2014 cta jurisdiction & nirc remedies (2)

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2014 LECTURE A. COURT OF TAX APPEALS (CTA) 1. Laws and Implementing rules 2. Special and Limited Jurisdiction 3. CTA has no power or authority to deviate from the ruling of the Supreme Court B. CTA’S JURISDICTION 1. CTA DIVISION 2. CTA EN BANC 3. PERIOD TO APPEAL TO CTA C. GENERAL PRINCIPLES ON TAX REMEDIES UNDER NIRC PRESCRIPTIVE PERIODS 1. ASSESSMENT 2. REFUND 3. CRIMINAL OFFENSES D. REMEDIES OF THE GOVERNMENT E. REMEDIES OF THE TAXPAYER 1. ADMINISTRATIVE PROTEST 2. CLAIM FOR REFUND F. OTHER RECENT SIGNIFICANT CASES A. COURT OF TAX APPEALS (CTA) 1. LAWS AND IMPLEMENTING RULES a. Republic Act No. (RA) 1125 - “AN ACT CREATING THE COURT OF TAX APPEALS” KEY ELEMENTS: CREATION SPECIAL AND LIMITED JURISDICTION EFFECTIVE: JUNE 16, 1954 b. RA 9282 – “AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT NO. 1125, AS AMENDED

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2014 LECTURE

A. COURT OF TAX APPEALS (CTA)

1. Laws and Implementing rules2. Special and Limited Jurisdiction3. CTA has no power or authority to deviate from the

ruling of the Supreme Court

B. CTA’S JURISDICTION

1. CTA DIVISION

2. CTA EN BANC

3. PERIOD TO APPEAL TO CTA

C. GENERAL PRINCIPLES ON TAX REMEDIES UNDER NIRC

PRESCRIPTIVE PERIODS

1. ASSESSMENT

2. REFUND

3. CRIMINAL OFFENSES

D. REMEDIES OF THE GOVERNMENT

E. REMEDIES OF THE TAXPAYER

1. ADMINISTRATIVE PROTEST

2. CLAIM FOR REFUND

F. OTHER RECENT SIGNIFICANT CASES

A. COURT OF TAX APPEALS (CTA)

1. LAWS AND IMPLEMENTING RULESa. Republic Act No. (RA) 1125 - “AN ACT CREATING THE

COURT OF TAX APPEALS”

KEY ELEMENTS:

CREATIONSPECIAL AND LIMITED JURISDICTION

EFFECTIVE: JUNE 16, 1954b. RA 9282 – “AN ACT EXPANDING THE JURISDICTION OF

THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT NO. 1125, AS AMENDED OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES.”

KEY ELEMENTS:

EXPANDED JURISDICTIONSAME RANK AS COURT OF APPEALS (CA)ENLARGEMENT OF MEMBERSHIP CREATION OF CTA EN BANC

AMENDS RA 1125 “An Act Creating the Court of Tax Appeals”

EFFECTIVE: APRIL 23, 2004 c. RA 9503 - “AN ACT ENLARGING THE ORGANIZATIONAL STRUCTURE OF THE COURT OF TAX APPEALS, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES.”

KEY ELEMENTS:ENLARGEMENT OF MEMBERSHIPCREATION OF THIRD DIVISION

EFFECTIVE: JULY 5, 2008.

IMPLEMENTING RULES – The “Revised Rules of the Court of Tax Appeals” (RRCTA) [A.M. No. 05-11-07-SC].

2. Special and Limited Jurisdiction

As a specialized court dedicated exclusively to the study and resolution of tax issues, the CTA has developed an expertise on the subject of taxation. The Court cannot be compelled to set aside its decisions, unless there is a finding that the questioned decision is not supported by substantial evidence or there is a showing of abuse or improvident exercise of authority. Therefore, its findings are accorded the highest respect and are generally conclusive upon this court, in the absence of grave abuse of discretion or palpable error. GULF AIR COMPANY, PHILIPPINE BRANCH (GF) vs.

COMMISSIONER OF INTERNAL REVENUE G.R. No. 182045. September 19, 2012.

The CA and the CTA are now of the same level pursuant to RA 9282. Decisions of the CA are thus no longer superior to nor reversive of those of the CTA. xxx all rulings of this Court on questions of law are conclusive and binding on all courts including the CA. All courts must take their bearings from the decisions of this Court. Systra Philippines, Incorporated v. CIR, GR 176290, Res. Sept. 21, 2007, 533 SCRA 776.

CTA, as a court of record, is required to conduct a formal trial (trial de novo) to prove every minute aspect of the claim citing CIR v. Manila Mining Corporation, G.R. No. 153204, August 31, 2005, 468 SCRA 571, 588-589. Kepco Phil. Corp. vs. CIR, GR 179356, December 14, 2009.

3. CTA has no power nor authority to deviate from the ruling of the Supreme Court; Dispositive portion prevails over body

Facts: In the consolidated refund cases, the dispositive portion of a Supreme Court Decision originally consisting of three CTA cases docketed as CTA 6365, 6383 & 6612, only the CA Case 80675 (covering CTA 6365 & 6383) was mentioned without reference to CA 83165 (CTA 6612). After CTA issued a writ of execution covering CTA cases 6365 & 6383, Fortune Tobacco Corporation filed a motion for the issuance of additional writ of execution for CTA case 6612 which was denied by both CTA Division and en banc.

Ruling: The dispositive portion of the SC decision was corrected to reflect the omitted case. CTA cannot be faulted for denying FTC’s Motion for Additional Writ of Execution

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filed in CTA Case Nos. 6365, 6383 and 6612 “for it has no power nor authority to deviate from the wording of the dispositive portion of Our July 21, 2008 Decision in G.R. Nos. 167274-75. To reiterate, the CTA simply followed the all too familiar doctrine that “when there is a conflict between the dispositive portion of the decision and the body thereof, the dispositive portion controls irrespective of what appears in the body of the decision.” Veering away from the fallo might even be viewed as irregular and may give rise to a charge of breach of the Code of Judicial Conduct.” CIR v. Fortune Tobacco Corporation, GR 167274-75 & 192576, Sept. 11, 2013.

