TAX REMEDIES (National Internal under Sections 254 (Attempt to Evade or Defeat

Revenue Code) Tax) and 255 (Willful Failure to Pay Tax) of the
I. BUREAU OF INTERNAL REVENUE NIRC. On the lack of control number in the
A. Organizational Structure assessment notice, CIR explained that such is a
1. Chief Officials of the Bureau of mere office requirement in the Assessment
Internal Revenue (Section 3) Service for the purpose of internal control and
2. Agents of the Commissioner of monitoring; hence, the unnumbered assessment
Internal Revenue (Section 12) notices should not be interpreted as irregular or
anomalous

B. Powers and Duties of the BIR On September 22, 2003, the Chief State
1. Powers and Duties of the Bureau of Prosecutor issued a Resolution finding no
Internal Revenue (Section 2) sufficient evidence to establish probable cause
2. Power of the Commissioner to against respondents LMCEC, Camus and
Interpret Tax Laws and to Decide Mendoza. On the required prior determination of
Tax Cases (Section 4) fraud, the Chief State Prosecutor ruled that
3. Power of the Commissioner to there was no prior determination of fraud. CIR
Obtain Information, and to appealed to respondent Secretary of Justice but
Summon, Examine, and Take the latter denied its petition for review
Testimony of Persons (Section 5)
a. CIR v. Raul M. Gonzales, G.R. No. ISSUE: Whether LMCEC and its corporate
177279, 13 October 2010 officers may be prosecuted for violation of
Sections 254 (Attempt to Evade or Defeat Tax)
CIR V. RAUL M. GONZALES and 255 (Willful Failure to Supply Correct and
G.R. NO. 177279, 13 OCTOBER 2010 Accurate Information and Pay Tax).
VILLARAMA, JR., J
RULING: Yes. In the Details of Discrepancies
FACTS: Pursuant to Letter of Authority issued attached as Annex B of the PAN, private
by then Commissioner of Internal Revenue respondents were already notified that inasmuch
(petitioner) Dakila B. Fonacier, and officers of as the revenue officers were not given the
the Tax Fraud Division (TFD), National Office, opportunity to examine LMCECs books of
conducted a fraud investigation against accounts, accounting records and other
respondent L. M. Camus Engineering documents, said revenue officers gathered
Corporation (LMCEC) for the taxable years 1997, information from third parties. Such procedure is
1998 and 1999. The audit and investigation authorized under Section 5 of the NIRC, which
against LMCEC were precipitated by the provides:
information provided by an "informer" that
LMCEC had substantial under declared income SEC. 5. Power of the Commissioner to
for the said period. Obtain Information, and to Summon,
Examine, and Take Testimony of Persons.
LMCEC failed and refused to pay the deficiency In ascertaining the correctness of any
tax assessment which had become final and return, or in making a return when none
executory as a result of the said taxpayer's has been made, or in determining the
failure to file a protest thereon within the 30-day liability of any person for any internal
reglementary period contending that LMCEC revenue tax, or in collecting any such
cannot be held liable whatsoever for the alleged liability, or in evaluating tax compliance,
tax deficiency which had become due and the Commissioner is authorized:
demandable. They also assail as invalid the
assessment notices which bear no serial (A) To examine any book, paper,
numbers. CIR disagreed with the contention of record or other data which may be
LMCEC that the complaint filed is not criminal relevant or material to such
in nature, pointing out that LMCEC and its inquiry;
officers Camus and Mendoza were being charged (B) To obtain on a regular basis
for the criminal offenses defined and penalized from any person other than the
 person whose internal revenue tax whether the prosecutor’s findings are supported
liability is subject to audit or by the facts, or by the law. In so doing, courts do
investigation, or from any office or not act as prosecutors but as organs of the
officer of the national and local judiciary, exercising their mandate under the
governments, government agencies Constitution, relevant statutes, and remedial
and instrumentalities, including rules to settle cases and controversies. Clearly,
the Bangko Sentral ng Pilipinas the power of the Secretary of Justice to review
and government-owned or - does not preclude this Court and the CA from
controlled corporations, any intervening and exercising our own powers of
information such as, but not review with respect to the DOJs findings, such as
limited to, costs and volume of in the exceptional case in which grave abuse of
production, receipts or sales and discretion is committed, as when a clear
gross incomes of taxpayers, and sufficiency or insufficiency of evidence to support
the names, addresses, and a finding of probable cause is ignored.
financial statements of
corporations, mutual fund
companies, insurance companies, b. Fitness by Design v. CIR, G.R.
regional operating headquarters of No. 177982, 17 October 2008
multinational companies, joint
accounts, associations, joint FITNESS BY DESIGN V. CIR
ventures or consortia and G.R. NO. 177982, 17 OCTOBER 2008
registered partnerships, and their CARPIO MORALES, J
members;
(C) To summon the person liable FACTS: On March 17, 2004, the Commissioner
for tax or required to file a return, on Internal Revenue (respondent) assessed
or any officer or employee of such Fitness by Design, Inc. (petitioner) for deficiency
person, or any person having income taxes for the tax year 1995 in the total
possession, custody, or care of the amount of ₱10,647,529.69. Petitioner protested
books of accounts and other the assessment on the ground that it was issued
accounting records containing beyond the three-year prescriptive. On February
entries relating to the business of 1, 2005, respondent issued a warrant of distraint
the person liable for tax, or any and/or levy against Fitness by Design. In his
other person, to appear before the answer, CIR alleged that failure of Fitness by
Commissioner or his duly Design to file a VAT return and for filing a
authorized representative at a fraudulent income tax return for the year 1995,
time and place specified in the the corresponding taxes may be assessed at any
summons and to produce such time within ten (10) years after the discovery of
books, papers, records, or other such omission or fraud pursuant to Section
data, and to give testimony; 222(a) of the 1997 Tax Code. The subject
(D) To take such testimony of the deficiency tax assessments have already become
person concerned, under oath, as final, executory and demandable for failure of the
may be relevant or material to petitioner to file a protest within the
such inquiry reglementary period provided for by law. Thus,
the CIR has legal basis to collect the tax liability
The determination of probable cause is part of either by distraint and levy or civil action.
the discretion granted to the investigating
prosecutor and ultimately, the Secretary of The Bureau of Internal Revenue (BIR) filed on
Justice. However, this Court and the CA possess March 10, 2005 a criminal complaint before the
the power to review findings of prosecutors in Department of Justice against the officers and
preliminary investigations. Although policy accountant of petitioner for violation of the
considerations call for the widest latitude of provisions of "The National Internal Revenue
deference to the prosecutor’s findings, courts Code of 1977, as amended, covering the taxable
should never shirk from exercising their power, year 1995." During the preliminary hearing,
when the circumstances warrant, to determine Fitness by Design’s former bookkeeper attested
that a former colleague – certified public b. Oceanic Wireless Network, Inc.
accountant Leonardo Sablan (Sablan) – illegally v. CIR, G.R. No. 148380, 9
took custody of petitioner’s accounting records, December 2005
invoices, and official receipts and turned them
over to the BIR. OCEANIC WIRELESS NETWORK, INC. V.
CIR
Fitness subpoenaed Sablan for the hearing G.R. NO. 148380, 9 DECEMBER 2005
before the CTA but he failed to appear. Fitness AZCUNA, J
submitted written interrogatories addressed to FACTS: Petitioner received from the Bureau of
Sablan but was denied by the CTA as it sought Internal Revenue (BIR) deficiency tax
that such testimony, documents, and admissions assessments for the taxable year 1984. Petitioner
sought are not relevant and it violates Section 2 filed a protest against the tax assessments and
of Republic Act No. 2338 proscribing the requested a reconsideration or its cancellation in
revelation of identities of informers of violations a letter to the BIR Commissioner dated April 12,
of internal revenue laws. 1988. Acting in behalf of the BIR Commissioner,
the then Chief of the BIR Accounts Receivable
ISSUE: Whether or not the BIR can obtain and Billing Division, Mr. Severino B. Buot,
information without the consent of Fitness by reiterated the tax assessments while denying
Design? petitioner's request for reinvestigation. He
likewise demanded the petitioner to pay the total
RULING: Yes. The questioned resolutions were amount of P8, 644,998.71 within ten (10) days
not tainted by arbitrariness. from receipt thereof, otherwise the case shall be
referred to the Collection Enforcement Division
The law allows the BIR access to all relevant or of the BIR National Office for the issuance of a
material records and data in the person of the warrant of distraint and Levy without further
taxpayer (pursuant to Section 5 of the Tax Code), notice. Upon petitioner’s failure to pay the
and the BIR can accept documents which cannot subject tax assessments within the prescribed
be admitted in a judicial proceeding where the period, the Assistant Commissioner for
Rules of Court are strictly observed. To require Collection, acting for the Commissioner of
the consent of the taxpayer would defeat the Internal Revenue, issued the corresponding
intent of the law to help the BIR assess and warrants of distraint and/or levy and
collect the correct amount of taxes. garnishment. These were served on petitioner on
October 10, 1991 and October 17, 1991,
A CTA Case is not a criminal prosecution where respectively.
petitioner can cross examine the witness against Petitioner filed a Petition for Review with the
him and to have compulsory process issued to Court of Tax Appeals (CTA) to contest the
secure the attendance of witnesses and the issuance of the warrants to enforce the collection
production of other evidence in his behalf does of the tax assessments.
not lie. Petition is DISMISSED. The CTA dismissed the petition for lack of
jurisdiction in a decision dated September 16,
1994, declaring that said petition was filed
beyond the thirty (30)-day period reckoned from
4. Power of the Commissioner to Make the time when the demand letter of January 24,
Assessments and Prescribe Additional 1991 by the Chief of the BIR Accounts Receivable
Requirements for Tax Administration and and Billing Division was presumably received.
Enforcement (Section 6) ISSUE: Whether the demand letter for tax
a. Revenue Memorandum deficiency assessments issued and signed by a
Circular No. 23-2000 subordinate officer who was acting in behalf of
the Commissioner of Internal Revenue, is
deemed final and executory and subject to an
appeal to the Court of Tax Appeals or not.
RULING: YES. A demand letter for payment of
delinquent taxes may be considered a decision on
a disputed or protested assessment. The
determination on whether or not a demand letter the letter contained a notation indicating that
is final is conditioned upon the language used or petitioner’s request for reconsideration had been
the tenor of the letter being sent to the taxpayer. denied for lack of supporting documents.
We laid down the rule that the Commissioner of The above conclusion finds support
Internal Revenue should always indicate to the in Commissioner of Internal Revenue v. Ayala
taxpayer in clear and unequivocal language what Securities Corporation, where we held:
constitutes his final determination of the The letter of February 18, 1963 (Exh. G),
disputed assessment, thus: in the view of the Court, is tantamount to
. . . we deem it appropriate to state that a denial of the reconsideration or
the Commissioner of Internal Revenue [respondent corporation’s]…protest o[f]
should always indicate to the taxpayer in the assessment made by the petitioner,
clear and unequivocal language whenever considering that the said letter [was] in
his action on an assessment questioned by itself a reiteration of the demand by the
a taxpayer constitutes his final Bureau of Internal Revenue for the
determination on the disputed settlement of the assessment already
assessment, as contemplated by Sections made, and for the immediate payment of
7 and 11 of Republic Act No. 1125, as the sum of P758,687.04 in spite of the
amended. On the basis of his statement vehement protest of the respondent
indubitably showing that the corporation on April 21, 1961. This
Commissioner’s communicated action is certainly is a clear indication of the firm
his final decision on the contested stand of petitioner against the
assessment, the aggrieved taxpayer would reconsideration of the disputed
then be able to take recourse to the tax assessment…This being so, the said letter
court at the opportune time. Without amount[ed] to a decision on a disputed or
needless difficulty, the taxpayer would be protested assessment, and, there, the
able to determine when his right to appeal court a quo did not err in taking
to the tax court accrues. cognizance of this case.
The rule of conduct would also obviate all desire Similarly, in Surigao Electric Co., Inc v. Court of
and opportunity on the part of the taxpayer to Tax Appeals, and in CIR v. Union Shipping
continually delay the finality of the assessment – Corporation, we held:
