REGEN B. VOLOSO|Taxation II - 1st sem SY 2014-2015 Atty.

Lock| Assigned Readings for the 1st week|8/1/14

REMEDIES UNDER THE NATIONAL INTERNAL REVENUE CODE
I.

ASSESSMENT OF INTERNAL REVENUE TAXES

A.

DEFINITION/NATURE/EFFECT/BASIS

Revenue Regulation (RR) No. 18-2013 amending RR No. 1299:

Notice of Informal Conference already deleted.
Modes of procedure in the issuance of a deficiency tax
assessment:
1. Preliminary Assessment Notice (PAN) - is issued, if after
review and evaluation by the Commissioner or his duly
authorized representative, it is determined that there
exists sufficient basis to assess the taxpayer for any
deficiency tax or taxes.
If the taxpayer fails to respond within 15 days
from date of receipt of PAN, he shall be
considered in default, in which case, a Formal
Letter of Demand and Final Assessment Notice
(FLD/FAN) shall be issued calling for payment
of the taxpayers deficiency tax liability,
inclusive of applicable penalties.
If the taxpayer, within 15 days from the date of
receipt of PAN, responds that he/it disagrees
with the findings of deficiency tax(es), an
FLD/FAN shall be issued within 15 days of the
submission of the taxpayers response, calling
for the payment of the taxpayers deficiency
tax liability, inclusive of applicable penalties.
2. FLD and FAN issued by the Commissioner or his duly
authorized representative. It shall state the facts, the
law, rules and regulations, or jurisprudence on which
the assessment is based; otherwise the assessment shall
be void.
3. Disputed Assessment The taxpayer or its authorized
representative
or
tax
agent
may
protest
administratively against the aforesaid FLD/FAN within
30 days from the date of receipt thereof.
Request for reconsideration refers to a plea
of re-evaluation of an assessment on the basis
of existing records without need of additional
evidence. It may involve both a question of fact
or of law, or both.
Request for reinvestigation refers to a plea of
re-evaluation of an assessment on the basis of
newly-discovered or additional evidence that a
taxpayer intends to present in the
reinvestigation. It may also involve a question
of fact or of law or both.
The taxpayer shall submit all relevant
supporting documents in support of is protest
within 60 days from the date of the filing of
his letter of protest, otherwise, the
assessment shall become final, executory and
demandable.
The taxpayer shall state in his protest:
i.
The nature of protest (reconsideration/reinvestigation), specifying newly discovered or
additional evidence he intends to present if it is
a request for reinvestigation;
ii.
Date of the assessment notice; and
iii.
The applicable law, rules and regulations, or
jurisprudence on which his protest is based,
otherwise the protest is void.
For undisputed issued, it shall become final, executory and
demandable hence, a collection letter shall be issued
calling for payment of the said deficiency tax, inclusive of
applicable surcharge and/or interest.

If taxpayer fails to file a protest against the FLD/FAN

within 30 from the date of receipt thereof, the assessment
shall become final, executory and demandable.
If the protest is not acted upon by the Commissioners
duly authorized representative within 180 days counted
form the date of filing of the protest (request for
reconsideration) or from the date of submission by
the taxpayer of the required documents within 60
days from the date of filing of the protest (request for
re-investigation), the taxpayer may either:
Appeal to the CTA within 30 days after the
expiration of the 180-day period; or
Await the final decision of the Commissioners
duly authorized representative on the disputed
assessment and appeal such final decision of the
CTA within 30 days after receipt of a copy of
such decision, are mutually exclusive and the
resort to one bars the application of the other.
If protest or administrative appeal is denied by the
Commissioner, the taxpayer may appeal to the CTA
within 30 days from receipt of said decision, otherwise
it shall become final, executory and demandable
4. Final Decision on Disputed Assessment (FDDA) The
decision of the Commissioner or his duly authorized
representative shall state the facts, the applicable law,
rules and regulations or jurisprudence on which such
decision is based, otherwise, the decision shall be void;
and that the same is his final decision.
Modes of Service of PAN/FLD/FAN/FDDA
1. Personal service registered/known address
2. Substituted service
Registered Address - with his clerk or with a
person having charge thereof;
Known Address (business activities are held) with his clerk or with a person having charge
thereof;
Known address (also the residence) leaving the
copy with a person of legal age residing therein.
No person is found in the both addresses/ the
party found in the address refuses to received
absence/refusal shall be attested by a barangay
official and 2 disinterested person. Notice shall
be given to the barangay official.
3. Service by mail
sent by registered mail to the registered/known
address
sent through reputable professional courier
service available in the locality
if there is no registry/reputable courier service,
may be done by ordinary mail.
Civil Penalties
1. 25% Surcharge
Failure to file any return and pay the tax thereon
Filing a return with an internal revenue officer
other that those with whim the return is
required to be filed; or
Failure to pay the deficiency tax within the time
prescribed
Failure to pay the full or part of the amount tax
shown on any return
2. 50% Surcharge
Willful neglect to file the return within the period
prescribed by the Code, or in case a false or
fraudulent return is willfully made, the penalty to
be imposed shall be 50% of the tax or the
deficiency tax
R.A. 10021 otherwise known as the Exchange Information on
Tax Matters Act of 2009 (approved on March 5, 2010)

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Authority of commissioner of internal revenue to inquire

into bank deposit accounts related information held by
financial institutions of:
1. A decedent to determine his gross estate;
2. Any taxpayer who has filed an application for
compromise of his tax liability;
3. A specific taxpayer(s) subject of a request for the supply
of tax information from a foreign tax authority
Willful refusal to supply information punishable by a fine
of not less than P50,000 but not more than P100,000, or
suffer imprisonment of not less than 2 years but not more
than 5 years, or both.

