ASSESSMENT OF TAXES

NIRC SECTION 203 Period of Limitation Upon Assessment and Collection. — Except as
provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the
last day prescribed by law for the filing of the return, and no proceeding in court without
assessment for the collection of such taxes shall be begun after the expiration of such period:
Provided, That in a case where a return is filed beyond the period prescribed by law, the three
(3)-year period shall be counted from the day the return was filed. For purposes of this Section, a
return filed before the last day prescribed by law for the filing thereof shall be considered as filed
on such last day.
NIRC SECTION 228 Protesting of Assessment — When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings:
Provided however, That a pre-assessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation
of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding
tax for a taxable period was determined to have carried over and automatically applied the same
amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the
succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited
to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred
to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of
the protest, all relevant supporting documents shall have been submitted, otherwise, the
assessment shall become final.
 If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said
decision, or from the lapse of the one hundred eighty (180) day period; otherwise, the decision
shall become final, executory and demandable.

Q. Discuss the concept and rule of assessment as one of the authorities of the BIR
Commissioner.
Ans. An assessment is a written notice that the amount stated therein is due and containing
a demand for the payment thereof ((Alhambra Cigar etc. v. Collector, L-128026, May 19, 1959).
Assessment is not an action of proceeding for the collection of taxes but a step preliminary to
warrant of distraint or levy if that is feasible and also to establish a sufficient cause for judicial
action under the pertinent provisions of the Tax Code (Benipayo v. Collector L-13556, January
31, 1962; 19Sy Po v. Court of Tax Appeals, 164 SCRA 524). An assessment may be contested
by the taxpayer and in case of denial, a proper appeal may be made to the Court of Tax Appeals.
Assessment is presumed to be correct and valid (Collector v. Bohol Land Transportation Co. L-
13099, April 23,1960); however, this presumption may be rebutted by the taxpayer (Benipayo v.
Collector, ibid). To stand the test of judicial scrutiny, assessment must be based on actual facts
not on hearsay evidence (Philippine American Drug Co. v. Collector L-1322, January 31, 159;
Sec. 203, NIRC Collector v. Bautista L-11140, L-2259 May 27, 1959) or on mere presumptions
no matter how logical it may be. This is so, because it is better for one taxpayer to be able to
evade payment of tax legally due from him than to require a taxpayer to pay one centavo more
than what is due and demandable from him (Republic v. de la Rama L-21108, Nov. 29, 1966).
A transaction may be re-examined for purposes of re-assessment in the event of an error or
an understatement is noted. Although, reassessment reflects against the efficiency or ability of
revenue agents nevertheless, the government is not estopped or barred by the error or mistake of
its agents. The action, however, to make proper assessment/reassessment must be made within
the prescriptive period of three years from date the return was filed or ten years if no return is
filed, otherwise, the taxpayer would invoke prescription. However, if the person liable for
payment of the tax did not receive the assessment, the latter could not become final and
executory.
Q. What is meant by assessment?
Ans. As applied to internal revenue taxes, assessment may be defined as the official action of
an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer.
Assessment is a finding by the taxing agency that the taxpayer has not paid his correct taxes.
Q. What are being included in the assessment?
Ans. The action (assessment) necessarily involves-
(1) The computation of the sum due;
(2) Giving of notice to that effect to the taxpayer; and
(3) The making, simultaneously with or sometime after the giving of notice of a demand
upon him for the payment of the tax or deficiency stated.
Q. Who has authority to make assessment?
 Ans. It is vested with the Commissioner; however, he may delegate his authority to
subordinate officials, unless the assessment is final assessment. Assessment issued by
subordinate officials has the same effect and force as issued by the Commissioner himself, unless
reviewed or revised by him37Arches v. Bellosillo, L-2354, May 26, 1967.
Q. When is the assessment considered made for the purpose of giving effect to such
assessment?
Ans. Under these circumstances:
(1) If it made within the period of three (3) or 10 years, as the case may be; and
(2) Notice to that effect is released mailed or sent to the taxpayer also within the same
period; But receipt of notice need not be within the prescribed period (Basilan Estate Inc. v.
Commissioner, L-22492, Sept. 5, 1967).

Q. What are the requirements for validity of assessment?

Ans. The primary requirement of due process which are complied with by the following:
First. A pre-assessment notice must be furnished to the taxpayer advising him that proper
taxes should be assessed (Sec.228, Tax Code).
Second, The taxpayer must actually be furnished with the notice of pre-assessment. Under
Rev.Regs. 18-2013 (November 28, 2013), the taxpayer has 15 days from receipt of the pre-
assessment notice within which to file his reply and explain why no assessment notice should be
sent to him.
Third, The notice of assessment is sent formally-
(1) If BIR is not satisfied by the taxpayer's explanation; or
(2) If the notice of pre-assessment was not replied to by the taxpayer.

Q. Is pre-assessment notice being required before sending a notice of assessment?

Ans. Yes. Generally, without a pre-assessment notice, the assessment would be of not force
and effect and the taxpayer could ignore the same without adverse consequences. (Rev. Regs 18-
2013 )
Q. Are there instances where notice of assessment may be issued without the required
pre-assessment notice?
Ans. Yes, in these instances:
(1) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return.
(2) When a deficiency has been determined between the tax withheld and the amount
actually remitted by the withholding agent.
(3) When a taxpayer who has opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable year was determined to have the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(4) When the excise tax due on excisable articles has been paid; or
 (5) When an article locally purchased or imported by an exempt person such as, but not
limited to vehicles, capital equipment machineries and spare parts, has been sold, traded, or
transferred to non-exempt persons (Sec. 228, Tax Code.)
Q. What is the presumption of an assessment being sent to the taxpayer? State the
rationale of such settled presumption?
Ans. In our jurisprudence, settled is the rule that assessments are prima facie presumed
correct and made in good faith. In the absence of any proof of any irregularity in the performance
of official duties, an assessment will not be disturbed (Commissioner v. Court of Tax Appeals,
240 SCRA 368(1995).
The presumption of the correctness of the issued assessments is justified by the following
reasons:
(1) Lifeblood (necessity) theory of taxes;
(2) Presumption of the regularity in the performance of public functions (Commissioner v.
Tuazon, Inc. 173 SCRA 397).

Q. Who has the duty to rebut the prima facie presumption of the correctness of the
assessment?
Ans. It is the taxpayer's duty to prove that the assessment is not correct and was not made in
good faith. Commissioner of Internal Revenue v. Court of Tax Appeals, 240 SCRA 368 (1995);
He must overcome the presumption of correctness and regularity by showing irregularities in the
performance of the official duties.
Commissioner of Internal Revenue Island Garment Manufacturing Corporation 153 SCRA
665; Collector v. Benipayo, 4 SCRA 182; Santos v. Commissioner of Internal Revenue CTA
Case No. 5157 prom. April 15, 1998; Mantex Trading Co. Inc. v. Commissioner of Internal
Revenue, prom Sept. 30, 1998

Q. When may the Commissioner exercise the power to assess the proper tax on the best
evidence obtainable?
Ans. In two instances:
(1) When a report is required by law as a basis for the assessment of any national internal
revenue tax shall not be forthcoming within the time fixed by law or rules and regulations; or
(2) When there is reason to believe that any such report is false, incomplete or erroneous
(First and second pars. Sec. 6(A), NIRC of 1997).

