21.

SAN AGUSTIN v. CIR

GR No. 138485
September 10, 2001
FACTS:
1. Petition for Review was filed by the executor with the CTA with the prayer
that Commissioner's decision be reversed and for a refund of
P438,040.38.
2. Commissioner opposed, alleging that the CTA's jurisdiction was not
properly invoked as no claim for a tax refund of the deficiency tax
collected was filed with the BIR before the petition was filed, violating of
Sections 204 and 230 NIRC. Moreover, there is no statutory basis for the
refund of the deficiency surcharges, interests and penalties charged by
the Commissioner upon the estate of the decedent.
ISSUE:
WON taxpayer can appeal a disputed assessment
HELD:
No.
1. Respondent set up several defenses, one of which was that petitioner
had failed to first file a written claim for refund, pursuant to Section 306
of the Tax Code, of the amounts paid. Convinced that the lack of a written
claim for refund was fatal to petitioner's recourse to it, the Court of Tax
Appeals dismissed the petition for lack of jurisdiction. On appeal to this
Court, the tax court's ruling was reversed; the Court held:
"We agree with petitioner that Section 7 of Republic Act No.1125,
creating the Court of Tax Appeals, in providing for appeals from '(1) Decisions of the Collector 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 the law administered by
the Bureau of Internal Revenue allows an appeal from a decision of the Collector in cases involving'
disputed assessments' as distinguished from cases involving' refunds
of internal revenue taxes, fees or other charges, x x'; that the present
action involves a disputed assessment'; because from the time
petitioner received assessments Nos. 17-EC-00301-55 and 17-AC600107-56 disallowing certain deductions claimed by him in his
income tax returns for the years 1955 and 1956, he already protested
and refused to pay the same, questioning the correctness and legality
of such assessments; and that the petitioner paid the disputed
assessments under protest before filing his petition for review with the
Court a quo, only to forestall the sale of his properties that had been
placed under distraint by the respondent Collector since December 4,
1957. To hold that the taxpayer has now lost the right to appeal from
the ruling on, the disputed assessment but must prosecute his appeal
under section 306 of the Tax Code, which requires a taxpayer to file a
claim for refund of the taxes paid as a condition precedent to his right

to appeal, would in effect require of him to go through a useless and

needless ceremony that would only delay the ! disposition of the case,
for the Collector (now Commissioner) would certainly disallow the
claim for refund in the same way as he disallowed the protest against
the assessment. The law, should not be interpreted as to result in
absurdities.
22.
Philippine Journalists, Inc. v. Commissioner of Internal Revenue,
G.R. No. 162852
16 December 2004
FACTS
The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of
Authority for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio
Gapasin to examine petitioners books of account and other accounting records for internal
revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to send a
representative to an informal conference for an opportunity to object and present
documentary evidence relative to the proposed assessment. Petitioners Comptroller,
LorenzaTolentino, executed a Waiver of the Statute of Limitation Under the National
Internal Revenue Code (NIRC). Records show that, it did not bear the date of acceptance,
that petitioner was not furnished a copy of the waiver, and the waiver was signed only by
the Revenue District Officer. The tax liability exceeds One Million Pesos (P1,000,000.00).
ISSUE
Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year
prescriptive period under the NIRC.
HELD
NO.
The waiver document is incomplete and defective and thus the three-year prescriptive
period was not tolled or extended and continued to run. Consequently, the
Assessment/Demand was invalid because it was issued beyond the three (3) year period.
In the same manner, Warrant of Distraint and/or Levy which petitioner received thereafter
is also null and void for having been issued pursuant to an invalid assessment.
The NIRC, under Sections 203 and 222, provides for a statute of limitations on the
assessment and collection of internal revenue taxes in order to safeguard the interest of
the taxpayer against unreasonable investigation. Unreasonable investigation contemplates
cases where the period for assessment extends indefinitely because this deprives the
taxpayer of the assurance that it will no longer be subjected to further investigation for
taxes after the expiration of a reasonable period of time.
The waiver is also defective from the government side because it was signed only by a
revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 2090. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral
agreement between two parties to extend the period to a date certain. The conformity of

the BIR must be made by either the Commissioner or the Revenue District Officer. This
case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and
executed almost seven months before the expiration of the three-year prescription period.
For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the
BIR.

