CIR v. Pascor Realty
June 29, 1999 | Panganiban, J. | Definition of Assessment
PETITIONERS: Commissioner of Internal Revenue
RESPONDENTS: Pascor Realty and Development Corporation, Rogelio A. Dio, Virginia S.
Dio
SUMMARY
Revenue officers, authorized by CIR, found Pascor liable for tax deficiency. CIR, instead of
issuing an assessment, filed a criminal complaint against Pascor with the DOJ for tax
evasion. CIR attached to the criminal complaint an affidavit executed by revenue officers
stating the tax liabilities of a Pascor. Pascor filed an MR of the tax evasion charges with
the CIR. CIR denied MR on the ground that no formal assessment has as yet been issued
by the CIR. Pascor filed a protest with the CTA, arguing that the affidavit attached to the
criminal complaint is tantamount to a formal assessment notice, hence, can be subjected
to protest. CTA ruled in favor of Pascor, holding that the joint affidavit attached to the
complaint submitted to the DOJ constitutes an assessment. SC ruled in favor of CIR,
holding that the joint affidavit attached to the complaint submitted to the DOJ cannot be
deemed an assessment that can be questioned before the CTA. The purpose of the joint
affidavit was merely to support and substantiate the criminal complaint for tax evasion. It
was not meant to be a notice of the tax due and a demand to the Pascor for payment
thereof.
DOCTRINE
 An assessment contains:
o a computation of tax liabilities; and
o a demand for payment within a prescribed period.
 An assessment signals the time when penalties and interests begin to accrue the
taxpayer.
o To enable the taxpayer to determine his remedies thereon, due process
requires that it must be served on and received by the taxpayer
FACTS
1. CIR authorized revenue officers to examine the books of accounts and other
accounting records of Pascor.
2. The revenue officers recommended the issuance of an assessment against
Pascor.
3. CIR opted instead to file a criminal complaint against Pascor with the DOJ for tax
evasion.
o Attached to the criminal complaint was a joint affidavit executed by the
revenue officers.
 It merely contained a computation of Pascor’s tax liability.
 It did not state a demand or a period for payment.
 It was addressed to the justice secretary, not to the taxpayers.
4. Pascor received a notice from the DOJ that a criminal case for tax evasion had
been filed against them.
5. Pascor filed an MR of the tax evasion charges with the CIR.
6. CIR: denied MR on the ground that no formal assessment has as yet been issued
by the CIR.
7. Pascor filed a protest with the CTA, arguing:
o that the affidavit attached to the criminal complaint is tantamount to a
formal assessment notice (FAN), hence, can be subjected to protest;
o that there is a simultaneous assessment and filing of criminal case;
o that the same is contrary to due process because it is its theory that an
assessment should come first before a criminal case of tax evasion
should be filed.
8. CIR filed a MTD on the following grounds:
o that the CTA has no jurisdiction over the case because the CIR has not
yet issued a FAN against Pascor;
o that the affidavit attached to the complaint is not a FAN;
o that since there is no FAN, there cannot be a valid subject of a protest.
9. CTA: denied the MTD.
o the joint affidavit attached to the complaint submitted to the DOJ
constitutes an assessment;
o an assessment is defined as simply the statement of the details and the
amount of tax due from a taxpayer;
o therefore, the joint affidavit which contains a computation of the tax
liability of Pascor is in effect an assessment which can be the subject of
a protest.
10. CA: affirmed CA.
11. CIR filed a petition for review on certiorari with the SC, arguing:
o that the filing of the criminal complaint with the DOJ cannot, in any way,
be construed as a formal assessment of Pascor’s tax liabilities.
o Sec. 205, NIRC, provides that remedies for the collection of deficient
taxes may be by either civil or criminal action.
o Sec. 223(a), NIRC, states that in case of failure to file a return, the tax
may be assessed or a proceeding in court may be begun without
assessment.
ISSUES/HELD
1. W/N the revenue officers’ affidavit-report, which was attached to the criminal
complaint filed with the DOJ, constituted an assessment that could be
questioned before the CTA.—NO
2. W/N the filing of a criminal complaint must be preceded by an assessment—NO
  The purpose of the joint affidavit was merely to support and substantiate the
RATIO criminal complaint for tax evasion.
 An assessment contains not only a computation of tax liabilities, but also a o Clearly, it was not meant to be a notice of the tax due and a demand to
demand for payment within a prescribed period. the Pascor for payment thereof.
 It also signals the time when penalties and interests begin to accrue against the  An assessment not necessary before the filing of a criminal complaint.
taxpayer. o Sec. 222, NIRC specifically states that in cases where a false or
 To enable the taxpayer to determine his remedies thereon, due process requires fraudulent return is submitted or in cases of failure to file a return,
that it must be served on and received by the taxpayer. proceedings in court may be commenced without an assessment.
