digest taxation

8/13/2019 Digest Taxation

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1. CIR V P SCOR RE LTY & DEVT CORP et. al.309 SCRA 402; GR No. 128315, June 29, 1999Facts: The CIR authorized certain BIR officers to examine the books of accounts and other accounting recordsof Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted inrecommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987,

respectively. The Commissioner filed a criminal complaint for tax evasion against PRDC, its president andtreasurer before the DOJ. Private respondents filed immediately an urgent request for reconsideration onreinvestigation disputing the tax assessment and tax liability. The Commissioner denied private respondents request for reconsideration/reinvestigation on the ground that no formal assessment has been issued whichthe latter elevated to the CTA on a petition for review. The Commissioners motion to dismiss on the groundof the CTAs lack of jurisdiction denied by CTA and ordered the Commissioner to file an answer. Instead ofcomplying with the order of CTA, Commissioner filed a petition with the CA alleging grave abuse ofdiscretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenueofficers and the endorsement of said report as assessment which may be appealed to the CTA. The CAsustained 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. Neitherthe Tax Code nor the revenue regulations governing the protest assessments provide a specific definition orform of an assessment.

An assessment must be sent to and received by the taxpayer, and must demand payment of the taxesdescribed therein within a specific period. The revenue officers affidavit merely contained a computation ofrespondents tax liability. It did not state a demand or period for payment. It was addressed to the Secretaryof Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint for taxevasion; it was not meant to be a notice of tax due and a demand to private respondents for the paymentthereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows thatcommissioner 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 besupported by a prima facie showing of failure to file a required return. The CIR had, in such tax evasioncases, discretion on whether to issue an assessment, or to file a criminal case against the taxpayer, or to doboth.

2. Marcos II vs. CA273 SCRA 47 1997Facts:Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the deficiency income taxassessments and estate tax assessments upon the estate and properties of his late father despite the pendencyof the probate proceedings of the will of the late President. On the other hand, the BIR argued that theStates authority to collect internal revenue taxes is paramount.

Petitioner further argues that "the numerous pending court cases questioning the late president's ownershipor interests in several properties (both real and personal) make the total value of his estate, and the

consequent estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents'assessment of the estate tax and their issuance of the Notices of Levy and sale are premature and oppressive."


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He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were filed by thegovernment to question the ownership and interests of the late President in real and personal propertieslocated within and outside the Philippines. Petitioner, however, omits to allege whether the properties leviedupon by the BIR in the collection of estate taxes upon the decedent's estate were among those involved in thesaid cases pending in the Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant tothe matter at issue. The mere fact that the decedent has pending cases involving ill-gotten wealth does not

affect the enforcement of tax assessments over the properties indubitably included in his estate.

Issue:Is the contention of Marcos correct?Held:No. The approval of the court, sitting in probate or as a settlement tribunal over the deceaseds estate,is not a mandatory requirement in the collection of estate taxes.

There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probateor estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced andcollected.

The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance ofgovernment. Taxes are the lifeblood of government and should be collected without unnecessary hindrance.

However, such collection should be made in accordance with law as any arbitrariness will negate the existenceof government itself.

It is not the Department of Justice which is the government agency tasked to determine the amount of taxesdue upon the subject estate, but the Bureau of Internal Revenue whose determinations and assessments arepresumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In the absence ofproof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even anassessment based on estimates is prima facie valid and lawful where it does not appear to have been arrivedat arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that theassessment is erroneous. Failure to present proof of error in the assessment will justify the judicialaffirmance of said assessment. In this instance, petitioner has not pointed out one single provision in theMemorandum of the Special Audit Team which gave rise to the questioned assessment, which bears a trace offalsity. Indeed, the petitioner's attack on the assessment bears mainly on the alleged improbable and

unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the charge ofimpropriety of the assessments made.

3. Meralco Securities Corporation vs. Savellano117 SCRA 804; GR No. L-36181 October 23, 1982Facts: On May 22, 1967, the late Juan G. Maniago (substituted in these proceedings by his wife and children)submitted to petitioner Commissioner of Internal Revenue confidential denunciation against the MeralcoSecurities Corporation for tax evasion for having paid income tax only on 25 % of the dividends it receivedfrom the Manila Electric Co. for the years 1962-1966, thereby allegedly shortchanging the government ofincome tax due from 75% of the said dividends.

Petitioner Commissioner of Internal Revenue caused the investigation of the denunciation after which he

found and held that no deficiency corporate income tax was due from the Meralco Securities Corporation onthe dividends it received from the Manila Electric Co. and accordingly denied Maniago's claim for informer'sreward on a non-existent deficiency.On August 28, 1970, Maniago filed a petition for mandamus, and subsequently an amended petition formandamus, in the Court of First Instance of Manila, docketed therein as Civil Case No. 80830, against theCommissioner of Internal Revenue and the Meralco Securities Corporation to compel the Commissioner toimpose the alleged deficiency tax assessment on the Meralco Securities Corporation and to award to him thecorresponding informer's reward under the provisions of R.A. 2338. Respondent judge granted the saidpetition and thereafter, denied the motions for reconsideration filed by all the parties.

Issues:(1) Whether or not respondent judge has jurisdiction over the subject matter of the case; (2) Whetheror not respondent heirs of Maniago are entitled to informers reward.