and, consequently, the collection of the amount ". . . In this letter, the commissioner not
demanded as taxes – by repeated requests for only in effect demanded that the
recomputation and reconsideration. On the part petitioner pay the amount of ₱11,533.53
of the Commissioner, this would encourage his but also gave warning that in the event it
office to conduct a careful and thorough study of failed to pay, the said commissioner would
every questioned assessment and render a be constrained to enforce the collection
correct and definite decision thereon in the first thereof by means of the remedies provided
instance. This would also deter the by law. The tenor of the letter, specifically
Commissioner from unfairly making the the statement regarding the resort to
taxpayer grope in the dark and speculate as to legal remedies, unmistakably indicate[d]
which action constitutes the decision appealable the final nature of the determination
to the tax court. Of greater import, this rule of made by the commissioner of the
conduct would meet a pressing need for fair play, petitioner’s deficiency franchise tax
regularity, and orderliness in administrative liability."
action. The demand letter received by petitioner verily
In this case, the letter of demand dated January signified a character of finality. Therefore, it was
24, 1991, unquestionably constitutes the final tantamount to a rejection of the request for
action taken by the Bureau of Internal Revenue reconsideration. As correctly held by the Court of
on petitioner’s request for reconsideration when Tax Appeals, "while the denial of the protest was
it reiterated the tax deficiency assessments due in the form of a demand letter, the notation in
from petitioner, and requested its payment. the said letter making reference to the protest
Failure to do so would result in the "issuance of a filed by petitioner clearly shows the intention of
warrant of distraint and levy to enforce its the respondent to make it as [his] final decision."
collection without further notice. ―In addition,
This now brings us to the crux of the matter as to Section 6 of the Code further provides:
whether said demand letter indeed attained "SEC. 6. Power of the Commissioner to Make
finality despite the fact that it was issued and Assessments and Prescribe Additional
signed by the Chief of the Accounts Receivable Requirements for Tax Administration and
and Billing Division instead of the BIR Enforcement. –
Commissioner. (A) Examination of Returns and
The general rule is that the Commissioner of Determination of Tax Due. - After a
Internal Revenue may delegate any power vested return has been filed as required under
upon him by law to Division Chiefs or to officials the provisions of this Code,
of higher rank. He cannot, however, delegate the the Commissioner or his duly
four powers granted to him under the National authorized representative may
Internal Revenue Code (NIRC) enumerated in authorize the examination of any
Section 7. taxpayer and the assessment of the
As amended by Republic Act No. 8424, Section 7 correct amount of tax; Provided, however,
of the Code authorizes the BIR Commissioner to That failure to file a return shall not
delegate the powers vested in him under the prevent the Commissioner from
pertinent provisions of the Code to any authorizing the examination of any
subordinate official with the rank equivalent to a taxpayer.
division chief or higher, except the following: The tax or any deficiency tax so assessed shall be
(a) The power to recommend the paid upon notice and demand from
promulgation of rules and regulations by the Commissioner or from his duly
the Secretary of Finance; authorized representative. . .." (Emphasis
(b) The power to issue rulings of first supplied)
impression or to reverse, revoke or modify Thus, the authority to make tax assessments
any existing ruling of the Bureau; may be delegated to subordinate officers. Said
(c) The power to compromise or abate assessment has the same force and effect as that
under Section 204(A) and (B) of this Code, issued by the Commissioner himself, if not
any tax deficiency: Provided, reviewed or revised by the latter such as in this
however, that assessments issued by the case.
Regional Offices involving basic deficiency A request for reconsideration must be made
taxes of five hundred thousand pesos within thirty (30) days from the taxpayer’s
(P500,000) or less, and minor criminal receipt of the tax deficiency assessment,
violations as may be determined by rules otherwise, the decision becomes final,
and regulations to be promulgated by the unappealable and therefore, demandable. A tax
Secretary of Finance, upon the assessment that has become final, executory and
recommendation of the Commissioner, enforceable for failure of the taxpayer to assail
discovered by regional and district the same as provided in Section 228 can no
officials, may be compromised by a longer be contested, thus:
regional evaluation board which shall be "SEC. 228. Protesting of Assessment. –
composed of the Regional Director as When the Commissioner or his duly
Chairman, the Assistant Regional authorized representative finds that
Director, heads of the Legal, Assessment proper taxes should be assessed, he shall
and Collection Divisions and the Revenue first notify the taxpayer of his
District Officer having jurisdiction over findings…Such assessment may be
the taxpayer, as members; and protested administratively by filing a
(d) The power to assign or reassign request for reconsideration or
internal revenue officers to reinvestigation within thirty (30) days
establishments where articles subject to from receipt of the assessment in such
excise tax are produced or kept. form and manner as may be prescribed by
It is clear from the above provision that the act of implementing rules and regulations.
issuance of the demand letter by the Chief of the Within sixty (60) days from filing of the
Accounts Receivable and Billing Division does protest, all relevant supporting
not fall under any of the exceptions that have documents shall have been submitted;
been mentioned as non-delegable.
 otherwise, the assessment shall become notarized on February 19, 2003, received by the
final. BIR Tax Fraud Division on February 28, 2003
If the protest is denied in whole or in part, or is and accepted by Assistant Commissioner
not acted upon within one hundred (180) days Salazar.
from submission of documents, the taxpayer
adversely affected by the decision or inaction The BIR issued a Preliminary Assessment Notice
may appeal to the Court of Tax Appeals within for the taxable year 1998 against the Kudos
thirty (30) days from receipt of the said decision, Metal Corp. This was followed by a Formal
or from the lapse of the one hundred eighty (180) Letter of Demand with Assessment Notices for
- day period; otherwise, the decision shall become taxable year 1998, dated September 26, 2003
final, executory and demandable." which was received by respondent on November
Here, petitioner failed to avail of its right to 12, 2003.
bring the matter before the Court of Tax Appeals
within the reglementary period upon the receipt ISSUE: Whether the Assistant Commissioner of
of the demand letter reiterating the assessed the Enforcement Service is authorized to sign a
delinquent taxes and denying its request for Waiver of the Defense of Presentation.
reconsideration which constituted the final Note: This issue was not raised to the Supreme
determination by the Bureau of Internal Court but was decided upon by the CTA, En
Revenue on petitioner’s protest. Being a final Banc.
disposition by said agency, the same would have
been a proper subject for appeal to the Court of
Tax Appeals. RULING: Yes, the Assistant Commissioner of
The rule is that for the Court of Tax Appeals to the Enforcement Service is authorized to
acquire jurisdiction, an assessment must first be sign the waiver.
disputed by the taxpayer and ruled upon by the
Commissioner of Internal Revenue to warrant a The CTA found that the Assistant
decision from which a petition for review may be Commissioner of the Enforcement Service is
taken to the Court of Tax Appeals. Where an authorized to sign the waiver pursuant to
adverse ruling has been rendered by the
RDAO No. 05-01, which provides in part as
Commissioner of Internal Revenue with
follows:
reference to a disputed assessment or a claim for
refund or credit, the taxpayer may appeal the
A. For National Office cases:
same within thirty (30) days after receipt thereof
Designated Revenue Official
c. CIR v. Kudos Metal Corp., G.R.
1. Assistant Commissioner (ACIR),
No. 178087, 5 May 2010
For tax fraud and policy Enforcement
Service cases
CIR V. KUDOS METAL CORP.
2. ACIR, Large Taxpayers Service For
G.R. NO. 178087, 5 MAY 2010
large taxpayers’ cases other than
DEL CASTILLO, J
those cases falling under Subsection B
FACTS: Kudos Metal Corp’s records were hereof
reviewed and audited after it failed to comply 3. ACIR, Legal Service For cases
with the three Notices of Presentation of Records pending verification and awaiting
served by the BIR. resolution of certain legal issues prior
Kudos Metal Corp.’s accountant, Nelia Pasco to prescription and for
executed a Waiver of the Defense of Prescription issuance/compliance of Subpoena
on December 10, 2001 which was notarized on Duces Tecum
January 22, 2002. It was received by the BIR 4. ACIR, Assessment Service (AS) For
Enforcement Service on January 31, 2002 and by cases which are pending in or subject
the BIR Tax Fraud Division on February 4, 2002, to review or approval by the ACIR, AS
and accepted by the Assistant Commissioner of
Based on the foregoing, the Assistant
the Enforcement Service, Percival T. Salazar.
Commissioner, Enforcement Service is
A second Waiver of Defense of Prescription was
authorized to sign waivers in tax fraud cases. A
again executed by Pasco on February 18, 2003,
perusal of the records reveals that the residential land as tax base for computation of
investigation of the subject deficiency taxes in the deficiencies.
this case was conducted by the National RULING:
Investigation Division of the BIR, which was 1.) Yes.
formerly named the Tax Fraud Division. Thus, While the Commission of Internal Revenue has
the subject assessment is a tax fraud case. the authority to prescribe real property values
and divide the Philippine into zones as provided
under Section 6(E) of the National Internal
d. Republic v. Aquafresh Seafoods, Revenue Code, the law is clear that the same has
Inc., G.R. No. 170389, 20 to be done upon consultation with competent
October 2010 appraisers both from the public and private
sectors. Petitioner’s act of re-classifying the
REPUBLIC V. AQUAFRESH SEAFOODS, subject properties from residential to commercial
INC. cannot be done without first complying with the
G.R. NO. 170389, 20 OCTOBER 2010 procedures prescribed by law.
PERALTA, J
FACTS: Aquafresh Seafoods Inc. sold to Philips 2.) No.
Seafoods, Inc. two parcels of land, including As observed by the CTA en banc, that the
improvements thereon, for Php 3,100, 000.00. ―Revised Zonal Values of Real Properties‖ was
Aquafresh paid Php 186,000.00, representing the drafted by petitioner, with representatives from
Capital Gains Tax (CGT) and Php 46,500.00, both public and private sectors, duly satisfied the
representing the Documentary Stamp Tax (DST) requirement of the law for its validity. It
due from the said sale. indicates the zonal values and classified the
The Bureau of Internal Revenue (BIR) received a properties in Barrio Banica as residential.
report that the lots sold were undervalued for Hence, it is proper application.
taxation purposes. After an investigation, BIR As regards the contention of petitioner that the
concluded that the subject properties were act of classifying the subject properties was in
commercial with a zonal value of Php 2,000.00 accordance with the section 1(b) and 2 Zonal
per square meter. BIR assessed Aquafresh of Value Guidelines, the Court ruled that it was not
CGT and DST defencies in the sum of Php applicable in the instant case. Section 1(b) does
1,372,171.46 and Php 356,267.62, respectively. not apply because said proviso operates only
when no zonal valuation has been prescribed and
Aquafresh protested the assessments. section 2 shall apply only when the real property
Aquafresh's argued that the subject properties is located in an area or zone where the properties
were located in Barrio Banica, Roxas, where the are not yet classified and their respective zonal
pre-defined zonal value was Php 650.00 per valuation are not yet determined.
square meter based on the ―Revised Zonal Values 5. Authority of the
of Real Properties in the City of Roxas‖. Commissioner to Delegate Power
Aquafresh argued that since there was already a (Section 7)
pre-defined zonal value for properties located in
Barrio Banica, the BIR officials had no business The Commissioner may delegate
re-classifying the subject properties to the powers vested in him under
commercial. The CTA ruled in favor of the pertinent provisions of this
respondent. Hence, the petitioner filed the Code to any or such subordinate
instant petition. officials with the rank equivalent
ISSUES:
to a division chief or higher,
1.) Whether the requirement of consultation with
subject to such limitations and
competent appraisers both from private and
public sectors in determining the fair market restrictions as may be imposed
value of the subject lots were applicable in the under rules and regulations to be
instant case. promulgated by the Secretary of
2.) Whether the CTA erred in applying the fair Finance, upon recommendation of
market value based on the zonal valuation of the Commissioner: Provided,
however, That the following
powers of the Commissioner shall excise tax are produced or
not be delegated: kept.

