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Friday, January 13, 2012 Followers

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Digested Cases in Taxation
    GR No. 128315, June 29, 1999
Blog Archive
Facts: The CIR authorized certain BIR officers to examine the books of accounts and
►  2014 (6)
other accounting records of Pascor Realty and Development Corp. (PRDC) for 1986,
►  2013 (2)
1987 and 1988. The examination resulted in recommendation for the issuance of an
assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively. The ▼  2012 (4)
Commissioner filed a criminal complaint for tax evasion against PRDC, its president ►  October (3)
and treasurer before the DOJ. Private respondents filed immediately an urgent request ▼  January (1)
for reconsideration on reinvestigation disputing the tax assessment and tax liability.
Digested Cases in
The Commissioner denied private respondent’s request for Taxation
reconsideration/reinvestigation on the ground that no formal assessment has been
issued which the latter elevated to the CTA on a petition for review. The Commissioner’s ►  2011 (7)
motion to dismiss on the ground of the CTA’s lack of jurisdiction denied by CTA  and
ordered the Commissioner to file an answer. Instead of complying with the order of
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CTA, Commissioner filed a petition with the CA alleging grave abuse of discretion and
lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue
officers and the endorsement of said report as assessment which may be appealed to
the CTA. The CA sustained the CTA decision and dismissed the petition.

Issues: (1) Whether or not the criminal complaint for tax evasion can be construed as lem Onitsuaf
an assessment. (2) Whether or not an assessment is necessary before criminal
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charges for tax evasion may be instituted.
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Held: The filing of the criminal complaint with the DOJ cannot be construed as a formal
assessment. Neither the Tax Code nor the revenue regulations governing the protest
assessments provide a specific definition or form of an assessment.

An assessment must be sent to and received by the taxpayer, and must demand
payment of the taxes described therein within a specific period. The revenue officer’s
affidavit merely contained a computation of respondent’s tax liability. It did not state a
demand or period for payment. It was addressed to the Secretary of Justice not to the
taxpayer. They joint affidavit was meant to support the criminal complaint for tax
evasion; it was not meant to be a notice of tax due and a demand to private
respondents for the payment thereof. The fact that the complaint was sent to the DOJ,
and not to private respondent, shows that commissioner intended to file a criminal
complaint for tax evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be filed. A criminal

charge need not only be supported by a prima facie showing of failure to file a required
return. The CIR had, in such tax evasion cases, discretion on whether to issue an
assessment, or to file a criminal case against the taxpayer, or to do both.

2. Marcos II vs. CA
    273 SCRA 47 1997

Facts: Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring
the deficiency income tax assessments and estate tax assessments upon the estate
and properties of his late father despite the pendency of the probate proceedings of the
will of the late President. On the other hand, the BIR argued that the State’s authority to
collect internal revenue taxes is paramount.

Petitioner further argues that "the numerous pending court cases questioning the late
president's ownership or interests in several properties (both real and personal) make
the total value of his estate, and the consequent estate tax due, incapable of exact
pecuniary determination at this time.  Thus, respondents' assessment of the estate tax
and their issuance of the Notices of Levy and sale are premature and oppressive." He
points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which
were filed by the government to question the ownership and interests of the late
President in real and personal properties located within and outside the Philippines. 
Petitioner, however, omits to allege whether the properties levied upon by the BIR in the
collection of estate taxes upon the decedent's estate were among those involved in the
said cases pending in the Sandiganbayan.  Indeed, the court is at a loss as to how
these cases are relevant to the matter at issue.  The mere fact that the decedent has
pending cases involving ill-gotten wealth does not affect the enforcement of tax
assessments over the properties indubitably included in his estate.

 Issue: Is the contention of Marcos correct?

Held: No. The approval of the court, sitting in probate or as a settlement tribunal over
the deceased’s estate, is not a mandatory requirement in the collection of estate taxes.

There is nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's claim for
estate taxes, before the same can be enforced and collected.

The enforcement of tax laws and the collection of taxes are of paramount importance
for the sustenance of government. Taxes are the lifeblood of government and should be
collected without unnecessary hindrance. However, such collection should be made in
accordance with law as any arbitrariness will negate the existence of government itself.

It is not the Department of Justice which is the government agency tasked to determine
the amount of taxes due upon the subject estate, but the Bureau of Internal Revenue
whose determinations and assessments are presumed correct and made in good faith.
The taxpayer has the duty of proving otherwise.  In the absence of proof of any
irregularities in the performance of official duties, an assessment will not be disturbed. 
Even an assessment based on estimates is prima facie valid and lawful where it does
not appear to have been arrived at arbitrarily or capriciously.  The burden of proof is
upon the complaining party to show clearly that the assessment is erroneous.  Failure
to present proof of error in the assessment will justify the judicial affirmance of said
assessment. In this instance, petitioner has not pointed out one single provision in the
Memorandum of the Special Audit Team which gave rise to the questioned
assessment, which bears a trace of falsity.  Indeed, the petitioner's attack on the
assessment bears mainly on the alleged improbable and unconscionable amount of
the taxes charged.  But mere rhetoric cannot supply the basis for the charge of
impropriety of the assessments made.

3. Meralco Securities Corporation vs. Savellano

    GR No. L-36181     October 23, 1982 

 Facts:  On May 22, 1967, the late Juan G. Maniago (substituted in these proceedings by
his wife and children) submitted to petitioner Commissioner of Internal Revenue
confidential denunciation against the Meralco Securities Corporation for tax evasion for
having paid income tax only on 25 % of the dividends it received from the Manila
Electric Co. for the years 1962-1966, thereby allegedly shortchanging the government
of income tax due from 75% of the said dividends.

Petitioner Commissioner of Internal Revenue caused the investigation of the

denunciation after which he found and held that no deficiency corporate income tax
was due from the Meralco Securities Corporation on the dividends it received from the
Manila Electric Co. and accordingly denied Maniago's claim for informer's reward on a
non-existent deficiency.
On August 28, 1970, Maniago filed a petition for mandamus, and subsequently an
amended petition for mandamus, in the Court of First Instance of Manila, docketed
therein as Civil Case No. 80830, against the Commissioner of Internal Revenue and the
Meralco Securities Corporation to compel the Commissioner to impose the alleged
deficiency tax assessment on the Meralco Securities Corporation and to award to him
the corresponding informer's reward under the provisions of R.A. 2338. Respondent
judge granted the said petition and thereafter, denied the motions for reconsideration
filed by all the parties.  

