TAX REMEDIES (National Internal Revenue Code)
I. BUREAU OF INTERNAL REVENUE
A. Organizational Structure 
1. Chief Officials of the Bureau of Internal
Revenue (Section 3)
2. Agents of the Commissioner of Internal
Revenue (Section 12)
B. Powers and Duties of the BIR
1. Powers and Duties of the Bureau of
Internal Revenue (Section 2)
2. Power of the Commissioner to Interpret
Tax Laws and to Decide Tax Cases
(Section 4)
3. Power of the Commissioner to Obtain
Information, and to Summon, Examine,
and Take Testimony of Persons (Section
5)
a. CIR v. Raul M. Gonzales, G.R. No.
177279, 13 October 2010
CIR V. RAUL M. GONZALES
G.R. NO. 177279, 13 OCTOBER 2010
VILLARAMA, JR., J
FACTS: Pursuant to Letter of Authority issued by then
Commissioner of Internal Revenue (petitioner) Dakila B.
Fonacier, and officers of the Tax Fraud Division (TFD),
National Office, conducted a fraud investigation against
respondent L. M. Camus Engineering Corporation
(LMCEC) for the taxable years 1997, 1998 and 1999.
The audit and investigation against LMCEC were
precipitated by the information provided by an
"informer" that LMCEC had substantial under declared
income for the said period. 
LMCEC failed and refused to pay the deficiency tax
assessment which had become final and executory as a
result of the said taxpayer's failure to file a protest
thereon within the 30-day reglementary period
contending that LMCEC cannot be held liable
whatsoever for the alleged tax deficiency which had
become due and demandable. They also assail as invalid
the assessment notices which bear no serial numbers.
CIR disagreed with the contention of LMCEC that the
complaint filed is not criminal in nature, pointing out
that LMCEC and its officers Camus and Mendoza were
being charged for the criminal offenses defined and
penalized under Sections 254 (Attempt to Evade or
Defeat Tax) and 255 (Willful Failure to Pay Tax) of the
NIRC. On the lack of control number in the assessment
notice, CIR explained that such is a mere office
requirement in the Assessment Service for the purpose
of internal control and monitoring; hence, the
unnumbered assessment notices should not be
interpreted as irregular or anomalous
On September 22, 2003, the Chief State Prosecutor
issued a Resolution finding no sufficient evidence to
establish probable cause against respondents LMCEC,
Camus and Mendoza. On the required prior
determination of fraud, the Chief State Prosecutor ruled
that there was no prior determination of fraud. CIR
appealed to respondent Secretary of Justice but the latter
denied its petition for review
ISSUE: Whether LMCEC and its corporate officers may
be prosecuted for violation of Sections 254 (Attempt to
Evade or Defeat Tax) and 255 (Willful Failure to Supply
Correct and Accurate Information and Pay Tax).
RULING: Yes. In the Details of Discrepancies attached
as Annex B of the PAN, private respondents were
already notified that inasmuch as the revenue officers
were not given the opportunity to examine LMCECs
books of accounts, accounting records and other
documents, said revenue officers gathered information
from third parties. Such procedure is authorized under
Section 5 of the NIRC, which provides: 
SEC. 5. Power of the Commissioner to Obtain
Information, and to Summon, Examine, and
Take Testimony of Persons. In ascertaining the
correctness of any return, or in making a return
when none has been made, or in determining the
liability of any person for any internal revenue
tax, or in collecting any such liability, or in
evaluating tax compliance, the Commissioner is
authorized:
(A) To examine any book, paper, record
or other data which may be relevant or
material to such inquiry;
(B) To obtain on a regular basis from
any person other than the person whose
internal revenue tax liability is subject to
audit or investigation, or from any office
or officer of the national and local
governments, government agencies and
instrumentalities, including the Bangko
Sentral ng Pilipinas and government-
owned or -controlled corporations, any
information such as, but not limited to,
costs and volume of production, receipts
or sales and gross incomes of taxpayers,
and the names, addresses, and financial
statements of corporations, mutual fund
companies, insurance companies,
regional operating headquarters of
multinational companies, joint accounts,
 associations, joint ventures or consortia
and registered partnerships, and their
members;
(C) To summon the person liable for tax
or required to file a return, or any officer
or employee of such person, or any
person having possession, custody, or
care of the books of accounts and other
accounting records containing entries
relating to the business of the person
liable for tax, or any other person, to
appear before the Commissioner or his
duly authorized representative at a time
and place specified in the summons and
to produce such books, papers, records,
or other data, and to give testimony;
(D) To take such testimony of the
person concerned, under oath, as may be
relevant or material to such inquiry
The determination of probable cause is part of the
discretion granted to the investigating prosecutor and
ultimately, the Secretary of Justice. However, this Court
and the CA possess the power to review findings of
prosecutors in preliminary investigations. Although
policy considerations call for the widest latitude of
deference to the prosecutor’s findings, courts should
never shirk from exercising their power, when the
circumstances warrant, to determine whether the
prosecutor’s findings are supported by the facts, or by
the law. In so doing, courts do not act as prosecutors but
as organs of the judiciary, exercising their mandate
under the Constitution, relevant statutes, and remedial
rules to settle cases and controversies. Clearly, the power
of the Secretary of Justice to review does not preclude
this Court and the CA from intervening and exercising
our own powers of review with respect to the DOJs
findings, such as in the exceptional case in which grave
abuse of discretion is committed, as when a clear
sufficiency or insufficiency of evidence to support a
finding of probable cause is ignored.
b. Fitness by Design v. CIR, G.R. No.
177982, 17 October 2008
FITNESS BY DESIGN V. CIR
G.R. NO. 177982, 17 OCTOBER 2008
CARPIO MORALES, J
FACTS: On March 17, 2004, the Commissioner on
Internal Revenue (respondent) assessed Fitness by
Design, Inc. (petitioner) for deficiency income taxes for
the tax year 1995 in the total amount of ₱10,647,529.69.
Petitioner protested the assessment on the ground that it
was issued beyond the three-year prescriptive. On
February 1, 2005, respondent issued a warrant of
distraint and/or levy against Fitness by Design.  In his
answer, CIR alleged that failure of Fitness by Design to
file a VAT return and for filing a fraudulent income tax
return for the year 1995, the corresponding taxes may be
assessed at any time within ten (10) years after the
discovery of such omission or fraud pursuant to Section
222(a) of the 1997 Tax Code. The subject deficiency tax
assessments have already become final, executory and
demandable for failure of the petitioner to file a protest
within the reglementary period provided for by law.
Thus, the CIR has legal basis to collect the tax liability
either by distraint and levy or civil action.
The Bureau of Internal Revenue (BIR) filed on March
10, 2005 a criminal complaint before the Department of
Justice against the officers and accountant of petitioner
for violation of the provisions of "The National Internal
Revenue Code of 1977, as amended, covering the
taxable year 1995." During the preliminary hearing,
Fitness by Design’s former bookkeeper attested that a
former colleague – certified public accountant Leonardo
Sablan (Sablan) – illegally took custody of petitioner’s
accounting records, invoices, and official receipts and
turned them over to the BIR.
Fitness subpoenaed Sablan for the hearing before the
CTA but he failed to appear. Fitness submitted written
interrogatories addressed to Sablan but was denied by
the CTA as it sought that such testimony, documents,
and admissions sought are not relevant and it violates
Section 2 of Republic Act No. 2338 proscribing the
revelation of identities of informers of violations of
internal revenue laws.
ISSUE: Whether or not the BIR can obtain information
without the consent of Fitness by Design? 
RULING: Yes. The questioned resolutions were not
tainted by arbitrariness.
The law allows the BIR access to all relevant or material
records and data in the person of the taxpayer (pursuant
to Section 5 of the Tax Code), and the BIR can accept
documents which cannot be admitted in a judicial
proceeding where the Rules of Court are strictly
observed. To require the consent of the taxpayer would
defeat the intent of the law to help the BIR assess and
collect the correct amount of taxes.
A CTA Case is not a criminal prosecution where
petitioner can cross examine the witness against him and
to have compulsory process issued to secure the
attendance of witnesses and the production of other
evidence in his behalf does not lie. Petition is
DISMISSED. 

