CASE DIGEST IN TAX REMEDIES

Michelle Claire O. Flores

JD 3-A

Case 17
CIR VS. UNITED SALVAGE
G.R. No. 197515               July 2, 2014

FACTS:

Respondent (USTP) is engaged in the business of sub-contracting work for service contractors
engaged in petroleum operations in the Philippines. In the course of respondent’s operations,
petitioner found respondent liable for deficiency income tax, withholding tax, value-added tax
and documentary stamp tax (DST) for taxable years 1992,1994, 1997 and 1998. Petitioner,
through BIR officials, issued demand letters with attached assessment notices for withholding
tax on compensation (WTC) and expanded withholding tax (EWT) for taxable years 1992, 1994
and 1998.

USTP filed administrative protests against the 1994 and 1998 EWT assessments, respectively. In
2003, the USTP appealed by way of Petition for Review before the CTA, but moved to withdraw
the same during the pendency of the proceedings because it availed of the benefits of the Tax
Amnesty Program. Having complied with all the requirements therefor, the CTA-Special First
Division partially granted the Motion to Withdraw and declared the issues on income tax, VAT
and DST deficiencies closed and terminated

The CTA-Special First Division held that the Preliminary Assessment Notices (PANs) for
deficiency EWT for taxable years 1994 and 1998 were not formally offered; hence, pursuant to
Section 34, Rule 132 of the Revised Rules of Court, the Court shall neither consider the same as
evidence nor rule on their validity.

As regards the Final Assessment Notices (FANs) for deficiency EWT for taxable years 1994 and
1998, the CTA-Special First Division held that the same do not show the law and the facts on
which the assessments were based. Said assessments were, therefore, declared void for failure to
comply with Section 228 of the 1997 Tax Code. From the foregoing, the only remaining valid
assessment is for taxable year 1992.

Nevertheless, the CTA-Special First Division declared that the right of petitioner to collect the
deficiency EWT and WTC, respectively, for taxable year 1992 had already lapsed pursuant to
Section 203 of the Tax Code. Thus, in ruling for USTP, the CTA-Special First Division
cancelled Assessment Notices both dated January 9, 1996 and covering the period of 1992.

Petitioner moved to reconsider the aforesaid ruling however it was denied the same for lack of
merit. Upon appeal, the CTA En Banc affirmed with modification the of the CTA-Special First
Division. The CTA En Banc upheld the 1998 EWT assessment. In addition to the basic EWT
deficiency of ₱14,496.79, USTP is ordered to pay surcharge, annual deficiency interest, and
annual delinquency interest from the date due until full payment pursuant to Section 249 of the
1997 NIRC.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

ISSUE:

Whether or not the EWT assessment issued against the respondent for taxable year 1994 were
valid.

RULING:

NO. In order to determine whether the requirement for a valid assessment is duly complied with,
it is important to ascertain the governing law, rules and regulations and jurisprudence at the time
the assessment was issued. In the instant case, the PANs and FANs pertaining to the deficiency
EWT for taxable years 1994 and 1998, respectively, were issued on January 19, 1998, when the
Tax Code was already in effect, as correctly found by the CTA En Banc. The date of issuance of
the notice of assessment determines which law applies- the 1997 NIRC or the old Tax Code.

In the instant case, the 1997 NIRC covers the 1994 and 1998 EWT FANs because there were
issued on January 19, 1998 and September 21, 2001, respectively, at the time of the effectivity of
the 1997 NIRC. Clearly, the assessments are governed by the law. Indeed, Section 228 of the
Tax Code provides that the taxpayer shall be informed in writing of the law and the facts on
which the assessment is made. Otherwise, the assessment is void. To implement the aforesaid
provision, Revenue Regulation No. 12-99was enacted by the BIR, of which Section 3.1.4 thereof
reads:

3.1.4. Formal Letter of Demand and Assessment Notice. –The formal letter of demand and
assessment notice shall be issued by the Commissioner or his duly authorized representative. The
letter of demand calling for payment of the taxpayer’s deficiency tax or taxes shall state the facts,
the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void. The same shall be sent to the
taxpayer only by registered mail or by personal delivery.