Q. What should be the correct basis for assessment in order that the assessment can
pass the text of judicial scrutiny?
Ans. The assessment must:
(1) Be based on actual facts and not mere presumption no matter how reasonable or logical
the presumption may be (In re Estate of Guilete, 58 Phil. 813; Santos v. Commissioner of
Internal Revenue prom. April 15, 1998).
(2) Not based on hearsay evidence.
 Elegado v. Court of Appeals, 173 SCRA 285 (1980); Atlas Consolidated Mining and
Development Corporation v. Court of Appeals, et. al. 424 SCRA 289 (1995); Interprovincial
Autobus Co. v. Collector of Internal Revenue, 89 Phil. 290 (1956); Sy Po v. Court of Tax
Appeals et. al., 164 SCRA 525(1988); Dayrit et. al., v. Cruz et. al. 165 SCRA 571 (1988);

Q. Can provisional assessment be superseded by an earlier assessment which had

already become final and executory?
Ans. No, it cannot be superseded (Sec, 228, Tax Code).
Q. What are the primary classes of assessment?
Ans. Primary classifications are: disputed assessment; and undisputed assessment. Other
classifications of assessments are: self-assessment, illegal assessment, void assessment, and
deficiency assessment, and erroneous assessment, pre-assessment and final assessment.
Q. State the procedural and remedial rules governing disputed assessments.
Ans. The procedural rule is as follows:
First, the Commissioner of Internal Revenue notifies the taxpayer through a Pre-Assessment
Notice of findings that proper taxes should be assessed (Rev. Regs. No. 18-2013).
Second, the taxpayer must respond within 15 days from receipt of Pre-Assessment Notice
why no tax liabilities should be assessed against him:
(1) If the Commissioner accepts the taxpayer's explanation the proceedings are ended (3rd
par. 228, Tax Code).
(2) If the Commissioner rejects the taxpayer's explanation, the proceedings are ended or an
assessment is issued based on the findings (3rd par. Sec. 228, Tax Code).
Third, the Commissioner issues the notice of assessment.
Fourth, The taxpayer-
(1) If taxpayer does not file a formal protest within 30 days from receipt of assessment, the
assessment becomes final, executory, demandable and not appealable to the Court of Tax
Appeals and the BIR could avail any of the remedies to collect the tax.
(2) The taxpayer administratively protests or disputes the assessment by filing a request for
reconsideration or reinvestigation within 30 days from receipt of notice of assessment (4th par.
Sec. 228, Tax Code;).
(3) Within 60 days from filing of the protest, all relevant supporting documents shall be
submitted.
(4) If the documents are not seasonably submitted, the assessment shall become final,
executory, demandable and not appealable to the Court of Appeals.
Fifth, The Commissioner denies the administrative protest or dispute within one hundred
eighty (180) days from receipt of the relevant supporting documents-
(1) The BIR Commissioner denies the administrative protest or dispute; or
(2) The BIR Commissioner does not act on the administrative protest or dispute.
Sixth, The taxpayer-
 (1) The taxpayer receives the BIR Commissioners denial of his administrative protest or
dispute and within 30 days from receipt of the denial appeals the decision of the BIR
Commissioner to the Court of Tax Appeals by means of petition for review.
(2) If the taxpayer does not seasonably interpose an appeal, the decision of the BIR
Commissioner denying the administrative protest or dispute becomes final and executory. The
disputed assessment becomes final, executory, demandable and not anymore appealable to the
Court of Tax Appeals.
(3) Learns of the inaction by the BIR Commissioner on his administrative protest or dispute
within 30 days from the lapse of 180 days from the taxpayer's submission of all the relevant
supporting document, must interpose an appeal to the Court of Tax Appeals by means of a
petition for review.
Seventh, the Court of Tax Appeals-
(1) Grant the petition or affirms the decision of the BIR Commissioner;
(2) Dismisses the petition or affirm the decision of the BIR Commissioner;
(3) The Court of Tax Appeals having its lower collegiate court has 12 months from the
admission of the case for decision within which to decide or resolve the same [Sec.15(1), Art.
VIII, 1987 Constitution].
Eight, the decision of the Court of Tax Appeals may be subject to a motion for
reconsideration and in case of denial, the decision is appealable to the Court of Appeals, by way
of petition for review within 15 days from such denial.
Ninth, The Court of Appeals, where the petition for review being filed.
(1) May grant the petition and reverses the decision of the Court of Tax Appeals;
(2) Dismisses the petition or affirm the Court of Tax Appeal's decision.
(3) The Court of Appeals must decide the case within 12 months from submittal of decision.
(4) Adverse decision may be subject to motion for reconsideration and in case of denial, a
petition for review on certiorari to the Supreme Court upon payment of proper docket fees.
Tenth, In the Supreme Court, it may-
(1) Grant the petition and reverses the decision appealed from.
(2) Dismisses the petition and affirming the Court of Appeals' decision; and
(3) A reconsideration may be filed and in case of denial thereof, the Supreme Court decision
becomes final and executory.

Q. What is the procedure in case of an undisputed assessment?

Ans. Procedurally,
(1) The Commissioner files an ordinary action for the collection of the tax before the
ordinary trial court having appropriate jurisdiction because the Court of Tax Appeals has no
jurisdiction over undisputed assessment.
(2) Any decision of the trial court would be appealable to the appellate court until the
Supreme Court, per existing 1997 Rules of Civil Procedure.
 Q. What remedies are available to a taxpayer who considers himself aggrieved in
connection with the assessment and collection of internal revenue taxes?
Ans. The following available remedies are:
(1) Filing of administrative protest and/or motion for reconsideration within 30 days from
receipt of the notice of assessment;
(2) Filing a petition for review with the Court of Tax Appeals within 30 days from receipt of
the Commissioner's denial.
(3) If appeal is denied, a petition for review may be filed with the Court of Appeals within 15
days from receipt of the adverse decision.
(4) Final appeal by certiorari to the Supreme Court.

Q. In general, what is the period of limitation for assessment of income tax? Under the
National Internal Revenue Code, what are the periods of limitations for assessment of tax
liability and collection of the tax?
Ans. Generally, the prescriptive period or statute of limitations for making assessment must
be within three (3) years.
(1) After the last day prescribed by law for the filing of the return; or
(2) Where a return is filed beyond the period prescribed by law, it should be counted from the
day the return was filed; or
(3) Where the return was filed before the last day prescribed by law for filing thereof, it shall
be counted on the last day of filing (Sec.. 203, Tax Code).

Q. Are there instances where the 3-year prescriptive period to file assessment, not
applicable? State at least one exception for the 3-year prescriptive period.
Ans. Instances where an assessment could be made despite the lapse of the 3-year period
from the time the return was filed or should have been filed whichever is the later.
(1) In case of false or fraudulent return to evade the payment of a tax-at any time within 10
years after discovery of the falsity or fraud. [Sec. 222(a), Tax Code].
(2) In case of failure to file a return- at any time within 30 days after discovery of the
omission to file return [Sec. 222(a), Tax Code].
(3) If before the expiration of the 3-year period for the assessment of the tax, there is an
agreement in writing between taxpayer and the BIR- the period agreed upon which may be
extended by subsequent written agreements made before the period previously agreed upon
expires.
Maersk-Tabacalera Shipping Agency (Filipinas), Inc. v. The Commissioner of Internal
Revenue CTA Case No. 5006 promulgated Feb. 20, 1996;

Q. How is the 3-year prescriptive period for assessment computed?

Ans. The 3-year period for the issuance of assessments as well as warrants of distraint, levy
and garnishment was interpreted by RMC NO. 48-90 which provides that the period shall have
an aggregate number of 1,095 days corresponding to 365 days multiplied by three (3) years
regardless of the fact that within such period there is a leap year which is 366 days.
Maersk Tabacalera Shipping Agency(Filipinas) Inc. v. Commissioner CTA NO. 5006 prom.
Feb. 20, 1996; Querol v. Collector, 6 SCRA 304 and Commissioner v. Sison, 7 SCRA 884;
Commissioner v. Wyeth Suaco Laboratories Inc. 220 SCRA 125(1991)

Q. Can the 3-year period of statute of prescription or limitations be suspended?

Ans. Yes, in the following cases:
(1) When Commissioner is prohibited from making any assessment or beginning restraint or
levy in court and for 60 days thereafter.
(2) When the taxpayer requests for reinvestigation and is granted a reinvestigation by the
Commissioner. The reinvestigation must be of such nature that paves the way for new and
revised assessment
(3) When the taxpayer could not be located in the address given by him in the return filed
upon which the tax is being assessed/collected (Sec. 223, Tax Code).
(4) When the warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative or a member of the household with sufficient discretion and no property could be
located; and
(5) When the taxpayer is out of the Philippines (Sec.223, Tax Code).

Q. What are the requisites in order that the protest or reinvestigation of assessment is
validated? Or What are the requisites before a taxpayer's request of reinvestigation be
granted by BIR?
Ans. The following:
(1) Showing that the request is seasonably filed within the 30 days from receipt of the
assessment notice;
(2) Proof that the assessment is wrong or incorrect.
(3) Showing of the correct and just assessment.

