Tax Cases:

Lascona Land Co VS CIR (2012 GR 171251)

Facts: Petitioner was issued a defficiency assessment for the year 1993 on which
petitioner filed a protest.

The CIR denied the protest of petitioner and petitioner elevated the case to CTA.

The case was elevated to the CTA beyond the 30 day period following the 180 day. The
CTA upheld the petitioner, but the CIR opposed and said that the appeal was beyond such
period resulting in the finality of the assessment.

Issue: Whether the subject assessment has become final, executory and demandable due
to the failure of petitioner to file an appeal before the CTA within thirty (30) days from
the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the
NIRC.

Held:
Petitioner Lascona, invoking Section 3,1[11] Rule 4 of the Revised Rules of the Court of
Tax Appeals, maintains that in case of inaction by the CIR on the protested assessment, it
has the option to either: (1) appeal to the CTA within 30 days from the lapse of the 180-
day period; or (2) await the final decision of the Commissioner on the disputed
assessment even beyond the 180-day period in which case, the taxpayer may appeal
such final decision within 30 days from the receipt of the said decision. Corollarily,
petitioner posits that when the Commissioner failed to act on its protest within the 180-
day period, it had the option to await for the final decision of the Commissioner on the
protest, which it did.

CIR, In arguing that the assessment became final and executory by the sole reason that
petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180-
day reglementary period, respondent, in effect, limited the remedy of Lascona, as a
taxpayer, under Section 228 of the NIRC to just one, that is - to appeal the inaction of the
Commissioner on its protested assessment after the lapse of the 180-day period. This is
incorrect.

1
CIR VS Pascor Realty Corp. (1999 GR 128315)

* An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a prescribed period. It also signals the time when penalties and protests
begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies
thereon, due process requires that it must be served on and received by the taxpayer.
Accordingly, an affidavit, which was executed by revenue officers stating the tax
liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be
deemed an assessment that can be questioned before the Court of Tax Appeals.

Facts:
Upon examination of its books, respondent realty corp was found out to have deficiency
taxes in the years 1986-88 in the aggregate amount of P10M. The CIR filed a criminal
case against respondent for tax evasion.

The respondent appealed to CTA to contest the assessment.

The CIR moved to dismiss stating that there was still no assessment issued in order for
them to oppose the assessment, but was denied by the CTA

Held:

an assessment informs the taxpayer that he or she has tax liabilities. But not all
documents coming from the BIR containing a computation of the tax liability can be
deemed assessments.

To start with, an assessment must be sent to and received by a taxpayer, and must demand
payment of the taxes described therein within a specific period. Thus, the NIRC imposes
a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay deficiency
tax within the time prescribed for its payment in the notice of assessment. Likewise, an
interest of 20 percent per annum, or such higher rates as may be prescribed by rules and
regulations, is to be collected form the date prescribed for its payment until the full
payment. 12

The issuance of an assessment is vital in determining, the period of limitation regarding

its proper issuance and the period within which to protest it. Section 203 13 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, 14 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 15 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 is a notice 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.

That the BIR examiners' Joint Affidavit attached to the Criminal Complaint contained
some details of the tax liabilities of private respondents does not ipso facto make it an
assessment. The purpose of the Joint Affidavit was merely to support and substantiate the
Criminal Complaint for tax evasion. Clearly, it was not meant to be a notice of the tax due
and a demand to the private respondents for payment thereof.
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.

The issuance of an assessment must be distinguished from the filing of a complaint.

Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the
taxpayer. The taxpayer is then given a chance to submit position papers and documents to
prove that the assessment is unwarranted. If the commissioner is unsatisfied, an
assessment signed by him or her is then sent to the taxpayer informing the latter
specifically and clearly that an assessment has been made against him or her. In contrast,
the criminal charge need not go through all these. The criminal charge is filed directly
with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed
against him, not that the commissioner has issued an assessment. It must be stressed that
a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for
violation of the Tax Code.

CIR VS Metrostar Superama(2010 GR 185371)

Facts:

Respondents were assessed with defficiency for withholding taxes but they were not
given a PAN, only FAN was received by the respondents.

Held:
Jurisprudence is replete with cases holding that if the taxpayer denies ever
having received an assessment from the BIR, it is incumbent upon the latter
to prove by competent evidence that such notice was indeed received by the
addressee. The onus probandi was shifted to respondent to prove by contrary
evidence that the Petitioner received the assessment in the due course of mail.
The Supreme Court has consistently held that while a mailed letter is deemed
received by the addressee in the course of mail, this is merely a disputable
presumption subject to controversion and a direct denial thereof shifts the burden
to the party favored by the presumption to prove that the mailed letter was indeed
received by the addressee (Republic vs. Court of Appeals, 149 SCRA 351). Thus
as held by the Supreme Court in Gonzalo P. Nava vs. Commissioner of Internal
Revenue, 13 SCRA 104, January 30, 1965:

"The facts to be proved to raise this presumption

are (a) that the letter was properly addressed with
postage prepaid, and (b) that it was mailed. Once these
facts are proved, the presumption is that the letter was
received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mail. But if
one of the said facts fails to appear, the presumption does
not lie. (VI, Moran, Comments on the Rules of Court, 1963
ed, 56-57 citing Enriquez vs. Sunlife Assurance of Canada,
41 Phil 269)."

x x x. What is essential to prove the fact of mailing is the

registry receipt issued by the Bureau of Posts or the Registry return
card which would have been signed by the Petitioner or its authorized
representative. And if said documents cannot be located, Respondent
at the very least, should have submitted to the Court a certification
issued by the Bureau of Posts and any other pertinent document
which is executed with the intervention of the Bureau of Posts.

Can the CIR Collect without a notice/assessment?

