BATCH 7 Cases on Prescription
period from the filing of the tax return within
CIR vs Tulio-Duron
October 2005
G.R. 139858
FACTS:
Arturo Tulio is engaged in the construction
business. The CIR sent him a demand letter
with two final assessment notices requesting
payment of his deficiency percentage taxes
of P188,585.76 and P245,669.53 for the
taxable years 1986 and 1987. However,
despite receipt, Tulio failed to act on the
assessment notices. Hence, the same
became final and executor pursuant to
Section 229 of the 1996 NIRC. CIR, petitioner
sent letters to respondent giving him the last
opportunity to settle his deficiency tax
liabilities. But respondent was obstinate.
Thus, on October 29, 1997, petitioner filed
with the RTC, Branch 60, Baguio City a civil
action for the collection of the deficiency
percentage taxes, docketed as Civil Case No.
3853-R. Incidentally, it bears emphasis that it
is the RTC which has jurisdiction over this
case, not the Court of Tax Appeals. It is the
ordinary courts, not the tax court, which can
entertain BIR money claims based on
assessments that have become final and
executory. On March 22, 1999, the RTC
issued an Order directing respondent to file
his answer to the complaint. Three days
thereafter, respondent filed a motion to
dismiss alleging that the complaint was filed
beyond the three-year prescriptive period
provided by Section 203 of the National
Internal Revenue Code. The RTC issued its
first challenged Order dismissing Civil Case
No. 3853-R by reason of prescription.
Petitioner filed a motion for reconsideration
but was denied on August 25, 1999. Hence,
this petition for review on certiorari.
ISSUE:
Whether petitioners cause of action for the
collection of deficiency percentage taxes
against respondent has prescribed.
RULING:
The petition is GRANTED. Petitioners cause
of action for the collection of deficiency
percentage taxes against respondent has not
prescribed. The lower court erroneously
applied Section 203 of the same Code
providing for the three-year prescriptive
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
(now Section 222) of the National Internal
Revenue Code provides:
"Section 223. Exceptions as to Period of
Limitation of Assessment and Collection of
Taxes.
(a) In the case of a false or fraudulent
return with intent to evade tax or of failure to
file a return, the tax may be assessed, or a
proceeding in court for the collection of such
tax may be filed without assessment, at any
time within ten (10) years after the discovery
of the falsity, fraud or omission: Provided,
That in a fraud assessment which had
become final and executory, the fact of fraud
shall be judicially taken cognizance of in the
civil or criminal action for the collection
thereof.
(c) Any internal revenue tax which has
been assessed within the period of limitation
as prescribed in paragraph (a) hereof may be
collected by distraint or levy or by a
proceeding in court within three (3) years
following the assessment of the tax." 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. As we held in Marcos II vs.
Court of Appeals,the omission to file an
estate tax return, and the subsequent failure
to contest or appeal the assessment made
by the BIR is fatal, considering that under
Section 223 of the NIRC, in case of failure to
file a return, the tax may be assessed at any
time within ten years after the omission, and
any tax so assessed may be collected by
levy upon real property within three years
following the assessment of the tax (as was
done here). Since the estate tax assessment
had become final and unappealable, there is
now no reason why petitioner should not
enforce its authority to collect respondents
deficiency percentage taxes for 1986 and
1987.
BPI vs CIR (2005) Mamugay
Facts:
BPI, sold $500,000 in June 6 and 14 1985 to
the Central Bank for the total amount of
$1,000,000.On October 1989, the BIR
assessed BPI for tax deficiency of
documentary tax on such sales of foreign
bills of exchange. BPI filed and protested the
assessment on 1989, BPI did not receive any
immediate reply to its protest. On 1992 BIR
issued a warrant of Distraint and/or Levy
against the petitioner. The warrant was
served on 1992 but never heard anything
from the BIR until the 1997 when the
reconsideration was denied.
BPI filed a petition for Review with the CTA
and raised prescription as a defense. It
alleged that the right to collect must be done
within 3 years only, but the BIR waited more
than 7 years to deny the protest. BIR
reiterated its position and remained silent as
regards the issue on prescription.