23.
CIR vs. Phil. Global Communitions
G.R. No. 167146
October 31, 2006
FACTS:
Responded was pre-assessed for a deficiency tax for the year 1990. In 1994,
final assessment was sent to respondent and through counsel, Philcon sent protest letter
to CIR. In 2002, after 8 long years, respondent received from CIR a final decision denying
the respondents protest and affirming said assessment. CTA ruled on prescription and
ordered CIR to withdraw and cancel assessment previously issued against petitioner.
ISSUE:
Whether or not CIRs right to collect alleged deficiency tax is barred by
prescription
RULING:
There was nothing from the respondents protest letter that could tell the
running of prescriptive period upon which CIR could have caused the collection from
respondent. The motion for reconsideration was in effect denied by CIR and prescription
runs from 1994 until 1997, collection effected in 2002 was barred now, by prescription.

24.
RIZAL COMMERCIAL BANKING CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE
GR NO. 168498
April 24, 2007
FACTS:
RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20,
2001. As the protest was not acted upon, it filed a Petition for Review with the Court of Tax
Appeals (CTA) on April 30, 2002, or more than 30 days after the lapse of the 180-day
period reckoned from the submission of complete documents. The CTA dismissed the
Petition for lack of jurisdiction since the appeal was filed out of time.
ISSUE:
Has the action to protest the assessment judicially prescribed?
HELD:
YES. The assessment has become final. The jurisdiction of the CTA has been expanded to
include not only decision but also inactions and both are jurisdictional such that failure to
observe either is fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a Petition
with the CTA within 30 days from the lapse of the 180-day period OR (2) await the final
decision of the CIR and appeal such decision to the CTA within 30 days after receipt of the
decision. These options are mutually exclusive and resort to one bars the application of
the other. Thus, if petitioner belatedly filed an action based on inaction, it can not
subsequently file another petition once the decision comes out.

25.
BPI vs CIR
GR No. 174942
March 7, 2008
FACTS:
BPI requested for the details of the amounts alleged in the 1986 deficiency taxes
mentioned in the PAN. CIR issued an assessment/ demand notices for deficiency
withholding tax at source and DST involving the amounts of P190,752,860.82 and
P24,587,174.63 for the years 1982 to 1986.
April 20, 1989 BPI filed a protest on the demand/assessment notices. BPI requested for
an opportunity to present or submit additional documentation on the swap transactions in
connection with the reinvestigation of the assessment. BPI executed several Waivers of
Statutes of Limitations, the last of which was effective until December 31, 1994.
Aug. 9, 2002 CIR issued a final decision and ordered the cancellation of the deficiency
withholding tax but the DST deficiency tax was retained.
BPI received the notice of the decision on January 15, 2003. Thereafter, BPI filed a
Petition for Review before the CTA. CTA denied the petition. Hence, BPIs recourse to the
SC. BPI Contended that the right of the government to collect the DST had already
prescribed because the CIR failed to issue any reply granting BPIs request for
reinvestigation, warranting the conclusion that prescription had already set in. CIR
contended (thru OSG) the prescriptive period was tolled by the protest letters filed by BPI
which were granted and acted upon by the CIR. Thus, it was only upon BPIs receipt of the
Aug 2002 decision that the period to collect commenced to run again.
ISSUE: WON the collection of the deficiency DST is barred by prescription
HELD:
In order to determine whether the prescriptive period for collecting the tax deficiency was
effectively tolled by BPIs filing of the protest letters dated 20 April and 8 May 1989 as
claimed by the CIR, we need to examine Section 320 of the Tax Code of 1977. In order to
suspend the running of the prescriptive periods for assessment and collection, the request
for reinvestigation must be granted by the CIR.
In BPI v. Commissioner of Internal Revenue, the Court emphasized the rule that the CIR
must first grant the request for reinvestigation as a requirement for the suspension of the
statute of limitations. The Court said:
In the case of Republic of the Philippines v. Gancayco, taxpayer
Gancayco requested for a thorough reinvestigation of the
assessment against him and placed at the disposal of the Collector
of Internal Revenue all the evidences he had for such purpose; yet,
the Collector ignored the request, and the records and documents

were not at all examined. Considering the given facts, this Court
pronounced that
x x x The act of requesting a reinvestigation alone does not
suspend the period. The request should first be granted, in
order to effect suspension. (Collector v. Suyoc Consolidated,
supra; also Republic v. Ablaza, supra).

