Collector v. Benipayo (1962) (extrapolation of 3:1 child-to-adult ratio) Issues: 1.

ssues: 1. W/N there is sufficient evidence in the record showing that

Benipayo sold and issued to his adult customers two tax-free 20-centavo
Doctrines: • Assessment must be based on actual facts. children’s tickets, instead of one 40-centavo ticket for each adult customer;
to cheat or defraud the Government.
Facts: Respondent Alberto Benipayo is the owner and operator of the Lucena
Theater located in the municipality of Lucena, Quezon. In October of 1953 Held/Ratio: 1. NO. The Court quoted the decision of the CTA:
Internal Revenue Agent Romeo de Guia’s investigated respondent’s
amusement tax liability in connnection with the operation of Benipayo’s [A]ssessments should not be based on mere presumptions no matter how
theater. His finding was that during the years 1949 to 1951 the average ratio reasonable or logical said presumptions may be. Assuming arguendo that the
of adults and children patronizing the Lucena Theater was 3 to 1, i.e., for average ratio of adults and children patronizing the Lucena Theater from
every three adults entering the theater, one child was also admitted, while 1949 to 1951 was 3 to 1, the same does not give rise to the inference that the
during the period the period from August, 1952 to September, 1953, the same conditions existed during the years in question (1952 and 1953). The
proportion is reversed - three children to one adult. From this he concluded fact that almost the same ratio existed during the month of July, 1955 does
that respondent must have fraudulently sold two tax-free 20-centavo tickets, not provide a sufficient inference on the conditions in 1952 and 1953. .. In
in order to avoid payment of the amusement tax prescribed in Section 260 of order to stand the test of judicial scrutiny, the assessment must be based on
the National Internal Revenue Code. Based on the average ratio between actual facts. The presumption of correctness of assessment being a mere
adult and children attendance in the past years, Examiner de Guia presumption cannot be made to rest on another presumption that the
recommended a deficiency amusement tax assessment against respondent in circumstances in 1952 and 1953 are presumed to be the same as those
the sum of P11,193.45, inclusive of 25% surcharge, plus a suggested existing in 1949 to 1951 and July 1955. In the case under consideration there
compromise penalty of P900.00 for violation of section 260 of the National are no substantial facts to support the assessment in question. ... Fraud is a
Internal Revenue Code, or a total sum of P12,093.45 covering the period serious charge and, to be sustained, it must be supported by clear and
from August, 1952 to September, 1953 inclusive. In July of 1954, CIR issued convincing proof which, in the present case, is lacking.
a deficiency amusement tax assessment against Benipayo. In August 1954,
Benipayo filed the corresponding protest with the Conference Staff of the
Bureau of Internal Revenue. After due hearing, the Conference Staff
submitted to petitioner Collector of Internal Revenue its finding to the effect
that the “meager reports of these fieldmen (Examiner de Guia and the
Provincial Revenue Agent of Quezon) are mere presumptions and
conclusions, devoid of findings of the fact of the alleged fraudulent practices
of the herein taxpayer”. In view thereof, and as recommended by the
Conference Staff, CIR referred the case back to the Provincial Revenue Agent
of Quezon for further investigation. The Provincial Revenue Officer H.I.
Bernardo reinforced the findings of Agent De Guia. His report stated that
returns from July 1-11 showed tickets with ratio of 1:3, but from July 14-24,
when agents for his office supervised in the sales of admission tickets, the
sales ratio soared to 3:1. His investigation report read “without fear of
contradiction that the ratio of 3:1 xxx conveys the true picture of the
situation under the law of averages.” Thereafter, the Conference Staff of the
Bureau of Internal Revenue recommended to the Collector of Internal
Revenue the issuance of the deficiency amusement tax assessment in
question in this appeal. CTA reversed the decision of the CIR, relieving
Benipayo of the deficiency amusement tax assessed.
CIR v. Metro Star Superama, Inc. (2010) PAN should have also been served. CIR, however, failed to support its claim
with substantial evidence. With this, the Court held that there was no clear
Doctrines: • Sending of a PAN (pre-assessment notice) as required by Section showing that Metrostar actually received the alleged PAN.
228 of NIRC is part of due process requirement in the issuance of a
deficiency tax assessment, the absence of which renders nugatory any 2. YES, Section 228 of NIRC clearly requires that taxpayer must first be
assessment made by the tax authorties. Failure to send the PAN make’s CIR informed that he is liable for deficiency of taxes through send of PAN and to
tax assessment VOID. proceed heedlessly with tax collection without first establishing a valid
assessment is violative of one’s right for due process. The Court held that the
Facts: CIR filed before the Supreme Court a petition for review on certiorari sending of PAN to taxpayer to inform him of the assessment made is but part
against the CTA-En banc’s decision that the assessment made by CIR is Void of the “due process requirement in the issuance of deficiency tax assessment
due to non-service of PAN. CIR assessed Metro Star Superama, Inc “ the absence of which renders nugatory any assessment made by the tax
(Metrostar) of deficiency in value-added tax and withholding tax for 1999. authority. It is clearly stated in sec 228, that failure to send PAN stating the
The following are previous events: On Jan 2001 — Regional Director of BIR facts and the law on which the assessment was made, renders the assessment
issued letter of Authority for Revenue Officer to examine Metrostar’s book of made by CIR void.
account. Due to failure of the latter to present the records a subpoena duces
tecum was issued by BIR. On Nov 2001, a preliminary 15-day letter was
issued to Metrostar wherein BIR stated that a post audit review was held and
that it was found that there was a deficiency in value-added and withholding
taxes of around P292,000. On April 11, 2002, Metrostar received Formal
Letter of Demand Assessing from Rev. district assessing them P292,000 for
deficiency valueadded and withholding taxes for 1999. With this, Metro star
filed a petition for review with CTA wherein the corporation denied that it
received a PAN thus claiming that such assessment made by BIR was not
accorded due process.

