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1TAX REMEDIES

CASE DIGEST 2014-2015


1.
ADAMSON vs. CA
FACTS:
Lucas Adamson and AMC in 2 transactions, sold shares of stocks to APAC Phils.,
Inc. of which its corresponding capital gains tax were paid. The CIR issued a “Notice
of Taxpayer” AMC, Adamson et al., informing them of deficiencies on
their payment of CGT and VAT. Subsequently the CIR filed with DOJ a
complaint against the petitioners for tax evasion. Petitioners were charged before
the RTC, and upon motion by the petitioners, RTC dismissed the complaint
ruling the complaints for tax evasion filed by the Commissioner should be
regarded as a decision of the Commissioner regarding the tax liabilities of
petitioners, and appealable to the CTA. The CIR filed a Petition for Review with the
Court of Appeals assailing the trial court’s dismissal of the criminal cases.
She averred that it was not a condition prerequisite that a formal assessment should
first be given to the private respondents before she may file the aforesaid criminal
complaints against them. She argued that the criminal complaints for tax
evasion may proceed independently from the assessment cases pending before
the CTA. CA reversed the RTC’s decision and reinstated the criminal complaints.
Petitioners filed a letter-request for re-investigation of the “Examiner’s Findings”
issued by the BIR. Before the CIR could act on the letter-request, petitioners filed a
Petition for Review with the CTA, assailing the CIR’s findings of tax evasion against
them in which the CIR moved to dismiss on the ground that it was premature as no
formal assessment of the tax liability of the petitioners had been issued yet.
CTA denied the motion and considered the filing of the CIR with the DOJ as an
implied formal assessment, and the filing of the criminal information with the RTC
as denial of petitioner’s protest regarding the tax deficiency.

ISSUES:
1. WON the CIR’s recommendation letter to the DOJ can be considered as formal
assessment
2. WON the filing of criminal complaints are premature for lack of formal
assessment
3. WON the CTA has jurisdiction over both the criminal and civil cases

HELD:
1. An assessment contains not only a computation of tax liabilities, but also a demand
for payment within a prescribed period. It also signals the time when penalties
and interests begin to accrue against the taxpayer. To enable the taxpayer
to determine his remedies thereon, due process requires that it must be served
on and received by the taxpayer. Accordingly, an affidavit, which was executed
by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal
complaint for tax evasion, cannot be deemed an assessment that can be questioned
before the Court of Tax Appeals. To start with, an assessment must be sent to
and received by a taxpayer, and must demand payment of the taxes described therein
within a specific period. The issuance of an assessment is vital in determining the
period of limitation regarding its proper issuance and the period within which
to protest it. Necessarily, the taxpayer must be certain that a specific
document constitutes an assessment. Otherwise, confusion would arise regarding
the period within which to make an assessment or to protest the same, or whether
interest and penalty may accrue thereon. In the context in which it is used in the
NIRC, an assessment is a written notice and demand made by the BIR
on the taxpayer for the settlement of a due tax liability that is there definitely
set and fixed. We rule that the recommendation letter of the Commissioner cannot
be considered a formal assessment. Even a cursory perusal of the said letter would
reveal three key points:

a. It was not addressed to the taxpayers.


b. There was no demand made on the taxpayers to pay the tax liability, nor a
period for payment set therein.
c. The letter was never mailed or sent to the taxpayers by the Commissioner.

Section 269 of the NIRC (now Section 222 of the Tax Reform Act of 1997) provides:
Sec. 269. 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 after the collection of
such tax may be begun without assessment , at any time within ten 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 collection thereof... 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. In the case of
Ungab vs. Cusi, the Court ruled that there was no need for precise computation and
formal assessment in order for criminal complaints to be filed against
him. An assessment of a deficiency is not necessary to a criminal prosecution for
willful attempt to defeat and evade the income tax. A crime is complete when the
violator has knowingly and willfully filed a fraudulent return, with intent to evade
and defeat the tax. The perpetration of the crime is grounded upon knowledge
on the part of the taxpayer that he has made an inaccurate return, and the
government’s failure to discover the error and promptly to assess has no
connections with the commission of the crime.

