EXERCISES 16 1

1. Income tax 15,000.

00
Less: Withholding tax 8,000.0
0
Income tax due 7,000.0
0
Add: Penalties
Late filing and late payment (7,000 x 1,750.0
25%) 0
Interest (7,000 x 20% x 1/24) 58. 1,808.3
33 3
Total 8,808.3
3

Due, 1st installment (15,000 x ) 7,500

Less: Withholding tax 8,000
Available for withholding on 2nd installment ( 50
0)

Due, 2nd installment (15,000 x 1/2) 7,500.0

0
Less: Withholding tax 500.0
0
Due, 2nd installment 7,000.
00
Add: Penalty for late payment (7,000 x 1,750.0
25%) 0
Interest from July 15 (7,000 x 20% x 116.6 1,866.
1/12) 7 87
Tax payable 8,866.
67

2. a. Income tax P15,00

0
Add: Penalty for late filing/payment 3,750
(15,000 x 25%)
Interest 4/16 to 5/15 (15,000 x 250 4,000
20% x 1/12)
Tax payable 19,000

b. Income tax 15,000.

00
Less: Payment, April 15, 2009 7,500.
00
 Balance, 2nd installment 7,500.
00
Add: Penalty and interest
Penalty for late payment (7,500 x 1,875.0
25%) 0
Interest 7/15 to 8/1 (7,500 x 20% 62.50 1,937.
x 1/24) 50
Payable, 2nd installment 9,437.
50

c. Income tax 15,000

Add: Penalty and interest
Penalty for late filing/payment 7,500
(15,000 x 50%)
Interest 4/15 to 5/15 (5,000 x 250 7,750
20% x 1/12)
Income tax 22,750

3. Income tax P30,00

0
Add: Penalties
Late filing and late payment (30,000 x P15,000
50%)
Interest (30,000 x 20% x 6/12) 3,000 18,000
Income tax due 48,000

4. Yes, he is liable for the deficiency tax. However, he may be excused for
paying the 50% penalty for the falsified tax return. Fraud in filing return
cannot be presumed but must be clearly established (Graphic Arts vs.
CIR, July 18, 1984).

EXERCISES 16 2

1. ANSWER: A
In case of willful neglect to file the return within the period prescribed
by this code or by rules and regulations, or in case a false or fraudulent
return is willfully made, the penalty to be imposed shall be 50% of the
tax. (Sec. 248{B}, NIRC)

2. ANSWER: C
See the discussion in No.1 above.

3. ANSWER: D
 See the discussion in No.1 above.

4. ANSWER: D
Civil penalty includes the payment of interest, the imposition of 25%
and 50% penalty and the payment of fine. Imprisonment is considered as
criminal sanction for criminal offenses committed.

5. Answer: D
Income tax due P
50,000
Less: Withholding tax 5,000
Income tax due payable as of April 15, 45,000
2008
Add: Penalty and interest
Penalty (P45,000 x 25%) 11,250
Interest (P45,000 x 20% x 3/12) 2,250 13,5
00
Income tax due as of July 15, 2008 58,500

6. Answer: C
Income tax payable as of April 15, 2008 P
45,000
Add: Penalty and interest
Penalty (P 45,000 x 50%) P
22,500
Interest (P 45,000 x 20% x 3/12) 2,250 24,7
50
Income tax due as of July 15, 2001 69,750

7. Answer: B
Payable, 2nd installment 5,00
0
Add: Interest (5,000 x 20% x 3/12) 250
Penalty for late payment (5,000 x 1,250
25%)
Payable as of October 15, 2008 6,500

8. Answer: A
Income tax 120,0
00
Add: Penalty and interest
Penalty (120,000 x 25%) 30,00
0
Interest (120,000 x 20% 2.5/12) 5,000 35,00
 0
Income tax due as of June 30, 2008 155,00
0

9. Answer: C
Income tax 120,0
00
Add: Penalty and interest
Penalty (P120,000 x 50%) 60,00
0
Interest (P120,000 x 20% x 2.5/12) 5,000 65,00
0
Income tax due as of June 30, 2008 185,00
0

1 Answer: B
0
Income tax 120,0
00
Add: Penalty (P120,000 x 25%) 30,00
0
Total amount due 150,00
0
Less: Amount already paid 120,00
0
Amount still due 30,00
0