Held: (1) Respondent judge has no jurisdiction to take cognizance of the case because the subject matterthereof clearly falls within the scope of cases now exclusively within the jurisdiction of the Court of Tax


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Appeals. Section 7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appealsexclusive appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of InternalRevenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges,penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code orother law or part of law administered by the Bureau of Internal Revenue. The law transferred to the Court ofTax Appeals jurisdiction over all cases involving said assessments previously cognizable by courts of first

instance, and even those already pending in said courts. The question of whether or not to impose adeficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the

words "disputed assessments" or of "other matters arising under the National Internal Revenue Code . . . .Inthe case of Blaquera vs. Rodriguez, et al, this Court ruled that "the determination of the correctness orincorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction of theCourt of Tax Appeals and not of the Court of First Instance, for under the provisions of Section 7 of RepublicAct No. 1125, the Court of Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any decisionof the Collector of Internal Revenue in cases involving disputed assessments and other matters arising underthe National Internal Revenue Code or other law or part of law administered by the Bureau of InternalRevenue."

(2) Considering then that respondent judge may not order by mandamus the Commissioner to issue theassessment against Meralco Securities Corporation when no such assessment has been found to be due, no

deficiency taxes may therefore be assessed and collected against the said corporation. Since no taxes are to becollected, no informer's reward is due to private respondents as the informer's heirs. Informer's reward iscontingent upon the payment and collection of unpaid or deficiency taxes. An informer is entitled by way ofreward only to a percentage of the taxes actually assessed and collected. Since no assessment, much less anycollection, has been made in the instant case, respondent judge's writ for the Commissioner to payrespondents 25% informer's reward is gross error and without factual nor legal basis.

Petitions granted and the questioned decision of respondent judge and order reversed and set aside.


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4. SY PO vs. CTAG.R. No. 81446; August 18, 1988Facts: Po Bien Sing, the sole proprietor of Silver Cup Wine Factory (SCWF), engaged in the business ofmanufacture and sale of compounded liquors. On the basis of a denunciation against SCWF allegedly "for taxevasion amounting to millions of pesos, Secretary of Finance directed the Finance-BIR--NBI team toinvestigate.

On the basis of the team's report of investigation, the respondent Commissioner of Internal Revenue assessedMr. Po Bien Sing deficiency income tax for 1966 to 1970 in the amount of P7,154,685.16 and for deficiencyspecific tax for January 2,1964 to January 19, 1972 in the amount of P5,595,003.68

Petitioner protested the deficiency assessments. The BIR recommended the reiteration of the assessments inview of the taxpayer's persistent failure to present the books of accounts for examination.

Issue:WON the assessments have valid and legal basis.Held:The law is specific and clear. The rule on The Best Evidence Obtainable applies when a tax reportrequired by law for the purpose of assessment is not available or when tax report is incomplete or fraudulent.

The tax assessment by tax examiners are presumed correct and made in good faith. The taxpayer has the duty

to prove otherwise. In the absence of proof of irregularities in the performance of duties, an assessment dulymade by the BIR examiner and approved by his superior officers will not be disturbed. All presumptions arein favour of the correctness of tax assessments.


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5. CIR vs. CA, CTA and FORTUNE TOBACCO CORP.261 SCRA 236; G.R. No. 119761; August 29, 1996Facts:Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the manufacture of different brands ofcigarettes, registered "Champion," "Hope," and "More" cigarettes. BIR classified them as foreign brands since

they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortun changedthe names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands fromthe foreign brand category.

A 45% Ad Valorem taxes were imposed on these brands. Then Republic Act ("RA") No. 7654 was enacted 55% for locally manufactured foreign brand while 45% for locally manufactured brands. 2 days before theeffectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIRsaying since there is no showing who the real owner/s are of Champion, Hope and More, it follows that thesame shall be considered locally manufactured foreign brand for purposes of determining the ad valorem tax- 55%. BIR sent via telefax a copy of RMC 37-93 to Fortune Tobacco addressed to no one in particular. ThenFortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. CIR assessed FortuneTobacco for ad valorem tax deficiency amounting to P9,598,334.00.

Fortune Tobacco filed a petition for review with the CTA. 8 CTA upheld the position of Fortune. CA affirmed.

Issue:WON it was necessary for BIR to follow the legal requirements when it issued its RMCHeld. YES. CIR may not disregard legal requirements in the exercise of its quasi-legislative powers whichpublication, filing, and prior hearing.

When an administrative rule is merely interpretative in nature, its applicability needs nothing further than itsbare issuance for it gives no real consequence more than what the law itself has already prescribed. BUT

when, upon the other hand, the administrative rule goes beyond merely providing for the means that canfacilitate or render least cumbersome the implementation of the law but substantially increases the burden ofthose governed, the agency must accord, at least to those directly affected, a chance to be heard, before thatnew issuance is given the force and effect of law.RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact

and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" withinthe classification of locally manufactured cigarettes bearing foreign brands and to thereby have them coveredby RA 7654 which subjects mentioned brands to 55% the BIR not simply interpreted the law; verily, itlegislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing,and of publication should not have been then ignored.

6. CIR v. Benguet Corp463 SCRA 28; G.R. Nos. 134587 and 134588; January 8, 2005Facts:Benguet Corporation is a domestic corporation engaged in the exploration, development and operationof mineral resources, and the sale or marketing thereof to various entities. It is a VAT registered enterprise.

The transactions in question occurred during the period between 1988 and 1991. Under Sec. 99 of NIRC asamended by E.O. 273 s. 1987 then in effect, any person who, in the course of trade or business, sells, bartersor exchanges goods, renders services, or engages in similar transactions and any person who imports goods isliable for output VAT at rates of either 10% or 0% (zero-rated) depending on the classification of thetransaction under Sec. 100 of the NIRC.


