1. SMI-ED Phil. Technology, Inc. v.

CIR

FACTS: SMI-Ed Philippines is a PEZA-registered corporation authorized “to engage in the business of
manufacturing ultra high-density microprocessor unit package.”6

SMI-Ed Philippines “failed to commence operations.”. On August 1, 2000, it sold its buildings and some
of its installed machineries and equipment to Ibiden Philippines, Inc., another PEZA-registered enterprise,
for ¥2,100,000,000.00 (₱893,550,000.00). SMI-Ed Philippines was dissolved on November 30, 2000. In its
quarterly income tax return for year 2000, SMI-Ed Philippines subjected the entire gross sales of
itsproperties to 5% final tax on PEZA registered corporations. SMI-Ed Philippines paid taxes amounting
to ₱44,677,500.00.

On Feb 2, 2001, SMI-Ed Philippines filed an administrative claim for the refund of ₱44,677,500.00 with the
Bureau of Internal Revenue (BIR). SMIEd Philippines alleged that the amount was erroneously paid. It also
indicated the refundable amount in its final income tax return filed on March 1, 2001. It also alleged that it
incurred a net loss of ₱2,233,464,538.00.

The BIR – did not act on SMI-Ed Philippines’ claim, which prompted the latter to file a petition for review
before the Court of Tax Appeals on September 9, 2002.

PETITIONER ARGUMENTS:

 Court of Tax Appeals Second Division erroneously assessed the 6% capital gains tax on the sale of SMI-
Ed Philippines’ equipment, machineries, and buildings. Section 27(D)(5) of the National Internal
Revenue Code of 1997 is clear that the 6% capital gains tax on domestic corporations applies only on
the sale of lands and buildings and not to machineries and equipment.


 It also argued that the Court of Tax Appeals Second Division cannot make an assessment at the first
instance. Its jurisdiction to make an assessment since its jurisdiction, with respect to the decisions
of respondent, is merely appellate.

 Even if the Court of Tax Appeals Second Division has such power, the period to make an assessment
had already prescribed under Section 203of the National Internal Revenue Code of 1997 since the return
for the erroneous payment was filed on September 13, 2000. This is more than three (3) years from the last
day prescribed by law for the filing of the return.

The Court of Tax Appeals Second Division denied SMI-Ed Philippines’ claim for refund in the decision dated
December 29, 2004, WITH THE findings:


 The court found that SMI-Ed Philippines’ administrative claim for refund and the petition for review with the
Court of Tax Appeals were filed within the two-year prescriptive period.

 However, fiscal incentives given to PEZA-registered enterprises may be availed only by PEZA-
registered enterprises that had already commenced operations. Since SMI-Ed Philippines had not
commenced operations, it was not entitled to the incentives of either the income tax holiday or the 5%
preferential tax rate. Payment of the 5% preferential tax amounting to ₱44,677,500.00 was
erroneous. (so erroneous ang self-assessment ni SMI)


 After finding that SMI-Ed Philippines sold properties that were capital assets under Section 39(A)(1) of the
National Internal Revenue Code of 1997, the Court of Tax Appeals Second Division subjected the sale of
SMIEd Philippines’ assets to 6% capital gains tax under Section 27(D)(5) of the same Code and Section 2
of Revenue Regulations No. 8-98. It was found liable for capital gains tax amounting to
₱53,613,000.00.Therefore, SMIEd Philippines must still pay the balance of ₱8,935,500.00 as deficiency tax
“which respondent should perhaps look into.


 In its comment, respondent argued that the Court of Tax Appeals’ determination of petitioner’s liability
for capital gains tax was not an assessment.


 Such determination was necessary to settle the question regarding the tax consequence of the sale of the
properties. This is clearly within the Court of Tax Appeals’ jurisdiction under Section 7 of Republic Act No.
9282.42Respondent also argued that “petitioner failed to justify its claim for refund.”

CTA EN BANC- AFFIRMED CTA DIVISION’S RULING

SMI-Ed Philippines filed a petition for review before this court on December 27, 2006, praying for the grant
of its claim for refund and the reversal of the Court of Tax Appeals En Banc’s decision.

ISSUES:

1. The honorable CTA En Banc grievously erred and acted beyond its jurisdiction when it assessed for
deficiency tax in the first instance.
2. Even assuming that the honorable CTA En Banc has the right to make an assessment against the petitioner-
appellant, it grievously erred in finding that the machineries and equipment sold by the petitioner-
appellant is subject to the six percent (6%) capital gains tax under Section 27(D)(5) of the Tax Code.33

HELD:

1. Jurisdiction of the Court of Tax Appeals- there is jurisdiction

The term “assessment” refers to the determination of amounts due from a person obligated to make payments.
In the context of national internal revenue collection, it refers the determination of the taxes due from a
taxpayer under the National Internal Revenue Code of 1997.

The power and duty to assess national internal revenue taxes are lodged with the BIR.

Section 2 of the National Internal Revenue Code of 1997 provides:

SEC. 2. Powers and Duties of the Bureau of Internal Revenue. – The Bureau of Internal Revenue shall be
under the supervision and control of the Department of Finance and its powers and duties shall comprehend
the assessment and collection of all national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, and fines connected therewith,including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code
or other laws. (Emphasis supplied) The BIR is not mandated to make an assessment relative to every
return filed with it. Tax returns filed with the BIR enjoy the presumption that these are in accordance with
the law. Tax returns are also presumed correct since these are filed under the penalty of perjury.. Generally,
however, the BIR assesses taxes when it appears, after a return had been filed, that the taxes paid were
incorrect or false, or fraudulent. The BIR also assesses taxes when taxes are due but no return is filed.

Thus:

SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for
Tax Administration and Enforcement.–

(A) Examination of Returns and Determination of Tax Due. – After a return has been filed as required under
the provisions of this Code, the Commissioner or his duly authorized representative may authorize the
examination of any taxpayer and the assessment of the correct amount of tax: Provided, however; That failure
to file a return shall not prevent the Commissioner from authorizing the examination of any taxpayer. The tax
or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his
duly authorized representative.

The Court of Tax Appeals has no power to make an assessment at the first instance. On matters such as
tax collection, tax refund, and others related to the national internal revenue taxes, the Court of Tax Appeals’
jurisdiction is appellate in nature.

Thus, the BIR first has to make an assessment of the taxpayer’s liabilities. When the BIR makes the
assessment, the taxpayer is allowed to dispute that assessment before the BIR. If the BIR issues a
decision that is unfavorable to the taxpayer or if the BIR fails to act on a dispute brought by the
taxpayer, the BIR’s decision or inaction may be brought on appeal to the Court of Tax Appeals. The
Court of Tax Appeals then acquires jurisdiction over the case.

When the BIR’s unfavorable decision is brought on appeal to the Court of Tax Appeals, the Court of Tax
Appeals reviews the correctness of the BIR’s assessment and decision. In reviewing the BIR’s assessment
and decision, the Court of Tax Appeals had to make its own determination of the taxpayer’s tax
liabilities. The Court of Tax Appeals may not make such determination before the BIR makes its assessment
and before a dispute involving such assessment is brought to the Court of Tax Appeals on appeal.

The Court of Tax Appeals’ jurisdiction is not limited to cases when the BIR makes an assessment or a
decision unfavorable to the taxpayer. Because Republic Act No. 1125 also vests the Court of Tax Appeals
with jurisdiction over the BIR’s inaction on a taxpayer’s refund claim, there may be instances when the
Court of Tax Appeals has to take cognizance of cases that have nothing to do with the BIR’s assessments
or decisions.

WHEN THE BIR FAILS TO ACT ON A CLAIM FOR REFUND OF VOLUNTARILY BUT
MISTAKENLY PAID TAXES, FOR EXAMPLE, THERE IS NO DECISION OR ASSESSMENT
INVOLVED.

Taxes are generally self-assessed. They are initially computed and voluntarily paid by the taxpayer. The
government does not have to demand it. If the tax payments are correct, the BIR need not make an assessment.
The self-assessing and voluntarily paying taxpayer, however, may later find that he or she has erroneously
paid taxes. Erroneously paid taxes may come in the form of amounts that should not have been paid. Thus, a
taxpayer may find that he or she has paid more than the amount that should have been paid under the law.
Erroneously paid taxes may also come in the form of tax payments for the wrong category of tax. Thus, a
taxpayer may find that he or she has paid a certain kind of tax that he or she is not subject to.

