TAX II - Cases

1. AFP GENERAL INSURANCE CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
222133, November 04, 2020

2. COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. MCDONALD'S PHILIPPINES REALTY CORP, G.R. No.
242670, May 10, 2021

3. Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, G.R. NO. 172598 : December 21, 2007

4. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. BASF COATING + INKS PHILS., INC., RESPONDENT,
G.R. No. 198677. November 26, 2014

5. Commissioner of Internal Revenue v. T Shuttle Services, Inc., G.R. No. 240729 (24 August 2020)

6. China Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 172509 (4 February 2015)

7. Commissioner of Internal Revenue vs. First Express Pawnshop, G.R. Nos. 172054-46 (16 June 2009)

8. Imelda Sze v. BIR, G.R. No. 210238, 6 January 2020 - NO DIGEST YET

9. Rep. of the Phil vs First Gas G.R. No. 214933. February 15, 2022

10. G.R. No. 249045. January 11, 2023 Commissioner of Internal Revenue Vs. Parity Packaging Corporation

11. G.R. No. 249153. September 12, 2022 PRIME STEEL MILL, INCORPORATED, PETITIONER, VS. COMMISSIONER OF
INTERNAL REVENUE - DIRI NACOCOPY

12. CIR vs. Fitness By Design, Inc., G.R. No. 215957, 9 November 2016

13. CIR vs. Next Mobile, G.R. No. 212825, 7 December 2015

14. CIR vs. UNIOIL Corporation, G.R. No. 204405, 4 August 2021

15. Himalayang Pilipino Plans, Inc. vs. CIR, G.R. No. 241848, 14 May 2021

G.R. No. 222133. November 04, 2020

AFP GENERAL INSURANCE CORPORATION

v.

COMMISSIONER OF INTERNAL REVENUE

Facts:

CIR, through Deputy CIR Gregorio V. Cabantac, issued Letter of Authority (LOA) No. 000219645 dated May 7, 2008, empowering
Bureau of Internal Revenue (BIR) Revenue Officers Mercedes J. Espina and Jonas P. Punza to examine AGIC's books of account
and records in relation to taxable year 2006.

As a result of the audit investigation, the CIR issued a Preliminary Assessment Notice (PAN) against AGIC. AGIC responded to
the PAN through a Letter dated January 25,2010 addressed to the CIR.

In turn, the CIR issued a Revised PAN9 dated February 19, 2010, with attached details of discrepancies, finding AGIC liable for
deficiency income tax (IT), documentary stamp tax (DST) on the increase of capital stock, value-added tax (VAT), late remittance
of DST on insurance policies, expanded withholding tax (EWT) inclusive of penalties,16 surcharge, and interest.

Subsequently, the CIR issued a Formal Letter of Demand (FLD)17 dated April 6, 2010, with attached details of discrepancy18 and
assessment notices,19 requesting AGIC to pay deficiency internal revenue taxes amounting to P25,647,389.04.

AGIC formally protested these assessments on April 22, 2010 (administrative protest). Due to the CIR's alleged inaction on its
protest, AGIC elevated the assessment case to the CTA. In turn, the CIR filed an answer to AGIC's petition.

For its part, AGIC insisted that the CTA Division failed to resolve the principal issue of the case: LOA No. 00021964's validity.
According to AGIC, the subject LOA is invalid "for failure of the concerned [r]evenue [o]fficer to have the same revalidated after x x
x 120 days [i.e., within which the tax authorities must issue an audit investigation report], pursuant to Revenue Memorandum
Order No. [RMO] 38-88 dated August 24, 1988, as reiterated in Revenue Memorandum Circular [RMC] No. 40-2006, dated July
13, 2006."

Ruling of the CTA Division

The CIR countered that "the non-revalidation of a [LOA] would only warrant a disciplinary action against the concerned [r]evenue
[o]fficer, and not render the same invalid or void.

The CTA Division held as follows:

1. The revenue officers' failure to have the LOA revalidated after the 120-day reglementary period does not nullify the LOA. Under
the aforecited tax issuances, such failure gives rise to administrative sanctions/penalties, but does not invalidate the LOA itself.

2. The cancellation of the assessment for unremitted DST on insurance policies for taxable year 2005 was proper inasmuch as the
subject LOA only covered taxable year 2006.

3. The PAN and Memoranda filed before the CTA Division, respondent CIR clearly alleged that the deficiency VAT assessment
was grounded on the "substantial [under-declaration]of taxable sales, receipts or income and failure to report sales, receipts or
income in anamount exceeding x x x 30% of that declared per return."

However, AGIC failed to refute the assessments, including the alleged under-declaration.

Aggrieved, AGIC brought the case before the CTA En Banc.

Ruling of the CTA En Banc

The CTA En Banc modified the CTA Division ruling to reduce the amount of deficiency VAT assessment to P5,912,622.72,
inclusive of 50% surcharge, plus applicable interests. It held that AGIC was properly assessed therefor. After evaluation, the CTA
En Banc upheld the assessments for IT, EWT, and DST, amounting to P12,746,567.80

Issues:

(1) Was the subject LOA invalid?

(2) Had the CIR's power to assess AGIC for deficiency VAT and DST already prescribed by the time it issued the FLD dated April
6, 2010?

Ruling:

The petition has no merit.

General Rule: Tax assessments are prima facie correct.

Tax authorities enjoy the presumption of regularity in the performance of their duties in relation to tax investigation
and assessment.

Thus, in denying deficiency tax liability, it is incumbent upon a taxpayer to show clearly that the assessment is void or erroneous,
or that the tax authorities had been remiss in issuing the same.

After a judicious review of the case records, the Court finds that AGIC failed to discharge this burden.

Validity of LOA No. 00021964

The power to assess necessarily includes the authority to examine any taxpayer for purposes of determining the correct amount of
tax due from him.

Verily, the law vests the BIR with general powers in relation to the "assessment and collection of all national internal revenue
taxes.” Only "the CIR or his duly authorized representative may authorize the examination of any taxpayer" and issue an
assessment against him.

In cases where the BIR conducts an audit without a valid LOA, or in excess of theauthority duly provided therefor, the resulting
assessment shall be void and ineffectual.

Petitioner AGIC insists that the subject LOA is defective because it was not revalidated:(a) upon the expiration of the 30-day
period of service and (b) upon the expiration of the120-day period, as required by RMO No. 38-88 and RMC No. 40-06.

Revalidating an unserved LOA

The LOA commences the audit process and informs the taxpayer that he shall be investigated for possible deficiency tax
assessment.

In the case at bar, the CIR issued LOA No. 00021964 on May 8, 2008, the 30th day therefrom fell on June 6, 2008. However,
AGIC claimed to have received the subject LOA only on June 13, 2008. By that time, without revalidation, the LOA had already
become null and void. The argument has no merit.

1. Whether the tax authorities actually served the subject LOA within 30 days from issuance is a factual question, which is outside
the scope of the Court's review sought through a Rule 45 petition. The Court is not a trier of facts. The Court shall not reexamine
or reevaluate "the truthfulness or falsity of the allegations of the parties".

2. CTA En Banc found that AGIC received the LOA dated May 7, 2008 on May 13, 2008 or well within the 30-day reglementary
period of service. The Court gives utmost respect to the findings of the tax court as the Court recognizes its expertise on tax
matters.

3. Even if the Court brushes aside these recognized principles and follows AGIC's reasoning, it is clear that they would have had
the legal right to refuse service of an LOA it believed was defective due to lack of revalidation. However, it is undisputed that AGIC
did not contest the LOA upon receipt and allowed the tax authorities to proceed with and complete the audit.

Moreover, AGIC did not question the timeliness of the LOA's service in any of the following: reply to the PAN, two-page formal
administrative protest to the FLD, Petition for Review, and Motion for Reconsideration76 before the CTA Division. AGIC raised this
argument only on appeal (to the CTA En Banc).