(a) The power to

recommend the
6. Duty of the Commissioner to Ensure the
promulgation of rules and
Provision and Distribution of Forms, Receipts,
regulations by the
Certificates, and Appliances, and the
Secretary of Finance;
Acknowledgment of Payment of Taxes (Section 8)
(b) The power to issue
(A) Provision and Distribution
rulings of first impression
to Proper-Officials. - Any law to
or to reverse, revoke or
the contrary notwithstanding, it
modify any existing ruling
shall be the duty of the
of the Bureau;
Commissioner, among other
things, to prescribe, provide, and
(c) The power to
distribute to the proper officials
compromise or abate,
the requisite licenses; internal
under Sec. 204 (A) and (B)
revenue stamps; unique, secure
of this Code, any tax
and non-removable identification
liability: Provided,
markings (hereafter called unique
however, That
identification markings), such as
assessments issued by the
codes or stamps, be affixed to or
regional offices involving
form part of all unit packets and
basic deficiency taxes of
packages and any outside
Five hundred thousand
packaging of cigarettes and bottles
pesos (P500,000) or less,
of distilled spirits; labels and other
and minor criminal
forms; certificates; bonds; records;
violations, as may be
invoices; books; receipts;
determined by rules and
instruments; appliances and
regulations to be
apparatus used in administering
promulgated by the
the laws falling within the
Secretary of finance, upon
jurisdiction of the Bureau. For this
recommendation of the
purpose, internal revenue stamps,
Commissioner, discovered
or other markings and labels shall
by regional and district
be caused by the Commissioner to
officials, may be
be printed with adequate security
compromised by a regional
features.
evaluation board which
Internal revenue stamps, whether
shall be composed of the
of a bar code or fuson design, or
Regional Director as
other markings shall be firmly and
Chairman, the Assistant
conspicuously affixed or printed on
Regional Director, the
each pack of cigars and cigarettes
heads of the Legal,
and bottles of distilled spirits
Assessment and Collection
subject to excise tax in the manner
Divisions and the Revenue
and form as prescribed by the
District Officer having
Commissioner, upon approval of
jurisdiction over the
the Secretary of Finance.
taxpayer, as members; and
To further improve tax
(d) The power to assign or
administration, cigarette and
reassign internal revenue
alcohol manufacturers shall be
officers to establishments
required to install automated
where articles subject to
volume-counters of packs and
 bottles to deter over-removals and made before the expiration of the
misdeclaration of removals. period previously agreed upon.

(B) Receipts for Payment (c) Any internal revenue tax which
Mode. - It shall be the duty of the has been assessed within the
Commissioner or his duly period of limitation as prescribed
authorized representative or an in paragraph (a) hereof may be
authorized agent bank to whom collected by distraint or levy or by
any payment of any tax is made a proceeding in court within five
under the provisions of this Code (5) years following the assessment
to acknowledge the payment of of the tax.
such tax, expressing the amount
paid and the particular account for (d) Any internal revenue tax,
which such payment was made in which has been assessed within
a form and manner prescribed the period agreed upon as provided
therefor by the Commissioner. in paragraph (b) hereinabove, may
be collected by distraint or levy or
II. PRESCRIPTIVE PERIODS by a proceeding in court within the
period agreed upon in writing
before the expiration of the five (5)
A. Imprescriptibility of taxes -year period. The period so agreed
Exceptions: upon may be extended by
1. Section 222 subsequent written agreements
made before the expiration of the
Exceptions as to Period of period previously agreed upon.
Limitation of Assessment and
Collection of Taxes. (e) Provided, however, that nothing
in the immediately preceding and
(a) In the case of a false or paragraph (a) hereof shall be
fraudulent return with intent to construed to authorize the
evade tax or of failure to file a examination and investigation or
return, the tax may be assessed, or inquiry into any tax return filed in
a proceeding in court for the accordance with the provisions of
collection of such tax may be filed any tax amnesty law or decree.
without assessment, at any time
within ten (10) years after the
discovery of the falsity, fraud or
omission: Provided, That in a fraud 2. Section 430, RA No. 10863
assessment which has become final
and executory, the fact of fraud Sec. 430. Period of Limitation. –
shall be judicially taken cognizance In the absence of fraud and
of in the civil or criminal action for when the goods have been
the collection thereof. finally assessed and released,
the assessment shall be
(b) If before the expiration of the conclusive upon all parties
time prescribed in Section 203 for three (3) years from the date of
the assessment of the tax, both the final payment of duties and
Commissioner and the taxpayer taxes, or upon completion of
have agreed in writing to its the post clearance audit.
assessment after such time, the
tax may be assessed within the
period agreed upon. The period so 3. Section 194, LGC
agreed upon may be extended by
subsequent written agreement
Periods of Assessment and (2) The taxpayer
Collection. - requests for a
(a) Local taxes, fees, or reinvestigation and
charges shall be assessed executes a waiver in
within five (5) years from writing before
the date they became due. expiration of the
No action for the collection period within which
of such taxes, fees, or to assess or collect;
charges, whether and
administrative or judicial, (3) The taxpayer is
shall be instituted after the out of the country or
expiration of such period: otherwise cannot be
Provided, That. taxes, fees located.
or charges which have
accrued before the
effectivity of this Code may 4. Section 270, LGC
be assessed within a period
of three (3) years from the Periods Within Which To
date they became due. Collect Real Property Taxes. -
(b) In case of fraud or intent The basic real property tax and
to evade the payment of any other tax levied under this
taxes, fees, or charges, the Title shall be collected within five
same may be assessed (5) years from the date they
within ten (10) years from become due. No action for the
discovery of the fraud or collection of the tax, whether
intent to evade payment. administrative or judicial, shall be
(c) Local taxes, fees, or instituted after the expiration of
charges may be collected such period. In case of fraud or
within five (5) years from intent to evade payment of the tax,
the date of assessment by such action may be instituted for
administrative or judicial the collection of the same within
action. No such action shall ten (10) years from the discovery of
be instituted after the such fraud or intent to evade
expiration of said period: payment.
Provided, however, That, The period of prescription within
taxes, fees or charges which to collect shall be suspended
assessed before the for the time during which:
effectivity of this Code may
be collected within a period (1) The local treasurer is
of three (3) years from the legally prevented from
date of assessment. collecting the tax;
(d) The running of the (2) The owner of the
periods of prescription property or the person
provided in the preceding having legal interest
paragraphs shall be therein requests for
suspended for the time reinvestigation and
during which: executes a waiver in writing
before the expiration of the
(1) The treasurer is period within which to
legally prevented collect; and
from making the (3) The owner of the
assessment of property or the person
collection; having legal interest
therein is out of the country
 or otherwise cannot be willfully made, the penalty
located. to be imposed shall be fifty
percent (50%) of the tax or
of the deficiency tax, in case,
any payment has been made
B. Sections 203, 222, 223 on the basis of such return
before the discovery of the
SEC. 223. Suspension of falsity or fraud: Provided,
Running of Statute of That a substantial under-
Limitations. - The running of the declaration of taxable sales,
Statute of Limitations provided in receipts or income, or a
Sections 203 and 222 on the substantial overstatement
making of assessment and the of deductions, as determined
beginning of distraint or levy a by the Commissioner
proceeding in court for collection, pursuant to the rules and
in respect of any deficiency, shall regulations to be
be suspended for the period during promulgated by the
which the Commissioner is Secretary of Finance, shall
prohibited from making the constitute prima facie
assessment or beginning distraint evidence of a false or
or levy or a proceeding in court and fraudulent return: Provided,
for sixty (60) days thereafter; when further, That failure to
the taxpayer requests for a report sales, receipts or
reinvestigation which is granted by income in an amount
the Commissioner; when the exceeding thirty percent
taxpayer cannot be located in the (30%) of that declared per
address given by him in the return return, and a claim of
filed upon which a tax is being deductions in an amount
assessed or collected: Provided, exceeding (30%) of actual
that, if the taxpayer informs the deductions, shall render the
Commissioner of any change in taxpayer liable for
address, the running of the Statute substantial under-
of Limitations will not be declaration of sales, receipts
suspended; when the warrant of or income or for
distraint or levy is duly served overstatement of
upon the taxpayer, his authorized deductions, as mentioned
representative, or a member of his herein.
household with sufficient 3. Cases:
discretion, and no property could a. Talento v. Escalada
be located; and when the taxpayer 556 SCRA 491 (2008)
is out of the Philippines.
EMERLINDA S. TALENTO, IN HER
CAPACITY AS THE PROVINCIAL
1. Fraud v. Fraudulent Return TREASURER OF THE PROVINCE OF
BATAAN V. HON. REMIGIO M. ESCALADA,
JR., PRESIDING JUDGE OF THE
2. See Section 248(B) REGIONAL TRIAL COURT OF BATAAN,
BRANCH 3, AND PETRON CORPORATION
(B) In case of willful neglect G.R. NO. 180884 (JUNE 27, 2008)
to file the return within the YNARES-SANTIAGO, J.
period prescribed by this
Code or by rules and FACTS: Petron received from the Provincial
regulations, or in case a Assessor’s Office of Bataan a notice of revised
false or fraudulent return is assessment over its machineries and pieces of
equipment. Based on said revised assessment, that it should develop a rubber plantation. In
Provincial Treasurer of Bataan issued a notice compliance with this requirement, private
informing Petron that it has a deficiency real respondent purchased from the Philippine
property tax due. Petron was given 60 days government in 1961, under the Public Land Act
within which to file an appeal with the Local and the Parity Amendment to the 1935
Board of Assessment Appeals (LBAA). Petron Constitution, certain parcels of land located in
filed a petition with the LBAA contesting the Tumajubong, Basilan, and there developed a
revised assessment. It also sent a letter to rubber plantation.
Provincial Treasurer stating that in view of the
pendency of its appeal with the LBAA, any action More than a decade later, on August 2, 1973, the
on the subject properties would be premature. justice secretary rendered an opinion stating
But Petron received a notice of sale of its that, upon the expiration of the Parity
properties from the Provincial Treasurer. Petron Amendment on July 3, 1974, the ownership
filed with the RTC for prohibition with prayer for rights of Americans over public agricultural
TRO and preliminary injunction. RTC ruled in lands, including the right to dispose or sell their
favor of Petron. The Provincial Treasurer real estate, would be lost. On the basis of this
received the order of the RTC on November 6, Opinion, private respondent sold to Siltown
2007. Hence, it had only up to November 21, Realty Philippines, Inc. on January 21, 1974, its
2007 to file a petition for review. However, the Basilan landholding for P500,000 payable in
petition was filed to the Supreme Court only on installments. In accord with the terms of the
January 4, 2008, or 43 days late. sale, Siltown Realty Philippines, Inc. leased the
said parcels of land to private respondent for a
ISSUE: Whether the action of the Provincial period of 25 years, with an extension of another
Assessor’s Office against Petron already 25 years at the latter's option.
prescribed.
Based on the BIR's Letter of Authority No. 10115
RULING: Yes. dated April 14, 1975, the books and accounts of
private respondent were examined for the
The Provincial Treasurer’s failure to file an purpose of determining its tax liability for
appeal within the reglementary period rendered taxable year 1974. The examination resulted in
the order of the trial court final and executory, the April 23, 1975 assessment of private
justifying the dismissal of the Provincial respondent for deficiency income tax in the
Treasurer’s petition. amount of P6,005.35, which it duly paid.