TAX AUDIT PROCESS

LETTER OF AUTHORITY/AUDIT NOTICE/TAX VERIFICATION
NOTICE
RAMO No. 1-00
Arranging for an appointment a telephone or a personal
call by the Revenue Officer (RO) should be made to the
taxpayer himself and not his representative.
Serving of Letter of Authority (LA)
o RO assigned should present the LA + copy of
Taxpayers Bill of Rights
o LA gives authorizes or empowers a designated RO
to examine, verify and scrutinize taxpayers books
and records
o LA must be presented to the taxpayer within 30
days from its date of issue; otherwise, it becomes
null and void unless revalidated.
RMO No. 44-2010 dtd May 12, 2010
Electronic issuance of LA

Letter of Authority Monitory System (LAMS)

Objectives:
a) To prescribe the documentary requirements and
enhanced automation procedures for the issuance
of Las in all investigating offices under the RO, the
Large Taxpayers Services (LTPs), the Enforcement
Services (ES), and the various Task Forces and
Special Teams authorized by the CIR to conduct
audit investigations; and
b) To provide policies and procedures relative to the
use of the LAMS, and to secure the integrity and
credibility of the issuance of LAs.

Beginning June 1, 2010, the rule on the need for revalidation

of LAs for failure of the revenue officials to complete the
audit within the prescribed period shall be withdrawn.
Accordingly, there is no need for revalidation of the LA even
if the prescribed audit period has been exceeded. However,
the failure of the RO to complete the audit within the
prescribed period shall be subject to the applicable
administrative sanctions.
RMO No. 69-2010 dated August 11, 2010
Guidelines on the Issuance of Electronic Letters of Authority, Tax
Verification Notices (TVN), and Memorandum of Assignment
(MOA)
BIR Form No. 1966 which will be used in printing eLA under
the LAMS, shall be requisitioned from the Accountable Forms
Division (AFD):
Investigating Office/Approving Official
RDO -> Regional Director
LTS Audit Division-> Assistant Commissioner
National Investigation Div. & SID -> CIR

August 16, 2010 only eLAs printed on BIR Form No. 1966
shall be issued by the Bureau for the audit/investigation of
tax liabilities
TVNs shall be issued for estate tax cases, irrespective of
amount of gross estate until December 31, 2010

G.R. No. 178697 November 17, 2010

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. SONY
PHILIPPINES, INC., Respondent.
FACTS:

November 24, 1998 CIR issued LA No. 19734 authorizing

certain revenue officers to examine Sonys books of
accounts & other accounting records regarding revenue
taxes for the period 1997 and unverified prior years.

December 6, 1999 a preliminary assessment for 1997

deficiency taxes and penalties was issued by the CIR which
Sony protested.

Acting on the protest, CIR issued final assessment notices,

formal letter of demand & the details of the discrepancies.

October 24, 2000 within 30 days after the lapse of 180

days from submission of supporting documents to the CIR,
Sony filed a petition for review before the CTA.

CTA 1st division cancelled the deficiency assessment

issued by CIR for VAT (the subsidized advertising expense
paid by Sony was duly covered by a VAT invoice resulted in
an input VAT credit) but upheld the deficiency assessment
for expanded withholding tax P1,035,879.70 and the
penalties for late remittance of internal revenue taxes
P1,269,593.00

Hence this petition for review.

CIR insists that LOA, although it states the period 1997

and unverified prior years, should be understood to mean
the fiscal years ending March 31, 1998.
ISSUE: W/N the CTA erred in ruling that respondent is not liable
for deficiency VAT?
HELD:

SC held in the NEGATIVE.

Based on Section 13 of the Tax Code, a Letter of Authority

or LOA is the authority given to the appropriate revenue
officer assigned to perform assessment functions. It
empowers or enables said revenue officer to examine the
books of account and other accounting records of a
taxpayer for the purpose of collecting the correct amount
of tax. The very provision of the Tax Code that the CIR
relies on is unequivocal with regard to its power to grant
authority to examine and assess a taxpayer.

Clearly, there must be a grant of authority before any

revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer
so authorized must not go beyond the authority given. In
the absence of such authority, the assessment or
examination is a nullity.

Here, LOA 19734 covered the period 1997 and unverified

prior years. For said reason, the CIR acting through its
revenue officers went beyond the scope of their authority
because the deficiency VAT assessment arrived at was
based on records from January to March 1998 or using the
fiscal year which ended in March 31, 1998.
PRESERVATION OF BOOKS OF ACCOUNTS AND TAX RECORDS
RR No. 17-2013 dtd September 27, 2013
Preservation of Books of Accounts and Tax Records
Internal revenue taxes shall be assessed within 3 years after
the last day prescribed by law for the filing of the return, and
no court proceeding in court without assessment for the
collection of such taxes shall begun after the expiration of
such period.

