254-CIR v. FMF Dev't. Corp. G.R. No. 167765 June 30, 2008
254-CIR v. FMF Dev't. Corp. G.R. No. 167765 June 30, 2008
254-CIR v. FMF Dev't. Corp. G.R. No. 167765 June 30, 2008
167765 1 of 5
TOTAL P2,053,698.25
On November 24, 1999, FMF filed a letter of protest on the assessment invoking, inter alia, the defense of
prescription by reason of the invalidity of the waiver. In its reply, the BIR insisted that the waiver is valid because
it was signed by the RDO, a duly authorized representative of petitioner. It also ordered FMF to immediately settle
its tax liabilities; otherwise, judicial action will be taken. Treating this as BIRs final decision, FMF filed a petition
for review with the CTA challenging the validity of the assessment.
On March 20, 2003, the CTA granted the petition and cancelled Assessment Notice No. 33-1-00487-95 because it
was already time-barred. The CTA ruled that the waiver did not extend the three-year prescriptive period within
which the BIR can make a valid assessment because it did not comply with the procedures laid down in Revenue
Memorandum Order (RMO) No. 20-90. First, the waiver did not state the dates of execution and acceptance of the
waiver, by the taxpayer and the BIR, respectively; thus, it cannot be determined with certainty if the waiver was
executed and accepted within the prescribed period. Second, the CTA also found that FMF was not furnished a
copy of the waiver signed by RDO Zambarrano. Third, the CTA pointed out that since the case involves an amount
of more than P1 million, and the period to assess is not yet about to prescribe, the waiver should have been signed
by the Commissioner of Internal Revenue, and not a mere RDO. The Commissioner of Internal Revenue filed a
motion for reconsideration, but it was denied.
On appeal to the Court of Appeals, the decision of the CTA was affirmed. Sustaining the findings of the CTA, the
Court of Appeals held that the waiver did not strictly comply with RMO No. 20-90. Thus, it nullified Assessment
Notice No. 33-1-00487-95. The fallo of the Court of Appeals decision reads:
WHEREFORE, finding the instant petition not impressed with merit, the same is DENIED DUE
COURSE and is hereby DISMISSED. No costs.
SO ORDERED.
The Commissioner of Internal Revenue sought reconsideration, but it was denied.
Hence the instant petition, raising the following issues:
I.
WHETHER OR NOT RESPONDENTS WAIVER OF THE STATUTE OF LIMITATIONS WAS
VALIDLY EXECUTED.
II.
WHETHER O[R] NOT THE PERIOD TO ASSESS HAD PRESCRIBED.
III.
WHETHER OR NOT THE COURT OF APPEALS CORRECTLY DISREGARDED PETITIONERS
SUBSTANTIVE ARGUMENT.
Essentially, the present controversy deals with the validity of the waiver and whether it validly extended the
original three-year prescriptive period so as to make Assessment Notice No. 33-1-00487-95 valid. The basic
questions to be resolved therefore are: (1) Is the waiver valid? and (2) Did the three-year period to assess internal
revenue taxes already prescribe?
CIR v. FMF Devt. Corp. G.R. No. 167765 3 of 5
Petitioner contends that the waiver was validly executed mainly because it complied with Section 222 (b) of the
National Internal Revenue Code (NIRC). Petitioner points out that the waiver was in writing, signed by the
taxpayer and the Commissioner, and executed within the three-year prescriptive period. Petitioner also argues that
the requirements in RMO No. 20-90 are merely directory; thus, the indication of the dates of execution and
acceptance of the waiver, by the taxpayer and the BIR, respectively, are not required by law. Petitioner adds that
there is no provision in RMO No. 20-90 stating that a waiver may be invalidated upon failure of the BIR to furnish
the taxpayer a copy of the waiver. Further, it contends that respondents execution of the waiver was a renunciation
of its right to invoke prescription. Petitioner also argues that the government cannot be estopped by the mistakes
committed by its revenue officer in the enforcement of RMO No. 20-90.
On the other hand, respondent counters that the waiver is void because it did not comply with RMO No. 20-90.
Respondent assails the waiver because (1) it was not signed by the Commissioner despite the fact that the
assessment involves an amount of more than P1 million; (2) there is no stated date of acceptance by the
Commissioner or his duly authorized representative; and (3) it was not furnished a copy of the BIR-accepted
waiver. Respondent also cites Philippine Journalists, Inc. v. Commissioner of Internal Revenue and contends that
the procedures in RMO No. 20-90 are mandatory in character, precisely to give full effect to Section 222 (b) of the
NIRC. Moreover, a waiver of the statute of limitations is not a waiver of the right to invoke the defense of
prescription.
After considering the issues and the submissions of the parties in the light of the facts of this case, we are in
agreement that the petition lacks merit.
Under Section 203 of the NIRC, internal revenue taxes must be assessed within three years counted from the
period fixed by law for the filing of the tax return or the actual date of filing, whichever is later. This mandate
governs the question of prescription of the governments right to assess internal revenue taxes primarily to
safeguard the interests of taxpayers from unreasonable investigation. Accordingly, the government must assess
internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of
the assurance that it will no longer be subjected to further investigation for taxes after the expiration of reasonable
period of time.
An exception to the three-year prescriptive period on the assessment of taxes is Section 222 (b) of the NIRC, which
provides:
xxxx
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be
assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written
agreement made before the expiration of the period previously agreed upon.
xxxx
The above provision authorizes the extension of the original three-year period by the execution of a valid waiver,
where the taxpayer and the BIR agreed in writing that the period to issue an assessment and collect the taxes due is
extended to an agreed upon date. Under RMO No. 20-90, which implements Sections 203 and 222 (b), the
following procedures should be followed:
1. The waiver must be in the form identified as Annex "A" hereof.
2. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the case of a
CIR v. FMF Devt. Corp. G.R. No. 167765 4 of 5
Commissioner. On this basis, no implied consent can be presumed, nor can it be contended that the concurrence to
such waiver is a mere formality.
Consequently, petitioner cannot rely on its invocation of the rule that the government cannot be estopped by the
mistakes of its revenue officers in the enforcement of RMO No. 20-90 because the law on prescription should be
interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer
within the contemplation of the Commission which recommended the approval of the law. To the Government, its
tax officers are obliged to act promptly in the making of assessment so that taxpayers, after the lapse of the period
of prescription, would have a feeling of security against unscrupulous tax agents who will always try to find an
excuse to inspect the books of taxpayers, not to determine the latters real liability, but to take advantage of a
possible opportunity to harass even law-abiding businessmen. Without such legal defense, taxpayers would be open
season to harassment by unscrupulous tax agents.
In fine, Assessment Notice No. 33-1-00487-95 dated October 25, 1999, was issued beyond the three-year
prescriptive period. The waiver was incomplete and defective and thus, the three-year prescriptive period was not
tolled nor extended and continued to run until April 15, 1999. Even if the three-year period be counted from May 8,
1996, the date of filing of the amended return, assuming the amended return was substantially different from the
original return, a case which affects the reckoning point of the prescriptive period, still, the subject assessment is
definitely considered time-barred.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution dated January 31,
2005 and April 14, 2005, respectively, of the Court of Appeals in CA-G.R. SP No. 79675 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Carpio-Morales, Tinga, Velasco, Jr., and Brion, JJ., concur.