The law requires that the legal and factual bases of the assessment be stated in the formal letter
of demand and assessment and notice. Such cannot be assumed. 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.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 18
CIR VS. HANTEX TRADING CO., INC.
G.R. NO. 136975 31 MARCH 2005

FACTS:

The respondent is a corporation duly organized and existing under the laws of the Philippines.
Being engaged in the sale of plastic products, it imports synthetic resin and other chemicals for
the manufacture of its products. For this purpose, it is required to file an Import Entry and
Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section
1301 of the Tariff and Customs Code. Sometime in October 1989, Acting Chief of Counter-
Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received
confidential information that the respondent had imported synthetic resin amounting
to P115,599,018.00 but only declared P45,538,694.57.

Investigation ensued and subpoenas were issued. However, the respondent's president and
general manager refused to comply with the subpoena, contending that its books of accounts and
records of importation of synthetic resin and calcium bicarbonate had been investigated
repeatedly by the Bureau of Internal Revenue (BIR) on prior occasions.8  EIIB Commissioner
Almonte transmitted the entire docket of the case to the BIR and recommended the collection of
the total tax assessment from the respondent.

Meanwhile, the Bureau of Customs could not authenticate the machine copies of the import
entries as well, since the original copies of the said entries filed with the Bureau of Customs had
apparently been eaten by termites. Thus, the Bureau relied on the certified copies of the
respondent’s Profit and Loss Statement for 1987 and 1988 on file with the SEC, machine copies
of the Consumption entries, Series of 1987, submitted by informer, as well as excerpts from the
entries certified by the Tomas and Danganan who are Chief of the Collection Division and Chief
of the Collection Division of the Bureau of Customs, respectively.

The case was submitted to the CTA which ruled that Hantex have tax deficiency and is ordered
to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency
assessments issued by the petitioner were unlawful and baseless since the copies of the import
entries relied upon in computing the deficiency tax of the respondent were not duly authenticated
by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR
investigators.

ISSUE:
Whether or not the final assessment of the petitioner against the respondent for deficiency
income tax and sales tax for the latter’s 1987 importation of resins and calcium bicarbonate is
based on competent evidence and the law.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

RULING:

NO. Pursuant to Section 16 of the NIRC of 1977, as amended, which provides that the
Commissioner of Internal Revenue has the power to make assessments and prescribe additional
requirements for tax administration and enforcement. Among such powers are those provided in
paragraph (b) thereof, which states:

(b) Failure to submit required returns, statements, reports and other documents. 'When a report
required by law as a basis for the assessment of any national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when there is reason to believe that
any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax
on the best evidence obtainable.

However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not
include mere photocopies of records/documents. The petitioner, in making a preliminary and
final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere
machine copies of records/documents. Mere photocopies of the Consumption Entries have no
probative weight if offered as proof of the contents thereof. The reason for this is that such
copies are mere scraps of paper and are of no probative value as basis for any deficiency income
or business taxes against a taxpayer. Indeed, in United States v. Davey, the U.S. Court of
Appeals (2nd Circuit) ruled that where the accuracy of a taxpayer's return is being checked, the
government is entitled to use the original records rather than be forced to accept purported copies
which present the risk of error or tampering.

The original copies of the Consumption Entries were of prime importance to the BIR. This is so
because such entries are under oath and are presumed to be true and correct under penalty of
falsification or perjury. Admissions in the said entries of the importers' documents are
admissions against interest and presumptively correct. In fine, then, the petitioner acted
arbitrarily and capriciously in relying on and giving weight to the machine copies of the
Consumption Entries in fixing the tax deficiency assessments against the respondent.

The rule is that in the absence of the accounting records of a taxpayer, his tax liability may be
determined by estimation. The petitioner is not required to compute such tax liabilities with
mathematical exactness. Approximation in the calculation of the taxes due is justified. To hold
otherwise would be tantamount to holding that skillful concealment is an invincible barrier to
proof. However, the rule does not apply where the estimation is arrived at arbitrarily and
capriciously.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 19
CIR VS. TOLEDO POWER CORP.
G.R. No. 196415, December 02, 2015

The burden of proving entitlement to a tax refund rests on the taxpayer.

