COMMISSIONER OF INTERNAL

REVENUE, Petitioner, vs. ISABELA CULTURAL
CORPORATION, respondent.

DECISION

PANGANIBAN,  J.:

A final demand letter from the Bureau of Internal Revenue,

reiterating to the taxpayer the immediate payment of a tax
deficiency assessment previously made, is tantamount to a denial of
the taxpayers request for reconsideration. Such letter amounts to a
final decision on a disputed assessment and is thus appealable to
the Court of Tax Appeals (CTA).

The Case

Before this Court is a Petition for Review on Certiorari 1 pursuant to

Rule 45 of the Rules of Court, seeking to set aside the August 19,
1998 Decision 2 of the Court of Appeals 3 (CA) in CA-GR SP No.
46383 and ultimately to affirm the dismissal of CTA Case No. 5211.
The dispositive portion of the assailed Decision reads as follows:

WHEREFORE, the assailed decision is REVERSED and SET ASIDE.

Accordingly, judgment is hereby rendered REMANDING the case to
the CTA for proper disposition.4

The Facts

The facts are undisputed. The Court of Appeals quoted the summary
of the CTA as follows:

As succinctly summarized by the Court of Tax appeals (CTA for

brevity), the antecedent facts are as follows:

In an investigation conducted on the 1986 books of account of

[respondent, petitioner] had the preliminary [finding] that
[respondent] incurred a total income tax deficiency
of P9,985,392.15, inclusive of increments. Upon protest by
[respondents] counsel, the said preliminary assessment was
reduced to the amount of P325,869.44, a breakdown of which
follows:

Deficiency Income Tax P321,022.68

Deficiency Expanded
Withholding Tax 4,846.76
___________
Total P325,869.44

==========

(pp. 187-189, BIR records)

On February 23, 1990, [respondent] received from [petitioner] an

assessment letter, dated February 9, 1990, demanding payment of
the amounts of P333,196.86 and P4,897.79 as deficiency income
tax and expanded withholding tax inclusive of surcharge and
interest, respectively, for the taxable period from January 1, 1986
to December 31, 1986. (pp. 204 and 205, BIR rec.)

In a letter, dated March 22, 1990, filed with the [petitioners] office
on March 23, 1990 (pp. 296-311, BIR rec.), [respondent] requested
x x x a reconsideration of the subject assessment.

Supplemental to its protest was a letter, dated April 2, 1990, filed

with the [petitioners] office on April 18, 1990 (pp. 224 & 225, BIR
rec.), to which x x x were attached certain documents supportive of
its protest, as well as a Waiver of Statute of Limitation, dated April
17, 1990, where it was indicated that [petitioner] would only have
until April 5, 1991 within which to asses and collect the taxes that
may be found due from [respondent] after the re-investigation.

On February 9, 1995, [respondent] received from [petitioner] a

Final Notice Before Seizure, dated December 22, 1994 (p. 340, BIR
rec.). In said letter, [petitioner] demanded payment of the subject
assessment within ten (10) days from receipt thereof. Otherwise,
failure on its part would constrain [petitioner] to collect the subject
assessment through summary remedies.
[Respondent] considered said final notice of seizure as [petitioners]
final decision. Hence, the instant petition for review filed with this
Court on March 9, 1995.

The CTA having rendered judgment dismissing the petition,

[respondent] filed the instant petition anchored on the argument
that [petitioners] issuance of the Final Notice Before Seizure
constitutes [its] decision on [respondents] request for
5
reinvestigation, which the [respondent] may appeal to the CTA.

Ruling of the Court of Appeals

In its Decision, the Court of Appeals reversed the Court of Tax

Appeals. The CA considered the final notice sent by petitioner as the
latters decision, which was appealable to the CTA. The appellate
court reasoned that the final Notice before seizure had effectively
denied petitioners request for a reconsideration of the
commissioners assessment. The 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.

Hence, this recourse. 6

Issues

In his Memorandum, 7 petitioner presents for this Courts

consideration a solitary issue:

Whether or not the Final Notice Before Seizure dated February 9,

1995 signed by Acting Chief Revenue Collection Officer Milagros
Acevedo against ICC constitutes the final decision of the CIR
appealable to the CTA.8

The Courts Ruling

The Petition is not meritorious.

Sole Issue: The Nature of the Final Notice Before Seizure

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 the adverted assessment within ten (10) days after receipt
hereof. Should you again fail, and refuse to pay, this Office will be
constrained to enforce its collection by summary remedies of
Warrant of Levy of Road Property, Distraint of Personal Property or
Warrant of Garnishment, and/or simultaneous court action.

Please give this matter your preferential attention.

Very truly yours,

ISIDRO B. TECSON, JR.

Revenue District Officer

By:

(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection
Officer9
cräläwvirtualibräry

Petitioner maintains that this Final Notice was a mere reiteration of

the delinquent taxpayers obligation to pay the taxes due. It was
supposedly a mere demand that should not have been mistaken for
a decision on a protested assessment. Such decision, the
commissioner contends, must unequivocably indicate that it is the
resolution of the taxpayers request for reconsideration and must
likewise state the reason therefor.

Respondent, on the other hand, points out that the Final Notice
Before Seizure should be considered as a denial of its request for
reconsideration of the disputed assessment. The Notice should be
deemed as petitioners last act, since failure to comply with it would
lead to the distraint and levy of respondents properties, as indicated
therein.
We agree with respondent. 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
taxpayers 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 Court of Tax Appeals for review.