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The 3-year period shall be counted from the day the return
was filed.
Section 222. Exceptions as to Period of Limitation of
Assessment and Collection of Taxes:
a) In the case of a false or fraudulent return with
intent to evade or of a failure to file a return, the
tax may be assessed, or a proceeding in court for
the collection of such tax may be filed without
assessment, at any time within 10 years after the
discovery of the falsity, fraud or omission.
b) If before the expiration of the time prescribed in
Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in
writing to its assessment after such time, the tax
may be assessed within the period agreed upon.
(Waiver of Statute of Limitations)
c) If there is a pending tax case, protest or claim for
tax credit/refund of taxes, and the books and
records concerned are material to the case, then
such books and records should be kept until the
case is finally resolved.
d) The books of accounts and other pertinent records
of tax-exempt organizations or grantees of tax
incentives are subject to periodic examination by
the BIR for purposes of ascertaining whether they
have been complying with the conditions under
which they have been granted tax exemption or tax
incentives and their tax liability, if any.
Section 2. Retention Periods. All taxpayers are required
to preserve their books of accounts, including
subsidiary books and other accounting records, for a
period of 10 years reckoned from the day following the
deadline in filing a return, or if filed after the deadline,
from the date of the filing of the return, for the taxable
year when the last entry was made in the books of
accounts.
other accounting records includes corresponding
invoices, receipts, vouchers and returns, and other
source documents supporting the entries in the books of
accounts

HELD:

TAX ASSESSMENT
G.R. No. 128315 June 29, 1999
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
PASCOR REALTY AND DEVELOPMENT CORPORATION,
ROGELIO A. DIO and VIRGINIA S. DIO, respondents.
FACTS:

March 1, 1995 CIR filed a criminal complaint before

the DOJ against PRDC alleging evasion of taxes in the
total amount of P10,513,671.

PRDC
filed
an
Urgent
Request
for
Reconsideration/Reinvestigation disputing the tax
assessment and tax liability.

CIR denied the urgent request on the ground that no

formal assessment has yet been issued by the
Commissioner.

When PRDC elevated the case to the CTA, CIR then filed
a Motion to Dismiss on the ground that CTA has no
jurisdiction over the subject matter of the petition as
there was no formal assessment issued against the
PRDC.

When the MTD was denied, CIR filed a petition to the

CA.

CA sustained CTAs decision.

ISSUE: W/N the revenue officers Affidavit-Report, which was
attached to criminal revenue complaint filed the DOJ, constituted
an assessment that could be questioned before the CTA?

SC held in the NEGATIVE.

An assessment must be sent to and received by a
taxpayer, and must demand payment of the taxes
described therein within which to protest.
Section 203 of the NIRC provides that internal revenue
taxes must be assessed within three years from the last
day within which to file the return. Section 222, on the
other hand, specifies a period of ten years in case a
fraudulent return with intent to evade was submitted or
in case of failure to file a return. Also, Section 228 of the
same law states that said assessment may be protested
only within thirty days from receipt thereof.
Necessarily, the taxpayer must be certain that a specific
document constitutes an assessment. Otherwise,
confusion would arise regarding the period within
which to make an assessment or to protest the same, or
whether interest and penalty may accrue thereon.
It should also be stressed that the said document duly
sent to the taxpayer. Indeed, an assessment is deemed
made only when the collector of internal revenue
releases, mails or sends such notice to the taxpayer.
In the present case, the revenue officers Affidavit
merely contained a computation of respondents tax
liability. It did not state a demand or a period for
payment. Worse, it was addressed to the justice
secretary, not to the taxpayers.
The fact that the Complaint itself was specifically
directed and sent to the DOJ and not to private
respondents shows that the intent of the commissioner
was to file a criminal complaint for tax evasion, not to
issue an assessment.
Additional issue: Assessment not necessary before
filing of criminal complaint.
Section 222 of the NIRC specifically states that in cases
where a false or fraudulent return is submitted or in
cases of failure to file a return such as this case,
proceedings in court may be commenced without an
assessment. Furthermore, Section 205 of the same Code
clearly mandates that the civil and criminal aspects of
the case may be pursued simultaneously.

PRE-ASSESSMENT NOTICE (PAN)/ WHEN NOT REQUIRED

The Pre-Assessment Notice is a communication issued by the

Regional Assessment Division, or any other concerned BIR
Office, informing a Taxpayer who has been audited of the
findings of the Revenue Officer, following the review of these
findings.
If the Taxpayer disagrees with the findings stated in the PAN,
he shall then have fifteen (15) days from his receipt of the
PAN to file a written reply contesting the proposed
assessment.
Under what instances is PAN no longer required? A
Preliminary Assessment Notice shall not be required in any
of the following cases, in which case, issuance of the formal
assessment notice for the payment of the taxpayers
deficiency tax liability shall be sufficient:
a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax
appearing on the face of the tax return filed by the
taxpayer; or
b) When a discrepancy has been determined between the
tax withheld and the amount actually remitted by the
withholding agent; or
c) When a taxpayer who opted to claim a refund or tax
credit of excess creditable withholding tax for a taxable
period was determined to have carried over and
automatically applied the same amount claimed

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d)
e)

against the estimated tax liabilities for the taxable

quarter or quarters of the succeeding taxable year; or
When the excise tax due on excisable articles has not
been paid; or
When an article locally purchased or imported by an
exempt person, such as, but not limited to, vehicles,
capital equipment, machineries and spare parts, has
been sold, traded or transferred to non-exempt persons.