FACTS:

Toledo Power Corporation (TPC) is a general partnership principally engaged in the business of
power generation and sale of electricity to the National Power Corporation (NPC) and several
others. On December 22, 2003, TPC filed with BIR Regional District Office (RDO) No. 83 an
administrative claim for refund or credit of its unutilized input Value Added Tax (VAT) for the
taxable year 2002 in the total amount of P14,254,013.27 under Republic Act No. 9136 or the
Electric Power Industry Reform Act of 2001 (EPIRA) and the NIRC of 1997.
The CTA Division rendered a Decision8 partially granting TPC's claim in the reduced amount of
P7,598,279.29.9 Since NPC is exempt from the payment of all taxes, including VAT, the CTA
Division allowed TPC to claim a refund or credit of its unutilized input VAT attributable to its
zero-rated sales of electricity to NPC for the taxable year 2002. 10 The CTA Division, however,
denied the claim attributable to TPC's sales of electricity to several others due to the failure of
TPC to prove that it is a generation company under the EPIRA. 11 The CTA Division did not
consider the said sales as valid zero-rated sales because TPC did not submit a Certificate of
Compliance (COC) from the Energy Regulatory Commission (ERC).

TPC moved for partial reconsideration contending that as an existing generation company, it was
not required to obtain a COC from the ERC as a prerequisite for its operations, and that the issue
of whether it is a generation company was never raised during the trial. The CIR, likewise,
sought partial reconsideration arguing that the administrative claim was merely pro forma since
TPC failed to submit the complete documents required under Revenue Memorandum Order
(RMO) No. 53-98,17 which were necessary to ascertain the correct amount to be refunded in the
administrative claim.

The case reached the CTA En Banc which rendered a decision dismissing both Petitions for lack
of merit

ISSUE:

Whether the TPC is entitled to the full amount of its claim for tax refund or credit.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

RULING:

NO. TPC is not entitled to a refund or credit of unutilized input VAT attributable to its sales of
electricity to several others (CEBECO, ACMDC, and AFC). Section 6 of the EPIRA provides
that the sale of generated power by generation companies shall be zero-rated. Section 4(x) of the
same law states that a generation company "refers to any person or entity authorized by the ERC
to operate facilities used in the generation of electricity." Corollarily, to be entitled to a refund or
credit of unutilized input VAT attributable to the sale of electricity under the EPIRA, a taxpayer
must establish: (1) that it is a generation company, and (2) that it derived sales from power
generation.

Under the EPIRA, all new generation companies and existing generation facilities are required to
obtain a COC from the ERC. New generation companies must show that they have complied
with the requirements, standards, and guidelines of the ERC before they can operate.55 As for
existing generation facilities, they must submit to the ERC an application for a COC together
with the required documents within ninety (90) days from the effectivity of the EPIRA Rules and
Regulations.56 Based on the documents submitted, the ERC will determine whether the applicant
has complied with the standards and requirements for operating a generation company. If the
applicant is found compliant, only then will the ERC issue a COC.

In this case, when the EPIRA took effect in 2001, TPC was an existing generation facility. And
at the time the sales of electricity to CEBECO, ACMDC, and AFC were made in 2002, TPC was
not yet a generation company under EPIRA. Although it filed an application for a COC on June
20, 2002, it did not automatically become a generation company. It was only on June 23,2005,
when the ERC issued a COC in favor of TPC, that it became a generation company under
EPIRA. Consequently, TPC's sales of electricity to CEBECO, ACMDC, and AFC cannot qualify
for VAT zero-rating under the EPIRA.