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In January of 1988, Benguet applied for and was granted by the BIR zero-rated status on its sale of gold toCentral Bank. On 28 August 1988 VAT Ruling No. 3788-88 was issued which declared that the sale of gold toCentral Bank is considered as export sale subject to zero-rate pursuant toSection 100 of the Tax Code, as amended by EO 273.

Relying on its zero-rated status and the above issuances, Benguet sold gold to the Central Bank during the

period of 1 August 1989 to 31 July 1991 and entered into transactions that resulted in input VAT incurred inrelation to the subject sales of gold. It then filed applications for tax refunds/creditscorresponding to input VAT.

However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23 January 1992 that wasissued subsequent to the consummation of the subject sales of gold to the Central Ban`k which provides thatsales of gold to the Central Bank shall not be considered as export sales and thus, shall be subject to 10%

VAT. BIR VAT Ruling No. 008-92 withdrew, modified, and superseded all inconsistent BIR issuances.Both petitioner and Benguet agree that the retroactive application of VAT Ruling No. 008-92 is valid only ifsuch application would not be prejudicial to the Benguet pursuant Sec. 246 of the NIRC.

Issues:(1) WON Benguets sale of gold to the Central Bank during theperiod when such was classified by BIR issuances as zerorated could be taxed validly at a 10% rate after the

consummation of the transactions involved; (2) WON there was prejudice to Benguet Corp due to the newBIR VAT Ruling.

Held:(1) NO. At the time when the subject transactions were consummated, the prevailing BIR regulationsrelied upon by Benguet ordained that gold sales to the Central Bank were zero-rated. Benguet should not befaulted for relying on the BIRs interpretation of the said laws and regulations.

While it is true, as CIR alleges, that government is not estopped from collecting taxes which remain unpaidon account of the errors or mistakes of its agents and/or officials and there could be no vested right arisingfrom an erroneous interpretation of law, these principles must give way toexceptions based on and in keeping with the interest of justice and fair play. (then the Court cited the ABS-CBN case).

(2) YES. The adverse effect is that Benguet Corp became the unexpected and unwilling debtor to the BIR ofthe amount equivalent to the total VAT cost of its product, a liability it previously could have recovered fromthe BIR in a zero-rated scenario or at least passed on to the Central Bank had it known it would have beentaxed at a 10% rate. Thus, it is clear that Benguet suffered economic prejudice when it consummated sales ofgold to the Central Bank were taken out of the zero-rated category. The change in the VAT rating ofBenguets transactions with the Central Bank resulted in the twin loss of its exemption from payment ofoutput VAT and its opportunity to recover input VAT, and at the same time subjected it to the 10% VATsans the option to pass on this cost to the Central Bank, with the total prejudice in money terms beingequivalent to the 10% VAT levied on its sales of gold to the Central Bank.

Even assuming that the right to recover Benguets excess payment of income tax has not yet prescribed, thisrelief would only address Benguets overpayment of income tax but not the other burdens discussed above.

Verily, this remedy is not a feasible option for Benguet because the very reason why it was issued a deficiency

tax assessment is that its input VATwas not enough to offset its retroactive output VAT. Indeed, the burden of having to go through anunnecessary and cumbersome refund process is prejudice enough.


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7. CIR v Bursmeiters Wain ScandinavianGR 153205; January 22, 2007Facts:A foreign consortium, parent company of Burmeister, entered into an O&M contract with NPC. Theforeign entity then subcontracted the actual O&M to Burmeister. NPC paid the foreign consortium a mixtureof currencies while the consortium, in turn, paid Burmeister foreign currency inwardly remitted into thePhilippines. BIR did not want to grant refund since the services are not destined for consumption abroad

(or the destination principle).

Issue:Are the receipts of Burmeister entitled to VAT zero-rated status?Held:PARTIALLY. Respondent is entitled to the refund prayed for BUT ONLY for the period covered prior tothe filing of CIRs Answer in the CTA.

The claim has no merit since the consortium, which was the recipient of services rendered by Burmeister, wasdeemed doing business within the Philippines since its 15-year O&M with NPC can not be interpreted as anisolated transaction.

In addition, the services referring to processing, manufacturing, repacking and services other than those in(1) of Sec. 102 both require (i) payment in foreign currency; (ii) inward remi ttance; (iii) accounted for by the

BSP; AND (iv) that the service recipient is doing business outside the Philippines. The Court ruled that if thisis not the case, taxpayers can circumvent just by stipulating payment in foreign currency.

The refund was partially allowed since Burmeister secured a ruling from the BIR allowing zero-rating of itssales to foreign consortium. However, the ruling is only valid until the time that CIR filed its Answer in theCTA which is deemed revocation of the previously-issued ruling. The Court said the revocation can notretroact since none of the instances in Section 246 (bad faith, omission of facts, etc.) are present.


