TAXATION LAW 2 SEMESTER 1, AY 16-17

CASE NAME: QUIRICO P. UNGAB, petitioner, income, business tax and forest charges for
vs. HON. VICENTE N. CUSI, JR., in his capacity the year 1973 and inviting petitioner to an
as Judge of the Court of First Instance, Branch 1, informal conference where the petitioner,
16TH Judicial District, Davao City, THE duly assisted by counsel, may present his
COMMISSIONER OF INTERNAL REVENUE, and objections to the findings of the BIR
JESUS N. ACEBES, in his capacity as State Examiner.
Prosecutor, respondents. 3. Upon receipt of the notice, the petitioner
wrote the BIR District Revenue Officer
CASE NUMBER/ DATE: G.R. No. L-41919-24. protesting the assessment, claiming that
May 30, 1980 he was only a dealer or agent on
commission basis in the banana sapling
PONENTE: CONCEPCION JR., business and that his income, as reported
in his income tax returns for the said year,
TOPIC: Tax Remedies was accurately stated.
4. BIR Examiner Ben Garcia, however, was
DOCTRINE: fully convinced that the petitioner had filed
a fraudulent income tax return so that he
National Internal Revenue Code submitted a "Fraud Referral Report," to
Preliminary investigation Authority of the Tax Fraud Unit of the Bureau of
State Prosecutor to investigate and Internal Revenue. After examining the
prosecute violations of the National records of the case, the Special
Internal Revenue Code independently of Investigation Division of the Bureau of
the City Fiscal Case at bar. Internal Revenue found sufficient proof
Jurisdiction of the Court of First Instance that the herein petitioner is guilty of tax
over criminal prosecution for violations of evasion for the taxable year 1973 and
the National Internal Revenue Code recommended his prosecution.
Computation and assessment of deficiency 5. In a Second Indorsement to the Chief of
taxes is not a prerequisite for criminal the Prosecution Division, dated December
prosecution under the Code. 12, 1974, the Commissioner of Internal
Prescription Petition for reconsideration of Revenue approved the prosecution of the
assessment of deficiency taxes suspends petitioner.
the prescriptive period for the collection of 6. State Prosecutor Jesus Acebes who had
taxes, not the prescriptive period of a been designated to assist all Provincial and
criminal action for violation of law. City Fiscals throughout the Philippines in
the investigation and prosecution, if the
FACTS:
evidence warrants, of all violations of the
1. In July 1974 BIR examiner Ben Garcia National Internal Revenue Code, as
examined the income tax returns filed by amended, and other related laws, in
the herein petitioner, Ungab, for the Administrative Order No. 116 dated
calendar year ending December 31, 1973. December 5, 1974, and to whom the case
2. In the course of his examination, he was assigned, conducted a preliminary
discovered that the petitioner failed to investigation of the case, and finding
report his income derived from sales of probable cause, filed six (6) informations
banana samplings. As a result, BIR against the petitioner with the Court of
District Revenue Officer sent a Notice of First Instance of Davao City.
Taxpayer to the petitioner informing him 7. On September 16, 1975, the petitioner filed
that there is due from him (petitioner) the a motion to quash the informations
amount of P104,980.81, representing upon the grounds that: (1) the

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

informations are null and void for want of cases, said informations are null
authority on the part of the State and void."
Prosecutor to initiate and prosecute the
said cases and (2) the trial court has no ISSUES:
jurisdiction to take cognizance of the
1. Whether or not the State Prosecutor is
above-entitled cases in view of his pending
allegedly without authority to initiate and
protest against the assessment made by
prosecute the said cases.
the BIR Examiner.
2. Whether or not the filing of the
Trial Court denied the motion on
informations was precipitate and
October 22, 1975.
premature since the Commissioner of
8. The petitioner filed the instant recourse
Internal Revenue has not yet resolved his
praying for a TRO issued by the Court,
protests against the assessment of the
ordering the respondent Judge from
Revenue District Officer.
further proceeding with the trial and
3. Whether or not petitioner was denied
hearing of Criminal Case Nos. 1960, 1961,
recourse to the Court of Tax Appeals.
1962, 1963, 1964, and 1965 of the Court of
First Instance of Davao, all entitled:
RULING:
"People of the Philippines, plaintiff, versus
Quirico Ungab, accused." 1. NO. The respondent State Prosecutor,
9. The petitioner seeks the annulment of the although believing that he can proceed
informations filed against him on the independently of the City Fiscal in the
ground that the respondent State investigation and prosecution of these
Prosecutor is allegedly without authority cases, first sought permission from the
to do so. Arguments: City Fiscal of Davao City before he started
That while the respondent State the preliminary investigation of these
Prosecutor may initiate the cases, and the City Fiscal, after being
investigation of and prosecute shown Administrative Order No. 116,
crimes and violations of penal dated December 5, 1974, designating the
laws when duly authorized, said State Prosecutor to assist all
certain requisites, enumerated by Provincial and City fiscals throughout the
this Court in its decision in the Philippines in the investigation and
case of Estrella vs. Orendain, prosecution of all violations of the National
should be observed before such Internal Revenue Code, as amended, and
authority may be exercised other related laws, graciously allowed the
otherwise, the provisions of the respondent State Prosecutor to conduct the
Charter of Davao City on the investigation of said cases, and in fact, said
functions and powers of the City investigation was conducted in the office of
Fiscal will be meaningless the City Fiscal.
because according to said charter
he has charge of the prosecution of 2. NO. What is involved here is not the
all crimes committed within his collection of taxes where the assessment of
jurisdiction and the Commissioner of Internal Revenue
That since "appropriate may be reviewed by the Court of Tax
circumstances are not extant to Appeals, but a criminal prosecution for
warrant the intervention of the violations of the National Internal
State Prosecution to initiate the Revenue Code which is within the
investigation, sign the cognizance of courts of first instance. While
informations and prosecute these there can be no civil action to enforce

