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CIR V. ST. LUKES MEDICAL CENTER
The BIR assessed St. Luke’s for deficiency taxes
for 1998. St. Luke’s filed an administrative
protest with the BIR against the deficiency tax
assessments. The BIR did not act on the protest
within the 180-day period under Section 228 of
the NIRC. Thus, St. Luke’s appealed to the
CTA. The BIR argued before the CTA that
Section 27(B) of the NIRC, which imposes a
10% preferential tax rate on the income of
proprietary nonprofit hospitals, should be
applicable to St. Luke’s. The BIR claimed that
St. Luke’s was actually operating for profit in
1998 because only 13% of its revenues came
from charitable purposes. St. Luke’s maintained
that it is a non-stock and non-profit institution
for charitable and social welfare purposes under
Section 30(E) and (G) of the NIRC. It argued
that the making of profit per se does not destroy
its income tax exemption.
St. Luke’s is liable for deficiency income tax
in 1998 under Section 27(B) of the NIRC,
which imposes a preferential tax rate of 10%
on the income of proprietary non-profit
hospitals.
St. Luke’s is organized as a non-stock and non-
profit charitable institution. However, this does
not automatically exempt St. Luke’s from
paying taxes. Even if St. Luke’s meets the test of
charity, a charitable institution is not ipso facto
tax exempt. To be exempt from real property
taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution
use the property “actually, directly and
exclusively” for charitable purposes. To be
exempt from income taxes, Section 30(E) of the
NIRC requires that a charitable institution must
be “organized and operated exclusively” for
charitable purposes. Likewise, to be exempt
from income taxes, Section 30(G) of the NIRC
requires that the institution be “operated
exclusively” for social welfare. In short, the last
paragraph of Section 30 provides that if a tax
exempt charitable institution
conducts “any” activity for profit, such activity
is not tax exempt even as its not-for-profit
activities remain tax exempt. St. Luke’s is a
corporation that is not “operated exclusively” for
charitable or social welfare purposes insofar as
its revenues from paying patients are
concerned. Such income from for-profit
activities, under the last paragraph of Section 30,
is merely subject to income tax, previously at the
ordinary corporate rate but now at the
preferential 10% rate pursuant to Section 27(B).
TOLENTINO V. SECRETARY OF FINANCE
The Philippine Press Institute, Inc. (PPI)
contends that by removing the exemption of
the press from the VAT while maintaining
those granted to others, the law discriminates
against the press. Is this contention correct?
No. It would suffice to say that since the law
granted the press a privilege, the law could take
back the privilege anytime without offense to the
Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the
exercise of its sovereign prerogative. Indeed, in
withdrawing the exemption, the law merely
subjects the press to the same tax burden to
which other businesses have long ago been
subject. The PPI asserts that it does not really
matter that the law does not discriminate against
the press because “even nondiscriminatory
taxation on constitutionally guaranteed freedom
is unconstitutional.” The Court was speaking in
that case (Murdock v. Pennsylvania) of a license
tax, which, unlike an ordinary tax, is mainly for
regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint
on the exercise of its right. The VAT is,
however, different. It is not a license tax. It is
not a tax on the exercise of a privilege, much
less a constitutional right. It is imposed on the
sale, barter, lease or exchange of goods or
properties or the sale or exchange of services
and the lease of properties purely for revenue
purposes. To subject the press to its payment is
not to burden the exercise of its right any more
than to make the press pay income tax or subject
it to general regulation is not to violate its
freedom under the Constitution
Chamber of Real Estate and Builders
Associations, Invc., (CREBA), on the other
hand, asserts that R.A. No. 7716 (1) impairs
the obligations of contracts, (2) classifies
transactions as covered or exempt without
reasonable basis and (3) violates the rule that
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taxes should be uniform and equitable and
that Congress shall “evolve a progressive
system of taxation”. Should the Expanded
Value-Added Tax Law be declared
unconstitutional based on the following
grounds?
NO.
1. IT DOES NOT IMPAIR THE
OBLIGATIONS OF CONTRACTS. It has been
held in an early case that even though such
taxation may affect particular contracts, as it
may increase the debt of one person and lessen
the security of another, or may impose
additional burdens upon one class and release
the burdens of another, still the tax must be paid
unless prohibited by the Constitution, nor can it
be said that it impairs the obligation of any
existing contract in its true legal sense.