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8. CIR vs. HANTEX TRADING CO., INC.454 SCRA ; G.R. No. 136975; March 31, 2005Facts:Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plasticproducts, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose,it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureauof Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. VicenteAmoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau(EIIB), received confidential information that the respondent had imported synthetic resin amounting toP115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present its books ofaccount which it failed to do. The bureau cannot find any original copies of the products Hentex importedsince the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondentsProfit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the ConsumptionEntries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas andDanganan. The case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered topay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued

by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computingthe deficiency tax of the respondent were not duly authenticated by the public officer charged with theircustody, nor verified under oath by the EIIB and the BIR investigators.Issue:Whether or not the final assessment of the petitioner against the respondent for deficiency income taxand sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competentevidence and the law.Held:Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that theCommissioner of Internal Revenue has the power to make assessments and prescribe additional requirementsfor tax administration and enforcement. Among such powers are those provided in paragraph (b), whichprovides that Failure to submit required returns, statements, reports and other documents. When a reportrequired by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming

within the time fixed by law or regulation or when there is reason to believe that any such report is false,incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable. This

provision applies when the Commissioner of Internal Revenue undertakes to perform her administrative dutyof assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or toamend a return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, asamended, includes the corporate and accounting records of the taxpayer who is the subject of the assessmentprocess, the accounting records of other taxpayers engaged in the same line of business, including their grossprofit and net profit sales. Such evidence also includes data, record, paper, document or any evidencegathered by internal revenue officers from other taxpayers who had personal transactions or from whom thesubject taxpayer received any income; and record, data, document and information secured from governmentoffices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and theTariff and Customs Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, asamended, does not include mere photocopies of records/documents. The petitioner, in making a preliminaryand final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machinecopies of records/documents. Mere photocopies of the Consumption Entries have no probative weight if

offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper andare of no probative value as basis for any deficiency income or business taxes against a taxpayer.


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9. BPI v CIRG.R No. 137736; October 17, 2005Facts:The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner filed aprotest letter, requesting for reconsideration with BIR however the latter did not reply. Instead, BIR issued a

warrant for distraint/levy against petitioner BPI. The petitioner did not hear from BIR until September 11, 1997

when then Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration. Subsequently, thepetitioner filed a petition for review with the CTA, raising the defense of prescription. The CTA denied thepetition and held that the period of prescription had not yet prescribed nonetheless, it held that thepetitioner was not liable for the deficiency of DST. On appeal, the CA reversed the ruling of CTA on the issueof DST tax and held that the petitioner was indeed liable for DST.

Issue:Whether or not the right of the respondent to collect from petitioner BPIis barred by prescription?Held :Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, countedfrom the date of actual filing of the return or from the last date prescribed by law for the filing of suchreturn, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding or thecollection thereof without an assessment. In case of a false or fraudulent return with intent to evade tax orthe failure to file any return at all, the prescriptive period for assessment of the tax due shall be 10 years from

discovery by the BIR of the falsity, fraud, or omission. When the BIR validly issues an assessment, withineither the three-year or ten-year period, whichever is appropriate, then the BIR has another three years afterthe assessment within which to collect the national internal revenue tax due thereon by distraint, levy, and/orcourt proceeding. The assessment of the tax is deemed made and the three-year period for collection of theassessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR tothe taxpayer.

In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protestletter suspended the running of the prescriptive period for collecting the assessed DST. This Court, however,takes the opposing view, and, based on the succeeding discussion, concludes that there is no valid ground forsuspending the running of the prescriptive period for collection of the deficiency DST assessed againstpetitioner BPI.

The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus,shall be construed liberally in his favor

10. ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. CIR421 SCRA 266; GR. No. 155541; January 27, 2004Facts:During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by thePhilippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her death,PhilTrust filed her income tax return for 1978 not indicating that the decedent had died. The BIR conductedan administrative investigation of the decedents tax liability and found a deficiency income tax for the year1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by registered mail a demandletter and assessment notice addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was theaddress stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner of Internal

Revenue issued warrants of distraint and levy to enforce the collection of decedents deficiency income taxliability and serve the same upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a


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motion to allow his claim with probate court for the deficiency tax. The Court denied BIRs claim against theestate on the ground that no proper notice of the tax assessment was made on the proper party. On appeal,the CA held that BIRs service on PhilTrust of the notice of assessment was binding on the estate as PhilTrustfailed in its legal duty to inform the respondent of antecedents death. Consequently, as the estate failed toquestion the assessment within the statutory period of thirty days, the assessment became final, executory,and incontestable.

Issue: (1) Whether or not the CA erred in holding that the service of deficiency tax assessment on Julianathrough PhilTrust was a valid service as to bind the estate; (2) Whether or not the CA erred in holding thatthe tax assessment had become final, executory, and incontestable.

Held:(1) Since the relationship between PhilTrust and the decedent was automatically severed the moment ofthe taxpayers death, none of the PhilTrusts acts or omissions could bind the estate of the taxpayer. Althoughthe administrator of the estate may have been remiss in his legal obligation to inform respondent of thedecedents death, the consequence thereof merely refer to the imposition of certain penal sanction on theadministrator. These do not include the indefinite tolling of the prescriptive period for making deficiency taxassessment or waiver of the notice requirement for such assessment.

(2) The assessment was served not even on an heir or the estate but on a completely disinterested party. This

improper service was clearly not binding on the petitioner. The most crucial point to be remembered is thatPhilTust had absolutely no legal relationship with the deceased or to her Estate. There was therefore noassessment served on the estate as to the alleged underpayment of tax. Absent this assessment, no proceedingcould be initiated in court for collection of said tax; therefore, it could not have become final, executory andincontestable. Respondents claim for collection filed with the court only on November 22, 1984 was barredfor having been made beyond the five-year prescriptive period set by law.

11. CIR v. TulioGR139858; October 25, 2005.Facts:This involves the collection of percentage taxes for 1986 and 1987. Tulio did not file tax returns. BIRdiscovered on September 14 1989. RTC dismissed BIR collection case on the ground of prescription. Itcounted 3 years from the return was supposed to be filed with the BIR instead of 10 yrs from discovery ofomission to file return by the respondent.