4. Power of the Commissioner to Make
Assessments and Prescribe Additional
Requirements for Tax Administration and
Enforcement (Section 6)
a. Revenue Memorandum Circular No.
23-2000
b. Oceanic Wireless Network, Inc. v.
CIR, G.R. No. 148380, 9 December
2005
OCEANIC WIRELESS NETWORK, INC. V. CIR
G.R. NO. 148380, 9 DECEMBER 2005
AZCUNA, J
FACTS: Petitioner received from the Bureau of Internal
Revenue (BIR) deficiency tax assessments for the
taxable year 1984. Petitioner filed a protest against the
tax assessments and requested a reconsideration or its
cancellation in a letter to the BIR Commissioner dated
April 12, 1988. Acting in behalf of the BIR
Commissioner, the then Chief of the BIR Accounts
Receivable and Billing Division, Mr. Severino B. Buot,
reiterated the tax assessments while denying petitioner's
request for reinvestigation. He likewise demanded the
petitioner to pay the total amount of P8, 644,998.71
within ten (10) days from receipt thereof, otherwise the
case shall be referred to the Collection Enforcement
Division of the BIR National Office for the issuance of a
warrant of distraint and Levy without further notice.
Upon petitioner’s failure to pay the subject tax
assessments within the prescribed period, the Assistant
Commissioner for Collection, acting for the
Commissioner of Internal Revenue, issued the
corresponding warrants of distraint and/or levy and
garnishment. These were served on petitioner on
October 10, 1991 and October 17, 1991, respectively.
Petitioner filed a Petition for Review with the Court of
Tax Appeals (CTA) to contest the issuance of the
warrants to enforce the collection of the tax assessments.
The CTA dismissed the petition for lack of jurisdiction
in a decision dated September 16, 1994, declaring that
said petition was filed beyond the thirty (30)-day period
reckoned from the time when the demand letter of
January 24, 1991 by the Chief of the BIR Accounts
Receivable and Billing Division was presumably
received.
ISSUE: Whether the demand letter for tax deficiency
assessments issued and signed by a subordinate officer
who was acting in behalf of the Commissioner of
Internal Revenue, is deemed final and executory and
subject to an appeal to the Court of Tax Appeals or not.
RULING: YES. A demand letter for payment of
delinquent taxes may be considered a decision on a
disputed or protested assessment. The determination on
whether or not a demand letter is final is conditioned
upon the language used or the tenor of the letter being
sent to the taxpayer.
We laid down the rule that the Commissioner of Internal
Revenue should always indicate to the taxpayer in clear
and unequivocal language what constitutes his final
determination of the disputed assessment, thus:
. . . we deem it appropriate to state that the
Commissioner of Internal Revenue should
always indicate to the taxpayer in clear and
unequivocal language whenever his action on an
assessment questioned by a taxpayer constitutes
his final determination on the disputed
assessment, as contemplated by Sections 7 and
11 of Republic Act No. 1125, as amended. On
the basis of his statement indubitably showing
that the Commissioner’s communicated action is
his final decision on the contested assessment,
the aggrieved taxpayer would then be able to
take recourse to the tax court at the opportune
time. Without needless difficulty, the taxpayer
would be able to determine when his right to
appeal to the tax court accrues.
The rule of conduct would also obviate all desire and
opportunity on the part of the taxpayer to continually
delay the finality of the assessment – and, consequently,
the collection of the amount demanded as taxes – by
repeated requests for recomputation and reconsideration.
On the part of the Commissioner, this would encourage
his office to conduct a careful and thorough study of
every questioned assessment and render a correct and
definite decision thereon in the first instance. This would
also deter the Commissioner from unfairly making the
taxpayer grope in the dark and speculate as to which
action constitutes the decision appealable to the tax
court. Of greater import, this rule of conduct would meet
a pressing need for fair play, regularity, and orderliness
in administrative action.
In this case, the letter of demand dated January 24, 1991,
unquestionably constitutes the final action taken by the
Bureau of Internal Revenue on petitioner’s request for
reconsideration when it reiterated the tax deficiency
assessments due from petitioner, and requested its
payment. Failure to do so would result in the "issuance
of a warrant of distraint and levy to enforce its collection
without further notice. “In addition, the letter contained a
notation indicating that petitioner’s request for
reconsideration had been denied for lack of supporting
documents.
The above conclusion finds support in Commissioner of
Internal Revenue v. Ayala Securities Corporation, where
we held:
The letter of February 18, 1963 (Exh. G), in the
view of the Court, is tantamount to a denial of
the reconsideration or [respondent corporation’s]
…protest o[f] the assessment made by the
petitioner, considering that the said letter [was]
in itself a reiteration of the demand by the
Bureau of Internal Revenue for the settlement of
the assessment already made, and for the
immediate payment of the sum of P758,687.04
in spite of the vehement protest of the
respondent corporation on April 21, 1961. This
certainly is a clear indication of the firm stand of
petitioner against the reconsideration of the
disputed assessment…This being so, the said
letter amount[ed] to a decision on a disputed or
protested assessment, and, there, the court a quo
did not err in taking cognizance of this case.
Similarly, in Surigao Electric Co., Inc v. Court of Tax
Appeals, and in CIR v. Union Shipping Corporation, we
held:
". . . In this letter, the commissioner not only in
effect demanded that the petitioner pay the
amount of ₱11,533.53 but also gave warning
that in the event it failed to pay, the said
commissioner would be constrained to enforce
the collection thereof by means of the remedies
provided by law. The tenor of the letter,
specifically the statement regarding the resort to
legal remedies, unmistakably indicate[d] the
final nature of the determination made by the
commissioner of the petitioner’s deficiency
franchise tax liability."
The demand letter received by petitioner verily signified
a character of finality. Therefore, it was tantamount to a
rejection of the request for reconsideration. As correctly
held by the Court of Tax Appeals, "while the denial of
the protest was in the form of a demand letter, the
notation in the said letter making reference to the protest
filed by petitioner clearly shows the intention of the
respondent to make it as [his] final decision."
This now brings us to the crux of the matter as to
whether said demand letter indeed attained finality
despite the fact that it was issued and signed by the
Chief of the Accounts Receivable and Billing Division
instead of the BIR Commissioner.
The general rule is that the Commissioner of Internal
Revenue may delegate any power vested upon him by
law to Division Chiefs or to officials of higher rank. He
cannot, however, delegate the four powers granted to
him under the National Internal Revenue Code (NIRC)
enumerated in Section 7.
As amended by Republic Act No. 8424, Section 7 of the
Code authorizes the BIR Commissioner to delegate the
powers vested in him under the pertinent provisions of
the Code to any subordinate official with the rank
equivalent to a division chief or higher, except the
following:
(a) The power to recommend the promulgation
of rules and regulations by the Secretary of
Finance;
(b) The power to issue rulings of first impression
or to reverse, revoke or modify any existing
ruling of the Bureau;
(c) The power to compromise or abate under
Section 204(A) and (B) of this Code, any tax
deficiency: Provided, however, that assessments
issued by the Regional Offices involving basic
deficiency taxes of five hundred thousand pesos
(P500,000) or less, and minor criminal
violations as may be determined by rules and
regulations to be promulgated by the Secretary
of Finance, upon the recommendation of the
Commissioner, discovered by regional and
district officials, may be compromised by a
regional evaluation board which shall be
composed of the Regional Director as Chairman,
the Assistant Regional Director, heads of the
Legal, Assessment and Collection Divisions and
the Revenue District Officer having jurisdiction
over the taxpayer, as members; and
(d) The power to assign or reassign internal
revenue officers to establishments where articles
subject to excise tax are produced or kept.
It is clear from the above provision that the act of
issuance of the demand letter by the Chief of the
Accounts Receivable and Billing Division does not fall
under any of the exceptions that have been mentioned as
non-delegable.
Section 6 of the Code further provides:
"SEC. 6. Power of the Commissioner to Make
Assessments and Prescribe Additional Requirements for
Tax Administration and Enforcement. –
(A) Examination of Returns and Determination
of Tax Due. - After a return has been filed as
required under the provisions of this Code,
the Commissioner or his duly authorized
representative may authorize the examination
of any taxpayer and the assessment of the
correct amount of tax; Provided, however, That
failure to file a return shall not prevent the
Commissioner from authorizing the examination
of any taxpayer.
The tax or any deficiency tax so assessed shall be paid
upon notice and demand from the Commissioner or
from his duly authorized
representative. . .." (Emphasis supplied)
Thus, the authority to make tax assessments may be
delegated to subordinate officers. Said assessment has
the same force and effect as that issued by the
Commissioner himself, if not reviewed or revised by the
latter such as in this case.
A request for reconsideration must be made within thirty
(30) days from the taxpayer’s receipt of the tax
deficiency assessment, otherwise, the decision becomes
final, unappealable and therefore, demandable. A tax
assessment that has become final, executory and
enforceable for failure of the taxpayer to assail the same
as provided in Section 228 can no longer be contested,
thus:
"SEC. 228. Protesting of Assessment. – When
the Commissioner or his duly authorized
representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his
findings…Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such
form and manner as may be prescribed by
implementing rules and regulations. Within sixty
(60) days from filing of the protest, all relevant
supporting documents shall have been
submitted; otherwise, the assessment shall
become final.
If the protest is denied in whole or in part, or is not acted
upon within one hundred (180) days from submission of
documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of the said
decision, or from the lapse of the one hundred eighty
(180) - day period; otherwise, the decision shall become
final, executory and demandable."
Here, petitioner failed to avail of its right to bring the
matter before the Court of Tax Appeals within the
reglementary period upon the receipt of the demand
letter reiterating the assessed delinquent taxes and
denying its request for reconsideration which constituted
the final determination by the Bureau of Internal
Revenue on petitioner’s protest. Being a final disposition
by said agency, the same would have been a proper
subject for appeal to the Court of Tax Appeals.
The rule is that for the Court of Tax Appeals to acquire
jurisdiction, an assessment must first be disputed by the
taxpayer and ruled upon by the Commissioner of
Internal Revenue to warrant a decision from which a
petition for review may be taken to the Court of Tax
Appeals. Where an adverse ruling has been rendered by
the Commissioner of Internal Revenue with reference to
a disputed assessment or a claim for refund or credit, the
taxpayer may appeal the same within thirty (30) days
after receipt thereof
c. CIR v. Kudos Metal Corp., G.R. No.
178087, 5 May 2010
CIR V. KUDOS METAL CORP.
G.R. NO. 178087, 5 MAY 2010
DEL CASTILLO, J
FACTS: Kudos Metal Corp’s records were reviewed
and audited after it failed to comply with the three
Notices of Presentation of Records served by the BIR. 
Kudos Metal Corp.’s accountant, Nelia Pasco executed a
Waiver of the Defense of Prescription on December 10,
2001 which was notarized on January 22, 2002. It was
received by the BIR Enforcement Service on January 31,
2002 and by the BIR Tax Fraud Division on February 4,
2002, and accepted by the Assistant Commissioner of
the Enforcement Service, Percival T. Salazar.
A second Waiver of Defense of Prescription was again
executed by Pasco on February 18, 2003, notarized on
February 19, 2003, received by the BIR Tax Fraud
Division on February 28, 2003 and accepted by
Assistant Commissioner Salazar.
The BIR issued a Preliminary Assessment Notice for the
taxable year 1998 against the Kudos Metal Corp. This
was followed by a Formal Letter of Demand with
Assessment Notices for taxable year 1998, dated
September 26, 2003 which was received by respondent
on November 12, 2003.
ISSUE: Whether the Assistant Commissioner of the
Enforcement Service is authorized to sign a Waiver of
the Defense of Presentation. 
Note: This issue was not raised to the Supreme Court
but was decided upon by the CTA, En Banc. 
RULING: Yes, the Assistant Commissioner of the
Enforcement Service is authorized to sign the
waiver. 
The CTA found that the Assistant Commissioner of
the Enforcement Service is authorized to sign the
waiver pursuant to RDAO No. 05-01, which
provides in part as follows:
A. For National Office cases:
Designated Revenue Official
1. Assistant Commissioner (ACIR), For tax
fraud and policy Enforcement Service cases
2. ACIR, Large Taxpayers Service For large
taxpayers’ cases other than those cases
falling under Subsection B hereof
3. ACIR, Legal Service For cases pending
verification and awaiting resolution of
certain legal issues prior to prescription and
for issuance/compliance of Subpoena Duces
Tecum
4. ACIR, Assessment Service (AS) For
cases which are pending in or subject to
review or approval by the ACIR, AS
Based on the foregoing, the Assistant Commissioner,
Enforcement Service is authorized to sign waivers in tax
fraud cases. A perusal of the records reveals that the
investigation of the subject deficiency taxes in this case
was conducted by the National Investigation Division of
the BIR, which was formerly named the Tax Fraud
Division. Thus, the subject assessment is a tax fraud
case.
d. Republic v. Aquafresh Seafoods,
Inc., G.R. No. 170389, 20 October
2010
REPUBLIC V. AQUAFRESH SEAFOODS, INC.
G.R. NO. 170389, 20 OCTOBER 2010
PERALTA, J
FACTS: Aquafresh Seafoods Inc. sold to Philips
Seafoods, Inc. two parcels of land, including
improvements thereon, for Php 3,100, 000.00. Aquafresh
paid Php 186,000.00, representing the Capital Gains Tax
(CGT) and Php 46,500.00, representing the
Documentary Stamp Tax (DST) due from the said sale.  property is located in an area or zone where the
The Bureau of Internal Revenue (BIR) received a report
that the lots sold were undervalued for taxation
purposes. After an investigation, BIR concluded that the
subject properties were commercial with a zonal value of
Php 2,000.00 per square meter. BIR assessed Aquafresh
of CGT and DST defencies in the sum of Php
1,372,171.46 and Php 356,267.62, respectively.  powers vested in him under the
Aquafresh protested the assessments. Aquafresh's argued
that the subject properties were located in Barrio Banica,
Roxas, where the pre-defined zonal value was Php
650.00 per square meter based on the “Revised Zonal
Values of Real Properties in the City of Roxas”.
Aquafresh argued that since there was already a pre-
defined zonal value for properties located in Barrio
Banica, the BIR officials had no business re-classifying
the subject properties to commercial. The CTA ruled in
favor of respondent. Hence, the petitioner filed the
instant petition.  Commissioner shall not be delegated:
ISSUES: 
1.) Whether the requirement of consultation with
competent appraisers both from private and public
sectors in determining the fair market value of the
subject lots were applicable in the instant case.
2.) Whether the CTA erred in applying the fair market
value based on the zonal valuation of residential land as
tax base for computation of the deficiencies.
RULING:  reverse, revoke or modify any
1.) Yes.  existing ruling of the Bureau;
While the Commission of Internal Revenue has the
authority to prescribe real property values and divide the
Philippine into zones as provided under Section 6(E) of
the National Internal Revenue Code, the law is clear that
the same has to be done upon consultation with
competent appraisers both from the public and private
sectors. Petitioner’s act of re-classifying the subject
properties from residential to commercial cannot be
done without first complying with the procedures
prescribed by law.
2.) No. 
As observed by the CTA en banc, that the “Revised
Zonal Values of Real Properties” was drafted by
petitioner, with representatives from both public and
private sectors, duly satisfied the requirement of the law
for its validity. It indicates the zonal values and
classified the properties in Barrio Banica as residential.
Hence, it is proper application. 
As regards the contention of petitioner that the act of
classifying the subject properties was in accordance with
the section 1(b) and 2 Zonal Value Guidelines, the Court
ruled that it was not applicable in the instant case.
Section 1(b) does not apply because said proviso
operates only when no zonal valuation has been
prescribed and section 2 shall apply only when the real
properties are not yet classified and their respective
zonal valuation are not yet determined. 
5. Authority of the Commissioner to
Delegate Power (Section 7)
The Commissioner may delegate the
pertinent provisions of this Code to
any or such subordinate officials with
the rank equivalent to a division chief
or higher, subject to such limitations
and restrictions as may be imposed
under rules and regulations to be
promulgated by the Secretary of
Finance, upon recommendation of the
Commissioner: Provided, however,
That the following powers of the
 