Q. Give the basic rules governing the 30-day period as well as other remedies accorded
to taxpayer in cases of assessments.
Ans. These rulings and rules:
(1) A valid request for reconsideration one which calls attention to those facts or arguments
which have been disregarded in the decision denying the first request suspend the periods for
perfecting an appeal [Commissioner of Internal Revenue v. Island Garment Mft. Corporation et.
al. 153 SCRA 665 (1987)] (Commissioner v. Ayala 20 SCRA 51).
(2) Filing by BIR of a civil suit for collection of tax deficiency is considered a denial of
request for reconsideration and tolls the period for appeal [Commissioner of Internal Revenue v.
Union Shipping Corp. 185 2) A pro-forma request for reconsideration -one which merely
reiterates the ground/s already invoked does not suspend the running of the period for perfecting
an appeal (Filipinas Investment and Finance Corporation v. CSCRA 454 (1999)].
. (3) The period of appeal starts to run after the Commissioner has indicated to the taxpayer in
clear and unequivocal language his final denial from issuance of the warrant of distraint and
levy.
(4) A BIR demand letter sent to taxpayer after his protest of the assessment notice is
considered final decision of the Commissioner on protest (Surigao Electric Co. Inc. v. Court of
Appeals, 57 SCRA 523; (1974); . Or Commissioner's letter reiterating his previous demand is
considered a denial of the request for reconsideration of the protest and is already appealable to
the Court (Securities Corporation, L-29485, May 31, 1976).
(5) The 30-day period mentioned in Sec. 11 of Rep. Act No. 1125 within which the taxpayer
may question before the Court of Appeals any ruling of the BIR is jurisdictional because the
Court of tax Appeals has no authority to entertain appeals filed beyond the reglementary period(
Visayan Land Transportation v. Collector, May 19, 1959).

Q. Who has the burden of proof (onus probandi) in proving that taxpayer receive the
notice of assessment within the reglementary period of 30 days?
Ans.There is a presumption of receipt of notice in favor of BIR especially if the letter is not
returned by mail; however, the presumption is merely disputable and so the taxpayer may deny
such receipt and BIR has no now the burden to prove the letter was received.
Commissioner v. PASCOR Realty and Dev. Corp. 309 SCRA 402(1999); Arnold Woodcraft
International Inc. v. The Commissioner of Internal Revenue, et. la. CTA Case NO. 4269, March
18, 1994; Republic v. CTA et. al. (184 SCRA 355,356).

Q. What is the effect if taxpayer fails to dispute the assessment within 30 days from
such receipt?
Ans. The effects are:
(1) The assessment notice becomes final and unappealable and the assessment is considered
as undisputed assessment
(2) BIR may now implement the judicial and administrative remedies to collect the assessed
tax.
(3) The Court of Tax Appeals can no longer amend, modify such final assessment because
the assessment is already, final, executory, demandable and no longer subject to appeal in the
referred court.
Republic v. Court of Appeals, 149 SCRA 351 (1987); Duenas v. Manid, et. al., 151 SCRA
350; Dayrit v. Cruz, 153 SCRA 571; Ciao v. Apalisok, 180 SCRA 680; Adez Realty Inc. v.
Court of Tax Appeals, 212 SCRA 635;

(4) For collection of such assessed tax, BIR should file the case before the ordinary courts,
not with the Court of Tax Appeals. (Fernandez Munoz v. Commissioner of Internal Revenue
29 SCRA 196).

Q. During that appealable period to the Court of Tax Appeals, who are the proper
parties to institute the appeal?
 Ans. They are:
(1) Any person, association, or corporation adversely affected by such decision or ruling of
the Commissioner (Sec. 11, Rep. Act No. 1125).
(2) Stockholders of dissolved corporation in proportion to their distributive shares in the
dissolved corporation (Tan Tiong Bio v. Bureau of Internal Revenue 100 Phil. 86).
(3) Stockholders with unpaid subscription.
Note:
(1) Government cannot appeal to the Court of Tax Appeals (Collector of Customs v. Court
of Tax Appeals, 102 SCRA 244).
(2) If the assessment is based on fraudulent return, then the 10- year prescriptive period is
the applicable law, not 3-year.

SECTION 222 Exceptions as to Period of Limitation of Assessment and Collection of Taxes. —

(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a proceeding in court for the collection of such tax may be
filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud
or omission: Provided, That in a fraud assessment which has become final and executory, the
fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the
collection thereof.

Period within which to assess tax in cases of fraudulent and false returns and failure to file a
return.
The law is clear. When fraudulent tax returns are involved as in the cases at bar, a proceeding in
court after the collection of such tax may be begun without assessment. Here, the private
respondents had already filed the capital gains tax return and the VAT returns, and paid the
taxes they have declared due therefrom. Upon investigation of the examiners of the BIR, there
was a preliminary finding of gross discrepancy in the computation of the capital gains taxes due
from the sale of two lots of AAI shares, first to APAC and then to APAC Philippines, Limited.
The examiners also found that the VAT had not been paid for VAT-liable sale of services for the
third and fourth quarters of 1990. Arguably, the gross disparity in the taxes due and the amounts
actually declared by the private respondents constitutes badges of fraud.
Lucas G. Adamson, et al. vs. Court of Appeals, et al., G.R. Nos. 120935 & 124557, May 21, 2009

In cases of (1) fraudulent returns; (2) false returns with intent to evade tax; and (3) failure to file
a return, the period within which to assess tax is ten years from discovery of the fraud,
falsification or omission, as the case may be.
Commissioner of Internal Revenue vs. The Estate of Benigno P. Toda, Jr., et al., G.R. No.
147188, September 14, 2004

Prescriptive period is interrupted once taxpayer requests for reinvestigation or reconsideration

of assessment.
Settled is the rule that the prescriptive period provided by law to make a collection by distraint
or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or
reconsideration of the assessment.
Commissioner of Internal Revenue vs. Wyeth Suaco Laboratories, Inc., et al., G.R. No. 76281,
September 30, 1991

Taxpayer's request for review or reconsideration of assessment interrupts period of prescription.

The period of prescription of action to collect a taxpayer's deficiency income tax assessment is
interrupted when the taxpayer requests for a review or reconsideration of said assessment, and
starts to run again when said request is denied. Deducting all the periods of suspension from the
five-year prescriptive period, the action for collection was timely presented.
Commissioner of Internal Revenue vs. Capitol Subdivision, Inc., G.R. No. L-18993, April 30,
1964

Mere request for reexamination or reinvestigation of assessment may not suspend the running of
the period of limitation.
A mere request for reexamination or reinvestigation of assessment may not suspend the running
of the period of limitation for in such a case there is need of a written agreement to extend the
period between the Collector and the taxpayer. There are cases, however, where a taxpayer may
be prevented from setting up the defense of prescription even if he has not previously waived it in
writing as when by his repeated requests or positive acts the Government has been, for good
reasons, persuaded to postpone collection to make himself feel that the demand was not
unreasonable or that no harassment or injustice is meant by the Government. And when such
situation comes to pass there are authorities that hold, based on weighty reasons, that such an
attitude or behavior should not be countenanced if only to protect the interest of the Government.
Commissioner of Internal Revenue vs. Suyoc Consolidated Mining Co., et al., G.R. No. L-11527,
November 25, 1958

Criminal complaint is instituted not to demand payment but to penalize the taxpayer for violation
of the Tax Code.
The issuance of an assessment must be distinguished from the filing of a complaint. Before an
assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The
taxpayer is then given a chance to submit position papers and documents to prove that the
assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him or
her is then sent to the taxpayer informing the latter specifically and clearly that an assessment
has been made against him or her. In contrast, the criminal charge need not go through all
these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that
a criminal case had been filed against him, not that the commissioner has issued an assessment.
It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize
the taxpayer for violation of the Tax Code.
Commissioner of Internal Revenue vs. Pascor Realty and Devt. Corp., et al., G.R. No. 128315,
June 29, 1999

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the
tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such
time, the tax may be assessed within the period agreed upon. The period so agreed upon may be
extended by subsequent written agreement made before the expiration of the period previously
agreed upon.

EXTENSION OF PRESCRIPTIVE PERIOD

Pursuant to Section 223 (suspension of running of statute of limitations) of the Tax Code,
internal revenue taxes may be assessed or collected after the ordinary prescriptive period, if
before its expiration, both the Commissioner and the taxpayer have agreed in writing to its
assessment and/or collection after said period. The period so agreed upon may be extended by
subsequent written agreement made before the expiration of the period previously agreed upon.
This written agreement between the Commissioner and the taxpayer is the so-called “Waiver of
the Statute of Limitations.”