 Accordingly, an affidavit, which was executed by revenue officers stating the tax o Sec. 205, NIRC clearly mandates that the civil and criminal aspects of the
liabilities of a taxpayer and attached to a criminal complaint for tax evasion, case may be pursued simultaneously.
cannot be deemed an assessment that can be questioned before the CTA.
 NIRC defines the specific functions and effects of an assessment: DISPOSITIVE
o An assessment must be sent to and received by a taxpayer, and must Petition granted; assailed decision is reversed and set
demand payment of the taxes described therein within a specific period. aside.
 Thus, the NIRC imposes a 25 percent penalty, in addition to the
tax due, in case the taxpayer fails to pay the 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
rate as may be prescribed by rules and regulations, is to be
collected from the date prescribed for its payment until the full
payment
o 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.
 Sec. 203, NIRC provides that internal revenue taxes must be
assessed within three years from the last day within which to
file the return.
 Sec. 222, 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, Sec. 228 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.
o 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.
 The said affidavit-report is a notice duly sent to the taxpayer.
o An assessment is deemed made only when the CIR releases, mails or
sends such notice to the taxpayer.

CIR v CA, Atlas Consolidated Mining and CTA
March 10, 1995 | Regalado, J. | Presumption of Regularity of Assessment
PETITIONERS:COMMISSIONER OF INTERNAL REVENUE
RESPONDENTS: COURT OF APPEALS, ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION and COURT OF TAX APPEALS
SUMMARY
Atlas Consolidated Mining and Development Corporation (ACMDC) was assessed of
deficiency ad valorem percentage and fixed taxes by the CIR. ACDMC protested the
assessments. CTA reduced its tax liability ruling that it’s not liable for deficiency ad
valorem taxes on copper and silver. It also allowed the deduction of refining and smelting
charges from the price of copper concentrates. SC upheld the assessments made by the
CTA and ruled that it was correct on the manner of computing the valorem tax.
DOCTRINE
The charges for smelting and refining were assessed not on the basis of the price of the
copper extracted at the mine site which is prohibited by law, but on the basis of the actual
market value of the manufactured copper which in this case is the price quoted for copper
wire bar by the London Metal Exchange.The challenged assessment against ACMDC for
contractor's tax must be upheld.
FACTS
1. Atlas Consolidated Mining and Development Corporation (ACMDC) is a domestic
corporation which owns and operates a mining concession at Toledo City, Cebu,
the products of which are exported to Japan and other foreign countries. ACMDC
was notified of its deficiency ad valorem percentage and fixed taxes for taxable
year 1975 (P12.3M) and 1976 (P13.5M) by the Commissioner of Internal
Revenue. ACMDC protested both assessments but same were denied.
Court of Tax Appeals: ACMDC was not liable for deficiency ad valorem taxes on copper
and silver for 1975 and 1976 in the respective amounts of P11,276,540.79 and
P12,882,760.80, that in computing the ad valorem tax on copper mineral, the refining and
smelting charges should be deducted, in addition to freight and insurance charges, from
the London Metal Exchange (LME) price of manufactured copper. But ACMDC is liable to
pay 25% surcharge for late payment of ad valorem tax and late filing of notice of removal
of silver, gold and pyrite extracted during certain periods, and for alleged deficiency
manufacturer's sales tax and contractor's tax.
CA affirmed CTA on on the manner of computing the ad valorem tax.
CIR: CTA and CA erred in allowing the deduction of refining and smelting charges from the
price of copper concentrates. Actual market value of the mineral products should be the
gross sales realized from copper concentrates, deducting therefrom mining, milling,
refining, transporting, handling, marketing or any other expenses.
ISSUES/HELD
WON the CTA was correct on the manner of computing the ad valorem tax - YES
RATIO
According to Sec. 243 and 246 of NIRC as to computing the ad valorem tax, the term
"gross output" shall be the actual market value of minerals or mineral products, or of
bullion from each mine or mineral lands operated as a separate entity, without any
deduction for mining, milling, refining, transporting, handling, marketing or any other
expenses. Such assessment shall be based, not upon the cost of production or extraction
of said minerals or mineral products, but on the price which the same — before or
without undergoing a process of manufacture — would command in the ordinary course
of business.
The allowance by the tax court of smelting and refining charges as deductions is not
contrary to the tax code which ostensibly prohibit any form of deduction except freight
and insurance charges. The charges for smelting and refining were assessed not on the
basis of the price of the copper extracted at the mine site which is prohibited by law,
but on the basis of the actual market value of the manufactured copper which in this
case is the price quoted for copper wire bar by the London Metal Exchange.