JEOPARDY ASSESSMENT
RR No. 30-02 dated December 16, 2002

Section 3(1)(a). Jeopardy assessment refer to a tax

assessment which was assessed without the benefit of
complete or partial audit by an authorized revenue officer,
who has reason to believe that the assessment and collection
of a deficiency tax will be jeopardized by delay because of
the taxpayers failure to comply with the audit and
investigation requirements to present his books of accounts
and/or pertinent records, or to substantiate all or any of the
deductions, exemptions, or credits claimed in his return.
POWER OF THE COMMISSIONER TO ASSESS DEFICIENCY TAX
/ BEST EVIDENCE OBTAINABLE
RMC No. 23-00 dated November 27, 2000
Assessment of Deficiency Internal Revenue Taxes Based on the
Best Evidence Obtainable

Section 6(b) of the NIRC of 1997 When a report required

by law as basis for the assessment of any national internal
revenue tax shall not be forthcoming within the time fixed by
laws or rules and regulations 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.

When assessment based on best evidence obtainable is

justified:
a) The report or records requested from the taxpayer
are not forthcoming i.e., the records are lost; refusal
of the taxpayer to submit such records;
b) The reports submitted are false, incomplete or
erroneous.
[ G.R. No. 81446, August 18, 1988 ]
BONIFACIA SY PO, PETITIONER, VS. HONORABLE COURT OF
TAX APPEALS AND HONORABLE COMMISSIONER OF
INTERNAL REVENUE, RESPONDENTS.
FACTS:

Deceased Po Bien Sing was the sole proprietor of Silver

Cup Wine Factory in Talisay, Cebu. He was engaged in
the business of manufacture and sale of compounded
liquors, using alcohol and other ingredients as raw
materials.

On the basis of a denunciation against Silver Cup

allegedly for tax evasion amounting to millions of pesos,
the then Secretary of Finance directed the Finance-BIRNBI team constituted to conduct the investigation.

A letter and SDT dated April 13, 1971 and May 3, 1971
respectively were issued against Silver Cup requesting
the production of the accounting records and other
related documents for the examination of the team.

Mr. Po Bien Sing did not produce his books as

requested.

This prompted the team to enter the factory bodega of

Siver Cup and seized different brands, consisting 1,555
cases of alcohol products.

On the basis of the teams investigation, CIR assessed

Mr. Po Bien Sing deficiency income tax for 1996 to 1970
in the amount of P7,154,685.15 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. But

after reinvestigation, CIR reiterated the assessment in
view of petitioners persistent failure to present the
books of accounts for examination and compelling
respondent to issue warrants of distraint and levy.

Hence, this appeal.

ISSUE: W/N the assessments have valid and legal basis.
HELD:

SC held in the AFFIRMATIVE.

Section 16 (NIRC) Power of the CIR to make

assessments b) 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 of
Internal Revenue shall assess the proper tax on the best
evidence obtainable.

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 the tax report is incomplete or fraudulent.

In the instant case, the persistent failure of the late Po

Bien Sing and the herein petitioner to present their
books of accounts for examination for the taxable years
involved left the Commissioner of Internal Revenue no
other legal option except to resort to the power
conferred upon him under Section 16 of the Tax Code.

SC denied the petition and affirmed the decision of the

CTA.
G.R. No. 177982
October 17, 2008
FITNESS BY DESIGN, INC., petitioner, vs. COMMISSIONER ON
INTERNAL REVENUE, respondent.
FACTS:

March 17, 2004 CIR assessed petitioner FbD for

deficiency income taxes for the year 1995 in the total
amount of P10,647,529.69.

Petitioner protested the assessment on the ground that it

was issued beyond the 3-year prescriptive period under
Section 203 of the Tax Code. Additionally, it claimed that
since it was incorporated only on May 30, 1995, there was
no basis to assume that it had already earned income for
the tax year 1995.

CIR issued a warrant of distraint and/or levy. Petitioner

filed a petition for review reiterating its defense of
prescription.

In its answer, CIR alleged that its right to assess petitioner

for the year 1995 has not prescribed; that petitioners
1995 ITR filed on April 11, 1996 was false and fraudulent
for its deliberate failure to declare its true sales.

BIR filed a criminal complaint on March 10, 2005 before

the DOJ against the officeirs and accountant of petitioner
for violation of NIRC Code of 1977.

A preliminary hearing was conducted during which

petitioners former bookkeeper attested that a former
collegue CPA Leonardo Sablan illegally took custody of
petitioners accounting records, invoices, and ORs and
turned them over to the BIR.

On petitioners request, two subpoena ad testificandum

were issued to Sablan to appear in two hearings but he
failed to appear in both instances.

In related move, petitioner submitted written

interrogatories addressed to Sablan and other revenue
officers of the National Investigation Division.

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CTA issued a Resolution denying petitioners Motion for

Issuance of Subpoenas and disallowed the submission by
petitioner of written interrogatories to Sablan, who is not
a party to the case, and the revenue officers, it finding that
the testimony, documents, and admissions sought are not
relevant.21 Besides, the CTA found that to require Sablan
to testify would violate Section 2 of Republic Act No. 2338,
as implemented by Section 12 of Finance Department
Order No. 46-66, proscribing the revelation of identities of
informers of violations of internal revenue laws, except
when the information is proven to be malicious or false.

Hence, this present Petition for Certiorari.