11 Answer: C
Amount due per audit 200,0
00
Less: Amount paid 150,00
0
Deficiency tax 50,000
Add: Interest (50,000 x 20% x 15/12) 12,5
00
Amount still due 62,50
0

12 Answer: D
There is tax delinquency on the delay in the payment of the tax on
April 25, 2008 instead of April 15, 2008.
There is tax deficiency because the amount paid is P130,000 only
instead of P135,000.
EXERCISES 17 1

1. Upon failure of the person owing any delinquent tax to pay the same at
the time required, the BIR can exercise the distraint of the personal
property or levy of real property, or both, on the properties owned by
him.

2. The rule is whenever a tax return is filed on or before April 15 of any

year, the counting of the three-year period for assessment of taxes shall
start on April 16, the day following the deadline for filing the return.
However, when the return is filed after the deadline, the counting of
the three-year period shall commence to run on the date of filing. Since
the return was filed on April 13, 2007, the 3-year period shall expire on
April 15, 2010. Consequently, the assessment made on April 14, 2010
was made on time. However, the assessment on April 17, 2010 is not
valid because the same is made beyond the prescriptive period.
3. a. If it is found out that the overstatement of expenses reported in
the tax return resulted to more than 30% of the actual deductions, it
shall constitute a prima facie evidence of a fraudulent return. In this
case, the BIR is given a 10-year prescriptive period to assess the
return. In cases of fraudulent returns, the period shall commence to
run from the discovery of the fraud. Therefore, the last day for the BIR
to make a valid assessment is on the 10 th year after the discovery of
the fraud in the tax return filed by Bobby.
However, if the overstatement of expenses does not constitute
fraud, the last day for the BIR to issue an assessment is April 15,
2007.
b. The BIR is given five (5) years following the issuance of assessment to
execute warrant of distraint. Since the assessment is made March 12,
2010, it shall have until March 12, 2015 to execute a warrant.
c. No, because the 5-year period for distraint had already lapsed.
4. a. The taxpayer is given 30 days from receipt of assessment to file a
protest or request for reconsideration with the Bureau of Internal
Revenue. Roselle received the assessment on April 25, 2007,
therefore, she has until May 25, 2007 to act on the assessment.
Considering that the request for reconsideration was filed on May 2,
2007, the request was filed on time.
b. Roselle is given 30 days from receipt of the decision of the BIR
denying her request to appeal to the Court of tax Appeals.
The decision was received on October 20, 2007, therefore, she has
until Nov. 19, 2007 to appeal the decision of the Commissioner to the
Court of Tax Appeals.
EXERCISES
17-2
1. D
2. A
3. C
4. B
5. D
6. A
7. C
8. D - April 15, 2011
9. B
10. D - April 10, 2016
11. D
12. C
13. C
14. C
15. B
16. C
17. C
18. Answer: C
Deficiency income tax P
20,000
Add: Interest (20,000 x 20%) 4,00
0
Amount payable per assessment notice 24,00
0

19. C

20. Answer: E
October, 2008 31
November, 2008 30
December, 2008 31
January, 2009 31
February, 2009 28
March, 2009 (last day to act on the 29
 documents)
Total (expiration date) 180

March, 2009 2
April, 2009 (last day to appeal to 28
CTA)
Total (expiration date) 30

EXERCISE 17-3:
On the first question:
NO, the waiver was not validly executed for the following reasons:
1. It was not proven that respondent was furnished a copy of the BIR-
accepted waiver.
2. 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.
3. It did not contain the date of acceptance by the Commissioner, a
requisite necessary to determine whether the waiver was validly
accepted before the expiration of the original 3-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.

On the second question:

Yes. NIRC taxes must be assessed within 3 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.
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.

EXERCISE 17-4:
Section 76 offers two options: (1) filing for tax refund and (2) availing
of tax credit. The two options are alternative and the choice of one
precludes the other.
 However, the failure to indicate a choice will not bar a valid request
for a refund, should this option be chosen by the taxpayer later on. The
requirement is only for the purpose of easing tax administration particularly
the self-assessment and collection aspect.
In this case, PERF did not mark the refund box in its 1997 FAR.
Neither did it perform any act indicating that chosen tax credit. In fact, in
its 1998 ITR, PERF left blank the portion Less: Tax Credit/ Payments.
That action coupled with the filing of a claim for refund indicates that PERF
option to claim a refund. Under these circumstances, PERF is entitled to a
refund of its 1997 excess tax credits in the amount of P1,280,504.

