Digested Cases in Taxation

1. CIR V PASCOR REALTY & DEVT CORP et. al.

GR No. 128315, June 29, 1999
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. The 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. The Commissioner denied private respondents
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
Commissionersmotion to dismiss on the ground of the CTAs lack of jurisdiction
denied by CTA and ordered the Commissioner to file an answer. Instead of
complying with the order of CTA, Commissioner 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 the 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
officers affidavit merely contained a computation of respondents 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 caseagainst the taxpayer, or to do both.
2. Marcos II vs. CA
273 SCRA 47 1997
Facts: Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring
the deficiency income tax assessments and estate tax assessments upon the estate
and properties of his late father despite the pendency of the probate proceedings of
the will of the late President. On the other hand, the BIR argued that the States
authority to collect internal revenue taxes is paramount.
Petitioner further argues that "the numerous pending court cases questioning the
late president's ownership or 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." He points out the pendency of Sandiganbayan Civil Case Nos. 00010034 and 0141, which were filed by the government to question the ownership and
interests of the late President in real and personal properties located within and
outside the Philippines. Petitioner, however, omits to allege whether the properties
levied upon by the BIR in the collection of estate taxes upon the decedent's estate
were among those involved in the said cases pending in the Sandiganbayan.
Indeed, the court is at a loss as to how these cases are relevant to the 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 probate or estate settlement court's approval of the state's claim
for estate taxes, before the same can be enforced and collected.

The enforcement of tax laws and the collection of taxes are of paramount
importance for the sustenance of government. 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 existence of government itself.
It is not the Department of Justice which is the government agency tasked to
determine the amount of taxes due upon the subject estate, but the Bureau of
Internal Revenue whose determinations and assessments are presumed correct and
made in good faith. The taxpayer has the duty of proving otherwise. In the absence
of proof of any irregularities in the performance of official duties, an assessment will
not be disturbed. Even an assessment based on estimates is prima facie valid and
lawful where it does not appear to have been arrived at arbitrarily or capriciously.
The burden of proof is upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in the assessment will
justify the judicial affirmance of said assessment. In this instance, petitioner has not
pointed out one single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace of falsity.
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 of impropriety of the assessments made.
3. Meralco Securities Corporation vs. Savellano
GR No. L-36181
October 23, 1982
Facts: 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 Meralco Securities Corporation for tax evasion
for having paid income tax only on 25 % of the dividends it received from the Manila
Electric Co. for the years 1962-1966, thereby allegedly shortchanging the
government of income 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 on the dividends it received from
the Manila Electric Co. and accordingly denied Maniago's claim for informer's reward
on a non-existent deficiency.
On August 28, 1970, Maniago filed a petition for mandamus, and subsequently an
amended petition for mandamus, in the Court of First Instance of Manila, docketed

therein as Civil Case No. 80830, against the Commissioner of Internal Revenue and
the Meralco Securities Corporation to compel the Commissioner to impose the
alleged deficiency tax assessment on the Meralco Securities Corporation and to
award to him the corresponding informer's reward under the provisions of R.A. 2338.
Respondent judge granted the said petition 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) Whether or 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 matter thereof clearly falls within the scope of cases now
exclusively within the jurisdiction of the Court of Tax Appeals. Section 7 of Republic
Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive
appellate jurisdiction to review by appeal, among others, decisions of the
Commissioner of Internal Revenue 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 or other
law or part of law administered by the Bureau of Internal Revenue. The law
transferred to the Court of Tax 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 a
deficiency 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 . . . .In the case of Blaquera vs.
Rodriguez, et al, this Court ruled that "the determination of the correctness or
incorrectness of a tax assessment to which the taxpayer is not agreeable, falls
within the jurisdiction of the Court of Tax Appeals and not of the Court of First
Instance, for under the provisions of Section 7 of Republic Act No. 1125, the Court of
Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any decision of
the Collector of Internal Revenue in cases involving disputed assessments and other
matters arising under the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue."
(2) Considering then that respondent judge may not order by mandamus the
Commissioner to issue the assessment 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 be
collected, no informer's reward is due to private respondents as the informer's heirs.