Issues: 1. W/N Metro Star complied with due process requirement of serving
PAN before assessment

2. W/N deficiency assessment issued by respondent are void for failure to

send PAN

Held/Ratio:

1. YES. The Court held that the failure of the respondent to prove receipt of
the assessment by the Petitioner leads to the conclusion that no assessment
was issued. Based on jurisprudence, if the taxpayer denies ever having
received an assessment from the BIR, it is incumbent upon the latter to
prove by competent evidence that such notice was indeed received by the
addressee. The onus probandi was shifted to respondent to prove by contrary
evidence that the Petitioner received the assessment in the due course of
mail. It is essential to prove the fact of mailing is the registry receipt issued
by the Bureau of Posts or the Registry return card which would have been
signed by the Petitioner or its authorized representative. In this case, CIR
only stated that since FAN (final assessment notice) was served then the
Lascona Land Co. Inc. v. Commissioner of Internal Revenue to wait for the final decision of the CIR on the protested assessment. More
G.R. No. 171251, 05 March 2012 so, because the law and jurisprudence have always contemplated a scenario
where the CIR will decide on the protested assessment.
FACTS:
LACSONA LAND v. CIR (2000) — “taxpayer has option to wait for CIR’s
The Commissioner of Internal Revenue (CIR) issued an assessment against decision”
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 20 April 1998, Lacsona filed a protest against the CIR’s assessment of
Consequently, on April 20, 1998, Lascona filed a letter protest, but was deficiency taxes for 1993. On 12 March 1999 (well beyond the 180-day period
denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, given to the CIR to render a decision, and the 30 days thereafter given to the
Bureau of Internal Revenue, Revenue Region No. 8, Makati City. On April 12, taxpayer to appeal to the CTA, under Sec. 228), it received a letter from the
1999, Lascona appealed the decision before the CTA. Lascona alleged that CIR declaring that such assessment has become final & executory for failure
the Regional Director erred in ruling that the failure to appeal to the CTA to file an appeal with the CTA w/in 30 days after the lapse of the 180-day
within thirty (30) days from the lapse of the 180-day period rendered the period for the CIR to render a decision. SC reversed the CA ruling, since
assessment final and executory. The CIR, however, maintained that taxpayers are given 2 options under Sec. 228 in case of inaction of the CIR on
Lascona’s failure to timely file an appeal with the CTA after the lapse of the a protest: they can either a) file a petition for review w/ the CTA w/in 30
180-day reglementary period provided under Section 228 of the National days after the expiration of the 180-day period, OR b) wait for the CIR to
Internal Revenue Code (NIRC) resulted to the finality of the assessment. render a decision, and appeal to the CTA w/in 30 days from receipt of such
decision. These are mutually exclusive, and resort to one bars application of
ISSUE: the other. Thus, when Lacsona decided to wait for the CIR’s decision on its
protest, and finally receipt of the decision on March 12, it filed timely filed
Whether the subject assessment has become final, executory and the appeal on 12 April 1999.
demandable due to the failure of petitioner to file an appeal before the CTA
within thirty (30) days from the lapse of the One Hundred Eighty (180)-day
period pursuant to Section 228 of the NIRC.

HELD:

NO.

[T]he Court has held that in case the Commissioner failed to act on the
disputed assessment within the 180-day period from date of submission of
documents, a taxpayer can either: (1) file a petition for review with the Court
of Tax Appeals within 30 days after the expiration of the 180-day period; or
(2) await the final decision of the Commissioner on the disputed assessments
and appeal such final decision to the Court of Tax Appeals within 30 days
after receipt of a copy of such decision. These options are mutually exclusive
and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy to appeal
the inaction of the CIR, it did not intend to limit it to a single remedy of filing
of an appeal after the lapse of the 180-day prescribed period. Precisely, when
a taxpayer protested an assessment, he naturally expects the CIR to decide
either positively or negatively. A taxpayer cannot be prejudiced if he chooses
 Commissioner of Internal Revenue vs. Algue Inc. · There is no dispute that the payees duly reported their respective shares of
GR No. L-28896 | Feb. 17, 1988 the fees in their income tax returns and paid the corresponding taxes thereon.
CTA also found, after examining the evidence, that no distribution of
Facts: dividends was involved
· Algue Inc. is a domestic corp engaged in engineering, construction and other · CIR suggests a tax dodge, an attempt to evade a legitimate assessment by
allied activities involving an imaginary deduction
· On Jan. 14, 1965, the corp received a letter from the CIR regarding its · Algue Inc. was a family corporation where strict business procedures were
delinquency income taxes from 1958-1959, amtg to P83,183.85 not applied and immediate issuance of receipts was not required. at the end of
· A letter of protest or reconsideration was filed by Algue Inc on Jan 18 the year, when the books were to be closed, each payee made an accounting of
· On March 12, a warrant of distraint and levy was presented to Algue Inc. thru all of the fees received by him or her, to make up the total of P75,000.00. This
its counsel, Atty. Guevara, who refused to receive it on the ground of the arrangement was understandable in view of the close relationship among the
pending protest persons in the family corporation
· Since the protest was not found on the records, a file copy from the corp was · The amount of the promotional fees was not excessive. The total commission
produced and given to BIR Agent Reyes, who deferred service of the warrant paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K.
· On April 7, Atty. Guevara was informed that the BIR was not taking any After deducting the said fees, Algue still had a balance of P50,000.00 as clear
action on the protest and it was only then that he accepted the warrant of profit from the transaction. The amount of P75,000.00 was 60% of the total
distraint and levy earlier sought to be served commission. This was a reasonable proportion, considering that it was the
· On April 23, Algue filed a petition for review of the decision of the CIR with payees who did practically everything, from the formation of the Vegetable Oil
the Court of Tax Appeals Investment Corporation to the actual purchase by it of the Sugar Estate
· CIR contentions: properties.
- the claimed deduction of P75,000.00 was properly disallowed because it was · Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses
not an ordinary reasonable or necessary business expense - All the ordinary and necessary expenses paid or incurred during the
- payments are fictitious because most of the payees are members of the same taxable year in carrying on any trade or business, including a reasonable
family in control of Algue and that there is not enough substantiation of such allowance for salaries or other compensation for personal services actually
payments rendered xxx
· CTA: 75K had been legitimately paid by Algue Inc. for actual services · the burden is on the taxpayer to prove the validity of the claimed deduction
rendered in the form of promotional fees. These were collected by the Payees · In this case, Algue Inc. has proved that the payment of the fees was necessary
for their work in the creation of the Vegetable Oil Investment Corporation of and reasonable in the light of the efforts exerted by the payees in inducing
the Philippines and its subsequent purchase of the properties of the Philippine investors and prominent businessmen to venture in an experimental
Sugar Estate Development Company. enterprise and involve themselves in a new business requiring millions of
pesos.
Issue: W/N the Collector of Internal Revenue correctly disallowed the · Taxes are what we pay for civilization society. Without taxes, the government
P75,000.00 deduction claimed by Algue as legitimate business expenses in its would be paralyzed for lack of the motive power to activate and operate it.
income tax returns Hence, despite the natural reluctance to surrender part of one's hard earned
income to the taxing authorities, every person who is able to must contribute
Ruling: his share in the running of the government. The government for its part, is
· Taxes are the lifeblood of the government and so should be collected without expected to respond in the form of tangible and intangible benefits intended
unnecessary hindrance, made in accordance with law. to improve the lives of the people and enhance their moral and material values
· RA 1125: the appeal may be made within thirty days after receipt of the · Taxation must be exercised reasonably and in accordance with the prescribed
decision or ruling challenged procedure. If it is not, then the taxpayer has a right to complain and the courts
· During the intervening period, the warrant was premature and could will then come to his succor
therefore not be served.
· Originally, CIR claimed that the 75K promotional fees to be personal holding Algue Inc.’s appeal from the decision of the CIR was filed on time with the
company income, but later on conformed to the decision of CTA CTA in accordance with Rep. Act No. 1125. And we also find that the claimed
deduction by Algue Inc. was permitted under the Internal Revenue Code and
should therefore not have been disallowed by the CIR.

