TAX LAW 1_DISCUSSION GUIDE 2_TAX ADMINISTRATION AND REMEDIES

A. Statute of Limitations
1. Assessment of Internal Revenue Taxes
2. Period within which the government could collect (Sections 203, 222, NIRC)

1. Republic v. Hizon, GR No. 130430, 13 December 1999

Facts:
In 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax
assessment of P1,113,359.68 covering the fiscal year 1981-1982.
Respondent not having contested the assessment, petitioner, served warrants of
distraint and levy to collect the tax deficiency.
However, it did not proceed to dispose of the attached properties.
More than three years later, respondent wrote the BIR requesting a reconsideration of
her tax deficiency assessment. The BIR denied the request.
Thus, it filed a case with the RTC San Fernando, Pampanga to collect the tax
deficiency. The complaint was signed by Norberto Salud, Chief of the Legal Division,
BIR Region 4, and verified by Amancio Saga, the Bureau's Regional Director in
Pampanga.
Respondent moved to dismiss the case on two grounds:
o (1) that the complaint was not filed upon authority of the BIR Commissioner as
required by section 221 [2] of the NIRC, and
o (2) that the action had already prescribed.
Over... petitioner's objection, the trial court granted the motion and dismissed the
complaint.

Issues: WON the institution of the civil case for collection of taxes was without the approval of
the commissioner in violation of section 221 of the national internal revenue code.

Ruling:

Principles: the trial court stated:

There is no question that the NIRC explicitly provides that in the matter of filing cases
in Court, civil or criminal, for the collection of taxes, etc., the approval of the
commissioner must first be secured. [A]n action will not prosper in the absence of the
commissioner's approval. Thus, in the instant case, the absence of the approval of
the commissioner in the institution of the action is fatal to the cause of the plaintiff.
The trial court arrived at this conclusion because the complaint filed by the BIR was not
signed by then Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
o Form and mode of proceeding in actions arising under this Code. &mdash Civil
and criminal actions and proceedings instituted in behalf of the Government
under the authority of this Code or other law enforced by the BIR shall be
brought in the name of the Government of the Philippines and shall be
conducted by the provincial or city fiscal, or the Solicitor General, or by the legal
officers of the Bureau of Internal Revenue deputized by the Secretary of Justice,
but no civil and criminal actions for the recovery of taxes or the enforcement of
 any fine, penalty or forfeiture under this Code shall be begun without the
approval of the Commissioner.

To implement this provision Revenue Administrative Order No. 5-83 of the BIR
provides in pertinent portions:
The following civil and criminal cases are to be handled by Special Attorneys and
Special Counsels assigned in the Legal Branches of Revenue Regions:
II. Civil Cases
o 1. Complaints for collection on cases falling within the jurisdiction of the Region

In all the abovementioned cases, the Regional Director is authorized to sign all
pleadings filed in connection therewith which, otherwise, requires the signature of the
Commissioner.
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in this case
was signed by the BIR's Chief of Legal Division for Region 4 and verified by the
Regional Director, there was, therefore, compliance with the law.
However, the lower court refused to recognize RAO No. 10-95 and, by
implication, RAO No. 5-83. It held:
o [M]emorand[a], circulars and orders emanating from bureaus and agencies
whether in the purely public or quasi-public corporations are mere guidelines for
the internal functioning of the said offices. They are not laws which courts can
take judicial notice of.

As such, they have no binding effect upon the courts for such memoranda and
circulars are not the official acts of the legislative, executive and judicial departments of
the Philippines.
THIS IS ERRONEOUS. The rule is that as long as administrative issuances relate
solely to carrying into effect the provisions of the law, they are valid and have the force
of law.[6] The governing statutory provision in this case is §4(d) of the NIRC which
provides:
o Specific provisions to be contained in regulations. - The regulations of the
BIR shall, among other things, contain provisions specifying, prescribing, or
defining:
o (d) The conditions to be observed by revenue officers, provincial fiscals and
other officials respecting the institution and conduct of legal actions and
proceedings.

RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the
present 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:
o (a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
o (b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
 o (c) The power to compromise or abate under §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
(P500,000.00) 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
o (d) The power to assign or reassign internal revenue officers to establishments
where articles subject to excise tax are produced or kept.