Informer's reward is contingent upon the payment and collection of unpaid or

deficiency taxes. An informer is entitled by way of reward only to a percentage of
the taxes actually assessed and collected. Since no assessment, much less any
collection, has been made in the instant case, respondent judge's writ for the
Commissioner to pay respondents 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.
4. SY PO vs. CTA
G.R. No. 81446; August 18, 1988
Facts: Po Bien Sing, the sole proprietor of Silver Cup Wine Factory (SCWF), engaged in the
business of manufacture and sale of compounded liquors. On the basis of a denunciation against
SCWF allegedly "for tax evasion amounting to millions of pesos, Secretary of Finance directed
the Finance-BIR--NBI team to investigate.
On the basis of the team's report of investigation, the respondent Commissioner of Internal
Revenue assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 in the amount of
P7,154,685.16 and for deficiency specific 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 in view 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 report required 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 duly made by the BIR examiner and approved by his superior officers will
not be disturbed. All presumptions are in favour of the correctness of tax assessments.
5. CIR vs. CA, CTA and FORTUNE TOBACCO CORP.
G.R. No. 119761; August 29, 1996

Facts: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the

manufacture of different brands of cigarettes, 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, Fortune
changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,'
thereby removing the said brands from the 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 the effectivity of RA
7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the
BIR saying since there is no showing who the real owner/s are of Champion, Hope
and More, it follows that the same 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. Then
Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. CIR
assessed Fortune Tobacco for ad valorem tax deficiency amounting to
P9,598,334.00.
Fortune Tobacco filed a petition for review with the CTA.
Fortune. CA affirmed.

CTA upheld the position of

Issue: WON it was necessary for BIR to follow the legal requirements when it issued
its RMC
Held. YES. CIR may not disregard legal requirements in the exercise of its
quasi-legislative powers which publication, filing, and prior hearing.
When an administrative rule is merely interpretative in nature, its applicability
needs nothing further than its bare 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 can facilitate
or render least cumbersome the implementation of the law but substantially
increases the burden of those governed, the agency must accord, at least to those
directly affected, a chance to be heard, before that new 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" within the classification of locally
manufactured cigarettes bearing foreign brands and to thereby have them covered

by RA 7654 which subjects mentioned brands to 55% the BIR not simply interpreted
the law; verily, it legislated 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 Corp
G.R. Nos. 134587 and 134588; January 8, 2005
Facts: Benguet Corporation is a domestic corporation engaged in the exploration,
development and operation of 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 as amended by E.O. 273 s. 1987 then in effect, any person
who, in the course of trade or business, sells, barters or exchanges goods, renders
services, or engages in similar transactions and any person who imports goods is
liable for output VAT at rates of either 10% or 0% (zero-rated) depending on the
classification of the transaction under Sec. 100 of the NIRC.
In January of 1988, Benguet applied for and was granted by the BIR zero-rated
status on its sale of gold to Central Bank. On 28 August 1988 VAT Ruling No. 378888 was issued which declared that the sale of gold to Central Bank is considered as
export sale subject to zero-rate pursuant to
Section 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 in relation to the subject sales of
gold. It then filed applications for tax refunds/credits
corresponding to input VAT.
However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23
January 1992 that was issued subsequent to the consummation of the subject sales
of gold to the Central Ban`k which provides that sales 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 if such 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 the
period 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 new BIR VAT Ruling.
Held: (1) NO. At the time when the subject transactions were consummated, the
prevailing BIR regulations relied upon by Benguet ordained that gold sales to the
Central Bank were zero-rated. Benguet should not be faulted 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 unpaid on account of the errors or mistakes of its agents and/or
officials and there could be no vested right arising from an erroneous interpretation
of law, these principles must give way to
exceptions 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 of the amount equivalent to the total VAT cost of its
product, a liability it previously could have recovered from the BIR in a zero-rated
scenario or at least passed on to the Central Bank had it known it would have been
taxed at a 10% rate. Thus, it is clear that Benguet suffered economic prejudice
when it consummated sales of gold to the Central Bank were taken out of the zerorated category. The change in the VAT rating of Benguets transactions with the
Central Bank resulted in the twin loss of its exemption from payment of output 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 being equivalent 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, this relief 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 VAT
was not enough to offset its retroactive output VAT. Indeed, the burden of having to
go through an unnecessary and cumbersome refund process is prejudice enough.
7. CIR v Bursmeiters & Wain Scandinavian

