CIR v Union Shipping Corp.The CIR assessed Yee Fong Hong, Ltd the total sum of 500K, as deficiency income taxes due for the years 1971 and 1972. Respondent Yee protested the assessment.

November 25, 1976 – the CIR, without ruling on the protest by Yee, issued a Warrant of Distraint and Levy, which was served on private respondent's counsel. November 27, 1976 – Yee reiterated its request for the reinvestigation of the assessment. How-ever the CIR, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit before the CFI.January 10, 1976 – Respondent filed its Petition for Review of the petitioner's assessment of its de-ficiency income taxes in the Court of Tax Appeals.

According to the petitioner, the Court of Tax Appeals has no jurisdiction over this case. It claims that the warrant of distraint and levy is proof of the finality of an assessment and is tantamount to an outright denial of a motion for reconsideration of an assessment. Among others, petitioner contends that the warrant was issued after the respondent filed a request for reconsideration of subject assessment, thus constituting petitioner's final decision in the disputed assessments. Therefore, the period to appeal to the CTA commenced from the receipt of the warrant on No-vember 25, 1976 so that on January 10, 1976 when respondent corporation sought redress, it has long become final and executory.

Issue: Whether or not the issuance of a warrant of distraint and levy is proof of the finality of an assessment and is tantamount to an outright denial of a mo-tion for reconsideration of an assessment.

HELD:

The Supreme Court had already laid down the dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment.

There is no dispute that petitioner did not rule on private respondent's motion for reconsideration but left private respondent in the dark as to which action of the Commissioner is the decision ap-pealable to the CTA. Had he categorically stated that he denies private respondent's motion for re-consideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided. Under the circumstances, the CIR, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run.

Surigao electric v CA

In November 1961 the petitioner Surigao Electric Co., Inc., received a warrant of distraint and levy to enforce the collection from "Mainit Electric" of a deficiency franchise tax plus surcharge.

The controversy culminated in a revised assessment dated April 29, 1963 (received by the peti-tioner on May 8, 1963) in the amount of P11,533.53, representing the petitioner's deficiency franchise-tax and surcharges thereon for the period from April 1, 1956 to June 30, 1959. The pe-

titioner then requested a recomputation of the revised assessment in a letter to the Commis-sioner dated June 6, 1963 (sent by registered mail on June 7, 1963). The Commissioner, how-ever, in a letter dated June 28, 1963 (received by the petitioner on July 16, 1963), denied the re -quest for recomputation.

On August 1, 1963 the petitioner appealed to the Court of Tax Appeals. The tax court dismissed the appeal on October 1, 1965 on the ground that the appeal was filed beyond the thirty-day pe -riod of appeal provided by section 11 of Republic Act 1125.

ISSUE: whether or not the failure of a taxpayer to lodge his appeal within the prescribed period of 30 days from the notice of final assessment bars his ap-peal and renders the questioned decision final and executory? Yes.

A close reading of the numerous letters exchanged between the petitioner and the Commissioner clearly discloses that the letter of demand issued by the Commissioner on April 29, 1963 and received by the petitioner on May 8, 1963 constitutes the definite determination of the petitioner's deficiency franchise tax liability or the decision on the disputed as-sessment and, therefore, the decision appealable to the tax court.

This letter of April 29, 1963 was in response to the communications of the petitioner, particularly the letter of August 2, 1962 wherein it as-sailed the 4th Indorsement's data and findings on its deficiency, fran-chise tax liability computed at 5% (on the ground that its franchise precludes the imposition of a rate higher than the 2% fixed in its legislative franchise), and the letter of April 24, 1963 wherein it again questioned the assessment and requested for a recomputation (on the ground that the Government could make an assessment only for the period from May 29, 1956 to June 30, 1959). Thus, as early as August 2, 1962, the petitioner already disputed the assess-ment made by the Commissioner.

Moreover, the letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the Commissioner on the peti-tioner's several requests for reconsideration and recomputation.

In this letter, the Commissioner not only in effect demanded that the peti-tioner pay the amount of P11,533.53 but also gave warning that in the event it failed to pay, the said Commissioner would be constrained to enforce the collection thereof by means of the remedies provided by law. The tenor of the letter, specifically, the statement regarding the resort to legal remedies, unmistakably indicates the final nature of the determination made by the Commissioner of the petitioner's deficiency franchise tax liability.

