CASE DIGESTS: REMEDIES --CIR v.

Isabela Cultural Corporation Facts: In an investigation conducted in the 1986 books of account of Isabela, it preliminarily incurred a tax deficiency of P9,985,392.15, inclusive of increments. Upon protest by Isabelas counsel, the said preliminary assessment was reduced to the amount of P325,869.44. On February 23, 1990, Isabela received from CIR an assessment letter demanding payment of the amounts of P333,196.86 and P4,897.79 as deficiency income tax and expanded withholding tax inclusive of surcharge and interest, respectively, for the taxable period from January 1, 1986 to December 31, 1986. Isabela then filed a letter to CIR asking for reconsideration on the subject assessment. It even attached certain documents supporting its protest. On February 9, 1995, Isabela received from CIR a Final Notice Before Seizure. In said letter, CIR demanded payment of the subject assessment within ten (10) days from receipt thereof. Otherwise, failure on its part would constrain CIR to collect the subject assessment through summary remedies. Isabela considered said final notice of seizure as [petitioners] final decision. Hence, the instant petition for review filed with this Court on March 9, 1995. The CTA having rendered judgment dismissing the petition, Isabela filed the instant petition anchored on the argument that CIRs issuance of the Final Notice Before Seizure constitutes its decision on Isabelas request for reinvestigation, which Isabela may appeal to the CTA. CA reversed CTAs decision. CIR: Final Notice was a mere reiteration of the delinquent taxpayers obligation to pay the taxes due. It was supposedly a mere demand that should not have been mistaken for a decision on a protested assessment. Such decision, the commissioner contends, must unequivocably indicate that it is the resolution of the taxpayers request for reconsideration and must likewise state the reason therefor. Isabela: Final Notice Before Seizure should be considered as a denial of its request for reconsideration of the disputed assessment. The Notice should be deemed as petitioners last act, since failure to comply with it would lead to the distraint and levy of respondents properties, as indicated therein. Issue: Whether or not the Final Notice Before Seizure dated February 9, 1995 signed by Acting Chief Revenue Collection Officer Milagros Acevedo against ICC constitutes the final decision of the CIR appealable to the CTA. Held: No. In the normal course, the revenue district officer sends the taxpayer a notice of delinquent taxes, indicating the period covered, 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 letter to the BIR indicating its protest, stating the reasons therefore, and submitting such proof as may be

necessary. That letter is considered as the taxpayers request for reconsideration of the delinquent assessment. After the request is filed and received by the BIR, the assessment becomes a disputed assessment 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 exchanges between the commissioner of internal revenue (CIR) and the taxpayer. The former may ask clarificatory questions or require the latter to submit additional evidence. However, the CIRs position regarding the disputed assessment must be indicated in the final decision. It is this decision that is properly appealable to the CTA for review. In the light of the above facts, the Final Notice Before Seizure cannot but be considered as the commissioners decision disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIRs 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 properties would be subjected to distraint and levy. Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days after submission thereof. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable. In this case, the said period of 180 days had already lapsed when Isabela filed its request for reconsideration on March 23, 1990, without any action on the part of the CIR. In the instant case, the second notice received by Isabela verily indicated its nature that it was final. Unequivocably, therefore, it was tantamount to a rejection of the request for reconsideration. In the present case, CIR does not deny receipt of private respondents protest letter. As a matter of fact, it categorically relates the following in its Statement of Relevant Facts: 3. On March 23, 1990, respondent ICC wrote the CIR requesting for a reconsideration of the assessment on the ground that there was an error committed in the computation of interest and that there were expenses which were disallowed (Ibid., pp. 296-311).

4. On April 2, 1990, respondent ICC sent the CIR additional documents in support of its protest/reconsideration. The letter was received by the BIR on April 18, 1990. Respondent ICC further executed a Waiver of Statute of Limitation (dated April 17, 1990) whereby it consented to the BIR to assess and collect any taxes that may be discovered in the process of reinvestigation, until April 3, 1991 (Ibid., pp. 296-311). A copy of the waiver is hereto attached as Annex C. COMMISSIONER OF INTERNAL REVENUE vs. UNION SHIPPING CORPORATION and THE COURT OF TAX APPEALS G.R. No. L-66160 May 21, 1990 FACTS: In a letter dated December 27, 1974 petitioner assessed against Yee Fong Hong, Ltd. and/or herein private respondent UnionShipping Corporation for deficiency income taxes due for the years 1971 and 1972. Private respondent protested the assessment. Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy. In a letter, private respondent reiterated its request for reinvestigation. Petitioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit against private respondent. In 1979, private respondent filed with respondent court a Petition for Review. The CTA ruled in favor of private respondent. Hence, this is apetition for review on certiorari 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 motion 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 appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration but contrary to the above ruling of this Court, left private respondent in the dark as to which action of the Commissioner is the decision appealable to the Court of Tax Appeals. Had he categorically stated that he denies private respondent's motion for reconsideration 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. ADVERTISING ASSOCIATES V CA G.R. No. L-59758 December 26, 1984 AQUINO, J.:

paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realty dealer's tax for leasing billboards and electric signs and 3% contractor's tax for repairing electric signs. The billboards and electric signs manufactured by it are either sold or leased, As already stated, the Commissioner of Internal Revenue subjected to 3% contractor's tax its rental income from billboards and electric signs. The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest) on its income from billboards and neon signs. The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary purpose is to engage in general advertising business. Its income tax returns indicate that its business was advertising. Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71 deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated the assessments in his letters of July 12 and September 16,1974 (p. 3, Rollo). The taxpayer requested the cancellation of the assessments in its letters of September 13 and November 21, 1974 (p. 3, Rollo). Inexplicably, for about four years there was no movement in the case. Then, on March 31, 1978, the Commissioner resorted to the summary remedy of issuing two warrants of distraint, directing the collection enforcement division to levy on the taxpayer's personal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978. More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 in answer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint (Annex C of Petition, pp. 31-32, Rollo). He justified the assessments by stating that the rental income of Advertising Associates from billboards and neon signs constituted fees or compensation for its advertising services. He requested the taxpayer to pay the deficiency taxes within ten days from receipt of the demand; otherwise, the Bureau would enforce the warrants of distraint. He closed his demand letter with this paragraph: This constitutes our final decision on the matter. If you are not agreeable, you may appeal to the Court of Tax Appeals within 30 days from receipt of this letter. Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, it filed its petition for review. In its resolution of August 28, 1979, the Tax Court enjoined the enforcement of the warrants of distraint. The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the Commissioner's appealable decisions. Since Advertising Associates appealed from the decision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.

FACTS: In the instant case, Advertising Associates alleged that it sold in 1949 its advertising agency business to Philippine Advertising Counsellors, that its business is limited to the making, construction and installation of billboards and electric signs and making and printing of posters, signs, handbills, etc. (101 tsn). It contends that it is a media company, not an advertising company, It

ISSUE: (1) Whether the collection of the tax had already prescribed. (2) Whether the petition for review was filed within the reglementary period.

RULING: (1) Section 332 of the 1939 Tax Code, now section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax may be collected by distraint or levy or by a judicial proceeding begun 'within five years after the assessment of the tax". The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of distraint were served upon it on April 18 and may 25,1978 or within five years after the assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement was not implemented because of the pending protests of the taxpayer and its requests for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23, 1979. It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the taxpayer ample opportunity to contest the assessments but at the same time safeguarded the Government's interest by means of the warrants of distraint. (2) We hold that the petition for review was filed on time. The reviewable decision is that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint. No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioner's final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. That was the same situation in St. Stephen's Association and St. Stephen's Chinese Girl's School vs. Collector of Internal Revenue, 104 Phil. 314, 317-318. The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action (Surigao Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523).

HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this presumption is disregarded if the taxpayer denies ever having received a tax assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to prove by competent evidence that such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR to prove by contrary evidence that the Metro Star received the assessment in the due course of mail. In the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in January 2002. The CIR could have simply presented the registry receipt or the certification from the postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to comply with the requirement of service of the pre-assessment notice. The Supreme Court emphasized that the sending of a pre-assessment notice is part of the due process requirement in the issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax authorities. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. But even so, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

Lascona Land Co., Inc. vs Commissioner of Internal Revenue Taxation Failure of the CIR to Decide a Protest Remedies of the Taxpayer In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal assessment notice (FAN) to Lascona Land Co., Inc. (LLCI) demanding the latter to pay P753k in taxes. LLCI filed a timely protest on April 20, 1998. From said date (since no supporting document was required to be submitted), the CIR has 180 days to decide on the protest. However, the CIR promulgated its decision on March 3, 1999. LLCI received a copy of the decision on March 12, 1999. On April 12, 1999, LLCI appealed the decision to the Court of Tax Appeals (CTA). The CIR moved for the dismissal of the appeal on the ground that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if the CIR or its representative failed to act on a protest within the 180-day period the taxpayer may appeal within 30 days from the lapse of the 180-day period to the CTA otherwise, the decision shall become final and executory; that LLCI failed to appeal within the said period hence the CTA has no jurisdiction over the case appealed by LLCI. ISSUE: Whether or not the CIR is correct. HELD: No. The revenue regulation is invalid. Under the law (Section 228 of the National Internal Revenue Code), a taxpayer has two remedies if the CIR failed to act on his protest within the 180-day period, to wit; 1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of the decision, or 2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day period. Interpreting the above provision, the taxpayer has two options in case of inaction by the CIR. First is to appeal to the CTA within 30 days from the lapse of the 180 day period; or second, wait for the CIR to issue the decision and then appeal, if adverse, to the CTA within 30 days from the receipt of the decision by the taxpayer

CIR v. METRO STAR SUPERAMA Taxation Pre-Assessment Notice Due Process Requirement In January 2001, a revenue officer was authorized to examine the books of accounts of Metro Star Superama, Inc. In April 2002, after the audit review, the revenue district officer issued a formal assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in deficiency taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process was not observed when it was not issued a pre-assessment notice. Nevertheless, the Commissioner of Internal Revenue authorized the issuance of a Warrant of Distraint and/or Levy against the properties of Metro Star. Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of Metro Star. ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star.

(because even if the CIR failed to decide on the case within the 180 day period, it can still decide on it and may even issue a favorable judgment to the taxpayer, hence it may be logical to wait and only appeal if the adverse decision is actually received). In the case at bar, LLCI chose to wait for the CIR to decide on the case and it did not appeal within 30 days from the lapse of the 180day period. LLCI received the adverse decision of the CIR on March 12, 1999. It appealed on April 12, 1999 which is still within the 30day period to appeal to the CTA. The revenue regulation in question is invalid because in effect, it limited the remedy provided for by the law. Section 228 of the NIRC prevails over the said revenue regulation. The said revenue regulation cannot validly take away the option of the taxpayer to continue waiting, even after the lapse of the 180 day period, for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIRs ruling is adverse. It must however be noted that these two remedies are mutually exclusive.