ISSUE: W/N the CTA committed grave abuse of discretion when it
issued the questioned Resolution.
HELD:

SC held in the NEGATIVE.

The Court found that the testimonies, documents, and

admissions sought by petitioner to be presented in the
case through subpoenas and written interrogatories were
not relevant to the issues before the CTA since the issued
pertain only to whether the CTAs tax assessment against
petitioner had already prescribed, and whether
petitioners tax return was false or fraudulent.

However, the reason of petitioner for requesting the

issuance of subpoenas and submission of written
interrogatories was to establish that its accounting
records and related documents, invoices, and receipts
were illegally obtained.

Petitioner claims that it only intended to obtain

information on the whereabouts of the documents it need
in order to refute the assessment and not disclose the
identity of the informer. However, the SC found tha the
interrogatories addressed to Sablan and the revenue
officers show that they were intended to confirm
petitioners belief that Sablan was the informer.

The law thus allows the BIR access to all relevant or

material records and data in the person of the taxpayer,
and the BIR can accept documents which cannot be
admitted in a judicial proceeding where the Rules of Court
are strictly observed. To require the consent of the
taxpayer would defeat the intent of the law to help the BIR
assess and collect the correct amount of taxes.

SC dismissed the petition.

POWER TO ISSUE SUBPOENA DUCES TECUM (SDT)
RMO No. 002-08 dated January 8, 2008
Coverage: Those related to the conduct of investigation
pursuant to a Letter of Authority/Tax Verification
Notice/Mission Order
Already amended by RMO Nos. 10-2013 and 8-2014.
RMO No. 45-2010 dated May 12, 2010
Request for the production of the books of accounts and other
records and documents and in the issuance of SDT for failure to
comply with requests
1. The taxpayer, upon receipt of LA and checklist of
presentation of the requirements for the audit or access
to record request, the RO shall send first a 1st Notice,
after 10 days from receipt of LA and checklist,
demanding the taxpayer to furnish to the RO the
requirements.
2. If taxpayer ignores the 1st Notice, a 2nd and Final Notice
shall be sent to the taxpayer 10 c.d. from receipt of the
1st Notice.
3. If the taxpayer still refuses to comply, the Head Officer
shall request for the issuance of the SDT, after 10 c.d.
from receipt of the 2nd and Final Notice. The requested

4.
5.

office shall act on the request for the issuance of the SDT
within 5 c.d. from the receipt of such request.
The SDT must be served within 5 c.d. from issuance
thereof.
If taxpayer still refuses, the concerned BIR legal office
shall perform the ff. courses of action:
a) File a criminal case against the taxpayer for
violation of Sec 5 in relation to Sections 14 and
266 of the NIRC and or
b) Initiate a proceeding to cite the taxpayer for
contempt, under Section 3(f) Rule 71 of the
Revised Rules of Court.

RMO No. 088-2010 dated December 22, 2010

Failure to Obey Summons
If during the pendency of the criminal action for Failure to
Obey Summons, the respondent submits the required books
of accounts and other accounting records, and on this basis,
requests the Prosecutors Office or the Court for the
dismissal of the case, the prosecuting Officer of the BIR shall
concur therewith only upon presentation by said respondent
of the ff:
1. A joint certification stating that the required books of
accounts and other accounting records have been
received from respondent stating the date of
submission;
2. A receipt evidencing payment of the penalty of P10,000
on account of the delayed compliance which deferred
the ongoing audit investigation.
RMO No. 10-2013 dated April 17, 2013
Covered by the issuance of SDT:
1. Person liable for tax or required to file a return or any
officer or employee of such person, or any person
having possession, custody, or care of the books of
accounts and other accounting records containing
entries relating to the business of the person liable for
tax;
2. Any person other than the person whose internal
revenue tax liability is subject to audit or investigation,
or from any office or officer of the national and local
governments,
government
agencies
and
instrumentalities, including BSP and GOCCS
The Head of the RDO/Large Taxpayers Audit
Division/LRDO/National Investigation Division/ Special
Investigation Division concerned or any other officer duly
delegated by the Commissioner shall make a written notice
to the persons abovementioned to provide information or
the pertinent books of accounts, accounting records and
particular or specific documents.
If the information requested are not furnished/incomplete,
the concerned revenue officer shall request issuance of
SDT through a Memorandum Report.
In case of corporations, partnerships or associations, SDT
shall be issued to the following:
1. Partner
2. President
3. General manager
4. Branch manager
5. Treasurer
6. Registered officer-in-charge
7. Employee/s or other persons responsible for the
custody of the books of accounts and other
accounting records mandated to be submitted to be
provided.
RMO No. 8-2014 dated January 29, 2014
Requesting Office
Issued by
National Office
Assistant Commissioner,
Enforcement and Advocacy
Service

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Taxpayers under
the jurisdiction of
the LTS, including
LTDOs
Regional Offices

Assistant Commissioner, LTS

Revenue Regional Directors

This does not preclude the Commissioner and Deputy

Commissioners to exercise their authority under the NIRC to
issue SDT in appropriate cases.
The Assistant
B.