Subsequently, the BIR also issued Letters of

Authority Nos. 074420 RR and 074421 RR and
b. CIR v. Goodrich, Phils., Memorandum Authority Reference No. 749157
104171, 24 February 1999 for the purpose of examining Siltown's business,
income and tax liabilities. On the basis of this
COMMISSIONER OF INTERNAL REVENUE examination, the BIR commissioner issued
V. B.F. GOODRICH PHILS., INC. (NOW against private respondent on October 10, 1980,
SIME DARBY INTERNATIONAL TIRE CO., an assessment for deficiency in donor's tax in the
INC.) AND THE COURT OF APPEALS amount of P1,020,850, in relation to the
G.R. NO. 104171 FEBRUARY 24, 1999 previously mentioned sale of its Basilan
PANGANIBAN, J. landholdings to Siltown. Apparently, the BIR
deemed the consideration for the sale
FACTS: The facts undisputed. Private insufficient, and the difference between the fair
Respondent BF Goodrich Phils., Inc. (now Sime market value and the actual purchase price a
Darby International Tire Co, Inc.), was an taxable donation.
American-owned and controlled corporation
previous to July 3, 1974. As a condition for In a letter dated November 24, 1980, private
approving the manufacture by private respondent contested this assessment. On April
respondent of tires and other rubber products, 9, 1981, it received another assessment dated
the Central Bank of the Philippines required March 16, 1981, which increased to P 1,092,949
the amount demanded for the alleged deficiency For the purpose of safeguarding taxpayers from
donor's tax, surcharge, interest and compromise any unreasonable examination, investigation or
penalty. assessment, our tax law provides a statute of
Private respondent appealed the correctness and limitations in the collection of taxes. Thus, the
the legality of these last two assessments to the law on prescription, being a remedial measure,
CTA. The CTA modified the decision of the CIR should be liberally construed in order to afford
and ordered petitioner to pay the amount of such protection. As a corollary, the exceptions to
P1,311,179.01 plus 10% surcharge and 20% the law on prescription should perforce be
annual interest from March 16, 1981 until fully strictly construed.
paid.
Ineludibly, the BIR failed to show that private
Undaunted, private respondent elevated the respondent's 1974 return was filed fraudulently
matter to the Court of Appeals, which reversed with intent to evade the payment of the correct
the CTA. amount of tax. Moreover, even though a donor's
tax, which is defined as "a tax on the privilege of
Hence, this Petition for Review under Rule 45 of transmitting one's property or property rights to
the Rules of Court. another or others without adequate and full
valuable consideration," is different from capital
ISSUE: Whether or not petitioner's right to gains tax, a tax on the gain from the sale of the
assess herein deficiency donor's tax has indeed taxpayer's property forming part of capital
prescribed as ruled by public respondent Court of assets, the tax return filed by private
Appeals. respondent to report its income for the year 1974
was sufficient compliance with the legal
RULING: The petition has no merit. requirement to file a return. In other words, the
Sec. 331 of the National Internal Revenue Code fact that the sale transaction may have partly
provides: resulted in a donation does not change the fact
that private respondent already reported its
Sec. 331. Period of limitation upon income for 1974 by filing an income tax return.
assessment and collection. —
Except as provided in the Since the BIR failed to demonstrate clearly that
succeeding section, internal- private respondent had filed a fraudulent return
revenue taxes shall be assessed with the intent to evade tax, or that it had failed
within five years after the return to file a return at all, the period for assessments
was filed, and no proceeding in has obviously prescribed. Such instances of
court without assessment for the negligence or oversight on the part of the BIR
collection of such taxes shall be cannot prejudice taxpayers, considering that the
begun after expiration of such prescriptive period was precisely intended to give
period. For the purposes of this them peace of mind.
section, a return filed before the
last day prescribed by law for the
filing thereof shall be considered as c. See Section 6(A)
filed on such last day: Provided, A. Examination of Return
that this limitation shall not apply and Determination of Tax
to cases already investigated prior Due. After a return has been
to the approval of this Code. filed as required under the
provisions of this Code, the
Applying this provision of law to the facts at Commissioner or his duly
hand, it is clear that the October 16, 1980 and authorized representative may
the March 1981 assessments were issued by the authorize the examination of
BIR beyond the five-year statute of limitations. any taxpayer and the
The Court has thoroughly studied the records of assessment of the correct
this case and found no basis to disregard the five- amount of tax: Provided,
year period of prescription. however, That failure to file a
return shall not prevent the
 Commissioner from authorizing made in 1992 had already lapsed pursuant to
the examination of any Section 203 of the Tax Code.
taxpayer.
The tax or any deficiency tax so CIR avers that its right to collect the tax in 1992
assessed shall be paid upon notice has not yet prescribed because, while the final
and demand from the assessment and demand letter was issued in
Commissioner or from his duly 1996, the 5-year prescriptive period to collect was
authorized representative. interrupted when USTP filed its request for
reinvestigation in 1997 which was granted in
Any return, statement of 2001. Thus, the period for tax collection should
declaration filed in any office have begun from the date of the modified
authorized to receive the same assessment.
shall not be withdrawn: Provided,
That within three (3) years from ISSUE: Whether the right of CIR to collect the
the date of such filing, the same withholding tax for 1992 has prescribed
may be modified, changed, or RULING: Yes.
amended: Provided, further, That
no notice for audit or investigation The statute of limitations on assessment and
of such return, statement or collection of national internal revenue taxes was
declaration has in the meantime shortened from 5 years to 3 years by virtue of
been actually served upon the B.P. 700. Thus, petitioner has 3 years from the
taxpayer. date of actual filing of the tax return to assess a
national internal revenue tax or to commence
court proceedings for the collection thereof
without an assessment. However, when it validly
issues an assessment within the 3-year period, it
d. CIR v. United Salvage and has another 3 years within which to collect the
Towage, 729 SCRA 113 tax due by distraint, levy, or court proceeding.
The assessment of the tax is deemed made and
COMMISSIONER OF INTERNAL REVENUE the 3-year period for collection of the assessed
V. UNITED SALVAGE AND TOWAGE tax begins to run on the date the assessment
(PHILS.), INC. notice had been released, mailed or sent to the
G.R. NO. 197515 (JULY 2, 2014) taxpayer.
PERALTA, J.
The collection letter was issued by CIR in 2002,
FACTS: USTP, a business engaged in sub- despite that the Final Assessment Notices for the
contracting work in petroleum operations, deficiency was issued in 1996; clearly, 5 years
protested against the Notices of Assessment had already lapsed, beyond the 3-year
issued by the CIR that demanded the payment of prescriptive period. Further, the request for
deficiency withholding tax amounting to reinvestigation in 1997 was only acted upon in
₱135,407.40. USTP won the case in the Supreme 2001, also beyond the 3-year statute of
Court, and the case was remanded to the CTA- limitations from 1996. Also, the assessment
Special First Division. issued in 1994 warranted that the collection be
in 1997; however, the earliest attempt of the BIR
During the pendency of the proceedings, USTP to collect was made in 2003, several years after
moved to withdraw their petition because it the 3-year prescriptive period.
availed of the benefits of the Tax Amnesty
Program under R.A. 9480. The CTA partially
granted their motion, dismissing the aspects of e. BPI v. CIR, G.R. No. 139736,
the case other than that involving withholding 17 October 2005
tax. They decided that the withholding taxes in
1994 and 1998 were void for not showing the law BANK OF THE PHILIPPINE ISLANDS V.
and facts on which they were based, and those COMMISSIONER OF INTERNAL
REVENUE
 G.R. NO. 139736 (OCTOBER 17, 2005) collection of the assessed amount. It alleged that
CHICO-NAZARIO, J respondent BIR Commissioner only had three
years to collect on Assessment No. FAS-5-85-89-
FACTS: On two separate occasions, particularly 002054, but she waited for seven years and nine
on 06 June 1985 and 14 June 1985, BPI sold months to deny the protest.
United States (US) $500,000.00 to the Central
Bank of the Philippines (Central Bank), for the In her Answer and subsequent Memorandum,
total sales amount of US$1,000,000.00. respondent BIR Commissioner merely reiterated
her position, as stated in her letter to petitioner
On 10 October 1989, the Bureau of Internal BPI, dated 13 August 1997, which denied the
Revenue (BIR) issued Assessment No. FAS-5-85- latter's protest; and remained silent as to the
89-002054, finding petitioner BPI liable for expiration of the prescriptive period for collection
deficiency DST on its afore-mentioned sales of of the assessed deficiency DST
foreign bills of exchange to the Central Bank
Petitioner BPI received the Assessment, together ISSUE: Whether the right of respondent BIR
with the attached Assessment Notice, on 20 Commissioner to collect from petitioner BPI the
October 1989.Petitioner BPI, through its counsel, alleged deficiency DST for taxable year 1985 had
protested the Assessment in a letter dated 16 prescribed.
November 1989, and filed with the BIR on 17
November 1989. RULING: Yes.

Petitioner BPI did not receive any immediate The efforts of respondent Commissioner to collect
reply to its protest letter. However, on 15 on Assessment No. FAS-5-85-89 002054 were
October 1992, the BIR issued a Warrant of already barred by prescription. The period for the
Distraint and/or Levy against petitioner BPI for BIR to assess and collect an internal revenue tax
the assessed deficiency DST for taxable year is limited to three years by Section 203 of the
1985, in the amount of P27,720.00 (excluding the Tax Code of 1977, as amended.
compromise penalty of P300.00). It served the
Warrant on petitioner BPI only on 23 October In the present Petition, there is no
1992. controversy on the timeliness of the
issuance of the Assessment, only on the
Then again, petitioner BPI did not hear from the prescription of the period to collect the
BIR until 11 September 1997, when its counsel deficiency DST following its Assessment.
received a letter, dated 13 August 1997, signed Counting the three-year prescriptive
by then BIR Commissioner Liwayway Vinzons- period, for a total of 1,095 days, from 20
Chato, denying its' 'request for reconsideration. October 1989, then the BIR only had until
19 October 1992 within which to collect
BPI in its reply admitted that while industry the assessed deficiency DST. Although the
practice or market convention has the force of Warrant was issued on 15 October 1992,
law between the members of a particular previous to the expiration of the period for
industry, it is not binding with the BIR since it is collection on 19 October 1992, the same
not a party thereto. The same should, therefore, was served on petitioner BPI only on 23
not be allowed to prejudice the Bureau of its October 1992.
lawful task of collecting revenues necessary to
defray the expenses of the government. (Art. 11 If the service of the Warrant of Distraint
in relation to Art. 1306 of the New Civil Code.) and/or Levy on petitioner BPI on 23
October 1992 was already beyond the
Upon receipt of the above-cited letter from the prescriptive period for collection of the
BIR, petitioner BPI proceeded to file a Petition deficiency DST, which had expired on 19
for Review with the CTA on 10 October 1997. October 1992, then what more the letter
of respondent BIR Commissioner, dated
BPI raised in its Petition for Review before the 13 August 1997 and received by the
CTA, the defense of prescription of the right of counsel of the petitioner BPI only on 11
respondent BIR Commissioner to enforce September 1997, denying the protest of
petitioner BPI and requesting payment of not make repeated requests or performed
the deficiency DST? positive acts that could have persuaded
the respondent BIR Commissioner to
The Court also ruled that there is no valid delay collection, and that would have
ground for the suspension of the running prevented or estopped petitioner BPI from
of the prescriptive period for collection of setting up the defense of prescription
the assessed DST under the Tax Code of against collection of the tax assessed, as
1977, as amended. The statute of required in the Suyoc case.
limitations on assessment and
collection of taxes is for the protection
of the taxpayer and, thus, shall be
construed liberally in his favor. f. Commissioner of Internal
Revenue v. Transitions
The indefinite extension of the period for Optical Philippines, Inc., G.R.
assessment is unreasonable because it No. 227544, 22 November
deprives the said taxpayer of the 2017
assurance that he will no longer be
subjected to further investigation for COMMISSIONER OF INTERNAL REVENUE
taxes after the expiration of a reasonable V. TRANSITIONS OPTICAL PHILIPPINES,
period of time. The statute of limitations INC.
on collection may only be interrupted or G.R. NO. 227544 NOVEMBER 22, 2017
suspended by a valid waiver executed in LEONEN, J.
accordance with paragraph (d) of Section
223 of the Tax Code of 1977, as amended, FACTS: Transitions Optical received Letter of
and the existence of the circumstances Authority from the BIR to examine Transition
enumerated in Section 224 of the same Optical's books of accounts for internal revenue
Code, which include a request for tax purposes for taxable year 2004. On 2007, the
reinvestigation granted by the BIR parties executed a Waiver of the Defense of
Commissioner. Prescription. This was followed by another
supposed Waiver of the Defense of Prescription
Applying the given rules to the present Petition, (Second Waiver), extending the prescriptive
this Court finds that: period to November 30, 2008.

