Tax Remedies under NIRC

III.
Tax Remedies under the NIRC

1. Taxpayer’s remedies
The Commissioner of Internal Revenue issued a BIR ruling to the effect that the transaction is liable to income tax and
value added tax. Upon receipt of the ruling, a taxpayer does not agree thereto. What is his proper remedy? (2012 BAR)
a) File a petition for review with the Court of Tax Appeals within thirty (30) days from receipt thereof;
b) File a motion for reconsideration with the Commissioner of Internal Revenue;
c) File an appeal to the Secretary of Finance within thirty (30) days from receipt thereof;
d) File an appeal to the Secretary of Justice within thirty (30) days from receipt thereof.
SUGGESTED ANSWER:
c) File an appeal to the Secretary of Finance within thirty (30) days from receipt thereof Section 4, NIRC.
Describe separately the procedures on the legal remedies under the Tax Code available to an aggrieved taxpayer both at
the administrative and judicial levels. (5%)
SUGGESTED ANSWER:
The legal remedies of an aggrieved taxpayer under the Tax Code, both at the administrative and judicial levels, may be classified into
those for assessment, collection and refund.
The procedures for the administrative remedies for assessment are as follows:
- After receipt of the Pre-Assessment Notice, he must within fifteen (15) days from receipt explain why no additional taxes should
be assessed against him.
- If the Commissioner of Internal Revenue Issues an assessment notice, the taxpayer must administratively protest or dispute the
assessment by filing a motion for reconsideration or reinvestigation within thirty (30) days from receipt of the notice of
assessment. (4th par., Sec. 228, NIRC of 1997)
Within sixty (60) days from filing of the protest, the taxpayer shall submit all relevant supporting documents.
The judicial remedies of an aggrieved taxpayer relative to an assessment notice are as follows:
- Where the Commissioner of Internal Revenue has not acted on the taxpayer’s protest within a period of one hundred eighty
(180) days from submission of all relevant documents, then the taxpayer has a period of thirty (30) days from the lapse of said
180 days within which to interpose a petition for review with the Court of Tax Appeals.
- Should the Commissioner deny the taxpayer's protest, then he has a period of thirty (30) days from receipt of said denial within
which to interpose a petition for review with the Court of Tax Appeals.
In both cases the taxpayer must apply with the Court of Tax Appeals for the issuance of an injunctive writ to enjoin the Bureau of Internal
Revenue from collecting the disputed tax during the pendency of the proceedings.
The adverse decision of the Court of Tax Appeals is appealable to the Court of Appeals by means of a petition for certiorari within a period
of fifteen (15) days from receipt of the adverse decision, extendible for another period of fifteen (15) days for compelling reasons, but the
extension is not to exceed a total of thirty (30) days in all. The adverse decision of the Court of Appeals is appealable to the Supreme
Court by means of a petition for review on certiorari within a period of fifteen (15) days from receipt of the adverse decision of the Court
of Appeals.
The employment by the Bureau of Internal Revenue of any of the administrative remedies for the collection of the tax like distraint, levy,
etc. may be administratively appealed by the taxpayer to the Commissioner whose decision is appealable to the Court of Tax Appeals
under other matter arising under the provisions of the National Internal Revenue Code. The judicial appeal starts with the Court of Tax
Appeals, and continues in the same manner as shown above.
Should the Bureau of Internal Revenue decide to utilize Its judicial tax remedies for collecting the taxes by means of an ordinary suit filed
with the regular courts for the collection of a sum of money, the taxpayer could oppose the same going up the ladder of judicial processes
from the Municipal Trial Court (as the case may be) to the Regional Trial Court, to the Court of Appeals, thence to the Supreme Court.
The remedy of an aggrieved taxpayer on a claim for refund is to appeal the adverse decision of the Commissioner to the CTA in the same
manner outlined above. (BAR 2000)
What are the legal remedies of an aggrieved taxpayer both at the administrative and judicial levels? Describe separately
the procedures.
ANSWER:
The administrative and judicial remedies are such as may be provided for in law imposing the tax. An expression of such remedies in the
law should then be deemed exclusive by the taxpayer. When the law imposing the tax is silent on remedies, the laws and rules of
procedure of general application shall then govern.
Under the NIRC, an aggrieved taxpayer may either (1) dispute an assessment within thirty (30) days from receipt thereof by filing with
the Commissioner of Internal Revenue a request for reconsideration of reinvestigation, or (2) pay the assessment within the thirty days
then file a written claim with the Commissioner of Internal Revenue for refund within two years from full and final payment.
Upon an adverse decision of the Commissioner and within thirty days from receipt of notice of denial, an appeal may be filed with the
Court of Tax Appeals. However, with respect to claims for refunds, an appeal must also be filed within two years from the date of full and
final payment.
From the decision of the Court of Tax Appeals, an appeal or petition for review by certiorari may be taken to the Court of Appeals and
then to the Supreme Court in appropriate cases. (BAR 1992)
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a. Assessment
i. Concept of assessment
Mr. Alvarez is in the retail business. He received a deficiency tax assessment from the BIR containing only the computation
of the deficiency tax and the penalties, without any explanation of the factual and legal bases for the assessment.
Is the assessment valid? (1%) (2013 Bar Question)
(A) The assessment is valid; all that Mr. Alvarez has to know is the amount of the tax.
(B) The assessment is invalid; the law requires a statement of the facts and the law upon which the assessment is based.
(C) The assessment is valid but Mr. Alvarez can still contest it.
(D) The assessment is invalid because Mr. Alvarez has no way to determine if the computation is erroneous.
SUGGESTED ANSWER:
(B) The assessment is invalid; the law requires a statement of the facts and the law upon which the assessment is based.
Section 228 of the NIRC provides that a preliminart assessment notice shall inform the taxpayer in writing of the law and the facts on
which the assessment is based as part of due process; otherwise, the assessment shall be void. In relation to this provision, Section 3 of
RR No. 12-99 states that the preliminary assessment notice shall show in detail the facts and the law, rules and regulations, or
jurisprudence on which the assessment is based. (See also: Commissioner of Internal Revenue v. Reyes, G.R. No. 159694, January 27,
2006)
After examining the books and records of EDS Corporation, the 2004 final assessment notice, showing basic tax of PI ,
000,000., deficiency interest of P400,000, and due date for payment of April 30, 2007 but without the demand letter, was
mailed and released by the BIR on April 15, 2007. The registered letter, containing the tax assessment, was received by the
EDS Corporation on April 25, 2007.
What is an assessment notice?
SUGGESTED ANSWER:
An assessment notice is a formal notice to the taxpayer stating that the amount thereon is due as a tax and containing a demand for the
payment thereof. {Alhambra Cigar and Cigarette Mfg. Co.v. Collector, 10S PR 1337[1959]; CIR v. Pascor Realty and Development Corp.,
309 SCRA 402 [1999]). To be valid, the taxpayer must be informed in writing of the law and the facts on which the assessment is made.
(Section 228, NIRC). (BAR 2008)
Distinguish between a taxpayer’s remedies in connection with his tax assessment and/or demand and his claim for refund
of taxes alleged to have been erroneously or illegally collected.
ANSWER:
A tax assessment becomes final unless it is disputed or contested within 30 days from receipt thereof by the taxpayer. If the action taken
by the Commissioner on the request for reconsideration is unacceptable to the taxpayer, the latter must then appeal, by way of Petition
for Review to the Court of Tax Appeals within thirty days from receipt of the decision of the Commissioner of Internal Revenue. The
taxpayer may also opt to pay the tax before the finality of the assessment (e.g., within 30 days from receipt of the assessment) and then
file within two years a written claim for the refund of the tax. A denial by the Commissioner of a claim for refund must be appealed to the
CTA within thirty days from receipt of notice of denial and within two years from the day of full and final payment. Continued inaction by
the Commissioner on claims for refund may thus be taken as a denial appealable to the Court of Tax Appeals, in order to permit the
appeal to be considered or having been made within the two-year mandatory period. (BAR 1992)
a. Requisites for valid assessment
After examining the books and records of EDS Corporation, the 2004 final assessment notice, showing basic tax of PI ,
000,000., deficiency interest of P400,000, and due date for payment of April 30, 2007 but without the demand letter, was
mailed and released by the BIR on April 15, 2007. The registered letter, containing the tax assessment, was received by the
EDS Corporation on April 25, 2007.
a) What are the requisites of a valid assessment? Explain. (3%)
SUGGESTED ANSWER:
An assessment is a written notice and demand made by the Bureau on the taxpayer for the settlement of a tax liability that is due,
definitely set and fixed therein. The requisites of a valid assessment are:
- It must be made within the prescriptive period to assess; (Section 203, NIRC)
- There must be a preliminary assessment previously issued, except in those instances allowed by law; (Section 228, NIRC)
- The taxpayer must be informed in writing about the law and facts on which the assessment is based; (Section 228, NIRC) and
- It must be served upon the taxpayer or any of his authorized representatives. (Estate of Juliana Diez vda. De Gabriel v. CIR,
421 SCRA 266[2004]).
As tax lawyer of EDS Corporation, what legal defense(s) would you raise against the assessment? Explain. (3%)
SUGGESTED ANSWER:
I will question the validity of the assessment because of the failure to send the demand letter which contains a statement of the law and
the facts upon which the assessment is based. If an assessment notice is sent without informing the taxpayer in writing about the law
and facts on which the assessment is made, the assessment is void. (Section 228, NIRC; Azucena T. Reyes v. CIR, 480 SCRA 382
[2006]). (BAR 2008)
b. Constructive methods of income determination
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c. Inventory method for income determination
d. Jeopardy assessment
Jeopardy assessment is a valid ground to compromise a tax liability (2011 Bar Question)
(A) involving deficiency income taxes only, but not for other taxes.
(B) because of doubt as to the validity of the assessment.
(C) if the compromise amount does not exceed 10% of the basic tax.
(D) only when there is an approval of the National Evaluation Board.
SUGGESTED ANSWER:
(B) because of doubt as to the validity of the assessment.
What should the BIR do when the prescriptive period for the assessment of a tax deficiency is about to prescribe but the
taxpayer has not yet complied with the BIR requirements for the production of books of accounts and other records to
substantiate the claimed deductions, exemptions or credits? (2011 Bar Question)
(A) Call the taxpayer to a conference to explain the delay.
(B) Immediately conduct an investigation of the taxpayer's activities.
(C) Issue a jeopardy assessment coupled with a letter of demand.
(D) Issue a notice of constructive distraint to protect government interest.
SUGGESTED ANSWER:
B) Issue a jeopardy assessment coupled with a letter of demand.
e. Tax delinquency and tax deficiency
In January 2011, the BIR issued a ruling that Clemen's vodka imports were not subject to increased excise tax based on his
claim that his net retail price was only P200 per 750 milliliter bottle. This ruling was applied to his imports for May, June,
and July 2011. In September 2011, the BIR revoked its ruling and assessed him for deficiency taxes respecting his May,
June and July 2011 vodka imports because it discovered that his net retail price for the vodka was P250 per bottle from
January to September 2011. Does the retroactive application of the revocation violate Clemen's right to due process as a
taxpayer? (2011 Bar Question)
(A) Yes, since the presumption is that the BIR ascertained the facts before it made its ruling.
(B) No, because he acted in bad faith when he claimed a lower net retail price than what he actually used.
(C) No, since he could avail of remedies available for disputing the assessment.
(D) Yes, since he had already acquired a vested right in the favorable BIR ruling.
SUGGESTED ANSWER:
(B) No, because he acted in bad faith when he claimed a lower net retail price than what he actually used.
Which among the following circumstances negates the prima facie presumption of correctness of a BIR assessment?
(2011 Bar Question)
(A) The BIR assessment was seasonably protested within 30 days from receipt.
(B) No preliminary assessment notice was issued prior to the assessment notice.
(C) Proof that the assessment is utterly without foundation, arbitrary, and capricious.
(D) The BIR did not include a formal letter of demand to pay the alleged deficiency.
SUGGESTED ANSWER:
(C) Proof that the assessment is utterly without foundation, arbitrary, and capricious.
KaTato owns a parcel of land in San Jose, Batangas declared for real property taxation, as agricultural. In 1990, he used
the land for a poultry feed processing plant but continued to declare the property as agricultural. In March 2011, the local
tax assessor discovered KaTato’s change of use of his land and informed the local treasurer who demanded payment of
deficiency real property taxes from 1990 to 2011. Has the action prescribed? (2011 Bar Question)
(A) No, the deficiency taxes may be collected within five years from when they fell due.
(B) No. The deficiency taxes for the period 1990 up to 2011 may still be collected
within 10 years from March 2011.
(C) Yes. More than 10 years had lapsed for the period 1990 up to 2000, hence the right to collect the deficiency taxes has
prescribed.
(D) Yes. More than 5 years had lapsed for the collection of the deficiency taxes for the period 1990 up to 2005.
SUGGESTED ANSWER:
B) No. The deficiency taxes for the period 1990 up to 2011 may still be collected within 10 years from March 2011.
Is a deficiency tax assessment a bar to a claim for tax refund or tax credit? Explain.
SUGGESTED ANSWER:
No. As a general rule, a deficiency tax assessment is not a bar to a claim for tax refund or tax credit. It is logically appropriate; however,
that if the deficiency tax assessment is already final, the Commissioner should not grant the claim unless the taxpayer pays the
deficiency. Likewise, no tax refund or tax credit will be granted as long as there is pending a deficiency tax assessment for the same
taxable period. To award a tax refund or tax credit despite the existence of deficiency assessment for the same taxable period is an
absurdity and a polarity in conceptual effects. A taxpayer cannot be entitled to a refund and at the same time be liable for a tax
deficiency assessment. In order to avoid multiplicity of suits, it is logically necessary and legally appropriate that the issue of deficiency
tax assessment be resolved jointly with the taxpayer’s claim for tax refund, to determine once and for all in a single proceeding the true
and correct amount of tax due or refundable. [CIR v. CA, City trust Banking Corp. and CTA, 234 SCRA 348 (1994)]. (BAR 2005)
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Danilo, who is engaged in the trading business, entrusted to his accountant the preparation of his income tax return and
the payment of the tax due. The accountant filed a falsified tax return by underdeclaring the sales and overstating the
expense deductions by Danilo.
Is Danilo liable for the deficiency tax and the penalties thereon? What is the liability, if any, of the accountant? Discuss.
(5%)
SUGGESTED ANSWER:
Yes, Danilo is liable for the deficiency tax as well as for the deficiency interest. However, he is not liable to the fraud penalty because the
accountant acted beyond the limits of his authority. A tax return which does not correctly reflect taxable income may only be false but not
necessarily fraudulent where it appears that the return was not prepared by the taxpayer himself but by his accountant. Accordingly, the
50% surcharge for fraud could not be imposed. [Aznar v. CTA, 58 SCRA 719, (1974)]. On the other hand, the accountant may be held
criminally liable for violation of the Tax Code when he falsified the tax return by underdeclaring the sale and overstating the expense
deductions. (Sec. 257, NIRC). If Danny's accountant is a Certified Public Accountant, his certificate as CPA shall automatically be revoked
or cancelled upon conviction. (BAR 2005)
When is a revenue tax considered delinquent? [3%I
What constitutes prima facie evidence of a false or fraudulent return? [2%]
SUGGESTED ANSWER:
A revenue tax is considered delinquent when it is unpaid after the lapse of the last day prescribed by law for its payment. Likewise, it
could also be considered as delinquent where an assessment for deficiency tax has become final and the taxpayer has not paid it within
the period given in the notice of assessment. (BAR 1998)
Mr. Lajojo is a big-time swindler. In one year he was able to earn PI Million from his swindling activities. When the
Commissioner of Internal Revenue discovered his income from swindling, the Commissioner assessed him a deficiency
income tax for such income.
The lawyer of Mr. Lajojo protested the assessment on the following grounds:
If he has to pay the deficiency income tax assessment, there will be hardly anything left to return to the victims of the
swindling.
How will you rule on each of the three grounds for the protest? Explain.
ANSWER:
The deficiency income tax assessment is a direct tax imposed on the owner which is an excise on the privilege to earn an income. It will
not necessarily be paid out of the same income that were subjected to the tax. Mr. Lajojo’s liability to pay the tax is based on his having
realized a taxable income from his swindling activities and will not affect his obligation to make restitution. Payment of the tax is a civil
obligation imposed by law while restitution is a civil liability arising from a crime. (BAR 1995)
Businessman Stephen Yang filed an Income tax return for 1993 showing business net income of P350.000.00 on which he
paid an income tax of P61,000.00. After filing the return he realized that he forgot to include an item of business income in
1993 for P50.000.00. Being an honest taxpayer, he included this income in his return for 1994 and paid the corresponding
income tax thereon. In the examination of his 1993 return the BIR examiner found that Stephen Yang failed to report this
item of P50.000.00 and assessed him a deficiency income tax on this item, plus a 50% fraud surcharge.
Is the examiner correct? Explain.
If you were the lawyer of Stephen Yang, what would you have advised your client before he included in his 1994 return the
amount of P50.000.00 as 1993 income to avoid the fraud surcharge? Explain.
Considering that Stephen Yang had already been assessed a deficiency income tax for 1993 for his failure to report the
P50,000.00 income, what would you advise him to do to avoid the penalties for tax delinquency? Explain.
What would you advise Stephen Yang to do with regard to the income tax he paid for the P50,000.00 in his 1994 return? In
case your remedy fails, what is your other recourse? Explain.
ANSWER:
The examiner is correct in assessing a deficiency income tax for taxable year 1993 but not in imposing the 50% fraud surcharge. The
amount of all items of gross income must be included in gross income during the year in which received or realized (Sec. 38, NIRC). The
50% fraud surcharge attaches only if a false or fraudulent return is willfully made by Mr. Yang (Sec.248.NIRC). The fact that Mr. Yang
included the income in his 1994 return belies any claim of willfulness but is rather indicative of an honest mistake which was sought to be
rectified by a subsequent act that is the filing of the 1994 return.
Mr. Yang should have amended his 1993 Income tax return to allow for the inclusion of the P50.000 income during the taxable period it
was realized.
Mr. Yang should pay the deficiency income tax on or before the day prescribed for its payment per notice of demand. After payment and
within two years thereafter, he should file a claim for refund of taxes erroneously paid to recover the excessive surcharge imposed.
Mr. Yang should file a protest questioning the 50% surcharge and ask for the abatement thereof.
ALTERNATIVE ANSWER:
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Mr. Yang should file a written claim for refund with the Commissioner of Internal Revenue of the taxes paid on the P50.000 income
included in 1994 within two years from payment pursuant to Section 204(3) of the Tax Code. Should this remedy fail in the
administrative level, a judicial claim for refund can be instituted before the expiration of the two year period. (BAR 1995)
Do you think an action for mandamus with the RTC can prosper to compel the Commissioner to issue a deficiency
assessment?
ANSWER:
No. It has been held that the assessment of taxes is not a ministerial duty compellable by mandamus. It is a discretionary power vested
by law on the Commissioner of Internal Revenue in the exercise of which the regular courts may not interfere with. (BAR 1992)
ii. Power of the Commissioner to make assessments and prescribe additional requirements for tax administration and enforcement
On October 15, 2005, ABC Corp. imported 1,000 kilos of steel ingots and paid customs duties and VAT to the Bureau of
Customs on the importation. On February 17, 2009, the Bureau of Customs, citing provisions of the Tariff and Customs Code
on post-audit, investigated and assessed ABC Corp. for deficiency customs duties and VAT.
Is the Bureau of Customs correct? (2013 Bar Question)
SUGGESTED ANSWER:
The Bureau of Customs was not correct.
As to the VAT: The Bureau of Customs has no authority to assess ABC Corp. as this falls under the jurisdiction of the Bureau of Internal
Revenue (BIR). Under Sec. 2 of the NIRC, the BIR’s powers and duties include, among others, the assessment and collection of all
national internal revenue taxes, fees and charges. VAT is a national internal revenue tax under Title IV of the NIRC.
Under Sec. 12 of the NIRC, the Commissioner of Customs and his subordinates are merely agents and deputies for collection, not
assessment of national internal revenue taxes.
As to the deficiency customs duties found on post-audit: The Bureau of Customs was not correct in assessing deficiency customs duties.
The facts show that the investigation and assessment on post-audit were made on February 17, 2009, which is more than three (3) years
from October 15, 2005 which is the date of payment by ABC Corp.
Sec. 4 of Republic Act 9135 amended Section 1603 of the Tariff and Customs Code of the Philippines. The provision states that when
articles have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery, such entry and
passage free of duty or settlements of duties will, after the expiration of three (3) years from the date of the final payment of duties, in
the absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final and conclusive upon all parties,
unless the liquidation of the import entry was merely tentative. Customs
Administrative Order No. 5-2001 which implements RA 9135, confirms the above conclusion.
a. Power of the Commissioner to obtain information, and to summon/examine, and take testimony of persons
In 2010, pursuant to a Letter of Authority (LA) issued by the Regional Director, Mr. Abcede was assessed deficiency income
taxes by the BIR for the year 2009. He paid the deficiency. In 2011, Mr. Abcede received another LA for the same year
2009, this time from the National Investigation Division, on the ground that Mr. Abcede's 2009 return was fraudulent.
Mr. Abcede contested the LA on the ground that he can only be investigated once in a taxable year. Decide. (2013 Bar
Question)
SUGGESTED ANSWER:
Mr. Abcede’s contention is not correct; he may be re-investigated because he filed a fraudulent tax return for 2009. Section 235 of the
NIRC provides that the books and records of taxpayers may be examined and inspected only once in a taxable year, except in cases of
fraud, irregularity or mistakes, as determined by the Commissioner.
X dies in year 2000 leaving a bank deposit of P2, 000,000.00 under joint account with his associates in a law office.
Learning of X’s death from the newspapers, the Commissioner of Internal Revenue wrote to every bank in the country
asking them to disclose to him the amount of deposits that might be outstanding in his name or jointly with others at the
date of his death. May the bank holding the deposit refuse to comply on the ground of the Secrecy of Bank Deposit Law?
Explain.
SUGGESTED ANSWER:
No. The Commissioner of Internal Revenue has the authority to inquire into bank deposit accounts of a decedent to determine his gross
estate notwithstanding the provisions of the Bank Secrecy Law. Hence, the banks holding the deposits in question may not refuse to
disclose the amount of deposits on the ground of secrecy of bank deposits. (Section 6(F) of the 1997 Tax Code). The fact that the deposit
is a joint account will not preclude the Commissioner from inquiring thereon because the law mandates that if a bank has knowledge of
the death-of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the
said deposit account, unless the Commissioner has certified that the taxes imposed thereon have been paid. (Section 97 of the 1997 Tax
Code). Hence, to be able to give the required certification, the inclusion of the deposit is imperative, which may be made possible only
through the inquiry made by the Commissioner. (BAR 2003)
A taxpayer is suspected not to have declared his correct gross income in his return filed for 1997. The examiner requested
the Commissioner to authorize him to inquire into the bank deposits of the taxpayer so that he could proceed with the net
worth method of investigation to establish fraud. May the examiner be allowed to look into the taxpayer’s bank deposits?
In what cases may the Commissioner or his duly authorized representative be allowed to Inquire or look into the bank
deposits of a taxpayer? (5%)
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SUGGESTED ANSWER:
No, as this would be violative of Republic Act No. 1405, the Bank Deposits Secrecy Law.
The Commissioner of Internal Revenue or his duly authorized representative may be allowed to inquire or look into the bank deposits of a
taxpayer in the following cases:
For the purpose of determining the gross estate of a decedent;