Issue:Whether petitioners cause of action for the collection of deficiency percentage taxes against respondenthas prescribed.The lower court erroneously applied Section 203 of the same Code providing for the three-year prescriptive

period from the filing of the tax return within which internal revenue taxes shall be assessed. It held that suchperiod should be counted from the day the return was filed, or from August 15, 1990 up to August 15, 1993.However, as shown by the records, respondent failed to file a tax return, forcing petitioner to invoke thepowers of his office in tax administration and enforcement. Respondents failur e to file his tax returns is thuscovered by Section 223 providing for a ten-year prescriptive period within which a proceeding in court maybe filed.Here, respondent failed to file his tax returns for 1986 and 1987. On September 14, 1989, petitioner foundrespondents omission. Hence, the running of the ten-year prescriptive period within which to assess andcollect the taxes due from respondent commenced on that date until September 14, 1999. The two finalassessment notices were issued on February 28, 1991, well within the prescriptive period of three (3) years.

When respondent failed to question or protest the deficiency assessments thirty (30) days therefrom, or untilMarch 30, 1991, the same became final and executory.


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12. Oceanic Wireless v. CIRGR NO. 148380, December 9, 2005Facts: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency taxassessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest againstthe tax assessments and requested a reconsideration or cancellation of the same in a letter to the BIRCommissioner.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr.Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation. Saidletter likewise requested petitioner to pay within 10 days from receipt thereof, otherwise the case shall bereferred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant ofdistraint and levy without further notice.

Upon petitioners failure to pay the subject tax assessments within the prescribed period, the AssistantCommissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding

warrants of distraint and/or levy and garnishment.

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of thewarrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of

jurisdiction.Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as the finaldecision of the Commissioner of Internal Revenue on its protest because the same was signed by a meresubordinate and not by the Commissioner himself.

With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with theCourt of Appeals contending that there was no final decision to speak of because the Commissioner had yetto make a personal determination as regards the merits of petitioners case.

The Court of Appeals denied the petition.

Issue:Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was actingin behalf of the CIR is deemed final and executor and subject to an appeal to the CTA.


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Held:YES. A demand letter for payment of delinquent taxes may be considered a decision on a disputed orprotested assessment. The determination on whether or not a demand letter is final is conditioned upon thelanguage used or the tenor of the letter being sent to the taxpayer. In this case, the letter of demand,unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request forreconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested itspayment. Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its

collection without further notice. In addition, the letter contained a notation indicating that petitionersrequest for reconsideration had been denied for lack of supporting documents. The demand letter received bypetitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request forreconsideration.

This now brings us to the crux of the matter as to whether said demand letter indeed attained finality despitethe fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead ofthe BIR Commissioner.

The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him bylaw to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted tohim under the National Internal Revenue Code (NIRC) enumerated in Section .

As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegatethe powers vested in him under the pertinent provisions of the Code to any subordinate official with the rankequivalent to a division chief or higher, except the following:

(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of theBureau;

(c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency:Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of fivehundred thousand pesos (P500,000) or less, and minor criminal violations as may be determined by rules andregulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner,discovered by regional and district officials, may be compromised by a regional evaluation board which shall

be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal,Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, asmembers; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excisetax are produced or kept.It is clear from the above provision that the act of issuance of the demand letter by the Chief of the AccountsReceivable and Billing Division does not fall under any of the exceptions that have been mentioned as non-delegable.

Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment hasthe same force and effect.


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13. Philam Asset Management, Inc. vs CTAG.R.156637 and 162004; December 14, 2005Facts:Petitioner acts as investment manager of PFI &PBFI. It provides management &technical services andthus respectively paid for its services. PFI & PBFI withhold the amount of equivalent to 5% creditable taxregulation. On April 3, 1998, filed ITR with a net loss thus incurred withholding tax. Petitioner filed forrefund from BIR but was unanswered . CTA denied the petition for review. CA held that to request for eithera refund or credit of income tax paid, a corporation must signify its intention by marking the correspondingbox on its annual corporate adjustment return.

Issue:Whether or not petitioner is entitled to a refund of its creditible taxes.Ruling: Any tax income that is paid in excess of its amount due to the government may be refunded,provided that a taxpayer properly applies for the refund. One can not get a tax refund and a tax credit at thesame time for the same excess to income taxes paid. Failure to signify ones intention in Final AssessmentReturn (FAR) does not mean outright barring of a valid request for a refund

Requiring that the ITR on the FAR of the succeeding year be presented to the BIR in requesting a tax refundhas no basis in law and jurisprudence. The Tax Code likewise allows the refund of taxes to taxpayer thatclaims it in writing within 2 years after payment of the taxes. Technicalities and legalism should not bemisused by the government to keep money not belonging to it, and thereby enriched itself at the expense ofits law-abiding citizens.

14. Philippine Journalist, Inc. v. CIRG.R. No. 162852; December 16, 2004Facts:In 1995, the Bureau of Internal Revenue (BIR) issued Letter of Authority for two Revenue Officers toexamine petitioners books of account and other accounting records for internal revenue taxes for the period

January 1, 1994 to December 31, 1994.


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In 1997, petitioners Comptroller, executed a "Waiver of the Statute of Limitation Under the National InternalRevenue Code (NIRC)". The document "waive[d] the running of the prescriptive period provided by Sections223 and 224 and other relevant provisions of the NIRC and consent[ed] to the assessment and collection oftaxes which may be found due after the examination at any time after the lapse of the period of limitationsfixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of theinvestigation.

