G.R. No. 175097. February 5, 2010.

ALLIED BANKING CORPORATION, petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, respondent.

Taxation; Assessment; Tax Protest; Pursuant to Section 228 of

the National Internal Revenue Code (NIRC), the proper recourse of
petitioners was to dispute the assessment by filing an
administrative protest within 30 days from receipt thereof.—In the
instant case, petitioner timely filed a protest after receiving the
PAN. In response thereto, the BIR issued a Formal Letter of
Demand with Assessment Notices. Pursuant to Section 228 of the
NIRC, the proper recourse of petitioner was to dispute the
assessments by filing an administrative protest within 30 days
from receipt thereof. Petitioner, however, did not protest the final
assessment notices. Instead, it filed a Petition for Review with the
CTA. Thus, if we strictly apply the rules, the dismissal of the
Petition for Review by the CTA was proper.
Same; Same; Same; Instant case is an exception to the rule on
exhaustion of administrative remedies.—A careful reading of the
Formal Letter of Demand with Assessment Notices leads us to
agree with petitioner that the instant case is an exception to the
rule on exhaustion of administrative remedies, i.e., estoppel on
the part of the administrative agency concerned.
Same; Same; Same; Court have time and again reminded the
Commissioner of Internal Revenue (CIR) to indicate in a clear and
unequivocal language whether his action on a disputed assessment
constitute his final determination thereon in order for the taxpayer
concerned to determined when his or her right to appeal to tax
count accrues.—In this case, records show that petitioner disputed
the PAN but not the Formal Letter of Demand with Assessment
Notices. Nevertheless, we cannot blame petitioner for not filing a
protest against the Formal Letter of Demand with Assessment
Notices since the language used and the tenor of the demand
letter indicate that it is the final decision of the respondent on the
matter. We have time and again reminded the CIR to indicate, in
a clear and unequivocal language, whether his action on a
disputed assessment constitutes

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* SECOND DIVISION.
 693

his final determination thereon in order for the taxpayer

concerned to determine when his or her right to appeal to the tax
court accrues. Viewed in the light of the foregoing, respondent is
now estopped from claiming that he did not intend the Formal
Letter of Demand with Assessment Notices to be a final decision.
Same; Same; Same; It is the Formal Letter of Demand and
Assessment Notice that must be administratively protested or
disputed within 30 days and not the Preliminary Assessment
Notice (PAN).—We are not disregarding the rules of procedure
under Section 228 of the NIRC, as implemented by Section 3 of
BIR Revenue Regulations No. 12-99. It is the Formal Letter of
Demand and Assessment Notice that must be administratively
protested or disputed within 30 days, and not the PAN. Neither
are we deviating from our pronouncement in St. Stephen’s
Chinese Girl’s School v. Collector of Internal Revenue, 104 Phil.
314 (1958) that the counting of the 30 days within which to
institute an appeal in the CTA commences from the date of
receipt of the decision of the CIR on the disputed assessment, not
from the date the assessment was issued.

PETITION for review on certiorari of the decision and

resolution of the Court of Tax Appeals.
   The facts are stated in the opinion of the Court.
  Francisco Gerardo C. Llamas and Paul A. Bernardino
for petitioner Allied Banking Corporation.
  The Solicitor General for respondent.

DEL CASTILLO, J.:

The key to effective communication is clarity.
The Commissioner of Internal Revenue (CIR) as well as
his duly authorized representative must indicate clearly
and unequivocally to the taxpayer whether an action
constitutes a final determination on a disputed
assessment.1 Words must

_______________

1 Surigao Electric Co., Inc. v. Court of Tax Appeals, 156 Phil. 517, 522-
523; 57 SCRA 523, 528 (1974).

694

be carefully chosen in order to avoid any confusion that

could adversely affect the rights and interest of the
taxpayer.Assailed in this Petition for Review on Certiorari2
under Section 12 of Republic Act (RA) No. 9282,3 in relation
to Rule 45 of the Rules of Court, are the August 23, 2006
Decision4 of the Court of Tax Appeals (CTA) and its
October 17, 2006 Resolution5 denying petitioner’s Motion
for Reconsideration.
Factual Antecedents
On April 30, 2004, the Bureau of Internal Revenue (BIR)
issued a Preliminary Assessment Notice (PAN) to
petitioner Allied Banking Corporation for deficiency
Documentary Stamp Tax (DST) in the amount of
P12,050,595.60 and Gross Receipts Tax (GRT) in the
amount of P38,995,296.76 on industry issue for the taxable
year 2001.6 Petitioner received the PAN on May 18, 2004
and filed a protest against it on May 27, 2004.7
On July 16, 2004, the BIR wrote a Formal Letter of
Demand with Assessment Notices to petitioner, which
partly reads as follows:8