Tax statutes are to receive a reasonable construction with a view to carrying out their
purposes and intent. They should not be construed as to permit the taxpayer to easily
evade the payment of the tax. The challenged assessment against ACMDC for contractor's
tax must be upheld.
DISPOSITIVE
CA affirmed. Exempt Atlas Consolidated Mining and Development Corporation, petitioner
in G.R. No. 105563 of this Court, from the payment of manufacturer's sales tax, surcharge
and interest during the taxable year 1975.

Basilan Estates, Inc. v. CIR, G.R. No. L-22492, September 5, 1967
Basilan Estates v CIR
Assessments deemed made
SUMMARY. Taxpayer filed ITR on March 24, 1954. On February 26, 1959, the CIR
assessed taxpayer for deficiency income tax. Taxpayer claims that it never
received notice of such assessment or if it did, it received the notice beyond the
five-year prescriptive period. SC ruled in favor of CIR. Presumption of regularity in
performance of duties. Also, even granting that notice had been received by the
petitioner late, as alleged, under Section 331 of the Tax Code requiring five years
within which to assess deficiency taxes, the assessment is deemed made when
notice to this effect is released, mailed or sent by the Collector to the taxpayer
and it is not required that the notice be received by the taxpayer within the
aforementioned five-year period.
DOCTRINE. Under Section 331 of the Tax Code requiring 5 years within which to
assess deficiency taxes, the assessment is deemed made when notice to this
effect is released, mailed or sent by the Collector of Internal Revenue to the
taxpayer, and it is not required that the notice be received by the taxpayer within
the aforementioned 5 year period.
Facts:
Basilan Estate, Inc. a Philippine corporation engaged in coconut industry filed in
March 24, 1954 its income tax returns for 1953 and paid an income tax of P8,028.
On February 26, 1959, the Commissioner of Internal Revenue, assessed Basilan
Estates, Inc for deficiency income tax
On non-payment of the assessed amount, a warrant of distraint and levy was
issued on December 2, 1960.
Basilan Estate, Inc. filed before the Court of Tax Appeals a petition for review of
the following:
a. prescription of the period of assessment and collection (topic)
b. error in disallowing claimed
c. error in disallowing travelling & miscellaneous expenses
d. error in finding the existence of unreasonably accumulated profits
Issue: WON notice is personal notice is required within the 5 year prescriptive
period? NO
Ratio:
There is no dispute that the assessment of the deficiency tax was made on
February 26, 1959; but the petitioner claims that it never received notice of such
assessment or if it did, it received the notice beyond the five-year prescriptive
period. To show prescription, the annotation on the notice “No accompanying
letter 11/25/" is advanced as indicative of the fact that receipt of the notice was
after March 24, 1959, the last date of the five-year period within which to assess
deficiency tax, since the original returns were filed on March 24, 1954.
Although the evidence is not clear on this point, We cannot accept this
interpretation of the petitioner, considering the presence of circumstances that
lead Us to presume regularity in the performance of official functions.
The notice of assessment shows the assessment to have been made on February
26, 1959, well within the five-year period. On the right side of the notice is also
stamped "Feb. 26, 1959" — denoting the date of release, according to Bureau of
Internal Revenue practice. The Commissioner himself in his letter answering
petitioner's request to lift, the warrant of distraint and levy, asserts that notice
had been sent to petitioner. In the letter of the Regional Director forwarding the
case to the Chief of the Investigation Division which the latter received on March
10, 1959, notice of assessment was said to have been sent to petitioner.
Subsequently, the Chief of the Investigation Division indorsed on March 18, 1959
the case to the Chief of the Law Division. There it was alleged that notice was
already sent to petitioner on February 26, 1959. These circumstances pointing to
official performance of duty must necessarily prevail over petitioner's contrary
interpretation.
Even granting that notice had been received by the petitioner late, as alleged,
under Section 331 of the Tax Code requiring five years within which to assess
deficiency taxes, the assessment is deemed made when notice to this effect is
released, mailed or sent by the Collector to the taxpayer and it is not required
that the notice be received by the taxpayer within the aforementioned five-year
period.
 REPUBLIC v. CA and NIELSON & COMPANY, INC. April 30, 1987 | J. Padilla
SUMMARY
CIR sent via mail a demand letter assessing Nielson deficiency taxes for 1949-1952. The
CIR sent 3 more letters to follow up said assessment. Since Nielson did not contest the
assessment before the CTA, CIR filed a collection suit before the CFI against Nielson for
the unpaid taxes. CFI (after some procedural issues—see FACTS 4-6) eventually ordered
Nielson to pay. However, the CA reversed on the theory that it was not established that
the first demand letter had been in fact received by Nielson. The SC reversed the CA,
holding that while it was indeed incumbent upon the CIR to prove that the demand letter
was actually received (and that it failed to do so), the follow-up letter (which Nielson does
admit to have received) nevertheless constituted a notice of assessment, which became
final upon Nielson’s failure to appeal.