In these instances, the taxpayer may ask for a refund. If the BIR fails to act on the request for refund,
the taxpayer may bring the matter to the Court of Tax Appeals.
From the taxpayer’s self-assessment and tax payment up to his or her request for refund and the BIR’s inaction,
the BIR’s participation is limited to the receipt of the taxpayer’s payment. The BIR does not make an
assessment; the BIR issues no decision; and there is no dispute yet involved. Since there is no BIR
assessment yet, the Court of Tax Appeals may not determine the amount of taxes due from the
taxpayer. There is also no decision yet to review. However, there was inaction on the part of the BIR.
That inaction is within the Court of Tax Appeals’ jurisdiction.

In other words, the Court of Tax Appeals may acquire jurisdiction over cases even if they do not involve BIR
assessments or decisions.

In this case, the Court of Tax Appeals’ jurisdiction was acquired because petitioner brought the case
on appeal before the Court of Tax Appeals after the BIR had failed to act on petitioner’s claim for
refund of erroneously paid taxes. The Court of Tax Appeals did not acquire jurisdiction as a result of a
disputed assessment of a BIR decision.

Petitioner argued that the Court of Tax Appeals had no jurisdiction to subject it to 6% capital gains tax or
other taxes at the first instance. The Court of Tax Appeals has no power to make an assessment.

As earlier established, the Court of Tax Appeals has no assessment powers. In stating that petitioner’s
transactions are subject to capital gains tax, however, the Court of Tax Appeals was not making an
assessment. It was merely determining the proper category of tax that petitioner should have paid, in
view of its claim that it erroneously imposed upon itself and paid the 5% final tax imposed upon PEZA-
registered enterprises.

The determination of the proper category of tax that petitioner should have paid is an incidental matter
necessary for the resolution of the principal issue, which is whether petitioner was entitled to a refund.

The issue of petitioner’s claim for tax refund is intertwined with the issue of the proper taxes that are due from
petitioner. A claim for tax refund carries the assumption that the tax returns filed were correct. 55 If the tax
return filed was not proper, the correctness of the amount paid and, therefore, the claim for refund become
questionable. In that case, the court must determine if a taxpayer claiming refund of erroneously paid taxes is
more properly liable for taxes other than that paid.

If the taxpayer is found liable for taxes other than the erroneously paid 5% final tax, the amount of the
taxpayer’s liability should be computed and deducted from the refundable amount.

Any liability in excess of the refundable amount, however, may not be collected in a case involving solely the
issue of the taxpayer’s entitlement to refund. The question of tax deficiencyis distinct and unrelated to the
question of petitioner’s entitlement to refund. Tax deficiencies should be subject to assessment procedures
and the rules of prescription. The court cannot be expected to perform the BIR’s duties whenever it fails to do
so either through neglect or oversight. Neither can court processes be used as a tool to circumvent laws
protecting the rights of taxpayers.

Petitioner’s entitlement to benefits given to PEZA-registered enterprises

Petitioner is not entitled to benefits given to PEZA-registered enterprises, including the 5% preferential tax
rate under Republic Act No. 7916 or the Special Economic Zone Act of 1995. This is because it never began
its operation.

Essentially, the purpose of Republic Act No. 7916 is to promote development and encourage investments and
business activities that will generate employment.59 Giving fiscal incentives to businesses is one of the means
devised to achieve this purpose. It comes with the expectation that persons who will avail these incentives will
contribute to the purpose’s achievement. Hence, to avail the fiscal incentives under Republic Act No. 7916,
the law did not say that mere PEZA registration is sufficient.
 Republic Act No. 7916 or The Special Economic Zone Act of 1995 provides that the fiscal incentives and the
5% preferential tax rate are available only to businesses operating within the Ecozone. 60 A business is
considered in operation when it starts entering into commercial transactions that are not merely incidental to
but are related to the purposes of the business. It is similar to the definition of “doing business,” as applied in
actions involving the right of foreign corporations to maintain court actions:

“a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of,
the purpose and object of its organization” Petitioner never started its operations since its registration on June
29, 199863 because of the Asian financial crisis.64Petitioner admitted this.65 Therefore, it cannot avail the
incentives provided under Republic Act No. 7916. It is not entitled to the preferential tax rate of 5% on gross
income in lieu of all taxes. Because petitioner is not entitled to a preferential rate, it is subject to ordinary tax
rates under the National Internal Revenue Code of 1997.

Imposition of capital gains tax

The Court of Tax Appeals found that petitioner’s sale of its properties is subject to capital gains tax.

For petitioner’s properties to be subjected to capital gains tax, the properties must form part of petitioner’s
capital assets.

Section 39(A)(1) of the National Internal Revenue Code of 1997 defines “capital assets”:

SEC. 39. Capital Gains and Losses. –

(A) Definitions.- As used in this Title –

(1) Capital Assets.- the term ‘capital assets’ means property held by the taxpayer (whether or not connected
with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which
would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or
property held by the taxpayer primarily for sale to customers in the ordinary course of his trade orbusiness, or
property used in the trade or business, of a character which is subject to the allowance for depreciation
provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer. (Emphasis
supplied) Thus, “capital assets” refers to taxpayer’s property that is NOT any of the following:

1. Stock in trade;
2. Property that should be included inthe taxpayer’s inventory at the close of the taxable year;
3. Property held for sale in the ordinary course of the taxpayer’s business;
4. Depreciable property used in the trade or business; and
5. Real property used in the trade or business.

The properties involved in this case include petitioner’s buildings, equipment, and machineries. They are not
among the exclusions enumerated in Section 39(A)(1) of the National Internal Revenue Code of 1997. None
of the properties were used in petitioner’s trade or ordinary course of business because petitioner never
commenced operations. They were not part of the inventory. None of themwere stocks in trade. Based on the
definition of capital assets under Section 39 of the National Internal Revenue Code of 1997, they are capital
assets.

Respondent insists that since petitioner’s machineries and equipment are classified as capital assets, their sales
should be subject to capital gains tax. Respondent is mistaken.
Capital gains of individuals and corporations from the sale of real properties are taxed differently. Individuals
are taxed on capital gains from sale of all real properties located in the Philippines and classified as capital
assets. Therefore, only the presumed gain from the sale of petitioner’s land and/or building may be subjected
to the 6% capital gains tax. The income from the sale of petitioner’s machineries and equipment is subject to
the provisions on normal corporate income tax.

To determine, therefore, if petitioner is entitled to refund, the amount of capital gains tax for the sold land
and/or building of petitioner and the amount of corporate income tax for the sale of petitioner’s machineries
and equipment should be deducted from the total final tax paid. Petitioner indicated, however, in its March 1,
2001 income tax return for the 11-month period ending on November 30, 2000 that it suffered a net loss of
₱2,233,464,538.00.69

The BIR did not make a deficiency assessment for this declaration. Neither did the BIR dispute this statement
in its pleadings filed before this court. There is, therefore, no reason todoubt the truth that petitioner indeed
suffered a net loss in 2000.

Since petitioner had not started its operations, it was also not subject to the minimum corporate income
tax of 2% on gross income.70 Therefore, petitioner is not liable for any income tax.

Prescription

Section 203 of the National Internal Revenue Code of 1997 provides that as a general rule, the BIR has three
(3) years from the last day prescribed by law for the filing of a return to make an assessment. If the return is
filed beyond the last day prescribed by law for filing, the three-year period shall run from the actual date of
filing. This court said that the prescriptive period to make an assessment of internal revenue taxes is provided
“primarily to safeguard the interests of taxpayers from unreasonable investigation.” Accordingly, the
government must assess internal revenue taxes on time so as not to extend indefinitely the period of assessment
and deprive the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes
after the expiration of reasonable period of time.73

Rules derogating taxpayers’ right against prolonged and unscrupulous investigations are strictly construed
against the government.74

The BIR had three years from the filing of petitioner’s final tax return in 2000 to assess petitioner’s taxes.
Nothing stopped the BIR from making the correct assessment. The elevation of the refund claim with the
Court of Tax Appeals was not a bar against the BIR’s exercise of its assessment powers.

The BIR, however, did not initiate any assessment for deficiency capital gains tax.78 Since more than a decade
have lapsed from the filing of petitioner’s return, the BIR can no longer assess petitioner for deficiency capital
gains taxes, if petitioner is later found to have capital gains tax liabilities in excess of the amount claimed for
refund.

The Court of Tax Appeals should not be expected to perform the BIR’s duties of assessing and collecting
taxes whenever the BIR, through neglect or oversight, fails to do so within the prescriptive period allowed by
law.