B. CTA’S JURISDICTION ON CASES INVOLVING NIRC

1. CTA DIVISION

(a) EXCLUSIVE APPELLATE JURISDICTION to review by appeal:

(1) Decisions of the Commissioner of Internal Revenue (CIR) in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code (NIRC) or other laws administered by the Bureau of Internal Revenue (BIR).

Exclusive & Original power to interpret the provisions of the NIRC & other tax laws is vested with the CIR, subject to review by Sec. of Finance. Sec. 4, NIRC. CTA’s jurisdiction to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule of regulation, which is vested in the regular courts. British American Tobacco vs. Jose Isidro Camacho, et al, G.R. No. 163583, Aug. 20, 2008.

CIR’s denial of taxpayer’s entitlement to amnesty program is a decision appealable to the CTA under “decisions on other matters arising from other laws administered by the BIR”, in this case it is RA 9480, the Tax Amnesty Law. Philippine Aluminum Wheels, Inc. vs. CIR, CTA 7817, Nov. 12, 2012.

Issue on prescription of the BIR’s right to collect taxes fall under “other matters” over which the CTA has appellate jurisdiction. CIR vs. Hambrecht & Quist, G.R. 165229, Nov. 17, 2010.

FINAL DECISION APPEALABLE TO CTA

Final Decision on Disputed Assessment (FDDA) issued by Deputy Commissioner, a duly authorized representative of CIR, may still be elevated to the CIR within 30 days from receipt and said FDDA shall not attain finality. [Sec. 3.1.5, RR 12-99] College Assurance Plan Phils., Inc., represented by its Vice-President for Accounting Services, Mr. Alfeo S. Pelayo v. CIR, CTA 7190, Aug. 16, 2013.

A letter issued by Revenue District Officer which is still subject to approval of CIR is not a final decision appealable to CTA. Brixton Investment Corporation v. CIR, CTA Case 8379, Aug. 12, 2013.

A demand letter for payment of delinquent taxes is the Final Decision on disputed assessment appealable to CTA. [citing Oceanic Wireless Network, Inc. v. CIR, et al., GR 148380, Dec. 9, 2005, 477 SCRA 205] Cagayan Corn Products Corporation v. CIR, CTA Case 8491, July 8, 2013.

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(2) INACTION by the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the Bureau of Internal Revenue, where the NIRC provides a specific period for action.

[OPTIONAL NOT MANDATORY in the case of disputed assessments but MANDATORY in the case of claims for refund. Sections 228 & 229, NIRC; Section 3(a)(2), Rule 4, RRCTA; Lascona vs. CIR, G.R. No. 171251, March 5, 2012 reversed CA in CA-G.R. SP No. 58061, Oct. 25, 2005 & reinstated the Decision and Res. of CTA in Case No. 5777, Jan. 4, 2000.]

CTA’s JURISDICTION; TAXPAYER MAY AWAIT THE FINAL DECISION OF THE CIR EVEN AFTER THE LAPSE OF THE 180-DAY PERIOD UNDER SEC 228 OF THE NIRC

On March 27, 1998, the CIR issued an assessment against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. On April 20, 1998, Lascona filed a letter protest which was denied by BIR Regional Director, RR No. 8, Makati City, in his Letter dated March 3, 1999. The SC held that the disputed assessment did not become final and executory when Lascona decided to await the final decision of the CIR. In case of CIR’s inaction on the protested assessment, the taxpayer may (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of the decision citing RCBC vs. CIR, G.R. No. 168498, April 24, 2007 and Section 3 A (2), Rule 4 of the Revised Rules of the CTA.

These options are mutually exclusive and resort to one bars the application of the other. Lascona Land Co., Inc. vs. CIR, G.R. No. 171251, March 5, 2012.

(3) Decisions, orders or resolutions of the Regional Trial Courts (RTCs) in LOCAL TAX CASES originally decided or resolved by them in the exercise of their original jurisdiction.

CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax case. The City of Manila, represented by Mayor Jose L. Atienza, Jr. and Ms. Liberty M. Toledo, in her capacity as the City Treasurer of Manila vs. Hon Caridad H. Grecia-Cuerdo, et al., GR 175723, Feb. 4, 2014.

(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. [Rule 4, Section 3(a)(4), RRCTA; Secs. 2313 & 2402, TCCP; R.V. Marzan Freight, Inc. v. CA, G.R. No. 128064, March 4, 2004, abandonment; Nestle Philippines, Inc. v. CA, G.R. No. 134114, July 6, 2001, exception to rule that appeal must be from the decision of the Commissioner of Customs; El Greco Manning and Management Corp. v. CIR, GR 177188, Dec. 4, 2008.]

(5) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs, which are adverse to the Government under Section 2315 of the Tariff and Customs Code of the Philippines (TCCP). [Rule 4, Section 3(a)(5), RRCTA; mere clarification.]

(6) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture, in the case of agricultural product, commodity or article, involving dumping and countervailing

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duties under Sections 301 and 302, respectively, of the TCC, and safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties. [Rule 4, Section 3(a)(6), RRCTA; Southern Cross Cement Corp. v. The Phil. Cement Manufacturers Corp., G.R. No. 158540, July 8, 2004, 2nd Div. & en banc Resolution, August 3, 2005]

(b) JURISDICTION OVER TAX COLLECTION CASES:

(1) Exclusive original jurisdiction in TAX COLLECTION cases involving final and executory assessments for taxes, fees, charges and penalties, where the principal amount of taxes and fees, exclusive of charges and penalties claimed is One million pesos (P1,000,000.00) or more. Principal less than P1,000,000 or no specified amount = regular courts.

(2) Exclusive appellate jurisdiction over appeals from the judgments, resolutions or orders of the RTCs in TAX COLLECTION cases originally decided by them, in their respective territorial jurisdiction.

(c) CRIMINAL JURISDICTION:

(1) Exclusive original jurisdiction over all CRIMINAL OFFENSES arising from violations of the NIRC or TCCP and other laws administered by the BIR or the Bureau of Customs, where the principal amount of taxes and fees, exclusive of charges and penalties claimed is One million pesos (P1,000,000.00) or more.

Criminal action includes civil action for recovery of taxes.

Principal less than P1,000,000 or no specified amount = regular courts [People v. Tan, G.R. No. 144707, Resolution Dec. 1, 2004]

(2) Exclusive appellate jurisdiction in CRIMINAL OFFENSES over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by them, in their respective territorial jurisdiction.