2. The sale of food items, petroleum, medical
and veterinary services, etc., which are essential
goods and services was already exempt under
Section 103, pars. (b) (d) (1) of the NIRC before
the enactment of R.A. No. 7716. Petitioner is in
error in claiming that R.A. No. 7716 granted
exemption to these transactions while subjecting
those of petitioner (sale on real property) to the
payment of the VAT.
3. Equality and uniformity of taxation mean that
all taxable articles or kinds of property of the
same class be taxed at the same rate. The taxing
power has the authority to make reasonable and
natural classifications for purposes of taxation.
To satisfy this requirement it is enough that the
statute or ordinance applies equally to all
persons, firms, and corporations placed in
similar situation. Furthermore, the Constitution
does not really prohibit the imposition of
indirect taxes which, like the VAT, are
regressive. What it simply provides is that
Congress shall “evolve a progressive system of
taxation.” The constitutional provision has been
interpreted to mean simply that “direct taxes are
. . . to be preferred [and] as much as possible,
indirect taxes should be minimized.” The
mandate to Congress is not to prescribe, but
to evolve, a progressive tax system.
LANDBANK V. CACAYURAN
Taxpayer is allowed to sue if: (1) public funds
derived from taxation are disbursed by a
political subdivision or instrumentality and in
doing so, a law is violated or some irregularity is
committed; and (2) the petitioner is directly
affected by the alleged act.
In the case, the proceeds from the Subject Loans
had already been converted into public funds by
the Municipality’s receipt thereof. Funds coming
from private sources become impressed with the
characteristics of public funds when they are
under official custody. Public plaza belongs to
public dominion, Cacayuran need not to be a
privy to the loans, as long as taxes are involved,
people have a right to question the contracts
entered into by the government.
Generally, an ultra vires act is one committed
outside the object for which a corporation is
created as defined by the law of its organization
and therefore beyond the powers conferred upon
it by law.43 There are two (2) types of ultra
vires acts. There is a distinction between an act
utterly beyond the jurisdiction of a municipal
corporation and the irregular exercise of a basic
power under the legislative grant in matters not
in themselves jurisdictional. The former are ultra
vires in the primary sense and void; the latter,
ultra vires only in a secondary sense which does
not preclude ratification or the application of the
doctrine of estoppel in the interest of equity and
essential justice.
Applying these principles to the case at bar, it is
clear that the Subject Loans belong to the first
class of ultra vires acts deemed as void. Records
disclose that the said loans were executed by the
Municipality for the purpose of funding the
conversion of the Agoo Plaza into a commercial
center pursuant to the Redevelopment Plan.
However, the conversion of the said plaza is
beyond the Municipality’s jurisdiction
considering the property’s nature as one for
public use and thereby, forming part of the
public dominion. Accordingly, it cannot be the
object of appropriation either by the State or by
private persons. Nor can it be the subject of
lease or any other contractual undertaking.
PLANTERS PRODUCTS, INC. V.
FERTPHIL CORP.
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President Ferdinand Marcos, exercising his
legislative powers, issued LOI No. 1465 which
provided, among others, for the imposition of a
capital recovery component (CRC) on the
domestic sale of all grades of fertilizers in the
Philippines. Fertiphil paid P10 for every bag of
fertilizer it sold in the domestic market to the
Fertilizer and Pesticide Authority (FPA). After
the 1986 Edsa Revolution, FPA voluntarily
stopped the imposition of the P10 levy. With the
return of democracy, Fertiphil demanded from
PPI a refund of the amounts it paid under LOI
No. 1465, but PPI refused to accede to the
demand. It questioned the constitutionality of
LOI No. 1465 for being unjust, unreasonable,
oppressive, invalid and an unlawful imposition
that amounted to a denial of due process of
law.Fertiphil alleged that the LOI solely favored
PPI, a privately owned corporation, which used
the proceeds to maintain its monopoly of the
fertilizer industry.
In its Answer, FPA, through the Solicitor
General, countered that the issuance of LOI No.