Indeed, Section 228 of the Tax Code clearly requires that the taxpayer must first be
informed that he is liable for deficiency taxes through the sending of a PAN. He must be
informed of the facts and the law upon which the assessment is made. The law imposes a
substantive, not merely a formal, requirement. To proceed heedlessly with tax collection
without first establishing a valid assessment is evidently violative of the cardinal
principle in administrative investigations - that taxpayers should be able to present their
case and adduce supporting evidence

From the provision quoted above, it is clear that the sending of a PAN to taxpayer to
inform him of the assessment made is but part of the due process requirement in the
issuance of a deficiency tax assessment, the absence of which renders nugatory any
assessment made by the tax authorities. The use of the word shall in subsection 3.1.2
describes the mandatory nature of the service of a PAN. The persuasiveness of the right to
due process reaches both substantial and procedural rights and the failure of the CIR to
strictly comply with the requirements laid down by law and its own rules is a denial of
Metro Stars right to due process.2[15] Thus, for its failure to send the PAN stating the
facts and the law on which the assessment was made as required by Section 228 of R.A.
No. 8424, the assessment made by the CIR is void.

The Court need not belabor to discuss the matter of Metro Stars failure to file its protest,
for it is well-settled that a void assessment bears no fruit.3

CIR VS Enron Subic Power (2009 GR 166387)

Facts:
The CIR issued Enron a tax defficiency assessment (PAN) and FAN afterwards but the
legal and factual basis was not stated in the assessments

Held:
Both the CTA and the CA concluded that the deficiency tax assessment merely

itemized the deductions disallowed and included these in the gross income. It also

imposed the preferential rate of 5% on some items categorized by Enron as costs. The

legal and factual bases were, however, not indicated.

2
3
 The CIR insists that an examination of the facts shows that Enron was properly

apprised of its tax deficiency. During the pre-assessment stage, the CIR advised Enrons

representative of the tax deficiency, informed it of the proposed tax deficiency assessment

through a preliminary five-day letter and furnished Enron a copy of the audit working

paper4[14] allegedly showing in detail the legal and factual bases of the assessment.

The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the
preliminary five-day letter, were not valid substitutes for the mandatory notice in writing
of the legal and factual bases of the assessment. These steps were mere perfunctory
discharges of the CIRs duties in correctly assessing a taxpayer.5[15] The requirement for
issuing a preliminary or final notice, as the case may be, informing a taxpayer of the
existence of a deficiency tax assessment is markedly different from the requirement of
what such notice must contain. Just because the CIR issued an advice, a preliminary letter
during the pre-assessment stage and a final notice, in the order required by law, does not
necessarily mean that Enron was informed of the law and facts on which the deficiency
tax assessment was made
The formal letter of demand calling for payment of the taxpayers deficiency tax or taxes
shall state the fact, the law, rules and regulations or jurisprudence on which the
assessment is based, otherwise the formal letter of demand and the notice of
assessment shall be void.

CIR VS Gonzalez (2010 GR No. 177279)

Facts:

LCMEC was filed a charge for failure to comply with the subpoena duces tecum and for
tax evasion by the BIR.

The Bir claimed that LCMEC had substantial deficiency taxes for income and VAT for
the period 1997 to 1999.

The First case was denied by the Prosecutors office for lack of cause of action,

The case was raised to the chief state prosecutor for review while the case for tax evasion
was appealed to the Secretary of Justice.

4
5
Both of the cases were denied by the Chief State Prosecutor and the Secretary of Justice.

The BIR appealed to the CA, but such appeal was denied and affirmed the decision of the
Secretary of Justice

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:

- Whether there was litis pendencia as between the two cases: tax evasion case, and case
for failure to comply with the subpoena duces tecum: NO

It is clear that I.S. No. 00-956 involves a separate offense and hence litis pendentia is not
present considering that the outcome of I.S. No. 00-956 is not determinative of the issue
as to whether probable cause exists to charge the private respondents with the crimes of
attempt to evade or defeat tax and willful failure to supply correct and accurate
information and pay tax defined and penalized under Sections 254 and 255, respectively.
For the crime of tax evasion in particular, compliance by the taxpayer with such
subpoena, if any had been issued, is irrelevant. As we held in Ungab v. Cusi, Jr.,[41] [t]he
crime is complete when the [taxpayer] has x x x knowingly and willfully filed [a]
fraudulent [return] with intent to evade and defeat x x x the tax. Thus, respondent
Secretary erred in holding that petitioner committed forum shopping when it filed the
present criminal complaint during the pendency of its appeal from the City Prosecutors
dismissal of I.S. No. 00-956 involving the act of disobedience to the summons in the
course of the preliminary investigation on LMCECs correct tax liabilities for taxable
years 1997, 1998 and 1999.

- Whether the abscence of a control number in the FAN is fatal to the assessment: NO

As it is, the formality of a control number in the assessment notice is not a requirement
for its validity but rather the contents thereof which should inform the taxpayer of the
declaration of deficiency tax against said taxpayer. 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 NIRC.

The Formal Letter of Demand dated August 7, 2002 contains not only a detailed
computation of LMCECs tax deficiencies but also details of the specified discrepancies,
explaining the legal and factual bases of the assessment. It also reiterated that in the
absence of accounting records and other documents necessary for the proper
determination of the companys internal revenue tax liabilities, the investigating revenue
officers resorted to the Best Evidence Obtainable as provided in Section 6(B) of the
NIRC (third party information) and in accordance with the procedure laid down in RMC
No. 23-2000 dated November 27, 2000.

-Whether the liability of LMCEC had been extinguished by the fact of availment of the
VAP program of the BIR

Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also
gives the government a chance to collect uncollected tax from tax evaders without having
to go through the tedious process of a tax case. [51] Even assuming arguendo that the
issuance of RR No. 2-99 is in the nature of tax amnesty, it bears noting that a tax amnesty,
much like a tax exemption, is never favored nor presumed in law and if granted by
statute, the terms of the amnesty like that of a tax exemption must be construed strictly
against the taxpayer and liberally in favor of the taxing authority.[52]

For the same reason, the availment by LMCEC of VAP under RR No. 8-2001 as amended
by RR No. 10-2001, through payment supposedly made in October 29, 2001 before the
said program ended on October 31, 2001, 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. As correctly asserted by petitioner,
from the express terms of the aforesaid revenue regulations, LMCEC 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 PAN on February 19,
2001, and second, it was the subject of investigation as a result of verified information
filed by a Tax Informer under Section 282 of the NIRC duly recorded in the BIR Official
Registry as Confidential Information (CI) No. 29-2000[53] even prior to the issuance of the
PAN.