(a) The statute of limitations for collection Thereafter, the CIR issued a PAN. Transitions
of the deficiency DST in Assessment No. Optical filed a written protest. Then the CIR
FAS-5-85-89-002054, issued against issued against Transitions Optical a Final
petitioner BPI, had already expired; and Assessment Notice (FAN) and a Formal Letter of
(b) None of the conditions and Demand (FLD) mailed on December 2, 2008.
requirements for exception from the Transitions Optical alleged that the demand for
statute of limitations on collection exists deficiency taxes had already prescribed at the
herein: Petitioner BPI did not execute any time the FAN was mailed on December 2, 2008.
waiver of the prescriptive period on
collection as mandated by paragraph (c) of The CTA division found the waivers to be
Section 223 of the Tax Code of 1977, as defective and void. Granting for the sake of
amended; the protest filed by petitioner argument that the subject Waivers were validly
BPI was a request for reconsideration, not executed, the assessment must be cancelled for
a request for reinvestigation that was being issued beyond the prescriptive period
granted by respondent BIR Commissioner provided by law to assess. The CTA en banc
which could have suspended the affirmed the division.
prescriptive period for collection under
Section 224 of the Tax Code of 1977, as The CIR maintains that Transitions is estopped
amended; and, petitioner BPI, other than from questioning the validity of the waivers since
filing a request for reconsideration of their execution was delayed by Transition’s own
Assessment No. FAS-5-85-89-002054, did
failure to comply with the orders of the BIR to records. GMCC failed to respond to the
submit documents. Letter of Authority as well as the
subsequent letters requesting that its
On the other hand, even assuming that the records and documents be produced.
waivers were valid, Transitions argues that the  Due to GMCC's failure to act on the
assessment would still be void as the FAN was requests, the Assistant Commissioner of
served only on December 4, 2008, beyond the the Enforcement Service of the Bureau of
extended period of November 30, 2008. Internal Revenue issued a Subpoena
Duces Tecum on GMCC president, Jose C.
ISSUE: Whether or not the assessment of Go. When GMCC still failed to comply
deficiency taxes against Transitions Optical for with the Subpoena Duces Tecum, the
taxable year 2004 had prescribed. revenue officers were constrained to
investigate GMCC through Third Party
RULING: Yes. Information.
 The investigation revealed that in 1998,
Transitions repeatedly failed to comply with GMCC, through Go, executed two dacion
CIR’s notices. Having benefitted from the en pago agreements to pay for the
Waivers executed at its instance, Transitions is obligations of GMCC's sister companies.
estopped from claiming that they were invalid GMCC allegedly failed to declare the
and that prescription had set in. income it earned from these agreements
for taxation purposes in 1998.
But, even as respondent is estopped from  It was also discovered that in 1999,
questioning the validity of the Waivers, the GMCC sold condominium units and
assessment is nonetheless void because it was parking slots for a total amount of
served beyond the supposedly extended period. P5,350,000.00 to a Valencia K. Wong.[15]
Since the validity period of the second Waiver is However, GMCC did not declare the
only until November 30, 2008, prescription had income it earned from these transactions
already set in at the time the FAN and the FLD in its 1999 Audited Financial Statements.
were actually mailed on December 4, 2008.
g. Republic of The Philippines November 17, 2003
v. GMCC United  Bureau of Internal Revenue issued a
Development Corporation, Notice to Taxpayer to GMCC, which
G.R. No. 191856, 07 GMCC ignored.
December 2016 On December 8, 2003
 Bureau of Internal Revenue issued a
REPUBLIC OF THE PHILIPPINES VS Preliminary Assessment Notice.
GMCC UNITED DEVELOPMENT November 23, 2004
CORPORATION  GMCC protested the issuance of the Final
GR NO. 191856 (DECEMBER 7, 2016) Assessment Notice citing that the period
LEONEN, J. to assess and collect the tax had already
prescribed. The Bureau of Internal
FACTS: On March 28, 2003 Revenue denied the protest in a Final
 Bureau of Internal Revenue National Decision dated February 10, 2005.
Investigation Division issued a Letter of October 7, 2005
Authority, authorizing its revenue officers  BIR filed with the Department of Justice
to examine the books of accounts and a criminal complaint for violation of
other accounting records of GMCC United Sections 254, [21] 255, [22] and 267, [23]
Development Corporation (GMCC) of the National Internal Revenue Code
covering taxable years 1998 and 1999. against GMCC, its president, Jose C. Go,
and its treasurer, Xu Xian Chun. The
April 3, 2003 president countered that the complaint be
 GMCC was served a copy of said Letter of dismissed because the action has already
Authority and was requested to present prescribed and GMCC did not defraud the
its books of accounts and other accounting Government.
 FMF invoked the defense of prescription by
ISSUE: Is the applicable prescription period for reason of the invalidity of the waiver. In its
the tax assessment the 10-year period or the reply, the BIR insisted that the waiver is valid
three (3) year period? because it was signed by the RDO, a duly
authorized representative of petitioner. It also
RULING: The case falls under section 203 of the ordered FMF to immediately settle its tax
Tax Code. The three (3) year prescription period liabilities; otherwise, judicial action will be
should be applied. taken.

In the case, the last day prescribed by law for CTA granted the petition and cancelled the
filing its 1998 tax return was April 15, 1999. The Assessment Notice because it was already time-
petitioner had three (3) years (2002) to make an barred. The CTA ruled that the waiver did not
assessment. The preliminary assessment was extend the three-year prescriptive period within
made only on December8, 2003 thus the period to which the BIR can make a valid assessment
assess the tax had already expired. because it did not comply with the procedures
For the 10-year period under section 222 (a) to laid down in Revenue Memorandum Order. First,
apply, it is not enough that the fraud is alleged the waiver did not state the dates of execution
in the complaint. It must be established by clear and acceptance of the waiver, by the taxpayer
and convincing evidence. and the BIR, respectively; thus, it cannot be
determined with certainty if the waiver was
executed and accepted within the prescribed
h. CIR v. FMF Dev. Corp., 556 period. Second, the CTA also found that FMF
SCRA 698 was not furnished a copy of the waiver signed by
RDO. Third, the CTA pointed out that since the
COMMISSIONER OF INTERNAL REVENUE case involves an amount of more than P1 million,
V FMF DEVELOPMENT CORPORATION and the period to assess is not yet about to
G.R. NO. 167765 JUNE 30, 2008 prescribe, the waiver should have been signed by
QUISUMBING, J. the Commissioner of Internal Revenue, and not a
mere RDO. The CA affirmed the CTA.
FACTS: For taxable year 1995, the BIR sent
FMF pre-assessment notices, all dated October 6, ISSUE: Whether or not the period to assess had
1998, informing it of its alleged tax liabilities. prescribed.
FMF filed a protest against these notices with
the BIR and requested for a RULING: Yes.
reconsideration/reinvestigation. The Revenue
Officer advised FMF of the informal conference The waiver in question here was defective and
set on February 2, 1999 to allow it to present did not validly extend the original three-year
evidence to dispute the BIR assessments. prescriptive period. Firstly, it was not proven
that respondent was furnished a copy of the BIR-
On February 9, 1999, FMF President executed a accepted waiver. Secondly, the waiver was signed
waiver of the three-year prescriptive period for only by a revenue district officer, when it should
the BIR to assess internal revenue taxes, hence have been signed by the Commissioner as
extending the assessment period until October mandated by the NIRC.
31, 1999. The waiver was accepted and signed by
RDO. The Assessment Notice dated October 25, 1999,
was issued beyond the three-year prescriptive
On October 18, 1999, FMF received amended period. The waiver was incomplete and defective
pre-assessment notices dated October 6, 1999 and thus, the three-year prescriptive period was
from the BIR. FMF immediately filed a protest not tolled nor extended.
on November 3, 1999 but on the same day, it i. CIR vs. Stanley Works
received BIR’s Demand Letter and Assessment (Phils.) Incorporated, GR No.
Notice reflecting FMF’s alleged deficiency taxes 187859, 3 December 2014
and accrued interests.
COMMISSIONER OF INTERNAL REVENUE the deficiency income tax plus interest that may
V. have accrued.
THE STANLEY WORKS SALES (PHILS.),
INCORPORATED On March 30, 2004, respondent received its copy
G.R. NO. 187589 (DECEMBER 3, 2014) of the assailed Decision. Hence, on April 28,
SERENO, CJ 2004, respondent filed before the Court in
Division a Petition for Review.
FACTS: On April 16, 1990, respondent filed with The CTA First Division found that although the
the BIR its Annual Income Tax Return for assessment was made within the prescribed
taxable year 1989. period, the period within which petitioner may
collect deficiency income taxes had already
On March 19, 1993, pursuant to Letter of lapsed.
Authority dated July 3, 1992, the BIR issued
against respondent a Pre-Assessment Notice The CTA Division ruled that the request for
(PAN) No. 002523 for 1989 deficiency income reconsideration did not suspend the running of
tax. the prescriptive period to collect deficiency
income tax. There was no valid waiver of the
On March 29, 1993, respondent received its copy statute of limitations, as the following infirmities
of the PAN. were found: (1) there was no conformity, either
by respondent or his duly authorized
On April 12, 1993, petitioner, through OTC representative; (2) there was no date of
Domingo C. Paz of Revenue Region No. 4B-2 of acceptance to show that both parties had agreed
Makati, issued to respondent Assessment Notice on the Waiver before the expiration of the
No. 002523-89-6014 for deficiency income tax for prescriptive period; and (3) there was no proof
taxable year 1989. The Notice was sent on April that respondent was furnished a copy of the
15, 1993 and respondent received it on April 21, Waiver. Applying jurisprudence and relevant
1993. BIR rulings, the waiver was considered defective;
thus, the period for collection of deficiency
On May 19, 1993, respondent, through its income tax had already prescribed.
external auditors Punongbayan & Araullo, filed a
protest letter and requested reconsideration and The CTA En Banc affirmed the CTA First
cancellation of the assessment. Division Decision dated 6 May 2008 and
Resolution dated 14 July 2008. The Waiver
On November 16, 1993, a certain Mr. John Ang, executed by respondent on 16 November 1993
on behalf of respondent, executed a "Waiver of could not be used by petitioner as a basis for
the Defense of Prescription Under the Statute of extending the period of assessment and
Limitations of the National Internal Revenue collection, as there was no evidence that the
Code" (Waiver). Under the terms of the Waiver, latter had acted upon the waiver. Hence, the
respondent waived its right to raise the defense unilateral act of respondent in executing said
of prescription under Section 223 of the NIRC of document did not produce any effect on the
1977 insofar as the assessment and collection of prescriptive period for the assessment and
any deficiency taxes for the year ended December collection of its deficiency tax.
31, 1989, but not after June 30, 1994. The
Waiver was not signed by petitioner or any of his ISSUES:
authorized representatives and did not state the
date of acceptance as prescribed under Revenue 1. Whether the petitioner's right to collect the
Memorandum Order No. 20-90. Respondent did deficiency income tax of respondent for taxable
not execute any other Waiver or similar year 1989 has prescribed.
document before or after the expiration of the
November 16, 1993 Waiver on June 30, 1994. 2. Whether the respondent's repeated requests
and positive acts constitute "estoppel" from
On March 22, 2004, petitioner rendered a setting up the defense of prescription under the
Decision denying respondents request for NIRC.
reconsideration and ordering respondent to pay
RULING: the Government and to its citizens; to the
1. Yes. The period to assess and collect deficiency Government because tax officers would be
taxes may be extended only upon a written obliged to act promptly in the making of
agreement between the CIR and the taxpayer assessment, and to citizens because after the
prior to the expiration of the three-year lapse of the period of prescription citizens would
prescribed period in accordance with Section 222 hav ea feeling of security against unscrupulous
(b) of the NIRC. In relation to the tax agents who will always find an excuse to
implementation of this provision, the CIR issued inspect the books of taxpayers, not to determine
Revenue Memorandum Order (RMO) No. 20- the latter's real liability, but to take advantage of
9010 on 4 April 1990 to provide guidelines on the every opportunity to molest peaceful, law-abiding
proper execution of the Waiver of the Statute of citizens. Without such legal defense taxpayers
Limitations would furthermore be under obligation to always
keep their books and keep them open for
The BIR cannot claim the benefits of extending inspection subject to harassment by
the period to collect the deficiency tax as a unscrupulous tax agents. The law on prescription
consequence of the Waiver when, in truth it was being a remedial measure should be interpreted
the BIRs inaction which is the proximate cause in a way conducive to bringing about the
of the defects of the Waiver. The BIR has the beneficient purpose of affording protection to the
burden of ensuring compliance with the taxpayer within the contemplation of the
requirements of RMO No. 20-90, as they have Commission which recommends the approval of
the burden of securing the right of the the law.
government to assess and collect tax deficiencies.
This right would prescribe absent any showing of 2. No. The respondent is not barred from setting
a valid extension of the period set by the law. up the defense of prescription.