GR 153205; January 22, 2007

Facts: A foreign consortium, parent company of Burmeister, entered into an O&M
contract with NPC. The foreign entity then subcontracted the actual O&M to
Burmeister. NPC paid the foreign consortium a mixture of currencies while the
consortium, in turn, paid Burmeister foreign currency inwardly remitted into the
Philippines. 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 to the filing of CIRs Answer in the CTA.
The claim has no merit since the consortium, which was the recipient of services
rendered by Burmeister, was deemed doing business within the Philippines since its
15-year O&M with NPC can not be interpreted as an isolated 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 remittance; (iii) accounted for by the BSP; AND (iv) that the
service recipient is doing business outside the Philippines. The Court ruled that if
this is 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 its sales to foreign consortium. However, the ruling is only
valid until the time that CIR filed its Answer in the CTA which is deemed revocation
of the previously-issued ruling. The Court said the revocation can not retroact since
none of the instances in Section 246 (bad faith, omission of facts, etc.) are present.

8. CIR vs. HANTEX TRADING CO., INC.

G.R. No. 136975; March 31, 2005
Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale
of plastic products, it imports synthetic resin and other chemicals for the manufacture of its
products. For this purpose, it is required to file an Import Entry and Internal Revenue
Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff
and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-

Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received
confidential information that the respondent had imported synthetic resin amounting to
P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present
its books of account which it failed to do. The bureau cannot find any original copies of the
products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on
the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with
the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the
informer, as well as excerpts from the entries certified by Tomas and Danganan. The case was
submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to pay, per
investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments
issued by the petitioner were unlawful and baseless since the copies of the import entries relied
upon in computing the deficiency tax of the respondent were not duly authenticated by the
public officer charged with their custody, nor verified under oath by the EIIB and the BIR
investigators.
Issue: Whether or not the final assessment of the petitioner against the respondent for
deficiency income tax and sales tax for the latters 1987 importation of resins and calcium
bicarbonate is based on competent evidence and the law.
Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides
that the Commissioner of Internal Revenue has the power to make assessments and prescribe
additional requirements for tax administration and enforcement. Among such powers are those
provided in paragraph (b), which provides that Failure to submit required returns, statements,
reports and other documents. When a report required by law as a basis for the assessment of
any national internal revenue tax shall not be forthcoming within the time fixed by law or
regulation or when there is reason to believe that any such report is false, incomplete or
erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable. This
provision applies when the Commissioner of Internal Revenue undertakes to perform her
administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a
taxpayers failure to file one, or to amend a return already filed in the BIR. The best evidence
envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting
records of the taxpayer who is the subject of the assessment process, the accounting records of
other taxpayers engaged in the same line of business, including their gross profit and net profit
sales. Such evidence also includes data, record, paper, document or any evidence gathered by
internal revenue officers from other taxpayers who had personal transactions or from whom the
subject taxpayer received any income; and record, data, document and information secured
from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the
Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence
obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies
of records/documents. The petitioner, in making a preliminary and final tax deficiency

assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of
records/documents. Mere photocopies of the Consumption Entries have no probative weight if
offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of
paper and are of no probative value as basis for any deficiency income or business taxes against
a taxpayer.
Companies exempt from zero-rate tax
9. BPI v CIR
G.R No. 139786O; ctober 17, 2005
Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax
(DST). The petitioner filed a protest 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, the petitioner filed a petition for review with the CTA,
raising the defense of prescription. The CTA denied the petition and held that the
period of prescription had not yet prescribed nonetheless, it held that the petitioner
was not liable for the deficiency of DST. On appeal, the CA reversed the ruling of
CTA on the issue of 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, counted from the date of actual filing of the return or from the last
date prescribed by law for the filing of such return, whichever comes later, to assess
a national internal revenue tax or to begin a court proceeding or the collection
thereof without an assessment. In case of a false or fraudulent return with intent to
evade tax or the 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, within either the
three-year or ten-year period, whichever is appropriate, then the BIR has another
three years after the assessment within which to collect the national internal
revenue tax due thereon by distraint, levy, and/or court proceeding. The
assessment of the tax is deemed made and the three-year period for collection of
the assessed tax begins to run on the date the assessment notice had been
released, mailed or sent by the BIR to the taxpayer.