PERIOD TO ASSESS DEFICIENCY TAX

PRESCRIPTION

G.R. No. L-14519

July 26, 1960
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. LUIS
G. ABLAZA, defendant-appellee.
FACTS:

October 3, 1951 - CIR assessed income taxes for the years

1945, 1946, 1947 and 1948 on the income taxes of
defendant Ablaza totaling P5,254.70

October 16, 1951 the accounts for Ablaza requested a

reinvestigation of Ablazas tax liability on the ground that
the assessment is based on third-party information and
neither the taxpayer nor his accountants were permitted
to appear in person.

October 17, 1951 the petition for reinvestigation was

granted in a letter of the CIR.

October 30, 1951 the accountants again sent another

letter to the CIR submitting copy of its own computation
and on October 23, 1952 submitted a supplemental
memorandum.

March 10, 1954, the accountants sent a letter to the

examiner of accounts and collections requesting for a
copy of the detailed computation of the alleged tax liability
as soon as the reinvestigation is terminated to enable
them to prove the veracity of the taxpayers side of the
case.

February 11, 1957 CIR made a final assessment of the

income taxes of Ablaza, fixing said income taxes for the
years already mentioned at P2, 066.56.

Upon receipt of said notice, the accountants sent a letter to

CIR dated May 8, 1957 protesting the assessments on the
ground that the income taxes are no longer collectible for
the reason that they have already prescribed.

As the Collector did not agree to the alleged claim, Ablaza

instituted an action in the CFI.

CFI upheld Ablazas contention that the action to collect

the said income taxes had prescribed.

Upon appeal, the Government contends that the

prescriptive period has not fully run at the time of the
assessment, in view especially of the letter of the
accountants dated March 10, 1954.
ISSUE: W/N the action to collect the income taxes had already
prescribed.
HELD:

SC held in the NEGATIVE.

The law prescribing a limitation of actions for the

collection of the income tax is beneficial both to the
Government and to its citizens; to the Government
because tax officers would be obliged to act promptly in
the making of assessment, and to citizens because after the
lapse of the period of prescription citizens would have a
feeling of security against unscrupulous tax agents who
will always find an excuse to inspect the books of
taxpayers, not to determine the latter's real liability, but to
take advantage of every opportunity to molest peaceful,
law-abiding citizens. Without such legal defense taxpayers

would furthermore be under obligation to always keep

their books and keep them open for inspection subject to
harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be
interpreted in a way conducive to bringing about the
beneficient purpose of affording protection to the taxpayer
within the contemplation of the Commission which
recommend the approval of the law.
All that the letter asks is that the taxpayer be furnished a
copy of the computation. The request may be explained in
this manner: As the reinvestigation was allowed on
October 1, 1951 and on October 16, 1951, the taxpayer
supposed or expected that at the time, March, 1954 the
reinvestigation was about to be finished and he wanted a
copy of the re-assessment in order to be prepared to admit
or contest it. Nowhere does the letter imply a demand or
request for a ready requested and, therefore, the said
letter may not be interpreted to authorize or justify the
continuance of the suspension of the period of limitations.
SC affirmed the judgment of the lower court.
COUNTING OF PERIODS

Art. 13 of the New Civil Code. When the laws speak of years,
months, days or nights, it shall be understood that years are
of three hundred sixty-five days each; months, of thirty days;
days, of twenty-four hours; and nights from sunset to
sunrise.
Section 31 of the Revised Administrative Code: Legal
Periods. - "Year" shall be understood to be twelve calendar
months; "month" of thirty days, unless it refers to a specific
calendar month in which case it shall be computed according
to the number of days the specific month contains; "day," to a
day of twenty-four hours; and "night," from sunset to
sunrise.

[ G.R. NO. 162155, August 28, 2007 ]

COMMISSIONER OF INTERNAL REVENUE AND ARTURO V.
PARCERO IN HIS OFFICIAL CAPACITY AS REVENUE DISTRICT
OFFICER OF REVENUE DISTRICT NO. 049 (MAKATI),
PETITIONERS, VS. PRIMETOWN PROPERTY GROUP, INC.,
RESPONDENT.
FACTS:

March 11, 1999 Gilbert Yap, vice chair of PPG applied for
the refund or credit of income tax respondent paid in 1997
citing that it suffered losses amounting to P71,879,228
due to the increase in the cost of labor and materials and
difficulty in obtaining financing for projects and collecting
receivables.

March 13, 1999 revenue officer Elizabeth Santos

required PPG to submit additional documents to support
its claim. But despite its compliance, the claim was not
acted upon.

April 14, 2000, it filed a petition for review in the CTA.

CTA dismissed the petition as it was filed beyond the 2year prescriptive period for filing a judicial claim for tax
refund or tax credit citing Section 229 of the NIRC. 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.

It applied Article 13 of the NCC in counting the period.

Thus, 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.

Upon appeal, the CA reversed the decision of the CTA. It

rules that Article 13 did not distinguish between a regular

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year and a leap year. 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.
ISSUE: W/N the respondent filed the judicial claim for refund
beyond the two-year prescriptive period provided in Section 229
of the NIRC?
HELD:

SC held in the NEGATIVE.

Section 31 of the Administrative Code provides that year

shall be understood to be twelve calendar months x x x.

Both Article 13 of the Civil Code and Section 31, Chapter

VIII, Book I of the Administrative Code of 1987 deal with
the same subject matter - the computation of legal periods.
Under the Civil Code, a year is equivalent to 365 days
whether it be a regular year or a leap year. Under the
Administrative Code of 1987, however, a year is composed
of 12 calendar months. Needless to state, under the
Administrative Code of 1987, the number of days is
irrelevant.