None of the exceptions relates to the Commissioner's power to approve the filing of tax
collection cases.

2. CIR v. Javier Jr., GR No. 78953, 31 July 1991 (199 SCRA 825)
Facts:
petition for review before the Court of the portion of the Decision of the (CTA) in C.T.A.
Case entitled, denied the Commissioner's Motion for Reconsiderationand Motion for
New Trial on the deletion of the 50% surcharge assessment or imposition.
Victoria L. Javier, the wife of the petitioner... received from the Prudential Bank and
Trust Company in Pasay City the amount of US$999,973.70 remitted... by her sister,
Mrs. Dolores Ventosa, through some banks in the United States, among which is
Mellon Bank, N.A.
Mellon Bank, N.A. filed a complaint with the Court of First Instance of Rizal... against
the petitioner (private respondent herein), his wife... and other defendants, claiming
that its remittance of US$1,000,000.00 was a clerical error and should have been
US$1,000.00 only,... the excess amount of US$999,000.00 be returned... the City
Fiscal of Pasay City filed an Information with the then Circuit Criminal Court (docketed
as CCC-VII-2369-P.C.) charging the petitioner (private respondent herein) and his...
wife with the crime of estafa... converted to their own personal use and benefit the
amount of US$999,000.00 which they received under an implied trust for the benefit of
Mellon
Bank and as a result of the mistake in the remittance by the latter.
petitioner (private respondent herein) filed his Income Tax Return for the taxable year
1977... stating in the footnote of the return that
"Taxpayer was recipient of some money received from abroad which he presumed to
be a gift but turned out to be an error and is now subject of litigation."... acting
Commissioner of Internal Revenue... demanding that petitioner (private respondent
herein) pay on or before December 15, 1980 the amount of P1,615.96 and
P9,287,297.51 as deficiency assessments for the years 1976 and 1977 respectively.
wrote the Bureau of Internal Revenue that he was paying the deficiency income
assessment for the year 1976 but denying that he had any undeclared income for the
year 1977 and requested... that the assessment for 1977 be made to await final court
decision on the case filed against him
 CIR Romulo Villa a letter dated October 8, 1981 stating in reply to his December
15,1980 letter-protest that "the... amount of Mellon Bank's erroneous remittance which
you were able to dispose, is definitely taxable.
also imposed a 50% fraud penalty against Javier.
CTA, after the proper proceedings, rendered the challenged decision.
This additional requirement, to our mind, is much less called for because petitioner
(private respondent), as stated earlier, reflected in his 1977 return as footnote
From this, it can hardly be said that there was actual and intentional fraud, consisting
of deception willfully and deliberately done or resorted to by petitioner.

Issues: WON a taxpayer who merely states as a footnote in his income tax return that a sum
of money that he erroneously received and already spent is the subject of a pending litigation
and there did not declare it as income is liable to pay the 50% penalty for filing a fraudulent
return.