CIR v. ALGUE, INC. (1988) — "exception to Warrant of Distraint and

Levy as proof of the finality of the assessment which renders hopeless
request for reconsideration" January 14, 1965, Algue received a letter
assessing them P83,183.85 delinquency income taxes for 1958 and 1959.
January 18, 1965, Algue filed a letter of protest or request for
reconsideration, stamp received the same day. March 12, 1965, a warrant of
distraint and levy was presented to Algue through its counsel, Atty. Guevara,
who refused to receive it due to the pending protest, for which no positive act
was shown to have been made, no copy could even be found in the dockets.
Atty. Guevara gave a photostat of it to the BIR. April 7, 1965, Atty. Guevara
was finally informed that the BIR was not taking any action on the protest
and it was only then that he accepted the warrant of distraint and levy earlier
sought to be served. April 23, 1965, Algue filed a petition for review with the
CTA. ISSUE is w/n the appeal to the CTA was filed on time and the Court
ruled in the affirmative. Since the protest was not pro-forma, meaning it had
strong legal considerations, it effectively tolled the reglementary period for
an appeal to the CTA (30days from receipt of decision). [Jan. 14 receipt of
assessment--(4 days)--Jan. 18 protest --period tolled-- April 7 denial of
protest, thus period started running again to April 23 (appeal to CTA). 4 days
+ 16 days, = 20 days lang] It is true that as a rule the warrant of distraint and
levy is "proof of the finality of the assessment" and renders hopeless a
request for reconsideration," being "tantamount to an outright denial thereof
and makes the said request deemed rejected." But there is a special
circumstance in the case at bar that prevents application of this accepted
doctrine.
Oceanic Wireless Network Inc. V Commissioner of Internal
Revenue Held:
1. No. BIR’s right has not yet prescribed and the assessment notices are
Facts: valid. At the time of the execution of the waiver, there was no preliminary
Oceanic Wireless is a corporation with principal office located in assessment issued yet against petitioner where the kind and amount of tax
Legaspi Village, Makati. In April 1996, petitioner filed its 1995 Annual could be referred to. Such details cannot be specified in the waiver since it
Corporate Annual Income Tax Return. In December 1996, petitioner was still unascertainable at the time.
received a letter from the Revenue District Officer authorizing Revenue
Officers to examine the books of accounts and other records for the period Following the rule that the period of respondent to assess was extended up to
January to December 1995. July 31, 1999 in view of the waiver, the deficiency assessments issued against
petitioner on July 30, 1999 are within the period allowed by law.
In 1999, petitioner executed a Waiver of Defense of Prescription of
the NIRC within which respondent may assess petitioner for deficiency 2. No. The purpose of Section 228 of the National Internal Revenue Code
taxes. A preliminary report of tax assessment was issued and petitioner was of 1997in requiring that "(t)he taxpayer be informed of the law and facts on
requested to attend an informal conference to discuss the result of the which assessment is made" is to give the taxpayer the opportunity to
investigation done on the books. refute the findings of the examiner and give a more accurate and detailed
explanation regarding the proposed assessment.
Again, petitioner received another pre-assessment notice this time with
Details of Discrepancies. The company was advised to file a written protest In the case, there was substantial compliance with Sec. 228 of the NIRC
or set up an office conference to discuss the assessments for deficiency because petitioner was able to protest the assessments intelligently, thereby
income. Inasmuch as the authority of respondent to assess was about to implying that it had actual knowledge of the factual and legal bases of the
prescribe in July 31 1999, demand letters were sent on July 30, 1999. assessments. The fact that petitioner was furnished the computation and
brief explanation of how the assessment for deficiency quarterly income tax
Petitioner now contends that the assessment notices for taxable year 1995 was arrived at, the requirement under Section 228 of the 1997 Tax Code is
are void for having been issued beyond the 3-yr prescriptive period as deemed complied with. And even if petitioner was not furnished of the
provided under the NIRC. Since the tax return was filed in April 1995, detailed computation of the deficiency quarterly income tax, the same was
respondent has 3 years to assess the petitioner. But the assessment was discussed with petitioner during the informal conference.
done in 1999, hence the action has already prescribed.
3. Yes. Petitioner having failed to comply with the requirement of the law
Petitioner also questions the validity of the waiver on the ground that it in disputing an assessment, the same became final, executory and
failed to state the kind and amount of tax required under RMO 20-90. demandable. Sec. 228 states that:

Respondent argues that petitioner executed a waiver extending the period of x x x If the protest is denied in whole or in part, or is not acted upon within
the respondent pursuant to the provisions in the Tax Code. one hundred eighty (180) daysfrom submission of documents, the taxpayer
adversely affected by the decision or inaction may appeal to the Court of Tax
Issue: Appeals within thirty (30) days from receipt of the said decision, or from the
1. Whether or not the BIR’s right to assess has already prescribed. lapse of the one hundred eighty (180)-day period; otherwise, the decision
shall become final, executory and demandable. Undoubtedly, a taxpayer has
2. Whether or not the deficiency assessments are void for failure to state sixty (60) days from the filing of the protest to submit the relevant
the law and facts to which the assessments are made. documents to support its protest, otherwise, the assessment becomes final.
Within one hundred eighty(180) days from the submission of the relevant
3. Whether or not petitioner is liable for deficiency income tax. documents, the respondent should act on the protest. If the respondent
rendered his decision within the period or failed to act on it, the remedy of
the taxpayer is to file within thirty (30) days from the receipt of the decision
or from the lapse of one hundred eighty(180) days, an appeal to this court,
otherwise, the assessment will become final, executory and demandable. x x
x

In the case, petitioner failed to submit supporting documents contrary to

what was jointly stipulated by the parties. Hence, the reckoning of the 180-
day period would be the day the protest was filed (August 16, 1999).
However, respondent failed to render his decision within 180 days or until
February 12, 2000. The remedy of petitioner was to file within 30 days there
from an appeal with this court which would be until March 14, 2000. But
since the Petition for Review was filed only on May 12, 2000, the same was
definitely filed beyond the date prescribed by law.

*Case dismissed for being filed out of time.

OCEANIC WIRELESS INC. v. CIR -- “demand letter issued by a

subordinate” Oceanic received from the BIR deficiency tax assessments.
They protested the assessments and requested a consideration or
cancellation of the same. On January, the Chief of BIR Billing Division
denied the request and asked Oceanic to pay their dues within 10 days from
receipt of the letter otherwise the necessary warrants for distraint and levy
will be issued. They failed to pay and the warrants were issued. It was only
on November that Oceanic filed a case with the CTA. Logically, it was denied
due to prescription. Oceanic contends that the reply issued by the Chief of
Billing cannot be considered a final demand because a subordinate officer
issued it. 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 it is final is conditioned upon the language
used or tenor of the letter being sent to the taxpayer. The letter must use
clear and equivocal terms whenever his action on an assessment constitutes
his final determination. This is to enable the taxpayer to determine when his
right to appeal to the CTA accrues. The fact that only a subordinate of the
CIR issued the demand is of no moment because demands may be made by
the “commissioner or his duly authorized representative” (see Sec 6, NIRC).
After the denial of the protest/MR, Oceanic had 30 days to file an appeal
with the CTA. However, since it failed to appeal the denial within the
reglementary period, the decision of the CIR (via its subordinate) was
considered final, executory and enforceable (see Sec 228, NIRC).
CIR v. ISABELA CULTURAL CORPORATION retainer fees charged by the firm. They cannot give as an excuse the delayed
billing, since it could have inquired into the amount of their obligation and
Facts: Isabela Cultural Corporation (ICC), a domestic corporation received reasonably determine the amount.
an assessment notice for deficiency income tax and expanded withholding tax
from BIR. It arose from the disallowance of ICC’s claimed expense for
professional and security services paid by ICC; as well as the alleged CIR v. ISABELA CULTURAL CORPORATION — “final decision, last
understatement of interest income on the three promissory notes due from opportunity” CIR investigated Isabela Cultural Corporation’s 1986 books of
Realty Investment Inc. The deficiency expanded withholding tax was allegedly account and discovered an income tax deficiency of some 9 million. Isabel
due to the failure of ICC to withhold 1% e-withholding tax on its claimed protested. CIR sent an assessment letter and demanded payment of
deduction for security services. deficiency income tax and withholding tax. Isabela requested for
reconsideration. CIR sent Isabela a Final Notice before Seizure and
ICC sought a reconsideration of the assessments. Having received a final
demanded payment within 10 days from its receipt. Isabela treated this as
notice of assessment, it brought the case to CTA, which held that it is
CIR’s final decision and filed a petition before the CTA. SC held that the Final
unappealable, since the final notice is not a decision. CTA’s ruling was
reversed by CA, which was sustained by SC, and case was remanded to CTA. Notice Before Seizure is deemed as the CIR’s final decision. If the protest is
CTA rendered a decision in favor of ICC. It ruled that the deductions for not acted upon within 180 days from submission of documents, the taxpayer
professional and security services were properly claimed, it said that even if may appeal to the CTA. Here, Isabela filed its request for reconsideration
services were rendered in 1984 or 1985, the amount is not yet determined at beyond the 180-day period. Moreover, the letter stated, “We are giving you
that time. Hence it is a proper deduction in 1986. It likewise found that it is this last opportunity to settle the adverted assessment.” It was tantamount to
the BIR which overstate the interest income, when it applied compounding a rejection of the request for reconsideration.
absent any stipulation.

Petitioner appealed to CA, which affirmed CTA, hence the petition.

Issue: Whether or not the expenses for professional and security services are
deductible.

Held: No. One of the requisites for the deductibility of ordinary and necessary
expenses is that it must have been paid or incurred during the taxable year.
This requisite is dependent on the method of accounting of the taxpayer. In
the case at bar, ICC is using the accrual method of accounting. Hence, under
this method, an expense is recognized when it is incurred. Under a Revenue
Audit Memorandum, when the method of accounting is accrual, expenses not
being claimed as deductions by a taxpayer in the current year when they are
incurred cannot be claimed in the succeeding year.

The accrual of income and expense is permitted when the all-events test has
been met. This test requires: 1) fixing of a right to income or liability to pay;
and 2) the availability of the reasonable accurate determination of such
income or liability. The test does not demand that the amount of income or
liability be known absolutely, only that a taxpayer has at its disposal the
information necessary to compute the amount with reasonable accuracy.

From the nature of the claimed deductions and the span of time during which
the firm was retained, ICC can be expected to have reasonably known the
Commissioner of Internal Revenue v. Pascor Realty and Moreover, the CTA acquired jurisdiction when the CIR denied PRDC’s letter
Development Corporation, et al. (1999) concerning the disputing of the assessment. CIR appealed to the SC.