26.
PETRON CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 180385
July 28, 2010
FACTS:
A corporation engaged in the production of petroleum products, Petron is
a Board of Investment (BOI) registered enterprise in accordance with the
provisions of the Omnibus Investment Code.
Pursuant to its undertaking under the aforesaid Deeds of Assignment,
Petron issued Credit Notes (CNs) in an equivalent amount in favor of its
assignors which, by themselves or thru their own assignees, used the same to
avail of fuel products from the former. On the ground, however, that its use of
TCCs issued to said grantees was invalid for being violative of Rule IX of the
Rules and Regulations issued by the BOI to implement Presidential Decree No.
1789 and Batas Pambansa Blg. 391, Petron received a collection letter dated
April 22, 1998 from the BIR Revenue District Office of South Makati, Metro
Manila, demanding payment of the total amount ofP1,107,542,547.08 in unpaid
taxes, surcharges and interests for the years 1993 to 1997.
ISSUE:
WHETHER THE COURT OF TAX APPEALS EN BANC COMMITTED GRAVE
REVERSIBLE ERROR WHEN IT RULED THAT THE SUBSEQUENT CANCELLATION
BY THE DOF CENTER OF THE TAX CREDIT CERTIFICATES PREVIOUSLY USED TO
PAY PETRONS TAX LIABILITIES HAD THE EFFECT OF NON-PAYMENT OF
PETRONS
EXCISE
TAXES
ALLEGEDLY
BECAUSE
THE
SUBSEQUENT
CANCELLATION OF THE TCCs RESULTS IN NON-PAYMENT OF PETRONS EXCISE
TAX LIABILITIES.
HELD:
The post-audit of the TCCs was not meant as a suspensive condition for
their validity but pertained only to computational discrepancies resulting from
their transfer and utilization, Petron maintains that respondent failed to prove
the fraud which purportedly attended the procurement of the subject
TCCs. Against Petrons contention that its rights as a purchaser in good faith
cannot be prejudiced even in the face of the Centers subsequent finding of
fraud in the grant of the TCCs, the Office of the Solicitor General, in
representation of respondent, argues that, the cancellation of the subject TCCs
effectively avoided the payment of the excise tax liabilities of Petron which, as
assignee, could not acquire rights better than the grantees-assignors.
Clearly, a tax payment through a TCC cannot be both effective when
made and dependent on a future event for its effectivity. Our system of laws

and procedures abhors ambiguity. Moreover, if the TCCs are considered to be

subject to post-audit as a suspensive condition, the very purpose of the TCC
would be defeated as there would be no guarantee that the TCC would be
honored by the government as payment for taxes. Given the nature of the
TCCs immediate effectiveness and validity, however, said authority may only
be exercised before the TCC has been fully utilized by a transferee which had
no participation in the perpetration of fraud in the issuance, transfer and
utilization thereof. Once accepted by the BIR and applied towards the
satisfaction of such a tranferees tax obligations, a TCC is effectively used up,
debited and canceled such that there is nothing left to avoid or to cancel anew.
27.
CIR vs Gonzales
GR No. 177279
Oct. 13, 2010
FACTS:
It was discovered that LMCEC filed fraudulent tax returns with substantial
underdeclarations of taxable income for the years 1997, 1998 and 1999. Petitioner thus
assessed the company of total deficiency taxes amounting to P430,958,005.90 covering
the said period. It was alleged that despite the receipt of the final assessment notice and
formal demand letter on October 1, 2002, LMCEC failed and refused to pay the deficiency
tax assessment
LMCEC further averred that it had availed of the Bureaus Tax Amnesty Programs
(Economic Recovery Assistance Payment [ERAP] Program and the Voluntary Assessment
Program [VAP]) for 1998 and 1999; for 1997, its tax liability was terminated and closed
under Letter of Termination.
ISSUE: Whether LMCEC and its corporate officers may be prosecuted for violation of
Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful Failure to Supply Correct
and Accurate Information and Pay Tax).
HELD:
Both the formal letter of demand and the notice of assessment shall be void if the former
failed to state the fact, the law, rules and regulations or jurisprudence on which the
assessment is based, which is a mandatory requirement under section 228 of the National
Internal Revenue Code.
Economic Recovery Assistance Payment (ERAP) Program; immunity. The program
granted immunity from audit and investigation of income tax, VAT and percentage tax
returns for 1998. It expressly excluded withholding tax returns. Since such immunity from
audit and investigation does not preclude the collection of revenues generated from audit
and enforcement activities, it follows that the BIR is likewise not barred from collecting any
tax deficiency discovered as a result of tax fraud investigations.
Availment by the taxpayer of the voluntary assessment program (VAP) under Revenue
Regulations No, 8-2001, as amended, did not amount to settlement of its assessed tax
deficiencies for the period 1997 to 1999, nor immunity from prosecution for filing fraudulent