Ruling:
Thus, even without the footnote, the failure to declare the "mistake remittance" is not
fraudulent.
when the private respondent filed his income tax return on March 15, 1978 he was
being sued by the Mellon Bank for the return of the money, and was being prosecuted
by the Government for estafa committed allegedly by his failure to return the... money
and by converting it to his personal benefit.
The basic tax amounted to P4,899,377.00 (See p. 6 of the Petition) and could not have
been paid without using part of the mistaken remittance.
not unreasonable for... the private respondent to simply state in his income tax return
that the amount received was still under litigation.
If he had paid the tax, would that not constitute estafa for using the funds for his own
personal... benefit?  and would the Government refund it to him if the courts ordered
him to refund the money to the Mellon Bank?
Section 248 of the 1988 National Internal Revenue Code), a taxpayer who files a false
return is liable to pay the fraud penalty of 50% of the tax due from him or of the
deficiency tax in case payment has been made on... the basis of the return filed before
the discovery of the falsity or fraud.
there is no fraud in the filing of the return and agree fully with the Court of Tax Appeals'
interpretation of Javier's notation on his income tax return... it was an "error or mistake
of fact or law" not constituting fraud, that such notation... was practically an invitation
for investigation and that Javier had literally "laid his cards on the table.
Aznar v. Court of Tax Appeals,
The fraud contemplated by law is actual and not constructive.  It must be intentional
fraud, consisting of deception willfully and deliberately done or resorted to in order to
induce another to give up some legal... right.  Negligence, whether slight or gross, is
not equivalent to the fraud with intent to evade the tax contemplated by law.
Fraud is never imputed and the courts never sustain findings of fraud upon
circumstances which, at most, create only suspicion and the mere understatement of a
tax is not itself proof of fraud for... the purpose of tax evasion
A "fraudulent return" is always an attempt to evade a tax, but merely "false return" may
not be.
there was no actual and intentional fraud through willful and deliberate misleading of
the government agency concerned, the Bureau of Internal Revenue,... It must amount
 to intentional wrong - doing with the sole object of avoiding the... tax.  It necessarily
follows that a mere mistake cannot be considered as fraudulent intent,... government
was... not induced to give up some legal right and place itself at a disadvantage so as
to prevent its lawful agents from proper assessment of tax liabilities because Javier did
not conceal anything.
It must amount to intentional wrong - doing with the sole object of avoiding the... tax.   It
necessarily follows that a mere mistake cannot be considered as fraudulent intent,...
the imposition of the fraud penalty in this case is not justified by the extant... facts. 
Javier may be guilty of swindling charges... but the records lack a clear showing of
fraud committed because he did not conceal the fact that he had received an amount
of money although it... was a "subject of Litigation.
the 50% surcharge imposed as fraud penalty by the petitioner against the private
respondent in the deficiency assessment should be deleted.
Principles:
Fraud is never imputed and the courts never sustain findings of fraud upon
circumstances which, at most, create only suspicion and the mere understatement of a
tax is not itself proof of fraud for... the purpose of tax evasion.
The fraud contemplated by law is actual and not constructive.  It must be intentional
fraud, consisting of deception willfully and deliberately done or resorted to in order to
induce another to give up some legal... right.  Negligence, whether slight or gross, is
not equivalent to the fraud with intent to evade the tax contemplated by law.  It must
amount to intentional wrong - doing with the sole object of avoiding the... tax.   It
necessarily follows that a mere mistake cannot be considered as fraudulent intent,

3. PNOC v. CA, GR No. 109976, 26 April 2005

4. BPI v. CIR, GR No. 174942, 7 March 2008

3. Period within which the action may be filed
i. Civil Cases (Sections 203, 222, NIRC)
ii. Criminal Cases (Title X, Sec 281, NIRC)
4. Cases:

5. Republic v. Hizon, GR No. 130430, 13 December 1999 (re approval of filing of civil and
criminal action)
Facts:
In 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax
assessment of P1,113,359.68 covering the fiscal year 1981-1982.
Respondent not having contested the assessment, petitioner, served warrants of
distraint and levy to collect the tax deficiency.
However, it did not proceed to dispose of the attached properties.
More than three years later, respondent wrote the BIR requesting a reconsideration of
her tax deficiency assessment. The BIR denied the request.
Thus, it filed a case with the RTC San Fernando, Pampanga to collect the tax
deficiency. The complaint was signed by Norberto Salud, Chief of the Legal Division,
BIR Region 4, and verified by Amancio Saga, the Bureau's Regional Director in
Pampanga.
Respondent moved to dismiss the case on two grounds:
 o (1) that the complaint was not filed upon authority of the BIR Commissioner as
required by section 221 [2] of the NIRC, and
o (2) that the action had already prescribed.
Over... petitioner's objection, the trial court granted the motion and dismissed the
complaint.

Issues: WON the institution of the civil case for collection of taxes was without the approval of
the commissioner in violation of section 221 of the national internal revenue code.