WHEREFORE, the Court of Tax Appeals’ November 3, 2006 decision is SET ASIDE. The Bureau of
Internal Revenue is ordered to refund petitioner SMI-Ed Philippines Technology, Inc. the amount of
5% final tax paid to the BIR, less the 6% capital gains tax on the sale of petitioner SMI-Ed Philippines
Technology, Inc. ‘s land and building. In view of the lapse of the prescriptive period for assessment, any
capital gains tax accrued from the sale of its land and building that is in excess of the 5% final tax paid
to the Bureau of Internal Revenue may no longer be recovered from petitioner SMI-Ed Philippines
Technology, Inc.

2. CIR. v. FMF Development Corp

Facts:
On April 15, 1996, FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and
declared a loss
On May 8, 1996, however, it filed an amended return and declared a loss
The BIR then sent FMF pre-assessment notices, all dated
October 6, 1998, informing it of its alleged tax liabilities.
FMF filed a protest against these notices with the BIR and requested for a
reconsideration/reinvestigation.
He also advised FMF of the informal conference set on February 2, 1999 to allow it to present
evidence to... dispute the BIR assessments.
On February 9, 1999, FMF President Enrique Fernandez executed a waiver of the three-year
prescriptive period for the BIR to assess internal revenue taxes, hence extending the assessment
period until October 31, 1999.
The waiver was accepted and signed by RDO
Zambarrano.
On October 18, 1999, FMF received amended pre-assessment notices... from the BIR.
FMF immediately filed a protest on November 3, 1999 but on the same day, it received BIR's
Demand Letter and Assessment Notice... reflecting FMF's alleged deficiency taxes
On November 24, 1999, FMF filed a letter of protest on the assessment invoking, inter alia,[7] the
defense of prescription by reason of the invalidity of the waiver.
In its reply, the BIR insisted that the waiver is valid because it was signed... by the RDO, a duly
authorized representative of petitioner.
FMF filed a petition for review with the CTA challenging the... validity of the assessment.
On March 20, 2003, the CTA granted the petition and cancelled Assessment Notice No. 33-1-00487-
95 because it was already time-barred.
The CTA ruled that the waiver did not extend the three-year prescriptive period within which the BIR
can make a valid assessment because it... did not comply with the procedures laid down in Revenue
Memorandum Order (RMO) No. 20-90
First, the waiver did not state the dates of execution and acceptance of the waiver, by the taxpayer
and the BIR, respectively; thus, it cannot be... determined with certainty if the waiver was executed
and accepted within the prescribed period
Second, the CTA also found that FMF was not furnished a copy of the waiver signed by RDO
Zambarrano.
Third, the CTA pointed out that since the case involves... an amount of more than P1 million, and
the period to assess is not yet about to prescribe, the waiver should have been signed by the
Commissioner of Internal Revenue, and not a mere RDO
On appeal to the Court of Appeals, the decision of the CTA was affirmed... the waiver did not strictly
comply with RMO No. 20-90.
Petitioner contends that the waiver was validly executed mainly because it complied with Section
222 (b)[12] of the National Internal Revenue Code (NIRC). Petitioner points out that the waiver was
in writing, signed by the taxpayer and the
Commissioner, and executed within the three-year prescriptive period.
Petitioner also argues that the requirements in RMO No. 20-90 are merely directory; thus, the
indication of the dates of execution and acceptance of the waiver, by the taxpayer and the BIR,
respectively, are... not required by law.
Petitioner also argues that the requirements in RMO No. 20-90 are merely directory... there is no
provision in RMO No. 20-90 stating that a waiver may be invalidated upon failure of the BIR to
furnish the taxpayer a copy of the waiver... urther, it contends that respondent's execution of the
waiver was a... renunciation of its right to invoke prescription.
Further, it contends that respondent's execution of the waiver was a... renunciation of its right to
invoke prescription.
On the other hand, respondent counters that the waiver is void because it did not comply with RMO
No. 20-90.
Respondent assails the waiver because (1) it was not signed by the Commissioner despite the fact
that the assessment involves an amount of more than P1 million;
(2)... there is no stated date of acceptance by the Commissioner or his duly authorized
representative... it was not furnished a copy of the BIR-accepted waiver.
Moreover, a waiver of the statute of limitations is not a waiver of the right to invoke the defense of...
prescription.
Moreover, a waiver of the statute of limitations is not a waiver of the right to invoke the defense of...
prescription
Petitioner contends that the procedures in RMO No. 20-90 are merely directory and that the
execution of a waiver was a renunciation of respondent's right to invoke prescription.
Issues:
WHETHER OR NOT RESPONDENT'S WAIVER OF THE STATUTE OF LIMITATIONS WAS
VALIDLY EXECUTED.
WHETHER O[R] NOT THE PERIOD TO ASSESS HAD PRESCRIBED.
whether it validly extended the original three-year prescriptive period so as to make Assessment
Notice No. 33-1-00487-95 valid
) Is the... waiver valid?
Did the three-year period to assess internal revenue taxes already prescribe?
Ruling:
October 25, 1999
Under Section 203[15] of the NIRC, internal revenue taxes must be assessed within three years
counted from the period fixed by law for the filing of the tax return or the actual date of filing,
whichever is later.
An exception to the three-year prescriptive period on the assessment of taxes is Section 222 (b) of
the NIRC, which provides:... f before the expiration of the time prescribed in Section 203 for the
assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time, the tax may be assessed within the period agreed upon. The period
so agreed... upon may be extended by subsequent written agreement made before the expiration
of the period previously agreed upon.
authorizes the extension of the original three-year period by the execution of a valid waiver, where
the taxpayer and the BIR agreed in writing that the period to issue an assessment and collect the
taxes due is extended to an agreed upon date.
waiver shall be signed by the taxpayer himself or his duly authorized representative.
The date of such acceptance... by the Bureau should be indicated.
before the expiration of the period of prescription
Commissioner For tax cases involving more than P1M... waiver must be executed in three (3)
copies,... docket of the case... copy for the taxpayer... copy for the Office accepting the waiver
The fact of receipt by the taxpayer of his/her file... copy shall be indicated in the original copy.
Applying RMO No. 20-90, the waiver in question here was defective and did not validly extend the
original three-year prescriptive period. Firstly, it was not proven that respondent was furnished a
copy of the BIR-accepted waiver. Secondly, the waiver was signed only... by a revenue district
officer, when it should have been signed by the Commissioner as mandated by the NIRC and RMO
No. 20-90, considering that the case involves an amount of more than P1 million, and the period to
assess is not yet about to prescribe. Lastly, it did not contain... the date of acceptance by the
Commissioner of Internal Revenue, a requisite necessary to determine whether the waiver was
validly accepted before the expiration of the original three-year period. Bear in mind that the waiver
in question is a bilateral agreement, thus... necessitating the very signatures of both the
Commissioner and the taxpayer to give birth to a valid agreement.
a waiver of the statute of limitations under the NIRC, to a certain extent being a derogation of the
taxpayer's right to security against prolonged and unscrupulous investigations,... must be carefully
and strictly construed.
does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally,
particularly where the language of the document is equivocal... in this case, the waiver became
unlimited in time because it did not specify a definite date, agreed upon between the BIR and
respondent, within which the former may assess and collect taxes. It also had no binding effect on
respondent because there was no consent by the
Commissioner. On this basis, no implied consent can be presumed, nor can it be contended that
the concurrence to such waiver is a mere formality.
In fine, Assessment Notice No. 33-1-00487-95 dated October 25, 1999, was issued beyond the
three-year prescriptive period.
The waiver was incomplete and defective and thus, the three-year prescriptive period was not tolled
nor extended and continued to run until April 15,... 1999
Even if the three-year period be counted from May 8, 1996, the date of filing of the amended return,
assuming the amended return was substantially different from the original return, a case which
affects the reckoning point of the prescriptive period,[22] still, the subject assessment is definitely
considered time-barred.