All told, we find no error on the part of the CTA En Banc, in considering TPC's sales of
electricity to CEBECO, ACMDC, and AFC for taxable year 2002 as invalid zero-rated sales, and
in consequently denying TPC's claim for refund or credit of unutilized input VAT attributable to
the said sales of electricity.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 20
LG ELECTRONICS VS. CIR
G.R. No. 165451               December 3, 2014

FACTS:

LG Electronics Philippines, Inc. (LG) is a corporation duly organized and existing under the laws
of the Philippines. On March 21, 1998, LG received a formal assessment notice and demand
letter from the Bureau of Internal Revenue. LG was assessed deficiency income tax of
267,365,067.41 for the taxable year of 1994. LG, through its external auditor, filed an
administrative protest for reconsideration and reinvestigation with the BIR against the tax
assessment. It claimed that the assessment did not have factual and legal bases. LG also
subsequently submitted supporting documents. The Commissioner of Internal Revenue argued
before the Court of Tax Appeals that the assessment issued was in accordance with law since the
interest expenses claimed by LG were unsupported by sufficient proof. LG had undeclared
income.

In its Decision dated May 11, 2004, the Court of Tax Appeals ruled that LG was liable for the
payment of deficiency income tax for taxable year 1994, including 20% delinquency interest.
According to the Court of Tax Appeals, petitioner failed to submit in evidence a vital document,
which is the loan agreement.

Petitioner filed a Manifestation dated January 29, 2008 stating that it availed itself of the tax
amnesty by paying the total amount of ₱8,647,565.50 provided under Republic Act No. 9480. In
addition, the Bureau of Internal Revenue issued a ruling  which held that petitioner complied
with the provisions of R 9480. Petitioner is, thus, entitled to the immunities and privileges
provided for under the law.

However, according to respondent, petitioner cannot claim the tax amnesty provided under
Republic Act No. 9480 for the following reasons: (1) accounts receivable by the Bureau of
Internal Revenue as of the date of amnesty are not covered since these constitute government
property; (2) cases that have already been favorably ruled upon by the trial court or appellate
courts prior to the availment of tax amnesty are not covered; and (3) petitioner’s case involves
withholding taxes that are not covered by the Tax Amnesty Act.

ISSUE:

Whether the petitioner is entitled to the immunities and privileges under the Tax Amnesty Law
or RA 9480.

RULING:

Yes. LG has properly availed itself of the tax amnesty under RA No. 9840 by paying the correct
amount and submitting the required documents. LG’s completion of the requirements and
compliance with the procedure laid down in the law and the implementing rules entitled it to the
privileges and immunities under the tax amnesty program.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Moreover, tax assessments that are disputed administratively or judicially are still covered by the
tax amnesty law except those cases excluded from the coverage of the law like tax cases subject
of final and executory judgments by the courts. The present case has not become final and
executory when LG availed of the tax amnesty program.

A tax amnesty is a general pardon or the intentional overlooking by the State of its authority to
impose penalties on persons otherwise guilty of violation of a tax law. It partakes of an absolute
waiver by the government of its right to collect what is due it and to give tax evaders who wish
to relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never
favored or presumed in law. The grant of a tax amnesty, similar to a tax exemption, must be
construed strictly against the taxpayer and liberally in favor of the taxing authority
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 21
ASIATRUST DEVELOPMENT BANK VS. CIR
G.R. No. 201530 April 19, 2017

FACTS:

Asiatrust Development Bank, Inc. (Asiatrust) received from the Commissioner of Internal
Revenue (CIR) three Formal Letters of Demand (FLD) with Assessment Notices for deficiency
internal revenue taxes. Asiatrust timely protested the assessment notices. Due to the inaction of
the CIR on the protest, Asiatrust filed before the CTA a Petition for Review praying for the
cancellation of the tax assessments for deficiency income tax, documentary stamp tax both
regular and industry issue, final withholding tax, expanded withholding tax, and fringe benefits
tax issued against it by the CIR. On December 28, 2001, the CIR issued against Asiatrust new
Assessment Notices for deficiency taxes covering the fiscal years ending June 30, 1996, 1997,
and 1998, respectively. On the same day, Asiatrust partially paid said deficiency tax assessments
thus leaving balancing.

