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CIR v. Isabela Cultural Corporation

Facts:

In an investigation conducted in the 1 986 books o f account of Isabela, it preliminarily incurreda tax deciency of P9,985,392.15, inclusive of increments. Upon protest by Isabelas counsel,the said preliminary asses sment was reduced to the am ount of P325,869.44.

On February 23, 1990, Isabela received from CIR an assessment letter demanding payment ofthe amounts of P333,196.86 and P4,897.79 as deciency income tax and expanded

withholding tax inclusive of surcharge and in January 1, 1986 to December 31, 1986. Isabela then led a letter to CIR asking for

reconsideration on the su bject assessm ent. It even attached certain documents su pporting itsprotest.

On February 9 , 1995, Isabela recei ved from CIR a F inal Notice B efore S eizure. In said letter,CIR demanded payment of the su bject assessment within ten (10) days from receipt thereof.Otherwise, failure on its p art would constrain CIR to collect the su bject assessment throughsummary remedies.

Isabela considered said nal notice of seizure a s [ petitioners] nal decision. Hence, the instantpetition for r eview led with this C ourt on March 9, 1995.

The CTA having rendered judgment dismissing the petition, anchored o n the argu ment that CIRs issuance of the Final Notice Before S eizure con stitutes i tsdecision on Isabelas requ est for r einvestigation, which Isabela may a ppeal to th e C TA. CAreversed CTAs d ecision.

CIR: Final Notice w as a m ere r eiteration of the d elinquent taxpayers o bligation to pay th e taxesdue. I t was su pposedly a m ere demand that should not have been mistaken for a decision on aprotested assessment. Such decision, the commissioner contends, must unequivocablyindicate t hat it is t he resol ution of the tax payers requ est for recon sideration and must likewisestate th e rea son therefor.

Isabela: Final Notice B efore S eizure sh ould be con sidered a s a d enial of its request forreconsideration of the disputed a ssessm ent. The Notice sh ould be dee med a s pet itioners lastact, since failure t o comply with it would lead to th e d istraint and levy of respondentsproperties, as indicated therein.

Issue:

Whether or not t he Final Notice Before Seizure da ted February 9 , 1995 signed by Acting ChiefRevenue Collection Officer Milagros Acevedo against ICC constitutes t he nal decision of theCIR appealable to the CTA.

Held:

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No. In the n ormal course, the re venue d istrict officer s ends t he t axpayer a n otice of delinquenttaxes, indicating the p eriod covered, the a mount due including interest, and the reason for t hedelinquency. I f the taxpayer di sagrees w ith or w ishes t o protest the ass essment, it sends aletter t o th e B IR indicating its p rotest, stating th e rea sons t herefore, and submitting s uch proofas m ay b e n ecessary. That letter is con sidered a s t he taxpayers r equest for r econsideration ofthe delinquent assessm ent. After the request is led and received by the BIR, the assessm ent

becomes a disputed assessment on which it must render a decappealable to the Court of Tax Appeals for r eview.

Prior t o the d ecision on a disputed assessm ent, there m ay st ill be exch anges b etween thecommissioner of internal revenue (CIR) and the t axpayer. The former may ask claricatoryquestions or r equire the latter to su bmit additional evidence. However, the CIRs positionregarding the disputed assessment must be indicated in the nal decision. It is t his d ecisionthat i s p roperly a ppealable t o the C TA for r eview.

In the light of the a bove facts, the F inal Notice B efore S eizure ca nnot but be con sidered as thecommissioners d ecision disposing of the request for r econsideration led by resp ondent, whoreceived no oth er r esponse t o its r equest. Not only was th e Notice t he on ly respo nse r eceived;its con tent and tenor su pported the theory t hat it was th e CIRs nal act regarding the requestfor recon sideration. The very ti tle ex pressl y indicated that it was a nal n otice prior t o seizureof property. The letter i tself clearly st ated that respondent was b eing given this LASTOPPORTUNITY to p ay; otherwise, its p roperties w ould be su bjected to distraint and levy.

Furthermore, Section 228 of the National Internal Revenue Code states that a delinquenttaxpayer may nevertheless directly appeal a disputed assessment, if its request forreconsideration remains u nacted upon 180 days af ter s ubmission thereof.

Within a period to be prescribed by plmenti

required to resp ond to sa id notice. If the t axpayer f ails t o respo nd, the Commissioner or hisduly au thorized repr esentative sh all issue an assessment based on his ndings.

Such assessment may be prot ested administratively by ling a requ est for reconsideration orreinvestigation within thirty (30) days f rom receipt of the a ssessment in such form and manneras m ay be prescribed by implementing ru les an d regulations. Within sixty (60) days from lingof the p rotest, all relevant supporting d ocuments sh all have b ecome nal.

If the p rotest is d enied in whole or i n part, or is n ot acted upon within one h undred eighty(180) days from submission of documents, the taxpayer adversely affected by the decision orinaction may a ppeal to the Court of Tax Appeals w ithin (30) days from receipt of the sa id

decision, or from the lapse of the on e h undred eighty (180)-day p eriod; otherwise t he d ecisionshall become nal, executory an d demandable.

In this case , the sa id period of 180 days h ad already lapsed when Isabela led its r equest forreconsideration on March 23, 1990, without any act ion on the part of the CIR.

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In the i nstant case, the s econd notice recei ved by Isabela verily indicated its n ature t hat it was nal . Unequivocably, therefore, it was t antamount to a rej ection of the request for

reconsideration.

In the p resent case, CIR does n ot deny recei pt of private resp ondents p rotest letter. As amatter o f fact, it catego rically relates the following in its S tatement of R elevant Fa cts:

3. On March 23, 1990, respondent ICC wrote the CIR requesting for a re consideration of the assessm ent on the ground thatthere was an error com mitted in the com putation of interest and tha t there were expenses w hich were di sallowed (Ibid., pp.296-311).

4. O n April 2, 199 0, r espondent ICC sent the CIR additional documents in support of its prot est/recon sideration. The letter was received by the BIR on April 18, 1990. Respondent ICC further executed a Waiver of Statute of Limitation (dat

17, 1990) whereby it consented to the BIR to assess an d collect any taxes tha t may be discovered in the process ofreinvestigation, until April 3, 1991 (Ibid., pp. 29 6-311). A copy o f the w aiver i s h ereto a ttached as Annex C.