respondent of his right to show the contrary, this matter being evidentiary in
nature.
(Book) The plea of prescription is deemed waived by failing to raise the issue of prescription in the petition for
review filed in the CTA.
124. Sambrano v CTA

Facts: Sambrano, the owner and operator of a fleet of passenger and freight trucks with lines between Manila
and the northern provinces of Luzon, received from the Collector of Internal Revenue a demand for the
payment of his income tax liabilities. This was followed by another letter dated January 6, 1951, assessing
Sambrano's tax deficiencies at P188,741.07 and demanding that same be paid to the Deputy Provincial
Treasurer of Ilocos Sur. Petitioner Sambrano was not assessed of his income tax for 1947, it appearing that he
had a decrease in net worth for that period. He already signified his intention to file a surety bond to
guarantee the payment of his tax liability and on May 3, 1951, executed a chattel mortgage on 67 of his TPU
buses in favor of the Government. Said mortgage was duly approved. Petitioner likewise undertook to settle
his tax obligations in 24 monthly installments. In virtue of said mortgage, a corresponding notice of tax lien
upon the property and property rights of the taxpayer was sent by the Collector of Internal Revenue to the
Register of Deeds of Ilocos Sur. On account of petitioner's failure to comply with the terms and conditions of
the mortgage, warrants of distraint and levy covering the taxpayer's properties. As a consequence thereof, the
Deputy Provincial Treasurer of Vigan, Ilocos Sur, seized 63 auto buses of petitioner, but the sale of said
vehicles at public auction,  was  suspended because  of  Sambrano's proposal to make substantial payment.
Petitioner again did not make good of his promise.

Petitioner filed a petition praying that the respondent Collector of Internal Revenue be enjoined from
proceeding with the contemplated public sale of his properties. Later, petitioner, claims to have raised the
question of prescription in the Court of Tax Appeals which was not passed upon by said Court in its resolution
subject of the present action. It is to be noted, however, that petitioner's tax liabilities were reassessed only
on April 28, 1951 and the assessment of taxes accrued from 1939-1941 was clearly beyond the 5-year
prescriptive period provided for by said section 331 of the Tax Code.

Issue: Whether the petitioner can avail the plea of prescription.

Ruling: No. The plea of prescription is deemed waived by the acknowledgement of the obligation. Although
the percentage taxes for the years 1939-1941 and 1945 may have been extinguished by prescription on
account of the mandate of sections 331 and 332, yet in the case at bar, petitioner's obligation to pay the
percentage taxes for the years 1939-1941 and 1945, assessed on January 6, 1951, and re-assessed on April 28,
1951, as well as other tax deficiencies, was acknowledged by means of the chattel mortgage of May 3, 1951,
an act which amounts to a renewal (renovacion) of the obligation or a waiver of the benefit granted by law to
the petitioner who is estopped from raising the question of prescription after having waived such defense by
the execution of said mortgage.

125. PH Journalist Inc. v CIR

Facts: Petitioner was assessed deficiency taxes by the BIR. Petitioner’s representative executed a waiver of the
statute of limitations under the NIRC which waived the running of prescriptive period and consented to the
assessment and collection of taxes after the lapse of 3 year-period until the completion of investigation
regarding the assessment. Later on, BIR served a final notice before seizure to Petitioner while petitioner
refused to pay because the assessment was without basis. A warrant of distraint / levy was signed by Deputy
Commissioner of BIR. Petitioner filed a petition for review with CTA which ruled that the assessment notices
were actually received by petitioner but the waiver executed by it was void because of non-compliance with
RMO 20-90. CA reversed this saying that the defects in the waiver were mere formalities and so CA upheld its
validity. Also, that CTA has no jurisdiction over the case as the petition for review was not the proper remedy.
Mere assessment notices which have become final after the lapse of 30-day reglementary period are not
appealable.

Issue: WON the waiver is valid?

Ruling: NO. The waiver of the statute of limitations is derogation of the taxpayer’s right to security against
prolonged and unscrupulous investigations and must therefore be carefully and strictly construed (against the
government). The waiver of the Statute of Limitations is not a waiver of the right to invoke the defense of
prescription, but 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. Being a remedial measure, the law on prescription
should be liberally construed in order afford such protection to the taxpayer. (Book)

126. PFIZER VS. CTA [2003]

FACTS: Pfizer, Inc. ("Pfizer"), petitioner, is a corporation duly organized and existing under Philippines Laws,
engaged in the business of manufacturing and distributing chemical pharmaceutical, medicinal, and biological
products. On July 10, 2000, petitioner filed a "Petition for Review" with the Court assailing the assessment for
alleged deficiency income tax and value-added tax in the total amount of P52,895,130.82 for the fiscal year
ended November 30, 1995 issued by the BIR. On April21, 2003, the Court rendered its Decision granting the
petition, and ordering the cancellation and withdrawal of the deficiency tax assessments.
ISSUE: Whether or not the revival of "Pfizer, Inc. versus Commissioner of Internal Revenue" CTA Case No. 6135 is proper.

Ruling. YES. The Court finds the "Petition for Revival of Judgment" meritorious. Section 6, Rule 39 of the Revised Rules of
Court states: "Sec. 6. Execution by motion or by independent action. -A final and executory judgment or order may be
executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred
by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by
motion within five (5) years from the date of its entry and thereafter by action before it is barred by the statute of
limitations."

The judgment sought to be revived became final and executory on June 28, 2004 and was accordingly entered into the
Book of Entries of Judgments of the Supreme Court on the same date. On the other hand, the "Petition for Revival of
Judgment" was filed on March 2, 2011. It is clear that the petition was filed well within the period provided by law.

127. FMF Dev Corp vs CIR CTA

Petitioner filed its Corporate Annual Income Tax Return. Respondent issued against the petitioner deficiency
income tax and withholding tax pre-assessment notices. Petitioner filed its protest against the said income tax
pre-assessment notice, coupled with a request for reconsideration or
reinvestigation. Petitioner received from respondent a withholding tax Pre-Assessment Notice. Petitioner filed
its protest against the said Pre-Assessment Notice and requested for reinvestigation of the same.

Records show that petitioner was required to execute a Waiver of the Statute of Limitations as a requirement
for reinvestigation. Thus, on February 9 I999, petitioner, through its representative Enrique C. Fernandez,
executed a Waiver extending respondent's period to assess until October 31, 1999.

Issue: W/N the waiver was valid

Ruling: No

Book
The waiver of the Statute of Limitations is a derogation of the taxpayer’s right to security against prolonged
and unscrupulous investigations and must therefore be carefully and strictly construed against the
government.

The waiver of the Statute of Limitations is not a waiver of the right to invoke the defense of prescription, but 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. Being a remedial measure, the law on prescription should be liberally
construed in order to afford such protection to the taxpayer.

Explanation:
The subject waiver which could have extended the right of respondent to issue the assessment notice in
question, failed to state the date of acceptance by the respondent. Under the aforequoted RMO, both the
date of execution by the taxpayer and the date of acceptance by the Bureau should be before the expiration
of the period of prescription.