On April 19, 2005, the CIR approved Asiatrust's Offer of Compromise of DST - regular
assessments for the fiscal years mentioned. During the trial, Asiatrust manifested that it availed
of the Tax Abatement Program for its deficiency final withholding tax - trust assessments for
fiscal years ending June 30, 1996 and 1998; and that on June 29, 2007, it paid the basic taxes in
the amounts of P4,187,683.27 and P6,097,825.03 for the said fiscal years, respectively.  Asiatrust
also claimed that on March 6, 2008, it availed of the provisions of Republic Act (RA) No. 9480,
otherwise known as the Tax Amnesty Law of 2007.

The CTA Division rendered a Decision partially granting the Petition. Accordingly, assessment
Notices issued against Asiatrust for deficiency documentary stamp, final withholding, expanded
withholding, and fringe benefits tax assessments for the fiscal year ended June 30, 1996 are
VOID for being issued beyond the prescriptive period allowed by law.

However, still unsatisfied with the decision, both parties elevated the case to CTA En Banc. The
CTA En Banc denied both appeals. It denied the CIR' s appeal for failure to file a prior motion
for reconsideration of the Amended Decision,40 while it denied Asiatrust's appeal for lack of
merit. The CTA En Banc  sustained the ruling of the CT A Division that in the absence of a
termination letter, it cannot be established that Asiatrust validly availed of the Tax Abatement
Program

ISSUE:

Whether the CTA En Banc erred in finding that petitioner is liable for deficiency final
withholding tax for fiscal year ending June 30, 1998.

RULING:
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

NO. Based on the guidelines provided in Section 4 of the RR No. 15-06, the last step in the tax
abatement process is the issuance of the termination letter. The presentation of the termination
letter is essential as it proves that the taxpayer's application for tax abatement has been approved.
Thus, without a termination letter, a tax assessment cannot be considered closed and terminated.

In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a
Certification issued by the BIR to prove that it availed of the Tax Abatement Program and paid
the basic tax. It also attached copies of its BIR Tax Payment Deposit Slips and a Jetter issued by
RDO Nacar. These documents, however, do not prove that Asiatrust's application for tax
abatement has been approved. If at all, these documents only prove Asiatrust's payment of basic
taxes, which is not a ground to consider its deficiency tax assessment closed and terminated.
Since no tennination letter has been issued by the BIR, there is no reason for the Court to
consider as closed and terminated the tax assessment on Asiatrust's final withholding tax for
fiscal year ending June 30, 1998.

Asiatrust's application for tax abatement will be deemed approved only upon the issuance of a
tem1ination letter, and only then will the deficiency tax assessment be considered closed and
terminated. However, in case Asiatrust's application for tax abatement is denied, any payment
made by it would be applied to its outstanding tax liability. For this reason, Asiatrust's allegation
of double taxation must also fail.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 22
CIR VS. BF GOODRICH PHILS. INC.
G.R. No. 104171 February 24, 1999

FACTS

Private Respondent BF Goodrich Phils. Inc. was an American-owned and controlled corporation
previous to July 3, 1974. As a condition for approving the manufacture by private respondent of
tires and other rubber products, the Central Bank of the Philippines required that it should
develop a rubber plantation. More than a decade later, the justice secretary rendered an opinion
stating that, upon the expiration of the Parity Amendment on July 3, 1974, the ownership rights
of Americans over public agricultural lands, including the right to dispose or sell their real estate,
would be lost.

On the basis of this Opinion, private respondent sold to Siltown Realty Philippines, Inc. Based
on the BIR's Letter of Authority, the books and accounts of private respondent were examined
for the purpose of determining its tax liability for taxable year 1974. The examination resulted
assessment of private respondent for deficiency income tax in the amount of P6,005.35, which it
duly paid.

Subsequently, the BIR also issued Letters of Authority for the purpose of examining Siltown's
business, income and tax liabilities. On the basis of this examination, the BIR commissioner
issued against private respondent on October 10, 1980, an assessment for deficiency in donor's
tax in the amount of P1,020,850, in relation to the previously mentioned sale of its Basilan
landholdings to Siltown. Apparently, the BIR deemed the consideration for the sale insufficient,
and the difference between the fair market value and the actual purchase price a taxable
donation.