Doctrines: • Assessment is laying a tax. ‘The word assessment when used in Issues: 1. W/N the filing of the criminal complaint with the attached Joint
connection with taxation, may have more than one meaning. The ultimate Affidavit can be construed as an assessment.
purpose of an assessment to such a connection is to ascertain the amount
that each taxpayer is to pay. More commonly, the word ‘assessment’ means Held/Ratio: 1. NO. There is no specific definition or form of assessment
the official valuation of a taxpayer’s property for purpose of taxation contained in the NIRC and revenue regulations. However, the NIRC provides
the specific functions and effects of an assessment. An assessment informs
• An assessment informs the taxpayer of his liabilities. It must be sent to and the taxpayer of his liabilities. It must be sent to and received by a taxpayer,
received by a taxpayer, and must demand payment of the taxes within a and must demand payment of the taxes within a specific period. It is deemed
specific period. It is deemed a notice duly sent to the taxpayer. It is a notice duly sent to the taxpayer. It is considered “made” only when the
considered “made” only when the collector of internal revenue releases, collector of internal revenue releases, mails or sends such notice to the
mails or sends such notice to the taxpayer. taxpayer. The taxpayer must be certain that a specific document constitutes
an assessment. Otherwise, confusion would arise regarding the period within
Facts: BIR Commissioner Jose Ong authorized Revenue Officers Thomas which to make an assessment or to protest the same, or whether interest and
Que, Sonia Estorco and Emmanuel Savellano to examine Pasco Realty and penalty may accrue.
Development Corporation (PRDC)’ books of accounts and other accounting
records. They examined years 1986, 1987, and 1988. They recommended that Here, the Joint Affidavit is not an assessment. First, it only contained a
an assessment be issued in the amounts of P7,498,434.65 and P3,015,236.35 computation of PRDC’s tax liability. Second, it did not state a demand or a
for the years 1986 and 1987, respectively. The Commissioner of Internal period for payment. Third, it was addressed to the justice secretary and not
Revenue filed a criminal complaint in the DOJ against PRDC, its President the taxpayers. Though the Joint Affidavit contains certain details, it
Rogelio Dio, and its Treasurer Virgina Dio. The CIR alleged PRDC evaded continues to remain an assessment because its purpose was merely to
taxes amounting to P10,513,671.00. The DOJ subpoenaed PRDC, President support and substantiate the complaint for tax evasion. It was not meant to
Dio and Treasurer Dio. Contesting the complaint, PRDC filed an Urgent be a notice of the tax due and a demand of payment to PRDC. Moreover, the
Request for Reconsideration/ Reinvestigation of the tax liability. However, in fact that it was specifically addressed and sent to the DOJ shows that the CIR
a letter, the CIR denied this because the Commissioner has yet to issue a intended to file a complaint and not issue an assessment. Although the
formal assessment. PRDC filed a petition for review before the Court of Tax revenue officers recommended the issuance of an assessment, the
Appeals (CTA). CIR filed a Motion to Dismiss claiming that the CTA lacks commissioner opted instead to file a criminal case for tax evasion. What
jurisdiction over the subject matter of the petition due to the absence of a private respondents received was a notice from the DOJ that a criminal case
formal assessment. The CTA denied the motion to dismiss and ordered the for tax evasion had been filed against them, not a notice that the Bureau of
CIR to file an answer. Instead of filing an answer or moving to reconsider the Internal Revenue had made an assessment. Further, the CIR received a
resolution, the CIR filed a Petition for Review on Certiorari before the Court motion for reconsideration of the tax evasion charges and not an assessment.
of Appeals (CA). It claimed the CTA acted with grave abuse of discretion and
without discretion when it considered the affidavit/ report of the revenue Other additional issues: Assessment is not necessary before a criminal
officer and the indorsement of the report to the Secretary of Justice as complaint may be filed. Section 222 of the NIRC provides that in cases where
assessment. The CA held that the CTA did not commit grave abuse of a false or fraudulent return is submitted or in cases of failure to file a return
discretion when it ruled that the criminal complaint for tax evasion such as this case, proceedings in court may be commenced without an
constituted an “assessment”. The Joint Affidavit of the revenue officers assessment.
submitted with the criminal complaint already contains sufficient details
Procedure on how assessments are issued: Before an assessment is issued,
needed for an assessment. To constitute as an assessment, the following
there is, by practice, a pre-assessment notice sent to the taxpayer. The
details must be present: kind and amount of tax due, and the period covered.
taxpayer is then given a chance to submit position papers and documents to
prove that the assessment is unwarranted. If the commissioner is unsatisfied,
an assessment signed by him or her is then sent to the taxpayer informing
the latter specifically and clearly that an assessment has been made against
him or her. The criminal charge need not go through all these.
CIR v. Enron Subic Power corporation (2009) of the law but also of the facts on which the assessment is made. The Court
explained that such an amendment is in keeping with the constitutional
Doctrine: • Due process demands that a taxpayer must be informed of the principle that no person shall be deprived of property without due process.
legal and factual bases of the assessment against it. Otherwise, the
assessment is void.

Facts: The respondent corporation Enron filed its annual income tax return,
for the year 1996 on April 12, 1997, indicating a net loss of P7,684,948.
Subsequently, it was informed by BIR, through a PRELIMINARY 5-DAY
LETTER, of a proposed assessment of an alleged P2,880,817.25 deficiency
income tax. Enron disputed this proposed assessment in its first protest
letter. On May 26, 1999, the CIR sent Enron a FORMAL ASSESSMENT
NOTICE requiring the latter to pay the alleged deficiency income tax of
P2,880,817.25 for the year 1996. This was again protested by Enron. Because
its protest wasn’t resolved within the 180-day period, Enron filed a petition
for review in the CTA, questioning the substantive validity of the assessment
and arguing that the deficiency tax assessment did not provide the legal and
factual bases of the assessment, in defiance of Sec. 228 of the NIRC and Sec
3.1.4 of RR No. 12-99. 2 The CTA ordered the deficiency assessment
cancelled for the reason that the assessment notice sent to Enron failed to
comply with the requirements of the mentioned provisions by failing to show
the applicability of the cited law to the facts of the assessment. This CTA
ruling was affirmed by the CA. The CIR argues that Enron was informed,
through the preliminary 5-day letter and the formal assessment notice, of the
legal and factual bases of the deficiency assessment against it.