DOCTRINE: See RATIO 4
FACTS
1. In a demand letter, dated 16 July 1955, the Commissioner of Internal Revenue assessed
private respondent deficiency taxes for the years 1949 to 1952, totalling P14,449.00. The
CIR reiterated its demand, per letters dated 24 April 1956, 19 September 1956, and 9
February 1960.
2. Nielson did not contest the assessment in the Court of Tax Appeals.
3. On the theory that the assessment had become final and executory, CIR filed a complaint
for collection of the said amount with CFI Manila.
4. However, for failure to serve summons upon Nielson, the complaint was dismissed,
without prejudice, in the Court's order dated 30 June 1961.
5. On motion, the order of dismissal was set aside, at the same time giving petitioner sixty
(60) days within which to serve summons, but CIR failed to do so again, so the CFI issued
an order dated 4 October 1962 dismissing the case without prejudice. The order of
dismissal became final on 5 November 1962.
6. On 15 November 1962, the complaint was re-filed, BUT erroneously docketed as Civil Case
No. 42911 (same as the first case). Without correcting this error, another complaint was
filed on 26 November 1963, docketed as Civil Case No. 55817, the subject matter of the
present appeal.
7. In Civil Case No. 55817, the CFI ordered Nielson to pay the Government the amount of
P11,496.00 as ad valorem tax, occupation fees, additional residence tax and 25%
surcharge for late payment, for the years 1949 to 1952.
8. CA reversed and denied the MR.
9. CIR’s position
a. Following Rules of Court Section 8, Rule 13 and Section 5(m) and (v), the
very first demand letter (16 July 1955) must be considered to have been
received by Nielson. It showed an imprint indicating that the original
thereof was released and mailed on 4 August 1955 by the Chief, Records
Section of the Bureau of Internal Revenue, and that the original letter
was not returned.
b. If service is made by ordinary mail, unless the actual date of receipt is
shown, service is deemed complete and effective upon the expiration of
five (5) days after mailing.
c. As the letter of demand dated 16 July 1955 was actually mailed to
private respondent, there arises the presumption that the letter was
received by private respondent in the absence of evidence to the
contrary
ISSUE/HELD
Was there a valid notice of assessment? YES, and as a result, this triggered the 30-day
period to appeal, BUT Nielson failed to contest the assessment during such period.
RATIO
1. While CIR is correct that a mailed letter is deemed received by the addressee in the
ordinary course of mail, stilt this is merely a disputable presumption, subject to
controversion, and a direct denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter was indeed received by the
addressee.
2. IN THIS CASE, there was no such admission made by Nielson to the effect that he received
the mailed notice of assessment. Since CIR has not adduced proof that Nielson had in fact
received the demand letter of 16 July 1955, it cannot be assumed that Nielson did in fact
receive it.
3. HOWEVER, the follow up letter dated 19 September 1956 was admittedly received by
Nielson. This follow-up letter is considered a notice of assessment in itself.
4. Under Section 7 of Republic Act No. 1125, the assessment is appealable to the Court of
Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer's failure to
appeal in due time makes the assessment in question final, executory and demandable.
5. IN THIS CASE, Nielson failed to appeal the assessment within the said period. Thus,
Nielson is now barred from disputing the correctness of the assessment or from invoking
any defense that would reopen the question of its liability on the merits.
6. Mamburao Lumber Co. vs. Republic: In a suit for collection of internal revenue taxes
where the assessment has already become final and executory, the action to collect is
akin to an action to enforce a judgment. No inquiry can be made therein as to the merits
of the original case or the justness of the judgment relied upon.
DISPOSITIVE
ACCORDINGLY, the appealed decision is hereby reversed. The decision of the Court a quo
is hereby reinstated. No costs.
 Gonzalo P. NAVA v. CIR
January 30, 1965 | JBL Reyes | Assessments deemed made
SUMMARY: On March 30, 1955, Nava was assessed for deficiency income taxes for his
1950 income. (SEE underlined parts of FACT #3). Nava claims prescription. CTA ruled that
there was none. SC agreed with Nava since the Collector could not prove that the
assessments were served on Nava within the period of prescription (SEE RATIO 1
underlined part for specific details).
DOCTRINES
1. Deficiency income tax assessments cannot be enforced where the tax collector
cannot prove that said assessments were served on the taxpayer within the
period of prescription provided by law.