- Where the taxpayer has filed an application for compromise of his tax liability by reason of financial incapacity to pay such tax liability.
[Sec. 6 (F), NIRC of 1997]
Where the taxpayer has signed a waiver authorizing the Commissioner or his duly authorized representatives to inquire into the bank
deposits. (BAR 2000)
A Co., a Philippine corporation, is a big manufacturer of consumer goods and has several suppliers of raw materials. The
BIR suspects that some of the suppliers are not properly reporting their income on their sales to A Co. The CIR therefore:
Issued an access letter to A Co. to furnish the BIR information on sales and payments to its suppliers.
Issued an access letter to a bank (CX Bank) to furnish the BIR on deposits of some suppliers of A Co. on the alleged ground
that the suppliers are committing tax evasion.
A Co., X Bank and the suppliers have not been issued by the BIR letter of authority to examine. A Co. and X Bank believe
that the BIR is on a “fishing expedition" and come to you for counsel. What is your advice? (10%)
SUGGESTED ANSWER:
I will advise A Co. and B Co. that the BER is justified only in getting information from the former but not from the latter. The BIR is
authorized to obtain information from other persons other than those whose internal revenue tax liability is subject to audit or
investigation. However, this power shall not be construed as granting the Commissioner the authority to inquire into bank deposits.
(Section 5, NIRC). (BAR 1999)
Can the Commissioner of Internal Revenue inquire into the bank deposits of a taxpayer? If so, does this power of the
Commissioner conflict with FLA. 1405 (Secrecy of Bank Deposits Law) [5%]
SUGGESTED ANSWER:
The Commissioner of Internal Revenue is authorized to inquire into the bank deposits of: a decedent to determine his gross estate;
any taxpayer who has filed an application for compromise of his tax liability by means of financial Incapacity to pay his tax liability (Sec.
6(F), NIRC).
The limited power of the Commissioner does not conflict with R.A. No. 1405 because the provisions of the Tax Code granting this power is
an exception to the Secrecy of Bank Deposits Law as embodied in a later legislation.
Furthermore, in case a taxpayer applies for an application to compromise the payment of his tax liabilities on his claim that his financial
position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in
writing his privilege under R.A. No. 1405, and such waiver shall constitute the authority of the Commissioner to inquire into the bank
deposits of the taxpayer. (BAR 1998)
iii. When assessment is made

a. Prescriptive period for assessment
The Commissioner of Internal Revenue issued an assessment for deficiency income tax for taxable year 2000 last July 31,
2006 in the amount of P10 Million inclusive of surcharge and interests. If the delinquent taxpayer is your client, what steps
will you take? What is your defense? 10%
SUGGESTED ANSWER:
Since my client has already lost his right to protest the assessment having been issued on July 31, 2006 and that he is already
categorized as a delinquent tax payer. I will advise him to wait for a collection action to be instituted by the commissioner. Once colletion
is pursued. I will file a petition for review with the
CTA to question the validity of the commissioner’s action. My defense would be prescription. Since the assessment was issued beyond the
prescriptive period to assess, the assessment is invalid and any action to collect an invalid assessment is not warranted (Phil. Journalists,
Inc. v. CIR, 447 SCRA 214 [2004])
ANOTHER SUGGESTED ANSWER:

I will advise my client, who is a delinquent taxpayer, to file a request with the Commissioner of Internal Revenue for the abatement of the
entire assessment on the ground that the same is unjustly assessed (Sec, 204, NIRC), I will invoke prescription as a defense against the
assessment. I will tell the Commissioner that the assessment having been issued beyond the prescriptive period, the deficiency income
tax would appear to be unjustly assessed which would justify the abatement or cancellation of the entire assessment.

I will immediately file a protest within thirty (30) days from receipt of the assessment by my client addressed to the Commissioner of
Internal Revenue, alleging prescription as my defense because the assessment was issued beyond three (3) years as required by law
(Sec. 228 and 203, NIRC).
Should the Commissioner deny my protest, I will file an appeal to the Court of Tax Appeals (CTA) within thirty (30) days from receipt of
the decision (Sec. 228, NIRC).
Should the CTA Division deny my petition for review, I will file a Motion for Reconsideration within 15 days from receipt of the denial.
Page 6 of 32
Should the Division deny my Motion for Reconsideration, I will appeal to the CTA en banc and from the latter’s denial, I will appeal to the
Supreme Court by way of a petition for certiorari within 15 days from receipt of the en banc decision. (BAR 2006)
Mr. Sebastian is a Filipino seaman employed by a Norwegian company which is engaged exclusively in international
shipping. He and his wife, who manages their business, filed a joint income tax return for 1997 on March 15.1998. After an
audit of the return, the BIR issued on April 20, 2001 a deficiency income tax assessment for the sum of P250,000.00,
inclusive of interest and penalty. For failure of Mr. and Mrs. Sebastian to pay the tax within the period stated in the notice
of assessment, the BIR issued on August 19,2001 warrants of distraint and levy to enforce collection of the tax.
Decide Mr. Castro’s protest. (2%) SUGGESTED ANSWER:

The protest should be resolved against Mr. Castro. What was filed is a fraudulent return making the prescriptive period for assessment
ten (10) years from discovery of the fraud (Section 222, NIRC). Accordingly, the assessment was issued within the prescriptive period to
make an assessment based on a fraudulent return.
If you are the lawyer of Mr. and Mrs. Sebastian, what possible defense or defenses will you raise in behalf of your clients
against the action of the BIR in enforcing collection of the tax by the summary remedies of warrants of distraint and levy?
Explain your answer. (3%)
SUGGESTED ANSWER:
I will raise the defense of prescription. The right of the BIR to assess prescribes after three years counted from the last day prescribed by
law for the filing of the income tax returns when the said return is filed on time. (Section 203, NIRC). The last day for filing the 1997
income tax return is April 15,1998. Since the assessment was issued only on April 20, 2001, the BIR’s right to assess has already
prescribed. (BAR 2002)
A Co., a Philippine Corporation, filed its 1995 Income Tax Return (ITR) on April 15, 1996, showing a net loss. On November
10. 1996, it amended its 1995 ITR to show more losses. After a tax investigation, the BIR disallowed certain deductions
claimed by A Co., putting A Co. in a net income position. As a result, on August 5, 1999, the BIR issued a deficiency income
assessment against A Co. A Co. protested the assessment on the ground that it has prescribed: Decide. (5%)
SUGGESTED ANSWER:
The right of the BIR to assess the tax has not prescribed. The rule is that internal revenue taxes shall be assessed within three years after
the last day prescribed by law for the filing of the return. (Section 203, NIRC). However, if the return originally filed is amended
substantially, the counting of the three-year period starts from the date the amended return was filed. (CIR v. Phoenix Assurance Co.,
Ltd., 14 SCRA 52). There is a substantial amendment in this case because a new return was filed declaring more losses, which can only
be done either (1) in reducing gross income or (2) in increasing the items of deductions, claimed. (BAR 1999)
Taxes were generally imprescriptible; statutes, however, may provide otherwise. State the rules that have been adopted on
this score by –
The National Internal Revenue Code;
SUGGESTED ANSWER:
The rules that have been adopted on prescription are as follows:
National Internal Revenue Code - The statute of limitation for assessment of tax if a return is filed is within three (3) years from the last
day prescribed by law for the filing of the return or if filed after the last day, within three years from date of actual filing. If no return is
filed or the return filed is false or fraudulent, the period to assess is within ten years from discovery of the omission, fraud or falsity. (BAR
1997)
On September 19, 1973, the BIR sent a notice of assessment to X to pay P300.000.00 as forest charges for the year 1970-
73. Xmade a partial payment of P100.000.00 on September 28,1973. X died in November, 1977. On July 29, 1979, the BIR
filed in the Testate Estate Proceedings of X a claim for P200.000.00the unpaid forest charges left by X. the administrator of
the estate opposed the claim on the ground of prescription. Decide.
ANSWER:
Where assessment was made, the tax may be collected within five (5) years (now 3 years) from the date of assessment [Coflection of
Internal Revenue v. Pineda, 2 SCRA 401; Umali, Roman A., Reviewer in Taxation, 1985. pp. 486-487; Vitug, JoseC., Compendium of Tax
Law and Jurisprudence, 2nd Rev., Ed.. 1986, p. 255).
In the case at bar, X on the basis of the notice of assessment, voluntarily made a partial payment to the Bureau of Internal Revenue in
the amount of One Hundred Thousand Pesos (P100,000.00). However, it took the BIR almost more than five (5) years to take the
necessary legal action to collect the remaining amount of taxes due.
This is clearly beyond the five (5) now three (3) year period for the collection of taxes. Hence, the claim filed by the BIR against the
Estate of X for the payment of Two Hundred Thousand Pesos (P200.000.00) has prescribed.
ALTERNATIVE ANSWERS:
The claim has prescribed as the BIR has only three (3) years from the date of the assessment to collect.
Taxes are money claims that must be filed with the probate court within the period provided for in the Rules of Court (Sections 1 and 2.
Rule 86). In the case of Domingo v. Garlttos (8 SCRA 443), the court ruled that the claims shall be barred if filed beyond the prescribed
period Just like any other money claims. But the ruling in Garlitos was superseded by Vera v. Fernandez which ruled that estate taxes are
payable even if presented beyond the period in the statute of non-claims in the Rules of Court. (BAR 1993)
1. False, fraudulent, and non-filing of returns
Page 7 of 32
A false return and a fraudulent return are one and the same. SUGGESTED ANSWER:
False. There is a difference between a false return and a fraudulent return. The first merely implies a deviation from the truth or fact
whether intentional or not, whereas the second is intentional and deceitful with the aim of evading the correct tax due (Aznar v.
Commissioner, GR No. L-20569, August 23, 1974, 58 SCRA S19[1974]). (BAR 2009)
What constitutes prima facie evidence of a false or fraudulent return to justify the imposition of a 50% surcharge on the
deficiency tax due from a taxpayer? Explain. (5%)
SUGGESTED ANSWER:
There is a prima facie evidence of false or fraudulent return when the taxpayer substantially underdeclared his taxable sales, receipts or
income, or substantially overstated his deductions, the taxpayer’s failure to report sales, receipts or income in an amount exceeding 30%
of that declared per return, and a claim of deduction in an amount exceeding 30% of actual deduction shall render the taxpayer liable for
substantial underdeclaration and overdeclaration, respectively, and will justify the imposition of the 50% surcharge on the deficiency tax
due from the taxpayer. (Sec. 248, NIRC). (BAR 2002)
What constitutes prima facie evidence of a false or fraudulent return? [2%]
SUGGESTED ANSWER:
There is prima facie evidence of a false or fraudulent return when the taxpayer has wilfully and knowingly filed it with the intent to evade
a part or all of the tax legally due from him (Ungab v. Cusi, 97 SCRA 877). There must appear a design to mislead or deceive on the part
of the taxpayer, or at least culpable negligence. A mistake, not culpable in respect of its value would not constitute a false return. (Words
and Phrases, Vol 16, page 173). (BAR 1998)
Distinguish a false return from a fraudulent return.
ANSWER:
The distinction between a false return and a fraudulent return is that the first merely implies a deviation from the truth or fact whether
intentional or not, whereas the second is intentional and deceitful with the sole aim of evading the correct tax due [Aznar vs.
Commissioner, L-20569. August 23, 1974).
ALTERNATIVE ANSWER:
A false return contains deviations from the truth which may be due to mistakes, carelessness or ignorance of the person preparing the
return. A fraudulent return contains an intentional wrongdoing with the sole object of avoiding the tax and it may consist in the
intentional under declaration of income, intentional over declaration of deductions or the recurrence of both. A false return is not
necessarily tainted with fraud because the fraud contemplated by law is actual and not constructive. Any deviation from the truth on the
other hand, whether intentional or not, constitutes falsity. [Aznar vs. Commissioner, L-20569, August 23, 1974) (BAR 1996)
b. Suspension of running of statute of limitations
What is the effect of the execution by a taxpayer of a “waiver of the statute of limitations” on his defense of prescription?
(2%)
SUGGESTED ANSWER:
The waiver of the statute of limitation executed by a taxpayer is not a waiver of the right to invoke the defense of prescription. The
waiver of the statute of limitation is merely an agreement in writing between the taxpayer and the BIR that the period to assess and
collect taxes due is extended to a date certain. If prescription has already set in at the time of the execution of the waiver is invalid, the
taxpayer can still raise prescription as a defense (Phil. Journalists Inc., v. CIR, GR No. 162852, Dec. 16, 2004)
Mia, a compensation income earner, filed her income tax return for the taxable year 2007 on March 30, 2008. On May 20,
2011, Mia received an assessment notice and letter of demand covering the taxable year 2007 but the postmark on the
envelope shows April 10, 2011. Her return is not a false and fraudulent return. Can Mia raise the defense of prescription?
(2011 Bar Question)
(A) No. The 3 year prescriptive period started to run on April 15, 2008, hence, it has not yet expired on April 10, 2011.
(B) Yes. The 3 year prescriptive period started to run on April 15, 2008, hence, it had already expired by May 20, 2011.
(C) No. The prescriptive period started to run on March 30, 2008, hence, the 3 year period expired on April 10, 2011.
(D) Yes. Since the 3-year prescriptive period started to run on March 30, 2008, it already expired by May 20, 2011.
SUGGESTED ANSWER:
A) No. The 3 year prescriptive period started to run on April 15, 2008, hence, it has not yet expired on April 10, 2011.
There is prima facie evidence of a false or fraudulent return where the: (2011 Bar Question)
(A) tax return was amended after a notice of assessment was issued.
(B) tax return was filed beyond the reglementary period.
(C) taxpayer changed his address without notifying the BIR.
(D) deductions claimed exceed by 30% the actual deductions.
SUGGESTED ANSWER:
(D) deductions claimed exceed by 30% the actual deductions.
The prescriptive period for the collection of the deficiency tax assessment will be tolled: (2012 BAR)
a) If the taxpayer files a request for reconsideration with the Asst. Commissioner;
b) If the taxpayer files a request for reinvestigation that is approved by the Commissioner of Internal Revenue;
c) If the taxpayer changes his address in the Philippines that is communicated to the BIR official;
d) If a warrant of levy is served upon the taxpayer’s real property in Manila.
Page 8 of 32
SUGGESTED ANSWER:
b) If the taxpayer files a request for reinvestigation that is approved by the Commissioner of Internal Revenue
Section 223, NIRC; BPI v. Commissioner, G.R. No. 139736, October 17, 2005.
Taxpayer A was required by the BIR to sign and submit a waiver of the statute of limitations on the assessment period, to
give the BIR more time to complete its investigation. The BIR accepted the waiver but failed to indicate the date of its
acceptance.
What is the legal status of the waiver? (1%)(2013 Bar Question)
(A) The waiver is valid because the date of acceptance is immaterial and unimportant.
(B) The waiver is invalid; the taxpayer cannot be required to waive the statute of limitations.
(C) The waiver is invalid; the date of acceptance is crucial in counting the start of the period of suspension of the
prescriptive period.
(D) The waiver is valid, having been accepted by the BIR.
SUGGESTED ANSWER:
(C) The waiver is invalid; the date of acceptance is crucial in counting the start of the period of suspension of the prescriptive period.
Section 2 of the Revenue Memorandum Order No. 20-90 provides that the date of such acceptance by the BIR should be indicated. Both
the date of execution by the taxpayer and date of acceptance by the BIR should be before the expiration of the period of prescription or
before the lapse of the period agreed upon in case a subsequent agreement is executed.
A Co., a Philippine Corporation, filed its 1995 Income Tax Return (ITR) on April 15, 1996, showing a net loss. On November
10. 1996, it amended its 1995 ITR to show more losses. After a tax investigation, the BIR disallowed certain deductions
claimed by A Co., putting A Co. in a net income position. As a result, on August 5, 1999, the BIR issued a deficiency income
assessment against A Co. A Co. protested the assessment on the ground that it has prescribed: Decide. (5%)
SUGGESTED ANSWER:
The right of the BIR to assess the tax has not prescribed. The rule is that internal revenue taxes shall be assessed within three years after
the last day prescribed by law for the filing of the return. (Section 203, NIRC). However, if the return originally filed is amended
substantially, the counting of the three-year period starts from the date the amended return was filed. (CIR v. Phoenix Assurance Co.,
Ltd., 14 SCRA 52). There is a substantial amendment in this case because a new return was filed declaring more losses, which can only
be done either (1) in reducing gross income or (2) in increasing the items of deductions, claimed. (BAR 1999)
Antonio Cruz was appointed by the Regional Trial Court as Administrator in the testate proceedings for the settlement of
the estate of his deceased father. On 12 February 1987, the Commissioner of Internal Revenue issued a deficiency estate
tax assessment for the estate in question in the amount of P2.816,514.60. The notice of deficiency assessment was
received by the Administrator on 19 February 1987. In his letter to the Commissioner, dated 21 February 1987, which was
received by the latter’s office two (2) days later, the Administrator requested for a reconsideration of the assessment on
the ground that the same is contrary to law and is not supported by sufficient evidence. He also requested for a period of
fifteen (15) days within which to submit the estate’s position paper.
On 4 August 1988, not having received the promise position paper, the Commissioner filed with the Court a motion for
allowance of claim and for an order of payment of estate taxes, praying therein that the administrator be directed to pay
the BIR the aforementioned deficiency tax. The Administrator opposed the motion alleging that by reasons of the pendency
of his request for reconsideration, the deficiency assessment has not become final and executory and, therefore, the
absence of a decision on the disputed' assessment is a bar against collection of taxes. He further argued that it is the Court
of Tax Appeals, and not the Regional Trial Court, which has exclusive jurisdiction over the claim.
Resolve the motion and issues raised.
ANSWER:
Evidently, the request for reconsideration did not express or specify the grounds therefor. A request for reconsideration in the tenor
stated in the problem is insufficient, not being substantiatied, to stop the running of the 30-day period within which the assessment may
be disputed (Dayrit vs. Cruz, G.R No. 39919, 26 September 1988). The failure of the taxpayer to submit the promised position paper
within the said 30-day period had the effect of rendering the assessment final and executory. In addition, the pendency of a decision on a
disputed assessment does not bar the collection of the NIRC taxes, and no injunction maybe issued by any court (except by the Court of
Tax Appeals as an incident to a timely petition for review). In the absence of a petition for review with the Court of Tax Appeals which
may be brought by a taxpayer within thirty (30) days from the receipt of the final decision of the Commissioner, the Court of Tax Appeals
has no jurisdiction to take cognizance thereof (See Sec. 11, RA. 1125). Premises considered, the action taken by the Commissioner with
the Regional Trial Court was appropriate and in accordance with law.
ALTERNATIVE ANSWER:
Once a request for reconsideration is made by the taxpayer on an assessment of the BIR within 30 days from receipt thereof, the
Commissioner is bound to make a decision thereon. That decision is the one appealable to the Court of Tax Appeals. But if the taxpayer
does not appeal within the 30-day period, the assessment becomes final and executory and demandable. The implication of this new
provision in the NIRC is that the Commissioner cannot collect the tax as long as the taxpayer has still the right to appeal from the
Commissioner’s action. (BAR 1991)
iv. General provisions on additions to the tax