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

collection before the assessment CASE NAME: COMMISSIONER OF INTERNAL

procedures provided in the Code have been REVENUE, Petitioner, vs. TEAM [PHILIPPINES]
followed, there is no requirement for the OPERATIONS CORPORATION [formerly MIRANT
precise computation and assessment of the (PHILS) OPERATIONS
tax before there can be a criminal CORPORATION], Respondent.
prosecution under the Code.
CASE NUMBER/ DATE: G.R. No. 179260. April 2,
An assessment of a deficiency is not 2014
necessary to a criminal prosecution for
PONENTE: PEREZ, J.
willful attempt to defeat and evade the
income tax. A crime is complete when the
DOCTRINES:
violator has knowingly and willfuly filed a
fraudulent return with intent to evade and In order to be entitled to a refund claim or
defeat the tax. The perpetration of the issuance of a tax credit certificate
crime is grounded upon knowledge on the representing any excess or unutilized
part of the taxpayer that he has made an creditable withholding tax, it must be
inaccurate return, and the government's shown that the claimant has complied with
failure to discover the error and promptly the essential basic conditions set forth
to assess has no connections with the under pertinent provisions of law and
commission of the crime. existing jurisprudential declarations.
In Banco Filipino Savings and Mortgage
3. NO. It has been ruled that a petition for Bank v. Court of Appeals,13 this Court had
reconsideration of an assessment may previously articulated that there are three
affect the suspension of the prescriptive essential conditions for the grant of a claim
period for the collection of taxes, but not for refund of creditable withholding income
the prescriptive period of a criminal action tax, to wit: (1) the claim is filed with the
for violation of law. Obviously, the protest Commissioner of Internal Revenue within
of the petitioner against the assessment of the two-year period from the date of
the District Revenue Officer cannot stop payment of the tax (2) it is shown on the
his prosecution for violation of the return of the recipient that the income
National Internal Revenue Code. payment received was declared as part of
Accordingly, the respondent Judge did not the gross income and (3) the fact of
abuse his discretion in denying the motion withholding is established by a copy of a
to quash filed by the petitioner. statement duly issued by the payor to the
payee showing the amount paid and the
DISPOSITIVE PORTION: WHEREFORE, the
amount of the tax withheld therefrom.
petition should be, as it is hereby dismissed. The
The NIRC of 1997, as amended, likewise
temporary restraining order heretofore issued is
provides for the strict observance of the
hereby set aside. With costs against the petitioner.
concept of the irrevocability rule, the focal
SO ORDERED.
provision of which is Section 76 thereof,
quoted hereunder for easy reference:
o SEC. 76. Final Adjustment
Return. Every corporation
liable to tax under Section 27
shall file a final adjustment return
covering the total taxable income
for the preceding calendar or fiscal
year. If the sum of the quarterly