EXERCISE 17-5:
The proper party to question, or seek a refund of an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed by law and who
paid the same even if he shifts the burden thereof to another. Even if
Petron passed on to Sikair the burden of the tax, the additional amount
billed to Silkair for jet fuel is not a tax but part of the price which Silkair
had to pay as a purchaser.
An excise tax is an indirect tax where the tax burden can be shifted to
the customer but the tax liability remains with the manufacturer or
producer.
The excise taxes are collected from manufacturers or producers
before removal of the domestic products from the place of production.
Although excise taxes can be considered as taxes on production, they are
really taxes on property as they are imposed on certain specified goods.
When Petron removes its petroleum products from its refinery in
Limay, Bataan, it pays the excise taxes due on the petroleum products thus
removed. Petron, as manufacturer or producer, is the person liable for the
payment of the excise tax as shown in the Excise Tax Returns filed with the
BIR. Stated otherwise, Petron is the taxpayer that is primarily, directly and
legally liable for the payment of the excise taxes. However, since an excise
tax is an indirect tax, Petron can transfer to its customers the amount of the
excise tax paid by treating it as part of the cost of the goods and tacking it
on to the selling price.
Silkair as the purchaser and end consumer, ultimately bears the tax
burden, but this does not transform petitioners status into a statutory
taxpayer.
In the refund of indirect taxes, the statutory taxpayer is the proper
party who can claim the refund.
Petitioner should invoke its tax exemption to Petron before buying the
aviation jet fuel. Petron, however, remains the statutory taxpayer on those
excise taxes.
EXERCISE 17-6
In the instant case, petitioner timely filed a protest after receiving the PAN. In response
thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section
228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an
administrative protest within 30 days from receipt thereof. Petitioner, however, did not protest the
final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly
apply the rules, the dismissal of the Petition for Review by the CTA was proper.
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us
to agree with petitioner that the instant case is an exception to the rule on exhaustion of
administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In this case, we find the CIR estopped from claiming that the filing of the Petition for Review
was premature because petitioner failed to exhaust all administrative remedies.
We cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices,
respondent used the word appeal instead of protest, reinvestigation, or reconsideration.
Although there was no direct reference for petitioner to bring the matter directly to the CTA, it
cannot be denied that the word appeal under prevailing tax laws refers to the filing of a Petition
for Review with the CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the
terms protest, reinvestigation and reconsideration refer to the administrative remedies a
taxpayer may take before the CIR, while the term appeal refers to the remedy available to the
taxpayer before the CTA. Section 9 of RA 9282, amending Section 11 of RA 1125, likewise uses the
term appeal when referring to the action a taxpayer must take when adversely affected by a
decision, ruling, or inaction of the CIR. As we see it then, petitioner in appealing the Formal Letter
of Demand with Assessment Notices to the CTA merely took the cue from respondent. Besides, any
doubt in the interpretation or use of the word appeal in the Formal Letter of Demand with
Assessment Notices should be resolved in favor of petitioner, and not the respondent who caused
the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as
implemented by Section 3 of BIR Revenue Regulations No. 12-99. It is the Formal Letter of
Demand and Assessment Notice that must be administratively protested or disputed within 30
days, and not the PAN.
What we are saying in this particular case is that, the Formal Letter of Demand with
Assessment Notices which was not administratively protested by the petitioner can be considered a
final decision of the CIR appealable to the CTA because the words used, specifically the words final
decision and appeal, taken together led petitioner to believe that the Formal Letter of Demand
with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and
that the available remedy was to appeal the same to the CTA.