Moreover, there is no showing that petitioner was even furnished a copy of the waiver. Under RMO No. 20-90,
the fact of receipt by the taxpayer of his/her file copy shall be indicated in the original copy. Finally,
considering that the case involves more than 1 million pesos, the waiver should have been signed by the
respondent himself, especially taking into account that when the same was allegedly executed, the period to
assess was not about to prescribe

*128 omitted*
129. Union Cement v CIR

Facts: Petitioner was involved in a two-step merger. One of the companies involved in the merger with the
petitioner was Bacnotan Marketing Corporation (BMC) -engaged in the business of buying, selling,
transporting, and warehousing of cement.
On March 28, 2003, Union received a PAN pertaining to the business operation of BMC, informing
petitioner BMC’s alleged income tax and VAT liabilities from june 1999 - april 22, 2000. April 14, 2003, Union
protested PAN for lack of factual and legal bases and signed waiver of the defense of prescription under the
statute of limitations, extending the period to assess up to June 30, 2003. For CIR, a certain MS Flor Mercado
signed the waiver for Atty. Edwin Abella (asstnt Commissioner - BIR large taxpayers service). On June 30, 2003,
petitioner received FAN for June to dec 1999 for P97M.

Issue: W/N the prescriptive period of 3 years (under Sec 203 of NIRC) was tolled because of the waiver

Ruling: No. Considering the requisites provided by RMO 20-90, there are infirmities in the execution of the
subject waiver in this case, which are: 1. Waiver was signed by Ms Mercado (having no authority)l; 2. The
original copy of the waiver does not indicated the fact of the receipt by the taxpayer of his/her file copy of the
waiver; and 3. Subject waiver failed to indicate the specific kind of tax and the amount of tax due. There is
complieance of RMO 20-90 only of the taxpayer(TP) received a copy of waiver accepted by the BIR. The
requirement to furnish TP copy of waiver is not only to give notice of existence of document but of the
acceptance by BIR and perfection of the agreement.
It should be emphasized that RMO 20-90 requires specific information; hence, to substitute the same
with general statements is a departure from RMO 20-90. Since the waiver was improperly issued, the
prescriptive period was not tolled.
130. CIR vs Kudos Metal Corporation
Facts:
K Corp, through its accountant, executed two Waivers of Defense of Prescription. The Bureau of
Internal Revenue (“BIR”) issued an assessment, which K Corp duly protested. The BIR denied the protest and
required K Corp to pay deficiency tax liabilities
On December 10, 2001, Kudos’ accountant, executed a Waiver of the Defense of Prescription. This was
followed by a second Waiver of Defense of Prescription on February 18, 2003.
In its petition for review before the Court of Tax Appeals (“CTA”), K Corp raised the defense of
prescription on the ground that the waivers executed by its accountant were invalid and thus did not extend
the BIR’s period to assess.

Issue:
Whether the right of the government to assess has expired
Held:
Yes. An assessment notice issued after the three-year prescriptive period is no longer valid and
effective
(BOOK) Generally, a valid waiver of the statute of limitations for the assessment and collection of taxes
must be executed by the taxpayer and accepted by the BIR prior to the expiration of the period which it seeks
to extend. The same must also be executed by the taxpayer or his duly authorized representative, or in the
case of a corporation, it must be signed by any of its responsible officers.
131. CIR vs THE STANLEY WORKS SALES-PHILIPPINES G.R. No. 187589 December 3, 2014
FACTS:
Petitioner is the duly appointed officer of the Bureau of Internal Revenue (BIR) mandated to decide
disputed assessments or other matters arising under the National Internal Revenue Code. Respondent and
Stanley Works Agencies (Pte.) Limited, Singapore (Stanley-Singapore) entered into a Representation
Agreement. On April 16, 1990, respondent filed with the BIR its Annual Income Tax Return for taxable year
1989. On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992, the BIR issued against
respondent a Pre-Assessment Notice (PAN) No. 002523 for 1989 deficiency income tax. On May 19, 1993,
respondent, through its external auditors Punongbayan & Araullo, filed a protest letter and requested
reconsideration and cancellation of the assessment. On November 16, 1993, a certain Mr. John Ang, on behalf
of respondent, executed a "Waiver of the Defense of Prescription Under the Statute of Limitations of the
National Internal Revenue Code" (Waiver). Under the terms of the Waiver, respondent waived its right to raise
the defense of prescription under Section 223 of the NIRC of 1977 insofar as the assessment and collection of
any deficiency taxes for the year ended December 31, 1989, but not after June 30, 1994. The Waiver was not
signed by petitioner or any of his authorized representatives and did not state the date of acceptance as
prescribed under Revenue Memorandum Order No. 20-90. Respondent did not execute any other Waiver or
similar document before or after the expiration of the November 16, 1993 Waiver on June 30, 1994.

After trial on the merits, the CTA First Division found that although the assessment was made within
the prescribed period, the period within which petitioner may collect deficiency income taxes had already
lapsed. The CTA En Banc affirmed the CTA First Division Decision dated 6 May 2008 and Resolution dated 14
July 2008. The Waiver executed by respondent on 16 November 1993 could not be used by petitioner as a
basis for extending the period of assessment and collection, as there was no evidence that the latter had acted
upon the waiver. Hence, the unilateral act of respondent in executing said document did not produce any
effect on the prescriptive period for the assessment and collection of its deficiency tax.

ISSUE: WON petitioner’s right to collect the deficiency income tax of respondent for taxable year 1989 has
prescribed?

HELD:
YES. The CTA Division has already made a factual finding on the infirmities of the Waiver executed by
respondent on 16 November 1993. The Court found that the following requisites were absent: (1) Conformity
of either petitioner or a duly authorized representative; (2) Date of acceptance showing that both parties had
agreed on the Waiver before the expiration of the prescriptive period; and (3) Proof that respondent was
furnished a copy of the Waiver. These findings are undisputed by petitioner. The period to assess and collect
deficiency taxes may be extended only upon a written agreement between the CIR and the taxpayer prior to
the expiration of the three-year prescribed period in accordance with Section 222 (b) of the NIRC. In relation
to the implementation of this provision, the CIR issued Revenue Memorandum Order (RMO) No. 20-90 10 on 4
April 1990 to provide guidelines on the proper execution of the Waiver of the Statute of Limitations. To
emphasize, the Waiver was not a unilateral act of the taxpayer; hence, the BIR must act on it, either by
conforming to or by disagreeing with the extension. A waiver of the statute of limitations, whether on
assessment or collection, should not be construed asa waiver of the right to invoke the defense of prescription
but, rather, an agreement between the taxpayer and the BIR to extend the period to a date certain, within
which the latter could still assess or collect taxes due. The waiver does not imply that the taxpayer relinquishes
the right to invoke prescription unequivocally. Since the Waiver in this case is defective and therefore invalid,
it produces no effect; thus, the prescriptive period for collecting deficiency income tax for taxable year 1989
was never suspended or tolled. Consequently, the right to enforce collection based on Assessment Notice
No. 002523-89-6014 has already prescribed.
Prescription in relation to acts or delays of taxpayer

132. Joaquin Lopez vs Enrique Ochoa – GR L- 7955

Facts: Enrique P. Ochoa executed in favor of Joaquin Lopez a document whereby he mortgaged a piece of land
located in Manila as security for the payment of a loan in the amount of P15,000 in Japanese military notes to
be paid. Ochoa paid Lopez the sum of P375 as interest on the principal of the aforesaid loan for the period
from August 26, 1943 to February 25, 1944 and on June 12, 1944, he paid P5,000, in Japanese war notes, on
account of the principal for which Lopez issued a receipt.
Ochoa tendered to Lopez the payment of the balance of the indebtedness with the corresponding interest,
but the latter refused to accept it on the ground that it was against the terms of the mortgage. In view of such
refusal, Ochoa advised Lopez that he deposit the money in court and, accordingly, he filed a complaint with
the Court of First Instance of Manila accompanied by a deposit in the amount of P10,631.50.