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

tax payments made during the tax credit certificate corresponding to its
said taxable year is not equal to reported unutilized creditable withholding
the total tax due on the entire taxes for taxable year 2001 in the amount
taxable income of that year, the of P69,562,412.00.
corporation shall either: (A) Pay 3. March 27, 2003: respondent filed a Petition
the balance of tax still due or (B) for Review before the CTA, in order to toll
Carry-over the excess credit or (C) the running of the two-year prescriptive
Be credited or refunded with the period provided under Section 229 of the
excess amount paid, as the case NIRC of 1997, as amended.
may be. 4. CTA DIVISION RULING: GRANTED.
In case the corporation is entitled to a tax BASIS: ruling on the numerous
credit or refund of the excess estimated documentary evidence presented by
quarterly income taxes paid, the excess respondent during the proceedings,
amount shown on its final adjustment such as:
return may be carried over and credited Income Tax Returns (ITRs) for
against the estimated quarterly income tax taxable years 2001 and 2002,
liabilities for the taxable quarters of the various Certificates of
succeeding taxable years. Once the option Creditable Tax Withheld at
to carry-over and apply the excess quarterly Source for taxable year 2001
income tax against income tax due for the duly issued to it by its
taxable quarters of the succeeding taxable withholding agents, and
years has been made, such option shall be Report of the Commissioned
considered irrevocable for that taxable Independent Certified Public
period and no application for cash refund Accountant dated 15 March
or issuance of a tax credit certificate shall 2004, among others.
be allowed therefor. That respondent has indeed
Court of Tax Appeals Conclusions of the established its entitlement to a
Court of Tax Appeals (CTA) will not be refund/tax credit of its excess
overturned unless there has been an abuse creditable withholding taxes in
or improvident exercise of authority. compliance with the following basic
requirements:
TOPIC: Tax Remedies 1. that the claim for refund (or
issuance of a tax credit
FACTS:
certificate) was filed within
1. April 15, 2002: Respondent filed its 2001 the two-year prescriptive
income tax return with the BIR where period prescribed under
reported an income tax overpayment in the Section 204(C), in relation to
amount of P69,562,412.00 arising from Section 229 of the NIRC of
unutilized creditable taxes withheld during 1997, as amended
the year. 2. that the fact of withholding is
Respondent marked the established by a copy of a
appropriate box manifesting its statement duly issued by the
intent to have the above payor (withholding agent) to
overpayment refunded. the payee, showing the
2. March 19, 2003: respondent filed with the amount paid and the amount
BIR, pursuant to Section 76 in relation to of tax withheld therefrom
Section 204 of the NIRC of 1997, a letter and
requesting for the refund or issuance of a

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

3.
that the income upon which 1. The claim is filed with the Commissioner
the taxes were withheld was of Internal Revenue within the two-year
included in the return of the period from the date of payment of the tax
recipient. 2. It is shown on the return of the recipient
MR: Denied. Petition for review. that the income payment received was
5. CTA EN BANC: AFFIRMED IN TOTO. declared as part of the gross income and
That there was no cogent reason 3. The fact of withholding is established by a
to disturb the findings and copy of a statement duly issued by the
conclusion spelled out therein. It payor to the payee showing the amount
revealed that what the petition paid and the amount of the tax withheld
seeks to accomplish was for the therefrom.
CTA En Banc to view and The first condition is pursuant to
appreciate the evidence in another Sections 204(C) and 229 of the NIRC
perspective, which unfortunately of 1997.
had already been considered and The second and third conditions are
passed upon correctly by the CTA anchored on Section 2.58.3(B) of
in Division. Revenue Regulations No. 2-98.

ISSUE: Whether or not respondent has established In case the corporation is entitled to a tax credit or
its entitlement for the refund or issuance of a tax refund of the excess estimated quarterly income
credit certificate in its favor the entire amount of taxes paid, the excess amount shown on its final
P69,562,412.00 representing its unutilized tax adjustment return may be carried over and credited
credits for taxable year ended 31 December 2001, against the estimated quarterly income tax
pursuant to the applicable provisions of the NIRC liabilities for the taxable quarters of the succeeding
of 1997, as amended. taxable years.

RULING: YES. The Court in this case agrees with Once the option to carry-over and apply the
the conclusion of the CTA in Division and excess quarterly income tax against income
subsequent affirmation of the CTA En Banc that tax due for the taxable quarters of the
respondent complied with all the requirements for succeeding taxable years has been made,
the refund of its unutilized creditable withholding such option shall be considered irrevocable
taxes for taxable period ending 31 December 2001. for that taxable period and no application
The respondent had indeed complied with the for cash refund or issuance of a tax credit
abovementioned requirements. certificate shall be allowed therefor.