return and attempt to evade or defeat tax. From the express terms of the said revenue
regulations, taxpayer is not qualified to avail of the VAP granting taxpayers the privilege of
last priority in the audit and investigation of all internal revenue taxes for the taxable year
2000 and all prior years under certain conditions, considering that, first, it was issued a
preliminary assessment notice (PAN) on February 19, 2001, and, second, it was the
subject of investigation as a result of verified informed filed by a tax informer under section
282 of the National Internal Revenue Code duly recorded in the BIR official registry even
prior to the issuance of the PAN, which are excepted from coverage of the VAP under said
regulations. Moreover, the taxpayer cannot invoke the availment of VAP to foreclose any
subsequent audit of its account books and other accounting records in view of the strong
finding of underdeclaration in its payment of the correct income tax liability by more than
30% as supported by the written report of the Tax Fraud Division
28.
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 BIR s 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.
ISSUES:
(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.
29.
Asianbank (Global Business Bank) v. Commissioner, CTA
CTA Case No. 6095
Oct 21, 2011
FACTS:
Petitioner seeks for refund or issuance of a tax credit certificate, allegedly petitioner s
overpaid income tax for the taxable year 1997.
ISSUE: WON Petitioner is entitled to the refund or issuance of a tax credit certificate
HELD:
The petition lacks merit.
In the instant case, there records show that in its Annual Income Tax Return for the taxable
year 1997 filed with the BIR, petitioner reflected a net loss and an overpaid income tax.
The said overpaid income tax for 1997 allegedly composed of the first quarter tax payment
and creditable taxes withheld at source. However, petitioner marked the box TO BE
APPLIED AS CREDIT TO NEXT YEAR instead of the option TO BE REFUNDED for its
1997 overpaid income tax, showing its decision to carry-over its excess creditable taxes
withheld for the taxable year 1997. Thus, in its 1998 ITR, petitioner carried over and
reflected its 1997 excess income tax payment as Prior Years Excess Credits Having
exercised the option w/ respect to its claimed excess income tax payment, petitioner is
bound by the irrevocability rule under section 76 of the NIRC of 1997. Consequently,
petitioner cannot seek the refund even if the same was not utilised in the succeeding year
1998. Petitioners only recourse is to apply the excess amount to the succeeding
quarters/years until it is fully utilized.

30.
CIR vs. Enron Subic Power Corporation
GR NO. 166387
Jan. 19, 2009
FACTS: 1997, Enron Subic Power Corporation received a pre-assessment notice from the
Bureau of Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million for
the year 1996. Enron filed a protest. In 1999, Enron received a final assessment notice
(FAN) from the BIR for the same amount of tax deficiency.
Enron however assailed the FAN because according to Enron the FAN is not compliant
with Section 228 of the National Internal Revenue Code (NIRC) which provides that the
legal and factual bases of the assessment must be contained in the FAN. The FAN issued
to Enron only contained the computation of its alleged tax liability.
The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the
legal and factual bases of the assessment however, the CIR insisted that the same has
been substantially complied with already because during the pre-assessment stage, the
representative of Enron has been advised of the said factual and legal bases of the
assessment.
ISSUE: Whether or not there is a valid final assessment notice issued to Enron.
HELD: No. The wording of Section 228 of the NIRC provides:
The taxpayer shall be informed in writing of the law and the facts on which the assessment
is made; otherwise the assessment shall be void.
The word shall is mandatory. The law requires that the legal and factual bases of the
assessment be stated in the formal letter of demand and assessment notice. It cannot be
substituted by other notices or advisories issued or delivered to the taxpayer during the
preliminary stage.