There obviously exists a manifest incompatibility in the

manner of computing legal periods under the Civil Code
and the Administrative Code of 1987. For this reason, we
hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori
derogat priori.

Applying Section 31, Chapter VIII, Book I of the

Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent
filed its final adjusted return on April 14, 1998) consisted
of 24 calendar months.

It was held that PPGs petition 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.

SC denied the petition.

RULE IF WRONG RETURNS/AMENDED RETURN
G.R. No. L-29485 November 21, 1980
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
AYALA SECURITIES CORPORATION and THE HONORABLE
COURT OF TAX APPEALS, respondents.
FACTS:

CTA reversed the decision of the CIR assessing petitioner

the amount of P758,687.04 as 25% surtax and interest.

CTA held that the assessment made on February 21, 1961

by petitioner against Ayala fell under the 5-year
prescriptive period provided in Section 331 of the NIRC
and that the assessment had therefore been made after the
expiration of the said 5-year prescriptive period and was
of no binding force and effect.

CA affirmed CTAs decision.

Petitioner submits that there is no law requiring taxpayers

to file returns of their accumulated surplus, it is obvious
that neither Section 33 nor Section 332(a) of the Tax Code
applies in a case involving the 25% surtax imposed by
Section 25 of the Tax Code.
ISSUE: W/N the CA erred in holding that the assessment made on
the taxpayer fell under the 5-year prescriptive period.
HELD:

SC held in the NEGATIVE.

SC held that there is no such limit on the right of the CIR to

assess the 25% tax on unreasonably accumulated surplus
provided in Section 25 of the Tax Code, since there is no
express statutory provision limiting such right or
providing for its prescription.

The underlying purpose of the additional tax in question

on a corporation's improperly accumulated profits or
surplus is as set forth in the text of section 25 of the Tax
Code itself 1 to avoid the situation where a corporation
unduly retains its surplus instead of declaring and paving
dividends to its shareholders or members who would then
have to pay the income tax due on such dividends received
by them.
Petitioner commissioner's plausible alternative contention
is that even if the 25% surtax were to be deemed subject
to prescription, computed from the filing of the income tax
return in 1955, the intent to evade payment of the surtax
is an inherent quality of the violation and the return filed
must necessarily partake of a false and/or fraudulent
character which would make applicable the 10-year
prescriptive period provided in section 332(a) of the Tax
Code and since the assessment was made in 1961 (the
sixth year), the assessment was clearly within the 10-year
prescriptive period.
SC ordered respondent corporation to pay the assessment
in the sum of P758,687.04 as 25% surtax on its
unreasonable accumulated surplus, plus the 5% surcharge
and 1% monthly interest thereon.

G.R. No. L-20601

February 28, 1966
BUTUAN SAWMILL, INC., petitioner, vs. HON. COURT OF TAX
APPEALS, ET AL., respondents.
FACTS:

During the period from Jan 31, 1951 to June 8, 1953, it

sold logs to Japanese firms at prices FOB Vessel
Magallanes, Agusan, including cost of loading, wharfage
stevedoring and other costs in the Phils. The quality,
quantity and measurement specifications were certified by
the Bureau of Forestry. The freight was paid by the
Japanese buyers and the payments were effected by
means of irrevocable letters of credit in favor of petitioner
and payable thru PNB or any other bank named by it.

Upon investigation by the BIR, it was ascertained that no

sales tax return was filed by the petitioner and neither did
it pay the corresponding tax on the sales.

ON the basis of agent Antonio Moles report dated

September 17, 1957, respondent determined against
petitioner the sum of P40,004.01 representing sales tax,
surcharge and compromise penalty on its sales of logs
from Jan 1951 to June 1953.

And in consequence of a reinvestigation, respondent, on

Nov 6, 1958, amended the amount of the previous
assessment to P38,917.74.

Subsequent request for reconsideration of the amended

assessment having been denied, petitioner filed the instant
petition for review on November 7, 1960.

Lower court upheld the legality and correctness of the

amended assessment of the sales tax and surcharge.
ISSUE: W/N the assessment was made within the prescriptive
period provided by law.
HELD:

SC held in the AFFIRMATIVE.

SC held that an income tax return cannot be considered as

a return for compensating tax for purposes of computing
the period of prescription under Section 331 of the Tax
Code, and that the taxpayer must file a return for the
particular tax required by law in order to avail himself of
the benefits of Section 331 of the Tax Code; otherwise, if
he does not file a return, an assessment may be made
within the time stated in Section 332(a) of the same Code.

It being undisputed that petitioner failed to file a return

for the disputed sales corresponding to the years 1951,
1952 and 1953, and this omission was discovered only on

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September 17, 1957, and that under Section 332(a) of the

Tax Code assessment thereof may be made within ten (10)
years from and after the discovery of the omission to file
the return, it is evident that the lower court correctly held
that the assessment and collection of the sales tax in
question has not yet prescribed.
SC upheld the decision appealed from.

G.R. No. L-19727

May 20, 1965
THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
PHOENIX ASSURANCE CO., LTD., respondent.
FACTS:

Phoenix Assurance Co., Ltd. is a foreign insurance

corporation organized under the laws of Great Britain,
licensed to do business in the Philippines with head office
in London. Through its hear office, it entered in London
into worldwide reinsurance treaties with various foreign
insurance companies. It agree to cede a portion of
premiums received on original insurances underwritten
by its head office, subsidiaries, and branch offices
throughout the world, in consideration for assumption by
the foreign insurance companies of an equivalent portion
of the liability form such original insurances.