To the Court's mind, AGIC's failure to exercise its right to refuse the service of an allegedly defective LOA shows that they had
acquiesced to the tax authorities' investigation. That it waited until after the issuance of the PAN, FLD, as well as the CTA
Division's adverse decision before objecting to this irregularity could only be interpreted as a mere afterthought to resist possible
tax liability.

Revalidating a served LOA in connection with the "120-day rule”

AGIC claims that LOA No. 00021964 was nullified due to the assigned revenue officers' failure to: (1) render the investigation
report within this period, and (2) submit the LOA for revalidation. Thus, the resulting tax assessments are also void

In any case, AGIC does not even allege facts showing that the assigned revenue officers continued with their audit investigation
beyond the first 120 days after issuance/service of the LOA.

Failure to revalidate the LOA in accordance with the 120-day rule shall only be an issue in cases where tax authorities proceeded
with an extended audit without first seeking the requisite revalidation. Furthermore, even if the Court assumes that the BIR illegally
extended their investigation, AGIC could have also resisted further investigation as early as the 121st day after the LOA's
issuance/service if it truly believed that the assigned revenue officers no longer possessed the requisite authority. That it kept
silent about the supposed violation and complained only when it was already found liable for deficiency taxes, once again, only
show that it acquiesced to the BIR's extended audit, if any.

Based on the foregoing, absent any showing that the failure to revalidate resulted in a violation of AGIC's right to due process, the
Court upholds the subject LOA's validity.

Revalidating an unserved LOA Revalidating a served LOA in connection with

the "120-day rule."

A Letter of Authority must be served or presented
to the taxpayer within 30 days from its date of
issue; otherwise, it becomes null and void unless
revalidated. The taxpayer has all the right to
refuse its service if presented beyond the 30-day
period depending on the policy set by top
management.
5. The Division Chief/RDO shall be responsible
for the monthly monitoring of LAs issued to
ensure that reports are rendered within the
reglementary 120-day period. The Division
Chief/RDO shall be jointly responsible with the
REOs for cases with LAs pending beyond the
120-day period.

Revalidation is done by issuing a new Letter of
Authority or by just simply stamping the words
"Revalidated on ____________ "on the face of
the copy of the Letter of Authority issued. [RAMO
1-00, 2.3]
6. It shall be the duty of the Division Chief/RDO to
report immediately to the inspection Service any
tax case for which no report of investigation has
been rendered 120 days after the issuance of an
LA. [RMO 38-88]

The foregoing issuance refers to the "120-day

period" as the time within which an
investigation report shall be rendered.

2. Fieldmen are hereby enjoined to serve the

authority to investigate within thirty (30) days from
the date of the issuance and to conduct the
investigation and submit the report thereon within
one hundred twenty (120) days from the date of
the issuance of the authority. Any authority to
investigate which has not been reported within
the above-mentioned period is considered void
and the examiner concerned is prohibited from
further investigation or contact with the taxpayer
after the said period unless the authority is
revalidated. [RMO 43-64]

The issuance confirms that a revenue officer

assigned to an audit is duty-bound to render an
investigation report within 120 days from the
LOA's issuance. The 120-day period for rendering
an investigation report was intended as an
internal efficiency measure: to expedite the
conduct of audits and ensure that BIR examiners
regularly report open investigations and their
progress.

The revenue officer may validly request for LOA

revalidation, which shall be supported by a
progress report and an enumeration of reasons to
justify his request.

It contemplates a served LOA and an on-going

audit investigation. Stated differently, the revenue
officer was already authorized to commence an
audit only that he was unable to conclude it within
120 days.

The expiration of the 120-day period merely

renders an LOA unenforceable, inasmuch as the
revenue officer must first seek ratification of his
expired authority to audit to be able to validly
continue investigation beyond the first 120 days.

The revalidation requirement involving an
unserved LOA is imposed on the revenue officer
because he/she exclusively derives authority
therefrom. It is intended to reconfirm his/her
designation as the BIR personnel duly authorized
(by the CIR) to examine the taxpayer's books and
extend the period of service. Otherwise, his/her
subsequent presence in a taxpayer's premises for
a supposed tax audit shall be illegitimate.
That the revenue officer is unable to conduct
further investigation does not invalidate his/her
authority during the first 120 days or the
procedures he/she had already performed within
that period. He/she may instead render a report
based on the results of his/her initial investigation
from which an assessment may be legitimately
issued.

Prescription of the CIR's Power to Assess Deficiency VAT and DST

General Rule: The CIR may issue a tax assessment within a three year prescriptive period counted from:

(a) the statutory deadline to file a return for the specific tax type, or

(b) if filed beyond the deadline, the date of actual filing of the tax return, whichever is later.

Exception: The prescriptive period may be extended to ten years, in case of a false or fraudulent return with intent to evade tax or
of failure to file a return

Unremitted DST on insurance policies.

The Supreme Court upheld CTA's ruling. It stated that it is supported by law and jurisprudence as AGIC failed to present in
evidence its 2006 DST returns.

Prescription is a matter of defense. The taxpayer has the burden of proving that the prescriptive period has lapsed, including
positively identifying when the prescriptive period began to run and exactly when it expired. Consequently, AGIC cannot avail itself
of the defense of prescription inasmuch as they failed to present proof of actual filing of their DST returns.

Deficiency VAT.

The court a quo upheld the timeliness of the issuance of the deficiency VAT assessment after applying the 10-year prescription
period, instead of the general rule of three years.

The petition reveals that AGIC assails this ruling by relying heavily on the claim that the three-year prescriptive period had already
expired. AGIC did not even allege facts or present proof to dispute the correctness of applying the 10-year prescriptive period.
Certainly, AGIC's argument must be stricken down for being unresponsive and unsubstantiated.

In any case, the court a quo’s application of the 10-year period was justified by its finding that AGIC had under-declared their 2006
gross receipts subject to VAT by 38.88%.

Under the Tax Code, failure to report sales, receipts, or income of at least 30% of the amount declared in the return constitutes
prima facie evidence of a false or fraudulent return. This presumption shall stand as AGIC did not present proof to dispute the
finding of under-declaration. There being an undisputed case of a false or fraudulent return, an exception to the general rule, the
CTA En Banc correctly applied the 10-year prescriptive period under Section 222(a), instead of the three-year period under
Section 203 of the Tax Code.

WHEREFORE, the instant petition is DENIED.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. MCDONALD'S

PHILIPPINES REALTY CORP, G.R. No. 242670, May 10, 2021

Doctrine:

1. An LOA must be issued by the CIR or his duly authorized representative before any revenue officer can perform an
examination or assessment. An LOA is a special authority granted to a specific revenue officer, and an examination or assessment
conducted without such authority is a nullity.

2. If the original revenue officer authorized by an LOA is reassigned or transferred, the new revenue officer must be granted a
separate or amended LOA naming them specifically to continue the audit or investigation to comply with due process
requirements.

3. The use of a memorandum of assignment or referral memorandum without a new or amended LOA usurps the powers of
the CIR and his authorized representatives to grant authority to examine taxpayer’s books of accounts and should not be
considered valid authorization for an audit or investigation.

Facts:

This case involves the Commissioner of Internal Revenue (petitioner) versus McDonald’s Philippines Realty Corporation
(respondent) concerning the invalidation of a deficiency value-added tax (VAT) assessment by the Court of Tax Appeals (CTA).
The respondent is a foreign corporation licensed to operate in the Philippines, with the primary activity of purchasing and leasing
McDonald’s Restaurant sites.

On August 31, 2007, the Bureau of Internal Revenue (BIR) issued a Letter of Authority (LOA) authorizing specific revenue officers
to examine the books of the respondent for all internal revenue taxes for 2006. Subsequently, on December 2, 2008, one of the
originally authorized revenue officers was reassigned, and Rona Marcellano was designated to continue the audit without issuing a
new LOA.