In 1998, Revenue Officer submitted his audit report recommending the issuance of an assessment and findingthat petitioner had deficiency taxes. Subsequently, the Assessment Division of the BIR issued Pre-AssessmentNotices which informed petitioner of the results of the investigation. Thus, BIR issued Assessment/Demandstating the deficiency taxes, inclusive of interest and compromise penaltyOn March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. Panganibanto the petitioner to pay the assessment within ten (10) days from receipt of the letter. On November 10, 1999,a Final Notice Before Seizure was issued by the same deputy commissioner giving the petitioner ten (10) daysfrom receipt to pay. Petitioner received a copy of the final notice on November 24, 1999. By letters datedNovember 26, 1999, petitioner asked to be clarified how the tax liability of P111,291,214.46 was reached andrequested an extension of thirty (30) days from receipt of the clarification within which to reply.The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt ofTax Assessment/Demand. Petitioner also contested that the assessment had no factual and legal basis. OnMarch 28, 2000, a Warrant of Distraint and/or Levy was received by the petitioner.

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) which was amended on May 12,2000. Petitioner complains: (a) that no assessment or demand was received from the BIR; (b) that the

warrant of distraint and/or levy was without factual and legal bases as its issuance was premature; (c) thatthe assessment, having been made beyond the 3-year prescriptive period, is null and void; (d) that theissuance of the warrant without being given the opportunity to dispute the same violates its right to dueprocess; and (e) that the grave prejudice that will be sustained if the warrant is enforced is enough basis forthe issuance of the writ of preliminary injunction.CTA ruled in favor of PJI. It declared that the deficiency income, value-added and expanded withholding taxassessments issued by the respondent against the petitioner on December 9, 1998, in the total amount ofP111,291,214.46 for the year 1994 CANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise,it declared that the Warrant of Distraint and/or Levy No. 33-06-046 NULL and VOID.On appeal CA ruled that Mere assessment notices which have become final after the lapse of the thirty (30)-day reglementary period are not appealable. Thus, the CTA should not have entertained the petition at all.

Also, it ruled that there is a valid waiver thus the running of the prescriptive period is tolled.

Issues:(1) whether or not CTA has jurisdiction over the issues in this case. (2) Whether or not the Waiver ofthe Statute of Limitations is valid and binding on the petitioner

Held: (1) No. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of theCommissioner of Internal Revenue on matters relating to assessments or refunds. The second part of theprovision covers other cases that arise out of the NIRC or related laws administered by the Bureau of InternalRevenue. The wording of the provision is clear and simple. It gives the CTA the jurisdiction to determine ifthe warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations

was validly effected.

(2) No. As found by the CTA, the Waiver of Statute of Limitations, signed by petitioners comptroller onSeptember 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former mayassess and collect revenue taxes. Thus, petitioners waiver became unlimited in time, violating Section 222(b)of the NIRC.The waiver document is being incomplete and defective, the three-year prescriptive period was not tolled orextended and continued to run until April 17, 1998. Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year period. In thesame manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000is also null and void for having been issued pursuant to an invalid assessment.


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15. Rafael Arsenio S. Dizon, v. CTA and CIRG.R. No. 140944; April 30, 2008Facts:Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of his will was filed.The probate court appointed Atty. Rafael Arsenio P. Dizon as administrator of the Estate of Jose Fernandez.

An estate tax return was filed later on which showed ZERO estate tax liability. BIR thereafter issued adeficiency estate tax assessment, demanding payment of Php 66.97 million as deficiency estate tax. This wassubsequently reduced by CTA to Php 37.42 million. The CA affirmed the CTAs ruling, hence, the instantpetition.

The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of thegross estate, no estate tax was due. On the other hand, respondents argue that since the claims of theEstates creditors have been condoned, such claims may no longer be deducted from the gross estate of the

decedent.

Issue:Whether the actual claims of creditors may be fully allowed as deductions from the gross estate of Josedespite the fact that the said claims were reduced or condoned through compromise agreements entered intoby the Estate with its creditors

Held:YES. Following the US Supreme Courts ruling in Ithaca Trust Co. v. United States, the Court held thatpost-death developments are not material in determining the amount of deduction. This is because estate taxis a tax imposed on the act of transferring property by will or intestacy and, because the act on which the taxis levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred shouldbe ascertained, as nearly as possible, as of the that time. This is the date-of-death valuation rule.

The Court, in adopting the date-of-death valuation principle, explained that: First. There is no law, nor do we

discern any legislative intent in our tax laws, which disregards the date-of-death valuation principle andparticularly provides that post-death developments must be considered in determining the net value of the


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estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond whatthe statute expressly and clearly imports, tax statutes being construed strictissimi juris against thegovernment. Second. Such construction finds relevance and consistency in our Rules on Special Proceedings

wherein the term "claims" required to be presented against a decedent's estate is generally construed to meandebts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime,or liability contracted by the deceased before his death. Therefore, the claims existing at the time of death are

significant to, and should be made the basis of, the determination of allowable deductions.

16. Pilipinas Shell Petrolium Corp v. CIRG.R. No. 172598; December 21, 2007Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum Corporation (PSPC) foralleged deficiency excise tax liabilities of PhP 1,705,028,008.06 for the taxable years 1992 and 1994 to 1997,inclusive of delinquency surcharges and interest. As basis for the collection letter, the BIR alleged that PSPCis not a qualified transferee of the TCCs it acquired from other BOI-registered companies. These allegedexcise tax deficiencies covered by the collection letter were already paid by PSPC with TCCs acquiredthrough, and issued and duly authorized by the Center, and duly covered by Tax Debit Memoranda (TDM) ofboth the Center and BIR, with the latter also issuing the corresponding Accept Payment for Excise Taxes(APETs).