April 1, 1953, Phoenix filed its Phil income tax return for
1952, declaring therein a deduction from gross income of
P35,912.25 as part of the head office expenses incurred for
its Phil business, computed at 5% gross Philippine income.

August 30, 1955 it amended its income tax return for

1952 by excluding from its gross income the amount of
P316,526.75 representing reinsurance premiums ceded to
foreign reinsurers and further eliminating deduction
corresponding to the coded premiums.

July 24, 1958 - The CIR disallowed P15,826.35 of the

claimed deduction for head office expenses and assessed a
deficiency tax of P5,667.

August 1, 1958 the BIR released its assessment for years

1952 and 1954 which resulted from the disallowance of
the deduction claimed by Phoenix as head office expenses
allocable to its business in the Phils fixed by the
Commissioner at 5% of the net Phil income instead of 5%
of the gross Phil income as claimed in the returns.

Phoenix protested the assessment for withholding tax and

deficiency income tax. However, CIR denied the protest.

Upon appeal to the CTA, it declared the right of CIR to

assess deficiency income tax for 1952 have prescribed.
ISSUE: Should the running of the prescriptive period commence
from the filing of the original or amended return?
HELD:

SC held that the counting of the prescriptive period should

start from the filing of the amended return.

Considering that the deficiency assessment was based on

the amended return which, as aforestated, is substantially
different from the original return, the period of limitation
of the right to issue the same should be counted from the
filing of the amended income tax return. From August 30,
1955, when the amended return was filed, to July 24,
1958, when the deficiency assessment was issued, less
than five years elapsed. The right of the Commissioner to
assess the deficiency tax on such amended return has not
prescribed.

To strengthen our opinion, we believe that to hold

otherwise, we would be paving the way for taxpayers to
evade the payment of taxes by simply reporting in their
original return heavy losses and amending the same more
than five years later when the Commissioner of Internal
Revenue has lost his authority to assess the proper tax
thereunder. The object of the Tax Code is to impose taxes

for the needs of the Government, not to enhance tax

avoidance to its prejudice.
[ G. R. No. L-19495, November 24, 1966 ]
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS.
LILIA YUSAY GONZALES AND THE COURT OF TAX APPEALS,
RESPONDENTS.
FACTS:

May 11, 1949 Jose Yusay filed with BIR an estate and
inheritance tax return declaring total properties of
P219,584.32. FMV of real properties was computed by
increasing the assessed value by 40%

October 29, 1953 BIR assessed the estate and

inheritance taxes in the sums of p6,849.78 and
P16,970.63, respectively.

January 25, 1955, BIR increased the assessment to

P8,225.89 as estate and inheritance tax plus delinquency
interest and demanded payment thereof.

July 12, 1957 an agent of BIR apprised the CIR of the

existence of the reamended project partition. By virtue
thereof, CIR caused the estate of Matias Yuas to be
reinvestigated for estate and inheritance tax liability.
Accordingly, on February 13, 1958, they issued the
assessment totaling P97,723.96.

November 17, 1959 Yusay disputed the legality of the

assessment dated February 13, 1958. She claimed that the
right to make the same had prescribed inasmuch as more
than 5 years had elapsed since the filing of the estate and
inheritance tax return.

CIR rejected the request of Yusay on the ground that that

the right to assess the taxes in question has not been lost
by prescription since the return which did not name the
heirs cannot be considered a true and complete return
sufficient to start the running of the period of limitations
of five years under Section 331 of the Tax Code and
pursuant to Section 332 of the same Code he has ten years
within which to make the assessment counted from the
discovery on September 24, 1953 of the identity of the
heirs

Upon appeal, CTA held that the right of CIR to assess had
already prescribed.
ISSUE: Whether or not the right of CIR to assess the estate and
inheritance tax have already prescribed?
HELD:

SC held in the NEGATIVE.

For purposes of determining whether or not the

Commissioner's assessment of February 13, 1958 is
barred by prescription, Section 332(a) which is an
exception to Section 331 of the Tax Code finds
application. [16]We quote Section 332(a):

"SEC. 332. Exceptions as to period of limitation of

assessment and collection of taxes. - (a) In the case of a
false or fraudulent re-turn with Intent to evade tax or of a
failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be
begun without assessment, at any time within ten years
after the discovery of the falsity, fraud, or omission."

As stated, the Commissioner came to know of the identity

of the heirs on September 24, 1953 and the
huge underdeclaration in the gross estate on July 12, 1957.
Prom the latter date, Section 94 of the Tax Code obligated
him to make a return or amend one already filed based on
his own knowledge and information obtained through
testimony or otherwise, and subsequently to assess
thereon the taxes due. The running of the period of
limitations under Section 332(a) of the Tax Code should
therefore be reckoned from said date for, as aforesaid, it is
from that time that the Commissioner was expected by

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law to make his return and assess the tax due thereon.
Prom July 12, 1957 to February 13, 1958, the date of the
assessment now in dispute, less than ten years have
elapsed. Hence, prescription did not abate the
Commissioner's right to issue said assessment.
SC affirmed the assessment of the CIR.

- end -

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