The petitioner eventually demanded payment for deficiency VAT for 2006. The respondent protested, arguing that Marcellano
wasn’t authorized to investigate since no new or amended LOA was provided to her. The CTA Division and En Banc agreed,
declaring the assessment void due to the lack of authority. The case reached the Supreme Court upon the petitioner’s review
request.

Issues:

1. Whether the practice of substituting originally-named revenue officers in an LOA to continue an audit investigation without a
separate or amended LOA violates the taxpayer’s right to due process.

2. Whether such a practice usurps the statutory power of the Commissioner of Internal Revenue or his duly authorized
representative to grant the authority to examine a taxpayer’s books of accounts.

3. Whether the practice complies with existing BIR rules and regulations regarding the requirement of an LOA.

Held:

The Supreme Court denied the petition for lack of merit, affirming the CTA’s decisions. The Court emphasized that identifying
specifically named revenue officers in the LOA is a due process requirement for the validity of an audit or investigation by the BIR.
Substituting revenue officers without a new or amended LOA violates the taxpayer’s right to due process, usurps the statutory
powers of the CIR, and does not comply with existing BIR rules and regulations, particularly RMO No. 43-90 dated September 20,
1990, which requires the issuance of a new LOA for reassignment of cases.

3. Pilipinas Shell Petroleum Corporation vs. CIR

GR No. 172598, December 21, 2007

Facts:

BIR sent a collection letter to PSPC for alleged deficiency excise tax liabilities of Php 1.7M for the taxable years 1992 and 1994 to
1997, inclusive of delinquency surcharges and interest. Meanwhile, in late 1999, and despite the pendency of CA-G.R. SP No.
55329, the Center sent several letters to PSPC dated August 31, 1999,8 September 1, 1999,9 and October 18, 1999. The first
required PSPC to submit copies of pertinent sales invoices and delivery receipts covering sale transactions of PSPC products to
the TCC assignors/transferors purportedly in connection with an ongoing post audit. The second letter similarly required
submission of the same documents covering PSPC Industrial Fuel Oil (IFO) deliveries to Spintex International, Inc. The third letter
is in reply to the September 29, 1999 letter sent by PSPC requesting a list of the serial numbers of the TCCs assigned or
transferred to it by various BOI-registered companies, either assignors or transferors.

PSPC avers that its statutory and procedural right to due process was violated by respondent in the issuance of the assessment.
PSPC claims respondent violated RR 12-99 since no pre-assessment notice was issued to PSPC before the November 15, 1999
assessment. Moreover, PSPC argues that the November 15, 1999 assessment effectively deprived it of its statutory right to protest
the pre-assessment within 30 days from receipt of the disputed assessment letter.

Issue:

WON the statutory and procedural right to due process was violated

Ruling:

PSPC’s rights to substantive and procedural due process have indeed been violated. The facts show that PSPC was not accorded
due process before the assessment was levied on it. The Center required PSPC to submit certain sales documents relative to
supposed delivery of IFOs by PSPC to the TCC transferors. PSPC contends that it could not submit these documents as the
transfer of the subject TCCs did not require that it be a supplier of materials and/or component supplies to the transferors in a
letter dated October 29, 1999 which was received by the Center on November 3, 1999. On the same day, the Center informed
PSPC of the cancellation of the subject TCCs and the TDM covering the application of the TCCs to PSPC’s excise tax liabilities.
The objections of PSPC were brushed aside by the Center and the assessment was issued by respondent on November 15, 1999,
without following the statutory and procedural requirements clearly provided under the NIRC and applicable regulations.

The procedures delineated in the said statutory provisos and RR 12-99 were not followed by respondent, depriving PSPC of due
process in contesting the formal assessment levied against it. Respondent ignored RR 12-99 and did not issue PSPC a notice for
informal conference44 and a preliminary assessment notice, as required.45 PSPC’s November 4, 1999 motion for reconsideration
of the purported Center findings and cancellation of the subject TCCs and the TDM was not even acted upon.

PSPC was merely informed that it is liable for the amount of excise taxes it declared in its excise tax returns for 1992 and 1994 to
1997 covered by the subject TCCs via the formal letter of demand and assessment notice. For being formally defective, the
November 15, 1999 formal letter of demand and assessment notice is void.

Formal Letter of Demand and Assessment Notice. ––The formal letter of demand and assessment notice shall be issued by the
Commissioner or his duly authorized representative. The letter of demand calling for payment of the taxpayer’s deficiency tax or
taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void. The same shall be sent to the taxpayer only by registered mail or by
personal delivery. x x x

In short, respondent merely relied on the findings of the Center which did not give PSPC ample opportunity to air its side. While
PSPC indeed protested the formal assessment, such does not denigrate the fact that it was deprived of statutory and procedural
due process to contest the assessment before it was issued.

G.R. No. 198677 November 26, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
BASF COATING + INKS PHILS., INC., Respondent.

Facts:

Respondent was a corporation which was duly organized under and by virtue of the laws of the Republic of the Philippines on
August 1, 1990 with a term of existence of fifty (50) years. Its BIR-registered address was at 101 Marcos Alvarez Avenue, Barrio
Talon, Las Piñas City. Majority of the members of the Board of Directors and the stockholders representing more than two-thirds
(2/3) of the entire subscribed and outstanding capital stock of herein respondent corporation, resolved to dissolve the corporation
by shortening its corporate term to March 31, 2001. Subsequently, respondent moved out of its address in Las Piñas City and
transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna.

On June 26, 2001, respondent submitted two letters to the BIR. The first letter was a notice of respondent's dissolution, in
compliance with the requirements of Section 52(c) of the National Internal Revenue Code. On the other hand, the second letter
was a manifestation indicating the submission of various documents supporting respondent's dissolution, among which was BIR
Form No. 1905, which refers to an update of information contained in its tax registration.

Thereafter, a Formal Assessment Notice (FA N), was sent by registered mail to respondent's former address in Las Piñas City. The
FAN indicated an amount of 18 million pesos representing income tax, VAT, WTC, EWT and DST for the taxable year of 1999.

On March 5, 2004, the Chief of the Collection Section of BIR Revenue Region No. 7, RDO No. 39, South Quezon City, issued a
First Notice Before Issuance of Warrant of Distraint and Levy, which was sent to the residence of one of respondent's directors.

On March 19, 2004, respondent filed a protest letter citing lack of due process and prescription as grounds.

After 180 days had lapsed without action on the part of petitioner on respondent's protest, the latter filed a Petition for Review with
the CTA.

Trial on the merits ensued.

The CTA Special First Division ruled that since petitioner was actually aware of respondent's new address, the former's failure to
send the Preliminary Assessment Notice and FAN to the said address should not be taken against the latter. Consequently, since
there are no valid notices sent to respondent, the subsequent assessments against it are considered void. Aggrieved by the
Decision, petitioner filed a Motion for Reconsideration, but the CTA Special First Division denied it.

Petitioner then filed a Petition for Review with the CTA En Banc. The CTA En Banc promulgated its assailed Decision denying
petitioner's Petition for Review for lack of merit. The CTA En Banc held that petitioner's right to assess respondent for deficiency
taxes for the taxable year 1999 has already prescribed and that the FAN issued to respondent never attained finality because
respondent did not receive it.

Petitioner filed a Motion for Reconsideration, but the CTA En Banc denied it.

Hence, the present petition

Issue: WON the running of the 3-year prescriptive period to assess was suspended when BC failed to notify the CIR of its change
of address

Held:

NO. It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the Statute of Limitations provided under the
provisions of Sections 203 and 222 of the same Act shall be suspended 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. In addition, Section 11 of Revenue Regulation No. 12-85
states that, in case of change of address, the taxpayer is required to give a written notice thereof to the Revenue District Officer or
the district having jurisdiction over his former legal residence and/or place of business. However, this Court agrees with both the
CTA Special First Division and the CTA En Banc in their ruling that the above mentioned provisions on the suspension of the three-
year period to assess apply only if the BIR Commissioner is not aware of the whereabouts of the taxpayer.