His several demands to cancel the mortgage having failed, Ochoa commenced the present action with the
prayer that the tender of payment and consignation made by him of the amount of P10,000 be declared as
complete payment of his obligation and that the mortgage executed by him be cancelled, with costs.

It was contended that there is an allegation of estoppel, and not of waiver, but these two terms are frequently
used as convertible.

Issue: W/N estoppel and waiver are convertible?

Ruling:Yes.

BOOK: The doctrine of waiver has been characterized as technical, as of some arbitrariness. It is one of the
most familiar in the law, prevalent in ancient as well as in modern times throughout every branch of law as
well as of practice. It is a doctrine resting upon an equitable principle which courts of law will recognize, that a
person, with full knowledge of the facts shall not be permitted to act in a manner inconsistent with his former
position or conduct to the prejudice of abhorrence so to speak, of a person’s taking inconsistent positions and
gaining advantages thereby through the aid of courts. The doctrine, it has been said, belongs to the family of,
is of the nature of, is based upon, estoppel. The essence of waiver, it has been stated, is estoppel, and where
there is no estoppel, there is no waiver. ‘Waiver’ and ‘estoppel’ are frequently used as convertible. On the
other hand, it has been said that the terms are not convertible, that an estoppel in pais has connections in no
wise akin to waiver, and that the doctrine of waiver does not necessarily depend on estoppel or
misrepresentation; thus, a waiver does not necessarily imply that one has been misled to his prejudice or into
an altered position; a waiver may be created by acts, conduct, or declaration to create a technical estoppel.
However, the distinction, it has been said, is more easily preserved in dealing with express waiver, but where
the waiver relied upon is constructive or merely implied from the conduct of a party, irrespective of what his
actual intention may have been, it is at least questionable if there are not present some of the elements of
estoppel.

133. COLLECTOR vs PINEDA

No. L-14522. May 31, 1961

FACTS: After the closure of the estate proceedings of Atanacio Pineda and the distribution of the estate to his
heirs, BIR investigated the income tax liability of Anastacio Pineda’s estate for the years 1945, 1946, 1947, and
1948 and it found that the corresponding income tax return were not filed. This resulted to a P760.28
deficiency income tax for 1945 and 1946 and real estate dealer’s fixed tax for the 4th quarter of 1946 and for
the whole year 1947. Manuel Pineda, eldest son of Anastacio, received the assessment. He contested the
same alleging that only a proportionate part should be his liability, i.e. he was appealing “only that
proportionate part or portion pertaining to him as one of the heirs”. CTA ruled that Pineda is liable only for
taxes corresponding to his share in the estate. Hence, the present petition by the CIR to the SC. The CIR
proposed to hold respondent liable not only for his share in the tax but for the payment of all taxes found by
the CTA to be due from the estate.

ISSUE: Whether or not Pineda may avail himself of the plea of prescription.

RULING: NO. Petitioner contends, however, that respondent may not avail himself of the plea of prescription,
the delay in making the revised assessment having been due mainly to his protest against the original
assessment, thereby inducing petitioner herein to order several reinvestigations, the first of which was made
by examiner Espinosa, who submitted her report on August 27, 1953, upon which the income tax assessment
notice of October 19, 1953, must have been based. Petitioner relies, in support of his pretense, upon the case
of Commissioner of Internal Revenue vs. Consolidated Mining Co., L-11527(November 25, 1958), in which we
held that “x x x there are cases however where a taxpayer may be prevented from setting up the defense of
prescription even if he has not previously waived it in writing as when by his repeated requests or positive
acts the Government has been, for good rea- sons, persuaded to postpone collection to make him feel that
the demand was not unreasonable or that no harassment or injustice is meant by the Government.” The
Suyoc case is not in point for respondent herein had not requested or induced the petitioner by positive acts to
delay the making of the revised assessment notice of October 19, 1953. Up to that time, respondent merely
contended that the amounts sought to be collected by petitioner were not due from the estate of the
deceased and gave his reasons therefor. Petitioner had a perfectly legitimate right to do this and the same
does not suffice to stop him from invoking the statute of limitations. The rule applicable to the case at bar,
with respect to the income tax liability for 1947, is that laid down in Collector of Internal Revenue vs.
Solano, L-11475 (July 31, 1958).

134. CIR v Next Mobile (NM)

FACTS: After submission of its returns for the year 2001, NM received a copy of the LOA given by the BIR to
Revenue Officer (RO) NLC, covering January to December of 2001. 5 waivers were signed by NM's finance
director to extend the prescriptive period of assessment.

In 2005, BIR sent NM a Preliminary Assessment Notice (PAN) to which the latter replied. Later, NM received a
Formal Letter of Demand (FLD) to pay various tax deficiencies amounting to 313 million pesos.

On November 23, 2005, NM filed its protest against the FLD and requested the reinvestigation. BIR denied the
protest. NM filed a Petition for Review before the CTA.
In the CTA, NM argued that the CIR's right to assess NM's deficiency taxes had already prescribed, invoking the
lack of authority on the part of the person who signed the waivers. The CTA ruled in favor of NM and said that
the 5 waivers of the statute of limitations were not valid and binding; thus, the three-year period of limitation
within which to assess deficiency taxes was not extended. It also held that the records belie the allegation that
respondent filed false and fraudulent tax returns; thus, the extension of the period of limitation from 3 to 10
years does not apply.

ISSUE: W/N the period to pay has already prescribed

RULING: NO. The Court has consistently held that a waiver of the statute of limitations must faithfully
comply with the provisions of RMO 20-90 and RDAO 05-01 in order to be valid and binding. An exception to
this rule is when the parties are in pari delicto or in equal fault:

First, the parties in this case are in pari delicto or “in equal fault.” In pari delicto connotes that the two
parties to a controversy are equally culpable or guilty and they shall have no action against each other.
However, although the parties are in pari delicto, the Court may interfere and grant relief at the suit of one
of them, where public policy requires its intervention, even though the result may be that a benefit will be
derived by one party who is in equal guilt with the other.

Here, to uphold the validity of the Waivers would be consistent with the public policy embodied in the
principle that taxes are the lifeblood of the government, and their prompt and certain availability is an
imperious need. Taxes are the nation’s lifeblood through which government agencies continue to operate
and which the State discharges its functions for the welfare of its constituents. As between the parties, it
would be more equitable if petitioner’s lapses were allowed to pass and consequently uphold the Waivers
in order to support this principle and public policy.

Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Parties
who do not come to court with clean hands cannot be allowed to benefit from their own wrongdoing.
Following the foregoing principle, respondent should not be allowed to benefit from the flaws in its own
Waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes.

Third, respondent is estopped from questioning the validity of its Waivers. While it is true that the Court has
repeatedly held that the doctrine of estoppel must be sparingly applied as an exception to the statute of
limitations for assessment of taxes, the Court finds that the application of the doctrine is justified in this
case. Verily, the application of estoppel in this case would promote the administration of the law, prevent
injustice and avert the accomplishment of a wrong and undue advantage. 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.

Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one
hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it
caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules. The
BIR’s negligence in the performance of its duties was so gross that it amounted to malice and bad faith.
Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a
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.

135. Republic vs. Acebedo

Facts: Deficiency income tax for 1948. Notice of assessment issued on 1949. Complaint for collection filed on
1961. Respondent filed his answer but before trial filed for a motion to dismiss on the grounds of prescription,
which was granted by the court. Petitioner claimed therein that the waiver of the statute of limitations was
signed by respondent dated 1959, as well as claiming that the period of prescription was suspended by the
defendant’s various requests for reinvestigation or reconsideration of the tax assessment.

Issue: Whether or not the suit was filed on time.

Held: No. Section 22(b) and (d), 1997 Tax Code authorizes the taxpayer and the Government to extend by
mutual agreement in writing the prescriptive period for the assessment and collection of taxes. It is necessary
that the waiver be executed by the parties before the lapse of the five year prescriptive period. A waiver is
ineffective if it is executed beyond the original 3 year/now 5 year period of prescription.
*136 and 137 omitted*
138. Republic v Ret, 4 SCRA 783 (1962)
Facts: Damian Ret filed with BIR his ITR for year 1948, where he made appear that his net income was only
P2,252.53 with no income tax liability at all. The BIR found out later that the return was fraudulent. Defendant
Ret failed to file his ITR for 1949. BIR assessed him a deficiency income tax, inclusive of surcharge for rendering
a false and/or fraudulent return. CIR demanded payment but Ret failed to pay. Ret was prosecuted for
violation of NIRC.
Issue: Whether or not only written agreements can suspend the running of the period of limitation.
Ruling: Yes. Only written agreements can suspend the running of the period of limitation. The appellant’s
right to collect the income tax due through judicial action has already prescribed. Section 332 of Tax Code
provides: the running of the statutory limitation shall be suspended for the period during which the CIR is
prohibited from making the assessment, or beginning distraint or levy or a proceeding in court, and for 60
days thereafter. As stated, the plaintiff was not prohibited by any order of the court or by any law from
commencing or filing a proceeding in court. In the instant case, there is np such written agreement, and there
was nothing to agree about.

139. Republic v. Xavier Gun Trading Co

Facts: The Bureau of Internal Revenue discovered that the "Xavier Gun Trading" , failed to declare certain
amounts representing sales for 1948. Mrs. Estrella F. Javier, branch manager, acknowledged the violation and
promised to pay. Xavier Gun Trading, as principal and the Luzon Surety Co. Inc., as surety, executed an
ordinary bond for payment of taxes,an action was instituted in the CFI of Manila by the plaintiff Republic
against the defendants Xavier Gun Trading and Luzon Surety Co. Inc. they raise the defense that plaintiff's
cause of action, if any, is barred by the statute of limitations and that the Court of First Instance has no
jurisdiction over the subject matter of the action.
Issue: W/N the right to collect has prescribed
Ruling: No. B: The filing of the bond has been held to be tantamount to a written waiver which interrupts
the period of limitation

140. Sambrano vs. CTA

Facts: This is a petition for review to enjoin the CIR from proceeding with the sale at public auction and to
declare the sale of house and lot void. Petitioner is the owner of the fleet of passenger and freight trucks. CIR
demanded payment of his tax liabilities but the petitioner instead executed a chattel mortgage in order to pay
his tax obligations. The petitioner failed to pay his tax after due the date of the notice of assessment. Due to
failure to comply with the terms and conditions of the chattel mortgage, the CIR issued a warrant of distraint
and levy on such properties. Petitioner contended that he is no longer liable to pay such because of
prescription.

Issue:

Whether or not the petition is with merit.

Ruling:

No. The filing of a chattel mortgage to secure the tax obligation is tantamount to a written waiver of the
statute of limitations. The liability was acknowledged by means of the chattel mortgage of May 3, 1951, an
act which amounts to a renewal (renovacion) of the obligation or a waiver of the benefit granted by law to the
petitioner who is estopped from raising the question of prescription after having waived such defense by the
execution of said mortgage.

141. REPUBLIC v. LOPEZ

FACTS:

Respondent Benito Lopez filed his income tax return for 1950 for which an assessment was issued by the BIR
on November 1952 demanding payment of 245,100.29 PHP as deficiency income tax. Lopez requested for a
reconsideration which was given due course, and resulted in the reduction of the assessment to 20,346.14
PHP on May 1954. On July 9 1955, Lopez pleaded for another reinvestigation which was granted by the BIR
and an assessment was issued demanding payment of 6,019 PHP as additional deficiency income tax for 1950.
Appellee prayed for a third investigation which was acceded to by the BIR in 1956 provided he waives the
statue of limitations. Ironically instead of executing an unconditional waiver, defendant imposed a deadline on
December 1957 within which the government should finish the third reinvestigation.

ISSUE:

Whether or not the time limit of December 31, 1957 enjoined by appellee in the

contemplated “Waiver of the Statute of Limitations”, be binding and operative.

HELD:

NO. It is well-settled in our jurisdiction that the 5-year prescriptive period fixed by section 332 (c) of the
Internal Revenue Code within which the government may sue to collect an assessed tax is to be counted from
the last revised assessment resulting from a reinvestigation asked for by the taxpayer. When a taxpayer
demands a reinvestigation, the time employed in reinvestigation should be deducted from the total period of
limitation. By applying these rules, the prescriptive period of 5 years had not elapsed from the revision of
1954.

Tax waivers are supposed to extend, not reduce, the prescriptive periods provided by law. Hence, the
Commissioner cannot validly agree to reduce the prescriptive period to less than that granted by law to the
detriment of the State since it diminishes the Government’s opportunities to collect taxes due the Republic.

*142 missing*

143. PH Bank of Communications v CIR CTA 5251 (1999)

Facts:
Petitioner filed its 1989 annual income tax return on April 11, 1990 and so, the BIR has until April 15, 1993 to
assess. On March 16, 1993, petitioner executed a waiver consenting to the assessment and/or collection of
the taxes which may be found due after investigation at any time before or after the lapse of the period of
limitations fixed by NIRC but not later than September 30, 1993.
Issue: WON the respondent’s right to assess has already prescribed.
Ruling:
Yes. Waiver must be signed by revenue official who is duly authorized. It would seem, therefore, that the
BIR’s right to assess was extended by said waiver. An examination, however, of the waiver would reveal the
absence of the signature of the Commissioner, whose signature is required in waivers for tax cases involving
more than 1 million pesos under RMO 20-90. The subject waiver was instead signed by the Assistant Revenue
Service Chief, Special Operations Service, of the BIR. Since the amount involved in the assessment is 16M, the
waiver was invalid insofar as the said assessment was concerned and consequently did not suspend the
running of the three-year prescriptive period.