CTA rendered the decision in favor BIR
stating that the action has not prescribed but
the sale of foreign currency is not subject to
documentary stamp tax. Further the
assessment was order for cancellation
because the transaction between BPI and the
Central Bank was tax exempt. The CA
sustained the finding of the CAT that the
action has not yet prescribed, but it adopted
the position of the BIR that the sale of
foreign currency was not tax exempt.
Issue:
Whether or not BIRs right to collect the tax
deficiency on documentary stamps has
prescribed
Ruling:
Yes. The period for the BIR to assess and
collect an internal revenue tax is limited to
three years by Section 203 of the Tax Code of
1977:
SEC. 203. Period of limitation upon
assessment and collection. Except as
provided in the succeeding section, internal
revenue taxes shall be assessed within three
years after the last day prescribed by law for
the filing of the return, and no proceeding in
court without assessment for the collection
of such taxes shall be begun after the
expiration of such period: Provided, That in a
case where a return is filed beyond the
period prescribed by law, the three-year
period shall be counted from the day the
return was filed. For the purposes of this
section, a return filed before the last day
prescribed by law for the filing thereof shall
be considered as filed on such last day.
It may only be interrupted or suspended by a
valid waiver executed in accordance with
paragraph (d) of Section 223 of the Tax Code
of 1977
(d) Any internal revenue tax which has been
assessed within the period agreed upon as
provided in paragraph (b) hereinabove may 2) The protest filed by petitioner BPI was a
be collected by distraint or levy or by a request for reconsideration, not a request for
proceeding in court within the period agreed reinvestigation that was granted by
upon in writing before the expiration of the respondent BIR Commissioner which could
three-year period. The period so agreed have suspended the prescriptive period for
upon may be extended by subsequent collection under Section
written agreements made before the
expiration of the period previously agreed BIR Commissioner and other BIR officials
upon. failed to act promptly in resolving and
denying the request for reconsideration filed
and the existence of the circumstances by petitioner BPI and in enforcing collection
enumerated in Section 224 of the same on the assessment. They presented no
Code, which include a request for reason or explanation as to why it took them
reinvestigation granted by the BIR almost eight years to address the protest of
Commissioner. petitioner BPI. The statute on limitations
imposed by the Tax Code precisely intends to
SEC. 224. Suspension of running of protect the taxpayer from such prolonged
statute. The running of the statute of and unreasonable assessment and
limitation provided in Section[s] 203 and 223 investigation by the BIR.
on the making of assessment and the
beginning of distraint or levy or a proceeding
in court for collection, in respect of any
deficiency, shall be suspended for the period
during which the Commissioner is prohibited
from making the assessment or beginning BPI VS CIR (2008)
Dungog
distraint or levy or a proceeding in court and
for sixty days thereafter; when the taxpayer Facts: BPI, the surviving bank after its
requests for a reinvestigation which is merger with Far East Bank and Trust
granted by the Commissioner; when the Company, is a corporation duly created and
taxpayer cannot be located in the address existing under the laws of the Republic of the
given by him in the return filed upon which a Philippines. CIR issued to the petitioner a
tax is being assessed or pre-assessment notice (PAN)
collected: Provided,That, if the taxpayer dated November 26, 1986. BPI requested for
informs the Commissioner of any change in the details of the amounts alleged as 1982-
address, the running of the statute of 1986 deficiency taxes mentioned in
limitations will not be suspended; when the the November 26, 1986 PAN. On April 7,
warrant of distraint and levy is duly served 1989, the CIR issued to the petitioner,
upon the taxpayer, his authorized assessment/demand notices for deficiency
representative, or a member of his withholding tax at source (Swap
household with sufficient discretion, and no Transactions) and DST for the years 1982 to
property could be located; and when the 1986. On April 20, 1989, BPI filed a protest
taxpayer is out of the Philippines. on the demand/assessment notices. BPI
None of the conditions and requirements for executed several Waivers of the Statutes of
exception from the statute of limitations on Limitations, the last of which was effective
collection exists herein: until December 31, 1994. On August 9, 2002,
the CIR issued a final decision on petitioners
1) Petitioner BPI did not execute any waiver protest ordering the withdrawal and
of the prescriptive period on collection as cancellation of the deficiency withholding tax
mandated by paragraph (d) of Section 223; assessment in the amount
of P190,752,860.82 and considered the same
as closed and terminated. On the other hand,
the deficiency DST assessment in the
amount of P24,587,174.63 was reiterated
and the petitioner was ordered to pay the
said amount within thirty (30) days from
receipt of such order. Petitioner received a
copy of the said decision on January 15,
2003.