Issue: 1. Whether the deficiency assessment is void for noncompliance with

Sec. 228 and RR No. 12-99

Held/Ratio: 1. Yes, it is void. It is clear that a taxpayer must be informed in

writing of the legal and factual bases of the tax assessment made against him.
In this case, the CIR merely issued a formal assessment and indicated
therein the supposed tax, surcharge, interest and compromise penalty due
thereon. In issuing the Formal Assessment Notice, the CIR did not provide
Enron with the written bases of the law and facts on which the assessment
was based. The CIR did not bother to explain how it arrived at such an
assessment. More so, he failed to mention the specific provision of the Tax
Code or rules and regulations which were not complied with by Enron. The
advice of tax deficiency and the preliminary 5-day letter were not valid
substitutes for the mandatory notice in writing provided for in Sec. 228 of
the NIRC and RR No. 12-99. The Court notes that the old law merely
required that the taxpayer be notified of the assessment made by the BIR.
This was changed in 1998 and the taxpayer must now be informed not only
Commissioner of Internal Revenue vs Philippine Global
Communication, Inc.
Taxation – Tax Collection – Prescriptive Period – Reconsideration vs
Reinvestigation
In April 1991, Philippine Global Communication, Inc. (PGCI) filed its annual
income tax return (ITR) for the taxable year 1990. A tax audit was
subsequently conducted by the Bureau of Internal Revenue (BIR) and
eventually a final assessment notice (FAN) was timely issued in April 1994.
The FAN demanded PGCI to pay P118 million in deficiency taxes inclusive of
surcharge and interest. PGCI was able to file a protest within the reglementary
period. PGCI however refused to produce additional evidence. In October
2002, eight years after the FAN was issued, the Commissioner of Internal
Revenue (CIR) issued a final decision denying the protest filed by PGCI. PGCI
then filed a petition for review with the Court of Tax Appeals (CTA). The CIR
filed its answer in January 2003. The CTA ruled that the CIR can no longer
collect because it is already barred by prescription. The CIR argued that the
prescriptive period has been extended because PGCI asked for a
reinvestigation.
ISSUE: Whether or not the CIR is barred by prescription.
HELD: Yes. Under the law, the CIR has 3 years from the issuance of the FAN
to make its collection. The FAN was issued in April 1994 and so the CIR has
until April 1997 to make a collection. Within that period, the CIR never issued
a warrant of distraint/levy. Its earliest collection effort was only when it filed
an answer to the appeal filed by PGCI. CIR’s answer was filed in January 2003
which was way beyond the three year prescriptive period to collect the
assessed taxes.
The CIR cannot invoke that the protest filed by PGCI is in effect a request for
reinvestigation. Under the law, a request for reinvestigation shall toll the
running of the prescriptive period to collect. However in the case at bar, the
protest filed by PGCI is not a request for reinvestigation but rather it was a
request for reconsideration. And in such case, it did not suspend the
prescriptive period. The protest is a request for reconsideration because PGCI
did not adduce additional evidence or documents. PGCI merely sought the
CIR to review the existing records on file.
CIR v. Kudos Metal Corporation (2010) the blame to the taxpayer. To stress, a waiver of the statute of limitations,
being a derogation of the taxpayer’s right to security against prolonged and
Facts: Pursuant to a Letter of Authority dated September 7, 1999, the BIR unscrupulous investigations, must be carefully and strictly construed.
served upon Kudos Metal Corp Notices of Presentation of Records. Kudos
failed to comply with these notices. Hence, the BIR issued a Subpeona Duces
Tecum dated September 21, 2006. On December 10, 2001, Kudos’
accountant, executed a Waiver of the Defense of Prescription. This was
followed by a second Waiver of Defense of Prescription on February 18,
2003. On August 25, 2003, the BIR issued a Preliminary Assessment Notice
for the taxable year 1998 against the respondent. This was followed by a
Formal Letter of Demand with Assessment Notices. CTA Division Right to
assess has prescribed. Issues of the first waiver: Assistant Commissioner is
not the revenue official authorized to sign the waiver, as the tax case involves
more than P1,000,000. The waiver failed to indicate the date of acceptance.
The fact of receipt by the taxpayer of his file copy was not indicated on the
original copy. CTA En Banc Agreed only to the second and third grounds.
Issue: 1. Whether the right of the government to assess has expired.
Held/Ratio: 1. Yes. An assessment notice issued after the three-year
prescriptive period is no longer valid and effective. Exceptions however are
provided under Section 222of the NIRC. The period to assess and collect
taxes may only be extended upon a written agreement between the CIR and
the taxpayer executed before the expiration of the three-year period. RMO
20-90 issued on April 4, 1990 and RDAO 05-01issued on August 2, 2001 lay
down the procedure for the proper execution of the waiver.7 The first waiver
had the following infirmities:

1. The waivers were executed without the notarized written authority of

Pasco to sign the waiver in behalf of respondent. 2. The waivers failed to
indicate the date of acceptance. 3. The fact of receipt by the respondent of its
file copy was not indicated in the original copies of the waivers. Estoppel
does not apply in this case. In another case8 , estoppel was applied as an
exception to the statute of limitations on collection of taxes and not on the
assessment of taxes. There was a finding that the taxpayer made several
requests or positive acts to convince the government to postpone the
collection of taxes. In this case, the assessments were issued beyond the
prescribed period. Also, there is no showing that respondent made any
request to persuade the BIR to postpone the issuance of the assessments.
The BIR cannot hide behind the doctrine of estoppel to cover its failure to
comply with RMO 20-90 and RDAO 05-01, which the BIR itself issued. As
stated earlier, the BIR failed to verify whether a notarized written authority
was given by the respondent to its accountant, and to indicate the date of
acceptance and the receipt by the respondent of the waivers. Having caused
the defects in the waivers, the BIR must bear the consequence. It cannot shift
RCBC v. CIR (2011) (RCBC is estopped because it already paid)