The foregoing-view accords with settled jurisprudence — and this despite the fact that nothing in Republic Act 1125, 1 as amended, even remotely sug-gests the element truly determinative of the appealability to the Court of Appeals of a ruling of the Commissioner of Internal Revenue.

To sustain the petitioner's contention that the Commissioner's letter of June 28, 1963 denying its request for further amendment of the revised assessment constitutes the ruling appealable to the tax court and that the thirty-day period

should, therefore, be counted from July 16, 1963, the day it received the June 28, 1963 letter, would, in effect, leave solely to the petitioner's will the determination of the commencement of the statutory thirty-day pe-riod, and place the petitioner — and for that matter, any taxpayer — in a position, to delay at will and on convenience the finality of a tax as-sessment. This absurd interpretation espoused by the petitioner would result in grave detriment to the interests of the Government, considering that taxes constitute its life-blood and their prompt and certain availability is an impera-tive need. 6

The revised assessment embodied in the Commissioner's letter dated April 29, 1963 being, in legal contemplation, the final ruling reviewable by the tax court, the thirty-day appeal period should be counted from May 8, 1963 (the day the petitioner received a copy of the said letter).

From May 8, 1963 to June 7, 1963 (the day the petitioner, by registered mail, sent to the Commissioner its letter of June 6, 1963 requesting for further re-computation of the amount demanded from it) saw the lapse of thirty days. The June 6, 1963 request for further recomputation, partaking of a motion for reconsideration, tolled the running of the thirty-day period from June 7, 1963 (the day the petitioner sent its letter by registered mail) to July 16, 1963 (the day the petitioner received the letter of the Commissioner dated June 28, 1963 turning down its request).

The prescriptive period commenced to run again on July 16, 1963. The petitioner filed its petition for review with the tax court on August 1, 1963 — af-ter the lapse of an additional sixteen days.

The petition for review having been filed beyond the thirty-day period, we rule that the Court of Tax Appeals correctly dismissed the same.

The thirty-day period prescribed by section 11 of Republic Act 1125, as amended, within which a taxpayer adversely affected by a decision of the Com-missioner of Internal Revenue should file his appeal with the tax court, is a jurisdictional requirement, 7 and the failure of a taxpayer to lodge his appeal within the prescribed period bars his appeal and renders the questioned decision final and executory. 8

Prescinding from all the foregoing, we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the tax-payer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determina-tion on the disputed assessment, as contemplated by sections 7 and 11 of Republic Act 1125, as amended.

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ISABELA CUL-TURAL CORPORATION, respondent.

A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayer’s request for reconsideration.  Such letter amounts to a final decision on a disputed assessment and is thus appealable to the Court of Tax Appeals (CTA).

The Facts

On February 23, 1990, [respondent] received from [petitioner] an assessment letter, dated February 9, 1990, demanding payment of the amounts of P333,196.86 and P4,897.79 as deficiency income tax and expanded withhold-ing tax inclusive of surcharge and interest, respectively, for the taxable period from January 1, 1986 to December 31, 1986.  (pp. 204 and 205, BIR rec.)

In a letter, dated March 22, 1990, filed with the [petitioner’s] office on March 23, 1990 (pp. 296-311, BIR rec.), [respondent] requested x x x a reconsidera-tion of the subject assessment.

On February 9, 1995, [respondent] received from [petitioner] a Final Notice Before Seizure, dated December 22, 1994 (p. 340, BIR rec.).  In said letter, [petitioner] demanded payment of the subject assessment within ten (10) days from receipt thereof.  Otherwise, failure on its part would con-strain [petitioner] to collect the subject assessment through summary reme-dies.

Ruling of the Court of Appeals

  The appellate court reasoned that the final Notice before seizure had effectively denied petitioner’s request for a reconsideration of the commissioner’s assessment. 

Issues

“Whether or not the Final Notice Before Seizure dated February 9, 1995 signed constitutes the final decision of the CIR appealable to the CTA.”- yes

Respondent, points out that the Final Notice Before Seizure should be con-sidered as a denial of its request for reconsideration of the disputed assess-ment.  The Notice should be deemed as petitioner’s last act, since failure to comply with it would lead to the distraint and levy of respondent ’s properties, as indicated therein.