In their Decisions, both the CTA and the Court of Appeals found that the filing by
petitioner BPI of a protest letter 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 for
suspending the running of the prescriptive period for collection of the deficiency
DST assessed against petitioner 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. CIR
GR. No. 155541; January 27, 2004
Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business
affairs were managed by the Philippine 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 conducted an
administrative investigation of the decedents tax liability and found a deficiency
income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18,
1982, the BIR sent by registered mail a demand letter and assessment notice
addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was the address
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 tax liability and serve the same upon her heir,
Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his
claim with probate court for the deficiency tax. The Court denied BIRs claim against
the estate 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 PhilTrust failed in its legal duty to inform
the respondent of antecedents death. Consequently, as the estate failed to
question 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 Juliana through PhilTrust was a valid service as to bind the estate; (2)
Whether or not the CA erred in holding that the tax assessment had become final,
executory, and incontestable.
Held: (1) Since the relationship between PhilTrust and the decedent was

automatically severed the moment of the taxpayers death, none of the PhilTrusts
acts or omissions could bind the estate of the taxpayer. Although the administrator
of the estate may have been remiss in his legal obligation to inform respondent of
the decedents death, the consequence thereof merely refer to the imposition of
certain penal sanction on the administrator. These do not include the indefinite
tolling of the prescriptive period for making deficiency tax assessment 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 that PhilTust had absolutely
no legal relationship with the deceased or to her Estate. There was therefore no
assessment served on the estate as to the alleged underpayment of tax. Absent this
assessment, no proceeding could be initiated in court for collection of said tax;
therefore, it could not have become final, executory and incontestable.
Respondents claim for collection filed with the court only on November 22, 1984
was barred for having been made beyond the five-year prescriptive period set by
law.
11. CIR v. Tulio
GR139858; October 25, 2005.
Facts: This involves the collection of percentage taxes for 1986 and 1987. Tulio did
not file tax returns. BIR discovered on September 14 1989. RTC dismissed BIR
collection case on the ground of prescription. It counted 3 years from the return was
supposed to be filed with the BIR instead of 10 yrs from discovery of omission to file
return by the respondent.
Issue: Whether petitioners cause of action for the collection of deficiency
percentage taxes against respondent has 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 such period 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 the powers of his office in tax administration and enforcement.
Respondents failure to file his tax returns is thus covered by Section 223 providing
for a ten-year prescriptive period within which a proceeding in court may be filed.
Here, respondent failed to file his tax returns for 1986 and 1987. On September 14,
1989, petitioner found respondents omission. Hence, the running of the ten-year

prescriptive period within which to assess and collect the taxes due from
respondent commenced on that date until September 14, 1999. The two final
assessment 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 until March 30, 1991, the
same became final and executory.
12. Oceanic Wireless v. CIR
GR NO. 148380, December 9, 2005