Issue: Whether the collection of the
deficiency DST is barred by prescription?
Held: No. The statute of limitations on
assessment and collection of national
internal revenue taxes was shortened from
five (5) years to three (3) years by Batas
Pambansa Blg. 700. Thus, the CIR has three
(3) years from the date of actual filing of the
tax return to assess a national internal
revenue tax or to commence court
proceedings for the collection thereof without
an assessment. When it validly issues an
assessment within the three (3)-year period,
it has another three (3) years within which to
collect the tax due by distraint, levy, or court
proceeding. The assessment of the tax is
deemed made and the three (3)-year period
for collection of the assessed tax begins to
run on the date the assessment notice had
been released, mailed or sent to the
taxpayer. As applied to the present case, the
CIR had three (3) years from the time he
issued assessment notices to BPI on 7 April
1989 or until 6 April 1992 within which to
collect the deficiency DST. However, it was
only on 9 August 2002 that the CIR ordered
BPI to pay the deficiency.
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 went on to declare that the burden of
proof that the request for reinvestigation had
been actually granted shall be on the
CIR. Such grant may be expressed in its
communications with the taxpayer or implied
from the action of the CIR or his authorized
representative in response to the request for
reinvestigation. There is nothing in the
records of this case which indicates,
expressly or impliedly, that the CIR had
granted the request for reinvestigation filed
by BPI. What is reflected in the records is the
piercing silence and inaction of the CIR on
the request for reinvestigation, as he
considered BPIs letters of protest to be. In
fact, it was only in his comment to the
present petition that the CIR, through the
OSG, argued for the first time that he had
granted the request for reinvestigation.
There is no evidence that the CIR actually
conducted a reinvestigation upon the request
of BPI or that the latter was made aware of
the action taken on its request. Hence, there
is no basis for the tax courts ruling that the
filing of the request for reinvestigation tolled
the running of the prescriptive period for
collecting the tax deficiency.
Neither did the waiver of the statute of
limitations signed by BPI supposedly
effective until 31 December 1994 suspend
the prescriptive period. The CIR himself
contends that the waiver is void as it shows
no date of acceptance in violation of RMO
No. 20-90. At any rate, the records of this
case do not disclose any effort on the part of
the Bureau of Internal Revenue to collect the
deficiency tax after the expiration of the
waiver until eight (8) years thereafter when it
finally issued a decision on the protest. The
inordinate delay of the CIR in acting upon
and resolving the request for reinvestigation
filed by BPI and in collecting the DST
allegedly due from the latter had resulted in
the prescription of the governments right to
collect the deficiency.
CIR vs. PHILIPPINE GLOBAL
COMMUNICATION, INC.
G. R. No. 167146; October 31, 2006
SUAMEN
FACTS:
Respondent, a corporation engaged in
telecommunications, filed its Annual Income
Tax Return for taxable year 1990 on 15 April
1991. Through its counsel
Ponce Enrile Cayetano Reyes
and Manalastas Law Offices, it filed a formal
protest letter against Assessment Notice
then filed another protest letter on 23 May
1994, through another
counsel Siguion Reyna Montecillo & Ongsiako
Law Offices. In both letters, respondent
requested for the cancellation of the tax
assessment, which they alleged was invalid
for lack of factual and legal basis. On 16
October 2002, more than 8 years after the
assessment, the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices
received from the CIR a Final Decision
denying the respondents protest against
Assessment Notice. Respondent filed a
Petition for Review with the CTA. The CTA
ruled on the primary issue of prescription
and found it unnecessary to decide the
issues on the validity and propriety of the
assessment. It decided that the protest
letters filed by the respondent cannot
constitute a request
for reinvestigation, hence, they cannot toll
the running of the prescriptive period to
collect the assessed deficiency income
tax. Thus, since more than 3 years had
lapsed from the time of the Assessment
Notice, the CIRs right to collect the same has
prescribed.
ISSUE: Has the CIRs right to collect
respondents alleged deficiency income tax
prescribed?
HELD:
Yes.