In the present case, petitioner, by all indications, is well aware that respondent had moved to its new address in Calamba, Laguna,
as shown by the following documents which form partof respondent's records with the BIR:

1) Checklist on Income Tax/Withholding Tax/Documentary Stamp Tax/Value-Added Tax and Other Percentage Taxes;17

2) General Information (BIR Form No. 23-02);18

3) Report on Taxpayer's Delinquent Account, dated June 27, 2002;19

4) Activity Report, dated October 17, 2002;20

5) Memorandum Report of Examiner, dated June 27, 2002;21

6) Revenue Officer's Audit Report on Income Tax;22

7) Revenue Officer's Audit Report on Value-Added Tax;23

8) Revenue Officer's Audit Report on Compensation Withholding Taxes;24

9) Revenue Officer's Audit Report on Expanded Withholding Taxes;25

10) Revenue Officer's Audit Report on Documentary Stamp Taxes.26

Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter regarding the results of its investigation and an
invitation to an information conference. This could not have been done without being aware of BC's new address. Finally, the PAN
was "returned to sender" before the FAN was sent.

Hence, despite the absence of a formal written notice of Bc's change of address, the fact remains that petitioner became aware of
respondent's new address as shown by documents replete in its records. As a consequence, the running of the three-year period
to assess respondent was not suspended and has already prescribed.

[ G.R. No. 240729, August 24, 2020 ]

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. T SHUTTLE SERVICES, INC., RESPONDENT.

DOCTRINE:
The mere presentation of the registry receipt is insufficient to prove the receipt of the Preliminary Assessment Notice and
the Final Assessment Notice.

FACTS:
In 2009, petitioner CIR issued to the respondent a Letter of Notice (LN) informing it of the discrepancy found on its tax
returns for 2007 with the Reconciliation of Listings for Enforcement and Third-Party Matching under the Tax Reconciliation
System.

Subsequently, the Bureau of Internal Revenue (BIR) issued a follow-up letter but still, the respondent made no action. Thus,
on January 12, 2010, the CIR issued a Letter of Authority (LOA) and Notice of Informal Conference (NIC). On March 29,
2010, the CIR issued a Preliminary Assessment Notice (PAN) with attached Details of Discrepancies that found the
respondent liable for deficiency income tax and value-added tax (VAT). On July 20, 2010, the CIR issued a Final
Assessment Notice (FAN).

In 2013, the revenue district officer (RDO) issued a Final Notice Before Seizure (FNBS), giving the respondent the last
opportunity to settle its tax liability within 10 days from the notice. On March 20, 2013, the respondent sent a letter to the
RDO and collection officers stating that it was not aware of any pending liability for 2007 and that Mr. B. Benitez, who signed
and received the preliminary notices, was not authorized to receive the notices. On April 19, 2013, the respondent protested
the FNBS. It claimed that the service of the NIC was invalid and that it did not receive the PAN and FAN prior to the
issuance of the FNBS.

Aggrieved, the respondent filed a Petition for Review with the Court of Tax Appeals (CTA) Division. Meanwhile, the CIR
prayed for the denial of the petition for review arguing that no error or illegality can be ascribed to his assessment as due
process was observed, and the respondent failed to interpose a timely protest against the FAN and to submit within the
prescribed period of 60 days supporting documents to refute the findings of the revenue examiners.

ISSUE:
Whether the PAN and FAN were properly and duly served upon and received by the respondent.

RULING:
No. Section 3 of RR 12-99 provides that the service of the PAN or the FAN to the taxpayer may be made by registered mail.
Under Section 3(v), Rule 131 of the Rules of Court, there is a disputable presumption that "a letter duly directed and mailed
was received in the regular course of the mail." However, the presumption may be controverted, and in the case of direct
denial the burden is shifted to the party favored by the presumption to establish that the addressee actually received the
subject mailed letter.

Here, the CIR failed to identify and authenticate the signatures appearing on Registry Receipts for the purpose of
ascertaining whether such signatures were those of respondent's authorized representative/s. Hence, it is readily apparent
that the CIR could not have complied with the requirement of noting the position/designation/relationship of Mr. B. Benitez,
the recipient, to respondent, the taxpayer.

NOTE:
The deficiency for CY 2007 are void for failure to accord respondent due process in their issuance. Besides, even granting
that the PAN and the FAN were properly and duly served upon and received by respondent the Court affirms the CTA En
Banc's ruling that the FAN and the assessment notices attached to it are still void for failure to demand payment of the taxes
due within a specific period.

6. CBC v. CIR GR No. 172509, 2015-02-04

Facts:
Petitioner CBC is a universal bank duly organized and existing under the laws of the Philippines. For the taxable
years 1982 to 1986, CBC was engaged in transactions involving sales of foreign exchange to the Central Bank of
the Philippines (now Bangko Sentral ng Pilipinas), commonly known as SWAP transactions. Petitioner did not file
tax returns or pay tax on the SWAP transactions for those taxable years.
On 8 May 1989, petitioner CBC, through its vice-president, sent a letter of protest to the BIR. CBC raised the
following defenses: (1) double taxation, as the bank had previously paid the DST on all its transactions involving
sales of foreign bills of exchange to the
Central Bank; (2) absence of liability, as the liability for the DST in a sale of foreign exchange through telegraphic
transfers to the Central Bank falls on the buyer ? in this case, the Central Bank; (3) due process violation, as the
bank's records were never... formally examined by the BIR examiners; (4) validity of the assessment, as it did not
include the factual basis therefore; (5) exemption, as neither the tax-exempt entity nor the other party was liable
for the payment of DST before the effectivity of Presidential Decree Nos. (PD) 1177 and 1931 for the years 1982
to 1986. In the protest, the taxpayer requested a reinvestigation so as to substantiate its assertions.
On 6 December 2001, more than 12 years after the filing of the protest, the Commissioner of Internal Revenue
(CIR) rendered a decision reiterating the deficiency DST assessment and ordered the payment thereof plus
increments within 30 days from receipt of the decision. On 18 January 2002, CBC filed a Petition for Review with
the CTA. On 11 March 2002, the CIR filed an Answer with a demand for CBC to pay the assessed DST.
On 23 February 2005, and after trial on the merits, the CTA Second Division denied the Petition of CBC. The CTA
ruled that a SWAP arrangement should be treated as a telegraphic transfer subject to documentary stamp tax.
On 30 March 2005, petitioner CBC filed a Motion for Reconsideration, but it was denied in a Resolution dated 14
July 2005. On 5 August 2005, petitioner appealed to the CTA En Banc. The appellate tax court, however,
dismissed the Petition for Review in a Decision dated 1 December 2005. CBC filed a Motion for Reconsideration
on 21 December 2005, but it was denied in a 20 March 2006 Resolution.
The taxpayer now comes to this Court with a Rule 45 Petition, reiterating the arguments it raised at the CTA level
and invoking for the first time the argument of prescription. Petitioner CBC states that the government has three
years from 19 April 1989, the date the former received the assessment of the CIR, to collect the tax. Within that
time frame, however, neither a warrant of distraint or levy was issued, nor a collection case filed in court.
On 17 October 2006, respondent CIR submitted its Comment in compliance with the Court's Resolution dated 26
June 2006. The Comment did not have any discussion on the question of prescription. On 21 February 2007, the
Court issued a Resolution directing the parties to file their respective Memoranda. Petitioner CBC filed its
Memorandum on 26 April 2007. The CIR, on the other hand, filed on 17 April 2007 a Manifestation stating that it
was adopting the allegations and authorities in its Comment in lieu of the required Memorandum.
Issues:
Given the facts and the arguments raised in this case, the resolution of this case hinges on this issue: whether
the right of the BIR to collect the assessed DST from CBC is barred by prescription.
Ruling:
We grant the Petition on the ground that the right of the BIR to collect the assessed DST is barred by the statute
of limitations.
In this case, the records do not show when the assessment notice was mailed, released or sent to CBC.
Nevertheless, the latest possible date that the BIR could have released, mailed or sent the assessment notice
was on the same date that CBC received it, 19 April 1989. Assuming therefore that 19 April 1989 is the reckoning
date, the BIR had three years to collect the assessed DST. However, the records of this case show that there was
neither a warrant of distraint or levy served on CBC's properties nor a collection case filed in court by the BIR
within the three-year period.
Sec. 320. Suspension of running of statute. The running of the statute of limitations provided in Sections 318 or
319 on the making of assessment and the beginning of distraint or levy or 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 days thereafter; when
the taxpayer requests for a re-investigation 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 and 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.
If the pleadings or the evidence on record show that the claim is barred by prescription, the court is mandated to
dismiss the claim even if prescription is not raised as a defense. In Heirs of Valientes v. Ramas, we ruled that the
CA may motu proprio... dismiss the case on the ground of prescription despite failure to raise this ground on
appeal. The court is imbued with sufficient discretion to review matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a... complete and just resolution of the case.
More so, when the provisions on prescription were enacted to benefit and protect taxpayers from investigation
after a reasonable period of time.