RCBC vs. CIR


FACTS:
On July 5, 2001, petitioner Rizal Commercial Banking Corporation received a
Formal Letter of Demand dated May 25, 2001 from the respondent Commissioner
of Internal Revenue for its tax liabilities. On July 20, 2001, petitioner filed a protest
letter/request for reconsideration/reinvestigation pursuant to Section 228 of the
National Internal Revenue Code of 1997. Since the protest was not acted upon
by the respondent, petitioner filed on April 30, 2002 a petition for review with
the CTA for the cancellation of the assessments. On July 15, 2003, respondent
filed a motion to resolve first the issue of CTA’s jurisdiction, which was granted by
the CTA in a Resolution dated September 10, 2003. The petition for review was
dismissed because it was filed beyond the 30-day period following the lapse of 180
days from petitioner’s submission of documents in support of its protest, as provided
under Section 228 of the NIRC and Section 11 of R.A. No. 1125, otherwise known
as the Law Creating the Court of Tax Appeals. Petitioner did not file a motion for
reconsideration or an appeal to the CTA En Banc from the dismissal of its petition
for review. Consequently, the September 10, 2003 Resolution became final and
executory on October 1, 2003 and Entry of Judgment was made on December 1,
2003. Thereafter, respondent sent a Demand Letter to petitioner for the payment
of the deficiency tax assessments. Petitioner then filed a Petition for Relief from
Judgment on the ground of excusable negligence in which the CTA denied.

ISSUE:

WON the petitioner should be afforded opportunity to fully litigate the issue and
have the case determined based on its merits rather than on technicality.

HELD:
Petitioner protested the assessments pursuant to Section 228 of the NIRC,
which provides: SEC. 228.
Protesting of Assessment
.- x x x.
xxxx
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 (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.
xxxx
Following the periods provided for in the aforementioned laws, from July
20, 2001, that is, the date of petitioner’s filing of protest, it had until
September 18, 2001 to submit relevant documents and from September 18, 2001,
the Commissioner had until March 17, 2002 to issue his decision. As admitted by
petitioner, the protest remained unacted by the Commissioner of Internal
Revenue. Therefore, it had until April 16, 2002 within which to elevate the case to
this court. Thus, when petitioner filed its Petition for Review on April 30, 2002, the
same is outside the thirty (30) day period. The failure of a taxpayer to appeal from
an assessment on time rendered the assessment final, executory and demandable.
Consequently, petitioner is precluded from disputing the correctness of the
assessment.

MERALCO SECURITIES CORP. vs. HON.


SAVELLANO
FACTS:

Maniago submitted to the CIR a confidential denunciation against


MERALCO Securities Corp.(MSC) for tax evasion. The CIR caused an
investigation of the denunciation after which it was found and held that no deficiency
corporate income tax was due from MSC. Maniago filed a petition for mandamus in
the CFI Manila against the CIR and MSC to compel the Commissioner to impose
the alleged deficiency tax assessment. The CIR filed a motion to dismiss, arguing
that since in matters of issuance and non-issuance of assessments, he is clothed
under the National Internal Revenue Code and existing rules and regulations with
discretionary power in evaluating the facts of a case and since mandamus
win not lie to compel the performance of a discretionary power, he cannot be
compelled to impose the alleged tax deficiency assessment against the Meralco
Securities Corporation. He further argued that mandamus may not lie against him
for that would be tantamount to a usurpation of executive powers, since the Office
of the Commissioner of Internal Revenue is undeniably under the control of
the executive department.

ISSUE:
1. WON the CFI has jurisdiction
2. WON mandamus lies

HELD:

Respondent judge has no jurisdiction to take cognizance of the case


because the subject matter thereof clearly falls within the scope of cases now
exclusively within the jurisdiction of the Court of Tax Appeals. Section 7 of
Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax
Appeals exclusive appellate jurisdiction to review by appeal, among others,
decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under the National
Internal Revenue Code or other law or part of law administered by the Bureau of
Internal Revenue. The question of whether or not to impose a deficiency tax
assessment on Meralco Securities Corporation undoubtedly comes within the
purview of the words "disputed assessments" or of "other matters arising under
the National Internal Revenue Code.

Mandamus only lies to enforce the performance of a ministerial act or duty


and not to control the performance of a discretionary power. Purely
administrative and discretionary functions may not be interfered with by the courts.
Since the office of the Commissioner of Internal Revenue is charged with the
administration of revenue laws, which is the primary responsibility of the executive
branch of the government, mandamus may not he against the Commissioner
to compel him to impose a tax assessment not found by him to be due or
proper for that would be tantamount to a usurpation of executive functions.