3. Republic v. GMCC United Development Corp

Facts:
On March 28, 2003, the Bureau of Internal Revenue National Investigation Division issued a Letter
of Authority, authorizing its revenue officers to examine the books of accounts and other accounting
records of GMCC United Development Corporation (GMCC) covering taxable years 1998 and
1999.[6] On April 3, 2003 GMCC was served a copy of said Letter of Authority and was requested
to present its books of accounts and other accounting records.[7] GMCC failed to respond to the
Letter of Authority as well as the subsequent letters requesting that its records and documents be
produced.
Due to GMCC's failure to act on the requests, the Assistant Commissioner of the Enforcement
Service of the Bureau of Internal Revenue issued a Subpoena Duces Tecum on GMCC president,
Jose C. Go (Go).[9] When GMCC still failed to comply with the Subpoena Duces Tecum, the revenue
officers were constrained to investigate GMCC through Third Party Information.[
The investigation revealed that in 1998, GMCC, through Go, executed two dacion en pago
agreements to pay for the obligations of GMCC's sister companies, Ever Emporium, Inc., Gotesco
Properties, Inc. and Ever Price Club, Inc., to Rizal Commercial Banking Corporation.[11] GMCC
allegedly failed to declare the income it earned from these agreements for taxation purposes in
1998.[12] Moreover, these transactions constituted a donation in favor of GMCC's sister companies
for which GMCC failed to pay the corresponding donor's tax.[13] The BIR also assessed the value
added tax over the said transactions.
It was also discovered that in 1999, GMCC sold condominium units and parking slots for a total
amount of P5,350,000.00 to a Valencia K. Wong.[15] However, GMCC did not declare the income
it earned from these transactions in its 1999 Audited Financial Statements
Thus, on November 17, 2003, the Bureau of Internal Revenue issued a Notice to Taxpayer to
GMCC, which GMCC ignored.[17] On December 8, 2003, the Bureau of Internal Revenue issued a
Preliminary Assessment Notice.[18] It was only when the Bureau of Internal Revenue issued the
Final Assessment Notice that GMCC responded.[19] In a Letter dated November 23, 2004, GMCC
protested the issuance of the Final Assessment Notice citing that the period to assess and collect
the tax had already prescribed. The Bureau of Internal Revenue denied the protest in a Final
Decision dated February 10, 2005.[
In light of the discovered tax deficiencies, the Bureau of Internal Revenue, on October 7, 2005, filed
with the Department of Justice a criminal complaint for violation of Sections 254,[21] 255,[22] and
267,[23] of the National Internal Revenue Code against GMCC, its president, Jose C. Go, and its
treasurer, Xu Xian Chun.[24]
In his Counter-Affidavit, Go prayed that the complaint be dismissed, arguing, among others, that the
action had already prescribed and that GMCC did not defraud the government.[25] Assuming that
the period to assess had not yet prescribed, GMCC argued that there was nothing to declare since
it earned no income from the dacion en pago transactions.[26] Furthermore, even though the dacion
en pago transactions were not included in the GMCC 1998 Financial Statement, they had been duly
reflected in the GMCC 2000 Financial Statement.
On May 26, 2006, the Department of Justice, through the Chief State Prosecutor, issued a
Resolution[27] dismissing the criminal complaint against the GMCC officers. The State Prosecutor
ruled that there was no proof that GMCC defrauded the government. The Bureau went beyond its
authority when it assessed and issued the Letter of Authority knowing that the period to assess had
already lapsed. Moreover, the prosecutor ruled that since GMCC did not gain from the assailed
transactions, the imposition of income, VAT, and donor's taxes were improper... he Court of Appeals
denied the Petition and affirmed in toto the Department of Justice's Resolution... the Court of
Appeals denied the Petition and affirmed in toto the Department of Justice's Resolution.
Issues:
the Court of Appeals denied the Petition and affirmed in toto the Department of Justice's
Resolution... whether the Court of Appeals erred in declaring that the Secretary of Justice did not
commit grave abuse of discretion when he found no probable cause and dismissed the tax evasion
case against the respondent officers of GMCC.
whether the applicable prescriptive period for the tax assessment is the ten-year period or the three-
year period.
hether the applicable prescriptive period for the tax assessment is the ten-year period or the three-
year period. The Petition must be denied.
Ruling:
We are convinced that the Court of Appeals committed no reversible error in affirming the ruling of
the Secretary of Justice that there was no probable cause to file a tax evasion case against the
respondent officers. Since the assessment for the tax had already prescribed, no proceeding in court
on the basis of such return can be filed.
In ruling that there was no probable cause to indict the respondent officers for the acts charged, the
Court of Appeals said there was no clear showing that there was deliberate intent on the part of the
respondents to evade payment of the taxes. Both the State Prosecutor[37] and the Court of
Appeals[38] emphasized that if respondents really intended to evade payment, they would have
omitted the assailed transactions completely in all their financial statements.
As it stands, while the dacion en pago transactions were missing in the GMCC 1998 Financial
Statement, they had been listed in the GMCC 2000 Financial Statement.[39] Respondents' act of
filing and recording said transactions in their 2000 Financial Statement belie the allegation that they
intended to evade paying their tax liability. Petitioner's contention that the belated filing is a mere
afterthought designed to make it appear that the non-reporting was not deliberate, does not
persuade considering that the filing of the 2000 Financial Statement was done prior to the issuance
of the March 2003 Letter of Authority, which authorized the investigation of GMCC's books.
Moreover, a prosecutor's grave abuse of discretion in dismissing a case must be clearly shown
before the Courts can interven... bsent any indication that the Secretary of Justice gravely abused
his discretion in not finding probable cause for the complaint against respondent officers to prosper,
the dismissal stands.
As to the issue on the applicable prescriptive period, it is the three-year prescriptive period that
applies in this case.
The power of the Commissioner of Internal Revenue to assess and collect taxes is provided under
Section 2 of the National Internal Revenue Code
However, this power to assess and collect taxes is limited by Section 203 of the National Internal
Revenue Code
SEC. 203. Period of Limitation Upon Assessment and Collection.- Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed.
For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day.
As found by the Court of Appeals, there is no clear and deliberate intent to evade payment of taxes
in relation to the dacion en pago transactions[50] or on the sale transaction with Valencia Wong.[51]
The dacion en pago transactions, though not included in the 1998 Financial Statement, were
properly listed in GMCC's Financial Statement for the year 2000.[52] Regarding the sale transaction
with Valencia Wong, the respondents said that it was not reflected in the year 1999 because it was
an installment sale. Units sold on installment, they explained, are recognized not in the year they
are fully paid, but in the year when at least 25% of the selling price is paid.[53] In this instance, the
unit and the parking lot were sold prior to 1996, thus, in the Schedule of Unsold Units filed by GMCC
as of December 31, 1996, the said properties were no longer included.
A reading of Section 203 will show that it prohibits two acts after the expiration of the three-year
period. First, an assessment for the collection of the taxes in the return, and second, initiating a court
proceeding on the basis of such return. The State Prosecutor was correct in dismissing the complaint
for tax evasion since it was clear that the prescribed return cannot be used as basis for the case.
All told, the dismissal of the tax evasion case against respondent officers was proper. The Court of
Appeals did not err in affirming the dismissal. Petitioner failed to prove that respondent officers
wilfully intended to evade paying tax. Moreover, having found no basis to disregard the three-year
period of prescription, it is clear that the assessments were issued beyond the statute of limitations
WHEREFORE, the Petition is DENIED.

4. CIR v. Standard Chartered Bank

FACTS:

Respondent received CIR's Formal Letter of Demand for alleged deficiency income tax, final income
tax, withholding tax - final and compensation, and increments for the taxable year worth P
33,326,211.37.

Respondent protested the said assessment by filing a letter-protest with the CIR requesting the
assessment to be withdrawn.

In the middle of things, respondent paid the BIR the assessed deficiency for both the withholding
taxes.

Respondent then filed for a petition for the cancellation and setting aside of the assessments which
the CTA granted. The CTA held that it has already prescribed as it covered the taxable year of
1998.

The NIRC provides that the assessments should have been issued within the three-year
prescriptive period. The CIR also presented the Waivers of Statute of Limitations executed by the
parties which extended the period to assess respondent. The CTA held that the CIR failed to strictly
comply and conform with the provisions of Revenue Memorandum Order No. 20-90. The CTA held
that the waivers were invalid.

ISSUE: Whether the assessments were already prescribed. Whether the waiver was invalid.

RULING:

Yes and yes.

The NIRC is clear that in a case where a return is filed beyond the period prescribed by law, the
three-year period shall be counted from the day the return was filed.

The waiver, as also provided by the NIRC, is an exception to the three-day prescription. But, as the
CTA first held, the provisions of the RMO should have been strictly complied with. Failing to comply
renders a waiver defective and ineffectual.
 5. CIR v. Bank of the Philippine Islands

Facts:
In filing its Corporate Income Tax Return for the Calendar Year 2000, BPI carried over the excess
tax credits from the previous years of 1997, 1998 and 1999. However, BPI failed to indicate in its
ITR its choice of whether to carry over its excess tax credits or to claim the refund of or issuance
of a tax credit certificate.