PSPC protested the collection letter, but it was denied. Because of respondent inaction on a motion for

reconsideration PSPC filed a petition for review before the CTA.

In 1999, the CTA ruled that the use by PSPC of the TCCs was legal and valid, and that respondents attemptto collect alleged delinquent taxes and penalties from PSPC without an assessment constitutes denial of dueprocess. Respondent elevated CTA Decision to the Court of Appeals (CA) through a petition for review.

Despite the pendency of this case, PSPC received assessment letter from respondent for excise tax deficiencies,surcharges, and interest based on the first batch of cancelled TCCs and TDM covering PSPCs use of theTCCs. All these cancelled TDM and TCCs were also part of the subject matter of the now pending before theCA.

PSPC protested the assessment letter, but the protest was denied by the BIR, constraining it to file anothercase before the CTA. Subsequently, CTA ruled in favor of PSPC and accordingly cancelled and set aside the

assessment issued by the respondent. Respondent motion for reconsideration of the above decision which wasrejected thus respondent appealed the above decision before the CTA En Banc.

The CTA En Banc ruled in favor of respondent and ordered PSPC to pay the amount of P570,577,401.61 asdeficiency excise tax for the taxable years 1992 and 1994 to 1997, inclusive of 25% surcharge and 20%interest.

Issue:Whether or not petitioner is liable for the assessment of deficiency excise tax after the validly issuedTCCs were subsequently cancelled for having been issued fraudulently

Held:No. Petitioner is not liable for the assessment of deficiency excise tax.In the instant case, with due application, approval, and acceptance of the payment by PSPC of the subject

TCCs for its then outstanding excise tax liabilities in 1992 and 1994 to 1997, the subject TCCs have beencanceled as the money value of the tax credits these represented have been used up. Therefore, the DOF


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through the Center may not now cancel the subject TCCs as these have already been canceled and used upafter their acceptance as payment for PSPCs excise tax liabilities. What has been used up, debited, andcanceled cannot anymore be declared to be void, ineffective, and canceled anew.

Besides, it is indubitable that with the issuance of the corresponding TDM, not only is the TCC canceledwhen fully utilized, but the payment is also final subject only to a post-audit on computational errors. Under

RR 5-2000, a TDM is a certification, duly issued by the Commissioner or his duly authorized representative,reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that thetaxpayer named therein has duly paid his internal revenue tax liability in the form of and through the use of aTax Credit Certificate, duly issued and existing in accordance with the provisions of these Regulations. TheTax Debit Memo shall serve as the official receipt from the BIR evidencing a taxpayers payment orsatisfaction of his tax obligation. The amount shown therein shall be charged against and deducted from thecredit balance of the aforesaid Tax Credit Certificate.

Thus, with the due issuance of TDM by the Center and TDM by the BIR, the payments made by PSPC withthe use of the subject TCCs have been effected and consummated as the TDMs serve as the official receiptsevidencing PSPCs payment or satisfaction of its tax obligation. Moreover, the BIR not only issued thecorresponding TDM, but it also issued ATAPETs which doubly show the payment of the subject excise taxesof PSPC.

Based on the above discussion, we hold that respondent erroneously and without factual and legal basis leviedthe assessment. Consequently, the CTA En Banc erred in sustaining respondentsassessment.

17. CIR v. Primetown Property GroupGR 161155; August 28, 2007


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Facts:Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or creditof income tax respondents paid in 1997.

The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim arefund or credit commenced on that date. According to the CTA, the two-year prescriptive period under

Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000was a leap year, respondent's petition, which was filed 731 days after respondent filed its final adjusted return,was filed beyond the reglementary period.

On appeal, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of the Civil Codedid not distinguish between a regular year and a leap year. According to the CA, even if the year 2000 was aleap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 shouldstill be counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neitherinterpreted nor construed.

Issue:Whether or not the counting of the 2-year prescriptive period for filing claim of refund is governed bythe Civil Code.

Held:Counting of 2-year period for filing claim for refund is no longer in accordance with Art 13 of the CivilCode but under Sec 31 of EO 227 - The Administrative Code of 1987.

As between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Codeof 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail beingthe more recent law, following the legal maxim, Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998,the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1st month -Apr 15,1998 to May 14, 1998 . 24th month - Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil584 (1969) is no longer controlling. The 2-year period should start to run from filing of the final adjustedreturn.

We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th

calendar month from the day respondent filed its final adjusted return. Hence, it was filed within thereglementary period

18. and 19. CIR vs. Reyes and Reyes vs. CIRGR Nos. 159694 163581Facts:Decedent Tancinco left a 1,292 square-meter residential lot and an old house thereon. The heirs of thedecedent received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for theamount of P14,912,205.47, inclusive of surcharge and interest. The CIR issued a preliminary collection letter toReyes, followed by a Final Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was servedupon the estate. Reyes initially protested the notice of levy but then the heirs proposed a compromisesettlement of P1,000,000.00. The CIR rejected Reyess offer, pointing out that since the est ate tax is a chargeon the estate and not on the heirs, the latters financial incapacity is immaterial as, in fact, the gross value of

the estate amounting to P32,420,360.00 is more than sufficient to settle the tax liability. As the estate failedto pay its tax liability within the deadline, BIR notified Reyes that the subject property would be sold at public


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auction on August 8, 2000. Reyes filed a protest with the BIR Appellate Division. Assailing the scheduledauction sale, she asserted that the assessment, letter of demand, and the whole tax proceedings against theestate are void ab initio. She offered to file the corresponding estate tax return and pay the correct amount oftax without surcharge or interest.