Issues: (1) Whether or not respondent judge has jurisdiction over the subject matter of
the case; (2) Whether or not respondent heirs of Maniago are entitled to informer’s

Held: (1) 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 law transferred to the Court of Tax
Appeals jurisdiction over all cases involving said assessments previously cognizable
by courts of first instance, and even those already pending in said courts. 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 . . .
.In the case of Blaquera vs. Rodriguez, et al, this Court ruled that "the determination of
the correctness or incorrectness of a tax assessment to which the taxpayer is not
agreeable, falls within the jurisdiction of the Court of Tax Appeals and not of the Court
of First Instance, for under the provisions of Section 7 of Republic Act No. 1125, the
Court of Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any
decision of the Collector of Internal Revenue in cases involving disputed assessments
and other matters arising under the National Internal Revenue Code or other law or part
of law administered by the Bureau of Internal Revenue."

(2) Considering then that respondent judge may not order by mandamus the
Commissioner to issue the assessment against Meralco Securities Corporation when
no such assessment has been found to be due, no deficiency taxes may therefore be
assessed and collected against the said corporation. Since no taxes are to be collected,
no informer's reward is due to private respondents as the informer's heirs. Informer's
reward is contingent upon the payment and collection of unpaid or deficiency taxes. An
informer is entitled by way of reward only to a percentage of the taxes actually
assessed and collected. Since no assessment, much less any collection, has been
made in the instant case, respondent judge's writ for the Commissioner to pay
respondents 25% informer's reward is gross error and without factual nor legal basis.

Petitions granted and the questioned decision of respondent judge and order reversed
and set aside.

4. SY PO vs. CTA
    G.R. No. 81446; August 18, 1988

Facts: Po Bien Sing, the sole proprietor of Silver Cup Wine Factory (SCWF),
engaged in the business of manufacture and sale of compounded liquors. On the
basis of a denunciation against SCWF allegedly "for tax evasion amounting to
millions of pesos, Secretary of Finance directed the Finance-BIR--NBI team to

On the basis of the team's report of investigation, the respondent Commissioner

of Internal Revenue assessed Mr. Po Bien Sing deficiency income tax for 1966 to
1970 in the amount of P7,154,685.16  and for deficiency specific tax for January
2,1964 to January 19, 1972 in the amount of P5,595,003.68

Petitioner protested the deficiency assessments. The BIR recommended the

reiteration of the assessments in view of the taxpayer's persistent failure to
present the books of accounts for examination.
Issue: WON the assessments have valid and legal basis.

Held: 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 tax report is incomplete or fraudulent.

The tax assessment by tax examiners are presumed correct and made in good
faith. The taxpayer has the duty to prove otherwise. In the absence of proof of
irregularities in the performance of duties, an assessment duly made by the BIR
examiner and approved by his superior officers will not be disturbed. All
presumptions are in favour of the correctness of tax assessments.


    G.R. No. 119761; August 29, 1996

Facts: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the manufacture

of different brands of cigarettes, registered "Champion," "Hope," and "More" cigarettes.
BIR classified them as foreign brands since they were listed in the World Tobacco
Directory as belonging to foreign companies. However, Fortun changed the names of
'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands
from the foreign brand category.

A 45% Ad Valorem taxes were imposed on these brands. Then Republic Act ("RA") No.
7654 was enacted – 55% for locally manufactured foreign brand while 45% for locally
manufactured brands. 2 days before the effectivity of RA 7654, Revenue Memorandum
Circular No. 37-93 ("RMC 37-93"), was issued by the BIR saying since there is no
showing who the real owner/s are of Champion, Hope and More, it follows that the
same shall be considered locally manufactured foreign brand for purposes of
determining the ad valorem tax  - 55%. BIR sent via telefax a copy of RMC 37-93 to
Fortune Tobacco addressed to no one in particular. Then Fortune Tobacco received, by
ordinary mail, a certified xerox copy of RMC 37-93. CIR assessed Fortune Tobacco for
ad valorem tax deficiency amounting to P9,598,334.00.

Fortune Tobacco filed a petition for review with the CTA. 8 CTA upheld the position of
Fortune. CA affirmed.

Issue: WON it was necessary for BIR to follow the legal requirements when it issued its

Held. YES. CIR may not disregard legal requirements in the exercise of its quasi-
legislative powers which publication, filing, and prior hearing.
When an administrative rule is merely interpretative in nature, its applicability needs
nothing further than its bare issuance for it gives no real consequence more than what
the law itself has already prescribed. BUT when, upon the other hand, the
administrative rule goes beyond merely providing for the means that can facilitate or
render least cumbersome the implementation of the law but substantially increases the
burden of those governed, the agency must accord, at least to those directly affected, a
chance to be heard, before that new issuance is given the force and effect of law.
RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as
amended, but has, in fact and most importantly, been made in order to place "Hope
Luxury," "Premium More" and "Champion" within the classification of locally
manufactured cigarettes bearing foreign brands and to thereby have them covered by
RA 7654 which subjects mentioned brands to 55% the BIR not simply interpreted the
law; verily, it legislated under its quasi-legislative authority. The due observance of the
requirements of notice, of hearing, and of publication should not have been then

6. CIR v. Benguet Corp

    G.R. Nos. 134587 and 134588; January 8, 2005

Facts: Benguet Corporation is a domestic corporation engaged in the exploration,

development and operation of mineral resources, and the sale or marketing thereof to
various entities. It is a VAT registered enterprise.
The transactions in question occurred during the period between 1988 and 1991. Under
Sec. 99 of NIRC as amended by E.O. 273 s. 1987 then in effect, any person who, in the
course of trade or business, sells, barters or exchanges goods, renders services, or
engages in similar transactions and any person who imports goods is liable for output
VAT at rates of either 10% or 0% (zero-rated) depending on the classification of the
transaction under Sec. 100 of the NIRC.