Whether the taxpayer should sign the waiver or not will depend on the particular facts of the
case. Should the taxpayer choose not to sign the waiver, the revenue officer would most likely
recommend the issuance of a formal assessment notice and letter of demand. At this level, the
remedy of the taxpayer is to file a protest within 30 days from date of receipt of the assessment.
However, to be able to cancel the assessment made, it is incumbent upon the taxpayer to produce
and submit documentary evidence and legal arguments in support of its position. Thus, if the
proposed assessment is perceived to be weak and the taxpayer can submit the documentary
evidence on the questioned items, the taxpayer may opt not to sign such waiver but the taxpayer
must be ready to fight the assessment at the administrative and judicial levels through the
submission of the original copies of the requisite documentary evidence. On the other hand, by
signing the waiver which extends the period for another six months within which the
Commissioner can make an assessment, a revised preliminary assessment may be issued or the
complete withdrawal of the proposed assessment may even be had at the administrative level.
The execution of the waiver, however, does not suspend the running of deficiency interest
equivalent to 20% per annum of the basic tax assessed. In order that no new items can be raised
by the revenue officers after the execution of the waiver, certain restrictions or limitations with
respect to the kind of tax, taxable period, and issues involving certain types of taxes may be
inserted in the waiver by the taxpayer or his authorized representative. This will prevent
unscrupulous revenue officers from expanding the scope of the examination or make new
assessments on the strength of a general or unrestricted waiver.

Before signing a waiver, the taxpayer should understand that different taxes have different
starting points for purposes of prescription. Ordinary income taxes prescribe within three years
from the filing of the annual income tax returns for individuals or corporations (BIR Form 1701
or 1702) covering the incomes subject to global tax system; capital gains subject to final
withholding taxes prescribe from the filing of the capital gains tax returns covering the
transactions; while value added tax and other percentage taxes prescribe from the filing of the
quarterly tax returns.

The stage of the tax examination may be material and have an impact on the validity of the
assessment. The general rule is that a waiver which does not specify the kind and amount of
taxes covered is not valid. However, a waiver is treated as valid even if it did not specify the
kind and amount of taxes covered, if at the time it was executed, the BIR had not yet come up
with preliminary findings. At that stage, the kind and amount of tax due were still
unascertainable. Oceanic Wireless
Network vs. Commissioner, CTA Case 6111, Nov. 3, 2004

Procedures in the execution of waivers- In the execution of said waiver, the following procedures
should be followed:

1. The waiver must be in the form identified hereof. This form may be reproduced by the Office
concerned but there should be no deviation from such form. The phrase "but not after ______
19 ___" should be filled up. This indicates the expiry date of the period agreed upon to assess or
collect the tax after the regular three-year period of prescription. The period agreed upon shall
constitute the time within which to effect the assessment or collection of the tax in addition to the
ordinary prescriptive period.

2. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In
the case of a corporation, the waiver must be signed by any of its responsible officials.

Soon after the waiver is signed by the taxpayer, the Commissioner or the revenue official
authorized by him, as hereinafter provided, shall sign the waiver indicating that the BIR has
accepted and agreed to the waiver. The date of such acceptance by the BIR should be indicated.
Both the date of execution by the taxpayer and date of acceptance by the BIR should be before
the expiration of the period of prescription or before the lapse of the period agreed upon in case
a subsequent agreement is executed.

3. The following revenue officials are authorized to sign the waiver.

A. In the National Office

1. ACIRs for Collection, For tax cases involving

Special Operations, not more than P500,000
National Assessment, Excise and
Legal on tax cases pending before
their respective offices.
In the absence of the ACIR,
the Head Executive Assistant
may sign the waiver.

2. Deputy Commissioner For tax cases involving

More than P500,000.00 but not more than P1M

3. Commissioner For tax cases involving more than P1M

B. In the Regional Offices

1. The Revenue District Officer with respect to tax cases still pending investigation and the
period to assess is about to prescribe, regardless of amount.
2. The Regional Director, the Assistant Regional Director, the Chief, Assessment Division or the
Chief, Legal Division with respect to cases still pending review and the period to assess or
collect is about to prescribe, regardless of amount.

3. The Regional Director, the Assistant Regional Director, the Chief, Collection Division or the
Chief, Legal Division with respect to cases still pending collection and the period to assess or
collect is about to prescribe regardless of amount.

4. The waiver must be executed in three copies, the original copy to be attached to the docket of
the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver.
The fact of receipt by the taxpayer of his file copy shall be indicated in the original copy.

5. The foregoing procedures shall be strictly followed. Any revenue official found not to have
complied with this Order resulting in prescription of the right to assess or collect shall be
administratively dealt with.1

A Waiver must be in the form prescribed in the regulations. Among others, the Waiver: (a) must
indicate a definite expiration date agreed upon by the Commissioner and the taxpayer within
which to assess or collect the tax after the regular three-year period of prescription; and (b)
should state the date of acceptance by the BIR. Without the date, it cannot be determined
whether the Waiver was actually accepted before the expiration of the three-year assessment
period. In addition, it is now required that the waiver to be submitted to the BIR should be duly
notarized by a notary public.

The taxpayer must be furnished a copy of the accepted Waiver. Under RMO 20-90, it is required
that the Waiver be executed in three copies, the second copy of which is for the taxpayer. The
fact of receipt by the taxpayer of his copy should be indicated in the original copy. The waiver is
not a unilateral act of the taxpayer. When petitioner’s comptroller signed the waiver, it was not
yet complete and final because the BIR had not assented. There is compliance with the provision
of RMO 20-90 only after the taxpayer received a copy of the waiver accepted by the BIR. The
requirement to furnish the tax-payer with a copy of the waiver is not only to give notice of the
existence of the document but of the acceptance by the BIR and the perfection of the
agreement.Philippine Journalist vs. Commissioner, G.R. No. 162852, Dec. 16, 2004

The prescribed form requires a statement of the kind of tax and the amount of the tax due. The
purpose of stating this specific kind of tax and the amount of tax due is for the petitioner to
determine which among the proposed tax assessments may subsequently be issued without the
petitioner invoking the defense of prescription. If the amount and kind of tax were not indicated
in the said waiver, there was no agreement to speak of.
Pfizer, Inc. vs. Commissioner, CTA Case No. 6135, Apr. 21, 2003; FMF
Development Corporation vs. Commissioner, CTA Case No. 6153,
Mar. 20, 2003
Illustrative Cases:

1. A waiver is ineffective if it is executed beyond the prescriptive period.--Section 222(b) and (d)
of the Tax Code authorizes the taxpayer and the Government to extend by mutual agreement in
writing the prescriptive period for the assessment and collection of taxes. It is necessary that the
waiver be executed by the parties before the lapse of the five-year prescriptiveperiod. A waiver
is ineffective if it is executed beyond the original three-year (now five year) period of
prescription. Republic vs. Acebedo, 22 SCRA 1356 The rule is in accord with the general law
on prescription that requires a written acknowledgment of the debtor to renew the cause of
action or interrupt the running of the limitation period.2There can be no extension of the
prescriptive period once prescription has set in. The law does not authorize the extension of the
prescriptive period once prescription has set in. The waiver of the statute of limitations executed
by the taxpayer cannot be deemed to include taxes which had already prescribed. The clear
import of Section 222(b) is that it does not authorize extension by agreement of the
Commissioner and the taxpayer once prescription has attached; i.e., after expiration of the
original period.
Republic vs. Lim de Yu, 10 SCRA 737; Philippine
Journalists vs Commissioner, G.R. No. 162852, Dec. 16, 2004

2. Waiver, where no period BIR may assess tax is indicated, is invalid.--A close scrutiny of the
waiver revealed that no period was agreed upon within which the respondent may validly assess
the petitioner after the regular three-year period of prescription provided by law. This Court,
therefore, holds that the said waiver is invalid and without any binding effect on the petitioner
for the reason that there was no consent by the respondent-Commissioner and no period was set
or agreed upon for subsequent assessment.
Pelican vs. Commissioner, CTA Case No. 5997, May 16, 2003