2. CTA EN BANC

The Court en banc shall exercise exclusive appellate jurisdiction over:

(a) CTA DIVISION [Rule 4, Section 2(a), RRCTA]

Decisions or resolutions on Motions for Reconsideration or New Trial of a Division of the Court.

Note: Only the resolutions on Motions for Reconsideration or New Trial may be directly appealed to CTA en banc. Section 18, RA 1125, as amended by RA 9282.

(b) CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA) [Rule 4, Section 2(e), RRCTA]

Decisions or rulings of the CBAA in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals.

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(c) LOCAL TAX CASES - RTC (appellate) [Rule 4, Section 2(b), RRCTA]

Decisions, orders or resolutions of the RTCs over LOCAL TAX CASES originally decided or resolved by them in the exercise of their appellate jurisdiction.

(d) TAX COLLECTION CASES - RTC (appellate jurisdiction) [Rule 4, Section 2(c), RRCTA]

In TAX COLLECTION cases involving final and executory assessments for taxes, fees, charges and penalties, judgments, resolutions or orders of the RTCs in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Courts in their respective jurisdiction.

(e) CRIMINAL CASES - CTA DIVISION (original & appellate jurisdiction) [Rule 4, Section 2(f) & (g), RRCTA]

In cases involving CRIMINAL OFFENSES arising from violations of the NIRC or TCCP and other laws administered by the BIR or the Bureau of Customs, decisions, resolutions or orders on motion for reconsideration or new trial of the CTA in Division in the exercise of original or appellate jurisdiction

(f) CRIMINAL CASES - RTC (appellate) [Rule 4, Section 2(h), RRCTA]

In cases involving CRIMINAL OFFENSES arising from violations of the NIRC or TCCP and other laws administered by the BIR or the Bureau of Customs, judgments, resolutions or

orders of the RTCs in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Courts in their respective jurisdiction.

E. APPEAL 1. PERIOD OF APPEAL TO CTA -

(a) DIVISION -

In civil cases, 30 days from receipt of decision or ruling or after the expiration of period fixed by law for action. (Sec. 11, RA 1125, as amended by Sec. 9, RA 9282; Rule 8, Sec. 3, RRCTA; Sec. 228, NIRC).

In case of claims for refund 1. Under Section 229, the appeal must also be filed within 2

years from payment of tax. 2. Under Section 112, the appeal is within 30 days from

receipt of decision or ruling or after the expiration of the 120-day.

In criminal cases, 15 days from receipt of decision or final order appealed from. (Rule 9, Sec. 9, RRCTA)

(b) EN BANC –

15 days from receipt of decision or resolution of CTA in Division on motion for reconsideration or new trial. (Rule 8, Sec. 1 & Sec. 4 (b), RRCTA; Rule 43, Sec. 4, Revised Rules of Court)

30 days from receipt of decision of CBAA, RTC (Sec. 11, RA 1125, am. by Sec. 9, RA 9282)

“A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a

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petition for review with the CTA en banc.” (Sec. 18, RA 1125, as amended by Sec. 11, RA 9282)

REQUIREMENTS ON APPEAL MUST BE STRICTLY FOLLOWED

PNB filed its petition with the CTA en banc 4 days beyond the extended period granted it to file such petition; without attaching to the petition the duplicate original or certified true copy of the CTA Division’s decision and resolution as well as an affidavit of service. The petition was dismissed for failure to observe three procedural rules under the Rules of the CTA and Rules of Court. “A pleading filed by ordinary mail or by private messengerial service xxx is deemed filed on the day it is actually received by the court, and not on the day it was mailed or delivered to the messengerial service.” Attaching duplicate originals or certified true copies of the assailed decision to a petition is mandatory as non-observance of the rule is a ground for the dismissal of the petition. “Although the failure to attach the required affidavit of service is not fatal if the registry receipt attached to the petition clearly shows service to the other party, it must be remembered that this was not the only rule of procedure PNB failed to satisfy. “ PNB vs. CIR, G.R. No. 172458, Dec. 14, 2011.

(c) Filing of Motion for Reconsideration or New Trial-

15 days from the date of receipt of notice of the decision, resolution or order of the Court in question. (Sec. 1, Rule 15, RRCTA)

15-day period to file a motion for reconsideration of the decision of the Court in Division is mandatory and non-extendible. Petitioner’s Motion for Partial Reconsideration was filed one day late. First Sumiden Realty, Inc. vs. CIR, CTA 8151, Res. Dec. 21, 2012.

15-day period for filing MR is mandatory and jurisdictional. It had 15 days or until December 11, 2010 to file its MR, however, its MR was only filed on December 22, 2010. Luzon Hydro Corporation vs. CIR, CTA EB No. 722, Jan. 6, 2012 & Res. May 7, 2012.

(d) In case of reversal of Decision of CTA Division(Sec. 2, RA 1125, am. By RA 9282 & further amended by Sec.2, RA 9503)

The affirmative votes of 5 members of the Court en banc shall be necessary to reverse a decision of a Division. Applying the Aichi case, the Court En Banc reversed the decision of CTA Division with 4-1-2 votes (2 others on leave). 4 voted on prematurity of judicial claim, 1 voted to deny the judicial petition for failure to present original VAT returns & 2 voted that prematurity is not jurisdictional. CIR vs. Takasago Philippines, Inc., CTA EB 835, Oct. 15, 2012, & Res. Feb. 14, 2013.

2. MODE OF APPEAL TO CTA -

Petition for Review under Rule 42 for appeal to CTA in Division and under Rule 43 of the Revised Rules of Court for appeal to CTA en banc. However, in criminal cases, the general rule applicable in regular courts in matters of appeal and prosecution shall apply (Sec. 11, RA 1125, amended by Sec. 9, RA 9282). Rule 122 and Rule 124 of the Revised Rules of Court apply. In tax collection cases, Rules 8 and 41 of the Revised Rules of Court may apply.

3. APPEAL TO SUPREME COURT - Only judgments, final orders or resolutions of CTA en banc are appealable by a verified petition for review on certiorari pursuant to Rule 45 of the Rules of Court, as amended. (Sec. 19, RA 1125, amended by Sec. 12, RA 9282)

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C. GENERAL PRINCIPLES ON REMEDIES

1. General rule on the prescriptive period for assessment.

Section 203, NIRC

SECTION 203. Period of Limitation Upon Assessment and Collection. — Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.