On April 9, 1981, it received another assessment dated March 16, 1981, which increased to P
1,092,949 the amount demanded for the alleged deficiency donor's tax, surcharge, interest and
compromise penalty. Private respondent appealed the correctness and the legality of these last
two assessments to the CTA. After trial in due course, the CTA rendered its Decision modifying
the CIR decision.

Undaunted, private respondent elevated the matter to the Court of Appeals, which reversed the
CTA’s decision.

ISSUE:

Whether or not petitioner’s right to assess herein deficiency donor's tax has indeed prescribed as
ruled by public respondent Court of Appeals
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

RULING:

The petition has no merit.

The petitioner contends that the Court of Appeals erred in reversing the CTA on the issue of
prescription, because its ruling was based on factual findings that should have been left
undisturbed on appeal, in the absence of any showing that it had been tainted with gross error or
grave abuse of discretion.

The Court is not persuaded.

True, the factual findings of the CTA are generally not disturbed on appeal when supported by
substantial evidence and in the absence of gross error or grave abuse of discretion. However, the
CTA's application of the law to the facts of this controversy is an altogether different matter, for
it involves a legal question. There is a question of law when the issue is the application of the
law to a given set of facts. On the other hand, a question of fact involves the truth or falsehood of
alleged facts. 

In the present case, the Court of Appeals ruled not on the truth or falsity of the facts found by the
CTA, but on the latter's application of the law on prescription.
Sec. 331 of the National Internal Revenue Code provides:

Sec. 331. Period of limitation upon assessment and collection. — Except as

provided in the succeeding section, internal-revenue taxes shall be assessed within
five years after the return was filed, and no proceeding in court without
assessment for the collection of such taxes shall be begun after expiration of such
period. For the 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: Provided, That this limitation shall not apply to cases already investigated
prior to the approval of this Code.

Applying this provision of law to the facts at hand, it is clear that the October 16, 1980 and the
March 1981 assessments were issued by the BIR beyond the five-year statute of limitations.

For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or
assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law
on prescription, being a remedial measure, should be liberally construed in order to afford such
protection. 12 As a corollary, the exceptions to the law on prescription should perforce be strictly
construed.

Furthermore, the fact that private respondent sold its real property for a price less than its
declared fair market value did not by itself justify a finding of false return.

Since the BIR failed to demonstrate clearly that private respondent had filed a fraudulent return
with the intent to evade tax, or that it had failed to file a return at all, the period for assessments
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

has obviously prescribed. Such instances of negligence or oversight on the part of the BIR cannot
prejudice taxpayers, considering that the prescriptive period was precisely intended to give them
peace of mind.

Case 23
CIR VS. KUDOS METAL CORP.
G.R. No. 178087               May 5, 2010

FACTS:

On April 15, 1999, respondent Kudos Metal Corporation filed its Annual Income Tax Return
(ITR) for the taxable year 1998. Pursuant to a Letter of Authority dated September 7, 1999, the
Bureau of Internal Revenue (BIR) served upon respondent three Notices of Presentation of
Records. Respondent failed to comply with these notices, hence, the BIR issued a Subpeona
Duces Tecum dated September 21, 2006, receipt of which was acknowledged by respondent’s
President. A review and audit of respondent’s records then ensued.

On December 10, 2001, respondent’s accountant (Pasco), executed a Waiver of the Defense of
Prescription,4 which was notarized on January 22, 2002, received by the BIR Enforcement
Service on January 31, 2002 and by the BIR Tax Fraud Division on February 4, 2002, and
accepted by the Assistant Commissioner of the Enforcement Service,

This was followed by a second Waiver of Defense of Prescription executed by Pasco on February
18, 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 for
taxable year 1998, dated September 26, 2003 which was received by respondent on November
12, 2003. Respondent challenged the assessments by filing its "Protest on Various Tax
Assessments".

The BIR rendered a final Decision requesting the immediate payment of the tax liabilities
amounting to P25,624,048.76. On October 4, 2005, the CTA Second Division issued a
Resolution1 canceling the assessment notices issued against respondent for having been issued
beyond the prescriptive period.

On appeal, the CTA En Banc affirmed the cancellation of the assessment notices.