(a) The power to recommend
the promulgation of rules and
regulations by the Secretary of
Finance;
 
(b) The power to issue rulings
of first impression or to
 
(c) The power to compromise
or abate, under Sec. 204 (A)
and (B) of this Code, any tax
 liability: Provided, however,
That assessments issued by the
regional offices involving
basic deficiency taxes of Five
hundred thousand pesos
(P500,000) or less, and minor
criminal violations, as may be
determined by rules and
regulations to be promulgated
by the Secretary of finance,
upon recommendation of the
Commissioner, discovered by
regional and district officials,
may be compromised by a
regional evaluation board
which shall be composed of
the Regional Director as
Chairman, the Assistant
Regional Director, the heads of
the Legal, Assessment and
Collection Divisions and the
Revenue District Officer
having jurisdiction over the
taxpayer, as members; and
 
(d) The power to assign or
reassign internal revenue
officers to establishments
where articles subject to excise
tax are produced or kept.
6. Duty of the Commissioner to Ensure the
Provision and Distribution of Forms, Receipts,
Certificates, and Appliances, and the
Acknowledgment of Payment of Taxes (Section
8)
(A) Provision and Distribution to
Proper-Officials. - Any law to the
contrary notwithstanding, it shall be the
duty of the Commissioner, among other
things, to prescribe, provide, and
distribute to the proper officials the
requisite licenses; internal revenue
stamps; unique, secure and non-
removable identification markings
(hereafter called unique identification
markings), such as codes or stamps, be
affixed to or form part of all unit packets
and packages and any outside packaging
of cigarettes and bottles of distilled
spirits; labels and other forms;
certificates; bonds; records; invoices;
books; receipts; instruments; appliances
and apparatus used in administering the
laws falling within the jurisdiction of the
Bureau. For this purpose, internal
revenue stamps, or other markings and
labels shall be caused by the
Commissioner to be printed with
adequate security features.
Internal revenue stamps, whether of a
bar code or fuson design, or other
markings shall be firmly and
conspicuously affixed or printed on each
pack of cigars and cigarettes and bottles
of distilled spirits subject to excise tax in
the manner and form as prescribed by
the Commissioner, upon approval of the
Secretary of Finance.
 
To further improve tax administration,
cigarette and alcohol manufacturers
shall be required to install automated
volume-counters of packs and bottles to
deter over-removals and misdeclaration
of removals.
 
(B) Receipts for Payment Mode. - It
shall be the duty of the Commissioner or
his duly authorized representative or an
authorized agent bank to whom any
payment of any tax is made under the
provisions of this Code to acknowledge
the payment of such tax, expressing the
amount paid and the particular account
for which such payment was made in a
form and manner prescribed therefor by
the Commissioner.
 
II. PRESCRIPTIVE PERIODS
A. Imprescriptibility of taxes
Exceptions:
1. Section 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.
(b) If before the expiration of the time
prescribed in Section 203 for the
assessment of the tax, both the
Commissioner and the taxpayer have
agreed in writing to its assessment after
such time, the tax may be assessed
within the period agreed upon. The
period so agreed upon may be extended
by subsequent written agreement made
before the expiration of the period
previously agreed upon.
 
(c) Any internal revenue tax which has
been assessed within the period of
limitation as prescribed in paragraph (a)
hereof may be collected by distraint or
levy or by a proceeding in court within
five (5) years following the assessment
of the tax.
 
(d) Any internal revenue tax, which has
been assessed within the period agreed
upon as provided in paragraph (b)
hereinabove, may be collected by
distraint or levy or by a proceeding in
court within the period agreed upon in
writing before the expiration of the five
(5) -year period. The period so agreed
upon may be extended by subsequent
written agreements made before the
expiration of the period previously
agreed upon.
 
(e) Provided, however, that nothing in
the immediately preceding and
paragraph (a) hereof shall be construed
to authorize the examination and
investigation or inquiry into any tax
return filed in accordance with the
provisions of any tax amnesty law or
decree.
2. Section 430, RA No. 10863
Sec. 430. Period of Limitation. – In the
absence of fraud and when the goods
have been finally assessed and
released, the assessment shall be
conclusive upon all parties three (3)
years from the date of final payment
of duties and taxes, or upon
completion of the post clearance
audit.
3. Section 194, LGC
Periods of Assessment and Collection. -
(a) Local taxes, fees, or charges
shall be assessed within five (5)
years from the date they became
due. No action for the collection
of such taxes, fees, or charges,
whether administrative or
judicial, shall be instituted after
the expiration of such period:
Provided, That. taxes, fees or
charges which have accrued
before the effectivity of this
Code may be assessed within a
period of three (3) years from
the date they became due.
(b) In case of fraud or intent to
evade the payment of taxes,
fees, or charges, the same may
be assessed within ten (10)
years from discovery of the
fraud or intent to evade
payment.
(c) Local taxes, fees, or charges
may be collected within five (5)
years from the date of
assessment by administrative or
judicial action. No such action
shall be instituted after the
expiration of said period:
Provided, however, That, taxes,
fees or charges assessed before
the effectivity of this Code may
be collected within a period of
three (3) years from the date of
assessment.
(d) The running of the periods
of prescription provided in the
preceding paragraphs shall be
suspended for the time during
which:
(1) The treasurer is
legally prevented from
making the assessment
of collection;
(2) The taxpayer
requests for a
reinvestigation and
 executes a waiver in
writing before
expiration of the period
within which to assess
or collect; and
(3) The taxpayer is out
of the country or
otherwise cannot be
located.
4. Section 270, LGC
Periods Within Which To Collect Real
Property Taxes. - The basic real
property tax and any other tax levied
under this Title shall be collected within
five (5) years from the date they become
due. No action for the collection of the
tax, whether administrative or judicial,
shall be instituted after the expiration of
such period. In case of fraud or intent to
evade payment of the tax, such action
may be instituted for the collection of
the same within ten (10) years from the
discovery of such fraud or intent to
evade payment.
The period of prescription within which
to collect shall be suspended for the time
during which:
(1) The local treasurer is legally
prevented from collecting the
tax;
(2) The owner of the property or
the person having legal interest
therein requests for
reinvestigation and executes a
waiver in writing before the
expiration of the period within
which to collect; and
(3) The owner of the property or
the person having legal interest
therein is out of the country or
otherwise cannot be located.
B. Sections 203, 222, 223
SEC. 223. Suspension of Running of
Statute of Limitations. - The running of
the Statute of Limitations provided in
Sections 203 and 222 on the making of
assessment and the beginning of
distraint or levy a proceeding in court
for collection, in respect of any
deficiency, shall be suspended for the
period during which the Commissioner
is prohibited from making the
assessment or beginning distraint or levy
or a proceeding in court and for sixty
(60) days thereafter; when the taxpayer
requests for a reinvestigation which is
granted by the Commissioner; when the
taxpayer cannot be located in the address
given by him in the return filed upon
which a tax is being assessed or
collected: Provided, that, if the taxpayer
informs the Commissioner of any
change in address, the running of the
Statute of Limitations will not be
suspended; when the warrant of distraint
or levy is duly served upon the taxpayer,
his authorized representative, or a
member of his household with sufficient
discretion, and no property could be
located; and when the taxpayer is out of
the Philippines.
1. Fraud v. Fraudulent Return
2. See Section 248(B)
 
(B) In case of willful neglect to
file the return within the period
prescribed by this Code or by
rules and regulations, or in case
a false or fraudulent return is
willfully made, the penalty to be
imposed shall be fifty percent
(50%) of the tax or of the
deficiency tax, in case, any
payment has been made on the
basis of such return before the
discovery of the falsity or fraud:
Provided, That a substantial
under-declaration of taxable
sales, receipts or income, or a
substantial overstatement of
deductions, as determined by the
Commissioner pursuant to the
rules and regulations to be
promulgated by the Secretary of
Finance, shall constitute prima
facie evidence of a false or
fraudulent return: Provided,
further, That failure to report
sales, receipts or income in an
amount exceeding thirty percent
 (30%) of that declared per
return, and a claim of deductions
in an amount exceeding (30%)
of actual deductions, shall render
the taxpayer liable for
substantial under-declaration of
sales, receipts or income or for
overstatement of deductions, as
mentioned herein.
3. Cases:
a. Talento v. Escalada 556 SCRA
491 (2008)
EMERLINDA S. TALENTO, IN HER CAPACITY
AS THE PROVINCIAL TREASURER OF THE
PROVINCE OF BATAAN V. HON. REMIGIO M.
ESCALADA, JR., PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF BATAAN,
BRANCH 3, AND PETRON CORPORATION
G.R. NO. 180884 (JUNE 27, 2008)
YNARES-SANTIAGO, J.
FACTS: Petron received from the Provincial Assessor’s
Office of Bataan a notice of revised assessment over its
machineries and pieces of equipment. Based on said
revised assessment, Provincial Treasurer of Bataan
issued a notice informing Petron that it has a deficiency
real property tax due. Petron was given 60 days within
which to file an appeal with the Local Board of
Assessment Appeals (LBAA). Petron filed a petition
with the LBAA contesting the revised assessment. It also
sent a letter to Provincial Treasurer stating that in view
of the pendency of its appeal with the LBAA, any action
on the subject properties would be premature. But Petron
received a notice of sale of its properties from the
Provincial Treasurer. Petron filed with the RTC for
prohibition with prayer for TRO and preliminary
injunction. RTC ruled in favor of Petron. The Provincial
Treasurer received the order of the RTC on November 6,
2007. Hence, it had only up to November 21, 2007 to
file a petition for review. However, the petition was filed
to the Supreme Court only on January 4, 2008, or 43
days late.
ISSUE: Whether the action of the Provincial Assessor’s
Office against Petron already prescribed.
RULING: Yes.
The Provincial Treasurer’s failure to file an appeal
within the reglementary period rendered the order of the
trial court final and executory, justifying the dismissal of
the Provincial Treasurer’s petition.
b. CIR v. Goodrich, Phils., 104171,
24 February 1999
COMMISSIONER OF INTERNAL REVENUE V.
B.F. GOODRICH PHILS., INC. (NOW SIME
DARBY INTERNATIONAL TIRE CO., INC.) AND
THE COURT OF APPEALS
G.R. NO. 104171 FEBRUARY 24, 1999
PANGANIBAN, J.
 