Prior to the decision on a disputed assessment, there may still be

exchanges between the commissioner of internal revenue (CIR) and
the taxpayer. The former may ask clarificatory questions or require
the latter to submit additional evidence. However, the CIRs position
regarding the disputed assessment must be indicated in the final
decision. It is this decision that is properly appealable to the CTA for
review.

Indisputably, respondent received an assessment letter dated

February 9, 1990, stating that it had delinquent taxes due; and it
subsequently filed its motion for reconsideration on March 23, 1990.
In support of its request for reconsideration, it sent to the CIR
additional documents on April 18, 1990. The next communication
respondent received was already the Final Notice Before Seizure
dated November 10, 1994.

In the light of the above facts, the Final Notice Before Seizure
cannot but be considered as the commissioners 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 CIRs 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; otherwise, its
properties would be subjected to distraint and levy. How then could
it have been made to believe that its request for reconsideration
was still pending determination, despite the actual threat of seizure
of its properties?

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. We
quote:

Sec. 228. Protesting an Assessment. x x x

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 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.10 cräläwvirtualibräry

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.

Lastly, jurisprudence dictates that a final demand letter for payment

of delinquent taxes may be considered a decision on a disputed or
protested assessment. In Commissioner of Internal Revenue v.
Ayala Securities Corporation, this Court held:
The letter of February 18, 1963 (Exh. G), in the view of the Court, is
tantamount to a denial of the reconsideration or [respondent
corporations] x x x protest o[f] the assessment made by the
petitioner, considering that the said letter [was] in itself a
reiteration of the demand by the Bureau of Internal Revenue for the
settlement of the assessment already made, and for the immediate
payment of the sum of P758,687.04 in spite of the vehement
protest of the respondent corporation on April 21, 1961. This
certainly is a clear indication of the firm stand of petitioner against
the reconsideration of the disputed assessment, in view of the
continued refusal of the respondent corporation to execute the
waiver of the period of limitation upon the assessment in question.

This being so, the said letter amount[ed] to a decision on a disputed

or protested assessment and, there, the court a quo did not err in
taking cognizance of this case.11cräläwvirtualibräry

Similarly, in Surigao Electric Co., Inc. v. Court of Tax Appeals 12 and

again in CIR v. Union Shipping Corp., 13  we ruled:

x x x. The letter of demand dated April 29, 1963 unquestionably

constitutes the final action taken by the commissioner on the
petitioners several requests for reconsideration and recomputation.
In this letter the commissioner not only in effect demanded that the
petitioner pay the amount of P11,533.53 but also gave warning that
in the event it failed to pay, the said commissioner would be
constrained to enforce the collection thereof by means of the
remedies provided by law. The tenor of the letter, specifically the
statement regarding the resort to legal remedies, unmistakably
indicate[d] the final nature of the determination made by the
commissioner of the petitioners deficiency franchise tax liability.

As in CIR v. Union Shipping, 14 petitioner failed to rule on the Motion

for Reconsideration filed by private respondent, but simply
continued to demand payment of the latters alleged tax
delinquency. Thus, the Court reiterated the dictum that the BIR
should always indicate to the taxpayer in clear and unequivocal
language what constitutes final action on a disputed assessment.
The object of this policy is to avoid repeated requests for
reconsideration by the taxpayer, thereby delaying the finality of the
assessment and, consequently, the collection of the taxes due.
Furthermore, the taxpayer would not be groping in the dark,
speculating as to which communication or action of the BIR may be
the decision appealable to the tax court. 15
cräläwvirtualibräry

In the instant case, the second notice received by private

respondent verily indicated its nature that it was final.
Unequivocably, therefore, it was tantamount to a rejection of the
request for reconsideration.

Commissioner v. Algue  16 is not in point here. In that case, the

Warrant of Distraint and Levy, issued to the taxpayer without any
categorical ruling on its request for reconsideration, was not
deemed equivalent to a denial of the request. Because such request
could not in fact be found in its records, the BIR cannot be
presumed to have taken it into consideration. The request was
considered only when the taxpayer gave a copy of it, duly stamp-
received by the BIR. Hence, the Warrant was deemed premature.

In the present case, petitioner does not deny receipt of private

respondents protest letter. As a matter of fact, it categorically
relates the following in its Statement of Relevant Facts: 17 cräläwvirtualibräry

3. On March 23, 1990, respondent ICC wrote the CIR requesting for
a reconsideration of the assessment on the ground that there was
an error committed in the computation of interest and that there
were expenses which were disallowed (Ibid., pp. 296-311).

4. On April 2, 1990, respondent ICC sent the CIR additional

documents in support of its protest/reconsideration. The letter was
received by the BIR on April 18, 1990. Respondent ICC further
executed a Waiver of Statute of Limitation (dated April 17, 1990)
whereby it consented to the BIR to assess and collect any taxes that
may be discovered in the process of reinvestigation, until April 3,
1991 (Ibid., pp. 296-311). A copy of the waiver is hereto attached
as Annex C.

Having admitted as a fact private respondents request for

reconsideration, petitioner must have passed upon it prior to the
issuance of the Final Notice Before Seizure.
WHEREFORE , the Petition is hereby DENIED  and the assailed
Decision AFFIRMED.

SO ORDERED.