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Metro Star Superama was audited for taxable year 1999 and received a Preliminary 15-day Letter on November 15,
2001. On April 11, 2002, it received a Formal Letter of Demand dated April 3, 2002. Denying that it received a PreAssessment Notice and thus not accorded due process, Metro Star Superama filed a Petition with the CTA.
Was the Petitioner accorded the required due process?
NO. Since the Petitioner denied receipt of the Pre-Assessment Notice, the burden of proving the same shifts to the BIR.
To raise the presumption of receipt, it must be shown that (a) the letter was properly addressed with postage prepaid
and (b) that it was mailed. If receipt is denied, the BIR must then show actual receipt through presentation of the
registry receipt or, if the same cannot be located, at least a certification from the Bureau of Posts.
The Court likewise added that the issuance of a Pre-Assessment Notice is a mandatory requirement save only on
specified instances. The old rule laid down in CIR vs. Menguito that only the FAN is mandatory no longer applies since
the same was ruled upon based on the old provision.
CIR issued assessment notices against Respondent for deficiency income tax, VAT and documentary stamp tax on
deposit on subscription and on pawn tickets. Respondent filed its written protest on the assessments. When CIR did not
act on the protest during the 180-day period, respondent filed a petition before the CTA.
Has Respondents right to dispute the assessment in the CTA prescribed?
NO. The assessment against Respondent has not become final and unappealable. It cannot be said that respondent failed
to submit relevant supporting documents that would render the assessment final because when respondent submitted its
protest, respondent attached all the documents it felt were necessary to support its claim. Further, CIR cannot insist on
the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable
to pay, and has not paid, the DST on the deposit on subscription.
The term "relevant supporting documents" are those documents necessary to support the legal basis in disputing a tax
assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents and
cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of
the BIR, which may require the production of documents that a taxpayer cannot submit. Since the taxpayer is deemed
to have submitted all supporting documents at the time of filing of its protest, the 180-day period likewise started to run
on that same date.


Mirant filed its final adjusted Annual Income Tax Return for fiscal year ending 1999 declaring a net loss. It then

amended the said return this time reflecting an increased net loss and showing that it opted to carry over as tax credit its
overpayment to the succeeding taxable year. This excess tax credit was unutilized in 2000 as Mirant still reported a net
loss. Mirant then filed a claim for refund of its excess creditable income tax for 1999.
Can Mirant claim for refund its excess credits from 1999?
NO. Mirants choice to carry over its 1999 excess income tax credit to succeeding taxable years is irrevocable,
regardless of whether it was able to actually apply the said amount to a tax liability. It is a mistake to understand the
phrase "for that taxable period" as a prescriptive period for the irrevocability rule i.e., that since the tax credit in this
case was acquired in 1999, and Respondent opted to carry it over to 2000, then the irrevocability of the option to carry
over expired by the end of 2000, leaving Respondent free to again take another option as regards its 1999 excess
income tax credit. The Court ruled that this interpretation effectively renders nugatory the irrevocability rule.
Smart entered into an Agreement with Prism, a nonresident foreign corporation domiciled in Malaysia, whereby Prism
will provide programming and consultancy services to Smart. Thinking that the payments to Prism were royalties,
Smart withheld 25% under the RP-Malaysia Tax Treaty. Smart then filed a refund with the BIR alleging that the
payments were not subject to Philippine withholding taxes given that they constituted business profits paid to an entity
without a permanent establishment in the Philippines.
Does Smart have the right to file the claim for refund?
YES. The Court reiterated the ruling in Procter & Gamble stating that a person liable for tax has sufficient legal
interest to bring a suit for refund of taxes he believes were illegally collected from him. Since the withholding agent is
an agent of the beneficial owner of the payments (i.e., nonresident), the authority as agent is held to include the filing of
a claim for refund. The Silkair case was held inapplicable as it involved excise taxes and not withholding taxes.
Smart was granted a refund given that only a portion of its payments represented royalties since it is only that portion
over which Prism maintained intellectual property rights and the rest involved full transfer of proprietary rights to
Smart and were thus treated as business profits of Prism.

INC.- Tax Assessment and Protest

The assessment against Hambrecht & Quist had become final and unappelable since there was a failure to protest the
same within the 30-day period provided by law. However, the CTA held that the BIR failed to collect within the
prescribed time and thus ordered the cancellation of the assessment notice. The CIR disputed the jurisdiction of the
CTA arguing that since the assessment had become final and unappealable, the taxpayer can no longer dispute the
correctness of the assessment even before the CTA.

Can the CTA still take cognizance of an assessment case which has become final and unappealable for failure of
the taxpayer to protest within the 30-day protest period?
YES. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters
relating to assessments or refunds. The CTA law clearly bestows jurisdiction to the CTA even on other matters
arising under the National Internal Revenue Code. Thus, the issue of whether the right of the CIR to collect has
prescribed, collection being one of the duties of the BIR, is considered covered by the term other matters. The fact
that assessment has become final for failure to protest only means that the validity or correctness of the assessment may
no longer be questioned on appeal. However, this issue is entirely distinct from the issue of whether the right to collect
has in fact prescribed.
The Court ruled that the right to collect has indeed prescribed since there was no proof that the request for
reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect was never suspended.