In order to be entitled to a refund claim or issuance It is apt to restate here the hornbook doctrine that
of a tax credit certificate representing any excess or the findings and conclusions of the CTA are
unutilized creditable withholding tax, it must be accorded the highest respect and will not be lightly
shown that the claimant has complied with the set aside.
essential basic conditions set forth under pertinent
The CTA, by the very nature of its
provisions of law and existing jurisprudential
functions, is dedicated exclusively to the
declarations.
resolution of tax problems and has
In Banco Filipino Savings and Mortgage Bank v. accordingly developed an expertise on the
CA: there are three essential conditions for the subject unless there has been an abusive
grant of a claim for refund of creditable withholding or improvident exercise of authority.
income tax, to wit: Consequently, its conclusions will not be
overturned unless there has been an abuse
or improvident exercise of authority. Its

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

findings can only be disturbed on appeal if CASE NAME: COMMISSIONER OF INTERNAL

they are not supported by substantial REVENUE and ARTURO V. PARCERO in his
evidence or there is a showing of gross
official capacity as Revenue District Officer of
error or abuse on the part of the Tax
Revenue District No. 049 (Makati), petitioners, vs.
Court.
PRIMETOWN PROPERTY GROUP, INC.,
In the absence of any clear and convincing
proof to the contrary, this Court must respondent.
presume that the CTA rendered a decision
which is valid in every respect. CASE NUMBER/DATE: G.R. No. 162155. August
28, 2007.
DISPOSITIVE PORTION: WHEREFORE, the
petition is hereby DENIED for lack of merit. PONENTE: CORONA, J.:
Accordingly, the Decision dated 19 June 2007 and
TOPIC: Tax Remedies
Resolution dated 13 August 2007 of the CTA En
Banc are hereby AFFIRMED. No costs. DOCTRINES:

Prescription The rule is that the two year

prescriptive period is reckoned from the
filing of the final adjusted return A year is
equivalent to 365 days regardless of
whether it is a regular year of a leap year.
Calendar Month A calendar month is a
month designated in the calendar without
regard to the number of days it may
contain.
Court holds that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987,
being the more recent law, governs the
computation of legal periods.Both Article
13 of the Civil Code and Section 31,
Chapter VIII, Book I of the Administrative
Code of 1987 deal with the same subject
matter the computation of legal periods.
Under the Civil Code, a year is equivalent
to 365 days whether it be a regular year or
a leap year. Under the Administrative
Code of 1987, however, a year is composed
of 12 calendar months. Needless to state,
under the Administrative Code of 1987, the
number of days is irrelevant. There
obviously exists a manifest incompatibility
in the manner of computing legal periods
under the Civil Code and the
Administrative Code of 1987. For this
reason, we hold that Section 31, Chapter
VIII, Book I of the Administrative Code of
1987, being the more recent law, governs
the computation of legal periods. Lex
posteriori derogat priori.

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

FACTS: The petition was filed beyond the

two-year prescriptive period for
1. March 11, 1999: Primetown Property filing a judicial claim for tax
Group, Inc., applied for the refund or credit refund or tax credit invoking
of income tax respondent paid in 1997. Section 229 of the National
In a letter, Primetown explained Internal Revenue Code (NIRC):
that:
The increase in the cost of Sec. 229. Recovery of
labor and materials and Taxes Erroneously or
difficulty in obtaining Illegally Collected. -- No
financing for projects and suit or proceeding shall
collecting receivables caused be maintained in any
the real estate industry to court for the recovery of
slowdown. any national internal
As a consequence, while revenue tax hereafter
business was good during the alleged to have been
first quarter of 1997, erroneously or illegally
respondent suffered losses assessed or collected, or
amounting to P71,879,228 of any penalty claimed to
that year. have been collected
Because respondent suffered without authority, or of
losses, it was not liable for any sum alleged to have
income taxes. been excessively or in any
Nevertheless, respondent paid manner wrongfully
its quarterly corporate income collected, until a claim for
tax and remitted creditable refund or credit has been
withholding tax from real duly filed with the
estate sales to the BIR in the Commissioner but such
total amount of suit or proceeding may be
P26,318,398.32. maintained, whether or
Therefore, respondent was not such tax, penalty, or
entitled to tax refund or tax sum has been paid under
credit. protest or duress.
2. On May 13, 1999: Revenue officer Santos
required respondent to submit additional In any case, no such
documents to support its claim. suit or proceeding
3. Respondent complied but its claim was not shall be filed after the
acted upon. expiration of two (2)
4. April 14, 2000: it filed a petition for review years from the date of
in the Court of Tax Appeals (CTA). payment of the tax or
5. CTA RULING: DISMISSED. The two-year penalty regardless of
prescriptive period under Section 229 of
any supervening cause
the NIRC for the filing of judicial claims
that may arise after
was equivalent to 730 days. Because the
payment: Provided,
year 2000 was a leap year, respondent's
however, That the
petition, which was filed 731 days after
Commissioner may, even
respondent filed its final adjusted return,
without a claim therefor,
was filed beyond the reglementary period.
refund or credit any tax,
BASIS:

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

where on the face of the covered by April 15, 1998 to April

return upon which 14, 1999 and April 15, 1999 to
payment was made, such April 14, 2000 should still be
payment appears clearly counted as 365 days each or a
to have been erroneously total of 730 days. A statute which
paid. is clear and explicit shall be
neither interpreted nor construed.
CTA found that respondent filed
its final adjusted return on April ISSUES: Whether or not the claim should have
14, 1998. Thus, its right to claim a
been filed on or before April 13, 2000 or within 730
refund or credit commenced on
days, reckoned from the time respondent filed its
that date applying Article 13 of
final adjusted return because tax refunds, being in
the Civil Code which states:
the nature of an exemption, should be strictly
construed against claimants and Section 229 of the
Art. 13. When the law NIRC should be strictly applied against respondent
speaks of years, months, inasmuch as it has been consistently held that the
days or nights, it shall be prescriptive period (for the filing of tax refunds and
understood that years tax credits) begins to run on the day claimants file
are of three hundred their final adjusted returns.
sixty-five days each
months, of thirty days RULING: The respondent's petition (filed on April
days, of twenty-four 14, 2000) was filed on the last day of the 24th
hours, and nights from calendar month from the day respondent filed its
sunset to sunrise. final adjusted return. Hence, it was filed within the
reglementary period.
If the months are
designated by their The conclusion of the CA that respondent filed its
name, they shall be petition for review in the CTA within the two-year
computed by the number prescriptive period provided in Section 229 of the
of days which they NIRC is correct. Its basis, however, is not.
respectively have.
The rule is that the two-year prescriptive period is
In computing a period, reckoned from the filing of the final adjusted
the first day shall be return. But how should the two-year
excluded, and the last prescriptive period be computed?
included.
As already quoted, Article 13 of the Civil Code
6. MR: denied. provides that when the law speaks of a year, it is
understood to be equivalent to 365 days.
7. CA RULED: reversed and set aside the In National Marketing Corporation v. Tecson, we
decision of the CTA. Article 13 of the Civil ruled that a year is equivalent to 365 days
Code did not distinguish between a regular regardless of whether it is a regular year or a leap
year and a leap year. The rule that a year year.
has 365 days applies, notwithstanding the
fact that a particular year is a leap year. However, in 1987, EO 292 or the Administrative
Code of 1987 was enacted. Section 31, Chapter VIII,
In other words, even if the year Book I thereof provides:
2000 was a leap year, the periods

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

Sec. 31. Legal Periods. "Year" shall be Implied repeals, however, are not favored.
understood to be twelve calendar An implied repeal must have been clearly
months; "month" of thirty days, unless it and unmistakably intended by the
refers to a specific calendar month in legislature. The test is whether the
which case it shall be computed according subsequent law encompasses entirely the
to the number of days the specific month subject matter of the former law and they
contains "day", to a day of twenty-four cannot be logically or reasonably
hours and "night" from sunrise to sunset. reconciled.
(emphasis supplied)
Both Article 13 of the Civil Code and Section 31,
A calendar month is "a month designated in the Chapter VIII, Book I of the Administrative Code of
calendar without regard to the number of days it 1987 deal with the same subject matter the
may contain." It is the "period of time running from computation of legal periods. Under the Civil Code,
the beginning of a certain numbered day up to, but a year is equivalent to 365 days whether it be a
not including, the corresponding numbered day of regular year or a leap year. Under the
the next month, and if there is not a sufficient Administrative Code of 1987, however, a year is
number of days in the next month, then up to and composed of 12 calendar months. Needless to state,
including the last day of that month." To illustrate, under the Administrative Code of 1987, the number
one calendar month from December 31, 2007 will be of days is irrelevant.
from January 1, 2008 to January 31, 2008 one
calendar month from January 31, 2008 will be from There obviously exists a manifest incompatibility in
February 1, 2008 until February 29, 2008. the manner of computing legal periods under the
Civil Code and the Administrative Code of 1987.
[Anxillary issue] A law may be repealed For this reason, we hold that Section 31, Chapter
expressly (by a categorical declaration that VIII, Book I of the Administrative Code of 1987,
the law is revoked and abrogated by being the more recent law, governs the computation
another) or impliedly (when the provisions of legal periods. Lex posteriori derogat priori.
of a more recent law cannot be reasonably
reconciled with the previous one). Section Applying Section 31, Chapter VIII, Book I of the
27, Book VII (Final Provisions) of the Administrative Code of 1987 to this case, the two-
Administrative Code of 1987 states: year prescriptive period (reckoned from the time
respondent filed its final adjusted return on April
Sec. 27. Repealing 14, 1998) consisted of 24 calendar months.
clause. All laws,
DISPOSITIVE PORTION: Accordingly, the
decrees, orders, rules and
petition is hereby DENIED. The case
regulation, or portions
thereof, inconsistent with is REMANDED to the Court of Tax Appeals which
this Code are hereby is ordered to expeditiously proceed to hear C.T.A.
repealed or modified Case No. 6113 entitled Primetown Property Group,
accordingly. Inc. v. Commissioner of Internal Revenue and
Arturo V. Parcero.