_______________

2 Rollo, pp. 7-21.

3 An Act Expanding the Jurisdiction of the Court of Tax Appeals
(CTA), Elevating its Rank to the Level of a Collegiate Court with Special
Jurisdiction and Enlarging its Membership, Amending for the Purpose
Certain Sections of Republic Act No. 1125, As Amended, otherwise known
as the Law Creating the Court of Tax Appeals, and for Other Purposes.
4  Rollo, pp. 23-30; penned by Associate Justice Erlinda P. Uy and
concurred in by Presiding Justice Ernesto D. Acosta, and Associate
Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, and Caesar A.
Casanova. Associate Justice Olga Palanca-Enriquez inhibited herself and
did not take part.
5 Id., at pp. 32-34.
6 Id., at pp. 53-54.
7 Id., at p. 24.
8 Id., at pp. 35-36.

695

“It is requested that the above deficiency tax be paid immediately

upon receipt hereof, inclusive of penalties incident to delinquency.
This is our final decision based on investigation. If you disagree,
you may appeal the final decision within thirty (30) days from
receipt hereof, otherwise said deficiency tax assessment shall
become final, executory and demandable.”

Petitioner received the Formal Letter of Demand with

Assessment Notices on August 30, 2004.9
Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for
Review10 with the CTA which was raffled to its First
Division and docketed as CTA Case No. 7062.11
On December 7, 2004, respondent CIR filed his
Answer.12 On July 28, 2005, he filed a Motion to Dismiss13
on the ground that petitioner failed to file an
administrative protest on the Formal Letter of Demand
with Assessment Notices. Petitioner opposed the Motion to
Dismiss on August 18, 2005.14
On October 12, 2005, the First Division of the CTA
rendered a Resolution15 granting respondent’s Motion to
Dismiss. It ruled:

“Clearly, it is neither the assessment nor the formal demand

letter itself that is appealable to this Court. It is the decision of
the Commissioner of Internal Revenue on the disputed
assessment that can be appealed to this Court (Commissioner of
Internal Revenue vs. Villa, 22 SCRA 3). As correctly pointed out
by respondent, a disputed assessment is one wherein the taxpayer
or his duly authorized representative filed an administrative
protest against the formal letter

_______________

9 Id., at p. 24.
10 Id., at pp. 37-61.
11 Id., at p. 24.
12 Id.
13 Id., at pp. 62-66.
14 Id., at p. 25.
15 Id., at pp. 67-72.

696

of demand and assessment notice within thirty (30) days from

date [of] receipt thereof. In this case, petitioner failed to file an
administrative protest on the formal letter of demand with the
corresponding assessment notices. Hence, the assessments did not
become disputed assessments as subject to the Court’s review
under Republic Act No. 9282. (See also Republic v. Liam Tian
Teng Sons & Co., Inc., 16 SCRA 584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The
Petition for Review is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.”16

Aggrieved, petitioner moved for reconsideration but the

motion was denied by the First Division in its Resolution
dated February 1, 2006.17
Proceedings before the CTA En Banc
On February 22, 2006, petitioner appealed the dismissal
to the CTA En Banc.18 The case was docketed as CTA EB
No. 167.
Finding no reversible error in the Resolutions dated
October 12, 2005 and February 1, 2006 of the CTA First
Division, the CTA En Banc denied the Petition for Review19
as well as petitioner’s Motion for Reconsideration.20
The CTA En Banc declared that it is absolutely
necessary for the taxpayer to file an administrative protest
in order for the CTA to acquire jurisdiction. It emphasized
that an administrative protest is an integral part of the
remedies given to a taxpayer in challenging the legality or
validity of an assessment. According to the CTA En Banc,
although there are exceptions to the doctrine of exhaustion
of administrative

_______________

16 Id., at pp. 71-72.

17 Id., at p. 25.
18 Id., at p. 23.
19 Id., at p. 29.
20 Id., at p. 34.

697

remedies, the instant case does not fall in any of the

exceptions.