1465 was a valid exercise of the police power of
the State in ensuring the stability of the fertilizer
industry in the country.
The imposition of the levy was an exercise by
the state of its taxation power
While it is true that the power of taxation can be
used as an implement of police power, the
primary purpose of the levy is revenue
generation. If the purpose is primarily revenue,
or if revenue is, at least, one of the real and
substantial purposes, then the exaction is
properly called a tax. The P10 levy under LOI
No. 1465 is too excessive to serve a mere
regulatory purpose. The levy, no doubt, was a
big burden on the seller or the ultimate
consumer. It increased the price of a bag of
fertilizer by as much as five percent. A plain
reading of the LOI also supports the
conclusion that the levy was for revenue
generation. The LOI expressly provided that
the levy was imposed "until adequate capital
is raised to make PPI viable."
The P10 levy is unconstitutional because it
was not for a public purpose. The levy was
imposed to give undue benefit to PPI
An inherent limitation on the power of taxation
is public purpose. Taxes are exacted only for a
public purpose. They cannot be used for purely
private purposes or for the exclusive benefit of
private persons. The reason for this is simple.
The power to tax exists for the general welfare;
hence, implicit in its power is the limitation that
it should be used only for a public purpose. The
LOI expressly provided that the levy be imposed
to benefit PPI, a private company.
ANGELES UNIVERSITY FOUNDATION
vs. CITY OF ANGELES et. al
Petitioner is an educational institution and was
converted into a non-stock, non-profit education
foundation under the provisions of R.A. 6055,
Petitioner claimed that it is exempt from the
payment of the building permit and locational
clearance fees.
Building permit fees are not charges on
property, they are not impositions from
which petitioner is exempt.
The building permit fee is neither a tax nor a
charge on property. Based on Sections 102, 103
and 104, the building permit fee is a regulatory
imposition on certain activities the owner may
conduct either to build such structures or to
repair, alter, renovate or demolish the same. As
to petitioner’s argument that the building permit
fees collected by respondents are in reality taxes
because the primary purpose is to raise revenues
for the local government unit, the same does not
hold water.
A charge of a fixed sum which bears no relation
at all to the cost of inspection and regulation
may be held to be a tax rather than an exercise of
the police power. In this case, the Secretary of
Public Works and Highways who is mandated to
prescribe and fix the amount of fees and other
charges that the Building Official shall collect in
connection with the performance of regulatory
functions, has promulgated and issued the
Implementing Rules and Regulations which
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provide for the bases of assessment of such fees.
SISON V. ANCHETA
Batas Pambansa 135 was enacted. Sison, as
taxpayer, alleged that its provision (Section 1)
unduly discriminated against him by the
imposition of higher rates upon his income as a
professional, that it amounts to class legislation,
and that it transgresses against the equal
protection and due process clauses of the
Constitution as well as the rule requiring
uniformity in taxation.
BP 135 does not violate the due process and
equal protection clauses, and the rule on
uniformity in taxation
On due process - it is undoubted that it may be
invoked where a taxing statute is so arbitrary
that it finds no support in the Constitution. An
obvious example is where it can be shown to
amount to the confiscation of property from
abuse of power. Petitioner alleges arbitrariness
but his mere allegation does not suffice and
there must be a factual foundation of such
unconsitutional taint.
On equal protection - it suffices that the laws
operate equally and uniformly on all persons
under similar circumstances, both in the
privileges conferred and the liabilities imposed.
On the matter that the rule of taxation shall be
uniform and equitable - this requirement is met
when the tax operates with the same force and
effect in every place where the subject may be
found." Also, the rule of uniformity does not call
for perfect uniformity or perfect equality,
because this is hardly unattainable. When the
problem of classification became of issue, the
Court said: "Equality and uniformity in taxation
means that all taxable articles or kinds of
property of the same class shall be taxed the
same rate. The taxing power has the authority to
make reasonable and natural classifications for
purposes of taxation..." As provided by this
Court, where "the differentation" complained of
"conforms to the practical dictates of justice and
equity" it "is not discriminatory within the
meaning of this clause and is therefore uniform."