a. Civil penalties
Page 9 of 32
SUGGESTED ANSWER:
b. Interest
c. Compromise penalties
A domestic corporation failed to withhold and remit the tax on income received from Philippine sources by a nonresident
foreign corporation. In addition to the civil penalties provided for under the Tax Code, a compromise penalty was imposed
for violation of the withholding tax provisions. May the Commissioner of Internal Revenue legally enforce the collection of
compromise penalty? (5%)
SUGGESTED ANSWER:
No. There is no showing that the compromise penalty was imposed by the Commissioner of Internal Revenue with the agreement and
conformity of the taxpayer. (Wonder Mechanical Engineering Corporation v. Court of Tax Appeals, et al. 64 SCRA 555). (BAR 2000)
v. Assessment process
a. Tax audit
b. Notice of informal conference
c. Issuance of preliminary assessment notice
When is a pre-assessment notice required under the following cases? (1%)

(A) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as 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 the excise tax due on excisable articles has been paid.
(D) 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. (2014 Bar Question)
SUGGESTED ANSWER :
B. When the excise tax due on excisable articles has been paid.
d. Notice of informal conference

e. Issuance of preliminary assessment notice
f. Exceptions to issuance of preliminary assessment notice
A preliminary Assessment Notice (PAN) is NOT required to be issued by the BIR before issuing a Final Assessment Notice
(FAN) on one of the following cases: (2012 BAR)
a) When a taxpayer does not pay the 2010 deficiency income tax liability on or before July 15 of the year;
b) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on
the face of the return;
c) When a discrepancy has been determined between the value added tax paid and the amount due for the year; d) When
the amount of discrepancy shown in the Letter Notice is not paid within thirty (30) days from date of receipt.
SUGGESTED ANSWER:
b) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the
return
Section 228, NIRC.
Mr. Tiaga has been a law-abiding citizen diligently paying his income taxes. On May 5, 2014, he was surprised to receive an
assessment notice from the Bureau of Internal Revenue (BIR) informing him of a deficiency tax assessment as a result of a
mathematical error in the computation of his income tax, as appearing on the face of his income tax return for the year
2011, which he filed on April 15, 2012. Mr. Tiaga believes that there was no such error in the computation of his income tax
for the year 2011. Based on the assessment received by Mr. Tiaga, may he already file a protest thereon? (2014 Bar
Question)
SUGGESTED ANSWER :
Yes, Mr. Tiaga may already file a protest. Rev. Regs. No. 18-2013, implementing Sec. 228 of the Tax Code, states that no PAN is required
if the deficiency tax is a result of a mathematical error in the computation of tax as appearing on the face of the tax return. In such case,
an FLD/FAN shall be issued outright. Thus, the assessment notice sent by the BIR is deemed an FLD/FAN which may be the subject of a
protest.
g. Reply to preliminary assessment notice
On July 31, 2011, Esperanza received a preliminary assessment notice from the BIR demanding that she pays P180,000.00
deficiency income taxes on her 2009 income. How many days from July 31, 2011 should Esperanza respond to the notice?
(2011 Bar Question)
(A) 180 days. (B) 30 days. (C) 60 days. (D) 15 days.
SUGGESTED ANSWER:
Page 10 of 32
(D) 15 days
h. Issuance of formal letter of demand and assessment notice/final assessment notice
On March 30, 2005 Miguel Foods, Inc. received a notice of assessment and a letter of demand on its April 15, 2002 final
adjustment return from the BIR. Miguel Foods then filed a request for reinvestigation together with the requisite
supporting documents on April 25, 2005. On June 2, 2005, the BIR issued a final assessment reducing the amount of the
tax demanded. Since Miguel Foods was satisfied with the reduction, it did not do anything anymore. On April 15, 2010 the
BIR garnished the corporation's bank deposits to answer for the tax liability. Was the BIR action proper? (2011 Bar Question)
(A) Yes. The BIR has 5 years from the filing of the protest within which to collect.
(B) Yes. The BIR has 5 years from the issuance of the final assessment within which to collect.
(C) No. The taxpayer did not apply for a compromise.
(D) No. Without the taxpayer’s prior authority, the BIR action violated the Bank Deposit Secrecy Law.
SUGGESTED ANSWER:
(B) Yes. The BIR has 5 years from the issuance of the final assessment within which to collect
On April 15, 2011, the Commissioner of Internal Revenue mailed by registered mail the final assessment notice and the
demand letter covering the calendar year 2007 with the QC Post Office. Which statement is correct? (2012 BAR)
a) The assessment notice is void because it was mailed beyond the prescriptive period;
b) The assessment notice is void because it was not received by the taxpayer within the three-year period from the date
of filing of the tax return;
c) The assessment notice is void if the taxpayer can show that the same was received only after one (1) month from date
of mailing;
d) The assessment notice is valid even if the taxpayer received the same after the three-year period from the date of filing
of the tax return.
SUGGESTED ANSWER:
d) The assessment notice is valid even if the taxpayer received the same after the three-year period from the date of filing of the tax
return.
Section 203, NIRC; BPI v. CIR, G.R. No. 139736, October 17, 2005.
Taxpayer Andy received on January 3, 2010 a preliminary assessment notice (PAN) from the BIR, stating that he had
fifteen (15) days from its receipt to comment or to file a protest. Eight (8) days later (or on January11, 2010), before he
could comment or file a protest, Andy received the final assessment notice (FAN).
Decide on the validity of the FAN. (1%)(2013 Bar Question)

(A) The FAN is invalid; Andy was not given the chance to respond to the PAN, in violation of his due process rights.
(B) The FAN is invalid for being premature.
(C) The FAN is valid since it was issued before the right to assess prescribed.
(D) The FAN is valid. There is no legal requirement that the FAN should await the protest to the PAN because protest to
the PAN is not mandatory.
SUGGESTED ANSWER:
(D) The FAN is valid. There is no legal requirement that the FAN should await the protest to the PAN because protest to the PAN is
not mandatory. RR No. 12-99 provides for the due process requirement in the issuance of a deficiency tax assessment pursuant
to Section 228 of the NIRC. Under 3.1.1 of RR No. 12-99, if the taxpayer is not amenable to the submitted report of investigation
of the revenue officer, the taxpayer shall be informed by the BIR, in writing, of the discrepancy/discrepancies for purposes of the
informal conference in order to afford the taxpayer with an opportunity to present his side of the case. His failure to respond
within 15 days from the date of the receipt of the notice for the informal conference would result in the issuance of PAN.
Therefore, prior to the issuance of the PAN, the taxpayer is already given the opportunity to present his side. Although the same
RR provides that the taxpayer is given 15 days to file a protest, his failure to do so or the issuance by the BIR of the FAN before
the expiration of the 15-day period, as in the given problem, shall not defeat Andy’s right to due process.
Upon issuance of the FAN, Andy may still file an administrative protest within thirty (30) days form the date of receipt thereof. In case of
denial of the protest by the Commissioner’s authorized representative, Andy may still elevate the adverse decision to the Commissioner
within 30 days form its receipt. He may, thereafter, elevate the adverse decision to the CTA and, finally, to the Supreme Court.
Considering, therefore, that Andy could present his side before and after the issuance of the PAN, the reply to the latter is mandatory.
Minolta Philippines, Inc. (Minolta) is an EPZA-registered enterprise enjoying preferential tax treatment under a special law.
After investigation of its withholding tax returns for the taxable year 1997, the BIR issued a deficiency withholding tax
assessment in the amount of P150,000.00. On May 15, 1999, because of financial difficulty, the deficiency tax remained
unpaid, as a result of which the assessment became final and executory. The BIR also found that, in violation of the
provisions of the National Internal Revenue Code, Minolta did not file its final corporate income tax return for the taxable
year 1998, because it allegedly incurred net toss from its operations. On May 17, 2002, the BIR filed with the Regional
Trial Court an action for collection of the deficiency withholding tax for 1997.
Will the BIR’s action for collection prosper? As counsel of Minolta, what action will you take? Explain your answer. (5%)
SUGGESTED ANSWER:
Yes, BIR’s action for collection will prosper because the assessment is already final and executory. It can already be enforced through
Page 11 of 32
judicial action.
As counsel of Minolta, I will introduce evidence that the income payment was reported by the payee and the income tax was paid thereon
in 1997 so that my client may only be allowed to pay the civil penalties for non-withholding pursuant to RMO No. 38-83. [Note: It is not
clear whether this is a case of non-withholding/ underwithholding or non- remittance of tax withheld. As such, the tax counsel may be
open to other remedies against the assessment] (BAR 2002)
i. Disputed assessment
No action shall be taken by the BIR on the taxpayer’s disputed issues until the taxpayer has paid the deficiency taxes: (2011
Bar Question)
(A) when the assessment was issued against a false and fraudulent return.
(B) if there was a failure to pay the deficiency tax within 60 days from BIR demand.
(C) if the Regional Trial Court issues a writ of preliminary injunction to enjoin the BIR.
(D) attributable to the undisputed issues in the assessment notice.
SUGGESTED ANSWER:
(D) attributable to the undisputed issues in the assessment notice.
Which court acts on: disputed assessments? ANSWER:

The CTA exercises exclusive appellate Jurisdiction over disputed assessments. (BAR 1992)
j. Administrative decision on a disputed assessment
Pursuant to the National Internal Revenue Code and under existing rules and regulations, the Commissioner of Internal
Revenue is clothed with the authority/power to evaluate facts of tax cases and issue assessments/demands against a
taxpayer for deficiency taxes.
If a KTC Judge, on motion of an informer, renders a decision ordering the Commissioner to assess and collect from the
taxpayer certain deficiency taxes when, in fact, the BIR has already ascertained that no deficiency taxes are due the
taxpayer, what proper course of action would you advise your informer-client to undertake?
ANSWER:
The issue being disputed assessment, jurisdiction, if at all, lies with the Court of Tax Appeals and not with the RTC. The court decision, in
my view, can be voided. I would simply advice my client to pursue the matter administratively. If the evidence warrants, I could have the
matter investigated by the Ombudsman.
ALTERNATIVE ANSWER:
I will advise the client to go to the BIR to file an information under oath so that it may consider any evidence my client may have in his
possession. (BAR 1992)
vi. Protesting assessment

a. Protest of assessment by taxpayer
1. Protested assessment
The BIR issued in 2010 a final assessment notice and demand letter against X Corporation covering deficiency income as
for the year 2008 in the amount of P10 Million. X Corporation earlier requested the advice of a lawyer on whether or not it
should file a request for reconsideration or a request for reinvestigation. The lawyer said it does not matter whether the
protest against the assessment is a request for reconsideration or a request for reinvestigation, because it has same
consequences or implications.
a. What are the differences between a request for reconsideration and a request for reinvestigation?
b. Do you agree with the advice of the lawyer? Explain your answer (2012)
Suggested Answer:
a. Request for Reconsideration – plea for evaluation of assessment on the basis of existing records without need of presentation
of additional evidence. It does not suspend the period to collect the deficiency tax.
Request for Reinvestigation – plea for re-evaluation on the basis of newly discovered evidences which are to be introduced for
examination for the first time. It suspends the prescriptive period to collect.
b. NO, in view of the aforesaid difference between Request for Reconsideration & Request for Reinvestigation.
On March 10, 2010, Continental, Inc. received a preliminary assessment notice (PAN) dated March 1, 2010 issued by the
Commissioner of Internal Revenue (CIR) for deficiency income tax for its taxable year 2008. It failed to protest the PAN.
The CIR thereupon issued a final assessment notice (FAN) with letter of demand on April 30, 2010. The FAN was received
by the corporation on May 10, 2010, following which or on May 25, 2010, it filed its protest against it.
The CIR denied the protest on the ground that the assessment had already become final and executory, the corporation
having failed to protest the PAN. Is the CIR correct?
Explain. (2010 Bar Question)
SUGGESTED ANSWER:
The issuance of preliminary assessment notice (PAN) does not give rise to the right of the taxpayer to protest. What can be protested by
Page 12 of 32
a taxpayer is the final assessment notice (FAN) or that assessment issued following the PAN. Since the FAN was timely protested, within
30 days from receipt thereof, the assessment did not become final and executory.
2. When to file a protest
Since the taxpayer has opted to carry-over the PI million overpaid income tax for taxable year 2008, said option is
considered irrevocable and no application for cash refund shall be allowed for it (Sec. 76, NIRC; CIR v. Bank of Philippine
Island, G.R. No. 178490, July 7, 2009).
On March 10, 2010, Continental, Inc. received a preliminary assessment notice (PAN) dated March 1, 2010 issued by the
Commissioner of Internal Revenue (CIR) for deficiency income tax for its taxable year 2008. It failed to protest the PAN.
The CIR thereupon issued a final assessment notice (FAN) with letter of demand on April 30, 2010.
The FAN was received by the corporation on May 10, 2010, following which or on May 25, 2010, it filed its protest against
it.
The CIR denied the protest on the ground that the assessment had already become final and executory, the corporation
having failed to protest the PAN.
Is the CIR correct? Explain. (5%) SUGGESTED ANSWER:

No. The issuance of preliminary assessment notice (PAN) does not give rise to the right of the taxpayer to protest. What can be protested
by a taxpayer is the final assessment notice (FAN) or that assessment issued following the PAN. Since the FAN was timely protested
(within 30 days from receipt thereof, the assessment did not become final and executory (Sec. 228, NIRC; RR No. 12-99).
A final assessment notice was issued by the BIR on June 13, 2000, and received by the taxpayer on June 15, 2000. The
taxpayer protested the assessment on July 31, 2000. The protest was initially given due course, but was eventually denied
by the Commissioner of Internal Revenue in a decision dated June 15, 2005. The taxpayer then filed a petition for review
with the Court of Tax Appeals (CTA), but the CTA dismissed the same.
Is the CTA correct in dismissing the petition for review? Explain your answer. (4%)
SUGGESTED ANSWER:
Yes. The protest was filed out of time, hence the CTA does not acquire jurisdiction over the matter (CIR v. Atlas Mining and Development
Corp. [2000]). (BAR 2009)
3. Forms of protest
4. Content and validity of protest
When a protest against the deficiency income tax assessment was denied by the BIR Regional Director of Quezon City, the
appeal to the Court of Tax Appeals must be filed by a taxpayer: (2012 BAR)
a) If the amount of basic tax assessed is P100,000.00 or more;

b) If the amount of basic tax assessed is P300,000.00 or more;
c) If the amount of basic tax assessed is P500,000.00 or more;
d) If the amount of basic tax assessed is P1 Million or more;
SUGGESTED ANSWER:
All the choices are correct. All decisions on disputed assessments are appealable to the CTA (in Division) irrespective of the amount
(Section 3, RA 9282).
The submission of the required documents within sixty (60) days from the filing of the protest is available only where:
(2012 BAR)
a) The taxpayer previously filed a Motion for Reconsideration with the BIR official;
b) The taxpayer previously filed a request for reconsideration with the BIR official;
c) The taxpayer previously filed a request for reinvestigation with the BIR official;
d) The taxpayer previously filed an extension to file a protest with the BIR official.
SUGGESTED ANSWER:
c) The taxpayer previously filed a request for reinvestigation with the BIR official Section 228, NIRC; RCBC v. CIR.
b. Submission of documents within 60 days from filing of protest

c. Effect of failure to protest
What is the effect on the tax liability of a taxpayer who does not protest an assessment for deficiency taxes? (2011 Bar
Question)
(A) The taxpayer may appeal his liability to the CTA since the assessment is a final decision of the Commissioner on the
matter.
(B) The BIR could already enforce the collection of the taxpayer's liability if it could secure authority from the CTA.
(C) The taxpayer's liability becomes fixed and subject to collection as the assessment becomes final and collectible.
(D) The taxpayer's liability remains suspended for 180 days from the expiration of the period to protest.
SUGGESTED ANSWER:
C) The taxpayer's liability becomes fixed and subject to collection as the assessment becomes final and collectible.
d. Period provided for the protest to be acted upon
Page 13 of 32
vii. Rendition of decision by Commissioner
a. Denial of protest
1. Commissioner’s actions equivalent to denial of protest
A taxpayer received a tax deficiency assessment of P 1.2 Million from the BIR demanding payment within 10 days,
otherwise, it would collect through summary remedies. The taxpayer requested for a reconsideration stating the grounds
therefor. Instead of resolving the request for reconsideration, the BIR sent a Final Notice Before Seizure to the taxpayer.
May this action of the Commissioner of Internal Revenue be deemed a denial of the request for reconsideration of the
taxpayer to entitle him to appeal to the Court of Tax Appeals? Decide with reasons. (5%)
SUGGESTED ANSWER:
Yes. The action of the Commissioner of Internal Revenue is deemed a denial of the request for reconsideration of the taxpayer, thus
entitling him to appeal to the CTA. The Notice was the only response received by the taxpayer and its content and tenor supports the
theory that it was the BIR’s final act regarding the request for reconsideration. The very title of the notice indicated that it was a “Final
Notice Before Seizure" which means that the taxpayer’s properties will be subjected to seizure to enforce the deficiency assessment.
Thus, in one decided case, the Supreme Court ruled that the Final Notice Before Seizure is a final decision of the Commissioner on the
disputed assessment [CIR v. Isabela Cultural Corp., 361 SCRA 71 (2001)].

No, the Final Notice Before Seizure does not constitute a denial of the request for reconsideration. The Commissioner is mandated to
come out with a decision clearly stating the facts and the law upon which it is based and that the same constitutes his final decision.
(Revenue Regulations No. 12-99, Implementing Sec. 228, NIRC). It cannot merely be implied from the issuance of a Warrant of Distraint
and Levy. [CIR v. Union Shipping Corp., 185 SCRA 547, (1990)]. Since the final notice before seizure is issued ahead of a Warrant of
Distraint and Levy, with more reason that this earlier action cannot be considered as a denial of the protest. (BAR 2005)
A Co., a Philippine corporation, received an income tax deficiency assessment from the BIR on May 5, 1995. On May 31,
1995, A Co. filed its protest with the BIR. On July 30, 1995. A Co. submitted to the BIR all relevant supporting documents.
The CIR did not formally rule on the protest but on January 25. 1996, A Co. was served a summons and a copy of the
complaint for collection of the tax deficiency filed by the BIR with the Regional Trial Court (RTC). On February 20. 1996, A
Co. brought a Petition for Review before the CTA. The BIR contended that the Petition is premature since there was no
formal denial of the protest of A Co. and should therefore be dismissed.
Has the CTA jurisdiction over the case?
Has the RTC jurisdiction over the collection case filed by the BIR? Explain.
SUGGESTED ANSWER:
Yes, the CTA has jurisdiction over the case because this qualifies as an appeal from the Commissioner's decision on disputed assessment.
When the Commissioner decided to collect the tax assessed without first deciding on the taxpayer's protest, the effect of the
Commissioner is action of filing a judicial action for collection is a decision of denial of the protest, in which event the taxpayer may file an
appeal with the CTA. (Republic v. Lim Tian Teng &. Sons, Inc., 16 SCRA 584; Dayrit v. Cruz, L-39910, Sept. 26, 1988).
The RTC has no jurisdiction over the collection case filed by the BIR. The filing of an appeal with the CTA has the effect of divesting the
RTC of jurisdiction over the collection case. At the moment the taxpayer appeals the case to the Court of Tax Appeals in view of the
Commissioner's filing of the collection case with the RTC which was considered as a decision of denial, it gives a justifiable basis for the
taxpayer to move for dismissal in the RTC of the Government's action to collect the tax liability under dispute. {Yabesv.Flojo, 15 SCRA
278; San Juan v. Vasquez, 3 SCRA 92). There is no final, executory and demandable assessment which can be enforced by the BIR, once
a timely appeal is filed. (BAR 1999)
CFB Corporation, a domestic corporation engaged in food processing and other allied activities, received a letter from the
BIR assessing it for deliquency income taxes. CFB filed a letter of protest. One month after, a warrant of distraint and levy
was served on CFB Corporation.
If you were the lawyer engaged by CFB Corporation to contest the assessment made by the BIR, what steps will you take to
protect your client? (5%)
SUGGESTED ANSWER:
I shall immediately file a motion for reconsideration of the issuance of the warrant of distraint and levy and seek from the BIR
Commissioner a denial of the protest “in clear and unequivocal language.”This is so because the issuance of a warrant of distraint and
levy is not considered as a denial by the BIR of the protest filed by CFB Corporation (CIR v. Union Shipping Corp. 185 SCRA 547).
Within thirty (30) days from receipt of such denial “ln clear and unequivocal language," I shall then file a petition for review with the
Court of Tax Appeals.
ALTERNATIVE ANSWER:
Within thirty (30) days from receipt of the warrant of distraint and levy, I shall file a petition for review with the Court of Tax Appeals with
an application for issuance of a writ of preliminary injunction to enjoin the Bureau of Internal Revenue from enforcing the warrant.
This is the action I shall take because I shall consider the issuance of the warrant as a final decision of the Commissioner of Internal
Revenue which could be the subject of appeal to the Court of Tax Appeals (Yabes Flojo, 15 SCRA 278). The CTA may, however, remand
the case to the BIR and require the Commissioner to specifically rule on the protest. The decision of the Commissioner, if adverse to my
client, would then constitute an appealable decision. (BAR 1998)
If the request for re-investigation is denied, is it possible or advisable to file a petition for review with any court or agency
Page 14 of 32
as a last resort?
ANSWER:
A denial of a request for re-investigation on an assessment partakes the nature of a decision if made by the Commissioner. In this a case,
an appeal may be filed with the CTA within thirty days from receipt of the notice of denial.
ALTERNATIVE ANSWER:
On the assumption that the denial by the BIR was not made by the Commissioner himself but by the regional officer, for instance, or that
the request for re-investigation is not on an assessment as yet, then it may not necessarily constitute a decision on a disputed
assessment from which an appeal may be made to the Court of Tax Appeals. (BAR 1992)
a. Filing of criminal action against taxpayer

b. Issuing a warrant of distraint and levy
2. Inaction by Commissioner
viii. Remedies of taxpayer to action by Commissioner
a. In case of denial of protest
In the examination conducted by the revenue officials against the corporate taxpayer in 2010, the BIR issued a final
assessment notice and demand letter which states: "It is requested that the above deficiency tax be paid immediately upon
receipt hereof, inclusive of penalties incident to delinquency. This is our final decision based on investigation. If you
disagree, you may appeal this final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable." The assessment was immediately appealed by the taxpayer to
the Court of Tax Appeals, without filing its protest against the assessment and without a denial thereof by the BIR. If you
were the judge, would your deny the petition for review filed by the taxpayer and consider the case as prematurely filed?
Explain your answer (2012 BAR)
Suggested Answer:
NO, the Petition for Review should not be denied. The case is an exception to the rule on exhaustion of administrative remedies. The BIR
is estopped from claiming that the filing of the Petition for Review is premature because the taxpayer failed to exhaust all
administrative remedies. The statement of the BIR in its Final Assessment Notice and Demand Letter led the taxpayer to
conclude that only a final judicial ruling in his favor would be accepted by the BIR. The taxpayer cannot be blamed for not filing a
protest against the Formal Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter indicate
that it is the final decision of the respondent on the matter. The CIR should indicate, in a clear and unequivocal language, whether his
action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine when his or
her right to appeal to the tax court accrues. Although there was no direct reference for the taxpayer 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 (Allied Bank v.
CIR, G.R. No. 175097, Feb. 5, 2010).
Explain the following statements:

a. The acquittal of the taxpayer in a criminal action under the Tax Code does not necessarily result in an exoneration of
said taxpayer from his civil liability to pay taxes.
b. Should the accused be found guilty beyond reasonable doubt for violation of Sec. 255 of the Tax Code for failure to file
tax return or to supply correct information, the imposition of the civil liability by the CTA should be automatic and no
assessment notice from the BIR is necessary? (2012)
Suggested Answer:
a. In taxation, the taxpayer becomes criminally liable because of a civil liability. While he may be acquitted on the criminal case, his
acquittal could not operate to discharged him from the duty to pay tax, since that duty is imposed by statute prior to and
independent of any attempt on the taxpayer to evade payment. The obligation to pay the tax is not a mere consequence of the
felonious acts charged in the information, nor is a mere civil liability derived from crime that would be wiped out by the judicial
declaration that the criminal acts charged did not exist (Castro v. Collector of Internal Revenue, L-12174, April 26, 1962).
b. YES. If the failure to file tax return or to supply correct information resulted to unpaid taxes the amount of which is proven during
trial, the CTA shall not only impose the criminal penalty but must likewise order the payment of the civil liability (Sec. 205(b), NIRC).
As a matter of fact, it is well-recognized that in the case of failure to file a return, a proceeding in court for the collection of the tax
may be filed without the need of an assessment (Sec. 222(a), NIRC).
A taxpayer received an assessment notice from the BIR on February 3, 2009. The following day, he filed a protest, in the
form of a request for reinvestigation, against the assessment and submitted all relevant documents in support of the
protest. On September 11, 2009, the taxpayer, apprehensive because he had not yet received notice of a decision by the
Commissioner on his protest, sought your advice.
What remedy or remedies are available to the taxpayer? Explain. (4%)
SUGGESTED ANSWER:
The remedy of a taxpayer is to avail of either of two options:
a. File a petition for review with the CTA within 30 days after the expiration of the 180- day period from submission of all relevant
documents; or
b. Await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days
after receipt of a copy of such decision.
These options are mutually exclusive such that resort to one bars the application of the other (RCBC v. OR, 522SCRA 144(2007]). (BAR
2009)
Page 15 of 32
On June 1, 2003, Global Bank received a final notice of assessment from the BIR for deficiency documentary stamp tax in
the amount of P5 Million. On June 30, 2003, Global Bank filed a request for reconsideration with the Commissioner of
Internal Revenue. The Commissioner denied the request for reconsideration only on May 30, 2006, at the same time
serving on Globed Bank a warrant of distraint to collect the deficiency tax. If you were its counsel, what will be your advice
to the bank? Explain. 5%
SUGGESTED ANSWER:
The denial of the request for reconsideration is a final decision of the Commissioner of Internal Revenue. I would advise Global Bank to
appeal the Commissioner’s denial to the Court of Tax Appeals (CTA) within 30 days from receipt, if the remedy of appeal is still available.
I will further advise the bank to file a motion for injunction with the Court of Tax Appeals to enjoin the Commissioner from enforcing the
assessment pending resolution of the appeal. While an appeal to the CTA will not suspend the payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction of its tax liability, the CTA is authorized to give injunctive relief if the enforcement would
jeopardize the interest of the taxpayer, as in this case where the assessment has not become final.

Since the denial of the protest was made on May 30, 2006, I would assume that Global Bank has already lost its right to appeal. The
assessment having become final for failure to file a timely appeal, I will now advise my client to file a request with the Commissioner of
Internal Revenue for a compromise settlement of the tax assessed, which has already become final by invoking doubtful validity of the
assessment (Sec. 204, NIRC).