31.
CIR v FMF Devt Corp
GR No. 167765
June 30, 2008
Facts:
On April 15, 1996, FMF filed its Corporate Annual Income Tax Return for taxable year 1995
and declared a loss of P3,348,932.The BIR then sent FMF pre-assessment notices
informing it of its alleged tax liabilities. FMF filed a protest against these notices with the
BIR and requested for a reconsideration/reinvestigation. RDO Rogelio Zambarrano
informed FMF that the reinvestigation had been referred to Revenue Officer Alberto
Fortaleza. On February 9, 1999, FMF President executed a waiver of the three-year
prescriptive period for the BIR to assess internal revenue taxes to extend the assessment
period until October 31, 1999. The waiver was accepted and signed by RDO Zambarrano.
On October 18, 1999, FMF received amended pre-assessment notices dated October 6,
1999 from the BIR. FMF immediately filed a protest on November 3, 1999 but on the same
day, it received BIRs Demand Letter and Assessment Notice dated October 25, 1999
reflecting FMFs alleged deficiency taxes and accrued interests the total of which
amounted to P2,053,698.25. On November 24, 1999, FMF filed a letter of protest on the
assessment invoking the defense of prescription by reason of the invalidity of the waiver.
Issues:
(1) Is the waiver valid?
(2) Did the three-year period to assess internal revenue taxes already prescribe?
Held:
Petition lacks merit. Under Section 203 of the NIRC, internal revenue taxes must be
assessed within three years counted from the period fixed by law for the filing of the tax
return or the actual date of filing, whichever is later. This mandate governs the question of
prescription of the governments right to assess internal revenue taxes primarily to
safeguard the interests of taxpayers from unreasonable investigation. Accordingly, the
government must assess internal revenue taxes on time so as not to extend indefinitely
the period of assessment and deprive the taxpayer of the assurance that it will no longer
be subjected to further investigation for taxes after the expiration of reasonable period of
time.

Applying RMO No. 20-90, the waiver in question here was defective and did not validly
extend the original three-year prescriptive period.
Firstly, it was not proven that respondent was furnished a copy of the BIR-accepted waiver.
Secondly, the waiver was signed only by a revenue district officer, when it should have
been signed by the Commissioner as mandated by the NIRC and RMO No. 20-90,
considering that the case involves an amount of more than P1 million, and the period to
assess is not yet about to prescribe. Lastly, it did not contain the date of acceptance by the
Commissioner of Internal Revenue, a requisite necessary to determine whether the waiver
was validly accepted before the expiration of the original three-year period. Bear in mind
that the waiver in question is a bilateral agreement, thus necessitating the very signatures
of both the Commissioner and the taxpayer to give birth to a valid agreement.

32.
FEBTC v CIR
GR. No. 138919
May 2, 2006
FACTS:
Petitioner is the trustee of various retirement plans established by several companies for
its employees. As trustee of the retirement plans, petitioner was authorized to hold,
manage, invest and reinvest the assets of these plans.[3] Petitioner utilized such authority
to invest these retirement funds in various money market placements, bank deposits,
deposit substitute instruments and government securities. These investments necessarily
earned interest income. Petitioners claim for refund centers on the tax withheld by the
various withholding agents, and paid to the CIR for the four (4) quarters of 1993, on the
aforementioned interest income. It is alleged that the total final withholding tax on interest
income paid for that year amounted to P6,049,971.83.[4]
Petitioner filed its written claim for refund with the Bureau of Internal Revenue (BIR).

Petitioner cited this Courts precedent setting decision in Commissioner of Internal

Revenue v. Court of Appeals,[5] promulgated on 23 March 1992, said case holding that
employees trusts are exempted by specific mandate of law from income taxation.
Nonetheless, the claims for refund were denied.
As to the claim for refund covering the period 9 October 1993 up to 31 December 1993,
the CTA likewise ruled that such could not be granted, the evidence being insufficient to
establish the fact that the money or assets of the funds were indeed used or placed in
money market placements, bank deposits, other deposit substitute instruments and
government securities, more particularly treasury bills.
ISSUE: WON Petitioner can claim refund
HELD:
We agree with the CIR that petitioner should have instead submitted documentary proof of
transactions, such as confirmation receipts and purchase orders, as the best evidence on
the participation of the funds from these employees trusts. The appreciation of facts made
by the CTA, which exercises particular expertise on the subject of tax, generally binds this
Court.[25] It may not be so, as the CIR contends, that the proper purpose for presenting

such documents is to establish that the funds were actually invested in treasury bills and
money market placements, since the character of the investments does not detract from
the fact that all income earned by the employees trusts is exempt from taxation. Instead,
these documents are vital insofar as they establish the extent of the investments made by
petitioner from the employees trusts, as distinguished from those made from other account
sources, and correspondingly, the amount of taxes withheld from the interest income
derived from these employees trusts alone.
The claim for tax refund was simply not proven with the particularity demanded of an
action seeking to siphon off the nations lifeblood.