BPI filed with the Commissioner of Internal Revenue (CIR) an administrative claim for refund. The
CIR failed to act on the claim for tax refund of BPI. Hence, BPI filed a Petition for Review before
the CTA, whom denied the claim.

The CTA relied on the irrevocability rule laid down in Section 76 of the National Internal Revenue
Code (NIRC) of 1997, which states that once the taxpayer opts to carry over and apply its excess
income tax to succeeding taxable years, its option shall be irrevocable for that taxable period and
no application for tax refund or issuance of a tax credit shall be allowed for the same.

The Court of Appeals reversed the CTA decision stating that there was no actual carrying over of
the excess tax credit, given that BPI suffered a net loss in 1999, and was not liable for any income
tax for said taxable period, against which the 1998 excess tax credit could have been applied.

The Court of Appeals further stated that even if Section 76 was to be construed strictly and
literally, the irrevocability rule would still not bar BPI from seeking a tax refund of its 1998 excess
tax credit despite previously opting to carry over the same. The phrase “for that taxable period”
qualified the irrevocability of the option of BIR to carry over its 1998 excess tax credit to only the
1999 taxable period; such that, when the 1999 taxable period expired, the irrevocability of the
option of BPI to carry over its excess tax credit from 1998 also expired.

Issue:
1. What is the period captured by the irrevocability rule?
2. Whether or not the taxpayer’s failure to mark the option chosen is fatal to whatever claim

Held:
1. The last sentence of Section 76 of the NIRC of 1997 reads: “Once the option to carry-over and
apply the excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable for
that taxable period and no application for tax refund or issuance of a tax credit certificate
shall be allowed therefor.” The phrase “for that taxable period” merely identifies the excess
income tax, subject of the option, by referring to the taxable period when it was acquired by the
taxpayer.

In the present case, the excess income tax credit, which BPI opted to carry over, was acquired by
the said bank during the taxable year 1998. The option of BPI to carry over its 1998 excess
income tax credit is irrevocable; it cannot later on opt to apply for a refund of the very same 1998
excess income tax credit.

2. No. Failure to signify one’s intention in the FAR does not mean outright barring of a valid
request for a refund, should one still choose this option later on. The reason for requiring that a
choice be made in the FAR upon its filing is to ease tax administration (Philam Asset
Management, Inc. v. CIR G.R. No. 156637 and No. 162004, 14 December 2005). When
circumstances show that a choice has been made by the taxpayer to carry over the excess
income tax as credit, it should be respected; but when indubitable circumstances clearly show that
another choice – a tax refund – is in order, it should be granted. Therefore, as to which option the
taxpayer chose is generally a matter of evidence.

“Technicalities and legalisms, however exalted, should not be misused by the government to keep
money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens.”

6. CIR v. Pascor Realty & Development Corp

Facts: The CIR authorized certain BIR officers to examine the books of accounts and other
accounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The
examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and
P3,015,236.35 for 1986 and 1987, respectively.

On March 1, 1995, Commissioner filed a criminal complaint for tax evasion against PRDC, its
president and treasurer before the DOJ. Private respondents filed immediately an urgent request
for reconsideration on reinvestigation disputing the tax assessment and tax liability.

On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the
criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondent’s
request for reconsideration (reinvestigation on the ground that no formal assessment has been
issued which the latter elevated to the CTA on a petition for review. The Commissioner’s motion to
dismiss on the ground of the CTA’s lack of jurisdiction inasmuch as no formal assessment was
issued against private respondent was denied by CTA and ordered the Commissioner to file an
answer but did not instead filed a petition with the CA alleging grave abuse of discretion and lack of
jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the
endorsement of said report as assessment which may be appealed to he CTA. The CA sustained
the CTA decision and dismissed the petition.
Issues:

1. Whether or not the criminal complaint for tax evasion can be construed as an assessment.
2. Whether or not an assessment is necessary before criminal charges for tax evasion may be
instituted.

Held:
The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment.
Neither the Tax Code nor the revenue regulations governing the protest assessments provide a
specific definition or form of an assessment.

An assessment must be sent to and received by the taxpayer, and must demand payment of the
taxes described therein within a specific period. The revenue officer’s affidavit merely contained a
computation of respondent’s tax liability. It did not state a demand or period for payment. It was
addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support
the criminal complaint for tax evasion; it was not meant to be a notice of tax due and a demand to
private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and
not to private respondent, shows that commissioner intended to file a criminal complaint for tax
evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be filed. A criminal charge need not
only be supported by a prima facie showing of failure to file a required return. The CIR had, in such
tax evasion cases, discretion on whether to issue an assessment, or to file a criminal case against
the taxpayer, or to do both.

7. CIR v. GJM Philippines Manufacturing, Inc

Facts: On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. CIR found out
that GJM had tax deficiencies due to disallowances/understatements, therefore, CIR had the right
to assess GJM within the 3 year prescriptive period under Sec. 203 of the NIRC or until April 15,
2003. On February 17, 2003, CIR delivered the Preliminary Assessment Notice (PAN) to GJM.
Subsequently, on April 14, 2003, the Formal Assessment Notice (FAN) were delivered by the CIR.
GJM denied having received any assessment from the BIR, thus, such right of assessment by the
latter has prescribed.

Issue: Whether or not the denial of GJM having received the Formal Assessment Notice (FAN)
made such right of assessment by the CIR prescribe;

Held: Yes, it has been settled that while a mailed letter is deemed received by the addressee in
the course of mail, this is merely a disputable presumption subject to controversion, the direct
denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received
by the addressee. In the case at bar, CIR was not able to prove that GJM has received the FAN
sent by them ergo their right to assess has prescribed.

8. CIR v. Asalus Corp

FACTS:
On December 16, 2010, respondent Asalus Corporation (Asalus) received a Notice of Informal
Conference from Revenue District Office No. 47 of the Bureau of Internal Revenue (BIR). It was in
connection with the investigation conducted by Revenue Officer Fidel M. Bañares II on the Value-
Added Tax transactions of Asalus for the taxable year 2007. Asalus filed its Letter-Reply, dated
December 29, 2010, questioning the basis of Bañares' computation for its VAT liability.

On January 10, 2011, petitioner Commissioner of Internal Revenue issued the Preliminary
Assessment Notice finding Asalus liable for deficiency VAT for 2007 in the aggregate amount of
P413,378,058.11.

On August 26, 2011, Asalus received the Formal Assessment Notice stating that it was liable for
deficiency VAT for 2007 in the total amount of P95,681,988.64, inclusive of surcharge and interest.
Consequently, it filed its protest against the FAN, dated September 6, 2011.

On October 16, 2012, Asalus received the Final Decision on Disputed Assessment showing VAT
deficiency for 2007 in the aggregate amount of P106,761,025.17, inclusive of surcharge and interest
and P25,000.00 as compromise penalty. As a result, it filed a petition for review before the CTA
Division.

In its April 2, 2014 Decision, the CTA Division ruled that the VAT assessment issued on August 26,
2011 had prescribed and consequently deemed invalid.

ISSUE:

WHETHER OR NOT the CTA erred in the decision and that the petition be granted in favor of the
petitioner.

HELD:

The statement given by the CTA were correct in a way, and it was given due respect for they found
it partly correct but, after a review of the records and applicable laws and jurisprudence, the Court
finds that the CTA erred in concluding that the assessment against Asalus had prescribed. Internal
revenue taxes shall be assessed within three years after the last day prescribed by law for the filing
of the return, or where the return is filed beyond the period, from the day the return was actually
filed. Section 222 of the NIRC, however, provides for exceptions to the general rule. It states that in
the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the
assessment may be made within ten years from the discovery of the falsity, fraud or omission.

In the oft-cited Aznar v. CTA, the Court compared a false return to a fraudulent return in relation to
the applicable prescriptive periods for assessments, to wit:

Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not file false
and fraudulent returns with intent to evade tax, while respondent Commissioner of Internal Revenue
insists contrariwise, with respondent Court of Tax Appeals concluding that the very "substantial
under declarations of income for six consecutive years eloquently demonstrate the falsity or
fraudulence of the income tax returns with an intent to evade the payment of tax."
WHEREFORE, petition is GRANTED. The July 30, 2015 Decision and the November 6, 2015
Resolution of the Court of Tax Appeals En Banc are REVERSED and SET ASIDE. The case is
ordered REMANDED to the Court of Tax Appeals for the determination of the Value Added Tax
liabilities of the Asalus Corporation.
 9. BIR v. Office of the Ombudsman

10. Chavez v. PCGG

FACTS: Petitioner Francisco I. Chavez, as taxpayer, citizen and former government official who
initiated the prosecution of the Marcoses and their cronies who committed unmitigated plunder of
the public treasury and the systematic subjugation of the countrys economy, alleges that what
impelled him to bring this action were several news reports[2] bannered in a number of broadsheets
sometime in September 1997. These news items referred to (1) the alleged discovery of billions of
dollars of Marcos assets deposited in various coded accounts in Swiss banks; and (2) the reported
execution of a compromise, between the government (through PCGG) and the Marcos heirs, on
how to split or share these assets.