Exception to the general rule

SECTION 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. —

(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

(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.

(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five (5) years following the assessment of the tax.

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (5)-year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon.

(e) Provided, however, That nothing in the immediately preceding Section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax return filed in accordance with the provisions of any tax amnesty law or decree.

2. Construction of law on prescription. Prescription, being a remedial measure, should be liberally construed in order to afford taxpayers such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed. CIR vs. B.F. Goodrich Phils., Inc. & CA, G.R. 104171 Feb. 24, 1999.

Rationale : The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security

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against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. RP vs. Ablaza, L-14519, July 26, 1960.

3. What is an Assessment?

An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed. It also signals the time when penalties and interests begin to accrue against the taxpayer. A definite period or a date certain for the payment of tax liabilities is indispensable in an assessment. FAN was declared invalid. Fitness By Design Inc. vs. CIR, CTA 7160, July 10, 2012; Adamson vs. CA, G.R. 120935 & 124557, May 21, 2009; Estate of the Late J.D. Vda. De Gabriel vs. CIR, G.R. 155541, Jan. 27, 2004. CIR vs. Pascor Realty and Development Corporation, et al., G.R. 128315, June 29, 1999; Ungab vs. Cusi, G.R. L-41919-24, May 30, 1980.

A written communication containing a computation by a revenue officer of the tax liability of a taxpayer and giving him an opportunity to contest or disprove the BIR examiner's findings is NOT an assessment since it is yet indefinite. CIR Letter recommending criminal prosecution is NOT an assessment. Adamson vs. CA, supra.

The formality of a control number in the assessment notice is not a requirement for its validity but rather the contents thereof which should inform the taxpayer of the declaration of deficiency tax against said taxpayer. Commissioner of Internal Revenue vs. Hon. Raul M. Gonzalez, et al, G.R. No. 177279, October 13, 2010.

4. No injuction to restrain tax collection

Section 218, NIRC

SECTION 218. Injunction not Available to Restrain Collection of Tax. — No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.

ExceptionSection 11, RA 1125 as amended by RA 9282

xxx Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.

5. The assessment of the tax is deemed made on the date the assessment notice had been released, mailed or sent to the taxpayer. BPI vs. CIR, G.R. 174942, March 7, 2008. Receipt thereof by the taxpayer within the prescriptive period is not necessary. Barcelon, Roxas Securities, Inc. vs. CIR, G.R. 157064, Aug. 7, 2006; CIR vs. Philippine Global Communications, Inc., G.R. 167146, Oct. 31, 2006.

6. Disputable presumption of receipt of mail.

Where there is denial of receipt of PAN & FAN, burden of proof of receipt is shifted to CIR. Even granting PAN and FAN were sent on the dates issued, the assessments were issued beyond the 3-year prescriptive period. Waivers were mere photocopies while the original waiver attached to BIR Records was not authenticated by competent witness and not formally offered. La Flor Dela Isabela, Inc. vs. CIR, CTA 8132, Sept. 25, 2012 citing Barcelon, Roxas Securities, Inc. vs. CIR, G.R. 157064, Aug. 7, 2006.

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7. Waiver of prescription.

Defective waiver does not extend the prescriptive period to assess. Authority to sign waiver should be in writing and duly notarized; waiver must indicate the date of acceptance by the authorized representative of the BIR; 1st and 3rd waivers were received on the same day, May 23, 2005. 4th and 5th waivers were received on the same day, May 13, 2005. Next Mobile, Inc. (formerly Nextel Communications Phils., Inc.) vs. CIR, CTA 7965, Dec. 11, 2012; Belle Corp. vs. CIR, CTA 8175, Sept. 18, 2012, affirmed in Res. Nov. 19, 2012; CIR vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010; CIR vs. FMF Devt. Corp., G.R. 167765, June 30, 2008

Failure to indicate the kind and amount of tax involved in the Waiver of the Statute of Limitations rendered it defective. La Flor dela Isabela, Inc. vs. CIR, CTA 8154, Aug. 3, 2012, affirmed Res. Oct. 5, 2012.

The requirement to furnish the taxpayer with a copy of the accepted waiver is to give notice not only of the existence of the document but of the acceptance by the BIR and perfection of the agreement. Philippine Journalists, Inc. vs. CIR, G.R.162852, Dec. 16, 2004.

8. Request for reinvestigation vis a vis request for reconsideration

Request for reconsideration filed by petitioner cannot suspend the statute of limitation. The prescriptive period to collect is interrupted when taxpayer requests for reinvestigation of the assessment and the same is granted by the CIR. Burden of proof that the request has been granted is on the CIR. Bravo Alabang, Inc. vs. CIR, CTA 8199, Nov. 29, 2012; BPI vs. CIR, G.R. 174942, March 7, 2008.

9. Prescriptive Periods for Refund

For erroneously or illegally collected taxes.

SECTION 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

For unutilized input VAT arising from zero-rates sales.

(A) Zero-Rated or Effectively Zero-Rated Sales. — Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provide, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2),

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the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales.

(B) Cancellation of VAT Registration. — A person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes.

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.

(D) Manner of Giving Refund. — Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being countersigned by the Chairman, Commission on Audit, the provisions of the Administrative Code of 1987 to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the Commission on Audit."

10. Prescriptive periods for unutilized input VAT arising from zero-rated sales.

Summary of Rules on Prescriptive Periods Involving VAT (1) An administrative claim must be filed with the CIR within

two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made.

(2) CIR has 120 days from the date of submission of complete documents to decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part of the two-year period. If the 120-day period expires without any decision from the CIR, then the administrative claim may be considered to be denied by inaction.

(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR's decision denying the administrative claim or from the expiration of the 120-day period without any action from the CIR.

(4) Exception to the mandatory and jurisdictional 120+30 day periods. All taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010.

120+30 day periods are mandatory and jurisdictional.

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“It is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The waiting period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order No. 273, which took effect on 1 January 1988. The waiting period was extended to 120 days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in our statute books for more than fifteen (15) years before San Roque filed its judicial claim.”

“Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer's petition. Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.”

