Lascona vs CIR

Case Digest GR 171251 March 5 2012

Facts:

On March 27 1998, the CIR issued an assessment notice against Lascona Land Co., Inc
informing the latter of its deficiency income tax for the year 1993. On March 27 1998, Lascona
filed a letter protest. In its letter dated March 3, 1999, which was received by Lascona on March
12, 1999, the Commissioner denied the protest on the ground that the assessment has become
final and executory when Lascona did not appeal before the CTA within 30 days after the lapse
of 180-day period as mandated by Sec 228 of the NIRC.

On April 12 1999, Lascona appealed the Commissioner’s decision before the CTA. Lascona
averred that the Commissioner erred in ruling that failure to file a timely appeal before the CTA
resulted to the finality of the assessment.

Issue: W/N the taxpayer’s failure to appeal before the CTA within 30 days after the lapse of the
180-day reglementary period pursuant to Sec 228 resulted to the finality of the assessment

No. First, it must be clarified that the word “decision” does not signify the assessment itself. It is
well-established in jurisprudence that the word “decision” in the CTA Charter has been
interpreted to mean the decisions of the Commissioner on the protest of the taxpayer against the
assessments.

Second, the filing of an appeal within 30 days after the lapse of 180-day period is not the only
remedy available in case of inaction by the CIR on the protested assessment. It is a well-settled
rule in jurisprudence, which is consistent with the Revised Rules of the CTA, that the taxpayer
may also opt to await the final decision of the Commissioner on the disputed assessment and
appeal such 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.

Here, 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 CTA by filing a
petition for review within 30 days after receipt of 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 copy of the decision. #

Note ***RMC 54-2014

In the filing of administrative claims for refund or tax credit of input taxes, the option for the
taxpayer to wait for the Commissioner’s decision on its claim before filing an appeal may not be
available.
Under the new rule promulgated by the BIR in 2014, if the claim for VAT refund or credit is not
acted upon by the Commissioner within the 120-day period as required by law, such inaction
shall be deemed a denial of the application for tax refund or credit. Further, the new regulation
provides that the taxpayer can appeal in one of the two ways: (1) File the judicial claim within 30
days after the Commissioner denies the claim within the 120-day period, or (2) File the judicial
claim within 30 days after the expiration of the 120-day period if the Commissioner did not act
on the claim.

This will have to mean that, unlike in the case of appealing before the CTA for disputed
assessments, the remedy of the taxpayer to wait for the Commissioner’s decision even after the
120-day period is not available when it comes to claiming refund or tax credit of VAT input
taxes. Thus, if the taxpayer failed to file an appeal or judicial claim within 30 days after the lapse
of the 120-day period of the Commissioner’s inaction, the taxpayer loses its right to appeal to the
CTA.

G.R. No. 224327, June 11, 2018

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. BANK OF THE

PHILIPPINE ISLANDS, Respondent.

DECISION

PERALTA, J.:

For this Court’s resolution is the Petition for Review on Certiorari1 under Rule 45 of the Revised
Rules of Civil Procedure assailing the Decision2 dated September 16, 2015 and Resolution3 dated
April 21, 2016 of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 1173 (CTA CASE
No. 8350) on petitioner Commissioner of Internal Revenue's (CIR) tax assessment against
respondent Bank of the Philippine Islands (BPI).

The facts follow.

Citytrust Banking Corporation (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.

Thereafter, on August 11, 1989, July 12, 1990 and November 8, 1990, CBC executed Waivers of
the Statute of Limitations under the National Internal Revenue Code (NIRC).

On March 7, 1991, petitioner CIR issued a Pre-Assessment Notice (PAN) against CBC for
deficiency taxes, among which is for deficiency Income Tax for taxable year 1986 in the total
amount of P19,202,589.97. The counsel for CBC filed its protest against the PAN on April 22,
1991.

Petitioner, on May 6, 1991, issued a Letter, with attached Assessment Notices, demanding for
the payment of the deficiency taxes within thirty (30) days from receipt thereof. The counsel for
CBC filed its Protest against the assessments on May 27, 1991 and another Protest on February
17, 1992.

A Letter was again issued by petitioner on February 5, 1992 requesting for the payment of CBC's
tax liabilities, within ten (10) days from receipt thereof.

The counsel for CBC, on March 29, 1994, issued a Letter addressed to petitioner offering a
compromise settlement on its deficiency Income Tax assessment for Taxable year 1986, with an
attached Application for Compromise Settlement/Abatement of Penalties under Revenue
Memorandum Order (RMO) No. 45-93, in the amount of P1,721,503.40, or twenty percent
(20%) of the subject assessment, which was received on March 30, 1994. On May 2, 1994, the
counsel for CBC issued a Letter addressed to petitioner, reiterating its Letter of offer of
compromise settlement dated March 29, 1994 and Application for Compromise
Settlement/Abatement under RMO No. 45-93.