EXERCISE 17 7
THE first motion should be granted while the second motion should be denied.
Section 11 of Republic Act 9282 states that the Petition for Review shall be filed with
the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil
Procedure which also states that the Petition for Review of an adverse judgment or final
order of the RTC must be filed with the Court of Appeals within: (1) the original 15-day
period from receipt of the judgment or final order to be appealed; (2) an extended period of
15 days from the lapse of the original period; and (3) only for the most compelling reasons,
another extended period not to exceed 15 days from the lapse of the first extended period.
Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the
30-day original period for filing a Petition for Review with the CTA under Section 11 of
Republic Act No. 9282, as implemented by Section 3(a), Rule 8 of the Revised Rules of the
CTA, may be extended for a period of 15 days. No further extension shall be allowed
thereafter, except only for the most compelling reasons, in which case the extended period
shall not exceed 15 days.
Even the CTA en banc, in its decision dated January 18, 2008, recognizes that the
30-day period within which to file the Petition for Review with the CTA may, indeed, be
extended.

EXERCISE 17-8
The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the
preliminary 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. 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 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 legal and factual bases of the assessment must be stated in the formal letter of
demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express
provisions of Article 228 of the NIRC and RR 12-99 would be rendered nugatory. The
alleged factual bases in the advice, preliminary letter and audit working papers did not
suffice. There was no going around the mandate of the law that the legal and factual bases
of the assessment be stated in writing in the formal letter of demand accompanying the
assessment notice.
Such requirement is in keeping with the constitutional principle that no person shall be
deprived of property without due process. In view of the absence of a fair opportunity for
Enron to be informed of the legal and factual bases of the assessment against it, the
assessment in question was void.
Verily, taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. However, such collection should be made in accordance with law as
any arbitrariness will negate the very reason for the government itself.

EXERCISE 17-9.
NO. It cannot be said that FEPCI failed to submit relevant supporting documents that
would render the assessment final because when FEPCI submitted its protest, FEPCI
attached the GIS and Balance Sheet. Further, CIR cannot insist on the submission of proof
of DST payment because such document does not exist as respondent claims that it is not
liable to pay, and has not paid, the DST on the deposit on subscription.
The term relevant supporting documents should be understood as those
documents necessary to support the legal basis in disputing a tax assessment as
determined by the taxpayer. The BIR can only inform the taxpayer to submit additional
documents. The BIR cannot demand what type of supporting documents should be
submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the
production of documents that a taxpayer cannot submit.
FEPCI, having submitted its supporting documents on the same day the protest was
filed, had until July 31, 2002 to wait for petitioner reply to its protest. On August 28, 2002
or within 30 days after the lapse of the 180-day period counted from the filing of the
protest as the supporting documents were simultaneously filed, FEPCI filed a petition before
the Court of Tax Appeals.
FEPCI has complied with the requisites in disputing an assessment pursuant to Sec
228 of the Tax Code. Hence, the tax assessment cannot be considered as final, executory
and demandable.

EXERCISE 18 1
1. No. The appellant is given only 30 days from receipt of the decision of
the Commissioner of Internal Revenue to file an appeal with the Court of
Tax Appeals. Considering that it took Lani Perez three (3) years to appeal
with the appellate court, she is already estopped from filing said appeal.
Furthermore, the appeal was filed with the Court of Tax Appeals after
more than two (2) years from payment.

2. He should immediately file a Petition for Review with the Court of Tax
Appeals, notwithstanding the failure of the Commissioner of Internal
Revenue to render a decision. Otherwise, Mr. Santos right to seek
recourse to court action would prescribe as he has only two (2) years
from the payment of the tax within which to file the petition.

3. No. A decision of the of the Commissioner of Internal is appellable to the

Court of Tax Appeals and not to the Court of Appeals. This jurisdiction is
an exclusive appellate jurisdiction of the CTA..
A motion for reconsideration filed July 20, 2007 is ineffective
because the right of Pareng Budong to file said motion is already barred
by prescription.

4. No. A decision of a City Board of Assessment Appeals is appellable to the

Central Board of Assessment Appeals whose decision is also appealable
to the Court of Tax Appeals. Hence, the appeal was not property made.

5. Yes. The Court of Tax Appeals has exclusive appellate jurisdiction over
decisions of the Commissioner of Customs involving forfeitures.

The decision of the Court of Tax Appeals is not appealable to the

Court of Appeals because they are of the same level or co-equal with
each other.

6. Both justices should agree on the issue because an affirmative vote of

two members of a decision is necessary for the rendition of a decision.
EXERCISE 18 2

1. C
2. D
3. C
4. C
5. C
6. C
7. C
8. C
9. C
10. A