BIR Ruling No. DA-489-03, a general interpretative rule, was an erroneous interpretation of law but was given effect by equitable estoppel

“BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under Section 246 of the Tax Code. xxx

However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the 120-day period was mandatory and jurisdictional, which is the correct interpretation of the law; third, prior to its issuance, no taxpayer can claim that it was misled by the BIR into filing a judicial claim

prematurely; and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly construed against the taxpayer.”

Excess input VAT is not “excessively” collected tax under Section 229

“In a claim for refund or credit of "excess" input VAT under Section 110 (B) and Section 112 (A), the input VAT is not "excessively" collected as understood under Section 229. At the time of payment of the input VAT the amount paid is the correct and proper amount.”

CTA decisions do not constitute precedents

“There is also the claim that there are numerous CTA decisions allegedly supporting the argument that the filing dates of the administrative and judicial claims are inconsequential, as long as they are within the two-year prescriptive period. Suffice it to state that CTA decisions do not constitute precedents, and do not bind this Court or the public. That is why CTA decisions are appealable to this Court, which may affirm, reverse or modify the CTA decisions as the facts and the law may warrant. Only decisions of this Court constitute binding precedents, forming part of the Philippine legal system.”

CIR v. San Roque Power Corp., GR 187485, 196113 & 197156, Feb. 12, 2013, 690 SCRA 336. Affirmed with finality Res. Oct. 8, 2013. As a general rule, a void law or administrative act cannot be the source of legal rights or duties. Exception: Doctrine of Operative Fact where judicial declaration of invalidity may not necessarily

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obliterate all the effects of a void act prior to such declaration. The doctrine applies to BIR Ruling No. DA-489-03 but NOT on BIR’s mere administrative practice prior to its issuance of the said ruling; there must be “legislative or executive measure.” Sec. 246, 1997 NIRC (Non-retroactivity of Rulings) adopts the operative fact doctrine but CTA rulings are NOT executive issuances within its meaning.

See also Mindanao II Geothermal Partnership v. CIR, GR 193301, March 11, 2013, 693 SCRA 49. Premature, did not fall within the period of exception. Judicial claim was filed on April 25, 2003 (administrative claim was filed on April 24, 2003). Nippon Express (Phils.) Corp. v. CIR, G.R. No. 196907, March 13, 2013, 693 SCRA 456. Team Energy Corporation (Formerly Mirant Pagbilao Corporation) vs. CIR, GR 197760, Jan. 13, 2014; Team Energy Corporation (Formerly Mirant Pagbilao Corporation) vs. CIR, GR 190928, Jan. 13, 2014. Claim for refund covering 3rd and 4th quarters of 2001. 3rd Q premature while 4th Q fell within the window period. CIR vs. Toledo Power, Inc., GR 183880, January 20, 2014. CIR vs. Mindanao II Geothermal Partnership, GR 191498, Jan. 15, 2014.

Principle of Solutio Indebiti is not applicable in a claim for refund of unutilized input VAT. CBK Power Company Limited vs. CIR, GR 198729-30, Jan. 15, 2014.

11. Prescriptive period for refund of unutilized input VAT arising from cessation of business.

The business operations ceased on Dec. 31, 2007. Petitioner filed an Application for Registration Information Update on July 1, 2008. The effectivity date of petitioner's formal cessation of business is reckoned on Aug. 1, 2008. Counting the two (2)-year period from August 1, 2008, petitioner may apply for the issuance of a tax credit certificate of its unutilized input tax until

August 1, 2010. However, in the case of the petitioner, it filed its administrative claim as early as July 7, 2008, hence, premature. A taxpayer whose registration has been cancelled due to, among others, cessation of business, may, within two (2) years from the date of cancellation of its registration, apply for the issuance of a TCC for any unused input tax which may be used to pay other internal revenue taxes. The two (2)-year prescriptive period is reckoned from the date of the cancellation of the taxpayer's registration under Section 236(F)(l) & (2)(b), NIRC which will take effect only from the first day of the following month. Associated Swedish Steels Phils., Inc. vs. CIR, CTA EB 854, Aug. 23, 2012 & Res. Jan. 21, 2013.

12. Prescriptive period for erroneously paid input VAT.

In a claim for refund based on mistake of paying excess input VAT, the applicable prescriptive period is Section 229 and not Section 112 of the 1997 NIRC. Ericsson Telecommunications, Inc. vs. CIR, CTA Case No. 8027, May 7, 2012. Amended Decision, Aug. 2, 2012. It is sufficient to rely on petitioner’s VAT return and confirmation payment generated under the EFPS payment system of the BIR to determine the actual amount remitted.

13. Prescriptive period for erroneously paid advance VAT is the 2-year period under Sections 204 and 229 of the 1997 NIRC. CIR vs. Negros Sugar Farmers Multi-Purpose Cooperative, CTA EB 877, Feb. 14, 2013.

14. Prescription of criminal offenses under the NIRC is 5 years from commission of violation or discovery and institution of judicial proceedings.

Section 281 of the 1997 NIRC provides:

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SEC. 281. Prescription for Violations of any Provision of This Code. – All violations of any provision of this Code shall prescribe after five (5) years.

Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.

The term for prescription shall not run when the offender is absent from the Philippines.

Interpreting then Section 354 (now Section 281) of the NIRC, the Supreme Court affirmed the conjunctive condition, making tax offenses practically imprescriptible. In criminal cases, statutes of limitations are an act of grace, constituting a surrender of sovereignty. Hence, they receive a strict construction in favor of the government. Emilio E. Lim, Sr. v. CA & People, G.R. Nos. 48134-37, October 18, 1990.

x x x The Solicitor General stresses that Section 354 speaks not only of discovery of the fraud but also institution of judicial proceedings. Note the conjunctive word "and" between the phrases "the discovery thereof" and "the institution of judicial proceedings for its investigation and proceedings". In other words, in addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. It was on September 1, 1969 that the offenses subject of Criminal Cases Nos. 1790 and 1791 were indorsed to the Fiscal's Office for

preliminary investigation. Inasmuch as a preliminary investigation is a proceeding for investigation and punishment of a crime, it was only on September 1, 1969 that the prescriptive period commenced.

x x xThe Court is inclined to adopt the view of the

Solicitor General. For while that particular point might have been raised in the Ching Lak case, the Court, at that time, did not give a definitive ruling which would have settled the question once and for all. As Section 354 stands in the statute book (and to this day it has remained unchanged) it would indeed seem that tax cases, such as the present ones, are practically imprescriptible for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years.

x x xUnless amended by the Legislature, Section 354

stays in the Tax Code as it was written during the days of the Commonwealth. And as it is, must be applied regardless of its apparent one-sidedness in favor of the Government. In criminal cases, statutes of limitations are acts of grace, a surrendering by the sovereign of its right to prosecute. They receive a strict construction in favor of the Government and limitations in such cases will not be presumed in the absence of clear legislation. Emilio E. Lim, Sr. v. CA & People, ibid.