FACTS: The facts undisputed.  Private Respondent BF
Goodrich Phils., Inc. (now Sime Darby International
Tire Co, Inc.), was an American-owned and controlled
corporation previous to July 3, 1974. As a condition for
approving the manufacture by private respondent of tires
and other rubber products, the Central Bank of the
Philippines required that it should develop a rubber
plantation. In compliance with this requirement, private
respondent purchased from the Philippine government in
1961, under the Public Land Act and the Parity
Amendment to the 1935 Constitution, certain parcels of
land located in Tumajubong, Basilan, and there
developed a rubber plantation.
More than a decade later, on August 2, 1973, the justice
secretary rendered an opinion stating that, upon the
expiration of the Parity Amendment on July 3, 1974, the
ownership rights of Americans over public agricultural
lands, including the right to dispose or sell their real
estate, would be lost. On the basis of this Opinion,
private respondent 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. Apparently,
the BIR deemed the consideration for the sale
insufficient, and the difference between the fair market
value and the actual purchase price a taxable donation.
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.
Private respondent appealed the correctness and the
legality of these last two assessments to the CTA. The
CTA modified the decision of the CIR and ordered
petitioner to pay the amount of P1,311,179.01 plus 10%
surcharge and 20% annual interest from March 16, 1981
until fully paid.
Undaunted, private respondent elevated the matter to the
Court of Appeals, which reversed the CTA.
Hence, this Petition for Review under Rule 45 of the
Rules of Court.   respondent already reported its income for 1974 by filing
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: The petition has no merit.
Sec. 331 of the National Internal Revenue Code
provides:
Sec. 331. Period of limitation upon
assessment and collection. — Except as
provided in the succeeding section,
internal-revenue taxes shall be assessed
within five years after the return was
filed, and no proceeding in court without
assessment for the collection of such
taxes shall be begun after expiration of
such period. For the 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: Provided, that this limitation shall
not apply to cases already investigated
prior to the approval of this Code.
Applying this provision of law to the facts at hand, it is
clear that the October 16, 1980 and the March 1981
assessments were issued by the BIR beyond the five-
year statute of limitations. The Court has thoroughly
studied the records of this case and found no basis to
disregard the five-year period of prescription. 
For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or assessment,
our tax law provides a statute of limitations in the
collection of taxes. Thus, the law on prescription, being
a remedial measure, should be liberally construed in
order to afford such protection.  As a corollary, the
exceptions to the law on prescription should perforce be
strictly construed.
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.  Moreover, even though a donor's tax, which is
defined as "a tax on the privilege of transmitting one's
property or property rights to another or others without
adequate and full valuable consideration," is different
from capital gains tax, a tax on the gain from the sale of
the taxpayer's property forming part of capital assets, 
the tax return filed by private respondent to report its
income for the year 1974 was sufficient compliance with
the legal requirement to file a return. In other words, the
fact that the sale transaction may have partly resulted in
a donation does not change the fact that private
an income tax return.
Since the BIR failed to demonstrate clearly that private
respondent had filed a fraudulent return with the intent
to evade tax, or that it had failed to file a return at all, the
period for assessments has obviously prescribed. Such
instances of 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.
c. See Section 6(A)
A. Examination of Return and
Determination of Tax Due. After a
return has been filed as required
under the provisions of this Code,
the Commissioner or his duly
authorized representative may
authorize the examination of any
taxpayer and the assessment of the
correct amount of tax: Provided,
however, That failure to file a return
shall not prevent the Commissioner
from authorizing the examination of
any taxpayer.
The tax or any deficiency tax so
assessed shall be paid upon notice and
demand from the Commissioner or from
his duly authorized representative.
 
Any return, statement of declaration
filed in any office authorized to receive
the same shall not be withdrawn:
Provided, That within three (3) years
 from the date of such filing, the same
may be modified, changed, or amended:
Provided, further, That no notice for
audit or investigation of such return,
statement or declaration has in the
meantime been actually served upon the
taxpayer.
d. CIR v. United Salvage and
Towage, 729 SCRA 113
COMMISSIONER OF INTERNAL REVENUE V.
UNITED SALVAGE AND TOWAGE (PHILS.),
INC.
G.R. NO. 197515 (JULY 2, 2014)
PERALTA, J.
FACTS: USTP, a business engaged in sub-contracting
work in petroleum operations, protested against the
Notices of Assessment issued by the CIR that demanded
the payment of deficiency withholding tax amounting to
₱135,407.40. USTP won the case in the Supreme Court,
and the case was remanded to the CTA-Special First
Division.  CHICO-NAZARIO, J
During the pendency of the proceedings, USTP moved
to withdraw their petition because it availed of the
benefits of the Tax Amnesty Program under R.A. 9480.
The CTA partially granted their motion, dismissing the
aspects of the case other than that involving withholding
tax. They decided that the withholding taxes in 1994 and
1998 were void for not showing the law and facts on
which they were based, and those made in 1992 had
already lapsed pursuant to Section 203 of the Tax Code.
CIR avers that its right to collect the tax in 1992 has not
yet prescribed because, while the final assessment and
demand letter was issued in 1996, the 5-year prescriptive
period to collect was interrupted when USTP filed its
request for reinvestigation in 1997 which was granted in
2001. Thus, the period for tax collection should have
begun from the date of the modified assessment.
ISSUE: Whether the right of CIR to collect the
withholding tax for 1992 has prescribed
RULING: Yes.
The statute of limitations on assessment and collection
of national internal revenue taxes was shortened from 5
years to 3 years by virtue of B.P. 700. Thus, petitioner
has 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. However, when it validly issues an
assessment within the 3-year period, it has another 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 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.
The collection letter was issued by CIR in 2002, despite
that the Final Assessment Notices for the deficiency was
issued in 1996; clearly, 5 years had already lapsed,
beyond the 3-year prescriptive period. Further, the
request for reinvestigation in 1997 was only acted upon
in 2001, also beyond the 3-year statute of limitations
from 1996. Also, the assessment issued in 1994
warranted that the collection be in 1997; however, the
earliest attempt of the BIR to collect was made in 2003,
several years after the 3-year prescriptive period.
e. BPI v. CIR, G.R. No. 139736, 17
October 2005
BANK OF THE PHILIPPINE ISLANDS V.
COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 139736 (OCTOBER 17, 2005)
FACTS: On two separate occasions, particularly on 06
June 1985 and 14 June 1985, BPI sold United States
(US) $500,000.00 to the Central Bank of the Philippines
(Central Bank), for the total sales amount of
US$1,000,000.00.
On 10 October 1989, the Bureau of Internal Revenue
(BIR) issued Assessment No. FAS-5-85-89-
002054, finding petitioner BPI liable for deficiency DST
on its afore-mentioned sales of foreign bills of exchange
to the Central Bank
Petitioner BPI received the Assessment, together with
the attached Assessment Notice,   on 20 October
1989.Petitioner BPI, through its counsel, protested the
Assessment in a letter dated 16 November 1989, and
filed with the BIR on 17 November 1989.
Petitioner BPI did not receive any immediate reply to its
protest letter. However, on 15 October 1992, the BIR
issued a Warrant of Distraint and/or Levy against
petitioner BPI for the assessed deficiency DST for
taxable year 1985, in the amount of P27,720.00
(excluding the compromise penalty of P300.00). It
served the Warrant on petitioner BPI only on 23 October
1992.
Then again, petitioner BPI did not hear from the BIR
until 11 September 1997, when its counsel received a
letter, dated 13 August 1997, signed by then BIR
Commissioner Liwayway Vinzons-Chato, denying its'
'request for reconsideration.
BPI in its reply admitted that while industry practice or
market convention has the force of law between the
members of a particular industry, it is not binding with
the BIR since it is not a party thereto. The same should,
therefore, not be allowed to prejudice the Bureau of its
lawful task of collecting revenues necessary to defray
the expenses of the government. (Art. 11 in relation to
Art. 1306 of the New Civil Code.)
Upon receipt of the above-cited letter from the BIR,
petitioner BPI proceeded to file a Petition for Review
with the CTA on 10 October 1997.
BPI raised in its Petition for Review before the CTA, the
defense of prescription of the right of respondent BIR
Commissioner to enforce collection of the assessed
amount. It alleged that respondent BIR Commissioner
only had three years to collect on Assessment No. FAS-
5-85-89-002054, but she waited for seven years and nine
months to deny the protest. 
In her Answer and subsequent Memorandum,
respondent BIR Commissioner merely reiterated her
position, as stated in her letter to petitioner BPI, dated 13
August 1997, which denied the latter's protest; and
remained silent as to the expiration of the prescriptive
period for collection of the assessed deficiency DST
ISSUE: Whether the right of respondent BIR
Commissioner to collect from petitioner BPI the alleged
deficiency DST for taxable year 1985 had prescribed.  enumerated in Section 224 of the same Code,
RULING: Yes.  granted by the BIR Commissioner.
The efforts of respondent Commissioner to collect on
Assessment No. FAS-5-85-89 002054 were already
barred by prescription. The period for the BIR to assess
and collect an internal revenue tax is limited to three
years by Section 203 of the Tax Code of 1977, as
amended.  89-002054, issued against petitioner BPI, had
In the present Petition, there is no controversy
on the timeliness of the issuance of the
Assessment, only on the prescription of the
period to collect the deficiency DST following
its Assessment. Counting the three-year
prescriptive period, for a total of 1,095
days, from 20 October 1989, then the BIR only
had until 19 October 1992 within which to
collect the assessed deficiency DST. Although
the Warrant was issued on 15 October 1992,
previous to the expiration of the period for
collection on 19 October 1992, the same was
served on petitioner BPI only on 23 October
1992.
If the service of the Warrant of Distraint and/or
Levy on petitioner BPI on 23 October 1992 was
already beyond the prescriptive period for
collection of the deficiency DST, which had
expired on 19 October 1992, then what more the
letter of respondent BIR Commissioner, dated
13 August 1997 and received by the counsel of
the petitioner BPI only on 11 September 1997,
denying the protest of petitioner BPI and
requesting payment of the deficiency DST?
The Court also ruled that there is no valid
ground for the suspension of the running of the
prescriptive period for collection of the assessed
DST under the Tax Code of 1977, as amended.
The statute of limitations on assessment and
collection of taxes is for the protection of the
taxpayer and, thus, shall be construed liberally
in his favor.
The indefinite extension of the period for
assessment is unreasonable because it deprives
the said taxpayer of the assurance that he will no
longer be subjected to further investigation for
taxes after the expiration of a reasonable period
of time. The statute of limitations on collection
may only be interrupted or suspended by a valid
waiver executed in accordance with paragraph
(d) of Section 223 of the Tax Code of 1977, as
amended, and the existence of the circumstances
which include a request for reinvestigation
Applying the given rules to the present Petition, this
Court finds that:
(a) The statute of limitations for collection of the
deficiency DST in Assessment No. FAS-5-85-
already expired; and
(b) None of the conditions and requirements for
exception from the statute of limitations on
collection exists herein: Petitioner BPI did not
execute any waiver of the prescriptive period on
collection as mandated by paragraph (c) of
Section 223 of the Tax Code of 1977, as
amended; the protest filed by petitioner BPI was
a request for reconsideration, not a request for
reinvestigation that was granted by respondent
BIR Commissioner which could have suspended
the prescriptive period for collection under
 Section 224 of the Tax Code of 1977, as
amended; and, petitioner BPI, other than filing a
request for reconsideration of Assessment No.
FAS-5-85-89-002054, did not make repeated
requests or performed positive acts that could
have persuaded the respondent BIR
Commissioner to delay collection, and that
would have prevented or estopped petitioner BPI
from setting up the defense of prescription
against collection of the tax assessed, as required
in the Suyoc case.
f. Commissioner of Internal
Revenue v. Transitions Optical
Philippines, Inc., G.R. No.
227544, 22 November 2017
COMMISSIONER OF INTERNAL REVENUE V.
TRANSITIONS OPTICAL PHILIPPINES, INC.
G.R. NO. 227544 NOVEMBER 22, 2017
LEONEN, J.
FACTS: Transitions Optical received Letter of
Authority from the BIR to examine Transition Optical's
books of accounts for internal revenue tax purposes for
taxable year 2004. On 2007, the parties executed a
Waiver of the Defense of Prescription. This was
followed by another supposed Waiver of the Defense of
Prescription (Second Waiver), extending the prescriptive
period to November 30, 2008.
Thereafter, the CIR issued a PAN. Transitions Optical
filed a written protest. Then the CIR issued against
Transitions Optical a Final Assessment Notice (FAN)
and a Formal Letter of Demand (FLD) mailed on
December 2, 2008. Transitions Optical alleged that the
demand for deficiency taxes had already prescribed at
the time the FAN was mailed on December 2, 2008. 
The CTA division found the waivers to be defective and
void. Granting for the sake of argument that the subject
Waivers were validly executed, the assessment must be
cancelled for being issued beyond the prescriptive period
provided by law to assess. The CTA en banc affirmed
the division.
The CIR maintains that Transitions is estopped from
questioning the validity of the waivers since their
execution was delayed by Transition’s own failure to
comply with the orders of the BIR to submit documents.  a Subpoena Duces Tecum on GMCC president,
On the other hand, even assuming that the waivers were
valid, Transitions argues that the assessment would still
be void as the FAN was served only on December 4,
2008, beyond the extended period of November 30,
2008.
ISSUE: Whether or not the assessment of deficiency
taxes against Transitions Optical for taxable year 2004
had prescribed.
RULING: Yes. 
Transitions repeatedly failed to comply with CIR’s
notices. Having benefitted from the Waivers executed at
its instance, Transitions is estopped from claiming that
they were invalid and that prescription had set in.
But, even as respondent is estopped from questioning the
validity of the Waivers, the assessment is nonetheless
void because it was served beyond the supposedly
extended period. Since the validity period of the second
Waiver is only until November 30, 2008, prescription
had already set in at the time the FAN and the FLD were
actually mailed on December 4, 2008.
g. Republic of The Philippines v.
GMCC United Development
Corporation, G.R. No. 191856, 07
December 2016
REPUBLIC OF THE PHILIPPINES VS GMCC
UNITED DEVELOPMENT CORPORATION
GR NO. 191856 (DECEMBER 7, 2016)
LEONEN, J.
FACTS: On March 28, 2003
 Bureau of Internal Revenue National
Investigation Division issued a Letter of
Authority, authorizing its revenue officers to
examine the books of accounts and other
accounting records of GMCC United
Development Corporation (GMCC) covering
taxable years 1998 and 1999.
April 3, 2003 
 GMCC was served a copy of said Letter of
Authority and was requested to present its books
of accounts and other accounting records.
GMCC failed to respond to the Letter of
Authority as well as the subsequent letters
requesting that its records and documents be
produced.
 Due to GMCC's failure to act on the requests,
the Assistant Commissioner of the Enforcement
Service of the Bureau of Internal Revenue issued
Jose C. Go. When GMCC still failed to comply
with the Subpoena Duces Tecum, the revenue
officers were constrained to investigate GMCC
through Third Party Information.
  The investigation revealed that in 1998, GMCC,
through Go, executed two dacion en pago
agreements to pay for the obligations of
GMCC's sister companies. GMCC allegedly
failed to declare the income it earned from these
agreements for taxation purposes in 1998.  G.R. NO. 167765 JUNE 30, 2008
 It was also discovered that in 1999, GMCC sold
condominium units and parking slots for a total
amount of P5,350,000.00 to a Valencia K.
Wong.[15] However, GMCC did not declare the
income it earned from these transactions in its
1999 Audited Financial Statements.
 