Issue

Hence, the present recourse, where petitioner raises the

lone issue of whether the Formal Letter of Demand dated
July 16, 2004 can be construed as a final decision of the
CIR appealable to the CTA under RA 9282.

Our Ruling

The petition is meritorious.

Section 7 of RA 9282 expressly provides
that the CTA exercises exclusive appellate
jurisdiction to review by appeal decisions
of the CIR in cases involving disputed
assessments
The CTA, being a court of special jurisdiction, can take
cognizance only of matters that are clearly within its
jurisdiction.21 Section 7 of RA 9282 provides:

“Sec. 7. Jurisdiction.—The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as
herein provided:
(1) Decisions of the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees
or other charges, penalties in relation thereto, or
other matters arising under the National Internal
Revenue Code or other laws administered by the
Bureau of Internal Revenue;

_______________

21 Rizal Commercial Banking Corporation v. Commissioner of Internal

Revenue, G.R. No. 168498, April 24, 2007, 522 SCRA 144, 150.
 698

(2) Inaction by the Commissioner of Internal Revenue

in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising
under the National Internal Revenue Code or other
laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the
inaction shall be deemed a denial; (Emphasis
supplied)
     x x x x”

The word “decisions” in the above quoted provision of RA

9282 has been interpreted to mean the decisions of the CIR
on the protest of the taxpayer against the assessments.22
Corollary thereto, Section 228 of the National Internal
Revenue Code (NIRC) provides for the procedure for
protesting an assessment. It states:

“SECTION 228. Protesting of Assessment.—When the

Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the taxpayer
of his findings: Provided, however, That a preassessment notice
shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on
the face of the return; or
(b) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding
agent; or
(c) When a taxpayer who opted to claim a refund or tax credit
of excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding taxable year; or

_______________

22  Commissioner of Internal Revenue v. Villa, 130 Phil. 3, 6; 22 SCRA 3, 6

(1968).

699

(d) When the excise tax due on excisable articles has not been
paid; or
(e) When an article locally purchased or imported by an
exempt person, such as, but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
 The taxpayers shall be informed in writing of the law and the
facts on which the assessment is made; otherwise, the assessment
shall be void.
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the Commissioner or his
duly authorized representative shall issue an assessment based
on his findings.
Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations. Within
sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of the one
hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable.”

In the instant case, petitioner timely filed a protest after

receiving the PAN. In response thereto, the BIR issued a
Formal Letter of Demand with Assessment Notices.
Pursuant to Section 228 of the NIRC, the proper recourse
of petitioner was to dispute the assessments by filing an
administrative protest within 30 days from receipt thereof.
Petitioner, however, did not protest the final assessment
notices. Instead, it filed a Petition for Review with the
CTA. Thus, if we strictly apply the rules, the dismissal of
the Petition for Review by the CTA was proper.

700

The case is an exception to the rule on

exhaustion of administrative remedies
However, a careful reading of the Formal Letter of
Demand with Assessment Notices leads us to agree with
petitioner that the instant case is an exception to the rule
on exhaustion of administrative remedies, i.e., estoppel on
the part of the administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay
Commission,23 the respondent contended that before filing
a petition with the court, petitioner should have first
exhausted all administrative remedies by appealing to the
Office of the President. However, we ruled that respondent
was estopped from invoking the rule on exhaustion of
administrative remedies considering that in its Resolution,
it said, “The opinions promulgated by the Secretary of
Justice are advisory in nature, which may either be
accepted or ignored by the office seeking the opinion, and
any aggrieved party has the court for recourse”. The
statement of the respondent in said case led the petitioner
to conclude that only a final judicial ruling in her favor
would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from
claiming that the filing of the Petition for Review was
premature because petitioner failed to exhaust all
administrative remedies.
The Formal Letter of Demand with Assessment Notices
reads:

“Based on your letter-protest dated May 26, 2004, you alleged the
following:
1. That the said assessment has already prescribed in accordance
with the provisions of Section 203 of the Tax Code.