D. REMEDIES OF THE GOVERNMENT

a. Distraint of personal property(Sections 205)

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b. Actual (Section 207-208)

c. Constructive (Section 206)

d. Levy of real property (Section 207)

e. Civil Action

f. Criminal Action (Sections 220, 221, 229)

g. Imposition of penalties and interests (Sections 248, 249)

1. Assessment on EWT on management fees paid to alleged non-resident foreign corporation was sustained since performance of services outside the Philippines was not proven. Thunderbird Pilipinas Hotels And Resorts, Inc. vs CIR, CTA 7902, July 18, 2012 citing CIR vs. Baier-Nickel, G.R. 153793, Aug. 29, 2006.

2. In case of acquittal, the accused may still be adjudged civilly liable.

For failure to protest the Formal Letter of Demand, accused was held civilly liable for deficiency income tax. The extinction of the penal action does not carry with it the extinction of the civil action where: (a) the acquittal is based on reasonable doubt as only preponderance of evidence is required; (b) the court declares that the liability of the accused is only civil; and (c) the civil liability of the accused does not arise from or is not based upon the crime of which the accused was acquitted. People vs. Judy Anne Santos y Lumagui, CTA Crim O-012, Jan. 16, 2013.

3. Remedy of Certiorari under Rule 65 in Criminal Case

A petition for certiorari under Rule 65, not appeal is the remedy to question a verdict of acquittal whether at the trial court or at the appellate level. In our jurisdiction, we

adhere to finality-of-acquittal doctrine, i.e., judgment of acquittal is final and unappealable. The rule however, is not without exception. In several cases, the court has entertained petitions for certiorari questioning the acquittal of the accused in, or the dismissals of, criminal cases. Jerome Castro vs. People, G.R. 180832, July 23, 2008; Yuchengco vs. CA, 427 Phil 11; & Galman vs. Sandiganbayan, 144 SCRA 43 (1986).

4. Criminal action includes civil action; Spouse liability.

Accused Gloria V. Kintanar was found criminally and civilly liable for failure to file her ITRs for taxable years 2000 and 2001 in violation of Sec. 255 of 1997 NIRC, as amended. Criminal action includes civil action for recovery of taxes. Accused's reliance on her husband to file the required ITRs without ensuring full compliance is considered willful act on her part tantamount to "deliberate ignorance" or "conscious avoidance" of her legal duty. People v. Gloria Kintanar, CTA Crim Case No. O-033, Aug. 26, 2009, w/ cdo (civil liability only, no willfulness proven). AFFIRMED in CTA EB Crim. No. 006, Dec. 3, 2010, & Res. March 29, 2011& by SC Minute Res. Aug. 15, 2011 & Nov. 16, 2011. EOJ Jan. 19, 2012.

5. Best Evidence; Assessment is NOT necessary before criminal prosecution.

Accused Joel C. Mendez was convicted for willful failure to file income tax return for 2002 and for willful failure to supply the correct and accurate information in the return for 2003. No civil liability was imposed for lack of assessment. Circumstantial evidence using the best evidence (contract of lease of building, certification of advertising placements with Phil. Daily Inquirer, Letter from PAL showing 41 travels from 1995-2000, Letter from LTO showing purchases of vehicles, etc.) obtained are

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sufficient to support his guilty beyond reasonable doubt. Willful blindness doctrine was applied. Issuance of subpoena duces tecum is not a condition precedent in resorting to best evidence. Assessment is not necessary before a criminal prosecution, People vs. Joel C. Mendez CTA Crim Case Nos. O-013 and O-015, Jan. 5, 2011& Res. May 27, 2011, w/ dissenting based on lack of jurisdiction. AFFIRMED in CTA EB Crim. No. 014 &015, Dec. 11, 2012 citing Soliven vs. Fastforms Philippines, Inc., G.R. 139031, Oct. 18, 2004.

6. Responsible officer was held criminally liable while corporation was civilly liable; Service of Assessment to the corporation is sufficient

Accused (Wong Yan Tak), President of Pic N’ Pac Mart, Inc., was held criminally for the corporation’s failure to pay VAT. Service of assessment to the actual taxpayer (corporation) is sufficient, even without service to the persons behind the company. Sale of the convenience store will not divest the accused of his responsibility as President of the corporation. It would be different had it been the sale/assignment of shares of the corp. Accused was sentenced to 1 yr. to 2 yrs. imprisonment, & fine of P10,000, plus payment of deficiency VAT of P3,552,716.81 with 20% interest. Corporation was ordered to pay P50,000. People vs. Wong Yan Tak, Geralyn Bobier and Pic N’ Pac Mart, Inc., CTA Crim O-090, Oct. 17, 2012. Amended Decision, Jan. 8, 2013, civil liability should be collected from Pic N’ Pac Mart, Inc not against the accused. No allegation was made that the corp. was used merely as an adjunct by its stockholders. See also People vs. Rogelio A. Tan, CTA Crim O-064 & O-065, June 27, 2012. The Court applied the willful blindness doctrine in convicting the President and Gen. Mgr. of Jadewell Parking Systems Corp. for failure to supply correct and accurate information in the corp.’s ITR.

7. Simultaneous imposition of deficiency interest and delinquency interest.

Deficiency interest is imposed for the shortage of taxes paid, while delinquency interest is imposed for the delay in payment of taxes. The law itself allows the simultaneous imposition of these two kinds of interests. Deficiency interest under Section 249(B) of the 1997 NIRC applies to all internal revenue taxes imposed by NIRC including deficiency expanded withholding tax. Takenaka Corporation v. CIR, CTA EB 745, Sept. 4, 2012 & Res. Feb. 4, 2013. Dissent PJ EDA, The imposition of deficiency interest and delinquency interest simultaneously for a given period of time is grossly excessive and unconscionable; it becomes penal, rather than compensatory.