Issue:WON the assessment in this case can be used as a basis for the perfection of a tax compromise.Held: NO. The 2nd paragraph of Sec. 228 of NIRC is clear and mandatory insofar as taxpayers shall beinformed in writing of the law and the facts on which the assessment is made, otherwise the assessment shallbe void. RA 8424 has already amended the provisions of Sec. 229 of NIRC on protesting an assessment. Theold requirement of merely notifying the taxpayer of the CIRs findings was changed in 1998 of informing thetaxpayer of not only the law, but also of the facts on which an assessment would be made, otherwise, theassessment itself would be invalid. Being invalid, the assessment canot be in turn be used as a basis for theperfection of a tax compromise.

Hence, it is premature to declare the compromise on the tax liability of the estate perfected andconsummated considering that the tax assessment is void. While administrative agencies, like the BIR, werenot bound by procedural requirements, they were still required by law and equity to observe substantive dueprocess. The reason behind this requirement, said the CA, was to ensure that taxpayers would be duly

apprised of -- and could effectively protest -- the basis of tax assessments against them.7 Since the assessmentand the demand were void, the proceedings emanating from them were likewise void, and any orderemanating from them could never attain finality.

20. CIR vs. First Express Pawnshop Company, Inc.G.R. Nos. 172045-46; June 16 2009Facts:CIR issued assessment notices against Respondent for deficiency income tax, VAT and documentarystamp tax on deposit on subscription and on pawn tickets. Respondent filed its written protest on theassessments. When CIR did not act on the protest during the 180-day period, respondent filed a petitionbefore the CTA.

Issue:Has Respondents right to dispute the assessment in the CTA prescribed?Held:NO. The assessment against Respondent has not become final and unappealable. It cannot be said thatrespondent failed to submit relevant supporting documents that would render the assessment final because

when respondent submitted its protest, respondent attached all the documents it felt were necessary tosupport its claim. Further, CIR cannot insist on the submission of proof of DST payment because suchdocument does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on thedeposit on subscription.

The term "relevant supporting documents" are those documents necessary to support the legal basis indisputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submitadditional documents and cannot demand what type of supporting documents should be submitted.Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that ataxpayer cannot submit. Since the taxpayer is deemed to have submitted all supporting documents at the time

of filing of its protest, the 180-day period likewise started to run on that same date.


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21. CIR vs. Enron Subic Power CorpGR No. 166387; January 19, 2009Facts:The BIR assessed Enron which countered by filing a Petition for Review with the CTA stating that theassessment disregarded the provisions of the Tax Code and of RR No. 12-99, when the assessment failed toprovide the legal and factual bases of the assessment. The CTA and CA ruled that the assessment notice mustnot only refer to the supporting revenue laws or regulations for the assessment but must also justify theirapplicability to the factual milieu of the assessment.

Issue:Is the disputed assessment valid?Held: NO. The assessment is not valid. Although the revenue examiners discussed their findings withRespondents representative during the pre-assessment stage, the same, together with the Preliminary Five-Day Letter and Petitioners Annex G, were not sufficient to comply with the procedural requirement of dueprocess. The Tax Code provides that a taxpayer shall be informed (and not merely notified as was therequirement before) in writing of the law and the facts on which the assessment is made; otherwise, theassessment shall be void. The use of the word shall indicates the mandatory nature of the requirement.


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22. TFS Inc. v. CIRG.R. No. 166829; April 19, 2010Facts:The CTA rendered a Decision upholding the assessment issued against petitioner in the amount ofP11,905,696.32, representing deficiency VAT for the year 1998, inclusive of 25% surcharge and 20% deficiencyinterest, plus 20% delinquency interest from February 25, 2002 until full payment, pursuant to Sections 248and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled that pawnshops are subjectto VAT under Section 108(A) of the NIRC as they are engaged in the sale of services for a fee, remunerationor consideration.

Petitioner filed before the Court of Appeals a Petition for Review but it was dismissed by the CA for lack ofjurisdiction in view of the enactment of Republic Act No. 9282 (RA 9282).

Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The petition, however, wasdismissed for having been filed out of time. Petitioner filed a Motion for Reconsideration but it was denied.

Issues:(1) Whether the Honorable court of Tax Appeal en banc should have given due course to the petitionfor review and not strictly applied the technical rules of procedure to the detriment of justice; (2) Whether ornot petitioner is subject to the 10% VAT.

Held:(1) The petition is meritorious. Jurisdiction to review decisions or resolutions issued by the Divisions ofthe CTA is no longer with the CA but with the CTA En Banc. This rule is embodied in Section 11 of RA 9282.In the instant case, we are constrained to disregard procedural rules because we cannot in conscience allowthe government to collect deficiency VAT from petitioner considering that the government has no right at allto collect or to receive the same. Besides, dismissing this case on a mere technicality would lead to the unjustenrichment of the government at the expense of petitioner, which we cannot permit. Technicalities should

never be used as a shield to perpetrate or commit an injustice.

(2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the amount of P11,905,696.32for taxable year 1998 on the ground that pawnshops are not included in the coverage of VAT.

We agree. x x x Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the taxyears 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank financialintermediaries being specifically deferred by law, then petitioner is not liable for VAT during these tax years.But with the full implementation of the VAT system on non-bank financial intermediaries starting January 1,2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present, by virtue ofR.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from0% to 5%, as the case may be.


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Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the VAT deficiencyassessment issued by the BIR against petitioner has no legal basis and must therefore be cancelled. In thesame vein, the imposition of surcharge and interest must be deleted.

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