November 17, 2003
 Bureau of Internal Revenue issued a Notice to
Taxpayer to GMCC, which GMCC ignored.
On December 8, 2003
 Bureau of Internal Revenue issued a Preliminary
Assessment Notice.
November 23, 2004
 GMCC protested the issuance of the Final
Assessment Notice citing that the period to
assess and collect the tax had already prescribed.
The Bureau of Internal Revenue denied the
protest in a Final Decision dated February 10,
2005.
October 7, 2005
 BIR filed with the Department of Justice a
criminal complaint for violation of Sections 254,
[21] 255, [22] and 267, [23] of the National
Internal Revenue Code against GMCC, its
president, Jose C. Go, and its treasurer, Xu Xian
Chun. The president countered that the
complaint be dismissed because the action has
already prescribed and GMCC did not defraud
the Government.
ISSUE: Is the applicable prescription period for the tax
assessment the 10-year period or the three (3) year
period?
RULING: The case falls under section 203 of the Tax
Code. The three (3) year prescription period should be
applied.  First, the waiver did not state the dates of execution and
In the case, the last day prescribed by law for filing its
1998 tax return was April 15, 1999. The petitioner had
three (3) years (2002) to make an assessment. The
preliminary assessment was made only on December8,
2003 thus the period to assess the tax had already
expired.
For the 10-year period under section 222 (a) to apply, it
is not enough that the fraud is alleged in the complaint. It
must be established by clear and convincing evidence.
h. CIR v. FMF Dev. Corp., 556
SCRA 698
COMMISSIONER OF INTERNAL REVENUE V
FMF DEVELOPMENT CORPORATION
QUISUMBING, J.
FACTS: For taxable year 1995, the BIR sent FMF pre-
assessment notices, all dated October 6, 1998, informing
it of its alleged tax liabilities. FMF filed a protest against
these notices with the BIR and requested for a
reconsideration/reinvestigation. The Revenue Officer
advised FMF of the informal conference set on February
2, 1999 to allow it to present evidence to dispute the BIR
assessments.
On February 9, 1999, FMF President executed a waiver
of the three-year prescriptive period for the BIR to
assess internal revenue taxes, hence extending the
assessment period until October 31, 1999. The waiver
was accepted and signed by RDO.
On October 18, 1999, FMF received amended pre-
assessment notices dated October 6, 1999 from the BIR.
FMF immediately filed a protest on November 3, 1999
but on the same day, it received BIR’s Demand Letter
and Assessment Notice reflecting FMF’s alleged
deficiency taxes and accrued interests.
FMF invoked the defense of prescription by reason of
the invalidity of the waiver. In its reply, the BIR insisted
that the waiver is valid because it was signed by the
RDO, a duly authorized representative of petitioner. It
also ordered FMF to immediately settle its tax liabilities;
otherwise, judicial action will be taken. 
CTA granted the petition and cancelled the Assessment
Notice because it was already time-barred. The CTA
ruled that the waiver did not extend the three-year
prescriptive period within which the BIR can make a
valid assessment because it did not comply with the
procedures laid down in Revenue Memorandum Order.
acceptance of the waiver, by the taxpayer and the BIR,
respectively; thus, it cannot be determined with certainty
if the waiver was executed and accepted within the
prescribed period. Second, the CTA also found that FMF
was not furnished a copy of the waiver signed by RDO.
Third, the CTA pointed out that since the case involves
an amount of more than P1 million, and the period to
assess is not yet about to prescribe, the waiver should
have been signed by the Commissioner of Internal
Revenue, and not a mere RDO. The CA affirmed the
CTA.
ISSUE: Whether or not the period to assess had the defense of prescription under Section 223 of the
prescribed. NIRC of 1977 insofar as the assessment and collection
of any deficiency taxes for the year ended December 31,
RULING: Yes. 1989, but not after June 30, 1994. The Waiver was not
signed by petitioner or any of his authorized
The waiver in question here was defective and did not representatives and did not state the date of acceptance
validly extend the original three-year prescriptive period. as prescribed under Revenue Memorandum Order No.
Firstly, it was not proven that respondent was furnished 20-90. Respondent did not execute any other Waiver or
a copy of the BIR-accepted waiver. Secondly, the waiver similar document before or after the expiration of the
was signed only by a revenue district officer, when it November 16, 1993 Waiver on June 30, 1994. 
should have been signed by the Commissioner as
mandated by the NIRC.  On March 22, 2004, petitioner rendered a Decision
denying respondents request for reconsideration and
The Assessment Notice dated October 25, 1999, was ordering respondent to pay the deficiency income tax
issued beyond the three-year prescriptive period. The plus interest that may have accrued. 
waiver was incomplete and defective and thus, the three-
year prescriptive period was not tolled nor extended. On March 30, 2004, respondent received its copy of the
i. CIR vs. Stanley Works (Phils.) assailed Decision. Hence, on April 28, 2004, respondent
Incorporated, GR No. 187859, 3 filed before the Court in Division a Petition for Review. 
December 2014 The CTA First Division found that although the
assessment was made within the prescribed period, the
COMMISSIONER OF INTERNAL REVENUE V.  period within which petitioner may collect deficiency
THE STANLEY WORKS SALES (PHILS.), income taxes had already lapsed.
INCORPORATED
G.R. NO. 187589 (DECEMBER 3, 2014) The CTA Division ruled that the request for
SERENO, CJ reconsideration did not suspend the running of the
prescriptive period to collect deficiency income tax.
FACTS: On April 16, 1990, respondent filed with the There was no valid waiver of the statute of limitations,
BIR its Annual Income Tax Return for taxable year as the following infirmities were found: (1) there was no
1989.  conformity, either by respondent or his duly authorized
representative; (2) there was no date of acceptance to
On March 19, 1993, pursuant to Letter of Authority show that both parties had agreed on the Waiver before
dated July 3, 1992, the BIR issued against respondent a the expiration of the prescriptive period; and (3) there
Pre-Assessment Notice (PAN) No. 002523 for 1989 was no proof that respondent was furnished a copy of the
deficiency income tax.  Waiver. Applying jurisprudence and relevant BIR
rulings, the waiver was considered defective; thus, the
On March 29, 1993, respondent received its copy of the period for collection of deficiency income tax had
PAN.  already prescribed. 