Ruling:

Principles: the trial court stated:

There is no question that the NIRC explicitly provides that in the matter of filing cases
in Court, civil or criminal, for the collection of taxes, etc., the approval of the
commissioner must first be secured. [A]n action will not prosper in the absence of the
commissioner's approval. Thus, in the instant case, the absence of the approval of
the commissioner in the institution of the action is fatal to the cause of the plaintiff.
The trial court arrived at this conclusion because the complaint filed by the BIR was not
signed by then Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
o Form and mode of proceeding in actions arising under this Code. &mdash Civil
and criminal actions and proceedings instituted in behalf of the Government
under the authority of this Code or other law enforced by the BIR shall be
brought in the name of the Government of the Philippines and shall be
conducted by the provincial or city fiscal, or the Solicitor General, or by the legal
officers of the Bureau of Internal Revenue deputized by the Secretary of Justice,
but no civil and criminal actions for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall be begun without the
approval of the Commissioner.

To implement this provision Revenue Administrative Order No. 5-83 of the BIR
provides in pertinent portions:
The following civil and criminal cases are to be handled by Special Attorneys and
Special Counsels assigned in the Legal Branches of Revenue Regions:
II. Civil Cases
o 1. Complaints for collection on cases falling within the jurisdiction of the Region

In all the abovementioned cases, the Regional Director is authorized to sign all
pleadings filed in connection therewith which, otherwise, requires the signature of the
Commissioner.
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in this case
was signed by the BIR's Chief of Legal Division for Region 4 and verified by the
Regional Director, there was, therefore, compliance with the law.
However, the lower court refused to recognize RAO No. 10-95 and, by
implication, RAO No. 5-83. It held:
 o [M]emorand[a], circulars and orders emanating from bureaus and agencies
whether in the purely public or quasi-public corporations are mere guidelines for
the internal functioning of the said offices. They are not laws which courts can
take judicial notice of.

As such, they have no binding effect upon the courts for such memoranda and
circulars are not the official acts of the legislative, executive and judicial departments of
the Philippines.
THIS IS ERRONEOUS. The rule is that as long as administrative issuances relate
solely to carrying into effect the provisions of the law, they are valid and have the force
of law.[6] The governing statutory provision in this case is §4(d) of the NIRC which
provides:
o Specific provisions to be contained in regulations. - The regulations of the
BIR shall, among other things, contain provisions specifying, prescribing, or
defining:
o (d) The conditions to be observed by revenue officers, provincial fiscals and
other officials respecting the institution and conduct of legal actions and
proceedings.

RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the
present 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:
o (a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
o (b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
o (c) The power to compromise or abate under §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
(P500,000.00) 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
o (d) The power to assign or reassign internal revenue officers to establishments
where articles subject to excise tax are produced or kept.

None of the exceptions relates to the Commissioner's power to approve the filing of tax
collection cases.

6. CIR v. La Suerte Cigar, G.R. No. 144942, 4 July 2002 (Re participation of the Office of the
Solicitor General)
7. PNOC v. CA, G.R. No. 109976, Apr 26, 2005

8. Lim v. CA, GR Nos. 48134-37, 18 October 1990, 190 SCRA 616 (re prescription of criminal
actions, Section 281, NIRC)

9. Marcos II v. CA, GR No. 120880, 5 June 1997 (re-enforcement of tax liability during
pendency of probate proceedings)

B. Remedies of the Taxpayer

I. Before Payment
1. Protest (Section 228, NIRC)
a. Requirements of a valid protest—Rev. Regs. 12-85
b. Cases

10. CIR v. Wyeth Suaco Laboratories, GR No. 76281, 30 Sept 1991

CIR v. Atlas Consolidated Mining, GR Nos. 31230-32, 14 Feb 2000

11. Lascona v. CIR, CTA Case 5777, 4 January 2000 vis-à-vis Section 7 (2), RA 9282 and
the Revised Rules of Procedure of the CTA, AM No. 05-11-07-CTA

12. CIR v. Union Shipping, GR No. 66160, 21 May 1990, 185 SCRA 548 and CIR v.
IsabelaCultural Corporation, GR No. 135210, 11 July 2001