Section 1 of RR No. 8-2001 provides:

SECTION 1. COVERAGE. x x x

Any person, natural or juridical, including estates and trusts, liable

to pay any of the above-cited internal revenue taxes for the above
specified period/s who, due to inadvertence or otherwise, erroneously paid
his internal revenue tax liabilities or failed to file tax return/pay taxes may
avail of the Voluntary Assessment Program (VAP), except those falling
under any of the following instances:
 1.1 Those covered by a Preliminary Assessment Notice
(PAN), Final Assessment Notice (FAN), or Collection Letter issued on or
before July 31, 2001; or

1.2 Persons under investigation as a result of verified

information filed by a Tax Informer under Section 282 of the Tax
Code of 1997, duly processed and recorded in the BIR Official
Registry Book on or before July 31, 2001;

- Whether an investigation can only be done once a year.

General Rule, yes. But the discovery of substantial underdeclarations of income

by LMCEC for taxable years 1997, 1998 and 1999 upon verified information provided by
an informer under Section 282 of the NIRC, as well as the necessity of obtaining
information from third parties to ascertain the correctness of the return filed or evaluation
of tax compliance in collecting taxes (as a result of the disobedience to the summons
issued by the Bureau against the private respondents), are circumstances warranting
exception from the general rule in Section 235.[55]

As already stated, the substantial underdeclared income in the returns filed by

LMCEC for 1997, 1998 and 1999 in amounts equivalent to more than 30% (the
computation in the final assessment notice showed underdeclarations of almost 200%)
constitutes prima facie evidence of fraudulent return under Section 248(B) of the
NIRC. Prior to the issuance of the preliminary and final notices of assessment, the
revenue officers conducted a preliminary investigation on the information and documents
showing substantial understatement of LMCECs tax liabilities which were provided by
the Informer, following the procedure under RMO No. 15-95.[56] Based on the prima
facie finding of the existence of fraud, petitioner issued LA No. 00009361 for the TFD to
conduct a formal fraud investigation of LMCEC.

- Whether the assessment can be assailed having failed to file a protest of the FAN

As we held in Marcos II v. Court of Appeals[62]:

It is not the Department of Justice which is the government agency
tasked to determine the amount of taxes due upon the subject estate, but
the Bureau of Internal Revenue, whose determinations and assessments
are presumed correct and made in good faith. The taxpayer has the duty of
proving otherwise. In the absence of proof of any irregularities in the
performance of official duties, an assessment will not be
disturbed. Even an assessment based on estimates is prima facie valid
 and lawful where it does not appear to have been arrived at
arbitrarily or capriciously. The burden of proof is upon the complaining
party to show clearly that the assessment is erroneous. Failure to present
proof of error in the assessment will justify the judicial affirmance of said
assessment. x x x.
Moreover, these objections to the assessments should have been
raised, considering the ample remedies afforded the taxpayer by the
Tax Code, with the Bureau of Internal Revenue and the Court of Tax
Appeals, as described earlier, and cannot be raised now via Petition
for Certiorari, under the pretext of grave abuse of discretion. The course of
action taken by the petitioner reflects his disregard or even repugnance of
the established institutions for governance in the scheme of a well-ordered
society. The subject tax assessments having become final, executory
and enforceable, the same can no longer be contested by means of a
disguised protest. In the main, Certiorari may not be used as a substitute
for a lost appeal or remedy. This judicial policy becomes more pronounced
in view of the absence of sufficient attack against the actuations of
government. (Emphasis supplied.)
Philippine Journalists VS. Cir (2004 GR 162852)
Facts:
Upon examination by the Revenue officers of the records of petitioner, it was
found out that they have tax deficiency of its income and vat for the tax year of
1997.

The petitioners were invited to an informal conference for them to adduce

evidence relative to the protested assessment. In that conference, the petitioners
representative executed a waiver of prescriptive period in favor of the CIR, until
completion of the investigation.

The BIR thereafter issued a PAN thereafter followed the FAN. After a few
months, the BIR issued a preliminary collection letter and thereafter a final notice
before seizure.
The petitioner opposed and questioned the assessment on its basis of the facts and
law and filed a petition for review in the CTA.

The CTA ruled in favor of the petitioner and denied motion for reconsideration.

Appeal was then filed by CIR to the CA. The CA reversed the CIR.
Issue:
1. Whether the CTA has jurisdiction
2. Whether the waiver was valid and assuming it is, was there a need to indicate
an expiration of a waiver

Held:

1. We agree with petitioner. Section 7(1) of Republic Act No. 1125, the Act Creating the
Court of Tax Appeals, provides for the jurisdiction of that special court:

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;
(Emphasis supplied).

The appellate jurisdiction of the CTA is not limited to cases which involve decisions of
the Commissioner of Internal Revenue on matters relating to assessments or refunds. The
second part of the provision covers other cases that arise out of the NIRC or related laws
administered by the Bureau of Internal Revenue. The wording of the provision is clear
and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and
levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was
validly effected.

2. The second and fifth assigned errors both focus on Revenue Memorandum Circular
No. 20-90 (RMO No. 20-90) on the requisites of a valid waiver of the statute of
limitations. The Court of Appeals held that the requirements and procedures laid down in
the RMO are only formal in nature and did not invalidate the waiver that was signed even
if the requirements were not strictly observed.

The NIRC, under Sections 203 and 222,19 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. 20Unreasonable 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. As was held
in Republic of the Phils. v. Ablaza:
 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 latters real liability, but to take advantage of
every opportunity to molest peaceful, law-abiding citizens. Without such a 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 beneficent purpose of affording protection to the
taxpayer within the contemplation of the Commission which recommend the
approval of the law. (Emphasis supplied)

In the execution of said waiver, the following procedures should be followed:

1. The waiver must be in the form identified hereof. This form may be reproduced by the
Office concerned but there should be no deviation from such form. The phrase "but
not after __________ 19___" should be filled up

2.

Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue
or the revenue official authorized by him, as hereinafter provided, shall sign the
waiver indicating that the Bureau has accepted and agreed to the waiver. The date of
such acceptance by the Bureau should be indicated

3. The following revenue officials are authorized to sign the waiver.

A. In the National Office

3. Commissioner For tax cases

involving more than
P1M

B. In the Regional Offices

1. The Revenue District Officer with respect to tax cases still pending investigation and
the period to assess is about to prescribe regardless of amount.


5. The foregoing procedures shall be strictly followed. Any revenue official found not
to have complied with this Order resulting in prescription of the right to
assess/collect shall be administratively dealt with. (Emphasis supplied)22

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation
of the taxpayers right to security against prolonged and unscrupulous investigations and
must therefore be carefully and strictly construed.23 The waiver of the statute of
limitations is not a waiver of the right to invoke the defense of prescription as erroneously
held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that
the period to issue an assessment and collect the taxes due is extended to a date certain.
The waiver does not mean that the taxpayer relinquishes the right to invoke prescription
unequivocally particularly where the language of the document is equivocal. For the
purpose of safeguarding taxpayers from any unreasonable examination, investigation or
assessment, our tax law provides a statute of limitations in the collection of taxes. Thus,
the law on prescription, being a remedial measure, should be liberally construed in order
to afford such protection. As a corollary, the exceptions to the law on prescription should
perforce be strictly construed.

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.
20-90. 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.

On this basis neither implied consent can be presumed nor can it be contended that
the waiver required under Sec. 319 of the Tax Code is one which is unilateral nor
can it be said that concurrence to such an agreement is a mere formality because it
is the very signatures of both the Commissioner of Internal Revenue and the
taxpayer which give birth to such a valid agreement.

The flaw in the appellate courts reasoning stems from its assumption that the waiver is a
unilateral act of the taxpayer when it is in fact and in law an agreement between the
taxpayer and the BIR.

The waiver document is incomplete and defective and thus the three-year prescriptive
period was not tolled or extended and continued to run until April 17, 1998.
Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998
was invalid because it was issued beyond the three (3) year period. In the same manner,
Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28,
2000 is also null and void for having been issued pursuant to an invalid assessment.

CIR VS Petron Corporation (2012 GR 185568)

Facts:

Petron has been a transferee of various Tax Credit Certificates from various BOI-
registered entities in which they utilize in payment of its excise tax liabilities by virtue of
a BOI letter issued, it acknowledged and accepted the transfers of the TCCs from the
various BOI-registered entities.

On January 2002, the CIR assessed Petron of tax deficiencies based on the ground that
the TCCs utilized by petitioner in its payment of excise taxes have been cancelled by the
DOF for having been fraudulently issued and transferred, pursuant to its EXCOM
Resolution No. 03-05-99. The TCCs issued were fraudulently obtained and were
fraudulently transferred to Petron. Such assessment was opposed by Petron.

Without acting on Petrons opposition, the BIR issued a Warrant of Distraint and/or Levy
against Petron, Prompting the latter to file a petition to the CTA 2nd division.

The CTA denied the petition and ordered Petron to pay. The CTA Second Division held
Petron liable for deficiency excise taxes on the ground that the cancellation by the DOF
of the TCCs previously issued to and utilized by respondent to settle its tax liabilities had
the effect of nonpayment of the latters excise taxes. These taxes corresponded to the
value of the TCCs Petron used for payment. The
CTA Second Division ruled that payment can only occur if the instrument used to
discharge an obligation represents its stated value. [6] It further ruled that Petrons
acceptance of the TCCs was considered a contract entered into by respondent with the
CIR and subject to post-audit,[7] which was considered a suspensive condition governed
by Article 1181 of the Civil Code.

Agrieved, The Respondents appealed to the CTA en Banc, which reversed the assailed
ruling.

Issue: Whether or not Petron is liable for tax deficiency by reason of its use of the TCCs
which were later found out to be transferred fraudulently?

Held: no.

-What is a tax credit certificate

Tax Credit Certificate means a certification, duly issued to the taxpayer named therein, by
the Commissioner or his duly authorized representative, reduced in a BIR Accountable
Form in accordance with the prescribed formalities, acknowledging that the grantee-
taxpayer named therein is legally entitled a tax credit, the money value of which may be
used in payment or in satisfaction of any of his internal revenue tax liability (except those
excluded), or may be converted as a cash refund, or may otherwise be disposed of in the
manner and in accordance with the limitations, if any, as may be prescribed by the
provisions of these Regulations.

It may be transferred in favor of an assignee subject to the following conditions:

1) the TCC transfer must be with prior approval of the Commissioner or the
duly authorized representative;

2) 2) the transfer of a TCC should be limited to one transfer only; and

3) 3) the transferee shall strictly use the TCC for the payment of the
assignees direct internal revenue tax liability and shall not be convertible to cash.[34]

A TCC is valid only for 10 years subject to the following rules:

(1) it must be utilized within five (5) years from the date of issue; and
 (2) it must be revalidated thereafter or be otherwise considered invalid.[35]

The processing of a TCC is entrusted to a specialized agency called the One-Stop-

Shop Inter-Agency Tax Credit and Duty Drawback Center (Center), created on 07
February 1992 under Administrative Order (A.O.) No. 226. Its purpose is to expedite the
processing and approval of tax credits and duty drawbacks.

-whether Petron is party to the fraud that would invalidate the TCC

We agree with the pronouncement of the CTA En Banc that Petron has not been
shown or proven to have participated in the alleged fraudulent acts involved in the
transfer and utilization of the subject TCCs. Petron had the right to rely on the
joint stipulation that absolved it from any participation in the alleged fraud
pertaining to the issuance and procurement of the subject TCCs. The joint
stipulation made by the parties consequently obviated the opportunity of the CIR
to present evidence on this matter, as no proof is required for an admission made
by a party in the course of the proceedings.