To emphasize, the Waiver was not a unilateral True, respondent filed a Protest and asked for a
act of the taxpayer; hence, the BIR must act on reconsideration and cancellation of the
it, either by conforming to or by disagreeing with assessment on 19 May 1993; however, it is
the extension. A waiver of the statute of uncontested that petitioner failed to act on that
limitations, whether on assessment or collection, Protest until 29 November 2001, when the latter
should not be construed as a waiver of the right required the submission of other supporting
to invoke the defense of prescription but, rather, documents. In fact, the Protest was denied only
an agreement between the taxpayer and the BIR on 22 March 2004.
to extend the period to a date certain, within
which the latter could still assess or collect taxes Petitioner’s reliance on CIR v. Suyoc (Suyoc) is
due. The waiver does not imply that the taxpayer likewise misplaced. In Suyoc, the BIR was
relinquishes the right to invoke prescription induced to extend the collection of tax through
unequivocally. repeated requests for extension to pay and for
reinvestigation, which were all denied by the
Although we recognize that the power of taxation Collector. Contrarily, herein respondent filed
is deemed inherent in order to support the only one Protest over the assessment, and
government, tax provisions are not all about petitioner denied it 10 years after. The
raising revenue. Our legislature has provided subsequent letters of respondent cannot be
safeguards and remedies beneficial to both the construed as inducements to extend the period of
taxpayer, to protect against abuse; and the limitation, since the letters were intended to
government, to promptly act for the availability urge petitioner to act on the Protest, and not to
and recovery of revenues. A statute of limitations persuade the latter to delay the actual collection.
on the assessment and collection of internal
revenue taxes was adopted to serve a purpose Even assuming arguendo that the Waiver
that would benefit both the taxpayer and the executed by respondent on 16 November 1993 is
government. valid, the right of petitioner to collect the
deficiency income tax for the year 1989 would
The law prescribing a limitation of actions for the have already prescribed by 2001 when the latter
collection of the income tax is beneficial both to first acted upon the protest, more so in 2004
when it finally denied the reconsideration. Metal Corp. This was followed by a Formal
Records show that the Waiver extends only for Letter of Demand with Assessment Notices for
the period ending 30 June 1994, and that there taxable year 1998, dated September 26, 2003
were no further extensions or waivers executed which was received by respondent on November
by respondent. Again, a waiver is not a 12, 2003.
unilateral act of the taxpayer or the BIR, but is a
bilateral agreement between two parties to ISSUE: Whether BIR’s right to assess unpaid
extend the period to a date certain. taxes of Kudos Metal Corp prescribed.

Since the Waiver in this case is defective and RULING: Yes. The Supreme Court found that
therefore invalid, it produces no effect; thus, the BIR’s right to assess unpaid taxes of Kudos
prescriptive period for collecting deficiency Metal Corp prescribed.
income tax for taxable year 1989 was never
suspended or tolled. Consequently, the right to Section 203 of the National Internal Revenue
enforce collection based on Assessment Notice Code of 1997 (NIRC) mandates the government
No. 002523-89-6014 has already prescribed. 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
j.
See RMC 6-2005 for the of such return, whichever comes later. Hence, an
format of the Waiver assessment notice issued after the three-year
k. Revenue Memorandum Order No. 14-2016 prescriptive period is no longer valid and
l. Revenue Memorandum Circular No. 141- effective. Exceptions however are provided under
2019 Section 222 of the NIRC.
m. CIR vs. Kudos Metal, GR No. 178087, 5
May 2010 Section 222 (b) of the NIRC provides that the
period to assess and collect taxes may only be
COMMISSIONER OF INTERNAL REVENUE extended upon a written agreement between the
V. KUDOS METAL CORPORATION CIR and the taxpayer executed before the
G.R. NO. 178087 (MAY 5, 2010) expiration of the three-year period. RMO 20-
DEL CASTILLO, J. 90 issued on April 4, 1990 and RDAO 05-
01 issued on August 2, 2001 lay down the
FACTS: Kudos Metal Corp’s records were procedure for the proper execution of the waiver,
reviewed and audited after it failed to comply to wit:
with the three Notices of Presentation of Records
served by the BIR. 1. The waiver must be in the proper form
prescribed by RMO 20-90. The phrase
Kudos Metal Corp.’s accountant, Nelia Pasco "but not after ______ 19 ___", which
executed a Waiver of the Defense of Prescription indicates the expiry date of the period
on December 10, 2001 which was notarized on agreed upon to assess/collect the tax after
January 22, 2002. It was received by the BIR the regular three-year period of
Enforcement Service on January 31, 2002 and by prescription, should be filled up.
the BIR Tax Fraud Division on February 4, 2002, 2. The waiver must be signed by the
and accepted by the Assistant Commissioner of taxpayer himself or his duly authorized
the Enforcement Service, Percival T. Salazar. representative. In the case of a
corporation, the waiver must be signed by
A second Waiver of Defense of Prescription was any of its responsible officials. In case the
again executed by Pasco on February 18, 2003, authority is delegated by the taxpayer to
notarized on February 19, 2003, received by the a representative, such delegation should
BIR Tax Fraud Division on February 28, 2003 be in writing and duly notarized.
and accepted by Assistant Commissioner 3. The waiver should be duly notarized.
Salazar. 4. The CIR or the revenue official
authorized by him must sign the waiver
The BIR issued a Preliminary Assessment Notice indicating that the BIR has accepted and
for the taxable year 1998 against the Kudos agreed to the waiver. The date of such
 acceptance by the BIR should be
indicated. However, before signing the On January 23, 1997, RCBC executed two
waiver, the CIR or the revenue official Waivers of the Defense of Prescription Under the
authorized by him must make sure that Statute of Limitations of the National Internal
the waiver is in the prescribed form, duly Revenue Code covering the internal revenue
notarized, and executed by the taxpayer taxes due for the years 1994 and 1995, effectively
or his duly authorized representative. extending the period of the Bureau of Internal
5. Both the date of execution by the Revenue (BIR) to assess up to December 31,
taxpayer and date of acceptance by the 2000.
Bureau should be before the expiration of
the period of prescription or before the On January 27, 2000, RCBC received a formal
lapse of the period agreed upon in case a letter of demand with assessment notice for
subsequent agreement is executed. deficiency taxes of around 4 billion pesos. RCBC
6. The waiver must be executed in three disagreed with the assessment and filed a protest
copies, the original copy to be attached to together with supporting documents.
the docket of the case, the second copy for
the taxpayer and the third copy for the On December 6, 2000, RCBC received another
Office accepting the waiver. The fact of Formal Letter of Demand with Assessment
receipt by the taxpayer of his/her file copy Notices for deficiency taxes of around 300 million
must be indicated in the original copy to pesos, on the same day RCBC paid an amount of
show that the taxpayer was notified of the 15 million pesos.
acceptance of the BIR and the perfection
of the agreement. RCBC refused to pay the amount left and argued
that the waivers of the Statute of Limitations
A perusal of the waivers executed by which it executed on January 23, 1997 were not
respondent’s accountant reveals the following valid because the same were not signed or
infirmities: conformed to by the respondent CIR as required
under Section 222(b) of the Tax Code.
1. The waivers were executed without the
notarized written authority of Pasco to CIR on the other hand contends that RCBC is
sign the waiver in behalf of respondent. now estopped from questioning the validity of the
2. The waivers failed to indicate the date said waivers.
of acceptance.
3. The fact of receipt by the respondent of ISSUE: Whether RCBC is estopped from
its file copy was not indicated in the questioning the validity on the waivers of the
original copies of the waivers. defense of prescription?

Due to the defects in the waivers, the period to RULING: Yes.