8. Reckoning point of deficiency interest and delinquency interest.

Section 249(B) and (C)(3) of the 1997 NIRC, reckons the imposition of deficiency interest on any deficiency tax ''from the date prescribed for its payment until the full payment thereof:· while the assessment of the delinquency interest that is imposed upon failure to pay a deficiency tax, or any surcharge or interest thereon, shall be reckoned from ''the due date appearing in the notice and demand of the Commissioner until the amount is fully paid. Takenaka Corporation v. CIR, CTA EB 745, Sept. 4, 2012 & Res. Feb. 4, 2013. Dissent PJ EDA.

9. Waiver of surcharge, deficiency and delinquency interest.

The surcharge, deficiency and delinquency interest were not waived. There was no showing that the nature of disputed VAT assessment is controversial. First Sumiden Realty, Inc. vs. CIR, CTA 8151, Res. Dec. 21, 2012. Advertising Associates, Inc. vs. CIR, G.R. 59758, Dec. 26, 1984; Cagayan Electric Power & Light Co., Inc. vs. CIR & CTA, G.R. 60126. Sept. 25, 1985.

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E. REMEDIES OF THE TAXPAYER

Administrative Protest Section 228, NIRC

SECTION 228. Protesting of Assessment. — When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a preassessment notice shall not be required in the following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or

(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or

(d) When the excise tax due on excisable articles has not been paid; or

(e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.

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 been submitted; otherwise, the assessment shall 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 thirty (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.

1. Administrative protest is the proper remedy to question validity of PAN & FAN, NOT a request for ruling.

FAN & FLD became final, executory & demandable when petitioner failed to file an administrative protest within the prescribed 30-day period. A request for ruling is not the proper remedy to question the validity of PAN & FAN after they attained finality. Abelardo K. Pagente v. Hon. Esmeralda Tabule, et al., CTA Case No. 8280, Feb. 5, 2013.

2. CIR was able to prove the taxpayer’s receipt of PAN, Final Demand Letter (FLD) & FAN.

CIR sufficiently established that FLD & FAN were sent by registered mail and received by the taxpayer while receipt of PAN was never questioned. In Metro Star Superama case, Metro Star Superama was deprived of the opportunity to be heard due to BIR’s failure to prove that the taxpayer actually received the PAN. Thus, in that case the assessment was invalidated. In this case, it is undisputed that a PAN dated January 7, 2009 was issued by Mr. Gandarosa. Petitioner does not claim that the PAN was not served upon him or that he did not receive the PAN. Abelardo K. Pagente v. Hon.

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Esmeralda Tabule, et al., CTA Case No. 8280, Feb. 5, 2013. CIR vs. Metro Star Superama, Inc., G.R. No. 185371, Dec. 8, 2010.

3. Failure to prove that FAN was personally served on taxpayer or any duly authorized representative.

Attempted service to an Acctg. Adm. Asst. is not a valid service as she is not authorized & refusal will not give rise to constructive service, even though witnessed by 2 other revenue officers. Under Section 3.1.7, RR 12-99, constructive service of FAN is effected by leaving the FAN to the taxpayer’s premises, attested to, witnessed and signed by at least 2 revenue officers other than the revenue officer who constructively served the same with written report of the service. Gallardo And Associates vs. CIR, CTA 7920, Nov. 12, 2012.

4. Taxpayer may await the Final Decision of the CIR even after the lapse of the 180-day period under Sec. 228 of the NIRC.

On March 27, 1998, the CIR issued an assessment against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. On April 20, 1998, Lascona filed a letter protest which was denied by BIR Regional Director, RR No. 8, Makati City, in his Letter dated March 3, 1999. The SC held that the disputed assessment did not become final and executory when Lascona decided to await the final decision of the CIR. In case of CIR’s inaction on the protested assessment, the taxpayer may (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of the decision citing RCBC vs. CIR, G.R. No. 168498, April 24, 2007 and Section 3 A (2), Rule 4 of the Revised Rules of the CTA. These options are mutually exclusive and

resort to one bars the application of the other. Lascona Land Co., Inc. vs. CIR, G.R. No. 171251, March 5, 2012.

5. Failure to appeal the inaction of CIR on disputed assessment rendered the assessment final, executory & demandable.

Defenses of legality or validity and prescription can no longer be interposed when assessment attained finality due to petitioner’s failure to timely file an appeal. Also, the options to file a petition due to CIR’s inaction or to await the decision of the CIR are mutually exclusive. It has been settled that when a taxpayer appeals CIR’s inaction on disputed assessment before the CTA but which appeal is dismissed for being filed out of time, the taxpayer can no longer resort to the second option of awaiting the decision of the CIR and appeal the same to CTA. Philippine Dream Company, Inc. vs. BIR, CTA 7700, Dec. 6, 2012 & Res. Feb. 6, 2013. Citing RCBC vs. CIR, G.R. No. 168498, April 24, 2007.

6. PAN is part of due process.

Taxpayer was not accorded due process in the absence of proof of actual receipt of undated PAN. Taxpayer’s direct denial of the receipt of PAN shifts the burden upon the CIR to prove that PAN was actually received by the former. Laurence Lee V. Luang vs. Hon. Sixto S. Esquivias IV, in his capacity as CIR, CTA Case No. 7967, Jan. 5, 2012 & Res. Feb. 23, 2012 citing CIR vs. Metro Star Superama, Inc., G.R. No. 185371, Dec. 8, 2010. People vs. Katherine M. Lim and Edelyn Coronacion, CTA Crim Case No. O-113, Dec. 12, 2011 & Res. Jan. 27, 2012. People vs. Joseph Typingco, CTA Crim O-114, May 16, 2012 & Res. July 2, 2012.

7. Final Decision on Disputed Assessment (FDDA) is void for failure to state the facts and the law on which it is based.

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EWT, WTC & FBT assessments for 2005. As original EWT & FBT assessments were merely reiterated in FDDA, despite satisfactory explanation of portions of the assessments, there is lack of due process & thus the same are void. The requirement that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void is also applicable to FDDA. Ultimately it is FDDA, at the administrative level, which will determine the final tax liability of the taxpayer and which may be the subject of appeal before the CTA. Liquigaz Philippines Corp. vs. CIR, CTA 8141, Nov. 22, 2012 & Res. Feb. 20, 2013.