Facts: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (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 assessments 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 Receivable and Billing
Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners 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
National Office for the issuance of a warrant of distraint and levy without further notice.
Upon petitioners failure to pay the subject tax assessments within the prescribed period, the
Assistant Commissioner 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 the warrants 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 final decision of the Commissioner of Internal Revenue 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 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 acting in behalf of the CIR is deemed final and executor 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 Internal Revenue on petitioners request for reconsideration when it reiterated the tax
deficiency assessments due from petitioner, and requested its payment. 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 petitioners 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 Commissioner.
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 modify 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 pesos (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
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,
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 letter by the Chief of
the Accounts Receivable 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 has the same force and effect.
13. Philam Asset Management, Inc. vs CTA
G.R.156637 and 162004; December 14, 2005
Facts: Petitioner acts as investment manager of PFI &PBFI. It provides management
&technical services and thus respectively paid for its services. PFI & PBFI withhold
the amount of equivalent to 5% creditable tax regulation. On April 3, 1998, filed ITR
with a net loss thus incurred withholding tax. Petitioner filed for refund from BIR but
was unanswered . CTA denied the petition for review. CA held that to request for
either a refund or credit of income tax paid, a corporation must signify its intention
by marking the corresponding box 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 the same time for the same excess to
income taxes paid. Failure to signify ones intention in Final Assessment Return
(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 refund has no basis in law and jurisprudence. The Tax Code likewise
allows the refund of taxes to taxpayer that claims it in writing within 2 years after
payment of the taxes. Technicalities and legalism should not be misused by the
government to keep money not belonging to it, and thereby enriched itself at the
expense of its law-abiding citizens.

14. Philippine Journalist, Inc. v. CIR

G.R. No. 162852; December 16, 2004
Facts: In 1995, the Bureau of Internal Revenue (BIR) issued Letter of Authority for
two Revenue Officers to examine petitioners books of account and other accounting
records for internal revenue taxes for the period January 1, 1994 to December 31,
1994.
In 1997, petitioners Comptroller, executed a "Waiver of the Statute of Limitation
Under the National Internal Revenue Code (NIRC)". The document "waive[d] the
running of the prescriptive period provided by Sections 223 and 224 and other
relevant provisions of the NIRC and consent[ed] to the assessment and collection of
taxes which may be found due after the examination at any time after the lapse of
the period of limitations fixed by said Sections 223 and 224 and other relevant
provisions of the NIRC, until the completion of the investigation.
In 1998, Revenue Officer submitted his audit report recommending the issuance of
an assessment and finding that petitioner had deficiency taxes. Subsequently, the
Assessment Division of the BIR issued Pre-Assessment Notices which informed
petitioner of the results of the investigation. Thus, BIR issued Assessment/Demand
stating the deficiency taxes, inclusive of interest and compromise penalty
On March 16, 1999, a Preliminary Collection Letter was sent by Deputy
Commissioner Romeo S. Panganiban to 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) days from receipt to pay. Petitioner received a copy of the final notice on
November 24, 1999. By letters dated November 26, 1999, petitioner asked to be
clarified how the tax liability of P111,291,214.46 was reached and requested 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 of Tax Assessment/Demand. Petitioner also contested that the
assessment had no factual and legal basis. On March 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) that the assessment,
having been made beyond the 3-year prescriptive period, is null and void; (d) that
the issuance of the warrant without being given the opportunity to dispute the same
violates its right to due process; and (e) that the grave prejudice that will be
sustained if the warrant is enforced is enough basis for the issuance of the writ of
preliminary injunction.

CTA ruled in favor of PJI. It declared that the deficiency income, value-added and
expanded withholding tax assessments issued by the respondent against the
petitioner on December 9, 1998, in the total amount of P111,291,214.46 for the
year 1994 ANCELLED, WITHDRAWN andWITH 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 of the 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 the Commissioner of Internal Revenue on matters relating to
assessments or refunds. The second part of the provision covers other cases that
arise out of the NIRC or related laws administered by the Bureau of Internal
Revenue. The wording of the provision is clear and simple. It gives the CTA the
jurisdiction to determine if the 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 on September 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 may assess
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 or extended 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 the
same manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner
received on March 28, 2000 is also null and void for having been issued pursuant to
an invalid assessment.
15. Rafael Arsenio S. Dizon, v. CTA and CIR
G.R. No. 140944; April 30, 2008
Facts: 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 a deficiency estate tax assessment, demanding payment of Php
66.97 million as deficiency estate tax. This was subsequently reduced by CTA to
Php 37.42 million. The CA affirmed the CTAs ruling, hence, the instant petition.
The petitioner claims that in as much as the valid claims of creditors against the
Estate are in excess of the gross estate, no estate tax was due. On the other hand,
respondents argue that since the claims of the Estates 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 Jose despite the fact that the said claims were reduced or
condoned through compromise agreements entered into by the Estate with its
creditors
Held: YES. Following the US Supreme Courts ruling in Ithaca Trust Co. v. United
States, the Court held that post-death developments are not material in determining
the amount of deduction. This is because estate tax is a tax imposed on the act of
transferring property by will or intestacy and, because the act on which the tax is
levied occurs at a discrete time, i.e., the instance of death, the net value of the
property transferred should be 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 and particularly provides that postdeath developments must be considered in determining the net value of the estate.
It bears emphasis that tax burdens are not to be imposed, nor presumed to be
imposed, beyond what the statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government. 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 mean debts 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. CIR
G.R. No. 172598; December 21, 2007

Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas Shell Petroleum
Corporation (PSPC) for alleged 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 PSPC is not a qualified transferee of the TCCs it acquired from other
BOI-registered companies. These alleged excise tax deficiencies covered by the
collection letter were already paid by PSPC with TCCs acquired through, and issued
and duly authorized by the Center, and duly covered by Tax Debit Memoranda
(TDM) of both 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 attempt to collect alleged delinquent taxes and penalties from
PSPC without an assessment constitutes denial of due process. 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 the TCCs. All these
cancelled TDM and TCCs were also part of the subject matter of the now pending
before the CA.
PSPC protested the assessment letter, but the protest was denied by the BIR,
constraining it to file another case 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 was
rejected 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 as deficiency 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 issued TCCs 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 been canceled as the money value of the
tax credits these represented have been used up. Therefore, the DOF through the
Center may not now cancel the subject TCCs as these have already been canceled
and used up after their acceptance as payment for PSPCs excise tax liabilities.
What has been used up, debited, and canceled 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 canceled when 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 the taxpayer named therein has duly paid his internal revenue tax liability in
the form of and through the use of a Tax 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 or
satisfaction of his tax obligation. The amount shown therein shall be charged
against and deducted from the credit 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 with the use of the subject TCCs have been effected and
consummated as the TDMs serve as the official receipts evidencing PSPCs payment
or satisfaction of its tax obligation. Moreover, the BIR not only issued the
corresponding TDM, but it also issued ATAPETs which doubly show the payment of
the subject excise taxes of PSPC.
Based on the above discussion, we hold that respondent erroneously and without
factual and legal basis levied the assessment. Consequently, the CTA En Banc erred
in sustaining respondents assessment.
17. CIR v. Primetown Property Group
GR 161155; August 28, 2007
Facts: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied
for the refund or credit of 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 a refund 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 2000 was 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 Code did not distinguish between a regular year and a leap
year. According to the CA, even if the year 2000 was a leap year, the periods
covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000
should still be counted as 365 days each or a total of 730 days. A statute which is
clear and explicit shall be neither interpreted nor construed.
Issue:
Whether or not the counting of the 2-year prescriptive period for filing
claim of refund is governed by the Civil Code.
Held: Counting of 2-year period for filing claim for refund is no longer in accordance
with Art 13 of the Civil Code 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 Code of 1987, which states that a year is composed of 12
calendar months, it is the latter that must prevail being the 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 Phil
584 (1969) is no longer controlling. The 2-year period should start to run from filing
of the final adjusted return.
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 the reglementary period
18. CIR vs. Reyes and Reyes vs. CIR
GR Nos. 159694 & 163581