We agree with respondent.  In the normal course, the revenue district offi-cer sends the taxpayer a notice of delinquent taxes, indicating the period cov-ered, the amount due including interest, and the reason for the delinquency.   If the taxpayer disagrees with or wishes to protest the assessment, it sends a let-ter to the BIR indicating its protest, stating the reasons therefor, and submit-ting such proof as may be necessary. That letter is considered as the tax-payer’s request for reconsideration of the delinquent assessment.  After the re-

quest is filed and received by the BIR, the assessment becomes a disputed as-sessment on which it must render a decision.  That decision is appealable to the Court of Tax Appeals for review.

Prior to the decision on a disputed assessment, there may still be ex-changes between the commissioner of internal revenue (CIR) and the tax-payer.  The former may ask clarificatory questions or require the latter to sub-mit additional evidence.  However, the CIR’s position regarding the disputed as-sessment must be indicated in the final decision.  It is this decision that is prop-erly appealable to the CTA for review.

Indisputably, respondent received an assessment letter dated February 9, 1990, stating that it had delinquent taxes due; and it subsequently filed its mo-tion for reconsideration on March 23, 1990.  In support of its request for recon-sideration, it sent to the CIR additional documents on April 18, 1990.  The next communication respondent received was already the Final Notice Be-fore Seizure dated November 10, 1994.

In the light of the above facts, the Final Notice Before Seizure cannot but be considered as the commissioner’s decision disposing of the re-quest for reconsideration filed by respondent, who received no other response to its request.  Not only was the Notice the only response re-ceived; its content and tenor supported the theory that it was the CIR’s final act regarding the request for reconsideration. 

The very title expressly indicated that it was a final notice prior to seizure of property.  The letter itself clearly stated that respondent was being given “this LAST OPPORTUNITY” to pay; otherwise, its prop-erties would be subjected to distraint and levy.  How then could it have been made to believe that its request for reconsideration was still pending de-termination, despite the actual threat of seizure of its properties?

Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may nevertheless directly appeal a disputed assess-ment, if its request for reconsideration remains unacted upon 180 days after submission thereof.  In this case, the said period of 180 days had already lapsed when respondent filed its request for reconsideration on March 23, 1990, without any action on the part of the CIR.

Lastly, jurisprudence dictates that a final demand letter for pay-ment of delinquent taxes may be considered a decision on a disputed or protested assessment.  In Commissioner of Internal Revenue v. Ayala Se-curities Corporation, this Court held:

In the instant case, the second notice received by private respon-dent verily indicated its nature – that it was final.  Unequivocably, therefore, it was tantamount to a rejection of the request for recon-sideration.

Oceanic Wireless  v. CIR       GR NO. 148380, December 9, 2005

Facts: On March 17, 1988, petitioner received from the Bureau of Internal Rev-enue (BIR) deficiency tax assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest against the tax assess-ments and requested a reconsideration or cancellation of the same in a letter to the BIR Commissioner.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Re-ceivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assess-ments while denying petitioner’s request for reinvestigation. Said letter likewise requested petitioner to pay within 10 days from receipt thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR Na-tional Office for the issuance of a warrant of distraint and levy without further notice.

Upon petitioner’s failure to pay the subject tax assessments within the pre-scribed period, the Assistant Commissioner for Collection, acting for the Com-missioner 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 con-test the issuance of the warrants to enforce the collection of the tax assess-ments. 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 final decision of the Commissioner of Internal Rev-enue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself.

With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the Court of Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal de-termination as regards the merits of petitioner’s 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 acting in behalf of the CIR is deemed final and ex-ecutor and subject to an appeal to the CTA.

Held: YES. A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language 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 In-ternal Revenue on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its pay-ment. 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 con-tained a notation indicating that petitioner’s request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration.

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

The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him 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 delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent 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 mod-ify any existing ruling of the Bureau;

(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 five hundred thousand pe-sos (P500,000) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district offi-cials, may be compromised by a regional evaluation board which shall be com-posed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue Dis-trict Officer having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.It is clear from the above provision that the act of issuance of the demand let-ter by the Chief of the Accounts Receivable and Billing Division does not fall un-der 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 has the same force and effect.