In January of 1988, Benguet applied for and was granted by the BIR zero-rated status
on its sale of gold to Central Bank. On 28 August 1988 VAT Ruling No. 3788-88 was
issued which declared that the sale of gold to Central Bank is considered as export sale
subject to zero-rate pursuant to
Section 100 of the Tax Code, as amended by EO 273.

Relying on its zero-rated status and the above issuances, Benguet sold gold to the
Central Bank during the period of 1 August 1989 to 31 July 1991 and entered into
transactions that resulted in input VAT incurred in relation to the subject sales of gold.
It then filed applications for tax refunds/credits
corresponding to input VAT.

However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23
January 1992 that was issued subsequent to the consummation of the subject sales of
gold to the Central Ban`k which provides that sales of gold to the Central Bank shall not
be considered as export sales and thus, shall be subject to 10% VAT. BIR VAT Ruling
No. 008-92 withdrew, modified, and superseded all inconsistent BIR issuances.
Both petitioner and Benguet agree that the retroactive application of VAT Ruling No.
008-92 is valid only if such application would not be prejudicial to the Benguet pursuant
Sec. 246 of the NIRC.

Issues: (1) WON Benguet’s sale of gold to the Central Bank during the
period when such was classified by BIR issuances as zerorated could be taxed validly
at a 10% rate after the consummation of the transactions involved; (2) WON there was
prejudice to Benguet Corp due to the new BIR VAT Ruling.

Held: (1) NO. At the time when the subject transactions were consummated, the
prevailing BIR regulations relied upon by Benguet ordained that gold sales to the
Central Bank were zero-rated. Benguet should not be faulted for relying on the BIRs
interpretation of the said laws and regulations.

While it is true, as CIR alleges, that government is not estopped from collecting taxes
which remain unpaid on account of the errors or mistakes of its agents and/or officials
and there could be no vested right arising from an erroneous interpretation of law, these
principles must give way to
exceptions based on and in keeping with the interest of justice and fair play. (then the
Court cited the ABS-CBN case).

(2) YES. The adverse effect is that Benguet Corp became the unexpected and unwilling
debtor to the BIR of the amount equivalent to the total VAT cost of its product, a liability
it previously could have recovered from the BIR in a zero-rated scenario or at least
passed on to the Central Bank had it known it would have been taxed at a 10% rate.
Thus, it is clear that Benguet suffered economic prejudice when it consummated sales
of gold to the Central Bank were taken out of the zero-rated category. The change in the
VAT rating of Benguet’s transactions with the Central Bank resulted in the twin loss of
its exemption from payment of output VAT and its opportunity to recover input VAT, and
at the same time subjected it to the 10% VAT sans the option to pass on this cost to the
Central Bank, with the total prejudice in money terms being equivalent to the 10% VAT
levied on its sales of gold to the Central Bank.

Even assuming that the right to recover Benguets excess payment of income tax has
not yet prescribed, this relief would only address Benguet’s overpayment of income tax
but not the other burdens discussed above. Verily, this remedy is not a feasible option
for Benguet because the very reason why it was issued a deficiency tax assessment is
that its input VAT
was not enough to offset its retroactive output VAT. Indeed, the burden of having to go
through an unnecessary and cumbersome refund process is prejudice enough.
7. CIR v Bursmeiters & Wain Scandinavian
    GR 153205; January 22, 2007

Facts: A foreign consortium, parent company of Burmeister, entered into an O&M

contract with NPC. The foreign entity then subcontracted the actual O&M to Burmeister.
NPC paid the foreign consortium a mixture of currencies while the consortium, in turn,
paid Burmeister foreign currency inwardly remitted into the Philippines. BIR did not
want to grant refund since the services are “not destined for consumption abroad” (or
the destination principle).

Issue: Are the receipts of Burmeister entitled to VAT zero-rated status?

Held: PARTIALLY. Respondent is entitled to the refund prayed for BUT ONLY for the
period covered prior to the filing of CIR’s Answer in the CTA.

The claim has no merit since the consortium, which was the recipient of services
rendered by Burmeister, was deemed doing business within the Philippines since its 15-
year O&M with NPC can not be interpreted as an isolated transaction.

In addition, the services referring to ‘processing, manufacturing, repacking’ and

‘services other than those in (1)’ of Sec. 102 both require (i) payment in foreign
currency; (ii) inward remittance; (iii) accounted for by the BSP; AND (iv) that the service
recipient is doing business outside the Philippines. The Court ruled that if this is not the
case, taxpayers can circumvent just by stipulating payment in foreign currency.

The refund was partially allowed since Burmeister secured a ruling from the BIR
allowing zero-rating of its sales to foreign consortium. However, the ruling is only valid
until the time that CIR filed its Answer in the CTA which is deemed revocation of the
previously-issued ruling. The Court said the revocation can not retroact since none of
the instances in Section 246 (bad faith, omission of facts, etc.) are present.


    G.R. No. 136975; March 31, 2005

Facts: Hantex Trading Co is a company organized under the Philippines. It is

engaged in the sale of plastic products, it imports synthetic resin and other
chemicals for the manufacture of its products. For this purpose, it is required to
file an Import Entry and Internal Revenue Declaration (Consumption Entry) with
the Bureau of Customs under Section 1301 of the Tariff and Customs Code.
Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence
Division of the Economic Intelligence and Investigation Bureau (EIIB), received
confidential information that the respondent had imported synthetic resin
amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex
receive a subpoena to present its books of account which it failed to do. The
bureau cannot find any original copies of the products Hentex imported since the
originals were eaten by termites. Thus, the Bureau relied on the certified copies
of the respondent’s Profit and Loss Statement for 1987 and 1988 on file with the
SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by
the informer, as well as excerpts from the entries certified by Tomas and
Danganan. The case was submitted to the CTA which ruled that Hentex have tax
deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled
that the income and sales tax deficiency assessments issued by the petitioner
were unlawful and baseless since the copies of the import entries relied upon in
computing the deficiency tax of the respondent were not duly authenticated by
the public officer charged with their custody, nor verified under oath by the EIIB
and the BIR investigators.

Issue: Whether or not the final assessment of the petitioner against the
respondent for deficiency income tax and sales tax for the latter’s 1987
importation of resins and calcium bicarbonate is based on competent evidence
and the law.

Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended
which provides that the Commissioner of Internal Revenue has the power to
make assessments and prescribe additional requirements for tax administration
and enforcement. Among such powers are those provided in paragraph (b),
which provides that “Failure to submit required returns, statements, reports and
other documents. – When a report required by law as a basis for the assessment
of any 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 shall assess the proper tax on
the best evidence obtainable.” This provision applies when the Commissioner of
Internal Revenue undertakes to perform her administrative duty of assessing the
proper tax against a taxpayer, to make a return in case of a taxpayer’s failure to
file one, or to amend a return already filed in the BIR. The “best evidence”
envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and
accounting records of the taxpayer who is the subject of the assessment process,
the accounting records of other taxpayers engaged in the same line of business,
including their gross profit and net profit sales. Such evidence also includes data,
record, paper, document or any evidence gathered by internal revenue officers
from other taxpayers who had personal transactions or from whom the subject
taxpayer received any income; and record, data, document and information
secured from government offices or agencies, such as the SEC, the Central Bank of
the Philippines, the Bureau of Customs, and the Tariff and Customs Commission.
However, the best evidence obtainable under Section 16 of the 1977 NIRC, as
amended, does not include mere photocopies of records/documents. The
petitioner, in making a preliminary and final tax deficiency assessment against a
taxpayer, cannot anchor the said assessment on mere machine copies of
records/documents. Mere photocopies of the Consumption Entries have no
probative weight if offered as proof of the contents thereof. The reason for this is
that such copies are mere scraps of paper and are of no probative value as basis
for any deficiency income or business taxes against a taxpayer.

Companies exempt from zero-rate tax

9. BPI v CIR
     G.R No. 139786O; ctober 17, 2005

Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp  Tax
(DST). The petitioner filed a protest letter, requesting for reconsideration with BIR
however the latter did not reply. Instead, BIR issued a warrant for distraint/levy against
petitioner BPI. The petitioner did not hear from BIR until September 11, 1997 when then
Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration.
Subsequently, the petitioner filed a petition for review with the CTA, raising the defense
of prescription. The CTA denied the petition and held that the period of prescription had
not yet prescribed nonetheless, it held that the petitioner was not liable for the
deficiency of DST. On appeal, the CA reversed the ruling of CTA on the issue of DST tax
and held that the petitioner was indeed liable for DST.

Issue: Whether or not the right of the respondent to collect from petitioner BPIis barred
by prescription?

Held : Yes, the Court ruled that the period to collect has already prescribed. The BIR has
three years, counted from the date of actual filing of the return or from the last date
prescribed by law for the filing of such return, whichever comes later, to assess a
national internal revenue tax or to begin a court proceeding or the collection thereof
without an assessment. In case of a false or fraudulent return with intent to evade tax
or the failure to file any return at all, the prescriptive period for assessment of the tax
due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. When
the BIR validly issues an assessment, within either the three-year or ten-year period,
whichever is appropriate, then the BIR has another three years after the assessment
within which to collect the national internal revenue tax due thereon by distraint, levy,
and/or court proceeding. The assessment of the tax is deemed made and the three-
year period for collection of the assessed tax begins to run on the date the assessment
notice had been released, mailed or sent by the BIR to the taxpayer.

In their Decisions, both the CTA and the Court of Appeals found that the filing by
petitioner BPI of a protest letter suspended the running of the prescriptive  period for
collecting the assessed DST. This Court, however, takes the opposing view, and, based
on the succeeding discussion, concludes that there is no valid ground for suspending
the running of the prescriptive period for collection of the deficiency DST assessed
against petitioner BPI.

The statute of limitations on assessment and collection of taxes is for the protection of

the taxpayer and, thus, shall be construed liberally in his favor

      GR. No. 155541; January 27, 2004

Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs
were managed by the Philippine Trust Company (PhilTrust). The decedent died on April
3, 1979 but two days after her death, PhilTrust filed her income tax return for 1978 not
indicating that the decedent had died. The BIR conducted an administrative
investigation of the decedent’s tax liability and found a deficiency income tax for the
year 1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by
registered mail a demand letter and assessment notice addressed to the decedent “c/o
PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978 income tax
return. On June 18, 1984, respondent Commissioner of Internal Revenue issued
warrants of distraint and levy to enforce the collection of decedent’s deficiency income
tax liability and serve the same upon her heir, Francisco Gabriel. On November 22,
1984, Commissioner filed a motion to allow his claim with probate court for the
deficiency tax. The Court denied BIR’s claim against the estate on the ground that no
proper notice of the tax assessment was made on the proper party. On appeal, the CA
held that BIR’s service on PhilTrust of the notice of assessment was binding on the
estate as PhilTrust failed in its legal duty to inform the respondent of antecedent’s
death. Consequently, as the estate failed to question the assessment within the
statutory period of thirty days, the assessment became final, executory, and

Issue: (1) Whether or not the CA erred in holding that the service of deficiency tax
assessment on Juliana through PhilTrust was a valid service as to bind the estate; (2)
Whether or not the CA erred in holding that the tax assessment had become final,
executory, and incontestable.

Held: (1) Since the relationship between PhilTrust and the decedent was automatically
severed the moment of the taxpayer’s death, none of the PhilTrust’s acts or omissions
could bind the estate of the taxpayer. Although the administrator of the estate may
have been remiss in his legal obligation to inform respondent of the decedent’s death,
the consequence thereof merely refer to the imposition of certain penal sanction on the
administrator. These do not include the indefinite tolling of the prescriptive period for
making deficiency tax assessment or waiver of the notice requirement for such

(2) The assessment was served not even on an heir or the estate but on a completely
disinterested party. This improper service was clearly not binding on the petitioner. The
most crucial point to be remembered is that PhilTust had absolutely no legal
relationship with the deceased or to her Estate. There was therefore no assessment
served on the estate as to the alleged underpayment of tax. Absent this assessment, no
proceeding could be initiated in court for collection of said tax; therefore, it could not
have become final, executory and incontestable. Respondent’s claim for collection filed
with the court only on November 22, 1984 was barred for having been made beyond the
five-year prescriptive period set by law.

11. CIR v. Tulio

      GR139858; October 25, 2005.