On April 12, 1993, petitioner, through OTC Domingo C.
Paz of Revenue Region No. 4B-2 of Makati, issued to
respondent Assessment Notice No. 002523-89-6014 for
deficiency income tax for taxable year 1989. The Notice
was sent on April 15, 1993 and respondent received it on
April 21, 1993.  collection, as there was no evidence that the latter had
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 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
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.
ISSUES: 
1. Whether the petitioner's right to collect the deficiency
income tax of respondent for taxable year 1989 has
prescribed. 
2. Whether the respondent's repeated requests and
positive acts constitute "estoppel" from setting up the
defense of prescription under the NIRC.
RULING:  defense taxpayers would furthermore be under
1. Yes. 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. 20-9010 on 4 April 1990 to provide
guidelines on the proper execution of the Waiver of the
Statute of Limitations
The BIR cannot claim the benefits of extending the
period to collect the deficiency tax as a consequence of
the Waiver when, in truth it was the BIRs inaction which
is the proximate cause of the defects of the Waiver. The
BIR has the burden of ensuring compliance with the
requirements of RMO No. 20-90, as they have the
burden of securing the right of the government to assess
and collect tax deficiencies. This right would prescribe
absent any showing of a valid extension of the period set
by the law.
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 as a
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. 
Although we recognize that the power of taxation is
deemed inherent in order to support the government, tax
provisions are not all about raising revenue. Our
legislature has provided safeguards and remedies
beneficial to both the taxpayer, to protect against abuse;
and the government, to promptly act for the availability
and recovery of revenues. A statute of limitations on the
assessment and collection of internal revenue taxes was
adopted to serve a purpose that would benefit both the
taxpayer and the government.
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 hav
ea 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
obligation to always keep their books and keep them
open for inspection subject to harassment by
unscrupulous tax agents. The law on prescription being a
remedial measure should be interpreted in a way
conducive to bringing about the beneficient purpose of
affording protection to the taxpayer within the
contemplation of the Commission which recommends
the approval of the law. 
2. No. The respondent is not barred from setting up the
defense of prescription. 
True, respondent filed a Protest and asked for a
reconsideration and cancellation of the assessment on 19
May 1993; however, it is uncontested that petitioner
failed to act on that Protest until 29 November 2001,
when the latter required the submission of other
supporting documents. In fact, the Protest was denied
only on 22 March 2004.
 
Petitioner’s reliance on CIR v. Suyoc (Suyoc) is likewise
misplaced. In Suyoc, the BIR was induced to extend the
collection of tax through repeated requests for extension
to pay and for reinvestigation, which were all denied by
the Collector. Contrarily, herein respondent filed only
one Protest over the assessment, and petitioner denied it
10 years after. The subsequent letters of respondent
cannot be construed as inducements to extend the period
of limitation, since the letters were intended to urge
petitioner to act on the Protest, and not to persuade the
latter to delay the actual collection.
 
Even assuming arguendo that the Waiver executed by
respondent on 16 November 1993 is valid, the right of
petitioner to collect the deficiency income tax for the
year 1989 would have already prescribed by 2001 when
the latter first acted upon the protest, more so in 2004
when it finally denied the reconsideration. Records show
that the Waiver extends only for the period ending 30
June 1994, and that there were no further extensions or
waivers executed by respondent. Again, a waiver is not a
unilateral act of the taxpayer or the BIR, but is a bilateral
agreement between two parties to extend the period to a
date certain. 
 
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.

j.See RMC 6-2005 for the format
of the Waiver
k. Revenue Memorandum Order No. 14-2016
l. Revenue Memorandum Circular No. 141-2019
m. CIR vs. Kudos Metal, GR No. 178087, 5 May
2010
COMMISSIONER OF INTERNAL REVENUE V.
KUDOS METAL CORPORATION
G.R. NO. 178087 (MAY 5, 2010)
DEL CASTILLO, J.
FACTS: Kudos Metal Corp’s records were reviewed
and audited after it failed to comply with the three
Notices of Presentation of Records served by the BIR.  the case of a corporation, the waiver must be
Kudos Metal Corp.’s accountant, Nelia Pasco executed a
Waiver of the Defense of Prescription on December 10,
2001 which was notarized on January 22, 2002. It was
received by the BIR Enforcement Service on January 31,
2002 and by the BIR Tax Fraud Division on February 4,
2002, and accepted by the Assistant Commissioner of
the Enforcement Service, Percival T. Salazar.
A second Waiver of Defense of Prescription was again
executed by Pasco on February 18, 2003, notarized on
February 19, 2003, received by the BIR Tax Fraud
Division on February 28, 2003 and accepted by
Assistant Commissioner Salazar.
The BIR issued a Preliminary Assessment Notice for the
taxable year 1998 against the Kudos Metal Corp. This
was followed by a Formal Letter of Demand with
Assessment Notices for taxable year 1998, dated
September 26, 2003 which was received by respondent
on November 12, 2003.
ISSUE: Whether BIR’s right to assess unpaid taxes of
Kudos Metal Corp prescribed.
RULING: Yes. The Supreme Court found that BIR’s
right to assess unpaid taxes of Kudos Metal Corp
prescribed.  notified of the acceptance of the BIR and the
Section 203 of the National Internal Revenue Code of
1997 (NIRC) mandates the government to assess internal
revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the
actual date of filing of such return, whichever comes
later. Hence, an assessment notice issued after the three-
year prescriptive period is no longer valid and effective.
Exceptions however are provided under Section 222 of
the NIRC.
Section 222 (b) of the NIRC provides that the period to
assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer
executed before the expiration of the three-year period.
RMO 20-90 issued on April 4, 1990 and RDAO 05-
01 issued on August 2, 2001 lay down the procedure for
the proper execution of the waiver, to wit:
 
1. The waiver must be in the proper form
prescribed by RMO 20-90. The phrase "but not
after ______ 19 ___", which indicates the expiry
date of the period agreed upon to assess/collect
the tax after the regular three-year period of
prescription, should be filled up.
2. The waiver must be signed by the taxpayer
himself or his duly authorized representative. In
signed by any of its responsible officials. In case
the authority is delegated by the taxpayer to a
representative, such delegation should be in
writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by
him must sign the waiver indicating that the BIR
has accepted and agreed to the waiver. The date
of such acceptance by the BIR should be
indicated. However, before signing the waiver,
the CIR or the revenue official authorized by
him must make sure that the waiver is in the
prescribed form, duly notarized, and executed by
the taxpayer or his duly authorized
representative.
5. Both the date of execution by the taxpayer
and date of acceptance by the Bureau should be
before the expiration of the period of
prescription or before the lapse of the period
agreed upon in case a subsequent agreement is
executed.
6. The waiver must be executed in three copies,
the original copy to be attached to the docket of
the case, the second copy for the taxpayer and
the third copy for the Office accepting the
waiver. The fact of receipt by the taxpayer of
his/her file copy must be indicated in the
original copy to show that the taxpayer was
perfection of the agreement. 
 
A perusal of the waivers executed by respondent’s
accountant reveals the following infirmities:
1. The waivers were executed without the
notarized written authority of Pasco to sign the
waiver in behalf of respondent.
2. The waivers failed to indicate the date of
acceptance.
 3. The fact of receipt by the respondent of its file
copy was not indicated in the original copies of
the waivers.
 
Due to the defects in the waivers, the period to assess or
collect taxes was not extended. Consequently, the
assessments were issued by the BIR beyond the three-
year period and are void
 
n. RCBC v. CIR, G.R. No. 170257,
7 September 2011
RCBC V. CIR
G.R. NO. 170257 (SEPTEMBER 7, 2011)
MENDOZA, J
FACTS: RCBC received a Letter of Authority on Aug.
15 ,1996 for the examination of it’s books and records
for all internal taxes for January 1,1994 to December 31,
1995.
On January 23, 1997, RCBC executed two Waivers of
the Defense of Prescription Under the Statute of
Limitations of the National Internal Revenue Code
covering the internal revenue taxes due for the years
1994 and 1995, effectively extending the period of the
Bureau of Internal Revenue (BIR) to assess up to
December 31, 2000.
On January 27, 2000, RCBC received a formal letter of
demand with assessment notice for deficiency taxes of
around 4 billion pesos. RCBC disagreed with the
assessment and filed a protest together with supporting
documents.
On December 6, 2000, RCBC received another Formal
Letter of Demand with Assessment Notices for
deficiency taxes of around 300 million pesos, on the
same day RCBC paid an amount of 15 million pesos.
RCBC refused to pay the amount left and argued that the
waivers of the Statute of Limitations which it executed
on January 23, 1997 were not valid because the same
were not signed or conformed to by the respondent CIR
as required under Section 222(b) of the Tax Code.
CIR on the other hand contends that RCBC is now
estopped from questioning the validity of the said
waivers.
ISSUE: Whether RCBC is estopped from questioning
the validity on the waivers of the defense of
prescription?
RULING: Yes.
Under Article 1431 of the Civil Code, the doctrine of
estoppel is anchored on the rule that "an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against
the person relying thereon." A party is precluded from
denying his own acts, admissions or representations to
the prejudice of the other party in order to prevent fraud
and falsehood.
Estoppel is clearly applicable to the case at bench.
RCBC, through its partial payment of the revised
assessments issued within the extended period as
provided for in the questioned waivers, impliedly
admitted the validity of those waivers. Had petitioner
truly believed that the waivers were invalid and that the
assessments were issued beyond the prescriptive period,
then it should not have paid the reduced amount of taxes
in the revised assessment. RCBC’s subsequent action
effectively belies its insistence that the waivers are
invalid. The records show that on December 6, 2000,
upon receipt of the revised assessment, RCBC
immediately made payment on the uncontested taxes.
Thus, RCBC is estopped from questioning the validity of
the waivers. To hold otherwise and allow a party to
gainsay its own act or deny rights which it had
previously recognized would run counter to the principle
of equity which this institution holds dear.
o. CIR v. Phoenix Assurance Inc., L-
19727, 20 May 1965
PHOENIX ASSURANCE, CO., LTD. V.
COMMISSIONER OF INTERNAL REVENUE
G.R. NO. L-19903 (MAY 20, 1965)
BENGZON, J.P., J.
 
