Dispute of Assessment - Wong

Protest

- It is the act by the taxpayer of questioning the validity of the imposition of the corresponding delinquency
increments for internal revenue taxes as shown in the notice of assessment and letter of demand.

“SEC. 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 preassessment
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 the 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 reasons;

The taxpayer or its authorized representative or tax agent may protest administratively against the aforesaid FLD/FAN
within thirty (30) days from date of receipt thereof. The taxpayer protesting an assessment may file a written request for
reconsideration or reinvestigation

When is an assessment considered disputed?

- When the taxpayer, indicates its protest against the delinquent assessment of the RO and requests for
reconsideration, through a letter. After the request is filed and received by the BIR, the assessment becomes a
disputed assessment (CIR v. Isabela Cultural Corp., GR 135210, July 11, 2001).

Procedure to be followed in protesting an assessment

1. BIR issues assessment notice.

2. The taxpayer files an administrative protest against the assessment. Such protest may either be a request for
reconsideration/for reinvestigation. The protest must be filed within 30 days from receipt of assessment. (“30-day
period”)

3. All relevant documents must be submitted within 60 days from filing of protest; otherwise, the assessment shall
become final and unappealable. (“60-day period”)

4. In case the CIR decides adversely or if no decision yet after the lapse of 180 days, the taxpayer may appeal to the CTA
Division, 30 days from the receipt of the decision or from the lapse of the 180 days otherwise the decision shall become
final, executory and demandable. (RCBC v. CIR, GR 168498, Apr. 24, 2007)

5. If the decision is adverse to the taxpayer, he may file a motion for reconsideration or new trial before the same
Division of the CTA within 15 days from notice thereof.

6. In case the resolution of a Division of the CTA on a motion for reconsideration or new trial is adverse to the taxpayer,
he may file a petition for review with the CTA en banc.

7. The ruling or decision of the CTA en banc may be appealed with the Supreme Court through a verified petition for
review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure.

Final Decision on a Disputed Assessment

- The decision of the Commissioner or his duly authorized representative shall state the facts, the applicable law,
rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void,
and that the same is his final decision (Sec. 3.1.5, Rev. Regs. No. 18-2013).
Requisites of a protest

1. In writing;

2. Addressed to the CIR;

3. Accompanied by a waiver of the Statute of Limitations in favor of the Government. Without the waiver the
prescriptive period will not be tolled;

4. State the facts, applicable law, rules and regulations or jurisprudence on which the protest is based otherwise the
protest would be void; and

5. Must contain the following:

a. Name of the taxpayer and address for the immediate past 3 taxable years;

b. Nature of the request, specifying the newly discovered evidence to be presented;

c. Taxable periods covered by the assessment;

d. Amount and kind of tax involved and the assessment notice number;

e. Date of receipt of the assessment notice or letter of demand;

f. Itemized statement of the finding to which the taxpayer agrees (if any) as basis for the computation of
the tax due, which must be paid upon filing of the protest;

g. Itemized schedule of the adjustments to which the taxpayer does not agree;

h. Statements of facts or law in support of the protest; and

i. Documentary evidence as it may deem necessary and relevant to support its protest to be submitted 60 days
from the filing thereof.

Effect of a protest against an assessment

- Prescriptive period provided by law to make collection by distraint or levy or by a proceeding in court is
interrupted once a taxpayer protests the assessment and requests for its cancellation.

Forms of Protest

Request for reconsideration

a claim for re-evaluation of the assessment based on existing records without need of additional evidence. It
may involve a question of fact or law or both. It does not toll the statute of limitations.

Request for reinvestigation

a claim for re-evaluation of the assessment based on newly-discovered or additional evidence. It may also
involve a question of fact or law or both. It tolls the statute of limitations.

- For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his
protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall become
final.
- NOTE: The sixty (60)-day period for the submission of all relevant supporting documents shall not apply to
requests for reconsideration.

“Relevant supporting documents”

• Refer to those documents necessary to support the legal and factual bases in disputing a tax assessment as
determined by the taxpayer.

• These are documents which the taxpayer feels would be necessary to support his protest and not what the
Commissioner feels should be submitted, otherwise, the taxpayer would always be at the mercy of the BIR
which may require production of such documents which taxpayer could not produce(Standard Chartered Bank v.
CIR, CTA case No. 5696, Aug. 16, 2001).
“The assessment shall become final”

- The term shall mean the taxpayer is barred from disputing the correctness of the issued assessment by
introduction of newly discovered or additional evidence, and the Final Decision on a Disputed Assessment
(FDDA) shall consequently be denied.

Remedy available to the taxpayer if the CIR denies his protest in whole or in part

- The remedy is to appeal such decision to the CTA within 30 days from receipt of the decision otherwise, the
assessment will become final, executory and demandable.