SY PO vs. CTA
FACTS:
Petitioner is the widow of the late Po Bien Sing who was the sole proprietor of Silver
Cup Wine Factory. On the basis of a denunciation against Silver Cup
allegedly for tax evasion an investigation was conducted and a subpoena
duces tecum was issued against Silver Cup requesting the production of the
accounting records and other related documents for examination. Silver Cup
failed to produce said books of account, prompting the investigation team to enter
into the factory of Silver Cup and seized different brands of alcohol products and
a corresponding inventory was made. On the basis of the investigation team’s
report, the CIR assessed Silver Cup deficiency income tax. Petitioner then
protested the deficiency assessments.

ISSUE:
WON the assessment had valid and legal bases.
HELD:
Section 16(b) of the National Internal Revenue Code of
1977 as amended. It reads: Sec. 16. Power of the Commissioner of Internal Revenue
to make assessments.—
(b) Failure to submit required returns, statements, reports and other
documents. - When a report required by law as a basis for the assessment of an
national internal revenue tax shall not be forthcoming within the time fixed by law
or regulation or when there is reason to believe that any such report is false,
incomplete, or erroneous, the Commissioner of Internal Revenue shall assess the
proper tax on the best evidence obtainable. In case a person fails to file a required
return or other document at the time prescribed by law, or willfully or otherwise,
files a false or fraudulent return or other documents, the Commissioner shall make
or amend the return from his own knowledge and from such information
as he can obtain through testimony or otherwise, which shall be prima
facie correct and sufficient for all legal purposes. The law is specific and clear.
The rule on the "best evidence obtainable" applies when a tax report required by law
for the purpose of assessment is not available or when the tax report is incomplete
or fraudulent. In the instant case, the persistent failure of the late Po Bien Sing and
the herein petitioner to present their books of accounts for examination for the
taxable years involved left the Commissioner of Internal Revenue no other legal
option except to resort to the power conferred upon him under Section 16 of
the Tax Code.

CAPITOL STEEL CORPORATION vs .


PHIVIDEC INDUSTRIAL AUTHORITY
FACTS:

Capitol Steel owns 65 parcels of land while PHIVIDEC is a GOCC which is


vested with governmental and proprietary functions including the power of
eminent domain for the purpose of acquiring rights of way or any property for the
establishment or expansion of the Phividec Industrial Areas. The properties of
Capitol Steel were identified as the most ideal site for the Mindanao International
Container Terminal Project. Phividec filed an expropriation case but was later
dismissed due to the unauthorized engagement by PHIVIDEC of the legal
services of a private lawyer. In the meantime, Capitol Steel requested the Technical
Committee on Real Property Valuation (TCRPV) of BIR. TCRPV thereafter issued
Resolution No. 36-2001 fixing the "reasonable and realistic zonal valuation" of the
properties at P700 per square meter. PHIVIDEC, refilled the case. PHIVIDEC filed
an Urgent Motion for the Issuance of a Writ of Possession. The total amount
deposited represents 100% of the value of the properties based on the schedule of
zonal valuation for real properties under Department Order No. 40-97 fixing the
zonal valuation of the properties at Sugbongcogon and Casinglot at P300 and
P500 per square meter, respectively. Capitol Steel opposed claiming instead that
under the TCRPV Resolution, the properties have been revalued at P700 per square
meter. RTC ruled in favor of Capitol. CA reversed holding that the zonal valuation
established under D.O. 40-97 should be the basis in computing the provisional value
of the properties, and that the valuation made by the TCRPV was neither
binding nor effective for failure to comply with the guidelines relative to
the establishment of zonal values of real properties.

ISSUE:

Whether or not RTC is correct in using the TCRPV valuation.