13. Protector’s Servicesv. CA, GR No. 118176, 12 April 2000

2. Compromise
II. After Payment
1. Refund (Section 229, NIRC)
a. Must be strictly construed against the taxpayer—

13. Citibank, NA v. Court of Appeals, GR No. 107434, 10 October 1997, 280 SCRA 459;

14. FEBTC v. CIR, GR No. 138919, 02 May 2006

b. Grounds for filing a claim for refund (See Section 229,

15. Engtek Phils v. CIR, CTA Case No. 6644, 26 January 2005)

c. Period within which to file a claim for refund

i. General rule is two years from the date of payment

16. ACCRA Investments Corporation v. Court of Appeals, GR No. 96322, 20 December 199

17. CIR v. TMX Sales, 15 January 1992

18. CIR v. PhilAm Life, 29 May 1995

19. CIR v. CA and BPI, GR No. 117254, 21 January 1999

ii. exception to the 2-year period:

20. CIR v. PNB, GR No. , 25 October 2005

21. CIR v. Primetown Property, GR No. 162155, 28 Aug 2007.

FACTS:
Gilbert Yap, Vice Chair of Primetown applied on March 11, 1999 for a refund or credit
of income tax which Primetown paid in 1997. He claimed that they are entitled for a
refund because they suffered losses that year due to the increase of cost of labor and
materials, etc. However, despite the losses, they still paid their quarterly income tax
and remitted creditable withholding tax from real estate sales to BIR. Hence, they
were claiming for a refund. On May 13, 1999, revenue officer Elizabeth Santos
required Primetown to submit additional documents to which Primetown complied with.
However, its claim was not acted upon which prompted it to file a petition for review in
CTA on April 14, 2000. CTA dismissed the petition as it was filed beyonf the 2-year
prescriptive period for filing a judicial claim for tax refund according to Sec 229 of
NIRC. According to CTA, the two-year period is equivalent to 730 days pursuant to Art
13 of NCC. Since Primetown filed its final adjustment return on April 14, 1998 and that
year 2000 was a leap year, the petition was filed 731 days after Primetown filed its final
adjusted return. Hence, beyond the reglementary period. Primetown appealed to CA.
CA reversed the decision of CTA. Hence, this appeal.

ISSUES: (1) How should the two-year prescriptive period be computed? (2) Whether or not
the claim for tax refund was filed within the two-year period?

RULING:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter—the computation of
legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a
regular year or a leap year. Under the Administrative Code of 1987, however, a year
is composed of 12 calendar months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of computing legal
periods under the Civil Code and the Administrative Code of 1987. For this reason, we
hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the
more recent law, governs the computation of legal periods. Lex posteriori derogat
priori.
We therefore hold that respondent’s petition (filed on April 14, 2000) was filed on the
last day of the 24th calendar month from the day respondent filed its final adjusted
return. Hence, it was filed within the reglementary period.
 ii. In case of amended returns
iii. In case of taxpayers contemplating dissolution

22. BPI v. CIR, 28 August 2001; See also: Sections 52(c) and 56(a)
d. Who has the personality to file a claim for refund?

23. CIR v. Procter and Gamble, GR No. 66838, 16 Dec 1991; CIR v. CA, 20 January 1999

Doctrine: Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied to
dividend remittances to non-resident corporate stockholders of a Philippine corporation. This
rate goes down to 15% ONLY IF he country of domicile of the foreign stockholder corporation
“shall allow” such foreign corporation a tax credit for “taxes deemed paid in the Philippines,”
applicable against the tax payable to the domiciliary country by the foreign stockholder
corporation.

FACTS:
Procter and Gamble Philippines declared dividends payable to its parent
company and sole stockholder, P&G USA. Such dividends amounted to Php
24.1M. P&G Phil paid a 35% dividend withholding tax to the BIR which
amounted to Php 8.3M It subsequently filed a claim with the Commissioner of
Internal Revenue for a refund or tax credit, claiming that pursuant to Section
24(b)(1) of the National Internal Revenue Code, as amended by Presidential Decree
No. 369, the applicable rate of withholding tax on the dividends remitted was only
15%.