Facts: This involves the collection of percentage taxes for 1986 and 1987. Tulio did not
file tax returns. BIR discovered on September 14 1989. RTC dismissed BIR collection
case on the ground of prescription. It counted 3 years from the return was supposed to
be filed with the BIR instead of 10 yrs from discovery of omission to file return by the
Issue: Whether petitioner’s cause of action for the collection of deficiency percentage
taxes against respondent has prescribed.
The lower court erroneously applied Section 203 of the same Code providing for the
three-year prescriptive period from the filing of the tax return within which internal
revenue taxes shall be assessed. It held that such period should be counted from the
day the return was filed, or from August 15, 1990 up to August 15, 1993. However, as
shown by the records, respondent failed to file a tax return, forcing petitioner to invoke
the powers of his office in tax administration and enforcement. Respondent’s failure to
file his tax returns is thus covered by Section 223 providing for a ten-year prescriptive
period within which a proceeding in court may be filed.
Here, respondent failed to file his tax returns for 1986 and 1987. On September 14,
1989, petitioner found respondent’s omission. Hence, the running of the ten-year
prescriptive period within which to assess and collect the taxes due from respondent
commenced on that date until September 14, 1999. The two final assessment notices
were issued on February 28, 1991, well within the prescriptive period of three (3) years.
When respondent failed to question or protest the deficiency assessments thirty (30)
days therefrom, or until March 30, 1991, the same became final and executory.

12. Oceanic Wireless  v. CIR

       GR NO. 148380, December 9, 2005

Facts: On March 17, 1988, petitioner received from the Bureau of Internal
Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total
amount of P8,644,998.71. Petitioner filed its protest against the tax assessments
and requested a reconsideration or cancellation of the same in a letter to the BIR

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts
Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax
assessments while denying petitioner’s request for reinvestigation. Said letter
likewise requested petitioner to pay within 10 days from receipt thereof,
otherwise the case shall be referred to the Collection Enforcement Division of the
BIR National Office for the issuance of a warrant of distraint and levy without
further notice.

Upon petitioner’s failure to pay the subject tax assessments within the prescribed
period, the Assistant Commissioner for Collection, acting for the Commissioner of
Internal Revenue, issued the corresponding warrants of distraint and/or levy and

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to
contest the issuance of the warrants to enforce the collection of the tax
assessments. The CTA dismissed the petition for lack of jurisdiction.
Petitioner filed a Motion for Reconsideration arguing that the demand letter
cannot be considered as the final decision of the Commissioner of Internal
Revenue on its protest because the same was signed by a mere subordinate and
not by the Commissioner himself.

With the denial of its motion for reconsideration, petitioner consequently filed a
Petition for Review with the Court of Appeals contending that there was no final
decision to speak of because the Commissioner had yet to make a personal
determination as regards the merits of petitioner’s case.

The Court of Appeals denied the petition.

Issue: Whether the demand letter for tax deficiency issued and signed by a
subordinate officer who was acting in behalf of the CIR is deemed final and
executor and subject to an appeal to the CTA.

Held: YES. A demand letter for payment of delinquent taxes may be considered a
decision on a disputed or protested assessment. The determination on whether or
not a demand letter is final is conditioned upon the language used or the tenor of
the letter being sent to the taxpayer. In this case, the letter of demand,
unquestionably constitutes the final action taken by the Bureau of Internal
Revenue on petitioner’s request for reconsideration when it reiterated the tax
deficiency assessments due from petitioner, and requested its payment. Failure to
do so would result in the “issuance of a warrant of distraint and levy to enforce
its collection without further notice.” In addition, the letter contained a notation
indicating that petitioner’s request for reconsideration had been denied for lack
of supporting documents. The demand letter received by petitioner verily
signified a character of finality. Therefore, it was tantamount to a rejection of the
request for reconsideration.

This now brings us to the crux of the matter as to whether said demand letter
indeed attained finality despite the fact that it was issued and signed by the Chief
of the Accounts Receivable and Billing Division instead of the BIR Commissioner.

The general rule is that the Commissioner of Internal Revenue may delegate any
power vested upon him by law to Division Chiefs or to officials of higher rank. He
cannot, however, delegate the four powers granted to him under the National
Internal Revenue Code (NIRC) enumerated in Section .

As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR
Commissioner to delegate the powers vested in him under the pertinent
provisions of the Code to any subordinate official with the rank equivalent to a
division chief or higher, except the following:

(a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;

(c) The power to compromise or abate under Section 204(A) and (B) of this Code,
any tax deficiency: Provided, however, that assessments issued by the Regional
Offices involving basic deficiency taxes of five hundred thousand pesos
(P500,000) or less, and minor criminal violations as may be determined by rules
and regulations to be promulgated by the Secretary of Finance, upon the
recommendation of the Commissioner, discovered by regional and district
officials, may be compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant Regional Director,
heads of the Legal, Assessment and Collection Divisions and the Revenue District
Officer having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments

where articles subject to excise tax are produced or kept.
It is clear from the above provision that the act of issuance of the demand letter
by the Chief of the Accounts Receivable and Billing Division does not fall under
any of the exceptions that have been mentioned as non-delegable.

Thus, the authority to make tax assessments may be delegated to subordinate officers.
Said assessment has the same force and effect.

13. Philam Asset Management, Inc. vs CTA

      G.R.156637 and 162004; December 14, 2005

Facts: Petitioner acts as investment manager of PFI &PBFI. It provides management

&technical services and thus respectively paid for it’s services. PFI & PBFI withhold the
amount of equivalent to 5% creditable tax regulation. On April 3, 1998, filed ITR with a
net loss thus incurred withholding tax. Petitioner filed for refund from BIR but was
unanswered . CTA denied the petition for review. CA held that to request for either a
refund or credit of income tax paid, a corporation must signify it’s intention by marking
the corresponding box on it’s annual corporate adjustment return.

Issue: Whether or not petitioner is entitled to a refund of it’s creditible taxes.

Ruling: Any tax income that is paid in excess of it’s amount due to the government may
be refunded, provided that a taxpayer properly applies for the refund. One can not get a
tax refund and a tax credit at the same time for the same excess to income taxes paid.
Failure to signify one’s intention in Final Assessment Return (FAR) does not mean
outright barring of a valid request for a refund
Requiring that the ITR on the FAR of the succeeding year be presented to the BIR in
requesting a tax refund has no basis in law and jurisprudence. The Tax Code likewise
allows the refund of taxes to taxpayer that claims it in writing within 2 years after
payment of the taxes. Technicalities and legalism should not be misused by the
government to keep money not belonging to it, and thereby enriched itself at the
expense of it’s law-abiding citizens.