RULING:
No.
When the second expropriation case was re-filed, R.A. 8974, which provides for
substantive requirements before a writ of possession is issued, was already in force
and in effect. SECTION 4. Guidelines for Expropriation Proceeding (a) Upon the
filing of the complaint, and after due notice to the defendant, the implementing
agency shall immediately pay the owner of the property the amount
equivalent to the sum of one hundred percent (100%) of the value of the property
based on the current relevant zonal valuation of the Bureau of Internal Revenue
(BIR) The "current relevant zonal valuation" under Section 4 of R.A. 8974 pertains
to the values reflected in the schedule of zonal values embodied in a Department
Order issued pursuant to Revenue Memorandum Order (RMO) No. 56-89 issued by
the Commissioner of Internal Revenue. Court finds that the determination of P300
and P500 per square meter zonal values were, along with the zonal values of other
real properties located in all municipalities under the jurisdiction of Revenue
District Office No. 98 was subject to hearing. The zonal values were approved by
both the TCRPV and the ECRPV and on even date, the Secretary of Finance,
upon the recommendation of the BIR, issued D.O. 40-97 to implement the
schedule of zonal values. In contrast, the P700 per square meter zonal value provided
for under TCRPV Resolution was not approved by the ECRPV, was not embodied
in a Department Order, and did not undergo the required public hearing
and publication required. To clarify, the payment of the provisional value as a
prerequisite to the issuance of a writ of possession differs from the payment
of just compensation for the expropriated property. While the provisional value
is based on the current relevant zonal valuation, just compensation is based
on the prevailing fair market value of the property. While the law grants to the CIR
the power to determine zonal values, including the authority to delegate to the
Assistant Commissioner of the Assessment Service the authority to approve and
sign TCRPV resolutions involving requests for revaluation of established zonal
values of real properties, the same is for the purpose of computing internal revenue
taxes. The revaluation under RDAO 4-2001 is, as correctly held by the appellate
court, "a specific rather than a zonal valuation," and is "not a revaluation of the
schedule of zonal values [under D.O. 40-97] but merely the fine tuning of the value
of a specific property of an individual taxpayer in order to reflect fair market values."

CIR vs Sony Philippines Inc


Facts
In November 24, 1998, the Commissioner of Internal Revenue issued a
Letter of Authority No. 000019734 (LOA 19734) which authorized certain
revenue examiners to examine Sony Philippines’ books of accounts and other
accounting records regarding revenue taxes for “the period 1997 and unverified
prior years.” After the examination of said books, the CIR found out, among others,
that Sony Philippines is liable for deficiency taxes and penalties for value added tax
amounting to P11,141,014.41. Sony sought re-evaluation of the assessment by filing
a protest and on October 24, 2000, within 30 days after the lapse of 180 days from
the submission of supporting documents to the CIR, Sony filed a petition for review
before the CTA. Sony Philippines contested such finding as it argued that the basis
used by the CIR to assess said deficiency were the records covering the period
of January 1998 through March 1998 which was a period not covered by the letter
of authority so issued. The CIR countered that the LOA phrase “the period 1997 and
unverified prior years” should be understood to mean the fiscal year ending on
March 31, 1998. The Court of Tax Appeals and the CTA decided in favor of Sony
Philippines. So did the CTA en banc.

Issue:
WON the Commissioner of Internal Revenue is correct
Ruling:
No. The LOA issued is clear on which period is covered by the examination to be
conducted. It’s only meant to cover the year “1997 and unverified prior years” not
the year 1998. The revenue officers who examined the records covering the period
of January to March 1998 had exceeded their authority because the deficiency VAT
assessment they arrived at was based on records from January to March 1998 or
using the fiscal year which ended in March 31, 1998.

Further, the LOA which covered “1997 and unverified prior years” is
in violation of the principle that a Letter of Authority should cover a taxable period
not exceeding one taxable year. If the audit of a taxpayer shall include more than
one taxable period, the other periods or years shall be specifically indicated in the
LOA

CIR vs Kudos Metal Corp.


Facts:

Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the taxable
year 1998. Pursuant to an LOA, BIR served upon respondent three Notices
of Presentation of Records. Respondent failed to comply with these notices, hence,
the BIR issued a Subpeona Duces Tecum dated September 21, 2006, receipt
of which was acknowledged by respondents President, Mr. Chan Ching Bio, in a
letter dated October 20, 2000. Respondent accountant, executed two Waiver of the
Defense of Prescription dated December 10, 2001 and February 18, 2003. BIR
issued a Preliminary Assessment Notice for the taxable year 1998 against the
respondent. This was followed by a Formal Letter of Demand with Assessment
Notices for taxable year 1998. Respondent challenged the assessments by filing
its “Protest on Various Tax Assessments” on December 3, 2003 and its
“Legal Arguments and Documents in Support of Protests against Various
Assessments” on February 2, 2004. BIR rendered a final Decision on the matter,
requesting the immediate payment of the Respondent’s tax liabilities. Respondent
filed a Petition for Review with the CTA believing that the government’s right to
assess taxes has prescribed. CTA cancelled the assessment notices issued
against respondent for having been issued beyond the prescriptive period which
was also affirmed by the CTA En Banc.