ISSUE: Whether or not P&G Philippines is entitled to the refund or tax credit.
RULING: YES.
P&G Philippines is entitled. Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax
rate will be applied to dividend remittances to non-resident corporate stockholders of
a Philippine corporation. This rate goes down to 15% ONLY IF he country of
domicile of the foreign stockholder corporation “shall allow” s uch foreign corporation a
tax credit for “taxes deemed paid in the Philippines,” applicable against the tax payable
to the domiciliary country by the foreign stockholder corporation. However, such tax
credit for “taxes deemed paid in the Philippines” MUST, as a minimum, reach an
amount equivalent to 20 percentage points which represents the difference between
the regular 35% dividend tax rate and the reduced 15% tax rate. Thus, the test is if
USA “shall allow” P&G USA a tax credit for ”taxes deemed paid in the Philippines”
applicable against the US taxes of P&G US A, and such tax credit must reach at least
20 percentage points. Requirements were met.

24. Silkair v. CIR, GR Nos. 171383 & 172379, 14 Nov 2008

e. Is setting-off of taxes against a pending claim for refund allowed?

 —The doctrine of equitable recoupment—

25. Philex Mining Corp. v. CIR, GR No. 125704, 28 Aug 1998

f. Is automatic application of excess tax credits allowed? (Sec. 76)

26. Calamba Steel v. CIR, GR No. 151857, 28 April 2005

27. Systra Philippines v. CIR, GR No. 176290, 21 September 2007 CIR v. BPI, GR No.
178490, 07 July 2009 (Irrevocability Rule)

g. Effect of existing tax liability on a pending claim for refund

28. CIR v. CA and Citytrust, GR No. 106611, 21 July 1994

h. Period of validity of a tax refund/credit (Sec. 230, NIRC)

i. Returns are not actionable documents for purposes of the rules
on civil procedure and evidence

29. Aguilar v. CIR, CA Case dated 30 March 1990)

j. Refund and Protest are mutually exclusive remedies—

30. Vda. De San Agustin v. CIR, 10 September 2001

k. Is the taxpayer entitled to claim interest on the refunded tax?

(Sec. 79 (c) 2, NIRC)
2. Other Remedies
a. Action to Contest Forfeiture of Chattel (Sec. 231)
b. Redemption of Property Sold (Sec. 214)
C. Remedies available to the government
a. No injunction to restrain collection of taxes (Sec. 218, NIRC)
b. Period within which the government could collect (Sections 203, 222, NIRC)

31. Republic v. Hizon, GR No. 130430, 13 December 1999

Facts:
In 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax
assessment of P1,113,359.68 covering the fiscal year 1981-1982.
Respondent not having contested the assessment, petitioner, served warrants of
distraint and levy to collect the tax deficiency.
However, it did not proceed to dispose of the attached properties.
More than three years later, respondent wrote the BIR requesting a reconsideration of
her tax deficiency assessment. The BIR denied the request.
Thus, it filed a case with the RTC San Fernando, Pampanga to collect the tax
deficiency. The complaint was signed by Norberto Salud, Chief of the Legal Division,
 BIR Region 4, and verified by Amancio Saga, the Bureau's Regional Director in
Pampanga.
Respondent moved to dismiss the case on two grounds:
o (1) that the complaint was not filed upon authority of the BIR Commissioner as
required by section 221 [2] of the NIRC, and
o (2) that the action had already prescribed.
Over... petitioner's objection, the trial court granted the motion and dismissed the
complaint.

Issues: WON the institution of the civil case for collection of taxes was without the approval of
the commissioner in violation of section 221 of the national internal revenue code.

Ruling:

Principles: the trial court stated:

There is no question that the NIRC explicitly provides that in the matter of filing cases
in Court, civil or criminal, for the collection of taxes, etc., the approval of the
commissioner must first be secured. [A]n action will not prosper in the absence of the
commissioner's approval. Thus, in the instant case, the absence of the approval of
the commissioner in the institution of the action is fatal to the cause of the plaintiff.
The trial court arrived at this conclusion because the complaint filed by the BIR was not
signed by then Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
o Form and mode of proceeding in actions arising under this Code. &mdash Civil
and criminal actions and proceedings instituted in behalf of the Government
under the authority of this Code or other law enforced by the BIR shall be
brought in the name of the Government of the Philippines and shall be
conducted by the provincial or city fiscal, or the Solicitor General, or by the legal
officers of the Bureau of Internal Revenue deputized by the Secretary of Justice,
but no civil and criminal actions for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall be begun without the
approval of the Commissioner.