Since the assessment has already become final, I will now advise Global Bank to pay the assessment in order to save on the 20% interest
which continues to run indefinitely until the entire obligation is paid (Sec. 249, NIRC). This will also save the taxpayer and its officers
from possible criminal prosecution for non-payment of taxes considering that in taxation, criminal liability arises as a result of the civil
liability to pay taxes (Republic v. Patanao,L-22356, 20 SCRA 712 [1967]). (BAR 2006)
CFB Corporation, a domestic corporation engaged in food processing and other allied activities, received a letter from the
BIR assessing it for deliquency income taxes. CFB filed a letter of protest. One month after, a warrant of distraint and levy
was served on CFB Corporation.
If you were the lawyer engaged by CFB Corporation to contest the assessment made by the BIR, what steps will you take to
protect your client? (5%)
SUGGESTED ANSWER:
I shall immediately file a motion for reconsideration of the issuance of the warrant of distraint and levy and seek from the BIR
Commissioner a denial of the protest “in clear and unequivocal language.”This is so because the issuance of a warrant of distraint and
levy is not considered as a denial by the BIR of the protest filed by CFB Corporation (CIR v. Union Shipping Corp. 185 SCRA 547).
Within thirty (30) days from receipt of such denial “ln clear and unequivocal language," I shall then file a petition for review with the
Court of Tax Appeals.
ALTERNATIVE ANSWER:
Within thirty (30) days from receipt of the warrant of distraint and levy, I shall file a petition for review with the Court of Tax Appeals with
an application for issuance of a writ of preliminary injunction to enjoin the Bureau of Internal Revenue from enforcing the warrant.
This is the action I shall take because I shall consider the issuance of the warrant as a final decision of the Commissioner of Internal
Revenue which could be the subject of appeal to the Court of Tax Appeals (Yabes v. Flojo, 15 SCRA 278). The CTA may, however, remand
the case to the BIR and require the Commissioner to specifically rule on the protest. The decision of the Commissioner, if adverse to my
client, would then constitute an appealable decision. (BAR 1998)
b. In case of inaction by Commissioner within 180 days from submission of documents
On March 27, 2012, the Bureau of Internal Revenue (BIR) issued a notice of assessment against Blue Water Industries Inc.
(BWI), a domestic corporation, informing the latter of its alleged deficiency corporate income tax for the year 2009. On
April 20, 2012, BWI filed a letter protest before the BIR contesting said assessment and demanding that the same be
cancelled or set aside.
However, on May 19, 2013, that is, after more than a year from the filing of the letter protest, the BIR informed BWI that
the latter’s letter protest was denied on the ground that the assessment had already become final, executory and
demandable. The BIR reasoned that its failure to decide the case within 180 days from filing of the letter protest should
have prompted BWI to seek recourse before the Court of Tax Appeals (CTA) by filing a petition for review within thirty
(30) days after the expiration of the 180-day period as mandated by the provisions of the last paragraph of Section 228 of
the National Internal Revenue Code (NIRC). Accordingly, BWI’s failure to file a petition for review before the CTA rendered
the assessment final, executory and demandable.
Is the contention of the BIR correct? Explain. (2014 Bar Question)
SUGGESTED ANSWER :
No. Notwithstanding the lapse of the 180-day period, BWI had the option to await the BIR’S final decision on its protest before filing a
Petition for Review with the CTA. Pursuant to the case of Lascona Land Co., Inc. v. Commissioner of Internal Revenue (G.R. No. 171251,
March 5, 2012), in case the Commissioner fails to act on a taxpayer’s protest within the 180-day period, a taxpayer can either: ( i) file a
petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or ( ii) await the final decision
of the Commissioner on the disputed assessments, and thereafter appeal such final decision to the CTA within 30 days after the receipt of
a copy of such decision. In the present case, BWI simply availed itself of the second option.
A taxpayer received an assessment notice from the BIR on February 3, 2009. The following day, he filed a protest, in the
form of a request for reinvestigation, against the assessment and submitted all relevant documents in support of the
Page 16 of 32
protest. On September 11, 2009, the taxpayer, apprehensive because he had not yet received notice of a decision by the
Commissioner on his protest, sought your advice.
What remedy or remedies are available to the taxpayer? Explain. (4%)
SUGGESTED ANSWER:
The remedy of a taxpayer is to avail of either of two options:
1. File a petition for review with the CTA within 30 days after the expiration of the 180- day period from submission of all relevant
documents; or
2. Await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days
after receipt of a copy of such decision.
These options are mutually exclusive such that resort to one bars the application of the other (RCBC v. OR, 522SCRA 144(2007]). (BAR
2009)
c. Effect of failure to appeal
Spanflex Int’l Inc. received a notice of assessment from the BIR. It seasonably filed a protest with all the necessary
supporting documents but the BIR failed to act on the protest. Thirty days from the lapse of 180 days from the filing of its
protest, Spanflex still has not elevated the matter to the CTA. What remedy, if any, can Spanflex take? (2011 Bar Question)
(A) It may file a motion to admit appeal if it could prove that its failure to appeal was due to the negligence of counsel.
(B) It may no longer appeal since there is no BIR decision from which it could appeal.
(C) It may wait for the final decision of the BIR on his protest and appeal it to the CTA within 30 days from receipt of such
decision.
(D) None. Its right to appeal to the CTA has prescribed.
SUGGESTED ANSWER:
(C) It may wait for the final decision of the BIR on his protest and appeal it to the CTA within 30 days from receipt of such decision.
The taxpayer seasonably filed his protest together with all the supporting documents. It is already July 31, 2011, or 180
days from submission of the protest but the BIR Commissioner has not yet decided his protest. Desirous of an early
resolution of his protested assessment, the taxpayer should file his appeal to the Court of Tax Appeals not later than: (2011
Bar Question)
(A) August 31, 2011.
(B) August 30, 2011.
(C) August 15, 2011.
(D) August 1, 2011.
SUGGESTED ANSWER:
b) August 30, 2011;
The taxpayer received an assessment notice on April 15, 2011 and filed its request for reinvestigation against the
assessment on April 30, 2011. Additional documentary evidence in support of its protest was submitted by it on June 30,
2011. If no denial of the protest was received by the taxpayer, when is the last day for the filing of its appeal to the CTA?
(2012 BAR)
a) November 30, 2011;
b) December 30, 2011;
c) January 30, 2012;
d) February 28, 2012.
SUGGESTED ANSWER:
c) January 30, 2012 Section 228, NIRC.
Using the same facts in the immediately preceding number, but assuming that the final decision on the disputed
assessment was received by the taxpayer on July 30, 2011, when is the last day for filing of the appeal to the CTA? (2012
BAR)
a) August 30, 2011; b) September 30, 2011; c) December 30, 2011; d) January 30, 2012.
SUGGESTED ANSWER:
a) August 30, 2011;

Section 228, NIRC (nearest answer but not correct answer)
[Note: The period to appeal is within 30 days from receipt of the final decision by the Commissioner. The decision was received on July
30, 2011 so the last day to perfect an appeal with the CTA is August 29, 2011. It is thus clear that the question did not provide for the
CORRECT answer. Hence, it should be treated as a bonus question.]
On May 15, 2013, CCC, Inc. received the Final Decision on Disputed Assessment issued by the Commissioner of Internal
Revenue (CIR) dismissing the protest of CCC, Inc. and affirming the assessment against said corporation. On June 10,
2013, CCC, Inc. filed a Petition for Review with the Court of Tax Appeals (CTA) in division. On July 31, 2015, CCC, Inc.
received a copy of the Decision dated July 22, 2015 of the CT A division dismissing its Petition. CCC, Inc. immediately filed a
Petition for Review with the CT A en banc on August 6, 2015. Is the immediate appeal by CCC, Inc. to the CTA en banc of
the adverse Decision of the CTA division the proper remedy? (2015 Bar Question)
SUGGESTED ANSWER:
Page 17 of 32
No, CCC, Inc. should first file a motion for reconsideration with the CTA Division. Petition for review of a decision or resolution of the
Court in Division must be preceded by the filing of a timely motion for reconsideration or new trial with the Division. Before the CTA En
Banc could take cognizance of the petition for review concerning a case falling under its exclusive appellate jurisdiction, the litigant must
sufficiently show that it sought prior reconsideration or moved for a new trial with the concerned CTA division.
b. Collection
i. Requisites
ii. Prescriptive periods
A final assessment notice was issued by the BIR on June 13, 2000, and received by the taxpayer on June 15, 2000. The
taxpayer protested the assessment on July 31, 2000. The protest was initially given due course, but was eventually denied
by the Commissioner of Internal Revenue in a decision dated June 15, 2005. The taxpayer then filed a petition for review
with the Court of Tax Appeals (CTA), but the CTA dismissed the same.
Assume that the CTA’s decision dismissing the petition for review has become final. May the Commissioner legally enforce
collection of the delinquent tax? Explain. (4%)
SUGGESTED ANSWER:
No. The protest was filed out of time and, therefore, did not suspend the running of the prescriptive period for the collection of the tax.
Once the right to collect has prescribed, the Commissioner can no longer enforce collection of the tax liability against the taxpayer (CIR v.
Atlas Mining and Development Corp., February 14,2000). (BAR 2009)
TY Corporation filed its final adjusted income tax return for 1993 on April 12,1994 showing a net loss from operations.
After investigation, the BIR issued a pre- assessment notice on March 30, 1996. A final notice and demand letter dated
April 15, 1997 was issued, personally delivered to and received by the company’s chief accountant. For willful refusal and
failure of TY Corporation to pay the tax, warrants of distraint and levy on its properties were issued and served upon it. On
January 10, 2002, a criminal charge for violation of the Tax Code was instituted in the Regional Trial Court with the
approval of the Commissioner.
The company moved to dismiss the criminal complaint on the ground that an act for violation of any provision of the Tax
Code prescribes after five (5) years and, in this case, the period commenced to run on March 30,1996 when the pre-
assessment was issued.
How will you resolve the motion? Explain your answer. (5%)
SUGGESTED ANSWER:
The motion to dismiss should not be granted. It is only when the assessment has become final and unappealable that the 5-year period to
file a criminal action commences to run (Tupaz v. Ulep, 316 SCRA 118 [1999]). The pre-assessment notice issued on March 30,1996 is
not a final assessment which is enforceable by the BIR. It is the issuance of the final notice and demand letter dated April 15,1997 and
the failure of the taxpayer to protest within 30 days from receipt thereof that made the assessment final and unappealable. The earliest
date that the assessment has become final is May 16,1997 and since the criminal charge was instituted on January 10, 2002, the same
was timely filed. (BAR 2002)
May the collection of taxes be barred by prescription? Explain your answer. (3%) SUGGESTED ANSWER:
Yes. The collection of taxes may be barred by prescription. The prescriptive periods for collection of taxes are governed by the tax law
imposing the tax. However, if the tax law does not provide for prescription, the right of the government to collect taxes becomes
imprescriptible. (BAR 2001)
Taxes were generally imprescriptible; statutes, however, may provide otherwise. State the rules that have been adopted on
this score by –
The National Internal Revenue Code;
SUGGESTED ANSWER:
The rules that have been adopted on prescription are as follows:
National Internal Revenue Code - The statute of limitation for assessment of tax if a return is filed is within three (3) years from the last
day prescribed by law for the filing of the return or if filed after the last day, within three years from date of actual filing. If no return is
filed or the return filed is false or fraudulent, the period to assess is within ten years from discovery of the omission, fraud or falsity. (BAR
1997)
Fitness, Inc. is a domestic corporation engaged in the manufacture and sale of nutritional products. It pays royalties to its
foreign licensor. After investigation, the BIR on December 17, 1974, sent a notice of assessment to Fitness, Inc. for
allegedly failing to remit withholding tax at source for the fourth quarter of 1973 on its royalties. It demanded payment of
P3,000,000.00. The notice was re-ceived by Fitness, Inc. on December 19, 1974. On February 8,1975, Fitness, Inc., through
its counsel, protested the assessment and requested its cancellation or withdrawal on the ground that it lacked factual and
legal bases. On December 10, 1979, the Commissioner of the BIR rendered a decision reducing the assessment to
PI.500.000.00. Fitness. Inc. was not satisfied and on January 18.1980, it filed a petition for review of the decision in the
CTA to enjoin the enforcement of the assessment. On February 7, 1980, the BIR issued a warrant of distraint against
Fitness. Inc. The CTA enjoined the collection of the deficiency taxes by virtue of the warrant of distraint. It was argued by
Fitness, Inc. that the right of the BIR to collect its alleged deficiency taxes had already prescribed. Rule on the argument.
ANSWER:
The warrant of distraint was served on the taxpayer within the prescriptive period (then 5 years, now three (3) years). In Commissioner
v. WyethSuaco (202 SCRA125), the court ruled that the prescriptive period provided by law to make collection by distraint and/or levy or
by a proceeding in court is interrupted once a taxpayer protests the assessment and requests for its cancellation. Thus, when the
taxpayer protested the assessment on 8 February 1975, the prescriptive period to collect was interrupted and resumed on 10 December
1979. When the Commissioner issued the warrant of distraint on 7 February 1980 it was well within the five-year (now 3 years)
Page 18 of 32
prescriptive period to collect.
The Bureau of Internal Revenue (“BIR") shall assess internal revenue taxes within three
(3) years after the last day prescribed by law for the filing of return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period (Section
203 of the National Internal Revenue Code [“NIRC"). However. this three (3)-year prescriptive period shall be suspended when the
taxpayer requests for a reinvestigation and which is granted by the Commission (Section 224 of NIRC). In case an assessment was made,
the tax may be collected within three (3) years from the date of assessment (Collector of Internal Revenue v. Pineda,2 SCRA 401; Umali,
Roman A, Reviewer in Taxation,1985, pp. 486-487; Vitug, Jose C., Compendium of Tax Law and Jurisprudence, 2nd Rev., Ed., 1989, p.
255). If the taxpayer asks for a reinvestigation of the assessment and such reinvestigation is made, and on the basis of which the BIR
makes another assessment, the three (3)-year period for collection is to be counted from the last assessment (Rep. v. Lopez,7 SCRA 566;
Rep. v. Acebedo, 22 SCRA 1356; Umali, Roman A., Reviewer in Taxation,1985, pp. 486-487; Vitug, Jose C., Compendium of Tax Law and
Jurisprudence, 2nd Rev., Ed., 1989, p. 255).
In the case at bar, the running of the three (3)-year prescriptive period for the BIR to collect taxes started to run only on 10 December
1979, when a final assessment was made by the BIR reducing the tax due to One Million Five Hundred Thousand Pesos (PI,500,000.00).
The distraint against Fitness, Inc. Hence, the action of the BIR to collect the deficiency taxes was clearly within the three (3)- year
prescriptive period.
The right of the BIR to collect the deficiency taxes has not prescribed, as the prescriptive period is reckoned from the date of the reduced
assessment, which is December 10, 1979. The BIR has three (3) years from said date to collect.
The reduced assessment is In the nature of a compromise assessment, the first assessment received by Fitness on December 19,1974,
and protested only on February 8,1975, having already become final and binding on Fitness. Applying the present provisions of the NIRC.
Fitness should have protested the assessment within thirty (30) days from receipt of the same. Failing to do so, the assessment became
final and was presumably merely compromised. The date of such compromise assessment should then be the basis for computing the
prescriptive period of three (3) years.
Note:
Beginning 1984, the prescriptive period of the right of the government to assess and collect internal revenue taxes was reduced from five
(5) to three (3) years. (BAR 1993)
iii. Distraint of personal property including garnishment
When a BIR decision affirming an assessment is appealed to the CTA, the BIR's power to garnish the taxpayer's bank
deposits: (2011 Bar Question)
(A) is suspended to await the finality of such decision.
(B) is suspended given that the CTA can reverse BIR decisions when prejudicial to the taxpayer.
(C) is not suspended because only final decisions of the BIR are subject to appeal.
(D) is not suspended since the continued existence of government depends on tax revenues.
SUGGESTED ANSWER:
(D) is not suspended since the continued existence of government depends on tax revenues.
Is the BIR authorized to issue a warrant of garnishment against the bank account of a taxpayer despite the pendency of his
protest against the assessment with the BIR or appeal with the Court of Tax Appeals? [5%]
SUGGESTED ANSWER:
The BIR is authorized to issue a warrant of garnishment against the bank account of a taxpayer despite the pendency of protest (Yabes v.
Flojo, 15 SCRA 278). Nowhere in the tax Code is the Commissioner required to rule first on the protest before he can institute collection
proceedings on the tax assessed. The legislative policy is to give the Commissioner much latitude in the speedy and prompt collection of
taxes because it is in taxation that the Government depends to obtain the means to carry on its operations (Republic v. Tim Tian Teng
Sons, Inc., 16 SCRA 584).
The Commissioner is not authorized to issue the warrant of garnishment during the pendency of appeal with the Court of Tax Appeals
because the assessment is not yet final and unappealable.
ALTERNATIVE ANSWER:
No. because the assessment has not yet become final, executory and demandable. The basic consideration in the collection of taxes is
whether the assessment is final and unappealable or the decision of the Commissioner is final, executory and demandable, the BIR has
legal basis to collect the tax liability by either administrative or judicial action. (BAR 1998)
a. Summary remedy of distraint of personal property

1. Purchase by the government at sale upon distraint
2. Report of sale to the Bureau of Internal Revenue (BIR)
3. Constructive distraint to protect the interest of the government
iv. Summary remedy of levy on real property
Is the BIR authorized to collect estate tax deficiencies by the summary remedy of levy upon and sale of real properties of
the decedent without first securing the authority of the court sitting in probate over the supposed will of the decedent?
[5%]
SUGGESTED ANSWER:
Page 19 of 32
Yes. The BIR is authorized to collect estate tax deficiency through the summary remedy of levying upon and sale of real properties of a
decedent, without the cognition and authority of the court sitting in probate over the supposed will of the deceased, because the
collection of estate tax is executive in character. As such the estate tax is exempted from the application of the statute of non-claims, and
this is justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood of the government
(Marcos v. UR, G.R. No. 120880, June 5, 1997).
ALTERNATIVE ANSWER:
Yes, if the tax assessment has already become final executory and enforceable. The approval of the court sitting in probate over the
supposed will of the deceased is not a mandatory requirement for the collection of the estate tax.
The probate court is determining issues which are not against the property of the decedent, or a claim against the estate as such, but is
against the interest or property right which the heir, legatee, devisee, etc. has in the property formerly held by the decedent. (Marcos v.
CIR, G.R. No. 120880, June 5, 1997). (BAR 1998)
a. Advertisement and sale

b. Redemption of property sold
c. Final deed of purchaser
v. Forfeiture to government for want of bidder
a. Remedy of enforcement of forfeitures
1. Action to contest forfeiture of chattel
b. Resale of real estate taken for taxes
c. When property to be sold or destroyed
d. Disposition of funds recovered in legal proceedings or obtained from forfeiture
vi. Further distraint or levy
Which court has jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the
waiver of the Statute of Limitations was validly effected? (2012 BAR)
a) City Courts; b) Regional Trial Court; c) Court of Tax Appeals; d) Court of Appeals.
SUGGESTED ANSWER:
c) Court of Tax Appeals Section 7, RA 9282.
Which statement is correct? The collection of a deficiency tax assessment by distraint and levy: (2012 BAR)
a) May be repeated, if necessary, until the full amount due, including all expenses, is collected;
b) Must be done successively, first by distraint and then by levy;
c) Automatically covers the bank deposits of a delinquent taxpayer;
d) May be done only once during the taxable year.
SUGGESTED ANSWER:
a) May be repeated, if necessary, until the full amount due, including all expenses, is collected
Section 217, NIRC.
vii. Tax lien