8. Assessment is void when no sufficient evidence to support it. The assessment was merely based on the BIR’s computer generated third party information which was not verified with other externally sourced data; third parties controverted the allegations. Fax N Parcel, Inc. vs. CIR, CTA EB 883, Feb. 14, 2013.

9. It is mandatory to state the factual and legal bases of the assessment.

The disallowances of the BIR, among which were (1) purchases-unsupported in the amount of P62,541,979; (2) unaccounted expenses in the amount of P 3,422,592.90; & (3) rental and professional fees in the amount of P1,635,104.32 lacked factual bases. Petitioner was only able to obtain the details of the amount under no. 1 after it requested from the Chief LTDO of Makati.

“The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged "factual bases" in the

advice, preliminary letter and "audit working papers" did not suffice. There was no going around the mandate of the law that the legal and factual bases of the assessment be stated in writing in the formal letter of demand accompanying the assessment notice.

We note that the old law merely required that the taxpayer be notified of the assessment made by the CIR. This was changed in 1998 and the taxpayer must now be informed not only of the law but also of the facts on which the assessment is made. 16 Such amendment is in keeping with the constitutional principle that no person shall be deprived of property without due process. 17 In view of the absence of a fair opportunity for Enron to be informed of the legal and factual bases of the assessment against it, the assessment in question was void. We reiterate our ruling in Reyes v. Almanzor, et al.” Penn Philippines, Inc. vs. CIR, CTA 7686, Dec. 11, 2012 citing CIR vs. Enron Subic Power Corp., G.R. 166387, Jan. 19, 2009, 576 SCRA 212. Commissioner of Internal Revenue vs. Hon. Raul M. Gonzalez, et al, G.R. No. 177279, October 13, 2010.

10. Assessment must contain legal and factual bases. Surety bond posted cannot be released until after the finality of the case.

The details in the PAN and Formal Letter of Demand with Details of Discrepancies and Assessment Notice are NOT sufficient to afford the taxpayer the opportunity to intelligently protest the assessment. There was discrepancy in the amounts specified in the PAN vis-à-vis the amounts in the computation sheet attached to the PAN. CIR failed to provide taxpayer with the list of the alleged undeclared importations which allegedly gave rise to the deficiency assessments issued against it. In view of

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the foregoing, the assessment was held to be invalid; cannot give rise to an obligation to pay deficiency taxes. BASF Philippines, Inc. vs. CIR, CTA Case No. 8128, Nov. 22, 2011 & Res. Feb. 6, 2012 denied the release of bond until the case is finally decided, resolved or terminated pursuant to Sec. VII, Circular No. 04-970-SC.

11. The validity of the assessment itself is a separate and distinct issue from the issue of whether the right of the BIR to collect tax has prescribed. CIR vs. Hambrecht & Quist, G.R. 165229, Nov. 17, 2010.

Refund

Requisites in a claim for refund of unutilized Creditable Withholding Tax

a. The claim was timely filed;b. The fact of withholding must be established by a

copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld;

c. It must be shown on the return that the income received was declared as part of the gross income.

12. Failure to present sufficient evidence to support that income received was declared as part of the gross income.

The court was not able to determine with veracity whether or not the income payments related to the CWT of P66,597,813.06 formed part of the declared income/loss in the Annual ITR. Petitioner failed to present detailed GL, reconciliation schedules or any other documents that will help the court verify the discrepancy and ascertain that the income payments related to

the claimed CWT were reported as part of the gross income in the ITR. UCPB vs. CIR, CTA 8083, Dec. 12, 2012; Orix Auto Leasing Ph. Corp. vs. CIR, CTA 8001, Nov. 8, 2012; Winebrenner & Iñigo Insurance Brokers, Inc. vs. CIR, CTA 8072, July 24, 2012.

13. Irrevocability Rule applies only to the option of carry-over.

The claim was denied despite both the administrative and judicial claims were timely filed within the 2-year period. Section 76 of the 1997 NIRC clearly provides that the Irrevocability Rule applies only to the option of carry-over. UPSI Management, Inc. vs. CIR, CTA EB 828, Feb. 8, 2013, Dissent J EFV/CMG relied on CIR vs. McGeorge Food Industries, Inc. G.R. No. 174 157, Oct. 20,2010 that both options of refund or carry-over are irrevocable; United Coconut Planters Bank vs. CIR, CTA EB 725, Aug. 23, 2012 Res. Nov. 21, 2012.

14. Input VAT which has been capitalized or charged to expense cannot be claimed as tax credit during any taxable year notwithstanding any adjustment made during the succeeding taxable year per RMC 42-2003. Energy Development Corp. vs. CIR, CTA 7792, Nov. 19, 2012.

15. OTHER RECENT SIGNIFICANT CASES

1. Willfull or deliberate failure to evade payment of tax cannot be imputed to the accused when the computation and determination of tax was approved by the BIR

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Gaw’s misclassification of the land as capital assets when it paid its CGT and DST was done with initial conformity or approval of the BIR following the procedure under RMO 15-2003. Accused was acquitted, however, CTA Case No. 8503 will continue in order to thresh out his civil liability. People vs. Macario Lim Gaw, Jr., CTA Crim. O-206; O-207; CTA Case 8503, Res. Jan. 3, 2013.

2. Retroactive application of SC Ruling; Decision of the SC is part of the law from the moment the law was passed

Accenture’s sale of services to its foreign clients did not qualify for zero-rating sales for failure to prove that foreign clients (recipient of service) are non-resident foreign corporation doing business outside the Philippines. Effectively, the same ruling in the Burmeister case (CIR vs. Burmeister and Scandinavian Contractor Mindanao, Inc., GR No. 153205, Jan. 22, 2007) was retroactively applied in this case. Amex case (CIR vs. American Express, 500 Phil. 586, 2005) was harmonized with Burmeister. In Amex, the place of performance and/or consumption of the service is immaterial. In Burmeister, the Court found that, although the place of the consumption of the service does not affect the entitlement of a transaction to zero-rating, the place where the recipient conduct its business does. Recipient of service must be proven to be a non-resident foreign corp. Accenture, Inc. vs. CIR, GR No. 190102, July 11, 2012.

- End of Session -

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