Lutz v Araneta “It is inherent in the power to
tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that
'inequalities which result from a singling out of
one particular class for taxation, or exemption
infringe no constitutional limitation.”
LUNG CENTER V. QUEZON CITY
The petitioner Lung Center of the Philippines is
a non-stock and non-profit entity established by
virtue of Presidential Decree No. 1823. It owns a
piece of land, in the middle of which is a
hospital stands. A big space at the ground floor
is being leased to private parties for canteen and
small stores and to medical and to professional
practitioners. A big portion of the lot is being
leased for commercial purposes to a private
enterprise. In 1993, both land and the hospital
building were assessed for real property taxes in
the amount of about Php 4.5 Million. The
petitioner avers that it is a charitable institution
within the context of Section 28(3), Article VI of
the 1987 Constitution. It asserts that its character
as a charitable institution is not altered by the
fact that it admits paying patients and renders
medical services to them, leases portions of the
land to private parties, and rents out portions of
the hospital to private medical practitioners from
which it derives income to be used for
operational expenses.
Only those portions of the hospital used for
patients whether paying or non-paying are
exempt from real property taxes. Those
portions of its real property that are leased to
private entities are not exempt from real
property taxes as these are not actually,
directly and exclusively used for charitable
purposes.
The test whether an enterprise is charitable or
not is whether it exists to carry out a purpose
reorganized in law as charitable or whether it is
maintained for gain, profit, or private advantage.
As a general principle, a charitable institution
does not lose its character as such and its
exemption from taxes simply because it derives
income from paying patients, whether out-
patient, or confined in the hospital, or receives
subsidies from the government, so long as the
money received is devoted or used altogether to
the charitable object which it is intended to
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achieve; and no money inures to the private
benefit of the persons managing or operating the
institution. However, under the 1973 and 1987
Constitutions and Rep. Act No. 7160 in order to
be entitled to the exemption, the petitioner is
burdened to prove, by clear and unequivocal
proof, that (a) it is a charitable institution; and
(b) its real properties are ACTUALLY,
DIRECTLY and EXCLUSIVELY used for
charitable purposes.
SILICON V CIR
Petitioner sought to recover the VAT it paid on
imported capital goods for the 2nd quarter of
2001. On 16 October 2001, it filed an
application for a tax credit/refund.
On 4 September 2002, petitioner also filed for a
tax credit/refund of the VAT it had paid on
imported capital goods for the 3 rd and
4th quarters of 2001.
Because of the continuous inaction by
respondent on the administrative claims of
petitioner for a tax credit/refund in the total
amount of P25,041,116.22, the latter filed
separate petitions for review before the CTA.
The judicial claims of petitioner were filed
beyond the 120+30 day period. Ruling No.
DA-489-03 certainly did not allow the filing of
a judicial claim long after the expiration of
the 120+30 day period.
The petitioner’s administrative claims were filed
well within the two-year period provided by law.
Upon the filing of an administrative claim,
respondent is given a period of 120 days within
which to (1) grant a refund or issue the tax credit
certificate for creditable input taxes; or (2) make
a full or partial denial of the claim for a tax
refund or tax credit. Failure on the part of
respondent to act on the application within the
120-day period shall be deemed a denial.
The 120-day period begins to run from the date
of submission of complete documents
supporting the administrative claim. Whether
respondent rules in favor of or against the
taxpayer - or does not act at all on the
administrative claim - within the period of 120
days from the submission of complete
documents, the taxpayer may resort to a judicial
claim before the CTA. The judicial claim shall
be filed within a period of 30 days after the
receipt of respondent's decision or ruling or after
the expiration of the 120-day period, whichever
is sooner.
Aside from a specific exception to the
mandatory and jurisdictional nature of the
periods provided by the law, any claim filed in a
period less than or beyond the 120+30 days
provided by the NIRC is outside the jurisdiction
of the CTA.
The judicial claims of petitioner were filed
beyond the 120+30 day period. Ruling No. DA-
489-03 certainly did not allow the filing of a
judicial claim long after the expiration of the
120+30 day period.
As things stood, the CTA had no jurisdiction to
act upon, take cognizance of, and render
judgment upon the petitions for review filed by
petitioner. For having been rendered without
jurisdiction, the decision of the CTA Second
Division in this case - and consequently, the
decision of the CTA En Banc - is a total nullity
that creates no rights and produces no effect.