assess or collect taxes was not extended.
Consequently, the assessments were issued by Under Article 1431 of the Civil Code, the doctrine
the BIR beyond the three-year period and are of estoppel is anchored on the rule that "an
void admission or representation is rendered
conclusive upon the person making it, and cannot
n. RCBC v. CIR, G.R. No. be denied or disproved as against the person
170257, 7 September 2011 relying thereon." A party is precluded from
denying his own acts, admissions or
RCBC V. CIR representations to the prejudice of the other
G.R. NO. 170257 (SEPTEMBER 7, 2011) party in order to prevent fraud and falsehood.
MENDOZA, J
Estoppel is clearly applicable to the case at
FACTS: RCBC received a Letter of Authority on bench. RCBC, through its partial payment of the
Aug. 15 ,1996 for the examination of it’s books revised assessments issued within the extended
and records for all internal taxes for January period as provided for in the questioned waivers,
1,1994 to December 31, 1995. impliedly admitted the validity of those waivers.
Had petitioner truly believed that the waivers his right to issue the assessment has not
were invalid and that the assessments were prescribed inasmuch as the same was availed of
issued beyond the prescriptive period, then it before the 5-year period provided for in Section
should not have paid the reduced amount of 331 of the Tax Code expired, counting the
taxes in the revised assessment. RCBC’s running of the period from August 30, 1955, the
subsequent action effectively belies its insistence date when the amended return was filed.
that the waivers are invalid. The records show
that on December 6, 2000, upon receipt of the ISSUE: Should the running of the prescriptive
revised assessment, RCBC immediately made period commence from the filing of the original or
payment on the uncontested taxes. Thus, RCBC amended return?
is estopped from questioning the validity of the
waivers. To hold otherwise and allow a party to RULING: To our mind, the Commissioner's view
gainsay its own act or deny rights which it had should be sustained. The changes and alterations
previously recognized would run counter to the embodied in the amended income tax return
principle of equity which this institution holds consisted of the exclusion of reinsurance
dear. premiums received from domestic insurance
companies by Phoenix Assurance Co., Ltd.'s
London head office, reinsurance premiums ceded
o. CIR v. Phoenix Assurance to foreign reinsurers not doing business in the
Inc., L-19727, 20 May 1965 Philippines and various items of deduction
attributable to such excluded reinsurance
PHOENIX ASSURANCE, CO., LTD. V. premiums thereby substantially modifying the
COMMISSIONER OF INTERNAL REVENUE original return. Furthermore, although the
G.R. NO. L-19903 (MAY 20, 1965) deduction for head office expenses allocable to
BENGZON, J.P., J. Philippine business, whose disallowance gave
rise to the deficiency tax, was claimed also in the
FACTS: Phoenix Assurance Co., Ltd., a foreign original return, the Commissioner could not have
insurance corporation organized under the laws possibly determined a deficiency tax thereunder
of Great Britain, is licensed to do business in the because Phoenix Assurance Co., Ltd. declared a
Philippines with head office in London. Through loss of P199,583.93 therein which would have
its head office, it entered in London into more than offset such disallowance of
worldwide reinsurance treaties with various P15,826.35.
foreign insurance companies. It agreed to cede a
portion of premiums received on original Considering that the deficiency assessment was
insurances underwritten by its head office, based on the amended return which, as
subsidiaries, and branch offices throughout the aforestated, is substantially different from the
world, in consideration for assumption by the original return, the period of limitation of the
foreign insurance companies of an equivalent right to issue the same should be counted
portion of the liability from such original from the filing of the amended income tax
insurances. return. From August 30, 1955, when the
amended return was filed, to July 24, 1958, when
Phoenix Assurance Co., Ltd. filed its income tax the deficiency assessment was issued, less than
return for 1952 on April 1, 1953 showing a loss of five years elapsed. The right of the Commissioner
P199,583.93. It amended said return on August to assess the deficiency tax on such amended
30, 1955 reporting a tax liability of P2,502.00. On return has not prescribed.
July 24, 1958, after examination of the amended
return, the Commissioner of Internal Revenue To strengthen our opinion, we believe that to
assessed deficiency income tax in the sum of hold otherwise, we would be paving the way for
P5,667.00. The Court of Tax Appeals found the taxpayers to evade the payment of taxes by
right of the Commissioner of Internal Revenue simply reporting in their original return heavy
barred by prescription, the same having been losses and amending the same more than five
exercised more than five years from the date the years later when the Commissioner of Internal
original return was filed. On the other hand, the Revenue has lost his authority to assess the
Commissioner of Internal Revenue insists that proper tax thereunder. The object of the Tax
Code is to impose taxes for the needs of the lawful task of collecting revenues necessary to
Government, not to enhance tax avoidance to its defray the expenses of the government. (Art. 11
prejudice. in relation to Art. 1306 of the New Civil Code.)

Upon receipt of the above-cited letter from the

p. BPI v. CIR, G.R. No. 139736, BIR, petitioner BPI proceeded to file a Petition
17 October 2005 for Review with the CTA on 10 October 1997.

BANK OF THE PHILIPPINE ISLANDS V. BPI raised in its Petition for Review before the
COMMISSIONER OF INTERNAL REVENUE CTA, the defense of prescription of the right of
G.R. NO. 139736 (OCTOBER 17, 2005) respondent BIR Commissioner to enforce
CHICO-NAZARIO, J collection of the assessed amount. It alleged that
respondent BIR Commissioner only had three
FACTS: On two separate occasions, particularly years to collect on Assessment No. FAS-5-85-89-
on 06 June 1985 and 14 June 1985, BPI sold 002054, but she waited for seven years and nine
United States (US) $500,000.00 to the Central months to deny the protest.
Bank of the Philippines (Central Bank), for the
total sales amount of US$1,000,000.00. In her Answer and subsequent Memorandum,
respondent BIR Commissioner merely reiterated
On 10 October 1989, the Bureau of Internal her position, as stated in her letter to petitioner
Revenue (BIR) issued Assessment No. FAS-5-85- BPI, dated 13 August 1997, which denied the
89-002054, finding petitioner BPI liable for latter's protest; and remained silent as to the
deficiency DST on its afore-mentioned sales of expiration of the prescriptive period for collection
foreign bills of exchange to the Central Bank of the assessed deficiency DST.

Petitioner BPI received the Assessment, together ISSUE: Whether the right of respondent BIR
with the attached Assessment Notice, on 20 Commissioner to collect from petitioner BPI the
October 1989.Petitioner BPI, through its counsel, alleged deficiency DST for taxable year 1985 had
protested the Assessment in a letter dated 16 prescribed.
November 1989, and filed with the BIR on 17
November 1989. RULING: Yes.

Petitioner BPI did not receive any immediate The efforts of respondent Commissioner to collect
reply to its protest letter. However, on 15 on Assessment No. FAS-5-85-89 002054 were
October 1992, the BIR issued a Warrant of already barred by prescription. The period for the
Distraint and/or Levy against petitioner BPI for BIR to assess and collect an internal revenue tax
the assessed deficiency DST for taxable year is limited to three years by Section 203 of the
1985, in the amount of P27,720.00 (excluding the Tax Code of 1977, as amended.
compromise penalty of P300.00). It served the
Warrant on petitioner BPI only on 23 October In the present Petition, there is no
1992. controversy on the timeliness of the
issuance of the Assessment, only on the
Then again, petitioner BPI did not hear from the prescription of the period to collect the
BIR until 11 September 1997, when its counsel deficiency DST following its Assessment.
received a letter, dated 13 August 1997, signed Counting the three-year prescriptive
by then BIR Commissioner Liwayway Vinzons- period, for a total of 1,095 days, from 20
Chato, denying its' 'request for reconsideration. October 1989, then the BIR only had until
19 October 1992 within which to collect
BPI in its reply admitted that while industry the assessed deficiency DST. Although the
practice or market convention has the force of Warrant was issued on 15 October 1992,
law between the members of a particular previous to the expiration of the period for
industry, it is not binding with the BIR since it is collection on 19 October 1992, the same
not a party thereto. The same should, therefore, was served on petitioner BPI only on 23
not be allowed to prejudice the Bureau of its October 1992.
 Section 223 of the Tax Code of 1977, as
If the service of the Warrant of Distraint amended; the protest filed by petitioner
and/or Levy on petitioner BPI on 23 BPI was a request for reconsideration, not
October 1992 was already beyond the a request for reinvestigation that was
prescriptive period for collection of the granted by respondent BIR Commissioner
deficiency DST, which had expired on 19 which could have suspended the
October 1992, then what more the letter prescriptive period for collection under
of respondent BIR Commissioner, dated Section 224 of the Tax Code of 1977, as
13 August 1997 and received by the amended; and, petitioner BPI, other than
counsel of the petitioner BPI only on 11 filing a request for reconsideration of
September 1997, denying the protest of Assessment No. FAS-5-85-89-002054, did
petitioner BPI and requesting payment of not make repeated requests or performed
the deficiency DST? positive acts that could have persuaded
the respondent BIR Commissioner to
The Court also ruled that there is no valid delay collection, and that would have
ground for the suspension of the running prevented or estopped petitioner BPI from
of the prescriptive period for collection of setting up the defense of prescription
the assessed DST under the Tax Code of against collection of the tax assessed, as
1977, as amended. The statute of required in the Suyoc case.
limitations on assessment and
collection of taxes is for the protection
of the taxpayer and, thus, shall be q. Aznar vs. CTA, GR No. L-
construed liberally in his favor. 20569, 23 August 1974

The indefinite extension of the period for JOSE B. AZNAR, IN HIS CAPACITY AS
assessment is unreasonable because it ADMINISTRATOR OF THE ESTATE OF
deprives the said taxpayer of the THE DECEASED, MATIAS H. AZNAR V.
assurance that he will no longer be COURT OF TAX APPEALS AND
subjected to further investigation for COLLECTOR OF INTERNAL REVENUE
taxes after the expiration of a reasonable GR NO. L-20569, 23 AUGUST 1974
period of time. The statute of limitations ESGUERRA, J.
on collection may only be interrupted or
suspended by a valid waiver executed in FACTS: Petitioner, as administrator of the
accordance with paragraph (d) of Section estate of the deceased, Matias H. Aznar, seeks a
223 of the Tax Code of 1977, as amended, review and nullification of the decision of the
and the existence of the circumstances Court of Tax Appeals ordering the petitioner to
enumerated in Section 224 of the same pay the government the sum of P227,691.77
Code, which include a request for representing deficiency income taxes for the
reinvestigation granted by the BIR years 1946 to 1951. An investigation by the
Commissioner. Commissioner of Internal Revenue (CIR)
ascertained the assets and liabilities of the
Applying the given rules to the present Petition, taxpayer and it was discovered that from 1946 to
this Court finds that: 1951, his net worth had increased every year,
which increases in net worth was very much
(a) The statute of limitations for collection more than the income reported during said years.
of the deficiency DST in Assessment No.
FAS-5-85-89-002054, issued against The findings clearly indicated that the taxpayer
petitioner BPI, had already expired; and did not declare correctly the income reported in
(b) None of the conditions and his income tax returns for the aforesaid years.
requirements for exception from the Petitioner avers that according to the NIRC, the
statute of limitations on collection exists right of the CIR to assess deficiency income taxes
herein: Petitioner BPI did not execute any of the late Aznar for the years 1946, 1947, and
waiver of the prescriptive period on 1948 had already prescribed at the time the
collection as mandated by paragraph (c) of assessment was made on November 28, 1952;
there being a five year limitation upon r. CIR vs. Philippine Daily
assessment and collection from the filing of the Inquirer, GR No. 213943, 22
returns. Meanwhile, respondents believe that the March 2017
prescription period in the case at bar that is
applicable is under Sec. 332 of the NIRC which COMMISSIONER OF INTERNAL REVENUE
provides that: "(a) In the case of a false or V. PHILIPPINE DAILY INQUIRER
fraudulent return with intent to evade tax or of a G.R. NO. 213943 (MARCH 22, 2017)
failure to file a return, the tax may be assessed, CARPIO, J
or a proceeding in court for the collection of such
tax may be begun without assessment, at any FACTS: BIR alleged that there was an
time within ten years after the discovery of the underdeclaration of domestic purchases in PDI's
falsity, fraud or omission". Petitioner argues said declaration on its VAT Returns for taxable year
provision does not apply because the taxpayer 2004. In response, PDI submitted reconciliation
did not file false and fraudulent returns with reports and executed a Waiver of the Statute of
intent to evade tax. Limitation (First Waiver) consenting to the
assessment and/or collection of taxes for the year
ISSUE: Whether or not the action filed Aznar 2004. BIR invited PDI to an informal conference
has not prescribed. to present any objections that it might have on
the BIR's findings. On 5 June 2007, PDI
RULING: The Sec. 332 of the NIRC does not executed a Waiver of the Statute of Limitation
apply because the taxpayer did not file false and (Second Waiver).
fraudulent returns with intent to evade tax,
while respondent Commissioner of Internal PDI received the PAN on 4 December 2007. On
Revenue insists contrariwise, with respondent 12 December 2007, PDI sought reconsideration of
Court of Tax Appeals concluding that the very the PAN and expressed its willingness to execute
"substantial under declarations of income for six another Waiver (Third Waiver), which it did on
consecutive years eloquently demonstrate the the same date, thus extending BIR's right to
falsity or fraudulence of the income tax returns assess and/or collect. PDI received a Formal
with an intent to evade the payment of tax." Letter of Demand dated 11 March 2008