A provision in the compromise agreement provides:

xxx the FIRST PARTY shall determine which shall be ceded to the FIRST PARTY, and which shall
be assigned to/retained by the PRIVATE PARTY. The assets of the PRIVATE PARTY shall be net
of, and exempt from, any form of taxes due the Republic of the Philippines. Xxx

ISSUE: Whether or not such provision in the compromise agreement exempting the Marcoses from
the taxes due to the government in valid

RULING: The PCGG has a limited life in carrying out its tasks and time is running short. It is thus
imperative that the Court must hold even now, and remind PCGG, that it has indeed exceeded its
bounds in entering into the General and Supplemental Agreements. The agreements clearly suffer
from Constitutional and statutory infirmities,to wit: 1) The agreements contravene the statute in
granting criminal immunity to the Marcos heirs; 2) PCGG’s commitment to exempt from all forms of
taxes the property to be retained the Marcos’ heirs controverts the Constitution; and 3)the
government’s undertaking to cause the dismissal of all cases filed against the Marcoses pending
before the Sandiganbayan and other courts encroaches upon judicial powers.

11. Asiatrust Development Bank, Inc. v. CIR

Facts:

Asiatrust Development Bank, Inc. (Asiatrust), on separate dates in February 2000, received from
the Commissioner of Internal Revenue (CIR) three Formal Letters of Demand (FLD) with
Assessment Notices for deficiency internal revenue taxes in the amounts of P131,909,161.85,
P83,012,265.78, and ₱l44,012,918.42 for fiscal years ending June 30, 1996, 1997, and 1998,
respectively.

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 (DST) - regular, DST - industry
issue, final withholding tax, expanded withholding tax, and fringe benefits tax issued against it by
the CIR.

The CIR issued against Asiatrust new Assessment Notices for deficiency taxes in the amounts of ₱l
12,816,258.73, ₱53,314,512.72, and ₱133,013,458.73, covering the fiscal years ending June 30,
1996, 1997, and 1998, respectively and Asiatrust partially paid said deficiency tax assessments thus
leaving the following balances:
The CIR approved Asiatrust's Offer of Compromise of DST - regular assessments for the fiscal years
ending June 30, 1996, 1997, and 1998. 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 and declared void the tax
assessments for fiscal year ending June 30, 1996 for having been issued beyond the three-year
prescriptive period. However, due to the failure of Asiatrust to present documentary and testimonial
evidence to prove its availment of the Tax Abatement Program and the Tax Amnesty Law, the CTA
Division affirmed the deficiency DST- Special Savings Account (SSA) assessments for the fiscal
years ending June 30, 1997 and 1998 and the deficiency DST - Interbank Call Loans (IBCL) and
deficiency final withholding tax - trust assessments for fiscal year ending June 30, 1998, in the total
amount of ₱142,777,785.91.

However, [Asiatrust's] deficiency documentary stamp tax - Special Savings Account assessments
for the fiscal years ended June 30, 1997 & 1998, and deficiency documentary sta..111p tax - IBCL
and deficiency final withholding tax - trust assessments for the fiscal year ended June 30, 1998, in
the aggregate amount of ?142,777,785.91 are hereby AFFIRMED. The said amount is broken down
as follows:
Asiatrust filed a Motion for Reconsideration attaching photocopies of its Application for Abatement
Program, BIR Payment Form, BIR Tax Payment Deposit Slip, Improved Voluntary Assessment
Program Application Forms, Tax Amnesty Return, Tax Amnesty Payment Form, Notice of Availment
of Tax Amnesty and Statement of Assets and Liabilities and Networth (SALN). The CIR, on the other
hand, filed a Motion for Partial Reconsideration of the assessments assailing the CTA Division's
finding of prescription and cancellation of assessment notices for deficiency income, DST - regular,
DST - trust, and fringe benefit tax for fiscal years ending June 30, 1997 and 1998. 18 The CTA
Division issued a Resolution denying the motion of the CIR while partially granting the motion of
Asiatrust.

The CIR appealed the Decision and the Resolution before the CTA En Banc via a Petition for
Review. The CTA En Banc however dismissed the Petition for being premature considering that the
proceedings before the CTA Division was still pending.

Asiatrust filed a Manifestation informing the CTA Division that the BIR issued a Certification that
Asiatrust paid the amounts of ₱4,187,683.27 and ₱6,097,825.03 at the Development Bank of the
Philippines in connection with the One-Time Administrative Abatement.

The CTA Division rendered an Amended Decision finding that Asiatrust is entitled to the immunities
and privileges granted in the Tax Amnesty Law.

Asiatrust moved for partial reconsideration insisting that the Certification issued by the BIR is
sufficient proof of its availment of the Tax Abatement Program considering that the CIR has not yet
issued a termination letter. The CTA Division issued a Resolution denying Asiatrust's motion. The
CTA Division maintained that it cannot consider Asiatrust's availment of the Tax Abatement Program
in the absence of a termination letter from the BIR. Both parties appealed 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, while it denied Asiatrust's appeal for lack of merit. The
CTA En Banc sustained the ruling of the CTA Division that in the absence of a termination letter, it
cannot be established that Asiatrust validly availed of the Tax Abatement Program.

The CTA En Banc denied the motions for partial reconsideration of the CIR and Asiatrust. Hence,
the instant consolidated Petitions under Rule 45 of the Rules of Court.

Issues:

G.R. No. 201530

1. Whether the CTA en banc erred in finding that Asiatrust is liable for deficiency final withholding
tax for fiscal year ending June 30, 1998.
2. Whether the order of the CTA En Banc for petitioner to pay again the final withholding tax for
fiscal year ending June 30, 1998 would amount to double taxation.
3. Whether the CTA En Banc erred in resolving the issue of alleged deficiency final withholding tax
for fiscal year ending June 30, 1998 based on mere technicalities.
G.R. Nos. 201680-81
1. Whether xx x the CTA En Banc committed reversible error when it dismissed the CIR's petition
for review on the ground that the latter allegedly failed to comply with section 1, rule 8 of the revised
rules of the CTA.
2. Whether the CTA en banc committed reversible error when it sustained the amended decision
dated 16 march 2010 of the first division declaring closed and terminated respondent's liability for
deficiency documentary stamp tax for taxable years 1997 and 1998.

Ruling:

The Petitions lack merit. G.R. No. 201530 An application for tax abatement is considered approved
only upon the issuance of a termination letter. Section 204(B) of the 1997 National lnten1al Revenue
Code (NIRC) empowers the CIR to abate or cancel a tax liability. The BIR issued RR No. 15-06
prescribing the guidelines on the implementation of the one-time administrative abatement of all
penalties/surcharges and interest on delinquent accounts and assessments (preliminary or final,
disputed or not). Section 4 of RR No. 15-06 provides:

SECTION 4. Who May Avail, - Any person/ taxpayer, natural or juridical, may settle thru this
abatement program any delinquent account or assessment which has been released as of June 30,
2006, by paying an amount equal to One Hundred Percent (100%) of the Basic Tax assessed with
the Accredited Agent Bank (AAB) of the Revenue District Office (RDO)/Large Taxpayers Service
(LTS)/Large Taxpayers District Office (LTDO) that has jurisdiction over the taxpayer. In the absence
of an AAB, payment may be made with the Revenue Collection Officer/Deputized Treasurer of the
RDO that has jurisdiction over the taxpayer. After payment of the basic tax, the assessment for
penalties/surcharge and interest shall be cancelled by the concerned BIR Office following existing
rules and procedures. Thereafter, the docket of the case shall be forwarded to the Office of the
Commissioner, thru the Deputy Commissioner for Operations Group, for issuance of Termination
Letter.1âwphi1 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 letter
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.

Thus, the Court finds no error on the part of the CTA En Banc in affirming the said tax assessment.
G.R. Nos. 201680-81 An appeal to the CTA En Banc must be preceded by the filing of a timely
motion for reconsideration or new trial with the CTA Division.