The 3-year statute of limitations on the
collection of an assessed tax provided under
Section 269(c) of the Tax Code of 1977, a law
enacted to protect the interests of the
taxpayer, must be given effect. In providing
for exceptions to such rule in Section 271,
the law strictly limits the suspension of the
running of the prescription period to, among
other instances, protests wherein the
taxpayer requests for a reinvestigation. In
this case, where the taxpayer merely filed 2
protest letters requesting for a
reconsideration, and where the BIR could not
have conducted a reinvestigation because no
new or additional evidence was submitted,
the running of statute of limitations cannot
be interrupted. The tax which is the subject
of the Decision issued by the CIR on
2002 affirming the Formal Assessment issued
1994 can no longer be the subject of any
proceeding for its collection. Consequently,
the right of the government to collect the
alleged deficiency tax is barred by
prescription.
CIR vs. Hambrecht & Quist Philippines,
Inc., G.R. No. 169225, November 17,
2010
Reinvestigation
GALLO
Facts: On November 4, 1993, Hambrecht
received a tracer letter or follow-up letter
dated October 11, 1993 issued by the
Accounts Receivable/Billing Division of the
BIRs National Office demanding for payment
of alleged deficiency income and expanded
withholding taxes for the taxable year 1989
amounting to P2,936,560.87. On December
3, 1993, Hambrecht, through its external
auditors filed with the same Accounts
Receivable/Billing Division of the BIRs
National Office, its protest letter against the
alleged deficiency tax assessments for 1989
as indicated in the said tracer letter. The
alleged deficiency income tax assessment
apparently resulted from an adjustment
made to respondents taxable income for the
year 1989, on account of the disallowance of
certain items of expense. On November 7,
2001, nearly eight (8) years later,
respondents external auditors received a
letter from herein petitioner Commissioner of
Internal Revenue advising the respondent
that petitioner had rendered a final decision
denying its protest on the ground that the
protest against the disputed tax assessment
was allegedly filed beyond the 30-day
reglementary period prescribed in then
Section 229 of the National Internal Revenue
Code. Hambrecht appealed to the CTA the
final decision of the Commissioner of Internal
Revenue denying its protest against the
deficiency income and withholding tax
assessments issued for taxable year 1989.
CTA Ruling: The assessment had become
final and unappealable for failure of
respondent to file a protest within the 30-day
period provided by law. However, the CTA (a)
held that the CIR failed to collect the
assessed taxes within the prescriptive
period; and (b) directed the cancellation and
withdrawal of Assessment Notice.
CIR filed a Petition for Review with the
CTA En Banc but this was denied.
CIR insists that its right to collect the tax
deficiency it assessed on respondent is not
barred by prescription since the prescriptive
period thereof was allegedly suspended by
respondents request for reinvestigation
Issue: Has the period to collect the
assessment prescribed?
Ruling: Yes. The pertinent provision of the
1986 NIRC is Section 224, to wit:
Section 224. Suspension of running of
statute. The running of the statute of
limitations provided in Sections 203 and 223
on the making of assessment and the
beginning of distraint or levy or a proceeding
in court for collection, in respect of any
deficiency, shall be suspended 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 re-investigation
which is granted by the Commissioner;
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: Provided, That, if the taxpayer
informs the Commissioner of any change in
address, the statute will not be suspended;
when the warrant of distraint and 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 plain and unambiguous wording of the
said provision dictates that two requisites
must concur before the period to enforce
collection may be suspended: (a) that the
taxpayer requests for reinvestigation,
and (b) that petitioner grants such
request.
In order to suspend the running of the
prescriptive periods for assessment and
collection, the request for
reinvestigation must be granted by the
CIR. Consequently, the mere filing of a
protest letter which is not granted does not
operate to suspend the running of the period
to collect taxes. In the case at bar, the
records show that respondent filed a request
for reinvestigation on December 3, 1993,
however, there is no indication that
petitioner acted upon respondents protest.
There is nothing in the record that would
show what action was taken in connection
with the protest of the respondent. In fact,
petitioner did not hear anything from the
respondent nor received any communication
from the respondent relative to its protest,
not until eight years later when the final
decision of the Commissioner was issued. In
other words, the request for
reinvestigation was not granted. Thus,
the prescriptive period for the CIRs right to
collect was not suspended and has
prescribed.