_______________

23 105 Phil. 377, 383 (1959).

701

2. That since the exemption of FCDUs from all taxes found in the
Old Tax Code has been deleted, the wording of Section 28(A)(7)(b)
discloses that there are no other taxes imposable upon FCDUs
aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST
for taxable year 2001 has not prescribed for [sic] simply because no
returns were filed, thus, the three year prescriptive period has not
lapsed.
With the implementation of the CTRP, the phrase “exempt from all
taxes” was deleted. Please refer to Section 27(D)(3) and 28(A)(7) of the
new Tax Code. Accordingly, you were assessed for deficiency gross
receipts tax on onshore income from foreign currency transactions in
accordance with the rates provided under Section 121 of the said Tax
Code. Likewise, deficiency documentary stamp taxes was [sic] also
assessed on Loan Agreements, Bills Purchased, Certificate of Deposits
and related transactions pursuant to Sections 180 and 181 of NIRC, as
amended.
The 25% surcharge and 20% interest have been imposed pursuant to
the provision of Section 248(A) and 249(b), respectively, of the National
Internal Revenue Code, as amended.
It is requested that the above deficiency tax be paid immediately
upon receipt hereof, inclusive of penalties incident to delinquency. This
is our final decision based on investigation. If you disagree, you
may appeal this final decision within thirty (30) days from
receipt hereof, otherwise said deficiency tax assessment shall
become final, executory and demandable.”24 (Emphasis supplied)

It appears from the foregoing demand letter that the

CIR has already made a final decision on the matter and
that the remedy of petitioner is to appeal the final decision
within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of
Internal Revenue,25 we considered the language used and
the

_______________

24 Rollo, p. 36.
25 G.R. No. 148380, December 9, 2005, 477 SCRA 205, 211.

702

tenor of the letter sent to the taxpayer as the final decision

of the CIR.
In this case, records show that petitioner disputed the
PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless, we cannot blame
petitioner for not filing a protest against the Formal Letter
of Demand with Assessment Notices since the language
used and the tenor of the demand letter indicate that it is
the final decision of the respondent on the matter. We have
time and again reminded the CIR to indicate, in a clear and
unequivocal language, whether his action on a disputed
assessment constitutes his final determination thereon in
order for the taxpayer concerned to determine when his or
her right to appeal to the tax court accrues.26 Viewed in the
light of the foregoing, respondent is now estopped from
claiming that he did not intend the Formal Letter of
Demand with Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal
Letter of Demand with Assessment Notices, respondent
used the word “appeal” instead of “protest”,
“reinvestigation”, or “reconsideration”. Although there was
no direct reference for petitioner to bring the matter
directly to the CTA, it cannot be denied that the word
“appeal” under prevailing tax laws refers to the filing of a
Petition for Review with the CTA. As aptly pointed out by
petitioner, under Section 228 of the NIRC, the terms
“protest”, “reinvestigation” and “reconsideration” refer to
the administrative remedies a taxpayer may take before
the CIR, while the term “appeal” refers to the remedy
available to the taxpayer before the CTA. Section 9 of RA
9282, amending Section 11 of RA 1125,27 likewise uses the

_______________

26 Surigao Electric Co., Inc. v. Court of Tax Appeals, supra note 1.

27 Section 11. Who may Appeal; Mode of Appeal; Effect of Appeal.—
Any party adversely affected by a decision, ruling or inaction of the
Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry
 703

term “appeal” when referring to the action a taxpayer must

take when adversely affected by a decision, ruling, or
inaction of the CIR. As we see it then, petitioner in
appealing the Formal Letter of Demand with Assessment
Notices to the CTA merely took the cue from respondent.
Besides, any doubt in the interpretation or use of the word
“appeal” in the Formal Letter of Demand with Assessment
Notices should be resolved in favor of petitioner, and not
the respondent who caused the confusion.
To be clear, we are not disregarding the rules of
procedure under Section 228 of the NIRC, as implemented
by Section 3 of BIR Revenue Regulations No. 12-99.28 It is
the Formal Let-