Section 1, Rule 8 of the Revised Rules of the CTA states: SECTION 1. Review of cases in the Court
en bane. - In cases falling under the exclusive appellate jurisdiction of the Court en bane, the petition
for review of a decision or resolution of the Court in Division must be preceded by the filing of a
timely motion for reconsideration or new trial with the Division.

Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely
motion for reconsideration or new trial must first be filed with the CTA Division that issued the
assailed decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the
word "must" indicates that the filing of a prior motion is mandatory, and not merely directory. In this
case, the CIR's failure to move for a reconsideration of the Amended Decision of the CTA Division
is a ground for the dismissal of its Petition for Review before the CTA En Banc. Thus, the CTA En
Banc did not err in denying the CIR's appeal on procedural grounds.

12. Silkair (Singapore) Pte. Ltd. v. CIR

FACTS:

Petitioner is a corporation organized under the laws of Singapore which has a Philippine
representative office, is an online international air carrier.

Silkair filed with the Bureau of Internal Revenue (BIR) for the refund of excise taxes for their
purchase of jet fuel.

The CIR, in their reply, said that petitioner failed to prove that the sale of the fuel was directly made
from a domestic oil company to them. The excise tax on petroleum products is the direct liability of
the manufacturer/producer, and when added to the cost of the goods sold to the buyer, it is no longer
a tax but part of the price which the buyer has to pay to obtain the article.

The CTA denying Silkair’s petition stated that as the excise tax was imposed manufacturer of
petroleum products, any claim for refund should be filed by the latter; and where the burden of tax
is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost
of the goods purchased.

ISSUE: Whether Silkair PTE. Ltd. can claim for tax credit.

RULING:

No.

The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person
on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to
another. Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a
refund based on Section 135 of the NIRC of 1997.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed
to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.

13. CIR v. Petron Corp.

Facts:
A corporation engaged in the production of petroleum products, Petron
Pursuant to Deeds of
Assignment executed in its favor, Petron acquired Tax Credit Certificates (TCCs) from, among
others, the following BOI-registered entities, namely, Diamond Knitting Corporation, Filstar Textile
Industrial Corporation, Alliance Thread Co., Inc., Fiber Tech. Corporation, Jantex
Phils., Inc. and Master Colour System Corporation... the TCCs were subject to the following
conditions, to... wit:
The assignments of the TCCs were duly approved by the Department of Finance One-Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center (the Center), a tax credit window created under
Administrative Order No. 226
Issued DOF Tax Debit Memos (DOF-TDMs) by the Center, Petron, as assignee of said TCCs,
utilized the same to pay its excise tax liabilities for the... years 1993 to 1997.
Upon Petron's surrender of the DOF-TDMs, TCCs and Deeds of Assignment, the corresponding
Authorities to Accept Payment of Excise Taxes (ATAPETs) were further issued by the BIR Collection
Program Division.
Petron received a collection letter dated April 22, 1998 from the BIR Revenue District Office of South
Makati, Metro Manila, demanding payment of the total amount of P1,107,542,547.08 in unpaid
taxes, surcharges and interests for the years 1993 to

1997.

Petron received a collection letter dated April 22, 1998 from the BIR Revenue District Office of South
Makati, Metro Manila, demanding payment of the total amount of P1,107,542,547.08 in unpaid
taxes, surcharges and interests for the years 1993 to
1997
With the denial of its letters of protest to the foregoing collection letter, Petron perfected an appeal
which was docketed as C.T.A. Case No. 5657 before the CTA.
With the denial of its letters of protest to the foregoing collection letter
Upholding Petron's argument to the effect, among other matters, that its... status as a BOI-registered
enterprise and its transactions with the original grantees qualified it to be a transferee of the subject
TCCs,... The collection of the alleged delinquent excise taxes
CANCELLED
Accordingly,... Respondents are ENJOINED from collecting the said amount of taxes against the
petitioner.
On October 24, 1999, the Center cancelled TCCs... of the same TCCs... acquired and used by
Petron on the ground that they were fraudulently procured and transferred.
As a consequence of the cancellation, respondent issued an Assessment dated November 15, 1999
(the
Assessment), directing Petron to pay deficiency excise taxes
In view of respondent's inaction on the protest it filed to question the factual and legal bases of the
Assessment,... Petron filed the July 7, 2000 petition for review which was docketed before the CTA...
the invalidation of the cancellation of the TCCs as well as the withdrawal of the
Assessment... respondent filed its... answer,... Contending that... the TCCs were cancelled on the
strength of the Center's findings... that they were fraudulently obtained and transferred to Petron
upon fictitious supply agreements with the grantees... respondent sought the dismissal of the
petition,... At the pre-trial conference conducted in the case, the parties submitted a Joint Stipulation
of Facts and Issues... the CTA Second Division went on to render the August 23, 2006...
decision,[31] denying Petron's petition
ORDERED TO PAY... deficiency excise taxes
Petron elevated the matter via the petition for review docketed... before the CTA En Banc
CTA En Banc rendered the herein assailed decision, affirming... decision of the CTA Second
Division
The Center's finding of fraud in the procurement of the TCCs by the grantees rendered the same
worthless, even in the hands of an assignee like Petron
The evidence adduced in the case which showed misrepresentation in the levels of fuel oil use by
the grantees and the non-delivery of petroleum products by Petron also indicate that fraud also
attended the transfer of the TCCs;
The Center acted within its mandate in declaring TCCs fraudulently issued and transferred;
Aggrieved, Petron filed the petition for review on certiorari
Petron argues that, having been issued pursuant to Administrative Order No. 226 in relation to
Executive Order No. 226, the subject TCCs were immediately effective and could be readily used
by the grantees and/or their... transferees.
Petron maintains that respondent failed to prove the fraud which purportedly attended the
procurement of the subject TCCs.
Petron correctly argues that the CTA En Banc reversibly erred in holding that the result of the post-
audit conducted by the Center partook the nature of a suspensive condition for the validity of the
subject TCCs... and the use thereof as payment of its tax liabilities or duties.
TCCs were, consequently, valid upon their issuance in favor of the... original grantees which had
the right to use them in payment of their tax liabilities and/or transfer them in favor of assignees like
Petron which could, in turn, utilize them as payment of its own tax liabilities.
Issues:
SUBSEQUENT CANCELLATION BY THE DOF CENTER OF THE TAX CREDIT CERTIFICATES
PREVIOUSLY USED TO PAY PETRON'S TAX LIABILITIES HAD THE EFFECT OF NON-
PAYMENT OF PETRON'S EXCISE
TAXES
THERE WAS NO FRAUD IN THE TRANSFER OF THE SUBJECT TAX CREDIT CERTIFICATES.
THE TAX CREDIT CERTIFICATES WERE FRAUDULENTLY TRANSFERRED FROM THE
GRANTEES TO PETRON
Ruling:
Post-audit
(T)he TCCs are immediately valid and effective after their issuance.
The foregoing guidelines cannot be clearer on the validity and effectivity of the TCC to pay or settle
tax liabilities of the grantee or transferee, as they do not make the effectivity and validity of the TCC
dependent on the outcome of a post-audit. In fact, if we are to... sustain the appellate tax court, it
would be absurd to make the effectivity of the payment of a TCC dependent on a post-audit since
there is no contemplation of the situation wherein there is no post-audit.
Clearly, a tax payment through a TCC cannot be both effective when made and dependent on a
future... event for its effectivity. Our system of laws and procedures abhors ambiguity.
Moreover, if the TCCs are considered to be subject to post-audit as a suspensive condition, the very
purpose of the TCC would be defeated as there would be no guarantee that the TCC would be
honored by the government as payment for taxes. No investor would take the risk of... utilizing TCCs
if these were subject to a post-audit that may invalidate them, without prescribed grounds or limits
as to the exercise of said post-audit.
The inescapable conclusion is that the TCCs are not subject to post-audit as a suspensive condition,
and are thus valid and effective from their issuance.
Not being privy to the issuance of the subject TCCs and having already used them in paying its own
tax liabilities, Petron also correctly points out that it cannot be prejudiced by the fraud which
supposedly attended the issuance of the same.
More so, when it is borne in mind... that, as ground for the cancellation of said TCCs, fraud was not
adequately established by respondent with clear and convincing evidence showing that the grantees
had not, indeed, manufactured and exported at the volumes which served as bases for the grant of
the subject
TCCs.
While the CTA is not governed strictly by technical rules of evidence on the principle that rules of
procedure are not ends in themselves but are primarily intended as tools in the administration of
justice,... respondent's presentation of evidence to... prove the fraud which attended the issuance
of the subject TCCs is not a mere procedural technicality which may be disregarded considering
that it is the very basis for the claim that Petron's payment of its excise tax liabilities had been
avoided.
It cannot be over-emphasized... that fraud is a question of fact[47] which cannot be presumed and
must be proven by clear and convincing evidence[48] by the party alleging the same.
Without even presenting the documents which served as bases for the issuance of... the subject
TCCs from 1994 to 1997, respondent miserably failed in discharging his evidentiary burden with the
presentation of the Center's cancellation memoranda to which were simply annexed some of the
grantees' original registration documents[49] and... their Financial Statements for an average of two
years.
For a party charged with the burden of proving the same, respondent did not even come close to
establishing the fraud which purportedly attended both the issuance of the subject TCCs and the
transfer thereof in favor of Petron.
hat respondent's reliance of the Center's... cancellation memoranda was misplaced and misguided
is evident from the following admissions in the parties' June 22, 2001 Joint Stipulation of Facts and
Issues
Having proven the valuable consideration for the grantees' transfer of the TCCs in its favor, it also
bears pointing out that Petron has more than amply proved its good faith by complying with the
procedures laid down for the transfer and use thereof.
Petron had every right to rely on the validity of the subject TCCs, the Center's approval of the deeds
of assignment the grantees executed over the same and the BIR's acceptance of its use thereof in
payment of its excise taxes.
Petron was not shown to have had a hand in or knowledge of the fraud which purportedly attended
the issuance of the... same TCCs.
As a transferee in good faith and for value, Petron cannot, therefore, be said to have incurred any
liability insofar as the transfers of the subject TCCs are concerned.
respondent had no legal basis to once again assess the excise taxes Petron already paid with the
use of the TCCs assigned in its favor... another is entered invalidating respondent's Assessment
of... petitioner's deficiency excise taxes for the years 1995 to 1997 for lack of legal bases