The waiver that does not specify a definite agreed date between the BIR and petitioner, within
which the former may assess and collect taxes, becomes unlimited in time, violating Section
222(b) of the Tax Code.3

3. RDO who attested in the waiver did not sign it for the Commissioner-A close scrutiny of the
waiver of the statute of limitation shows that the RDO had merely attested the aforesaid waiver;
that aforesaid officer did not sign the waiver either for or by virtue of the authority of the
Commissioner. Clearly, for all legal intents and purposes of the above law, Section 332 (now
Section 222) of the Tax Code, there was no valid waiver executed by the Commissioner and
petitioner to stop the running of the period within which to validly assess the tax in question.
Moreover, it is only the Commissioner, who is specially named by said provision of Section
332(b) of the Tax Code, as the one who can sign the waiver of the statute of limitation, and since
the Commissioner has not signed the waiver, there is, therefore, no consummated or valid waiver
which may suspend the running of the period within which to assess the tax in question
Collector vs. Solano, L-11475, July 31, 1958

4. Filing of bond is tantamount to a written waiver.-- Only written agreements can suspend the
running of the period of limitation.Republic vs. Ret, 4 SCRA 783

The filing of the bond has been held to be tantamount to a written waiver which interrupts the
period of limitation. Republic vs. Xavier Gun Trading Co., 4 SCRA 1133 The filing of a chattel
mortgage to secure the tax obligation is tantamount to a writ-ten waiver of the statute of
limitations. Sambrano vs. CTA, 101 Phil 1.

5. Waivers extend, not reduce, prescriptive periods provided by law.-- Tax waivers are
supposed to extend, not reduce, the prescriptive periods provided by law. Hence, the
Commissioner cannot validly agree to reduce the prescriptive period to less than that granted by
law to the detriment of the State, since it diminishes the Government’s opportunities to collect
taxes due to the Republic. Republic vs. Lopez, 7 SCRA 566

Rules in cases where more than one waiver was signed

1. Waiver must be in writing and signed by both the Commissioner and the taxpayer.-- The CTA
held that the three waivers signed by the taxpayer have no binding effect for lack of consent on
the part of the Commissioner. Upon the other hand, the Commissioner maintains that the
waivers are valid although not signed by the Commissioner because (a) when the revenue
officers extended the period to audit and investigate taxpayer’s tax returns, the BIR gave its
implied consent to such waivers; (b) the signature of the Commissioner is a mere formality and
the lack of it does not vitiate the binding effect of the waivers; and (c) that a waiver is not a
contract but a unilateral act of renouncing one’s right to avail of the defense of prescription and
remains binding in accordance with the terms and conditions set forth in the waiver. The court
did not go along with Commissioner’s theory. Section 319 (now Section 222) of the Tax Code is
clear and explicit that the waiver must be in writing and signed by both the Commissioner and
the taxpayer. Commissioner vs.
Carnation Phil (now merged with Nestle Phils.) and CTA,
CA-G.R. SP No. 30220, May 31, 1994

2. Waiver must be signed by revenue official who is duly authorized.--Petitioner filed its 1989
annual income tax return on April 11, 1990 and so, the BIR has until April 15, 1993 to assess.
On March 16, 1993, petitioner executed a waiver consenting to the assessment and/ or collection
of the taxes which may be found due after investigation at any time before or after the lapse of
the period of limitations fixed by Sections 203 (period of limitation upon assessment and
collection) and 222 (exceptions as to period of limitation of assessment and collection of taxes)
of the Tax Code but not later than September 30, 1993. It would seem, therefore, that the BIR’s
right to assess was extended by the said waiver. An examination, however, of the waiver would
reveal the absence of the signature of the Commissioner, whose signature is required in waivers
for tax cases involving more than one million pesos under RMO 20-90. The subject waiver was
instead signed by the Assistant Revenue Service Chief, Special Operations Service, of the BIR.
Since the amount involved in the assessment is P16,259,617.67, the waiver was invalid insofar as
the said assessment was concerned and consequently, it did not suspend the running of the three-
year prescriptive period. Thus, when respondent issued the aforesaid assessment on July 27,
1993, his right to assess has prescribed.
Philippine Bank of Communications vs. Commissioner, CTA Case No.
5251, Nov. 7, 1999

3. Unsigned first waiver is not a valid agreement; period to assess was not suspended by the
execution of first waiver.--The first waiver extended the period of assessment up to December 31,
1992 and the second waiver extended it up to June 30, 1993. However, these waivers have no
binding effect. The first waiver was not valid be-cause the Commissioner (or his duly authorized
representative) did not give his consent as evidenced by the fact that he did not sign the
document. The fact that it was left unsigned by the Commissioner signifies that there was no
valid agreement to stop the running of the period of limitations. Section 222(b) of the Tax Code
clearly provides that both the Commissioner and the taxpayer must agree in writing on the
period agreed upon. Since the Commissioner did not affix her signature, the document is
ineffective….The fact that the waiver executed on September 30, 1992 was signed by the
representative of the petitioner and not by the Commissioner, the period to assess was never
extended. The waiver was not consummated and therefore was invalid and void. As regards the
second waiver executed by the petitioner, the same was of no consequence since the first waiver
was not valid. Thus, the period to assess was not suspended by petitioner’s execution of the first
waiver, more so by the second waiver. As required by Section 222 of the Tax Code, the second
waiver must be executed before the expiration of the period previously agreed upon. Inasmuch
as there is no valid waiver previously agreed upon, no valid extension can be made. The law
bars the respondent in issuing the subject assessment.
Luzon Packaging Products vs. Commissioner, CTA Case
5016, June 23, 1997

4. Amount and kind of tax, and date of acceptance of waiver by BIR and date of fact of receipt
by taxpayer must be indicated in the waiver.--If the amount and kind of tax were not indicated in
the first waiver, there was logically no agreement to speak of. An agreement is “the expression
by two or more persons of a common intention to affect their legal relations; it consists in their
being of the same mind and intention concerning the matter agreed upon.”4 Moreover, the date
of the acceptance of said waiver by the respondent and the fact of receipt by the petitioner of its
copy of the accepted waiver were not indicated in said waiver. Therefore, having ruled that the
first waiver was invalid, the three-year reglementary period was not interrupted. In other words,
the assessment issued on March 14, 1996, for alleged liability incurred in 1990 already
prescribed. Considering that the first waiver is not valid, there can be no basis for the second
waiver … In sum, even supposing that the two waivers were valid, the assessment issued on
March 14, 1996 is still void simply because it does not correspond to the original assessments
nor to the same assessments in a reduced amount. As evinced by the records, the subject
assessment is entirely separate and distinct from the assessment issued on November 25, 1994.
The assessment issued on March 14, 1996, which gives rise to the instant petition, pertains to
deficiency income tax for 1990 in the amount of P85,282,456.17, by reason of the disallowance
by respondent of certain interest expenses. However, the assessment notices above-mentioned
relate to different tax liabilities of herein petitioner. In fact, the memorandum issued by the
Revenue Officer who conducted the reinvestigation contained a recommendation for the
cancellation of the same assessments for lack of factual and legal basis.
Solid Cement Corporation vs. Commissioner, CTA Case 5420,
May 27, 1999;
Commissioner vs. FMF Dev. Corp.,
CA-GR SP No. 79675, Jan. 31, 2005

5. Failure of the parties to set or state the extended period of prescription in the waiver
invalidates such waiver. Commissioner vs. Enron
Subic Power Corporation, CA-GR SP No. 82966, Dec. 21, 2004

The BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-
90 and RDAO 05-01, which the BIR itself issued. As stated earlier, the BIR failed to verify
whether a notarized written authority was given by the respondent to its accountant, and to
indicate the date of acceptance and the receipt by the respondent of the waivers. Having caused
the defects in the waivers, the BIR must bear the consequence. It cannot shift the blame to the
taxpayer. To stress, a waiver of the statute of limitations, being a derogation of the taxpayer's
right to security against prolonged and unscrupulous investigations, must be carefully and
strictly construed.
Commissioner of Internal Revenue vs. Kudos Metal Corp., G.R. No. 178087, May 5, 2010

(c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax.