2. The presumption that a letter duly directed and mailed was received in the
regular course of mail cannot apply where none of the required facts to raise this
presumption, i.e. that the letter was properly addressed with postage prepaid
and that it was mailed, have been shown.
3. Mere notations on the records of the tax collector of the mailing of a notice of a
deficiency tax assessment to a taxpayer, made without the taxpayer's
intervention, notice or control, and without adequate supporting evidence,
cannot suffice to prove that such notice was sent and received; otherwise, the
taxpayer would be at the mercy of the revenue officers, without adequate
protection and defense.
FACTS
1. May 15, 1951 → Nava filed his income tax return (ITR) for 1950, and was
assessed by Commissioner (COMM) (now Collector) in the sum of P4,952.00,
based solely on said return. Nava paid ½ of the tax due, leaving a balance of
P2,491.00. Nava offered his backpay certificate to pay said balance, but COMM
refused.
2. July 28, 1953 → Nava requested the COMM to hold in abeyance the collection of
said balance until the question of W/N he was entitled to pay the same out of his
backpay shall have been decided, but this was also rejected by COMM, followed
by 2 more letters or notices demanding payment of the balance thereof, the last
of which was dated February 22, 1955.
3. March 30, 1955 → Collector issued a deficiency income tax assessment notice
requiring petitioner to pay not later than April 30, 1955 the sum of P9,124.50,
that included the balance of P2,491.00, still unpaid under the original
assessment, plus a 50% surcharge. Several notices of this revised assessment are
alleged to have been issued to the taxpayer, but Nava claims to have learned of it
for the first time on December 19, 1956, more than five years since the original
tax return was filed. In a letter, Nava asserted that more than 6 years had
elapsed, protested the assessment, and contended that it was a closed issue. The
Director insisted upon his demand that the new assessment be paid (registered
letter of Mach 25, 1957). Nava asked for reconsideration, and on June 16, 1958
was informed that reinvestigation would be granted provided the taxpayer
waived the statute of limitations, a condition that was rejected. The
reconsideration of the assessment was denied by the Collector's letter of July 22,
1958 , and on August 8, 1958 Nava filed a petition for review with the CTA. The
latter reduced the deficiency to P3,052.00, and cancelled the 50% surcharge.
Nava appealed to SC.
ISSUE/HELD/DISPOSITIVE: W/N the enforcement of the tax assessment has prescribed →
Yes (CTA: No). CTA Reversed
RATIO
1. [SC on why CTA is wrong] CTA relied mainly on the duplicate copy of the
deficiency income tax notice found in the BIR file of petitioner Nava. On the
corresponding blank space for the date of issue of said duplicate copy was typed
"3/30/55". Nava denied having received the original copy of the said notice. The
Revenue Commissioner, on the other hand, presented a witness (Mr. Pablo
Sangil, an employee [clerk] of the B.I.R.) who attempted to establish that the
original copy thereof was actually issued on March 30, 1955. This witness,
however, disclaimed having personal knowledge of its issuance or release on said
date either by mail or personal delivery because, according to him, he was
assigned in the income tax section of the BIR in October, 1956 only. Sangil also
declared that there is no notation whatsoever in said file copy nor even a slip of
paper attached to the records, to show that the original copy of said exhibit was
ever actually issued or sent to the taxpayer. He even admitted that he had no
hand in the preparation or sending of written notices or demand letters of the
BIR to the taxpayers, his duties being merely to keep the dockets of taxpayers
pertaining to income tax, to post and transmit papers to the other branches of
the Bureau of action, and to keep letters of taxpayers, memorandum and other
official matters. Respondent presented another witness, Mr. Eliseo B. Fernandez,
whose duties, as record clerk of the Records Control Section of the BIR since
1957 (already past the limitation period of this case), are to send mail and to
keep a record book of letters which are mailed to the taxpayers. He only declared
as to the fact that there appears in his record book a note that a letter dated
March 15, 1957 was mailed by special delivery with return card to Gonzalo P.
Nava. He admitted, however, that he was not the one who prepared such entry
in the record book. What was the nature of the letter does not appear; at any
rate, it was mailed beyond the 5-year limitation period. CTA also relied on the
supposed notices noted in ink (followed by an illegible initial) in Exhibit "3" for
respondent, the first of which was purportedly sent on April 10, 1956, the second
 on July 3, 1956, and the final one on August 25, 1956, as well as on the supposed
"call-up" or demand letters referred to in a memorandum of an agent of BIR. No Republic v. Ricarte
witness for the respondent testified to the issuance or sending of any of these
supposed written demand letters or notices, nor was there any duplicate or even Nov. 12, 1985 | Makasiar, CJ. | Assessments; Deemed Made
a simple copy thereof found in petitioner Nava's Bureau of Internal Revenue file.
