GOVERNMENTS REMEDIES UNDER THE NIRC

It must first be understood that the Code provides the Government with
two remedies, namely: 1) ASSESSMENT; and 2) COLLECTION.

Further, there are two kinds of assessment and collection: (a) the normal
or ordinary assessment and collection under Section 203; and (b) the
abnormal or extraordinary assessment and collection under Section 222.

1. NORMAL or ORDINARY ASSESSMENT and COLLECTION is available to the

Government if there was a return filed by the taxpayer and such return is not
false or fraudulent. The Government may only make the assessment under
this Section within three (3) years after the last day prescribed by law for the
filing of the return not from the time of payment. However, when the return
is filed beyond the period of filing prescribed by law, the three-year period
shall be counted from the day of the filing of the return.

For collection, the Code does not provide for a prescriptive period.
However, under the Old Code, the prescriptive period provided for both
normal and abnormal is three (3) years. Under the new Code, the
prescriptive period for abnormal is five (5) years, hence, it can be concluded
that the prescriptive period for normal is also five (5) years. It will create an
absurd situation where there is no prescriptive period under the normal but
there is a prescriptive period for abnormal.

2. ABNORMAL or EXTRAORDINARY ASSESSMENT and COLLECTION is resorted to

by the Government in cases where: (a) the taxpayer omits or fails to file his
return; or (b) the taxpayer filed a return but the return was fraudulent; or (c)
the return filed by the taxpayer was false. There are two remedies or options
under abnormal assessment and collection: (1) assess and collect; or (2)
collection without assessment.

For assessment and collection, the prescriptive period for assessment is

ten (10) years from the discovery of the non-filing of the return or the
fraudulent or false return (Section 222 [a]); while the period for collection
prescribes after five (5) years from the date of final assessment (Section 222
[c]).

When the Government opts to collect without assessment, there would be

no prescriptive period for assessment. The prescriptive period for collection,
in this case, shall be ten (10) years from the discovery of the non-filing of the
return or the fraudulent or false return.

Q: CAN THE BIR JUST COLLECT WITHOUT ASSESSMENT? This was answered by the
Supreme Court in the case of Fortune Tobacco where it was held that since the
return filed was fraudulent, the BIR can avail of the remedy of collection without
assessment. The BIR is allowed to exercise that option.
PROCEDURE FOR ASSESSMENT (Section 228; RR No. 12-99)

Section 228 of the NIRC provides for two steps for assessment: (1) Pre-
Assessment Notice (PAN); and (2) Final Assessment Notice (FAN). On the other
hand, RR No. 12-99 provides for three (3) steps namely: (1) Notice of Informal
Conference; (2) Preliminary Notice of Assessment (PAN); and (3) Formal Letter of
Demand and Notice to Pay the Tax, which is equivalent to FAN.

The procedure for assessment can be better understood from the

following flow chart:

Notice of Informal Conference

File a Reply within 15 days from receipt of Notice

Failed to file a Reply

Send Notice again Preliminary Notice of Assessment (PAN)

File a Reply within 15 days upon receipf of PAN

Failed to file a Reply

Repeat PAN Declare in Default, send Formal Letter of

Demand and Notice to Pay Tax (FAN)

File a Protest within 30 days from

receipt of FAN
In case of Protest:

Two kinds of Protests:

1. Motion for reconsideration - 60 day period not applicable
2. Motion for reinvestigation - 60 days from filing of protest

Submit the complete sets of documents

The BIR is given 180 days to decide from receipt thereof

Protest denied or lapsed of 180-days, appeal to the CTA in

Division within 30 days from receipt thereof

Petition denied, file M/R within 15 days from receipt of denial

M/R denied, appeal to the CTA En Banc within 15 days from

receipt thereof

Petition denied, file M/R within 15 days from receipt thereof

Petition denied by CTA En Banc, appeal to the Supreme Court

PRE-ASSESSMENT NOTICE (PAN)

As a rule, a pre-assessment notice is issued to a taxpayer who fails to file a

return, or files a return but fails to pay the tax, or files a return, pays the tax but
such payment is insufficient.
 Section 228 enumerates the instances where PAN is not necessary, to wit:

a) When the finding for deficiency tax is the result of mathematical error in
the computation of the tax appearing on the face of the return;
b) When a discrepancy has been determined between the tax withheld and
the amount actually remitted by the withholding agent;
c) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have
carried over and automatically applied the same amount claimed
against the estimated tax liabilities for the taxable quarter or quarters of
the succeeding taxable year;
d) When the excise tax due on excisable articles has not been paid;
e) When an article locally purchased or imported by an exempt person,
such as, but not limited to vehicles, capital equipment, machineries and
spare parts, has been sold, traded or transferred to non-exempt persons.

In the foregoing instances, the taxpayer shall receive a final assessment

notice without the benefit of a pre-assessment notice.

FINAL ASSESSMENT NOTICE (FAN)

Referring to the foregoing flowchart, a final assessment notice is issued

when:

1) The taxpayer, having received a pre-assessment notice, fails to

respondent within the period provided for by the rules and regulations
(Section 228, last paragraph); and
2) Under the five instances enumerated under Section 228 where the pre-
assessment is not necessary.

PROTEST

After receipt of the FAN, the taxpayer cannot immediately appeal to the
Court of Tax Appeals. The Code mandates that before such appeal can be
made, a protest must first be filed by the taxpayer.

After the filing of the protest, the BIR is given a period of 180 days within
which to decide on the matter. The 180-days period is to be committed on the
day the protest has been filed if it is a motion for reconsideration. If it is a motion
for reinvestigation, the 180-day period shall be reckoned on the day the
documents or receipts were filed with the 60-day period of time. Upon denial of
the protest or the lapse of the 180-day period within the BIR acting upon the
protest, the taxpayer may appeal to the CTA within 30 days from receipt of the
denial or lapse of the period, otherwise, the decision shall become final,
executor and demandable.

Appeal to the CTA

If the protest is denied, in whole or in part, or the 180-day period has

already lapsed without the BIR acting upon the protest, the taxpayer may
appeal the denial to the CTA within 30 days from receipt of the denial or the
lapse of the period.
Appeal to the Supreme Court

After appealing to the CTA, and after rendering an unfavourable

decision, the taxpayer may file a motion for reconsideration of said decision
within 15 days from receipt of the decision to the Court of Tax Appeals sitting in
Division. Thereafter, if the decision is still unfavourable, to the CTA En Banc.

Thereafter, if the CTA En Banc also renders an unfavourable decision, the

taxpayer is given the remedy to file a petition for certiorari to the Supreme Court
under Rule 65 of the Rules of Court. It must be noted that only grave abuse of
discretion amounting to lack or excess of jurisdiction can be a ground for this
petition. Thus, objections to assessments should be raised, by means of ample
remedies afforded to the taxpayer by the Tax Code, to the BIR as well as the
CTA, not via petition for certiorari.

In this regard, it can be deduced from the foregoing discussion that there
are several instances where the final assessment becomes final and executory,
these are:

1) When the protest is not filed on time;

2) When the supporting documents were not filed within the 60-day period;
3) When no appeal was filed to the CTA within 30 days after the lapse of the
180-day period; and
4) When there was an appeal filed but such was beyond the period to
appeal.