A repealing clause like Sec. 27 above is not

an express repealing clause because it fails
to identify or designate the laws to be
abolished. Thus, the provision above
only impliedly repealed all laws
inconsistent with the Administrative Code
of 1987.

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

CASE NAME: BANK OF THE PHILIPPINE 4. On April 7, 1989, respondent issued to the
ISLANDS (Formerly: Far East Bank and Trust petitioner, assessment/demand notices
FAS-1-82 to 86/89-000 and FAS 5-82 to
Company), petitioner, vs. COMMISSIONER OF
86/89-000 for deficiency withholding tax at
INTERNAL REVENUE, respondent.
source (Swap Transactions) and DST
involving the amounts of P190,752,860.82
CASE NUMBER/ DATE: G.R. No. 174942. March
and P24,587,174.63, respectively, for the
7, 2008.
years 1982 to 1986.
PONENTE: TINGA, J.
5. On April 20, 1989, petitioner filed a protest
TOPIC: Tax Remedies on the demand/assessment notices.

DOCTRINES: On May 8, 1989, petitioner filed a

supplemental protest.
Assessment and Collection of Taxes
Prescription The statute of limitations on
On March 12, 1993, petitioner
assessment and collection of national
requested for an opportunity to
internal revenue taxes was shortened from
present or submit additional
five (5) years to three (3) years by Batas
documentation on the Swap
Pambansa Blg. 700.
Transactions with the then
The Commissioner of Internal Revenue
Central Bank (page 240, BIR
(CIR) must first grant the request for
Records).
reinvestigation as a requirement for the
suspension of the statute of limitations.
The burden of proof that the request for Petitioner also submitted to the
reinvestigation had been actually granted BIR, Swap Contracts with the
shall be on the Commissioner of Internal Central Bank in connection with
Revenue (CIR). the reinvestigation of the
assessment in the letter.
FACTS:
Waivers of the Statutes of
1. Petitioner, the surviving bank after its Limitations was issued by the
merger with Far East Bank and Trust petitioner effective until December
Company, is a corporation duly created and 31, 1994.
existing under the laws of the Republic of
the Philippines with principal office at 6. On August 9, 2002, respondent issued a
Ayala Avenue corner Paseo de Roxas Ave., final decision on petitioners protest
Makati City. ordering:

2. Respondent thru then Revenue Service The withdrawal and cancellation

Chief Valdez, issued to the petitioner a of the deficiency withholding tax
pre-assessment notice (PAN) dated assessment in the amount
November 26, 1986. of P190,752,860.82 and considered
the same as closed and
3. 3 days after, petitioner requested for the terminated.
details of the amounts alleged as 1982-
1986 deficiency taxes mentioned in the The deficiency DST assessment in
November 26, 1986 PAN. the amount of P24,587,174.63 was
reiterated and the petitioner was

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

ordered to pay the said amount reinvestigation which

within thirty (30) days from tolled the prescriptive
receipt of such order. period provided by law to
collect a tax deficiency by
7. Petitioner received a copy of the said distraint, levy, or court
decision on January 15, 2003. proceeding. It further
held, as regards the
8. On January 24, 2003, petitioner filed a second issue,
Petition for Review before the Court.
o RULING ON ISSUE 2:
9. On August 31, 2004, the Court rendered a BPIs cabled instructions
Decision denying the petitioners Petition to its foreign
for Review. correspondent bank to
remit a specific sum in
10. On September 21, 2004, petitioner filed a dollars to the Federal
Motion for Reconsideration of the Reserve Bank, the same
abovementioned Decision which was to be credited to the
denied for lack of merit in a Resolution account of the Central
dated February 14, 2005. Bank, are in the nature
of a telegraphic transfer
11. On March 9, 2005, petitioner filed with the subject to DST under
Court En Banc a Motion for Extension of Section 195 of the Tax
Time to File Petition for Review praying Code.
for an extension of fifteen (15) days from
March 10, 2005 or until March 25, 2005. 13. In its Petition for Review, BPI argues:
Petitioners motion was granted in a
Resolution dated March 16, 2005. That the governments right to
collect the DST had already
12. The CTA synthesized the foregoing issues prescribed because the
into: Commissioner of Internal Revenue
(CIR) failed to issue any reply
Whether the collection of the granting BPIs request for
deficiency DST is barred by reinvestigation manifested in the
prescription and protest letters dated 20 April and
8 May 1989. It was only through
the 9 August 2002 Decision
Whether BPI is liable for DST on
ordering BPI to pay deficiency
its SWAP loan transactions.
DST, or after the lapse of more
than thirteen (13) years, that
o RULING ON ISSUE 1:
applying the case the CIR acted on the request
of Commissioner of for reinvestigation,
Internal Revenue v. Wyeth warranting the conclusion
Suaco Laboratories, that prescription had already
Inc.,4(Wyeth Suaco case), set in.
ruled that BPIs protest
and supplemental protest That the CIR was not
should be considered precluded from collecting the
requests for deficiency within three (3)