14.  Philippine Journalist, Inc. v. CIR

        G.R. No. 162852; December 16, 2004

Facts: In 1995, the Bureau of Internal Revenue (BIR) issued Letter of Authority for two
Revenue Officers to examine petitioner’s books of account and other accounting
records for internal revenue taxes for the period January 1, 1994 to December 31, 1994.
In 1997, petitioner’s Comptroller, executed a "Waiver of the Statute of Limitation Under
the National Internal Revenue Code (NIRC)". The document "waive[d] the running of the
prescriptive period provided by Sections 223 and 224 and other relevant provisions of
the NIRC and consent[ed] to the assessment and collection of taxes which may be
found due after the examination at any time after the lapse of the period of limitations
fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the
completion of the investigation.”
In 1998, Revenue Officer submitted his audit report recommending the issuance of an
assessment and finding that petitioner had deficiency taxes. Subsequently, the
Assessment Division of the BIR issued Pre-Assessment Notices which informed
petitioner of the results of the investigation. Thus, BIR issued Assessment/Demand
stating the deficiency taxes, inclusive of interest and compromise penalty
On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner
Romeo S. Panganiban to the petitioner to pay the assessment within ten (10) days from
receipt of the letter. On November 10, 1999, a Final Notice Before Seizure was issued by
the same deputy commissioner giving the petitioner ten (10) days from receipt to pay.
Petitioner received a copy of the final notice on November 24, 1999. By letters dated
November 26, 1999, petitioner asked to be clarified how the tax liability of
P111,291,214.46 was reached and requested an extension of thirty (30) days from
receipt of the clarification within which to reply.
The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do
not show receipt of Tax Assessment/Demand. Petitioner also contested that the
assessment had no factual and legal basis. On March 28, 2000, a Warrant of Distraint
and/or Levy was received by the petitioner.
Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) which was
amended on May 12, 2000. Petitioner complains: (a) that no assessment or demand
was received from the BIR; (b) that the warrant of distraint and/or levy was without
factual and legal bases as its issuance was premature; (c) that the assessment, having
been made beyond the 3-year prescriptive period, is null and void; (d) that the issuance
of the warrant without being given the opportunity to dispute the same violates its right
to due process; and (e) that the grave prejudice that will be sustained if the warrant is
enforced is enough basis for the issuance of the writ of preliminary injunction.
CTA ruled in favor of PJI. It declared that the deficiency income, value-added and
expanded withholding tax assessments issued by the respondent against the petitioner
on December 9, 1998, in the total amount of P111,291,214.46 for the year 1994
ANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise, it declared that
the Warrant of Distraint and/or Levy No. 33-06-046 NULL and VOID.
On appeal CA ruled that Mere assessment notices which have become final after the
lapse of the thirty (30)-day reglementary period are not appealable. Thus, the CTA
should not have entertained the petition at all. Also, it ruled that there is a valid waiver
thus the running of the prescriptive period is tolled.
Issues: (1) whether or not CTA has jurisdiction over the issues in this case. (2) Whether
or not the Waiver of the Statute of Limitations is valid and binding on the petitioner
Held: (1) No. The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the Commissioner of Internal Revenue on matters relating to assessments
or refunds. The second part of the provision covers other cases that arise out of the
NIRC or related laws administered by the Bureau of Internal Revenue. The wording of
the provision is clear and simple. It gives the CTA the jurisdiction to determine if the
warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of
Statute of Limitations was validly effected.
(2) No. As found by the CTA, the Waiver of Statute of Limitations, signed by petitioner’s
comptroller on September 22, 1997 is not valid and binding because it does not
conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date
between the BIR and petitioner, within which the former may assess and collect
revenue taxes. Thus, petitioner’s waiver became unlimited in time, violating Section
222(b) of the NIRC.
The waiver document is being incomplete and defective, the three-year prescriptive
period was not tolled or extended and continued to run until April 17, 1998.
Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9,
1998 was invalid because it was issued beyond the three (3) year period. In the same
manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on
March 28, 2000 is also null and void for having been issued pursuant to an invalid

15. Rafael Arsenio S. Dizon, v. CTA and CIR

      G.R. No. 140944; April 30, 2008

Facts: Jose P. Fernandez died in November 7, 1987.  Thereafter, a petition for the
probate of his will was filed.  The probate court appointed Atty. Rafael Arsenio P. Dizon
as administrator of the Estate of Jose Fernandez. 

An estate tax return was filed later on which showed ZERO estate tax liability.  BIR
thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97
million as deficiency estate tax.  This was subsequently reduced by CTA to Php 37.42
million.  The CA affirmed the CTA’s ruling, hence, the instant petition.

The petitioner claims that in as much as the valid claims of creditors against the Estate
are in excess of the gross estate, no estate tax was due.  On the other hand,
respondents argue that since the claims of the Estate’s creditors have been condoned,
such claims may no longer be deducted from the gross estate of the decedent.

Issue: Whether the actual claims of creditors may be fully allowed as deductions from
the gross estate of Jose despite the fact that the said claims were reduced or
condoned through compromise agreements entered into by the Estate with its creditors

Held: YES. Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United States,
the Court held that post-death developments are not material in determining the
amount of deduction.  This is because estate tax is a tax imposed on the act of
transferring property by will or intestacy and, because the act on which the tax is levied
occurs at a discrete time, i.e., the instance of death, the net value of the property
transferred should be ascertained, as nearly as possible, as of the that time.  This is the
date-of-death valuation rule.

The Court, in adopting the date-of-death valuation principle, explained that: First.  There
is no law, nor do we discern any legislative intent in our tax laws, which disregards the
date-of-death valuation principle and particularly provides that post-death
developments must be considered in determining the net value of the estate. It bears
emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax statutes being construed strictissimi
juris against the government. Second. Such construction finds relevance and
consistency in our Rules on Special Proceedings wherein the term "claims" required to
be presented against a decedent's estate is generally construed to mean debts or
demands of a pecuniary nature which could have been enforced against the deceased
in his lifetime, or liability contracted by the deceased before his death. Therefore, the
claims existing at the time of death are significant to, and should be made the basis of,
the determination of allowable deductions.