Commissioner of Internal Revenue vs. 1st Express Pawnshop Co., Inc.

G.R. No. 172045-46

Jun 16, 2009

FACTS:

Commissioner of Internal Revenue (petitioner) filed a petition to reverse the decision of the Court of Tax Appeals (CTA) regarding
the liability of First Express Pawnshop Company, Inc. (respondent) to pay value-added tax (VAT) and documentary stamp tax
(DST). CTA ruled that the respondent is not liable for DST.

Petitioner issued assessment notices against the respondent for deficiency income tax, deficiency VAT, and deficiency DST on
December 28, 2001. Respondent received the assessment notices on January 3, 2002, and filed a written protest on February 1,
2002.

Petitioner did not act on the protest within the 180-day period. Respondent filed a petition before the CTA on August 28, 2002.

Respondent argued that the petitioner did not consider the supporting documents on interest expenses and donations, resulting in
the deficiency income tax., and claimed that pawnshops are not subject to VAT and that no deficiency DST was due. Petitioner
argued that the assessment was valid and correct and that the respondent is subject to 10% VAT based on its gross receipts.

CTA ruled that the respondent is not liable for deficiency DST on deposit on subscription, but is liable for deficiency VAT.It ordered
the respondent to pay the deficiency VAT, as well as surcharge and delinquency interest.

Both parties filed motions for reconsideration, which were denied by the CTA. Case was elevated to the CTA En Banc, which
affirmed the liability of the respondent to pay VAT and ordered it to pay DST on pawnshop tickets. CTA En Banc found that the
respondent's deposit on subscription was not subject to DST. Petitioner filed a petition before the Supreme Court.

ISSUE:

Whether the CTA erred in disregarding the assessment of the petitioner.

RULING:

The Supreme Court ruled in favor of the respondent, stating that the deposit on subscription is not subject to DST.

Assessment for deficiency DST on deposit on subscription was cancelled. Assessment did not become final and unappealable
because the respondent submitted relevant supporting documents with its protest. Petition was denied and the decision of the CTA
was affirmed.

For the deposit on subscription to be subject to DST, there must be an agreement to subscribe, shares issued or additional
subscription in the restructuring plan, and proof that the issued shares can be considered as issued certificates of stock.

In this case, there was no subscription or contract for the acquisition of unissued stock, and no proof that the deposit on
subscription was converted to capital stock. Therefore, the assessment for deficiency DST on deposit on subscription was
cancelled.

The assessment did not become final and unappealable because the respondent submitted relevant supporting documents, such
as the General Information Sheet and Balance Sheet, with its protest. The term "relevant supporting documents" should be
understood as those necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The
respondent complied with the requisites in disputing the assessment.

Therefore, the petition was denied and the decision of the CTA was affirmed

9. Rep. of the Phil vs First Gas G.R. No. 214933. February 15, 2022

Facts:

The case involves a dispute between the Republic of the Philippines, represented by the Bureau of Internal Revenue (BIR), and
First Gas Power Corporation.

The BIR issued Final Assessment Notices and Formal Letters of Demand to First Gas, assessing it for deficiency income taxes
and penalties for the taxable years 2000 and 2001.

First Gas appealed the assessments to the Court of Tax Appeals (CTA), which granted its petition and cancelled the assessments.
The BIR filed a Petition for Review with the CTA En Banc, but it was denied.

The BIR then filed a Petition for Review on Certiorari with the Supreme Court.

Issue:

Whether the deficiency tax assessments for the taxable years 2000 and 2001 issued by the BIR against First Gas are valid.

Ruling:

The Supreme Court ruled in favor of First Gas and affirmed the cancellation of the assessments.

Ratio:

The deficiency income tax assessment for the taxable year 2000 was invalid because the waivers of the defense of prescription,
which would have extended the period to assess, were defective.

The waivers did not indicate the date of acceptance by the BIR, rendering them ineffective.

As a result, the assessment for the taxable year 2000 was issued beyond the three-year prescriptive period.

The assessments for the taxable year 2001 were also invalid because they did not indicate a definite due date for payment.

The Final Assessment Notices and Formal Letters of Demand did not contain a specific date or period within which the tax
liabilities should be paid by First Gas.

Therefore, the assessments for the taxable year 2001 were deemed invalid.

In summary, the Supreme Court ruled that the deficiency tax assessments for the taxable years 2000 and 2001 issued by the BIR
against First Gas were invalid.

The assessment for the taxable year 2000 was issued beyond the prescriptive period due to defective waivers.

The assessments for the taxable year 2001 were invalid because they did not indicate a definite due date for payment.

10. Commissioner of Internal Revenue vs. Parity Packaging Corp.

G. R. No. 249045

The Court affirmed the decision of the Court of Tax Appeals (CTA) to cancel the deficiency income tax assessment but uphold the
liability for deficiency VAT, EWT, and DST for the taxable year 2010, as the petitioner failed to prove the falsity of the respondent's
tax returns and the prescriptive periods under the National Internal Revenue Code should apply.

Facts:

The case involves a dispute between the Commissioner of Internal Revenue (petitioner) and Parity Packaging Corporation
(respondent).

In 2012, the respondent received a Letter of Authority authorizing the examination of its books of accounts for the taxable year
2010.

The respondent received a Preliminary Assessment Notice and a Final Assessment Notice, finding it liable for deficiency income
tax, value-added tax (VAT), expanded withholding tax (EWT), and documentary stamp tax (DST) for the said period.

The respondent filed a protest, but it was denied.

The respondent then filed a Petition for Review with the Court of Tax Appeals (CTA), which partially granted the petition by
canceling the deficiency income tax assessment but upholding the liability for VAT, EWT, and DST, albeit in reduced amounts.

The petitioner filed a motion for reconsideration, which was rejected by the CTA.

The petitioner then elevated the case to the CTA En Banc.

Issue:

Whether the CTA En Banc erred in holding the respondent liable for reduced deficiency VAT, EWT, and DST for the taxable year
2010.

Ruling:

The Court found that the CTA En Banc did not commit any error in its rulings and, therefore, denied the Petition for Review on
Certiorari.

The Court affirmed the CTA En Banc's decision to cancel the deficiency income tax assessment but uphold the liability for
deficiency VAT, EWT, and DST for the taxable year 2010.

Ratio:

The petitioner's argument that the extraordinary ten-year period under Section 222(a) of the National Internal Revenue Code
(NIRC) should apply in this case was unfounded.

Section 222(a) is a mere exception to the general rule and requires proof that the taxpayer filed a false or fraudulent return.