viii. Compromise
a. Authority of the Commissioner to compromise and abate taxes
Does the Court of Appeals have the power to review compromise agreements forged by the Commissioner of Internal
Revenue and a taxpayer? Explain. (2010 Bar Question)
SUGGESTED ANSWER:
No, for either of two reasons:
(a) in instances in which the CIR is vested with authority to compromise, such authority should be exercised in accordance
with the CIR discretion and courts have no power, as a general rule, to compel him to exercise such discretion one way or
another.
(b) If the CIR abuses his discretion by not following the parameters set by law, the CTA, not the CA, may correct such abuse if
the matter is appealed to it. In case of arbitrary or capricious exercise by the CIR of the power to compromise, the compromise
can be attacked and reversed through judicial process. It must be noted however, that a compromise is considered as other
matters arising under the NIRC which vests the CTA with jurisdiction and since the decision of the CTA is appealable to the
Supreme Court, the Court of Appeals is devoid of any power to review a compromise settlement forged by the CIR.
When the financial position of the taxpayer demonstrates a clear inability to pay the tax, the Commissioner of Internal
Revenue may validly compromise the tax liability.
SUGGESTED ANSWER:
True. Financial incapacity is a ground allowed by law in order that the Commissioner of Internal Revenue may compromise a tax liability
(Section 204, NIRC), (BAR 2009)
After the tax assessment had become final and unappealable, the Commissioner of Internal Revenue initiated the fling of a
civil action to collect the tax due from NX. After several years, a decision was rendered by the court ordering NX to pay the
tax due plus penalties and surcharges. The judgment became final and executory, but attempts to execute the judgment
award were futile.
Subsequently, NX offered the Commissioner a compromise settlement of 50% of the judgment award, representing that
Page 20 of 32
this amount is all he could really afford. Does the Commissioner have the power to accept the compromise offer? Is it legal
and ethical? Explain briefly. (5%)
SUGGESTED ANSWER:
Yes. The Commissioner has the power to accept the offer of compromise if the financial position of the taxpayer clearly demonstrates a
clear inability to pay the tax (Section 204, NIRC). As represented by NX in his offer, only 50% of the judgment award is all he could really
afford. This is an offer for compromise based on financial incapacity which the Commissioner shall not accept unless accompanied by a
waiver of the secrecy of bank deposits (Section 6[F], NIRC). The waiver will enable the Commissioner to ascertain the financial position of
the taxpayer, although the inquiry need not be limited only to the bank deposits of the taxpayer but also as to his financial position as
reflected in his financial statements or other records upon which his property holdings can be ascertained.
If indeed, the financial position of NX as determined by the Commissioner demonstrates a clear inability to pay the tax, the acceptance of
the offer is legal and ethical because the ground upon which the compromise was anchored is within the context of the law and the rate
of compromise is well within and far exceeds the minimum prescribed by law which is only 10% of the basic tax assessed. (BAR 2004)
A domestic corporation failed to withhold and remit the tax on income received from Philippine sources by a nonresident
foreign corporation. In addition to the civil penalties provided for under the Tax Code, a compromise penalty was imposed
for violation of the withholding tax provisions. May the Commissioner of Internal Revenue legally enforce the collection of
compromise penalty? (5%)
SUGGESTED ANSWER:
No. There is no showing that the compromise penalty was imposed by the Commissioner of Internal Revenue with the agreement and
conformity of the taxpayer. (Wonder Mechanical Engineering Corporation v. Court of Tax Appeals, et al. 64 SCRA 555). (BAR 2000)
Under what conditions may the Commissioner of Internal Revenue be authorized to:
Compromise the payment of any internal revenue tax? (2%), and abate or cancel a tax liability? (3%)
SUGGESTED ANSWER:
The Commissioner of Internal Revenue may be authorized to compromise the payment of any internal revenue tax where:
A reasonable doubt as to the validity of the claim against the taxpayer exists: or
the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
The Commissioner of Internal Revenue may abate or cancel a tax liability when: The tax or any portion thereof appears to be
unjustly or excessively assessed: or The administration and collection costs involved do not justify the collection of the amount
due. (Sec. 204 (B). NIRC of 1997] (BAR 2000)
May the Commissioner of the Internal Revenue compromise the payment of withholding tax (tax deducted and withheld at
source) where the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax? (5%]
SUGGESTED ANSWER:
No. A taxpayer who is constituted as withholding agent who has deducted and withheld at source the tax on the income payment made
by him holds the taxes as trust funds for the government (Sec. 58[D]) and is obligated to remit them to the BIR. The subsequent inability
of the withholding agent to pay/remit the tax withheld is not a ground for compromise because the withholding tax is not a tax upon the
withholding agent but it is only a procedure for the collection of a tax. (BAR 1998)
Explain the extent of the authority of the Commissioner of Internal Revenue to compromise and abate taxes?
ANSWER:
The authority of the Commissioner to compromise encompasses both civil and criminal liabilities of the taxpayer. The civil compromise is
allowed only in cases (a) where the tax assessment is of doubtful validity, or (b) when the financial position of the taxpayer demonstrates
a clear inability to pay the tax. The compromise of the tax liability is possible at any stage of litigation and the amount of compromise is
left to the discretion of the Commissioner except with respect to final assessments issued against laige taxpayers wherein the
Commissioner cannot compromise for less than fifty percent (50%). Any compromise involving large taxpayers lower than fifty percent
(50%) shall be subject to the approval of the Secretary of Finance.
All criminal violations except those involving fraud, can be compromised by the Commissioner but only prior to the filing of the
information with the Court.
The Commissioner may also abate or cancel a tax liability when (a) the tax or any portion thereof appears to have been unjustly or
excessively assessed; or (b) the administrative and collection costs involved do not justify collection of the amount due. (Sec. 204. NIRC)
(BAR 1996)
ix. Civil and criminal actions
Mr. Chan, a manufacturer of garments, was investigated for failure to file tax returns and to pay taxes for the taxable year
1997. Despite the subpoena duces tecum issued to him, he refused to present and submit his books of accounts and
allied records. Investigators, therefore, raided his factory and seized several bundles of manufactured garments, supplies
and unpaid imported textile materials. After his apprehension and based on the testimony of a former employee, deficiency
income and business taxes were assessed against Mr. Chan on April 15, 2000. It was then that he paid the taxes. Criminal
action was nonetheless instituted against him in the Regional Trial Court for violation of the Tax Code. Mr. Chan moved to
dismiss the criminal case on the ground that he had already paid the taxes assessed against him. He also demanded the
return of the garments and materials seized from his factory. How will you resolve Mr. Chan's motion? (2012 BAR)
Suggested Answer:
Page 21 of 32
The motion to dismiss should be denied. The satisfaction of the civil liability is not one of the grounds for the extinction of
criminal action (People v. Ildefonso Tierra, 12 SCRA 666 [1964]). Likewise, the payment of the tax due after apprehension shall
not constitute a valid defense in any prosecution for violation of any provision of the Tax Code (Sec. 253[a], NIRC). However,
the garments and materials seized from the factory should be ordered returned because the payment of the tax had released them from
any lien that the Government has over them.
Based on the Affidavit of the Commissioner of Internal Revenue (CIR), an Information for failure to file income tax return
under Section 255 of the National Internal Revenue Code (NIRC) was filed by the Department of Justice (DOJ) with the
Manila Regional Trial Court (RTC) against XX, a Manila resident.
XX moved to quash the Information on the ground that the RTC has no jurisdiction in view of the absence of a formal
deficiency tax assessment issued by the CIR.
Is a prior assessment necessary before an Information for violation of Section 255 of the NIRC could be filed in court?
Explain. (2010 Bar Question)
SUGGESTED ANSWER:
No. In case of failure to file a return, a proceeding in court for the collection of the tax may be filed without an assessment. The tax can
be collected by filing a criminal action with the RTC because a criminal action with the RTC is a mode of collecting the tax liability.
Besides, the CIR is empowered to prepare a return on the basis of his own knowledge and upon such information and he can obtain from
testimony or otherwise, which shall be prima facie correct and sufficient for legal purposes. The issuance of a formal deficiency tax
assessment, therefore, is not required.
a. Suit to recover tax based on false or fraudulent returns
True or False. (2010 Bar Question)
a. In civil cases involving the collection of internal revenue taxes, prescription is construed strictly against the
government and liberally in favor of the taxpayer. (1%)
SUGGESTED ANSWER: True.
b. In criminal cases involving tax offenses punishable under the National Internal Revenue Code (NIRC), prescription is
construed strictly against the government.
SUGGESTED ANSWER: False.
c. In criminal cases where the Court of Tax Appeals (CTA) has exclusive original jurisdiction, the right to file a separate
civil action for the recovery of taxes may be reserved. (1%)
d. Proceedings before the CTA in the exercise of its exclusive original jurisdiction are in the nature of trial de novo. (1%)
SUGGESTED ANSWER: True.
e. Judgments, resolutions or orders of the Regional Trial Court in the exercise of its original jurisdiction involving
criminal offenses arising from violations of the NIRC are appealable to the CTA, which shall hear the cases en banc. (1%)
The prescriptive period to file a criminal action is: (2012 BAR)
a) Ten (10) years from the date of discovery of the commission of fraud or non- filing of tax return;
b) Five (5) years from the date of issuance of the final assessment notice;
c) Three (3) years from the filing of the annual tax return;
d) Five (5) years from the commission of the violation of the law, and if the same be not known at the time, from the
discovery thereof and the institution of judicial proceedings for its investigation and punishment.
SUGGESTED ANSWER:
d) Five (5) years from the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof
and the institution of judicial proceedings for its investigation and punishment.
Section 281, NIRC.
The accused’s mere reliance on the representations made by his accountant, with deliberate refusal or avoidance to verify
the contents of his tax return and to inquire on its authenticity constitutes: (2012 BAR)
a) Simple negligence; b) Gross negligence; c) Willful blindness; d) Excusable negligence.
SUGGESTED ANSWER:
c) Willful blindness; CTA E.B. Criminal Case No. 006; People vsKintanar, G.R. No. 196340.
The acquittal of the accused in the criminal action for the failure to file income tax return and failure to supply correct
information will have the following consequence: (2012 BAR)
a) The CTA will automatically exempt the accused from any civil liability;
b) The CTA will still hold the taxpayer liable for deficiency income tax liability in all cases, since preponderance of evidence
Page 22 of 32
is merely required for tax cases;
c) The CTA will impose civil or tax liability only if there was a final assessment notice issued by the BIR against the
accused in accordance with the prescribed procedures for issuing assessments, which was presented during the trial;
d) The CTA will impose civil or tax liability, provided that a computation of the tax liability is presented during the trial.
SUGGESTED ANSWER:
c) The CTA will impose civil or tax liability only if there was a final assessment notice issued by the BIR against the accused in
accordance with the prescribed procedures for issuing assessments, which was presented during the trial
OR
d) The CTA will impose civil or tax liability, provided that a computation of the tax liability is presented during the trial.
Republic v. Patanao, L-22356, July 1, 1967; (Castro v. Collector of Internal Revenue, L- 12174, April 26, 1962).
What is the liability, if any, of the accountant? Discuss. SUGGESTED ANSWER:

The accountant may be held criminally liable for violation of the Tax Code when he falsified the tax return by underdeclaring the sale and
overstating the expense deductions. (Sec. 257, NIRC). If Danny's accountant is a Certified Public Accountant, his certificate as CPA shall
automatically be revoked or cancelled upon conviction. (BAR 2005)
c. Refund
i. Grounds and requisites for refund
X Corporation had excess income tax payment for the year 2008, which it chose to carry over in 2009. In filing its 2009
corporate income tax return, it signified its intention (by checking the small box "refund" at the bottom of the return) to
get a refund of the overpaid amount in 2008. Can the refund be allowed or not, and if disallowed, does X Corporation lose
the claimed amount? (2012 BAR)
a) X Corporation may not get the refund because the decision to carry over in 2008 was irrevocable for that year, and it
may not change that decision in succeeding years;
b) X Corporation may not get the refund in 2009, but the amount being claimed as refund may be utilized in succeeding
years until fully exhausted because there is no prescriptive period for carry over of excess income tax payments;
c) X Corporation may get the refund, provided that it will no longer carry over such amount or utilize the same against its
income tax liability in the future;
d) X Corporation may file instead a claim of tax credit, in lieu of refund.
SUGGESTED ANSWER:
b) X Corporation may not get the refund in 2009, but the amount being claimed as refund may be utilized in succeeding years until fully
exhausted because there is no prescriptive period for carry over of excess income tax payments
Section 76, NIRC.
The carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax
payments may now be carried over to the succeeding taxable years until fully utilized. In addition, the option to carry-over excess income
tax payments is now irrevocable. Hence, unutilized excess income tax payments may no longer be refunded. (Belle Corp. v. CIR, G.R. No.
181298, January 10, 2011)
What must a taxpayer do in order to claim a refund of, or tax credit for, taxes and penalties which he alleges to have been
erroneously, illegally or excessively assessed or collected? (3%)
SUGGESTED ANSWER:
The taxpayer must comply with the following procedures in claiming a refund of, or tax credit for, taxes and penalties which he alleges to
have been erroneously, illegally or excessively assessed or collected:
He should file a written claim for refund with the Commissioner within two years after the date of payment of the tax or penalty (Sec.
204, NIRC);
The claim filed must state a categorical demand for reimbursement (Bermejo v. Collector, 87 Phil. 96 [1950]).
The suit or proceeding for recovery must be commenced in court within two years from date of payment of the tax or penalty regardless
of any supervening event that will arise after payment (Sec. 229, NIRC).
Note:
If the answer given is only number 1, it is suggested that the same shall be given full credit considering that this is the only requirement
for the Commissioner to acquire jurisdiction over the claim. (BAR 2002
ii. Requirements for refund as laid down by cases
Why is the filing of an administrative claim with the BIR necessary? (3%)
SUGGESTED ANSWER:
The filing of an administrative claim for refund with the BIR is necessary in order:
To afford the Commissioner an opportunity to consider the claim and to have a chance to correct the errors of subordinate officers
(Gonzales v. CTA. et aL, 14 SCRA 79): and
Page 23 of 32
To notify the Government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue
available for expenditures. [Bermejo v. Collector, G.R. No. L-3028. Jufy 29, 1950)
Exceptions to requirement of a written claim:
Can the Commissioner grant a refund or tax credit even without a written claim for it? (2%)
SUGGESTED ANSWER:
Yes. When the taxpayer files a return which on its face shows an overpayment of the tax and the option to refund/ claim a tax credit was
chosen by the taxpayer, the Commissioner shall grant the refund or tax credit without the need for a written claim. This is so, because a
return filed showing an overpayment shall be considered as a written claim for credit or refund. (Secs. 76 and 204, NIRC). Moreover, the
law provides that the Commissioner may, even without a written claim therefore, refund or credit any tax where on the face of the return
upon which payment was made, such payment appears clearly to have been erroneously paid. ('Sec. 229, NIRC). (BAR 2002)
a. Necessity of written claim for refund
If the retiree is within his legal rights in claiming refund of the taxes withheld, will the BIR automatically grant his claim?
Explain your answer.
ANSWER:
No. Because he must file a written claim. (BAR 1992)
b. Claim containing a categorical demand for reimbursement

c. Filing of administrative claim for refund and the suit/proceeding before the CTA within 2 years from date of payment regardless of any
supervening cause
ABCD Corporation (ABCD) is a domestic corporation with individual and corporate shareholders who are residents of the
United States. For the 2nd quarter of 1983, these U.S.- based individual and corporate stockholders received cash dividends
from the corporation. The corresponding withholding tax on dividend income — 30% for individual and 35% for corporate
non-resident stockholders — was deducted at source and remitted to the BIR.
On May 15,1984, ABCD filed with the Commissioner of Internal Revenue a formal claim for refund, alleging that under the
RP-US Tax Treaty, the deduction withheld at source as tax on dividends earned was fixed at 25% of said income. Thus,
ABCD asserted that it overpaid the withholding tax due on the cash dividends given to its non-resident stockholders in the
U.S. the Commissioner denied the claim.
On January 17, 1985, ABCD filed a petition with the Court of Tax Appeals (CTA) reiterating its demand for refund.
Does ABCD Corporation have the legal personality to file the refund on behalf of its non-resident stockholders? Why or why
not? (3%)
SUGGESTED ANSWER:
Yes, withholding agents is not only an agent of the government but is also an agent of the taxpayer/income earner. Hence, ABCD is also
an agent of the beneficial owner of the dividends with respect to the actual payment of the tax to the government, such authority may
reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such for refund and to bring an
action for recovery of such claim (CIR v. Procter & Gamble, 204 SCRA 377, {1991}) (BAR 2009)
On March 12, 2001, REN paid his taxes. Ten months later, he realized that he had overpaid and so he immediately filed a
claim for refund with the Commissioner of Internal Revenue.
On February 27, 2003, he received the decision of the Commissioner denying REN’s claim for refund. On March 24, 2003,
REN filed an appeal with the Court of Tax Appeals. Was his appeal filed on time or not? Reason. (5%)
SUGGESTED ANSWER:
The appeal was not filed on time. The two-year period of limitation for filing a claim for refund is not only a limitation for pursuing the
claim at the administrative level but also a limitation for appealing the case to the Court of Tax Appeals. The law provides that no suit or
proceeding shall be filed after the expiration of two years from the date of the payment of the tax or penalty regardless of any
supervening cause that may arise after payment (Section 229, NIRC). Since the appeal was only made on March 24, 2003, more than
two years had already elapsed from the time the taxes were paid on March 12, 2003. Accordingly, REN had lost his judicial remedy
because of prescription. (BAR 2004)
XCEL Corporation filed its quarterly income tax return for the first quarter of 1985 and paid an Income tax of P500.000.00
on May 15, 1985. In the subsequent quarters, XCEL suffered losses so that on April 15, 1986 it declared a net loss of
PI,000,000.00 in its annual income tax return. After failing to get a refund, XCEL filed on March 1, 1988 a case with the
Court of Tax Appeals to recover the P500.000.00 in taxes paid on May 15, 1985. Is the action to recover the taxes filed
timely?
ANSWER:
The action for refund was filed in the Court of Tax Appeals on time. In the case of Commissioner v. TMX Sales.fnc., 205 SCRA 184, which
is similar to this case, the Supreme Court ruled that in the case of overpaid quarterly corporate income tax, the two-year period for filing
claims for refund In the BIR as well as in the institution of an action for refund in the CTA, the two-year prescriptive period for tax refunds
(Sec. 230, Tax Code) is counted from the filing of the final, adjustment return under Sec. 67 of the Tax Code, and not from the filing of
the quarterly return and payment of the quarterly tax. The CTA action on March 1, 1988 was clearly within the reglementary two-year
period from the filing of the final adjustment return of the corporation on April 15, 1986. (BAR 1994)
Mr. Dante Raymundo retired from the government service as Director of Land Transportation on January 6, 1985. Upon
Page 24 of 32
retirement, Mr. Raymundo received, among other benefits, his terminal leave pay for which the BIR withheld the sum of
P56.000.00 a week following the date of his retirement.
On October 17, 1991, following the decision of the Supreme Court that the money value of the accumulated leave
credits/terminal pay is not subject to withholding tax, Mr. Raymundo filed a claim for refund of P56.000.00 with the
Commissioner of Internal Revenue.
Is Mr. Raymundo within his rights in claiming a refund of taxes withheld on his terminal leave following the Supreme Court
decision?
ANSWER:
No. Under Section 230 of the NIRC, a suit for the recovery of tax erroneously or illegally collected cannot be filed after the expiration of
two years from the date of payment of tax regardless of any supervening cause that may arise after payment. Thus, the right of Mr.
Raymundo to claim for refund has already prescribed. (BAR 1992)
Assuming that the BIR denies the claim for refund, what could be the possible reason or statutory basis for such a denial?
ANSWER:
The possible reason for a denial would be that the written claim has already prescibed or that the terminal pay leave is not excluded from
income tax. Sec. 230, NIRC (supra). (BAR 1992)
Discuss the theory of supervening event as it applies to claims for refund of erroneously/illegally collected taxes. Can the
retiree claim a refund under this theory? Explain.
SUGGESTED ANSWER:
The theory of supervening event expresses that an event which is beyond the control of the parties would allow the recovery of
erroneously or illegally collected taxes provided the proceeding for such recovery is made within the prescriptive period from the
occurrence of such event. The theory of the supervening event has been abrogated by Section 230 of the NIRC. (BAR 1992)
iii. Legal basis of tax refunds