33.
CIR v Azucena Reyes
GR NO. 159694
Jan. 27, 2006
FACTS:
In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a tax
audit was conducted on the estate. Meanwhile, the National Internal Revenue Code
(NIRC) of 1997 was passed. Eventually in 1998, the estate was issued a final assessment
notice (FAN) demanding the estate to pay P14.9 million in taxes inclusive of surcharge
and interest; the estates liability was based on Section 229 of the [old] Tax Code. Azucena
Reyes, one of the heirs, protested the FAN. The Commissioner of Internal Revenue (CIR)
nevertheless issued a warrant of distraint and/or levy. Reyes again protested the warrant
but in March 1999, she offered a compromise and was willing to pay P1 million in taxes.
Her offer was denied. She continued to work on another compromise but was eventually
denied. The case reached the Court of Tax Appeals where Reyes was also denied. In the
Court of Appeals, Reyes received a favorable judgment.
ISSUE: Whether or not the formal assessment notice is valid.
HELD: No. The NIRC of 1997 was already in effect when the FAN was issued. Under
Section 228 of the NIRC, taxpayers shall be informed in writing of the law and the facts on
which the assessment is made: otherwise, the assessment shall be void. In the case at
bar, the FAN merely stated the amount of liability to be shouldered by the estate and the
law upon which such liability is based. However, the estate was not informed in writing of
the facts on which the assessment of estate taxes had been made. The estate was merely
informed of the findings of the CIR. Section 228 of the NIRC being remedial in nature can
be applied retroactively even though the tax investigation was conducted prior to the law s
passage. Consequently, the invalid FAN cannot be a basis of a compromise, any
proceeding emanating from the invalid FAN is void including the issuance of the warrant of
distraint and/or levy.

34.
SANTOS VS PEOPLE OF THE PHILIPPINES and BIR
G.R. No. 173176
Aug 26, 2008
FACTS:
BIR Commissioner Parayno summarized the findings of the investigating BIR officers that
petitioner, in her Annual Income Tax Return for taxable year 2002 filed with the BIR,
declared an income of P8,033,332.70 derived from her talent fees solely from ABS-CBN;
initial documents gathered from the BIR offices and those given by petitioners accountant
and third parties, however, confirmed that petitioner received in 2002 income in the
amount of at least P14,796,234.70, not only from ABS-CBN, but also from other sources,
such as movies and product endorsements; the estimated tax liability arising from
petitioners under declaration amounted to P1,718,925.52, including incremental penalties;
the non-declaration by petitioner of an amount equivalent to at least 84.18% of the income
declared in her return was considered a substantial under declaration of income, which
constituted prima facie evidence of false or fraudulent return under Section 248(B) of the
NIRC, as amended; and petitioners failure to account as part of her income the
professional fees she received from sources other than ABS-CBN and her under
declaration of the income she received from ABS-CBN amounted to manifest violations of
Sections 254 and 255, as well as Section 248(B) of the NIRC, as amended.
She also asserts that she has been denied due process and equal protection of the laws

when similar charges for violation of the NIRC, as amended, against Regina Encarnacion
A. Velasquez (Velasquez) were dismissed by the DOJ for the reason that Velasquez s tax
liability was not yet fully determined when the charges were filed.
Issue: WON petitioner was denied of equal protection of law.
Held:
Petitioner cannot claim denial of due process when she was given the opportunity to file
her affidavits and other pleadings and submit evidence before the DOJ during the
preliminary investigation of her case and before the Information was filed against her. Due
process is merely an opportunity to be heard. In addition, preliminary investigation
conducted by the DOJ is merely inquisitorial. It is not a trial of the case on the merits. Its
sole purpose is to determine whether a crime has been committed and whether the