GJM PHIL MANUFACTURING INC V.
CIR
GJM filed its Annual Income Tax Return for the
year 1999. CIR found out that GJM had tax
deficiencies due to
disallowances/understatements, therefore, CIR
had the right to assess GJM within the 3 year
prescriptive period under Sec. 203 of the NIRC
or until April 15, 2003. On February 17, 2003,
CIR delivered the Preliminary Assessment
Notice (PAN) to GJM. Subsequently, on April
14, 2003, the Formal Assessment Notice (FAN)
were delivered by the CIR. GJM denied having
received any assessment from the BIR, thus,
such right of assessment by the latter has
prescribed.
The denial of GJM having received the
Formal Assessment Notice (FAN) made such
right of assessment by the CIR prescribe
While a mailed letter is deemed received by the
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addressee in the course of mail, this is merely a
disputable presumption subject to controversion,
the direct denial of which shifts the burden to the
sender to prove that the mailed letter was, in
fact, received by the addressee. In the case at
bar, CIR was not able to prove that GJM has
received the FAN sent by them ergo their right
to assess has prescribed.
SPOUSES PACQUIAO V. CIR
It was found that Pacquiao failed to file his VAT
returns for the years 2008 and 2009.
Furthermore, he also failed to state his US
sourced income for the year 2009. CIR issued a
letter of authority then a Notice of Initial
Assessment-Informal Conference. This process
continued until the FDDA was issued addressed
to Manny only, informing him that the CIR
found him liable for deficiency income tax and
VAT for taxable years 2008 and 2009. The CIR
proceeded to effect Warrants of Distraint and
Levy and Garnishment on the properties of the
petitioners, who in turn, questioned such
collection process in the Court of Tax Appeals.
The CTA Second Division issued a decision
ordering the CIR to desist from collecting on the
deficiency tax assessments against the
petitioners considering that it was beyond the
petitioner’s net worth. CTA, however, still
required the petitioners to deposit the same
amount of P3,298,514,894.35 or post a bond in
the amount of P4,947,772,341.53. This order
was then brought to the Supreme Court under
Rule 65.
The CTA has ample authority to issue
injunctive writs to restrain the collection of
tax and to even dispense with the deposit of
the amount claimed or the filing of the
required bond, whenever the method
employed by the CIR in the collection of tax
jeopardizes the interests of a taxpayer for
being patently in violation of the law.
Such authority emanates from the jurisdiction
conferred to it not only by Section 11 of R.A.
No. 1125, but also by Section 7 of the same law.
From all the foregoing, it is clear that the
authority of the courts to issue injunctive writs
to restrain the collection of tax and to dispense
with the deposit of the amount claimed or the
filing of the required bond is not simply
confined to cases where prescription has set in.
As explained by the Court, whenever it is
determined by the courts that the method
employed by the Collector of Internal Revenue
in the collection of tax is not sanctioned by law,
the bond requirement under Section 11 of R.A.
No. 1125 should be dispensed with. The purpose
of the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly, to
prevent the absurd situation wherein the court
would declare “that the collection by the
summary methods of distraint and levy was
violative of law, and then, in the same breath
require the petitioner to deposit or file a bond as
a prerequisite for the issuance of a writ of
injunction.
SAN ROQUE POWER CORP V. CIR
San Roque Power Corp is a VAT-registered
taxpayer which was granted by the BIR a zero-
rating on its sales of electricity to National
Power Corporation (NPC). On Dec 22, 2005 and
Feb 27, 2006, the petitioner filed two separate
administrative claims for refund of its alleged
unutilized input tax. Due to inaction of CIR, the
petitioner filed petitions for review before the
CTA: 1. On March 30, 2006, for its unutilized
input VAT for the period Jan-March 2004; and
2. On June 20, 2006, for the period April-Dec
2004.