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. Through its head office, it
entered in London into worldwide reinsurance treaties
with various foreign insurance companies. It agreed to
cede a portion of premiums received on original
insurances underwritten by its head office, subsidiaries,
and branch offices throughout the world, in
consideration for assumption by the foreign insurance
companies of an equivalent portion of the liability from
such original insurances.
 
Phoenix Assurance Co., Ltd. filed its income tax return
for 1952 on April 1, 1953 showing a loss of
P199,583.93. It amended said return on August 30, 1955
reporting a tax liability of P2,502.00. On July 24, 1958,
after examination of the amended return, the
Commissioner of Internal Revenue assessed deficiency
income tax in the sum of P5,667.00. The Court of Tax
Appeals found the right of the Commissioner of Internal
Revenue barred by prescription, the same having been
exercised more than five years from the date the original
return was filed. On the other hand, the Commissioner of
Internal Revenue insists that his right to issue the
assessment has not prescribed inasmuch as the same was
availed of before the 5-year period provided for in
Section 331 of the Tax Code expired, counting the
running of the period from August 30, 1955, the date
when the amended return was filed.
ISSUE: Should the running of the prescriptive period
commence from the filing of the original or amended
return?
RULING: To our mind, the Commissioner's view
should be sustained. The changes and alterations
embodied in the amended income tax return consisted of
the exclusion of reinsurance premiums received from
domestic insurance companies by Phoenix Assurance
Co., Ltd.'s London head office, reinsurance premiums
ceded to foreign reinsurers not doing business in the
Philippines and various items of deduction attributable
to such excluded reinsurance premiums thereby
substantially modifying the original return. Furthermore,
although the deduction for head office expenses
allocable to Philippine business, whose disallowance
gave rise to the deficiency tax, was claimed also in the
original return, the Commissioner could not have
possibly determined a deficiency tax thereunder because
Phoenix Assurance Co., Ltd. declared a loss of
P199,583.93 therein which would have more than offset
such disallowance of P15,826.35.  served the Warrant on petitioner BPI only on 23 October
 
Considering that the deficiency assessment was based on
the amended return which, as aforestated, is substantially
different from the original return, the period of
limitation of the right to issue the same should be
counted from the filing of the amended income tax
return. From August 30, 1955, when the amended
return was filed, to July 24, 1958, when the deficiency
assessment was issued, less than five years elapsed. The
right of the Commissioner to assess the deficiency tax on
such amended return has not prescribed.
 
To strengthen our opinion, we believe that to hold
otherwise, we would be paving the way for taxpayers to
evade the payment of taxes by simply reporting in their
original return heavy losses and amending the same
more than five years later when the Commissioner of
Internal Revenue has lost his authority to assess the
proper tax thereunder. The object of the Tax Code is to
impose taxes for the needs of the Government, not to
enhance tax avoidance to its prejudice.
p. BPI v. CIR, G.R. No. 139736, 17
October 2005
BANK OF THE PHILIPPINE ISLANDS V.
COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 139736 (OCTOBER 17, 2005)
CHICO-NAZARIO, J
FACTS: On two separate occasions, particularly on 06
June 1985 and 14 June 1985, BPI sold United States
(US) $500,000.00 to the Central Bank of the Philippines
(Central Bank), for the total sales amount of
US$1,000,000.00.
On 10 October 1989, the Bureau of Internal Revenue
(BIR) issued Assessment No. FAS-5-85-89-
002054, finding petitioner BPI liable for deficiency DST
on its afore-mentioned sales of foreign bills of exchange
to the Central Bank
Petitioner BPI received the Assessment, together with
the attached Assessment Notice,   on 20 October
1989.Petitioner BPI, through its counsel, protested the
Assessment in a letter dated 16 November 1989, and
filed with the BIR on 17 November 1989.
Petitioner BPI did not receive any immediate reply to its
protest letter. However, on 15 October 1992, the BIR
issued a Warrant of Distraint and/or Levy against
petitioner BPI for the assessed deficiency DST for
taxable year 1985, in the amount of P27,720.00
(excluding the compromise penalty of P300.00). It
1992.
Then again, petitioner BPI did not hear from the BIR
until 11 September 1997, when its counsel received a
letter, dated 13 August 1997, signed by then BIR
Commissioner Liwayway Vinzons-Chato, denying its'
'request for reconsideration.
BPI in its reply admitted that while industry practice or
market convention has the force of law between the
members of a particular industry, it is not binding with
the BIR since it is not a party thereto. The same should,
therefore, not be allowed to prejudice the Bureau of its
lawful task of collecting revenues necessary to defray
the expenses of the government. (Art. 11 in relation to
Art. 1306 of the New Civil Code.)
Upon receipt of the above-cited letter from the BIR,
petitioner BPI proceeded to file a Petition for Review
with the CTA on 10 October 1997.

BPI raised in its Petition for Review before the CTA, the
defense of prescription of the right of respondent BIR
Commissioner to enforce collection of the assessed
amount. It alleged that respondent BIR Commissioner
only had three years to collect on Assessment No. FAS-
5-85-89-002054, but she waited for seven years and nine
months to deny the protest.  in his favor.
In her Answer and subsequent Memorandum,
respondent BIR Commissioner merely reiterated her
position, as stated in her letter to petitioner BPI, dated 13
August 1997, which denied the latter's protest; and
remained silent as to the expiration of the prescriptive
period for collection of the assessed deficiency DST.
ISSUE: Whether the right of respondent BIR
Commissioner to collect from petitioner BPI the alleged
deficiency DST for taxable year 1985 had prescribed.  amended, and the existence of the circumstances
RULING: Yes.  which include a request for reinvestigation
The efforts of respondent Commissioner to collect on
Assessment No. FAS-5-85-89 002054 were already
barred by prescription. The period for the BIR to assess
and collect an internal revenue tax is limited to three
years by Section 203 of the Tax Code of 1977, as
amended.  deficiency DST in Assessment No. FAS-5-85-
In the present Petition, there is no controversy
on the timeliness of the issuance of the
Assessment, only on the prescription of the
period to collect the deficiency DST following
its Assessment. Counting the three-year
prescriptive period, for a total of 1,095
days, from 20 October 1989, then the BIR only
had until 19 October 1992 within which to
collect the assessed deficiency DST. Although
the Warrant was issued on 15 October 1992,
previous to the expiration of the period for
collection on 19 October 1992, the same was
served on petitioner BPI only on 23 October
1992.
If the service of the Warrant of Distraint and/or
Levy on petitioner BPI on 23 October 1992 was
already beyond the prescriptive period for
collection of the deficiency DST, which had
expired on 19 October 1992, then what more the
letter of respondent BIR Commissioner, dated
13 August 1997 and received by the counsel of
the petitioner BPI only on 11 September 1997,
denying the protest of petitioner BPI and
requesting payment of the deficiency DST?
The Court also ruled that there is no valid
ground for the suspension of the running of the
prescriptive period for collection of the assessed
DST under the Tax Code of 1977, as amended.
The statute of limitations on assessment and
collection of taxes is for the protection of the
taxpayer and, thus, shall be construed liberally
The indefinite extension of the period for
assessment is unreasonable because it deprives
the said taxpayer of the assurance that he will no
longer be subjected to further investigation for
taxes after the expiration of a reasonable period
of time. The statute of limitations on collection
may only be interrupted or suspended by a valid
waiver executed in accordance with paragraph
(d) of Section 223 of the Tax Code of 1977, as
enumerated in Section 224 of the same Code,
granted by the BIR Commissioner.
Applying the given rules to the present Petition, this
Court finds that:
(a) The statute of limitations for collection of the
89-002054, issued against petitioner BPI, had
already expired; and
(b) None of the conditions and requirements for
exception from the statute of limitations on
collection exists herein: Petitioner BPI did not
execute any waiver of the prescriptive period on
collection as mandated by paragraph (c) of
Section 223 of the Tax Code of 1977, as
amended; the protest filed by petitioner BPI was
a request for reconsideration, not a request for
reinvestigation that was granted by respondent
BIR Commissioner which could have suspended
the prescriptive period for collection under
Section 224 of the Tax Code of 1977, as
amended; and, petitioner BPI, other than filing a
request for reconsideration of Assessment No.
FAS-5-85-89-002054, did not make repeated
requests or performed positive acts that could
have persuaded the respondent BIR
Commissioner to delay collection, and that
would have prevented or estopped petitioner BPI
from setting up the defense of prescription
against collection of the tax assessed, as required
in the Suyoc case.
q. Aznar vs. CTA, GR No. L-20569,
23 August 1974