respondent therein is probably guilty of the crime. It is not the occasion for the full and
exhaustive display of the parties evidence. Hence, if the investigating prosecutor is
already satisfied that he can reasonably determine the existence of probable cause based
on the parties evidence thus presented, he may terminate the proceedings and resolve
the case.
The equal protection clause exists to prevent undue favor or privilege. It is intended to
eliminate discrimination and oppression based on inequality. It merely requires that all
persons shall be treated alike, under like circumstances and conditions, both as to the
privileges conferred and liabilities enforced. Petitioner was not able to duly establish to the
satisfaction of this Court that she and Velasquez were indeed similarly situated, i.e., that
they committed identical acts for which they were charged with the violation of the same
provisions of the NIRC; and that they presented similar arguments and evidence in their
defense - yet, they were treated differently.
35.
FITNESS BY DESIGN INC V. CIR
GR NO. 177982
Oct. 17, 2008
Facts: Commissioner on Internal Revenue (respondent) assessed Fitness by Design, Inc.
(petitioner) for deficiency income taxes for the tax year 1995. Petitioner protested and filed
a Petition for Review with Motion to Suspend Collection of Income Tax, before the Court of
Tax Appeals and raised prescription as a defense. A preliminary hearing on the issue of
prescription was conducted during which petitioners former bookkeeper attested that
certified public accountant Leonardo Sablan illegally took custody of petitioners
accounting records, invoices, and official receipts and turned them over to the BIR.
Petitioner requested for the issuance of subpoena ad testificandum to Sablan for the
hearing and of subpoena duces tecum to the BIR for the production of the Affidavit of the
Informer bearing on the assessment in question. In addition, petitioner submitted written
interrogatories addressed to Sablan. The CTA denied petitioners motion for Issuance of
Subpoenas and disallowed the submission by petitioner of written interrogatories to
Sablan. 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. Petitioner filed a rule 65.
Issue: Did the CTA err in denying the motions for subpoenas and written interrogatories?
Held: The CTA did NOT err. In requesting the issuance of the subpoenas and the
submission of written interrogatories, petitioner sought to establish that its accounting
records and related documents, invoices, and receipts which were the bases of the
assessment against it were illegally obtained. The only issues, however, which surfaced
during the preliminary hearing before the CTA, were whether respondents
issuance of assessment against petitioner had prescribed and whether petitioners tax r
eturn was false or fraudulent. Besides, as the CTA held, the subpoenas and answers to
the written interrogatories would violate Section 2 of Republic Act No. 2338 as
implemented by Section 12 of Finance Department Order No. 46-66. Petitioner claims,
however, that it only intended to elicit information on the whereabouts of the documents it
needs in order to refute the assessment, and not to disclose the identity of the informer.
Petitioners position does not persuade. The interrogatories addressed to Sablan and the

revenue officers show that they were intended to confirm petitioners belief that Sablan
was the informer. Lastly, Petitioner impugns the manner in which the documents in
question reached the BIR, Sablan having allegedly submitted them to the BIR without its
(petitioners) consent. Petitioners lack of consent does not, however, imply that the BIR
obtained them illegally or that the information received is false or malicious. Nor does the
lack of consent preclude the BIR from assessing deficiency taxes on petitioner based on
the documents. Section 5 of the Tax Code 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 tax.

36.
ASIA INTERNATIONAL AUCTIONEERS V PARAYNO, JR.
G.R no. 103445
December 18, 2007
FACTS: Then CIR Guillermo L. Parayno, Jr. and herein respondent, issued
Revenue
Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines on the Taxation
of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones
that are Sold at Public Auction."
The petitioners filed a complaint before the RTC of Olongapo City, praying for the
nullification of RMC No. 31-2003 for being unconstitutional and an ultra vires act. The RTC
granted TRO and a preliminary injunction pending the determination of constitutionality.
In response, the respondents filed with the CA a petition for certiorari under Rule 65
of the Rules of Court with prayer for the issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction to enjoin the trial court from exercising jurisdiction over the
case. The same was granted and the CA declared the RTC of Olongapo City bereft of
jurisdiction and the TRO and preliminary injunction issued by the same null and void. The
CA held that the proper court with jurisdiction over the matter is the CTA and not the RTC.
Hence, the petitioners filed this petition. Petitioners contend that jurisdiction over the
case at bar properly pertains to the regular courts as this is "an action to
declare as unconstitutional, void. They explain that they "do not challenge the rate,
structure or figures of the imposed taxes, rather they challenge the authority of the
respondent Commissioner
to impose and collect the said taxes." They claim that the challenge on the authority of the
CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals
(CTA).
ISSUE: Whether or not the CTA is the proper court of jurisdiction to hear a case to
declare Revenue Memorandum Circulars unconstitutional and against
existing law
where the challenge does not involve the rate and figures of the imposed taxes?