In this case, the petitioner timely filed its
administrative claims for refund/credit of its
unutilized input VAT within the 2 year
prescriptive period. However, the petitioner,
without waiting for the full expiration of the
120-day periods and without any decision by the
CIR, immediately filed its petitions for review
with the CTA on 30 March 2006, or a
mere ninety-eight (98) days for the first
administrative claim; and on 20 June 2006, or
only one hundred thirteen (113) days for the
second administrative claim, from the
submission of the said claims. In other words,
the judicial claims of the petitioner were
prematurely filed as correctly found by the CTA
En Banc.
The two judicial claims filed by the petitioner
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fell within the window period, thus, the CTA
can take cognizance over them
It was noted that BIR Ruling No. DA-489-03,
which provides that a taxpayer-claimant need
not wait for the lapse of the 120-day period
before it could seek judicial relief with the CTA
by way of Petition for Review is a general
interpretative rule issued by the CIR. Thus,
taxpayers can rely on this ruling from the time of
its issuance on 10 December 2003. In other
words, the 120+30-day period is generally
mandatory and jurisdictional from the effectivity
of the 1997 NIRC on 1 January 1998, up to the
present. By way of an exception, judicial
claims filed during the window period from
10 December 2003 to 6 October 2010, need
not wait for the exhaustion of the 120-day
period..
In this case, the two judicial claims filed by the
petitioner fell within the window period, thus,
the CTA can take cognizance over them.
Moreover, we considered as insignificant the
failure of a taxpayer to invoke BIR Ruling No.
DA-489-03 before the CTA. Our reason was that
the said ruling is an official act emanating from
the BIR. We can take judicial notice of such
issuance and its consistent application in past
rulings of the Court relating to the timeliness of
judicial claims which makes it even more
mandatory in taking cognizance of the same.
CIR V. COVANTA
CIR issued Formal Letters of Demand and
Assessment Notices against CEPHI for
deficiency value-added tax (VAT) and expanded
withholding tax (EWT). CEPHI protested the
assessments by filing two (2) separate Letters of
Protest. However, the CIR issued another
Formal Letter of Demand and Assessment
NoticE. The assessment lead to CEPHI filing a
Letter of Protest on the MCIT assessment.
The protests remained unacted upon. Thus,
CEPHI filed separate petitions before the CTA,
seeking the cancellation and withdrawal of the
deficiency assessments. On December 6, 2005,
the CIR filed an answer.
After the parties' respective submission of their
fonnal offer of evidence, CEPHI filed a
Supplemental Petition on October 7, 2008,
informing the CTA that it availed of the tax
amnesty under R.A. No. 9480. CEPHI
afterwards submitted a Supplemental Formal
Offer of Evidence, together with the documents
relevant to its tax amnesty.
CEPHI is entitled to the immunities
and privileges of the tax amnesty
program upon full compliance with
the requirements of R.A. No. 9480.
R.A. No. 9480 governs the tax amnesty program
for national internal revenue taxes for the
taxable year 2005 and prior years. Subject to
certain exceptions, a taxpayer may avail of this
program by complying with the documentary
submissions to the Bureau of Internal Revenue
(BIR) and thereafter, paying the applicable
amnesty tax.
Upon the taxpayer's full compliance with these
requirements, the taxpayer is immediately
entitled to the enjoyment of the immunities and
privileges of the tax amnesty program. 32 But
when: (a) the taxpayer fails to file a SALN and
the Tax Amnesty Return; or (b) the net worth of
the taxpayer in the SALN as of December 31,
2005 is proven to be understated to the extent of
30% or more, the taxpayer shall cease to enjoy
these immunities and privileges.
The implementing rules and regulations of R.A.
No. 9480, as embodied in Department of
Finance (DOF) Department Order No. 29-07,
laid down the procedure for availing of the tax
amnesty. Considering that CEPHI completed the
requirements and paid the corresponding
amnesty tax, it is considered to have totally
complied with the tax amnesty program. As a
matter of course, CEPHI is entitled to the
immediate enjoyment of the immunities and
privileges of the tax amnesty program.
Nonetheless, the Court emphasizes that the
immunities and privileges granted to taxpayers
under R.A. No. 9480 is not absolute. It is
subject to a resolutory condition insofar as
the taxpayers' enjoyment of the immunities
and privileges of the law is concerned. These
immunities cease upon proof that they
underdeclared their net worth by 30%.