144. Luzon packaging products vs CIR, CTA

Facts: Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws of the
Philippines. It is engaged manufacturing packaging products. On November 21, 1990, Revenue Officer Antonio
C. Navarro was authorized to examine the books of accounts of petitioner for income and documentary stamp
tax liabilities for fiscal years ending June 30, 1988 and 1989. On September 30, 1992, petitioner executed a
"Waiver Of The Defense of Prescription Under the Statute Of Limitations Of The National Internal Revenue
Code", extending the period within which respondent can assess petitioner up to December 31, 1992. This
waiver was signed by the representative of petitioner but not by the Commissioner of Internal Revenue.
Subsequently, another waiver was executed by the petitioner which was undated and this time the period" to
assess was extended up to June 30, 1993. This second waiver was signed by Mr. Rolando N. Espana, Assistant
Vice President I Cl1 I cf, Financial Officer, In behalf of the petitioner and by Mr . Bernardo A. Frlaneza, Assistant
Revenue Service Chief, Special Operations Service, In behalf of the respondent. On Apri I 20, 1993, petitioner
received assessment notices for deficiency income and expanded withholding taxes on its loan transactions.
Petitioner protested.

Issue: Whether or not the assessment for deficiency income tax was issued beyond the three-year period
allowed by law.

Ruling: Yes. The first waiver extended the period of assessment up to December 31, 1992 and the second
waiver extended I up to June 30, 1993. However, these waivers have no binding effect. The first waiver was
not valid because the Commissioner (or his duly authorized representatives) did not give his consent as
evidence by the fact that he did not sign the document. The fact that it was left unsigned by the
Commissioner signifies that there was no valid agreement to stop the running of the period of limitations.
Sec 223(b) of the NIRc clearly provides that both the Commissioner and the taxpayer must agree in writing
on the period agreed upon. Since the Commissioner did not affix her signature, the document is ineffective…
The fact that the waiver executed on Sept 30, 1992 was signed by the representative of the petitioner and
not by the Commissioner, the period to assess was never extended. The waiver was not consummated and
therefore was invalid and void. As regards to the second waiver executed by the petitioner, the same was of
no consequence since the first waiver was not valid. Thus, the period to assess was not suspended by
petitioner’s execution of the first waiver, more so by the second waiver. As required by Section 223, the
second waiver must be executed before the expiration of the period previously agreed upon. Inasmuch as
there is no valid waiver previously agreed upon, no valid extension can be made. The law bars the
respondent in issuing the subject assessment.

145. AFISCO INSURANCE vs CIR

FACTS:
The petitioners are domestic non-life insurance corporations. Upon issuance by them of Erection, Machinery
Breakdown, Boiler Explosion and Contractors' All Risk insurance policies, they entered into a Quota Share
Reinsurance Treaty and a Surplus Reinsurance Treaty with the Munchener Ruckversicherungs-Gesselschaft
(hereafter called Munich), a non-resident foreign insurance corporation. The reinsurance treaties required
petitioners to form a [p]ool. Accordingly, a pool composed of the petitioners was formed on the same day.
The pool of machinery insurers was assessed by the Commissioner for deficiency corporate taxes, and
withholding taxes.
Petitioners argue that the government's right to assess and collect the subject tax had prescribed (it gave
notice 5yrs after the information was filed). CA ruled that the pool of machinery insurers that prescription did
not bar BIR from collecting the taxes due, because "the taxpayer cannot be located at the address given in the
information return filed."
ISSUE: W/N the prescriptive period was tolled.
RULING: NO
BOOK: The law clearly states that the said period will be suspended only "if the taxpayer informs the
Commissioner of Internal Revenue of any change in the address."  Since the “pool” changed its address
without notice to the BIR, and indeed, it could not be located at the given address given in the information
return filed and for which reason there was delay in sending the assessment, the rights of the government
to assess and to collect had not prescribed.
Indeed, whether the government's right to collect and assess the tax has prescribed involves facts which have
been ruled upon by the lower courts.

146. Palanca vs. CIR

Facts: Gliceria Diluangco died testate proceedings were filed with the Court of First Instance of Manila for her
estate’s settlement and distribution. Upon discovering that the executor failed to file the return the estate was
tentatively assessed estate and inheritance taxes. Atty. Manuel V. San Jose, executor of the estate and counsel
for the heirs of the deceased, requested reconsideration of the imposition of the 25% surcharge, which the
Commissioner denied. Subsequently, Atty. San Jose again requested reconsideration of the imposition of the
same surcharge. The Commissioner of Internal Revenue issued a warrant of distraint and levy for the
satisfaction of the deficiency, estate and inheritance taxes. Here it is admitted that the estate and inheritance
taxes in question were finally assessed. Petitioners contend that the issuance of the warrant in question
cannot be considered as having begun the summary remedy of distraint and levy because it was not served
upon the taxpayer in accordance with law and the defect is made to consist in that the warrant was served not
upon the taxpayer himself but upon one Arturo Cristi, secretary of Atty. Manuel V. San Jose, contrary to what
the law provides that a warrant should be served upon the taxpayer himself except when he is absent from
the Philippines.

Issue: Whether or not the contention of petitioner is correct

Ruling: Yes. The contention that the warrant is ineffective because it was not served upon the taxpayers themselves
is also untenable considering that the same was served upon Atty. Manuel V. San Jose, or his secretary, who has
always acted right along not only in behalf of the estate but also of the heirs of the deceased.

(The service of a warrant of distraint or levy to a taxpayer’s authorized representative, who always acted in behalf of the
taxpayer, is sufficient to toll the running of the prescriptive period) - BOOK

147. Advertising Associates vs. CA

Facts:

This case is about the liability of Advertising Associates, lnc. for P382,700.16 as 3% contractor's percentage tax on its
rental income from the lease of neon signs and billboards imposed by section 191 of the Tax Code (as amended by
Republic Acts Nos. 1612 and 6110) on business agents and independent contractors. Parenthetically, it may be noted
that Presidential Decree No. 69, effective November 24, 1972, added paragraph 17 to section 191 by taxing lessors of
personal property.

Petitioner's contention is that the collection of the tax had already prescribed. Section 332 of the 1939 Tax Code, now
section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax may be
collected by distraint or levy or by a judicial proceeding begun 'within five years after the assessment of the tax".

Issue: Whether or not the collecton of tax has prescribed

Ruling:
No. The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of
distraint were served upon it on April 18 and may 25,1978 or within five years after the assessment of the tax.
Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement was not
implemented because of the pending protests of the taxpayer and its requests for withdrawal of the warrants which
were eventually resolved in Commissioner Plana's letter of May 23, 1979.

148. COLLECTOR OF INTERNAL REVENUE vs. VDA. DE CODIÑERA

102 PHIL 1165

GR No. L-9675, September 28, 1957

"The property levied by a competent court may, with the consent thereof, be distrained, subject to the prior lien of
the attachment creditor."

FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Restituto
Codiñera for collection of certain deficiency specific tax. However, it could not be effected in view of the attachment of
the said properties of the CFI-Manila of another case. After seven years, the Collector of Internal Revenue issued a
warrant of distraint and levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effects and
other personal property of whatever character, and levy upon the real property and interest in or rights to real property
of the estate of the deceased. The heirs of the deceased filed the action with the CTA barring the government to collect
said deficiency on the ground of prescription therefore praying to declare null and void, and of no legal force and effect
the warrant of distraint and levy which the respondent issued on March 7, 1955.

ISSUE: Does the attachment made by a court in a civil case over certain properties of a taxpayer bar the government
from enforcing a warrant of distraint and levy over the aforesaid properties in order to collect the taxes due?

HELD: No. There may be a valid reason for non-distraint of the property which was due to the attachment of the CFI-
Manila in another case. However, such property levied by a competent court may, with the consent thereof, be
subsequently distrained, subject to the prior lien of the attachment creditor. The attachment merely deprives the
Collector of Internal Revenue the power to divest the Court of its jurisdiction over said property but it does not impair
such rights as the Government may have for the collection of taxes.

149. CORDERO vs. GONDA

FACTS: On September 18, 1953, a demand letter was made on Patricio Ponferrada by the BIR for the payment
of forest charges. Ponferrada made a partial payment. Thereafter he died. In the Testate Estate proceedings,
Joaquin Cordero was named Administrator. On July 29, 1959, BIR filed in the probate proceedings a claim for
the said balance. Upon a stipulation of facts, the probate court declared that said claim had prescribed. BIR
now appeals direct to this Court.

ISSUE: W/N the partial payment of the taxpayer suspends the running of the prescription of the collection
of the tax liabilities.
RULING: No. When the taxpayer partially paid the deficiency tax, the prescriptive period to collect IS NOT
SUSPENDED because the government is not prevented from collecting the tax nor does it constitute as a
waiver “in writing” of the defense of prescription. From September 18, 1953, when demand for payment was
made to July 29, 1959 when court claim was filed, more than five (5) years have elapsed. By the terms of
Article 332(c) of the Tax Code, supra, action to collect has prescribed.

150. BANK OF THE PHILIPPINE ISLANDS vs.COMMISSIONER OF INTERNAL REVENUE

FACTS: Respondent thru then Revenue Service Chief Cesar M. Valdez, issued to the petitioner a pre-
assessment notice (PAN). Then after petitioner’s receipt of PAN, respondent issued to the petitioner,
assessment/demand notices.  Petitioner filed a protest on the demand/assessment notices, and later filed a
supplemental protest. Respondent issued a final decision on petitioner’s protest ordering Petitioner to pay.
BPI argues that the government’s right to collect the DST had already prescribed because the Commissioner of
Internal Revenue (CIR) failed to issue any reply granting BPI’s request for reinvestigation manifested in the
protest letters dated 20 April and 8 May 1989. It was only through the 9 August 2002 Decision ordering BPI to
pay deficiency DST, or after the lapse of more than thirteen (13) years, that the CIR acted on the request for
reinvestigation, warranting the conclusion that prescription had already set in. It further claims that the CIR
was not precluded from collecting the deficiency within three (3) years from the time the notice of assessment
was issued on 7 April 1989, or even until the expiration on 31 December 1994 of the last waiver of the statute
of limitations signed by BPI.
ISSUE: Has the collection of the alleged tax deficiency prescribed?
HELD: The statute of limitations on assessment and collection of national internal revenue taxes was
shortened from five (5) years to three (3) years by Batas Pambansa Blg. 700. 10 Thus, the CIR has three (3) years
from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court
proceedings for the collection thereof without an assessment.
When it validly issues an assessment within the three (3)-year period, it has another three (3) years within
which to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made
and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment
notice had been released, mailed or sent to the taxpayer. 11
As applied to the present case, the CIR had three (3) years from the time he issued assessment notices to BPI
on 7 April 1989 or until 6 April 1992 within which to collect the deficiency DST. However, it was only on 9
August 2002 that the CIR ordered BPI to pay the deficiency. In order to suspend the running of the
prescriptive periods for assessment and collection, the request for reinvestigation must be granted by the
CIR. The burden of proof that the request for reinvestigation had been actually granted shall be on the CIR.
Such grant may be expressed in its communications with the taxpayer or implied from the action of the CIR
or his authorized representative in response to the request for reinvestigation.
There is nothing in the records of this case which indicates, expressly or impliedly, that the CIR had granted
the request for reinvestigation filed by BPI. What is reflected in the records is the piercing silence and
inaction of the CIR on the request for reinvestigation, as he considered BPI’s letters of protest to be.
151. CIR v Wyeth Suaco Lab

Facts: On December 19, 1974, Wyeth Suaco received notice of assessment from the BIR for its failure to remit
withholding tax at source for the 4th quarter of 1973 on accrued royalties, remuneration for technical services
paid abroad and cash dividends, including the deduction of non-deductible raw materials from its reports. The
company, thru its taxconsultant, SVG & co., sent BIR two letters dated January 17, 1975 and February 8, 1975
protesting the assessment and requesting their cancellation or withdrawal on the ground that
said assessments lacked factual or legal basis. Also, there were letters from the company to the BIR to such
effect. On September 12, 1975, the CIR offered to compromise but only resulted to a slight reduction of the
tax as per the acting Commissioner’s decision on December 10, 1979. On January 18, 1980, Wyeth Suaco filed
petition for review with the CTA, praying that CIR be enjoined from enforcing the  assessments by reason of
prescription and that assessments be declared null and void for lack of legal and factual basis. The CTA decided
against the CIR holding that while the assessmentsfor the deficiency taxes were made within the five-year
period oflimitation, the right of CIR to collect the same has already prescribed, in accordance with Sec. 319(c)
of the NIRC.

Issue: Whether the CTA is correct.

Ruling: No, the CTA is wrong. The letters of Wyeth Suaco interrupted the running of the five-year
perspective period to collect the deficiency taxes. Settled is the rule that the prescriptive period provided by
law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer
requests for reinvestigation or reconsideration of the assessment. Wyeth Suaco admitted that it was seeking
reconsideration of the tax assessments as shown in a letter of its president and General Manager. Further,
although the protest letters prepared by SGV & Co. did not categorically state or use the words
“reinvestigation” and “reconsideration”, the same are to be treated as letters of reinvestigation and
reconsideration.

As to Wyeth Suaco’s argument that withholding tax at source should only be remitted to the BIR once the
incomes subject to withholding tax at source have actually been paid, the SC cited the lifeblood doctrine, the
express provision of the law which requires the filing of monthly return and payment of taxes withheld at
source within 10 days after the end of each month. Further, the company uses  accrual method of accounting
and therefore the effect of transactions and other events on assets and liabilities are recognized and reported
in the time periods to which they relate rather than only when cash is received or paid.