iv. Statutory basis for tax refund under the tax code
a. Scope of claims for refund
b. Necessity of proof for claim or refund
International Technologies, Inc. (ITI) filed a claim for refund for unutilized input VAT with the Court of Tax Appeals (CTA).
In the course of the trial, ITI engaged the services of an independent Certified Public Accountant (CPA) who examined the
voluminous invoices and receipts of ITI. ITI offered in evidence only the summary prepared by the CPA, without the
invoices and the receipts, and then submitted the case for decision. Can the CTA grant ITI’s claim for refund based only on
the CPA’s summary? Explain. (4%)
SUGGESTED ANSWER:
No. The summary prepared by the CPA does not prove anything unless the documents which were the basis of the summary are
submitted to the CTA and adduced in evidence. The invoices and receipts must be presented because they are the only real and direct
evidence that would enable the Court to determine with particular certainty the basis of the refund (CIR v. Rio Tuba Nickel Mining Corp.,
207SCRA S49[l992]). (BAR 2009)
c. Burden of proof for claim of refund

d. Nature of erroneously-paid tax/illegally assessed collected
Distinguish between a taxpayer’s remedies in connection with his tax assessment and/or demand and his claim for refund
of taxes alleged to have been erroneously or illegally collected.
ANSWER:
A tax assessment becomes final unless it is disputed or contested within 30 days from receipt thereof by the taxpayer. If the action taken
by the Commissioner on the request for reconsideration is unacceptable to the taxpayer, the latter must then appeal, by way of Petition
for Review to the Court of Tax Appeals within thirty days from receipt of the decision of the Commissioner of Internal Revenue. The
taxpayer may also opt to pay the tax before the finality of the assessment (e.g., within 30 days from receipt of the assessment) and then
file within two years a written claim for the refund of the tax. A denial by the Commissioner of a claim for refund must be appealed to the
CTA within thirty days from receipt of notice of denial and within two years from the day of full and final payment. Continued inaction by
the Commissioner on claims for refund may thus be taken as a denial appealable to the Court of Tax Appeals, in order to permit the
appeal to be considered or having been made within the two-year mandatory period. (BAR 1992)
e. Tax refund vis-à-vis tax credit
Mirador, Inc., a domestic corporation, filed its Annual Income Tax Return for its taxable year 2008 on April 15, 2009. In the
Return, it reflected an income tax overpayment of P1,000,000.00 and indicated its choice to carry-over the overpayment as
an automatic tax credit against its income tax liabilities in subsequent years.
On April 15, 2010, it filed its Annual Income Tax Return for its taxable year 2009 reflecting a taxable loss and an income
tax overpayment for the current year 2009 in the amount of P500,000.00 and its income tax overpayment for the prior year
2008 of P1,000,000.00. In its 2009 Return, the corporation indicated its option to claim for refund the total income tax
overpayment of P1,500,000.00
Choose which of the following statements is correct.
A. Mirador, Inc. may claim as refund the total income tax overpayment of P1,500,000.00 reflected in its income tax
Page 25 of 32
return for its taxable year 2009;
B. It may claim as refund the amount of P500,000.00 representing its income tax overpayment for its taxable year 2009;
or
C. No amount may be claimed as refund. Explain the basis of your answer. (2010 Bar Question)
SUGGESTED ANSWER:
b. It may claim as refund the amount of P500,000.00 representing its income tax overpayment for its taxable year 2009.
Since it has opted to carry-over the Php 1.0M overpaid income tax for taxable year 2008, said option is considered irrevocable and no
application for cash refund shall be allowed for it.
In its final adjustment return for the 2010 taxable year, ABC Corp. had excess tax credits arising from its over-withholding
of income payments. It opted to carry over the excess tax credits to the following year. Subsequently, ABC Corp. changed
its mind and applied for a refund of the excess tax credits.
Will the claim for refund prosper? (2013 Bar Question)
SUGGESTED ANSWER:
The claim for refund will not prosper as it is barred by the irrevocability rule.
Paragraph 2, Section 76 of the NIRC embodies the irrevocability rule. This rule provides that a corporation which is entitled to a tax credit
or refund of the excess estimated quarterly income taxes paid has two options: (1) to carry-over the excess credit; or (2) to apply for the
issuance of a tax credit certificate or to claim a cash refund. If the corporation opts to carry-over its excess credit in the final adjustment
return, its choice shall be irrevocable for that taxable period. The purpose of this rule is to prevent a taxpayer from claiming excess tax
credits twice.
In the given problem, ABC Corp. opted to carry-over its excess tax credits for the 2010 taxable year. Consequently, ABC Corp. can no
longer revoke its choice to carry-over the excess tax credits and instead claim for a refund.
Congress enacts a law granting grade school and high school students a 10% discount on all school-prescribed textbooks
purchased from any bookstore. The law allows bookstores to claim in full the discount as a tax credit.
If in a taxable year a bookstore has no tax due on which to apply the tax credits, can the bookstore claim from the BIR a
tax refund in lieu of tax credit? Explain. 2.5%
XXX
If a bookstore closes its business due to losses without being able to recoup the discount, can it claim reimbursement of
the discount from the government on the ground that without such reimbursement, the law constitutes taking of private
property for public use without just compensation? Explain. 5%
SUGGESTED ANSWER:
1. No. The law is clear that bookstores can only claim the discount as a tax credit. The term tax credit connotes that the amount when
claimed shall only be treated as a reduction from any tax liability, plain and simple. There is nothing in the law that grants a refund when
the bookstore has no tax liability against which the tax credit can be used (CIR v. Central Luzon Drug Corp., 456 SCRA 414 [2005]).
3. No, the bookstore cannot claim reimbursement. The tax credit privilege given to it is the compensation for the subsidy taken by the
government for the benefit of a class of taxpayers to which the students belong. However, the privilege granted is limited only to the
reduction of a present or future tax liability because by its nature, it is the existence or lack of a tax liability that determines whether the
discount can be used as a tax credit. Accordingly, if the business continues to operate at a loss and no other taxes are due, compelling
the business to close shop, the credit can never be applied and will be lost altogether. (CIR
Central Luzon Drug Corp., Id.) (BAR 2006)
f. Essential requisites for claim of refund
State the conditions required by the Tax Code before the Commissioner of Internal Revenue could authorize the refund or
credit of taxes erroneously or illegally received.
SUGGESTED ANSWER:
The conditions are:
- A written claim for refund is filed by the taxpayer with the Commissioner of Internal Revenue. (Sec. 204, NIRC);
- The claim for refund must be a categorical demand for reimbursement. [Bermejo
v. Collector of Internal Revenue, 87 Phil. 96 (1950)];
- The claim for refund or tax credit must be filed with the Commissioner, or the suit or proceeding therefore must be commenced
in court within 2 years from date of payment of the tax or penalty regardless of any supervening cause (Sec. 229, NIRC). (BAR
2005)
v. Who may claim/apply for tax refund/tax credit

a. Taxpayer/withholding agents of non-resident foreign corporation
ABCD Corporation (ABCD) is a domestic corporation with individual and corporate shareholders who are residents of the
United States. For the 2nd quarter of 1983, these U.S.- based individual and corporate stockholders received cash dividends
from the corporation. The corresponding withholding tax on dividend income — 30% for individual and 35% for corporate
non-resident stockholders — was deducted at source and remitted to the BIR.
On May 15,1984, ABCD filed with the Commissioner of Internal Revenue a formal claim for refund, alleging that under the
RP-US Tax Treaty, the deduction withheld at source as tax on dividends earned was fixed at 25% of said income. Thus,
Page 26 of 32
ABCD asserted that it overpaid the withholding tax due on the cash dividends given to its non-resident stockholders in the
U.S. the Commissioner denied the claim.
On January 17, 1985, ABCD filed a petition with the Court of Tax Appeals (CTA) reiterating its demand for refund.
Does ABCD Corporation have the legal personality to file the refund on behalf of its non-resident stockholders? Why or why
not? (3%)
SUGGESTED ANSWER:
Yes, withholding agents is not only an agent of the government but is also an agent of the taxpayer/income earner. Hence, ABCD is also
an agent of the beneficial owner of the dividends with respect to the actual payment of the tax to the government, such authority may
reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such for refund and to bring an
action for recovery of such claim (CIR v. Procter & Gamble, 204 SCRA 377, {1991}) (BAR 2009)
DEF Corporation is a wholly owned subsidiary of DEF, Inc., California, USA. Starting December 15, 2004. DEF Corporation
paid annual royalties to DEF, Inc., for the use of the latter's software, for which the former, as withholding agent of the
government, withheld and remitted to the BIR the 15% final tax based on the gross royalty payments. The withholding tax
return was filed and the tax remitted to the BIR on January 10 of the following year. On April 10, 2007, DEF Corporation
filed a written claim for tax credit with the BIR, arising from erroneously paid income taxes covering the years 2004 and
2005. The following day, DEF
Corporation filed a petition for review with the Court of Tax Appeals. involving the tax credit claim for 2004 and 2005.
b) Can the BIR lawyer raise the defense that DEF Corporation is not the proper party to file such claim for tax credit?
Explain. (3%)
SUGGESTED ANSWER:
b) No. The withholding agent who is mandated by law to withhold and remit the tax on the income of a non-resident in the Philippines
becomes directly liable for the payment of the tax. Therefore, it is the proper party to file a claim for refund in case of overwithholding.
(Commissioner v. Wander Philippines, Inc., 160SCRA 573 [1988]). (BAR 2008)
Does a withholding agent have the right to file an application for tax refund?
SUGGESTED ANSWER:
Yes. A withholding agent should be allowed to claim for tax refund, because under the law said agent is the one who is held liable for any
violation of the withholding tax law should such violation occur [Commissioner of Internal Revenue v. Wander Philippines Inc., 160 SCRA
570, (1988)1. Furthermore, since the withholding agent is made personally liable to deduct and withhold any tax under Section 53(c) of
the Tax Code, it is imperative that he be considered the taxpayer for all legal intents and purposes. Thus, by any reasonable standard,
such person should be regarded as a party in interest to bring suit for refund of taxes [Commissioner of Internal Revenue v. Procter and
Gamble Philippines Manufacturing Corporation and CTA, 204 SCRA 377, (1991). (BAR 2005)
A Co. is the wholly owned subsidiary of B Co., a non-resident German company. A Co. has a trademark licensing agreement
with B Co. On Feb. 10, 1995, A Co. remitted to B Co. royalties of P 10,000,000, which A Co. subjected to a WT of 25% or
P2,500,000. Upon advice of counsel, A Co. realized that the proper WT rate is 10%. On March 20, 1996, A Co. filed a claim
for refund of P2,500,000 with the BIR The BIR denied the claim on Nov. 15, 1996. On Nov. 28, 1996, ACo. filed a petition
for review with the CTA The BIR attacked the capacity of A Co.. as agent, to bring the refund case. Decide the issue. (5%)
SUGGESTED ANSWER:
A Co., the withholding agent of the non-resident foreign corporation is entitled to claim the refund of excess withholding tax paid on the
income of said corporation in the Philippines. Being a withholding agent, it is the one held liable for any violation of the withholding tax
law should such a violation occur. In the same vein, it should be allowed to claim a refund in case of overwithholding. (CIR v. Wander
Phils. Inc., GR No. 68378,
April 15, 1988, 160 SCRA 573; CIR v. Procter & Gamble PMC, 204 SCRA 377). (BAR
1999)
Corporation X declared cash dividends in favor of its non-resident stockholders in the United States from which amount, the
tax on dividend income was withheld.
Under the RP-US Tax Treaty, deductions allowed as tax on dividends earned at source were fixed at lower rates giving rise
to overpayment of the tax on dividends paid to the nonresident US stockholders (representing the difference between the
amount of withholding tax paid and the amount supposed to have been withheld under the mentioned tax covenant).
Corporation X filed a claim for refund of said overpayment with the Commissioner of Internal Revenue within the
prescribed period which however, remained unacted upon, and before the expiration of the two (2) year reglementary
period, it filed a judicial claim for refund with the Court of Tax Appeals.
Respondent Commissioner of Internal Revenue argues that Corporation X is not the real party in interest to prosecute a
claim for refund of the overpaid taxes of the nonresident US stockholders, who are the real parties in interest. But neither
could it maintain an action for refund in a representative capacity having failed to show proof of authorization.
Will Corporation X*s case prosper? Explain.
ANSWER: Yes. A subsidiary, while not the real party in interest, could prosecute a claim of refund in behalf of its non-resident stockholders
by virtue of its being the withholding agent for the government in respect of the cash dividends it declared [Comm. vs. Wander Phils.).
No. The tax is due on the non-resident stockholders. The rule is that the refund may be claimed by the taxpayer on whom the tax is
Page 27 of 32
imposed and who effectively paid the tax. (BAR 1992)
vi. Prescriptive period for recovery of tax erroneously or illegally collected
As a general rule, within what period must a taxpayer elevate to the Court of Tax Appeals a denial of his application for
refund of income tax overpayment? (2011 Bar Question)
(A)Within 30 days from receipt of the Commissioner’s denial of his application for refund.
(B) Within 30 days from receipt of the denial which must not exceed 2 years from payment of income tax.
(C) Within 2 years from payment of the income taxes sought to be refunded.
(D) Within 30 days from receipt of the denial or within two years from payment.
SUGGESTED ANSWER:
(B) Within 30 days from receipt of the denial which must not exceed 2 years from payment of income tax.
In case of full or partial denial of the written claim for refund or excess input tax directly attributable to zero-rated sales,
or the failure on the part of the Commissioner to act on the application within 120 days from the date of submission of
complete documents, an appeal must be filed with the CTA: (2012 BAR)
a) Within thirty (30) days after filing the administrative claim with the BIR;
b) Within sixty (60) days after filing the administrative claim with the BIR;
c) Within one hundred twenty (120) days after filing the administrative claim with the BIR;
d) Within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the 120-day period.
SUGGESTED ANSWER:
d) Within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the 120-day period.
In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the
taxpayer is to appeal the inaction of the CIR to CTA within 30 days. (CIR
v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, October 6, 2010)
DEF Corporation is a wholly owned subsidiary of DEF, Inc., California, USA. Starting December 15, 2004. DEF Corporation
paid annual royalties to DEF, Inc., for the use of the latter's software, for which the former, as withholding agent of the
government, withheld and remitted to the BIR the 15% final tax based on the gross royalty payments. The withholding tax
return was filed and the tax remitted to the BIR on January 10 of the following year. On April 10, 2007, DEF Corporation
filed a written claim for tax credit with the BIR, arising from erroneously paid income taxes covering the years 2004 and
2005. The following day, DEF Corporation filed a petition for review with the Court of Tax Appeals. involving the tax credit
claim for 2004 and 2005.
As a BIR lawyer handling the case, would you raise the defense of prescription in your answer to the claim for tax credit?
Explain. (3%)
SUGGESTED ANSWER:
Yes. The claim for refund for the2004erroneously paid income tax was filed out of time because the claim was only filed after more than
two years had elapsed from the payment thereof. (Section 204 (c) and 229, NIRC). (BAR 2008)
On March 12, 2001, REN paid his taxes. Ten months later, he realized that he had overpaid and so he immediately filed a
claim for refund with the Commissioner of Internal Revenue.
On February 27, 2003, he received the decision of the Commissioner denying REN’s claim for refund. On March 24, 2003,
REN filed an appeal with the Court of Tax Appeals. Was his appeal filed on time or not? Reason. (5%)
SUGGESTED ANSWER:
The appeal was not filed on time. The two-year period of limitation for filing a claim for refund is not only a limitation for pursuing the
claim at the administrative level but also a limitation for appealing the case to the Court of Tax Appeals. The law provides that no suit or
proceeding shall be filed after the expiration of two years from the date of the payment of the tax or penalty regardless of any
supervening cause that may arise after payment (Section 229, NIRC). Since the appeal was only made on March 24, 2003, more than
two years had already elapsed from the time the taxes were paid on March 12, 2003. Accordingly, REN had lost his judicial remedy
because of prescription. (BAR 2004)
A corporation files its income tax return on a calendar year basis. For the first quarter of 1993, it paid on 30 May 1993 its
quarterly income tax in the amount of P3.0 million. On 20 August 1993, it paid the second quarterly income tax of P0.5
million. The third quarter resulted in a net loss, and no tax was paid. For the fourth and final return for 1993, the company
reported a net loss for the year, and the taxpayer Indicated in the income tax return that it opted to claim a refund of the
quarterly income tax payments.
On 10 January 1994, the corporation filed with the Bureau of Internal Revenue a written claim for the refund of P3.5
million.
BIR failed to act on the claim for refund; hence, on 02 March 1996, the corporation filed a petition for review with the Court
of Tax Appeals on its claim for refund of the overpayment of its 1993 quarterly income tax. BIR, in its answer to the
petition, alleged that the claim for refund was filed beyond the reglementary period.
Did the claim for refund prescribe?
ANSWER:
Page 28 of 32
The claim for refund has prescribed. The counting of the two-year prescriptive period for filing a claim for refund is counted not from the
date when the quarterly income taxes were paid but on the date when the final adjustment return or annual income tax return was filed
(CIR v. TMX Sales Inc., G.R. No. 83736, January 15, 1992; CIR v. PhilAm Life Insurance Co., Inc., G.R. No. 105208, May 29, 1995). It is
obvious that the annual income tax return was filed before January 10, 1994 because the written claim for refund was filed with the BIR
on January 10,1994. Since the two-year prescriptive period is not only a limitation of action in the administrative stage but also a
limitation of action for bringing the case to the judicial stage, the petition for review filed with the CTA on March 02, 1996 is beyond the
reglementary period. (BAR 1997)
Is protest at the time of payment of taxes/duties a requirement to preserve the taxpayers’ right to claim a refund? Explain.
ANSWER:
For taxes imposed under the NIRC, protest at the time of payment is not required to preserve the taxpayers’ right to claim refund. This is
clear under Section 230 of the NIRC which provides that a suit or proceeding maybe maintained for the recovery of national internal
revenue tax or penalty alleged to have been erroneously assessed or collected, whether such tax or penalty has been paid under protest
or not.
For duties imposed under the Tariff and Customs Code, a protest at the time of payment is required to preserve the taxpayers’ claim for
refund. The procedure under the TCC is to the effect that when a ruling or decision of the Collector of Customs is made whereby liability
for duties is determined, the party adversely affected may protest such ruling or decision by presenting to the Collector, at the time when
payment is made, or within fifteen days thereafter, a written protest setting forth his objections to the ruling or decision in question (Sec.
2308, TCC). (BAR 1996)
Apple Computer Corp. (ACC) is a foreign corporation doing business in the Philippines through a local branch located at
Makati, Metro Manila. In 1985, the local branch applied with the Central Bank for authority to remit to ACC branch profits
amounting to P8,000,000.00. After paying the 15% branch remittance tax of PI,200,000.00, the branch office remitted to
ACC the balance of P6.800.000.00. In January 1986, the branch office was advised by its. legal counsel that it overpaid the
branch remittance tax since the basis of the computation thereof should be the amount actually remitted and not the
amount applied for. Accordingly, the branch office applied for a refund in the amount of P180.000.00.
If you were the Commissioner of Internal Revenue, would you grant the claim for refund?
ANSWER:
If I were the Commissioner of Internal Revenue, I would allow the claim for refund. The remittance tax should be computed on the
amount actually remitted (Marubeni Corporation vs. Commissioner, G.R No. 76573, 14 September 1989). In the refund of taxes, the
claim therefor can be filed within two (2) years from the time of payment so long as the tax payment was made before an assessment by
the Commis-sioner has become final (Sec. 230, N1RC). (BAR 1991)
vii. Other consideration affecting tax refunds
On April 16, 2012, the corporation filed its annual corporate income tax return for 2011, showing an overpayment of
income tax of P1 Million which is to be carried over to the succeeding year(s). On May 15, 2012, the corporation sought
advice from you and said that it contemplates to file an amended return for 2011, which shows that instead of carryover of
the excess income tax payment, the same shall be considered as a claim for tax refund and the small box shown as
"refund" in the return will be filled up. Within a year, the corporation will file the formal request for refund for the excess
payment. (2012 BAR)
a. Will you recommend to the corporation such a course of action and justify that the amended return is the latest official
act of the corporation as to how it may treat such overpayment of tax or should you consider the option granted to
taxpayers as irrevocable, once previously exercised by it? Explain your answer.
b. Should the petition for review filed with the CTA on the basis of the amended tax return be denied by the BIR and the
CTA, could the corporations till carry over such excess payment of income tax in the succeeding years, considering that
there is no prescriptive period provided for in the income tax law with respect to carry over of excess income tax
payments? Explain your answer.
Suggested Answer:
a. NO. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such options shall be considered IRREVOCABLE for the taxable year period and no
application for tax refund or issuance of tax credit certificate shall be allowed therefor (Sec. 76, NIRC).
b. YES. The carry-over of excess income tax payments is no longer limited to the succeeding taxable years until fully utilized. In
addition, the option to carry-over excess income tax payments is now irrevocable. Hence, unutilized excess income tax payments
may no longer be refunded (Belle Corp. v. CIR, G.R. No. 181298, Jan. 10, 2011).
c.
2. Government remedies
a. Administrative remedies
i. Tax lien
ii. Levy and sale of real property
iii. Forfeiture of real property to the government for want of bidder
iv. Further distraint and levy
The BIR could not avail itself of the remedy of levy and distraint to implement, through collection, an assessment that has
become final, executory, and demandable where: (2011 Bar Question)
(A) the subject of the assessment is an income tax.
(B) the amount of the tax involved does not exceed P100.00.
(C) the corporate taxpayer has no other uncollected tax liability.
(D) the taxpayer is an individual compensation income earner.
Page 29 of 32
SUGGESTED ANSWER:
(B) the amount of the tax involved does not exceed P100.00.
v. Suspension of business operation