Facts: RCBC filed its Corporation Annual Income Tax Returns for Foreign
Currency Deposit Unit for the calendar years 1994 and 1995. On August 15,
1996, RCBC received a Letter of Authority issued from CIR Liwayway
Vinzons-Chato, authorizing a special audit team to examine the books for all
internal revenue taxes from January 1, 1994 to December 31, 1995. On
January 23, 1997, RCBC executed two Waivers of the Defense of Prescription
covering the internal revenue taxes due for the years 1994 and 1995,
effectively extending the period of the Bureau of Internal Revenue (BIR) to
assess up to December 31, 2000. Subsequently, on January 27, 2000, RCBC
received a Formal Letter of Demand together with Assessment Notices from
the BIR. RCBC filed a protest on February 24, 2000 and on November 20,
2000, it filed a petition for review before the CTA. On December 6, 2000,
RCBC received another Formal Letter of Demand with Assessment Notices
dated October 20, 2000, following the reinvestigation it requested, which
drastically reduced the original amount of deficiency taxes and on the same
day, RCBC paid the following deficiency taxes as assessed. RCBC, however,
refused to pay the following assessments for deficiency onshore tax and
documentary stamp tax which remained to be the subjects of its petition for
review.

Issue: 1. Whether petitioner, by paying the other tax assessment covered by

the waivers of the statute of limitations, is rendered estopped from
questioning the validity of the said waivers with respect to the assessment of
deficiency onshore tax.

Held/Ratio: 1. YES. RCBC, through its partial payment of the revised

assessments issued within the extended period as provided for in the
questioned waivers, impliedly admitted the validity of those waivers. Had
petitioner truly believed that the waivers were invalid and that the
assessments were issued beyond the prescriptive period, then it should not
have paid the reduced amount of taxes in the revised assessment. RCBC’s
subsequent action effectively belies its insistence that the waivers are invalid.
The records show that on December 6, 2000, upon receipt of the revised
assessment, RCBC immediately made payment on the uncontested taxes.
Thus, RCBC is estopped from questioning the validity of the waivers. To hold
otherwise and allow a party to gainsay its own act or deny rights which it had
previously recognized would run counter to the principle of equity which this
institution holds dear.
 Bank of the Philippine Islands vs Commissioner of Internal
Revenue
Taxation – Collection – Prescriptive Period – Reconsideration vs
Reinvestigation
On October 20, 1989, the Bureau of Internal Revenue (BIR) issued a formal
assessment notice (FAN) against the Bank of the Philippine Islands (BPI). The
FAN demanded BPI to pay P28k in taxes. In November 1989, BPI filed a
protest however the protest did not specify if it was a request for
reconsideration or a reinvestigation. The BIR did not reply on the protest but
on October 15, 1992 (four days before the expiration of the period to collect –
or 1095 days [3 years]after issuance of FAN on 10/20/1989), the
Commissioner of Internal Revenue (CIR) issued a warrant of distraint/levy
against BPI for the satisfaction of the assessed tax. The warrant was served to
BPI on October 23, 1992 (four days after period has prescribed). In September
1997, the CIR finally sent a letter to BPI advising the latter that its protest is
denied.
ISSUE:
1. Whether or not the filing of the protest by BPI suspended the running of the
prescriptive period.
2. Whether or not the government’s right to collect the assessed tax has
prescribed.
HELD:

1. No. The protest did not indicate whether BPI was asking for a reconsideration
or a reinvestigation but since BPI did not adduce additional evidence, it should
be treated as a request for reconsideration. Under the tax code, a request for
reconsideration does not suspend the running of the prescriptive period. Even
assuming that the protest is a request for reinvestigation, the same did not toll
the running of the prescriptive period because the CIR failed to show proof
that the request has been granted and that a reinvestigation has been actually
conducted. In fact, BPI never heard from the BIR not until the CIR decided
the protest in September 1997 – 5 years after the protest has been filed.
2. Yes. When it comes to collection, even though the warrant for distraint/levy
was issued within the prescriptive period, it is required that the same should
be served upon the taxpayer within the prescriptive period. This is because it
is upon the service of the Warrant that the taxpayer is informed of the denial
by the BIR of any pending protest of the said taxpayer, and the resolute
intention of the BIR to collect the tax assessed. In the case at bar, BPI received
the warrant 4 days after the expiration of the prescriptive period hence, the
right to collect has already prescribed.
SECURITY BANK v. CIR (2006) — Security Bank Corp. (SBC) received a
PAN for deficiency Documentary Stamp Tax (DST) on the (1) promissory
notes issued and (2) on sale of securities under repurchase agreement. SBC
protested because the promissory notes were NON-NEGOTIABLE and
therefore not subject to DST and the sale of securities were also not subject
to DST. The BIR did not answer the letter-protest but it sent an assessment
letter . SBC answered and said that the BIR, through former Commissioner
Tan, entered into a general compromise agreement with the Bankers
Association of the Phil. (BAP) concerning the DST assessment relating to
non-negotiable promissory notes. Pursuant to said compromise, SBC signed
its own compromise agreement by paying P650k as full settlement. The court
said that the compromise was not valid because it was not authorized by the
BIR commissioner. SBC’s contention that the BIR, through its various
officials, accepted its offer to settle its entire DST deficiency assessment.
(they paid P650k) ISSUE: W/N the compromise is valid? HELD: NO. The
BIR Commissioner has the sole power and authority to compromise taxes.
Neither was there any showing that the BIR Commissioner specifically
authorized those revenue officials, who purportedly accepted and approved
SBC’s offer of payment, to compromise the DST on sale of securities, which,
to stress, were not included in the Compromise Agreement of August 15,
1988 by delegating his power to compromise said DST assessment on
securities. This ultra vires act of those revenue officials cannot have any valid
and binding legal effect upon the BIR, so as to proscribe the latter from
issuing the assailed reassessment of unpaid DST on the sales of securities
under repurchase agreements for the year 1983.
Republic of the Philippines v. Pedro Patanao (1967) Facts: This is an appeal criminal cases cannot operate to discharge Patanao from the duty of paying
from an order of the CFI of Agusan in a civil case, dismissing the Republic’s taxes which the law requires to be paid, since that duty is imposed by statute
complaint in so far as it concerns the collection of deficiency income taxes prior to and independently of any attempts by the taxpayer to evade
(taxable year 1951, 1953 and 1954) and residence taxes (1951- 52). Patanao payment. The obligation is not a consequence of the felonious acts charged in
was engaged in the business of producing logs and lumber for sale during the the criminal proceedings, nor is it a mere civil liability arising from crime tat
years 1951-55. It was alleged that he failed to file income tax returns for 1953 could be wiped out by the judicial declaration of non-exitence of the criminal
and 1954 and that the return he filed for 1951, 1952 and 1955 were false and acts charged. As to the prescription of the action, the complaint was filed on
fraudulent because he did not report substantial income earned by him from December 7, 1962 and was not barred by prescription because what was
his business. The Republic through the Deputy Commissioner of Internal applicable was the 10-year prescription period from the discovery of the
Revenue sent a letter of demand with enclosed income taxes assessment. falsity, fraud or omission. The fraud in the income tax return for 1951 was
Notwithstanding repeated demands, the Republic refused, failed and discovered on February 14, 1958 hence the 1962 filing was well within the 10-
neglected to pay the taxes and the assessment became final, executory and year prescription period.
demandable because it was not contested before the CTA, Patanao moved to
dismiss the complaint on 2 grounds: 1. Action is barred by prior judgment,
Patanao having been previously acquitted in criminal cases for failure to file
income tax returns and non-payment of income taxes. 2. Action is
prescribed. After considering the motion to dismiss, the opposition and the
rejoinder to the opposition, the lower court held that the only cause of action
left to the Republic is for the collection of income tax due for the year 1955
and the residence tax for 1953 to 1955. The lower court ruled that the present
action was barred by prior judgment, being that the accused was acquitted in
prior criminal cases for not filing and non-payment of his income tax returns
for the years 1953 and 1954. Since there was no waiver or reservation as to
the filing of a separate civil vase, Patanao was completely exonerated of any
civil action to collect the payment of the said taxes. Issues: 1. W/N the lower
court properly dismissed the case for being barred by prior judgment.
Held/Ratio: 1. NO, the court fell into error in applying the principle
underlying the civil liability of an offender under the Penal Code to a case
involving the collection of taxes. The 2 cases are of different factual premises,
which are opposed to each other and founded on entirely different
philosophies. Under the penal law, civil liability is incurred by reason of the
offender’s criminal act. Meanwhile, under the income tax law, the civil
liability to pay taxes arises from engaging in a taxable activity (i.e. business)
and the criminal liability from the failure to satisfy such civil obligation. The
difference in the factual premises and foundation principles of the 2 cases is
one of the reasons for not imposing civil indemnity on the criminal infractor
of the income tax law. Also, while the NIRC provided the imposition of the
penalty of imprisonment or fine for refusal or neglect to pay income taxes or
to make a return, it failed to provide for collection of income tax in criminal
proceedings. The only civil remedies provided for the collection of income
tax are distraint of goods, chattels by judicial action, which are remedies
generally exclusive in the absence of a contrary intent. The acquittal in
ection with the operation of Benipayo’s theater. Issues: 1. W/N there is sufficient evidence in the record showing that
Benipayo sold and issued to his adult customers two tax-free 20-centavo
His finding was that during the years 1949 to 1951 the average ratio of adults children’s tickets, instead of one 40-centavo ticket for each adult customer;
and children patronizing the Lucena Theater was 3 to 1, i.e., for every three to cheat or defraud the Government.
adults entering the theater, one child was also admitted, while during the
period the period from August, 1952 to September, 1953, the proportion is Held/Ratio: 1. NO. The Court quoted the decision of the CTA:
reversed - three children to one adult. From this he concluded that
respondent must have fraudulently sold two tax-free 20-centavo tickets, in [A]ssessments should not be based on mere presumptions no matter how
order to avoid payment of the amusement tax prescribed in Section 260 of reasonable or logical said presumptions may be. Assuming arguendo that the
the National Internal Revenue Code. average ratio of adults and children patronizing the Lucena Theater from
1949 to 1951 was 3 to 1, the same does not give rise to the inference that the
Based on the average ratio between adult and children attendance in the past same conditions existed during the years in question (1952 and 1953). The
years, Examiner de Guia recommended a deficiency amusement tax fact that almost the same ratio existed during the month of July, 1955 does
assessment against respondent in the sum of P11,193.45, inclusive of 25% not provide a sufficient inference on the conditions in 1952 and 1953. .. In
surcharge, plus a suggested compromise penalty of P900.00 for violation of order to stand the test of judicial scrutiny, the assessment must be based on
section 260 of the National Internal Revenue Code, or a total sum of actual facts. The presumption of correctness of assessment being a mere
P12,093.45 covering the period from August, 1952 to September, 1953 presumption cannot be made to rest on another presumption that the
inclusive. In July of 1954, CIR issued a deficiency amusement tax assessment circumstances in 1952 and 1953 are presumed to be the same as those
against Benipayo. existing in 1949 to 1951 and July 1955. In the case under consideration there
are no substantial facts to support the assessment in question. ... Fraud is a
In August 1954, Benipayo filed the corresponding protest with the serious charge and, to be sustained, it must be supported by clear and
Conference Staff of the Bureau of Internal Revenue. After due hearing, the convincing proof which, in the present case, is lacking.
Conference Staff submitted to petitioner Collector of Internal Revenue its
finding to the effect that the “meager reports of these fieldmen (Examiner de
Guia and the Provincial Revenue Agent of Quezon) are mere presumptions
and conclusions, devoid of findings of the fact of the alleged fraudulent
practices of the herein taxpayer”.

In view thereof, and as recommended by the Conference Staff, CIR referred

the case back to the Provincial Revenue Agent of Quezon for further
investigation. The Provincial Revenue Officer H.I. Bernardo reinforced the
findings of Agent De Guia. His report stated that returns from July 1-11
showed tickets with ratio of 1:3, but from July 14-24, when agents for his
office supervised in the sales of admission tickets, the sales ratio soared to
3:1. His investigation report read “without fear of contradiction that the ratio
of 3:1 xxx conveys the true picture of the situation under the law of averages.”
Thereafter, the Conference Staff of the Bureau of Internal Revenue
recommended to the Collector of Internal Revenue the issuance of the
deficiency amusement tax assessment in question in this appeal. CTA
reversed the decision of the CIR, relieving Benipayo of the deficiency
amusement tax assessed.