Issue:
WON the government’s right to assess unpaid
taxes has already prescribed
Ruling:
Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates
the government to assess internal revenue taxes within three years from the last
day prescribed by law for the filing of the tax return or the actual date of filing
of such return, whichever comes later. Hence, an assessment notice issued after
the three-year prescriptive period is no longer valid and effective. Exceptions
however are provided under Section 222 of the NIRC. Section 222 (b) of the NIRC
provides that the period to assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer executed before the expiration
of the three-year period. The waivers executed by respondent’s accountant did
not extend the period within which the assessment can be made because of the
infirmities of the said waivers (executed w/o the notarized written authority of
Pasco to sign the waiver in behalf of respondent, waivers failed to
indicate date of acceptance & the fact of receipt by the respondent of its file copy
was not indicated in the original copies of the waivers). Consequently, the
assessments were issued by the BIR beyond the 3-year period and are void.

COMMISSIONER OF INTERNAL REVENUE vs. . ISABELA CULTURAL


CORPORATION

FACTS:
Respondent was assessed an income tax deficiency by the BIR in the reduced amount
of P325,869.44. It moved for reconsideration and filed a letter attaching certain
documents in support of its protest. The BIR sent a Final Notice Before Seizure
to respondent demanding payment of the subject assessment within 10 days from
receipt thereof and that failure on respondent's part would constrain the BIR to
collect through summary remedies. The notice, however, did not contain a
categorical statement that the BIR has denied respondent's motion for
reconsideration. Respondent, nonetheless, filed a petition for review with CTA
alleging that the final notice of seizure was petitioner's final decision. CTA
dismissed the same. CA reversed. CA ruled that the final notice before
seizure had effectively denied petitioner's request for reconsideration of the
assessment; hence, appealable to CTA. CA relied on the long-settled tax
jurisprudence that a demand letter reiterating payment of delinquent taxes amounted
to a decision on a disputed assessment.

ISSUE:
Whether or not the Final Notice Before Seizure constitutes the final decision
of the CIR appealable to the CTA.
RULING:
Yes.
The Final Notice Before Seizure sent by the Bureau of Internal Revenue (BIR) to
respondent reads as follows: "On Feb. 9, 1990, [this] Office sent you a letter
requesting you to settle the above-captioned assessment. To date, however,
despite the lapse of a considerable length of time, we have not been honored with a
reply from you. In this connection, we are giving you this LAST OPPORTUNITY
to settle...”

In the normal course, the revenue district officer sends the taxpayer a notice of
delinquent taxes, indicating the period covered, the amount due including interest,
and the reason for the delinquency. If the taxpayer disagrees with or wishes to protest
the assessment, it sends a letter to the BIR indicating its protest, stating the
reasons therefor, and submitting such proof as may be necessary. That letter is
considered as the taxpayer's request for reconsideration of the delinquent
assessment. After the request is filed and received by the BIR, the assessment
becomes a disputed assessment on which it must render a decision. That decision
is appealable to the CTA for review.

The Final Notice Before Seizure cannot but be considered as the


commissioner's decision disposing of the request for reconsideration filed by
respondent, who received no other response to its request. Not only was the Notice
the only response received; its content and tenor supported the theory that it was the
CIR's final act regarding the request for reconsideration. The very title expressly
indicated that it was a final notice prior to seizure of property. The letter itself clearly
stated that respondent was being given "this LAST OPPORTUNITY" to pay.
Furthermore, Section 228 of the National Internal Revenue Code states that
a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its
request for reconsideration remains unacted upon 180 days after submission thereof.
In this case, the said period of 180 days had already lapsed when respondent filed its
request for reconsideration on March 23, 1990, without any action on the part of the
CIR.

CIR V. PHILIPPINE GLOBAL


COMMUNICATION, INC.