Although witness Sangil testified as to the meaning of the dates noted in Exhibit Pets: Republic of the Philippines
"3", his testimony cannot be given much credence because those supposed Resp: Francisco Ricarte
notices were sent on or before August 25, 1956 at the latest, and, as pointed out,
the witness was assigned in the income tax section of the Bureau of Internal Summary:
Revenue since October, 1956 only. Thus, respondent utterly failed to prove by Defendant filed and paid his income taxes for the year of 1958. After a reinvestigation by
substantial evidence that the assessment notice dated March 30, 1955 and the the BIR, it was found that there was a tax deficiency. Defendant failed to pay it, leading to
other supposed written demand letters or notices subsequent thereto were in the present suit. The city court dismissed the complaint due to the action having
fact issued or sent to Nava. [SEE DOC 2] prescribed, as the suit was filed in 1966. On appeal, the CFI also dismissed the case,
2. Since none of these requirements have been shown, there has been no valid declaring that the BIR mistakenly used a different law not yet enacted to assess his alleged
and effective issuance or release of said deficiency income tax assessment tax liability. The Court held that action has prescribed, as plaintiff failed to prove that
notice dated March 30, 1955 and of the other demand letters or notices notice of the 1961 assessment was received by the defendant, meaning that prescription
subsequent thereto, the latest of which was purportedly sent on August 25, began to run in 1959.
1956, and these dates cannot be reckoned with in computing the period of
prescription within which a court action to collect the same may be brought. The
Doctrine: Ratios 3 & 7
fact that in Exhibit "E" Nava acknowledged receipt of the second final notice
personally delivered to him is no proof that he received the first notice by mail.
There is a difference between receiving a second final notice and receiving a final
Facts:
1. On March 2 1959, Francisco Ricarte filed his income tax return for 1958. The
notice for the second time.
Office of the CIR made the assessment, fixing liability at P222 as the income tax
3. Since Nava's 1950 ITR was made on May 15, 1951, and no valid and effective
liability (pursuant to then sec. 51(a) of Commonwealth Act 466). Ricarte paid via
notice of the re-assessment having been made against the petitioner after that
2 equal installments on May 15th and August 17th.
date (May 15, 1951), the period under Section 331 of the Tax Code within
2. On June 20th, RA 2343 took effect. Its amendment provided that the taxpayer
which to make a re-assessment expired on May 15, 1956. Since the notice of
assesses, files his return and pays the amount reflected in said return upon filing.
said deficiency income tax was effectively made on December 19, 1956 at the
3. The BIR conducted an investigation. In 1961, it found that Ricarte had a
earliest, the judicial action to collect any deficiency tax on Nava's 1950 income
deficiency of P1,136.87. It sent Ricarte a notice of the deficiency, coupled w/ the
tax return has already prescribed under Section 332 (c) of the Tax Code, it
corresponding audit sheet and letter of demand via mail. Ricarte failed to pay, so
having been found by the Tax Appeals court that said return was not false or
a suit was filed against him in 1966, for collection of unpaid taxes in the City
fraudulent.
Court of Cebu.
4. While an assessment is made when sent within the prescribed period, even if
4. City Court: case DISMISSED; action’s prescribed, seeing as the assessment was
received by the taxpayer after its expiration (CIR vs Bautista), this ruling makes it
made by the BIR on April 1959 and the present case was filed on January 1966
the more imperative that the release, mailing, or sending of the notice be clearly
(beyond 5 years).
and satisfactorily proved. (SEE DOC 3) Since action to collect said deficiency
5. On appeal to the CFI, the parties entered a stipulation of facts. This revealed that
income tax has already prescribed, it is unnecessary to discuss the other issues
respondent was an arrastre contractor, that copies of the notice of assessment
raised.
w/ pertinent documents was sent to respondent by mail, and that he had been
given opportunities to explain the deficiency thru letters and call-letters but
remains to do so.
6. CFI: complaint DISMISSED; what the BIR sought to collect from appellee was
based on an assessment which the Bureau made under the provisions of a new
 law, R.A. No. 2343, which was not yet in effect at the time of the filing of
appellee's income tax return for 1958.
Issues/Held:
1. W/N the appellant can still collect the alleged deficiency income tax liability thru
judicial proceeding? NO
Ratio:
1. It may be pointed out that before the amendment of the tax code, Section 51(a)
relating to payment and assessment of income tax, prescribed…Sec. 51.
Assessment and payment of income tax.-(a) An assessment shall be
made by the Collector of Internal Revenue and all persons and corporations
subject to tax shall be notified of the amount for which they are respectively
liable on or before the first day of May of each successive year.