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

years from the time the notice induced the CIR to delay the
of assessment was issued on 7 collection of the assessed tax.
April 1989, or even until the
expiration on 31 December 15. BPI argues [in its Reply]: Suyoc case
1994 of the last waiver of the does not apply because:
statute of limitations signed
by BPI. first, it never induced the CIR to
postpone tax collection
That the cabled instructions to its
correspondent bank are not second, its request for
subject to DST because the reinvestigation was not
National Internal Revenue Code of categorically acted upon by the
1977 (Tax Code of 1977) does not CIR within the three-year
contain a specific provision that collection period after assessment.
cabled instructions on SWAP
transactions are subject to DST. AND! BPI maintains that it did
not receive any communication
14. OSGs COMMENT: from the CIR in reply to its
protest letters.
The prescriptive period was tolled
by the protest letters filed by BPI ISSUE: Whether the collection of the deficiency
which were granted and acted DST is barred by prescription.
upon by the CIR.
RULING: YES. As applied to the present case, the
o The action was allegedly CIR had three (3) years from the time he issued
communicated to BPI as, assessment notices to BPI on 7 April 1989 or until 6
in fact, the latter April 1992 within which to collect the deficiency
submitted additional DST. However, it was only on 9 August 2002 that
documents pertaining to the CIR ordered BPI to pay the deficiency.
its SWAP transactions in
support of its request for The statute of limitations on assessment and
reinvestigation. collection of national internal revenue taxes was
shortened from five (5) years to three (3) years by
o It was only upon BPIs Batas Pambansa Blg. 700. Thus, the CIR has three
receipt on 13 January (3) years from the date of actual filing of the tax
2003 of the 9 August return to assess a national internal revenue tax or
2002 Decision that the to commence court proceedings for the collection
period to collect thereof without an assessment.
commenced to run again.
When it validly issues an assessment within the
three (3)-year period, it has another three (3) years
Citing the case of CIR v. Suyoc
within which to collect the tax due by distraint,
Consolidated Mining Company, et
levy, or court proceeding. The assessment of the tax
al. (Suyoc case) in support of its
is deemed made and the three (3)-year period for
argument that BPI is already
collection of the assessed tax begins to run on the
estopped from raising the defense
date the assessment notice had been released,
of prescription in view of its
mailed or sent to the taxpayer.
repeated requests for
reinvestigation which allegedly