ISSUE:

Whether or not the Court of Tax Appeals En banc erred in ruling that the government’s right to
assess unpaid taxes of respondent prescribed.

RULING:

Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the government to
assess internal revenue taxes within three years from the last day prescribed by law for the filing
of the tax return or the actual date of filing of such return, whichever comes later. Hence, an
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

assessment notice issued after the three-year prescriptive period is no longer valid and effective.
Exceptions however are provided under Section 22216 of the NIRC.

Section 222 (b) of the NIRC provides that 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.

A perusal of the waivers executed by respondent’s accountant reveals 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.
Due to the defects in the waivers, the period to assess or collect taxes was not extended.
Consequently, the assessments were issued by the BIR beyond the three-year period and are
void.

We find no merit in petitioner’s claim that respondent is now estopped from claiming
prescription since by executing the waivers, it was the one which asked for additional time to
submit the required documents.

The doctrine of estoppel cannot be applied in this case as an exception to the statute of
limitations on the assessment of taxes considering that there is a detailed procedure for the
proper execution of the waiver, which the BIR must strictly follow. As we have often said, the
doctrine of estoppel is predicated on, and has its origin in, equity which, broadly defined, is
justice according to natural law and right.22 As such, the doctrine of estoppel cannot give validity
to an act that is prohibited by law or one that is against public policy. 23 It should be resorted to
solely as a means of preventing injustice and should not be permitted to defeat the administration
of the law, or to accomplish a wrong or secure an undue advantage, or to extend beyond them
requirements of the transactions in which they originate. 24 Simply put, the doctrine of estoppel
must be sparingly applied.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 24
CIR VS. PHOENIX ASSURANCE CO.
G.R. No. L-19727             May 20, 1965

FACTS:

Phoenix Assurance Co., Ltd., a foreign insurance corporation organized under the laws of Great
Britain, is licensed to do business in the Philippines with head office in London. It agree to cede
a portion of premiums received on original insurances underwritten by its head office,
subsidiaries, and branch offices throughout the world, in consideration for assumption by the
foreign insurance companies of an equivalent portion of the liability from such original
insurances.

On April 29, 1955, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1954
claiming therein, among others, a deduction from gross income of P99,624.75 as head office
expenses allocable to its Philippine business, computed at 5% of its gross Philippine income. It
also excluded from its gross income the amount of P203,384.69 representing reinsurance
premiums ceded to foreign reinsurers not doing business in the Philippines.

On August 1, 1958 the Bureau of Internal Revenue released the following assessment for
deficiency income tax for the years 1952 and 1954 against Phoenix Assurance Co. in the amount
of P 2,847.00. Phoenix Assurance Co., Ltd. protested against the aforesaid assessments for
withholding tax and deficiency income tax. However, the Commissioner of Internal Revenue
denied such protest.

The Court of Tax Appeals found the right of the Commissioner of Internal Revenue barred by
prescription, the same having been exercised more than five years from the date the original
return was filed. On the other hand, the Commissioner of Internal Revenue insists that his right
to issue the assessment has not prescribed inasmuch as the same was availed of before the 5-year
period provided for in Section 331 of the Tax Code expired, counting the running of the period
from August 30, 1955, the date when the amended return was filed.

ISSUE:

Whether the running of the prescriptive period commence from the filing of the original or
amended return.

RULING:

The running of the prescriptive period commences from filing of the amended return.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

The changes and alterations embodied in the amended income tax return consisted of the
exclusion of reinsurance premiums received from domestic insurance companies by Phoenix
Assurance Co., Ltd.'s London head office, reinsurance premiums ceded to foreign reinsurers not
doing business in the Philippines and various items of deduction attributable to such excluded
reinsurance premiums thereby substantially modifying the original return.
Considering that the deficiency assessment was based on the amended return which, as
aforestated, is substantially different from the original return, the period of limitation of the right
to issue the same should be counted from the filing of the amended income tax return. From
August 30, 1955, when the amended return was filed, to July 24, 1958, when the deficiency
assessment was issued, less than five years elapsed. The right of the Commissioner to assess the
deficiency tax on such amended return has not prescribed.