Unfortunately for the CIR, however, there is no
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such proof in CEPHI's case. The Court, thus,
finds it necessary to deny the present petition.
While tax amnesty is in the nature of a tax
exemption, which is strictly construed against
the taxpayer, the Court cannot disregard the
plain text of R.A. No. 9480.
CIR V. BPI
Citytrust Bankin Corp (CBC) filed its Annual
Income Tax Returns for its Regular Banking
Unit, and Foreign Currency Deposit Unit for
taxable year 1986 on April 15, 1987. CBC
executed Waivers of Statute of Limitations
under the NIRC. On March 4, 1991, CIR issued
a PAN against CBC for deficiency taxes, among
which is for deficiency income tax. The counsel
for CBC filed its protest. CIR issued a letter
demanding payment of the deficiency taxes
within 30 days from receipt thereof. CBC filed
its protest against the assessments.
Consequently, on Sept 21, 2011, CIR issued a
Warrant of Distraint and/or levy against
respondent BPI which prompted the latter to file
a petition for review with CTA.
The doctrine of estoppel cannot be applied in
this case as an exception to the statute of
limitations on the assessment of taxes
considering that there is a detailed procedure
for the proper execution of the waiver, which
the BIR must strictly follow. As such, the
doctrine of estoppel cannot give validity to an
act that is prohibited by law or one that is
against public policy.
Moreover, 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. xxx 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.
Applying the said ruling in the case at bench,
BPI is not estopped from raising the
invalidity of the subject Waivers as the BIR
in this case caused the defects thereof. As
such, the invalid Waivers did not operate to
toll or extend the period of prescription.
From the above disquisitions, it is clear that the
right of petitioner to assess respondent has
already prescribed and respondent is not liable to
pay the deficiency tax assessment. The period of
collection has also prescribed. As held by the
CTA
UNGAB V. CUSI
BIR Examiner Ben Garcia examined the income
tax returns filed by Quirico P. Ungab, for the
calendar year ending December 31, 1973. In the
course of his examination, he discovered that the
petitioner failed to report his income derived
from sales of banana saplings. As a result, the
BIR District Revenue Officer at Davao City sent
a "Notice of Taxpayer" to the petitioner
informing him that there is due from him
(Ungab) the amount of P104,980.81,
representing income, business tax and forest
charges for the year 1973 and inviting petitioner
to an informal conference where the petitioner,
duly assisted by counsel, may present his
objections to the findings of the BIR Examiner.
Upon receipt of the notice, the petitioner wrote
the BIR District Revenue Officer protesting the
assessment, claiming that he was only a dealer
or agent on commission basis in the banana
sapling business and that his income. BIR
Examiner Ben Garcia, however, was fully
convinced that the petitioner had filed a
fraudulent income tax return so that he
submitted a "Fraud Referral Report," to the Tax
Fraud Unit of the BIR. Consequently, the
Special Investigation Division of the BIR found
sufficient proof that the herein petitioner is
guilty of tax evasion for the taxable year 1973
and recommended his prosecution. Ungab filed a
motion to quash the informations on the ground
that his pending protest with the CIR has not yet
been acted upon hence the assessment is not yet
final and executory and therefore the trial court
has no jurisdiction yet over the criminal cases.
What is involved here is not the collection of
taxes where the assessment of the
Commissioner of Internal Revenue may be
reviewed by the Court of Tax Appeals, but a
criminal prosecution for violations of the
Kean ganda

National Internal Revenue Code which is

within the cognizance of courts of first
instance.
While there can be no civil action to enforce
collection before the assessment procedures
provided in the Code have been followed, there
is no requirement for the precise computation
and assessment of the tax before there can be a
criminal prosecution under the Code.
Besides, it has been ruled that a petition for
reconsideration of an assessment may affect the
suspension of the prescriptive period for the
collection of taxes, but not the prescriptive
period of a criminal action for violation of law.
Obviously, the protest of the petitioner against
the assessment of the District Revenue Officer
cannot stop his prosecution for violation of the
National Internal Revenue Code. Accordingly,
the respondent Judge did not abuse his discretion
in denying the motion to quash filed by the
petitioner.