EXCEPTIONS TO THE 3-YEAR PRESCTIPTION RULE

1. Fraudulent returns 2. Willful neglect to file 3. Waiver of the statutes of

limitation by the taxpayer
Fraudulent return
Fraud involves an intentional and deliberate act on the part of the taxpayer of
deceive the government to avoid a tax. The presence of fraud must be proven by
clear and convincing evidence. It cannot be justified by mere speculation. In the
NIRC however, income tax returns are considered prima facie fraudulent if the
gross income is understated by more than 30% or when the deductions claimed is
overstated by more than 30%.
Willful neglect to file
Unless with a reasonable cause, the failure to file is normally considered willful
neglect if the taxpayer incurred multiple instance non-filing. In practice, 3 years of
non-filing of tax return is normally considered willful neglect.
Note the following rules:
Deadline of assessment
With a tax return filed
- Return is non-fraudulent 3 years from date of filing or deadline
whichever is late
- Return is fraudulent 10 years from the discovery of fraud
Non-filing of tax return 10 years from the discovery of non-filing

Waiver of the statutes of limitation by the taxpayer

When the taxpayer requests for a reinvestigation of his assessment which is
granted by the CIR, the CIR and the taxpayer usually agree for the temporary
suspension of the prescriptive period for not less than 6 months (180 days) to give
way to the reinvestigation. So, even if the revised final assessment is rendered to
the taxpayer more than 3 years from the date of filing of the return so long as it is
within the agreed time extension in the waiver, the assessment remains valid.