vi. Non-availability of injunction to restrain collection of tax
b. Judicial remedies
3. Statutory offenses and penalties

a. Civil penalties
i. Surcharge
SUGGESTED ANSWER:
ii. Interest
a. In general
b. Deficiency interest
Is Danilo liable for the deficiency tax and the penalties thereon? What is the liability, if any, of the accountant? Discuss.
(5%)
SUGGESTED ANSWER:
Yes, Danilo is liable for the deficiency tax as well as for the deficiency interest. However, he is not liable to the fraud penalty because the
accountant acted beyond the limits of his authority. A tax return which does not correctly reflect taxable income may only be false but not
necessarily fraudulent where it appears that the return was not prepared by the taxpayer himself but by his accountant. Accordingly, the
50% surcharge for fraud could not be imposed. [Aznar v. CTA, 58 SCRA 719, (1974)].
On the other hand, the accountant may be held criminally liable for violation of the Tax Code when he falsified the tax return by
underdeclaring the sale and overstating the expense deductions. (Sec. 257, NIRC). If Danny's accountant is a Certified Public Accountant,
his certificate as CPA shall automatically be revoked or cancelled upon conviction. (BAR 2005)
What is a “deficiency interest" for purposes of the income tax? Illustrate.
ANSWER:
Deficiency interest for purposes of the income tax is the interest due on any amount of tax due or installment thereof which is not paid on
or before the date prescribed for its payment computed at the rate of 20% per annum or the Manila Reference Rate, whichever is higher,
from the date prescribed for its payment until it is fully paid. If for example after the audit of the books of XYZCorp. for taxable year 1993
there was found to be due a deficiency income tax of PI25,000.00 inclusive of the 25% surcharge imposed under Section 248 of the Tax
Code, the interest will be computed on the P125.000.00 from April 15, 1994 up to its date of payment. (BAR 1995)
c. Delinquency interest
What is a “delinquency interest" for purposes of the income tax? Illustrate. ANSWER:
Delinquency interest is the interest of 20% or the Manila Reference Rate, whichever is higher, required to be paid in case of failure to
pay:
- the amount of the tax due on any return required to be filed; or
- the amount of the tax due for which return is required; or
- the deficiency tax or any surcharge or interest thereon, on the due date appearing in the notice and demand of the
Commissioner of Internal Revenue.
If in the above illustration the assessment notice was released on December31,1994 and the amount of deficiency tax, inclusive of
surcharge and deficiency interest were computed up to January 30, 1995 which is the due date for payment per assessment notice,
failure to pay on this latter date will render the tax delinquent and will require the payment of delinquency interest. (BAR 1995)
d. Interest on extended payment
4. Compromise and abatement of taxes

a. Compromise
State and discuss briefly whether the following cases may be compromised or may not be compromised:
Delinquent accounts:
Cases under administrative protest, after issuance of the final assessment notice to the taxpayer, which are still pending:
Criminal tax fraud cases;
Page 30 of 32
Criminal violations already filed in court;
Cases where final reports of reinvestigation or reconsideration have been issued resulting in the reduction of the original
assessment agreed to by the taxpayer when he signed the required agreement form. (5%)
SUGGESTED ANSWER:
Delinquent accounts may be compromised if either of the two conditions is present: (1) the assessment is of doubtful validity, or (2) the
financial position of the taxpayer demonstrates a clear inability to pay the tax. (Sec. 204(A), NIRC; Sec. 2 of Revenue Regulations No.
30- 2002).
These may be compromised, provided that it is premised upon doubtful validity of the assessment or financial incapacity to pay (ibid).
These may not be compromised, so that the taxpayer may not profit from his fraud, thereby discouraging its commission (ibid).
These may not be compromised in order that the taxpayer will not profit from his criminal acts (ibid).
Cases where final reports of reinvestigation or reconsideration have been issued resulting in the reduction of the original assessment
agreed to by the taxpayer when he signed the required agreement form, cannot be compromised. By giving his conformity to the revised
assessment, the taxpayer admits the validity of the assessment and his capacity to pay the same. (Sec. 2 of Revenue Regulations No. 30-
2002). (BAR 2005)
Minolta Philippines, Inc. (Minolta) is an EPZA-registered enterprise enjoying preferential tax treatment under a special law.
After investigation of its withholding tax returns for the taxable year 1997, the BIR issued a deficiency withholding tax
assessment in the amount of P150,000.00. On May 15, 1999, because of financial difficulty, the deficiency tax remained
unpaid, as a result of which the assessment became final and executory. The BIR also found that, in violation of the
provisions of the National Internal Revenue Code, Minolta did not file its final corporate income tax return for the taxable
year 1998, because it allegedly incurred net toss from its operations. On May 17, 2002, the BIR filed with the Regional
Trial Court an action for collection of the deficiency withholding tax for 1997.
May criminal violations of the Tax Code be compromised? If Minolta makes a voluntary offer to compromise the criminal
violations for non-filing and non- payment of taxes for the year 1998, may the Commissioner accept the offer? Explain
(5%)
SUGGESTED ANSWER:
All criminal violations of the Tax Code may be compromised except those already filed in court or those involving fraud (Section 204,
NIRC). Accordingly, if Minolta makes a voluntary offer to compromise the criminal violations for non-filing and non-payment of taxes for
the year 1998, the Commissioner may accept the offer which is allowed by law. However, if it can be established that a tax has not been
paid as a consequence of non-filing of the return, the civil liability for taxes may be dealt with independently of the criminal violations.
The compromise settlement of the criminal violations will not relieve the taxpayer from its civil liability. But the civil liability for taxes may
also be compromised if the financial position of the taxpayer demonstrates a clear inability to pay the tax. (BAR 2002)
An information was filed in court for willful non-payment of income tax the assessment of which has become final. The
accused, through counsel, presented a motion that he be allowed to compromise his tax liability subject of the information.
The prosecutor indicated his conformity to the motion. Is this procedure correct? (5%]
SUGGESTED ANSWER:
No. Criminal violations, if already filed in court, may not be compromised (Sec. 204[B], NIRC). Furthermore, the payment of the tax due
after apprehension shall not constitute a valid defense in any prosecution for violation of any provisions of the Tax Code (Sec. 247(a),
NIRC). Finally, there is no showing that the prosecutor in the problem is a legal officer of the Bureau of Internal Revenue to whom the
conduct of criminal actions is lodged by the Tax Code.
ALTERNATIVE ANSWER:
No. If the compromise referred to is the civil aspect, the procedure followed is not correct. Compromise for the payment of any internal
revenue tax shall be made only by the Commissioner of Internal Revenue or in a proper case the Evaluation Board of the BIR (Sec. 204,
NIRC). Applying the law to the case at bar, compromise settlement can only be effected by leave of Court. (BAR 1998)
May the Commissioner of the Internal Revenue compromise the payment of withholding tax (tax deducted and withheld at
source) where the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax? (5%]
SUGGESTED ANSWER:
No. A taxpayer who is constituted as withholding agent who has deducted and withheld at source the tax on the income payment made
by him holds the taxes as trust funds for the government (Sec. 58[D]) and is obligated to remit them to the BIR. The subsequent inability
of the withholding agent to pay/remit the tax withheld is not a ground for compromise because the withholding tax is not a tax upon the
withholding agent but it is only a procedure for the collection of a tax. (BAR 1998)
May the tax liability of a taxpayer be compromised during the pendency of an appeal? Explain.
ANSWER:
Yes. During the pendency of the appeal, the taxpayer may still enter into a compromise settlement of his tax liability for as long as any of
the grounds for a compromise, ie. doubtful validity of assessment and financial incapacity of taxpayer, is present. A compromise of a tax
liability is possible at any stage of litigation, even during appeal, although legal propriety demands that prior leave of court should be
obtained (Pasudeco vs. CIR. L-39387. June 29. 1982). (BAR 1996)
b. Abatement
Anion, Inc. received a notice of assessment and a letter from the BIR demanding the payment of P3 million pesos in
deficiency income taxes for the taxable year 2008. The financial statements of the company show that it has been suffering
Page 31 of 32
financial reverses from the year 2009 up to the present. Its asset position shows that it could pay only P500,000.00 which
it offered as a compromise to the BIR. Which among the following may the BIR require to enable it to enter into a
compromise with Anion, Inc.? (2011 Bar Question)
(A) Anion must show it has faithfully paid taxes before 2009.
(B) Anion must promise to pay its deficiency when financially able.
(C) Anion must waive its right to the secrecy of its bank deposits.
(D) Anion must immediately deposit the P500,000.00 with the BIR.
SUGGESTED ANSWER:
C) Anion must waive its right to the secrecy of its bank deposits.
The Commissioner of Internal Revenue may NOT inquire into the bank deposits of a taxpayer, except: (2012 BAR)
a) When the taxpayer files a fraudulent return;

b) When the taxpayer offers to compromise the assessed tax based on erroneous assessment;
c) When the taxpayer offers to compromise the assessed tax based on financial incapacity to pay and he authorizes the
Commissioner in writing to look into his bank records;
d) When the taxpayer did not file his income tax return for the year.
SUGGESTED ANSWER:
c) When the taxpayer offers to compromise the assessed tax based on financial incapacity to pay and he authorizes the Commissioner in
writing to look into his bank records;
Section 6(F), NIRC.
Which statement below on compromise of tax liability is correct? (2012 BAR)
a) Compromise of a tax liability is available only at the administrative level;

b) Compromise of a tax liability is available only before trial at the CTA;
c) Compromise of a tax liability is available even during appeal, provided that prior leave of court is obtained;
d) Compromise of a tax liability is still available even after the court decision has become final and executory.
SUGGESTED ANSWER:
c) Compromise of a tax liability is available even during appeal, provided that prior leave of court is obtained
RR 30-2002.
Page 32 of 32

Tax Remedies under NIRC

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Tax Remedies under NIRC

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III.

Tax Remedies under the NIRC

Is the assessment valid? (1%) (2013 Bar Question)

What is an assessment notice?

a. Requisites for valid assessment

a) What are the requisites of a valid assessment? Explain. (3%)

b. Constructive methods of income determination

e. Tax delinquency and tax deficiency

When is a revenue tax considered delinquent? [3%I

What constitutes prima facie evidence of a false or fraudulent return? [2%]

Is the examiner correct? Explain.

Is the Bureau of Customs correct? (2013 Bar Question)

For the purpose of determining the gross estate of a decedent;

iii. When assessment is made

ANOTHER SUGGESTED ANSWER:

ANOTHER SUGGESTED ANSWER:

Decide Mr. Castro’s protest. (2%) SUGGESTED ANSWER:

The National Internal Revenue Code;

1. False, fraudulent, and non-filing of returns

What constitutes prima facie evidence of a false or fraudulent return? [2%]

Distinguish a false return from a fraudulent return.

b. Suspension of running of statute of limitations

Resolve the motion and issues raised.

iv. General provisions on additions to the tax

When is a pre-assessment notice required under the following cases? (1%)

d. Notice of informal conference

g. Reply to preliminary assessment notice

h. Issuance of formal letter of demand and assessment notice/final assessment notice

Decide on the validity of the FAN. (1%)(2013 Bar Question)

Which court acts on: disputed assessments? ANSWER:

j. Administrative decision on a disputed assessment

vi. Protesting assessment

Explain. (2010 Bar Question)

2. When to file a protest

Is the CIR correct? Explain. (5%) SUGGESTED ANSWER:

a) If the amount of basic tax assessed is P100,000.00 or more;

b. Submission of documents within 60 days from filing of protest

d. Period provided for the protest to be acted upon

ANOTHER SUGGESTED ANSWER:

Has the CTA jurisdiction over the case?

a. Filing of criminal action against taxpayer

Explain the following statements:

What remedy or remedies are available to the taxpayer? Explain. (4%)

ANOTHER SUGGESTED ANSWER:

ANOTHER SUGGESTED ANSWER:

b. In case of inaction by Commissioner within 180 days from submission of documents

Is the contention of the BIR correct? Explain. (2014 Bar Question)

What remedy or remedies are available to the taxpayer? Explain. (4%)

c. Effect of failure to appeal

a) August 30, 2011;

iii. Distraint of personal property including garnishment

a. Summary remedy of distraint of personal property

iv. Summary remedy of levy on real property

a. Advertisement and sale

vi. Further distraint or levy

vii. Tax lien

ix. Civil and criminal actions

a. Suit to recover tax based on false or fraudulent returns

True or False. (2010 Bar Question)

SUGGESTED ANSWER: True.

SUGGESTED ANSWER: False.

SUGGESTED ANSWER: False.

SUGGESTED ANSWER: True.