152. Republic v Ker & Co., Ltd.

Facts: 1953 -> BIR examined Respondent’s books of accounts and issued assessments for deficiency income tax (1947-
1950). In 1956, Ker filed with the CTA a petition for review with preliminary injunction. CTA dismissed the appeal for
having been instituted beyond the 30-day period. Ker refused to pay, claiming prescription of the CIR’s right to collect
tax. 1963-> Petitioner filed an MR contending that the right of the CIR collect the deficiency assessment for 1947 has not
prescribed by a lapse of merely five years and three months, because the taxpayer's income tax return was fraudulent
in which case prescription sets in 10 years from the date of discovery of the fraud

Ker’s stand: since the Petitioner filed the complaint for the collection of the deficiency income tax only nine years from
the date the tax was assessed, the right to collect the same has prescribed pursuant to Section 332 (c) of the Tax Code.
Petitioner’s stand: that the running of the prescriptive period was interrupted by the filing of the taxpayer's petition
for review in the Court of Tax Appeals on March 1, 1956.

ISSUE: Did the pendency of the taxpayer's appeal in the CTA and in the SC have the effect of legally preventing
the CIR from instituting an action in the CFI for the collection of the tax?
Ruling: YES. The running of the prescriptive period to collect deficiency taxes shall be suspended for the
period during which the commissioner is prohibited from beginning a distraint and levy or instituting a
proceeding in court, and for 60 days thereafter. In this case, the pendency of the taxpayer’s appeal in the CTA
and in the SC had the effect of temporarily staying the hands of the Commissioner. If the taxpayer’s stand that
the pendency of the appeal did not stop the running of the period because the CTA did not have jurisdiction
over the case is upheld, taxpayers would be encouraged to delay the payment of taxes in the hope of
ultimately avoiding the same. Under the circumstances, the running of the prescriptive period was suspended.
The reason for such prohibition is that when a case is on appeal to the CTA, the Commissioner is prevented
from filing an ordinary action to collect the tax in the regular courts.
*153 omitted*

154. CIR vs Atlas Consolidated Mining & Dev Corp

Petitioner is engaged in the business of mining and duly registered with the BIR as a VAT enterprise.
Respondent duly approved petitioner's application for VAT zero-rating.

Petitioner filed a VAT return with whereby it declared its sales as zero-rated sales and therefore not subject to
any output VAT. Petitioner filed a claim with respondent for refund/credit of VAT input taxes on its purchase
of goods and services for the first quarter of 1990 in the total amount of P35M. Respondent resolved
petitioner's claim for VAT refund/credit by allowing only P2M. The petitioner moved for reconsideration.
Granted by BIR.
Issue: W/N there was a suspension in the running of the prescriptive period for the collection of taxes.
Ruling: No.

Book
A mere request for reinvestigation or reconsideration of an assessment does not have the effect of a
suspension.

The ruling is logical, otherwise there would be no point to the legal requirement that the extension of the
original period be agreed in writing.

The legal requirement above adverted to obviously refers to Sec 319(c) of the Tax Code, whereunder the
5year period to enforce collection of a tax, either by distraint or levy or by a proceeding in court, may be
extended if, prior to the expiration thereof, another period is “agreed upon in writing by the Commissioner of
Internal Revenue and the taxpayer”
155. REPUBLIC v AQUIAS

FACTS: On June 12, 1954, the BIR assessed and demanded of the defendant deficiency percentage taxes. Defendant
requested a reinvestigation which was granted by the plaintiff on September 2, 1954. Later on, the plaintiff notified the
defendant that the reinvestigation of his tax deficiencies will be conducted on October 15, 1956, but neither the
defendant nor his counsel appeared on the said date scheduled for the reinvestigation.

The BIR issued a Warrant of Distraint and Levy but it was not executed due to the fact that the defendant's counsel
requested that the same be lifted on the ground that the plaintiff's right to collect taxes thru civil remedies either by
distraint and levy or by judicial action has prescribed and if not, a reinvestigation be conducted.

The BIR denied the defendant's request for further reinvestigation and reiterated its demand for deficiency percentage
taxes. The defendant did not contest the demand nor the final decision of the plaintiff. The defendant did not pay the
percentage tax deficiencies.

ISSUE: Whether or not the present action for collection of the deficiency taxes had prescribed

RULING: No. Where the reinvestigation requested by appellant was not conducted because neither the appellant nor his
counsel appeared, the prescriptive period remains suspended until the BIR issued a warrant of distraint and levy, which
was the first clear and unequivocal act on the part of the Government which showed that as far as it was concerned, the
old assessment of the deficiency taxes was final, and hence collection of the amount assessed would proceed.

The interruption began on Sept. 2, 1954 when the appellant’s request for reinvestigation was granted, since the grant in
effect tied the hands of the appellee from filing the action.

156. BPI v CIR

Facts: BPI sold $500,000 to the Central Bank for $1M. BIR assessed BPI for deciency documentary stamp tax
(DST) on the sales. On Oct 20, 1989, BPI received the assessment. On nov 17, petitioner protested, but there
was no immediate reply. On Oct 15, 1992, BIR issued a warrant of distraint and/or levy, but it was served only
on Oct 23, 1992.
 On Sept 11, 1997, BPI received a letter from the CIR, denying its request for recon and addressing the
points raised in the protest letter. BPI filed a petition for review with the CTA on OCt 10, 1997, raising the
ground on prescription. CTA held that the period to collect has not yet prescribed, but it cancelled the
assessment as the sales were tax exempt. CIR appealed to CA, which sustained that the period to collect has
not yet prescribed, but held that the sales were subject to DST.

Issue: W/N request for reconsideration may suspend the running of the prescriptive period

Ruling: No. Sec 224 of the Tax Code provides that only a request for reinvestigation may suspend the running
of the prescriptive period. Taxpayer’s protest letter did not specifically request for either recon or
reinvestigation, but its contents would show that it did not present any new evidence. The BIR itself referred
to it as a request for recon. Even if it was considered as a request for reinvestigation, it may only validly
suspend the running of the period, when it has been granted by the CIR. Such grant need not be express, but
may be implied from the acts of the Commissioner or his authorized representative in response to the request
for reinvestigation.

Additional note: Request for reconsideration - refers to a plea for a re-evaluation of an assessment on the basis
of the existing records without need of additional evidence.
Request for reinvestigation - refers to a plea for re-evaluation of an assessment on the basis of newly-
discovered or additional evidence that a TP intends to present in the reinvestigation.
157. People vs Duque
Facts:
Respondent was charged and later convicted for the crime of illegal recruitment under Section 38 in
relation to Section 39 of P.D. No. 442, as amended, known as The Labor Code of the Philippines
Duque thus contends that the prescriptive period began to run sometime in January 1986. The
information was, however, filed by the Assistant Provincial Prosecutor of Laguna on 22 May 1990, i.e., more
than four (4) years later as Art 290 of Labor Code states that offenses penalized under such code will prescribe
in 3 years. Duque concludes that the offense of illegal recruitment had accordingly prescribed by May 1990.
The Labor Code, however, does not contain any provisions on the mode of computation of the three-
year prescriptive period it established.
The Solicitor General states, and we agree with him, that Act No. 3326, as amended, entitled "An Act to
Establish Periods of Prescription for Violations Penalized by Special Acts and Municipal Ordinances and to
Provide When Prescription Shall Begin to Run"
Section 2:
Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and institution of judicial proceedings for its
investigation and punishment.
Issue:
Whether or not the institution of criminal offense charged against respondent has been prescribed
Held:
Yes
(BOOK) The phrase “institution of judicial proceedings for its investigation and punishment” may be
either disregarded as surplusage or should be deemed preceded by the word “until”.
We believe and so hold that the applicable prescriptive period in the case at bar began to run from the
time the recruitment activities of appellant Duque were ascertained by the complainants and by the POEA to
have been carried out without any license or authority from the government. The discovery by the
complainants and by the POEA was, as a practical matter, simultaneous in character and occurred sometime in
December 1989 when the complainants went to the POEA with the complaint for recovery of the placement
fees and expenses they had paid to appellant Duque, and the POEA, acting upon that complaint, discovered
and informed the private complainants that Duque had operated as a recruiter without the essential
government license or authority. Accordingly, the offense of illegal recruitment had not prescribed when the
complaint was filed with the Provincial Prosecutor's Office in April 1990 and when the information was filed in
court in May 1990.