14. Ungab v. Cusi, Jr

FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for
allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequently filed a
motion to quash on the ground that (1) the information are null and void for want of authority on the
part of the State Prosecutor to initiate and prosecute the said cases; and (2)that the trial court has
no jurisdiction to take cognizance of the case in view of his pending protest against the assessment
made by the BIR examiner. The trial court denied the motion prompting the petitioner to file a petition
for certiorari and prohibition with preliminary injunction and restraining order to annul and set aside
the information filed.
ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yet
resolved the protest against the tax assessment tenable?

HELD: No. The contention is without merit. What is involved here is not the collection of taxes where
the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax
Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is
within the cognizance of courts of first instance. While there can be no civil action to enforce
collection before the assessment procedures provided in the Code have been followed, there is no
requirement for the precise computation and assessment of the tax before there can be a criminal
prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to
defeat and evade the income tax. A crime is complete when the violator has knowingly and wilfully
filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is
grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and
the government's failure to discover the error and promptly to assess has no connections with the
commission of the crime.
15. Azarcon v. Sandiganbayan

Facts: Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling dirt and
ore. His services were contracted by PICOP. Occasionally, he engaged the services of sub-
contractors like Jaime Ancla whose trucks were left at the former’s premises.

On May 25, 1983, a Warrant of Distraint of Personal Property was issued by BIR commanding one
of its Regional Directors to distraint the goods, chattels or effects and other personal property of
Jaime Ancla, a sub-contractor of accused Azarcon and a delinquent taxpayer. A Warrant of
Garnishment was issued to and subsequently signed by accused Azarcon ordering him to transfer,
surrender, transmit and/or remit to BIR the property in his possession owned by Ancla. Azarcon then
volunteered himself to act as custodian of the truck owned by Ancla.

After some time, Azarcon wrote a letter to the Reg. Dir of BIR stating that while he had made
representations to retain possession of the property of Ancla, he thereby relinquishes whatever
responsibility he had over the said property since Ancla surreptitiously withdrew his equipment from
him. In his reply, the BIR Reg. Dir. said that Azarcon’s failure to comply with the provisions of the
warrant did not relieve him from his responsibility.

Along with his co-accused, Azarcon was charged before the Sandiganbayan with the crime of
malversation of public funds or property. On March 8, 1994, the Sandiganbayan rendered a Decision
sentencing the accused to suffer the penalty of imprisonment ranging from 10 yrs and 1 day of
prision mayor in its maximum period to 17 yrs, 4 mos and 1 day of reclusion temporal. Petitioner
filed a motion for new trial which was subsequently denied by Sandiganbayan. Hence, this petition.

Issue: Whether or not Sandiganbayan has jurisdiction over a private individual designated by BIR
as a custodian of distrained property.

Held: SC held that the Sandiganbayan’s decision was null and void for lack of jurisdiction.

Sec. 4 of PD 1606 provides for the jurisdiction of the Sandiganbayan. It was specified therein that
the only instances when the Sandiganbayan will have jurisdiction over a private individual is when
the complaint charges the private individual either as a co-principal, accomplice or accessory of a
public officer or employee who has been charged with a crime within its jurisdiction.
The Information does no charge petitioner Azarcon of becoming a co-principal, accomplice or
accessory to a public officer committing an offense under the Sandiganbayan’s jurisdiction. Thus,
unless the petitioner be proven a public officer, Sandiganbayan will have no jurisdiction over the
crime charged.

Art. 203 of the RPC determines who public officers are. Granting that the petitioner, in signing the
receipt for the truck constructively distrained by the BIR, commenced to take part in an activity
constituting public functions, he obviously may not be deemed authorized by popular election.
Neither was he appointed by direct provision of law nor by competent authority. While BIR had
authority to require Azarcon to sign a receipt for the distrained truck, the National Internal Revenue
Code did not grant it power to appoint Azarcon a public officer. The BIR’s power authorizing a private
individual to act as a depositary cannot be stretched to include the power to appoint him as a public
officer. Thus, Azarcon is not a public officer.

16. David v. Ramos

17. Churchill v. Rafferty

FACTS: The judgment appealed from in this case perpetually restrains and prohibits the defendant
and his deputies from collecting and enforcing against the plaintiffs and their property the annual tax
mentioned and described in subsection (b) of section 100 of Act No. 2339, effective July 1, 1914,
and from destroying or removing any sign, signboard, or billboard, the property of the plaintiffs, for
the sole reason that such sign, signboard, or billboard is, or may be, offensive to the sight; and
decrees the cancellation of the bond given by the plaintiffs to secure the issuance of the preliminary
injunction granted soon after the commencement of this action.

ISSUE: Whether or not a provision in the internal revenue law prohibiting the courts from enjoining
the collection of an internal revenue tax is invalid

RULING: NO. A provision in an internal revenue law prohibiting the courts from enjoining the
collection for an internal revenue tax is not invalid as opposed to the due process and equal
protection of the law clauses of the bill of rights of the Organic Act. Such legislation has been upheld
by the United States Supreme Court

Nor is such a provision of law invalid as curtailing the jurisdiction of the courts of the Philippine
Islands as fixed by section 9 of the Organic Act; a) because jurisdiction was never conferred upon
Philippine courts to enjoin the collection of taxes imposed by the Philippine Commission; and b)
because, in the present case, another adequate remedy has been provided by payment and protest

18. CIR v. Cebu Portland Cement Co

FACTS: By virtue of a decision of the Court of Tax Appeals, the CIR was ordered to refund to the
Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad
valorem taxes on cement produced and sold by it after October 1957. The private respondent then
moved for a writ of execution to enforce the said judgment The motion was opposed by the petitioner
on the ground that the private respondent had an outstanding sales tax liability to which the judgment
debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales
taxes in the amount of P 4,789,279.85 plus 28% surcharge.
ISSUE: Whether or not assessment of taxes can be enforced even if it is a subject of a pending
case or it is still being contested

RULING: The argument that the assessment cannot as yet be enforced because it is still being
contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government."
If the payment of taxes could be postponed by simply questioning their validity, the machinery of the
state would grind to a halt and all government functions would be paralyzed. That is the reason why,
save for the exception already noted, the Tax Code provides:

Sec. 291. Injunction not available to restrain collection of tax. — No court shall have authority
to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge
imposed by this Code.

It goes without saying that this injunction is available not only when the assessment is already being
questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment
is still-and only-on the administrative level. There is all the more reason to apply the rule here
because it appears that even after crediting of the refund against the tax deficiency, a balance of
more than P 4 million is still due from the private respondent.

19. Spouses Pacquiao v. Court of Tax Appeals