To implement this provision Revenue Administrative Order No. 5-83 of the BIR
provides in pertinent portions:
The following civil and criminal cases are to be handled by Special Attorneys and
Special Counsels assigned in the Legal Branches of Revenue Regions:
II. Civil Cases
o 1. Complaints for collection on cases falling within the jurisdiction of the Region

In all the abovementioned cases, the Regional Director is authorized to sign all
pleadings filed in connection therewith which, otherwise, requires the signature of the
Commissioner.
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in this case
was signed by the BIR's Chief of Legal Division for Region 4 and verified by the
Regional Director, there was, therefore, compliance with the law.
However, the lower court refused to recognize RAO No. 10-95 and, by
implication, RAO No. 5-83. It held:
o [M]emorand[a], circulars and orders emanating from bureaus and agencies
whether in the purely public or quasi-public corporations are mere guidelines for
the internal functioning of the said offices. They are not laws which courts can
take judicial notice of.

As such, they have no binding effect upon the courts for such memoranda and
circulars are not the official acts of the legislative, executive and judicial departments of
the Philippines.
THIS IS ERRONEOUS. The rule is that as long as administrative issuances relate
solely to carrying into effect the provisions of the law, they are valid and have the force
of law.[6] The governing statutory provision in this case is §4(d) of the NIRC which
provides:
o Specific provisions to be contained in regulations. - The regulations of the
BIR shall, among other things, contain provisions specifying, prescribing, or
defining:
o (d) The conditions to be observed by revenue officers, provincial fiscals and
other officials respecting the institution and conduct of legal actions and
proceedings.

RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the
present 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:
o (a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
o (b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
o (c) The power to compromise or abate under §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
(P500,000.00) 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
o (d) The power to assign or reassign internal revenue officers to establishments
where articles subject to excise tax are produced or kept.

None of the exceptions relates to the Commissioner's power to approve the filing of tax
collection cases.
32. CIR v. Javier Jr., GR No. 78953, 31 July 1991 (199 SCRA 825

33. PNOC v. CA, GR No. 109976, 26 April 2005

34. BPI v. CIR, GR No. 174942, 7 March 2008

c. Overview of Remedies (Section 205)

1. Tax Lien (Section 219, NIRC)

35. CIR v. NLRC, GR No. 74965, 9 November 1994

2. Compromise
3. Distraint and/or Levy
4. Civil Action
5. Criminal Action
6. Forfeiture
7. Suspension of business operations
8. Enforcement of administrative fines
d. Administrative Remedies in Detail (Sections 206-217, NIRC)
1. Distraint
a. Actual
b. Constructive
2. Levy
3. Garnishment
e. Judicial Remedies in Detail (Section 220, NIRC)
1. Period within which the action may be filed
i. Civil Cases (Sections 203, 222, NIRC)
ii. Criminal Cases (Title X, Sec 281, NIRC)
f. Where should these cases be filed?
a. Criminal Cases (See the imposable penalty vis-à-vis the jurisdiction of
courts)
b. Civil Cases (Consider the amount of tax sought to be collected vis-à-vis the
jurisdiction of courts, together with the provisions of RA9282)
g. Cases:

36. Republic v. Hizon, GR No. 130430, 13 December 1999 (re approval of filing of civil and
criminal action)
Facts:
In 1986, the BIR issued to respondent Salud V. Hizon a deficiency income tax
assessment of P1,113,359.68 covering the fiscal year 1981-1982.
Respondent not having contested the assessment, petitioner, served warrants of
distraint and levy to collect the tax deficiency.
However, it did not proceed to dispose of the attached properties.
More than three years later, respondent wrote the BIR requesting a reconsideration of
her tax deficiency assessment. The BIR denied the request.
 Thus, it filed a case with the RTC San Fernando, Pampanga to collect the tax
deficiency. The complaint was signed by Norberto Salud, Chief of the Legal Division,
BIR Region 4, and verified by Amancio Saga, the Bureau's Regional Director in
Pampanga.
Respondent moved to dismiss the case on two grounds:
o (1) that the complaint was not filed upon authority of the BIR Commissioner as
required by section 221 [2] of the NIRC, and
o (2) that the action had already prescribed.
Over... petitioner's objection, the trial court granted the motion and dismissed the
complaint.