158. EMILIO E. LIM, SR. and ANTONIA SUN LIM vs CA G.R. Nos. L-48134-37 October 18, 1990
FACTS:
Spouses Lim were engaged in the dealership of various household appliances. For filing fraudulent
income tax returns for the years 1958-1959, they were assessed deficiency income taxes. The first assessment
was made on April 7, 1965 however petitioner refused to by requestion for an investigation. After such, the
second assessment was made which increased the collectible deficiency tax from the spouses. On 1967,
petitioners wrote the BIR to protest the latest assessment and repeated their request for a reinvestigation. n
October 10, 1967, the BIR rendered a final decision holding that there was no cause for reversal of the
assessment against the Lim couple. Petitioners were required to pay deficiency income taxes for 1958 and
1959 amounting to P1,237,190.55 inclusive of interest, surcharges and compromise penalty for late payment.
The final notice and demand for payment was served on petitioners through their daughter-in-law on July 3,
1968. Still, no payment was forthcoming from the delinquent taxpayers. Accordingly on September 1, 1969,
the matter was referred by the BIR to the Manila Fiscal's Office for investigation and prosecution. On June 23,
1970, four (4) separate criminal informations were filed against petitioners. On August 19, 1975, the trial court
rendered two (2) joint decisions finding petitioners guilty as charged.
ISSUE: WON the crime of filing false returns can be considered "discovered" only after the manner of
commission, and the nature and extent of the fraud have been definitely ascertained?

HELD:
Yes. The court agrees with the Solicitor General that the crime of filing false returns can be considered
"discovered" only after the manner of commission, and the nature and extent of the fraud have been
definitely ascertained. It was only on October 10, 1967 when the BIR rendered its final decision holding that
there was no ground for the reversal of the assessment and therefore required the petitioners to pay
P1,237,190.55 in deficiency taxes that the tax infractions were discovered. Not only that. The Solicitor General
stresses that Section 354 speaks not only of discovery of the fraud but also institution of judicial proceedings.
Note the conjunctive word "and" between the phrases "the discovery thereof" and "the institution of judicial
proceedings for its investigation and proceedings." In other words, in addition to the fact of discovery, there
must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year
limiting period begins to run. It was on September 1, 1969 that the offenses subject of Criminal Cases Nos.
1790 and 1791 were indorsed to the Fiscal's Office for preliminary investigation. Inasmuch as a preliminary
investigation is a proceeding for investigation and punishment of a crime, it was only on September 1, 1969
that the prescriptive period commenced.

The Court is inclined to adopt the view of the Solicitor General. For while that particular point might
have been raised in the Ching Lak case, the Court, at that time, did not give a definitive ruling which would
have settled the question once and for all. As Section 354 stands in the statute book (and to this day it has
remained unchanged) it would indeed seem that tax cases, such as the present ones, are practically
imprescriptible for as long as the period from the discovery and institution of judicial proceedings for its
investigation and punishment, up to the filing of the information in court does not exceed five (5) years.
Period to file criminal action

159. Aguinaldo Industries Corporation vs CIR

Facts: Aguinaldo Industries Corp. acquired a parcel of land site of the fishing net factory. Later, it sold the said
property, the profit from this sale which was entered in the books of the Fish Nets Division as miscellaneous
income. The examiners of the BIR found that the Fish Nets Division deducted from its gross income P61,187.48
as additional remuneration paid to the officers of Aguinaldo Industries, such deduction was claimed as part of
the selling expenses of the land.

It was determined that the payment of a bonus to them out of the gain realized from the sale cannot be
considered as a selling expense. We now come to the issue regarding the imposition of 5% surcharge and 1%
monthly interest for late payment of the deficiency tax on petitioner's income which was earned in 1957 and
assessed on May 30, 19-08.

Issue: Whether the prescriptive period shall be counted from the date when the final notice and demand is
served on the tax payer ?

Ruling: Yes

BOOK: If the nature of the crime is such that it could only be committed after service of notice and demand for
payment of the deficiency taxes upon the taxpayer, like those violations committed under Section 255 of the
Tax Code for failure to file return and to supply accurate information, the prescriptive period shall be counted
from the date when the final notice and demand is served on the tax payer. This is so because prior to the
receipt of the letter of assessment, no violation has yet been committed by the taxpayer. The crime is
committed only after its receipt coupled with the willful refusal to pay the taxes due within the allotted time.

160. TUPAZ vs ULEP

316 SCRA 118, October 1, 1999

FACTS: State Prosecutor filed with the Metropolitan Trial Court (MeTC), Quezon City an information against
herein petitioner Petronila C. Tupaz and her late husband, Jose J. Tupaz, Jr., as corporate officers of El Oro
Engravers Corporation for nonpayment of deficiency in corporate income tax for the year 1979 but was later
dismissed and denied upon reconsideration. Subsequently, the same prosecutor filed two (2) informations
before Regional Trial Court (RTC), for the same alleged non-payment of deficiency of corporate income tax for
the year 1979, one was raffled to Branch 105 while the other to Branch 86.  Respondent Judge Ulep issued an
order directing the prosecution to withdraw the information in Branch 86 after discovering that said
information was identical to that filed with Branch 105.  The prosecutor withdrew the information and was
granted. But later on filed a motion to reinstate the same, stating that the motion to withdraw information
was made through palpable mistake, and the result of excusable neglect—to which the respondent Judge
granted the motion over the objections of the petitioner.  Petitioner files this petition assailing that
respondent Judge committed a grave abuse of discretion in reinstating the information because the offense
has prescribed and exposed her to double jeopardy.

ISSUE: Whether or not Tupaz contention is correct that the filing to reinstate the case has already prescribed.

HELD: YES. We sustain petitioner’s contention. The reinstatement of the information would expose her to
double jeopardy. An accused is placed in double jeopardy if he is again tried for an offense for which he has
been convicted, acquitted or in another manner in which the indictment against him was dismissed without
his consent. In the instant case, there was a valid complaint filed against petitioner to which she pleaded not
guilty. The court dismissed the case at the instance of the prosecution, without asking for accused-petitioner’s
consent. This consent cannot be implied or presumed. Such consent must be expressed as to have no doubt as
to the accused’s conformity. As petitioner’s consent was not expressly given, the dismissal of the case must be
regarded as final and with prejudice to the re-filing of the case. Consequently, the trial court committed grave
abuse of discretion in reinstating the information against petitioner in violation of her constitutionally
protected right against double jeopardy.