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

In order to determine whether the prescriptive may be expressed in its communications with the
period for collecting the tax deficiency was taxpayer or implied from the action of the CIR or
effectively tolled by BPIs filing of the protest letters his authorized representative in response to the
dated 20 April and 8 May 1989 as claimed by the request for reinvestigation.
CIR, we need to examine Section 32012 of the Tax
Code of 1977, which states: There is nothing in the records of this case which
indicates, expressly or impliedly, that the CIR had
Sec. 320. Suspension of running of statute. granted the request for reinvestigation filed by BPI.
The running of the statute of limitations What is reflected in the records is the piercing
provided in Sections 318 or 319 on the silence and inaction of the CIR on the request for
making of assessment and the beginning of reinvestigation, as he considered BPIs letters of
distraint or levy or a proceeding in court protest to be.
for collection, in respect of any deficiency,
shall be suspended for the period during In fact, it was only in his comment to the present
which the Commissioner is prohibited from petition that the CIR, through the OSG, argued for
making the assessment or beginning the first time that he had granted the request for
distraint or levy or a proceeding in court reinvestigation. His consistent stance invoking
and for sixty days thereafter when the the Wyeth Suaco case, as reflected in the records, is
taxpayer requests for a re- that the prescriptive period was tolled by BPIs
investigation which is granted by the request for reinvestigation, without any assertion
Commissioner; when the taxpayer cannot that the same had been granted or at least acted
be located in the address given by him in upon.
the return filed upon which a tax is being
assessed or collected: Provided, That if the In the Wyeth Suaco case, private
taxpayer informs the Commissioner of any respondent Wyeth Suaco Laboratories, Inc.
change in address, the running of the sent letters seeking the reinvestigation or
statute of limitations will not be reconsideration of the deficiency tax
suspended when the warrant of distraint assessments issued by the BIR. The
and levy is duly served upon the taxpayer, records of the case showed that as a result
his authorized representative, or a of these protest letters, the BIR
member of his household with sufficient Manufacturing Audit Division conducted a
discretion, and no property could be review and reinvestigation of the
located and when the taxpayer is out of assessments. The records further showed
the Philippines. (Emphasis supplied) that the company, thru its finance
manager, communicated its inability to
The above section is plainly worded. In order to settle the tax deficiency assessment
suspend the running of the prescriptive periods for and admitted that it knew of the ongoing
assessment and collection, the request for review and consideration of its protest.
reinvestigation must be granted by the CIR.
As differentiated from the Wyeth
In BPI v. CIR, the Court emphasized the rule that Suaco case, however, there is no evidence
the CIR must first grant the request for in this case that the CIR actually
reinvestigation as a requirement for the suspension conducted a reinvestigation upon the
of the statute of limitations. request of BPI or that the latter was made
aware of the action taken on its request.
The Court went on to declare that the burden of Hence, there is no basis for the tax courts
proof that the request for reinvestigation had been ruling that the filing of the request for
actually granted shall be on the CIR. Such grant reinvestigation tolled the running of the

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

prescriptive period for collecting the tax transactions, which were never even acted upon,
deficiency. much less granted, cannot be said to have
persuaded the CIR to postpone the collection of the
Neither did the waiver of the statute of limitations deficiency DST.
signed by BPI supposedly effective until 31
December 1994 suspend the prescriptive period. The inordinate delay of the CIR in acting upon and
resolving the request for reinvestigation filed by
The CIR himself contends that the waiver BPI and in collecting the DST allegedly due from
is void as it shows no date of acceptance in the latter had resulted in the prescription of the
violation of RMO No. 20-90. governments right to collect the deficiency. As this
Court declared in Republic of the Philippines v.
At any rate, the records of this case do not Ablaza:
disclose any effort on the part of the
Bureau of Internal Revenue to collect the The law prescribing a limitation of actions
deficiency tax after the expiration of the for the collection of the income tax is
waiver until eight (8) years thereafter beneficial both to the Government and to
when it finally issued a decision on the its citizens to the Government because tax
protest. officers would be obliged to act promptly in
the making of assessment, and to citizens
The Suyoc case inapplicable. because after the lapse of the period of
prescription citizens would have a feeling
In that case, several requests for of security against unscrupulous tax
reinvestigation and reconsideration were agents who will always find an excuse to
filed by Suyoc Consolidated Mining inspect the books of taxpayers, not to
Company purporting to question the determine the latters real liability, but to
correctness of tax assessments against it. take advantage of every opportunity to
As a result, the Collector of Internal molest peaceful, law-abiding citizens.
Revenue refrained from collecting the tax Without such a legal defense taxpayers
by distraint, levy or court proceeding in would furthermore be under obligation to
order to give the company every always keep their books and keep them
opportunity to prove its claim. The open for inspection subject to harassment
Collector also conducted several by unscrupulous tax agents. The law on
reinvestigations which eventually led to a prescription being a remedial measure
reduced assessment. The company, should be interpreted in a way conducive
however, filed a petition with the CTA to bringing about the beneficent purpose of
claiming that the right of the government affording protection to the taxpayer within
to collect the tax had already prescribed. the contemplation of the Commission
which recommend the approval of the law.
Suyoc could not set up the defense of
prescription since, by its own action, the Given the prescription of the governments claim,
government was induced to delay the we no longer deem it necessary to pass upon the
collection of taxes to make the company validity of the assessment.
feel that the demand was not unreasonable
or that no harassment or injustice was DISPOSITIVE PORTION: WHEREFORE, the
meant by the government. petition is GRANTED. The Decision of the Court of
Tax Appeals dated 15 August 2006 and its
In this case, BPIs letters of protest and submission Resolution dated 5 October 2006, are hereby
of additional documents pertaining to its SWAP

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 TAXATION LAW 2 SEMESTER 1, AY 16-17

REVERSED and SET ASIDE. No pronouncement

as to costs.

TAX REMEDIES | 15