The petitioner failed to present any evidence to prove the falsity of the respondent's tax returns, thus, the three-year prescriptive
period under Section 203 of the NIRC should apply.

The respondent's non-filing of DST returns should not trigger the ten-year assessment period for all of its deficiency tax liabilities.

The prescriptive periods under Sections 203 and 222 of the NIRC are reckoned from the last day of filing of each return for each
type of tax.

Withholding taxes are still internal revenue taxes covered by the prescriptive period under Section 203 of the NIRC.

Withholding taxes do not cease to become income taxes just because they are collected and paid by the withholding agent.

The correctness of the CTA En Banc's computation of the respondent's deficiency income tax, VAT, EWT, and DST is a factual
question that cannot be re-examined in a petition for review on certiorari.

The findings of fact of the CTA are generally regarded as final and conclusive, unless a party can show that they are not supported
by evidence or based on a misapprehension of facts.

12. COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. FITNESS BY DESIGN, INC., Respondent

G.R. No. 215957, November 9, 2016

Topic: Issuance of a Formal Assessment is a substantive prerequisite for collection of taxes.

FACTS:

On April 11, 1996, Fitness filed its Annual Income Tax Return for the taxable year of 1995. According to Fitness, it was
still in its pre-operating stage during the covered period.

On June 9, 2004, Fitness received a copy of the Final Assessment Notice (FAN). The FAN assessed that Fitness had
a tax deficiency in the amount of ₱10,647,529.69.

Fitness filed a protest to the FAN on June 25, 2004. According to Fitness, the Commissioner's period to assess
had already prescribed. Further, the assessment was without basis since the company was only incorporated on
May 30, 1995

On February 2, 2005, the Commissioner issued a Warrant of Distraint and/or Levy.

On March 1, 2005, Fitness filed before the First Division of the Court of Tax Appeals a Petition for Review (With Motion
to Suspend Collection of Income Tax, Value Added Tax, Documentary Stamp Tax and Surcharges and Interests).

In its defense, the Commissioner posited that the Warrant of Distraint and/or Levy was issued in accordance with law.
The Commissioner claimed that its right to assess had not yet prescribed under Section 222(a) of the NIRC. Because
the 1995 Income Tax Return filed by Fitness was false and fraudulent for its alleged intentional failure to reflect its true
sales, Fitness' respective taxes may be assessed at any time within 10 years from the discovery of fraud or omission.

The CTA first division granted Fitness' petition on the ground that the assessment has already prescribed. It cancelled
and set aside the FAN as well as the Warrant of Distraint and/or Levy issued by the Commissioner. It ruled that the
Final Assessment Notice is invalid for failure to comply with the requirements of Section 228 of the National Internal
Revenue Code.

On appeal before the CTA en banc, the Commissioner asserted that it had 10 years to make an assessment due to the
fraudulent income tax return filed by Fitness. It also claimed that the assessment already attained finality due to
Fitness' failure to file its protest within the period provided by law.

Meanwhile, Fitness argued that the Final Assessment Notice issued to it could not be claimed as a valid deficiency
assessment that could justify the issuance of a warrant of distraint and/or levy. It asserted that it was a mere request
for payment as it did not provide the period within which to pay the alleged liabilities.

The CTA en banc, ruled in favor of Fitness. Hence, this petition by CIR.

ISSUES:

1. Whether the Final Assessment Notice issued against respondent Fitness by Design, Inc. is a valid
assessment under Section 228 of the National Internal Revenue Code and Revenue Regulations No. 12-99?

Petitioner argues that the Final Assessment Notice issued to respondent is valid since it complies with Section 228 of
the National Internal Revenue Code and Revenue Regulations No. 12-99. The law states that the taxpayer shall be
informed in writing of the facts, jurisprudence, and law on which the assessment is based. Nothing in the law provides
that due date for payment is a substantive requirement for the validity of a final assessment notice.

Petitioner further claims that a perusal of the Final Assessment Notice shows that April 15, 2004 is the due date for
payment.

In its Comment, Fitness argues that the Final Assessment Notice issued was merely a request and not a demand for
payment of tax liabilities. The Final Assessment Notice cannot be considered as a final deficiency assessment
because it deprived respondent of due process when it failed to reflect its fixed tax liabilities.

Moreover, it also gave respondent an indefinite period to pay its tax liabilities.

Fitness points out that an assessment should strictly comply with the law for its validity. Jurisprudence

provides that "not all documents coming from the BIR containing a computation of the tax liability can be deemed
assessments[,] which can attain finality." Therefore, the Warrant of Distraint and/or Levy cannot be enforced since it is
based on an invalid assessment. Respondent likewise claims that since the Final Assessment Notice was allegedly
based on fraud, it must show the details of the fraudulent acts imputed to it as part of due process.

RULING: NO. The disputed Final Assessment Notice is not a valid assessment.

First, it lacks the definite amount of tax liability for which respondent is accountable. It does not purport to be a demand
for payment of tax due, which a final assessment notice should supposedly be. An assessment, in the context of the
National Internal Revenue Code, is a "written notice and demand made by the [Bureau of Internal Revenue] on the
taxpayer for the settlement of a due tax liability that is there: definitely set and fixed." Although the disputed notice
provides for the computations of respondent's tax liability, the amount remains indefinite. It only provides that the tax
due is still subject to modification, depending on the date of payment. Thus:

The complete details covering the aforementioned discrepancies established during the investigation of
this case are shown in the accompanying Annex 1 of this Notice. The 50% surcharge and 20% interest
have been imposed pursuant to Sections 248 and 249 (B) of the [National Internal Revenue Code], as
amended. Please note, however, that the interest and the total amount due will have to be adjusted if prior
or beyond April 15, 2004.

Second, there are no due dates in the Final Assessment Notice. This negates petitioner's demand for payment.138
Petitioner's contention that April 15, 2004 should be regarded as the actual due date cannot be accepted. The last
paragraph of the Final Assessment Notice states that the due dates for payment were supposedly reflected in the
attached assessment:

In view thereof, you are requested to pay your aforesaid deficiency internal revenue tax liabilities through
the duly authorized agent bank in which you are enrolled within the time shown in the enclosed
assessment notice.

However, based on the findings of the Court of Tax Appeals First Division, the enclosed assessment pertained to
remained unaccomplished.

Contrary to petitioner's view, April 15, 2004 was the reckoning date of accrual of penalties and surcharges and not
the due date for payment of tax liabilities. The total amount depended upon when respondent decides to pay. The
notice, therefore, did not contain a definite and actual demand to pay.

Compliance with Section 228 of the National Internal Revenue Code is a substantive requirement. It is not a mere
formality. Providing the taxpayer with the factual and legal bases for the assessment is crucial before proceeding with
tax collection. Tax collection should be premised on a valid assessment, which would allow the taxpayer to present
his or her case and produce evidence for substantiation.

2. Whether the CTA erred in cancelling CIR’s Warrant of Distraint and/or Levy for the collection of
deficiency taxes from Fitness?

No, since the said Warrant is void. Warrant was void because the FAN was not valid. The issuance of a valid
formal assessment is a substantive prerequisite for collection of taxes. An assessment does not only include a
computation of tax liabilities; it also includes a demand for payment within a period prescribed. Its main purpose is to
determine the amount that a taxpayer is liable to pay.

Taxes are the lifeblood of government and should be collected without hindrance. However, the collection of

taxes should be exercised "reasonably and in accordance with the prescribed procedure."
The essential nature of taxes for the existence of the State grants government with vast remedies to ensure its
collection. However, taxpayers are guaranteed their fundamental right to due process of law, as articulated in
various ways in the process of tax assessment. After all, the State's purpose is to ensure the well-being of its
citizens, not simply to deprive them of their fundamental rights.

PETITION DENIED.

13. COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. NEXT MOBILE, INC.

(FORMERLY NEXTEL COMMUNICATIONS PHILS., INC.),Respondent.

(G.R. No. 212825, December 07, 2015)

PRINCIPLE:

Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within 3 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 not valid and effective.

Exceptions to this rule are provided under Section 222 of the NIRC.

FACTS:

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

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

On November 23, 2005, NM filed its protest against the FLD and requested the reinvestigation. BIR denied the protest.

NM filed a Petition for Review before the CTA.

In the CTA, NM argued that the CIR's right to assess NM's deficiency taxes had already prescribed, invoking the lack of authority
on the part of the person who signed the waivers.

The CTA ruled in favor of NM and said that the 5 waivers of the statute of limitations were not valid and binding; thus, the three-
year period of limitation within which to assess deficiency taxes was not extended.

It also held that the records belie the allegation that respondent filed false and fraudulent tax returns; thus, the extension of the
period of limitation from 3 to 10 years does not apply.

ISSUES:

1. WON the CIR's right to assess respondent's deficiency taxes already prescribed.

2. WON the 10-year period of limitation for assessments of false and fraudulent returns applicable in this case?

RULING:

1. No, the CIR's right to assess NM's deficiency taxes had NOT yet prescribed.

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. This is a waiver.

RMO No. 20-90 and RDA0 05-01 must be strictly complied with in order for such a waver to be valid.Thus, a waiver of
assessment period is invalid if, for example:

[1] It does not specify a definite agreed date between the BIR and the taxpayer within which the former may assess and
collect revenue taxes;

[2] It has been signed only by a revenue district officer, not the Commissioner;

[3] It has no date of acceptance;

[4| The taxpayer was not furnished a copy of the BIR-accepted waiver;

[5] The person who executed the waivers had no notarized written board authority to sign the waivers in behalf of the
corporation; or

[6] The fact of receipt by the taxpayer of its file copy was not indicated in the original copies of the waivers.

In this case, both are at fault because NM deliberately executed defective waivers and raised the same problem to avoid
its tax liablity. On the other hand, the BIR's negligence or failure to comply with the abovementioned regulations is SO
gross that it amounts to malice and bad faith.

Although it is true that waivers of this kind must be carefully and strictly construed because they are in derogation of the
taxpayer's right to security against prolonged and unscrupulous investigations, there are 5 reasons why the CTA'S
decision should be reversed.

[1] The parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two parties to a
controversy are equally culpable or guilty and they shall have no action against each other.

[2] To uphold the validity of the waiverS parties must come to court with clean hands would be consistent with the public
policy embodied in the principle that taxes are the lifeblood of the government.

[31 Parties must come to court with clean hands. NM should not be allowed to benefit from the defects in its own waivers.

[4] NM is estopped from questioning the validity of its own waivers. It allowed the government to rely on the defective
waivers without raising them as soon as possible. In fact, in its protest, it did not mention this.

(5] Finally, this is a highly suspicious situation. The BIR miserably failed to exact from NM compliance with its own rules
while NM raised the same invalidity it caused to avoid its tax liability. Such a situation is dangerous and open to abuse by
unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind
technicalities.

2. No, the longer 10-year period is not applicable. Applicable is the normal 3-year period.

Records failed to establish, even by prima facie evidence, that NM filed false and fraudulent returns on the ground of
substantial under- declaration of income in respondent Next Mobile's Annual ITR for taxable year endin December 31,
2001.

SUMMARY: Next Mobile (NM) lost the case. The CIR Succeeded in convincing the Supreme Court that the CTA was wrong in
invalidating the waivers.

14. [ G.R. No. 204405, August 04, 2021 ]

COMMISSIONER OF INTERNAL REVENUE, PETITIONER,
VS.
UNIOIL CORPORATION, RESPONDENT.

FACTS

· On January 26, 2009, [respondent] received a Formal Letter of Demand and Final Assessment Notice
(FAN) finding [it] liable for deficiency withholding tax on compensation and deficiency expanded withholding tax for the
year ending December 31, 2005.

· [Unioil] filed its protest to the FAN on February 25, 2009 and submitted its supporting documents on April 24, 2009.

· In resolving the propriety of the CIR's tax assessments for deficiency withholding taxes (on compensation and
expanded) against Unioil, the CTA Third Division listed Unioil's procedural and substantive arguments, among others: that
[Unioil] did not receive a Preliminary Assessment Notice [(PAN)] prior to the issuance of the FAN, contrary to the
procedures outlined in Revenue Regulation (RR) 12-99[;]"6

· The CTA held that in the case at bar, [UNIOIL] denied receiving the Preliminary Assessment Notice. It follows
that it is incumbent upon [the CIR] to prove the receipt of the subject assessment notice by contrary
evidence. However, records lay bare of clear and convincing evidence to show that [Unioil] indeed received a PAN.

· [The CIR] offered in evidence a draft Preliminary Assessment Notice (Exhibit "9") and a PAN dated November 27,
2008 (Exhibit "10") to establish, among others, that a PAN was issued in compliance with existing revenue issuances; but
the same failed to show that they were sent to petitioner, either through personal delivery or mail. No other documentary or
testimonial evidence was submitted by [the CIR] to disprove [Unioil]'s alleged non-receipt of the PAN and [the CIR]'s
failure to do so leads to the conclusion that no PAN was really issued.

· In sum, [the CIR]'s failure to strictly comply with the notice requirements as laid down in Section 228 of the
NIRC of 1997, as amended, and RR No. 12- 99 amounts to the denial of [Unioil]'s right to due process, effectively
voiding the assessments issued.

· The CTA En Banc rendered the assailed Decision affirming in toto the CTA Third Division. The issuance of PAN is an
integral part of procedural due process. The PAN lays down the factual and legal basis for the assessment. In the present
petition, respondent denies the receipt of the PAN in relation to the deficiency tax assessments issued against it by the
petitioner. As respondent categorically denies the receipt of the PAN, it is incumbent upon petitioner to prove the contrary.
Hence, as petitioner failed to prove the receipt of the PAN by the respondent, thereby effectively denying the latter of its
right to due process We affirm the CTA Third Division's ruling cancelling and setting aside the subject assessments for
deficiency withholding taxes and deficiency expanded withholding taxes for the taxable year 2005.

· Obtaining no relief from the CTA, the CIR filed this petition for review on certiorari and submitted for the first time
proof of its issuance of a PAN and Unioil's actual receipt thereof. The CIR is adamant that it did issue a PAN which
had been duly acknowledged and received by Unioil.

· On the CIR's newly invoked proof that Unioil had in fact received the "missing" PAN, Unioil maintains that the CIR's
assessments for deficiency withholding taxes were issued beyond the three-year prescriptive period provided in Section
203 of the NIRC

ISSUE

WON Respondent was denied of its right to due process based on the purported failure to receive a preliminary assessment notice
(PAN).

RULING

Yes, respondent was denied of its right to due process.

The existence and validity of the PAN was the threshold and only issue decided by the CTA, in Division and En Banc, when it
cancelled and set aside the CIR's assessment for deficiency withholding taxes (on compensation and expanded) against Unioil. To
stress, the CIR did not proffer this proof of Unioil's receipt of the PAN in their petition for review before the CTA En Banc. Since it
was not offered as evidence, there is nothing for this Court to consider. Otherwise stated, the CIR failed to establish the fact of
issuance of the PAN to Unioil. The CIR's failure to comply with the notice requirements under Section 228 of the 1997 NIRC
effectively denied Unioil of its right to due process. Consequently, the CIR's assessment was void.

Tax collection must be preceded by a valid assessment to allow the taxpayer to protest the assessment, present their
case and adduce supporting evidence.37 Without complying with the unequivocal mandate of first informing the taxpayer of the
government's claim, there can be no deprivation of property, because no effective protest can be made. In fine, We rule that the
assessment is void for not stating the factual and legal bases therefor and the three-year period for assessment has
already prescribed. Indeed, while the government cannot be estopped by the negligence or omission of its agents, the
mandatory provisions on Sections 20339 and 22840 of the NIRC cannot be rendered nugatory by the mere act of the CIR.