16. Pilipinas Shell Petrolium Corp v. CIR

      G.R. No. 172598; December 21, 2007

Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum
Corporation (PSPC) for alleged deficiency excise tax liabilities of PhP 1,705,028,008.06
for the taxable years 1992 and 1994 to 1997, inclusive of delinquency surcharges and
interest.  As basis for the collection letter, the BIR alleged that PSPC is not a qualified
transferee of the TCCs it acquired from other BOI-registered companies.  These alleged
excise tax deficiencies covered by the collection letter were already paid by PSPC with
TCCs acquired through, and issued and duly authorized by the Center, and duly covered
by Tax Debit Memoranda (TDM) of both the Center and BIR, with the latter also issuing
the corresponding Accept Payment for Excise Taxes (APETs).

PSPC protested the collection letter, but it was denied.  Because of respondent inaction
on a motion for reconsideration PSPC filed a petition for review before the CTA.

In 1999, the CTA ruled that the use by PSPC of the TCCs was legal and valid, and that
respondent’s attempt to collect alleged delinquent taxes and penalties from PSPC
without an assessment constitutes denial of due process.  Respondent elevated CTA
Decision to the Court of Appeals (CA) through a petition for review.

Despite the pendency of this case, PSPC received assessment letter from respondent
for excise tax deficiencies, surcharges, and interest based on the first batch of
cancelled TCCs and TDM covering PSPC’s use of the TCCs.  All these cancelled TDM
and TCCs were also part of the subject matter of the now pending before the CA.

PSPC protested the assessment letter, but the protest was denied by the BIR,
constraining it to file another case before the CTA.  Subsequently, CTA ruled in favor of
PSPC and accordingly cancelled and set aside the assessment issued by the
respondent. Respondent motion for reconsideration of the above decision which was
rejected thus respondent appealed the above decision before the CTA En Banc.

The CTA En Banc ruled in favor of respondent and ordered PSPC to pay the amount of
P570,577,401.61 as deficiency excise tax for the taxable years 1992 and 1994 to 1997,
inclusive of 25% surcharge and 20% interest.
Issue: Whether or not petitioner is liable for the assessment of deficiency excise tax
after the validly issued TCCs were subsequently cancelled for having been issued

Held: No. Petitioner is not liable for the assessment of deficiency excise tax.

In the instant case, with due application, approval, and acceptance of the payment by
PSPC of the subject TCCs for its then outstanding excise tax liabilities in 1992 and
1994 to 1997, the subject TCCs have been canceled as the money value of the tax
credits these represented have been used up.  Therefore, the DOF through the Center
may not now cancel the subject TCCs as these have already been canceled and used
up after their acceptance as payment for PSPC’s excise tax liabilities.  What has been
used up, debited, and canceled cannot anymore be declared to be void, ineffective, and
canceled anew.

Besides, it is indubitable that with the issuance of the corresponding TDM, not only is
the TCC canceled when fully utilized, but the payment is also final subject only to a
post-audit on computational errors.  Under RR 5-2000, a TDM is a certification, duly
issued by the Commissioner or his duly authorized representative, reduced in a BIR
Accountable Form in accordance with the prescribed formalities, acknowledging that
the taxpayer named therein has duly paid his internal revenue tax liability in the form of
and through the use of a Tax Credit Certificate, duly issued and existing in accordance
with the provisions of these Regulations.  The Tax Debit Memo shall serve as the
official receipt from the BIR evidencing a taxpayer’s payment or satisfaction of his tax
obligation.  The amount shown therein shall be charged against and deducted from the
credit balance of the aforesaid Tax Credit Certificate.

Thus, with the due issuance of TDM by the Center and TDM by the BIR, the payments
made by PSPC with the use of the subject TCCs have been effected and consummated
as the TDMs serve as the official receipts evidencing PSPC’s payment or satisfaction of
its tax obligation.  Moreover, the BIR not only issued the corresponding TDM, but it also
issued ATAPETs which doubly show the payment of the subject excise taxes of PSPC.

Based on the above discussion, we hold that respondent erroneously and without
factual and legal basis levied the assessment.  Consequently, the CTA En Banc erred in
sustaining respondent’s assessment.

17.  CIR v. Primetown Property Group

       GR 161155; August 28, 2007

Facts: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for
the refund or credit of income tax respondent’s paid in 1997.

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. 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.

On appeal, the 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, 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.

Issue:      Whether or not the counting of the 2-year prescriptive period for filing claim of
refund is governed by the Civil Code.

Held: Counting of 2-year period for filing claim for refund is no longer in accordance
with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of

As between the Civil Code, which provides that a year is equivalent to 365 days, and the
Administrative Code of 1987, which states that a year is composed of 12 calendar
months, it is the latter that must prevail being the more recent law, following the legal
maxim, Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR
filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14,
2000.  The procedure is 1st month -Apr 15, 1998 to May 14, 1998 ….  24th month -  Mar
15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer
controlling. The 2-year period should start to run from filing of the final adjusted return.
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the
last day of the 24th calendar month from the day respondent filed its final adjusted
return. Hence, it was filed within the reglementary period

18. CIR vs. Reyes and Reyes vs. CIR

     GR Nos. 159694 & 163581

Facts: Decedent Tancinco left a 1,292 square-meter residential lot and an old house
thereon. The heirs of the decedent  received a final estate tax assessment notice and a
demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of
surcharge and interest. The CIR issued a preliminary collection letter to Reyes, followed
by a Final Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was
served upon the estate. Reyes initially protested the notice of levy but then the heirs
proposed a compromise settlement of P1,000,000.00. The CIR rejected Reyes’s offer,
pointing out that since the estate tax is a charge on the estate and not on the heirs, the
latter’s financial incapacity is immaterial as, in fact, the gross value of the estate
amounting to P32,420,360.00 is more than sufficient to settle the tax liability. As the
estate failed to pay its tax liability within the deadline, BIR notified Reyes that the
subject property would be sold at public auction on August 8, 2000. Reyes filed a
protest with the BIR Appellate Division. Assailing the scheduled auction sale, she
asserted that the assessment, letter of demand, and the whole tax proceedings against
the estate are void ab initio. She offered to file the corresponding estate tax return and
pay the correct amount of tax without surcharge or interest.