C I R vs. Phil. Global Communication, Inc., G.R. No. 167146, October 31, 2006

FACTS: Phil. Global Communication, a corporation engaged in telecommunications, received

a Formal Assessment Notice dated April 14, 1994, for deficiency income tax in the total amount
of P118,271,672.00. Through counsel, respondent filed two formal protest letters against the
assessment alleging lack of factual and legal basis. More than eight years after the assessment
was presumably issued, respondent received from the CIR a Final Decision denying its protest
and affirming the assessment in toto.

Respondent then filed a Petition for Review with the CTA which ruled that the CIR’s right to
collect has prescribed. It decided that the protest letters filed by the respondent cannot constitute
a request for reinvestigation, hence, they cannot toll the running of the prescriptive period to
collect the assessed deficiency income tax. After a motion for reconsideration and a Petition for
Review with the CTA en banc were denied, the CIR went to the Supreme Court on a Petition for
Review on Certiorari.
ISSUE: Whether or not CIR's right to collect respondent's alleged deficiency income tax is
barred by prescription under Section 269(c) of the Tax Code of 1977.

RULING: The three-year statute of limitations on the collection of an assessed tax provided
under Section 269(c) of the Tax Code of 1977, a law enacted to protect the interests of the
taxpayer, must be given effect. In providing for exceptions to such rule in Section 271, the law
strictly limits the suspension of the running of the prescription period to, among other instances,
protests wherein the taxpayer requests for a reinvestigation.

In this case, where the taxpayer merely filed two protest letters requesting for a reconsideration,
and where the BIR could not have conducted a reinvestigation because no new or additional
evidence was submitted, the running of statute of limitations cannot be interrupted. The tax
which is the subject of the Decision issued by the CIR on 8 October 2002 affirming the Formal
Assessment issued on 14 April 1994 can no longer be the subject of any proceeding for its
collection. Consequently, the right of the government to collect the alleged deficiency tax is
barred by prescription.

Bank of the Philippine Islands vs. C I R, G.R. No. 139736, October 17, 2005

FACTS: On two separate occasions, particularly on 06 June 1985 and 14 June 1985, petitioner
BPI sold United States (US) $500,000.00 to the Central Bank of the Philippines (Central Bank),
for the total sales amount of US$1,000,000.00. On 10 October 1989, the BIR issued an
Assessment finding petitioner BPI liable for deficiency DST on its afore-mentioned sales of
foreign bills of exchange to the Central Bank.

Petitioner BPI received the Assessment, together with the attached Assessment Notice on 20
October 1989. Petitioner BPI protested the Assessment in a letter dated 16 November 1989, and
filed with the BIR on 17 November 1989. Petitioner BPI did not receive any immediate reply to
its protest letter. However, on 15 October 1992, the BIR issued a Warrant of Distraint and/or
Levy against petitioner BPI for the assessed deficiency DST for taxable year 1985. It served the
Warrant on petitioner BPI only on 23 October 1992.

Then again, petitioner BPI did not hear from the BIR until 11 September 1997, when its counsel
received a letter, dated 13 August 1997, signed by then BIR Commissioner LiwaywayVinzons-
Chato, denying its "request for reconsideration," and addressing the points raised by petitioner
BPI in its protest letter, dated 16 November 1989. Upon receipt of this letter, petitioner BPI
proceeded to file a Petition for Review with the CTA on 10 October 1997; to which respondent
BIR Commissioner, represented by the Office of the Solicitor General, filed an Answer on 08
December 1997.

Petitioner BPI raised in its Petition for Review before the CTA, in addition to the arguments
presented in its protest letter, dated 16 November 1989, the defense of prescription of the right of
respondent BIR Commissioner to enforce collection of the assessed amount. It alleged that
respondent BIR Commissioner only had three years to collect on the Assessment, but she waited
for seven years and nine months to deny the protest.

ISSUE: Whether the right of respondent BIR Commissioner to collect from petitioner BPI the
alleged deficiency DST for taxable year 1985 had prescribed.

HELD: Yes. As enunciated in Secs. 203, 223 and 224 of the Tax Code, the BIR has three years,
counted from the date of actual filing of the return or from the last date prescribed by law for the
filing of such return, whichever comes later, to assess a national internal revenue tax or to begin
a court proceeding for the collection thereof without an assessment. In case of a false or
fraudulent return with intent to evade tax or the failure to file any return at all, the prescriptive
period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity,
fraud, or omission. When the BIR validly issues an assessment, within either the three-year or
ten-year period, whichever is appropriate, then the BIR has another three years after the
assessment within which to collect the national internal revenue tax due thereon by distraint,
levy, and/or court proceeding. The assessment of the tax is deemed made and the three-year
period for collection of the assessed tax begins to run on the date the assessment notice had been
released, mailed or sent by the BIR to the taxpayer.

In the present Petition, there is no controversy on the timeliness of the issuance of the
Assessment, only on the prescription of the period to collect the deficiency DST following its
Assessment. While the Assessment and the corresponding Assessment Notice were both dated 10
October 1989 and were received by petitioner BPI on 20 October 1989, there was no showing as
to when the said Assessment and Assessment Notice were released, mailed or sent by the BIR.
Still, it can be granted that the latest date the BIR could have released, mailed or sent the
Assessment and Assessment Notice to petitioner BPI was on the same date they were received by
the latter, on 20 October 1989. Counting the three-year prescriptive period, for a total of 1,095
days, from 20 October 1989, then the BIR only had until 19 October 1992 within which to collect
the assessed deficiency DST.

The earliest attempt of the BIR to collect on the Assessment was its issuance and service of a
Warrant of Distraint and/or Levy on petitioner BPI. Although the Warrant was issued on 15
October 1992, previous to the expiration of the period for collection on 19 October 1992, the
same was served on petitioner BPI only on 23 October 1992.

In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI
of a protest letter suspended the running of the prescriptive period for collecting the assessed
DST.

The statute of limitations on assessment and collection of national internal revenue taxes may be
suspended if the taxpayer executes a valid waiver thereof, as provided in paragraphs (b) and (d)
of Section 223 of the Tax Code of 1977, as amended; and in specific instances enumerated in
Section 224 of the same Code, which include a request for reinvestigation granted by the BIR
Commissioner. Outside of these statutory provisions, however, this Court also recognized one
other exception to the statute of limitations on collection of taxes in the case of Collector of
Internal Revenue v. Suyoc Consolidated Mining Co.

i. Execution of a valid waiver

The statute of limitations on assessment and collection of national internal revenue taxes may be
waived, subject to certain conditions, under paragraphs (b) and (d) of Section 223 of the Tax
Code of 1977, as amended, respectively. Petitioner BPI, however, did not execute any such
waiver in the case at bar.

According to paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended, the
prescriptive periods for assessment and collection of national internal revenue taxes,
respectively, could be waived by agreement.

The agreements so described are often referred to as waivers of the statute of limitations. The
waiver of the statute of limitations, whether on assessment or collection, should not be construed
as a waiver of the right to invoke the defense of prescription but, rather, an agreement between
the taxpayer and the BIR to extend the period to a date certain, within which the latter could still
assess or collect taxes due. The waiver does not mean that the taxpayer relinquishes the right to
invoke prescription unequivocally.

A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 223 of the
Tax Code of 1977, as amended, must be: (1) in writing; (2) agreed to by both the Commissioner
and the taxpayer; (3) before the expiration of the ordinary prescriptive periods for assessment
and collection; and (4) for a definite period beyond the ordinary prescriptive periods for
assessment and collection. The period agreed upon can still be extended by subsequent written
agreement, provided that it is executed prior to the expiration of the first period agreed upon.
The BIR had issued Revenue Memorandum Order (RMO) No. 20-90 on 04 April 1990 to lay
down an even more detailed procedure for the proper execution of such a waiver. RMO No. 20-
90 mandates that the procedure for execution of the waiver shall be strictly followed, and any
revenue official who fails to comply therewith resulting in the prescription of the right to assess
and collect shall be administratively dealt with.

A request for reconsideration or reinvestigation by the taxpayer, without a valid waiver of the
prescriptive periods for the assessment and collection of tax, as required by the Tax Code and
implementing rules, will not suspend the running thereof.