In affirming the CTA's holding that the assessment against Unioil is void, we emphasize the import of an assessment as containing
not only a computation of tax liabilities but also a demand for payment within a prescribed period.42 The issuance of an
assessment is vital in determining the period of limitation regarding its proper issuance and the period within which to
protest it.

CIR’s RIGHT TO ASSESS HAS ALREAD PRESCRIBED.

Section 20344 of the 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 to the period of
limitation of assessment, however, are provided under Section 22245 of the same code, as in cases of (i) filing of a false or
fraudulent return with intent to evade tax or (ii) failure to file a return or (iii) a written agreement to waive and extend the
period within which to assess the taxpayer's liability.

The blithe contention of the CIR is not well-taken; the exception to the prescriptive period to assess taxes under Section
22249 of the NIRC is not applicable. In determining whether the return filed is false or fraudulent, jurisprudence has consistently
held that fraud is never imputed.50 The Court has refrained from sustaining findings of fraud upon circumstances which, at most,
create only suspicion.51 The mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion. Here,
apart from the CIR's bare allegation of falsity or fraudulency in Unioil's filed returns, the CIR neither states nor points to any other
detail establishing actual fraud committed by Unioil. The CIR does not substantiate its allegation of fraud and appears to make the
argument only to evade the three-year prescriptive period to assess the tax.

In conflict with its initial assertion that the assessment was made pursuant to Section 7258 of the NIRC, the CIR yet again
contends that the assessment has not prescribed since the contentious and "missing" PAN had been issued before the
expiration of the three-year prescriptive period. In any case, the PAN and the FAN pertain to different aspects of the CIR's
power to assess taxes. In Commissioner of Internal Revenue v. Transitions Optical Philippines, Inc.,59 we clarified that
the assessment contemplated in Sections 20360 and 22261 of the NIRC refers to the service of the FAN upon the
taxpayer.

PAN v. FAN

A PAN merely informs the taxpayer of the initial findings of the Bureau of Internal Revenue. It contains the proposed assessment,
and the facts, law, rules, and regulations or jurisprudence on which the proposed assessment is based. It does not contain a
demand for payment but usually requires the taxpayer to reply within 15 days from receipt. Otherwise, the Commissioner of
Internal Revenue will finalize an assessment and issue a FAN.The PAN is a part of due process. It gives both the taxpayer and the
Commissioner of Internal Revenue the opportunity to settle the case at the earliest possible time without the need for the issuance
of a FAN.

On the other hand, a FAN contains not only a computation of tax liabilities but also a demand for payment within a prescribed
period. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the amount assessed and
demanded. It also signals the time when penalties and interests begin to accrue against the taxpayer.

THE FORMAL LETTER OF DEMAND IS VOID

Section 228 of the NIRC and its implementing rule and regulation, Section 3 of RR No. 12-99, mandate the contents for an
assessment: "[t]he taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void."

In the case before us, the CIR only perfunctorily assessed Unioil for deficiency withholding tax on compensation and expanded
withholding tax and went through just the motions without due consideration. This is apparent from the haste in which the Formal
Letter of Demand and the FAN were issued on January 14, 2009 in order to ostensibly beat the three-year prescriptive period
which set after January 15, 2009. It is true that the Commissioner is not obliged to accept the taxpayer's explanations, as
explained by the Court of Tax Appeals. However, when he or she rejects these explanations, he or she must give some reason for
doing so. He or she must give the particular facts upon which his or her conclusions are based, and those facts must appear in the
record.

Similarly, in this case, despite respondent’s submission of its explanations and pieces of evidence to the assessments, the
Commissioner failed to acknowledge these submissions and instead issued identical Preliminary Assessment Notice, Final Letter
of Demand with the Final Assessment Notices, and Collection Letter, the latter being premised on respondent’s alleged failure to
submit supporting documents to its protest. Had the Commissioner performed her functions properly and considered the
explanations and pieces of evidence submitted by respodnent, this case could have been settled at the earliest possible time.

The requirement set by law to state in writing the factual and legal bases for the assessment is not a hollow exhortation.ℒαwρhi৷
The law imposes a substantive, not merely a formal, requirement.

the rule against estoppel does not apply. Although the government cannot be estopped by the negligence or omission of its
agents, the obligatory provision on protesting a tax assessment cannot be rendered nugatory by a mere act of the CIR.

15. Himalayang Pilipino Plans, Inc. vs. CIR, G.R. No. 241848,

14 May 2021

Doctrine: Section 13 of the NIRC requires that a revenue officer must be validly authorized before conducting an audit of a
taxpayer

Facts:

· The BIR Regional Director of Quezon City issued an electronic LOA on September 29, 2010, authorizing the
examination of the petitioner's books of accounts and other accounting records for all internal revenue taxes for the period
spanning January 1, 2009, to December 31, 2009.

· Petitioner received the LOA on October 12, 2010 and thereafter submitted the pertinent documents relevant to the
examination of its books of accounts for the said taxable year.

· Revenue officers named in the ELOA were Officers Ruby Cacdac and Barnardo Andaya, however, it was officer
Bernard Bagauisan who conducted the actual audit of petitioner's books of accounts.

· In its examination of the book of accounts, it was found that there were deficiency taxes for the taxable year 2009,
hence the issuance of Preliminary Assessment Notice (PAN) with Details of Discrepancies.

· On January 14, 2013, petitioner received a Formal Letter of Demand with Final Assessment Notices and Details of
Discrepancies.

· Himalaya then administratively protested the FAN on February 14, 2013 or 31 days after receipt of FAN.

· Due to the alleged inaction of respondent on its protest, petitioner filed a Petition for Review on November 7, 2013 to
the CTA in Division, in which, the CTA dismissed the petition for lack of jurisdiction because petitioner's protest against the
FAN and FLD were filed out of time.

· CTA En Banc affirmed the ruling of the CTA Second Division.

· Taking a hint from the dissenting opinion of Presiding Justice Del Rosario, petitioner moved for the reconsideration of
the CTA En Banc's decision and raised for the first time that the FAN and FLD issued against it were null and void because
of the lack of authority of the revenue officers who conducted the audit.

· CTA En Banc denied the motion because HImalaya belatedly raised the issue on the authority of the revenue officer.

· Thus, review for certiorari was filed.

Issue:

Whether or not the assessment conducted against petitioner was null and void?

Ruling:

YES. The assessment conducted against Himalaya is null and void.

Under Revenue Memorandum Order (RMO) No. 43-90, the reassignment of the examination of petitioner's books of accounts
pursuant to the ELOA rom revenue officer Cacdac to revenue officer Bagauisan necessitates the issuance of a new LOA. In
addition, under RMO No. 43-90, the only BIR officials authorized to issue and sign Letters of Authority are the Regional Directors,
the Deputy Commissioners and the Commissioner.

Here, here was no new LOA issued naming Bagauisan as the new revenue officer who would conduct the examination of
petitioner's books of accounts. The authority of Bagauisan is anchored only upon the memorandum of assignment signed by
revenue district officer Nacar.

Section 13 of the NIRC requires that a revenue officer must be validly authorized before conducting an audit of a taxpayer, hence,
the lack of a valid LOA authorizing Revenue Officer Bagauisan to conduct an audit on petitioner makes the assessment void.

Lastly, as stated in Presiding Justice Del Rosario's dissenting opinion on the CTA En Banc's decision, the failure of petitioner to
raise at the earliest opportunity, the lack of the revenue officer's authority, does not preclude the Court from considering the same
because the said issue goes into the intrinsic validity of the assessment itself.

Note: The Court's decision highlights the importance of a valid LOA in conducting tax assessments.