Issue: WON the assessment in this case can be used as a basis for the perfection of a
tax compromise.

Held: NO. The 2nd paragraph of Sec. 228 of NIRC is clear and mandatory insofar as
taxpayers shall be informed in writing of the law and the facts on which the
assessment is made, otherwise the assessment shall be void. RA 8424 has already
amended the provisions of Sec. 229 of NIRC on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998
of informing the taxpayer of not only the law, but also of the facts on which an
assessment would be made, otherwise, the assessment itself would be invalid. Being
invalid, the assessment canot be in turn be used as a basis for the perfection of a tax

Hence, it is premature to declare the compromise on the tax liability of the estate
perfected and consummated considering that the tax assessment is void. While
administrative agencies, like the BIR, were not bound by procedural requirements, they
were still required by law and equity to observe substantive due process. The reason
behind this requirement, said the CA, was to ensure that taxpayers would be duly
apprised of -- and could effectively protest -- the basis of tax assessments against
them.7 Since the assessment and the demand were void, the proceedings emanating
from them were likewise void, and any order emanating from them could never attain

20. CIR  vs. First Express Pawnshop Company, Inc.

G.R. Nos. 172045-46; June 16 2009

Facts: CIR issued assessment notices against Respondent for deficiency income tax,
VAT and documentary stamp tax on deposit on subscription and on pawn tickets.
Respondent filed its written protest on the assessments. When CIR did not act on the
protest during the 180-day period, respondent filed a petition before the CTA.
Issue: Has Respondent’s right to dispute the assessment in the CTA prescribed?

Held: NO. The assessment against Respondent has not become final and
unappealable. It cannot be said that respondent failed to submit relevant supporting
documents that would render the assessment final because when respondent
submitted its protest, respondent attached all the documents it felt were necessary to
support its claim. Further, CIR cannot insist on the submission of proof of DST payment
because such document does not exist as respondent claims that it is not liable to pay,
and has not paid, the DST on the deposit on subscription.
The term "relevant supporting documents" are those documents necessary to support
the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR
can only inform the taxpayer to submit additional documents and cannot demand what
type of supporting documents should be submitted. Otherwise, a taxpayer will be at the
mercy of the BIR, which may require the production of documents that a taxpayer
cannot submit. Since the taxpayer is deemed to have submitted all supporting
documents at the time of filing of its protest, the 180-day period likewise started to run
on that same date.

21. CIR vs. Enron Subic Power Corp

       GR No. 166387;  January  19, 2009

Facts: The BIR assessed Enron which countered by filing a Petition for Review with the
CTA stating that the assessment disregarded the provisions of the Tax Code and of RR
No. 12-99, when the assessment failed to provide the legal and factual bases of the
assessment. The CTA and CA ruled that the assessment notice must not only refer to
the supporting revenue laws or regulations for the assessment but must also justify
their applicability to the factual milieu of the assessment.
Issue: Is the disputed assessment valid?
Held: NO. The assessment is not valid. Although the revenue examiners discussed their
findings with Respondent’s representative during the pre-assessment stage, the same,
together with the Preliminary Five-Day Letter and Petitioner’s Annex G, were not
sufficient to comply with the procedural requirement of due process. The Tax Code
provides that a taxpayer shall be informed (and not merely “notified” as was the
requirement before) in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void. The use of the word “shall” indicates
the mandatory nature of the requirement.

22. TFS Inc. v. CIR

      G.R. No. 166829; April 19, 2010

Facts: The CTA rendered a Decision upholding the assessment issued against
petitioner in the amount of P11,905,696.32, representing deficiency VAT for the year
1998, inclusive of 25% surcharge and 20% deficiency interest, plus 20% delinquency
interest from February 25, 2002 until full payment, pursuant to Sections 248 and 249(B)
of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled that pawnshops
are subject to VAT under Section 108(A) of the NIRC as they are engaged in the sale of
services for a fee, remuneration or consideration.

Petitioner filed before the Court of Appeals a Petition for Review but it was dismissed
by the CA for lack of jurisdiction in view of the enactment of Republic Act No. 9282 (RA

Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The
petition, however, was dismissed for having been filed out of time. Petitioner filed a
Motion for Reconsideration but it was denied.
Issues: (1) Whether the Honorable court of Tax Appeal en banc should have given due
course to the petition for review and not strictly applied the technical rules of procedure
to the detriment of justice; (2) Whether or not petitioner is subject to the 10% VAT.

Held: (1) The petition is meritorious. Jurisdiction to review decisions or resolutions

issued by the Divisions of the CTA is no longer with the CA but with the CTA En Banc.
This rule is embodied in Section 11 of RA 9282.
In the instant case, we are constrained to disregard procedural rules because we
cannot in conscience allow the government to collect deficiency VAT from petitioner
considering that the government has no right at all to collect or to receive the same.
Besides, dismissing this case on a mere technicality would lead to the unjust
enrichment of the government at the expense of petitioner, which we cannot permit.
Technicalities should never be used as a shield to perpetrate or commit an injustice.

(2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the
amount of P11,905,696.32 for taxable year 1998 on the ground that pawnshops are not
included in the coverage of VAT.

We agree.  x x x Since petitioner is a non-bank financial intermediary, it is subject to 10%

VAT for the tax years 1996 to 2002; however, with the levy, assessment and collection
of VAT from non-bank financial intermediaries being specifically deferred by law, then
petitioner is not liable for VAT during these tax years. But with the full implementation
of the VAT system on non-bank financial intermediaries starting January 1, 2003,
petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present,
by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to
percentage tax on gross receipts from 0% to 5%, as the case may be.

Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently,
the VAT deficiency assessment issued by the BIR against petitioner has no legal basis
and must therefore be cancelled. In the same vein, the imposition of surcharge and
interest must be deleted.

Posted by lem Onitsuaf at 9:23 PM

1 comment:

Unknown September 25, 2015 at 3:08 AM

hello, hope you can post more tax digested cases. Thanks

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