Petitioner, on October 12, 1994, approved the earlier mentioned Application for Compromise
Settlement of CBC, provided that one hundred percent (100%) of its deficiency Income Tax
assessment for the year 1986, or in the amount of P8,607,517.00, be paid within fifteen (15) days
from receipt thereof.

The counsel for CBC, on November 28, 1994, issued a Letter addressed to petitioner, requesting
for a reconsideration of the approved amount as compromise settlement, and offering to pay the
amount of P1,600,000.00 as full and final settlement of the subject assessment. The same counsel
for CBC issued a Letter on March 8, 1995 reiterating its request for reconsideration and offering
to increase its full and final settlement in the amount P3,200,000.00.

On March 28, 1995, petitioner approved the Application for Compromise Settlement of CBC
dated March 30, 1994, provided that CBC pay the amount of P8,607,517.00 within fifteen (15)
days from receipt thereof.

Later, on May 4, 1995, the counsel for CBC issued another Letter addressed to petitioner,
requesting for a final reconsideration, and reiterating its offer of compromise in the amount of
P3,200,000.00.

Petitioner, however, disapproved the Application for Compromise Settlement of CBC dated
March 30, 1994. The counsel of CBC, on July 27, 1995, issued a Letter addressed to petitioner
requesting for reconsideration and offering to pay the increased amount of P4,303,758.50.

Meanwhile, on October 4, 1996, the Securities and Exchange Commission approved the Articles
of Merger between respondent BPI and CBC, with BPI as the surviving corporation.

Afterwards, on May 26, 2011, petitioner issued a Notice of Denial addressed to respondent,
requesting for the payment of CBC's deficiency Income Tax for taxable year 1986, within fifteen
(15) days from receipt thereof, and on July 28, 2011, petitioner issued another Letter addressed
to respondent, denying the offer of compromise penalty, and requesting for the payment of the
amount of P19,202,589.97, plus all increments incident to delinquency, pursuant to Sections 248
(A) (3) and 249 (C) (3) of the 1997 NIRC, as amended.

Consequently, on September 21, 2011, petitioner issued a Warrant of Distraint and/or Levy
against respondent BPI which prompted the latter to file a Petition for Review with the CTA on
October 7, 2011.

In a Decision4 dated February 12, 2014, the CTA Special Third Division granted the petition for
review, thus:

WHEREFORE, the Petition for Review is hereby GRANTED. Accordingly, the Warrant of
Distraint and/or Levy dated September 21, 2011 is hereby CANCELLED and SET ASIDE.

SO ORDERED.5

According to the CTA Special Third Division, BPI can validly assail the Warrant of Distraint
and/or Levy, as its appellate jurisdiction is not limited to cases which involve decisions of the
Commissioner of Internal Revenue on matters relating to assessments or refunds. The Court
further ruled that the Assessment Notices, being issued only on May 6, 1991, were already issued
beyond the three-year period to assess, counting from April 15, 1987, when CBC filed its Annual
Income Tax Returns for the taxable year 1986. The same Court also held that the Waivers of
Statute of Limitations executed on July 12, 1990 and November 8, 1990 were not in accordance
with the proper form of a valid waiver pursuant to RMO No. 20-90, thus, the waivers failed to
extend the period given to petitioner to assess.

After the denial of petitioner's motion for reconsideration, a petition for review was filed with the
CTA En Banc, in which the latter Court denied the said petition, thus:

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED.
Accordingly, the Decision and the Resolution, dated February 12, 2014 and April 25, 2014,
respectively, are hereby AFFIRMED.

SO ORDERED.6

Hence, the present petition after the CTA En Banc denied petitioner's motion for reconsideration.

Petitioner raises the following grounds for the allowance of the present petition:

THE CTA EN BANC ERRED IN AFFIRMING THE CTA SPECIAL THIRD DIVISION'S
EXERCISE OF JURISDICTION OVER THE INSTANT CONTROVERSY.

THE CTA EN BANC ERRED IN AFFIRMING THE ANNULMENT OF THE WARRANT OF

DISTRAINT AND/OR LEVY AGAINST RESPONDENT GIVEN PETITIONER'S CLEAR
RIGHT TO THE SAME.7
Petitioner argues that the CTA did not acquire jurisdiction over the case for respondent's failure
to contest the assessments made against it by the Bureau of Internal Revenue (BIR) within the
period prescribed by law. Petitioner also contends that by the principle of estoppel, respondent is
not allowed to raise the defense of prescription against the efforts of the government to collect
the tax assessed against it.