Issues: WON the institution of the civil case for collection of taxes was without the approval of
the commissioner in violation of section 221 of the national internal revenue code.

Ruling:

Principles: the trial court stated:

There is no question that the NIRC explicitly provides that in the matter of filing cases
in Court, civil or criminal, for the collection of taxes, etc., the approval of the
commissioner must first be secured. [A]n action will not prosper in the absence of the
commissioner's approval. Thus, in the instant case, the absence of the approval of
the commissioner in the institution of the action is fatal to the cause of the plaintiff.
The trial court arrived at this conclusion because the complaint filed by the BIR was not
signed by then Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
o Form and mode of proceeding in actions arising under this Code. &mdash Civil
and criminal actions and proceedings instituted in behalf of the Government
under the authority of this Code or other law enforced by the BIR shall be
brought in the name of the Government of the Philippines and shall be
conducted by the provincial or city fiscal, or the Solicitor General, or by the legal
officers of the Bureau of Internal Revenue deputized by the Secretary of Justice,
but no civil and criminal actions for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall be begun without the
approval of the Commissioner.

To implement this provision Revenue Administrative Order No. 5-83 of the BIR
provides in pertinent portions:
The following civil and criminal cases are to be handled by Special Attorneys and
Special Counsels assigned in the Legal Branches of Revenue Regions:
II. Civil Cases
o 1. Complaints for collection on cases falling within the jurisdiction of the Region

In all the abovementioned cases, the Regional Director is authorized to sign all
pleadings filed in connection therewith which, otherwise, requires the signature of the
Commissioner.
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in this case
was signed by the BIR's Chief of Legal Division for Region 4 and verified by the
Regional Director, there was, therefore, compliance with the law.
However, the lower court refused to recognize RAO No. 10-95 and, by
implication, RAO No. 5-83. It held:
o [M]emorand[a], circulars and orders emanating from bureaus and agencies
whether in the purely public or quasi-public corporations are mere guidelines for
the internal functioning of the said offices. They are not laws which courts can
take judicial notice of.

As such, they have no binding effect upon the courts for such memoranda and
circulars are not the official acts of the legislative, executive and judicial departments of
the Philippines.
THIS IS ERRONEOUS. The rule is that as long as administrative issuances relate
solely to carrying into effect the provisions of the law, they are valid and have the force
of law.[6] The governing statutory provision in this case is §4(d) of the NIRC which
provides:
o Specific provisions to be contained in regulations. - The regulations of the
BIR shall, among other things, contain provisions specifying, prescribing, or
defining:
o (d) The conditions to be observed by revenue officers, provincial fiscals and
other officials respecting the institution and conduct of legal actions and
proceedings.

RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the
present 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:
o (a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
o (b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
o (c) The power to compromise or abate under §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
(P500,000.00) 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
o (d) The power to assign or reassign internal revenue officers to establishments
where articles subject to excise tax are produced or kept.

None of the exceptions relates to the Commissioner's power to approve the filing of tax
collection cases.
38. CIR v. La Suerte Cigar, G.R. No. 144942, 4 July 2002 (Re participation of the Office of the
Solicitor General)
39. PNOC v. Court of Appeals, G.R. No. 109976, Apr 26, 2005

40. Lim v. CA, GR Nos. 48134-37, 18 October 1990, (re prescription of criminal actions,
Section 281,NIRC)

41. Marcos II v. CA, GR No. 120880, 5 June 1997 (re enforcement of tax liability during
pendency of probate proceedings)

42. Judy Anne Santos v. People, GR No. 173176, 26 August 2008

C. Effects of failure to pay the tax on time:

Additions to the tax (Chapter I, Title X, NIRC)
1. Surcharges
a. Ordinary (Section 248A, NIRC)
i. Failure to pay tax on time as required by the tax code or the regulations
ii. Failure to pay the deficiency tax within the time fixed in the notice
iii. Filing of the return with the wrong office
b. Fraud Penalty (Section 248B, NIRC)

43. CIR v. Javier Jr., GR No. 78953, 31 July 1991.199 SCRA 825