-Is Petron liable to pay the defficiency?

The transferee in good faith and for value may not be unjustly
prejudiced by the fraud committed by the claimant or transferor in the
procurement or issuance of the TCC from the Center. It is not only unjust
but well-nigh violative of the constitutional right not to be deprived of
one's property without due process of law. Thus, a re-assessment of tax
liabilities previously paid through TCCs by a transferee in good faith and
for value is utterly confiscatory, more so when surcharges and interests are
likewise assessed.
A transferee in good faith and for value of a TCC who has relied
on the Center's representation of the genuineness and validity of the TCC
transferred to it may not be legally required to pay again the tax covered
by the TCC which has been belatedly declared null and void, that is, after
the TCCs have been fully utilized through settlement of internal revenue
tax liabilities. Conversely, when the transferee is party to the fraud as
when it did not obtain the TCC for value or was a party to or has
knowledge of its fraudulent issuance, said transferee is liable for the taxes
and for the fraud committed as provided for by law.

We held in Petron v. CIR (Petron),[53] which is on all fours with the instant case,
that TCCs are valid and effective from their issuance and are not subject to a post-
audit as a suspensive condition for their validity. Our ruling in Petron finds
guidance from our earlier ruling in Shell, which categorically states that a TCC is
valid and effective upon its issuance and is not subject to a post-audit. The
implication on the instant case of the said earlier ruling is that Petron has the right
to rely on the validity and effectivity of the TCCs that were assigned to it. In
finally determining their effectivity in the settlement of respondents excise tax
liabilities, the validity of those TCCs should not depend on the results of the
DOFs post-audit findings.

- Is estoppel applicatble to CIR?

We recognize the well-entrenched principle that estoppel does not apply to the
government, especially on matters of taxation. Taxes are the nations lifeblood through
which government agencies continue to operate and with which the State discharges its
functions for the welfare of its constituents.[56] As an exception, however, this general rule
cannot be applied if it would work injustice against an innocent party.[57]

Petron, in this case, was not proven to have had any participation in or knowledge
of the CIRs allegation of the fraudulent transfer and utilization of the subject TCCs.
Respondents status as a transferee in good faith and for value of these TCCs has been
established and even stipulated upon by petitioner.[58] Respondent was thereby provided
ample protection from the adverse findings subsequently made by the Center. [59] Given
the circumstances, the CIRs invocation of the non-applicability of estoppel in this case is
misplaced.
CIR vS Kudos Metal Corp

Facts:
The respondents were given notices of presentation of records and were issued a
supoena duces tecum upon failure to provide them with records for the taxable
year 1998.

In 1999, The respondents accountant signed 2 waivers successively for waiver of

prescription in favor of the BIR.

The BIR issued a PAN on 2003 and thereafter a FAN. The respondents opposed
the assessment , but the CIR held that the taxpayer pay the assessment
immidiately.

The respondents filed a petition for review with the CTA 2 nd division, and held in
favor of the respondents by reason of an invalid waiver they have executed, thus
rendering the assesment to have prescribed.

The CIR, after their motion for reconsideration being denied, filed an appeal with
the CTA En Banc, which affirmed the CTA 2nd division for two of the reasons
provided by the 2nd division

Issue:
Whether or not the BIRs right to assess the respondents have prescribed.

Held:

General Rule:
Section 203[15] of the National Internal Revenue Code of 1997 (NIRC) mandates the
government to assess internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual date of filing of such return,
whichever comes later. Hence, an assessment notice issued after the three-year
prescriptive period is no longer valid and effective.
Exceptions are provided by Sec 222, which among others provide that a valid
waiver of prescription was made;

the procedure for the proper execution of the waiver, to wit:

1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase
but not after ______ 19 ___, which indicates the expiry date of the period
agreed upon

2. The waiver must be signed by the taxpayer himself or his duly authorized
representative.

3. The waiver should be duly notarized.

4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver. The date of
such acceptance by the BIR should be indicated.

5. Both the date of execution by the taxpayer and date of acceptance by the
Bureau should be before the expiration of the period of prescription or before
the lapse of the period agreed upon in case a subsequent agreement is
executed.

6. The waiver must be executed in three copies, the original copy to be attached
to the docket of the case, the second copy for the taxpayer and the third copy
for the Office accepting the waiver.

A perusal of the waivers executed by respondents accountant reveals the following

infirmities:

1. The waivers were executed without the notarized written authority

of Pasco to sign the waiver in behalf of respondent.
 2. The waivers failed to indicate the date of acceptance.

3. The fact of receipt by the respondent of its file copy was not indicated
in the original copies of the waivers.

CIR VS GJM Marketing (2016 GR202695)

Facts:
GJM filed its return on 1999. Thereafter, its parent company announced bankruptcy.
GJM later on informed BIR of its transfer of business location and revenue district from
Makati to Cavite on which the BIR confirmed.

BIR on 2002 sent a letter of informal conference to GJM that it has tax deficiency. BIR
on Feb 12, 2003 sent a PAN to GJMs former location, and the FAN on on August 18,
2003 on its new location in cavite however, GJM alleged that they did not receive the
FAN.
GJM received a warrant or restraint/levy from the revenue district of Makati.
Respondents filed an opposition on January 7, 2004, but the BIR denied the opposition.

GJM filed for review to the CTA. The CTA first division rendered decision in favor of
GJM.

Upon having been denied of its motion for reconsideration, the BIR appealed to the CTA
En Banc, which denied its petition.

Issue:
Whether or not the assessment notice was sent within the 3-year prescriptive period for
the taxable year 1999

Held:

-The assessment was within the 3 year prescriptive period.