In its Comment8 dated August 22, 2016, respondent claims that the assessment notice issued
against it, is not yet final and executory and that the CTA has jurisdiction over the case. It further
asserts that the right of petitioner to assess deficiency income tax for the taxable year 1986 had
already prescribed pursuant to the Tax Code of 1977 and that the right of petitioner to collect the
alleged deficiency income tax for the taxable year 1986 had already prescribed. Respondent also
insists that it is not liable for the alleged deficiency income tax and increments for the taxable
year 1986.

The petition lacks merit.

First of all, the CTA did not err in its ruling that it has jurisdiction over cases asking for the
cancellation and withdrawal of a warrant of distraint and/or levy as provided under Section 7 of
Republic Act (R.A.) No. 9282, thus:

Sec. 7 Jurisdiction. – The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. x x x

2. Inaction by the Commissioner of the Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matter arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue, where
the National Internal Revenue Code provides a specific period of action, in which
case the inaction shall be deemed a denial;

xxxx

Anent the other grounds relied upon by petitioner, such are factual in nature. It is doctrinal that
the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature
of its function of being dedicated exclusively to the resolution of tax problems, has developed an
expertise on the subject, unless there has been an abuse or improvident exercise of authority.9
We thus accord the findings of fact by the CTA with the highest respect. These findings of facts
can only be disturbed on appeal if they are not supported by substantial evidence or there is a
showing of gross error or abuse on the part of the CTA. In the absence of any clear and
convincing proof to the contrary, this Court must presume that the CTA rendered a decision
which is valid in every respect.10 Nevertheless, the factual findings of the CTA are supported by
substantial evidence.
An assessment becomes final and unappealable if within thirty (30) days from receipt of the
assessment, the taxpayer fails to file his or her protest requesting for reconsideration or
reinvestigation as provided in Section 229 of the NIRC, thus:

SECTION 229. Protesting of assessment. – When the Commissioner of Internal Revenue or his
duly authorized representative finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings within a period to be prescribed by implementing regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the
Commissioner shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration

or reinvestigation in such form and manner as may be prescribed by implementing
regulations within thirty (30) days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable.

If the protest is denied in whole and in part, the individual, association or corporation
adversely affected by the decision on the protest may appeal to the Court of Tax Appeals
within thirty (30) days from receipt of the said decision; otherwise, the decision shall
become final, executory and demandable.11

Petitioner insists that respondent failed to elevate the tax assessment against it to the CTA within
the required period. Respondent, on the other hand, claims that it never received any final
decision on the disputed assessment from petitioner granting or denying the same, whether in
whole or in part.

The CTA was correct in ruling that petitioner failed to prove that it sent a notice of assessment
and that it was received by respondent, thus:

The February 5, 1992 Decision of the CIR which she insists to be the reckoning point to protest,
was not proven to have been received by BPI when the latter denied its receipt. Thus, the
assessment notice dated May 6, 1991 should be deemed as the final decision of the CIR on the
matter, in which BPI timely protested on May 27, 1991. While a mailed letter is deemed received
by the addressee in the ordinary course of mail, this is still merely a disputable presumption
subject to controversion, and a direct denial of the receipt thereof shifts the burden upon the
party favored by the presumption to prove that the mailed letter was indeed received by the
addressee. (Republic v. Court of Appeals, G.R. No. L-38540, April 30, 1987, 149 SCRA 351,
355.) In the instant case, BPI denies receiving the assessment notice, and the CIR was unable to
present substantial evidence that such notice was, indeed, mailed or sent before the BIR's right to
assess had prescribed and that said notice was received by BPI. As a matter of fact, there was an
express admission on the part of the CIR that there was no proof that indeed the alleged Final
Assessment Notice was ever sent to or received by BPI. As stated in the Transcript of
stenographic Notes on the court hearing dated October 29, 2012:

Q: And you anchor your argument based on this document (Letter dated February 5, 1992) that
this is the final decision of the BIR, is that correct?
A: Yes.
Q: When was this received by the petitioner City Trust Banking Corporation?
A: I think it was only mailed.

Q: What is your proof that it was mailed?

A: Because the BIR...(interrupted by Atty. Nidea)

Q: Do you have any proof that it was mailed?

A: No, I don't have any proof.

Q: So, you don't have any proof. So you don't have any proof that it was received by the
petitioner?
A: I don't have any idea.

Q: You don't have any proof.