_______________

  or the Secretary of Agriculture or the Central Board of Assessment

Appeals or the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or ruling or after
the expiration of the period fixed by law for action as referred to in Section
7(a) (2) herein.

xxxx
28 Section 3. Due Process Requirement in the Issuance of a Deficiency
Tax Assessment.—
xxxx
3.1.2 Preliminary Assessment Notice (PAN).—If after review and
evaluation by the Assessment Division or by the Commissioner or his duly
authorized representative, as the case may be, it is determined that there
exists sufficient basis to assess the taxpayer for any deficiency tax or
taxes, the said Office shall issue to the taxpayer, at least by registered
mail, a Preliminary Assessment Notice (PAN) for the proposed
assessment, showing in detail, the facts and the law, rules and
regulations, or jurisprudence on which the proposed assessment is based.
If the taxpayer fails to respond within fifteen (15) days from date of
receipt of the PAN, he shall be considered in default, in which case, a
formal letter of demand and assessment notice shall be caused to be
issued by the said Office, calling for payment of the taxpayer’s deficiency
tax liability, inclusive of the applicable penalties.
xxxx

704

ter of Demand and Assessment Notice that must be

administratively protested or disputed within 30 days, and
not the  

_______________
 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. x x x
3.1.5 Disputed Assessment.—The taxpayer or his duly authorized
representative may protest administratively against the aforesaid formal
letter of demand and assessment notice within thirty (30) days from date
of receipt thereof x x x.
The taxpayer shall state the facts, the applicable law, rules and
regulations, or jurisprudence on which his protest is based, otherwise, his
protest shall be considered void and without force and effect x x x.
The taxpayer shall submit the required documents in support of his
protest within sixty (60) days from the date of filing of his letter of protest,
otherwise, the assessment shall become final and executory and
demandable x x x
If the taxpayer fails to file a valid protest against the formal letter of
demand and assessment notice within thirty (30) days from date of receipt
thereof, the assessment shall become final, executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner, the
taxpayer may appeal to the Court of Tax Appeals within thirty (30) days
from date of receipt of the said decision, otherwise, the assessment shall
become final, executory and demandable.
AIn general, if the protest is denied, in whole or in part, by the
Commissioner or his duly authorized representative, the taxpayer may
appeal to the Court of Tax Appeals, within thirty (30) days from date of
receipt of the said decision, otherwise, the assessment shall become final,
executory and demandable: Provided, however, that if the taxpayer
elevates his protest to the Commissioner within thirty (30) days from date
of receipt of the final decision of the Commissioner’s duly authorized
representative, the latter’s decision shall not

705

PAN. Neither are we deviating from our pronouncement in

St. Stephen’s Chinese Girl’s School v. Collector of Internal
Revenue,29 that the counting of the 30 days within which to
institute an appeal in the CTA commences from the date of
receipt of the decision of the CIR on the disputed
assessment, not from the date the assessment was issued.
What we are saying in this particular case is that, the
Formal Letter of Demand with Assessment Notices which
was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the
CTA because the words used, specifically the words “final
decision” and “appeal”, taken together led petitioner to
believe that the Formal Letter of Demand with Assessment
Notices was in fact the final decision of the CIR on the
 letter-protest it filed and that the available remedy was to
appeal the same to the CTA.
We note, however, that during the pendency of the
instant case, petitioner availed of the provisions of Revenue
Regulations No. 30-2002 and its implementing Revenue
Memorandum Order by submitting an offer of compromise
for the settlement of the GRT, DST and VAT for the period
1998-2003, as evidenced by a Certificate of Availment
dated November 21, 2007.30 Accordingly, there is no reason
to reinstate the Petition for Review in CTA Case No. 7062.

_______________

be considered final, executory and demandable, in which case, the protest

shall be decided by the Commissioner.

If the Commissioner or his duly authorized representative fails to act

on the taxpayer’s protest within one hundred eighty (180) days from date
of submission, by the taxpayer, of the required documents in support of
his protest, the taxpayer may appeal to the Court of Tax Appeals within
thirty (30) days from the lapse of said 180-day period, otherwise, the
assessment shall become final, executory and demandable.
xxxx
29 104 Phil. 314, 317 (1958).
30 Annex “A” of petitioner’s Memorandum.

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