The protest filed by petitioner BPI did not constitute a request for reinvestigation, granted by the
respondent BIR Commissioner, which could have suspended the running of the statute of
limitations on collection of the assessed deficiency DST under Section 224 of the Tax Code of
1977, as amended.
ii. Request for reinvestigation which is granted by the Commissioner

There is a distinction between a request for reconsideration and a request for reinvestigation.
Revenue Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary of Finance,
upon the recommendation of the BIR Commissioner, governs the procedure for protesting an
assessment and distinguishes between the two types of protest, as follows —

(a) Request for reconsideration. — refers to a plea for a re-evaluation of an assessment on

the basis of existing records without need of additional evidence. It may involve both a question
of fact or of law or both.

(b) Request for reinvestigation. — refers to a plea for re-evaluation of an assessment on the
basis of newly-discovered or additional evidence that a taxpayer intends to present in the
reinvestigation. It may also involve a question of fact or law or both.

With the issuance of RR No. 12-85 on 27 November 1985 providing the above-quoted
distinctions between a request for reconsideration and a request for reinvestigation, the two
types of protest can no longer be used interchangeably and their differences so lightly brushed
aside. It bears to emphasize that under Section 224 of the Tax Code of 1977, as amended, the
running of the prescriptive period for collection of taxes can only be suspended by a request for
reinvestigation, not a request for reconsideration. Undoubtedly, a reinvestigation, which entails
the reception and evaluation of additional evidence, will take more time than a reconsideration
of a tax assessment, which will be limited to the evidence already at hand; this justifies why the
former can suspend the running of the statute of limitations on collection of the assessed tax,
while the latter cannot.

The protest letter of petitioner BPI, dated 16 November 1989 and filed with the BIR the next day,
on 17 November 1989, did not specifically request for either a reconsideration or
reinvestigation. A close review of the contents thereof would reveal, however, that it protested
Assessment No. FAS-5-85-89-002054 based on a question of law, in particular, whether or not
petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in taxable
year 1985. The same protest letter did not raise any question of fact; neither did it offer to
present any new evidence. In its own letter to petitioner BPI, dated 10 September 1992, the BIR
itself referred to the protest of petitioner BPI as a request for reconsideration. These
considerations would lead this Court to deduce that the protest letter of petitioner BPI was in the
nature of a request for reconsideration, rather than a request for reinvestigation and,
consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension of the
running of the statute of limitations should not apply.

Even if, for the sake of argument, this Court glosses over the distinction between a request for
reconsideration and a request for reinvestigation, and considers the protest of petitioner BPI as
a request for reinvestigation, the filing thereof could not have suspended at once the running of
the statute of limitations. Article 224 of the Tax Code of 1977, as amended, very plainly requires
that the request for reinvestigation had been granted by the BIR Commissioner to suspend the
running of the prescriptive periods for assessment and collection.

That the BIR Commissioner must first grant the request for reinvestigation as a requirement for
suspension of the statute of limitations is even supported by existing jurisprudence.

The burden of proof that the taxpayer's request for reinvestigation had been actually granted
shall be on respondent BIR Commissioner. The grant may be expressed in communications with
the taxpayer or implied from the actions of the respondent BIR Commissioner or his authorized
BIR representatives in response to the request for reinvestigation.

In the present Petition, (1) the protest filed by petitioner BPI was a request for reconsideration,
not a reinvestigation, of the assessment against it; and (2) even granting that the protest of
petitioner BPI was a request for reinvestigation, there was no showing that it was granted by
respondent BIR Commissioner and that actual reinvestigation had been conducted.

iii. Collector of Internal Revenue v. Suyoc Consolidated Mining Co.

The only exception to the statute of limitations on collection of taxes, other than those already
provided in the Tax Code, was recognized in the Suyoc case.

In the Suyoc case, this Court expressly conceded that a mere request for reconsideration or
reinvestigation of an assessment may not suspend the running of the statute of limitations. It
affirmed the need for a waiver of the prescriptive period in order to effect suspension thereof.
However, even without such waiver, the taxpayer may be estopped from raising the defense of
prescription because by his repeated requests or positive acts, he had induced Government
authorities to delay collection of the assessed tax.

By the principle of estoppel, taxpayer Suyoc was not allowed to raise the defense of prescription
against the efforts of the Government to collect the tax assessed against it. This Court adopted
the following principle from American jurisprudence: "He who prevents a thing from being done
may not avail himself of the nonperformance which he has himself occasioned, for the law says
to him in effect 'this is your own act, and therefore you are not damnified.'"

Conclusion

To summarize all the foregoing discussion, this Court lays down the following rules on the
exceptions to the statute of limitations on collection. The statute of limitations on collection may
only be interrupted or suspended by a valid waiver executed in accordance with paragraph (d)
of Section 223 of the Tax Code of 1977, as amended, and the existence of the circumstances
enumerated in Section 224 of the same Code, which include a request for reinvestigation granted
by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is not accompanied by a valid
waiver or there is no request for reinvestigation that had been granted by the BIR Commissioner,
the taxpayer may still be held in estoppel and be prevented from setting up the defense of
prescription of the statute of limitations on collection when, by his own repeated requests or
positive acts, the Government had been, for good reasons, persuaded to postpone collection to
make the taxpayer feel that the demand is not unreasonable or that no harassment or injustice is
meant by the Government, as laid down by this Court in the Suyoc case.

(d) Any internal revenue tax, which has been assessed within the period agreed upon as
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding
in court within the period agreed upon in writing before the expiration of the five (5)-year period.
The period so agreed upon may be extended by subsequent written agreements made before the
expiration of the period previously agreed upon.

(e) Provided, however, That nothing in the immediately preceding Section and paragraph (a)
hereof shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree.

Sec. 222 (b) - Exceptions as to Period of Limitation of Assessment and Collection of Taxes
The BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-
90 and RDAO 05-01, which the BIR itself issued. As stated earlier, the BIR failed to verify
whether a notarized written authority was given by the respondent to its accountant, and to
indicate the date of acceptance and the receipt by the respondent of the waivers. Having caused
the defects in the waivers, the BIR must bear the consequence. It cannot shift the blame to the
taxpayer. To stress, a waiver of the statute of limitations, being a derogation of the taxpayer's
right to security against prolonged and unscrupulous investigations, must be carefully and
strictly construed.
Commissioner of Internal Revenue vs. Kudos Metal Corp., G.R. No. 178087, May 5, 2010

SECTION 223 Suspension of Running of Statute of Limitations. — The running of the Statute
of Limitations provided in Sections 203 and 222 on the making of assessment and the beginning
of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner is

(a) prohibited from making the assessment or beginning distraint or levy or a proceeding in court
and for sixty (60) days thereafter;
(b) when the taxpayer requests for a reinvestigation which is granted by the Commissioner;

(c) when the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected:

Provided, That, if the taxpayer informs the Commissioner of any change in address, the running
of the Statute of Limitations will not be suspended;

(d) when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property could be
located; and

(e) when the taxpayer is out of the Philippines.

Interruption of the Prescriptive Period

The running of the prescriptive periods for assessment and collection of taxes is suspended under
any of the following circumstances:

a. When the Commissioner is prohibited from making the

assessment or beginning distraint and levy or a proceeding in court and for sixty (60)
days thereafter;

b. When the taxpayer requests for the reinvestigation which is granted by the
Commissioner;

c. When the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected; provided that if the taxpayer informs the
Commissioner of any change in address, the running of the Statute of Limitations will not
be suspended;

d. When the warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative or a member of his household with sufficient discretion and no property
could be located; and

e. When the taxpayer is out of the Philippines.