Facts: Decedent Tancinco left a 1,292 square-meter residential lot and an old house
thereon. The heirs of the decedent received a final estate tax assessment notice
and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47,
inclusive of surcharge and interest. The CIR issued a preliminary collection letter to
Reyes, followed by a Final Notice Before Seizure. Subsequently, a Warrant of
Distraint and/or Levy was served upon the estate. Reyes initially protested the
notice of levy but then the heirs proposed a compromise settlement of
P1,000,000.00. The CIR rejected Reyess offer, pointing out that since the estate tax
is a charge on 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 failed to pay its tax
liability within the deadline, BIR notified Reyes that the subject property would be
sold at public auction on August 8, 2000. Reyes filed a protest with the BIR
Appellate Division. Assailing the scheduled auction sale, she asserted that the
assessment, letter of demand, and the whole tax proceedings against the estate are
void ab initio. She offered to file the corresponding estate tax return and pay the
correct amount of tax 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 be informed in writing of the law and the facts on which the
assessment is made, otherwise the assessment shall be void. RA 8424 has already
amended the provisions of Sec. 229 of NIRC on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIRs findings was changed in
1998 of informing the taxpayer of not only the law, but also of the facts on which an
assessment would be made, otherwise, the assessment itself would be invalid.
Being invalid, the assessment canot be in turn be used as a basis for the perfection
of a tax compromise.
Hence, it is premature to declare the compromise on the tax liability of the estate
perfected and consummated considering that the tax assessment is void. While
administrative agencies, like the BIR, were not bound by procedural requirements,
they were still required by law and equity to observe substantive due process. 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 assessment and the demand were void, the proceedings
emanating from them were likewise void, and any order emanating from them could
never attain finality.

20. CIR vs. First Express Pawnshop Company, Inc.

G.R. Nos. 172045-46; June 16 2009
Facts: CIR issued assessment notices against Respondent for deficiency income tax,
VAT and documentary stamp tax on deposit on subscription and on pawn tickets.
Respondent filed its written protest on the assessments. When CIR did not act on
the protest during the 180-day period, respondent filed a petition before 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 that respondent 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
to support its claim. Further, CIR cannot insist on the submission of proof of DST
payment because such document does not exist as respondent claims that it is not
liable to pay, and has not paid, the DST on the deposit on subscription.
The term "relevant supporting documents" are those documents necessary to
support the legal basis in disputing a tax assessment as determined by the
taxpayer. The BIR can only inform the taxpayer to submit additional 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 a taxpayer 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.
21. CIR vs. Enron Subic Power Corp
GR No. 166387; January 19, 2009
Facts: The BIR assessed Enron which countered by filing a Petition for Review with
the CTA stating that the assessment disregarded the provisions of the Tax Code and
of RR No. 12-99, when the assessment failed to provide the legal and factual bases
of the assessment. The CTA and CA ruled that the assessment notice must not only
refer to the supporting revenue laws or regulations for the assessment but must
also justify their applicability 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 with Respondents 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 due process. The
Tax Code provides that a taxpayer shall be informed (and not merely notified as
was the requirement before) in writing of the law and the facts on which the

assessment is made; otherwise, the assessment shall be void. The use of the word
shall indicates the mandatory nature of the requirement.
22. TFS Inc. v. CIR
G.R. No. 166829; April 19, 2010
Facts: The CTA rendered a Decision upholding the assessment issued against
petitioner in the amount of P11,905,696.32, representing deficiency VAT for the year
1998, inclusive of 25% surcharge and 20% deficiency interest, plus 20%
delinquency interest from February 25, 2002 until full payment, pursuant to
Sections 248 and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The
CTA ruled that pawnshops are subject to VAT under Section 108(A) of the NIRC as
they are engaged in the sale of services for a fee, remuneration or consideration.
Petitioner filed before the Court of Appeals a Petition for Review but it was
dismissed by the CA for lack of jurisdiction 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, was dismissed 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 petition for review and not strictly applied the technical rules of
procedure to the detriment of justice; (2) Whether or not petitioner is subject to the
10% VAT.
Held: (1) The petition is meritorious. Jurisdiction to review decisions or resolutions
issued by the Divisions of the 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 allow the government to collect deficiency VAT from petitioner
considering that the government has no right at all to collect or to receive the same.
Besides, dismissing this case on a mere technicality would lead to the unjust
enrichment 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 ofP11,905,696.32 for 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 tax years 1996 to 2002; however, with the levy, assessment and
collection of VAT from non-bank financial intermediaries 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 of R.A. No. 9238, petitioner is no longer liable for
VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case
may be.
Guided by the foregoing, petitioner is not liable for VAT for the year 1998.
Consequently, the VAT deficiency assessment issued by the BIR against petitioner
has no legal basis and must therefore be cancelled. In the same vein, the imposition
of surcharge and interest must be deleted.