2. HOWEVER, as amended by R.A. No. 2343, effective on June 20, 1959, it now
reads: sec. 51. Payment and assessment of income tax.—(a) Payment of tax.—
(1) In general.-The total amount of tax imposed by this Title shall be paid at the
time the return is filed but not later than the fifteenth day of April following the
close of the calendar year, ... ...xxx...(b) Assessment and payment of
deficiency tax.—After the return is filed the Commissioner of Internal Revenue
shall examine it and assess the correct amount of the tax. The tax or deficiency in
tax so discovered shall be paid upon notice and demand from the Commissioner
of Internal Revenue.
3. Clearly, before the amendment, the taxpayer files his income tax return and the
Collector (now Commissioner) of Internal Revenue assesses the tax due and
notifies the taxpayer thereof. On the other hand, under the amendatory act, the
taxpayer assesses himself, files his return and is required to pay the tax as shown
in his return upon filing thereof. This procedure is commonly known as the "pay-
as-you-file" system. In other words, under the old law, the Collector of Internal
Revenue was required to assess the tax due, while under R.A. No. 2343 the
taxpayer himself computes the tax on the basis of the figures appearing in his
income tax return.
4. We do not agree with the former Court of First Instance of Cebu that the
subsequent assessment made on January 19, 1961 was based on the amendatory
act. Appellee filed his income tax return for the year 1958 on March 2, 1959 and
the same was assessed by the Bureau of Internal Revenue on April 6, 1959. The
tax was paid in two installments. The Bureau of Internal Revenue reviewed the
said return and found out a deficiency in the assessment it previously made and
the income tax paid by the appellee. A notice of assessment was sent to the
appellee on January 19, 1961. Such subsequent assessment undertaken by the
Bureau of Internal Revenue was based merely on the income tax return filed by
the appellee where no assessment has been made by him. As has been said, the
amount of tax due was previously computed by the Bureau of Internal Revenue.
Finding that it made an error, the Bureau reassessed the income tax return of the
appellee; but such reassessment was made pursuant to the old law and not
under the amendatory act.
5. However, We agree with the lower court that the present action was filed after
the prescriptive period of five (5) years provided for in Section 332(c) of the
National Internal Revenue Code.
6. Appellant asseverates that the present action was filed within the five-year
prescriptive period provided for under the abovequoted provision of the tax
code; that the subsequent notice of assessment was made and appellee notified
thereof on January 19, 1961; that from January 19, 1961 up to the date this case
was filed in court on January 14, 1966, only four years, eleven months and
twenty-five days had elapsed.
7. Although a subsequent notice of assessment was allegedly made and sent to
appellee on January 19, 1961, it was the finding both of the former City Court of
Cebu and the defunct Court of First Instance of Cebu that no evidence has been
presented by the appellant that the appellee actually received a copy of that
assessment notice regarding the alleged deficiency tax. Such finding, being one
of fact, can no longer be reviewed by this Court. Even in the stipulation of facts
entered into between the parties, there is no stipulation showing that the
appellant actually received the subsequent notice of assessment. Thus, the
prescriptive period provided for in Section 332(c) of the tax code should be
counted from April 6, 1959, the date when the Bureau of Internal Revenue
assessed the income tax return of the appellant. From said date until the filing of
this case on January 14, 1966, six years and nine months had elapsed. Verily, the
action had already prescribed.
Dispositive: Appealed Decision affirmed w/ no costs.
Tambunting Pawnshop v CIR of Value Added Tax from non-bank financial intermediaries was
specifically deferred by law, Petitioner is not liable for Value Added Tax
Jan. 21, 2010 | Carpio-Morales, J. | Waive of Penalties during these tax years.
PETITIONERS: Tambunting Pawnshop 2. With the full implementation of the Value Added Tax system on non-bank
RESPONDENTS: CIR financial intermediaries starting January 1, 2003, Petitioner is liable for
SUMMARY: 10% Value Added Tax for said tax year. And beginning 2004 up to the
Tambunting was assessed for deficiency VAT anad DST. CTA held Tambunting present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT
liable for the DST. Before the SC, Tambunting argued against its liability for but it is subject to percentage tax on gross receipts from 0% to 5%, as the
surcharges and interest on the ground that it was in good faith in not paying the case may be.
DST, since it it relied on the rulings of the CIR and CTA that pawn tickets are not
subject to documentary stamp tax. SC held good faith and honest belief that one
is not subject to tax on the basis of previous interpretations of government
agencies tasked to implement the tax law are sufficient justification to delete the
imposition of surcharges and interest.