Here, GJM filed its Annual Income Tax Return for the taxable year 1999 on April
12, 2000. The three (3)-year prescriptive period, therefore, was only until April 15, 2003.
The records reveal that the BIR sent the FAN through registered mail on April 14, 2003,
well-within the required period. The Court has held that when an assessment is made
within the prescriptive period, as in the case at bar, receipt by the taxpayer may or may
not be within said period. But it must be clarified that the rule does not dispense with the
requirement that the taxpayer should actually receive the assessment notice, even beyond
the prescriptive period.7 GJM, however, denies ever having received any FAN.

-The taxpayer did not receive the PAN and denied receiving the FAN.

If the taxpayer denies having received an assessment from the BIR, it then becomes
incumbent upon the latter to prove by competent evidence that such notice was indeed
received by the addressee.8 Here, the onus probandi has shifted to the BIR to show by
contrary evidence that GJM indeed received the assessment in the due course of mail. It
has been settled that while a mailed letter is deemed received by the addressee in the
course of mail, this is merely a disputable presumption subject to controversion, the direct
denial of which shifts the burden to the sender to prove that the mailed letter was, in fact,
received by the addressee.

To prove the fact of mailing, it is essential to present :

A. the registry receipt issued by the Bureau of Posts or
B. the Registry return card which would have been signed by the taxpayer or its
authorized representative.
C. And if said documents could not be located, a certification issued by the Bureau of
Posts and any other pertinent document executed with its intervention.

BIR VS BASF (2014 GR 198677)

Facts:
Respondents board of directors agreed with atleast a vote of 2/3 to dissolve the
corporation by shortening its corporate term on May 31, 2001 and notices to the
BIR as required by law were sent by respondents of such fact. The respondents
transferred from Las Pinas to Laguna

On January 2003, the BIR sent a FAN to respondents assessing them of a

deficiency tax of P18M to its former address in Las Pinas City.

On march 2004, the BIR issued a first notice before warrant of distraint and levy.
The Respondents opposed on the ground of lack of due process and prescription.

After the lapse of 180 days without action, the respondents raised the issue to the
CTA, the CTA special first division held in favor of Respondents herein.

Petitioners filed for petition for review to the CTA En Banc, which denied the
petition.
Issue:
Whether the failure of Respondents to notify BIR of the change in its address
suspended the running of the prescription period

Held:

-Such suspension applies only when BIR does not know the whereabouts of the
Taxpayer

It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the
Statute of Limitations provided under the provisions of Sections 203 and 222 of the same
Act shall be suspended:

1. when the taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected.
2. In addition, Section 11 of Revenue Regulation No. 12-85 states that, in case of change
of address, the taxpayer is required to give a written notice thereof to the Revenue
District Officer or the district having jurisdiction over his former legal residence and/or
place of business. However, this Court agrees with both the CTA Special First Division
and the CTA En Banc in their ruling that the above mentioned provisions on the
suspension of the three-year period to assess apply only if the BIR Commissioner is not
aware of the whereabouts of the taxpayer.

In the present case, petitioner, by all indications, is well aware that respondent had moved
to its new address in Calamba, Laguna, as shown by the following documents which form
part of respondent's records with the BIR

Furthermore, petitioner should have been alerted by the fact that prior to mailing the
FAN, petitioner sent to respondent's old address a Preliminary Assessment Notice but it
was "returned to sender." This was testified to by petitioner's Revenue Officer II at its
Revenue District Office 39 in Quezon City.31 Yet, despite this occurrence, petitioner still
insisted in mailing the FAN to respondent's old address.

Hence, despite the absence of a formal written notice of respondent's change of address,
the fact remains that petitioner became aware of respondent's new address as shown by
documents replete in its records. As a consequence, the running of the three-year period
to assess respondent was not suspended and has already prescribed.

- Purpose of the statute of limitations:

It bears stressing that, in a number of cases, this Court has explained that the statute of
limitations on the collection of taxes primarily benefits the taxpayer. In these cases, the
Court exemplified the detrimental effects that the delay in the assessment and collection
of taxes inflicts upon the taxpayers. Thus, in Commissioner of Internal Revenue v.
Philippine Global Communication, Inc.,32 this Court echoed Justice Montemayor's
disquisition in his dissenting opinion in Collector of Internal Revenue v. Suyoc
Consolidated Mining Company,33 regarding the potential loss to the taxpayer if the
assessment and collection of taxes are not promptly made, thus:

Prescription in the assessment and in the collection of taxes is provided by the Legislature
for the benefit of both the Government and the taxpayer; for the Government for the
purpose of expediting the collection of taxes, so that the agency charged with the
assessment and collection may not tarry too long or indefinitely tothe prejudice of the
interests of the Government, which needs taxes to run it; and for the taxpayer so that
within a reasonable time after filing his return, he may know the amount of the
assessment he is required to pay, whether or not such assessment is well founded and
reasonable so that he may either pay the amount of the assessment or contest its validity
in court x x x. It would surely be prejudicial to the interest of the taxpayer for the
Government collecting agency to unduly delay the assessment and the collection because
by the time the collecting agency finally gets around to making the assessment or making
the collection, the taxpayer may then have lost his papers and books to support his claim
and contest that of the Government, and what is more, the tax is in the meantime
accumulating interest which the taxpayer eventually has to pay.34

Likewise, in Republic of the Philippines v. Ablaza, 35 this Court elucidated that the
prescriptive period for the filing of actions for collection of taxes is justified by the need
to protect law-abiding citizens from possible harassment. Also, in Bank of the Philippine
Islands v. Commissioner of Internal Revenue,36 it was held that the statute of limitations
on the assessment and collection of taxes is principally intended to afford protection to
the taxpayer against unreasonable investigations as the indefinite extension of the period
for assessment deprives the taxpayer of the assurance that he will no longer be subjected
to further investigation for taxes after the expiration of a reasonable period of time. Thus,
in Commissioner of Internal Revenue v. B.F. Goodrich Phils., Inc., 37 this Court ruled that
the legal provisions on prescription should be liberally construed to protect taxpayers and
that, as a corollary, the exceptions to the rule on prescription should be strictly construed.