The ordinary period of prescription of 5 years PDI filed its protest, alleging that the period
within which to assess tax liabilities under Sec. within which the BIR should act on its protest
331 of the NIRC should be applicable to normal had already lapsed. The CTA First Division ruled
circumstances, but whenever the government is that the NIRC authorizes the extension of the
placed at a disadvantage so as to prevent its original three-year prescriptive period by the
lawful agents from proper assessment of tax execution of a valid waiver upon the agreement
liabilities due to false returns, fraudulent return in writing between the taxpayer and the BIR,
intended to evade payment of tax or failure to file provided: (1) the agreement was made before the
returns, the period of ten years provided for in expiration of the three-year period and (2) the
Sec. 332 (a) NIRC, from the time of the discovery guidelines in the proper execution of the waiver
of the falsity, fraud or omission even seems to be are strictly followed.
inadequate and should be the one enforced.
The CTA Division found that while the First and
There being undoubtedly false tax returns in this Second Waivers were executed in three copies,
case, We affirm the conclusion of the respondent the BIR failed to provide the office accepting the
Court of Tax Appeals that Sec. 332 (a) of the waivers with their respective third copies. The
NIRC should apply and that the period of ten CTA First Division found that the third copies
years within which to assess petitioner's tax were still attached to the docket of the case. The
liability had not expired at the time said CTA First Division also found that the BIR failed
assessment was made. to prove that the Third Waiver was executed in
three copies. Further, the revenue official who
accepted the Third Waiver was not authorized to
do so. Thus, period has prescribed.
The CTA en banc affirmed the Division in toto.
 203 of the NIRC. On October 16, 2012, Asalus
ISSUE: Whether or not the prescriptive period to received FDDA showing VAT deficiency
assess deficiency tax has already prescribed. amounting to P106, 761, 025.17 and P25, 000.00
as compromise penalty
RULING: The First Waiver was not properly
executed and thus, could not have extended the ISSUE: Whether or not petitioner’s right to
three-year prescriptive period to assess and asses respondent had already prescribed.
collect taxes for the year 2004. To make matters
worse, the CIR committed the same error in the RULING: No.
execution of the Second Waiver. Even if we
consider that the First Waiver was validly Generally, internal revenue taxes shall be
executed, the Second Waiver failed to extend the assessed within 3 years after the last day
prescriptive period because its execution was prescribed by law for filing the return, or where
contrary to the procedure set forth. Granting the return is filed beyond the period from the day
further that the First and Second Waivers were the return was actually filed, and Section 222 of
validly executed, the Third Waiver executed on the NIRC provides the exception, among which is
still failed to extend the three-year prescriptive that in case of a false or fraudulent return with
period because it was not executed in three intent to evade tax, or failure to file a return,
copies. In short, the records of the case showed assessment may be made within 10 years from
that the CIR's three-year prescriptive period to discovery. When there is a showing that a
assess deficiency tax had already prescribed due taxpayer has substantially undeclared its sales,
to the defects of all the Waivers. Clearly, the receipts, or income, there is presumption that it
defects in the Waivers resulted to the non- has filed a false return, and CIR need not
extension of the period to assess or collect taxes, present evidence immediately. And in the case at
and made the assessments issued by the BIR bar, audit investigation revealed that there were
beyond the three-year prescriptive period void. undeclared VATable sales more than 30% of that
declared in Asalus’ returns.

s. CIR vs. Asalus Corporation,

GR No. 221590, February 22, t. CIR v. Ayala Securities Corp.,
2017 101 SCRA 231

COMMISSIONER OF INTERNAL REVENUE COMMISSIONER OF INTERNAL REVENUE

V. ASALUS CORPORATION V. AYALA SECURITIES CORPORATION
GR NO. 221590 (FEBRUARY 22, 2017) AND THE HONORABLE COURT OF TAX
MENDOZA J. APPEALS
G.R. NO. L-29485 (MARCH 31, 1976)
FACTS: On December 6, 2010, respondent ESGUERRA, J.
received a Notice of Informal Conference from
RDO 47 of BIR in connection with the FACTS: On November 29, 1955, Ayala
investigation conducted by Revenue Officer Securities Corporation, a domestic corporation
Bañares on the VAT transactions of Asalus for organized and existing under the laws of the
the taxable year 2007. Asalus filed a letter-reply Philippines, filed its income tax returns with the
questioning the basis of the computation. On office of the petitioner for its fiscal year which
January 10, 2011, CIR issued PAN finding ended on September 30, 1955 showing a surplus
Asalus liable for deficiency VAT for 20p7 of P2,758,442.37.
amounting to P413, 378, 058.11. Asalus filed a
protest, which CIT subsequently denied. On On February 21, 1961, petitioner advised the
August 26, 201, Asalus received the Formal respondent corporation of the assessment of
Assessment notice stating that it was liable for P758.687.04 on its accumulated surplus reflected
P95, 681, 98i.64. Asalus filed a protest, then on on its income tax return for the fiscal year which
September 6, 2011, he filed a supplemental ended September 30, 1955. On April 19, 1961,
protest stating that the deficiency VAT the respondent corporation protested against the
assessment had prescribed pursuant to Section assessment on its retained and accumulated
surplus pertaining to the taxable year 1955 and evidence presented by the petitioner as to any
sought reconsideration thereof for the reason fraud or falsity on the return with intent to
that the said assessment was issued beyond the evade payment of tax, not even in the income tax
five-year prescriptive period. assessment nor in the letter-decision of February
18, 1963, nor in his answer to the petition for
On May 30, 1961, petitioner wrote respondent review. Petitioner merely relies on the provisions
corporation's auditing and accounting firm with of Sec 25 of the National Internal Revenue Code,
the "advise that your request for reconsideration violation of which, according to Petitioner,
will be the subject matter of further presupposes the existence of fraud.
reinvestigation and a thorough analysis of the The applicable provision of law in this case is
issues involved conditioned, however, upon the Section 331 of the National Internal Revenue
execution of your client of the enclosed form for Code, to wit:
waiver of the defense of prescription". However,
respondent corporation did not execute the SEC. 331. Period of limitation
requested waiver of the statute of limitations, upon assessment and collection. —
considering its claim that the assessment in Except as provided in the
question had already prescribed. succeeding section, internal
revenue taxes shall be assessed
Respondent corporation in its Petition for Review within five years after the return
alleges that the assessment made by petitioner was filed, and no proceeding in
Commissioner of Internal Revenue is illegal and court without assessment for the
invalid considering that the assessment in collection of such taxes shall be
question, having been issued only on February begun after the expiration of such
21, 1961, and received by the respondent period. For the purposes of this
corporation on March 22, 1961, the same was section, a return filed before the
issued beyond the five-year period from the date last day prescribed by law for the
of the filing of respondent corporations income filing thereof shall be considered as
tax return November 29, 1955, and, therefore, filed on such last day: Provided,
petitioner's right to make the assessment has that this limitation shall not apply
already prescribed, pursuant to the provision of to cases already investigated prior
Section 331 of the National Internal Revenue to the approval of this Code.
Code.
Under Section 46(d) of the National Internal
Petitioner in his answer alleged that the Revenue Code, the Ayala Securities Corporation
assessment made by his office on the designated September 30, 1955, as the last day of
accumulated surplus of the corporation as the closing of its fiscal year, and under Section
reflected on its income tax return for the taxable 46(b) the income tax returns for the said
year 1955 has not as yet prescribed and, further, corporation shall be filed on or before the
that the respondent corporation's accumulation fifteenth (15th) day of the fourth (4th) month
of surplus for the taxable year 1955 was following the close of its fiscal year. The Ayala
improper as the retention of such surplus was Securities Corporation could, therefore, file its
availed of by the corporation to prevent the income tax returns on or before January 15,
imposition of the income tax upon the individual 1956. The assessment by the Commissioner of
shareholders or members of the said corporation. Internal Revenue shall be made within five (5)
years from January 15, 1956, or not later than
ISSUE: Whether or not Section 331 of the January 15, 1961, in accordance with Section 331
National Internal Revenue Code is applicable, of the National Internal Revenue Code herein
which provides for a five-year period of above-quoted. As the assessment issued on
prescription of assessment from the filing of the February 21, 1961, which was received by the
return. Ayala Securities Corporation on March 22, 1961,
was made beyond the five-year period prescribed
RULING: On the issue of whether Sec. 331 or under Section 331 of said Code, the same was
See. 332(a) of the National Internal Revenue made after the prescriptive period had expired
Code should apply to this case, there is no iota of
and, therefore, was no longer binding on the
Ayala Securities Corporation. RULING: Yes.

For this reason, we are of the view that after The prescriptive period under Section 203 of the
reaching the conclusion that the right of the NIRC applies to EWT and WTC assessments.
Commissioner of Internal Revenue to assess the Also, La Flor’s EWT and WTC assessments for
25% surtax had already prescribed under Section 2005 were barred by prescription.
331 of the National Internal Revenue Code.
Withholding taxes are internal revenue taxes
covered by Section 203 of the NIRC: ―SEC. 203.
Period of Limitation Upon Assessment and
u. CIR v. La Flor Dela Isabel, Collection. – Except as provided in Section 222,
Inc., GR No. 211289, January internal revenue taxes shall be assessed within
1, 2019 three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding
COMMISSIONER OF INTERNAL REVENUE in court without assessment for the collection of
V. LA FLOR DELA ISABEL, INC. such taxes shall be begun after the expiration of
GR NO. 211289 (JANUARY 14, 2019) such period: Provided, That in case where a
REYES, J. JR., J. return is filed beyond the period prescribed by
law, the three (3)-year period shall be counted
FACTS: La Flor dela Isabela, Inc. is a domestic from the day the return was filed. For purposes
corporation duly organized and existing under of this Section, a return filed before the last day
Philippine Law. It filed monthly returns for the prescribed by law for the filing thereof shall be
Expanded Witholding Tax and Withholding Tax considered as filed on such last day.‖
on Compensation for Calendar Year 2005. Once
on 2008, and twice on 2009, it executed Waivers Under the existing withholding tax system, the
of the Statute of Limitations. Later on, it withholding agent retains a portion of the
received four Formal Letters of Demand and amount received by the income earner. In turn,
Final Assessment Notices. Subsequently, it filed the said amount is credited to the total income
its Letter of Protest contesting the assessment tax payable in transactions covered by the EWT.
notices. On the other hand, in cases of income payments
subject to WTC and Final Withholding Tax, the
The CTA, later affirmed by the CA, subsequently amount withheld is already the entire tax to be
ruled in favour of La Flor cancelling the paid for the particular source of income. Thus, it
deficiency tax assessments against it. It ruled can readily be seen that the payee is the
that based on the dates when La Flor filed its taxpayer, the person on whom the tax is
returns for EWT and WTC, the CIR had until imposed, while the payor, a separate entity, acts
February 15, 2008 to March 1, 2009 to issue an as the government’s agent for the collection of
assessment pursuant to the three-year the tax in order to ensure its payment.
prescriptive period under Section 203 of the
NIRC. The Waivers entered into by the CIR and Thus, withholding tax assessments such as EWT
La Flor did not effectively extend the prescriptive and WTC clearly contemplate deficiency internal
period for the issuance of the tax assessments. revenue taxes. Their aim is to collect unpaid
income taxes and not merely to impose a penalty
ISSUES: on the withholding agent for its failure to comply
with its statutory duty.

1. Whether the prescriptive period under As to the second issue, in Commissioner of

section 203 of the NIRC applies to EWT Internal Revenue v. Systems Technology
and WTC assessments. Institute, Inc., the Court ruled that waivers
2. Whether La Flor’s EWT and WTC extending the prescriptive period of tax
assessments for 2005 were barred by assessments must be compliant with RMO No.
prescription 20-90 and must indicate the nature and amount
of the tax due.