To strengthen our opinion, we believe that to hold otherwise, we would be paving the way for
taxpayers to evade the payment of taxes by simply reporting in their original return heavy losses
and amending the same more than five years later when the Commissioner of Internal Revenue
has lost his authority to assess the proper tax thereunder. The object of the Tax Code is to impose
taxes for the needs of the Government, not to enhance tax avoidance to its prejudice.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

Case 25
CBC VS. CITY TREASURER OF MANILA
G.R. No. 204117 July 01, 2015

FACTS:

On January 2007, on the basis of the reported income of respondent amounting to

P34,310,777.34 for the year ending December 31, 2006, respondent CBC was assessed the
amount of P267,128.70 by petitioner City Treasurer of Manila for taxable year 2007. On
January 15, 2007, respondent CBC paid the amount of P267,128.70 and protested, thru a Letter
dated January 12, 2007, the imposition of business tax under Section 21 of the Manila Revenue
Code in the amount of P154,398.50, on the ground that it is not liable of said additional business
tax and the same constitutes double taxation.

On April 17, 2007, respondent CBC filed a Petition for Review with the RTC of Manila to which
it rendered its decision9 granting the petition filed by CBC and ordered the City Treasurer to
refund the amount of P154,398.50, representing the assessment paid by it under Section 21 of
Manila Ordinance No. 7988,10 as amended by Tax Ordinance No. 8011. The RTC found that the
City Treasurer had no basis to collect the amount of P154,398.50 because the Department of
Justice (DOJ) was of the opinion that Ordinance Nos. 7988 and 8011 were unconstitutional

On October 1, 2010, the CTA Division15reversed the decision of the RTC, effectively dismissing
CBC’s protest against the disputed assessment. The CTA Division noted that the petition for
review was filed one (1) day beyond the reglementary period allowed by Section 195 of the
Local Government Code16 (LGC) to taxpayers who wished to appeal a denial of a protest due to
the inaction of the City Treasurer.

Aggrieved, CBC elevated the matter to the CTA En Banc. On appeal, the CTA En
Banc affirmed the ruling of the CTA Division in toto, reiterating that the petition for review was
filed out of time. CBC filed its motion for reconsideration of the said decision but the CTA En
Banc denied the same.

ISSUE:

Whether or not the honorable ourt of tax appeals gravely erred in disregarding the law and
interest of substantial justice by reversing the ruling of the trial court solely because of its
assumed pronouncement that the original petition was filed one (1) day beyond the reglementary
period.
 CASE DIGEST IN TAX REMEDIES
Michelle Claire O. Flores
JD 3-A

RULING:

The petition lacks merit.

Under the current state of law, there can be no doubt that the law does not prescribe any formal
requirement to constitute a valid protest. To constitute a valid protest, it is sufficient if what has
been filed contains the spontaneous declaration made to acquire or keep some right or to prevent
an impending damage. Accordingly, a protest is valid so long as it states the taxpayer’s objection
to the assessment and the reasons therefor.

In this case, the Court finds that the City Treasurer’s contention that CBC was not able to
properly protest the assessment to be without merit. The Court is of the view that CBC was able
to properly file its protest against the assessment of the City Treasurer when it filed its letter on
January 15, 2007, questioning the imposition while paying the assessed amount.

SECTION 195. Protest of Assessment. - When the local treasurer or his duly authorized
representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice
of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the
surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of
assessment, the taxpayer may file a written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final and executory. The local treasurer shall
decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the
protest to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the
assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he
shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty
(30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day
period prescribed herein within which to appeal with the court of competent jurisdiction
otherwise the assessment becomes conclusive and unappealable.
[Emphasis Supplied]

Time and again, it has been held that the perfection of an appeal in the manner and within the
period laid down by law is not only mandatory but also jurisdictional. The failure to perfect an
appeal as required by the rules has the effect of defeating the right to appeal of a party and
precluding the appellate court from acquiring jurisdiction over the case. At the risk of being
repetitious, the Court declares that the right to appeal is not a natural right nor a part of due
process. It is merely a statutory privilege, and may be exercised only in the manner and in
accordance with the provisions of the law