The voluntary and unilateral act of respondent in inviting petitioner to air its objections to the
proposed assessment could not be construed to suspend the period within to assess the tax.
Pacific Transport Lines vs. Commissioner, CTA Case No.
1039, Apr. 29, 1981

Period the Commissioner is prohibited from making assessment, beginning distraint and levy, or
proceeding in court and for sixty days.--The running of the prescriptive period to collect
deficiency taxes shall be suspended for the period during which the Commissioner is prohibited
from beginning a distraint and levy or instituting a proceeding in court, and for sixty days
thereafter. In this case, the pendency of the taxpayer’s appeal in the CTA and in the Supreme
Court had the effect of temporarily staying the hands of the Commissioner. If the taxpayer’s
stand that the pendency of the appeal did not stop the running of the period because the CTA did
not have jurisdiction over the case is upheld, taxpayers would be encouraged to delay the
payment of taxes in the hope of ultimately avoiding the same. Under the circumstances, the
running of the prescriptive period was suspended. The reason for such prohibition is that when
a case is on appeal to the CTA, the Commissioner is prevented from filing an ordinary action to
collect the tax in the regular courts. Republic vs. Ker & Co., Ltd., 18 SCRA 207

Request for reinvestigation is granted by BIR.--The only agreement that can suspend the running
of the prescriptive period for the collection of taxes is a written agreement between the taxpayer
and the Commissioner, entered into before the expiration of the five-year (now three-year)
period, extending the period of limitation prescribed by law. The rule is in accord with the
general law on prescription that requires a written acknowledgment of the debtor to renew the
cause of action or interrupt the running of the limitation period.
New Civil Code, Art. 1155; Collector vs.
Solano, L-11475, July 31, 1958;
Republic vs. Gancayco, 11 SCRA 380

A mere request for reinvestigation or reconsideration of an assessment does not have the effect
of suspension. The ruling is logical; otherwise, there would be no point to the legal requirement
that the extension of the original period be agreed upon in writing.” The “legal requirement”
above adverted to obviously refers to Section 319(c ) (now Section 223) of the Tax Code,
whereby the five-year period therein fixed to enforce collection of a tax, either by distraint or
levy or by a proceeding in court, may be extended if, prior to the expiration thereof, another
period is agreed upon in writing by the Commissioner and the taxpayer.”
Commissioner vs. Atlas Consolidated Mining & Development Corporation, CA-
G.R. SP No. 41979, Sept. 30, 1999
Where the reinvestigation requested by appellant was not conducted because neither the
appellant nor his counsel appeared, the prescriptive period remains suspended until the BIR
issued a warrant of distraint and levy, which was the first clear and unequivocal act on the part
of the Government which showed that as far as it was concerned, the old assessment of the
deficiency taxes was final, and hence collection of the amount assessed would proceed. The
interruption began on Sept. 2, 1954, when the appellant’s request for reinvestigation was
granted, since the grant in effect tied the hands of the appellee from filing the action.Republic vs.
Aquias, 33 SCRA 607

Giving a written notice to the BIR about the tax-payer’s change of address is very important in
that failure to do so would mean suspension of the running of the statute of limitations. The
receipt of a warrant of distraint and/or levy by the taxpayer will also stop the running of the
prescriptive period where no property belonging to the taxpayer can be found by the BIR.

Differences between extension and interruption of prescriptive periods

a. In extension of the prescriptive period, the taxpayer and the Commissioner or his authorized
representative sign a written waiver extending the period within which the BIR may assess or
collect the tax. In suspension or interruption of the prescriptive period, the contracting parties
do not sign any written agreement interrupting the period. Either the taxpayer requested for a
reinvestigation which was granted by the Commissioner, or a warrant of distraint or levy was
issued by the Commissioner or his authorized representative and no property of the taxpayer
could be located.

b. The grounds for extension of the prescriptive period are provided for in Section 222(b) to (e),
while the grounds for the interruption of the prescriptive period are given in Section 223, both of
the Tax Code.

c. To validly extend the prescriptive period, the waiver must be signed by the contracting parties
before the expiration of the time prescribed to assess or to collect (or before the issuance,
release and mailing of the assessment notice and demand letter). In the case of suspension or
interruption of prescriptive period, the actions of the taxpayer and the BIR are taken after the
issuance, release and mailing of assessment notice and letter of demand.

d. In extension and suspension of the prescriptive period, the effect is to extend or prolong the
period within which the Commissioner may assess or collect the tax. In suspension of the
prescriptive period, the period during which any of the enumerated condition exists is deducted
from the total period. The period to assess or collect mentioned in the law is not extended.
However, in the case of extension, the period stated in the law within which the Commissioner
may assess or collect is extended by the agreement signed by both parties.

When must issue on prescription be raised?

Issue of prescription must be raised by the government at the administrative level.-- The
Commissioner claims that fraud attended the filing of the return; that this being so, Section
332(a) [now Section 222(a)] of the Tax Code would apply. It may be well to note that the
assessment letter itself did not impute fraud in the return with intent to evade payment of the tax.
Precisely, no surcharge for fraud was imposed. In his answer to the petition for review filed by
Yusay in the CTA, the Commissioner alleged no fraud. Instead, he broached the insufficiency of
the return as barring the commencement of the running of the statute of limitations. He raised
the point of fraud for the first time in the proceedings, only in his memorandum filed with the Tax
Court subsequent to resting his case. Said Court rejected the plea of fraud for lack of allegation
and proof, and ruled that the return, although not accurate, was sufficient to start the period of
prescription. Fraud is a question of fact. The circumstances constituting it must be alleged and
proved in the court below.

The CFI acting as a settlement court is not the proper tribunal to pass upon the defense of
prescription; therefore, it would be but futile to raise it therein. Moreover, the Tax Code does
not bar the right to contest the legality of the tax after a taxpayer pays it. Under Section 306, he
can pay the tax and claim a refund therefore. A fortiori, his willingness to pay the tax is no
waiver to raise defenses against the tax legality.
Commissioner vs. Gonzales, 18 SCRA 757
Issue of prescription must be raised by the taxpayer at the administrative level.--The issue as to
the right of the government to assess and collect must be raised at the administrative level, and
evidence to prove prescription of the right to assess and collect must be introduced by the
taxpayer.

Invalidity of waiver may still be raised during the trial at CTA.--The contention of the respondent
that failure of the petitioner to raise the issue of prescription in its letter-protest, precluded it
from invoking the same for the first time before this Court is untenable. In the first place, the
petitioner cannot raise the issue of prescription in its letter-protest filed on July 15, 1993
because of its prior execution of a supposedly valid “waiver of the defense of prescription” on
August 17, 1992. It was only after a careful perusal of the records of the BIR that the petitioner
discovered the invalidity of the waiver signed by its representative. Such knowledge prompted
the petitioner to file a Motion to Allow Petitioner to Adduce Additional Rebuttal Evidence where
it invoked the defense of prescription. Central Cement
Corporation vs. Commissioner, CTA Case 5024, June 13, 1997

When government admitted allegation of prescription in its answer, taxpayer need not introduce
evidence.--When the taxpayer assailed the right of the government to assess and collect, alleged
the facts constituting prescription, supported by annexes (in its petition for review), and the
government admitted the allegation in its answer, there was no need for the taxpayer to present
further evidence on this point… The demand on the taxpayer to pay the amount erroneously
refunded is in effect an assessment for deficiency franchise tax. And being so, the right to assess
or collect the same is governed by Section 331 (now Section 222) of the Tax Code, rather than by
Article 1145 of the Civil Code Guagua Electric
Light Plant Co. vs. Collector and Court of Tax Appeals

Requisites for suspension of the period to enforce collection.

The plain and unambiguous wording of the said provision dictates that two requisites must
concur before the period to enforce collection may be suspended: (a) that the taxpayer requests
for reinvestigation, and (b) that the Commissioner of Internal Revenue (CIR) grants such
request. On this point, we have previously held that: The above section is plainly worded. In
order to suspend the running of the prescriptive periods for assessment and collection, the
request for reinvestigation must be granted by the CIR. Consequently, the mere filing of a protest
letter which is not granted does not operate to suspend the running of the period to collect taxes.
Commissioner of Internal Revenue vs. Hambrecht & Quist Philippines, Inc., G.R. No. 169225,
November 17, 2010
Bank of the Philippine Islands vs. Commissioner of Internal Revenue, G.R. No. 174942, March
7, 2008

The pendency of taxpayer's appeal temporarily stayed the hands of the Commissioner.
Under the Tax Code the running of the prescriptive period to collect deficiency taxes shall be
suspended for the period during which the Commissioner of Internal Revenue is prohibited from
beginning a distraint and levy or instituting a proceeding in court, and for sixty days thereafter.
The pendency of the taxpayer's appeal in the Court of Tax Appeals and in the Supreme Court
had the effect of temporarily staying the hands of the said Commissioner. If the taxpayer's stand
that the pendency of the appeal did not stop the running of the period because the Court of Tax
Appeals did not have jurisdiction over the case of taxes is upheld, taxpayers would be
encouraged to delay the payment of taxes in the hope of ultimately avoiding the same. Under the
circumstances, the running of the prescriptive period was suspended."
Republic of the Phils.vs. Ker & Co., Ltd., G.R. No. L-21609, September 29, 1966