Facts:
Among the exceptions provided by the aforecited section, and invoked by
the CIR as a ground for this petition, is the instance when the taxpayer requests for
a reinvestigation which is granted by the Commissioner. However, this exception
does not apply to this case since the respondent never requested for a
reinvestigation. More importantly, the CIR could not have conducted a
reinvestigation where, as admitted by the CIR in its Petition, the respondent refused
to submit any new evidence. Revenue Regulations No. 12-85, the Procedure
Governing Administrative Protests of Assessment of the Bureau of Internal
Revenue, issued on 27 November 1985, defines the two types of protest, the request
for reconsideration and the request for reinvestigation, and distinguishes one from
the other in this manner:
Section 6. Protest. -
The taxpayer may protest administratively an assessment by filing a
written request for reconsideration or reinvestigation specifying the following
particulars:
x x x x For the purpose of protest herein—
(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 evidence or additional evidence that a taxpayer
intends to present in the investigation. It may also involve a question of fact or law
or both. The main difference between these two types of protests lies in the
records or evidence to be examined by internal revenue officers, whether these are
existing records or newly discovered or additional evidence. re-evaluation of
existing records which results from a request for reconsideration does not toll the
running of the prescription period for the collection of an assessed tax. Section 271
distinctly limits the suspension of the running of the statute of limitations to
instances when reinvestigation is requested by a taxpayer and is granted by
the CIR. The Court provided a clear-cut rationale in the case of Bank of the
Philippine Islands v. Commissioner of Internal Revenue explaining why a
request for reinvestigation, and not a request for reconsideration, interrupts
the running of the statute of limitations on the collection of the assessed tax:
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. In the present case, the separate
letters of protest dated 6 May 1994 and 23 May 1994 are requests for
reconsideration. The CIR’s allegation that there was a request for reinvestigation
is inconceivable since respondent consistently and categorically refused to
submit new evidence and cooperate in any reinvestigation proceedings.

FISHWEALTH CANNING CORPORATION, vs COMMISSIONER OF


INTERNAL REVENUE,

FACTS:
The CIR ordered the examination of the internal revenue taxes for the taxable year
1999 of Fishwealth Canning Corp. The investigation disclosed that petitioner was
liable in the amount of P2,395,826.88. Petitioner eventually settled these
obligations on August 30, 2000. On August 25, 2000, respondent reinvestigated
petitioner’s books of accounts and other records of internal revenue taxes
covering the same period for the purpose of which it issued a subpoena duces
tecum requiring petitioner to submit its records and books of accounts.
Petitioner requested the cancellation of the subpoena on the ground that the same set
of documents had previously been examined. As petitioner did not heed the
subpoena, respondent thereafter filed a criminal complaint against petitioner which
complaint was dismissed for insufficiency of evidence. Respondent sent, on
August 6, 2003, petitioner a Final Assessment Notice of income tax and VAT
deficiencies. Respondent thereafter issued a Final Decision on Disputed
Assessment dated August 2, 2005, which petitioner received on August 4, 2005,
denying its letter of protest. Instead of appealing to the CTA, petitioner filed,
on September 1, 2005, a Letter of Reconsideration dated August 31, 2005.
Respondent demanded payment of petitioner’s tax liabilities drawing
petitioner to file on October 20, 2005 a Petition for Review before the CTA. In
Answer, Respondent argued that it was filed out of time. CTA First Division agreed.
Resolution was received Oct. 31, 2006. On November 21, 2006, petitioner filed a
petition for review before the CTA En Banc which, by Decision of July 5, 2007, held
that the petition before the First Division, as well as that before it, was filed out of
time.

ISSUE:
Whether or not the petition with CTA First Division and CTA En banc was filed out
of time.

RULING:
Yes.
Section 228 of the 1997 Tax Code provides that an assessment x x x 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.
In the case at bar, petitioner’s administrative protest was denied by Final
Decision on Disputed Assessment dated August 2, 2005 issued by respondent and
which petitioner received on August 4, 2005. Under the above-quoted Section 228
of the 1997 Tax Code, petitioner had 30 days to appeal respondent’s denial of its
protest to the CTA. Since petitioner received the denial of its administrative
protest on August 4, 2005, it had until September 3, 2005 to file a petition
for review before the CTA Division. It filed one, however, on October 20,
2005, hence, it was filed out of time. For a motion for reconsideration of the
denial of the administrative protest does not toll the 30-day period to appeal to the
CTA.