If the protest is denied, in whole or in part, by the Commissioner’s duly authorized representative, the taxpayer may
either:

1. Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said decision

2. Elevate his protest through request for reconsideration to the Commissioner within thirty (30) days from date of
receipt of the said decision

Effect of Failure to Protest

- It makes the Final Assessment Notice final and executory, and the taxpayer loses his right to contest the
assessment, at the administrative and judicial levels.
- Thus, the filing of the protest within 30 days from the receipt of the assessment would be mandatory for the
taxpayer to use the other administrative and judicial remedies.

Options given to the taxpayer if there would be an inaction by the CIR within 180 days from submission of the
documents

1. File a petition for review with the CTA within 30 days after the expiration of the 180-day period; or

2. Wait for the final decision of the CIR on the disputed assessment and appeal the final decision to the CTA within
30 days from the receipt of the decision.

Effect of the failure to appeal by a taxpayer

1. The decision or assessment becomes final and executory.

2. In an action for the collection of the tax by the government, the taxpayer is barred from re-opening the question
already decided.

3. The assessment is considered correct which may be enforced by summary or judicial remedies.

4. In a proceeding for collection of tax by judicial action, the taxpayer’s defenses are similar to those of the
defendant in a case for the enforcement of a judgment by judicial action.

5. The assessment which has become final and executory cannot be superseded by a new assessment.

Commissioner of Internal Revenue vs. Metro Star Superama Inc., 637 SCRA 633, G.R. No. 185371.

Facts:

A revenue officer was authorized to examine the books of accounts of Metro Star Superama, Inc. After, the audit
review, the RDO issued a formal assessment notice against Metro Star advising the latter that it is liable to pay
P292,874.16 in deficiency taxes.

Metro Star assailed the issuance of the formal assessment notice as it averred that due process was not
observed when it was not issued a pre-assessment notice. Nevertheless, the CIR authorized the issuance of a Warrant of
Distraint and/or Levy against the properties of Metro Star.

Metro Star appealed to the Court of Tax Appeals, to which the CTA ruled in its favor.

Issue:Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star.

Ruling:No.

It is true that there is a presumption that the tax assessment was duly issued. However, this presumption is
disregarded if the taxpayer denies ever having received a tax assessment from the Bureau of Internal Revenue. In such
cases, it is incumbent upon the BIR to prove by competent evidence that such notice was indeed received by the
addressee-taxpayer.

The onus probandi was shifted to the BIR to prove by contrary evidence that the Metro Star received the assessment in
the due course of mail. In the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in
January 2002. The CIR could have simply presented the registry receipt or the certification from the postmaster that it
mailed the pre-assessment notice, but failed.

Neither did it offer any explanation on why it failed to comply with the requirement of service of the pre-
assessment notice. The Supreme Court emphasized that the sending of a pre-assessment notice is part of the due
process requirement in the issuance of a deficiency tax assessment,” the absence of which renders nugatory any
assessment made by the tax authorities

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. But even
so, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure.

Lascona Land Co. Inc. vs. Commission of Internal Revenue, 667 SCRA 455, G.R. No. 171251.

Facts:

The Commissioner of Internal Revenue (CIR) issued Assessment Notice No. 0000047-93-407 against Lascona
Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount
of P753,266.56.

Consequently, Lascona filed a letter protest, but was denied by Norberto R. Odulio, OIC, Regional Director, BIR,
Revenue Region No. 8, Makati City, in his Letter dated March 3, 1999. Said letter denied the protest for the reason that
the case was not appealed to the CTA after the lapsed of 180 days from day of filing the said protests.

Lascona then appealed the decision before the CTA and alleged that the Regional Director erred in ruling that
the failure to appeal to the CTA within 30 days from the lapse of the 180-day period rendered the assessment final and
executory.

The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA after the lapse of the
180-day reglementary period provided under Section 228 of the NIRC resulted to the finality of the assessment. In its
Decision, the CTA nullified the subject assessment.

The CTA denied the CIR's motion for reconsideration for lack of merit.

The CIR filed an appeal before the CA. The Court of Appeals granted the CIR's petition and set aside the
Decision of the CTA and its Resolution dated March 3, 2000. It further declared that the subject Assessment Notice No.
0000047-93-407 dated March 27, 1998 as final, executory and demandable.

Issue:Whether the subject assessment has become final, executory and demandable due to the failure of petitioner to
file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period pursuant
to Section 228 of the NIRC.

Ruling:The Court decided in favor of Lascona.

In RCBC v. CIR, the Court has held that in case the Commissioner failed to act on the disputed assessment within
the 180-day period from date of submission of documents, a taxpayer can either:

1. file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period;
or

2. await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the
Court of Tax Appeals within 30 days after receipt of a copy of such decision.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not
intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period.

Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or
negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested
assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will
decide on the protested assessment.

Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested
assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty
days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for
the CIR to act on the disputed assessments.

Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the Letter
dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt of the
copy of the decision.

Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its inaction on the protested
assessment. It is imperative that the taxpayers are informed of its action in order that the taxpayer should then at least
be able to take recourse to the tax court at the opportune time.