DOCTRINE:
Good faith and honest belief that one is not subject to tax on the basis of previous
interpretations of government agencies tasked to implement the tax law are
sufficient justification to delete the imposition of surcharges and interest
Facts:
1. Tambunting was assessed for deficiency VAT and DST.
2. Tambunting protested the assessment but received no response, so it
filed a petition for review with the TCA.
3. One of the issues that Tambunting raised was that pawn tickets are not
subject to documentary stamp tax pursuant to existing laws and
jurisprudence.
4. CTA ruled that it was liable for documentary stamp tax.
5. Before the SC, Tambunting argued against its liability for surcharges and
interest on the ground that it was in good faith in not paying the DST,
since it relied on the rulings of the CIR and CTA that pawn tickets are not
subject to documentary stamp tax.
Issue: WON the surcharges and interest can be waived? Yes
Ratio:
1. The Court held that good faith and honest belief that one is not subject to
tax on the basis of previous interpretations of government agencies
tasked to implement the tax law are sufficient justification to delete the
imposition of surcharges and interest.
Other issue: Is petitioner liable for VAT? No
1. NO. Since Petitioner is considered a non-bank financial intermediary, it is
subject to 10% VAT for the tax years 1996 to 2002 but since the collection
ILOILO CITY v SMART COMMUNICATIONS, INC
27 February 2009 | Brion | Waiver of Penalties | LIM
SUMMARY
ILOILO assessed SMART for deficiency local franchise and business taxes. SMART argued
that it was exempted, based on the interpretation of certain laws as well as on a letter-
opinion from the DoF’s Bureau of Local Government Finance (BLGF). SC held SMART
liable. On the issue of surcharges/penalties, SC held that SMART is also liable because …
DOCTRINE
The settled rule is that good faith and honest belief that one is not subject to tax on the
basis of previous interpretation of government agencies tasked to implement the tax laws
are sufficient justification to delete the imposition of surcharges and interest [SAME
doctrine in Tambunting v CIR].
As applied, it was wrong for SMART to have relied on the BLGF advisory since it is not
charged with the authority to interpret tax laws, unlike the BIR. [In Tambunting, the
taxpayer relied on the rulings of the CTA and CIR. Thus while the latter were wrong, the
taxpayer was not held liable for surcharges/”waiver of penalty”].
FACTS
1. ILOILO assessed SMART for deficiency local franchise and business taxes, in the
amount of P764,545.29 (for years 1997 to 2001).
2. SMART protested, claiming exemption from payment of local franchise and
business taxes based on §9, RA 7294 (SMART’s franchise) and §23 RA 7925
(Public Telecommunications Policy Act).
3. SMART says that its interpretation of these laws is correct, while ILOILO says that
SMART is wrong.
4. SMART argues : that it relied in good faith on the letter-opinion of the BLGF
which said that SMART should be considered exempt from local franchise tax
pursuant to LGC §137. Thus, assuming the SC holds SMART liable for the
deficiency assessment, SMART should be exonerated from surcharges and
interest.
2. SMART cannot be said to have relied in good faith in the findings and conclusion
of the BGLF, which would allegedly be cause for deletion of surcharges and
interest.
3. PLDT v Davao (2001) : “we do not find BLGF’s interpretation of local tax laws to
be authoritative and persuasive. The BLGFs function is merely to provide
consultative services and technical assistance to the local governments and the
general public on local taxation, real property assessment, and other related
matters. Unlike the CIR who has been given the express power to interpret the
Tax Code and other national tax laws, no such power is given to the BLGF.
SMART’s dependence on BLGF’s interpretation was thus misplaced.”
FALLO
Pet. GRANTED, SMART liable to pay the local franchise and business taxes amounting to
P764,545.29 plus the surcharges and interest due thereon.
NOTES
§9 RA 7294 : Tax provisions. x x x the grantee shall pay a franchise tax equivalent to 3% of all gross receipts of
the business transacted under this franchise by the grantee, and the said percentage shall be in lieu of all taxes
on this franchise or earnings thereof x x x
§23 RA 7295 : Equality of Treatment in the Telecommunications Industry. Any advantage, favor, privilege,
exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become
part of previously granted telecommunications franchise and shall be accorded immediately and unconditionally
to the grantees of such franchises x x x.

ISSUES/HELD
WON SMART is liable for deficiency local taxes - YES
1. SC held for ILOILO, mainly because the “in lieu of all taxes” clause in §9, RA 7294 is ambiguous,
and because it is a tax exemption, should be construed strictissima juris against the taxpayer.

[TOPIC] WON SMART is liable for surcharges and interest too - YES
1. Because SMART is liable for deficiency local taxes, it should also be made to pay
surcharge and interests on the taxes due.