- Due process if violated without a notice to the taxpayer

It might not also be amiss to point out that petitioner's issuance of the First Notice Before
Issuance of Warrant of Distraint and Levy38 violated respondent's right to due process
because no valid notice of assessment was sent to it. An invalid assessment bears no valid
fruit. The law imposes a substantive, not merely a formal, requirement. To proceed
heedlessly with tax collection without first establishing a valid assessment is evidently
violative of the cardinal principle inadministrative investigations: that taxpayers should
be able to present their case and adduce supporting evidence. 39 In the instant case,
respondent has not properly been informed of the basis of its tax liabilities. Without
complying with the unequivocal mandate of first informing the taxpayer of the
governments claim, there can be no deprivation of property, because no effective protest
can be made.

As to the second assigned error, petitioner's reliance on the provisions of Section 3.1.7 of
BIR Revenue Regulation No. 12-9944 as well as on the case of Nava v. Commissioner of
Internal Revenue45 is misplaced, because in the said case, one of the requirements ofa
valid assessment notice is that the letter or notice must be properly addressed. It is not
enough that the notice is sent by registered mail as provided under the said Revenue
Regulation. In the instant case, the FAN was sent to the wrong address. Thus, the CTA is
correct in holding that the FAN never attained finality because respondent never received
it, either actually or constructively.

CIR VS Tulio (2005 GR 139858)

Facts:
On February 1991, Respondent was given by BIR a FAN for deficiency taxes for
the taxable periods 1986 and 1987, on which respondent failed to oppose and had
become final and executory.

On October 1991, the BIR issued a notice of distraint and levy against respondent,
however, respondent had no properties.

BIR filed for civil collection case for percentage taxes to the RTC against the
respondent. Respondent filed a motion to dismiss on the ground of prescription o
the part of BIR to assess. RTC Granted the motion

Issue:
Whether or not the assessment had been filed beyond the prescriptive period
Held:
- The prescriptive period is not 3 years as provided in Sec 203, but falls on the
extraordinary period as provided in Sec 222

The lower court erroneously applied Section 203 of the same Code providing for
the three-year prescriptive period from the filing of the tax return within which
internal revenue taxes shall be assessed. It held that such period should be counted
from the day the return was filed, or from August 15, 1990 up to August 15, 1993.
However, as shown by the records, respondent failed to file a tax return, forcing
petitioner to invoke the powers of his office in tax administration and
enforcement. Respondents failure to file his tax returns is thus covered by Section
223 providing for a ten-year prescriptive period within which a proceeding in
court may be filed.

Section 223 specifies three (3) instances when the running of the three-year

prescriptive period does not apply. These are: (1) filing a false return, (2) filing a

fraudulent return with intent to evade tax or (3) failure to file a return. The period within

which to assess tax is ten years from discovery of the fraud, falsification or omission.

Here, respondent failed to file his tax returns for 1986 and 1987. On September

14, 1989, petitioner found respondents omission. Hence, the running of the ten-year

prescriptive period within which to assess and collect the taxes due from respondent

commenced on that date until September 14, 1999. The two final assessment notices were

issued on February 28, 1991, well within the prescriptive period of three (3) years. When

respondent failed to question or protest the deficiency assessments thirty (30) days

therefrom, or until March 30, 1991, the same became final and executory.
RP VS Hizon (1999 GR 130430)

Facts:
Respondent was sent an assessment for tax deficiency on July 1986 for the taxable
periods 1981 and 1982. No opposition was made by respondents, thus it became
final and executory followed by a warrant of distraint and levy on January 1989,
but did not proceed to dispose of the properties

After 3 years, respondent filed a motion for reconsideration to the CIR, but was
denied.

BIR filed for civil case for collection of the deficiency tax in the RTC.
Respondents filed a motion to dismiss on the ground that there was no prior
authority granted by the Commissioner on the collection case and on the ground
of Prescription of the action.

RTC resolved in favor of Respondents.

Issue:

Held:

First. In sustaining respondent's contention that petitioner's complaint was filed without
the authority of the BIR Commissioner, the trial court stated: 4
There is no question that the National Internal Revenue Code explicitly provides that in
the matter of filing cases in Court, civil or criminal, for the collection of taxes, etc., the
approval of the commissioner must first be secured. . . . [A]n action will not prosper in
the absence of the commissioner's approval. Thus, in the instant case, the absence of the
approval of the commissioner in the institution of the action is fatal to the cause of the
plaintiff . . . .

The trial court arrived at this conclusion because the complaint filed by the BIR was not
signed by then Commissioner Liwayway Chato.

Sec. 221 of the NIRC provides:

Form and mode of proceeding in actions arising under this Code. Civil and criminal
actions and proceedings instituted in behalf of the Government under the authority of this
Code or other law enforced by the Bureau of Internal Revenue shall be brought in the
name of the Government of the Philippines and shall be conducted by the provincial or
city fiscal, or the Solicitor General, or by the legal officers of the Bureau of Internal
Revenue deputized by the Secretary of Justice, but no civil and criminal actions for the
recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code
shall begun without the approval of the Commissioner. (Emphasis supplied)

To implement this provision Revenue Administrative Order No. 5-83 of the BIR provides
in pertinent portions:

The following civil and criminal cases are to be handled by Special Attorneys and Special
Counsels assigned in the Legal Branches of Revenues Regions:

xxx xxx xxx

II. Civil Cases

1. Complaints for collection on cases falling within the jurisdiction of the Region . . . .

In all the above mentioned cases, the Regional Director is authorized to sign all pleadings
filed in connection therewith which, otherwise, requires the signature of the
Commissioner.

xxx xxx xxx

Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in this case
was signed by the BIR's Chief of Legal Division for Region 4 and verified by the
Regional Director, there was, therefore, compliance with the law.
- Regulations are binding with the courts as long as it is n harmony with the laws

The rule is that as long as administrative issuances relate solely to carrying into effect the
provisions of the law, they are valid and have the force of law. 6 The governing statutory
provision in this case is 4(d) of the NIRC which provides:

Specific provisions to be contained in regulations. The regulations of the Bureau of

Internal Revenue shall, among other things, contain provisions specifying, prescribing, or
defining:

xxx xxx xxx

(d) The conditions to be observed by revenue officers, provincial fiscals and other
officials respecting the institution and conduct of legal actions and proceedings.

RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.

As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the
present Code authorizes the BIR Commissioner to delegate the powers vested in him
under the pertinent provisions of the Code to any subordinate official with the rank
equivalent to a division chief or higher, except the following:

(a) The power to recommend the promulgation of rules and regulations by the Secretary
of Finance;

(b) The power to issue rulings of first impression or to reverse, revoke or modify any
existing ruling of the Bureau;

(c) The power to compromise or abate under 204 (A) and (B) of this Code, any tax
deficiency: Provided, however, that assessment issued by the Regional Offices involving
basic deficiency taxes of five hundred thousand pesos (P500,000.00) or less, and minor
criminal violations as may be determined by rules and regulations to be promulgated by
the Secretary of Finance, upon the recommendation of the Commissioner, discovered by
regional and district officials, may be compromised by a regional evaluation board which
shall be composed of the Regional Director as Chairman, the Assistant Regional Director,
heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer
having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where
articles subject to excise tax are produced or kept.

None of the exceptions relates to the Commissioner's power to approve the filing of tax
collection cases.
- The action had prescribed and had not been suspended by the late motion for
reconsideration by respondent

Any internal revenue tax which has been assessed within the period of limitation above-
prescribed may be collected by distraint or levy or by a proceeding in court within three
years 7 following the assessment of the tax.

The running of the three-year prescriptive period is suspended 8

for the period during which the Commissioner is prohibited from making the assessment
or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when
the taxpayer requests for a reinvestigation which is granted by the Commissioner; when
the taxpayer cannot be located in the address given by him in the return filed upon which
the tax is being assessed or collected; provided, that, if the taxpayer informs the
Commissioner of any change in address, the running of the statute of limitations will not
be suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his
authorized representative or a member of his household with sufficient discretion, and no
property could be located; and when the taxpayer is out of the Philippines.

, the three-year prescriptive period must have commenced running again sometime after
the service of the warrants of distraint and levy. Petitioner, however, does not state when
or why this took place and, indeed, there appears to be no reason for such. It is
noteworthy that petitioner raised this point before the lower court apparently as an
alternative theory, which, however, is untenable.

For the foregoing reasons, we hold that petitioner's contention that the action in this case
had not prescribed when filed has no merit. Our holding, however, is without prejudice to
the disposition of the properties covered by the warrants of distraint and levy which
petitioner served on respondent, as such would be a mere continuation of the summary
remedy it had timely begun. Although considerable time has passed since then, as held
in Advertising Associates Inc. v. Court of Appeals 17 and Palanca v. Commissioner of
Internal Revenue, 18 the enforcement of tax collection through summary proceedings may
be carried out beyond the statutory period considering that such remedy was seasonably
availed of.
Azarcon VS Sandiganbayan (1997 GR 116033)

Facts:
On May 1983, a warrant of distraint and levy was issued against Ancla , who is a
Sub-contractor of petitioner, for tax delinquency. A writ of garnishment was
issued to Petitioner as holder of some of the properties of Ancla

On November 1985, Petitioner notified BIR that Ancla had withdrew operations
with Petitioner and he had surreptitiously acquired back the property subject of
the garnishment. With this letter, Petitioner intends to free himself of the
obligation imposed upon him of taking care of the property.

It was found out upon investigation that the truck of Anlca was rented out again
by one Cuevas. However, the Director filed a letter complaint against Petitioner
and Ancla.

A case for malversation of public funds or property by the Sandiganbayan was

filed.

The petitioner filed for a motion for reconsideration on the ground that he was not
a public officer, and a motion to dismiss on such ground was denied. Motion for
new trial and reconsideration was denied.

Issue:
whether the Sandiganbayan had jurisdiction over the subject matter of the
controversy. Corollary to this is the question of whether petitioner can be
considered a public officer by reason of his being designated by the Bureau of
Internal Revenue as a depositary of distrained property.

Held:
- only public officers can be under the jurisdiction of SB.

the jurisdiction of the court must appear clearly from the statute law or it will not
be held to exist. It cannot be presumed or implied." 26 And for this purpose in
criminal cases, "the jurisdiction of a court is determined by the law at the time of
commencement of the action.

The foregoing provisions unequivocally specify the only instances when the
Sandiganbayan will have jurisdiction over a private individual, i.e. when the
complaint charges the private individual either as a co-principal, accomplice or
accessory of a public officer or employee who has been charged with a crime
within its jurisdiction.

- the fact that petitioner's designation by the BIR as a custodian of distrained property
qualifies as appointment by direct provision of law, or by competent authority is not in
the instant case, while the BIR had authority to require Petitioner Azarcon to sign a
receipt for the distrained truck, the NIRC did not grant it power to appoint Azarcon a
public officer.

It is axiomatic in our constitutional framework, which mandates a limited government,

that its branches and administrative agencies exercise only that power delegated to them
as "defined either in the Constitution or in legislation or in both." 34 Thus, although the
"appointing power is the exclusive prerogative of the President, . . ." 35 the quantum of
powers possessed by an administrative agency forming part of the executive branch will
still be limited to that "conferred expressly or by necessary or fair implication" in its
enabling act. Hence, "(a)n administrative officer, it has been held, has only such powers
as are expressly granted to him and those necessarily implied in the exercise
thereof." 36Corollarily, implied powers "are those which are necessarily included in, and
are therefore of lesser degree than the power granted. It cannot extend to other matters
not embraced therein, nor are not incidental thereto.

After a thorough review of the case at bench, the Court thus finds Petitioner
Alfredo Azarcon and his co-accused Jaime Ancla to be both private individuals
erroneously charged before and convicted by Respondent Sandiganbayan which
had no jurisdiction over them. The Sandiganbayan's taking cognizance of this case
is of no moment since "(j)urisdiction cannot be conferred by . . . erroneous belief
of the court that it had jurisdiction.