LASCONA LAND CO., INC. vs.


COMMISSIONER OF INTERNAL REVENUE
FACTS:
Before this Court is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court. On March 27, 1998, 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, on April 20, 1998,
Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-
Charge (OIC), Regional Director-- “we cannot give due course to your request to
cancel or set aside the assessment notice issued to your client for the reason
that the case was not elevated to the Court of Tax Appeals as mandated by
the provisions of the last paragraph of Section 228 of the Tax Code.” Lascona
appealed the decision before the CTA. the CTA, in its Decision, nullified the
subject assessment. It held that in cases of inaction by the CIR on the protested
assessment, Section 228 of the NIRC provided two options for the taxpayer: (1)
appeal to the CTA within thirty (30) days from the lapse of the one hundred eighty
(180)-day period, or (2) wait until the Commissioner decides on his protest before
he elevates the case. The CIR moved for reconsideration. It argued that in declaring
the subject assessment as final, executory and demandable, it did so pursuant to
Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated September 6, 1999 which
reads, thus: If the Commissioner or his duly authorized representative fails to
act on the taxpayer's protest within one hundred eighty (180) days from date of
submission, by the taxpayer, of the required documents in support of his
protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days
from the lapse of the said 180-day period; otherwise, the assessment shall become
final, executory and demandable. CTA denied the CIR's motion for
reconsideration for lack of merit. CTA held that Revenue Regulations No. 12-99
must conform to Section 228 of the NIRC. It pointed out that the former spoke
of an assessment becoming final, executory and demandable by reason of the
inaction by the Commissioner, while the latter referred to decisions becoming final,
executory and demandable should the taxpayer adversely affected by the
decision fail to appeal before the CTA within the prescribed period. Finally,
it emphasized that in cases of discrepancy, Section 228 of the NIRC must
prevail over the revenue regulations. Dissatisfied, the CIR filed an appeal before the
CA. Court of Appeals granted the CIR's petition and set aside the Decision dated
January 4, 2000 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. Lascona moved for reconsideration,
but was denied for lack of merit.

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 petition is meritorious.

Section 228 of the NIRC is instructional as to the remedies of a taxpayer


in case of the inaction of the Commissioner on the protested assessment, to wit: SEC.
228.Protesting of Assessment. 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 (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. 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. This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the
Court of Tax Appeals, to wit:
SEC. 3.
Cases within the jurisdiction of the Court in Divisions
. — The Court in Divisions
shall exercise:
: Provided, that in case of disputed assessments, the inaction of the
Commissioner of Internal Revenue within the one hundred eighty day-
period under Section 228 of the National Internal revenue Code shall be
deemed a denial for purposes of allowing the taxpayer to appeal his case to
the Court and does not necessarily constitute a formal decision of the
Commissioner of Internal Revenue on the tax case; Provided, further, that
should the taxpayer opt to await the final decision of the Commissioner of Internal
Revenue on the disputed assessments beyond the one hundred eighty day-period
abovementioned, the taxpayer may appeal such final decision to the Court under
Section 3(a), Rule 8 of these Rules; As early as the case of CIR v. Villa it was
already established that the word "decisions" in paragraph 1, Section 7 of Republic
Act No. 1125, quoted above, has been interpreted to mean the decisions of the
Commissioner of Internal Revenue on the protest of the taxpayer against the
assessments. Where a taxpayer questions an assessment and asks the Collector
to reconsider or cancel the same because he (the taxpayer) believes he is not
liable therefor, the assessment becomes a "disputed assessment" that the
Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only
upon receipt of the decision of the Collector on the disputed assessment, . . .
It must be emphasized, however, that in case of the inaction of the CIR on the
protested assessment, while we reiterate — the taxpayer has two options, either: (1)
file a petition for review with the CTA within 30 days after the expiration of the 180-
day period; or (2) await the final decision of the Commissioner on the disputed
assessment and appeal such final decision to the CTA within 30 days after the
receipt of a copy of such decision, these options are mutually exclusive and
resort to one bars the application of the other. 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 Commissioner of Internal
Revenue 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. Taxes are the lifeblood of the government and so
should be collected without unnecessary hindrance. On the other hand, such
collection should be made in accordance with law as any arbitrariness will negate
the very reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the real
purpose of taxation, which is the promotion of the common good, may be achieved.
WHEREFORE, the petition is GRANTED. The Decision dated October 25,
2005 and the Resolution dated January 20, 2006 of the Court of Appeals in CA-
G.R. SP No. 58061 are REVERSED and SET ASIDE. Accordingly, the
Decision dated January 4, 2000 of the Court of Tax Appeals in C.T.A. Case No.
5777 and its Resolution dated March 3, 2000 are REINSTATED

COMMISSIONER OF INTERNAL REVENUE and ARTURO V. PARCERO


in his official capacity as Revenue District Officer of Revenue District
No. 049 (Makati) vs. PRIMETOWN PROPERTY GROUP, INC.