Moreover, as correctly pointed out in the assailed Resolution, whether or not the Letter dated
February 5, 1992 constitutes as the Final Decision on the Disputed Assessment appealable under
Section 229 of the 1977 Tax Code, or whether the same was validly served and duly received by
BPI, are immaterial matters which will not cure the nullity of the said Preliminary Assessment
Notice and Assessment Notices, as they were clearly made beyond the prescriptive period.12

In the case of Nava v. Commissioner of Internal Revenue,13 this Court stressed on the importance
of proving the release, mailing or sending of the notice.

While we have held that an assessment is made when sent within the prescribed period, even if
received by the taxpayer after its expiration (Coll. Of Int. Rev. vs. Bautista, L-12250 and L-
12259, May 27, 1959), this ruling makes it the more imperative that the release, mailing, or
sending of the notice be clearly and satisfactorily proved. Mere notations made without the
taxpayer's intervention, notice, or control, without adequate supporting evidence, cannot suffice;
otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate
protection or defense.

Thus, the failure of petitioner to prove the receipt of the assessment by respondent would
necessarily lead to the conclusion that no assessment was issued.

As to the contention of petitioner that through the principle of estoppel, respondent is not
allowed to raise the defense of prescription against the efforts of the government to collect the
tax assessed against it, such is misplaced. Its argument that respondent's belated assertions
relative to the alleged defects and flaws in the waivers it signed in favor of the government
should not be given merit, is also amiss.

Petitioner cannot implore the doctrine of estoppel just to compensate its failure to follow the
proper procedure. As aptly ruled by the CTA:
It is well established that issues raised for the first time on appeal are barred by estoppel.
However, in the leading case of Commissioner of Internal Revenue v. Kudos Metal Corporation,
the Supreme Court held that:

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. xxx As such, the doctrine of
estoppel cannot give validity to an act that is prohibited by law or one that is against public
policy. xxx

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. 14

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:

As to the period of collection, We uphold the ruling of the Division that such has already
prescribed. Regardless if We will reckon the period to collect from May 6, 1991, or the alleged
Final Demand Letter on February 5, 1992, counting the three-year period therein to collect in
accordance with Section 223 (c) of the 1977 Tax Code, obviously, the mode of collection
through the issuance of Warrant of Distraint and/or Levy on October 05, 2011 was made beyond
the prescriptive period.15

It must be remembered that [T]he law imposes a substantive, not merely a formal, requirement.
To proceed heedlessly with tax collection without first establishing a valid assessment is
evidently violative of the cardinal principle in administrative investigations: that taxpayers
should be able to present their case and adduce supporting evidence.16 Although taxes are the
lifeblood of the government, their assessment and collection "should be made in accordance with
law as any arbitrariness will negate the very reason for government itself."17

WHEREFORE, the Petition for Review on Certiorari dated June 16, 2016 of petitioner
Commissioner of Internal Revenue is DENIED for lack of merit. Consequently, the Decision
dated September 16, 2015 and the Resolution dated April 21, 2016 of the Court of Tax Appeals
En Banc in CTA EB No. 1173 (CTA CASE No. 8350), are AFFIRMED.

SO ORDERED.
Fishwealth Canning Corporation vs. Commissioner of Internal Revenue, 610 SCRA 524,
G.R. No. 179343. January 21, 2010
Carpio- Morales, J.

Facts:
The Commissioner of Internal Revenue (respondent), by Letter of Authority dated May 16, 2000,
ordered the examination of the internal revenue taxes for the taxable year 1999 of Fishwealth
Canning Corp. (petitioner). The investigation disclosed that petitioner was liable in the amount
of P2,395,826.88 representing income tax, value added tax (VAT), withholding tax deficiencies
and other miscellaneous deficiencies. Petitioner eventually settled these obligations onAugust
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.

Respondent sent, on August 6, 2003, petitioner a Final Assessment Notice of income tax and
VAT deficiencies totaling P67,597,336.75 for the taxable year 1999, which assessment petitioner
contested by letter of September 23, 2003.

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, and requesting the
immediate payment thereof, “inclusive of penalties incident to delinquency.” Respondent added
that if petitioner disagreed, it may appeal to the Court of Tax Appeals (CTA) “within thirty (30)
days from date of receipt hereof, otherwise our said deficiency income and value-added taxes
assessments shall become final, executory, and demandable.” Instead of appealing to the CTA,
petitioner filed, on September 1, 2005, a Letter of Reconsideration dated August 31, 2005.

Petitioner filed a Motion for Reconsideration which was denied. The Resolution denying its
motion for reconsideration was received by petitioner on October 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 CTA En Banc erred in holding that the petition it filed before the CTA First
Division as well as that filed before it (CTA En Banc) was filed out of time.

Held:
The Court dismissed the petition. 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.