an

HELD: Yes, the court held that the CTA is the proper court to decide the case. Under
Sec. 7. Jurisdiction.The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided(1) 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 laws or part of law administered by the Bureau of Internal Revenue.
In the case at bar, the assailed revenue regulations and revenue memorandum
circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles
sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which
provides that "exportation or removal of goods from the territory of the [SSEZ] to the other
parts of the Philippine territory shall be subject to customs duties and taxes under the
Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued
pursuant to the power of the CIR under Section 4 of the National Internal Revenue.

37.
British American Tobacco Corporation v. Finance Secretary Camacho
GR No. 163583
Aug 20, 2008
Facts:
Petitioner interposes that the assailed provisions: (1) violate the equal protection and
uniformity of taxation clauses of the Constitution, (2) contravene Section 19,[1] Article XII
of the Constitution on unfair competition, and (3) infringe the constitutional provisions on
regressive and inequitable taxation. Petitioner further argues that assuming the assailed
provisions are constitutional, it is entitled to a downward reclassification of Lucky Strike
from the premium-priced to the high-priced tax bracket. Lucky Strike reiterates in its MR
that the classification freeze provision violates the equal protection and uniformity of
taxation clauses because older brands are taxed based on their 1996 net retail prices
while new brands are taxed based on their present day net retail prices.
ISSUE:
WON
1. The pertinent portions of RA 8240, as amended by RA 9334, discriminates against new
cigarette brands and favors old cigarette brands? 2.
2. The classification freeze provision unduly favors older brands over newer brands?
HELD: Petition is denied
Without merit
and a rehash of petitioners previous arguments before this Court
The rational basis test was properly applied to gauge the constitutionality of the assailed
law in the face of an equal protection challenge The classification is considered valid and
reasonable provided that: (1) it rests on substantial distinctions; (2) it is germane to the
purpose of the law; (3) it applies, all things being equal, to both present and future
conditions; and (4) it applies equally to all those belonging to the same class.

The classification freeze provision

was inserted in the law for reasons of practicality and expediency.
since a new brand was not yet in existence at the time of the passage of RA 8240, then
Congress needed a uniform mechanism to fix the tax bracket of a new brand.
The current net retail price, similar to what was used to classify the brands
under Annex D as of October 1, 1996, was thus the logical and practical
choice.
The classification freeze provision was in the main the result of Congresss earnest efforts
to improve the efficiency and effectivity of the tax administration over sin products while
trying to balance the same with other State interest

38.
ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR
GR Nos. 141104 & 148763
June 8, 2007
FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production,
and sale of various mineral products, filed claims with the BIR for refund/credit of input VAT
on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the
years 1990 and 1992. BIR did not immediately act on the matter prompting the petitioner
to file a petition for review before the CTA. The latter denied the claims on the grounds that
for zero-rating to apply, 70% of the company's sales must consists of exports, that the
same were not filed within the 2-year prescriptive period (the claim for 1992 quarterly
returns were judicially filed only on April 20, 1994), and that petitioner failed to submit
substantial evidence to support its claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following:
sales to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year
prescriptive period should be counted from the date of filing of the last adjustment return
which was April 15, 1993, and not on every end of the applicable quarters; and that the
certification of the independent CPA attesting to the correctness of the contents of the
summary of suppliers invoices or receipts examined, evaluated and audited by said CPA
should substantiate its claims.
ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its
applications for refund/credit of input VAT?
HELD: No. Although the Court agreed with the petitioner corporation that the two-year
prescriptive period for the filing of claims for refund/credit of input VAT must be counted
from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS
inside the EPZA are taxed as exports because these export processing zones are to be
managed as a separate customs territory from the rest of the Philippines, and thus, for tax
purposes, are effectively considered as foreign territory, it still denies the claims of
petitioner corporation for refund of its input VAT on its purchases of capital goods and

effectively zero-rated sales during the period claimed for not being established and
substantiated by appropriate and sufficient evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi juris against the person or
entity claiming the exemption. The taxpayer who claims for exemption must justify his
claim by the clearest grant of organic or statute law and should not be permitted to stand
on vague implications.