FACTS:
This petition for review on certiorari seeks to set aside the August 1, 2003 decision
of the Court of Appeals (CA) in CA-G.R. SP No. 64782 and its February 9,
2004 resolution denying reconsideration. In March 11, 1999, Gilbert Yap,
vice chair of respondent Primetown Property Group, Inc., applied for the refund
or credit of income tax respondent paid in 1997 he explained that the increase in the
cost of labor and materials and difficulty in obtaining financing for projects and
collecting receivables caused the real estate industry to slowdown. As a
consequence, while business was good during the first quarter of 1997, respondent
suffered losses amounting to P71,879,228 that year. According to Yap, because
respondent suffered losses, it was not liable for income taxes. Nevertheless,
respondent paid its quarterly corporate income tax and remitted creditable
withholding tax from real estate sales to the BIR in the total amount of
P26,318,398.32. Therefore, respondent was entitled to tax refund or tax credit. On
May 13, 1999, revenue officer Elizabeth Y. Santos required respondent
to submit additional documents to support its claim. Respondent complied
but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for
review in the Court of Tax Appeals (CTA). On December 15, 2000, the CTA
dismissed the petition as it was filed beyond the two-year prescriptive period for
filing a judicial claim for tax refund or tax credit. It invoked Section 229 of the
National Internal Revenue Code (NIRC):
Sec. 229.
Recovery of Taxes Erroneously or Illegally Collected.

xxx xxx xxx
In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of
any supervening cause that may arise after payment.

The CTA found that respondent filed its final adjusted return on April
14, 1998. Thus, its right to claim a refund or credit commenced on that date. Thus,
according to the CTA, the two-year prescriptive period under Section 229 of
the NIRC for the filing of judicial claims was equivalent to 730 days. Because
the year 2000 was a leap year, respondent's petition, which was filed 731
days after respondent filed its final adjusted return, was filed beyond the
reglementary period. Respondent moved for reconsideration but it was denied.
Hence, it filed an appeal in the CA. CA reversed and set aside the decision of the
CTA. It ruled that Article 13 of the Civil Code did not distinguish between a regular
year and a leap year. According to the CA, The rule that a year has 365 days applies,
notwithstanding the fact that a particular year is a leap year. In other words,
even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April
14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days
each or a total of 730 days. A statute which is clear and explicit shall be neither
interpreted nor construed. Petitioners moved for reconsideration but it was
denied. Thus, this appeal. Petitioners contend that tax refunds, being in the nature
of an exemption, should be strictly construed against claimants.

ISSUE:
The rule is that the two-year prescriptive period is reckoned from the filing of the
final adjusted return. But how should the two-year prescriptive period be
computed?

RULING:
The conclusion of the CA that respondent filed its petition for review in the CTA
within the two-year prescriptive period provided in Section 229 of the NIRC is
correct
.
Its basis, however, is not. As already quoted, Article 13 of the Civil Code
provides that when the law speaks of a year, it is understood to be
equivalent to 365 days. In National Marketing Corporation v. Tecson, we ruled that
a year is equivalent to 365 days regardless of whether it is a regular year or a leap
year. However, in 1987, EO 292 or the Administrative
Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides: Sec.
31. Legal Periods . — "Year" shall be understood to be twelve calendar
months; A calendar month is "a month designated in the calendar without regard to
the number of days it may contain." To illustrate, one calendar month from
December 31, 2007 will be from January 1, 2008 to January 31, 2008; one
calendar month from January 31, 2008 will be from February 1, 2008 until February
29, 2008. A law may be repealed expressly (by a categorical declaration that the law
is revoked and abrogated by another) or impliedly (when the provisions of a more
recent law cannot be reasonably reconciled with the previous one).