JOSE B. AZNAR, IN HIS CAPACITY AS
ADMINISTRATOR OF THE ESTATE OF THE
DECEASED, MATIAS H. AZNAR V. COURT OF
TAX APPEALS AND COLLECTOR OF
INTERNAL REVENUE
GR NO. L-20569, 23 AUGUST 1974
ESGUERRA, J.
FACTS: Petitioner, as administrator of the estate of the
deceased, Matias H. Aznar, seeks a review and
nullification of the decision of the Court of Tax Appeals
ordering the petitioner to pay the government the sum of
P227,691.77 representing deficiency income taxes for
the years 1946 to 1951. An investigation by the
Commissioner of Internal Revenue (CIR) ascertained the
assets and liabilities of the taxpayer and it was
discovered that from 1946 to 1951, his net worth had
increased every year, which increases in net worth was
very much more than the income reported during said
years.
The findings clearly indicated that the taxpayer did not
declare correctly the income reported in his income tax
returns for the aforesaid years. 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.
ISSUE: Whether or not the action filed Aznar has not
prescribed.
RULING: The Sec. 332 of the NIRC does not apply
because the taxpayer did not file false and fraudulent
returns with intent to evade tax, while respondent
Commissioner of Internal Revenue insists contrariwise,
with respondent Court of Tax Appeals concluding that
the very "substantial under declarations of income for six
consecutive years eloquently demonstrate the falsity or
fraudulence of the income tax returns with an intent to
evade the payment of tax."
The ordinary period of prescription of 5 years within
which to assess tax liabilities under Sec. 331 of the
NIRC should be applicable to normal circumstances, but
whenever the government is placed at a disadvantage so
as to prevent its lawful agents from proper assessment of
tax liabilities due to false returns, fraudulent return
intended to evade payment of tax or failure to file
returns, the period of ten years provided for in Sec. 332
(a) NIRC, from the time of the discovery of the falsity,
fraud or omission even seems to be inadequate and
should be the one enforced. 
There being undoubtedly false tax returns in this case,
We affirm the conclusion of the respondent Court of Tax
Appeals that Sec. 332 (a) of the NIRC should apply and
that the period of ten years within which to assess
petitioner's tax liability had not expired at the time said
assessment was made.
r. CIR vs. Philippine Daily Inquirer,
GR No. 213943, 22 March 2017
COMMISSIONER OF INTERNAL REVENUE V.
PHILIPPINE DAILY INQUIRER
G.R. NO. 213943 (MARCH 22, 2017)
CARPIO, J
FACTS: BIR alleged that there was an underdeclaration
of domestic purchases in PDI's declaration on its VAT
Returns for taxable year 2004. In response, PDI
submitted reconciliation reports and executed a Waiver
of the Statute of Limitation (First Waiver) consenting to
the assessment and/or collection of taxes for the year
2004. BIR invited PDI to an informal conference to
present any objections that it might have on the BIR's
findings. On 5 June 2007, PDI executed a Waiver of the
Statute of Limitation (Second Waiver). 
PDI received the PAN on 4 December 2007. On 12
December 2007, PDI sought reconsideration of the PAN
and expressed its willingness to execute another Waiver
(Third Waiver), which it did on the same date, thus
extending BIR's right to assess and/or collect. PDI
received a Formal Letter of Demand dated 11 March
2008
PDI filed its protest, alleging that the period within
which the BIR should act on its protest had already
lapsed. The CTA First Division ruled that the NIRC
authorizes the extension of the original three-year
prescriptive period by the execution of a valid waiver
upon the agreement in writing between the taxpayer and
the BIR, provided: (1) the agreement was made before
the expiration of the three-year period and (2) the
guidelines in the proper execution of the waiver are
strictly followed.  Assessment notice stating that it was liable for P95, 681,
The CTA Division found that while the First and Second
Waivers were executed in three copies, the BIR failed to
provide the office accepting the waivers with their
respective third copies. The CTA First Division found
that the third copies were still attached to the docket of
the case. The CTA First Division also found that the BIR
failed to prove that the Third Waiver was executed in
three copies. Further, the revenue official who accepted
the Third Waiver was not authorized to do so. Thus,
period has prescribed.
The CTA en banc affirmed the Division in toto.  RULING: No.
ISSUE: Whether or not the prescriptive period to assess
deficiency tax has already prescribed.
RULING: The First Waiver was not properly executed
and thus, could not have extended the three-year
prescriptive period to assess and collect taxes for the
year 2004. To make matters worse, the CIR committed
the same error in the execution of the Second Waiver.
Even if we consider that the First Waiver was validly
executed, the Second Waiver failed to extend the
prescriptive period because its execution was contrary to
the procedure set forth. Granting further that the First
and Second Waivers were validly executed, the Third
Waiver executed on still failed to extend the three-year
prescriptive period because it was not executed in three
copies. In short, the records of the case showed that the
CIR's three-year prescriptive period to assess deficiency
tax had already prescribed due to the defects of all the
Waivers. Clearly, the defects in the Waivers resulted to
the non-extension of the period to assess or collect taxes,
and made the assessments issued by the BIR beyond the
three-year prescriptive period void.
s. CIR vs. Asalus Corporation, GR
No. 221590, February 22, 2017
COMMISSIONER OF INTERNAL REVENUE V.
ASALUS CORPORATION
GR NO. 221590 (FEBRUARY 22, 2017)
MENDOZA J.
FACTS: On December 6, 2010, respondent received a
Notice of Informal Conference from RDO 47 of BIR in
connection with the investigation conducted by Revenue
Officer Bañares on the VAT transactions of Asalus for
the taxable year 2007. Asalus filed a letter-reply
questioning the basis of the computation. On January 10,
2011, CIR issued PAN finding Asalus liable for
deficiency VAT for 20p7 amounting to P413, 378,
058.11. Asalus filed a protest, which CIT subsequently
denied. On August 26, 201, Asalus received the Formal
98i.64. Asalus filed a protest, then on September 6,
2011, he filed a supplemental protest stating that the
deficiency VAT assessment had prescribed pursuant to
Section 203 of the NIRC. On October 16, 2012, Asalus
received FDDA showing VAT deficiency amounting to
P106, 761, 025.17 and P25, 000.00 as compromise
penalty
ISSUE: Whether or not petitioner’s right to asses
respondent had already prescribed.
 
Generally, internal revenue taxes shall be assessed
within 3 years after the last day prescribed by law for
filing the return, or where the return is filed beyond the
period from the day the return was actually filed, and
Section 222 of the NIRC provides the exception, among
which is that in case of a false or fraudulent return with
intent to evade tax, or failure to file a return, assessment
may be made within 10 years from discovery. When
there is a showing that a taxpayer has substantially
undeclared its sales, receipts, or income, there is
presumption that it has filed a false return, and CIR need
not present evidence immediately. And in the case at
bar, audit investigation revealed that there were
undeclared VATable sales more than 30% of that
declared in Asalus’ returns.
t. CIR v. Ayala Securities Corp.,
101 SCRA 231
COMMISSIONER OF INTERNAL REVENUE V.
AYALA SECURITIES CORPORATION AND THE
HONORABLE COURT OF TAX APPEALS
G.R. NO. L-29485 (MARCH 31, 1976)
ESGUERRA, J.
FACTS: On November 29, 1955, Ayala Securities
Corporation, a domestic corporation organized and
existing under the laws of the Philippines, filed its
income tax returns with the office of the petitioner for its
fiscal year which ended on September 30, 1955 showing
a surplus of P2,758,442.37. 
On February 21, 1961, petitioner advised the respondent
corporation of the assessment of P758.687.04 on its
accumulated surplus reflected on its income tax return
for the fiscal year which ended September 30, 1955. On
April 19, 1961, the respondent corporation protested
against the assessment on its retained and accumulated
surplus pertaining to the taxable year 1955 and sought
reconsideration thereof for the reason that the said
assessment was issued beyond the five-year prescriptive
period.
On May 30, 1961, petitioner wrote respondent
corporation's auditing and accounting firm with the
"advise that your request for reconsideration will be the
subject matter of further reinvestigation and a thorough
analysis of the issues involved conditioned, however,
upon the execution of your client of the enclosed form
for waiver of the defense of prescription". However,
respondent corporation did not execute the requested
waiver of the statute of limitations, considering its claim
that the assessment in question had already prescribed.
Respondent corporation in its Petition for Review
alleges that the assessment made by petitioner
Commissioner of Internal Revenue is illegal and invalid
considering that the assessment in question, having been
issued only on February 21, 1961, and received by the
respondent corporation on March 22, 1961, the same
was issued beyond the five-year period from the date of
the filing of respondent corporations income tax return
November 29, 1955, and, therefore, petitioner's right to
make the assessment has already prescribed, pursuant to
the provision of Section 331 of the National Internal
Revenue Code.
Petitioner in his answer alleged that the assessment made
by his office on the accumulated surplus of the
corporation as reflected on its income tax return for the
taxable year 1955 has not as yet prescribed and, further,
that the respondent corporation's accumulation of surplus
for the taxable year 1955 was improper as the retention
of such surplus was availed of by the corporation to
prevent the imposition of the income tax upon the
individual shareholders or members of the said
corporation.  longer binding on the Ayala Securities Corporation.
ISSUE: Whether or not Section 331 of the National
Internal Revenue Code is applicable, which provides for
a five-year period of prescription of assessment from the
filing of the return.
RULING: On the issue of whether Sec. 331 or See.
332(a) of the National Internal Revenue Code should
apply to this case, 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 nor in the letter-decision of
February 18, 1963, 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. 
The applicable provision of law in this case is Section
331 of the National Internal Revenue Code, to wit:  corporation duly organized and existing under Philippine
SEC. 331. Period of limitation upon
assessment and collection. — Except as
provided in the succeeding section,
internal revenue taxes shall be assessed
within five years after the return was
filed, and no proceeding in court without
assessment for the collection of such
taxes shall be begun after the expiration
of such period. For the 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: Provided, that this limitation shall
not apply to cases already investigated
prior to the approval of this Code.
Under Section 46(d) of the National Internal Revenue
Code, the Ayala Securities Corporation designated
September 30, 1955, as the last day of the closing of its
fiscal year, and under Section 46(b) the income tax
returns for the said corporation shall be filed on or
before the fifteenth (15th) day of the fourth (4th) month
following the close of its fiscal year. The Ayala
Securities Corporation could, therefore, file its income
tax returns on or before January 15, 1956. The
assessment by the Commissioner of Internal Revenue
shall be made within five (5) years from January 15,
1956, or not later than January 15, 1961, in accordance
with Section 331 of the National Internal Revenue Code
herein above-quoted. As the assessment issued on
February 21, 1961, which was received by the Ayala
Securities Corporation on March 22, 1961, was made
beyond the five-year period prescribed under Section
331 of said Code, the same was made after the
prescriptive period had expired and, therefore, was no
 
For this reason, we are of the view that after reaching the
conclusion that the right of the Commissioner of Internal
Revenue to assess the 25% surtax had already prescribed
under Section 331 of the National Internal Revenue
Code.
u. CIR v. La Flor Dela Isabel, Inc.,
GR No. 211289, January 1, 2019
COMMISSIONER OF INTERNAL REVENUE V.
LA FLOR DELA ISABEL, INC.
GR NO. 211289 (JANUARY 14, 2019)
REYES, J. JR., J.
FACTS: La Flor dela Isabela, Inc. is a domestic
Law. It filed monthly returns for the Expanded
Witholding Tax and Withholding Tax on Compensation
for Calendar Year 2005. Once on 2008, and twice on
2009, it executed Waivers of the Statute of Limitations.
Later on, it received four Formal Letters of Demand and
Final Assessment Notices. Subsequently, it filed its
Letter of Protest contesting the assessment notices.
Withholding Tax, the amount withheld is already the
entire tax to be paid for the particular source of income.
Thus, it can readily be seen that the payee is the
taxpayer, the person on whom the tax is imposed, while
the payor, a separate entity, acts as the government’s
agent for the collection of the tax in order to ensure its
payment. 

The CTA, later affirmed by the CA, subsequently ruled
in favour of La Flor cancelling the deficiency tax
assessments against it. It ruled that based on the dates
when La Flor filed its returns for EWT and WTC, the
CIR had until February 15, 2008 to March 1, 2009 to
issue an assessment pursuant to the three-year
prescriptive period under Section 203 of the NIRC. The
Waivers entered into by the CIR and La Flor did not
effectively extend the prescriptive period for the
issuance of the tax assessments.
ISSUES:
Thus, withholding tax assessments such as EWT and
WTC clearly contemplate deficiency internal revenue
taxes. Their aim is to collect unpaid income taxes and
not merely to impose a penalty on the withholding agent
for its failure to comply with its statutory duty. 
As to the second issue, in Commissioner of Internal
Revenue v. Systems Technology Institute, Inc., the
Court ruled that waivers extending the prescriptive
period of tax assessments must be compliant with RMO
No. 20-90 and must indicate the nature and amount of
the tax due.

1. Whether the prescriptive period under section

203 of the NIRC applies to EWT and WTC
assessments. 
2. Whether La Flor’s EWT and WTC assessments
for 2005 were barred by prescription

RULING: Yes.

The prescriptive period under Section 203 of the NIRC

applies to EWT and WTC assessments. Also, La Flor’s
EWT and WTC assessments for 2005 were barred by
prescription. 

Withholding taxes are internal revenue taxes covered by

Section 203 of the NIRC: “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 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.”

Under the existing withholding tax system, the

withholding agent retains a portion of the amount
received by the income earner. In turn, the said amount
is credited to the total income tax payable in transactions
covered by the EWT. On the other hand, in cases of
income payments subject to WTC and Final